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Table of Contents
 

 
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 September 30, 2002
 
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.)
 
2450 Bayshore Parkway, Mountain View, California 94043
(Address of principal executive offices, including ZIP code)
 
(650) 316-6000
(Registrant’s telephone number, including area code)
 
None
(Former name, former address and former fiscal year, if changed since last report)
 
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 ¨.
 
The number of shares outstanding of the Registrant’s Common Stock as of September 30, 2002 was 98,892,711.
 


Table of Contents
 
EQUINIX, INC.
 
INDEX
 
    
Page
No.

Part I.    Financial Information
Item 1.
     
3
       
4
       
5
       
6
Item 2.
     
29
Item 3.
     
50
Item 4.
     
51
Part II.    Other Information
Item 1.
     
51
Item 2.
     
52
Item 3.
     
52
Item 4.
     
52
Item 5.
     
52
Item 6.
     
53
  
57

2


Table of Contents
 
PART I.    FINANCIAL INFORMATION
 
Item 1.    Condensed Consolidated Financial Statements
 
EQUINIX, INC.
Condensed Consolidated Balance Sheets
(in thousands)
 
    
September 30,
2002

    
December 31,
2001

 
    
(unaudited)
 
Assets
                 
Current assets:
                 
Cash and cash equivalents
  
$
9,310
 
  
$
58,831
 
Short-term investments
  
 
2,312
 
  
 
28,890
 
Accounts receivable, net
  
 
6,721
 
  
 
6,909
 
Current portion of restricted cash and short-term investments
  
 
47
 
  
 
47
 
Prepaids and other current assets
  
 
10,881
 
  
 
8,541
 
    


  


Total current assets
  
 
29,271
 
  
 
103,218
 
Property and equipment, net
  
 
386,699
 
  
 
325,226
 
Construction in progress
  
 
 
  
 
103,691
 
Restricted cash and short-term investments, less current portion
  
 
1,517
 
  
 
27,997
 
Debt issuance costs, net
  
 
8,695
 
  
 
11,333
 
Other assets
  
 
2,136
 
  
 
3,589
 
    


  


Total assets
  
$
428,318
 
  
$
575,054
 
    


  


Liabilities and Stockholders’ Equity
                 
Current liabilities:
                 
Accounts payable and accrued expenses
  
$
9,862
 
  
$
17,499
 
Accrued construction costs
  
 
 
  
 
34,650
 
Accrued interest payable
  
 
6,381
 
  
 
2,167
 
Current portion of debt facilities and capital lease obligations
  
 
5,562
 
  
 
7,206
 
Current portion of senior secured credit facility
  
 
100,000
 
  
 
 
Other current liabilities
  
 
3,397
 
  
 
1,807
 
    


  


Total current liabilities
  
 
125,202
 
  
 
63,329
 
Debt facilities and capital lease obligations, less current portion
  
 
3,192
 
  
 
6,344
 
Senior secured credit facility, less current portion
  
 
 
  
 
105,000
 
Senior notes
  
 
139,303
 
  
 
187,882
 
Other liabilities
  
 
12,755
 
  
 
8,978
 
    


  


Total liabilities
  
 
280,452
 
  
 
371,533
 
    


  


Stockholders’ equity:
                 
Common stock
  
 
99
 
  
 
80
 
Additional paid-in capital
  
 
563,819
 
  
 
544,343
 
Deferred stock-based compensation
  
 
(4,244
)
  
 
(11,022
)
Accumulated other comprehensive income
  
 
546
 
  
 
135
 
Accumulated deficit
  
 
(412,354
)
  
 
(330,015
)
    


  


Total stockholders’ equity
  
 
147,866
 
  
 
203,521
 
    


  


Total liabilities and stockholders’ equity
  
$
428,318
 
  
$
575,054
 
    


  


 
See accompanying notes to condensed consolidated financial statements.

3


Table of Contents
 
EQUINIX, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
 
    
Three months ended September 30,

    
Nine months ended
September 30,

 
    
2002

    
2001

    
2002

    
2001

 
    
(unaudited)
 
Revenues
  
$
20,187
 
  
$
17,178
 
  
$
58,385
 
  
$
45,948
 
    


  


  


  


Costs and operating expenses:
                                   
Cost of revenues (includes stock-based compensation of $49, $19, $216 and $412 for the three and nine months ended September 30, 2002 and 2001, respectively)
  
 
26,217
 
  
 
24,597
 
  
 
78,599
 
  
 
74,593
 
Sales and marketing (includes stock-based compensation of $218, $496, $802 and $2,344 for the three and nine months ended September 30, 2002 and 2001, respectively)
  
 
2,888
 
  
 
3,982
 
  
 
12,168
 
  
 
13,274
 
General and administrative (includes stock-based compensation of $1,225, $2,384, $4,622 and $13,285 for the three and nine months ended September 30, 2002 and 2001, respectively)
  
 
8,159
 
  
 
12,621
 
  
 
22,735
 
  
 
47,013
 
Restructuring charges
  
 
19,010
 
  
 
48,565
 
  
 
28,960
 
  
 
48,565
 
    


  


  


  


Total costs and operating expenses
  
 
56,274
 
  
 
89,765
 
  
 
142,462
 
  
 
183,445
 
    


  


  


  


Loss from operations
  
 
(36,087
)
  
 
(72,587
)
  
 
(84,077
)
  
 
(137,497
)
Interest income
  
 
179
 
  
 
2,318
 
  
 
961
 
  
 
9,477
 
Interest expense
  
 
(8,180
)
  
 
(11,305
)
  
 
(26,411
)
  
 
(32,948
)
Gain on debt extinguishment
  
 
 
  
 
 
  
 
27,188
 
  
 
 
    


  


  


  


Net loss
  
$
(44,088
)
  
$
(81,574
)
  
$
(82,339
)
  
$
(160,968
)
    


  


  


  


Net loss per share:
                                   
Basic and diluted
  
$
(0.44
)
  
$
(1.03
)
  
$
(0.88
)
  
$
(2.07
)
    


  


  


  


Weighted average shares
  
 
100,509
 
  
 
79,058
 
  
 
93,687
 
  
 
77,843
 
    


  


  


  


 
See accompanying notes to condensed consolidated financial statements.

4


Table of Contents
 
EQUINIX, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
 
    
Nine months ended
September 30,

 
    
2002

    
2001

 
    
(unaudited)
 
Cash flows from operating activities:
                 
Net loss
  
$
(82,339
)
  
$
(160,968
)
Adjustments to reconcile net loss to net cash used in operating activities:
                 
Depreciation
  
 
39,499
 
  
 
36,444
 
Amortization of deferred stock-based compensation
  
 
5,640
 
  
 
16,041
 
Amortization of debt-related issuance costs and discounts
  
 
4,425
 
  
 
5,884
 
Allowance for doubtful accounts
  
 
2,338
 
  
 
192
 
Loss on disposal of property and equipment
  
 
11
 
  
 
 
Restructuring charges
  
 
28,960
 
  
 
48,565
 
Gain on debt extinguishment
  
 
(27,188
)
  
 
 
Changes in operating assets and liabilities:
                 
Accounts receivable
  
 
(2,150
)
  
 
(3,517
)
Prepaids and other current assets
  
 
2,585
 
  
 
102
 
Other assets
  
 
1,332
 
  
 
(2,685
)
Accounts payable and accrued expenses
  
 
(3,180
)
  
 
(807
)
Accrued restructuring charge
  
 
(8,869
)
  
 
(574
)
Accrued interest payable
  
 
4,999
 
  
 
8,243
 
Other current liabilities
  
 
1,590
 
  
 
533
 
Other liabilities
  
 
2,606
 
  
 
490
 
    


  


Net cash used in operating activities
  
 
(29,741
)
  
 
(52,057
)
    


  


Cash flows from investing activities:
                 
Purchase of short-term investments
  
 
(14,662
)
  
 
(150,621
)
Sales and maturities of short-term investments
  
 
41,224
 
  
 
102,165
 
Purchases of property and equipment
  
 
(5,091
)
  
 
(77,160
)
Accrued construction costs
  
 
(28,708
)
  
 
(61,843
)
Purchase of restricted cash and short-term investments
  
 
(5,090
)
  
 
(25,325
)
Sale of restricted cash and short-term investments
  
 
5,820
 
  
 
20,972
 
    


  


Net cash used in investing activities
  
 
(6,507
)
  
 
(191,812
)
    


  


Cash flows from financing activities:
                 
Proceeds from exercise of stock options and employee st