News and Events
Industry Events
Media/Analyst Coverage
News Releases
Investor Relations
Overview
Corporate Governance
Investor FAQ
SEC Filings
Historical Financial Information
Annual Reports
Electronic Delivery Enrollment
E-mail Alerts
Investor Events
Analyst Coverage
Contact Investor Relations

Jess Page
Corporate Communications Manager
949-542-1455
jess.page@qlogic.com


 
News Release


RSS Feeds RSS Feeds | E-mail Alerts E-mail Alerts | Financial Tear Sheet Investor Fact Sheet | Investor FAQ | FY15 Annual Report | 2015 Conflict Minerals Report

<< Back
QLogic Reports Third Quarter Results for Fiscal Year 2011

ALISO VIEJO, Calif., Jan 27, 2011 (BUSINESS WIRE) -- QLogic Corp. (Nasdaq:QLGC), a leading supplier of high performance network infrastructure solutions, today announced its third quarter financial results for the period ended December 26, 2010.

Third Quarter Highlights

  • Net revenue: $155.8 million
  • GAAP net income: $50.3 million or $0.47 per diluted share
  • Non-GAAP net income: $57.2 million or $0.53 per diluted share
  • Operating margin: 26.0% GAAP, 32.2% non-GAAP
  • Cash generated from operations: $60.0 million
  • Cash and investment securities: $343.2 million as of December 26, 2010

Financial Results

Net revenue for the third quarter of fiscal 2011 was $155.8 million and increased 4% from $149.1 million in the same quarter last year. Revenue from Host Products was $113.5 million during the third quarter of fiscal 2011 and increased 3% from $110.4 million in the same quarter last year. Revenue from Network Products was $28.9 million during the third quarter of fiscal 2011 and increased 6% from $27.4 million in the same quarter last year. Revenue from Silicon Products was $10.6 million during the third quarter of fiscal 2011 and increased 23% from $8.7 million in the same quarter last year.

Net income on a GAAP basis for the third quarter of fiscal 2011 increased to $50.3 million, or $0.47 per diluted share, from $28.6 million, or $0.25 per diluted share, for the third quarter of fiscal 2010. Net income on a non-GAAP basis for the third quarter of fiscal 2011 increased to $57.2 million, or $0.53 per diluted share, from $36.2 million, or $0.31 per diluted share, for the third quarter of fiscal 2010. The GAAP and non-GAAP net income per diluted share amounts for the third quarter of fiscal 2011 include the benefits associated with the retroactive reinstatement of the federal research tax credit and other third-quarter specific income tax items, which contributed $0.13 to net income per diluted share.

"We are very pleased with our strong financial performance in the third quarter. We experienced solid sequential revenue growth for both our Host and Network Products. In addition, we achieved our highest quarterly operating income in the last two years as a result of our strong gross margin performance and careful operating expense management," said Simon Biddiscombe, president and chief executive officer, QLogic. "Based on our accomplishments and execution against our strategies, we believe we will capitalize on the significant incremental opportunities in the rapidly expanding high performance data center connectivity market."

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 2011 third 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 Doug Naylor, vice president of finance and interim chief financial officer, will host the conference call. The call is being webcast live via the Internet at www.qlogic.com and www.earnings.com. Phone access to participate in the conference call is available at (719) 457-2727, pass code: 4576589.

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 twelve months following the conference call. A replay of the conference call will be available via webcast at www.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 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: the high performance data center connectivity market may not expand as rapidly as we anticipate or we may not effectively capitalize on expected incremental opportunities in the market; declines in information technology spending levels; 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; potential adverse effects of increased market acceptance of blade servers; 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; 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; 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; declines in the market value of the company's investment securities; the complexity of the company's products; sales fluctuations arising from customer transitions to new products; changes in the company's tax provisions or adverse outcomes resulting from examination of its income tax returns; environmental compliance costs; international economic, regulatory, political and other risks; uncertain benefits from strategic business combinations; the ability to attract and retain key personnel; difficulties in transitioning to smaller geometry process technologies;the ability to protect proprietary rights; the ability to satisfactorily resolve any infringement claims; the use of "open source" software in the company's products; changes in regulations or standards regarding energy use of the company's products; 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 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 Nine Months Ended
December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

Net revenues $ 155,771 $ 149,122 $ 444,909 $ 403,354
Cost of revenues 53,000 53,020 153,112 145,258
Gross profit 102,771 96,102 291,797 258,096
Operating expenses:
Engineering and development 33,148 33,978 100,649 102,294
Sales and marketing 20,103 18,812 60,953 58,268
General and administrative 9,061 8,780 25,560 24,923
Special charges -- -- 931 848
Total operating expenses 62,312 61,570 188,093 186,333
Operating income 40,459 34,532 103,704 71,763
Interest and other income, net 773 1,736 4,258 6,996
Income before income taxes 41,232 36,268 107,962 78,759
Income taxes (9,107 ) 7,620 2,188 18,985
Net income $ 50,339 $ 28,648 $ 105,774 $ 59,774
Net income per share:
Basic $ 0.48 $ 0.25 $ 0.97 $ 0.51
Diluted $ 0.47 $ 0.25 $ 0.96 $ 0.51
Number of shares used in per share calculations:
Basic 105,830 114,695 108,492 116,935
Diluted 107,327 116,479 110,032 117,965
QLOGIC CORPORATION
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

(unaudited -- in thousands, except per share amounts)

Three Months Ended Nine Months Ended
December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

GAAP net income $ 50,339 $ 28,648 $ 105,774 $ 59,774
Items excluded from GAAP net income:
Stock-based compensation 8,519 8,742 27,111 27,425
Amortization of acquisition-related intangible assets

1,156

1,893

3,467

6,719

Special charges -- -- 931 848
Gains recognized on previously impaired investment securities

--

--

(312

)

(605

)

Income tax effect (2,772 ) (3,084 ) (8,437 ) (8,947 )
Total non-GAAP adjustments 6,903 7,551 22,760 25,440
Non-GAAP net income $ 57,242 $ 36,199 $ 128,534 $ 85,214
Net income per diluted share:
GAAP net income $ 0.47 $ 0.25 $ 0.96 $ 0.51
Adjustments 0.06 0.06 0.21 0.21
Non-GAAP net income $ 0.53 $ 0.31 $ 1.17 $ 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 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 Nine Months Ended
December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $ 599 $ 650 $ 1,962 $ 2,039
Amortization of acquisition-related intangible assets

1,156

1,624

3,467

4,833

Total cost of revenue adjustments 1,755 2,274 5,429 6,872
Operating expenses:
Engineering and development:
Stock-based compensation 3,714 4,508 12,692 14,122
Sales and marketing:
Stock-based compensation 1,824 1,629 5,866 5,230
Amortization of acquisition-related intangible assets

--

269

--

1,886

General and administrative:
Stock-based compensation 2,382 1,955 6,591 6,034
Special charges -- -- 931 848
Total operating expense adjustments 7,920 8,361 26,080 28,120
Interest and other income:
Gains recognized on previously impaired investment securities

--

--

(312

)

(605

)

Total non-GAAP adjustments before income taxes

9,675

10,635

31,197

34,387

Income tax effect (2,772 ) (3,084 ) (8,437 ) (8,947 )
Total non-GAAP adjustments $ 6,903 $ 7,551 $ 22,760 $ 25,440
QLOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited -- in thousands)

December 26, 2010 March 28, 2010
ASSETS
Current assets:
Cash and cash equivalents $ 106,292 $ 190,308
Short-term investment securities 236,882 185,365
Accounts receivable, net 83,916 73,301
Inventories 25,857 19,403
Deferred tax assets 14,758 10,976
Other current assets 22,950 9,845
Total current assets 490,655 489,198
Property and equipment, net 78,666 83,496
Goodwill 119,748 119,748
Purchased intangible assets, net 14,013 17,394
Deferred tax assets 25,966 36,917
Other assets 2,909 3,984
$ 731,957 $ 750,737
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,574 $ 36,766
Accrued compensation 22,558 22,727
Accrued taxes 3,745 2,633
Deferred revenue 10,424 9,240
Other current liabilities 5,855 11,069
Total current liabilities 74,156 82,435
Accrued taxes 61,268 70,577
Deferred revenue 5,532 7,401
Other liabilities 6,132 6,985
Total liabilities 147,088 167,398
Stockholders' equity:
Common stock 208 205
Additional paid-in capital 830,251 778,853
Retained earnings 1,354,449 1,248,675
Accumulated other comprehensive income 448 1,206
Treasury stock (1,600,487 ) (1,445,600 )
Total stockholders' equity 584,869 583,339
$ 731,957 $ 750,737
QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited -- in thousands)

Nine Months Ended

December 26,

2010

December 27,

2009

Cash flows from operating activities:
Net income $ 105,774 $ 59,774
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 22,612 23,912
Stock-based compensation 27,111 27,425
Amortization of acquisition-related intangible assets 3,467 6,719
Deferred income taxes 6,810 4,554
Net gains on investment securities (2,021 ) (2,639 )
Other non-cash items 1,435 1,169
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable (10,769 ) (17,378 )
Inventories (6,454 ) 19,503
Other assets 841 148
Accounts payable (6,232 ) (2,446 )
Accrued compensation 405 (9,505 )
Accrued taxes (21,068 ) (19,359 )
Deferred revenue (685 ) 1,295
Other liabilities (3,968 ) (695 )
Net cash provided by operating activities 117,258 92,477
Cash flows from investing activities:
Purchases of available-for-sale securities (221,884 ) (213,704 )
Proceeds from sales and maturities of available-for-sale securities 146,840 175,513
Proceeds from disposition of trading securities 23,800 10,525
Distributions from other investment securities 329 3,076
Purchases of property and equipment (17,881 ) (17,605 )
Acquisition of business, net of cash acquired -- (14,931 )
Net cash used in investing activities (68,796 ) (57,126 )
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards

29,637

18,966

Excess tax benefits from stock-based awards 1,610 (154 )
Minimum tax withholding paid on behalf of employees for restricted stock units

(6,739

)

(2,833

)

Purchases of treasury stock (156,986 ) (108,976 )
Payoff of line of credit assumed in acquisition -- (934 )
Net cash used in financing activities (132,478 ) (93,931 )
Net decrease in cash and cash equivalents (84,016 ) (58,580 )
Cash and cash equivalents at beginning of period 190,308 203,722
Cash and cash equivalents at end of period $ 106,292 $ 145,142
QLOGIC CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION

(unaudited -- in thousands)

Net Revenues

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

Three Months Ended Nine Months Ended
December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

Host Products $ 113,492 $ 110,446 $ 320,141 $ 292,801
Network Products 28,923 27,413 81,787 76,880
Silicon Products 10,628 8,660 34,927 25,653
Service and other 2,728 2,603 8,054 8,020
$ 155,771 $ 149,122 $ 444,909 $ 403,354
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 Nine Months Ended
December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

United States $ 65,718 $ 66,531 $ 198,234 $ 185,898
Asia-Pacific and Japan 43,426 37,625 120,806 100,352
Europe, Middle East and Africa 36,283 35,518 99,599 91,702
Rest of world 10,344 9,448 26,270 25,402
$ 155,771 $ 149,122 $ 444,909 $ 403,354

SOURCE: QLogic Corp.

Media Contact:
QLogic Corporation
Sonal Dave
949-533-1655
sonal.dave@qlogic.com
or
Investor Contact:
QLogic Corporation
Doug Naylor
949-389-7525
doug.naylor@qlogic.com