Table of Contents
Liquidity and Capital Resources
July 27, October 27, Increase/ 2013 2012 (Decrease) (in thousands)
Cash and cash equivalents
20 % We use cash generated by operations as our primary source of liquidity. We expect that cash provided by operating activities will fluctuate in future periods as a result of a number of factors, including fluctuations in our revenues, the timing of product shipments during the quarter, accounts receivable collections, inventory and supply chain management, and the timing and amount of tax, litigation settlements and other payments or receipts. For additional discussion, see "Part II - Other Information, Item 1A. Risk Factors." In
January 2013, we issued $300 millionof the 2023 Notes in the Offering. On January 22, 2013, we called the 2018 Notes for redemption. On February 21, 2013, we used the net proceeds from the Offering, together with cash on hand, to redeem all of our outstanding 2018 Notes, including the payment of the applicable premium and expenses associated with the redemption, and the interest on the 2018 Notes up to the date of redemption (see Note 8, "Borrowings," of the Notes to Condensed Consolidated Financial Statements). Based on past performance and current expectations, we believe that internally generated cash flows and cash on hand are generally sufficient to support business operations, capital expenditures, contractual obligations, and other liquidity requirements associated with our operations for at least the next twelve months. Also, we have up to $125 millionavailable under our revolving credit facility, and we can factor our trade receivables up to the maximum amount available at any time under our $50 millionfactoring facility to provide additional liquidity. There are no other transactions, arrangements, or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity of, availability of, or our requirements for capital resources. Financial Condition Cash and cash equivalents as of July 27, 2013, increased by $76.9 millionover the balance as of October 27, 2012, primarily due to the cash generated from operations and proceeds from the issuance of our common stock in connection with employee participation in our equity compensation plans, partially offset by the cash used for the acquisition of Vyatta, purchases of property and equipment and the repurchase of outstanding shares of our common stock. Net proceeds from the issuance of common stock in connection with employee participation in our equity compensation plans have historically been a significant component of our liquidity. The extent to which we receive proceeds from these plans can increase or decrease based upon changes in the market price of our common stock, from the amount of awards granted to employees and from the types of awards that are granted to employees. As a result, our cash flow resulting from the issuance of common stock in connection with employee participation in equity compensation plans will vary. A majority of our accounts receivable balance is derived from sales to our OEM partners. As of July 27, 2013, two customers accounted for 12% and 11%, respectively, of total accounts receivable, for a combined total of 23% of total accounts receivable. As of October 27, 2012, three customers accounted for 16%, 12% and 10%, respectively, of total accounts receivable, for a combined total of 38% of total accounts receivable. We perform ongoing credit evaluations of our customers and generally do not require collateral or security interests on accounts receivable balances. We have established reserves for credit losses, sales allowances, and other allowances. While we have not experienced material credit losses in any of the periods presented, there can be no assurance that we will not experience material credit losses in the future.