Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jul. 31, 2017 | Sep. 01, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CIENA CORP | |
Entity Central Index Key | 936,395 | |
Current Fiscal Year End Date | --10-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jul. 31, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 142,688,322 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2017 | Jul. 31, 2016 | Jul. 31, 2017 | Jul. 31, 2016 | |
Revenue: | ||||
Products | $ 610,742 | $ 553,450 | $ 1,702,365 | $ 1,535,017 |
Services | 117,977 | 117,100 | 354,873 | 349,365 |
Total revenue | 728,719 | 670,550 | 2,057,238 | 1,884,382 |
Cost of goods sold: | ||||
Products | 341,197 | 299,381 | 955,303 | 851,641 |
Services | 59,446 | 62,684 | 181,834 | 189,713 |
Total cost of goods sold | 400,643 | 362,065 | 1,137,137 | 1,041,354 |
Gross profit | 328,076 | 308,485 | 920,101 | 843,028 |
Operating expenses: | ||||
Research and development | 117,729 | 116,697 | 356,221 | 339,346 |
Selling and marketing | 86,739 | 83,732 | 260,292 | 252,878 |
General and administrative | 35,569 | 34,336 | 106,423 | 100,681 |
Amortization of intangible assets | 3,837 | 14,529 | 29,368 | 46,957 |
Acquisition and integration costs | 0 | 1,029 | 0 | 4,613 |
Restructuring costs | 2,203 | 1,138 | 8,874 | 2,057 |
Total operating expenses | 246,077 | 251,461 | 761,178 | 746,532 |
Income from operations | 81,999 | 57,024 | 158,923 | 96,496 |
Interest and other income (loss), net | (848) | (3,647) | (3,396) | (11,456) |
Interest expense | (13,415) | (15,967) | (41,926) | (41,285) |
Income before income taxes | 67,736 | 37,410 | 113,601 | 43,755 |
Provision for income taxes | 7,726 | 3,864 | 11,704 | 7,758 |
Net income | $ 60,010 | $ 33,546 | $ 101,897 | $ 35,997 |
Basic net income per common share (in dollars per share) | $ 0.42 | $ 0.24 | $ 0.72 | $ 0.26 |
Diluted net income per potential common share (in dollars per share) | $ 0.39 | $ 0.23 | $ 0.69 | $ 0.26 |
Weighted average basic common shares outstanding (in shares) | 142,464 | 138,881 | 141,631 | 137,835 |
Weighted average dilutive potential common shares outstanding (in shares) | 172,112 | 169,349 | 164,431 | 139,053 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2017 | Jul. 31, 2016 | Jul. 31, 2017 | Jul. 31, 2016 | |
Net income | $ 60,010 | $ 33,546 | $ 101,897 | $ 35,997 |
Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||
Change in unrealized gain (loss) on available-for-sale securities, net of tax | (6) | 169 | (533) | 425 |
Change in cumulative translation adjustments | 13,644 | (2,724) | 11,891 | 1,969 |
Other comprehensive income (loss) | 15,691 | (5,771) | 18,834 | 736 |
Total comprehensive income | 75,701 | 27,775 | 120,731 | 36,733 |
Change in unrealized gain (loss) on foreign currency forward contracts, net of tax | ||||
Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||
Change in unrealized gain (loss) on foreign currency forward contracts and forward starting interest rate swaps, net of tax | 2,380 | (946) | 2,906 | 518 |
Change in unrealized gain (loss) on forward starting interest rate swap, net of tax | ||||
Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||
Change in unrealized gain (loss) on foreign currency forward contracts and forward starting interest rate swaps, net of tax | $ (327) | $ (2,270) | $ 4,570 | $ (2,176) |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jul. 31, 2017 | Oct. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 559,540 | $ 777,615 |
Short-term investments | 234,743 | 275,248 |
Accounts receivable, net | 653,242 | 576,235 |
Inventories | 276,421 | 211,251 |
Prepaid expenses and other | 199,189 | 172,843 |
Total current assets | 1,923,135 | 2,013,192 |
Long-term investments | 59,874 | 90,172 |
Equipment, building, furniture and fixtures, net | 314,850 | 288,406 |
Goodwill | 267,841 | 266,974 |
Other intangible assets, net | 106,990 | 146,711 |
Other long-term assets | 63,970 | 68,120 |
Total assets | 2,736,660 | 2,873,575 |
Current liabilities: | ||
Accounts payable | 258,358 | 235,942 |
Accrued liabilities and other short-term obligations | 284,629 | 310,353 |
Deferred revenue | 110,629 | 109,009 |
Current portion of long-term debt | 4,000 | 236,241 |
Total current liabilities | 657,616 | 891,545 |
Long-term deferred revenue | 86,898 | 73,854 |
Other long-term obligations | 116,534 | 124,394 |
Long-term debt, net | 931,302 | 1,017,441 |
Total liabilities | 1,792,350 | 2,107,234 |
Commitments and contingencies (Note 21) | ||
Stockholders’ equity: | ||
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding | 0 | 0 |
Common stock – par value $0.01; 290,000,000 shares authorized; 142,672,784 and 139,767,627 shares issued and outstanding | 1,427 | 1,398 |
Additional paid-in capital | 6,772,687 | 6,715,478 |
Accumulated other comprehensive loss | (5,495) | (24,329) |
Accumulated deficit | (5,824,309) | (5,926,206) |
Total stockholders’ equity | 944,310 | 766,341 |
Total liabilities and stockholders’ equity | $ 2,736,660 | $ 2,873,575 |
CONDENSED CONSOLIDATED BALANCE5
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jul. 31, 2017 | Oct. 31, 2016 |
Stockholders’ equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 290,000,000 | 290,000,000 |
Common stock, shares issued (in shares) | 142,672,784 | 139,767,627 |
Common stock, shares outstanding (in shares) | 142,672,784 | 139,767,627 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Jul. 31, 2017 | Jul. 31, 2016 | |
Cash flows provided by operating activities: | ||
Net income | $ 101,897 | $ 35,997 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements | 55,873 | 46,624 |
Share-based compensation costs | 36,843 | 41,832 |
Amortization of intangible assets | 39,721 | 59,428 |
Provision for inventory excess and obsolescence | 28,727 | 26,663 |
Provision for warranty | 5,188 | 13,114 |
Other | 21,076 | 15,706 |
Changes in assets and liabilities: | ||
Accounts receivable | (80,652) | (37,768) |
Inventories | (93,896) | (56,267) |
Prepaid expenses and other | (26,450) | 16,687 |
Accounts payable, accruals and other obligations | (5,960) | (5,087) |
Deferred revenue | 13,978 | (4,120) |
Net cash provided by operating activities | 96,345 | 152,809 |
Cash flows used in investing activities: | ||
Payments for equipment, furniture, fixtures and intellectual property | (76,004) | (81,161) |
Purchase of available for sale securities | (189,802) | (340,168) |
Proceeds from maturities of available for sale securities | 260,003 | 160,606 |
Settlement of foreign currency forward contracts, net | (1,619) | (9,982) |
Acquisition of business, net of cash acquired | 0 | (32,000) |
Net cash used in investing activities | (7,422) | (302,705) |
Cash flows provided by (used in) financing activities: | ||
Proceeds from issuance of term loan, net | 0 | 248,750 |
Payment of long-term debt | (232,554) | (45,990) |
Payment for modification of term loans | (93,625) | 0 |
Payment of debt issuance costs | 0 | (3,980) |
Payment of capital lease obligations | (2,650) | (5,359) |
Proceeds from issuance of common stock | 20,395 | 22,118 |
Net cash provided by (used in) financing activities | (308,434) | 215,539 |
Effect of exchange rate changes on cash and cash equivalents | 1,436 | (1,696) |
Net increase (decrease) in cash and cash equivalents | (218,075) | 63,947 |
Cash and cash equivalents at beginning of period | 777,615 | 790,971 |
Cash and cash equivalents at end of period | 559,540 | 854,918 |
Supplemental disclosure of cash flow information | ||
Cash paid during the period for interest | 33,861 | 31,787 |
Cash paid during the period for income taxes, net | 26,793 | 9,947 |
Non-cash investing activities | ||
Purchase of equipment in accounts payable | 6,012 | 10,204 |
Construction in progress subject to build-to-suit lease | 0 | 35,875 |
Equipment | ||
Non-cash investing activities | ||
Equipment acquired under and building subject to capital lease | 0 | 5,322 |
Building | ||
Non-cash investing activities | ||
Equipment acquired under and building subject to capital lease | $ 50,370 | $ 8,993 |
INTERIM FINANCIAL STATEMENTS
INTERIM FINANCIAL STATEMENTS | 9 Months Ended |
Jul. 31, 2017 | |
Quarterly Financial Data [Abstract] | |
INTERIM FINANCIAL STATEMENTS | INTERIM FINANCIAL STATEMENTS The interim financial statements included herein for Ciena Corporation and its wholly owned subsidiaries (“Ciena”) have been prepared by Ciena, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). In the opinion of management, the financial statements included in this report reflect all normal recurring adjustments that Ciena considers necessary for the fair statement of the results of operations for the interim periods covered and of the financial position of Ciena at the date of the interim balance sheets. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The Condensed Consolidated Balance Sheet as of October 31, 2016 was derived from audited financial statements, but does not include all disclosures required by GAAP. However, Ciena believes that the disclosures are adequate to understand the information presented herein. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. These financial statements should be read in conjunction with Ciena’s audited consolidated financial statements and the notes thereto included in Ciena’s annual report on Form 10-K for the fiscal year ended October 31, 2016 . Ciena has a 52 or 53-week fiscal year , with quarters ending on the Saturday nearest to the last day of January, April, July and October, respectively, of each year. Fiscal 2017 and 2016 are 52-week fiscal years. For purposes of financial statement presentation, each fiscal year is described as having ended on October 31, and the fiscal quarters are described as having ended on January 31, April 30 and July 31 of each fiscal year. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Jul. 31, 2017 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES Business Combinations Ciena records acquisitions using the purchase method of accounting. All of the assets acquired, liabilities assumed, contractual contingencies and contingent consideration are recognized at their fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and net intangible assets acquired is recorded as goodwill. The application of the purchase method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to allocate purchase price consideration properly between assets that are depreciated and amortized from goodwill. These assumptions and estimates include a market participant's use of the asset and the appropriate discount rates for a market participant. Ciena's estimates are based on historical experience, information obtained from the management of the acquired companies and, when appropriate, include assistance from independent third-party appraisal firms. Significant assumptions and estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. In addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates. Use of Estimates The preparation of the financial statements and related disclosures in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are used for selling prices for multiple element arrangements, share-based compensation, convertible notes payable valuations, bad debts, valuation of inventories and investments, recoverability of intangible assets, other long-lived assets and goodwill, income taxes, warranty obligations, restructuring liabilities, derivatives, incentive compensation, contingencies and litigation. Ciena bases its estimates on historical experience and assumptions that it believes are reasonable. Actual results may differ materially from management’s estimates. Cash and Cash Equivalents Ciena considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Any restricted cash collateralizing letters of credit is included either in other current assets or in other long-term assets depending upon the duration of the restriction. Investments Ciena's investments are classified as available-for-sale and are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Ciena recognizes losses in the income statement when it determines that a decline in the fair value of any investment below its cost basis is other-than-temporary. In determining whether a decline in fair value is other-than-temporary, Ciena considers various factors, including market price (when available), investment ratings, the financial condition and near-term prospects of the investee, the length of time and the extent to which the fair value has been less than Ciena's cost basis, and Ciena's intent and ability to hold the investment until maturity or for a period of time sufficient to allow for any anticipated recovery in market value. Ciena considers all marketable debt securities that it expects to convert to cash within one year or less to be short-term investments, with all others considered to be long-term investments. Ciena has minority equity investments in privately held technology companies that are classified in other long-term assets. These investments are carried at cost because Ciena owns less than 20% of the voting equity and does not have the ability to exercise significant influence over the companies. Ciena monitors these investments for impairment and makes appropriate reductions to the carrying value when necessary. As of July 31, 2017 , the combined carrying value of these investments was $6.0 million . Ciena has not estimated the fair value of these cost method investments because determining the fair value is not practicable. Ciena has not evaluated these investments for impairment as there have not been any events or changes in circumstances that Ciena believes would have had a significant adverse effect on the fair value of these investments. Inventories Inventories are stated at the lower of cost or market, with cost computed using standard cost, which approximates actual cost, on a first-in, first-out basis. Ciena records a provision for excess and obsolete inventory when an impairment has been identified. Segment Reporting Ciena's chief operating decision maker, its chief executive officer, evaluates the Company's performance and allocates resources based on multiple factors, including measures of segment profit (loss). Operating segments are defined as components of an enterprise that engage in business activities that may earn revenue and incur expense, for which discrete financial information is available, and for which such information is evaluated regularly by the chief operating decision maker for purposes of allocating resources and assessing performance. Ciena considers the following to be its operating segments for reporting purposes: (i) Networking Platforms, (ii) Software and Software-Related Services, and (iii) Global Services. See Note 20 below. Goodwill Goodwill is the excess of the purchase price over the fair values assigned to the net assets acquired in a business combination. Ciena tests goodwill for impairment on an annual basis, which it has determined to be the last business day of fiscal September each year. Ciena also tests goodwill for impairment between annual tests if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. The first step in the process of assessing goodwill impairment is to compare the fair value of the reporting unit with the unit’s carrying amount, including goodwill. If this test indicates that the fair value is less than the carrying value, then step two as amended by Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2017-04, Simplifying the Test for Goodwill Impairment, adopted by Ciena in the first quarter of fiscal 2017, requires goodwill impairments to be measured on the basis of the fair value of the reporting unit relative to the reporting unit's carrying amount. A non-cash goodwill impairment charge would have the effect of decreasing earnings or increasing losses in such period. If Ciena is required to take a substantial impairment charge, its operating results would be materially adversely affected in such period. Long-lived Assets Long-lived assets include: equipment, building, furniture and fixtures; intangible assets; and maintenance spares. Ciena tests long-lived assets for impairment whenever triggering events or changes in circumstances indicate that the asset's carrying amount is not recoverable from its undiscounted cash flows. An impairment loss is measured as the amount by which the carrying amount of the asset or asset group exceeds its fair value. Ciena's long-lived assets are assigned to asset groups that represent the lowest level for which cash flows can be identified. Equipment, Building, Furniture and Fixtures and Internal Use Software Equipment, building, furniture and fixtures are recorded at cost. Depreciation and amortization are computed using the straight-line method over useful lives of two to five years for equipment and furniture and fixtures and the shorter of useful life or lease term for leasehold improvements. Ciena establishes assets and liabilities for the estimated construction costs incurred under build-to-suit lease arrangements to the extent that Ciena is involved in the construction of structural improvements or takes construction risk prior to commencement of a lease. See Notes 10 and 13 below. Qualifying internal use software and website development costs incurred during the application development stage, which consist primarily of outside services and purchased software license costs, are capitalized and amortized straight-line over the estimated useful lives of two to five years. Intangible Assets Ciena has recorded finite-lived intangible assets as a result of several acquisitions. Finite-lived intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over the expected economic lives of the respective assets, up to seven years, which approximates the use of intangible assets. Ciena has recorded in-process research and development projects acquired as the result of an acquisition as indefinite-lived intangible assets. Upon completion of the projects, the assets will be amortized on a straight-line basis over the expected economic life of the asset, which will be determined on that date. Should the project be determined to be abandoned, and the asset developed has no alternative use, the full value of the asset will be charged to expense. Maintenance Spares Maintenance spares are recorded at cost. Spares usage cost is expensed ratably over four years. Concentrations Substantially all of Ciena's cash and cash equivalents are maintained at a small number of major U.S. financial institutions. The majority of Ciena's cash equivalents consist of money market funds. Deposits held with banks may exceed the amount of insurance provided on such deposits. Because these deposits generally may be redeemed upon demand, management believes that they bear minimal risk. Historically, a significant percentage of Ciena's revenue has been concentrated among sales to a small number of large communications service providers. Consolidation among Ciena's customers has increased this concentration. Consequently, Ciena's accounts receivable are concentrated among these customers. See Note 20 below. Additionally, Ciena's access to certain materials or components is dependent upon sole or limited source suppliers. The inability of any of these suppliers to fulfill Ciena's supply requirements, or significant changes in supply cost, could affect future results. Ciena relies on a small number of contract manufacturers to perform the majority of the manufacturing for its products. If Ciena cannot effectively manage these manufacturers or forecast future demand, or if these manufacturers fail to deliver products or components on time, Ciena's business and results of operations may suffer. Revenue Recognition Ciena recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectibility is reasonably assured. Customer purchase agreements and customer purchase orders are generally used to determine the existence of an arrangement. Shipping documents and evidence of customer acceptance, when applicable, are used to verify delivery or services rendered. Ciena assesses whether the price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Ciena assesses collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer's payment history. Revenue for maintenance services is deferred and recognized ratably over the period during which the services are performed. Shipping and handling fees billed to customers are included in revenue, with the associated expenses included in product cost of goods sold. Software revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. In instances where final acceptance criteria of the software are specified by the customer, revenue is deferred until there are no uncertainties regarding customer acceptance. Ciena limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or refund privileges. Revenue for multiple element arrangements is allocated to each unit of accounting based on the relative selling price of each delivered element, with revenue recognized for each delivered element when the revenue recognition criteria are met. Ciena determines the selling price for each deliverable based upon the selling price hierarchy for multiple-deliverable arrangements. Under this hierarchy, Ciena uses vendor-specific objective evidence ("VSOE") of selling price, if it exists, or third party evidence ("TPE") of selling price if VSOE does not exist. If neither VSOE nor TPE of selling price exists for a deliverable, Ciena uses its best estimate of selling price ("BESP") for that deliverable. For multiple element software arrangements where VSOE of undelivered maintenance does not exist, revenue for the entire arrangement is recognized over the maintenance term. VSOE, when determinable, is established based on Ciena's pricing and discounting practices for the specific product or service when sold separately. In determining whether VSOE exists, Ciena requires that a substantial majority of the selling prices for a product or service falls within a reasonably narrow pricing range. Ciena has been unable to establish TPE of selling price because its go-to-market strategy differs from that of others in its markets, and the extent of customization and differentiated features and functions varies among comparable products or services from its peers. Ciena determines BESP based upon management-approved pricing guidelines, which consider multiple factors including the type of product or service, gross margin objectives, competitive and market conditions, and the go-to-market strategy, all of which can affect pricing practices. Warranty Accruals Ciena provides for the estimated costs to fulfill customer warranty obligations upon recognition of the related revenue. Estimated warranty costs include estimates for material costs, technical support labor costs and associated overhead. Warranty is included in cost of goods sold and is determined based upon actual warranty cost experience, estimates of component failure rates and management's industry experience. Ciena's sales contracts do not permit the right of return of the product by the customer after the product has been accepted. Accounts Receivable, Net Ciena's allowance for doubtful accounts is based on its assessment, on a specific identification basis, of the collectibility of customer accounts. Ciena performs ongoing credit evaluations of its customers and generally has not required collateral or other forms of security from them. In determining the appropriate balance for Ciena's allowance for doubtful accounts, management considers each individual customer account receivable in order to determine collectibility. In doing so, management considers creditworthiness, payment history, account activity and communication with the customer. If a customer's financial condition changes, Ciena may be required to record an allowance for doubtful accounts for that customer, which could negatively affect its results of operations. Research and Development Ciena charges all research and development costs to expense as incurred. Types of expense incurred in research and development include employee compensation, prototype equipment, consulting and third party services, depreciation, facility costs and information technology. Advertising Costs Ciena expenses all advertising costs as incurred. Legal Costs Ciena expenses legal costs associated with litigation as incurred. Share-Based Compensation Expense Ciena measures and recognizes compensation expense for share-based awards based on estimated fair values on the date of grant. Ciena estimates the fair value of each option-based award on the date of grant using the Black-Scholes option-pricing model. This model is affected by Ciena's stock price as well as estimates regarding a number of variables, including expected stock price volatility over the expected term of the award and projected employee stock option exercise behaviors. Ciena estimates the fair value of each restricted stock unit award based on the fair value of the underlying common stock on the date of grant. In each case, Ciena only recognizes expense in its Condensed Consolidated Statement of Operations for those stock options or restricted stock units that are expected ultimately to vest. Ciena recognizes the estimated fair value of performance-based awards, net of estimated forfeitures, as share-based expense over the performance period, using graded vesting, which considers each performance period or tranche separately, based upon Ciena's determination of whether it is probable that the performance targets will be achieved. At the end of each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets, and the expense is adjusted accordingly. Ciena uses the straight-line method to record expense for share-based awards with only service-based vesting. See Note 19 below. Income Taxes Ciena accounts for income taxes using an asset and liability approach. This approach recognizes deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, and for operating loss and tax credit carryforwards. In estimating future tax consequences, Ciena considers all expected future events other than the enactment of changes in tax laws or rates. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the ordinary course of business, transactions occur for which the ultimate outcome may be uncertain. In addition, tax authorities periodically audit Ciena’s income tax returns. These audits examine significant tax filing positions, including the timing and amounts of deductions and the allocation of income tax expenses among tax jurisdictions. Ciena is currently under audit in India for 2012 through 2014 and in Canada for 2011 through 2013. Management does not expect the outcome of these audits to have a material adverse effect on Ciena’s consolidated financial position, results of operations or cash flows. Ciena’s major tax jurisdictions and the earliest open tax years are as follows: United States (2014), United Kingdom (2014), Canada (2011), India (2012) and Brazil (2012). Limited adjustments can be made to Federal U.S. tax returns in earlier years in order to reduce net operating loss carryforwards. Ciena classifies interest and penalties related to uncertain tax positions as a component of income tax expense. Ciena has not provided for U.S. deferred income taxes on the cumulative unremitted earnings of its non-U.S. affiliates, as it plans to indefinitely reinvest cumulative unremitted foreign earnings outside the U.S., and it is not practicable to determine the unrecognized deferred income taxes. These cumulative unremitted foreign earnings relate to ongoing operations in foreign jurisdictions and are required to fund foreign operations, capital expenditures and future expansion requirements. Ciena recognizes windfall tax benefits associated with the exercise of stock options or release of restricted stock units directly to stockholders’ equity only when realized. A windfall tax benefit occurs when the actual tax benefit realized by Ciena upon an employee’s disposition of a share-based award exceeds the deferred tax asset, if any, associated with the award that Ciena had recorded. When assessing whether a tax benefit relating to share-based compensation has been realized, Ciena follows the “with-and-without” method. Under the with-and-without method, the windfall is considered realized and recognized for financial statement purposes only when an incremental benefit is provided after considering all other tax benefits including Ciena’s net operating losses. The with-and-without method results in the windfall from share-based compensation awards always being effectively the last tax benefit to be considered. Consequently, the windfall attributable to share-based compensation will not be considered realized in instances where Ciena’s net operating loss carryover (that is unrelated to windfalls) is sufficient to offset the current year’s taxable income before considering the effects of current-year windfalls. Loss Contingencies Ciena is subject to the possibility of various losses arising in the ordinary course of business. These may relate to disputes, litigation and other legal actions. Ciena considers the likelihood of loss or the incurrence of a liability, as well as Ciena's ability to estimate the amount of loss reasonably, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Ciena regularly evaluates current information available to it in order to determine whether any accruals should be adjusted and whether new accruals are required. Fair Value of Financial Instruments The carrying value of Ciena's cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair market value due to the relatively short period of time to maturity. For information related to the fair value of Ciena's convertible notes and term loans, see Note 16 below. Fair value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Ciena utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy prioritizes the inputs into three broad levels as follows: • Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities; • Level 2 inputs are quoted prices for identical or similar assets or liabilities in less active markets or model-derived valuations in which significant inputs are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and • Level 3 inputs are unobservable inputs based on Ciena's assumptions used to measure assets and liabilities at fair value. By distinguishing between inputs that are observable in the marketplace, and therefore more objective, and those that are unobservable, and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements. A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. Restructuring From time to time, Ciena takes actions to better align its workforce, facilities and operating costs with perceived market opportunities, business strategies and changes in market and business conditions. Ciena recognizes a liability for the cost associated with an exit or disposal activity in the period in which the liability is incurred, except for one-time employee termination benefits related to a service period, typically of more than 60 days , which are accrued over the service period. See Note 3 below. Foreign Currency Certain of Ciena's foreign branch offices and subsidiaries use the U.S. Dollar as their functional currency because Ciena Corporation, as the U.S. parent entity, exclusively funds the operations of these branch offices and subsidiaries. For those subsidiaries using the local currency as their functional currency, assets and liabilities are translated at exchange rates in effect at the balance sheet date, and the statement of operations is translated at a monthly average rate. Resulting translation adjustments are recorded directly to a separate component of stockholders' equity. Where the monetary assets and liabilities are transacted in a currency other than the entity's functional currency, re-measurement adjustments are recorded in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. See Note 4 below. Derivatives From time to time, Ciena uses foreign currency forward contracts to reduce variability in certain forecasted non-U.S. Dollar denominated cash flows. Generally, these derivatives have maturities of 12 months or less. Ciena also has interest rate hedge arrangements to reduce variability in certain forecasted interest expense associated with its term loans. All of these derivatives are designated as cash flow hedges. At the inception of the cash flow hedge, and on an ongoing basis, Ciena assesses whether the derivative has been effective in offsetting changes in cash flows attributable to the hedged risk during the hedging period. The effective portion of the derivative's net gain or loss is initially reported as a component of accumulated other comprehensive income (loss), and, upon occurrence of the forecasted transaction, is subsequently reclassified to the line item in the Condensed Consolidated Statement of Operations to which the hedged transaction relates. Any net gain or loss associated with the ineffectiveness of the hedging instrument is reported in interest and other income (loss), net. To date, no ineffectiveness has occurred. Ciena records derivative instruments in the Condensed Consolidated Statements of Cash Flows within operating, investing, or financing activities consistent with the cash flows of the hedged items. From time to time, Ciena uses foreign currency forward contracts to hedge certain balance sheet exposures. These forward contracts are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. See Notes 6 and 14 below. Computation of Net Income (Loss) per Share Ciena calculates basic earnings per share ("EPS") by dividing earnings attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted EPS includes other potential dilutive shares that would be outstanding if securities or other contracts to issue common stock were exercised or converted into common stock. Ciena uses a dual presentation of basic and diluted EPS on the face of its income statement. A reconciliation of the numerator and denominator used for the basic and diluted EPS computations is set forth in Note 18 below. Software Development Costs Ciena develops software for sale to its customers. GAAP requires the capitalization of certain software development costs that are incurred subsequent to the date technological feasibility is established and prior to the date the product is generally available for sale. The capitalized cost is then amortized straight-line over the estimated life of the product. Ciena defines technological feasibility as being attained at the time a working model is completed. To date, the period between Ciena achieving technological feasibility and the general availability of such software has been short, and software development cost qualifying for capitalization has been insignificant. Accordingly, Ciena has not capitalized any software development costs. Newly Issued Accounting Standards - Effective In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03") . ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. ASU 2015-03 is to be applied on a retrospective basis and represents a change in accounting principle. In August 2015, the FASB issued Accounting Standards Update No. 2015-15, “Interest — Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements — Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting” (“ASU 2015-15”), which clarifies the treatment of debt issuance costs from line-of-credit arrangements after the adoption of ASU 2015-03. In particular, ASU 2015-15 clarifies that the SEC staff would not object to an entity deferring and presenting debt issuance costs related to a line-of-credit arrangement as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of such arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Ciena adopted these ASU's during the first quarter of fiscal 2017. The adoption of ASU 2015-03 resulted in the reclassification of unamortized debt issuance costs related to Ciena's convertible notes and term loans from other long-term assets to current portion of long-term debt and long-term debt, net in Ciena's Consolidated Balance sheets in the amount of $5.8 million at July 31, 2017 and $8.9 million at October 31, 2016. As permitted by ASU 2015-15, Ciena elected not to reclassify unamortized debt issuance costs associated with its ABL Credit Facility (described in Note 17 below) and to continue to present such capitalized costs in other assets. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. ASU 2017-04 requires goodwill impairments to be measured on the basis of the fair value of the reporting unit relative to the reporting unit's carrying amount rather than on the basis of the implied amount of goodwill relative to the goodwill balance of the reporting unit. ASU 2017-04 is effective for annual and interim impairment tests for periods beginning after December 15, 2021. Early adoption is allowed for annual and interim impairment tests occurring after January 1, 2017. Ciena elected to adopt ASU 2017-04 during the first quarter of fiscal 2017. Newly Issued Accounting Standards - Not Yet Effective In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") , which provides guidance for revenue recognition. This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts . For multiple element software arrangements where VSOE of undelivered maintenance does not exist, Ciena currently recognizes revenue for the entire arrangement over the maintenance term. Ciena expects that the adoption of this ASU will require that it determine the stand alone selling price for each of the elements at the contract inception, and Ciena consequently expects certain software deliverables will be recognized at a point in time rather than over a period of time. Ciena also expects certain installation and deployment and consulting and network design services will be recognized over a period of time rather than at a point in time. Ciena has considered the impact of the guidance in ASC 340-40, Other Assets and Deferred Costs; Contracts with Customers , and the interpretations of the FASB Transition Resource Group for Revenue Recognition (TRG) with respect to capitalization and amortization of incremental costs of obtaining a contract. In conjunction with this interpretation, Ciena has elected to implement the prac |
RESTRUCTURING COSTS
RESTRUCTURING COSTS | 9 Months Ended |
Jul. 31, 2017 | |
Restructuring and Related Activities [Abstract] | |
RESTRUCTURING COSTS | RESTRUCTURING COSTS Ciena has undertaken a number of restructuring activities intended to reduce expense and to better align its workforce and costs with market opportunities, product development and business strategies. The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the nine months ended July 31, 2017 (in thousands): Workforce reduction Consolidation of excess facilities Total Balance at October 31, 2016 $ 868 $ 1,970 $ 2,838 Additional liability recorded 3,967 (1) 4,907 (2) 8,874 Cash payments (3,370 ) (2,679 ) (6,049 ) Balance at July 31, 2017 $ 1,465 $ 4,198 $ 5,663 Current restructuring liabilities $ 1,465 $ 4,198 $ 5,663 Non-current restructuring liabilities $ — $ — $ — (1) Reflects a global workforce reduction of approximately 60 employees during fiscal 2017 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes and systems. (2) Reflects unfavorable lease commitments and relocation costs incurred during fiscal 2017 in connection with the facility transition from Ciena's existing research and development center located at Lab 10 on the former Nortel Carling Campus to a new campus facility in Ottawa, Canada. The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the nine months ended July 31, 2016 (in thousands): Workforce reduction Consolidation of excess facilities Total Balance at October 31, 2015 $ 591 $ 688 $ 1,279 Additional liability recorded 2,067 (9 ) 2,058 Cash payments (1,736 ) (316 ) (2,052 ) Balance at July 31, 2016 $ 922 $ 363 $ 1,285 Current restructuring liabilities $ 922 $ 363 $ 1,285 Non-current restructuring liabilities $ — $ — $ — |
INTEREST AND OTHER INCOME (LOSS
INTEREST AND OTHER INCOME (LOSS), NET | 9 Months Ended |
Jul. 31, 2017 | |
Other Income and Expenses [Abstract] | |
INTEREST AND OTHER INCOME (LOSS), NET | INTEREST AND OTHER INCOME (LOSS), NET The components of interest and other income (loss), net, are as follows (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Interest income $ 1,820 $ 1,250 $ 4,609 $ 2,918 Gains (losses) on non-hedge designated foreign currency forward contracts 834 (4,787 ) (891 ) (20,000 ) Foreign currency exchange gain (loss) (2,946 ) (839 ) (4,071 ) 5,291 Modification of term loan — — (2,924 ) — Other (556 ) 729 (119 ) 335 Interest and other income (loss), net $ (848 ) $ (3,647 ) $ (3,396 ) $ (11,456 ) Ciena Corporation, as the U.S. parent entity, uses the U.S. Dollar as its functional currency; however, some of its foreign branch offices and subsidiaries use the local currency as their functional currency. During the first nine months of fiscal 2017 Ciena recorded $4.1 million in foreign currency exchange rate losses, and during the first nine months of fiscal 2016 , Ciena recorded $5.3 million in foreign currency exchange rate gains as a result of monetary assets and liabilities that were transacted in a currency other than the entity's functional currency, and the re-measurement adjustments were recorded in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. From time to time, Ciena uses foreign currency forwards to hedge these balance sheet exposures. These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. During the first nine months of fiscal 2017 and fiscal 2016 , Ciena recorded losses of $0.9 million and $20.0 million , respectively, from non-hedge designated foreign currency forward contracts. |
SHORT-TERM AND LONG-TERM INVEST
SHORT-TERM AND LONG-TERM INVESTMENTS | 9 Months Ended |
Jul. 31, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |
SHORT-TERM AND LONG-TERM INVESTMENTS | SHORT-TERM AND LONG-TERM INVESTMENTS As of the dates indicated, investments are comprised of the following (in thousands): July 31, 2017 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. government obligations: Included in short-term investments $ 225,032 $ — (272 ) $ 224,760 Included in long-term investments 59,976 — (102 ) 59,874 $ 285,008 $ — $ (374 ) $ 284,634 Commercial paper: Included in short-term investments $ 9,983 — — $ 9,983 $ 9,983 $ — $ — $ 9,983 October 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. government obligations: Included in short-term investments $ 260,125 $ 140 $ (6 ) $ 260,259 Included in long-term investments 90,145 57 (30 ) 90,172 $ 350,270 $ 197 $ (36 ) $ 350,431 Commercial paper: Included in short-term investments $ 14,989 — — $ 14,989 $ 14,989 $ — $ — $ 14,989 The following table summarizes the final legal maturities of debt investments at July 31, 2017 (in thousands): Amortized Cost Estimated Fair Value Less than one year $ 235,015 $ 234,743 Due in 1-2 years 59,976 59,874 $ 294,991 $ 294,617 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Jul. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS As of the date indicated, the following table summarizes the assets and liabilities that are recorded at fair value on a recurring basis (in thousands): July 31, 2017 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 392,351 $ — $ — $ 392,351 U.S. government obligations — 284,634 — 284,634 Commercial paper — 89,887 — 89,887 Foreign currency forward contracts — 1,811 — 1,811 Total assets measured at fair value $ 392,351 $ 376,332 $ — $ 768,683 Liabilities: Foreign currency forward contracts $ — $ 229 $ — $ 229 Forward starting interest rate swap — 1,396 — 1,396 Total liabilities measured at fair value $ — $ 1,625 $ — $ 1,625 October 31, 2016 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 625,277 $ — $ — $ 625,277 U.S. government obligations — 350,431 — 350,431 Commercial paper — 69,959 — 69,959 Foreign currency forward contracts — 175 — 175 Total assets measured at fair value $ 625,277 $ 420,565 $ — $ 1,045,842 Liabilities: Foreign currency forward contracts $ — $ 1,396 $ — $ 1,396 Forward starting interest rate swap — 5,967 — 5,967 Total liabilities measured at fair value $ — $ 7,363 $ — $ 7,363 As of the date indicated, the assets and liabilities above are presented on Ciena’s Condensed Consolidated Balance Sheet as follows (in thousands): July 31, 2017 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 392,351 $ 79,904 $ — $ 472,255 Short-term investments — 234,743 — 234,743 Prepaid expenses and other — 1,811 — 1,811 Long-term investments — 59,874 — 59,874 Total assets measured at fair value $ 392,351 $ 376,332 $ — $ 768,683 Liabilities: Accrued liabilities $ — $ 229 $ — $ 229 Other long-term obligations — 1,396 — 1,396 Total liabilities measured at fair value $ — $ 1,625 $ — $ 1,625 October 31, 2016 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 625,277 $ 54,970 $ — $ 680,247 Short-term investments — 275,248 — 275,248 Prepaid expenses and other — 175 — 175 Long-term investments — 90,172 — 90,172 Total assets measured at fair value $ 625,277 $ 420,565 $ — $ 1,045,842 Liabilities: Accrued liabilities $ — $ 1,396 $ — $ 1,396 Other long-term obligations — 5,967 — 5,967 Total liabilities measured at fair value $ — $ 7,363 $ — $ 7,363 Ciena did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 9 Months Ended |
Jul. 31, 2017 | |
Receivables [Abstract] | |
ACCOUNTS RECEIVABLE | ACCOUNTS RECEIVABLE As of July 31, 2017 , one customer accounted for 10.3% of Ciena's net accounts receivable and as of October 31, 2016 , a different customer accounted for 10.4% of Ciena's net accounts receivable. Ciena has not historically experienced a significant amount of bad debt expense. The allowance for doubtful accounts was $3.6 million and $4.0 million as of July 31, 2017 and October 31, 2016 , respectively. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Jul. 31, 2017 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES As of the dates indicated, inventories are comprised of the following (in thousands): July 31, October 31, Raw materials $ 46,857 $ 44,644 Work-in-process 16,172 12,852 Finished goods 179,394 156,402 Deferred cost of goods sold 90,157 59,856 332,580 273,754 Provision for excess and obsolescence (56,159 ) (62,503 ) $ 276,421 $ 211,251 Ciena writes down its inventory for estimated obsolescence or unmarketable inventory by an amount equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about future demand and market conditions. During the first nine months of fiscal 2017 , Ciena recorded a provision for excess and obsolescence of $28.7 million , primarily related to a decrease in the forecasted demand for certain Networking Platforms products. Deductions from the provision for excess and obsolete inventory relate primarily to disposal activities. |
PREPAID EXPENSES AND OTHER
PREPAID EXPENSES AND OTHER | 9 Months Ended |
Jul. 31, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
PREPAID EXPENSES AND OTHER | PREPAID EXPENSES AND OTHER As of the dates indicated, prepaid expenses and other are comprised of the following (in thousands): July 31, October 31, Prepaid VAT and other taxes $ 92,998 $ 77,474 Product demonstration equipment, net 42,881 42,259 Deferred deployment expense 28,028 19,138 Prepaid expenses 25,229 25,659 Other non-trade receivables 6,847 4,398 Financing receivable 1,395 3,740 Derivative assets 1,811 175 $ 199,189 $ 172,843 Depreciation of product demonstration equipment was $7.5 million and $8.1 million for the first nine months of fiscal 2017 and 2016 , respectively. |
EQUIPMENT, BUILDING, FURNITURE
EQUIPMENT, BUILDING, FURNITURE AND FIXTURES | 9 Months Ended |
Jul. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
EQUIPMENT, BUILDING, FURNITURE AND FIXTURES | EQUIPMENT, BUILDING, FURNITURE AND FIXTURES As of the dates indicated, equipment, building, furniture and fixtures are comprised of the following (in thousands): July 31, October 31, Equipment, furniture and fixtures $ 483,482 $ 451,029 Building subject to capital lease 79,002 22,529 Construction in progress subject to build-to-suit lease — 57,602 Leasehold improvements 86,617 60,011 649,101 591,171 Accumulated depreciation and amortization (334,251 ) (302,765 ) $ 314,850 $ 288,406 Ciena capitalizes construction in progress and records a corresponding long-term liability for build-to-suit lease agreements where Ciena is considered the owner, for accounting purposes, during the construction period. On April 15, 2015, Ciena entered into a build-to-suit lease arrangement pursuant to which the landlord constructed, and Ciena subsequently leased, two new office buildings at its new Ottawa, Canada campus. The landlord constructed the buildings and contributed up to a maximum of CAD $290.00 per rentable square foot in total construction costs plus certain allowances for tenant improvements, and Ciena was responsible for any additional construction costs. As of May 1, 2017, occupancy for both of the office buildings was complete. As such, Ciena recorded capital leases of $50.4 million for these buildings, which will be depreciated over the lease term and removed the build-to-suit construction in progress asset and the corresponding long-term liability. The total of the depreciation of equipment, furniture and fixtures and the amortization of leasehold improvements was $48.3 million and $38.5 million for the first nine months of fiscal 2017 and 2016 , respectively. |
OTHER INTANGIBLE ASSETS
OTHER INTANGIBLE ASSETS | 9 Months Ended |
Jul. 31, 2017 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
OTHER INTANGIBLE ASSETS | OTHER INTANGIBLE ASSETS As of the dates indicated, other intangible assets are comprised of the following (in thousands): July 31, 2017 October 31, 2016 Gross Intangible Accumulated Amortization Net Intangible Gross Intangible Accumulated Amortization Net Intangible Developed technology $ 341,255 $ (262,308 ) $ 78,947 $ 347,727 $ (248,128 ) $ 99,599 In-process research and development 671 — 671 4,200 — 4,200 Patents and licenses 7,165 (6,473 ) 692 7,165 (6,285 ) 880 Customer relationships, covenants not to compete, outstanding purchase orders and contracts 334,642 (307,962 ) 26,680 358,647 (316,615 ) 42,032 Total other intangible assets $ 683,733 $ (576,743 ) $ 106,990 $ 717,739 $ (571,028 ) $ 146,711 During the third quarter of fiscal 2017, certain fully amortized intangible assets of approximately $34.0 million were eliminated from gross intangible assets and accumulated amortization, with no corresponding impact to the income statement. These assets were primarily technology for products no longer being sold by Ciena. As the result of the acquisition of the high-speed photonics components assets from TeraXion and its wholly-owned subsidiary on February 1, 2016, Ciena had recorded in-process research and development projects acquired as indefinite-lived intangible assets. Upon completion of the projects, the assets will be amortized on a straight-line basis over the expected economic life of the assets. In the third quarter of fiscal 2017, Ciena placed into service $3.5 million of developed technology, which will be amortized over the expected economic life of five years. The aggregate amortization expense of intangible assets was $39.7 million and $59.4 million for the first nine months of fiscal 2017 and 2016 , respectively. Expected future amortization of intangible assets for the fiscal years indicated is as follows (in thousands): Period ended October 31, 2017 (remaining three months) $ 5,993 2018 23,386 2019 22,839 2020 21,812 2021 18,878 Thereafter 13,411 $ 106,319 (1) (1) Does not include amortization of in-process research and development, as estimation of the timing of future amortization expense would be impractical. |
GOODWILL
GOODWILL | 9 Months Ended |
Jul. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL | GOODWILL The following table presents the goodwill allocated to Ciena's applicable reportable segments as of the dates indicated (in thousands): Balance at October 31, 2016 Acquisitions Impairments Translation Balance at July 31, 2017 Software and Software-Related Services $ 201,428 $ — $ — $ — $ 201,428 Networking Platforms 65,546 — — 867 66,413 Total $ 266,974 $ — $ — $ 867 $ 267,841 |
OTHER BALANCE SHEET DETAILS
OTHER BALANCE SHEET DETAILS | 9 Months Ended |
Jul. 31, 2017 | |
Balance Sheet Related Disclosures [Abstract] | |
OTHER BALANCE SHEET DETAILS | OTHER BALANCE SHEET DETAILS As of the dates indicated, other long-term assets are comprised of the following (in thousands): July 31, October 31, Maintenance spares, net $ 46,576 $ 49,535 Deferred debt issuance costs, net (1) 1,122 1,363 Financing receivable 716 1,870 Other 15,556 15,352 $ 63,970 $ 68,120 (1) As described in Note 2 above, in connection with Ciena's adoption of ASU 2015-03 during the first quarter of fiscal 2017, deferred debt issuance costs associated with its convertible notes and term loans were retrospectively reclassified from other long-term assets to current portion of long-term debt and long-term debt, net on the Condensed Consolidated Balance Sheets. The deferred debt issuance costs reflected relate to Ciena's ABL Credit Facility (described in Note 17 below). The amortization of deferred debt issuance costs for Ciena's ABL Credit Facility is included in interest expense, and was $0.3 million and $0.3 million during the first nine months of fiscal 2017 and 2016 , respectively. As of the dates indicated, accrued liabilities and other short-term obligations are comprised of the following (in thousands): July 31, October 31, Compensation, payroll related tax and benefits $ 94,934 $ 106,687 Warranty 44,296 52,324 Vacation 40,541 36,112 Capital lease obligations 3,784 2,321 Interest payable 5,032 4,649 Other 96,042 108,260 $ 284,629 $ 310,353 The following table summarizes the activity in Ciena’s accrued warranty for the fiscal periods indicated (in thousands): Nine months ended Beginning Ending July 31, Balance Provisions Settlements Balance 2016 $ 56,654 13,114 (15,289 ) $ 54,479 2017 $ 52,324 5,188 (13,216 ) $ 44,296 The decrease in warranty provisions during fiscal 2017 was primarily due to lower failure rates than previously estimated and reduced costs due to efficiencies. As of the dates indicated, deferred revenue is comprised of the following (in thousands): July 31, October 31, Products $ 61,913 $ 45,216 Services 135,614 137,647 197,527 182,863 Less current portion (110,629 ) (109,009 ) Long-term deferred revenue $ 86,898 $ 73,854 As of the dates indicated, other long-term obligations are comprised of the following (in thousands): July 31, October 31, Capital lease obligations $ 76,549 $ 24,298 Income tax liability 15,621 14,122 Deferred tenant allowance 8,412 9,164 Straight-line rent 7,371 6,406 Forward starting interest rate swap 1,396 5,967 Construction liability — 57,602 Other 7,185 6,835 $ 116,534 $ 124,394 Ciena capitalizes construction in progress and records a corresponding long-term liability for build-to-suit lease agreements where Ciena is considered the owner during the construction period for accounting purposes. As of May 1, 2017, occupancy of both office buildings was complete. As such, Ciena recorded capital leases for these buildings, which will be depreciated over the lease terms and removed the build-to-suit construction in progress asset and the corresponding long-term liability. See Note 10 for more details regarding this arrangement. The following is a schedule by fiscal year of future minimum lease payments under capital leases and the present value of minimum lease payments as of July 31, 2017 (in thousands): Period ended October 31, 2017 (remaining three months) $ 2,371 2018 9,486 2019 9,060 2020 8,078 2021 7,974 Thereafter 96,279 Net minimum capital lease payments 133,248 Less: Amount representing interest (52,915 ) Present value of minimum lease payments 80,333 Less: Current portion of present value of minimum lease payments (3,784 ) Long-term portion of present value of minimum lease payments $ 76,549 |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 9 Months Ended |
Jul. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS Foreign Currency Derivatives As of July 31, 2017 and October 31, 2016 , Ciena had forward contracts in place to reduce the variability in its Canadian Dollar and Indian Rupee denominated expense, which principally relates to research and development activities, and its British Pound denominated expense, which principally relates to sales and marketing activities. The notional amount of these contracts was approximately $35.4 million and $107.6 million as of July 31, 2017 and October 31, 2016 , respectively. These foreign exchange contracts have maturities of 12 months or less and have been designated as cash flow hedges. During the first nine months of fiscal 2017 and fiscal 2016 , in order to hedge certain balance sheet exposures, Ciena entered into forward contracts to mitigate risk due to volatility in the Brazilian Real, Canadian Dollar and Mexican Peso. The notional amount of these contracts was approximately $86.8 million and $59.6 million as of July 31, 2017 and October 31, 2016 , respectively. These foreign exchange contracts have maturities of 12 months or less and have not been designated as hedges for accounting purposes. Interest Rate Derivatives Ciena is exposed to floating rates of LIBOR interest on its term loan borrowings (see Note 16 below) and has hedged such risk by entering into floating to fixed interest rate swap arrangements ("interest rate swaps"). During the second quarter of fiscal 2017, Ciena refinanced its existing 2019 and 2021 Term Loans into a new 2022 Term Loan (as defined in Note 16 ), thereby reducing the aggregate outstanding principal to $400 million and extending the maturity to January 2022 (see Note 16 below). In order to align its interest rate hedges to the reduced 2022 Term Loan principal value and later maturity date, Ciena also reduced the total outstanding value of its interest rate swaps, as described below, and entered into new forward starting interest rate swaps in January 2017 and February 2017, respectively. The interest rate swaps, as adjusted, fix 98% , 82% and 77% of the principal value of the 2022 Term Loan from February 2017 through July 2018, July 2018 through June 2020, and June 2020 through January 2021, respectively. The fixed rate on the amounts hedged during these periods will be 4.25% , 4.25% and 4.75% , respectively. The total notional amount of these interest rate swaps in effect as of July 31, 2017 was $390.6 million . During fiscal 2014 , Ciena entered into interest rate swaps that fixed the interest rate under the 2019 Term Loan (as defined in Note 16 ) at 5.004% for the period commencing on July 20, 2015 through July 19, 2018. The total notional amount of these derivatives as of October 31, 2016 was $244.4 million . In May 2016, Ciena entered into interest rate swaps that fixed the total interest rate under the 2021 Term Loan (as defined in Note 16 ) at 4.62% to 4.87% , depending on the applicable margin, for the period commencing on June 20, 2016 through June 22, 2020. The total notional amount of these derivatives as of October 31, 2016 was $248.8 million . Ciena expects the variable rate payments to be received under the terms of the interest rate swaps to offset exactly the forecasted variable rate payments on the equivalent notional amounts of the term loans. These derivative contracts have been designated as cash flow hedges. Other information regarding Ciena's derivatives is immaterial for separate financial statement presentation. See Note 4 and Note 6 above. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME | 9 Months Ended |
Jul. 31, 2017 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME | ACCUMULATED OTHER COMPREHENSIVE INCOME The following table summarizes the changes in accumulated balances of other comprehensive income ("AOCI") for the nine months ended July 31, 2017 : Unrealized Unrealized Unrealized Cumulative Gain/(Loss) on Gain/(Loss) on Gain/(Loss) on Forward Foreign Currency Marketable Securities Foreign Currency Contracts Starting Interest Rate Swap Translation Adjustment Total Balance at October 31, 2016 $ 139 $ (1,091 ) $ (5,967 ) $ (17,410 ) $ (24,329 ) Other comprehensive income (loss) before reclassifications (533 ) 896 4,838 11,891 17,092 Amounts reclassified from AOCI — 2,010 (268 ) — 1,742 Balance at July 31, 2017 $ (394 ) $ 1,815 $ (1,397 ) $ (5,519 ) $ (5,495 ) The following table summarizes the changes in AOCI for the nine months ended July 31, 2016 : Unrealized Unrealized Unrealized Cumulative Gain/(Loss) on Gain/(Loss) on Gain/(Loss) on Forward Foreign Currency Marketable Securities Foreign Currency Contracts Starting Interest Rate Swap Translation Adjustment Total Balance at October 31, 2015 $ (78 ) $ (268 ) $ (5,522 ) $ (16,258 ) $ (22,126 ) Other comprehensive income (loss) before reclassifications 425 (70 ) (4,655 ) 1,969 (2,331 ) Amounts reclassified from AOCI — 588 2,479 — 3,067 Balance at July 31, 2016 $ 347 $ 250 $ (7,698 ) $ (14,289 ) $ (21,390 ) All amounts reclassified from AOCI related to settlement (gains) losses on foreign currency forward contracts designated as cash flow hedges impacted research and development expense and sales and marketing expense on the Condensed Consolidated Statements of Operations. All amounts reclassified from AOCI related to settlement (gains) losses on forward starting interest rate swaps designated as cash flow hedges impacted interest and other income (loss), net on the Condensed Consolidated Statements of Operations. |
SHORT-TERM AND LONG-TERM DEBT
SHORT-TERM AND LONG-TERM DEBT | 9 Months Ended |
Jul. 31, 2017 | |
Debt Disclosure [Abstract] | |
SHORT-TERM AND LONG-TERM DEBT | SHORT-TERM AND LONG-TERM DEBT Outstanding Term Loan Payable The net carrying values of Ciena's term loans were comprised of the following for the fiscal periods indicated (in thousands): July 31, 2017 October 31, 2016 Term Loan Payable due July 15, 2019 $ — $ 241,359 Term Loan Payable due April 25, 2021 — 244,944 Term Loan Payable due January 30, 2022 393,674 — $ 393,674 $ 486,303 The term loan balances in the table above reflect Ciena's adoption of ASU 2015-03, as described in Note 2 above. Deferred debt issuance costs that were deducted from the carrying amounts of the term loans totaled $3.3 million at July 31, 2017 and $4.9 million at October 31, 2016 . Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate method, through the maturity of the term loans. The amortization of deferred debt issuance costs for these term loans is included in interest expense, and was $0.7 million and $0.8 million during the first nine months of fiscal 2017 and 2016 , respectively. The carrying values of the term loans listed above are also net of any unamortized debt discounts. 2022 Term Loan On January 30, 2017, Ciena, as borrower, and Ciena Communications, Inc. and Ciena Government Solutions, Inc., as guarantors, entered into an Omnibus Refinancing Amendment to the Credit Agreement, Security Agreement and Pledge Agreement with the lenders party thereto and the administrative agent (the “Refinancing Agreement”), pursuant to which Ciena refinanced its existing 2019 Term Loan and 2021 Term Loan (as described under "Prior Term Loans" below) into a single term loan with an aggregate principal amount of $400 million maturing on January 30, 2022 (the “2022 Term Loan”). In connection with the transaction, Ciena received a loan in the amount of $399.5 million , net of original discount, from the 2022 Term Loan and repaid $493.1 million of outstanding principal under the 2019 Term Loan and 2021 Term Loan. The 2022 Term Loan requires Ciena to make installment payments of approximately $1.0 million on a quarterly basis. This arrangement was accounted for as a modification of debt and, as such, $2.9 million of debt issuance costs associated with the 2022 Term Loan were expensed. The aggregate balance of $3.5 million of debt issuance costs and approximately $1.7 million of original discount from the 2019 Term Loan and the 2021 Term Loan, and approximately $0.5 million of original discount from the 2022 Term Loan, are included in the carrying value of the 2022 Term Loan. See table below. The Refinancing Agreement amends the Term Loan Credit Agreement (as defined below) and provides that the 2022 Term Loan will, among other things: • be subject to mandatory prepayment on the same basis as under the Term Loan Credit Agreement; • bear interest, at Ciena’s election, at a per annum rate equal to (a) LIBOR (subject to a floor of 0.75% ) plus an applicable margin of 2.50% , or (b) a base rate (subject to a floor of 1.75% ) plus an applicable margin of 1.50% ; and • be repayable at any time at Ciena's election, provided that repayment of the 2022 Term Loan with proceeds of certain indebtedness prior to July 30, 2017 will require a prepayment premium of 1% of the aggregate principal amount of such prepayment. Except as amended by the Refinancing Agreement, the remaining terms of the Term Loan Credit Agreement remain in full force and effect. The principal balance, unamortized debt discount, deferred debt issuance costs and net carrying value of the liability components of Ciena's 2022 Term Loan were as follows as of July 31, 2017 (in thousands): Principal Balance Unamortized Discount Deferred Debt Issuance Costs Net Carrying Value Term Loan Payable due January 30, 2022 $ 399,000 $ (2,038 ) $ (3,288 ) $393,674 The following table sets forth the carrying value and the estimated fair value of Ciena's 2022 Term Loan (in thousands): July 31, 2017 Carrying Value (1) Fair Value (2) Term Loan Payable due January 30, 2022 $ 393,674 $ 401,993 (1) Includes unamortized debt discount and debt issuance costs. (2) Ciena's term loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its 2022 Term Loan using a market approach based upon observable inputs, such as current market transactions involving comparable securities. Prior Term Loans On July 15, 2014, Ciena entered into a Term Loan Credit Agreement (the "Term Loan Credit Agreement") providing for senior secured term loans in an aggregate principal amount of $250 million (the “2019 Term Loan”) with a maturity date of July 15, 2019. The 2019 Term Loan required Ciena to make installment payments of approximately $0.6 million on a quarterly basis. On April 25, 2016, Ciena entered into an Incremental Joinder and Amendment Agreement (the “Incremental Term Loan Credit Agreement”) that amended the Term Loan Credit Agreement. The Incremental Term Loan Credit Agreement provided for a new tranche of senior secured term loans under the Term Loan Credit Agreement in an aggregate principal amount of $250 million (the “2021 Term Loan”). The 2021 Term Loan required Ciena to make installment payments of approximately $0.6 million on a quarterly basis. Maturity of 2017 Convertible Notes On June 15, 2017, the outstanding 0.875% Convertible Senior Notes matured and Ciena repaid the approximately $185.3 million in aggregate principal amount outstanding, together with approximately $0.8 million in accrued interest through the date of maturity. Outstanding Convertible Notes Payable The net carrying values of Ciena's outstanding convertible notes payable was comprised of the following for the fiscal periods indicated (in thousands): July 31, 2017 October 31, 2016 0.875% Convertible Senior Notes due June 15, 2017 $ — $ 231,240 3.75% Convertible Senior Notes due October 15, 2018 348,557 347,630 4.0% Convertible Senior Notes due December 15, 2020 193,071 188,509 $ 541,628 $ 767,379 The convertible notes payable balances in the table above reflects Ciena's adoption of ASU 2015-03, as described in Note 2 above. Deferred debt issuance costs that were deducted from the carrying amounts of the convertible notes payable totaled $2.5 million at July 31, 2017 and $3.9 million at October 31, 2016 . Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate method, through the maturity of the convertible notes payable. The amortization of deferred debt issuance costs is included in interest expense, and was $1.4 million and $2.1 million during the first nine months of fiscal 2017 and 2016 , respectively. The carrying values of the convertible notes payable listed above also include accretion of principal and are net of any unamortized debt discounts. The principal balance, unamortized debt discount, deferred debt issuance costs and net carrying value of the liability and equity components of Ciena's outstanding issues of convertible notes were as follows as of July 31, 2017 (in thousands): Liability Component Equity Component Principal Balance Unamortized Debt Discount Deferred Debt Issuance Costs Net Carrying Value Net Carrying Value 3.75% Convertible Senior Notes due October 15, 2018 $ 350,000 $ — $ (1,443 ) $ 348,557 $ — 4.0% Convertible Senior Notes due December 15, 2020 $ 203,996 $ (9,893 ) $ (1,032 ) $ 193,071 $ 43,131 The following table sets forth, in thousands, the net carrying value and the estimated fair value of Ciena’s outstanding issues of convertible notes as of July 31, 2017 : July 31, 2017 Net Carrying Value (1) Fair Value (2) 3.75% Convertible Senior Notes due October 15, 2018 348,557 482,825 4.0% Convertible Senior Notes due December 15, 2020 193,071 269,719 $ 541,628 $ 752,544 (1) Includes unamortized debt discount, accretion of principal and deferred debt issuance costs. (2) The convertible notes are categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its outstanding convertible notes using a market approach based upon observable inputs, such as current market transactions involving comparable securities. |
ABL CREDIT FACILITY
ABL CREDIT FACILITY | 9 Months Ended |
Jul. 31, 2017 | |
Debt Disclosure [Abstract] | |
ABL CREDIT FACILITY | ABL CREDIT FACILITY Ciena Corporation and certain of its subsidiaries are parties to a senior secured asset-based revolving credit facility (the “ABL Credit Facility”). Ciena principally uses the ABL Credit Facility to support the issuance of letters of credit that arise in the ordinary course of its business and thereby to reduce its use of cash required to collateralize these instruments. As of July 31, 2017 , letters of credit totaling $74.1 million were collateralized by the ABL Credit Facility. There were no borrowings outstanding under the ABL Credit Facility as of July 31, 2017 . |
EARNINGS PER SHARE CALCULATION
EARNINGS PER SHARE CALCULATION | 9 Months Ended |
Jul. 31, 2017 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE CALCULATION | EARNINGS PER SHARE CALCULATION The following table (in thousands except per share amounts) is a reconciliation of the numerator and denominator of the basic net income per common share (“Basic EPS”) and the diluted net income per potential common share (“Diluted EPS”). Basic EPS is computed using the weighted average number of common shares outstanding. Diluted EPS is computed using the weighted average number of the following, in each case, to the extent the effect is not anti-dilutive: (i) common shares outstanding; (ii) shares issuable upon vesting of restricted stock units; (iii) shares issuable under Ciena’s employee stock purchase plan and upon exercise of outstanding stock options, using the treasury stock method; and (iv) shares underlying Ciena’s outstanding convertible notes. Quarter Ended July 31, Nine Months Ended July 31, Numerator 2017 2016 2017 2016 Net income $ 60,010 $ 33,546 $ 101,897 $ 35,997 Add: Interest expense associated with 0.875% Convertible Senior Notes due 2017 246 1,326 1,343 — Add: Interest expense associated with 3.75% Convertible Senior Notes due 2018 3,572 3,572 10,750 — Add: Interest expense associated with 4.0% Convertible Senior Notes due 2020 3,323 — — — Net income used to calculate Diluted EPS $ 67,151 $ 38,444 $ 113,990 $ 35,997 Quarter Ended July 31, Nine Months Ended July 31, Denominator 2017 2016 2017 2016 Basic weighted average shares outstanding 142,464 138,881 141,631 137,835 Add: Shares underlying outstanding stock options and restricted stock units and issuable under employee stock purchase plan 1,386 895 1,401 1,218 Add: Shares underlying 0.875% Convertible Senior Notes due 2017 1,708 12,217 4,043 — Add: Shares underlying 3.75% Convertible Senior Notes due 2018 17,356 17,356 17,356 — Add: Shares underlying 4.0% Convertible Senior Notes due 2020 9,198 — — — Dilutive weighted average shares outstanding 172,112 169,349 164,431 139,053 Quarter Ended July 31, Nine Months Ended July 31, EPS 2017 2016 2017 2016 Basic EPS $ 0.42 $ 0.24 $ 0.72 $ 0.26 Diluted EPS $ 0.39 $ 0.23 $ 0.69 $ 0.26 The following table summarizes the weighted average shares excluded from the calculation of the denominator for Diluted EPS due to their anti-dilutive effect for the periods indicated (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Shares underlying stock options and restricted stock units 682 2,082 988 2,089 0.875% Convertible Senior Notes due June 15, 2017 — — — 12,571 3.75% Convertible Senior Notes due October 15, 2018 — — — 17,356 4.0% Convertible Senior Notes due December 15, 2020 — 9,198 9,198 9,198 Total shares excluded due to anti-dilutive effect 682 11,280 10,186 41,214 |
SHARE-BASED COMPENSATION EXPENS
SHARE-BASED COMPENSATION EXPENSE | 9 Months Ended |
Jul. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION EXPENSE | SHARE-BASED COMPENSATION EXPENSE Ciena has outstanding equity awards issued under its 2008 Omnibus Incentive Plan (the "2008 Plan"), certain legacy equity plans, equity plans assumed as a result of previous acquisitions, and its 2017 Omnibus Incentive Plan (the "2017 Plan"), which was approved by Ciena's stockholders on March 23, 2017. All equity awards granted on or after March 23, 2017 are made exclusively from the 2017 Plan. Ciena also makes shares of its common stock available for purchase under its Amended and Restated 2003 Employee Stock Purchase Plan (the "ESPP"). Each of the 2017 Plan and the ESPP are described below. 2017 Plan The 2017 Plan has a ten year term and authorizes the issuance of awards including stock options, restricted stock units (RSUs), restricted stock, unrestricted stock, stock appreciation rights (SARs) and other equity and/or cash performance incentive awards to employees, directors and consultants of Ciena. Subject to certain restrictions, the Compensation Committee of the Board of Directors has broad discretion to establish the terms and conditions for awards under the 2017 Plan, including the number of shares, vesting conditions, and the required service or performance criteria. Options and SARs have a maximum term of ten years, and their exercise price may not be less than 100% of fair market value on the date of grant. Repricing of stock options and SARs is prohibited without stockholder approval. Certain change in control transactions may cause awards granted under the 2017 Plan to vest, unless the awards are continued or substituted for in connection with the transaction. The 2017 Plan authorizes and reserves 8.9 million shares for issuance. In addition, any shares that remained available for issuance under the 2008 Plan as of March 23, 2017 were added to the 2017 Plan and are available for issuance thereunder. The number of shares available under the 2017 Plan will also be increased from time to time by: (i) the number of shares subject to outstanding awards granted under Ciena's prior equity compensation plans that are forfeited, expire or are canceled without delivery of common stock following the effective date of the 2017 Plan, and (ii) the number of shares subject to awards assumed or substituted in connection with the acquisition of another company. As of July 31, 2017 , approximately 10.4 million shares remained available for issuance under the 2017 Plan. Stock Options Ciena did not grant any stock options during the first nine months of fiscal 2017 or fiscal 2016 . Outstanding stock option awards granted to employees in prior periods or assumed as a result of acquisitions are generally subject to service-based vesting conditions and vest incrementally over a four -year period. The following table is a summary of Ciena’s stock option activity for the period indicated (shares in thousands): Shares Underlying Options Outstanding Weighted Average Exercise Price Balance at October 31, 2016 1,387 $ 26.90 Exercised (223 ) 10.74 Canceled (270 ) 28.80 Balance at July 31, 2017 894 $ 30.35 The total intrinsic value of options exercised during the first nine months of fiscal 2017 and fiscal 2016 was $3.1 million and $4.6 million , respectively. The following table summarizes information with respect to stock options outstanding at July 31, 2017 , based on Ciena’s closing stock price on the last trading day of Ciena’s third fiscal quarter of 2017 (shares and intrinsic value in thousands): Options Outstanding at Vested Options at July 31, 2017 July 31, 2017 Number Weighted Average Remaining Weighted Number Weighted Average Remaining Weighted Range of of Contractual Average Aggregate of Contractual Average Aggregate Exercise Underlying Life Exercise Intrinsic Underlying Life Exercise Intrinsic Price Shares (Years) Price Value Shares (Years) Price Value $ 1.88 — $ 11.16 65 2.84 $ 8.66 $ 1,094 64 2.78 $ 8.64 $ 1,082 $ 11.34 — $ 17.24 178 4.84 13.44 2,130 172 4.76 13.39 2,065 $ 17.50 — $ 30.46 127 1.82 25.90 222 119 1.48 26.35 172 $ 31.93 — $ 37.10 299 1.74 35.10 — 299 1.74 35.10 — $ 37.82 — $ 55.63 225 3.92 46.17 — 224 3.91 46.19 — $ 1.88 — $ 55.63 894 3.00 $ 30.35 $ 3,446 878 2.92 $ 30.56 $ 3,319 Assumptions for Option-Based Awards Ciena recognizes the fair value of service-based options as share-based compensation expense on a straight-line basis over the requisite service period. Restricted Stock Units A restricted stock unit is a stock award that entitles the holder to receive shares of Ciena common stock as the unit vests. Ciena's outstanding restricted stock unit awards are subject to service-based vesting conditions and/or performance-based vesting conditions. Awards subject to service-based conditions typically vest in increments over a three or four -year period. However, the 2017 Plan permits Ciena to grant service-based stock awards with a minimum one -year vesting period. Awards with performance-based vesting conditions require the achievement of certain operational, financial or other performance criteria or targets as a condition of vesting, or the acceleration of vesting, of such awards. Ciena recognizes the estimated fair value of performance-based awards, net of estimated forfeitures, as share-based compensation expense over the performance period, using graded vesting, which considers each performance period or tranche separately, based upon Ciena's determination of whether it is probable that the performance targets will be achieved. At the end of each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets. The following table is a summary of Ciena's restricted stock unit activity for the period indicated, with the aggregate fair value of the balance outstanding at the end of each period, based on Ciena's closing stock price on the last trading day of the relevant period (shares and aggregate fair value in thousands): Restricted Stock Units Outstanding Weighted Average Grant Date Fair Value Per Share Aggregate Fair Value Balance at October 31, 2016 4,280 $ 19.96 $ 83,511 Granted 2,211 Vested (1,687 ) Canceled or forfeited (476 ) Balance at July 31, 2017 4,328 $ 21.36 $ 110,051 The total fair value of restricted stock units that vested and were converted into common stock during the first nine months of fiscal 2017 and fiscal 2016 was $41.5 million and $41.3 million , respectively. The weighted average fair value of each restricted stock unit granted by Ciena during the first nine months of fiscal 2017 and fiscal 2016 was $23.36 and $19.72 respectively. Assumptions for Restricted Stock Unit Awards The fair value of each restricted stock unit award is based on the closing price on the date of grant. Share-based expense for service-based restricted stock unit awards is recognized, net of estimated forfeitures, ratably over the vesting period on a straight-line basis. Share-based expense for performance-based restricted stock unit awards, net of estimated forfeitures, is recognized ratably over the performance period based upon Ciena's determination of whether it is probable that the performance targets will be achieved. At the end of each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets. The estimation of whether the performance targets will be achieved involves judgment, and the estimate of expense is revised periodically based on the probability of achieving the performance targets. Revisions are reflected in the period in which the estimate is changed. If any performance goals are not met, no compensation cost is ultimately recognized against that goal, and to the extent previously recognized, compensation expense is reversed. Because share-based compensation expense is recognized only for those awards that are ultimately expected to vest, the amount of share-based compensation expense recognized reflects a reduction for estimated forfeitures. Ciena estimates forfeitures at the time of grant and revises those estimates in subsequent periods based upon new or changed information. Amended and Restated Employee Stock Purchase Plan (ESPP) Under the ESPP, eligible employees may enroll in a 12 -month offer period that begins in December and June of each year. Each offer period includes two six -month purchase periods. Employees may purchase a limited number of shares of Ciena common stock at 85% of the fair market value on either the day immediately preceding the offer date or the purchase date, whichever is lower. The ESPP is considered compensatory for purposes of share-based compensation expense. Pursuant to the ESPP's “evergreen” provision, on December 31 of each year, the number of shares available under the ESPP increases by up to approximately 0.6 million shares, provided that the total number of shares available at that time shall not exceed 8.2 million shares. Unless earlier terminated, the ESPP will terminate on January 24, 2023. During the first nine months of fiscal 2017 , Ciena issued 1.0 million shares under the ESPP. At July 31, 2017 , 5.5 million shares remained available for issuance under the ESPP. Share-Based Compensation Expense for Periods Reported The following table summarizes share-based compensation expense for the periods indicated (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Product costs $ 709 $ 645 $ 1,978 $ 1,845 Service costs 619 637 1,926 1,922 Share-based compensation expense included in cost of sales 1,328 1,282 3,904 3,767 Research and development 3,139 3,479 10,001 10,698 Sales and marketing 3,242 3,590 9,628 12,248 General and administrative 4,321 4,284 13,191 14,381 Acquisition and integration costs — — — 714 Share-based compensation expense included in operating expense 10,702 11,353 32,820 38,041 Share-based compensation expense capitalized in inventory, net (17 ) (13 ) 119 24 Total share-based compensation $ 12,013 $ 12,622 $ 36,843 $ 41,832 As of July 31, 2017 , total unrecognized share-based compensation expense was approximately $76.5 million : (i) $0.2 million , which relates to unvested stock options and is expected to be recognized over a weighted-average period of 1.1 years; and (ii) $76.3 million , which relates to unvested restricted stock units and is expected to be recognized over a weighted-average period of 1.4 years. |
SEGMENTS AND ENTITY WIDE DISCLO
SEGMENTS AND ENTITY WIDE DISCLOSURES | 9 Months Ended |
Jul. 31, 2017 | |
Segment Reporting [Abstract] | |
SEGMENTS AND ENTITY WIDE DISCLOSURES | SEGMENTS AND ENTITY WIDE DISCLOSURES Segment Reporting Ciena’s internal organizational structure and the management of its business are grouped into the following operating segments: • Networking Platforms reflects sales of Ciena’s Converged Packet Optical, Packet Networking and Optical Transport product lines . ◦ Converged Packet Optical — includes the 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System, which feature Ciena's WaveLogic coherent optical processors. Products also include the Waveserver stackable interconnect system, the family of CoreDirector® Multiservice Optical Switches and the OTN configuration for the 5410 Reconfigurable Switching System. This product line also includes sales of the Z-Series Packet-Optical Platform. ◦ Packet Networking — includes the 3000 family of service delivery switches and service aggregation switches and the 5000 family of service aggregation switches. This product line also includes the 8700 Packetwave Platform and the Ethernet packet configuration for the 5410 Service Aggregation Switch. ◦ Optical Transport — includes the 4200 Advanced Services Platform, 5100/5200 Advanced Services Platform, Common Photonic Layer (CPL) and 6100 Multiservice Optical Platform. Ciena's Optical Transport products have either been previously discontinued, or are expected to be discontinued during fiscal 2017, reflecting network operators' transition toward next-generation converged network architectures. The Networking Platforms segment also includes sales of operating system software and enhanced software features embedded in each of the product lines above. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations. • Software and Software-Related Services reflects sales of Ciena’s network virtualization, management, control and orchestration software solutions and software-related services, including subscription, installation, support, and consulting services. ◦ This segment includes Ciena’s element and network management solutions and planning tools, including the OneControl Unified Management System, ON-Center® Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release and Planet Operate. As Ciena seeks adoption of its Blue Planet software platform and transitions features, functionality and customers to this platform, Ciena expects revenue declines for its other element and network management solutions. ◦ This segment includes Ciena’s Blue Planet network virtualization, service orchestration and network management software platform. Ciena's Blue Planet platform includes multi-domain service orchestration (MDSO), network function virtualization (NFV), management and orchestration (NFV MANO), and Ciena's manage, control and plan (MCP) solution, SDN Multilayer Controller and V-WAN application. Revenue from the software platforms portion of this segment is included in product revenue on the Condensed Consolidated Statement of Operations. Revenue from software-related services is included in services revenue on the Condensed Consolidated Statement of Operations. • Global Services reflects sales of a broad range of Ciena’s services for consulting and network design, installation and deployment, maintenance support and training activities. Revenue from this segment is included in services revenue on the Condensed Consolidated Statement of Operations. Ciena's long-lived assets, including equipment, building, furniture and fixtures, finite-lived intangible assets and maintenance spares, are not reviewed by the chief operating decision maker for purposes of evaluating performance and allocating resources. As of July 31, 2017 , equipment, building, furniture and fixtures, net totaled $314.9 million primarily supporting asset groups within Ciena's Networking Platforms and Software and Software-Related Services segments and supporting Ciena's unallocated selling and general and administrative activities. As of July 31, 2017 , $40.4 million of Ciena's intangible assets, net were assigned to asset groups within Ciena's Networking Platforms segment and $66.6 million of Ciena's intangible assets, net were assigned to asset groups within Ciena's Software and Software-Related Services segment. As of July 31, 2017 , all of the maintenance spares, net, totaling $46.6 million , were assigned to asset groups within Ciena's Global Services segment. Segment Revenue The table below (in thousands) sets forth Ciena’s segment revenue for the respective periods: Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Revenue: Networking Platforms Converged Packet Optical $ 506,532 $ 467,615 $ 1,421,315 $ 1,291,956 Packet Networking 82,121 63,658 220,641 180,437 Optical Transport 3,694 9,619 11,822 30,215 Total Networking Platforms 592,347 540,892 1,653,778 1,502,608 Software and Software-Related Services Software Platforms 18,395 12,558 48,587 32,409 Software-Related Services 23,856 19,011 70,760 55,059 Total Software and Software-Related Services 42,251 31,569 119,347 87,468 Global Services Maintenance Support and Training 57,902 55,996 171,133 169,123 Installation and Deployment 27,397 31,245 84,011 92,317 Consulting and Network Design 8,822 10,848 28,969 32,866 Total Global Services 94,121 98,089 284,113 294,306 Consolidated revenue $ 728,719 $ 670,550 $ 2,057,238 $ 1,884,382 Segment Profit (Loss) Segment profit (loss) is determined based on internal performance measures used by the chief executive officer to assess the performance of each operating segment in a given period. In connection with that assessment, the chief executive officer excludes the following items: selling and marketing costs; general and administrative costs; amortization of intangible assets; acquisition and integration costs; restructuring costs; interest and other income (loss), net; interest expense; and provisions for income taxes. The table below (in thousands) sets forth Ciena’s segment profit (loss) and the reconciliation to consolidated net income during the respective periods indicated: Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Segment profit (loss): Networking Platforms $ 159,649 $ 150,521 $ 423,859 $ 390,109 Software and Software-Related Services 11,133 2,412 23,384 (970 ) Global Services 39,565 38,855 116,637 114,543 Total segment profit 210,347 191,788 563,880 503,682 Less: Non-performance operating expenses Selling and marketing 86,739 83,732 260,292 252,878 General and administrative 35,569 34,336 106,423 100,681 Amortization of intangible assets 3,837 14,529 29,368 46,957 Acquisition and integration costs — 1,029 — 4,613 Restructuring costs 2,203 1,138 8,874 2,057 Add: Other non-performance financial items Interest expense and other income (loss), net (14,263 ) (19,614 ) (45,322 ) (52,741 ) Less: Provision for income taxes 7,726 3,864 11,704 7,758 Consolidated net income $ 60,010 $ 33,546 $ 101,897 $ 35,997 Entity Wide Reporting Ciena's operating segments each engage in business across four geographic regions: North America; Europe, Middle East and Africa (“EMEA”); Asia Pacific (“APAC”); and Caribbean and Latin America (“CALA”). North America includes only activities in the United States and Canada. The following table reflects Ciena’s geographic distribution of revenue principally based on the relevant location for Ciena's delivery of products and performance of services. For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 North America $ 465,238 $ 438,013 $ 1,295,539 $ 1,226,222 EMEA 96,068 104,266 293,387 281,163 CALA 51,709 46,606 120,826 148,312 APAC 115,704 81,665 347,486 228,685 Total $ 728,719 $ 670,550 $ 2,057,238 $ 1,884,382 North America includes $438.1 million and $410.0 million of United States revenue for fiscal quarters ended July 31, 2017 and 2016 , respectively. For the nine months ended July 31, 2017 and 2016 , United States revenue was $1.2 billion and $1.1 billion , respectively. No other country accounted for 10% or more of total revenue for the periods presented above. The following table reflects Ciena's geographic distribution of equipment, building, furniture and fixtures, net, with any country accounting for at least 10% of total equipment, building, furniture and fixtures, net, specifically identified. Equipment, building, furniture and fixtures, net, attributable to geographic regions outside of the United States and Canada are reflected as “Other International.” For the periods below, Ciena's geographic distribution of equipment, building, furniture and fixtures was as follows (in thousands): July 31, October 31, Canada $ 208,422 $ 173,885 United States 94,790 103,018 Other International 11,638 11,503 Total $ 314,850 $ 288,406 For the periods below, customers accounting for at least 10% of Ciena’s revenue, were as follows (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 AT&T $ 120,931 $ 105,418 $ 324,900 $ 348,032 Verizon 82,918 n/a 206,272 n/a Total $ 203,849 $ 105,418 $ 531,172 $ 348,032 n/a Denotes revenue representing less than 10% of total revenue for the period The customers identified above purchased products and services from each of Ciena's operating segments. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Jul. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Foreign Tax Contingencies Ciena is subject to various tax liabilities arising in the ordinary course of business. Ciena does not expect that the ultimate settlement of these liabilities will have a material effect on its results of operations, financial position or cash flows. Litigation From May 15 through June 3, 2015, five separate putative class action lawsuits in connection with Ciena’s then-pending acquisition of Cyan, Inc. (“Cyan”) were filed in the Court of Chancery of the State of Delaware. On June 23, 2015, each of these lawsuits was consolidated into a single case captioned In Re Cyan, Inc. Shareholder Litigation, Consol. C.A. No. 11027-CB. On July 15, 2016, the plaintiffs filed a third amended complaint against the members of Cyan's board of directors, which generally alleged that they breached their fiduciary duties by engaging in a conflicted and unfair sales process, failing to maximize stockholder value in the acquisition, taking steps to preclude competitive bidding, and failing to disclose material information necessary for stockholders to make an informed decision regarding the acquisition. On August 5, 2016, the defendants filed a motion to dismiss the third amended complaint. On May 11, 2017, the Court of Chancery granted the defendants' motion to dismiss the third amended complaint with prejudice. As a result of the acquisition of Cyan in August 2015, Ciena became a defendant in a securities class action lawsuit. On April 1, 2014, a purported stockholder class action lawsuit was filed in the Superior Court of California, County of San Francisco, against Cyan, the members of Cyan’s board of directors, Cyan’s former Chief Financial Officer, and the underwriters of Cyan’s initial public offering. On April 30, 2014, a substantially similar lawsuit was filed in the same court against the same defendants. The two cases have been consolidated as Beaver County Employees Retirement Fund, et al. v. Cyan, Inc. et al., Case No. CGC-14-538355. The consolidated complaint alleges violations of federal securities laws on behalf of a purported class consisting of purchasers of Cyan’s common stock pursuant or traceable to the registration statement and prospectus for Cyan’s initial public offering in April 2013, and seeks unspecified compensatory damages and other relief. On May 19, 2015, the proposed class was certified. On August 25, 2015, the defendants filed a motion for judgment on the pleadings based on an alleged lack of subject matter jurisdiction over the case, which motion was denied on October 23, 2015. On May 24, 2016, the defendants filed a petition for a writ of certiorari on the jurisdiction issue with the United States Supreme Court, which petition was granted on June 27, 2017. The matter is expected to be heard during the Supreme Court’s October 2017 Term. On November 18, 2016, the Superior Court stayed the case pending the outcome of the Supreme Court’s decision. Ciena believes that the consolidated lawsuit is without merit and intends to defend it vigorously. On May 29, 2008, Graywire, LLC filed a complaint in the United States District Court for the Northern District of Georgia against Ciena and four other defendants, alleging, among other things, that certain of the parties’ products infringe U.S. Patent 6,542,673 (the “’673 Patent”), relating to an identifier system and components for optical assemblies. The complaint seeks injunctive relief and damages. In July 2009, upon request of Ciena and certain other defendants, the U.S. Patent and Trademark Office (“PTO”) granted the defendants’ inter partes application for reexamination with respect to certain claims of the ‘673 Patent, and the district court granted the defendants’ motion to stay the case pending reexamination of all of the patents-in-suit. In December 2010, the PTO confirmed the validity of some claims and rejected the validity of other claims of the ‘673 Patent, to which Ciena and other defendants filed an appeal. On March 16, 2012, the PTO on appeal rejected multiple claims of the ‘673 Patent, including the two claims on which Ciena is alleged to infringe. Thereafter, on May 28, 2013, the plaintiff filed an amendment with the PTO in which it canceled the claims of the ‘673 Patent on which Ciena is alleged to infringe. The case currently remains stayed, and there can be no assurance as to whether or when the stay will be lifted. In addition to the matters described above, Ciena is subject to various legal proceedings and claims arising in the ordinary course of business, including claims against third parties that may involve contractual indemnification obligations on the part of Ciena. Ciena does not expect that the ultimate costs to resolve these matters will have a material effect on its results of operations, financial position or cash flows. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 9 Months Ended |
Jul. 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | SUBSEQUENT EVENT On August 2, 2017, Ciena completed its offer to exchange its outstanding 3.75% Convertible Senior Notes due 2018 (the “Original Notes”) for a new series of 3.75% Convertible Senior Notes due 2018 (the “New Notes”) and an exchange fee of $2.50 per $1,000 original principal amount. The New Notes give Ciena the option, at its election, to settle conversions of such notes for cash, shares of its common stock, or a combination of cash and shares. Through these cash settlement options, Ciena believes that it will gain additional flexibility to better manage its long-term capital structure and reduce the dilutive impact of its convertible notes upon stockholders. It is Ciena’s current intent that upon any conversion of the New Notes, Ciena will settle the principal amount thereof in cash. Accordingly, beginning in the fourth quarter of fiscal 2017, Ciena intends to use the treasury stock method for the New Notes in its diluted earnings per share calculation. Following settlement of the exchange, $61.3 million in aggregate principal amount at maturity of Original Notes and $288.7 million in aggregate principal amount at maturity of the New Notes were outstanding. |
SIGNIFICANT ACCOUNTING POLICI29
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Jul. 31, 2017 | |
Accounting Policies [Abstract] | |
Business Combinations | Ciena records acquisitions using the purchase method of accounting. All of the assets acquired, liabilities assumed, contractual contingencies and contingent consideration are recognized at their fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and net intangible assets acquired is recorded as goodwill. The application of the purchase method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to allocate purchase price consideration properly between assets that are depreciated and amortized from goodwill. These assumptions and estimates include a market participant's use of the asset and the appropriate discount rates for a market participant. Ciena's estimates are based on historical experience, information obtained from the management of the acquired companies and, when appropriate, include assistance from independent third-party appraisal firms. Significant assumptions and estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. In addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates. |
Use of Estimates | The preparation of the financial statements and related disclosures in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are used for selling prices for multiple element arrangements, share-based compensation, convertible notes payable valuations, bad debts, valuation of inventories and investments, recoverability of intangible assets, other long-lived assets and goodwill, income taxes, warranty obligations, restructuring liabilities, derivatives, incentive compensation, contingencies and litigation. Ciena bases its estimates on historical experience and assumptions that it believes are reasonable. Actual results may differ materially from management’s estimates. |
Cash and Cash Equivalents | Ciena considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Any restricted cash collateralizing letters of credit is included either in other current assets or in other long-term assets depending upon the duration of the restriction. |
Investments | Ciena's investments are classified as available-for-sale and are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Ciena recognizes losses in the income statement when it determines that a decline in the fair value of any investment below its cost basis is other-than-temporary. In determining whether a decline in fair value is other-than-temporary, Ciena considers various factors, including market price (when available), investment ratings, the financial condition and near-term prospects of the investee, the length of time and the extent to which the fair value has been less than Ciena's cost basis, and Ciena's intent and ability to hold the investment until maturity or for a period of time sufficient to allow for any anticipated recovery in market value. Ciena considers all marketable debt securities that it expects to convert to cash within one year or less to be short-term investments, with all others considered to be long-term investments. Ciena has minority equity investments in privately held technology companies that are classified in other long-term assets. These investments are carried at cost because Ciena owns less than 20% of the voting equity and does not have the ability to exercise significant influence over the companies. Ciena monitors these investments for impairment and makes appropriate reductions to the carrying value when necessary. As of July 31, 2017 , the combined carrying value of these investments was $6.0 million . Ciena has not estimated the fair value of these cost method investments because determining the fair value is not practicable. Ciena has not evaluated these investments for impairment as there have not been any events or changes in circumstances that Ciena believes would have had a significant adverse effect on the fair value of these investments. |
Inventories | Inventories are stated at the lower of cost or market, with cost computed using standard cost, which approximates actual cost, on a first-in, first-out basis. Ciena records a provision for excess and obsolete inventory when an impairment has been identified. |
Segment Reporting | Ciena's chief operating decision maker, its chief executive officer, evaluates the Company's performance and allocates resources based on multiple factors, including measures of segment profit (loss). Operating segments are defined as components of an enterprise that engage in business activities that may earn revenue and incur expense, for which discrete financial information is available, and for which such information is evaluated regularly by the chief operating decision maker for purposes of allocating resources and assessing performance. Ciena considers the following to be its operating segments for reporting purposes: (i) Networking Platforms, (ii) Software and Software-Related Services, and (iii) Global Services. |
Goodwill | Goodwill is the excess of the purchase price over the fair values assigned to the net assets acquired in a business combination. Ciena tests goodwill for impairment on an annual basis, which it has determined to be the last business day of fiscal September each year. Ciena also tests goodwill for impairment between annual tests if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. The first step in the process of assessing goodwill impairment is to compare the fair value of the reporting unit with the unit’s carrying amount, including goodwill. If this test indicates that the fair value is less than the carrying value, then step two as amended by Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2017-04, Simplifying the Test for Goodwill Impairment, adopted by Ciena in the first quarter of fiscal 2017, requires goodwill impairments to be measured on the basis of the fair value of the reporting unit relative to the reporting unit's carrying amount. A non-cash goodwill impairment charge would have the effect of decreasing earnings or increasing losses in such period. If Ciena is required to take a substantial impairment charge, its operating results would be materially adversely affected in such period. |
Long-lived Assets | Long-lived assets include: equipment, building, furniture and fixtures; intangible assets; and maintenance spares. Ciena tests long-lived assets for impairment whenever triggering events or changes in circumstances indicate that the asset's carrying amount is not recoverable from its undiscounted cash flows. An impairment loss is measured as the amount by which the carrying amount of the asset or asset group exceeds its fair value. Ciena's long-lived assets are assigned to asset groups that represent the lowest level for which cash flows can be identified. |
Equipment, Building, Furniture and Fixtures | Equipment, building, furniture and fixtures are recorded at cost. Depreciation and amortization are computed using the straight-line method over useful lives of two to five years for equipment and furniture and fixtures and the shorter of useful life or lease term for leasehold improvements. Ciena establishes assets and liabilities for the estimated construction costs incurred under build-to-suit lease arrangements to the extent that Ciena is involved in the construction of structural improvements or takes construction risk prior to commencement of a lease. |
Internal Use Software | Qualifying internal use software and website development costs incurred during the application development stage, which consist primarily of outside services and purchased software license costs, are capitalized and amortized straight-line over the estimated useful lives of two to five years. |
Intangible Assets | Ciena has recorded finite-lived intangible assets as a result of several acquisitions. Finite-lived intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over the expected economic lives of the respective assets, up to seven years, which approximates the use of intangible assets. Ciena has recorded in-process research and development projects acquired as the result of an acquisition as indefinite-lived intangible assets. Upon completion of the projects, the assets will be amortized on a straight-line basis over the expected economic life of the asset, which will be determined on that date. Should the project be determined to be abandoned, and the asset developed has no alternative use, the full value of the asset will be charged to expense. |
Maintenance Spares | Maintenance spares are recorded at cost. Spares usage cost is expensed ratably over four years. |
Concentrations | Substantially all of Ciena's cash and cash equivalents are maintained at a small number of major U.S. financial institutions. The majority of Ciena's cash equivalents consist of money market funds. Deposits held with banks may exceed the amount of insurance provided on such deposits. Because these deposits generally may be redeemed upon demand, management believes that they bear minimal risk. Historically, a significant percentage of Ciena's revenue has been concentrated among sales to a small number of large communications service providers. Consolidation among Ciena's customers has increased this concentration. Consequently, Ciena's accounts receivable are concentrated among these customers. See Note 20 below. Additionally, Ciena's access to certain materials or components is dependent upon sole or limited source suppliers. The inability of any of these suppliers to fulfill Ciena's supply requirements, or significant changes in supply cost, could affect future results. Ciena relies on a small number of contract manufacturers to perform the majority of the manufacturing for its products. If Ciena cannot effectively manage these manufacturers or forecast future demand, or if these manufacturers fail to deliver products or components on time, Ciena's business and results of operations may suffer. |
Revenue Recognition | Ciena recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectibility is reasonably assured. Customer purchase agreements and customer purchase orders are generally used to determine the existence of an arrangement. Shipping documents and evidence of customer acceptance, when applicable, are used to verify delivery or services rendered. Ciena assesses whether the price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Ciena assesses collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer's payment history. Revenue for maintenance services is deferred and recognized ratably over the period during which the services are performed. Shipping and handling fees billed to customers are included in revenue, with the associated expenses included in product cost of goods sold. Software revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. In instances where final acceptance criteria of the software are specified by the customer, revenue is deferred until there are no uncertainties regarding customer acceptance. Ciena limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or refund privileges. Revenue for multiple element arrangements is allocated to each unit of accounting based on the relative selling price of each delivered element, with revenue recognized for each delivered element when the revenue recognition criteria are met. Ciena determines the selling price for each deliverable based upon the selling price hierarchy for multiple-deliverable arrangements. Under this hierarchy, Ciena uses vendor-specific objective evidence ("VSOE") of selling price, if it exists, or third party evidence ("TPE") of selling price if VSOE does not exist. If neither VSOE nor TPE of selling price exists for a deliverable, Ciena uses its best estimate of selling price ("BESP") for that deliverable. For multiple element software arrangements where VSOE of undelivered maintenance does not exist, revenue for the entire arrangement is recognized over the maintenance term. VSOE, when determinable, is established based on Ciena's pricing and discounting practices for the specific product or service when sold separately. In determining whether VSOE exists, Ciena requires that a substantial majority of the selling prices for a product or service falls within a reasonably narrow pricing range. Ciena has been unable to establish TPE of selling price because its go-to-market strategy differs from that of others in its markets, and the extent of customization and differentiated features and functions varies among comparable products or services from its peers. Ciena determines BESP based upon management-approved pricing guidelines, which consider multiple factors including the type of product or service, gross margin objectives, competitive and market conditions, and the go-to-market strategy, all of which can affect pricing practices. |
Warranty Accruals | Ciena provides for the estimated costs to fulfill customer warranty obligations upon recognition of the related revenue. Estimated warranty costs include estimates for material costs, technical support labor costs and associated overhead. Warranty is included in cost of goods sold and is determined based upon actual warranty cost experience, estimates of component failure rates and management's industry experience. Ciena's sales contracts do not permit the right of return of the product by the customer after the product has been accepted. |
Accounts Receivable, Net | Ciena's allowance for doubtful accounts is based on its assessment, on a specific identification basis, of the collectibility of customer accounts. Ciena performs ongoing credit evaluations of its customers and generally has not required collateral or other forms of security from them. In determining the appropriate balance for Ciena's allowance for doubtful accounts, management considers each individual customer account receivable in order to determine collectibility. In doing so, management considers creditworthiness, payment history, account activity and communication with the customer. If a customer's financial condition changes, Ciena may be required to record an allowance for doubtful accounts for that customer, which could negatively affect its results of operations. |
Research and Development | Ciena charges all research and development costs to expense as incurred. Types of expense incurred in research and development include employee compensation, prototype equipment, consulting and third party services, depreciation, facility costs and information technology. |
Advertising Costs | Ciena expenses all advertising costs as incurred. |
Legal Costs | Ciena expenses legal costs associated with litigation as incurred. |
Share-Based Compensation Expense | Ciena measures and recognizes compensation expense for share-based awards based on estimated fair values on the date of grant. Ciena estimates the fair value of each option-based award on the date of grant using the Black-Scholes option-pricing model. This model is affected by Ciena's stock price as well as estimates regarding a number of variables, including expected stock price volatility over the expected term of the award and projected employee stock option exercise behaviors. Ciena estimates the fair value of each restricted stock unit award based on the fair value of the underlying common stock on the date of grant. In each case, Ciena only recognizes expense in its Condensed Consolidated Statement of Operations for those stock options or restricted stock units that are expected ultimately to vest. Ciena recognizes the estimated fair value of performance-based awards, net of estimated forfeitures, as share-based expense over the performance period, using graded vesting, which considers each performance period or tranche separately, based upon Ciena's determination of whether it is probable that the performance targets will be achieved. At the end of each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets, and the expense is adjusted accordingly. Ciena uses the straight-line method to record expense for share-based awards with only service-based vesting. |
Income Taxes | Ciena accounts for income taxes using an asset and liability approach. This approach recognizes deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, and for operating loss and tax credit carryforwards. In estimating future tax consequences, Ciena considers all expected future events other than the enactment of changes in tax laws or rates. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the ordinary course of business, transactions occur for which the ultimate outcome may be uncertain. In addition, tax authorities periodically audit Ciena’s income tax returns. These audits examine significant tax filing positions, including the timing and amounts of deductions and the allocation of income tax expenses among tax jurisdictions. Ciena is currently under audit in India for 2012 through 2014 and in Canada for 2011 through 2013. Management does not expect the outcome of these audits to have a material adverse effect on Ciena’s consolidated financial position, results of operations or cash flows. Ciena’s major tax jurisdictions and the earliest open tax years are as follows: United States (2014), United Kingdom (2014), Canada (2011), India (2012) and Brazil (2012). Limited adjustments can be made to Federal U.S. tax returns in earlier years in order to reduce net operating loss carryforwards. Ciena classifies interest and penalties related to uncertain tax positions as a component of income tax expense. Ciena has not provided for U.S. deferred income taxes on the cumulative unremitted earnings of its non-U.S. affiliates, as it plans to indefinitely reinvest cumulative unremitted foreign earnings outside the U.S., and it is not practicable to determine the unrecognized deferred income taxes. These cumulative unremitted foreign earnings relate to ongoing operations in foreign jurisdictions and are required to fund foreign operations, capital expenditures and future expansion requirements. Ciena recognizes windfall tax benefits associated with the exercise of stock options or release of restricted stock units directly to stockholders’ equity only when realized. A windfall tax benefit occurs when the actual tax benefit realized by Ciena upon an employee’s disposition of a share-based award exceeds the deferred tax asset, if any, associated with the award that Ciena had recorded. When assessing whether a tax benefit relating to share-based compensation has been realized, Ciena follows the “with-and-without” method. Under the with-and-without method, the windfall is considered realized and recognized for financial statement purposes only when an incremental benefit is provided after considering all other tax benefits including Ciena’s net operating losses. The with-and-without method results in the windfall from share-based compensation awards always being effectively the last tax benefit to be considered. Consequently, the windfall attributable to share-based compensation will not be considered realized in instances where Ciena’s net operating loss carryover (that is unrelated to windfalls) is sufficient to offset the current year’s taxable income before considering the effects of current-year windfalls. |
Loss Contingencies | Ciena is subject to the possibility of various losses arising in the ordinary course of business. These may relate to disputes, litigation and other legal actions. Ciena considers the likelihood of loss or the incurrence of a liability, as well as Ciena's ability to estimate the amount of loss reasonably, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Ciena regularly evaluates current information available to it in order to determine whether any accruals should be adjusted and whether new accruals are required. |
Fair Value of Financial Instruments | The carrying value of Ciena's cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair market value due to the relatively short period of time to maturity. For information related to the fair value of Ciena's convertible notes and term loans, see Note 16 below. Fair value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Ciena utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy prioritizes the inputs into three broad levels as follows: • Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities; • Level 2 inputs are quoted prices for identical or similar assets or liabilities in less active markets or model-derived valuations in which significant inputs are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and • Level 3 inputs are unobservable inputs based on Ciena's assumptions used to measure assets and liabilities at fair value. By distinguishing between inputs that are observable in the marketplace, and therefore more objective, and those that are unobservable, and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements. A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. |
Restructuring | From time to time, Ciena takes actions to better align its workforce, facilities and operating costs with perceived market opportunities, business strategies and changes in market and business conditions. Ciena recognizes a liability for the cost associated with an exit or disposal activity in the period in which the liability is incurred, except for one-time employee termination benefits related to a service period, typically of more than 60 days , which are accrued over the service period. |
Foreign Currency | Certain of Ciena's foreign branch offices and subsidiaries use the U.S. Dollar as their functional currency because Ciena Corporation, as the U.S. parent entity, exclusively funds the operations of these branch offices and subsidiaries. For those subsidiaries using the local currency as their functional currency, assets and liabilities are translated at exchange rates in effect at the balance sheet date, and the statement of operations is translated at a monthly average rate. Resulting translation adjustments are recorded directly to a separate component of stockholders' equity. Where the monetary assets and liabilities are transacted in a currency other than the entity's functional currency, re-measurement adjustments are recorded in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. |
Derivatives | From time to time, Ciena uses foreign currency forward contracts to reduce variability in certain forecasted non-U.S. Dollar denominated cash flows. Generally, these derivatives have maturities of 12 months or less. Ciena also has interest rate hedge arrangements to reduce variability in certain forecasted interest expense associated with its term loans. All of these derivatives are designated as cash flow hedges. At the inception of the cash flow hedge, and on an ongoing basis, Ciena assesses whether the derivative has been effective in offsetting changes in cash flows attributable to the hedged risk during the hedging period. The effective portion of the derivative's net gain or loss is initially reported as a component of accumulated other comprehensive income (loss), and, upon occurrence of the forecasted transaction, is subsequently reclassified to the line item in the Condensed Consolidated Statement of Operations to which the hedged transaction relates. Any net gain or loss associated with the ineffectiveness of the hedging instrument is reported in interest and other income (loss), net. To date, no ineffectiveness has occurred. Ciena records derivative instruments in the Condensed Consolidated Statements of Cash Flows within operating, investing, or financing activities consistent with the cash flows of the hedged items. From time to time, Ciena uses foreign currency forward contracts to hedge certain balance sheet exposures. These forward contracts are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. |
Computation of Net Income (Loss) per Share | Ciena calculates basic earnings per share ("EPS") by dividing earnings attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted EPS includes other potential dilutive shares that would be outstanding if securities or other contracts to issue common stock were exercised or converted into common stock. Ciena uses a dual presentation of basic and diluted EPS on the face of its income statement. |
Software Development Costs | Ciena develops software for sale to its customers. GAAP requires the capitalization of certain software development costs that are incurred subsequent to the date technological feasibility is established and prior to the date the product is generally available for sale. The capitalized cost is then amortized straight-line over the estimated life of the product. Ciena defines technological feasibility as being attained at the time a working model is completed. To date, the period between Ciena achieving technological feasibility and the general availability of such software has been short, and software development cost qualifying for capitalization has been insignificant. Accordingly, Ciena has not capitalized any software development costs. |
Newly Issued Accounting Standards - Effective and Not Yet Effective | In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03") . ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. ASU 2015-03 is to be applied on a retrospective basis and represents a change in accounting principle. In August 2015, the FASB issued Accounting Standards Update No. 2015-15, “Interest — Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements — Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting” (“ASU 2015-15”), which clarifies the treatment of debt issuance costs from line-of-credit arrangements after the adoption of ASU 2015-03. In particular, ASU 2015-15 clarifies that the SEC staff would not object to an entity deferring and presenting debt issuance costs related to a line-of-credit arrangement as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of such arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Ciena adopted these ASU's during the first quarter of fiscal 2017. The adoption of ASU 2015-03 resulted in the reclassification of unamortized debt issuance costs related to Ciena's convertible notes and term loans from other long-term assets to current portion of long-term debt and long-term debt, net in Ciena's Consolidated Balance sheets in the amount of $5.8 million at July 31, 2017 and $8.9 million at October 31, 2016. As permitted by ASU 2015-15, Ciena elected not to reclassify unamortized debt issuance costs associated with its ABL Credit Facility (described in Note 17 below) and to continue to present such capitalized costs in other assets. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. ASU 2017-04 requires goodwill impairments to be measured on the basis of the fair value of the reporting unit relative to the reporting unit's carrying amount rather than on the basis of the implied amount of goodwill relative to the goodwill balance of the reporting unit. ASU 2017-04 is effective for annual and interim impairment tests for periods beginning after December 15, 2021. Early adoption is allowed for annual and interim impairment tests occurring after January 1, 2017. Ciena elected to adopt ASU 2017-04 during the first quarter of fiscal 2017. Newly Issued Accounting Standards - Not Yet Effective In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") , which provides guidance for revenue recognition. This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts . For multiple element software arrangements where VSOE of undelivered maintenance does not exist, Ciena currently recognizes revenue for the entire arrangement over the maintenance term. Ciena expects that the adoption of this ASU will require that it determine the stand alone selling price for each of the elements at the contract inception, and Ciena consequently expects certain software deliverables will be recognized at a point in time rather than over a period of time. Ciena also expects certain installation and deployment and consulting and network design services will be recognized over a period of time rather than at a point in time. Ciena has considered the impact of the guidance in ASC 340-40, Other Assets and Deferred Costs; Contracts with Customers , and the interpretations of the FASB Transition Resource Group for Revenue Recognition (TRG) with respect to capitalization and amortization of incremental costs of obtaining a contract. In conjunction with this interpretation, Ciena has elected to implement the practical expedient clause allowing for incremental costs to be recognized as an expense when incurred if the period of the asset recognition is one year or less and amortized over the period of performance if the period of the asset recognition is greater than one year. Ciena expects to implement this standard using the modified retrospective approach whereby the cumulative effect at adoption will be an adjustment to the opening balance of retained earnings. The comparative information will not be restated and will continue to be reported under the accounting standards in effect for those periods. ASU 2014-09 will be effective for Ciena beginning in the first quarter of fiscal 2019. Ciena is continuing to evaluate other possible impacts of the adoption of this ASU on its Consolidated Financial Statements and disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases ("ASU 2016-02") , which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and to provide additional disclosures. ASU 2016-02 is effective for Ciena beginning in the first quarter of fiscal 2020. Under current GAAP, the majority of Ciena’s leases for its properties are considered operating leases, and Ciena expects that the adoption of this ASU will require these leases to be classified as financing leases and to be recognized as assets and liabilities on Ciena’s balance sheet. Ciena is continuing to evaluate other possible impacts of the adoption of this ASU on its Consolidated Financial Statements and disclosures. In March 2016, the FASB issued ASU No. 2016-09 ("ASU 2016-09") , Improvements to Employee Share-Based Payment Accounting , which provides guidance on several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. ASU 2016-09 is effective for Ciena beginning in the first quarter of fiscal 2018. Under the new guidance, Ciena would recognize all excess tax benefits previously unrecognized, along with any related valuation allowance, on a modified retrospective basis as a cumulative-effect adjustment to retained earnings as of the date of adoption of this updated standard. Additionally, the consolidated statements of cash flows will include excess tax benefits as an operating activity, with the prior periods adjusted accordingly, as a result of the adoption. Finally, Ciena will elect to continue to estimate expected forfeitures rather than account for forfeitures as they occur. In January 2017, the FASB issued ASU No. 2017-01 ("ASU 2017-01") , Business Combinations: Clarifying the Definition of a Business , which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition or disposal of assets or businesses. The amendments in this update provide a screen to determine when a set of assets is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. ASU 2017-01 is effective for Ciena beginning first quarter of fiscal 2018. Ciena will evaluate the effect of the update at the time of any future acquisition or disposal. In August 2017, the FASB issued ASU No. 2017-12 ("ASU 2017-12") , Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities , which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The amendments in this update better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and presentation of hedge results. ASU 2017-12 is effective for Ciena beginning in the first quarter of fiscal 2020. Ciena is evaluating the effect of the update on its Consolidated Financial Statements and disclosures. |
RESTRUCTURING COSTS (Tables)
RESTRUCTURING COSTS (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Restructuring and Related Activities [Abstract] | |
Activity and balance of the restructuring liability accounts | The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the nine months ended July 31, 2017 (in thousands): Workforce reduction Consolidation of excess facilities Total Balance at October 31, 2016 $ 868 $ 1,970 $ 2,838 Additional liability recorded 3,967 (1) 4,907 (2) 8,874 Cash payments (3,370 ) (2,679 ) (6,049 ) Balance at July 31, 2017 $ 1,465 $ 4,198 $ 5,663 Current restructuring liabilities $ 1,465 $ 4,198 $ 5,663 Non-current restructuring liabilities $ — $ — $ — (1) Reflects a global workforce reduction of approximately 60 employees during fiscal 2017 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes and systems. (2) Reflects unfavorable lease commitments and relocation costs incurred during fiscal 2017 in connection with the facility transition from Ciena's existing research and development center located at Lab 10 on the former Nortel Carling Campus to a new campus facility in Ottawa, Canada. The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the nine months ended July 31, 2016 (in thousands): Workforce reduction Consolidation of excess facilities Total Balance at October 31, 2015 $ 591 $ 688 $ 1,279 Additional liability recorded 2,067 (9 ) 2,058 Cash payments (1,736 ) (316 ) (2,052 ) Balance at July 31, 2016 $ 922 $ 363 $ 1,285 Current restructuring liabilities $ 922 $ 363 $ 1,285 Non-current restructuring liabilities $ — $ — $ — |
INTEREST AND OTHER INCOME (LO31
INTEREST AND OTHER INCOME (LOSS), NET (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Other Income and Expenses [Abstract] | |
Schedule of interest and other income (loss), net | The components of interest and other income (loss), net, are as follows (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Interest income $ 1,820 $ 1,250 $ 4,609 $ 2,918 Gains (losses) on non-hedge designated foreign currency forward contracts 834 (4,787 ) (891 ) (20,000 ) Foreign currency exchange gain (loss) (2,946 ) (839 ) (4,071 ) 5,291 Modification of term loan — — (2,924 ) — Other (556 ) 729 (119 ) 335 Interest and other income (loss), net $ (848 ) $ (3,647 ) $ (3,396 ) $ (11,456 ) |
SHORT-TERM AND LONG-TERM INVE32
SHORT-TERM AND LONG-TERM INVESTMENTS (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |
Short-term and long-term investments | As of the dates indicated, investments are comprised of the following (in thousands): July 31, 2017 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. government obligations: Included in short-term investments $ 225,032 $ — (272 ) $ 224,760 Included in long-term investments 59,976 — (102 ) 59,874 $ 285,008 $ — $ (374 ) $ 284,634 Commercial paper: Included in short-term investments $ 9,983 — — $ 9,983 $ 9,983 $ — $ — $ 9,983 October 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. government obligations: Included in short-term investments $ 260,125 $ 140 $ (6 ) $ 260,259 Included in long-term investments 90,145 57 (30 ) 90,172 $ 350,270 $ 197 $ (36 ) $ 350,431 Commercial paper: Included in short-term investments $ 14,989 — — $ 14,989 $ 14,989 $ — $ — $ 14,989 |
Legal maturities of debt investments | The following table summarizes the final legal maturities of debt investments at July 31, 2017 (in thousands): Amortized Cost Estimated Fair Value Less than one year $ 235,015 $ 234,743 Due in 1-2 years 59,976 59,874 $ 294,991 $ 294,617 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Summary of the fair value of assets and liabilities recorded on a recurring basis | As of the date indicated, the following table summarizes the assets and liabilities that are recorded at fair value on a recurring basis (in thousands): July 31, 2017 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 392,351 $ — $ — $ 392,351 U.S. government obligations — 284,634 — 284,634 Commercial paper — 89,887 — 89,887 Foreign currency forward contracts — 1,811 — 1,811 Total assets measured at fair value $ 392,351 $ 376,332 $ — $ 768,683 Liabilities: Foreign currency forward contracts $ — $ 229 $ — $ 229 Forward starting interest rate swap — 1,396 — 1,396 Total liabilities measured at fair value $ — $ 1,625 $ — $ 1,625 October 31, 2016 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 625,277 $ — $ — $ 625,277 U.S. government obligations — 350,431 — 350,431 Commercial paper — 69,959 — 69,959 Foreign currency forward contracts — 175 — 175 Total assets measured at fair value $ 625,277 $ 420,565 $ — $ 1,045,842 Liabilities: Foreign currency forward contracts $ — $ 1,396 $ — $ 1,396 Forward starting interest rate swap — 5,967 — 5,967 Total liabilities measured at fair value $ — $ 7,363 $ — $ 7,363 |
Assets and liabilities as presented on Ciena's Condensed Consolidated Balance Sheets | As of the date indicated, the assets and liabilities above are presented on Ciena’s Condensed Consolidated Balance Sheet as follows (in thousands): July 31, 2017 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 392,351 $ 79,904 $ — $ 472,255 Short-term investments — 234,743 — 234,743 Prepaid expenses and other — 1,811 — 1,811 Long-term investments — 59,874 — 59,874 Total assets measured at fair value $ 392,351 $ 376,332 $ — $ 768,683 Liabilities: Accrued liabilities $ — $ 229 $ — $ 229 Other long-term obligations — 1,396 — 1,396 Total liabilities measured at fair value $ — $ 1,625 $ — $ 1,625 October 31, 2016 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 625,277 $ 54,970 $ — $ 680,247 Short-term investments — 275,248 — 275,248 Prepaid expenses and other — 175 — 175 Long-term investments — 90,172 — 90,172 Total assets measured at fair value $ 625,277 $ 420,565 $ — $ 1,045,842 Liabilities: Accrued liabilities $ — $ 1,396 $ — $ 1,396 Other long-term obligations — 5,967 — 5,967 Total liabilities measured at fair value $ — $ 7,363 $ — $ 7,363 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | As of the dates indicated, inventories are comprised of the following (in thousands): July 31, October 31, Raw materials $ 46,857 $ 44,644 Work-in-process 16,172 12,852 Finished goods 179,394 156,402 Deferred cost of goods sold 90,157 59,856 332,580 273,754 Provision for excess and obsolescence (56,159 ) (62,503 ) $ 276,421 $ 211,251 |
PREPAID EXPENSES AND OTHER (Tab
PREPAID EXPENSES AND OTHER (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid expenses and other | As of the dates indicated, prepaid expenses and other are comprised of the following (in thousands): July 31, October 31, Prepaid VAT and other taxes $ 92,998 $ 77,474 Product demonstration equipment, net 42,881 42,259 Deferred deployment expense 28,028 19,138 Prepaid expenses 25,229 25,659 Other non-trade receivables 6,847 4,398 Financing receivable 1,395 3,740 Derivative assets 1,811 175 $ 199,189 $ 172,843 |
EQUIPMENT, BUILDING, FURNITUR36
EQUIPMENT, BUILDING, FURNITURE AND FIXTURES (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Equipment, building, furniture and fixtures | As of the dates indicated, equipment, building, furniture and fixtures are comprised of the following (in thousands): July 31, October 31, Equipment, furniture and fixtures $ 483,482 $ 451,029 Building subject to capital lease 79,002 22,529 Construction in progress subject to build-to-suit lease — 57,602 Leasehold improvements 86,617 60,011 649,101 591,171 Accumulated depreciation and amortization (334,251 ) (302,765 ) $ 314,850 $ 288,406 |
OTHER INTANGIBLE ASSETS (Tables
OTHER INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Schedule of indefinite-lived intangible assets | As of the dates indicated, other intangible assets are comprised of the following (in thousands): July 31, 2017 October 31, 2016 Gross Intangible Accumulated Amortization Net Intangible Gross Intangible Accumulated Amortization Net Intangible Developed technology $ 341,255 $ (262,308 ) $ 78,947 $ 347,727 $ (248,128 ) $ 99,599 In-process research and development 671 — 671 4,200 — 4,200 Patents and licenses 7,165 (6,473 ) 692 7,165 (6,285 ) 880 Customer relationships, covenants not to compete, outstanding purchase orders and contracts 334,642 (307,962 ) 26,680 358,647 (316,615 ) 42,032 Total other intangible assets $ 683,733 $ (576,743 ) $ 106,990 $ 717,739 $ (571,028 ) $ 146,711 |
Schedule of finite-lived intangible assets | As of the dates indicated, other intangible assets are comprised of the following (in thousands): July 31, 2017 October 31, 2016 Gross Intangible Accumulated Amortization Net Intangible Gross Intangible Accumulated Amortization Net Intangible Developed technology $ 341,255 $ (262,308 ) $ 78,947 $ 347,727 $ (248,128 ) $ 99,599 In-process research and development 671 — 671 4,200 — 4,200 Patents and licenses 7,165 (6,473 ) 692 7,165 (6,285 ) 880 Customer relationships, covenants not to compete, outstanding purchase orders and contracts 334,642 (307,962 ) 26,680 358,647 (316,615 ) 42,032 Total other intangible assets $ 683,733 $ (576,743 ) $ 106,990 $ 717,739 $ (571,028 ) $ 146,711 |
Expected future amortization of finite-lived intangible assets | Expected future amortization of intangible assets for the fiscal years indicated is as follows (in thousands): Period ended October 31, 2017 (remaining three months) $ 5,993 2018 23,386 2019 22,839 2020 21,812 2021 18,878 Thereafter 13,411 $ 106,319 (1) (1) Does not include amortization of in-process research and development, as estimation of the timing of future amortization expense would be impractical. |
GOODWILL (Tables)
GOODWILL (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill | The following table presents the goodwill allocated to Ciena's applicable reportable segments as of the dates indicated (in thousands): Balance at October 31, 2016 Acquisitions Impairments Translation Balance at July 31, 2017 Software and Software-Related Services $ 201,428 $ — $ — $ — $ 201,428 Networking Platforms 65,546 — — 867 66,413 Total $ 266,974 $ — $ — $ 867 $ 267,841 |
OTHER BALANCE SHEET DETAILS (Ta
OTHER BALANCE SHEET DETAILS (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Balance Sheet Related Disclosures [Abstract] | |
Other long-term assets | As of the dates indicated, other long-term assets are comprised of the following (in thousands): July 31, October 31, Maintenance spares, net $ 46,576 $ 49,535 Deferred debt issuance costs, net (1) 1,122 1,363 Financing receivable 716 1,870 Other 15,556 15,352 $ 63,970 $ 68,120 (1) As described in Note 2 above, in connection with Ciena's adoption of ASU 2015-03 during the first quarter of fiscal 2017, deferred debt issuance costs associated with its convertible notes and term loans were retrospectively reclassified from other long-term assets to current portion of long-term debt and long-term debt, net on the Condensed Consolidated Balance Sheets. The deferred debt issuance costs reflected relate to Ciena's ABL Credit Facility (described in Note 17 below). The amortization of deferred debt issuance costs for Ciena's ABL Credit Facility is included in interest expense, and was $0.3 million and $0.3 million during the first nine months of fiscal 2017 and 2016 , respectively. |
Accrued liabilities | As of the dates indicated, accrued liabilities and other short-term obligations are comprised of the following (in thousands): July 31, October 31, Compensation, payroll related tax and benefits $ 94,934 $ 106,687 Warranty 44,296 52,324 Vacation 40,541 36,112 Capital lease obligations 3,784 2,321 Interest payable 5,032 4,649 Other 96,042 108,260 $ 284,629 $ 310,353 |
Accrued warranty | The following table summarizes the activity in Ciena’s accrued warranty for the fiscal periods indicated (in thousands): Nine months ended Beginning Ending July 31, Balance Provisions Settlements Balance 2016 $ 56,654 13,114 (15,289 ) $ 54,479 2017 $ 52,324 5,188 (13,216 ) $ 44,296 |
Deferred revenue | As of the dates indicated, deferred revenue is comprised of the following (in thousands): July 31, October 31, Products $ 61,913 $ 45,216 Services 135,614 137,647 197,527 182,863 Less current portion (110,629 ) (109,009 ) Long-term deferred revenue $ 86,898 $ 73,854 |
Other liabilities | As of the dates indicated, other long-term obligations are comprised of the following (in thousands): July 31, October 31, Capital lease obligations $ 76,549 $ 24,298 Income tax liability 15,621 14,122 Deferred tenant allowance 8,412 9,164 Straight-line rent 7,371 6,406 Forward starting interest rate swap 1,396 5,967 Construction liability — 57,602 Other 7,185 6,835 $ 116,534 $ 124,394 |
Future minimum lease payments under capital leases | The following is a schedule by fiscal year of future minimum lease payments under capital leases and the present value of minimum lease payments as of July 31, 2017 (in thousands): Period ended October 31, 2017 (remaining three months) $ 2,371 2018 9,486 2019 9,060 2020 8,078 2021 7,974 Thereafter 96,279 Net minimum capital lease payments 133,248 Less: Amount representing interest (52,915 ) Present value of minimum lease payments 80,333 Less: Current portion of present value of minimum lease payments (3,784 ) Long-term portion of present value of minimum lease payments $ 76,549 |
ACCUMULATED OTHER COMPREHENSI40
ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of accumulated other comprehensive income | The following table summarizes the changes in accumulated balances of other comprehensive income ("AOCI") for the nine months ended July 31, 2017 : Unrealized Unrealized Unrealized Cumulative Gain/(Loss) on Gain/(Loss) on Gain/(Loss) on Forward Foreign Currency Marketable Securities Foreign Currency Contracts Starting Interest Rate Swap Translation Adjustment Total Balance at October 31, 2016 $ 139 $ (1,091 ) $ (5,967 ) $ (17,410 ) $ (24,329 ) Other comprehensive income (loss) before reclassifications (533 ) 896 4,838 11,891 17,092 Amounts reclassified from AOCI — 2,010 (268 ) — 1,742 Balance at July 31, 2017 $ (394 ) $ 1,815 $ (1,397 ) $ (5,519 ) $ (5,495 ) The following table summarizes the changes in AOCI for the nine months ended July 31, 2016 : Unrealized Unrealized Unrealized Cumulative Gain/(Loss) on Gain/(Loss) on Gain/(Loss) on Forward Foreign Currency Marketable Securities Foreign Currency Contracts Starting Interest Rate Swap Translation Adjustment Total Balance at October 31, 2015 $ (78 ) $ (268 ) $ (5,522 ) $ (16,258 ) $ (22,126 ) Other comprehensive income (loss) before reclassifications 425 (70 ) (4,655 ) 1,969 (2,331 ) Amounts reclassified from AOCI — 588 2,479 — 3,067 Balance at July 31, 2016 $ 347 $ 250 $ (7,698 ) $ (14,289 ) $ (21,390 ) |
SHORT-TERM AND LONG-TERM DEBT (
SHORT-TERM AND LONG-TERM DEBT (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of carrying values and estimated fair values of convertible notes | The net carrying values of Ciena's term loans were comprised of the following for the fiscal periods indicated (in thousands): July 31, 2017 October 31, 2016 Term Loan Payable due July 15, 2019 $ — $ 241,359 Term Loan Payable due April 25, 2021 — 244,944 Term Loan Payable due January 30, 2022 393,674 — $ 393,674 $ 486,303 The following table sets forth the carrying value and the estimated fair value of Ciena's 2022 Term Loan (in thousands): July 31, 2017 Carrying Value (1) Fair Value (2) Term Loan Payable due January 30, 2022 $ 393,674 $ 401,993 The net carrying values of Ciena's outstanding convertible notes payable was comprised of the following for the fiscal periods indicated (in thousands): July 31, 2017 October 31, 2016 0.875% Convertible Senior Notes due June 15, 2017 $ — $ 231,240 3.75% Convertible Senior Notes due October 15, 2018 348,557 347,630 4.0% Convertible Senior Notes due December 15, 2020 193,071 188,509 $ 541,628 $ 767,379 The following table sets forth, in thousands, the net carrying value and the estimated fair value of Ciena’s outstanding issues of convertible notes as of July 31, 2017 : July 31, 2017 Net Carrying Value (1) Fair Value (2) 3.75% Convertible Senior Notes due October 15, 2018 348,557 482,825 4.0% Convertible Senior Notes due December 15, 2020 193,071 269,719 $ 541,628 $ 752,544 (1) Includes unamortized debt discount, accretion of principal and deferred debt issuance costs. (2) The convertible notes are categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its outstanding convertible notes using a market approach based upon observable inputs, such as current market transactions involving comparable securities. |
Schedule of details of convertible notes | The principal balance, unamortized debt discount, deferred debt issuance costs and net carrying value of the liability components of Ciena's 2022 Term Loan were as follows as of July 31, 2017 (in thousands): Principal Balance Unamortized Discount Deferred Debt Issuance Costs Net Carrying Value Term Loan Payable due January 30, 2022 $ 399,000 $ (2,038 ) $ (3,288 ) $393,674 The principal balance, unamortized debt discount, deferred debt issuance costs and net carrying value of the liability and equity components of Ciena's outstanding issues of convertible notes were as follows as of July 31, 2017 (in thousands): Liability Component Equity Component Principal Balance Unamortized Debt Discount Deferred Debt Issuance Costs Net Carrying Value Net Carrying Value 3.75% Convertible Senior Notes due October 15, 2018 $ 350,000 $ — $ (1,443 ) $ 348,557 $ — 4.0% Convertible Senior Notes due December 15, 2020 $ 203,996 $ (9,893 ) $ (1,032 ) $ 193,071 $ 43,131 |
EARNINGS PER SHARE CALCULATION
EARNINGS PER SHARE CALCULATION (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Earnings Per Share [Abstract] | |
Reconciliation of numerator and denominator of Basic and Diluted Earnings Per Share | The following table (in thousands except per share amounts) is a reconciliation of the numerator and denominator of the basic net income per common share (“Basic EPS”) and the diluted net income per potential common share (“Diluted EPS”). Basic EPS is computed using the weighted average number of common shares outstanding. Diluted EPS is computed using the weighted average number of the following, in each case, to the extent the effect is not anti-dilutive: (i) common shares outstanding; (ii) shares issuable upon vesting of restricted stock units; (iii) shares issuable under Ciena’s employee stock purchase plan and upon exercise of outstanding stock options, using the treasury stock method; and (iv) shares underlying Ciena’s outstanding convertible notes. Quarter Ended July 31, Nine Months Ended July 31, Numerator 2017 2016 2017 2016 Net income $ 60,010 $ 33,546 $ 101,897 $ 35,997 Add: Interest expense associated with 0.875% Convertible Senior Notes due 2017 246 1,326 1,343 — Add: Interest expense associated with 3.75% Convertible Senior Notes due 2018 3,572 3,572 10,750 — Add: Interest expense associated with 4.0% Convertible Senior Notes due 2020 3,323 — — — Net income used to calculate Diluted EPS $ 67,151 $ 38,444 $ 113,990 $ 35,997 Quarter Ended July 31, Nine Months Ended July 31, Denominator 2017 2016 2017 2016 Basic weighted average shares outstanding 142,464 138,881 141,631 137,835 Add: Shares underlying outstanding stock options and restricted stock units and issuable under employee stock purchase plan 1,386 895 1,401 1,218 Add: Shares underlying 0.875% Convertible Senior Notes due 2017 1,708 12,217 4,043 — Add: Shares underlying 3.75% Convertible Senior Notes due 2018 17,356 17,356 17,356 — Add: Shares underlying 4.0% Convertible Senior Notes due 2020 9,198 — — — Dilutive weighted average shares outstanding 172,112 169,349 164,431 139,053 Quarter Ended July 31, Nine Months Ended July 31, EPS 2017 2016 2017 2016 Basic EPS $ 0.42 $ 0.24 $ 0.72 $ 0.26 Diluted EPS $ 0.39 $ 0.23 $ 0.69 $ 0.26 |
Weighted average shares excluded from calculation of denominator for Basic and Diluted EPS | The following table summarizes the weighted average shares excluded from the calculation of the denominator for Diluted EPS due to their anti-dilutive effect for the periods indicated (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Shares underlying stock options and restricted stock units 682 2,082 988 2,089 0.875% Convertible Senior Notes due June 15, 2017 — — — 12,571 3.75% Convertible Senior Notes due October 15, 2018 — — — 17,356 4.0% Convertible Senior Notes due December 15, 2020 — 9,198 9,198 9,198 Total shares excluded due to anti-dilutive effect 682 11,280 10,186 41,214 |
SHARE-BASED COMPENSATION EXPE43
SHARE-BASED COMPENSATION EXPENSE (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of stock option activity | The following table is a summary of Ciena’s stock option activity for the period indicated (shares in thousands): Shares Underlying Options Outstanding Weighted Average Exercise Price Balance at October 31, 2016 1,387 $ 26.90 Exercised (223 ) 10.74 Canceled (270 ) 28.80 Balance at July 31, 2017 894 $ 30.35 |
Summarizes information with respect to stock options outstanding | The following table summarizes information with respect to stock options outstanding at July 31, 2017 , based on Ciena’s closing stock price on the last trading day of Ciena’s third fiscal quarter of 2017 (shares and intrinsic value in thousands): Options Outstanding at Vested Options at July 31, 2017 July 31, 2017 Number Weighted Average Remaining Weighted Number Weighted Average Remaining Weighted Range of of Contractual Average Aggregate of Contractual Average Aggregate Exercise Underlying Life Exercise Intrinsic Underlying Life Exercise Intrinsic Price Shares (Years) Price Value Shares (Years) Price Value $ 1.88 — $ 11.16 65 2.84 $ 8.66 $ 1,094 64 2.78 $ 8.64 $ 1,082 $ 11.34 — $ 17.24 178 4.84 13.44 2,130 172 4.76 13.39 2,065 $ 17.50 — $ 30.46 127 1.82 25.90 222 119 1.48 26.35 172 $ 31.93 — $ 37.10 299 1.74 35.10 — 299 1.74 35.10 — $ 37.82 — $ 55.63 225 3.92 46.17 — 224 3.91 46.19 — $ 1.88 — $ 55.63 894 3.00 $ 30.35 $ 3,446 878 2.92 $ 30.56 $ 3,319 |
Summary of restricted stock unit activity | The following table is a summary of Ciena's restricted stock unit activity for the period indicated, with the aggregate fair value of the balance outstanding at the end of each period, based on Ciena's closing stock price on the last trading day of the relevant period (shares and aggregate fair value in thousands): Restricted Stock Units Outstanding Weighted Average Grant Date Fair Value Per Share Aggregate Fair Value Balance at October 31, 2016 4,280 $ 19.96 $ 83,511 Granted 2,211 Vested (1,687 ) Canceled or forfeited (476 ) Balance at July 31, 2017 4,328 $ 21.36 $ 110,051 |
Share-based compensation expense | The following table summarizes share-based compensation expense for the periods indicated (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Product costs $ 709 $ 645 $ 1,978 $ 1,845 Service costs 619 637 1,926 1,922 Share-based compensation expense included in cost of sales 1,328 1,282 3,904 3,767 Research and development 3,139 3,479 10,001 10,698 Sales and marketing 3,242 3,590 9,628 12,248 General and administrative 4,321 4,284 13,191 14,381 Acquisition and integration costs — — — 714 Share-based compensation expense included in operating expense 10,702 11,353 32,820 38,041 Share-based compensation expense capitalized in inventory, net (17 ) (13 ) 119 24 Total share-based compensation $ 12,013 $ 12,622 $ 36,843 $ 41,832 |
SEGMENTS AND ENTITY WIDE DISC44
SEGMENTS AND ENTITY WIDE DISCLOSURES (Tables) | 9 Months Ended |
Jul. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment revenue | The table below (in thousands) sets forth Ciena’s segment revenue for the respective periods: Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Revenue: Networking Platforms Converged Packet Optical $ 506,532 $ 467,615 $ 1,421,315 $ 1,291,956 Packet Networking 82,121 63,658 220,641 180,437 Optical Transport 3,694 9,619 11,822 30,215 Total Networking Platforms 592,347 540,892 1,653,778 1,502,608 Software and Software-Related Services Software Platforms 18,395 12,558 48,587 32,409 Software-Related Services 23,856 19,011 70,760 55,059 Total Software and Software-Related Services 42,251 31,569 119,347 87,468 Global Services Maintenance Support and Training 57,902 55,996 171,133 169,123 Installation and Deployment 27,397 31,245 84,011 92,317 Consulting and Network Design 8,822 10,848 28,969 32,866 Total Global Services 94,121 98,089 284,113 294,306 Consolidated revenue $ 728,719 $ 670,550 $ 2,057,238 $ 1,884,382 |
Segment profit (loss) and the reconciliation to consolidated net income (loss) | The table below (in thousands) sets forth Ciena’s segment profit (loss) and the reconciliation to consolidated net income during the respective periods indicated: Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Segment profit (loss): Networking Platforms $ 159,649 $ 150,521 $ 423,859 $ 390,109 Software and Software-Related Services 11,133 2,412 23,384 (970 ) Global Services 39,565 38,855 116,637 114,543 Total segment profit 210,347 191,788 563,880 503,682 Less: Non-performance operating expenses Selling and marketing 86,739 83,732 260,292 252,878 General and administrative 35,569 34,336 106,423 100,681 Amortization of intangible assets 3,837 14,529 29,368 46,957 Acquisition and integration costs — 1,029 — 4,613 Restructuring costs 2,203 1,138 8,874 2,057 Add: Other non-performance financial items Interest expense and other income (loss), net (14,263 ) (19,614 ) (45,322 ) (52,741 ) Less: Provision for income taxes 7,726 3,864 11,704 7,758 Consolidated net income $ 60,010 $ 33,546 $ 101,897 $ 35,997 |
Ciena's geographic distribution of revenue and long-lived assets | For the periods below, Ciena's geographic distribution of equipment, building, furniture and fixtures was as follows (in thousands): July 31, October 31, Canada $ 208,422 $ 173,885 United States 94,790 103,018 Other International 11,638 11,503 Total $ 314,850 $ 288,406 For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 North America $ 465,238 $ 438,013 $ 1,295,539 $ 1,226,222 EMEA 96,068 104,266 293,387 281,163 CALA 51,709 46,606 120,826 148,312 APAC 115,704 81,665 347,486 228,685 Total $ 728,719 $ 670,550 $ 2,057,238 $ 1,884,382 |
Schedule of revenue by major customers by reporting segments | For the periods below, customers accounting for at least 10% of Ciena’s revenue, were as follows (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 AT&T $ 120,931 $ 105,418 $ 324,900 $ 348,032 Verizon 82,918 n/a 206,272 n/a Total $ 203,849 $ 105,418 $ 531,172 $ 348,032 n/a Denotes revenue representing less than 10% of total revenue for the period |
INTERIM FINANCIAL STATEMENTS (D
INTERIM FINANCIAL STATEMENTS (Details) | 9 Months Ended |
Jul. 31, 2017 | |
Quarterly Financial Data [Abstract] | |
Fiscal year | 52 or 53-week fiscal year |
SIGNIFICANT ACCOUNTING POLICI46
SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Millions | 9 Months Ended | |
Jul. 31, 2017 | Oct. 31, 2016 | |
Significant Accounting Policies [Line Items] | ||
Carrying value of minority equity interest | $ 6 | |
Expected economic lives of finite-lived intangible assets, maximum (in years) | 7 years | |
Expected number of years Spares usage cost is expensed (in years) | 4 years | |
One-time employee termination benefits related service period (more than 60 days) | 60 days | |
Minimum | Equipment, furniture and fixtures | ||
Significant Accounting Policies [Line Items] | ||
Estimated useful lives capitalized and amortized straight-line (in years) | 2 years | |
Minimum | Software and website development | ||
Significant Accounting Policies [Line Items] | ||
Estimated useful lives capitalized and amortized straight-line (in years) | 2 years | |
Maximum | ||
Significant Accounting Policies [Line Items] | ||
Measurement period for marketable debt securities (in years) | 1 year | |
Derivative maturity (in months) | 12 months | |
Maximum | Equipment, furniture and fixtures | ||
Significant Accounting Policies [Line Items] | ||
Estimated useful lives capitalized and amortized straight-line (in years) | 5 years | |
Maximum | Software and website development | ||
Significant Accounting Policies [Line Items] | ||
Estimated useful lives capitalized and amortized straight-line (in years) | 5 years | |
Other noncurrent assets | Accounting Standards Update 2015-03 | ||
Significant Accounting Policies [Line Items] | ||
Unamortized debt issuance costs | $ (5.8) | $ (8.9) |
Long-term debt | Accounting Standards Update 2015-03 | ||
Significant Accounting Policies [Line Items] | ||
Unamortized debt issuance costs | $ 5.8 | $ 8.9 |
RESTRUCTURING COSTS (Details)
RESTRUCTURING COSTS (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Jul. 31, 2017USD ($) | Jul. 31, 2016USD ($) | Jul. 31, 2017USD ($)employee | Jul. 31, 2016USD ($) | ||
Activity and balance of the restructuring liability accounts | |||||
Balance at beginning of period | $ 2,838 | $ 1,279 | |||
Additional liability recorded | $ 2,203 | $ 1,138 | 8,874 | 2,057 | |
Additional liability recorded | 2,058 | ||||
Cash payments | (6,049) | (2,052) | |||
Balance at end of period | 5,663 | 1,285 | 5,663 | 1,285 | |
Current restructuring liabilities | 5,663 | 1,285 | 5,663 | 1,285 | |
Non-current restructuring liabilities | 0 | 0 | $ 0 | 0 | |
Workforce reduction | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Number of employee reduction | employee | [1] | 60 | |||
Activity and balance of the restructuring liability accounts | |||||
Balance at beginning of period | $ 868 | 591 | |||
Additional liability recorded | [1] | 3,967 | |||
Additional liability recorded | 2,067 | ||||
Cash payments | (3,370) | (1,736) | |||
Balance at end of period | 1,465 | 922 | 1,465 | 922 | |
Current restructuring liabilities | 1,465 | 922 | 1,465 | 922 | |
Non-current restructuring liabilities | 0 | 0 | 0 | 0 | |
Consolidation of excess facilities | |||||
Activity and balance of the restructuring liability accounts | |||||
Balance at beginning of period | 1,970 | 688 | |||
Additional liability recorded | [2] | 4,907 | |||
Additional liability recorded | (9) | ||||
Cash payments | (2,679) | (316) | |||
Balance at end of period | 4,198 | 363 | 4,198 | 363 | |
Current restructuring liabilities | 4,198 | 363 | 4,198 | 363 | |
Non-current restructuring liabilities | $ 0 | $ 0 | $ 0 | $ 0 | |
[1] | Reflects a global workforce reduction of approximately 60 employees during fiscal 2017 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes and systems. | ||||
[2] | Reflects unfavorable lease commitments and relocation costs incurred during fiscal 2017 in connection with the facility transition from Ciena's existing research and development center located at Lab 10 on the former Nortel Carling Campus to a new campus facility in Ottawa, Canada. |
INTEREST AND OTHER INCOME (LO48
INTEREST AND OTHER INCOME (LOSS), NET (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2017 | Jul. 31, 2016 | Jul. 31, 2017 | Jul. 31, 2016 | |
Other Income and Expenses [Abstract] | ||||
Interest income | $ 1,820 | $ 1,250 | $ 4,609 | $ 2,918 |
Gains (losses) on non-hedge designated foreign currency forward contracts | 834 | (4,787) | (891) | (20,000) |
Foreign currency exchange gain (loss) | (2,946) | (839) | (4,071) | 5,291 |
Modification of term loan | 0 | 0 | (2,924) | 0 |
Other | (556) | 729 | (119) | 335 |
Interest and other income (loss), net | $ (848) | $ (3,647) | $ (3,396) | $ (11,456) |
SHORT-TERM AND LONG-TERM INVE49
SHORT-TERM AND LONG-TERM INVESTMENTS (Details) - USD ($) $ in Thousands | Jul. 31, 2017 | Oct. 31, 2016 |
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | $ 294,991 | |
Estimated Fair Value | 294,617 | |
U.S. government obligations | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 285,008 | $ 350,270 |
Gross Unrealized Gains | 0 | 197 |
Gross Unrealized Losses | (374) | (36) |
Estimated Fair Value | 284,634 | 350,431 |
U.S. government obligations | Included in short-term investments | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 225,032 | 260,125 |
Gross Unrealized Gains | 0 | 140 |
Gross Unrealized Losses | (272) | (6) |
Estimated Fair Value | 224,760 | 260,259 |
U.S. government obligations | Included in long-term investments | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 59,976 | 90,145 |
Gross Unrealized Gains | 0 | 57 |
Gross Unrealized Losses | (102) | (30) |
Estimated Fair Value | 59,874 | 90,172 |
Commercial paper | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 9,983 | 14,989 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Estimated Fair Value | 9,983 | 14,989 |
Commercial paper | Included in short-term investments | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 9,983 | 14,989 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Estimated Fair Value | $ 9,983 | $ 14,989 |
SHORT-TERM AND LONG-TERM INVE50
SHORT-TERM AND LONG-TERM INVESTMENTS (Details 2) $ in Thousands | Jul. 31, 2017USD ($) |
Legal maturities of debt investments | |
Amortized Cost, Less than one year | $ 235,015 |
Amortized Cost, Due in 1-2 years | 59,976 |
Amortized Cost | 294,991 |
Estimated Fair Value, Less than one year | 234,743 |
Estimated Fair Value, Due in 1-2 years | 59,874 |
Estimated Fair Value | $ 294,617 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands | Jul. 31, 2017 | Oct. 31, 2016 |
Assets: | ||
U.S. government obligations | $ 294,617 | |
Fair value, Measurements, Recurring | ||
Assets: | ||
Money market funds | 392,351 | $ 625,277 |
U.S. government obligations | 284,634 | 350,431 |
Commercial paper | 89,887 | 69,959 |
Foreign currency forward contracts | 1,811 | 175 |
Total assets measured at fair value | 768,683 | 1,045,842 |
Liabilities: | ||
Foreign currency forward contracts | 229 | 1,396 |
Forward starting interest rate swap | 1,396 | 5,967 |
Total liabilities measured at fair value | 1,625 | 7,363 |
Fair value, Measurements, Recurring | Level 1 | ||
Assets: | ||
Money market funds | 392,351 | 625,277 |
U.S. government obligations | 0 | 0 |
Commercial paper | 0 | 0 |
Foreign currency forward contracts | 0 | 0 |
Total assets measured at fair value | 392,351 | 625,277 |
Liabilities: | ||
Foreign currency forward contracts | 0 | 0 |
Forward starting interest rate swap | 0 | 0 |
Total liabilities measured at fair value | 0 | 0 |
Fair value, Measurements, Recurring | Level 2 | ||
Assets: | ||
Money market funds | 0 | 0 |
U.S. government obligations | 284,634 | 350,431 |
Commercial paper | 89,887 | 69,959 |
Foreign currency forward contracts | 1,811 | 175 |
Total assets measured at fair value | 376,332 | 420,565 |
Liabilities: | ||
Foreign currency forward contracts | 229 | 1,396 |
Forward starting interest rate swap | 1,396 | 5,967 |
Total liabilities measured at fair value | 1,625 | 7,363 |
Fair value, Measurements, Recurring | Level 3 | ||
Assets: | ||
Money market funds | 0 | 0 |
U.S. government obligations | 0 | 0 |
Commercial paper | 0 | 0 |
Foreign currency forward contracts | 0 | 0 |
Total assets measured at fair value | 0 | 0 |
Liabilities: | ||
Foreign currency forward contracts | 0 | 0 |
Forward starting interest rate swap | 0 | 0 |
Total liabilities measured at fair value | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS (Deta52
FAIR VALUE MEASUREMENTS (Details 2) - Fair value, Measurements, Recurring - USD ($) $ in Thousands | Jul. 31, 2017 | Oct. 31, 2016 |
Assets: | ||
Total assets measured at fair value | $ 768,683 | $ 1,045,842 |
Liabilities: | ||
Total liabilities measured at fair value | 1,625 | 7,363 |
Cash equivalents | ||
Assets: | ||
Total assets measured at fair value | 472,255 | 680,247 |
Short-term investments | ||
Assets: | ||
Total assets measured at fair value | 234,743 | 275,248 |
Prepaid expenses and other | ||
Assets: | ||
Total assets measured at fair value | 1,811 | 175 |
Long-term investments | ||
Assets: | ||
Total assets measured at fair value | 59,874 | 90,172 |
Accrued liabilities | ||
Liabilities: | ||
Total liabilities measured at fair value | 229 | 1,396 |
Other long-term obligations | ||
Liabilities: | ||
Total liabilities measured at fair value | 1,396 | 5,967 |
Level 1 | ||
Assets: | ||
Total assets measured at fair value | 392,351 | 625,277 |
Liabilities: | ||
Total liabilities measured at fair value | 0 | 0 |
Level 1 | Cash equivalents | ||
Assets: | ||
Total assets measured at fair value | 392,351 | 625,277 |
Level 1 | Short-term investments | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Level 1 | Prepaid expenses and other | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Level 1 | Long-term investments | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Level 1 | Accrued liabilities | ||
Liabilities: | ||
Total liabilities measured at fair value | 0 | 0 |
Level 1 | Other long-term obligations | ||
Liabilities: | ||
Total liabilities measured at fair value | 0 | 0 |
Level 2 | ||
Assets: | ||
Total assets measured at fair value | 376,332 | 420,565 |
Liabilities: | ||
Total liabilities measured at fair value | 1,625 | 7,363 |
Level 2 | Cash equivalents | ||
Assets: | ||
Total assets measured at fair value | 79,904 | 54,970 |
Level 2 | Short-term investments | ||
Assets: | ||
Total assets measured at fair value | 234,743 | 275,248 |
Level 2 | Prepaid expenses and other | ||
Assets: | ||
Total assets measured at fair value | 1,811 | 175 |
Level 2 | Long-term investments | ||
Assets: | ||
Total assets measured at fair value | 59,874 | 90,172 |
Level 2 | Accrued liabilities | ||
Liabilities: | ||
Total liabilities measured at fair value | 229 | 1,396 |
Level 2 | Other long-term obligations | ||
Liabilities: | ||
Total liabilities measured at fair value | 1,396 | 5,967 |
Level 3 | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Liabilities: | ||
Total liabilities measured at fair value | 0 | 0 |
Level 3 | Cash equivalents | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Level 3 | Short-term investments | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Level 3 | Prepaid expenses and other | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Level 3 | Long-term investments | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Level 3 | Accrued liabilities | ||
Liabilities: | ||
Total liabilities measured at fair value | 0 | 0 |
Level 3 | Other long-term obligations | ||
Liabilities: | ||
Total liabilities measured at fair value | $ 0 | $ 0 |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Oct. 31, 2016 | Jul. 31, 2017 | |
Concentration Risk [Line Items] | ||
Allowance for doubtful accounts | $ 4 | $ 3.6 |
Accounts receivable | Customer concentration risk | Unidentified customer one | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 10.40% | 10.30% |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Jul. 31, 2017 | Jul. 31, 2016 | Oct. 31, 2016 | |
Inventories | |||
Raw materials | $ 46,857 | $ 44,644 | |
Work-in-process | 16,172 | 12,852 | |
Finished goods | 179,394 | 156,402 | |
Deferred cost of goods sold | 90,157 | 59,856 | |
Inventories before provision | 332,580 | 273,754 | |
Provision for excess and obsolescence | (56,159) | (62,503) | |
Total inventories | 276,421 | $ 211,251 | |
Provisions | $ 28,727 | $ 26,663 |
PREPAID EXPENSES AND OTHER (Det
PREPAID EXPENSES AND OTHER (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Jul. 31, 2017 | Jul. 31, 2016 | Oct. 31, 2016 | |
Prepaid expenses and other | |||
Prepaid VAT and other taxes | $ 92,998 | $ 77,474 | |
Product demonstration equipment, net | 42,881 | 42,259 | |
Deferred deployment expense | 28,028 | 19,138 | |
Prepaid expenses | 25,229 | 25,659 | |
Other non-trade receivables | 6,847 | 4,398 | |
Financing receivable | 1,395 | 3,740 | |
Derivative assets | 1,811 | 175 | |
Prepaid expenses and other | 199,189 | $ 172,843 | |
Depreciation of product demonstration equipment | $ 7,500 | $ 8,100 |
EQUIPMENT, BUILDING, FURNITUR56
EQUIPMENT, BUILDING, FURNITURE AND FIXTURES (Details) $ in Thousands | 9 Months Ended | |||
Jul. 31, 2017USD ($) | Jul. 31, 2016USD ($) | Oct. 31, 2016USD ($) | Apr. 15, 2015buildingCAD / ft² | |
Property, Plant and Equipment, Net [Abstract] | ||||
Buildings, equipment, furniture and fixtures, gross | $ 649,101 | $ 591,171 | ||
Accumulated depreciation and amortization | (334,251) | (302,765) | ||
Buildings, equipment, furniture and fixtures, net | 314,850 | 288,406 | ||
Equipment, furniture and fixtures (Textuals) [Abstract] | ||||
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements | 55,873 | $ 46,624 | ||
Equipment, furniture and fixtures | ||||
Property, Plant and Equipment, Net [Abstract] | ||||
Buildings, equipment, furniture and fixtures, gross | 483,482 | 451,029 | ||
Building | ||||
Property, Plant and Equipment, Net [Abstract] | ||||
Buildings, equipment, furniture and fixtures, gross | 79,002 | 22,529 | ||
Equipment, furniture and fixtures (Textuals) [Abstract] | ||||
Building subject to capital lease | 50,370 | 8,993 | ||
Construction in progress subject to build-to-suit lease | ||||
Property, Plant and Equipment, Net [Abstract] | ||||
Buildings, equipment, furniture and fixtures, gross | 0 | 57,602 | ||
Equipment, furniture and fixtures (Textuals) [Abstract] | ||||
Number of buildings to be leased | building | 2 | |||
Maximum landlord contribution per rentable square feet | CAD / ft² | 290 | |||
Leasehold improvements | ||||
Property, Plant and Equipment, Net [Abstract] | ||||
Buildings, equipment, furniture and fixtures, gross | 86,617 | $ 60,011 | ||
Equipment furniture fixtures and leasehold improvements | ||||
Equipment, furniture and fixtures (Textuals) [Abstract] | ||||
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements | $ 48,300 | $ 38,500 |
OTHER INTANGIBLE ASSETS (Detail
OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Jul. 31, 2017 | Jul. 31, 2017 | Jul. 31, 2016 | Oct. 31, 2016 | ||
Other Intangible Assets | |||||
Accumulated Amortization | $ (576,743) | $ (576,743) | $ (571,028) | ||
Net Intangible | [1] | 106,319 | 106,319 | ||
Total other intangible assets, gross | 683,733 | 683,733 | 717,739 | ||
Total other intangible assets, net | 106,990 | $ 106,990 | 146,711 | ||
Other Intangible Assets (Textuals) [Abstract] | |||||
Fully amortized intangible assets eliminated from gross intangible assets and accumulated amortization | 34,000 | ||||
Expected economic lives of finite-lived intangible assets, maximum (in years) | 7 years | ||||
Aggregate amortization expense of intangible assets | $ 39,721 | $ 59,428 | |||
Expected future amortization of finite-lived intangible assets | |||||
2017 (remaining three months) | 5,993 | 5,993 | |||
2,018 | 23,386 | 23,386 | |||
2,019 | 22,839 | 22,839 | |||
2,020 | 21,812 | 21,812 | |||
2,021 | 18,878 | 18,878 | |||
Thereafter | 13,411 | 13,411 | |||
Net Intangible | [1] | 106,319 | 106,319 | ||
In-process research and development | |||||
Indefinite-lived Intangible Assets [Line Items] | |||||
Indefinite lived intangible assets | 671 | 671 | 4,200 | ||
Developed technology | |||||
Other Intangible Assets | |||||
Gross Intangible | 341,255 | 341,255 | 347,727 | ||
Accumulated Amortization | (262,308) | (262,308) | (248,128) | ||
Net Intangible | 78,947 | 78,947 | 99,599 | ||
Other Intangible Assets (Textuals) [Abstract] | |||||
Assets placed into service | 3,500 | $ 3,500 | |||
Expected economic lives of finite-lived intangible assets, maximum (in years) | 5 years | ||||
Expected future amortization of finite-lived intangible assets | |||||
Net Intangible | 78,947 | $ 78,947 | 99,599 | ||
Patents and licenses | |||||
Other Intangible Assets | |||||
Gross Intangible | 7,165 | 7,165 | 7,165 | ||
Accumulated Amortization | (6,473) | (6,473) | (6,285) | ||
Net Intangible | 692 | 692 | 880 | ||
Expected future amortization of finite-lived intangible assets | |||||
Net Intangible | 692 | 692 | 880 | ||
Customer relationships, covenants not to compete, outstanding purchase orders and contracts | |||||
Other Intangible Assets | |||||
Gross Intangible | 334,642 | 334,642 | 358,647 | ||
Accumulated Amortization | (307,962) | (307,962) | (316,615) | ||
Net Intangible | 26,680 | 26,680 | 42,032 | ||
Expected future amortization of finite-lived intangible assets | |||||
Net Intangible | $ 26,680 | $ 26,680 | $ 42,032 | ||
[1] | Does not include amortization of in-process research and development, as estimation of the timing of future amortization expense would be impractical. |
GOODWILL (Details)
GOODWILL (Details) $ in Thousands | 9 Months Ended |
Jul. 31, 2017USD ($) | |
Goodwill [Roll Forward] | |
Goodwill beginning balance | $ 266,974 |
Acquisitions | 0 |
Impairments | 0 |
Translation | 867 |
Goodwill ending balance | 267,841 |
Software and Software-Related Services | |
Goodwill [Roll Forward] | |
Goodwill beginning balance | 201,428 |
Acquisitions | 0 |
Impairments | 0 |
Translation | 0 |
Goodwill ending balance | 201,428 |
Networking Platforms | |
Goodwill [Roll Forward] | |
Goodwill beginning balance | 65,546 |
Acquisitions | 0 |
Impairments | 0 |
Translation | 867 |
Goodwill ending balance | $ 66,413 |
OTHER BALANCE SHEET DETAILS (De
OTHER BALANCE SHEET DETAILS (Details) - USD ($) $ in Thousands | 9 Months Ended | |||
Jul. 31, 2017 | Jul. 31, 2016 | Oct. 31, 2016 | ||
Other long-term assets | ||||
Maintenance spares, net | $ 46,576 | $ 49,535 | ||
Deferred debt issuance costs, net | [1] | 1,122 | 1,363 | |
Financing receivable | 716 | 1,870 | ||
Other | 15,556 | 15,352 | ||
Total other long-term assets | 63,970 | $ 68,120 | ||
Other Balance Sheet Details (Textuals) [Abstract] | ||||
Amortization of debt issuance costs included in interest expense | $ 300 | $ 300 | ||
[1] | As described in Note 2 above, in connection with Ciena's adoption of ASU 2015-03 during the first quarter of fiscal 2017, deferred debt issuance costs associated with its convertible notes and term loans were retrospectively reclassified from other long-term assets to current portion of long-term debt and long-term debt, net on the Condensed Consolidated Balance Sheets. The deferred debt issuance costs reflected relate to Ciena's ABL Credit Facility (described in Note 17 below). The amortization of deferred debt issuance costs for Ciena's ABL Credit Facility is included in interest expense, and was $0.3 million and $0.3 million during the first nine months of fiscal 2017 and 2016, respectively. |
OTHER BALANCE SHEET DETAILS (60
OTHER BALANCE SHEET DETAILS (Details 2) - USD ($) $ in Thousands | Jul. 31, 2017 | Oct. 31, 2016 | Jul. 31, 2016 | Oct. 31, 2015 |
Accrued liabilities | ||||
Compensation, payroll related tax and benefits | $ 94,934 | $ 106,687 | ||
Warranty | 44,296 | 52,324 | $ 54,479 | $ 56,654 |
Vacation | 40,541 | 36,112 | ||
Capital lease obligations | 3,784 | 2,321 | ||
Interest payable | 5,032 | 4,649 | ||
Other | 96,042 | 108,260 | ||
Total accrued liabilities and other short-term obligations | $ 284,629 | $ 310,353 |
OTHER BALANCE SHEET DETAILS (61
OTHER BALANCE SHEET DETAILS (Details 3) - USD ($) $ in Thousands | 9 Months Ended | |
Jul. 31, 2017 | Jul. 31, 2016 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Beginning balance | $ 52,324 | $ 56,654 |
Provisions | 5,188 | 13,114 |
Settlements | (13,216) | (15,289) |
Ending balance | $ 44,296 | $ 54,479 |
OTHER BALANCE SHEET DETAILS (62
OTHER BALANCE SHEET DETAILS (Details 4) - USD ($) $ in Thousands | Jul. 31, 2017 | Oct. 31, 2016 |
Deferred revenue | ||
Deferred revenue | $ 197,527 | $ 182,863 |
Less current portion | (110,629) | (109,009) |
Long-term deferred revenue | 86,898 | 73,854 |
Products | ||
Deferred revenue | ||
Deferred revenue | 61,913 | 45,216 |
Services | ||
Deferred revenue | ||
Deferred revenue | $ 135,614 | $ 137,647 |
OTHER BALANCE SHEET DETAILS (63
OTHER BALANCE SHEET DETAILS (Details 5) - USD ($) $ in Thousands | Jul. 31, 2017 | Oct. 31, 2016 |
Balance Sheet Related Disclosures [Abstract] | ||
Capital lease obligations | $ 76,549 | $ 24,298 |
Income tax liability | 15,621 | 14,122 |
Deferred tenant allowance | 8,412 | 9,164 |
Straight-line rent | 7,371 | 6,406 |
Forward starting interest rate swap | 1,396 | 5,967 |
Construction liability | 0 | 57,602 |
Other | 7,185 | 6,835 |
Total other long-term obligations | $ 116,534 | $ 124,394 |
OTHER BALANCE SHEET DETAILS (64
OTHER BALANCE SHEET DETAILS (Details 6) - USD ($) $ in Thousands | Jul. 31, 2017 | Oct. 31, 2016 |
Balance Sheet Related Disclosures [Abstract] | ||
2017 (remaining three months) | $ 2,371 | |
2,018 | 9,486 | |
2,019 | 9,060 | |
2,020 | 8,078 | |
2,021 | 7,974 | |
Thereafter | 96,279 | |
Net minimum capital lease payments | 133,248 | |
Less: Amount representing interest | (52,915) | |
Present value of minimum lease payments | 80,333 | |
Less: Current portion of present value of minimum lease payments | (3,784) | $ (2,321) |
Long-term portion of present value of minimum lease payments | $ 76,549 | $ 24,298 |
DERIVATIVE INSTRUMENTS (Details
DERIVATIVE INSTRUMENTS (Details) - USD ($) | 9 Months Ended | ||||||
Jul. 31, 2017 | Apr. 30, 2017 | Jan. 30, 2017 | Oct. 31, 2016 | May 31, 2016 | Apr. 25, 2016 | Jul. 15, 2014 | |
Maximum | |||||||
Derivative [Line Items] | |||||||
Derivative maturity (in months) | 12 months | ||||||
Secured debt | Term Loan 2022 | |||||||
Derivative [Line Items] | |||||||
Term loan principal amount | $ 400,000,000 | $ 400,000,000 | |||||
Secured debt | Term loan 2019 | |||||||
Derivative [Line Items] | |||||||
Term loan principal amount | $ 250,000,000 | ||||||
Secured debt | Term loan 2021 | |||||||
Derivative [Line Items] | |||||||
Term loan principal amount | $ 250,000,000 | ||||||
Foreign Currency Contracts | Designated as hedging instrument | Cash flow hedging | |||||||
Derivative [Line Items] | |||||||
Derivative asset, notional amount | $ 35,400,000 | $ 107,600,000 | |||||
Derivative maturity (in months) | 12 months | ||||||
Foreign Currency Contracts | Not designated as hedging instrument | |||||||
Derivative [Line Items] | |||||||
Derivative asset, notional amount | $ 86,800,000 | 59,600,000 | |||||
Derivative maturity (in months) | 12 months | ||||||
Interest Rate Swap One | Designated as hedging instrument | Cash flow hedging | Secured debt | Term Loan 2022 | |||||||
Derivative [Line Items] | |||||||
Interest rate swap fix | 98.00% | ||||||
Derivative, swaption interest rate | 4.25% | ||||||
Interest Rate Swap Two | Designated as hedging instrument | Cash flow hedging | Secured debt | Term Loan 2022 | |||||||
Derivative [Line Items] | |||||||
Interest rate swap fix | 82.00% | ||||||
Derivative, swaption interest rate | 4.25% | ||||||
Interest Rate Swap Three | Designated as hedging instrument | Cash flow hedging | Secured debt | Term Loan 2022 | |||||||
Derivative [Line Items] | |||||||
Interest rate swap fix | 77.00% | ||||||
Derivative, swaption interest rate | 4.75% | ||||||
Starting Interest Rate Swap | Designated as hedging instrument | Cash flow hedging | |||||||
Derivative [Line Items] | |||||||
Derivative asset, notional amount | 244,400,000 | ||||||
Starting Interest Rate Swap | Designated as hedging instrument | Cash flow hedging | Secured debt | Term Loan 2022 | |||||||
Derivative [Line Items] | |||||||
Derivative asset, notional amount | $ 390,600,000 | ||||||
Starting Interest Rate Swap | Designated as hedging instrument | Cash flow hedging | Secured debt | Term loan 2019 | |||||||
Derivative [Line Items] | |||||||
Derivative, swaption interest rate | 5.004% | ||||||
Starting Interest Rate Swap | Designated as hedging instrument | Cash flow hedging | Secured debt | Term loan 2021 | |||||||
Derivative [Line Items] | |||||||
Derivative asset, notional amount | $ 248,800,000 | ||||||
Starting Interest Rate Swap | Designated as hedging instrument | Cash flow hedging | Secured debt | Term loan 2021 | Minimum | |||||||
Derivative [Line Items] | |||||||
Derivative, swaption interest rate | 4.62% | ||||||
Starting Interest Rate Swap | Designated as hedging instrument | Cash flow hedging | Secured debt | Term loan 2021 | Maximum | |||||||
Derivative [Line Items] | |||||||
Derivative, swaption interest rate | 4.87% |
ACCUMULATED OTHER COMPREHENSI66
ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Jul. 31, 2017 | Jul. 31, 2016 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Accumulated other comprehensive income - beginning balance | $ 766,341 | |
Accumulated other comprehensive income - ending balance | 944,310 | |
AOCI Attributable to Parent | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Accumulated other comprehensive income - beginning balance | (24,329) | $ (22,126) |
Other comprehensive income (loss) before reclassifications | 17,092 | (2,331) |
Amounts reclassified from AOCI | 1,742 | 3,067 |
Accumulated other comprehensive income - ending balance | (5,495) | (21,390) |
Unrealized gain/(loss) on marketable securities | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Accumulated other comprehensive income - beginning balance | 139 | (78) |
Other comprehensive income (loss) before reclassifications | (533) | 425 |
Amounts reclassified from AOCI | 0 | 0 |
Accumulated other comprehensive income - ending balance | (394) | 347 |
Unrealized gain/(loss) on derivatives | Foreign Currency Contracts | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Accumulated other comprehensive income - beginning balance | (1,091) | (268) |
Other comprehensive income (loss) before reclassifications | 4,838 | (70) |
Amounts reclassified from AOCI | (268) | 588 |
Accumulated other comprehensive income - ending balance | 1,815 | 250 |
Unrealized gain/(loss) on derivatives | Starting Interest Rate Swap | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Accumulated other comprehensive income - beginning balance | (5,967) | (5,522) |
Other comprehensive income (loss) before reclassifications | 896 | (4,655) |
Amounts reclassified from AOCI | 2,010 | 2,479 |
Accumulated other comprehensive income - ending balance | (1,397) | (7,698) |
Cumulative foreign currency translation adjustment | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Accumulated other comprehensive income - beginning balance | (17,410) | (16,258) |
Other comprehensive income (loss) before reclassifications | 11,891 | 1,969 |
Amounts reclassified from AOCI | 0 | 0 |
Accumulated other comprehensive income - ending balance | $ (5,519) | $ (14,289) |
SHORT-TERM AND LONG-TERM DEBT67
SHORT-TERM AND LONG-TERM DEBT (Details) - USD ($) | Jun. 15, 2017 | Jan. 30, 2017 | Apr. 25, 2016 | Jul. 15, 2014 | Jul. 31, 2017 | Jul. 31, 2016 | Apr. 30, 2017 | Oct. 31, 2016 |
Debt Instrument [Line Items] | ||||||||
Amortization of debt issuance costs included in interest expense | $ 300,000 | $ 300,000 | ||||||
Accrued interest repaid | 33,861,000 | 31,787,000 | ||||||
0.875% Convertible Senior Notes due June 15, 2017 | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest rate on convertible notes (as a percent) | 0.875% | |||||||
Secured debt | Term Loan 2022 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt issuance costs, net | $ 2,900,000 | 3,288,000 | ||||||
Term loan principal amount | 400,000,000 | $ 400,000,000 | ||||||
Principal Balance | 399,500,000 | 399,000,000 | ||||||
Installment payments | 1,000,000 | |||||||
Original discount | $ 500,000 | 2,038,000 | ||||||
Debt instrument, prepayment premium | 1.00% | |||||||
Secured debt | Term Loan 2019 and Term Loan 2021 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt issuance costs, net | $ 3,500,000 | 3,300,000 | $ 4,900,000 | |||||
Amortization of debt issuance costs included in interest expense | 700,000 | 800,000 | ||||||
Repurchased face amount | 493,100,000 | |||||||
Original discount | $ 1,700,000 | |||||||
Secured debt | Term loan 2019 | ||||||||
Debt Instrument [Line Items] | ||||||||
Term loan principal amount | $ 250,000,000 | |||||||
Installment payments | $ 600,000 | |||||||
Secured debt | Term loan 2021 | ||||||||
Debt Instrument [Line Items] | ||||||||
Term loan principal amount | $ 250,000,000 | |||||||
Installment payments | $ 600,000 | |||||||
Secured debt | 0.875% Convertible Senior Notes due June 15, 2017 | ||||||||
Debt Instrument [Line Items] | ||||||||
Repurchased face amount | $ 185,300,000 | |||||||
Accrued interest repaid | $ 800,000 | |||||||
Convertible senior notes | Convertible senior notes due 2017, 2018 and 2020 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt issuance costs, net | 2,500,000 | $ 3,900,000 | ||||||
Amortization of debt issuance costs included in interest expense | $ 1,400,000 | $ 2,100,000 | ||||||
London Interbank offered rate (LIBOR) | Secured debt | Term Loan 2022 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt instrument, LIBOR interest floor | 0.75% | |||||||
Debt instrument, basis spread on variable rate | 2.50% | |||||||
Base rate | Secured debt | Term Loan 2022 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt instrument, basis spread on variable rate | 1.50% | |||||||
Debt instrument, interest rate floor | 1.75% |
SHORT-TERM AND LONG-TERM DEBT68
SHORT-TERM AND LONG-TERM DEBT (Details 2) - USD ($) $ in Thousands | Jul. 31, 2017 | Jan. 30, 2017 | Oct. 31, 2016 | ||
Debt Instrument [Line Items] | |||||
Net Carrying Value | $ 393,674 | $ 486,303 | |||
Carrying value and estimated current fair value of outstanding convertible notes | |||||
Carrying value | 541,628 | [1] | $ 767,379 | ||
Fair value | [2] | 752,544 | |||
0.875% Convertible Senior Notes due June 15, 2017 | |||||
Debt Instrument [Line Items] | |||||
Interest rate on convertible notes (as a percent) | 0.875% | ||||
Carrying value and estimated current fair value of outstanding convertible notes | |||||
Carrying value | $ 0 | $ 231,240 | |||
3.75% Convertible Senior Notes due October 15, 2018 | |||||
Debt Instrument [Line Items] | |||||
Interest rate on convertible notes (as a percent) | 3.75% | ||||
Carrying value and estimated current fair value of outstanding convertible notes | |||||
Carrying value | $ 348,557 | [1] | 347,630 | ||
Fair value | [2] | $ 482,825 | |||
4.0% Convertible Senior Notes due December 15, 2020 | |||||
Debt Instrument [Line Items] | |||||
Interest rate on convertible notes (as a percent) | 4.00% | ||||
Carrying value and estimated current fair value of outstanding convertible notes | |||||
Carrying value | $ 193,071 | [1] | 188,509 | ||
Fair value | [2] | 269,719 | |||
Secured debt | Term Loan Payable due July 15, 2019 | |||||
Debt Instrument [Line Items] | |||||
Net Carrying Value | 0 | 241,359 | |||
Secured debt | Term Loan Payable due April 25, 2021 | |||||
Debt Instrument [Line Items] | |||||
Net Carrying Value | 0 | 244,944 | |||
Secured debt | Term Loan Payable due Jan 30, 2022 | |||||
Debt Instrument [Line Items] | |||||
Principal Balance | 399,000 | $ 399,500 | |||
Unamortized Debt Discount | (2,038) | (500) | |||
Deferred Debt Issuance Costs | (3,288) | $ (2,900) | |||
Net Carrying Value | 393,674 | [3] | $ 0 | ||
Term loan fair value | [4] | $ 401,993 | |||
[1] | Includes unamortized debt discount, accretion of principal and deferred debt issuance costs. | ||||
[2] | The convertible notes are categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its outstanding convertible notes using a market approach based upon observable inputs, such as current market transactions involving comparable securities. | ||||
[3] | Includes unamortized debt discount and debt issuance costs. | ||||
[4] | Ciena's term loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its 2022 Term Loan using a market approach based upon observable inputs, such as current market transactions involving comparable securities. |
SHORT-TERM AND LONG-TERM DEBT69
SHORT-TERM AND LONG-TERM DEBT (Details 3) - USD ($) $ in Thousands | Jul. 31, 2017 | Oct. 31, 2016 |
Debt Instrument [Line Items] | ||
Net Carrying Value | $ 393,674 | $ 486,303 |
3.75% Convertible Senior Notes due October 15, 2018 | Convertible notes payable | ||
Debt Instrument [Line Items] | ||
Principal Balance | 350,000 | |
Unamortized Debt Discount | 0 | |
Deferred Debt Issuance Costs | (1,443) | |
Net Carrying Value | 348,557 | |
Equity component, Net carrying amount | 0 | |
4.0% Convertible Senior Notes due December 15, 2020 | Convertible notes payable | ||
Debt Instrument [Line Items] | ||
Principal Balance | 203,996 | |
Unamortized Debt Discount | (9,893) | |
Deferred Debt Issuance Costs | (1,032) | |
Net Carrying Value | 193,071 | |
Equity component, Net carrying amount | $ 43,131 |
ABL CREDIT FACILITY (Details)
ABL CREDIT FACILITY (Details) - Letter of credit | Jul. 31, 2017USD ($) |
Line of Credit Facility [Line Items] | |
Letters of credit collateralized by the credit facility | $ 74,100,000 |
Revolving credit facility | |
Line of Credit Facility [Line Items] | |
Line of credit outstanding | $ 0 |
EARNINGS PER SHARE CALCULATIO71
EARNINGS PER SHARE CALCULATION (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2017 | Jul. 31, 2016 | Jul. 31, 2017 | Jul. 31, 2016 | |
Numerator | ||||
Net income | $ 60,010 | $ 33,546 | $ 101,897 | $ 35,997 |
Net income used to calculate Diluted EPS | $ 67,151 | $ 38,444 | $ 113,990 | $ 35,997 |
Denominator | ||||
Basic weighted average shares outstanding (in shares) | 142,464 | 138,881 | 141,631 | 137,835 |
Add: Shares underlying outstanding stock options and restricted stock units and issuable under employee stock purchase plan (in shares) | 1,386 | 895 | 1,401 | 1,218 |
Dilutive weighted average shares outstanding (in shares) | 172,112 | 169,349 | 164,431 | 139,053 |
EPS | ||||
Basic EPS (in dollars per share) | $ 0.42 | $ 0.24 | $ 0.72 | $ 0.26 |
Diluted EPS (in dollars per share) | $ 0.39 | $ 0.23 | $ 0.69 | $ 0.26 |
0.875% Convertible Senior Notes due June 15, 2017 | ||||
Numerator | ||||
Add: Interest expense associated with Convertible Senior Notes | $ 246 | $ 1,326 | $ 1,343 | $ 0 |
Denominator | ||||
Add: Shares underlying Convertible Senior Notes (in shares) | 1,708 | 12,217 | 4,043 | 0 |
3.75% Convertible Senior Notes due October 15, 2018 | ||||
Numerator | ||||
Add: Interest expense associated with Convertible Senior Notes | $ 3,572 | $ 3,572 | $ 10,750 | $ 0 |
Denominator | ||||
Add: Shares underlying Convertible Senior Notes (in shares) | 17,356 | 17,356 | 17,356 | 0 |
4.0% Convertible Senior Notes due December 15, 2020 | ||||
Numerator | ||||
Add: Interest expense associated with Convertible Senior Notes | $ 3,323 | $ 0 | $ 0 | $ 0 |
Denominator | ||||
Add: Shares underlying Convertible Senior Notes (in shares) | 9,198 | 0 | 0 | 0 |
EARNINGS PER SHARE CALCULATIO72
EARNINGS PER SHARE CALCULATION (Details 2) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | |||
Jul. 31, 2017 | Jul. 31, 2016 | Jul. 31, 2017 | Jul. 31, 2016 | Oct. 31, 2016 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Total excluded due to anti-dilutive effect (in shares) | 682 | 11,280 | 10,186 | 41,214 | |
0.875% Convertible Senior Notes due June 15, 2017 | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Interest rate on convertible notes (as a percent) | 0.875% | ||||
3.75% Convertible Senior Notes due October 15, 2018 | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Interest rate on convertible notes (as a percent) | 3.75% | 3.75% | |||
4.0% Convertible Senior Notes due December 15, 2020 | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Interest rate on convertible notes (as a percent) | 4.00% | 4.00% | |||
Shares underlying stock options and restricted stock units | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Total excluded due to anti-dilutive effect (in shares) | 682 | 2,082 | 988 | 2,089 | |
Convertible Senior Notes | 0.875% Convertible Senior Notes due June 15, 2017 | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Total excluded due to anti-dilutive effect (in shares) | 0 | 0 | 0 | 12,571 | |
Convertible Senior Notes | 3.75% Convertible Senior Notes due October 15, 2018 | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Total excluded due to anti-dilutive effect (in shares) | 0 | 0 | 0 | 17,356 | |
Convertible Senior Notes | 4.0% Convertible Senior Notes due December 15, 2020 | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Total excluded due to anti-dilutive effect (in shares) | 0 | 9,198 | 9,198 | 9,198 |
SHARE-BASED COMPENSATION EXPE73
SHARE-BASED COMPENSATION EXPENSE (Details Textual) $ / shares in Units, $ in Millions | 9 Months Ended | |
Jul. 31, 2017USD ($)period$ / sharesshares | Jul. 31, 2016USD ($)$ / shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unrecognized share-based compensation | $ | $ 76.5 | |
2017 Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Maximum expiration period of incentive awards (in years) | 10 years | |
Shares authorized for issuance under plan (in shares) | 8,900,000 | |
Remaining authorized shares available for issuance (in shares) | 10,400,000 | |
Restricted stock units (RSUs) | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total fair value of restricted stock units vested and converted into common stock (in years) | $ | $ 41.5 | $ 41.3 |
Weighted average fair value of each restricted stock unit granted (in dollars per share) | $ / shares | $ 23.36 | $ 19.72 |
Unrecognized share-based compensation | $ | $ 76.3 | |
Weighted-average period for recognition of share-based compensation (in years) | 1 year 5 months 12 days | |
Restricted stock units (RSUs) | Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period of service-based awards (in years) | 3 years | |
Restricted stock units (RSUs) | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period of service-based awards (in years) | 4 years | |
Restricted stock units (RSUs) | 2017 Plan | Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period of service-based awards (in years) | 1 year | |
Employee Stock Options and Stock Appreciation Rights | 2017 Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Maximum expiration period of incentive awards (in years) | 10 years | |
Minimum exercise price, percentage of fair market value on grant date (as a percent) | 100.00% | |
Employee Stock | 2003 Employee Stock Purchase Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Remaining authorized shares available for issuance (in shares) | 5,500,000 | |
Offer period for ESPP (in years) | 12 months | |
Number of purchase periods in offer period | period | 2 | |
Length of purchase period (in years) | 6 months | |
ESPP discount percentage purchase date (as a percent) | 85.00% | |
Maximum number of shares increase under ESPP (in shares) | 600,000 | |
Shares issued under ESPP (in shares) | 1,000,000 | |
Employee Stock | 2003 Employee Stock Purchase Plan | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares authorized for issuance under plan (in shares) | 8,200,000 | |
Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period of service-based awards (in years) | 4 years | |
Intrinsic value of option exercised | $ | $ 3.1 | $ 4.6 |
Unrecognized share-based compensation | $ | $ 0.2 | |
Weighted-average period for recognition of share-based compensation (in years) | 1 year 22 days |
SHARE-BASED COMPENSATION EXPE74
SHARE-BASED COMPENSATION EXPENSE (Details) shares in Thousands | 9 Months Ended |
Jul. 31, 2017$ / sharesshares | |
Summary of stock option activity [Roll Forward] | |
Shares underlying options outstanding, Beginning balance (in shares) | shares | 1,387 |
Shares underlying options outstanding, Exercised (in shares) | shares | (223) |
Shares underlying options outstanding, Canceled (in shares) | shares | (270) |
Shares underlying options outstanding, Ending balance (in shares) | shares | 894 |
Weighted average exercise price [Roll Forward] | |
Weighted average exercise price, Beginning balance (in dollars per share) | $ / shares | $ 26.90 |
Weighted average exercise price, Exercised (in dollars per share) | $ / shares | 10.74 |
Weighted average exercise price, Canceled (in dollars per share) | $ / shares | 28.80 |
Weighted average exercise price, Ending balance (in dollars per share) | $ / shares | $ 30.35 |
SHARE-BASED COMPENSATION EXPE75
SHARE-BASED COMPENSATION EXPENSE (Details 2) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 9 Months Ended | |
Jul. 31, 2017 | Oct. 31, 2016 | |
Summarizes information with respect to stock options outstanding | ||
Weighted average exercise price - options (in dollars per share) | $ 30.35 | $ 26.90 |
Range of exercise price 1.88 to 11.16 | ||
Summarizes information with respect to stock options outstanding | ||
Range of exercise price, Lower (in dollars per share) | 1.88 | |
Range of exercise price, Upper (in dollars per share) | $ 11.16 | |
Number of underlying shares - options (in shares) | 65 | |
Weighted average remaining contractual life - options (in years) | 2 years 10 months 2 days | |
Weighted average exercise price - options (in dollars per share) | $ 8.66 | |
Aggregate intrinsic value - options | $ 1,094 | |
Number of underlying shares - vested options (in shares) | 64 | |
Weighted average remaining contractual life - vested options (in years) | 2 years 9 months 11 days | |
Weighted average exercise price - vested options (in dollars per share) | $ 8.64 | |
Aggregate intrinsic value - vested options | $ 1,082 | |
Range of exercise price 11.34 to 17.24 | ||
Summarizes information with respect to stock options outstanding | ||
Range of exercise price, Lower (in dollars per share) | $ 11.34 | |
Range of exercise price, Upper (in dollars per share) | $ 17.24 | |
Number of underlying shares - options (in shares) | 178 | |
Weighted average remaining contractual life - options (in years) | 4 years 10 months 2 days | |
Weighted average exercise price - options (in dollars per share) | $ 13.44 | |
Aggregate intrinsic value - options | $ 2,130 | |
Number of underlying shares - vested options (in shares) | 172 | |
Weighted average remaining contractual life - vested options (in years) | 4 years 9 months 4 days | |
Weighted average exercise price - vested options (in dollars per share) | $ 13.39 | |
Aggregate intrinsic value - vested options | $ 2,065 | |
Range of exercise price 17.50 to 30.46 | ||
Summarizes information with respect to stock options outstanding | ||
Range of exercise price, Lower (in dollars per share) | $ 17.50 | |
Range of exercise price, Upper (in dollars per share) | $ 30.46 | |
Number of underlying shares - options (in shares) | 127 | |
Weighted average remaining contractual life - options (in years) | 1 year 9 months 26 days | |
Weighted average exercise price - options (in dollars per share) | $ 25.90 | |
Aggregate intrinsic value - options | $ 222 | |
Number of underlying shares - vested options (in shares) | 119 | |
Weighted average remaining contractual life - vested options (in years) | 1 year 5 months 23 days | |
Weighted average exercise price - vested options (in dollars per share) | $ 26.35 | |
Aggregate intrinsic value - vested options | $ 172 | |
Range of exercise price 31.93 to 37.10 | ||
Summarizes information with respect to stock options outstanding | ||
Range of exercise price, Lower (in dollars per share) | $ 31.93 | |
Range of exercise price, Upper (in dollars per share) | $ 37.10 | |
Number of underlying shares - options (in shares) | 299 | |
Weighted average remaining contractual life - options (in years) | 1 year 8 months 27 days | |
Weighted average exercise price - options (in dollars per share) | $ 35.10 | |
Aggregate intrinsic value - options | $ 0 | |
Number of underlying shares - vested options (in shares) | 299 | |
Weighted average remaining contractual life - vested options (in years) | 1 year 8 months 27 days | |
Weighted average exercise price - vested options (in dollars per share) | $ 35.10 | |
Aggregate intrinsic value - vested options | $ 0 | |
Range of exercise price 37.82 to 55.63 | ||
Summarizes information with respect to stock options outstanding | ||
Range of exercise price, Lower (in dollars per share) | $ 37.82 | |
Range of exercise price, Upper (in dollars per share) | $ 55.63 | |
Number of underlying shares - options (in shares) | 225 | |
Weighted average remaining contractual life - options (in years) | 3 years 11 months 1 day | |
Weighted average exercise price - options (in dollars per share) | $ 46.17 | |
Aggregate intrinsic value - options | $ 0 | |
Number of underlying shares - vested options (in shares) | 224 | |
Weighted average remaining contractual life - vested options (in years) | 3 years 10 months 28 days | |
Weighted average exercise price - vested options (in dollars per share) | $ 46.19 | |
Aggregate intrinsic value - vested options | $ 0 | |
Range of exercise price 1.88 to 55.63 | ||
Summarizes information with respect to stock options outstanding | ||
Range of exercise price, Lower (in dollars per share) | $ 1.88 | |
Range of exercise price, Upper (in dollars per share) | $ 55.63 | |
Number of underlying shares - options (in shares) | 894 | |
Weighted average remaining contractual life - options (in years) | 3 years | |
Weighted average exercise price - options (in dollars per share) | $ 30.35 | |
Aggregate intrinsic value - options | $ 3,446 | |
Number of underlying shares - vested options (in shares) | 878 | |
Weighted average remaining contractual life - vested options (in years) | 2 years 11 months 1 day | |
Weighted average exercise price - vested options (in dollars per share) | $ 30.56 | |
Aggregate intrinsic value - vested options | $ 3,319 |
SHARE-BASED COMPENSATION EXPE76
SHARE-BASED COMPENSATION EXPENSE (Details 3) - Restricted stock units (RSUs) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 9 Months Ended | |
Jul. 31, 2017 | Oct. 31, 2016 | |
Summary of Restricted Stock Unit Activity | ||
Beginning balance (in shares) | 4,280 | |
Granted (in shares) | 2,211 | |
Vested (in shares) | (1,687) | |
Canceled or forfeited (in shares) | (476) | |
Ending balance (in shares) | 4,328 | |
Weighted Average Grant Date Fair Value [Abstract] | ||
Weighted average grant date fair value (in dollars per share) | $ 21.36 | $ 19.96 |
Aggregate Intrinsic Value Disclosures | ||
Aggregate Fair Value | $ 110,051 | $ 83,511 |
SHARE-BASED COMPENSATION EXPE77
SHARE-BASED COMPENSATION EXPENSE (Details 4) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2017 | Jul. 31, 2016 | Jul. 31, 2017 | Jul. 31, 2016 | |
Share-based compensation expense | ||||
Share-based compensation expense capitalized in inventory, net | $ (17) | $ (13) | $ 119 | $ 24 |
Total share-based compensation | 12,013 | 12,622 | 36,843 | 41,832 |
Cost of Sales | ||||
Share-based compensation expense | ||||
Share-based compensation expense | 1,328 | 1,282 | 3,904 | 3,767 |
Product costs | ||||
Share-based compensation expense | ||||
Share-based compensation expense | 709 | 645 | 1,978 | 1,845 |
Service costs | ||||
Share-based compensation expense | ||||
Share-based compensation expense | 619 | 637 | 1,926 | 1,922 |
Operating Expense | ||||
Share-based compensation expense | ||||
Share-based compensation expense | 10,702 | 11,353 | 32,820 | 38,041 |
Research and development | ||||
Share-based compensation expense | ||||
Share-based compensation expense | 3,139 | 3,479 | 10,001 | 10,698 |
Sales and marketing | ||||
Share-based compensation expense | ||||
Share-based compensation expense | 3,242 | 3,590 | 9,628 | 12,248 |
General and administrative | ||||
Share-based compensation expense | ||||
Share-based compensation expense | 4,321 | 4,284 | 13,191 | 14,381 |
Acquisition and integration costs | ||||
Share-based compensation expense | ||||
Share-based compensation expense | $ 0 | $ 0 | $ 0 | $ 714 |
SEGMENTS AND ENTITY WIDE DISC78
SEGMENTS AND ENTITY WIDE DISCLOSURES (Details Textual) - USD ($) $ in Thousands | Jul. 31, 2017 | Oct. 31, 2016 | |
Segment Reporting Information [Line Items] | |||
Equipment, building, furniture and fixtures, net | $ 314,850 | $ 288,406 | |
Other intangible assets, net | [1] | 106,319 | |
Maintenance spares, net | 46,576 | $ 49,535 | |
Networking Platforms | |||
Segment Reporting Information [Line Items] | |||
Other intangible assets, net | 40,400 | ||
Software and Software-Related Services | |||
Segment Reporting Information [Line Items] | |||
Other intangible assets, net | $ 66,600 | ||
[1] | Does not include amortization of in-process research and development, as estimation of the timing of future amortization expense would be impractical. |
SEGMENTS AND ENTITY WIDE DISC79
SEGMENTS AND ENTITY WIDE DISCLOSURES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2017 | Jul. 31, 2016 | Jul. 31, 2017 | Jul. 31, 2016 | |
Revenue: | ||||
Revenue | $ 728,719 | $ 670,550 | $ 2,057,238 | $ 1,884,382 |
Segment profit (loss) and the reconciliation to consolidated net income (loss) | ||||
Operating income (loss) | 81,999 | 57,024 | 158,923 | 96,496 |
Less: Non-performance operating expenses | ||||
Selling and marketing | 86,739 | 83,732 | 260,292 | 252,878 |
General and administrative | 35,569 | 34,336 | 106,423 | 100,681 |
Amortization of intangible assets | 3,837 | 14,529 | 29,368 | 46,957 |
Acquisition and integration costs | 0 | 1,029 | 0 | 4,613 |
Restructuring costs | 2,203 | 1,138 | 8,874 | 2,057 |
Add: Other non-performance financial items | ||||
Interest expense and other income (loss), net | (14,263) | (19,614) | (45,322) | (52,741) |
Less: Provision for income taxes | 7,726 | 3,864 | 11,704 | 7,758 |
Net income | 60,010 | 33,546 | 101,897 | 35,997 |
Networking Platforms | ||||
Revenue: | ||||
Revenue | 592,347 | 540,892 | 1,653,778 | 1,502,608 |
Networking Platforms | Converged Packet Optical | ||||
Revenue: | ||||
Revenue | 506,532 | 467,615 | 1,421,315 | 1,291,956 |
Networking Platforms | Packet Networking | ||||
Revenue: | ||||
Revenue | 82,121 | 63,658 | 220,641 | 180,437 |
Networking Platforms | Optical Transport | ||||
Revenue: | ||||
Revenue | 3,694 | 9,619 | 11,822 | 30,215 |
Software and Software-Related Services | ||||
Revenue: | ||||
Revenue | 42,251 | 31,569 | 119,347 | 87,468 |
Software and Software-Related Services | Software Platforms | ||||
Revenue: | ||||
Revenue | 18,395 | 12,558 | 48,587 | 32,409 |
Software and Software-Related Services | Software-Related Services | ||||
Revenue: | ||||
Revenue | 23,856 | 19,011 | 70,760 | 55,059 |
Global Services | ||||
Revenue: | ||||
Revenue | 94,121 | 98,089 | 284,113 | 294,306 |
Global Services | Maintenance Support and Training | ||||
Revenue: | ||||
Revenue | 57,902 | 55,996 | 171,133 | 169,123 |
Global Services | Installation and Deployment | ||||
Revenue: | ||||
Revenue | 27,397 | 31,245 | 84,011 | 92,317 |
Global Services | Consulting and Network Design | ||||
Revenue: | ||||
Revenue | 8,822 | 10,848 | 28,969 | 32,866 |
Operating Segments | ||||
Segment profit (loss) and the reconciliation to consolidated net income (loss) | ||||
Operating income (loss) | 210,347 | 191,788 | 563,880 | 503,682 |
Operating Segments | Networking Platforms | ||||
Segment profit (loss) and the reconciliation to consolidated net income (loss) | ||||
Operating income (loss) | 159,649 | 150,521 | 423,859 | 390,109 |
Operating Segments | Software and Software-Related Services | ||||
Segment profit (loss) and the reconciliation to consolidated net income (loss) | ||||
Operating income (loss) | 11,133 | 38,855 | 23,384 | (970) |
Operating Segments | Global Services | ||||
Segment profit (loss) and the reconciliation to consolidated net income (loss) | ||||
Operating income (loss) | $ 39,565 | $ 2,412 | $ 116,637 | $ 114,543 |
SEGMENTS AND ENTITY WIDE DISC80
SEGMENTS AND ENTITY WIDE DISCLOSURES (Details 2) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Jul. 31, 2017USD ($) | Jul. 31, 2016USD ($) | Jul. 31, 2017USD ($)region | Jul. 31, 2016USD ($) | Oct. 31, 2016USD ($) | |
Segment Reporting [Abstract] | |||||
Number of geographic regions in which entity operates | region | 4 | ||||
Ciena's geographic distribution of revenue | |||||
Revenue | $ 728,719 | $ 670,550 | $ 2,057,238 | $ 1,884,382 | |
Ciena's geographic distribution of equipment, furniture and fixtures | |||||
Equipment, building, furniture and fixtures, net | 314,850 | 314,850 | $ 288,406 | ||
North America | |||||
Ciena's geographic distribution of revenue | |||||
Revenue | 465,238 | 438,013 | 1,295,539 | 1,226,222 | |
EMEA | |||||
Ciena's geographic distribution of revenue | |||||
Revenue | 96,068 | 104,266 | 293,387 | 281,163 | |
CALA | |||||
Ciena's geographic distribution of revenue | |||||
Revenue | 51,709 | 46,606 | 120,826 | 148,312 | |
APAC | |||||
Ciena's geographic distribution of revenue | |||||
Revenue | 115,704 | 81,665 | 347,486 | 228,685 | |
Canada | |||||
Ciena's geographic distribution of equipment, furniture and fixtures | |||||
Equipment, building, furniture and fixtures, net | 208,422 | 208,422 | 173,885 | ||
United States | |||||
Ciena's geographic distribution of revenue | |||||
Revenue | 438,100 | $ 410,000 | 1,200,000 | $ 1,100,000 | |
Ciena's geographic distribution of equipment, furniture and fixtures | |||||
Equipment, building, furniture and fixtures, net | 94,790 | 94,790 | 103,018 | ||
Other International | |||||
Ciena's geographic distribution of equipment, furniture and fixtures | |||||
Equipment, building, furniture and fixtures, net | $ 11,638 | $ 11,638 | $ 11,503 |
SEGMENTS AND ENTITY WIDE DISC81
SEGMENTS AND ENTITY WIDE DISCLOSURES (Details 3) - Customer concentration risk - Sales revenue, net - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2017 | Jul. 31, 2016 | Jul. 31, 2017 | Jul. 31, 2016 | |
Revenue, Major Customer [Line Items] | ||||
Revenue | $ 203,849 | $ 105,418 | $ 531,172 | $ 348,032 |
AT&T | ||||
Revenue, Major Customer [Line Items] | ||||
Revenue | 120,931 | $ 105,418 | 324,900 | $ 348,032 |
Verizon | ||||
Revenue, Major Customer [Line Items] | ||||
Revenue | $ 82,918 | $ 206,272 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | May 29, 2008defendant | Jun. 03, 2015lawsuit | Mar. 16, 2012claim |
Cyan, Inc. acquisition, class action lawsuits | |||
Loss Contingencies [Line Items] | |||
Number of putative class action lawsuits | lawsuit | 5 | ||
Patent '673 | |||
Loss Contingencies [Line Items] | |||
Number of putative class action lawsuits | claim | 2 | ||
Number of other defendants | defendant | 4 |
SUBSEQUENT EVENT (Details)
SUBSEQUENT EVENT (Details) - USD ($) | Aug. 02, 2017 | Jul. 31, 2017 |
Original Notes 3.75% Convertible Senior Notes due October 15, 2018 | ||
Subsequent Event [Line Items] | ||
Interest rate on convertible notes (as a percent) | 3.75% | |
Subsequent Event | New Notes 3.75% Convertible Senior Notes Due 2018 | ||
Subsequent Event [Line Items] | ||
Interest rate on convertible notes (as a percent) | 3.75% | |
Exchange fee ratio | $ 0.0025 | |
Subsequent Event | Secured debt | Original Notes 3.75% Convertible Senior Notes due October 15, 2018 | ||
Subsequent Event [Line Items] | ||
Term loan principal amount | 61,300,000 | |
Subsequent Event | Secured debt | New Notes 3.75% Convertible Senior Notes Due 2018 | ||
Subsequent Event [Line Items] | ||
Term loan principal amount | $ 288,700,000 |