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Immersion Corp. Reports Operating Results (10-K)

March 05, 2012 | About:

10qk

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Immersion Corp. (IMMR) filed Annual Report for the period ended 2011-12-31.

Immersion Corp has a market cap of $183.3 million; its shares were traded at around $6.87 with and P/S ratio of 5.9.

Highlight of Business Operations:

For the year ended December 31, 2011, revenues generated in North America, Europe, Far East, and Rest of the World represented 42%, 13%, 45%, and 0%, respectively, compared to 37%, 15%, 46%, and 2%, respectively, for the year ended December 31, 2010. The shift in revenues among regions was mainly due to a decrease in product sales in Europe, the Far East, and Rest of the World as a result of the divestiture of the medical simulation product lines. These decreases were partially offset by an increase in royalty and license revenue in the Far East. The increase in Far Eastern royalty and license revenue was primarily due to increased

Product sales The decrease in product sales was due primarily to a $4.9 million decrease in medical product sales arising mainly from the divesture of certain medical simulation product lines in the period ending March 31, 2010. Revenue for the years ended December 31, 2010 and 2009 for the three divested product lines were approximately $4 million and $6 million, respectively. Sales of our Virtual IV medical simulator product also declined by $1.6 million from $3.9 million to $2.3 million when compared to the same period in the prior year.

For the year ended December 31, 2010, revenues generated in North America, Europe, Far East, and Rest of the World represented 37%, 15%, 46%, and 2%, respectively, compared to 47%, 14%, 37%, and 2%, respectively, for the year ended December 31, 2009. The shift in revenues among regions was mainly due to a decrease in product sales in North America, Europe and the Far East as a result of the divestiture of certain medical simulation product lines. Product sales decreases were offset by an increase in royalty and license revenue in the Far East and Europe. Product sales decreases in North America were also partially offset by an increase in royalty and license revenue in North America. The increase in royalty and license revenue in Europe was primarily due to increased royalty and license revenue from licensees of mobile devices. The increase in royalty and license revenue in the Far East was primarily due to increased royalty and license revenue from licensees of mobile devices, manufacturers of integrated circuits, automotive licensees, and touchscreen licensees. The increase in royalty and license revenue in North America was primarily due to increased royalty and license revenue from gaming licensees, medical licensees, and touchscreen licensees.

2010 compared to 2009 The divestiture of the Endoscopy, Endovascular, and Laparoscopy medical simulation product lines was a major contributor to the overall reduction of cost of revenues in 2010 compared to 2009. Specifically, the decrease in cost of revenues for 2010 as compared to 2009 was primarily due to decreased direct material costs and production costs of $1.5 million, reduced overhead costs of $1.0 million, decreased obsolescence expense of $632,000, decreased physical inventory write off costs of $630,000, decreased inventory scrap costs of $619,000, decreased freight costs of $331,000, reduced warranty and repair expense of $305,000 and reduced royalty expense of $173,000. The decrease in direct material, production costs, and freight expense of approximately 41% was mainly due to a similar decrease in product sales. Overhead costs decreased mainly as a result of reduced salary expense and the related overhead from the outsourcing of manufacturing during 2010 and the elimination of operations personnel in the second quarter of 2010. The decrease in obsolescence expense and inventory scrap costs was mainly due to a write-off of medical product parts that did not recur in 2010. The reduction of physical inventory write off costs consisted primarily of physical count to book adjustments of medical demonstration equipment inventory in the second quarter of 2009 that did not recur in 2010. The decrease in warranty and repair costs was mainly due to costs relating to medical products that did not recur in 2010. Year to date, cost of revenues decreased as a percentage of product revenue to 9% for 2010 from 30% for 2009. This decrease is mainly due to the result of the reduced medical physical inventory adjustment expense, the reduced warranty and repair expense, the decreased inventory write off of medical inventory parts, and the reduced overhead discussed above.

For the year ended December 31, 2011, we recorded a provision for income taxes of $1.8 million yielding an effective tax rate of 1202.6%. The current year tax provision is reflective of the recording of foreign withholding tax expense which has increased as a result of increased revenues in certain Asian countries. For the year ended December 31, 2010, we recorded a provision for income taxes of $1.5 million yielding an effective tax rate of (32.9)%. The 2010 year tax provision is also reflective of the recording of foreign withholding tax expense. For the year ended December 31, 2009, we recorded a benefit for income taxes of $310,000 yielding an effective tax rate of 1.1%. The tax benefit for 2009 is reflective of the recording of a benefit for the alternative minimum tax and net operating loss carrybacks, research and development monetization, offset in part by a valuation allowance on specific deferred tax assets and foreign withholding tax expense. As such, for each of these three years, the effective tax rate differs from the statutory rates, respectively.

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