EX-99.1 2 a20176exv99w1.htm EXHIBIT 99.1 exv99w1
 

Exhibit 99.1
FOR IMMEDIATE RELEASE
Editor’s Contact:
Christine Flavio
QLogic Corporation
Phone: (650) 934-8057
christine.flavio@qlogic.com
Investor’s Contact:
Tony Massetti
QLogic Corporation
Phone: (949) 389-7533
tony.massetti@qlogic.com
 
QLOGIC REPORTS FOURTH QUARTER
AND FISCAL YEAR 2006 RESULTS
Record Revenue from Continuing Operations
Aliso Viejo, Calif., May 3, 2006 — QLogic Corporation (Nasdaq:QLGC), the leader in Fibre Channel host bus adapters (HBAs), stackable switches and blade server switches today announced its financial results for the fourth quarter and fiscal year ended April 2, 2006.
Net revenue from continuing operations for the fourth quarter of fiscal 2006 was a record $130.5 million and increased 17% from $111.7 million in the comparable quarter last year. During the fourth quarter of fiscal 2006, revenue from SAN Infrastructure Products, which are comprised of HBAs, switches and silicon, was $121.8 million, an increase of 19% from the comparable quarter last year and 1% sequentially.
Income from continuing operations on a GAAP basis for the fourth quarter of fiscal 2006 was $31.4 million, or $0.19 per share on a diluted basis, an increase of 1% from the fourth quarter of last year and a decrease of 1% sequentially.
Net revenue from continuing operations for fiscal 2006 was $494.1 million, up 15% from $428.7 million for fiscal 2005. Income from continuing operations on a GAAP basis for fiscal 2006 was $121.8 million, or $0.70 per share on a diluted basis, an increase of 9% from $111.4 million, or $0.59 per share on a diluted basis, for fiscal 2005.
Net income on a GAAP basis for the fourth quarter of fiscal 2006, including the results from discontinued operations, was $32.5 million, or $0.20 per share on a diluted basis. Net income on a GAAP basis for fiscal 2006, including the results from discontinued operations, was $283.6 million, or $1.63 per share on a diluted basis.

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The Company generated $132.5 million in cash from continuing operations during fiscal 2006. The Company’s balance sheet at the end of fiscal 2006 was highlighted by $665.6 million of cash and short-term investments.
“I am very pleased with QLogic’s fiscal year 2006 performance,” said H.K. Desai, the Company’s chief executive officer and president. “With annual revenue growth for HBAs in excess of 20% and switches in excess of 35%, we are confident that the continued execution of our strategies will support our ongoing growth expectations.”
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.
Non-GAAP income from continuing operations for the fourth quarter of fiscal 2006 was $34.5 million, or $0.21 per share on a diluted basis, an increase of 10% sequentially. During fiscal 2006, the Company’s non-GAAP income from continuing operations was $124.7 million, or $0.72 per share on a diluted basis, an increase of 6% from fiscal 2005.
QLogic’s fourth quarter and fiscal 2006 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 and via CCBN. Phone access to participate in the conference call is available at (719) 457-2654, pass code: 7044570.
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 May 17, 2006 at (719) 457-0820 or (888) 203-1112, pass code: 7044570.

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Effects of 2006 Stock Split
All share numbers and per share amounts set forth in this release and the accompanying financial schedules have been adjusted to reflect the Company’s two-for-one stock split effected March 2, 2006 through the payment of a stock dividend to the holders of record of common stock on February 16, 2006.
About QLogic
QLogic is a leading supplier of high performance storage networking solutions including Fibre Channel host bus adapters (HBAs), blade server embedded Fibre Channel switches, Fibre Channel stackable switches, iSCSI HBAs, iSCSI routers and storage services platforms for enabling advanced storage management applications. The Company is also a leading supplier of server networking products including InfiniBand host channel adapters that accelerate cluster performance. QLogic products are delivered to small-to-medium business and large enterprises around the world via its channel partner community. QLogic’s products are also powering solutions from leading companies like Cisco, Dell, EMC, Hitachi Data Systems, HP, IBM, NEC, Network Appliance and Sun Microsystems. QLogic is a member of the S&P 500 Index. For more information go to 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 systems; charter documents and stockholder rights plan that may discourage a business combination; and facilities of the Company and its suppliers and customers are located in areas subject to 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     Year Ended  
    April 2,     January 1,     April 3,     April 2,     April 3,  
    2006     2006     2005     2006     2005  
Net revenues
   $ 130,450     $ 129,185     $ 111,727     $ 494,077     $ 428,719  
Cost of revenues
     38,358       36,900       30,687       144,246       121,074  
 
                              
Gross profit
     92,092       92,285       81,040       349,831       307,645  
 
                              
 
                                        
Operating expenses:
                                        
Engineering and development
     25,180       22,797       20,766       89,753       82,791  
Sales and marketing
     17,466       16,100       14,602       64,416       54,582  
General and administrative
     4,851       4,362       3,916       17,295       16,659  
Purchased in-process research and development
     10,510       —       —       10,510       —  
 
                              
Total operating expenses
     58,007       43,259       39,284       181,974       154,032  
 
                              
 
                                        
Operating income
     34,085       49,026       41,756       167,857       153,613  
 
                                        
Interest and other income
     15,246       5,151       5,539       32,627       17,873  
 
                              
 
                                        
Income from continuing operations before income taxes
     49,331       54,177       47,295       200,484       171,486  
 
                                        
Income taxes
     17,957       22,496       16,177       78,653       60,071  
 
                              
 
                                        
Income from continuing operations
     31,374       31,681       31,118       121,831       111,415  
 
                                        
Income from discontinued operations, net of income taxes
     1,175       134,557       15,037       161,757       46,181  
 
                              
 
                                        
Net income
   $ 32,549     $ 166,238     $ 46,155     $ 283,588     $ 157,596  
 
                              
 
                                        
Income from continuing operations per share:
                                        
Basic
   $ 0.19     $ 0.20     $ 0.17     $ 0.71     $ 0.60  
Diluted
   $ 0.19     $ 0.19     $ 0.17     $ 0.70     $ 0.59  
 
                                        
Income from discontinued operations per share:
                                        
Basic
   $ 0.01     $ 0.83     $ 0.08     $ 0.95     $ 0.25  
Diluted
   $ 0.01     $ 0.83     $ 0.08     $ 0.93     $ 0.25  
 
                                        
Net income per share:
                                        
Basic
   $ 0.20     $ 1.03     $ 0.25     $ 1.66     $ 0.85  
Diluted
   $ 0.20     $ 1.02     $ 0.25     $ 1.63     $ 0.84  
 
                                        
Number of shares used in per share calculations:
                                        
Basic
     161,722       161,317       184,186       171,250       185,024  
Diluted
     164,378       163,093       187,699       173,467       187,315  

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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     Year Ended  
    April 2,     January 1,     April 3,     April 2,     April 3,  
    2006     2006     2005     2006     2005  
GAAP income from continuing operations
   $ 31,374     $ 31,681     $ 31,118     $ 121,831     $ 111,415  
Items excluded from GAAP income from continuing operations:
                                        
Amortization of acquisition related intangible assets included in cost of revenues
     201       —       —       201       —  
Acquisition related non-cash compensation charges included in:
                                        
Engineering and development expenses
     256       170       511       426       5,892  
Sales and marketing expenses
     62       42       —       104       —  
Insurance recovery included in general and administrative expenses
     —       (700 )     —       (700 )     —  
Purchased in-process research and development
     10,510       —       —       10,510       —  
Gain on sale of shares acquired in the sale of discontinued operations included in interest and other income
     (8,463 )     —       —       (8,463 )     —  
Income tax effect
     578       194       —       772       —  
 
                              
Non-GAAP income from continuing operations
   $ 34,518     $ 31,387     $ 31,629     $ 124,681     $ 117,307  
 
                              
Diluted income from continuing operations per share:
                                        
GAAP income from continuing operations
   $ 0.19     $ 0.19     $ 0.17     $ 0.70     $ 0.59  
Adjustments
     0.02       —       —       0.02       0.04  
 
                              
Non-GAAP income from continuing operations
   $ 0.21     $ 0.19     $ 0.17     $ 0.72     $ 0.63  
 
                              
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 for fiscal 2006 excludes amortization of acquisition related intangible assets, acquisition related non-cash compensation charges, purchased in-process research and development, an insurance recovery received, the gain on sale of shares received as consideration in the sale of the hard disk drive and tape drive controller business and the related income tax effect of these items. The non-GAAP financial information presented for fiscal 2005 excludes acquisition related non-cash compensation charges. Management believes these items are 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

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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 adjustments 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)
                 
    April 2, 2006     April 3, 2005  
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 125,192     $ 165,644  
Short-term investments
     540,448       646,694  
Accounts receivable, net
     67,571       54,245  
Inventories
     39,440       22,661  
Other current assets
     46,441       32,699  
Current assets related to discontinued operations
     —       17,576  
 
            
Total current assets
     819,092       939,519  
 
                
Property and equipment, net
     82,630       71,322  
Goodwill and other intangible assets
     32,679       8,518  
Other assets
     3,306       527  
Long-term assets related to discontinued operations
     —       6,454  
 
            
 
                
 
   $ 937,707     $ 1,026,340  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Accounts payable
   $ 32,160     $ 19,975  
Accrued compensation
     22,990       19,629  
Income taxes payable
     12,920       17,999  
Other current liabilities
     10,283       7,444  
Current liabilities related to discontinued operations
     —       3,774  
 
            
Total current liabilities
     78,353       68,821  
 
                
Deferred tax liabilities
     —       1,336  
 
            
Total liabilities
     78,353       70,157  
 
            
 
                
Stockholders’ equity:
                
Common stock
     195       193  
Additional paid-in capital
     537,648       504,663  
Retained earnings
     883,310       599,722  
Accumulated other comprehensive loss
     (1,799 )     (3,394 )
Treasury stock
     (560,000 )     (145,001 )
 
            
Total stockholders’ equity
     859,354       956,183  
 
            
 
   $ 937,707     $ 1,026,340  
 
            

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QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited — in thousands)
                 
    Year Ended  
    April 2,     April 3,  
    2006     2005  
Cash flows from operating activities:
                
Net income
   $ 283,588     $ 157,596  
Income from discontinued operations, net of income taxes
     (161,757 )     (46,181 )
 
            
Income from continuing operations
     121,831       111,415  
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
                
Depreciation and amortization
     17,898       15,059  
Purchased in-process research and development
     10,510       —  
Deferred income taxes
     (4,480 )     (158 )
Tax benefit from issuance of stock under stock plans
     5,055       2,441  
Stock-based compensation
     175       578  
Provision for losses on accounts receivable
     (366 )     90  
Loss on disposal of property and equipment
     168       187  
Changes in operating assets and liabilities, net of acquisition:
                
Accounts receivable
     (12,513 )     (3,297 )
Inventories
     (16,230 )     (2,671 )
Other assets
     (5,840 )     (3,572 )
Accounts payable
     11,877       3,840  
Accrued compensation
     3,263       3,528  
Income taxes payable
     (1,205 )     4,094  
Other liabilities
     2,405       1,593  
 
            
Net cash provided by operating activities
     132,548       133,127  
 
            
 
                
Cash flows from investing activities:
                
Purchases of marketable securities
     (946,087 )     (672,418 )
Sales and maturities of marketable securities
     1,101,680       694,140  
Additions to property and equipment
     (28,295 )     (22,299 )
Acquisition of business, net of cash acquired
     (35,210 )     —  
Restricted cash placed in escrow
     (12,000 )     —  
Purchase of other assets
     —       (4,000 )
 
            
Net cash provided by (used in) investing activities
     80,088       (4,577 )
 
            
 
                
Cash flows from financing activities:
                
Proceeds from issuance of stock under stock plans
     27,757       13,735  
Purchase of treasury stock
     (414,999 )     (85,009 )
 
            
Net cash used in financing activities
     (387,242 )     (71,274 )
 
            
 
                
Cash provided by (used in) continuing operations
     (174,606 )     57,276  
 
            
 
                
Cash flows from discontinued operations:
                
Net cash provided by (used in) operating activities
     (47,182 )     48,815  
Net cash provided by (used in) investing activities, including proceeds from sale
     181,336       (3,358 )
 
            
Cash provided by discontinued operations
     134,154       45,457  
 
            
 
                
Net increase (decrease) in cash and cash equivalents
     (40,452 )     102,733  
 
                
Cash and cash equivalents at beginning of period
     165,644       62,911  
 
            
 
                
Cash and cash equivalents at end of period
   $ 125,192     $ 165,644  
 
            

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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     Year Ended  
    April 2,     January 1,     April 3,     April 2,     April 3,  
    2006     2006     2005     2006     2005  
SAN Infrastructure Products
   $ 121,845     $ 120,402     $ 101,985     $ 460,050     $ 387,922  
Management Controllers
     7,130       6,050       7,971       27,136       37,003  
Other
     1,475       2,733       1,771       6,891       3,794  
 
                              
 
   $ 130,450     $ 129,185     $ 111,727     $ 494,077     $ 428,719  
 
                              
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     Year Ended  
    April 2,     January 1,     April 3,     April 2,     April 3,  
    2006     2006     2005     2006     2005  
United States
   $ 72,875     $ 68,394     $ 60,847     $ 271,937     $ 227,771  
International
     57,575       60,791       50,880       222,140       200,948  
 
                              
 
   $ 130,450     $ 129,185     $ 111,727     $ 494,077     $ 428,719  
 
                              

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