Exhibit 99.1
Vitesse Reports Results for First Quarter Fiscal 2005
CAMARILLO, Calif.--(BUSINESS WIRE)--Jan. 25, 2005--Vitesse
Semiconductor Corporation (NASDAQ: VTSS) ("Vitesse" or the "Company")
today reported results for the first quarter of fiscal 2005 ended
December 31, 2004. Revenues in the first quarter of fiscal 2005 were
$44.5 million, compared to $50.3 million in the first quarter of
fiscal 2004, and $52.0 million in the fourth quarter of fiscal 2004.
On a generally accepted accounting principles (GAAP) basis, net
loss for the first quarter of fiscal 2005 was $17.2 million or $0.08
loss per share compared to net loss of $7.9 million or $0.04 loss per
share in the first quarter of fiscal 2004 and net loss of $3.1 million
or $0.01 loss per share in the fourth quarter of fiscal 2004.
Non-GAAP net loss for the first quarter of fiscal 2005 was $9.6
million or $0.04 loss per share, compared to non-GAAP net income of
$0.2 million or $0.00 income per share in the first quarter of fiscal
2004, and non-GAAP net loss of $3.9 million or $0.02 loss per share in
the fourth quarter of fiscal 2004. Non-GAAP net loss for each of the
three months ended December 31, 2004, December 31, 2003 and September
30, 2004 excludes amortization of intangible assets,
acquisition-related deferred stock-based compensation, other
acquisition-related compensation expense, employee stock purchase plan
compensation, restructuring charges, loss on extinguishment of debt
and net gain on termination of interest rate swap, and includes an
adjustment to income taxes.
Vitesse's President and CEO, Lou Tomasetta, said, "In the first
fiscal quarter, as we had previously forecasted, we saw a continuing
sequential decline in revenues resulting principally from decreased
demand from our Storage customers. On a positive note, our Ethernet
business continued to grow in terms of revenues and design-in
activity. We believe that overall revenues will show modest
improvement in the second fiscal quarter with the stabilization of
inventory levels and a pickup in end customer demand."
The Company will hold a conference call on January 25, 2005 at
2:00 p.m. PST. A live Web cast of the call will be available on
Vitesse's Web site at www.vitesse.com. Those without Internet access
may listen to the live conference call by dialing 1-800-450-5178
(United States and Canada) or 1-706-679-4116 (International).
Conference name is "Vitesse Semiconductor Corporation." A replay of
the Web cast will be available on the Company's Web site after the
call. A telephone replay of the conference call will be available for
seven days, beginning on January 25, 2005 at 3:30 p.m. PST. Dial-in
number for the telephone replay is 1-706-645-9291, conference ID
number 3368353.
About Vitesse
Vitesse designs, develops and markets a diverse portfolio of
high-performance, cost-competitive semiconductor solutions for
communications and storage networks worldwide. Engineering excellence
and dedicated customer service distinguish Vitesse as an industry
leader in Gigabit Ethernet LAN, Ethernet-over-SONET, Advanced
Switching, Fibre Channel, Serial Attached SCSI, Optical Transport, and
other applications. Vitesse innovation empowers customers to deliver
superior products for Enterprise, Access, Metro and Core applications.
Additional company and product information is available at
www.vitesse.com.
Forward-Looking Statements
This press release contains forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements regarding our future operating results and the
markets for our products. Our actual results could differ materially
from our forward looking statements for a variety of reasons,
including among other things, failure of our markets to achieve
expected growth, delays or cancellations of orders by our customers,
competition in our markets, unexpected expenses or increased expenses
associated with bringing new products to market and the
discontinuation of certain operations, difficulties in bringing new
products to market, costs associated with the integration of
acquisitions, and possible future write-downs of assets. For a more
complete discussion of the risks and uncertainties that may cause our
actual results to differ materially from our forward looking
statements, please read the reports we file from time to time with the
Securities and Exchange Commission, including our Annual Report on
Form 10-K for the year ended September 30, 2004.
Non-GAAP Financial Measures
We provide non-GAAP statements of operations data and net income
and loss in addition to our GAAP financial information. We believe
that it is useful to provide financial analysts and investors with
specific detail on expenses and gains that are either non-cash in
nature or that are unusual. We believe that the elimination of
non-cash items and unusual gains and losses, as reflected in our
non-GAAP information provided in our filings, is helpful to analysts
and investors who may wish to use some or all of this information to
analyze our current performance, prospects and valuation. Similarly,
our management uses the non-GAAP information internally to evaluate
our operating performance and in formulating our budget for future
periods.
For the three months ended December 31, 2004 and 2003, we have
excluded several items from our non-GAAP net income (loss) figures.
Excluded non-cash expenses consist of amortization of intangibles,
amortization of deferred compensation, employee stock purchase plan
compensation, restructuring and asset impairment charges and the net
gain on termination of an interest rate swap. Excluded cash items,
which are unusual, consist of acquisition-related other compensation
expense and the loss on extinguishment of debt.
In addition to the non-GAAP measures discussed above, we also
apply a non-GAAP tax rate to our non-GAAP income before taxes, which
represents an expected long-term target rate based on various tax
planning strategies that we have implemented in the past and continue
to implement in the future. This rate also assumes a certain mix of
foreign shipments based on historical and expected trends, which may
result in a shifting of income to lower tax jurisdictions. The
non-GAAP tax rate does not take into account the various loss
carryforwards, tax credits and reversal of the valuation allowance on
the deferred tax assets which may result in a reduced GAAP tax rate.
The GAAP tax rate, as well as our income tax liability, are expected
to be significantly lower than the pro-forma rate at least through
fiscal 2005.
Although we believe our non-GAAP measures provide useful
information, these measures are not in accordance with, and are not a
substitute for, our GAAP financial information. Please consult the
reconciliation table immediately following the GAAP Statement of
Operations for a reconciliation of GAAP results to non-GAAP results.
For complete information on the non-cash expenses and unusual charges
and gains eliminated from our GAAP results, please see our financial
statements and "Management's Discussion and Analysis of Results of
Operations and Financial Condition" that will be included in the
periodic report we expect to file with the SEC with respect to the
financial periods discussed herein.
VITESSE SEMICONDUCTOR CORPORATION
FINANCIAL SUMMARY
Statement of Operations - GAAP basis (unaudited)
(in thousands except per share data)
Three Months Ended
---------------------------
Dec 31, Dec 31, Sept 30,
2004 2003 2004
--------- -------- --------
Revenues $44,459 $50,312 $52,012
Costs and expenses:
Cost of revenues 20,198 17,869 20,450
Engineering and development 24,874 25,721 25,089
Selling, general and administrative 11,881 12,257 12,322
Restructuring charge -- 86 --
Employee stock purchase plan
compensation 1,468 -- (4,668)
Amortization of intangible assets 2,377 1,818 2,377
--------- -------- --------
Loss from continuing operations, before
other expense and income taxes (16,339) (7,439) (3,558)
Other expense, net (672) (161) (476)
Loss on extinguishment of debt -- -- (191)
--------- -------- --------
Loss from continuing operations, before
income taxes (17,011) (7,600) (4,225)
Income tax expense (benefit) 204 350 (1,121)
--------- -------- --------
Net loss ($17,215) ($7,950) ($3,104)
========= ======== ========
Net loss per share--diluted ($0.08) ($0.04) ($0.01)
========= ======== ========
Weighted average shares--diluted 213,296 213,563 216,872
========= ======== ========
Condensed Consolidated Balance Sheet Data -- GAAP basis
- --------------------------------------------------
(in thousands)
Dec 31, Sept 30, Sept 30,
2004 2004 2003
-------------------------------
(unaudited)
Assets:
- --------------------------------------
Cash and investments $42,159 $183,125 $234,574
Accounts receivables, net 39,061 36,447 35,171
Inventories, net 41,061 41,162 24,851
Prepaid expenses and other current assets 8,098 9,524 4,457
Restricted cash 6,600 6,600 --
Property and equipment, net 92,799 74,403 92,541
Restricted deposits 31,105 48,217 57,101
Goodwill and intangible assets 240,716 243,092 194,785
Other assets 15,645 16,448 22,264
----------- --------- ---------
Total assets $517,244 $659,018 $665,744
=========== ========= =========
Liabilities and Shareholders' Equity:
- --------------------------------------
Accounts payable $21,241 $17,789 $11,553
Accrued expenses and other current
liabilities 23,754 25,077 22,679
Accrued restructuring 10,642 13,553 27,923
Accrued interest 389 267 257
Deferred gain 4,319 5,210 9,330
Income taxes payable 1,715 1,511 1,913
Other long-term liabilities 1,146 1,146 9,259
Convertible debt, due March 2005 -- 132,746 195,732
Convertible debt, due Oct 2024 96,700 90,000 --
Minority interest 1,511 1,481 1,590
Shareholders' equity 355,827 370,238 385,508
----------- --------- ---------
Total liabilities and shareholders'
equity $517,244 $659,018 $665,744
=========== ========= =========
VITESSE SEMICONDUCTOR CORPORATION
FINANCIAL SUMMARY
Reconciliation of GAAP net loss to non-GAAP net income (loss):
(in thousands except per share data)
Three Months Ended
---------------------------
Dec 31, Dec 31, Sept 30,
2004 2003 2004
--------- -------- --------
GAAP net loss ($17,215) ($7,950) ($3,104)
Adjustments to net loss:
Amortization of intangibles (1) 2,377 1,818 2,377
Amortization of deferred compensation (2) 511 5,916 1,406
Other compensation expense (3) 385 -- 263
Employee stock purchase plan
compensation (4) 1,468 -- (4,668)
Restructuring charge (5) -- 86 --
Loss on extinguishment of debt (6) -- -- 191
Net gain on termination of swap
related to extinguishment of debt (7) -- -- (296)
Income taxes (8) 2,903 302 (32)
--------- -------- --------
Non-GAAP net income (loss) ($9,571) $172 ($3,863)
========= ======== ========
GAAP net loss per share--diluted ($0.08) ($0.04) ($0.01)
Adjustment to net loss per share--diluted 0.04 0.04 ($0.01)
--------- -------- --------
Non-GAAP net income (loss) per share--
diluted ($0.04) $0.00 ($0.02)
========= ======== ========
Shares used to calculate non-GAAP net
income (loss) per share--diluted 213,296 224,362 216,872
========= ======== ========
Non-GAAP Adjustments:
The GAAP net loss has been adjusted to reflect the following:
(1) The elimination of the non-cash amortization of identifiable
intangible assets associated with purchase acquisitions.
(2) The elimination of the non-cash amortization of deferred
compensation expense associated with stock options issued in purchase
transactions, which amounts are included under Engineering and
development expense.
(3) The elimination of other compensation expense related to
purchase transactions, which amounts are included under Engineering
and development expense.
(4) The elimination of the non-cash charge for employee stock
purchase plan compensation that was recorded under the variable method
of accounting in accordance with Emerging Issues Task Force 97-12,
Accounting for Increased Share Authorizations in an IRS Section 423
Employee Stock Purchase Plan under APB Opinion No. 25. This amount can
vary significantly based on changes in future stock price and levels
of employee participation.
(5) The elimination of a restructuring charge for excess facilities.
(6) The elimination of the loss on extinguishment of debt.
(7) The elimination of the gain on the termination of interest
rate swap associated with the extinguishment of debt, which amount is
included under Other expense, net for the quarter ended September 30,
2004.
(8) The income tax adjustment from a GAAP rate to a non-GAAP rate
of 22%, which represents an expected long-term target rate based on
various tax planning strategies that the Company has implemented in
the past and plans to continue in the future. This adjustment is
included in Income tax expense (benefit) for each of the periods
presented. The non-GAAP tax rate does not take into account the
various loss carryforwards, tax credits and reversal of the valuation
allowance on the deferred tax assets which may result in a different
GAAP tax rate.
CONTACT: Vitesse Semiconductor Corporation
Eugene F. Hovanec, 805-388-3700