EX-99.1 2 a4645165ex99.txt PRESS RELEASE Exhibit 99.1 CIENA Reports Second Quarter 2004 Results LINTHICUM, Md.--(BUSINESS WIRE)--May 20, 2004--CIENA(R) Corporation (NASDAQ:CIEN), a leading global provider of innovative networking solutions, today reported its second fiscal quarter results for the period ending April 30, 2004. Revenue for the quarter totaled $74.7 million, representing a 12.5% sequential increase and an increase of 1.6% for the same period a year ago. On a generally accepted accounting principles (GAAP) basis, CIENA's reported net loss for the quarter was $76.2 million, or a net loss of $0.16 per share. "The last quarter was important for CIENA as we took significant and deliberate steps in two key areas aimed at improving our business in both the immediate and longer-term," said Gary Smith, CIENA's president and CEO. "First, with the acquisitions of Catena Networks and Internet Photonics, we have added products to help build CIENA into a leading provider of service-delivery solutions. Second, we initiated the next phase of strategic operating expense reductions that will improve our cost structure and shorten the path to our near-term goals of achieving cash flow breakeven and profitability." Second Quarter 2004 Highlights -- Ended the quarter with cash and short- and long-term investments valued at $1.46 billion, using cash of $60 million in the quarter. -- Announced expected annualized cost savings of $60 to $70 million, including $55 to $65 million at the operating expense level, associated with closing the Company's San Jose, Calif., facility and related headcount reductions. -- Announced customer wins spanning CIENA's networking solutions portfolio including: -- MCI's selection of CIENA as a strategic supplier for its new nationwide, ultra long-haul network. -- Verizon's choice of CIENA's multiservice switching solutions to enhance the efficiency of its nationwide enterprise data services. -- Red Electrica's deployment of CIENA solutions to expand its broadband services. -- An exclusive agreement with UK-carrier, THUS, for CIENA's multiservice solutions in metro and edge applications. -- Spanish Internet service provider, Arsys Internet's, selection of CIENA and reseller partner Laurel Networks, for a Broadband Remote Access Server (B-RAS) application. -- In addition, SBC recognized CIENA as an outstanding supplier for the superior performance of its DN 7000(TM) Series Multiservice Edge Switch. -- From a solutions perspective, CIENA announced and began deployments of the next-generation of its core networking capabilities with CoreStream(TM) Agility, designed to enable efficient delivery of high-growth broadband services, and also a new-generation CN 2000(TM) Storage Over SONET/SDH Platform to incorporate Dynamic Bandwidth Assignment capabilities and the latest ITU Generic Framing Procedure (GFP) standard. In addition, on May 3, 2004, just following completion of CIENA's second fiscal quarter, the Company announced it had completed the acquisitions of Catena Networks, Inc. and Internet Photonics, Inc. Non-GAAP Presentation In evaluating the operating performance of its business, CIENA's management excludes certain charges or credits that are required by GAAP. These items, which are identified in the table below, share one or more of the following characteristics: they are unusual, and CIENA does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of the Company's control. Quarter Ended 6 Months Ended -------------- --------------- April 30, 2004 April 30, 2004 -------------- --------------- Item (in thousands) (in thousands) ---- -------------- --------------- Deferred stock compensation $ 1,902 $ 4,746 Amortization of intangible assets 3,395 6,791 Accelerated amortization of leasehold improvements 1,649 1,649 Restructuring costs 5,185 8,578 Recovery of use tax payments (1,931) (1,931) Recovery of doubtful accounts, net (2,794) (2,794) Gain on equity investments, net (139) (593) Loss on extinguishment of debt - 8,216 Income tax benefit on adjusted net loss 24,402 45,437 -------------- --------------- Total Adjustments $ 31,669 $ 70,099 ============== =============== GAAP Net Loss $ (76,216) $ (152,924) Adjusted for items above 31,669 70,099 -------------- --------------- Non GAAP Net Loss $ (44,547) $ (82,825) ============== =============== Please see Appendix A for additional information about this table. These adjustments are not in accordance with GAAP, and making these adjustments may not permit meaningful comparisons to other companies. As of the quarter ended April 30, 2004, CIENA's weighted average shares outstanding were approximately 475,189,000. Adjusting CIENA's quarterly GAAP results as noted would reduce the Company's net loss in its second fiscal quarter to $0.09 per share. For the six months ended April 30, 2004, CIENA's weighted average shares outstanding were approximately 474,192,000. Adjusting CIENA's six month GAAP results as noted would reduce the Company's net loss for the period to $0.17 per share. Business Outlook "While it appears the industry has achieved a certain level of stability, customers are maintaining an overall cautious and focused approach to spending," said CIENA's Smith. "Spending in the core of the network remains a secondary priority as service providers focus on getting more users on to their networks and generating more revenue from that traffic. With the addition of new service delivery platforms from Catena and Internet Photonics, CIENA is better positioned to benefit from that focus. "In part as a result of our broader portfolio reach, we expect revenue for our third fiscal quarter will increase by as much as 30 percent from our fiscal second quarter revenue," said Smith. Live Web Broadcast of Q2 Results CIENA will host a discussion of this morning's announcements with investors and financial analysts today, Thursday, May 20, 2004 at 8:30 a.m. (Eastern). The live broadcast of the discussion will be available via CIENA's homepage at www.CIENA.com. An archived version of the discussion will be available shortly following the conclusion of the live broadcast on the Investor Relations page of CIENA's website at: www.CIENA.com/investors. NOTE TO INVESTORS This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions of CIENA (the Company) that involve risks and uncertainties. Forward-looking statements in this release, including but not limited to: we initiated the next phase of strategic operating expense reductions that will improve our cost structure and shorten the path to our near-term goals of achieving cash flow breakeven and profitability; while it appears the industry has achieved a certain level of stability, customers are maintaining an overall cautious and focused approach to spending; spending in the core of the network remains a secondary priority as service providers focus on getting more users on to their networks and generating more revenue from that traffic; with the addition of new service delivery platforms from Catena and Internet Photonics, CIENA is better positioned to benefit from that focus; and, in part as a result of our broader portfolio reach, we expect revenue for our third fiscal quarter will increase by as much as 30 percent from our fiscal second quarter revenue, are based on information available to the Company as of the date hereof. The Company's actual results could differ materially from those stated or implied in such forward-looking statements, due to risks and uncertainties associated with the Company's business, which include the risk factors disclosed in the Company's Report on Form 10-Q, which we expect to file with the Securities and Exchange Commission on May 20, 2004. Forward-looking statements include statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. The Company assumes no obligation to update the information included in this press release, whether as a result of new information, future events or otherwise. CIENA CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Quarter Ended Six Months Ended ------------------- --------------------- April 30, April 30, April 30, April 30, 2003 2004 2003 2004 --------- --------- ---------- ---------- Revenues: Products $ 63,399 $ 62,422 $ 124,620 $ 117,096 Services 10,141 12,277 19,394 24,017 --------- --------- ---------- ---------- Total revenue 73,540 74,699 144,014 141,113 Costs: Products 40,406 56,289 79,983 90,849 Services 14,919 10,188 29,551 21,489 --------- --------- ---------- ---------- Total cost of goods sold 55,325 66,477 109,534 112,338 --------- --------- ---------- ---------- Gross profit 18,215 8,222 34,480 28,775 --------- --------- ---------- ---------- Operating expenses: Research and development 52,193 46,479 105,927 93,656 Selling and marketing 25,663 25,075 52,268 50,543 General and administrative 8,066 5,992 22,772 13,083 Deferred stock compensation costs: Research and development 3,406 1,408 7,204 3,613 Selling and marketing 676 415 1,435 933 General and administrative 346 79 720 200 Amortization of intangible assets 3,421 3,395 6,975 6,791 Restructuring costs 2,724 5,185 2,724 8,578 Recovery of use tax payments - (1,931) - (1,931) Recovery of doubtful accounts, net - (2,794) - (2,794) --------- --------- ---------- ---------- Total operating expenses 96,495 83,303 200,025 172,672 --------- --------- ---------- ---------- Loss from operations (78,280) (75,081) (165,545) (143,897) Interest and other income, net 11,131 5,614 24,432 13,292 Interest expense (8,061) (6,473) (20,264) (13,857) Gain (loss) on equity investments, net - 139 (10) 593 Loss on extinguishment of debt - - (20,606) (8,216) --------- --------- ---------- ---------- Loss before income taxes (75,210) (75,801) (181,993) (152,085) Provision for income taxes 251 415 610 839 --------- --------- ---------- ---------- Net loss $(75,461) $(76,216) $(182,603) $(152,924) ========= ========= ========== ========== Basic and diluted net loss per common share and dilutive potential common share $ (0.17) $ (0.16) $ (0.42) $ (0.32) ========= ========= ========== ========== Weighted average basic 433,932 475,189 433,330 474,192 common and dilutive ========= ========= ========== ========== potential common shares outstanding CIENA CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (unaudited) October 31, April 30, 2003 2004 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 309,665 $ 218,145 Short-term investments 796,809 824,929 Accounts receivable, net 43,600 38,593 Inventories, net 44,995 34,457 Prepaid expenses and other 34,334 42,388 ----------- ----------- Total current assets 1,229,403 1,158,512 Long-term investments 519,744 416,199 Equipment, furniture and fixtures, net 114,930 100,123 Goodwill 336,039 335,974 Other intangible assets, net 108,408 99,681 Other long-term assets 69,641 67,346 ----------- ----------- Total assets $2,378,165 $2,177,835 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 44,402 $ 38,532 Accrued liabilities 98,926 89,797 Restructuring liabilities 14,378 12,605 Unfavorable lease commitments 9,380 9,467 Income taxes payable 4,640 5,596 Deferred revenue 14,473 16,373 ----------- ----------- Total current liabilities 186,199 172,370 Long-term deferred revenue 14,547 16,964 Long-term restructuring liabilities 52,164 45,888 Long-term unfavorable lease commitments 61,312 56,362 Other long-term obligations 2,698 2,741 Convertible notes payable 730,428 690,000 ----------- ----------- Total liabilities 1,047,348 984,325 ----------- ----------- Commitments and contingencies Stockholders' equity: Preferred stock - par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding - - Common stock - par value $0.01; 980,000,000 shares authorized; 473,214,856 and 476,940,672 shares issued and outstanding 4,732 4,769 Additional paid-in capital 4,861,182 4,874,950 Deferred stock compensation (9,664) (4,572) Notes receivable from stockholders (448) (448) Accumulated other comprehensive income (loss) 2,447 (833) Accumulated deficit (3,527,432) (3,680,356) ----------- ----------- 1,330,817 1,193,510 ----------- ----------- Total liabilities and stockholders' equity $2,378,165 $2,177,835 =========== =========== Appendix A The adjustments management makes in analyzing CIENA's first quarter fiscal 2004 GAAP results are as follows: -- Deferred stock compensation costs - a non-cash expense largely unrelated to normal operations, and which arises under GAAP accounting from the assumption of unvested stock options issued by any companies we acquire. -- Amortization of intangible assets - a non-cash expense unrelated to normal operations arising from acquisitions of intangible assets, principally developed technology acquired in the Cyras, ONI, WaveSmith, and Akara acquisitions, which CIENA is required to amortize over its expected useful life. -- Accelerated amortization of leasehold improvements - a non-cash expense related to the planned closing of our San Jose, California facility. -- Restructuring costs - non-recurring charges, unrelated to normal operations, incurred as the result of reducing the size of the Company's operations to align its resources with the reduced size of the telecommunications market as well as the result of targeting new segment opportunities within the overall market. -- Recovery of use tax payments - a non-recurring gain unrelated to normal operations. -- Recovery of doubtful accounts, net - a non-recurring gain unrelated to normal operations due to payment received from a customer from which payment was previously deemed doubtful due to the customer's financial condition. -- Gain on equity investments, net - a non-recurring gain unrelated to normal operations. -- Loss on extinguishment of debt - a non-recurring expense, unrelated to normal operations. -- Income tax benefit on adjusted net loss - the income tax charge or benefit on the adjusted net loss, which is a necessary adjustment for consistency. The Company currently has a full valuation allowance for GAAP reporting purposes and accordingly does not recognize a tax benefit for losses generated. ABOUT CIENA CIENA Corporation delivers innovative network solutions to the world's largest service providers and enterprises, increasing the cost-efficiency of current services while enabling the creation of new carrier-class data services built upon the existing network infrastructure. Additional information about CIENA can be found at www.ciena.com. CONTACT: CIENA Corporation Investor Contacts: Suzanne DuLong or Jessica Towns, 888-243-6223 ir@ciena.com or Press Contacts: Aaron Graham or Nicole Anderson, 877-857-7377 pr@ciena.com