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 December 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 January 20, 2005, 91,845,427 shares of the Registrant’s common stock were outstanding.

QLOGIC CORPORATION

INDEX

             
Page
 PART I.  FINANCIAL INFORMATION
   Financial Statements:        
     Condensed Consolidated Balance Sheets at December 26, 2004 and March 28, 2004     1  
     Condensed Consolidated Statements of Income for the three and nine months ended December 26, 2004 and December 28, 2003     2  
     Condensed Consolidated Statements of Cash Flows for the nine months ended December 26, 2004 and December 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     26  
   Controls and Procedures     26  
 
 PART II.  OTHER INFORMATION
   Unregistered Sales of Equity Securities and Use of Proceeds     27  
   Exhibits     27  
     Signatures     28  
 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
                     
December 26, March 28,
2004 2004
(Unaudited; In
thousands, except share
and per share amounts)
ASSETS
Current assets:
               
 
Cash and cash equivalents
  $ 185,847     $ 156,593  
 
Short-term investments
    582,339       586,441  
 
Accounts receivable, less allowance for doubtful accounts of $1,776 and $1,372 as of December 26, 2004 and March 28, 2004, respectively
    76,539       67,355  
 
Inventories
    24,309       20,935  
 
Other current assets
    29,155       22,256  
     
     
 
   
Total current assets
    898,189       853,580  
Property and equipment, net
    70,654       67,224  
Other assets
    10,689       7,711  
     
     
 
    $ 979,532     $ 928,515  
     
     
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
               
 
Accounts payable
  $ 20,466     $ 18,570  
 
Accrued compensation
    19,612       18,849  
 
Income taxes payable
    21,527       10,691  
 
Other current liabilities
    14,489       12,687  
     
     
 
   
Total current liabilities
    76,094       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; 95,885,000 and 95,440,000 shares issued at December 26, 2004 and March 28, 2004, respectively
    96       95  
 
Additional paid-in capital
    491,019       482,039  
 
Retained earnings
    553,567       442,126  
 
Accumulated other comprehensive income (loss)
    (1,137 )     4,028  
 
Treasury stock, at cost; 4,068,000 and 1,330,000 shares at December 26, 2004 and March 28, 2004, respectively
    (140,001 )     (59,992 )
 
Deferred stock-based compensation
    (106 )     (578 )
     
     
 
   
Total stockholders’ equity
    903,438       867,718  
     
     
 
    $ 979,532     $ 928,515  
     
     
 

See accompanying notes to condensed consolidated financial statements.

1

Table of Contents

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                     
Three Months Ended Nine Months Ended
December 26, December 28, December 26, December 28,
2004 2003 2004 2003
(Unaudited; In thousands, except per share amounts)
Net revenues
  $ 150,252     $ 137,064     $ 414,672     $ 395,566  
Cost of revenues
    45,448       42,881       126,576       127,249  
     
     
     
     
 
 
Gross profit
    104,804       94,183       288,096       268,317  
     
     
     
     
 
Operating expenses:
                               
 
Engineering and development
    24,331       21,514       71,632       65,731  
 
Sales and marketing
    15,166       13,846       43,568       38,011  
 
General and administrative
    4,502       5,944       12,947       14,443  
     
     
     
     
 
   
Total operating expenses
    43,999       41,304       128,147       118,185  
     
     
     
     
 
Operating income
    60,805       52,879       159,949       150,132  
Interest and other income
    4,468       3,495       12,334       12,463  
     
     
     
     
 
Income before income taxes
    65,273       56,374       172,283       162,595  
Income taxes
    21,917       21,422       60,842       61,786  
     
     
     
     
 
Net income
  $ 43,356     $ 34,952     $ 111,441     $ 100,809  
     
     
     
     
 
Net income per share:
                               
 
Basic
  $ 0.47     $ 0.37     $ 1.20     $ 1.07  
     
     
     
     
 
 
Diluted
  $ 0.46     $ 0.36     $ 1.19     $ 1.05  
     
     
     
     
 
Number of shares used in per share calculation:
                               
 
Basic
    92,157       94,458       92,663       94,252  
     
     
     
     
 
 
Diluted
    93,484       96,823       93,604       96,395  
     
     
     
     
 

See accompanying notes to condensed consolidated financial statements.

2

Table of Contents

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                       
Nine Months Ended
December 26, December 28,
2004 2003
(Unaudited; In thousands)
Cash flows from operating activities:
               
 
Net income
  $ 111,441     $ 100,809  
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
   
Depreciation and amortization
    11,152       10,886  
   
Deferred income taxes
    (4,422 )     7,398  
   
Tax benefit from issuance of stock under stock plans
    1,358       9,620  
   
Amortization of deferred stock-based compensation
    472       963  
   
Provision for losses on accounts receivable
    414       141  
   
Loss on disposal of property and equipment
    245       638  
   
Changes in operating assets and liabilities:
               
     
Accounts receivable
    (9,598 )     (26,393 )
     
Inventories
    (3,374 )     1,506  
     
Other assets
    (5,454 )     1,532  
     
Accounts payable
    1,896       (146 )
     
Accrued compensation
    763       (1,930 )
     
Income taxes payable
    10,836       (1,344 )
     
Other liabilities
    1,802       9,406  
     
     
 
     
Net cash provided by operating activities
    117,531       113,086  
     
     
 
Cash flows from investing activities:
               
 
Purchases of marketable securities
    (462,442 )     (836,453 )
 
Sales and maturities of marketable securities
    461,379       761,030  
 
Additions to property and equipment
    (14,827 )     (15,434 )
     
     
 
     
Net cash used in investing activities
    (15,890 )     (90,857 )
     
     
 
Cash flows from financing activities:
               
 
Proceeds from issuance of stock under stock plans
    7,622       19,338  
 
Purchase of treasury stock
    (80,009 )     (19,545 )
     
     
 
     
Net cash used in financing activities
    (72,387 )     (207 )
     
     
 
Net increase in cash and cash equivalents
    29,254       22,022  
Cash and cash equivalents at beginning of period
    156,593       137,810  
     
     
 
Cash and cash equivalents at end of period
  $ 185,847     $ 159,832  
     
     
 

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 nine months ended December 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:

                 
December 26, March 28,
2004 2004
(In thousands)
Raw materials
  $ 8,545     $ 4,024  
Finished goods
    15,764       16,911  
     
     
 
    $ 24,309     $ 20,935  
     
     
 
 
Note 3.  Other Comprehensive Income

      The components of total comprehensive income are as follows:

                                   
Three Months Ended Nine Months Ended
December 26, December 28, December 26, December 28,
2004 2003 2004 2003
(In thousands)
Net income
  $ 43,356     $ 34,952     $ 111,441     $ 100,809  
Other comprehensive loss:
                               
 
Change in unrealized gains/losses on investments
    (1,179 )     (501 )     (5,165 )     (1,542 )
     
     
     
     
 
    $ 42,177     $ 34,451     $ 106,276     $ 99,267  
     
     
     
     
 
 
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 Nine Months Ended
December 26, December 28, December 26, December 28,
2004 2003 2004 2003
(In thousands, except per share amounts)
Net income
  $ 43,356     $ 34,952     $ 111,441     $ 100,809  
     
     
     
     
 
Shares:
                               
 
Weighted-average shares outstanding — basic
    92,157       94,458       92,663       94,252  
 
Dilutive potential common shares, using treasury stock method
    1,327       2,365       941       2,143  
     
     
     
     
 
 
Weighted-average shares outstanding — diluted
    93,484       96,823       93,604       96,395  
     
     
     
     
 
Net income per share:
                               
 
Basic
  $ 0.47     $ 0.37     $ 1.20     $ 1.07