Vitesse Reports Fourth Quarter and Fiscal 2009 Year End Results

Loss from operations was $1.8 million in the fourth quarter of 2009 compared with operating income of $11.5 million in the fourth quarter of 2008. The Company’s fourth quarter net loss was $9.5 million, or $0.04 per share, compared with net income of $10.2 million, or $0.04 per share, in the year-ago quarter.

Fourth Quarter 2009 New Product Introductions

Vitesse introduced three new products in the fourth quarter of fiscal year 2009:

VSC3144-11: Availability of this breakthrough 11.5 Gbps 144x144 crosspoint switch enables a dramatic 40% bandwidth improvement in switches used in Carrier and Enterprise networking environments and achieves an industry best 1.656 Tbps switching capacity.

VSC3316: Another innovation to its industry-leading signal integrity portfolio, the VSC3316 is a new 16-port asynchronous crosspoint switch with enhanced FlexEQ™ signal equalization capabilities.

VSC8486-11: Extending its offering of industry-leading VSC8486 10 Gbps XAUI to XFI LAN/WAN transceivers with a highly integrated, next-generation device, the VSC8486-11 features synchronous Ethernet clocking and delivers superior high-speed signals for XFP and SFP+ module-based Carrier Ethernet equipment.

Outlook and Goals

Vitesse expects to see a continued industry recovery and resumed top line growth in 2010. As such, the Company intends to make investments in the first half of the year that will position it for growth in 2011 and beyond. In 2010, Vitesse plans to increase product introductions to an average of six per quarter from three per quarter in 2009 and to transition its California test facility to its subcontractors in Asia.

The Company also plans to continue to generate positive cash flow from operations. The Company has not changed its long-term operating targets which call for the following as a percentage of revenue: gross margin of 55% to 60%, R&D of 25% to 28%, SG&A of 11% to 14%, income from operations of 11% to 16% and EBITDA of 17% to 22%. Further, the Company is targeting annual inventory turns of five times and accounts payable and accounts receivable in line with normal industry levels.

Conference Call Information

A conference call is scheduled for Monday, December 14, 2009 at 1:30 p.m. Pacific Time/4:30 p.m. Eastern Time. To listen to the conference call via telephone, dial 800-450-5178 (U.S. toll-free) or 706-679-6171 (International) and provide the passcode 43131353. Participants should dial in at least 10 minutes prior to the start of the call. The Company will also broadcast the conference call via a webcast over the internet. To listen via the Internet, the webcast can be accessed through the Vitesse corporate web site at www.vitesse.com. The call will be recorded and available for replay until Monday, December 21, 2009. To access the audio replay, dial 800-642-1687 (U.S. toll-free) or 706-645-9291 (International) and entering the passcode 43131353.

Investor Conference Participation

Vitesse will participate in the 12th Annual Needham & Company Growth Stock Conference, January 12 - 14, 2010. Representing Vitesse at this event will be Chris Gardner, CEO, and Rich Yonker, CFO. They will present on Thursday, January 14, 2010 at 1:50 p.m. Eastern Time. The presentation will be webcast. To listen to the webcast, view the investor section of the Company's web site: www.vitesse.com.

About Vitesse

Vitesse designs, develops and markets a diverse portfolio of high-performance, cost-competitive semiconductor solutions for Carrier and Enterprise networks worldwide. Engineering excellence and dedicated customer service distinguish Vitesse as an industry leader in Gigabit Ethernet LAN, Ethernet-over-SONET, Fibre Channel, Serial Attached SCSI, Optical Transport, and other applications. Additional company and product information is available at www.vitesse.com.

Vitesse is a registered trademark in the United States and/or other jurisdictions of Vitesse Semiconductor Corporation. All other trademarks or registered trademarks mentioned herein are the property of their respective holders.

Cautions Regarding Forward Looking Statements:

All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current facts. These forward-looking statements are based on our current expectations, estimates and projections about our business and industry, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” and similar terms, and variations or negatives of these words. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements.

CONSOLIDATED BALANCE SHEETS
       
September 30,
2009 2008
(in thousands, except share data)
 
ASSETS
Current assets:
Cash and cash equivalents $ 57,544 $ 36,722
Accounts receivable, net 11,369 6,307
Inventory 18,809 37,466
Assets held for sale - 3,164
Restricted cash 398 592
Prepaid expenses and other current assets   4,956     4,011  
Total current assets 93,076 88,262
Property, plant and equipment, net 7,874 8,084
Goodwill - 191,418
Other intangible assets, net 1,541 913
Other assets   3,077     3,600  
$ 105,568   $ 292,277  
 
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable 14,191 $ 16,101
Accrued expenses and other current liabilities 10,887 20,242
Derivative liability 12,209 -
Deferred revenue 1,156 2,721
Current portion of debt and capital leases 5,236 -
Convertible subordinated debt   10,000     -  
Total current liabilities 53,679 39,064
 
Other long-term liabilities 1,810 1,564
Long-term debt, net of discount 24,652 29,423
Convertible subordinated debt   86,700     96,700  
Total liabilities   166,841     166,751  
Minority interest 86 165
Commitments and contingencies
Shareholders' (deficit) equity:
Preferred stock, $0.01 par value. 10,000,000 shares authorized; none outstanding - -

Common stock, $.01 par value. 500,000,000 shares authorized; 230,905,580 and 226,205,580 shares outstanding
at September 30, 2009 and 2008, respectively

2,314 2,267
Additional paid-in-capital 1,754,598 1,747,324
Accumulated other comprehensive income - -
Accumulated deficit   (1,818,271 )   (1,624,230 )
Total shareholders' (deficit) equity   (61,359 )   125,361  
$ 105,568   $ 292,277  
 
CONSOLIDATED STATEMENTS OF OPERATIONS
                 
Three Months Ended September 30, Twelve Months Ended September 30,
2009 2008 2009 2008
(in thousands, except per share data)
 
Product revenues $ 39,184 $

55,360

$ 154,927 $ 218,536
Intellectual property revenues   -     10,000     13,250     10,000  
Net revenues 39,184

65,360

168,177 228,536
Costs and expenses:
Cost of revenues 20,457 26,367 78,414 106,344
Engineering, research and development

11,964

12,398 45,685 49,982
Selling, general and administrative 8,467 12,799 40,227 50,557
Accounting remediation & reconstruction expense and litigation costs (179 ) 1,948 (9,922 ) 10,761
Goodwill impairment - - 191,418 -
Amortization of intangible assets   292     310     1,360     2,514  
Costs and expenses  

41,001

    53,822     347,182    

220,158

 
(Loss) income from operations

(1,817

)

11,538

(179,005 )

8,378

Other (expense) income:
Interest expense, net

(8,759

) (1,162 ) (16,862 ) (3,868 )
Loss on extinguishment of debt - - - -
Other income, net   244     646     223     4,882  
Other (expense) income, net

(8,515

) (516 ) (16,639 ) 1,014
Income tax (benefit) expense (851 ) 1,768 (1,451 ) 1,222
Minority interest in loss (earnings) of consolidated subsidiary   -     -     81     (660 )
(Loss) income from continuing operations before discontinued operations (9,479 ) 9,254 (194,112 ) 7,510
Discontinued operations

Income (loss) from discontinued operations, net of tax of $997 and gain on sale of $21,500 in 2008

  -     943     71     9,044  
Net (loss) income $ (9,479 ) $ 10,197   $ (194,041 ) $ 16,553  
Basic (loss) income per share:
Continuing operations (0.04 ) 0.04 (0.85 ) 0.03
Discontinued operations   0.00     0.01     0.00     0.04  
Net (loss) income $ (0.04 ) $ 0.05   $ (0.85 ) $ 0.07  
Diluted (loss) income per share:
Continuing operations (0.04 ) 0.04 (0.85 ) 0.03
Discontinued operations   0.00     0.00     0.00     0.04  
Net (loss) income $ (0.04 ) $ 0.04   $ (0.85 ) $ 0.07  
Weighted average shares outstanding:
Basic 230,906 223,786 229,554 223,614
Diluted 230,906 261,767 229,554 223,614




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