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RadiSys Corp. Reports Operating Results (10-Q)

May 08, 2009 | About:

RadiSys Corp. (RSYS) filed Quarterly Report for the period ended 2009-03-31.

RadiSys Corporation is a leader in computer based building blocks used by original equipment manufacturers for products in the telecommunications and networked equipment markets. Unlike general purpose computers embedded computer solutions are incorporated into systems and equipment to provide a single or a limited number of critical system control functions and are generally integrated into larger automated systems. RadiSys Corp. has a market cap of $207.4 million; its shares were traded at around $8.91 with a P/E ratio of 40.5 and P/S ratio of 0.6.

Highlight of Business Operations:

Financial Results Total revenue was $77.6 million and $86.0 million for the three months ended March 31, 2009 and 2008, respectively. Backlog was approximately $41.4 million and $34.4 million at March 31, 2009 and December 31, 2008, respectively. Backlog includes all purchase orders scheduled for delivery within 12 months. The decrease in revenues for the three months ended March 31, 2009 compared to the same period in 2008 was driven by decreased revenues from our traditional wireless business and our commercial markets. These declines were offset by increased revenues from our next-generation communications products.

Net loss was $40.1 million and $7.2 million for the three months ended March 31, 2009 and 2008, respectively. Net loss per share was $1.73 and $0.32 for the three months ended March 31, 2009 and 2008, respectively. Net loss increased from 2008 to 2009, due to increased income tax expense, which totaled $38.9 million for the three months ended March 31, 2009, as compared to an income tax benefit of $491,000 for the three months ended March 31, 2008. The increase in income tax expense was driven by the establishment of a valuation allowance for our U.S. deferred tax assets.

Cash and cash equivalents amounted to $79.1 million and $74.0 million at March 31, 2009 and December 31, 2008, respectively. The increase in cash and cash equivalents and investments during the three months ended March 31, 2009, is primarily due to cash generated from our operating activities in the amount of $4.3 million. Additionally, financing activities generated cash flows of $1.6 million largely due to proceeds from the issuance of our common stock. Cash flows used in investing activities totaling $552,000, slightly offset these increases. Investing activities were primarily related to capital expenditures, which were down compared to prior periods due to our focus on reducing spending.

Stock-based Compensation Expense. Stock-based compensation expense consists of amortization of stock-based compensation associated with stock options, restricted shares and shares issued to employees as a result of the employee stock purchase plan (ESPP). Stock-based compensation expense increased by $254,000 or 10.0%, from $2.5 million for the three months ended March 31, 2008 to $2.8 million for the three months ended March 31, 2009. The increase is primarily due to the incremental cost of stock-based compensation, which totaled $234,000, associated with restructuring activities undertaken during the three months ended March 31, 2009, which included charges related to the modification of equity awards of certain employees involved in the restructuring plan.

Interest Expense. Interest expense includes interest incurred on our convertible notes and our lines of credit. Interest expense decreased $1.2 million, or 66.4%, from $1.8 million during the three months ended March 31, 2008, to $590,000 during the three months ended March 31, 2009. The decrease in interest expense during the three months ended March 31, 2009, compared to the same period in 2008, was driven by the adoption of FSP APB 14-1 during the first quarter of 2009, which resulted in the retrospective recognition of interest expense in the amount of $1.2 million for the three months ended March 31, 2008.

Income Tax Provision. We recorded a tax provision of $38.9 million and a tax benefit of $491,000 for the three months ended March 31, 2009 and 2008, respectively. We expect the effective tax rate for the year ending December 31, 2009 to be higher in comparison to 12.6% for the year ended December 31, 2008. The anticipated increase in the effective tax rate, is primarily due to discrete items related to the full valuation allowance against our U.S. net deferred tax assets and the revaluation of our Canadian net deferred tax assets. The establishment of a valuation allowance resulted in a $42.0 million tax expense while the revaluation of net Canadian tax assets resulted in a tax benefit of $3.2 million in the three months ended March 31, 2009. See Note 11 Income Taxes of the Notes to the Unaudited Consolidated Financial Statements for more details regarding these discrete items.

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