-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E5GeXVZa822yCStRNLz3l7hBCYyK1mNA6D3liIYLroZYDjbqdDbp/jYS41Zl74Tj i8KYX7ucwghZODeqz9xV7A== 0001157523-06-008856.txt : 20060831 0001157523-06-008856.hdr.sgml : 20060831 20060831071527 ACCESSION NUMBER: 0001157523-06-008856 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060831 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060831 DATE AS OF CHANGE: 20060831 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIENA CORP CENTRAL INDEX KEY: 0000936395 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 232725311 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21969 FILM NUMBER: 061066660 BUSINESS ADDRESS: STREET 1: 1201 WINTERSON ROAD CITY: LINTHICUM STATE: MD ZIP: 21090 BUSINESS PHONE: 4108658500 MAIL ADDRESS: STREET 1: 1201 WINTERSON ROAD CITY: LINTHICUM STATE: MD ZIP: 21090 8-K 1 a5218766.txt CIENA CORPORATION 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) August 31, 2006 ----------------------- Ciena Corporation - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware - -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 0-21969 23-2725311 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 1201 Winterson Road, Linthicum, MD 21090 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (410) 865-8500 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02 - RESULTS OF OPERATIONS AND FINANCIAL CONDITION On August 31, 2006, Ciena Corporation issued a press release announcing its financial results for its third fiscal quarter ended July 31, 2006. The text of the press release is furnished as Exhibit 99.1 to this Report. The information in this Report shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended. ITEM 9.01 - FINANCIAL STATEMENTS AND EXHIBITS (c) The following exhibit is being filed herewith: Exhibit Number Description of Document -------------- ----------------------- Exhibit 99.1 Text of Press Release dated August 31, 2006, issued by Ciena Corporation, reporting its results of operations for its third fiscal quarter ended July 31, 2006. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Ciena Corporation Date: August 31, 2006 By: /S/ Russell B. Stevenson, Jr. ---------------------------------------- Russell B. Stevenson, Jr. Senior Vice President, General Counsel and Secretary EX-99.1 2 a5218766ex99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 Ciena Reports Fiscal Third Quarter 2006 Results; Delivers 16% sequential revenue growth in tenth straight quarter of growth LINTHICUM, Md.--(BUSINESS WIRE)--Aug. 31, 2006--Ciena(R) Corporation (NASDAQ:CIEN), the network specialist, today announced results for its fiscal third quarter 2006 ended July 31, 2006. Revenue for the third quarter totaled $152.5 million, representing a 16.3% sequential increase from fiscal second quarter revenue of $131.2 million, and an increase of 38.0% over the same period a year ago when the Company reported sales of $110.5 million. For the nine months ended July 31, 2006, Ciena reported revenue of $404.1 million, representing an increase of 30.7% over revenue of $309.1 million for the same nine-month year-ago period. "Strong sequential revenue growth in our fiscal third quarter, combined with significant progress toward a normalized operating model, attests to continued success in the execution of our strategy," said Ciena CEO and President Gary Smith. "Our ability to deliver ten straight quarters of revenue growth is evidence that our network specialist position is resonating with customers, as service providers and enterprises alike look to evolve network infrastructures to make ready for a new wave of Ethernet and IP-based services and end-user applications." Separately today, Ciena announced that its Board of Directors has approved a one-for-seven reverse split of its common stock to be effective as of 5:00 p.m. Eastern Time on September 22, 2006. The results presented in this press release do not take into account the effect of this forthcoming reverse split. On the basis of generally accepted accounting principles (GAAP), Ciena's net loss for the fiscal third quarter 2006 was $4.3 million, or a net loss of $0.01 per share. This compares with a reported GAAP net loss of $51.0 million, or a net loss of $0.09 per share, for the same period a year ago. For the nine-month period ended July 31, 2006, Ciena's reported GAAP net loss was $12.5 million, or a net loss of $0.02 per share. This compares to a GAAP net loss of $182.8 million, or a net loss of $0.32 per share, for the same nine-month year-ago period. Ciena's GAAP results for its fiscal third quarter 2006 include $2.9 million of share-based compensation expense related to equity-based awards in accordance with Statement of Financial Accounting Standards (SFAS) No. 123R, adopted by Ciena on November 1, 2005. Fiscal year 2005's GAAP results do not include the impact of SFAS 123R. Non-GAAP Presentation of Quarterly Results In evaluating the operating performance of its business, Ciena's management excludes certain charges and credits that are required by GAAP. These items, which are identified in the table that follows (in thousands except per share data), 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 July 31, July 31, 2005 2006 ------------ ------------ Stock compensation product $ - $ 361 Stock compensation services - 211 Stock compensation research and development 2,195 1,061 Stock compensation sales and marketing 934 715 Stock compensation general and administrative 153 594 Contingent legal and consulting fees upon litigation settlement - 5,705 Amortization of intangible assets 9,653 6,295 Restructuring costs 4,355 11,008 Long-lived asset impairment (25) - Provision for (recovery of) doubtful accounts, net 2,604 (139) Loss (gain) on equity investments, net 1,708 (948) Loss (gain) on extinguishment of debt (3,882) - Income tax adjustment 11,722 (6,994) ------------ ------------ Total adjustments $ 29,417 $ 17,869 ============ ============ GAAP net loss $ (51,027) $ (4,285) Adjustment for items above 29,417 17,869 ------------ ------------ Adjusted (non-GAAP) net (loss) income $ (21,610) $ 13,584 ============ ============ Weighted average basic common shares outstanding 576,331 589,381 Weighted average basic common and dilutive potential common shares outstanding 576,331 650,666 Adjusted (non-GAAP) net (loss) income per share $ (0.04) $ 0.02 Adjusting Ciena's fiscal third quarter 2006 GAAP net loss by $17.9 million for the items noted above would have the effect of moving the Company's quarterly results from a net loss of $4.3 million to net income of $13.6 million. The GAAP net loss per share, calculated using the basic share count of 589.4 million shares, is a loss of $0.01 per share. Since the consequence of the adjustments described above result in moving from a net loss to a net profit, it is necessary to use the Company's fully diluted share count of 650.7 million shares to compute earnings per share on an as-adjusted basis. On this basis, the as-adjusted earnings per share would be $0.02. To aid investors' understanding of Ciena's results and the effect of SFAS 123R-related share-based compensation expenses, the following table summarizes the presentation of Ciena's financial results covered in this press release for both the Company's fiscal third quarter 2005 and fiscal third quarter 2006. Periods prior to the Company's fiscal first quarter 2006 have not been restated to reflect, and do not include, the impact of SFAS 123R. Prior periods do include share-based compensation expense recognized in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," as interpreted by Financial Accounting Standards Board (FASB) Interpretation (FIN) No. 44. (in thousands except per share data) Q3 2005 Q3 2006 --------------------- --------------------- Net Net Income Net Net Income Income (Loss) Income (Loss) (Loss) per Share (Loss) per Share ---------- ---------- ---------- ---------- GAAP - ----- 1. GAAP results as reported $(51,027) $(0.09) $(4,285) $(0.01) ========== ========== ========== ========== Non-GAAP - --------- 1. GAAP results less SFAS 123R-related share- based compensation expense N/A N/A $(1,343) $(0.00) ========== ========== 2. GAAP results less APB 25-related share- based compensation expense $(47,745) $(0.08) N/A N/A ========== ========== 3. As-adjusted results (excludes SFAS 123R and APB 25-related share-based compensation expense and other items as defined in previous table) $(21,610) $(0.04) $13,584 $0.02 ========== ========== ========== ========== Third Quarter 2006 Performance Highlights -- Delivered sequential revenue growth of 16.3% and year-over-year revenue growth of 38.0%. -- As a result of ongoing product- and manufacturing-related cost reductions and favorable product mix in the quarter, delivered overall gross margin of 47.0%, a slight decrease from fiscal second quarter gross margin of 48.0%. -- Ended the fiscal third quarter 2006 with cash and short- and long-term investments of $1.2 billion. Third Quarter 2006 Customer Highlights -- neuf cegetel selected the CN 4200(TM) FlexSelect(TM) Advanced Services Platform for deployment across its metro and regional broadband network in France to support the delivery of new broadband applications to corporate and residential customers. -- Provided CN 4200 FlexSelect Advanced Services Platform to fortify Allen's TV Cable Service, Inc.'s (ATVC) services infrastructure that was damaged by Hurricanes Katrina and Rita. -- Named an outstanding supplier to AT&T Inc., one of the world's leading data, voice, wireless and Internet services providers, as a result of Ciena's commitment to excellence over the past year. Third Quarter 2006 Product Highlights -- Expanded CN 4200 FlexSelect Advanced Services Platform family with the CN 4200 MC, which extends the FlexSelect Architecture to the network edge and reduces the cost to deliver a variety of service backhaul and metro transport applications. -- Introduced the new Ethernet Services Line Module (ESLM), an enhancement to Ciena's market-leading CoreDirector(R) multiservice switch, to further simplify migration to packet-based services while reducing the cost and complexity of existing SONET/SDH networks. -- Added Dynamic Wavelength Routing capabilities to the CN 4200 FlexSelect Advanced Services Platform, creating the only solution that uses a hybrid electrical and optical ROADM design to combine whole and sub-wavelength switching in one platform. -- CN 4200 FlexSelect Advanced Services Platform was awarded 4.5 out of 5 diamonds in Broadband Gear Report's 2006 Diamond Technology Reviews. Business Outlook "We continue to see positive indicators in overall market demand for next-generation solutions that maximize the business case for IP service delivery," said Smith. "As a result of these market dynamics and strong traction across our product portfolio and customer landscape, we expect our fiscal fourth quarter revenue will trend upward sequentially by as much as 5% from our fiscal third quarter revenue." Smith continued, "We remain confident in our ability to balance prudent investment with operating efficiencies, enabling us to effectively grow and scale our business while preserving our innovation and focus on the technology areas we've chosen to pursue." Live Web Broadcast of Fiscal Third Quarter Results Ciena will host a discussion of its fiscal third quarter results with investors and financial analysts today, Thursday, August 31, 2006 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-Q filed with the Securities and Exchange Commission on June 1, 2006. 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 continue to see positive indicators in overall market demand for next-generation solutions that maximize the business case for IP service delivery; as a result of these market dynamics and strong traction across our product portfolio and customer landscape, we expect our fiscal fourth quarter revenue will trend upward sequentially by as much as 5% from our fiscal third quarter revenue; and, we remain confident in our ability to balance prudent investment with operating efficiencies, enabling us to effectively grow and scale our business while preserving our innovation and focus on the technology areas we've chosen to pursue. 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 BALANCE SHEETS (in thousands, except share data) ASSETS (unaudited) October 31, July 31, Current assets: 2005 2006 ------------ ------------ Cash and cash equivalents $ 358,012 $ 552,234 Short-term investments 579,531 466,362 Accounts receivable, net 72,786 89,638 Inventories, net 49,333 95,821 Prepaid expenses and other 37,867 43,631 ------------ ------------ Total current assets 1,097,529 1,247,686 Long-term investments 155,944 187,074 Equipment, furniture and fixtures, net 28,090 28,227 Goodwill 232,015 232,015 Other intangible assets, net 120,324 98,536 Other long-term assets 41,327 37,001 ------------ ------------ Total assets $ 1,675,229 $ 1,830,539 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 43,868 $ 39,492 Accrued liabilities 76,491 88,205 Restructuring liabilities 15,492 9,413 Unfavorable lease commitments 9,011 8,008 Income taxes payable 5,785 5,855 Deferred revenue 27,817 22,689 ------------ ------------ Total current liabilities 178,464 173,662 Long-term deferred revenue 15,701 19,912 Long-term restructuring liabilities 54,285 28,218 Long-term unfavorable lease commitments 41,364 34,880 Other long-term obligations 1,296 1,732 Convertible notes payable 648,752 842,262 ------------ ------------ Total liabilities 939,862 1,100,666 ------------ ------------ 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; 580,340,947 and 590,932,298 shares issued and outstanding 5,803 5,909 Additional paid-in capital 5,489,613 5,491,942 Deferred stock compensation (2,286) - Changes in unrealized gains on investments, net (4,673) (2,402) Translation adjustment (495) (495) Accumulated deficit (4,752,595) (4,765,081) ------------ ------------ Total stockholders' equity 735,367 729,873 ------------ ------------ Total liabilities and stockholders' equity $ 1,675,229 $ 1,830,539 ============ ============ CIENA CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Quarter Ended Nine Months Ended July 31, July 31, --------------------- --------------------- 2005 2006 2005 2006 ---------- ---------- ---------- ---------- Revenues: Products $ 97,448 $ 137,809 $ 271,366 $ 360,958 Services 13,032 14,690 37,708 43,146 ---------- ---------- ---------- ---------- Total revenue 110,480 152,499 309,074 404,104 ---------- ---------- ---------- ---------- Costs: Products 62,756 70,356 189,447 189,712 Services 10,095 10,479 30,601 29,367 ---------- ---------- ---------- ---------- Total cost of goods sold 72,851 80,835 220,048 219,079 ---------- ---------- ---------- ---------- Gross profit 37,629 71,664 89,026 185,025 ---------- ---------- ---------- ---------- Operating expenses: Research and development 34,814 26,190 105,084 84,508 Selling and marketing 30,209 24,903 86,697 78,132 General and administrative 9,493 16,217 26,043 37,359 Amortization of intangible assets 9,653 6,295 30,268 18,885 Restructuring costs 4,355 11,008 15,245 16,037 Long-lived asset impairments (25) - 134 (6) Provision for (recovery of) doubtful accounts, net 2,604 (139) 2,604 (2,990) Gain on lease settlement - - - (11,648) ---------- ---------- ---------- ---------- Total operating expenses 91,103 84,474 266,075 220,277 ---------- ---------- ---------- ---------- Loss from operations (53,474) (12,810) (177,049) (35,252) Interest and other income, net 7,522 14,045 22,058 34,504 Interest expense (7,163) (6,148) (21,619) (18,016) Gain (loss) on equity investments, net (1,708) 948 (8,986) 215 Gain on extinguishment of debt 3,882 - 3,882 7,052 ---------- ---------- ---------- ---------- Loss before income taxes (50,941) (3,965) (181,714) (11,497) Provision for income taxes 86 320 1,115 989 ---------- ---------- ---------- ---------- Net loss $ (51,027) $ (4,285) $(182,829) $ (12,486) ========== ========== ========== ========== Basic and diluted net loss per common share and dilutive potential common share $ (0.09) $ (0.01) $ (0.32) $ (0.02) ========== ========== ========== ========== Weighted average basic common and dilutive potential common shares outstanding 576,331 589,381 573,939 584,977 ========== ========== ========== ========== CIENA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine Months Ended July 31, -------------------------- 2005 2006 ------------ ------------ Cash flows from operating activities: Net loss $ (182,829) $ (12,486) Adjustments to reconcile net loss to net cash used in operating activities: Early extinguishment of debt (3,882) (7,052) Amortization of premium on marketable securities 12,344 2,058 Non-cash loss from equity investments 8,986 733 Non-cash impairment of long-lived assets 134 - Depreciation and amortization of leasehold improvements 26,803 13,173 Stock compensation 8,810 10,953 Amortization of intangibles 33,169 21,788 Provision for doubtful accounts 2,604 - Provision for inventory excess and obsolescence 3,396 6,158 Provision for warranty and other contractual obligations 7,546 10,885 Other 2,072 1,236 Changes in assets and liabilities: Accounts receivable (27,348) (16,852) Inventories (7,229) (52,646) Prepaid expenses and other 5,194 1,282 Accounts payable, accrued liabilities and other obligations (17,789) (42,744) Income taxes payable 739 70 Deferred revenue 8,101 (917) ------------ ------------ Net cash used in operating activities (119,179) (64,361) ------------ ------------ Cash flows from investing activities: Additions to equipment, furniture, fixtures and intellectual property (8,935) (13,332) Proceeds from sale of equipment, furniture and fixtures 266 - Restricted cash (819) 1,347 Purchases of available for sale securities (490,041) (403,664) Maturities of available for sale securities 755,320 485,916 Minority equity investments, net 4,882 948 ------------ ------------ Net cash provided by investing activities 260,673 71,215 ------------ ------------ Cash flows from financing activities: Proceeds from issuance of 0.25% convertible senior notes payable - 300,000 Repurchase of 3.75% convertible notes payable (36,913) (98,410) Debt issuance costs - (7,990) Purchase of call spread option - (28,457) Proceeds from issuance of common stock 5,498 22,225 Repayment of notes receivable from stockholders 48 - ------------ ------------ Net cash (used) provided by financing activities (31,367) 187,368 ------------ ------------ Net increase in cash and cash equivalents 110,127 194,222 Cash and cash equivalents at beginning of period 185,868 358,012 ------------ ------------ Cash and cash equivalents at end of period $ 295,995 $ 552,234 ============ ============ Appendix A The adjustments management makes in analyzing Ciena's fiscal third quarter 2006 GAAP results are as follows: -- Stock compensation costs - As of November 1, 2005, Ciena adopted SFAS 123R. In accordance with the modified prospective application transition method, Ciena's consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123R. Prior periods do include share-based compensation expense recognized in accordance with APB 25 as interpreted by FASB Interpretation (FIN) No. 44. -- Contingent legal and consulting fees upon litigation settlement - included in general and administrative expenses during our third quarter of fiscal 2006 were $5.7 million in contingent fees paid to outside counsel and advisors connected with the settlement of patent litigation with Nortel Networks. -- 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. -- 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 opportunities within the overall market, which the Company feels are not reflective of its ongoing operating costs. -- 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. -- Provision for (recovery of) doubtful accounts - a non-recurring charge unrelated to normal operations resulting from the recovery of an amount that was previously written off. -- Gain (loss) on equity investments, net - a non-recurring loss or gain related to changes in the value of the Company's equity investments which the Company feels is not reflective of its ongoing operating costs. -- Gain on extinguishment of debt - a non-recurring gain related to the early extinguishment of outstanding debt. -- Income tax adjustment net loss - the income tax charge or benefit on the adjusted net loss or income, 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 Press Contact: Nicole Anderson, 410-694-5786 pr@ciena.com or Investor Contact: Jessica Towns, 888-243-6223 ir@ciena.com -----END PRIVACY-ENHANCED MESSAGE-----