Exhibit 99.1
Vitesse Reports Results for Second Quarter Fiscal 2005
CAMARILLO, Calif.--(BUSINESS WIRE)--April 21, 2005--Vitesse
Semiconductor Corporation (NASDAQ:VTSS) ("Vitesse" or the "Company")
today reported results for the second quarter of fiscal 2005 ended
March 31, 2005. Revenues in the second quarter of fiscal 2005 were
$47.2 million, compared to $56.0 million in the second quarter of
fiscal 2004, and $44.5 million in the first quarter of fiscal 2005.
Revenues for the six months ended March 31, 2005 were $91.6 million,
compared to $106.3 million in the six months ended March 31, 2004.
On a generally accepted accounting principles (GAAP) basis, net
loss for the second quarter of fiscal 2005 was $28.9 million or $0.13
loss per share compared to net loss of $17.5 million or $0.08 loss per
share in the second quarter of fiscal 2004 and net loss of $17.2
million or $0.08 loss per share in the first quarter of fiscal 2005.
Net loss for the six months ended March 31, 2005 was $46.1 million or
$0.22 loss per share, compared to net loss of $25.4 million or $0.12
loss per share for the six months ended March 31, 2004.
Non-GAAP net loss for the second quarter of fiscal 2005 was $9.4
million or $0.04 loss per share, compared to non-GAAP net income of
$1.4 million or $0.01 income per share in the second quarter of fiscal
2004, and non-GAAP net loss of $9.5 million or $0.04 loss per share in
the first quarter of fiscal 2005. Non-GAAP net loss for the six months
ended March 31, 2005 was $18.9 million or $0.09 loss per share,
compared to non-GAAP net income of $1.6 million or $0.01 income per
share for the six months ended March 31, 2004. Non-GAAP results for
all periods presented exclude amortization of intangible assets,
acquisition-related deferred stock-based compensation, other
acquisition-related compensation expense, employee stock purchase plan
compensation, investment impairment charges, restructuring charges,
fixed asset impairment charges, and include an adjustment to income
taxes.
In the second quarter of fiscal 2005, in an effort to reduce
operating costs and lower its break-even level, the Company
implemented a restructuring program that included a reduction in
workforce, and the closure of certain facilities. The workforce
reduction, which began in February and will be completed in April,
will reduce headcount by approximately 12%. In connection with this
restructuring, the Company recorded various charges aggregating $10.2
million, comprised of the following elements (in 000's):
Severance and other benefits $ 1,012
Facility lease settlement costs $ 476
Impairment of property and equipment $ 8,709
Total $10,197
The Company also recorded a charge in the amount of $2.3 million
for the impairment of certain long-term investments. Additionally, the
Company recorded a restructuring charge of $0.2 million related to
adjustments to estimated sublease income from a previous restructuring
program.
Vitesse's President and CEO, Lou Tomasetta, said, "I am encouraged
to see our revenues rebounding after going through a steep decline in
the second half of calendar 2004. Storage revenues were particularly
strong in the March quarter, growing 18% sequentially. Additionally,
our Ethernet business continued to grow with some key products
entering a production ramp. We expect that both these businesses will
continue to grow in the current quarter. While our cost cutting
efforts have reduced our operating costs going forward, the actions we
took did not occur until later on in the quarter and so we did not see
the full impact of these measures in the March quarter."
Conference Call Information
The Company will hold a conference call on April 21, 2005 at 2:00
p.m. PDT. 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
April 21, 2005 at 4:00 p.m. PDT. Dial-in number for the telephone
replay is 1-706-645-9291, conference ID number 5384109.
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 and our Quarterly
Report on Form 10-Q for the quarter ended December 31, 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 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 and six months ended March 31, 2005 and 2004,
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 and restructuring and asset impairment
charges. Excluded unusual cash items consist of acquisition-related
other compensation expense.
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 is 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 Six Months Ended
----------------------------- ------------------
Mar 31, Mar 31, Dec 31, Mar 31, Mar 31,
2005 2004 2004 2005 2004
-------------------------------------- ---------
Revenues $47,158 $56,034 $44,459 $91,617 $106,346
Costs and expenses:
Cost of revenues 21,114 19,535 20,198 41,312 37,404
Engineering and
development 27,058 29,349 24,874 51,932 55,302
Selling, general and
administrative 12,263 11,441 11,827 24,090 23,466
Restructuring charge 10,410 196 -- 10,410 282
Employee stock
purchase plan
compensation (941) 10,338 1,468 527 10,338
Amortization of
intangible assets 2,335 1,737 2,377 4,712 3,555
--------- --------- --------- -------- ---------
Loss from operations,
before other expense
and income taxes (25,081) (16,562) (16,285) (41,366) (24,001)
Other expense, net (2,588) (766) (672) (3,260) (927)
Fixed asset impairment (1,140) -- -- (1,140) --
--------- --------- --------- -------- ---------
Loss from operations,
before income taxes (28,809) (17,328) (16,957) (45,766) (24,928)
Income tax expense 89 123 258 347 473
--------- --------- --------- -------- ---------
Net loss ($28,898) ($17,451) ($17,215)($46,113) ($25,401)
========= ========= ========= ======== =========
Net loss per share--
diluted ($0.13) ($0.08) ($0.08) $(0.22) ($0.12)
========= ========= ========= ======== =========
Weighted average
shares--diluted 215,408 215,652 213,296 214,468 214,675
========= ========= ========= ======== =========
Condensed Consolidated Balance Sheet Data -- GAAP basis
- ----------------------------------------------------------------------
(in thousands) Mar 31, Sept 30,
2005 2004
------------ ---------
(unaudited)
Assets:
- -----------------------------------------------
Cash and investments $34,063 $183,125
Accounts receivables, net 38,977 36,447
Inventories, net 40,845 41,162
Prepaid expenses and other current assets 8,953 9,524
Restricted cash 814 6,600
Property and equipment, net 113,869 74,403
Restricted deposits -- 48,217
Goodwill and intangible assets 243,082 243,092
Other assets 10,866 16,448
----------- ---------
Total assets $491,469 $659,018
=========== =========
Liabilities and Shareholders' Equity:
- -----------------------------------------------
Accounts payable $18,319 $17,789
Accrued expenses and other current liabilities 26,076 25,077
Accrued restructuring 4,386 13,553
Accrued interest 752 267
Deferred gain 4,319 5,210
Income taxes payable 1,798 1,511
Other long-term liabilities 6,692 1,146
Convertible debt, due March 2005 -- 132,746
Convertible debt, due October 2024 96,700 90,000
Minority interest 780 1,481
Shareholders' equity 331,647 370,238
----------- ---------
Total liabilities and shareholders' equity $491,469 $659,018
=========== =========
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 Six Months Ended
----------------------------- -------------------
Mar 31, Mar 31, Dec 31, Mar 31, Mar 31,
2005 2004 2004 2005 2004
--------------------------------------------------
GAAP net loss ($28,898) ($17,451) ($17,215) ($46,113) ($25,401)
Adjustments to
net loss:
Amortization of
intangibles (1) 2,335 1,737 2,377 4,712 3,555
Amortization of
deferred
compensation (2) 807 5,734 511 1,318 11,418
Other
compensation
expense (3) 752 1,023 385 1,137 1,255
Employee stock
purchase plan
compensation
(4) (941) 10,338 1,468 527 10,338
Investment
impairment
charge (5) 2,296 119 -- 2,296 119
Restructuring
charge (6) 10,410 196 -- 10,410 282
Fixed asset
impairment
charge (7) 1,140 -- -- 1,140 --
Income taxes (8) 2,732 (277) 2,946 5,678 25
--------- --------- --------- --------- ---------
Non-GAAP net income
(loss) ($9,367) $1,419 ($9,528) ($18,895) $1,591
========= ========= ========= ========= =========
GAAP net loss per
share--diluted ($0.13) ($0.08) ($0.08) ($0.22) ($0.12)
Adjustment to net
loss per share--
diluted $0.09 $0.09 $0.04 $0.13 $0.13
--------- --------- --------- --------- ---------
Non-GAAP net income
(loss) per share
--diluted ($0.04) $0.01 ($0.04) ($0.09) $0.01
========= ========= ========= ========= =========
Shares used to
calculate non-GAAP
net income (loss)
per share--
diluted 215,408 228,120 213,296 214,468 225,924
========= ========= ========= ========= =========
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 long-term investment impairment charges,
which amounts are included under other expenses, net.
(6) The elimination of a restructuring charge for excess
facilities, severance expense, and fixed asset impairment.
(7) The elimination of a fixed asset impairment charge related to
leased manufacturing equipment.
(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 carry forwards, 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
Investor Relations Contact:
Eugene F. Hovanec, (805) 388-3700