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| 8-K - CIENA CORPORATION 8-K - CIENA CORP | a6847088.htm |
Exhibit 99.1
Ciena Reports Unaudited Fiscal Third Quarter 2011 Results
Achieves key milestone with 4% as-adjusted quarterly operating profit
LINTHICUM, Md.--(BUSINESS WIRE)--September 1, 2011--Ciena® Corporation (NASDAQ: CIEN), the network specialist, today announced unaudited financial results for its fiscal third quarter ended July 31, 2011.
For the fiscal third quarter 2011, Ciena reported revenue of $435.3 million. On the basis of generally accepted accounting principles (GAAP), Ciena's net loss for the fiscal third quarter 2011 was $(31.5) million, or $(0.33) per common share, which compares to a GAAP net loss of $(109.9) million, or $(1.18) per common share, for the fiscal third quarter 2010. Ciena's adjusted (non-GAAP) net income for the fiscal third quarter 2011 was $8.3 million, or $0.08 per common share, which compares to an adjusted (non-GAAP) net loss of $(8.0) million, or $(0.09) per common share, for the fiscal third quarter 2010.
“Our third quarter results, which included a favorable product mix and reduced operating expense to achieve an as-adjusted operating profit, demonstrate our early progress in delivering additional operating leverage from the business,” said Gary Smith, president and CEO of Ciena. “Despite current macroeconomic headwinds that could cause the rate of market growth to be moderated, we believe that we are well-positioned to capitalize on the continued modernization of today's networks and to grow faster than the market.”
Fiscal Third Quarter 2011 Performance Summary
The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to prior periods, including sequential quarterly and year over year changes. A reconciliation between the GAAP and adjusted (non-GAAP) measures contained in this release is included in Appendix A.
| GAAP Results | |||||||||||||||||
| Q3 | Q2 | Q3 | Period Change | ||||||||||||||
| FY 2011 | FY 2011 | FY 2010 | Q-T-Q | Y-T-Y | |||||||||||||
| Revenue | $ | 435.3 | $ | 417.9 | $ | 389.7 | 4.2% | * | 11.7% | * | |||||||
| Gross margin | 42.5% | 39.7% | 37.0% | 2.8 | ** | 5.5 | ** | ||||||||||
| Operating expense | $ | 202.3 | $ | 221.5 | $ | 243.6 | -8.7% | * | -17.0% | * | |||||||
| Operating margin | -4.0% | -13.3% | -25.5% | 9.3 | ** | 21.5 | ** | ||||||||||
| * Denotes % change | |||||||||||||||||
| ** Denotes absolute change in margin | |||||||||||||||||
| Non-GAAP Results | |||||||||||||||||
| Q3 | Q2 | Q3 | Period Change | ||||||||||||||
| FY 2011 | FY 2011 | FY 2010 | Q-T-Q | Y-T-Y | |||||||||||||
| Revenue | $ | 435.3 | $ | 417.9 | $ | 389.7 | 4.2% | * | 11.7% | * | |||||||
| Adj. gross margin | 44.1% | 41.3% | 45.2% | 2.8 | ** | -1.1 | ** | ||||||||||
| Adj. operating expense | $ | 175.2 | $ | 186.0 | $ | 178.0 | -5.8% | * | -1.6% | * | |||||||
| Adj. operating margin | 3.8% | -3.2% | -0.5% | 7.0 | ** | 4.3 | ** | ||||||||||
| * Denotes % change | |||||||||||||||||
| ** Denotes absolute change in margin | |||||||||||||||||
| Revenue by Segment | |||||||||||||||
| Q3 FY 2011 | Q2 FY 2011 | Q3 FY 2010 | |||||||||||||
| Revenue | %* | Revenue | %* | Revenue | %* | ||||||||||
| Packet-Optical Transport | $ | 266.5 | 61.3% | $ | 272.6 | 65.2% | $ | 242.1 | 62.1% | ||||||
| Packet-Optical Switching | 40.7 | 9.3% | 31.3 | 7.5% | $ | 34.8 | 8.9% | ||||||||
| Carrier Ethernet Service Delivery | 40.5 | 9.3% | 30.9 | 7.4% | $ | 33.8 | 8.7% | ||||||||
| Software and Services | 87.6 | 20.1% | $ | 83.1 | 19.9% | $ | 79.0 | 20.3% | |||||||
| Total | $ | 435.3 | 100.0% | $ | 417.9 | 100.0% | $ | 389.7 | 100.0% | ||||||
Additional Performance Metrics for Fiscal Third Quarter 2011
- Non-U.S. customers contributed 48% of total revenue
- One 10%-plus customer represented a total of 17% of revenue
- Cash and investments totaled $536.6 million
- Average days’ sales outstanding (DSOs) were 86
- Accounts receivable balance was $414.8 million
-
Inventories totaled $243.8 million, including:
- Raw materials: $42.0 million
- Work in process: $12.3 million
- Finished goods: $154.1 million
- Deferred cost of sales: $66.7 million
- Reserve for excess and obsolescence: $31.3 million
- Product inventory turns were 3.3
- Headcount totaled 4,339
Business Outlook for Fiscal Fourth Quarter 2011
Statements relating to business outlook are forward-looking in nature and actual results may differ materially. These statements should be read in the context of the Notes to Investors below.
Ciena expects fiscal fourth quarter 2011 financial performance to include:
- Revenue in the range of $440 to $460 million
- Adjusted gross margin percentage in the low 40s range
- Adjusted operating expense in the upper $170s million range
Live Web Broadcast of Unaudited Fiscal Third Quarter 2011 Results
Ciena will host a discussion of its unaudited fiscal third quarter 2011 results with investors and financial analysts today, Thursday, September 1, 2011 at 8:30 a.m. (Eastern). The live broadcast of the discussion will be available via Ciena's homepage at http://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.
Notes to Investors
Forward-looking statements. This press release contains certain forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts, assumptions and other information available to the Company as of the date hereof. 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: “Our third quarter results, which included a favorable product mix and solid operating expense controls to achieve an as-adjusted operating profit, demonstrate our early progress in delivering additional operating leverage for the business”; “While we believe that we are well-positioned to capitalize on the continued modernization of today's networks and to grow faster than the market, current macroeconomic and industry headwinds could cause the rate of market growth to be moderated”; “Ciena expects fiscal fourth quarter 2011 financial performance to include revenue in the range of $440 to $460 million, adjusted gross margin percentage in the low 40s range, adjusted operating expense in the upper $170s million range.”
Ciena’s actual results, performance or events may differ materially from these forward-looking statements made or implied due a number of risks and uncertainties relating to Ciena’s business, including: the effect of broader economic and market conditions on our customers and their business; changes in network spending or network strategy by large communication service providers; the timing and size of customer orders, including our ability to recognize revenue relating to such sales; the level of competitive pressure we encounter; the product, customer and geographic mix of sales within the period; the level of success relating to efforts to optimize Ciena’s operations; changes in foreign currency exchange rates affecting revenue and operating expense; and the other risk factors disclosed in Ciena’s Report on Form 10-Q filed with the Securities and Exchange Commission on March 10, 2011. Ciena assumes no obligation to update any forward-looking information included in this press release.
Non-GAAP Presentation of Quarterly Results. This release includes non-GAAP measures of Ciena’s gross profit, operating expense, income (loss) from operations, net income (loss) and net income (loss) per share. In evaluating the operating performance of Ciena’s business, management excludes certain charges and credits that are required by GAAP. These items, 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 Ciena’s control. Management believes that the non-GAAP measures below provide management and investors useful information and meaningful insight to the operating performance of the business. The presentation of these non-GAAP financial measures should be considered in addition to Ciena’s GAAP results and these measures are not intended to be a substitute for the financial information prepared and presented in accordance with GAAP. Ciena’s non-GAAP measures and the related adjustments may differ from non-GAAP measures used by other companies and should only be used to evaluate Ciena’s results of operations in conjunction with our corresponding GAAP results. To the extent not previously disclosed in a prior Ciena financial results press release, Appendix A to this press release sets forth a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release.
| CIENA CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Quarter Ended July 31, | ||||||||
| 2010 | 2011 | |||||||
| Revenue: | ||||||||
| Products | $ | 312,378 | $ | 350,030 | ||||
| Services | 77,297 | 85,283 | ||||||
| Total revenue | 389,675 | 435,313 | ||||||
| Cost of goods sold: | ||||||||
| Products | 201,559 | 198,217 | ||||||
| Services | 44,107 | 52,199 | ||||||
| Total cost of goods sold | 245,666 | 250,416 | ||||||
| Gross profit | 144,009 | 184,897 | ||||||
| Operating expenses: | ||||||||
| Research and development | 100,869 | 93,216 | ||||||
| Selling and marketing | 52,127 | 61,895 | ||||||
| General and administrative | 32,649 | 28,172 | ||||||
| Acquisition and integration costs | 17,033 | 4,822 | ||||||
| Amortization of intangible assets | 38,727 | 13,673 | ||||||
| Restructuring costs | 2,157 | 504 | ||||||
| Total operating expenses | 243,562 | 202,282 | ||||||
| Loss from operations | (99,553 | ) | (17,385 | ) | ||||
| Interest and other income (loss), net | (2,668 | ) | (3,160 | ) | ||||
| Interest expense | (5,990 | ) | (9,470 | ) | ||||
| Loss before income taxes | (108,211 | ) | (30,015 | ) | ||||
| Provision for income taxes | 1,644 | 1,435 | ||||||
| Net loss | $ | (109,855 | ) | $ | (31,450 | ) | ||
| Basic net loss per common share | $ | (1.18 | ) | $ | (0.33 | ) | ||
| Diluted net loss per potential common share | $ | (1.18 | ) | $ | (0.33 | ) | ||
| Weighted average basic common shares outstanding | 92,906 | 96,313 | ||||||
| Weighted average dilutive potential common shares outstanding | 92,906 | 96,313 | ||||||
| CIENA CORPORATION | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands, except share data) | ||||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| October 31, | July 31, | |||||||
| Current assets: | 2010 | 2011 | ||||||
| Cash and cash equivalents | $ | 688,687 | $ | 486,332 | ||||
| Accounts receivable, net | 343,582 | 414,826 | ||||||
| Inventories | 261,619 | 243,827 | ||||||
| Prepaid expenses and other | 147,680 | 141,401 | ||||||
| Total current assets | 1,441,568 | 1,286,386 | ||||||
| Long-term investments | - | 50,227 | ||||||
| Equipment, furniture and fixtures, net | 120,294 | 126,174 | ||||||
| Other intangible assets, net | 426,412 | 349,845 | ||||||
| Other long-term assets | 129,819 | 125,801 | ||||||
| Total assets | $ | 2,118,093 | $ | 1,938,433 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 200,617 | $ | 140,806 | ||||
| Accrued liabilities | 193,994 | 182,563 | ||||||
| Deferred revenue | 75,334 | 100,988 | ||||||
| Total current liabilities | 469,945 | 424,357 | ||||||
| Long-term deferred revenue | 29,715 | 26,302 | ||||||
| Other long-term obligations | 16,435 | 16,754 | ||||||
| Convertible notes payable | 1,442,705 | 1,442,449 | ||||||
| Total liabilities | 1,958,800 | 1,909,862 | ||||||
| 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; 290,000,000 shares authorized; 94,060,300 and 96,883,868 shares issued and outstanding | 941 | 969 | ||||||
| Additional paid-in capital | 5,702,137 | 5,743,211 | ||||||
| Accumulated other comprehensive income | 1,062 | 2,430 | ||||||
| Accumulated deficit | (5,544,847 | ) | (5,718,039 | ) | ||||
| Total stockholders' equity | 159,293 | 28,571 | ||||||
| Total liabilities and stockholders' equity | $ | 2,118,093 | $ | 1,938,433 | ||||
| CIENA CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Nine Months Ended July 31, | ||||||||
| 2010 | 2011 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (253,197 | ) | $ | (173,192 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of premium (discount) on marketable securities | 574 | (25 | ) | |||||
| Change in fair value of embedded redemption feature | (2,570 | ) | (3,380 | ) | ||||
| Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements | 28,146 | 44,765 | ||||||
| Share-based compensation costs | 26,451 | 27,919 | ||||||
| Amortization of intangible assets | 82,476 | 76,567 | ||||||
| Provision for inventory excess and obsolescence | 10,749 | 11,461 | ||||||
| Provision for warranty | 16,388 | 10,538 | ||||||
| Other | 1,955 | 2,170 | ||||||
| Changes in assets and liabilities, net of effect of acquisition: | ||||||||
| Accounts receivable | (134,844 | ) | (72,030 | ) | ||||
| Inventories | (30,765 | ) | 6,331 | |||||
| Prepaid expenses and other | (29,528 | ) | (4,462 | ) | ||||
| Accounts payable, accruals and other obligations | 84,886 | (81,388 | ) | |||||
| Deferred revenue | (3,957 | ) | 22,241 | |||||
| Net cash used in operating activities | (203,236 | ) | (132,485 | ) | ||||
| Cash flows used in investing activities: | ||||||||
| Payments for equipment, furniture, fixtures and intellectual property | (34,646 | ) | (41,138 | ) | ||||
| Restricted cash | (18,845 | ) | (8,727 | ) | ||||
| Purchase of available for sale securities | (63,591 | ) | (49,894 | ) | ||||
| Proceeds from maturities of available for sale securities | 454,141 | - | ||||||
| Proceeds from sales of available for sale securities | 179,380 | - | ||||||
| Acquisition of business | (693,247 | ) | - | |||||
| Receipt of contingent consideration related to business acquisition | - | 16,394 | ||||||
| Net cash used in investing activities | (176,808 | ) | (83,365 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of 4.0% convertible notes payable, net | 364,316 | - | ||||||
| Proceeds from issuance of common stock and warrants | 924 | 13,183 | ||||||
| Net cash provided by financing activities | 365,240 | 13,183 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (664 | ) | 312 | |||||
| Net decrease in cash and cash equivalents | (14,804 | ) | (202,667 | ) | ||||
| Cash and cash equivalents at beginning of period | 485,705 | 688,687 | ||||||
| Cash and cash equivalents at end of period | $ | 470,237 | $ | 486,332 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the period for interest | $ | 4,748 | $ | 18,869 | ||||
| Cash paid during the period for income taxes, net | $ | 2,037 | $ | 1,781 | ||||
| Non-cash investing and financing activities | ||||||||
| Purchase of equipment in accounts payable | $ | 4,421 | $ | 5,186 | ||||
| Fixed assets acquired under capital leases | $ | - | $ | 1,268 | ||||
| APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements | ||||||||
| Quarter Ended July 31, | ||||||||
| 2010 | 2011 | |||||||
| Gross Profit Reconciliation (GAAP/non-GAAP) | ||||||||
| GAAP gross profit | $ | 144,009 | $ | 184,897 | ||||
| Share-based compensation-products | 548 | 579 | ||||||
| Share-based compensation-services | 432 | 511 | ||||||
| Amortization of intangible assets | 5,698 | 5,826 | ||||||
| Fair value adjustment of acquired inventory | 25,478 | - | ||||||
| Total adjustments related to gross profit | 32,156 | 6,916 | ||||||
| Adjusted (non-GAAP) gross profit | $ | 176,165 | $ | 191,813 | ||||
| Adjusted (non-GAAP) gross profit percentage | 45.21 | % | 44.06 | % | ||||
| Operating Expense Reconciliation (GAAP/non-GAAP) | ||||||||
| GAAP operating expense | $ | 243,562 | $ | 202,282 | ||||
| Share-based compensation-research and development | 2,302 | 2,423 | ||||||
| Share-based compensation-sales and marketing | 2,902 | 2,736 | ||||||
| Share-based compensation-general and administrative | 2,473 | 2,882 | ||||||
| Acquisition and integration costs | 17,033 | 4,822 | ||||||
| Amortization of intangible assets | 38,727 | 13,673 | ||||||
| Restructuring costs | 2,157 | 504 | ||||||
| Total adjustments related to operating expense | 65,594 | 27,040 | ||||||
| Adjusted (non-GAAP) operating expense | $ | 177,968 | $ | 175,242 | ||||
| Income (Loss) from Operations Reconciliation (GAAP/non-GAAP) | ||||||||
| GAAP loss from operations | $ | (99,553 | ) | $ | (17,385 | ) | ||
| Total adjustments related to gross profit | 32,156 | 6,916 | ||||||
| Total adjustments related to operating expense | 65,594 | 27,040 | ||||||
| Adjusted (non-GAAP) (loss) income from operations | $ | (1,803 | ) | $ | 16,571 | |||
| Adjusted (non-GAAP) operating margin percentage | -0.46 | % | 3.81 | % | ||||
| Net Income (Loss) Reconciliation (GAAP/non-GAAP) | ||||||||
| GAAP net loss | $ | (109,855 | ) | $ | (31,450 | ) | ||
| Total adjustments related to gross profit | 32,156 | 6,916 | ||||||
| Total adjustments related to operating expense | 65,594 | 27,040 | ||||||
| Change in fair value of embedded redemption feature | 4,070 | 5,780 | ||||||
| Adjusted (non-GAAP) net income (loss) | $ | (8,035 | ) | $ | 8,286 | |||
| Weighted average basic common shares outstanding | 92,906 | 96,313 | ||||||
| Weighted average dilutive potential common shares outstanding | 92,906 | 104,146 | ||||||
| Net Income (Loss) per Common Share | ||||||||
| GAAP diluted net loss per common share | $ | (1.18 | ) | $ | (0.33 | ) | ||
| Adjusted (non-GAAP) diluted net income (loss) per common share | $ | (0.09 | ) | $ | 0.08 | |||
The adjusted (non-GAAP) measures above and their reconciliation to Ciena's GAAP results for the periods presented reflect adjustments relating to the following items:
• Share-based compensation expense – a non-cash expense incurred in accordance with share-based compensation accounting guidance.
• Amortization of intangible assets – a non-cash expense arising from the acquisition of intangible assets, principally developed technologies and customer-related intangibles acquired from the MEN Business, that Ciena is required to amortize over its expected useful life.
• Fair value adjustment of acquired inventory – an infrequent charge required by acquisition accounting rules resulting from the required revaluation of inventory acquired from the MEN Business to estimated fair value. This revaluation resulted in a net increase in inventory carrying value and an increase in cost of goods sold for the periods indicated.
• Acquisition and integration costs – reflects transaction expense, and consulting and third party service fees associated with the acquisition of the Nortel MEN Business and the integration of this business into Ciena's operations. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.
• Restructuring costs – infrequent costs incurred as a result of restructuring activities (or in the case of recoveries, previous restructuring activities) taken to align resources with perceived market opportunities that Ciena believes are not reflective of its ongoing operating costs.
• Change in fair value of embedded redemption feature – a non-cash unrealized gain or loss reflective of a mark to market fair value adjustment of an embedded derivative related to the redemption feature of Ciena's outstanding 4.0% senior convertible notes.
CONTACT:
Ciena Corporation
Press Contact:
Nicole
Anderson, 410-694–5700
pr@ciena.com
or
Investor
Contact:
Gregg Lampf, 888-243–6223
ir@ciena.com