COSTA MESA, Calif.,
April 29, 2015 /PRNewswire/
-- Emulex Corporation (NYSE: ELX), a leader in network
connectivity, monitoring and management, announced today its
financial results for the third quarter of fiscal 2015 ending
March 29, 2015.
On February 25th, 2015,
Emulex entered into a definitive agreement with Avago Technologies
Limited (NASDAQ: AVGO) under which Avago agreed to acquire Emulex
for $8.00 per share in an all-cash
transaction valued at approximately $606
million as of the offer date. In anticipation of this
transaction, which is expected to close during Avago's second half
of the fiscal year ending November 1,
2015, Emulex will not issue financial guidance for the
upcoming quarter or conduct a third quarter results conference
call. Emulex has also discontinued its share repurchases
under the previously announced authorization.
Third Quarter Financial Highlights
- Third quarter 2015 revenue of $96
million with non-GAAP EPS of $0.16 as compared to initial guidance of
$0.11-$0.15. A GAAP net loss of
($0.82) compared to prior guidance of
a loss of ($0.06) to ($0.10), the latter of which excluded a
$0.79 charge incurred in the third
quarter for impairment of goodwill and intangible assets related to
the Company's Network Visibility Products (NVP) operations.
- Fibre Channel (FC) revenue performance exceeded prior
expectations of mid-single-digit annual declines, led by the Gen 5
(16Gb) FC family of products, which were up more than 100% over the
prior year.
- Skyhawk™-based 10Gb Ethernet products designed for current x86
server offerings grew revenue greater than 30% compared to the
prior quarter and over six-fold over the prior year.
- Non-GAAP gross margin of 67.5% expanded approximately 180 basis
points year-over-year and 120 basis points as compared to the prior
quarter.
- Cash, cash equivalents and investments at the end of the
quarter of $203 million.
EMULEX CORPORATION
AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Operations
|
(unaudited, in
thousands, except per share data)
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
March
29,
|
|
March
30,
|
March
29,
|
|
March
30,
|
|
2015
|
|
2014
|
2015
|
|
2014
|
|
|
|
|
|
|
|
Net
revenues
|
$
96,296
|
|
$
109,730
|
$
311,192
|
|
$
347,558
|
|
|
|
|
|
|
|
Cost of
sales:
|
|
|
|
|
|
|
Cost of goods
sold
|
31,524
|
|
37,864
|
105,675
|
|
119,664
|
Amortization
of core and developed technology
|
|
|
|
|
|
|
intangible
assets
|
6,186
|
|
6,240
|
18,895
|
|
18,639
|
Expenses
related to the Broadcom patents
|
1,976
|
|
1,978
|
5,791
|
|
5,833
|
Cost of
sales
|
39,686
|
|
46,082
|
130,361
|
|
144,136
|
Gross
profit
|
56,610
|
|
63,648
|
180,831
|
|
203,422
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
Engineering and development
|
33,482
|
|
37,119
|
100,802
|
|
119,550
|
Selling
and marketing
|
16,540
|
|
18,349
|
49,282
|
|
57,290
|
General
and administrative
|
11,511
|
|
12,413
|
25,056
|
|
32,449
|
Amortization of other intangible assets
|
571
|
|
1,584
|
1,747
|
|
4,791
|
Impairment of goodwill and intangible assets
|
57,895
|
|
-
|
57,895
|
|
-
|
Total operating
expenses
|
119,999
|
|
69,465
|
234,782
|
|
214,080
|
|
|
|
|
|
|
|
Operating
loss
|
(63,389)
|
|
(5,817)
|
(53,951)
|
|
(10,658)
|
|
|
|
|
|
|
|
Non-operating
(expense) income, net:
|
|
|
|
|
|
|
Interest
income
|
2
|
|
5
|
5
|
|
25
|
Interest
expense
|
(2,434)
|
|
(2,356)
|
(7,227)
|
|
(3,506)
|
Other
(expense) income, net
|
182
|
|
(135)
|
(213)
|
|
(118)
|
Total non-operating
(expense) income, net
|
(2,250)
|
|
(2,486)
|
(7,435)
|
|
(3,599)
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(65,639)
|
|
(8,303)
|
(61,386)
|
|
(14,257)
|
|
|
|
|
|
|
|
Income tax (benefit)
provision
|
(6,574)
|
|
(1,104)
|
(5,924)
|
|
610
|
|
|
|
|
|
|
|
Net loss
|
$
(59,065)
|
|
$
(7,199)
|
$
(55,462)
|
|
$
(14,867)
|
|
|
|
|
|
|
|
Net loss per
share:
|
|
|
|
|
|
|
Basic
|
$
(0.82)
|
|
$
(0.09)
|
$
(0.78)
|
|
$
(0.17)
|
Diluted
|
$
(0.82)
|
|
$
(0.09)
|
$
(0.78)
|
|
$
(0.17)
|
|
|
|
|
|
|
|
Number of shares used
in per share computations:
|
|
|
|
|
|
|
Basic
|
71,977
|
|
80,883
|
71,492
|
|
86,403
|
Diluted
|
71,977
|
|
80,883
|
71,492
|
|
86,403
|
EMULEX CORPORATION
AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(unaudited, in
thousands)
|
|
|
|
March
29,
|
June
29,
|
|
|
2015
|
2014
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
|
$
202,734
|
$
158,439
|
Accounts receivable,
net
|
|
62,816
|
76,974
|
Inventories
|
|
21,724
|
25,831
|
Prepaid expenses and
other current assets
|
|
18,800
|
20,029
|
Deferred income
taxes
|
|
223
|
223
|
Total current
assets
|
|
306,297
|
281,496
|
|
|
|
|
Property and
equipment, net
|
|
56,377
|
59,908
|
Goodwill and
intangible assets, net
|
|
277,989
|
356,526
|
Other
assets
|
|
16,892
|
19,993
|
Total
assets
|
|
$
657,555
|
$
717,923
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
|
$
22,989
|
$
25,762
|
Accrued and other
current liabilities
|
|
40,485
|
42,183
|
Total current
liabilities
|
|
63,474
|
67,945
|
|
|
|
|
Convertible senior
notes
|
|
150,854
|
146,478
|
Other
liabilities
|
|
7,602
|
6,842
|
Deferred income
taxes
|
|
4,329
|
15,550
|
Accrued
taxes
|
|
26,462
|
26,462
|
Total
liabilities
|
|
252,721
|
263,277
|
|
|
|
|
Total
stockholders' equity
|
|
404,834
|
454,646
|
Total liabilities and
equity
|
|
$
657,555
|
$
717,923
|
EMULEX CORPORATION
AND SUBSIDIARIES
|
Condensed
Consolidated Statement of Cash Flows
|
(unaudited, in
thousands)
|
|
|
Nine Months
Ended
|
|
March
29,
|
|
March
30,
|
|
2015
|
|
2014
|
|
|
|
|
Cash flows from
operations:
|
|
|
|
Net loss
|
$
(55,462)
|
|
$
(14,867)
|
Adjustments to
reconcile net loss to net cash provided by
|
|
|
|
operating
activities:
|
|
|
|
Depreciation and
amortization
|
34,300
|
|
37,805
|
Stock based
compensation
|
11,119
|
|
12,226
|
Impairment of goodwill and
intangible assets
|
57,895
|
|
-
|
Deferred income
taxes
|
(11,221)
|
|
-
|
Other reconciling
items
|
3,993
|
|
2,610
|
Changes in assets and
liabilities
|
18,140
|
|
13,455
|
Net cash provided by
operating activities
|
58,764
|
|
51,229
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Investment in
property and equipment, net
|
(11,606)
|
|
(13,063)
|
Net cash used in investing
activities
|
(11,606)
|
|
(13,063)
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Issuance of
convertible senior notes
|
-
|
|
175,000
|
Repurchase of
common stock
|
(1,004)
|
|
(103,039)
|
Other
|
(1,008)
|
|
(6,756)
|
Net cash (used in) provided
by financing activities
|
(2,012)
|
|
65,205
|
|
|
|
|
Effect of exchange
rates on cash and cash equivalents
|
(851)
|
|
295
|
|
|
|
|
Net increase in cash
and cash equivalents
|
44,295
|
|
103,666
|
Opening cash
balance
|
158,439
|
|
105,637
|
Ending cash
balance
|
$
202,734
|
|
$
209,303
|
EMULEX CORPORATION
AND SUBSIDIARIES
|
Supplemental
Information
|
Reconciliation of
GAAP Net Loss to Non-GAAP Net Income:
|
|
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
March
29,
|
March
30,
|
March
29,
|
March
30,
|
($000s)
|
2015
|
2014
|
2015
|
2014
|
GAAP net loss as
presented above
|
$
(59,065)
|
$
(7,199)
|
$
(55,462)
|
$
(14,867)
|
GAAP loss per share
as presented above
|
$
(0.82)
|
$
(0.09)
|
$
(0.78)
|
$
(0.17)
|
Basic Shares used in
GAAP loss per share computations
|
71,977
|
80,883
|
71,492
|
86,403
|
|
|
|
|
|
Items excluded from
GAAP net loss to calculate non-GAAP net income:
|
|
|
|
|
Amortization of intangibles:
|
|
|
|
|
Cost of
sales
|
$
6,186
|
$
6,240
|
$
18,895
|
$
18,639
|
Amortization of
intangibles (operating expense)
|
571
|
1,584
|
1,747
|
4,791
|
Total amortization of intangibles
|
6,757
|
7,824
|
20,642
|
23,430
|
Stock-based compensation:
|
|
|
|
|
Cost of
sales
|
233
|
233
|
421
|
469
|
Engineering and
development
|
1,770
|
1,243
|
4,656
|
4,279
|
Selling and
marketing
|
1,184
|
962
|
3,412
|
3,038
|
General and
administrative
|
1,377
|
1,472
|
2,630
|
4,440
|
Total stock-based compensation
|
4,564
|
3,910
|
11,119
|
12,226
|
Site
closure and other restructuring costs:
|
|
|
|
|
Cost of
sales
|
-
|
25
|
89
|
302
|
Engineering and
development
|
-
|
230
|
(141)
|
5,425
|
Selling and
marketing
|
61
|
473
|
(1,015)
|
1,125
|
General and
administrative
|
-
|
154
|
(33)
|
1,400
|
Total site closure and other restructuring costs
|
61
|
882
|
(1,100)
|
8,252
|
Expenses
related to the Broadcom patents:
|
|
|
|
|
Cost of
sales
|
1,976
|
1,978
|
5,791
|
5,833
|
Engineering and
development
|
6
|
81
|
57
|
2,403
|
Selling and
marketing
|
19
|
3
|
150
|
825
|
General and
administrative
|
-
|
5,020
|
-
|
5,325
|
Total
expenses related to the Broadcom patents
|
2,001
|
7,082
|
5,998
|
14,386
|
Expenses
related to the acquisition of Endace:
|
|
|
|
|
Selling and
marketing
|
-
|
-
|
-
|
21
|
General and
administrative
|
-
|
(31)
|
-
|
321
|
Total
expenses related to the acquisition of Endace
|
-
|
(31)
|
-
|
342
|
Expenses
related to the Avago acquisition:
|
|
|
|
|
General and
administrative
|
4,406
|
-
|
4,406
|
-
|
Total expenses related to the Avago acquisition
|
4,406
|
-
|
4,406
|
-
|
Expenses
related to the Avago litigation:
|
|
|
|
|
General and
administrative
|
116
|
-
|
116
|
-
|
Total expenses related to the Avago litigation
|
116
|
-
|
116
|
-
|
Expenses
related to class action lawsuit:
|
|
|
|
|
General and
administrative
|
42
|
-
|
385
|
-
|
Total expenses related to class action lawsuit
|
42
|
-
|
385
|
-
|
Expenses
related to IRS NOPA:
|
|
|
|
|
General and
administrative
|
303
|
172
|
355
|
172
|
Total expenses related to IRS NOPA
|
303
|
172
|
355
|
172
|
Impairment of goodwill and intangible assets and related
expenses:
|
|
|
|
|
General and
administrative
|
129
|
-
|
129
|
-
|
Impairment of
goodwill and intangible assets (operating expense)
|
57,895
|
-
|
57,895
|
-
|
Total
impairment of goodwill and intangible assets and related
expenses
|
58,024
|
-
|
58,024
|
-
|
Accretion of debt discount on convertible senior notes
|
1,667
|
1,562
|
4,920
|
2,327
|
Tax
impact of above items and U.S. GAAP tax valuation
allowance
|
(7,145)
|
(2,107)
|
(9,381)
|
(3,438)
|
Impact on GAAP net income (loss)
|
$
70,796
|
$
19,294
|
$
95,484
|
$
57,697
|
|
|
|
|
|
Non-GAAP net
income
|
$
11,731
|
$
12,095
|
$
40,022
|
$
42,830
|
Non-GAAP diluted
earnings per share
|
$
0.16
|
$
0.15
|
$
0.55
|
$
0.49
|
Diluted shares used
in non-GAAP earnings per share computations
|
73,661
|
82,270
|
73,193
|
88,142
|
Reconciliation of
GAAP Gross Margin to Non-GAAP Gross Margin:
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
March
29,
|
March
30,
|
March
29,
|
March
30,
|
($000s)
|
2015
|
2014
|
2015
|
2014
|
Revenue
|
$
96,296
|
$
109,730
|
$
311,192
|
$
347,558
|
|
|
|
|
|
GAAP gross
margin
|
56,610
|
63,648
|
180,831
|
203,422
|
GAAP gross margin
%
|
58.8%
|
58.0%
|
58.1%
|
58.5%
|
|
|
|
|
|
Items excluded from
GAAP gross margin to calculate non-GAAP gross margin:
|
|
|
|
|
Amortization
of intangibles
|
6,186
|
6,240
|
18,895
|
18,639
|
Stock-based
compensation
|
233
|
233
|
421
|
469
|
Site closure
and other restructuring costs
|
-
|
25
|
89
|
302
|
Expenses
related to the Broadcom patents
|
1,976
|
1,978
|
5,791
|
5,833
|
Impact on gross margin
|
8,395
|
8,476
|
25,196
|
25,243
|
|
|
|
|
|
Non-GAAP gross
margin
|
$
65,005
|
$
72,124
|
$
206,027
|
$
228,665
|
Non-GAAP gross margin
%
|
67.5%
|
65.7%
|
66.2%
|
65.8%
|
Reconciliation of
GAAP Operating Expenses to Non-GAAP Operating Expenses:
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
March
29,
|
March
30,
|
March
29,
|
March
30,
|
($000s)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
GAAP operating
expenses, as presented above
|
$
119,999
|
$
69,465
|
$
234,782
|
$
214,080
|
|
|
|
|
|
Items excluded from
GAAP operating expenses to calculate non-GAAP operating
expenses:
|
|
|
|
|
Amortization of intangibles
|
(571)
|
(1,584)
|
(1,747)
|
(4,791)
|
Stock-based compensation
|
(4,331)
|
(3,677)
|
(10,698)
|
(11,757)
|
Site
closure and other restructuring costs
|
(61)
|
(857)
|
1,189
|
(7,950)
|
Expenses
related to the Broadcom patents
|
(25)
|
(5,104)
|
(207)
|
(8,553)
|
Expenses
related to the acquisition of Endace
|
-
|
31
|
-
|
(342)
|
Expenses
related to the Avago acquisition
|
(4,406)
|
-
|
(4,406)
|
-
|
Expenses
related to the Avago litigation
|
(116)
|
-
|
(116)
|
-
|
Expenses
related to class action lawsuit
|
(42)
|
-
|
(385)
|
-
|
Expenses
related to IRS NOPA
|
(303)
|
(172)
|
(355)
|
(172)
|
Impairment of goodwill and intangible assets
|
|
|
|
|
and related
expenses
|
(58,024)
|
-
|
(58,024)
|
-
|
Impact
on operating expenses
|
(67,879)
|
(11,363)
|
(74,749)
|
(33,565)
|
Non-GAAP operating
expenses
|
$
52,120
|
$
58,102
|
$
160,033
|
$
180,515
|
Reconciliation of
GAAP Operating Loss to Non-GAAP Operating Income:
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
March
29,
|
March
30,
|
March
29,
|
March
30,
|
($000s)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
GAAP operating loss
as presented above
|
$
(63,389)
|
$
(5,817)
|
$
(53,951)
|
$
(10,658)
|
|
|
|
|
|
Items excluded from
GAAP operating loss to calculate non-GAAP operating
income:
|
|
|
|
|
Amortization of intangibles
|
6,757
|
7,824
|
20,642
|
23,430
|
Stock-based compensation
|
4,564
|
3,910
|
11,119
|
12,226
|
Site
closure and other restructuring costs
|
61
|
882
|
(1,100)
|
8,252
|
Expenses
related to the Broadcom patents
|
2,001
|
7,082
|
5,998
|
14,386
|
Expenses
related to the acquisition of Endace
|
-
|
(31)
|
-
|
342
|
Expenses
related to the Avago acquisition
|
4,406
|
-
|
4,406
|
-
|
Expenses
related to the Avago litigation
|
116
|
-
|
116
|
-
|
Expenses
related to class action lawsuit
|
42
|
-
|
385
|
-
|
Expenses
related to IRS NOPA
|
303
|
172
|
355
|
172
|
Impairment of goodwill and intangible assets
|
|
|
|
|
and related
expenses
|
58,024
|
-
|
58,024
|
-
|
Impact
on operating loss
|
76,274
|
19,839
|
99,945
|
58,808
|
Non-GAAP operating
income
|
$
12,885
|
$
14,022
|
$
45,994
|
$
48,150
|
Net Revenue by
Product Lines:
|
|
|
Q3
FY
|
|
|
Q3
FY
|
|
|
|
|
2015
|
%
Total
|
|
2014
|
%
Total
|
|
|
($000s)
|
Revenues
|
Revenues
|
|
Revenues
|
Revenues
|
|
%
Change
|
|
|
|
|
|
|
|
|
Network Connectivity
Products
|
$ 70,827
|
74%
|
|
$ 77,905
|
71%
|
|
-9%
|
Storage Connectivity
and Other Products
|
18,467
|
19%
|
|
24,767
|
23%
|
|
-25%
|
Emulex Connectivity
Division
|
89,294
|
93%
|
|
102,672
|
94%
|
|
-13%
|
Network Visibility
Products
|
7,002
|
7%
|
|
7,058
|
6%
|
|
-1%
|
Total net
revenues
|
$ 96,296
|
100%
|
|
$ 109,730
|
100%
|
|
-12%
|
Net Revenues by
Channel:
|
|
|
Q3
FY
|
|
|
Q3
FY
|
|
|
|
|
2015
|
%
Total
|
|
2014
|
%
Total
|
|
|
($000s)
|
Revenues
|
Revenues
|
|
Revenues
|
Revenues
|
|
%
Change
|
|
|
|
|
|
|
|
|
OEM
|
$ 77,247
|
80%
|
|
$ 91,516
|
83%
|
|
-16%
|
Distribution
|
16,142
|
17%
|
|
15,478
|
14%
|
|
4%
|
End-user and
other
|
2,907
|
3%
|
|
2,736
|
3%
|
|
6%
|
Total net
revenues
|
$ 96,296
|
100%
|
|
$ 109,730
|
100%
|
|
-12%
|
Net Revenues by
Territory:
|
|
|
Q3
FY
|
|
|
Q3
FY
|
|
|
|
|
2015
|
%
Total
|
|
2014
|
%
Total
|
|
|
($000s)
|
Revenues
|
Revenues
|
|
Revenues
|
Revenues
|
|
%
Change
|
|
|
|
|
|
|
|
|
Asia
Pacific
|
$ 59,544
|
62%
|
|
$ 64,749
|
59%
|
|
-8%
|
United
States
|
18,497
|
19%
|
|
28,962
|
26%
|
|
-36%
|
Europe, Middle East
and Africa
|
16,235
|
17%
|
|
15,498
|
14%
|
|
5%
|
Rest of
world
|
2,020
|
2%
|
|
521
|
1%
|
|
288%
|
Total net
revenues
|
$ 96,296
|
100%
|
|
$ 109,730
|
100%
|
|
-12%
|
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 third fiscal quarter which
may be accessed via our website at www.emulex.com: (i) non-GAAP net
income and diluted earnings per share, (ii) non-GAAP gross margin,
(iii) non-GAAP operating expenses, (iv) non-GAAP operating income.
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 costs 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.
Expenses related to the Avago acquisition. We have
incurred various expenses in connection with Avago's intent to
acquire the Company including but not limited to legal fees,
accounting fees and other expenses. 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 are infrequent in nature.
Expenses related to the Avago litigation. We have incurred
legal expenses in connection legal proceedings arising out of with
the merger transaction with Avago. 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 are infrequent in nature.
Expenses related to class action lawsuit. We have incurred
expenses related to a class action lawsuit that was initiated
following our share repurchases in the fall of 2013. 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.
Expenses related to IRS NOPA. We have incurred various
legal and accounting expenses related to the receipt and our
response to the Notice of Proposed Adjustment (NOPA) received from
the Internal Revenue Service in March of 2014. We disagree
with the IRS' proposed adjustments and the basis for its positions,
and will administratively appeal to the IRS Appeals Office.
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 but will continue in future periods
until these audits are resolved.
Impairment of goodwill and intangible assets and related
expenses. With respect to the exclusion of charges relating
to the impairment of intangibles, we believe these types of charges
are infrequent in nature and that they do not accurately reflect
the ongoing costs of operation of our core business. As a
result, we believe that the exclusion of such charges gives
management and investors a more effective means of evaluating its
historical performance and projected costs. In this regard,
we note that charges of this nature are infrequent and are
unrelated to our core business.
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.
- - - - - - - - -
About Emulex
Emulex provides connectivity, monitoring
and management solutions for high-performance networks, delivering
provisioning, end-to-end application visibility, optimization and
acceleration for the next generation of software-defined, telco and
Web-scale data centers. The Company's I/O connectivity portfolio,
which has been designed into server and storage solutions from
leading OEMs and ODMs worldwide, enables organizations to manage
bandwidth, latency, security and virtualization. The Emulex network
visibility portfolio enables global organizations to monitor and
improve application and network performance management. Emulex is
headquartered in Costa Mesa,
Calif. For more information about Emulex (NYSE:ELX) please
visit http://www.Emulex.com.
Investor
Contact:
|
Press
Contact:
|
Paul
Mansky
|
Katherine
Lane
|
Vice President,
Corporate Development and
|
Senior Director,
Corporate and Marketing
|
Investor
Relations
|
Communications
|
+1 714
885-2888
|
+1
714-885-3828
|
paul.mansky@emulex.com
|
katherine.lane@emulex.com
|
"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."
In addition to those factors, 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;
- 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.
On February 25, 2015, Emulex
agreed to be acquired by Avago Technologies Limited (NASDAQ: AVGO),
subject to the satisfaction of certain conditions. Factors related
to the acquisition which could cause actual results to differ from
those projected or contemplated in any such forward-looking
statements include, but are not limited to, the following factors:
(1) the risk that the conditions to the closing of the
transaction are not satisfied, including the risk that Avago may
not receive a sufficient number of shares tendered from Emulex
stockholders to complete the tender offer; (2) litigation
relating to the transaction; (3) uncertainties as to the
timing of the consummation of the transaction and the ability of
each of Emulex and Avago to consummate the transaction;
(4) risks that the proposed transaction disrupts the current
plans and operations of Emulex or Avago; (5) the ability of
Emulex to retain and hire key personnel; (6) competitive
responses to the proposed transaction; (7) unexpected costs,
charges or expenses resulting from the transaction;
(8) potential adverse reactions or changes to business
relationships resulting from the announcement or completion of the
transaction; (9) Avago's ability to achieve the growth
prospects and synergies expected from the transaction, as well as
delays, challenges and expenses associated with integrating Emulex
with Avago's existing businesses; and (10) legislative,
regulatory and economic developments.
Additional Information about the Transaction and Where to
Find It
The tender offer by Avago for the outstanding shares
of Emulex commenced on April 7, 2015.
Certain information related to the pending transaction
included on this release is for informational purposes only and
shall not constitute an offer to purchase or the solicitation of an
offer to sell any shares of the common stock of Emulex or any other
securities. The offer is being made pursuant to a tender offer
statement on Schedule TO, which contains an offer to purchase, form
of letter of transmittal and other documents relating to the tender
offer (collectively, the "Tender Offer Materials"), each filed with
the U.S. Securities and Exchange Commission (the "SEC") by Avago,
Avago Technologies Wireless (U.S.A.) Manufacturing Inc. and Emerald Merger
Sub, Inc. on April 7, 2015. On
the same date, Emulex filed with the SEC a
solicitation/recommendation statement on Schedule 14D-9 with
respect to the tender offer. The Tender Offer Materials, as well as
the Schedule 14D-9, were also mailed to Emulex stockholders.
Investors and security holders are urged to carefully read these
documents, as well as any other documents relating to the tender
offer or related transactions that are filed with the SEC, when
they become available, as they may be amended from time to time,
because these documents will contain important information relating
to the tender offer and related transactions. Investors and
security holders may obtain a free copy of these documents, and
other annual, quarterly and special reports and other information
filed with the SEC by Avago or Emulex, at the SEC's website at
www.sec.gov. In addition, such materials are available for free
from Avago or Emulex by directing any requests to investor
relations at Emulex at the phone number or email address above.
A description of certain interests of the directors and
executive officers of Emulex is set forth in Emulex's Form 10-K/A,
Amendment No. 1, in Part III thereof, which was filed with the
SEC on October 27, 2014. A description of certain interests of
the directors and executive officers of Avago is set forth in
Avago's proxy statement for its 2015 annual meeting, which was
filed with the SEC on February 20, 2015. To the extent
holdings of either company's securities by their respective
directors and certain officers have subsequently changed, such
changes have been reflected on Forms 4 filed with the SEC.
All trademarks, trade names, service marks, and logos
referenced herein belong to their respective companies.
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SOURCE Emulex Corporation