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DSP Group Inc. Reports Operating Results (10-Q)

November 09, 2010 | About:
10qk

10qk

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DSP Group Inc. (DSPG) filed Quarterly Report for the period ended 2010-09-30.

Dsp Group Inc. has a market cap of $180.3 million; its shares were traded at around $7.72 with a P/E ratio of 48.3 and P/S ratio of 0.8. DSPG is in the portfolios of Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Total Revenues. Our total revenues were $65.1 million for the third quarter of 2010, as compared to $65.5 million for the same period in 2009. Our total revenues were $182.1 million for the first nine months of 2010, as compared to $157.5 million for the same period in 2009. The increase for the first nine months of 2010 as compared to 2009 was primarily a result of increased sales of our DECT products. Sales of DECT products for the third quarter of 2010 and 2009 were $52.6 million and $51.6 million, respectively, representing approximately 81% and 79%, respectively, of total revenues, an increase of 2% in absolute dollars when comparing sales for the third quarter of 2010 to sales for the third quarter of 2009. Sales of DECT products for the first nine months of 2010 and 2009 were $145.3 million and $123.7 million, respectively, representing approximately 80% and 79%, respectively, of total revenues, an increase of 17% in absolute dollars when comparing sales for the first nine months of 2010 to sales for the first nine months of 2009. Out of the DECT sales, (i) Sales of our DECT 6.0 products in the U.S. market increased from $62.4 million for the first nine months of 2009 to $69.6 million for the first nine months of 2010. Sales of our DECT 6.0 products in the U.S. market decreased from $23.2 million for the third quarter of 2009 to $20.9 million for the third quarter of 2010 and (ii) Sales of our DECT products in the European market and in the rest of world (besides of the U.S. Market) increased from $61.3 million for the first nine months of 2009 to $75.7 million for the first nine months of 2010. Sales of our DECT products in the European market and in the rest of world (besides of the U.S. Market) increased from $28.4 million for the third quarter of 2009 to $31.7 million for the third quarter of 2010. Sales of 2.4GHz products were $8.1 million and $6.7 million for the third quarter of 2010 and 2009, respectively, representing 12% and 10%, respectively, of our total revenues for the third quarter of 2010 and 2009, representing an increase of 21% in absolute dollars when comparing sales for the third quarter of 2010 to sales for the third quarter of 2009. Sales of 2.4GHz products for the first nine months of 2010 and 2009 were $21.8 million and $17.7 million, respectively, representing approximately 12% and 11%, respectively, of our total revenues for the nine moths of 2010 and 2009, representing an increase of 23% in absolute dollars when comparing sales for the first nine months of 2010 to the first nine months of 2009.

Research and Development Expenses. Our research and development expenses decreased to $14.1 million for the third quarter of 2010 from $15.2 million for the third quarter of 2009. Research and development expenses decreased to $41.1 million for the first nine months of 2010 from $42.6 million for the first nine months of 2009. The decrease for the first nine months of 2010 in research and development expenses, as compared to the comparable period in 2009, was mainly due to (i) a decrease in IP purchases and tapeout expenses in the amount of $3.3 million, and (ii) a decrease in equity-based compensation expenses in the amount of $0.5 million. The above referenced expense decrease was offset by an increase in the number of research and development employees and an increase in payroll and labor contractor expenses in the amount of $2.1 million for the first nine months of 2010, as compared to the same period in 2009.

General and Administrative Expenses. Our general and administrative expenses decreased to $3.5 million for the third quarter of 2010 from $3.7 million for the third quarter of 2009. General and administrative expenses decreased to $10.9 million for the first nine months of 2010 from $11.4 million for the first nine months of 2009. The decrease in general and administrative expenses was mainly attributed to a decrease in accounting expenses and to a decrease in equity-based compensation expenses by $0.2 and $0.3 million for the third quarter and nine months ended September 30 in 2010, as compared to the comparable periods in 2009. The above referenced decrease was offset to some extent by an increase in other expenses, such as legal expenses in 2010, in comparison to 2009.

Financial and Other Income, net. Financial and other income, net, for the three months ended September 30, 2010 decreased to $0.4 million from $1.1 million for the three months ended September 30, 2009. Financial and other income, net, for the nine months ended September 30, 2010 decreased to $1.1 million from $2.3 million for the nine months ended September 30, 2009. The decrease was mainly due to (i) a gain from the realization of available-for-sale securities in the amount of $0.7 million and $0.8 million in the third quarter and the first nine months of 2009, respectively, in comparison to $0 gain in the third quarter and the first nine months of 2010, and (ii) the devaluation of the Euro against the U.S. dollar, which resulted in expenses associated with the exchange rate differences.

Provision for Income Taxes. Our income tax benefit was $0.9 million for the first nine months of 2010, as compared to an income tax benefit of $11.6 million for the first nine months of 2009. Our income tax benefit for the third quarter of 2010 was $1.0 million, as compared to an income tax benefit of $7.6 million for the third quarter of 2009. Two main items caused a decrease in our income tax benefit for the first nine months of 2010, as compared to the same period in 2009. First, pursuant to a settlement with the U.S. Internal Revenue Service relating to an audit of our U.S. federal income tax returns for 2003 and 2004, we recorded a tax benefit of $3.5 million for the nine months ended September 30, 2009 as a result of the partial reversal of the tax reserves associated with the tax audit. Second, we recorded a tax benefit of $7.6 million during the nine months ended September 30, 2009 as a result of the reversal of an income tax contingency reserve that was determined to be no longer required due to the expiration of applicable limitation statutes. The decrease in our income tax benefit for the third quarter of 2010 resulted mainly from the recordation of the $7.6 million tax benefit mentioned above. We recorded an amount of $0.6 million in the third quarter of 2010 as a result of a reversal of an income tax contingency reserve that was determined to be no longer required due to the expiration of the applicable statute of limitations.

Operating Activities. For the first nine months of 2010, we generated $11.7 million of cash and cash equivalents from our operating activities. Cash generated from operating activities amounted to $13.9 million for the first nine months of 2009. The decrease in cash generated from operating activities for the first nine months of 2010, as compared to cash generated by operating activities for the same period in 2009, was mainly as a result of (i) an increase in accounts receivable by $16.2 million during the first nine months of 2010, as compared to a decrease in accounts receivable of $3.9 million during the first nine months of 2009, and (ii) an increase in inventories by $5.0 million during the first nine months of 2010, as compared to a decrease in inventories of $1.1 million during the first nine months of 2009. The increase in the amount of cash generated from operating activities for the first nine months of 2009, as compared to the first nine months of 2010, was offset to some extent by (i) an increase in accounts payables by $8.2 million during the first nine months of 2010, as compared to an increase in accounts payables of $3.3 million during the first nine months of 2009, (ii) a decrease in prepaid expenses by $5.4 million during the first nine months of 2010, as compared to a decrease in prepaid expenses of $3.4 million during the first nine months of 2009, mainly due to a higher amount of advances that were returned from tax authorities in 2010 as compared to 2009, and (iii) an increase in net profit for the first nine months of 2010, as compared to the same period in 2009.

Read the The complete Report

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