QLogic Reports First Quarter Results for Fiscal 2017

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
July 3,

2016

        June 28,

2015

Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $ 268 $ 250
Amortization of acquisition-related intangible assets 4,159 3,467
Amortization of license fee   657   617
Total cost of revenue adjustments   5,084   4,334
Operating expenses:
Engineering and development:
Stock-based compensation 2,691 3,274
Sales and marketing:
Stock-based compensation 1,195 1,201
Amortization of acquisition-related intangible assets 169 169
General and administrative:
Stock-based compensation 1,071 1,262
Transactions costs 2,716
Special charges   (624 )   1,079
Total operating expense adjustments   7,218   6,985
Interest and other income, net:
Gains recognized on previously impaired investment securities   (1,373 )  
Total non-GAAP adjustments before income taxes 10,929 11,319
Income tax adjustments   (4,333 )   2,642
Total non-GAAP adjustments $ 6,596 $ 13,961
 
 
                     

QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited — in thousands)

 
July 3,

2016

April 3,

2016

ASSETS
Current assets:
Cash and cash equivalents $ 119,618 $ 125,408
Marketable securities   245,657   229,439
Total cash and marketable securities 365,275 354,847
Accounts receivable, net 74,090 55,546
Inventories 36,574 39,745
Other current assets   13,617   13,268
Total current assets 489,556 463,406
Property and equipment, net 76,961 71,738
Goodwill 167,232 167,232
Purchased intangible assets, net 58,555 62,998
Deferred tax assets 41,897 41,003
Other assets   16,747   17,491
$ 850,948 $ 823,868
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 39,294 $ 29,576
Accrued compensation 16,615 19,389
Accrued taxes 905 955
Other current liabilities   10,751   11,156
Total current liabilities 67,565 61,076
Accrued taxes 8,474 9,510
Other liabilities   5,526   5,904
Total liabilities   81,565   76,490
Stockholders’ equity:
Common stock 219 218
Additional paid-in capital 1,019,339 1,015,666
Retained earnings 1,787,413 1,769,130
Accumulated other comprehensive loss (286 ) (334 )
Treasury stock   (2,037,302 )   (2,037,302 )
Total stockholders’ equity   769,383   747,378
$ 850,948 $ 823,868
 
 
               

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited — in thousands)

 
Three Months Ended
July 3,

2016

        June 28,

2015

Cash flows from operating activities:
Net income $ 18,283 $ 2,556
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,010 10,616
Stock-based compensation 5,225 5,987
Deferred income taxes (940 ) 3,400
Other non-cash items, net (1,042 ) 539
Changes in operating assets and liabilities:
Accounts receivable (18,885 ) 2,517
Inventories 3,171 (8,671 )
Other assets (235 ) (134 )
Accounts payable 6,793 2,218
Accrued compensation (2,774 ) (4,913 )
Accrued taxes, net (1,128 ) (3,081 )
Other liabilities   (783 )   (1,567 )
Net cash provided by operating activities   17,695   9,467
Cash flows from investing activities:
Purchases of available-for-sale securities (61,661 ) (50,639 )
Proceeds from sales and maturities of available-for-sale securities 45,679 34,209
Purchases of property and equipment (7,842 ) (10,782 )
Other investing activities   1,373  
Net cash used in investing activities   (22,451 )   (27,212 )
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards 2,575 16,497
Minimum tax withholding paid on behalf of employees for restricted stock units (4,126 ) (5,062 )
Purchases of treasury stock (17,856 )
Other financing activities   517   1,124
Net cash used in financing activities   (1,034 )   (5,297 )
Net decrease in cash and cash equivalents (5,790 ) (23,042 )
Cash and cash equivalents at beginning of period   125,408   115,241
Cash and cash equivalents at end of period $ 119,618 $ 92,199
 
 

QLOGIC CORPORATION

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