Exhibit 99.1
Vitesse Reports Results for Fourth Quarter and Fiscal Year Ended 2005
CAMARILLO, Calif.--(BUSINESS WIRE)--Oct. 27, 2005--Vitesse Semiconductor
Corporation (NASDAQ: VTSS) ("Vitesse" or the "Company") today reported results
for the fourth quarter and fiscal year ended September 30, 2005. Revenues in the
fourth quarter of fiscal 2005 were $48.2 million, compared to $52.0 million in
the fourth quarter of fiscal 2004, and $51.0 million in the third quarter of
fiscal 2005. Revenues for the year ended September 30, 2005 were $190.8 million,
compared to $218.8 million in the year ended September 30, 2004.
In the fourth quarter of fiscal 2005, the Company was required to record a
non-cash asset impairment charge in the amount of $49.4 million in accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. This charge represents the write-down of the book values of several
assets to their fair market values. Additionally, the Company wrote down certain
inventories and increased its inventory reserves in the fourth quarter of fiscal
2005, resulting in a charge of $5.3 million that is included in cost of
revenues.
On a generally accepted accounting principles (GAAP) basis, net loss for
the fourth quarter of fiscal 2005 was $68.9 million, or $0.32 loss per share,
compared to net loss of $3.1 million, or $0.01 loss per share, in the fourth
quarter of fiscal 2004 and net loss of $11.8 million, or $0.05 loss per share,
in the third quarter of fiscal 2005. Net loss for the year ended September 30,
2005 was $126.9 million, or $0.59 loss per share, compared to net loss of $33.1
million, or $0.15 loss per share, for the year ended September 30, 2004.
Non-GAAP net loss for the fourth quarter of fiscal 2005 was $9.4 million,
or $0.04 loss per share, compared to non-GAAP net loss of $3.9 million, or $0.02
loss per share, in the fourth quarter of fiscal 2004, and non-GAAP net loss of
$7.2 million, or $0.03 loss per share, in the third quarter of fiscal 2005.
Non-GAAP net loss for the year ended September 30, 2005 was $35.5 million, or
$0.16 loss per share, compared to non-GAAP net income of $1.2 million, or $0.01
income per share, for the year ended September 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, inventory
write-downs, 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, "As we had announced
earlier this month, our revenues declined 5% sequentially due to softness in
demand for our storage products that we saw towards the end of the quarter, as
well as a delay by our customers in the ramp of SAS-based storage systems caused
in turn by delays in the availability of next-generation processors.
"During the quarter we continued to gain market share in our Ethernet
business as we showed another quarter of double-digit sequential growth in this
market. Finally, we took additional cost-cutting measures in October that will
decrease our breakeven point. Overall, we remain well positioned in our markets
and expect to resume top line growth this quarter."
Conference Call Information
The Company will hold a conference call on October 27, 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 October 27, 2005 at 4:00 p.m. PDT. The dial-in number for the
telephone replay is 1-706-645-9291, conference ID number 1369446.
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
June 30, 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 twelve months ended September 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, inventory write-downs, 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 that we expect to 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 2006.
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 Year Ended
---------------------------- --------------------
Sept 30, Sept 30, June 30, Sept 30, Sept 30,
2005 2004 2005 2005 2004
-------------------------------------------------
Revenues $48,190 $52,012 $50,971 $190,778 $218,775
Costs and expenses:
Cost of revenues 27,416 20,450 22,415 91,143 78,720
Engineering and
development 24,736 25,089 24,775 101,443 108,533
Selling, general
and administrative 13,312 12,322 12,725 50,127 47,356
Restructuring
charge -- -- 65 10,475 886
Impairment of long-
lived assets 49,413 -- -- 50,553 --
Employee stock
purchase plan
compensation -- (4,668) -- 527 5,420
In process research
and development -- -- -- -- 3,700
Amortization of
intangible assets 2,302 2,377 2,331 9,345 8,902
--------- -------- --------- ---------- ---------
Loss from operations,
before other expense
and income taxes (68,989) (3,558) (11,340) (122,835) (34,742)
Other income
(expense), net (260) (476) (456) (3,976) 1,017
Loss on extinguishment
of debt -- (191) -- -- (191)
--------- -------- --------- ---------- ---------
Loss from operations,
before income taxes (69,249) (4,225) (11,796) (126,811) (33,916)
Income tax expense
(benefit) (319) (1,121) 40 68 (851)
--------- -------- --------- ---------- ---------
Net loss ($68,930) ($3,104) ($11,836) ($126,879) ($33,065)
========= ======== ========= ========== =========
Net loss per share--
diluted ($0.32) ($0.01) ($0.05) ($0.59) ($0.15)
========= ======== ========= ========== =========
Weighted average
shares--diluted 218,546 216,872 216,607 216,130 215,726
========= ======== ========= ========== =========
Condensed Consolidated Balance Sheet Data -- GAAP basis
- ----------------------------------------------------------------------
(in thousands) Sept 30, June 30, Sept 30,
2005 2005 2004
----------- ----------- ---------
(unaudited) (unaudited)
Assets:
- ------------------------------------
Cash and investments $32,000 $34,104 $183,125
Accounts receivables, net 30,403 33,375 36,447
Inventories, net 35,158 40,764 41,162
Prepaid expenses and other current
assets 7,485 7,686 9,524
Restricted cash 8 814 6,600
Property and equipment, net 58,074 109,825 74,403
Restricted deposits 0 0 48,217
Goodwill and intangible assets 238,916 240,944 243,092
Other assets 9,292 10,583 16,448
----------- ----------- ---------
Total assets $411,336 $478,095 $659,018
=========== =========== =========
Liabilities and Shareholders' Equity:
- ------------------------------------
Accounts payable $20,188 $17,881 $17,789
Accrued expenses and other current
liabilities 27,472 31,451 25,077
Accrued restructuring 2,020 3,126 13,553
Accrued interest 725 530 267
Deferred gain 4,319 4,319 5,210
Income taxes payable 699 1,784 1,511
Other long-term liabilities 3,916 1,146 1,146
Convertible debt, due March 2005 0 0 132,746
Convertible debt, due October 2024 96,700 96,700 90,000
Minority interest 772 772 1,481
Shareholders' equity 254,525 320,386 370,238
----------- ----------- ---------
Total liabilities and
shareholders' equity $411,336 $478,095 $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 Year Ended
---------------------------- --------------------
Sept 30, Sept 30, June 30, Sept 30, Sept 30,
2005 2004 2005 2005 2004
-------------------------------------------------
GAAP net loss ($68,930) ($3,104) ($11,836) ($126,879) ($33,065)
Adjustments to net
loss:
Amortization of
intangibles(1) 2,302 2,377 2,331 9,345 8,902
Amortization of
deferred
compensation(2) 32 1,406 149 1,499 17,993
Other compensation
expense(3) 152 263 114 1,403 1,756
Employee stock
purchase plan
compensation(4) - (4,668) - 527 5,420
Investment
impairment charge(5) (9) - (73) 2,214 119
In process research and
development charge(6) - - - - 3,700
Restructuring charge(7) - - 65 10,475 886
Gain on sale of
fixed assets(8) - - - - (3,235)
Loss on extinguishment
of debt(9) - 191 - - 191
Net gain on termination of
swap related to
extinguishement
of debt(9) - (296) - - (296)
Inventory
obsolescence
charge(10) 5,261 - - 5,261 -
Impairement of
long-lived
assets(11) 49,413 - - 49,413 -
Fixed asset
impairment
charge(12) - - - 1,140 -
Income taxes(13) 2,343 (32) 2,066 10,087 (1,185)
--------- -------- --------- ---------- ---------
Non-GAAP net income
(loss) ($9,436) ($3,863) ($7,184) ($35,515) $1,186
========= ======== ========= ========== =========
GAAP net loss per
share--diluted ($0.32) ($0.01) ($0.05) ($0.59) ($0.15)
Adjustment to net
loss per share--
diluted 0.28 (0.01) 0.02 0.43 $0.16
--------- -------- --------- ---------- ---------
Non-GAAP net income
(loss) per share
--diluted ($0.04) ($0.02) ($0.03) ($0.16) $0.01
========= ======== ========= ========== =========
Shares used to
calculate non-GAAP net
income (loss) per
share--diluted 218,546 216,872 216,607 216,130 216,648
========= ======== ========= ========== =========
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 loss on early termination of long-term
debt, and related net gain on termination of swap related to same
debt.
(10) The elimination of a charge related to increasing inventory
obsolescence reserves which amount is included in cost of revenues.
(11) The elimination of a long-lived asset impairment charge
recorded in accordance with FASB 144, Accounting for the Impairment or
Disposal of Long-Lived Assets.
(12) The elimination of a fixed asset impairment charge related to
leased manufacturing equipment.
(13) 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
Mr. Yatin Mody, Chief Financial Officer, 805-388-3700