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Form 8-K INFINERA CORP For: Oct 27

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October 27, 2015 4:28 PM EDT



 
 
 
 
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
__________________________________________________ 
FORM 8-K
 
 __________________________________________________ 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 27, 2015
 
__________________________________________________ 
INFINERA CORPORATION
(Exact name of registrant as specified in its charter)
 
__________________________________________________ 
 
 
 
 
 
Delaware
 
001-33486
 
77-0560433
(State or other jurisdiction of
incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
140 Caspian Court
Sunnyvale, CA 94089
(Address of principal executive offices, including zip code)
(408) 572-5200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
 
__________________________________________________ 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
 
 




Item 2.02
Results of Operations and Financial Condition.
On October 27, 2015, Infinera Corporation issued a press release announcing selected unaudited financial results for its third quarter ended September 26, 2015. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished under Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such a filing.
The press release furnished herewith as Exhibit 99.1 refers to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the press release.
Item 9.01
Financial Statements and Exhibits.
(d)
Exhibits.

Exhibit No.
  
Description
 
 
99.1
  
Press release dated October 27, 2015.


 


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
INFINERA CORPORATION
 
 
 
Date: October 27, 2015
 
By:
 
/s/ BRAD FELLER
 
 
 
 
Brad Feller
Chief Financial Officer





EXHIBIT INDEX
Exhibit No.
  
Description
 
 
99.1
  
Press release dated October 27, 2015.





Exhibit 99.1

Infinera Corporation Reports Third Quarter 2015 Financial Results

Sunnyvale, California - October 27, 2015 - Infinera Corporation (NASDAQ: INFN), provider of Intelligent Transport Networks, today released financial results for the third quarter of 2015 ended September 26, 2015. Infinera’s financial results for the third quarter of 2015 include the operating results of Transmode from the date the acquisition closed on August 20, 2015.

GAAP financial results for the quarter were impacted by certain purchase accounting adjustments and one-time acquisition-related costs related to the Transmode acquisition. Additionally, GAAP results include non-cash stock-based compensation expenses and the amortization of debt discount on Infinera’s convertible senior notes. The foregoing items have been excluded from Infinera’s non-GAAP results.

GAAP revenue for the quarter was $232.5 million compared to $207.3 million in the second quarter of 2015 and $173.6 million in the third quarter of 2014.

GAAP gross margin for the quarter was 44.2% compared to 46.7% in the second quarter of 2015 and 43.4% in the third quarter of 2014. GAAP operating margin for the quarter was 6.1% compared to 8.0% in the second quarter of 2015 and 4.3% in the third quarter of 2014.

GAAP net income for the quarter was $8.5 million, or $0.06 per diluted share, compared to $17.9 million, or $0.13 per diluted share, in the second quarter of 2015, and $4.8 million, or $0.04 per diluted share, in the third quarter of 2014.

Non-GAAP revenue for the quarter was $233.2 million compared to $207.3 million in the second quarter of 2015 and $173.6 million in the third quarter of 2014.

Non-GAAP gross margin for the quarter was 47.5% compared to 47.4% in the second quarter of 2015 and 44.2% in the third quarter of 2014. Non-GAAP operating margin for the quarter was 14.4% compared to 13.0% in the second quarter of 2015 and 8.6% in the third quarter of 2014.

Non-GAAP net income for the quarter was $32.2 million, or $0.22 per diluted share, compared to $25.7 million, or $0.18 per diluted share, in the second quarter of 2015, and $14.2 million, or $0.11 per diluted share, in the third quarter of 2014.

A further explanation of the use of non-GAAP financial information and a reconciliation of the non-GAAP financial measures to the GAAP equivalents can be found at the end of this release.
    
“Our excellent third quarter results reflect continued strength across our core business, including growing Cloud Xpress revenues as well as the initial contribution from the new metro business. Adding the recently announced metro core and long haul interconnect products along with Transmode’s suite of metro solutions enables Infinera to further enhance the superior experience we deliver to our customers,” said Tom Fallon, Infinera’s Chief Executive Officer. “As the most vertically integrated transport provider in the world, now armed with a broad end-to-end portfolio, Infinera is in a terrific position to continue to deliver differentiated financial results on both the top and bottom lines.”

Conference Call Information
Infinera will host a conference call for analysts and investors to discuss its third quarter of 2015 results and its outlook for the fourth quarter of 2015 today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Interested parties may join the conference call by dialing 1-800-593-9940 (toll free) or 1-630-395-0029




(international), pass-code PIC. A live webcast of the conference call will also be accessible from the Investor Relations section of Infinera’s website at www.infinera.com. Following the webcast, an archived version will be available on the website for 90 days. To hear the replay, parties in the United States and Canada should call 1-800-884-1527. International parties can access the replay at 1-203-369-3842.

Contacts:
 
Media:
Anna Vue
Investors:
Jeff Hustis
Tel. +1 (916) 595-8157
Tel. +1 (408) 213-7150

About Infinera
Infinera provides Intelligent Transport Networks, enabling carriers, cloud operators, governments and enterprises to scale network bandwidth, accelerate service innovation and simplify optical network operations. Infinera's end-to-end packet-optical portfolio is designed for long-haul, subsea, datacenter interconnect and metro applications. Infinera's unique large scale photonic integrated circuits enable innovative optical networking solutions for the most demanding networks. To learn more about Infinera visit www.infinera.com, follow us on Twitter @Infinera and read our latest blog posts at blog.infinera.com.

Forward-Looking Statements
This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. Such forward-looking statements include, without limitation, Infinera’s ability to provide a superior experience to its customers and Infinera’s ability to continue to deliver differentiated financial results on both the top and bottom lines. Forward-looking statements can also be identified by forward-looking words such as "anticipated," "believed," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. These statements are based on information available to Infinera as of the date hereof and actual results could differ materially from those stated or implied due to risks and uncertainties. The risks and uncertainties that could cause Infinera’s results to differ materially from those expressed or implied by such forward-looking statements include delays in the development and introduction of Infinera’s products and market acceptance of these products; Infinera’s ability to successfully integrate the Infinera and Transmode businesses; the effect that changes in product pricing or mix, and/or increases in component costs could have on Infinera’s gross margin; Infinera’s reliance on single-source suppliers; aggressive business tactics by Infinera’s competitors; Infinera’s ability to protect Infinera’s intellectual property; claims by others that Infinera infringes their intellectual property; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery or demand of products; Infinera’s ability to respond to rapid technological changes; and other risks and uncertainties detailed in Infinera’s SEC filings from time to time. More information on potential factors that may impact Infinera’s business are set forth in its Quarterly Report on Form 10-Q for the quarter ended on June 27, 2015 as filed with the SEC on July 31, 2015, as well as subsequent reports filed with or furnished to the SEC from time to time. These reports are available on Infinera’s website at www.infinera.com and the SEC’s website at www.sec.gov. Infinera assumes no obligation to, and does not currently intend to, update any such forward-looking statements.

Use of Non-GAAP Financial Information
In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude non-cash stock-based compensation expenses, acquisition-related costs, certain purchase accounting adjustments and amortization of debt discount on Infinera’s convertible senior notes. Infinera believes these adjustments are appropriate to enhance an overall understanding of its underlying financial performance and also its prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary




indicators management uses as a basis for its planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income, basic and diluted net income per share, gross margin or operating margin prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations. For a description of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures, please see the section titled, “GAAP to Non-GAAP Reconciliations.” Infinera anticipates disclosing forward-looking non-GAAP information in its conference call to discuss its third quarter 2015 results, including an estimate of certain non-GAAP financial measures for the fourth quarter of 2015 that excludes non-cash stock-based compensation expenses, acquisition-related costs, certain purchase accounting adjustments and amortization of debt discount on Infinera’s convertible senior notes.

A copy of this press release can be found on the Investor Relations page of Infinera’s website at www.infinera.com.

Infinera and the Infinera logo are trademarks or registered trademarks of Infinera Corporation. All other trademarks used or mentioned herein belong to their respective owners.





Infinera Corporation
GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 26, 2015
 
September 27, 2014
 
September 26, 2015
 
September 27, 2014
Revenue:
 
 
 
 
 
 
 
 
Product
 
$
202,365

 
$
147,178

 
$
542,190

 
$
413,784

Services
 
30,107

 
26,381

 
84,490

 
67,989

Total revenue
 
232,472

 
173,559

 
626,680

 
481,773

Cost of revenue:
 
 
 
 
 
 
 
 
Cost of product
 
117,154

 
86,703

 
306,151

 
251,047

Cost of services
 
12,513

 
11,554

 
32,816

 
26,765

Total cost of revenue
 
129,667

 
98,257

 
338,967

 
277,812

Gross profit
 
102,805

 
75,302

 
287,713

 
203,961

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
45,466

 
35,051

 
128,144

 
96,135

Sales and marketing
 
24,721

 
20,794

 
67,298

 
56,738

General and administrative
 
18,358

 
11,977

 
46,324

 
36,612

Total operating expenses
 
88,545

 
67,822

 
241,766

 
189,485

Income from operations
 
14,260

 
7,480

 
45,947

 
14,476

Other income (expense), net:
 
 
 
 
 
 
 
 
Interest income
 
406

 
373

 
1,371

 
1,046

Interest expense
 
(3,014
)
 
(2,781
)
 
(8,851
)
 
(8,186
)
Other gain (loss), net
 
(3,293
)
 
(24
)
 
1,788

 
(1,017
)
Total other income (expense), net
 
(5,901
)
 
(2,432
)
 
(5,692
)
 
(8,157
)
Income before income taxes
 
8,359

 
5,048

 
40,255

 
6,319

Provision for (benefit from) income taxes
 
(151
)
 
205

 
1,473

 
1,070

Net income
 
$
8,510

 
$
4,843

 
$
38,782

 
$
5,249

Net income per common share:
 


 


 
 
 
 
Basic
 
$
0.06

 
$
0.04

 
$
0.30

 
$
0.04

Diluted
 
$
0.06

 
$
0.04

 
$
0.27

 
$
0.04

Weighted average shares used in computing net income per common share:
 
 
 
 
 
 
 
 
Basic
 
134,834

 
124,378

 
131,007

 
122,953

Diluted
 
145,300

 
128,964

 
141,082

 
127,062








Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except percentages and per share data)
(Unaudited) 
 
Three Months Ended
 
Nine Months Ended
 
September 26, 2015
 
 
 
June 27, 2015
 
 
 
September 27, 2014
 
 
 
September 26, 2015
 
 
 
September 27, 2014
 
 
Reconciliation of Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
232,472

 
 
 
$
207,346

 
 
 
$
173,559

 
 
 
$
626,680

 
 
 
$
481,773

 
 
Acquisition-related deferred revenue adjustment(1)
721

 
 
 
—

 
 
 
—

 
 
 
721

 
 
 
—

 
 
Non-GAAP as adjusted
$
233,193

 
 
 
$
207,346

 
 
 
$
173,559

 
 
 
$
627,401

 
 
 
$
481,773

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Gross Profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
102,805

 
44.2
%
 
$
96,796

 
46.7
%
 
$
75,302

 
43.4
%
 
$
287,713

 
45.9
%
 
$
203,961

 
42.3
%
Acquisition-related deferred revenue adjustment(1)

721

 
 
 
—

 
 
 
—

 
 
 
721

 
 
 
—

 
 
Stock-based compensation(2)
1,621

 
 
 
1,493

 
 
 
1,491

 
 
 
4,357

 
 
 
4,135

 
 
Amortization of acquired intangible assets(3)
1,922

 
 
 
—

 
 
 
—

 
 
 
1,922

 
 
 
—

 
 
Acquisition-related inventory step-up
 expense(4)
3,620

 
 
 
—

 
 
 
—

 
 
 
3,620

 
 
 
—

 
 
Non-GAAP as adjusted
$
110,689

 
47.5
%
 
$
98,289

 
47.4
%
 
$
76,793

 
44.2
%
 
$
298,333

 
47.6
%
 
$
208,096

 
43.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Income from Operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
14,260

 
6.1
%
 
$
16,530

 
8.0
%
 
$
7,480

 
4.3
%
 
$
45,947

 
7.3
%
 
$
14,476

 
3.0
%
Acquisition-related deferred revenue adjustment(1)
721

 
 
 
—

 
 
 
—

 
 
 
721

 
 
 
—

 
 
Stock-based compensation(2)
8,451

 
 
 
8,209

 
 
 
7,371

 
 
 
23,868

 
 
 
20,847

 
 
Amortization of acquired intangible assets(3)
2,608

 
 
 
—

 
 
 
—

 
 
 
2,608

 
 
 
—

 
 
Acquisition-related inventory step-up
expense(4)
3,620

 
 
 
—

 
 
 
—

 
 
 
3,620

 
 
 
—

 
 
Acquisition-related costs(5)
3,950

 
 
 
2,264

 
 
 
—

 
 
 
6,676

 
 
 
—

 
 
Non-GAAP as adjusted
$
33,610

 
14.4
%
 
$
27,003

 
13.0
%
 
$
14,851

 
8.6
%
 
$
83,440

 
13.3
%
 
$
35,323

 
7.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
8,510

 
 
 
$
17,906

 
 
 
$
4,843

 
 
 
$
38,782

 
 
 
$
5,249

 
 
Acquisition-related deferred revenue adjustment(1)
721

 
 
 
—

 
 
 
—

 
 
 
721

 
 
 
—

 
 
Stock-based compensation(2)
8,451

 
 
 
8,209

 
 
 
7,371

 
 
 
23,868

 
 
 
20,847

 
 
Amortization of acquired intangible assets(3)
2,608

 
 
 
—

 
 
 
—

 
 
 
2,608

 
 
 
—

 
 
Acquisition-related inventory step-up
expense(4)
3,620

 
 
 
—

 
 
 
—

 
 
 
3,620

 
 
 
—

 
 




 
Three Months Ended
 
Nine Months Ended
 
September 26, 2015
 
 
 
June 27, 2015
 
 
 
September 27, 2014
 
 
 
September 26, 2015
 
 
 
September 27, 2014
 
 
Acquisition-related costs(5)
3,950

 
 
 
2,264

 
 
 
—

 
 
 
6,676

 
 
 
—

 
 
Acquisition-related forward contract (gain) loss(6)
3,728

 
 
 
(4,782
)
 
 
 
—

 
 
 
(1,054
)
 
 
 
—

 
 
Amortization of debt discount(7)
2,162

 
 
 
2,109

 
 
 
1,956

 
 
 
6,328

 
 
 
5,724

 
 
Income tax effects(8)
(1,529
)
 
 
 
—

 
 
 
—

 
 
 
(1,529
)
 
 
 
—

 
 
Non-GAAP as adjusted
$
32,221

 
 
 
$
25,706

 
 
 
$
14,170

 
 
 
$
80,020

 
 
 
$
31,820

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income per Common Share - Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
0.06

 
 
 
$
0.14

 
 
 
$
0.04

 
 
 
$
0.30

 
 
 
$
0.04

 
 
Non-GAAP as adjusted
$
0.24

 
 
 
$
0.20

 
 
 
$
0.11

 
 
 
$
0.61

 
 
 
$
0.26

 
 
Net Income per Common Share - Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
0.06

 
 
 
$
0.13

 
 
 
$
0.04

 
 
 
$
0.27

 
 
 
$
0.04

 
 
Non-GAAP as adjusted
$
0.22

 
 
 
$
0.18

 
 
 
$
0.11

 
 
 
$
0.57

 
 
 
$
0.25

 
 
Weighted Average Shares Used in Computing Net Income per Common Share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
134,834

 
 
 
130,349

 
 
 
124,378

 
 
 
131,007

 
 
 
122,953

 
 
Diluted
145,300

 
 
 
140,642

 
 
 
128,964

 
 
 
141,082

 
 
 
127,062

 
 




_____________________________

(1) 
Business combination accounting principles require Infinera to write down to fair value its maintanence support contracts assumed in the Transmode acquisition. The revenue for these support contracts is deferred and typically recognized over a one year period, so Infinera's GAAP revenue for the one year period after the acquisition will not reflect the full amount of revenue that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP adjustment eliminates the effect of the deferred revenue write-down. Management believes these adjustments to the revenue from these support contracts are useful to investors as an additional means to reflect revenue trends of Infinera's business.

(2) 
Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation effective January 1, 2006. The following table summarizes the effects of stock-based compensation related to employees and non-employees (in thousands):
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 26, 2015
 
June 27, 2015
 
September 27, 2014
 
September 26, 2015
 
September 27, 2014
Cost of revenue
 
$
645

 
$
613

 
$
492

 
$
1,740

 
$
1,421

Research and development
 
2,788

 
2,817

 
2,270

 
8,183

 
6,488

Sales and marketing
 
2,131

 
2,070

 
1,982

 
5,922

 
5,517

General and administration
 
1,911

 
1,829

 
1,628

 
5,406

 
4,707

 
 
7,475

 
7,329

 
6,372

 
21,251

 
18,133

Cost of revenue - amortization from balance sheet*
 
976

 
880

 
999

 
2,617

 
2,714

Total stock-based compensation expense
 
$
8,451

 
$
8,209

 
$
7,371

 
$
23,868

 
$
20,847


*
Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.

(3) 
Amortization of acquisition-related intangible assets consists of amortization of developed technology, trade names, and customer relationships acquired in connection with the Transmode acquisition. U.S. GAAP accounting requires that acquired intangible assets are recorded at fair value and amortized over their useful lives. As this amortization is non-cash, Infinera has excluded the effect in calculating its non-GAAP operating expenses, gross margin and net income measures. Management believes the amortization of acquired intangible assets are not indicative of ongoing operating performance and their exclusion provide a better indication of Infinera's underlying business performance.
(4) 
Business combination accounting principles require Infinera to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment to Infinera's cost of sales excludes the amortization of the step-up in carrying value for units sold in the quarter. Management believes the adjustment is useful to investors as an additional means to reflect cost of sales and gross margin trends of Infinera's business.
(5) 
Acquisition-related costs related to Transmode acquisition, which closed during the third quarter of 2015, include legal, financial and other professional fees incurred in connection with the transaction. These amounts have been adjusted in arriving at Infinera's non-GAAP results because management believes that these expenses are non-recurring, not indicative of ongoing operating performance and their exclusion provides a better indication of Infinera's underlying business performance.
(6) 
In April 2015, Infinera entered into a foreign currency forward contract and in July 2015, Infinera entered into a series of foreign currency exchange option contracts to hedge currency exposures associated with the cash portion of the offer to acquire Transmode. The forward contract and option contracts were subsequently closed during the third quarter of 2015. The net change in the fair value of the forward contract and option contracts impacted Infinera's financial statements for the current interim reporting period. Management has excluded the impact of these gains and losses in arriving at Infinera's non-GAAP results because they are non-recurring and management believes that these gains are not indicative of ongoing operating performance.




(7) 
Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes, Infinera is required to amortize as a debt discount an amount equal to the fair value of the conversion option that was recorded in equity as interest expense on its $150 million 1.75% convertible debt issuance in May 2013 over the term of the notes. Interest expense has been adjusted in arriving at Infinera's non-GAAP results because management believes that this non-cash expense is not indicative of ongoing operating performance and provides a better indication of Infinera's underlying business performance.
(8) 
The difference between the GAAP and non-GAAP tax rates were due to the net tax effects of the purchase accounting adjustments related to the Transmode acquisition, which closed during the third quarter of 2015.





Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)
 
 
September 26, 2015
 
December 27, 2014
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
161,103

 
$
86,495

Short-term investments
 
126,218

 
239,628

Accounts receivable, net of allowance for doubtful accounts of $630 in 2015 and $38 in 2014
 
141,586

 
154,596

Inventory
 
169,875

 
146,500

Prepaid expenses and other current assets
 
31,780

 
24,636

Total current assets
 
630,562

 
651,855

Property, plant and equipment, net
 
98,720

 
81,566

Intangible assets, net
 
162,082

 
—

Goodwill
 
190,119

 
—

Long-term investments
 
51,422

 
59,233

Cost-method investment
 
14,500

 
14,500

Long-term restricted cash
 
5,319

 
5,460

Other non-current assets
 
6,867

 
5,402

Total assets
 
$
1,159,591

 
$
818,016

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
69,983

 
$
61,533

Accrued expenses
 
35,704

 
26,441

Accrued compensation and related benefits
 
40,586

 
38,795

Accrued warranty
 
17,802

 
12,241

Deferred revenue
 
31,411

 
35,321

Total current liabilities
 
195,486

 
174,331

Long-term debt, net
 
123,222

 
116,894

Accrued warranty, non-current
 
18,939

 
14,799

Deferred revenue, non-current
 
15,368

 
10,758

Other long-term liabilities
 
53,661

 
19,327

Commitments and contingencies
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock, $0.001 par value
 
 
 
 
Authorized shares - 25,000 and no shares issued and outstanding
 
—

 
—

Common stock, $0.001 par value
 
 
 
 
Authorized shares - 500,000 as of September 26, 2015 and December 27, 2014
 
 
 
 
Issued and outstanding shares - 139,785 as of September 26, 2015 and 126,160 as of December 27, 2014
 
140

 
126

Additional paid-in capital
 
1,289,087

 
1,077,225

Accumulated other comprehensive income (loss)
 
360

 
(4,618
)
Accumulated deficit
 
(552,044
)
 
(590,826
)
Total Infinera stockholders’ equity
 
737,543

 
481,907

Noncontrolling interest
 
15,372

 
—

Total stockholders' equity
 
752,915

 
481,907

Total liabilities and stockholders’ equity
 
$
1,159,591

 
$
818,016





Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited) 
 
 
Nine Months Ended
 
 
September 26, 2015
 
September 27, 2014
Cash Flows from Operating Activities:
 
 
 
 
Net income
 
$
38,782

 
$
5,249

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
22,094

 
19,340

Amortization of debt discount and issuance costs
 
6,873

 
6,217

Amortization of premium on investments
 
2,405

 
2,720

Realized gain from forward contract
 
(1,053
)
 
—

Stock-based compensation expense
 
23,868

 
20,847

Other loss
 
605

 
15

Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
28,838

 
(35,463
)
Inventory
 
(8,901
)
 
(9,015
)
Prepaid expenses and other assets
 
(6,058
)
 
(4,965
)
Accounts payable
 
(2,339
)
 
11,009

Accrued liabilities and other expenses
 
(7,196
)
 
657

Deferred revenue
 
700

 
(4,272
)
Accrued warranty
 
8,742

 
4,898

Net cash provided by operating activities
 
107,360

 
17,237

Cash Flows from Investing Activities:
 
 
 
 
Purchase of available-for-sale investments
 
(126,940
)
 
(214,272
)
Purchase of cost-method investment
 
—

 
(5,500
)
Acquisition of business, net of cash acquired
 
(144,038
)
 
—

Realized gain from forward contract for business acquisition
 
1,053

 
—

Proceeds from sale of available-for-sale investments
 
67,303

 
17,876

Proceeds from maturities and calls of investments
 
178,717

 
168,137

Purchase of property and equipment
 
(26,710
)
 
(14,364
)
Change in restricted cash
 
127

 
(320
)
Net cash used in investing activities
 
(50,488
)
 
(48,443
)
Cash Flows from Financing Activities:
 
 
 
 
Proceeds from issuance of common stock
 
23,433

 
19,683

Minimum tax withholding paid on behalf of employees for net share settlement
 
(5,043
)
 
(1,846
)
Net cash provided by financing activities
 
18,390

 
17,837

Effect of exchange rate changes on cash
 
(654
)
 
(97
)
Net change in cash and cash equivalents
 
74,608

 
(13,466
)
Cash and cash equivalents at beginning of period
 
86,495

 
124,330

Cash and cash equivalents at end of period
 
$
161,103

 
$
110,864

Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid for income taxes, net of refunds
 
$
2,301

 
$
1,056

Cash paid for interest
 
$
1,313

 
$
1,313

Supplemental schedule of non-cash investing and financing activities:
 
 
 
 
Transfer of inventory to fixed assets
 
$
5,861

 
$
1,838

Common stock issued in connection with acquisition
 
$
169,507

 
$
—





Infinera Corporation
Supplemental Financial Information
(Unaudited)
 
 
 
Q4'13
 
Q1'14
 
Q2'14
 
Q3'14
 
Q4'14
 
Q1'15
 
Q2'15
 
Q3'15
Revenue ($ Mil)
 

$139.1

 

$142.8

 

$165.4

 

$173.6

 

$186.3

 

$186.9

 

$207.3

 

$232.5

GAAP Gross Margin %
 
40.2
%
 
40.9
%
 
42.5
%
 
43.4
%
 
45.3
%
 
47.2
%
 
46.7
%
 
44.2
%
Non-GAAP Gross Margin %(1)
 
41.4
%
 
41.8
%
 
43.3
%
 
44.2
%
 
46.1
%
 
47.8
%
 
47.4
%
 
47.5
%
Revenue Composition:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic %
 
54
%
 
78
%
 
82
%
 
70
%
 
58
%
 
68
%
 
75
%
 
68
%
International %
 
46
%
 
22
%
 
18
%
 
30
%
 
42
%
 
32
%
 
25
%
 
32
%
Customers >10% of Revenue
 
1

 
2

 
2

 
1

 
1

 
2

 
3

 
2

Cash Related Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash from (Used in) Operations ($ Mil)
 

$25.8

 

($15.4
)
 

$10.3

 

$22.3

 

$18.7

 

$19.8

 

$55.0

 

$32.5

Capital Expenditures ($ Mil)
 

$7.5

 

$5.6

 

$4.4

 

$4.4

 

$8.8

 

$7.4

 

$8.7

 

$10.6

Depreciation & Amortization ($ Mil)
 

$6.0

 

$6.3

 

$6.5

 

$6.5

 

$6.6

 

$6.6

 

$6.3

 

$9.2

DSO’s
 
66

 
68

 
66

 
71

 
76

 
64

 
48

 
55

Inventory Metrics:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Raw Materials ($ Mil)
 

$14.3

 

$13.2

 

$11.2

 

$11.6

 

$15.2

 

$22.4

 

$30.2

 

$24.2

Work in Process ($ Mil)
 

$49.2

 

$47.8

 

$40.6

 

$44.4

 

$50.0

 

$45.9

 

$43.9

 

$48.5

Finished Goods ($ Mil)
 

$60.2

 

$65.5

 

$79.1

 

$74.8

 

$81.3

 

$88.9

 

$83.1

 

$97.2

Total Inventory ($ Mil)
 

$123.7

 

$126.5

 

$130.9

 

$130.8

 

$146.5

 

$157.2

 

$157.2

 

$169.9

Inventory Turns(2)
 
2.6

 
2.6

 
2.9

 
3.0

 
2.7

 
2.5

 
2.8

 
2.9

Worldwide Headcount
 
1,318

 
1,346

 
1,396

 
1,456

 
1,495

 
1,530

 
1,598

 
1,978

 
 
 
 
 
 

(1) 
Non-GAAP adjustments include non-cash stock-based compensation expense, certain purchase accounting adjustments and amortization of acquired intangible assets. For a description of this non-GAAP financial measure, please see the section titled, “GAAP to Non-GAAP Reconciliations” of this press release for a reconciliation to the most directly comparable GAAP financial measures.

(2) 
Infinera calculates non-GAAP inventory turns as annualized non-GAAP cost of revenue before adjustments for non-cash stock-based compensation expense and certain purchase accounting adjustments, divided by the average inventory for the quarter.





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