sctovc
 

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE TO
(Rule 14d-100)

TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) or 13(e)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934

CIENA CORPORATION
(Name of Subject Company (Issuer))

CIENA CORPORATION
(Name of Filing Persons (Issuer))

ONI SYSTEMS CORP. 5% CONVERTIBLE SUBORDINATED NOTES DUE OCTOBER 15, 2005
(Title of Class of Securities)

68273F-AA-1
(CUSIP Number of Class of Securities)

RUSSELL B. STEVENSON, JR.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CIENA CORPORATION
1201 WINTERSON ROAD
LINTHICUM, MARYLAND 21090
(410) 865-8500
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)

With a Copy to:

MICHAEL J. SILVER
AMY BOWERMAN FREED
HOGAN & HARTSON L.L.P.
111 SOUTH CALVERT STREET
SUITE 1600
BALTIMORE, MD 21202
(410) 659-2700

CALCULATION OF FILING FEE

     
TRANSACTION VALUATION*   AMOUNT OF FILING FEE
Not applicable   Not applicable

* No filing fee is required because this filing contained only preliminary communications made before the commencement of a tender offer.

o Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

     
Amount Previously Paid: N/A   Filing Party: N/A
Form or Registration No.: N/A   Date Filed: N/A

x Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

     
o  third party tender offer subject to Rule 14d-1.   o going-private transaction subject to Rule 13e-3.
x issuer tender offer subject to Rule 13e-4.   o amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer.   o


 

         
       
    Investor Contacts:   Suzanne DuLong or Jessica Towns
        CIENA Corporation
        (888) 243-6223
        email: ir@ciena.com
 
    Press Contacts:   Denny Bilter or Glenn Jasper
        CIENA Corporation
        (877) 857-7377
        email: pr@ciena.com

FOR IMMEDIATE RELEASE

CIENA Reports Fourth Quarter and Fiscal Year 2002 Results; Commences Tender
Offer to Repurchase Remaining Outstanding 5% ONI Notes

LINTHICUM, Md. December 12, 2002 – CIENA® Corporation (NASDAQ: CIEN) today reported revenue of $61.9 million for its fourth fiscal quarter ended October 31, 2002. Under GAAP, CIENA’s reported net loss for the period was $754.8 million, or a net loss of $1.75 per share.

The quarter’s results include charges for a goodwill impairment of $557.3 million, restructuring charges of $78.7 million associated with workforce reductions, lease terminations, non-cancelable lease costs and the write-down of certain property, equipment and leasehold improvements, deferred stock compensation charges of $5.7 million, amortization of intangible assets of $3.0 million, a charge for settlement of litigation with Pirelli of $1.8 million, losses on equity investments of $9.9 million, and a $2.7 million loss related to the repurchase and early extinguishment of $97.1 million of the $300 million outstanding 5% convertible subordinated notes due in 2005 assumed in the purchase of ONI Systems. In addition, CIENA recorded a charge of $1.6 million related to excess inventory.

“Despite a challenging year, our ongoing operating results in our fiscal fourth quarter show the positive effects of the steps taken across our company over the last year to align our business with a changed environment,” said Gary Smith, CIENA’s president and CEO. “During the quarter we grew our revenue, improved gross margins and delivered lower-than-anticipated ongoing operating expenses.”

For its 2002 fiscal year, CIENA reported revenue of $361.2 million. Under GAAP, CIENA’s reported net loss for the period was $1,597.5 million, or a net loss of $4.37 per share.

The year’s results include charges for a goodwill impairment of $557.3 million, restructuring costs of $225.4 million associated with workforce reductions, lease terminations, non-cancelable lease costs and the write-down of certain property, equipment and leasehold improvements, deferred stock compensation charges of $20.3 million, a provision for doubtful accounts of $14.8 million, amortization of intangible

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CIENA Reports Q4 and Fiscal 2002 Results; Commences Tender Offer/December 12, 2002/Page 2 of 8

assets of $9.0 million, a charge for settlement of litigation with Pirelli of $1.8 million, losses on equity investments of $15.7 million, and a $2.7 million loss related to the repurchase and early extinguishment of $97.1 million of the $300 million outstanding ONI 5% convertible subordinated notes due in 2005. In addition, CIENA recorded a charge of $286.5 million, primarily related to excess inventory associated with its long-haul transport products and non-cancelable purchase commitments with suppliers.

     In evaluating the operating performance of its business, CIENA’s management excludes certain charges or credits that are required by GAAP. These items, which are identified in the table below, share one or more of the following characteristics: they are unusual and CIENA does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of the Company’s control.

                 
    Quarter Ended   Fiscal Yr Ended
   
 
    October 31, 2002   October 31, 2002
   
 
Item   (in thousands)   (in thousands)
   
 
Payroll tax on stock options
  $     $ 38  
Deferred stock compensation costs
    5,740       20,324  
Amortization of intangible assets
    3,003       8,972  
Restructuring costs
    78,691       225,429  
Goodwill impairment
    557,286       557,286  
Pirelli litigation
    1,792       1,792  
Provision for doubtful accounts
          14,813  
Loss on equity investments
    9,937       15,677  
Loss on extinguishment of debt
    2,683       2,683  
Income tax effect of excluding items above
    32,493       334,661  
 
   
     
 
 
  $ 691,625     $ 1,181,675  

*Please see appendix A for additional information about this table.

These adjustments are not in accordance with GAAP and making such adjustments may not permit meaningful comparisons to other companies. As of the quarter ended October 31, 2002, CIENA’s weighted average shares outstanding were approximately 431,257,000. As of the fiscal year ended October 31, 2002, CIENA’s weighted average shares outstanding were approximately 365,202,000.

Debt Repurchase

During the fourth quarter of fiscal 2002, CIENA took steps to improve its already strong balance sheet. The Company saved $21.9 million in future principal payment by purchasing $97.1 million of the $300 million outstanding ONI 5% convertible subordinated notes due in 2005 for $75.2 million on the open market. At the time of purchase, these notes had an accreted book value of $72.5 million.

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CIENA Reports Q4 and Fiscal 2002 Results; Commences Tender Offer/December 12, 2002/Page 3 of 8

In addition, CIENA today announced that it has commenced a tender offer for the outstanding 5% Convertible Subordinated Notes due October 15, 2005 originally issued by ONI Systems Corp. and assumed by CIENA in its acquisition of ONI in June 2002. CIENA’s purpose in seeking to repurchase the notes is to reduce its annual interest expense and eliminate the need to repay or refinance the debt at maturity in 2005. The tender offer is not contingent on any financing. The notes are currently convertible into CIENA common stock at a conversion rate of approximately 7.7525 shares per $1,000 principal amount held, subject to adjustment. The purchase price for the notes will be $860.00 in cash per $1,000 principal amount, plus accrued and unpaid interest up to, but not including, the date of payment.

Holders that desire to tender their notes pursuant to the offer must follow the procedures described in the Offer to Purchase and other related documents to be filed by CIENA with the Securities and Exchange Commission. These documents will be mailed to the registered holders of the notes. The tender offer will expire at 5:00 p.m., New York City time, on January 13, 2003, unless the offer is extended.

Goldman, Sachs & Co. will act as the dealer managers for the tender offer and State Street Bank and Trust Company of California, N.A. will act as depositary. Requests for copies of the Offer to Purchase and additional information concerning the terms of the tender offer or questions about the offer may be directed to Goldman, Sachs & Co., at 85 Broad Street, New York City, New York 10004, Attn: Prospectus Department, Telephone: (212) 902-1000 or to the information agent for the tender offer, Georgeson Shareholder, 17 State Street, 10th Floor, New York, New York 10004, Telephone: (866) 295-4322.

If the Company successfully purchases all of the $202.9 million outstanding ONI 5% notes at $860 per $1,000 principal amount, it will save approximately $28.4 million in future principal payment and will record a book loss of approximately $18.7 million related to the extinguishment of this debt due to the fact that the accreted book value of the notes will be less than the purchase price. The Company will use its cash and cash equivalents, and short-term investments to fund the note purchase.

Business Outlook

“We are encouraged by the order activity we have seen thus far in our fiscal first quarter and expect that revenue in the quarter could increase by as much as 10 percent from our fiscal 2002 fourth quarter,” said Smith. “In addition, we expect to make continued progress toward profitability through our ongoing efforts to improve gross margin and to lower ongoing operating expenses.”

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CIENA Reports Q4 and Fiscal 2002 Results; Commences Tender Offer/December 12, 2002/Page 4 of 8

“The telecom equipment market has changed radically in just the last 12 months,” continued Smith. “While challenging, this change has created opportunity for those positioned to pursue it. CIENA’s financial strength and our commitment to continued investment in our business differentiates us from our competitors, many of whom are experiencing financial and directional uncertainty.”

“As a result, we believe CIENA has an opportunity to achieve growth in 2003 despite decreased carrier spending,” concluded Smith. “In addition to working toward increased market share, we are pursuing feature additions and product extensions, and developing new sales channels, to increase our addressable market.”

Live Web Broadcast of Q4 and Fiscal Year 2002 Results
CIENA will host a discussion of its fiscal fourth quarter and fiscal year 2002 results with investors and financial analysts on Thursday, December 12, 2002 at 8:30 a.m. (Eastern). The live broadcast of the discussion will be available via CIENA’s homepage at www.CIENA.com. An archived version of the discussion will be available shortly following the conclusion of the live broadcast on the Investor Relations page of CIENA’s website at: www.CIENA.com/investors.

NOTE TO CIENA INVESTORS
This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions of CIENA (the Company) that involve risks and uncertainties. Forward-looking statements in this release, including if the Company successfully purchases all of the $202.9 million outstanding 5% notes at $860 per $1,000 principal amount, it will save approximately $28.4 million in future principal payment and will record a book loss of approximately $18.7 million related to the extinguishment of this debt due to the fact that the accreted book value of the notes will be less than the purchase price, the Company will use its cash and cash equivalents, and short-term investments to fund the note purchase, we are encouraged by the order activity we have seen thus far in our fiscal first quarter and expect that revenue in the quarter could increase by as much as 10 percent from our fiscal 2002 fourth quarter, in addition, we expect to make continued progress toward profitability through our ongoing efforts to improve gross margin and to lower ongoing operating expenses, the telecom equipment market has changed radically in just the last 12 months, while challenging, this change has created opportunity for those positioned to pursue it, CIENA’s financial strength and our commitment to continued investment in our business differentiates us from our competitors, many of whom are experiencing financial and directional uncertainty, as a result, we believe CIENA has an opportunity to achieve growth in 2003 despite decreased carrier spending, in addition to working toward increased market share, we are pursuing feature additions and product extensions, and developing new sales channels, to increase our addressable market, are based on information available to the Company as of the date hereof. 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-K filed with the Securities and Exchange Commission on December 12, 2002. Forward-looking statements include statements regarding the Company’s expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking 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.

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CIENA Reports Q4 and Fiscal 2002 Results; Commences Tender Offer/December 12, 2002/Page 5 of 8

THIS PRESS RELEASE IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SECURITIES. CIENA PLANS TO FILE A SCHEDULE TO (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND OTHER TENDER OFFER DOCUMENTS) TODAY WITH THE SEC WITH REGARD TO ITS OFFER TO PURCHASE THE NOTES.

SECURITY HOLDERS ARE URGED TO READ THE OFFER TO PURCHASE, RELATED LETTER OF TRANSMITTAL AND THE OTHER TENDER OFFER DOCUMENTS TO BE FILED BY CIENA WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. THE OFFER TO PURCHASE, RELATED LETTER OF TRANSMITTAL AND THE OTHER TENDER OFFER DOCUMENTS FILED WITH THE SEC BY CIENA MAY BE OBTAINED WHEN THEY BECOME AVAILABLE FOR FREE AT THE SEC’S WEB SITE, WWW.SEC.GOV. REQUESTS FOR COPIES OF THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND THE OTHER TENDER OFFER DOCUMENTS OR QUESTIONS ABOUT THE OFFER MAY BE DIRECTED TO THE DEALER MANAGERS FOR THE OFFER, GOLDMAN, SACHS & CO., AT 85 BROAD STREET, NEW YORK CITY, NEW YORK 10004, ATTN: PROSPECTUS DEPARTMENT, TELEPHONE: (212) 902-1000 OR THE INFORMATION AGENT FOR THE OFFER, GEORGESON SHAREHOLDER, 17 STATE STREET, 10TH FLOOR, NEW YORK, NEW YORK 10004, TELEPHONE: (866) 295-4322.

(Condensed Consolidated Balance Sheets and Consolidated Statements of Operations follow)

 


 

CIENA Reports Q4 and Fiscal 2002 Results; Commences Tender Offer/December 12, 2002/Page 6 of 8

CIENA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

                         
            October 31,
           
            2001   2002
           
 
       
ASSETS
               
Current assets:
               
 
Cash and cash equivalents
  $ 397,890     $ 377,189  
 
Short-term investments
    902,594       1,130,414  
 
Accounts receivable, net
    395,063       28,680  
 
Inventories, net
    254,968       47,023  
 
Deferred income taxes
    186,861        
 
Prepaid expenses and other
    53,713       54,351  
 
   
     
 
     
Total current assets
    2,191,089       1,637,657  
Long-term investments
    494,657       570,861  
Equipment, furniture and fixtures, net
    331,490       196,951  
Goodwill
    178,891       212,500  
Other intangible assets, net
    47,874       62,457  
Other long-term assets
    73,300       70,596  
 
   
     
 
   
Total assets
  $ 3,317,301     $ 2,751,022  
 
   
     
 
       
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
   
Accounts payable
  $ 68,735     $ 39,841  
   
Accrued liabilities
    133,084       132,588  
   
Restructuring liabilities
    15,439       27,423  
   
Unfavorable lease commitments
          7,630  
   
Income taxes payable
    6,649        
   
Deferred revenue
    29,480       15,388  
   
Other current obligations
    995       948  
 
   
     
 
       
Total current liabilities
    254,382       223,818  
   
Deferred income taxes
    64,072        
   
Long-term deferred revenue
          15,444  
   
Long-term restructuring liabilities
          65,742  
   
Long-term unfavorable lease commitments
          70,124  
   
Other long-term obligations
    5,982       5,009  
   
Convertible notes payable
    863,883       843,616  
 
   
     
 
       
Total liabilities
    1,188,319       1,223,753  
 
   
     
 
Commitments and contingencies
               
Stockholders’ equity:
               
 
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares
               
 
issued and outstanding
           
Common stock – par value $0.01; 980,000,000 shares authorized;
               
 
328,022,264 and 432,842,481 shares issued and outstanding
    3,280       4,328  
Additional paid-in capital
    3,667,512       4,658,882  
Notes receivable from stockholders
    (3,236 )     (3,866 )
Accumulated other comprehensive income
    4,842       8,840  
Accumulated deficit
    (1,543,416 )     (3,140,915 )
 
   
     
 
 
Total stockholder’s equity
    2,128,982       1,527,269  
 
   
     
 
Total liabilities and stockholders’ equity
  $ 3,317,301     $ 2,751,022  
 
   
     
 

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CIENA Reports Q4 and Fiscal 2002 Results; Commences Tender Offer/December 12, 2002/Page 7 of 8

CIENA CORPORATION
CONSOLIDATED INCOME STATEMENTS
(in thousands, except share and per share data)
(unaudited)

                                     
        Quarter Ended October 31,   Years Ended October 31,
       
 
        2001   2002   2001   2002
       
 
 
 
Revenue
  $ 367,774     $ 61,918     $ 1,603,229     $ 361,155  
Excess and obsolete inventory costs
    16,586       1,592       68,411       286,475  
Cost of goods sold
    204,968       51,801       836,138       309,559  
 
   
     
     
     
 
 
Gross profit (loss)
    146,220       8,525       698,680       (234,879 )
 
   
     
     
     
 
Operating Expenses
                               
 
Research and development (1)
    73,195       61,355       235,831       239,619  
 
Selling and marketing (2)
    38,909       32,012       146,949       130,276  
 
General and administrative (3)
    15,143       13,091       57,865       50,820  
 
Deferred stock compensation costs
    16,401       5,740       41,367       20,324  
 
Amortization of goodwill
    75,873             177,786        
 
Amortization of intangible assets
    1,922       3,003       4,413       8,972  
 
In-process research and development
                45,900        
 
Restructuring costs
    15,439       78,691       15,439       225,429  
 
Goodwill impairment
    1,719,426       557,286       1,719,426       557,286  
 
Pirelli litigation
          1,792             1,792  
 
Provision for doubtful accounts
                (6,579 )     14,813  
 
   
     
     
     
 
   
Total operating expenses
    1,956,308       752,970       2,438,397       1,249,331  
 
   
     
     
     
 
Loss from operations
    (1,810,088 )     (744,445 )     (1,739,717 )     (1,484,210 )
Interest and other income (expense), net
    18,756       16,370       63,579       61,145  
Interest expense
    (12,098 )     (15,583 )     (30,591 )     (45,339 )
Loss on equity investments, net
          (9,937 )           (15,677 )
Loss on extinguishment of debt
          (2,683 )           (2,683 )
 
   
     
     
     
 
Income (loss) before income taxes
    (1,803,430 )     (756,278 )     (1,706,729 )     (1,486,764 )
Provision (benefit) for income taxes
    (1,148 )     (1,508 )     87,333       110,735  
 
   
     
     
     
 
Net income (loss)
  $ (1,802,282 )   $ (754,770 )   $ (1,794,062 )   $ (1,597,499 )
 
   
     
     
     
 
Basic net income (loss) per common share
  $ (5.51 )   $ (1.75 )   $ (5.75 )   $ (4.37 )
 
   
     
     
     
 
Diluted net income (loss) per common and
                               
 
dilutive potential common share
  $ (5.51 )   $ (1.75 )   $ (5.75 )   $ (4.37 )
 
   
     
     
     
 
Weighted average basic common shares
                               
 
outstanding
    326,834       431,257       311,815       365,202  
 
   
     
     
     
 
Weighted average basic common and dilutive
                               
 
potential common shares outstanding
    326,834       431,257       311,815       365,202  
 
   
     
     
     
 


(1)   Exclusive of $9,647, $4,396, $17,783 and $15,672 deferred stock compensation costs for quarters ended Oct. 31, 2001, Oct. 31, 2002 and years ended Oct. 31, 2001 and Oct. 31 2002, respectively.
 
(2)   Exclusive of $959, $911, $8,378 and $3,560 deferred stock compensation costs for quarters ended Oct. 31, 2001, Oct. 31, 2002 and years ended Oct. 31, 2001 and Oct. 31 2002, respectively.
 
(3)   Exclusive of $5,795, $433, $15,206 and $1,092 deferred stock compensation costs for quarters ended Oct. 31, 2001, Oct. 31, 2002 and years ended Oct. 31, 2001 and Oct. 31 2002, respectively.

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CIENA Reports Q4 and Fiscal 2002 Results; Commences Tender Offer/December 12, 2002/Page 7 of 8

Appendix A

The adjustments management makes in analyzing CIENA’s fourth quarter and fiscal year GAAP results are as follows:

    Payroll tax on stock options – an uncontrollable expense, largely unrelated to normal operations, that fluctuates significantly depending largely on the price of our stock and the magnitude of option exercises in a given period.
 
    Deferred stock compensation costs – a non-cash expense largely unrelated to normal operations, and which arises under GAAP accounting from the assumption of unvested stock options issued by any companies we acquire, including Cyras and ONI.
 
    Amortization of intangible asset – a non-cash expense unrelated to normal operations arising from acquisitions of intangible assets, principally developed technology acquired in the Cyras and ONI acquisitions which CIENA is required to amortize over its expected useful life.
 
    Restructuring costs – non-recurring charges, unrelated to normal operations, incurred as a result of reducing the size of the Company’s operations to align its resources with the reduced size of the telecommunications market.
 
    Goodwill impairment – a non-cash expense unrelated to normal operations.
 
    Pirelli litigation – a non-recurring expense, unrelated to normal operations.
 
    Provision for doubtful accounts – non-recurring charges that are outside of the Company’s control that arise when our customers’ ability to pay is in doubt. In recent periods primarily related to the financial health of service provider customers.
 
    Loss on equity investments – a decline in the fair market value of an equity investment that is determined to be other-than-temporary.
 
    Loss on debt extinguishment – a non-recurring expense, unrelated to normal operations.
 
    Income tax effect – the income tax charge or benefit on the adjusted net loss, which is a necessary adjustment for consistency.

ABOUT CIENA
CIENA Corporation’s market-leading intelligent optical networking systems form the core for the new era of networks and services worldwide. CIENA’s LightWorks™ architecture enables next-generation optical services and changes the fundamental economics of service-provider networks by simplifying the network and reducing the cost to operate it. Additional information about CIENA can be found at www.CIENA.com.

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