INFINERA CORP, 10-Q filed on 11/8/2017
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2017
Nov. 2, 2017
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2017 
 
Document Fiscal Year Focus
2017 
 
Document Fiscal Period Focus
Q3 
 
Trading Symbol
INFN 
 
Entity Registrant Name
INFINERA CORP 
 
Entity Central Index Key
0001138639 
 
Current Fiscal Year End Date
--12-30 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding (in shares)
 
149,327,225 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 122,042 
$ 162,641 
Short-term investments
134,319 
141,697 
Short-term restricted cash
740 
8,490 
Accounts receivable, net of allowance for doubtful accounts of $885 in 2017 and $772 in 2016
137,133 
150,370 
Inventory
242,848 
232,955 
Prepaid expenses and other current assets
50,320 
34,270 
Total current assets
687,402 
730,423 
Property, plant and equipment, net
143,217 
124,800 
Intangible assets
99,953 
108,475 
Goodwill
197,325 
176,760 
Long-term investments
47,575 
40,779 
Cost-method investment
7,000 
7,000 
Long-term restricted cash
4,299 
6,449 
Other non-current assets
4,328 
3,897 
Total assets
1,191,099 
1,198,583 
Current liabilities:
 
 
Accounts payable
89,310 
62,486 
Accrued expenses
30,080 
31,580 
Accrued compensation and related benefits
40,571 
46,637 
Short-term debt, net
141,985 
Accrued warranty
14,245 
16,930 
Deferred revenue
65,328 
58,900 
Total current liabilities
381,519 
216,533 
Long-term debt, net
133,586 
Accrued warranty, non-current
17,917 
23,412 
Deferred revenue, non-current
21,794 
19,362 
Deferred tax liability
23,384 
25,327 
Other long-term liabilities
14,547 
18,035 
Commitments and contingencies (Note 15)
   
   
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 July 01, 2017 and December 31, 2016; Issued and outstanding shares – 148,189 as of July 01, 2017 and 145,021 as of December 31, 2016
149 
145 
Additional paid-in capital
1,406,936 
1,354,082 
Accumulated other comprehensive loss
8,949 
(28,324)
Accumulated deficit
(684,096)
(563,575)
Total stockholders' equity
731,938 
762,328 
Total liabilities and stockholders’ equity
$ 1,191,099 
$ 1,198,583 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]
 
 
Net of allowance for doubtful accounts
$ 885 
$ 772 
Preferred stock, par value (in usd per share)
$ 0.001 
$ 0.001 
Preferred stock, shares authorized (in shares)
25,000,000 
25,000,000 
Preferred stock, shares issued (in shares)
Preferred stock, shares outstanding (in shares)
Common stock, par value (in usd per share)
$ 0.001 
$ 0.001 
Common stock, authorized shares (in shares)
500,000,000 
500,000,000 
Common stock, shares issued (in shares)
149,305,000 
145,021,000 
Common stock, shares outstanding (in shares)
149,305,000 
145,021,000 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Sep. 24, 2016
Revenue:
 
 
 
 
Product
$ 159,579 
$ 156,188 
$ 449,992 
$ 599,802 
Services
33,001 
29,264 
94,931 
89,290 
Total revenue
192,580 
185,452 
544,923 
689,092 
Cost of revenue:
 
 
 
 
Cost of product
111,803 
91,064 
311,437 
331,564 
Cost of services
12,951 
9,786 
36,772 
32,842 
Total cost of revenue
124,754 
100,850 
348,209 
364,406 
Gross profit
67,826 
84,602 
196,714 
324,686 
Operating expenses:
 
 
 
 
Research and development
56,616 
50,855 
169,076 
164,541 
Sales and marketing
27,824 
27,960 
86,662 
88,434 
General and administrative
17,634 
16,646 
53,556 
51,617 
Total operating expenses
102,074 
95,461 
309,294 
304,592 
Income (loss) from operations
(34,248)
(10,859)
(112,580)
20,094 
Other income (expense), net:
 
 
 
 
Interest income
857 
647 
2,470 
1,764 
Interest expense
(3,549)
(3,313)
(10,408)
(9,644)
Other gain (loss), net
(80)
(188)
(462)
(1,116)
Total other income (expense), net
(2,772)
(2,854)
(8,400)
(8,996)
Income (loss) before income taxes
(37,000)
(13,713)
(121,000)
11,100 
Provision for (benefit from) income taxes
211 
(2,400)
(459)
(725)
Net income (loss)
(37,231)
(11,297)
(120,521)
11,823 
Less: Loss attributable to noncontrolling interest
(125)
(503)
Net income (loss) attributable to Infinera Corporation
$ (37,231)
$ (11,172)
$ (120,521)
$ 12,326 
Net income (loss) per common share attributable to Infinera Corporation:
 
 
 
 
Basic (in usd per share)
$ (0.25)
$ (0.08)
$ (0.82)
$ 0.09 
Diluted (in usd per share)
$ (0.25)
$ (0.08)
$ (0.82)
$ 0.08 
Weighted average shares used in computing net income (loss) per common share:
 
 
 
 
Basic (in shares)
148,777 
143,850 
147,367 
142,350 
Diluted (in shares)
148,777 
143,850 
147,367 
145,921 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Sep. 24, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net income (loss)
$ (37,231)
$ (11,297)
$ (120,521)
$ 11,823 
Other comprehensive income (loss), net of tax:
 
 
 
 
Unrealized gain (loss) on available-for-sale investments
87 
(166)
27 
476 
Foreign currency translation adjustment
12,614 
(4,107)
37,257 
(7,609)
Tax related to available-for-sale investment
(11)
(11)
Net change in accumulated other comprehensive income (loss)
12,690 
(4,273)
37,273 
(7,133)
Less: Comprehensive loss attributable to noncontrolling interest
(125)
(503)
Comprehensive income (loss) attributable to Infinera Corporation
$ (24,541)
$ (15,445)
$ (83,248)
$ 5,193 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Cash Flows from Operating Activities:
 
 
Net income (loss)
$ (120,521)
$ 11,823 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
Depreciation and amortization
49,391 
45,764 
Amortization of debt discount and issuance costs
8,399 
7,598 
Amortization of premium on investments
359 
925 
Impairment of intangible assets
252 
Stock-based compensation expense
35,424 
29,191 
Other loss
11 
261 
Changes in assets and liabilities:
 
 
Accounts receivable
15,078 
33,044 
Inventory
(9,601)
(61,078)
Prepaid expenses and other assets
(15,366)
(1,625)
Accounts payable
25,840 
(13,935)
Accrued liabilities and other expenses
(10,310)
(7,580)
Deferred revenue
8,575 
(805)
Accrued warranty
(8,447)
(179)
Net cash provided by (used in) operating activities
(20,916)
43,404 
Cash Flows from Investing Activities:
 
 
Purchase of available-for-sale investments
(122,249)
(118,017)
Proceeds from sales of available-for-sale investments
10,531 
Proceeds from maturities and calls of investments
111,970 
110,554 
Purchase of cost-method investment
(5,000)
Purchase of property and equipment
(50,247)
(32,878)
Change in restricted cash
4,389 
(4,950)
Net cash used in investing activities
(45,606)
(50,291)
Cash Flows from Financing Activities:
 
 
Security pledge to acquire noncontrolling interest
5,596 
(5,921)
Acquisition of noncontrolling interest
(471)
(16,771)
Proceeds from issuance of common stock
17,991 
16,486 
Minimum tax withholding paid on behalf of employees for net share settlement
(963)
(3,592)
Net cash provided by (used in) financing activities
22,153 
(9,798)
Effect of exchange rate changes on cash
3,770 
(1,420)
Net change in cash and cash equivalents
(40,599)
(18,105)
Cash and cash equivalents at beginning of period
162,641 
149,101 
Cash and cash equivalents at end of period
122,042 
130,996 
Supplemental disclosures of cash flow information:
 
 
Cash paid for income taxes, net of refunds
4,159 
5,557 
Cash paid for interest
1,317 
1,445 
Supplemental schedule of non-cash investing activities:
 
 
Transfer of inventory to fixed assets
$ 3,110 
$ 5,211 
Basis of Presentation and Significant Accounting Policies
Basis of Presentation and Significant Accounting Policies
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 31, 2016.
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, inventory valuation, accrued warranty, business combinations, fair value measurement of investments and accounting for income taxes. Other estimates, assumptions and judgments made by management include allowances for sales returns, allowances for doubtful accounts, useful life of intangible assets, property, plant and equipment, and fair value measurement of the liability component of the Company's $150.0 million in aggregate principal amount of 1.75% convertible senior notes due June 1, 2018 (the “Notes”). 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. To the extent there are material differences between these estimates and actual results, the Company’s condensed consolidated financial statements will be affected.
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 intercompany 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 31, 2016.
To date, a few of the Company’s customers have accounted for a significant portion of its revenue.  For the three months ended September 30, 2017, two customers individually accounted for 16% and 12% of the Company's total revenue and for the corresponding period in 2016, two customers individually accounted for 16% and 12% of the Company's total revenue, respectively. For the nine months ended September 30, 2017, two customers individually accounted for 16% and 11% of the Company's total revenue and for the corresponding period in 2016, two customers individually accounted for 16% and 10% of the Company's total revenue, respectively.
There have been no material changes in the Company’s significant accounting policies for the nine months ended September 30, 2017 as compared to those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Recent Accounting Pronouncements
In May 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”), which amends the scope of modification accounting for share-based payment arrangements, and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Topic 718. This guidance is effective for the Company in its first quarter of fiscal 2018, with early adoption permitted. The Company does not expect the new guidance to have any material impact on its consolidated financial statements.
In January 2017, the FASB issued Accounting Standards Update 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). The guidance eliminates Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. ASU 2017-04 will be effective for the Company's annual or any interim goodwill impairment tests in its first quarter of fiscal 2020. The Company is currently evaluating the impact the adoption of ASU 2017-04 will have on its consolidated financial statements.
In November 2016, the FASB issued Accounting Standards Update 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”), which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As such, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and ending-of-period total amounts shown on the statement of cash flows. The Company is required to adopt ASU 2016-18 on a retrospective basis for fiscal years, and for interim periods within those fiscal years, beginning with its first quarter of fiscal 2018. Early adoption is permitted, including adoption in an interim period. Subsequent to the adoption of ASU 2016-18, the change in restricted cash would be excluded from the change in cash flows from investing and financing activities and included in the change in total cash, restricted cash and cash equivalents as reported in the statement of cash flows. The Company is currently evaluating the impact the adoption of ASU 2016-18 will have on its consolidated financial statements.
In August 2016, the FASB issued Accounting Standards Update 2016-15, “Statement of Cash Flows (Topic 320): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain transactions are presented and classified in the statement of cash flows. The Company early adopted ASU 2016-15 on a retrospective basis during the third quarter of fiscal 2017. The Company's adoption of 2016-15 had no impact on its consolidated statements of cash flows.
In June 2016, the FASB issued Accounting Standards Update 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. This guidance is effective for the Company in its first quarter of fiscal 2020 and early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements.
In May 2016, the FASB issued Accounting Standards Update 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update)” (“ASU 2016-11”), which rescinds various standards codified as part of Topic 605, Revenue Recognition in relation to the future adoption of Topic 606. These rescissions include changes to topics pertaining to revenue and expense recognition for freight services in process, accounting for shipping and handling fees and costs, and accounting for consideration given by a vendor to a customer. This guidance is effective for the Company in its first quarter of fiscal 2018 and early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-11 will have on its consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. This guidance is effective for the Company in its first quarter of fiscal 2019 and early adoption is permitted. ASU 2016-02 is required to be applied with a modified retrospective approach and requires application of the new standard at the beginning of the earliest comparative period presented. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on its consolidated financial statements and expects to have increases in the assets and liabilities of its consolidated balance sheets.
In July 2015, the FASB issued Accounting Standards Update 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”), to simplify the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first-out or the retail inventory method. Under ASU 2015-11, inventory should be at the lower of cost and net realizable value. The Company adopted ASU 2015-11 during the first quarter of fiscal 2017. The Company's adoption of 2015-11 had no impact on the Company's financial position, results of operations or cash flows.
In May 2014, the FASB issued Accounting Standards Update 2014-09, “Revenue from Contracts from Customers (Topic 606)” (“ASU 2014-09”), which creates a single, joint revenue standard that is consistent across all industries and markets for companies that prepare their financial statements in accordance with U.S. GAAP. Under ASU 2014-09, an entity is required to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services. In August 2015, the FASB issued Accounting Standards update 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which deferred the effective date of ASU 2014-09 by one year with early adoption permitted beginning after December 15, 2016. The updated standard is effective for interim and annual periods beginning after December 15, 2017. In April 2016, the FASB issued Accounting Standards Update 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” which clarifies the implementation guidance on identifying performance obligations and licensing. In May 2016, the FASB issued Accounting Standards Update 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” which amends the guidance on collectability, noncash consideration, presentation of sales tax and transition. In December 2016, the FASB issued Accounting Standards Update 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” to increase stakeholders' awareness of the proposals and to expedite improvements to ASU 2014-09. These standards will be effective for the Company's first quarter of 2018. The Company currently anticipates adopting the standard using the modified retrospective method as an adjustment to its opening balance of retained earnings. Prior periods will not be retrospectively adjusted. Although the Company has not yet determined the quantitative impact that the new revenue standard would have on its consolidated financial statements, the Company believes the new standard will impact the operations, policies and accounting in the areas of customer purchase commitments, contract termination rights, variable consideration, stand-alone selling price and capitalization of costs to obtain a contract.
The Company continues to evaluate the impact of the new revenue standard on its accounting policies, internal controls, processes and system requirements, and has assigned internal resources in addition to the engagement of third party service providers to assist in this evaluation. In addition, the Company has made and will continue to make investments in systems and processes to enable timely and accurate reporting under the new revenue standard. The Company currently remains on schedule with its implementation and expects that the necessary operational and internal control structural changes will be implemented prior to the adoption date. The Company is in the process of evaluating whether or not there will be a material impact on its consolidated financial statements.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements
Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
Valuation techniques used by the Company are based upon observable and unobservable inputs. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about market participant assumptions based on the best information available. Observable inputs are the preferred source of values. These two types of inputs create the following fair value hierarchy:
Level 1
 
 
Quoted prices in active markets for identical assets or liabilities.
 
 
 
 
 
Level 2
 
 
Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
 
 
 
Level 3
 
 
Prices or valuations that require management inputs that are both significant to the fair value measurement and unobservable.
The Company measures its cash equivalents, foreign currency exchange forward contracts and marketable debt securities at fair value and classifies its investments in accordance with the fair value hierarchy. The Company’s money market funds and U.S. treasuries are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets for identical securities.
The Company classifies its certificates of deposit, commercial paper, U.S. agency notes, corporate bonds and foreign currency exchange forward contracts within Level 2 of the fair value hierarchy as follows:
Certificates of Deposit
The Company reviews market pricing and other observable market inputs for the same or similar securities obtained from a number of industry standard data providers. In the event that a transaction is observed for the same or similar security in the marketplace, the price on that transaction reflects the market price and fair value on that day. In the absence of any observable market transactions for a particular security, the fair market value at period end would be equal to the par value. These inputs represent quoted prices for similar assets or these inputs have been derived from observable market data.
Commercial Paper
The Company reviews market pricing and other observable market inputs for the same or similar securities obtained from a number of industry standard data providers. In the event that a transaction is observed for the same or similar security in the marketplace, the price on that transaction reflects the market price and fair value on that day and then follows a revised accretion schedule to determine the fair market value at period end. In the absence of any observable market transactions for a particular security, the fair market value at period end is derived by accreting from the last observable market price. These inputs represent quoted prices for similar assets or these inputs have been derived from observable market data accreted mathematically to par.
U.S. Agency Notes
The Company reviews trading activity and pricing for its U.S. agency notes as of the measurement date. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from a number of industry standard data providers. These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data.
Corporate Bonds
The Company reviews trading activity and pricing for each of the corporate bond securities in its portfolio as of the measurement date and determines if pricing data of sufficient frequency and volume in an active market exists in order to support Level 1 classification of these securities. If sufficient quoted pricing for identical securities is not available, the Company obtains market pricing and other observable market inputs for similar securities from a number of industry standard data providers. In instances where multiple prices exist for similar securities, these prices are used as inputs into a distribution-curve to determine the fair market value at period end.
Foreign Currency Exchange Forward Contracts
As discussed in Note 5, “Derivative Instruments” to the Notes to Condensed Consolidated Financial Statements, the Company mainly holds non-speculative foreign exchange forward contracts to hedge certain foreign currency exchange exposures. The Company estimates the fair values of derivatives based on quoted market prices or pricing models using current market rates. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit risk, foreign exchange rates, and forward and spot prices for currencies.
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 September 30, 2017
 
As of December 31, 2016
 
Fair Value Measured Using
 
Fair Value Measured Using
 
Level 1      
 
Level 2      
 
Total        
 
Level 1      
 
Level 2      
 
Total        
Assets
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
32,544

 
$

 
$
32,544

 
$
41,773

 
$

 
$
41,773

Certificates of deposit

 
240

 
240

 

 
1,881

 
1,881

Commercial paper

 
14,969

 
14,969

 

 
39,310

 
39,310

Corporate bonds

 
125,544

 
125,544

 

 
88,324

 
88,324

U.S. agency notes

 
10,694

 
10,694

 

 
11,759

 
11,759

U.S. treasuries
39,437

 

 
39,437

 
52,092

 

 
52,092

Foreign currency exchange forward contracts

 

 

 

 
187

 
187

Total assets
$
71,981

 
$
151,447

 
$
223,428

 
$
93,865

 
$
141,461

 
$
235,326

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange forward contracts
$

 
$
(80
)
 
$
(80
)
 
$

 
$
(71
)
 
$
(71
)

During the three and nine months ended September 30, 2017, there were no transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy. As of September 30, 2017 and December 31, 2016, none of the Company’s existing securities were classified as Level 3 securities.
Cash, cash equivalents and investments were as follows (in thousands): 
 
September 30, 2017
 
Adjusted
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Cash
$
80,508

 
$

 
$

 
$
80,508

Money market funds
32,544

 

 

 
32,544

Commercial paper
3,000

 

 

 
3,000

U.S. treasuries
5,990

 

 

 
5,990

Total cash and cash equivalents
$
122,042

 
$

 
$

 
$
122,042

Certificates of deposit
240

 

 

 
240

Commercial paper
11,971

 

 
(2
)
 
11,969

Corporate bonds
86,024

 
2

 
(73
)
 
85,953

U.S. agency notes
7,700

 

 
(7
)
 
7,693

U.S. treasuries
28,506

 

 
(42
)
 
28,464

Total short-term investments
$
134,441

 
$
2

 
$
(124
)
 
$
134,319

Corporate bonds
39,630

 
3

 
(42
)
 
39,591

U.S. agency notes
3,006

 

 
(5
)
 
3,001

U.S. treasuries
4,998

 

 
(15
)
 
4,983

Total long-term investments
47,634

 
3

 
(62
)
 
47,575

Total cash, cash equivalents and investments
$
304,117

 
$
5

 
$
(186
)
 
$
303,936


 
December 31, 2016
 
Adjusted
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Cash
$
109,978

 
$

 
$

 
$
109,978

Money market funds
41,773

 

 

 
41,773

Commercial paper
8,892

 

 
(1
)
 
8,891

U.S. agency notes
1,999

 

 

 
1,999

Total cash and cash equivalents
$
162,642

 
$

 
$
(1
)
 
$
162,641

Certificates of deposit
1,881

 

 

 
1,881

Commercial paper
30,425

 

 
(6
)
 
30,419

Corporate bonds
63,097

 
1

 
(59
)
 
63,039

U.S. agency notes
7,285

 

 
(8
)
 
7,277

U.S. treasuries
39,093

 
9

 
(21
)
 
39,081

Total short-term investments
$
141,781

 
$
10

 
$
(94
)
 
$
141,697

Corporate bonds
25,374

 

 
(89
)
 
25,285

U.S. agency notes
2,499

 

 
(16
)
 
2,483

U.S. treasuries
13,032

 
2

 
(23
)
 
13,011

Total long-term investments
$
40,905

 
$
2

 
$
(128
)
 
$
40,779

Total cash, cash equivalents and investments
$
345,328

 
$
12

 
$
(223
)
 
$
345,117


 
As of September 30, 2017, the Company’s available-for-sale investments have a contractual maturity term of up to 21 months. Gross realized gains and losses on short-term and long-term investments were insignificant in all periods. The specific identification method is used to account for gains and losses on available-for-sale investments.
As of September 30, 2017, the Company had $256.4 million of cash, cash equivalents and short-term investments, including $56.5 million of cash and cash equivalents 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.
Cost-method Investment
Cost-method Investment
Cost-method Investment
In 2016, the Company invested $7.0 million in a privately-held company. In addition to the $7.0 million investment, the transaction included a customer supply agreement and warrants to purchase up to $10.0 million of additional shares of preferred stock. The warrants vest and become exercisable upon certain conditions being met.
As of September 30, 2017 and December 31, 2016, the Company's cost-method investment balance was $7.0 million in both periods. This investment is accounted for as a cost-method investment as the Company owns less than 20% of the voting securities and does not have the ability to exercise significant influence over operating and financial policies of the entity. The Company regularly evaluates the carrying value of its cost-method investment for impairment. If the Company believes that the carrying value of the cost basis investment is in excess of estimated fair value, the Company’s policy is to record an impairment charge in other income (expense), net, in the accompanying condensed consolidated statements of operations to adjust the carrying value to estimated fair value, when the impairment is deemed other-than-temporary. During the three and nine months ended September 30, 2017, no impairment charges were recorded as there have not been any events or changes in circumstances that the Company believes would have a significant adverse effect on the fair value of its investment. As of September 30, 2017 and December 31, 2016, the fair value of the Company's cost-method investment was not estimated.
Derivative Instruments
Derivative Instruments
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 and minimize the volatility of reported earnings. The Company utilizes foreign currency exchange forward contracts, primarily short term in nature.
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 forward contracts to reduce the volatility of cash flows primarily related to forecasted revenues and expenses denominated in euros, British pound and Swedish kronor (“SEK”). The contracts are settled at maturity and at rates 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.
For the three months ended September 30, 2017 and September 24, 2016, the before-tax effect of the foreign currency exchange forward contracts was a loss of $1.2 million and a loss of $0.2 million, respectively, and for the nine months ended September 30, 2017 and September 24, 2016, the before-tax effect of the foreign currency exchange forward contracts were a loss of $2.9 million and a loss of $0.8 million, respectively. In each of these periods, the impact of the gross gains and losses were offset by foreign exchange rate fluctuations on the underlying foreign currency denominated amounts.
As of September 30, 2017, 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 with one high-quality institution 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 September 30, 2017
 
As of December 31, 2016
 
Gross Notional(1)  
 
Other Accrued Liabilities
 
Gross Notional(1)  
 
Prepaid Expense and Other Assets
 
Other Accrued Liabilities
Foreign currency exchange forward contracts
 
 
 
 
 
 
 
 
 
Related to euro denominated receivables
$
22,261

 
$
(79
)
 
$
23,887

 
$
137

 
$
(71
)
Related to British pound denominated receivables
$

 

 
$
6,353

 
48

 

Related to euro denominated restricted cash
$
248

 
(1
)
 
$
242

 
2

 

 


 
$
(80
)
 


 
$
187

 
$
(71
)
 
 
 
(1) 
Represents the face amounts of forward contracts that were outstanding as of the period noted.
Goodwill and Intangible Assets
Goodwill and Intangible Assets
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 nine months ended September 30, 2017 (in thousands):
Balance as of December 31, 2016
$
176,760

Foreign currency translation adjustments
20,565

Accumulated impairment loss

Balance as of September 30, 2017
$
197,325


The gross carrying amount of goodwill may change due to the effects of foreign currency fluctuations as these assets are denominated in SEK.
Intangible Assets
The following tables present details of the Company’s intangible assets as of September 30, 2017 and December 31, 2016 (in thousands, except for weighted-average):
 
September 30, 2017
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Weighted-Average Remaining Useful Life (In Years)
Intangible assets with finite lives:


 


 


 
 
Customer relationships
$
51,497

 
$
(13,529
)
 
$
37,968

 
5.9
Developed technology
105,624

 
(43,639
)
 
61,985

 
3.0
Total intangible assets
$
157,121

 
$
(57,168
)
 
$
99,953

 
4.1

 
December 31, 2016
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Weighted Average Remaining Useful Life (In Years)
Intangible assets with finite lives:
 
 
 
 
 
 
 
Trade names
$
220

 
$
(220
)
 
$

 
0.0
Customer relationships
46,125

 
(7,793
)
 
38,332

 
6.6
Developed technology
94,320

 
(24,715
)
 
69,605

 
3.7
Other intangible assets
819

 
(567
)
 
252

 
4.6
Total intangible assets with finite lives
$
141,484

 
$
(33,295
)
 
$
108,189

 
4.7
In-process technology
286

 

 
286

 
 
Total intangible assets
$
141,770

 
$
(33,295
)
 
$
108,475

 
 

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 these assets are denominated in SEK. Amortization expense was $7.0 million and $19.9 million for the three and nine months ended September 30, 2017, respectively, and was $6.7 million and $19.8 million for the three and nine months ended, respectively, for the corresponding periods in 2016.
Intangible assets are carried at cost less accumulated amortization. Amortization expenses are recorded to the appropriate cost and expense categories. During the nine months ended September 30, 2017, the Company recorded an impairment charge of $0.3 million related to other intangible assets, which the Company has determined that the carrying value will not be recoverable. During the first quarter of 2017, the Company transferred $0.3 million of its in-process technology to developed technology, which is being amortized over a useful life of five years.
The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of September 30, 2017 (in thousands):
 
 
 
Fiscal Years
 
Total
 
Remainder of 2017
 
2018
 
2019
 
2020
 
2021
 
2022 and Thereafter
Total future amortization expense
$
99,953

 
$
6,958

 
$
27,832

 
$
27,204

 
$
19,852

 
$
7,257

 
$
10,850

Balance Sheet Details
Balance Sheet Details
Balance Sheet Details

The following table provides details of selected balance sheet items (in thousands):
 
September 30, 2017
 
December 31, 2016
Inventory:
 
 
 
Raw materials
$
35,810

 
$
33,158

Work in process
84,334

 
74,533

Finished goods
122,704

 
125,264

Total inventory
$
242,848

 
$
232,955

Property, plant and equipment, net:
 
 
 
Computer hardware
$
13,648

 
$
12,775

Computer software(1)
32,542

 
26,779

Laboratory and manufacturing equipment
244,784

 
222,311

Land and building
12,347

 

Furniture and fixtures
2,476

 
2,075

Leasehold and building improvements
42,846

 
42,267

Construction in progress
33,877

 
33,633

Subtotal
$
382,520

 
$
339,840

Less accumulated depreciation and amortization
(239,303
)
 
(215,040
)
Total property, plant and equipment, net
$
143,217

 
$
124,800

Accrued expenses:
 
 
 
Loss contingency related to non-cancelable purchase commitments
$
4,012

 
$
5,555

Professional and other consulting fees
5,184

 
4,955

Taxes payable
2,523

 
2,384

Royalties
5,466

 
5,375

Other accrued expenses
12,895

 
13,311

Total accrued expenses
$
30,080

 
$
31,580

 
 
 
(1) 
Included in computer software at September 30, 2017 and December 31, 2016 were $11.4 million and $9.1 million, respectively, related to enterprise resource planning (ERP) systems that the Company implemented. The unamortized ERP costs at September 30, 2017 and December 31, 2016 were $5.1 million and $4.0 million, respectively.
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss includes certain changes in equity that are excluded from net income. The following table sets forth the changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2017 (in thousands): 
 
 
Unrealized Gain (Loss) on Other Available-for-Sale Securities
 
Foreign Currency Translation     
 
Accumulated Tax Effect
 
Total        
Balance at December 31, 2016
 
$
(209
)
 
$
(27,236
)
 
$
(879
)
 
$
(28,324
)
Net current-period other comprehensive income (loss)
 
27

 
37,257

 
(11
)
 
37,273

Balance at September 30, 2017
 
$
(182
)
 
$
10,021

 
$
(890
)
 
$
8,949

Basic and Diluted Net Income (Loss) Per Common Share
Basic and Diluted Net Income (Loss) Per Common Share
Basic and Diluted Net Income (Loss) Per Common Share
Basic net income (loss) per common share is computed by dividing net income (loss) attributable to Infinera Corporation by the weighted average number of common shares outstanding during the period. Diluted net income (loss) attributable to Infinera Corporation per common share is computed using net income (loss) attributable to Infinera Corporation and the weighted average number of common shares outstanding plus potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include the assumed exercise of outstanding stock options, assumed release of outstanding restricted stock units (“RSUs”) and performance stock units (“PSUs”), and assumed issuance of common stock under the Company's 2007 Employee Stock Purchase Plan (“ESPP”) using the treasury stock method.
Potentially dilutive common shares also include the assumed conversion of the Notes from the conversion spread (as discussed in Note 10, “Convertible Senior Notes”). The Company includes the common shares underlying PSUs in the calculation of diluted net income per share only when they become contingently issuable.
In net loss periods, potentially diluted common shares have been excluded from the diluted net loss calculation. The dilutive impact of the Notes (as defined in Note 10, “Convertible Senior Notes”) was based on the difference between the Company's average stock price during the period and the conversion price of the Notes. Upon conversion of the Notes, it is the Company’s intention to pay cash equal to the lesser of the aggregate principal amount or the conversion value of the Notes being converted, therefore, only the conversion spread relating to the Notes would be included in the Company’s diluted earnings per share calculation.
The following table sets forth the computation of net income (loss) per common share – basic and diluted (in thousands, except per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Numerator:
 
 
 
 
 
 
 
Net income (loss) attributable to Infinera Corporation
$
(37,231
)
 
$
(11,172
)
 
$
(120,521
)
 
$
12,326

Denominator:
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
148,777

 
143,850

 
147,367

 
142,350

Effect of dilutive securities:
 
 
 
 
 
 
 
Employee equity plans

 

 

 
2,580

Assumed conversion of convertible senior notes from conversion spread

 

 

 
991

Diluted weighted average common shares outstanding
148,777

 
143,850

 
147,367

 
145,921

 
 
 
 
 
 
 
 
Net income (loss) per common share attributable to Infinera Corporation
 
 
 
 
 
 
 
Basic
$
(0.25
)
 
$
(0.08
)
 
(0.82
)
 
$
0.09

Diluted
$
(0.25
)
 
$
(0.08
)
 
(0.82
)
 
$
0.08


The Company incurred net losses during the three and nine months ended September 30, 2017 and the three months ended September 24, 2016, and as a result, potential common shares from stock options, RSUs, PSUs, assumed release of outstanding stock under the ESPP and assumed conversion of the Notes from the conversion spread were not included in the diluted shares used to calculate net loss per share, as their inclusion would have been anti-dilutive.
During the nine months ended September 24, 2016, the Company included the dilutive effects of the Notes in the calculation of diluted net income per common share as the applicable average market price was above the conversion price of the Notes. The effects of other potentially dilutive common shares from stock options, RSUs, PSUs and assumed release of outstanding stock under the ESPP were not included in the calculation of diluted net income per share for the nine months ended September 24, 2016 because their effect were anti-dilutive under the treasury stock method or the performance condition of the award had not been met.
The following sets forth the potentially dilutive shares excluded from the computation of the diluted net income (loss) per share because their effect was anti-dilutive (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Stock options
1,406

 
1,834

 
1,482

 
61

RSUs
6,359

 
5,475

 
6,877

 
2,454

PSUs
1,434

 
905

 
1,437

 
643

ESPP shares
1,395

 
1,334

 
1,080

 
638

Total
10,594

 
9,548

 
10,876

 
3,796

Convertible Senior Notes
Convertible Senior Notes
Convertible Senior Notes
In May 2013, the Company issued the Notes, which will mature on June 1, 2018, unless earlier purchased by the Company 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 to the Company were approximately $144.5 million.
The Notes are governed by an indenture dated as of May 30, 2013 (the “Indenture”), between the Company, as issuer, and U.S. Bank National Association, as trustee. The Notes are unsecured and do not contain any financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by the Company.
Upon conversion, it is the Company's intention to pay cash equal to the lesser of the aggregate principal amount or the conversion value of the Notes. For any remaining conversion obligation, the Company intends to pay cash, shares of common stock or a combination of cash and shares of common stock, at its election. For all conversions that occur on or after December 1, 2017, the Company will be required to make a settlement method election, if any, prior to December 1, 2017. If the Company does not make a settlement method election, it will be required to settle the lessor of the aggregate principal amount or the conversion value of the Notes in cash, and issue shares for the remaining conversion value, if any. The current conversion rate is 79.4834 shares of common stock per $1,000 principal amount of Notes, subject to anti-dilution adjustments, which is equivalent to a conversion price of approximately $12.58 per share of common stock.
Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events, including for any cash dividends. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest upon conversion of a Note. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than canceled, extinguished or forfeited. Holders may convert their Notes under the following circumstances:

during any fiscal quarter (and only during such fiscal quarter) if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day (the “Stock Price Conversion Trigger”);

during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

upon the occurrence of specified corporate events described under the Indenture, such as a consolidation, merger or binding share exchange; or

at any time on or after December 1, 2017 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances.
If the Company undergoes a fundamental change as defined in the Indenture governing the Notes, holders may require the Company to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, upon the occurrence of a “make-whole fundamental change” (as defined in the Indenture), the Company may, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change.

The net carrying amounts of the debt obligation were as follows (in thousands):
 
September 30, 2017
 
December 31, 2016
Principal
$
150,000

 
$
150,000

Unamortized discount (1)
(7,380
)
 
(15,114
)
Unamortized issuance cost (1)
(635
)
 
(1,300
)
Net carrying amount
$
141,985

 
$
133,586

 
 
 
(1) 
Unamortized debt conversion discount and issuance costs will be amortized over the remaining life of the Notes, which is approximately 8 months.

As of September 30, 2017 and December 31, 2016, the carrying amount of the equity component of the Notes was $43.3 million.
In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes.
In accounting for the issuance costs of $5.5 million related to the Notes, the Company allocated the total amount incurred to the liability and equity components of the Notes based on their relative values. Issuance costs attributable to the liability component were initially recorded as other non-current assets and were amortized to interest expense over the term of the Notes. Accounting Standards Update 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”) requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. The Company adopted ASU 2015-03 during the first quarter of 2016. The December 31, 2016 balance sheet was retrospectively adjusted to reclassify $2.1 million from other non-current assets to a reduction of the Notes payable liability.
The issuance costs attributable to the equity component were netted with the equity component in stockholders’ equity. Additionally, the Company initially recorded a deferred tax liability of $17.0 million in connection with the issuance of the Notes, and a corresponding reduction in valuation allowance. The impact of both was recorded to stockholders’ equity.
The Company determined that the embedded conversion option in the Notes does not require separate accounting treatment as a derivative instrument because it is both indexed to the Company’s own stock and would be classified in stockholder’s equity if freestanding.
The following table sets forth total interest expense recognized related to the Notes (in thousands): 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Contractual interest expense
$
656

 
$
656

 
$
1,969

 
$
1,969

Amortization of debt issuance costs
228

 
206

 
665

 
602

Amortization of debt discount
2,643

 
2,391

 
7,734

 
6,996

Total interest expense
$
3,527

 
$
3,253

 
$
10,368

 
$
9,567


The coupon rate is 1.75%. For the three and nine months ended September 30, 2017 and September 24, 2016, the debt discount and debt issuance costs were amortized, using an annual effective interest rate of 10.23%, to interest expense over the term of the Notes.
As of September 30, 2017, the fair value of the Notes was $152.6 million. The fair value was determined based on the quoted bid price of the Notes in an over-the-counter market on September 29, 2017. The Notes are classified as Level 2 of the fair value hierarchy.
During the three months ended September 30, 2017, the closing price of the Company's common stock did not meet the Stock Price Conversion Trigger; therefore, holders of the Notes may not convert their Notes during the fourth quarter of 2017 pursuant to the Stock Price Conversion Trigger. However, the Notes will be convertible at the option of the holders on or after December 1, 2017 until the close of business on the second scheduled trading day immediately preceding the maturity date. Based on the closing price of the Company’s common stock of $8.87 on September 29, 2017 (the last trading day of the fiscal quarter), the if-converted value of the Notes did not exceed their principal amount.
Stockholders' Equity
Stockholders' Equity
Stockholders’ Equity
Stock-based Compensation Plans
The Company has stock-based compensation plans pursuant to which the Company has granted stock options, RSUs and PSUs. The Company also has an ESPP for all eligible employees.
In February 2016, the Company's board of directors adopted the 2016 Equity Incentive Plan (“2016 Plan”) and the Company's stockholders approved the 2016 Plan in May 2016. In May 2017, the Company's stockholders approved an amendment to the 2016 Plan to increase the number of shares authorized for issuance under the 2016 Plan by 6.4 million shares. As of September 30, 2017, the Company has reserved a total of 13.9 million shares of common stock for issuance of stock options, RSUs and PSUs to employees, non-employees, consultants and members of the Company's board of directors, pursuant to the 2016 Plan, plus any shares subject to awards granted under the Company’s 2007 Equity Incentive Plan (the “2007 Plan”) that, after the effective date of the 2016 Plan, expire, are forfeited or otherwise terminate without having been exercised in full to the extent such awards were exercisable, and shares issued pursuant to awards granted under the 2007 Plan that, after the effective date of the 2016 Plan, are forfeited to or repurchased by the Company due to failure to vest. The 2016 Plan has a maximum term of 10 years from the date of adoption, or it can be earlier terminated by the Company's board of directors. The 2007 Plan was canceled; however, it continues to govern outstanding grants under the 2007 Plan.
The following tables summarize the Company’s equity award activity and related information (in thousands, except per share data): 
 
Number of Stock
Options
 
Weighted-Average
Exercise
Price
  Per Share  
 
  Aggregate  
Intrinsic
Value
Outstanding at December 31, 2016
1,655

 
$
8.30

 
$
965

Stock options granted

 
$

 
 
Stock options exercised
(196
)
 
$
7.78

 
$
373

Stock options canceled
(53
)
 
$
13.02

 


Outstanding at September 30, 2017
1,406

 
$
8.19

 
$
1,223

Exercisable at September 30, 2017
1,404

 
$
8.19

 
$
1,223


 
 
Number of
Restricted
Stock Units
 
Weighted-
Average
 Grant Date 
Fair Value
Per Share
 
  Aggregate  
Intrinsic
Value
Outstanding at December 31, 2016
5,293

 
$
14.10

 
$
44,939

RSUs granted
3,289

 
$
10.48

 


RSUs released
(2,023
)
 
$
13.55

 
$
19,398

RSUs canceled
(200
)
 
$
13.72

 


Outstanding at September 30, 2017
6,359

 
$
12.41

 
$
56,405


 
 
Number of
Performance
Stock Units
 
Weighted-
Average
 Grant Date 
Fair Value
Per Share
 
  Aggregate  
Intrinsic
Value
Outstanding at December 31, 2016
904

 
$
14.13

 
$
7,672

PSUs granted
916

 
$
16.36

 

PSUs released
(26
)
 
$
11.83

 
$
225

PSUs canceled
(360
)
 
$
11.58

 

Outstanding at September 30, 2017
1,434

 
$
16.24

 
$
12,719

Expected to vest at September 30, 2017
968

 

 
$
8,582



The aggregate intrinsic value of unexercised stock options is calculated as the difference between the closing price of the Company’s common stock of $8.87 at September 29, 2017 (the last trading day of the fiscal quarter) and the exercise prices of the underlying stock options. The aggregate intrinsic value of the stock options that have been exercised is calculated as the difference between the fair market value of the common stock at the date of exercise and the exercise price of the underlying stock options.
The aggregate intrinsic value of unreleased RSUs and unreleased PSUs is calculated using the closing price of the Company's common stock of $8.87 at September 29, 2017 (the last trading day of the fiscal quarter). The aggregate intrinsic value of RSUs and PSUs released is calculated using the fair market value of the common stock at the date of release.

The following table presents total stock-based compensation cost for instruments granted but not yet amortized, net of estimated forfeitures, of the Company’s equity compensation plans as of September 30, 2017. These costs are expected to be amortized on a straight-line basis over the following weighted-average periods (in thousands, except for weighted-average period):
 
Unrecognized
Compensation
Expense, Net
 
Weighted-
Average Period
(in years)
Stock options
$
7

 
0.3
RSUs
$
61,090

 
2.7
PSUs
$
12,879

 
1.6

Employee Stock Options
The Company did not grant any stock options during the three and nine months ended September 30, 2017. Amortization of stock-based compensation related to stock options in the three and nine months ended September 30, 2017 and September 24, 2016 was insignificant.
Employee Stock Purchase Plan
The fair value of the shares was estimated at the date of grant using the following assumptions (expense amounts in thousands):
 
Three Months Ended
 
Nine Months Ended
Employee Stock Purchase Plan
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Volatility
47%
 
67%
 
47% - 51%
 
56% - 67%
Risk-free interest rate
1.16%
 
0.51%
 
0.81% - 1.16%
 
0.51% - 0.52%
Expected life
0.5 years
 
0.5 years
 
0.5 years
 
0.5 years
Estimated fair value
$2.44
 
$3.16
 
$2.44 - $3.46
 
$3.16 - $4.53
Total stock-based compensation expense
$1,502
 
$1,565
 
$4,575
 
$4,054

Restricted Stock Units
During the three and nine months ended September 30, 2017, the Company granted RSUs to employees to receive 0.1 million shares and 3.3 million shares of the Company’s common stock, respectively. All RSUs awarded are subject to each individual's continued service to the Company through each applicable vesting date. The Company accounted for the fair value of the RSUs using the closing market price of the Company’s common stock on the date of grant. Amortization of stock-based compensation related to RSUs in the three and nine months ended September 30, 2017 was approximately $7.9 million and $24.0 million, and was $7.7 million and $21.4 million in the three and nine months ended September 24, 2016, respectively.
Performance Stock Units
Pursuant to the 2007 Plan and the 2016 Plan, the Company has granted PSUs to certain of the Company’s executive officers, senior management and other employees. All PSUs awarded are subject to each individual's continued service to the Company through each applicable vesting date and if the performance metrics are not met within the time limits specified in the award agreements, the PSUs will be canceled.
PSUs granted to the Company’s executive officers and senior management under the 2007 Plan during the first quarter of 2015 and 2016 are based on the total stockholder return (“TSR”) of the Company's common stock price as compared to the TSR of the S&P North American Technology Multimedia Networking Index (“SPGIIPTR”) over the span of one year, two years and three years. The number of shares to be issued upon vesting of these PSUs range from zero to two times the target number of PSUs granted depending on the Company’s performance against the SPGIIPTR.
PSUs granted to the Company’s executive officers and senior management under the 2016 Plan during the first quarter of 2017 are based on the TSR of the Company's common stock price relative to the TSR of the individual companies listed in the SPGIIPTR over the span of one year, two years and three years. The number of shares to be issued upon vesting of these PSUs range from zero to two times the target number of PSUs granted depending on the Company’s performance against the individual companies listed in the SPGIIPTR.
The ranges of estimated values of the PSUs granted that are compared to the index, as well as the assumptions used in calculating these values were based on estimates as follows:
 
 
2017
 
2016
 
2015
Index
 
SPGIIPTR
 
SPGIIPTR
 
SPGIIPTR
Index volatility
 
33% - 34%
 
18%
 
18% - 19%
Infinera volatility
 
55% - 56%
 
55%
 
48%
Risk-free interest rate
 
1.41% - 1.63%
 
0.95% - 1.07%
 
0.97% - 1.10%
Correlation with index/index component
 
0.10 - 0.49
 
0.58 - 0.59
 
0.52
Estimated fair value
 
$15.23 - $17.35
 
$10.31 - $16.62
 
$18.08 - $19.29


In addition, certain other PSUs granted to the Company’s executive officers, senior management and certain other employees will only vest upon the achievement of specific financial or operational performance criteria.

The following table summarizes by grant year, the Company’s PSU activity for the nine months ended September 30, 2017 (in thousands):
 
 
 
 
Grant Year
 
 
Total Number of Performance Stock Units
 
2014
 
2015
 
2016
 
2017
Outstanding at December 31, 2016
 
904

 
123

 
148

 
633

 

PSUs granted
 
916

 

 

 

 
916

PSUs released
 
(26
)
 
(21
)
 
(5
)
 

 

PSUs canceled
 
(360
)
 
(102
)
 
(60
)
 
(194
)
 
(4
)
Outstanding at September 30, 2017
 
1,434

 

 
83

 
439

 
912


Amortization of stock-based compensation related to PSUs in the three and nine months ended September 30, 2017 was approximately $2.7 million and $7.3 million, respectively, and was $1.7 million and $4.9 million in the three and nine months ended September 24, 2016, respectively.
Stock-Based Compensation
The following tables summarize the effects of stock-based compensation on the Company’s condensed consolidated balance sheets and statements of operations for the periods presented (in thousands):
 
September 30, 2017
 
December 31, 2016
Stock-based compensation effects in inventory
$
5,373

 
$
4,911

 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Stock-based compensation effects included in net income (loss) before income taxes
 
 
 
 
 
 
 
Cost of revenue
$
779

 
$
756

 
$
2,337

 
$
2,175

Research and development
4,040

 
3,496

 
12,004

 
9,721

Sales and marketing
3,025

 
2,826

 
9,024

 
8,006

General and administration
3,039

 
2,465

 
8,431

 
6,850

 
$
10,883

 
$
9,543

 
$
31,796

 
$
26,752

Cost of revenue – amortization from balance sheet (1)
1,284

 
668

 
3,628

 
2,439

Total stock-based compensation expense
$
12,167

 
$
10,211

 
$
35,424

 
$
29,191

 
 
 
(1) 
Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.
Income Taxes
Income Taxes
Income Taxes
Income taxes for the three and nine months ended September 30, 2017 included a tax provision of $0.2 million and a tax benefit of $0.5 million, respectively, on pre-tax losses of $37.0 million and $121.0 million, respectively. This compared to a tax benefit of $2.4 million and $0.7 million, respectively, on a pre-tax loss of $13.7 million and pre-tax income of $11.1 million, respectively, for the three and nine months ended September 24, 2016. The incremental pre-tax losses in 2017 as compared to 2016 primarily relate to operating losses in the United States, for which no tax benefit was recognized due to the Company's valuation allowance position. The results for the three and nine months ended September 30, 2017 included approximately $7.0 million and $20.3 million, respectively, of purchase accounting amortization and other charges related to the acquisition of Transmode AB, a Swedish company, which occurred in 2015, with a corresponding tax benefit of approximately $1.5 million and $4.5 million, respectively. Exclusive of this tax benefit, provision for income taxes otherwise increased by approximately $0.1 million during the nine months ended September 30, 2017 compared to the corresponding period in 2016, as a result of an operating loss in the United States and lower foreign income tax for our Swedish operations, offset by higher foreign taxes related to an increase in spending in certain of the Company's cost-plus foreign subsidiaries. Due to the Company’s current operating losses and tax loss carryforwards in the United States and cost-plus international structures outside of Sweden, the tax expense or benefit is less sensitive to pretax income or loss than would otherwise be expected, compared to the statutory tax rate. Due to the closure of a remote R&D facility, management changed its intention with respect to a foreign subsidiary’s previously permanently reinvested earnings during the three months ended September 30, 2017, such that management no longer asserts that these earnings are permanently reinvested. Accordingly, the Company accrued associated withholding taxes of approximately $0.6 million during the three months ended September 30, 2017.
In all periods, the tax expense and benefit projected in the Company's effective tax rate assumptions primarily represents foreign taxes of the Company's overseas subsidiaries compensated on a cost-plus basis, as well as the results of the Company's Swedish operations, inclusive of purchase accounting amortization and other charges for the three and nine months ended September 30, 2017.
The Company must assess the likelihood that some portion or all of its deferred tax assets will be recovered from future taxable income within the respective jurisdictions. In the past, the Company established a valuation allowance against its deferred tax assets as it determined that its ability to recover the value of these assets did not meet the “more-likely-than-not” standard. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management judgment is required on an on-going basis to determine whether it needs to maintain the valuation allowance recorded against its net deferred tax assets. The Company must consider all positive and negative evidence, including its forecasts of taxable income over the applicable carryforward periods, its current financial performance, its market environment and other factors in evaluating the need for a valuation allowance against its net U.S. deferred tax assets. At September 30, 2017, the Company does not believe that it is more-likely-than-not that it would be able to utilize its deferred tax assets in the foreseeable future. Accordingly, the domestic net deferred tax assets continued to be fully reserved with a valuation allowance. To the extent that the Company determines that deferred tax assets are realizable on a more-likely-than-not basis, and adjustment is needed, that adjustment will be recorded in the period that the determination is made and would generally decrease the valuation allowance and record a corresponding benefit to earnings.
Segment Information
Segment Information
Segment Information
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Company’s Chief Executive Officer (“CEO”). The Company’s CEO reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. The Company has one business activity as a provider of optical transport networking equipment, software and services. Accordingly, the Company is considered to be in a single reporting segment and operating unit structure.
Revenue by geographic region is based on the shipping address of the customer. The following tables set forth revenue and long-lived assets by geographic region (in thousands):
Revenue
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
United States
$
113,617

 
$
104,045

 
$
325,593

 
$
445,270

Other Americas
5,636

 
17,390

 
14,642

 
31,916

Europe, Middle East and Africa
58,391

 
51,940

 
163,714

 
176,386

Asia Pacific
14,936

 
12,077

 
40,974

 
35,520

Total revenue
$
192,580

 
$
185,452

 
$
544,923

 
$
689,092



Property, plant and equipment, net
 
September 30, 2017
 
December 31, 2016
United States
$
135,440

 
$
117,715

Other Americas
620

 
218

Europe, Middle East and Africa
3,875

 
3,822

Asia Pacific
3,282

 
3,045

Total property, plant and equipment, net
$
143,217

 
$
124,800

Guarantees
Guarantees
Guarantees
Product Warranties
Activity related to product warranty was as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Beginning balance
$
32,400

 
$
40,989

 
$
40,342

 
$
38,844

Charges to operations
4,550

 
5,196

 
14,231

 
19,258

Utilization
(3,484
)
 
(5,002
)
 
(10,773
)
 
(13,691
)
Change in estimate(1)
(1,304
)
 
(2,562
)
 
(11,638
)
 
(5,790
)
Balance at the end of the period
$
32,162

 
$
38,621

 
$
32,162

 
$
38,621

 
 
 
(1) 
The Company records product warranty liabilities based on the latest quality and cost information available as of the date the revenue is recorded. The changes in estimate shown here are due to changes in overall actual failure rates, the mix of new versus used units related to replacement of failed units, and changes in the estimated cost of repair. As the Company's products mature over time, failure rates and repair costs generally decline leading to favorable changes in warranty reserves. In addition, during the first quarter of 2017, due to product quality improvements, the Company revised certain estimates used in calculating its product warranties that resulted in a one-time reduction to the warranty accrual of $2.2 million.
Letters of Credit and Bank Guarantees
The Company had $4.3 million of standby letters of credit and bank guarantees outstanding as of September 30, 2017 that consisted of $2.2 million related to customer performance guarantees, $1.2 million related to value added tax and customs' licenses, and $0.9 million related to property leases. The Company had $8.7 million of standby letters of credit and bank guarantees outstanding as of December 31, 2016 that consisted of $4.5 million related to property leases, $3.1 million related to customer performance guarantees and $1.1 million related to a value added tax license.
As of September 30, 2017 and December 31, 2016, the Company had a line of credit for approximately $1.6 million and $1.1 million, respectively, to support the issuance of letters of credit, of which zero and $0.3 million had been issued and outstanding, respectively. The Company has pledged approximately $5.1 million and $4.5 million of assets of a subsidiary to secure this line of credit and other obligations as of September 30, 2017 and December 31, 2016, respectively.
Litigation and Contingencies
Litigation and Contingencies
Litigation and Contingencies
Legal Matters
On November 23, 2016, Oyster Optics, LLC (“Oyster Optics”) filed a complaint against the Company in the United States District Court for the Eastern District of Texas. The complaint asserts U.S. Patent Nos. 6,469,816, 6,476,952, 6,594,055, 7,099,592, 7,620,327, 8,374,511 and 8,913,898 (collectively, the “Oyster Optics patents in suit”). The complaint seeks unspecified damages and a permanent injunction. The Company believes that it does not infringe any valid and enforceable claim of the Oyster Optics patents in suit, and intends to defend this action vigorously. The Company filed its answer to Oyster Optics' complaint on February 3, 2017. On October 23, 2017, the Company filed a petition for Inter Partes Review (“IPR”) of one of the Oyster Optics patents in suit with the U.S. Patent and Trademark Office. Other defendants have filed IPR petitions in connection with the Oyster Optics patents in suit. The Court has set a trial date for June 2018. The Company is currently unable to predict the outcome of this litigation and therefore cannot reasonably estimate the possible loss or range of loss, if any, arising from this matter.
On March 24, 2017, Core Optical Technologies, LLC (“Core Optical”) filed a complaint against the Company in the United States District Court for the Central District of California. The complaint asserts U.S. Patent No. 6,782,211 (the “Core Optical patent in suit”). The complaint seeks unspecified damages and a permanent injunction. The Company believes that it does not infringe any valid and enforceable claim of the Core Optical patent in suit, and intends to defend this action vigorously. The Company filed its answer to Core Optical's complaint on September 25, 2017. Because this action is in the early stages, the Company is unable to predict the outcome of this litigation at this time and therefore cannot reasonably estimate the possible loss or range of loss, if any, arising from this matter.
In addition to the matters described above, the Company is subject to various legal proceedings, claims and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, the Company does not expect that the ultimate costs to resolve these matters will have a material effect on its consolidated financial position, results of operations or cash flows.
Loss Contingencies
The Company is subject to the possibility of various losses arising in the ordinary course of business. These may relate to disputes, litigation and other legal actions. In the preparation of its quarterly and annual financial statements, the Company considers the likelihood of loss or the incurrence of a liability, including whether it is probable, reasonably possible or remote that a liability has been incurred, as well as the Company’s ability to reasonably estimate the amount of loss, in determining loss contingencies. In accordance with U.S. GAAP, an estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company regularly evaluates current information to determine whether any accruals should be adjusted and whether new accruals are required. As of September 30, 2017, the Company has accrued the estimated liabilities associated with certain loss contingencies.
Intellectual Property Indemnification
The Company has agreed to indemnify certain customers for claims made against the Company’s products, where such claims allege infringement of third party intellectual property rights, including, but not limited to, patents, registered trademarks and/or copyrights. Under the aforementioned indemnification clauses, the Company may be obligated to defend the customer and pay for the damages awarded against the customer under an infringement claim as well as the customer’s attorneys’ fees and costs. The Company’s indemnification obligations generally do not expire after termination or expiration of the agreement containing the indemnification obligation. In certain cases, there are limits on and exceptions to the Company’s potential liability for indemnification. Although historically the Company has not made significant payments under these indemnification obligations, the Company cannot estimate the amount of potential future payments, if any, that it might be required to make as a result of these agreements. The maximum potential amount of any future payments that the Company could be required to make under these indemnification obligations could be significant.
Subsequent Events
Subsequent Events
Subsequent Events

On November 8, 2017, the Company announced a plan to restructure its worldwide operations. The restructuring will begin immediately and the Company expects a majority of the activities to be completed during the fourth quarter of 2017. As part of the restructuring, the Company expects to reduce its workforce by approximately 10%, with the majority of geographies and sites being affected.

The Company estimates it will incur total costs related to the restructuring to range from $21.0 million to $27.0 million. The major components of the restructuring costs will include severance and employee-related costs expected to be in the range of $10.0 million to $12.0 million, facilities-related charges expected to be in the range of $6.0 million to $8.0 million, and other charges primarily related to equipment write-downs expected to be in the range of $5.0 million to $7.0 million.
Recent Accounting Pronouncements (Policies)
Recent Accounting Pronouncements
Recent Accounting Pronouncements
In May 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”), which amends the scope of modification accounting for share-based payment arrangements, and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Topic 718. This guidance is effective for the Company in its first quarter of fiscal 2018, with early adoption permitted. The Company does not expect the new guidance to have any material impact on its consolidated financial statements.
In January 2017, the FASB issued Accounting Standards Update 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). The guidance eliminates Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. ASU 2017-04 will be effective for the Company's annual or any interim goodwill impairment tests in its first quarter of fiscal 2020. The Company is currently evaluating the impact the adoption of ASU 2017-04 will have on its consolidated financial statements.
In November 2016, the FASB issued Accounting Standards Update 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”), which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As such, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and ending-of-period total amounts shown on the statement of cash flows. The Company is required to adopt ASU 2016-18 on a retrospective basis for fiscal years, and for interim periods within those fiscal years, beginning with its first quarter of fiscal 2018. Early adoption is permitted, including adoption in an interim period. Subsequent to the adoption of ASU 2016-18, the change in restricted cash would be excluded from the change in cash flows from investing and financing activities and included in the change in total cash, restricted cash and cash equivalents as reported in the statement of cash flows. The Company is currently evaluating the impact the adoption of ASU 2016-18 will have on its consolidated financial statements.
In August 2016, the FASB issued Accounting Standards Update 2016-15, “Statement of Cash Flows (Topic 320): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain transactions are presented and classified in the statement of cash flows. The Company early adopted ASU 2016-15 on a retrospective basis during the third quarter of fiscal 2017. The Company's adoption of 2016-15 had no impact on its consolidated statements of cash flows.
In June 2016, the FASB issued Accounting Standards Update 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. This guidance is effective for the Company in its first quarter of fiscal 2020 and early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements.
In May 2016, the FASB issued Accounting Standards Update 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update)” (“ASU 2016-11”), which rescinds various standards codified as part of Topic 605, Revenue Recognition in relation to the future adoption of Topic 606. These rescissions include changes to topics pertaining to revenue and expense recognition for freight services in process, accounting for shipping and handling fees and costs, and accounting for consideration given by a vendor to a customer. This guidance is effective for the Company in its first quarter of fiscal 2018 and early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-11 will have on its consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. This guidance is effective for the Company in its first quarter of fiscal 2019 and early adoption is permitted. ASU 2016-02 is required to be applied with a modified retrospective approach and requires application of the new standard at the beginning of the earliest comparative period presented. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on its consolidated financial statements and expects to have increases in the assets and liabilities of its consolidated balance sheets.
In July 2015, the FASB issued Accounting Standards Update 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”), to simplify the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first-out or the retail inventory method. Under ASU 2015-11, inventory should be at the lower of cost and net realizable value. The Company adopted ASU 2015-11 during the first quarter of fiscal 2017. The Company's adoption of 2015-11 had no impact on the Company's financial position, results of operations or cash flows.
In May 2014, the FASB issued Accounting Standards Update 2014-09, “Revenue from Contracts from Customers (Topic 606)” (“ASU 2014-09”), which creates a single, joint revenue standard that is consistent across all industries and markets for companies that prepare their financial statements in accordance with U.S. GAAP. Under ASU 2014-09, an entity is required to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services. In August 2015, the FASB issued Accounting Standards update 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which deferred the effective date of ASU 2014-09 by one year with early adoption permitted beginning after December 15, 2016. The updated standard is effective for interim and annual periods beginning after December 15, 2017. In April 2016, the FASB issued Accounting Standards Update 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” which clarifies the implementation guidance on identifying performance obligations and licensing. In May 2016, the FASB issued Accounting Standards Update 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” which amends the guidance on collectability, noncash consideration, presentation of sales tax and transition. In December 2016, the FASB issued Accounting Standards Update 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” to increase stakeholders' awareness of the proposals and to expedite improvements to ASU 2014-09. These standards will be effective for the Company's first quarter of 2018.
Fair Value Measurements (Tables)
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 September 30, 2017
 
As of December 31, 2016
 
Fair Value Measured Using
 
Fair Value Measured Using
 
Level 1      
 
Level 2      
 
Total        
 
Level 1      
 
Level 2      
 
Total        
Assets
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
32,544

 
$

 
$
32,544

 
$
41,773

 
$

 
$
41,773

Certificates of deposit

 
240

 
240

 

 
1,881

 
1,881

Commercial paper

 
14,969

 
14,969

 

 
39,310

 
39,310

Corporate bonds

 
125,544

 
125,544

 

 
88,324

 
88,324

U.S. agency notes

 
10,694

 
10,694

 

 
11,759

 
11,759

U.S. treasuries
39,437

 

 
39,437

 
52,092

 

 
52,092

Foreign currency exchange forward contracts

 

 

 

 
187

 
187

Total assets
$
71,981

 
$
151,447

 
$
223,428

 
$
93,865

 
$
141,461

 
$
235,326

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange forward contracts
$

 
$
(80
)
 
$
(80
)
 
$

 
$
(71
)
 
$
(71
)
Cash, cash equivalents and investments were as follows (in thousands): 
 
September 30, 2017
 
Adjusted
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Cash
$
80,508

 
$

 
$

 
$
80,508

Money market funds
32,544

 

 

 
32,544

Commercial paper
3,000

 

 

 
3,000

U.S. treasuries
5,990

 

 

 
5,990

Total cash and cash equivalents
$
122,042

 
$

 
$

 
$
122,042

Certificates of deposit
240

 

 

 
240

Commercial paper
11,971

 

 
(2
)
 
11,969

Corporate bonds
86,024

 
2

 
(73
)
 
85,953

U.S. agency notes
7,700

 

 
(7
)
 
7,693

U.S. treasuries
28,506

 

 
(42
)
 
28,464

Total short-term investments
$
134,441

 
$
2

 
$
(124
)
 
$
134,319

Corporate bonds
39,630

 
3

 
(42
)
 
39,591

U.S. agency notes
3,006

 

 
(5
)
 
3,001

U.S. treasuries
4,998

 

 
(15
)
 
4,983

Total long-term investments
47,634

 
3

 
(62
)
 
47,575

Total cash, cash equivalents and investments
$
304,117

 
$
5

 
$
(186
)
 
$
303,936


 
December 31, 2016
 
Adjusted
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Cash
$
109,978

 
$

 
$

 
$
109,978

Money market funds
41,773

 

 

 
41,773

Commercial paper
8,892

 

 
(1
)
 
8,891

U.S. agency notes
1,999

 

 

 
1,999

Total cash and cash equivalents
$
162,642

 
$

 
$
(1
)
 
$
162,641

Certificates of deposit
1,881

 

 

 
1,881

Commercial paper
30,425

 

 
(6
)
 
30,419

Corporate bonds
63,097

 
1

 
(59
)
 
63,039

U.S. agency notes
7,285

 

 
(8
)
 
7,277

U.S. treasuries
39,093

 
9

 
(21
)
 
39,081

Total short-term investments
$
141,781

 
$
10

 
$
(94
)
 
$
141,697

Corporate bonds
25,374

 

 
(89
)
 
25,285

U.S. agency notes
2,499

 

 
(16
)
 
2,483

U.S. treasuries
13,032

 
2

 
(23
)
 
13,011

Total long-term investments
$
40,905

 
$
2

 
$
(128
)
 
$
40,779

Total cash, cash equivalents and investments
$
345,328

 
$
12

 
$
(223
)
 
$
345,117

Derivative Instruments (Tables)
Fair Value of Derivative Instruments not Designated as Hedging Instruments
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 September 30, 2017
 
As of December 31, 2016
 
Gross Notional(1)  
 
Other Accrued Liabilities
 
Gross Notional(1)  
 
Prepaid Expense and Other Assets
 
Other Accrued Liabilities
Foreign currency exchange forward contracts
 
 
 
 
 
 
 
 
 
Related to euro denominated receivables
$
22,261

 
$
(79
)
 
$
23,887

 
$
137

 
$
(71
)
Related to British pound denominated receivables
$

 

 
$
6,353

 
48

 

Related to euro denominated restricted cash
$
248

 
(1
)
 
$
242

 
2

 

 


 
$
(80
)
 


 
$
187

 
$
(71
)
 
 
 
(1) 
Represents the face amounts of forward contracts that were outstanding as of the period noted.
Goodwill and Intangible Assets (Tables)
The following table presents details of the Company’s goodwill during the nine months ended September 30, 2017 (in thousands):
Balance as of December 31, 2016
$
176,760

Foreign currency translation adjustments
20,565

Accumulated impairment loss

Balance as of September 30, 2017
$
197,325

 
December 31, 2016
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Weighted Average Remaining Useful Life (In Years)
Intangible assets with finite lives:
 
 
 
 
 
 
 
Trade names
$
220

 
$
(220
)
 
$

 
0.0
Customer relationships
46,125

 
(7,793
)
 
38,332

 
6.6
Developed technology
94,320

 
(24,715
)
 
69,605

 
3.7
Other intangible assets
819

 
(567
)
 
252

 
4.6
Total intangible assets with finite lives
$
141,484

 
$
(33,295
)
 
$
108,189

 
4.7
In-process technology
286

 

 
286

 
 
Total intangible assets
$
141,770

 
$
(33,295
)
 
$
108,475

 
 
The following tables present details of the Company’s intangible assets as of September 30, 2017 and December 31, 2016 (in thousands, except for weighted-average):
 
September 30, 2017
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Weighted-Average Remaining Useful Life (In Years)
Intangible assets with finite lives:


 


 


 
 
Customer relationships
$
51,497

 
$
(13,529
)
 
$
37,968

 
5.9
Developed technology
105,624

 
(43,639
)
 
61,985

 
3.0
Total intangible assets
$
157,121

 
$
(57,168
)
 
$
99,953

 
4.1

 
December 31, 2016
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Weighted Average Remaining Useful Life (In Years)
Intangible assets with finite lives:
 
 
 
 
 
 
 
Trade names
$
220

 
$
(220
)
 
$

 
0.0
Customer relationships
46,125

 
(7,793
)
 
38,332

 
6.6
Developed technology
94,320

 
(24,715
)
 
69,605

 
3.7
Other intangible assets
819

 
(567
)
 
252

 
4.6
Total intangible assets with finite lives
$
141,484

 
$
(33,295
)
 
$
108,189

 
4.7
In-process technology
286

 

 
286

 
 
Total intangible assets
$
141,770

 
$
(33,295
)
 
$
108,475

 
 
The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of September 30, 2017 (in thousands):
 
 
 
Fiscal Years
 
Total
 
Remainder of 2017
 
2018
 
2019
 
2020
 
2021
 
2022 and Thereafter
Total future amortization expense
$
99,953

 
$
6,958

 
$
27,832

 
$
27,204

 
$
19,852

 
$
7,257

 
$
10,850

Balance Sheet Details (Tables)
Details of Selected Balance Sheet Items
The following table provides details of selected balance sheet items (in thousands):
 
September 30, 2017
 
December 31, 2016
Inventory:
 
 
 
Raw materials
$
35,810

 
$
33,158

Work in process
84,334

 
74,533

Finished goods
122,704

 
125,264

Total inventory
$
242,848

 
$
232,955

Property, plant and equipment, net:
 
 
 
Computer hardware
$
13,648

 
$
12,775

Computer software(1)
32,542

 
26,779

Laboratory and manufacturing equipment
244,784

 
222,311

Land and building
12,347

 

Furniture and fixtures
2,476

 
2,075

Leasehold and building improvements
42,846

 
42,267

Construction in progress
33,877

 
33,633

Subtotal
$
382,520

 
$
339,840

Less accumulated depreciation and amortization
(239,303
)
 
(215,040
)
Total property, plant and equipment, net
$
143,217

 
$
124,800

Accrued expenses:
 
 
 
Loss contingency related to non-cancelable purchase commitments
$
4,012

 
$
5,555

Professional and other consulting fees
5,184

 
4,955

Taxes payable
2,523

 
2,384

Royalties
5,466

 
5,375

Other accrued expenses
12,895

 
13,311

Total accrued expenses
$
30,080

 
$
31,580

 
 
 
(1) 
Included in computer software at September 30, 2017 and December 31, 2016 were $11.4 million and $9.1 million, respectively, related to enterprise resource planning (ERP) systems that the Company implemented. The unamortized ERP costs at September 30, 2017 and December 31, 2016 were $5.1 million and $4.0 million, respectively.
Accumulated Other Comprehensive Loss (Tables)
Summary of Changes in Accumulated Other Comprehensive Income (Loss)
The following table sets forth the changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2017 (in thousands): 
 
 
Unrealized Gain (Loss) on Other Available-for-Sale Securities
 
Foreign Currency Translation     
 
Accumulated Tax Effect
 
Total        
Balance at December 31, 2016
 
$
(209
)
 
$
(27,236
)
 
$
(879
)
 
$
(28,324
)
Net current-period other comprehensive income (loss)
 
27

 
37,257

 
(11
)
 
37,273

Balance at September 30, 2017
 
$
(182
)
 
$
10,021

 
$
(890
)
 
$
8,949

Basic and Diluted Net Income (Loss) Per Common Share (Tables)
The following table sets forth the computation of net income (loss) per common share – basic and diluted (in thousands, except per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Numerator:
 
 
 
 
 
 
 
Net income (loss) attributable to Infinera Corporation
$
(37,231
)
 
$
(11,172
)
 
$
(120,521
)
 
$
12,326

Denominator:
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
148,777

 
143,850

 
147,367

 
142,350

Effect of dilutive securities:
 
 
 
 
 
 
 
Employee equity plans

 

 

 
2,580

Assumed conversion of convertible senior notes from conversion spread

 

 

 
991

Diluted weighted average common shares outstanding
148,777

 
143,850

 
147,367

 
145,921

 
 
 
 
 
 
 
 
Net income (loss) per common share attributable to Infinera Corporation
 
 
 
 
 
 
 
Basic
$
(0.25
)
 
$
(0.08
)
 
(0.82
)
 
$
0.09

Diluted
$
(0.25
)
 
$
(0.08
)
 
(0.82
)
 
$
0.08

The following sets forth the potentially dilutive shares excluded from the computation of the diluted net income (loss) per share because their effect was anti-dilutive (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Stock options
1,406

 
1,834

 
1,482

 
61

RSUs
6,359

 
5,475

 
6,877

 
2,454

PSUs
1,434

 
905

 
1,437

 
643

ESPP shares
1,395

 
1,334

 
1,080

 
638

Total
10,594

 
9,548

 
10,876

 
3,796

Convertible Senior Notes (Tables)
The net carrying amounts of the debt obligation were as follows (in thousands):
 
September 30, 2017
 
December 31, 2016
Principal
$
150,000

 
$
150,000

Unamortized discount (1)
(7,380
)
 
(15,114
)
Unamortized issuance cost (1)
(635
)
 
(1,300
)
Net carrying amount
$
141,985

 
$
133,586

 
 
 
(1) 
Unamortized debt conversion discount and issuance costs will be amortized over the remaining life of the Notes, which is approximately 8 months.
The following table sets forth total interest expense recognized related to the Notes (in thousands): 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Contractual interest expense
$
656

 
$
656

 
$
1,969

 
$
1,969

Amortization of debt issuance costs
228

 
206

 
665

 
602

Amortization of debt discount
2,643

 
2,391

 
7,734

 
6,996

Total interest expense
$
3,527

 
$
3,253

 
$
10,368

 
$
9,567

Stockholders' Equity (Tables)
The following tables summarize the Company’s equity award activity and related information (in thousands, except per share data): 
 
Number of Stock
Options
 
Weighted-Average
Exercise
Price
  Per Share  
 
  Aggregate  
Intrinsic
Value
Outstanding at December 31, 2016
1,655

 
$
8.30

 
$
965

Stock options granted

 
$

 
 
Stock options exercised
(196
)
 
$
7.78

 
$
373

Stock options canceled
(53
)
 
$
13.02

 


Outstanding at September 30, 2017
1,406

 
$
8.19

 
$
1,223

Exercisable at September 30, 2017
1,404

 
$
8.19

 
$
1,223

 
Number of
Restricted
Stock Units
 
Weighted-
Average
 Grant Date 
Fair Value
Per Share
 
  Aggregate  
Intrinsic
Value
Outstanding at December 31, 2016
5,293

 
$
14.10

 
$
44,939

RSUs granted
3,289

 
$
10.48

 


RSUs released
(2,023
)
 
$
13.55

 
$
19,398

RSUs canceled
(200
)
 
$
13.72

 


Outstanding at September 30, 2017
6,359

 
$
12.41

 
$
56,405

 
Number of
Performance
Stock Units
 
Weighted-
Average
 Grant Date 
Fair Value
Per Share
 
  Aggregate  
Intrinsic
Value
Outstanding at December 31, 2016
904

 
$
14.13

 
$
7,672

PSUs granted
916

 
$
16.36

 

PSUs released
(26
)
 
$
11.83

 
$
225

PSUs canceled
(360
)
 
$
11.58

 

Outstanding at September 30, 2017
1,434

 
$
16.24

 
$
12,719

Expected to vest at September 30, 2017
968

 

 
$
8,582



The following table presents total stock-based compensation cost for instruments granted but not yet amortized, net of estimated forfeitures, of the Company’s equity compensation plans as of September 30, 2017. These costs are expected to be amortized on a straight-line basis over the following weighted-average periods (in thousands, except for weighted-average period):
 
Unrecognized
Compensation
Expense, Net
 
Weighted-
Average Period
(in years)
Stock options
$
7

 
0.3
RSUs
$
61,090

 
2.7
PSUs
$
12,879

 
1.6
The fair value of the shares was estimated at the date of grant using the following assumptions (expense amounts in thousands):
 
Three Months Ended
 
Nine Months Ended
Employee Stock Purchase Plan
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Volatility
47%
 
67%
 
47% - 51%
 
56% - 67%
Risk-free interest rate
1.16%
 
0.51%
 
0.81% - 1.16%
 
0.51% - 0.52%
Expected life
0.5 years
 
0.5 years
 
0.5 years
 
0.5 years
Estimated fair value
$2.44
 
$3.16
 
$2.44 - $3.46
 
$3.16 - $4.53
Total stock-based compensation expense
$1,502
 
$1,565
 
$4,575
 
$4,054
The ranges of estimated values of the PSUs granted that are compared to the index, as well as the assumptions used in calculating these values were based on estimates as follows:
 
 
2017
 
2016
 
2015
Index
 
SPGIIPTR
 
SPGIIPTR
 
SPGIIPTR
Index volatility
 
33% - 34%
 
18%
 
18% - 19%
Infinera volatility
 
55% - 56%
 
55%
 
48%
Risk-free interest rate
 
1.41% - 1.63%
 
0.95% - 1.07%
 
0.97% - 1.10%
Correlation with index/index component
 
0.10 - 0.49
 
0.58 - 0.59
 
0.52
Estimated fair value
 
$15.23 - $17.35
 
$10.31 - $16.62
 
$18.08 - $19.29
The following table summarizes by grant year, the Company’s PSU activity for the nine months ended September 30, 2017 (in thousands):
 
 
 
 
Grant Year
 
 
Total Number of Performance Stock Units
 
2014
 
2015
 
2016
 
2017
Outstanding at December 31, 2016
 
904

 
123

 
148

 
633

 

PSUs granted
 
916

 

 

 

 
916

PSUs released
 
(26
)
 
(21
)
 
(5
)
 

 

PSUs canceled
 
(360
)
 
(102
)
 
(60
)
 
(194
)
 
(4
)
Outstanding at September 30, 2017
 
1,434

 

 
83

 
439

 
912


The following tables summarize the effects of stock-based compensation on the Company’s condensed consolidated balance sheets and statements of operations for the periods presented (in thousands):
 
September 30, 2017
 
December 31, 2016
Stock-based compensation effects in inventory
$
5,373

 
$
4,911

 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Stock-based compensation effects included in net income (loss) before income taxes
 
 
 
 
 
 
 
Cost of revenue
$
779

 
$
756

 
$
2,337

 
$
2,175

Research and development
4,040

 
3,496

 
12,004

 
9,721

Sales and marketing
3,025

 
2,826

 
9,024

 
8,006

General and administration
3,039

 
2,465

 
8,431

 
6,850

 
$
10,883

 
$
9,543

 
$
31,796

 
$
26,752

Cost of revenue – amortization from balance sheet (1)
1,284

 
668

 
3,628

 
2,439

Total stock-based compensation expense
$
12,167

 
$
10,211

 
$
35,424

 
$
29,191

 
 
 
(1) 
Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.

Segment Information (Tables)
Revenue by geographic region is based on the shipping address of the customer. The following tables set forth revenue and long-lived assets by geographic region (in thousands):
Revenue
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
United States
$
113,617

 
$
104,045

 
$
325,593

 
$
445,270

Other Americas
5,636

 
17,390

 
14,642

 
31,916

Europe, Middle East and Africa
58,391

 
51,940

 
163,714

 
176,386

Asia Pacific
14,936

 
12,077

 
40,974

 
35,520

Total revenue
$
192,580

 
$
185,452

 
$
544,923

 
$
689,092

Property, plant and equipment, net
 
September 30, 2017
 
December 31, 2016
United States
$
135,440

 
$
117,715

Other Americas
620

 
218

Europe, Middle East and Africa
3,875

 
3,822

Asia Pacific
3,282

 
3,045

Total property, plant and equipment, net
$
143,217

 
$
124,800

Guarantees (Tables)
Activity Related to Product Warranty
Activity related to product warranty was as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 24, 2016
 
September 30, 2017
 
September 24, 2016
Beginning balance
$
32,400

 
$
40,989

 
$
40,342

 
$
38,844

Charges to operations
4,550

 
5,196

 
14,231

 
19,258

Utilization
(3,484
)
 
(5,002
)
 
(10,773
)
 
(13,691
)
Change in estimate(1)
(1,304
)
 
(2,562
)
 
(11,638
)
 
(5,790
)
Balance at the end of the period
$
32,162

 
$
38,621

 
$
32,162

 
$
38,621

 
 
 
(1) 
The Company records product warranty liabilities based on the latest quality and cost information available as of the date the revenue is recorded. The changes in estimate shown here are due to changes in overall actual failure rates, the mix of new versus used units related to replacement of failed units, and changes in the estimated cost of repair. As the Company's products mature over time, failure rates and repair costs generally decline leading to favorable changes in warranty reserves. In addition, during the first quarter of 2017, due to product quality improvements, the Company revised certain estimates used in calculating its product warranties that resulted in a one-time reduction to the warranty accrual of $2.2 million.
Basis of Presentation and Significant Accounting Policies (Details) (USD $)
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2017
Sales revenue, net
Customer concentration risk
Customer One
Sep. 24, 2016
Sales revenue, net
Customer concentration risk
Customer One
Sep. 30, 2017
Sales revenue, net
Customer concentration risk
Customer One
Sep. 24, 2016
Sales revenue, net
Customer concentration risk
Customer One
Sep. 30, 2017
Sales revenue, net
Customer concentration risk
Customer Two
Sep. 24, 2016
Sales revenue, net
Customer concentration risk
Customer Two
Sep. 30, 2017
Sales revenue, net
Customer concentration risk
Customer Two
Sep. 24, 2016
Sales revenue, net
Customer concentration risk
Customer Two
Sep. 30, 2017
1.75% Convertible Senior Notes Due June 1, 2018
Dec. 31, 2016
1.75% Convertible Senior Notes Due June 1, 2018
Concentration Risk [Line Items]
 
 
 
 
 
 
 
 
 
 
Principal amount
 
 
 
 
 
 
 
 
$ 150,000,000.0 
$ 150,000,000 
Debt instrument interest percentage
 
 
 
 
 
 
 
 
1.75% 
 
Concentration risk
16.00% 
16.00% 
16.00% 
16.00% 
12.00% 
12.00% 
11.00% 
10.00% 
 
 
Fair Value Measurements - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) (Fair value, measurements, recurring, USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Assets
 
 
Total assets
$ 223,428 
$ 235,326 
Foreign currency exchange forward contracts
 
 
Assets
 
 
Total assets
187 
Liabilities
 
 
Foreign currency exchange forward contracts
(80)
(71)
Money market funds
 
 
Assets
 
 
Total assets
32,544 
41,773 
Certificates of deposit
 
 
Assets
 
 
Total assets
240 
1,881 
Commercial paper
 
 
Assets
 
 
Total assets
14,969 
39,310 
Corporate bonds
 
 
Assets
 
 
Total assets
125,544 
88,324 
U.S. agency notes
 
 
Assets
 
 
Total assets
10,694 
11,759 
U.S. treasuries
 
 
Assets
 
 
Total assets
39,437 
52,092 
Level 1
 
 
Assets
 
 
Total assets
71,981 
93,865 
Level 1 |
Foreign currency exchange forward contracts
 
 
Assets
 
 
Total assets
Liabilities
 
 
Foreign currency exchange forward contracts
Level 1 |
Money market funds
 
 
Assets
 
 
Total assets
32,544 
41,773 
Level 1 |
Certificates of deposit
 
 
Assets
 
 
Total assets
Level 1 |
Commercial paper
 
 
Assets
 
 
Total assets
Level 1 |
Corporate bonds
 
 
Assets
 
 
Total assets
Level 1 |
U.S. agency notes
 
 
Assets
 
 
Total assets
Level 1 |
U.S. treasuries
 
 
Assets
 
 
Total assets
39,437 
52,092 
Level 2
 
 
Assets
 
 
Total assets
151,447 
141,461 
Level 2 |
Foreign currency exchange forward contracts
 
 
Assets
 
 
Total assets
187 
Liabilities
 
 
Foreign currency exchange forward contracts
(80)
(71)
Level 2 |
Money market funds
 
 
Assets
 
 
Total assets
Level 2 |
Certificates of deposit
 
 
Assets
 
 
Total assets
240 
1,881 
Level 2 |
Commercial paper
 
 
Assets
 
 
Total assets
14,969 
39,310 
Level 2 |
Corporate bonds
 
 
Assets
 
 
Total assets
125,544 
88,324 
Level 2 |
U.S. agency notes
 
 
Assets
 
 
Total assets
10,694 
11,759 
Level 2 |
U.S. treasuries
 
 
Assets
 
 
Total assets
$ 0 
$ 0 
Fair Value Measurements - Investments at Fair Value (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Cash
$ 80,508 
$ 109,978 
Adjusted Amortized Cost
304,117 
345,328 
Gross Unrealized Gains
12 
Gross Unrealized Losses
(186)
(223)
Fair Value
303,936 
345,117 
Cash and Cash Equivalents
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
122,042 
162,642 
Gross Unrealized Gains
Gross Unrealized Losses
(1)
Fair Value
122,042 
162,641 
Cash and Cash Equivalents |
Money market funds
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
32,544 
41,773 
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
32,544 
41,773 
Cash and Cash Equivalents |
Commercial paper
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
3,000 
8,892 
Gross Unrealized Gains
Gross Unrealized Losses
(1)
Fair Value
3,000 
8,891 
Cash and Cash Equivalents |
U.S. agency notes
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
 
1,999 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
1,999 
Cash and Cash Equivalents |
U.S. treasuries
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
5,990 
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
5,990 
 
Short-term Investments
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
134,441 
141,781 
Gross Unrealized Gains
10 
Gross Unrealized Losses
(124)
(94)
Fair Value
134,319 
141,697 
Short-term Investments |
Commercial paper
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
11,971 
30,425 
Gross Unrealized Gains
Gross Unrealized Losses
(2)
(6)
Fair Value
11,969 
30,419 
Short-term Investments |
Certificates of deposit
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
240 
1,881 
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
240 
1,881 
Short-term Investments |
Corporate bonds
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
86,024 
63,097 
Gross Unrealized Gains
Gross Unrealized Losses
(73)
(59)
Fair Value
85,953 
63,039 
Short-term Investments |
U.S. agency notes
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
7,700 
7,285 
Gross Unrealized Gains
Gross Unrealized Losses
(7)
(8)
Fair Value
7,693 
7,277 
Short-term Investments |
U.S. treasuries
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
28,506 
39,093 
Gross Unrealized Gains
Gross Unrealized Losses
(42)
(21)
Fair Value
28,464 
39,081 
Other Long-term Investments
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
47,634 
40,905 
Gross Unrealized Gains
Gross Unrealized Losses
(62)
(128)
Fair Value
47,575 
40,779 
Other Long-term Investments |
Corporate bonds
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
39,630 
25,374 
Gross Unrealized Gains
Gross Unrealized Losses
(42)
(89)
Fair Value
39,591 
25,285 
Other Long-term Investments |
U.S. agency notes
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
3,006 
2,499 
Gross Unrealized Gains
Gross Unrealized Losses
(5)
(16)
Fair Value
3,001 
2,483 
Other Long-term Investments |
U.S. treasuries
 
 
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
 
 
Adjusted Amortized Cost
4,998 
13,032 
Gross Unrealized Gains
Gross Unrealized Losses
(15)
(23)
Fair Value
$ 4,983 
$ 13,011 
Fair Value Measurements - Additional Information (Details) (USD $)
9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Sep. 24, 2016
Dec. 26, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Available-for-sale investments
21 months 
 
 
 
Cash, cash equivalents and short-term investments
$ 256,400,000 
 
 
 
Cash and cash equivalents held by foreign subsidiaries
122,042,000 
162,641,000 
130,996,000 
149,101,000 
Foreign Subsidiary
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents held by foreign subsidiaries
$ 56,500,000 
 
 
 
Cost-method Investment (Details) (USD $)
9 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Dec. 31, 2016
Sep. 30, 2017
Cost-method Investments
Sep. 30, 2017
Cost-method Investments
Dec. 31, 2016
Cost-method Investments
Gain (Loss) on Investments [Line Items]
 
 
 
 
 
 
Purchase of cost-method investment
$ 0 
$ 5,000,000 
 
 
 
$ 7,000,000 
Cost-method investment, preferred stock warrant issued
 
 
 
 
 
10,000,000.0 
Cost-method investment, total
7,000,000 
 
7,000,000 
7,000,000 
7,000,000 
7,000,000 
Less than percent of voting securities (less than)
 
 
 
 
20.00% 
 
Impairment charge on cost-method investments
 
 
 
$ 0 
$ 0 
 
Derivative Instruments - Narrative (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Sep. 24, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]
 
 
 
 
Before-tax effect of foreign currency exchange forward contracts not designated as hedging instruments, gain (loss)
$ (1.2)
$ (0.2)
$ (2.9)
$ (0.8)
Derivative Instruments - Fair Value of Derivative Instruments Not Designated as Hedging Activities (Details) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Derivative [Line Items]
 
 
Prepaid Expense and Other Assets
$ 50,320,000 
$ 34,270,000 
Not designated as hedging instrument
 
 
Derivative [Line Items]
 
 
Prepaid Expense and Other Assets
 
187,000 
Other Accrued Liabilities
(80,000)
(71,000)
Not designated as hedging instrument |
Related to euro denominated receivables
 
 
Derivative [Line Items]
 
 
Gross Notional
22,261,000 
23,887,000 
Prepaid Expense and Other Assets
 
137,000 
Other Accrued Liabilities
(79,000)
(71,000)
Not designated as hedging instrument |
Related to British pound denominated receivables
 
 
Derivative [Line Items]
 
 
Gross Notional
6,353,000 
Prepaid Expense and Other Assets
 
48,000 
Other Accrued Liabilities
Not designated as hedging instrument |
Related to euro denominated restricted cash
 
 
Derivative [Line Items]
 
 
Gross Notional
248,000 
242,000 
Prepaid Expense and Other Assets
 
2,000 
Other Accrued Liabilities
$ (1,000)
$ 0 
Goodwill and Intangible Assets - Goodwill Roll Forward (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Goodwill [Roll Forward]
 
Balance as of December 31, 2016
$ 176,760 
Foreign currency translation adjustments
20,565 
Accumulated impairment loss
Balance as of September 30, 2017
$ 197,325 
Goodwill and Intangible Assets - Purchased Intangible Assets (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Intangible assets with finite lives:
 
 
Gross Carrying Amount
 
$ 141,484 
Accumulated Amortization
(57,168)
(33,295)
Net Carrying Amount
99,953 
108,189 
Weighted average remaining useful life (in years)
4 years 1 month 6 days 
4 years 8 months 12 days 
Gross Carrying Amount
157,121 
141,770 
Net Carrying Amount
99,953 
108,475 
Customer relationships
 
 
Intangible assets with finite lives:
 
 
Gross Carrying Amount
51,497 
46,125 
Accumulated Amortization
(13,529)
(7,793)
Net Carrying Amount
37,968 
38,332 
Weighted average remaining useful life (in years)
5 years 10 months 24 days 
6 years 7 months 6 days 
Developed technology
 
 
Intangible assets with finite lives:
 
 
Gross Carrying Amount
105,624 
94,320 
Accumulated Amortization
(43,639)
(24,715)
Net Carrying Amount
61,985 
69,605 
Weighted average remaining useful life (in years)
3 years 
3 years 8 months 12 days 
Trade names
 
 
Intangible assets with finite lives:
 
 
Gross Carrying Amount
 
220 
Accumulated Amortization
 
(220)
Net Carrying Amount
 
Weighted average remaining useful life (in years)
 
0 days 
Other intangible assets
 
 
Intangible assets with finite lives:
 
 
Gross Carrying Amount
 
819 
Accumulated Amortization
 
(567)
Net Carrying Amount
 
252 
Weighted average remaining useful life (in years)
 
4 years 7 months 6 days 
In-process technology
 
 
Acquired Indefinite-lived Intangible Assets [Line Items]
 
 
Indefinite-lived intangible assets
 
$ 286 
Goodwill and Intangible Assets - Future Amortization Expense (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
 
 
Net Carrying Amount
$ 99,953 
$ 108,189 
Remainder of 2017
6,958 
 
2018
27,832 
 
2019
27,204 
 
2020
19,852 
 
2021
7,257 
 
2022 and Thereafter
$ 10,850 
 
Goodwill and Intangible Assets - Goodwill and Intangible Assets (Details) (USD $)
3 Months Ended 9 Months Ended 3 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Other intangible assets
Apr. 1, 2017
Developed technology
Intangible assets with finite lives:
 
 
 
 
 
 
Amortization expense
$ 7,000,000 
$ 6,700,000 
$ 19,900,000 
$ 19,800,000 
 
 
Impairment charge
 
 
252,000 
300,000 
 
Finite-lived intangible assets, period increase (decrease)
 
 
 
 
 
$ 300,000 
Finite-lived intangible asset, useful life
 
 
 
 
 
5 years 
Balance Sheet Details (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Inventory:
 
 
Raw materials
$ 35,810 
$ 33,158 
Work in process
84,334 
74,533 
Finished goods
122,704 
125,264 
Total inventory
242,848 
232,955 
Property, plant and equipment, net:
 
 
Property, plant and equipment, gross
382,520 
339,840 
Less accumulated depreciation and amortization
(239,303)
(215,040)
Total property, plant and equipment, net
143,217 
124,800 
Accrued expenses:
 
 
Loss contingency related to non-cancelable purchase commitments
4,012 
5,555 
Professional and other consulting fees
5,184 
4,955 
Taxes payable
2,523 
2,384 
Royalties
5,466 
5,375 
Other accrued expenses
12,895 
13,311 
Total accrued expenses
30,080 
31,580 
Computer hardware
 
 
Property, plant and equipment, net:
 
 
Property, plant and equipment, gross
13,648 
12,775 
Computer software
 
 
Property, plant and equipment, net:
 
 
Property, plant and equipment, gross
32,542 
26,779 
Laboratory and manufacturing equipment
 
 
Property, plant and equipment, net:
 
 
Property, plant and equipment, gross
244,784 
222,311 
Land and building
 
 
Property, plant and equipment, net:
 
 
Property, plant and equipment, gross
12,347 
Furniture and fixtures
 
 
Property, plant and equipment, net:
 
 
Property, plant and equipment, gross
2,476 
2,075 
Leasehold and building improvements
 
 
Property, plant and equipment, net:
 
 
Property, plant and equipment, gross
42,846 
42,267 
Construction in progress
 
 
Property, plant and equipment, net:
 
 
Property, plant and equipment, gross
33,877 
33,633 
Enterprise resource planning systems
 
 
Property, plant and equipment, net:
 
 
Property, plant and equipment, gross
11,400 
9,100 
Total property, plant and equipment, net
$ 5,100 
$ 4,000 
Accumulated Other Comprehensive Loss (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
 
Beginning balance
$ (879)
Beginning balance
(28,324)
Net current-period other comprehensive income (loss)
(11)
Net current-period other comprehensive income (loss)
37,273 
Ending balance
(890)
Ending balance
8,949 
Unrealized Gain (Loss) on Other Available-for-Sale Securities
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
 
Beginning balance
(209)
Net current-period other comprehensive income (loss)
27 
Ending balance
(182)
Foreign Currency Translation
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
 
Beginning balance
(27,236)
Net current-period other comprehensive income (loss)
37,257 
Ending balance
$ 10,021 
Basic and Diluted Net Income (Loss) Per Common Share - Computation of EPS (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Sep. 24, 2016
Numerator:
 
 
 
 
Net income (loss) attributable to Infinera Corporation
$ (37,231)
$ (11,172)
$ (120,521)
$ 12,326 
Denominator:
 
 
 
 
Basic weighted average common shares outstanding (in shares)
148,777 
143,850 
147,367 
142,350 
Effect of dilutive securities:
 
 
 
 
Employee equity plans (in shares)
2,580 
Assumed conversion of convertible senior notes from conversion spread (in shares)
991 
Diluted weighted average common shares outstanding (in shares)
148,777 
143,850 
147,367 
145,921 
Net income (loss) per common share attributable to Infinera Corporation
 
 
 
 
Basic (in usd per share)
$ (0.25)
$ (0.08)
$ (0.82)
$ 0.09 
Diluted (in usd per share)
$ (0.25)
$ (0.08)
$ (0.82)
$ 0.08 
Basic and Diluted Net Income (Loss) Per Common Share - Antidilutive Shares (Details)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Sep. 24, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from earnings per share computation (in shares)
10,594 
9,548 
10,876 
3,796 
Stock options
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from earnings per share computation (in shares)
1,406 
1,834 
1,482 
61 
RSUs
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from earnings per share computation (in shares)
6,359 
5,475 
6,877 
2,454 
PSUs
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from earnings per share computation (in shares)
1,434 
905 
1,437 
643 
ESPP shares
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from earnings per share computation (in shares)
1,395 
1,334 
1,080 
638 
Convertible Senior Notes - Narrative (Details) (USD $)
9 Months Ended 0 Months Ended 1 Months Ended 9 Months Ended
Sep. 30, 2017
Jun. 30, 2017
May 30, 2013
Dec. 31, 2016
Long-term debt
Accounting Standards Update 2015-03
Dec. 31, 2016
Other noncurrent assets
Accounting Standards Update 2015-03
May 30, 2013
1.75% Convertible Senior Notes Due June 1, 2018
May 30, 2013
1.75% Convertible Senior Notes Due June 1, 2018
Sep. 30, 2017
1.75% Convertible Senior Notes Due June 1, 2018
Dec. 31, 2016
1.75% Convertible Senior Notes Due June 1, 2018
Sep. 24, 2016
1.75% Convertible Senior Notes Due June 1, 2018
Sep. 30, 2017
Convertible senior notes, conversion circumstance one
D
Sep. 30, 2017
Convertible senior notes, conversion circumstance two
D
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from issuance of debt, net
 
 
 
 
 
 
$ 144,500,000 
 
 
 
 
 
Initial conversion rate per $1,000 principal amount of Notes
 
 
 
 
 
0.0794834 
 
 
 
 
 
 
Initial conversion price (in usd per share)
 
 
 
 
 
 
$ 12.58 
 
 
 
 
 
Threshold trading days for debt instrument conversion
 
 
 
 
 
 
 
 
 
 
20 
 
Convertible threshold consecutive trading days
 
 
 
 
 
 
 
 
 
 
30 
Convertible threshold minimum percentage
 
 
 
 
 
 
 
 
 
 
130.00% 
 
Convertible threshold business days
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, convertible, if-converted value in excess of principal
 
 
 
 
 
 
 
 
 
 
 
1,000 
Convertible, threshold maximum percentage
 
 
 
 
 
 
 
 
 
 
 
98.00% 
Purchase price as a percentage on principal amount of the notes upon the occurrence of a fundamental change
100.00% 
 
 
 
 
 
 
 
 
 
 
 
Net equity component carrying amount
 
 
 
 
 
 
 
43,300,000 
43,300,000 
 
 
 
Debt issuance costs, gross
 
 
5,500,000 
 
 
 
 
 
 
 
 
 
Debt issuance cost increase (decrease)
 
 
 
2,100,000 
(2,100,000)
 
 
 
 
 
 
 
Deferred tax liability
 
 
 
 
 
 
 
17,000,000 
 
 
 
 
Debt instrument interest percentage
 
 
 
 
 
 
 
1.75% 
 
 
 
 
Additional effective rate of interest to be used on amortized carrying value
 
 
 
 
 
 
 
10.23% 
 
10.23% 
 
 
Total estimated fair value of the notes
$ 152,600,000 
 
 
 
 
 
 
 
 
 
 
 
Closing price of common stock (in usd per share)
 
$ 8.87 
 
 
 
 
 
 
 
 
 
 
Convertible Senior Notes - Components of Convertible Senior Notes (Details) (USD $)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2017
1.75% Convertible Senior Notes Due June 1, 2018
Dec. 31, 2016
1.75% Convertible Senior Notes Due June 1, 2018
Debt Instrument [Line Items]
 
 
 
Principal amount
 
$ 150,000,000.0 
$ 150,000,000 
Unamortized discount
 
(7,380,000)
(15,114,000)
Unamortized issuance cost
 
(635,000)
(1,300,000)
Net carrying amount
 
$ 141,985,000 
$ 133,586,000 
Remaining life
8 months 
 
 
Stockholders' Equity - Narrative (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2017
Sep. 29, 2017
Sep. 30, 2017
Restricted stock units
Sep. 24, 2016
Restricted stock units
Sep. 30, 2017
Restricted stock units
Sep. 24, 2016
Restricted stock units
Sep. 30, 2017
PSUs
Sep. 30, 2017
Performance stock unit grants
Sep. 24, 2016
Performance stock unit grants
Sep. 30, 2017
Performance stock unit grants
Sep. 24, 2016
Performance stock unit grants
Sep. 30, 2017
2016 Equity Incentive Plan
May 31, 2017
2016 Equity Incentive Plan
Apr. 1, 2017
2016 Equity Incentive Plan
PSUs
Minimum
Apr. 1, 2017
2016 Equity Incentive Plan
PSUs
Maximum
Apr. 1, 2017
2016 Equity Incentive Plan
PSUs
Existing employees
Vesting 1
Apr. 1, 2017
2016 Equity Incentive Plan
PSUs
Existing employees
Vesting 2
Apr. 1, 2017
2016 Equity Incentive Plan
PSUs
Existing employees
Vesting 3
Sep. 30, 2017
2007 Equity Incentive Plan
PSUs
Minimum
Sep. 30, 2017
2007 Equity Incentive Plan
PSUs
Maximum
Sep. 30, 2017
2007 Equity Incentive Plan
PSUs
Existing employees
Vesting 1
Sep. 30, 2017
2007 Equity Incentive Plan
PSUs
Existing employees
Vesting 2
Sep. 30, 2017
2007 Equity Incentive Plan
PSUs
Existing employees
Vesting 3
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in shares authorized (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
6,400,000 
 
 
 
 
 
 
 
 
 
 
Reserved common stock for issuance of options (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
13,900,000 
 
 
 
 
 
 
 
 
 
 
 
2016 Plan maximum term
 
 
 
 
 
 
 
 
 
 
 
 
10 years 
 
 
 
 
 
 
 
 
 
 
 
Closing price of common stock (in usd per share)
 
 
$ 8.87 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock options, granted (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares granted (in shares)
 
 
 
100,000 
 
3,300,000 
 
916,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of stock-based compensation
 
 
 
$ 7.9 
$ 7.7 
$ 24.0 
$ 21.4 
 
$ 2.7 
$ 1.7 
$ 7.3 
$ 4.9 
 
 
 
 
 
 
 
 
 
 
 
 
Duration of grants based on shareholder return of common stock price versus designated index
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 year 
2 years 
3 years 
 
 
1 year 
2 years 
3 years 
Ranges of number of shares issued on vesting of PSUs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.0 
 
 
 
2.0 
 
 
 
Stockholders' Equity - Equity Award Activity - Options (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2017
Number of Stock Options
 
 
Stock options, granted (in shares)
Stock options
 
 
Number of Stock Options
 
 
Stock options, beginning balance (in shares)
 
1,655,000 
Stock options, granted (in shares)
 
Stock options, exercised (in shares)
 
(196,000)
Stock options, canceled (in shares)
 
(53,000)
Stock options, ending balance (in shares)
1,406,000 
1,406,000 
Stock options, exercisable (in shares)
1,404,000 
1,404,000 
Weighted-Average Exercise Price Per Share
 
 
Weighted-average exercise price per share, beginning balance (in usd per share)
 
$ 8.30 
Weighted-average exercise per share, options granted (in usd per share)
 
$ 0.00 
Weighted-average exercise price per share, options exercised (in usd per share)
 
$ 7.78 
Weighted-average exercise price per share, options canceled (in usd per share)
 
$ 13.02 
Weighted-average exercise price per share, ending balance (in usd per share)
$ 8.19 
$ 8.19 
Average exercise price per share, exercisable (in usd per share)
$ 8.19 
$ 8.19 
Aggregate Intrinsic Value
 
 
Aggregate intrinsic value, beginning balance
 
$ 965 
Aggregate intrinsic value, options exercised
 
373 
Aggregate intrinsic value, ending balance
1,223 
1,223 
Aggregate intrinsic value, exercisable
$ 1,223 
$ 1,223 
Stockholders' Equity - Equity Award Activity - RSUs (Details) (Restricted stock units, USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2017
Restricted stock units
 
 
Number of Restricted Stock Units
 
 
Number of units, beginning balance (in shares)
 
5,293 
Number of units granted (in shares)
100 
3,300 
Number of units released (in shares)
 
(2,023)
Number units canceled (in shares)
 
(200)
Number of units, ending balance (in shares)
6,359 
6,359 
Weighted- Average Grant Date Fair Value Per Share
 
 
Weighted-average grant date fair value per share, beginning balance (in usd per share)
 
$ 14.10 
Weighted-average grant date fair value per share, granted (in usd per share)
 
$ 10.48 
Weighted-average grant date fair value per share, released (in usd per share)
 
$ 13.55 
Weighted-average grant date fair value per share, canceled (in usd per share)
 
$ 13.72 
Weighted-average grant date fair value per share, ending balance (in usd per share)
$ 12.41 
$ 12.41 
Aggregate Intrinsic Value
 
 
Aggregate intrinsic value, beginning balance
 
$ 44,939 
Aggregate intrinsic value, RSUs released
 
19,398 
Aggregate intrinsic value, ending balance
$ 56,405 
$ 56,405 
Stockholders' Equity - Equity Award Activity - PSUs (Details) (PSUs, USD $)
In Thousands, except Per Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2017
PSUs
 
Number of Performance Stock Units
 
Number of units, beginning balance (in shares)
904 
Number of units granted (in shares)
916 
Number of units released (in shares)
(26)
Number units canceled (in shares)
(360)
Number of units, ending balance (in shares)
1,434 
Number of restricted stock units, expected to vest (in shares)
968 
Weighted- Average Grant Date Fair Value Per Share
 
Weighted-average grant date fair value per share, beginning balance (in usd per share)
$ 14.13 
Weighted-average grant date fair value per share, granted (in usd per share)
$ 16.36 
Weighted-average grant date fair value per share, released (in usd per share)
$ 11.83 
Weighted-average grant date fair value per share, canceled (in usd per share)
$ 11.58 
Weighted-average grant date fair value per share, ending balance (in usd per share)
$ 16.24 
Aggregate Intrinsic Value
 
Aggregate intrinsic value, beginning balance
$ 7,672 
Aggregate Intrinsic Value, PSUs released
225 
Aggregate intrinsic value, ending balance
12,719 
Aggregate intrinsic value, expected to vest
$ 8,582 
Stockholders' Equity - Total Stock Based Compensation Cost for Instruments Granted but Not Yet Amortized (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Stock options, unrecognized compensation expense, net
$ 7 
Stock options, weighted-average period
3 months 18 days 
RSUs
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Unrecognized compensation expense, net
61,090 
Weighted-average period
2 years 8 months 12 days 
PSUs
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Unrecognized compensation expense, net
$ 12,879 
Weighted-average period
1 year 7 months 6 days 
Stockholders' Equity - Estimated Fair Value of ESPP, Valuation Assumptions (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Sep. 24, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock-based compensation expense
$ 12,167 
$ 10,211 
$ 35,424 
$ 29,191 
Employee Stock Purchase Plans
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Volatility
47.00% 
67.00% 
 
 
Volatility minimum
 
 
47.00% 
56.00% 
Volatility maximum
 
 
51.00% 
67.00% 
Risk-free interest rate
1.16% 
0.51% 
 
 
Risk-free interest rate minimum
 
 
0.81% 
0.51% 
Risk-free interest rate maximum
 
 
1.16% 
0.52% 
Expected life
6 months 
6 months 
6 months 
6 months 
Estimated fair value (in usd per share)
$ 2.44 
$ 3.16 
 
 
Stock-based compensation expense
$ 1,502 
$ 1,565 
$ 4,575 
$ 4,054 
Minimum |
Employee Stock Purchase Plans
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Estimated fair value (in usd per share)
 
 
$ 2.44 
$ 3.16 
Maximum |
Employee Stock Purchase Plans
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Estimated fair value (in usd per share)
 
 
$ 3.46 
$ 4.53 
Stockholders' Equity - Valuation Assumptions (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Employee Stock Purchase Plans
Sep. 24, 2016
Employee Stock Purchase Plans
Sep. 30, 2017
Employee Stock Purchase Plans
Sep. 24, 2016
Employee Stock Purchase Plans
Sep. 30, 2017
Employee Stock Purchase Plans
Minimum
Sep. 24, 2016
Employee Stock Purchase Plans
Minimum
Sep. 30, 2017
Employee Stock Purchase Plans
Maximum
Sep. 24, 2016
Employee Stock Purchase Plans
Maximum
Sep. 30, 2017
PSUs
Dec. 31, 2016
PSUs
Dec. 26, 2015
PSUs
Sep. 30, 2017
PSUs
Minimum
Dec. 31, 2016
PSUs
Minimum
Dec. 26, 2015
PSUs
Minimum
Sep. 30, 2017
PSUs
Maximum
Dec. 31, 2016
PSUs
Maximum
Dec. 26, 2015
PSUs
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Infinera volatility
 
 
 
 
47.00% 
67.00% 
 
 
 
 
 
 
 
55.00% 
48.00% 
 
 
 
 
 
 
Volatility minimum
 
 
 
 
 
 
47.00% 
56.00% 
 
 
 
 
55.00% 
 
 
 
 
 
 
 
 
Volatility maximum
 
 
 
 
 
 
51.00% 
67.00% 
 
 
 
 
56.00% 
 
 
 
 
 
 
 
 
Risk-free interest rate minimum
 
 
 
 
 
 
0.81% 
0.51% 
 
 
 
 
1.41% 
0.95% 
0.97% 
 
 
 
 
 
 
Risk-free interest rate maximum
 
 
 
 
 
 
1.16% 
0.52% 
 
 
 
 
1.63% 
1.07% 
1.10% 
 
 
 
 
 
 
Risk-free interest rate
 
 
 
 
1.16% 
0.51% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected life
 
 
 
 
6 months 
6 months 
6 months 
6 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated fair value (in usd per share)
 
 
 
 
$ 2.44 
$ 3.16 
 
 
$ 2.44 
$ 3.16 
$ 3.46 
$ 4.53 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
$ 12,167 
$ 10,211 
$ 35,424 
$ 29,191 
$ 1,502 
$ 1,565 
$ 4,575 
$ 4,054 
 
 
 
 
 
 
 
 
 
 
 
 
 
Index volatility
 
 
 
 
 
 
 
 
 
 
 
 
 
18.00% 
 
33.00% 
 
18.00% 
34.00% 
 
19.00% 
Correlation with index/index component
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.52 
0.10 
0.58 
 
0.49 
0.59 
 
Estimated fair value (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
$ 16.36 
 
 
$ 15.23 
$ 10.31 
$ 18.08 
$ 17.35 
$ 16.62 
$ 19.29 
Stockholders' Equity - Nonvested Performance Based Units Activity By Grant Year (Details) (PSUs)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Number of Performance Stock Units
 
Number of units, beginning balance (in shares)
904 
Number of units granted (in shares)
916 
Number of units released (in shares)
(26)
Number units canceled (in shares)
(360)
Number of units, ending balance (in shares)
1,434 
2014
 
Number of Performance Stock Units
 
Number of units, beginning balance (in shares)
123 
Number of units granted (in shares)
Number of units released (in shares)
(21)
Number units canceled (in shares)
(102)
Number of units, ending balance (in shares)
2015
 
Number of Performance Stock Units
 
Number of units, beginning balance (in shares)
148 
Number of units granted (in shares)
Number of units released (in shares)
(5)
Number units canceled (in shares)
(60)
Number of units, ending balance (in shares)
83 
2016
 
Number of Performance Stock Units
 
Number of units, beginning balance (in shares)
633 
Number of units granted (in shares)
Number of units released (in shares)
Number units canceled (in shares)
(194)
Number of units, ending balance (in shares)
439 
2017
 
Number of Performance Stock Units
 
Number of units, beginning balance (in shares)
Number of units granted (in shares)
916 
Number of units released (in shares)
Number units canceled (in shares)
(4)
Number of units, ending balance (in shares)
912 
Stockholders' Equity - Balance Sheet and Statements of Operations (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Cost of revenue
Sep. 24, 2016
Cost of revenue
Sep. 30, 2017
Cost of revenue
Sep. 24, 2016
Cost of revenue
Sep. 30, 2017
Research and development
Sep. 24, 2016
Research and development
Sep. 30, 2017
Research and development
Sep. 24, 2016
Research and development
Sep. 30, 2017
Sales and marketing
Sep. 24, 2016
Sales and marketing
Sep. 30, 2017
Sales and marketing
Sep. 24, 2016
Sales and marketing
Sep. 30, 2017
General and administration
Sep. 24, 2016
General and administration
Sep. 30, 2017
General and administration
Sep. 24, 2016
General and administration
Sep. 30, 2017
Stock-based compensation effects in inventory
Dec. 31, 2016
Stock-based compensation effects in inventory
Effects Of Stock Based Compensation [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation effects in inventory
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 5,373 
$ 4,911 
Stock-based compensation effects included in net income (loss) before income taxes
10,883 
9,543 
31,796 
26,752 
779 
756 
2,337 
2,175 
4,040 
3,496 
12,004 
9,721 
3,025 
2,826 
9,024 
8,006 
3,039 
2,465 
8,431 
6,850 
 
 
Cost of revenue – amortization from balance sheet
1,284 
668 
3,628 
2,439 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total stock-based compensation expense
$ 12,167 
$ 10,211 
$ 35,424 
$ 29,191 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income Taxes (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
Sep. 24, 2016
Business Acquisition [Line Items]
 
 
 
 
Provision (benefit) for income taxes
$ (211,000)
$ 2,400,000 
$ 459,000 
$ 725,000 
Pre-tax income (loss)
37,000,000 
13,713,000 
121,000,000 
(11,100,000)
Income tax benefit increase
100,000 
 
 
 
Accrual associated with withholding taxes
600,000 
 
600,000 
 
Transmode
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
Provision (benefit) for income taxes
1,500,000 
 
4,500,000 
 
Purchase accounting amortization expense
$ 7,000,000 
 
$ 20,300,000 
 
Segment Information - Revenue and Long-Lived Assets (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 24, 2016
Sep. 30, 2017
segment
Sep. 24, 2016
Segment Reporting [Abstract]
 
 
 
 
Number of reporting segments
 
 
 
Number of operating segments
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Total revenue
$ 192,580 
$ 185,452 
$ 544,923 
$ 689,092 
United States
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Total revenue
113,617 
104,045 
325,593 
445,270 
Other Americas
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Total revenue
5,636 
17,390 
14,642 
31,916 
Europe, Middle East and Africa
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Total revenue
58,391 
51,940 
163,714 
176,386 
Asia Pacific
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Total revenue
$ 14,936 
$ 12,077 
$ 40,974 
$ 35,520 
Segment Information - Property, Plant and Equipment, Net (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Geographic Information For Property Plant And Equipment [Line Items]
 
 
Total property, plant and equipment, net
$ 143,217 
$ 124,800 
United States
 
 
Geographic Information For Property Plant And Equipment [Line Items]
 
 
Total property, plant and equipment, net
135,440 
117,715 
Other Americas
 
 
Geographic Information For Property Plant And Equipment [Line Items]
 
 
Total property, plant and equipment, net
620 
218 
Europe, Middle East and Africa
 
 
Geographic Information For Property Plant And Equipment [Line Items]
 
 
Total property, plant and equipment, net
3,875 
3,822 
Asia Pacific
 
 
Geographic Information For Property Plant And Equipment [Line Items]
 
 
Total property, plant and equipment, net
$ 3,282 
$ 3,045 
Guarantees - Narrative (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Guarantor Obligations [Line Items]
 
 
Outstanding standby letters of credit
$ 4.3 
$ 8.7 
Debt instrument, collateral amount
5.1 
4.5 
Banker's guarantees or performance bonds
 
 
Guarantor Obligations [Line Items]
 
 
Line of credit facility, remaining borrowing capacity
1.6 
1.1 
Proceeds from lines of credit
0.3 
Letter of credit
 
 
Guarantor Obligations [Line Items]
 
 
Property leases
0.9 
4.5 
Customer performance guarantee
2.2 
3.1 
Value added tax license
$ 1.2 
$ 1.1 
Subsequent Events (Details) (Scenario, Forecast, Subsequent Event, USD $)
3 Months Ended
Dec. 30, 2017
Subsequent Event [Line Items]
 
Reduction in workforce percent
10.00% 
Minimum
 
Subsequent Event [Line Items]
 
Restructuring cost
$ 21,000,000 
Severance and employee-related costs
10,000,000 
Other costs
6,000,000 
Other charges primarily equipment write-down
5,000,000.0 
Maximum
 
Subsequent Event [Line Items]
 
Restructuring cost
27,000,000 
Severance and employee-related costs
12,000,000 
Other costs
8,000,000 
Other charges primarily equipment write-down
$ 7,000,000.0