News Column

Ciena Reports Fiscal Second Quarter 2014 Financial Results

June 17, 2014



ENP Newswire - 17 June 2014

Release date- 05062014 - HANOVER, Md. - Ciena Corporation (NYSE: CIEN), the network specialist, today announced unaudited financial results for its fiscal second quarter ended April 30, 2014.

For the fiscal second quarter 2014, Ciena reported revenue of $560.0 million as compared to $507.7 million for the fiscal second quarter 2013.

On the basis of generally accepted accounting principles (GAAP), Ciena's net loss for the fiscal second quarter 2014 was $(10.2) million, or $(0.10) per common share, which compares to a GAAP net loss of $(27.1) million, or $(0.27) per common share, for the fiscal second quarter 2013.

Ciena's adjusted (non-GAAP) net income for the fiscal second quarter 2014 was $19.4 million, or $0.17 per diluted common share, which compares to an adjusted (non-GAAP) net income of $2.2 million, or $0.02 per diluted common share, for the fiscal second quarter 2013.

'As a direct result of our expanding role and reach in the industry, we delivered strong financial results in both our second quarter and first half of fiscal 2014, including continued revenue growth and increased operating leverage,' said Gary B. Smith, president and CEO, Ciena. 'As the shift continues toward on-demand networking models and as we continue to diversify our business, we expect to deliver steadily improving financial performance, including performance in the second half of the year that is stronger than the first half.'

Fiscal Second Quarter 2014 Performance Summary

The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to prior periods, including sequential quarter 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

Q2 Q1 Q2 Period Change

FY 2014 FY 2014 FY 2013 Q-T-Q* Y-T-Y*

Revenue $ 560.0$ 533.7$ 507.7 4.9 % 10.3 %

Gross margin 42.4 % 42.3 % 41.3 % 0.1 % 1.1 %

Operating expense $ 230.5$ 222.5$ 220.1 3.6 % 4.7 %

Operating margin 1.3 % 0.6 % (2.1) % 0.7 % 3.4 %

Non-GAAP Results

Q2 Q1 Q2 Period Change

FY 2014 FY 2014 FY 2013 Q-T-Q* Y-T-Y*

Revenue $ 560.0$ 533.7$ 507.7 4.9 % 10.3 %

Adj. gross margin 43.1 % 43.4 % 42.5 % (0.3) % 0.6 %

Adj. operating expense $ 206.3$ 199.8$ 197.4 3.3 % 4.5 %

Adj. operating margin 6.2 % 5.9 % 3.7 % 0.3 % 2.5 %

Revenue by Segment

Q2 FY 2014 Q1 FY 2014 Q2 FY 2013

Revenue % Revenue % Revenue %

Converged Packet Optical $ 356.8 63.7 $ 333.4 62.5 $ 294.3 57.9

Packet Networking 66.5 11.9 51.7 9.7 54.2 10.7

Optical Transport 29.6 5.3 40.1 7.5 57.4 11.3

Software and Services 107.1 19.1 108.5 20.3 101.8 20.1

Total $ 560.0 100.0 $ 533.7 100.0 $ 507.7 100.0

*Denotes % change, or in the case of margin, absolute change

Additional Performance Metrics for Fiscal Second Quarter 2014

Non-U.S. customers contributed 42% of total revenue

One customer accounted for greater than 10% of revenue and represented 21.5% of total revenue

Cash and investments totaled $430.2 million

Cash flow from operations totaled $2.0 million

Average days' sales outstanding (DSOs) were 83

Accounts receivable balance was $515.0 million

Inventories totaled $294.0 million, including:

Raw materials: $56.7 million

Work in process: $7.9 million

Finished goods: $181.0 million

Deferred cost of sales: $95.9 million

Reserve for excess and obsolescence: $(47.5) million

Product inventory turns were 3.5

Headcount totaled 4,998

Business Outlook for Fiscal Third Quarter 2014

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 third quarter 2014 financial performance to include:

Revenue in the range of $585 to $615 million

Adjusted (non-GAAP) gross margin in the low to mid 40s percent range

Adjusted (non-GAAP) operating expense to be approximately $210 million range

Live Web Broadcast of Unaudited Fiscal Second Quarter 2014 Results

Ciena will host a discussion of its unaudited fiscal second quarter 2014 results with investors and financial analysts today, Thursday, June 5, 2014 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 transcript 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.

To accompany its live broadcast, Ciena has posted to the Investor Relations page of its website at www.ciena.com/investors a presentation that includes certain highlighted information to be discussed on the call and certain historical results of operations.

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 Ciena's 'Business Outlook for Fiscal Third Quarter of 2014' as well as: 'Diversifying business drives continued growth and differentiated performance'; 'As a direct result of our expanding role and reach in the industry, we delivered strong financial results in both our second quarter and first half of fiscal 2014, including continued revenue growth and increased operating leverage.'; 'As the shift continues toward on-demand networking models and as we continue to diversify our business, we expect to deliver steadily improving financial performance, including performance in the second half of the year that is stronger than the first half.'

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; seasonality and 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; supply chain disruptions and 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, which Ciena filed with the Securities and Exchange Commission on March 7, 2014. 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.

About Ciena. Ciena (NYSE: CIEN) is the network specialist. We collaborate with customers worldwide to unlock the strategic potential of their networks and fundamentally change the way they perform and compete. Ciena leverages its deep expertise in packet and optical networking and distributed software automation to deliver solutions in alignment with its OPn architecture for next-generation networks. We enable a high-scale, programmable infrastructure that can be controlled and adapted by network-level applications, and provide open interfaces to coordinate computing, storage and network resources in a unified, virtualized environment. For updates on Ciena news, follow us on Twitter @Ciena or on LinkedIn at http://www.linkedin.com/company/ciena. Investors are encouraged to review the Investors section of our website at www.ciena.com/investors, where we routinely post press releases, SEC filings, recent news, financial results, and other announcements. From time to time we exclusively post material information to this website along with other disclosure channels that we use.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Quarter Ended April 30, Six Months Ended April 30,

2013 2014 2013 2014

Revenue:

Products $413,217$460,821$766,274$893,762

Services 94,495 99,240 194,531 200,002

Total revenue 507,712 560,061 960,805 1,093,764

Cost of goods sold:

Products 239,441 257,632 435,962 502,848

Services 58,758 64,738 119,535 127,374

Total cost of goods sold 298,199 322,370 555,497 630,222

Gross profit 209,513 237,691 405,308 463,542

Operating expenses:

Research and development 100,787 103,492 189,912 204,989

Selling and marketing 74,475 83,662 141,063 162,010

General and administrative 30,883 31,882 59,091 61,979

Amortization of intangible assets 12,439 11,493 24,892 23,932

Restructuring costs 1,509 - 6,539 115

Total operating expenses 220,093 230,529 421,497 453,025

Income (loss) from operations (10,580) 7,162 (16,189) 10,517

Interest and other income (loss), net (2,716) (1,905) (2,853) (7,903)

Interest expense (11,392) (11,020) (22,124) (22,048)

Loss on extinguishment of debt - - (28,630) -

Loss before income taxes (24,688) (5,763) (69,796) (19,434)

Provision for income taxes 2,391 4,395 4,607 6,660

Net loss $(27,079)$(10,158)$(74,403)$(26,094)

Basic net loss per common share $(0.27)$(0.10)$(0.73)$(0.25)

Diluted net loss per potential common share $(0.27)$(0.10)$(0.73)$(0.25)

Weighted average basic common shares outstanding 101,913 105,451 101,560 104,977

Weighted average dilutive potential common shares outstanding 101,913 105,451 101,560 104,977

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

October 31, April 30,

2013 2014

ASSETS

Current assets:

Cash and cash equivalents $ 346,487$ 325,083

Short-term investments 124,979 90,049

Accounts receivable, net 488,578 514,973

Inventories 249,103 293,952

Prepaid expenses and other 186,655 207,279

Total current assets 1,395,802 1,431,336

Long-term investments 15,031 15,042

Equipment, furniture and fixtures, net 119,729 119,876

Other intangible assets, net 185,828 155,117

Other long-term assets 86,380 74,093

Total assets $ 1,802,770$ 1,795,464

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

Accounts payable $ 254,849$ 229,498

Accrued liabilities 271,656 254,436

Deferred revenue 88,550 118,473

Convertible notes payable - 187,647

Total current liabilities 615,055 790,054

Long-term deferred revenue 23,620 23,820

Other long-term obligations 34,753 35,789

Long-term convertible notes payable 1,212,019 1,026,641

Total liabilities $1,885,447$1,876,304

Commitments and contingencies

Stockholders' equity (deficit):

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; 103,705,709 and 105,584,958 shares issued and outstanding 1,037 1,056

Additional paid-in capital 5,893,880 5,926,276

Accumulated other comprehensive loss (7,774) (12,258)

Accumulated deficit (5,969,820) (5,995,914)

Total stockholders' equity (deficit) (82,677) (80,840)

Total liabilities and stockholders' equity (deficit) $ 1,802,770$ 1,795,464

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Six Months Ended April 30,

2013 2014

Cash flows used in operating activities:

Net loss $ (74,403)$ (26,094)

Adjustments to reconcile net loss to net cash used in operating activities:

Loss on extinguishment of debt 28,630 -

Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements 28,857 27,143

Share-based compensation costs 18,147 23,443

Amortization of intangible assets 35,661 30,712

Provision for inventory excess and obsolescence 9,027 12,972

Provision for warranty 11,060 12,424

Other 5,068 10,164

Changes in assets and liabilities:

Accounts receivable (76,526) (27,548)

Inventories 2,975 (57,821)

Prepaid expenses and other (33,969) (19,054)

Accounts payable, accruals and other obligations 24,805 (51,631)

Deferred revenue 19,799 30,123

Net cash used in operating activities (869) (35,167)

Cash flows provided by (used in) investing activities:

Payments for equipment, furniture, fixtures and intellectual property (21,496) (26,485)

Restricted cash 1,679 1,912

Purchase of available for sale securities (99,914) (95,033)

Proceeds from maturities of available for sale securities 50,000 130,000

Settlement of foreign currency forward contracts, net - (4,029)

Net cash provided by (used in) investing activities (69,731) 6,365

Cash flows from financing activities:

Payment of long term debt (216,210) -

Payment for debt and equity issuance costs (3,661) -

Payment of capital lease obligations (1,427) (1,520)

Proceeds from issuance of common stock 5,955 8,970

Net cash provided by (used in) financing activities (215,343) 7,450

Effect of exchange rate changes on cash and cash equivalents (3) (52)

Net decrease in cash and cash equivalents (285,943) (21,352)

Cash and cash equivalents at beginning of period 642,444 346,487

Cash and cash equivalents at end of period $ 356,498$ 325,083

Supplemental disclosure of cash flow information

Cash paid during the period for interest $ 15,720$ 17,047

Cash paid during the period for income taxes, net $ 5,136$ 7,221

Non-cash investing and financing activities

Purchase of equipment in accounts payable $ 3,006$ 4,799

Fixed assets acquired under capital leases $ 1,286 $ -

APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements

Quarter Ended

April 30,

2013 2014

Gross Profit Reconciliation

GAAP gross profit $209,513$237,691

Share-based compensation-products 686 741

Share-based compensation-services 435 568

Amortization of intangible assets 5,384 2,328

Total adjustments related to gross profit 6,505 3,637

Adjusted (non-GAAP) gross profit $216,018$241,328

Adjusted (non-GAAP) gross profit percentage 42.5 % 43.1 %

Operating Expense Reconciliation

GAAP operating expense $220,093$230,529

Share-based compensation-research and development 2,204 2,782

Share-based compensation-sales and marketing 3,382 4,246

Share-based compensation-general and administrative 3,144 3,661

Amortization of intangible assets 12,439 11,493

Restructuring costs 1,509 -

Settlement of patent litigation - 2,000

Total adjustments related to operating expense 22,678 24,182

Adjusted (non-GAAP) operating expense $197,415$206,347

Income (Loss) from Operations Reconciliation

GAAP income (loss) from operations $(10,580)$7,162

Total adjustments related to gross profit 6,505 3,637

Total adjustments related to operating expense 22,678 24,182

Adjusted (non-GAAP) income from operations $18,603 34,981

Adjusted (non-GAAP) operating margin percentage 3.7 % 6.2 %

Net Income (Loss) Reconciliation

GAAP net loss $(27,079)$(10,158)

Total adjustments related to gross profit 6,505 3,637

Total adjustments related to operating expense 22,678 24,182

Non-cash interest expense 247 302

Change in fair value of embedded redemption feature (120) 1,460

Adjusted (non-GAAP) net income $2,231$19,423

Weighted average basic common shares outstanding 101,913 105,451

Weighted average dilutive potential common shares outstanding 1 103,165 120,628

Net Income (Loss) per Common Share

GAAP diluted net loss per common share $(0.27)$(0.10)

Adjusted (non-GAAP) diluted net income per common share 2 $0.02$0.17

Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the second quarter of fiscal 2013 includes 1.3 million shares underlying certain stock options and restricted stock units.

Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the second quarter of fiscal 2014 includes 2.1 million shares underlying certain stock options and restricted stock units, and 13.1 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017.

The calculation of Adjusted (non-GAAP) diluted net income per common share for the second quarter of fiscal 2014 requires adding back interest expense of approximately $1.4 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017 to the Adjusted (non-GAAP) net income in order to derive the numerator for the Adjusted earnings per common share calculation.

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, that Ciena is required to amortize over its expected useful life.

Restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities.

Settlement of patent litigation - included in general and administrative expense during the second quarter of fiscal 2014 is a $2.0 million patent litigation settlement.

Non-cash interest expense - a non-cash debt discount expense amortized as interest expense during the term of Ciena's 4.0% senior convertible notes due December 15, 2020 relating to the required separate accounting of the equity component of these convertible notes.

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 due March 15, 2015.

Press Contacts:

Nicole Anderson

Ciena Corporation

(877) 857 -7377

pr@ciena.com Investor Contacts:

Gregg Lampf

Ciena Corporation

(877) 243 6273

ir@ciena.com

Media inquiriesFor media inquiries, please contact Jamie Moody at 877-857-7377 or email us.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: ENP Newswire


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters