<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
_______________________
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______ to _______
COMMISSION FILE NO. 0-23298
QLOGIC CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0537669
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3545 HARBOR BOULEVARD
COSTA MESA, CALIFORNIA 92626
- ---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
(714) 438-2200
- --------------------------------------------------------------------------------
(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 X No
--- ---
As of August 8, 1996, the registrant had 5,627,537 shares of common stock
outstanding.
<PAGE> 2
QLOGIC CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
- ------------------------------ ----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets June 30, 1996 and March 31,1996 . . . 3
Condensed Consolidated Statements of Operations Three months ended
June 30, 1996 and July 2, 1995 . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows Three months ended
June 30, 1996 and July 2, 1995 . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8, 9, 10
PART II. OTHER INFORMATION
- ---------------------------
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12, 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
QLOGIC CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
--------- ---------
<S> <C> <C>
ASSETS
Cash $ 9,536 $ 8,414
Accounts and notes receivable, net 4,555 7,033
Inventories 7,736 6,670
Deferred income taxes 624 648
Prepaid expenses and other current assets 310 239
--------- ---------
Total current assets 22,761 23,004
Property and equipment, net 5,223 5,520
Other assets 495 15
--------- ---------
$ 28,479 $ 28,539
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 30, MARCH 31,
1996 1996
--------- ---------
Accounts payable $ 5,597 $ 6,177
Accrued expenses 3,162 3,218
Current installments of capitalized lease obligations 263 275
--------- ---------
Total current liabilities 9,022 9,670
Capitalized lease obligations, excluding current installments 519 576
Other non-current liabilities 1,266 2,016
Stockholders' equity:
Preferred stock, $0.10 par value;
800,000 shares authorized, none issued; and Series A,
$0.001 par value; 200,000 shares authorized, none issued - -
Common stock $0.10 par value; 12,500,000 shares authorized;
5,613,901 and 5,557,598 shares issued and outstanding
at June 30, 1996 and March 31, 1996 respectively 561 556
Additional paid-in capital 17,224 16,801
Accumulated deficit (113) (1,080)
--------- ---------
Total stockholders' equity 17,672 16,277
--------- ---------
$ 28,479 $ 28,539
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
QLOGIC CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
JUNE 30, JULY 2,
1996 1995
---------- ----------
<S> <C> <C>
Net revenues $ 15,740 $ 9,570
Cost of sales 9,585 5,995
---------- ----------
Gross profit 6,155 3,575
Operating expenses:
Engineering and development 2,089 1,653
Selling and marketing 1,357 1,989
General and administrative 1,117 1,095
---------- ----------
Total operating expenses 4,563 4,737
Operating income (loss) 1,592 (1,162)
Interest income (expense) 59 (18)
---------- ----------
Income (loss) before income taxes 1,651 (1,180)
Income tax provision (benefit) 684 (456)
---------- ----------
Net income (loss) $ 967 $ (724)
========== ==========
Net income (loss) per common and
equivalent shares $ 0.16 $ (0.13)
========== ==========
Weighted average common and
common equivalent shares 5,894,350 5,552,458
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
QLOGIC CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
JUNE 30, JULY 2,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 967 $ (724)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 612 575
Loss on disposal of property and equipment 368 -
Provision for deferred income taxes and income tax payable 24 (6)
Change in assets and liabilities:
Decrease in accounts and notes receivables 2,478 1,559
Increase in inventories (1,066) (1,470)
Increase in prepaid expenses and other current assets (71) (91)
Decrease (increase) in other assets (480) 99
Decrease in accounts payable (580) (36)
Decrease in accrued expenses (56) (210)
Decrease in other non-current liabilities (750) -
--------- ---------
Net cash provided by (used in) operating activities 1,446 (304)
--------- ---------
Cash flows used in investing activities:
Additions to property and equipment (683) (220)
--------- ---------
Net cash used in investing activities (683) (220)
--------- ---------
Cash flows from financing activities:
Principal payments under capital leases (69) (66)
Proceeds from exercises of stock options 428 -
--------- ---------
Net cash provided by (used in) financing activities 359 (66)
--------- ---------
Net change in cash 1,122 (590)
--------- ---------
Cash at beginning of period 8,414 1,149
--------- ---------
Cash at end of period $ 9,536 $ 559
========= =========
Cash paid during the period for:
Interest $ 49 $ 27
========= =========
Income taxes $ 1,096 $ 35
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
QLOGIC CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
NOTE (1) BASIS OF PRESENTATION
In the opinion of the Company, the accompanying condensed consolidated
financial statements contain all adjustments (which are normal recurring
accruals) necessary to present fairly the financial position as of June 30,
1996 and March 31, 1996, the results of operations for the three months ended
June 30, 1996 and July 2, 1995 and the statements of cash flows for the three
months ended June 30, 1996 and July 2, 1995.
NOTE (2) INVENTORIES
Components of inventories are as follows:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
--------- ---------
<S> <C> <C>
Raw materials $ 3,187 $ 2,122
Work in progress 287 1,455
Finished goods 4,262 3,093
--------- ---------
$ 7,736 $ 6,670
========= =========
</TABLE>
NOTE (3) NET INCOME (LOSS) PER SHARE
Net income (loss) per common and equivalent share was computed based on
the weighted average number of common and equivalent shares outstanding (if
dilutive) during the periods presented (5,894,350 for the three months ended
June 30, 1996). The Company has granted certain stock options which have been
treated as common share equivalents in computing both primary and fully diluted
income per share. The primary and fully diluted income (loss) per share
calculations are approximately the same.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth selected items from the QLogic Corporation
Condensed Consolidated Statements of Operations and should be read in
conjunction with the Selected Financial Data and Condensed Consolidated
Financial Statements included elsewhere herein. References to amounts are in
thousands unless otherwise specified. Prior to December 28, 1992, Emulex
Corporation ("Emulex") operated the micro devices business as a division
("EMD"). On March 30, 1992, the Board of Directors of Emulex approved in
principle a plan of reorganization (the "Reorganization Plan"). Pursuant to
the Reorganization Plan, QLogic was formed as a separate corporation on
November 18, 1992 and on December 28, 1992 exchanged 5,000,000 shares of its
common stock for the net assets of EMD.
On February 24, 1994, pursuant to the Reorganization Plan, Emulex declared
a special dividend consisting of the distribution (the "Distribution") to its
stockholders of all outstanding shares of common stock of QLogic. The purpose
of the Distribution was to enable QLogic to gain independent access to equity
markets so that it may use its capital stock as a source of funding for growth
and acquisitions and to attract and retain key employees.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
JUNE 30, 1996 JULY 2, 1995
--------------- --------------
<S> <C> <C> <C>
Net revenues......................... $15,740 100.0% $ 9,570 100.0%
Cost of sales........................ 9,585 60.9 5,995 62.6
------ ----- ------- -----
Gross profit..................... 6,155 39.1 3,575 37.4
Operating expenses:
Engineering and development...... 2,089 13.3 1,653 17.3
Selling and marketing............ 1,357 8.6 1,989 20.8
General and administrative....... 1,117 7.1 1,095 11.4
------ ----- ------- -----
Total operating expenses......... 4,563 29.0 4,737 49.5
------ ----- ------- -----
Operating income (loss).......... $1,592 10.1 $(1,162) (12.1)
====== ===== ======= =====
</TABLE>
NET REVENUES
Net revenues for the three months ended June 30, 1996 increased $6.2
million, or 64.5 percent, from the comparable three months in fiscal 1995 to
$15.7 million. The increase was primarily the result of sales increases in
the TEC, ISP, and board product lines of $2.6 million, $1.6 million, and $1.2
million, respectively.
COST OF SALES
The cost of sales percentage for the three months ended June 30, 1996 was
60.9 percent, a decrease of 1.7 percent from the comparable period in the prior
fiscal year. The decrease in the cost of sales percentage was primarily due to
improved manufacturing efficiencies related to increased volume.
7
<PAGE> 8
OPERATING EXPENSES
Operating expenses for the three months ended June 30, 1996 decreased $0.2
million or 3.7 percent from the comparable period in the prior fiscal year.
Selling and marketing expenses decreased by $0.6 million related to reduced
advertising expenses. The decrease in operating expenses was partially offset
by engineering and development expenditures increasing by $0.4 million, because
of increases in salary and related expenses and engineering material expenses.
OPERATING INCOME (LOSS)
Operating income for the three months ended June 30, 1996 increased $2.8
million from the three month period ended July 2, 1995. The operating income
was associated with gross profit increasing by $2.6 million from the comparable
period in the prior fiscal year. Another contributing factor to the operating
income increase was an operating expense decrease of $0.2 million from the
comparable period in the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 1996 increased by $0.4 million from March 31,
1996.
QLogic has a line of credit of up to $7.5 million with Silicon Valley
Bank. There were no borrowings under the line of credit during the quarter
ended June 30, 1996. The line of credit with Silicon Valley Bank expires July
5, 1997.
QLogic anticipates capital expenditures in fiscal 1997 will be
approximately $3.5 million. QLogic also has long-term lease commitments of
approximately $0.5 million which are due over the next five years. QLogic
believes that existing cash balances, facilities and equipment leases, cash
flow from operating activities and its available line of credit should be
sufficient to satisfy its anticipated long-term operating and capital
expenditure requirements.
In order to increase working capital to take advantage of business
opportunities, the Company may seek additional equity and/or debt financing
within the next twelve months.
Prior to the Distribution, QLogic and Emulex entered into a Tax Sharing
Agreement (the "Tax Sharing Agreement") for purposes of allocating
pre-Distribution tax liabilities between QLogic and Emulex and to implement the
Distribution as a tax-free distribution. The total amount due Emulex pursuant
to the Tax Sharing Agreement at June 30, 1996 is $1.0 million which is included
in other non-current liabilities. Amounts due Emulex under the Tax Sharing
Agreement are payable on December 30, 1999, and bear interest, commencing
January 1, 1996, at the rate applicable to underpayments of Federal income
taxes, which was 8.5 percent at June 30, 1996. Interest due Emulex is payable
quarterly beginning April 1996.
8
<PAGE> 9
BUSINESS ENVIRONMENT AND CERTAIN FACTORS BEARING ON FUTURE RESULTS
The foregoing discussion, including the discussion under the caption
Liquidity and Capital Resources contains forward-looking statements that
involve risks and uncertainties. In addition, the Company may from time to
time make oral forward-looking statements. The Company wishes to caution
readers that a number of important factors could cause results to differ
materially from those in the forward-looking statements. Factors that could
cause or contribute to such differences include those discussed below, as well
as those discussed elsewhere herein.
Both the semiconductor and the computer peripherals industries are highly
competitive and are characterized by rapidly changing technology and evolving
industry standards. All of the Company's products compete with products
available from numerous companies, many of which have substantially greater
research and development, marketing and financial resources, manufacturing
capability, customer support organizations and brand recognition than those of
the Company. There can be no assurance that the Company's SCSI products will
be able to compete successfully with other SCSI products offered presently or
in the future by other SCSI vendors.
Although the Company believes that it provides an adequate allowance for
sales returns, there can be no assurance that future sales returns will not
exceed the Company's allowance in any particular fiscal quarter, and therefore,
could have a material adverse effect on operating results.
The Company provides its major distributors and certain volume purchasers
with price protection in the event that the Company reduces the price of its
products. Although the Company believes that it has provided an adequate
allowance for price protection, there can be no assurance that the impact of
future price reductions by the Company will not exceed the Company's allowance
in any specific fiscal period. Any price protection in excess of recorded
allowances could result in a material adverse effect on operating results.
A significant portion of the Company's revenue in each fiscal quarter
results from orders booked in that quarter. A significant percentage of the
Company's bookings and sales to major customers on a quarterly basis
historically has occurred during the last month of the quarter and have
typically been concentrated in the latter half of that month. This trend
continued in the first three months of fiscal 1996. Orders placed by major
customers are typically based upon the customers' forecasted sales level for
Company products and inventory levels of Company products desired to be
maintained by the major customers at the time of the orders. Major
distribution customers sometimes receive negotiated cash rebates, market
development funds, and extended payment terms from the Company for incentive
purposes, in accordance with or in some cases, above and beyond standard
industry practice. Changes in purchasing patterns by one or more of the
Company's major customers, customer policies pertaining to desired inventory
levels of Company products, negotiations of rebate and market development
funds, as well as changes in the ability of the Company to anticipate in
advance the mix of customer orders or to ship large quantities of products near
the end of a fiscal quarter, could result in material fluctuations in quarterly
operating results. These factors could also increase the inventory levels
maintained by the Company and adversely affect the inventory reserves required
to be maintained by the Company.
The Company believes that there is a desire among certain major
distribution customers and volume purchasers to reduce their on-hand inventory
levels of computer products, including the Company's products. This could have
a significant adverse impact on the Company's operating results during the
future period or periods that such customers initiate such inventory
reductions. The timing of new product announcements and introductions by the
Company or significant product returns by major distribution customers to the
Company could also result in material fluctuations in quarterly operating
results.
In addition to the factors described above that could adversely affect the
Company's business and results of operations, and, therefore, the market
valuation of its common stock, the Company's future results of operations may
be impacted by various trends and uncertainties that are beyond the Company's
control, including adverse changes in general economic conditions, government
regulations and foreign currency fluctuations.
9
<PAGE> 10
Other characteristics of the Company and the computer software and
hardware industry may adversely impact the Company. These include the ability
of the Company to integrate any future acquired businesses by retaining key
technical personnel of acquired businesses and managing and integrating the
business systems of acquired companies. The inability to retain key personnel
or to manage and integrate business systems could substantially reduce the
expected benefits of such acquisitions. As the Company's products become more
complex, the Company could experience delays in product development that are
common in the computer industry. Significant delays in product development and
release would adversely affect the Company's results of operations. There can
be no assurance that the Company will respond effectively to technological
changes or new product announcements by other companies or that the Company's
research and development efforts will be successful. Furthermore, introduction
of new products, moving production of existing products to different suppliers,
and customers extended use of mature products involves substantial business
risks because of the possibility of product "bugs" or performance problems, in
which event the Company could experience significant product returns, warranty
expenses, expedite charges, in addition to lower sales and lower profits.
As a result of the foregoing factors, past performance trends by the
Company may not be indicative of future operating results and should not be
used by investors in predicting or anticipating future results. The market
price of the Company's common stock has been, and may continue to be volatile.
Factors identified above, along with other factors that may arise in the
future, quarterly fluctuations in the Company's operating results and general
conditions or perceptions of securities analysts relating to technology stocks
in general or to the Company specifically may have a significant impact on the
market price of the Company's common stock and could cause substantial market
price fluctuations over short periods.
These and other factors which could cause actual results to differ
materially from those in forward-looking statements are also discussed in the
Company's other filings with the Securities and Exchange Commission, including
its recent filings on Form 10-K and Form 10-Q.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
---------------------
On June 4, 1996, the Board of Directors of QLogic Corporation (the
"Corporation") approved the adoption of a Shareholder Rights Plan and on June
4, 1996 declared a dividend distribution of one Right for each outstanding
share of the Corporation's Common Stock to stockholders of record on the close
of business on June 20, 1996 (the "Dividend Date"). Each Right entitles the
registered holder to purchase from the Corporation a unit consisting of one
one-hundredth of a share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $0.001 per share (the "Preferred Stock"), at a purchase price
of $45.00 per Unit, subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement dated as of June 4, 1996 (the
"Rights Agreement") between the Corporation and Harris Trust Company of
California, as Rights Agent.
CERTIFICATES. Initially, the Rights will be attached to all Common
Stock certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. Subject to extension by the Board of
Directors in certain circumstances, the Rights will separate from the Common
Stock and a distribution date (the "Date of Distribution") will occur upon the
earlier of (i) 10 days following a public announcement that a person or group
of affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date"); or (ii) 10
business days following the commencement of a tender offer or exchange offer
that would result in a person or group beneficially owning 15% or more of the
outstanding shares of Common Stock. Until the Date of Distribution, (i) the
Rights will be evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock certificates; (ii) new Common
Stock certificates issued will contain a notation incorporating the Rights
Agreement by reference; and (iii) the surrender for transfer of any
certificates for Common Stock outstanding will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
EXPIRATION AND EXERCISE. The Rights are not exercisable until the Date
of Distribution and will expire at the close of business on June 4, 2006,
unless earlier redeemed by the Corporation as described below.
As soon as practicable after the Date of Distribution, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Date of Distribution and, thereafter, the separate
Rights Certificates will represent the Rights. Except as otherwise determined
by the Board of Directors, only shares of Common Stock issued prior to the Date
of Distribution will be issued with Rights.
"FLIP-IN". In the event that, at any time following the Dividend Date,
(i) the Corporation is the surviving corporation in a merger with an Acquiring
Person and its Common Stock is not changed or exchanged; (ii) an Acquiring
Person becomes the beneficial owner of more than 15% of the outstanding shares
of Common Stock; (iii) an Acquiring Person engages in one or more
"self-dealing" transactions as set forth in the Rights Agreement; or (iv)
during such time as there is an Acquiring Person, an event occurs which results
in such Acquiring Person's ownership interest being increased by more than 1%
(e.g., a reverse stock split), each holder of a Right will thereafter have the
right to receive, upon exercise, Common Stock (or, in certain circumstances,
cash, property or other securities of the Corporation) having a value equal to
two times the exercise price of the Right. Notwithstanding any of the
foregoing, following the occurrence of any of the events set forth in this
paragraph, all Rights that are, or (under certain circumstances specified in
the
11
<PAGE> 12
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void. However, rights are not exercisable following the occurrence of any
of the events set forth above until such time as the Rights are no longer
redeemable by the Corporation as set forth below.
For example, at an exercise price of $45.00 per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following an event
set forth in the preceding paragraph would entitle its holder to purchase
$90.00 worth of Common Stock (or other consideration, as noted above) for
$45.00. Assuming that the Common Stock had a per share value of $45.00 at such
time, the holder of each valid Right would be entitled to purchase two shares
of Common Stock for $45.00.
PERMITTED OFFER. A tender or exchange offer for all outstanding Common
Stock at a price and on terms determined by the Board of Directors prior to the
purchase to be adequate and in the best interests of the Corporation and its
stockholders (other than the Acquiring Person) is a Permitted Offer under the
Rights Agreement. A Permitted Offer does not trigger the exercisability of the
Rights.
"FLIP-OVER". In the event that, at any time following the Stock
Acquisition Date, (i) the Corporation is acquired in a merger or other business
combination transaction in which the Corporation is not the surviving
corporation; or (ii) 50% or more of the Corporation's assets or earning power
is sold or transferred, each holder of a Right (except Rights which previously
have been voided as set forth above) shall thereafter have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right. The events set forth in
this paragraph and in the preceding paragraph under the caption "FLIP-IN" are
referred to as the "Triggering Events."
EXCHANGE FEATURE. At any time after any Person becomes an Acquiring
Person and prior to the acquisition by such person or group of 50% or more of
the outstanding Common Stock, the Board of Directors may exchange the Rights
(other than the Rights owned by such Person or group which will have become
void), in whole or in part, at an exchange rate of one share of Common Stock
(or a combination of cash, property, Common Stock or other securities having an
equal value) per Right (subject to adjustment).
ADJUSTMENT FOR DILUTION. The purchase price payable, and the number of
Units of Preferred Stock or other securities or property issuable upon exercise
of the Rights are subject to adjustment from time to time to prevent dilution
(i) in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock; (ii) if holders of the Preferred
Stock are granted certain rights or warrants to subscribe for Preferred Stock
or convertible securities at less than the current market price of the
Preferred Stock; or (iii) upon the distribution to holders of the Preferred
Stock of evidences of indebtedness or assets (excluding regular cash dividends)
or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments amount to at least 1% of the purchase
price. No fractional Units will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Preferred Stock on the
last trading date prior to the date of exercise.
12
<PAGE> 13
REDEMPTION. At any time until ten days following the Stock Acquisition
Date (subject to extension by the Continuing Directors, as defined below), the
Corporation may redeem the Rights in whole, but not in part, at a price of
$.001 per Right. Under certain circumstances set forth in the Rights Agreement,
the decision to redeem shall require the concurrence of a majority of the
Continuing Directors. After the redemption period has expired, the
Corporation's right of redemption may be reinstated if an Acquiring Person
reduces his beneficial ownership to 10% or less of the outstanding shares of
the Common Stock in a transaction or series of transactions not involving the
Corporation. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, with (where required) the concurrence of the
Continuing Directors, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.001 redemption price. Rights are
not exercisable while subject to redemption.
CONTINUING DIRECTORS. The term "Continuing Directors" means any member
of the Board of Directors of the Corporation who was a member of the Board
prior to the date of the Rights Agreement, and any person who is subsequently
elected to the Board if such person is recommended or approved by a majority of
the Continuing Directors, but shall not include an Acquiring Person, or an
affiliate or associate of an Acquiring Person, or any representative of the
foregoing entities or persons.
STOCKHOLDER RIGHTS. Until a Right is exercised, the holder thereof, as
such, will have no rights as a stockholder of the Corporation, including,
without limitation, the right to vote or to receive dividends. While the
distribution of the Rights will not be taxable to stockholders or to the
Corporation, stockholders may, depending upon the circumstances, recognize
taxable income in the event that the Rights become exercisable for Common Stock
(or other consideration) of the Corporation or for common stock (or other
consideration) of the acquiring company as set forth above.
AMENDMENTS. Other than those provisions relating to the principal
economic terms of the Rights, any of the provisions of the Rights Agreement may
be amended by the Board of Directors of the Corporation prior to the
Distribution Date. After the Date of Distribution, the provisions of the Rights
Agreement may be amended by the Board (in certain circumstances, with the
concurrence of the Continuing Directors) in order to cure any ambiguity, to
make changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen
any time period under the Rights Agreement; provided, however, that no
amendment to adjust the time period governing redemption shall be made at such
time as the Rights are not redeemable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.6 Rights Agreement dated as of June 4, 1996 between
QLogic Corporation and Harris Trust Company of
California, which includes as Exhibit A thereto a form
of Certificate of Designation for the Preferred Stock,
as Exhibit B thereto the Form of Rights Certificate and
as Exhibit C thereto a Summary of Terms of Shareholder
Rights Plan (incorporated by reference to Exhibit 2.1
to the Form 8-A filed on June 19, 1996).
27 Financial Data Schedule.
(b) Reports on Form 8-K
The registrant has not filed any reports on Form 8-K during the
quarter for which this report is filed.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 13, 1996
QLOGIC CORPORATION
BY: /s/ H.K. DESAI
------------------------------
(H.K. Desai)
President and
Chief Executive Officer
BY: /s/ THOMAS R. ANDERSON
------------------------------
(Thomas R. Anderson)
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
- ------- ----------- ----------
<S> <C> <C>
3.6 Rights Agreement dated as of June 4, 1996 between
QLogic Corporation and Harris Trust Company of
California, which includes as Exhibit A thereto a
form of Certificate of Designation for the Preferred
Stock, as Exhibit B thereto the Form of Rights
Certificate and as Exhibit C thereto a Summary of
Terms of Shareholder Rights Plan.
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 9,536
<SECURITIES> 0
<RECEIVABLES> 4,555
<ALLOWANCES> 535
<INVENTORY> 7,736
<CURRENT-ASSETS> 22,761
<PP&E> 13,630
<DEPRECIATION> 8,406
<TOTAL-ASSETS> 28,479
<CURRENT-LIABILITIES> 9,022
<BONDS> 0
0
0
<COMMON> 561
<OTHER-SE> 17,111
<TOTAL-LIABILITY-AND-EQUITY> 28,479
<SALES> 15,740
<TOTAL-REVENUES> 15,740
<CGS> 9,585
<TOTAL-COSTS> 9,585
<OTHER-EXPENSES> 4,565
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (59)
<INCOME-PRETAX> 1,651
<INCOME-TAX> 684
<INCOME-CONTINUING> 967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 967
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
