QLogic Reports Third Quarter Results for Fiscal Year 2013

  QLogic Reports Third Quarter Results for Fiscal Year 2013

Business Wire

ALISO VIEJO, Calif. -- January 24, 2013

QLogic Corp. (Nasdaq:QLGC), a leading supplier of high performance network
infrastructure solutions, today announced its third quarter financial results
for the period ended December 30, 2012.

Third Quarter Highlights

  *Net revenue: $119.4 million
  *GAAP income from continuing operations: $13.7 million or $0.15 per diluted
    share
  *Non-GAAP income from continuing operations: $18.3 million or $0.20 per
    diluted share
  *Operating margin: 12.1% GAAP, 18.1% non-GAAP
  *Cash and marketable securities: $495.2 million as of December 30, 2012
  *Cash generated from operations: $32.7 million

Financial Results

Net revenue for the third quarter of fiscal 2013 was $119.4 million compared
to $142.8 million in the same quarter last year. Revenue from Host Products
was $89.8 million during the third quarter of fiscal 2013 compared to $111.8
million in the same quarter last year. Revenue from Network Products was $20.1
million during the third quarter of fiscal 2013 compared to $18.5 million in
the same quarter last year. Revenue from Silicon Products was $9.6 million
during the third quarter of fiscal 2013 compared to $12.4 million in the same
quarter last year.

Income from continuing operations on a GAAP basis for the third quarter of
fiscal 2013 was $13.7 million, or $0.15 per diluted share, compared to $29.2
million, or $0.29 per diluted share, for the third quarter of fiscal 2012.
Income from continuing operations on a non-GAAP basis for the third quarter of
fiscal 2013 was $18.3 million, or $0.20 per diluted share, compared to $34.5
million, or $0.34 per diluted share, for the third quarter of fiscal 2012.

“During the December quarter, we reported financial results that exceeded our
expectations. We delivered revenue of $119.4 million and non-GAAP income from
continuing operations per diluted share of $0.20, both above our original
guidance range,” said Simon Biddiscombe, president and chief executive
officer, QLogic. “We are seeing stabilization in our business and I believe
our investments in innovative technologies for new market opportunities
position us well to deliver future growth.”

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 2013 conference call is scheduled for today at
2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Simon Biddiscombe, president
and chief executive officer, and Jean Hu, 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 (877) 675-4750,
pass code: 2146165.

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 networking, including adapters, switches and ASICs. Leading OEMs
and channel partners worldwide rely on QLogic products for their data, storage
and server 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, the stabilization of the business, and investments for new
market opportunities to deliver future growth) 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 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; the ability to attract and retain
key personnel; 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; and security system
risks, data protection breaches and cyber-attacks.

More detailed information on these and additional factors which 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 30,  January 1,   December 30,  January 1,
                           2012       2012           2012       2012
                                                                    
Net revenues             $  119,386     $  142,779   $  367,624     $  423,535
Cost of revenues           39,089       45,766      121,382      133,979
Gross profit               80,297       97,013      246,242      289,556
                                                                    
Operating expenses:
Engineering and             38,409         34,229       115,891        104,146
development
Sales and marketing         19,325         19,858       57,950         58,088
General and                8,139        8,803       24,951       26,820
administrative
Total operating            65,873       62,890      198,792      189,054
expenses
                                                                    
Operating income            14,424         34,123       47,450         100,502
                                                                    
Interest and other         903          798         2,935        2,926
income, net
                                                                    
Income from continuing
operations before           15,327         34,921       50,385         103,428
income taxes
                                                                    
Income taxes               1,622        5,700       6,459        13,504
                                                                    
Income from continuing      13,705         29,221       43,926         89,924
operations
                                                                    
Income (loss) from
discontinued               (464    )     804         (425    )     1,181
operations, net of
income taxes
                                                                    
Net income               $  13,241     $  30,025    $  43,501     $  91,105
                                                                    
Income from continuing
operations per share:
Basic                    $  0.15        $  0.29      $  0.46        $  0.88
Diluted                  $  0.15        $  0.29      $  0.46        $  0.87
                                                                    
Income (loss) from
discontinued
operations per share:
Basic                    $  (0.01   )   $  0.01      $  —           $  0.01
Diluted                  $  (0.01   )   $  0.01      $  —           $  0.01
                                                                    
Net income per share:
Basic                    $  0.14        $  0.30      $  0.46        $  0.89
Diluted                  $  0.14        $  0.30      $  0.46        $  0.88
                                                                    
Number of shares used
in per share
calculations:
Basic                       92,386         100,135      94,518         102,696
Diluted                     92,570         100,668      94,963         103,340


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 30,  January 1,   December 30,  January 1,
                          2012        2012        2012        2012    
                                                                   
GAAP income from        $  13,705      $ 29,221     $  43,926      $ 89,924
continuing operations
Items excluded from
GAAP income from
continuing
operations:
Stock-based                6,973         7,620         23,295        24,349
compensation
Amortization of
acquisition-related        243           242           730           730
intangible assets
Income tax effect         (2,576  )    (2,567 )     (7,444  )    (7,354  )
Total non-GAAP            4,640       5,295       16,581      17,725  
adjustments
Non-GAAP income from    $  18,345     $ 34,516    $  60,507     $ 107,649 
continuing operations
                                                                   
Income from
continuing operations
per diluted share:
GAAP income from        $  0.15        $ 0.29       $  0.46        $ 0.87
continuing operations
Adjustments               0.05        0.05        0.18        0.17    
Non-GAAP income from    $  0.20       $ 0.34      $  0.64       $ 1.04    
continuing operations

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         Three Months Ended         Nine Months Ended
thousands)
                         December 30,  January 1,   December 30,  January 1,
                           2012        2012        2012        2012   
Non-GAAP Adjustments:
Cost of revenues:
Stock-based              $  529         $ 590        $  1,839       $ 1,924
compensation
Amortization of
acquisition-related        243         242         730         730    
intangible assets
Total cost of revenue      772         832         2,569       2,654  
adjustments
                                                                    
Operating expenses:
Engineering and
development:
Stock-based                 3,030         3,256         10,444        10,948
compensation
Sales and marketing:
Stock-based                 1,619         1,783         5,217         5,166
compensation
General and
administrative:
Stock-based                1,795       1,991       5,795       6,311  
compensation
Total operating            6,444       7,030       21,456      22,425 
expense adjustments
                                                                    
Total non-GAAP
adjustments before          7,216         7,862         24,025        25,079
income taxes
Income tax effect          (2,576  )    (2,567 )     (7,444  )    (7,354 )
Total non-GAAP           $  4,640      $ 5,295     $  16,581     $ 17,725 
adjustments


QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited — in thousands)

                                        December 30,    April 1,
                                          2012           2012       
ASSETS
Current assets:
Cash and cash equivalents                $ 99,856         $ 164,516
Marketable securities                     395,327        373,439    
Total cash and marketable securities       495,183          537,955
Accounts receivable, net                   69,499           76,588
Inventories                                23,035           19,724
Deferred tax assets                        13,838           16,780
Other current assets                      23,006         35,842     
Total current assets                       624,561          686,889
                                                          
Property and equipment, net                88,393           78,010
Goodwill                                   110,976          110,976
Purchased intangible assets, net           4,360            5,277
Deferred tax assets                        35,655           30,558
Other assets                              1,553          1,708      
                                                          
                                         $ 865,498       $ 913,418    
                                                          
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                         $ 30,547         $ 34,198
Accrued compensation                       25,941           28,326
Accrued taxes                              2,452            2,799
Deferred revenue                           5,711            6,504
Other current liabilities                 11,080         9,390      
Total current liabilities                  75,731           81,217
                                                          
Accrued taxes                              66,953           64,853
Other liabilities                         6,284          7,505      
Total liabilities                         148,968        153,575    
                                                          
Stockholders’ equity:
Common stock                               212              211
Additional paid-in capital                 924,604          901,734
Retained earnings                          1,660,702        1,617,201
Accumulated other comprehensive income     1,883            1,033
Treasury stock                            (1,870,871 )    (1,760,336 )
Total stockholders’ equity                716,530        759,843    
                                                          
                                         $ 865,498       $ 913,418    


QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited — in thousands)

                                                  Nine Months Ended
                                                   December 30,  January 1,
                                                    2012         2012     
                                                                  
Cash flows from operating activities:
Net income                                         $ 43,501       $ 91,105
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                        21,071         24,514
Stock-based compensation                             23,295         25,787
Deferred income taxes                                (3,810   )     (4,334   )
Other non-cash items                                 3,138          5,082
Changes in operating assets and liabilities:
Accounts receivable                                  7,179          (12,244  )
Inventories                                          (3,311   )     (36      )
Other assets                                         113            119
Accounts payable                                     (2,499   )     (2,333   )
Accrued compensation                                 (2,385   )     2,382
Accrued taxes                                        14,367         4,531
Deferred revenue                                     (625     )     (1,412   )
Other liabilities                                   1,495        936      
Net cash provided by operating activities           101,529      134,097  
                                                                  
Cash flows from investing activities:
Purchases of available-for-sale securities           (228,202 )     (336,005 )
Proceeds from sales and maturities of                204,325        247,928
available-for-sale securities
Purchases of property and equipment                 (31,728  )    (23,480  )
Net cash used in investing activities               (55,605  )    (111,557 )
                                                                  
Cash flows from financing activities:
Proceeds from issuance of common stock under         6,571          12,674
stock-based awards
Excess tax benefits from stock-based awards          129            529
Minimum tax withholding paid on behalf of            (5,555   )     (5,425   )
employees for restricted stock units
Purchases of treasury stock                         (111,729 )    (103,900 )
Net cash used in financing activities               (110,584 )    (96,122  )
                                                                  
Net decrease in cash and cash equivalents            (64,660  )     (73,582  )
                                                                  
Cash and cash equivalents at beginning of period    164,516      147,780  
                                                                  
Cash and cash equivalents at end of period         $ 99,856      $ 74,198   


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 30,  January 1,   December 30,  January 1,
                   2012           2012         2012           2012
                                                              
Host Products      $   89,763     $  111,835   $   280,367    $  324,208
Network Products       20,051        18,501        57,166        56,198
Silicon Products      9,572        12,443       30,091       43,129
                   $   119,386    $  142,779   $   367,624    $  423,535

Contact:

QLogic Corporation
Media Contact:
Steve Sturgeon, 858-472-5669
steve.sturgeon@qlogic.com
or
Investor Contact:
Jean Hu, 949-389-7579
jean.hu@qlogic.com
 
Press spacebar to pause and continue. Press esc to stop.