Attached files
Exhibit 99.1
| BROCADE CONTACTS
|
| |||
| Public Relations John Noh Tel: 408-333-5108 jnoh@brocade.com |
Investor Relations Robert Eggers Tel: 408-333-8797 reggers@brocade.com |
Brocade Reports Fiscal Q3 Results
Strong Performance in Storage Area Networking Led the Way to Year-over-Year Growth in Revenue
SAN JOSE, Calif., August 18, 2010 — Brocade® (NASDAQ: BRCD) today reported financial results for its third fiscal quarter ended July 31, 2010. Brocade recorded quarterly revenues of $504 million for an increase of two percent year-over-year, resulting in a diluted earnings per share (EPS) of $0.05 on a GAAP basis and $0.13 on a non-GAAP basis.
“Q3 was another solid quarter for Brocade in which we achieved better-than-expected results from our storage area networking business and continued to make progress in our Ethernet go-to-market initiatives,” said Michael Klayko, CEO of Brocade.
Klayko continued: “As we look to Q4, we expect a strong finish to our fiscal 2010. Despite operating in a challenging global economy with variable IT spending patterns, we are confident that our sales and marketing strategies as well as our product portfolio are aligned well with customer imperatives.”
In addition to this press release, Brocade management has posted prepared comments and slides on its Fiscal Q3 results and outlook at www.BRCD.com. Brocade will host a live webcast conference call to answer questions from investors and analysts today at 2:30 p.m. Pacific time. Questions may also be submitted in advance to ir@brocade.com.
Other Q3 product, customer and partner announcements are available at http://newsroom.brocade.com/.
Financial Highlights and Additional Financial Information
| • | Q3 revenue was $504 million, increasing approximately 1% sequentially and 2% year-over-year. |
| • | Q3 GAAP EPS (diluted) was $0.05, sequentially level, and increasing from a loss in Q3 2009. |
| • | Q3 non-GAAP EPS (diluted) was $0.13, sequentially level, and increasing 8% year-over-year. |
| • | Q3 non-GAAP operating margin was 17.3% versus 20.5% in Q2 2010 and 20.3% in Q3 2009. |
| • | Q3 effective GAAP tax rate was (220)%; non-GAAP effective tax rate was 0.2%. |
| • | Q3 Adj. EBITDA was $102 million, down from $116 million in Q2 2010 and $119 million in Q3 2009. |
| • | Q3 total Storage Area Networking (SAN) port shipments were approximately 1.0 million. |
| Q3 2010 | Q2 2010 | Q3 2009 | ||||||||||
| Revenue |
$ | 504M | $ | 501M | $ | 493M | ||||||
| GAAP net income (loss) (1) |
$ | 22M | $ | 22M | $ | (23)M | ||||||
| Non-GAAP net income |
$ | 64M | $ | 63M | $ | 55M | ||||||
| GAAP EPS – diluted (1) |
$ | 0.05 | $ | 0.05 | $ | (0.06 | ) | |||||
| Non-GAAP EPS – diluted |
$ | 0.13 | $ | 0.13 | $ | 0.12 | ||||||
| Non-GAAP gross margin |
54.1 | % | 56.7 | % | 58.2 | % | ||||||
| Non-GAAP operating margin |
17.3 | % | 20.5 | % | 20.3 | % | ||||||
| Adjusted EBITDA (2) |
$ | 102M | $ | 116M | $ | 119M | ||||||
| Cash provided by operations |
$ | 55M | $ | 68M | $ | 17M | ||||||
Please see important note of explanation on Non-GAAP measures below, including a detailed reconciliation between GAAP and Non-GAAP information in the tables included herein.
Brocade
130 Holger Way, San Jose, CA. 95134
T. 408.333.8000 F. 408.333.8101
www.brocade.com
| Q3 2010 | Q2 2010 | Q3 2009 | ||||||||||
| As a % of total revenues |
||||||||||||
| OEM revenues |
64 | % | 63 | % | 63 | % | ||||||
| Channel/Direct revenues |
36 | % | 37 | % | 37 | % | ||||||
| 10% or greater customer revenues |
44 | % | 44 | % | 46 | % | ||||||
| Domestic revenues |
64 | % | 65 | % | 64 | % | ||||||
| International revenues |
36 | % | 35 | % | 36 | % | ||||||
| Data Storage Revenues |
58 | % | 56 | % | 58 | % | ||||||
| Ethernet Products Revenues |
24 | % | 26 | % | 24 | % | ||||||
| Federal % of Ethernet Revenues (3) |
25 | % | 28 | % | 21 | % | ||||||
| Stackable % of Ethernet Revenues (3) |
35 | % | 36 | % | 26 | % | ||||||
| Chassis % of Ethernet Revenues (3) |
65 | % | 64 | % | 74 | % | ||||||
| Enterprise % of Ethernet Revenues (3) |
84 | % | 78 | % | 83 | % | ||||||
| Service Providers % of Ethernet Revenues (3) |
16 | % | 22 | % | 17 | % | ||||||
| Global Services Revenue |
18 | % | 18 | % | 18 | % | ||||||
| Q3 2010 | Q2 2010 | Q3 2009 | ||||||||||
| Cash, cash equivalents and investments |
$ | 295.7M | $ | 290.4M | $ | 249.9M | ||||||
| Deferred revenues |
$ | 247.9M | $ | 246.7M | $ | 230.1M | ||||||
| Capital expenditures – non-campus related |
$ | 23.1M | $ | 19.7M | $ | 20.0M | ||||||
| Capital expenditures – campus related |
$ | 23.5M | $ | 42.4M | $ | 24.8M | ||||||
| Total debt, net of discount (1) |
$ | 957M | $ | 981M | $ | 1,134M | ||||||
| Days sales outstanding |
54 days | 54 days | 56 days | |||||||||
| Employees at end of period |
4,520 | 4,245 | 3,866 | |||||||||
| 1) | Retrospectively adjusted as a result of applying new standard that changed the accounting for convertible debt instruments. |
| 2) | Adjusted EBITDA is as defined in the Term Debt Credit Agreement. |
| 3) | Ethernet revenues include product and support revenues. |
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. In evaluating Brocade’s performance, management uses certain non-GAAP financial measures to supplement consolidated financial statements prepared under GAAP.
Management believes that non-GAAP financial measures used in this press release allow management to gain a better understanding of Brocade’s comparative operating performance both from period to period, and to its competitors’ operating results. Management also believes these non-GAAP financial measures help indicate Brocade’s baseline performance before gains, losses or charges that are considered by management to be outside ongoing operating results. Accordingly, management uses these non-GAAP financial measures for planning and forecasting of future periods and in making decisions regarding operations performance and the allocation of resources. Management believes these non-GAAP financial measures, when read in conjunction with Brocade’s GAAP financials, provide useful information to investors by offering:
| • | the ability to make more meaningful period-to-period comparisons of Brocade’s ongoing operating results; |
| • | the ability to make more meaningful comparisons of Brocade’s operating performance against industry and competitor companies; |
| • | the ability to better identify trends in Brocade’s underlying business and to perform related trend analysis; |
| • | a better understanding of how management plans and measures Brocade’s underlying business; and |
| • | an easier way to compare Brocade’s most recent results of operations against investor and analyst financial models. |
Management excludes certain gains or losses and benefits or costs in determining non-GAAP net income that are the result of infrequent events or arise outside the ordinary course of Brocade’s continuing operations. Management believes that it is appropriate to evaluate Brocade’s operating performance by excluding those items that are not indicative of ongoing operating results or limit comparability. Such items
Page 2 of 9
include: (i) provision for certain pre-acquisition litigation, (ii) legal fees associated with certain pre-acquisition litigation, (iii) legal fees associated with indemnification obligations to former directors and officers and other related costs, net, (iv) acquisition and integration costs (in connection with the Foundry acquisition), (v) restructuring costs and facilities leases losses (vi) in-process research and development charges (in connection with the Foundry acquisition), (vii) goodwill and acquisition related intangibles impairment, (viii) loss on sale of property, (ix) acquisition-related financing charges, and (x) interest expense related to adoption of new standard relating to convertible debt instruments.
Management also excludes the following non-cash charges in determining non-GAAP net income (i) stock-based compensation expense and (ii) amortization of purchased intangible assets. Because of varying available valuation methodologies, subjective assumptions and the variety of award types, management believes that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Management believes that the expense associated with the amortization of acquisition-related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for Brocade’s newly acquired and long-held businesses.
Finally, management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.
Limitations These non-GAAP financial measures have limitations, however, because they do not include all items of income and expense that impact the Company. Management compensates for these limitations by also considering Brocade’s GAAP results. The non-GAAP financial measures that Brocade uses are not prepared in accordance with, and should not be considered an alternative to measurements required by GAAP, such as operating income, net income (loss) and net income (loss) per share, and should not be considered measurements of Brocade’s liquidity. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, these non-GAAP financial measures may not be comparable to similar measurements reported by other companies.
Cautionary Statement
This press release contains statements that are forward-looking in nature, including statements regarding Brocade’s expected financial performance, including sales and marketing strategies and product positioning. These statements are based on current expectations on the date of this press release and involve a number of risks and uncertainties which may cause actual results to differ significantly from such estimates. The risks include, but are not limited to, the effect of changes in IT spending levels in one or more of our target markets, market competition and changes in the industry, Brocade’s ability to successfully introduce new products and services on a timely basis, capitalize on new Brocade sales and marketing initiatives, including expanded go-to-market activities, and Brocade’s ability to manage its business effectively in a rapidly evolving market. Certain of these and other risks are set forth in more detail in “Item 1A. Risk Factors” in Brocade’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 2010. Brocade does not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.
About Brocade
Brocade® (NASDAQ GS: BRCD) develops extraordinary networking solutions that enable today’s complex, data-intensive businesses to optimize information connectivity and maximize the business value of their data. For more information, visit www.brocade.com.
# # #
Brocade, the B-wing symbol, BigIron, DCX, Fabric OS, FastIron, IronPoint, IronShield, IronView, IronWare, JetCore, NetIron, SecureIron, ServerIron, StorageX and TurboIron are registered trademarks, and DCFM, Extraordinary Networks and SAN Health are trademarks of Brocade Communications Systems, Inc., in the United States and/or in other countries. All other brands, products or service names are or may be trademarks or service marks of, and are used to identify, products or services of their respective owners.
© 2010 Brocade Communications Systems, Inc. All Rights Reserved.
Page 3 of 9
BROCADE COMMUNICATIONS SYSTEMS, INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| July 31, 2010 |
Aug 1, 2009 (1) |
July 31, 2010 |
Aug 1, 2009 (1) |
|||||||||||||
| Net revenues |
||||||||||||||||
| Product |
$ | 414,702 | $ | 402,483 | $ | 1,273,672 | $ | 1,183,117 | ||||||||
| Service |
88,811 | 90,797 | 270,316 | 248,054 | ||||||||||||
| Total net revenues |
503,513 | 493,280 | 1,543,988 | 1,431,171 | ||||||||||||
| Cost of revenues |
||||||||||||||||
| Product |
204,844 | 185,347 | 585,804 | 535,912 | ||||||||||||
| Service |
47,668 | 47,488 | 146,456 | 132,606 | ||||||||||||
| Total cost of revenues |
252,512 | 232,835 | 732,260 | 668,518 | ||||||||||||
| Gross margin |
251,001 | 260,445 | 811,728 | 762,653 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
85,884 | 94,718 | 265,317 | 259,464 | ||||||||||||
| Sales and marketing |
101,112 | 103,640 | 291,289 | 281,703 | ||||||||||||
| General and administrative |
17,540 | 23,070 | 49,719 | 62,753 | ||||||||||||
| Legal fees associated with indemnification obligations and other related costs |
(74 | ) | (561 | ) | 504 | 38,553 | ||||||||||
| Amortization of intangible assets |
16,190 | 17,052 | 49,433 | 51,666 | ||||||||||||
| Acquisition and integration costs |
— | 1,450 | 204 | 4,794 | ||||||||||||
| Restructuring costs and facilities lease loss benefit, net |
— | — | — | 2,329 | ||||||||||||
| In-process research and development |
— | — | — | 26,900 | ||||||||||||
| Goodwill and acquisition related intangible assets impairment |
— | — | — | 53,306 | ||||||||||||
| Total operating expenses |
220,652 | 239,369 | 656,466 | 781,468 | ||||||||||||
| Income (loss) from operations |
30,349 | 21,076 | 155,262 | (18,815 | ) | |||||||||||
| Interest income and other loss, net |
(1,399 | ) | 809 | (2,231 | ) | (2,912 | ) | |||||||||
| Interest expense |
(22,061 | ) | (24,875 | ) | (63,656 | ) | (76,528 | ) | ||||||||
| Loss on sale of investments and property, net |
(24 | ) | (52 | ) | (8,599 | ) | (576 | ) | ||||||||
| Income (loss) before provision for (benefit from) income taxes |
6,865 | (3,042 | ) | 80,776 | (98,831 | ) | ||||||||||
| Income tax provision (benefit) |
(15,096 | ) | 20,452 | (14,660 | ) | 14,655 | ||||||||||
| Net income (loss) |
$ | 21,961 | $ | (23,494 | ) | $ | 95,436 | $ | (113,486 | ) | ||||||
| Net income (loss) per share – basic |
$ | 0.05 | $ | (0.06 | ) | $ | 0.22 | $ | (0.29 | ) | ||||||
| Net income (loss) per share – diluted |
$ | 0.05 | $ | (0.06 | ) | $ | 0.20 | $ | (0.29 | ) | ||||||
| Shares used in per share calculation – basic |
449,489 | 406,916 | 443,795 | 390,087 | ||||||||||||
| Shares used in per share calculation – diluted |
481,863 | 406,916 | 481,764 | 390,087 | ||||||||||||
| (1) | As adjusted due to changes to the accounting for convertible debt instruments. |
Page 4 of 9
BROCADE COMMUNICATIONS SYSTEMS, INC.
GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| July 31, 2010 |
October 31, 2009 (1) |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 292,537 | $ | 334,193 | ||||
| Short-term investments |
3,155 | 4,678 | ||||||
| Restricted cash |
— | 12,502 | ||||||
| Total cash, cash equivalents and short-term investments and restricted cash |
295,692 | 351,373 | ||||||
| Accounts receivable, net |
296,530 | 297,819 | ||||||
| Inventories |
87,524 | 72,152 | ||||||
| Deferred tax assets |
77,904 | 84,629 | ||||||
| Prepaid expenses and other current assets |
57,615 | 79,302 | ||||||
| Total current assets |
815,265 | 885,275 | ||||||
| Property and equipment, net |
516,650 | 442,408 | ||||||
| Goodwill |
1,653,445 | 1,659,934 | ||||||
| Intangible assets, net |
374,657 | 470,872 | ||||||
| Non-current deferred tax assets |
191,781 | 184,713 | ||||||
| Other assets |
48,850 | 28,218 | ||||||
| Total assets |
$ | 3,600,648 | $ | 3,671,420 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 146,001 | $ | 181,249 | ||||
| Accrued employee compensation |
79,380 | 160,832 | ||||||
| Deferred revenue |
185,536 | 174,870 | ||||||
| Current liabilities associated with facilities lease losses |
7,366 | 10,769 | ||||||
| Current portion of capital lease obligations |
1,683 | — | ||||||
| Revolving credit facility |
— | 14,050 | ||||||
| Current portion of term loan |
26,312 | 38,822 | ||||||
| Convertible subordinated debt |
— | 169,332 | ||||||
| Other accrued liabilities |
96,170 | 105,263 | ||||||
| Total current liabilities |
542,448 | 855,187 | ||||||
| Non-current capital lease obligations, net of current portion |
6,950 | — | ||||||
| Term loan, net of current portion |
327,239 | 860,114 | ||||||
| Senior Secured Notes |
595,270 | — | ||||||
| Non-current liabilities associated with facilities lease losses |
4,495 | 10,150 | ||||||
| Non-current deferred revenue |
62,412 | 60,575 | ||||||
| Non-current income tax liability |
59,812 | 92,276 | ||||||
| Other non-current liabilities |
8,154 | 15,114 | ||||||
| Total liabilities |
1,606,780 | 1,893,416 | ||||||
| Stockholders’ equity |
||||||||
| Common stock |
452 | 434 | ||||||
| Additional paid-in capital |
2,028,908 | 1,901,238 | ||||||
| Accumulated other comprehensive loss |
(13,180 | ) | (5,920 | ) | ||||
| Accumulated deficit |
(22,312 | ) | (117,748 | ) | ||||
| Total stockholders’ equity |
1,993,868 | 1,778,004 | ||||||
| Total liabilities and stockholders’ equity |
$ | 3,600,648 | $ | 3,671,420 | ||||
| (1) | As adjusted due to changes to the accounting for convertible debt instruments. |
Page 5 of 9
BROCADE COMMUNICATIONS SYSTEMS, INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended July 31, 2010 and Aug 1, 2009
(in thousands)
(unaudited)
| Three Months Ended | ||||||||
| July 31, 2010 |
Aug 1, 2009 (1) |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 21,961 | $ | (23,494 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Change in excess tax benefits or detriments from share-based compensation |
(5,255 | ) | — | |||||
| Depreciation and amortization |
50,493 | 50,956 | ||||||
| Loss on disposal of property and equipment |
379 | 218 | ||||||
| Amortization of debt issuance costs and original issue discount |
4,635 | 7,186 | ||||||
| Net (gains) losses on investments and marketable equity securities |
(7 | ) | 52 | |||||
| Provision for doubtful accounts receivable and sales allowances |
2,840 | 4,184 | ||||||
| Non-cash compensation expense |
24,682 | 43,313 | ||||||
| Capitalization of interest cost |
(720 | ) | (2,311 | ) | ||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
(1,831 | ) | (51,734 | ) | ||||
| Inventories |
(10,705 | ) | 10,092 | |||||
| Prepaid expenses and other assets |
6,071 | (13,848 | ) | |||||
| Accounts payable |
38,522 | 6,770 | ||||||
| Accrued employee compensation |
(49,490 | ) | (15,792 | ) | ||||
| Deferred revenue |
1,229 | (14,370 | ) | |||||
| Other accrued liabilities |
(24,188 | ) | 17,775 | |||||
| Liabilities associated with facilities lease losses |
(3,356 | ) | (2,366 | ) | ||||
| Net cash provided by operating activities |
55,260 | 16,631 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(46,582 | ) | (44,826 | ) | ||||
| Purchases of short-term investments |
(17 | ) | (61 | ) | ||||
| Proceeds from maturities and sale of short-term investments |
— | 8,466 | ||||||
| Net cash used in investing activities |
(46,599 | ) | (36,421 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Payment of fees related to Senior Secured Notes |
(664 | ) | — | |||||
| Payment of principal related to the term loan |
(30,564 | ) | (33,141 | ) | ||||
| Payment of capital lease related to principal |
(494 | ) | — | |||||
| Change in excess tax benefits or detriments from share-based compensation |
5,255 | — | ||||||
| Proceeds from issuance of common stock, net |
30,064 | 73,094 | ||||||
| Common stock repurchases |
(5,000 | ) | — | |||||
| Net cash provided by (used in) financing activities |
(1,403 | ) | 39,953 | |||||
| Effect of exchange rate fluctuations on cash and cash equivalents |
(1,954 | ) | 1,390 | |||||
| Net increase in cash and cash equivalents |
5,304 | 21,553 | ||||||
| Cash and cash equivalents, beginning of period |
287,233 | 222,626 | ||||||
| Cash and cash equivalents, end of period |
$ | 292,537 | $ | 244,179 | ||||
| (1) | As adjusted due to changes to the accounting for convertible debt instruments. |
Page 6 of 9
BROCADE COMMUNICATIONS SYSTEMS, INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended July 31, 2010 and Aug 1, 2009
(in thousands)
(unaudited)
| Nine Months Ended | ||||||||
| July 31, | Aug 1, | |||||||
| 2010 | 2009 (1) | |||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 95,436 | $ | (113,486 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
| Change in excess tax benefits or detriments from share-based compensation |
(5,318 | ) | 986 | |||||
| Depreciation and amortization |
148,106 | 145,087 | ||||||
| Loss on disposal of property and equipment |
9,838 | 1,369 | ||||||
| Amortization of debt issuance costs and original issue discount |
16,419 | 17,784 | ||||||
| Net (gains) losses on investments and marketable equity securities |
(224 | ) | 570 | |||||
| Provision for doubtful accounts receivable and sales allowances |
8,706 | 9,533 | ||||||
| Non-cash compensation expense |
76,351 | 101,505 | ||||||
| Capitalization of interest cost |
(7,755 | ) | (6,356 | ) | ||||
| Asset impairment charge |
— | 53,306 | ||||||
| In-process research and development |
— | 26,900 | ||||||
| Non-cash facilities lease loss benefit |
— | (339 | ) | |||||
| Changes in assets and liabilities, net of acquired assets and assumed liabilities: |
||||||||
| Restricted cash |
12,502 | — | ||||||
| Accounts receivable |
(7,419 | ) | (75,786 | ) | ||||
| Inventories |
(15,373 | ) | 43,898 | |||||
| Prepaid expenses and other assets |
16,629 | 4,304 | ||||||
| Deferred tax assets |
— | 651 | ||||||
| Accounts payable |
(30,122 | ) | (41,867 | ) | ||||
| Accrued employee compensation |
(97,970 | ) | (56,110 | ) | ||||
| Deferred revenue |
12,503 | 21,078 | ||||||
| Other accrued liabilities |
(31,387 | ) | (5,426 | ) | ||||
| Liabilities associated with facilities lease losses |
(8,832 | ) | (7,391 | ) | ||||
| Liability associated with class action lawsuit |
— | (160,000 | ) | |||||
| Net cash provided by (used in) operating activities |
192,090 | (39,790 | ) | |||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(155,970 | ) | (118,278 | ) | ||||
| Purchases of short-term investments |
(41 | ) | (116 | ) | ||||
| Proceeds from maturities and sale of short-term investments |
1,788 | 154,931 | ||||||
| Proceeds from maturities and sale of long-term investments |
— | 30,173 | ||||||
| Proceeds from sale of property |
30,185 | — | ||||||
| Decrease in restricted cash |
— | 1,075,079 | ||||||
| Net cash paid in connection with acquisitions |
— | (1,297,482 | ) | |||||
| Net cash used in investing activities |
(124,038 | ) | (155,693 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Payment of convertible subordinated debt |
(172,500 | ) | — | |||||
| Payment of senior underwriting fees related to term loan |
— | (30,525 | ) | |||||
| Payment of fees related to Senior Secured Notes |
(3,665 | ) | — | |||||
| Payment related to the term loan |
(552,808 | ) | (108,141 | ) | ||||
| Change in excess tax benefits or detriments from share-based compensation |
5,318 | (986 | ) | |||||
| Payment of revolving credit facility |
(14,050 | ) | — | |||||
| Payment of capital lease related to principal |
(494 | ) | — | |||||
| Proceeds from issuance of common stock, net |
69,883 | 110,280 | ||||||
| Common stock repurchases |
(25,004 | ) | — | |||||
| Proceeds from issuance of bonds |
587,968 | — | ||||||
| Proceeds from revolving credit facility |
— | 14,050 | ||||||
| Net cash used in financing activities |
(105,352 | ) | (15,322 | ) | ||||
| Effect of exchange rate fluctuations on cash and cash equivalents |
(4,356 | ) | 1,100 | |||||
| Net decrease in cash and cash equivalents |
(41,656 | ) | (209,705 | ) | ||||
| Cash and cash equivalents, beginning of period |
334,193 | 453,884 | ||||||
| Cash and cash equivalents, end of period |
$ | 292,537 | $ | 244,179 | ||||
| Supplemental Schedule of non-cash investing activities: |
||||||||
| Fair value of stock options and unvested awards assumed in exchange for acquired Foundry assets |
$ | — | $ | 254,312 | ||||
| (1) | As adjusted due to changes to the accounting for convertible debt instruments. |
Page 7 of 9
BROCADE COMMUNICATIONS SYSTEMS, INC.
RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended | ||||||||
| July 31, 2010 |
Aug 1, 2009 (1) |
|||||||
| Net income (loss) on a GAAP basis |
$ | 21,961 | $ | (23,494 | ) | |||
| Adjustments: |
||||||||
| Stock-based compensation expense included in cost of revenues |
5,518 | 8,459 | ||||||
| Amortization of intangible assets expense included in cost of revenues |
14,466 | 17,950 | ||||||
| Provision for certain pre-acquisition litigation |
1,604 | — | ||||||
| Legal fees associated with certain pre-acquisition litigation |
13 | — | ||||||
| Total gross margin adjustments |
21,601 | 26,409 | ||||||
| Legal fees associated with indemnification obligations and other related costs |
(74 | ) | (561 | ) | ||||
| Stock-based compensation expense included in research and development |
6,392 | 12,444 | ||||||
| Stock-based compensation expense included in sales and marketing |
8,776 | 15,013 | ||||||
| Stock-based compensation expense included in general and administrative |
3,996 | 7,397 | ||||||
| Amortization of intangible assets expense included in operating expenses |
16,191 | 17,052 | ||||||
| Acquisition and integration costs |
— | 1,450 | ||||||
| Total operating expense adjustments |
35,281 | 52,795 | ||||||
| Total operating income adjustments |
56,882 | 79,204 | ||||||
| Interest expense related to adoption of new standards relating to convertible debt instruments |
— | 2,030 | ||||||
| Income tax effect of adjustments |
(15,217 | ) | (2,364 | ) | ||||
| Non-GAAP net income |
$ | 63,626 | $ | 55,376 | ||||
| Non-GAAP net income per share – basic |
$ | 0.14 | $ | 0.14 | ||||
| Non-GAAP net income per share – diluted |
$ | 0.13 | $ | 0.12 | ||||
| Shares used in non-GAAP per share calculation – basic |
449,489 | 406,916 | ||||||
| Shares used in non-GAAP per share calculation – diluted |
481,863 | 476,888 | ||||||
| (1) | As adjusted due to changes to the accounting for convertible debt instruments. |
See explanation of non-GAAP information included herein.
Page 8 of 9
BROCADE COMMUNICATIONS SYSTEMS, INC.
RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME
(in thousands, except per share amounts)
(unaudited)
| Nine Months Ended | ||||||||
| July 31, 2010 |
Aug 1, 2009 (1) |
|||||||
| Net income (loss) on a GAAP basis |
$ | 95,436 | $ | (113,486 | ) | |||
| Adjustments: |
||||||||
| Stock-based compensation expense included in cost of revenues |
16,377 | 18,593 | ||||||
| Amortization of intangible assets expense included in cost of revenues |
46,783 | 47,905 | ||||||
| Provision for certain pre-acquisition litigation |
1,604 | — | ||||||
| Legal fees associated with certain pre-acquisition litigation |
330 | — | ||||||
| Total gross margin adjustments |
65,094 | 66,498 | ||||||
| Legal fees associated with indemnification obligations and other related costs |
504 | 38,553 | ||||||
| Stock-based compensation expense included in research and development |
21,508 | 30,115 | ||||||
| Stock-based compensation expense included in sales and marketing |
27,809 | 35,886 | ||||||
| Stock-based compensation expense included in general and administrative |
10,657 | 16,911 | ||||||
| Amortization of intangible assets expense included in operating expenses |
49,433 | 51,666 | ||||||
| Acquisition and integration costs |
203 | 4,794 | ||||||
| Restructuring costs and facilities lease losses |
— | 2,329 | ||||||
| In-process research and development |
— | 26,900 | ||||||
| Goodwill and acquisition related intangibles impairment |
— | 53,306 | ||||||
| Total operating expense adjustments |
110,114 | 260,460 | ||||||
| Total operating income adjustments |
175,208 | 326,958 | ||||||
| Loss on sale of property |
8,737 | — | ||||||
| Acquisition-related financing charges |
— | 4,366 | ||||||
| Interest expense related to adoption of new standards relating to convertible debt instruments |
2,490 | 5,928 | ||||||
| Income tax effect of adjustments |
(61,501 | ) | (57,709 | ) | ||||
| Non-GAAP net income |
$ | 220,370 | $ | 166,057 | ||||
| Non-GAAP net income per share – basic |
$ | 0.50 | $ | 0.43 | ||||
| Non-GAAP net income per share – diluted |
$ | 0.45 | $ | 0.38 | ||||
| Shares used in non-GAAP per share calculation – basic |
443,795 | 390,087 | ||||||
| Shares used in non-GAAP per share calculation – diluted |
486,500 | 441,666 | ||||||
| (1) | As adjusted due to changes to the accounting for convertible debt instruments. |
See explanation of non-GAAP information included herein.
Page 9 of 9