QLogic Reports First Quarter Results for Fiscal Year 2014

QLogic Reports First Quarter Results for Fiscal Year 2014

ALISO VIEJO, Calif.--(BUSINESS WIRE)-- 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 30, 2013.

During early June, the company commenced a restructuring plan designed to enhance product focus and streamline business operations with the goal of driving long-term profitable growth. As a result of the sharpened product focus, the company revised its product categories for revenue reporting. Effective this quarter, revenue is presented in two new categories – Advanced Connectivity Platforms and Legacy Connectivity Products. Net revenue from Advanced Connectivity Platforms and Legacy Connectivity Products for the last five quarters is presented in the accompanying supplemental financial information.

Financial Results

Net revenue for the first quarter of fiscal 2014 was $113.1 million compared to $130.4 million in the same quarter last year. Revenue from Advanced Connectivity Platforms was $93.2 million during the first quarter of fiscal 2014 compared to $108.0 million in the same quarter last year. Revenue from Legacy Connectivity Products was $19.9 million during the first quarter of fiscal 2014 compared to $22.3 million in the same quarter last year.

Loss from continuing operations on a GAAP basis for the first quarter of fiscal 2014 was $(3.1) million, or $(0.03) per diluted share, compared to income from continuing operations of $18.4 million, or $0.19 per diluted share, for the first quarter of fiscal 2013. Loss from continuing operations on a GAAP basis for the first quarter of fiscal 2014 includes special charges of $12.0 million recorded in connection with the restructuring plan. Income from continuing operations on a non-GAAP basis for the first quarter of fiscal 2014 was $16.4 million, or $0.18 per diluted share, compared to $25.3 million, or $0.26 per diluted share, for the first quarter of fiscal 2013.

“I am very pleased with our execution and disciplined financial management during the first quarter. The restructuring activities are progressing according to our plan and we are sharply focused on the server and storage connectivity markets,” said Jean Hu, interim chief executive officer, senior vice president and chief financial officer, QLogic. “With this market focus, I believe we are on the right track to drive the execution of new product opportunities and to deliver improved financial performance.”

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 2014 conference call is scheduled for today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Jean Hu, interim chief executive officer, 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 (888) 299-7207, pass code: 2969688.

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 the restructuring activities are progressing according to our plan and our belief that we are on the right track to drive the execution of new product opportunities and to deliver improved financial performance) 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: uncertainties whether our restructuring plan will achieve its stated goals; uncertainty whether our enhanced product focus will achieve its stated goals; 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 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; 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; 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 INCOME
 

(unaudited — in thousands, except per share amounts)

 
Three Months Ended
June 30,

2013

  July 1,

2012

 
Net revenues $ 113,116 $ 130,371
Cost of revenues   36,619     43,313  
Gross profit   76,497     87,058  
 
Operating expenses:
Engineering and development 40,387 39,458
Sales and marketing 19,413 18,886
General and administrative 7,739 8,673
Special charges   12,033      
Total operating expenses   79,572     67,017  
 
Operating income (loss) (3,075 ) 20,041
 
Interest and other income, net   773     1,078  
 
Income (loss) from continuing operations before income taxes

(2,302

)

21,119

 
Income taxes   748     2,678  
 
Income (loss) from continuing operations (3,050 ) 18,441
 
 
Loss from discontinued operations, net of income taxes       (55 )
 
Net income (loss) $ (3,050 ) $ 18,386  
 
Income (loss) from continuing operations per share:
Basic $ (0.03 ) $ 0.19
Diluted $ (0.03 ) $ 0.19
 
Loss from discontinued operations per share:
Basic $ $
Diluted $ $
 
Net income (loss) per share:
Basic $ (0.03 ) $ 0.19
Diluted $ (0.03 ) $ 0.19
 
Number of shares used in per share calculations:
Basic 89,146 97,405
Diluted 89,146 98,369
 
QLOGIC CORPORATION
 
RECONCILIATION OF GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS TO
NON-GAAP INCOME FROM CONTINUING OPERATIONS
 

(unaudited — in thousands, except per share amounts)

 
Three Months Ended
June 30,

2013

  July 1,

2012

 
GAAP income (loss) from continuing operations $ (3,050 ) $ 18,441
Items excluded from GAAP income (loss) from continuing operations:
Stock-based compensation 8,171 9,277
Amortization of acquisition-related intangible assets 243 244
Special charges 12,033
Income tax effect   (981 )   (2,617 )
Total non-GAAP adjustments   19,466     6,904  
Non-GAAP income from continuing operations $ 16,416   $ 25,345  
 
Income (loss) from continuing operations per diluted share:
GAAP income (loss) from continuing operations $ (0.03 ) $ 0.19
Adjustments   0.21     0.07  
Non-GAAP income from continuing operations $ 0.18   $ 0.26  
 
Number of shares used in non-GAAP per diluted share calculations

89,770

98,369

 

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
June 30,

2013

 

July 1,

2012

Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $ 584 $ 770
Amortization of acquisition-related intangible assets   243     244  
Total cost of revenue adjustments   827     1,014  
 
Operating expenses:
Engineering and development:
Stock-based compensation 4,351 4,318
Sales and marketing:
Stock-based compensation 1,793 1,965
General and administrative:
Stock-based compensation 1,443 2,224
Special charges   12,033      
Total operating expense adjustments   19,620     8,507  
 
Total non-GAAP adjustments before income taxes 20,447 9,521
Income tax effect   (981 )   (2,617 )
Total non-GAAP adjustments $ 19,466   $ 6,904  
 
QLOGIC CORPORATION
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 

(unaudited — in thousands)

 
June 30,

2013

March 31,

2013

ASSETS
Current assets:
Cash and cash equivalents $ 94,552 $ 95,532
Marketable securities   337,317     359,974  
Total cash and marketable securities 431,869 455,506
Accounts receivable, net 69,271 66,135
Inventories 17,108 20,160
Deferred tax assets 13,307 13,036
Other current assets   28,875     24,381  
Total current assets 560,430 579,218
 
Property and equipment, net 94,086 96,336
Goodwill 110,976 110,976
Purchased intangible assets, net 3,748 4,054
Deferred tax assets 25,630 31,992
Other assets   2,496     2,587  
 
$ 797,366   $ 825,163  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 26,936 $ 29,668
Accrued compensation 22,079 27,453
Accrued taxes 3,217 4,559
Deferred revenue 4,623 4,676
Other current liabilities   14,414     7,651  
Total current liabilities 71,269 74,007
 
Accrued taxes 10,845 10,772
Other liabilities   6,240     6,107  
Total liabilities   88,354     90,886  
 
Stockholders’ equity:
Common stock 213 212
Additional paid-in capital 937,378 932,557
Retained earnings 1,687,287 1,690,337
Accumulated other comprehensive income (loss) (722 ) 1,887
Treasury stock   (1,915,144 )   (1,890,716 )
Total stockholders’ equity   709,012     734,277  
 
$ 797,366   $ 825,163  
 
QLOGIC CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 

(unaudited — in thousands)

 
Three Months Ended

 

June 30,

2013

  July 1,

2012

 
Cash flows from operating activities:
Net income (loss) $ (3,050 ) $ 18,386
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 7,806 6,572
Stock-based compensation 8,171 9,277
Deferred income taxes 5,403 (2,254 )
Impairment of property and equipment 2,429
Other non-cash items 345 809
Changes in operating assets and liabilities:
Accounts receivable (3,169 ) (2,224 )
Inventories 3,052 (2,429 )
Other assets (210 ) (2,240 )
Accounts payable (289 ) 661
Accrued compensation (5,374 ) (7,895 )
Accrued taxes, net (5,366 ) 3,108
Other liabilities   6,843     5,245  
Net cash provided by operating activities   16,591     27,016  
 
Cash flows from investing activities:
Purchases of available-for-sale securities (89,318 ) (72,440 )
Proceeds from sales and maturities of available-for-sale securities 108,609 65,799
Purchases of property and equipment   (10,111 )   (9,486 )
Net cash provided by (used in) investing activities   9,180     (16,127 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards 1,963 2,847
Excess tax benefits from stock-based awards 5 126
Minimum tax withholding paid on behalf of employees for restricted stock units (4,280 ) (5,349 )
Purchases of treasury stock (24,428 ) (55,977 )
Payments for credit facility commitment fee   (11 )    
Net cash used in financing activities   (26,751 )   (58,353 )
 
Net decrease in cash and cash equivalents (980 ) (47,464 )
 
Cash and cash equivalents at beginning of period   95,532     164,516  
 
Cash and cash equivalents at end of period $ 94,552   $ 117,052  
 

QLOGIC CORPORATION

 
SUPPLEMENTAL FINANCIAL INFORMATION
 

(unaudited — in thousands)

 
Net Revenues
 

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

   
Three Months Ended

July 1,
2012

 

September 30,
2012

 

December 30,
2012

 

March 31,
2013

 

June 30,
2013

 
Advanced Connectivity Platforms $ 108,042 $ 97,417 $ 96,991 $ 96,966 $ 93,190
Legacy Connectivity Products   22,329   20,450   22,395   19,948   19,926
$ 130,371 $ 117,867 $ 119,386 $ 116,914 $ 113,116
 

Advanced Connectivity Platforms include the company’s strategic server and storage connectivity products, while Legacy Connectivity Products include the company’s other products, such as Fibre Channel switch products and 1Gb iSCSI products. Legacy Connectivity Products are comprised of products previously reported as Network Products, but also include 1Gb iSCSI products that had previously been included in the company’s Host and Silicon Products.



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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