Company Quick10K Filing
Infinera
Price5.60 EPS-3
Shares181 P/E-2
MCap1,011 P/FCF-6
Net Debt198 EBIT-426
TEV1,210 TEV/EBIT-3
TTM 2019-09-28, in MM, except price, ratios
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8-K 2018-02-07

INFN 10Q Quarterly Report

Part I. Financial Information
Item 1.Condensed Consolidated Financial Statements (Unaudited)
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part II. Other Information
Item 1.Legal Proceedings
Item 1A. Risk Factors
Item 6.Exhibits
EX-31.1 infn-03272021exhibit311.htm
EX-31.2 infn-03272021exhibit312.htm
EX-32.1 infn-03272021exhibit321.htm

Infinera Earnings 2021-03-27

Balance SheetIncome StatementCash Flow
1.91.51.10.80.40.02012201420172020
Assets, Equity
0.40.30.20.0-0.1-0.22012201420172020
Rev, G Profit, Net Income
0.40.30.20.0-0.1-0.22012201420172020
Ops, Inv, Fin

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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 27, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-33486
INFINERA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware77-0560433
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
6373 San Ignacio Avenue
San Jose, CA 95119
(Address of principal executive offices, including zip code)
(408) 572-5200
(Registrant’s telephone number, including area code)
140 Caspian Court
Sunnyvale, CA 94089
(Former name or former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s) Name of exchange on which registered
Common stock, par value $0.001 per shareINFN The Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  
Large accelerated filer Accelerated Filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  


Table of Contents
As of April 30, 2021, 204,996,590 shares of the registrant’s Common Stock, $0.001 par value, were issued and outstanding.


Table of Contents
INFINERA CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED MARCH 27, 2021
INDEX
 
  Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Risk Factors
Item 6.


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PART I. FINANCIAL INFORMATION
 

Item 1.Condensed Consolidated Financial Statements (Unaudited)
3

Table of Contents
INFINERA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
(Unaudited)
March 27,
2021
December 26,
2020
ASSETS
Current assets:
Cash$234,029 $298,014 
Short-term restricted cash
3,288 3,293 
Accounts receivable, net of allowance for doubtful accounts of $3,102 in 2021 and $2,912 in 2020
276,855 319,428 
Inventory262,827 269,307 
Prepaid expenses and other current assets139,245 171,831 
Total current assets916,244 1,061,873 
Property, plant and equipment, net153,118 153,133 
Operating lease right-of-use assets64,942 68,851 
Intangible assets115,164 124,882 
Goodwill265,216 273,426 
Long-term restricted cash12,228 14,076 
Other non-current assets40,043 36,256 
Total assets$1,566,955 $1,732,497 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$151,984 $175,762 
Accrued expenses and other current liabilities129,598 150,550 
Accrued compensation and related benefits56,050 52,976 
Short-term debt, net25,068 101,983 
Accrued warranty18,943 19,369 
Deferred revenue124,285 133,246 
Total current liabilities505,928 633,886 
Long-term debt, net453,427 445,996 
Long-term financing lease obligations1,964 1,383 
Long-term accrued warranty19,944 21,339 
Long-term deferred revenue28,960 29,810 
Long-term deferred tax liability3,681 4,164 
Long-term operating lease liabilities72,912 76,126 
Other long-term liabilities86,791 93,509 
Commitments and contingencies (Note 13)
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 27, 2021
      and December 26, 2020
      Issued and outstanding shares – 204,812 as of March 27, 2021 and
      201,397 as of December 26, 2020
205 201 
Additional paid-in capital1,983,599 1,965,245 
Accumulated other comprehensive loss(14,870)(11,898)
Accumulated deficit(1,575,586)(1,527,264)
Total stockholders' equity393,348 426,284 
Total liabilities and stockholders’ equity$1,566,955 $1,732,497 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

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INFINERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 Three Months Ended
 March 27,
2021
March 28,
2020
Revenue:
Product$254,161 $255,192 
Services76,746 75,081 
Total revenue330,907 330,273 
Cost of revenue:
Cost of product165,485 201,792 
Cost of services43,260 40,695 
Amortization of intangible assets4,616 8,628 
Acquisition and integration costs 1,035 
Restructuring and related514 1,157 
Total cost of revenue213,875 253,307 
Gross profit117,032 76,966 
Operating expenses:
Research and development73,529 68,180 
Sales and marketing32,772 36,689 
General and administrative26,506 29,620 
Amortization of intangible assets4,405 4,555 
Acquisition and integration costs614 9,222 
Restructuring and related2,319 5,580 
Total operating expenses140,145 153,846 
Loss from operations(23,113)(76,880)
Other income (expense), net:
Interest income40 24 
Interest expense(11,843)(8,794)
Other gain (loss), net(12,395)(12,682)
Total other income (expense), net(24,198)(21,452)
Loss before income taxes(47,311)(98,332)
Provision for income taxes1,011 936 
Net loss$(48,322)$(99,268)
Net loss per common share:
Basic$(0.24)$(0.55)
Diluted$(0.24)$(0.55)
Weighted average shares used in computing net loss per common share:
Basic202,638 182,024 
Diluted202,638 182,024 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

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INFINERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
 Three Months Ended
 March 27,
2021
March 28,
2020
Net loss$(48,322)$(99,268)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment(3,833)(11,106)
Actuarial gain (loss) on pension liabilities861 (394)
Net change in accumulated other comprehensive income (loss)(2,972)(11,500)
Comprehensive loss$(51,294)$(110,768)
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Table of Contents
INFINERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
 
Three Months Ended March 27, 2021
 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total Stockholders' Equity
 SharesAmount
Balance at December 26, 2020201,397 $201 $1,965,245 $(11,898)$(1,527,264)$426,284 
Stock options exercised46 — 332 — — 332 
ESPP shares issued1,294 2 9,011— — 9,013 
Restricted stock units released2,269 2 (2)— —  
Shares withheld for tax obligations(194)— (1,938)— — (1,938)
Stock-based compensation— — 10,951 — — 10,951 
Other comprehensive loss— — — (2,972)— (2,972)
Net loss— — — — (48,322)(48,322)
Balance at March 27, 2021204,812 $205 $1,983,599 $(14,870)$(1,575,586)$393,348 





Three Months Ended March 28, 2020
 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total Stockholders' Equity
 SharesAmount
Balance at December 28, 2019181,134 $181 $1,740,884 $(34,639)$(1,319,891)$386,535 
ESPP shared issued1,839 2 7,392 — — 7,394 
Restricted stock units released225 — — — — — 
Stock-based compensation— — 11,411 — — 11,411 
Cumulative effect adjustment from adoption of Topic 326— — — — (650)(650)
Conversion option related to convertible senior notes, net of allocated costs— — 67,797 — — 67,797 
Other comprehensive loss— — — (11,500)— (11,500)
Net loss— — — — (99,268)(99,268)
Balance at March 28, 2020183,198 $183 $1,827,484 $(46,139)$(1,419,809)$361,719 





The accompanying notes are an integral part of these condensed consolidated financial statements.

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Table of Contents
INFINERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months Ended
 March 27,
2021
March 28,
2020
Cash Flows from Operating Activities:
Net loss$(48,322)$(99,268)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization20,546 25,445 
Non-cash restructuring charges and related costs1,410 1,760 
Amortization of debt discount and issuance costs7,822 5,731 
Operating lease expense5,228 5,204 
Stock-based compensation expense10,974 11,703 
Other, net2,065 1,153 
Changes in assets and liabilities:
Accounts receivable38,671 70,238 
Inventory4,059 17,737 
Prepaid expenses and other assets20,669 (18,744)
Accounts payable(23,584)(72,355)
Accrued liabilities and other expenses(11,964)(32,083)
Deferred revenue(8,944)(8,038)
Net cash provided by (used in) operating activities18,630 (91,517)
Cash Flows from Investing Activities:
Purchase of property and equipment, net(11,721)(8,464)
Net cash used in investing activities(11,721)(8,464)
Cash Flows from Financing Activities:
Proceeds from issuance of 2027 Notes 194,500 
Proceeds from revolving line of credit 55,000 
Repayment of revolving line of credit(77,000) 
Payment of debt issuance cost (1,775)
Repayment of mortgage payable(22)(99)
Payment of term license obligation(2,544) 
Principal payments on financing lease obligations(309) 
Proceeds from issuance of common stock9,344 7,395 
Minimum tax withholding paid on behalf of employees for net share settlement(1,938) 
Net cash (used in) provided by financing activities(72,469)255,021 
Effect of exchange rate changes on cash and restricted cash(278)(4,369)
Net change in cash and restricted cash(65,838)150,671 
Cash and restricted cash at beginning of period315,383 132,797 
Cash and restricted cash at end of period(1)
$249,545 $283,468 
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Supplemental disclosures of cash flow information:
Cash paid for income taxes, net$4,355 $1,072 
Cash paid for interest$7,654 $5,131 
Supplemental schedule of non-cash investing and financing activities:
Unpaid debt issuance cost$ $1,793 
Property and equipment included in accounts payable and accrued liabilities$255 $3,370 
Transfer of inventory to fixed assets$1,041 $118 
Unpaid term licenses (included in accounts payable, accrued liabilities and other long-term liabilities)$10,533 $ 


(1)     Reconciliation of cash and restricted cash to the condensed consolidated balance sheets:
March 27,
2021
March 28,
2020
 (In thousands)
Cash$234,029 $261,534 
Short-term restricted cash3,288 4,126 
Long-term restricted cash12,228 17,808 
Total cash and restricted cash$249,545 $283,468 

The accompanying notes are an integral part of these condensed consolidated financial statements.
9

Table of Contents
INFINERA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.Basis of Presentation and Significant Accounting Policies
Basis of Presentation
Infinera Corporation (the “Company”) prepared its interim condensed consolidated financial statements that accompany these notes in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020.
The Company has made certain estimates, assumptions and judgments that can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Significant estimates, assumptions and judgments made by management include revenue recognition, stock-based compensation, employee benefit and pension plans, inventory valuation, accrued warranty, operating and financing lease liabilities, and accounting for income taxes. Other less significant estimates, assumptions and judgments made by management include allowances for sales returns, allowances for doubtful accounts, useful life of intangible assets, and property, plant and equipment. Management believes that the estimates and judgments upon which they rely are reasonable based upon information available to them at the time that these estimates and judgments are made. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the recent outbreak of a novel strain of the coronavirus (“COVID-19”). These estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in the Company's condensed consolidated financial statements.
The interim financial information is unaudited, but reflects all adjustments that are, in management’s opinion, necessary to provide a fair presentation of results for the interim periods presented. All adjustments are of a normal recurring nature. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated.
This interim information should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020.
    To date, a few of the Company’s customers have accounted for a significant portion of its revenue. For the three months ended March 27, 2021, one customer accounted for 10% of the Company's total revenue. The same customer accounted for 11% of the Company's total revenue for the three months ended March 28, 2020.
    There have been no material changes in the Company’s significant accounting policies for the three months ended March 27, 2021 compared to those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020.
2.Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
    In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, "Simplifying the Accounting for Income Taxes" (“ASU 2019-12”), as part of its simplification initiative. ASU 2019-12 removes certain exceptions from Accounting Standards Codification ("ASC") 740, "Income Taxes" ("ASC 740"), including (i) the exception to the incremental approach for intra period tax allocation when there is a loss from continuing operations and income or a gain from other items such as discontinued operations or other comprehensive income; (ii) the exception to accounting for outside basis differences of equity method investments and foreign subsidiaries; and (iii) the exception to limit tax benefit recognized in interim period in cases when the year-to-date losses exceeds anticipated losses. ASU 2019-12 also simplifies U.S. GAAP in several other areas of ASC 740 such as (i) franchise taxes and other taxes partially based on income; (ii) step-up in tax basis goodwill considered part of a business combination in which the book goodwill was originally recognized or should be considered a separate transaction; (iii) separate financial statements of entities not subject to tax; and (iv) interim recognition of enactment of tax laws or rate changes. ASU 2019-12 is effective for the Company for fiscal years (and interim periods within those fiscal
10


years) beginning after December 15, 2020. The Company adopted ASU 2019-12 in the first quarter of 2021 and the impact of the adoption was not material to the Company's consolidated financial statements.
Accounting Pronouncements Not Yet Effective
In August 2020, the FASB issued ASU 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)" ("ASU 2020-06"). The ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. This update removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. This update also simplifies the diluted net income per share calculation in certain areas. The update is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company elected not to early adopt ASU 2020-06. The Company is currently evaluating the impact of the adoption of ASU 2020-06 would have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04 (Topic 848), "Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides temporary optional expedients and exceptions to the existing guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. The standard was effective upon issuance and may generally be applied through December 31, 2022 to any new or amended contracts, hedging relationships, and other transactions that reference LIBOR. The Company will apply the amendments when its relevant contracts are modified upon transition to alternative reference rates.
3.    Leases
    The Company has operating leases for real estate and automobiles. The operating lease expense for the three months ended March 27, 2021 was $7.3 million (including $2.0 million of rent expense due to restructuring resulting in abandonment of certain lease facilities). The operating lease expense for the three months ended March 28, 2020 was $8.6 million (including $1.4 million of accelerated rent expense due to restructuring resulting in abandonment of certain lease facilities). Variable lease cost, short-term lease cost and sublease income were immaterial during the three months ended March 27, 2021 and March 28, 2020.
As of March 27, 2021, $16.1 million was included in accrued expenses and other current liabilities and $72.9 million as long-term operating lease liabilities. As of December 26, 2020, $14.9 million was included in accrued expenses and other current liabilities and $76.1 million as long-term operating lease liabilities.
The following table presents maturity of lease liabilities under the Company's non-cancelable operating leases as of March 27, 2021 (in thousands):
Remainder of 2021$17,361 
202222,249 
202317,284 
202415,180 
202514,178 
Thereafter30,866 
Total lease payments117,118 
Less: interest(1)
28,068 
Present value of lease liabilities$89,050 
(1) Calculated using the interest rate for each lease.
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The following table presents supplemental information for the Company's non-cancelable operating leases for the three months ended March 27, 2021 (in thousands, except for weighted average and percentage data):
Weighted average remaining lease term6.39 years
Weighted average discount rate9.18 %
Cash paid for amounts included in the measurement of lease liabilities$6,113 
Leased assets obtained in exchange for new operating lease liabilities$2,591 
Financing Lease Obligations
During the three months ended March 27, 2021, there was one new finance lease arrangement. The lease term for existing arrangements range from three to five years with options to purchase at the end of the term. Finance lease expense for the three months ended March 27, 2021 was approximately $0.3 million. Finance lease expense for the three months ended March 28, 2020 was $0.2 million.
As of March 27, 2021, $1.4 million was included in accrued expenses and other current liabilities and $2.0 million as long-term finance lease obligation related to these equipment finance lease arrangements. As of December 26, 2020, $1.1 million was included in accrued expenses and other current liabilities and $1.4 million as a long-term finance lease obligation related to these equipment finance lease arrangements.
The following table presents maturity of lease liability under the Company's finance leases as of March 27, 2021 (in thousands):
Remainder of 2021$1,326 
20221,366 
2023831 
2024177 
Thereafter 
Total lease payments3,700 
Less: interest274 
Present value of lease liabilities$3,426 
The following table presents supplemental information for the Company's finance leases for the three months ended March 27, 2021 (in thousands, except for weighted average and percentage data):
Weighted average remaining lease term2.31 years
Weighted average discount rate7.12 %
Cash paid for amounts included in the measurement of lease liabilities$309 
Leased assets obtained in exchange for new finance lease liabilities$1,208 
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4. Revenue Recognition
Disaggregation of Revenue
The following table presents the Company's revenue disaggregated by revenue source (in thousands):
Three Months Ended
March 27,
2021
March 28,
2020
Product$254,161 $255,192 
Services76,746 75,081 
Total revenue$330,907 $330,273 
The Company sells its products directly to customers who are predominantly service providers and to channel partners that sell on its behalf. The following table presents the Company's revenue disaggregated by geography, based on the shipping address of the customer (in thousands):
Three Months Ended
March 27,
2021
March 28,
2020
United States$157,649 $170,526 
Other Americas19,531 19,688 
Europe, Middle East and Africa114,908 88,578 
Asia Pacific38,819 51,481 
Total revenue$330,907 $330,273 
    The following table presents the Company's revenue disaggregated by sales channel (in thousands):
Three Months Ended
March 27,
2021
March 28,
2020
Direct$271,301 $244,351 
Indirect59,606 85,922 
Total revenue$330,907 $330,273 
Contract Balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in thousands):
March 27,
2021
December 26,
2020
Accounts receivable, net$276,855 $319,428 
Contract assets$33,899 $51,583 
Deferred revenue$153,245 $163,056 
Revenue recognized for the three months ended March 27, 2021 that was included in the deferred revenue balance at the beginning of the reporting period was $31.3 million. Revenue recognized for the three months ended March 28, 2020 that was included in the deferred revenue balance at the beginning of the reporting period was $38.7 million. Changes in the contract asset and liability balances during the three months ended March 27, 2021 and March 28, 2020 were not materially impacted by other factors.
Transaction Price Allocated to the Remaining Performance Obligation
The Company’s remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially satisfied, consisting of deferred revenue and backlog. The Company’s backlog represents purchase orders received from customers for future product shipments and services. The Company’s backlog is subject to future events that could cause the amount or timing of the related revenue to change, and, in certain cases, may be canceled without penalty. Orders in backlog may be fulfilled several quarters following receipt or may relate to multi-year support service obligations.
13


The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) pursuant to contracts that are not subject to cancellation without penalty at the end of the reporting period (in thousands):
Remainder of 20212022202320242025ThereafterTotal
Revenue expected to be recognized in the future as of March 27, 2021$454,393 $60,539 $39,260 $11,552 $2,708 $2,119 $570,571 

5.    Fair Value Measurements
The following tables represent the Company’s fair value hierarchy for its assets and liabilities measured at fair value on a recurring basis (in thousands): 
 As of March 27, 2021As of December 26, 2020
 Fair Value Measured UsingFair Value Measured Using
 Level 1      Level 2      Total        Level 1Level 2      Total        
Assets (Liabilities)
Foreign currency exchange forward contracts$ $(151)$(151)$ $(72)$(72)
During the three months ended March 27, 2021, there were no transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy. As of each of March 27, 2021 and December 26, 2020, none of the Company’s existing assets or liabilities were classified as Level 3.
The Company classifies certain facilities-related charges within Level 3 of the fair value hierarchy and applies fair value accounting on a nonrecurring basis when impairment indicators exist or upon the existence of observable fair values. The fair values are classified as Level 3 measurements due to the significance of unobservable inputs. This analysis requires management to make assumptions and estimates regarding industry and economic factors, future operating results and discount rates.
The Company measures goodwill and intangible assets at fair value on a nonrecurring basis when there are identifiable events or changes in circumstances that may have a significant adverse impact on the fair value of these assets. In light of the COVID-19 pandemic, the Company performed an analysis of impairment indicators of these assets and noted no adverse impact to their fair values as of March 27, 2021.    
Facilities-related Charges
In connection with the 2018 Restructuring Plan (as defined in Note 9, “Restructuring and Related Costs” to the Notes to Condensed Consolidated Financial Statements), for the three months ended March 27, 2021, the Company calculated the fair value of $2.0 million, in facilities-related charges based on estimated future discounted cash flows and classified the fair value as a Level 3 measurement due to the significance of unobservable inputs. These inputs included the amount and timing of estimated sublease rental receipts that the Company could reasonably obtain over the remaining lease term at the discount rate.
Cash
As of March 27, 2021, the Company had $234.0 million of cash, including $98.7 million of cash held by its foreign subsidiaries.  
As of December 26, 2020, the Company had $298.0 million of cash, including $87.4 million of cash held by its foreign subsidiaries. The Company's cash held by its foreign subsidiaries is used for operational and investing activities in those locations, and the Company does not currently have the need or the intent to repatriate those funds to the United States.
14


6.    Derivative Instruments
Foreign Currency Exchange Forward Contracts
The Company transacts business in various foreign currencies, has international sales, cost of sales, and expenses denominated in foreign currencies, and carries foreign-currency-denominated account balances, subjecting the Company to foreign currency risk. The Company’s primary foreign currency risk management objective is to protect the U.S. dollar value of future cash flows and minimize the volatility of reported earnings. The Company utilizes foreign currency forward contracts, which are primarily short term in nature.
Historically, the Company enters into foreign currency exchange forward contracts to manage its exposure to fluctuation in foreign exchange rates that arise from its Euro and British pound denominated account balances. Gains and losses on these contracts are intended to offset the impact of foreign exchange rate fluctuations on the underlying foreign currency denominated account balances, and therefore do not subject the Company to material balance sheet risk.
As of March 27, 2021 and December 26, 2020, the Company posted collateral of $0.9 million and $0.9 million, respectively, on its derivative instruments to cover potential credit risk exposure. This amount is classified as other long-term restricted cash on the accompanying condensed consolidated balance sheets.
For the three months ended March 27, 2021 and March 28, 2020, the before-tax effect of the foreign currency exchange forward contracts was a net gain of $0.3 million and $0.1 million, respectively, included in other gain (loss), net in the condensed consolidated statements of operations. In each of these periods, the impact of the gross gains and losses was offset by foreign exchange rate fluctuations on the underlying foreign currency denominated amounts.
As of March 27, 2021, the Company did not designate foreign currency exchange forward contracts as hedges for accounting purposes. Accordingly, changes in the fair value are recorded in the accompanying condensed consolidated statements of operations. These contracts were entered into with one institution with high credit quality and the Company consistently monitors the creditworthiness of the counterparties.
The fair value of derivative instruments not designated as hedging instruments in the Company’s condensed consolidated balance sheets was as follows (in thousands):
 As of March 27, 2021As of December 26, 2020
 
Gross Notional(1)  
Prepaid expenses and other current assetsOther
Accrued
Liabilities
Gross
Notional
(1)
Other
Accrued
Liabilities
Foreign currency exchange forward contracts
Related to Euro denominated monetary balances$11,341 $6 $ $23,605 $(59)
Related to British Pound denominated monetary balances$19,159 $ (157)4,868 (13)
$30,500 $6 $(157)$28,473 $(72)
(1)Represents the face amounts of forward contracts that were outstanding as of the end of the period noted.
Accounts Receivable Factoring
The Company sells certain designated trade account receivables based on factoring arrangements with well-established factoring companies. Pursuant to the terms of the arrangements, the Company accounts for these transactions in accordance with ASC Topic 860, "Transfers and Servicing". The Company's factor purchases trade accounts receivables on a non-recourse basis and without any further obligations. Trade accounts receivables balances sold are removed from the condensed consolidated balance sheets and cash received is reflected as cash provided by operating activities in the condensed consolidated statements of cash flow. The difference between the fair value of the Company's trade receivables and the proceeds received is recorded as interest expense in the Company's condensed consolidated statements of operations. For both the three months ended March 27, 2021 and March 28, 2020, the Company's recognized factoring related interest expense was approximately $0.1 million, respectively. For the three months ended March 27, 2021 and March 28, 2020, the Company's gross amount of trade accounts receivables sold was approximately $31.0 million and $26.5 million, respectively.
15


7.    Goodwill and Intangible Assets
Goodwill
Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net tangible and identified intangible assets acquired.
The following table presents details of the Company’s goodwill during the three months ended March 27, 2021 (in thousands):
Balance as of December 26, 2020
$273,426 
Foreign currency translation adjustments(8,210)
Balance as of March 27, 2021
$265,216 
The gross carrying amount of goodwill may change due to the effects of foreign currency fluctuations as a portion of these assets are denominated in foreign currency. To date, the Company has not recognized any impairment losses on goodwill.
Intangible Assets
The following tables present details of the Company’s intangible assets as of March 27, 2021 and December 26, 2020 (in thousands, except for weighted average data):
 March 27, 2021
 Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Remaining Useful Life (In Years)
Intangible assets with finite lives:
Trade names$1,000 $(1,000)$ — 
Customer relationships and backlog159,955 (93,590)66,365 4.7
Developed technology187,891 (139,092)48,799 2.8
Total intangible assets with finite lives$348,846 $(233,682)$115,164 
*NMF = Not meaningful
 December 26, 2020
 Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Remaining Useful Life (In Years)
Intangible assets with finite lives:
Trade names$1,000 $(1,000)$ — 
Customer relationships and backlog162,098 (90,667)71,431 4.9
Developed technology192,285 (138,834)53,451 3.0
Total intangible assets with finite lives$355,383 $(230,501)$124,882 
The gross carrying amount of intangible assets and the related amortization expense of intangible assets may change due to the effects of foreign currency fluctuations as a portion of these assets are denominated in foreign currency. Amortization expense was $9.0 million and $13.1 million for the three months ended March 27, 2021 and March 28, 2020, respectively.
Intangible assets are carried at cost less accumulated amortization and impairment, if any. Amortization expenses are recorded to the appropriate cost and expense categories.
The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of March 27, 2021 (in thousands):
 Fiscal Years
 TotalRemainder of 20212022202320242025Thereafter
Total future amortization expense$115,164 $26,888 $33,284 $27,215 $11,983 $9,025 $6,769 
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Table of Contents
8.    Balance Sheet Details
Restricted Cash
    The Company’s restricted cash balance is held in deposit accounts at various banks globally. These amounts primarily collateralize the Company’s issuances of standby letters of credit and bank guarantees.
Allowance for Credit Losses
    The following table provides a rollforward of the allowance for doubtful accounts for accounts receivable for the three months ended March 27, 2021 (in thousands):
Balance as of December 26, 2020
$2,912 
Additions(1)
461 
Write offs(2)
(225)
Other(3)
(46)
Balance as of March 27, 2021
$3,102 
(1)     The new additions during the three months ended March 27, 2021 are primarily due to specific reserves.
(2)    The write offs during the three months ended March 27, 2021 are primarily amounts fully reserved previously.
(3)     Primarily represents foreign currency translation a