Exhibit 99.1
Vitesse Reports Financial Results for First Quarter Fiscal Year 2006
CAMARILLO, Calif.--(BUSINESS WIRE)--Jan. 23, 2006--Vitesse
Semiconductor Corporation (NASDAQ:VTSS) ("Vitesse" or the "Company")
today reported results for the first quarter ended December 31, 2005.
Revenues in the first quarter of fiscal 2006 were $53.0 million,
compared to $44.5 million in the first quarter of fiscal 2005, and
$48.2 million in the fourth quarter of fiscal 2005.
On a generally accepted accounting principles (GAAP) basis, net
loss for the first quarter of fiscal 2006 was $14.1 million, or
$(0.06) loss per share, compared to net loss of $17.2 million, or
$(0.08) loss per share, in the first quarter of fiscal 2005 and net
loss of $68.9 million, or $(0.32) loss per share, in the fourth
quarter of fiscal 2005.
During the quarter, the Company implemented a restructuring
program in order to align its costs with its projected revenues. This
restructuring involved the closure of one design facility and the
termination of approximately 70 employees. In connection with this
restructuring, the Company recorded a charge for severance, fixed
asset impairment and lease termination costs in the amount of $1.3
million.
In the first quarter of fiscal 2006, the Company adopted Statement
of Financial Accounting Standards No. 123 (Revised), "Share-Based
Payment" (SFAS 123R). As a result, the company recorded stock option
expense related to its stock option and employee stock purchase plans
in the aggregate amount of $3.7 million. Of this expense $0.2 million
is included under Cost of Revenues, $1.8 million under Engineering,
research and development expenses and $1.8 million under Selling,
general and administrative expenses in both the GAAP and non-GAAP
statements of operations for the period ended December 31, 2005.
Non-GAAP net loss including the effect of share-based payment
charges for the first quarter of fiscal 2006 was $7.9 million, or
$(0.04) loss per share, compared to net loss of $9.5 million, or
$(0.04) loss per share, in the first quarter of fiscal 2005, and net
loss of $9.4 million, or $(0.04) loss per share, in the fourth quarter
of fiscal 2005.
Non-GAAP net loss before share-based payment charges for the first
quarter of fiscal 2006 was $5.0 million, or $(0.02) loss per share.
Non-GAAP results for all periods presented exclude certain
non-cash expenses including amortization of intangible assets,
acquisition-related deferred stock-based compensation, investment
impairment charges, inventory write-downs, and fixed asset impairment
charges, and include an adjustment to income taxes. Excluded unusual
cash items are restructuring charges and acquisition-related other
compensation expense. Additionally, periods prior to fiscal 2006 do
not include stock-based compensation related to the effect of SFAS
123R, as the Company did not apply SFAS 123R retroactively.
Vitesse's President and CEO, Lou Tomasetta, said, "I am pleased to
see our revenues grow 10% sequentially to $53.0 million in the first
fiscal quarter in spite of the challenges we faced with longer
assembly and test lead times. The growth in customer demand was
broad-based across our three business units. Our Ethernet products
continued to see double-digit growth driven by increased penetration
in the Small and Mid-Size Enterprise (SME) space. Storage revenues
rebounded, even though shipments of Serial Attached SCSI (SAS)
products in the quarter were not significant. Further, I am encouraged
to see resurgence in our telecom business, particularly in Asia."
Mr. Tomasetta continued, "We saw operating expenses decline during
the quarter as a result of the cost cutting measures that we had
previously announced. This will take us a step closer towards
attaining profitability."
Conference Call Information
The Company will hold a conference call on January 23, 2006 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
will be able to listen to the live conference call by dialing
1-800-450-5178 (United States and Canada) or 1-706-679-4116
(International). The Conference ID is 4151027. 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 23, 2006 at 4:00 p.m. PST. The dial-in
number for the telephone replay is 1-706-645-9291 and the Conference
ID number is 4151027.
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, 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.
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 ended December 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 intangible
assets, acquisition-related deferred stock-based compensation,
investment impairment charges, inventory write-downs, and fixed asset
impairment charges. Excluded unusual cash items are restructuring
charges and acquisition-related other compensation expense.
We adopted SFAS 123R in the first quarter of fiscal 2006.
Accordingly, our consolidated financial statements for the period
ended December 31, 2005 include stock-based compensation charges,
which are not reflected in the financial statement of any prior
periods. With a view towards providing analysts and investors with
information that can be compared between periods, we are providing the
non-GAAP measure "Net Loss Before Share-Based Payment Charge."
In addition to the adjustments discussed above, we also apply a
non-GAAP tax rate to our non-GAAP loss 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
-----------------------------
Dec 31, Dec 31, Sept 30,
2005 2004 2005
--------- --------- ---------
Revenues $53,011 $44,459 $48,190
Costs and expenses:
Cost of revenues (1) 23,073 20,198 27,416
Engineering, research and
development (2) 24,184 24,874 24,736
Selling, general and administrative (3) 15,536 11,827 13,312
Restructuring charge 1,327 -- --
Impairment of long-lived assets -- -- 49,413
Employee stock purchase plan
compensation -- 1,468 --
Amortization of intangible assets 2,237 2,377 2,302
--------- --------- ---------
Loss from operations, before other
expense and income taxes (13,346) (16,285) (68,989)
Other expense, net (482) (672) (260)
--------- --------- ---------
Loss from operations, before income taxes (13,828) (16,957) (69,249)
Income tax expense (benefit) 228 258 (319)
--------- --------- ---------
Net loss ($14,056) ($17,215) ($68,930)
========= ========= =========
Net loss per share--diluted ($0.06) ($0.08) ($0.32)
========= ========= =========
Weighted average shares--diluted 218,893 213,296 218,546
========= ========= =========
(1) Includes share-based payment charges in the amount of $194 for the
three month period ended December 31, 2005.
(2) Includes share-based payment charges in the amount of $1,780 for
the three month period ended December 31, 2005.
(3) Includes share-based payment charges in the amount of $1,761 for
the three month period ended December 31, 2005.
Condensed Consolidated Balance Sheet Data -- GAAP basis
- ----------------------------------------------------------------------
(in thousands) Dec 31, Sept 30, Dec 31,
2005 2005 2004
----------- --------- -----------
(unaudited) (unaudited)
Assets:
- ------------------------------------
Cash and investments $29,051 $32,000 $42,159
Accounts receivables, net 32,962 30,403 39,061
Inventories, net 35,140 35,158 41,061
Prepaid expenses and other current
assets 6,986 7,485 8,098
Restricted cash 8 8 6,600
Property and equipment, net 54,912 58,074 92,799
Restricted deposits -- -- 31,105
Goodwill and intangible assets 238,329 238,916 240,716
Other assets 9,781 9,292 15,645
----------- --------- -----------
Total assets $407,169 $411,336 $517,244
=========== ========= ===========
Liabilities and Shareholders' Equity:
- -------------------------------------
Accounts payable $23,354 $20,188 $21,241
Accrued expenses and other current
liabilities 29,095 27,470 23,754
Accrued restructuring 1,376 2,020 10,642
Accrued interest 363 725 389
Deferred gain 7,254 4,319 4,319
Income taxes payable 782 699 1,715
Other long-term liabilities 2,589 3,916 1,146
Convertible debt, due October 2024 96,700 96,700 96,700
Minority interest 781 772 1,511
Shareholders' equity 244,875 254,527 355,827
----------- --------- -----------
Total liabilities and
shareholders' equity $407,169 $411,336 $517,244
=========== ========= ===========
VITESSE SEMICONDUCTOR CORPORATION
FINANCIAL SUMMARY
Reconciliation of GAAP net loss to non-GAAP net loss:
(in thousands except per share data) Three Months Ended
-----------------------------
Dec 31, Dec 31, Sept 30,
2005 2004 2005
--------- --------- ---------
GAAP net loss ($14,056) ($17,215) ($68,930)
Adjustments to net loss:
Amortization of intangibles (1) 2,237 2,377 2,302
Amortization of deferred
compensation (2) 16 511 32
Other compensation expense (3) 134 385 152
Employee stock purchase plan
compensation (4) -- 1,468 --
Investment impairment charge (5) -- -- (9)
Restructuring charge (6) 1,327 -- --
Inventory obsolescence charge (7) -- -- 5,261
Impairment of long-lived assets (8) -- -- 49,413
Income tax benefit (9) 2,453 2,946 2,343
--------- --------- ---------
Non-GAAP net loss ($7,889) ($9,528) ($9,436)
========= ========= =========
GAAP net loss per share--diluted ($0.06) ($0.08) ($0.32)
Adjustment to net loss per
share--diluted 0.02 0.04 0.28
--------- --------- ---------
Non-GAAP net loss per share--diluted ($0.04) ($0.04) ($0.04)
========= ========= =========
Shares used to calculate non-GAAP net
loss per share--diluted 218,893 213,296 218,546
========= ========= =========
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, research and development expense.
(3) The elimination of other compensation expense related to purchase
transactions, which amounts are included under Engineering,
research 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.
(5) The elimination of long-term investment charges, which amounts are
included in other expenses, net.
(6) The elimination of a restructuring charge for excess facilities,
severance and fixed asset impairment.
(7) The elimination of a charge related to increasing inventory
obsolescence reserves which amount is included in cost of
revenues.
(8) The elimination of a long-lived asset impairment charge recorded
in accordance with FASB144, Accounting for the Impairment or
Disposal of Long-Lived Assets.
(9) 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.
VITESSE SEMICONDUCTOR CORPORATION
FINANCIAL SUMMARY
Reconciliation of non-GAAP net loss to non-GAAP net loss before share-
based payment charges:
(in thousands except per share data) Three Months Ended
----------------------------
Dec 31, Dec 31, Sept 30,
2005 2004 2005
---------- -------- --------
Non-GAAP net loss ($7,889) ($9,528) ($9,436)
Share-based payment charges 3,735 -- --
Income tax adjustment (822) -- --
---------- -------- --------
Non-GAAP net loss before share-based
payment charges ($4,976) ($9,528) ($9,436)
========== ======== ========
Non-GAAP net loss per share--diluted ($0.04) ($0.04) ($0.04)
Adjustment to non-GAAP net loss per
share--diluted 0.02 -- --
---------- -------- --------
Non-GAAP net loss before share-based
payment charges per share--diluted ($0.02) ($0.04) ($0.04)
========== ======== ========
Shares used to calculate non-GAAP net loss
before share-based payment charges per
share--diluted 218,893 213,296 218,546
========== ======== ========
CONTACT: Vitesse Semiconductor Corporation
Mr. Yatin Mody, Chief Financial Officer, 805-388-3700