QLogic Exceeds Revenue and EPS Guidance for Fourth Quarter of Fiscal 2016

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       Year Ended
April 3,

2016

      March 29,

2015

April 3,

2016

      March 29,

2015

Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $ 203 $ 178 $ 825 $ 1,049
Amortization of acquisition-related intangible assets 3,239 4,213 13,592 16,596
Amortization of license fee 686 718 2,554 2,828
Acquisition-related charges         1,226
Total cost of revenue adjustments   4,128   5,109   16,971   21,699
Operating expenses:
Engineering and development:
Stock-based compensation 2,291 2,501 9,140 10,024
Sales and marketing:
Stock-based compensation 1,112 1,366 3,780 4,631
Amortization of acquisition-related intangible assets 169 169 675 703
General and administrative:
Stock-based compensation 865 1,322 2,883 4,841
Special charges   1,192   5,648   11,806   10,520
Total operating expense adjustments   5,629   11,006   28,284   30,719
Total non-GAAP adjustments before income taxes 9,757 16,115 45,255 52,418
Income tax adjustments   (2,791 )   (2,412 )   (7,258 )   (6,024 )
Total non-GAAP adjustments $ 6,966 $ 13,703 $ 37,997 $ 46,394
 
 

QLOGIC CORPORATION

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