Attached files
| file | filename |
|---|---|
| 8-K - TRANSWITCH CORP /DE | v210454_8-k.htm |
EXHIBIT
99.1
News
Release
TranSwitch
Corporation Announces
Fourth
Quarter 2010 Financial Results
SHELTON,
CT – February 8, 2011 – TranSwitch Corporation (NASDAQ: TXCC), a leading
provider of semiconductor solutions for the converging voice, data and video
network, today announced financial results for the fourth quarter ended December
31, 2010.
Net
revenues for the fourth quarter of 2010 were approximately $10.1 million, as
compared to net revenues of $12.8 million for the third quarter of 2010 and
$12.1 million for the fourth quarter of 2009. GAAP net loss for the
fourth quarter of 2010 was ($1.8) million, or ($0.08) per basic and diluted
common share as compared to a net loss of ($1.8) million, or ($0.08) per basic
and diluted common share, during the third quarter of 2010 and a net loss of
($12.7) million, or ($0.64) per basic and diluted common share during the fourth
quarter of 2009.
The GAAP
gross margin for the fourth quarter was 64%. This is compared to the Company's
GAAP gross margin of 56% for the third quarter of 2010, and 53% for the fourth
quarter of 2009.
Total
non-GAAP operating expenses for the fourth quarter of fiscal 2010 were $7.3
million, as compared to $6.6 million in the third quarter of fiscal 2010 and
$8.6 million in the fourth quarter of 2009. Total GAAP operating expenses for
the fourth quarter of fiscal 2010 were $8.0 million which included expenses of
$0.4 million in amortization of purchase price intangibles and $0.7 million in
stock-based compensation along with a benefit of $0.4 million from the reversal
of accrued royalties.
Non-GAAP
operating loss for the fourth quarter of fiscal 2010 was ($0.9) million,
compared to non-GAAP operating income of $0.6 million for the third quarter of
fiscal 2010 and a non-GAAP operating loss of ($2.1) million for the fourth
quarter of 2009. On a GAAP basis, the operating loss for the fourth
quarter of fiscal 2010 was ($1.6) million, compared to an operating loss of
($0.4) million for the third quarter of fiscal 2010 and an operating loss of
($12.6) million for the fourth quarter of 2009.
Non-GAAP
net loss for the fourth quarter was ($1.1) million, or ($0.05) per share
compared with a non-GAAP net loss of ($0.8) million, or ($0.04) per share, for
the third quarter of 2010 and a non-GAAP net loss of ($2.2) million, or ($0.11)
per share, for the fourth quarter of 2009. The non-GAAP net loss for
the fourth quarter of 2010 excluded expenses of $0.4 million in amortization of
purchase price intangibles and $0.7 million in stock-based compensation along
with a benefit of $0.4 million from the reversal of accrued
royalties.
Further
information about non-GAAP measures and reconciliation to the GAAP results is
provided after the financial statements attached to this release.
In
addition, TranSwitch also announced that it is planning a restructuring
including a workforce reduction to be implemented and concluded during the first
quarter of 2011. The actions are meant to continue to further reshape
the company consistent with its increased focus on video and voice-over-IP.
TranSwitch expects that these restructuring actions will result in annual
savings of approximately $2 million, and that these savings will begin to be
recognized in the second quarter of 2011. In connection with the restructuring,
TranSwitch expects to incur pre-tax restructuring charges of approximately
$500,000. The Company expects these charges to be recorded in the
first quarter of 2011.
“We
continue steadfast on our path to reposition the company toward the high growth
markets of video and voice-over-IP which represent more than a billion dollar
addressable market,” said Dr. Ali Khatibzadeh, President and Chief Executive
Officer of TranSwitch Corporation. “We are on track to introduce the
first of our new HDMI and DisplayPort video interconnect products by the second
quarter of 2011. These products leverage our differentiators in
high-speed video interconnect technology and are expected to create an important
new growth engine for the company.”
"In terms
of our financial performance, revenue and non-GAAP operating income came in-line
within the range of guidance provided in October while we exceeded our gross
margin target,” continued Dr. Khatibzadeh. “While we continue to
operate in a slow telecommunications infrastructure market due to inventory
correction in the near term, we anticipate demand recovery as we move beyond the
current quarter.”
Additional
details on TranSwitch’s fourth quarter 2010 financial results will be discussed
during a conference call regarding this announcement today at 5:30 pm Eastern
time. To listen to the live call, investors can dial 719-325-4760 and reference
confirmation code: 6601266. The call will be recorded and a replay will be
available two hours after the conclusion of the live broadcast through February
17, 2011. To access the replay, dial 719-457-0820 and enter
confirmation code: 6601266. Investors can also access an audio
webcast which will be broadcast through Vcall’s Investor Calendar at www.investorcalendar.com
or the Company’s website at www.transwitch.com. This audio webcast will also be
available on a replay basis for 10 business days.
About
TranSwitch Corporation
TranSwitch
Corporation designs, develops and markets innovative semiconductors that provide
core functionality and complete solutions for voice, data and video
communications network equipment. As a leading supplier to telecom, datacom,
cable television and wireless markets, TranSwitch customers include the major
OEMs that serve the worldwide public network, the Internet, and corporate Wide
Area Networks (WANs). TranSwitch devices are inherently flexible, with many
incorporating embedded programmable microcontrollers to rapidly meet customers’
new requirements or evolving network standards by modifying a function via
software instruction. TranSwitch implements global communications standards in
its VLSI solutions and is committed to providing high-quality products and
services. TranSwitch, Shelton, CT, is an ISO 9001:2008 registered company. For
more information, visit www.transwitch.com.
Forward-looking
statements in this release, including statements regarding management's
expectations for future financial results and the markets for TranSwitch's
products, are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that these
forward-looking statements regarding TranSwitch, its operations and its
financial results, involve risks and uncertainties that could cause actual
results to differ materially from those contained in the forward-looking
statements, including without limitation the risks associated with acquiring new
businesses; the risk of downturns in economic conditions generally and in the
telecommunications and data communications markets and the semiconductor
industry specifically; risks in product development and market acceptance of and
demand for TranSwitch's products and products developed by TranSwitch's
customers; risks relating to TranSwitch's indebtedness; risks of failing to
attract and retain key managerial and technical personnel; risks associated with
foreign sales and high customer concentration; risks associated with competition
and competitive pricing pressures; risks associated with investing in new
businesses; risks of dependence on third-party VLSI fabrication facilities;
risks related to intellectual property rights and litigation; risks in
technology development and commercialization; and other risks detailed in
TranSwitch's filings with the Securities and Exchange Commission.
TranSwitch
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any such statements to reflect any change in
expectations or any change in events, conditions or circumstances on which any
such statement is based.
TranSwitch
is a registered trademark of TranSwitch Corporation.
Reconciliation
of Non-GAAP Financial Measures to Comparable U.S. GAAP Measures
(Unaudited)
Pursuant
to the requirements of Regulation G, the Company has provided a reconciliation
of each non-GAAP financial measure used in this earnings release and related
conference call or webcast to the most directly comparable financial measure
prepared in accordance with accounting principles generally accepted in the
United States (“GAAP”). The reconciliation for historic non-GAAP measures is
provided herein on a quantitative basis and for non-GAAP measures that are
forward-looking is provided herein on a qualitative basis.
The
non-GAAP measures used in this earnings release and related conference call
differ from GAAP in that they exclude expenses related to stock-based
compensation, amortization of intangible assets, the effects of special charges
such as asset impairments, restructuring charges and benefits and gain on
extinguishment of debt. The Company’s basis for these adjustments is described
below. Management uses these non-GAAP measures for internal reporting and
forecasting purposes. The Company has provided these non-GAAP financial measures
in addition to GAAP financial results because it believes that these non-GAAP
financial measures provide useful information to certain investors and financial
analysts for comparison across accounting periods not influenced by certain
non-cash items that are not used by management when evaluating the Company’s
historical and prospective financial performance.
Management
uses these non-GAAP financial measures when evaluating the Company’s operating
performance and believes that such measures are useful to investors and
financial analysts in assessing the Company’s operating performance due to the
following factors:
|
·
|
The
Company believes that the presentation of non-GAAP measures that adjust
for the impact of stock-based compensation expenses, amortization of
intangible assets, the effects of special charges such as asset
impairments and restructuring charges and benefits and gain on
extinguishment of debt provides investors and financial analysts with a
consistent basis for comparison across accounting periods and, therefore,
are useful to investors and financial analysts in helping them to better
understand the Company’s operating results and underlying operational
trends.
|
We do not
provide forward-looking GAAP measures or a reconciliation of the forward-looking
non-GAAP measures to GAAP measures because of our inability to project special
charges, asset impairments, employee separation costs and stock-based
compensation related expenses.
The
non-GAAP financial measures we provide have certain limitations because they do
not reflect all of the costs associated with the operation of our business as
determined in accordance with GAAP. The non-GAAP measures are in addition to,
and not a substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP and may be different from non-GAAP measures
used by other companies. We endeavor to compensate for the limitations of these
non-GAAP measures by providing GAAP financial statements, descriptions of the
reconciling items and a reconciliation of the non-GAAP measures to the most
directly comparable GAAP measures so that investors can appropriately
incorporate the non-GAAP measures and their limitations into their analyses.
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.
For
more information contact:
Robert A.
Bosi
Chief
Financial Officer
Phone:
203.929.8810 ext. 2465
Ted
Chung
Vice
President Business Development
Phone:
203.929.8810 ext. 2004
TranSwitch
Corporation
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in
thousands, except for per share amounts)
|
Three
Months Ended
|
Twelve
Months Ended
|
|||||||||||||||||||
|
Dec.
31,
2010 |
Sept.
30,
2010 |
Dec.
31,
2009 |
Dec.
31,
2010 |
Dec.
31,
2009 |
||||||||||||||||
|
Net
revenues:
|
||||||||||||||||||||
|
Product
revenues
|
$ | 6,865 | $ | 11,017 | $ | 10,656 | $ | 41,703 | $ | 50,709 | ||||||||||
|
Service
revenues
|
3,229 | 1,828 | 1,488 | 8,119 | 5,398 | |||||||||||||||
|
Total
net revenues
|
10,094 | 12,845 | 12,144 | 49,822 | 56,107 | |||||||||||||||
|
Cost
of revenues:
|
||||||||||||||||||||
|
Cost
of product revenues
|
2,492 | 4,941 | 4,680 | 17,992 | 21,393 | |||||||||||||||
|
Provision
for excess and obsolete inventories
|
116 | 96 | 228 | 773 | 678 | |||||||||||||||
|
Cost
of service revenues
|
1,057 | 673 | 745 | 3,259 | 2,552 | |||||||||||||||
|
Total
cost of revenues
|
3,665 | 5,710 | 5,653 | 22,024 | 24,623 | |||||||||||||||
|
Gross
profit
|
6,429 | 7,135 | 6,491 | 27,798 | 31,484 | |||||||||||||||
|
Operating
expenses:
|
||||||||||||||||||||
|
Research
and development
|
4,572 | 3,714 | 4,848 | 15,994 | 19,132 | |||||||||||||||
|
Marketing
and sales
|
2,114 | 1,938 | 2,297 | 7,784 | 10,413 | |||||||||||||||
|
General
and administrative
|
1,768 | 1,881 | 2,266 | 7,479 | 8,038 | |||||||||||||||
|
Restructuring
(benefit) charge and asset impairments
|
— | (4 | ) | (184 | ) | 398 | (6,257 | ) | ||||||||||||
|
Impairment
of goodwill
|
— | — | 10,075 | — | 10,075 | |||||||||||||||
|
Reversal
of accrued royalties
|
(418 | ) | — | (197 | ) | (418 | ) | (197 | ) | |||||||||||
|
Total
operating expenses
|
8,036 | 7,529 | 19,105 | 31,237 | 41,204 | |||||||||||||||
|
Operating
loss (Note 1)
|
(1,607 | ) | (394 | ) | (12,614 | ) | (3,439 | ) | (9,720 | ) | ||||||||||
|
Other
income (expense):
|
||||||||||||||||||||
|
Impairment
of investments in non-publicly traded companies
|
— | — | — | — | (31 | ) | ||||||||||||||
|
Other
income (expense)
|
325 | (869 | ) | (68 | ) | 426 | (750 | ) | ||||||||||||
|
Interest
income (expense):
|
||||||||||||||||||||
|
Interest
income
|
30 | 17 | 15 | 84 | 122 | |||||||||||||||
|
Interest
expense
|
(157 | ) | (173 | ) | (180 | ) | (704 | ) | (787 | ) | ||||||||||
|
Interest
expense, net
|
(127 | ) | (156 | ) | (165 | ) | (620 | ) | (665 | ) | ||||||||||
|
Total
other income (expense), net
|
198 | (1,025 | ) | (233 | ) | (194 | ) | (1,446 | ) | |||||||||||
|
Loss
before income taxes
|
(1,409 | ) | (1,419 | ) | (12,847 | ) | (3,633 | ) | (11,166 | ) | ||||||||||
|
Income
tax expense (benefit)
|
419 | 392 | (117 | ) | 976 | 365 | ||||||||||||||
|
Net
loss
|
$ | (1,828 | ) | $ | (1,811 | ) | $ | (12,730 | ) | $ | (4,609 | ) | $ | (11,531 | ) | |||||
|
Basic
and diluted net loss per common share:
|
$ | (0.08 | ) | $ | (0.08 | ) | $ | (0.64 | ) | $ | (0.21 | ) | $ | (0.58 | ) | |||||
|
Basic
and diluted average common shares outstanding
|
23,428 | 23,326 | 20,009 | 22,162 | 19,938 | |||||||||||||||
|
Note
1: Stock-based compensation expense included in cost of revenues and
operating expenses is as follows:
|
||||||||||||||||||||
|
Cost
of revenues
|
$ | 39 | $ | 34 | $ | 14 | $ | 111 | $ | 46 | ||||||||||
|
Research
and development
|
270 | 195 | 213 | 877 | 732 | |||||||||||||||
|
Marketing
and sales
|
147 | 101 | 29 | 384 | 135 | |||||||||||||||
|
General
and administrative
|
308 | 251 | 143 | 986 | 392 | |||||||||||||||
|
Total
|
$ | 764 | $ | 581 | $ | 399 | $ | 2,358 | $ | 1,305 | ||||||||||
TranSwitch
Corporation
CONDENSED
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in
thousands)
|
December
31,
2010
|
December 31,
2009
|
|||||||
|
ASSETS
|
|
|
||||||
|
Current
assets:
|
|
|
||||||
|
Cash,
cash equivalents, restricted cash and short-term
investments
|
|
$
|
7,835
|
|
$
|
5,075
|
||
|
Accounts
receivable, net
|
|
7,907
|
|
11,667
|
||||
|
Inventories
|
|
2,555
|
|
4,183
|
||||
|
Prepaid
expenses and other current assets
|
|
2,089
|
|
2,299
|
||||
|
Total
current assets
|
|
20,386
|
|
23,224
|
||||
|
Property
and equipment, net
|
|
1,239
|
|
1,268
|
||||
|
Goodwill
|
14,144
|
14,144
|
||||||
|
Other
assets
|
|
10,049
|
|
14,320
|
||||
|
Total
assets
|
|
$
|
45,818
|
|
$
|
52,956
|
||
|
|
|
|||||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
||||||
|
Current
liabilities:
|
|
|
||||||
|
Accounts
payable, accrued expenses and other current liabilities
|
|
$
|
14,120
|
|
$
|
19,151
|
||
|
Restructuring
liabilities, current portion
|
|
891
|
|
1,775
|
||||
|
5.45%
Convertible Notes, current portion
|
|
3,758
|
|
5,004
|
||||
|
|
|
|||||||
|
Total
current liabilities
|
18,769
|
|
25,930
|
|||||
|
|
||||||||
|
Restructuring
liabilities
|
|
10,317
|
|
10,593
|
||||
|
5.45%
Convertible Notes
|
|
—
|
|
3,758
|
||||
|
|
|
|||||||
|
Total
liabilities
|
|
29,086
|
|
40,281
|
||||
|
|
|
|||||||
|
Total
stockholders’ equity
|
|
16,732
|
|
12,675
|
||||
|
|
|
|||||||
|
Total
liabilities and stockholders’ equity
|
|
$
|
45,818
|
|
$
|
52,956
|
||
|
|
|
TRANSWITCH
CORPORATION
Supplemental
Reconciliation of GAAP Results to Non-GAAP
(Unaudited)
(In
thousands, except per share data)
|
Three
Months Ended
|
Twelve
Months Ended
|
|||||||||||||||||||
|
December
31,
|
September
30,
|
December
31,
|
December
31,
|
December
31,
|
||||||||||||||||
|
2010
|
2010
|
2009
|
2010
|
2009
|
||||||||||||||||
|
GAAP
gross profit
|
$ | 6,429 | $ | 7,135 | $ | 6,491 | $ | 27,798 | $ | 31,484 | ||||||||||
|
Add:
|
||||||||||||||||||||
|
Inventory
write-up acquired
|
- | - | - | - | 269 | |||||||||||||||
|
Stock-based
compensation
|
39 | 34 | 14 | 111 | 46 | |||||||||||||||
|
Non-GAAP
gross profit
|
$ | 6,468 | $ | 7,169 | $ | 6,505 | $ | 27,909 | $ | 31,799 | ||||||||||
|
GAAP
gross margin
|
63.7 | % | 55.5 | % | 53.5 | % | 55.8 | % | 56.1 | % | ||||||||||
|
Inventory
write-up acquired
|
0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.5 | % | ||||||||||
|
Stock-based
compensation
|
0.4 | % | 0.3 | % | 0.1 | % | 0.2 | % | 0.1 | % | ||||||||||
|
Non-GAAP
gross margin
|
64.1 | % | 55.8 | % | 53.6 | % | 56.0 | % | 56.7 | % | ||||||||||
|
GAAP
research and development expenses
|
$ | 4,572 | $ | 3,714 | $ | 4,848 | $ | 15,994 | $ | 19,132 | ||||||||||
|
Less:
|
||||||||||||||||||||
|
Amortization
of purchase accounting intangibles
|
114 | 113 | 114 | 454 | 460 | |||||||||||||||
|
Stock-based
compensation
|
270 | 195 | 213 | 877 | 732 | |||||||||||||||
|
Non-GAAP
research and development expenses
|
$ | 4,188 | $ | 3,406 | $ | 4,521 | $ | 14,663 | $ | 17,940 | ||||||||||
|
GAAP
selling, general, and administrative expenses
|
$ | 3,882 | $ | 3,819 | $ | 4,563 | $ | 15,263 | $ | 18,451 | ||||||||||
|
Less:
|
||||||||||||||||||||
|
Amortization
of purchase accounting intangibles
|
282 | 283 | 283 | 1,131 | 1,156 | |||||||||||||||
|
Stock-based
compensation
|
455 | 352 | 172 | 1,370 | 527 | |||||||||||||||
|
Non-GAAP
selling, general, and administrative expenses
|
$ | 3,145 | $ | 3,184 | $ | 4,108 | $ | 12,762 | $ | 16,768 | ||||||||||
|
GAAP
operating expenses
|
$ | 8,036 | $ | 7,529 | $ | 19,105 | $ | 31,237 | $ | 41,204 | ||||||||||
|
Less:
|
||||||||||||||||||||
|
Amortization
of purchase accounting intangibles
|
396 | 396 | 397 | 1,585 | 1,616 | |||||||||||||||
|
Stock-based
compensation
|
725 | 547 | 385 | 2,247 | 1,259 | |||||||||||||||
|
Reversal
of accrued royalties
|
(418 | ) | - | (197 | ) | (418 | ) | (197 | ) | |||||||||||
|
Impairment
of goodwill
|
- | - | 10,075 | - | 10,075 | |||||||||||||||
|
Restructuring
(benefits) charges
|
- | (4 | ) | (184 | ) | 398 | (6,257 | ) | ||||||||||||
|
Non-GAAP
operating expenses
|
$ | 7,333 | $ | 6,590 | $ | 8,629 | $ | 27,425 | $ | 34,708 | ||||||||||
|
Non-GAAP
operating (loss) income
|
$ | (865 | ) | $ | 579 | $ | (2,124 | ) | $ | 484 | $ | (2,909 | ) | |||||||
|
GAAP
net loss
|
$ | (1,828 | ) | $ | (1,811 | ) | $ | (12,730 | ) | $ | (4,609 | ) | $ | (11,531 | ) | |||||
|
Add:
|
||||||||||||||||||||
|
Amortization
of purchase accounting intangibles
|
396 | 396 | 397 | 1,585 | 1,616 | |||||||||||||||
|
Stock-based
compensation
|
764 | 581 | 399 | 2,358 | 1,305 | |||||||||||||||
|
Inventory
write-up acquired
|
- | - | - | - | 269 | |||||||||||||||
|
Reversal
of accrued royalties
|
(418 | ) | - | (197 | ) | (418 | ) | (197 | ) | |||||||||||
|
Impairment
of goodwill
|
- | - | 10,075 | - | 10,075 | |||||||||||||||
|
Restructuring
charges (benefits)
|
- | (4 | ) | (184 | ) | 398 | (6,257 | ) | ||||||||||||
|
Non-GAAP
net loss
|
$ | (1,086 | ) | $ | (838 | ) | $ | (2,240 | ) | $ | (686 | ) | $ | (4,720 | ) | |||||
|
Non-GAAP
basic net loss per share
|
$ | (0.05 | ) | $ | (0.04 | ) | $ | (0.11 | ) | $ | (0.03 | ) | $ | (0.24 | ) | |||||
|
Basic
shares used to calculate non-GAAP net loss per share
|
23,428 | 23,326 | 20,009 | 22,162 | 19,938 | |||||||||||||||