QLogic Reports Fourth Quarter and Fiscal Year 2015 Results

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
March 29,   March 30, March 29,   March 30,
  2015     2014     2015     2014  
Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $ 178 $ 267 $ 1,049 $ 1,349
Amortization of acquisition-related intangible assets 4,213 1,408 16,596 2,138
Amortization of license fee 718 133 2,828 133
Acquisition-related charges       802     1,226     802  
Total cost of revenue adjustments   5,109     2,610     21,699     4,422  
 
Operating expenses:
Engineering and development:
Stock-based compensation 2,501 1,848 10,024 10,918
Sales and marketing:
Stock-based compensation 1,366 1,063 4,631 5,337
Amortization of acquisition-related intangible assets 169 703
General and administrative:
Stock-based compensation 1,322 1,413 4,841 5,034
Acquisition-related charges 715 715
Special charges   5,648     56,524     10,520     74,853  
Total operating expense adjustments   11,006     61,563     30,719     96,857  
 
Interest and other income:
Gains recognized on previously impaired investment securities  

   

(425

)

 

   

(425

)

 
Total non-GAAP adjustments before income taxes 16,115 63,748 52,418 100,854
 
Income tax effects   (2,412 )   3,783     (6,024 )   219  
 
Total non-GAAP adjustments $ 13,703   $ 67,531   $ 46,394   $ 101,073  
 
QLOGIC CORPORATION
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 

(unaudited — in thousands)

 
  March 29,   March 30,
  2015     2014  
ASSETS
 
Current assets:
Cash and cash equivalents $ 115,241 $ 91,258
Marketable securities   201,174     186,783  
Total cash and marketable securities 316,415 278,041
Accounts receivable, net 87,436 65,213
Inventories 29,978 18,036
Deferred tax assets 12,545 15,080
Other current assets   21,802     16,590  
Total current assets 468,176 392,960
 
Property and equipment, net 78,501 86,527
Goodwill 167,232 167,232
Purchased intangible assets, net 77,659 95,163
Deferred tax assets 36,335 32,827
Other assets   20,752     23,554  
 
$ 848,655   $ 798,263  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Accounts payable $ 40,497 $ 30,657
Accrued compensation 22,476 26,956
Accrued taxes 2,711 981
Deferred revenue 3,359 3,954
Other current liabilities   8,359     16,123  
Total current liabilities 77,402 78,671
 
Accrued taxes 14,516 17,095
Other liabilities   9,721     9,071  
Total liabilities   101,639     104,837  
 
Stockholders’ equity:
Common stock 215 214
Additional paid-in capital 983,579 958,008
Retained earnings 1,722,664 1,672,071
Accumulated other comprehensive income (loss) (99 ) 435
Treasury stock   (1,959,343 )   (1,937,302 )
Total stockholders’ equity   747,016     693,426  
 
$ 848,655   $ 798,263  
 
QLOGIC CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 

(unaudited — in thousands)

 
  Year Ended
March 29,   March 30,
  2015     2014  
 
Cash flows from operating activities:
Net income (loss) $ 50,593 $ (18,266 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 47,119 32,523
Stock-based compensation 20,545 22,638
Deferred income taxes (1,457 ) (3,637 )
Asset impairments 3,697 8,022
Other non-cash items 1,136 2,729
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (22,337 ) 899
Inventories (11,942 ) 6,660
Other assets 3,924 (19,013 )
Accounts payable 3,487 4,376
Accrued compensation (4,480 ) (1,511 )
Accrued taxes, net 821 9,855
Other liabilities   (8,610 )   11,516  
Net cash provided by operating activities   82,496     56,791  
 
Cash flows from investing activities:
Purchases of available-for-sale securities (189,707 ) (342,921 )
Proceeds from sales and maturities of available-for-sale securities 173,403 510,816
Purchases of property and equipment (26,118 ) (27,550 )
Acquisition of businesses       (157,352 )
Net cash used in investing activities   (42,422 )   (17,007 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards 9,717 8,711
Minimum tax withholding paid on behalf of employees for restricted stock units (4,690 ) (4,739 )
Purchases of treasury stock (21,140 ) (47,785 )
Other financing activities   22     (245 )
Net cash used in financing activities   (16,091 )   (44,058 )
 
Net increase (decrease) in cash and cash equivalents 23,983 (4,274 )
 
Cash and cash equivalents at beginning of year   91,258     95,532  
 
Cash and cash equivalents at end of year $ 115,241   $ 91,258  
 
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
March 29,   March 30, March 29,   March 30,
2015 2014 2015 2014
Advanced Connectivity Platforms $ 120,718 $ 101,085 $ 465,000 $ 386,738
Legacy Connectivity Products   12,325   14,635   55,198   74,169
$ 133,043 $ 115,720 $ 520,198 $ 460,907

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