QLogic Reports Second Quarter Results for Fiscal Year 2013

QLogic Reports Second Quarter Results for Fiscal Year 2013

ALISO VIEJO, Calif.--(BUSINESS WIRE)-- QLogic Corp. (Nasdaq: QLGC  ) , a leading supplier of high performance network infrastructure solutions, today announced its second quarter financial results for the period ended September 30, 2012.

Second Quarter Highlights

  • Net revenue: $117.9 million
  • GAAP income from continuing operations: $11.8 million or $0.13 per diluted share
  • Non-GAAP income from continuing operations: $16.8 million or $0.18 per diluted share
  • Operating margin: 11.0% GAAP, 17.2% non-GAAP
  • Cash and marketable securities: $484.4 million as of September 30, 2012
  • Cash generated from operations: $41.8 million

Financial Results

Net revenue for the second quarter of fiscal 2013 was $117.9 million compared to $136.3 million in the same quarter last year. Revenue from Host Products was $89.6 million during the second quarter of fiscal 2013 compared to $103.4 million in the same quarter last year. Revenue from Network Products was $17.6 million during the second quarter of fiscal 2013 compared to $19.0 million in the same quarter last year. Revenue from Silicon Products was $10.7 million during the second quarter of fiscal 2013 compared to $13.9 million in the same quarter last year.

Income from continuing operations on a GAAP basis for the second quarter of fiscal 2013 was $11.8 million, or $0.13 per diluted share, compared to $26.5 million, or $0.26 per diluted share, for the second quarter of fiscal 2012. Income from continuing operations on a non-GAAP basis for the second quarter of fiscal 2013 was $16.8 million, or $0.18 per diluted share, compared to $32.0 million, or $0.31 per diluted share, for the second quarter of fiscal 2012.

“Despite the challenging macroeconomic environment and weakness in enterprise server sales, we delivered fiscal second quarter revenue of $117.9 million, above the mid-point of our guidance range,” said Simon Biddiscombe, president and chief executive officer, QLogic. “During these difficult times, we remain committed to our long-term strategy of focus and investment in both our core and expansion markets to drive our future growth and shareholder value.”

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 fiscal 2013 second quarter 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) 627-6585, pass code: 8531242.

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, and the focus and investments that may drive future growth and shareholder value) 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; security system risks, data protection breaches and cyber-attacks; and issues related to the upgrade of the company’s enterprise resource planning system.

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 Six Months Ended
September 30,

2012

  October 2,

2011

September 30,

2012

  October 2,

2011

 
Net revenues $ 117,867 $ 136,275 $ 248,238 $ 280,756
Cost of revenues   38,980   43,345   82,293   88,213
Gross profit   78,887   92,930   165,945   192,543
 
Operating expenses:
Engineering and development 38,024 35,065 77,482 69,917
Sales and marketing 19,739 18,509 38,625 38,230
General and administrative   8,139   8,854   16,812   18,017
Total operating expenses   65,902   62,428   132,919   126,164
 
Operating income 12,985 30,502 33,026 66,379
 
Interest and other income, net   954   1,080   2,032   2,128
 
Income from continuing operations before income taxes 13,939 31,582 35,058 68,507
 
Income taxes   2,159   5,075   4,837   7,804
 
Income from continuing operations 11,780 26,507 30,221 60,703
 
Income from discontinued operations, net of income taxes   94   2,147   39   377
 
Net income $ 11,874 $ 28,654 $ 30,260 $ 61,080
 
Income from continuing operations per share:
Basic $ 0.13 $ 0.26 $ 0.32 $ 0.58
Diluted $ 0.13 $ 0.26 $ 0.31 $ 0.58
 
Income from discontinued operations per share:
Basic $ $ 0.02 $ $ 0.01
Diluted $ $ 0.02 $ $
 
Net income per share:
Basic $ 0.13 $ 0.28 $ 0.32 $ 0.59
Diluted $ 0.13 $ 0.28 $ 0.31 $ 0.58
 
Number of shares used in per share calculations:
Basic 93,762 103,273 95,584 103,976
Diluted 93,949 103,562 96,159 104,676
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 Six Months Ended
September 30,

2012

  October 2,

2011

September 30,

2012

  October 2,

2011

 
GAAP income from continuing operations $ 11,780 $ 26,507 $ 30,221 $ 60,703
Items excluded from GAAP income from continuing operations:
Stock-based compensation 7,045 7,539 16,322 16,729
Amortization of acquisition-related intangible assets 243 244 487 488
Income tax effect   (2,251 )   (2,312 )   (4,868 )   (4,787 )
Total non-GAAP adjustments   5,037     5,471     11,941     12,430  
Non-GAAP income from continuing operations $ 16,817   $ 31,978   $ 42,162   $ 73,133  
 
Income from continuing operations per diluted share:
GAAP income from continuing operations $ 0.13 $ 0.26 $ 0.31 $ 0.58
Adjustments   0.05     0.05     0.13     0.12  
Non-GAAP income from continuing operations $ 0.18   $ 0.31   $ 0.44   $ 0.70  

Non-GAAP Financial Measures

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

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

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

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

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

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

(unaudited – in thousands)   Three Months Ended   Six Months Ended
September 30,

2012

 

October 2,

2011

September 30,

2012

  October 2,

2011

Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $ 540 $ 593 $ 1,310 $ 1,334
Amortization of acquisition-related intangible assets   243     244     487     488  
Total cost of revenue adjustments   783     837     1,797     1,822  
 
Operating expenses:
Engineering and development:
Stock-based compensation 3,096 3,296 7,414 7,692
Sales and marketing:
Stock-based compensation 1,633 1,701 3,598 3,383
General and administrative:
Stock-based compensation   1,776     1,949     4,000     4,320  
Total operating expense adjustments   6,505     6,946     15,012     15,395  
 
Total non-GAAP adjustments before income taxes 7,288 7,783 16,809 17,217
Income tax effect   (2,251 )   (2,312 )   (4,868 )   (4,787 )
Total non-GAAP adjustments $ 5,037   $ 5,471   $ 11,941   $ 12,430  
QLOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited — in thousands)
 
September 30,

2012

April 1,

2012

ASSETS
Current assets:
Cash and cash equivalents $ 103,465 $ 164,516
Marketable securities   380,951     373,439  
Total cash and marketable securities 484,416 537,955
Accounts receivable, net 72,948 76,588
Inventories 21,788 19,724
Deferred tax assets 15,034 16,780
Other current assets   26,111     35,842  
Total current assets 620,297 686,889
 
Property and equipment, net 86,409 78,010
Goodwill 110,976 110,976
Purchased intangible assets, net 4,665 5,277
Deferred tax assets 34,391 30,558
Other assets   1,610     1,708  
 
$ 858,348   $ 913,418  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 35,736 $ 34,198
Accrued compensation 21,056 28,326
Accrued taxes 2,379 2,799
Deferred revenue 5,626 6,504
Other current liabilities   11,977     9,390  
Total current liabilities 76,774 81,217
 
Accrued taxes 66,546 64,853
Other liabilities   6,330     7,505  
Total liabilities   149,650     153,575  
 
Stockholders’ equity:
Common stock 212 211
Additional paid-in capital 916,336 901,734
Retained earnings 1,647,461 1,617,201
Accumulated other comprehensive income 2,268 1,033
Treasury stock   (1,857,579 )   (1,760,336 )
Total stockholders’ equity   708,698     759,843  
 
$ 858,348   $ 913,418  
QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited — in thousands)
 
Six Months Ended

 

September 30,

2012

  October 2,

2011

 
Cash flows from operating activities:
Net income $ 30,260 $ 61,080
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 13,524 16,359
Stock-based compensation 16,322 17,687
Deferred income taxes (3,493 ) 509
Other non-cash items 2,094 1,524
Changes in operating assets and liabilities:
Accounts receivable 3,749 (16,625 )
Inventories (2,064 ) 3,423
Other assets (2,223 ) (652 )
Accounts payable 2,222 2,137
Accrued compensation (7,270 ) (3,636 )
Accrued taxes 12,908 156
Deferred revenue (884 ) (1,453 )
Other liabilities   3,663     1,310  
Net cash provided by operating activities   68,808     81,819  
 
Cash flows from investing activities:
Purchases of available-for-sale securities (137,446 ) (242,274 )
Proceeds from sales and maturities of available-for-sale securities 129,587 160,542
Purchases of property and equipment   (22,029 )   (18,202 )
Net cash used in investing activities   (29,888 )   (99,934 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards

4,894

9,959

Excess tax benefits from stock-based awards 128 539
Minimum tax withholding paid on behalf of employees for restricted stock units

(5,505

)

(5,363

)

Purchases of treasury stock   (99,488 )   (60,146 )
Net cash used in financing activities   (99,971 )   (55,011 )
 
Net decrease in cash and cash equivalents (61,051 ) (73,126 )
 
Cash and cash equivalents at beginning of period   164,516     147,780  
 
Cash and cash equivalents at end of period $ 103,465   $ 74,654  
QLOGIC CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION

(unaudited — in thousands)

 
Net Revenues

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

 
Three Months Ended Six Months Ended
September 30,

2012

  October 2,

2011

September 30,

2012

  October 2,

2011

 
Host Products $ 89,558 $ 103,448 $ 190,604 $ 212,373
Network Products 17,579 18,970 37,115 37,697
Silicon Products   10,730   13,857   20,519   30,686
$ 117,867 $ 136,275 $ 248,238 $ 280,756



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

KEYWORDS:   United States  North America  California

INDUSTRY KEYWORDS:

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