Trident Microsystems Reports Third Quarter of Fiscal Year 2008 Results
SANTA CLARA, Calif., April 28 /PRNewswire-FirstCall/ — Trident Microsystems, Inc. (Nasdaq: TRID), a leader in high-performance semiconductor system solutions for the multimedia and digital television markets, today announced results for the third fiscal quarter of 2008, ended March 31, 2008. For the third quarter of fiscal 2008, the company reported net revenues of $55.3 million, representing a sequential decrease of 26 percent compared to net revenues of $75.0 million in the quarter ended December 31, 2007 and a 9% year-over-year decrease from the $60.6 million reported in the quarter ended March 31, 2007.
For the third quarter of fiscal 2008, a net loss of $0.2 million was recorded on a generally accepted accounting principles ("GAAP") basis, or $0.00 per share on a diluted basis, which included $5.3 million of GAAP adjustments driven primarily by stock-based compensation expense. This compares to net income of $7.2 million in the quarter ended December 31, 2007, on a GAAP basis, or $0.12 per share on a diluted basis, which included $12.2 million of GAAP adjustments.
Non-GAAP net income for the third quarter of fiscal 2008 was $5.1 million or $0.08 per share on a diluted basis. This compares to non-GAAP net income of $19.4 million or $0.30 per share on a diluted basis, in the second quarter of fiscal 2008 and to $13.9 million or $0.22 per share in the third quarter of fiscal 2007. A detailed reconciliation between net income (loss) on a GAAP basis and non-GAAP net income is provided in a table following the non-GAAP Condensed Consolidated Statements of Operations.
"Our third quarter results reflect the challenges we face in an increasingly competitive market environment as we continue to evolve our product portfolio to include SoC solutions," said Sylvia D. Summers, Trident's Chief Executive Officer and President.
"We are committed to transforming Trident products to recapture our customer base and to position the company for strategic growth in calendar 2009. By focusing on improved execution across the organization, we will leverage our substantial engineering talent and expertise to extend our product roadmap and to develop and deliver industry-leading SoC solutions. In parallel, we will continue our efforts to align our sales and marketing team to be customer facing," added Summers.
Current Outlook
Trident's outlook for the fourth quarter of fiscal 2008, described below, is based on current expectations and is subject to various factors, including those set forth in the Forward-Looking Information statement below. Actual results may differ materially.
-- Trident expects net revenues to be in the range of approximately
$38-41 million.
-- Non-GAAP gross margins are projected to decrease to the 45-47% range.
-- Non-GAAP operating expenses are projected to be approximately
$12-13 million for R&D expenses, driven primarily by hiring of
additional engineers in Trident's China development centers, and
approximately $6-7 million for SG&A expenses.
-- Non-GAAP Operating Income is projected to be near break-even.
-- Provision for income taxes is projected to be a benefit of
approximately $2 million.
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, expenses related to a software license fees adjustment, 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 detailed reconciliation between net income on a GAAP basis and non-GAAP net income is provided in a table following non-GAAP Consolidated Statements of Operations.
Investor Conference Call
Trident will host a conference call today, April 28, 2008, at 2:00 p.m. PT/ 5:00 p.m. ET to discuss these quarterly results. Shareholders may participate in the call by calling 888-680-0894 or 617-213-4860 and entering passcode 62591323. 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 April 30, 2008 until midnight Pacific Time, on May 12, 2008 and can be accessed by calling 888-286-8010 (domestic) or 617-801-6888 (international) using access code 87934152.
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 Operations (Unaudited)
Three Months Ended Nine Months Ended
March December March March March
(In thousands, except 31, 31, 31, 31, 31,
per share data) 2008 2007 2007 2008 2007
Net revenues $55,284 $74,984 $60,579 $218,442 $200,202
Cost of revenues 29,105 38,602 30,993 112,742 100,671
Gross profit 26,179 36,382 29,586 105,700 99,531
Gross margin % 47.4% 48.5% 48.8% 48.4% 49.7%
Research and
development expenses 15,274 12,633 11,283 41,819 31,659
% of net revenues 27.6% 16.8% 18.6% 19.1% 15.8%
Selling, general and
administrative
expenses 7,120 13,970 10,866 38,391 36,389
% of net revenues 12.9% 18.6% 17.9% 17.6% 18.2%
Income from operations 3,785 9,779 7,437 25,490 31,483
% of net revenues 6.8% 13.0% 12.3% 11.7% 15.7%
Interest and other
income (expense),
net (1) (796) 2,387 1,659 5,283 5,252
Income before income
taxes 2,989 12,166 9,096 30,773 36,735
% of net revenue 5.4% 16.2% 15.0% 14.1% 18.3%
Provision for income
taxes (2) 3,216 4,916 3,481 13,691 13,188
% of net revenues 5.8% 6.6% 5.7% 6.3% 6.6%
Income (loss) before
cumulative effect of
change in accounting
principle (227) 7,250 5,615 17,082 23,547
% of net revenues (0.4)% 9.7% 9.3% 7.8% 11.8%
Cumulative effect of
change in accounting
principle - - - - (190)
% of net revenues 0.0% 0.0% 0.0% 0.0% (0.1)%
Net income (loss) $(227) $7,250 $5,615 $17,082 $23,357
% of net revenues (0.4)% 9.7% 9.3% 7.8% 11.7%
Basic net income
(loss) per share
Prior to cumulative
effect of change in
accounting
principle $(0.00) $0.12 $0.10 $0.29 $0.41
Cumulative effect of
change in accounting
principle - - - - -
Basic net income
(loss) per share $(0.00) $0.12 $0.10 $0.29 $0.41
Common shares used
in computing basic
per share amounts 59,369 59,269 57,748 59,025 57,599
Diluted net income
(loss) per share
Prior to cumulative
effect of change in
accounting
principle $(0.00) $0.12 $0.09 $0.27 $0.37
Cumulative effect of
change in accounting
principle - - - - -
Diluted net income
(loss) per share $(0.00) $0.12 $0.09 $0.27 $0.37
Common and common
equivalent shares
used in computing
diluted per share
amounts under GAAP
basis 59,369 62,747 63,440 62,719 63,346
(1) Amounts in the three and nine months ended March 31, 2008 include a
$2.7 million foreign currency remeasurment loss related to income
taxes payable in foreign jurisdictions, which resulted from the
relative weakness of the U.S. dollar.
(2) Amounts for each quarter and nine months ended, included the
amortization of foreign taxes associated with intercompany profit on
assets remaining within Trident's group.
Trident Microsystems, Inc.
Non-GAAP Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
March December March March March
(In thousands, except 31, 31, 31, 31, 31,
per share data) 2008 2007 2007 2008 2007
Net revenues $55,284 $74,984 $60,579 $218,442 $200,202
Cost of revenues 28,014 37,067 29,378 108,479 96,048
Gross profit 27,270 37,917 31,201 109,963 104,154
Gross margin % 49.3% 50.6% 51.5% 50.3% 52.0%
Research and
development expenses 11,278 9,036 9,001 30,172 24,886
% of net revenues 20.4% 12.1% 14.9% 13.8% 12.4%
Selling, general and
administrative expenses 6,690 6,144 6,266 19,969 19,071
% of net revenues 12.1% 8.2% 10.3% 9.1% 9.5%
Income from operations 9,302 22,737 15,934 59,822 60,197
% of net revenues 16.8% 30.3% 26.3% 27.4% 30.1%
Interest and other
income (expense),
net (1) (1,000) 1,628 1,443 2,537 5,036
Income before income
taxes 8,302 24,365 17,377 62,359 65,233
% of net revenues 15.0% 32.5% 28.7% 28.5% 32.6%
Provision for income
taxes (2) 3,216 4,916 3,481 13,691 13,188
% of net revenues 5.8% 6.6% 5.7% 6.3% 6.6%
Net income 5,086 19,449 13,896 48,668 52,045
% of net revenues 9.2% 25.9% 22.9% 22.3% 26.0%
Basic net income per
share $0.09 $0.33 $0.24 $0.82 $0.90
Common shares used in
computing basic per
share amounts 59,369 59,269 57,748 59,025 57,599
Diluted net income
per share $0.08 $0.30 $0.22 $0.76 $0.81
Common and common
equivalent shares
used in computing
diluted per share
amounts under
non-GAAP basis (3) 63,067 63,988 64,431 63,901 64,534
(1) Amounts in the three and nine months ended March 31, 2008 include a
$2.7 million foreign currency remeasurment loss related to income
taxes payable in foreign jurisdictions, which resulted from the
relative weakness of the U.S. dollar.
(2) Amounts for each quarter and nine months ended, included the
amortization of foreign taxes associated with intercompany profit on
assets remaining within Trident's group.
(3) 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 (loss) on a GAAP basis and a non-GAAP
basis is as follows:
Three Months Ended Nine Months Ended
(In thousands, except March December March March March
per share data, 31, 31, 31, 31, 31,
unaudited) 2008 2007 2007 2008 2007
GAAP net income (loss) $(227) $7,250 $5,615 $17,082 $23,357
Amortization of
intangibles
Cost of revenues 1,040 1,485 1,484 4,011 4,256
Selling, general
and administrative
expenses 108 167 167 442 435
Total amortization of
intangibles (1) 1,148 1,652 1,651 4,453 4,691
Stock-based compensation
expense
Cost of revenues 51 50 131 252 367
Research and
development 2,519 3,597 2,282 10,170 6,773
Selling, general
and administrative
expenses 2,822 4,756 1,625 13,816 4,126
Total stock-based
compensation
expense (2) 5,392 8,403 4,038 24,238 11,266
Software license
fees (3) 1,477 - - 1,477 -
Other income, net (4) (204) (759) (216) (2,746) (216)
Stock options related
professional fees (5) (2,500) 2,903 2,808 4,164 12,757
Cumulative effect of
change in accounting
principle (6) - - - - 190
Non-GAAP net income $5,086 $19,449 $13,896 $48,668 $52,045
Basic net income
per share $0.09 $0.33 $0.24 $0.82 $0.90
Common shares used in
computing basic
per share amounts 59,369 59,269 57,748 59,025 57,599
Diluted net income
per share $0.08 $0.30 $0.22 $0.76 $0.81
Common and common
equivalent shares used
in computing diluted
per share amounts
under non-GAAP basis 63,067 63,988 64,431 63,901 64,534
(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 a non-cash 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) Software license fees represent an adjustment for prior software
usage.
(4) The capital gains are excluded from the non-GAAP net income (loss)
calculation. Management believes that such 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 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.
(5) Stock options related professional fees are excluded from the non-GAAP
net income (loss) calculation. Management believes that these
professional fees are not related to the ongoing business and
operating performance of Trident. Amounts in the three and nine
months ended March 31, 2008 include insurance reimbursements received
for the Directors' and Officers' insurance partially offset by the
stock options related professional fees incurred.
(6) 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)
March 31, December 31, March 31,
(In thousands) 2008 2007 2007
ASSETS
Current assets
Cash and cash
equivalents $200,316 $185,512 $134,366
Investments 36,117 36,950 49,365
Accounts
receivable, net 15,144 15,747 14,685
Inventories 11,300 12,092 14,891
Prepaid expenses
and other current
assets 16,505 17,677 13,009
Total current assets 279,382 267,978 226,316
Property and
equipment, net 23,086 23,143 17,927
Intangible assets,
net 9,671 9,540 14,499
Goodwill 1,372 - -
Other assets 9,000 8,357 15,351
Total assets $322,511 $309,018 $274,093
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable (1) $14,531 $13,525 $21,516
Accrued expenses (1) 25,742 21,787 25,532
Income taxes
payable 21,633 19,618 38,457
Total current
liabilities 61,906 54,930 85,505
Long-term income
taxes payable (2) 23,602 21,937 -
Deferred income tax
liabilities 247 83 1,425
Total liabilities 85,755 76,950 86,930
Stockholders' equity
Capital stock 203,290 197,907 173,276
Retained earnings 35,880 36,107 12,037
Accumulated other
comprehensive
income (loss) (2,414) (1,946) 1,850
Total stockholders'
equity 236,756 232,068 187,163
Total liabilities
and stockholders'
equity $322,511 $309,018 $274,093
(1) Certain Balance Sheet items have been reclassified to conform to the
current year's format. These classifications had no impact on
previously reported net income.
(2) 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
$21.4 million to "Long-term income taxes payable."