[October 30, 2014] |
|
Emulex Announces Fiscal 2015 First Quarter Results
COSTA MESA, Calif. --(Business Wire)--
Emulex Corporation (NYSE:ELX), a leader in network connectivity,
monitoring and management, today announced earnings results for the
first quarter of fiscal 2015 ending September 28, 2014.
First Quarter Financial Highlights
-
Total revenue of $104 million, up 4% sequentially and above the $93
million to $99 million initial guidance range provided in our fiscal
fourth quarter earnings call, driven by strength in Network and
Storage Connectivity Products.
-
Non-GAAP diluted earnings of $0.14 and a GAAP loss of $0.01 per share
as compared to guidance of $0.07 - $0.11 on a non-GAAP basis and a
$0.07 - $0.11 loss on a GAAP basis.
-
Non-GAAP operating income of $13 million, up 90% versus the prior
quarter, reflecting stronger revenue performance, consistent non-GAAP
gross margin, and operational discipline.
-
Generated $21 million in cash from operations in the quarter with an
ending cash, cash equivalents, and investments balance of $174 million.
"We entered our fiscal 2015 on strong footing, with solid performance
across multiple categories including our Ethernet and Fibre Channel
products, allowing us to outperform versus expectations," commented Jeff
Benck, president and CEO, Emulex. "Over the past forty-five days we have
launched an unprecedented number of OEM and ODM design wins for our
Connectivity products, designed to meet the performance requirements of
Grantley-based servers, with more to come. We look forward to seeing
these enterprise products ramp in the market over the coming year."
"While a number of things went well for us in the quarter, our Network
Visibility Products (NVP) Division requires additional attention. To
that end, we recently appointed industry veteran Ali Hedayati as senior
vice president and general manager of NVP, reporting directly to me. I
fully expect with Ali's proven business management and segment
experience that NVP will benefit from his leadership," Benck concluded.
Business Outlook
Although actual results may vary depending on a variety of factors,
including those listed in the Safe Harbor Statement below and our
filings with the SEC, Emulex is forecasting second quarter net revenue
in the range of $102 - $108 million. The Company expects second quarter
non-GAAP earnings of $0.14 - $0.18 and a GAAP loss of $0.04 to breakeven
per share. GAAP estimates for the second quarter reflect approximately
$0.18 per diluted share in expected expense arising primarily from
amortization of intangibles, stock-based compensation, royalties,
mitigation expenses and license fees associated with the Broadcom patent
litigation, the accretion of debt discount on outstanding convertible
senior notes, and the tax effects and the impact of our U.S. GAAP tax
valuation allowance associated with these items. Reconciliations between
GAAP and non-GAAP results are included in the accompanying financial
data.
First Quarter Business Highlights
-
Secured design wins with 10/20/40Gb Ethernet and Converged Network and
8/16Gb Fibre Channel products optimized for the high performance needs
of the next generation Intel Grantley-based platforms introduced by
major OEMs and ODMs including:
-- Dell PowerEdge 13th generation
servers -- HP ProLiant Gen9 servers -- IBM System x and
BladeCenter servers -- Lenovo ThinkServer family -- Fujitsu
PRIMERGY RX, TX, BX and CX rack, tower, blade, and scale-out servers --
Quanta QuantaGrid, QuantaPlex and Rackgo X servers
-
Joined the 25Gb Ethernet Consortium, reiterating the commitment to
develop interoperable 25GbE solutions that increase the performance of
data center networks
-
Introduced the Emulex OpenWorks™ Connector for the new Emulex
OneConnect® OCec14000 Cloud Adapters, for bare metal adapter
configuration management and provisioning/deployment in scale-out
cloud environments
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
|
|
|
Three Months Ended
|
|
September 28,
|
|
September 29,
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
Net revenues
|
$
|
103,809
|
|
|
$
|
114,832
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
Cost of goods sold
|
36,616
|
|
|
39,691
|
|
Amortization of core and developed technology intangible assets
|
6,354
|
|
|
6,160
|
|
Expenses related to the Broadcom patents
|
1,725
|
|
|
1,497
|
|
Cost of sales
|
44,695
|
|
|
47,348
|
|
Gross profit
|
59,114
|
|
|
67,484
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Engineering and development
|
33,640
|
|
|
40,411
|
|
Selling and marketing
|
16,652
|
|
|
19,092
|
|
General and administrative
|
7,089
|
|
|
9,629
|
|
Amortization of other intangible assets
|
600
|
|
|
1,604
|
|
Total operating expenses
|
57,981
|
|
|
70,736
|
|
|
|
|
|
|
|
Operating income (loss)
|
1,133
|
|
|
(3,252
|
)
|
|
|
|
|
|
|
Non-operating (loss) income:
|
|
|
|
|
|
Interest income
|
1
|
|
|
4
|
|
Interest expense
|
(2,384
|
)
|
|
(2
|
)
|
Other (expense) income, net
|
(368
|
)
|
|
152
|
|
Total non-operating (loss) income
|
(2,751
|
)
|
|
154
|
|
|
|
|
|
|
|
Loss before income taxes
|
(1,618
|
)
|
|
(3,098
|
)
|
|
|
|
|
|
|
Income tax (benefit) provision
|
(899
|
)
|
|
543
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(719
|
)
|
|
$
|
(3,641
|
)
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.01
|
)
|
|
$
|
(0.04
|
)
|
Diluted
|
$
|
(0.01
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
Number of shares used in net loss per share computations:
|
|
|
|
|
|
|
|
Basic
|
|
71,042
|
|
|
|
91,444
|
|
Diluted
|
|
71,042
|
|
|
|
91,444
|
|
|
|
|
|
|
|
|
|
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
|
|
|
September 28,
|
|
June 29,
|
|
2014
|
|
|
2014
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
174,140
|
|
|
$
|
158,439
|
|
Accounts receivable, net
|
72,598
|
|
|
76,974
|
|
Inventories
|
21,274
|
|
|
25,831
|
|
Prepaid income taxes
|
4,919
|
|
|
2,839
|
|
Prepaid expenses and other current assets
|
16,344
|
|
|
17,190
|
|
Deferred income taxes
|
223
|
|
|
223
|
|
Total current assets
|
289,498
|
|
|
281,496
|
|
|
|
|
|
|
|
Property and equipment, net
|
58,603
|
|
|
59,908
|
|
Goodwill and intangible assets, net
|
349,572
|
|
|
356,526
|
|
Other assets
|
18,981
|
|
|
19,993
|
|
|
$
|
716,654
|
|
|
$
|
717,923
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
$
|
24,596
|
|
|
$
|
25,762
|
|
Accrued and other current liabilities
|
40,371
|
|
|
42,183
|
|
Total current liabilities
|
64,967
|
|
|
67,945
|
|
|
|
|
|
|
|
Convertible senior notes
|
147,915
|
|
|
146,478
|
|
Other liabilities
|
5,760
|
|
|
6,842
|
|
Deferred income taxes
|
15,550
|
|
|
15,550
|
|
Accrued taxes
|
26,462
|
|
|
26,462
|
|
Total liabilities
|
260,654
|
|
|
263,277
|
|
|
|
|
|
|
|
Total stockholders' equity
|
456,000
|
|
|
454,646
|
|
|
$
|
716,654
|
|
|
$
|
717,923
|
|
|
|
|
|
|
|
|
|
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(unaudited, in thousands)
|
|
Three Months Ended
|
|
September 28,
|
|
September 29,
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
Cash flows from operations:
|
|
|
|
|
|
Net loss
|
$
|
(719
|
)
|
|
$
|
(3,641
|
)
|
Adjustments to reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
11,528
|
|
|
12,568
|
|
Stock based compensation
|
3,531
|
|
|
4,572
|
|
Other reconciling items
|
1,855
|
|
|
105
|
|
Changes in assets and liabilities
|
4,651
|
|
|
(8,635
|
)
|
Net cash provided by operating activities
|
20,846
|
|
|
4,969
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Investment in property and equipment, net
|
(4,090
|
)
|
|
(4,533
|
)
|
Net cash used in investing activities
|
(4,090
|
)
|
|
(4,533
|
)
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Other
|
(719
|
)
|
|
(1,239
|
)
|
Net cash used in financing activities
|
(719
|
)
|
|
(1,239
|
)
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents
|
(336
|
)
|
|
57
|
|
|
|
|
|
|
|
Net increase in cash & cash equivalents
|
15,701
|
|
|
(746
|
)
|
Opening cash balance
|
158,439
|
|
|
105,637
|
|
Ending cash balance
|
$
|
174,140
|
|
|
$
|
104,891
|
|
|
|
|
|
|
|
|
|
EMULEX CORPORATION AND SUBSIDIARIES
Supplemental Information
|
|
|
Reconciliation of GAAP Net Loss to Non-GAAP
Net Income:
|
|
|
Three Months Ended
|
($000s)
|
September 28,
|
|
September 29,
|
|
2014
|
|
|
2013
|
|
GAAP net loss as presented above
|
$
|
(719
|
)
|
|
$
|
(3,641
|
)
|
GAAP loss per share as presented above
|
$
|
(0.01
|
)
|
|
$
|
(0.04
|
)
|
Shares used in GAAP loss per share computations
|
71,042
|
|
|
91,444
|
|
|
|
|
|
|
|
Items excluded from GAAP net loss to calculate non-GAAP net income:
|
|
|
|
|
|
Amortization of intangibles:
|
|
|
|
|
|
Cost of sales
|
$ 6,354
|
|
|
$ 6,160
|
|
Amortization of intangibles (operating expense)
|
600
|
|
|
1,604
|
|
Total amortization of intangibles
|
6,954
|
|
|
7,764
|
|
Stock-based compensation:
|
|
|
|
|
|
Cost of sales
|
116
|
|
|
89
|
|
Engineering and development
|
1,640
|
|
|
1,904
|
|
Selling and marketing
|
1,106
|
|
|
1,202
|
|
General and administrative
|
669
|
|
|
1,377
|
|
Total stock-based compensation
|
3,531
|
|
|
4,572
|
|
Site closure and other restructuring costs:
|
|
|
|
|
|
Cost of sales
|
36
|
|
|
-
|
|
Engineering and development
|
(93
|
)
|
|
-
|
|
Selling and marketing
|
(657
|
)
|
|
-
|
|
General and administrative
|
(19
|
)
|
|
-
|
|
Total site closure and other restructuring costs
|
(733
|
)
|
|
-
|
|
Expenses related to the Broadcom patents:
|
|
|
|
|
|
Cost of sales
|
1,725
|
|
|
1,497
|
|
Engineering and development
|
42
|
|
|
1,516
|
|
Selling and marketing
|
127
|
|
|
746
|
|
General and administrative
|
5
|
|
|
257
|
|
Total expenses related to the Broadcom patents
|
1,899
|
|
|
4,016
|
|
Expenses related to the acquisition of Endace:
|
|
|
|
|
|
Selling and marketing
|
-
|
|
|
21
|
|
General and administrative
|
-
|
|
|
352
|
|
Total expenses related to the acquisition of Endace
|
-
|
|
|
373
|
|
Expenses related to class action lawsuit:
|
|
|
|
|
|
General and administrative
|
179
|
|
|
-
|
|
Total expenses related to class action lawsuit
|
179
|
|
|
-
|
|
Accretion of debt discount on convertible senior notes
|
1,613
|
|
|
-
|
|
Tax impact of above items and U.S. GAAP tax valuation allowance
|
(2,262
|
)
|
|
(695
|
)
|
Impact on GAAP net loss
|
$ 11,181
|
|
|
$ 16,030
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
|
$
|
10,462
|
|
|
$
|
12,389
|
|
Non-GAAP diluted earnings per share
|
$
|
0.14
|
|
|
$
|
0.13
|
|
Diluted shares used in non-GAAP earnings per share computations
|
72,701
|
|
|
93,524
|
|
|
|
|
|
|
|
Reconciliation of GAAP Gross Margin to
Non-GAAP Gross Margin:
|
|
Three Months Ended
|
($000s)
|
September 28,
|
|
September 29,
|
|
|
2014
|
|
|
|
2013
|
|
Revenue
|
$
|
103,809
|
|
|
$
|
114,832
|
|
|
|
|
|
|
|
GAAP gross margin
|
|
59,114
|
|
|
|
67,484
|
|
GAAP gross margin %
|
|
56.9
|
%
|
|
|
58.8
|
%
|
|
|
|
|
|
|
Items excluded from GAAP gross margin to calculate non-GAAP gross
margin:
|
|
|
|
|
|
Amortization of intangibles
|
|
6,354
|
|
|
|
6,160
|
|
Stock-based compensation
|
|
116
|
|
|
|
89
|
|
Site closure and other restructuring costs
|
|
36
|
|
|
|
-
|
|
Expenses related to the Broadcom patents
|
|
1,725
|
|
|
|
1,497
|
|
Impact on gross margin
|
|
8,231
|
|
|
|
7,746
|
|
|
|
|
|
|
|
Non-GAAP gross margin
|
$
|
67,345
|
|
|
$
|
75,230
|
|
Non-GAAP gross margin %
|
|
64.9
|
%
|
|
|
65.5
|
%
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Operating Expenses to
Non-GAAP Operating Expenses:
|
|
Three Months Ended
|
($000s)
|
September 28,
|
|
September 29,
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
GAAP operating expenses, as presented above
|
$
|
57,981
|
|
|
$
|
70,736
|
|
|
|
|
|
|
|
Items excluded from GAAP operating expenses to calculate non-GAAP
operating expenses:
|
|
|
|
|
|
Amortization of intangibles
|
(600
|
)
|
|
(1,604
|
)
|
Stock-based compensation
|
(3,415
|
)
|
|
(4,483
|
)
|
Site closure and other restructuring costs
|
769
|
|
|
-
|
|
Expenses related to the Broadcom patents
|
(174
|
)
|
|
(2,519
|
)
|
Expenses related to the acquisition of Endace
|
-
|
|
|
(373
|
)
|
Expenses related to class action lawsuit
|
(179
|
)
|
|
-
|
|
Impact on operating expenses
|
(3,599
|
)
|
|
(8,979
|
)
|
Non-GAAP operating expenses
|
$
|
54,382
|
|
|
$
|
61,757
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Operating Income
(Loss) to Non-GAAP Operating Income:
|
|
Three Months Ended
|
($000s)
|
September 28,
|
|
September 29,
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
GAAP operating income (loss) as presented above
|
$
|
1,133
|
|
|
$
|
(3,252
|
)
|
|
|
|
|
|
|
Items excluded from GAAP operating income (loss) to calculate
non-GAAP operating income:
|
|
|
|
|
|
Amortization of intangibles
|
6,954
|
|
|
7,764
|
|
Stock-based compensation
|
3,531
|
|
|
4,572
|
|
Site closure and other restructuring costs
|
(733
|
)
|
|
-
|
|
Expenses related to the Broadcom patents
|
1,899
|
|
|
4,016
|
|
Expenses related to the acquisition of Endace
|
-
|
|
|
373
|
|
Expenses related to class action lawsuit
|
179
|
|
|
-
|
|
Impact on operating income (loss)
|
11,830
|
|
|
16,725
|
|
Non-GAAP operating income
|
$
|
12,963
|
|
|
$
|
13,473
|
|
|
|
|
|
|
|
|
|
|
Guidance for
Three Months Ending
December 28, 2014
|
|
|
|
|
Non-GAAP diluted earnings per share guidance
|
$0.14 - $0.18
|
|
|
Items excluded, net of tax, from non-GAAP diluted earnings per share
to calculate GAAP loss per share guidance:
|
|
Amortization of intangibles
|
(0.09)
|
Stock-based compensation
|
(0.05)
|
Expenses related to the Broadcom patents
|
(0.03)
|
Accretion of debt discount on convertible senior notes
|
(0.02)
|
Tax impact of above items and U.S. GAAP tax valuation allowance
|
0.01
|
|
|
GAAP loss per share guidance
|
($0.04 - $0.00)
|
|
|
Historical Net Revenue by Product Lines:
|
|
($000s)
|
|
Q1 FY 2015
Revenues
|
|
% Total Revenues
|
|
Q1 FY 2014
Revenues
|
|
% Total Revenues
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network Connectivity Products
|
|
$
|
75,800
|
|
|
73
|
%
|
|
$
|
77,980
|
|
|
68
|
%
|
|
(3
|
)%
|
Storage Connectivity and Other Products
|
|
22,135
|
|
|
21
|
%
|
|
26,755
|
|
|
23
|
%
|
|
(17
|
)%
|
Emulex Connectivity Division
|
|
97,935
|
|
|
94
|
%
|
|
104,735
|
|
|
91
|
%
|
|
(6
|
)%
|
Network Visibility Products
|
|
5,874
|
|
|
6
|
%
|
|
10,097
|
|
|
9
|
%
|
|
(42
|
)%
|
Total net revenues
|
|
$
|
103,809
|
|
|
100
|
%
|
|
$
|
114,832
|
|
|
100
|
%
|
|
(10
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical Net Revenues by Channel:
|
|
($000s)
|
|
Q1 FY 2015
Revenues
|
|
% Total Revenues
|
|
Q1 FY 2014
Revenues
|
|
% Total Revenues
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from OEM customers
|
|
$
|
85,785
|
|
|
83
|
%
|
|
$
|
97,524
|
|
|
85
|
%
|
|
(12
|
)%
|
Revenues from distribution
|
|
14,555
|
|
|
14
|
%
|
|
11,518
|
|
|
10
|
%
|
|
26
|
%
|
Other
|
|
3,469
|
|
|
3
|
%
|
|
5,790
|
|
|
5
|
%
|
|
(40
|
)%
|
Total net revenues
|
|
$
|
103,809
|
|
|
100
|
%
|
|
$
|
114,832
|
|
|
100
|
%
|
|
(10
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical Net Revenues by Territory:
|
|
($000s)
|
|
Q1 FY 2015
Revenues
|
|
% Total Revenues
|
|
Q1 FY 2014
Revenues
|
|
% Total Revenues
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia-Pacific
|
|
$
|
66,726
|
|
|
64
|
%
|
|
$
|
67,384
|
|
|
59
|
%
|
|
(1
|
)%
|
United States
|
|
21,694
|
|
|
21
|
%
|
|
28,746
|
|
|
25
|
%
|
|
(25
|
)%
|
Europe, Middle East and Africa
|
|
13,355
|
|
|
13
|
%
|
|
17,860
|
|
|
15
|
%
|
|
(25
|
)%
|
Rest of world
|
|
2,034
|
|
|
2
|
%
|
|
842
|
|
|
1
|
%
|
|
142
|
%
|
Total net revenues
|
|
$
|
103,809
|
|
|
100
|
%
|
|
$
|
114,832
|
|
|
100
|
%
|
|
(10
|
)%
|
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 first
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 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:
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.
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.
Site closure and other restructuring costs.
We have recognized expenses related to an organizational restructure
including closure and consolidation of certain facilities, as well as
severance and related costs. 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 may be
incurred in future periods but are generally infrequent in nature.
Patent litigation damages, license fees and
royalties related to the Broadcom patents. 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 these cost of sales expenses related to the Broadcom
patents 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 generally unrelated to our core business and/or infrequent
in nature but will continue in future periods.
Dismissal Agreement and mitigation expenses
related to the Broadcom patents. Effective March 30, 2014, we
have entered into a Dismissal and Standstill Agreement (Dismissal
Agreement) agreeing to pay Broadcom, a non-refundable, non-cancelable
dismissal and standstill fee of $5 million. We have recognized
mitigation expenses related to the Broadcom patents. We believe that
exclusion of these operating expenses related to the Broadcom patents 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
generally unrelated to our core business and/or infrequent in nature but
will continue in future periods.
Expenses related to the acquisition of Endace
Limited. We have incurred various expenses in connection with our
acquisition of Endace Limited including but not limited to legal fees,
accounting fees, the mark-up on acquired inventory, severance costs and
realized translation loss. We believe that exclusion of these charges 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, 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 relate to the acquisition of an operating business
and, as such, are infrequent in nature but may occur in future periods
in the event we make a material acquisition.
Expenses related to class action lawsuit.
We have incurred expenses related to a class action lawsuit. 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.
Accretion of debt discount on convertible senior
notes. We have accreted debt discount in connection with the
convertible senior notes. We believe that exclusion of this expense 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
generally unrelated to our core business but will continue in future
periods until maturity of the convertible senior notes.
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
"Safe Harbor'' Statement under the Private Securities Litigation Reform
Act of 1995: With the exception of historical information, the
statements set forth above 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 actual future results
could differ materially from those described in the forward-looking
statements as a result of a variety of factors, including those
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." Those factors and the factors listed below could cause
actual results to differ materially from those in the forward-looking
statements:
-
faster than anticipated declines in the demand for storage networking
and fiber channel and 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;
-
the highly competitive nature of the markets for our products as well
as pricing pressures that may result from such competitive conditions
and the emergence of new or stronger competitors as a result of
consolidation movements in the market;
-
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 our OEM customers to successfully incorporate our products
into their systems;
-
our reliance on a limited number of third-party suppliers and
subcontractors for components and assembly, many of which are located
outside of the United States;
-
the effect on our margins of rapid migration of technology and product
substitution by customers, including transitions from application
specific integrated circuit (ASIC) solutions to boards for selected
applications and higher-end to lower-end products, mezzanine card
products or modular Local Area Network (LAN) on Motherboard (LOMs);
-
the non-linearity and variability in the level of our revenue
resulting from the variable and seasonal procurement patterns of our
customers;
-
the possibility that our goodwill could become impaired in the near
term which would result in a non-cash charge and could adversely
affect our reported GAAP operating results;
-
any inadequacy of our intellectual property protection or our ability
to obtain necessary licenses or other intellectual property rights on
commercially reasonable terms;
-
our ability to attract and retain key technical personnel;
-
our ability to respond quickly to technological developments and to
benefit from our research and development activities as well as
government grants related thereto and delays in product development;
-
intellectual property and other litigation against us, with or without
merit, that could result in substantial attorneys' fees and costs,
cause product shipment delays, loss of patent rights, monetary
damages, costs associated with product or component redesigns and
require us to indemnify customers or enter into royalty or licensing
agreements, which may or may not be available;
-
our dependence on sales and product production outside of the United
States so that our results could be affected by adverse economic,
social, political and infrastructure conditions in those countries;
-
that we may fail to realize the anticipated benefits from the
acquisition of Endace Limited (Endace) on a timely basis or at all
which could result in an impairment of assets or be unable to complete
the integration of Endace's technology into our existing operations in
a timely and efficient manner;
-
the effect of any actual or potential unsolicited offers to acquire
us, proxy contests or the activities of activist investors;
-
weakness in domestic and worldwide macro-economic conditions, currency
exchange rate fluctuations or potential disruptions in world credit
and equity markets; terrorist activities, natural disasters, or
general economic or political instability and any resulting disruption
in our supply chain or customer purchasing patterns; and
-
changes in tax rates or legislation, accounting standards and other
regulatory changes.
About Emulex
Emulex, a leader in network connectivity, monitoring and management,
provides hardware and software solutions for global networks that
support enterprise, cloud, government and telecommunications. Emulex's
products enable unrivaled end-to-end application visibility,
optimization and acceleration. The Company's I/O connectivity offerings,
including its line of ultra high-performance Ethernet and Fibre
Channel-based connectivity products, have been designed into server and
storage solutions from leading OEMs, including Cisco, Dell, EMC,
Fujitsu, Hitachi, HP, Huawei, IBM, NetApp and Oracle, and can be found
in the data centers of nearly all of the Fortune 1000. Emulex's
monitoring and management solutions, including its portfolio of network
visibility and recording products, provide organizations with complete
network performance management at speeds up to 100Gb Ethernet. Emulex is
headquartered in Costa Mesa, Calif., and has offices and research
facilities in North America, Asia, New Zealand and Europe. For more
information about Emulex (NYSE:ELX) please visit http://www.Emulex.com.
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.
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