Trident Microsystems Reports Financial Results for First Quarter of Fiscal Year 2008

Record Non-GAAP Operating Income in September Quarter

SANTA CLARA, Calif., Oct. 25 /PRNewswire-FirstCall/ -- Trident Microsystems, Inc. (NASDAQ: TRID) a leading provider of digital TV technology for the consumer digital video marketplace, today announced for the first fiscal quarter of 2008, ended September 30, 2007, the Company achieved net revenues of $88,174,000, a sequential increase of 25% from the $70,593,000 reported in the quarter ended June 30, 2007 and a 24% year-over-year increase from the $71,363,000 reported in the quarter ended September 30, 2006.

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.

Forward-Looking Information

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/




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