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BROCADE COMMUNICATIONS SYSTEMS, INC. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: December 14, 2012 05:06PM
BROCADE COMMUNICATIONS SYSTEMS, INC. (BRCD) filed Annual Report for the period ended 2012-10-27. Brocade Communications Systems Inc has a market cap of $2.61 billion; its shares were traded at around $5.45 with a P/E ratio of 19.7 and P/S ratio of 1.2. Brocade Communications Systems Inc had an annual average earning growth of 23.9% over the past 10 years. GuruFocus rated Brocade Communications Systems Inc the business predictability rank of 3.5-star.
Highlight of Business Operations:filed by A10 and Enterasys Networks, Inc. Brocade's suppliers and customers also may be subject to third party intellectual property claims, which could negatively impact their ability to supply Brocade or their willingness to purchase from Brocade, respectively. In addition, Brocade may be subject to claims and indemnification obligations with respect to third-party intellectual property rights pursuant to Brocade agreements with suppliers, OEM and channel partners, or customers. The third party asserters of such intellectual property claims may be unreasonable in their demands, or may simply refuse to settle, which could lead to expensive settlement payments, prolonged periods of litigation expenses, additional burden on employees or other resources, distraction from Brocade's business initiatives and operations, component supply stoppages and lost sales.
Includes net revenues of $259.2 million, $257.5 million and $254.4 million for the years ended October 27, 2012, October 29, 2011 and October 30, 2010, respectively, relating to the Netherlands.
A significant portion of our revenues are concentrated among a relatively small number of OEM customers. For the fiscal years ended October 27, 2012, October 29, 2011 and October 30, 2010, the same three customers each represented 10% or more of our total net revenues for a combined total of 47% (EMC with 16%, HP with 13% and IBM with 18%), 43% (EMC with 15%, HP with 13% and IBM with 15%) and 47% (EMC with 16%, HP with 14% and IBM with 17%), respectively, of our total net revenues. We expect that a significant portion of our future revenues will continue to come from sales of products to a relatively small number of OEM partners and to the U.S. federal government and its individual agencies through our distributors and resellers. Therefore, the loss of, or a significant decrease in the level of sales to, or a change in the ordering pattern of any one of these customers could seriously harm our financial condition and results of operations.
A majority of our accounts receivable balance is derived from sales to our OEM partners. As of October 27, 2012, three customers accounted for 16%, 12% and 10%, respectively, of total accounts receivable. As of October 29, 2011, two customers accounted for 16% and 14%, respectively, of total accounts receivable. We perform ongoing credit evaluations of our customers
Accounting for income taxes. The determination of our tax provision is subject to estimates and judgments due to operations in multiple tax jurisdictions inside and outside the United States. Sales to our international customers are principally taxed at rates that are lower than the United States statutory rates. The ability to maintain our current effective tax rate is contingent upon existing tax laws in both the United States and in the respective countries in which our international subsidiaries are located. Future changes in domestic or international tax laws could affect the continued realization of the tax benefits we are currently receiving and expect to receive from international sales. In addition, an increase in the percentage of our total revenue from international customers or in the mix of international revenue among particular tax jurisdictions could change our overall effective tax rate. We intend to reinvest current and remaining accumulated earnings of our foreign subsidiaries for expansion of our business operations outside the United States for an indefinite period of time. These earnings could become subject to United States federal and state income taxes and foreign withholding taxes, as applicable, should they be either deemed or actually remitted from our international subsidiaries to the United States. In addition, we evaluate the expected realization of our deferred tax assets and assess the need for a valuation allowance on a quarterly basis. As of October 27, 2012, our net deferred tax asset balance was $227.7 million. We believe that sufficient positive evidence exists from historical operations and projections of U.S. taxable income in future years to conclude that it is more likely than not that we would realize our deferred tax assets. Historical operations showed that we have cumulative profits for the prior 12 quarters ended October 27, 2012. Accordingly, we only apply a valuation allowance on the deferred tax assets relating to capital loss carryforwards due to limited carryforward periods and the character of such tax attributes. In the event future income by jurisdiction is less than what is currently projected, we may be required to apply a valuation allowance to these deferred tax assets in jurisdictions for which realization is no longer determined to be more likely than not.
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