Trident Microsystems Reports Results for Third Quarter Ended Sept. 30, 2010

Oct 26, 2010, 16:01 ET from Trident Microsystems, Inc.

SUNNYVALE, Calif., Oct. 26 /PRNewswire-FirstCall/ -- Trident Microsystems, Inc. (Nasdaq: TRID), a leader in high-performance semiconductor system solutions for the connected home, today announced results for its third quarter ended Sept. 30, 2010.

For the quarter, the company reported net revenues of $176.6 million, which compares with $171.6  million in the prior sequential quarter and $31.1 million in the quarter ended Sept. 30, 2009.  On a generally accepted accounting principles ("GAAP") basis, the company reported a net loss for the quarter of $17.5 million, or $0.10 per share.  This compares with a net loss of $48.8 million, or $0.28 per share in the prior sequential quarter and a net loss of $17.2 million, or $0.25 per share, in the quarter ended Sept. 30, 2009.  

Non-GAAP Results

Non-GAAP net loss for the quarter was $0.0 million, or $0.00 per share, which compares with a non-GAAP net loss of $14.6 million, or $0.08 per share, in the prior sequential quarter and a non-GAAP net loss of $11.6 million, or $0.17 per share, in the quarter ended Sept. 30, 2009.  A detailed reconciliation between GAAP and non-GAAP net income (loss) is provided as a supplement to the attached financial statements.

Sylvia Summers, Trident's chief executive officer, said, "Results for the quarter were in line with our guidance.  We achieved increases in both our TV and Set-Top Box product revenues, along with improved gross margins and lower operating expenses in line with our integration plans.  In addition, we achieved non-GAAP operating breakeven and positive cash flow a full quarter ahead of the plan we outlined upon announcing the acquisition of the NXP product lines one year ago."

Ms. Summers continued, "Looking to the fourth quarter, we expect Trident revenues will be down 20 to 25 percent from the seasonally strong third quarter as our TV business is impacted by both industry softness and share loss from supply constraints earlier in the year, partially offset by a modest increase in our Set-Top Box business.  In total, we expect to be cash flow neutral in the fourth quarter as the decline in revenues is offset by further spending reductions from our acquisition-related  restructuring activities.  Based on a preliminary view of 2011 demand and design wins, we currently expect the TV industry softness to continue into the seasonally weak first quarter, while we expect full year Trident revenues to be similar to 2010 and operations to be cash flow positive for the year.  Just as importantly, over the next few quarters we expect to begin sampling the first products that feature the best of Trident's impressive IP portfolio acquired over the past 18 months.  These are the products that we believe will drive market share and revenue gains coming out of next year."

Outlook

For the quarter ending Dec. 31, 2010, Trident is providing the following outlook.  The company's outlook for any period is based on current expectations and is subject to various factors, including those set forth in the Forward-Looking Information statement below. Actual results may differ materially.

  • Quarter ending Dec. 31, 2010:
    • Net revenues are expected to be in the range of $130 million to $140 million.
    • Non-GAAP gross margins are expected to be in the range of 33% to 34%.
    • Non-GAAP operating expenses are expected to be in the range of $51 million to $54 million, with research and development expenses in the range of $37 million to $39 million and selling, general and administrative expenses of approximately $14 million to $15 million.  
    • Non-GAAP operating loss is expected to be in the range of $4 million to $8 million.
    • Provision for income taxes is expected to be approximately $1 million.
    • Adjustments to GAAP net income are expected to be in the range of $20 million to $25 million, including restructuring charges in the range of $6 million to $8 million.  These charges are not included in the guidance for non-GAAP operating loss.

Investor Conference Call

Date:   Tuesday, Oct. 26, 2010

Time:   2:00 p.m. Pacific Time (5:00 p.m. Eastern Time)

Domestic Dial-In:   866-730-5770

International Dial-In:  857-350-1594

Passcode:  80541204



A replay of the conference call will be available for two weeks, beginning on Oct. 26, 2010 and will be accessible by calling 888-286-8010 (domestic) or +1-617-801-6888 (international) using access code 71562115.  This call is being webcast by Thomson/CCBN and can be accessed at Trident's web site at: http://www.tridentmicro.com. The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at www.fulldisclosure.com, Thomson/CCBN's individual investor portal, powered by StreetEvents.  Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).

Use of Non-GAAP Financial Information

To supplement the consolidated financial results prepared under GAAP, Trident uses a non-GAAP conforming, or non-GAAP, measure of net income (loss) that is GAAP net income (loss) adjusted to exclude certain costs, expenses and gains. Non-GAAP net income (loss) 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 (loss) 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 (loss) by adjusting GAAP net income (loss) for acquisition-related expenses, stock-based compensation expense, expenses related to the stock option investigation and related matters, legal settlements, restructuring charges, expenses related to software license fees adjustment, amortization and impairment of intangible assets from acquisitions, impairment loss, backlog amortization, capital gains and losses and dividend income.  A detailed reconciliation between net loss on a GAAP basis and non-GAAP net income (loss) is provided in an attached table.

Forward-Looking Information  

This press release contains forward-looking statements, including statements regarding financial expectations for the fourth quarter of fiscal year 2010, expected restructuring activity, and our outlook for 2011. The forward-looking statements made 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, our ability to realize the benefits from our acquisition of product lines and IP from NXP, our ability to reduce expenses, the timing of new product introductions, the ability to obtain design wins among major OEMs for Trident's products, the availability of wafers from our suppliers, and competitive pressures, including pricing and competitors' new product introductions, the impact of the uncertain global macroeconomic environment, the increasingly competitive TV and Set Top Box semiconductor  markets and our ability to retain key employees globally. Additional factors that may affect Trident's business are described in detail in Trident's filings with the Securities and Exchange Commission available at http://www.sec.gov.

About Trident Microsystems, Inc.

Trident Microsystems, Inc., with headquarters in Sunnyvale, California, is a leading force in the digital home entertainment market, delivering an extensive range of platform solutions that enhance the consumer experience in the Connected Home.  As one of the top-three semiconductor providers to both the TV and set-top box markets, Trident's solutions can be found in the products of leading OEMs and channel partners worldwide.  The company's extensive IP portfolio of more than 2,000 patents has been driving key innovations in image quality, 3D TV, low power consumption, and 45nm designs. For further information about Trident and its products, please consult the Company's web site: www.tridentmicro.com.

NOTE: Trident is a trademark 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.

TRID-IR

TRIDENT MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


















Three Months Ended


Nine Months Ended





September 30,


June 30,


September 30,


September  30,


September  30,

(In thousands, except per share data)


2010


2010


2009


2010


2009

Net revenues




$176,568


$171,648


$31,093


$438,619


$52,857

Cost of revenues



128,398


138,722


20,592


343,738


37,273

Gross profit




48,170


32,926


10,501


94,881


15,584

% of net revenues



27.3%


19.2%


33.8%


21.6%


29.5%

Research and development expenses


44,709


49,653


16,350


131,427


43,586

% of net revenues



25.3%


28.9%


52.6%


30.0%


82.5%

Selling, general and administrative expenses


19,459


22,311


8,837


61,906


19,884

% of net revenues



11.0%


13.0%


28.4%


14.1%


37.6%

In-process research and development


-


-


-


-


697

% of net revenues



0.0%


0.0%


0.0%


0.0%


1.3%

Goodwill impairment



0


7,851


0


7,851


1,432

% of net revenues



0.0%


4.6%


0.0%


1.8%


2.7%

Restructuring charges



2,301


4,470


1,508


15,166


1,557

% of net revenues



1.3%


2.6%


4.8%


3.5%


2.9%

Operating loss



(18,299)


(51,359)


(16,194)


(121,469)


(51,572)

% of net revenues



(10.4)%


(29.9)%


(52.1)%


(27.7)%


(97.6)%

Loss on investment



(94)


-


-


(303)


-

Gain on acquisition



-


-


-


43,402


-

Interest and other income (expense), net


2,628


287


(533)


3,479


(52)

Loss before income taxes


(15,765)


(51,072)


(16,727)


(74,891)


(51,624)

% of net revenues



(8.9)%


(29.8)%


(53.8)%


(17.1)%


(97.7)%

Provision for (benefit from) income taxes


1,749


(2,255)


429


219


3,211

% of net revenues



1.0%


(1.3)%


1.4%


0.0%


6.1%

Net loss




($17,514)


($48,817)


($17,156)


($75,110)


($54,835)

% of net revenues



(9.9)%


(28.4)%


(55.2)%


(17.1)%


(103.7)%














Basic and diluted net loss per share


($0.10)


($0.28)


($0.25)


($0.47)


($0.84)

Shares used in basic and diluted per share computation


174,553


174,018


69,237


159,624


65,143



TRIDENT MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
















September 30,


June 30,


December 31,

(In thousands)



2010


2010


2009





















ASSETS









Current assets









Cash and cash equivalents


$  102,711


$  96,915


$  147,995


Accounts receivable, net


96,443


97,813


4,582


Accounts receivable from related parties

4,941


8,488


-


Inventories



26,998


32,475


14,536


Note receivable from related party


20,884


7,476


-


Prepaid expenses and other current assets

28,286


26,812


13,962













Total current assets


280,263


269,979


181,075











Property and equipment, net


30,776


32,561


26,168

Goodwill




-


-


7,851

Intangible assets, net



94,330


108,046


5,635

Long-term note receivable from related party

-


20,882


-

Other assets



18,504


18,664


7,764













Total assets



$423,873


$450,132


$228,493











LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities









Accounts payable



$  12,494


$  20,242


$  18,883


Accounts payable to related parties


28,364


38,362


2,401


Accrued  expenses and other current liabilities

77,907


71,235


27,068


Income taxes payable


2,651


2,532


1,696













Total current liabilities


121,416


132,371


50,048

Long-term income taxes payable


23,495


22,265


22,262

Deferred income tax liabilities


94


94


94

Other long-term liabilities



3,024


3,767


-













Total liabilities



148,029


158,497


72,404











Stockholders' equity









Preferred stock



-


-


-


Common stock



177


176


71


Additional paid-in capital


432,586


430,864


237,827


Accumulated deficit



(156,919)


(139,405)


(81,809)













Total stockholders' equity


275,844


291,635


156,089













Total liabilities and stockholders' equity

$423,873


$450,132


$228,493



TRIDENT MICROSYSTEMS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited)














Three Months Ended


Nine Months Ended




September 30,


June 30,


September 30,



September 30,


September  30,

(In thousands, except per share data)

2010


2010


2009



2010


2009














GAAP Gross profit


$                  48,170


$                      32,926


$                            10,501



$                         94,881


$                       15,584

 Amortization of acquisition-related intangible assets (1)

11,612


16,972


970



38,800


2,385

 Stock-based compensation expense (2)

82


86


3



272


297

 Impairment of intangible assets other than goodwill (3)

(337)


863


-



1,756


-

Non-GAAP Gross profit


$                  59,527


$                      50,847


$                            11,474



$                       135,709


$                       18,266

% of Net revenues


33.7%


29.6%


36.9%


30.9%


34.6%














GAAP Research and development expenses (R&D)

$                  44,709


$                      49,653


$                            16,350



$                       131,427


$                       43,586

 Amortization of acquisition-related intangible assets (1)

(775)


(824)


(719)



(2,084)


(719)

 Stock-based compensation expense (2)

(841)


(902)


-



(2,623)


(3,050)

 Impairment of intangible assets other than goodwill (3)

-


-


-



-


(1,706)

 Software license fees (4)


-


-


-



-


788

Non-GAAP Research and development expenses

$                  43,093


$                      47,927


$                            15,631



$                       126,720


$                       38,899

% of Net revenues


24.4%


27.9%


50.3%


28.9%


73.6%














GAAP Selling, general and administrative expenses (SG&A)

$                  19,459


$                      22,311


$                              8,837



$                         61,906


$                       19,884

 Amortization of acquisition-related intangible assets (1)

(1,329)


(1,339)


(51)



(3,422)


(178)

 Stock-based compensation expense (2)

(938)


(1,246)


(521)



(1,863)


(3,240)

 Stock options related professional fees (5)

(471)


(525)


979



(1,222)


3,950

 Acquisition-related expenses (6)

(188)


(790)


(2,800)



(5,337)


(2,800)

Non-GAAP Selling, general and administrative expenses

$                  16,533


$                      18,411


$                              6,444



$                         50,062


$                       17,616

% of Net revenues


9.4%


10.7%


20.7%


11.4%


33.3%














GAAP Operating Loss


$                 (18,299)


$                    (51,359)


$                          (16,194)



$                     (121,469)


$                      (51,572)

Total of above adjustments to Gross profit, R&D and SG&A

15,899


23,547


4,085



57,379


9,637

 In-process research and development

-


-


-



-


697

 Restructuring Charges (7)


2,301


4,470


1,508



15,166


1,557

 Impairment of goodwill (3)


-


7,851


-



7,851


1,432

Non-GAAP Operating Loss


$                        (99)


$                    (15,491)


$                          (10,601)



$                       (41,073)


$                      (38,249)

% of Net revenues


-0.1%


-9.0%


-34.1%


-9.4%


-72.4%



























GAAP Net loss


$                 (17,514)


$                    (48,817)


$                          (17,156)



$                       (75,110)


$                      (54,835)

Total operating loss adjustments

18,200


35,868


5,593



80,396


12,626

 Legal settlements (10)


(817)


(1,674)





(2,491)


-

(Gain) loss on investment (9)

94


-


-



303


(19)

(Gain) on acquisition (8)


-


-


-



(43,402)


-

Non-GAAP Net loss


$                        (37)


$                    (14,623)


$                          (11,563)



$                       (40,304)


$                      (42,228)

% of Net revenues


0.0%


-8.5%


-37.2%


-9.2%


-79.9%



























GAAP basic and diluted net loss per share

$                     (0.10)


$                        (0.28)


$                              (0.25)



$                           (0.47)


$                          (0.84)

GAAP shares - basic and dilutive

174,553


174,018


69,237



159,624


65,143














Non-GAAP basic and diluted net income (loss) per share

$                     (0.00)


$                        (0.08)


$                              (0.17)



$                           (0.25)


$                          (0.65)

Non-GAAP shares - basic and diluted

174,553


174,018


69,237



159,624


65,143














(1) Amortization of acquisition-related intangible assets represents the amortization of identifiable intangible assets. Management deemed that these acquisition-related charges are not related to Trident's core operating performance and it is appropriate to exclude those charges

from Trident's non-GAAP financial measures, as it enhances the ability of investors to compare Trident's period-over-period operating results.

(2) Stock-based compensation expense relates primarily to the equity awards such as stock options and restricted stock. This is non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond Trident's control. Hence, management excludes this item from the non-GAAP financial measures.

(3) Charges for impairment of goodwill and intangible assets incurred as a result of their carrying value exceeding the fair value.  Management believes that these charges are not directly associated with the Company's core operating performance.

(4) Software license fees represent an adjustment for prior years' software usage.  

(5) Stock options related professional fees are excluded from the non-GAAP net loss calculation.  Management believes that these  professional fees are not related to the Company's ongoing business and operating performance of Trident.  

(6) Acquisition-related expenses represent external costs incurred in connection with our acquisition, which we generally would not have incurred in the normal course of business.

(7) Management believes that restructuring charges are not directly associated with the Company's core operating performance.

(8) The preliminary purchase price allocation assigned $48.5 million to gain on acquisition. Subsequently, in accordance with applicable accounting guidance, the preliminary estimate was reduced by $5.1 million as a result of new information received by the Company subsequent to March 31, 2010.  Management believes that gain on acquisition is not related to the ongoing business and operating performance of Trident.  

(9)  Management believes that (Gain) loss on investments are not related to the ongoing business and operating performance of Trident.  

(10)  Management believes that legal settlements are not related to the ongoing business and operating performance of Trident.  



SOURCE Trident Microsystems, Inc.



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