Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
EXPLANATORY NOTE
As previously disclosed inThis Amendment No. 1 on Form 10-Q/A (this Amendment) amends the CurrentQuarterly Report on Form 8-K10-Q for the fiscal quarter ended April 1, 2023 (the Original Form 10-Q), filed by Infinera Corporation (the “Company”)(Infinera, the Company, we, us or our) with the Securities and Exchange Commission (the “SEC”)SEC) on April 30, 2020 (the “Prior Form 8-K”),May 4, 2023. Unless otherwise indicated or unless the filing of the Company’scontext requires otherwise, all references herein to this Quarterly Report on Form 10-Q, this Form 10-Q, this Quarterly Report and similar names refer to the Original Form 10-Q, as amended by this Amendment.
Subsequent to the filing of our Annual Report on Form 10-K for the year ended December 31, 2022 and our Quarterly Reports on Form 10-Q for the periods ended April 1, 2023 and July 1, 2023, Ernst & Young LLP (EY), our independent registered public accounting firm, informed us that the Public Company Accounting Oversight Board had commenced an inspection of EY’s audit of our consolidated financial statements for the fiscal year ended December 31, 2022. Subsequently, EY raised questions regarding our stand-alone sales price (“SSP”) methodology as it relates to revenue allocation between product revenue, which is recognized upon delivery, and certain components of services revenue, which is recognized over a period of time. In addition, EY raised questions regarding the sufficiency of documentation retained by us related to the revenue portion of our quote to cash cycle (revenue cycle) and our inventory cycle. As a result of these queries, we reexamined our SSP methodology and engaged in an evaluation of our review procedures related to our revenue cycle and our inventory cycle. Subsequently, we concluded that, as of December 31, 2022, there were material weaknesses in our internal control over financial reporting related to our revenue cycle, inventory cycle, and with respect to these, our internal resources, expertise and policies required to maintain an effective control environment. As a result, our internal control over financial reporting was not effective, as of December 31, 2022, and continues to be ineffective, and these material weaknesses are not remediated as of the date of the filing of this Amendment. Furthermore, we have determined that because of these material weaknesses, the Company’s disclosure controls and procedures were not effective at a reasonable assurance level as of April 1, 2023.
These material weaknesses did not result in any material misstatement of our condensed consolidated financial statements for the quarter ended March 28, 2020 (the “Quarterly Report”) was delayed dueApril 1, 2023 included in our Original Form 10-Q, and accordingly, we have concluded that the condensed consolidated financial statements and other financial information included in our Original Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented.
Accordingly, this Amendment is being filed to circumstances relatedamend Part I, Item 4—Controls and Procedures to address management’s re-evaluation of disclosure controls and procedures and reflect the identification of a material weaknesses in internal control over financial reporting.
Part II, Item 6—Exhibits and Financial Statement Schedules also has been amended to include currently dated certifications from our Chief Executive Officer and Chief Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications are attached to this Amendment as Exhibits 31.1, 31.2 and 32.1.
This Amendment is limited in scope to the novel coronavirus (“COVID-19”). As notedportions of this Amendment set forth above, and does not modify, amend, or update in any way any other items or disclosures contained in the Quarterly Report,Original Form 10-Q, including the impact ofcondensed consolidated financial statements set forth in the Company’s work-from-home policy that was implementedOriginal Form 10-Q or XBRL data filed in responseExhibit 101.
Except as noted above, this Amendment has not been updated for other events or information subsequent to the COVID-19 pandemic in order to protect its global workforce contributed to delays in certain operational processes, including its routine quarterly financial statement close process for the quarter ended March 28, 2020. Specifically, the Company’s work-from-home policy resulted in more restricted access to facilities and books and records required to prepare the Quarterly Report. The postponementdate of the filing of the Quarterly Report allowedOriginal Form 10-Q, and should be read in conjunction with the Company additional time to assessOriginal Form 10-Q and our other filings with the impactSEC.
PART I. FINANCIAL INFORMATION
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation was performed by our management, with the participation of our principal executive officer and our principal financial officer, of the COVID-19 pandemic on its operations, financial positioneffectiveness of our disclosure controls and forecasts, process its quarterly financial information, as well as prepare additional disclosures regarding these impacts on its business. Collectively, the amount of additional timeprocedures (as defined in Rules 13a-15(e) and resources required to perform these tasks prevented the Company from completing the work necessary to file the Quarterly Report by its May 7, 2020 due date. This amendment to the Quarterly Report (this “Amendment”) is being filed solely to add this Explanatory Note and indicate that the Company relied on the SEC’s “Order15d -15(e) under Section 36 of the Securities Exchange Act of 1934, Modifying Exemptions fromas amended (the "Exchange Act")). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the ReportingExchange Act is recorded, processed, summarized and Proxy Delivery Requirements for Public Companies,” dated March 25, 2020 (Release No. 34-88465),reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to postponemanagement, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance that the filingcontrol system’s objectives will be met. Additionally, management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that, as of the end of the period covered by this Quarterly Report.Report on Form 10-Q (April 1, 2023), our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described in "Management's Report on Internal Control Over Financial Reporting" below.
Our management, with the participation of our principal executive officer and principal financial officer, identified control deficiencies with our revenue cycle, inventory cycle, and with respect to these, our internal resources, expertise and policies required to maintain an effective control environment, that, individually or in the aggregate, constitute material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis.
Within the revenue cycle, controls over the annual establishment of the stand-alone selling prices (“SSPs”) for our performance obligations were not designed to include an adequate review and evaluation of whether the methodology used to develop and establish SSPs, including related financial statement disclosures, was in conformity with ASC 606, Revenue from Contracts with Customers.
Within the inventory cycle, controls over judgements used in the estimation of reserves for excess and obsolete inventory were not designed and operating effectively to support such judgements. In addition, controls over the application of our policy for capitalizing variances from standard costs as part of the cost of inventory, did not operate effectively.
Additionally, as related to both our revenue and inventory cycles, certain key controls were not sufficiently designed to assess the completeness and accuracy of Information Produced by the Entity (IPE).
The disclosures containedmaterial weaknesses identified above indicate that we had insufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in this Amendment are entirely consistentthe application of GAAP commensurate with the Prior Form 8-Kcomplexity of our business and doour financial accounting and reporting requirements. In turn, this impacted our ability to adequately design, implement and monitor financial reporting controls related to our revenue cycle and inventory cycle that identify and mitigate risks of material misstatements in our financial statements.
While these material weaknesses did not modifyresult in a material misstatement of our previously filed financial statements, there is a reasonable possibility that these control deficiencies could have resulted in a material misstatement in our annual or update in any wayinterim consolidated financial statements that would not be detected. As a result, our principal executive officer and principal financial officer have concluded that our internal control over financial reporting was not effective as of April 1, 2023.
Remediation Plan for the disclosures containedMaterial Weaknesses
Our management, under the oversight of the Audit Committee of our Board of Directors, has evaluated the material weaknesses described above and designed a remediation plan to enhance our internal control environment. To remediate the material weaknesses, we plan to:
a.revise the methodology used to determine our SSPs, including the design and implementation of effective controls that provide adequate review and evaluation of such methodology, and related financial statement disclosures;
b.review and revise the design and implementation of key controls related to inventory, including the estimation of reserves for excess and obsolete inventory and the application of our policy for capitalizing variances from standard costs;
c.design and implement effective controls over IPE to ensure adequate levels of evidence and documentation to support controls procedures, augmented by training of our control preparers and reviewers related to the assessment of completeness and accuracy; and
d.review and enhance our personnel with the appropriate level of technical accounting knowledge, experience, and training in the Quarterly Report other thanapplication of GAAP commensurate with the complexity of our business and our financial accounting and reporting requirements, particularly in areas related to addour revenue and inventory cycles.
We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that control deficiencies contributing to our material weaknesses are remediated as soon as possible. We believe our efforts listed above will enable us to successfully remediate our material weaknesses, however, we cannot provide assurance as to when our remediation measures will be complete. We will consider the additional disclosure set forth above.material weaknesses remediated after the applicable controls operate for a sufficient period of time and management has concluded, through testing, that such controls are operating effectively. We will monitor the effectiveness of our remediation plan and refine it as appropriate.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Item 6.Exhibits
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| Exhibit No. | | Description |
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| Exhibit No. | | Description
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| | Second Amendment to Credit Agreement, dated as of March 4, 2020, among Infinera Corporation, the lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on March 4, 2020 |
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101.INS***101.INS^ | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.document |
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101.SCH***101.SCH^ | | XBRL Taxonomy Extension Schema Document |
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101.CAL***101.CAL^ | | XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF***101.DEF^ | | XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB***101.LAB^ | | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE***101.PRE^ | | XBRL Taxonomy Extension Presentation Linkbase Document |
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| 104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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* | Management contract or compensatory plan, contract or arrangement. |
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** | Previously furnished with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2020, as filed on May 15, 2020.
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*** Previously filed with the Registrant’sThe certification attached as Exhibit 32.1 that accompanies this Quarterly Report on Form 10-Q/A is not deemed filed with the SEC and is not to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q/A, irrespective of any general incorporation language contained in such filing.
^ Previously filed with our Original Form 10-Q, fororiginally filed with the quarter ended March 28, 2020, as filedSEC on May 15, 2020.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereuntothereunto duly authorized.
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| Infinera Corporation |
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| By: | | | | /s/ NANCY ERBA |
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| | | | Infinera Corporation |
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Date: May 21, 2020 | | By: | | /s/ Nancy Erba |
| | | | Nancy Erba
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
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| Date: | | February 29, 2024 |