SOURCE: Brocade

Brocade

November 18, 2013 17:29 ET

Brocade Reports Fourth Quarter and Fiscal 2013 Earnings

FY2013 GAAP EPS Increased 10% Yr./Yr. and Non-GAAP EPS Increased 21% Yr./Yr.

SAN JOSE, CA--(Marketwired - Nov 18, 2013) - Brocade® (NASDAQ: BRCD) today reported financial results for its fourth quarter and full fiscal year 2013 ended October 26, 2013. Brocade reported fourth quarter revenue of $559 million, representing a decrease of 3% year-over-year and an increase of 4% quarter-over-quarter. Revenue for fiscal year 2013 was $2,223 million, down 1% year-over-year. The resulting GAAP diluted earnings-per-share (EPS) was $0.14 for Q4 and $0.45 for fiscal 2013, up 27% and 10% year-over-year, respectively. Non-GAAP diluted EPS was $0.24 for Q4 and $0.80 for fiscal 2013, up 41% and 21% year-over-year, respectively.

"Q4 was a quarter in which we executed successfully across many facets of our business strategy," said Lloyd Carney, CEO of Brocade. "We exceeded expectations for non-GAAP operating margin, non-GAAP EPS, and cash flow despite the U.S. Federal budget issues and continued softness in the overall storage market. This resulted in record non-GAAP net income and non-GAAP EPS for both Q4 and fiscal 2013. Our solid performance in our fourth quarter was a great end to a transformative year for Brocade. I am pleased with the focus and execution of our team and excited about building upon our success in fiscal year 2014 and beyond."

Summary of Q4 and fiscal 2013 results:

  • Q4 2013 Storage Area Networking (SAN) business revenue, including products and services, was $380 million, down 4% year-over-year and up 3% quarter-over-quarter. The lower year-over-year SAN business revenue was impacted by continued soft demand in the overall storage market. Brocade Gen 5 (16 Gbps) Fibre Channel products represented 69% of director and switch revenue in the quarter, up from 34% in Q4 2012. Fiscal 2013 SAN business revenue was $1,540 million, down 2% year-over-year.

  • Q4 2013 IP Networking business revenue, including products and services, was $179 million, down 3% year-over-year and up 7% quarter-over-quarter. From a product standpoint, Ethernet switch revenue was down 8% year-over-year and up 4% quarter-over-quarter, while routing revenue was up 1% year-over-year and up 28% quarter-over-quarter. From a customer standpoint, both Service Provider and Enterprise revenues were up sequentially and year-over-year. Federal revenue was up sequentially, but down year-over-year in a challenging Federal spending environment. Fiscal 2013 IP Networking business revenue was $682 million, up 3% year-over-year.

  • Q4 2013 GAAP gross margin was 64.9%, compared to 62.4% in Q4 2012 and 63.0% in Q3 2013. Non-GAAP gross margin was 67.2%, compared to 64.8% in Q4 2012 and 65.6% in Q3 2013. Fiscal 2013 GAAP and non-GAAP gross margin improved to 63.4% and 66.0%, respectively, compared to 61.8% and 64.5%, respectively, in fiscal 2012. The year-over-year and sequential improvements in gross margin were due to a favorable product mix within the IP Networking business and lower manufacturing and overhead costs.

  • Q4 2013 GAAP operating margin was 15.0%, compared to 14.9% in Q4 2012 and 13.9% in Q3 2013, and includes $25 million in restructuring and related costs. Non-GAAP operating margin was 26.6% in Q4 2013, compared to 22.5% in Q4 2012 and 21.6% in Q3 2013. Fiscal 2013 GAAP and non-GAAP operating margin improved to 13.9% and 22.7%, respectively, compared to 12.4% and 20.5%, respectively, in fiscal 2012. The year-over-year and sequential improvements in operating margin were a result of expanded gross margin and lower operating expenses. Based on the Q4 2013 results, the Company has achieved its spending reduction goal of $100 million in annualized savings, as compared to Q1 2013.

  • Q4 2013 GAAP net income was $64 million, compared to $54 million in Q4 2012 and $119 million in Q3 2013. Non-GAAP net income was $109 million, compared to $78 million in Q4 2012 and $87 million in Q3 2013. Fiscal 2013 GAAP and non-GAAP net income increased to $209 million and $373 million, respectively, compared to $195 million and $311 million, respectively, in fiscal 2012.

  • Average diluted shares outstanding for Q4 2013 were 14.0 million lower compared to Q4 2012 and down slightly from Q3 2013. The Company repurchased 41.2 million shares ($240 million) during fiscal 2013, including 7.8 million shares ($53 million) in Q4 2013. Share repurchases in Q1 2014 to date total 8.1 million ($65 million).

  • Operating cash flow was $170 million in Q4 2013, down 19% year-over-year and up 66% quarter-over-quarter. Fiscal 2013 operating cash flow was $451 million, down 24% year-over-year. The changes in cash flow for Q4 2013 and fiscal 2013 are due to an increase in accounts receivable and timing of variable compensation payments. During the quarter, the Company received a $71 million payment relating to the A10 Networks litigation settlement and ended the year with a cash balance of $987 million or $382 million, net of senior debt and capitalized leases.

Brocade management will host a conference call today at 2:30 p.m. PT (5:30 p.m. ET) to discuss Q4 and fiscal 2013 results, as well as a Q1 2014 outlook. To access the webcast please go to www.brcd.com/events.cfm. A replay of the conference call and the prepared comments and slides will be available at www.brcd.com.

Other Q4 2013 product, customer, and partner announcements are available at http://newsroom.brocade.com/.

Financial Highlights and Additional Financial Information

           
  Q4 2013   Q3 2013   Q4 2012
Revenue   $559M     $537M     $578M
GAAP net income   $64M     $119M     $54M
Non-GAAP net income   $109M     $87M     $78M
GAAP EPS -- diluted $ 0.14     $ 0.26     $ 0.11  
Non-GAAP EPS -- diluted $ 0.24     $ 0.19     $ 0.17  
GAAP gross margin   64.9 %     63.0 %     62.4 %
Non-GAAP gross margin   67.2 %     65.6 %     64.8 %
GAAP operating income   $84M     $74M     $86M
Non-GAAP operating income   $148M     $116M     $130M
GAAP operating margin   15.0 %     13.9 %     14.9 %
Non-GAAP operating margin   26.6 %     21.6 %     22.5 %
Adjusted EBITDA (1)   $149M     $213M     $153M
Effective GAAP tax provision rate   14.2 %     16.3 %     25.1 %
Effective Non-GAAP tax provision rate   21.6 %     18.2 %     32.4 %
Cash provided by operations   $170M     $102M     $210M
Storage Area Networking (SAN) port shipments   1.1M     1.0M     1.1M
                 

Please see important note of explanation on non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.

1) Adjusted EBITDA is as defined in the Term Debt Credit Agreement.

Financial Highlights and Additional Financial Information (Continued)

           
  Q4 2013   Q3 2013   Q4 2012
Routes to market as a % of total net revenues:          
  OEM revenues 65 %   66 %   65 %
  Channel/Direct revenues 35 %   34 %   35 %
  10% or greater customer revenues 46 %   47 %   46 %
Geographic split as a % of total net revenues:          
  Domestic revenues 62 %   61 %   63 %
  International revenues 38 %   39 %   37 %
Segment split as a % of total net revenues:          
  SAN product revenues 58 %   59 %   59 %
  IP Networking product revenues 26 %   25 %   26 %
  Global Services revenues 16 %   16 %   15 %
  SAN business revenues (2) 68 %   69 %   68 %
  IP Networking business revenues (2) 32 %   31 %   32 %
Estimates as a % of IP Networking business revenues:          
  Enterprise, excluding Federal 54 %   55 %   45 %
  Federal 13 %   12 %   24 %
  Service Provider 33 %   33 %   31 %
                   
Additional information: Q4 2013   Q3 2013   Q4 2012
  Cash and cash equivalents $987M   $790M   $713M
  Deferred revenues $303M   $300M   $293M
  Capital expenditures $10M   $10M   $17M
  Total debt, net of discount $599M   $599M   $601M
  Cash, net of senior debt and capitalized leases $382M   $186M   $108M
  Days sales outstanding 41 days   37 days   37 days
  Employees at end of period (3) 4,169   4,565   4,536
           

2) SAN and IP Networking business revenues include product, support and services revenues.

3) Q4 2013 ending headcount excludes 224 employees that were notified of their termination during the quarter, but were still on Brocade payroll as of the end of the quarter.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. In evaluating Brocade's performance, management uses certain non-GAAP financial measures to supplement consolidated financial statements prepared under GAAP.

Management believes that non-GAAP financial measures used in this press release allow management to gain a better understanding of Brocade's comparative operating performance both from period to period, and to its competitors' operating results. Management also believes these non-GAAP financial measures help indicate Brocade's baseline performance before gains, losses or charges that are considered by management to be outside ongoing operating results. Accordingly, management uses these non-GAAP financial measures for planning and forecasting of future periods and in making decisions regarding operations performance and the allocation of resources. Management believes these non-GAAP financial measures, when read in conjunction with Brocade's GAAP financials, provide useful information to investors by offering:

  • the ability to make more meaningful period-to-period comparisons of Brocade's ongoing operating results;

  • the ability to make more meaningful comparisons of Brocade's operating performance against industry and competitor companies;

  • the ability to better identify trends in Brocade's underlying business and to perform related trend analysis;

  • a better understanding of how management plans and measures Brocade's underlying business; and

  • an easier way to compare Brocade's most recent results of operations against investor and analyst financial models.

Management excludes certain gains or losses and benefits or costs in determining non-GAAP net income that are the result of infrequent events or arise outside the ordinary course of Brocade's continuing operations. Management believes that it is appropriate to evaluate Brocade's operating performance by excluding those items that are not indicative of ongoing operating results or limit comparability. Such items include, but are not limited to: (i) legal provision or recovery associated with certain pre-acquisition litigation, (ii) legal fees associated with indemnification obligations and other related costs, net, (iii) call premium cost and original issue discount and debt issuance costs of debt related to lenders that did not participate in refinancing, (iv) settlement gain associated with certain pre-acquisition related litigation, (v) restructuring and related costs, net and (vi) specific non-cash and non-recurring tax benefits or detriments.

Management also excludes the following non-cash charges in determining non-GAAP net income (i) stock-based compensation expense and (ii) amortization of purchased intangible assets. Because of varying available valuation methodologies, subjective assumptions and the variety of award types, management believes that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Management also believes that the expense associated with the amortization of acquisition-related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for Brocade's newly acquired and long-held businesses.

Finally, management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.

Limitations These non-GAAP financial measures have limitations, however, because they do not include all items of income and expense that impact the Company. Management compensates for these limitations by also considering Brocade's GAAP results. The non-GAAP financial measures that Brocade uses are not prepared in accordance with, and should not be considered an alternative to measurements required by GAAP, such as operating income, net income and net income per-share, and should not be considered measurements of Brocade's liquidity. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, these non-GAAP financial measures may not be comparable to similar measurements reported by other companies.

Cautionary Statement

This press release contains statements that are forward-looking in nature, including statements regarding Brocade's strategy, business prospects, organizational and business alignment, profitability, expense management, cash flow, and market conditions. These statements are based on current expectations on the date of this press release and involve a number of risks and uncertainties which may cause actual results to differ significantly from such estimates. The risks include, but are not limited to, changes in IT spending levels in one or more of our target markets including the data center, Federal government and service provider sectors, customer acceptance of Brocade's Ethernet fabric solutions, Brocade's ability to continue to successfully innovate new products and services on a timely basis and achieve widespread market acceptance, and the effect of increasing market competition and changes in the industry. Certain of these and other risks are set forth in more detail in "Item 1A. Risk Factors" in Brocade's Quarterly Report on Form 10-Q for the fiscal quarter ended July 27, 2013 and in Brocade's Annual Report on Form 10-K for the fiscal year ended October 27, 2012. Brocade does not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.

About Brocade

Brocade (NASDAQ: BRCD) networking solutions help the world's leading organizations transition smoothly to a world where applications and information reside anywhere. (www.brocade.com)

ADX, AnyIO, Brocade, Brocade Assurance, the B-wing symbol, DCX, Fabric OS, ICX, MLX, MyBrocade, OpenScript, VCS, VDX, and Vyatta are registered trademarks, and HyperEdge, The Effortless Network, and The On-Demand Data Center are trademarks of Brocade Communications Systems, Inc., in the United States and/or in other countries. Other brands, products, or service names mentioned may be trademarks of their respective owners.

© 2013 Brocade Communications Systems, Inc. All Rights Reserved.

   
BROCADE COMMUNICATIONS SYSTEMS, INC.  
CONSOLIDATED STATEMENTS OF INCOME  
(Unaudited)  
   
  Three Months Ended     For the Year Ended  
  October 26,
2013
    October 27,
2012
    October 26,
2013
    October 27,
2012
 
  (In thousands, except per-share amounts)  
Net revenues                              
  Product $ 468,581     $ 491,169     $ 1,870,567     $ 1,890,856  
  Service   90,219       87,188       352,297       346,914  
    Total net revenues   558,800       578,357       2,222,864       2,237,770  
Cost of revenues                              
  Product   158,947       176,635       658,362       689,856  
  Service   37,213       41,032       155,623       164,895  
    Total cost of revenues   196,160       217,667       813,985       854,751  
Gross margin   362,640       360,690       1,408,879       1,383,019  
Operating expenses:                              
  Research and development   89,433       90,310       378,521       363,090  
  Sales and marketing   134,090       150,581       567,637       608,502  
  General and administrative   16,878       18,831       74,518       74,583  
  Amortization of intangible assets   13,125       14,737       54,256       59,204  
  Restructuring, integration and indemnification costs (recoveries)   25,464       (89 )     25,464       (89 )
    Total operating expenses   278,990       274,370       1,100,396       1,105,290  
Income from operations   83,650       86,320       308,483       277,729  
Interest expense   (9,214 )     (14,684 )     (55,261 )     (52,488 )
Interest and other income (loss), net   458       505       77,239       (840 )
Income before income tax   74,894       72,141       330,461       224,401  
Income tax expense   10,661       18,140       121,838       29,220  
Net income $ 64,233     $ 54,001     $ 208,623     $ 195,181  
Net income per-share -- basic $ 0.14     $ 0.12     $ 0.46     $ 0.43  
Net income per-share -- diluted $ 0.14     $ 0.11     $ 0.45     $ 0.41  
Shares used in per-share calculation -- basic   444,642       459,333       450,516       456,629  
Shares used in per-share calculation -- diluted   460,237       474,213       463,705       472,343  
   
   
   
BROCADE COMMUNICATIONS SYSTEMS, INC.  
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  
(Unaudited)  
   
  Three Months Ended   For the Year Ended  
  October 26,
2013
    October 27,
2012
  October 26,
2013
    October 27,
2012
 
  (In thousands)  
Net income $ 64,233     $ 54,001   $ 208,623     $ 195,181  
Other comprehensive income and loss, net of tax:                            
  Unrealized gains (losses) on cash flow hedges:                            
    Change in unrealized gains and losses   1,250       4,332     (1,748 )     (3,468 )
    Net gains and losses reclassified into earnings   (162 )     2,411     (376 )     7,433  
  Net unrealized gains (losses) on cash flow hedges   1,088       6,743     (2,124 )     3,965  
  Foreign currency translation adjustments   2,156       2,594     (1,456 )     (1,833 )
Total other comprehensive income (loss)   3,244       9,337     (3,580 )     2,132  
Total comprehensive income $ 67,477     $ 63,338   $ 205,043     $ 197,313  
   
   
   
BROCADE COMMUNICATIONS SYSTEMS, INC.  
CONSOLIDATED BALANCE SHEETS  
(Unaudited)  
   
  October 26, 2013     October 27, 2012  
  (In thousands, except par value)  
ASSETS              
Current assets:              
  Cash and cash equivalents $ 986,997     $ 713,226  
  Accounts receivable, net of allowances for doubtful accounts of $575 and $833 at October 26, 2013, and October 27, 2012, respectively   249,598       233,139  
  Inventories   45,344       68,179  
  Deferred tax assets   98,018       91,539  
  Prepaid expenses and other current assets   42,846       49,496  
    Total current assets   1,422,803       1,155,579  
Property and equipment, net   472,940       518,940  
Goodwill   1,645,437       1,624,089  
Intangible assets, net   40,258       109,265  
Non-current deferred tax assets   1,585       136,175  
Other assets   38,368       37,213  
    Total assets $ 3,621,391     $ 3,581,261  
LIABILITIES AND STOCKHOLDERS' EQUITY              
Current liabilities:              
  Accounts payable $ 88,218     $ 117,350  
  Accrued employee compensation   145,996       182,597  
  Deferred revenue   226,696       216,283  
  Current restructuring liabilities   16,418       976  
  Current portion of long-term debt   2,996       1,977  
  Other accrued liabilities   80,339       91,285  
    Total current liabilities   560,663       610,468  
Long-term debt, net of current portion   596,208       599,203  
Non-current restructuring liabilities   1,008       1,606  
Non-current deferred revenue   76,426       76,907  
Non-current income tax liability   38,680       55,387  
Other non-current liabilities   1,593       1,870  
    Total liabilities   1,274,578       1,345,441  
Commitments and contingencies              
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: 445,285 and 456,913 shares at October 26, 2013, and October 27, 2012, respectively   445       457  
  Additional paid-in capital   1,915,152       2,009,190  
  Accumulated other comprehensive loss   (13,444 )     (9,864 )
  Retained earnings   444,660       236,037  
    Total stockholders' equity   2,346,813       2,235,820  
    Total liabilities and stockholders' equity $ 3,621,391     $ 3,581,261  
   
   
   
BROCADE COMMUNICATIONS SYSTEMS, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
   
  Three Months Ended  
  October 26,
2013
    October 27,
2012
 
  (In thousands)  
Cash flows from operating activities:              
  Net income $ 64,233     $ 54,001  
  Adjustments to reconcile net income to net cash provided by operating activities:              
    Excess tax (benefits) detriments from stock-based compensation   3,720       (3,803 )
    Depreciation and amortization   45,109       47,535  
    Loss on disposal of property and equipment   2,679       479  
    Amortization of debt issuance costs and original issue discount   277       4,021  
    Net gains on investments   --       (144 )
    Provision for doubtful accounts receivable and sales allowances   2,324       1,768  
    Non-cash compensation expense   16,527       18,423  
  Changes in assets and liabilities:              
    Accounts receivable   (33,459 )     (3,753 )
    Inventories   5,258       6,755  
    Prepaid expenses and other assets   3,016       1,312  
    Deferred tax assets   4,481       1,075  
    Accounts payable   (7,118 )     (756 )
    Accrued employee compensation   24,598       42,125  
    Deferred revenue   2,649       13,367  
    Other accrued liabilities   20,026       28,315  
    Current restructuring liabilities   15,449       (228 )
      Net cash provided by operating activities   169,769       210,492  
Cash flows from investing activities:              
  Proceeds from maturities and sale of short-term investments   --       952  
  Purchases of property and equipment   (10,422 )     (16,792 )
  Proceeds from collection of convertible note receivable   70,000       --  
      Net cash provided by (used in) investing activities   59,578       (15,840 )
Cash flows from financing activities:              
  Payment of principal related to the term loan   --       (30,000 )
  Payment of principal related to capital leases   (91 )     (477 )
  Common stock repurchases   (52,640 )     (60,056 )
  Proceeds from issuance of common stock   21,913       22,319  
  Excess tax benefits (detriments) from stock-based compensation   (3,720 )     3,803  
      Net cash used in financing activities   (34,538 )     (64,411 )
Effect of exchange rate fluctuations on cash and cash equivalents   2,095       2,359  
Net increase in cash and cash equivalents   196,904       132,600  
Cash and cash equivalents, beginning of period   790,093       580,626  
Cash and cash equivalents, end of period $ 986,997     $ 713,226  
   
   
   
BROCADE COMMUNICATIONS SYSTEMS, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
   
  For the Year Ended  
  October 26,
2013
    October 27,
2012
 
  (In thousands)  
Cash flows from operating activities:              
  Net income $ 208,623     $ 195,181  
  Adjustments to reconcile net income to net cash provided by operating activities:              
    Excess tax benefits from stock-based compensation   (3,189 )     (5,141 )
    Non-cash tax charges   78,206       --  
    Depreciation and amortization   184,114       192,218  
    Loss on disposal of property and equipment   6,709       883  
    Amortization of debt issuance costs and original issue discount   1,214       7,788  
    Original issue discount and debt issuance costs related to lenders that did not participate in refinancing   5,360       --  
    Net gains on investments   --       (179 )
    Provision for doubtful accounts receivable and sales allowances   9,221       11,301  
    Non-cash compensation expense   73,618       77,169  
  Changes in assets and liabilities:              
    Accounts receivable   (25,509 )     4,701  
    Inventories   24,173       4,656  
    Prepaid expenses and other assets   (66,001 )     3,987  
    Deferred tax assets   4,825       1,256  
    Accounts payable   (28,862 )     7,720  
    Accrued employee compensation   (57,859 )     47,679  
    Deferred revenue   8,599       22,744  
    Other accrued liabilities   12,944       20,277  
    Current restructuring liabilities   14,843       (1,370 )
      Net cash provided by operating activities   451,029       590,870  
Cash flows from investing activities:              
  Proceeds from maturities and sale of short-term investments   --       952  
  Purchases of property and equipment   (52,371 )     (72,797 )
  Net cash paid in connection with acquisition   (44,629 )     --  
  Proceeds from collection of convertible note receivable   70,000       --  
  Proceeds from sale of subsidiary   --       35  
      Net cash used in investing activities   (27,000 )     (71,810 )
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   --       (190,000 )
  Payment of debt issuance costs related to senior unsecured notes   (992 )     --  
  Payment of principal related to capital leases   (1,627 )     (1,866 )
  Common stock repurchases   (240,000 )     (130,209 )
  Proceeds from issuance of common stock   93,771       98,791  
  Excess tax benefits from stock-based compensation   3,189       5,141  
      Net cash used in financing activities   (149,409 )     (218,143 )
Effect of exchange rate fluctuations on cash and cash equivalents   (849 )     (1,893 )
Net increase in cash and cash equivalents   273,771       299,024  
Cash and cash equivalents, beginning of year   713,226       414,202  
Cash and cash equivalents, end of year $ 986,997     $ 713,226  
   
   
   
BROCADE COMMUNICATIONS SYSTEMS, INC.  
RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME  
(Unaudited)  
   
  Three Months Ended  
  October 26,
2013
    October 27,
2012
 
  (In thousands, except per-share amounts)  
Net income on a GAAP basis $ 64,233     $ 54,001  
Adjustments:              
  Stock-based compensation expense included in cost of revenues   3,174       3,388  
  Amortization of intangible assets expense included in cost of revenues   9,650       10,713  
    Total gross margin adjustments   12,824       14,101  
  Legal recovery associated with indemnification obligations and other related costs, net   --       (89 )
  Stock-based compensation expense included in research and development   4,304       4,211  
  Stock-based compensation expense included in sales and marketing   6,104       8,311  
  Stock-based compensation expense included in general and administrative   2,945       2,513  
  Amortization of intangible assets expense included in operating expenses   13,125       14,737  
  Restructuring and other related costs, net   25,464       --  
    Total operating expense adjustments   51,942       29,683  
      Total operating income adjustments   64,766       43,784  
  Income tax effect of non-tax adjustments   (19,506 )     (19,443 )
Non-GAAP net income $ 109,493     $ 78,342  
Non-GAAP net income per-share -- basic $ 0.25     $ 0.17  
Non-GAAP net income per-share -- diluted $ 0.24     $ 0.17  
Shares used in non-GAAP per-share calculation -- basic   444,642       459,333  
Shares used in non-GAAP per-share calculation -- diluted   460,237       474,213  
   
   
   
BROCADE COMMUNICATIONS SYSTEMS, INC.  
RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME  
(Unaudited)  
   
  For the Year Ended  
  October 26,
2013
    October 27,
2012
 
  (In thousands, except per-share amounts)  
Net income on a GAAP basis $ 208,623     $ 195,181  
Adjustments:              
  Stock-based compensation expense included in cost of revenues   14,519       15,433  
  Amortization of intangible assets expense included in cost of revenues   39,731       46,229  
  Legal provision (recovery) associated with certain pre-acquisition litigation   3,460       (465 )
    Total gross margin adjustments   57,710       61,197  
  Legal recovery associated with indemnification obligations and other related costs, net   --       (89 )
  Stock-based compensation expense included in research and development   17,509       17,952  
  Stock-based compensation expense included in sales and marketing   29,425       33,257  
  Stock-based compensation expense included in general and administrative   12,165       10,527  
  Amortization of intangible assets expense included in operating expenses   54,256       59,204  
  Restructuring and other related costs, net   25,464       --  
    Total operating expense adjustments   138,819       120,851  
      Total operating income adjustments   196,529       182,048  
  Call premium cost and original issue discount and debt issuance costs related to lenders that did not participate in refinancing   15,299       --  
  Gain on A10 litigation settlement, net   (76,816 )     --  
  Tax provision impact from passage of California Proposition 39 - Single Sales Factor apportionment   78,206       --  
  Income tax effect of non-tax adjustments   (48,891 )     (66,458 )
Non-GAAP net income $ 372,950     $ 310,771  
Non-GAAP net income per-share -- basic $ 0.83     $ 0.68  
Non-GAAP net income per-share -- diluted $ 0.80     $ 0.66  
Shares used in non-GAAP per-share calculation -- basic   450,516       456,629  
Shares used in non-GAAP per-share calculation -- diluted   463,705       472,343  
               

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