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
“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.
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.
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.
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|
|(in thousands, except share data)|
|Cash and cash equivalents||$||57,544||$||36,722|
|Accounts receivable, net||11,369||6,307|
|Assets held for sale||-||3,164|
|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|
|Other intangible assets, net||1,541||913|
|LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' (DEFICIT) EQUITY|
|Accrued expenses and other current liabilities||10,887||20,242|
|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|
|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
|Accumulated other comprehensive income||-||-|
|Total shareholders' (deficit) equity||(61,359||)||125,361|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|Three Months Ended September 30,||Twelve Months Ended September 30,|
|(in thousands, except per share data)|
|Intellectual property revenues||-||10,000||13,250||10,000|
|Costs and expenses:|
|Cost of revenues||20,457||26,367||78,414||106,344|
|Engineering, research and development||
|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|
|Amortization of intangible assets||292||310||1,360||2,514|
|Costs and expenses||
|(Loss) income from operations||
|Other (expense) income:|
|Interest expense, net||
|Loss on extinguishment of debt||-||-||-||-|
|Other income, net||244||646||223||4,882|
|Other (expense) income, net||
|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|
Income (loss) from discontinued operations, net of tax of $997 and gain on sale of $21,500 in 2008
|Net (loss) income||$||(9,479||)||$||10,197||$||(194,041||)||$||16,553|
|Basic (loss) income per share:|
|Net (loss) income||$||(0.04||)||$||0.05||$||(0.85||)||$||0.07|
|Diluted (loss) income per share:|
|Net (loss) income||$||(0.04||)||$||0.04||$||(0.85||)||$||0.07|
|Weighted average shares outstanding:|
Rich Yonker, +1-805-388-3700