Pro forma net income for fiscal Q1 was $7.5 million, compared with pro forma net income of $4.6 million reported in the prior quarter. Pro forma diluted earnings per share were $0.10 on 76.9 million diluted shares outstanding, compared with $0.06 on 83.0 million diluted shares outstanding reported in the prior quarter. Pro forma results for the current quarter include an excess inventory charge for ongoing businesses of $12.7 million; excluding this charge, pro forma earnings would have been $0.26 per diluted share. Pro forma results exclude investment gains and special charges.
Including all charges and gains, the net loss on a GAAP basis for the first quarter of 2002 was $23.0 million, and the diluted loss per share was $0.31 on 74.3 million shares outstanding, compared with diluted earnings per share of $0.05 on 83.0 million shares outstanding reported in the prior quarter. During the first fiscal quarter of 2002, the company took a $36.6 million charge associated with the company’s exit from the magnetic storage business, a $1.9 million charge for in-process R&D associated with the Peak Audio acquisition, a $1.9 million charge to cover the costs associated with the May reduction of its workforce, and $1.1 million of amortization of intangible assets related to last year’s acquisition of AudioLogic and the Q1 acquisition of Peak Audio. The company also realized investment gains that totaled $11.0 million.
During the first fiscal quarter, sales in the magnetic storage division declined three percent from the previous quarter, substantially less than the company anticipated. Continued sluggish demand in the personal computer and communications markets resulted in reduced revenue in the company’s Analog business segment. The company’s Internet Solutions business grew approximately 11 percent over Q4 levels.
Pro forma gross margins, excluding reserve actions, were 39 percent versus 37 percent in the prior quarter.
Cash and marketable securities at quarter-end were $173 million; the company remains essentially debt free.
Overall semiconductor market conditions impacted our performance in Q1, but we believe revenues in our Analog and Internet Solutions businesses will grow approximately 10 percent in Q2, said David D. French, president and CEO of Cirrus Logic. We expect revenue from magnetic storage to decline from the $120 million we reported this quarter down to approximately $10 million in Q2, essentially completing our exit from the magnetic storage business. Therefore, we expect Q2 revenue to be approximately $75 to $85 million with a pro forma loss of $0.15-to-$0.20 per share.
The Q2 revenue forecast does not include revenue associated with non-cancelable Q2 purchase orders totaling $32 million from Western Digital Corporation, which are currently the subject of litigation. The GAAP earnings associated with this additional revenue are approximately $0.23 per share. We are hopeful that an early resolution of this dispute will allow recognition of these amounts in the near future.
Looking at Q2, our Analog and Internet Solutions business backlog is up over first quarter levels, our book-to-bill ratio is strong and design win activity is high. But in the short term, as with most everyone else in the industry, we remain cautious about the market environment, and we will continue to manage our expenses and resources very carefully.
We continue to invest in the future with our recent acquisition of Peak Audio and our recently announced pending acquisitions of LuxSonor Semiconductors, Inc. and ShareWave, Inc., which have leadership positions in commercial audio networking, DVD processors and home wireless markets, respectively. These acquisitions, combined with our existing leadership in audio technology, will significantly strengthen our position as the largest pure play semiconductor company in consumer entertainment electronics, said Mr. French.
