QLogic Reports First Quarter Results for Fiscal Year 2015

  QLogic Reports First Quarter Results for Fiscal Year 2015  Business Wire  ALISO VIEJO, Calif. -- July 24, 2014  QLogic Corp. (Nasdaq:QLGC), a leading supplier of high performance network infrastructure solutions, today announced its first quarter financial results for the period ended June 29, 2014.  Net revenue for the first quarter of fiscal 2015 was $119.4 million and increased 6% from $113.1 million in the same quarter last year. Revenue from Advanced Connectivity Platforms was $104.7 million during the first quarter of fiscal 2015 and increased 12% from $93.2 million in the same quarter last year. Revenue from Legacy Connectivity Products was $14.7 million during the first quarter of fiscal 2015 compared to $19.9 million in the same quarter last year.  “Fiscal year 2015 is off to a solid start as we delivered both revenue and non-GAAP earnings per diluted share that exceeded the midpoint of our guidance ranges. Our strong revenue performance was driven by a 12% year-over-year increase in revenue from Advanced Connectivity Platforms,” said Prasad Rampalli, president and chief executive officer, QLogic. “Our team executed very well to further establish QLogic as a leader in data and storage networking connectivity products. We are making significant progress in the enterprise Ethernet market and our revenue from these products is an important contributor to our overall growth. We continue to believe that we are well positioned to experience revenue growth through expanded market opportunities.”  Net income on a GAAP basis for the first quarter of fiscal 2015 increased to $6.0 million, or $0.07 per diluted share, from a net loss of $3.1 million, or $0.03 per diluted share, for the first quarter of fiscal 2014. Net income on a non-GAAP basis for the first quarter of fiscal 2015 increased 13% to $18.5 million, or $0.21 per diluted share, from $16.4 million, or $0.18 per diluted share, for the first quarter of fiscal 2014.  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 first quarter fiscal 2015 conference call is scheduled for today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Prasad Rampalli, 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. Phone access to participate in the conference call is available at (888) 278-8446, pass code: 7597692.  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 are making significant progress in the enterprise Ethernet market and that we are well positioned to experience revenue growth through expanded market opportunities) 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: potential fluctuations in operating results; gross margins that may vary over time; unfavorable economic conditions; 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; uncertain benefits from strategic business combinations, acquisitions and divestitures; 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; 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; a reduction in sales efforts by current distributors; 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 OPERATIONS  (unaudited — in thousands, except per share amounts)                                                                                Three Months Ended                                        June 29,                    June 30,                                                                                                   2014                        2013                                                                     Net revenues                           $ 119,449                   $ 113,116 Cost of revenues                        48,754                    36,619   Gross profit                            70,695                    76,497                                                                       Operating expenses: Engineering and development              37,821                      40,387 Sales and marketing                      16,034                      19,413 General and administrative               8,900                       7,739 Special charges                         2,544                     12,033   Total operating expenses                65,299                    79,572                                                                       Operating income (loss)                  5,396                       (3,075  )                                                                     Interest and other income, net          142                       773                                                                          Income (loss) before income              5,538                       (2,302  ) taxes                                                                     Income tax expense (benefit)            (462    )                  748                                                                          Net income (loss)                      $ 6,000                    $ (3,050  )                                                                     Net income (loss) per share: Basic                                  $ 0.07                      $ (0.03   ) Diluted                                $ 0.07                      $ (0.03   )                                                                     Number of shares used in per share calculations: Basic                                    87,395                      89,146 Diluted                                  88,253                      89,146                                                                                                                                                                                QLOGIC CORPORATION  RECONCILIATION OF GAAP NET INCOME (LOSS) TO  NON-GAAP NET INCOME  (unaudited — in thousands, except per share amounts)                                                                                    Three Months Ended                                          June 29,                   June 30,                                                                                                      2014                       2013                                                                      GAAP net income (loss)                   $ 6,000                    $ (3,050 ) Items excluded from GAAP net income (loss): Stock-based compensation                   5,540                      8,171 Amortization of acquisition-related intangible             4,448                      243 assets Acquisition-related charges                771                        — Amortization of license fee                699                        — Special charges                            2,544                      12,033 Income tax effect                         (1,516 )                  (981   ) Total non-GAAP adjustments                12,486                   19,466  Non-GAAP net income                      $ 18,486                  $ 16,416                                                                       Net income (loss) per diluted share: GAAP net income (loss)                   $ 0.07                     $ (0.03  ) Adjustments                               0.14                     0.21    Non-GAAP net income                      $ 0.21                    $ 0.18                                                                         Number of shares used in non-GAAP          88,253                     89,770 per diluted share calculations                                                                                                                                            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 net income and non-GAAP net income per diluted share, on a basis consistent with its historical presentation, to assist investors in understanding the company’s core net income and core net income 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 net profitability with historical periods and comparisons of the company’s core net profitability with the corresponding results for competitors. Management believes that non-GAAP net income and non-GAAP net income 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 net profitability and related profitability on a per diluted share basis.  Management uses non-GAAP net income and non-GAAP net income 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                                          June 29,                   June 30,                                                                                                      2014                       2013 Non-GAAP Adjustments: Cost of revenues: Stock-based compensation                 $ 355                      $ 584 Amortization of acquisition-related intangible             4,448                      243 assets Acquisition-related charges                771                        — Amortization of license fee               699                      —       Total cost of revenue adjustments         6,273                    827                                                                          Operating expenses: Engineering and development: Stock-based compensation                   2,971                      4,351 Sales and marketing: Stock-based compensation                   1,010                      1,793 General and administrative: Stock-based compensation                   1,204                      1,443 Special charges                           2,544                    12,033  Total operating expense                   7,729                    19,620  adjustments                                                                      Total non-GAAP adjustments before          14,002                     20,447 income taxes                                                                      Income tax effect                         (1,516 )                  (981   )                                                                      Total non-GAAP adjustments               $ 12,486                  $ 19,466                                                                                                                                                                                                  QLOGIC CORPORATION  CONDENSED CONSOLIDATED BALANCE SHEETS  (unaudited — in thousands)                                                                                                   June 29,                       March 30,                                   2014                           2014 ASSETS Current assets: Cash and cash equivalents        $ 60,882                       $ 91,258 Marketable securities             189,532                      186,783     Total cash and marketable          250,414                        278,041 securities Accounts receivable, net           84,103                         65,213 Inventories                        25,715                         18,036 Deferred tax assets                14,681                         15,080 Other current assets              19,870                       16,590      Total current assets               394,783                        392,960                                                                  Property and equipment,            86,304                         84,912 net Goodwill                           193,294                        194,107 Purchased intangible               65,400                         69,903 assets, net Deferred tax assets                29,091                         32,827 Other assets                      22,796                       23,554                                                                                                        $ 791,668                     $ 798,263                                                                      LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable                 $ 31,261                       $ 30,657 Accrued compensation               19,721                         26,956 Accrued taxes                      1,530                          981 Deferred revenue                   4,040                          3,954 Other current liabilities         8,502                        16,123      Total current liabilities          65,054                         78,671                                                                  Accrued taxes                      13,871                         17,095 Other liabilities                 9,315                        9,071       Total liabilities                 88,240                       104,837                                                                      Stockholders’ equity: Common stock                       214                            214 Additional paid-in capital         961,690                        958,008 Retained earnings                  1,678,071                      1,672,071 Accumulated other                  755                            435 comprehensive income Treasury stock                    (1,937,302 )                  (1,937,302 ) Total stockholders’ equity        703,428                      693,426                                                                                                       $ 791,668                     $ 798,263                                                                                                                                                                            QLOGIC CORPORATION  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited — in thousands)                                                                                Three Months Ended                                        June 29,                    June 30,                                                                                                  2014                        2013 Cash flows from operating activities: Net income (loss)                      $ 6,000                     $ (3,050  ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization            12,180                      7,806 Stock-based compensation                 5,540                       8,171 Deferred income taxes                    4,076                       5,403 Asset impairments                        1,011                       2,429 Other non-cash items                     581                         345 Changes in operating assets and liabilities: Accounts receivable                      (18,880 )                   (3,169  ) Inventories                              (7,679  )                   3,052 Other assets                             77                          (210    ) Accounts payable                         416                         (289    ) Accrued compensation                     (7,235  )                   (5,374  ) Accrued taxes, net                       (5,418  )                   (5,366  ) Other liabilities                       (7,291  )                  6,843    Net cash provided by (used in)          (16,622 )                  16,591   operating activities                                                                     Cash flows from investing activities: Purchases of available-for-sale          (51,759 )                   (89,318 ) securities Proceeds from sales and maturities of available-for-sale         48,932                      108,609 securities Purchases of property and               (8,989  )                  (10,111 ) equipment Net cash provided by (used in)          (11,816 )                  9,180    investing activities                                                                     Cash flows from financing activities: Proceeds from issuance of common         1,440                       1,963 stock under stock-based awards Minimum tax withholding paid on behalf of employees for                  (3,298  )                   (4,280  ) restricted stock units Purchases of treasury stock              —                           (24,428 ) Other financing activities              (80     )                  (6      ) Net cash used in financing              (1,938  )                  (26,751 ) activities                                                                     Net decrease in cash and cash            (30,376 )                   (980    ) equivalents                                                                     Cash and cash equivalents at            91,258                    95,532   beginning of period                                                                     Cash and cash equivalents at end       $ 60,882                   $ 94,552   of period                                                                                                                                                                             QLOGIC CORPORATION  SUPPLEMENTAL FINANCIAL INFORMATION  (unaudited — in thousands)                                        Net Revenues    A summary of the company’s revenue components is as follows:                                                                              Three Months Ended                                       June 29,                  June 30,                                                                                               2014                      2013 Advanced Connectivity Platforms       $ 104,701                 $ 93,190 Legacy Connectivity Products           14,748                   19,926                                       $ 119,449                 $ 113,116                                                                   Contact:  QLogic Corporation Media Contact: Steve Sturgeon, 858-472-5669 steve.sturgeon@qlogic.com or Investor Contact: Doug Naylor, 949-542-1330 doug.naylor@qlogic.com  
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