SOURCE: Infinera

Infinera

October 18, 2010 16:10 ET

Infinera Corporation Reports Third Quarter 2010 Financial Results

Revenue of $130.1 Million on Year-Over-Year Growth of 56%; Non-GAAP Profit of $0.18 per Diluted Share; Non-GAAP Gross Margin at 51%

SUNNYVALE, CA--(Marketwire - October 18, 2010) - Infinera Corporation (NASDAQ: INFN), a leading provider of digital optical communications systems, today released financial results for the third quarter ended September 25, 2010.

--  GAAP revenues for the quarter were $130.1 million compared to $111.4
    million in the second quarter of 2010 and $83.4 million in the third
    quarter of 2009, representing year-over-year growth of 56%.

--  GAAP gross margins for the quarter were 50% compared to 42% in the
    second quarter of 2010 and 33% in the third quarter of 2009.  GAAP net
    income for the quarter was $4.4 million, or $0.04 per basic and diluted
    share, compared to a net loss of $9.6 million, or $(0.10) per share, in
    the second quarter of 2010 and a net loss of $16.5 million, or $(0.17)
    per share, in the third quarter of 2009.

--  Non-GAAP gross margins for the quarter were 51% compared to 44% in the
    second quarter of 2010 and 38% in the third quarter of 2009, which
    excludes restructuring and other related costs and non-cash stock-based
    compensation.  Non-GAAP net income for the quarter was $18.7 million,
    or $0.18 per diluted share, compared to net income of $3.0 million, or
    $0.03 per diluted share in the second quarter of 2010 and a net loss of
    $3.1 million, or $(0.03) per share, in the third quarter of 2009.

Management Commentary

"I am pleased with the outstanding financial performance delivered by the Infinera team in the third quarter," said Tom Fallon, president and chief executive officer. "We achieved new records for quarterly revenue, gross margin and tributary adapter module shipments. The stronger revenue, higher profit margins and ongoing operating expense control resulted in significant income leverage, with a non-GAAP operating income contribution of $18.5 million for the quarter. We believe this operating income contribution, combined with our achievement of 51% gross margin, validates our long-term business model and demonstrates the leverage that is achievable."

"We believe that our continued solid financial performance stems from our customers' confidence in Infinera's unique and differentiated PIC-based networks and our expanded product portfolio that provides the end-to-end solutions that they are demanding," continued Fallon.

The company also noted the following developments in the third quarter and more recently:

--  Positive cash from operations of $10.0 million;
--  TAM shipments of more than 3,000 units;
--  The addition of two new invoiced customers bringing its customer roster
    to 77;
--  The addition of six new ATN metro customers, bringing total ATN
    customers to 15;
--  The launch of new hardware and software products for the company's DTN
    and ATN platforms that enable a new end-to-end "Digital OTN" solution;
    and
--  Two important technical demonstrations, including:
    --  PIC-based 100 Gigabit per second (100G) coherent transmission and
        reception over a 1,348 kilometer route on an XO Communications
        nationwide network on a production Infinera line system, and
    --  100 Gigabit Ethernet services over Colt's existing London to
        Frankfurt Infinera network.

Conference Call Information:

Infinera will host a conference call for analysts and investors to discuss its third quarter results and fourth quarter outlook today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will also be accessible from the "Investor Relations" section of the company's website at www.infinera.com. Following the webcast, an archived version will be available on the website for 90 days. To hear the replay, parties in the United States and Canada should call 1-866-380-8126. International parties can access the replay at 1-203-369-0357.


About Infinera

Infinera provides Digital Optical Networking systems to telecommunications carriers worldwide. Infinera's systems are unique in their use of a breakthrough semiconductor technology: the photonic integrated circuit (PIC). Infinera's systems and PIC technology are designed to provide customers with simpler and more flexible engineering and operations, faster time-to-service, and the ability to rapidly deliver differentiated services without reengineering their optical infrastructure. For more information, please visit www.infinera.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements about our belief in the power and achievement of our long-term business model, our belief in our customers' confidence in our PIC-based networks and expanded product portfolio, and our belief that the quarterly results validates our long-term business model and demonstrates the leverage that is achievable. These forward-looking statements involve risks and uncertainties, as well as assumptions that if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs and develop new or enhanced products to meet those needs; the adoption rate of our products; our ability to establish and maintain successful relationships with our customers; our ability to reduce customer concentration; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; general political, economic and market conditions and events; and other risks and uncertainties described more fully in our documents filed with or furnished to the U.S. Securities and Exchange Commission (SEC). More information about these and other risks that may impact Infinera's business are set forth in our annual report on Form 10-K, which was filed with the SEC on March 1, 2010, as well as subsequent reports filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

Use of Non-GAAP financial information

In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude non-cash stock-based compensation expenses and non-recurring restructuring and other related costs. We believe these adjustments are appropriate to enhance an overall understanding of our underlying financial performance and also our prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss), basic and diluted net income (loss) per share, or gross margin prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations. For a description of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section titled, "GAAP to Non-GAAP Reconciliations." We anticipate disclosing forward-looking non-GAAP information in our conference call to discuss our third quarter 2010 results, including an estimate of non-GAAP earnings for the fourth quarter of 2010 that excludes non-cash stock-based compensation expenses.

A copy of this press release can be found on the investor relations page of Infinera's website at www.infinera.com.

Infinera Corporation and the Infinera logo are trademarks or registered trademarks of Infinera Corporation. All other trademarks used or mentioned herein belong to their respective owners.

Infinera Corporation
GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)


                                 Three Months Ended     Nine Months Ended
                                --------------------  --------------------
                                September  September  September  September
                                25, 2010   26, 2009    25, 2010   26, 2009
                                ---------  ---------  ---------  ---------
Revenue:
  Product                       $ 115,121  $  73,690  $ 299,323  $ 193,912
  Ratable product and related
   support and services             1,460        892      4,738      3,206
  Services                         13,480      8,826     33,158     21,802
                                ---------  ---------  ---------  ---------
      Total revenue               130,061     83,408    337,219    218,920

Cost of revenue (1):
  Cost of product                  58,552     47,473    171,660    137,037
  Cost of ratable product and
   related support and
   services                           874        444      2,558      1,532
  Cost of services                  6,224      5,049     14,286      9,681
  Restructuring costs (credit)
   related to cost of revenue         (60)     2,736       (182)     2,736
                                ---------  ---------  ---------  ---------
      Total cost of revenue        65,590     55,702    188,322    150,986

Gross profit                       64,471     27,706    148,897     67,934
Operating expenses (1):
  Research and development         29,886     23,611     87,292     70,445
  Sales and marketing              14,847     12,364     41,566     34,945
  General and administrative       15,609     10,373     45,794     31,978
  Restructuring and other costs         -        601        159        601
                                ---------  ---------  ---------  ---------
      Total operating expenses     60,342     46,949    174,811    137,969

Income (loss) from operations       4,129    (19,243)   (25,914)   (70,035)

Other income (expense), net:
  Interest income                     284        441      1,094      1,956
    Total other-than-temporary
     impairment losses                  -          -          -     (2,747)
    Portion of loss recognized
     in other comprehensive
     loss                               -       (161)         -      1,653
                                ---------  ---------  ---------  ---------
  Net credit impairment losses
   recognized in earnings               -       (161)         -     (1,094)
  Other gain (loss), net              172        870       (352)      (138)
                                ---------  ---------  ---------  ---------
      Total other income
      (expense), net                  456      1,150        742        724

Income (loss) before income
 taxes                              4,585    (18,093)   (25,172)   (69,311)
Provision for (benefit from)
 income taxes                         225     (1,561)        20     (1,340)
                                ---------  ---------  ---------  ---------
Net income (loss)               $   4,360  $ (16,532) $ (25,192) $ (67,971)
                                =========  =========  =========  =========
Net income (loss) per common
 share
  Basic                         $    0.04  $   (0.17) $   (0.26) $   (0.71)
                                =========  =========  =========  =========
  Diluted                       $    0.04  $   (0.17) $   (0.26) $   (0.71)
                                =========  =========  =========  =========

Weighted average shares used in
 computing net income (loss)
 per common share
  Basic                            99,976     95,864     98,647     95,100
                                =========  =========  =========  =========
  Diluted                         105,159     95,864     98,647     95,100
                                =========  =========  =========  =========

(1) The following table summarizes the effects of stock-based compensation
    related to employees and non-employees for the three and nine months
    ended September 25, 2010 and September 26, 2009:


                                 Three Months Ended     Nine Months Ended
                                --------------------- ---------------------
                                 September  September  September  September
                                 25, 2010   26, 2009   25, 2010   26, 2009
                                ---------- ---------- ---------- ----------
  Cost of revenue               $      725 $      490 $    1,858 $    1,346
  Research and development           3,773      2,915     10,546      7,066
  Sales and marketing                2,148      1,710      6,187      4,723
  General and administration         6,281      3,984     17,188     10,142
                                ---------- ---------- ---------- ----------
                                    12,927      9,099     35,779     23,277
  Cost of revenue -
   amortization from balance
   sheet*                            1,517        987      4,182      2,457
                                ---------- ---------- ---------- ----------
  Total stock-based
   compensation expense         $   14,444 $   10,086 $   39,961 $   25,734
                                ========== ========== ========== ==========

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


Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except per share data)
(Unaudited)

                        Three Months Ended            Nine Months Ended
                ----------------------------------  ----------------------
                September    June 26,   September   September   September
                 25, 2010      2010      26, 2009    25, 2010    26, 2009
                ----------  ----------  ----------  ----------  ----------
Reconciliation
 of Gross
 Profit:
U.S. GAAP as
 reported       $   64,471  $   47,310  $   27,706  $  148,897  $   67,934
Restructuring
 and other
 related
 costs(1)              (60)        (29)      2,736        (182)      2,736
Stock-based
 compensation
 (2)                 2,242       1,867       1,477       6,040       3,803
                ----------  ----------  ----------  ----------  ----------
Non-GAAP as
 adjusted       $   66,653  $   49,148  $   31,919  $  154,755  $   74,473
                ==========  ==========  ==========  ==========  ==========

Reconciliation
 of Gross
 Margin:
U.S. GAAP as
 reported               50%         42%         33%         44%         31%
Restructuring
 and other
 related
 costs(1)               - %         - %          3%          -%          1%
Stock-based
 compensation
 (2)                     1%          2%          2%          2%          2%
                ----------  ----------  ----------  ----------  ----------
Non-GAAP as
 adjusted               51%         44%         38%         46%         34%
                ==========  ==========  ==========  ==========  ==========

Reconciliation
 of Income
 (Loss) from
 Operations:
U.S. GAAP as
 reported       $    4,129  $   (9,741) $  (19,243) $  (25,914) $  (70,035)
Restructuring
 and other
 related
 costs(1)              (60)        (31)      3,337         (23)      3,337
Stock-based
 compensation
 (2)                14,444      12,607      10,086      39,961      25,734
                ----------  ----------  ----------  ----------  ----------
Non-GAAP as
 adjusted       $   18,513  $    2,835  $   (5,820) $   14,024  $  (40,964)
                ==========  ==========  ==========  ==========  ==========

Reconciliation
 of Net Income
 (Loss):
U.S. GAAP as
 reported       $    4,360  $   (9,561) $  (16,532) $  (25,192) $  (67,971)
Restructuring
 and other
 related
 costs(1)              (60)        (31)      3,337         (23)      3,337
Stock-based
 compensation
 (2)                14,444      12,607      10,086      39,961      25,734
                ----------  ----------  ----------  ----------  ----------
Non-GAAP as
 adjusted       $   18,744  $    3,015  $   (3,109) $   14,746  $  (38,900)
                ==========  ==========  ==========  ==========  ==========

Net Income
 (Loss) per
 Common
 Share - Basic:
U.S. GAAP       $     0.04  $    (0.10) $    (0.17) $    (0.26) $    (0.71)
                ==========  ==========  ==========  ==========  ==========
Non-GAAP        $     0.19  $     0.03  $    (0.03) $     0.15  $    (0.41)
                ==========  ==========  ==========  ==========  ==========

Net Income
 (Loss) per
 Common
 Share -
 Diluted:
U.S. GAAP       $     0.04  $    (0.10) $    (0.17) $    (0.26) $    (0.71)
                ==========  ==========  ==========  ==========  ==========
Non-GAAP        $     0.18  $     0.03  $    (0.03) $     0.14  $    (0.41)
                ==========  ==========  ==========  ==========  ==========

Weighted
 average shares
 used in
 computing net
 income (loss)
 per common
 share -
 U.S. GAAP:
Basic               99,976      98,777      95,864      98,647      95,100
                ==========  ==========  ==========  ==========  ==========
Diluted            105,159      98,777      95,864      98,647      95,100
                ==========  ==========  ==========  ==========  ==========

Weighted
 average shares
 used in
 computing net
 income (loss)
 per common
 share -
 Non-GAAP:
Basic               99,976      98,777      95,864      98,647      95,100
                ==========  ==========  ==========  ==========  ==========
Diluted            105,159     103,945      95,864     103,389      95,100
                ==========  ==========  ==========  ==========  ==========

(1) Adjustment amount represents restructuring and other related costs
    (credit) recorded in relation to the closure of our Maryland FAB
    announced on July 21, 2009.  These amounts have been adjusted in
    arriving at our non-GAAP results as they are non-recurring in nature
    and the adjusted numbers provide a better indication of our underlying
    business performance.

                     Three Months Ended             Nine Months Ended
                     September 25, 2010            September 25, 2010
                 ----------------------------  ---------------------------
                 Cost of   Operating           Cost of    Operating
                 Revenue   Expenses    Total   Revenue    Expenses   Total
                 -------  -----------  ------  -------  ------------ -----
  Severance and
   related
   expenses      $     -  $         -  $    -  $  (144) $         55 $ (89)
  Equipment and
   facility-
   related costs     (60)           -     (60)     (38)            -   (38)
  Lease
   termination         -            -       -        -           104   104
                 -------  -----------  ------  -------  ------------ -----
  Total          $   (60) $         -  $  (60) $  (182) $        159 $ (23)
                 =======  ===========  ======  =======  ============ =====



                      Three Months Ended
                        June 26, 2010
                 ----------------------------
                 Cost of   Operating
                 Revenue   Expenses    Total
                 -------  -----------  ------
  Severance and
   related
   expenses      $  (129) $         -  $ (129)
  Equipment and
   facility-
   related costs     100            -     100
  Lease
   termination         -           (2)     (2)
                 -------  -----------  ------
  Total          $   (29) $        (2) $  (31)
                 =======  ===========  ======




                 Three and Nine Months Ended
                      September 26, 2009
                 ----------------------------
                 Cost of   Operating
                 Revenue   Expenses    Total
                 -------  -----------  ------
  Severance and
   related
   expenses      $   804  $        97   $ 901
  Equipment and
   facility-
   related costs   1,900          415   2,315
  Lease
   termination        32           89     121
                 -------  -----------  ------
                                      
  Total          $ 2,736  $       601  $3,337
                 =======  ===========  ======

(2) Stock-based compensation expense is calculated in accordance with the
    fair value recognition provisions of Financial Accounting Standards
    Board Accounting Standards Codification (ASC) Topic 718, Compensation
    -- Stock Compensation effective January 1, 2006. The following table
    summarizes the effects of stock-based compensation related to
    employees and non-employees:


                           Three Months Ended           Nine Months Ended
                     -------------------------------- ---------------------
                     September   June 26,  September  September  September
                      25, 2010     2010     26, 2009   25, 2010   26, 2009
                     ---------- ---------- ---------- ---------- ----------
  Cost of revenue    $      725 $      564 $      490 $    1,858 $    1,346
  Research and
   development            3,773      3,350      2,915     10,546      7,066
  Sales and
   marketing              2,148      2,192      1,710      6,187      4,723
  General and
   administration         6,281      5,198      3,984     17,188     10,142
                     ---------- ---------- ---------- ---------- ----------
                         12,927     11,304      9,099     35,779     23,277
  Cost of revenue -
   amortization from
   balance sheet*         1,517      1,303        987      4,182      2,457
                     ---------- ---------- ---------- ---------- ----------
  Total stock-based
   compensation
   expense           $   14,444 $   12,607 $   10,086 $   39,961 $   25,734
                     ========== ========== ========== ========== ==========

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



Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)


                                                 September 25, December 26,
                                                      2010         2009
                                                  -----------  -----------
ASSETS

Current assets:
  Cash and cash equivalents                       $    97,976  $   109,859
  Short-term investments                              174,940      143,350
  Short-term restricted cash                            1,856        1,533
  Accounts receivable                                  64,058       69,483
  Other receivables                                     3,221          927
  Inventories, net                                     88,694       68,872
  Deferred inventory costs                              6,940        5,891
  Prepaid expenses and other current assets            11,068        8,313
                                                  -----------  -----------
    Total current assets                              448,753      408,228

Property, plant and equipment, net                     47,134       43,656
Deferred inventory costs, non-current                   3,141        4,438
Long-term investments                                  11,118       18,255
Cost-method investment                                  4,500            -
Long-term restricted cash                               2,219        2,480
Deferred tax asset                                      7,649       12,449
Other non-current assets                                2,215        2,439
                                                  -----------  -----------
    Total assets                                  $   526,729  $   491,945
                                                  ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                $    45,880  $    31,129
  Accrued expenses                                     17,088       13,929
  Accrued compensation and related benefits            18,031       19,248
  Accrued warranty                                      5,560        6,091
  Deferred revenue                                     18,386       18,295
  Deferred tax liability                                7,649       12,649
                                                  -----------  -----------
    Total current liabilities                         112,594      101,341

  Accrued warranty, non-current                         5,364        5,049
  Deferred revenue, non-current                         4,714        8,080
  Other long-term liabilities                           5,749        8,968

Commitments and contingencies

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 September 25,
   2010 and December 26, 2009
  Issued and outstanding shares - 100,960 as of
   September 25, 2010 and 96,874
   as of December 26, 2009                                101           97
  Additional paid-in capital                          801,766      747,580
  Accumulated other comprehensive loss                 (1,007)      (1,810)
  Accumulated deficit                                (402,552)    (377,360)
                                                  -----------  -----------
  Total stockholders' equity                          398,308      368,507
                                                  -----------  -----------
    Total liabilities and stockholders' equity    $   526,729  $   491,945
                                                  ===========  ===========


Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

                                                      Nine Months Ended
                                                  ------------------------
                                                September 25, September 26,
                                                      2010         2009
                                                  -----------  -----------
Cash Flows from Operating Activities:
Net loss                                          $   (25,192) $   (67,971)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
  Depreciation and amortization                        11,594       12,064
  Non-cash restructuring and other costs                  100        2,404
  Net credit impairment losses in earnings                  -        1,094
  Amortization of premium on investments                2,753          289
  Stock-based compensation expense                     39,961       25,733
  Unrealized loss on Put Rights                         1,696        2,540
  Unrealized holding gain for trading securities       (1,696)      (3,141)
  Non-cash tax benefit                                   (411)           -
  Tax benefit (reversal) from stock option
   transactions                                             -         (593)
  Reduction of tax benefit from stock option
   transactions                                             -          248
  Gain on disposal of assets                             (139)        (117)
  Other gain                                              (71)        (113)
  Changes in assets and liabilities:
    Accounts receivable                                 5,425       15,324
    Other receivables                                    (430)      (1,105)
    Inventories, net                                  (19,787)     (12,728)
    Prepaid expenses and other current assets              21       (2,331)
    Deferred inventory costs                              114           21
    Other non-current assets                            4,911       (4,795)
    Accounts payable                                   15,024       (1,875)
    Accrued liabilities and other expenses             (6,856)       8,749
    Deferred revenue                                   (3,275)      (3,922)
    Accrued warranty                                     (215)         197
                                                  -----------  -----------
      Net cash provided by (used in) operating
       activities                                      23,527      (30,028)

Cash Flows from Investing Activities:
  Purchase of available-for-sale investments         (212,307)    (136,338)
  Purchase of cost-method investment                   (4,500)           -
  Proceeds from sale of available-for-sale
   investments                                              -        1,536
  Proceeds from maturities and calls of
   investments, and exercise of Put Rights            184,662       93,157
  Proceeds from disposal of assets                        284          206
  Purchase of property and equipment                  (15,639)     (11,599)
  Change in restricted cash                               (61)      (1,148)
                                                  -----------  -----------
      Net cash used in investing activities           (47,561)     (54,186)

Cash Flows from Financing Activities:
  Proceeds from issuance of common stock               12,341        8,545
  Excess (reduction of) tax benefit from stock
   option transactions                                      -         (248)
  Repurchase of common stock                              (14)         (19)
  Payments for purchase of assets under financing
   arrangement                                           (262)           -
                                                  -----------  -----------
      Net cash provided by financing activities        12,065        8,278

Effect of exchange rate changes on cash                    86          111
Net change in cash and cash equivalents               (11,883)     (75,825)
Cash and cash equivalents at beginning of period      109,859      166,770
                                                  -----------  -----------
Cash and cash equivalents at end of period        $    97,976  $    90,945
                                                  ===========  ===========

Supplemental disclosures of cash flow
 information:
  Cash paid for income taxes                      $       882  $     1,245


Infinera Corporation
Supplemental Financial Information
(Unaudited)


                 Q4'08  Q1'09  Q2'09  Q3'09  Q4'09  Q1'10   Q2'10   Q3'10
                 -----  -----  -----  -----  -----  -----  ------  ------
Revenue ($ Mil)
 (1)             $86.2  $66.6  $68.9  $83.4  $90.2  $95.8  $111.4  $130.1
Gross Margin
 % (1)              36%    31%    31%    38%    40%    41%     44%     51%
                 -----  -----  -----  -----  -----  -----  ------  ------
 Invoiced
  Shipment
  Composition:
 Domestic %         73%    74%    64%    63%    74%    79%     81%     73%
 International %    27%    26%    36%    37%    26%    21%     19%     27%
 Largest
  Customer %        23%    30%    20%    15%    17%    22%     13%     19%
                 -----  -----  -----  -----  -----  -----  ------  ------
 Cash
  Related
  Information:
 Cash from
  Operations
  ($ Mil)        ($ 5.4)($2.9) ($18.8)($ 8.3)($ 2.7) $ 2.3  $11.2   $ 10.0
 Capital
  Expenditures
  ($ Mil)         $ 7.8  $ 6.0  $ 2.8  $ 2.8  $ 4.4  $ 4.7  $  5.0  $  5.9
 Depreciation &
  Amortization
  ($ Mil)         $ 4.1  $ 3.9  $ 4.0  $ 4.2  $ 4.5  $ 4.0  $  3.7  $  3.9
 DSO's               74     61     72     61     71     56      45      45
                  -----  -----  -----  -----  -----  -----  ------  ------
 Inventory
  Metrics:
 Raw
  Materials
  ($ Mil)         $ 9.1  $ 7.7  $10.1  $ 7.4  $ 6.9  $ 7.5  $  9.1  $ 11.0
 Work in
  Process ($
  Mil)            $37.9  $43.2  $40.1  $36.2  $32.1  $31.5  $ 29.2  $ 36.5
 Finished
  Goods
  ($ Mil)         $12.0  $13.6  $22.3  $29.3  $29.9  $33.0  $ 45.9  $ 41.2
                  -----  -----  -----  -----  -----  -----  ------  ------
 Total
  Inventory
  ($ Mil)         $59.0  $64.5  $72.5  $72.9  $68.9  $72.0  $84.2   $ 88.7
Inventory
 Turns (1)          3.8    2.8    2.6    3.0    3.2    3.2     3.0     2.9
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 Worldwide
  Headcount         937    962    973    970    974    999   1,028   1,040
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(1) Q4'08 reflects Adjusted GAAP results and non-GAAP adjustments. Periods
    Q1'09 and going forward reflect non-GAAP results. Adjusted GAAP results
    reflect our GAAP results reduced for amounts released from deferred
    revenue and deferred cost of inventory balances recorded prior to the
    second quarter of 2008 and previously reported in our invoiced shipment
    results. Non-GAAP adjustments include restructuring and other related
    costs and non-cash stock-based compensation.

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