UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2015
OR
| ¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
to
Commission File Number 000-31293
EQUINIX, INC.
(Exact name of registrant as specified in its charter)
|
|
|
| Delaware |
|
77-0487526 |
| (State of incorporation) |
|
(I.R.S. Employer Identification No.) |
One Lagoon Drive, Fourth Floor, Redwood City, California 94065
(Address of principal executive offices, including ZIP code)
(650) 598-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) Yes x No
¨ and (2) has been subject to such filing requirements for the past 90
days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
|
|
|
|
| Large accelerated filer |
|
x |
|
Accelerated filer |
|
¨ |
|
|
|
|
| Non-accelerated filer |
|
¨ |
|
Smaller reporting company |
|
¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ¨ No x
The number of shares outstanding of the registrant’s Common Stock as of March 31, 2015 was 56,922,122.
EQUINIX, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
EQUINIX, INC.
Condensed Consolidated Balance Sheets
(in thousands)
|
|
|
|
|
|
|
|
|
| |
|
March 31, |
|
|
December 31, |
|
| |
|
2015 |
|
|
2014 |
|
| |
|
(Unaudited) |
|
| Assets |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
536,709 |
|
|
$ |
610,917 |
|
| Short-term investments |
|
|
522,343 |
|
|
|
529,395 |
|
| Accounts receivable, net |
|
|
277,900 |
|
|
|
262,570 |
|
| Other current assets |
|
|
102,592 |
|
|
|
88,061 |
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
|
1,439,544 |
|
|
|
1,490,943 |
|
| Long-term investments |
|
|
10,691 |
|
|
|
439 |
|
| Property, plant and equipment |
|
|
4,990,883 |
|
|
|
4,998,270 |
|
| Goodwill |
|
|
984,436 |
|
|
|
1,002,129 |
|
| Intangible assets, net |
|
|
136,010 |
|
|
|
147,527 |
|
| Other assets |
|
|
166,130 |
|
|
|
178,125 |
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
7,727,694 |
|
|
$ |
7,817,433 |
|
|
|
|
|
|
|
|
|
|
| Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
|
$ |
321,942 |
|
|
$ |
285,796 |
|
| Accrued property, plant and equipment |
|
|
123,659 |
|
|
|
114,469 |
|
| Current portion of capital lease and other financing obligations |
|
|
23,819 |
|
|
|
21,362 |
|
| Current portion of mortgage and loans payable |
|
|
54,939 |
|
|
|
59,466 |
|
| Other current liabilities |
|
|
141,996 |
|
|
|
162,664 |
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
666,355 |
|
|
|
643,757 |
|
| Capital lease and other financing obligations, less current portion |
|
|
1,177,638 |
|
|
|
1,168,042 |
|
| Mortgage and loans payable, less current portion |
|
|
512,446 |
|
|
|
534,686 |
|
| Convertible debt |
|
|
147,808 |
|
|
|
145,853 |
|
| Senior notes |
|
|
2,750,000 |
|
|
|
2,750,000 |
|
| Other liabilities |
|
|
311,718 |
|
|
|
304,964 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
5,565,965 |
|
|
|
5,547,302 |
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
| Stockholders’ equity: |
|
|
|
|
|
|
|
|
| Common stock |
|
|
57 |
|
|
|
57 |
|
| Additional paid-in capital |
|
|
3,383,079 |
|
|
|
3,334,305 |
|
| Treasury stock |
|
|
(10,687 |
) |
|
|
(11,411 |
) |
| Accumulated dividends |
|
|
(523,146 |
) |
|
|
(424,387 |
) |
| Accumulated other comprehensive loss |
|
|
(468,036 |
) |
|
|
(332,443 |
) |
| Accumulated deficit |
|
|
(219,538 |
) |
|
|
(295,990 |
) |
|
|
|
|
|
|
|
|
|
| Total stockholders’ equity |
|
|
2,161,729 |
|
|
|
2,270,131 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ equity |
|
$ |
7,727,694 |
|
|
$ |
7,817,433 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements
3
EQUINIX, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
| |
|
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| |
|
(Unaudited) |
|
| Revenues |
|
$ |
643,174 |
|
|
$ |
580,053 |
|
|
|
|
|
|
|
|
|
|
| Costs and operating expenses: |
|
|
|
|
|
|
|
|
| Cost of revenues |
|
|
298,313 |
|
|
|
287,525 |
|
| Sales and marketing |
|
|
78,616 |
|
|
|
67,428 |
|
| General and administrative |
|
|
113,640 |
|
|
|
103,303 |
|
| Acquisition costs |
|
|
1,156 |
|
|
|
185 |
|
|
|
|
|
|
|
|
|
|
| Total costs and operating expenses |
|
|
491,725 |
|
|
|
458,441 |
|
|
|
|
|
|
|
|
|
|
| Income from operations |
|
|
151,449 |
|
|
|
121,612 |
|
| Interest income |
|
|
520 |
|
|
|
1,434 |
|
| Interest expense |
|
|
(68,791 |
) |
|
|
(68,820 |
) |
| Other income (expense) |
|
|
(514 |
) |
|
|
678 |
|
|
|
|
|
|
|
|
|
|
| Income from operations before income taxes |
|
|
82,664 |
|
|
|
54,904 |
|
| Income tax expense |
|
|
(6,212 |
) |
|
|
(13,567 |
) |
|
|
|
|
|
|
|
|
|
| Net income |
|
|
76,452 |
|
|
|
41,337 |
|
| Net loss attributable to redeemable non-controlling interests |
|
|
— |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
| Net income attributable to Equinix |
|
$ |
76,452 |
|
|
$ |
41,387 |
|
|
|
|
|
|
|
|
|
|
| Earnings per share (“EPS”) attributable to Equinix: |
|
|
|
|
|
|
|
|
| Basic EPS |
|
$ |
1.35 |
|
|
$ |
0.83 |
|
|
|
|
|
|
|
|
|
|
| Weighted-average shares |
|
|
56,661 |
|
|
|
49,598 |
|
|
|
|
|
|
|
|
|
|
| Diluted EPS |
|
$ |
1.34 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
| Weighted-average shares |
|
|
57,227 |
|
|
|
53,386 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements
4
EQUINIX, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
| |
|
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| |
|
(Unaudited) |
|
| Net income |
|
$ |
76,452 |
|
|
$ |
41,337 |
|
| Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
| Foreign currency translation gain (loss) |
|
|
(146,311 |
) |
|
|
14,970 |
|
| Unrealized gain on available for sale securities |
|
|
103 |
|
|
|
839 |
|
| Unrealized gain on cash flow hedges |
|
|
10,556 |
|
|
|
200 |
|
| Change in defined benefit plans |
|
|
59 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Total other comprehensive income (loss), net of tax |
|
|
(135,593 |
) |
|
|
16,009 |
|
|
|
|
|
|
|
|
|
|
| Comprehensive income (loss), net of tax |
|
|
(59,141 |
) |
|
|
57,346 |
|
|
|
|
|
|
|
|
|
|
| Net loss attributable to redeemable non-controlling interests |
|
|
— |
|
|
|
50 |
|
| Other comprehensive income attributable to redeemable non-controlling interests |
|
|
— |
|
|
|
(2,067 |
) |
|
|
|
|
|
|
|
|
|
| Comprehensive income (loss) attributable to Equinix |
|
$ |
(59,141 |
) |
|
$ |
55,329 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements
5
EQUINIX, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
| |
|
Three months ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
| Net income |
|
$ |
76,452 |
|
|
$ |
41,337 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
| Depreciation |
|
|
115,341 |
|
|
|
107,023 |
|
| Stock-based compensation |
|
|
30,613 |
|
|
|
24,981 |
|
| Excess tax benefits from stock-based compensation |
|
|
(708 |
) |
|
|
(10,018 |
) |
| Amortization of intangible assets |
|
|
6,295 |
|
|
|
6,905 |
|
| Amortization of debt issuance costs and debt discounts |
|
|
3,774 |
|
|
|
6,409 |
|
| Provision for allowance for doubtful accounts |
|
|
1,865 |
|
|
|
1,055 |
|
| Other items |
|
|
3,899 |
|
|
|
3,919 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
(30,791 |
) |
|
|
(28,995 |
) |
| Income taxes, net |
|
|
(12,555 |
) |
|
|
(15,749 |
) |
| Other assets |
|
|
720 |
|
|
|
18,292 |
|
| Accounts payable and accrued expenses |
|
|
29,693 |
|
|
|
8,830 |
|
| Other liabilities |
|
|
8,213 |
|
|
|
7,729 |
|
|
|
|
|
|
|
|
|
|
| Net cash provided by operating activities |
|
|
232,811 |
|
|
|
171,718 |
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| Purchases of investments |
|
|
(18,446 |
) |
|
|
(93,423 |
) |
| Sales of investments |
|
|
6,709 |
|
|
|
212,299 |
|
| Maturities of investments |
|
|
7,031 |
|
|
|
102,778 |
|
| Business acquisitions, net of cash acquired |
|
|
(10,247 |
) |
|
|
— |
|
| Purchase of real estate |
|
|
(38,282 |
) |
|
|
(16,791 |
) |
| Purchases of other property, plant and equipment |
|
|
(150,120 |
) |
|
|
(105,907 |
) |
| Change in restricted cash |
|
|
3,521 |
|
|
|
(71 |
) |
|
|
|
|
|
|
|
|
|
| Net cash provided by (used in) investing activities |
|
|
(199,834 |
) |
|
|
98,885 |
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| Purchases of treasury stock |
|
|
— |
|
|
|
(47,120 |
) |
| Proceeds from employee equity awards |
|
|
16,384 |
|
|
|
14,387 |
|
| Excess tax benefits from stock-based compensation |
|
|
708 |
|
|
|
10,018 |
|
| Payment of dividends |
|
|
(96,619 |
) |
|
|
— |
|
| Repayment of capital lease and other financing obligations |
|
|
(5,296 |
) |
|
|
(4,250 |
) |
| Repayment of mortgage and loans payable |
|
|
(13,361 |
) |
|
|
(10,317 |
) |
| Debt issuance costs |
|
|
(610 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Net cash used in financing activities |
|
|
(98,794 |
) |
|
|
(37,282 |
) |
| Effect of foreign currency exchange rates on cash and cash equivalents |
|
|
(8,391 |
) |
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash and cash equivalents |
|
|
(74,208 |
) |
|
|
233,280 |
|
| Cash and cash equivalents at beginning of period |
|
|
610,917 |
|
|
|
261,894 |
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at end of period |
|
$ |
536,709 |
|
|
$ |
495,174 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements
6
1. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by Equinix, Inc. (‘‘Equinix’’ or
the ‘‘Company’’) and reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the financial position and the results of operations for the interim
periods presented. The condensed consolidated balance sheet data as of December 31, 2014 has been derived from audited consolidated financial statements as of that date. The consolidated financial statements have been prepared in accordance
with the regulations of the Securities and Exchange Commission (‘‘SEC’’), but omit certain information and footnote disclosure necessary to present the statements in accordance with generally accepted accounting principles in the
United States of America (“GAAP”). For further information, refer to the Consolidated Financial Statements and Notes thereto included in Equinix’s Form 10-K as filed with the SEC on March 2, 2015. Results for the interim periods
are not necessarily indicative of results for the entire fiscal year.
Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Equinix and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Income Taxes
The Company has elected to be treated as a real estate investment trust (“REIT”) for federal income tax purposes effective
January 1, 2015. As a result, the Company may deduct the distributions made to its shareholders from taxable income generated by its Qualified REIT Subsidiaries (“QRSs”). The Company’s dividends paid deduction generally
eliminates the taxable income of the QRSs, resulting in no income tax due. However, the Taxable REIT Subsidiaries (“TRSs”) will continue to be subject to income taxes on any taxable income generated by them. In addition, the foreign
operations of the Company will continue to be subject to local income taxes regardless of whether the foreign operations are operated as a QRS or a TRS.
The Company provides for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate is
subject to change in the future due to various factors such as the operating performances of the QRSs and TRSs, tax law changes and future business acquisitions.
The Company’s effective tax rates were 7.5% and 24.7% for the three months ended March 31, 2015 and 2014, respectively. The decrease
in the effective tax rate is primarily due to our REIT conversion. As a REIT, the Company is entitled to a deduction for dividends paid, resulting in a substantial reduction of federal income tax expense.
Recent Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03,
Interest – Imputation of Interest (“ASU 2015-03”), to simplify the presentation of debt issuance costs. The ASU requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying amount of the
debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs is not affected by this ASU. This ASU is effective for financial statements issued for fiscal years beginning after
December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated
financial statements.
7
In February 2015, the FASB issued ASU 2015-02, Consolidations (“ASU 2015-02”). This ASU
requires companies to adopt a new consolidation model, specifically: (1) the ASU modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; (2) the
ASU eliminates the presumption that a general partner should consolidate limited partnership; (3) the ASU affects the consolidation analysis of reporting entities that involved with VIEs and (4) the ASU provides a scope exception from
consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar Rule 2a-7 of the Investment Company Act of 1940 for registered money market
funds. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this
standard will have on its consolidated financial statements.
In January 2015, FASB issued ASU 2015-01, Income
Statement—Extraordinary and Unusual Items (“ASU 2015-01”), to simplify the income statement presentation requirements by eliminating the concept of extraordinary items. ASU 2015-01 is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2015, with early adoption permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not believe the adoption of ASU 2015-01 will
have a significant impact on its consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), to provide guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to
continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016, with early
adoption permitted. The Company does not believe the adoption of ASU 2014-15 will have a significant impact on its consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This ASU requires companies to
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which companies expect to be entitled in exchange for those goods or services. This ASU will replace most existing
revenue recognition guidance in GAAP when it becomes effective. This ASU is effective for fiscal years and interim periods beginning after December 15, 2016. Early adoption is not permitted. The Company is currently evaluating the impact that
the adoption of this standard will have on its consolidated financial statements.
2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (“EPS”) for the periods
presented (in thousands, except per share amounts):
8
|
|
|
|
|
|
|
|
|
| |
|
Three months ended March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Net income |
|
$ |
76,452 |
|
|
$ |
41,337 |
|
| Net loss attributable to redeemable non-controlling interests |
|
|
— |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
| Net income attributable to Equinix, basic |
|
|
76,452 |
|
|
|
41,387 |
|
| Effect of assumed conversion of convertible debt: |
|
|
|
|
|
|
|
|
| Interest expense, net of tax |
|
|
— |
|
|
|
1,984 |
|
|
|
|
|
|
|
|
|
|
| Net income attributable to Equinix, diluted |
|
$ |
76,452 |
|
|
$ |
43,371 |
|
|
|
|
|
|
|
|
|
|
| Weighted-average shares used to calculate basic EPS |
|
|
56,661 |
|
|
|
49,598 |
|
| Effect of dilutive securities: |
|
|
|
|
|
|
|
|
| Convertible debt |
|
|
— |
|
|
|
3,371 |
|
| Employee equity awards |
|
|
566 |
|
|
|
417 |
|
|
|
|
|
|
|
|
|
|
| Total dilutive potential shares |
|
|
566 |
|
|
|
3,788 |
|
|
|
|
|
|
|
|
|
|
| Weighted-average shares used to calculate diluted EPS |
|
|
57,227 |
|
|
|
53,386 |
|
|
|
|
|
|
|
|
|
|
| EPS attributable to Equinix: |
|
|
|
|
|
|
|
|
| Basic EPS |
|
$ |
1.35 |
|
|
$ |
0.83 |
|
|
|
|
|
|
|
|
|
|
| Diluted EPS |
|
$ |
1.34 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
The following table sets forth weighted-average outstanding potential
shares of common stock that are not included in the diluted EPS calculation above because to do so would be anti-dilutive for the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
Three months ended March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Shares related to the potential conversion of 4.75% convertible subordinated notes |
|
|
1,942 |
|
|
|
4,432 |
|
| Common stock related to employee equity awards |
|
|
211 |
|
|
|
337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,153 |
|
|
|
4,769 |
|
|
|
|
|
|
|
|
|
|
3. Acquisition
On January 14, 2015, the Company acquired all of the issued and outstanding share capital of Nimbo Technologies Inc.
(“Nimbo”), a company which specializes in migrating business applications to the cloud with extensive experience moving legacy applications into a hybrid cloud architecture, and connecting legacy data centers to the cloud, for a cash
payment of $10,000,000 and a contingent earn-out arrangement to be paid over two years (the “Nimbo Acquisition”). Nimbo continues to operate under the Nimbo name. The Nimbo Acquisition was accounted for using the acquisition method.
As a result of the Nimbo Acquisition, the Company recorded goodwill of $17,154,000, which represents the excess of the total purchase price over the fair value of the assets acquired and liabilities assumed. The Company recorded the contingent
earn-out arrangement at its estimated fair value. The results of operations for Nimbo are not significant to the Company; therefore, the Company does not present its purchase price allocation or pro forma combined results of operations. In addition,
any prospective changes in the Company’s earn-out estimates are not expected to have a material effect on the Company’s consolidated statement of operations.
4. Derivatives and Hedging Activities
Derivatives Designated as Hedging Instruments
Cash Flow Hedges. The Company hedges its exposure to foreign currency exchange rate fluctuations for forecasted revenues and expenses in
its EMEA region in order to help manage the Company’s exposure to foreign currency exchange rate fluctuations between the U.S. dollar and the British pound, Euro and Swiss franc.
9
Effective January 1, 2015, a wholly-owned subsidiary of the Company entered into intercompany
derivative hedging instruments (“intercompany derivatives”) with the Company. The Company offsets the exposure arising from these intercompany derivative contracts on a net basis through derivative contracts entered into with unrelated
third parties in order to designate the intercompany derivative instruments as hedging instruments. The Company, who is the counterparty to the intercompany derivatives, does not designate the instruments as hedging instruments. The fair values of
these intercompany derivatives are eliminated in consolidation. The contracts that are entered into with the unrelated third parties are included as derivatives not designated as hedging instruments.
As of March 31, 2015, the Company’s cash flow hedges mature within one month to nine months, as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Notional
Amount |
|
|
Fair Value (1) |
|
|
Accumulated
other
comprehensive
income (loss) (2) |
|
| Derivative assets |
|
$ |
206,955 |
|
|
$ |
21,059 |
|
|
$ |
21,123 |
|
| Derivative liabilities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
206,955 |
|
|
$ |
21,059 |
|
|
$ |
21,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
All derivative assets related to cash flow hedges are included in the condensed consolidated balance sheets within other current assets. |
| (2) |
Included in the condensed consolidated balance sheets within accumulated other comprehensive income (loss). |
As of December 31, 2014, the Company’s cash flow hedges mature within one month to one year as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Notional
Amount |
|
|
Fair Value (1) |
|
|
Accumulated
other
comprehensive
income (loss) (2) |
|
| Derivative assets |
|
$ |
281,055 |
|
|
$ |
8,404 |
|
|
$ |
8,480 |
|
| Derivative liabilities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
281,055 |
|
|
$ |
8,404 |
|
|
$ |
8,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
All derivative assets related to cash flow hedges are included in the condensed consolidated balance sheets within other current assets. |
| (2) |
Included in the condensed consolidated balance sheets within accumulated other comprehensive income (loss). |
During the three months ended March 31, 2015, there were no ineffective cash flow hedges. During the three months ended March 31,
2015, the amount of gains reclassified from accumulated other comprehensive income (loss) to revenue were $8,078,000 and the amount of losses reclassified from accumulated other comprehensive income (loss) to operating expenses were not significant.
During the three months ended March 31, 2014, there were no ineffective cash flow hedges. During the three months ended March 31, 2014, the amount of gains (losses) reclassified from accumulated other comprehensive income (loss) to revenue
and operating expenses were not significant.
Derivatives Not Designated as Hedging Instruments
Embedded Derivatives. The Company is deemed to have foreign currency forward contracts embedded in certain of the Company’s
customer agreements that are priced in currencies different from the functional or local currencies of the parties involved. These embedded derivatives are separated from their host contracts and carried on the Company’s balance sheet at
their fair value. The majority of these embedded derivatives arise as a result of the Company’s foreign subsidiaries pricing their customer contracts in the U.S. dollar. Gains and losses on these embedded derivatives are included within
revenues in the Company’s condensed consolidated statements of operations. During the three months ended March 31, 2015 and 2014, gains (losses) from these embedded derivatives were not significant.
10
Economic Hedges of Embedded Derivatives. The Company uses foreign currency forward
contracts to manage the foreign exchange risk associated with the Company’s embedded derivatives (“economic hedges of embedded derivatives”). Gains and losses on these contracts are included in revenues along with gains and losses of
the related embedded derivatives. The Company entered into various economic hedges of embedded derivatives during the three months ended March 31, 2015 and 2014. During the three months ended March 31, 2015 and 2014, gains (losses) from
these contracts were not significant.
Foreign Currency Forward and Option Contracts. The Company also
uses foreign currency forward and options contracts to manage the foreign exchange risk associated with certain foreign currency-denominated assets and liabilities. As a result of foreign currency fluctuations, the U.S. dollar equivalent values of
the foreign currency-denominated assets and liabilities change. Gains and losses on these contracts are included in other income (expense), net, along with those foreign currency gains and losses of the related foreign currency-denominated assets
and liabilities associated with the foreign currency forward and options contracts. The Company entered into various foreign currency forward and options contracts during the three months ended March 31, 2015 and 2014. The Company recorded a
gain of $10,257,000 from these contracts during the three months ended March 31, 2015. Gains (losses) from these contracts were not significant during the three months ended March 31, 2014.
Offsetting Derivative Assets and Liabilities
The following table presents the fair value of derivative instruments recognized in the Company’s condensed consolidated balance sheets as
of March 31, 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Gross
Amounts |
|
|
Gross
amounts
offset in the
balance
sheet |
|
|
Net amounts (1) |
|
|
Gross
amounts not
offset in the
balance
sheet (2) |
|
|
Net |
|
| Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency forward contracts |
|
$ |
21,059 |
|
|
$ |
— |
|
|
$ |
21,059 |
|
|
$ |
— |
|
|
$ |
21,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Embedded derivatives |
|
|
9,661 |
|
|
|
— |
|
|
|
9,661 |
|
|
|
— |
|
|
|
9,661 |
|
| Economic hedges of embedded derivatives |
|
|
702 |
|
|
|
— |
|
|
|
702 |
|
|
|
— |
|
|
|
702 |
|
| Foreign currency forward contracts |
|
|
7,313 |
|
|
|
— |
|
|
|
7,313 |
|
|
|
(907 |
) |
|
|
6,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,676 |
|
|
|
— |
|
|
|
17,676 |
|
|
|
(907 |
) |
|
|
16,769 |
|
| Additional netting benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(27 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
38,735 |
|
|
$ |
— |
|
|
$ |
38,735 |
|
|
$ |
(934 |
) |
|
$ |
37,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency forward contracts |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Embedded derivatives |
|
|
18 |
|
|
|
— |
|
|
|
18 |
|
|
|
— |
|
|
|
18 |
|
| Economic hedges of embedded derivatives |
|
|
27 |
|
|
|
— |
|
|
|
27 |
|
|
|
— |
|
|
|
27 |
|
| Foreign currency forward contracts |
|
|
907 |
|
|
|
— |
|
|
|
907 |
|
|
|
(907 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
952 |
|
|
|
— |
|
|
|
952 |
|
|
|
(907 |
) |
|
|
45 |
|
| Additional netting benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(27 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
952 |
|
|
$ |
— |
|
|
$ |
952 |
|
|
$ |
(934 |
) |
|
$ |
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
As presented in the Company’s condensed consolidated balance sheets within other current assets, other assets, other current liabilities and other liabilities. |
11
| (2) |
The Company enters into master netting agreements with its counterparties for transactions other than embedded derivatives to mitigate credit risk exposure to any single counterparty. Master netting agreements allow for
individual derivative contracts with a single counterparty to offset in the event of default. |
The following table presents
the fair value of derivative instruments recognized in the Company’s condensed consolidated balance sheets as of December 31, 2014 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Gross
Amounts |
|
|
Gross
amounts
offset in the
balance
sheet |
|
|
Net balance
sheet
amounts (1) |
|
|
Gross
amounts not
offset in the
balance
sheet (2) |
|
|
Net |
|
| Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency forward contracts |
|
$ |
8,404 |
|
|
$ |
— |
|
|
$ |
8,404 |
|
|
$ |
— |
|
|
$ |
8,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Embedded derivatives |
|
|
9,182 |
|
|
|
— |
|
|
|
9,182 |
|
|
|
— |
|
|
|
9,182 |
|
| Foreign currency forward and option contracts |
|
|
5,153 |
|
|
|
— |
|
|
|
5,153 |
|
|
|
(138 |
) |
|
|
5,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,335 |
|
|
|
— |
|
|
|
14,335 |
|
|
|
(138 |
) |
|
|
14,197 |
|
| Additional netting benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(508 |
) |
|
|
(508 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,739 |
|
|
$ |
— |
|
|
$ |
22,739 |
|
|
$ |
(646 |
) |
|
$ |
22,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency forward contracts |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Embedded derivatives |
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
| Economic hedges of embedded derivatives |
|
|
390 |
|
|
|
— |
|
|
|
390 |
|
|
|
— |
|
|
|
390 |
|
| Foreign currency forward and option contracts |
|
|
416 |
|
|
|
— |
|
|
|
416 |
|
|
|
(138 |
) |
|
|
278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
810 |
|
|
|
— |
|
|
|
810 |
|
|
|
(138 |
) |
|
|
672 |
|
| Additional netting benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(508 |
) |
|
|
(508 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
810 |
|
|
$ |
— |
|
|
$ |
810 |
|
|
$ |
(646 |
) |
|
$ |
164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
As presented in the Company’s condensed consolidated balance sheets within other current assets, other assets, other current liabilities and other liabilities. |
| (2) |
The Company enters into master netting agreements with its counterparties for transactions other than embedded derivatives to mitigate credit risk exposure to any single counterparty. Master netting agreements allow for
individual derivative contracts with a single counterparty to offset in the event of default. |
12
5. Fair Value Measurements
The Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2015
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fair value at
March 31, |
|
|
Fair value
measurement using |
|
| |
|
2015 |
|
|
Level 1 |
|
|
Level 2 |
|
| Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash |
|
$ |
312,264 |
|
|
$ |
312,264 |
|
|
$ |
— |
|
| Money market and deposit accounts |
|
|
221,311 |
|
|
|
221,311 |
|
|
|
— |
|
| U.S. government securities |
|
|
336,402 |
|
|
|
336,402 |
|
|
|
— |
|
| U.S. government agency securities |
|
|
185,941 |
|
|
|
— |
|
|
|
185,941 |
|
| Certificates of deposit |
|
|
13,825 |
|
|
|
— |
|
|
|
13,825 |
|
| Derivative instruments (1) |
|
|
38,735 |
|
|
|
— |
|
|
|
38,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,108,478 |
|
|
$ |
869,977 |
|
|
$ |
238,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Derivative instruments (1) |
|
$ |
952 |
|
|
$ |
— |
|
|
$ |
952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
952 |
|
|
$ |
— |
|
|
$ |
952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Includes both foreign currency embedded derivatives and foreign currency forward contracts. Amounts are included within other current assets, other assets, other current liabilities and other liabilities in the
Company’s accompanying condensed consolidated balance sheet. |
6. Leases
Capital Lease and Other Financing Obligations
Atlanta 2 Capital Lease
In January 2015,
the Company entered into a lease amendment to extend the lease term of the Company’s Atlanta 2 IBX data center (the “AT2 Lease”). The lease was originally accounted for as an operating lease. Pursuant to the accounting
standard for leases, the Company reassessed the lease classification of the AT2 Lease as a result of the lease amendment and determined that upon the amendment the lease should be accounted for as a capital lease. The Company recorded a capital
lease asset totaling approximately $25,960,000 and a capital lease liability totaling approximately $26,230,000 during the three months ended March 31, 2015. The lease term, including a renewal option, was extended to December 2024.
Maturities of Capital Lease and Other Financing Obligations
The Company’s capital lease and other financing obligations are summarized as follows (in thousands):
13
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Capital lease
obligations |
|
|
Other
financing
obligations |
|
|
Total |
|
| 2015 (9 months remaining) |
|
$ |
49,180 |
|
|
$ |
40,458 |
|
|
$ |
89,638 |
|
| 2016 |
|
|
66,065 |
|
|
|
56,313 |
|
|
|
122,378 |
|
| 2017 |
|
|
67,662 |
|
|
|
59,454 |
|
|
|
127,116 |
|
| 2018 |
|
|
69,678 |
|
|
|
60,895 |
|
|
|
130,573 |
|
| 2019 |
|
|
71,556 |
|
|
|
59,023 |
|
|
|
130,579 |
|
| Thereafter |
|
|
851,824 |
|
|
|
564,939 |
|
|
|
1,416,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total minimum lease payments |
|
|
1,175,965 |
|
|
|
841,082 |
|
|
|
2,017,047 |
|
| Plus amount representing residual property value |
|
|
— |
|
|
|
405,850 |
|
|
|
405,850 |
|
| Less estimated building costs |
|
|
— |
|
|
|
(10,533 |
) |
|
|
(10,533 |
) |
| Less amount representing interest |
|
|
(566,152 |
) |
|
|
(644,755 |
) |
|
|
(1,210,907 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Present value of net minimum lease payments |
|
|
609,813 |
|
|
|
591,644 |
|
|
|
1,201,457 |
|
| Less current portion |
|
|
(16,029 |
) |
|
|
(7,790 |
) |
|
|
(23,819 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
593,784 |
|
|
$ |
583,854 |
|
|
$ |
1,177,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Debt Facilities
Mortgage and Loans Payable
The Company’s mortgage and loans payable consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
March 31, |
|
|
December 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Term loan |
|
$ |
490,000 |
|
|
$ |
500,000 |
|
| ALOG financings |
|
|
46,108 |
|
|
|
56,863 |
|
| Mortgage payable and other loans payable |
|
|
30,753 |
|
|
|
36,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
566,861 |
|
|
|
593,471 |
|
| Less amount representing debt discount |
|
|
(1,487 |
) |
|
|
(1,600 |
) |
| Plus amount representing mortgage premium |
|
|
2,011 |
|
|
|
2,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
567,385 |
|
|
|
594,152 |
|
| Less current portion |
|
|
(54,939 |
) |
|
|
(59,466 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
512,446 |
|
|
$ |
534,686 |
|
|
|
|
|
|
|
|
|
|
Convertible Debt
The Company’s convertible debt consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
March 31, |
|
|
December 31, |
|
| |
|
2015 |
|
|
2014 |
|
| 4.75% convertible subordinated notes |
|
|
157,885 |
|
|
|
157,885 |
|
| Less amount representing debt discount |
|
|
(10,077 |
) |
|
|
(12,032 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
147,808 |
|
|
$ |
145,853 |
|
|
|
|
|
|
|
|
|
|
14
Holders of the 4.75% convertible subordinated notes were eligible to convert their notes during
the quarter ended March 31, 2015 and are eligible to convert their notes during the three months ending June 30, 2015, since the stock price condition conversion clause was met during the applicable periods. As of March 31, 2015, had
the holders of the 4.75% convertible subordinated notes converted their notes, the 4.75% convertible subordinated notes would have been convertible into a maximum of 1,952,280 shares of the Company’s common stock.
To minimize the impact of potential dilution upon conversion of the 4.75% convertible subordinated notes, the Company entered into capped call
transactions (“the Capped Call”) separate from the issuance of the 4.75% convertible subordinated notes and paid a premium of $49,664,000 for the Capped Call in 2009. The Capped Call covers a total of approximately 4,432,638 shares of the
Company’s common stock, subject to adjustment. Under the Capped Call, the Company effectively raised the conversion price of the 4.75% convertible subordinated notes from $84.32 to $114.82.
Pursuant to the declaration of the quarterly dividend in March 2015, the Company further amended the Capped Call agreement to adjust the
effective conversion price of the 4.75% convertible subordinated notes from $80.87 to $110.04 per share of common stock. Depending upon the Company’s stock price at the time the 4.75% convertible subordinated notes are redeemed, the settlement
of the Capped Call will result in a delivery of up to 1,225,002 shares of the Company’s common stock to the Company; however, the Company will receive no benefit from the Capped Call if the Company’s stock price is $80.87 or lower at the
time of conversion and will receive less shares than the 1,225,002 share maximum as described above for share prices in excess of $110.04 at the time of conversion than it would have received at a share price of $110.04 (the Company’s benefit
from the Capped Call is capped at $110.04 and the benefit received begins to decrease above this price).
Senior Notes
The Company’s senior notes consisted of the following as of (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
March 31, |
|
|
December 31, |
|
| |
|
2015 |
|
|
2014 |
|
| 5.375% Senior Notes due 2023 |
|
$ |
1,000,000 |
|
|
$ |
1,000,000 |
|
| 5.375% Senior Notes due 2022 |
|
|
750,000 |
|
|
|
750,000 |
|
| 4.875% Senior Notes due 2020 |
|
|
500,000 |
|
|
|
500,000 |
|
| 5.75% Senior Notes due 2025 |
|
|
500,000 |
|
|
|
500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,750,000 |
|
|
$ |
2,750,000 |
|
|
|
|
|
|
|
|
|
|
Maturities of Debt Facilities
The following table sets forth maturities of the Company’s debt, including mortgage and loans payable, convertible debt and senior notes
and excluding debt discounts and premium as of March 31, 2015 (in thousands):
15
|
|
|
|
|
| Year ending: |
|
|
|
|
| 2015 (9 months remaining) |
|
$ |
43,660 |
|
| 2016 |
|
|
215,449 |
|
| 2017 |
|
|
51,600 |
|
| 2018 |
|
|
47,209 |
|
| 2019 |
|
|
341,303 |
|
| Thereafter |
|
|
2,777,536 |
|
|
|
|
|
|
|
|
$ |
3,476,757 |
|
|
|
|
|
|
Fair Value of Debt Facilities
The following table sets forth the estimated fair values of the Company’s mortgage and loans payable, senior notes and convertible debt,
including current maturities, as of (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
March 31,
2015 |
|
|
December 31,
2014 |
|
| Mortgage and loans payable |
|
$ |
537,216 |
|
|
$ |
553,045 |
|
| Convertible debt |
|
|
159,979 |
|
|
|
162,159 |
|
| Senior notes |
|
|
2,890,118 |
|
|
|
2,790,023 |
|
The Company has determined that the inputs used to value its debt facilities fall within Level 2 of the fair
value hierarchy.
Interest Charges
The following table sets forth total interest costs incurred and total interest costs capitalized for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
Three months ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Interest expense |
|
$ |
68,791 |
|
|
$ |
68,820 |
|
| Interest capitalized |
|
|
3,203 |
|
|
|
3,406 |
|
|
|
|
|
|
|
|
|
|
| Interest charges incurred |
|
$ |
71,994 |
|
|
$ |
72,226 |
|
|
|
|
|
|
|
|
|
|
8. Commitments and Contingencies
Purchase Commitments
Primarily as a result of the Company’s various IBX expansion projects, as of March 31, 2015, the Company was contractually committed
for $214,271,000 of unaccrued capital expenditures, primarily for IBX equipment not yet delivered and labor not yet provided, in connection with the work necessary to open these IBX data centers and make them available to customers for installation.
In addition, the Company had numerous other, non-capital purchase commitments in place as of March 31, 2015, such
16
as commitments to purchase power in select locations through the remainder of 2015 and thereafter, and other open purchase orders for goods or services to be delivered or provided during the
remainder of 2015 and thereafter. Such other miscellaneous purchase commitments totaled $339,159,000 as of March 31, 2015.
9. Stockholders’ Equity
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Balance as of
December 31,
2014 |
|
|
Net
Change |
|
|
Balance as of
March 31,
2015 |
|
| Foreign currency translation loss |
|
$ |
(336,946 |
) |
|
$ |
(146,311 |
) |
|
$ |
(483,257 |
) |
| Unrealized gain on cash flow hedges |
|
|
6,603 |
|
|
|
10,556 |
|
|
|
17,159 |
|
| Unrealized gain (loss) on available for sale securities |
|
|
(99 |
) |
|
|
103 |
|
|
|
4 |
|
| Change in defined benefit plans |
|
|
(2,001 |
) |
|
|
59 |
|
|
|
(1,942 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(332,443 |
) |
|
$ |
(135,593 |
) |
|
$ |
(468,036 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in foreign currencies can have a significant impact to the Company’s condensed consolidated
balance sheets (as evidenced above in the Company’s foreign currency translation gain or loss), as well as its consolidated results of operations, as amounts in foreign currencies are generally translating into more U.S. dollars when the U.S.
dollar weakens or less U.S. dollars when the U.S. dollar strengthens. As of March 31, 2015, the U.S. dollar was generally stronger relative to certain currencies of the foreign countries in which the Company operates. This overall strength of
the U.S. dollar had an overall negative impact on the Company’s consolidated financial position because the foreign denominations translated into less U.S. dollars as evidenced by an increase in the foreign currency translation loss for the
three months ended March 31, 2015 as reflected in the above table. In future periods, the volatility of the U.S. dollar as compared to the other currencies in which the Company operates could have a significant impact on its consolidated
financial position and results of operations, including the amount of revenue that the Company reports in future periods.
Dividends
On February 19, 2015, the Company announced a quarterly cash dividend of $1.69 per share, with a record date of March 11, 2015 and a
payment date of March 25, 2015. The Company paid a total of $96,196,000 on March 25, 2015 for the first quarter cash dividend. In addition, the Company accrued an additional $2,630,000 in dividends payable for the restricted stock units
that have not yet vested.
Stock-Based Compensation
In February 2015, the Compensation Committee and the Stock Award Committee of the Company’s Board of Directors approved the issuance of an
aggregate of 586,646 shares of restricted stock units to certain employees, including executive officers, pursuant to the 2000 Equity Incentive Plan, as part of the Company’s annual refresh program. These equity awards are subject to vesting
provisions and have a weighted-average grant date fair value of $222.40 and a weighted-average requisite service period of 3.44 years. The valuation of restricted stock units with only a service condition or a service
17
and performance condition requires no significant assumptions as the fair value for these types of equity awards is based solely on the fair value of the Company’s stock price on the date of
grant. In connection with the Company’s REIT conversion, the Company used revenue and adjusted funds from operations (“AFFO”) as the performance measurements in the restricted stock units with both service and performance conditions
that were granted in February 2015, whereby revenue and adjusted EBITDA were used as the performance measurements in prior years’ grants.
The Company uses a Monte Carlo simulation option-pricing model to determine the fair value of restricted stock units with a service and market
condition. There were no significant changes in the assumptions used to determine the fair value of restricted stock units with a service and market condition that were granted during the three months ended March 31, 2015 compared to the three
months ended March 31, 2014.
The following table presents, by operating expense category, the Company’s stock-based
compensation expense recognized in the Company’s condensed consolidated statement of operations (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
Three months ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Cost of revenues |
|
$ |
2,306 |
|
|
$ |
1,870 |
|
| Sales and marketing |
|
|
8,711 |
|
|
|
7,000 |
|
| General and administrative |
|
|
19,596 |
|
|
|
16,111 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
30,613 |
|
|
$ |
24,981 |
|
|
|
|
|
|
|
|
|
|
10. Segment Information
While the Company has a single line of business, which is the design, build-out and operation of IBX data centers, it has
determined that it has three reportable segments comprised of its Americas, EMEA and Asia-Pacific geographic regions. The Company’s chief operating decision-maker evaluates performance, makes operating decisions and allocates resources based on
the Company’s revenue and adjusted EBITDA performance both on a consolidated basis and based on these three reportable segments. The Company defines adjusted EBITDA as income from operations plus depreciation, amortization, accretion,
stock-based compensation expense, restructuring charges, impairment charges and acquisition costs as presented below (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
Three months ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Adjusted EBITDA: |
|
|
|
|
|
|
|
|
| Americas |
|
$ |
172,734 |
|
|
$ |
149,563 |
|
| EMEA |
|
|
76,031 |
|
|
|
63,205 |
|
| Asia-Pacific |
|
|
56,983 |
|
|
|
47,620 |
|
|
|
|
|
|
|
|
|
|
| Total adjusted EBITDA |
|
|
305,748 |
|
|
|
260,388 |
|
| Depreciation, amortization and accretion expense |
|
|
(122,530 |
) |
|
|
(113,610 |
) |
| Stock-based compensation expense |
|
|
(30,613 |
) |
|
|
(24,981 |
) |
| Acquisition costs |
|
|
(1,156 |
) |
|
|
(185 |
) |
|
|
|
|
|
|
|
|
|
| Income from operations |
|
$ |
151,449 |
|
|
$ |
121,612 |
|
|
|
|
|
|
|
|
|
|
18
The Company also provides the following additional segment disclosures (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
Three months ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Total revenues: |
|
|
|
|
|
|
|
|
| Americas |
|
$ |
363,969 |
|
|
$ |
330,033 |
|
| EMEA |
|
|
164,623 |
|
|
|
151,430 |
|
| Asia-Pacific |
|
|
114,582 |
|
|
|
98,590 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
643,174 |
|
|
$ |
580,053 |
|
|
|
|
|
|
|
|
|
|
| Total depreciation and amortization: |
|
|
|
|
|
|
|
|
| Americas |
|
$ |
66,727 |
|
|
$ |
60,027 |
|
| EMEA |
|
|
26,507 |
|
|
|
29,712 |
|
| Asia-Pacific |
|
|
28,402 |
|
|
|
24,254 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
121,636 |
|
|
$ |
113,993 |
|
|
|
|
|
|
|
|
|
|
| Capital expenditures: |
|
|
|
|
|
|
|
|
| Americas |
|
$ |
131,255 |
(1)(2) |
|
$ |
67,515 |
|
| EMEA |
|
|
27,556 |
|
|
|
15,564 |
|
| Asia-Pacific |
|
|
39,838 |
|
|
|
39,619 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
198,649 |
|
|
$ |
122,698 |
|
|
|
|
|
|
|
|
|
|
| (1) |
Includes the purchase price for the business acquisitions, net of cash acquired, which totaled $10,247. |
| (2) |
Includes the purchase price for the San Jose land purchase, which totaled $38,282. |
The
Company’s long-lived assets are located in the following geographic areas as of (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
March 31,
2015 |
|
|
December 31,
2014 |
|
| Americas |
|
$ |
2,940,658 |
|
|
$ |
2,874,562 |
|
| EMEA |
|
|
1,065,135 |
|
|
|
1,135,319 |
|
| Asia-Pacific |
|
|
985,090 |
|
|
|
988,389 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,990,883 |
|
|
$ |
4,998,270 |
|
|
|
|
|
|
|
|
|
|
19
Revenue information by category is as follows (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
Three months ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Colocation |
|
$ |
481,545 |
|
|
$ |
434,623 |
|
| Interconnection |
|
|
101,658 |
|
|
|
87,026 |
|
| Managed infrastructure |
|
|
23,855 |
|
|
|
25,384 |
|
| Rental |
|
|
2,599 |
|
|
|
2,670 |
|
|
|
|
|
|
|
|
|
|
| Recurring revenues |
|
|
609,657 |
|
|
|
549,703 |
|
| Non-recurring revenues |
|
|
33,517 |
|
|
|
30,350 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
643,174 |
|
|
$ |
580,053 |
|
|
|
|
|
|
|
|
|
|
No single customer accounted for 10% or greater of the Company’s revenues for the three months ended
March 31, 2015 and 2014. No single customer accounted for 10% or greater of the Company’s gross accounts receivable as of March 31, 2015 and December 31, 2014.
11. Subsequent Events
On April 30, 2015, the Company, as borrower, and certain subsidiaries as guarantors entered into an amendment (the
“Amendment”) of its Credit Agreement dated December 17, 2014 (the “Original Credit Agreement” and, as amended, the “Amended Credit Agreement”). The Original Credit Agreement provided for a senior credit
facility of $1,500,000,000, comprised of (i) a $1,000,000,000 senior secured multi-currency revolving credit facility and (ii) a $500,000,000 senior secured term loan facility (the “Term Loan Facility”). The Amendment
facilitated the conversion of the outstanding U.S. Dollar-denominated principal amount of the Term Loan Facility to an approximately equivalent amount denominated in four foreign currencies: Euro, British pounds Swiss francs and Japanese yen (the
“Foreign Currencies”). In connection with the execution of the Amendment, on April 30, 2015, Equinix prepaid the US dollar-denominated $490,000,000 principal balance of the Term Loan Facility and immediately re-borrowed under the Term
Loan Facility approximately the same aggregate amount denominated in the Foreign Currencies.
20
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The words “Equinix”, “we”, “our”, “ours”, “us” and the “Company” refer to
Equinix, Inc. The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words
‘‘believes,’’ ‘‘anticipates,’’ ‘‘plans,’’ ‘‘expects,’’ ‘‘intends’’ and similar expressions are intended to identify forward-looking statements. Our
actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed in “Liquidity
and Capital Resources’’ below and ‘‘Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q. All forward-looking statements in this document are based on information available to us as of the date of
this report and we assume no obligation to update any such forward-looking statements.
Our management’s discussion and analysis
of financial condition and results of operations is intended to assist readers in understanding our financial information from our management’s perspective and is presented as follows:
| |
• |
|
Non-GAAP Financial Measures |
| |
• |
|
Liquidity and Capital Resources |
| |
• |
|
Contractual Obligations and Off-Balance-Sheet Arrangements |
| |
• |
|
Critical Accounting Policies and Estimates |
| |
• |
|
Recent Accounting Pronouncements |
Overview
Equinix provides global data center offerings that protect and connect the world’s most valued information assets. Global enterprises,
financial services companies and content and network service providers rely upon Equinix’s leading insight and data centers in 33 markets around the world for the safekeeping of their critical IT equipment and the ability to directly connect to
the networks that enable today’s information-driven economy. Equinix offers the following solutions: (i) premium data center colocation, (ii) interconnection and (iii) exchange and outsourced IT infrastructure services. As of
March 31, 2015, we operated or had partner International Business Exchange (“IBX”) data centers in the Atlanta, Boston, Chicago, Dallas, Denver, Los Angeles, Miami, New York, Philadelphia, Rio de Janeiro, Sao Paulo, Seattle, Silicon
Valley, Toronto and Washington, D.C. metro areas in the Americas region; France, Germany, Italy, the Netherlands, Switzerland, the United Arab Emirates and the United Kingdom in the Europe, Middle East and Africa (“EMEA”) region; and
Australia, China, Hong Kong, Indonesia, Japan and Singapore in the Asia-Pacific region.
Our data centers in 33 markets around the world
are a global platform, which allows our customers to increase information and application delivery performance while significantly reducing costs. This global platform and the quality of our IBX data centers have enabled us to establish a critical
mass of customers. As more customers choose our IBX data centers, it benefits their suppliers and business partners to colocate with us as well, in order to gain the full economic and performance benefits of our offerings. These partners, in turn,
pull in their business partners, creating a “marketplace” for their services. Our global platform enables scalable, reliable and cost-effective colocation, interconnection and traffic exchange that lowers overall cost and increases
flexibility. Our focused business model is built on our critical mass of customers and the resulting “marketplace” effect. This global platform, combined with our strong financial position, continues to drive new customer growth and
bookings.
21
Historically, our market has been served by large telecommunications carriers who have bundled
telecommunications products and services with their colocation offerings. The data center market landscape has evolved to include cloud computing/utility providers, application hosting providers and systems integrators, managed infrastructure
hosting providers and colocation providers. More than 350 companies provide data center solutions in the U.S. alone. Each of these data center solutions providers can bundle various colocation, interconnection and network offerings, and outsourced
IT infrastructure services. We are able to offer our customers a global platform that reaches 15 countries with proven operational reliability, improved application performance and network choice, and a highly scalable set of offerings.
Our utilization rate was approximately 79% as of March 31, 2015 and 75% as of March 31, 2014; however, excluding the impact of our
IBX data center expansion projects that have opened during the last 12 months, our utilization rate would have increased to approximately 83% as of March 31, 2015. Our utilization rate varies from market to market among our IBX data centers
across the Americas, EMEA and Asia-Pacific regions. We continue to monitor the available capacity in each of our selected markets. To the extent we have limited capacity available in a given market it may limit our ability for growth in that market.
We perform demand studies on an ongoing basis to determine if future expansion is warranted in a market. In addition, power and cooling requirements for most customers are growing on a per unit basis. As a result, customers are consuming
an increasing amount of power per cabinet. Although we generally do not control the amount of power our customers draw from installed circuits, we have negotiated power consumption limitations with certain of our high power demand
customers. This increased power consumption has driven the requirement to build out our new IBX data centers to support power and cooling needs twice that of previous IBX data centers. We could face power limitations in our IBX data centers even
though we may have additional physical cabinet capacity available within a specific IBX data center. This could have a negative impact on the available utilization capacity of a given IBX data center, which could have a negative impact on our
ability to grow revenues, affecting our financial performance, operating results and cash flows.
Strategically, we will continue to
look at attractive opportunities to grow our market share and selectively improve our footprint and offerings. As was the case with our recent expansions and acquisitions, our expansion criteria will be dependent on a number of factors, such as
demand from new and existing customers, quality of the design, power capacity, access to networks, capacity availability in the current market location, amount of incremental investment required by us in the targeted property, lead-time to break
even on a free cash flow basis, and in-place customers. Like our recent expansions and acquisitions, the right combination of these factors may be attractive to us. Depending on the circumstances, these transactions may require additional capital
expenditures funded by upfront cash payments or through long-term financing arrangements in order to bring these properties up to Equinix standards. Property expansion may be in the form of purchases of real property, long-term leasing arrangements
or acquisitions. Future purchases, construction or acquisitions may be completed by us or with partners or potential customers to minimize the outlay of cash, which can be significant.
Our business is based on a recurring revenue model comprised of colocation and related interconnection and managed infrastructure offerings.
We consider these offerings recurring because our customers are generally billed on a fixed and recurring basis each month for the duration of their contract, which is generally one to three years in length. Our recurring revenues have comprised
more than 90% of our total revenues during the past three years. In addition, during any given quarter of the past three years, more than half of our monthly recurring revenue bookings came from existing customers, contributing to our revenue
growth. During the three months ended March 31, 2015 and 2014, our largest customer accounted for approximately 3% of our recurring revenues. Our 50 largest customers accounted for approximately 34% and 35% of our recurring revenues for the
three months ended March 31, 2015 and 2014, respectively.
Our non-recurring revenues are primarily comprised of installation
services related to a customer’s initial deployment and professional services that we perform. These services are considered to be non-recurring because they are billed typically once, upon completion of the installation or the professional
22
services work performed. The majority of these non-recurring revenues are typically billed on the first invoice distributed to the customer in connection with their initial installation. However,
revenues from installation services are deferred and recognized ratably over the expected life of the customer installation. Additionally, revenue from contract settlements, when a customer wishes to terminate their contract early, is recognized
when no remaining performance obligations exist and collectability is reasonably assured, to the extent that the revenue has not previously been recognized. As a percentage of total revenues, we expect non-recurring revenues to represent less than
10% of total revenues for the foreseeable future.
Our Americas revenues are derived primarily from colocation and related interconnection
offerings, and our EMEA and Asia-Pacific revenues are derived primarily from colocation and managed infrastructure offerings.
The largest
components of our cost of revenues are depreciation, rental payments related to our leased IBX data centers, utility costs, including electricity and bandwidth, IBX data center employees’ salaries and benefits, including stock-based
compensation, repairs and maintenance, supplies and equipment and security services. A substantial majority of our cost of revenues is fixed in nature and should not vary significantly from period to period, unless we expand our existing IBX data
centers or open or acquire new IBX data centers. However, there are certain costs which are considered more variable in nature, including utilities and supplies that are directly related to growth in our existing and new customer base. We expect the
cost of our utilities, specifically electricity, will generally increase in the future on a per-unit or fixed basis in addition to the variable increase related to the growth in consumption by our customers. In addition, the cost of electricity is
generally higher in the summer months as compared to other times of the year. To the extent we incur increased utility costs, such increased costs could materially impact our financial condition, results of operations and cash flows. Furthermore, to
the extent we incur increased electricity costs as a result of either climate change policies or the physical effects of climate change, such increased costs could materially impact our financial condition, results of operations and cash flows.
Sales and marketing expenses consist primarily of compensation and related costs for sales and marketing personnel, including stock-based
compensation, sales commissions, marketing programs, public relations, promotional materials and travel, as well as bad debt expense and amortization of customer contract intangible assets.
General and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation, accounting, legal
and other professional service fees, and other general corporate expenses such as our corporate regional headquarters office leases and some depreciation expense.
Due to our recurring revenue model, and a cost structure which has a large base that is fixed in nature and generally does not grow in
proportion to revenue growth, we expect our cost of revenues, sales and marketing expenses and general and administrative expenses to decline as a percentage of revenues over time, although we expect each of them to grow in absolute dollars in
connection with our growth. However, for cost of revenues, this trend may periodically be impacted when a large expansion project opens or is acquired, and before it starts generating any meaningful revenue. Furthermore, in relation to cost of
revenues, we note that the Americas region has a lower cost of revenues as a percentage of revenue than either EMEA or Asia-Pacific. This is due to both the increased scale and maturity of the Americas region, compared to either the EMEA or
Asia-Pacific region, as well as a higher cost structure outside of the Americas, particularly in EMEA. While we expect all three regions to continue to see lower cost of revenues as a percentage of revenues in future periods, we expect the trend
that sees the Americas having the lowest cost of revenues as a percentage of revenues to continue. As a result, to the extent that revenue growth outside the Americas grows in greater proportion than revenue growth in the Americas, our overall cost
of revenues as a percentage of revenues may increase in future periods. Sales and marketing expenses may periodically increase as a percentage of revenues as we continue to scale our operations to invest in sales and marketing initiatives to further
increase our revenue, including the hiring of additional headcount and new product innovations. General and administrative expenses may also periodically increase as a percentage of revenues as we continue to scale our operations to support our
growth.
23
Real Estate Investment Trust (“REIT”) Conversion
In September 2012, we announced that our Board of Directors approved a plan for Equinix to pursue conversion to a REIT. On December 23,
2014, our Board of Directors formally approved our conversion to a REIT effective on January 1, 2015. We completed the implementation of the REIT conversion in 2014, and as a result we have elected to be treated as a REIT for federal income tax
purposes effective January 1, 2015. The REIT conversion includes our data center operations in the U.S., Europe and Japan; our data center operations in other jurisdictions will initially be designated as taxable REIT subsidiaries
(“TRSs”).
As a REIT, we will generally be permitted to deduct from federal income taxes the dividends we pay to our
stockholders (including, for this purpose, the value of any deemed distribution on account of adjustments to the conversion rate relating to our outstanding debt securities that are convertible into our common stock, provided the deemed distribution
is not a preferential dividend). The income represented by such dividends will not be subject to federal taxation at the entity level but will be taxed, if at all, at the stockholder level. Nevertheless, the income of our TRSs which hold our U.S.
operations that may not be REIT-compliant, are subject, as applicable, to federal and state corporate income tax. Likewise, our foreign subsidiaries continue to be subject to foreign income taxes in jurisdictions in which they hold assets or conduct
operations, regardless of whether held or conducted through TRSs or through qualified REIT subsidiaries (“QRSs”). We are also subject to a separate corporate income tax on any gains recognized during a specified period (generally 10 years)
following the REIT conversion that are attributable to “built-in” gains with respect to the assets that we owned on January 1, 2015. Our ability to qualify as a REIT will depend upon our compliance with various requirements, including
requirements related to the nature of our assets, the sources of our income and the distributions to our stockholders. If we fail to qualify as a REIT, we will be subject to federal income tax at regular corporate rates. Even if we qualify for
taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRSs operations. In particular, while state income tax regimes often parallel the federal
income tax regime for REITs, many states do not completely follow federal rules and some may not follow them at all.
In connection with
our conversion to a REIT, we are seeking a private letter ruling (“PLR”) from the U.S. Internal Revenue Service (“IRS”). Our PLR request has multiple components, and we submitted the PLR request to the IRS in the fourth quarter
of 2012. We currently expect to receive a favorable PLR from the IRS in 2015.
We expect to incur a total of approximately $360.0 to
$370.0 million in tax liabilities associated with a change in our methods of depreciating and amortizing various data center assets for tax purposes from our prior methods to methods that are more consistent with the characterization of such assets
as real property for REIT purposes. The recapture expenses are generally payable over a four-year period starting in 2012 and, as of March 31, 2015, we have settled $281.0 million of the estimated federal and state tax liability related to the
recapture of depreciation and amortization expenses. Prior to our decision to convert to a REIT, our balance sheet reflected our income tax liability as a non-current deferred tax liability. As a result of the REIT conversion, our non-current tax
liability was reclassified from non-current to current over the four-year period, which started in the third quarter of 2012 with the all the remaining non-current tax liability being reclassed to current as of December 31, 2014. The current
liability reflects the tax liability that relates to additional taxable income expected to be recognized within the twelve-month period from the date of the balance sheet. As a REIT, we also expect to incur approximately $10.0 million annually
in compliance costs beginning in 2015.
On October 16, 2014, we announced the declaration by our Board of Directors of a special
distribution (the “2014 Special Distribution”) of $416.0 million on our shares of common stock, payable in either common stock or cash to, and at the election of, our stockholders of record as of October 27, 2014 (the “Record
Date”). Common stockholders elected to receive payment of the 2014 Special Distribution in the form of stock or cash, with the total cash payment to all stockholders limited to no
24
more than 20% of the total distribution. The value of the 2014 Special Distribution, plus the value of the deemed distribution on account of the adjustment to the conversion rate relating to our
outstanding 4.75% convertible subordinated notes that was made as a result of the 2014 Special Distribution (the “2014 Conversion Rate Adjustment”), exceeded our previously undistributed accumulated earnings and profits attributable to all
taxable periods ending prior to January 1, 2015.
We intend to declare one or more special distributions in the fourth quarter of
2015 (the “2015 Special Distributions”), which would encompass some extraordinary items of taxable income that we expect to recognize in 2015, such as depreciation recapture in respect of accounting method changes commenced in our pre-REIT
period and foreign earnings and profits recognized as dividend income. We estimate the aggregate amount of our 2015 Special Distributions, together with the expected value of the deemed distributions associated with any adjustments to the conversion
rate of our outstanding 4.75% convertible subordinated notes resulting from the 2015 Special Distributions (the “2015 Conversion Rate Adjustments”), will equal approximately $580.0 to $680.0 million. The conversion of our existing data
center operations into the REIT and the addition of new entities into the REIT may also result in future special distributions.
We also
began paying quarterly dividends in 2015 in connection with our conversion to a REIT effective January 1, 2015. On February 19, 2015, we announced a quarterly cash dividend of $1.69 per share, which was paid on March 25, 2015 to
shareholders of record on March 11, 2015.
We continue to monitor our REIT compliance to maintain our status as a REIT. For this, and
other reasons, as necessary, we may convert certain of our data center operations in Canada and Asia-Pacific into the REIT in the coming years.
25
Results of Operations
Three Months Ended March 31, 2015 and 2014
Revenues. Our revenues for the three months ended March 31, 2015 and 2014 were generated from the following revenue
classifications and geographic regions (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended March 31, |
|
|
% change |
|
| |
|
2015 |
|
|
% |
|
|
2014 |
|
|
% |
|
|
Actual |
|
|
Constant
currency |
|
| Americas: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recurring revenues |
|
$ |
347,054 |
|
|
|
54 |
% |
|
$ |
314,980 |
|
|
|
54 |
% |
|
|
10 |
% |
|
|
12 |
% |
| Non-recurring revenues |
|
|
16,915 |
|
|
|
3 |
% |
|
|
15,053 |
|
|
|
3 |
% |
|
|
12 |
% |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363,969 |
|
|
|
57 |
% |
|
|
330,033 |
|
|
|
57 |
% |
|
|
10 |
% |
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EMEA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recurring revenues |
|
|
153,424 |
|
|
|
24 |
% |
|
|
142,125 |
|
|
|
25 |
% |
|
|
8 |
% |
|
|
24 |
% |
| Non-recurring revenues |
|
|
11,199 |
|
|
|
2 |
% |
|
|
9,305 |
|
|
|
1 |
% |
|
|
20 |
% |
|
|
41 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
164,623 |
|
|
|
26 |
% |
|
|
151,430 |
|
|
|
26 |
% |
|
|
9 |
% |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asia-Pacific: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recurring revenues |
|
|
109,179 |
|
|
|
17 |
% |
|
|
92,598 |
|
|
|
16 |
% |
|
|
18 |
% |
|
|
27 |
% |
| Non-recurring revenues |
|
|
5,403 |
|
|
|
0 |
% |
|
|
5,992 |
|
|
|
1 |
% |
|
|
-10 |
% |
|
|
-3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,582 |
|
|
|
17 |
% |
|
|
98,590 |
|
|
|
17 |
% |
|
|
16 |
% |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recurring revenues |
|
|
609,657 |
|
|
|
95 |
% |
|
|
549,703 |
|
|
|
95 |
% |
|
|
11 |
% |
|
|
17 |
% |
| Non-recurring revenues |
|
|
33,517 |
|
|
|
5 |
% |
|
|
30,350 |
|
|
|
5 |
% |
|
|
10 |
% |
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
643,174 |
|
|
|
100 |
% |
|
$ |
580,053 |
|
|
|
100 |
% |
|
|
11 |
% |
|
|
17 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Revenues. Our revenues from the U.S., the largest revenue contributor in the Americas
region for the period, represented approximately 92% of the regional revenues during the three months ended March 31, 2015 and 2014. Growth in Americas revenues was primarily due to (i) $6.0 million of revenue generated from our
recently-opened IBX data centers or IBX data center expansions in the Miami, Atlanta, New York, São Paulo and Toronto metro areas and (ii) an increase in orders from both our existing customers and new customers during the period. During
the three months ended March 31, 2015, the U.S. dollar was generally stronger relative to the Canadian dollar and Brazilian real than during the three months ended March 31, 2014, resulting in approximately $5.2 million of unfavorable
foreign currency impact to our Americas revenues during the three months ended March 31, 2015 when compared to average exchange rates of the three months ended March 31, 2014. We expect that our Americas revenues will continue to grow in
future periods as a result of continued growth in the recently-opened IBX data centers and additional expansions currently taking place in Atlanta, Dallas, Philadelphia, Seattle, Silicon Valley, Rio de Janeiro and Washington D.C. metro areas,
which are expected to open during 2015 and 2016. Our estimates of future revenue growth take account of expected changes in recurring revenues attributed to customer bookings, customer churn or changes or amendments to customers’ contracts.
EMEA Revenues. Our revenues from the U.K., the largest revenue contributor in the EMEA region for the period, represented
approximately 37% of the regional revenues during the three months ended March 31, 2015 and 2014. Our EMEA revenue growth was primarily due to (i) approximately $3.0 million of revenue from our recently-opened IBX data centers or IBX data
center expansions in the Amsterdam and London metro areas and (ii) an increase in orders from both our existing customers and new customers during the period. During the three months ended March 31, 2015, the impact of foreign currency
fluctuations resulted in approximately $24.5 million of unfavorable foreign currency impact to our EMEA revenues primarily due to a generally stronger U.S. dollar relative to the British pound, Euro, and Swiss franc during the three months ended
March 31, 2015 compared to the three months ended March 31, 2014. We expect that our EMEA revenues will continue to grow in future periods as a result
26
of continued growth in recently-opened IBX data centers and additional expansions currently taking place in the Amsterdam, Frankfurt and Paris metro areas, which are expected to open during 2015.
Our estimates of future revenue growth take account of expected changes in recurring revenues attributed to customer bookings, customer churn or changes or amendments to customers’ contracts.
Asia-Pacific Revenues. Our revenues from Singapore, the largest revenue contributor in the Asia-Pacific region, represented
approximately 39% and 37%, respectively, of the regional revenues during the three months ended March 31, 2015 and 2014. Our Asia-Pacific revenue growth was primarily due to (i) approximately $10.3 million of revenue generated from our
recently-opened IBX data center expansions in the Osaka, Singapore, Hong Kong, Melbourne and Shanghai metro areas and (ii) an increase in orders from both our existing customers and new customers during the period. During the three months ended
March 31, 2015, the U.S. dollar was generally stronger relative to the Australian dollar, Japanese yen and Singapore dollar, than during the three months ended March 31, 2014, resulting in approximately $8.7 million of unfavorable foreign
currency impact to our Asia-Pacific revenues during the three months ended March 31, 2015 when compared to average exchange rates of the three months ended March 31, 2014. We expect that our Asia-Pacific revenues will continue to grow in
future periods as a result of continued growth in recently-opened IBX data center expansions and additional expansions currently taking place in the Hong Kong, Melbourne, Shanghai, Singapore, Sydney and Tokyo metro areas, which are expected to open
during the remainder of 2015 and 2016. Our estimates of future revenue growth take account of expected changes in recurring revenues attributed to customer bookings, or changes or amendments to customers’ contracts.
Cost of Revenues. Our cost of revenues for the three months ended March 31, 2015 and 2014 were split among the following
geographic regions (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended March 31, |
|
|
% change |
|
| |
|
2015 |
|
|
% |
|
|
2014 |
|
|
% |
|
|
Actual |
|
|
Constant
currency |
|
| Americas |
|
$ |
150,369 |
|
|
|
50 |
% |
|
$ |
141,765 |
|
|
|
49 |
% |
|
|
6 |
% |
|
|
9 |
% |
| EMEA |
|
|
81,216 |
|
|
|
28 |
% |
|
|
86,531 |
|
|
|
30 |
% |
|
|
-6 |
% |
|
|
9 |
% |
| Asia-Pacific |
|
|
66,728 |
|
|
|
22 |
% |
|
|
59,229 |
|
|
|
21 |
% |
|
|
13 |
% |
|
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
298,313 |
|
|
|
100 |
% |
|
$ |
287,525 |
|
|
|
100 |
% |
|
|
4 |
% |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Cost of revenues as a percentage of revenues: |
|
|
|
|
|
|
|
|
| Americas |
|
|
41 |
% |
|
|
43 |
% |
| EMEA |
|
|
49 |
% |
|
|
57 |
% |
| Asia-Pacific |
|
|
58 |
% |
|
|
60 |
% |
| Total |
|
|
46 |
% |
|
|
50 |
% |
Americas Cost of Revenues. Our Americas cost of revenues for the three months ended March 31,
2015 and 2014 included $53.4 million and $50.4 million, respectively, of depreciation expense. The increase in depreciation expense was primarily due to our IBX data center expansion activity, partially offset by the increase in the useful lives of
certain fixed assets when we entered into lease amendments to extend the lease term for certain IBX data centers. Excluding depreciation expense, the increase in our Americas cost of revenues was primarily due to $3.8 million of higher utility,
repairs and maintenance costs in support of our business growth and $2.1 million of higher compensation costs, including general salaries, bonuses and stock-based compensation. During the three months ended March 31, 2015, the impact of foreign
currency fluctuations to our Americas cost of revenues resulted in
27
approximately $3.7 million of favorable foreign currency impact to our Americas cost of revenues primarily due to a generally stronger U.S. dollar relative to the Canadian dollar and Brazilian
real during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. We expect Americas cost of revenues to increase as we continue to grow our business.
EMEA Cost of Revenues. Our EMEA cost of revenues for the three months ended March 31, 2015 and 2014 included $22.0 million
and $25.8 million, respectively, of depreciation expense. The decrease in depreciation expense was primarily due to the increase in the useful lives of certain fixed assets resulting from extending the lease term of certain IBX data centers,
partially offset by an increase in depreciation expense due to our IBX data center expansion activity. During the three months ended March 31, 2015, the impact of foreign currency fluctuations to our EMEA cost of revenues resulted in
approximately $13.3 million of net favorable foreign currency impact to our EMEA cost of revenues primarily due to a generally stronger U.S. dollar relative to the British pound, Euro and Swiss franc during the three months ended March 31, 2015
compared to the three months ended March 31, 2014. We expect EMEA cost of revenues to increase as we continue to grow our business.
Asia-Pacific Cost of Revenues. Our Asia-Pacific cost of revenues for the three months ended March 31, 2015 and 2014 included
$27.2 million and $23.3 million, respectively, of depreciation expense. Growth in depreciation expense was primarily due to our IBX data center expansion activity. During the three months ended March 31, 2015, the impact of foreign currency
fluctuations to our Asia-Pacific cost of revenues resulted in approximately $5.0 million of net favorable foreign currency impact to our Asia-Pacific cost of revenues primarily due to a generally stronger U.S. dollar relative to the Australian
dollar, Japanese yen, and Singapore dollar during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. We expect Asia-Pacific cost of revenues to increase as we continue to grow our business.
Sales and Marketing Expenses. Our sales and marketing expenses for the three months ended March 31, 2015 and 2014 were
split among the following geographic regions (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended March 31, |
|
|
% change |
|
| |
|
2015 |
|
|
% |
|
|
2014 |
|
|
% |
|
|
Actual |
|
|
Constant
currency |
|
| Americas |
|
$ |
49,045 |
|
|
|
62 |
% |
|
$ |
41,074 |
|
|
|
61 |
% |
|
|
19 |
% |
|
|
21 |
% |
| EMEA |
|
|
17,245 |
|
|
|
22 |
% |
|
|
17,084 |
|
|
|
25 |
% |
|
|
1 |
% |
|
|
14 |
% |
| Asia-Pacific |
|
|
12,326 |
|
|
|
16 |
% |
|
|
9,270 |
|
|
|
14 |
% |
|
|
33 |
% |
|
|
41 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
78,616 |
|
|
|
100 |
% |
|
$ |
67,428 |
|
|
|
100 |
% |
|
|
17 |
% |
|
|
22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Sales and marketing expenses as a percentage of revenues: |
|
|
|
|
|
|
|
|
| Americas |
|
|
13 |
% |
|
|
12 |
% |
| EMEA |
|
|
10 |
% |
|
|
11 |
% |
| Asia-Pacific |
|
|
11 |
% |
|
|
9 |
% |
| Total |
|
|
12 |
% |
|
|
12 |
% |
Americas Sales and Marketing Expenses. The increase in our Americas sales and marketing expenses
was primarily due to $6.6 million of higher compensation costs, including sales compensation, general salaries, bonuses, stock-based compensation and headcount growth (519 Americas sales and marketing employees as of March 31, 2015 versus 413
as of March 31, 2014). During the three months ended March 31, 2015, the impact of foreign currency fluctuations to our Americas sales and marketing expenses was not significant when compared to average exchange rates of the three months
ended
28
March 31, 2014. Over the past several years, we have been investing in our Americas sales and marketing initiatives to further increase our revenue. These investments have included the
hiring of additional headcount and new product innovation efforts and, as a result, our Americas sales and marketing expenses as a percentage of revenues have increased. Although we anticipate that we will continue to invest in Americas sales and
marketing initiatives, we believe our Americas sales and marketing expenses as a percentage of revenues will remain at approximately current levels over the next year but should ultimately decrease as we continue to grow our business.
EMEA Sales and Marketing Expenses. Our EMEA sales and marketing expenses did not materially change. During the three months ended
March 31, 2015, the impact of foreign currency fluctuations to our EMEA sales and marketing expenses resulted in approximately $2.3 million of net favorable foreign currency impact due to a generally stronger U.S. dollar relative to the British
pound, Euro and Swiss franc during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. Over the past several years, we have been investing in our EMEA sales and marketing initiatives to further increase
our revenue. These investments have included the hiring of additional headcount and new product innovation efforts. Although we anticipate that we will continue to invest in EMEA sales and marketing initiatives, we believe our EMEA sales and
marketing expenses as a percentage of revenues will remain at approximately current levels over the next year or two but should ultimately decrease as we continue to grow our business.
Asia-Pacific Sales and Marketing Expenses. The increase in our Asia-Pacific sales and marketing expenses was primarily due to $2.5
million of higher compensation costs, including sales compensation, general salaries, bonuses, stock-based compensation expense and headcount growth (150 Asia-Pacific sales and marketing employees as of March 31, 2015 versus 125 as of
March 31, 2014). For the three months ended March 31, 2015, the impact of foreign currency fluctuations to our Asia-Pacific sales and marketing expenses was not significant when compared to average exchange rates of the three months ended
March 31, 2014. Over the past several years, we have been investing in our Asia-Pacific sales and marketing initiatives to further increase our revenue. These investments have included the hiring of additional headcount and new product
innovation efforts and, as a result, our Asia-Pacific sales and marketing expenses have increased. Although we anticipate that we will continue to invest in Asia-Pacific sales and marketing initiatives, we believe our Asia-Pacific sales and
marketing expenses as a percentage of revenues will remain at approximately current levels over the next year or two but should ultimately decrease as we continue to grow our business.
General and Administrative Expenses. Our general and administrative expenses for the three months ended March 31, 2015 and
2014 were split among the following geographic regions (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended March 31, |
|
|
% change |
|
| |
|
2015 |
|
|
% |
|
|
2014 |
|
|
% |
|
|
Actual |
|
|
Constant
currency |
|
| Americas |
|
$ |
82,123 |
|
|
|
72 |
% |
|
$ |
75,357 |
|
|
|
73 |
% |
|
|
9 |
% |
|
|
9 |
% |
| EMEA |
|
|
20,431 |
|
|
|
18 |
% |
|
|
17,829 |
|
|
|
17 |
% |
|
|
15 |
% |
|
|
26 |
% |
| Asia-Pacific |
|
|
11,086 |
|
|
|
10 |
% |
|
|
10,117 |
|
|
|
10 |
% |
|
|
10 |
% |
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
113,640 |
|
|
|
100 |
% |
|
$ |
103,303 |
|
|
|
100 |
% |
|
|
10 |
% |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
| |
|
Three months ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| General and administrative expenses as a percentage of revenues: |
|
|
|
|
|
|
|
|
| Americas |
|
|
23 |
% |
|
|
23 |
% |
| EMEA |
|
|
12 |
% |
|
|
12 |
% |
| Asia-Pacific |
|
|
10 |
% |
|
|
10 |
% |
| Total |
|
|
18 |
% |
|
|
18 |
% |
Americas General and Administrative Expenses. The increase in our Americas general and
administrative expenses was primarily due to $6.0 million of higher compensation costs, including general salaries, bonuses and headcount growth (720 Americas general and administrative employees as of March 31, 2015 versus 699 as of
March 31, 2014). Excluding compensation costs, the increase in our Americas general and administrative expenses was due to $3.9 million of higher depreciation expenses primarily due to the implementation of the Oracle R12 ERP system and certain
systems to support the REIT conversion, partially offset by $5.0 million decrease in professional fees from our REIT conversion process incurred during the three months ended March 31, 2014. During the three months ended March 31, 2015,
the impact of foreign currency fluctuations to our Americas general and administrative expenses was not significant when compared to average exchange rates for the three months ended March 31, 2014. Over the course of the past year, we have
been investing in our Americas general and administrative functions to scale this region effectively for growth, which has included additional investments into improving our back office systems. We expect our current efforts to improve our back
office systems will continue over the next several years. Going forward, although we are carefully monitoring our spending, we expect Americas general and administrative expenses to increase as we continue to further scale our operations to support
our growth.
EMEA General and Administrative Expenses. Our EMEA general and administrative expenses did not materially change.
During the three months ended March 31, 2015, the impact of foreign currency fluctuations to our EMEA general and administrative expenses resulted in approximately $2.0 million of net favorable foreign currency impact due to a generally
stronger U.S. dollar relative to the British pound, Euro and Swiss franc during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. Over the course of the past year, we have been investing in our EMEA
general and administrative functions as a result of our ongoing efforts to scale this region effectively for growth. Going forward, although we are carefully monitoring our spending given the current economic environment, we expect our EMEA general
and administrative expenses to increase in future periods as we continue to scale our operations to support our growth; however, as a percentage of revenues, we generally expect them to decrease.
Asia-Pacific General and Administrative Expenses. Our Asia-Pacific general and administrative expenses did not materially change. For
the three months ended March 31, 2015, the impact of foreign currency fluctuations to our Asia-Pacific general and administrative expenses was not significant when compared to average exchange rates of the three months ended March 31,
2014. Going forward, although we are carefully monitoring our spending given the current economic environment, we expect Asia-Pacific general and administrative expenses to increase as we continue to scale our operations to support our growth;
however, as a percentage of revenues, we generally expect them to decrease.
Acquisition Costs. During the three months
ended March 31, 2015 and 2014, we recorded acquisition costs totaling $1.2 million and $185,000, respectively, primarily attributed to the Americas region.
Interest Income. Interest income decreased to $520,000 for the three months ended March 31, 2015 from $1.4 million for
the three months ended March 31, 2014. The average annualized yield for the three months ended March 31, 2015 was 0.19% versus 0.44% for the three months ended March 31, 2014. We expect our interest income to remain at these low
levels for the foreseeable future due to the impact of a continued low interest rate environment and a portfolio more weighted towards short-term securities.
30
Interest Expense. Interest expense was $68.8 million for the three months
ended March 31, 2015 and March 31, 2014. During the three months ended March 31, 2015 and 2014, we capitalized $3.2 million and $3.4 million, respectively, of interest expense to construction in progress. Going forward, we expect to
incur higher interest expense as we recognize the full impact of our $1.25 billion senior notes and $1.5 billion senior credit facility offerings, partially offset by the redemption of our 7.00% senior notes, settlement of our 3.00% convertible
notes and prepayment and termination of our $750.0 million multicurrency credit facility. We may also incur additional indebtedness to support our growth, resulting in higher interest expense.
Other Income (Expense). We recorded $514,000 of other expense and $678,000 of other income, respectively, for the three months
ended March 31, 2015 and 2014, primarily due to foreign currency exchange gains and losses during the periods.
Income
Taxes. Effective January 1, 2015, we elected to be treated as a REIT for federal income tax purposes. As a REIT, we are generally not subject to federal income taxes on taxable income distributed to our stockholders. We intend to
distribute the entire taxable income generated by the operations of our QRSs for the tax year ending December 31, 2015. As such, no provision for U.S. income taxes for the REIT has been included in the accompanying condensed consolidated
financial statements for the three months ended March 31, 2015.
We have made TRS elections for some of our subsidiaries in and
outside the U.S. In general, a TRS may provide services that would otherwise be considered impermissible for REITs to provide and may hold assets that REITs cannot hold directly. U.S. income taxes for the TRS entities located in the U.S. and foreign
income taxes for our foreign operations were accrued, as necessary, for the three months ended March 31, 2015.
For the three months
ended March 31, 2015 and 2014, we recorded $6.2 million and $13.6 million of income tax expenses, respectively. Our effective tax rates were 7.5% and 24.7% for the three months ended March 31, 2015 and 2014, respectively. We expect to
recognize a significantly lower income tax provision in 2015 as compared to the income tax provision in 2014 due to our REIT conversion because we are entitled to a deduction for dividends paid, which will result in a substantial reduction of U.S.
income tax expense. As a REIT, substantially all of our income tax expense will be incurred based on the earnings generated by our foreign subsidiaries and our U.S. TRSs.
Adjusted EBITDA. Adjusted EBITDA is a key factor in how we assess the performance of each segment, measure the operational cash
generating abilities of each segment and develop regional growth strategies such as IBX data center expansion decisions. We define adjusted EBITDA as income or loss from operations plus depreciation, amortization, accretion, stock-based compensation
expense, restructuring charges, impairment charges and acquisition costs. Our adjusted EBITDA for the three months ended March 31, 2015 and 2014 was split among the following geographic regions (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended March 31, |
|
|
% change |
|
| |
|
2015 |
|
|
% |
|
|
2014 |
|
|
% |
|
|
Actual |
|
|
Constant
currency |
|
| Americas |
|
$ |
172,734 |
|
|
|
56 |
% |
|
$ |
149,563 |
|
|
|
57 |
% |
|
|
15 |
% |
|
|
17 |
% |
| EMEA |
|
|
76,031 |
|
|
|
25 |
% |
|
|
63,205 |
|
|
|
25 |
% |
|
|
20 |
% |
|
|
38 |
% |
| Asia-Pacific |
|
|
56,983 |
|
|
|
19 |
% |
|
|
47,620 |
|
|
|
18 |
% |
|
|
20 |
% |
|
|
29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
305,748 |
|
|
|
100 |
% |
|
$ |
260,388 |
|
|
|
100 |
% |
|
|
17 |
% |
|
|
24 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
Americas Adjusted EBITDA. The increase in our Americas adjusted EBITDA was due to higher
revenues as result of our IBX data center expansion activity and organic growth as described above. During the three months ended March 31, 2015, currency fluctuations resulted in approximately $1.9 million of unfavorable foreign currency
impact on our Americas adjusted EBITDA primarily due to the generally stronger U.S. dollar relative to the Brazilian real and Canadian dollar during the three months ended March 31, 2015 compared to the three months ended March 31, 2014.
EMEA Adjusted EBITDA. The increase in our EMEA adjusted EBITDA was primarily due to higher revenues as result of our IBX data
center expansion activity and organic growth as described above, and the decrease in adjusted operating expenses as a percentage of revenues primarily attributable to lower cost of revenues and utilities. During the three months ended March 31,
2015, currency fluctuations resulted in approximately $11.5 million of net unfavorable foreign currency impact to our EMEA adjusted EBITDA primarily due to generally stronger U.S. dollar relative to the Euro, British pound, and Swiss franc during
the three months ended March 31, 2015 compared to the three months ended March 31, 2014.
Asia-Pacific Adjusted EBITDA.
The increase in our Asia-Pacific adjusted EBITDA was primarily due to higher revenues as result of our IBX data center expansion activity and organic growth as described above. The U.S. dollar was generally stronger relative to the Australian
dollar, Japanese yen and Singapore dollar compared to the three months ended March 31, 2014, resulting in approximately $4.6 million of net unfavorable foreign currency impact to our Asia-Pacific adjusted EBITDA during the three months ended
March 31, 2015 when compared to average exchange rates of the three months ended March 31, 2014.
Non-GAAP Financial Measures
We provide all information required in accordance with generally accepted accounting principles (“GAAP”), but we believe that
evaluating our ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, we use non-GAAP financial measures to evaluate our operations. Legislative and regulatory requirements encourage the use of
and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors.
Our management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as
a substitute for, financial information prepared in accordance with GAAP. However, we have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what
management believes to be our core, ongoing business operations. We believe that the inclusion of this non-GAAP financial measure provides consistency and comparability with past reports and provides a better understanding of the overall performance
of the business and its ability to perform in subsequent periods. We believe that if we did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.
Investors should note, however, that the non-GAAP financial measures used by us may not be the same non-GAAP financial measures, and may not
be calculated in the same manner, as those of other companies. In addition, whenever we use non-GAAP financial measures, we provide a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors
are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.
Our primary non-GAAP financial measures, adjusted funds from operations (“AFFO”) and adjusted EBITDA, exclude depreciation expense
as these charges primarily relate to the initial construction costs of our IBX data centers and do not reflect our current or future cash spending levels to support our business. Our IBX data centers are long-lived assets and have an economic life
greater than 10 years. The construction costs of our IBX data centers do not recur and future capital expenditures remain minor relative to our initial investment. This is a trend we expect to continue. In addition, depreciation is
32
also based on the estimated useful lives of our IBX data centers. These estimates could vary from actual performance of the asset, are based on historical costs incurred to build out our IBX data
centers and are not indicative of current or expected future capital expenditures. Therefore, we exclude depreciation from our operating results when evaluating our operations.
In addition, in presenting AFFO and adjusted EBITDA, we exclude amortization expense related to certain intangible assets, as it represents a
cost that may not recur and is not a good indicator of our current or future operating performance. We exclude accretion expense, both as it relates to asset retirement obligations as well as accrued restructuring charge liabilities, as these
expenses represent costs which we believe are not meaningful in evaluating our current operations. We exclude stock-based compensation expense as it primarily represents expense attributed to equity awards that have no current or future cash
obligations. As such, we, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. We also exclude restructuring charges. The restructuring charges relate to our
decisions to exit leases for excess space adjacent to several of our IBX data centers, which we did not intend to build out, or our decision to reverse such restructuring charges. We also exclude impairment charges related to certain long-lived
assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of long-lived assets are not recoverable. Finally, we exclude acquisition costs from our AFFO and adjusted
EBITDA. The acquisition costs relate to costs we incur in connection with business combinations. Management believes such items as restructuring charges, impairment charges and acquisition costs are non-core transactions; however, these types of
costs will or may occur in future periods.
Adjusted EBITDA
We use Adjusted EBITDA to evaluate our performance both on a consolidated basis, as well as the operating performance of each of our segments
(Americas, EMEA and Asia-Pacific) and as a metric in the determination of vesting of restricted stock units that were granted before 2015 that have both service and performance conditions. In presenting adjusted EBITDA, we exclude certain items that
we believe are not good indicators of our current or future operating performance. These items are depreciation, amortization, accretion of asset retirement obligations and accrued restructuring charges, stock-based compensation, restructuring
charges, impairment charges and acquisition costs. We exclude these items for the same reasons that they are excluded from the non-GAAP financial measures mentioned above.
We define adjusted EBITDA as income or loss from operations plus depreciation, amortization, accretion, stock-based compensation expense,
restructuring charges, impairment charges and acquisition costs as presented below (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
| |
|
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Income from operations |
|
$ |
151,449 |
|
|
$ |
121,612 |
|
| Depreciation, amortization, and accretion expense |
|
|
122,530 |
|
|
|
113,610 |
|
| Stock-based compensation expense |
|
|
30,613 |
|
|
|
24,981 |
|
| Acquisition costs |
|
|
1,156 |
|
|
|
185 |
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA |
|
$ |
305,748 |
|
|
$ |
260,388 |
|
|
|
|
|
|
|
|
|
|
Our adjusted EBITDA results have improved each year and in each region in total dollars due to the improved
operating results discussed earlier in “Results of Operations,” as well as due to the nature of our business model which consists of a recurring revenue stream and a cost structure which has a large base that is fixed in nature as
discussed earlier in “Overview.” Although we have also been investing in our future growth as described above (e.g. through additional IBX data center expansions, acquisitions and increased investments in sales and marketing as well as
general and administrative expenses), we believe that our adjusted EBITDA results will continue to improve in future periods as we continue to grow our business.
33
Funds from Operations (“FFO”) and AFFO
We use FFO and AFFO, which are non-GAAP financial measures commonly used in the REIT industry. FFO is calculated in accordance with the
standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents net income (loss), excluding gains (losses) from the disposition of real estate assets, depreciation and amortization on real
estate assets and adjustments for unconsolidated joint ventures’ and non-controlling interests’ share of these items.
We use
AFFO to evaluate our performance on a consolidated basis and as a metric in the determination of employees’ annual bonuses and vesting of restricted stock units that have both service and performance conditions. In presenting AFFO, we exclude
certain items that we believe are not good indicators of our current or future operating performance. AFFO represents FFO excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring
charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, gains (losses) on debt extinguishment, the non-cash portion of income tax expense,
recurring capital expenditures and adjustments for unconsolidated joint ventures’ and non-controlling interests’ share of these items. The adjustments for both installation revenue and straight-line rent expense are intended to isolate the
cash activity included within the straight-lined or amortized results in the consolidated statement of operations.
Our FFO and AFFO for
the three months ended March 31, 2015 and 2014 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
Three months ended March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Net income |
|
$ |
76,452 |
|
|
$ |
41,337 |
|
| Net income attributable to redeemable non-controlling interests |
|
|
— |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
| Net income attributable to Equinix |
|
|
76,452 |
|
|
|
41,387 |
|
| Adjustments: |
|
|
|
|
|
|
|
|
| Real estate depreciation and amortization |
|
|
102,648 |
|
|
|
99,451 |
|
| Gain/loss on disposition of real estate property |
|
|
62 |
|
|
|
33 |
|
| Adjustments for FFO from unconsolidated joint ventures |
|
|
28 |
|
|
|
28 |
|
| Non-controlling interests’ share of above adjustments |
|
|
— |
|
|
|
(2,167 |
) |
|
|
|
|
|
|
|
|
|
| NAREIT FFO attributable to common shareholders |
|
|
179,190 |
|
|
|
138,732 |
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
| |
|
Three months ended March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| NAREIT FFO attributable to common shareholders |
|
$ |
179,190 |
|
|
$ |
138,732 |
|
| Adjustments: |
|
|
|
|
|
|
|
|
| Installation revenue adjustment |
|
|
8,654 |
|
|
|
7,173 |
|
| Straight-line rent expense adjustment |
|
|
3,201 |
|
|
|
3,029 |
|
| Amortization of deferred financing costs |
|
|
3,858 |
|
|
|
6,499 |
|
| Stock-based compensation expense |
|
|
30,613 |
|
|
|
24,981 |
|
| Non-real estate depreciation expense |
|
|
12,693 |
|
|
|
7,572 |
|
| Amortization expense |
|
|
6,295 |
|
|
|
6,970 |
|
| Accretion expense |
|
|
894 |
|
|
|
(383 |
) |
| Recurring capital expenditures |
|
|
(22,373 |
) |
|
|
(26,449 |
) |
| Acquisition costs |
|
|
1,156 |
|
|
|
185 |
|
| Non-cash portion of income tax expense |
|
|
(2,408 |
) |
|
|
4,955 |
|
| Adjustments for AFFO from unconsolidated joint ventures |
|
|
(17 |
) |
|
|
(21 |
) |
| Non-controlling interests share of above adjustments |
|
|
— |
|
|
|
(499 |
) |
|
|
|
|
|
|
|
|
|
| Adjusted Funds from Operations (AFFO) |
|
$ |
221,756 |
|
|
$ |
172,744 |
|
|
|
|
|
|
|
|
|
|
Our AFFO results have improved due to the improved operating results discussed earlier in “Results of
Operations,” as well as due to the nature of our business model which consists of a recurring revenue stream and a cost structure which has a large base that is fixed in nature as discussed earlier in “Overview.” Although we have also
been investing in our future growth as described above (e.g. through additional IBX data center expansions, acquisitions and increased investments in sales and marketing, and general and administrative expenses), we believe that our AFFO results
will continue to improve in future periods as we continue to grow our business.
Constant Currency Presentation
Our revenues and certain operating expenses (cost of revenues, sales and marketing and general and administrative expenses) from our
international operations have represented and will continue to represent a significant portion of our total revenues and certain operating expenses. As a result, our revenues and certain operating expenses have been and will continue to be affected
by changes in the U.S. dollar against major international currencies such as the Brazilian real, British pound, Canadian dollar, Euro, Swiss franc, Australian dollar, Hong Kong dollar, Japanese yen, Singapore dollar and United Arab Emirates dirham.
In order to provide a framework for assessing how each of our business segments performed excluding the impact of foreign currency fluctuations, we present period-over-period percentage changes in our revenues and certain operating expenses on a
constant currency basis in addition to the historical amounts as reported. Presenting constant currency results of operations is a non-GAAP financial measure and is not meant to be considered in isolation or as an alternative to GAAP results of
operations. However, we have presented this non-GAAP financial measure to provide investors with an additional tool to evaluate our operating results. To present this information, our current and comparative prior period revenues and certain
operating expenses from entities with functional currencies other than the U.S. dollar are converted into U.S. dollars at the exchange rates in effect for the comparable prior period rather than the actual exchange rates in effect during the
respective periods (i.e. average rates in effect for the three months ended March 31, 2014 are used as exchange rates for the three months ended March 31, 2015 when comparing the three months ended March 31, 2015 with the three months
ended March 31, 2014).
Liquidity and Capital Resources
As of March 31, 2015, our total indebtedness was comprised of (i) convertible debt principal totaling $157.9 million from our 4.75%
convertible subordinated notes and (ii) non-convertible debt and financing obligations totaling approximately $4.5 billion consisting of (a) approximately $2.8 billion of principal from our senior notes, (b) approximately $1.2 billion
from our capital lease and other financing obligations, and (c) $566.9 million of principal from our mortgage and loans payable.
35
We believe we have sufficient cash, coupled with anticipated cash generated from operating
activities, to meet our operating requirements, including repayment of the current portion of our debt as it becomes due, payment of tax liabilities related to our conversion to a REIT, payment of the cash portion of the special distributions,
payment of regular dividends and completion of our publicly-announced expansion projects. As of March 31, 2015, we had $1.1 billion of cash, cash equivalents and short-term and long-term investments, of which approximately $870.9 million was
held in the U.S. We believe that our current expansion activities in the U.S. can be funded with our U.S.-based cash and cash equivalents and investments. Besides our investment portfolio, we have additional liquidity available to us from the $1.0
billion revolving credit facility that forms part of our $1.5 billion senior credit facility. As of March 31, 2015, we had 29 irrevocable letters of credit totaling $44.1 million issued and outstanding under the revolving credit facility; as a
result, we had a total of approximately $955.9 million of additional liquidity available to us under the revolving credit facility. Besides any further financing activities we may pursue, customer collections are our primary source of cash. While we
believe we have a strong customer base, and have continued to experience relatively strong collections, if the current market conditions were to deteriorate, some of our customers may have difficulty paying us and we may experience increased churn
in our customer base, including reductions in their commitments to us, all of which could have a material adverse effect on our liquidity. Additionally, we may pursue additional expansion opportunities, primarily the build out of new IBX data
centers, in certain of our existing markets which are at or near capacity within the next year, as well as potential acquisitions. We are also now operating as a REIT and paying out regular, recurring cash dividends. While we expect to fund these
plans with our existing resources, additional financing, either debt or equity, may be required if current market conditions were to deteriorate, we may be unable to secure additional financing or any such additional financing may only be available
to us on unfavorable terms. An inability to pursue additional expansion opportunities will have a material adverse effect on our ability to maintain our desired level of revenue growth in future periods.
Sources and Uses of Cash
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
March 31, |
|
| |
|
2015 |
|
|
2014 |
|
| Net cash provided by operating activities |
|
$ |
232,811 |
|
|
$ |
171,718 |
|
| Net cash provided by (used in) investing activities |
|
|
(199,834 |
) |
|
|
98,885 |
|
| Net cash used in financing activities |
|
|
(98,794 |
) |
|
|
(37,282 |
) |
Operating Activities. The increase in net cash provided by operating activities was primarily due to
improved operating results, favorable working capital activities such as decreased payments of certain accounts payable and accrued expenses, lower tax payments and interest payments and a reduction in excess tax benefits from stock-based
compensation, partially offset by an increase in prepayment of certain expenses. It is possible for some large customer receivables that were anticipated to be collected in one quarter to be delayed to the next quarter. The timing of collection of
customer receivables can vary slightly from one period to the next, which can impact cash flows from operating activities. For example, certain significant customer receivables which were anticipated to be collected in March 2015 were instead
collected in April 2015, which negatively impacted cash flows from operating activities for the three months ended March 31, 2015. We expect that we will continue to generate cash from our operating activities during the remainder of 2015 and
beyond.
Investing Activities. The net cash used in investing activities for the three months ended March 31, 2015 was
primarily due to $150.1 million of capital expenditures primarily as a result of expansion activity, $38.3 million for the purchases of land in San Jose, California and $18.4 million for the purchase of investments, offset by sales and maturities of
investments for $13.7 million. The net cash
36
provided by investing activities for the three months ended March 31, 2014 was primarily due to $315.1 million of sales and maturities of investments, partially offset by $93.4 million of
purchases of investments, $105.9 million of capital expenditures primarily as a result of expansion activity and $16.8 million for the purchase of a plot of land in Melbourne, Australia. During 2015, we expect that our IBX expansion construction
activity will be greater than our 2014 levels. However, if the opportunity to expand is greater than planned and we have sufficient funding to pursue such expansion opportunities, we may further increase the level of capital expenditures to support
this growth as well as pursue additional business acquisitions, property acquisitions or joint ventures.
Financing Activities. The
net cash used in financing activates for the three months ended March 31, 2015 was primarily due to a $96.6 million dividend distribution and $18.7 million repayment of various debt, capital leases and other financing obligations, offset by
$16.4 million of proceeds from employee equity awards. The net cash used in financing activities for the three months ended March 31, 2014 was primarily due to $47.1 million of purchases of treasury stock under our share repurchase program that
expired on December 31, 2014 and $14.6 million of repayments of various debt, capital leases and other financing obligations, partially offset by $14.4 million of proceeds from employee equity awards and $10.0 million of excess tax benefits
from stock-based compensation. Going forward, we expect that our financing activities will consist primarily of repayment of our debt and additional financings needed to support expansion opportunities, additional acquisitions or joint ventures, the
payment of our regular cash dividends and the cash portion of our 2015 Special Distributions.
Contractual Obligations and Off-Balance-Sheet
Arrangements
We lease a majority of our IBX data centers and certain equipment under non-cancelable lease agreements expiring through
2053. The following represents our debt maturities, financings, leases and other contractual commitments as of March 31, 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2015
(9 months) |
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
Thereafter |
|
|
Total |
|
| Capital lease and other financing obligations (1) |
|
|
89,638 |
|
|
|
122,378 |
|
|
|
127,116 |
|
|
|
130,573 |
|
|
|
130,579 |
|
|
|
1,416,763 |
|
|
|
2,017,047 |
|
| Operating leases (2) |
|
|
72,303 |
|
|
|
95,661 |
|
|
|
91,814 |
|
|
|
87,192 |
|
|
|
81,608 |
|
|
|
571,029 |
|
|
|
999,607 |
|
| Other contractual commitments (3) |
|
|
380,916 |
|
|
|
90,055 |
|
|
|
52,497 |
|
|
|
3,367 |
|
|
|
2,497 |
|
|
|
24,099 |
|
|
|
553,431 |
|
| Asset retirement obligations (4) |
|
|
— |
|
|
|
480 |
|
|
|
9,047 |
|
|
|
3,248 |
|
|
|
11,175 |
|
|
|
44,056 |
|
|
|
68,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
542,857 |
|
|
$ |
308,574 |
|
|
$ |
280,474 |
|
|
$ |
224,380 |
|
|
$ |
225,859 |
|
|
$ |
2,055,947 |
|
|
$ |
3,638,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Represents principal and interest. |
| (2) |
Represents minimum operating lease payments, excluding potential lease renewals. |
| (3) |
Represents off-balance sheet arrangements. Other contractual commitments are described below. |
| (4) |
Represents liability, net of future accretion expense. |
There are no other material changes in
our commitments under convertible debt, senior notes, term loans, ALOG financings, mortgage payable and other loans payable as well as the ALOG acquisition contingent consideration, as disclosed in our Annual Report on Form 10-K for the year ended
December 31, 2014.
In connection with certain of our leases and other contracts requiring deposits, we entered into 29 irrevocable
letters of credit totaling $44.1 million under the revolving credit facility. These letters of credit were provided in lieu of cash deposits under the multicurrency revolving credit facility. If the landlords for these IBX leases decide to draw down
on these letters of credit triggered by an event of default under the lease, we will be required to fund these letters of credit either through cash collateral or borrowing under the multicurrency revolving credit facility. These contingent
commitments are not reflected in the table above.
We had accrued liabilities related to uncertain tax positions totaling approximately
$24.8 million as of March 31, 2015. These liabilities, which are reflected on our balance sheet, are not reflected in the table above since it is unclear when these liabilities will be paid.
37
Primarily as a result of our various IBX data center expansion projects, as of March 31,
2015, we were contractually committed for $214.3 million of unaccrued capital expenditures, primarily for IBX equipment not yet delivered and labor not yet provided in connection with the work necessary to complete construction and open these IBX
data centers prior to making them available to customers for installation. This amount, which is expected to be paid during the remainder of 2015 and thereafter, is reflected in the table above as “other contractual commitments.”
We had other non-capital purchase commitments in place as of March 31, 2015, such as commitments to purchase power in select locations
and other open purchase orders, which contractually bind us for goods or services to be delivered or provided during 2015 and beyond. Such other purchase commitments as of March 31, 2015, which total $339.2 million, are also reflected in the
table above as “other contractual commitments.”
In addition, although we are not contractually obligated to do so, we expect to
incur additional capital expenditures of approximately $150.0 million to $200.0 million, in addition to the $214.3 million in contractual commitments discussed above as of March 31, 2015, in our various IBX data center expansion projects during
2015 and thereafter in order to complete the work needed to open these IBX data centers. These non-contractual capital expenditures are not reflected in the table above. If we so choose, whether due to economic factors or other considerations, we
could delay these non-contractual capital expenditure commitments to preserve liquidity.
Critical Accounting Policies and Estimates
Equinix’s financial statements and accompanying notes are prepared in accordance with GAAP. Preparing financial statements requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. These estimates and assumptions are affected by management’s application of accounting policies. On an ongoing basis, management evaluates its estimates and judgments. Critical accounting policies for Equinix
that affect our more significant judgment and estimates used in the preparation of our condensed consolidated financial statements include accounting for income taxes, accounting for business combinations, accounting for impairment of goodwill and
accounting for property, plant and equipment, which are discussed in more detail under the caption “Critical Accounting Policies and Estimates” in Management’s Discussion and Analysis of Financial Condition and Results of Operations,
set forth in Part II Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2014.
As discussed previously,
on December 23, 2014, our Board of Directors formally approved our conversion to a REIT effective on January 1, 2015. We completed the implementation of the REIT conversion in 2014. Effective on January 1, 2015, we have elected to be
treated as a REIT for federal income tax purposes. As a REIT, we are generally not subject to federal income taxes on taxable income distributed to our stockholders. We intend to distribute the entire taxable income generated by the operations of
our QRSs for the tax year ending December 31, 2015. As such, no provision for U.S. income taxes for the REIT has been included in the accompanying condensed consolidated financial statements for the three months ended March 31, 2015.
We have made TRS elections for some of our subsidiaries in and outside the U.S. In general, a TRS may provide services that would otherwise be
considered impermissible for REITs to provide and may hold assets that REITs cannot hold directly. U.S. income taxes for the TRS entities located in the country and foreign income taxes for our foreign operations were accrued, as necessary, for the
three months ended March 31, 2015.
38
Recent Accounting Pronouncements
See Note 1 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
While there have been no significant changes in our market risk, investment portfolio risk, interest rate risk, foreign currency risk and
commodity price risk exposures and procedures during the three months ended March 31, 2015 as compared to the respective risk exposures and procedures disclosed in Quantitative and Qualitative Disclosures About Market Risk, set forth in Part II
Item 7A, of our Annual Report on Form 10-K for the year ended December 31, 2014, the U.S. dollar strengthened relative to certain of the currencies of the foreign countries in which we operate during the three months ended March 31,
2015. This has significantly impacted our consolidated financial position and results of operations during this period, including the amount of revenue that we reported. Continued strengthening or weakening of the U.S. dollar will continue to have a
significant impact to us in future periods.
Excluding consideration from hedging contracts, an immediate 10% appreciation in current
foreign exchange rates as of March 31, 2015 would have resulted in an increase of $29.8 million and $4.9 million in revenue and net income before taxes. Excluding consideration from hedging contracts, an immediate 10% depreciation in
current foreign exchange rates as of March 31, 2015 would have resulted in a decrease of $29.7 million and $7.3 million in revenue and net income before taxes.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and our Chief Financial Officer,
after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this
quarterly report, have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
(b) Changes in Internal Control over Financial Reporting. During the first quarter of 2015, we began operating as a
REIT and, as a result, we have implemented new internal control processes and procedures related to the tests that we must comply with under the U.S. Internal Revenue Code to maintain our qualification as a REIT. As a REIT for U.S. federal income
tax purposes, we must satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets and the amounts we distribute to our stockholders. The new internal control processes and procedures were
undertaken as a result of our conversion to a REIT effective on January 1, 2015 and not in response to any actual or perceived deficiencies in our internal control over financial reporting.
Other than as described above, there have not been any changes in our internal control over financial reporting during the period covered by
this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(c) Limitations on the Effectiveness of Controls. Our management, including our Chief Executive Officer and Chief Financial
Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed and operated to be effective at the reasonable assurance level. However, our management does not expect that our disclosure
controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty,
and that
39
breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management
override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost effective control system,
misstatements due to error or fraud may occur and not be detected.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A.
Risk Factors
In addition to the other information contained in this report, the following risk factors should be considered carefully
in evaluating our business and us:
Risks Related to Operating as a REIT
We may not qualify or remain qualified as a REIT.
We expect to be taxed as a REIT under the Code, commencing with our taxable year beginning January 1, 2015. We believe we are operating
so as to qualify as a REIT under the Code and believe that our organization and method of operation complies with the rules and regulations promulgated under the Code and will enable us to continue to qualify as a REIT. However, we cannot assure you
that we will qualify as a REIT, or that we will remain qualified as a REIT. Qualification as a REIT requires us to satisfy numerous requirements (some on an annual and others on a quarterly basis) established under highly technical and complex
sections of the Code which may change from time to time and for which there are only limited judicial and administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control.
For example, in order to qualify as a REIT, we must derive at least 95% of our gross income in any year from qualifying sources. In addition, we must satisfy specified asset tests on a quarterly basis.
If, in any taxable year, we fail to qualify for taxation as a REIT and are not entitled to relief under the Code:
| |
• |
|
we will not be allowed a deduction for distributions to stockholders in computing our taxable income; |
| |
• |
|
we will be subject to federal and state income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates; and |
| |
• |
|
we will be disqualified from REIT tax treatment for four taxable years following the year we were so disqualified. |
Any such corporate tax liability could be substantial and would reduce the amount of cash available for other purposes.
In addition, if we fail to qualify as a REIT, we still will have incurred substantial costs to support the REIT conversion and may still be
subject to federal and state tax liability of approximately $360.0 to $370.0 million resulting from the recapture of depreciation and amortization expenses, of which $281.0 million has been settled as of March 31, 2015.
40
As a REIT, failure to make required distributions would subject us to federal corporate income tax.
We began paying quarterly distributions in the first quarter of 2015. The amount, timing and form of any future distributions will be
determined, and will be subject to adjustment, by our Board of Directors. To qualify and be taxed as a REIT, we are generally required to distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction
and excluding net capital gain) each year to our stockholders. Generally, we expect to distribute all or substantially all of our REIT taxable income. If our cash available for distribution falls short of our estimates, we may be unable to maintain
distributions that approximate our REIT taxable income and may fail to qualify for taxation as a REIT. In addition, our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the
actual receipt of income and the payment of expenses and the recognition of income and expenses for federal income tax purposes, or the effect of nondeductible expenditures, such as capital expenditures, payments of compensation for which
Section 162(m) of the Code denies a deduction, the creation of reserves or required debt service or amortization payments.
To the
extent that we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4%
nondeductible excise tax on our undistributed taxable income if the actual amount that we distribute to our stockholders for a calendar year is less than the minimum amount specified under the Code.
We may be required to borrow funds or raise equity to satisfy our REIT distribution requirements.
Depending on the ultimate size and timing of any 2015 Special Distributions and the cash outlays associated with our conversion to a REIT, or
the size and timing of future regular or special distributions, including any distributions made to satisfy REIT distribution requirements and maintain our qualification and taxation as a REIT, we may need to borrow funds or raise equity, even if
the then-prevailing market conditions are not favorable for these borrowings or offerings.
Any insufficiency of our cash flows to cover
our REIT distribution requirements could adversely impact our ability to raise short- and long-term debt or to offer equity securities in order to fund distributions required to maintain our qualification and taxation as a REIT. Furthermore, the
REIT distribution requirements may increase the financing we need to fund capital expenditures, future growth and expansion initiatives. This would increase our indebtedness. A significant increase in our outstanding debt could lead to a downgrade
of our credit rating. A downgrade of our credit rating could negatively impact our ability to access credit markets. Further, certain of our current debt instruments limit the amount of indebtedness we and our subsidiaries may incur. Significantly
more financing, therefore, may be unavailable, more expensive or restricted by the terms of our outstanding indebtedness. For a discussion of risks related to our substantial level of indebtedness, see “Other Risks”.
Whether we issue equity, at what price and the amount and other terms of any such issuances will depend on many factors, including alternative
sources of capital, our then-existing leverage, our need for additional capital, market conditions and other factors beyond our control. If we raise additional funds through the issuance of equity securities or debt convertible into equity
securities, the percentage of stock ownership by our existing stockholders may be reduced. In addition, new equity securities or convertible debt securities could have rights, preferences and privileges senior to those of our current stockholders,
which could substantially decrease the value of our securities owned by them. Depending on the share price we are able to obtain, we may have to sell a significant number of shares in order to raise the capital we deem necessary to execute our
long-term strategy, and our stockholders may experience dilution in the value of their shares as a result.
41
Legislative or other actions affecting REITs could have a negative effect on us or our stockholders.
At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. Federal and state
tax laws are constantly under review by persons involved in the legislative process, the IRS, the U.S. Department of the Treasury and state taxing authorities. Changes to the tax laws, regulations and administrative interpretations, which may have
retroactive application, could adversely affect us. In addition, some of these changes could have a more significant impact on us as compared to other REITs due to the nature of our business and our substantial use of TRSs. We cannot predict with
certainty whether, when, in what forms, or with what effective dates, the tax laws, regulations and administrative interpretations applicable to us may be changed.
Complying with REIT requirements may limit our flexibility or cause us to forego otherwise attractive opportunities.
As a REIT for U.S. federal income tax purposes, we must satisfy tests concerning, among other things, the sources of our income, the nature
and diversification of our assets and the amounts we distribute to our stockholders. For example, under the Code, no more than 25% of the value of the assets of a REIT may be represented by securities of our TRS and other nonqualifying assets. This
limitation may affect our ability to make large investments in other non-REIT qualifying operations or assets. In addition, in order to maintain qualification as a REIT, we must annually distribute at least 90% of our REIT taxable income, determined
without regard to the dividends paid deduction and excluding any net capital gains. Even if we maintain our qualification as a REIT, we will be subject to U.S. federal income tax at regular corporate rates for our undistributed REIT taxable income,
as well as U.S. federal income tax at regular corporate rates for income recognized by our TRS. Because of these distribution requirements, we will likely not be able to fund future capital needs and investments from operating cash flow. As such,
compliance with REIT tests may hinder our ability to make certain attractive investments, including the purchase of significant nonqualifying assets and the material expansion of non-real estate activities.
There are uncertainties relating to our estimate of our 2015 Special Distributions and the expected value of the deemed distributions associated with the
2015 Conversion Rate Adjustments, as well as the percentage of common stock and cash we may distribute in the 2015 Special Distributions.
We have provided an estimated range of our 2015 Special Distributions and the expected value of the deemed distributions associated with the
2015 Conversion Rate Adjustments. Our 2015 Special Distributions will encompass our depreciation recapture in respect of our accounting method changes commenced in our pre-REIT period as well as dividend income recognized from the cumulative foreign
earnings and profits of the data center operations outside the U.S. to be included in the REIT conversion as of January 1, 2015. However, our estimate of extraordinary items of taxable income in 2015 may be incorrect. For these reasons and
others, our actual 2015 Special Distributions and, consequently, the estimated range of the sum of the 2015 Special Distributions together with the expected value of the deemed distributions associated with the 2015 Conversion Rate Adjustments, may
be materially different from our current estimates.
We anticipate paying up to 20% of the 2015 Special Distributions in the form of cash
and at least 80% in the form of common stock. We may in fact decide, based on our cash flows and strategic plans, IRS revenue procedures relating to distributions of earnings and profits, leverage and other factors, to pay these amounts in a
different mix of cash and common stock.
42
As a REIT, we are limited in our ability to fund distribution payments using cash generated through our TRSs.
Our ability to receive distributions from our TRSs is limited by the rules with which we must comply to maintain our status as a
REIT. In particular, at least 75% of our gross income for each taxable year as a REIT must be derived from real estate. Consequently, no more than 25% of our gross income may consist of dividend income from our TRSs and other nonqualifying types of
income. Thus, our ability to receive distributions from our TRSs may be limited, and may impact our ability to fund distributions to our stockholders using cash flows from our TRSs. Specifically, if our TRSs become highly profitable, we might become
limited in our ability to receive net income from our TRSs in an amount required to fund distributions to our stockholders commensurate with that profitability.
In addition, a significant amount of our income and cash flows from our TRSs will be generated from our international operations. In many
cases, there are local withholding taxes and currency controls that may impact our ability or willingness to repatriate funds to the United States to help satisfy REIT distribution requirements.
Our planned extensive use of TRSs, including for certain of our international operations, may cause us to fail to qualify as a REIT.
The net income of our TRSs is not required to be distributed to the REIT, and income that is not distributed to the REIT generally will not be
subject to the REIT income distribution requirement. However, there may be limitations on our ability to accumulate earnings in our TRSs and the accumulation or reinvestment of significant earnings in our TRSs could result in adverse tax treatment.
In particular, if the accumulation of cash in our TRSs causes the fair market value of our securities in our TRSs and other nonqualifying assets to exceed 25% of the fair market value of our assets, we would fail to qualify as a REIT.
Our cash distributions are not guaranteed and may fluctuate.
A REIT generally is required to distribute at least 90% of its REIT taxable income to its stockholders.
Our Board of Directors, in its sole discretion, will determine on a quarterly basis the amount of cash to be distributed to our stockholders
based on a number of factors including, but not limited to, our results of operations, cash flow and capital requirements, economic conditions, tax considerations, borrowing capacity and other factors, including debt covenant restrictions that may
impose limitations on cash payments, future acquisitions and divestitures and any stock repurchase program. Consequently, our distribution levels may fluctuate.
Even if we qualify as a REIT, some of our business activities are subject to corporate level income tax and foreign taxes, which will continue to reduce
our cash flows, and we will have potential deferred and contingent tax liabilities.
As a REIT, we may be subject to some federal,
state, local and foreign taxes on our income and assets, including alternative minimum taxes, taxes on any undistributed income, and state, local or foreign income, franchise, property and transfer taxes. In addition, we could in certain
circumstances be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Code to maintain qualification for taxation as a REIT.
A portion of our business is conducted through wholly owned TRSs because certain of our business activities could generate nonqualifying REIT
income as currently structured and operated. The income of our U.S. TRSs will continue to be subject to federal and state corporate income taxes. In addition, our international assets and operations will continue to be subject to taxation in the
foreign jurisdictions where those assets are held or those operations are conducted. Any of these taxes would decrease our earnings and our available cash.
43
We will also be subject to a federal corporate level tax at the highest regular corporate rate
(currently 35%) on gain recognized from a sale of assets occurring within a specified period (generally ten years) after the effective date of our REIT election, that is, January 1, 2015, to the extent of the built-in-gain based on the fair
market value of those assets on the effective date of the REIT election in excess of our then tax basis. In addition, depreciation recapture income that we will recognize in our 2015 and subsequent taxable years, as a result of accounting method
changes that were effective prior to January 1, 2015, will be fully subject to this 35% tax.
In addition, the IRS and any state or
local tax authority may successfully assert liabilities against us for corporate income taxes for our pre-REIT period, in which case we will owe these taxes plus applicable interest and penalties, if any. Moreover, any increase in taxable income for
these pre-REIT periods will likely result in an increase in pre-REIT accumulated earnings and profits, which could either increase the taxable portion of our 2015 distributions to our stockholders or cause us to pay an additional taxable
distribution to our stockholders after the relevant determination.
Restrictive loan covenants could prevent us from satisfying REIT distribution
requirements.
Restrictions in our credit facility and our indentures may prevent us from satisfying our REIT distribution
requirements, and we could fail to qualify for taxation as a REIT. If these limits do not jeopardize our qualification for taxation as a REIT but nevertheless prevent us from distributing 100% of our REIT taxable income, we would be subject to
federal corporate income tax, and potentially a nondeductible excise tax, on the retained amounts. See “Other Risks” for further information on our restrictive loan covenants.
Complying with REIT requirements may limit our ability to hedge effectively and increase the cost of our hedging and may cause us to incur tax liabilities.
The REIT provisions of the Code limit our ability to hedge assets, liabilities, revenues and expenses. Generally, income from hedging
transactions that we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets and income from certain currency hedging transactions related to our non-U.S. operations do
not constitute “gross income” for purposes of the REIT gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as nonqualifying income for
purposes of the REIT gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRSs
would be subject to tax on income or gains resulting from hedges entered into by them or expose us to greater risks associated with changes in interest rates or exchange rates than we would otherwise want to bear. In addition, hedging losses in any
of our TRSs generally will not provide any tax benefit, except for being carried forward for possible use against future capital gain in the TRSs.
We
have limited experience operating as a REIT, which may adversely affect our financial condition, results of operations, cash flow, per share trading price of our common stock and ability to forecast dividends.
We began operating as a REIT on January 1, 2015 and, as such, have limited operating history as a REIT. In addition, prior to
January 1, 2015 our senior management team had no prior experience operating a REIT. We can provide no assurance that our past experience has sufficiently prepared us to operate successfully as a REIT. Our inability to operate successfully as a
REIT, including the failure to maintain REIT status, could adversely affect our business, financial condition and results of operations.
44
Distributions payable by REITs generally do not qualify for preferential tax rates.
Qualifying distributions payable by corporations to individuals, trusts and estates that are U.S. stockholders are currently eligible for
federal income tax at preferential rates. Distributions payable by REITs, in contrast, generally are not eligible for the preferential rates. The preferential rates applicable to regular corporate distributions could cause investors who are
individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay distributions, which could adversely affect the value of the stock of REITs, including
our common stock.
Our certificate of incorporation contains restrictions on the ownership and transfer of our stock, though they may not be successful
in preserving our REIT status.
As a REIT, no more than 50% of the value of outstanding shares of our stock may be owned, beneficially
or constructively, by five or fewer individuals at any time during the last half of each taxable year other than the first year for which we elect to be taxed as a REIT. In addition, rents from “affiliated tenants” will not qualify as
qualifying REIT income if we own 10% or more by vote or value of the customer, whether directly or after application of attribution rules under the Code. Subject to certain exceptions, our certificate of incorporation prohibits any stockholder from
owning beneficially or constructively more than (i) 9.8% in value of the outstanding shares of all classes or series of our capital stock or (ii) 9.8% in value or number, whichever is more restrictive, of the outstanding shares of any
class or series of our capital stock. We refer to these restrictions collectively as the “ownership limits” and we included them in our certificate of incorporation to facilitate our compliance with REIT tax rules. The constructive
ownership rules under the Code are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of
our outstanding common stock (or the outstanding shares of any class or series of our stock) by an individual or entity could cause that individual or entity or another individual or entity to own constructively in excess of the relevant ownership
limits. Any attempt to own or transfer shares of our common stock or of any of our other capital stock in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void. Even though our
certificate of incorporation contains the ownership limits, there can be no assurance that these provisions will be effective to prevent our REIT status from being jeopardized, including under the affiliated tenant rule. Furthermore, there can be no
assurance that we will be able to enforce the ownership limits. If the restrictions in our certificate of incorporation are not effective and as a result we fail to satisfy the REIT tax rules described above, then absent an applicable relief
provision, we will fail to qualify as a REIT.
Other Risks
Acquisitions present many risks, and we may not realize the financial or strategic goals that were contemplated at the time of any transaction.
Over the last several years, we have completed several acquisitions, including that of Switch & Data Facilities Company, Inc.
(“Switch and Data”) in 2010, an approximate 53% controlling equity interest in ALOG Data Centers do Brasil S.A. (“ALOG”) in 2011 and the remaining outstanding shares of ALOG in 2014, Asia Tone Limited and ancotel GmbH in
2012, an acquisition of a Dubai IBX data center in 2012, an acquisition of a carrier hotel in Frankfurt in 2013 and Nimbo in 2015. We may make additional acquisitions in the future, which may include (i) acquisitions of businesses, products,
services or technologies that we believe to be complementary, (ii) acquisitions of new IBX data centers or real estate for development of new IBX data centers or (iii) acquisitions through investments in local data center operators. We may
pay for future acquisitions by using our existing cash resources (which may limit other potential uses of our cash), incurring additional debt (which may increase our interest expense, leverage and debt service requirements) and/or issuing shares
(which may dilute our existing stockholders and have a negative effect on our earnings per share). Acquisitions expose us to potential risks, including:
| |
• |
|
the possible disruption of our ongoing business and diversion of management’s attention by acquisition, transition and integration activities; |
45
| |
• |
|
our potential inability to successfully pursue or realize some or all of the anticipated revenue opportunities associated with an acquisition or investment; |
| |
• |
|
the possibility that we may not be able to successfully integrate acquired businesses, or businesses in which we invest, or achieve anticipated operating efficiencies or cost savings; |
| |
• |
|
the possibility that announced acquisitions may not be completed, due to failure to satisfy the conditions to closing or for other reasons; |
| |
• |
|
the dilution of our existing stockholders as a result of our issuing stock in transactions, such as our acquisition of Switch and Data, where 80% of the consideration payable to Switch and Data’s stockholders
consisted of shares of our common stock; |
| |
• |
|
the possibility of customer dissatisfaction if we are unable to achieve levels of quality and stability on par with past practices; |
| |
• |
|
the possibility that our customers may not accept either the existing equipment infrastructure or the “look-and-feel” of a new or different IBX data center; |
| |
• |
|
the possibility that additional capital expenditures may be required or that transaction expenses associated with acquisitions may be higher than anticipated; |
| |
• |
|
the possibility that required financing to fund an acquisition may not be available on acceptable terms or at all; |
| |
• |
|
the possibility that we may be unable to obtain required approvals from governmental authorities under antitrust and competition laws on a timely basis or at all, which could, among other things, delay or prevent us
from completing an acquisition, limit our ability to realize the expected financial or strategic benefits of an acquisition or have other adverse effects on our current business and operations; |
| |
• |
|
the possible loss or reduction in value of acquired businesses; |
| |
• |
|
the possibility that future acquisitions may present new complexities in deal structure, related complex accounting and coordination with new partners, particularly in light of our status as a REIT; |
| |
• |
|
the possibility that future acquisitions may be in geographies and regulatory environments to which we are unaccustomed; |
| |
• |
|
the possibility that carriers may find it cost-prohibitive or impractical to bring fiber and networks into a new IBX data center; |
| |
• |
|
the possibility of litigation or other claims in connection with, or as a result of, an acquisition, including claims from terminated employees, customers, former stockholders or other third parties; and
|
| |
• |
|
the possibility of pre-existing undisclosed liabilities, including, but not limited to, lease or landlord related liability, environmental liability or asbestos liability, for which insurance coverage may be
insufficient or unavailable. |
The occurrence of any of these risks could have a material adverse effect on our business,
results of operations, financial condition or cash flows.
We cannot assure that the price of any future acquisitions of IBX data centers
will be similar to prior IBX data center acquisitions. In fact, we expect costs required to build or render new IBX data centers operational to increase in the future. If our revenue does not keep pace with these potential acquisition and expansion
costs, we may not be able to maintain our current or expected margins as we absorb these additional expenses. There is no assurance we would successfully overcome these risks or any other problems encountered with these acquisitions.
46
Our substantial debt could adversely affect our cash flows and limit our flexibility to raise additional
capital.
We have a significant amount of debt and may need to incur additional debt to support our growth. Additional debt may also
be incurred to fund future acquisitions, any future special distributions, regular distributions or the other cash outlays associated with qualifying as or maintaining qualification as a REIT. As of March 31, 2015, our total indebtedness was
approximately $4.7 billion, our stockholders’ equity was $2.2 billion and our cash and investments totaled $1.1 billion. In addition, as of March 31, 2015, we had approximately $955.9 million of additional liquidity available to us from
our $1.0 billion revolving credit facility as part of a $1.5 billion senior credit facility agreement entered into with a group of lenders. Some of our debt contains covenants which may limit our operating flexibility. In addition to our substantial
debt, we lease a majority of our IBX data centers and certain equipment under non-cancellable lease agreements, the majority of which are accounted for as operating leases. As of March 31, 2015, our total minimum operating lease
commitments under those lease agreements, excluding potential lease renewals, was approximately $999.6 million, which represents off-balance sheet commitments.
Our substantial amount of debt and related covenants, and our off-balance sheet commitments, could have important consequences. For example,
they could:
| |
• |
|
require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payments on our debt and in respect of other off-balance sheet arrangements, reducing the availability of our
cash flow to fund future capital expenditures, working capital, execution of our expansion strategy and other general corporate requirements; |
| |
• |
|
make it more difficult for us to satisfy our obligations under our various debt instruments; |
| |
• |
|
increase our vulnerability to general adverse economic and industry conditions and adverse changes in governmental regulations; |
| |
• |
|
limit our flexibility in planning for, or reacting to, changes in our business and industry, which may place us at a competitive disadvantage compared with our competitors; |
| |
• |
|
limit our operating flexibility through covenants with which we must comply, such as limiting our ability to repurchase shares of our common stock; |
| |
• |
|
limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity, which would also limit our ability to further expand our business; and |
| |
• |
|
make us more vulnerable to increases in interest rates because of the variable interest rates on some of our borrowings to the extent we have not entirely hedged such variable rate debt. |
The occurrence of any of the foregoing factors could have a material adverse effect on our business, results of operations and financial
condition. In addition, the performance of our stock price may trigger events that would require the write-off of a significant portion of our debt issuance costs related to our convertible debt, which may have a material adverse effect on our
results of operations.
We may also need to refinance a portion of our outstanding debt as it matures. There is a risk that we may not be
able to refinance existing debt or that the terms of any refinancing may not be as favorable as the terms of our existing debt. Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates
upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. These risks could materially adversely affect our financial condition, cash flows and results of operations.
47
Global economic uncertainty and debt issues could adversely impact our business and financial condition.
The varying pace of global economic recovery continues to create uncertainty and unpredictability and add risk to our future outlook.
An uncertain global economy could also result in churn in our customer base, reductions in revenues from our offerings, longer sales cycles, slower adoption of new technologies and increased price competition, adversely affecting our liquidity. The
uncertain economic environment could also have an impact on our foreign exchange forward contracts if our counterparties’ credit deteriorates or they are otherwise unable to perform their obligations. Finally, our ability to access the capital
markets may be severely restricted at a time when we would like, or need, to do so which could have an impact on our flexibility to pursue additional expansion opportunities and maintain our desired level of revenue growth in the future.
The market price of our stock may continue to be highly volatile, and the value of an investment in our common stock may decline.
The market price of the shares of our common stock has been and may continue to be highly volatile. General economic and market conditions,
and market conditions for telecommunications stocks in general, may affect the market price of our common stock.
Announcements by us or
others, or speculations about our future plans, may also have a significant impact on the market price of our common stock. These may relate to:
| |
• |
|
our operating results or forecasts; |
| |
• |
|
new issuances of equity, debt or convertible debt by us; |
| |
• |
|
changes to our capital allocation, tax planning or business strategy; |
| |
• |
|
our qualification as a REIT and our declaration of distributions to our shareholders; |
| |
• |
|
a stock repurchase program; |
| |
• |
|
developments in our relationships with corporate customers; |
| |
• |
|
announcements by our customers or competitors; |
| |
• |
|
changes in regulatory policy or interpretation; |
| |
• |
|
governmental investigations; |
| |
• |
|
changes in the ratings of our debt or stock by rating agencies or securities analysts; |
| |
• |
|
our purchase or development of real estate and/or additional IBX data centers; |
| |
• |
|
our acquisitions of complementary businesses; or |
| |
• |
|
the operational performance of our IBX data centers. |
The stock market has from time to time
experienced extreme price and volume fluctuations, which have particularly affected the market prices for telecommunications companies, and which have often been unrelated to their operating performance. These broad market fluctuations may adversely
affect the market price of our common stock. Furthermore, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the
future. Securities litigation against us could result in substantial costs and/or damages, and divert management’s attention from other business concerns, which could seriously harm our business.
48
If we are not able to generate sufficient operating cash flows or obtain external financing, our ability to
fund incremental expansion plans may be limited.
Our capital expenditures, together with ongoing operating expenses, obligations to
service our debt and the cash outlays associated with our REIT distribution requirements, will be a substantial drain on our cash flow and may decrease our cash balances. Additional debt or equity financing may not be available when needed or, if
available, may not be available on satisfactory terms. Our inability to obtain additional debt and/or equity financing or to generate sufficient cash from operations may require us to prioritize projects or curtail capital expenditures which could
adversely affect our results of operations.
Fluctuations in foreign currency exchange rates in the markets in which we operate internationally could
harm our results of operations.
We may experience gains and losses resulting from fluctuations in foreign currency exchange rates. To
date, the majority of our revenues and costs are denominated in U.S. dollars; however, the majority of revenues and costs in our international operations are denominated in foreign currencies. Where our prices are denominated in U.S. dollars, our
sales and revenues could be adversely affected by declines in foreign currencies relative to the U.S. dollar, thereby making our offerings more expensive in local currencies. We are also exposed to risks resulting from fluctuations in foreign
currency exchange rates in connection with our international expansions. To the extent we are paying contractors in foreign currencies, our expansions could cost more than anticipated as a result of declines in the U.S dollar relative to foreign
currencies. In addition, fluctuating foreign currency exchange rates have a direct impact on how our international results of operations translate into U.S. dollars.
Although we currently undertake, and may decide in the future to further undertake, foreign exchange hedging transactions to reduce foreign
currency transaction exposure, we do not currently intend to eliminate all foreign currency transaction exposure. In addition, REIT compliance rules may restrict our ability to enter into hedging transactions. Therefore, any weakness of the U.S.
dollar may have a positive impact on our consolidated results of operations because the currencies in the foreign countries in which we operate may translate into more U.S. dollars. However, if the U.S. dollar strengthens relative to the currencies
of the foreign countries in which we operate, our consolidated financial position and results of operations may be negatively impacted as amounts in foreign currencies will generally translate into fewer U.S. dollars. For additional information on
foreign currency risk, refer to our discussion of foreign currency risk in “Quantitative and Qualitative Disclosures About Market Risk” included in Item 7A of this Annual Report on Form 10-K.
Changes in U.S. or foreign tax laws, regulations, or interpretations thereof, including changes to tax rates, may adversely affect our financial statements
and cash taxes.
We are a U.S. company with global subsidiaries and are subject to income taxes in the U.S. and many foreign
jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. Although we believe that we have adequately assessed and accounted for our potential tax liabilities, and that our tax estimates are
reasonable, there can be no certainty that additional taxes will not be due upon audit of our tax returns or as a result of changes to the tax laws and interpretations thereof. The U.S. Congress as well as the governments of many of the
countries in which we operate are actively discussing changes to the corporate recognition and taxation of worldwide income. The nature and timing of any changes to each jurisdiction’s tax laws and the impact on our future tax liabilities
cannot be predicted with any accuracy but could materially and adversely impact our results of operations and financial position or cash flows.
49
We are continuing to invest in our expansion efforts but may not have sufficient customer demand in the future
to realize expected returns on these investments.
We are considering the acquisition or lease of additional properties and the
construction of new IBX data centers beyond those expansion projects already announced. We will be required to commit substantial operational and financial resources to these IBX data centers, generally 12 to 18 months in advance of securing
customer contracts, and we may not have sufficient customer demand in those markets to support these centers once they are built. In addition, unanticipated technological changes could affect customer requirements for data centers, and we may not
have built such requirements into our new IBX data centers. Either of these contingencies, if they were to occur, could make it difficult for us to realize expected or reasonable returns on these investments.
Our offerings have a long sales cycle that may harm our revenues and operating results.
A customer’s decision to purchase our offerings typically involves a significant commitment of resources. In addition, some customers
will be reluctant to commit to locating in our IBX data centers until they are confident that the IBX data center has adequate carrier connections. As a result, we have a long sales cycle. Furthermore, we may devote significant time and resources in
pursuing a particular sale or customer that does not result in revenue. We have also significantly expanded our sales force in recent years, and it will take time for these new hires to become fully productive.
Delays due to the length of our sales cycle may materially and adversely affect our revenues and operating results, which could harm our
ability to meet our forecasts and cause volatility in our stock price.
Any failure of our physical infrastructure or offerings could lead to
significant costs and disruptions that could reduce our revenue and harm our business reputation and financial results.
Our business
depends on providing customers with highly reliable solutions. We must safehouse our customers’ infrastructure and equipment located in our IBX data centers. We own certain of our IBX data centers, but others are leased by us, and we rely on
the landlord for basic maintenance of our leased IBX data centers. If such landlord has not maintained a leased property sufficiently, we may be forced into an early exit from the center which could be disruptive to our business. Furthermore, we
continue to acquire IBX data centers not built by us. If we discover that these IBX data centers and their infrastructure assets are not in the condition we expected when they were acquired, we may be required to incur substantial additional costs
to repair or upgrade the centers.
The offerings we provide in each of our IBX data centers are subject to failure resulting from numerous
factors, including:
| |
• |
|
physical, electronic and cybersecurity breaches; |
| |
• |
|
fire, earthquake, hurricane, flood, tornado and other natural disasters; |
| |
• |
|
sabotage and vandalism; and |
50
| |
• |
|
failure of business partners who provide our resale products. |
Problems at one or more of our
IBX data centers, whether or not within our control, could result in service interruptions or significant equipment damage. We have service level commitment obligations to certain of our customers. As a result, service interruptions or significant
equipment damage in our IBX data centers could result in difficulty maintaining service level commitments to these customers and potential claims related to such failures. Because our IBX data centers are critical to many of our customers’
businesses, service interruptions or significant equipment damage in our IBX data centers could also result in lost profits or other indirect or consequential damages to our customers. We cannot guarantee that a court would enforce any contractual
limitations on our liability in the event that one of our customers brings a lawsuit against us as a result of a problem at one of our IBX data centers. In addition, any loss of service, equipment damage or inability to meet our service level
commitment obligations could reduce the confidence of our customers and could consequently impair our ability to obtain and retain customers, which would adversely affect both our ability to generate revenues and our operating results.
Furthermore, we are dependent upon Internet service providers, telecommunications carriers and other website operators in the Americas,
Asia-Pacific and EMEA regions and elsewhere, some of which have experienced significant system failures and electrical outages in the past. Our customers may in the future experience difficulties due to system failures unrelated to our systems and
offerings. If, for any reason, these providers fail to provide the required services, our business, financial condition and results of operations could be materially and adversely impacted.
We are currently making significant investments in our back office information technology systems, including those surrounding the customer experience from
initial quote to customer billing, and upgrading our worldwide financial application suite. Difficulties, distractions or disruptions to these efforts may interrupt our normal operations and adversely affect our business and operating results.
Commencing in 2012, we began a significant project to overhaul our back office systems that support the customer experience from
initial quote to customer billing and our revenue recognition process. Additionally, commencing in 2013, we began to devote significant resources to the upgrade of our worldwide financial application suite from Oracle’s version 11i to R12. Both
projects have continued into 2015. Oracle has already begun to discontinue its support for our current business application suite. While the Oracle financial application suite implementation was largely completed in July 2014 and the initial
implementation of the systems to support our billing and revenue process was completed in August 2014, substantial work continues on our back office systems. As a result of that discontinued support and our continued work on these projects, we may
experience difficulties with our systems, management distraction and significant business disruptions. Difficulties with our systems may interrupt our ability to accept and deliver customer orders and may adversely impact our overall financial
operations, including our accounts payable, accounts receivables, general ledger, close processes, internal financial controls and our ability to otherwise run and track our business. We may need to expend significant attention, time and
resources to correct problems or find alternative sources for performing these functions. All of these changes to our financial systems create an increased risk of deficiencies in our internal controls over financial reporting until such
systems are stabilized. Such significant investments in our back office systems may take longer to complete and cost more than originally planned. In addition, we may not realize the full benefits we hoped to achieve and there is a risk of an
impairment charge if we decide that portions of these projects will not ultimately benefit the company or are de-scoped. Any such difficulty or disruption may adversely affect our business and operating results.
The insurance coverage that we purchase may prove to be inadequate.
We carry liability, property, business interruption and other insurance policies to cover insurable risks to our company. We select the types
of insurance, the limits and the deductibles based on our specific risk profile, the cost of the insurance coverage versus its perceived benefit and general industry
51
standards. Our insurance policies contain industry standard exclusions for events such as war and nuclear reaction. We purchase minimal levels of earthquake insurance for certain of our IBX data
centers, but for most of our data centers, including many in California, we have elected to self-insure. The earthquake and flood insurance that we do purchase would be subject to high deductibles and any of the limits of insurance that we purchase
could prove to be inadequate, which could materially and adversely impact our business, financial condition and results of operations.
Our
construction of additional new IBX data centers or IBX data center expansions could involve significant risks to our business.
In
order to sustain our growth in certain of our existing and new markets, we must expand an existing data center, lease a new facility or acquire suitable land, with or without structures, to build new IBX data centers from the ground up. Expansions
or new builds are currently underway, or being contemplated, in many of our markets. Any related construction requires us to carefully select and rely on the experience of one or more designers, general contractors, and associated subcontractors
during the design and construction process. Should a designer, general contractor, or significant subcontractor experience financial or other problems during the design or construction process, we could experience significant delays, increased costs
to complete the project and/or other negative impacts to our expected returns.
Site selection is also a critical factor in our expansion
plans. There may not be suitable properties available in our markets with the necessary combination of high power capacity and fiber connectivity, or selection may be limited. Thus, while we may prefer to locate new IBX data centers adjacent to our
existing locations it may not always be possible. In the event we decide to build new IBX data centers separate from our existing IBX data centers, we may provide interconnection solutions to connect these two centers. Should these solutions not
provide the necessary reliability to sustain connection, this could result in lower interconnection revenue and lower margins and could have a negative impact on customer retention over time.
Environmental regulations may impose upon us new or unexpected costs.
We are subject to various federal, state, local and international environmental and health and safety laws and regulations, including those
relating to the generation, storage, handling and disposal of hazardous substances and wastes. Certain of these laws and regulations also impose joint and several liability, without regard to fault, for investigation and cleanup costs on current and
former owners and operators of real property and persons who have disposed of or released hazardous substances into the environment. Our operations involve the use of hazardous substances and materials such as petroleum fuel for emergency
generators, as well as batteries, cleaning solutions and other materials. In addition, we lease, own or operate real property at which hazardous substances and regulated materials have been used in the past. At some of our locations, hazardous
substances or regulated materials are known to be present in soil or groundwater, and there may be additional unknown hazardous substances or regulated materials present at sites we own, operate or lease. At some of our locations, there are land use
restrictions in place relating to earlier environmental cleanups that do not materially limit our use of the sites. To the extent any hazardous substances or any other substance or material must be cleaned up or removed from our property, we may be
responsible under applicable laws, regulations or leases for the removal or cleanup of such substances or materials, the cost of which could be substantial.
In addition, we are subject to environmental, health and safety laws regulating air emissions, storm water management and other issues arising
in our business. While these obligations do not normally impose material costs upon our operations, unexpected events, equipment malfunctions and human error, among other factors, can lead to violations of environmental laws, regulations or permits.
Furthermore, environmental laws and regulations change frequently and may require additional investment to maintain compliance. Noncompliance with existing, or adoption of more stringent, environmental or health and safety laws and regulations or
the discovery of previously unknown contamination could require us to incur costs or become the basis of new or increased liabilities that could be material.
52
Regulation of greenhouse gas (“GHG”) emissions could increase the cost of electricity
by reducing supplies of electricity generated from fossil fuels, by requiring the use of more expensive generating methods or by imposing taxes or fees upon electricity generation or use. Electricity is a material cost in connection with our
business, and an increase in the cost of electricity, whether from regulations of GHGs or otherwise, could adversely affect us.
Regulations to limit GHG emissions have been in force in the European Union for some time. In the U.S., regulation of GHGs is in force
for new sources under existing law and regulations. In addition, the U.S. Environmental Protection Agency (“EPA”) has proposed regulations under existing statutory authority that would require states to reduce GHG emissions by 30% by 2030.
Certain states, like California, regulate GHG emissions by imposing regulatory caps on allowances and by selling or auctioning the rights to such emissions. These programs have not had a material adverse effect on our electricity costs to date, but
due to the market-driven nature of some of the programs, could do so in the future.
In addition, regulation of GHGs is subject to change
globally and nationally. For example, the United States and China recently announced an agreement regarding climate change that would require China to consider regulating its GHG emissions to prevent further increases in emissions of GHGs by 2030.
In order for China to meet this commitment, China may impose limitations on fossil fuel generation or costs upon electricity, similar to those imposed in the U.S. and elsewhere. In other international forums, new commitments under the International
Convention on Climate Change could result in new limits on GHG emissions within participating nations. Any such new regulations could trigger increases in electricity costs that could adversely affect our business in affected countries.
Even existing programs can change over time in ways that affect our operations. California’s cap-and-trade program was expanded on
January 1, 2015 to require fuel distributors (for example, gas pipeline companies and diesel fuel distributors) to obtain allowances for the GHG emissions attributable to the combustion of the fuels they sell. Such regulations have increased
our costs for both electricity and fuel (for example, for emergency generators) in California.
The physical impacts of climate change,
including extreme weather conditions such as heat waves, could materially increase our costs of operation due to, for example, an increase in our energy use in order to maintain the temperature and internal environment of our data centers necessary
for our operations. To the extent any environmental laws enacted or regulations impose new or unexpected costs, our business, results of operations or financial condition may be adversely affected.
If we are unable to recruit or retain qualified personnel, our business could be harmed.
We must continue to identify, hire, train and retain IT professionals, technical engineers, operations employees, and sales, marketing,
finance and senior management personnel who maintain relationships with our customers and who can provide the technical, strategic and marketing skills required for our company to grow. There is a shortage of qualified personnel in these fields, and
we compete with other companies for the limited pool of talent. The failure to recruit and retain necessary personnel, including, but not limited to, members of our executive team, could harm our business and our ability to grow our company.
We may not be able to compete successfully against current and future competitors.
We must be able to differentiate our IBX data centers and product offerings from those of our competitors. In addition to competing with other
neutral colocation providers, we compete with traditional colocation providers, including telecommunications companies, carriers, internet service providers, managed services providers and large REITs who also operate in our market and may enjoy
53
a cost advantage in providing offerings similar to those provided by our IBX data centers. We may experience competition from our landlords which could also reduce the amount of space available
to us for expansion in the future. Rather than leasing available space in our buildings to large single tenants, they may decide to convert the space instead to smaller square foot units designed for multi-tenant colocation use, blurring the line
between retail and wholesale space. We may also face competition from existing competitors or new entrants to the market seeking to replicate our global IBX data center concept by building or acquiring data centers, offering colocation on neutral
terms or by replicating our strategy and messaging. Finally, customers may also decide it is cost-effective for them to build out their own data centers. Once customers have an established data center footprint, either through a relationship with
one of our competitors or through in-sourcing, it may be extremely difficult to convince them to relocate to our IBX data centers.
Some
of our competitors may adopt aggressive pricing policies, especially if they are not highly leveraged or have lower return thresholds than we do. As a result, we may suffer from pricing pressure that would adversely affect our ability to generate
revenues. Some of these competitors may also provide our target customers with additional benefits, including bundled communication services or cloud services, and may do so in a manner that is more attractive to our potential customers than
obtaining space in our IBX data centers. Similarly, with growing acceptance of cloud-based technologies, Equinix is at risk losing customers that may decide to fully leverage cloud infrastructure offerings instead of managing their own. Competitors
could also operate more successfully or form alliances to acquire significant market share.
Failure to compete successfully may
materially adversely affect our financial condition, cash flows and results of operations.
Our business could be harmed by prolonged power outages or
shortages, increased costs of energy or general lack of availability of electrical resources.
Our IBX data centers are susceptible to
regional costs of power, power shortages, planned or unplanned power outages and limitations, especially internationally, on the availability of adequate power resources.
Power outages, such as those relating to the earthquake and tsunami in Japan in 2011 or Superstorm Sandy, which hit the U.S. East Coast in
2012, could harm our customers and our business. We attempt to limit our exposure to system downtime by using backup generators and power supplies; however, we may not be able to limit our exposure entirely even with these protections in place. Some
of our IBXs are located in leased buildings where, depending upon the lease requirements and number of tenants involved, we may or may not control some or all of the infrastructure including generators and fuel tanks. As a result, in the event of a
power outage, we may be dependent upon the landlord, as well as the utility company, to restore the power.
In addition, global
fluctuations in the price of power can increase the cost of energy, and although contractual price increase clauses exist in the majority of our customer agreements, we may not always choose to pass these increased costs on to our customers.
In each of our markets, we rely on third parties to provide a sufficient amount of power for current and future customers. At the same time,
power and cooling requirements are growing on a per unit basis. As a result, some customers are consuming an increasing amount of power per cabinet. We generally do not control the amount of power our customers draw from their installed circuits.
This means that we could face power limitations in our IBX data centers. This could have a negative impact on the effective available capacity of a given center and limit our ability to grow our business, which could have a negative impact on our
financial performance, operating results and cash flows.
We may also have difficulty obtaining sufficient power capacity for potential
expansion sites in new or existing markets. We may experience significant delays and substantial increased costs demanded by the utilities to provide the level of electrical service required by our current IBX data center designs.
54
If our internal controls are found to be ineffective, our financial results or our stock price may be
adversely affected.
Our most recent evaluation of our controls resulted in our conclusion that, as of December 31, 2014, in
compliance with Section 404 of the Sarbanes-Oxley Act of 2002, our internal controls over financial reporting were effective. Our ability to manage our operations and growth, through, for example, ongoing billing system updates being deployed
into production during 2015, will require us to further develop our controls and reporting systems and implement or amend new or existing controls and reporting systems. All of these changes to our financial systems create an increased risk of
deficiencies in our internal controls over financial reporting until such systems are stabilized. If, in the future, our internal control over financial reporting is found to be ineffective, or if a material weakness is identified in our controls
over financial reporting, our financial results may be adversely affected. Investors may also lose confidence in the reliability of our financial statements which could adversely affect our stock price.
If we cannot effectively manage our international operations, and successfully implement our international expansion plans, our revenues may not increase
and our business and results of operations would be harmed.
For the years ended December 31, 2014, 2013 and 2012, we recognized
approximately 49%, 46% and 44%, respectively, of our revenues outside the U.S. For the three months ended March 31, 2015, we recognized approximately 48% of our revenues outside of the US. We currently operate outside of the U.S. in Canada,
Brazil, EMEA and Asia-Pacific.
To date, the network neutrality of our IBX data centers and the variety of networks available to our
customers has often been a competitive advantage for us. In certain of our acquired IBX data centers in the Asia-Pacific region the limited number of carriers available reduces that advantage. As a result, we may need to adapt our key
revenue-generating offerings and pricing to be competitive in those markets. In addition, we are currently undergoing expansions or evaluating expansion opportunities outside of the U.S. Undertaking and managing expansions in foreign jurisdictions
may present unanticipated challenges to us.
Our international operations are generally subject to a number of additional risks,
including:
| |
• |
|
the costs of customizing IBX data centers for foreign countries; |
| |
• |
|
protectionist laws and business practices favoring local competition; |
| |
• |
|
greater difficulty or delay in accounts receivable collection; |
| |
• |
|
difficulties in staffing and managing foreign operations, including negotiating with foreign labor unions or workers’ councils; |
| |
• |
|
difficulties in managing across cultures and in foreign languages; |
| |
• |
|
political and economic instability; |
| |
• |
|
fluctuations in currency exchange rates; |
| |
• |
|
difficulties in repatriating funds from certain countries; |
| |
• |
|
our ability to obtain, transfer, or maintain licenses required by governmental entities with respect to our business; |
| |
• |
|
unexpected changes in regulatory, tax and political environments; |
55
| |
• |
|
our ability to secure and maintain the necessary physical and telecommunications infrastructure; |
| |
• |
|
compliance with anti-bribery and corruption laws; |
| |
• |
|
compliance with economic and trade sanctions enforced by the Office of Foreign Assets Control of the U.S. Department of Treasury; and |
| |
• |
|
compliance with evolving governmental regulation with which we have little experience. |
In
addition, compliance with international and U.S. laws and regulations that apply to our international operations increases our cost of doing business in foreign jurisdictions. These laws and regulations include data privacy requirements, labor
relations laws, tax laws, anti-competition regulations, import and trade restrictions, export requirements, economic and trade sanctions, U.S. laws such as the Foreign Corrupt Practices Act and local laws which also prohibit corrupt payments to
governmental officials. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business. Any such violations could include prohibitions on
our ability to offer our offerings in one or more countries, could delay or prevent potential acquisitions, and could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees,
our business and our operating results. Our success depends, in part, on our ability to anticipate and address these risks and manage these difficulties.
Economic uncertainty in developing markets could adversely affect our revenue and earnings.
We conduct business, or are contemplating expansion, in developing markets with economies that tend to be more volatile than those in the U.S.
and Western Europe. The risk of doing business in developing markets such as Brazil, China, India, Indonesia, Russia, the United Arab Emirates and other economically volatile areas could adversely affect our operations and earnings. Such
risks include the financial instability among customers in these regions, political instability, fraud or corruption and other non-economic factors such as irregular trade flows that need to be managed successfully with the help of the local
governments. In addition, commercial laws in some developing countries can be vague, inconsistently administered and retroactively applied. If we are deemed not to be in compliance with applicable laws in developing countries where we
conduct business, our prospects and business in those countries could be harmed, which could then have a material adverse impact on our results of operations and financial position. Our failure to successfully manage economic, political and
other risks relating to doing business in developing countries and economically and politically volatile areas could adversely affect our business.
The use of high power density equipment may limit our ability to fully utilize our older IBX data centers.
Some customers have increased their use of high power density equipment, such as blade servers, in our IBX data centers which has increased
the demand for power on a per cabinet basis. Because many of our IBX data centers were built a number of years ago, the current demand for power may exceed the designed electrical capacity in these centers. As power, not space, is a limiting
factor in many of our IBX data centers, our ability to fully utilize those IBX data centers may be limited. The ability to increase the power capacity of an IBX data center, should we decide to, is dependent on several factors including, but not
limited to, the local utility’s ability to provide additional power; the length of time required to provide such power; and/or whether it is feasible to upgrade the electrical infrastructure of an IBX data center to deliver additional power to
customers. Although we are currently designing and building to a higher power specification than that of many of our older IBX data centers, there is a risk that demand will continue to increase and our IBX data centers could become underutilized
sooner than expected.
56
We expect our operating results to fluctuate.
We have experienced fluctuations in our results of operations on a quarterly and annual basis. The fluctuations in our operating results may
cause the market price of our common stock to be volatile. We may experience significant fluctuations in our operating results in the foreseeable future due to a variety of factors, including, but not limited to:
| |
• |
|
fluctuations of foreign currencies in the markets in which we operate; |
| |
• |
|
the timing and magnitude of depreciation and interest expense or other expenses related to the acquisition, purchase or construction of additional IBX data centers or the upgrade of existing IBX data centers;
|
| |
• |
|
demand for space, power and services at our IBX data centers; |
| |
• |
|
changes in general economic conditions, such as an economic downturn, or specific market conditions in the telecommunications and Internet industries, both of which may have an impact on our customer base;
|
| |
• |
|
charges to earnings resulting from past acquisitions due to, among other things, impairment of goodwill or intangible assets, reduction in the useful lives of intangible assets acquired, identification of additional
assumed contingent liabilities or revised estimates to restructure an acquired company’s operations; |
| |
• |
|
the duration of the sales cycle for our offerings and our ability to ramp our newly-hired sales persons to full productivity within the time period we have forecasted; |
| |
• |
|
restructuring charges or reversals of restructuring charges, which may be necessary due to revised sublease assumptions, changes in strategy or otherwise; |
| |
• |
|
acquisitions or dispositions we may make; |
| |
• |
|
the financial condition and credit risk of our customers; |
| |
• |
|
the provision of customer discounts and credits; |
| |
• |
|
the mix of current and proposed products and offerings and the gross margins associated with our products and offerings; |
| |
• |
|
the timing required for new and future IBX data centers to open or become fully utilized; |
| |
• |
|
competition in the markets in which we operate; |
| |
• |
|
conditions related to international operations; |
| |
• |
|
increasing repair and maintenance expenses in connection with aging IBX data centers; |
| |
• |
|
lack of available capacity in our existing IBX data centers to generate new revenue or delays in opening new or acquired IBX data centers that delay our ability to generate new revenue in markets which have otherwise
reached capacity; |
| |
• |
|
changes in rent expense as we amend our IBX data center leases in connection with extending their lease terms when their initial lease term expiration dates approach or changes in shared operating costs in connection
with our leases, which are commonly referred to as common area maintenance expenses; |
57
| |
• |
|
the timing and magnitude of other operating expenses, including taxes, expenses related to the expansion of sales, marketing, operations and acquisitions, if any, of complementary businesses and assets;
|
| |
• |
|
the cost and availability of adequate public utilities, including power; |
| |
• |
|
changes in employee stock-based compensation; |
| |
• |
|
increasing interest expense due to any increases in interest rates and/or potential additional debt financings; |
| |
• |
|
changes in our tax planning strategies or failure to realize anticipated benefits from such strategies; |
| |
• |
|
changes in income tax benefit or expense; and |
| |
• |
|
changes in or new generally accepted accounting principles (“GAAP”) in the U.S. as periodically released by the Financial Accounting Standards Board (“FASB”). |
Any of the foregoing factors, or other factors discussed elsewhere in this report, could have a material adverse effect on our business,
results of operations and financial condition. Although we have experienced growth in revenues in recent quarters, this growth rate is not necessarily indicative of future operating results. Prior to 2008, we had generated net losses every fiscal
year since inception. It is possible that we may not be able to generate net income on a quarterly or annual basis in the future. In addition, a relatively large portion of our expenses are fixed in the short-term, particularly with respect to lease
and personnel expenses, depreciation and amortization and interest expenses. Therefore, our results of operations are particularly sensitive to fluctuations in revenues. As such, comparisons to prior reporting periods should not be relied upon as
indications of our future performance. In addition, our operating results in one or more future quarters may fail to meet the expectations of securities analysts or investors.
Our days sales outstanding (DSO) of our accounts receivables have been increasing.
Although we have historically experienced a record of strong collection of our accounts receivables as evidenced by our prior DSO metrics, our
DSO has increased over the past few quarters. We have recently centralized responsibilities for customer billing and collections in the EMEA region. This transition of responsibilities has impacted our DSO efforts. We are also
implementing a new billing system. The initial implementation of this system was completed in August 2014, but the full implementation of the system is not expected to be complete until later in 2015. The ongoing changes in the billing system may
result in further delays in our billing and collections. While we believe these are temporary issues that will resolve themselves over time, the overall negative impact to our DSO has had an impact to our operating cash flows, liquidity and
financial performance. If we are unable to resolve the underlying issues that are contributing to our current DSO levels, our operating cash flows, liquidity and financial performance may continue to be impacted.
We may incur goodwill and other intangible asset impairment charges, or impairment charges to our property, plant and equipment, which could result in a
significant reduction to our earnings.
In accordance with GAAP, we are required to assess our goodwill and other intangible assets
annually, or more frequently whenever events or changes in circumstances indicate potential impairment, such as changing market conditions or any changes in key assumptions. If the testing performed indicates that an asset may not be recoverable, we
are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or other intangible assets and the implied fair value of the goodwill or other intangible assets in the period the determination is
made.
58
We also monitor the remaining net book values of our property, plant and equipment periodically,
including at the individual IBX data center level. Although each individual IBX data center is currently performing in line with our expectations, the possibility that one or more IBX data centers could begin to under-perform relative to our
expectations is possible and may also result in non-cash impairment charges.
These charges could be significant, which could have a
material adverse effect on our business, results of operations or financial condition.
We have incurred substantial losses in the past and may incur
additional losses in the future.
As of March 31, 2015, our accumulated deficit was $219.5 million. Although we have generated
net income for each fiscal year since 2008, except for the year ended December 31, 2014, we are also currently investing heavily in our future growth through the build out of multiple additional IBX data centers and IBX data center expansions
as well as acquisitions of complementary businesses. As a result, we will incur higher depreciation and other operating expenses, as well as acquisition costs and interest expense, that may negatively impact our ability to sustain profitability in
future periods unless and until these new IBX data centers generate enough revenue to exceed their operating costs and cover our additional overhead needed to scale our business for this anticipated growth. The current global financial uncertainty
may also impact our ability to sustain profitability if we cannot generate sufficient revenue to offset the increased costs of our recently-opened IBX data centers or IBX data centers currently under construction. In addition, costs associated with
the acquisition and integration of any acquired companies, as well as the additional interest expense associated with debt financing we have undertaken to fund our growth initiatives, may also negatively impact our ability to sustain profitability.
Finally, given the competitive and evolving nature of the industry in which we operate, we may not be able to sustain or increase profitability on a quarterly or annual basis.
The failure to obtain favorable terms when we renew our IBX data center leases, or the failure to renew such leases, could harm our business and results of
operations.
While we own certain of our IBX data centers, others are leased under long-term arrangements with lease terms expiring at
various dates through 2053. These leased centers have all been subject to significant development by us in order to convert them from, in most cases, vacant buildings or warehouses into IBX data centers. Most of our IBX data center leases have
renewal options available to us. However, many of these renewal options provide for the rent to be set at then-prevailing market rates. To the extent that then-prevailing market rates or negotiated rates are higher than present rates, these higher
costs may adversely impact our business and results of operations, or we may decide against renewing the lease. In the event that an IBX data center lease does not have a renewal option, or we fail to exercise a renewal option in a timely fashion
and lose our right to renew the lease, we may not be successful in negotiating a renewal of the lease with the landlord. A failure to renew a lease could force us to exit a building prematurely, which could be disruptive to our business, harm our
customer relationships, expose us to liability under our customer contracts, cause us to take impairment charges and negatively affect our operating results.
We depend on a number of third parties to provide Internet connectivity to our IBX data centers; if connectivity is interrupted or terminated, our
operating results and cash flow could be materially and adversely affected.
The presence of diverse telecommunications carriers’
fiber networks in our IBX data centers is critical to our ability to retain and attract new customers. We are not a telecommunications carrier, and as such, we rely on third parties to provide our customers with carrier services. We believe that the
availability of carrier capacity will directly affect our ability to achieve our projected results. We rely primarily on revenue opportunities from the telecommunications carriers’ customers to encourage them to invest the capital and operating
resources required to connect from their centers to our IBX data centers. Carriers will likely evaluate the revenue opportunity of an IBX data center based on the assumption that the environment will be highly competitive. We cannot provide
assurance that each and every carrier will elect to offer its services within our IBX data centers or that once a carrier has decided to provide Internet connectivity to our IBX data centers that it will continue to do so for any period of time.
59
Our new IBX data centers require construction and operation of a sophisticated redundant fiber
network. The construction required to connect multiple carrier facilities to our IBX data centers is complex and involves factors outside of our control, including regulatory processes and the availability of construction resources. Any hardware or
fiber failures on this network may result in significant loss of connectivity to our new IBX data center expansions. This could affect our ability to attract new customers to these IBX data centers or retain existing customers.
If the establishment of highly diverse Internet connectivity to our IBX data centers does not occur, is materially delayed or is discontinued,
or is subject to failure, our operating results and cash flow will be adversely affected.
We may be vulnerable to security breaches which could
disrupt our operations and have a material adverse effect on our financial performance and operating results.
A party who is able to
compromise the security measures on our networks or the security of our infrastructure could misappropriate either our proprietary information or the personal information of our customers, or cause interruptions or malfunctions in our operations or
our customers’ operations. As we provide assurances to our customers that we provide the highest level of security, such a compromise could be particularly harmful to our brand and reputation. We may be required to expend significant capital
and resources to protect against such threats or to alleviate problems caused by breaches in security. As techniques used to breach security change frequently, and are generally not recognized until launched against a target, we may not be able to
implement security measures in a timely manner or, if and when implemented, we may not be able to determine the extent to which these measures could be circumvented. Any breaches that may occur could expose us to increased risk of lawsuits,
regulatory penalties, loss of existing or potential customers, harm to our reputation and increases in our security costs, which could have a material adverse effect on our financial performance and operating results.
We have government customers, which subjects us to risks including early termination, audits, investigations, sanctions and penalties.
We derive some revenues from contracts with the U.S. government, state and local governments and foreign governments. Some of these customers
may terminate all or part of their contracts at any time, without cause.
There is increased pressure for governments and their agencies,
both domestically and internationally, to reduce spending. Some of our federal government contracts are subject to the approval of appropriations being made by the U.S. Congress to fund the expenditures under these contracts. Similarly, some of our
contracts at the state and local levels are subject to government funding authorizations.
Additionally, government contracts are
generally subject to audits and investigations which could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of
payments, fines and suspensions or debarment from future government business.
60
Because we depend on the development and growth of a balanced customer base, including key magnet customers,
failure to attract, grow and retain this base of customers could harm our business and operating results.
Our ability to maximize
revenues depends on our ability to develop and grow a balanced customer base, consisting of a variety of companies, including enterprises, cloud, digital content and financial companies, and network service providers. We consider certain of these
customers to be key magnets in that they draw in other customers. The more balanced the customer base within each IBX data center, the better we will be able to generate significant interconnection revenues, which in turn increases our overall
revenues. Our ability to attract customers to our IBX data centers will depend on a variety of factors, including the presence of multiple carriers, the mix of our offerings, the overall mix of customers, the presence of key customers attracting
business through vertical market ecosystems, the IBX data center’s operating reliability and security and our ability to effectively market our offerings. However, some of our customers may face competitive pressures and may ultimately not be
successful or may be consolidated through merger or acquisition. If these customers do not continue to use our IBX data centers it may be disruptive to our business. Finally, the uncertain economic climate may harm our ability to attract and retain
customers if customers slow spending, or delay decision-making, on our offerings, or if customers begin to have difficulty paying us and we experience increased churn in our customer base. Any of these factors may hinder the development, growth and
retention of a balanced customer base and adversely affect our business, financial condition and results of operations.
We may be subject to
securities class action and other litigation, which may harm our business and results of operations.
We may be subject to securities
class action or other litigation. For example, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. Litigation can be lengthy, expensive, and divert
management’s attention and resources. Results cannot be predicted with certainty and an adverse outcome in litigation could result in monetary damages or injunctive relief that could seriously harm our business, results of operations, financial
condition or cash flows.
We may not be able to protect our intellectual property rights.
We cannot make assurances that the steps taken by us to protect our intellectual property rights will be adequate to deter misappropriation of
proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. We also are subject to the risk of litigation alleging infringement of third-party intellectual
property rights. Any such claims could require us to spend significant sums in litigation, pay damages, develop non-infringing intellectual property, or acquire licenses to the intellectual property that is the subject of the alleged infringement.
Government regulation may adversely affect our business.
Various laws and governmental regulations, both in the U.S. and abroad, governing Internet related services, related communications services
and information technologies remain largely unsettled, even in areas where there has been some legislative action. For example, the Federal Communications Commission recently adopted new network neutrality rules that may result in material changes
in the regulations and contribution regime affecting us and our customers. Likewise, as part of a review of the current equity market structure, the Securities and Exchange Commission and the Commodity Futures Trading Commission
(“CFTC”) have both sought comments regarding the regulation of independent data centers, such as us, which provide colocation for financial markets and exchanges. The CFTC is also considering regulation of companies that use automated and
high-frequency trading systems. Any such regulation may ultimately affect our provision of offerings.
It also may take years to determine
whether and how existing laws, such as those governing intellectual property, privacy, libel, telecommunications services and taxation, apply to the Internet and to related offerings such as ours, and substantial resources may be required to comply
with regulations or bring any non-compliant business practices into compliance with such regulations. In addition, the development of the market for online commerce and the displacement of traditional telephony service by the Internet and related
communications services may prompt an increased call for more stringent consumer protection laws or other regulation both in the U.S. and abroad that may impose additional burdens on companies conducting business online and their service providers.
61
The adoption, or modification of laws or regulations relating to the Internet and our business,
or interpretations of existing laws, could have a material adverse effect on our business, financial condition and results of operations.
Industry
consolidation may have a negative impact on our business model.
If customers combine businesses, they may require less colocation
space, which could lead to churn in our customer base. Regional competitors may also consolidate to become a global competitor. Consolidation of our customers and/or our competitors may present a risk to our business model and have a negative impact
on our revenues.
Terrorist activity throughout the world and military action to counter terrorism could adversely impact our business.
The continued threat of terrorist activity and other acts of war or hostility contribute to a climate of political and economic uncertainty.
Due to existing or developing circumstances, we may need to incur additional costs in the future to provide enhanced security, including cybersecurity, which would have a material adverse effect on our business and results of operations. These
circumstances may also adversely affect our ability to attract and retain customers, our ability to raise capital and the operation and maintenance of our IBX data centers.
We have various mechanisms in place that may discourage takeover attempts.
Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a third party from acquiring control of us
in a merger, acquisition or similar transaction that a stockholder may consider favorable. Such provisions include:
| |
• |
|
ownership limitations and transfer restrictions relating to our stock that are intended to facilitate our compliance with certain REIT rules relating to share ownership; |
| |
• |
|
authorization for the issuance of “blank check” preferred stock; |
| |
• |
|
the prohibition of cumulative voting in the election of directors; |
| |
• |
|
limits on the persons who may call special meetings of stockholders; |
| |
• |
|
limits on stockholder action by written consent; and |
| |
• |
|
advance notice requirements for nominations to the Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings. |
In addition, Section 203 of the Delaware General Corporation Law, which restricts certain business combinations with interested
stockholders in certain situations, may also discourage, delay or prevent someone from acquiring or merging with us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.
Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not applicable.
62
Item 5. Other Information
None.
Item 6.
Exhibits
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Incorporated by Reference |
|
|
|
| Exhibit
Number |
|
Exhibit Description |
|
Form |
|
Filing
Date/
Period
End Date |
|
Exhibit |
|
|
Filed
Herewith |
| 3.1 |
|
Amended and Restated Certificate of Incorporation of the Registrant, as amended to date. |
|
10-K/A |
|
12/31/02 |
|
|
3.1 |
|
|
|
|
|
|
|
|
|
| 3.2 |
|
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant |
|
8-K |
|
6/14/11 |
|
|
3.1 |
|
|
|
|
|
|
|
|
|
| 3.3 |
|
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant |
|
8-K |
|
6/11/13 |
|
|
3.1 |
|
|
|
|
|
|
|
|
|
| 3.4 |
|
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant |
|
10-Q |
|
6/30/14 |
|
|
3.4 |
|
|
|
|
|
|
|
|
|
| 3.5 |
|
Certificate of Designation of Series A and Series A-1 Convertible Preferred Stock. |
|
10-K/A |
|
12/31/02 |
|
|
3.3 |
|
|
|
|
|
|
|
|
|
| 3.6 |
|
Amended and Restated Bylaws of the Registrant. |
|
8-K |
|
12/23/14 |
|
|
3.1 |
|
|
|
|
|
|
|
|
|
| 4.1 |
|
Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4.2 |
|
Indenture dated June 12, 2009 by and between Equinix, Inc. and U.S. Bank National Association, as trustee. |
|
8-K |
|
6/12/09 |
|
|
4.1 |
|
|
|
|
|
|
|
|
|
| 4.3 |
|
Form of 4.75% Convertible Subordinated Note Due 2016 (see Exhibit 4.2). |
|
|
|
|
|
|
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4.4 |
|
Indenture for the 2020 Notes dated March 5, 2013 by and between Equinix, Inc. and U.S. Bank National Association as trustee |
|
8-K |
|
3/5/13 |
|
|
4.1 |
|
|
|
|
|
|
|
|
|
| 4.5 |
|
Form of 4.875% Senior Note due 2020 (see Exhibit 4.4) |
|
8-K |
|
3/5/13 |
|
|
4.2 |
|
|
|
|
|
|
|
|
|
| 4.6 |
|
Indenture for the 2023 Notes dated March 5, 2013 by and between Equinix, Inc. and U.S. Bank National Association as trustee |
|
8-K |
|
3/5/13 |
|
|
4.3 |
|
|
|
|
|
|
|
|
|
| 4.7 |
|
Form of 5.375% Senior Note due 2023 (see Exhibit 4.6) |
|
8-K |
|
3/5/13 |
|
|
4.4 |
|
|
|
|
|
|
|
|
|
| 4.8 |
|
Indenture, dated as of November 20, 2014, between Equinix, Inc. and U.S. Bank National Association, as trustee |
|
8-K |
|
11/20/14 |
|
|
4.1 |
|
|
|
|
|
|
|
|
|
| 4.9 |
|
First Supplemental Indenture, dated as of November 20, 2014, between Equinix, Inc. and U.S. Bank National Association, as trustee |
|
8-K |
|
11/20/14 |
|
|
4.2 |
|
|
|
|
|
|
|
|
|
| 4.10 |
|
Form of 5.375% Senior Note due 2022 (see Exhibit 4.9) |
|
8-K |
|
11/20/14 |
|
|
4.3 |
|
|
|
|
|
|
|
|
|
| 4.11 |
|
Second Supplemental Indenture, dated as of November 20, 2014, between Equinix, Inc. and U.S. Bank National Association, as trustee |
|
8-K |
|
11/20/14 |
|
|
4.4 |
|
|
|
|
|
|
|
|
|
| 4.12 |
|
Form of 5.750% Senior Note due 2025 (see Exhibit 4.11) |
|
8-K |
|
11/20/14 |
|
|
4.5 |
|
|
|
|
|
|
|
|
|
| 4.13 |
|
Form of Registrant’s Common Stock Certificate |
|
10-K |
|
12/31/14 |
|
|
4.13 |
|
|
|
|
|
|
|
|
|
| 10.1 |
|
Form of Indemnification Agreement between the Registrant and each of its officers and directors. |
|
S-4
(File
No.
333-
93749) |
|
12/29/99 |
|
|
10.5 |
|
|
|
|
|
|
|
|
|
| 10.2 |
|
2000 Equity Incentive Plan, as amended. |
|
10-Q |
|
3/31/12 |
|
|
10.2 |
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10.3 |
|
2000 Director Option Plan, as amended. |
|
10-K |
|
12/31/07 |
|
|
10.4 |
|
|
|
|
|
|
|
|
|
| 10.4 |
|
2001 Supplemental Stock Plan, as amended. |
|
10-K |
|
12/31/07 |
|
|
10.5 |
|
|
|
|
|
|
|
|
|
| 10.5 |
|
Equinix, Inc. 2004 Employee Stock Purchase Plan, as amended. |
|
10-Q |
|
6/30/14 |
|
|
10.5 |
|
|
|
|
|
|
|
|
|
| 10.6 |
|
Severance Agreement by and between Stephen Smith and Equinix, Inc. dated December 18, 2008. |
|
10-K |
|
12/31/08 |
|
|
10.31 |
|
|
|
|
|
|
|
|
|
| 10.7 |
|
Severance Agreement by and between Peter Van Camp and Equinix, Inc. dated December 10, 2008. |
|
10-K |
|
12/31/08 |
|
|
10.32 |
|
|
|
|
|
|
|
|
|
| 10.8 |
|
Severance Agreement by and between Keith Taylor and Equinix, Inc. dated December 19, 2008. |
|
10-K |
|
12/31/08 |
|
|
10.33 |
|
|
|
|
|
|
|
|
|
| 10.9 |
|
Severance Agreement by and between Peter Ferris and Equinix, Inc. dated December 17, 2008. |
|
10-K |
|
12/31/08 |
|
|
10.34 |
|
|
|
|
|
|
|
|
|
| 10.10 |
|
Change in Control Severance Agreement by and between Eric Schwartz and Equinix, Inc. dated December 19, 2008. |
|
10-K |
|
12/31/08 |
|
|
10.35 |
|
|
|
|
|
|
|
|
|
| 10.11 |
|
Confirmation for Base Capped Call Transaction dated as of June 9, 2009 between Equinix, Inc. and Deutsche Bank AG, London Branch. |
|
8-K |
|
6/12/09 |
|
|
10.1 |
|
|
|
|
|
|
|
|
|
| 10.12 |
|
Confirmation for Additional Capped Call Transaction dated as of June 9, 2009 between Equinix, Inc. and Deutsche Bank AG, London Branch. |
|
8-K |
|
6/12/09 |
|
|
10.2 |
|
|
|
|
|
|
|
|
|
| 10.13 |
|
Confirmation for Base Capped Call Transaction dated as of June 9, 2009 between Equinix, Inc. and JPMorgan Chase Bank, National Association, London Branch. |
|
8-K |
|
6/12/09 |
|
|
10.4 |
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10.14 |
|
Confirmation for Additional Capped Call Transaction dated as of June 9, 2009 between Equinix, Inc. and JPMorgan Chase Bank, National Association, London Branch. |
|
8-K |
|
6/12/09 |
|
|
10.5 |
|
|
|
|
|
|
|
|
|
| 10.15 |
|
Confirmation for Base Capped Call Transaction dated as of June 9, 2009 between Equinix, Inc. and Goldman, Sachs & Co. |
|
8-K |
|
6/12/09 |
|
|
10.7 |
|
|
|
|
|
|
|
|
|
| 10.16 |
|
Confirmation for Additional Capped Call Transaction dated as of June 9, 2009 between Equinix, Inc. and Goldman, Sachs & Co. |
|
8-K |
|
6/12/09 |
|
|
10.8 |
|
|
|
|
|
|
|
|
|
| 10.17 |
|
Switch & Data 2007 Stock Incentive Plan. |
|
S-1/A
(File
No.
333-
137607)
filed
by
Switch
&
Data
Facilities
Company,
Inc. |
|
2/5/07 |
|
|
10.9 |
|
|
|
|
|
|
|
|
|
| 10.18 |
|
Change in Control Severance Agreement by and between Charles Meyers and Equinix, Inc. dated September 30, 2010. |
|
10-Q |
|
9/30/10 |
|
|
10.42 |
|
|
|
|
|
|
|
|
|
| 10.19 |
|
Form of amendment to existing severance agreement between the Registrant and each of Messrs. Ferris, Meyers, Smith, Taylor and Van Camp. |
|
10-K |
|
12/31/10 |
|
|
10.33 |
|
|
|
|
|
|
|
|
|
| 10.20 |
|
Letter amendment, dated December 14, 2010, to Change in Control Severance Agreement, dated December 18, 2008, and letter agreement relating to expatriate benefits, dated April 22, 2008, as amended, by and between the Registrant and
Eric Schwartz. |
|
10-K |
|
12/31/10 |
|
|
10.34 |
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10.21 |
|
Offer Letter from Equinix, Inc. to Sara Baack dated July 31, 2012. |
|
10-Q |
|
3/31/13 |
|
|
10.42 |
|
|
|
|
|
|
|
|
|
| 10.22 |
|
Restricted Stock Unit Agreement for Sara Baack under the Equinix, Inc. 2000 Equity Incentive Plan. |
|
10-Q |
|
3/31/13 |
|
|
10.43 |
|
|
|
|
|
|
|
|
|
| 10.23 |
|
Change in Control Severance Agreement by and between Sara Baack and Equinix, Inc. dated July 31, 2012. |
|
10-Q |
|
3/31/13 |
|
|
10.44 |
|
|
|
|
|
|
|
|
|
| 10.24 |
|
Form of Revenue/Adjusted EBITDA Restricted Stock Unit Agreement for CEO and CFO. |
|
10-Q |
|
3/31/13 |
|
|
10.46 |
|
|
|
|
|
|
|
|
|
| 10.25 |
|
Form of Revenue/Adjusted EBITDA Restricted Stock Unit Agreement for all other Section 16 officers. |
|
10-Q |
|
3/31/13 |
|
|
10.47 |
|
|
|
|
|
|
|
|
|
| 10.26 |
|
International Long-Term Assignment Letter by and between Equinix, Inc. and Eric Schwartz, dated May 21, 2013. |
|
10-Q |
|
6/30/13 |
|
|
10.51 |
|
|
|
|
|
|
|
|
|
| 10.27 |
|
Employment Agreement by and between Equinix (EMEA) B.V. and Eric Schwartz, dated as of August 7, 2013. |
|
10-Q |
|
9/30/13 |
|
|
10.54 |
|
|
|
|
|
|
|
|
|
| 10.28 |
|
Restricted Stock Unit Agreement dated August 14, 2013 for Charles Meyers under the Equinix, Inc. 2000 Equity Incentive Plan. |
|
10-Q |
|
9/30/13 |
|
|
10.55 |
|
|
|
|
|
|
|
|
|
| 10.29 |
|
Equinix, Inc. 2014 Incentive Plan. |
|
10-Q |
|
3/31/14 |
|
|
10.48 |
|
|
|
|
|
|
|
|
|
| 10.30 |
|
Offer Letter from Equinix, Inc. to Karl Strohmeyer dated October 28, 2013. |
|
10-Q |
|
3/31/14 |
|
|
10.49 |
|
|
|
|
|
|
|
|
|
| 10.31 |
|
Restricted Stock Unit Agreement for Karl Strohmeyer under the Equinix, Inc. 2000 Equity Incentive Plan. |
|
10-Q |
|
3/31/14 |
|
|
10.50 |
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10.32 |
|
Change in Control Severance Agreement by and between Karl Strohmeyer and Equinix, Inc. dated December 2, 2013. |
|
10-Q |
|
3/31/14 |
|
|
10.51 |
|
|
|
|
|
|
|
|
|
| 10.33 |
|
2014 Form of Revenue/Adjusted EBITDA Restricted Stock Unit Agreement for CEO and CFO. |
|
10-Q |
|
3/31/14 |
|
|
10.52 |
|
|
|
|
|
|
|
|
|
| 10.34 |
|
2014 Form of Revenue/Adjusted EBITDA Restricted Stock Unit Agreement for all other Section 16 officers. |
|
10-Q |
|
3/31/14 |
|
|
10.53 |
|
|
|
|
|
|
|
|
|
| 10.35 |
|
2014 Form of TSR Restricted Stock Unit Agreement for CEO and CFO. |
|
10-Q |
|
3/31/14 |
|
|
10.54 |
|
|
|
|
|
|
|
|
|
| 10.36 |
|
2014 Form of TSR Restricted Stock Unit Agreement for all other Section 16 officers. |
|
10-Q |
|
3/31/14 |
|
|
10.55 |
|
|
|
|
|
|
|
|
|
| 10.37 |
|
Lease between Digital 1350 Duane, LLC and Equinix LLC, dated March 27, 2014. |
|
10-Q |
|
3/31/14 |
|
|
10.56 |
|
|
|
|
|
|
|
|
|
| 10.38 |
|
Amendment Agreement dated as of May 2, 2014, between Equinix, Inc. and Goldman, Sachs & Co., amending and restating the Master Terms and Conditions for Capped Call Transactions between Equinix, Inc. and Goldman, Sachs & Co.
and amending the Confirmation for Base Capped Call Transaction. |
|
10-Q |
|
6/30/14 |
|
|
10.54 |
|
|
|
|
|
|
|
|
|
| 10.39 |
|
Amendment Agreement dated as of May 2, 2014, between Equinix, Inc. and Deutsche Bank AG, London Branch, amending and restating the Master Terms and Conditions for Capped Call Transactions between Equinix, Inc. and Deutsche Bank AG,
London Branch and amending the Confirmation for Base Capped Call Transaction. |
|
10-Q |
|
6/30/14 |
|
|
10.55 |
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10.40 |
|
Amendment Agreement dated as of May 2, 2014, between Equinix, Inc. and JPMorgan Chase Bank, National Association, London Branch, amending and restating the Master Terms and Conditions for Capped Call Transactions between
Equinix, Inc. and JPMorgan Chase Bank, National Association, London Branch and amending the Confirmation for Base Capped Call Transaction. |
|
10-Q |
|
6/30/14 |
|
|
10.56 |
|
|
|
|
|
|
|
|
|
| 10.41 |
|
Amendment Agreement, dated as of May 13, 2014, between Equinix, Inc. and Goldman, Sachs & Co., amending the Confirmation for Base Capped Call Transaction. |
|
10-Q |
|
6/30/14 |
|
|
10.57 |
|
|
|
|
|
|
|
|
|
| 10.42 |
|
Amendment Agreement dated as of May 13, 2014, between Equinix, Inc. and Deutsche Bank AG, London Branch, amending the Confirmation for Base Capped Call Transaction. |
|
10-Q |
|
6/30/14 |
|
|
10.58 |
|
|
|
|
|
|
|
|
|
| 10.43 |
|
Amendment Agreement dated as of May 13, 2014, between Equinix, Inc. and JPMorgan Chase Bank, National Association, London Branch, amending the Confirmation for Base Capped Call Transaction. |
|
10-Q |
|
6/30/14 |
|
|
10.59 |
|
|
|
|
|
|
|
|
|
| 10.44 |
|
Amendment Agreement, dated as of June 6, 2014, between Equinix, Inc. and Goldman, Sachs & Co., amending the Confirmation for Base Capped Call Transaction. |
|
10-Q |
|
6/30/14 |
|
|
10.6 |
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10.45 |
|
Amendment Agreement dated as of June 6, 2014, between Equinix, Inc. and Deutsche Bank AG, London Branch, amending the Confirmation for Base Capped Call Transaction. |
|
10-Q |
|
6/30/14 |
|
|
10.61 |
|
|
|
|
|
|
|
|
|
| 10.46 |
|
Amendment Agreement dated as of June 6, 2014, between Equinix, Inc. and JPMorgan Chase Bank, National Association, London Branch, amending the Confirmation for Base Capped Call Transaction. |
|
10-Q |
|
6/30/14 |
|
|
10.62 |
|
|
|
|
|
|
|
|
|
| 10.47 |
|
Agreement for Purchase and Sale of Shares Among RW Brasil Fundo de Investimentos em Participação, Antônio Eduardo Zago De Carvalho and Sidney Victor da Costa Breyer, as Sellers, and Equinix Brasil
Participaçãoes Ltda., as Purchaser, and Equinix South America Holdings LLC., as a Party for Limited Purposes and ALOG Soluções de Tecnologia em Informática S.A. as Intervening Consenting Party dated July 18,
2014 |
|
10-Q |
|
9/30/14 |
|
|
10.67 |
|
|
|
|
|
|
|
|
|
| 10.48 |
|
Credit Agreement, by and among Equinix, Inc., as borrower, Equinix LLC and Switch & Data LLC as guarantors, the Lenders (defined therein), Bank of America, N.A., as administrative agent, a Lender and L/C issuer, JPMorgan Chase
Bank, N.A., and TD Securities (USA) LLC, as co-syndication agents, Barclays Bank PLC, Citibank, N.A., Royal Bank of Canada and ING Bank N.V., Singapore Branch, as Co-Documentation Agents and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
J.P. Morgan Securities LLC, and TD Securities (USA) LLC, as joint lead arrangers and book runners, dated December 17, 2014. |
|
10-K |
|
12/31/14 |
|
|
10.48 |
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10.49 |
|
Equinix, Inc. 2015 Incentive Plan. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 10.50 |
|
2015 Form of Revenue/ AFFO Restricted Stock Unit Agreement for executives. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 10.51 |
|
2015 Form of TSR Restricted Stock Unit Agreement for executives. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 10.52 |
|
2015 Form of Time-Based Restricted Stock Unit Agreement for executives. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 18.2 |
|
Preferable Accounting Principles Letter from PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, dated April 24, 2013. |
|
10-Q |
|
3/31/13 |
|
|
18.2 |
|
|
|
|
|
|
|
|
|
|
|
| 21.1 |
|
Subsidiaries of Equinix, Inc. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 31.1 |
|
Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 31.2 |
|
Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 32.1 |
|
Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 32.2 |
|
Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 101.INS |
|
XBRL Instance Document. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 101.SCH |
|
XBRL Taxonomy Extension Schema Document. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 101.CAL |
|
XBRL Taxonomy Extension Calculation Document. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 101.DEF |
|
XBRL Taxonomy Extension Definition Document. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 101.LAB |
|
XBRL Taxonomy Extension Labels Document. |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
| 101.PRE |
|
XBRL Taxonomy Extension Presentation Document. |
|
|
|
|
|
|
|
|
|
|
X |
|
71
EQUINIX, INC.
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 thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
EQUINIX, INC. |
| Date: May 1, 2015 |
|
|
|
|
|
|
|
|
|
|
By: |
|
/S/ KEITH D. TAYLOR |
|
|
|
|
|
|
Chief Financial Officer |
|
|
|
|
|
|
(Principal Financial and Accounting Officer) |
72
INDEX TO EXHIBITS
|
|
|
| Exhibit
Number |
|
Description of Document |
| 10.49 |
|
Equinix, Inc. 2015 Incentive Plan. |
|
|
| 10.50 |
|
2015 Form of Revenue/AFFO Restricted Stock Unit Agreement for executives. |
|
|
| 10.51 |
|
2015 Form of TSR Restricted Stock Unit Agreement for executives. |
|
|
| 10.52 |
|
2015 Form of Time-Based Restricted Stock Unit Agreement for executives. |
|
|
| 21.1 |
|
Subsidiaries of Equinix, Inc. |
|
|
| 31.1 |
|
Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
| 31.2 |
|
Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
| 32.1 |
|
Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
| 32.2 |
|
Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
| 101.INS |
|
XBRL Instance Document. |
|
|
| 101.SCH |
|
XBRL Taxonomy Extension Schema Document. |
|
|
| 101.CAL |
|
XBRL Taxonomy Extension Calculation Document. |
|
|
| 101.DEF |
|
XBRL Taxonomy Extension Definition Document. |
|
|
| 101.LAB |
|
XBRL Taxonomy Extension Labels Document. |
|
|
| 101. PRE |
|
XBRL Taxonomy Extension Presentation Document. |
73
Exhibit 10.49
EQUINIX, INC. 2015 ANNUAL INCENTIVE PLAN
JANUARY 1, 2015
PLAN
OBJECTIVES
Equinix, Inc. (the “Company”) offers the 2015 Annual Incentive Plan (the “2015 AIP”) to certain eligible employees of
the Company and its subsidiaries and affiliates to provide them with the opportunity to participate in Company performance. It is designed to motivate participating employees to achieve certain Company objectives while providing competitive total
rewards for key positions and retaining top talent.
PLAN FEATURES
ELIGIBILITY/PARTICIPATION
All full-time and part-time
employees of the Company and employees of the Company’s subsidiaries and affiliates have the possibility of receiving a target bonus under the 2015 AIP, provided the conditions set out below are met. Commissioned sales employees and those on
Management by Objectives Plans are not eligible to participate. Full-time and part-time new hires may become eligible to participate in the 2015 AIP as of their hire date. The maximum target bonus that an employee not employed by the Company or a
participating subsidiary or affiliate at the beginning of the year may receive, however, will be a percentage of a target bonus equal to that percentage of the year he/she was employed by the Company or a participating subsidiary or affiliate and is
subject to the conditions set out below being met. An employee with a start date on or after October 1, 2015 will not be eligible to participate in the 2015 AIP.
To be eligible to receive a target bonus, the employee must be employed by the Company or a participating subsidiary or affiliate at the date when the bonus
amount is paid pursuant to the paragraph entitled “Payment of Awards” below, and for avoidance of doubt, an employee is not eligible to receive a bonus under the 2015 AIP if on the date a target bonus is to be paid:
| |
• |
|
he/she is on a Performance Improvement Plan; |
| |
• |
|
he/she is on notice (whether given or received) of termination of employment; |
| |
• |
|
he/she is on garden leave or a period of unpaid leave; and/or |
| |
• |
|
he/she is suspended from his/her duties for any reason and/or is subject to ongoing disciplinary proceedings or the subject of a disciplinary investigation. |
Payouts will be pro-rated over the period based on the position the employee held during the performance period. For example, if an employee is promoted from
Senior Manager to Director, his/her bonus will be calculated based upon the number of days in each position. As another example, if an employee is promoted from a non-commissioned position to a commissioned sales position, his/her bonus will be
pro-rated based on the number of days worked in a non-commissioned position. Subject to applicable laws, an employee on an approved leave of absence
(not considered as effective work time) from the Company or a participating subsidiary or affiliate will be eligible for the pro-rated bonus amount based on the number of days worked as an active
employee during the 2015 calendar year.
Any bonus payment made under the 2015 AIP will not form part of an employee’s pensionable salary.
The plan year is effective January 1, 2015 and will end on December 31, 2015. Where bonuses are awarded under the 2015 AIP, they will be paid after
plan year-end.
TARGET BONUSES
Target bonuses are
based on a percentage of the employee’s annual base salary. An employee’s target bonus percentage may be modified from time to time, for example, due to changes in the Company’s financials or salary changes, until the end of the plan
year.
The 2015 AIP includes an individual performance component. Bonus awards are linked to employee performance and are intended to reward achievement
of key results at both the Company and individual level. Employee performance will be measured by an annual performance review, and top performers may earn up to 150% of target bonus awards. Employees may receive less than their targeted bonus based
upon Company and individual performance. The degree to which the employee achieves his/her targeted bonus amount (e.g., less than, equal to, or greater than the target percentage) is the degree to which both the employee and the Company achieve key
performance goals throughout the year.
In addition, at its discretion the Compensation Committee of the Board of Directors (the “Compensation
Committee”) may reduce or eliminate the actual award that otherwise would be payable should economic conditions warrant it.
PAYMENT OF AWARDS
Individual awards are determined once the plan year has ended and the Compensation Committee has decided any amounts to be awarded. Where individual
awards are to be paid, they will be paid as soon after the close of the calendar year as practical. It is intended that payment will be made no later than required to ensure that no amount paid or to be paid hereunder shall be subject to the
provisions of Section 409A(a)(1)(B) of the U.S. Internal Revenue Code and that all payments shall be eligible for the short-term deferral exception to Section 409A of the U.S. Internal Revenue Code.
FORM OF PAYMENT
Each award to recipients shall be paid
in cash in a single lump sum. The Company shall withhold all required taxes and charges from an award, including any federal, state, local or other taxes and social insurance contributions. Amounts will be determined by the Company in U.S. dollars,
but may be paid to employees outside the United States in local currency.
PLAN ADMINISTRATION
The Plan is discretionary in nature, and the Compensation Committee may suspend, modify or terminate the 2015 AIP at any time without advance notice. The CEO
of the Company, or the
Compensation Committee with respect to the Company’s executive officer participants in the Plan, will have the final decision over any interpretations or disputes regarding the 2015 AIP. All
determinations and decisions made by the Compensation Committee, the Board of Directors, or the CEO pursuant to the provisions of the 2015 AIP shall be final, conclusive and binding on all persons and shall be given the maximum deference permitted
by law.
COMPANY PERFORMANCE AND FUNDING OF INCENTIVE POOL
The funding level of the incentive pool under the 2015 AIP (the “Incentive Pool”) will be based on Company performance against revenue and adjusted
funds from operations (“AFFO”) goals, as set forth in the Board of Directors-approved operating plan, adjusted from time to time throughout the plan year. The revenue goal (weighted at 50%) and the AFFO goal (weighted at 50%) will exclude
the impact of one-time events affecting the operating plan, such as expansion projects or acquisitions not contemplated in the operating plan, and will exclude the impact of fluctuations in foreign currencies against the foreign currency rates
applied in the FY2015 budget. The specific revenue and AFFO goals for FY15 shall be as set forth on a “Design Criteria” matrix, established prior to the end of the first quarter of the year.
The Design Criteria shall be as follows:
One hundred
percent (100%) of the Incentive Pool shall be funded if the Company hits its operating plan for revenue and AFFO for FY15, subject to the discretion retained by the Compensation Committee to reduce or eliminate the actual award that otherwise
would be payable based upon achieving this goal. For every 1% below operating plan for revenue, the revenue portion of the Incentive Pool shall be reduced by 20% and for every 1% below operating plan for AFFO, the AFFO portion of the Incentive
Pool shall be reduced by 20%. For instance, if the Company is 2% below operating plan for AFFO, only 60% of the AFFO portion of the Incentive Pool shall be funded. There shall be no Incentive Pool if revenue and AFFO are 95% or less of
the approved operating plan.
MISCELLANEOUS
Nothing in the 2015 AIP shall interfere with or limit in any way the right of the Company or its subsidiary or affiliate, as applicable, to terminate any
employee’s employment or service at any time, with or without cause. Except to the extent provided by applicable law or pursuant to a written agreement between the employee and the Company or its subsidiary or affiliate, employment with the
Company or its subsidiary or affiliates is on an at-will basis only. Nothing in this 2015 AIP shall constitute an employment agreement between an employee and the Company.
Each award that may become payable under the 2015 AIP shall be paid solely from the general assets of the Company. No amounts awarded or accrued under the
Plan shall be funded, set aside, subject to interest payment or otherwise segregated prior to payment. The obligation to pay awards under the 2015 AIP shall at all times be an unfunded and unsecured obligation of the Company. Employees shall have
the status of general creditors of the Company. Any bonus or award payable under the 2015 AIP is voluntary and occasional and does not create any contractual or other right to receive grants in future years or benefits in lieu of such awards.
The 2015 AIP and all awards shall be construed in accordance with and governed by the laws of the State of California, without regard to their conflict-of-law
provisions.
EXHIBIT 10.50
EQUINIX, INC. 2000 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD
FOR EXECUTIVES
You have been granted the number of restricted stock units (“Restricted Stock Units”) indicated below by Equinix, Inc. (the “Company”) on
the following terms:
Name:
Employee Id #:
Restricted Stock Unit Award Details:
Date of Grant:
Award Number:
Minimum Restricted Stock Units (0%):
Target Restricted Stock Units (83%):
Max Restricted Stock Units
(100%):
Each Restricted Stock Unit represents the right to receive one share of the Common Stock of the Company, and any Dividend Equivalents thereon
prior to settlement, subject to the terms and conditions contained in this Notice of Restricted Stock Unit Award for Executives and the Restricted Stock Unit Agreement (together, the “Agreement”). Capitalized terms not otherwise defined in
this Agreement shall have the meaning set forth in the 2000 Equity Incentive Plan (the “Plan”).
Vesting Schedule:
Vesting is dependent upon continuous active service as an employee, consultant or director of the Company or a subsidiary of the Company (“Service”)
throughout the vesting period. The Restricted Stock Units shall vest on the first Trading Day that coincides with or follows a determination that the Company achieves revenue and/or adjusted funds from operations (“AFFO”) goals for 2015 of
greater than $ million and $ million, respectively, as set forth on the attached Exhibit A, and if
achieved, then the Restricted Stock Units, and any Dividend Equivalents thereon, shall vest in a number of shares determined based on the degree of achievement of the revenue and AFFO targets as set forth on the matrix attached as Exhibit A,
and at the following times:
| |
• |
|
with respect to 50% of those units on the first Trading Day that coincides with or follows the date upon which the Board, or a committee thereof, certifies that the Company has achieved revenue and/or AFFO goals of
greater than $ million and $ million, respectively, for 2015; |
| |
• |
|
with respect to 25% of those units on February 15, 2017; and |
| |
• |
|
with respect to the remaining 25% of those units on February 15, 2018. |
The revenue and AFFO goals set
forth above will exclude the impact of fluctuations in foreign currencies against the foreign currency rates used in the Company’s 2015 operating plan.
The Board, or a committee thereof, may adjust the revenue and AFFO goals set forth above from time to time prior to the 2015 fiscal year end to take into
account the financial impacts of discontinued operations, the cumulative effect of accounting changes, acquisitions or divestitures, sales of assets and/or IBX expansions not currently contemplated by the Company.
Any Restricted Stock Units, and Dividend Equivalents thereon, that fail to vest based on the Company’s achievement of revenue and AFFO goals based on the
matrix set forth on Exhibit A hereto shall be forfeited to the Company immediately following the certification by the Board, or a committee thereof, of the Company’s achievement of the revenue and AFFO goals for 2015.
In the event of a Change in Control before the end of the 2015 fiscal year, vesting of these Restricted Stock Units, and any Dividend Equivalent thereon,
shall no longer be dependent on achievement of the revenue and AFFO goals described above. Instead, subject to your continued Service through the applicable vesting date, 50% of the Target Restricted Stock Units, and
any Dividend Equivalent thereon, will vest on February 15, 2016, 25% of the Target Restricted Stock Units, and any Dividend Equivalent thereon, will vest on February 15, 2017 and the
remaining 25% of the Target Restricted Stock Units, and any Dividend Equivalent thereon, will vest on February 15, 2018. The remaining Restricted Stock Units, and any Dividend Equivalents thereon, shall be forfeited to the Company (and such
forfeited Restricted Stock Units, and any Dividend Equivalents thereon, will not accelerate in the event this Award is not assumed or substituted with a new award).
By your signature and the signature of the Company’s representative below, you and the Company agree that the Restricted Stock Units, and any Dividend
Equivalents thereon, are granted under and governed by the terms and conditions of the Plan and the Agreement that is attached to and made a part of this document.
You further agree that the Company may deliver by email all documents relating to the Plan or this Award (including, without limitation, prospectuses required
by the U.S. Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements). You also agree that the Company may deliver
these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a web site, it will notify you by email.
By your signature below, you agree to cover all Tax-Related Items as defined in the Agreement.
|
|
|
|
|
|
|
|
|
| RECIPIENT: |
|
|
|
|
|
EQUINIX, INC. |
|
|
|
|
|
| Signature: |
|
|
|
|
|
By: |
|
|
|
|
|
|
|
| Print Name: |
|
|
|
|
|
Title: |
|
|
|
|
|
|
|
| Date: |
|
|
|
|
|
|
|
|
EQUINIX, INC. 2000 EQUITY INCENTIVE
PLAN
RESTRICTED STOCK UNIT AGREEMENT
| Payment for Shares |
No payment is required for the Restricted Stock Units, and any Dividend Equivalents thereon, you receive. |
| Vesting |
The Restricted Stock Units, and any Dividend Equivalents thereon, that you are receiving will vest in accordance with the Vesting Schedule stated in the Notice of Restricted Stock Unit Award for Executives; provided, however, that if your
Service terminates due to your death then, if and to the extent Restricted Stock Units, and any Dividend Equivalent thereon, have been earned based on the actual performance results as certified by the Board, or a committee thereof, based on the
matrix set forth on Exhibit A hereto, the portion of the Restricted Stock Units, and any Dividend Equivalents thereon, that would have become vested on the next scheduled vesting date will become vested and the underlying shares (and cash
equal to the Dividend Equivalents thereon) will be released to your estate not more than 3 1⁄2 months following such termination of Service but in any event
not later than March 15 of the calendar year following your death. |
| |
No additional Restricted Stock Units, or any Dividend Equivalents thereon, vest after your Service has terminated for any reason. It is intended that vesting in the Restricted Stock Units, and any Dividend Equivalents
thereon, is commensurate with a full-time work schedule. For possible adjustments that may be made by the Company, see the provision below entitled “Leaves of Absence and Part-Time Work.” |
| Dividend Equivalents |
You will be credited with Dividend Equivalents equal to the dividends you would have received if you had been the record owner of the Common Stock underlying the Restricted Stock Units on
each dividend record date on or after the Date of Grant and through the date you receive a settlement pursuant to the provision below entitled “Settlement of Units” (the “Dividend Equivalent”). Dividend Equivalents shall be
subject to the same terms and conditions as the Restricted Stock Units originally awarded pursuant to this Agreement, and they shall vest (or, if applicable, be forfeited) as if they had been granted at the same time as the original Restricted Stock
Unit award. If a dividend on the Common Stock is payable wholly or partially in Common Stock, the Dividend Equivalent representing that portion shall be in the form of additional Restricted Stock Units, credited on a one-for-one basis. If a dividend
on our Common Stock is payable wholly or partially in cash, the Dividend Equivalent representing that portion shall be in the form of cash, which will be paid to you, without interest, as described below in the provision “Settlement of
Units;” |
4
| |
provided, however, that the Committee may, in its discretion, provide that the cash portion of any extraordinary distribution on the Common Stock shall be in the form of additional Restricted
Stock Units. If a dividend on our Common Stock is payable wholly or partially in other than cash or Common Stock, the Committee may, in its discretion, provide for such Dividend Equivalents with respect to that portion as it deems appropriate under
the circumstances. |
| Settlement of Units |
Each Restricted Stock Unit, and any Dividend Equivalents thereon, will be settled on the first Trading Day that occurs on or after the day when the Restricted Stock Unit vests. However, each Restricted Stock Unit, and any Dividend Equivalents
thereon, must be settled not later than the March 15 of the calendar year after the calendar year in which the Restricted Stock Unit vests. |
| |
At the time of settlement, you will receive one share of the Company’s Common Stock for each vested Restricted Stock Unit (no fractional shares will be issued) and an amount of cash, without additional earnings and
rounded to the nearest whole cent, equal to the cash portion of the accumulated Dividend Equivalents applicable to the vested Restricted Stock Units, less any Tax-Related Items withholding. Any cash may be distributed to you directly or may be used
to offset the amount of any Tax-Related Items withholding arising from the vesting/settlement of the Restricted Stock Units and any Dividend Equivalents thereon. |
| Trading Day |
“Trading Day” means a day that satisfies each of the following requirements: |
| |
• |
|
The Nasdaq Global Market is open for trading on that day; |
| |
• |
|
You are permitted to sell shares of Common Stock on that day without incurring liability under Section 16(b) of the Securities Exchange Act; |
| |
• |
|
Either (a) you are not in possession of material non-public information that would make it illegal for you to sell shares of the Company’s Common Stock on that day under Rule 10b-5 of the U.S. Securities
and Exchange Commission or (b) you have a trading plan that complies with the requirements of Rule 10b5-1(c)(1) of the Securities Exchange Act that covers the shares underlying the vesting Restricted Stock Units; |
| |
• |
|
Under the Company’s Insider Trading Policy, you are permitted to sell shares of Common Stock on that day, and |
| |
• |
|
You are not prohibited from selling shares of Common Stock on that day by a written agreement between you and the Company or a third party. |
5
| Change in Control |
Except to the extent set forth in the Notice of Restricted Stock Unit Award, in the event of any Change in Control, vesting of these Restricted Stock Units, and any Dividend Equivalents thereon, will automatically accelerate in full as described
in Article X of the Plan. However, vesting of these Restricted Stock Units, and any Dividend Equivalents thereon, will not automatically accelerate if and to the extent these Restricted Stock Units are, in connection with the Change in
Control, either to be assumed by the successor corporation (or its parent) or to be replaced with a comparable award for shares of the capital stock of the successor corporation (or its parent). The determination of award comparability will be made
by the Committee, and its determination will be final, binding and conclusive. |
| |
In addition, you will vest as to 50% of the unvested Restricted Stock Units, and any Dividend Equivalents thereon, if the Company is subject to a Change in Control before your Service terminates, and you are subject to
a Qualifying Termination (as defined below) within 12 months after the Change in Control. |
| |
Notwithstanding the foregoing, any action taken in connection with a Change in Control must either (a) preserve the exemption of the Restricted Stock Units, and any Dividend Equivalents thereon, from
Section 409A of the Code or (b) comply with Section 409A of the Code. |
| Qualifying Termination |
A Qualifying Termination means a Separation (as defined below) resulting from: (a) involuntary discharge for any reason other than Cause (as defined below) within 12 months after a Change in Control; or (b) your voluntary resignation for Good
Reason (as defined below), between the date that is four months following a Change in Control and the date that is 12 months following a Change in Control; provided, however, that the grounds for Good Reason may arise at any time within the 12
months following the Change in Control. |
| |
Cause means your unauthorized use or disclosure of trade secrets that causes material harm to the Company, your conviction of, or a plea of “guilty” or “no contest” to, a felony or your gross
misconduct. |
| |
Good Reason means1: (i) a material diminution in your authority, duties or responsibilities; (ii) a material reduction in your level of |
| 1 |
Executives other than the CEO, CFO, CLO and CHRO shall have the following definition of “Good Reason”: (i) a material diminution in
your authority, duties or responsibilities, provided, however, if by virtue of the Company being acquired and made a division or business unit of a larger entity following a Change in Control, you retain substantially similar authority,
duties or responsibilities for such division or business unit of the acquiring corporation but not for the entire acquiring corporation, such reduction in authority, duties or responsibilities shall not constitute Good Reason for purposes of
this subclause (i); (ii) a 10% or greater reduction in your level of compensation, which will be determined based on an average of your annual Total Direct Compensation for the prior three calendar years or, if less, the number of years you
have been employed by the Company (referred to below as the “look-back years”); or (iii) a relocation of your place of employment by more than 30 miles, provided and only if such change, reduction or relocation is effected by the
Company without your consent. For purposes of the foregoing, Total Direct Compensation means total target cash compensation (annual base salary plus target annual cash incentives) plus the grant value of equity awards, determined at the time of
grant, based on the total stock compensation (FAS 123R) expense associated with that award; provided, however, that if you commenced employment with the Company during the look-back years, only one-third of the grant value of the equity grant
attributable to commencement of employment shall be counted. |
6
| |
compensation (including base salary and target bonus) other than pursuant to a Company-wide reduction of compensation where the reduction affects the other executive officers and your reduction
is substantially equal, on a percentage basis, to the reduction of the other executive officers; or (iii) a relocation of your place of employment by more than 30 miles, provided and only if such change, reduction or relocation is effected by the
Company without your consent. |
| |
For vesting to accelerate as a result of a voluntary resignation for Good Reason, all of the following requirements must be satisfied: (1) you must provide notice to the Company of your intent to assert Good Reason
within 120 days of the initial existence of one or more of the conditions set forth in (i) through (iii) of the preceding paragraph; and (2) the Company will have 30 days from the date of such notice to remedy the condition and, if it does so, you
may withdraw your resignation or may resign with no acceleration benefit. Should the Company remedy the condition as set forth above and then one or more of the conditions arises again within 12 months following the occurrence of a Change in
Control, you may assert Good Reason again subject to all of the conditions set forth herein. |
| |
Separation means a “separation from service,” as defined in the regulations under Section 409A of the Code. |
| Forfeiture |
If your Service terminates for any reason, then your Restricted Stock Units, and any Dividend Equivalents thereon, will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the
termination (including as a result of a Qualifying Termination). This means that the Restricted Stock Units, and any Dividend Equivalents thereon, will immediately revert to the Company. You receive no payment for Restricted Stock Units, and any
Dividend Equivalents thereon, that are forfeited. The Company determines when your Service terminates for this purpose. |
| Leaves of Absence and Part-Time Work |
For purposes of this Award, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing. But your Service terminates when the
approved leave ends, unless you immediately return to active work. |
7
| |
If you go on a leave of absence that lasts or is expected to last seven days or longer, then vesting will be suspended during the leave to the extent provided for in the Company’s leave policy. Upon your return to
active work (as determined by the Company), vesting will resume; however, unless otherwise provided in the Company’s leave policy, you will not receive credit for any vesting until you work an amount of time equal to the period of your leave.
|
| |
If you and the Company agree to a reduction in your scheduled work hours, then the Company reserves the right to modify the rate at which the Restricted Stock Units, and any Dividend Equivalents thereon, vest, so that
the rate of vesting is commensurate with your reduced work schedule. Any such adjustment shall be consistent with the Company’s policies for part-time or reduced work schedules or shall be pursuant to the terms of an agreement between you and
the Company pertaining to your reduced work schedule. |
| |
The Company shall not be required to adjust any vesting schedule pursuant to this provision. |
| Settlement / Stock Certificates |
No shares of Common Stock shall be issued to you prior to the date on which the Restricted Stock Units vest. After any Restricted Stock Units vest pursuant to this Agreement, the Company shall promptly cause to be issued in book-entry form,
registered in your name or in the name of your legal representatives or heirs, as the case may be, the number of shares of Common Stock representing your vested Restricted Stock Units. No fractional shares shall be issued. |
| Section 409A |
This provision applies only if the Company determines that you are a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of your “separation from service,” as defined in those
regulations. If this paragraph applies, then any Restricted Stock Units, and any Dividend Equivalents thereon, that otherwise would have been settled or paid during the first six months following your separation from service will instead be settled
or paid on the first business day following the six-month anniversary of your separation from service, unless the settlement of those units is exempt from Section 409A of the Code. |
| Stockholder Rights |
The Restricted Stock Units do not entitle you to any of the rights of a stockholder of the Company. Your rights, including rights to any Dividend Equivalents, shall remain forfeitable at all times prior to the date on which you vest in your
Award. Upon settlement of the Restricted Stock Units into shares of Common Stock, you will obtain full voting and other rights as a stockholder of the Company. |
| Units Restricted |
You may not sell, transfer, pledge or otherwise dispose of any Restricted Stock Units or rights under this Agreement other than by will or by the laws of descent and distribution. |
8
| Withholding Taxes |
Regardless of any action the Company and/or, if different, your employer (the “Employer”) take with respect to any or all income tax (including U.S. federal, state and local tax and/or non-U.S. tax), social insurance, payroll tax,
payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or the
Employer: (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Restricted Stock Units, including the award of the Restricted Stock Units, the vesting of the Restricted
Stock Units, the issuance of shares of Common Stock in settlement of the Restricted Stock Units, the subsequent sale of shares acquired at vesting and the receipt of any Dividend Equivalents and dividends; and (b) do not commit to structure the
terms of this Award or any aspect of the Restricted Stock Units to reduce or eliminate your liability for Tax-Related Items. Prior to the relevant taxable event, you shall pay or make adequate arrangements satisfactory to the Company and/or the
Employer to satisfy all withholding obligations for Tax-Related Items of the Company and/or the Employer. With the Company’s consent, these arrangements may include (i) withholding from any cash Dividend Equivalents or shares of Company
stock that otherwise would be issued to you when they vest, (ii) surrendering shares that you previously acquired or (iii) deducting the withholding taxes from any cash compensation payable to you. The fair market value of the shares you
surrender, determined as of the date taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. |
| |
The Company may refuse to deliver the shares of Common Stock to you if you fail to comply with your obligations in connection with the Tax-Related Items as described in this provision. |
| Restrictions on Resale |
You agree not to sell any shares of Common Stock you receive under this Agreement at a time when applicable laws, regulations, Company trading policies (including the Company’s Insider Trading Policy, a copy of which can be found on the
Company’s intranet) or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may
specify. |
| No Retention Rights |
Except to the extent provided specifically in an agreement between you and the Company, neither this Award nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary of the Company in any capacity; the
Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause. |
9
| |
In accepting this Award, you acknowledge that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified,
amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Agreement; (b) the Award is voluntary and occasional and does not create any contractual or other right to receive future awards of
Restricted Stock Units, and any Dividend Equivalents thereon, or benefits in lieu of Restricted Stock Units, and any Dividend Equivalents thereon, even if Restricted Stock Units have been granted repeatedly in the past; (c) all decisions with
respect to future awards, if any, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) your participation in the Plan shall not create a right to further employment with your Employer and shall not
interfere with the ability of your Employer to terminate your Service at any time with or without cause; (f) the Award is an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or any
subsidiary of the Company, and that is outside the scope of your employment or service contract, if any; (g) the Award is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculation of any
severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way
to, past services for the Company or any subsidiary of the Company; (h) in the event that you are not an employee of the Company, the Award and your participation in the Plan will not be interpreted to form an employment or service contract or
relationship with the Company and, furthermore, the Award and your participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Employer or any other subsidiary of the Company; (i) the future
value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty; (j) in consideration of the Award, no claim or entitlement to compensation or damages shall arise from termination of the Award or from any diminution
in value of the Award or shares of Common Stock acquired upon vesting of the Award resulting from termination of Service (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release the Company and any
subsidiary of the Company from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, you shall be deemed irrevocably to have
waived your entitlement to pursue such claim; (k) the Company is not providing any tax, legal or financial |
10
| |
advice, nor is the Company making any recommendations regarding your participation in the Plan or your acquisition or sale of the underlying shares of Common Stock; and (l) you are hereby advised
to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan. |
| Adjustments |
In the event of a stock split, a stock dividend or a similar change in Company stock, the number of Restricted Stock Units that will vest in any future installments will be adjusted accordingly, as provided for in the Plan. |
| Insider Trading Restrictions / Market Abuse Laws |
You acknowledge that, depending on your country of residence, you may be subject to insider trading restrictions and/or market abuse laws, which may affect your ability to acquire or sell shares of Common Stock or rights to shares of Common
Stock under the Plan during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in your country). Any restrictions under these laws or regulations are separate from and in addition to
any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions and that you are advised to speak to your personal legal advisor on
this matter. |
| Severability |
The provisions of this Agreement are severable and if any one or more provisions are determined to be invalid or otherwise enforceable, in whole or in part, the remaining provisions shall continue in effect. |
| Applicable Law |
This Agreement will be interpreted and enforced with respect to issues of contract law under the laws of the State of Delaware (except their choice of law provisions). |
| |
For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or this Agreement, the parties hereby submit to and consent to the exclusive
jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of San Mateo County, California, U.S.A. or the federal courts for the United States for the Northern District of California, and no other
courts, where this grant is made and/or to be performed. |
| The Plan and Other Agreements |
The text of the Plan is incorporated in this Agreement by reference. A copy of the Plan is available on the Company’s intranet or by request to the Stock Services Department. |
| |
This Agreement and the Plan constitute the entire understanding between you and the Company regarding this Award. Any prior agreements,
|
11
| |
commitments or negotiations concerning this Award are superseded. This Agreement may be amended only by another written agreement between the parties. |
BY SIGNING THE NOTICE OF RESTRICTED
STOCK UNIT AWARD, YOU AGREE TO
ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.
12
Exhibit A
EXHIBIT 10.51
EQUINIX, INC. 2000 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD
FOR EXECUTIVES
You have been granted the number of restricted stock units (“Restricted Stock Units”) indicated below by Equinix, Inc. (the “Company”) on
the following terms:
Name:
Employee Id #:
Restricted Stock Unit Award Details:
Date of Grant:
Award Number:
Minimum Restricted Stock Units (0%):
Target Restricted Stock Units (100%):
Max Restricted Stock Units
(200%):
|
|
|
| Performance Period: |
|
January 1, 2015 through December 31,
2017 |
Each Restricted Stock Unit represents the right to receive one share of the Common Stock of the Company, and any Dividend
Equivalents thereon prior to settlement, subject to the terms and conditions contained in this Notice of Restricted Stock Unit Award for Executives and the Restricted Stock Unit Agreement (together, the “Agreement”). Capitalized terms not
otherwise defined in this Agreement shall have the meaning set forth in the 2000 Equity Incentive Plan (the “Plan”).
Vesting Schedule:
Vesting is dependent upon continuous active service as an employee, consultant or director of the Company or a subsidiary of the Company
(“Service”) throughout the vesting period.
The Restricted Stock Units, and any Dividend Equivalents thereon, shall vest in a number of shares
determined based on the total shareholder return (“TSR”) of the Company’s Common Stock (“EQIX”) against the IWB Russell 1000 Index Fund (the “Index”), calculated using the 30-day trading averages for both EQIX and
the Index prior to the start (January 1, 2015) and end (December 31, 2017) of the Performance Period, and including the reinvestment of regular dividends paid by the Company and by the Index after January 1, 2015; provided both the Company and
the Index are paying regular dividends. EQIX performance above and below that of the Index results in the scaling set forth on Exhibit A hereto. The number of Restricted Stock Units, and any Dividend Equivalents thereon, vesting under the
award may range from 0% to 200% of the Target Restricted Stock Units as further illustrated on the attached Exhibit A.
Vesting shall occur on the
first Trading Day that coincides with or follows the date upon which the Board, or a committee thereof, certifies the TSR over the Performance Period. Any Restricted Stock Units, and Dividend Equivalents thereon, that fail to vest based on the
Company’s TSR achievement shall be forfeited to the Company.
In the event of a Change in Control before the end of the 2017 fiscal year, the
Performance Period shall be deemed terminated as of the effective date of the Change in Control (the “Shortened Performance Period”), such that TSR shall be calculated against the Index using the 30-day trading averages for both EQIX and
the Index at the start and end of the Shortened Performance Period, including reinvested dividends (provided both the Company and the Index are paying regular dividends), to determine the number of the Restricted Stock Units, and any Dividend
Equivalents thereon, that are deemed earned in an amount ranging from 0% to 200% as further illustrated on the attached Exhibit A, but that will remain unvested until December 31, 2017, except as otherwise provided in the Plan and the
Agreement. The remaining unearned Restricted Stock Units, and Dividend Equivalents thereon, shall be forfeited to the Company upon such Change in Control (and such forfeited Restricted Stock Units, and any Dividend Equivalents thereon, will not
accelerate in the event this Award is not assumed or substituted with a new award).
By your signature and the signature of the Company’s
representative below, you and the Company agree that the Restricted Stock Units, and any Dividend Equivalents thereon, are granted under and governed by the terms and conditions of the Plan and the Agreement that is attached to and made a part of
this document.
You further agree that the Company may deliver by email all documents relating to the Plan or this Award
(including, without limitation, prospectuses required by the U.S. Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy
statements). You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a web site, it will notify
you by email.
By your signature below, you agree to cover all Tax-Related Items as defined in the Agreement.
|
|
|
|
|
|
|
|
|
| RECIPIENT: |
|
|
|
|
|
EQUINIX, INC. |
|
|
|
|
|
| Signature: |
|
|
|
|
|
By: |
|
|
|
|
|
|
|
| Print Name: |
|
|
|
|
|
Title: |
|
|
|
|
|
|
|
| Date: |
|
|
|
|
|
|
|
|
EQUINIX, INC. 2000 EQUITY INCENTIVE
PLAN
RESTRICTED STOCK UNIT AGREEMENT
| Payment for Shares |
No payment is required for the Restricted Stock Units, and any Dividend Equivalents thereon, you receive. |
| Vesting |
The Restricted Stock Units, and any Dividend Equivalents thereon, that you are receiving will vest in accordance with the Vesting Schedule stated in the Notice of Restricted Stock Unit Award for Executives; provided, however, that if your
Service terminates due to your death then, if and to the extent Restricted Stock Units, and any Dividend Equivalent thereon, have been earned based on the actual performance results as certified by the Board, or a committee thereof, based on the
matrix set forth on Exhibit A hereto, the portion of the Restricted Stock Units, and any Dividend Equivalents thereon, that would have become vested on the next scheduled vesting date will become vested and the underlying shares (and cash
equal to the Dividend Equivalents thereon) will be released to your estate not more than 3 1⁄2 months following such termination of Service but in any event
not later than March 15 of the calendar year following your death. |
| |
No additional Restricted Stock Units, or any Dividend Equivalents thereon, vest after your Service has terminated for any reason. It is intended that vesting in the Restricted Stock Units, and any Dividend Equivalents
thereon, is commensurate with a full-time work schedule. For possible adjustments that may be made by the Company, see the provision below entitled “Leaves of Absence and Part-Time Work.” |
| Dividend Equivalents |
You will be credited with Dividend Equivalents equal to the dividends you would have received if you had been the record owner of the Common Stock underlying the Restricted Stock Units on
each dividend record date on or after the Date of Grant and through the date you receive a settlement pursuant to the provision below entitled “Settlement of Units” (the “Dividend Equivalent”). Dividend Equivalents shall be
subject to the same terms and conditions as the Restricted Stock Units originally awarded pursuant to this Agreement, and they shall vest (or, if applicable, be forfeited) as if they had been granted at the same time as the original Restricted Stock
Unit award. If a dividend on the Common Stock is payable wholly or partially in Common Stock, the Dividend Equivalent representing that portion shall be in the form of additional Restricted Stock Units, credited on a one-for-one basis. If a dividend
on our Common Stock is payable wholly or partially in cash, the Dividend Equivalent representing that portion shall be in the form of cash, which will be paid to you, without interest, as described below in the provision “Settlement of
Units;” |
4
| |
provided, however, that the Committee may, in its discretion, provide that the cash portion of any extraordinary distribution on the Common Stock shall be in the form of additional Restricted
Stock Units. If a dividend on our Common Stock is payable wholly or partially in other than cash or Common Stock, the Committee may, in its discretion, provide for such Dividend Equivalents with respect to that portion as it deems appropriate under
the circumstances. |
| Settlement of Units |
Each Restricted Stock Unit, and any Dividend Equivalents thereon, will be settled on the first Trading Day that occurs on or after the day when the Restricted Stock Unit vests. However, each Restricted Stock Unit, and any Dividend Equivalents
thereon, must be settled not later than the March 15 of the calendar year after the calendar year in which the Restricted Stock Unit vests. |
| |
At the time of settlement, you will receive one share of the Company’s Common Stock for each vested Restricted Stock Unit (no fractional shares will be issued) and an amount of cash, without additional earnings and
rounded to the nearest whole cent, equal to the cash portion of the accumulated Dividend Equivalents applicable to the vested Restricted Stock Units, less any Tax-Related Items withholding. Any cash may be distributed to you directly or may be used
to offset the amount of any Tax-Related Items withholding arising from the vesting/settlement of the Restricted Stock Units and any Dividend Equivalents thereon. |
| Trading Day |
“Trading Day” means a day that satisfies each of the following requirements: |
| |
• |
|
The Nasdaq Global Market is open for trading on that day; |
| |
• |
|
You are permitted to sell shares of Common Stock on that day without incurring liability under Section 16(b) of the Securities Exchange Act; |
| |
• |
|
Either (a) you are not in possession of material non-public information that would make it illegal for you to sell shares of the Company’s Common Stock on that day under Rule 10b-5 of the U.S. Securities
and Exchange Commission or (b) you have a trading plan that complies with the requirements of Rule 10b5-1(c)(1) of the Securities Exchange Act that covers the shares underlying the vesting Restricted Stock Units; |
| |
• |
|
Under the Company’s Insider Trading Policy, you are permitted to sell shares of Common Stock on that day, and |
| |
• |
|
You are not prohibited from selling shares of Common Stock on that day by a written agreement between you and the Company or a third party. |
5
| Change in Control |
Except to the extent set forth in the Notice of Restricted Stock Unit Award, in the event of any Change in Control, vesting of these Restricted Stock Units, and any Dividend Equivalents thereon, will automatically accelerate in full as described
in Article X of the Plan. However, vesting of these Restricted Stock Units, and any Dividend Equivalents thereon, will not automatically accelerate if and to the extent these Restricted Stock Units are, in connection with the Change in
Control, either to be assumed by the successor corporation (or its parent) or to be replaced with a comparable award for shares of the capital stock of the successor corporation (or its parent). The determination of award comparability will be made
by the Committee, and its determination will be final, binding and conclusive. |
| |
In addition, you will vest as to 50% of the unvested Restricted Stock Units, and any Dividend Equivalents thereon, if the Company is subject to a Change in Control before your Service terminates, and you are subject to
a Qualifying Termination (as defined below) within 12 months after the Change in Control. |
| |
Notwithstanding the foregoing, any action taken in connection with a Change in Control must either (a) preserve the exemption of the Restricted Stock Units, and any Dividend Equivalents thereon, from
Section 409A of the Code or (b) comply with Section 409A of the Code. |
| Qualifying Termination |
A Qualifying Termination means a Separation (as defined below) resulting from: (a) involuntary discharge for any reason other than Cause (as defined below) within 12 months after a Change in Control; or (b) your voluntary resignation
for Good Reason (as defined below), between the date that is four months following a Change in Control and the date that is 12 months following a Change in Control; provided, however, that the grounds for Good Reason may arise at any time within the
12 months following the Change in Control. |
| |
Cause means your unauthorized use or disclosure of trade secrets that causes material harm to the Company, your conviction of, or a plea of “guilty” or “no contest” to, a felony or your gross
misconduct. |
| |
Good Reason means1: (i) a material diminution in your authority, duties or responsibilities; (ii) a material reduction in your level of |
| 1 |
Executives other than the CEO, CFO, CLO and CHRO shall have the following definition of “Good Reason”: (i) a material diminution in your authority, duties or responsibilities, provided, however, if
by virtue of the Company being acquired and made a division or business unit of a larger entity following a Change in Control, you retain substantially similar authority, duties or responsibilities for such division or business unit of the
acquiring corporation but not for the entire acquiring corporation, such reduction in authority, duties or responsibilities shall not constitute Good Reason for purposes of this subclause (i); (ii) a 10% or greater reduction in your level
of compensation, which will be determined based on an average of your annual Total Direct Compensation for the prior three calendar years or, if less, the number of years you have been employed by the Company (referred to below as the
“look-back years”); or (iii) a relocation of your place of employment by more than 30 miles, provided and only if such change, reduction or relocation is effected by the Company without your consent. For purposes of the foregoing,
Total Direct Compensation means total target cash compensation (annual base salary plus target annual cash incentives) plus the grant value of equity awards, determined at the time of grant, based on the total stock compensation (FAS 123R) expense
associated with that award; provided, however, that if you commenced employment with the Company during the look-back years, only one-third of the grant value of the equity grant attributable to commencement of employment shall be counted.
|
6
| |
compensation (including base salary and target bonus) other than pursuant to a Company-wide reduction of compensation where the reduction affects the other executive officers and your reduction is substantially equal,
on a percentage basis, to the reduction of the other executive officers; or (iii) a relocation of your place of employment by more than 30 miles, provided and only if such change, reduction or relocation is effected by the Company without your
consent. |
| |
For vesting to accelerate as a result of a voluntary resignation for Good Reason, all of the following requirements must be satisfied: (1) you must provide notice to the Company of your intent to assert Good Reason
within 120 days of the initial existence of one or more of the conditions set forth in (i) through (iii) of the preceding paragraph; and (2) the Company will have 30 days from the date of such notice to remedy the condition and, if it
does so, you may withdraw your resignation or may resign with no acceleration benefit. Should the Company remedy the condition as set forth above and then one or more of the conditions arises again within 12 months following the occurrence of a
Change in Control, you may assert Good Reason again subject to all of the conditions set forth herein. |
| |
Separation means a “separation from service,” as defined in the regulations under Section 409A of the Code. |
| Forfeiture |
If your Service terminates for any reason, then your Restricted Stock Units, and any Dividend Equivalents thereon, will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the
termination (including as a result of a Qualifying Termination). This means that the Restricted Stock Units, and any Dividend Equivalents thereon, will immediately revert to the Company. You receive no payment for Restricted Stock Units, and any
Dividend Equivalents thereon, that are forfeited. The Company determines when your Service terminates for this purpose. |
| Leaves of Absence and Part-Time Work |
For purposes of this Award, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing. But your Service terminates when the
approved leave ends, unless you immediately return to active work. |
| |
If you go on a leave of absence that lasts or is expected to last seven |
7
| |
days or longer, then vesting will be suspended during the leave to the extent provided for in the Company’s leave policy. Upon your return to active work (as determined by the Company), vesting will resume;
however, unless otherwise provided in the Company’s leave policy, you will not receive credit for any vesting until you work an amount of time equal to the period of your leave. |
| |
If you and the Company agree to a reduction in your scheduled work hours, then the Company reserves the right to modify the rate at which the Restricted Stock Units, and any Dividend Equivalents thereon, vest, so that
the rate of vesting is commensurate with your reduced work schedule. Any such adjustment shall be consistent with the Company’s policies for part-time or reduced work schedules or shall be pursuant to the terms of an agreement between you and
the Company pertaining to your reduced work schedule. |
| |
The Company shall not be required to adjust any vesting schedule pursuant to this provision. |
| Settlement / Stock Certificates |
No shares of Common Stock shall be issued to you prior to the date on which the Restricted Stock Units vest. After any Restricted Stock Units vest pursuant to this Agreement, the Company shall promptly cause to be issued in book-entry form,
registered in your name or in the name of your legal representatives or heirs, as the case may be, the number of shares of Common Stock representing your vested Restricted Stock Units. No fractional shares shall be issued. |
| Section 409A |
This provision applies only if the Company determines that you are a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of your “separation from service,” as defined in those
regulations. If this paragraph applies, then any Restricted Stock Units, and any Dividend Equivalents thereon, that otherwise would have been settled or paid during the first six months following your separation from service will instead be settled
or paid on the first business day following the six-month anniversary of your separation from service, unless the settlement of those units is exempt from Section 409A of the Code. |
| Stockholder Rights |
The Restricted Stock Units do not entitle you to any of the rights of a stockholder of the Company. Your rights, including rights to any Dividend Equivalents, shall remain forfeitable at all times prior to the date on which you vest in your
Award. Upon settlement of the Restricted Stock Units into shares of Common Stock, you will obtain full voting and other rights as a stockholder of the Company. |
| Units Restricted |
You may not sell, transfer, pledge or otherwise dispose of any Restricted Stock Units or rights under this Agreement other than by will or by the laws of descent and distribution. |
8
| Withholding Taxes |
Regardless of any action the Company and/or, if different, your employer (the “Employer”) take with respect to any or all income tax (including U.S. federal, state and local tax and/or non-U.S. tax), social insurance, payroll tax,
payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or the
Employer: (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Restricted Stock Units, including the award of the Restricted Stock Units, the vesting of the Restricted
Stock Units, the issuance of shares of Common Stock in settlement of the Restricted Stock Units, the subsequent sale of shares acquired at vesting and the receipt of any Dividend Equivalents and dividends; and (b) do not commit to structure the
terms of this Award or any aspect of the Restricted Stock Units to reduce or eliminate your liability for Tax-Related Items. Prior to the relevant taxable event, you shall pay or make adequate arrangements satisfactory to the Company and/or the
Employer to satisfy all withholding obligations for Tax-Related Items of the Company and/or the Employer. With the Company’s consent, these arrangements may include (i) withholding from any cash Dividend Equivalents or shares of Company
stock that otherwise would be issued to you when they vest, (ii) surrendering shares that you previously acquired or (iii) deducting the withholding taxes from any cash compensation payable to you. The fair market value of the shares you
surrender, determined as of the date taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. |
| |
The Company may refuse to deliver the shares of Common Stock to you if you fail to comply with your obligations in connection with the Tax-Related Items as described in this provision. |
| Restrictions on Resale |
You agree not to sell any shares of Common Stock you receive under this Agreement at a time when applicable laws, regulations, Company trading policies (including the Company’s Insider Trading Policy, a copy of which can be found on the
Company’s intranet) or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may
specify. |
| No Retention Rights |
Except to the extent provided specifically in an agreement between you and the Company, neither this Award nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary of the Company in any capacity; the
Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause. |
9
| |
In accepting this Award, you acknowledge that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any
time, unless otherwise provided in the Plan and this Agreement; (b) the Award is voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units, and any Dividend Equivalents
thereon, or benefits in lieu of Restricted Stock Units, and any Dividend Equivalents thereon, even if Restricted Stock Units have been granted repeatedly in the past; (c) all decisions with respect to future awards, if any, will be at the sole
discretion of the Company; (d) your participation in the Plan is voluntary; (e) your participation in the Plan shall not create a right to further employment with your Employer and shall not interfere with the ability of your Employer to
terminate your Service at any time with or without cause; (f) the Award is an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or any subsidiary of the Company, and that is
outside the scope of your employment or service contract, if any; (g) the Award is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculation of any severance, resignation, termination,
redundancy, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or
any subsidiary of the Company; (h) in the event that you are not an employee of the Company, the Award and your participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Company and,
furthermore, the Award and your participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Employer or any other subsidiary of the Company; (i) the future value of the underlying shares
of Common Stock is unknown and cannot be predicted with certainty; (j) in consideration of the Award, no claim or entitlement to compensation or damages shall arise from termination of the Award or from any diminution in value of the Award or
shares of Common Stock acquired upon vesting of the Award resulting from termination of Service (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release the Company and any subsidiary of the Company
from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, you shall be deemed irrevocably to have waived your entitlement to
pursue such claim; (k) the Company is not providing any tax, legal or financial |
10
| |
advice, nor is the Company making any recommendations regarding your participation in the Plan or your acquisition or sale of the underlying shares of Common Stock; and (l) you are hereby
advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan. |
| Adjustments |
In the event of a stock split, a stock dividend or a similar change in Company stock, the number of Restricted Stock Units that will vest in any future installments will be adjusted accordingly, as provided for in the Plan. |
| Insider Trading Restrictions / Market Abuse Laws |
You acknowledge that, depending on your country of residence, you may be subject to insider trading restrictions and/or market abuse laws, which may affect your ability to acquire or sell shares of Common Stock or rights to shares of Common
Stock under the Plan during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in your country). Any restrictions under these laws or regulations are separate from and in addition to
any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions and that you are advised to speak to your personal legal advisor on
this matter. |
| Severability |
The provisions of this Agreement are severable and if any one or more provisions are determined to be invalid or otherwise enforceable, in whole or in part, the remaining provisions shall continue in effect. |
| Applicable Law |
This Agreement will be interpreted and enforced with respect to issues of contract law under the laws of the State of Delaware (except their choice of law provisions). |
| |
For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or this Agreement, the parties hereby submit to and consent to the exclusive
jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of San Mateo County, California, U.S.A. or the federal courts for the United States for the Northern District of California, and no other
courts, where this grant is made and/or to be performed. |
| The Plan and Other Agreements |
The text of the Plan is incorporated in this Agreement by reference. A copy of the Plan is available on the Company’s intranet or by request to the Stock Services Department. |
This Agreement and the Plan constitute the entire understanding between you and the Company regarding this Award. Any prior agreements,
11
| |
commitments or negotiations concerning this Award are superseded. This Agreement may be amended only by another written agreement between the parties. |
BY SIGNING THE NOTICE OF RESTRICTED
STOCK UNIT AWARD, YOU AGREE TO
ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.
12
EXHIBIT 10.52
EQUINIX, INC. 2000 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD
FOR EXECUTIVES
You have been granted the number of restricted stock units (“Restricted Stock Units”) indicated below by Equinix, Inc. (the “Company”) on
the following terms:
Name:
Employee Id #:
Restricted Stock Unit Award Details:
Date of Grant:
Award Number:
Number of Restricted Stock Units:
Each Restricted Stock Unit represents the right to receive one share of the Common Stock of the Company, and any Dividend Equivalents thereon prior to
settlement, subject to the terms and conditions contained in this Notice of Restricted Stock Unit Award for Executives and the Restricted Stock Unit Agreement (together, the “Agreement”). Capitalized terms not otherwise defined in this
Agreement shall have the meaning set forth in the 2000 Equity Incentive Plan (the “Plan”).
Vesting Schedule:
Vesting is dependent upon continuous active service as an employee, consultant or director of the Company or a subsidiary of the Company (“Service”)
throughout the vesting period. The Restricted Stock Units, and any Dividend Equivalents thereon, shall vest at the following times:
| |
• |
|
with respect to 33 1/3% of those units on the first Trading Day that coincides with or follows January 15, 2016; |
| |
• |
|
with respect to 33 1/3% of those units on the first Trading Day that coincides with or follows January 15, 2017; and |
| |
• |
|
with respect to 33 1/3% of those units on the first Trading Day that coincides with or follows January 15, 2018. |
By your signature and the signature of the Company’s representative below, you and the Company agree that the Restricted Stock Units, and any Dividend
Equivalents thereon, are granted under and governed by the terms and conditions of the Plan and the Agreement that is attached to and made a part of this document.
You further agree that the Company may deliver by email all documents relating to the Plan or this Award (including, without limitation, prospectuses required
by the U.S. Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements). You also agree that the Company may deliver
these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a web site, it will notify you by email.
By your signature below, you agree to cover all Tax-Related Items as defined in the Agreement.
|
|
|
|
|
|
|
|
|
| RECIPIENT: |
|
|
|
|
|
EQUINIX, INC. |
|
|
|
|
|
| Signature: |
|
|
|
|
|
By: |
|
|
|
|
|
|
|
| Print Name: |
|
|
|
|
|
Title: |
|
|
|
|
|
|
|
| Date: |
|
|
|
|
|
|
|
|
EQUINIX, INC. 2000 EQUITY INCENTIVE
PLAN
RESTRICTED STOCK UNIT AGREEMENT
| Payment for Shares |
No payment is required for the Restricted Stock Units, and any Dividend Equivalents thereon, you receive. |
| Vesting |
The Restricted Stock Units, and any Dividend Equivalents thereon, that you are receiving will vest in accordance with the Vesting Schedule stated in the Notice of Restricted Stock Unit Award for Executives; provided, however, that if your
Service terminates due to your death then the portion of the Restricted Stock Units, and any Dividend Equivalents thereon, that would have become vested on the next scheduled vesting date will become vested and the underlying shares (and cash equal
to the Dividend Equivalents thereon) will be released to your estate not more than 3 1⁄2 months following such termination of Service but in any event not
later than March 15 of the calendar year following your death. |
| |
No additional Restricted Stock Units, or any Dividend Equivalents thereon, vest after your Service has terminated for any reason. It is intended that vesting in the Restricted Stock Units, and any Dividend Equivalents
thereon, is commensurate with a full-time work schedule. For possible adjustments that may be made by the Company, see the provision below entitled “Leaves of Absence and Part-Time Work.” |
| Dividend Equivalents |
You will be credited with Dividend Equivalents equal to the dividends you would have received if you had been the record owner of the Common Stock underlying the Restricted Stock Units on
each dividend record date on or after the Date of Grant and through the date you receive a settlement pursuant to the provision below entitled “Settlement of Units” (the “Dividend Equivalent”). Dividend Equivalents shall be
subject to the same terms and conditions as the Restricted Stock Units originally awarded pursuant to this Agreement, and they shall vest (or, if applicable, be forfeited) as if they had been granted at the same time as the original Restricted Stock
Unit award. If a dividend on the Common Stock is payable wholly or partially in Common Stock, the Dividend Equivalent representing that portion shall be in the form of additional Restricted Stock Units, credited on a one-for-one basis. If a dividend
on our Common Stock is payable wholly or partially in cash, the Dividend Equivalent representing that portion shall be in the form of cash, which will be paid to you, without interest, as described below in the provision “Settlement of
Units;” provided, however, that the Committee may, in its discretion, provide that the cash portion of any extraordinary distribution on the Common Stock shall be in the form of additional Restricted Stock Units. If a
|
| |
dividend on our Common Stock is payable wholly or partially in other than cash or Common Stock, the Committee may, in its discretion, provide for such Dividend Equivalents with respect to that
portion as it deems appropriate under the circumstances. |
| Settlement of Units |
Each Restricted Stock Unit, and any Dividend Equivalents thereon, will be settled on the first Trading Day that occurs on or after the day when the Restricted Stock Unit vests. However, each Restricted Stock Unit, and any Dividend Equivalents
thereon, must be settled not later than the March 15 of the calendar year after the calendar year in which the Restricted Stock Unit vests. |
| |
At the time of settlement, you will receive one share of the Company’s Common Stock for each vested Restricted Stock Unit (no fractional shares will be issued) and an amount of cash, without additional earnings and
rounded to the nearest whole cent, equal to the cash portion of the accumulated Dividend Equivalents applicable to the vested Restricted Stock Units, less any Tax-Related Items withholding. Any cash may be distributed to you directly or may be used
to offset the amount of any Tax-Related Items withholding arising from the vesting/settlement of the Restricted Stock Units and any Dividend Equivalents thereon. |
| Trading Day |
“Trading Day” means a day that satisfies each of the following requirements: |
| |
• |
|
The Nasdaq Global Market is open for trading on that day; |
| |
• |
|
You are permitted to sell shares of Common Stock on that day without incurring liability under Section 16(b) of the Securities Exchange Act; |
| |
• |
|
Either (a) you are not in possession of material non-public information that would make it illegal for you to sell shares of the Company’s Common Stock on that day under Rule 10b-5 of the U.S. Securities
and Exchange Commission or (b) you have a trading plan that complies with the requirements of Rule 10b5-1(c)(1) of the Securities Exchange Act that covers the shares underlying the vesting Restricted Stock Units; |
| |
• |
|
Under the Company’s Insider Trading Policy, you are permitted to sell shares of Common Stock on that day, and |
| |
• |
|
You are not prohibited from selling shares of Common Stock on that day by a written agreement between you and the Company or a third party. |
| Change in Control |
Except to the extent set forth in the Notice of Restricted Stock Unit Award, in the event of any Change in Control, vesting of these Restricted Stock Units, and any Dividend Equivalents thereon, will automatically accelerate in full as described
in Article X of the Plan. However, vesting of these Restricted Stock Units, and any Dividend Equivalents thereon, will not automatically accelerate if and to the extent these Restricted Stock Units are, in connection with the Change in
Control, either to be assumed by the successor corporation (or its parent) or to be replaced with a comparable award for shares of the capital stock of the successor corporation (or its parent). The determination of award comparability will be made
by the Committee, and its determination will be final, binding and conclusive. |
| |
In addition, you will vest as to 50% of the unvested Restricted Stock Units, and any Dividend Equivalents thereon, if the Company is subject to a Change in Control before your Service terminates, and you are subject to
a Qualifying Termination (as defined below) within 12 months after the Change in Control. |
| |
Notwithstanding the foregoing, any action taken in connection with a Change in Control must either (a) preserve the exemption of the Restricted Stock Units, and any Dividend Equivalents thereon, from
Section 409A of the Code or (b) comply with Section 409A of the Code. |
| Qualifying Termination |
A Qualifying Termination means a Separation (as defined below) resulting from: (a) involuntary discharge for any reason other than Cause (as defined below) within 12 months after a Change in Control; or (b) your voluntary resignation for Good
Reason (as defined below), between the date that is four months following a Change in Control and the date that is 12 months following a Change in Control; provided, however, that the grounds for Good Reason may arise at any time within the 12
months following the Change in Control. |
| |
Cause means your unauthorized use or disclosure of trade secrets that causes material harm to the Company, your conviction of, or a plea of “guilty” or “no contest” to, a felony or your gross
misconduct. |
| |
Good Reason means1: (i) a material diminution in your authority, duties or responsibilities; (ii) a material reduction in your level of |
| 1 |
Executives other than the CEO, CFO, CLO and CHRO shall have the following definition of “Good Reason”: (i) a material diminution in
your authority, duties or responsibilities, provided, however, if by virtue of the Company being acquired and made a division or business unit of a larger entity following a Change in Control, you retain substantially similar authority,
duties or responsibilities for such division or business unit of the acquiring corporation but not for the entire acquiring corporation, such reduction in authority, duties or responsibilities shall not constitute Good Reason for purposes of
this subclause (i); (ii) a 10% or greater reduction in your level of compensation, which will be determined based on an average of your annual Total Direct Compensation for the prior three calendar years or, if less, the number of years you
have been employed by the Company (referred to below as the “look-back years”); or (iii) a relocation of your place of employment by more than 30 miles, provided and only if such change, reduction or relocation is effected by the
Company without your consent. For purposes of the foregoing, Total Direct Compensation means total target cash compensation (annual base salary plus target annual cash incentives) plus the grant value of equity awards, determined at the time of
grant, based on the total stock compensation (FAS 123R) expense associated with that award; provided, however, that if you commenced employment with the Company during the look-back years, only one-third of the grant value of the equity grant
attributable to commencement of employment shall be counted. |
| |
compensation (including base salary and target bonus) other than pursuant to a Company-wide reduction of compensation where the reduction affects the other executive officers and your reduction
is substantially equal, on a percentage basis, to the reduction of the other executive officers; or (iii) a relocation of your place of employment by more than 30 miles, provided and only if such change, reduction or relocation is effected by the
Company without your consent. |
| |
For vesting to accelerate as a result of a voluntary resignation for Good Reason, all of the following requirements must be satisfied: (1) you must provide notice to the Company of your intent to assert Good Reason
within 120 days of the initial existence of one or more of the conditions set forth in (i) through (iii) of the preceding paragraph; and (2) the Company will have 30 days from the date of such notice to remedy the condition and, if it does so, you
may withdraw your resignation or may resign with no acceleration benefit. Should the Company remedy the condition as set forth above and then one or more of the conditions arises again within 12 months following the occurrence of a Change in
Control, you may assert Good Reason again subject to all of the conditions set forth herein. |
| |
Separation means a “separation from service,” as defined in the regulations under Section 409A of the Code. |
| Forfeiture |
If your Service terminates for any reason, then your Restricted Stock Units, and any Dividend Equivalents thereon, will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the
termination (including as a result of a Qualifying Termination). This means that the Restricted Stock Units, and any Dividend Equivalents thereon, will immediately revert to the Company. You receive no payment for Restricted Stock Units, and any
Dividend Equivalents thereon, that are forfeited. The Company determines when your Service terminates for this purpose. |
| Leaves of Absence and Part-Time Work |
For purposes of this Award, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing. But your Service terminates when the
approved leave ends, unless you immediately return to active work. |
| |
If you go on a leave of absence that lasts or is expected to last seven days or longer, then vesting will be suspended during the leave to the
|
| |
extent provided for in the Company’s leave policy. Upon your return to active work (as determined by the Company), vesting will resume; however, unless otherwise provided in the
Company’s leave policy, you will not receive credit for any vesting until you work an amount of time equal to the period of your leave. |
| |
If you and the Company agree to a reduction in your scheduled work hours, then the Company reserves the right to modify the rate at which the Restricted Stock Units, and any Dividend Equivalents thereon, vest, so that
the rate of vesting is commensurate with your reduced work schedule. Any such adjustment shall be consistent with the Company’s policies for part-time or reduced work schedules or shall be pursuant to the terms of an agreement between you and
the Company pertaining to your reduced work schedule. |
| |
The Company shall not be required to adjust any vesting schedule pursuant to this provision. |
| Settlement / Stock Certificates |
No shares of Common Stock shall be issued to you prior to the date on which the Restricted Stock Units vest. After any Restricted Stock Units vest pursuant to this Agreement, the Company shall promptly cause to be issued in book-entry form,
registered in your name or in the name of your legal representatives or heirs, as the case may be, the number of shares of Common Stock representing your vested Restricted Stock Units. No fractional shares shall be issued. |
| Section 409A |
This provision applies only if the Company determines that you are a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of your “separation from service,” as defined in those
regulations. If this paragraph applies, then any Restricted Stock Units, and any Dividend Equivalents thereon, that otherwise would have been settled or paid during the first six months following your separation from service will instead be settled
or paid on the first business day following the six-month anniversary of your separation from service, unless the settlement of those units is exempt from Section 409A of the Code. |
| Stockholder Rights |
The Restricted Stock Units do not entitle you to any of the rights of a stockholder of the Company. Your rights, including rights to any Dividend Equivalents, shall remain forfeitable at all times prior to the date on which you vest in your
Award. Upon settlement of the Restricted Stock Units into shares of Common Stock, you will obtain full voting and other rights as a stockholder of the Company. |
| Units Restricted |
You may not sell, transfer, pledge or otherwise dispose of any Restricted Stock Units or rights under this Agreement other than by will or by the laws of descent and distribution. |
| Withholding Taxes |
Regardless of any action the Company and/or, if different, your employer (the “Employer”) take with respect to any or all income tax (including U.S. federal, state and local tax and/or non-U.S. tax), social insurance, payroll tax,
payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or the
Employer: (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Restricted Stock Units, including the award of the Restricted Stock Units, the vesting of the Restricted
Stock Units, the issuance of shares of Common Stock in settlement of the Restricted Stock Units, the subsequent sale of shares acquired at vesting and the receipt of any Dividend Equivalents and dividends; and (b) do not commit to structure the
terms of this Award or any aspect of the Restricted Stock Units to reduce or eliminate your liability for Tax-Related Items. Prior to the relevant taxable event, you shall pay or make adequate arrangements satisfactory to the Company and/or the
Employer to satisfy all withholding obligations for Tax-Related Items of the Company and/or the Employer. With the Company’s consent, these arrangements may include (i) withholding from any cash Dividend Equivalents or shares of Company
stock that otherwise would be issued to you when they vest, (ii) surrendering shares that you previously acquired or (iii) deducting the withholding taxes from any cash compensation payable to you. The fair market value of the shares you
surrender, determined as of the date taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. |
| |
The Company may refuse to deliver the shares of Common Stock to you if you fail to comply with your obligations in connection with the Tax-Related Items as described in this provision. |
| Restrictions on Resale |
You agree not to sell any shares of Common Stock you receive under this Agreement at a time when applicable laws, regulations, Company trading policies (including the Company’s Insider Trading Policy, a copy of which can be found on the
Company’s intranet) or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may
specify. |
| No Retention Rights |
Except to the extent provided specifically in an agreement between you and the Company, neither this Award nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary of the Company in any capacity; the
Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause. |
| |
In accepting this Award, you acknowledge that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified,
amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Agreement; (b) the Award is voluntary and occasional and does not create any contractual or other right to receive future awards of
Restricted Stock Units, and any Dividend Equivalents thereon, or benefits in lieu of Restricted Stock Units, and any Dividend Equivalents thereon, even if Restricted Stock Units have been granted repeatedly in the past; (c) all decisions with
respect to future awards, if any, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) your participation in the Plan shall not create a right to further employment with your Employer and shall not
interfere with the ability of your Employer to terminate your Service at any time with or without cause; (f) the Award is an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or any
subsidiary of the Company, and that is outside the scope of your employment or service contract, if any; (g) the Award is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculation of any
severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way
to, past services for the Company or any subsidiary of the Company; (h) in the event that you are not an employee of the Company, the Award and your participation in the Plan will not be interpreted to form an employment or service contract or
relationship with the Company and, furthermore, the Award and your participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Employer or any other subsidiary of the Company; (i) the future
value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty; (j) in consideration of the Award, no claim or entitlement to compensation or damages shall arise from termination of the Award or from any diminution
in value of the Award or shares of Common Stock acquired upon vesting of the Award resulting from termination of Service (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release the Company and any
subsidiary of the Company from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, you shall be deemed irrevocably to have
waived your entitlement to pursue such claim; (k) the Company is not providing any tax, legal or financial |
| |
advice, nor is the Company making any recommendations regarding your participation in the Plan or your acquisition or sale of the underlying shares of Common Stock; and (l) you are hereby advised
to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan. |
| Adjustments |
In the event of a stock split, a stock dividend or a similar change in Company stock, the number of Restricted Stock Units that will vest in any future installments will be adjusted accordingly, as provided for in the Plan. |
| Insider Trading Restrictions / Market Abuse Laws |
You acknowledge that, depending on your country of residence, you may be subject to insider trading restrictions and/or market abuse laws, which may affect your ability to acquire or sell shares of Common Stock or rights to shares of Common
Stock under the Plan during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in your country). Any restrictions under these laws or regulations are separate from and in addition to
any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions and that you are advised to speak to your personal legal advisor on
this matter. |
| Severability |
The provisions of this Agreement are severable and if any one or more provisions are determined to be invalid or otherwise enforceable, in whole or in part, the remaining provisions shall continue in effect. |
| Applicable Law |
This Agreement will be interpreted and enforced with respect to issues of contract law under the laws of the State of Delaware (except their choice of law provisions). |
| |
For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or this Agreement, the parties hereby submit to and consent to the exclusive
jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of San Mateo County, California, U.S.A. or the federal courts for the United States for the Northern District of California, and no other
courts, where this grant is made and/or to be performed. |
| The Plan and Other Agreements |
The text of the Plan is incorporated in this Agreement by reference. A copy of the Plan is available on the Company’s intranet or by request to the Stock Services Department. |
| |
This Agreement and the Plan constitute the entire understanding between you and the Company regarding this Award. Any prior agreements,
|
| |
commitments or negotiations concerning this Award are superseded. This Agreement may be amended only by another written agreement between the parties. |
BY SIGNING THE NOTICE OF RESTRICTED
STOCK UNIT AWARD, YOU AGREE TO
ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.
Exhibit 21.1
Subsidiaries of Equinix, Inc.
|
|
|
| Name |
|
Jurisdiction |
| Equinix LLC |
|
Delaware, U.S. |
| Equinix (US) Enterprises, Inc. |
|
Delaware, U.S. |
| Equinix South America Holdings, LLC |
|
Delaware, U.S. |
| Equinix RP II LLC |
|
Delaware, U.S. |
| CHI 3, LLC |
|
Delaware, U.S. |
| NY3, LLC |
|
Delaware, U.S. |
| SV1, LLC |
|
Delaware, U.S. |
| LA4, LLC |
|
Delaware, U.S. |
| NY2 Hartz Way LLC |
|
Delaware, U.S. |
| Equinix Pacific LLC |
|
Delaware, U.S. |
| CHI 3 Procurement, LLC |
|
Illinois, U.S. |
| Equinix Asia Pacific Pte Ltd |
|
Singapore |
| Equinix Singapore Holdings Pte Ltd |
|
Singapore |
| Equinix Singapore Pte Ltd |
|
Singapore |
| Equinix (Japan) Enterprises K.K. |
|
Japan |
| Equinix Japan KK (in Kanji) |
|
Japan |
| Equinix Australia Pty Ltd |
|
Australia |
| Equinix Hong Kong Ltd |
|
Hong Kong |
| Equinix Information Technologies Hong Kong Limited |
|
Hong Kong |
| Equinix Information Technology (Shanghai) Co Ltd. |
|
People’s Republic of China |
| Equinix YP Information Technology (Shanghai) Co Ltd. |
|
People’s Republic of China |
| Equinix Europe Ltd |
|
United Kingdom |
| Equinix Group Ltd |
|
United Kingdom |
| Equinix (UK) Ltd |
|
United Kingdom |
| Equinix (Services) Ltd |
|
United Kingdom |
| Equinix Corporation Ltd |
|
United Kingdom |
| Equinix Investments Ltd |
|
United Kingdom |
| Equinix (London) Ltd |
|
United Kingdom |
| Equinix (UK) Enterprises Ltd |
|
United Kingdom |
| Equinix (Real Estate) GmbH |
|
Germany |
| Equinix (Germany) GmbH |
|
Germany |
| Upminster GmbH |
|
Germany |
| Equinix (Germany) Enterprises GmbH |
|
Germany |
| Equinix (France) SAS |
|
France |
| Equinix (France) Enterprises SAS |
|
France |
| Interconnect Exchange Europe SL |
|
Spain |
| Equinix (Switzerland) GmbH |
|
Switzerland |
| Equinix (Switzerland) Enterprises GmbH |
|
Switzerland |
| Equinix (Netherlands) Holdings BV |
|
The Netherlands |
|
|
|
| EQIX (Global Holdings) C.V. |
|
The Netherlands |
| Equinix (EMEA) B.V. |
|
The Netherlands |
| Equinix (Netherlands) BV |
|
The Netherlands |
| Virtu Secure Web Services BV |
|
The Netherlands |
| Equinix (Real Estate) B.V. |
|
The Netherlands |
| Equinix (Netherlands) Enterprises BV |
|
The Netherlands |
| Equinix (Luxembourg) Holdings S.à r.l. |
|
Luxembourg |
| Equinix (Luxembourg) Investments S.à r.l. |
|
Luxembourg |
| Equinix Middle East FZ LLC |
|
United Arab Emirates |
| Equinix Italia S.r.L |
|
Italy |
| ancotel UK Ltd |
|
United Kingdom |
| ancotel HK Ltd |
|
Hong Kong |
| Equinix do Brasil Soluções de Tecnologia em Informática S.A. |
|
Brazil |
| Equinix do Brasil Telecomunicações Ltda. |
|
Brazil |
| Equinix Do Brasil Participacoes Ltda. |
|
Brazil |
| Moran Road Partners, LLC |
|
Delaware, U.S. |
| Switch & Data LLC |
|
Delaware, U.S. |
| Switch & Data Facilities Company LLC |
|
Delaware, U.S. |
| Switch and Data Operating Company LLC |
|
Delaware, U.S. |
| Equinix Canada Ltd. |
|
Canada |
| Equinix (Canada) Enterprises Ltd. |
|
Canada |
| Switch and Data CA Nine LLC |
|
Delaware, U.S. |
| Switch & Data MA One LLC |
|
Delaware, U.S. |
| Switch And Data NJ Two LLC |
|
Delaware, U.S. |
| Switch & Data/NY Facilities Company, LLC |
|
Delaware, U.S. |
| Switch and Data VA Four LLC |
|
Delaware, U.S. |
| Switch & Data WA One LLC |
|
Delaware, U.S. |
| Nimbo Technologies Inc. |
|
Delaware, U.S. |
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen M. Smith, certify that:
1. I have reviewed this
quarterly report on Form 10-Q of Equinix, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The
registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Dated: May 1, 2015
|
| /s/ Stephen M. Smith |
|
| Stephen M. Smith |
| Chief Executive Officer and President |
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Keith D. Taylor, certify that:
1. I have reviewed this
quarterly report on Form 10-Q of Equinix, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The
registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Dated: May 1, 2015
|
| /s/ Keith D. Taylor |
|
| Keith D. Taylor |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Equinix, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2015, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen M. Smith, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition
and result of operations of the Company.
|
| /s/ Stephen M. Smith |
|
| Stephen M. Smith |
| Chief Executive Officer and President |
|
| May 1, 2015 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Equinix, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2015, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Keith D. Taylor, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition
and result of operations of the Company.
|
| /s/ Keith D. Taylor |
|
| Keith D. Taylor |
| Chief Financial Officer |
|
| May 1, 2015 |
Equinix (NASDAQ:EQIX)
Historical Stock Chart
From Mar 2024 to Apr 2024
Equinix (NASDAQ:EQIX)
Historical Stock Chart
From Apr 2023 to Apr 2024
