EX-99.1 2 a5415222ex991.txt EXHIBIT 99.1 Exhibit 99.1 Ciena Reports Fiscal Second Quarter 2007 Results Company Delivers 17.2% Sequential, 47.5% Year-over-Year Revenue Growth LINTHICUM, Md.--(BUSINESS WIRE)--May 31, 2007--Ciena(R) Corporation (NASDAQ:CIEN), the network specialist, today announced results for its fiscal second quarter ended April 30, 2007. Revenue for the second quarter totaled $193.5 million, representing a 17.2% sequential increase from fiscal first quarter revenue of $165.1 million, and an increase of 47.5% over the same period a year ago when the Company reported sales of $131.2 million. For the six months ended April 30, 2007, Ciena reported revenue of $358.6 million, representing an increase of 42.5% over revenue of $251.6 million for the same six-month year-ago period. On the basis of generally accepted accounting principles (GAAP), Ciena's net income for the fiscal second quarter 2007 was $13.0 million, or net income of $0.14 per diluted share. This compares with a reported GAAP net loss of $1.9 million, or a net loss of $0.02 per share, for the same period a year ago. For the six-month period ended April 30, 2007, Ciena's reported GAAP net income was $24.1 million, or net income of $0.26 per diluted share. This compares to a GAAP net loss of $8.2 million, or a net loss of $0.10 per share, for the same six-month year-ago period. "Across all of our market segments, our customers' key operational focus is making the cost-effective transition from multiple, disparate networks to a converged, multi-purpose network infrastructure while simultaneously managing escalating bandwidth and quality-of-service requirements," said Gary Smith, Ciena president and CEO. "Several years ago, Ciena embarked on a strategy designed to position us to benefit from the network transition and convergence we're seeing emerge today, and we believe our persistent execution of that strategy, articulated in our FlexSelect(TM) Architecture and vision, is what has enabled us to deliver better-than-market revenue growth." 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 April 30, April 30, --------- --------- 2006 2007 --------- --------- Stock-based compensation-product $375 $362 Stock-based compensation-services 205 285 Stock-based compensation-research and development 1,421 1,085 Stock-based compensation-sales and marketing 948 1,866 Stock-based compensation-general and administrative 1,007 1,892 Amortization of intangible assets 6,295 6,295 Restructuring costs (recoveries) 3,014 (734) Long-lived asset impairment (3) - Recovery of doubtful accounts, net (247) - Gain on lease settlement (5,628) - Gain on extinguishment of debt (362) - ------------------- Total adjustments $7,025 $11,051 ========= ========= GAAP net income (loss) $(1,910) $13,010 Adjustment for items above 7,025 11,051 --------- --------- Adjusted (non-GAAP) net income $5,115 $24,061 ========= ========= Weighted average basic common shares outstanding 83,518 85,198 Weighted average dilutive potential common shares outstanding 87,457 93,737 Adjusted (non-GAAP) net income per share $0.06 $0.26 Please see Appendix A for additional information about this table. Adjusting Ciena's unaudited fiscal second quarter 2007 GAAP net income of $13.0 million for the items noted above would increase the Company's adjusted (non-GAAP) net income in the quarter to $24.1 million, or an adjusted (non-GAAP) net income of $0.26 per adjusted diluted share. This compares with an adjusted (non-GAAP) net income of $5.1 million, or an adjusted (non-GAAP) net income of $0.06 per adjusted diluted share, in the same year-ago period. Second Quarter 2007 Performance Highlights -- Achieved sequential quarterly revenue growth of 17.2% and year-over-year revenue growth of 47.5%. -- Delivered overall gross margin of 42.3% and product gross margin of 47.3%. -- Achieved positive cash flow with cash generated from operations in the quarter. -- Ended the fiscal second quarter 2007 with cash, cash equivalents and short- and long-term investments of $1.2 billion. Second Quarter 2007 Customer Highlights -- Star Telephone selected the CN 4200(TM) FlexSelect(TM) Advanced Services Platform for its core network infrastructure upgrade. -- Dreamline Co., Ltd. chose the CN 4200 to support the delivery of new Ethernet services for its growing base of leased-line customers in South Korea. -- RENATER, the national research and education network in France, deployed the CN 4200 across the organization's new metropolitan area network (MAN) in Paris. Second Quarter 2007 Product Highlights -- Announced FlexSelect(TM) for Ethernet, a comprehensive Ethernet strategy designed to make Ethernet a carrier-class, performance-grade convergence vehicle from the access network to the core. -- Introduced the 3000 Ethernet Access Series to provide access over any media for carrier Ethernet service delivery. -- Introduced the CN 5060(TM) Multiservice Carrier Ethernet Platform, a next-generation Ethernet-optimized platform that enables a cost-effective transition to converged Ethernet switching in metro and edge aggregation networks. -- Successfully completed interoperability testing and qualification of the CN 4200 FlexSelect Advanced Services Platform for both IBM's Geographically Dispersed Parallel Sysplex(TM) (GDPS(R)) business continuity solution and Server Time Protocol (STP), the new generation of technology for time synchronization of System Z(TM) mainframe server environments. Business Outlook "Given the demand pipeline we see today, we expect to deliver fiscal third quarter revenue growth of up to five percent from our fiscal second quarter, and we are increasing our fiscal 2007 annual growth expectations from between 27 to 30 percent growth to up to 36 percent growth," Smith said. "In addition, the visibility we have into anticipated product mix leads us to believe we will be able to achieve this growth while delivering gross margin in a mid-40s range in our fiscal third quarter," said Smith. "Successfully achieving our revenue and gross margin goals would put us on track to achieve a significant milestone of 10 percent income from operations on an as-adjusted basis as soon as our fiscal third quarter 2007." Live Web Broadcast of Fiscal Second Quarter Results Ciena will host a discussion of its fiscal second quarter results with investors and financial analysts today, Thursday, May 31, 2007 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 March 2, 2007. 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: Several years ago, Ciena embarked on a strategy designed to position us to benefit from the network transition and convergence we're seeing emerge today, and we believe our persistent execution of that strategy, articulated in our FlexSelect(TM) Architecture and vision, is what has enabled us to deliver better-than-market revenue growth; given the demand pipeline we see today, we expect to deliver fiscal third quarter revenue growth of up to five percent from our fiscal second quarter, and we are increasing our annual growth expectations from between 27 to 30 percent growth to up to 36 percent growth for fiscal 2007; the visibility we have into anticipated product mix leads us to believe we will be able to achieve this growth while delivering gross margin in a mid-40s range in our fiscal third quarter; and successfully achieving our revenue and gross margin goals would put us on track to achieve a significant milestone of 10 percent income from operations on an as-adjusted basis as soon as our fiscal third quarter. Ciena assumes no obligation to update the information included in this press release, whether as a result of new information, future events or otherwise. (Unaudited Condensed Consolidated Balance Sheets, Statement of Operations and Cash Flows follow) CIENA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (unaudited) ASSETS October 31, April 30, ----------- ----------- Current assets: 2006 2007 ----------- ----------- Cash and cash equivalents $220,164 $470,306 Short-term investments 628,393 646,653 Accounts receivable, net 107,172 145,495 Inventories, net 106,085 118,790 Prepaid expenses and other 36,372 43,930 ----------- ----------- Total current assets 1,098,186 1,425,174 Long-term investments 351,407 105,556 Equipment, furniture and fixtures, net 29,427 37,567 Goodwill 232,015 232,015 Other intangible assets, net 91,274 76,749 Other long-term assets 37,404 45,995 ----------- ----------- Total assets $1,839,713 $1,923,056 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $39,277 $69,942 Accrued liabilities 79,282 84,476 Restructuring liabilities 8,914 7,065 Unfavorable lease commitments 8,512 7,653 Income taxes payable 5,981 6,479 Deferred revenue 19,637 36,097 Convertible notes payable - 542,262 ----------- ----------- Total current liabilities 161,603 753,974 Long-term deferred revenue 21,039 24,071 Long-term restructuring liabilities 26,720 22,694 Long-term unfavorable lease commitments 32,785 28,596 Other long-term obligations 1,678 1,594 Long-term convertible notes payable 842,262 300,000 ----------- ----------- Total liabilities 1,086,087 1,130,929 ----------- ----------- 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; 140,000,000 shares authorized; 84,891,656 and 85,342,240 shares issued and outstanding 849 853 Additional paid-in capital 5,505,853 5,520,902 Unrealized gains on investments, net (496) (232) Translation adjustment (580) (1,462) Accumulated deficit (4,752,000) (4,727,934) ----------- ----------- Total stockholders' equity 753,626 792,127 ----------- ----------- Total liabilities and stockholders' equity $1,839,713 $1,923,056 =========== =========== CIENA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Quarter Ended Six Months Ended April 30, April 30, ------------------- ------------------- 2006 2007 2006 2007 --------- --------- --------- --------- Revenues: Products $117,208 $173,212 $223,149 $319,494 Services 13,967 20,315 28,456 39,134 --------- --------- --------- --------- Total revenue 131,175 193,527 251,605 358,628 --------- --------- --------- --------- Costs: Products 58,957 91,319 119,356 166,298 Services 9,312 20,378 18,888 36,872 --------- --------- --------- --------- Total cost of goods sold 68,269 111,697 138,244 203,170 --------- --------- --------- --------- Gross profit 62,906 81,830 113,361 155,458 --------- --------- --------- --------- Operating expenses: Research and development 28,856 31,642 58,318 61,495 Selling and marketing 26,657 30,182 53,229 55,057 General and administrative 11,246 11,707 21,142 22,008 Amortization of intangible assets 6,295 6,295 12,590 12,590 Restructuring costs (recoveries) 3,014 (734) 5,029 (1,200) Long-lived asset impairments (3) - (6) - Recovery of doubtful accounts, net (247) - (2,851) (10) Gain on lease settlement (5,628) - (11,648) - --------- --------- --------- --------- Total operating expenses 70,190 79,092 135,803 149,940 --------- --------- --------- --------- Income (loss) from operations (7,284) 2,738 (22,442) 5,518 Interest and other income, net 11,197 16,897 20,459 31,742 Interest expense (5,815) (6,148) (11,868) (12,296) Loss on equity investments, net - - (733) - Gain on extinguishment of debt 362 - 7,052 - --------- --------- --------- --------- Income (loss) before income taxes (1,540) 13,487 (7,532) 24,964 Provision for income taxes 370 477 669 898 --------- --------- --------- --------- Net income (loss) $(1,910) $13,010 $(8,201) $24,066 ========= ========= ========= ========= Basic net income (loss) per common share $(0.02) $0.15 $(0.10) $0.28 ========= ========= ========= ========= Diluted net income (loss) per potential common share $(0.02) $0.14 $(0.10) $0.26 ========= ========= ========= ========= Weighted average basic common shares outstanding 83,518 85,198 83,251 85,076 ========= ========= ========= ========= Weighted average dilutive potential common shares outstanding 83,518 93,737 83,251 93,491 ========= ========= ========= ========= CIENA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended April 30, ------------------- 2006 2007 --------- --------- Cash flows from operating activities: Net income (loss) $(8,201) $24,066 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Early extinguishment of debt (7,052) - Amortization of premium on marketable securities 1,955 (3,052) Non-cash loss from equity investments 733 - Depreciation and amortization of leasehold improvements 9,691 6,298 Stock compensation 8,118 8,937 Amortization of intangibles 14,525 14,525 Provision for inventory excess and obsolescence 4,376 6,385 Provision for warranty and other contractual obligations 6,815 7,111 Other 1,280 872 Changes in assets and liabilities: Accounts receivable (3,813) (38,323) Inventories (34,119) (19,090) Prepaid expenses and other 5,264 (12,173) Accounts payable, accrued liabilities and other obligations (60,318) 17,741 Income taxes payable (133) 498 Deferred revenue 15,312 19,492 --------- --------- Net cash provided by (used in) operating activities (45,567) 33,287 --------- --------- Cash flows from investing activities: Additions to equipment, furniture, fixtures and intellectual property (8,531) (14,438) Restricted cash 1,837 (5,549) Purchases of available for sale securities (130,837) (213,219) Maturities of available for sale securities 299,657 444,126 Minority equity investments, net - (181) --------- --------- Net cash provided by investing activities 162,126 210,739 --------- --------- Cash flows from financing activities: Proceeds from issuance of 0.25% convertible senior notes payable 300,000 - Repurchase of 3.75% convertible notes payable (98,410) - Debt issuance costs (7,652) - Purchase of call spread option (28,457) - Proceeds from exercise of stock options 16,171 6,116 --------- --------- Net cash provided by financing activities 181,652 6,116 --------- --------- Net increase in cash and cash equivalents 298,211 250,142 Cash and cash equivalents at beginning of period 358,012 220,164 --------- --------- Cash and cash equivalents at end of period $656,223 $470,306 ========= ========= Appendix A The adjustments management makes in analyzing Ciena's fiscal second quarter 2007 GAAP results are as follows: -- Stock-based compensation costs - A non-cash expense incurred in accordance with SFAS 123R using the modified prospective application transition method. -- 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. -- Restructuring costs (recoveries) - infrequent charges or recoveries 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. -- Long-lived asset impairment - infrequent 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 doubtful accounts - an infrequent gain unrelated to normal operations resulting from the recovery of a previously assessed doubtful payment due to a customer's financial condition. -- Gain on lease settlement - an infrequent gain unrelated to normal operations resulting from termination of obligations under a lease for an unused facility. -- Gain on extinguishment of debt - an infrequent gain related to the early extinguishment of outstanding debt. 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