qlgc-ex991

ALISO VIEJO, Calif., January 28, 2016—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 27, 2015.

Net revenue for the third quarter of fiscal 2016 was $122.7 million compared to $140.2 million in the same quarter last year. Revenue from Advanced Connectivity Platforms was $112.5 million during the third quarter of fiscal 2016 compared to $124.7 million in the same quarter last year.

Net income on a GAAP basis for the third quarter of fiscal 2016 was $23.4 million, or $0.28 per diluted share, compared to $22.4 million, or $0.25 per diluted share, for the third quarter of fiscal 2015. Net income on a non-GAAP basis for the third quarter of fiscal 2016 was $28.0 million, or $0.33 per diluted share, compared to $31.6 million, or $0.36 per diluted share, for the third quarter of fiscal 2015.

“I am very pleased with our financial performance and execution during the third quarter. We delivered both revenue and non-GAAP earnings per diluted share above the high end of our guidance range,” said Jean Hu, chief financial officer and acting chief executive officer, QLogic. “We believe that as we execute on our strategy to focus on providing differentiated solutions for both Fibre Channel and Ethernet connectivity platforms across enterprise and cloud data centers, we will be well positioned to deliver earnings growth and enhanced shareholder value.”

QLogic expects to achieve net revenue in the range of $113 - $119 million for the fourth quarter of fiscal 2016. The Company is forecasting fourth quarter non-GAAP earnings per diluted share of $0.23 - $0.27. QLogic estimates that GAAP earnings per diluted share will be lower than non-GAAP earnings per diluted share by $0.07 - $0.09 per share in the fourth quarter of fiscal 2016. The Company’s forecasted guidance is a forward-looking statement and does not include the effects of future acquisitions/divestitures, unanticipated asset impairments and other special charges, and other non-recurring items not reflective of ongoing operations. Our forward-looking estimates of both GAAP and non-GAAP measures of our financial performance may differ materially from our actual results and should not be relied upon as statements of fact.

QLogic uses certain non-GAAP financial measures to supplement financial statements based on GAAP. A summary of the historical 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 2016 conference call is scheduled for today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Jean Hu, chief financial officer and acting chief executive officer, will host the conference call. The call is being webcast live at http://ir.qlogic.com. Phone access to participate in the conference call is available at (719) 457-2648, conference ID: 7027428.

The financial information 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 also be available at http://ir.qlogic.com for twelve months.

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.

This press release contains statements relating to future results of the company (including certain beliefs and projections regarding business and market trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include without limitation, the company’s belief that as it executes on its strategy that it will be well positioned to deliver earnings growth and enhanced shareholder value, and its ability to achieve the company’s business outlook and financial guidance. 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 company's ability to compete effectively with other companies; the ability to attract and retain key personnel; the company's dependence on a small number of customers; the ability to maintain and gain market or industry acceptance of the company's 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; uncertain benefits from strategic business combinations, acquisitions and divestitures; the complexity of the company's products; declining average unit sales prices of comparable products; sales fluctuations arising from customer transitions to new products; seasonal fluctuations and uneven sales and purchasing patterns with customers and suppliers; 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.

	Three Months Ended						Nine Months Ended
	December 27, 2015			December 28, 2014			December 27, 2015		December 28, 2014
Net revenues	$	122,730		$	140,203		$	339,489	$	387,155
Cost of revenues		50,163			57,802			139,405		158,649
Gross profit		72,567			82,401			200,084		228,506
Operating expenses:
Engineering and development		29,626			34,802			97,487		108,103
Sales and marketing		13,272			16,153			42,382		47,640
General and administrative		6,832			7,677			18,833		25,274
Special charges		1,381			69			10,614		4,872
Total operating expenses		51,111			58,701			169,316		185,889
Operating income		21,456			23,700			30,768		42,617
Interest and other income (expense), net		561			(269	)		1,073		169
Income before income taxes		22,017			23,431			31,841		42,786
Income tax expense (benefit)		(1,416	)		996			3,614		3,341
Net income	$	23,433		$	22,435		$	28,227	$	39,445
Net income per share:
Basic	$	0.28		$	0.26		$	0.33	$	0.45
Diluted	$	0.28		$	0.25		$	0.32	$	0.45
Number of shares used in per share calculations:
Basic		83,503			87,728			85,916		87,679
Diluted		84,307			88,527			86,876		88,294

	Three Months Ended						Nine Months Ended
	December 27, 2015			December 28, 2014			December 27, 2015			December 28, 2014
GAAP net income	$	23,433		$	22,435		$	28,227		$	39,445
Items excluded from GAAP net income:
Stock-based compensation		4,236			4,903			12,157			15,178
Amortization of acquisition-related intangible assets		3,541			4,350			10,859			12,917
Amortization of license fee		688			716			1,868			2,110
Acquisition-related charges		—			192			—			1,226
Special charges		1,381			69			10,614			4,872
Income tax adjustments		(5,240	)		(1,030	)		(4,467	)		(3,612	)
Total non-GAAP adjustments		4,606			9,200			31,031			32,691
Non-GAAP net income	$	28,039		$	31,635		$	59,258		$	72,136
Net income per diluted share:
GAAP net income	$	0.28		$	0.25		$	0.32		$	0.45
Adjustments		0.05			0.11			0.36			0.37
Non-GAAP net income	$	0.33		$	0.36		$	0.68		$	0.82

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 27, 2015			December 28, 2014			December 27, 2015			December 28, 2014
Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation	$	186		$	258		$	622		$	871
Amortization of acquisition-related intangible assets		3,372			3,816			10,353			12,383
Amortization of license fee		688			716			1,868			2,110
Acquisition-related charges		—			192			—			1,226
Total cost of revenue adjustments		4,246			4,982			12,843			16,590
Operating expenses:
Engineering and development:
Stock-based compensation		1,990			2,243			6,849			7,523
Sales and marketing:
Stock-based compensation		1,045			1,182			2,668			3,265
Amortization of acquisition-related intangible assets		169			534			506			534
General and administrative:
Stock-based compensation		1,015			1,220			2,018			3,519
Special charges		1,381			69			10,614			4,872
Total operating expense adjustments		5,600			5,248			22,655			19,713
Total non-GAAP adjustments before income taxes		9,846			10,230			35,498			36,303
Income tax adjustments		(5,240	)		(1,030	)		(4,467	)		(3,612	)
Total non-GAAP adjustments	$	4,606		$	9,200		$	31,031		$	32,691

QLogic is forecasting fourth quarter non-GAAP earnings per diluted share of $0.23 - $0.27. The Company estimates that GAAP earnings per diluted share will be lower than non-GAAP earnings per diluted share by $0.07 - $0.09 per share in the fourth quarter of fiscal 2016. This difference is comprised of the following:

The Company’s forecasted guidance is a forward-looking statement and does not include the effects of future acquisitions/divestitures, unanticipated asset impairments and other special charges, and other non-recurring items not reflective of ongoing operations. Our forward-looking estimates of both GAAP and non-GAAP measures of our financial performance may differ materially from our actual results and should not be relied upon as statements of fact.

	December 27, 2015			March 29, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	87,069		$	115,241
Marketable securities		212,405			201,174
Total cash and marketable securities		299,474			316,415
Accounts receivable, net		69,736			87,436
Inventories		40,276			29,978
Other current assets		17,023			21,802
Total current assets		426,509			455,631
Property and equipment, net		74,081			78,501
Goodwill		167,232			167,232
Purchased intangible assets, net		66,521			77,659
Deferred tax assets		44,424			48,880
Other assets		18,625			20,752
	$	797,392		$	848,655
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	27,756		$	40,497
Accrued compensation		16,466			22,476
Accrued taxes		1,439			2,711
Other current liabilities		9,756			11,718
Total current liabilities		55,417			77,402
Accrued taxes		12,616			14,516
Other liabilities		6,937			9,721
Total liabilities		74,970			101,639
Stockholders’ equity:
Common stock		218			215
Additional paid-in capital		1,010,007			983,579
Retained earnings		1,750,891			1,722,664
Accumulated other comprehensive loss		(1,392	)		(99	)
Treasury stock		(2,037,302	)		(1,959,343	)
Total stockholders’ equity		722,422			747,016
	$	797,392		$	848,655

	Nine Months Ended
	December 27, 2015			December 28, 2014
Cash flows from operating activities:
Net income	$	28,227		$	39,445
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		30,618			35,511
Stock-based compensation		12,157			15,178
Deferred income taxes		4,616			(316	)
Asset impairments		1,954			1,455
Other non-cash items, net		674			1,257
Changes in operating assets and liabilities:
Accounts receivable		17,905			(29,892	)
Inventories		(10,298	)		(12,903	)
Other assets		3,234			1,236
Accounts payable		(7,365	)		4,121
Accrued compensation		(6,010	)		(7,501	)
Accrued taxes, net		(8,543	)		1,147
Other liabilities		(3,846	)		(11,398	)
Net cash provided by operating activities		63,323			37,340
Cash flows from investing activities:
Purchases of available-for-sale securities		(173,476	)		(123,431	)
Proceeds from sales and maturities of available-for-sale securities		159,911			116,260
Purchases of property and equipment		(21,991	)		(15,420	)
Proceeds from disposition of assets held for sale		7,553			—
Net cash used in investing activities		(28,003	)		(22,591	)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards		20,010			5,144
Minimum tax withholding paid on behalf of employees for restricted stock units		(5,736	)		(3,589	)
Purchases of treasury stock		(78,859	)		(11,834	)
Other financing activities		1,093			(220	)
Net cash used in financing activities		(63,492	)		(10,499	)
Net increase (decrease) in cash and cash equivalents		(28,172	)		4,250
Cash and cash equivalents at beginning of period		115,241			91,258
Cash and cash equivalents at end of period	$	87,069		$	95,508

	Three Months Ended				Nine Months Ended
	December 27, 2015		December 28, 2014		December 27, 2015		December 28, 2014
Advanced Connectivity Platforms	$	112,458	$	124,704	$	308,386	$	344,282
Legacy Connectivity Products		10,272		15,499		31,103		42,873
	$	122,730	$	140,203	$	339,489	$	387,155

Stock-based compensation	$0.05 - $0.06
Amortization of acquisition-related intangible assets and license fee	$0.05
Income taxes	($0.03 - $0.02	)
	$0.07 - $0.09