Record Non-GAAP Operating Income in September Quarter
Net income of $10,059,000 was recorded in the first quarter ended September 30, 2007, on a generally accepted accounting principles ("GAAP") basis, or $0.16 per share on a diluted basis, which included $10,443,000 in stock-based compensation expense as recognized under FASB 123R, $3,761,000 in legal and accounting fees related to our investigation into our historical stock option practices, $1,653,000 charged to cost of revenues relating to amortization of intangible assets and a $1,783,000 gain from a cash dividend received as a shareholder of United Microelectronics Corporation ("UMC"). This compares to net income of $10,513,000 in the quarter ended September 30, 2006, on a GAAP basis, or $0.17 per share on a diluted basis, which included $3,599,000 in stock-based compensation expense, $4,227,000 in legal and accounting fees related to our investigation into our historical stock option practices, $1,519,000 charged to cost of revenues relating to amortization of intangible assets and $190,000 in expense from the cumulative effect of a change in accounting principle.
Non-GAAP net income in the quarter ended September 30, 2007, was $24,133,000, or $0.38 per share on a diluted basis, and excludes the items noted above. This compares to non-GAAP net income of $16,637,000, or $0.26 per share on a diluted basis, in the fourth quarter of fiscal 2007 and to non-GAAP net income of $20,048,000 in the quarter ended September 30, 2006, or $0.32 per share on a diluted basis. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in a table following the non-GAAP Consolidated Statements of Income.
"We were able to generate record non-GAAP operating income of $27,783,000 ($11,926,000 on a GAAP basis), representing 31.5% of revenues, despite the fact that revenues came in at the low end of our expectations," said Sylvia D. Summers, Trident's new Chief Executive Officer.
"We believe the market is clearly segmenting between high quality Full HD ("1080P") capable large screen TV's found in prevailing specialty retailers and smaller, more cost sensitive, WXGA-driven TV's found in prevailing club channels and discount chains. We are very strong in the former - branded 1080P MEMC-enabled TV's, but our share in the latter category has begun to face challenges from new entrants and off brands who have begun to challenge branded TV's. Our primary focus remains on converting our customer base to use our single chip SOC -- our HiDTV Pro series, however, we expect that we may face challenges and competition in the less profitable WXGA markets. For this reason, we are forecasting our December quarter revenues in the range of $70 - $72 million and planning to resume revenue growth in the second half of calendar 2008, expecting our HiDTV Pro UX/WX/QX to begin shipping in high volume at that time. Expecting a growing portion of the market for calendar 2008 to continue shifting toward 1080P on both 120hz and 60hz panels, we believe we are particularly well positioned with the HiDTV Pro UX/WX/QX -- which is the only SOC offering in the market that supports 1080P with MEMC on both 120hz and 60hz panels from a single device," continued Ms. Summers.
Use of Non-GAAP Financial Information
To supplement the consolidated financial results prepared under generally accepted accounting principles ("GAAP"), Trident uses a non-GAAP conforming, or non-GAAP, measure of net income that is GAAP net income adjusted to exclude certain costs, expenses and gains. Non-GAAP net income gives an indication of Trident's baseline performance before gains, losses or other charges that are considered by management to be outside the company's core operating results. In addition, non-GAAP net income is among the primary indicators management uses as a basis for planning and forecasting future periods. These measures are not in accordance with, or an alternative for, GAAP and may be materially different from non-GAAP measures used by other companies. Trident computes non-GAAP net income by adjusting GAAP net income for the impact of certain investment gains (or losses) and excluding various items including stock-based compensation expense, expenses related to the stock option investigation and related matters and those related to the acquisition of Trident's minority interest held in its Taiwanese subsidiary ("TTI"), including amortization of intangible assets. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in a table following non-GAAP consolidated financial statements.
Investor Conference Call
Trident also announced that it will hold a conference call to discuss the earnings, which will be held on Thursday, October 25, 2007 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Shareholders may participate in the call by calling 617-614-3449 passcode 49790618. The conference call will also be webcast by Thomson/CCBN and can be accessed at Trident's web site at: http://www.tridentmicro.com. A replay of the conference call will be available from 5:00 p.m. Pacific Time October 25, 2007 until midnight Pacific Time August 1, 2007, and can be accessed by calling 617-801-6888 using passcode 51508606.
This press release contains forward-looking statements, including statements regarding the status of the market, Trident's market share, challenges and competition that Trident faces in its markets, financial expectations for the next quarter, volume shipments of Trident's products in 2008 and Trident's expectations regarding the market for its products and product introductions. The forward-looking statements above are subject to certain risks and uncertainties, and actual results could vary materially depending on a number of factors. These risks include, in particular, changes in trends in the DPTV industries, whether Trident is able to achieve timely product introductions, the failure to obtain design wins among major OEMs for Trident's products, and competitive pressures, including pricing and competitors' new product introductions. Additional factors that may affect Trident's business are described in detail in Trident's filings with the Securities and Exchange Commission.
About Trident Microsystems, Inc.
Trident Microsystems, Inc., with headquarter in Santa Clara, California, designs, develops and markets digital media for the masses in the form of integrated circuits (ICs) for HDTV, LCD TV, PDP TV, DLP TV, and DCRT. Trident's products are sold to a network of OEMs, original design manufacturers and system integrators worldwide. For further information about Trident and its products, please consult the company's web site: http://www.tridentmicro.com.
NOTE: Trident is a registered trademark of Trident Microsystems, Inc., HiDTV(TM), DPTV(TM), SVP(TM) WX, SVP(TM) UX, SVP(TM) PXP and SVP(TM) CX are trademarks of Trident Microsystems, Inc. All other company and product names are trademarks and/or registered trademarks of their respective owners. Features, pricing, availability and specifications are subject to change without notice.
Trident Microsystems, Inc. Condensed Consolidated Statements of Income (Unaudited) Three Months Ended (In thousands, except September 30, June 30, September 30, per share data) 2007 2007 2006 Net revenues $88,174 $70,593 $71,363 Cost of revenues 43,549 35,985 34,646 Cost of revenues - amortization of intangibles 1,486 1,486 1,385 Gross profit 43,139 33,122 35,332 % of net revenues 48.9% 46.9% 49.5% Research and development expenses 13,912 12,856 9,403 % of net revenues 15.8% 18.2% 13.2% Selling, general and administrative expenses 17,301 11,605 12,659 % of net revenues 19.6% 16.4% 17.7% Income from operations 11,926 8,661 13,270 % of net revenues 13.5% 12.3% 18.6% Interest and other income, net 3,692 1,586 2,292 Income before income taxes 15,618 10,247 15,562 % of net revenues 17.7% 14.5% 21.8% Provision for income taxes 5,559 3,486 4,859 % of net revenues 6.3% 4.9% 6.8% Income before cumulative effect of change in accounting principle 10,059 6,761 10,703 % of net revenues 11.4% 9.6% 15.0% Cumulative effect of change in accounting principle - - (190) % of net revenues 0.0% 0.0% (0.3)% Net income $10,059 $6,761 $10,513 % of net revenues 11.4% 9.6% 14.7% Basic net income per share Prior to cumulative effect of change in accounting principle $0.17 $0.12 $0.18 Cumulative effect of change in accounting principle - - - Basic net income per share $0.17 $0.12 $0.18 Common shares used in computing basic per share amounts 58,851 57,748 57,303 Diluted net income per share Prior to cumulative effect of change in accounting principle $0.16 $0.11 $0.17 Cumulative effect of change in accounting principle - - - Diluted net income per share $0.16 $0.11 $0.17 Common and common equivalent shares used in computing diluted per share amounts 63,605 63,571 63,116 Trident Microsystems, Inc. Non-GAAP Condensed Consolidated Statements of Income (Unaudited) Three Months Ended (In thousands, except September 30, June 30, September 30, per share data) 2007 2007 2006 Net revenues $88,174 $70,593 $71,363 Cost of revenues 43,398 35,826 34,545 Gross profit 44,776 34,767 36,818 % of net revenues 50.8% 49.2% 51.6% Research and development expenses 9,858 10,288 7,226 % of net revenues 11.2% 14.6% 10.1% Selling, general and administrative expenses 7,135 5,942 6,977 % of net revenues 8.1% 8.4% 9.8% Income from operations 27,783 18,537 22,615 % of net revenues 31.5% 26.3% 31.7% Interest and other income, net 1,909 1,586 2,292 Income before income taxes 29,692 20,123 24,907 % of net revenues 33.7% 28.5% 34.9% Provision for income taxes 5,559 3,486 4,859 % of net revenues 6.3% 4.9% 6.8% Net income 24,133 16,637 20,048 % of net revenues 27.4% 23.6% 28.1% Basic net income per share $0.41 $0.29 $0.35 Common shares used in computing basic per share amounts 58,851 57,748 57,303 Diluted net income per share $0.38 $0.26 $0.32 Common and common equivalent shares used in computing diluted per share amounts 63,605 63,571 63,116 Reconciliation between net income on a GAAP basis and non-GAAP net income is as follows: Three Months Ended (In thousands, except September 30, June 30, September 30, per share data, unaudited) 2007 2007 2006 GAAP net income $10,059 $6,761 $10,513 Amortization of intangibles Cost of revenues 1,486 1,486 1,385 Selling, general and administrative expenses 167 167 134 Total amortization of intangibles (1) 1,653 1,653 1,519 Stock-based compensation expense Cost of revenues 151 159 101 Research and development 4,054 2,568 2,177 Selling, general and administrative expenses 6,238 1,740 1,321 Total stock-based compensation expense (2) 10,443 4,467 3,599 Interest and other income, net (3) (1,783) - - Stock options related professional fees 3,761 3,756 4,227 Cumulative effect of change in accounting principle (4) - - 190 Non-GAAP net income $24,133 $16,637 $20,048 Basic net income per share $0.41 $0.29 $0.35 Common shares used in computing basic per share amounts 58,851 57,748 57,303 Diluted net income per share $0.38 $0.26 $0.32 Common and common equivalent shares used in computing diluted per share amounts 63,605 63,571 63,116 (1) Amortization of intangibles represents the amortization of identifiable intangible assets, acquired from the purchase of the minority interests of the Company's TTI subsidiary during a 12 month period ended June 30, 2005. (2) On July 1, 2005, the Company adopted SFAS 123(R), Share-Based Payment, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values. Stock-based compensation expense is recognized over the period during which an employee is required to provide service in exchange for the award -- the requisite service period (usually the vesting period). No compensation expense is recognized for equity instruments for which employees do not render the requisite service. (3) The dividend income received from UMC is excluded from the Non-GAAP net income calculation. (4) The adoption of EITF 06-2 , Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43, Accounting for Compensated Absences, resulted in a cumulative effect from an accounting change of $0.2 million on sabbatical expenses for which expenses had already been recorded. Trident Microsystems, Inc. Condensed Consolidated Balance Sheets (Unaudited) September 30, June 30, (In thousands) 2007 2007 ASSETS Current assets Cash and cash equivalents $160,261 $147,562 Short-term investment - UMC 41,960 50,667 Short-term investment - Others 1,435 1,077 Accounts receivable, net 29,131 9,161 Inventories 19,150 16,263 Prepaid expenses and other current assets 22,790 13,585 Deferred income taxes 83 83 Total current assets 274,810 238,398 Property and equipment, net 22,441 19,581 Intangible assets, net 11,192 12,845 Investments - other 2,597 3,089 Deferred income taxes 338 338 Other assets 8,573 9,628 Total assets $319,951 $283,879 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $27,474 $20,683 Accrued expenses 28,383 23,235 Income taxes payable 17,516 36,171 Total current liabilities 73,373 80,089 Long-term income taxes payable (1) 21,404 - Deferred income tax liabilities 1,557 1,942 Total liabilities 96,334 82,031 Stockholders' equity Capital stock 191,851 179,448 Retained earnings (accumulated deficit) 28,857 18,798 Accumulated other comprehensive income 2,909 3,602 Total stockholders' equity 223,617 201,848 Total liabilities and stockholders' equity $319,951 $283,879 (1) On July 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). Implementation of FIN 48 resulted in the reclassification of $21.4 million to "Long-term income taxes payable".
Web site: http://www.tridentmicro.com/