QLogic Reports Fourth Quarter and Fiscal Year 2006 Results; Record Revenue from Continuing Operations
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QLogic Reports Fourth Quarter and Fiscal Year 2006 Results; Record Revenue from Continuing Operations

ALISO VIEJO, Calif.—(BUSINESS WIRE)—May 3, 2006— QLogic Corporation (Nasdaq: QLGC), the leader in Fibre Channel host bus adapters (HBAs), stackable switches and blade server switches today announced its financial results for the fourth quarter and fiscal year ended April 2, 2006.

Net revenue from continuing operations for the fourth quarter of fiscal 2006 was a record $130.5 million and increased 17% from $111.7 million in the comparable quarter last year. During the fourth quarter of fiscal 2006, revenue from SAN Infrastructure Products, which are comprised of HBAs, switches and silicon, was $121.8 million, an increase of 19% from the comparable quarter last year and 1% sequentially.

Income from continuing operations on a GAAP basis for the fourth quarter of fiscal 2006 was $31.4 million, or $0.19 per share on a diluted basis, an increase of 1% from the fourth quarter of last year and a decrease of 1% sequentially.

Net revenue from continuing operations for fiscal 2006 was $494.1 million, up 15% from $428.7 million for fiscal 2005. Income from continuing operations on a GAAP basis for fiscal 2006 was $121.8 million, or $0.70 per share on a diluted basis, an increase of 9% from $111.4 million, or $0.59 per share on a diluted basis, for fiscal 2005.

Net income on a GAAP basis for the fourth quarter of fiscal 2006, including the results from discontinued operations, was $32.5 million, or $0.20 per share on a diluted basis. Net income on a GAAP basis for fiscal 2006, including the results from discontinued operations, was $283.6 million, or $1.63 per share on a diluted basis.

The Company generated $132.5 million in cash from continuing operations during fiscal 2006. The Company's balance sheet at the end of fiscal 2006 was highlighted by $665.6 million of cash and short-term investments.

"I am very pleased with QLogic's fiscal year 2006 performance," said H.K. Desai, the Company's chief executive officer and president. "With annual revenue growth for HBAs in excess of 20% and switches in excess of 35%, we are confident that the continued execution of our strategies will support our ongoing growth expectations."

The Company uses certain non-GAAP measures to supplement financial statements based on GAAP. A summary of these non-GAAP financial measures and a complete reconciliation of each non-GAAP measure to the most directly comparable GAAP 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.

Non-GAAP income from continuing operations for the fourth quarter of fiscal 2006 was $34.5 million, or $0.21 per share on a diluted basis, an increase of 10% sequentially. During fiscal 2006, the Company's non-GAAP income from continuing operations was $124.7 million, or $0.72 per share on a diluted basis, an increase of 6% from fiscal 2005.

QLogic's fourth quarter and fiscal 2006 conference call is scheduled for today at 2:30 p.m. Pacific Time (5:30 p.m. Eastern Time). H.K. Desai, chief executive officer and president, and Tony Massetti, senior vice president and chief financial officer, will host the conference call. The call is being webcast live via the Internet at www.qlogic.com and via CCBN. Phone access to participate in the conference call is available at (719) 457-2654, pass code: 7044570.

The financial information that the Company intends to discuss during the conference call will be available on the Company's website at www.qlogic.com for 12 months following the conference call. A replay of the conference call will be available via webcast for 12 months on the Company's website at www.qlogic.com. An audio replay of the conference call will also be available through May 17, 2006 at (719) 457-0820 or (888) 203-1112, pass code: 7044570.

Effects of 2006 Stock Split

All share numbers and per share amounts set forth in this release and the accompanying financial schedules have been adjusted to reflect the Company's two-for-one stock split effected March 2, 2006 through the payment of a stock dividend to the holders of record of common stock on February 16, 2006.

About QLogic

QLogic is a leading supplier of high performance storage networking solutions including Fibre Channel host bus adapters (HBAs), blade server embedded Fibre Channel switches, Fibre Channel stackable switches, iSCSI HBAs, iSCSI routers and storage services platforms for enabling advanced storage management applications. The Company is also a leading supplier of server networking products including InfiniBand host channel adapters that accelerate cluster performance. QLogic products are delivered to small-to-medium business and large enterprises around the world via its channel partner community. QLogic's products are also powering solutions from leading companies like Cisco, Dell, EMC, Hitachi Data Systems, HP, IBM, NEC, Network Appliance and Sun Microsystems. QLogic is a member of the S&P 500 Index. For more information go to www.qlogic.com.

Note: All QLogic-issued press releases appear on the Company's website ( www.qlogic.com). Any announcement that does not appear on the QLogic website has not been issued by QLogic.

Disclaimer - Forward-Looking Statements

This press release contains statements relating to future results of the Company (including certain beliefs and projections regarding business trends) 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; revenues may be affected by changes in IT spending levels; the stock price of the Company may be volatile; the Company's dependence on the storage area network market; the ability to maintain and gain market or industry acceptance of the Company's products; the Company's dependence on a limited number of customers; seasonal fluctuations and uneven sales patterns in orders from customers; the Company's ability to compete effectively with other companies; declining average unit sales prices of comparable products; a reduction in sales efforts by current distributors; reliance on third party licenses; dependence on sole source and limited source suppliers; the Company's dependence on relationships with certain silicon chip suppliers; the complexity of the Company's products; sales fluctuations arising from customer transitions to new products; the uncertainty associated with SOX 404 compliance; environmental compliance costs; terrorist activities and resulting military actions; international, economic, regulatory, political and other risks; uncertain benefits from strategic business combinations; the ability to maintain or expand upon strategic alliances; the strain on resources caused by growth and expansion; the ability to attract and retain key personnel; the decreased effectiveness of equity compensation; difficulties in transitioning to smaller geometry process technologies; the ability to protect proprietary rights; the ability to satisfactorily resolve any infringement claims; changes in tax laws or adverse tax audit results; computer viruses and other tampering with the Company's computer systems; charter documents and stockholder rights plan that may discourage a business combination; and facilities of the Company and its suppliers and customers are located in areas subject to natural disasters.

More detailed information on these and additional factors which 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 many 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 undertakes no obligation 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            Year Ended
                    ----------------------------- --------------------
                    April 2,   Jan. 1,  April 3,  April 2,   April 3,
                      2006      2006      2005      2006       2005
                    --------- --------- --------- --------- ----------

Net revenues        $130,450  $129,185  $111,727  $494,077   $428,719
Cost of revenues      38,358    36,900    30,687   144,246    121,074
                    --------- --------- --------- --------- ----------
  Gross profit        92,092    92,285    81,040   349,831    307,645
                    --------- --------- --------- --------- ----------

Operating expenses:
  Engineering and
   development        25,180    22,797    20,766    89,753     82,791
  Sales and
   marketing          17,466    16,100    14,602    64,416     54,582
  General and
   administrative      4,851     4,362     3,916    17,295     16,659
  Purchased in-
   process research
   and development    10,510         -         -    10,510          -
                    --------- --------- --------- --------- ----------
    Total operating
     expenses         58,007    43,259    39,284   181,974    154,032
                    --------- --------- --------- --------- ----------

Operating income      34,085    49,026    41,756   167,857    153,613

Interest and other
 income               15,246     5,151     5,539    32,627     17,873
                    --------- --------- --------- --------- ----------

Income from
 continuing
 operations before
 income taxes         49,331    54,177    47,295   200,484    171,486

Income taxes          17,957    22,496    16,177    78,653     60,071
                    --------- --------- --------- --------- ----------

Income from
 continuing
 operations           31,374    31,681    31,118   121,831    111,415

Income from
 discontinued
 operations, net of
 income taxes          1,175   134,557    15,037   161,757     46,181
                    --------- --------- --------- --------- ----------

Net income           $32,549  $166,238   $46,155  $283,588   $157,596
                    ========= ========= ========= ========= ==========

Income from
 continuing
 operations per
 share:
    Basic              $0.19     $0.20     $0.17     $0.71      $0.60
    Diluted            $0.19     $0.19     $0.17     $0.70      $0.59

Income from
 discontinued
 operations per
 share:
    Basic              $0.01     $0.83     $0.08     $0.95      $0.25
    Diluted            $0.01     $0.83     $0.08     $0.93      $0.25

Net income per
 share:
  Basic                $0.20     $1.03     $0.25     $1.66      $0.85
  Diluted              $0.20     $1.02     $0.25     $1.63      $0.84

Number of shares
 used in per share
 calculations:
  Basic              161,722   161,317   184,186   171,250    185,024
  Diluted            164,378   163,093   187,699   173,467    187,315



                          QLOGIC CORPORATION

       RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS

             TO NON-GAAP INCOME FROM CONTINUING OPERATIONS

         (unaudited -- in thousands, except per share amounts)


                            Three Months Ended         Year Ended
                        -------------------------- -------------------
                        April 2, Jan. 1,  April 3, April 2,  April 3,
                          2006     2006     2005     2006      2005
                        -------- -------- -------- --------- ---------

GAAP income from
 continuing operations  $31,374  $31,681  $31,118  $121,831  $111,415
Items excluded from
 GAAP income from
 continuing operations:
  Amortization of
   acquisition related
   intangible assets
   included in cost of
   revenues                 201        -        -       201         -
  Acquisition related
   non-cash
   compensation charges
   included in:
      Engineering and
       development
       expenses             256      170      511       426     5,892
      Sales and
       marketing
       expenses              62       42        -       104         -
  Insurance recovery
   included in general
   and administrative
   expenses                   -     (700)       -      (700)        -
  Purchased in-process
   research and
   development           10,510        -        -    10,510         -
  Gain on sale of
   shares acquired in
   the sale of
   discontinued
   operations included
   in interest and
   other income          (8,463)       -        -    (8,463)        -
  Income tax effect         578      194        -       772         -
                        -------- -------- -------- --------- ---------
Non-GAAP income from
 continuing operations  $34,518  $31,387  $31,629  $124,681  $117,307
                        ======== ======== ======== ========= =========

Diluted income from
 continuing operations
 per share:
  GAAP income from
   continuing
   operations             $0.19    $0.19    $0.17     $0.70     $0.59
  Adjustments              0.02        -        -      0.02      0.04
                        -------- -------- -------- --------- ---------
  Non-GAAP income from
   continuing
   operations             $0.21    $0.19    $0.17     $0.72     $0.63
                        ======== ======== ======== ========= =========

Non-GAAP Financial Measurements

The non-GAAP financial measurements contained herein are a supplement
to the corresponding financial measurements prepared in accordance
with generally accepted accounting principles (GAAP). The non-GAAP
financial information presented for fiscal 2006 excludes amortization
of acquisition related intangible assets, acquisition related non-cash
compensation charges, purchased in-process research and development,
an insurance recovery received, the gain on sale of shares received as
consideration in the sale of the hard disk drive and tape drive
controller business and the related income tax effect of these items.
The non-GAAP financial information presented for fiscal 2005 excludes
acquisition related non-cash compensation charges. Management believes
these items are not indicative of the Company's on-going core
operating performance.

The Company has presented non-GAAP income from continuing operations
and non-GAAP diluted income from continuing operations per share, on a
basis consistent with its historical presentation, to assist investors
in understanding the Company's core income from continuing operations
and non-GAAP diluted income from continuing operations per share on an
on-going basis. The non-GAAP presentation also enhances 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
on-going income from continuing operations and diluted income from
continuing operations per share are important measures in the
evaluation of the Company's profitability. These non-GAAP financial
measures exclude the adjustments described above, and thus provide an
overall measure of the Company's on-going net profitability and
related profitability on a diluted per share basis.

Management uses non-GAAP income from continuing operations in its
evaluation of the Company's core after-tax results of operations and
trends between fiscal periods and believes that this measure is an
important component 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 this non-GAAP
financial measurement.

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



                          QLOGIC CORPORATION

                 CONDENSED CONSOLIDATED BALANCE SHEETS

                      (unaudited -- in thousands)


                                                  April 2,   April 3,
                                                   2006        2005
                                                 --------- -----------
                     ASSETS
Current assets:
  Cash and cash equivalents                      $125,192    $165,644
  Short-term investments                          540,448     646,694
  Accounts receivable, net                         67,571      54,245
  Inventories                                      39,440      22,661
  Other current assets                             46,441      32,699
  Current assets related to discontinued
   operations                                           -      17,576
                                                 --------- -----------
    Total current assets                          819,092     939,519

Property and equipment, net                        82,630      71,322
Goodwill and other intangible assets               32,679       8,518
Other assets                                        3,306         527
Long-term assets related to discontinued
 operations                                             -       6,454
                                                 --------- -----------

                                                 $937,707  $1,026,340
                                                 ========= ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                $32,160     $19,975
  Accrued compensation                             22,990      19,629
  Income taxes payable                             12,920      17,999
  Other current liabilities                        10,283       7,444
  Current liabilities related to discontinued
   operations                                           -       3,774
                                                 --------- -----------
    Total current liabilities                      78,353      68,821

Deferred tax liabilities                                -       1,336
                                                 --------- -----------
    Total liabilities                              78,353      70,157
                                                 --------- -----------

Stockholders' equity:
  Common stock                                        195         193
  Additional paid-in capital                      537,648     504,663
  Retained earnings                               883,310     599,722
  Accumulated other comprehensive loss             (1,799)     (3,394)
  Treasury stock                                 (560,000)   (145,001)
                                                 --------- -----------
    Total stockholders' equity                    859,354     956,183
                                                 --------- -----------

                                                 $937,707  $1,026,340
                                                 ========= ===========



                          QLOGIC CORPORATION

            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                      (unaudited -- in thousands)


                                                       Year Ended
                                                  --------------------
                                                   April 2,   April 3,
                                                     2006       2005
                                                  ---------- ---------

Cash flows from operating activities:
  Net income                                       $283,588  $157,596
   Income from discontinued operations, net of
    income taxes                                   (161,757)  (46,181)
                                                  ---------- ---------
  Income from continuing operations                 121,831   111,415
  Adjustments to reconcile income from continuing
   operations to net cash provided by operating
   activities:
    Depreciation and amortization                    17,898    15,059
    Purchased in-process research and development    10,510         -
    Deferred income taxes                            (4,480)     (158)
    Tax benefit from issuance of stock under
     stock plans                                      5,055     2,441
    Stock-based compensation                            175       578
    Provision for losses on accounts receivable        (366)       90
    Loss on disposal of property and equipment          168       187
    Changes in operating assets and liabilities,
     net of acquisition:
      Accounts receivable                           (12,513)   (3,297)
      Inventories                                   (16,230)   (2,671)
      Other assets                                   (5,840)   (3,572)
      Accounts payable                               11,877     3,840
      Accrued compensation                            3,263     3,528
      Income taxes payable                           (1,205)    4,094
      Other liabilities                               2,405     1,593
                                                  ---------- ---------
        Net cash provided by operating activities   132,548   133,127
                                                  ---------- ---------

Cash flows from investing activities:
  Purchases of marketable securities               (946,087) (672,418)
  Sales and maturities of marketable securities   1,101,680   694,140
  Additions to property and equipment               (28,295)  (22,299)
  Acquisition of business, net of cash acquired     (35,210)        -
  Restricted cash placed in escrow                  (12,000)        -
  Purchase of other assets                                -    (4,000)
                                                  ---------- ---------
   Net cash provided by (used in) investing
    activities                                       80,088    (4,577)
                                                  ---------- ---------

Cash flows from financing activities:
  Proceeds from issuance of stock under stock
   plans                                             27,757    13,735
  Purchase of treasury stock                       (414,999)  (85,009)
                                                  ---------- ---------
   Net cash used in financing activities           (387,242)  (71,274)
                                                  ---------- ---------

Cash provided by (used in) continuing operations   (174,606)   57,276
                                                  ---------- ---------

Cash flows from discontinued operations:
  Net cash provided by (used in) operating
   activities                                       (47,182)   48,815
  Net cash provided by (used in) investing
   activities, including proceeds from sale         181,336    (3,358)
                                                  ---------- ---------
Cash provided by discontinued operations            134,154    45,457
                                                  ---------- ---------

Net increase (decrease) in cash and cash
 equivalents                                        (40,452)  102,733

Cash and cash equivalents at beginning of period    165,644    62,911
                                                  ---------- ---------

Cash and cash equivalents at end of period         $125,192  $165,644
                                                  ========== =========


                          QLOGIC CORPORATION

                  SUPPLEMENTAL FINANCIAL INFORMATION

                      (unaudited -- in thousands)

Net Revenues

A summary of the Company's revenue components is as follows:


                          Three Months Ended           Year Ended
                     ----------------------------- -------------------
                      April 2,  Jan. 1,   April 3,  April 2,  April 3,
                        2006     2006       2005      2006      2005
                     --------- --------- --------- --------- ---------

  SAN Infrastructure
   Products          $121,845  $120,402  $101,985  $460,050  $387,922
  Management
   Controllers          7,130     6,050     7,971    27,136    37,003
  Other                 1,475     2,733     1,771     6,891     3,794
                     --------- --------- --------- --------- ---------
                     $130,450  $129,185  $111,727  $494,077  $428,719
                     ========= ========= ========= ========= =========


Geographic Revenues

Revenues by geographic area are presented based upon the country of
destination. Net revenues by geographic area are as follows:


                          Three Months Ended           Year Ended
                     ----------------------------- -------------------
                      April 2,  Jan. 1,   April 3,  April 2,  April 3,
                        2006     2006       2005      2006      2005
                     --------- --------- --------- --------- ---------

  United States       $72,875   $68,394   $60,847  $271,937  $227,771
  International        57,575    60,791    50,880   222,140   200,948
                     --------- --------- --------- --------- ---------
                     $130,450  $129,185  $111,727  $494,077  $428,719
                     ========= ========= ========= ========= =========




Contact:
QLogic Corporation
Christine Flavio (Editors), 650-934-8057

Email Contact
or
Tony Massetti (Investors), 949-389-7533

Email Contact