October 31, 2011

IDT Reports Q2 Fiscal Year 2012 Financial Results

Q2 GAAP EPS of $0.32; Q2 GAAP EPS Continuing Operations of $0.06
Q2 Non-GAAP EPS Continuing Operations of $0.11
Repurchased Almost Four Million Shares

SAN JOSE, Calif.--(BUSINESS WIRE)-- Integrated Device Technology, Inc. (IDT®) (NASDAQ: IDTI), the Analog and Digital Company™ delivering essential mixed-signal semiconductor solutions, today announced results for the fiscal second quarter ended October 2, 2011.

"During our fiscal second quarter, we continued to streamline operations and introduce innovative mixed-signal solutions for our three target markets -- communications infrastructure, cloud computing and consumer mobility," said Dr. Ted Tewksbury, president and CEO of IDT. "Despite macroeconomic headwinds, we experienced strong sequential growth in Serial RapidIO® switches for wireless base stations and timing solutions for consumer devices, as well as robust design activity for new products."

"In order to sharpen our focus on our target vertical markets, we sold our image processing assets and initiated the divestiture of the remainder of our video business. This enables us to reduce total operating expenses while reallocating R&D resources to product categories with greater growth potential and profitability. Our disciplined approach to product portfolio management and expense control has enabled us to achieve stronger operating margins on lower revenue levels, positioning us to grow earnings when customer demand improves."

Recent Highlights

IDT recently announced:

  • It has released the world's highest performance family of Gen 3 PCI Express® (PCIe) switches optimized for solid-state drive (SSD) storage arrays and cloud computing applications.
  • The industry's lowest power DDR3 register for Dual In-Line Memory Modules (DIMMs) in high-efficiency data centers.
  • CoolRACTM technology -- a breakthrough power architecture for enterprise data centers that dramatically increases energy efficiency and lowers operating costs.
  • It has expanded its portfolio of CrystalFreeTM CMOS oscillators with the world's first ultra low power +/-50 parts-per-million (ppm) CMOS oscillator family, as well as the world's first family of oscillators that support the requirements of 5Gbps Super-Speed USB 3.0 controller applications.
  • The industry's most flexible Universal Frequency Translators (UFTs) with industry-leading phase noise performance.
  • The addition of a low-jitter Voltage Controlled Surface Acoustic Wave (SAW) Oscillator (VCSO) for high-end optical networking and telecom applications.
  • It has released the industry's first integrated timing, thermal sensor and fan control solution for PC mobile platforms, digital video recorders (DVRs), set top boxes (STBs), Network Attached Storage (NAS) and enterprise Ethernet switches and routers
  • Design wins for its PCIe switch, Low-Power DDR3 register, Serial RapidIO switch, PCI Express to RapidIO bridge, and low-power dual port solutions.
  • It intends to sell its Hillsboro, Oregon wafer fabrication facility and related assets to Alpha and Omega Semiconductor Limited ("AOS", NASDAQ: AOSL).

The following highlights the Company's financial performance on both a GAAP and non-GAAP basis. During the quarter, IDT divested its HQV business to Qualcomm for approximately $60 million. Concurrent with this divestiture, the Company also made the decision to divest the remaining portion of its video business. For financial statement purposes, the remaining video business will be classified as assets held for sale and will be treated as discontinued operations as the Company seeks a buyer of the business. The GAAP results include certain costs, charges, gains and losses, which are excluded from non-GAAP results based on management's determination that they are not directly reflective of ongoing operations. IDT has removed results from the video business from current and historical non-GAAP results. 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 from continuing operations is attached to this press release.

  • Revenue for the fiscal second quarter of 2012 was $138.3 million, compared with $159.6 million reported in the same period one year ago.
  • GAAP net income from continuing operations for the fiscal second quarter of 2012 was $8.4 million or $0.06 per diluted share, versus GAAP net income of $25.2 million or $0.16 per diluted share in the same period one year ago. Fiscal second quarter 2012 GAAP results include $4.6 million in acquisition and restructuring related charges and $4.3 million in stock-based compensation.
  • GAAP net income from discontinued operations for the September quarter was approximately $38.6 million or $0.26 per diluted share driven by a $46 million gain on the sale of HQV video processing business to Qualcomm which offset a $7.4 million loss generated by the video business unit.
  • Non-GAAP net income from continuing operations for the fiscal second quarter of 2012 was $16.7 million or $0.11 per diluted share, compared with non-GAAP net income from continuing operations of $35.0 million or $0.22 per diluted share reported in the same period one year ago.
  • GAAP gross profit for the fiscal second quarter of 2012 was $74.3 million, or 53.7 percent, compared with GAAP gross profit of $88.1 million, or 55.2 percent, in the same period one year ago. Non-GAAP gross profit for the fiscal second quarter of 2012 was $78.1 million, or 56.5 percent, compared with non-GAAP gross profit of $93.5 million, or 58.6 percent, reported in the same period one year ago.
  • GAAP R&D expense for the fiscal second quarter of 2012 was $39.6 million, compared with GAAP R&D expense of $38.0 million reported in the same period one year ago. Non-GAAP R&D expense for the fiscal second quarter of 2012 was $38.1 million, compared with non-GAAP R&D of $35.2 million in the same period one year ago.
  • GAAP SG&A expense for the fiscal second quarter of 2012 was $24.9 million, compared with GAAP SG&A expense of $25.6 million in the same period one year ago. Non-GAAP SG&A expense for the fiscal second quarter of 2012 was $22.6 million, compared with non-GAAP SG&A expense of $22.8 million in the same period one year ago.

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 1:30 p.m. Pacific time on October 31, 2011. The webcast replay will be available after 5 p.m. Pacific time on October 31, 2011.

Investors can also listen to the live call at 1:30 p.m. Pacific time on October 31, 2011 by calling (877) 260-8900 or (612) 332-1210. The conference call replay will be available after 5 p.m. Pacific time on October 31, 2011 through 11:59 p.m. Pacific time on November 6, 2011 at (800) 475-6701 or (320) 365-3844. The access code is 219821.

About IDT

Integrated Device Technology, Inc., the Analog and Digital Company™, develops system-level solutions that optimize its customers' applications. IDT uses its market leadership in timing, serial switching and interfaces, and adds analog and system expertise to provide complete application-optimized, mixed-signal solutions for the communications, computing and consumer segments. 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. Follow IDT on Facebook, LinkedIn, Twitter, and YouTube.

Forward Looking Statements

Investors are cautioned that forward-looking statements in this release, including but not limited to statements regarding demand for Company products, 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 introduction 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 April 3, 2011. 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 investor 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 restructuring-related costs, acquisition and divestiture-related charges, share-based compensation expense, results from discontinued operations 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 to investor community. The Company has reconciled 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 general accepted accounting standards in the United States (GAAP), 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, PureTouch, PowerSmart, and the IDT logo are trademarks or registered 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 Six Months Ended
October 2, July 3, September 26, October 2, September 26,
2011 2011 2010 2011 2010
Revenues $ 138,318 $ 149,285 $ 159,570 $ 287,603 $ 313,191
Cost of revenues   64,015     67,569     71,449     131,584     144,705  
Gross profit 74,303 81,716 88,121 156,019 168,486
Operating expenses:
Research and development 39,567 39,667 38,012 79,234 75,992
Selling, general and administrative   24,868     25,848     25,604     50,716     51,675  
Total operating expenses   64,435     65,515     63,616     129,950     127,667  
 
Operating income   9,868     16,201     24,505     26,069     40,819  
Other income (expense), net (1,828 ) 44 1,178 (1,784 ) 1,441
Income from continuing operations before income taxes 8,040 16,245 25,683 24,285 42,260
Provision (benefit) for income taxes   (367 )   947     441     580     1,386  
 
Net income from continuing operations 8,407 15,298 25,242 23,705 40,874
 
Discontinued operations:
Gain from divestiture 45,939 - - 45,939 -
Loss from discontinued operations (7,352 ) (7,644 ) (5,039 ) (14,996 ) (10,280 )
Provision (benefit) for income taxes   (60 )   (29 )   (21 )   (89 )   (43 )
Net income (loss) from discontinued operations 38,647 (7,615 ) (5,018 ) 31,032 (10,237 )
 
Net income $ 47,054   $ 7,683   $ 20,224   $ 54,737   $ 30,637  
 
Basic net income per share continuing operations $ 0.06 $ 0.10 $ 0.16 $ 0.16 $ 0.26
Basic net loss per share discontinued operations   0.27     (0.05 )   (0.03 )   0.21     (0.07 )
Basic net income per share $ 0.33   $ 0.05   $ 0.13   $ 0.37   $ 0.19  
 
Diluted net income per share continuing operations $ 0.06 $ 0.10 $ 0.16 $ 0.16 $ 0.26
Diluted net loss per share discontinued operations   0.26     (0.05 )   (0.03 )   0.21     (0.07 )
Diluted net income per share $ 0.32   $ 0.05   $ 0.13   $ 0.37   $ 0.19  
 
Weighted average shares:
Basic   144,682     147,828     157,021     146,249     159,340  
Diluted   146,169     151,074     157,649     148,686     160,171  
 
 
INTEGRATED DEVICE TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
           
(In thousands, except per share data)
 
Three Months Ended Six Months Ended
October 2, July 3, September 26, October 2, September 26,
2011 2011 2010 2011 2010
 
GAAP net income from continuing operations $ 8,407   $ 15,298   $ 25,242   $ 23,705   $ 40,874  
GAAP diluted net income per share continuing operations $ 0.06   $ 0.10   $ 0.16   $ 0.16   $ 0.26  
Acquisition related:
Amortization of acquisition related intangibles 3,861 4,128 4,937 7,989 9,794
Acquisition related costs (1) - - 432 - 1,140
Assets impairment (2) (92 ) (90 ) (183 ) (182 ) (277 )
Fair market value adjustment to acquired inventory sold - - 117 - 379
Restructuring related:
Severance and retention costs (15 ) 383 (125 ) 368 395
Facility closure costs (3) (5 ) 28 285 23 1,262
Fabrication production transfer costs (4) 816 1,845 1,383 2,661 2,212
Other:
Compensation expense (benefit)—deferred compensation plan (5) (1,337 ) 56 865 (1,281 ) 739
Loss (gain) on deferred compensation plan securities (5) 1,359 (45 ) (600 ) 1,314 (467 )
Stock-based compensation expense 4,282 3,772 3,297 8,054 7,516
Tax effects of Non-GAAP adjustments (6)   (541 )   (577 )   (699 )   (1,118 )   (668 )
Non-GAAP net Income from continuing operations $ 16,735 $ 24,798 $ 34,951 $ 41,533 $ 62,899
GAAP weighted average shares - diluted 146,169 151,074 157,649 148,686 160,171
Non-GAAP adjustment 1,994 1,747 2,087 1,840 1,920
Non-GAAP weighted average shares - diluted (7)   148,163     152,821     159,736     150,526     162,091  
Non-GAAP diluted net income per share continuing operations $ 0.11   $ 0.16   $ 0.22   $ 0.28   $ 0.39  
 
GAAP gross profit   74,303     81,716     88,121     156,019     168,486  
Acquisition and divestiture related:
Amortization of acquisition related intangibles 2,917 3,184 3,536 6,101 7,009
Acquisition related costs (1) - - - - 5
Assets impairment (2) (92 ) (90 ) (183 ) (182 ) (277 )
Fair market value adjustment to acquired inventory sold - 117 - 379
Restructuring related:
Severance and retention costs - (175 ) - (58 )
Facility closure costs (3) (4 ) 2 197 (2 ) 896
Fabrication production transfer costs (4) 816 1,845 1,383 2,661 2,212
Other:
Compensation expense (benefit) - deferred compensation plan (5) (289 ) 12 381 (277 ) 354
Stock-based compensation expense   453     427     133   880   642  
Non-GAAP gross profit   78,104     87,096     93,510     165,200     179,648  
 
GAAP R&D expenses:   39,567     39,667     38,012     79,234     75,992  
Acquisition and divestiture related:
Acquisition related costs (1) - (402 ) - (796 )
Restructuring related:
Severance and retention costs 15 (383 ) 98 (368 ) (335 )
Facility closure costs (3) 5 (15 ) (8 ) (10 ) (116 )
Other:
Compensation expense (benefit) - deferred compensation plan (5) 867 (37 ) (400 ) 830 (318 )
Stock-based compensation expense   (2,320 )   (1,999 )   (2,078 ) (4,319 )   (4,346 )
Non-GAAP R&D expenses   38,134     37,233     35,222     75,367     70,081  
 
GAAP SG&A expenses:   24,868     25,848     25,604     50,716     51,675  
Acquisition and divestiture related:
Amortization of acquisition related intangibles (944 ) (944 ) (1,401 ) (1,888 ) (2,785 )
Acquisition related costs (1) - (30 ) - (339 )
Restructuring related:
Severance and retention costs - (148 ) - (118 )
Facility closure costs (3) (4 ) (11 ) (80 ) (15 ) (250 )
Other:
Compensation expense (benefit) - deferred compensation plan (5) 181 (7 ) (84 ) 174 (67 )
Stock-based compensation expense   (1,509 )   (1,346 )   (1,086 ) (2,855 )   (2,528 )
Non-GAAP SG&A expenses   22,592     23,540     22,775     46,132     45,588  
 
GAAP interest income and other, net   (1,828 )   44     1,178     (1,784 )   1,441  
Loss (gain) on deferred compensation plan securities (5)   1,359     (45 )   (600 )   1,314     (467 )
Non-GAAP interest income and other, net   (469 )   (1 )   578     (470 )   974  
 
GAAP provision (benefit) for income taxes continuing operations   (367 )   947     441     580     1,386  
Tax effects of Non-GAAP adjustments (6)   541     577     699     1,118     668  
Non-GAAP provision (benefit) for income taxes continuing operations   174     1,524     1,140     1,698     2,054  
 

(1) Consists of costs incurred in connection with merger and acquisition-related activities, including legal and accounting fees.

 

(2) Consists of an impairment charge related to a note receivable and subsequent recoveries.

 

(3) Consists of ongoing costs associated with the exit of our leased and owned facilities.

 

(4) Consists of costs incurred in connection with the transition of our wafer fabrication processes in Oregon facility to TSMC.

 

(5) Consists of gains and losses on marketable equity securities related to our deferred compensation arrangements and the changes in the fair value of the assets in a separate trust that is invested in Corporate owned life insurance under our deferred compensation plan.

 

(6) Consists of the tax effects of non-GAAP adjustments.

 

(7) For purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of stock compensation expense attributable to future services not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury method.

 
 
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
       
October 2, April 3,
(In thousands) 2011     2011
 
ASSETS
Current assets:
Cash and cash equivalents $ 133,391 $ 104,680
Short-term investments 186,755 194,512
Accounts receivable, net 76,440 81,798
Inventories 79,808 67,041
Prepaid and other current assets   22,012       23,929
Total current assets 498,406 471,960
 
Property, plant and equipment, net 72,054 67,754
Goodwill 95,452 104,020
Acquisition-related intangibles 41,080 51,021
Other assets   36,003       32,705
TOTAL ASSETS $ 742,995     $ 727,460
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 30,293 $ 36,470
Accrued compensation and related expenses 26,531 28,212
Deferred income on shipments to distributors 16,033 12,853
Deferred taxes liabilities 2,220 2,224
Other accrued liabilities   29,018       30,886
Total current liabilities 104,095 110,645
 
Deferred tax liabilities 1,516 1,513
Long term income taxes payable 726 712
Other long term obligations   15,223       15,808
Total liabilities 121,560 128,678
 
Stockholders' equity   621,435       598,782
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 742,995     $ 727,460

Financial Contact:
IDT Investor Relations
Mike Knapp, 408-284-6515
mike.knapp@idt.com
or
Press Contact:
IDT Worldwide Marketing
Graham Robertson, 408-284-2644
graham.robertson@idt.com

Source: Integrated Device Technology, Inc.

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