NetApp
NetApp, Inc. (Form: 10-Q, Received: 02/22/2018 16:28:29)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 26, 2018

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 000-27130

NetApp, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

77-0307520

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

1395 Crossman Avenue,

Sunnyvale, California 94089

(Address of principal executive offices, including zip code)

(408) 822-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes       No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

(Do not check if a smaller reporting company)

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of February 14, 2018, there were 267,922,708 shares of the registrant’s common stock, $0.001 par value, outstanding.

 

 

 

 

 


TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

 

 

 

 

 

Item 1

  

Condensed Consolidated Financial Statements (Unaudited)

  

3

 

  

Condensed Consolidated Balance Sheets as of January 26, 2018 and April 28, 2017

  

3

 

  

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended January 26, 2018 and January 27, 2017

  

4

 

  

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended January 26, 2018 and January 27, 2017

  

5

 

  

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January 26, 2018 and January 27, 2017

  

6

 

  

Notes to Condensed Consolidated Financial Statements

  

7

Item 2

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

24

Item 3

  

Quantitative and Qualitative Disclosures About Market Risk

  

39

Item 4

  

Controls and Procedures

  

40

 

 

 

PART II — OTHER INFORMATION

  

 

 

 

 

 

 

Item 1

  

Legal Proceedings

  

41

Item 1A

  

Risk Factors

  

41

Item 2

  

Unregistered Sales of Equity Securities and Use of Proceeds

  

51

Item 3

  

Defaults upon Senior Securities

  

51

Item 4

  

Mine Safety Disclosures

  

51

Item 5

  

Other Information

  

51

Item 6

  

Exhibits

  

52

SIGNATURE

  

53

 

 

TRADEMARKS

© 2018 NetApp, Inc. All Rights Reserved. No portions of this document may be reproduced without prior written consent of NetApp, Inc. NetApp, the NetApp logo, and the marks listed at http://www.netapp.com/TM are trademarks of NetApp, Inc. Other company and product names may be trademarks of their respective owners.

 

 

 

2


P ART I — FINANCIAL INFORMATION

 

 

Item 1. Condensed Consolidated Financial Statements (Unaudited)

NETAPP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value)

(Unaudited)

 

 

 

January 26,

2018

 

 

April 28,

2017

 

ASSETS

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,974

 

 

$

2,444

 

Short-term investments

 

 

2,645

 

 

 

2,477

 

Accounts receivable

 

 

754

 

 

 

731

 

Inventories

 

 

98

 

 

 

163

 

Other current assets

 

 

295

 

 

 

383

 

Total current assets

 

 

6,766

 

 

 

6,198

 

Property and equipment, net

 

 

741

 

 

 

799

 

Goodwill

 

 

1,739

 

 

 

1,684

 

Other intangible assets, net

 

 

106

 

 

 

131

 

Other non-current assets

 

 

435

 

 

 

681

 

Total assets

 

$

9,787

 

 

$

9,493

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

458

 

 

$

347

 

Accrued expenses

 

 

739

 

 

 

782

 

Commercial paper notes

 

 

632

 

 

 

500

 

Current portion of long-term debt

 

 

 

 

 

749

 

Short-term deferred revenue and financed unearned services revenue

 

 

1,719

 

 

 

1,744

 

Total current liabilities

 

 

3,548

 

 

 

4,122

 

Long-term debt

 

 

1,540

 

 

 

744

 

Other long-term liabilities

 

 

973

 

 

 

249

 

Long-term deferred revenue and financed unearned services revenue

 

 

1,550

 

 

 

1,598

 

Total liabilities

 

 

7,611

 

 

 

6,713

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock and additional paid-in capital, $0.001 par value; 268 and 269 shares issued and outstanding as of January 26, 2018 and April 28, 2017, respectively

 

 

2,707

 

 

 

2,769

 

Retained earnings (accumulated deficit)

 

 

(489

)

 

 

40

 

Accumulated other comprehensive loss

 

 

(42

)

 

 

(29

)

Total stockholders' equity

 

 

2,176

 

 

 

2,780

 

Total liabilities and stockholders' equity

 

$

9,787

 

 

$

9,493

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

3


NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

January 26,

2018

 

 

January 27,

2017

 

 

January 26,

2018

 

 

January 27,

2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

920

 

 

$

784

 

 

$

2,450

 

 

$

2,154

 

Software maintenance

 

 

237

 

 

 

240

 

 

 

711

 

 

 

723

 

Hardware maintenance and other services

 

 

366

 

 

 

380

 

 

 

1,109

 

 

 

1,161

 

Net revenues

 

 

1,523

 

 

 

1,404

 

 

 

4,270

 

 

 

4,038

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product

 

 

468

 

 

 

435

 

 

 

1,238

 

 

 

1,170

 

Cost of software maintenance

 

 

6

 

 

 

7

 

 

 

19

 

 

 

22

 

Cost of hardware maintenance and other services

 

 

108

 

 

 

111

 

 

 

336

 

 

 

369

 

Total cost of revenues

 

 

582

 

 

 

553

 

 

 

1,593

 

 

 

1,561

 

Gross profit

 

 

941

 

 

 

851

 

 

 

2,677

 

 

 

2,477

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

423

 

 

 

381

 

 

 

1,268

 

 

 

1,228

 

Research and development

 

 

193

 

 

 

181

 

 

 

580

 

 

 

588

 

General and administrative

 

 

72

 

 

 

64

 

 

 

209

 

 

 

201

 

Restructuring charges

 

 

 

 

 

52

 

 

 

 

 

 

52

 

Gain on sale of properties

 

 

(218

)

 

 

(10

)

 

 

(218

)

 

 

(10

)

Total operating expenses

 

 

470

 

 

 

668

 

 

 

1,839

 

 

 

2,059

 

Income from operations

 

 

471

 

 

 

183

 

 

 

838

 

 

 

418

 

Other income (expense), net

 

 

14

 

 

 

 

 

 

25

 

 

 

(1

)

Income before income taxes

 

 

485

 

 

 

183

 

 

 

863

 

 

 

417

 

Provision for income taxes

 

 

991

 

 

 

37

 

 

 

1,058

 

 

 

98

 

Net income (loss)

 

$

(506

)

 

$

146

 

 

$

(195

)

 

$

319

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(1.89

)

 

$

0.53

 

 

$

(0.72

)

 

$

1.15

 

Diluted

 

$

(1.89

)

 

$

0.52

 

 

$

(0.72

)

 

$

1.13

 

Shares used in net income (loss) per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

268

 

 

 

274

 

 

 

269

 

 

 

277

 

Diluted

 

 

268

 

 

 

281

 

 

 

269

 

 

 

282

 

Cash dividends declared per share

 

$

0.20

 

 

$

0.19

 

 

$

0.60

 

 

$

0.57

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

4


NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

 

.

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

January 26,

2018

 

 

January 27,

2017

 

 

January 26,

2018

 

 

January 27,

2017

 

Net income (loss)

 

$

(506

)

 

$

146

 

 

$

(195

)

 

$

319

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(5

)

 

 

(3

)

 

 

3

 

 

 

(14

)

Defined benefit obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Defined benefit obligation adjustments

 

 

 

 

 

25

 

 

 

 

 

 

25

 

Reclassification adjustments related to defined

    benefit obligations

 

 

(1

)

 

 

 

 

 

(2

)

 

 

1

 

Income tax effect

 

 

 

 

 

(10

)

 

 

1

 

 

 

(10

)

Unrealized gains (losses) on available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

(17

)

 

 

(8

)

 

 

(15

)

 

 

(10

)

Unrealized gains (losses) on cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains arising during the period

 

 

 

 

 

5

 

 

 

 

 

 

8

 

Reclassification adjustments for gains included in

    net income

 

 

 

 

 

(5

)

 

 

 

 

 

(6

)

Other comprehensive income (loss)

 

 

(23

)

 

 

4

 

 

 

(13

)

 

 

(6

)

Comprehensive income (loss)

 

$

(529

)

 

$

150

 

 

$

(208

)

 

$

313

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

5


NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

January 26,

2018

 

 

January 27,

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(195

)

 

$

319

 

Adjustments to reconcile net income (loss) to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

150

 

 

 

173

 

Stock-based compensation

 

 

125

 

 

 

149

 

Deferred income taxes

 

 

258

 

 

 

73

 

Gain on sale of properties

 

 

(218

)

 

 

(10

)

Other items, net

 

 

(8

)

 

 

(8

)

Changes in assets and liabilities, net of acquisitions of businesses:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(8

)

 

 

208

 

Inventories

 

 

65

 

 

 

(27

)

Other operating assets

 

 

28

 

 

 

16

 

Accounts payable

 

 

115

 

 

 

13

 

Accrued expenses

 

 

58

 

 

 

(121

)

Deferred revenue and financed unearned services revenue

 

 

(102

)

 

 

(148

)

Long-term taxes payable

 

 

723

 

 

 

(16

)

Other operating liabilities

 

 

(7

)

 

 

-

 

Net cash provided by operating activities

 

 

984

 

 

 

621

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of investments

 

 

(1,262

)

 

 

(1,383

)

Maturities, sales and collections of investments

 

 

1,084

 

 

 

1,385

 

Purchases of property and equipment

 

 

(97

)

 

 

(137

)

Proceeds from sale of properties

 

 

210

 

 

 

 

Acquisitions of businesses, net of cash acquired

 

 

(75

)

 

 

 

Other investing activities, net

 

 

(1

)

 

 

2

 

Net cash used in investing activities

 

 

(141

)

 

 

(133

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock under employee stock

   award plans

 

 

157

 

 

 

112

 

Payments for taxes related to net share settlement of stock awards

 

 

(67

)

 

 

(42

)

Repurchase of common stock

 

 

(450

)

 

 

(576

)

Proceeds from issuance of commercial paper notes, net

 

 

132

 

 

 

392

 

Issuance of long-term debt, net

 

 

795

 

 

 

 

Repayment of short-term loan

 

 

 

 

 

(850

)

Repayment of long-term debt

 

 

(750

)

 

 

 

Dividends paid

 

 

(161

)

 

 

(157

)

Other financing activities, net

 

 

(6

)

 

 

(7

)

Net cash used in financing activities

 

 

(350

)

 

 

(1,128

)

Effect of exchange rate changes on cash and cash equivalents

 

 

37

 

 

 

(15

)

Net increase (decrease) in cash and cash equivalents

 

 

530

 

 

 

(655

)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of period

 

 

2,444

 

 

 

2,868

 

End of period

 

$

2,974

 

 

$

2,213

 

See accompanying notes to condensed consolidated financial statements.

 

 

6


NETAPP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1. Description of Business and Significant Accounting Policies

NetApp, Inc. (we, us, or the Company) provides global organizations the ability to manage and share their data across on-premises, private and public clouds. Together with our partners, we provide a full range of enterprise-class software, systems and services solutions that customers use to modernize their infrastructures, build next generation data centers and harness the power of hybrid clouds.

Basis of Presentation and Preparation

Our fiscal year is reported on a 52- or 53-week year ending on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal years 2018 and 2017, ending on April 27, 2018, and April 28, 2017, respectively, are each 52-week years, with 13 weeks in each of their quarters.

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company, and reflect all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows for the interim periods presented. The statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Accordingly, these statements do not include all information and footnotes required by GAAP for annual consolidated financial statements, and should be read in conjunction with our audited consolidated financial statements as of and for the fiscal year ended April 28, 2017 contained in our Annual Report on Form 10-K. The results of operations for the three and nine months ended January 26, 2018 are not necessarily indicative of the operating results to be expected for the full fiscal year or future operating periods.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; inventory valuation and purchase order accruals; valuation of goodwill and intangibles; restructuring reserves; product warranties; employee compensation and benefit accruals; stock-based compensation; loss contingencies; valuation of investment securities; income taxes and fair value measurements. Actual results could differ materially from those estimates.

There have been no significant changes in our significant accounting policies as of and for the nine months ended January 26, 2018, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended April 28, 2017.

 

2. Recent Accounting Standards Not Yet Effective

Revenue from Contracts with Customers

In May 2014, the FASB issued an accounting standards update related to the recognition and reporting of revenue that establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The guidance allows for the use of either the full or modified retrospective transition method. We will adopt this new standard, as amended, on its effective date in the first quarter of fiscal 2019.

Preliminarily, we plan to adopt the standard using the full retrospective method to restate each prior reporting period presented. Our ability to adopt this standard using the full retrospective method is dependent upon system readiness, for both revenue and commissions, and the completion of the analysis of information necessary to restate prior period financial statements and disclosures. We are continuing to assess the impact of this standard on our financial position, results of operations and related disclosures and have not yet determined whether the effect will be material. We do not expect that the adoption of this standard will have a material impact on our operating cash flows. Additionally, as we continue to assess the new standard along with industry trends and additional interpretive guidance, we may adjust our implementation plan accordingly.

 

We believe that the new standard will impact the following policies and disclosures:

 

in arrangements containing software, revenue deferred for the undelivered elements will be based on a relative fair value allocation, generally resulting in more software arrangement revenue being recognized earlier;

7


 

removal of the current limitation on contingent revenue for mu ltiple element arrangements, such as that related to the delivery of additional items or meeting other specified performance conditions, may result in revenue being recognized earlier;

 

estimation of variable consideration for arrangements with contract terms such as rights of return, potential penalties and acceptance clauses;

 

required disclosures, including information about the transaction price allocated to remaining performance obligations and expected timing of revenue recognition; and

 

accounting for deferred commissions, including costs that qualify for deferral and the amortization period.

We do not expect that the new standard will result in substantive changes in our deliverables or the amounts of revenue allocated between multiple deliverables, with the exception of the items discussed above.

Leases

In February 2016, the FASB issued an accounting standards update on financial reporting for leasing arrangements, including requiring lessees to recognize an operating lease with a term greater than one year on their balance sheets as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. This new standard will be effective for us in our first quarter of fiscal 2020, although early adoption is permitted. Upon adoption, lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently in the assessment phase to determine the adoption methodology and are evaluating the impact of this new standard on our consolidated financial statements and disclosures. We expect that most of our operating lease commitments will be subject to the new standard and recognized as lease liabilities and right-of-use assets upon adoption, which will increase the total assets and total liabilities we report.

Credit Losses on Financial Instruments

In June 2016, the FASB issued an accounting standards update on the measurement of credit losses on financial instruments. The standard introduces a new model for measuring and recognizing credit losses on financial instruments, requiring financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. It also requires that credit losses be recorded through an allowance for credit losses. This new standard will be effective for us in our first quarter of fiscal 2021, although early adoption is permitted. Upon adoption, companies must apply a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings, though a prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. Based on the composition of our investment portfolio, current market conditions, and historical credit loss activity, the adoption of this standard is not expected to have a material impact on our consolidated financial statements.

Income Taxes on Intra-Entity Transfers of Assets

In October 2016, the FASB issued an accounting standards update that requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This amends current GAAP which prohibits recognition of current and deferred income taxes for all types of intra-entity asset transfers until the asset has been sold to an outside party. This new standard will be effective for us in our first quarter of fiscal 2019, although early adoption is permitted. Upon adoption, companies must apply a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. We are currently evaluating the impact of this new standard on our consolidated financial statements.

Derecognition of Non-Financial Assets

In February 2017, the FASB issued an accounting standards update that amends guidance on how entities account for the derecognition of a nonfinancial asset or an in substance nonfinancial asset that is not a business. The guidance allows for the use of either the full or modified retrospective transition method. This new standard will be effective for us in our first quarter of fiscal 2019, although early adoption is permitted. We are currently evaluating the impact of this new standard on our consolidated financial statements.

Although there are several other new accounting pronouncements issued or proposed by the FASB that we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had or will have a material impact on our consolidated financial position, operating results or disclosures.

 

 

8


3. Statements of Cash Flows Additional Information

Non-cash investing and financing activities and supplemental cash flow information are as follows (in millions):

 

 

 

Nine Months Ended

 

 

 

January 26,

2018

 

 

January 27,

2017

 

Non-cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Capital expenditures incurred but not paid

 

$

19

 

 

$

13

 

Non-cash extinguishment of sale-leaseback financing obligations

 

$

130

 

 

$

19

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Income taxes paid, net of refunds

 

$

51

 

 

$

90

 

Interest paid

 

$

45

 

 

$

43

 

 

4. Business Combinations

On August 4, 2017, we acquired all of the outstanding shares of Greenqloud ehf., a privately-held provider of cloud management software based in Iceland, for $51 million in cash, of which we preliminarily allocated $10 million to developed technology, $38 million to goodwill, and the remainder to other assets.

On June 15, 2017, we acquired all of the outstanding shares of Plexistor Ltd., a privately-held provider of software defined memory architecture based in Israel, for $24 million in cash, of which we allocated $6 million to developed technology, $17 million to goodwill, and the remainder to other assets.

 

 

5. Goodwill and Purchased Intangible Assets, Net

Goodwill activity is summarized as follows (in millions):

 

Balance as of April 28, 2017

 

$

1,684

 

Additions

 

 

55

 

Balance as of January 26, 2018

 

$

1,739

 

Purchased intangible assets, net are summarized below (in millions):

 

 

 

January 26, 2018

 

 

April 28, 2017

 

 

 

Gross

 

 

Accumulated

 

 

Net

 

 

Gross

 

 

Accumulated

 

 

Net

 

 

 

Assets

 

 

Amortization

 

 

Assets

 

 

Assets

 

 

Amortization

 

 

Assets

 

Developed technology

 

$

164

 

 

$

(71

)

 

$

93

 

 

$

148

 

 

$

(44

)

 

$

104

 

Customer contracts/relationships

 

 

43

 

 

 

(30

)

 

 

13

 

 

 

43

 

 

 

(19

)

 

 

24

 

Other purchased intangibles

 

 

9

 

 

 

(9

)

 

 

 

 

 

9

 

 

 

(6

)

 

 

3

 

Total purchased intangible assets

 

$

216

 

 

$

(110

)

 

$

106

 

 

$

200

 

 

$

(69

)

 

$

131

 

Amortization expense for purchased intangible assets is summarized below (in millions):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

Statements of

 

 

January 26,

2018

 

 

January 27,

2017

 

 

January 26,

2018

 

 

January 27,

2017

 

 

Operations

Classification

Developed technology

 

$

10

 

 

$

8

 

 

$

27

 

 

$

21

 

 

Cost of revenues

Customer contracts/relationships

 

 

3

 

 

 

4

 

 

 

11

 

 

 

11

 

 

Operating expenses

Other purchased intangibles

 

 

1

 

 

 

1

 

 

 

3

 

 

 

3

 

 

Operating expenses

Total

 

$

14

 

 

$

13

 

 

$

41

 

 

$

35

 

 

 

9


As of January 26, 2018 , future amortization expense related to purchased intangible assets is as follows (in millions):

 

Fiscal Year

 

Amount

 

Remainder of 2018

 

$

12

 

2019

 

 

47

 

2020

 

 

31

 

2021

 

 

16

 

Total

 

$

106

 

 

 

6. Balance Sheet Details

Cash and cash equivalents (in millions):

 

 

 

January 26,

2018

 

 

April 28,

2017

 

Cash

 

$

2,563

 

 

$

2,275

 

Cash equivalents

 

 

411

 

 

 

169

 

Cash and cash equivalents

 

$

2,974

 

 

$

2,444

 

 

Inventories (in millions):

 

 

 

January 26,

2018

 

 

April 28,

2017

 

Purchased components

 

$

22

 

 

$

28

 

Finished goods

 

 

76

 

 

 

135

 

Inventories

 

$

98

 

 

$

163

 

 

Property and equipment, net (in millions):

 

 

 

January 26,

2018

 

 

April 28,

2017

 

Land

 

$

106

 

 

$

132

 

Buildings and improvements

 

 

576

 

 

 

612

 

Leasehold improvements

 

 

94

 

 

 

93

 

Computer, production, engineering and other equipment

 

 

726

 

 

 

741

 

Computer software

 

 

358

 

 

 

353

 

Furniture and fixtures

 

 

99

 

 

 

90

 

Construction-in-progress

 

 

26

 

 

 

26

 

 

 

 

1,985

 

 

 

2,047

 

Accumulated depreciation and amortization

 

 

(1,244

)

 

 

(1,248

)

Property and equipment, net

 

$

741

 

 

$

799

 

 

As of April 28, 2017, we had classified certain land and buildings located in Sunnyvale, California, previously reported as property and equipment as assets held-for-sale and included their book value of $118 million in other current assets in the condensed consolidated balance sheets. On September 8, 2017, we entered into an agreement to sell these properties for a total of $306 million, through two separate and independent closings. On December 7, 2017, the first closing occurred and we consummated the sale of properties with a net book value of $66 million for cash proceeds of $210 million, resulting in a gain, net of direct selling costs, of $142 million.   

 

The remaining properties, consisting of land with a net book value of $52 million, continue to be classified as assets held-for-sale as of January 26, 2018. We will consummate the sale of these properties, and receive cash proceeds of $96 million, upon the occurrence of the second closing, which is expected to occur within the next 12 months. That closing is subject to due diligence, certain termination rights and customary closing conditions, including local governmental approval of the subdivision of a land parcel.

 

 

10


Other non-current assets (in mi llions):

 

 

 

January 26,

2018

 

 

April 28,

2017

 

Deferred tax assets

 

$

289

 

 

$

525

 

Other assets

 

 

146

 

 

 

156

 

Other non-current assets

 

$

435

 

 

$

681

 

 

Accrued expenses (in millions):

 

 

 

January 26,

2018

 

 

April 28,

2017

 

Accrued compensation and benefits

 

$

347

 

 

$

340

 

Sale-leaseback financing obligations

 

 

 

 

 

130

 

Product warranty liabilities

 

 

26

 

 

 

33

 

Other current liabilities

 

 

366

 

 

 

279

 

Accrued expenses

 

$

739

 

 

$

782

 

 

Product warranty liabilities:

Equipment and software systems sales include a standard product warranty. The following tables summarize the activity related to product warranty liabilities and their balances as reported in our condensed consolidated balance sheets (in millions):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

January 26,

2018

 

 

January 27,

2017

 

 

January 26,

2018

 

 

January 27,

2017

 

Balance at beginning of period

 

$

44

 

 

$

54

 

 

$

50

 

 

$

70

 

Expense accrued during the period

 

 

3

 

 

 

4

 

 

 

11

 

 

 

9

 

Warranty costs incurred

 

 

(6

)

 

 

(8

)

 

 

(20

)

 

 

(29

)

Balance at end of period

 

$

41

 

 

$

50

 

 

$

41

 

 

$

50

 

 

 

 

January 26,

2018

 

 

April 28,

2017

 

Accrued expenses

 

$

26

 

 

$

33

 

Other long-term liabilities

 

 

15

 

 

 

17

 

Total warranty liabilities

 

$

41

 

 

$

50

 

 

Warranty expense accrued during the period includes amounts accrued for systems at the time of shipment, adjustments for changes in estimated costs for warranties on systems shipped in the period and changes in estimated costs for warranties on systems shipped in prior periods.

 

   Other long-term liabilities (in millions):

 

 

January 26,

2018

 

 

April 28,

2017

 

Liability for uncertain tax positions

 

$

303

 

 

$

148

 

Income taxes payable

 

 

569

 

 

 

 

Product warranty liabilities

 

 

15

 

 

 

17

 

Other liabilities

 

 

86

 

 

 

84

 

Other long-term liabilities

 

$

973

 

 

$

249

 

11


 

 

Deferred revenue and financed unearned services revenue (in millions):

 

 

 

January 26,

2018

 

 

April 28,