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Condensed Consolidated Statements of Operations
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Non-GAAP Calculation Of Net Income (Loss) Excluding Special Items
Sun Microsystems Reports Results for First Quarter Fiscal Year 2007
Revenue Growth and Strong Gross Margin Affirm Sun's Business Strategy and Focus on Innovation
SANTA CLARA, Calif. - October 26, 2006 - Sun Microsystems, Inc. (NASDAQ: SUNW) reported results today for its fiscal first quarter, which ended October 1, 2006.
Revenues for the first quarter of fiscal 2007 were $3.189 billion, an increase of 17 percent as compared with $2.726 billion for the first quarter of fiscal 2006. Year over year revenue increase resulted from both acquisitions and increasing acceptance of the Solaris 10 Operating System, as well as growth in the services business. Computer Systems Products revenues increased 15 percent year over year, the third consecutive quarter of year over year revenue increase.
Net loss for the first quarter of fiscal 2007 on a GAAP basis was $56 million or a net loss of ($0.02) per share, as compared with a net loss of $123 million, or net loss of ($0.04) per share, for the first quarter of fiscal 2006.
GAAP net loss for the first quarter of fiscal 2007 included: $21 million of restructuring and related impairment of asset charges and a $7 million benefit for related tax effects, $58 million of stock-based compensation charges and $79 million of intangible asset amortization relating to recent acquisitions. The net impact of these four items was approximately ($0.04) per share.
Cash generated from operations for the first quarter was $157 million, and cash and marketable debt securities balance at the end of the quarter was $4.671 billion.
"It's great to grow faster than the competition, maintain strong gross margins and see continued adoption of Solaris on HP, Dell and IBM computers," said Jonathan Schwartz, CEO of Sun Microsystems. "Customers across the world are turning to Sun as the safe choice for open source innovation, for industry leading identity and security management platforms and for the most eco-responsible infrastructure to power the network."
Sun has scheduled a conference call today to discuss its financial results for Q1 fiscal year 2007 at 1:30 p.m. (PT), which is being broadcast live at www.sun.com/investors.
About Sun Microsystems, Inc.
A singular vision -- "The Network Is The Computer" -- guides Sun in the development of technologies that power the world's most important markets. Sun's philosophy of sharing innovation and building communities is at the forefront of the next wave of computing: the Participation Age. Sun can be found in more than 100 countries and on the Web at http://sun.com.
To supplement Sun's consolidated financial statements presented in accordance with GAAP, Sun provides non-GAAP net income (loss) and non-GAAP net income (loss) per share data. The presentation of these non-GAAP financial measures should be considered in addition to Sun's GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
Sun's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain charges, gains and tax effects that may not be indicative of Sun's core business operating results. Sun believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Sun's performance. These non-GAAP financial measures also facilitate comparisons to Sun's historical performance and its competitors' operating results. Sun includes these non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. Non-GAAP measures are reconciled to comparable GAAP measures in the table entitled "Non-GAAP Calculation of Net Income (Loss) Excluding Special Items " following the text of this press release.
Sun, Sun Microsystems, the Sun logo, Solaris, and The Network Is The Computer are trademarks or registered trademarks of Sun Microsystems, Inc. in the United States and other countries.
Sun Microsystems, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(in millions, except per share amounts)
| |
Three Months Ended |
| October 1, 2006 |
September 25, 2005 |
| Net revenues: |
| Products |
$1,959 |
$1,704 |
| Services |
1,230 |
1,022 |
| Total net revenues |
$3,189 |
$2,726 |
| Cost of sales: |
| Cost of sales-products (including stock-based compensation expense of $3 and $2) (1) |
1,123 |
966 |
| Cost of sales-services (including stock-based compensation expense of $8 and $7) (1) |
678 |
558 |
| Total cost of sales |
1,801 |
1,524 |
| Gross margin |
1,388 |
1,202 |
| Operating expenses: |
| Research and development (including stock-based compensation expense of $18 and $17) (1) |
473 |
439 |
| Selling, general and administrative (including stock-based compensation expense of $29 and $24) (1) |
958 |
828 |
| Restructuring and related impairment of long-lived assets |
21 |
12 |
| Purchased in-process research and development |
- |
60 |
| Total operating expenses |
1,452 |
1,339 |
| Operating loss |
(64) |
(137) |
| Gain on equity investments, net |
- |
13 |
| Interest and other income, net |
42 |
44 |
| Loss before income taxes |
(22) |
(80) |
| Provision for income taxes |
34 |
43 |
| Net loss |
$(56) |
$(123) |
| Net loss per common share - basic and diluted |
$(0.02) |
$(0.04) |
| Shares used in the calculation of net income loss per common share - basic and diluted |
3,497 |
3,407 |
|
(1) For the three months ended October 1, 2006 and September 25, 2005, respectively.
Sun Microsystems, Inc.
Condensed Consolidated Balance Sheets
(in millions)
|
|
October 1, 2006
(unaudited) |
June 30, 2006* |
| Assets |
| Current Assets: |
| Cash and cash equivalents |
$3,362 |
$3,569 |
| Short-term marketable debt securities |
609 |
496 |
| Accounts receivable, net |
2,036 |
2,702 |
| Inventories |
584 |
540 |
| Deferred and prepaid tax assets |
214 |
209 |
| Prepaid expenses and other current assets |
747 |
757 |
| Total current assets |
7,552 |
8,273 |
| Property, plant and equipment, net |
1,583 |
1,812 |
| Long-term marketable debt securities |
700 |
783 |
| Goodwill |
2,566 |
2,610 |
| Other acquisition-related intangible assets, net |
848 |
929 |
| Other non-current assets, net |
645 |
675 |
| |
$13,894 |
$15,082 |
| Liabilities and Stockholders' Equity |
| Current liabilities: |
| Current portion of long-term debt and short-term borrowings |
$ 2 |
$ 503 |
| Accounts payable |
1,292 |
1,446 |
| Accrued payroll-related liabilities |
661 |
777 |
| Accrued liabilities and other |
1,063 |
1,190 |
| Deferred revenues |
1,695 |
1,988 |
| Warranty reserve |
244 |
261 |
| Total current liabilities |
4,957 |
6,165 |
| Long-term debt |
582 |
575 |
| Long-term deferred revenues |
558 |
506 |
| Other non-current obligations |
1,388 |
1,492 |
| Total stockholders' equity |
6,409 |
6,344 |
| |
$13,894 |
$15,082 |
|
* Derived from audited financial statements
Sun Microsystems, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in millions)
| |
Three Months Ended |
| October 1, 2006 |
September 25, 2005 |
| Cash flows from operating activities: |
Net loss: |
$(56) |
$(123) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
Depreciation and amortization |
123 |
143 |
Amortization of other acquisition related intangible assets |
81 |
46 |
Deferred Taxes |
(3) |
- |
Impairment of assets |
8 |
- |
Gain on investments, net |
- |
(13) |
Stock-based compensation expense |
58 |
50 |
Purchased in-process research and development |
- |
60 |
Changes in operating assets and liabilities: |
Accounts receivable, net |
672 |
449 |
Inventories |
(71) |
67 |
Prepaid and other assets |
36 |
203 |
Accounts payable |
(151) |
(174) |
Other liabilities |
(540) |
(484) |
Net cash provided by operating activities
|
157
|
224
|
Cash flows from investing activities: |
Purchases of marketable debt securities |
(675) |
(454) |
Proceeds from sales of marketable debt securities |
515 |
2,818 |
Proceeds from maturities of marketable debt securities |
136 |
75 |
Proceeds from sales of equity investments, net |
7 |
9 |
Proceeds from sale (purchases) of property, plant and equipment, net |
160 |
(48) |
Acquisition of spare parts and other assets |
(34) |
(20) |
Payments for acquisitions, net of cash acquired |
- |
(3,150) |
Net cash provided by (used in) investing activities
|
109
|
(770)
|
Cash flows from financing activities: |
Proceeds from issuance of common stock, net |
27 |
3 |
Principal payments on borrowings and other obligations |
(500) |
- |
Net cash provided by (used in) financing activities
|
(473)
|
3
|
Net decrease in cash and cash equivalents |
(207) |
(543) |
Cash and cash equivalents, beginning of period |
3,569 |
2,051 |
Cash and cash equivalents, end of period
|
$3,362
|
$1,508
|
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Sun Microsystems, Inc.
Non-GAAP Calculation Of Net Income (Loss) Excluding Special Items (unaudited)
(in millions, except per share amounts)
| |
Three Months Ended |
| October 1, 2006 |
September 25, 2005 |
| Calculation of net loss excluding special items: |
Net loss*,** |
$(56) |
$(123) |
Restructuring and related impairment of long-lived assets |
21 |
12 |
Purchased in-process research and development |
- |
60 |
Gain on equity investments, net |
- |
(13) |
Related tax effects |
(7) |
(4) |
Net loss excluding special items |
(42) |
(68) |
Net loss excluding special items per common share - basic and diluted |
$(0.01) |
$(0.02) |
Shares used in the calculation of net loss excluding special items per common share - basic and diluted |
3,497 |
3,407 |
|
* Net loss for the three months ended October 1, 2006 and September 25, 2005 included $58 million and $50 million of stock-based compensation expense or approximately $0.02 per share and $0.01 per share, respectively.
** Net loss for the three months ended October 1, 2006 and September 25, 2005 included $79 million and $122 million of purchase price accounting adjustments and intangible asset amortization relating to our fiscal 2006 acquisitions or approximately $0.02 per share and $0.04 per share, respectively.
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