CIEN
Ciena Corp
$20.21
($.19)
(.93%)
Ciena Reports Fiscal Fourth Quarter 2016 and Year-End Financial Results
Thursday, December 8, 2016  7:00:01 AM ET

Ciena(R) Corporation (CIEN), the network specialist, today announced unaudited financial results for its fiscal fourth quarter and year ended October 31, 2016.

For the fiscal fourth quarter 2016, Ciena reported revenue of $716.2 million as compared to $692.0 million for the fiscal fourth quarter 2015. For fiscal year 2016, Ciena reported revenue of $2.6 billion, as compared to $2.4 billion for fiscal year 2015.

On the basis of generally accepted accounting principles (GAAP), Ciena’s net income for the fiscal fourth quarter 2016 was $36.6 million, or $0.25 per diluted common share, which compares to a GAAP net loss of $13.8 million, or $0.10 per diluted common share, for the fiscal fourth quarter 2015. For fiscal year 2016, Ciena had a GAAP net income of $72.6 million, or $0.51 per diluted common share, which compares to a GAAP net income of $11.7 million or $0.10 per diluted common share for fiscal year 2015.

Ciena’s adjusted (non-GAAP) net income for the fiscal fourth quarter 2016 was $69.4 million, or $0.44 per diluted common share, which compares to an adjusted (non-GAAP) net income of $67.3 million, or $0.42 per diluted common share, for the fiscal fourth quarter 2015. For fiscal year 2016, Ciena’s adjusted (non-GAAP) net income was $214.6 million, or $1.38 per diluted common share, as compared to an adjusted (non-GAAP) net income of $179.0 million, or $1.31 per diluted common share for fiscal year 2015.

"Our strong fiscal 2016 results demonstrate our increasingly differentiated performance versus our competitors, marking Ciena’s seventh consecutive year of growing faster than the overall market as well as steady improvement in our operating leverage, profitability and cash flow," said Gary Smith, president and CEO, Ciena. "We believe that the combination of our leading technology, strategic investments, global scale and business diversification will enable us to continue to take market share and drive operating leverage in fiscal 2017."

Fiscal Fourth Quarter 2016 Performance Summary

The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to prior periods, including sequential quarterly and year over year changes. A reconciliation between the GAAP and adjusted (non-GAAP) measures contained in this release is included in Appendices A and B.

GAAP Results (unaudited)
Q4
Q3
Q4
Period Change
FY 2016
FY 2016
FY 2015
Q-T-Q*
Y-T-Y*
Revenue
$ 716.2
$ 670.6
$ 692.0
6.8 %
3.5 %
Gross margin
44.5 %
46.0 %
43.8 %
(1.5 )%
0.7 %
Operating expense
$ 258.9
$ 251.5
$ 293.6
2.9 %
(11.8 )%
Operating margin
8.3 %
8.5 %
1.4 %
(0.2 )%
6.9 %
Non-GAAP Results (unaudited)
Q4
Q3
Q4
Period Change
FY 2016
FY 2016
FY 2015
Q-T-Q*
Y-T-Y*
Revenue
$ 716.2
$ 670.6
$ 692.0
6.8 %
3.5 %
Adj. gross margin
45.2 %
46.8 %
44.9 %
(1.6 )%
0.3 %
Adj. operating expense
$ 232.4
$ 223.4
$ 220.5
4.0 %
5.4 %
Adj. operating margin
12.8 %
13.5 %
13.0 %
(0.7 )%
(0.2 )%
* Denotes % change, or in the case of margin, absolute change
Revenue by Segment (unaudited)
Q4 FY 2016
Q3 FY 2016
Q4 FY 2015
Revenue
%
Revenue
%
Revenue
%
Networking Platforms
Converged Packet Optical
$
488.0
68.1
$
467.6
69.7
$
484.3
70.0
Packet Networking
72.4
10.1
63.7
9.5
63.7
9.2
Optical Transport
5.8
0.8
9.6
1.4
16.7
2.4
Total Networking Platforms
566.2
79.0
540.9
80.6
564.7
81.6
Software and Software-Related Services
Software Platforms
16.3
2.3
12.6
1.9
9.6
1.4
Software-Related Services
21.3
3.0
19.0
2.8
16.7
2.4
Total Software and Software-Related Services
37.6
5.3
31.6
4.7
26.3
3.8
Global Services
Maintenance Support and Training
59.8
8.3
56.0
8.4
57.2
8.3
Installation and Deployment
38.6
5.4
31.2
4.7
33.5
4.8
Consulting and Network Design
14.0
2.0
10.9
1.6
10.3
1.5
Total Global Services
112.4
15.7
98.1
14.7
101.0
14.6
Total
$
716.2
100.0
$
670.6
100.0
$
692.0
100.0
Additional Performance Metrics for Fiscal Fourth Quarter 2016
Revenue by Geographic Region (unaudited)
Q4 FY 2016
Q3 FY 2016
Q4 FY 2015
Revenue
%
Revenue
%
Revenue
%
North America
$ 463.1
64.7
$ 438.0
65.3
$ 480.0
69.4
Europe, Middle East and Africa
112.5
15.7
104.3
15.6
94.0
13.6
Caribbean and Latin America
46.8
6.5
46.6
6.9
45.7
6.6
Asia Pacific
93.8
13.1
81.7
12.2
72.3
10.4
Total
$ 716.2
100.0
$ 670.6
100.0
$ 692.0
100.0

U.S. customers contributed 61% of total revenue

One 10%-plus customer represented a total of 18.3% of revenue

Cash and investments totaled $1.14 billion

Cash flow from operations totaled $136.7 million

Average days’ sales outstanding (DSOs) were 72

Accounts receivable balance was $576.2 million

Inventories totaled $211.3 million, including: -- Raw materials: $44.6 million

Work in process: $12.9 million

Finished goods: $156.4 million

Deferred cost of sales: $59.9 million

Reserve for excess and obsolescence: $(62.5) million

Product inventory turns were 6.1

Headcount totaled 5,555

Business Outlook for Fiscal First Quarter 2017

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 financial performance for fiscal first quarter 2017 to include:

Revenue in the range of $615 million to $645 million

Adjusted (non-GAAP) gross margin in the mid-40s percentage range

Adjusted (non-GAAP) operating expense in the range of $220 million to $225 million

Live Web Broadcast of Unaudited Fiscal Fourth Quarter 2016 Results

Ciena will host a discussion of its unaudited fiscal fourth quarter 2016 results with investors and financial analysts today, Thursday, December 8, 2016 at 8:30 a.m. (Eastern). The live broadcast will be available at www.ciena.com, and an archived replay 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. Ciena will also post to the Investor Relations page a presentation that includes certain highlighted information discussed on the call and certain historical results of operations.

Notes to Investors

Forward-Looking Statements. You are encouraged to review the Investors section of our website, where we routinely post press releases, SEC filings, recent news, financial results, supplemental financial information, and other announcements. From time to time we exclusively post material information to this website along with other disclosure channels that we use. This press release contains certain forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts, assumptions and other information available to the Company as of the date hereof. Forward-looking statements include statements regarding Ciena’s expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. Forward-looking statements in this release include: "Our strong fiscal 2016 results demonstrate our increasingly differentiated performance versus our competitors, marking Ciena’s seventh consecutive year of growing faster than the overall market as well as steady improvement in our operating leverage, profitability and cash flow."; "We believe that the combination of our leading technology, strategic investments, global scale and business diversification will enable us to continue to take market share and drive operating leverage in fiscal 2017." "Ciena expects fiscal first quarter 2017 financial performance to include: Revenue in the range of $615 million to $645 million; Adjusted (non-GAAP) gross margin in the mid-40s percentage range; Adjusted (non-GAAP) operating expense in the range of $220 million to $225 million."

Ciena’s actual results, performance or events may differ materially from these forward-looking statements made or implied due to 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 September 7, 2016. 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 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. Adjustments made in calculating Adjusted (non-GAAP) net income do not result in any incremental income tax due to the availability of Ciena’s deferred tax assets which would offset any additional income. As such, the tax effect of these adjustments is not presented as a separate reconciling item. 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.

With respect to Ciena’s expectations under "Business Outlook for Fiscal First Quarter 2017" above, Ciena is not able to provide a quantitative reconciliation of the adjusted (non-GAAP) gross margin and adjusted (non-GAAP) operating expense guidance measures to the corresponding gross profit and gross profit percentage, and operating expense GAAP measures without unreasonable efforts. Ciena cannot provide meaningful estimates of the non-recurring charges and credits excluded from these non-GAAP measures due to the forward-looking nature of these estimates and their inherent variability and uncertainty. For the same reasons, Ciena is unable to address the probable significance of the unavailable information.

About Ciena. Ciena (CIEN) is a network strategy and technology company. We translate best-in-class technology into value through a high-touch, consultative business model - with a relentless drive to create exceptional experiences measured by outcomes. For updates on Ciena, follow us on Twitter @Ciena, LinkedIn, the Ciena Insights blog, or visit www.ciena.com.

CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Quarter Ended October 31,
Year Ended October 31,
2016
2015
2016
2015
Revenue:
Products
$
582,455
$ 574,281
$ 2,117,472
$ 2,002,395
Services
133,736
117,692
483,101
443,274
Total revenue
716,191
691,973
2,600,573
2,445,669
Cost of goods sold:
Products
324,663
323,090
1,176,304
1,120,373
Services
72,980
65,895
262,693
249,733
Total cost of goods sold
397,643
388,985
1,438,997
1,370,106
Gross profit
318,548
302,988
1,161,576
1,075,563
Operating expenses:
Research and development
112,448
107,859
451,794
414,201
Selling and marketing
96,853
93,003
349,731
333,836
General and administrative
32,147
33,804
132,828
123,402
Amortization of intangible assets
14,551
36,454
61,508
69,511
Acquisition and integration costs
--
22,084
4,613
25,539
Restructuring costs
2,876
366
4,933
8,626
Total operating expenses
258,875
293,570
1,005,407
975,115
Income from operations
59,673
9,418
156,169
100,448
Interest and other income (loss), net
(1,339 )
(6,232 )
(12,795 )
(25,505 )
Interest expense
(15,371 )
(12,688 )
(56,656 )
(51,179 )
Income (loss) before income taxes
42,963
(9,502 )
86,718
23,764
Provision for income taxes
6,376
4,330
14,134
12,097
Net income (loss)
$
36,587
$ (13,832 )
$
72,584
$
11,667
Net Income (loss) per Common Share
Basic net income (loss) per common share
$
0.26
$
(0.10 )
$
0.52
$
0.10
Diluted net income (loss) per potential common share(1)
$
0.25
$
(0.10 )
$
0.51
$
0.10
Weighted average basic common shares outstanding
139,741
134,097
138,312
118,416
Weighted average diluted potential common shares outstanding (2)
165,298
134,097
150,704
120,101
1. The calculation of GAAP diluted net income per common share for
the fourth quarter of fiscal 2016 requires adding back interest
expense of approximately $0.7 million associated with Ciena’s 0.875%
convertible senior notes, due June 15, 2017 and approximately $3.6
million associated with Ciena’s 3.75% convertible senior notes, due
October 15, 2018 to the GAAP net income in order to derive the
numerator for the diluted earnings per common share calculation.
The calculation of GAAP diluted net income per common share for
fiscal 2016 requires adding back interest expense of approximately
$4.8 million associated with Ciena’s 0.875% convertible senior
notes, due June 15, 2017 to the GAAP net income in order to derive
the numerator for the diluted earnings per common share calculation.
2. Weighted average dilutive potential common shares outstanding
used in calculating GAAP diluted net income per common share for the
fourth quarter of fiscal 2016 includes 1.6 million shares underlying
certain stock options and restricted stock units, 6.6 million shares
underlying Ciena’s 0.875% convertible senior notes, due June 15,
2017 and 17.4 million shares underlying Ciena’s 3.75% convertible
senior notes, due October 15, 2018.
Weighted average dilutive potential common shares outstanding used
in calculating GAAP diluted net income per common share for fiscal
2016 includes 1.3 million shares underlying certain stock options
and restricted stock units and 11.1 million shares underlying
Ciena’s 0.875% convertible senior notes, due June 15, 2017.
Weighted average dilutive potential common shares outstanding used
in calculating GAAP diluted net income per common share for fiscal
2015 includes 1.7 million shares underlying certain stock options
and restricted stock units.
CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
October 31,
2016
2015
ASSETS
Current assets:
Cash and cash equivalents
$
777,615
$
790,971
Short-term investments
275,248
135,107
Accounts receivable, net
576,235
550,792
Inventories
211,251
191,162
Prepaid expenses and other
172,843
196,178
Total current assets
2,013,192
1,864,210
Long-term investments
90,172
95,105
Equipment, building, furniture and fixtures, net
288,406
191,973
Goodwill, net
266,974
256,434
Other intangible assets, net
146,711
202,673
Other long-term assets
76,987
84,656
Total assets
$
2,882,442
$
2,695,051
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable
$
235,942
$
222,140
Accrued liabilities and other short-term obligations
310,353
316,283
Deferred revenue
109,009
126,111
Current portion of long-term debt
236,558
2,500
Total current liabilities
891,862
667,034
Long-term deferred revenue
73,854
62,962
Other long-term obligations
124,394
72,540
Long-term debt, net
1,025,991
1,271,639
Total liabilities
$
2,116,101
$
2,074,175
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;
1,398
1,356
139,767,627 and 135,612,217 shares issued and outstanding
Additional paid-in capital
6,715,478
6,640,436
Accumulated other comprehensive loss
(24,329 )
(22,126 )
Accumulated deficit
(5,926,206 )
(5,998,790 )
Total stockholders’ equity
766,341
620,876
Total liabilities and stockholders’ equity
$
2,882,442
$
2,695,051
CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended October 31,
2016
2015
Cash flows from operating activities:
Net income
$
72,584
$
11,667
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of equipment, furniture and fixtures, and amortization
63,394
55,901
of leasehold improvements
Share-based compensation costs
51,993
55,340
Amortization of intangible assets
78,298
79,866
Provision for inventory excess and obsolescence
33,713
26,846
Provision for warranty
15,483
17,881
Other
25,514
27,373
Changes in assets and liabilities:
Accounts receivable
(26,074 )
(37,297 )
Inventories
(53,000 )
46,898
Prepaid expenses and other
30,047
(46,383 )
Accounts payable, accruals and other obligations
7,153
(10,505 )
Deferred revenue
(9,585 )
34,525
Net cash provided by operating activities
289,520
262,112
Cash flows used in investing activities:
Payments for equipment, furniture, fixtures and intellectual property
(107,185 )
(62,109 )
Restricted cash
11
(40 )
Purchase of available for sale securities
(365,191 )
(245,323 )
Proceeds from maturities of available for sale securities
230,612
205,000
Settlement of foreign currency forward contracts, net
(18,506 )
24,133
Purchase of cost method investment
(4,000 )
(2,000 )
Acquisition of business, net of cash acquired
(32,000 )
37,212
Net cash used in investing activities
(296,259 )
(43,127 )
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net
248,750
--
Payment of long-term debt
(266,116 )
(29,867 )
Payment of debt and equity issuance costs
(3,987 )
(421 )
Payment of capital lease obligations
(5,966 )
(8,038 )
Proceeds from issuance of common stock
23,091
30,275
Net cash used in financing activities
(4,228 )
(8,051 )
Effect of exchange rate changes on cash and cash equivalents
(2,389 )
(6,683 )
Net increase in cash and cash equivalents
(13,356 )
204,251
Cash and cash equivalents at beginning of fiscal year
790,971
586,720
Cash and cash equivalents at end of fiscal year
$
777,615
$
790,971
Supplemental disclosure of cash flow information
Cash paid during the fiscal year for interest
$
46,897
$
40,772
Cash paid during the fiscal year for income taxes, net
$
15,268
$
10,668
Non-cash investing and financing activities
Purchase of equipment in accounts payable
$
15,030
$
20,922
Equipment acquired under capital leases
$
5,322
$
464
Building subject to capital lease
$
8,993
$
14,939
Construction in progress subject to build-to-suit lease
$
39,914
$
18,663
Non-cash financing activities
Conversion of 4.0% convertible senior notes, due March 15, 2015 into
$ --
$
180,645
8,898,387 shares of common stock
Conversion of 8.0% convertible senior notes, due December 15, 2019,
$ --
$
117,140
assumed from the Cyan acquisition, into 4,589,626 shares of common
stock
Fair value of shares issued related to acquisition of business
$ --
$
302,114
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly
Measurements (unaudited)
Quarter Ended
October 31,
2016
2015
Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit
$
318,548
$
302,988
Share-based compensation-products
612
589
Share-based compensation-services
557
573
Amortization of intangible assets
4,320
3,438
Fair value adjustment of acquired inventory
--
3,069
Total adjustments related to gross profit
5,489
7,669
Adjusted (non-GAAP) gross profit
$
324,037
$
310,657
Adjusted (non-GAAP) gross profit percentage
45.2 %
44.9 %
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense
$
258,875
$
293,570
Share-based compensation-research and development
3,172
3,850
Share-based compensation-sales and marketing
2,890
4,468
Share-based compensation-general and administrative
2,961
5,860
Share-based compensation-acquisition and integration
--
7,588
Amortization of intangible assets
14,551
36,454
Acquisition and integration costs, excluding share-based compensation
--
14,496
Restructuring costs
2,876
366
Total adjustments related to operating expense
26,450
73,082
Adjusted (non-GAAP) operating expense
$
232,425
$
220,488
Income from Operations Reconciliation (GAAP/non-GAAP)
GAAP income from operations
$
59,673
$
9,418
Total adjustments related to gross profit
5,489
7,669
Total adjustments related to operating expense
26,450
73,082
Adjusted (non-GAAP) income from operations
91,612
$
90,169
Adjusted (non-GAAP) operating margin percentage
12.8 %
13.0 %
Net Income Reconciliation (GAAP/non-GAAP)
GAAP net income (loss)
$
36,587
$
(13,832 )
Total adjustments related to gross profit
5,489
7,669
Total adjustments related to operating expense
26,450
73,082
Loss on extinguishment of debt
376
--
Non-cash interest expense
500
362
Adjusted (non-GAAP) net income
$
69,402
$
67,281
Weighted average basic common shares outstanding
139,741
134,097
Weighted average dilutive potential common shares outstanding(1)
174,496
177,054
Net Income (Loss) per Common Share
GAAP diluted net income (loss) per common share
$
0.25
$
(0.10 )
Adjusted (non-GAAP) diluted net income per common share(2)
$
0.44
$
0.42
APPENDIX B - Reconciliation of Adjusted (Non- GAAP) Annual
Measurements (unaudited)
Year Ended
October 31,
2016
2015
Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit
$
1,161,576
$
1,075,563
Share-based compensation-products
2,457
2,400
Share-based compensation-services
2,479
2,156
Amortization of intangible assets
16,401
10,039
Fair value adjustment of acquired inventory
--
3,069
Total adjustments related to gross profit
21,337
17,664
Adjusted (non-GAAP) gross profit
$
1,182,913
$
1,093,227
Adjusted (non-GAAP) gross profit percentage
45.5 %
44.7 %
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense
$
1,005,407
$
975,115
Share-based compensation-research and development
13,870
10,665
Share-based compensation-sales and marketing
15,138
15,539
Share-based compensation-general and administrative
17,342
17,018
Share-based compensation-acquisition and integration
714
7,588
Amortization of intangible assets
61,508
69,511
Acquisition and integration costs, excluding share-based compensation
3,899
17,951
Restructuring costs
4,933
8,626
Settlement of patent litigation
1,200
500
Total adjustments related to operating expense
118,604
147,398
Adjusted (non-GAAP) operating expense
$
886,803
$
827,717
Income from Operations Reconciliation (GAAP/non-GAAP)
GAAP income from operations
$
156,169
$
100,448
Total adjustments related to gross profit
21,337
17,664
Total adjustments related to operating expense
118,604
147,398
Adjusted (non-GAAP) income from operations
$
296,110
$
265,510
Adjusted (non-GAAP) operating margin percentage
11.4 %
10.9 %
Income Reconciliation (GAAP/non-GAAP)
GAAP net income
$
72,584
$
11,667
Total adjustments related to gross profit
21,337
17,664
Total adjustments related to operating expense
118,604
147,398
Loss on extinguishment of debt
226
--
Non-cash expense associated with the conversion of convertible notes
--
768
Non-cash interest expense
1,881
1,491
Adjusted (non-GAAP) net income
$
214,632
$
178,988
Weighted average basic common shares outstanding
138,312
118,416
Weighted average dilutive potential common shares outstanding(3)
177,258
163,308
Net Income per Common Share
GAAP diluted net income per common share
$
0.51
$
0.10
Adjusted (non-GAAP) diluted net income per common share(4)
$
1.38
$
1.31
1. Weighted average dilutive potential common shares outstanding
used in calculating Adjusted (non-GAAP) diluted net income per
common share for the fourth quarter of fiscal 2016 includes 1.6
million shares underlying certain stock options and restricted stock
units, 6.6 million shares underlying Ciena’s 0.875% convertible
senior notes, due June 15, 2017, 17.4 million shares underlying
Ciena’s 3.75% convertible senior notes, due October 15, 2018 and 9.2
million shares underlying Ciena’s 4.0% convertible senior notes, due
December 15, 2020.
Weighted average dilutive potential common shares outstanding used
in calculating Adjusted (non-GAAP) diluted net income per common
share for the fourth quarter of fiscal 2015 includes 2.7 million
shares underlying certain stock options and restricted stock units,
13.0 million shares underlying Ciena’s 0.875% convertible senior
notes, due June 15, 2017, 17.4 million shares underlying Ciena’s
3.75% convertible senior notes, due October 15, 2018, 0.7 million
shares underlying the 8.0% convertible senior notes, due December
15, 2019 assumed from the Cyan acquisition and 9.2 million shares
underlying Ciena’s 4.0% convertible senior notes, due December 15,
2020.
2. The calculation of Adjusted (non-GAAP) diluted net income per
common share for the fourth quarter of fiscal 2016 requires adding
back interest expense of approximately $0.7 million associated with
Ciena’s 0.875% convertible senior notes, due June 15, 2017,
approximately $3.6 million associated with Ciena’s 3.75% convertible
senior notes, due October 15, 2018 and approximately $2.9 million
associated with Ciena’s 4.0% convertible senior notes, due December
15, 2020 to the Adjusted (non-GAAP) net income in order to derive
the numerator for the Adjusted earnings per common share calculation.
The calculation of Adjusted (non-GAAP) diluted net income per common
share for the fourth quarter of fiscal 2015 requires adding back
interest expense of approximately $1.4 million associated with
Ciena’s 0.875% convertible senior notes, due June 15, 2017,
approximately $3.6 million associated with Ciena’s 3.75% convertible
senior notes, due October 15, 2018, approximately $0.1 million
associated with Ciena’s 8.0% convertible senior notes, due December
15, 2019 assumed from the Cyan acquisition and approximately $2.8
million associated with Ciena’s 4.0% convertible senior notes, due
December 15, 2020 to the Adjusted (non-GAAP) net income in order to
derive the numerator for the Adjusted earnings per common share
calculation.
3. Weighted average dilutive potential common shares outstanding
used in calculating Adjusted (non-GAAP) diluted net income per
common share for fiscal 2016 includes 1.3 million shares underlying
certain stock options and restricted stock units, 11.1 million
shares underlying Ciena’s 0.875% convertible senior notes, due June
15, 2017, 17.4 million shares underlying Ciena’s 3.75% convertible
senior notes, due October 15, 2018 and 9.2 million shares underlying
Ciena’s 4.0% convertible senior notes, due December 15, 2020.
Weighted average dilutive potential common shares outstanding used
in calculating Adjusted (non-GAAP) diluted net income per common
share for fiscal 2015 includes 1.7 million shares underlying certain
stock options and restricted stock units, 3.4 million shares
underlying Ciena’s 4.0% convertible senior notes (which were paid at
maturity during the second quarter of fiscal 2015), 13.1 million
shares underlying Ciena’s 0.875% convertible senior notes, due June
15, 2017, 17.4 million shares underlying Ciena’s 3.75% convertible
senior notes, due October 15, 2018, 0.2 million shares underlying
Ciena’s 8.0% convertible senior notes assumed from the Cyan
acquisition, due December 15, 2019, and 9.2 million shares
underlying Ciena’s 4.0% convertible senior notes, due December 15,
2020.
4. The calculation of Adjusted (non-GAAP) diluted net income per
common share for fiscal 2016 requires adding back interest expense
of approximately $4.8 million associated with Ciena’s 0.875%
convertible senior notes, due June 15, 2017, approximately $14.3
million associated with Ciena’s 3.75% convertible senior notes, due
October 15, 2018 and approximately $11.4 million associated with
Ciena’s 4.0% convertible senior notes, due December 15, 2020 to the
Adjusted (non-GAAP) net income in order to derive the numerator for
the Adjusted earnings per common share calculation.
The calculation of Adjusted (non-GAAP) diluted net income per common
share for fiscal 2015 requires adding back interest expense of
approximately $3.2 million approximately associated with Ciena’s
4.0% convertible senior notes (which were paid at maturity during
the second quarter of fiscal 2015), approximately $5.5 million
associated with Ciena’s 0.875% convertible senior notes, due June
15, 2017, approximately $14.3 million associated with Ciena’s 3.75%
convertible senior notes, due October 15, 2018, approximately $0.1
million associated with Ciena’s 8.0% convertible senior notes, due
December 15, 2019 assumed from the Cyan acquisition and
approximately $11.4 million associated with Ciena’s 4.0% convertible
senior notes, due December 15, 2020 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.

Acquisition and integration costs - consist of financial, legal and accounting advisors, facilities and systems consolidation costs, and severance and other employment-related costs related to our recent acquisitions of Cyan and TeraXion. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.

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 the expected useful life.

Fair value adjustment of acquired inventory - an infrequent charge required by acquisition accounting rules resulting from the required revaluation of inventory acquired from Cyan to estimated fair value. This revaluation resulted in a net increase in inventory carrying value and an increase in cost of goods sold for the period indicated.

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 is a $1.2 million patent litigation settlement during the second quarter of fiscal 2016 and a $0.5 million patent litigation settlement during the third quarter of fiscal 2015.

Loss on extinguishment of debt - a loss related to certain private repurchases conducted with several holders of Ciena’s 0.875% convertible senior notes, due June 15, 2017.

Non-cash expense associated with the conversion of convertible notes - a non-cash expense related to certain private exchange offers conducted with several holders of Ciena’s 4.0% senior convertible notes due March 15, 2015 prior to maturity of such notes.

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.

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SOURCE: Ciena Corporation

Ciena Corporation
Press Contact:
Nicole Anderson, 877-857-7377
pr@ciena.com
or
Investor Contact:
Gregg Lampf, 877-243-6273
ir@ciena.com