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Vitesse Reports Third Quarter Fiscal Year 2009 Financial Results
Posted by: gurufocus (IP Logged)
Date: August 10, 2009 04:48PM

Press Release: Vitesse Reports Third Quarter Fiscal Year 2009 Financial Results

CAMARILLO, Calif.--(BUSINESS WIRE)--Vitesse Semiconductor Corporation (Pink Sheets: VTSS), a leading provider of advanced IC solutions for Carrier and Enterprise networks, today reported its financial results for the third quarter of fiscal year 2009, ended June 30, 2009. Following is a summary for this period:

  • Net revenues of $44.6 million, including $8.25 million in intellectual property (IP) revenue from the sale of certain non-core patents. Net product revenues for the third quarter of fiscal year 2009 were $36.4 million compared to $34.6 million in the second quarter of fiscal year 2009.
  • Net Income of $12.5 million, compared with a net loss of $7.1 million in the second quarter of fiscal year 2009. The third quarter result includes the effect of a one-time payment of $22.5 million from the settlement of litigation with KPMG LLP.
  • Cash totaled $51.4 million at June 30, 2009, compared with $39.4 million at March 31, 2009. The Company maintains the target of cash neutral or better for the fiscal year.
  • Four new products were introduced in the quarter, for a total of 15 fiscal year-to-date.

“We delivered a solid quarter in spite of challenging market conditions,” said Chris Gardner, CEO of Vitesse. “We experienced stabilization with ordering patterns from our customers and growth in Asia-Pacific, especially in China. We remain cautiously optimistic about the recovery of the industry as we believe that the bottom occurred last quarter. We continue to manage the business with tight expense controls and seek opportunities for strategic investments in R&D.”

Third Quarter Financial Results

Net revenues for the third quarter of fiscal year 2009 were $44.6 million, a decline of 18.9% compared to $55.0 million reported in the third quarter of fiscal year 2008. Product revenues were $36.4 million, a 33.9% decrease from the third quarter of fiscal year 2008. The sale of non-core product patents resulted in IP revenue of $8.25 million for the quarter, compared to no IP revenues in the third quarter of fiscal year 2008.

Cost of revenues decreased $10.7 million in the third quarter of fiscal year 2009 compared to the same period in fiscal year 2008. Engineering, research and development (R&D) expenses were $11.2 million for the third quarter of fiscal year 2009, compared to $12.5 million for the third quarter of fiscal year 2008, a decrease of $1.3 million or 10.1%. Selling, general and administrative expenses were $11.4 million for the third quarter of fiscal year 2009, which included an expense of $1.8 million related to the patent sale, compared to $14.6 million for the same period in fiscal year 2008.

Income from operations was $17.6 million, compared with an operating loss of $2.3 million for the third quarter of fiscal year 2008. The Company’s net income was $12.5 million, or $0.05 per share, compared with net income of $1.1 million, or $0.01 per share, for the third quarter of fiscal year 2008. Both income from operations and net income include a one time gain of $16 million from the KPMG LLP settlement, partially offset by the accrual of $3 million due to an expected SEC penalty related to historical option backdating and certain accounting irregularities.

Inventory, net of reserves, as measured on a sell through model, at June 30, 2009 totaled $23.9 million, a decrease of $13.5 million from September 30, 2008. Cash and cash equivalents totaled $51.4 million at June 30, 2009, an increase of $14.7 million from September 30, 2008. This includes $15.5 million net cash received from the settlement of the litigation with KPMG LLP.

New Product Introductions

Vitesse made four product announcements in the third quarter of fiscal year 2009:

VSC8641: This smaller form factor Gigabit copper PHY, with EcoEthernet™ technology, enables designers to more efficiently tackle next-generation network deployment in power-sensitive applications such as cable modems and PON optical network terminals.

VSC3144-08 and VSC3303: Achieving an industry’s best 1.2 Tbps switching capacity for 8G Fibre Channel applications, these crosspoint switches offer OEMs the technology needed for transmission and signal recovery of high-speed signals over lossy printed circuit boards, backplanes, and cable media.

E-StaX-34™: A 28-port fully managed Layer-2 Gigabit Ethernet switch that delivers advanced Quality of Service (QoS) and security features for industrial telecom applications, cost-effectively implements a 10-fold increase in the communication rate, extending transmissions beyond traditional Local Area Network (LAN) environments.

Conference Call Information

A conference call is scheduled for Monday, August 10, 2009 at 1:30 pm Pacific Time/4:30 pm Eastern Time. To listen to the conference call via telephone, dial 800-450-5178 (U.S. toll-free) or 706-679-6171 (International) and provide the passcode 22953585. Participants should dial in at least 10 minutes prior to the start of the call. The Company will also broadcast the conference call via a webcast over the internet. To listen to the webcast, please visit the investors section of the Vitesse website at www.vitesse.com. The call will be recorded and available for replay for seven days. To access the audio replay, dial 800-642-1687 (U.S. toll-free) or 706-645-9291 (International) and provide the passcode 22953585.

About Vitesse

Vitesse designs, develops and markets a diverse portfolio of high-performance, cost-competitive semiconductor solutions for Carrier and Enterprise networks worldwide. Engineering excellence and dedicated customer service distinguish Vitesse as an industry leader in Gigabit Ethernet LAN, Ethernet-over-SONET, Fibre Channel, Optical Transport, and other applications. Vitesse innovation empowers customers to deliver superior products for Enterprise, Access, Metro, and Core applications. Additional company and product information is available at www.vitesse.com.

Vitesse is a registered trademark and EcoEthernet is a trademark in the United States and/or other jurisdictions of Vitesse Semiconductor Corporation. All other trademarks or registered trademarks mentioned herein are the property of their respective holders.

Cautions Regarding Forward Looking Statements:

All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current facts. These forward-looking statements are based on our current expectations, estimates and projections about our business and industry, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” and similar terms, and variations or negatives of these words. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements.

VITESSE SEMICONDUCTOR CORPORATION
     
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
June 30, September 30,
2009 2008
(in thousands, except share data)
 
ASSETS
Current assets:
Cash and cash equivalents $ 51,422 $ 36,722
Accounts receivable, net 14,898 6,307
Inventory 23,936 37,466
Assets held for sale - 3,164
Restricted cash 395 592
Prepaid expenses and other current assets 4,345   4,011  
Total current assets 94,996 88,262
Property, plant and equipment, net 7,419 8,084
Goodwill - 191,418
Other intangible assets, net 1,833 913
Other assets 3,388   3,600  
$ 107,636   $ 292,277  
 
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS\' (DEFICIT) EQUITY
Current liabilities:
Accounts payable $ 16,980 $ 16,101
Accrued expenses and other current liabilities 9,825 20,242
Derivative liability 4,636 -
Deferred revenue 640 2,721
Current portion of debt, net of discount of $437 at June 30, 2009 29,563 -
Convertible subordinated debt 96,710   -  
Total current liabilities 158,354 39,064
 
Other long-term liabilities: 1,703 1,564
Long-term debt, net of discount of $577 at September 30, 2008 44 29,423
Convertible subordinated debt -   96,700  
Total liabilities 160,101   166,751  
Minority interest 166 165
Commitments and contingencies
Shareholders\' (deficit) equity:
Preferred stock, $0.01 par value. 10,000,000 shares authorized; none outstanding - -
Common stock, $0.01 par value. 500,000,000 shares authorized; 230,905,580 shares outstanding at June 30, 2009 and 226,205,580 at September 30, 2008 2,314 2,267
Additional paid-in-capital 1,753,846 1,747,324
Accumulated deficit (1,808,791 ) (1,624,230 )
Total shareholders\' (deficit) equity (52,631 ) 125,361  
$ 107,636   $ 292,277  
 
 

 

 

VITESSE SEMICONDUCTOR CORPORATION

 
     
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three months ended Nine months ended
 
June 30, June 30,
    2009 2008 2009 2008
(in thousands, except per share data) (in thousands, except per share data)
 
Product revenues $ 36,356   $ 55,041 $ 115,743 $ 163,176
Intellectual property revenues     8,250   -     13,250     -  
Net revenues 44,606 55,041 128,993 163,176
Costs and expenses:
Cost of revenues 17,282 27,965 57,957 79,977
Engineering, research and development 11,200 12,458 33,720 37,584
Selling, general and administrative (including gain on sale of fixed assets of $3.2 million for the nine months ended June 30, 2008 and a gain on the sale of building of $2.9 million for the nine months ended June 30, 2009) 11,412 14,570 31,761 37,758
Accounting remediation & reconstruction expense & litigation costs (13,206

)

 

2,067 (9,742 ) 8,813
Goodwill impairment - - 191,418 -
Amortization of intangible assets     362   310     1,068     2,204  
Costs and expenses     27,050   57,370     306,182     166,336  
 
Income (loss) from operations 17,556 (2,329 ) (177,189 ) (3,160 )
Other (expense) income:
Interest expense, net (5,804

)

 

(1,112 ) (8,104 ) (2,706 )
Other (expense) income, net     (38

)

 

  3,513     58     4,236  
Other (expense) income, net (5,842

)

 

2,401 (8,046 ) 1,530
 
Income tax (benefit) expense (696

)

 

3 (600 ) (546 )
Minority interests in earnings of consolidated subsidiary     -   (660 )   1     (660 )
Income (loss) from continuing operations before discontinued operations 12,410 (591 ) (184,634 ) (1,744 )
 
Discontinued operations
Income from discontinued operations, net of tax of $901 and $997 and gain on sale of $21,509 for the three and nine months ended June 30, 2008, respectively     71   1,703     71     8,101  
Net income (loss)     $ 12,481 $ 1,112   $ (184,563 ) $ 6,357  
 
Income (Loss) per Share
Income (loss) per share (basic and diluted):
Continuing operations $ 0.05 $ 0.00 $ (0.81 ) $ (0.01 )
Discontinued operations     0.00   0.01     0.00     0.04  
Net income (loss) per share     $ 0.05 $ 0.01   $ (0.81 ) $ 0.03  
 
Weighted average shares outstanding:

Stocks Discussed: VTSS,
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