Fourth Quarter Highlights
-- Net revenue increased 13% from the comparable quarter last year to $147.1 million.
-- Income from continuing operations: $18.4 million GAAP, $35.2 million non-GAAP.
-- Income from continuing operations per diluted share: $0.12 GAAP, $0.22 non-GAAP.
-- Cash generated from operations was $70.4 million.
-- $543.9 million in cash and short-term marketable securities as of April 1.
-- Repurchased $77.5 million of outstanding common stock.
Fiscal Year Highlights
-- Net revenue increased 19% from last year to a record $586.7 million.
-- Income from continuing operations: $105.4 million GAAP, $152.1 million non-GAAP.
-- Income from continuing operations per diluted share: $0.66 GAAP, $0.95 non-GAAP.
-- Cash generated from operations was $191.1 million.
Financial Results
Net revenue for the fourth quarter of fiscal 2007 was $147.1 million and increased 13% from $130.5 million in the comparable quarter last year. Revenue from SAN Infrastructure Products, which is comprised primarily of HBAs, switches and silicon, was $143.3 million during the fourth quarter of fiscal 2007, an increase of 18% from the comparable quarter last year.
"We are pleased with our strong financial performance and annual revenue growth during fiscal year 2007. The year was highlighted by record revenue of $586.7 million, which grew 19% from the prior year, and cash generated from operations of $191.1 million," said H.K. Desai, QLogic's chief executive officer. "We continue to believe the strength in our core business will be enhanced with the expected contribution from our new, emerging technology products."
Income from continuing operations on a GAAP basis for the fourth quarter of fiscal 2007 was $18.4 million, or $0.12 per diluted share, and included stock-based compensation expense, acquisition-related charges, impairment charges related to debt and equity securities, and the related income tax effects, totaling $16.8 million. The stock-based compensation expense was primarily the result of the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment ("SFAS 123R") in the first quarter of fiscal 2007. Income from continuing operations on a GAAP basis for the fourth quarter of fiscal 2006, which did not include any amounts for SFAS 123R but did include acquisition-related charges, a gain on the sale of shares acquired in the sale of discontinued operations and the related income tax effects, totaling $3.1 million, was $31.4 million or $0.19 per diluted share. Non-GAAP income from continuing operations for the fourth quarter of fiscal 2007 of $35.2 million, or $0.22 per diluted share, increased from $34.5 million, or $0.21 per diluted share, for the comparable quarter last year.
Net revenue for fiscal 2007 was $586.7 million and increased 19% from $494.1 million in fiscal 2006. Income from continuing operations on a GAAP basis for fiscal 2007 was $105.4 million, or $0.66 per diluted share, and included SFAS 123R stock-based compensation expense, acquisition-related charges, impairment charges related to debt and equity securities, and the related income tax effects, totaling $46.7 million. Income from continuing operations on a GAAP basis for fiscal 2006, which did not include any amounts for SFAS 123R, was $121.8 million or $0.70 per diluted share. Non-GAAP income from continuing operations for fiscal 2007 was $152.1 million, or $0.95 per diluted share, and increased 22% from fiscal 2006.
QLogic uses certain non-GAAP financial measures to supplement financial statements based on GAAP. A summary of these non-GAAP financial measures and a complete 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 2007 fourth quarter conference call is scheduled for today at 2:30 p.m. Pacific Time (5:30 p.m. Eastern Time). H.K. Desai, chief executive officer, and Tony Massetti, senior vice president and chief financial officer, will host the conference call. The call is being webcast live via the Internet at www.qlogic.com and via CCBN. Phone access to participate in the conference call is available at (719) 457-2728, pass code: 9932604.
The financial information that the company intends to discuss during the conference call will be available on the company's website at www.qlogic.com for 12 months following the conference call. A replay of the conference call will be available via webcast for 12 months on the company's website at www.qlogic.com. An audio replay of the conference call will also be available through May 17, 2007 at (719) 457-0820 or (888) 203-1112, pass code: 9932604.
About QLogic
QLogic is a leading supplier of high-performance storage networking solutions, producing the controller chips, host bus adapters (HBAs) and fabric switches that are the backbone of storage networks for most Global 2000 corporations. The company delivers a broad and diverse portfolio of products that includes Fibre Channel HBAs, blade server embedded Fibre Channel switches, Fibre Channel stackable switches, iSCSI HBAs, iSCSI routers and storage services platforms for enabling advanced storage management applications. The company is also a leading supplier of InfiniBand switches and InfiniBand host channel adapters for the emerging High Performance Computing Cluster (HPCC) market. QLogic products are delivered to small-to-medium businesses and large enterprises around the world via its channel partner community. QLogic products are also powering solutions from leading companies like Cisco, Dell, EMC, Hitachi Data Systems, HP, IBM, NEC, Network Appliance and Sun Microsystems. QLogic is a member of the S&P 500 Index.
Note: All QLogic-issued press releases appear on the company's website (www.qlogic.com). Any announcement that does not appear on the QLogic website has not been issued by QLogic.
Disclaimer - Forward-Looking Statements
This press release contains statements relating to future results of the company (including certain beliefs and projections regarding business trends) 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; revenues may be affected by changes in IT spending levels; the stock price of the company may be volatile; the company's dependence on the storage area network market; the ability to maintain and gain market or industry acceptance of the company's products; the company's dependence on a limited number of customers; seasonal fluctuations and uneven sales patterns in orders from customers; the company's ability to compete effectively with other companies; declining average unit sales prices of comparable products; a reduction in sales efforts by current distributors; dependence on sole source and limited source suppliers; the company's dependence on relationships with certain silicon chip suppliers; the complexity of the company's products; sales fluctuations arising from customer transitions to new products; the uncertainty associated with SOX 404 compliance; environmental compliance costs; terrorist activities and resulting military actions; international economic, regulatory, political and other risks; uncertain benefits from strategic business combinations; the ability to attract and retain key personnel; recognition of compensation expense related to employee stock options and the company's employee stock purchase plan; the decreased effectiveness of equity compensation; difficulties in implementing smaller geometry process technologies; the ability to protect proprietary rights; the ability to satisfactorily resolve any infringement claims; reliance on third party licenses; the use of "open source" software in our products; changes in our tax provisions or adverse outcomes resulting from examination of our income tax returns; computer viruses and other tampering with the company's computer systems; and facilities of the company and its suppliers and customers are located in areas subject to natural disasters.
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 many 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 Year Ended
------------------- -------------------
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
--------- --------- --------- ---------
Net revenues $147,096 $130,450 $586,697 $494,077
Cost of revenues 52,208 38,358 191,982 144,246
--------- --------- --------- ---------
Gross profit 94,888 92,092 394,715 349,831
--------- --------- --------- ---------
Operating expenses:
Engineering and development 35,773 25,180 135,315 89,753
Sales and marketing 22,636 17,466 86,731 64,416
General and administrative 7,770 4,851 31,044 17,295
Purchased in-process
research and development 1,800 10,510 3,710 10,510
--------- --------- --------- ---------
Total operating
expenses 67,979 58,007 256,800 181,974
--------- --------- --------- ---------
Operating income 26,909 34,085 137,915 167,857
Interest and other income
(expense), net (1,460) 15,246 16,872 32,627
--------- --------- --------- ---------
Income from continuing
operations before income
taxes 25,449 49,331 154,787 200,484
Income taxes 7,008 17,957 49,369 78,653
--------- --------- --------- ---------
Income from continuing
operations 18,441 31,374 105,418 121,831
Income from discontinued
operations, net of income
taxes - 1,175 - 161,757
--------- --------- --------- ---------
Net income $18,441 $32,549 $105,418 $283,588
========= ========= ========= =========
Income from continuing
operations per share:
Basic $0.12 $0.19 $0.66 $0.71
Diluted $0.12 $0.19 $0.66 $0.70
Income from discontinued
operations per share:
Basic $- $0.01 $- $0.95
Diluted $- $0.01 $- $0.93
Net income per share:
Basic $0.12 $0.20 $0.66 $1.66
Diluted $0.12 $0.20 $0.66 $1.63
Number of shares used in per
share calculations:
Basic 157,775 161,722 159,081 171,250
Diluted 159,235 164,378 160,680 173,467
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 Year Ended
------------------ -------------------
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
--------- -------- --------- ---------
GAAP income from continuing
operations $18,441 $31,374 $105,418 $121,831
Items excluded from GAAP income
from continuing operations:
Stock-based compensation 7,733 - 30,279 -
Amortization of purchased
intangible assets 5,089 201 12,940 201
Acquisition-related stock-
based compensation 1,283 318 9,092 530
Insurance recovery - - - (700)
Purchased in-process research
and development 1,800 10,510 3,710 10,510
Impairment of marketable
securities 8,094 - 8,094 -
Gain on sale of shares
acquired in the sale of
discontinued operations - (8,463) - (8,463)
Income tax effect (7,208) 578 (17,413) 772
--------- -------- --------- ---------
Total non-GAAP adjustments 16,791 3,144 46,702 2,850
--------- -------- --------- ---------
Non-GAAP income from continuing
operations $35,232 $34,518 $152,120 $124,681
========= ======== ========= =========
Income from continuing
operations per diluted share:
GAAP income from continuing
operations $0.12 $0.19 $0.66 $0.70
Adjustments 0.10 0.02 0.29 0.02
--------- -------- --------- ---------
Non-GAAP income from
continuing operations $0.22 $0.21 $0.95 $0.72
========= ======== ========= =========
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 information presented excludes the items summarized in the above table. Management believes that adjustments for these items enhance the comparison 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. The non-GAAP presentation also enhances 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 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 net profitability and related profitability on a diluted per share basis.
Management uses non-GAAP income from continuing operations in its evaluation of the company's core after-tax results of operations and trends between fiscal periods and believes that this measure is an important component 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 this non-GAAP financial measure. 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 information 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 Year Ended
------------------ -----------------
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
--------- -------- -------- --------
Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $466 $- $1,897 $-
Amortization of purchased
intangible assets 3,617 201 11,093 201
Acquisition-related stock-based
compensation 13 - 52 -
--------- -------- -------- --------
Total cost of revenue adjustments 4,096 201 13,042 201
--------- -------- -------- --------
Operating expenses:
Engineering and development:
Stock-based compensation 2,924 - 11,190 -
Amortization of purchased
intangible assets 67 - 267 -
Acquisition-related stock-based
compensation 1,616 256 7,601 426
Sales and marketing:
Stock-based compensation 2,272 - 8,155 -
Amortization of purchased
intangible assets 1,405 - 1,580 -
Acquisition-related stock-based
compensation (327) 62 1,387 104
General and administrative:
Stock-based compensation 2,071 - 9,037 -
Acquisition-related stock-based
compensation (19) - 52 -
Insurance recovery - - - (700)
Purchased in-process research and
development 1,800 10,510 3,710 10,510
--------- -------- -------- --------
Total operating expense
adjustments 11,809 10,828 42,979 10,340
--------- -------- -------- --------
Interest and other income
(expense):
Impairment of marketable
securities 8,094 - 8,094 -
Gain on sale of shares acquired
in the sale of discontinued
operations - (8,463) - (8,463)
--------- -------- -------- --------
Total interest and other income
(expense) adjustments 8,094 (8,463) 8,094 (8,463)
--------- -------- -------- --------
Total non-GAAP adjustments before
income taxes 23,999 2,566 64,115 2,078
Income tax effect (7,208) 578 (17,413) 772
--------- -------- -------- --------
Total non-GAAP adjustments $16,791 $3,144 $46,702 $2,850
========= ======== ======== ========
QLOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited -- in thousands)
April 1, 2007 April 2, 2006
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $76,804 $125,192
Short-term marketable securities 467,118 540,448
Accounts receivable, net 73,538 67,571
Inventories 38,935 39,440
Other current assets 40,758 46,441
--------------- ---------------
Total current assets 697,153 819,092
Property and equipment, net 90,913 82,630
Goodwill 102,910 24,725
Purchased intangible assets, net 55,093 7,954
Other assets 25,290 3,306
--------------- ---------------
$971,359 $937,707
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $29,280 $32,160
Accrued compensation 34,483 23,520
Income taxes payable 15,729 12,920
Deferred revenue 7,368 3,662
Other current liabilities 7,674 6,091
--------------- ---------------
Total current liabilities 94,534 78,353
Deferred tax liabilities 2,294 -
--------------- ---------------
Total liabilities 96,828 78,353
--------------- ---------------
Stockholders' equity:
Common stock 198 195
Additional paid-in capital 608,515 537,648
Retained earnings 988,728 883,310
Accumulated other comprehensive
income (loss) 169 (1,799)
Treasury stock (723,079) (560,000)
--------------- ---------------
Total stockholders' equity 874,531 859,354
--------------- ---------------
$971,359 $937,707
=============== ===============
QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited -- in thousands)
Year Ended
--------------------
April 1, April 2,
2007 2006
--------- ----------
Cash flows from operating activities:
Net income $105,418 $283,588
Income from discontinued operations, net of
income taxes - (161,757)
--------- ----------
Income from continuing operations 105,418 121,831
Adjustments to reconcile income from continuing
operations to net cash provided by continuing
operating activities:
Depreciation and amortization 27,554 17,697
Stock-based compensation 30,279 175
Acquisition-related:
Amortization of purchased intangible
assets 12,940 201
Stock-based compensation 9,092 530
Purchased in-process research and
development 3,710 10,510
Deferred income taxes (4,154) (4,480)
Provision for losses on accounts receivable 30 (54)
Loss on disposal of property and equipment 214 168
Impairment of marketable securities 8,094 -
Tax benefit from issuance of stock under
stock plans - 5,055
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (2,275) (12,825)
Inventories 2,771 (16,230)
Other assets (1,906) (5,840)
Accounts payable (7,401) 11,877
Accrued compensation 2,264 3,263
Income taxes payable 2,809 (1,205)
Deferred revenue 3,706 2,166
Other liabilities (2,076) (291)
--------- ----------
Net cash provided by continuing
operating activities 191,069 132,548
--------- ----------
Cash flows from investing activities:
Purchases of marketable securities (298,220) (946,087)
Sales and maturities of marketable securities 366,677 1,101,680
Additions to property and equipment (31,708) (28,295)
Acquisition of businesses, net of cash acquired (142,521) (35,210)
Restricted cash placed in escrow (24,000) (12,000)
Restricted cash received from escrow 12,508 -
--------- ----------
Net cash provided by (used in) continuing
investing activities (117,264) 80,088
--------- ----------
Cash flows from financing activities:
Proceeds from issuance of stock under stock
plans 33,703 27,757
Tax benefit from issuance of stock under stock
plans 5,816 -
Payoff of line of credit assumed in acquisition (1,632) -
Purchase of treasury stock (160,080) (414,999)
--------- ----------
Net cash used in continuing financing
activities (122,193) (387,242)
--------- ----------
Net cash used in continuing operations (48,388) (174,606)
--------- ----------
Cash flows from discontinued operations:
Net cash used in operating activities - (47,182)
Net cash provided by investing activities,
including proceeds from sale - 181,336
--------- ----------
Net cash provided by discontinued operations - 134,154
--------- ----------
Net decrease in cash and cash equivalents (48,388) (40,452)
Cash and cash equivalents at beginning of period 125,192 165,644
--------- ----------
Cash and cash equivalents at end of period $76,804 $125,192
========= ==========
QLOGIC CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
(unaudited -- in thousands)
Net Revenues
A summary of the company's revenue components is as follows:
Three Months Ended Year Ended
------------------- -------------------
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
--------- --------- --------- ---------
SAN Infrastructure Products $143,254 $121,845 $558,399 $460,050
Management Controllers 1,222 7,130 16,098 27,136
Other 2,620 1,475 12,200 6,891
--------- --------- --------- ---------
$147,096 $130,450 $586,697 $494,077
========= ========= ========= =========
Geographic Revenues
Revenues by geographic area are presented based upon the country of
destination. Net revenues by geographic area are as follows:
Three Months Ended Year Ended
------------------- -------------------
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
--------- --------- --------- ---------
United States $78,076 $72,875 $314,300 $271,937
Europe, Middle East and Africa 35,230 27,325 131,954 111,000
Asia-Pacific and Japan 24,333 29,459 111,130 108,166
Rest of world 9,457 791 29,313 2,974
--------- --------- --------- ---------
$147,096 $130,450 $586,697 $494,077
========= ========= ========= =========
Contact:
QLogic Corporation
Editor's Contact:
Frank Berry,
949-389-6499
Email Contact
or
Investor®�™s
Contact:
Tony Massetti, 949-389-7533
Email Contact