NetLogic Microsystems Announces Second Quarter 2011 Financial Results

Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), this announcement of operating results contains non-GAAP financial measures that exclude the income statement effects of stock-based compensation and related payroll taxes, change in contingent earn-out liability, amortization of intangible assets, fair value adjustments of acquired inventory and related taxes, acquisition-related costs, lease termination costs, a gain recognized on a pre-acquisition investment in Optichron, Inc., an impairment charge on another investment, and the effects of excluding stock-based compensation upon the number of diluted shares used in calculating non-GAAP earnings per share.

We have excluded stock-based compensation expense and changes in contingent earn-out liability in calculating these non-GAAP financial measures. These expenses rely on valuations based on future events such as the market price of our common stock and revenue generated from products acquired in the RMI and Optichron acquisitions during a defined period following the close that are difficult to predict and are affected by market factors that are largely not within the control of management. We have excluded stock related payroll taxes, amortization of intangible assets, fair value adjustments related to acquired inventory and the related tax effect, acquisition-related costs, a gain recognized on an investment in Optichron, Inc., and an impairment charge on another investment because we do not consider them to be related to our core operating performance.

We use the non-GAAP financial measures that exclude these items to make strategic decisions, forecast future results and evaluate the Company’s current performance. We believe that the presentation of non-GAAP financial measures that exclude these items is useful to investors because we do not consider these charges either part of the day-to-day business or reflective of the core operational activities of the Company that are within the control of management or that are used to evaluate management’s operating performance.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding these non-GAAP financial measures, and management’s explanation of why it considers such measures to be useful, refer to the Form 8-K dated July 28, 2011 that the Company has submitted to the Securities and Exchange Commission.

     

 

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME

(IN THOUSANDS)

(UNAUDITED)

 
Three months ended     Six months ended
June 30,

2011

  June 30,

2010

    June 30,

2011

  June 30,

2010

GAAP net loss $ (35,181 )   $ (4,835 ) $ (29,177 )   $ (62,172 )
Reconciling items:
Stock-based compensation and related taxes 16,168 12,610 27,277 25,489
Changes in contingent earn-out liability 36,711 5,164 36,711 50,411
Amortization of intangible assets 16,016 10,578 27,584 21,222
Fair value adjustments of acquired inventory 2,381 3,778 2,381 16,018
Acquisition-related costs 1,446 - 1,933 735
Lease termination costs - 503 - 503
Gain recognized on investment in Optichron (4,259 ) - (4,259 ) -
Impairment charge on other investment 1,276 1,276
Tax effect of inventory fair value adjustment   (847 )     (1,356 )       (847 )     (5,618 )
Non-GAAP net income $ 33,711     $ 26,442       $ 62,879     $ 46,588  
     

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF GAAP DILUTED NET INCOME (LOSS) PER SHARE TO

NON-GAAP DILUTED NET INCOME PER SHARE

(UNAUDITED)

 
Three months ended     Six months ended
June 30,

2011

  June 30,

2010

    June 30,

2011

  June 30,

2010

GAAP net loss per share - Diluted $ (0.51 )   $ (0.08 ) $ (0.43 )   $ (1.03 )
Reconciling items:
Stock-based compensation and related taxes 0.21 0.18 0.36 0.38
Changes in contingent earn-out liability 0.49 0.07 0.49 0.74
Amortization of intangible assets 0.21 0.15 0.37 0.31
Fair value adjustments of acquired inventory 0.03 0.05 0.03 0.24
Acquisition-related costs 0.02 - 0.03 0.01
Lease termination costs - 0.01 - 0.01
Gain recognized on investment in Optichron (0.06 ) - (0.06 ) -
Impairment charge on other investment 0.02 - 0.02 -
Tax effect of inventory fair value adjustment (0.01 ) (0.02 ) (0.01 ) (0.08 )

Difference in shares count between diluted GAAP
and diluted non-GAAP calculation

  0.05       0.02         0.04       0.11  
Non-GAAP net income per share - Diluted $ 0.45     $ 0.38       $ 0.84     $ 0.69  
     

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF THE SHARES USED FOR GAAP DILUTED

NET INCOME (LOSS) PER SHARE CALCULATION TO THE SHARES USED FOR

NON-GAAP DILUTED NET INCOME PER SHARE CALCULATION

(IN THOUSANDS)

(UNAUDITED)

 
Three months ended     Six months ended
June 30,

2011

  June 30,

2010

    June 30,

2011

  June 30,

2010

Shares used in calculation - Diluted (GAAP) 68,560   62,875 68,489   60,502
The effect of removing stock-based compensation expense for non-GAAP presentation purpose 2,381 2,415 2,165 2,740
The effect of dilutive potential common shares due to reporting non-GAAP net income 4,496   4,682     4,611   4,538
Shares used in calculation - Diluted (Non-GAAP) 75,437   69,972     75,265   67,780
 

 

         

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF GAAP GROSS MARGIN TO NON-GAAP GROSS MARGIN

(IN THOUSANDS, EXCEPT PERCENTAGES)

(UNAUDITED)

 
Three months ended       Six months ended    
June 30,

2011

  June 30,

2010

June 30,

2011

  June 30,

2010

GAAP gross margin $ 60,468 58.3 % $ 52,002 54.7 % $ 120,895 59.7 % $ 86,922 48.0 %
Reconciling items:
Stock-based compensation 280 0.3 % 143 0.2 % 521 0.3 % 369 0.2 %
Amortization of intangible assets 14,758 14.2 % 9,665 10.2 % 25,413 12.6 % 19,396 10.7 %
Fair value adjustment related to acquired inventory   2,381 2.3 %   3,778 4.0 %   2,381 1.2 %   16,018 8.8 %
Non-GAAP gross margin $ 77,887 75.1 % $ 65,588 69.0 % $ 149,210 73.7 % $ 122,705 67.7 %

 

NETLOGIC MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)

       
June 30,

2011

  December 31,

2010

ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 219,232 $ 256,167
Accounts receivables, net 40,794 19,829
Inventories 37,171 36,290
Deferred income taxes 7,498 8,428
Prepaid expenses and other current assets   11,799       11,458  
Total current assets 316,494 332,172
Property and equipment, net 25,677 20,507
Goodwill 166,400 112,700
Intangible asset, net 216,693 180,838
Other assets   78,803       66,372  
Total assets $ 804,067     $ 712,589  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 23,309 $ 17,257
Accrued liabilities 23,957 27,848
Contingent earn-out liability, current 79,888 -
Deferred margin 5,543 4,242
Software licenses and other obligations, current   3,685       4,514  
Total current liabilities 136,382 53,861
Contingent earn-out liability, long-term 298 -
Software licenses and other obligations, long-term 1,414 2,033
Other liabilities   40,166       37,782  
Total liabilities   178,260       93,676  
Stockholders' equity
Common stock 692 675
Additional paid-in capital 846,531 807,780
Accumulated other comprehensive loss (2,725 ) (28 )
Accumulated deficit   (218,691 )     (189,514 )
Total stockholders' equity   625,807       618,913  
Total liabilities and stockholders' equity $ 804,067     $ 712,589  

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