January 29, 2009

IDT Reports Fiscal Third Quarter 2009 Results

Company Generates 22 Percent of Total Revenue in Free Cash Flow

SAN JOSE, Calif.--(BUSINESS WIRE)-- IDT® (Integrated Device Technology, Inc.; NASDAQ: IDTI), a leading provider of essential mixed signal semiconductor solutions that enrich the digital media experience, today announced results for the fiscal third quarter of 2009 ended December 28, 2008.

“IDT’s resilient business model was highlighted during our fiscal third quarter of 2009 as we delivered strong bottom line results despite a 17 percent sequential decline in revenue. We exceeded the high end of our December 8, 2008 earnings projections, largely due to our variable expense structure,” said Dr. Ted Tewksbury, president and CEO of IDT. “Despite widespread weakness in the semiconductor sector and the broader economy, we continue to build critical skills, capabilities and new products to add value to our customers’ applications and propel revenue growth when demand improves. At the same time, we remain committed to controlling costs and delivering solid operating margins for our investors. Today, we are announcing a reduction of approximately seven percent of our global workforce which reflects a structured approach to improve our strategic focus and realign our expenses with a softer demand environment.”

The following highlights the Company’s financial performance on both a GAAP and non-GAAP basis. The GAAP results include certain costs, charges, gains and losses in accordance with GAAP which are excluded from non-GAAP results based on management’s determination that they are not directly reflective of on-going operations. Non-GAAP results are not in accordance with GAAP and may not be comparable to non-GAAP information provided by other companies. Non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. A complete reconciliation of GAAP to non-GAAP results is attached to this press release.

  • Revenue for the fiscal third quarter of 2009 was $167.1 million, compared with $201.2 million reported in the same period one year ago.
  • GAAP net loss for the fiscal third quarter of 2009 was $345.3 million or a loss of $2.06 per diluted share, versus GAAP net income of $13.4 million or approximately $0.07 per diluted share in the same period one year ago. As a result of the current economic environment and decline in the market value of the Company, IDT has conducted an interim goodwill and intangible asset impairment analysis which will result in an estimated non-cash charge of $339.1 million. Fiscal third quarter 2009 GAAP results also include $19.7 million in amortization of intangibles, $9.0 million of stock-based compensation, $5.6 million of in-process R&D related to the Silicon Optix transaction, and a $3.0 million asset impairment charge.
  • Non-GAAP net income for the fiscal third quarter of 2009 was $30.1 million or $0.18 per diluted share, compared with non-GAAP net income of $46.7 million or $0.25 per diluted share reported in the same period one year ago.
  • GAAP gross profit for the fiscal third quarter of 2009 was $69.7 million, versus GAAP gross profit of $88.3 million in the same period one year ago. Non-GAAP gross profit for the fiscal third quarter of 2009 was $84.3 million, compared with non-GAAP gross profit of $105.2 million reported in the same period one year ago.
  • GAAP R&D expense for the fiscal third quarter of 2009 was $37.2 million, compared with GAAP R&D expense of $40.6 million in the same period one year ago. Non-GAAP R&D expense for the fiscal third quarter of 2009 was $31.6 million, compared with non-GAAP R&D expense of $35.7 million in the same period one year ago.
  • GAAP SG&A expense for the fiscal third quarter of 2009 was $30.9 million, compared with GAAP SG&A expense of $38.9 million in the same period one year ago. Non-GAAP SG&A expense for the fiscal third quarter of 2009 was $21.8 million, compared with non-GAAP SG&A expense of $24.9 million in the same period one year ago.

Recent Highlights

The Company recently announced it(s):

  • DisplayPortTM compatible receiver, PanelPortTM, was included in EDN magazine's Hot 100 Products.
  • PanelPort solution, an embedded DisplayPort compliant receiver and timing controller device, has been chosen by CPT (Chunghwa Picture Tubes Ltd.) for inclusion in its 14"W flat panel display for notebooks.
  • Introduced PCI Express® (PCIe) switching and timing solutions and Intel-validated Double Data Rate 3 (DDR3) registers which support Intel® Xeon® processor based on Nehalem.
  • Launched two new PCIe Gen2 switching solutions that are optimized for computing and embedded applications. It also announced PCIe timing solutions, including fan-out buffers, zero-delay buffers, clocks and jitter attenuators.
  • PCIe switching solution has been chosen by ASUS for use on its newest high-end Intel processor-based motherboard.
  • Introduced a new series of devices in the company's industry-leading portfolio of flexible, low-power, asynchronous dual-ports for high-end handsets.

Webcast and Conference Call Information

Investors can listen to a live or replay webcast of the Company’s quarterly financial conference call at http://www.IDT.com. The live webcast will begin at 1:15 p.m. Pacific time on January 29, 2009. The webcast replay will be available after 5:00 p.m. Pacific time on January 29, 2009.

Investors can also listen to the live call at 1:15 p.m. Pacific time on January 29, 2009 by calling (800) 230-1074 or (612) 234-9960. The conference call replay will be available after 5:00 p.m. Pacific time on January 29, 2009 through 11:59 p.m. Pacific time on February 5, 2009 at (800) 475-6701 or (320) 365-3844. The access code is 980637.

About IDT

With the goal of continuously improving the digital media experience, IDT integrates its fundamental semiconductor heritage with essential innovation, developing and delivering low-power, mixed signal solutions that solve customer problems. Headquartered in San Jose, Calif., IDT has design, manufacturing and sales facilities throughout the world. IDT stock is traded on the NASDAQ Global Select Stock Market® under the symbol "IDTI". Additional information about IDT is accessible at www.IDT.com.

Forward Looking Statements

Investors are cautioned that forward-looking statements in this release, including but not limited to statements regarding demand for Company products, customer ordering patterns, and anticipated trends in Company sales, expenses, and profits, involve a number of risks and uncertainties that could cause actual results to differ materially from current expectations. Risks include, but are not limited to, global business and economic conditions, fluctuations in product demand, manufacturing capacity and costs, inventory management, competition, pricing, patent and other intellectual property rights of third parties, timely development and supply of new products and manufacturing processes, dependence on one or more customers for a significant portion of sales, successful integration of acquired businesses and technology, availability of capital, cash flow and other risk factors detailed in the Company’s Securities and Exchange Commission filings. The Company urges investors to review in detail the risks and uncertainties in the Company’s Securities and Exchange Commission filings, including but not limited to the Annual Report on Form 10-K for the fiscal year ended March 30, 2008 and Quarterly Report on Form 10-Q for the period ended September 28, 2008. All forward-looking statements are made as of the date of this release and the Company disclaims any duty to update such statements.

Non-GAAP Reporting

The Company presents non-GAAP financial measures because the financial community uses non-GAAP results in its analysis and comparison of historical results and projections of the Company's future operating results. These non-GAAP results exclude impairment charges, acquisition-related charges, share-based compensation expense and certain other expenses and benefits. Management uses these non-GAAP measures to manage and assess the profitability of the business. These non-GAAP results are also consistent with another way management internally analyzes IDT’s results and may be useful. The Company has reconciled such non-GAAP results to the most directly comparable GAAP financial measures in the financial tables at the end of this press release.

Reference to these non-GAAP results should be considered in addition to results that are prepared under current accounting standards, but should not be considered a substitute for results that are presented in accordance with GAAP. It should also be noted that IDT's non-GAAP information may be different from the non-GAAP information provided by other companies.

IDT and the IDT logo are trademarks of Integrated Device Technology, Inc. All other brands, product names and marks are or may be trademarks or registered trademarks used to identify products or services of their respective owners.

         
 
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
    Three Months Ended   Nine Months Ended
Dec. 28 Sept. 28, Dec. 30, Dec. 28 Dec. 30,
  2008     2008     2007     2008     2007  
 
Revenues $ 167,079 $ 200,541 $ 201,228 555,828 604,371
 
Cost of revenues   97,410     113,388     112,904     314,547     342,969  
 
Gross profit   69,669     87,153     88,324     241,281     261,402  
 
Operating expenses:
 
Research and development 37,247 41,532 40,616 122,398 127,191
 
Selling, general and administrative 30,879 32,211 38,929 96,055 127,658
 
Acquired in-process research and development 5,597 - - 5,597 -
 
Estimated goodwill and intangible assets impairment   339,051     -     -     339,051     -  
 
Total operating expenses   412,774     73,743     79,545     563,101     254,849  
 
Operating income (loss) (343,105 ) 13,410 8,779 (321,820 ) 6,553
 
Other-than-temporary impairment of investment (3,000 ) - - (3,000 ) -
 
Interest expense (14 ) (15 ) (20 ) (47 ) (89 )
 
Interest income and other, net   (1,150 )   384     3,443     699     13,741  
 
Income (loss) before income taxes (347,269 ) 13,779 12,202 (324,168 ) 20,205
 
Provision (benefit) for income taxes   (2,010 )   2,104     (1,216 )   262     3,124  
 
Net income (loss) $ (345,259 ) $ 11,675   $ 13,418     (324,430 )   17,081  
 
 
Net income (loss) per share:
 
Basic $ (2.06 ) $ 0.07 $ 0.07 $ (1.92 ) $ 0.09
 
Diluted $ (2.06 ) $ 0.07 $ 0.07 $ (1.92 ) $ 0.09
 
Weighted average shares:
 
Basic 167,412 169,570 186,720 169,354 190,240
 
Diluted 167,412 169,752 188,545 169,354 194,130

INTEGRATED DEVICE TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(In thousands)      
  Three Months Ended   Nine Months Ended
Dec. 28 Sept. 28, Dec. 30, Dec. 28 Dec. 30,
  2008     2008     2007     2008     2007  
 
 
GAAP Net Income (loss) $ (345,259 ) $ 11,675   $ 13,418   $ (324,430 ) $ 17,081  
 
GAAP Diluted Income (loss) Per Share $ (2.06 ) $ 0.07   $ 0.07   $ (1.92 ) $ 0.09  
Acquisition Related:
 
Amortization of acquisition related intangibles 19,652 20,592 24,492 61,104 85,509
 
Acquisition related costs (1) (2 ) (3 ) 398 (8 ) 2,046
 

Acquired In-process research and development (1)

5,597 - - 5,597 -
 
Estimated goodwill and intangible assets impairment 339,051 - - 339,051 -
 
Other-than-temporary impairment of investment (2) 3,000 - - - -
 
Restructuring Related:
 
Severance and retention costs 597 471 1,503 1,902 1,494
 
Assembly transition costs (3) - - - - 468
 
Facility closure costs (4) 50 19 (39 ) 145 295
 
Other:
 
Stock-based compensation expense 9,012 8,642 9,391 25,783 33,021
 
Tax effects of Non-GAAP adjustments (5)   (1,604 )   1,910     (2,415 )   430     (761 )
 
Non-GAAP Net Income $ 30,094   $ 43,306   $ 46,748   $ 109,574   $ 139,153  
 
Non-GAAP Diluted Earnings Per Share $ 0.18   $ 0.26   $ 0.25   $ 0.65   $ 0.72  
 
Weighted average shares:
 
Basic 167,412 169,570 186,720 169,354 190,240
 
Diluted 167,438 169,752 188,545 169,554 194,130
 
 
 
GAAP gross profit   69,669     87,153     88,324     241,281     261,402  
 
Acquisition Related:
 
Amortization of acquisition related intangibles 13,639 14,570 15,529 42,980 46,773
 
Acquisition related costs (1) - - 369 - 1,264
 
Restructuring Related:
 
Severance and retention costs 143 - - 799 (9 )
 
Assembly transition costs (3) - - - - 468
 
Facility closure costs (4) 15 3 (8 ) 43 204
 
Other:
 
Stock-based compensation expense   787     1,184     947     2,757     3,189  
 
Non-GAAP gross profit   84,253     102,910     105,161     287,860     313,291  
 
 
 
GAAP R&D Expenses:   37,247     41,532     40,616     122,398     127,191  
 
Acquisition Related:
 
Amortization of acquisition related intangibles (19 ) (19 ) (19 ) (57 ) (100 )
 
Acquisition related costs (1) 2 2 124 6 (49 )
 
Restructuring Related:
 
Severance and retention costs (454 ) (453 ) (262 ) (914 ) (262 )
 
Facility closure costs (4) (28 ) (16 ) 20 (81 ) (57 )
 
Other:
 
Stock-based compensation expense   (5,101 )   (5,149 )   (4,782 )   (15,402 )   (18,128 )
 
Non-GAAP R&D Expenses   31,647     35,897     35,697     105,950     108,595  
 
 
 
GAAP SG&A Expenses:   30,879     32,211     38,929     96,055     127,658  
 
Acquisition Related:
 
Amortization of acquisition related intangibles (5,994 ) (6,003 ) (8,944 ) (18,067 ) (38,636 )
 
Acquisition related costs (1) - 1 (153 ) 2 (733 )
 
Restructuring Related:
 
Severance and retention costs - (18 ) (1,241 ) (189 ) (1,241 )
 
Facility closure costs (4) (7 ) - 11 (21 ) (34 )
 
Other:
 
Stock-based compensation expense   (3,124 )   (2,309 )   (3,662 )   (7,624 )   (11,704 )
 
Non-GAAP SG&A Expenses   21,754     23,882     24,940     70,156     75,310  
 
 
 
GAAP Interest income and other, net  

(1,164

)   369     3,423     652     13,652  
 
Non-GAAP Interest income and other, net  

(1,164

)

 

369

    3,423    

652

    13,652  
 
 
 
GAAP Provision for Income Taxes   (2,010 )   2,104     (1,216 )   262     3,124  
 
Tax effects of Non-GAAP adjustments (5)   1,604     (1,910 )   2,415     (430 )   761  
 
Non-GAAP Provision for Income Taxes   (406 )   194     1,199     (168 )   3,885  

(1)  Consists of costs incurred in connection with merger and acquisition-related activities, including legal and accounting fees.  Also includes costs associated with our merger with ICS, such as additional depreciation resulting from purchase accounting and costs associated with the exit of previously leased facilities. In addition, the three month ended December 28, 2008 includes acquired IPR&D related to our acquisition of Silicon Optix's video processing technology and related assets.

(2)  Consists of an other-than-temporary impairment charge related to our investment in non-marketable equity security.

(3)  Consists of the costs incurred as the Company transitioned its assembly operations in Malaysia to a third-party.

(4)  Consists of ongoing costs associated with the exit of our leased facilities.

(5)  Consists of the tax effects of non-GAAP adjustments related to acquisitions and stock-based compensation expense.  

       
 
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
Dec 28, March 30,
(In thousands)     2008     2008
 
 
ASSETS
 
Current assets:
 
Cash and cash equivalents $ 188,216 $ 131,986
 
Short-term investments 114,184 107,205
 
Accounts receivable, net 65,030 83,091
 
Inventories 77,101 79,954
 
Deferred Taxes 4,853 4,853
 
Prepaid and other current assets   18,766       26,081
 
Total current assets 468,150 433,170
 
Property, plant and equipment, net 74,659 81,652
 
Goodwill 708,863 1,027,438
 
Acquisition-related intangibles 135,471 204,489
 
Other assets   26,531       36,504
 
TOTAL ASSETS $ 1,413,674     $ 1,783,253
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
 
Accounts payable $ 41,335 $ 44,655
 
Accrued compensation and related expenses 19,585 26,621
 
Deferred income on shipments to distributors 20,282 24,312
 
Income taxes payable - 150
 
Other accrued liabilities   19,078       19,978
 
Total current liabilities 100,280 115,716
 
 
Deferred tax liabilities 6,890 7,678
 
Long term income taxes payable 20,898 20,673
 
Other long term obligations   15,748       18,364
 
Total liabilities 143,816 162,431
 
 
Stockholders' equity   1,269,858       1,620,822
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,413,674     $ 1,783,253

Source: Integrated Device Technology, Inc.

IDT Investor Relations
Mike Knapp, 408-284-6515 (Financial)
mike.knapp@idt.com
or
IDT Worldwide Marketing
Carolyn Robinson, 408-284-8200 (Press)
carolyn.robinson@idt.com


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