QLogic Corporation : QLogic Reports Third Quarter Results for Fiscal Year 2012
01/26/2012 | 04:20pm
QLogic Corp. (Nasdaq:QLGC), a leading supplier of high performance
network infrastructure solutions, today announced its third quarter
financial results for the period ended January 1, 2012.
Third Quarter Highlights
Net revenue: $152.7 million
GAAP net income: $30.0 million or $0.30 per diluted share
Non-GAAP net income: $36.3 million or $0.36 per diluted share
Operating margin: 21.9% GAAP, 27.9% non-GAAP
Cash generated from operations: $52.3 million
Financial Results
Net revenue for the third quarter of fiscal 2012 was $152.7 million
compared to $155.8 million in the same quarter last year. Revenue from
Host Products was $112.7 million during the third quarter of fiscal 2012
compared to $113.5 million in the same quarter last year. Revenue from
Network Products was $24.4 million during the third quarter of fiscal
2012 compared to $28.9 million in the same quarter last year. Revenue
from Silicon Products increased to $12.4 million during the third
quarter of fiscal 2012 from $10.6 million in the same quarter last year.
Net income on a GAAP basis for the third quarter of fiscal 2012 was
$30.0 million, or $0.30 per diluted share, compared to $50.3 million, or
$0.47 per diluted share, for the third quarter of fiscal 2011. Net
income on a non-GAAP basis for the third quarter of fiscal 2012 was
$36.3 million, or $0.36 per diluted share, compared to $57.2 million, or
$0.53 per diluted share, for the third quarter of fiscal 2011. The GAAP
and non-GAAP net income per diluted share amounts for the third quarter
of fiscal 2011 include the benefits associated with the retroactive
reinstatement of the federal research tax credit and other third-quarter
specific income tax items, which contributed $0.13 to net income per
diluted share.
"We are very pleased with our strong financial performance and execution
during the third quarter. Our revenue of $152.7 million was at the upper
end of our guidance range and I am particularly pleased with our revenue
from Host Products, which grew 7 percent sequentially due to strength in
Fibre Channel and converged adapters," said Simon Biddiscombe, president
and chief executive officer, QLogic. "As announced earlier this week, we
entered into a definitive agreement to sell substantially all of the
assets associated with our InfiniBand business. We believe this
transaction will allow us to sharpen our focus on our core business and
the growth opportunities in the data center with converged networking,
enterprise Ethernet and storage area networking products."
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 2012 third 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
719-325-4827, pass code: 6745069.
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
About QLogic
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, our expectation that the sale of
substantially all of the assets associated with our InfiniBand business
will be consummated and our belief that there are growth opportunities
in the data center with converged networking, enterprise Ethernet and
storage area networking products) 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; declines in the
market value of the company's marketable securities; environmental
compliance costs; changes in regulations or standards regarding energy
use of the company's products; difficulties in transitioning to smaller
geometry process technologies; the use of "open source" software in the
company's products; and computer viruses and other tampering with the
company's computer systems.
More detailed information on these and additional factors which could
affect the company's operating and financial results are described in
the company's Forms 10-K, 10-Q and other reports filed, or to be filed,
with the Securities and Exchange Commission. The company urges all
interested parties to read these reports to gain a better understanding
of the business and other risks that the company faces. The
forward-looking statements contained in this press release are made only
as of the date hereof, and the company does not intend to update or
revise these forward-looking statements, whether as a result of new
information, future events or otherwise.
QLogic and the QLogic logo are registered trademarks of QLogic
Corporation. Other trademarks and registered trademarks are the property
of the companies with which they are associated.
QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited -- in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
January 1,
December 26,
January 1,
December 26,
2012
2010
2012
2010
Net revenues
$
152,661
$
155,771
$
454,463
$
444,909
Cost of revenues
52,055
53,000
154,010
153,112
Gross profit
100,606
102,771
300,453
291,797
Operating expenses:
Engineering and development
36,883
33,148
112,446
100,649
Sales and marketing
21,514
20,103
63,219
60,953
General and administrative
8,803
9,061
26,820
25,560
Special charges
--
--
--
931
Total operating expenses
67,200
62,312
202,485
188,093
Operating income
33,406
40,459
97,968
103,704
Interest and other income, net
798
773
2,926
4,258
Income before income taxes
34,204
41,232
100,894
107,962
Income taxes
4,179
(9,107
)
9,789
2,188
Net income
$
30,025
$
50,339
$
91,105
$
105,774
Net income per share:
Basic
$
0.30
$
0.48
$
0.89
$
0.97
Diluted
$
0.30
$
0.47
$
0.88
$
0.96
Number of shares used in per share calculations:
Basic
100,135
105,830
102,696
108,492
Diluted
100,668
107,327
103,340
110,032
QLOGIC CORPORATION
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(unaudited -- in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
January 1,
December 26,
January 1,
December 26,
2012
2010
2012
2010
GAAP net income
$
30,025
$
50,339
$
91,105
$
105,774
Items excluded from GAAP net income:
Stock-based compensation
8,100
8,519
25,787
27,111
Amortization of acquisition-related intangible assets
1,155
1,156
3,467
3,467
Special charges
--
--
--
931
Gains recognized on previously impaired investment securities
--
--
--
(312
)
Income tax effect
(3,010
)
(2,772
)
(8,676
)
(8,437
)
Total non-GAAP adjustments
6,245
6,903
20,578
22,760
Non-GAAP net income
$
36,270
$
57,242
$
111,683
$
128,534
Net income per diluted share:
GAAP net income
$
0.30
$
0.47
$
0.88
$
0.96
Adjustments
0.06
0.06
0.20
0.21
Non-GAAP net income
$
0.36
$
0.53
$
1.08
$
1.17
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
Nine Months Ended
January 1,
December 26,
January 1,
December 26,
2012
2010
2012
2010
Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation
$
632
$
599
$
2,075
$
1,962
Amortization of acquisition-related intangible assets
1,155
1,156
3,467
3,467
Total cost of revenue adjustments
1,787
1,755
5,542
5,429
Operating expenses:
Engineering and development:
Stock-based compensation
3,553
3,714
11,776
12,692
Sales and marketing:
Stock-based compensation
1,924
1,824
5,625
5,866
General and administrative:
Stock-based compensation
1,991
2,382
6,311
6,591
Special charges
--
--
--
931
Total operating expense adjustments
7,468
7,920
23,712
26,080
Interest and other income:
Gains recognized on previously impaired investment securities
?
?
?
(312
)
Total non-GAAP adjustments before income taxes
9,255
9,675
29,254
31,197
Income tax effect
(3,010
)
(2,772
)
(8,676
)
(8,437
)
Total non-GAAP adjustments
$
6,245
$
6,903
$
20,578
$
22,760
QLOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited -- in thousands)
January 1, 2012
April 3, 2011
ASSETS
Current assets:
Cash and cash equivalents
$
74,198
$
147,780
Marketable securities
321,627
236,296
Accounts receivable, net
82,221
70,134
Inventories
26,967
26,931
Deferred tax assets
19,954
17,754
Other current assets
13,390
20,753
Total current assets
538,357
519,648
Property and equipment, net
78,715
77,134
Goodwill
119,748
119,748
Purchased intangible assets, net
10,179
12,694
Deferred tax assets
27,284
25,333
Other assets
2,082
2,650
$
776,365
$
757,207
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
35,099
$
34,816
Accrued compensation
28,240
25,858
Accrued taxes
3,029
6,012
Deferred revenue
10,348
10,431
Other current liabilities
6,356
5,221
Total current liabilities
83,072
82,338
Accrued taxes
62,409
62,565
Deferred revenue
3,840
5,169
Other liabilities
5,922
5,971
Total liabilities
155,243
156,043
Stockholders' equity:
Common stock
209
208
Additional paid-in capital
877,763
844,546
Retained earnings
1,478,870
1,387,765
Accumulated other comprehensive income
299
614
Treasury stock
(1,736,019
)
(1,631,969
)
Total stockholders' equity
621,122
601,164
$
776,365
$
757,207
QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited -- in thousands)
Nine Months Ended
January 1,
December 26,
2012
2010
Cash flows from operating activities:
Net income
$
91,105
$
105,774
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
21,047
22,612
Stock-based compensation
25,787
27,111
Amortization of acquisition-related intangible assets
3,467
3,467
Deferred income taxes
(4,334
)
6,810
Net gains on investment securities
(729
)
(2,021
)
Other non-cash items
5,811
1,435
Changes in operating assets and liabilities:
Accounts receivable
(12,244
)
(10,769
)
Inventories
(36
)
(6,454
)
Other assets
119
841
Accounts payable
(2,333
)
(6,232
)
Accrued compensation
2,382
405
Accrued taxes
4,531
(21,068
)
Deferred revenue
(1,412
)
(685
)
Other liabilities
936
(3,968
)
Net cash provided by operating activities
134,097
117,258
Cash flows from investing activities:
Purchases of available-for-sale securities
(336,005
)
(221,884
)
Proceeds from sales and maturities of available-for-sale securities
247,928
146,840
Proceeds from disposition of trading securities
--
23,800
Distributions from other investment securities
--
329
Purchases of property and equipment
(23,480
)
(17,881
)
Net cash used in investing activities
(111,557
)
(68,796
)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards
12,674
29,637
Excess tax benefits from stock-based awards
529
1,610
Minimum tax withholding paid on behalf of employees for restricted
stock units
(5,425
)
(6,739
)
Purchases of treasury stock
(103,900
)
(156,986
)
Net cash used in financing activities
(96,122
)
(132,478
)
Net decrease in cash and cash equivalents
(73,582
)
(84,016
)
Cash and cash equivalents at beginning of period
147,780
190,308
Cash and cash equivalents at end of period
$
74,198
$
106,292
QLOGIC CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
(unaudited -- in thousands)
Net Revenues
A summary of the company's revenue components is as follows:
