CIENA Reports Fourth Quarter and Fiscal Year 2002 Results; Commences Tender Offer to Repurchase Remaining Outstanding 5% ONI Notes.Business Editors/High-Tech Writers LINTHICUM, Md.--(BUSINESS WIRE)--Dec. 12, 2002 CIENA(R) Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CIEN CIEN Ciena Corporation (stock symbol) ) today reported revenue of $61.9 million for its fourth fiscal quarter ended October October: see month. 31, 2002. Under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , CIENA's reported net loss for the period was $754.8 million, or a net loss of $1.75 per share. The quarter's results include charges for a goodwill impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of $557.3 million, restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $78.7 million associated with workforce reductions, lease terminations, non-cancelable lease costs and the write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of certain property, equipment and leasehold improvements Leasehold Improvement Improvements on a leased asset that increase the value of the asset. Notes: A leasehold improvement is classified as an asset that must be depreciated over time. , deferred stock compensation charges of $5.7 million, amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. of $3.0 million, a charge for settlement of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. with Pirelli  This article or section is in need of attention from an expert on the subject.Please help recruit one or [ improve this article] yourself. See the talk page for details. of $1.8 million, losses on equity investments of $9.9 million, and a $2.7 million loss related to the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. and early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of $97.1 million of the $300 million outstanding 5% convertible subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes due in 2005 assumed in the purchase of ONI ONI abbr. Office of Naval Intelligence Noun 1. ONI - the military intelligence agency that provides for the intelligence and counterintelligence and investigative and security requirements of the United States Navy Systems. In addition, CIENA recorded a charge of $1.6 million related to excess inventory. "Despite a challenging year, our ongoing operating results in our fiscal fourth quarter show the positive effects of the steps taken across our company over the last year to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. our business with a changed environment," said Gary Smith Gary Smith may refer to:
The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. ." For its 2002 fiscal year, CIENA reported revenue of $361.2 million. Under GAAP, CIENA's reported net loss for the period was $1,597.5 million, or a net loss of $4.37 per share. The year's results include charges for a goodwill impairment of $557.3 million, restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs of $225.4 million associated with workforce reductions, lease terminations, non-cancelable lease costs and the write-down of certain property, equipment and leasehold improvements, deferred stock compensation charges of $20.3 million, a provision for doubtful accounts of $14.8 million, amortization of intangible assets of $9.0 million, a charge for settlement of litigation with Pirelli of $1.8 million, losses on equity investments of $15.7 million, and a $2.7 million loss related to the repurchase and early extinguishment of $97.1 million of the $300 million outstanding ONI 5% convertible subordinated notes due in 2005. In addition, CIENA recorded a charge of $286.5 million, primarily related to excess inventory associated with its long-haul long haul n. 1. A long distance: It is a long haul from New York to Los Angeles. 2. A long period of time: Over the long haul the candidates performed well. transport products and non-cancelable purchase commitments with suppliers. 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 Fiscal Yr Ended
October 31, 2002 October 31, 2002
Item (in thousands) (in thousands)
-------------- --------------
Payroll tax on stock options $ - $ 38
Deferred stock compensation costs 5,740 20,324
Amortization of intangible assets 3,003 8,972
Restructuring costs 78,691 225,429
Goodwill impairment 557,286 557,286
Pirelli litigation 1,792 1,792
Provision for doubtful accounts - 14,813
Loss on equity investments 9,937 15,677
Loss on extinguishment of debt 2,683 2,683
Income tax effect of excluding
items above 32,493 334,661
-------------- --------------
$ 691,625 $ 1,181,675
Note: Please see Appendix A for additional information about this
table.
These adjustments are not in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP and making such adjustments may not permit meaningful comparisons to other companies. As of the quarter ended October 31, 2002, CIENA's weighted average shares outstanding were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 431,257,000. As of the fiscal year ended October 31, 2002, CIENA's weighted average shares outstanding were approximately 365,202,000. Debt Repurchase During the fourth quarter of fiscal 2002, CIENA took steps to improve its already strong balance sheet. The Company saved $21.9 million in future principal payment by purchasing $97.1 million of the $300 million outstanding ONI 5% convertible subordinated notes due in 2005 for $75.2 million on the open market. At the time of purchase, these notes had an accreted book value of $72.5 million. In addition, CIENA today announced that it has commenced a tender offer for the outstanding 5% Convertible Subordinated Notes due October 15, 2005 originally issued by ONI Systems Corp. and assumed by CIENA in its acquisition of ONI in June June: see month. 2002. CIENA's purpose in seeking to repurchase the notes is to reduce its annual interest expense and eliminate the need to repay or refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. the debt at maturity in 2005. The tender offer is not contingent on Adj. 1. contingent on - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent upon, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent any financing. The notes are currently convertible into CIENA common stock at a conversion rate of approximately 7.7525 shares per $1,000 principal amount held, subject to adjustment. The purchase price for the notes will be $860.00 in cash per $1,000 principal amount, plus accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. and unpaid interest up to, but not including, the date of payment. Holders that desire to tender their notes pursuant to the offer must follow the procedures described in the Offer to Purchase and other related documents to be filed by CIENA with the Securities and Exchange Commission. These documents will be mailed to the registered holders of the notes. The tender offer will expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. at 5:00 p.m., New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. time, on January January: see month. 13, 2003, unless the offer is extended. Goldman Gold·man , Emma 1869-1940. Russian-born American anarchist. Jailed repeatedly for her advocacy of birth control and opposition to military conscription, she was deported to the Soviet Union in 1919. , Sachs Sachs , Hans 1494-1576. German writer and Meistersinger noted for his many dramas, poems, and songs. His life inspired Wagner's opera Die Meistersinger von Nürnberg (1868). & Co. will act as the dealer managers for the tender offer and State Street Bank and Trust Company The State Street Bank and Trust Company is a bank. It was a subsidiary of the State Street Corporation, until it sold off the retail banking portion of this unit in 1999 to Citizens Financial Group (a subsidiary of the Royal Bank of Scotland), of Providence, RI. of California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). , N.A. will act as depositary DEPOSITARY, contracts. He with whom a deposit is confided or made. 2. It is, the essence of the contract of deposits that it should be gratuitous on the part 'of the depositary. 9 M. R. 470. . Requests for copies of the Offer to Purchase and additional information concerning the terms of the tender offer or questions about the offer may be directed to Goldman, Sachs & Co., at 85 Broad Street, New York City, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of 10004, Attn: Prospectus A document, notice, circular, advertisement, letter, or communication in written form or by radio or television that offers any security for sale, or confirms the sale of any security. Department, Telephone: (212) 902-1000 or to the information agent for the tender offer, Georgeson Shareholder, 17 State Street, 10th Floor, New York, New York 10004, Telephone: (866) 295-4322. If the Company successfully purchases all of the $202.9 million outstanding ONI 5% notes at $860 per $1,000 principal amount, it will save approximately $28.4 million in future principal payment and will record a book loss of approximately $18.7 million related to the extinguishment of this debt due to the fact that the accreted book value of the notes will be less than the purchase price. The Company will use its cash and cash equivalents, and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments to fund the note purchase. Business Outlook "We are encouraged by the order activity we have seen thus far in our fiscal first quarter and expect that revenue in the quarter could increase by as much as 10 percent from our fiscal 2002 fourth quarter," said Smith. "In addition, we expect to make continued progress toward profitability through our ongoing efforts to improve gross margin and to lower ongoing operating expenses." "The telecom equipment market has changed radically in just the last 12 months," continued Smith. "While challenging, this change has created opportunity for those positioned to pursue it. CIENA's financial strength and our commitment to continued investment in our business differentiates us from our competitors, many of whom are experiencing financial and directional In one direction. Contrast with omnidirectional. uncertainty." "As a result, we believe CIENA has an opportunity to achieve growth in 2003 despite decreased carrier spending," concluded Smith. "In addition to working toward increased market share, we are pursuing feature additions and product extensions, and developing new sales channels, to increase our addressable Reachable. When something is addressable, it can be identified and manipulated independently of its surroundings. For example, screen pixels and RAM memory are addressable. Each of the screen's picture elements can be individually turned on and off, and each of the memory's bytes can be market." Live Web Broadcast of Q4 and Fiscal Year 2002 Results CIENA will host a discussion of its fiscal fourth quarter and fiscal year 2002 results with investors and financial analysts on Thursday Thursday: see week. , December December: see month. 12, 2002 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 Investor relations The process by which the corporation communicates with its investors. page of CIENA's website at: www.CIENA.com/investors. NOTE TO CIENA INVESTORS This press release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. based on current expectations, forecasts and assumptions of CIENA (the Company) that involve risks and uncertainties. Forward-looking statements in this release, including if the Company successfully purchases all of the $202.9 million outstanding 5% notes at $860 per $1,000 principal amount, it will save approximately $28.4 million in future principal payment and will record a book loss of approximately $18.7 million related to the extinguishment of this debt due to the fact that the accreted book value of the notes will be less than the purchase price, the Company will use its cash and cash equivalents, and short-term investments to fund the note purchase, we are encouraged by the order activity we have seen thus far in our fiscal first quarter and expect that revenue in the quarter could increase by as much as 10 percent from our fiscal 2002 fourth quarter, in addition, we expect to make continued progress toward profitability through our ongoing efforts to improve gross margin and to lower ongoing operating expenses, the telecom equipment market has changed radically in just the last 12 months, while challenging, this change has created opportunity for those positioned to pursue it, CIENA's financial strength and our commitment to continued investment in our business differentiates us from our competitors, many of whom are experiencing financial and directional uncertainty, as a result, we believe CIENA has an opportunity to achieve growth in 2003 despite decreased carrier spending, in addition to working toward increased market share, we are pursuing feature additions and product extensions, and developing new sales channels, to increase our addressable market, are based on information available to the Company as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . 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 dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in the Company's Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the Securities and Exchange Commission on December 12, 2002. Forward-looking statements include statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. 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. THIS PRESS RELEASE IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual OF AN OFFER TO SELL SECURITIES. CIENA PLANS TO FILE A SCHEDULE TO (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL Letter of Transmittal A document used by security holder to accompany certificates surrendered in an exchange or other corporate action. AND OTHER TENDER OFFER DOCUMENTS) TODAY WITH THE SEC WITH REGARD TO ITS OFFER TO PURCHASE THE NOTES. SECURITY HOLDERS ARE URGED TO READ THE OFFER TO PURCHASE, RELATED LETTER OF TRANSMITTAL AND THE OTHER TENDER OFFER DOCUMENTS TO BE FILED BY CIENA WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. THE OFFER TO PURCHASE, RELATED LETTER OF TRANSMITTAL AND THE OTHER TENDER OFFER DOCUMENTS FILED WITH THE SEC BY CIENA MAY BE OBTAINED WHEN THEY BECOME AVAILABLE FOR FREE AT THE SEC'S WEB SITE, WWW.SEC.GOV. REQUESTS FOR COPIES OF THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND THE OTHER TENDER OFFER DOCUMENTS OR QUESTIONS ABOUT THE OFFER MAY BE DIRECTED TO THE DEALER MANAGERS FOR THE OFFER, GOLDMAN, SACHS & CO., AT 85 BROAD STREET, NEW YORK CITY, NEW YORK 10004, ATTN: PROSPECTUS DEPARTMENT, TELEPHONE: (212) 902-1000 OR THE INFORMATION AGENT FOR THE OFFER, GEORGESON SHAREHOLDER, 17 STATE STREET, 10TH FLOOR, NEW YORK, NEW YORK 10004, TELEPHONE: (866) 295-4322.
CIENA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
October 31,
-----------------------
2001 2002
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $397,890 $377,189
Short-term investments 902,594 1,130,414
Accounts receivable, net 395,063 28,680
Inventories, net 254,968 47,023
Deferred income taxes 186,861 -
Prepaid expenses and other 53,713 54,351
----------- -----------
Total current assets 2,191,089 1,637,657
Long-term investments 494,657 570,861
Equipment, furniture and fixtures, net 331,490 196,951
Goodwill 178,891 212,500
Other intangible assets, net 47,874 62,457
Other long-term assets 73,300 70,596
----------- -----------
Total assets $3,317,301 $2,751,022
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $68,735 $39,841
Accrued liabilities 133,084 132,588
Restructuring liabilities 15,439 27,423
Unfavorable lease commitments - 7,630
Income taxes payable 6,649 -
Deferred revenue 29,480 15,388
Other current obligations 995 948
----------- -----------
Total current liabilities 254,382 223,818
Deferred income taxes 64,072 -
Long-term deferred revenue - 15,444
Long-term restructuring liabilities - 65,742
Long-term unfavorable lease commitments - 70,124
Other long-term obligations 5,982 5,009
Convertible notes payable 863,883 843,616
----------- -----------
Total liabilities 1,188,319 1,223,753
----------- -----------
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;
328,022,264 and 432,842,481
shares issued and outstanding 3,280 4,328
Additional paid-in capital 3,667,512 4,658,882
Notes receivable from stockholders (3,236) (3,866)
Accumulated other comprehensive income 4,842 8,840
Accumulated deficit (1,543,416) (3,140,915)
----------- -----------
Total stockholder's equity 2,128,982 1,527,269
----------- -----------
Total liabilities and stockholders' equity $3,317,301 $2,751,022
=========== ===========
CIENA CORPORATION
CONSOLIDATED INCOME STATEMENTS
(in thousands, except share and per share data)
(Unaudited)
Quarter Ended Years Ended
October 31, October 31,
----------------------- -------------------------
2001 2002 2001 2002
------------ ---------- ------------ ------------
Revenue $367,774 $61,918 $1,603,229 $361,155
Excess and obsolete
inventory costs 16,586 1,592 68,411 286,475
Cost of goods sold 204,968 51,801 836,138 309,559
------------ ---------- ------------ ------------
Gross profit
(loss) 146,220 8,525 698,680 (234,879)
------------ ---------- ------------ ------------
Operating Expenses
Research and
development (1) 73,195 61,355 235,831 239,619
Selling and
marketing (2) 38,909 32,012 146,949 130,276
General and
administrative
(3) 15,143 13,091 57,865 50,820
Deferred stock
compensation costs 16,401 5,740 41,367 20,324
Amortization of
goodwill 75,873 - 177,786 -
Amortization of
intangible assets 1,922 3,003 4,413 8,972
In-process research
and development - - 45,900 -
Restructuring
costs 15,439 78,691 15,439 225,429
Goodwill
impairment 1,719,426 557,286 1,719,426 557,286
Pirelli litigation - 1,792 - 1,792
Provision for
doubtful accounts - - (6,579) 14,813
------------ ---------- ------------ ------------
Total
operating
expenses 1,956,308 752,970 2,438,397 1,249,331
------------ ---------- ------------ ------------
Loss from operations (1,810,088) (744,445) (1,739,717) (1,484,210)
Interest and other
income (expense),
net 18,756 16,370 63,579 61,145
Interest expense (12,098) (15,583) (30,591) (45,339)
Loss on equity
investments, net - (9,937) - (15,677)
Loss on
extinguishment of
debt - (2,683) - (2,683)
------------ ---------- ------------ ------------
Income (loss) before
income taxes (1,803,430) (756,278) (1,706,729) (1,486,764)
Provision (benefit)
for income taxes (1,148) (1,508) 87,333 110,735
------------ ---------- ------------ ------------
Net income (loss) $(1,802,282) $(754,770) $(1,794,062) $(1,597,499)
============ ========== ============ ============
Basic net income
(loss) per common
share $(5.51) $(1.75) $(5.75) $(4.37)
============ ========== ============ ============
Diluted net income
(loss) per common
and
dilutive potential
common share $(5.51) $(1.75) $(5.75) $(4.37)
============ ========== ============ ============
Weighted average
basic common shares
outstanding 326,834 431,257 311,815 365,202
============ ========== ============ ============
Weighted average
basic common and
dilutive
potential common
shares outstanding 326,834 431,257 311,815 365,202
============ ========== ============ ============
(1) Exclusive of $9,647, $4,396, $17,783 and $15,672 deferred stock
compensation costs for quarters ended Oct. 31, 2001, Oct. 31, 2002
and years ended Oct. 31, 2001 and Oct. 31, 2002, respectively.
(2) Exclusive of $959, $911, $8,378 and $3,560 deferred stock
compensation costs for quarters ended Oct. 31, 2001, Oct. 31, 2002
and years ended Oct. 31, 2001 and Oct. 31, 2002, respectively.
(3) Exclusive of $5,795, $433, $15,206 and $1,092 deferred stock
compensation costs for quarters ended Oct. 31, 2001, Oct. 31, 2002
and years ended Oct. 31, 2001 and Oct. 31, 2002, respectively.
Appendix A The adjustments management makes in analyzing CIENA's fourth quarter and fiscal year GAAP results are as follows: -- Payroll tax on stock options - an uncontrollable expense, largely unrelated to normal operations, that fluctuates significantly depending largely on the price of our stock and the magnitude of option exercises in a given period. -- 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, including Cyras and ONI. -- Amortization of intangible asset - a non-cash expense unrelated to normal operations arising from acquisitions of intangible assets, principally developed technology acquired in the Cyras and ONI acquisitions which CIENA is required to amortize over its expected useful life. -- Restructuring costs - non-recurring charges, unrelated to normal operations, incurred as a result of reducing the size of the Company's operations to align its resources with the reduced size of the telecommunications market. -- Goodwill impairment - a non-cash expense unrelated to normal operations. -- Pirelli litigation - a non-recurring expense, unrelated to normal operations. -- Provision for doubtful accounts - non-recurring charges that are outside of the Company's control that arise when our customers' ability to pay is in doubt. In recent periods primarily related to the financial health of service provider customers. -- Loss on equity investments - a decline in the fair market value of an equity investment that is determined to be other-than-temporary. -- Loss on debt extinguishment - a non-recurring expense, unrelated to normal operations. -- Income tax effect - the income tax charge or benefit on the adjusted net loss, which is a necessary adjustment for consistency. About CIENA CIENA Corporation's market-leading intelligent optical networking Communications between computers, telephones and other electronic devices using light. An optical network is far more reliable and has far greater potential transmission capacity than networking in the electrical domain. See optical fiber. systems form the core for the new era of networks and services worldwide. CIENA's LightWorks(TM) architecture enables next-generation optical services and changes the fundamental economics of service-provider networks by simplifying the network and reducing the cost to operate it. Additional information about CIENA can be found at www.CIENA.com. |
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