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 income from continuing operations and non-GAAP income from continuing operations per diluted share, on a basis consistent with its historical presentation, to assist investors in understanding the company’s core income from continuing operations and core income from continuing operations 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 profitability with historical periods and comparisons of the company’s core profitability with the corresponding results for competitors. Management believes that non-GAAP income from continuing operations and non-GAAP income from continuing operations 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 profitability and related profitability on a per diluted share basis.
Management uses non-GAAP income from continuing operations and non-GAAP income from continuing operations 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 30, | March 31, | March 30, | March 31, | |||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Non-GAAP Adjustments: | ||||||||||||||||
| Cost of revenues: | ||||||||||||||||
| Stock-based compensation | $ | 267 | $ | 533 | $ | 1,349 | $ | 2,372 | ||||||||
| Amortization of acquisition-related intangible assets | 1,408 | 243 | 2,138 | 973 | ||||||||||||
| Amortization of license fee | 133 | — | 133 | — | ||||||||||||
| Acquisition-related charges | 802 | — | 802 | — | ||||||||||||
| Total cost of revenue adjustments | 2,610 | 776 | 4,422 | 3,345 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Engineering and development: | ||||||||||||||||
| Stock-based compensation | 1,848 | 3,140 | 10,918 | 13,584 | ||||||||||||
| Sales and marketing: | ||||||||||||||||
| Stock-based compensation | 1,063 | 1,636 | 5,337 | 6,853 | ||||||||||||
| General and administrative: | ||||||||||||||||
| Stock-based compensation | 1,413 | 1,759 | 5,034 | 7,554 | ||||||||||||
| Acquisition-related charges | 715 | — | 715 | — | ||||||||||||
| Special charges | 56,524 | — | 74,853 | — | ||||||||||||
| Total operating expense adjustments | 61,563 | 6,535 | 96,857 | 27,991 | ||||||||||||
| Interest and other income: | ||||||||||||||||
| Gains recognized on previously impaired investment securities |
(425 |
) |
— |
(425 |
) |
— |
||||||||||
| Total non-GAAP adjustments before income taxes | 63,748 | 7,311 | 100,854 | 31,336 | ||||||||||||
| Income taxes: | ||||||||||||||||
| Special income tax benefits | — | (19,338 | ) | — | (19,338 | ) | ||||||||||
| Other income tax effects | 3,783 | (1,978 | ) | 219 | (9,422 | ) | ||||||||||
| Total income tax adjustments | 3,783 | (21,316 | ) | 219 | (28,760 | ) | ||||||||||
| Total non-GAAP adjustments | $ | 67,531 | $ | (14,005 | ) | $ | 101,073 | $ | 2,576 | |||||||
| QLOGIC CORPORATION | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
|
(unaudited — in thousands) |
||||||||
| March 30, | March 31, | |||||||
| 2014 | 2013 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 91,258 | $ | 95,532 | ||||
| Marketable securities | 186,783 | 359,974 | ||||||
| Total cash and marketable securities | 278,041 | 455,506 | ||||||
| Accounts receivable, net | 65,213 | 66,135 | ||||||
| Inventories | 18,036 | 20,160 | ||||||
| Deferred tax assets | 15,080 | 13,036 | ||||||
| Other current assets | 16,590 | 24,381 | ||||||
| Total current assets | 392,960 | 579,218 | ||||||
| Property and equipment, net | 84,912 | 96,336 | ||||||
| Goodwill and purchased intangible assets, net | 264,010 | 115,030 | ||||||
| Deferred tax assets | 32,827 | 31,992 | ||||||
| Other assets | 23,554 | 2,587 | ||||||
| $ | 798,263 | $ | 825,163 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 30,657 | $ | 29,668 | ||||
| Accrued compensation | 26,956 | 27,453 | ||||||
| Accrued taxes | 981 | 4,559 | ||||||
| Deferred revenue | 3,954 | 4,676 | ||||||
| Other current liabilities | 16,123 | 7,651 | ||||||
| Total current liabilities | 78,671 | 74,007 | ||||||
| Accrued taxes | 17,095 | 10,772 | ||||||
| Other liabilities | 9,071 | 6,107 | ||||||
| Total liabilities | 104,837 | 90,886 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 214 | 212 | ||||||
| Additional paid-in capital | 958,008 | 932,557 | ||||||
| Retained earnings | 1,672,071 | 1,690,337 | ||||||
| Accumulated other comprehensive income | 435 | 1,887 | ||||||
| Treasury stock | (1,937,302 | ) | (1,890,716 | ) | ||||
| Total stockholders’ equity | 693,426 | 734,277 | ||||||
| $ | 798,263 | $ | 825,163 | |||||
| QLOGIC CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
|
(unaudited — in thousands) |
||||||||
| Year Ended | ||||||||
| March 30, | March 31, | |||||||
| 2014 | 2013 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | (18,266 | ) | $ | 73,136 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 32,523 | 28,630 | ||||||
| Stock-based compensation | 22,638 | 30,363 | ||||||
| Deferred income taxes | (3,637 | ) | (110 | ) | ||||
| Asset impairments | 8,022 | — | ||||||
| Other non-cash items | 2,729 | 3,954 | ||||||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable | 899 | 10,635 | ||||||
| Inventories | 6,660 | (436 | ) | |||||
| Other assets | (19,013 | ) | (3,346 | ) | ||||
| Accounts payable | 4,376 | (3,555 | ) | |||||
| Accrued compensation | (1,511 | ) | (873 | ) | ||||
| Accrued taxes, net | 9,855 | (37,314 | ) | |||||
| Other liabilities | 11,516 | (3,919 | ) | |||||
| Net cash provided by operating activities | 56,791 | 97,165 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of available-for-sale securities | (342,921 | ) | (298,621 | ) | ||||
| Proceeds from sales and maturities of available-for-sale securities | 510,816 | 308,947 | ||||||
| Purchases of property and equipment | (27,550 | ) | (46,765 | ) | ||||
| Acquisition of businesses | (157,352 | ) | — | |||||
| Net cash used in investing activities | (17,007 | ) | (36,439 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock under stock-based awards | 8,711 | 8,250 | ||||||
| Excess tax benefits from stock-based awards | 53 | 177 | ||||||
| Minimum tax withholding paid on behalf of employees for restricted stock units | (4,739 | ) | (5,635 | ) | ||||
| Purchases of treasury stock | (47,785 | ) | (131,426 | ) | ||||
| Payments for credit facility commitment fee | (298 | ) | — | |||||
| Payments for debt issuance costs | — | (1,076 | ) | |||||
| Net cash used in financing activities | (44,058 | ) | (129,710 | ) | ||||
| Net decrease in cash and cash equivalents | (4,274 | ) | (68,984 | ) | ||||
| Cash and cash equivalents at beginning of year | 95,532 | 164,516 | ||||||
| Cash and cash equivalents at end of year | $ | 91,258 | $ | 95,532 | ||||
| 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 30, | March 31, | March 30, | March 31, | |||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||
| Advanced Connectivity Platforms | $ | 101,085 | $ | 96,966 | $ | 386,738 | $ | 399,416 | ||||
| Legacy Connectivity Products | 14,635 | 19,948 | 74,169 | 85,122 | ||||||||
| $ | 115,720 | $ | 116,914 | $ | 460,907 | $ | 484,538 | |||||
