QLogic Reports Second Quarter Results for Fiscal Year 2012
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QLogic Reports Second Quarter Results for Fiscal Year 2012

ALISO VIEJO, Calif. — (BUSINESS WIRE) — October 27, 2011 — QLogic Corp. (Nasdaq: QLGC), a leading supplier of high performance network infrastructure solutions, today announced its second quarter financial results for the period ended October 2, 2011.

Second Quarter Highlights

Financial Results

Net revenue for the second quarter of fiscal 2012 was $150.2 million and increased 2.5% from $146.5 million in the same quarter last year. Revenue from Host Products increased to $105.6 million during the second quarter of fiscal 2012 from $104.2 million in the same quarter last year. Revenue from Network Products was $27.8 million during the second quarter of fiscal 2012 and increased from $27.2 million in the same quarter last year. Revenue from Silicon Products increased to $13.9 million during the second quarter of fiscal 2012 from $12.4 million in the same quarter last year.

Net income on a GAAP basis for the second quarter of fiscal 2012 was $28.7 million, or $0.28 per diluted share, compared to $30.0 million, or $0.28 per diluted share, for the second quarter of fiscal 2011. Net income on a non-GAAP basis for the second quarter of fiscal 2012 was $35.1 million, or $0.34 per diluted share, compared to $36.6 million, or $0.34 per diluted share, for the second quarter of fiscal 2011.

“Despite macroeconomic challenges, we are pleased with our financial execution and discipline during the second quarter of fiscal 2012. We delivered revenue and earnings per share that approximated the mid-point of our guidance,” said Simon Biddiscombe, president and chief executive officer, QLogic. “During the quarter, we extended our Adaptive Convergence™ strategy with the public introduction of a new portfolio of innovative high performance networking products with the flexibility to power 16Gb Fibre Channel and 10Gb Ethernet converged networks from the same hardware. We are continuing to introduce highly innovative new products that we believe will position us to capitalize on the significant opportunities in cloud computing, convergence and virtualized environments.”

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 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 (719) 325-4917, pass code: 6854544.

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 belief that the opportunities in the cloud computing, convergence and virtualized environments are significant; and our belief that our new products will position us to capitalize on such 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: 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 Six Months Ended

October 2,
2011

 

September 26,
2010

October 2,
2011

 

September 26,
2010

 
Net revenues $ 150,180 $ 146,529 $ 301,802 $ 289,138
Cost of revenues   51,096   50,411   101,955   100,112
Gross profit   99,084   96,118   199,847   189,026
 
Operating expenses:
Engineering and development 37,871 32,792 75,563 67,501
Sales and marketing 20,442 20,420 41,705 40,850
General and administrative 8,854 8,031 18,017 16,499
Special charges         931
Total operating expenses   67,167   61,243   135,285   125,781
 
Operating income 31,917 34,875 64,562 63,245
 
Interest and other income, net   1,080   1,809   2,128   3,485
 
Income before income taxes 32,997 36,684 66,690 66,730
 
Income taxes   4,343   6,698   5,610   11,295
 
Net income $ 28,654 $ 29,986 $ 61,080 $ 55,435
 
Net income per share:
Basic $ 0.28 $ 0.28 $ 0.59 $ 0.50
Diluted $ 0.28 $ 0.28 $ 0.58 $ 0.50
 
Number of shares used in per share calculations:
Basic 103,273 108,220 103,976 109,823
Diluted 103,562 109,039 104,676 111,385
 

QLOGIC CORPORATION

RECONCILIATION OF GAAP NET INCOME TO

NON-GAAP NET INCOME

(unaudited — in thousands, except per share amounts)

 
Three Months Ended Six Months Ended

October 2,
2011

 

September 26,
2010

October 2,
2011

 

September 26,
2010

 
GAAP net income $ 28,654 $ 29,986 $ 61,080 $ 55,435
Items excluded from GAAP net income:
Stock-based compensation 8,020 8,269 17,687 18,592
Amortization of acquisition-related intangible assets

1,156

1,155

2,312

2,311

Special charges 931
Gains recognized on previously impaired investment securities

(312

)

Income tax effect   (2,755 )   (2,800 )   (5,666 )   (5,665 )
Total non-GAAP adjustments   6,421     6,624     14,333     15,857  
Non-GAAP net income $ 35,075   $ 36,610   $ 75,413   $ 71,292  
 
Net income per diluted share:
GAAP net income $ 0.28 $ 0.28 $ 0.58 $ 0.50
Adjustments   0.06     0.06     0.14     0.14  
Non-GAAP net income $ 0.34   $ 0.34   $ 0.72   $ 0.64  
 

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     Six Months Ended

October 2,
2011

   

September 26,
2010

 

October 2,
2011

   

September 26,
2010

Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $ 635 $ 629 $ 1,443 $ 1,363
Amortization of acquisition-related intangible assets  

1,156

 

1,155

   

2,312

   

2,311

 
Total cost of revenue adjustments   1,791   1,784     3,755     3,674  
 
Operating expenses:
Engineering and development:
Stock-based compensation 3,592 3,971 8,223 8,978
Sales and marketing:
Stock-based compensation 1,844 1,929 3,701 4,042
General and administrative:
Stock-based compensation 1,949 1,740 4,320 4,209
Special charges             931  
Total operating expense adjustments   7,385   7,640     16,244     18,160  
 
Interest and other income:
Gains recognized on previously impaired investment securities

 

 

   

(312

)

 
Total non-GAAP adjustments before income taxes

9,176

9,424

19,999

21,522

Income tax effect   (2,755 ) (2,800 )   (5,666 )   (5,665 )
Total non-GAAP adjustments $ 6,421   $ 6,624   $ 14,333   $

15,857

 
 

QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited — in thousands)

 
October 2, 2011 April 3, 2011
ASSETS
Current assets:
Cash and cash equivalents $ 74,654 $ 147,780
Marketable securities 316,267 236,296
Accounts receivable, net 86,522 70,134
Inventories 23,508 26,931
Deferred tax assets 18,202 17,754
Other current assets   17,518     20,753  
Total current assets 536,671 519,648
 
Property and equipment, net 81,928 77,134
Goodwill 119,748 119,748
Purchased intangible assets, net 11,315 12,694
Deferred tax assets 24,368 25,333
Other assets   2,454     2,650  
 
$ 776,484   $ 757,207  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 38,549 $ 34,816
Accrued compensation 22,222 25,858
Accrued taxes 3,686 6,012
Deferred revenue 10,115 10,431
Other current liabilities   7,838     5,221  
Total current liabilities 82,410 82,338
 
Accrued taxes 61,175 62,565
Deferred revenue 4,032 5,169
Other liabilities   6,163     5,971  
Total liabilities   153,780     156,043  
 
Stockholders’ equity:
Common stock 209 208
Additional paid-in capital 867,183 844,546
Retained earnings 1,448,845 1,387,765
Accumulated other comprehensive income 81 614
Treasury stock   (1,693,614 )   (1,631,969 )
Total stockholders’ equity   622,704     601,164  
 
$ 776,484   $ 757,207  
 

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited — in thousands)

 
Six Months Ended

 

October 2,
2011

 

September 26,
2010

 
Cash flows from operating activities:
Net income $ 61,080 $ 55,435
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,047 15,342
Stock-based compensation 17,687 18,592
Amortization of acquisition-related intangible assets 2,312 2,311
Deferred income taxes 509 5,147
Net gains on investment securities (817 ) (1,728 )
Other non-cash items 2,341 92
Changes in operating assets and liabilities:
Accounts receivable (16,625 ) (13,155 )
Inventories 3,423 (5,544 )
Other assets (652 ) 543
Accounts payable 2,137 (6,376 )
Accrued compensation (3,636 ) (718 )
Accrued taxes 156 (8,692 )
Deferred revenue (1,453 ) (733 )
Other liabilities   1,310     (3,234 )
Net cash provided by operating activities   81,819     57,282  
 
Cash flows from investing activities:
Purchases of available-for-sale securities (242,274 ) (47,920 )
Proceeds from sales and maturities of available-for-sale securities 160,542 107,165
Proceeds from disposition of trading securities 23,800
Distributions from other investment securities 329
Purchases of property and equipment   (18,202 )   (9,692 )
Net cash provided by (used in) investing activities   (99,934 )   73,682  
 
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards

9,959

7,757

Excess tax benefits from stock-based awards 539 1,059
Minimum tax withholding paid on behalf of employees for restricted stock units

(5,363

)

(5,937

)

Purchases of treasury stock   (60,146 )   (124,000 )
Net cash used in financing activities   (55,011 )   (121,121 )
 
Net increase (decrease) in cash and cash equivalents (73,126 ) 9,843
 
Cash and cash equivalents at beginning of period   147,780     190,308  
 
Cash and cash equivalents at end of period $ 74,654   $ 200,151  
 

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
October 2,

2011

  September 26,

2010

October 2,

2011

  September 26,

2010

 
Host Products $ 105,614 $ 104,177 $ 215,391 $ 206,649
Network Products 27,780 27,226 49,658 52,864
Silicon Products 13,857 12,431 30,686 24,299
Service and other   2,929   2,695   6,067   5,326
$ 150,180 $ 146,529 $ 301,802 $ 289,138



Contact:

Media Contact:
Tim Lustig
QLogic Corporation
949.389.6196
Email Contact
or
Investor Contact:
Jean Hu
QLogic Corporation
949.389.7579
Email Contact