Exhibit 99.1
Vitesse Reports Results for Third Quarter Fiscal 2005
CAMARILLO, Calif.--(BUSINESS WIRE)--July 21, 2005--Vitesse Semiconductor
Corporation (NASDAQ:VTSS) ("Vitesse" or the "Company") today reported results
for the third quarter of fiscal 2005 ended June 30, 2005. Revenues in the third
quarter of fiscal 2005 were $51.0 million, compared to $60.4 million in the
third quarter of fiscal 2004, and $47.2 million in the second quarter of fiscal
2005. Revenues for the nine months ended June 30, 2005 were $142.6 million,
compared to $166.8 million in the nine months ended June 30, 2004.
On a generally accepted accounting principles (GAAP) basis, net loss for
the third quarter of fiscal 2005 was $11.8 million or $0.05 loss per share
compared to net loss of $4.6 million or $0.02 loss per share in the third
quarter of fiscal 2004 and net loss of $28.9 million or $0.13 loss per share in
the second quarter of fiscal 2005. Net loss for the nine months ended June 30,
2005 was $57.9 million or $0.27 loss per share, compared to net loss of $30.0
million or $0.14 loss per share for the nine months ended June 30, 2004.
Non-GAAP net loss for the third quarter of fiscal 2005 was $7.2 million or
$0.03 loss per share, compared to non-GAAP net income of $3.5 million or $0.02
income per share in the third quarter of fiscal 2004, and non-GAAP net loss of
$9.4 million or $0.04 loss per share in the second quarter of fiscal 2005.
Non-GAAP net loss for the nine months ended June 30, 2005 was $26.1 million or
$0.12 loss per share, compared to non-GAAP net income of $5.0 million or $0.02
income per share for the nine months ended June 30, 2004. Non-GAAP results for
all periods presented exclude certain non-cash expenses including amortization
of intangible assets, acquisition-related deferred stock-based compensation,
employee stock purchase plan compensation, investment impairment charges, in
process research and development charges, restructuring charges, and fixed asset
impairment charges, and include an adjustment to income taxes. Excluded unusual
cash items consist of acquisition-related other compensation expense, and the
gain on sale of certain fixed assets.
Vitesse's President and CEO, Lou Tomasetta, said, "In the third quarter we
continued to grow revenues in all of our end markets. In particular, Ethernet
revenues were strong with production ramps beginning at many of our customers.
Financially, we made significant progress towards narrowing our losses, and I am
pleased to report that in the quarter we achieved our goal of being cash flow
break-even."
Conference Call Information
The Company will hold a conference call on July 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 July 21, 2005 at 4:00 p.m. PDT. Dial-in number for the
telephone replay is 1-706-645-9291, conference ID number 7671178.
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
March 31, 2005.
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 nine months ended June 30, 2005 and 2004, we have
excluded several items from our non-GAAP net income (loss) figures. Excluded
non-cash expenses consist of amortization of intangible assets,
acquisition-related deferred stock-based compensation, employee stock purchase
plan compensation, investment impairment charges, in process research and
development charges, restructuring charges and fixed asset impairment charges.
Excluded unusual cash items consist of acquisition-related other compensation
expense, and the gain on sale of fixed assets recorded in the quarter ended June
30, 2004.
In addition to the adjustments 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. Our GAAP tax rate is expected to be
significantly lower than this non-GAAP rate at least through fiscal 2005.
Although we believe our non-GAAP measures provide useful information, these
measures are not prepared in accordance with GAAP, 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 Nine Months Ended
---------------------------- -------------------
June 30, June 30, Mar 31, June 30, June 30,
2005 2004 2005 2005 2004
---------------------------- -------------------
Revenues $50,971 $60,417 $47,158 $142,588 $166,763
Costs and expenses:
Cost of revenues 22,415 20,866 21,114 63,727 58,270
Engineering and
development 24,775 28,142 27,058 76,707 83,444
Selling, general
and administrative 12,725 11,568 12,263 36,815 35,034
Restructuring
charge 65 604 10,410 10,475 886
Employee stock
purchase plan
compensation -- (250) (941) 527 10,088
In process research
and development -- 3,700 -- -- 3,700
Amortization of
intangible assets 2,331 2,970 2,335 7,043 6,525
--------- -------- --------- --------- ---------
Loss from operations,
before other expense
and income taxes (11,340) (7,183) (25,081) (52,706) (31,184)
Other expense, net (456) 2,420 (2,588) (3,716) 1,493
Fixed asset
impairment -- -- (1,140) (1,140) --
------------------ --------- --------- ---------
Loss from operations,
before income taxes (11,796) (4,763) (28,809) (57,562) (29,691)
Income tax expense 40 (203) 89 387 270
--------- -------- --------- --------- ---------
Net loss ($11,836) ($4,560) ($28,898) ($57,949) ($29,961)
========= ======== ========= ========= =========
Net loss per share--
diluted ($0.05) ($0.02) ($0.13) ($0.27) ($0.14)
========= ======== ========= ========= =========
Weighted average
shares--diluted 216,607 217,109 215,408 215,145 215,433
========= ======== ========= ========= =========
Condensed Consolidated Balance Sheet Data -- GAAP basis
(in thousands) June 30, March 31, Sept 30,
2005 2005 2004
----------- ----------- ---------
(unaudited) (unaudited)
Assets:
Cash and investments $34,104 $34,063 $183,125
Accounts receivables, net 33,375 38,977 36,447
Inventories, net 40,764 40,845 41,162
Prepaid expenses and other current
assets 7,686 8,953 9,524
Restricted cash 814 814 6,600
Property and equipment, net 109,825 113,869 74,403
Restricted deposits 0 0 48,217
Goodwill and intangible assets 240,944 243,082 243,092
Other assets 10,583 10,866 16,448
----------- ----------- ---------
Total assets $478,095 $491,469 $659,018
=========== =========== =========
Liabilities and Shareholders' Equity:
Accounts payable $17,881 $18,319 $17,789
Accrued expenses and other current
liabilities 31,451 26,076 25,077
Accrued restructuring 3,126 4,386 13,553
Accrued interest 530 752 267
Deferred gain 4,319 4,319 5,210
Income taxes payable 1,784 1,798 1,511
Other long-term liabilities 1,146 6,692 1,146
Convertible debt, due March 2005 0 0 132,746
Convertible debt, due October 2024 96,700 96,700 90,000
Minority interest 772 780 1,481
Shareholders' equity 320,386 331,647 370,238
----------- ----------- ---------
Total liabilities and
shareholders' equity $478,095 $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 Nine Months Ended
---------------------------- -------------------
June 30, June 30, Mar 31, June 30, June 30,
2005 2004 2005 2005 2004
------------------------------------------------
GAAP net loss ($11,836) ($4,560) ($28,898) ($57,949) ($29,961)
Adjustments to net
loss:
Amortization of
intangibles (1) 2,331 2,970 2,335 7,043 6,525
Amortization of
deferred
compensation (2) 149 5,169 807 1,467 16,587
Other compensation
expense (3) 114 238 752 1,251 1,493
Employee stock
purchase plan
compensation (4) - (250) (941) 527 10,088
Investment impairment
charge (5) (73) - 2,296 2,223 119
In process research
and development
charge (6) - 3,700 - - 3,700
Restructuring
charge (7) 65 604 10,410 10,475 886
Gain on sale of
fixed assets (8) - (3,235) - - (3,235)
Fixed asset
impairment
charge (9) - - 1,140 1,140 -
Income taxes (10) 2,066 (1,178) 2,732 7,744 (1,154)
--------- -------- --------- --------- ---------
Non-GAAP net income
(loss) ($7,184) $3,458 ($9,367) ($26,079) $5,048
========= ======== ========= ========= =========
GAAP net loss per
share--diluted ($0.05) ($0.02) ($0.13) ($0.27) ($0.14)
Adjustment to net
loss per share--
diluted 0.02 0.04 0.09 0.15 $0.16
--------- -------- --------- --------- ---------
Non-GAAP net income
(loss) per share--
diluted ($0.03) $0.02 ($0.04) ($0.12) $0.02
========= ======== ========= ========= =========
Shares used to
calculate non-GAAP
net income (loss)
per share--diluted 216,607 226,039 215,408 215,145 225,935
========= ======== ========= ========= =========
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 the non-cash in process research and
development charge associated with our acquisition of Cicada.
(7) The elimination of a restructuring charge for excess facilities,
severance expense, and fixed asset impairment.
(8) The elimination of the gain on sale of certain test equipment.
(9) The elimination of a fixed asset impairment charge related to
leased manufacturing equipment.
(10) 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
Yatin Mody, 805-388-3700 (Investor Relations)