Vitesse Reports Fourth Quarter and Fiscal 2009 Year End Results

CAMARILLO, Calif. — (BUSINESS WIRE) — December 14, 2009 — Vitesse Semiconductor Corporation (Pink Sheets:VTSS), a leading provider of advanced IC solutions for Carrier and Enterprise networks, today reported its audited financial results for the fourth quarter and fiscal year ended September 30, 2009.

Recent Operating and Financial Highlights

  • Completed debt restructuring transaction, closed in October 2009, resulting in a significantly improved balance sheet and operating flexibility in fiscal 2010.
  • Reported net revenues of $168.2 million in fiscal year 2009 compared with $228.5 million in fiscal year 2008, reflecting weak global economic conditions and cyclical industry downturn.
  • Generated positive cash flow from operations of $19.2 million in fiscal year 2009, compared with negative cash flow from operations of $22.6 million in fiscal year 2008.
  • Reported a net loss of $194.0 million in fiscal year 2009, compared with net income of $16.6 million in fiscal year 2008. 2009 results include non-cash expenses of $191.4 million for goodwill impairment and a $12.2 million fair value adjustment to our derivative liability.
  • Introduced 16 new products, exceeding 2009 target of 12.

CEO Commentary

“While 2009 was a challenging year for Vitesse, and for the industry as a whole, we delivered on the majority of our key goals,” said Chris Gardner, CEO of Vitesse. “Importantly, we resolved our debt issues with the completion of our debt restructuring in October, and move forward with a stronger balance sheet. We generated positive cash flow from operations in 2009 in spite of lower than expected revenue. We also took aggressive action to improve our operations and reduce operating expenses, while continuing our investment level in R&D.”

“Market conditions are beginning to improve and Vitesse is well positioned for 2010 with improved financial stability and a particularly strong new product cycle. In the coming year, we will focus on optimizing the value of our operations by continuing to invest in R&D and by transitioning our Camarillo, California test facility to our subcontractors in Asia. We believe these investments will position Vitesse for improved operating efficiencies and returns in 2011 and beyond,” Mr. Gardner concluded.

Fiscal Year 2009 Financial Results Summary

Net revenues for the fiscal year 2009 were $168.2 million, a decline of 26.4% compared with $228.5 million reported in fiscal year 2008. Product revenues were $154.9 million, a 29.1% decrease from prior year. Licensing revenues were $13.3 million, a 32.5% increase from the prior year. Core product revenues for fiscal year 2009 were $129.4 million, a decline of 23.7% from 2008. Non-core product revenues for fiscal year 2009 were $25.6 million, a decline of 47.9% from fiscal year 2008.

Cost of revenues decreased $27.9 million to $78.4 million in fiscal year 2009 compared with $106.3 million in fiscal year 2008. Engineering, research and development (R&D) expenses were $45.7 million for fiscal year 2009, compared with $50.0 million in fiscal year 2008, a decrease of $4.3 million or 8.6%. Selling, general and administrative expenses were $40.2 million for fiscal year 2009, compared to $50.6 million in fiscal year 2008.

Loss from operations was $179.0 million in fiscal 2009, compared with operating income of $8.4 million for fiscal year 2008. The Company’s net loss was $194.0 million, or $0.85 per share, compared with net income of $16.6 million, or $0.07 per share, for fiscal year 2008.

Balance Sheet Overview

Cash and cash equivalents totaled $57.5 million at September 30, 2009, an increase of $20.8 million from September 30, 2008. Inventory at September 30, 2009 totaled $18.8 million, a decrease of $18.7 million from September 30, 2008.

Fourth Quarter 2009 Financial Results Summary

Net revenues for the fourth quarter of fiscal year 2009 were $39.2 million, a decrease of 40.0% compared with $65.4 million reported for the fourth quarter of 2008 and a decrease of 12.2% compared with $44.6 million in the third quarter of fiscal year 2009. Product revenues were $39.2 million, a 29.2% decrease from the same quarter in 2008, and a 7.8% increase over $36.4 million reported for the third quarter of fiscal year 2009. Revenue for the fourth quarter of 2009 did not include any licensing revenues. Licensing revenues in the fourth quarter of 2008 and third quarter of 2009 were $10.0 million and $8.3 million, respectively.

Cost of revenues decreased $5.9 million to $20.5 million in the fourth quarter of 2009 compared with $26.4 million for the same quarter in 2008. As a percentage of product revenues, cost of product revenues increased from 47.6% in the fourth quarter of fiscal year 2008, to 52.2% in the quarter ended September 30, 2009. R&D expenses were $12.0 million for the fourth quarter of 2009, compared with $12.4 million a year ago, a decrease of $0.4 million or 3.5%. Selling, general and administrative expenses were $8.5 million for the fourth quarter of 2009 compared to $12.8 million in the fourth quarter of 2008.

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