News Column

INFINERA CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 1, 2014

This Quarterly Report on Form 10-Q contains "forward-looking statements" that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include our expectations regarding earnings, revenue, gross margin, expenses, cash flows and other financial items; any statements of the plans, strategies and objectives of management for future operations and personnel; factors that may affect our operating results; statements concerning new products or services, including future PIC capacity and new product costs, delivery dates and revenue; statements related to capital expenditures; statements related to future economic conditions, performance, market growth or our sales cycle; statements related to our convertible senior notes issued in May 2013; statements related to the effects of litigation on our financial position, results of operations or cash flows; statements as to industry trends and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. These statements are often identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," or "will," and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included elsewhere in this Form 10-Q and in our other SEC filings, including our Annual Report on Form 10-K for the fiscal year ended December 28, 2013 filed on February 21, 2014. Such forward-looking statements speak only as of the date of this report. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Overview We were founded in December 2000 with a unique vision for optical networking. Prior to this, communications service provider optical networks were built from fairly commoditized products, broadly known as wavelength division multiplexing ("WDM") systems. Recent growth in bandwidth demand has increased the need for the delivery of high-capacity low-cost bandwidth throughout the network. We believe that in many cases, traditional point-to-point network architectures do not provide the required flexibility to meet this demand. It takes large amounts of low-cost bandwidth, pervasive Optical Transport Network ("OTN") switching, and the intelligence of bandwidth management to manage these larger networks and deliver high-capacity services quickly and cost-effectively. We believe this can best be achieved with photonic integrated circuits ("PICs") and that only through photonic integration can network operators efficiently scale their network bandwidth without significant increases in space, power or operational workload. We provide optical transport networking equipment, software and services to telecommunications service providers, internet content providers, cable operators, and wholesale network operators, including subsea network operators (collectively, "Service Providers") across the globe. Optical transport networks are deployed by Service Providers facing significant demands for transmission capacity prompted by increased use of high-speed Internet access, mobile broadband, high-definition video streaming services, business Ethernet services, cloud-based services and wholesale bandwidth services. The Infinera Intelligent Transport Network is an architecture for Service Providers to address the increasing demand for cloud-based services and data center connectivity. This architectural approach helps Service Providers use time as a weapon to increase revenues with reliable, differentiated services while reducing operating costs through scale, multi-layer convergence and automation. The Infinera Intelligent Transport Network is based on platforms built with our unique PICs. Traffic patterns in the optical network continue to grow to accommodate increased demands for transmission capacity prompted by increased use of high-speed Internet access, mobile broadband, streaming high-definition video services, business Ethernet services, cloud-based services and wholesale bandwidth services. We believe that the Infinera Intelligent Transport Network architecture is uniquely enabled to deliver improvements in these areas compared to competitive WDM systems that still rely on discrete optical components rather than PICs. We also believe that this enables Service Providers to deploy reliable, high-capacity, efficient optical network solutions 23



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that are easy to use and to improve the integration between the layers of Service Provider networks with the lowest total cost of ownership. Our DTN platform currently supports 10 Gigabits per second ("Gbps") and 40 Gbps WDM transmission capacity combined with integrated switching capabilities. Our DTN-X platform supports 100 Gbps WDM transmission capacity with 500 Gbps super-channels and also integrates 5 Terabits per second of OTN switching capacity in a single bay. The DTN-X platform leverages the unique capabilities of our 500 Gbps PICs to deliver high-capacity Intelligent Transport Networks that reduce power, cooling and space, while simplifying transport network operations. Our ATN platform supports direct wavelength connectivity to DTN and DTN-X nodes, reducing equipment costs and providing unique network management capabilities across our Intelligent Transport Network. As of June 28, 2014, we have sold our network systems for deployment in the optical networks of 133 customers worldwide, including CenturyLink, Colt, Cox Communications, DANTE, Deutsche Telekom, Equinix, Interoute, KDDI, Level 3, NTT, OTE, Pacnet, Rostelecom, Telefonica, TeliaSonera International Carrier, Vodafone and XO Communications. Since the commencement of shipping our DTN-X platform in the second quarter of 2012, we have 46 customers who have purchased our DTN-X platform. We do not have long-term sales commitments from our customers. To date, a few of our customers have accounted for a significant portion of our revenue. Two customers each accounted for over 10% of our revenue in the second quarter of 2014, and no customer accounted for over 10% of our revenue in the corresponding period in 2013. Two customers each accounted for over 10% of our revenue in the six months ended June 28, 2014, and one customer accounted for over 10% of our revenue in the corresponding period in 2013. We are headquartered in Sunnyvale, California, with employees located throughout the Americas, Europe and the Asia Pacific region. We expect to continue to add personnel in the United States and internationally to develop our products and provide additional geographic sales and technical support coverage. We primarily sell our products through our direct sales force, with a small portion sold indirectly through resellers. We derived 97% and 98% of our revenue from direct sales to customers in the three and six months ended June 28, 2014, respectively, and 88% and 92% of our revenue for the three and six months ended June 28, 2013, respectively. Our strategy is to leverage channel partners where appropriate to expand our presence in certain geographies; however, we expect to continue generating a substantial majority of our revenue from direct sales. In the remainder of 2014, our goal is to continue our growth in the 100 Gbps technology cycle with additional network builds to both new and existing customers. We also anticipate customers who deployed the DTN-X platform over the past two years to buy additional capacity for their networks, which if they do, will drive both additional revenue and also improve gross margin levels. Given the lower than expected research and development expenses incurred during the first half of fiscal 2014, we currently expect to ramp up our research and development spending levels in the second half of the fiscal year to allow us to execute on our future product roadmap, including additional features for our long-haul offerings and new products for adjacent markets. We anticipate generating positive cash flows over the remainder of the fiscal year. Our year-over-year and quarter-over-quarter revenue will likely be volatile and may be impacted by several factors including general economic and market conditions, time-to-market development of new products, acquisitions of new customers and the timing of large product deployments. Critical Accounting Policies and Estimates Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our condensed consolidated financial statements, which we have prepared in accordance with the U.S. generally accepted accounting principles ("U.S. GAAP"). The preparation of these financial statements requires management to make estimates, assumptions and judgments that can affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. Management believes that there have been no significant changes during the six 24



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months ended June 28, 2014 to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 28, 2013. Results of Operations The following sets forth, for the periods presented, certain unaudited condensed consolidated statements of operations information (in thousands, except percentages): Three Months Ended June 28, 2014 June 29, 2013 % of total % of total Amount revenue Amount revenue Change % Change Revenue: Product $ 142,364 86 % $ 120,647 87 % $ 21,717 18 % Services 23,035 14 % 17,738 13 % 5,297 30 % Total revenue $ 165,399 100 % $ 138,385 100 % $ 27,014 20 % Cost of revenue: Product $ 85,906 52 % $ 80,198 58 % $ 5,708 7 % Services 9,240 6 % 6,533 5 % 2,707 41 % Total cost of revenue $ 95,146 58 % $ 86,731 63 % $ 8,415 10 % Gross profit $ 70,253 42 % $ 51,654 37 % $ 18,599 36 % Six Months Ended June 28, 2014 June 29, 2013 % of total % of total Amount revenue Amount revenue Change % Change Revenue: Product $ 266,606 87 % $ 228,990 87 % $ 37,616 16 % Services 41,608 13 % 34,020 13 % 7,588 22 % Total revenue $ 308,214 100 % $ 263,010 100 % $ 45,204 17 % Cost of revenue: Product $ 164,344 53 % $ 155,645 59 % $ 8,699 6 % Services 15,211 5 % 13,009 5 % 2,202 17 % Total cost of revenue $ 179,555 58 % $ 168,654 64 % $ 10,901 6 % Gross profit $ 128,659 42 % $ 94,356 36 % $ 34,303 36 % Revenue Total revenue increased by $27.0 million, or 20%, during the three months ended June 28, 2014 compared to the corresponding period in 2013 and increased by $45.2 million, or 17%, during the six months ended June 28, 2014 compared to the corresponding period in 2013. Total product revenue increased by $21.7 million, or 18%, during the three months ended June 28, 2014 compared to the corresponding period in 2013 as a result of growth across multiple customer verticals. We continue to see customers adding new routes and additional capacity to their existing networks. In addition, we continue to win opportunities with new customers wanting to adopt our platforms. Total product revenue increased by $37.6 million, or 16%, during the six months ended June 28, 2014 compared to the corresponding period in 2013. This increase was driven by relatively stronger demand across our customer base as they continue to deploy our products to meet the growing bandwidth needs of their networks. Total services revenue increased by $5.3 million, or 30%, during the three months ended June 28, 2014 compared to the corresponding period in 2013. Total services revenue increased by $7.6 million, or 22%, during the six months ended June 28, 2014 compared to the corresponding period in 2013. The increase in both the quarter 25



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and year-to-date periods of fiscal 2014 was due to higher levels of deployment services as customers build out new networks utilizing our teams' expertise as well as higher on-going support services as we continue to grow our installed base.



The following table summarizes our revenue by geography and sales channel for the periods presented (in thousands, except percentages):

Three Months Ended June 28, 2014 June 29, 2013 % of total % of total Amount revenue Amount revenue Change % Change Total revenue by geography Domestic $ 136,342 82 % $ 88,251 64 % $ 48,091 54 % International 29,057 18 % 50,134 36 % (21,077 ) (42 )% $ 165,399 100 % $ 138,385 100 % $ 27,014 20 % Total revenue by sales channel Direct $ 160,310 97 % $ 122,234 88 % $ 38,076 31 % Indirect 5,089 3 % 16,151 12 % (11,062 ) (68 )% $ 165,399 100 % $ 138,385 100 % $ 27,014 20 % Six Months Ended June 28, 2014 June 29, 2013 % of total % of total Amount revenue Amount revenue Change % Change Total revenue by geography Domestic $ 247,033 80 % $ 167,324 64 % $ 79,709 48 % International 61,181 20 % 95,686 36 % (34,505 ) (36 )% $ 308,214 100 % $ 263,010 100 % $ 45,204 17 % Total revenue by sales channel Direct $ 300,784 98 % $ 243,082 92 % $ 57,702 24 % Indirect 7,430 2 % 19,928 8 % (12,498 ) (63 )% $ 308,214 100 % $ 263,010 100 % $ 45,204 17 % International revenue decreased by $21.1 million to 18% of total revenue for the three months ended June 28, 2014 from 36% of total revenue in the corresponding period in 2013. International revenue decreased by $34.5 million to 20% of total revenue for the six months ended June 28, 2014 from 36% of total revenue in the corresponding period in 2013. In absolute dollars, international revenue declined as we experienced strong demand led by Europe in the first half of 2013, which we have not been able to duplicate in the first half of 2014. In addition, as a percentage of total revenue, international revenue decreased during the three and six months ended June 28, 2014 due to strong demand within North America. We believe that our DTN-X platform is well positioned as existing customers continue to build out their networks and as we gain new opportunities to deploy our networks with new customers. We continue to see strong demand across our customer base including both new customers as well as growth with existing customers. As a result, we currently expect that these dynamics will drive our revenue slightly higher in the third quarter of 2014 on a sequential basis and represent significant year-over-year growth. Cost of Revenue and Gross Margin Gross margin increased to 42% in the three months ended June 28, 2014 from 37% in the corresponding period of 2013. The increase was primarily driven by customers adding an increased volume of capacity to the DTN-X networks they have built over the last few years. Gross margin increased to 42% in the six months ended June 28, 2014 from 36% in the corresponding period of 2013. This increase was primarily due to improvements in revenue mix, including both the mix of customers as well as the ratio of new network builds to capacity adds to existing networks. 26



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Based on our current outlook, we expect that gross margin in the third quarter of 2014 will decline slightly as compared to the prior quarter as we anticipate a significant number of new network builds. Operating Expenses The following tables summarize our operating expenses for the periods presented (in thousands, except percentages): Three Months Ended June 28, 2014 June 29, 2013 % of total % of total Amount revenue Amount revenue Change % Change Operating expenses: Research and development $ 31,738 19 % $ 31,681 23 % $ 57 0.2 % Sales and marketing 18,082 11 % 17,155 13 % 927 5 % General and administrative 12,381 7 % 11,426 8 % 955 8 % Total operating expenses $ 62,201 37 % $ 60,262 44 % $ 1,939 3 % Six Months Ended June 28, 2014 June 29, 2013 % of total % of total Amount revenue Amount revenue Change % Change Operating expenses: Research and development $ 61,084 20 % $ 61,407 23 % $ (323 ) (1) % Sales and marketing 35,944 12 % 35,201 14 % 743 2 % General and administrative 24,635 8 % 21,298 8 % 3,337 16 % Total operating expenses $ 121,663 40 % $ 117,906



45 % $ 3,757 3 %

Research and Development Expenses Research and development expenses increased by $0.1 million, or 0.2%, during the three months ended June 28, 2014 compared to the corresponding period in 2013 primarily due to increased facilities and depreciation costs of $0.8 million and costs of professional outside services of $0.2 million. These increases were primarily offset by $0.9 million of decreased prototype and non-recurring engineering expenses due to the timing of certain projects. Research and development expenses decreased by $0.3 million, or 1%, during the six months ended June 28, 2014 compared to the corresponding period in 2013 primarily due to a decrease in prototype and non-recurring engineering expense due to timing of certain projects of $1.6 million and decreased stock-based compensation expense of $1.5 million due to lower equity activity as compared to the prior year. These decreases were partially offset by increased facilities and depreciation costs of $1.1 million, increased costs of professional outside services of $0.8 million, increased compensation costs of $0.6 million due to higher headcount and other discretionary spending of $0.2 million. 27



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Sales and Marketing Expenses Sales and marketing expenses increased by $0.9 million, or 5%, during the three months ended June 28, 2014 compared to the corresponding period in 2013 primarily due to increased compensation costs of $0.9 million due to higher headcount to support the continued expansion of our business, as well as increased travel and trade show related expenses of $0.5 million. These increases were partially offset by $0.6 million in lower costs related to customer lab trials. Sales and marketing expenses increased by $0.7 million, or 2%, during the six months ended June 28, 2014 compared to the corresponding period in 2013 primarily due to increased travel, trade show and other marketing related expenses of $0.9 million, increased compensation costs due to increased headcount of $0.5 million and $0.2 million in lower costs of professional outside services. These increases were partially offset by $0.9 million in lower costs related to customer lab trials. General and Administrative Expenses General and administrative expenses increased by $1.0 million, or 8%, during the three months ended June 28, 2014 compared to the corresponding period in 2013 primarily due to higher compensation and personnel-related costs of $0.6 million due to an increase in headcount along with increased costs of professional outside services of $0.3 million. General and administrative expenses increased by $3.3 million, or 16%, during the six months ended June 28, 2014 compared to the corresponding period in 2013 primarily due to higher compensation and personnel-related costs of $2.1 million and increased costs of professional outside services of $1.1 million. Other Income (Expense), Net Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, 2014 2013 Change % Change 2014 2013 Change % Change (In thousands) Interest



income $ 337$ 207$ 130 63 % $ 673

$ 404$ 269 67 % Interest expense (2,728 ) (849 ) (1,879 ) 221 % (5,405 ) (849 ) (4,556 ) 537 % Other gain (loss), net (264 ) (158 ) (106 ) 67 % (993 ) (361 ) (632 ) 175 % Total other income (expense), net $ (2,655 )$ (800 )$ (1,855 ) 232 % $ (5,725 )



$ (806 )$ (4,919 ) 610 %

Interest income increased by $0.1 million and $0.3 million during the three and six months ended June 28, 2014, respectively, compared to the corresponding periods in 2013. These increases were primarily driven by a higher investment balance as a result of both our cash generated from operations over the past year and the proceeds from the issuance in May 2013 of $150.0 million aggregate principal amount of 1.75% convertible senior notes due June 1, 2018 (the "Notes"), partially offset by lower investment returns. Interest expense for the three and six months ended June 28, 2014 consisted of cash interest payments and amortization of discount and issuance costs related to the Notes. The change in other gain (loss), net for the three months ended June 28, 2014 as compared to the same period of 2013 was primarily due to an increase in realized and unrealized foreign currency transaction loss. The change in other gain (loss), net for the six months ended June 28, 2014 as compared to the same period of 2013 was primarily due to a $0.8 million increase in realized and unrealized foreign currency transaction loss, partially offset by $0.2 million gain from the disposal of our remaining auction rate securities. Income Tax Provision Provision for income taxes for the three and six months ended June 28, 2014 was $0.6 million and $0.9 million, respectively, on pre-tax income of $5.4 million and $1.3 million, respectively. This compared to a tax provision of $0.6 million and $0.9 million, respectively, on a pre-tax loss of $9.4 million and $24.4 million, respectively, for the three and six months ended June 28, 2013. In all periods, the tax expense primarily represents foreign taxes of our overseas subsidiaries compensated on a cost plus basis and remains relatively similar in all periods, regardless of the level of consolidated earnings. We do not provide for tax on U.S. income, nor benefit U.S. 28



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losses, because of our significant loss carryforward position and a corresponding full valuation allowance. The release of transfer pricing reserves in the future will have a beneficial impact to tax expense, but the timing of the impact depends on factors such as expiration of the statute of limitations or settlements with tax authorities. No significant releases are expected in the near future based on information available at this time. Liquidity and Capital Resources Six Months Ended June 28, June 29, 2014 2013 (In thousands) Net cash flow provided by (used in): Operating activities $ (5,181 )$ (3,375 ) Investing activities $ (42,858 )$ (74,768 ) Financing activities $ 6,782$ 155,466 June 28, December 28, 2014 2013 (In thousands) Cash and cash equivalents $ 83,307$ 124,330 Short-term and long-term investments 267,780 237,079 Long-term restricted cash 4,404 3,904 $ 355,491$ 365,313 Cash, cash equivalents and short-term investments consist of highly-liquid investments in certificates of deposits, money market funds, commercial paper, corporate bonds and U.S. treasuries. Long-term investments primarily consist of corporate bonds. The restricted cash balance amounts are primarily pledged as collateral for certain stand-by and commercial letters of credit related to customer proposal guarantees, value added tax licenses and property leases. Operating Activities Net cash used in operating activities for the six months ended June 28, 2014 was $5.2 million as compared to $3.4 million for the corresponding period in 2013. Net income for the six months ended June 28, 2014 was $0.4 million, which included non-cash charges of $32.1 million, compared to a net loss of $25.3 million for the corresponding period in 2013, including non-cash charges of $29.6 million. Net cash used to fund working capital was $37.7 million for the six months ended June 28, 2014. Accounts receivables increased by $20.0 million primarily due to timing of invoicing of DTN-X deployments during the period. Inventory increased by $8.1 million due to increased levels of DTN-X inventory, including increased levels of inventory awaiting customer acceptance. Accounts payable decreased by $6.4 million primarily reflecting timing of purchases and payments of purchases during the period. Net cash used to fund working capital was $7.7 million for the six months ended June 29, 2013. Accounts receivables decreased by $10.3 million primarily due to improved timing of acceptance and invoicing of DTN-X deployments. Accounts payable decreased by $24.0 million primarily reflecting the timing of inventory purchases and improved linearity of supply during the period. Investing Activities Net cash used in investing activities in the six months ended June 28, 2014 was $42.9 million compared to net cash provided by investing activities of $74.8 million in the corresponding period of 2013. Investing activities for the six months ended June 28, 2014 included net cash used of $32.4 million associated with purchases, maturities and sales of investments in the period and $10.0 million of capital expenditures. Investing activities for the six months ended June 28, 2013 included net cash used of $65.3 million associated with purchases, maturities, calls and sales of investments in the period, and $9.4 million of capital expenditures. 29



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Financing Activities Net cash provided by financing activities in the six months ended June 28, 2014 was $6.8 million compared to $155.5 million in the corresponding period of 2013. Financing activities for the six months ended June 28, 2014 and the corresponding period in 2013 included net proceeds from the exercise of stock options and issuance of shares under the employee stock purchase plan ("ESPP"). These proceeds were offset by the minimum tax withholdings paid on behalf of employees for net share settlements of restricted stock units. Financing activities for the six months ended June 28, 2013 included net proceeds from the issuance of the Notes of $144.5 million. Liquidity We believe that our current cash, cash equivalents and investments, together with cash generated from operations, exercise of employee stock options and purchases under our ESPP will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. If these sources of cash are insufficient to satisfy our liquidity requirements beyond 12 months, we may require additional capital from equity or debt financings to fund our operations, to respond to competitive pressures or strategic opportunities, or otherwise. We may not be able to secure timely additional financing on favorable terms, or at all. The terms of any additional financing may place limits on our financial and operating flexibility. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer dilution in their percentage ownership of us, and any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. In May 2013, we issued the Notes, which will mature on June 1, 2018, unless earlier purchased by us or converted. Interest is payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2013. The net proceeds from the Notes issuance were approximately $144.5 million and intended to be used for working capital and other general corporate purposes. Upon conversion, it is our intention to pay cash equal to the lesser of the aggregate principal amount and the conversion value of the Notes as cash, shares of common stock or a combination of cash and shares of common stock, at our election, for any remaining conversion obligation. The carrying value of the Notes was $112.9 million as of June 28, 2014, which represents the liability component of the $150.0 million principal balance, net of $37.1 million debt discount. The debt discount is currently being amortized over the remaining term until maturity of the Notes on June 1, 2018. Any future redemption or conversion of the Notes could impact the timing of the repayment of these Notes. As of June 28, 2014, contractual obligations related to the Notes are payments of $1.3 million due within 2014, $2.6 million due each year from 2015 through 2017 and $151.3 million due in 2018. These amounts represent principal and interest cash payments over the term of the Notes. Any future redemption or conversion of the Notes could impact the amount or timing of our cash payments. For more information regarding the Notes, see Note 9, "Convertible Senior Notes," to the Notes to Condensed Consolidated Financial Statements. As of June 28, 2014, we had $314.0 million of cash, cash equivalents, and short-term investments, including $16.9 million of cash and cash equivalents held by our foreign subsidiaries. Our cash in foreign locations is used for operational and investing activities in those locations, and we do not currently have the need or the intent to repatriate those funds to the United States. Our policy with respect to undistributed foreign subsidiaries' earnings is to consider those earnings to be indefinitely reinvested. If we were to repatriate these funds, we would be required to accrue and pay U.S. taxes on such amounts, however, due to our significant net operating loss carryforward position for both federal and state tax purposes, as well as the full valuation allowance provided against our U.S. and state net deferred tax assets, we would currently be able to offset any such tax obligations in their entirety. However, foreign withholding taxes may be applicable. Off-Balance Sheet Arrangements As of June 28, 2014, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. 30



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