Infinera Corporation Reports First Quarter 2014 Financial Results

                                                                            
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Infinera Corporation                                                        
GAAP to Non-GAAP Reconciliations                                            
(In thousands, except percentages and per share data)                       
(Unaudited)                                                                 
                                                                            
                                              Three Months Ended            
                                  ----------------------------------------- 
                                    March 29,    December 28,    March 30,  
                                      2014           2013          2013     
                                  ------------   ------------  ------------ 
Reconciliation of Gross Profit:                                             
U.S. GAAP as reported             $     58,406   $     55,912  $     42,702 
Stock-based compensation(1)              1,284          1,695         2,088 
                                  ------------   ------------  ------------ 
Non-GAAP as adjusted              $     59,690   $     57,607  $     44,790 
                                  ============   ============  ============ 
                                                                            
Reconciliation of Gross Margin:                                             
U.S. GAAP as reported                     40.9%          40.2%         34.2%
Stock-based compensation(1)                0.9%           1.2%          1.7%
                                  ------------   ------------  ------------ 
Non-GAAP as adjusted                      41.8%          41.4%         35.9%
                                  ============   ============  ============ 
                                                                            
Reconciliation of Income (Loss)                                             
 from Operations:                                                           
U.S. GAAP as reported             $     (1,056)  $     (7,081) $    (14,942)
Stock-based compensation(1)              6,672          8,174         7,975 
                                  ------------   ------------  ------------ 
Non-GAAP as adjusted              $      5,616   $      1,093  $     (6,967)
                                                                   ============      ============    ============  
                                                                                                                                                        
Reconciliation  of  Net  Income                                                                                                
  (Loss):                                                                                                                                        
U.S.  GAAP  as  reported                          $          (4,374)    $        (10,178)  $        (15,279)
Stock-based  compensation(1)                            6,672                    8,174                  7,975  
Amortization  of  debt  discount(2)                  1,860                    1,814                          -  
                                                                    ------------      ------------    ------------  
Non-GAAP  as  adjusted                            $            4,158      $              (190)  $          (7,304)
                                                                    ============      ============    ============  
                                                                                                                                                        
Net  Income  (Loss)  per  Common  Share                                                                                    
  -  Basic:                                                                                                                                      
U.S.  GAAP  as  reported                          $            (0.04)    $            (0.08)  $            (0.13)
                                                                    ============      ============    ============  
Non-GAAP  as  adjusted                            $              0.03      $                    -    $            (0.06)
                                                                    ============      ============    ============  
                                                                                                                                                        
Net  Income  (Loss)  per  Common  Share                                                                                    
  -  Diluted:                                                                                                                                  
U.S.  GAAP  as  reported                          $            (0.04)    $            (0.08)  $            (0.13)
                                                                    ============      ============    ============  
Non-GAAP  as  adjusted(3)                      $              0.03      $                    -    $            (0.06)
                                                                    ============      ============    ============  
                                                                                                                                                        
Weighted  average  shares  used  in                                                                                          
  computing  net  income  (loss)  per                                                                                        
  common  share  -  U.S.  GAAP:                                                                                                    
Basic                                                                    121,352                119,743              114,308  
                                                                    ============      ============    ============  
Diluted                                                                121,352                119,743              114,308  
                                                                    ============      ============    ============  
                                                                                                                                                        
Weighted  average  shares  used  in                                                                                          
  computing  net  income  (loss)  per                                                                                        
  common  share  -  Non-GAAP:                                                                                                      
Basic                                                                    121,352                119,743              114,308  
                                                                    ============      ============    ============  
Diluted(3)                                                          125,435                125,134              117,602  
                                                                    ============      ============    ============  
                                                                                                                                                        
                                                                                                                                                        
        ------------------------------                                                                                    
(1)  Stock-based  compensation  expense  is  calculated  in  accordance  with  the      
          fair  value  recognition  provisions  of  Financial  Accounting  Standards        
          Board  Accounting  Standards  Codification  (ASC)  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                    
                                                                            --------------------------------------
                                                                                March  29,    December  28,      March  30,  
                                                                                    2014                  2013                  2013        
                                                                            ------------  ------------  ------------
        Cost  of  revenue                                      $                452  $                489  $                486
        Research  and  development                                  2,138                2,725                3,119
        Sales  and  marketing                                            1,720                1,965                1,999
        General  and  administration                              1,530                1,789                    769
                                                                            ------------  ------------  ------------
                                                                                          5,840                6,968                6,373
        Cost  of  revenue  -  amortization                                                                                    
          from  balance  sheet*                                              832                1,206                1,602
                                                                            ------------  ------------  ------------
        Total  stock-based  compensation                                                                                    
          expense                                                    $            6,672  $            8,174  $            7,975
                                                                            ============  ============  ============
                                                                                                                                                        
        ---------------------------------                                                                              
        *  Stock-based  compensation  expense  deferred  to  inventory  and  deferred      
          inventory  costs  in  prior  periods  and  recognized  in  the  current  period.  
                                                                                                                                                        
(2)  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.  These  amounts  have  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.                                                                                                                      
                                                                                                                                                        
(3)  Diluted  shares  used  to  calculate  net  loss  per  share  on  a  non-GAAP  basis  
          provided  for  informational  purposes  only.                                                            
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
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Infinera  Corporation                                                                                                                
Condensed  Consolidated  Balance  Sheets                                                                              
(In  thousands,  except  par  values)                                                                                      
(Unaudited)                                                                                                                                  
                                                                                                                                                        
                                                                                                  March  29,          December  28,  
                                                                                                        2014                      2013          
                                                                                              -------------    -------------  
ASSETS                                                                                                                                            
                                                                                                                                                        
Current  assets:                                                                                                                          
    Cash  and  cash  equivalents                                        $            85,249    $          124,330  
    Short-term  investments                                                          226,705                172,660  
    Accounts  receivable,  net  of  allowance  for                                                                  
      doubtful  accounts                                                                                                                
    of  $41  in  2014  and  $43  in  2013                                          107,405                100,643  
    Inventory                                                                                    126,465                123,685  
    Prepaid  expenses  and  other  current  assets                      20,537                  17,752  
                                                                                              -------------    -------------  
        Total  current  assets                                                          566,361                539,070  
                                                                                                                                                        
Property,  plant  and  equipment,  net                                        78,801                  79,668  
Long-term  investments                                                                  32,756                  64,419  
Cost-method  investment                                                                  9,000                    9,000  
Long-term  restricted  cash                                                            4,392                    3,904  
Other  non-current  assets                                                              5,776                    4,865  
                                                                                              -------------    -------------  
          Total  assets                                                            $          697,086    $          700,926  
                                                                                              =============    =============  
                                                                                                                                                        
LIABILITIES  AND  STOCKHOLDERS'  EQUITY                                                                                
                                                                                                                                                        
Current  liabilities:                                                                                                                
    Accounts  payable                                                          $            37,843    $            39,843  
    Accrued  expenses                                                                        20,244                  22,431  
    Accrued  compensation  and  related  benefits                      21,377                  33,899  
    Accrued  warranty                                                                        14,351                  12,374  
    Deferred  revenue                                                                        31,496                  32,402  
                                                                                              -------------    -------------  
        Total  current  liabilities                                                125,311                140,949  
                                                                                                                                                        
    Long-term  debt,  net                                                                111,024                109,164  
    Accrued  warranty,  non-current                                              12,034                  10,534  
    Deferred  revenue,  non-current                                                4,886                    4,888  
    Other  long-term  liabilities                                                  17,563                  17,581  
                                                                                                                                                        
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  March  29,                                                              
      2014  and  December  28,  2013                                                                                              
    Issued  and  outstanding  shares  -  122,485  as                                                                
      of  March  29,  2014  and  119,887                                                                                        
    as  of  December  28,  2013                                                                123                        120  
    Additional  paid-in  capital                                              1,038,216            1,025,661  
    Accumulated  other  comprehensive  loss                                (3,212)                (3,486)
    Accumulated  deficit                                                              (608,859)            (604,485)
                                                                                              -------------    -------------  
    Total  stockholders'  equity                                                  426,268                417,810  
                                                                                              -------------    -------------  
        Total  liabilities  and  stockholders'  equity  $          697,086    $          700,926  
                                                                                              =============    =============  
                                                                                                                                                        
                                                                                                                                                        
Infinera  Corporation                                                                                                                
Condensed  Consolidated  Statements  of  Cash  Flows                                                          
(In  thousands)                                                                                                                            
(Unaudited)                                                                                                                                  
                                                                                                                                                        
                                                                                                        Three  Months  Ended            
                                                                                              ----------------------------  
                                                                                                  March  29,            March  30,      
                                                                                                        2014                      2013          
                                                                                              -------------    -------------  
Cash  Flows  from  Operating  Activities:                                                                              
Net  loss                                                                              $            (4,374)  $          (15,279)
Adjustments  to  reconcile  net  loss  to  net  cash                                                              
  used  in  operating  activities:                                                                                            
    Depreciation  and  amortization                                                6,314                    6,334  
    (Recovery  of)  provision  for  other                                                                                  
      receivables                                                                                          -                        (88)
    Amotization  of  debt  discount  and  issuance                                                                  
      costs                                                                                              2,020                            -  
    Amortization  of  premium  on  investments                                  828                        314  
    Stock-based  compensation  expense                                          6,672                    7,975  
    Other  gain                                                                                          (20)                    (243)
    Changes  in  assets  and  liabilities:                                                                                
        Accounts  receivable                                                              (6,762)                (5,094)
        Inventory                                                                                  (3,354)                (5,041)
        Prepaid  expenses  and  other  assets                                  (3,797)                    (361)
        Accounts  payable                                                                    (2,080)                (8,045)
        Accrued  liabilities  and  other  expenses                      (13,448)                (6,301)
        Deferred  revenue                                                                        (909)                  4,340  
        Accrued  warranty                                                                      3,477                        190  
                                                                                              -------------    -------------  
            Net  cash  used  in  operating  activities                    (15,433)              (21,299)
                                                                                                                                                        
Cash  Flows  from  Investing  Activities:                                                                              
    Purchase  of  available-for-sale  investments                  (80,223)              (20,023)
    Proceeds  from  sale  of  available-for-sale                                                                    
      investments                                                                                          -                    2,850  
    Proceeds  from  maturities  and  calls  of                                                                          
      investments                                                                                57,063                  33,835  
    Purchase  of  property  and  equipment                                    (5,608)                (4,936)
    Change  in  restricted  cash                                                          (479)                        44  
                                                                                              -------------    -------------  
        Net  cash  provided  by  (used  in)  investing                                                                
          activities                                                                            (29,247)                11,770  
                                                                                                                                                        
Cash  Flows  from  Financing  Activities:                                                                              
    Proceeds  from  issuance  of  common  stock                              7,054                    5,560  
    Minimum  tax  withholding  paid  on  behalf  of                                                                  
      employees  for  net  share  settlement                                  (1,619)                (1,493)
                                                                                              -------------    -------------  
        Net  cash  provided  by  financing  activities                    5,435                    4,067  
                                                                                                                                                        
Effect  of  exchange  rate  changes  on  cash                                    164                      (206)
                                                                                                                                                        
Net  change  in  cash  and  cash  equivalents                            (39,081)                (5,668)
Cash  and  cash  equivalents  at  beginning  of                                                                      
  period                                                                                            124,330                104,666  
                                                                                              -------------    -------------  
Cash  and  cash  equivalents  at  end  of  period          $            85,249    $            98,998  
                                                                                              =============    =============  
                                                                                                                                                        
Supplemental  disclosures  of  cash  flow                                                                              
  information:                                                                                                                              
    Cash  paid  for  income  taxes,  net  of  refunds      $                  303    $                  210  
Supplemental  schedule  of  non-cash  financing                                                                  
  activities:                                                                                                                                
    Transfer  of  inventory  to  fixed  assets                $                  603    $              1,522  
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
Infinera  Corporation                                                                                                                
Supplemental  Financial  Information                                                                                    
(Unaudited)                                                                                                                                  
                                                                                                                                                        
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                                          Q2'12    Q3'12    Q4'12    Q1'13    Q2'13    Q3'13    Q4'13    Q1'14  
----------------------------------------------------------------------------
Revenue  ($  Mil)              $93.5  $112.2  $128.1  $124.6  $138.4  $142.0  $139.1  $142.8
Gross  Margin  %  (1)        36.6%    39.1%    35.9%    35.9%    38.9%    49.2%    41.4%    41.8%
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Invoiced  Shipment                                                                                                                      
  Composition:                                                                                                                              
Domestic  %                            70%        70%        63%        63%        64%        73%        54%        78%
International  %                  30%        30%        37%        37%        36%        27%        46%        22%
Largest  Customer  %            15%        13%        13%        14%  <  10%        17%        11%        21%
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Cash  Related                                                                                                                                
  Information:                                                                                                                              
Cash  from  (used  in)                                                                                                                  
  Operations  ($  Mil)  $(22.7)$(29.3)      $8.3$(21.3)    $17.9    $12.8    $25.8$(15.4)
Capital  Expenditures                                                                                                                
  ($  Mil)                              $6.1      $2.5      $3.2      $4.9      $4.5      $4.2      $7.5      $5.6
Depreciation  &                                                                                                                            
  Amortization  ($                                                                                                                        
  Mil)                                    $5.7      $6.1      $6.4      $6.3      $6.3      $5.9      $6.0      $6.3
DSO's                                        55          74          76          82          64          56          66          68
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Inventory  Metrics:                                                                                                                    
Raw  Materials  ($                                                                                                                        
  Mil)                                  $14.8    $12.4    $13.0    $12.2      $9.8    $12.1    $14.3    $13.2
Work  in  Process  ($                                                                                                                    
  Mil)                                  $49.4    $59.8    $57.3    $53.1    $41.0    $45.7    $49.2    $47.8
Finished  Goods  ($                                                                                                                      
  Mil)                                  $50.9    $46.3    $57.5    $65.7    $70.5    $65.7    $60.2    $65.5
----------------------------------------------------------------------------
Total  Inventory  ($                                                                                                                    
  Mil)                                $115.1  $118.5  $127.8  $131.0  $121.3  $123.5  $123.7  $126.5
Inventory  Turns  (2)          2.1        2.3        2.6        2.4        2.8        2.3        2.6        2.6
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Worldwide  Headcount      1,228    1,235    1,242    1,219    1,238    1,296    1,318    1,346
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  (1)  Amounts  reflect  non-GAAP  results.  Non-GAAP  adjustments  include  non-cash
          stock-based  compensation  expense.                                                                            
  (2)  Infinera  calculates  non-GAAP  inventory  turns  as  annualized  non-GAAP        
          cost  of  revenue  before  adjustments  for  non-cash  stock-based                        
          compensation  expense  divided  by  the  average  inventory  for  the  quarter.  
 




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