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 firstname.lastname@example.org or Investor Contact: Jean Hu, 949-389-7579 email@example.com
QLogic Reports Third Quarter Results for Fiscal Year 2013
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