Ciena Reports Fiscal Third Quarter 2006 Results; Delivers 16% sequential revenue growth in tenth straight quarter of growth.LINTHICUM, Md. -- 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) ), the network specialist, today announced results for its fiscal third quarter 2006 ended July July: see month. 31, 2006. Revenue for the third quarter totaled $152.5 million, representing a 16.3% sequential One after the other in some consecutive order such as by name or number. 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 Operating Model is a term that is used in many contexts. In essence an operating model describes how an organization operates across both business and technology domains. The Operating Model describes what is important for the organization. , attests to continued success in the execution of our strategy," said Ciena CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and President Gary Smith Gary Smith may refer to:
v. res·o·nat·ed, res·o·nat·ing, res·o·nates v.intr. 1. To exhibit or produce resonance or resonant effects. 2. with customers, as service providers and enterprises alike look to evolve Evolve may refer to several terms:
Telecommunications networking protocol introduced by Xerox Corp. in 1979. It was developed as an inexpensive way of sending information quickly between office machines connected together in a single room or building, but it rapidly became a standard computer and IP-based services and end-user (job) end-user - The person who uses a computer application, as opposed to those who developed or support it. The end-user may or may not know anything about computers, how they work, or what to do if something goes wrong. 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 September: see month. 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 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). ), 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 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 Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 123R, adopted by Ciena on November November: see month. 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 magnitude, in astronomy, measure of the brightness of a star or other celestial object. The stars cataloged by Ptolemy (2d cent. A.D.), all visible with the unaided eye, were ranked on a brightness scale such that the brightest stars were of 1st magnitude and the 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 di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share count of 650.7 million shares to compute To perform mathematical operations or general computer processing. For an explanation of "The 3 C's," or how the computer processes data, see computer. 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 The Accounting Principles Board (APB) is the former authoritative body of the American Institute of Certified Public Accountants (AICPA). It was created by the American Institute of Certified Public Accountants in 1959 and issued pronouncements on accounting principles until 1973, (APB APB See Accounting Principles Board (APB). ) Opinion No. 25, "Accounting for Stock Issued to Employees," as interpreted Translated from source code into machine code one line at a time. See interpreted language and interpreter. interpreted - interpreter by Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). (FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). ) Interpretation (FIN fin, organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface. ) 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 In a graphical environment, to enlarge a window to the full size of the screen. See Win Maximize windows. the business case for IP service delivery," said Smith. "As a result of these market dynamics and strong traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. across our product portfolio and customer landscape, we expect our fiscal fourth quarter revenue will trend upward sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen 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 we've Contraction of we have. we've have 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 Thursday: see week. , August 31, 2006 at 8:30 a.m. (Eastern). The live broadcast of the discussion will be available via Ciena's homepage See home page. 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: http://www.ciena.com/investors/investors.htm. 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 that involve risks and uncertainties. These statements 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" ; and Ciena's actual results could differ materially from those stated or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. , due to risks and uncertainties associated with its 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 its Report on Form 10-Q Form 10-Q See 10-Q. filed with the Securities and Exchange Commission on June June: see month. 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 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. 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 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 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. |
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