EX-99.1 2 a13582exv99w1.htm EXHIBIT 99.1 exv99w1
 

     
FOR IMMEDIATE RELEASE
  EXHIBIT 99.1
Editor’s Contact:
Frank Berry
QLogic Corporation
Phone: (949) 389-6499
frank.berry@qlogic.com
Investor’s Contact:
Tony Massetti
QLogic Corporation
Phone: (949) 389-7533
tony.massetti@qlogic.com
QLOGIC REPORTS SECOND QUARTER
RESULTS FOR FISCAL YEAR 2006
Record Revenue Level Achieved for Continuing Operations
Aliso Viejo, Calif., October 19, 2005 — QLogic Corporation (Nasdaq:QLGC), the leader in Fibre Channel host bus adapters (HBAs), today announced its second quarter financial results for the period ended October 2, 2005.
As previously announced, the Company has entered into an agreement to sell its hard disk drive controller and tape drive controller business to Marvell Technology Group, Ltd. for $225 million. This transaction is expected to close by the middle of the third fiscal quarter. As a result of this transaction, the financial information for the hard disk drive controller and tape drive controller business has been presented as discontinued operations for all periods.
Net revenue from continuing operations for the second quarter of fiscal 2006 was a record $119.0 million and increased 16% from $102.3 million in the comparable quarter last year. During the second quarter of fiscal 2006, revenue from SAN Infrastructure Products, which are comprised of HBAs, switches and silicon, was $110.5 million, an increase of 21% from the comparable quarter last year and 3% sequentially.
Income from continuing operations on a GAAP basis for the second quarter of fiscal 2006 was $30.5 million, or $0.34 per share on a diluted basis, an increase of 20% from the second quarter of last year and 8% sequentially.
Net revenue from continuing operations for the first six months of fiscal 2006 was $234.4 million, up 17% from the same period of fiscal year 2005. Income from continuing operations on a GAAP basis for the

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first six months of fiscal 2006 was $58.8 million, or $0.64 per share on a diluted basis, an increase of 22% from the same period last year.
Net income on a GAAP basis, including the results from discontinued operations, for the second quarter of fiscal 2006 was $43.0 million, or $0.48 per share on a diluted basis. Net income on a GAAP basis for the first six months of fiscal 2006 was $84.8 million, or $0.93 per share on a diluted basis.
During the second quarter, the Company repurchased $247 million of its common stock on the open market. In October, the Company repurchased an additional $103 million of common stock, thereby completing the current $350 million stock repurchase plan announced in August 2005. Since fiscal year 2003, the Company has repurchased a total of $550 million of the Company’s common stock under programs authorized by the Company’s Board of Directors.
The Company generated $68 million in cash from continuing operations during the first six months of fiscal 2006. The Company’s balance sheet at the end of the second quarter of fiscal 2006 was highlighted by $634 million of cash and short-term investments.
“We are pleased with our record revenue performance from continuing operations, which was driven by a 21% growth in our SAN Infrastructure Products from the prior year quarter,” said H. K. Desai, the Company’s chief executive officer and president. “The second quarter was also highlighted by our execution against our $350 million stock repurchase program, which was completed in October.”
The Company uses certain non-GAAP measures to supplement financial statements based on GAAP. A summary of these non-GAAP financial measures and a complete reconciliation of each non-GAAP measure to the most directly comparable GAAP measure, as well as a description of the reasons that management believes that these non-GAAP financial measures provide useful information to investors and the additional purposes for which management uses these non-GAAP financial measures is presented in the accompanying financial schedules. There is no difference between GAAP and non-GAAP results for any period of fiscal 2006.
Non-GAAP income from continuing operations for the second quarter of fiscal 2006 was $30.5 million, or $0.34 per share on a diluted basis, an increase of 12% from the second quarter of last year. During the first six months of fiscal 2006, the Company’s non-GAAP income from continuing operations was $58.8 million, or $0.64 per share on a diluted basis, and increased 13% from the same period last year.
QLogic’s fiscal 2006 second quarter conference call is scheduled for today at 2:30 p.m. Pacific Time (5:30 p.m. Eastern Time). H.K. Desai, chief executive officer and president, and Tony Massetti, senior vice president and chief financial officer, will host the conference call. The call is being webcast live via the Internet at www.qlogic.com. Phone access to participate in the conference call is available at (719) 457-2681, passcode: 9154830.

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The financial information that the Company intends to discuss during the conference call will be available on the Company’s website at www.qlogic.com for 12 months following the conference call. A replay of the conference call will be available via webcast for 12 months on the Company’s website at www.qlogic.com. An audio replay of the conference call will also be available through November 2, 2005 by calling (719) 457-0820, passcode: 9154830.
About QLogic
QLogic is the leading supplier of Fibre Channel host bus adapters (HBAs), blade server embedded Fibre Channel switches and Fibre Channel stackable switches. The Company is also a leading supplier of iSCSI HBAs. QLogic products are delivered to small, medium and large enterprises around the world, powering solutions from leading companies like Cisco, Dell, EMC, HP, IBM, NEC, Network Appliance and Sun Microsystems. QLogic is a member of the S&P 500 Index and Nasdaq 100 Index. For more information visit www.qlogic.com.
Note: All QLogic-issued press releases appear on the Company’s website (www.qlogic.com). Any announcement that does not appear on the QLogic website has not been issued by QLogic.
Disclaimer — Forward Looking Statements
This press release contains statements relating to future results of the Company (including certain beliefs and projections regarding business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied in the forward-looking statements. The Company advises readers that these potential risks and uncertainties include, but are not limited to: potential fluctuations in operating results; gross margins that may vary over time; revenues may be affected by changes in IT spending levels; the stock price of the Company may be volatile; the Company’s dependence on the storage area network market; the ability to maintain and gain market or industry acceptance of the Company’s products; the Company’s dependence on a limited number of customers; seasonal fluctuations and uneven sales patterns in orders from customers; the Company’s ability to compete effectively with other companies; declining average unit sales prices of comparable products; a reduction in sales efforts by current distributors; reliance on third party licenses; dependence on sole source and limited source suppliers; the Company’s dependence on relationships with certain silicon chip suppliers; the complexity of the Company’s products; sales fluctuations arising from customer transitions to new products; the uncertainty associated with SOX 404 compliance; environmental compliance costs; terrorist activities and resulting military actions; international, economic, regulatory, political and other risks; uncertain benefits from strategic business combinations; the ability to maintain or expand upon strategic alliances; the strain on resources caused by growth and expansion; the ability to attract and retain key personnel; the decreased effectiveness of equity compensation; difficulties in transitioning to smaller geometry process technologies; the ability to protect proprietary rights; the ability to satisfactorily resolve any infringement claims; changes in tax laws or adverse tax audit results; computer viruses and other tampering with the Company’s computer system; charter documents and stockholder rights plan that may discourage a business combination; and facilities located in areas subject to earthquakes and other natural disasters.
More detailed information on these and additional factors which could affect the Company’s operating and financial results are described in the Company’s Forms 10-K, 10-Q and other reports filed, or to be filed, with the Securities and Exchange Commission. The Company urges all interested parties to read these reports to gain a better understanding of the many business and other risks that the Company faces. The forward-looking statements contained in this press release are made only as of the date hereof, and the Company undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.
QLogic and the QLogic logo are registered trademarks of QLogic Corporation. Other trademarks and registered trademarks are the property of the companies with which they are associated.

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QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited — in thousands, except per share amounts)
                                         
    Three Months Ended     Six Months Ended  
    October 2,     July 3,     September 26,     October 2,     September 26,  
    2005     2005     2004     2005     2004  
Net revenues
   $ 119,012     $ 115,430     $ 102,281     $ 234,442     $ 200,951  
Cost of revenues
     34,995       33,993       29,270       68,988       57,425  
 
                              
Gross profit
     84,017       81,437       73,011       165,454       143,526  
 
                                        
Operating expenses:
                                        
Engineering and development
     21,417       20,359       21,013       41,776       40,966  
Sales and marketing
     15,617       15,233       12,982       30,850       26,090  
General and administrative
     4,190       3,892       4,219       8,082       8,424  
 
                              
Total operating expenses
     41,224       39,484       38,214       80,708       75,480  
 
                              
 
                                        
Operating income
     42,793       41,953       34,797       84,746       68,046  
 
                                        
Interest and other income
     6,111       6,119       4,233       12,230       7,866  
 
                              
 
                                        
Income from continuing operations before income taxes
     48,904       48,072       39,030       96,976       75,912  
 
                                        
Income taxes
     18,414       19,786       13,630       38,200       27,657  
 
                              
 
                                        
Income from continuing operations
     30,490       28,286       25,400       58,776       48,255  
 
                              
 
                                        
Income from discontinued operations, net of income taxes
     12,534       13,491       10,482       26,025       19,830  
 
                              
 
                                        
Net income
   $ 43,024     $ 41,777     $ 35,882     $ 84,801     $ 68,085  
 
                              
 
                                        
Income from continuing operations per share:
                                        
Basic
   $ 0.34     $ 0.31     $ 0.27     $ 0.65     $ 0.52  
Diluted
   $ 0.34     $ 0.31     $ 0.27     $ 0.64     $ 0.52  
 
                                        
Income from discontinued operations per share
                                        
Basic
   $ 0.14     $ 0.15     $ 0.11     $ 0.29     $ 0.21  
Diluted
   $ 0.14     $ 0.15     $ 0.11     $ 0.28     $ 0.21  
 
                                        
Net income per share:
                                        
Basic
   $ 0.48     $ 0.46     $ 0.39     $ 0.94     $ 0.73  
Diluted
   $ 0.48     $ 0.45     $ 0.38     $ 0.93     $ 0.73  
 
                                        
Number of shares used in per share computations:
                                        
Basic
     89,447       91,533       92,485       90,490       92,915  
Diluted
     90,526       92,672       93,222       91,599       93,664  

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QLOGIC CORPORATION
RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS
TO NON-GAAP INCOME FROM CONTINUING OPERATIONS
(unaudited — in thousands, except per share amounts)
                                         
    Three Months Ended     Six Months Ended  
    October 2,     July 3,     September 26,     October 2,     September 26,  
    2005     2005     2004     2005     2004  
GAAP income from continuing operations
   $ 30,490     $ 28,286     $ 25,400     $ 58,776     $ 48,255  
Items excluded from GAAP income from continuing operations:
                                        
Merger related stock compensation charges included in engineering and development expenses
     —       —       1,779       —       3,602  
 
                              
Non-GAAP income from continuing operations
   $ 30,490     $ 28,286     $ 27,179     $ 58,776     $ 51,857  
 
                              
 
                                        
Diluted income from continuing operations per share:
                                        
GAAP income from continuing operations
   $ 0.34     $ 0.31     $ 0.27     $ 0.64     $ 0.52  
Adjustments
     —       —       0.02       —       0.03  
 
                              
Non-GAAP income from continuing operations
   $ 0.34     $ 0.31     $ 0.29     $ 0.64     $ 0.55  
 
                              
Non-GAAP Financial Measurements
The non-GAAP financial measurements contained herein are a supplement to the corresponding financial measurements prepared in accordance with generally accepted accounting principles (GAAP). The non-GAAP financial information presented excludes non-cash merger related stock compensation charges, which relate to the Company’s acquisition of Little Mountain Group, Inc. in January 2001. Such non-cash charges ended during the fourth quarter of fiscal 2005. Management believes this item is not indicative of the Company’s on-going core operating performance.
The Company has presented non-GAAP income from continuing operations and non-GAAP diluted income from continuing operations per share, on a basis consistent with its historical presentation, to assist investors in understanding the Company’s core income from continuing operations and non-GAAP diluted income from continuing operations per share on an on-going basis. The non-GAAP presentation also enhances comparisons of the Company’s core net profitability with historical periods and comparisons of the Company’s core net profitability with the corresponding results for competitors. Management believes that on-going income from continuing operations and diluted income from continuing operations per share are important measures in the evaluation of the Company’s profitability. These non-GAAP financial measures exclude the adjustment described above, and thus provide an overall measure of the Company’s on-going net profitability and related profitability on a diluted per share basis.
Management uses non-GAAP income from continuing operations in its evaluation of the Company’s core after-tax results of operations and trends between fiscal periods and believes that this measure is an important component of its internal performance measurement process. In addition, the Company prepares and maintains its budgets and forecasts for future periods on a basis consistent with this non-GAAP financial measurement.
The non-GAAP financial measurements presented herein have certain limitations in that they do not reflect all of the costs associated with the operations of the Company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP information presented by the Company may be different from the non-GAAP measures used by other companies.

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QLOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited — in thousands)
                 
    October 2, 2005     April 3, 2005  
ASSETS
                
 
                
Current assets:
                
Cash and cash equivalents
   $ 51,003     $ 165,644  
Short-term investments
     583,112       646,694  
Accounts receivable, net
     64,383       54,245  
Inventories
     25,222       22,661  
Current assets of discontinued operations
     22,558       21,570  
Other current assets
     24,279       28,705  
 
            
Total current assets
     770,557       939,519  
 
                
Property and equipment, net
     75,556       71,322  
Long-term assets of discontinued operations
     6,935       6,454  
Other assets
     8,522       9,120  
 
            
 
                
 
   $ 861,570     $ 1,026,415  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Accounts payable
   $ 23,674     $ 19,975  
Accrued compensation
     15,318       19,629  
Income taxes payable
     20,855       14,125  
Accrued purchases of treasury stock
     33,946       —  
Current liabilities of discontinued operations
     8,631       7,648  
Other liabilities
     8,108       7,444  
 
            
Total current liabilities
     110,532       68,821  
 
                
Deferred tax liabilities
     630       —  
Long-term liabilities of discontinued operations
     1,648       1,411  
 
                
Stockholders’ equity:
                
Common stock
     97       96  
Additional paid-in capital
     514,222       504,760  
Retained earnings
     684,523       599,722  
Accumulated other comprehensive loss
     (2,882 )     (3,394 )
Treasury stock
     (447,200 )     (145,001 )
 
            
Total stockholders’ equity
     748,760       956,183  
 
            
 
                
 
   $ 861,570     $ 1,026,415  
 
            

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QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited — in thousands)
                 
    Six Months Ended  
    October 2,     September 26,  
    2005     2004  
Cash flows from operating activities:
                
Income from continuing operations
   $ 58,776     $ 48,255  
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
                
Depreciation and amortization
     8,547       7,173  
Deferred income taxes
     1,975       (3,115 )
Tax benefit from issuance of stock under stock plans
     1,288       487  
Stock-based compensation
     175       329  
Provision for losses on accounts receivable
     72       424  
Loss on disposal of property and equipment
     103       7  
Changes in operating assets and liabilities:
                
Accounts receivable
     (10,210 )     2,303  
Inventories
     (2,561 )     1,615  
Other assets
     3,162       (41 )
Accounts payable
     3,699       (1 )
Accrued compensation
     (4,311 )     (4,213 )
Income taxes payable
     6,730       3,283  
Other liabilities
     664       616  
 
            
Net cash provided by operating activities
     68,109       57,122  
 
            
 
                
Cash flows from investing activities:
                
Purchases of marketable securities
     (370,635 )     (347,240 )
Sales and maturities of marketable securities
     434,713       337,672  
Additions to property and equipment
     (12,351 )     (6,941 )
 
            
Net cash provided by (used in) investing activities
     51,727       (16,509 )
 
            
 
                
Cash flows from financing activities:
                
Proceeds from issuance of stock under stock plans
     8,000       3,596  
Purchase of treasury stock
     (268,253 )     (50,008 )
 
            
Net cash used in financing activities
     (260,253 )     (46,412 )
 
            
 
                
Net cash provided by discontinued operations
     25,776       11,858  
 
            
 
                
Net increase (decrease) in cash and cash equivalents
     (114,641 )     6,059  
 
                
Cash and cash equivalents at beginning of period
     165,644       62,911  
 
            
 
                
Cash and cash equivalents at end of period
   $ 51,003     $ 68,970  
 
            

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QLOGIC CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
(unaudited — in thousands)
Net Revenues
A summary of the Company’s revenue components is as follows:
                                         
    Three Months Ended     Six Months Ended  
    October 2,     July 3,     September 26,     October 2,     September 26,  
    2005     2005     2004     2005     2004  
SAN Infrastructure Products
   $ 110,480     $ 107,323     $ 91,073     $ 217,803     $ 180,352  
Management Controllers
     7,048       6,908       10,469       13,956       19,758  
Other
     1,484       1,199       739       2,683       841  
 
                              
 
   $ 119,012     $ 115,430     $ 102,281     $ 234,442     $ 200,951  
 
                              
Geographic Revenues
Revenues by geographic area are presented based upon the country of destination. Net revenues by geographic area are as follows:
                                         
    Three Months Ended     Six Months Ended  
    October 2,     July 3,     September 26,     October 2,     September 26,  
    2005     2005     2004     2005     2004  
United States
   $ 65,466     $ 65,202     $ 54,155     $ 130,668     $ 106,267  
International
     53,546       50,228       48,126       103,774       94,684  
 
                              
 
   $ 119,012     $ 115,430     $ 102,281     $ 234,442     $ 200,951  
 
                              

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