Trident Microsystems Reports Second Quarter of Fiscal Year 2008 Results
Thursday January 31, 4:15 pm ET
SANTA CLARA, Calif., Jan. 31 /PRNewswire-FirstCall/ — Trident Microsystems, Inc. (Nasdaq: TRID – News), a leader in high-performance semiconductor system solutions for the multimedia and digital television markets, today announced results for the second fiscal quarter of 2008, ended December 31, 2007. For the second quarter of fiscal 2008, the company reported net revenues of $75 million, representing a sequential decrease of 15 percent compared to net revenues of $88 million in the quarter ended September 30, 2007 and a 10% year-over-year increase from the $68 million reported in the quarter ended December 31, 2006.
For the second quarter of fiscal 2008, net income of $7.3 million was recorded on a generally accepted accounting (“GAAP”) basis, or $0.12 per share on a diluted basis, which included $8.4 million in stock-based compensation expense, $2.9 million in legal and accounting fees related to the company's investigation into its historical stock option practices, $1.7 million relating to amortization of intangible assets and a $0.8 million gain from the sale of equity investments. This compares to net income of $10.1 million in the quarter ended September 30, 2007, on a GAAP basis, or $0.16 per share on a diluted basis, which included $10.4 million in stock-based compensation expense, $3.8 million in legal and accounting fees related to the company's investigation into its historical stock option practices, $1.7 million relating to amortization of intangible assets and a $1.8 million gain from a cash dividend received as a shareholder of United Microelectronics Corporation.
Non-GAAP net income for the second quarter of fiscal 2008 was $19.4 million or $0.30 per share on a diluted basis, and excludes the items noted above. This compares to non-GAAP net income of $24.1 million or $0.37 per share on a diluted basis, in the first quarter of fiscal 2008 and to $18.1 million or $0.28 per share in the second quarter of fiscal 2007. Reconciliation between net income on a GAAP basis and non-GAAP net income is provided in a table following the non-GAAP Condensed Consolidated Statements of Income.
“Our second quarter results mark a period of solid financial performance for Trident. We exceeded the top end of our revenue guidance, held gross margins flat with the previous quarter, delivered non-GAAP net income of $19.4 million, and increased our cash position by 16% to $186 million over the prior quarter,” said Sylvia D. Summers, Trident's Chief Executive Officer.
“Going forward, Trident will be in a period of product transition as we move to develop and deliver more SoC solutions. We foresee a more competitive environment ahead and expect our results to be impacted in calendar year 2008. Our intention is to leverage our technology leadership and focus our resources on implementing an aggressive plan for strategic growth in 2009.”
Current Outlook
Trident's outlook for the second half of fiscal 2008 is based on current expectations and subject to various factors, including those set forth in the Forward-Looking Statement below.
-- Trident expects net revenues for the second half of fiscal 2008 to be
in the range of approximately $100-110 million.
-- Non-GAAP gross margins are projected to decrease to the 45-47% range
for this period.
As the company's SoC products ramp and the market matures, in the
future, gross margins are projected to reach a level closer to 40%.
-- Non-GAAP R&D expenses, for the second half of fiscal 2008, are
projected to be approximately $11-14 million per quarter driven
primarily by increased spending on NRE and further investing in
engineering resources in the company's China development
centers.
-- Non-GAAP SG&A expenses are projected to remain flat at approximately
$6-7 million per Quarter in the second half of fiscal 2008.
Use of Non-GAAP Financial Information
To supplement the consolidated financial results prepared under GAAP, Trident uses a non-GAAP conforming, or non-GAAP, measure of net income that is GAAP net income adjusted to exclude certain costs, expenses and gains. Non-GAAP net income gives an indication of Trident's baseline performance before gains, losses or other charges that are considered by management to be outside the company's core operating results. In addition, non-GAAP net income is among the primary indicators management uses as a basis for planning and forecasting future periods. These measures are not in accordance with, or an alternative for, GAAP and may be materially different from non-GAAP measures used by other companies. Trident computes non-GAAP net income by adjusting GAAP net income for compensation expense, expenses related to the stock option investigation and related matters and those related to the acquisition of Trident's minority interest held in its Taiwanese subsidiary (“TTI”), including amortization of intangible assets, capital gains and dividend income. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in a table following non-GAAP Consolidated Statements of Income.
Investor Conference Call
Trident will host a conference call today, January 31, 2008, at 2:00 p.m. PT/ 5:00 p.m. ET to discuss the quarterly results. Shareholders may participate in the call by calling 866-314-9013 or 617-213-8053 and entering passcode 34519135. This call is being webcasted by Thomson/CCBN and can be accessed at Trident's web site at: http://www.tridentmicro.com. The webcast is also being distributed through the Thomsom StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at http://www.fulldisclosure.com, Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (http://www.streetevents.com). A replay of the conference call will be available from 5:00 p.m. PT January 31, 2008 until midnight Pacific Time, on February 14, 2008 and can be accessed by calling 888-286-8010 (domestic) or 617-801-6888 (international) using access code 98368718.
Forward-Looking Information
This press release contains forward-looking statements, including statements regarding financial expectations for the second half of fiscal year 2008, the status of the market, Trident's market share, Trident's ability to develop and deliver SoC solutions, Trident's ability to leverage its technology leadership to take advantage of the market changes and achieve its aggressive plan for strategic growth in 2009, challenges and competition that Trident faces in its markets, and Trident's expectations regarding the market for its products and product introductions. The forward-looking statements above are subject to certain risks and uncertainties, and actual results could vary materially depending on a number of factors. These risks include, in particular, the timing of product introductions, the failure to obtain design wins among major OEMs for Trident's products, and competitive pressures, including pricing and competitors' new product introductions. Additional factors that may affect Trident's business are described in detail in Trident's filings with the Securities and Exchange Commission available at http://www.sec.gov.
About Trident Microsystems, Inc.
Trident Microsystems, Inc., with headquarters in Santa Clara, California, designs, develops and markets digital media for the masses in the form of multimedia integrated circuits (ICs) for PCs and digital processing ICs for TVs and TV monitors. Trident's products are sold to a network of OEMs, original design manufacturers and system integrators worldwide. For further information about Trident and its products, please consult the Company's web site: http://www.tridentmicro.com.
NOTE: Trident is a registered trademark of Trident Microsystems, Inc., HiDTV(TM), DPTV(TM), SVP(TM) WX, SVP(TM) UX, SVP(TM) PXP and SVP(TM) CX are trademarks of Trident Microsystems, Inc. All other company and product names are trademarks and/or registered trademarks of their respective owners. Features, pricing, availability and specifications are subject to change without notice.
Trident Microsystems, Inc.
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended
(In thousands, except per December 31, September 30, December 31,
share data) 2007 2007 2006
Net revenues $74,984 $88,174 $68,260
Cost of revenues 38,602 45,035 33,647
Gross profit 36,382 43,139 34,613
Gross margin 48.5% 48.9% 50.7%
Research and development
expenses 12,633 13,912 10,973
% of net revenues 16.8% 15.8% 16.1%
Selling, general and
administrative expenses 13,970 17,301 12,864
% of net revenues 18.6% 19.6% 18.8%
Income from operations 9,779 11,926 10,776
% of net revenues 13.0% 13.5% 15.8%
Interest and other income, net 2,387 3,692 1,301
Income before income taxes 12,166 15,618 12,077
% of net revenues 16.2% 17.7% 17.7%
Provision for income taxes 4,916 5,559 4,848
% of net revenues 6.6% 6.3% 7.1%
Income before cumulative
effect of change in
accounting principle 7,250 10,059 7,229
% of net revenues 9.7% 11.4% 10.6%
Cumulative effect of change
in accounting principle - - -
% of net revenues 0.0% 0.0% 0.0%
Net income $7,250 $10,059 $7,229
% of net revenues 9.7% 11.4% 10.6%
Basic net income per share
Prior to cumulative effect
of change in accounting
principle $0.12 $0.17 $0.13
Cumulative effect of change
in accounting principle - - -
Basic net income per share $0.12 $0.17 $0.13
Common shares used in
computing basic per
share amounts 59,269 58,851 57,748
Diluted net income per share
Prior to cumulative effect
of change in accounting
principle $0.12 $0.16 $0.11
Cumulative effect of change
in accounting principle - - -
Diluted net income per share $0.12 $0.16 $0.11
Common and common equivalent
shares used in computing
diluted per share amounts
under GAAP basis 62,747 63,605 63,501
Six Months Ended
(In thousands, except per December 31, December 31,
share data) 2007 2006
Net revenues $163,158 $139,623
Cost of revenues 83,637 69,678
Gross profit 79,521 69,945
Gross margin 48.7% 50.1%
Research and development expenses 26,545 20,376
% of net revenues 16.3% 14.6%
Selling, general and administrative expenses 31,271 25,523
% of net revenues 19.2% 18.3%
Income from operations 21,705 24,046
% of net revenues 13.3% 17.2%
Interest and other income, net 6,079 3,593
Income before income taxes 27,784 27,639
% of net revenues 17.0% 19.8%
Provision for income taxes 10,475 9,707
% of net revenues 6.4% 7.0%
Income before cumulative effect
of change in accounting principle 17,309 17,932
% of net revenues 10.6% 12.8%
Cumulative effect of change in
accounting principle - (190)
% of net revenues 0.0% (0.1)%
Net income $17,309 $17,742
% of net revenues 10.6% 12.7%
Basic net income per share
Prior to cumulative effect of
change in accounting principle $0.30 $0.31
Cumulative effect of change in
accounting principle - -
Basic net income per share $0.30 $0.31
Common shares used in computing
basic per share amounts 58,617 57,527
Diluted net income per share
Prior to cumulative effect of
change in accounting principle $0.28 $0.28
Cumulative effect of change in
accounting principle - -
Diluted net income per share $0.28 $0.28
Common and common equivalent shares
used in computing diluted per share
amounts under GAAP basis 62,924 63,316
Trident Microsystems, Inc.
Non-GAAP Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended
(In thousands, except per December 31, September 30, December 31,
share data) 2007 2007 2006
Net revenues $74,984 $88,174 $68,260
Cost of revenues 37,067 43,398 32,127
Gross profit 37,917 44,776 36,133
Gross margin 50.6% 50.8% 52.9%
Research and development expenses 9,036 9,858 8,659
% of net revenues 12.1% 11.2% 12.7%
Selling, general and administrative
expenses 6,144 7,135 5,829
% of net revenues 8.2% 8.1% 8.5%
Income from operations 22,737 27,783 21,645
% of net revenues 30.3% 31.5% 31.7%
Interest and other income, net 1,628 1,909 1,301
Income before income taxes 24,365 29,692 22,946
% of net revenues 32.5% 33.7% 33.6%
Provision for income taxes 4,916 5,559 4,848
% of net revenues 6.6% 6.3% 7.1%
Net income 19,449 24,133 18,098
% of net revenues 25.9% 27.4% 26.5%
Basic net income per share $0.33 $0.41 $0.31
Common shares used in
computing basic per share amounts 59,269 58,851 57,748
Diluted net income per share $0.30 $0.37 $0.28
Common and common equivalent
shares used in computing diluted
per share amounts under non-GAAP
basis (a) 63,988 65,148 64,661
Six Months Ended
(In thousands, except per December 31, December 31,
share data) 2007 2006
Net revenues $163,158 $139,623
Cost of revenues 80,465 66,672
Gross profit 82,693 72,951
Gross margin 50.7% 52.2%
Research and development expenses 18,894 15,885
% of net revenues 11.6% 11.4%
Selling, general and administrative expenses 13,279 12,805
% of net revenues 8.1% 9.2%
Income from operations 50,520 44,261
% of net revenues 31.0% 31.7%
Interest and other income, net 3,537 3,593
Income before income taxes 54,057 47,854
% of net revenues 33.1% 34.3%
Provision for income taxes 10,475 9,707
% of net revenues 6.4% 7.0%
Net income 43,582 38,147
% of net revenues 26.7% 27.3%
Basic net income per share $0.74 $0.66
Common shares used in computing
basic per share amounts 58,617 57,527
Diluted net income per share $0.68 $0.59
Common and common equivalent shares
used in computing diluted per share
amounts under non-GAAP basis (a) 64,075 64,603
(a) Common and common equivalent shares used to calculate non-GAAP diluted
net income per share excluded all the unamortized stock compensation
of stock options and restricted shares when determining whether the
awards are anti-dilutive. We also excluded unamortized stock
compensation from the assumed proceeds under the treasury stock
method. Non-GAAP results in the prior periods have been adjusted to
reflect such exclusion.
Trident Microsystems, Inc.
A reconciliation between net income on a GAAP basis and a non-GAAP
basis is as follows:
Three Months Ended
(In thousands, except per December 31, September 30, December 31,
share data, unaudited) 2007 2007 2006
GAAP net income $7,250 $10,059 $7,229
Amortization of intangibles
Cost of revenues 1,485 1,486 1,385
Selling, general and
administrative expenses 167 167 134
Total amortization of
intangibles (1) 1,652 1,653 1,519
Stock-based compensation expense
Cost of revenues 50 151 135
Research and development 3,597 4,054 2,314
Selling, general and
administrative expenses 4,756 6,238 1,179
Total stock-based
compensation expense (2) 8,403 10,443 3,628
Interest and other
income, net (3) (759) (1,783) -
Stock options related
professional fees 2,903 3,761 5,722
Cumulative effect of change in
accounting principle (4) - - -
Non-GAAP net income 19,449 24,133 18,098
Basic net income per share $0.33 $0.41 $0.31
Common shares used in computing
basic per share amounts 59,269 58,851 57,748
Diluted net income per share $0.30 $0.37 $0.28
Common and common equivalent
shares used in computing
diluted per share amounts
under non-GAAP basis 63,988 65,148 64,661
Six Months Ended
(In thousands, except per December 31, December 31,
share data, unaudited) 2007 2006
GAAP net income $17,309 $17,742
Amortization of intangibles
Cost of revenues 2,971 2,770
Selling, general and administrative expenses 334 268
Total amortization of intangibles (1) 3,305 3,038
Stock-based compensation expense
Cost of revenues 201 236
Research and development 7,651 4,491
Selling, general and administrative expenses 10,994 2,501
Total stock-based compensation expense (2) 18,846 7,228
Interest and other income, net (3) (2,542) -
Stock options related professional fees 6,664 9,949
Cumulative effect of change in accounting
principle (4) - 190
Non-GAAP net income 43,582 38,147
Basic net income per share $0.74 $0.66
Common shares used in computing basic per share
amounts 58,617 57,527
Diluted net income per share $0.68 $0.59
Common and common equivalent shares used
in computing diluted per share amounts under
non-GAAP basis 64,075 64,603
(1) Amortization of intangible assets represents the amortization of
identifiable intangible assets, acquired from the purchase of the
minority interests of the Company's TTI subsidiary during fiscal year
ended June 30, 2005. Management deemed that these acquisition related
charges are not related to Trident's core operating performance and it
is appropriate to exclude those charges from Trident's non-GAAP
financial measures, as it enhances the ability of investors to compare
Trident's period-over-period operating results.
(2) Stock-based compensation expense relates primarily to the equity
awards such as stock options and restricted stock. Stock-based
compensation is an expense that varies in amount from period to period
and is dependent on market forces that are often beyond Trident's
control. Hence, management excludes this item from the non-GAAP
financial measures, as it enhances the ability of investors to compare
Trident's period-over-period operating results.
(3) Capital gain and dividend income are excluded from the non-GAAP net
income calculation. Management believes that such dividend income and
gains/losses on the sale of Trident's investments are not related to
the ongoing business and operating performance of Trident. As such,
management believes that it is appropriate to exclude
investment-related gains/losses and dividend income from Trident's
non-GAAP financial measures. Management deemed that it can enhance the
ability of investors to compare Trident's period-over-period operating
results.
(4) The adoption of EITF 06-2, Accounting for Sabbatical Leave and Other
Similar Benefits Pursuant to FASB Statement No. 43, Accounting for
Compensated Absences, resulted in a cumulative effect from an
accounting change of $0.2 million on sabbatical expenses for which
expenses had already been recorded. Management deemed that those
charges from the initial adoption of EITF 06-2 are not related to the
ongoing business and operating performance of Trident.
Trident Microsystems, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
December 31, September 30, December 31,
(In thousands) 2007 2007 2006
ASSETS
Current assets
Cash and cash equivalents $185,512 $160,261 $137,554
Short-term investment - UMC 36,233 41,960 51,990
Short-term investment -
Others 717 1,435 -
Accounts receivable, net 15,747 29,131 8,665
Inventories 12,092 19,150 12,648
Prepaid expenses and other
current assets 17,594 22,790 12,640
Deferred income taxes 83 83 622
Total current assets 267,978 274,810 224,119
Property and equipment, net 23,143 22,441 6,772
Intangible assets, net 9,540 11,192 16,152
Investments - other 2,079 2,597 4,280
Deferred income taxes 338 338 947
Other assets 5,940 8,573 12,979
Total assets $309,018 $319,951 $265,249
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $13,704 $27,474 $14,608
Accrued expenses 21,608 28,383 32,621
Income taxes payable 19,618 17,516 37,224
Total current liabilities 54,930 73,373 84,453
Long-term income taxes payable
(1) 21,937 21,404 -
Deferred income tax
liabilities 83 1,557 1,604
Total liabilities 76,950 96,334 86,057
Stockholders' equity Capital
stock 197,907 191,851 169,238
Retained earnings 36,107 28,857 6,422
Accumulated other
comprehensive income/(loss) (1,946) 2,909 3,532
Total stockholders' equity 232,068 223,617 179,192
Total liabilities and
stockholders' equity $309,018 $319,951 $265,249
(1) On July 1, 2007, the Company adopted FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes" ("FIN 48").
Implementation of FIN 48 resulted in the reclassification of
$21.9 million to "Long-term income taxes payable".