IDT Reports Q1 Fiscal Year 2016 Financial Results

As presented in the “Reconciliation of GAAP to Non-GAAP” tables in the accompanying press release, each of the non-GAAP financial measures excludes one or more of the following items:

Acquisition related. Acquisition-related charges are not factored into management’s evaluation of potential acquisitions or IDT’s performance after completion of acquisitions, because they are not related to the Company’s core operating performance. Adjustments of these items provide investors with a basis to compare IDT’s performance to other companies without the variability caused by purchase accounting. Acquisition-related expenses primarily include:

  • Amortization of acquisition related intangibles, which include acquired intangibles such as purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements.
  • Acquisition related costs such as legal, accounting and other professional or consulting fees directly related to an acquisition.
  • Fair market value adjustment to acquired inventory sold.

Restructuring related. Restructuring charges primarily relate to changes in IDT’s infrastructure in efforts to reduce costs and expenses (gains) associated with strategic divestitures and restructuring in force actions. Restructuring charges (gains) are excluded from non-GAAP financial measures because they are not considered core operating activities. Although IDT has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. As such, management believes that it is appropriate to exclude restructuring charges (gains) from IDT’s non-GAAP financial measures as it enhances the ability of investors to compare the Company’s period-over-period operating results from continuing operations. Restructuring-related charges (gains) primarily include:

  • Severance and retention costs directly related to a restructuring action.
  • Facility closure costs consist of ongoing costs associated with the exit of our leased and owned facilities.
  • Gain on divestiture consists of gains recognized upon the strategic sale of business units.
  • Assets impairments including accelerated depreciation of certain assets no longer in use and impairment charge related to a note receivable and subsequent recoveries.

Other adjustments. These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and on-going future operating performance of IDT. Excluding this data allows investors to better compare IDT’s period-over-period performance without such expense, which IDT believes may be useful to the investor community. Other adjustments primarily include:

  • Stock based compensation expense.
  • Compensation expense (benefit) – deferred compensation, consists of gains and losses on marketable equity securities related to our deferred compensation arrangements.
  • Loss (gain) on deferred compensation plan securities represents the changes in the fair value of the assets in a separate trust that is invested in corporate owned life insurance under our deferred compensation plan.
  • Life insurance proceeds received, represents proceeds received under corporate owned life insurance under our deferred compensation plan.
  • Tax effects of non-GAAP adjustments. Effective first quarter of fiscal 2016, the Company changed its methodology for reporting non-GAAP taxes to be based on estimated cash tax expense and reserves. The Company forecasts its annual cash tax liability and allocates the tax to each quarter in proportion to earnings for that period. This approach is designed to enhance the ability of investors to understand the impact of the Company's tax expense on its current operations, provide improved modeling accuracy, and substantially reduce fluctuations caused by GAAP to non-GAAP adjustments, which may not reflect actual cash tax expense. Non-GAAP tax amounts for periods prior to March 30, 2015 have not been adjusted to reflect the new methodology.
  • Diluted weighted average shares non-GAAP adjustment, for purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of stock compensation expense attributable to future services not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury method.

IDT and the IDT logo are trademarks or registered trademarks of Integrated Device Technology, Inc. All other brands, product names and marks are or may be trademarks or registered trademarks used to identify products or services of their respective owners.

 
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
  Three Months Ended

June 28,

  Mar. 29,   June 29,
2015 2015 2014
Revenues $ 160,907 $ 158,350 $ 126,302
Cost of revenues   61,673     60,295     52,293  
Gross profit 99,234 98,055 74,009
Operating expenses:
Research and development 33,754 32,071 32,050
Selling, general and administrative   28,143     27,050     25,459  
Total operating expenses   61,897     59,121     57,509  
 
Operating income   37,337     38,934     16,500  
 
Other income, net   1,818     1,966     862  
Income from continuing operations before income taxes 39,155 40,900 17,362
Provision for income taxes   435     517     251  
 
Net income from continuing operations 38,720 40,383 17,111
 
Discontinued operations:
Gain from divestiture - - 16,840
Loss from discontinued operations (547 ) (799 ) (12,153 )
Provision for (benefit from) income taxes   15     318     (45 )
Net income (loss) from discontinued operations (562 ) (1,117 ) 4,732
 
Net income $ 38,158   $ 39,266   $ 21,843  
 
Basic net income per share - continuing operations $ 0.26 $ 0.27 $ 0.11
Basic net income (loss) per share - discontinued operations   -     (0.01 )   0.04  
Basic net income per share $ 0.26   $ 0.26   $ 0.15  
 
Diluted net income per share - continuing operations $ 0.25 $ 0.26 $ 0.11
Diluted net income (loss) per share - discontinued operations   -     (0.01 )   0.03  
Diluted net income per share $ 0.25   $ 0.25   $ 0.14  
 
Weighted average shares:
Basic   148,396     148,326     149,283  
Diluted   153,758     154,111     153,741  
 
 
INTEGRATED DEVICE TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (a)
(Unaudited)
(In thousands, except per share data)
  Three Months Ended
June 28,   Mar. 29,   June 29,
2015 2015 2014
 
GAAP net income from continuing operations $ 38,720  

 

$ 40,383   $ 17,111  
GAAP diluted net income per share continuing operations $ 0.25  

 

$ 0.26   $ 0.11  
Acquisition related:
Amortization of acquisition related intangibles 832

 

1,001 2,549
Restructuring related:
Severance and retention costs 921

 

- 526
Facility closure costs -

 

- 47
Assets impairment and other 147

 

265 2,302
Other:
Stock-based compensation expense 7,866

 

5,684 4,962
Gain from divestiture (51 ) (168 ) -
Assets impairment and other (325 ) - -
Compensation expense - deferred compensation plan 115

 

213 494
Gain on deferred compensation plan securities (108 )

 

(205 ) (480 )
Non-GAAP tax adjustments   83  

 

  (1,391 )   (859 )
Non-GAAP net income from continuing operations $ 48,200

 

$ 45,782 $ 26,652
GAAP weighted average shares - diluted 153,758

 

154,111 153,741
Non-GAAP adjustment   1,836  

 

  1,558     1,867  
Non-GAAP weighted average shares - diluted   155,594  

 

  155,669     155,608  
Non-GAAP diluted net income per share continuing operations $ 0.31  

 

$ 0.29   $ 0.17  
 
GAAP gross profit $ 99,234  

 

$ 98,055   $ 74,009  
Acquisition related:
Amortization of acquisition related intangibles 617

 

625 1,686
Restructuring related:
Severance and retention costs 182

 

- 23
Assets impairment and other 147

 

220 1,935
Other:
Compensation expense - deferred compensation plan 42

 

78 147
Stock-based compensation expense   682  

 

  589     319  
Non-GAAP gross profit $ 100,904  

 

$ 99,567   $ 78,119  
 
GAAP R&D expenses: $ 33,754  

 

$ 32,071   $ 32,050  
Restructuring related:
Severance and retention costs (347 )

 

- (240 )
Assets impairment and other - (45 ) (367 )
Other:
Compensation expense - deferred compensation plan (45 )

 

(83 ) (240 )
Stock-based compensation expense   (3,632 )

 

  (2,266 )   (2,521 )
Non-GAAP R&D expenses $ 29,730  

 

$ 29,677   $ 28,682  
 
GAAP SG&A expenses: $ 28,143  

 

$ 27,050   $ 25,459  
Acquisition related:
Amortization of acquisition related intangibles (215 )

 

(376 ) (863 )
Restructuring related:
Severance and retention costs (392 )

 

- (263 )
Facility closure costs -

 

- (47 )
Other:
Compensation expense - deferred compensation plan (28 )

 

(52 ) (107 )
Stock-based compensation expense   (3,552 )

 

  (2,829 )   (2,122 )
Non-GAAP SG&A expenses $ 23,956  

 

$ 23,793   $ 22,057  
 
GAAP interest income and other, net $ 1,818

 

$ 1,966 $ 862
Gain from divestiture (51 ) (168 ) -
Gain on deferred compensation plan securities (108 )

 

(205 ) (480 )
Assets impairment and other   (325 )

 

  -     -  
Non-GAAP interest income and other, net $ 1,334  

 

$ 1,593   $ 382  
 
GAAP provision for income taxes - continuing operations $ 435

 

$ 517 $ 251
Non-GAAP tax adjustments   (83 )

 

  1,391     859  
Non-GAAP provision for income taxes - continuing operations $ 352  

 

$ 1,908   $ 1,110  
 
(a) Refer to the accompanying “Notes to Non-GAAP Financial Measures” for a detailed discussion of management’s use of non-GAAP financial measures.
 
 
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
June 28, Mar. 29,
(In thousands) 2015 2015
 
ASSETS
Current assets:
Cash and cash equivalents $ 101,141 $ 116,945
Short-term investments 439,859 438,115
Accounts receivable, net 70,395 63,618
Inventories 42,703 45,410
Prepaid and other current assets   15,647   16,041
Total current assets 669,745 680,129
 
Property, plant and equipment, net 64,421 65,508
Goodwill 135,644 135,644
Acquisition-related intangibles 4,703 5,535
Other assets   26,681   26,843
TOTAL ASSETS $ 901,194 $ 913,659
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,752 $ 28,006
Accrued compensation and related expenses 23,809 43,649
Deferred income on shipments to distributors 10,380 15,694
Deferred taxes liabilities 1,491 1,401
Other accrued liabilities   11,003   17,582
Total current liabilities 68,435 106,332
 
Deferred tax liabilities 1,114 1,121
Long term income taxes payable 286 347
Other long-term obligations   20,764   17,605
Total liabilities 90,599 125,405
 
Stockholders' equity   810,595   788,254
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 901,194 $ 913,659
 

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