UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended December 28, 2003 | ||
| or | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
Commission File Number 0-23298
QLogic Corporation
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Delaware
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33-0537669 | |
| (State of incorporation) |
(I.R.S. Employer Identification No.) |
26650 Aliso Viejo Parkway
(949) 389-6000
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
As of January 23, 2004, 94,773,339 shares of the Registrant’s common stock were outstanding.
QLOGIC CORPORATION
INDEX
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| PART I. FINANCIAL INFORMATION | ||||||
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Item 1.
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Financial Statements: | |||||
| Condensed Consolidated Balance Sheets at December 28, 2003 and March 30, 2003 | 1 | |||||
| Condensed Consolidated Statements of Income for the three months and nine months ended December 28, 2003 and December 29, 2002 | 2 | |||||
| Condensed Consolidated Statements of Cash Flows for the nine months ended December 28, 2003 and December 29, 2002 | 3 | |||||
| Notes to Condensed Consolidated Financial Statements | 4 | |||||
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Item 2.
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Management’s Discussion and Analysis of
Financial Condition and Results of Operations |
8 | ||||
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk | 24 | ||||
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Item 4.
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Controls and Procedures | 24 | ||||
| PART II. OTHER INFORMATION | ||||||
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Item 1.
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Legal Proceedings | 25 | ||||
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Item 6.
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Exhibits and Reports on Form 8-K | 25 | ||||
| Signatures | 26 | |||||
i
PART I.
FINANCIAL INFORMATION
| Item 1. | Financial Statements |
QLOGIC CORPORATION
| December 28, | March 30, | |||||||||
| 2003 | 2003 | |||||||||
| (Unaudited; In | ||||||||||
| thousands, except share | ||||||||||
| and per share amounts) | ||||||||||
| ASSETS | ||||||||||
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Current assets:
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||||||||||
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Cash and cash equivalents
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$ | 159,832 | $ | 137,810 | ||||||
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Short-term investments
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579,268 | 505,387 | ||||||||
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Accounts receivable, less allowance for doubtful
accounts of $1,969 and $2,830 as of December 28, 2003 and
March 30, 2003, respectively
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75,946 | 49,694 | ||||||||
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Inventories
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17,859 | 19,365 | ||||||||
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Deferred income taxes
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28,558 | 31,914 | ||||||||
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Prepaid expenses and other current assets
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2,490 | 4,010 | ||||||||
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Total current assets
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863,953 | 748,180 | ||||||||
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Property and equipment, net
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63,723 | 59,813 | ||||||||
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Other assets
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5,372 | 9,426 | ||||||||
| $ | 933,048 | $ | 817,419 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current liabilities:
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Accounts payable
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$ | 15,155 | $ | 15,301 | ||||||
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Accrued compensation
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20,067 | 21,997 | ||||||||
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Income taxes payable
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17,857 | 19,201 | ||||||||
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Other accrued liabilities
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19,591 | 10,185 | ||||||||
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Total current liabilities
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72,670 | 66,684 | ||||||||
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Commitments and contingencies
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Stockholders’ equity:
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Preferred stock, $0.001 par value; 1,000,000
shares authorized (200,000 shares designated as Series A
Junior Participating Preferred, $0.001 par value); no shares
issued and outstanding
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— | — | ||||||||
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Common stock, $0.001 par value; 500,000,000
shares authorized; 94,857,000 and 93,945,000 shares issued at
December 28, 2003 and March 30, 2003, respectively
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95 | 94 | ||||||||
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Additional paid-in capital
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471,551 | 442,594 | ||||||||
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Retained earnings
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409,262 | 308,453 | ||||||||
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Accumulated other comprehensive income
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2,804 | 4,346 | ||||||||
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Treasury stock, at cost; 475,000 and 91,000
shares at December 28, 2003 and March 30, 2003,
respectively
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(22,523 | ) | (2,978 | ) | ||||||
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Deferred stock-based compensation
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(811 | ) | (1,774 | ) | ||||||
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Total stockholders’ equity
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860,378 | 750,735 | ||||||||
| $ | 933,048 | $ | 817,419 | |||||||
See accompanying notes to condensed consolidated financial statements.
1
QLOGIC CORPORATION
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| December 28, | December 29, | December 28, | December 29, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
| (Unaudited; In thousands, except per share amounts) | ||||||||||||||||||
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Gross revenues
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$ | 137,064 | $ | 114,167 | $ | 395,566 | $ | 323,472 | ||||||||||
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Stock-based sales discounts
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— | — | — | 3,228 | ||||||||||||||
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Net revenues
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137,064 | 114,167 | 395,566 | 320,244 | ||||||||||||||
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Cost of revenues
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42,881 | 40,908 | 127,249 | 118,215 | ||||||||||||||
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Gross profit
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94,183 | 73,259 | 268,317 | 202,029 | ||||||||||||||
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Operating expenses:
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Engineering and development
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21,514 | 21,540 | 65,731 | 59,352 | ||||||||||||||
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Sales and marketing
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13,846 | 10,955 | 38,011 | 33,008 | ||||||||||||||
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General and administrative
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5,944 | 3,530 | 14,443 | 10,375 | ||||||||||||||
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Total operating expenses
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41,304 | 36,025 | 118,185 | 102,735 | ||||||||||||||
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Operating income
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52,879 | 37,234 | 150,132 | 99,294 | ||||||||||||||
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Interest and other income, net
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3,495 | 5,417 | 12,463 | 12,196 | ||||||||||||||
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Income before income taxes
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56,374 | 42,651 | 162,595 | 111,490 | ||||||||||||||
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Income taxes
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21,422 | 15,138 | 61,786 | 37,906 | ||||||||||||||
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Net income
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$ | 34,952 | $ | 27,513 | $ | 100,809 | $ | 73,584 | ||||||||||
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Net income per share:
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Basic
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$ | 0.37 | $ | 0.29 | $ | 1.07 | $ | 0.79 | ||||||||||
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Diluted
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$ | 0.36 | $ | 0.29 | $ | 1.05 | $ | 0.77 | ||||||||||
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Number of shares used in per share calculation:
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Basic
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94,458 | 93,553 | 94,252 | 93,369 | ||||||||||||||
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Diluted
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96,823 | 95,231 | 96,395 | 95,337 | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
2
QLOGIC CORPORATION
| Nine Months Ended | |||||||||||
| December 28, | December 29, | ||||||||||
| 2003 | 2002 | ||||||||||
| (Unaudited; In thousands) | |||||||||||
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Cash flows from operating activities:
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Net income
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$ | 100,809 | $ | 73,584 | |||||||
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Adjustments to reconcile net income to net cash
provided by operating activities:
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Depreciation and amortization
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10,886 | 11,260 | |||||||||
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Tax benefit from issuance of stock under stock
plans
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9,620 | 5,088 | |||||||||
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Deferred income taxes
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7,398 | 4,253 | |||||||||
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Stock-based sales discounts
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— | 3,228 | |||||||||
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Other non-cash charges
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1,742 | 5,265 | |||||||||
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Changes in operating assets and liabilities
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(17,369 | ) | 20,072 | ||||||||
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Net cash provided by operating activities
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113,086 | 122,750 | |||||||||
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Cash flows from investing activities:
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Purchases of marketable securities
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(836,453 | ) | (654,993 | ) | |||||||
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Sales and maturities of marketable securities
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761,030 | 591,083 | |||||||||
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Additions to property and equipment
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(15,434 | ) | (11,536 | ) | |||||||
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Acquisition of business
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— | (1,695 | ) | ||||||||
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Net cash used in investing activities
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(90,857 | ) | (77,141 | ) | |||||||
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Cash flows from financing activities:
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Proceeds from issuance of stock under stock plans
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19,338 | 8,578 | |||||||||
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Purchase of treasury stock
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(19,545 | ) | — | ||||||||
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Net cash provided by (used in) financing
activities
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(207 | ) | 8,578 | ||||||||
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Net increase in cash and cash equivalents
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22,022 | 54,187 | |||||||||
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Cash and cash equivalents at beginning of period
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137,810 | 76,124 | |||||||||
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Cash and cash equivalents at end of period
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$ | 159,832 | $ | 130,311 | |||||||
See accompanying notes to condensed consolidated financial statements.
3
QLOGIC CORPORATION
Note (1) Basis of Presentation
In the opinion of management of QLogic Corporation (the “Company”), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring accruals) necessary to present fairly the Company’s financial position, results of operations and cash flows. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2003. The results of operations for the three months and nine months ended December 28, 2003 are not necessarily indicative of the results that may be expected for the entire fiscal year. Certain prior year amounts have been reclassified to conform to the current year presentation.
Note (2) Inventories
Components of inventories are as follows:
| December 28, | March 30, | |||||||
| 2003 | 2003 | |||||||
| (In thousands) | ||||||||
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Raw materials
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$ | 5,550 | $ | 10,887 | ||||
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Finished goods
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12,309 | 8,478 | ||||||
| $ | 17,859 | $ | 19,365 | |||||
Note (3) Other Comprehensive Income
The components of total comprehensive income are as follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December 28, | December 29, | December 28, | December 29, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
| (In thousands) | |||||||||||||||||
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Net income
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$ | 34,952 | $ | 27,513 | $ | 100,809 | $ | 73,584 | |||||||||
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Other comprehensive income (loss):
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Change in unrealized gains on investments
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(501 | ) | 157 | (1,542 | ) | 4,947 | |||||||||||
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Total comprehensive income
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$ | 34,451 | $ | 27,670 | $ | 99,267 | $ | 78,531 | |||||||||
Note (4) Net Income Per Share
Basic net income per share is based on the weighted-average number of common shares outstanding during the periods presented. Diluted net income per share is based on the weighted-average number of common shares and dilutive potential common shares outstanding during the periods presented. The Company has granted certain stock options and warrants which have been treated as dilutive potential common shares.
4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table sets forth the computation of basic and diluted net income per share:
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December 28, | December 29, | December 28, | December 29, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||
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Net income
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$ | 34,952 | $ | 27,513 | $ | 100,809 | $ | 73,584 | |||||||||
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Shares:
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Weighted-average shares outstanding —
basic
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94,458 | 93,553 | 94,252 | 93,369 | |||||||||||||
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Dilutive potential common shares, using treasury
stock method
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2,365 | 1,678 | 2,143 | 1,968 | |||||||||||||
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Weighted-average shares outstanding —
diluted
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96,823 | 95,231 | 96,395 | 95,337 | |||||||||||||
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Net income per share:
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Basic
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$ | 0.37 | $ | 0.29 | $ | 1.07 | $ | 0.79 | |||||||||
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Diluted
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$ | 0.36 | $ | 0.29 | $ | 1.05 | $ | 0.77 | & | ||||||||