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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. 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? 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".
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