8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 29, 2015

QLOGIC CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	0-23298	33-0537669
(State of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

26650 Aliso Viejo Parkway, Aliso Viejo, California	92656
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 389-6000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On January 29, 2015, the Company reported the financial results for its third fiscal quarter ended December 28, 2014. A copy of the press release issued by the Company concerning the foregoing results is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information contained herein and in the accompanying Exhibit 99.1 shall not be incorporated by reference into any filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such filing. The information in this report, including Exhibit 99.1 hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that section.

Discussion of Non-GAAP Financial Measures

In addition to the results presented on a generally accepted accounting principles (GAAP) basis in the press release included in Exhibit 99.1, the Company has also included certain non-GAAP financial measures. These non-GAAP financial measures include non-GAAP net income and non-GAAP net income per diluted share.

The Company believes that these supplemental non-GAAP financial measures, when presented in conjunction with the corresponding GAAP financial measures, provide useful information to investors and management regarding financial and business trends relating to its results of operations. However, non-GAAP financial measures 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 financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.

The Company has presented non-GAAP net income and non-GAAP net income per diluted share, on a basis consistent with its historical presentation, to assist investors in understanding the Company’s core net income and core net income per diluted share on an on-going basis. These non-GAAP financial measures may also assist investors in making comparisons of the Company’s core profitability with historical periods. Although the non-GAAP financial measures presented by the Company may be different from the non-GAAP financial measures used by other companies, the Company believes that these non-GAAP financial measures may also assist investors in making comparisons of the Company’s core profitability with the corresponding results for its competitors. Management also believes that non-GAAP net income and non-GAAP net income per diluted share are important measures in the evaluation of the Company’s profitability.

Management uses non-GAAP net income and non-GAAP net income per diluted share in its evaluation of the Company’s core after-tax results of operations and trends between fiscal periods and believes that these measures are important components 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 these non-GAAP financial measures. Management believes that providing these non-GAAP financial measures allows investors to view the Company’s financial results in the way that management views the financial results.

The Company excludes the following items from its non-GAAP financial measures:

Stock-based compensation. Stock-based compensation consists of expenses associated with stock options and restricted stock units granted by the Company and purchases of common stock under the Company’s Employee Stock Purchase Plan. Stock-based compensation is a non-cash expense that varies in amount from period to period as a result of factors that are difficult to predict and are generally outside the control of the Company, such as the market price and associated volatility of the Company’s common stock. Accordingly, management believes these expenses are not reflective of the Company’s core operating expenses and excludes them when assessing its core operating results and from its internal budgets and forecasts.

Amortization of acquisition-related intangible assets. In connection with acquisitions, the Company records purchased intangible assets which are amortized over their estimated useful lives. The amortization is a non-cash expense which is not considered by management when assessing the core operating results of the Company. The acquisition-related intangible assets and the related amortization can vary significantly based on the size and frequency of acquisitions.

Amortization of license fee. The Company entered into a patent license agreement that covers certain products in exchange for a one-time payment. The cost of the license attributable to future periods is amortized over the license term. This license is an infrequent and unusual transaction that management does not believe is directly related to its core operating performance. The amortization of the license fee is a non-cash expense which is not considered by management when assessing the core operating results of the Company. Management excludes such amortization expense when evaluating internal performance and believes that exclusion of this expense is useful to investors in evaluating the performance of its ongoing operations between fiscal periods and relative to its competitors.

Acquisition-related charges. Acquisition-related charges include the amortization of acquired inventory valuation step-up resulting from fair value adjustments required under purchase accounting for business combinations. Management believes these charges are unrelated to the Company’s core business and does not consider these costs when assessing the core operating results of the Company.

Special charges. Special charges include exit costs, asset impairments and other costs. The exit costs include severance and related costs associated with involuntarily terminated employees, the estimated costs associated with the portion of a facility under a non-cancelable lease that the Company ceased using and other related charges. Management believes these charges are unrelated to the Company’s core business and does not consider these special charges when assessing the core operating results of the Company.

Income tax effects. Income tax expense is adjusted by the difference in the amount of tax expense that would result from the use of the non-GAAP results instead of the GAAP results when calculating the Company’s tax expense, as well as the effects of any valuation allowance adjustments related to deferred tax assets. Management believes changes in valuation allowances related to the Company’s deferred tax assets associated with non-core assets (i.e., investment securities, state tax credits and net operating loss carryforwards) are unrelated to the Company’s core business. Accordingly, management does not consider changes in valuation allowances related to such deferred tax assets when assessing the core operating results of the Company.

Each of the foregoing items has been excluded from the non-GAAP financial measures presented by the Company. Management believes that such exclusion is appropriate since these items are not reflective of the Company’s core operating activities and thus excludes them from their internal budgets and forecasts, as well as their assessment of core operating performance.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1 Press Release*, dated January 29, 2015, reporting the financial results of QLogic Corporation for its third fiscal quarter ended December 28, 2014.

* The press release is being furnished pursuant to Item 9.01, and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	QLOGIC CORPORATION
January 29, 2015	/s/ Jean Hu
	Jean Hu
	Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description of Document
99.1	Press Release, dated January 29, 2015, reporting the financial results of QLogic Corporation for its third fiscal quarter ended December 28, 2014.

EX-99.1

Exhibit 99.1

Media Contact:

Steve Sturgeon

QLogic Corporation

858.472.5669

steve.sturgeon@qlogic.com

Investor Contact:

Doug Naylor

QLogic Corporation

949.542.1330

doug.naylor@qlogic.com

QLOGIC EXCEEDS REVENUE AND EPS GUIDANCE FOR Q3 FY2015

ALISO VIEJO, Calif., January 29, 2015—QLogic Corp. (Nasdaq:QLGC), a leading supplier of high performance network infrastructure solutions, today announced its third quarter financial results for the period ended December 28, 2014.

Third Quarter Highlights

• Net revenue: $140.2 million, up 10% sequentially

• GAAP net income: $22.4 million or $0.25 per diluted share

• Non-GAAP net income: $31.6 million, or $0.36 per diluted share

• GAAP operating income: $23.7 million, up 75% sequentially

• Non-GAAP operating income: $33.9 million, up 33% sequentially

• Operating margin: 16.9% GAAP, 24.2% non-GAAP

• Cash and marketable securities: $287.9 million as of December 28, 2014

• Cash generated from operations: $25.6 million

Net revenue for the third quarter of fiscal 2015 was $140.2 million and increased 17% from $119.4 million in the same quarter last year. Revenue from Advanced Connectivity Platforms was $124.7 million during the third quarter of fiscal 2015 and increased 27% from $98.5 million in the same quarter last year.

Net income on a GAAP basis for the third quarter of fiscal 2015 increased to $22.4 million or $0.25 per diluted share from $20.6 million or $0.24 per diluted share for the third quarter of fiscal 2014. Net income on a non-GAAP basis for the third quarter of fiscal 2015 increased 24% to $31.6 million, or $0.36 per diluted share, from $25.6 million, or $0.29 per diluted share, for the third quarter of fiscal 2014. The GAAP and non-GAAP net income per diluted share amounts for the third quarter of fiscal 2015 include the benefits associated with the retroactive reinstatement of the federal research tax credit, which contributed $0.04 to net income per diluted share.

“I am very pleased with our strong financial performance and execution during the third quarter. For the second consecutive quarter, we delivered both revenue and non-GAAP earnings per diluted share above the high end of our guidance range,” said Prasad Rampalli, president and chief executive officer, QLogic. “Our strong revenue performance, combined with our intense focus on operating expense management resulted in a significant expansion of our operating profit during the third quarter. Based on our compelling product portfolio, our focus on consistent execution and the current momentum with the enterprise upgrade cycle, we believe we are well positioned to continue delivering solid revenue and earnings per share performance.”

QLogic uses certain non-GAAP financial measures to supplement financial statements based on GAAP. A summary of these non-GAAP financial measures and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial 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 third quarter fiscal 2015 conference call is scheduled for today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Prasad Rampalli, president and chief executive officer, and Jean Hu, senior vice president and chief financial officer, will host the conference call. The call is being webcast live via the Internet at http://ir.qlogic.com and will include certain prepared materials. Phone access to participate in the conference call is available at (800) 475-6881, pass code: 9835550.

The financial information and the prepared materials that the company intends to discuss during the conference call will be available on the company’s website at http://ir.qlogic.com for twelve months following the conference call. A replay of the webcast will be available at http://ir.qlogic.com for twelve months.

Follow QLogic @ twitter.com/qlogic

QLogic – the Ultimate in Performance

QLogic (Nasdaq:QLGC) is a global leader and technology innovator in high performance server and storage networking connectivity products. Leading OEMs and channel partners worldwide rely on QLogic for their server and storage networking solutions. For more information, visit www.qlogic.com.

Disclaimer – Forward-Looking Statements

This press release contains statements relating to future results of the company (including certain beliefs and projections regarding business and market trends, as well as our belief that our product portfolio is compelling and we are well positioned to continue delivering solid revenue and earnings per share performance) 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; unfavorable economic conditions; the stock price of the company may be volatile; the company’s dependence on the networking markets served; the ability to maintain and gain market or industry acceptance of the company’s products; the company’s dependence on a small number of customers; the company’s ability to compete effectively with other companies; uncertain benefits from strategic business combinations, acquisitions and divestitures; the ability to attract and retain key personnel; the complexity of the company’s products; declining average unit sales prices of comparable products; the company’s dependence on sole source and limited source suppliers; the company’s dependence on relationships with certain third-party subcontractors and contract manufacturers; sales fluctuations arising from customer transitions to new products; seasonal fluctuations and uneven sales patterns in orders from customers; changes in the company’s tax provisions or adverse outcomes resulting from examination of its income tax returns; international economic, currency, regulatory, political and other risks; facilities of the company and its suppliers and customers are located in areas subject to natural disasters; the ability to protect proprietary rights; the ability to satisfactorily resolve any infringement claims; a reduction in sales efforts by current distributors; declines in the market value of the company’s marketable securities; changes in and compliance with regulations; difficulties in transitioning to smaller geometry process technologies; the use of “open source” software in the company’s products; system security risks, data protection breaches and cyber-attacks; and the company’s ability to borrow under its credit agreement is subject to certain covenants.

More detailed information on these and additional factors that 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 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 28, 2014			December 29, 2013		December 28, 2014		December 29, 2013
Net revenues	$	140,203		$	119,449	$	387,155	$	345,187
Cost of revenues		57,802			38,446		158,649		111,378
Gross profit		82,401			81,003		228,506		233,809
Operating expenses:
Engineering and development		34,802			35,235		108,103		110,412
Sales and marketing		16,153			16,113		47,640		51,957
General and administrative		7,677			7,406		25,274		22,698
Special charges		69			1,947		4,872		18,329
Total operating expenses		58,701			60,701		185,889		203,396
Operating income		23,700			20,302		42,617		30,413
Interest and other income (expense), net		(269	)		970		169		1,768
Income before income taxes		23,431			21,272		42,786		32,181
Income taxes		996			686		3,341		3,668
Net income	$	22,435		$	20,586	$	39,445	$	28,513
Net income per share:
Basic	$	0.26		$	0.24	$	0.45	$	0.32
Diluted	$	0.25		$	0.24	$	0.45	$	0.32
Number of shares used in per share calculations:
Basic		87,728			86,855		87,679		87,810
Diluted		88,527			87,186		88,294		88,209

QLOGIC CORPORATION

RECONCILIATION OF GAAP NET INCOME TO

NON-GAAP NET INCOME

(unaudited — in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	December 28, 2014			December 29, 2013			December 28, 2014			December 29, 2013
GAAP net income	$	22,435		$	20,586		$	39,445		$	28,513
Items excluded from GAAP net income:
Stock-based compensation		4,903			5,058			15,178			18,047
Amortization of acquisition-related intangible assets		4,350			243			12,917			730
Amortization of license fee		716			—			2,110			—
Acquisition-related charges		192			—			1,226			—
Special charges		69			1,947			4,872			18,329
Income tax effects		(1,030	)		(2,237	)		(3,612	)		(3,564	)
Total non-GAAP adjustments		9,200			5,011			32,691			33,542
Non-GAAP net income	$	31,635		$	25,597		$	72,136		$	62,055
Net income per diluted share:
GAAP net income	$	0.25		$	0.24		$	0.45		$	0.32
Adjustments		0.11			0.05			0.37			0.38
Non-GAAP net income	$	0.36		$	0.29		$	0.82		$	0.70

Non-GAAP Financial Measures

The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with generally accepted accounting principles (GAAP). The non-GAAP financial measures presented exclude the items summarized in the above table. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the company’s on-going core operating performance.

The company has presented non-GAAP net income and non-GAAP net income per diluted share, on a basis consistent with its historical presentation, to assist investors in understanding the company’s core net income and core net income per diluted share on an on-going basis. These non-GAAP financial measures may also assist investors in making 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 net income and non-GAAP net income per diluted 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 per diluted share basis.

Management uses non-GAAP net income and non-GAAP net income per diluted share in its evaluation of the company’s core after-tax results of operations and trends between fiscal periods and believes that these measures are important components 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 these non-GAAP financial measures. Management believes that providing these non-GAAP financial measures allows investors to view the company’s financial results in the way that management views the financial results.

The non-GAAP financial measures 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 financial 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 financial measures presented by the company may be different from the non-GAAP financial measures used by other companies.

For additional information on the items excluded from the non-GAAP financial measures and why the company believes that these non-GAAP financial measures provide useful supplemental information to investors, the company refers you to the Form 8-K regarding this release filed today with the Securities and Exchange Commission.

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 28, 2014			December 29, 2013			December 28, 2014			December 29, 2013
Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation	$	258		$	259		$	871		$	1,082
Amortization of acquisition-related intangible assets		3,816			243			12,383			730
Amortization of license fee		716			—			2,110			—
Acquisition-related charges		192			—			1,226			—
Total cost of revenue adjustments		4,982			502			16,590			1,812
Operating expenses:
Engineering and development:
Stock-based compensation		2,243			2,462			7,523			9,070
Sales and marketing:
Stock-based compensation		1,182			1,251			3,265			4,274
Amortization of acquisition-related intangible assets		534			—			534			—
General and administrative:
Stock-based compensation		1,220			1,086			3,519			3,621
Special charges		69			1,947			4,872			18,329
Total operating expense adjustments		5,248			6,746			19,713			35,294
Total non-GAAP adjustments before income taxes		10,230			7,248			36,303			37,106
Income tax effects		(1,030	)		(2,237	)		(3,612	)		(3,564	)
Total non-GAAP adjustments	$	9,200		$	5,011		$	32,691		$	33,542

QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited — in thousands)

	December 28, 2014			March 30, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	95,508		$	91,258
Marketable securities		192,424			186,783
Total cash and marketable securities		287,932			278,041
Accounts receivable, net		94,705			65,213
Inventories		30,939			18,036
Deferred tax assets		15,481			15,080
Other current assets		24,400			16,590
Total current assets		453,457			392,960
Property and equipment, net		74,841			84,912
Goodwill		167,232			194,107
Purchased intangible assets, net		82,091			69,903
Deferred tax assets		32,723			32,827
Other assets		21,157			23,554
	$	831,501		$	798,263
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	38,804		$	30,657
Accrued compensation		19,455			26,956
Accrued taxes		3,511			981
Deferred revenue		3,469			3,954
Other current liabilities		5,999			16,123
Total current liabilities		71,238			78,671
Accrued taxes		15,166			17,095
Other liabilities		8,282			9,071
Total liabilities		94,686			104,837
Stockholders’ equity:
Common stock		215			214
Additional paid-in capital		974,740			958,008
Retained earnings		1,711,516			1,672,071
Accumulated other comprehensive income (loss)		(520	)		435
Treasury stock		(1,949,136	)		(1,937,302	)
Total stockholders’ equity		736,815			693,426
	$	831,501		$	798,263

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited — in thousands)

	Nine Months Ended
	December 28, 2014			December 29, 2013
Cash flows from operating activities:
Net income	$	39,445		$	28,513
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		35,511			23,620
Stock-based compensation		15,178			18,047
Deferred income taxes		(316	)		(5,355	)
Asset impairments		1,455			3,129
Other non-cash items		1,257			2,577
Changes in operating assets and liabilities:
Accounts receivable		(29,892	)		(5,088	)
Inventories		(12,903	)		6,116
Other assets		1,236			537
Accounts payable		4,121			(1,919	)
Accrued compensation		(7,501	)		(2,719	)
Accrued taxes, net		1,147			7,734
Other liabilities		(11,398	)		2,841
Net cash provided by operating activities		37,340			78,033
Cash flows from investing activities:
Purchases of available-for-sale securities		(123,431	)		(259,008	)
Proceeds from sales and maturities of available-for-sale securities		116,260			261,253
Purchases of property and equipment		(15,420	)		(21,043	)
Net cash used in investing activities		(22,591	)		(18,798	)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards		5,144			6,756
Minimum tax withholding paid on behalf of employees for restricted stock units		(3,589	)		(4,584	)
Purchases of treasury stock		(11,834	)		(47,785	)
Other financing activities		(220	)		(156	)
Net cash used in financing activities		(10,499	)		(45,769	)
Net increase in cash and cash equivalents		4,250			13,466
Cash and cash equivalents at beginning of period		91,258			95,532
Cash and cash equivalents at end of period	$	95,508		$	108,998

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 28, 2014		December 29, 2013		December 28, 2014		December 29, 2013
Advanced Connectivity Platforms	$	124,704	$	98,452	$	344,282	$	285,653
Legacy Connectivity Products		15,499		20,997		42,873		59,534
	$	140,203	$	119,449	$	387,155	$	345,187