CIENA Reports Second Quarter 2004 Results.Business Editors/High-Tech Writers LINTHICUM, Md.--(BUSINESS WIRE)--May 20, 2004 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) ), a leading global provider of innovative networking solutions, today reported its second fiscal quarter results for the period ending April 30, 2004. Revenue for the quarter totaled $74.7 million, representing a 12.5% sequential increase and an increase of 1.6% for the same period a year ago. On a generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) basis, CIENA's reported net loss for the quarter was $76.2 million, or a net loss of $0.16 per share. "The last quarter was important for CIENA as we took significant and deliberate steps in two key areas aimed at improving our business in both the immediate and longer-term," said Gary Smith Gary Smith may refer to:
n. pl. ca·te·nae or ca·te·nas A closely linked series, especially of excerpted writings or commentaries. [Latin cat Networks and Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the Photonics, we have added products to help build CIENA into a leading provider of service-delivery solutions. Second, we initiated the next phase of strategic operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. reductions that will improve our cost structure and shorten (audio, compression) Shorten - A form of lossless audio compression. the path to our near-term goals of achieving cash flow breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations and profitability." Second Quarter 2004 Highlights -- Ended the quarter with cash and short- and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. investments valued at $1.46 billion, using cash of $60 million in the quarter. -- Announced expected annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. cost savings of $60 to $70 million, including $55 to $65 million at the operating expense level, associated with closing the Company's San Jose San Jose, city, United States San Jose (sănəzā`, săn hōzā`), city (1990 pop. 782,248), seat of Santa Clara co., W central Calif.; founded 1777, inc. 1850. , Calif., facility and related headcount reductions. -- Announced customer wins spanning CIENA's networking solutions portfolio including: -- MCI's selection of CIENA as a strategic supplier for its new nationwide, ultra long-haul network. -- Verizon's choice of CIENA's multiservice switching (1) A network switch that not only handles data, but adequately supports the real time transmission of voice and video. (2) A network device that supports multiple switching and routing protocols. solutions to enhance the efficiency of its nationwide enterprise data services. -- Red Electrica's deployment of CIENA solutions to expand its broadband services See broadband and broadband service provider. . -- An exclusive agreement with UK-carrier, THUS, for CIENA's multiservice solutions in metro and edge applications. -- Spanish Spanish, river, c.150 mi (240 km) long, issuing from Spanish Lake, S Ont., Canada, NW of Sudbury, and flowing generally S through Biskotasi and Agnew lakes to Lake Huron opposite Manitoulin island. There are several hydroelectric stations on the river. Internet service provider Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. , Arsys Internet's, selection of CIENA and reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. partner Laurel Networks Laurel Networks was founded in 1999, and specialized in routers for telecommunications carriers. In 2005, they were purchased by ECI Telecom for $88m, and formally renamed as the Data Networking Division within ECI. , for a Broadband Remote Access Server A broadband remote access server (BRAS) routes traffic to and from the digital subscriber line access multiplexers (DSLAM) on an Internet service provider's (ISP) network.[1] (B-RAS B-RAS Broadband-Remote Access Server ) application. -- In addition, SBC (1) (SBC Communications Inc., San Antonio, TX, www.sbc.com) A large, national telecommunications company that grew from a multitude of local and regional companies, including Southwestern Bell, Pacific Bell and Nevada Bell, into a single, unified brand by 2002. recognized CIENA as an outstanding supplier for the superior performance of its DN 7000(TM) Series Multiservice Edge Switch. -- From a solutions perspective, CIENA announced and began deployments of the next-generation of its core networking capabilities with CoreStream(TM) Agility, designed to enable efficient delivery of high-growth broadband services, and also a new-generation CN 2000(TM) Storage Over SONET/SDH Platform to incorporate Dynamic Bandwidth Assignment capabilities and the latest ITU (International Telecommunication Union, Geneva, Switzerland, www.itu.ch) A telecommunications standards body that is under the auspices of the United Nations. Comprising more than 185 member countries, the ITU sets standards for global telecom networks. Generic Framing Procedure Generic Framing Procedure (GFP) is defined by ITU-T G.7041. This allows mapping of variable length, higher-layer client signals over a transport network like SDH/SONET. The client signals can be protocol data unit (PDU) oriented (like IP/PPP or Ethernet Media Access Control) or can (GFP GFP Green Fluorescent Protein GFP Generic Framing Procedure GFP Government Furnished Property GFP Generic Frame Protocol GFP General Framing Procedure GFP Global Functional Plane GFP Global Field Power GFP Grandmothers for Peace GFP Glutton for Punishment ) standard. In addition, on May 3, 2004, just following completion of CIENA's second fiscal quarter, the Company announced it had completed the acquisitions of Catena Networks, Inc. and Internet Photonics, Inc. Non-GAAP Presentation In evaluating the operating performance of its business, CIENA's management excludes certain charges or credits that are required by GAAP. These items, which are identified in the 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 6 Months Ended
-------------- ---------------
April 30, 2004 April 30, 2004
-------------- ---------------
Item (in thousands) (in thousands)
---- -------------- ---------------
Deferred stock compensation $ 1,902 $ 4,746
Amortization of intangible assets 3,395 6,791
Accelerated amortization of leasehold
improvements 1,649 1,649
Restructuring costs 5,185 8,578
Recovery of use tax payments (1,931) (1,931)
Recovery of doubtful accounts, net (2,794) (2,794)
Gain on equity investments, net (139) (593)
Loss on extinguishment of debt - 8,216
Income tax benefit on adjusted net loss 24,402 45,437
-------------- ---------------
Total Adjustments $ 31,669 $ 70,099
============== ===============
GAAP Net Loss $ (76,216) $ (152,924)
Adjusted for items above 31,669 70,099
-------------- ---------------
Non GAAP Net Loss $ (44,547) $ (82,825)
============== ===============
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 these adjustments may not permit meaningful comparisons to other companies. As of the quarter ended April 30, 2004, CIENA's weighted average shares outstanding were approximately 475,189,000. Adjusting CIENA's quarterly GAAP results as noted would reduce the Company's net loss in its second fiscal quarter to $0.09 per share. For the six months ended April 30, 2004, CIENA's weighted average shares outstanding were approximately 474,192,000. Adjusting CIENA's six month GAAP results as noted would reduce the Company's net loss for the period to $0.17 per share. Business Outlook "While it appears the industry has achieved a certain level of stability, customers are maintaining an overall cautious and focused approach to spending," said CIENA's Smith. "Spending in the core of the network remains a secondary priority as service providers focus on getting more users on to their networks and generating more revenue from that traffic. With the addition of new service delivery platforms from Catena and Internet Photonics, CIENA is better positioned to benefit from that focus. "In part as a result of our broader portfolio reach, we expect revenue for our third fiscal quarter will increase by as much as 30 percent from our fiscal second quarter revenue," said Smith. Live Web Broadcast of Q2 Results CIENA will host a discussion of this morning's announcements with investors and financial analysts today, Thursday, May 20, 2004 at 8:30 a.m. (Eastern). The live broadcast of the discussion will be available via CIENA's homepage at www.CIENA.com. An archived version of the discussion will be available shortly following the conclusion of the live broadcast on the Investor Relations Investor relations The process by which the corporation communicates with its investors. page of CIENA's website at: www.CIENA.com/investors. NOTE TO 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 but not limited to: we initiated the next phase of strategic operating expense reductions that will improve our cost structure and shorten the path to our near-term goals of achieving cash flow breakeven and profitability; while it appears the industry has achieved a certain level of stability, customers are maintaining an overall cautious and focused approach to spending; spending in the core of the network remains a secondary priority as service providers focus on getting more users on to their networks and generating more revenue from that traffic; with the addition of new service delivery platforms from Catena and Internet Photonics, CIENA is better positioned to benefit from that focus; and, in part as a result of our broader portfolio reach, we expect revenue for our third fiscal quarter will increase by as much as 30 percent from our fiscal second quarter revenue, 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 in the Company's Report on Form 10-Q Form 10-Q See 10-Q. , which we expect to file with the Securities and Exchange Commission on May 20, 2004. Forward-looking statements include statements regarding the Company'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. 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.
CIENA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter Ended Six Months Ended
------------------- ---------------------
April 30, April 30, April 30, April 30,
2003 2004 2003 2004
--------- --------- ---------- ----------
Revenues:
Products $ 63,399 $ 62,422 $ 124,620 $ 117,096
Services 10,141 12,277 19,394 24,017
--------- --------- ---------- ----------
Total revenue 73,540 74,699 144,014 141,113
Costs:
Products 40,406 56,289 79,983 90,849
Services 14,919 10,188 29,551 21,489
--------- --------- ---------- ----------
Total cost of goods sold 55,325 66,477 109,534 112,338
--------- --------- ---------- ----------
Gross profit 18,215 8,222 34,480 28,775
--------- --------- ---------- ----------
Operating expenses:
Research and development 52,193 46,479 105,927 93,656
Selling and marketing 25,663 25,075 52,268 50,543
General and administrative 8,066 5,992 22,772 13,083
Deferred stock
compensation costs:
Research and development 3,406 1,408 7,204 3,613
Selling and marketing 676 415 1,435 933
General and
administrative 346 79 720 200
Amortization of intangible
assets 3,421 3,395 6,975 6,791
Restructuring costs 2,724 5,185 2,724 8,578
Recovery of use tax
payments - (1,931) - (1,931)
Recovery of doubtful
accounts, net - (2,794) - (2,794)
--------- --------- ---------- ----------
Total operating expenses 96,495 83,303 200,025 172,672
--------- --------- ---------- ----------
Loss from operations (78,280) (75,081) (165,545) (143,897)
Interest and other income,
net 11,131 5,614 24,432 13,292
Interest expense (8,061) (6,473) (20,264) (13,857)
Gain (loss) on equity
investments, net - 139 (10) 593
Loss on extinguishment of
debt - - (20,606) (8,216)
--------- --------- ---------- ----------
Loss before income taxes (75,210) (75,801) (181,993) (152,085)
Provision for income taxes 251 415 610 839
--------- --------- ---------- ----------
Net loss $(75,461) $(76,216) $(182,603) $(152,924)
========= ========= ========== ==========
Basic and diluted net loss
per common share and
dilutive potential common
share $ (0.17) $ (0.16) $ (0.42) $ (0.32)
========= ========= ========== ==========
Weighted average basic 433,932 475,189 433,330 474,192
common and dilutive ========= ========= ========== ==========
potential common shares
outstanding
CIENA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
October 31, April 30,
2003 2004
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 309,665 $ 218,145
Short-term investments 796,809 824,929
Accounts receivable, net 43,600 38,593
Inventories, net 44,995 34,457
Prepaid expenses and other 34,334 42,388
----------- -----------
Total current assets 1,229,403 1,158,512
Long-term investments 519,744 416,199
Equipment, furniture and fixtures, net 114,930 100,123
Goodwill 336,039 335,974
Other intangible assets, net 108,408 99,681
Other long-term assets 69,641 67,346
----------- -----------
Total assets $2,378,165 $2,177,835
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,402 $ 38,532
Accrued liabilities 98,926 89,797
Restructuring liabilities 14,378 12,605
Unfavorable lease commitments 9,380 9,467
Income taxes payable 4,640 5,596
Deferred revenue 14,473 16,373
----------- -----------
Total current liabilities 186,199 172,370
Long-term deferred revenue 14,547 16,964
Long-term restructuring liabilities 52,164 45,888
Long-term unfavorable lease commitments 61,312 56,362
Other long-term obligations 2,698 2,741
Convertible notes payable 730,428 690,000
----------- -----------
Total liabilities 1,047,348 984,325
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock - par value $0.01;
20,000,000 shares authorized; zero shares
issued and outstanding - -
Common stock - par value $0.01; 980,000,000
shares authorized; 473,214,856 and
476,940,672 shares issued and outstanding 4,732 4,769
Additional paid-in capital 4,861,182 4,874,950
Deferred stock compensation (9,664) (4,572)
Notes receivable from stockholders (448) (448)
Accumulated other comprehensive income
(loss) 2,447 (833)
Accumulated deficit (3,527,432) (3,680,356)
----------- -----------
1,330,817 1,193,510
----------- -----------
Total liabilities and stockholders' equity $2,378,165 $2,177,835
=========== ===========
Appendix A The adjustments management makes in analyzing CIENA's first quarter fiscal 2004 GAAP results are as follows: -- Deferred stock compensation costs - a non-cash expense Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) largely unrelated to normal operations Generally and collectively, the broad functions that a combatant commander undertakes when assigned responsibility for a given geographic or functional area. Except as otherwise qualified in certain unified command plan paragraphs that relate to particular commands, "normal operations" of , and which arises under GAAP accounting from the assumption of unvested stock options issued by any companies we acquire. -- 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. - a non-cash expense unrelated to normal operations arising from acquisitions of intangible assets, principally developed technology acquired in the Cyras, 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 , WaveSmith, and Akara acquisitions, which CIENA is required to amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. over its expected useful life. -- Accelerated amortization of 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. - a non-cash expense related to the planned closing of our San Jose, 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). facility. -- 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 - non-recurring charges, unrelated to normal operations, incurred as the result of reducing the size of the Company's operations to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. its resources with the reduced size of the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. market as well as the result of targeting new segment opportunities within the overall market. -- Recovery of use tax payments - a non-recurring gain unrelated to normal operations. -- Recovery of doubtful accounts, net - a non-recurring gain unrelated to normal operations due to payment received from a customer from which payment was previously deemed doubtful due to the customer's financial condition. -- Gain on equity investments, net - a non-recurring gain unrelated to normal operations. -- Loss on 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 debt - a non-recurring expense, unrelated to normal operations. -- Income tax benefit on adjusted net loss - the income tax charge or benefit on the adjusted net loss, which is a necessary adjustment for consistency. The Company currently has a full valuation allowance for GAAP reporting purposes and accordingly does not recognize a tax benefit for losses generated. ABOUT CIENA CIENA Corporation Ciena Corporation NASDAQ: CIEN develops and markets communications network platforms and software, and offers professional services. The Company's broadband access, data and optical networking platforms, software tools, and global network services support worldwide telecom delivers innovative network solutions to the world's largest service providers and enterprises, increasing the cost-efficiency of current services while enabling the creation of new carrier-class data services built upon the existing network infrastructure. Additional information about CIENA can be found at www.ciena.com. |
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