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BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
April 30,
2016
 
May 2,
2015
 
April 30,
2016
 
May 2,
2015
 
(In thousands, except per share amounts)
Net revenues:
 
 
 
 
 
 
 
Product
$
428,193

 
$
458,243

 
$
909,360

 
$
944,481

Service
95,113

 
88,332

 
188,230

 
178,333

Total net revenues
523,306

 
546,575

 
1,097,590

 
1,122,814

Cost of revenues:
 
 
 
 
 
 
 
Product
132,208

 
137,612

 
276,305

 
287,538

Service
40,787

 
36,754

 
82,159

 
73,384

Total cost of revenues
172,995

 
174,366

 
358,464

 
360,922

Gross margin
350,311

 
372,209

 
739,126

 
761,892

Operating expenses:
 
 
 
 
 
 
 
Research and development
89,263

 
91,870

 
182,520

 
177,101

Sales and marketing
148,933

 
143,078

 
300,760

 
283,316

General and administrative
22,791

 
20,722

 
45,220

 
45,393

Amortization of intangible assets
902

 
627

 
1,804

 
765

Acquisition and integration costs
5,757

 
2,344

 
5,757

 
2,344

Restructuring and other related benefits
—

 
(637
)
 
(566
)
 
(637
)
Total operating expenses
267,646

 
258,004

 
535,495

 
508,282

Income from operations
82,665

 
114,205

 
203,631

 
253,610

Interest expense
(9,955
)
 
(10,552
)
 
(19,820
)
 
(35,976
)
Interest and other income (loss), net
1,091

 
466

 
1,760

 
(93
)
Income before income tax
73,801

 
104,119

 
185,571

 
217,541

Income tax expense
30,716

 
27,079

 
48,840

 
53,234

Net income
$
43,085

 
$
77,040

 
$
136,731

 
$
164,307

Net income per share—basic
$
0.11

 
$
0.18

 
$
0.34

 
$
0.39

Net income per share—diluted
$
0.11

 
$
0.18

 
$
0.33

 
$
0.38

Shares used in per share calculation—basic
400,554

 
420,718

 
404,228

 
424,627

Shares used in per share calculation—diluted
408,748

 
433,234

 
411,917

 
436,195

 
 
 
 
 
 
 
 
Cash dividends declared per share
$
0.045

 
$
0.035

 
$
0.09

 
$
0.07


Page 1 of 5


BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
April 30,
2016
 
May 2,
2015
 
April 30,
2016
 
May 2,
2015
 
(In thousands)
Net income
$
43,085

 
$
77,040

 
$
136,731

 
$
164,307

Other comprehensive income and loss, net of tax:
 
 
 
 
 
 
 
Unrealized gains (losses) on cash flow hedges:
 
 
 
 
 
 
 
Change in unrealized gains and losses
1,964

 
(143
)
 
(336
)
 
(1,918
)
Net gains and losses reclassified into earnings
724

 
1,109

 
1,350

 
1,713

Net unrealized gains (losses) on cash flow hedges
2,688

 
966

 
1,014

 
(205
)
Foreign currency translation adjustments
2,070

 
(1,068
)
 
(133
)
 
(5,289
)
Total other comprehensive income (loss)
4,758

 
(102
)
 
881

 
(5,494
)
Total comprehensive income
$
47,843

 
$
76,938

 
$
137,612

 
$
158,813


Page 2 of 5


BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
April 30,
2016
 
October 31,
2015
 
(In thousands, except par value)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,427,643

 
$
1,440,882

Accounts receivable, net of allowances for doubtful accounts of $1,739 and $1,838 as of April 30, 2016, and October 31, 2015, respectively
204,915

 
235,883

Inventories
39,521

 
40,524

Deferred tax assets
—

 
78,675

Prepaid expenses and other current assets
67,598

 
56,235

Total current assets
1,739,677

 
1,852,199

Property and equipment, net
441,717

 
439,224

Goodwill
1,621,691

 
1,617,161

Intangible assets, net
69,611

 
75,623

Non-current deferred tax assets
69,309

 
813

Other assets
50,968

 
51,133

Total assets
$
3,992,973

 
$
4,036,153

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
97,498

 
$
98,143

Accrued employee compensation
133,511

 
142,075

Deferred revenue
230,540

 
244,622

Other accrued liabilities
68,757

 
77,524

Total current liabilities
530,306

 
562,364

Long-term debt, net of current portion
802,482

 
793,779

Non-current deferred revenue
74,434

 
72,065

Non-current income tax liability
62,110

 
47,010

Non-current deferred tax liabilities
—

 
24,024

Other non-current liabilities
2,499

 
3,376

Total liabilities
1,471,831

 
1,502,618

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: 399,383 and 413,923 shares as of April 30, 2016, and October 31, 2015, respectively
399

 
414

Additional paid-in capital
1,519,439

 
1,632,984

Accumulated other comprehensive loss
(24,121
)
 
(25,002
)
Retained earnings
1,025,425

 
925,139

Total stockholders’ equity
2,521,142

 
2,533,535

Total liabilities and stockholders’ equity
$
3,992,973

 
$
4,036,153


Page 3 of 5


BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended
 
April 30,
2016
 
May 2,
2015
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net income
$
136,731

 
$
164,307

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Excess tax benefits from stock-based compensation
(10,987
)
 
(29,570
)
Depreciation and amortization
45,839

 
40,247

Loss on disposal of property and equipment
437

 
1,241

Amortization of debt issuance costs and debt discount
8,704

 
5,224

Write-off of debt discount and debt issuance costs related to lenders that did not participate in refinancing
—

 
4,808

Provision (recovery) for doubtful accounts receivable and sales allowances
(1,083
)
 
4,694

Non-cash stock-based compensation expense
48,833

 
40,157

Changes in assets and liabilities, net of acquisitions:
 
 
 
Accounts receivable
32,051

 
35,237

Inventories
(424
)
 
3,008

Prepaid expenses and other assets
(1,882
)
 
(25,702
)
Deferred tax assets
(74
)
 
503

Accounts payable
(5,127
)
 
(6,160
)
Accrued employee compensation
(21,136
)
 
(39,997
)
Deferred revenue
(11,715
)
 
(9,149
)
Other accrued liabilities
5,500

 
25,285

Restructuring liabilities
(1,035
)
 
(1,866
)
Net cash provided by operating activities
224,632


212,267

Cash flows from investing activities:
 
 
 
Purchases of non-marketable equity and debt investments
(2,000
)
 
(150
)
Purchases of property and equipment
(42,425
)
 
(34,091
)
Purchase of intangible assets
—

 
(7,750
)
Net cash paid in connection with acquisitions
(8,061
)
 
(95,278
)
Proceeds from collection of note receivable
250

 
250

Net cash used in investing activities
(52,236
)
 
(137,019
)

Page 4 of 5


BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—Continued
(Unaudited)
 
Six Months Ended
 
April 30,
2016
 
May 2,
2015
 
(In thousands)
Cash flows from financing activities:
 
 
 
Payment of principal related to senior secured notes
—

 
(300,000
)
Payment of debt issuance costs
—

 
(1,661
)
Payment of principal related to capital leases
(197
)
 
(1,267
)
Common stock repurchases
(180,848
)
 
(208,244
)
Proceeds from issuance of common stock
20,512

 
21,975

Payment of cash dividends to stockholders
(36,445
)
 
(29,854
)
Proceeds from convertible notes
—

 
565,656

Purchase of convertible note hedge
—

 
(86,135
)
Proceeds from issuance of warrants
—

 
51,175

Excess tax benefits from stock-based compensation
10,987

 
29,570

Net cash provided by (used in) financing activities
(185,991
)
 
41,215

Effect of exchange rate fluctuations on cash and cash equivalents
356

 
(4,668
)
Net increase (decrease) in cash and cash equivalents
(13,239
)
 
111,795

Cash and cash equivalents, beginning of period
1,440,882

 
1,255,017

Cash and cash equivalents, end of period
$
1,427,643

 
$
1,366,812


Page 5 of 5