Silicon Image Reports First Quarter 2009 Financial Results

Conference Call

The company will host an investor conference call today to discuss its first quarter 2009 results at 2:00 p.m. Pacific Time and will Web cast that event. To access the conference call, dial 877-741-4248 or 719-325-4815 and enter pass code 5534052. The Web cast will be accessible on Silicon Image's investor relations Web site at http://www.SiliconImage.com. A replay of the conference call will be available within two hours of the conclusion of the conference call through April 28, 2009. To access the replay, please dial 888-203-1112 or 719-457-0820 and enter pass code 5534052.

About Silicon Image, Inc.

Silicon Image, Inc. is a leading provider of semiconductor and intellectual property products for the secure distribution, presentation and storage of high-definition content. With a rich history of technology innovation that includes creating industry standards such as DVI and HDMI, the company’s solutions facilitate the use of digital content amongst consumer electronics, personal computer (PC) and storage devices, with the goal to securely deliver digital content anytime, anywhere and on any device. Founded in 1995, the company is headquartered in Sunnyvale, California, with regional engineering and sales offices in China, Germany, Japan, Korea, Taiwan and the United Kingdom. For more information, please visit www.siliconimage.com.

NOTE: Silicon Image, the Silicon Image logo, LiquidHD, LiquidPlay, and MHL are trademarks, registered trademarks or service marks of Silicon Image, Inc. in the United States and/or other countries. HDMI is a trademark or registered trademark of HDMI Licensing, LLC in the United States and/or other countries. All other trademarks and registered trademarks are the property of their respective owners in the Unites States and/or other countries.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements include, but are not limited to, statements related to Silicon Image's future operating results, including revenue, gross margin, operating expenses, interest income, tax rates and use of cash. These forward-looking statements involve risks and uncertainties, including the risks of uncertain economic conditions, competition in our markets, the Company's ability to deliver financial performance in-line with its stated goals and other risks and uncertainties described from time to time in Silicon Image's filings with the Securities and Exchange Commission (SEC). These risks and uncertainties could cause the actual results to differ materially from those anticipated by these forward-looking statements. In addition, see the Risk Factors section of the most recent Form 10-K and 10-Q filed by Silicon Image with the U.S. Securities and Exchange Commission. These forward-looking statements are made on the date of this press release, and Silicon Image assumes no obligation to update any such forward-looking information.

SILICON IMAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
 
  Three Months Ended
March 31, 2009   December 31, 2008   March 31, 2008
Revenue:
Product $ 34,595 $ 49,204 $ 57,187
Licensing   5,917     10,239     9,926  
Total revenue   40,512     59,443     67,113  
Cost of revenue and operating expenses:
Cost of product revenue (1) 18,219 24,618 27,788
Cost of license revenue 196 123 349
Research and development (2) 17,734 20,265 21,542
Selling, general and administrative (3) 13,715 16,866 18,318
Impairment of goodwill 19,210 - -
Amortization of intangible assets 1,473 1,587 1,587
Restructuring expense (4)   759     3,982     -  
Total cost of revenue and operating expenses   71,306     67,441     69,584  
Loss from operations (30,794 ) (7,998 ) (2,471 )
Interest income and other, net   939     1,151     1,916  
Loss before provision for income taxes (29,855 ) (6,847 ) (555 )
Provision (benefit) for income taxes   3,474     (11,860 )   7  
Net income (loss) $ (33,329 ) $ 5,013   $ (562 )
 
Net income (loss) per share – basic and diluted $ (0.45 ) $ 0.07 $ (0.01 )
Weighted average shares – basic 74,421 74,068 80,987
Weighted average shares – diluted 74,421 74,940 80,987
_________________
(1) Includes stock compensation expense $ 199 $ 313 $ 350
(2) Includes stock compensation expense 1,374 1,934 1,234
(3) Includes stock compensation expense 1,992 2,836 2,439
(4) Includes stock compensation expense - 14 -
 
SILICON IMAGE, INC.
GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS) RECONCILIATION
(In thousands, except per share amounts)
(unaudited)
 
  Three Months Ended
March 31, 2009   December 31, 2008   March 31, 2008
 
GAAP net income (loss) $ (33,329 ) $ 5,013 $ (562 )
 
Non-GAAP adjustments:
Stock-based compensation expense (1) 3,565 5,097 4,023
Amortization of intangible assets (2) 1,473 1,587 1,587
Goodwill impairment (3) 19,210 - -
Restructuring expense   759     3,968   -  
Non-GAAP net income (loss) before tax adjustments (8,322 ) 15,665 5,048
 
Income tax effects on above adjustments (4)   4,686     -   (1,683 )
Non-GAAP net income (loss) $ (3,636 ) $ 15,665 $ 3,365  
 
Non-GAAP net income (loss) per share — basic and diluted $ (0.05 ) $ 0.21 $ 0.04
 
Weighted average shares — basic 74,421 74,068 80,987
Weighted average shares — diluted 74,421 74,940

81,574

 
 

(1) For the three months ended March 31, 2009, December 31 and March 31, 2008, these adjustments represent the non-cash amortization of stock-based compensation associated with SFAS No. 123 (R) Share-based Payment .

 
Cost of Revenue $ 199 $ 313 $ 350
Research and Development 1,374 1,934 1,234
Selling, General and Administrative 1,992 2,836 2,439
Restructuring expense   -     14   -  
Total $ 3,565   $ 5,097 $ 4,023  
 
 

(2) These adjustments represent expenses for the amortization of intangible assets recorded in connection with our acquisitions. These on-going expenses pertain to intangible assets that are not expected to be replaced when fully amortized, as might a depreciable tangible asset.

 
(3) This adjustment represents the impairment recorded on goodwill.
 
(4) Non-GAAP related items for Q4 2008 were not tax-effected as our tax effective rate results in a benefit for these periods.
 

SILICON IMAGE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Unaudited
   
March 31, 2009 December 31, 2008
Assets
Current Assets:
Cash and cash equivalents $ 21,099 $ 95,414
Short-term investments 147,908 89,591
Accounts receivable, net 17,505 5,922
Inventories 12,249 12,775
Prepaid expenses and other current assets 21,621 15,275
Deferred income taxes   6,252   6,665
Total current assets   226,634   225,642
Property and equipment, net 17,527 19,394
Goodwill - 19,210
Intangible assets, net 31,448 32,921
Deferred income taxes, non-current 19,584 28,193
Other assets   984   1,181
Total assets $ 296,177 $ 326,541
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable $ 10,692 $ 7,278
Accrued and other liabilities 20,566 23,023
Deferred license revenue 3,530 2,348
Deferred margin on sales to distributors   3,127   6,881
Total current liabilities   37,915   39,530
Other long-term liabilities   8,304   8,064
Total liabilities   46,219   47,594
Stockholders’ Equity:
Total stockholders’ equity   249,958   278,947
Total liabilities and stockholders’ equity $ 296,177 $ 326,541
 

SILICON IMAGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(In thousands)
Unaudited
 
  Three Months Ended March 31,
2009   2008
Cash flows from operating activities:
Net loss $ (33,329 ) $ (562 )
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation 2,281 2,722
Provision for doubtful accounts 27 265
Gain on recovery of accounts receivable previously written off (107 ) -

Amortization/(accretion) of investment premium/(discount)

829

(43

)

Amortization of intangible assets 1,473 1,587
Impairment of goodwill 19,210 -
Stock-based compensation expense 3,565 4,023
Tax deficiency from employee based compensation plans (580 ) (647 )
Excess tax benefits from employee stock transactions (8 ) (42 )
Deferred income taxes 9,022 (774 )

Loss on disposal of property and equipment

199

7

Gain on derivative transactions

(22 ) -

Realized (gain)/loss on sale of short-term investments

15

(49

)
Changes in assets and liabilities:
Accounts receivable (11,541 ) (6,022 )
Inventories 526 6,082
Prepaid expenses and other assets (6,081 ) 1,582
Accounts payable 2,720 199
Accrued and other liabilities (1,141 ) (1,327 )
Deferred revenue 1,182 1,111
Deferred margin on sales to distributors   (3,754 )   (983 )
Cash provided by (used in) operating activities (15,514 ) 7,129
Cash flows from investing activities:
Purchases of short-term investments (93,453 ) (75,134 )
Proceeds from sales of short-term investments 34,460 118,265

Purchases of property and equipment

(491 ) (2,597 )
Proceeds from sales of property and equipment   97     -  
Cash provided by (used in) investing activities (59,387 ) 40,534
Cash flows from financing activities:
Proceeds from issuances of common stock, net 1,627 1,838
Payments for vendor financed software and intangibles purchased (625 ) -
Excess tax benefits from employee stock transactions 8 42
Repurchase of restricted stock units for income tax withholding (224 ) -
Repurchase of common stock   -     (62,000 )
Cash provided by (used in) financing activities   786     (60,120 )
Effect of exchange rate changes on cash and cash equivalents (200 ) 139
Net decrease in cash and cash equivalents (74,315 ) (12,318 )
Cash and cash equivalents — beginning of period   95,414     137,822  
Cash and cash equivalents — end of period $ 21,099     125,504  
 
Supplemental cash flow information:
Restricted stock units vested $ 625   $ -  
Cash payment for income taxes, net of refunds $ 655   $ 222  
Unrealized net gain on short-term investments $ 168   $ 57  
Property and equipment purchased but not paid for $ 323   $ 515  




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