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
10-Q 2020-03-28 Filed 2020-05-15
10-K 2019-12-28 Filed 2020-03-04
10-Q 2019-09-28 Filed 2019-11-12
10-Q 2019-06-29 Filed 2019-08-08
10-Q 2019-03-30 Filed 2019-05-09
10-K 2018-12-29 Filed 2019-03-14
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10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-30 Filed 2018-02-28
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10-Q 2017-07-01 Filed 2017-08-08
10-Q 2017-04-01 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-02-23
10-Q 2016-09-24 Filed 2016-11-01
10-Q 2016-06-25 Filed 2016-08-02
10-Q 2016-03-26 Filed 2016-05-04
10-K 2015-12-26 Filed 2016-02-23
10-Q 2015-09-26 Filed 2015-11-05
10-Q 2015-06-27 Filed 2015-07-31
10-Q 2015-03-28 Filed 2015-05-04
10-K 2014-12-27 Filed 2015-02-18
10-Q 2014-09-27 Filed 2014-10-29
10-Q 2014-06-28 Filed 2014-08-01
10-Q 2014-03-29 Filed 2014-04-30
10-K 2013-12-28 Filed 2014-02-21
10-Q 2013-09-28 Filed 2013-11-01
10-Q 2013-06-29 Filed 2013-08-05
10-Q 2013-03-30 Filed 2013-05-07
10-K 2012-12-29 Filed 2013-03-05
10-Q 2012-09-29 Filed 2012-11-06
10-Q 2012-06-30 Filed 2012-08-07
10-Q 2012-03-31 Filed 2012-05-07
10-K 2011-12-31 Filed 2012-03-06
10-Q 2011-09-24 Filed 2011-11-01
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10-Q 2011-03-26 Filed 2011-05-03
10-K 2010-12-25 Filed 2011-03-01
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10-K 2009-12-26 Filed 2010-03-01
8-K 2020-05-29
8-K 2020-05-21
8-K 2020-05-11
8-K 2020-04-30
8-K 2020-04-13
8-K 2020-03-04
8-K 2020-03-04
8-K 2020-02-25
8-K 2020-01-03
8-K 2019-12-23
8-K 2019-11-12
8-K 2019-11-05
8-K 2019-08-20
8-K 2019-08-07
8-K 2019-08-01
8-K 2019-08-01
8-K 2019-06-03
8-K 2019-05-23
8-K 2019-05-08
8-K 2019-03-04
8-K 2019-02-21
8-K 2019-01-24
8-K 2018-12-10
8-K 2018-11-06
8-K 2018-10-01
8-K 2018-09-06
8-K 2018-08-07
8-K 2018-07-23
8-K 2018-05-24
8-K 2018-05-09
8-K 2018-02-15
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-03282020exhibit311.htm
EX-31.2 infn-03282020exhibit312.htm
EX-32.1 infn-03282020exhibit321.htm

Infinera Earnings 2020-03-28

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

Document
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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 28, 2020
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)
Delaware
 
77-0560433
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of exchange on which registered
Common stock, par value $0.001 per share
 
INFN
 
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  
As of May 13, 2020, 186,897,010 shares of the registrant’s Common Stock, $0.001 par value, were issued and outstanding.
 



INFINERA CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED MARCH 28, 2020
INDEX
 
 
 
Page
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 6.
 
 
 
 



PART I. FINANCIAL INFORMATION
 

Item 1.
Condensed Consolidated Financial Statements (Unaudited)
INFINERA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
(Unaudited)
 
March 28,
2020
 
December 28,
2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
261,534

 
$
109,201

Short-term restricted cash
4,126

 
4,339

Accounts receivable, net of allowance for doubtful accounts of $4,014 in 2020 and $4,005 in 2019
272,278

 
349,645

Inventory
319,696

 
340,429

Prepaid expenses and other current assets
159,845

 
139,217

Total current assets
1,017,479

 
942,831

Property, plant and equipment, net
148,815

 
150,793

Operating lease right-of-use assets
61,914

 
68,081

Intangible assets
155,356

 
170,346

Goodwill
239,412

 
249,848

Long-term restricted cash
17,808

 
19,257

Other non-current assets
26,347

 
27,182

Total assets
$
1,667,131

 
$
1,628,338

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
203,277

 
$
273,397

Accrued expenses and other current liabilities
186,668

 
193,168

Accrued compensation and related benefits
69,135

 
92,221

Short-term debt, net
31,680

 
31,673

Accrued warranty
18,988

 
21,107

Deferred revenue
95,693

 
103,753

Total current liabilities
605,441

 
715,319

Long-term debt, net
509,564

 
323,678

Long-term financing lease obligations
2,113

 
2,394

Accrued warranty, non-current
20,474

 
22,241

Deferred revenue, non-current
34,149

 
36,067

Deferred tax liability
7,505

 
8,700

Operating lease liabilities
60,420

 
64,210

Other long-term liabilities
65,746

 
69,194

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 28, 2020 and December 28, 2019
Issued and outstanding shares – 183,198 as of March 28, 2020 and 181,134 as of December 28, 2019
183

 
181

Additional paid-in capital
1,827,484

 
1,740,884

Accumulated other comprehensive loss
(46,139
)
 
(34,639
)
Accumulated deficit
(1,419,809
)
 
(1,319,891
)
Total stockholders' equity
361,719

 
386,535

Total liabilities and stockholders’ equity
$
1,667,131

 
$
1,628,338

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

3


INFINERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended
 
March 28,
2020
 
March 30,
2019
Revenue:
 
 
 
Product
$
255,192

 
$
223,007

Services
75,081

 
69,700

Total revenue
330,273

 
292,707

Cost of revenue:
 
 
 
Cost of product
201,792

 
157,817

Cost of services
40,695

 
36,676

Amortization of intangible assets
8,628

 
8,252

Acquisition and integration costs
1,035

 
2,064

Restructuring and related
1,157

 
21,466

Total cost of revenue
253,307

 
226,275

Gross profit
76,966

 
66,432

Operating expenses:

 
 
Research and development
68,180

 
73,660

Sales and marketing
36,689

 
40,037

General and administrative
29,620

 
33,044

Amortization of intangible assets
4,555

 
7,057

Acquisition and integration costs
9,222

 
7,134

Restructuring and related
5,580

 
17,188

Total operating expenses
153,846

 
178,120

Loss from operations
(76,880
)
 
(111,688
)
Other income (expense), net:
 
 
 
Interest income
24

 
766

Interest expense
(8,794
)
 
(7,563
)
Other gain (loss), net
(12,682
)
 
(2,923
)
Total other income (expense), net
(21,452
)
 
(9,720
)
Loss before income taxes
(98,332
)
 
(121,408
)
Provision for income taxes
936

 
193

Net loss
$
(99,268
)
 
$
(121,601
)
Net loss per common share:
 
 
 
Basic
$
(0.55
)
 
$
(0.69
)
Diluted
$
(0.55
)
 
$
(0.69
)
Weighted average shares used in computing net loss per common share:
 
 
 
Basic
182,024

 
176,406

Diluted
182,024

 
176,406

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

4


INFINERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
 
Three Months Ended
 
March 28,
2020
 
March 30,
2019
Net loss
$
(99,268
)
 
$
(121,601
)
Other comprehensive income (loss), net of tax:
 
 
 
Change in unrealized gain on available-for-sale investments

 
65

Foreign currency translation adjustment
(11,106
)
 
(5,557
)
Actuarial gain (loss) on pension liabilities
(394
)
 
78

Net change in accumulated other comprehensive loss
(11,500
)
 
(5,414
)
Comprehensive loss
$
(110,768
)
 
$
(127,015
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

5


INFINERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
 
 
 
Three Months Ended March 28, 2020
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Accumulated
Deficit
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Balance at December 28, 2019
 
181,134

 
$
181

 
$
1,740,884

 
$
(34,639
)
 
$
(1,319,891
)
 
$
386,535

ESPP shares issued
 
1,839

 
2

 
7,392

 

 

 
7,394

Restricted stock units released
 
225

 

 

 

 

 

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, 2020
 
183,198

 
$
183

 
$
1,827,484

 
$
(46,139
)
 
$
(1,419,809
)
 
$
361,719



 
 
Three Months Ended March 30, 2019
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Accumulated
Deficit
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Balance at December 29, 2018
 
175,452

 
$
175

 
$
1,685,916

 
$
(25,300
)
 
$
(956,970
)
 
$
703,821

ESPP shares issued
 
1,825

 
2

 
7,738

 

 

 
7,740

Restricted stock units released
 
138

 

 

 

 

 

Stock-based compensation
 

 

 
9,056

 

 

 
9,056

Cumulative-effect adjustment from adoption of Topic 842
 

 

 

 

 
23,697

 
23,697

Other comprehensive loss
 

 

 

 
(5,414
)
 

 
(5,414
)
Net loss
 

 

 

 

 
(121,601
)
 
(121,601
)
Balance at March 30, 2019
 
177,415

 
177

 
$
1,702,710

 
$
(30,714
)
 
$
(1,054,874
)
 
$
617,299


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


6


INFINERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended
 
March 28,
2020
 
March 30,
2019
Cash Flows from Operating Activities:
 
 
 
Net loss
$
(99,268
)
 
$
(121,601
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
25,445

 
30,939

Non-cash restructuring charges and related costs
1,760

 
16,851

Amortization of debt discount and issuance costs
5,731

 
4,614

Operating lease expense
5,204

 
14,966

Stock-based compensation expense
11,703

 
8,713

Other, net
1,153

 
1,775

Changes in assets and liabilities:
 
 
 
Accounts receivable
70,238

 
49,754

Inventory
17,737

 
(24,937
)
Prepaid expenses and other assets
(18,744
)
 
(5,236
)
Accounts payable
(72,355
)
 
(23,439
)
Accrued liabilities and other expenses
(32,083
)
 
(15,486
)
Deferred revenue
(8,038
)
 
6,933

Net cash used in operating activities
(91,517
)
 
(56,154
)
Cash Flows from Investing Activities:
 
 
 
Proceeds from maturities of investments

 
10,542

Acquisition of business, net of cash acquired

 
(10,000
)
Purchase of property and equipment, net
(8,464
)
 
(6,590
)
Net cash used in investing activities
(8,464
)
 
(6,048
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from issuance of 2027 Notes
194,500

 

Proceeds from mortgage payable

 
8,584

Proceeds from revolving line of credit
55,000

 

Repayment of revolving line of credit

 

Payment of debt issuance cost
(1,775
)
 
 
Repayment of mortgage payable
(99
)
 

Proceeds from issuance of common stock
7,395

 
7,740

Net cash provided by financing activities
255,021

 
16,324

Effect of exchange rate changes on cash and restricted cash
(4,369
)
 
(1,213
)
Net change in cash, cash equivalents and restricted cash
150,671

 
(47,091
)
Cash, cash equivalents and restricted cash at beginning of period
132,797

 
242,337

Cash, cash equivalents and restricted cash at end of period(1)
$
283,468

 
$
195,246

 
 
 
 

7


Supplemental disclosures of cash flow information:
 
 
 
Cash paid for income taxes, net of refunds
$
1,072

 
$
1,353

Cash paid for interest
$
5,131

 
$
4,315

Supplemental schedule of non-cash investing and financing activities:
 
 
 
Unpaid debt issuance cost
$
1,793

 
$

Transfer of inventory to fixed assets
$
118

 
$
1,805



(1)     Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:
 
March 28,
2020
 
March 30,
2019
 
 
 
 
 
(In thousands)
Cash and cash equivalents
$
261,534

 
$
167,259

Short-term restricted cash
4,126

 
4,671

Long-term restricted cash
17,808

 
23,316

Total cash, cash equivalents and restricted cash
$
283,468

 
$
195,246



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

8


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 28, 2019.
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 lease liabilities, business combinations, fair value measurement of investments 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 28, 2019.
To date, a few of the Company’s customers have accounted for a significant portion of its revenue. For the three months ended March 28, 2020, one customer accounted for 11% of the Company's total revenue and for the three months ended March 30, 2019, the same customer accounted for 11% of the Company's total revenue.
Certain reclassifications have been made to prior period balances in order to conform to the current period  presentation of the cash flows from operating activities in the condensed consolidated statements of cash flows. The reclassifications were not material and had no impact on previously reported net cash used in operating activities and on our other condensed consolidated financial statements for the periods ended March 28, 2020 and March 30, 2019.
There have been no material changes in the Company’s significant accounting policies for the three months ended March 28, 2020 compared to those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019, with the exception of updates to the policy noted below as a result of the adoption of ASU 2016-13 "Financial Instruments-Credit Losses (Topic 326)" ("Topic 326") as of December 29, 2019.
Allowance for doubtful accounts
The Company maintains an allowance for doubtful accounts for estimated credit losses resulting from the inability of its customers to make required payments and reviews the allowance quarterly. The Company determines expected credit losses by performing credit evaluations of its customers' financial condition, establishing both a general reserve and specific reserves for customers in an adverse financial condition and adjusting for its expectations of changes in conditions that may impact the collectability of outstanding receivables. The Company considers factors such as historical experience, credit quality, age of the accounts receivable balances, and geographic or country-specific risks. Amounts are written off when receivables are determined to be uncollectible.

9



2.
Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
        
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2016-13, “Financial Instruments-Credit Losses (Topic 326)” (“ASU 2016-13”), in order to improve financial reporting of expected credit losses on financial instruments and other commitments to extend credit. ASU 2016-13 requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and replaces the incurred loss impairment methodology in prior GAAP with a methodology that requires consideration of a broader range of information to estimate credit losses. The Company adopted ASU 2016-13 on a modified retrospective basis in the first quarter of 2020 through a cumulative-effect adjustment at the beginning of the first quarter of 2020 and the impact of the adoption was not material to the Company's consolidated financial statements as credit losses are not expected to be significant based on historical collection trends, the financial condition of the Company’s customers, and external market factors. The Company will continue to actively monitor the impact of the COVID-19 pandemic on expected credit losses.
In August 2018, the FASB issued Accounting Standards Update No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). This update eliminates, adds and modifies certain disclosure requirements for fair value measurements. ASU 2018-13 was effective for the Company in its first quarter of 2020. The Company adopted ASU 2018-13 in the first quarter of 2020 and the impact of the adoption was not material to the Company's consolidated financial statements.
Accounting Pronouncements Not Yet Effective
In March 2020, the FASB issued ASU No. 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 is currently evaluating the impact the adoption of ASU 2020-04 would have on its consolidated financial statements.
In December 2019, FASB issued Accounting Standards Update No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), as part of its simplification initiative. ASU 2019-12 removes certain exceptions from ASC 740, Income Taxes, 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 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 years) beginning after December 15, 2020, with early adoption permitted. The Company elected not to early adopt ASU 2019-12 as of December 28, 2019. The Company is currently evaluating the impact the adoption of ASU 2019-12 would have on its consolidated financial statements.
In August 2018, the FASB issued Accounting Standards Update No. 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”). This update eliminates, adds and modifies certain disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. ASU 2018-14 is effective for the Company in its first quarter of 2021, with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU 2018-14 would have on its consolidated financial statements.

10


3.    Leases
The Company has operating leases for real estate and automobiles. During the three months ended March 28, 2020, operating lease expense was approximately $8.6 million (including $1.4 million of accelerated rent expense due to restructuring resulting in abandonment of lease facilities). Variable lease cost, short-term lease cost and sublease income were immaterial during the three months ended March 28, 2020. As of March 28, 2020, $18.1 million was included in accrued expenses and other current liabilities and $60.4 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 28, 2020 (in thousands):
Remainder of 2020
 
$
18,987

2021
 
18,691

2022
 
15,245

2023
 
12,054

2024
 
10,066

Thereafter
 
35,855

Total lease payments
 
110,898

Less: interest(1)
 
32,423

Present value of lease liabilities
 
$
78,475


(1) Calculated using the interest rate for each lease.
The following table presents supplemental information for the three months ended March 28, 2020 (in thousands, except for weighted average and percentage data):
Weighted average remaining lease term
 
7.01 years

Weighted average discount rate
 
9.09
%
Cash paid for amounts included in the measurement of lease liabilities
 
$
6,425

Operating cash flow from operating leases
 
$
6,425

Leased assets obtained in exchange for new operating lease liabilities
 
$
1,818


Financing Lease Obligations
During the three months ended March 28, 2020, there were no new finance lease arrangements. The lease term for the existing arrangements range from 3 - 5 years with options to purchase at the end of the term. Finance lease cost was approximately $0.2 million for the three months ended March 28, 2020 and zero for the three months ended March 30, 2019. As of March 28, 2020, $1.7 million was included in accrued expenses and other current liabilities and $2.1 million as long-term finance lease obligation related to these equipment finance lease arrangements.
As of December 28, 2019, $1.4 million was included in accrued expenses and other current liabilities and $2.4 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 28, 2020 (in thousands):
 
 
 
Remainder of 2020
 
$
1,557

2021
 
1,199

2022
 
930

2023
 
402

Thereafter
 

Total lease payments
 
4,088

Less: interest
 
281

Present value of lease liabilities
 
$
3,807



11


The following table presents supplemental information for the three months ended March 28, 2020 (in thousands, except for weighted average and percentage data):
Weighted average remaining lease term
 
2.78 years

Weighted average discount rate
 
7.00
%
Cash paid for amounts included in the measurement of lease liabilities
 
$

Operating cash flow from operating leases
 
$

Leased assets obtained in exchange for new finance lease liabilities
 
$


4. Revenue Recognition
Capitalization of Costs to Obtain a Contract
The ending balance of the Company’s capitalized costs to obtain a contract as of March 28, 2020 and December 28, 2019 were $0.2 million and $0.2 million, respectively. The Company's amortization expense was not material for each of the three months ended March 28, 2020 and March 30, 2019.
Disaggregation of Revenue
The following table presents the Company's revenue disaggregated by revenue source (in thousands):
 
Three Months Ended
 
March 28,
2020
 
March 30,
2019
Product
$
255,192

 
$
223,007

Services
75,081

 
69,700

Total revenue
$
330,273

 
$
292,707

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 and by sales channel (in thousands):
 
Three Months Ended
 
March 28,
2020
 
March 30,
2019
United States
$
170,526

 
$
132,522

Other Americas
19,688

 
15,132

Europe, Middle East and Africa
88,578

 
98,992

Asia Pacific
51,481

 
46,061

Total revenue
$
330,273

 
$
292,707


 
Three Months Ended
 
March 28,
2020
 
March 30,
2019
Direct
$
244,351

 
$
248,196

Indirect
85,922

 
44,511

Total revenue
$
330,273

 
$
292,707


12


Contract Balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in thousands):
 
March 28,
2020
 
December 28, 2019
Accounts receivable, net
$
272,278

 
$
349,645

Contract assets
$
34,806

 
$
22,814

Deferred revenue
$
129,842

 
$
139,820


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 28, 2020 were not materially impacted by other factors.
Transaction Price Allocated to the Remaining Performance Obligation
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) at the end of the reporting period (in thousands):
 
Remainder of 2020

2021

2022

2023

2024

Thereafter
 
Total
Revenue expected to be recognized in the future as of March 28, 2020
$
453,406

 
$
37,172

 
$
11,538

 
$
6,056

 
$
1,802

 
$
449

 
$
510,423


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 28, 2020
 
As of December 28, 2019
 
Fair Value Measured Using
 
Fair Value Measured Using
 
Level 1      
 
Level 2      
 
Total        
 
Level 1      
 
Level 2      
 
Total        
Liabilities
 
 

 

 
 
 
 
 
 
Foreign currency exchange forward contracts
$

 
$
(52
)
 
$
(52
)
 
$

 
$
(159
)
 
$
(159
)

During the three months ended March 28, 2020, there were no transfers of liabilities between Level 1 and Level 2 of the fair value hierarchy. As of March 28, 2020 and December 28, 2019, none of the Company’s existing 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 28, 2020.    

13


Facilities-related Charges
In connection with the 2018 Restructuring Plan (as defined in Note 9, “Restructuring and Related Costs” to the Notes to Consolidated Financial Statements), the Company calculated the fair value of the $3.0 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, which included the amount and timing of estimated sublease rental receipts that the Company could reasonably obtain over the remaining lease term and the discount rate.
Cash
As of March 28, 2020, the Company had $261.5 million of cash, including $53.6 million of cash held by its foreign subsidiaries.  
As of December 28, 2019, the Company had $109.2 million of cash including $68.7 million of cash held by its foreign subsidiaries. The Company's cash in foreign locations 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.
6.    Derivative Instruments
Foreign Currency Exchange Forward Contracts
The Company transacts business in various foreign currencies and has international sales, cost of sales, and expenses denominated in foreign currencies, and carries foreign-currency-denominated monetary assets and liabilities, 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. The Company utilizes foreign currency forward contracts, 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 receivables and restricted cash balances. Gains and losses on these contracts are intended to offset the impact of foreign exchange rate fluctuations on the underlying foreign currency denominated accounts receivables and restricted cash, and therefore, do not subject the Company to material balance sheet risk.
The Company also enters into foreign currency exchange contracts to reduce the volatility of cash flows primarily related to forecasted revenues and expenses denominated in euros and British pounds. The contracts are generally settled for U.S. dollars, euros and British pounds at maturity under an average rate method agreed to at inception of the contracts. The gains and losses on these foreign currency derivatives are recorded to the consolidated statement of operations line item, in the current period, to which the item that is being economically hedged is recorded.
As of March 28, 2020, and December 28, 2019, the Company posted $0.9 million and 0.9 million, respectively, of collateral on its derivative instruments to cover potential credit risk exposure. This amount is classified as other long-term restricted cash on the accompanying consolidated balance sheets.
For the three months ended March 28, 2020 and March 30, 2019, the before-tax effect of the foreign currency exchange forward contracts was a net gain of $0.1 million and a net gain of $0.7 million, respectively, included in other gain (loss), net in the 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 28, 2020, the Company did not designate foreign currency exchange forward contracts as hedges for accounting purposes and accordingly, changes in the fair value are recorded in the accompanying condensed consolidated statements of operations. These contracts were entered into with one high-quality institution and the Company consistently monitors the creditworthiness of the counterparties.

14


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 28, 2020
 
As of December 28, 2019
 
Gross Notional(1)  
 
Other Accrued Liabilities
 
Gross
Notional(1)
 
Other
Accrued
Liabilities
Foreign currency exchange forward contracts
 
 
 
 
 
 
 
Related to euro denominated receivables
$
8,928

 
$
(52
)
 
$
27,566

 
$
(159
)
 
$
8,928

 
$
(52
)
 
$
27,566

 
$
(159
)
(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 to a large international banking institution. Pursuant to the terms of the arrangements, the Company accounts for these transactions in accordance with ASC 860. 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 consolidated balance sheets and cash received are reflected as cash provided by operating activities in the 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 consolidated statements of operations, and for the three months ended March 28, 2020 and March 30, 2019, the Company's recognized factoring related interest expense was approximately $0.1 million and $0.2 million. The gross amount of trade accounts receivables sold during the three months ended March 28, 2020 and March 30, 2019 totaled approximately $26.5 million and $24.4 million, respectively.
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 28, 2020 (in thousands):
Balance as of December 28, 2019
$
249,848

Foreign currency translation adjustments
(10,436
)
Balance as of March 28, 2020
$
239,412


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 28, 2020 and December 28, 2019 (in thousands, except for weighted average data):
 
March 28, 2020
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Weighted Average Remaining Useful Life (In Years)
Intangible assets with finite lives:


 


 


 
 
Trade names
$
1,000

 
$
(1,000
)
 
$

 
NMF*
Customer relationships and backlog
153,216

 
(71,159
)
 
82,057

 
5.6
Developed technology
174,068

 
(100,769
)
 
73,299

 
3.5
Total intangible assets with finite lives
$
328,284

 
$
(172,928
)
 
$
155,356

 


*NMF = Not meaningful

15


 
December 28, 2019
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Weighted Average Remaining Useful Life (In Years)
Intangible assets with finite lives:
 
 
 
 
 
 
 
Trade names
$
1,000

 
$
(1,000
)
 
$

 
NMF*
Customer relationships and backlog
155,942

 
(68,119
)
 
87,823

 
5.8
Developed technology
179,593

 
(97,070
)
 
82,523

 
3.5
Total intangible assets with finite lives
$
336,535

 
$
(166,189
)
 
$
170,346

 


*NMF = Not meaningful
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 $13.1 million for the three months ended March 28, 2020 and was $15.3 million for the three months ended March 30, 2019.
Intangible assets are carried at cost less accumulated amortization. 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 28, 2020 (in thousands):
 
 
 
Fiscal Years
 
Total
 
Remainder of 2020
 
2021
 
2022
 
2023
 
2024
 
2025 and Thereafter
Total future amortization expense
$
155,356

 
$
33,596

 
$
34,904

 
$
32,417

 
$
26,662

 
$
11,983

 
$
15,794



16


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. The following table provides details of selected balance sheet items (in thousands):
 
March 28,
2020
 
December 28,
2019
Inventory
 
 
 
Raw materials
$
49,992

 
$
47,474

Work in process
52,012

 
48,842

Finished goods
217,692

 
244,113

Total inventory
$
319,696

 
$
340,429

Property, plant and equipment, net
 
 
 
Computer hardware
$
33,179

 
$
36,086

Computer software(1)
45,124

 
45,428

Laboratory and manufacturing equipment(2)
314,701

 
313,081

Land and building
12,349

 
12,349

Furniture and fixtures
3,218

 
2,845

Leasehold and building improvements(3)
52,568

 
52,263

Construction in progress
37,148

 
27,946

Subtotal
498,287

 
489,998

Less accumulated depreciation and amortization(4)
(349,472
)
 
(339,205
)
Total property, plant and equipment, net
$
148,815

 
$
150,793

Accrued expenses and other current liabilities
 
 
 
Loss contingency related to non-cancelable purchase commitments
$
25,860

 
$
24,812

Professional and other consulting fees
14,218

 
12,296

Taxes payable
76,589

 
65,815

Accrued rebate and customer prepay liability
711

 
4,390

Short-term operating lease liability
18,054

 
18,106

Short-term financing lease obligation
1,693

 
1,380

Restructuring accrual
24,262

 
26,076

Other accrued expenses and other current liabilities
25,281

 
40,293

Total accrued expenses
$
186,668

 
$
193,168


(1) 
Included in computer software at March 28, 2020 and December 28, 2019 were $23.5 million and $23.3 million, respectively, related to enterprise resource planning (“ERP”) systems that the Company implemented. The unamortized ERP costs at March 28, 2020 and December 28, 2019 were $10.8 million and $11.3 million, respectively.
(2) 
Included in laboratory and manufacturing equipment at March 28, 2020 was $2 million related to an equipment finance lease entered by the Company for a term of three years with an option to purchase at the end of the three-year term. The finance lease was recorded at $2 million using a discount rate of 8.2% and was included in property, plant and equipment, net.
(3) 
Included in leasehold improvements at March 28, 2020 was equipment finance lease entered by the Company for a term of five-years with an option to purchase at the end of five year term. The finance lease was recorded at $2.3 million using a discount rate of 5% and was included in property, plant and equipment, net.
(4) 
Depreciation expense was $12.3 million, which includes depreciation of capitalized ERP cost of $0.7 million for the three months ended March 28, 2020.



17


9.    Restructuring and Related Costs