QLogic Reports First Quarter Results for Fiscal Year 2015

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
June 29,

2014

                June 30,

2013

Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $ 355 $ 584
Amortization of acquisition-related intangible assets 4,448 243
Acquisition-related charges 771
Amortization of license fee   699      
Total cost of revenue adjustments   6,273     827  
 
Operating expenses:
Engineering and development:
Stock-based compensation 2,971 4,351
Sales and marketing:
Stock-based compensation 1,010 1,793
General and administrative:
Stock-based compensation 1,204 1,443
Special charges   2,544     12,033  
Total operating expense adjustments   7,729     19,620  
 
Total non-GAAP adjustments before income taxes 14,002 20,447
 
Income tax effect   (1,516 )   (981 )
 
Total non-GAAP adjustments $ 12,486   $ 19,466  
 
 
                     

QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited — in thousands)

 
June 29,

2014

March 30,

2014

ASSETS
Current assets:
Cash and cash equivalents $ 60,882 $ 91,258
Marketable securities   189,532     186,783  
Total cash and marketable securities 250,414 278,041
Accounts receivable, net 84,103 65,213
Inventories 25,715 18,036
Deferred tax assets 14,681 15,080
Other current assets   19,870     16,590  
Total current assets 394,783 392,960
 
Property and equipment, net 86,304 84,912
Goodwill 193,294 194,107
Purchased intangible assets, net 65,400 69,903
Deferred tax assets 29,091 32,827
Other assets   22,796     23,554  
 
$ 791,668   $ 798,263  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 31,261 $ 30,657
Accrued compensation 19,721 26,956
Accrued taxes 1,530 981
Deferred revenue 4,040 3,954
Other current liabilities   8,502     16,123  
Total current liabilities 65,054 78,671
 
Accrued taxes 13,871 17,095
Other liabilities   9,315     9,071  
Total liabilities   88,240     104,837  
 
Stockholders’ equity:
Common stock 214 214
Additional paid-in capital 961,690 958,008
Retained earnings 1,678,071 1,672,071
Accumulated other comprehensive income 755 435
Treasury stock   (1,937,302 )   (1,937,302 )
Total stockholders’ equity   703,428     693,426  
 
$ 791,668   $ 798,263  
 
 
     

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited — in thousands)

 
Three Months Ended

 

June 29,

2014

                June 30,

2013

Cash flows from operating activities:
Net income (loss) $ 6,000 $ (3,050 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 12,180 7,806
Stock-based compensation 5,540 8,171
Deferred income taxes 4,076 5,403
Asset impairments 1,011 2,429
Other non-cash items 581 345
Changes in operating assets and liabilities:
Accounts receivable (18,880 ) (3,169 )
Inventories (7,679 ) 3,052
Other assets 77 (210 )
Accounts payable 416 (289 )
Accrued compensation (7,235 ) (5,374 )
Accrued taxes, net (5,418 ) (5,366 )
Other liabilities   (7,291 )   6,843  
Net cash provided by (used in) operating activities   (16,622 )   16,591  
 
Cash flows from investing activities:
Purchases of available-for-sale securities (51,759 ) (89,318 )
Proceeds from sales and maturities of available-for-sale securities 48,932 108,609
Purchases of property and equipment   (8,989 )   (10,111 )
Net cash provided by (used in) investing activities   (11,816 )   9,180  
 
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards 1,440 1,963
Minimum tax withholding paid on behalf of employees for restricted stock units (3,298 ) (4,280 )
Purchases of treasury stock (24,428 )
Other financing activities   (80 )   (6 )
Net cash used in financing activities   (1,938 )   (26,751 )
 
Net decrease in cash and cash equivalents (30,376 ) (980 )
 
Cash and cash equivalents at beginning of period   91,258     95,532  
 
Cash and cash equivalents at end of period $ 60,882   $ 94,552  
 
 
     

QLOGIC CORPORATION

SUPPLEMENTAL FINANCIAL INFORMATION

(unaudited — in thousands)

 

Net Revenues

 

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

 
Three Months Ended
June 29,

2014

                June 30,

2013

Advanced Connectivity Platforms $ 104,701 $ 93,190
Legacy Connectivity Products   14,748   19,926
$ 119,449 $ 113,116
 

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