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8-K - 8-K - QLOGIC CORPd665932d8k.htm

Exhibit 99.1

Media Contact:

Steve Sturgeon

QLogic Corporation

858.472.5669

steve.sturgeon@qlogic.com

Investor Contact:

Jean Hu

QLogic Corporation

949.389.7579

jean.hu@qlogic.com

QLOGIC REPORTS THIRD QUARTER

RESULTS FOR FISCAL YEAR 2014

ALISO VIEJO, Calif., January 29, 2014QLogic Corp. (Nasdaq:QLGC), a leading supplier of high performance network infrastructure solutions, today announced its third quarter financial results for the period ended December 29, 2013.

Third Quarter Highlights

 

    Net revenue: $119.4 million

 

    GAAP income from continuing operations: $20.6 million or $0.24 per diluted share

 

    Non-GAAP income from continuing operations: $25.6 million or $0.29 per diluted share

 

    Operating margin: 17.0% GAAP, 23.1% non-GAAP

 

    Cash and marketable securities: $462.4 million as of December 29, 2013

 

    Cash generated from operations: $37.4 million

Financial Results

Net revenue of $119.4 million for the third quarter of fiscal 2014 was consistent with the net revenue reported in the same quarter last year. Revenue from Advanced Connectivity Platforms increased to $98.5 million in the third quarter of fiscal 2014 from $97.0 million in the same quarter last year. Revenue from Legacy Connectivity Products was $21.0 million during the third quarter of fiscal 2014 compared to $22.4 million in the same quarter last year.

Income from continuing operations on a GAAP basis for the third quarter of fiscal 2014 increased to $20.6 million, or $0.24 per diluted share, from $13.7 million, or $0.15 per diluted share, for the third quarter of fiscal 2013. Income from continuing operations on a non-GAAP basis for the third quarter of fiscal 2014 increased to $25.6 million, or $0.29 per diluted share, from $18.3 million, or $0.20 per diluted share, for the third quarter of fiscal 2013.


“During the third quarter, we delivered strong financial results, including non-GAAP earnings per diluted share that exceeded our original guidance range,” said Jean Hu, interim chief executive officer, senior vice president and chief financial officer, QLogic. “We are very pleased with our continued focus and execution. As a result of our restructuring activities earlier in the year, we have continued our sharper focus on the server and storage connectivity markets and are now operating more effectively and efficiently as reflected in our financial results.”

QLogic uses certain non-GAAP financial measures to supplement financial statements based on GAAP. A summary of these non-GAAP financial measures and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a description of the reasons that management believes that these non-GAAP financial measures provide useful information to investors and the additional purposes for which management uses these non-GAAP financial measures, is presented in the accompanying financial schedules.

QLogic’s third quarter fiscal 2014 conference call is scheduled for today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Jean Hu, interim chief executive officer, senior vice president and chief financial officer, will host the conference call. The call is being webcast live via the Internet at http://ir.qlogic.com and www.earnings.com. Phone access to participate in the conference call is available at (888) 318-7470, pass code: 2752790.

The financial information that the company intends to discuss during the conference call will be available on the company’s website at http://ir.qlogic.com for twelve months following the conference call. A replay of the conference call will be available via webcast at http://ir.qlogic.com for twelve months.

Follow QLogic @ twitter.com/qlogic

QLogic – the Ultimate in Performance

QLogic (Nasdaq:QLGC) is a global leader and technology innovator in high performance server and storage networking connectivity products. Leading OEMs and channel partners worldwide rely on QLogic for their server and storage networking solutions. For more information, visit www.qlogic.com.

Disclaimer – Forward-Looking Statements

This press release contains statements relating to future results of the company (including certain beliefs and projections regarding business and market trends, as well as our belief that we have a sharper focus on the server and storage connectivity markets and that we are operating more effectively and efficiently) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied in the forward-looking statements. The company advises readers that these potential risks and uncertainties include, but are not limited to: unfavorable economic conditions; potential fluctuations in operating results; gross margins that may vary over time; the stock price of the company may be volatile; the company’s dependence on the networking markets served; the ability to maintain and gain market or industry acceptance of the company’s products; the company’s dependence on a small number of customers; the company’s ability to compete effectively with other companies; the ability to attract and retain key personnel; the complexity of the company’s products; declining average unit sales prices of comparable products; the company’s dependence on sole source and limited source suppliers; the company’s dependence on relationships with certain third-party subcontractors and contract manufacturers; sales fluctuations arising from customer transitions to new products; seasonal fluctuations and uneven sales patterns in orders from customers; a reduction in sales efforts by current distributors; changes in the company’s tax provisions or adverse outcomes resulting from examination of its income tax returns; international economic, currency, regulatory, political and other risks; facilities of the company and its suppliers and customers are located in areas subject to natural disasters; the ability to protect proprietary rights; the ability to satisfactorily resolve any infringement claims; uncertain benefits from strategic business combinations, acquisitions and divestitures; declines in the market value of the company’s marketable securities; changes in and compliance with regulations; difficulties in transitioning to smaller geometry process technologies; the use of “open source” software in the company’s products; system security risks, data protection breaches and cyber-attacks; and the company’s ability to borrow under its credit agreement is subject to certain covenants.

More detailed information on these and additional factors that could affect the company’s operating and financial results are described in the company’s Forms 10-K, 10-Q and other reports filed, or to be filed, with the Securities and Exchange Commission. The company urges all interested parties to read these reports to gain a better understanding of the business and other risks that the company faces. The forward-looking statements contained in this press release are made only as of the date hereof, and the company does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

QLogic and the QLogic logo are registered trademarks of QLogic Corporation. Other trademarks and registered trademarks are the property of the companies with which they are associated.


QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited — in thousands, except per share amounts)

 

     Three Months Ended     Nine Months Ended  
     December 29,
2013
     December 30,
2012
    December 29,
2013
     December 30,
2012
 

Net revenues

   $ 119,449       $ 119,386      $ 345,187       $ 367,624   

Cost of revenues

     38,446         39,089        111,378         121,382   
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

     81,003         80,297        233,809         246,242   
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating expenses:

          

Engineering and development

     35,235         38,409        110,412         115,891   

Sales and marketing

     16,113         19,325        51,957         57,950   

General and administrative

     7,406         8,139        22,698         24,951   

Special charges

     1,947                18,329           
  

 

 

    

 

 

   

 

 

    

 

 

 

Total operating expenses

     60,701         65,873        203,396         198,792   
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     20,302         14,424        30,413         47,450   

Interest and other income, net

     970         903        1,768         2,935   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from continuing operations before income taxes

     21,272         15,327        32,181         50,385   

Income taxes

     686         1,622        3,668         6,459   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from continuing operations

     20,586         13,705        28,513         43,926   

Loss from discontinued operations, net of income taxes

             (464             (425
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

   $ 20,586       $ 13,241      $ 28,513       $ 43,501   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from continuing operations per share:

          

Basic

   $ 0.24       $ 0.15      $ 0.32       $ 0.46   

Diluted

   $ 0.24       $ 0.15      $ 0.32       $ 0.46   

Loss from discontinued operations per share:

          

Basic

   $       $ (0.01   $       $   

Diluted

   $       $ (0.01   $       $   

Net income per share:

          

Basic

   $ 0.24       $ 0.14      $ 0.32       $ 0.46   

Diluted

   $ 0.24       $ 0.14      $ 0.32       $ 0.46   

Number of shares used in per share calculations:

          

Basic

     86,855         92,386        87,810         94,518   

Diluted

     87,186         92,570        88,209         94,963   


QLOGIC CORPORATION

RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS TO

NON-GAAP INCOME FROM CONTINUING OPERATIONS

(unaudited — in thousands, except per share amounts)

 

     Three Months Ended     Nine Months Ended  
     December 29,
2013
    December 30,
2012
    December 29,
2013
    December 30,
2012
 

GAAP income from continuing operations

   $ 20,586      $ 13,705      $ 28,513      $ 43,926   

Items excluded from GAAP income from continuing operations:

        

Stock-based compensation

     5,058        6,973        18,047        23,295   

Amortization of acquisition-related intangible assets

     243        243        730        730   

Special charges

     1,947               18,329          

Income tax effect

     (2,237     (2,576     (3,564     (7,444
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-GAAP adjustments

     5,011        4,640        33,542        16,581   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP income from continuing operations

   $ 25,597      $ 18,345      $ 62,055      $ 60,507   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations per diluted share:

        

GAAP income from continuing operations

   $ 0.24      $ 0.15      $ 0.32      $ 0.46   

Adjustments

     0.05        0.05        0.38        0.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP income from continuing operations

   $ 0.29      $ 0.20      $ 0.70      $ 0.64   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Financial Measures

The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with generally accepted accounting principles (GAAP). The non-GAAP financial measures presented exclude the items summarized in the above table. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the company’s on-going core operating performance.

The company has presented non-GAAP income from continuing operations and non-GAAP income from continuing operations per diluted share, on a basis consistent with its historical presentation, to assist investors in understanding the company’s core income from continuing operations and core income from continuing operations per diluted share on an on-going basis. These non-GAAP financial measures may also assist investors in making comparisons of the company’s core profitability with historical periods and comparisons of the company’s core profitability with the corresponding results for competitors. Management believes that non-GAAP income from continuing operations and non-GAAP income from continuing operations per diluted share are important measures in the evaluation of the company’s profitability. These non-GAAP financial measures exclude the adjustments described in the above table, and thus provide an overall measure of the company’s on-going profitability and related profitability on a per diluted share basis.

Management uses non-GAAP income from continuing operations and non-GAAP income from continuing operations per diluted share in its evaluation of the company’s core after-tax results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. In addition, the company prepares and maintains its budgets and forecasts for future periods on a basis consistent with these non-GAAP financial measures. Management believes that providing these non-GAAP financial measures allows investors to view the company’s financial results in the way that management views the financial results.

The non-GAAP financial measures presented herein have certain limitations in that they do not reflect all of the costs associated with the operations of the company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the company may be different from the non-GAAP financial measures used by other companies.


For additional information on the items excluded from the non-GAAP financial measures and why the company believes that these non-GAAP financial measures provide useful supplemental information to investors, the company refers you to the Form 8-K regarding this release filed today with the Securities and Exchange Commission.

A summary of the non-GAAP adjustments presented in the table above by the financial statement line impacted is as follows:

 

(unaudited – in thousands)    Three Months Ended     Nine Months Ended  
     December 29,
2013
    December 30,
2012
    December 29,
2013
    December 30,
2012
 

Non-GAAP Adjustments:

        

Cost of revenues:

        

Stock-based compensation

   $ 259      $ 529      $ 1,082      $ 1,839   

Amortization of acquisition-related intangible assets

     243        243        730        730   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue adjustments

     502        772        1,812        2,569   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Engineering and development:

        

Stock-based compensation

     2,462        3,030        9,070        10,444   

Sales and marketing:

        

Stock-based compensation

     1,251        1,619        4,274        5,217   

General and administrative:

        

Stock-based compensation

     1,086        1,795        3,621        5,795   

Special charges

     1,947               18,329          
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense adjustments

     6,746        6,444        35,294        21,456   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-GAAP adjustments before income taxes

     7,248        7,216        37,106        24,025   

Income tax effect

     (2,237     (2,576     (3,564     (7,444
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-GAAP adjustments

   $ 5,011      $ 4,640      $ 33,542      $ 16,581   
  

 

 

   

 

 

   

 

 

   

 

 

 


QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited — in thousands)

 

     December 29,
2013
    March 31,
2013
 
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 108,998      $ 95,532   

Marketable securities

     353,433        359,974   
  

 

 

   

 

 

 

Total cash and marketable securities

     462,431        455,506   

Accounts receivable, net

     71,153        66,135   

Inventories

     14,044        20,160   

Deferred tax assets

     14,978        13,036   

Other current assets

     20,513        24,381   
  

 

 

   

 

 

 

Total current assets

     583,119        579,218   

Property and equipment, net

     87,609        96,336   

Goodwill

     110,976        110,976   

Purchased intangible assets, net

     3,386        4,054   

Deferred tax assets

     34,652        31,992   

Other assets

     2,376        2,587   
  

 

 

   

 

 

 
   $ 822,118      $ 825,163   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current liabilities:

    

Accounts payable

   $ 23,837      $ 29,668   

Accrued compensation

     24,734        27,453   

Accrued taxes

     1,913        4,559   

Deferred revenue

     4,060        4,676   

Other current liabilities

     8,192        7,651   
  

 

 

   

 

 

 

Total current liabilities

     62,736        74,007   

Accrued taxes

     17,804        10,772   

Other liabilities

     7,824        6,107   
  

 

 

   

 

 

 

Total liabilities

     88,364        90,886   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Common stock

     214        212   

Additional paid-in capital

     951,743        932,557   

Retained earnings

     1,718,850        1,690,337   

Accumulated other comprehensive income

     249        1,887   

Treasury stock

     (1,937,302     (1,890,716
  

 

 

   

 

 

 

Total stockholders’ equity

     733,754        734,277   
  

 

 

   

 

 

 
   $ 822,118      $ 825,163   
  

 

 

   

 

 

 


QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited — in thousands)

 

     Nine Months Ended  
     December 29,
2013
    December 30,
2012
 

Cash flows from operating activities:

    

Net income

   $ 28,513      $ 43,501   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     23,620        21,071   

Stock-based compensation

     18,047        23,295   

Deferred income taxes

     (5,355     (3,810

Other non-cash items

     5,706        3,138   

Changes in operating assets and liabilities:

    

Accounts receivable

     (5,088     7,179   

Inventories

     6,116        (3,311

Other assets

     537        113   

Accounts payable

     (1,919     (2,499

Accrued compensation

     (2,719     (2,385

Accrued taxes, net

     7,734        14,367   

Other liabilities

     2,841        870   
  

 

 

   

 

 

 

Net cash provided by operating activities

     78,033        101,529   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of available-for-sale securities

     (259,008     (228,202

Proceeds from sales and maturities of available-for-sale securities

     261,253        204,325   

Purchases of property and equipment

     (21,043     (31,728
  

 

 

   

 

 

 

Net cash used in investing activities

     (18,798     (55,605
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock under stock-based awards

     6,756        6,571   

Excess tax benefits from stock-based awards

     46        129   

Minimum tax withholding paid on behalf of employees for restricted stock units

     (4,584     (5,555

Purchases of treasury stock

     (47,785     (111,729

Payments for credit facility commitment fee

     (202       
  

 

 

   

 

 

 

Net cash used in financing activities

     (45,769     (110,584
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     13,466        (64,660

Cash and cash equivalents at beginning of period

     95,532        164,516   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 108,998      $ 99,856   
  

 

 

   

 

 

 


QLOGIC CORPORATION

SUPPLEMENTAL FINANCIAL INFORMATION

(unaudited — in thousands)

Net Revenues

A summary of the company’s revenue components is as follows:

 

     Three Months Ended      Nine Months Ended  
     December 29,
2013
     December 30,
2012
     December 29,
2013
     December 30,
2012
 

Advanced Connectivity Platforms

   $ 98,452       $ 96,991       $ 285,653       $ 302,450   

Legacy Connectivity Products

     20,997         22,395         59,534         65,174   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 119,449       $ 119,386       $ 345,187       $ 367,624