EX-99.1 2 a26638exv99w1.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 THIRD QUARTER
RESULTS FOR FISCAL YEAR 2007
Record Revenues and Earnings Achieved
Aliso Viejo, Calif., January 23, 2007 — QLogic Corporation (Nasdaq:QLGC), the leader in Fibre Channel host bus adapters (HBAs), stackable switches and blade server switches, today announced its third quarter financial results for the period ended December 31, 2006.
Third Quarter Highlights
  •   Record revenue achieved for the 7th consecutive quarter.
 
  •   Net revenue increased 22% from the comparable quarter last year to $157.6 million.
 
  •   Income from continuing operations: $35.5 million GAAP, $44.9 million non-GAAP.
 
  •   Income from continuing operations per diluted share: $0.22 GAAP, $0.28 non-GAAP.
 
  •   $555.3 million in cash and marketable securities as of December 31.
 
  •   Cash generated from operations was $42.2 million.
Financial Results
Net revenue for the third quarter of fiscal 2007 was a record $157.6 million and increased 22% from $129.2 million in the comparable quarter last year. Revenue from SAN Infrastructure Products, which is comprised primarily of HBAs, switches and silicon, was $152.5 million during the third quarter of fiscal 2007, an increase of 27% from the comparable quarter last year.
“We are very pleased with our financial performance during the third quarter, which was driven by another strong quarter of HBA revenue growth,” said H. K. Desai, the Company’s chief executive officer and president. “Our HBA revenue grew 33% from the comparable quarter last year and 14% sequentially.”

 

 

Income from continuing operations on a GAAP basis for the third quarter of fiscal 2007 was $35.5 million, or $0.22 per share on a diluted basis, and increased 12% from the comparable quarter last year. Non-GAAP income from continuing operations for the third quarter of fiscal 2007 was $44.9 million, or $0.28 per share on a diluted basis, and increased 43% from the comparable quarter last year.
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.
QLogic’s fiscal 2007 third 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 and via CCBN. Phone access to participate in the conference call is available at (719) 457-2626, pass code: 9939749 .
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 February 6, 2007 at (719) 457-0820 or (888) 203-1112, pass code: 9939749 .
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 businesses and large enterprises around the world via its channel partner community. QLogic 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 http://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; 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 attract and retain key personnel; recognition of compensation expense related to employee stock options and the Company’s employee stock purchase plan; the decreased effectiveness of equity compensation; difficulties in implementing smaller geometry process technologies; the ability to protect proprietary rights; the ability to satisfactorily resolve any infringement claims; reliance on third party licenses; the use of “open source” software in our products; changes in our tax provisions or adverse outcomes resulting from examination of our income tax returns; computer viruses and other tampering with the Company’s computer systems; 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 does not intend 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.

 

 

QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited — in thousands, except per share amounts)
                                         
    Three Months Ended     Nine Months Ended  
    December 31,     October 1,     January 1,     December 31,     January 1,  
    2006     2006     2006     2006     2006  
Net revenues
   $ 157,611     $ 145,298     $ 129,185     $ 439,601     $ 363,627  
Cost of revenues
     50,698       45,756       36,900       139,774       105,888  
 
                              
Gross profit
     106,913       99,542       92,285       299,827       257,739  
 
                              
 
                                        
Operating expenses:
                                        
Engineering and development
     34,003       32,619       22,797       99,542       64,573  
Sales and marketing
     21,586       20,108       16,100       64,095       46,950  
General and administrative
     7,238       7,594       4,362       23,274       12,444  
Purchased in-process research and development
     —       —       —       1,910       —  
 
                              
Total operating expenses
     62,827       60,321       43,259       188,821       123,967  
 
                              
 
                                        
Operating income
     44,086       39,221       49,026       111,006       133,772  
 
                                        
Interest and other income
     5,646       5,844       5,151       18,332       17,381  
 
                              
 
                                        
Income from continuing operations before income taxes
     49,732       45,065       54,177       129,338       151,153  
 
                                        
Income taxes
     14,278       14,618       22,496       42,361       60,696  
 
                              
 
                                        
Income from continuing operations
     35,454       30,447       31,681       86,977       90,457  
 
                              
 
                                        
Discontinued operations:
                                        
Income from operations, net of income taxes
     —       —       4,570       —       30,595  
Gain on sale, net of income taxes
     —       —       129,987       —       129,987  
 
                              
Income from discontinued operations
     —       —       134,557       —       160,582  
 
                              
 
                                        
Net income
   $ 35,454     $ 30,447     $ 166,238     $ 86,977     $ 251,039  
 
                              
 
                                        
Income from continuing operations per share:
                                        
Basic
   $ 0.22     $ 0.19     $ 0.20     $ 0.55     $ 0.52  
Diluted
   $ 0.22     $ 0.19     $ 0.19     $ 0.54     $ 0.51  
 
                                        
Income from discontinued operations per share:
                                        
Basic
   $ —     $ —     $ 0.83     $ —     $ 0.92  
Diluted
   $ —     $ —     $ 0.83     $ —     $ 0.91  
 
                                        
Net income per share:
                                        
Basic
   $ 0.22     $ 0.19     $ 1.03     $ 0.55     $ 1.44  
Diluted
   $ 0.22     $ 0.19     $ 1.02     $ 0.54     $ 1.42  
 
                                        
Number of shares used in per share calculations:
                                        
Basic
     158,532       158,468       161,317       159,516       174,426  
Diluted
     160,760       159,827       163,093       161,161       176,497  

 

 

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     Nine Months Ended  
    December 31,     October 1,     January 1,     December 31,     January 1,  
    2006     2006     2006     2006     2006  
GAAP income from continuing operations
   $ 35,454     $ 30,447     $ 31,681     $ 86,977     $ 90,457  
Items excluded from GAAP income from continuing operations:
                                        
Stock-based compensation
     7,511       6,371       —       22,546       —  
Amortization of purchased intangible assets
     2,370       2,370       —       7,851       —  
Acquisition-related stock-based compensation
     2,337       2,593       212       7,809       212  
Purchased in-process research and development
     —       —       —       1,910       —  
Insurance recovery
     —       —       (700 )     —       (700 )
Income tax effect
     (2,777 )     (3,441 )     194       (10,205 )     194  
 
                              
Total non-GAAP adjustments
     9,441       7,893       (294 )     29,911       (294 )
 
                              
Non-GAAP income from continuing operations
   $ 44,895     $ 38,340     $ 31,387     $ 116,888     $ 90,163  
 
                              
 
                                        
Diluted income from continuing operations per share:
                                        
GAAP income from continuing operations
   $ 0.22     $ 0.19     $ 0.19     $ 0.54     $ 0.51  
Adjustments
     0.06       0.05       —       0.19       —  
 
                              
Non-GAAP income from continuing operations
   $ 0.28     $ 0.24     $ 0.19     $ 0.73     $ 0.51  
 
                              
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 the items summarized in the above table. Management believes that adjustments for these items enhance the comparison of period to period operating results or 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 core 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 non-GAAP income from continuing operations and non-GAAP 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 in the above table, 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.
A summary of the non-GAAP adjustments presented in the table above by the financial statement line impacted is as follows:
                                         
(unaudited - in thousands)   Three Months Ended     Nine Months Ended  
    December 31,     October 1,     January 1,     December 31,     January 1,  
    2006     2006     2006     2006     2006  
Non-GAAP Adjustments:
                                        
Cost of revenues:
                                        
Stock-based compensation
   $ 495     $ 424     $ —     $ 1,431     $ —  
Amortization of purchased intangible assets
     2,245       2,245       —       7,476       —  
Acquisition-related stock-based compensation
     13       13       —       39       —  
 
                              
Total cost of revenue adjustments
     2,753       2,682       —       8,946       —  
 
                              
 
                                        
Operating expenses:
                                        
Engineering and development:
                                        
Stock-based compensation
     3,023       2,419       —       8,266       —  
Amortization of purchased intangible assets
     67       66       —       200       —  
Acquisition-related stock-based compensation
     1,811       1,965       170       5,985       170  
Sales and marketing:
                                        
Stock-based compensation
     1,767       1,425       —       5,883       —  
Amortization of purchased intangible assets
     58       59       —       175       —  
Acquisition-related stock-based compensation
     491       591       42       1,714       42  
General and administrative:
                                        
Stock-based compensation
     2,226       2,103       —       6,966       —  
Acquisition-related stock-based compensation
     22       24       —       71       —  
Insurance recovery
     —       —       (700 )     —       (700 )
Purchased in-process research and development
     —       —       —       1,910       —  
 
                              
Total operating expense adjustments
     9,465       8,652       (488 )     31,170       (488 )
 
                              
 
                                        
Total non-GAAP adjustments before income taxes
     12,218       11,334       (488 )     40,116       (488 )
Income tax effect
     (2,777 )     (3,441 )     194       (10,205 )     194  
 
                              
Total non-GAAP adjustments
   $ 9,441     $ 7,893     $ (294 )   $ 29,911     $ (294 )
 
                              

 

 

QLOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited — in thousands)
                 
    December 31, 2006     April 2, 2006  
ASSETS
                
 
                
Current assets:
                
Cash and cash equivalents
   $ 91,643     $ 125,192  
Short-term marketable securities
     325,413       540,448  
Accounts receivable, net
     85,545       67,571  
Inventories
     44,464       39,440  
Other current assets
     36,648       46,441  
 
            
Total current assets
     583,713       819,092  
 
                
Long-term marketable securities
     138,272       —  
Property and equipment, net
     89,923       82,630  
Goodwill
     137,557       24,725  
Purchased intangible assets, net
     37,389       7,954  
Other assets
     31,218       3,306  
 
            
 
   $ 1,018,072     $ 937,707  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Accounts payable
   $ 33,305     $ 32,160  
Accrued compensation
     29,493       23,520  
Income taxes payable
     18,606       12,920  
Deferred revenue
     6,645       3,662  
Other current liabilities
     7,829       6,091  
 
            
Total current liabilities
     95,878       78,353  
 
                
Deferred tax liabilities
     2,709       —  
 
            
Total liabilities
     98,587       78,353  
 
            
 
                
Stockholders’ equity:
                
Common stock
     198       195  
Additional paid-in capital
     598,614       537,648  
Retained earnings
     970,287       883,310  
Accumulated other comprehensive loss
     (3,998 )     (1,799 )
Treasury stock
     (645,616 )     (560,000 )
 
            
Total stockholders’ equity
     919,485       859,354  
 
            
 
                
 
   $ 1,018,072     $ 937,707  
 
            

 

 

QLOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited — in thousands)
                 
    Nine Months Ended  
    December 31,     January 1,  
    2006     2006  
Cash flows from operating activities:
                
Net income
   $ 86,977     $ 251,039  
Income from discontinued operations, net of income taxes
     —       (30,595 )
Gain from sale of discontinued operations, net of income taxes
     —       (129,987 )
 
            
Income from continuing operations
     86,977       90,457  
Adjustments to reconcile income from continuing operations to net cash provided by continuing operating activities:
                
Depreciation and amortization
     26,904       12,851  
Stock-based compensation
     22,546       175  
Acquisition-related stock-based compensation
     7,809       212  
Purchased in-process research and development
     1,910       —  
Deferred income taxes
     (14,643 )     (7,117 )
Provision for losses on accounts receivable
     (55 )     57  
Loss on disposal of property and equipment
     163       130  
Tax benefit from issuance of stock under stock plans
     —       2,134  
Changes in operating assets and liabilities, net of acquisitions:
                
Accounts receivable
     (14,197 )     (15,894 )
Inventories
     (2,915 )     (6,578 )
Other assets
     1,109       3,014  
Accounts payable
     (2,777 )     3,056  
Accrued compensation
     (1,443 )     (2,276 )
Income taxes payable
     5,686       22,223  
Deferred revenue
     2,983       1,557  
Other liabilities
     629       958  
 
            
Net cash provided by continuing operating activities
     120,686       104,959  
 
            
 
                
Cash flows from investing activities:
                
Purchases of marketable securities
     (240,441 )     (639,830 )
Sales and maturities of marketable securities
     313,644       689,038  
Additions to property and equipment
     (23,666 )     (18,139 )
Acquisition of businesses, net of cash acquired
     (142,383 )     (35,241 )
Restricted cash received from escrow
     12,508       —  
Restricted cash placed in escrow
     (24,000 )     (12,000 )
 
            
Net cash used in continuing investing activities
     (104,338 )     (16,172 )
 
            
 
                
Cash flows from financing activities:
                
Proceeds from issuance of stock under stock plans
     31,063       12,394  
Tax benefit from issuance of stock under stock plans
     6,288       —  
Payoff of line of credit assumed in acquisition
     (1,632 )     —  
Purchase of treasury stock
     (85,616 )     (414,999 )
 
            
Net cash used in continuing financing activities
     (49,897 )     (402,605 )
 
            
 
                
Net cash used in continuing operations
     (33,549 )     (313,818 )
 
            
 
                
Cash flows from discontinued operations:
                
Net cash provided by operating activities
     —       32,719  
Net cash provided by investing activities, including proceeds from sale
     —       181,336  
 
            
Net cash provided by discontinued operations
     —       214,055  
 
            
 
                
Net decrease in cash and cash equivalents
     (33,549 )     (99,763 )
 
                
Cash and cash equivalents at beginning of period
     125,192       165,644  
 
            
 
                
Cash and cash equivalents at end of period
   $ 91,643     $ 65,881  
 
            

 

 

QLOGIC CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
(unaudited — in thousands)
Net Revenues
A summary of the Company’s revenue components is as follows:
                                         
    Three Months Ended     Nine Months Ended  
    December 31,     October 1,     January 1,     December 31,     January 1,  
    2006     2006     2006     2006     2006  
SAN Infrastructure Products
   $ 152,463     $ 135,283     $ 120,402     $ 415,145     $ 338,205  
Management Controllers
     2,557       5,430       6,050       14,876       20,006  
Other
     2,591       4,585       2,733       9,580       5,416  
 
                              
 
   $ 157,611     $ 145,298     $ 129,185     $ 439,601     $ 363,627  
 
                              
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     Nine Months Ended  
    December 31,     October 1,     January 1,     December 31,     January 1,  
    2006     2006     2006     2006     2006  
United States
   $ 78,779     $ 79,072     $ 68,394     $ 236,224     $ 199,062  
Europe, Middle East and Africa
     38,677       31,280       31,551       96,724       83,675  
Asia-Pacific and Japan
     29,769       27,784       27,700       86,797       78,707  
Rest of world
     10,386       7,162       1,540       19,856       2,183  
 
                              
 
   $ 157,611     $ 145,298     $ 129,185     $ 439,601     $ 363,627