EX-99.1 2 a4781336ex991.txt PRESS RELEASE EXHIBIT 99.1 Ciena Reports Fourth Quarter and Fiscal Year 2004 Results; Revenue Increases 8.5% Sequentially, 16.1% Year-over-Year LINTHICUM, Md.--(BUSINESS WIRE)--Dec. 9, 2004--Ciena(R) Corporation (NASDAQ:CIEN), the network specialist, today reported its fourth quarter and fiscal year 2004 results for the period ending October 31, 2004. Revenue for the fourth quarter totaled $82.0 million, representing an 8.5% sequential increase, and an increase of 16.1% over the same period a year ago. For the year, Ciena's revenue totaled $298.7 million, representing an increase of 5.5% over 2003 revenue of $283.1 million. On a generally accepted accounting principles (GAAP) basis, Ciena's reported net loss for the fiscal fourth quarter was $495.1 million, or a net loss of $0.87 per share. This loss includes a goodwill impairment of $371.7 million and compares to a GAAP net loss of $115.0 million, or a net loss of $0.24 per share, in the same period a year ago. On a GAAP basis, Ciena's reported net loss for the fiscal year was $789.5 million, or a net loss of $1.51 per share. This compares to a GAAP net loss of $386.5 million, or a net loss of $0.87 per share, in fiscal 2003. 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 tables that follow, 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 Quarter Ended Ended ----------- ----------- Oct 31, Oct 31, 2003 2004 ----------- ----------- (in (in Item thousands) thousands) ---- ----------- ----------- Stock compensation costs $ 3,487 $ 3,184 Amortization of intangible assets 6,416 11,381 In-process research and development 1,300 - Restructuring costs 8,972 34,982 Goodwill impairment - 371,712 Long-lived asset impairment 33,528 8,709 Recovery of use tax payments - - Recovery of doubtful accounts, net - - Accelerated amortization of leasehold improvements - 8,382 Loss (gain) on equity investments, net 4,750 4,500 Loss on extinguishment of debt - - Income tax benefit on adjusted net loss 20,031 18,328 ----------- ----------- Total Adjustments $ 78,484 $ 461,178 =========== =========== GAAP Net Loss $ (115,040) $ (495,073) Adjustment for items above 78,484 461,178 ----------- ----------- Non-GAAP Net Loss $ (36,556) $ (33,895) =========== =========== Please see Appendix A for additional information about this table. As of the quarter ended October 31, 2004, Ciena's weighted average shares outstanding were approximately 569,462,000. Adjusting Ciena's quarterly GAAP results as noted would reduce the Company's net loss in its fiscal fourth quarter to $0.06 per share. This compares with an adjusted net loss of $0.08 per share in the same period a year ago. Year Year Ended Ended ----------- ----------- Oct 31, Oct 31, 2003 2004 ----------- ----------- (in (in Item thousands) thousands) ---- ----------- ----------- Stock compensation costs $ 16,777 $ 11,883 Amortization of intangible assets 17,870 30,839 In-process research and development 2,800 30,200 Restructuring costs 13,575 57,107 Goodwill impairment - 371,712 Long-lived asset impairment 47,176 15,926 Recovery of use tax payments - (5,388) Recovery of doubtful accounts, net - (2,794) Accelerated amortization of leasehold improvements - 22,535 Loss (gain) on equity investments, net 4,760 4,107 Loss on extinguishment of debt 20,606 8,216 Income tax benefit on adjusted net loss 92,850 86,521 ----------- ----------- Total Adjustments $ 216,414 $ 630,864 =========== =========== GAAP Net Loss $ (386,517) $ (789,464) Adjustment for items above 216,414 630,864 ----------- ----------- Non-GAAP Net Loss $ (170,103) $ (158,600) =========== =========== Please see Appendix A for additional information about this table. For the fiscal year ended October 31, 2004, Ciena's weighted average shares outstanding were approximately 521,454,000. Adjusting Ciena's fiscal year 2004 GAAP results as noted would reduce the Company's net loss for the period to $0.30 per share. This compares with an adjusted net loss of $0.38 per share in the same period a year ago. These adjustments are not in accordance with GAAP, and making these adjustments may not permit meaningful comparisons to other companies. "Our fiscal fourth quarter was significant in a number of ways: we delivered stronger-than-expected revenue growth and improved gross margin, and we lowered our cash burn," said Gary Smith, Ciena's president and CEO. "There is more work to be done, but we have made meaningful progress in a number of strategic areas. In addition to expanding the breadth of product we are selling to existing customers, we also have developed new channel partnerships. These actions support our specialist approach to the market and our focus on specific applications that have a major impact on our customers' businesses." Fourth Quarter 2004 Highlights -- Delivered sequential revenue growth of 8.5% and year-over-year revenue growth of 16.1%. -- Improved gross margin from 24.9% in the fiscal third quarter to 29.5% in the fiscal fourth quarter. -- Reduced ongoing research and development, sales and marketing and general and administrative operating expenses by 9% sequentially. -- Reduced cash burn, ending the quarter with cash and short- and long-term investments valued at $1.29 billion. -- Forwarded enterprise channel strategy with the formal announcement of a partnership with EMC and secured several new enterprise customers including one of the nation's largest retailers. -- 35% of the quarter's total revenue resulted from recently acquired products targeting high-value data and service delivery applications. Business Outlook "We have taken a number of important steps toward restoring health and profitability to our business, and we have set the stage for continued meaningful improvements to Ciena's operating model," said Smith. "Short term, we expect customer spending patterns to drive revenue growth and anticipate our fiscal first quarter revenue will increase by between seven to ten percent from our fiscal fourth quarter revenue." Live Web Broadcast of Fourth Quarter and Fiscal Year Results Ciena will host a discussion of its fourth quarter and fiscal year results with investors and financial analysts today, Thursday, December 9, 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: http://www.ciena.com/investors/investors.htm NOTE TO INVESTORS This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. These statements are based on information available to the Company as of the date hereof; and Ciena's actual results could differ materially from those stated or implied, due to risks and uncertainties associated with its business, which include the risk factors disclosed in its Report on Form 10-K, which Ciena expects to file with the Securities and Exchange Commission on December 9, 2004. Forward-looking statements include statements regarding Ciena'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. Forward-looking statements in this release include: we have taken a number of important steps toward restoring health and profitability to our business, and we have set the stage for continued meaningful improvements to Ciena's operating model; short term, we expect customer spending patterns to drive revenue growth and anticipate our fiscal first quarter revenue will increase by between seven to ten percent from our fiscal fourth quarter revenue. Ciena 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 Oct 31, Year Ended Oct 31, --------------------- --------------------- 2003 2004 2003 2004 ---------- ---------- ---------- ---------- Revenue: Products $ 56,858 $ 68,774 $ 240,772 $ 250,210 Services 13,786 13,231 42,364 48,497 ---------- ---------- ---------- ---------- Total revenue 70,644 82,005 283,136 298,707 ---------- ---------- ---------- ---------- Costs: Products 34,425 47,543 153,602 186,461 Services 14,189 10,281 56,489 40,493 ---------- ---------- ---------- ---------- Total cost of goods sold 48,614 57,824 210,091 226,954 ---------- ---------- ---------- ---------- Gross profit 22,030 24,181 73,045 71,753 ---------- ---------- ---------- ---------- Operating Expenses Research and development 45,809 47,432 199,699 198,850 Selling and marketing 26,389 28,248 103,193 108,259 General and administrative 7,737 7,222 38,478 27,274 Stock compensation costs Research and development 2,688 1,041 12,824 6,514 Selling and marketing 606 1,904 2,728 4,051 General and administrative 193 239 1,225 1,318 Amortization of intangible assets 6,416 11,381 17,870 30,839 In-process research and development 1,300 - 2,800 30,200 Restructuring costs 8,972 34,982 13,575 57,107 Goodwill impairment - 371,712 - 371,712 Long-lived asset impairment 33,528 8,709 47,176 15,926 Recovery of sale, export, use tax liabilities and payments - - - (5,388) Provision (benefit) for doubtful accounts, net - - - (2,794) ---------- ---------- ---------- ---------- Total operating expenses 133,638 512,870 439,568 843,868 ---------- ---------- ---------- ---------- Loss from operations (111,608) (488,689) (366,523) (772,115) Interest and other income (expense), net 9,662 4,680 42,959 22,908 Interest expense (7,997) (6,487) (36,331) (26,813) Gain (loss) on equity investments, net (4,750) (4,500) (4,760) (4,107) Loss on extinguishment of debt - - (20,606) (8,216) ---------- ---------- ---------- ---------- Loss before income taxes (114,693) (494,996) (385,261) (788,343) Provision for income taxes 347 77 1,256 1,121 ---------- ---------- ---------- ---------- Net loss $(115,040) $(495,073) $(386,517) $(789,464) ========== ========== ========== ========== Basic and diluted net loss per common share and dilutive potential common share $ (0.24) $ (0.87) $ (0.87) $ (1.51) ========== ========== ========== ========== Weighted average basic common and dilutive potential common shares outstanding 470,244 569,462 446,696 521,454 ========== ========== ========== ========== Ciena Corporation CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (unaudited) ASSETS October 31, ----------------------- Current assets: 2003 2004 ----------- ----------- Cash and cash equivalents $ 309,665 $ 202,623 Short-term investments 796,809 753,251 Accounts receivable, net 43,600 45,878 Inventories, net 44,995 47,614 Prepaid expenses and other 34,334 29,906 ----------- ----------- Total current assets 1,229,403 1,079,272 Long-term investments 519,744 329,704 Equipment, furniture and fixtures, net 114,930 51,252 Goodwill 336,039 408,615 Other intangible assets, net 108,408 208,015 Other long-term assets 69,641 60,196 ----------- ----------- Total assets $2,378,165 $2,137,054 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 44,402 $ 31,509 Accrued liabilities 98,926 76,045 Restructuring liabilities 14,378 16,203 Unfavorable lease commitments 9,380 9,902 Income taxes payable 4,640 3,354 Deferred revenue 14,473 21,566 ----------- ----------- Total current liabilities 186,199 158,579 Long-term deferred revenue 14,547 16,010 Long-term restructuring liabilities 52,164 65,180 Long-term unfavorable lease commitments 61,312 51,341 Other long-term obligations 2,698 1,522 Convertible notes payable 730,428 690,000 ----------- ----------- Total liabilities 1,047,348 982,632 ----------- ----------- 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 571,656,659 shares issued and outstanding 4,732 5,717 Additional paid-in capital 4,861,182 5,482,175 Deferred stock compensation (9,664) (13,761) Notes receivable from stockholders (448) (48) Accumulated other comprehensive income (loss) 2,447 (2,765) Accumulated deficit (3,527,432) (4,316,896) ----------- ----------- Total stockholders' equity 1,330,817 1,154,422 ----------- ----------- Total liabilities and stockholders' equity $2,378,165 $2,137,054 =========== =========== Appendix A The adjustments management makes in analyzing Ciena's fourth quarter and fiscal year 2004 GAAP results are as follows: -- Stock compensation costs - a non-cash expense which arises under GAAP accounting from the assumption of unvested stock options issued by any companies we acquire and which the Company feels is not reflective of its ongoing operating costs. -- Amortization of intangible assets - a non-cash expense arising from acquisitions of intangible assets, principally developed technology, which Ciena is required to amortize over its expected useful life and which the Company feels is not reflective of its ongoing operating costs. -- In-process research and development - a non-recurring expense related to in-process technology that, as of the date of acquisition, has not reached technological feasibility and has no alternative future use. -- Restructuring costs - non-recurring charges 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, which the Company feels are not reflective of its ongoing operating costs. -- Goodwill impairment - non-cash expense resulting from the decline in the forecasted market demand for the Company's products and the reduction in valuations of comparable businesses. -- Long-lived asset impairments - non-recurring charges, incurred as a result of excess equipment classified as held for sale which the Company feels are not reflective of its ongoing operating costs. -- Recovery of sales, export and use tax liabilities and payments - a non-recurring gain which the Company feels is not reflective of its ongoing operating costs. -- Recovery of doubtful accounts, net - a non-recurring gain due to payment received from a customer from which payment was previously deemed doubtful due to the customer's financial condition which the Company feels is not reflective of its ongoing operating costs. -- Accelerated amortization of leasehold improvements - a non-cash expense related to the closure of our San Jose, California facility. -- Loss (gain) on equity investments, net - a non-recurring gain or loss related to changes in the value of the Company's equity investments which the Company feels is not reflective of its ongoing operating costs. -- Loss on extinguishment of debt - a non-recurring expense related to early extinguishment of long-term debt which the Company feels is not reflective of its ongoing operating costs. -- 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 is the network specialist, focused on expanding the possibilities for its customers' networks while reducing their cost of ownership. The Company's systems, software and services target and cure specific network pain points so that telcos, cable operators, governments and enterprises can best exploit the new applications that are driving their businesses forward. For more information, visit www.ciena.com. CONTACT: Ciena Corporation Investor Contact: Jessica Towns, 888-243-6223 ir@ciena.com or Press Contacts: Nicole Anderson, 410-694-5786 pr@ciena.com