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Emulex Announces Second Quarter Results
Submitted by admin on 1/31/2013 @ 1:15 PM
Companies mentioned in this article:
Emulex Corporation
COSTA MESA, Calif., Jan. 31, 2013 /PRNewswire/ -- Emulex Corporation (NYSE:ELX) today announced results for its second quarter of fiscal 2013 which ended on December 30, 2012.
(Logo: http://photos.prnewswire.com/prnh/20120403/NE81278LOGO )
Second Quarter Financial Highlights
-- Total net revenues of $122.1 million, an increase of 2% sequentially and
a decrease of 5% year-over-year
-- Network Connectivity Products (NCP) net revenues of $96.1 million, a
decrease of 1% both sequentially and year-over-year, representing
approximately 79% of total net revenues
-- Storage Connectivity Products (SCP) net revenues of $22.7 million, an
increase of 21% sequentially and a decrease of 18% year-over-year,
representing 18% of total net revenues
-- Advanced Technology and other Products (ATP) net revenues of $3.3
million, a decrease of 11% sequentially and 25% year-over-year,
representing 3% of total net revenues
-- Non-GAAP gross margins of 63.7% and GAAP gross margins of 58.6%
-- Non-GAAP diluted earnings per share of $0.19 and GAAP diluted earnings
per share of $0.06
-- Cash, cash equivalents and investments at the end of the quarter of
$211.2 million
Second Quarter Business Highlights
-- Announced intent to acquire Endace Limited, a network performance
management company that provides network monitoring appliances, network
analytics software and ultra-high speed network access switching with
100 percent accuracy
-- Gained more than seven points of overall Fibre Channel revenue market
share over nearest competitor and accelerated leadership in emerging
16Gb Fibre Channel (16GFC) segment with more than 75% market share
according to Dell'Oro Group's Q3 2012 Fibre Channel Adapter Vendor
report and Crehan Research's Q3 2012 Server-class Adapter and LOM market
share reports
-- Announced new LightPulse® 16Gb Fibre Channel (16GFC) blade adapters for
Dell PowerEdge(TM) blade servers to support the new end-to-end 16GFC
blade solution from Dell, extending Emulex 16GFC connectivity for Dell
customers across blade, storage and servers
-- Delivered an integrated HP NC553i 10Gb FlexFabric adapter for new HP
Integrity BL860c i4, BL870c i4 and BL890c i4 Server Blades, providing
I/O flexibility, efficiency and simplicity for LAN and SAN connectivity
-- Announced OneCore(TM) Storage software development kit (SDK), a new
comprehensive solution for independent hardware and software vendors
(IHVs and ISVs) and system integrators developing storage, flash/solid
state disk (SSD), application and networking appliance solutions
requiring low latency and high performance I/O connectivity
-- First I/O vendor to support the new VMware vSphere® 5.1 Web Client with
Emulex OneCommand® Manager plug-in for VMware vCenter(TM) Server,
integrating real-time lifecycle management of adapters provided by
Emulex into the VMware vCenter Server console, centralizing and
simplifying virtualization management
-- Won Systems Management Product of the Year award for Emulex OneCommand
Vision 3.0 at the Storage, Virtualization and Cloud Computing (SVC)
Awards
-- Named to CRN's 2013 Data Center 100 list, recognizing technology vendors
for powering, supporting and protecting today's data center services in
an environmentally and economically friendly manner, while boosting
efficiency and productivity
-- Partnered with Gnodal to deliver a joint high frequency trading (HFT)
solution using Emulex OneConnect® 10Gb Ethernet (10GbE) Network
Xceleration(TM) OCe12000-D adapters, with FastStack(TM) DBL(TM)
software, and a Gnodal GS4008 10GbE switch, eliminating network
congestion and providing industry-leading low latency
-- Announced a joint live data management solution for analyzing big data
with uCIRRUS using Emulex OneConnect 10GbE Network Xceleration
OCe12000-D adapters, with FastStack Sniffer10G(TM) software, and
uCIRRUS's XPRESSmp(TM)
Financial Results
In the second quarter, total net revenues of $122.1 million represented an increase of 2% over the first quarter results. On a GAAP basis, Emulex recorded net income of $5.6 million, or $0.06 per diluted share, compared to first quarter GAAP income of $0.7 million, or $0.01 per share. Non-GAAP net income for the second quarter was $17.2 million, or $0.19 per diluted share, essentially flat with the $0.19 of diluted earnings per share reported in the first quarter. Cash, cash equivalents and investments at the end of the quarter totaled $211.2 million compared to $186.4 million at the end of the first quarter. Reconciliations between GAAP and non-GAAP results are included in the accompanying financial data.
CEO Jim McCluney commented, "I'm pleased with the solid execution we were able to deliver for the second quarter, once again meeting both our top line revenue and our earnings goals. In addition to achieving our quarterly revenue and earnings objectives, we also strengthened our balance sheet, exiting the quarter with over $211 million in available cash and investments," continued McCluney.
"Looking forward, we are well positioned in 16Gb Fibre Channel to continue the share gain momentum we have delivered over the past three quarters, and with expected completion of our Endace acquisition this quarter, we will further increase our relevance as a thought leader in connectivity and management of high performance, converged Ethernet networks," McCluney concluded.
Business Outlook
Although actual results may vary depending on a variety of factors, many of which are outside the Company's control, including uncertainty related to the macro IT spending environment, the timing of new server launches by our customers, the timing of completion of the proposed acquisition of Endace Limited and the results and related costs of ongoing patent litigation, Emulex is providing guidance for its third fiscal quarter ending March 31, 2013. For the third quarter of fiscal 2013, Emulex is forecasting total net revenues in the range of $110-$114 million. The Company expects non-GAAP earnings per diluted share of $0.12 - $0.14 in the third quarter. Incremental to this guidance, we expect approximately $0.06 per diluted share related to the retroactive portion of the federal R&D tax credit. GAAP estimates for the third quarter reflect approximately $0.30 per diluted share in expected charges arising primarily from amortization of intangibles, stock-based compensation, costs associated with the proposed acquisition of Endace and the royalties, mitigation expenses and license fees associated with the Broadcom patent litigation, as well as the associated tax impact and U. S. valuation allowance.
About Emulex
Emulex, the leader in converged networking solutions, provides enterprise-class connectivity for servers, networks and storage devices within the data center. The company's product portfolio of Fibre Channel Host Bus Adapters, 10Gb Ethernet Network Interface Cards, Ethernet-based Converged Network Adapters, controllers, embedded bridges and switches, and connectivity management software are proven, tested and trusted by the world's largest and most demanding IT environments. Emulex solutions are used and offered by the industry's leading server and storage OEMs including, Cisco, Dell, EMC, Fujitsu, Hitachi, Hitachi Data Systems, HP, Huawei, IBM, NEC, NetApp and Oracle. Emulex is headquartered in Costa Mesa, Calif. and has offices and research facilities in North America, Asia and Europe. More information about Emulex (NYSE:ELX) is available at www.Emulex.com.
Note Regarding Non-GAAP Financial Information
To supplement the condensed consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), we have included the following non-GAAP financial measures in this press release or in the webcast to discuss our financial results for the second fiscal quarter which may be accessed via our website at www.emulex.com: (i) non-GAAP gross margin, (ii) non-GAAP operating expenses, (iii) non-GAAP operating income, (iv) non-GAAP net income, and (v) non-GAAP diluted earnings per share. These non-GAAP financial measures exclude certain expenses and reflect an additional way of viewing aspects of our operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our results of operations and the factors and trends affecting our business. However, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. We use our non-GAAP financial measures internally to better understand and evaluate our business, prepare annual budgets, and in measuring performance for some forms of compensation.
Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:
Stock-based compensation. Although stock-based compensation represents an important part of incentive compensation offered to our key employees, we believe that exclusion of the impact of stock-based compensation assists management and investors in evaluating the period over period performance of our business operations and in comparing our performance with those of our competitors. Stock-based compensation expense will recur in future periods.
Amortization of intangibles. Amortization of intangibles generally represents costs incurred by an acquired company or other third party to build value prior to our acquisition of the intangible assets. As such, it is effectively part of the transaction costs of the acquisition rather than ongoing costs of operating our core business. As a result, we believe that exclusion of these costs in presenting non-GAAP financial measures provides management and investors a more effective means of evaluating its historical performance and projected costs and the potential for realizing cost efficiencies within our core business. Amortization of intangibles will recur in future periods.
Site closure related expenses. We have recognized expenses related to closure and consolidation of certain facilities. We believe that exclusion of these expenses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are infrequent in nature.
Patent litigation damages, license fees and royalties. We have incurred expenses in the form of damages, sunset period royalties and settlement costs as a result of a judgment in a patent litigation proceeding with Broadcom and the related partial settlement and worldwide license agreement executed on July 3, 2012 (the Release Agreement). We believe that exclusion of charges related to the Broadcom patent damages, sunset period royalties and Release Agreement are useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors, as this amount relates to a judgment in litigation and does not reflect a continuing cost of operating our core business. In this regard, we note that expenses of this type are generally unrelated to our core business and/or infrequent in nature.
Mitigation expenses related to the Broadcom patents. We have recognized mitigation expenses related to the Broadcom patents. We believe that exclusion of these redesign, requalification and appeal expenses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are infrequent in nature.
Expenses related to the intent to acquire Endace Limited (LSE:EDA). We have incurred expenses during the due diligence process for this potential acquisition. We believe that exclusion of these charges are useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors, as these expenditures do not reflect a continuing cost of operating our current core business. In this regard, we note that expenses of this type are infrequent in nature.
Valuation allowance for U.S. federal and state deferred tax assets. The Company has concluded that it is more likely than not that we will be unable to fully utilize the majority of our U.S. federal and state deferred tax assets As a result, the Company has previously recorded a valuation allowance against those assets to the extent that they cannot be realized through net operating loss carrybacks to prior tax years. We believe that eliminating the impact of a discrete adjustment of this nature and its continuing impact on our effective tax rate is useful to management and investors in evaluating the performance of the Company's ongoing operations on a period-to-period basis and relative to the Company's competitors. In this regard, we note that adjustments of this type are generally infrequent in nature.
- - - - - - - - -
"Safe Harbor'' Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical information, the statements set forth above and below, including without limitation, those relating to the proposed acquisition of Endace above, those contained in the discussion of "Business Outlook" above, and the reconciliation of forward-looking diluted earnings per share below, contain forward-looking statements that involve risk and uncertainties. We expressly disclaim any obligation or undertaking to release publicly any updates or changes to these forward-looking statements that may be made to reflect any future events or circumstances. We wish to caution readers that a number of important factors could cause actual results to differ materially from those in the forward-looking statements. These factors include the possibility that the proposed acquisition of Endace Limited (Endace) is not completed on a timely basis or at all, the effects of the proposed acquisition of Endace, including our ability to realize the anticipated benefits from the pending acquisition of Endace on a timely basis or at all, and our ability to integrate the technology, operations and personnel of Endace into our existing operations in a timely and efficient manner. In addition, intellectual property claims, with or without merit could result in costly litigation, cause product shipment delays, require us to indemnify customers, or require us to enter into royalty or licensing agreements, which may or may not be available. Furthermore, we have in the past obtained, and may be required in the future to obtain, licenses of technology owned by other parties. We cannot be certain that the necessary licenses will be available or that they will be obtainable on commercially reasonable terms. If we were to fail to obtain such royalty or licensing agreements in a timely manner and on reasonable terms, our business, results of operations and financial condition could be materially adversely affected. Ongoing lawsuits, such as the action brought by Broadcom Corporation (Broadcom), present inherent risks, any of which could have a material adverse effect on our business, financial condition, or results of operations. Such potential risks include continuing expenses of litigation, risk of loss of patent rights and/or monetary damages, risk of injunction against the sale of products incorporating the technology in question, counterclaims, attorneys' fees, incremental costs associated with product or component redesigns, and diversion of management's attention from other business matters. With respect to the continuing Broadcom litigation, such potential risks also include the adequacy of any sunset period to make design changes, the ability to implement any design changes, the availability of customer resources to complete any re-qualification or re-testing that may be needed, the ability to maintain favorable working relationships with Emulex suppliers of serializer/deserializer (SerDes) modules, and the ability to obtain a settlement which does not put us at a competitive disadvantage. In addition, the fact that the economy generally, and the technology and storage market segments specifically, have been in a state of uncertainty makes it difficult to determine if past experience is a good guide to the future and makes it impossible to determine if markets will grow or shrink in the short term. Continual weakness in domestic and worldwide macroeconomic conditions and disruptions in world credit and equity markets and the resulting economic uncertainty for our customers, as well as the storage and converged networking market as a whole, has and could continue to adversely affect our revenues and results of operations. As a result of these uncertainties, we are unable to predict our future results with any accuracy. Other factors affecting these forward-looking statements include but are not limited to the following: faster than anticipated declines in the storage networking market, slower than expected growth of the converged networking market or the failure of our Original Equipment Manufacturer (OEM) customers to successfully incorporate our products into their systems; our dependence on a limited number of customers and the effects of the loss of, decrease in or delays of orders by any such customers, or the failure of such customers to make timely payments; the emergence of new or stronger competitors as a result of consolidation movements in the market; the timing and market acceptance of our products or our OEM customers' new or enhanced products; costs associated with entry into new areas of the server and storage technology markets; the variability in the level of our backlog and the variable and seasonal procurement patterns of our customers; any inadequacy of our intellectual property protection and the costs of actual or potential third-party claims of infringement and any related indemnity obligations or adverse judgments; the effect of any actual or potential unsolicited offers to acquire us; proxy fights or the actions of activist shareholders; impairment charges, including but not limited to goodwill and intangible assets; changes in tax rates or legislation; the effects of acquisitions; the effects of terrorist activities; natural disasters, and any resulting disruption in our supply chain or customer purchasing patterns or any other resulting economic or political instability; the highly competitive nature of the markets for our products as well as pricing pressures that may result from such competitive conditions; the effects of changes in our business model to separately charge for software; the effect of rapid migration of customers towards newer, lower cost product platforms; possible transitions from board or box level to application specific integrated circuit (ASIC) solutions for selected applications; a shift in unit product mix from higher-end to lower-end or mezzanine card products; a faster than anticipated decrease in the average unit selling prices or an increase in the manufactured cost of our products; delays in product development; our reliance on third-party suppliers and subcontractors for components and assembly; our ability to attract and retain key technical personnel; our ability to benefit from our research and development activities; our dependence on international sales and internationally produced products; changes in accounting standards; and any resulting regulatory changes on our business. These and other factors could cause actual results to differ materially from those in the forward-looking statements and are discussed in our filings with the Securities and Exchange Commission, including our recent filings on Forms 10-K and 10-Q, under the caption "Risk Factors."
--------------------
This news release refers to various products and companies by their trade names. In most, if not all, cases these designations are claimed as trademarks or registered trademarks by their respective companies.
Investor Contact: Press Contact:
Frank Yoshino Katherine Lane
Vice President, Finance Director, Corporate Communications
+1 714 885-3697 +1 714 885-3828
frank.yoshino@emulex.com katherine.lane@emulex.com
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
Three Months Ended Six Months Ended
December 30, January 1, December 30, January 1,
2012 2012 2012 2012
==== ==== ==== ====
Net revenues $122,145 $128,671 $241,412 $247,068
Cost of sales:
Cost of goods sold 44,472 48,099 88,623 92,351
Amortization of core and developed
technology intangible assets 5,149 5,149 10,297 13,723
Patent litigation settlement and
royalties 958 - 1,950 -
--- --- ----- ---
Cost of sales 50,579 53,248 100,870 106,074
------ ------ ------- -------
Gross profit 71,566 75,423 140,542 140,994
------ ------ ------- -------
Operating expenses:
Engineering and development 40,113 37,671 78,583 80,946
Selling and marketing 14,769 15,260 28,506 29,877
General and administrative 10,987 9,123 19,495 20,988
Amortization of other intangible
assets 1,365 1,602 2,888 3,364
----- ----- ----- -----
Total operating expenses 67,234 63,656 129,472 135,175
------ ------ ------- -------
Operating income 4,332 11,767 11,070 5,819
----- ------ ------ -----
Non-operating income (loss):
Interest income 8 32 8 55
Interest expense 2 (2) (4) (4)
Other income (expense), net (27) 141 (363) 542
--- --- ---- ---
Total non-operating income (loss) (17) 171 (359) 593
--- --- ---- ---
Income before income taxes 4,315 11,938 10,711 6,412
Income tax (benefit) provision (1,268) (3,056) 4,471 (1,423)
------ ------ ----- ------
Net income $5,583 $14,994 $6,240 $7,835
====== ======= ====== ======
Net income per share:
Basic $0.06 $0.17 $0.07 $0.09
===== ===== ===== =====
Diluted $0.06 $0.17 $0.07 $0.09
===== ===== ===== =====
Number of shares used in per share
computations:
Basic 90,063 85,906 89,705 86,384
====== ====== ====== ======
Diluted 91,816 87,816 91,637 88,323
====== ====== ====== ======
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
December 30, July 1,
2012 2012
==== ====
Assets
------
Current assets:
Cash and cash
equivalents $208,952 $201,048
Investments 2,241 28,879
Accounts receivable,
net 85,174 84,106
Inventories 23,135 20,319
Prepaid income taxes 2,929 10,784
Prepaid expenses and
other current
assets.......... 10,363 7,380
Deferred income taxes 8,517 10,722
----- ------
Total current assets 341,311 363,238
Property and
equipment, net 57,968 60,118
Goodwill and
Intangible assets,
net 269,107 282,292
Other assets 23,064 7,311
------ -----
$691,450 $712,959
======== ========
Liabilities and Stockholders' Equity
---------------------------------
Current liabilities:
Accounts payable $30,635 $26,889
Accrued and other
current liabilities 36,124 75,700
------ ------
Total current
liabilities 66,759 102,589
Other liabilities 4,006 3,878
Deferred income taxes 1,219 3,876
Accrued taxes 30,057 27,513
------ ------
Total liabilities 102,041 137,856
------- -------
Total stockholders'
equity 589,409 575,103
------- -------
$691,450 $712,959
======== ========
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(unaudited, in thousands)
Six Months Ended
December 30, January 1,
2012 2012
==== ====
Cash flows from operations:
Net income $6,240 $7,835
Adjustments to reconcile net income to
net cash
(used in) provided by operating
activities:
Depreciation
and
amortization 21,956 26,264
Stock based
compensation 10,929 12,579
Deferred
income taxes (452) 1,681
Other
reconciling
items (202) (954)
Changes in
assets and
liabilities (49,954) (9,274)
------- ------
Net cash (used
in) provided
by operating (11,483) 38,131
activities
Cash flows from investing activities:
Investment in
property and
equipment,
net (6,960) (6,048)
Maturities of/
(proceeds
from)
investments,
net 26,701 (7,377)
Net cash
provided by
(used in)
investing
activities 19,741 (13,425)
------ -------
Cash flows from financing activities:
Repurchase of
common stock - (20,058)
Other (515) (2,914)
---- ------
Net cash used
in financing
activities (515) (22,972)
---- -------
Effect of exchange rates on cash and
cash equivalents
161 (554)
--- ----
Net increase
in cash &
cash
equivalents 7,904 1,180
Opening cash
balance 201,048 131,160
------- -------
Ending cash
balance $208,952 $132,340
======== ========
EMULEX CORPORATION AND SUBSIDIARIES
Supplemental Information
Historical Net Revenue by Product
Lines:
---------------------------------
Network Connectivity Products (NCP)
primarily consist of Fibre Channel
LightPluse(R) and Ethernet
OneConnect(R) standup HBAs,
mezzanine cards, I/O ASICs, ULOMs,
and UCNAs to provide server Input/
Output (I/O) and target storage
array connectivity to enable servers
to reliably and efficiently connect
to Local Area Networks, Storage Area
Networks and Network Attached
Storage by offloading data
communication processing tasks from
the servers as information is
delivered and sent to the network.
Storage Connectivity Products (SCP)
include our InSpeed(R), FibreSpy(R),
switch-on-a-chip (SOC), bridge
and router products. SCP are
deployed inside storage arrays, tape
libraries, and other storage
appliances to connect storage
controllers to storage capacity,
delivering improved performance,
reliability, and connectivity.
Advanced Technology and Other
Products (ATP) primarily consists of
our Integrated Baseboard Management
Controllers (iBMC), our One
Command(R) Vision products, as well
as some legacy and other products
and services.
($000s) Q2 FY Q1 FY Q4 FY Q3 FY Q2 FY % Change
2013 2013 2012 2012 2012 Q2 vs Q2
Revenues Revenues Revenues Revenues Revenues
Network
Connectivity
Products $96,132 $96,733 $87,979 $91,127 $96,620 (1)%
Storage
Connectivity
Products 22,670 18,769 32,797 27,855 27,583 (18)%
Advanced
Technology and 3,343 3,765 8,179 6,764 4,468 (25)%
Other Products
Total net
revenues $122,145 $119,267 $128,955 $125,746 $128,671 (5)%
-------- -------- -------- -------- -------- ---
% Total % Total % Total % Total % Total
Revenues Revenues Revenues Revenues Revenues
-------- -------- -------- -------- --------
Network
Connectivity
Products 79% 81% 68% 73% 75%
Storage
Connectivity
Products 18% 16% 26% 22% 21%
Advanced
Technology and 3% 3% 6% 5% 4%
Other Products
Total net
revenues 100% 100% 100% 100% 100%
--- --- --- --- ---
Historical Net Revenues by Channel and Territory:
-------------------------------------------------
($000s) Q2 FY % Total Revenues Q2 FY % Total Revenues % Change
2013 2012
Revenues Revenues
-------- --------
Revenues
from OEM
customers $110,174 90% $117,925 92% (7)%
Revenues
from
distribution 11,896 10% 10,733 8% 11%
Other 75 nm 13 nm nm
--- --- --- --- ---
Total net
revenues $122,145 100% $128,671 100% (5)%
======== === ======== === ===
Asia-Pacific $73,610 60% $80,391 63% (8)%
United
States 31,151 26% 31,394 24% (1)%
Europe,
Middle East
and Africa 15,941 13% 16,473 13% (3)%
Rest of
world 1,443 1% 413 nm nm
Total net
revenues $122,145 100% $128,671 100% (5)%
======== === ======== === ===
nm - not meaningful
Summary of Stock-Based Compensation:
------------------------------------
Three Months Ended Six Months Ended
December 30, January 1, December 30, January 1,
($000s) 2012 2012 2012 2012
==== ==== ==== ====
Cost of sales $181 $315 $496 $767
Engineering and
development 2,214 2,449 4,912 5,284
Selling and
marketing 941 850 1,686 1,936
General and
administrative 2,039 2,525 3,835 4,592
----- ----- ----- -----
Total stock-based
compensation $5,375 $6,139 $10,929 $12,579
====== ====== ======= =======
Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin:
-------------------------------------------------------------
Three Months Ended Six Months Ended
December 30, January 1, December 30, January 1,
2012 2012 2012 2012
==== ==== ==== ====
GAAP gross margin 58.6% 58.6% 58.2% 57.1%
---- ---- ---- ----
Items excluded from
GAAP gross margin
to calculate non-
GAAP gross margin:
Stock-based
compensation 0.1% 0.2% 0.2% 0.3%
Amortization of
intangibles 4.2% 4.0% 4.3% 5.5%
Site closure
related expenses - (0.0)% - 0.0%
Patent litigation
damages, license 0.8% - 0.2%
fees and royalties 0.8%
Non-GAAP gross
margin 63.7% 62.8% 63.5% 63.1%
==== ==== ==== ====
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses:
---
Three Months Ended Six Months Ended
December 30, January 1, December 30, January 1,
($000s) 2012 2012 2012 2012
==== ==== ==== ====
GAAP operating
expenses, as
presented $67,234 $63,656 $129,472 $135,175
above
Items excluded from
GAAP operating
expenses to
calculate non-
GAAP
operating expenses:
Stock-based
compensation (5,194) (5,824) (10,433) (11,812)
Amortization of
other intangibles (1,365) (1,602) (2,888) (3,364)
Site closure
related expenses - 119 - (1,039)
Mitigation expenses
related to the (982) - (1,464) -
Broadcom patents
Expenses related to
the intent to (2,060) - (2,060) -
acquire Endace
Impact on operating
expenses (9,601) (7,307) (16,845) (16,215)
------ ------ ------- -------
Non-GAAP operating
expenses $57,633 $56,349 $112,627 $118,960
======= ======= ======== ========
Reconciliation of GAAP Operating Income to Non-GAAP Operating Income:
---------------------------------------------------------------------
Three Months Ended Six Months Ended
December 30, January 1, December 30, January 1,
($000s) 2012 2012 2012 2012
==== ==== ==== ====
GAAP operating
income as $4,332 $11,767 $11,070 $5,819
presented above
Items excluded from
GAAP operating
income to
calculate non-
GAAP operating
income:
Stock-based
compensation 5,375 6,139 10,929 12,579
Amortization of
intangibles 6,514 6,751 13,185 17,087
Site closure
related expenses - (142) - 1,142
Patent litigation
damages, license
fees 958 -
and royalties 1,950 388
Mitigation expenses
related to 982 - 1,464 -
Broadcom patents
Expenses related to
the intent to 2,060 - 2,060 -
acquire Endace
Impact on operating
income 15,889 12,748 29,588 31,196
Non-GAAP operating
income $20,221 $24,515 $40,658 $37,015
======= ======= ======= =======
Reconciliation of GAAP Net Income to Non-GAAP Net Income:
---------------------------------------------------------
Three Months Ended Six Months Ended
December 30, January 1, December 30, January 1,
($000s) 2012 2012 2012 2012
==== ==== ==== ====
GAAP net income as
presented $5,583 $14,994 $6,240 $7,835
above
Items excluded from
GAAP net income to
calculate non-
GAAP net income:
Stock-based
compensation 5,375 6,139 10,929 12,579
Amortization of
intangibles 6,514 6,751 13,185 17,087
Site closure
related expenses - (142) - 1,142
Patent litigation
damages, license
fees 958 -
and royalties 1,950 388
Mitigation related
to the Broadcom 982 - 1,464 -
patents
Expenses related to
the intent to 2,060 - 2,060 -
acquire Endace
Income tax effect
of above items (2,775) (5,094) (5,437) (4,560)
Valuation allowance
for U.S. federal (1,463) - 4,355 -
and/or state
deferred tax
assets
Impact on net
income 11,651 7,654 28,506 26,636
------ ----- ------ ------
Non-GAAP net income $17,234 $22,648 $34,746 $34,471
======= ======= ======= =======
Reconciliation of GAAP Diluted Earnings Per Share to Non-GAAP Diluted Earnings Per Share:
-----------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
December 30, January 1, December 30, January 1,
(shares in
000s) 2012 2012 2012 2012
==== ==== ==== ====
GAAP diluted
earnings per
share $0.06 $0.17 $0.07 $0.09
as presented
above
Items
excluded effect:
from GAAP
loss per
share to
calculate
diluted non-
GAAP
earnings per
share, net
of tax
Stock-based
compensation 0.06 0.07 0.12 0.15
Amortization
of
intangibles 0.07 0.08 0.14 0.19
Site closure
related
expenses - (0.00) - 0.01
Patent
litigation
damages,
license fee 0.01 -
and royalties 0.02 0.00
Mitigation
related to
the Broadcom 0.01 - 0.02 -
patents
Expenses
related to
the intent
to 0.02 - 0.02 -
acquire
Endace
Tax impact of
above items
and U.S. (0.04) (0.06) (0.01) (0.05)
GAAP
valuation
allowance
Impact on
GAAP
earnings per
share 0.13 0.09 0.31 0.30
---- ---- ---- ----
Non-GAAP
diluted
earnings per
share $0.19 $0.26 $0.38 0.39
===== ===== ===== ====
Diluted
shares used
in non-GAAP 91,816 87,816 91,637 88,323
per share
computations
Forward-Looking Diluted Earnings per Share Reconciliation:
----------------------------------------------------------
Guidance for
Three Months Ending
March 31, 2013
--------------
Normalized non-GAAP diluted
earnings per share guidance $0.12 - $0.14
Incremental benefit related to the
retroactive portion of the
federal 0.06
R&D tax credit
Total non-GAAP diluted earnings
per share guidance $0.18 - $0.20
Items excluded, net of tax, from
non-GAAP diluted earnings per
share to
calculate GAAP diluted earnings
per share guidance:
Stock-based compensation (0.06)
Amortization of intangibles (0.07)
Patent litigation damages, license
fees, royalties and mitigation (0.09)
expenses
Expenses related to the intent to
acquire Endace (0.01)
Tax impact of above items and U.S.
GAAP valuation allowance.. (0.07)
GAAP loss per share guidance ($0.12) - ($0.10)
================
SOURCE Emulex Corporation