ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
Delaware | 77-0409517 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | ý | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
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Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
Three Months Ended | Nine Months Ended | ||||||||||||||
July 27, 2013 | July 28, 2012 | July 27, 2013 | July 28, 2012 | ||||||||||||
(In thousands, except per-share amounts) | |||||||||||||||
Net revenues | |||||||||||||||
Product | $ | 447,993 | $ | 467,281 | $ | 1,401,986 | $ | 1,399,687 | |||||||
Service | 88,558 | 88,051 | 262,078 | 259,726 | |||||||||||
Total net revenues | 536,551 | 555,332 | 1,664,064 | 1,659,413 | |||||||||||
Cost of revenues | |||||||||||||||
Product | 160,441 | 173,637 | 499,415 | 513,221 | |||||||||||
Service | 37,908 | 41,217 | 118,410 | 123,863 | |||||||||||
Total cost of revenues | 198,349 | 214,854 | 617,825 | 637,084 | |||||||||||
Gross margin | 338,202 | 340,478 | 1,046,239 | 1,022,329 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 92,969 | 90,530 | 289,088 | 272,780 | |||||||||||
Sales and marketing | 139,220 | 146,378 | 433,547 | 457,921 | |||||||||||
General and administrative | 18,526 | 18,612 | 57,640 | 55,752 | |||||||||||
Amortization of intangible assets | 13,124 | 14,737 | 41,131 | 44,467 | |||||||||||
Total operating expenses | 263,839 | 270,257 | 821,406 | 830,920 | |||||||||||
Income from operations | 74,363 | 70,221 | 224,833 | 191,409 | |||||||||||
Interest expense | (9,247 | ) | (12,029 | ) | (46,047 | ) | (37,804 | ) | |||||||
Interest and other income (loss), net (Note 12) | 76,684 | 103 | 76,781 | (1,345 | ) | ||||||||||
Income before income tax | 141,800 | 58,295 | 255,567 | 152,260 | |||||||||||
Income tax expense | 23,104 | 14,995 | 111,177 | 11,080 | |||||||||||
Net income | $ | 118,696 | $ | 43,300 | $ | 144,390 | $ | 141,180 | |||||||
Net income per-share — basic | $ | 0.26 | $ | 0.09 | $ | 0.32 | $ | 0.31 | |||||||
Net income per-share — diluted | $ | 0.26 | $ | 0.09 | $ | 0.31 | $ | 0.30 | |||||||
Shares used in per-share calculation — basic | 449,446 | 457,147 | 452,474 | 455,727 | |||||||||||
Shares used in per-share calculation — diluted | 461,344 | 469,571 | 464,861 | 471,719 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 27, 2013 | July 28, 2012 | July 27, 2013 | July 28, 2012 | ||||||||||||
(In thousands) | |||||||||||||||
Net income | $ | 118,696 | $ | 43,300 | $ | 144,390 | $ | 141,180 | |||||||
Other comprehensive loss, net of tax: | |||||||||||||||
Unrealized gains (losses) on cash flow hedges: | |||||||||||||||
Change in unrealized gains and losses | (1,000 | ) | (3,518 | ) | (2,998 | ) | (7,800 | ) | |||||||
Net gains and losses reclassified into earnings | (10 | ) | 2,099 | (214 | ) | 5,022 | |||||||||
Net unrealized gains (losses) on cash flow hedges | (1,010 | ) | (1,419 | ) | (3,212 | ) | (2,778 | ) | |||||||
Foreign currency translation adjustments | (1,470 | ) | (2,951 | ) | (3,612 | ) | (4,427 | ) | |||||||
Total other comprehensive loss | (2,480 | ) | (4,370 | ) | (6,824 | ) | (7,205 | ) | |||||||
Total comprehensive income | $ | 116,216 | $ | 38,930 | $ | 137,566 | $ | 133,975 |
July 27, 2013 | October 27, 2012 | ||||||
(In thousands, except par value) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 790,093 | $ | 713,226 | |||
Accounts receivable, net of allowances for doubtful accounts of $638 and $833 at July 27, 2013, and October 27, 2012, respectively | 218,462 | 233,139 | |||||
Inventories | 50,601 | 68,179 | |||||
Deferred tax assets | 44,405 | 91,539 | |||||
Prepaid expenses and other current assets | 121,026 | 49,496 | |||||
Total current assets | 1,224,587 | 1,155,579 | |||||
Property and equipment, net | 487,944 | 518,940 | |||||
Goodwill | 1,646,639 | 1,624,089 | |||||
Intangible assets, net | 63,032 | 109,265 | |||||
Non-current deferred tax assets | 68,138 | 136,175 | |||||
Other assets | 31,391 | 37,213 | |||||
Total assets | $ | 3,521,731 | $ | 3,581,261 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 95,936 | $ | 117,350 | |||
Accrued employee compensation | 116,089 | 182,597 | |||||
Deferred revenue | 224,628 | 216,283 | |||||
Current portion of long-term debt | 2,367 | 1,977 | |||||
Other accrued liabilities | 63,618 | 92,261 | |||||
Total current liabilities | 502,638 | 610,468 | |||||
Long-term debt, net of current portion | 596,524 | 599,203 | |||||
Non-current deferred revenue | 75,845 | 76,907 | |||||
Non-current income tax liability | 36,495 | 55,387 | |||||
Other non-current liabilities | 3,000 | 3,476 | |||||
Total liabilities | 1,214,502 | 1,345,441 | |||||
Commitments and contingencies (Note 9) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $0.001 par value, 5,000 shares authorized, no shares issued and outstanding | — | — | |||||
Common stock, $0.001 par value, 800,000 shares authorized: | |||||||
Issued and outstanding: 447,344 and 456,913 shares at July 27, 2013, and October 27, 2012, respectively | 447 | 457 | |||||
Additional paid-in capital | 1,943,043 | 2,009,190 | |||||
Accumulated other comprehensive loss | (16,688 | ) | (9,864 | ) | |||
Retained earnings | 380,427 | 236,037 | |||||
Total stockholders’ equity | 2,307,229 | 2,235,820 | |||||
Total liabilities and stockholders’ equity | $ | 3,521,731 | $ | 3,581,261 |
Nine Months Ended | |||||||
July 27, 2013 | July 28, 2012 | ||||||
(In thousands) | |||||||
Cash flows from operating activities: | |||||||
Net income | $ | 144,390 | $ | 141,180 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Excess tax benefits from stock-based compensation | (6,909 | ) | (1,338 | ) | |||
Non-cash tax charges | 78,206 | — | |||||
Depreciation and amortization | 139,005 | 144,683 | |||||
Loss on disposal of property and equipment | 4,030 | 404 | |||||
Amortization of debt issuance costs and original issue discount | 937 | 3,767 | |||||
Original issue discount and debt issuance costs related to lenders that did not participate in refinancing | 5,360 | — | |||||
Net gains on investments | — | (35 | ) | ||||
Provision for doubtful accounts receivable and sales allowances | 6,897 | 9,533 | |||||
Non-cash compensation expense | 57,091 | 58,746 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | 7,950 | 8,454 | |||||
Inventories | 18,915 | (2,099 | ) | ||||
Prepaid expenses and other assets | (69,017 | ) | 2,675 | ||||
Deferred tax assets | 344 | 181 | |||||
Accounts payable | (21,744 | ) | 8,476 | ||||
Accrued employee compensation | (82,457 | ) | 5,554 | ||||
Deferred revenue | 5,950 | 9,377 | |||||
Other accrued liabilities | (7,688 | ) | (9,180 | ) | |||
Net cash provided by operating activities | 281,260 | 380,378 | |||||
Cash flows from investing activities: | |||||||
Proceeds from sale of subsidiary | — | 35 | |||||
Purchases of property and equipment | (41,949 | ) | (56,005 | ) | |||
Net cash paid in connection with acquisition | (44,629 | ) | — | ||||
Net cash used in investing activities | (86,578 | ) | (55,970 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from senior unsecured notes | 296,250 | — | |||||
Payment of principal related to senior secured notes | (300,000 | ) | — | ||||
Payment of principal related to the term loan | — | (160,000 | ) | ||||
Payment of debt issuance costs related to senior unsecured notes | (992 | ) | — | ||||
Payment of principal related to capital leases | (1,536 | ) | (1,389 | ) | |||
Common stock repurchases | (187,360 | ) | (70,153 | ) | |||
Proceeds from issuance of common stock | 71,858 | 76,472 | |||||
Excess tax benefits from stock-based compensation | 6,909 | 1,338 | |||||
Net cash used in financing activities | (114,871 | ) | (153,732 | ) | |||
Effect of exchange rate fluctuations on cash and cash equivalents | (2,944 | ) | (4,252 | ) | |||
Net increase in cash and cash equivalents | 76,867 | 166,424 | |||||
Cash and cash equivalents, beginning of period | 713,226 | 414,202 | |||||
Cash and cash equivalents, end of period | $ | 790,093 | $ | 580,626 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid for interest | $ | 39,693 | $ | 44,489 | |||
Cash paid for income taxes | $ | 14,918 | $ | 3,189 | |||
Supplemental schedule of non-cash investing activities: | |||||||
Acquisition of property and equipment through capital leases | $ | 1,042 | $ | — | |||
Convertible note receivable obtained from litigation settlement | $ | 70,000 | $ | — |
Assets acquired | |||
Cash | $ | 140 | |
Accounts receivable | 511 | ||
Identifiable intangible assets: | |||
In-process technology | 21,590 | ||
Customer relationships | 1,080 | ||
Core/developed technology | 1,040 | ||
Non-compete agreements | 810 | ||
Trade name | 460 | ||
Total identifiable intangible assets | 24,980 | ||
Goodwill (1) | 25,599 | ||
Other assets | 1,017 | ||
Total assets acquired | 52,247 | ||
Liabilities assumed | |||
Deferred tax liability | 3,393 | ||
Deferred revenue | 1,354 | ||
Accounts payable and other accrued liabilities | 2,731 | ||
Total liabilities assumed | 7,478 | ||
Net assets acquired | $ | 44,769 |
(1) | None of the goodwill recognized is expected to be deductible for income tax purposes. |
SAN Products | IP Networking Products | Global Services | Total | ||||||||||||
Balance at October 27, 2012 | |||||||||||||||
Goodwill | $ | 176,956 | $ | 1,337,549 | $ | 155,416 | $ | 1,669,921 | |||||||
Accumulated impairment losses | — | (45,832 | ) | — | (45,832 | ) | |||||||||
176,956 | 1,291,717 | 155,416 | 1,624,089 | ||||||||||||
Acquisitions | — | 25,599 | — | 25,599 | |||||||||||
Tax and other adjustments during the nine months ended July 27, 2013 (1) | (23 | ) | (3,026 | ) | — | (3,049 | ) | ||||||||
Balance at July 27, 2013 | |||||||||||||||
Goodwill | 176,933 | 1,360,122 | 155,416 | 1,692,471 | |||||||||||
Accumulated impairment losses | — | (45,832 | ) | — | (45,832 | ) | |||||||||
$ | 176,933 | $ | 1,314,290 | $ | 155,416 | $ | 1,646,639 |
(1) | The goodwill adjustments during the nine months ended July 27, 2013, were primarily a result of tax benefits from the exercise of stock awards of acquired companies. |
• | The Company’s operating forecasts; |
• | Revenue growth rates; and |
• | Risk-commensurate discount rates and costs of capital. |
July 27, 2013 | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Weighted- Average Remaining Useful Life (in years) | ||||||||||
Trade name | $ | 460 | $ | 82 | $ | 378 | 3.26 | |||||||
Core/developed technology | 192,340 | 175,604 | 16,736 | 0.50 | ||||||||||
Customer relationships | 287,090 | 263,427 | 23,663 | 0.59 | ||||||||||
Non-compete agreements | 810 | 145 | 665 | 3.26 | ||||||||||
In-process research and development (1) | 21,590 | — | 21,590 | — | ||||||||||
Total intangible assets (2) | $ | 502,290 | $ | 439,258 | $ | 63,032 | 0.62 | |||||||
October 27, 2012 | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Weighted- Average Remaining Useful Life (in years) | ||||||||||
Trade name | $ | 100 | $ | 97 | $ | 3 | 0.17 | |||||||
Core/developed technology | 218,845 | 173,070 | 45,775 | 1.14 | ||||||||||
Customer relationships | 327,765 | 264,278 | 63,487 | 1.16 | ||||||||||
Total intangible assets | $ | 546,710 | $ | 437,445 | $ | 109,265 | 1.16 |
(1) | Acquired in-process research and development (“IPRD”) is an intangible asset accounted for as an indefinite-lived asset until the completion or abandonment of the associated research and development effort. While accounted as an indefinite-lived asset, the IPRD intangible asset is subject to testing for impairment annually, as of the first day of the second fiscal quarter, and whenever events or changes in facts and circumstances indicate that it is more likely than not that IPRD is impaired. If the research and development effort associated with the IPRD is successfully completed, then the IPRD intangible asset will be amortized over its estimated useful life to be determined at the date the effort is completed. During the nine months ended July 27, 2013, the IPRD intangible asset was not amortized due to the current stage of the associated research and development effort. |
(2) | During the nine months ended July 27, 2013, $69.4 million of intangible assets became fully amortized and, therefore, were removed from the balance sheet. |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 27, 2013 | July 28, 2012 | July 27, 2013 | July 28, 2012 | ||||||||||||
Cost of revenues | $ | 9,650 | $ | 10,713 | $ | 30,081 | $ | 35,516 | |||||||
Operating expenses | 13,124 | 14,737 | 41,131 | 44,467 | |||||||||||
Total | $ | 22,774 | $ | 25,450 | $ | 71,212 | $ | 79,983 |
Fiscal Year | Estimated Future Amortization | ||
2013 (remaining three months) | $ | 22,775 | |
2014 | 21,311 | ||
2015 | 5,183 | ||
2016 | 4,871 | ||
2017 | 4,556 | ||
Thereafter | 4,336 | ||
Total | $ | 63,032 |
July 27, 2013 | October 27, 2012 | ||||||
Inventories: | |||||||
Raw materials | $ | 13,614 | $ | 24,240 | |||
Finished goods | 36,987 | 43,939 | |||||
Total | $ | 50,601 | $ | 68,179 |
July 27, 2013 | October 27, 2012 | ||||||
Prepaid expenses and other current assets: | |||||||
Convertible note receivable obtained from litigation settlement | $ | 70,000 | $ | — | |||
Other prepaid expenses and other current assets | 51,026 | 49,496 | |||||
Total | $ | 121,026 | $ | 49,496 |
July 27, 2013 | October 27, 2012 | ||||||
Property and equipment, net: | |||||||
Computer equipment | $ | 16,710 | $ | 17,953 | |||
Software | 56,655 | 51,680 | |||||
Engineering and other equipment (1) | 416,160 | 409,524 | |||||
Furniture and fixtures (1) | 28,113 | 30,516 | |||||
Leasehold improvements | 26,267 | 26,306 | |||||
Land and building | 384,654 | 384,666 | |||||
Subtotal | 928,559 | 920,645 | |||||
Less: Accumulated depreciation and amortization (1), (2) | (440,615 | ) | (401,705 | ) | |||
Total | $ | 487,944 | $ | 518,940 |
(1) | Engineering and other equipment, furniture and fixtures and accumulated depreciation and amortization include the following amounts under capital leases as of July 27, 2013, and October 27, 2012, respectively (in thousands): |
July 27, 2013 | October 27, 2012 | ||||||
Cost | $ | 11,655 | $ | 10,613 | |||
Accumulated depreciation | (4,915 | ) | (3,647 | ) | |||
Total | $ | 6,740 | $ | 6,966 |
(2) | The following table presents the depreciation of property and equipment included in the Condensed Consolidated Statements of Income (in thousands): |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 27, 2013 | July 28, 2012 | July 27, 2013 | July 28, 2012 | ||||||||||||
Depreciation expense | $ | 22,873 | $ | 21,709 | $ | 67,793 | $ | 64,700 |
Fair Value Measurements Using | |||||||||||||||
Balance as of July 27, 2013 | Quoted Prices in Active Markets For Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | |||||||||||||||
Money market funds (1) | $ | 269,019 | $ | 269,019 | $ | — | $ | — | |||||||
Derivative assets | 1,210 | — | 1,210 | — | |||||||||||
Total assets measured at fair value | $ | 270,229 | $ | 269,019 | $ | 1,210 | $ | — | |||||||
Liabilities: | |||||||||||||||
Derivative liabilities | $ | 1,851 | $ | — | $ | 1,851 | $ | — | |||||||
Total liabilities measured at fair value | $ | 1,851 | $ | — | $ | 1,851 | $ | — |
(1) | Money market funds are reported within “Cash and cash equivalents” in the Condensed Consolidated Balance Sheets. |
Fair Value Measurements Using | |||||||||||||||
Balance as of October 27, 2012 | Quoted Prices in Active Markets For Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | |||||||||||||||
Money market funds (1) | $ | 308,960 | $ | 308,960 | $ | — | $ | — | |||||||
Derivative assets | 2,941 | — | 2,941 | — | |||||||||||
Total assets measured at fair value | $ | 311,901 | $ | 308,960 | $ | 2,941 | $ | — | |||||||
Liabilities: | |||||||||||||||
Derivative liabilities | $ | 296 | $ | — | $ | 296 | $ | — | |||||||
Total liabilities measured at fair value | $ | 296 | $ | — | $ | 296 | $ | — |
(1) | Money market funds are reported within “Cash and cash equivalents” in the Condensed Consolidated Balance Sheets. |
Lease Loss Reserve | |||
Reserve balance at October 27, 2012 | $ | 2,582 | |
Cash payments on facilities leases | (605 | ) | |
Reserve balance at July 27, 2013 | $ | 1,977 |
July 27, 2013 | October 27, 2012 | ||||||||||||||||||
Maturity | Stated Annual Interest Rate | Amount | Effective Interest Rate | Amount | Effective Interest Rate | ||||||||||||||
Senior Secured Notes: | |||||||||||||||||||
2018 Notes | 2013 | 6.625% | $ | — | — | % | $ | 300,000 | 7.05 | % | |||||||||
2020 Notes | 2020 | 6.875% | 300,000 | 7.26 | % | 300,000 | 7.26 | % | |||||||||||
Senior Unsecured Notes: | |||||||||||||||||||
2023 Notes | 2023 | 4.625% | 300,000 | 4.83 | % | — | — | % | |||||||||||
Capital lease obligations | 2016 | 5.699% | 4,422 | 5.54 | % | 4,916 | 5.80 | % | |||||||||||
Total long-term debt | 604,422 | 604,916 | |||||||||||||||||
Less: | |||||||||||||||||||
Unamortized discount | 5,531 | 3,736 | |||||||||||||||||
Current portion of long-term debt | 2,367 | 1,977 | |||||||||||||||||
Long-term debt, net of current portion | $ | 596,524 | $ | 599,203 |
• | incur certain liens and enter into certain sale leaseback transactions; |
• | create, assume, incur or guarantee additional indebtedness of the Company’s subsidiaries without such subsidiary guaranteeing the 2023 Notes on a pari passu basis; and |
• | consolidate or merge with, or convey, transfer or lease all or substantially all of the Company’s or its subsidiaries’ assets. |
• | pay dividends, make investments or make other restricted payments; |
• | incur additional indebtedness; |
• | sell assets; |
• | enter into transactions with affiliates; |
• | incur liens; |
• | permit consensual encumbrances or restrictions on the Company’s restricted subsidiaries’ ability to pay dividends or make certain other payments to the Company; |
• | consolidate, merge, sell or otherwise dispose of all or substantially all of the Company’s or its restricted subsidiaries’ assets; and |
• | designate subsidiaries as unrestricted. |
Fiscal Year | Principal Balances | ||
2013 (remaining three months) | $ | 559 | |
2014 | 2,427 | ||
2015 | 1,195 | ||
2016 | 241 | ||
2017 | — | ||
Thereafter | 600,000 | ||
Total | $ | 604,422 |
Accrued Warranty | |||||||
Nine Months Ended | |||||||
July 27, 2013 | July 28, 2012 | ||||||
Beginning balance | $ | 14,453 | $ | 11,298 | |||
Liabilities accrued for warranties issued during the period | 3,753 | 5,827 | |||||
Warranty claims paid and used during the period | (6,500 | ) | (1,095 | ) | |||
Changes in liability for pre-existing warranties during the period | (2,050 | ) | (1,652 | ) | |||
Ending balance | $ | 9,656 | $ | 14,378 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 27, 2013 | July 28, 2012 | July 27, 2013 | July 28, 2012 | ||||||||||||
Cost of revenues | $ | 2 | $ | (278 | ) | $ | 31 | $ | (690 | ) | |||||
Research and development | (2 | ) | (410 | ) | 53 | (756 | ) | ||||||||
Sales and marketing | 10 | (1,551 | ) | 152 | (3,935 | ) | |||||||||
General and administrative | 1 | (113 | ) | 6 | (278 | ) | |||||||||
Total | $ | 11 | $ | (2,352 | ) | $ | 242 | $ | (5,659 | ) |
Derivatives Designated as Hedging Instruments | Derivatives Not Designated as Hedging Instruments | ||||||||||||||
In United States dollars | As of July 27, 2013 | As of October 27, 2012 | As of July 27, 2013 | As of October 27, 2012 | |||||||||||
Euro | $ | 26,487 | $ | 43,357 | $ | — | $ | — | |||||||
British pound | 10,026 | 20,499 | — | — | |||||||||||
Indian rupee | 21,092 | 16,046 | — | — | |||||||||||
Singapore dollar | 5,797 | 12,918 | — | — | |||||||||||
Japanese yen | 9,961 | 3,776 | 4,191 | 12,068 | |||||||||||
Swiss franc | 4,283 | 8,575 | — | — | |||||||||||
Total | $ | 77,646 | $ | 105,171 | $ | 4,191 | $ | 12,068 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 27, 2013 | July 28, 2012 | July 27, 2013 | July 28, 2012 | ||||||||||||
Cost of revenues | $ | 3,858 | $ | 3,074 | $ | 11,345 | $ | 12,045 | |||||||
Research and development | 4,020 | 3,110 | 13,205 | 13,741 | |||||||||||
Sales and marketing | 7,164 | 4,483 | 23,321 | 24,946 | |||||||||||
General and administrative | 3,727 | 2,402 | 9,220 | 8,014 | |||||||||||
Total stock-based compensation | $ | 18,769 | $ | 13,069 | $ | 57,091 | $ | 58,746 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 27, 2013 | July 28, 2012 | July 27, 2013 | July 28, 2012 | ||||||||||||
Stock options, including variable options | $ | 828 | $ | 169 | $ | 1,818 | $ | 899 | |||||||
Restricted stock awards and restricted stock units (“RSUs”) | 11,202 | 7,720 | 38,351 | 44,441 | |||||||||||
Employee stock purchase plan (“ESPP”) | 6,739 | 5,180 | 16,922 | 13,406 | |||||||||||
Total stock-based compensation | $ | 18,769 | $ | 13,069 | $ | 57,091 | $ | 58,746 |
Unrecognized Compensation Expense | Weighted- Average Period (in years) | ||||
Stock options | $ | 4,493 | 1.60 | ||
RSUs | $ | 100,627 | 2.13 | ||
ESPP | $ | 9,862 | 0.97 |
Nine Months Ended | Nine Months Ended | ||||||||||||
July 27, 2013 | July 28, 2012 | ||||||||||||
Granted (in thousands) | Weighted-Average Grant Date Fair Value | Granted (in thousands) | Weighted-Average Grant Date Fair Value | ||||||||||
Stock options | 2,875 | $ | 2.34 | 160 | $ | 2.39 | |||||||
RSUs | 11,519 | $ | 5.70 | 8,582 | $ | 4.84 |
SAN Products | IP Networking Products | Global Services | Total | ||||||||||||
Three months ended July 27, 2013 | |||||||||||||||
Net revenues | $ | 314,087 | $ | 133,906 | $ | 88,558 | $ | 536,551 | |||||||
Cost of revenues | 85,611 | 74,830 | 37,908 | 198,349 | |||||||||||
Gross margin | $ | 228,476 | $ | 59,076 | $ | 50,650 | $ | 338,202 | |||||||
Three months ended July 28, 2012 | |||||||||||||||
Net revenues | $ | 321,464 | $ | 145,817 | $ | 88,051 | $ | 555,332 | |||||||
Cost of revenues | 87,113 | 86,524 | 41,217 | 214,854 | |||||||||||
Gross margin | $ | 234,351 | $ | 59,293 | $ | 46,834 | $ | 340,478 | |||||||
Nine months ended July 27, 2013 | |||||||||||||||
Net revenues | $ | 994,909 | $ | 407,077 | $ | 262,078 | $ | 1,664,064 | |||||||
Cost of revenues | 270,461 | 228,954 | 118,410 | 617,825 | |||||||||||
Gross margin | $ | 724,448 | $ | 178,123 | $ | 143,668 | $ | 1,046,239 | |||||||
Nine months ended July 28, 2012 | |||||||||||||||
Net revenues | $ | 1,017,258 | $ | 382,429 | $ | 259,726 | $ | 1,659,413 | |||||||
Cost of revenues | 273,308 | 239,913 | 123,863 | 637,084 | |||||||||||
Gross margin | $ | 743,950 | $ | 142,516 | $ | 135,863 | $ | 1,022,329 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 27, 2013 | July 28, 2012 | July 27, 2013 | July 28, 2012 | ||||||||||||
Basic net income per-share | |||||||||||||||
Net income | $ | 118,696 | $ | 43,300 | $ | 144,390 | $ | 141,180 | |||||||
Weighted-average shares used in computing basic net income per-share | 449,446 | 457,147 | 452,474 | 455,727 | |||||||||||
Basic net income per-share | $ | 0.26 | $ | 0.09 | $ | 0.32 | $ | 0.31 | |||||||
Diluted net income per-share | |||||||||||||||
Net income | $ | 118,696 | $ | 43,300 | $ | 144,390 | $ | 141,180 | |||||||
Weighted-average shares used in computing basic net income per-share | 449,446 | 457,147 | 452,474 | 455,727 | |||||||||||
Dilutive potential common shares in the form of stock options | 2,842 | 6,172 | 3,686 | 8,391 | |||||||||||
Dilutive potential common shares in the form of other share-based awards | 9,056 | 6,252 | 8,701 | 7,601 | |||||||||||
Weighted-average shares used in computing diluted net income per-share | 461,344 | 469,571 | 464,861 | 471,719 | |||||||||||
Diluted net income per-share | $ | 0.26 | $ | 0.09 | $ | 0.31 | $ | 0.30 | |||||||
Antidilutive potential common shares in the form of (1) | |||||||||||||||
Stock options | 13,146 | 17,742 | 14,637 | 17,437 | |||||||||||
Other share-based awards | 12 | 1,000 | 171 | 728 |
(1) | These amounts are excluded from the computation of diluted net income per-share. |
• | upon the sale of the subsidiary or all or substantially all of its assets; |
• | upon the discharge of the guarantees under the credit facility and any other debt guaranteed by the applicable subsidiary provided that the credit facility has been paid in full and the applicable series of senior secured notes have an investment grade rating from both Standard & Poor’s and Moody’s; |
• | upon designation of the subsidiary as an “unrestricted subsidiary” under the applicable Indenture; |
• | upon the merger, consolidation or liquidation of the subsidiary into the Company or another subsidiary guarantor; and |
• | upon legal or covenant defeasance or the discharge of the Company’s obligations under the applicable indenture. |
• | upon the sale of the subsidiary or all or substantially all of its assets; |
• | upon the discharge of the guarantees under the Senior Secured Credit Facility, the 2020 Notes and any other debt guaranteed by the applicable subsidiary; |
• | upon the merger, consolidation or liquidation of the subsidiary into the Company or another subsidiary guarantor; and |
• | upon legal or covenant defeasance or the discharge of the Company’s obligations under the applicable indenture. |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Assets | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 270,192 | $ | 3,643 | $ | 516,258 | $ | — | $ | 790,093 | |||||||||
Accounts receivable, net | 129,224 | 360 | 88,878 | — | 218,462 | ||||||||||||||
Inventories | 42,517 | — | 8,084 | — | 50,601 | ||||||||||||||
Intercompany receivables | — | 487,040 | — | (487,040 | ) | — | |||||||||||||
Other current assets | 151,710 | 235 | 11,854 | 1,632 | 165,431 | ||||||||||||||
Total current assets | 593,643 | 491,278 | 625,074 | (485,408 | ) | 1,224,587 | |||||||||||||
Property and equipment, net | 471,893 | 534 | 15,517 | — | 487,944 | ||||||||||||||
Investment in subsidiaries | 997,365 | — | — | (997,365 | ) | — | |||||||||||||
Other non-current assets | 1,718,120 | 87,244 | 3,836 | — | 1,809,200 | ||||||||||||||
Total assets | $ | 3,781,021 | $ | 579,056 | $ | 644,427 | $ | (1,482,773 | ) | $ | 3,521,731 | ||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Accounts payable | $ | 72,048 | $ | 17 | $ | 23,871 | $ | — | $ | 95,936 | |||||||||
Current portion of long-term debt | 2,367 | — | — | — | 2,367 | ||||||||||||||
Intercompany payables | 456,806 | — | 30,234 | (487,040 | ) | — | |||||||||||||
Other current liabilities | 276,789 | 6,710 | 119,204 | 1,632 | 404,335 | ||||||||||||||
Total current liabilities | 808,010 | 6,727 | 173,309 | (485,408 | ) | 502,638 | |||||||||||||
Long-term debt, net of current portion | 596,524 | — | — | — | 596,524 | ||||||||||||||
Other non-current liabilities | 69,258 | 2,428 | 43,654 | — | 115,340 | ||||||||||||||
Total liabilities | 1,473,792 | 9,155 | 216,963 | (485,408 | ) | 1,214,502 | |||||||||||||
Total stockholders’ equity | 2,307,229 | 569,901 | 427,464 | (997,365 | ) | 2,307,229 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 3,781,021 | $ | 579,056 | $ | 644,427 | $ | (1,482,773 | ) | $ | 3,521,731 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Assets | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 284,466 | $ | 680 | $ | 428,080 | $ | — | $ | 713,226 | |||||||||
Accounts receivable, net | 150,367 | (1,847 | ) | 84,619 | — | 233,139 | |||||||||||||
Inventories | 55,084 | — | 13,095 | — | 68,179 | ||||||||||||||
Intercompany receivables | — | 478,133 | — | (478,133 | ) | — | |||||||||||||
Other current assets | 124,690 | 514 | 15,606 | 225 | 141,035 | ||||||||||||||
Total current assets | 614,607 | 477,480 | 541,400 | (477,908 | ) | 1,155,579 | |||||||||||||
Property and equipment, net | 500,530 | 213 | 18,197 | — | 518,940 | ||||||||||||||
Investment in subsidiaries | 871,157 | — | — | (871,157 | ) | — | |||||||||||||
Other non-current assets | 1,814,729 | 90,766 | 1,247 | — | 1,906,742 | ||||||||||||||
Total assets | $ | 3,801,023 | $ | 568,459 | $ | 560,844 | $ | (1,349,065 | ) | $ | 3,581,261 | ||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Accounts payable | $ | 92,661 | $ | — | $ | 24,689 | $ | — | $ | 117,350 | |||||||||
Current portion of long-term debt | 2,226 | (249 | ) | — | — | 1,977 | |||||||||||||
Intercompany payables | 434,981 | — | 43,152 | (478,133 | ) | — | |||||||||||||
Other current liabilities | 346,959 | 7,628 | 136,329 | 225 | 491,141 | ||||||||||||||
Total current liabilities | 876,827 | 7,379 | 204,170 | (477,908 | ) | 610,468 | |||||||||||||
Long-term debt, net of current portion | 599,203 | — | — | — | 599,203 | ||||||||||||||
Other non-current liabilities | 89,173 | 2,429 | 44,168 | — | 135,770 | ||||||||||||||
Total liabilities | 1,565,203 | 9,808 | 248,338 | (477,908 | ) | 1,345,441 | |||||||||||||
Total stockholders’ equity | 2,235,820 | 558,651 | 312,506 | (871,157 | ) | 2,235,820 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 3,801,023 | $ | 568,459 | $ | 560,844 | $ | (1,349,065 | ) | $ | 3,581,261 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Revenues | $ | 327,422 | $ | 1,053 | $ | 208,076 | $ | — | $ | 536,551 | |||||||||
Intercompany revenues | 5,647 | — | 7,855 | (13,502 | ) | — | |||||||||||||
Total net revenues | 333,069 | 1,053 | 215,931 | (13,502 | ) | 536,551 | |||||||||||||
Cost of revenues | 137,260 | 6,891 | 52,453 | 1,745 | 198,349 | ||||||||||||||
Intercompany cost of revenues | (14,489 | ) | — | 27,991 | (13,502 | ) | — | ||||||||||||
Total cost of revenues | 122,771 | 6,891 | 80,444 | (11,757 | ) | 198,349 | |||||||||||||
Gross margin (loss) | 210,298 | (5,838 | ) | 135,487 | (1,745 | ) | 338,202 | ||||||||||||
Operating expenses | 198,119 | 9,888 | 57,577 | (1,745 | ) | 263,839 | |||||||||||||
Intercompany operating expenses (income) | (14,763 | ) | (11 | ) | 14,774 | — | — | ||||||||||||
Total operating expenses | 183,356 | 9,877 | 72,351 | (1,745 | ) | 263,839 | |||||||||||||
Income (loss) from operations | 26,942 | (15,715 | ) | 63,136 | — | 74,363 | |||||||||||||
Other income (expense) | 67,657 | 350 | (570 | ) | — | 67,437 | |||||||||||||
Income (loss) before income tax provision and equity in net earnings (losses) of subsidiaries | 94,599 | (15,365 | ) | 62,566 | — | 141,800 | |||||||||||||
Income tax expense (benefit) | 26,079 | — | (2,975 | ) | — | 23,104 | |||||||||||||
Equity in net earnings (losses) of subsidiaries | 50,176 | — | — | (50,176 | ) | — | |||||||||||||
Net income (loss) | $ | 118,696 | $ | (15,365 | ) | $ | 65,541 | $ | (50,176 | ) | $ | 118,696 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Revenues | $ | 353,594 | $ | 1,038 | $ | 200,700 | $ | — | $ | 555,332 | |||||||||
Intercompany revenues | 11,442 | — | 5,239 | (16,681 | ) | — | |||||||||||||
Total net revenues | 365,036 | 1,038 | 205,939 | (16,681 | ) | 555,332 | |||||||||||||
Cost of revenues | 145,292 | 10,291 | 56,246 | 3,025 | 214,854 | ||||||||||||||
Intercompany cost of revenues | (8,078 | ) | — | 24,759 | (16,681 | ) | — | ||||||||||||
Total cost of revenues | 137,214 | 10,291 | 81,005 | (13,656 | ) | 214,854 | |||||||||||||
Gross margin (loss) | 227,822 | (9,253 | ) | 124,934 | (3,025 | ) | 340,478 | ||||||||||||
Operating expenses | 204,948 | 12,893 | 55,441 | (3,025 | ) | 270,257 | |||||||||||||
Intercompany operating expenses (income) | (38,781 | ) | (7,971 | ) | 46,752 | — | — | ||||||||||||
Total operating expenses | 166,167 | 4,922 | 102,193 | (3,025 | ) | 270,257 | |||||||||||||
Income (loss) from operations | 61,655 | (14,175 | ) | 22,741 | — | 70,221 | |||||||||||||
Other income (expense) | (11,495 | ) | 45 | (476 | ) | — | (11,926 | ) | |||||||||||
Income (loss) before income tax provision and equity in net earnings (losses) of subsidiaries | 50,160 | (14,130 | ) | 22,265 | — | 58,295 | |||||||||||||
Income tax expense | 13,032 | — | 1,963 | — | 14,995 | ||||||||||||||
Equity in net earnings (losses) of subsidiaries | 6,172 | — | — | (6,172 | ) | — | |||||||||||||
Net income (loss) | $ | 43,300 | $ | (14,130 | ) | $ | 20,302 | $ | (6,172 | ) | $ | 43,300 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Revenues | $ | 1,004,002 | $ | 3,176 | $ | 656,886 | $ | — | $ | 1,664,064 | |||||||||
Intercompany revenues | 21,881 | — | 17,680 | (39,561 | ) | — | |||||||||||||
Total net revenues | 1,025,883 | 3,176 | 674,566 | (39,561 | ) | 1,664,064 | |||||||||||||
Cost of revenues | 405,005 | 29,104 | 177,744 | 5,972 | 617,825 | ||||||||||||||
Intercompany cost of revenues | (41,711 | ) | — | 81,272 | (39,561 | ) | — | ||||||||||||
Total cost of revenues | 363,294 | 29,104 | 259,016 | (33,589 | ) | 617,825 | |||||||||||||
Gross margin (loss) | 662,589 | (25,928 | ) | 415,550 | (5,972 | ) | 1,046,239 | ||||||||||||
Operating expenses | 608,523 | 30,941 | 187,914 | (5,972 | ) | 821,406 | |||||||||||||
Intercompany operating expenses (income) | (89,648 | ) | (14,288 | ) | 103,936 | — | — | ||||||||||||
Total operating expenses | 518,875 | 16,653 | 291,850 | (5,972 | ) | 821,406 | |||||||||||||
Income (loss) from operations | 143,714 | (42,581 | ) | 123,700 | — | 224,833 | |||||||||||||
Other income (expense) | 34,305 | 306 | (3,486 | ) | (391 | ) | 30,734 | ||||||||||||
Income (loss) before income tax provision and equity in net earnings (losses) of subsidiaries | 178,019 | (42,275 | ) | 120,214 | (391 | ) | 255,567 | ||||||||||||
Income tax expense | 109,114 | 866 | 1,197 | — | 111,177 | ||||||||||||||
Equity in net earnings (losses) of subsidiaries | 75,875 | — | — | (75,875 | ) | — | |||||||||||||
Net income (loss) | $ | 144,780 | $ | (43,141 | ) | $ | 119,017 | $ | (76,266 | ) | $ | 144,390 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Revenues | $ | 1,046,498 | $ | 3,777 | $ | 609,138 | $ | — | $ | 1,659,413 | |||||||||
Intercompany revenues | 36,049 | — | 19,308 | (55,357 | ) | — | |||||||||||||
Total net revenues | 1,082,547 | 3,777 | 628,446 | (55,357 | ) | 1,659,413 | |||||||||||||
Cost of revenues | 417,480 | 38,279 | 173,170 | 8,155 | 637,084 | ||||||||||||||
Intercompany cost of revenues | (23,244 | ) | — | 78,601 | (55,357 | ) | — | ||||||||||||
Total cost of revenues | 394,236 | 38,279 | 251,771 | (47,202 | ) | 637,084 | |||||||||||||
Gross margin (loss) | 688,311 | (34,502 | ) | 376,675 | (8,155 | ) | 1,022,329 | ||||||||||||
Operating expenses | 620,073 | 43,382 | 175,620 | (8,155 | ) | 830,920 | |||||||||||||
Intercompany operating expenses (income) | (105,706 | ) | (20,532 | ) | 126,238 | — | — | ||||||||||||
Total operating expenses | 514,367 | 22,850 | 301,858 | (8,155 | ) | 830,920 | |||||||||||||
Income (loss) from operations | 173,944 | (57,352 | ) | 74,817 | — | 191,409 | |||||||||||||
Other expense | (34,692 | ) | (61 | ) | (4,396 | ) | — | (39,149 | ) | ||||||||||
Income (loss) before income tax provision and equity in net earnings (losses) of subsidiaries | 139,252 | (57,413 | ) | 70,421 | — | 152,260 | |||||||||||||
Income tax expense | 4,910 | — | 6,170 | — | 11,080 | ||||||||||||||
Equity in net earnings (losses) of subsidiaries | 6,838 | — | — | (6,838 | ) | — | |||||||||||||
Net income (loss) | $ | 141,180 | $ | (57,413 | ) | $ | 64,251 | $ | (6,838 | ) | $ | 141,180 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Net income (loss) | $ | 118,696 | $ | (15,365 | ) | $ | 65,541 | $ | (50,176 | ) | $ | 118,696 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Unrealized losses on cash flow hedges: | |||||||||||||||||||
Change in unrealized gains and losses | — | — | (1,000 | ) | — | (1,000 | ) | ||||||||||||
Net gains reclassified into earnings | — | — | (10 | ) | — | (10 | ) | ||||||||||||
Net unrealized losses on cash flow hedges | — | — | (1,010 | ) | — | (1,010 | ) | ||||||||||||
Foreign currency translation adjustments | 23 | — | (1,493 | ) | — | (1,470 | ) | ||||||||||||
Total other comprehensive income (loss) | 23 | — | (2,503 | ) | — | (2,480 | ) | ||||||||||||
Total comprehensive income (loss) | $ | 118,719 | $ | (15,365 | ) | $ | 63,038 | $ | (50,176 | ) | $ | 116,216 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Net income (loss) | $ | 43,300 | $ | (14,130 | ) | $ | 20,302 | $ | (6,172 | ) | $ | 43,300 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Unrealized losses on cash flow hedges: | |||||||||||||||||||
Change in unrealized gains and losses | — | — | (3,518 | ) | — | (3,518 | ) | ||||||||||||
Net losses reclassified into earnings | — | — | 2,099 | — | 2,099 | ||||||||||||||
Net unrealized losses on cash flow hedges | — | — | (1,419 | ) | — | (1,419 | ) | ||||||||||||
Foreign currency translation adjustments | 162 | — | (3,113 | ) | — | (2,951 | ) | ||||||||||||
Total other comprehensive income (loss) | 162 | — | (4,532 | ) | — | (4,370 | ) | ||||||||||||
Total comprehensive income (loss) | $ | 43,462 | $ | (14,130 | ) | $ | 15,770 | $ | (6,172 | ) | $ | 38,930 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Net income (loss) | $ | 144,780 | $ | (43,141 | ) | $ | 119,017 | $ | (76,266 | ) | $ | 144,390 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Unrealized losses on cash flow hedges: | |||||||||||||||||||
Change in unrealized gains and losses | — | — | (2,998 | ) | — | (2,998 | ) | ||||||||||||
Net gains reclassified into earnings | — | — | (214 | ) | — | (214 | ) | ||||||||||||
Net unrealized losses on cash flow hedges | — | — | (3,212 | ) | — | (3,212 | ) | ||||||||||||
Foreign currency translation adjustments | 1,149 | (628 | ) | (4,133 | ) | — | (3,612 | ) | |||||||||||
Total other comprehensive income (loss) | 1,149 | (628 | ) | (7,345 | ) | — | (6,824 | ) | |||||||||||
Total comprehensive income (loss) | $ | 145,929 | $ | (43,769 | ) | $ | 111,672 | $ | (76,266 | ) | $ | 137,566 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Net income (loss) | $ | 141,180 | $ | (57,413 | ) | $ | 64,251 | $ | (6,838 | ) | $ | 141,180 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Unrealized losses on cash flow hedges: | |||||||||||||||||||
Change in unrealized gains and losses | — | — | (7,800 | ) | — | (7,800 | ) | ||||||||||||
Net losses reclassified into earnings | — | — | 5,022 | — | 5,022 | ||||||||||||||
Net unrealized losses on cash flow hedges | — | — | (2,778 | ) | — | (2,778 | ) | ||||||||||||
Foreign currency translation adjustments | 296 | — | (4,723 | ) | — | (4,427 | ) | ||||||||||||
Total other comprehensive income (loss) | 296 | — | (7,501 | ) | — | (7,205 | ) | ||||||||||||
Total comprehensive income (loss) | $ | 141,476 | $ | (57,413 | ) | $ | 56,750 | $ | (6,838 | ) | $ | 133,975 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Net cash provided by operating activities | $ | 181,335 | $ | 2,846 | $ | 97,079 | $ | — | $ | 281,260 | |||||||||
Cash flows from investing activities: | |||||||||||||||||||
Purchases of property and equipment | (35,969 | ) | (23 | ) | (5,957 | ) | — | (41,949 | ) | ||||||||||
Net cash acquired (paid) in connection with acquisition | (44,769 | ) | 140 | — | — | (44,629 | ) | ||||||||||||
Net cash provided by (used in) investing activities | (80,738 | ) | 117 | (5,957 | ) | — | (86,578 | ) | |||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Proceeds from senior unsecured notes | 296,250 | — | — | — | 296,250 | ||||||||||||||
Payment of debt issuance costs related to senior unsecured notes | (992 | ) | — | — | — | (992 | ) | ||||||||||||
Payment of principal related to senior secured notes | (300,000 | ) | — | — | — | (300,000 | ) | ||||||||||||
Payment of principal related to capital leases | (1,536 | ) | — | — | — | (1,536 | ) | ||||||||||||
Common stock repurchases | (187,360 | ) | — | — | — | (187,360 | ) | ||||||||||||
Proceeds from issuance of common stock | 71,858 | — | — | — | 71,858 | ||||||||||||||
Excess tax benefits from stock-based compensation | 6,909 | — | — | — | 6,909 | ||||||||||||||
Net cash used in financing activities | (114,871 | ) | — | — | — | (114,871 | ) | ||||||||||||
Effect of exchange rate fluctuations on cash and cash equivalents | — | — | (2,944 | ) | — | (2,944 | ) | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (14,274 | ) | 2,963 | 88,178 | — | 76,867 | |||||||||||||
Cash and cash equivalents, beginning of period | 284,466 | 680 | 428,080 | — | 713,226 | ||||||||||||||
Cash and cash equivalents, end of period | $ | 270,192 | $ | 3,643 | $ | 516,258 | $ | — | $ | 790,093 |
Brocade Communications Systems, Inc. | Subsidiary Guarantors | Non-Guarantor Subsidiaries | Consolidating Adjustments | Total | |||||||||||||||
Net cash provided by operating activities | $ | 304,610 | $ | (716 | ) | $ | 76,484 | $ | — | $ | 380,378 | ||||||||
Cash flows from investing activities: | |||||||||||||||||||
Proceeds from sale of subsidiary | 35 | — | — | — | 35 | ||||||||||||||
Purchases of property and equipment | (47,341 | ) | — | (8,664 | ) | — | (56,005 | ) | |||||||||||
Net cash used in investing activities | (47,306 | ) | — | (8,664 | ) | — | (55,970 | ) | |||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Payment of principal related to the term loan | (160,000 | ) | — | — | — | (160,000 | ) | ||||||||||||
Payment of principal related to capital leases | (1,389 | ) | — | — | — | (1,389 | ) | ||||||||||||
Common stock repurchases | (70,153 | ) | — | — | — | (70,153 | ) | ||||||||||||
Proceeds from issuance of common stock | 76,472 | — | — | — | 76,472 | ||||||||||||||
Excess tax benefits from stock-based compensation | 1,338 | — | — | — | 1,338 | ||||||||||||||
Net cash used in financing activities | (153,732 | ) | — | — | — | (153,732 | ) | ||||||||||||
Effect of exchange rate fluctuations on cash and cash equivalents | — | — | (4,252 | ) | — | (4,252 | ) | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 103,572 | (716 | ) | 63,568 | — | 166,424 | |||||||||||||
Cash and cash equivalents, beginning of period | 101,366 | 1,528 | 311,308 | — | 414,202 | ||||||||||||||
Cash and cash equivalents, end of period | $ | 204,938 | $ | 812 | $ | 374,876 | $ | — | $ | 580,626 |
Three Months Ended | ||||||||||||||||||||
July 27, 2013 | % of Net Revenues | July 28, 2012 | % of Net Revenues | Increase/ (Decrease) | % Change | |||||||||||||||
SAN Products | $ | 314,087 | 58.5 | % | $ | 321,464 | 57.9 | % | $ | (7,377 | ) | (2.3 | )% | |||||||
IP Networking Products | 133,906 | 25.0 | % | 145,817 | 26.2 | % | (11,911 | ) | (8.2 | )% | ||||||||||
Global Services | 88,558 | 16.5 | % | 88,051 | 15.9 | % | 507 | 0.6 | % | |||||||||||
Total net revenues | $ | 536,551 | 100.0 | % | $ | 555,332 | 100.0 | % | $ | (18,781 | ) | (3.4 | )% |
Nine Months Ended | ||||||||||||||||||||
July 27, 2013 | % of Net Revenues | July 28, 2012 | % of Net Revenues | Increase/ (Decrease) | % Change | |||||||||||||||
SAN Products | $ | 994,909 | 59.8 | % | $ | 1,017,258 | 61.3 | % | $ | (22,349 | ) | (2.2 | )% | |||||||
IP Networking Products | 407,077 | 24.5 | % | 382,429 | 23.0 | % | 24,648 | 6.4 | % | |||||||||||
Global Services | 262,078 | 15.7 | % | 259,726 | 15.7 | % | 2,352 | 0.9 | % | |||||||||||
Total net revenues | $ | 1,664,064 | 100.0 | % | $ | 1,659,413 | 100.0 | % | $ | 4,651 | 0.3 | % |
• | The decrease in SAN product revenues was caused by a decrease in director and server product revenues due to weaker demand from our OEMs and weaker end-user demand in the overall storage market during the first half of calendar year 2013. We continue to maintain a positive view of the long-term SAN market despite a soft storage market in the near term. The decrease in SAN product revenues was partially offset by the continued strong growth in sales of our Gen 5 Fibre Channel products. Our average selling price per port slightly decreased by 0.3% during the three months ended July 27, 2013, which, combined with the 2.0% decrease in the number of ports shipped during the same period, resulted in lower SAN product revenues for the three months ended July 27, 2013; |
• | The decrease in IP Networking product revenues primarily reflects lower revenues from our Ethernet switch and IP routing products, partially offset by an increase in sales of our ADX and converged network adapter products. The decline was primarily due to lower-than-expected revenues from our U.S. federal government end customers, partially offset by an increase in revenues from our service provider end customers. Revenues from our U.S. federal government end customers decreased due to the current challenging federal environment and sequester, which we believe will continue in the near term. As the percentage of our IP Networking products being sold through two-tier distribution has increased, it has become increasingly difficult to quantify our revenues by end customer, and therefore, these results are based solely on our estimates; and |
• | The slight increase in Global Services revenues was primarily attributable to an increase in the sales of initial support contracts and renewal support contracts for both our SAN products and IP Networking products, partially offset by a decrease in professional services and out-of-warranty repair revenues. |
• | The decrease in SAN product revenues was caused by a decrease in director and server product revenues due to weaker demand from our OEMs and weaker end-user demand in the overall storage market during the first half of calendar year 2013. We continue to maintain a positive view of the long-term SAN market despite a soft storage market in the near term. The decrease in SAN product revenues was partially offset by the continued strong growth in sales of our Gen 5 Fibre Channel products. The continued growth in our Gen 5 Fibre Channel products helped to increase our average selling price per port by 2.9% during the nine months ended July 27, 2013, which partially offset the 5.0% decrease in the number of ports shipped during the same period; |
• | The increase in IP Networking product revenues primarily reflects higher revenues from our Ethernet switch, IP routing and application delivery products. We estimate that revenues from our service provider and enterprise end customers have increased for the nine months ended July 27, 2013, compared to the nine months ended July 28, 2012, while revenues from our U.S. federal government end customers have decreased due to the current challenging federal environment and sequester which caused a delay in the orders for some funded projects. As the percentage of our IP Networking products being sold through two-tier distribution has increased, it has become increasingly difficult to quantify our revenues by end customer, and therefore, these results are based solely on our estimates; and |
• | The increase in Global Services revenues was primarily attributable to an increase in the sales of initial support contracts and renewal support contracts for both our SAN products and IP Networking products, partially offset by a decrease in professional services and out-of-warranty repair revenues. |
Three Months Ended | ||||||||||||||||||||
July 27, 2013 | % of Net Revenues | July 28, 2012 | % of Net Revenues | Increase/ (Decrease) | % Change | |||||||||||||||
United States | $ | 328,475 | 61.2 | % | $ | 354,632 | 63.8 | % | $ | (26,157 | ) | (7.4 | )% | |||||||
Europe, the Middle East and Africa (1) | 127,241 | 23.7 | % | 116,033 | 20.9 | % | 11,208 | 9.7 | % | |||||||||||
Asia Pacific | 46,164 | 8.6 | % | 45,371 | 8.2 | % | 793 | 1.7 | % | |||||||||||
Japan | 24,266 | 4.5 | % | 29,417 | 5.3 | % | (5,151 | ) | (17.5 | )% | ||||||||||
Canada, Central and South America | 10,405 | 2.0 | % | 9,879 | 1.8 | % | 526 | 5.3 | % | |||||||||||
Total net revenues | $ | 536,551 | 100.0 | % | $ | 555,332 | 100.0 | % | $ | (18,781 | ) | (3.4 | )% |
(1) | Includes net revenues of $80.5 million and $59.3 million for the three months ended July 27, 2013, and the three months ended July 28, 2012, respectively, relating to the Netherlands. |
Nine Months Ended | ||||||||||||||||||||
July 27, 2013 | % of Net Revenues | July 28, 2012 | % of Net Revenues | Increase/ (Decrease) | % Change | |||||||||||||||
United States | $ | 1,007,108 | 60.5 | % | $ | 1,050,274 | 63.3 | % | $ | (43,166 | ) | (4.1 | )% | |||||||
Europe, the Middle East and Africa (2) | 415,332 | 25.0 | % | 358,893 | 21.6 | % | 56,439 | 15.7 | % | |||||||||||
Asia Pacific | 135,216 | 8.1 | % | 144,768 | 8.7 | % | (9,552 | ) | (6.6 | )% | ||||||||||
Japan | 77,101 | 4.6 | % | 72,046 | 4.4 | % | 5,055 | 7.0 | % | |||||||||||
Canada, Central and South America | 29,307 | 1.8 | % | 33,432 | 2.0 | % | (4,125 | ) | (12.3 | )% | ||||||||||
Total net revenues | $ | 1,664,064 | 100.0 | % | $ | 1,659,413 | 100.0 | % | $ | 4,651 | 0.3 | % |
(2) | Includes net revenues of $257.9 million and $183.0 million for the nine months ended July 27, 2013, and the nine months ended July 28, 2012, respectively, relating to the Netherlands. |
Three Months Ended | ||||||||||||||||||||
July 27, 2013 | % of Net Revenues | July 28, 2012 | % of Net Revenues | Increase/ (Decrease) | % Points Change | |||||||||||||||
SAN Products | $ | 228,476 | 72.7 | % | $ | 234,351 | 72.9 | % | $ | (5,875 | ) | (0.2 | )% | |||||||
IP Networking Products | 59,076 | 44.1 | % | 59,293 | 40.7 | % | (217 | ) | 3.4 | % | ||||||||||
Global Services | 50,650 | 57.2 | % | 46,834 | 53.2 | % | 3,816 | 4.0 | % | |||||||||||
Total gross margin | $ | 338,202 | 63.0 | % | $ | 340,478 | 61.3 | % | $ | (2,276 | ) | 1.7 | % |
Nine Months Ended | ||||||||||||||||||||
July 27, 2013 | % of Net Revenues | July 28, 2012 | % of Net Revenues | Increase/ (Decrease) | % Points Change | |||||||||||||||
SAN Products | $ | 724,448 | 72.8 | % | $ | 743,950 | 73.1 | % | $ | (19,502 | ) | (0.3 | )% | |||||||
IP Networking Products | 178,123 | 43.8 | % | 142,516 | 37.3 | % | 35,607 | 6.5 | % | |||||||||||
Global Services | 143,668 | 54.8 | % | 135,863 | 52.3 | % | 7,805 | 2.5 | % | |||||||||||
Total gross margin | $ | 1,046,239 | 62.9 | % | $ | 1,022,329 | 61.6 | % | $ | 23,910 | 1.3 | % |
• | SAN gross margins relative to net revenues decreased due to a 1.2% increase in manufacturing overhead costs relative to net revenues primarily due to an increase in per product unit overhead cost, partially offset by a 0.4% decrease in discrete period costs relative to net revenues. Additionally, amortization of SAN-related intangible assets decreased by 0.4% relative to net revenues; |
• | IP Networking gross margins relative to net revenues increased primarily due to a 2.6% decrease in product costs and a 1.0% decrease in manufacturing overhead costs; and |
• | Global Services gross margins relative to net revenues increased primarily due to a 5.1% decrease in service and support costs relative to net revenues, primarily due to a decrease in nonrecurring inventory excess and obsolescence charges during the three months ended July 27, 2013, as well as decreases in legal and IT expenses, partially offset by a 1.1% increase in stock-based compensation expense relative to net revenues. |
• | SAN gross margins relative to net revenues decreased due to a 1.4% increase in manufacturing overhead costs relative to net revenues primarily due to an increase in per product unit overhead cost, partially offset by a 0.6% decrease in amortization of SAN-related intangible assets and a 0.4% decrease in discrete period costs, in each case, relative to net revenues; |
• | IP Networking gross margins relative to net revenues increased primarily due to a 2.8% decrease in product costs, a 2.6% decrease in manufacturing overhead costs, and a 1.5% decrease in discrete period costs, in each case, relative to net revenues. These decreases were partially offset by the costs associated with certain Foundry pre-acquisition litigation which caused a 0.8% increase in costs, relative to net revenues; and |
• | Global Services gross margins relative to net revenues increased primarily due to a 2.6% decrease in service and support costs relative to net revenues, primarily due to a decrease in period costs related to improved utilization of service inventory assets within our spares depot, as well as decreases in legal, IT and facilities expenses. |
July 27, 2013 | July 28, 2012 | |||||||||||||||||||
Stock-based compensation expense: | Expense | % of Net Revenues | Expense | % of Net Revenues | Increase/ (Decrease) | % Change | ||||||||||||||
Three months ended | $ | 18,769 | 3.5 | % | $ | 13,069 | 2.4 | % | $ | 5,700 | 43.6 | % | ||||||||
Nine months ended | $ | 57,091 | 3.4 | % | $ | 58,746 | 3.5 | % | $ | (1,655 | ) | (2.8 | )% |
July 27, 2013 | July 28, 2012 | |||||||||||||||||||
Research and development expense: | Expense | % of Net Revenues | Expense | % of Net Revenues | Increase/ (Decrease) | % Change | ||||||||||||||
Three months ended | $ | 92,969 | 17.3 | % | $ | 90,530 | 16.3 | % | $ | 2,439 | 2.7 | % | ||||||||
Nine months ended | $ | 289,088 | 17.4 | % | $ | 272,780 | 16.4 | % | $ | 16,308 | 6.0 | % |
Increase (Decrease) | |||
Salaries and other compensation | $ | 3,691 | |
Various individually insignificant items | 1,392 | ||
The increase in R&D expenses was partially offset by a decrease in the following: | |||
Expenses related to legal, IT, facilities and other shared functions | (2,644 | ) | |
Total change | $ | 2,439 |
Increase (Decrease) | |||
Salaries and other compensation | $ | 13,730 | |
Engineering expenses | 3,235 | ||
Depreciation expense | 2,596 | ||
Various individually insignificant items | 651 | ||
The increase in R&D expenses was partially offset by a decrease in the following: | |||
Expenses related to legal, IT, facilities and other shared functions | (3,904 | ) | |
Total change | $ | 16,308 |
July 27, 2013 | July 28, 2012 | |||||||||||||||||||
Sales and marketing expense: | Expense | % of Net Revenues | Expense | % of Net Revenues | Increase/ (Decrease) | % Change | ||||||||||||||
Three months ended | $ | 139,220 | 25.9 | % | $ | 146,378 | 26.4 | % | $ | (7,158 | ) | (4.9 | )% | |||||||
Nine months ended | $ | 433,547 | 26.1 | % | $ | 457,921 | 27.6 | % | $ | (24,374 | ) | (5.3 | )% |
Increase (Decrease) | |||
Expenses related to legal, IT, facilities and other shared functions | $ | (3,640 | ) |
Outside services and other marketing expenses | (3,152 | ) | |
Salaries and other compensation | (2,697 | ) | |
Various individually insignificant items | (350 | ) | |
The decrease in sales and marketing expenses was partially offset by an increase in the following: | |||
Stock-based compensation expense | 2,681 | ||
Total change | $ | (7,158 | ) |
Increase (Decrease) | |||
Salaries and other compensation | $ | (8,961 | ) |
Outside services and other marketing expenses | (7,249 | ) | |
Expenses related to legal, IT, facilities and other shared functions | (7,001 | ) | |
Stock-based compensation expense | (1,625 | ) | |
The decrease in sales and marketing expenses was partially offset by an increase in the following: | |||
Various individually insignificant items | 462 | ||
Total change | $ | (24,374 | ) |
July 27, 2013 | July 28, 2012 | |||||||||||||||||||
General and administrative expense: | Expense | % of Net Revenues | Expense | % of Net Revenues | Increase/ (Decrease) | % Change | ||||||||||||||
Three months ended | $ | 18,526 | 3.5 | % | $ | 18,612 | 3.4 | % | $ | (86 | ) | (0.5 | )% | |||||||
Nine months ended | $ | 57,640 | 3.5 | % | $ | 55,752 | 3.4 | % | $ | 1,888 | 3.4 | % |
Increase (Decrease) | |||
Outside services expense | $ | (1,420 | ) |
The slight decrease in G&A expenses was partially offset by increases in the following: | |||
Stock-based compensation expense | 1,325 | ||
Various individually insignificant items | 9 | ||
Total change | $ | (86 | ) |
Increase (Decrease) | |||
Salaries and other compensation | $ | 4,818 | |
Stock-based compensation expense | 1,206 | ||
Various individually insignificant items | 1,019 | ||
The increase in G&A expenses was partially offset by a decrease in the following: | |||
Outside services expense | (5,155 | ) | |
Total change | $ | 1,888 |
July 27, 2013 | July 28, 2012 | |||||||||||||||||||
Amortization of intangible assets: | Expense | % of Net Revenues | Expense | % of Net Revenues | Increase/ (Decrease) | % Change | ||||||||||||||
Three months ended | $ | 13,124 | 2.4 | % | $ | 14,737 | 2.7 | % | $ | (1,613 | ) | (10.9 | )% | |||||||
Nine months ended | $ | 41,131 | 2.5 | % | $ | 44,467 | 2.7 | % | $ | (3,336 | ) | (7.5 | )% |
July 27, 2013 | July 28, 2012 | |||||||||||||||||||
Interest expense: | Expense | % of Net Revenues | Expense | % of Net Revenues | (Increase)/ Decrease | % Change | ||||||||||||||
Three months ended | $ | (9,247 | ) | (1.7 | )% | $ | (12,029 | ) | (2.2 | )% | $ | 2,782 | 23.1 | % | ||||||
Nine months ended | $ | (46,047 | ) | (2.8 | )% | $ | (37,804 | ) | (2.3 | )% | $ | (8,243 | ) | (21.8 | )% |
July 27, 2013 | July 28, 2012 | ||||||||||||||||||
Interest and other income (loss), net: | Income | % of Net Revenues | Income/ (Loss) | % of Net Revenues | Increase/ (Decrease) | % Change | |||||||||||||
Three months ended | $ | 76,684 | 14.3 | % | $ | 103 | 0.0 | % | $ | 76,581 | * | ||||||||
Nine months ended | $ | 76,781 | 4.6 | % | $ | (1,345 | ) | (0.1 | )% | $ | 78,126 | * |
* Not meaningful |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 27, 2013 | July 28, 2012 | July 27, 2013 | July 28, 2012 | ||||||||||||
Income tax expense | $ | 23,104 | $ | 14,995 | $ | 111,177 | $ | 11,080 | |||||||
Effective tax rate | 16.3 | % | 25.7 | % | 43.5 | % | 7.3 | % |
July 27, 2013 | October 27, 2012 | Increase/ (Decrease) | |||||||||
(in thousands) | |||||||||||
Cash and cash equivalents | $ | 790,093 | $ | 713,226 | $ | 76,867 | |||||
Percentage of total assets | 22 | % | 20 | % |
Original Amount Available | July 27, 2013 | ||||||||||
Used | Available | ||||||||||
Revolving credit facility | $ | 125,000 | $ | — | $ | 125,000 |
• | incur certain liens and enter into certain sale leaseback transactions; |
• | create, assume, incur or guarantee additional indebtedness of the Company’s subsidiaries without such subsidiary guaranteeing the 2023 Notes on a pari passu basis; and |
• | consolidate or merge with, or convey, transfer or lease all or substantially all of the Company’s or its subsidiaries’ assets. |
• | pay dividends, make investments or make other restricted payments; |
• | incur additional indebtedness; |
• | sell assets; |
• | enter into transactions with affiliates; |
• | incur liens; |
• | permit consensual encumbrances or restrictions on the Company’s restricted subsidiaries’ ability to pay dividends or make certain other payments to the Company; |
• | consolidate, merge, sell or otherwise dispose of all or substantially all of the Company’s or its restricted subsidiaries’ assets; and |
• | designate subsidiaries as unrestricted. |
• | Consolidated net income; |
• | Consolidated interest charges; |
• | Provision for federal, state, local and foreign income taxes; |
• | Depreciation and amortization expense; |
• | Fees, costs and expenses incurred on or prior to the closing date of the Foundry acquisition in connection with the acquisition and the financing thereof; |
• | Any cash restructuring charges and integration costs in connection with the Foundry acquisition, in an aggregate amount not to exceed $75.0 million; |
• | Approved non-cash restructuring charges incurred in connection with the Foundry acquisition and the financing thereof; |
• | Other non-recurring expenses reducing consolidated net income which do not represent a cash item in such period or future periods; |
• | Any non-cash stock-based compensation expense; and |
• | Legal fees associated with the indemnification obligations for the benefit of former officers and directors in connection with Brocade’s historical stock option litigation; |
• | Federal, state, local and foreign income tax credits; and |
• | All non-cash items increasing consolidated net income. |
Four Fiscal Quarters Ending During Period: | Minimum Consolidated Fixed Charge Coverage Ratio |
October 31, 2010, through October 29, 2011 | 1.50:1.00 |
October 30, 2011, through October 27, 2012 | 1.75:1.00 |
October 28, 2012, and thereafter | 1.75:1.00 |
Four Fiscal Quarters Ending During Period: | Maximum Consolidated Leverage Ratio |
October 31, 2010, through October 29, 2011 | 3.00:1.00 |
October 30, 2011, through October 27, 2012 | 2.75:1.00 |
October 28, 2012, and thereafter | 2.75:1.00 |
Four Fiscal Quarters Ending During Period: | Maximum Consolidated Senior Secured Leverage Ratio |
October 31, 2010, through October 29, 2011 | 2.50:1.00 |
October 30, 2011, through October 27, 2012 | 2.25:1.00 |
October 28, 2012, and thereafter | 2.00:1.00 |
Total | Less than 1 Year | 1—3 Years | 3—5 Years | More than 5 Years | |||||||||||||||
Contractual Obligations: | |||||||||||||||||||
2020 Notes (1) | 434,063 | 20,625 | 41,250 | 41,250 | 330,938 | ||||||||||||||
2023 Notes (1) | 431,393 | 13,875 | 27,750 | 27,750 | 362,018 | ||||||||||||||
Non-cancellable operating leases (2) | 74,963 | 5,775 | 38,728 | 21,853 | 8,607 | ||||||||||||||
Non-cancellable capital leases | 4,684 | 2,559 | 2,125 | — | — | ||||||||||||||
Purchase commitments, gross (3) | 195,527 | 195,527 | — | — | — | ||||||||||||||
Total contractual obligations | $ | 1,140,630 | $ | 238,361 | $ | 109,853 | $ | 90,853 | $ | 701,563 | |||||||||
Other Commitments: | |||||||||||||||||||
Standby letters of credit | $ | 211 | n/a | n/a | n/a | n/a | |||||||||||||
Unrecognized tax benefits and related accrued interest (4) | $ | 110,191 | n/a | n/a | n/a | n/a |
(1) | Amount reflects total anticipated cash payments, including anticipated interest payments. |
(2) | Amount excludes contractual sublease income of $24.5 million, which consists of $1.8 million to be received in less than one year, $14.2 million to be received in one to three years, and $8.5 million to be received in three to five years. |
(3) | Amount reflects total gross purchase commitments under our manufacturing arrangements with a third-party contract manufacturer. Of this amount, we have accrued $4.1 million for estimated purchase commitments that we do not expect to consume in normal operations within the next twelve months, in accordance with our policy. |
(4) | As of July 27, 2013, we had a gross liability for unrecognized tax benefits of $108.0 million and a net accrual for the payment of related interest and penalties of $2.2 million. |
• | The Company’s operating forecasts; |
• | Revenue growth rates; and |
• | Risk-commensurate discount rates and costs of capital. |
Change | Approximate Impact on Fair Value (In millions) | Excess of Fair Value over Carrying Value (In millions) | |||
Discount rate | ±1% | $ (27) - 28 | $ 64 - 119 | ||
DCF terminal value multiplier | ±0.5x | $ (40) - 40 | $ 51 - 131 |
Change | Approximate Impact on Fair Value (In millions) | Excess of Fair Value over Carrying Value (In millions) | |||
Discount rate | ±1% | $ (4) – 4 | $ 11 – 19 | ||
DCF terminal value multiplier | ±0.5x | $ (4) – 4 | $ 11 – 19 |
• | Properly determine the market for and define features of new products and services, which can be particularly challenging for initial product offerings in new markets; |
• | Excel as the networking market becomes more competitive; |
• | Differentiate Brocade’s new products and services from its competitors’ technology and product offerings; |
• | Address the complexities of interoperability of Brocade’s products with its installed base, OEM partners’ server and storage products, and its competitors’ products; |
• | Meet or exceed customer requirements for product features, cost-effectiveness, and scalability; and |
• | Maintain high levels of product quality and reliability. |
• | The availability and price of competing products and alternative technologies; |
• | The cost of certain product subcomponents, which could cause Brocade to modify prices to maintain adequate gross margins; |
• | Product qualification requirements by Brocade’s OEM partners, which can cause delays in market acceptance; |
• | The timing of the adoption of new industry standards relative to Brocade’s development of new technologies and products; and |
• | The ability of Brocade’s OEM partners to successfully distribute, support and provide training for its products. |
• | Shipment of a high number of customer orders toward the end of a fiscal quarter will increase reported receivables outstanding at the end of the period relative to reported sales for the period resulting in higher days sales outstanding, commonly referred to as “DSO”; |
• | Disruptions, or a continued decline, in general economic conditions, as well as potential impacts from lower IT spending, including the U.S. federal government, due to the Budget Control Act of 2011, where governmental departments such as the Department of Defense and certain intelligence agencies are likely to be negatively impacted by budget reductions and where Brocade’s revenue is more concentrated; |
• | Announcements and/or rumors of pending or completed acquisitions or other strategic transactions by Brocade, its competitors or its partners; |
• | Announcements, introductions and transitions of new products by Brocade, its competitors or its partners; |
• | Product qualifications and product introductions of Brocade’s partners; |
• | Long and complex sales cycles and the timing of customer orders; |
• | Internal supply and inventory management objectives of Brocade’s OEM partners and other customers; |
• | Brocade’s ability to timely produce products that comply with new environmental restrictions or related requirements of its customers; |
• | Brocade’s ability to obtain sufficient supplies of sole- or limited-sourced components, including ASICs, microprocessors, certain connectors, certain logic chips and programmable logic devices; |
• | Availability of supply or increases in prices of components used in the manufacture of Brocade’s products; |
• | Variations in the mix of Brocade’s products sold and the mix of distribution channels and geographies through which they are sold; |
• | Pending or threatened litigation, including any settlements or judgments related to such litigation; |
• | Stock-based compensation expense that is affected by Brocade’s stock price; |
• | Examinations by government tax authorities that may have unfavorable outcomes and subject Brocade to additional tax liabilities; |
• | New legislation and regulatory developments, including increases to tax rates or changes to treatment of an income or expense item; and |
• | Other risk factors detailed in this section. |
• | Difficulties in successfully integrating the acquired businesses and realizing any expected synergies; |
• | Inability to effectively coordinate sales and marketing efforts to communicate the capabilities of the combined company; |
• | Customer uncertainty that may cause delays or cancellations of customer purchases, as well as revenue attrition in excess of anticipated levels if existing customers alter or reduce their historical buying patterns; |
• | Unanticipated costs, litigation and other contingent liabilities; |
• | Diversion of management’s attention from Brocade’s daily operations and business; |
• | Adverse effects on existing business relationships with suppliers and customers; |
• | Risks associated with entering into markets in which Brocade has limited or no prior experience, including potentially less visibility into demand; |
• | Inability to attract and retain key employees; |
• | Inability to retain key customers, distributors, vendors and other business partners of the acquired business; |
• | Inability to successfully develop new products and services on a timely basis that address the market opportunities of the combined company; |
• | Inability to compete effectively against companies already serving the broader market opportunities expected to be available to the combined company; |
• | Inability to qualify the combined company’s products with OEM partners on a timely basis, or at all; |
• | Inability to successfully integrate and harmonize financial reporting and information technology systems; |
• | Failure to successfully manage additional remote locations, including the additional infrastructure and resources necessary to support and integrate such locations; |
• | Assumption or incurrence of debt and contingent liabilities and related obligations to service such liabilities and Brocade’s ability to satisfy financial and other negative operating covenants; |
• | Additional costs such as increased costs of manufacturing and service costs, costs associated with excess or obsolete inventory, costs of employee redeployment, relocation and retention, including salary increases or bonuses, accelerated amortization of deferred equity compensation, severance payments, reorganization or closure of facilities, taxes, advisor and professional fees, and termination of contracts that provide redundant or conflicting services; |
• | Incurrence of significant exit charges if products acquired in business combinations are unsuccessful; |
• | Incurrence of significant charges if Brocade divests, disposes of or otherwise exits all or part of an acquired business; |
• | Incurrence of acquisition- and integration-related costs, or amortization costs for acquired intangible assets, that could negatively impact Brocade’s operating results and financial condition; and |
• | Potential write-down of goodwill, acquired intangible assets and/or deferred tax assets, which could significantly impact Brocade’s operating results. |
• | Exposure to economic instability or fluctuations in international markets that could cause reductions in customer and public sector IT spending; |
• | Exposure to inflationary risks in China and the continuing sovereign debt risk and economic instability in Europe; |
• | Reduced or limited protection of intellectual property rights, particularly in jurisdictions that have less developed intellectual property regimes such as China and India; |
• | Managing research and development teams in geographically diverse locations, including teams divided between the United States and India; |
• | Significant wage inflation in certain growing economies such as India; |
• | Increased exposure to foreign currency exchange rate fluctuations, including the appreciation of foreign currencies such as the Chinese yuan or European Union’s euro; |
• | Communicating effectively across multiple geographies, cultures and languages; |
• | Recruiting sales and technical support personnel with the skills to design, manufacture, sell and support Brocade’s products in international markets; |
• | Complying with governmental regulation of encryption technology and regulation of imports and exports, including obtaining required import or export approval for its products; |
• | Increased complexity and costs of managing international operations; |
• | Commercial laws and business practices that favor local competition; |
• | Multiple, potentially conflicting, and changing governmental laws, regulations and practices, including differing data privacy, export, import, tax, labor, anti-bribery and employment laws; |
• | Longer sales cycles and manufacturing lead times; |
• | Increased complexity and cost of providing customer support and maintenance for international customers; |
• | Difficulties in collecting accounts receivable; and |
• | Increased complexity of logistics and distribution arrangements. |
• | Authorizing the issuance of preferred stock without stockholder approval; |
• | Prohibiting cumulative voting in the election of directors; |
• | Limiting the persons who may call special meetings of stockholders; and |
• | Prohibiting stockholder actions by written consent. |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program (1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) | ||||||||||
April 28, 2013 - May 25, 2013 | 9,319 | $ | 5.49 | 9,319 | $ | 410,933 | ||||||||
May 26, 2013 - June 22, 2013 | 9 | $ | 5.25 | 9 | $ | 410,886 | ||||||||
June 23, 2013 - July 27, 2013 | 8,603 | $ | 5.81 | 8,603 | $ | 360,886 | ||||||||
Total | 17,931 | $ | 5.64 | 17,931 | $ | 360,886 |
(1) | As of July 27, 2013, the Company’s Board of Directors had authorized a stock repurchase program for an aggregate amount of up to $1.3 billion (consisting of an original $100 million authorization on August 18, 2004, plus subsequent authorizations of an additional $200 million on January 16, 2007, $500 million on November 29, 2007, and $500 million on May 16, 2012), which was used for determining the amounts in these columns. Purchases may be made from time to time and the number of shares purchased and the timing of purchases are based on the level of our cash balances, general business and market conditions, our debt covenants, the trading price of our common stock and other factors, including alternative investment opportunities. |
Exhibit Number | Description of Document | |
10.1* | Senior Leadership Plan for fiscal year 2013, as approved on July 26, 2013 | |
10.2 | Amendment Number 6 dated June 19, 2013, with an effective date of May 22, 2013, to the OEM Purchase and License Agreement between EMC Corporation and Brocade | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer | |
32.1 | Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted 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 Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
* | Indicates management compensatory plan, contract or arrangement |
Brocade Communications Systems, Inc. | ||||
Date: | August 30, 2013 | By: | /s/ Daniel W. Fairfax | |
Daniel W. Fairfax Chief Financial Officer and Vice President, Finance |
• | If the OI Percentage is below 80%, the OI Payout Percentage shall be 0% (zero). |
• | If the OI Percentage is equal to or above 80% and below the Target OI Threshold, the OI Payout Percentage shall be equal to 100% less two (2) percentage points for each OI Percentage point below the Target OI Threshold. |
• | If the OI Percentage is equal to or above the Target OI Threshold, the OI Payout Percentage shall be equal to 100% plus three (3) percentage points for each OI Percentage point above the Target OI Threshold. |
• | If year over year Ethernet Revenue Growth is at or below 0% (zero), there is no Ethernet Revenue Growth Payout. |
• | If year over year Ethernet Revenue Growth is between 0% and 100% of target growth, then payout is determined using a linear progression between 0% (zero) and 100%. For example, if Ethernet Revenue Growth is half of target, then the payout would be 50% of the target payout. |
• | If year over year Ethernet Revenue Growth is at 100% of the target growth, then payout is at 100%. |
• | If year over year Ethernet Revenue Growth is above 100% of the target growth, there will be an accelerated performance payout of an additional 20% for each 1% of growth above the target growth. |
• | If year over year Total Revenue Growth is at or below 0% (zero), there is no Total Revenue Growth Payout. |
• | If year over year Total Revenue Growth is between 0% and 100% of the target growth, then payout is determined using a linear progression between 0% (zero) and 100%. For example, if Total Revenue Growth is half of target, then the payout would be 50% of the target payout. |
• | If year over year Total Revenue Growth is at 100% of the target growth, then payout is at 100%. |
• | If year over year Total Revenue Growth is above 100% of the target growth, there will be an accelerated performance payout of an additional 25% for each 1% of growth above the target growth. |
EMC Corporation (“EMC”) 176 South Street Hopkinton, MA 01748 Fax for legal notices: 508.293.7780 Email for legal notices: legalnotices@emc.com | and | Brocade Communications Systems, Inc. (“Subcontractor”) 130 Holger Way San Jose, CA 95134 Fax for legal notices: legalcontracts@brocade.com Email for legal notices: 408.333.8344 |
A. | The parties hereby incorporate by reference the Agreement. Except as expressly stated herein, the Agreement remains unchanged and in full force and effect. In case of conflict between this Amendment and the Agreement, the provisions set forth in this Amendment shall supersede and control with regard to the subject matter contained herein. |
B. | Exhibit J - Professional Services and Enterprise Support is hereby deleted. The following is hereby incorporated into the Agreement as a new Exhibit J: |
MSTR SUBK REV 20120521 | EMC CONFIDENTIAL | Page 1 |
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(1) | WORKERS COMPENSATION AND EMPLOYERS LIABILITY |
a. | Coverage “A” - Statutory limits. Coverage should include all areas involved in operations covered under the applicable order. |
b. | Coverage “B” - Employers Liability |
(2) | COMMERCIAL GENERAL LIABILITY - Including, but not limited to: |
a. | Limits of Liability $1,000,000 Per Occurrence/$2,000,000 General Aggregate |
b. | Commercial General Liability Coverage/Comprehensive General Liability Form |
c. | Contractors Protective Liability/Independent Contractors Liability |
d. | Products-Completed Operations |
e. | Broad Form Contractual Liability |
f. | Additional Insured Endorsement naming EMC Corporation |
g. | Waiver of Subrogation Endorsement naming EMC Corporation |
h. | Personal Injury |
(3) | AUTOMOBILE LIABILITY |
a. | Limit of Liability $1,000,000 Combined Single Limit Each Accident |
b. | Covered Automobiles: Owned, Non-owned, Hired or Leased |
c. | Additional Insured Endorsement naming EMC Corporation |
d. | Waiver of Subrogation Endorsement naming EMC Corporation |
e. | Statutory, No-Fault Liability coverage where applicable |
(4) | EXCESS OR UMBRELLA LIABILITY (Coverage in excess of General Liability and Auto Liability) |
a. | Limit of Liability $2,000,000 Combined Single Limit Per Occurrence |
b. | Additional Insured Endorsement naming EMC Corporation |
c. | Waiver of Subrogation Endorsement naming EMC Corporation |
(5) | ERRORS AND OMISSIONS/PROFESSIONAL INDEMNITY INSURANCE |
a. | Limit of Liability of $5,000,000 |
b. | Waiver of Subrogation Endorsement naming EMC Corporation |
MSTR SUBK REV 20120521 | EMC CONFIDENTIAL | Page 9 |
MSTR SUBK REV 20120521 | EMC CONFIDENTIAL | Page 10 |
MSTR SUBK REV 20120521 | EMC CONFIDENTIAL | Page 11 |
• | The term “contractor” shall mean the Subcontractor identified in the Agreement; |
• | The term “contract” shall mean this Agreement including the applicable SOW |
• | The terms “Government”, “contracting officer”, “contracting agency”, and similar terms shall mean EMC; |
• | The terms “Subcontract” and “subcontracting' shall refer to lower tier subcontracts and lower tier subcontracting; |
MSTR SUBK REV 20120521 | EMC CONFIDENTIAL | Page 12 |
MSTR SUBK REV 20120521 | EMC CONFIDENTIAL | Page 13 |
MSTR SUBK REV 20120521 | EMC CONFIDENTIAL | Page 14 |
1. | Subcontractor shall properly implement, maintain and enforce privacy and data security policies and, if requested by EMC, promptly provide to EMC copies of all such policies relevant to the Processing of EMC Personal Information for EMC to review. . Notwithstanding the foregoing, Subcontractor shall fully cooperate with EMC, at EMC's expense, unless Subcontractor engaged in wrongdoing affecting its obligations under the Agreement, in which case Subcontractor shall be responsible for all costs and expenses, in connection with any EMC or governmental investigations regarding EMC Personal Information or the provision of Subcontracted Services. |
2. | The following section applies to the extent that Subcontractor has access to EMC Personal Information and the conditions set forth in the following are true. During the term of the Agreement and for so long as Subcontractor retains EMC Personal Information at any Subcontractor or any Subvendor facility, EMC may conduct a site visit of Subcontractor's and/or Subvendor's facilities, at EMC's expense, by representatives of EMC, including without limitation its independent third-party auditor, provided that: (i) EMC will provide reasonable advance notice to Subcontractor and such site visit shall occur during normal business hours at a mutually agreeable time not more than once during any given calendar year per Subcontractor facility (other than a visit in connection with a Security Incident or a follow-up visit permitted by this Section 2); (ii) such site visit shall not unreasonably interfere with Subcontractor's operations; and (iii) any third party performing such site visit on behalf of EMC shall execute a nondisclosure agreement with Subcontractor in a form reasonably acceptable to Subcontractor with respect to the confidential treatment and restricted use of Subcontractor's confidential information. In the case of a Security Incident, Subcontractor shall initiate a call with EMC regarding the Security Incident within twenty four (24) hours of the Security Incident, which is in addition to the immediate notification requirement under Section 4.C of this Agreement. EMC may conduct a site visit within five (5) days after the initial notice of the Security Incident from Subcontractor to EMC. Access at Subcontractor facilities shall be subject to Subcontractor's reasonable access requirements and security policies. Thirty (30) days prior to a scheduled site visit (other than a visit in connection with a Security Incident), EMC shall provide Subcontractor with a list of records that EMC would like to inspect (“Records Request”). If Subcontractor objects to EMC reviewing particular records, Subcontractor shall notify EMC immediately and the parties will discuss the matter in good faith to arrive at a mutually agreed Records Request in the most expedient time possible. Subcontractor shall have the Records Request available for EMC's inspection on the agreed site visit date. If Subcontractor, in good faith, is not able to have such information available at that time, Subcontractor shall notify EMC in advance, but no less than two (2) days prior to the site visit date, and the parties will decide whether to proceed with the visit. If the parties decide to reschedule the visit, the new date shall be no more than seven (7) days after the originally scheduled date. Notwithstanding the foregoing, if during a site visit, EMC discovers a problem with security or other operational matters, EMC and Subcontractor shall work expeditiously and in good faith to agree on a plan to remediate such problems (“Remediation Plan”). Once the parties agree on a Remediation Plan, Subcontractor shall execute and complete the same without unreasonable delay and notify EMC when such actions are completed. Notwithstanding anything to the contrary in the Agreement, EMC may conduct a follow-up site visit within six (6) months of Subcontractor's notice of completion of the Remediation Plan. |
MSTR SUBK REV 20120521 | EMC CONFIDENTIAL | Page 15 |
EMC CORPORATION | SUBCONTRACTOR | |
By (Sign): /s/ Christopher Gambon | By (Sign): /s/ J. Paul Martin | |
Name (Print): Christopher Gambon | Name (Print): J. Paul Martin | |
Title: Manager, Human Capital | Title: V.P. of Global Services | |
Date: June 19, 2013 | Date: 6/19/13 |
MSTR SUBK REV 20120521 | EMC CONFIDENTIAL | Page 16 |
/s/ Lloyd A. Carney | |
Lloyd A. Carney | |
Chief Executive Officer | |
(Principal Executive Officer) |
/s/ Daniel W. Fairfax | |
Daniel W. Fairfax | |
Chief Financial Officer | |
(Principal Accounting Officer) |
By: | /s/ Lloyd A. Carney | ||
Lloyd A. Carney | |||
Chief Executive Officer |
By: | /s/ Daniel W. Fairfax | ||
Daniel W. Fairfax | |||
Chief Financial Officer |
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Stock-Based Compensation
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Jul. 27, 2013
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Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Stock-based compensation expense, net of estimated forfeitures, was included in the following line items of the Condensed Consolidated Statements of Income as follows (in thousands):
The following table presents stock-based compensation expense, net of estimated forfeitures, by grant type (in thousands):
The following table presents unrecognized compensation expense, net of estimated forfeitures, of the Company’s equity compensation plans as of July 27, 2013, which is expected to be recognized over the following weighted-average periods (in thousands, except for weighted-average period):
The following table presents details on grants made by the Company for the following periods:
The total intrinsic value of stock options exercised for the nine months ended July 27, 2013, and July 28, 2012, was $19.5 million and $23.1 million, respectively. |
Borrowings (Schedule Of Long-Term Debt) (Details) (USD $)
In Thousands, unless otherwise specified |
9 Months Ended | |
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Jul. 27, 2013
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Oct. 27, 2012
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Debt Instrument | ||
Long-term debt, gross | $ 604,422 | $ 604,916 |
Unamortized discount | 5,531 | 3,736 |
Current portion of long-term debt | 2,367 | 1,977 |
Long-term debt, net of current portion | 596,524 | 599,203 |
Senior Secured 2018 Notes
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Debt Instrument | ||
Maturity | Jan. 22, 2013 | |
Stated annual interest rate | 6.625% | |
Long-term debt, gross | 0 | 300,000 |
Effective interest rate | 0.00% | 7.05% |
Senior Secured 2020 Notes
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Debt Instrument | ||
Maturity | Jan. 15, 2020 | |
Stated annual interest rate | 6.875% | |
Long-term debt, gross | 300,000 | 300,000 |
Effective interest rate | 7.26% | 7.26% |
Senior Unsecured 2023 Notes
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Debt Instrument | ||
Maturity | Jan. 15, 2023 | |
Stated annual interest rate | 4.625% | |
Long-term debt, gross | 300,000 | 0 |
Effective interest rate | 4.83% | 0.00% |
Capital Lease Obligations
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Debt Instrument | ||
Maturity | May 31, 2016 | |
Stated annual interest rate | 5.69914% | |
Long-term debt, gross | $ 4,422 | $ 4,916 |
Effective interest rate | 5.54% | 5.80% |
Goodwill And Intangible Assets
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Jul. 27, 2013
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill And Intangible Assets | Goodwill and Intangible Assets The following table summarizes goodwill activity by reportable segment for the nine months ended July 27, 2013 (in thousands):
The Company conducts its goodwill impairment test annually, as of the first day of the second fiscal quarter, and whenever events or changes in facts and circumstances indicate that the fair value of the reporting unit may be less than its carrying amount. For the annual goodwill impairment test, the Company uses the income approach, the market approach or a combination thereof to determine each reporting unit’s fair value. The income approach provides an estimate of fair value based on discounted expected future cash flows (“DCF”). The market approach provides an estimate of fair value using various prices or market multiples applied to the reporting unit’s operating results and then applying an appropriate control premium. For the fiscal year 2013 annual goodwill impairment test, the Company used a combination of approaches to estimate each reporting unit’s fair value. The Company believed that at the time of impairment testing performed in the second fiscal quarter of 2013, the income approach and the market approach were equally representative of a reporting unit’s fair value. Determining the fair value of a reporting unit or an intangible asset requires judgment and involves the use of significant estimates and assumptions. The Company based its fair value estimates on assumptions it believes to be reasonable, but inherently uncertain. Estimates and assumptions with respect to the determination of the fair value of its reporting units using the income approach include, among other inputs:
The Company’s estimates of revenues and costs are based on historical data, various internal estimates and a variety of external sources, and are developed as part of our regular long-range planning process. The control premium used in market or combined approaches is determined by considering control premiums offered as part of the acquisitions that have occurred in the reporting units’ comparable market segments. Based on the results of the annual goodwill impairment analysis performed during the second fiscal quarter of 2013, the Company determined that no impairment needed to be recorded. During the three months ended July 27, 2013, there were no facts and circumstances that indicated that the fair value of the reporting units may be less than their current carrying amount. Intangible assets other than goodwill are amortized on a straight-line basis over the following estimated remaining useful lives, unless the Company has determined these lives to be indefinite. The following tables present details of the Company’s intangible assets (in thousands, except for weighted-average remaining useful life):
The Company performed its annual development period’s IPRD impairment test using measurement data as of the first day of the second fiscal quarter of 2013. During the test, the Company exercised the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of its IPRD asset is less than its carrying amount. After assessing the totality of events and circumstances, the Company determined that it is not more likely than not that the fair value of its IPRD assets is less than its carrying amount and no further testing is required. During the three months ended July 27, 2013, there were no events or changes in facts and circumstances that indicated that it is more likely than not that IPRD is impaired. The following table presents the amortization of intangible assets included in the Condensed Consolidated Statements of Income (in thousands):
The following table presents the estimated future amortization of intangible assets, including IPRD, that is estimated to be amortized in the remaining three months of fiscal year 2013, and thereafter, as of July 27, 2013 (in thousands):
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Goodwill And Intangible Assets Goodwill And Intangible Assets (Policies)
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9 Months Ended | ||||||||||||
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Jul. 27, 2013
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Accounting Policies [Abstract] | |||||||||||||
Goodwill and Intangible Assets, Goodwill Policy | The Company conducts its goodwill impairment test annually, as of the first day of the second fiscal quarter, and whenever events or changes in facts and circumstances indicate that the fair value of the reporting unit may be less than its carrying amount. For the annual goodwill impairment test, the Company uses the income approach, the market approach or a combination thereof to determine each reporting unit’s fair value. The income approach provides an estimate of fair value based on discounted expected future cash flows (“DCF”). The market approach provides an estimate of fair value using various prices or market multiples applied to the reporting unit’s operating results and then applying an appropriate control premium. For the fiscal year 2013 annual goodwill impairment test, the Company used a combination of approaches to estimate each reporting unit’s fair value. The Company believed that at the time of impairment testing performed in the second fiscal quarter of 2013, the income approach and the market approach were equally representative of a reporting unit’s fair value. Determining the fair value of a reporting unit or an intangible asset requires judgment and involves the use of significant estimates and assumptions. The Company based its fair value estimates on assumptions it believes to be reasonable, but inherently uncertain. Estimates and assumptions with respect to the determination of the fair value of its reporting units using the income approach include, among other inputs:
The Company’s estimates of revenues and costs are based on historical data, various internal estimates and a variety of external sources, and are developed as part of our regular long-range planning process. The control premium used in market or combined approaches is determined by considering control premiums offered as part of the acquisitions that have occurred in the reporting units’ comparable market segments. Based on the results of the annual goodwill impairment analysis performed during the second fiscal quarter of 2013, the Company determined that no impairment needed to be recorded. |
Interest and Other Income (Loss), net (Narrative) (Details) (A10 Networks, USD $)
In Millions, unless otherwise specified |
9 Months Ended |
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Jul. 27, 2013
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Component of Operating Other Cost and Expense | |
Other Nonoperating Income | $ 76.8 |
Gain Litigation Settlement Date | May 20, 2013 |
Warrants Initial Period | 90 days |
Warrants Subsequent Period | 30 days |
Cash
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Component of Operating Other Cost and Expense | |
Other Nonoperating Income | 5.0 |
Notes Receivable
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Component of Operating Other Cost and Expense | |
Other Nonoperating Income | 70.0 |
Note Receivable Interest Rate | 8.00% |
Investment Maturity Date | Jan. 22, 2014 |
Prepaid Expense And Other Current Asset
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Component of Operating Other Cost and Expense | |
Other Nonoperating Income | $ 1.8 |
Commitments And Contingencies (Schedule Of Accrued Liability For Estimated Future Warranty Costs) (Details) (USD $)
In Thousands, unless otherwise specified |
9 Months Ended | |
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Jul. 27, 2013
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Jul. 28, 2012
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Product Warranty Activity | ||
Beginning balance | $ 14,453 | $ 11,298 |
Liabilities accrued for warranties issued during the period | 3,753 | 5,827 |
Warranty claims paid and used during the period | (6,500) | (1,095) |
Changes in liability for pre-existing warranties during the period | (2,050) | (1,652) |
Ending balance | $ 9,656 | $ 14,378 |
Interest and Other Income (Loss), net
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9 Months Ended |
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Jul. 27, 2013
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Other Income and Expenses [Abstract] | |
Other Income and Other Expense Disclosure, Nonoperating | Interest and Other Income (Loss), netOn May 20, 2013, Brocade and A10 Networks, Inc. (“A10”) reached an agreement to settle both the lawsuit that Brocade filed against A10, A10’s founder and other individuals in the United States District Court for the Northern District of California on August 4, 2010, and the lawsuit that A10 filed against Brocade on September 9, 2011, along with all related claims as described in Note 9, “Commitments and Contingencies - Intellectual Property Litigation,” of the Notes to Condensed Consolidated Financial Statements.Among other agreed upon terms, A10 has granted the Company a broad patent license and agreed to pay the Company $5.0 million in cash and issued a $70.0 million unsecured convertible promissory note payable to the Company. The note bears interest at 8% per annum and is due and payable on demand at any time after January 22, 2014. The note may be prepaid at any time, but if the note is not paid in full within 90 days of its issuance, then the Company will receive warrants to purchase A10 preferred shares and will receive additional warrants every 30 days thereafter that the note is not paid in full. A10 also has agreed not to use any of the versions of source code that were found to infringe any of Brocade's copyrights, patents or trade secrets, except as necessary to service prior versions of product already sold to and in the possession of A10's customers. In addition, the settlement provides certain mutual covenants not to sue for various periods of time and certain general releases.Based on the fair value of the consideration received as a result of this settlement, the Company recognized a gain of $76.8 million in the third quarter of fiscal year 2013, which is reported within “Interest and Other Income (Loss), net” in the Condensed Consolidated Statements of Income for the three and nine months ended July 27, 2013.The unsecured convertible promissory note was reported within “Prepaid expenses and other current assets” in the Condensed Consolidated Balance Sheet as of July 27, 2013. The current and non-current portion of the $1.8 million in fair value of certain licensing rights granted to the Company as part of the settlement were reported within “Prepaid expenses and other current assets” and “Other assets,” respectively, in the Condensed Consolidated Balance Sheet as of July 27, 2013. |
Balance Sheet Details (Schedule of Property, Plant and Equipment) (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 27, 2013
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Oct. 27, 2012
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Property, Plant and Equipment | ||||||||
Property and equipment, gross | $ 928,559 | $ 920,645 | ||||||
Less: Accumulated depreciation and amortization | (440,615) | [1],[2] | (401,705) | [1],[2] | ||||
Total property and equipment, net | 487,944 | 518,940 | ||||||
Computer equipment
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Property, Plant and Equipment | ||||||||
Property and equipment, gross | 16,710 | 17,953 | ||||||
Software
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Property, Plant and Equipment | ||||||||
Property and equipment, gross | 56,655 | 51,680 | ||||||
Engineering and other equipment
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Property, Plant and Equipment | ||||||||
Property and equipment, gross | 416,160 | [1] | 409,524 | [1] | ||||
Furniture and fixtures
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Property, Plant and Equipment | ||||||||
Property and equipment, gross | 28,113 | [1] | 30,516 | [1] | ||||
Leasehold improvements
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Property, Plant and Equipment | ||||||||
Property and equipment, gross | 26,267 | 26,306 | ||||||
Land and building
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Property, Plant and Equipment | ||||||||
Property and equipment, gross | $ 384,654 | $ 384,666 | ||||||
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Commitments And Contingencies (Purchase Commitment Narrative) (Details) (Details) (Inventory Purchase Commitment, USD $)
In Millions, unless otherwise specified |
Jul. 27, 2013
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Inventory Purchase Commitment
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Purchase Commitment, Excluding Long-term Commitment [Line Items] | |
Purchase Commitment, Remaining Minimum Amount Committed | $ 191.5 |
Purchase Commitment, Recognized Loss | $ 4.1 |
Guarantor And Non-Guarantor Subsidiaries (Tables)
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Guarantor And Non-Guarantor Subsidiaries [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Condensed Consolidated Balance Sheet | The following is the condensed consolidated balance sheet as of July 27, 2013 (in thousands):
The following is the condensed consolidated balance sheet as of October 27, 2012 (in thousands):
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Schedule Of Condensed Consolidated Statement Of Income | The following is the condensed consolidated statement of operations for the three months ended July 27, 2013 (in thousands):
The following is the condensed consolidated statement of operations for the three months ended July 28, 2012 (in thousands):
The following is the condensed consolidated statement of operations for the nine months ended July 27, 2013 (in thousands):
The following is the condensed consolidated statement of operations for the nine months ended July 28, 2012 (in thousands):
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Schedule Of Condensed Consolidated Statement Of Comprehensive Income [Table Text Block] | The following is the condensed consolidated statement of comprehensive income (loss) for the three months ended July 27, 2013 (in thousands):
The following is the condensed consolidated statement of comprehensive income (loss) for the three months ended July 28, 2012 (in thousands):
The following is the condensed consolidated statement of comprehensive income (loss) for the nine months ended July 27, 2013 (in thousands):
The following is the condensed consolidated statement of comprehensive income (loss) for the nine months ended July 28, 2012 (in thousands):
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Schedule Of Condensed Consolidated Statement Of Cash Flows | The following is the condensed consolidated statement of cash flows for the nine months ended July 27, 2013 (in thousands):
The following is the condensed consolidated statement of cash flows for the nine months ended July 28, 2012 (in thousands):
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Acquisitions (Tables)
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 27, 2013
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Purchase Price Allocation | The following table summarizes the allocation of the purchase price to the fair value of the assets and liabilities acquired (in thousands):
|
Derivative Instruments And Hedging Activities Derivative Instruments And Hedging Activities (Policies)
|
9 Months Ended |
---|---|
Jul. 27, 2013
|
|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives, Methods of Accounting, Hedging Derivatives | A majority of the Company’s revenue, expense and capital purchasing activities is transacted in U.S. dollars. However, the Company is exposed to foreign currency exchange rate risk inherent in conducting business globally in numerous currencies. The Company is primarily exposed to foreign currency fluctuations related to operating expenses denominated in currencies other than the U.S. dollar, of which the most significant to its operations for the three and nine months ended July 27, 2013, and July 28, 2012, were the Chinese yuan, the euro, the Japanese yen, the Indian rupee, the British pound, the Singapore dollar and the Swiss franc. The Company has established a foreign currency risk management program to protect against the volatility of future cash flows caused by changes in foreign currency exchange rates. This program reduces, but does not always entirely eliminate, the impact of foreign currency exchange rate movements. The Company’s foreign currency risk management program includes foreign currency derivatives with cash flow hedge accounting designation that utilizes foreign currency forward and option contracts to hedge exposures to the variability in the U.S. dollar equivalent of anticipated non-U.S.-dollar-denominated cash flows. These instruments generally have a maturity of less than fifteen months. For these derivatives, the Company reports the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive loss in stockholders’ equity and reclassifies it into earnings in the same period in which the hedged transaction affects earnings. The tax effect allocated to cash flow hedge-related components of other comprehensive income was not significant for the three and nine months ended July 27, 2013, and July 28, 2012, respectively. Ineffective cash flow hedges are included in the Company’s net income as part of “Interest and other income (loss), net.” The amount recorded on ineffective cash flow hedges was not significant for the three and nine months ended July 27, 2013, and July 28, 2012, respectively. |
Balance Sheet Details (Schedule of Inventory) (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 27, 2013
|
Oct. 27, 2012
|
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 13,614 | $ 24,240 |
Finished goods | 36,987 | 43,939 |
Inventory, Net | $ 50,601 | $ 68,179 |
Derivative Instruments And Hedging Activities (Tables)
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 27, 2013
|
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Net Gains (Losses) Related To The Effective Portion Of Foreign Currency Derivatives | Net gains (losses) relating to the effective portion of foreign currency derivatives recorded in the Condensed Consolidated Statements of Income are as follows (in thousands):
|
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Schedule Of Total Gross Notional Amounts, Presented By Currency | Total gross notional amounts, presented by currency, are as follows (in thousands):
|
Acquisitions (Schedule of Purchase Price Allocation) (Details) (Vyatta, USD $)
In Thousands, unless otherwise specified |
Nov. 09, 2012
|
|||
---|---|---|---|---|
Business Acquisition, Purchase Price Allocation | ||||
Cash | $ 140 | |||
Accounts receivable | 511 | |||
Identifiable intangible assets | 24,980 | |||
Goodwill (1) | 25,599 | [1] | ||
Other assets | 1,017 | |||
Total assets acquired | 52,247 | |||
Deferred tax liability | 3,393 | |||
Deferred revenue | 1,354 | |||
Accounts payable and other accrued liabilities | 2,731 | |||
Total liabilities assumed | 7,478 | |||
Net assets acquired | 44,769 | |||
In-process technology
|
||||
Business Acquisition, Purchase Price Allocation | ||||
Identifiable intangible assets | 21,590 | |||
Customer relationships
|
||||
Business Acquisition, Purchase Price Allocation | ||||
Identifiable intangible assets | 1,080 | |||
Core/developed technology
|
||||
Business Acquisition, Purchase Price Allocation | ||||
Identifiable intangible assets | 1,040 | |||
Non-compete agreements
|
||||
Business Acquisition, Purchase Price Allocation | ||||
Identifiable intangible assets | 810 | |||
Trade name
|
||||
Business Acquisition, Purchase Price Allocation | ||||
Identifiable intangible assets | $ 460 | |||
|
Balance Sheet Details (Schedule of Capital Leased Assets) (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 27, 2013
|
Oct. 27, 2012
|
---|---|---|
Capital Leases | ||
Cost | $ 11,655 | $ 10,613 |
Accumulated depreciation | (4,915) | (3,647) |
Total | $ 6,740 | $ 6,966 |
Liabilities Associated With Facilities Lease Losses (Tables)
|
9 Months Ended | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 27, 2013
|
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||
Schedule Of Facilities Lease Loss Reserve | The following table summarizes the activity related to the facilities lease loss reserve included in “Other accrued liabilities” and “Other non-current liabilities” in the Condensed Consolidated Balance Sheets, net of expected sublease income (in thousands):
|
Stock-Based Compensation (Stock-Based Compensation Expense By Grant Type) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 27, 2013
|
Jul. 28, 2012
|
Jul. 27, 2013
|
Jul. 28, 2012
|
|
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Total stock-based compensation | $ 18,769 | $ 13,069 | $ 57,091 | $ 58,746 |
Stock options, including variable options
|
||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Total stock-based compensation | 828 | 169 | 1,818 | 899 |
Restricted stock awards and restricted stock units (“RSUs”)
|
||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Total stock-based compensation | 11,202 | 7,720 | 38,351 | 44,441 |
Employee stock purchase plan (“ESPP”)
|
||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Total stock-based compensation | $ 6,739 | $ 5,180 | $ 16,922 | $ 13,406 |
Guarantor And Non-Guarantor Subsidiaries (Narrative) (Details) (USD $)
In Millions, unless otherwise specified |
9 Months Ended | ||
---|---|---|---|
Jul. 27, 2013
|
Jan. 20, 2010
Senior Secured Notes
|
Jan. 22, 2013
Senior Unsecured 2023 Notes
|
|
Guarantor And Non-Guarantor Subsidiaries [Abstract] | |||
Description of Guarantees Given by Parent Company | On January 20, 2010, the Company issued $600.0 million aggregate principal amount of the 2018 Notes and 2020 Notes. In addition, on January 22, 2013, the Company issued $300.0 million aggregate principal amount of the 2023 Notes. The Company’s obligations under the 2023 Notes and the 2020 Notes are, and prior to January 22, 2013, the Company’s obligations under the 2018 Notes were, guaranteed by certain of the Company’s domestic subsidiaries (the “Subsidiary Guarantors”). Each of the Subsidiary Guarantors is 100% owned by the Company and all guarantees are joint and several. The senior secured notes are not guaranteed by certain of the Company’s domestic subsidiaries and all of the Company’s foreign subsidiaries (the “Non-Guarantor Subsidiaries”). Pursuant to the terms of the Indentures governing the Senior Secured Notes, the guarantees are full and unconditional, but are subject to release under the following circumstances: - upon the sale of the subsidiary or all or substantially all of its assets; - upon the discharge of the guarantees under the credit facility and any other debt guaranteed by the applicable subsidiary provided that the credit facility has been paid in full and the applicable series of senior secured notes have an investment grade rating from both Standard & Poor’s and Moody’s; - upon designation of the subsidiary as an “unrestricted subsidiary” under the applicable Indenture; - upon the merger, consolidation or liquidation of the subsidiary into the Company or another subsidiary guarantor; and - upon legal or covenant defeasance or the discharge of the Company’s obligations under the applicable indenture. The guarantees of the 2018 Notes were released on January 22, 2013, upon the discharge of the 2018 Indenture. Pursuant to the terms of the Indenture governing the 2023 Notes, the guarantees are full and unconditional but are subject to release under the following circumstances: - upon the sale of the subsidiary or all or substantially all of its assets; - upon the discharge of the guarantees under the Senior Secured Credit Facility, the 2020 Notes and any other debt guaranteed by the applicable subsidiary; - upon the merger, consolidation or liquidation of the subsidiary into the Company or another subsidiary guarantor; and - upon legal or covenant defeasance or the discharge of the Company’s obligations under the applicable indenture. Because the guarantees are subject to release under the above described circumstances, they would not be deemed “full and unconditional” for purposes of Rule 3-10 of Regulation S-X. However, as these circumstances are customary, the Company concluded that it may rely on Rule 3-10 of Regulation S-X, as the other requirements of Rule 3-10 have been met. | ||
Debt Instrument | |||
Debt Instrument, Face Amount | $ 600.0 | $ 300.0 |
Stock-Based Compensation (Stock-Based Compensation Expense Included In Line Items Of Consolidated Statements Of Operations) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 27, 2013
|
Jul. 28, 2012
|
Jul. 27, 2013
|
Jul. 28, 2012
|
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Total stock-based compensation | $ 18,769 | $ 13,069 | $ 57,091 | $ 58,746 |
Cost of revenues
|
||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Total stock-based compensation | 3,858 | 3,074 | 11,345 | 12,045 |
Research and development
|
||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Total stock-based compensation | 4,020 | 3,110 | 13,205 | 13,741 |
Sales and marketing
|
||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Total stock-based compensation | 7,164 | 4,483 | 23,321 | 24,946 |
General and administrative
|
||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Total stock-based compensation | $ 3,727 | $ 2,402 | $ 9,220 | $ 8,014 |
Goodwill And Intangible Assets (Schedule Of Company's Intangible Assets) (Details) (USD $)
|
9 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jul. 27, 2013
|
Oct. 27, 2012
|
||||||
Finite-Lived Intangible Assets | |||||||
Gross Carrying Value | $ 502,290,000 | [1] | $ 546,710,000 | ||||
Accumulated Amortization | 439,258,000 | [1] | 437,445,000 | ||||
Net Carrying Value | 63,032,000 | [1] | 109,265,000 | ||||
Weighted-Average Remaining Useful Life (in years) | 0 years 7 months 13 days | 1 year 1 month 28 days | |||||
Cost of Fully Amortized Intangible Assets | 69,400,000 | ||||||
Trade name
|
|||||||
Finite-Lived Intangible Assets | |||||||
Gross Carrying Value | 460,000 | 100,000 | |||||
Accumulated Amortization | 82,000 | 97,000 | |||||
Net Carrying Value | 378,000 | 3,000 | |||||
Weighted-Average Remaining Useful Life (in years) | 3 years 3 months 4 days | 0 years 2 months 1 day | |||||
Core/developed technology
|
|||||||
Finite-Lived Intangible Assets | |||||||
Gross Carrying Value | 192,340,000 | 218,845,000 | |||||
Accumulated Amortization | 175,604,000 | 173,070,000 | |||||
Net Carrying Value | 16,736,000 | 45,775,000 | |||||
Weighted-Average Remaining Useful Life (in years) | 0 years 6 months 0 days | 1 year 1 month 20 days | |||||
Customer relationships
|
|||||||
Finite-Lived Intangible Assets | |||||||
Gross Carrying Value | 287,090,000 | 327,765,000 | |||||
Accumulated Amortization | 263,427,000 | 264,278,000 | |||||
Net Carrying Value | 23,663,000 | 63,487,000 | |||||
Weighted-Average Remaining Useful Life (in years) | 0 years 7 months 2 days | 1 year 1 month 28 days | |||||
Non-compete agreements
|
|||||||
Finite-Lived Intangible Assets | |||||||
Gross Carrying Value | 810,000 | ||||||
Accumulated Amortization | 145,000 | ||||||
Net Carrying Value | 665,000 | ||||||
Weighted-Average Remaining Useful Life (in years) | 3 years 3 months 4 days | ||||||
In-Process Research and Development
|
|||||||
Finite-Lived Intangible Assets | |||||||
Gross Carrying Value | 21,590,000 | [2] | |||||
Accumulated Amortization | 0 | [2] | |||||
Net Carrying Value | $ 21,590,000 | [2] | |||||
|
Segment Information (Schedule Of Financial Information By Reportable Segment) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 27, 2013
|
Jul. 28, 2012
|
Jul. 27, 2013
|
Jul. 28, 2012
|
|
Segment Reporting Information | ||||
Net revenues | $ 536,551 | $ 555,332 | $ 1,664,064 | $ 1,659,413 |
Cost of revenues | 198,349 | 214,854 | 617,825 | 637,084 |
Gross margin | 338,202 | 340,478 | 1,046,239 | 1,022,329 |
SAN Products
|
||||
Segment Reporting Information | ||||
Net revenues | 314,087 | 321,464 | 994,909 | 1,017,258 |
Cost of revenues | 85,611 | 87,113 | 270,461 | 273,308 |
Gross margin | 228,476 | 234,351 | 724,448 | 743,950 |
IP Networking Products
|
||||
Segment Reporting Information | ||||
Net revenues | 133,906 | 145,817 | 407,077 | 382,429 |
Cost of revenues | 74,830 | 86,524 | 228,954 | 239,913 |
Gross margin | 59,076 | 59,293 | 178,123 | 142,516 |
Global Services
|
||||
Segment Reporting Information | ||||
Net revenues | 88,558 | 88,051 | 262,078 | 259,726 |
Cost of revenues | 37,908 | 41,217 | 118,410 | 123,863 |
Gross margin | $ 50,650 | $ 46,834 | $ 143,668 | $ 135,863 |
Fair Value Measurements Fair Value Measurements (Policies)
|
9 Months Ended |
---|---|
Jul. 27, 2013
|
|
Accounting Policies [Abstract] | |
Fair Value Transfer Policy | During the nine months ended July 27, 2013, the Company had no transfers between levels of the fair value hierarchy of its assets and liabilities measured at fair value. |
Condensed Consolidated Statements Of Cash Flows (USD $)
In Thousands, unless otherwise specified |
9 Months Ended | |
---|---|---|
Jul. 27, 2013
|
Jul. 28, 2012
|
|
Cash flows from operating activities: | ||
Net income | $ 144,390 | $ 141,180 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Excess tax benefits from stock-based compensation | (6,909) | (1,338) |
Non-cash tax charges | 78,206 | 0 |
Depreciation and amortization | 139,005 | 144,683 |
Loss on disposal of property and equipment | 4,030 | 404 |
Amortization of debt issuance costs and original issue discount | 937 | 3,767 |
Original issue discount and debt issuance costs related to lenders that did not participate in refinancing | 5,360 | 0 |
Net gains on investments | 0 | (35) |
Provision for doubtful accounts receivable and sales allowances | 6,897 | 9,533 |
Non-cash compensation expense | 57,091 | 58,746 |
Changes in assets and liabilities: | ||
Accounts receivable | 7,950 | 8,454 |
Inventories | 18,915 | (2,099) |
Prepaid expenses and other assets | (69,017) | 2,675 |
Deferred tax assets | 344 | 181 |
Accounts payable | (21,744) | 8,476 |
Accrued employee compensation | (82,457) | 5,554 |
Deferred revenue | 5,950 | 9,377 |
Other accrued liabilities | (7,688) | (9,180) |
Net cash provided by operating activities | 281,260 | 380,378 |
Cash flows from investing activities: | ||
Proceeds from sale of subsidiary | 0 | 35 |
Purchases of property and equipment | (41,949) | (56,005) |
Net cash paid in connection with acquisition | (44,629) | 0 |
Net cash used in investing activities | (86,578) | (55,970) |
Cash flows from financing activities: | ||
Proceeds from senior unsecured notes | 296,250 | 0 |
Payment of principal related to senior secured notes | (300,000) | 0 |
Payment of principal related to the term loan | 0 | (160,000) |
Payment of debt issuance costs related to senior unsecured notes | (992) | 0 |
Payment of principal related to capital leases | (1,536) | (1,389) |
Common stock repurchases | (187,360) | (70,153) |
Proceeds from issuance of common stock | 71,858 | 76,472 |
Excess tax benefits from stock-based compensation | 6,909 | 1,338 |
Net cash used in financing activities | (114,871) | (153,732) |
Effect of exchange rate fluctuations on cash and cash equivalents | (2,944) | (4,252) |
Net increase in cash and cash equivalents | 76,867 | 166,424 |
Cash and cash equivalents, beginning of period | 713,226 | 414,202 |
Cash and cash equivalents, end of period | 790,093 | 580,626 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 39,693 | 44,489 |
Cash paid for income taxes | 14,918 | 3,189 |
Supplemental schedule of non-cash investing activities: | ||
Acquisition of property and equipment through capital leases | 1,042 | 0 |
Convertible note receivable obtained from litigation settlement | $ 70,000 | $ 0 |
Summary Of Significant Accounting Policies
|
9 Months Ended |
---|---|
Jul. 27, 2013
|
|
Accounting Policies [Abstract] | |
Summary Of Significant Accounting Policies | Summary of Significant Accounting Policies There have been no material changes in the Company’s significant accounting policies for the nine months ended July 27, 2013, as compared to the significant accounting policies disclosed in Brocade’s Annual Report on Form 10-K for the fiscal year ended October 27, 2012. New Accounting Pronouncements or Updates Recently Adopted In June 2011 and December 2011, the FASB issued updates to ASC 220 Comprehensive Income (“ASC 220”): Presentation of Comprehensive Income. The amendments from these updates increase the prominence of items reported in other comprehensive income and eliminate the option to present components of other comprehensive income as part of the statement of equity. The Company adopted these updates in the first quarter of fiscal year 2013, presenting the required information in the Condensed Consolidated Statements of Comprehensive Income. Recent Accounting Pronouncements or Updates That Are Not Yet Effective In February 2013, the FASB issued an update to ASC 220: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. Under this update, an entity is required to provide information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. This update to ASC 220 should be applied prospectively and will be adopted by the Company in the first quarter of fiscal year 2014. The adoption of this update to ASC 220 will not have an impact on the Company’s financial position, results of operations or cash flows. The Company will include additional information required by this update prospectively starting from the first quarter of fiscal year 2014. In March 2013, the FASB issued an update to ASC 830 Foreign Currency Matters (“ASC 830”): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. Under this update, an entity is required to release any cumulative translation adjustment into net income when an entity ceases to have a controlling financial interest resulting in the complete or substantially complete liquidation of a subsidiary or group of assets within a foreign entity. This update to ASC 830 should be applied prospectively and will be adopted by the Company in the first quarter of fiscal year 2015. The Company does not expect the adoption of this update to ASC 830 to have a material impact on its financial position, results of operations or cash flows. In July 2013, the FASB issued an update to ASC 740 Income Taxes (“ASC 740”): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. Under this update, an entity is required to present an unrecognized tax benefit, or a portion thereof, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that these instances are not available at the reporting date. This update to ASC 740 should be applied prospectively and will be adopted by the Company in the first quarter of fiscal year 2015. The Company does not expect the adoption of this update to ASC 740 to have a material impact on its financial position, results of operations or cash flows. Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company’s cash and cash equivalents are primarily maintained at five major financial institutions. Deposits held with banks may be redeemed upon demand and may exceed the amount of insurance provided on such deposits. A majority of the Company’s accounts receivable balance is derived from sales to original equipment manufacturer (“OEM”) partners in the computer storage and server industry. As of July 27, 2013, two customers accounted for 12% and 11%, respectively, of total accounts receivable, for a combined total of 23% of total accounts receivable. As of October 27, 2012, three customers accounted for 16%, 12% and 10%, respectively, of total accounts receivable, for a combined total of 38% of total accounts receivable. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable balances. The Company has established reserves for credit losses, sales allowances and other allowances. For the three months ended July 27, 2013, three customers accounted for 20%, 15%, and 12%, respectively, of the Company’s total net revenues for a combined total of 47% of total net revenues. For the three months ended July 28, 2012, four customers accounted for 16%, 16%, 13% and 10% respectively, of the Company’s total net revenues for a combined total of 55% of total net revenues. The Company currently relies on single and limited sources for multiple key components used in the manufacture of its products. Additionally, the Company relies on contract manufacturers (“CMs”) for the manufacturing of its products. Although the Company uses standard parts and components for its products where possible, the Company’s CMs currently purchase, on the Company’s behalf, several key product components from single or limited supplier sources. |
Balance Sheet Details
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Jul. 27, 2013
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Balance Sheet Details [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Details | Balance Sheet Details The following table provides details of selected balance sheet items (in thousands):
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Guarantor And Non-Guarantor Subsidiaries (Schedule Of Consolidated Balance Sheet) (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 27, 2013
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Oct. 27, 2012
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Jul. 28, 2012
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Oct. 29, 2011
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Condensed Financial Statements, Captions | ||||
Cash and cash equivalents | $ 790,093 | $ 713,226 | $ 580,626 | $ 414,202 |
Accounts receivable, net | 218,462 | 233,139 | ||
Inventories | 50,601 | 68,179 | ||
Intercompany receivables | 0 | 0 | ||
Other current assets | 165,431 | 141,035 | ||
Total current assets | 1,224,587 | 1,155,579 | ||
Property and equipment, net | 487,944 | 518,940 | ||
Investment in subsidiaries | 0 | 0 | ||
Other non-current assets | 1,809,200 | 1,906,742 | ||
Total assets | 3,521,731 | 3,581,261 | ||
Accounts payable | 95,936 | 117,350 | ||
Current portion of long-term debt | 2,367 | 1,977 | ||
Intercompany payables | 0 | 0 | ||
Other current liabilities | 404,335 | 491,141 | ||
Total current liabilities | 502,638 | 610,468 | ||
Long-term debt, net of current portion | 596,524 | 599,203 | ||
Other non-current liabilities | 115,340 | 135,770 | ||
Total liabilities | 1,214,502 | 1,345,441 | ||
Total stockholders’ equity | 2,307,229 | 2,235,820 | ||
Total liabilities and stockholders’ equity | 3,521,731 | 3,581,261 | ||
Brocade Communications Systems, Inc.
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Condensed Financial Statements, Captions | ||||
Cash and cash equivalents | 270,192 | 284,466 | 204,938 | 101,366 |
Accounts receivable, net | 129,224 | 150,367 | ||
Inventories | 42,517 | 55,084 | ||
Intercompany receivables | 0 | 0 | ||
Other current assets | 151,710 | 124,690 | ||
Total current assets | 593,643 | 614,607 | ||
Property and equipment, net | 471,893 | 500,530 | ||
Investment in subsidiaries | 997,365 | 871,157 | ||
Other non-current assets | 1,718,120 | 1,814,729 | ||
Total assets | 3,781,021 | 3,801,023 | ||
Accounts payable | 72,048 | 92,661 | ||
Current portion of long-term debt | 2,367 | 2,226 | ||
Intercompany payables | 456,806 | 434,981 | ||
Other current liabilities | 276,789 | 346,959 | ||
Total current liabilities | 808,010 | 876,827 | ||
Long-term debt, net of current portion | 596,524 | 599,203 | ||
Other non-current liabilities | 69,258 | 89,173 | ||
Total liabilities | 1,473,792 | 1,565,203 | ||
Total stockholders’ equity | 2,307,229 | 2,235,820 | ||
Total liabilities and stockholders’ equity | 3,781,021 | 3,801,023 | ||
Subsidiary Guarantors
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Condensed Financial Statements, Captions | ||||
Cash and cash equivalents | 3,643 | 680 | 812 | 1,528 |
Accounts receivable, net | 360 | (1,847) | ||
Inventories | 0 | 0 | ||
Intercompany receivables | 487,040 | 478,133 | ||
Other current assets | 235 | 514 | ||
Total current assets | 491,278 | 477,480 | ||
Property and equipment, net | 534 | 213 | ||
Investment in subsidiaries | 0 | 0 | ||
Other non-current assets | 87,244 | 90,766 | ||
Total assets | 579,056 | 568,459 | ||
Accounts payable | 17 | 0 | ||
Current portion of long-term debt | 0 | (249) | ||
Intercompany payables | 0 | 0 | ||
Other current liabilities | 6,710 | 7,628 | ||
Total current liabilities | 6,727 | 7,379 | ||
Long-term debt, net of current portion | 0 | 0 | ||
Other non-current liabilities | 2,428 | 2,429 | ||
Total liabilities | 9,155 | 9,808 | ||
Total stockholders’ equity | 569,901 | 558,651 | ||
Total liabilities and stockholders’ equity | 579,056 | 568,459 | ||
Non-Guarantor Subsidiaries
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Condensed Financial Statements, Captions | ||||
Cash and cash equivalents | 516,258 | 428,080 | 374,876 | 311,308 |
Accounts receivable, net | 88,878 | 84,619 | ||
Inventories | 8,084 | 13,095 | ||
Intercompany receivables | 0 | 0 | ||
Other current assets | 11,854 | 15,606 | ||
Total current assets | 625,074 | 541,400 | ||
Property and equipment, net | 15,517 | 18,197 | ||
Investment in subsidiaries | 0 | 0 | ||
Other non-current assets | 3,836 | 1,247 | ||
Total assets | 644,427 | 560,844 | ||
Accounts payable | 23,871 | 24,689 | ||
Current portion of long-term debt | 0 | 0 | ||
Intercompany payables | 30,234 | 43,152 | ||
Other current liabilities | 119,204 | 136,329 | ||
Total current liabilities | 173,309 | 204,170 | ||
Long-term debt, net of current portion | 0 | 0 | ||
Other non-current liabilities | 43,654 | 44,168 | ||
Total liabilities | 216,963 | 248,338 | ||
Total stockholders’ equity | 427,464 | 312,506 | ||
Total liabilities and stockholders’ equity | 644,427 | 560,844 | ||
Consolidating Adjustments
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Condensed Financial Statements, Captions | ||||
Cash and cash equivalents | 0 | 0 | 0 | 0 |
Accounts receivable, net | 0 | 0 | ||
Inventories | 0 | 0 | ||
Intercompany receivables | (487,040) | (478,133) | ||
Other current assets | 1,632 | 225 | ||
Total current assets | (485,408) | (477,908) | ||
Property and equipment, net | 0 | 0 | ||
Investment in subsidiaries | (997,365) | (871,157) | ||
Other non-current assets | 0 | 0 | ||
Total assets | (1,482,773) | (1,349,065) | ||
Accounts payable | 0 | 0 | ||
Current portion of long-term debt | 0 | 0 | ||
Intercompany payables | (487,040) | (478,133) | ||
Other current liabilities | 1,632 | 225 | ||
Total current liabilities | (485,408) | (477,908) | ||
Long-term debt, net of current portion | 0 | 0 | ||
Other non-current liabilities | 0 | 0 | ||
Total liabilities | (485,408) | (477,908) | ||
Total stockholders’ equity | (997,365) | (871,157) | ||
Total liabilities and stockholders’ equity | $ (1,482,773) | $ (1,349,065) |
Acquisitions
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9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 27, 2013
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions On November 9, 2012, the Company completed its acquisition of Vyatta, Inc. (“Vyatta”), a privately held developer of a software-based network operating system suite headquartered in Belmont, California. Vyatta became a wholly-owned subsidiary of the Company as a result of the acquisition. The Vyatta operating system suite is deployed on conventional computer hardware platforms for multiple applications in network virtualization, software-defined networking (“SDN”) and private/public cloud computing platforms. This acquisition complements Brocade’s investments in Ethernet switches and router fabrics and enables Brocade to pursue new market opportunities in data center virtualization, public cloud, enterprise virtual private cloud and managed services. The results of operations of Vyatta are included in the Company’s Condensed Consolidated Statement of Income from the date of the acquisition. The Company does not consider the acquisition of Vyatta to be material to its results of operations or financial position, and therefore, Brocade is not presenting pro-forma financial information of combined operations. The total purchase price was $44.8 million, consisting of $43.6 million cash consideration and $1.2 million related to prepaid license fees paid by the Company to Vyatta that was effectively settled at the recorded amount as a result of the acquisition. Of the cash consideration, $7.0 million will be held in escrow for a period of 18 months from the closing of the acquisition and will be released subject to resolution of certain contingencies. In addition, the Company paid direct acquisition costs of $0.4 million. In connection with this acquisition, the Company allocated the total purchase consideration to the net assets and liabilities acquired, including identifiable intangible assets, based on their respective fair values at the acquisition date. The following table summarizes the allocation of the purchase price to the fair value of the assets and liabilities acquired (in thousands):
The allocation of the purchase price reflects the Company’s preliminary estimate in relation to the value of the Company’s deferred tax liability which is subject to change during the Vyatta acquisition’s measurement period. |
Acquisitions (Narrative) (Details) (Vyatta, USD $)
In Millions, unless otherwise specified |
9 Months Ended | |
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Jul. 27, 2013
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Nov. 09, 2012
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Vyatta
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Business Acquisition | ||
Effective Date of Acquisition | Nov. 09, 2012 | |
Goodwill, Expected Tax Deductible Amount | $ 0 | |
Acquisition Cost Expensed | 0.4 | |
Consideration Paid Held In Escrow, Amount | 7.0 | |
Consideration Paid Held In Escrow, Escrow Duration | 18 months | |
Business Combination, Consideration Transferred | ||
Cash consideration | 43.6 | |
Prepaid license fees consideration | 1.2 | |
Total purchase price | $ 44.8 |
Goodwill And Intangible Assets (Tables)
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Jul. 27, 2013
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Goodwill Activity By Reportable Segment | The following table summarizes goodwill activity by reportable segment for the nine months ended July 27, 2013 (in thousands):
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Schedule Of Company's Intangible Assets | The following tables present details of the Company’s intangible assets (in thousands, except for weighted-average remaining useful life):
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Schedule Of Amortization Of Intangible Assets Included On Consolidated Statements Of Operations | The following table presents the amortization of intangible assets included in the Condensed Consolidated Statements of Income (in thousands):
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Schedule Of Estimated Future Amortization Of Intangible Assets | The following table presents the estimated future amortization of intangible assets, including IPRD, that is estimated to be amortized in the remaining three months of fiscal year 2013, and thereafter, as of July 27, 2013 (in thousands):
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Borrowings (Tables)
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Jul. 27, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The following table provides details of the Company’s long-term debt (in thousands, except percentages):
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Schedule Of Debt Maturities | As of July 27, 2013, our aggregate debt maturities based on outstanding principal were as follows (in thousands):
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Net Income Per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||
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Jul. 27, 2013
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Jul. 28, 2012
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Jul. 27, 2013
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Jul. 28, 2012
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Earnings Per Share, Basic | ||||||||||
Net income | $ 118,696 | $ 43,300 | $ 144,390 | $ 141,180 | ||||||
Weighted-average shares used in computing basic net income per-share | 449,446 | 457,147 | 452,474 | 455,727 | ||||||
Net income per-share — basic | $ 0.26 | $ 0.09 | $ 0.32 | $ 0.31 | ||||||
Earnings Per Share, Diluted | ||||||||||
Net income | $ 118,696 | $ 43,300 | $ 144,390 | $ 141,180 | ||||||
Weighted-average shares used in computing diluted net income per-share | 461,344 | 469,571 | 464,861 | 471,719 | ||||||
Net income per-share — diluted | $ 0.26 | $ 0.09 | $ 0.31 | $ 0.30 | ||||||
Weighted Average Number of Shares Outstanding Reconciliation | ||||||||||
Weighted-average shares used in computing basic net income per-share | 449,446 | 457,147 | 452,474 | 455,727 | ||||||
Dilutive potential common shares in the form of stock options | 2,842 | 6,172 | 3,686 | 8,391 | ||||||
Dilutive potential common shares in the form of other share-based awards | 9,056 | 6,252 | 8,701 | 7,601 | ||||||
Weighted-average shares used in computing diluted net income per-share | 461,344 | 469,571 | 464,861 | 471,719 | ||||||
Stock options
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Antidilutive Securities Excluded from Computation of Earnings Per Share | ||||||||||
Antidilutive potential common shares | 13,146 | [1] | 17,742 | [1] | 14,637 | [1] | 17,437 | [1] | ||
Other share-based awards
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Antidilutive Securities Excluded from Computation of Earnings Per Share | ||||||||||
Antidilutive potential common shares | 12 | [1] | 1,000 | [1] | 171 | [1] | 728 | [1] | ||
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Net Income Per Share (Tables)
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Jul. 27, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Calculation Of Basic And Diluted Net Income (Loss) Per Share | The following table presents the calculation of basic and diluted net income per share (in thousands, except per share amounts):
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Segment Information Narrative (Details)
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9 Months Ended |
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Jul. 27, 2013
segments
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Segment Reporting [Abstract] | |
Number of operating segments | 4 |
Number of reportable segments, individually reported | 2 |
Number of operating segments, combined to reporting segment | 2 |
Borrowings (Schedule Of Debt Maturities) (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 27, 2013
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Oct. 27, 2012
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Long-term Debt, by Maturity [Abstract] | ||
2013 (remaining three months) | $ 559 | |
2014 | 2,427 | |
2015 | 1,195 | |
2016 | 241 | |
2017 | 0 | |
Thereafter | 600,000 | |
Long-term debt, gross | $ 604,422 | $ 604,916 |