Back to GetFilings.com



Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

     
(Mark One)
   
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended September 26, 2004
 
or
 
o
   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

(Exact name of registrant as specified in its charter)
     
Delaware
   33-0537669
(State of incorporation)   (I.R.S. Employer
Identification No.)

26650 Aliso Viejo Parkway

Aliso Viejo, California 92656
(Address of principal executive office and zip code)

(949) 389-6000

(Registrant’s telephone number, including area code)

     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.

Yes þ          No o

      Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes þ          No o

      As of October 18, 2004, 92,532,861 shares of the Registrant’s common stock were outstanding.

QLOGIC CORPORATION

INDEX

             
Page
 PART I.  FINANCIAL INFORMATION
   Financial Statements:        
     Condensed Consolidated Balance Sheets at September 26, 2004 and March 28, 2004     1  
     Condensed Consolidated Statements of Income for the three and six months ended September 26, 2004 and September 28, 2003     2  
     Condensed Consolidated Statements of Cash Flows for the six months ended September 26, 2004 and September 28, 2003     3  
     Notes to Condensed Consolidated Financial Statements     4  
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     8  
   Quantitative and Qualitative Disclosures About Market Risk     25  
   Controls and Procedures     25  
 PART II.  OTHER INFORMATION
   Unregistered Sales of Equity Securities and Use of Proceeds     26  
   Submission of Matters to a Vote of Security Holders     26  
   Exhibits     26  
     Signatures     27  
 EXHIBIT 31.1
 EXHIBIT 31.2
 EXHIBIT 32

i

Table of Contents

PART I.

FINANCIAL INFORMATION

 
Item 1. Financial Statements

QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
                     
September 26, March 28,
2004 2004
(Unaudited; In
thousands, except share
and per share amounts)
ASSETS
Current assets:
               
 
Cash and cash equivalents
  $ 197,379     $ 156,593  
 
Short-term investments
    557,296       586,441  
 
Accounts receivable, less allowance for doubtful accounts of $1,797 and $1,372 as of September 26, 2004 and March 28, 2004, respectively
    72,031       67,355  
 
Inventories
    22,404       20,935  
 
Other current assets
    23,874       22,256  
     
     
 
   
Total current assets
    872,984       853,580  
Property and equipment, net
    67,805       67,224  
Other assets
    7,036       7,711  
     
     
 
    $ 947,825     $ 928,515  
     
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
               
 
Accounts payable
  $ 18,200     $ 18,570  
 
Accrued compensation
    13,943       18,849  
 
Income taxes payable
    16,441       10,691  
 
Other current liabilities
    13,020       12,687  
     
     
 
   
Total current liabilities
    61,604       60,797  
     
     
 
Commitments and contingencies
               
Stockholders’ equity:
               
 
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
    —       —  
 
Common stock, $0.001 par value; 500,000,000 shares authorized; 95,674,000 and 95,440,000 shares issued at September 26, 2004 and March 28, 2004, respectively
    96       95  
 
Additional paid-in capital
    486,121       482,039  
 
Retained earnings
    510,211       442,126  
 
Accumulated other comprehensive income
    42       4,028  
 
Treasury stock, at cost; 3,148,000 and 1,330,000 shares at September 26, 2004 and March 28, 2004, respectively
    (110,000 )     (59,992 )
 
Deferred stock-based compensation
    (249 )     (578 )
     
     
 
   
Total stockholders’ equity
    886,221       867,718  
     
     
 
    $ 947,825     $ 928,515  
     
     
 

See accompanying notes to condensed consolidated financial statements.

1

Table of Contents

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                     
Three Months Ended Six Months Ended
September 26, September 28, September 26, September 28,
2004 2003 2004 2003
(Unaudited; In thousands, except per share amounts)
Net revenues
  $ 134,609     $ 132,267     $ 264,420     $ 258,502  
Cost of revenues
    41,173       42,366       81,128       84,368  
     
     
     
     
 
 
Gross profit
    93,436       89,901       183,292       174,134  
     
     
     
     
 
Operating expenses:
                               
 
Engineering and development
    24,146       21,482       47,301       44,217  
 
Sales and marketing
    14,202       12,436       28,402       24,165  
 
General and administrative
    4,232       4,408       8,445       8,499  
     
     
     
     
 
   
Total operating expenses
    42,580       38,326       84,148       76,881  
     
     
     
     
 
Operating income
    50,856       51,575       99,144       97,253  
Interest and other income
    4,233       3,556       7,866       8,968  
     
     
     
     
 
Income before income taxes
    55,089       55,131       107,010       106,221  
Income taxes
    19,207       20,950       38,925       40,364  
     
     
     
     
 
Net income
  $ 35,882     $ 34,181     $ 68,085     $ 65,857  
     
     
     
     
 
Net income per share:
                               
 
Basic
  $ 0.39     $ 0.36     $ 0.73     $ 0.70  
     
     
     
     
 
 
Diluted
  $ 0.38     $ 0.35     $ 0.73     $ 0.68  
     
     
     
     
 
Number of shares used in per share calculation:
                               
 
Basic
    92,485       94,282       92,915       94,150  
     
     
     
     
 
 
Diluted
    93,222       96,360       93,664       96,181  
     
     
     
     
 

See accompanying notes to condensed consolidated financial statements.

2

Table of Contents

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                       
Six Months Ended
September 26, September 28,
2004 2003
(Unaudited; In thousands)
Cash flows from operating activities:
               
 
Net income
  $ 68,085     $ 65,857  
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
   
Depreciation and amortization
    7,402       7,128  
   
Deferred income taxes
    (834 )     7,539  
   
Tax benefit from issuance of stock under stock plans
    487       6,246  
   
Amortization of deferred stock-based compensation
    329       730  
   
Provision for losses on accounts receivable
    424       —  
   
Loss on disposal of property and equipment
    7       104  
   
Changes in operating assets and liabilities:
               
     
Accounts receivable
    (5,100 )     (15,203 )
     
Inventories
    (1,469 )     48  
     
Other assets
    (109 )     1,145  
     
Accounts payable
    (370 )     2,129  
     
Accrued compensation
    (4,906 )     (5,354 )
     
Income taxes payable
    5,750       (5,796 )
     
Other liabilities
    333       3,379  
     
     
 
     
Net cash provided by operating activities
    70,029       67,952  
     
     
 
Cash flows from investing activities:
               
 
Purchases of marketable securities
    (305,171 )     (449,837 )
 
Sales and maturities of marketable securities
    330,330       420,262  
 
Additions to property and equipment
    (7,990 )     (9,920 )
     
     
 
     
Net cash provided by (used in) investing activities
    17,169       (39,495 )
     
     
 
Cash flows from financing activities:
               
 
Proceeds from issuance of stock under stock plans
    3,596       8,969  
 
Purchase of treasury stock
    (50,008 )     (998 )
     
     
 
     
Net cash provided by (used in) financing activities
    (46,412 )     7,971  
     
     
 
Net increase in cash and cash equivalents
    40,786       36,428  
Cash and cash equivalents at beginning of period
    156,593       137,810  
     
     
 
Cash and cash equivalents at end of period
  $ 197,379     $ 174,238  
     
     
 

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

QLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 28, 2004. The results of operations for the three and six months ended September 26, 2004 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

      The components of inventories are as follows:

                 
September 26, March 28,
2004 2004
(In thousands)
Raw materials
  $ 7,026     $ 4,024  
Finished goods
    15,378       16,911  
     
     
 
    $ 22,404     $ 20,935  
     
     
 
 
Note 3.  Other Comprehensive Income

      The components of total comprehensive income are as follows:

                                   
Three Months Ended Six Months Ended
September 26, September 28, September 26, September 28,
2004 2003 2004 2003
(In thousands)
Net income
  $ 35,882     $ 34,181     $ 68,085     $ 65,857  
Other comprehensive income (loss):
                               
 
Change in unrealized gains/ losses on investments
    1,705       (776 )     (3,986 )     (1,041 )
     
     
     
     
 
    $ 37,587     $ 33,405     $ 64,099     $ 64,816  
     
     
     
     
 
 
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

Table of Contents

QLOGIC CORPORATION

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 Six Months Ended
September 26, September 28, September 26, September 28,
2004 2003 2004 2003
(In thousands, except per share amounts)
Net income
  $ 35,882     $ 34,181     $ 68,085     $ 65,857  
     
     
     
     
 
Shares:
                               
 
Weighted-average shares outstanding — basic
    92,485       94,282       92,915       94,150  
 
Dilutive potential common shares, using treasury stock method
    737       2,078       749       2,031  
     
     
     
     
 
 
Weighted-average shares outstanding — diluted
    93,222       96,360       93,664       96,181  
     
     
     
     
 
Net income per share:
                               
 
Basic
  $ 0.39     $ 0.36     $ 0.73     $