Integrated Device Technology Inc. (IDTI) filed Quarterly Report for the period ended 2009-09-27.
Integrated Device Technology Inc. designs develops manufactures and markets a broad range of high-performance semiconductor products and modules. Applications for the company's products include data and telecommunications equipment such as routers hubs switches cellular base stations and other devices; personal computers; and networked peripherals and servers such as RAID arrays servers and printers. Integrated Device Technology Inc. has a market cap of $981.8 million; its shares were traded at around $5.93 with a P/E ratio of 37.2 and P/S ratio of 1.5.
Highlight of Business Operations:
Gross profit (the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009). Gross profit for the second quarter of fiscal 2010 was $51.1million, a decrease of $36.0 million compared to the second quarter of fiscal 2009. Gross margin for the second quarter of fiscal 2010 was 37% compared to 43% in the second quarter of fiscal 2009. The decrease in gross profit was primarily driven by lower revenue, lower utilization of our fabrication facility and an unfavorable shift in the mix of products sold. The utilization of our manufacturing capacity in Oregon decreased from approximately 79% of equipped capacity in the second quarter of fiscal 2009 to 77% of equipped capacity in the second quarter of fiscal 2010. In addition, our gross profit was negatively impacted by $7.6 million related to the sale of acquired inventory valued at fair market value, less an estimated selling cost, associated with our acquisition of Tundra. We also recorded $5.7 million of severance and benefit costs related to a reduction in force associated with our acquisition of Tundra and the restructuring action within our Oregon fabrication facility. Partially offsetting these decreases, our gross margin benefited from a $10.3 million decrease in intangible asset amortization as we wrote down the carrying value of intangible assets in fiscal 2009. In addition, a portion of the intangible assets are being amortized on an accelerated method, resulting in decreased amortization over time. Furthermore, our gross margin benefited from $0.7 million and $1.1 million decreases in performance related bonuses and equipment expenses, respectively, as a result of our cost control efforts in response to the challenging economic times. Finally, in the second quarter of fiscal 2010 and 2009, gross profit benefited by approximately $0.9 million and $1.1 million, respectively, from the sale of inventory previously written down.
Research and development (the first six months of fiscal 2010 compared to the first six months of fiscal 2009). Our year to date R&D expenses through the second quarter of fiscal 2010 were $77.8 million, a decrease of $7.4 million, or 9% compared to the same period one year ago. The decrease was primarily attributable to a $4.3 million reduction in performance related bonuses; a $4.6 million decrease in stock based compensation expense and a $1.1 million decrease in the 401(K) match, a Company-wide shutdown and reduction of R&D expenses associated with our divestiture of the NWD assets. In addition, indirect material expense and outside service decreased $0.4 million and $0.3 million, respectively. Partially offsetting these decreases was a $4.2 million increase in labor-related costs resulting from the Tundra and Leadis acquisitions and a $0.3 million and a $0.5 million increase in facilities and equipment expenses.
Selling, general and administrative. SG&A expenses decreased $1.5 million, or 5% to $30.7 million in the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009. The decrease was primarily attributable to a $4.2 million reduction in intangible asset amortization as we wrote down the fair value of intangible assets in fiscal 2009 and a portion of intangible assets, which is being amortized on an accelerated method, resulting in decreased amortization expense over time. Compared to the second quarter of fiscal 2009, sales representative commissions decreased $2.4 million attributable to lower revenues in the second quarter of fiscal 2010. In addition, stock based compensation expense decreased $2.3 million as a result of lower valuation of new grants in the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009 and performance related bonuses decreased $1.1million as a result of our cost control efforts. Partially offsetting these decreases was a $7.7 million increase in labor-related expenses, primarily attributable to the addition of Tundra personnel and the restructuring expenses associated with the Tundra acquisition. We also experienced a $0.4 million increase in legal and consulting services spending primarily attributable to the on-going litigation and a $0.2 million increase in equipment expense as a result of Tundra acquisition.
Selling, General and Administrative (the first six months of fiscal 2010 compared to the first six months of fiscal 2009). Our year to date SG&A expenses through the second quarter of fiscal 2010 were $56.1 million, a decrease of $9.1 million, or 14% compared to the same period one year ago. The decreases was primarily attributable to an $8.9 million reduction of intangible asset amortization, a decrease of $5.0 million in sales representative commissions due to decreased sales, a $3.6 million decrease in stock based compensation expense and a $2.0 million reduction in performance related bonuses. Partially offsetting these decreases was a $7.2 million increase in labor-related expenses as a result of the Tundra acquisition and restructuring actions. We also experienced a $3.8 million increase in legal and consulting services spending and a $0.4 million increase in equipment expense as a result of the Tundra acquisition.
During the second quarter of fiscal 2006, we completed the consolidation of our Northern California workforce into our San Jose headquarters and exited a leased facility in Salinas, California. Upon exiting the facility we recorded lease impairment charges of approximately $2.3 million, which represented the future rental payments under the agreements, reduced by an estimate of sublease income, and discounted to present value using an interest rate applicable to us. These charges were recorded as cost of revenues of $0.7million, research and development of $0.9 million and selling, general and administrative of $0.7 million. In fiscal 2008, we entered into a sublease agreement for our Salinas facility, resulting in a reduction to our accrued lease liabilities by $0.2 million. Since the initial restructuring, we have made lease payments of $1.1 million related to vacated facility in Salinas. As of September 27, 2009, the remaining accrued lease liabilities were $1.0 million.
Divestiture. On July 17, 2009, we completed the sale of certain assets related to our network search engine business (the "NWD assets") to NetLogic Microsystems, Inc ("Netlogic"), pursuant to an Asset Purchase Agreement by and between the Company and NetLogic dated April 30, 2009 (the "Agreement"). Upon closing of the transaction, NetLogic paid us $100 million in cash consideration, which included inventory valued at approximately $10 million (subject to adjustment). As of September 27, 2009, the inventory we sold to Netlogic was valued at $8.2 million and the excess cash for the inventory in the amount of $1.8 million was recorded as a payable to Netlogic. The NWD assets are part of the Communications reportable segment. In connection with the divestiture, we entered into a supply agreement with NetLogic whereby they agreed to buy and we agreed to sell Netlogic certain network search engine products for a limited time following the closing of the sale. According to the terms set forth in the agreement, we committed to sell certain products either at our standard costs or below our normal gross margins, which are lower than the estimated fair values. As a result, we recorded $3.0 million related to the estimated fair value of this agreement. In the second quarter of fiscal 2010, $0.2 million was recognized as revenue. We expect to complete the sale under this agreement within 2 years. In the second quarter of fiscal 2010, we recorded a gain of $82.7 million related to the divestiture.
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