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Emulex Announces Second Quarter Results



                   Emulex Announces Second Quarter Results

PR Newswire

COSTA MESA, Calif., Jan. 31, 2013

COSTA MESA, Calif., Jan. 31, 2013 /PRNewswire/ -- Emulex Corporation
(NYSE:ELX) today announced results for its second quarter of fiscal 2013 which
ended on December 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120403/NE81278LOGO )

Second Quarter Financial Highlights

  o Total net revenues of $122.1 million, an increase of 2% sequentially and a
    decrease of 5% year-over-year
  o Network Connectivity Products (NCP) net revenues of $96.1 million, a
    decrease of 1% both sequentially and year-over-year, representing
    approximately 79% of total net revenues
  o Storage Connectivity Products (SCP) net revenues of $22.7 million, an
    increase of 21% sequentially and a decrease of 18% year-over-year,
    representing 18% of total net revenues
  o Advanced Technology and other Products (ATP) net revenues of $3.3 million,
    a decrease of 11% sequentially and 25% year-over-year, representing 3% of
    total net revenues
  o Non-GAAP gross margins of 63.7% and GAAP gross margins of 58.6%
  o Non-GAAP diluted earnings per share of $0.19 and GAAP diluted earnings per
    share of $0.06
  o Cash, cash equivalents and investments at the end of the quarter of
     $211.2 million

 

Second Quarter Business Highlights

  o Announced intent to acquire Endace Limited, a network performance
    management company that provides network monitoring appliances, network
    analytics software and ultra-high speed network access switching with 100
    percent accuracy
  o Gained more than seven points of overall Fibre Channel revenue market
    share over nearest competitor and accelerated leadership in emerging 16Gb
    Fibre Channel (16GFC) segment with more than 75% market share according to
    Dell'Oro Group's Q3 2012 Fibre Channel Adapter Vendor report and Crehan
    Research's Q3 2012 Server-class Adapter and LOM market share reports
  o Announced new LightPulse® 16Gb Fibre Channel (16GFC) blade adapters for
    Dell PowerEdge™ blade servers to support the new end-to-end 16GFC blade
    solution from Dell, extending Emulex 16GFC connectivity for Dell customers
    across blade, storage and servers
  o Delivered an integrated HP NC553i 10Gb FlexFabric adapter for new HP
    Integrity BL860c i4, BL870c i4 and BL890c i4 Server Blades, providing I/O
    flexibility, efficiency and simplicity for LAN and SAN connectivity
  o Announced OneCore™ Storage software development kit (SDK), a new
    comprehensive solution for independent hardware and software vendors (IHVs
    and ISVs) and system integrators developing storage, flash/solid state
    disk (SSD), application and networking appliance solutions requiring low
    latency and high performance I/O connectivity
  o First I/O vendor to support the new VMware vSphere® 5.1 Web Client with
    Emulex OneCommand® Manager plug-in for VMware vCenter™ Server, integrating
    real-time lifecycle management of adapters provided by Emulex into the
    VMware vCenter Server console, centralizing and simplifying virtualization
    management
  o Won Systems Management Product of the Year award for Emulex OneCommand
    Vision 3.0 at the Storage, Virtualization and Cloud Computing (SVC) Awards
  o Named to CRN's 2013 Data Center 100 list, recognizing technology vendors
    for powering, supporting and protecting today's data center services in an
    environmentally and economically friendly manner, while boosting
    efficiency and productivity
  o Partnered with Gnodal to deliver a joint high frequency trading (HFT)
    solution using Emulex OneConnect® 10Gb Ethernet (10GbE) Network
    Xceleration™ OCe12000-D adapters, with FastStack™ DBL™ software, and a
    Gnodal GS4008 10GbE switch, eliminating  network congestion and providing
    industry-leading low latency
  o Announced a joint live data management solution for analyzing big data
    with uCIRRUS using Emulex OneConnect 10GbE Network Xceleration OCe12000-D
    adapters, with FastStack Sniffer10G™ software, and uCIRRUS's XPRESSmp™

Financial Results

In the second quarter, total net revenues of $122.1 million represented an
increase of 2% over the first quarter results.  On a GAAP basis, Emulex
recorded net income of $5.6 million, or $0.06 per diluted share, compared to
first quarter GAAP income of $0.7 million, or $0.01 per share.  Non-GAAP net
income for the second quarter was $17.2 million, or $0.19 per diluted share,
essentially flat with the $0.19 of diluted earnings per share reported in the
first quarter. Cash, cash equivalents and investments at the end of the
quarter totaled $211.2 million compared to $186.4 million at the end of the
first quarter.  Reconciliations between GAAP and non-GAAP results are included
in the accompanying financial data. 

CEO Jim McCluney commented, "I'm pleased with the solid execution we were able
to deliver for the second quarter, once again meeting both our top line
revenue and our earnings goals. In addition to achieving our quarterly revenue
and earnings objectives, we also strengthened our balance sheet, exiting the
quarter with over $211 million in available cash and investments," continued
McCluney.

"Looking forward, we are well positioned in 16Gb Fibre Channel to continue the
share gain momentum we have delivered over the past three quarters, and with
expected completion of our Endace acquisition this quarter, we will further
increase our relevance as a thought leader in connectivity and management of
high performance, converged Ethernet networks," McCluney concluded.

Business Outlook

Although actual results may vary depending on a variety of factors, many of
which are outside the Company's control, including uncertainty related to the
macro IT spending environment, the timing of new server launches by our
customers, the timing of completion of the proposed acquisition of Endace
Limited and the results and related costs of ongoing patent litigation, Emulex
is providing guidance for its third fiscal quarter ending March 31, 2013.  For
the third quarter of fiscal 2013, Emulex is forecasting total net revenues in
the range of $110-$114 million.  The Company expects non-GAAP earnings per
diluted share of $0.12 - $0.14 in the third quarter.  Incremental to this
guidance, we expect approximately $0.06 per diluted share related to the
retroactive portion of the federal R&D tax credit. GAAP estimates for the
third quarter reflect approximately $0.30 per diluted share in expected
charges arising primarily from amortization of intangibles, stock-based
compensation, costs associated with the proposed acquisition of Endace and the
royalties, mitigation expenses and license fees associated with the Broadcom
patent litigation, as well as the associated tax impact and U. S. valuation
allowance.

About Emulex

Emulex, the leader in converged networking solutions, provides
enterprise-class connectivity for servers, networks and storage devices within
the data center. The company's product portfolio of Fibre Channel Host Bus
Adapters, 10Gb Ethernet Network Interface Cards, Ethernet-based Converged
Network Adapters, controllers, embedded bridges and switches, and connectivity
management software are proven, tested and trusted by the world's largest and
most demanding IT environments. Emulex solutions are used and offered by the
industry's leading server and storage OEMs including, Cisco, Dell, EMC,
Fujitsu, Hitachi, Hitachi Data Systems, HP, Huawei, IBM, NEC, NetApp and
Oracle. Emulex is headquartered in Costa Mesa, Calif. and has offices and
research facilities in North America, Asia and Europe. More information about
Emulex (NYSE:ELX) is available at www.Emulex.com.

Note Regarding Non-GAAP Financial Information

To supplement the condensed consolidated financial statements presented in
accordance with U.S. generally accepted accounting principles (GAAP), we have
included the following non-GAAP financial measures in this press release or in
the webcast to discuss our financial results for the second fiscal quarter
which may be accessed via our website at www.emulex.com: (i) non-GAAP gross
margin, (ii) non-GAAP operating expenses, (iii) non-GAAP operating income,
(iv) non-GAAP net income, and (v) non-GAAP diluted earnings per share.  These
non-GAAP financial measures exclude certain expenses and reflect an additional
way of viewing aspects of our operations that, when viewed with the GAAP
results and the reconciliations to corresponding GAAP financial measures,
provide a more complete understanding of our results of operations and the
factors and trends affecting our business.  However, these non-GAAP measures
should be considered as a supplement to, and not as a substitute for, or
superior to, the corresponding measures calculated in accordance with GAAP. 
We use our non-GAAP financial measures internally to better understand and
evaluate our business, prepare annual budgets, and in measuring performance
for some forms of compensation.

Our non-GAAP financial measures reflect adjustments based on the following
items, as well as the related income tax effects:

Stock-based compensation.  Although stock-based compensation represents an
important part of incentive compensation offered to our key employees, we
believe that exclusion of the impact of stock-based compensation assists
management and investors in evaluating the period over period performance of
our business operations and in comparing our performance with those of our
competitors.  Stock-based compensation expense will recur in future periods.

Amortization of intangibles. Amortization of intangibles generally represents
costs incurred by an acquired company or other third party to build value
prior to our acquisition of the intangible assets.  As such, it is effectively
part of the transaction costs of the acquisition rather than ongoing costs of
operating our core business.  As a result, we believe that exclusion of these
costs in presenting non-GAAP financial measures provides management and
investors a more effective means of evaluating its historical performance and
projected costs and the potential for realizing cost efficiencies within our
core business.  Amortization of intangibles will recur in future periods.

Site closure related expenses.  We have recognized expenses related to closure
and consolidation of certain facilities.  We believe that exclusion of these
expenses is useful to management and investors in evaluating the performance
of our ongoing operations on a period-to-period basis and relative to our
competitors.  In this regard, we note that expenses of this type are
infrequent in nature.

Patent litigation damages, license fees and royalties. We have incurred
expenses in the form of damages, sunset period royalties and settlement costs
as a result of a judgment in a patent litigation proceeding with Broadcom and
the related partial settlement and worldwide license agreement executed on
July 3, 2012 (the Release Agreement).  We believe that exclusion of charges
related to the Broadcom patent damages, sunset period royalties and Release
Agreement are useful to management and investors in evaluating the performance
of our ongoing operations on a period-to-period basis and relative to our
competitors, as this amount relates to a judgment in litigation and does not
reflect a continuing cost of operating our core business.  In this regard, we
note that expenses of this type are generally unrelated to our core business
and/or infrequent in nature.

Mitigation expenses related to the Broadcom patents.  We have recognized
mitigation expenses related to the Broadcom patents.  We believe that
exclusion of these redesign, requalification and appeal expenses is useful to
management and investors in evaluating the performance of our ongoing
operations on a period-to-period basis and relative to our competitors.  In
this regard, we note that expenses of this type are infrequent in nature.

Expenses related to the intent to acquire Endace Limited (LSE:EDA).  We have
incurred expenses during the due diligence process for this potential
acquisition.  We believe that exclusion of these charges are useful to
management and investors in evaluating the performance of our ongoing
operations on a period-to-period basis and relative to our competitors, as
these expenditures do not reflect a continuing cost of operating our current
core business.  In this regard, we note that expenses of this type are
infrequent in nature.

Valuation allowance for U.S. federal and state deferred tax assets.  The
Company has concluded that it is more likely than not that we will be unable
to fully utilize the majority of our U.S. federal and state deferred tax
assets   As a result, the Company has previously recorded a valuation
allowance against those assets to the extent that they cannot be realized
through net operating loss carrybacks to prior tax years.  We believe that
eliminating the impact of a discrete adjustment of this nature and its
continuing impact on our effective tax rate is useful to management and
investors in evaluating the performance of the Company's ongoing operations on
a period-to-period basis and relative to the Company's competitors.  In this
regard, we note that adjustments of this type are generally infrequent in
nature.

- - - - - - - - -

"Safe Harbor'' Statement under the Private Securities Litigation Reform Act of
1995: With the exception of historical information, the statements set forth
above and below, including without limitation, those relating to the proposed
acquisition of Endace above, those contained in the discussion of "Business
Outlook" above, and the reconciliation of forward-looking diluted earnings per
share below, contain forward-looking statements that involve risk and
uncertainties. We expressly disclaim any obligation or undertaking to release
publicly any updates or changes to these forward-looking statements that may
be made to reflect any future events or circumstances. We wish to caution
readers that a number of important factors could cause actual results to
differ materially from those in the forward-looking statements. These factors
include the possibility that the proposed acquisition of Endace Limited
(Endace) is not completed on a timely basis or at all, the effects of the
proposed acquisition of Endace, including our ability to realize the
anticipated benefits from the pending acquisition of Endace on a timely basis
or at all, and our ability to integrate the technology, operations and
personnel of Endace into our existing operations in a timely and efficient
manner. In addition, intellectual property claims, with or without merit could
result in costly litigation, cause product shipment delays, require us to
indemnify customers, or require us to enter into royalty or licensing
agreements, which may or may not be available. Furthermore, we have in the
past obtained, and may be required in the future to obtain, licenses of
technology owned by other parties. We cannot be certain that the necessary
licenses will be available or that they will be obtainable on commercially
reasonable terms. If we were to fail to obtain such royalty or licensing
agreements in a timely manner and on reasonable terms, our business, results
of operations and financial condition could be materially adversely affected.
Ongoing lawsuits, such as the action brought by Broadcom Corporation
(Broadcom), present inherent risks, any of which could have a material adverse
effect on our business, financial condition, or results of operations. Such
potential risks include continuing expenses of litigation, risk of loss of
patent rights and/or monetary damages, risk of injunction against the sale of
products incorporating the technology in question, counterclaims, attorneys'
fees, incremental costs associated with product or component redesigns, and
diversion of management's attention from other business matters. With respect
to the continuing Broadcom litigation, such potential risks also include the
adequacy of any sunset period to make design changes, the ability to implement
any design changes, the availability of customer resources to complete any
re-qualification or re-testing that may be needed, the ability to maintain
favorable working relationships with Emulex suppliers of
serializer/deserializer (SerDes) modules, and the ability to obtain a
settlement which does not put us at a competitive disadvantage. In addition,
the fact that the economy generally, and the technology and storage market
segments specifically, have been in a state of uncertainty makes it difficult
to determine if past experience is a good guide to the future and makes it
impossible to determine if markets will grow or shrink in the short term.
Continual weakness in domestic and worldwide macroeconomic conditions and
disruptions in world credit and equity markets and the resulting economic
uncertainty for our customers, as well as the storage and converged networking
market as a whole, has and could continue to adversely affect our revenues and
results of operations. As a result of these uncertainties, we are unable to
predict our future results with any accuracy. Other factors affecting these
forward-looking statements include but are not limited to the following:
faster than anticipated declines in the storage networking market, slower than
expected growth of the converged networking market or the failure of our
Original Equipment Manufacturer (OEM) customers to successfully incorporate
our products into their systems; our dependence on a limited number of
customers and the effects of the loss of, decrease in or delays of orders by
any such customers, or the failure of such customers to make timely payments;
the emergence of new or stronger competitors as a result of consolidation
movements in the market; the timing and market acceptance of our products or
our OEM customers' new or enhanced products; costs associated with entry into
new areas of the server and storage technology markets; the variability in the
level of our backlog and the variable and seasonal procurement patterns of our
customers; any inadequacy of our intellectual property protection and the
costs of actual or potential third-party claims of infringement and any
related indemnity obligations or adverse judgments; the effect of any actual
or potential unsolicited offers to acquire us; proxy fights or the actions of
activist shareholders; impairment charges, including but not limited to
goodwill and intangible assets; changes in tax rates or legislation; the
effects of acquisitions; the effects of terrorist activities; natural
disasters, and any resulting disruption in our supply chain or customer
purchasing patterns or any other resulting economic or political instability;
the highly competitive nature of the markets for our products as well as
pricing pressures that may result from such competitive conditions; the
effects of changes in our business model to separately charge for software;
the effect of rapid migration of customers towards newer, lower cost product
platforms; possible transitions from board or box level to application
specific integrated circuit (ASIC) solutions for selected applications; a
shift in unit product mix from higher-end to lower-end or mezzanine card
products; a faster than anticipated decrease in the average unit selling
prices or an increase in the manufactured cost of our products; delays in
product development; our reliance on third-party suppliers and subcontractors
for components and assembly; our ability to attract and retain key technical
personnel; our ability to benefit from our research and development
activities; our dependence on international sales and internationally produced
products; changes in accounting standards; and any resulting regulatory
changes on our business. These and other factors could cause actual results to
differ materially from those in the forward-looking statements and are
discussed in our filings with the Securities and Exchange Commission,
including our recent filings on Forms 10-K and 10-Q, under the caption "Risk
Factors."

--------------------

This news release refers to various products and companies by their trade
names.  In most, if not all, cases these designations are claimed as
trademarks or registered trademarks by their respective companies.

 

Investor Contact:        Press Contact:
Frank Yoshino            Katherine Lane
Vice President, Finance  Director, Corporate Communications
+1 714 885-3697          +1 714 885-3828
frank.yoshino@emulex.com  katherine.lane@emulex.com

 

 

 

EMULEX CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share data)

 
                                         Three Months Ended Six Months Ended
                                         December   January  December  January
                                         30,       1,       30,       1,
                                         2012      2012     2012      2012
Net revenues                             $122,145  $128,671 $241,412  $247,068
Cost of sales:               
  Cost of goods sold                     44,472    48,099   88,623    92,351
    Amortization of core and developed
     technology intangible assets        5,149     5,149    10,297    13,723
  Patent litigation settlement and
    royalties                            958       -        1,950     -
Cost of sales                            50,579    53,248   100,870   106,074
         Gross profit                    71,566    75,423   140,542   140,994
Operating expenses:                   
   Engineering and                       40,113    37,671   78,583    80,946
development              
   Selling and marketing                 14,769    15,260   28,506    29,877
   General and                           10,987    9,123    19,495    20,988
administrative                
   Amortization of other intangible
      assets                             1,365     1,602    2,888     3,364
         Total operating                 67,234    63,656   129,472   135,175
expenses               
         Operating                       4,332     11,767   11,070    5,819
income                 
Non-operating income (loss):           
   Interest income                       8         32       8         55
   Interest expense                      2         (2)      (4)       (4)
   Other income (expense),               (27)      141      (363)     542
net             
         Total non-operating income      (17)      171      (359)     593
(loss)            
Income before income taxes               4,315     11,938   10,711    6,412
Income tax (benefit)                     (1,268)   (3,056)  4,471     (1,423)
provision            
Net income                               $5,583    $14,994  $6,240    $7,835
Net income per share:           
      Basic                              $0.06     $0.17    $0.07     $0.09
      Diluted                            $0.06     $0.17    $0.07     $0.09
Number of shares used in per share 

 computations:       
      Basic                              90,063    85,906   89,705    86,384
      Diluted                            91,816    87,816   91,637    88,323

 

 

 

EMULEX CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited, in thousands)

 
                                                        December 30, July 1,
                                                        2012         2012
Assets
Current assets:
      Cash and cash equivalents                         $208,952     $201,048
      Investments                                       2,241        28,879
      Accounts receivable, net                          85,174       84,106
      Inventories                                       23,135       20,319
      Prepaid income taxes                              2,929        10,784
      Prepaid expenses and other current                10,363       7,380
assets..........
      Deferred income taxes                             8,517        10,722
        Total current assets                            341,311      363,238
Property and equipment, net                             57,968       60,118
Goodwill and Intangible assets, net                     269,107      282,292
Other assets                                            23,064       7,311
                                                        $691,450     $712,959
 

 

Liabilities and Stockholders' Equity
Current liabilities:
      Accounts payable                                  $  30,635    $  26,889
      Accrued and other current liabilities             36,124       75,700
        Total current liabilities                       66,759       102,589
Other liabilities                                       4,006        3,878
Deferred income taxes                                   1,219        3,876
Accrued taxes                                           30,057       27,513
  Total liabilities                                     102,041      137,856
Total stockholders' equity                              589,409      575,103
                                                        $691,450     $712,959

 

EMULEX CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statement of Cash Flows

(unaudited, in thousands)

 
                                                       Six Months Ended
                                                       December 30, January 1,
                                                       2012         2012
Cash flows from operations:
Net income                                             $  6,240     $  7,835
  Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
      Depreciation and amortization                    21,956       26,264
      Stock based compensation                         10,929       12,579
      Deferred income taxes                            (452)        1,681
      Other reconciling items                          (202)        (954)
      Changes in assets and liabilities                (49,954)     (9,274)
         Net cash (used in) provided by operating      (11,483)     38,131
           activities
Cash flows from investing activities:
   Investment in property and equipment, net           (6,960)      (6,048)
   Maturities of/(proceeds from) investments, net      26,701       (7,377)
       Net cash provided by (used in) investing        19,741       (13,425)
activities
Cash flows from financing activities:
   Repurchase of common stock                          -            (20,058)
   Other                                               (515)        (2,914)
       Net cash used in financing activities           (515)        (22,972)
                                                                     
Effect of exchange rates on cash and cash equivalents
                                                       161          (554)
Net increase in cash & cash equivalents                7,904        1,180
Opening cash balance                                   201,048      131,160
Ending cash balance                                    $208,952     $132,340

 

EMULEX CORPORATION AND SUBSIDIARIES
Supplemental Information
Historical Net Revenue by Product Lines:
Network Connectivity Products (NCP) primarily consist of Fibre Channel
LightPluse® and Ethernet OneConnect® standup HBAs, mezzanine cards, I/O ASICs,
ULOMs, and UCNAs to provide server Input/Output (I/O) and target storage array
connectivity to enable servers to reliably and efficiently connect to Local
Area Networks, Storage Area Networks and Network Attached Storage by
offloading data communication processing tasks from the servers as information
is delivered and sent to the network.
Storage Connectivity Products (SCP) include our InSpeed®, FibreSpy®,
switch-on-a-chip (SOC), bridge and router products. SCP are deployed inside
storage arrays, tape libraries, and other storage appliances to connect
storage controllers to storage capacity, delivering improved performance,
reliability, and connectivity.  
Advanced Technology and Other Products (ATP) primarily consists of our
Integrated Baseboard Management Controllers (iBMC), our One Command® Vision
products, as well as some legacy and other products and services.

                     Q2 FY    Q1 FY     Q4 FY     Q3 FY     Q2 FY
($000s)               2013    2013      2012      2012      2012      % Change
                              Revenues            Revenues  Revenues  Q2 vs Q2
                    Revenues            Revenues
Network
Connectivity        $  96,132 $  96,733 $  87,979 $  91,127 $  96,620 (1)%
Products
Storage
Connectivity        22,670    18,769    32,797    27,855    27,583    (18)%
Products
Advanced Technology
and                 3,343     3,765     8,179     6,764     4,468     (25)%
  Other Products
Total net revenues  $122,145  $119,267  $128,955  $125,746  $128,671  (5)%
                    % Total   % Total   % Total   % Total   % Total
                              Revenues            Revenues  Revenues
                    Revenues            Revenues
Network
Connectivity        79%       81%       68%       73%       75%
Products
Storage
Connectivity        18%       16%       26%       22%       21%
Products
Advanced Technology
and                 3%        3%        6%        5%        4%
   Other Products
Total net revenues  100%      100%      100%      100%      100%

 

Historical Net Revenues by Channel and Territory:
                       Q2 FY                Q2 FY
($000s)                 2013   % Total       2012     % Total      % Change
                               Revenues               Revenues
                      Revenues              Revenues
Revenues from OEM     $110,174 90%          $ 117,925 92%          (7)%
customers
Revenues from         11,896   10%          10,733    8%           11%
distribution
Other                 75                nm  13                 nm           nm
Total net revenues    $122,145 100%         $128,671  100%         (5)%
Asia-Pacific          $73,610  60%          $80,391   63%          (8)%
United States         31,151   26%          31,394    24%          (1)%
Europe, Middle East   15,941   13%          16,473    13%          (3)%
and Africa
Rest of world         1,443    1%           413                nm           nm
Total net revenues    $122,145 100%         $128,671  100%         (5)%
 

nm – not meaningful

 

Summary of Stock-Based Compensation:
                               Three Months Ended      Six Months Ended
                               December 30, January 1, December 30, January 1,
($000s)                        2012         2012       2012         2012
Cost of sales                  $  181       $  315     $     496    $     767
Engineering and development    2,214        2,449      4,912        5,284
Selling and marketing          941          850        1,686        1,936
General and administrative     2,039        2,525      3,835        4,592
Total stock-based compensation $5,375       $6,139     $10,929      $12,579

 

Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin:
                               Three Months Ended      Six Months Ended
                               December 30, January 1, December 30, January 1,
                               2012         2012       2012         2012
GAAP gross margin              58.6%        58.6%      58.2%        57.1%
Items excluded from GAAP gross
margin to calculate non-GAAP
gross margin:
    Stock-based compensation   0.1%         0.2%       0.2%         0.3%
    Amortization of            4.2%         4.0%       4.3%         5.5%
intangibles
    Site closure related       -            (0.0)%     -            0.0%
expenses
    Patent litigation damages,                          
license                        0.8%         -                       0.2%
       fees and royalties                              0.8%
Non-GAAP gross margin          63.7%        62.8%      63.5%        63.1%

 

Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses:

 
                               Three Months Ended      Six Months Ended
                               December 30, January 1, December 30, January 1,
($000s)                        2012         2012       2012         2012
GAAP operating expenses, as
presented                      $67,234      $63,656    $129,472     $135,175
   above
Items excluded from GAAP
operating

expenses to calculate non-GAAP
operating expenses:
   Stock-based compensation    (5,194)      (5,824)    (10,433)     (11,812)
   Amortization of other       (1,365)      (1,602)    (2,888)      (3,364)
intangibles
   Site closure related        -            119        -            (1,039)
expenses
   Mitigation expenses related
to the                         (982)        -          (1,464)      -
     Broadcom patents
   Expenses related to the
intent to                      (2,060)      -          (2,060)      -
     acquire Endace
       Impact on operating     (9,601)      (7,307)    (16,845)     (16,215)
expenses
Non-GAAP operating expenses    $57,633      $56,349    $112,627     $118,960

 

Reconciliation of GAAP Operating Income to Non-GAAP Operating Income:
                               Three Months Ended      Six Months Ended
                               December 30, January 1, December 30, January 1,
($000s)                        2012         2012       2012         2012
GAAP operating income as       $  4,332     $11,767    $11,070      $  5,819
   presented above
Items excluded from GAAP
operating income to calculate
non-GAAP operating income:
   Stock-based compensation    5,375        6,139      10,929       12,579
   Amortization of intangibles 6,514        6,751      13,185       17,087
   Site closure related        -            (142)      -            1,142
expenses
   Patent litigation damages,                                        
license fees                   958          -
     and royalties                                     1,950        388
   Mitigation expenses related
to                             982          -          1,464        -
     Broadcom patents
   Expenses related to the
intent to                      2,060        -          2,060        -
     acquire Endace
        Impact on operating    15,889       12,748     29,588       31,196
income
Non-GAAP operating income      $20,221      $24,515    $40,658      $37,015

 

Reconciliation of GAAP Net Income to Non-GAAP Net Income:
                               Three Months Ended      Six Months Ended
                               December 30, January 1, December 30, January 1,
($000s)                        2012         2012       2012         2012
GAAP net income as presented   $  5,583     $14,994    $  6,240     $  7,835
   above
Items excluded from GAAP net
income to calculate non-GAAP
net income:
   Stock-based compensation    5,375        6,139      10,929       12,579
   Amortization of intangibles 6,514        6,751      13,185       17,087
   Site closure related        -            (142)      -            1,142
expenses
   Patent litigation damages,                                        
license fees                   958          -
     and royalties                                     1,950        388
   Mitigation related to the
Broadcom                       982          -          1,464        -
     patents
   Expenses related to the
intent to                      2,060        -          2,060        -
     acquire Endace
   Income tax effect of above  (2,775)      (5,094)    (5,437)      (4,560)
items
Valuation allowance for U.S.
federal                        (1,463)      -          4,355        -
   and/or state deferred tax
assets
       Impact on net income    11,651       7,654      28,506       26,636
Non-GAAP net income            $17,234      $22,648    $34,746      $34,471

 

Reconciliation of GAAP Diluted Earnings Per Share to Non-GAAP Diluted Earnings
Per Share:
                               Three Months Ended      Six Months Ended
                               December 30, January 1, December 30, January 1,
(shares in 000s)               2012         2012       2012         2012
GAAP diluted earnings per
share                          $0.06        $0.17      $0.07        $0.09
   as presented above
Items excluded from GAAP loss
per share to calculate diluted
non-GAAP earnings per share,
net of tax effect:
   Stock-based compensation    0.06         0.07       0.12         0.15
   Amortization of intangibles 0.07         0.08       0.14         0.19
   Site closure related        -            (0.00)     -            0.01
expenses
   Patent litigation damages,                                        
license fee                    0.01         -
    and royalties                                      0.02         0.00
   Mitigation related to the
Broadcom                       0.01         -          0.02         -
     patents
   Expenses related to the
intent to                      0.02         -          0.02         -
      acquire Endace
   Tax impact of above items
and U.S.                       (0.04)       (0.06)     (0.01)       (0.05)
     GAAP valuation allowance
   Impact on GAAP earnings per 0.13         0.09       0.31         0.30
share
Non-GAAP diluted earnings per  $0.19        $0.26      $0.38        0.39
share
Diluted shares used in
non-GAAP                       91,816       87,816     91,637       88,323

 per share computations

 

Forward-Looking Diluted Earnings per Share Reconciliation:
                                                           Guidance for

                                                           Three Months Ending

                                                           March 31, 2013
Normalized non-GAAP diluted earnings per share guidance    $0.12 - $0.14
   Incremental benefit related to the retroactive portion
of the federal                                             0.06
     R&D tax credit
Total non-GAAP diluted earnings per share guidance         $0.18 - $0.20
Items excluded, net of tax, from non-GAAP diluted earnings
per share to
calculate GAAP diluted earnings per share guidance:
        Stock-based compensation                           (0.06)
        Amortization of intangibles                        (0.07)
        Patent litigation damages, license fees, royalties
and mitigation                                             (0.09)
           expenses
        Expenses related to the intent to acquire Endace   (0.01)
        Tax impact of above items and U.S. GAAP valuation  (0.07)
allowance..
GAAP loss per share guidance                               ($0.12) – ($0.10)

 

SOURCE Emulex Corporation

Website: http://www.emulex.com
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