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| 8-K - FORM 8-K - TRANSWITCH CORP /DE | v301145_8k.htm |
News Release
TranSwitch Corporation Announces
Fourth Quarter 2011 Financial Results
SHELTON, CT – February 3, 2012 – 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, 2011.
Net revenues for the fourth quarter of 2011 were approximately $6.3 million, as compared to net revenues of $6.7 million for the third quarter of 2011 and $10.1 million for the fourth quarter of 2010. Net loss for the fourth quarter of 2011 was ($11.9) million, or ($0.39) per basic and diluted common share, as compared to a net loss of ($4.8) million, or ($0.16) per basic and diluted common share for the third quarter of 2011, and a net loss of ($1.8) million, or ($0.08) per basic and diluted common share for the fourth quarter of 2010. The Company's fourth quarter results include non-cash goodwill and intangible impairment charges aggregating $14.3 million related to an acquisition made by the Company in 2008 partially offset by a $6.9 million reversal of accrued restructuring liabilities due to an amendment to a sublease for approximately 93,000 square feet of excess office space. This amendment extends the sublease through May 2017.
The GAAP gross margin for the fourth quarter was 58%. This is compared to the Company's GAAP gross margin of 65% for the third quarter of 2011, and 64% for the fourth quarter of 2010.
Total non-GAAP operating expenses for the fourth quarter of 2011 were $7.7 million, as compared to $7.4 million in the third quarter of 2011 and $7.3 million in the fourth quarter of 2010. Non-GAAP operating expenses for the fourth quarter of 2011 exclude $0.1 million in amortization of purchase price intangibles, $0.5 million in stock-based compensation, $14.3 million in goodwill and intangible impairments, and benefits of $0.3 million and $6.9 million from the reversal of accrued royalties and restructuring liabilities, respectively. Total GAAP operating expenses for the fourth quarter of 2011 were $15.4 million, as compared to $8.8 million in the third quarter of 2011 and $8.0 million in the fourth quarter of 2010.
Non-GAAP operating loss for the fourth quarter of 2011 was ($4.1) million, compared to a non-GAAP operating loss of ($3.1) million for the third quarter of 2011 and a non-GAAP operating loss of ($0.9) million for the fourth quarter of 2010. On a GAAP basis, the operating loss for the fourth quarter of 2011 was ($11.8) million, compared to an operating loss of ($4.5) million for the third quarter of 2011 and an operating loss of ($1.6) million for the fourth quarter of 2010.
Non-GAAP net loss for the fourth quarter of 2011 was ($4.2) million, or ($0.14) per share, compared with a non-GAAP net loss of ($3.3) million, or ($0.11) per share, for the third quarter of 2011 and a non-GAAP net loss of ($1.1) million, or ($0.05) per share, for the fourth quarter of 2010.
Further information about non-GAAP measures is provided below and a reconciliation of the non-GAAP measures to the comparable GAAP results is provided after the financial statements attached to this release.
“We continue to make steady progress toward our strategic goal of developing a new growth engine in the video connectivity market,” stated Dr. M. Ali Khatibzadeh, President and CEO of TranSwitch Corporation. “During the quarter, we announced our first customer for HDplay™ products and recently introduced HDwire™ as the world’s fastest video interface solution for flat-screen panels. HDwire™ delivers record throughput while significantly reducing the cost and complexity of video interconnects inside TV’s and computer monitors.”
Additional details on TranSwitch’s fourth quarter 2011 financial results will be discussed during a conference call regarding this announcement today at 8:30 am Eastern time. To listen to the live call, investors can dial 719-325-4750 and reference confirmation code: 2399041. The call will be recorded and a replay will be available two hours after the conclusion of the live broadcast through February 17, 2012. To access the replay, dial 719-457-0820 and enter confirmation code: 2399041. 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 (NASDAQ: TXCC) designs, develops and supplies innovative semiconductor and intellectual property (IP) solutions that provide core functionality for voice, data and video communications equipment for network, enterprise and customer premises applications. Founded in 1988, TranSwitch is headquartered in Shelton,CT. The Company provides integrated multi-core network processor System-on-a-Chip (SoC) solutions and software solutions for fixed, 3G and 4G Mobile, VoIP and Multimedia Infrastructures. For the customer premises market the Company offers a family of communications processors that provide best-in-class performance for a range of applications and also provide interoperable connectivity solutions that enable the reliable distribution and presentation of high-definition (HD) content for consumer electronics and personal computer markets. Our intellectual property (IP) products are compliant with global industry standards such as HDMI and DisplayPort and also feature our proprietary HDP™ and AnyCable™ technologies. For more information, please 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 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 associated with foreign sales and high customer concentration; risks associated with competition and competitive pricing pressures; risks in technology development and commercialization; risks of failing to attract and retain key managerial and technical personnel; risks relating to TranSwitch’s available cash; risks associated with acquiring new businesses; risks of dependence on third-party VLSI fabrication facilities; risks related to intellectual property rights and litigation; 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 from the reversal of accrued royalties. 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 as 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 from the reversal of accrued royalties 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
Vice President and Chief Financial Officer
Phone: 203.929.8810 ext. 2465
Mary Lombardo
Investor Relations
Phone: 203.929.8810 ext. 2254
TranSwitch Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except for per share amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| Dec 31, 2011 | Sep. 30, 2011 | Dec 31, 2010 | Dec 31, 2011 | Dec 31, 2010 | ||||||||||||||||
| Net revenues: | ||||||||||||||||||||
| Product revenues | $ | 5,018 | $ | 4,855 | $ | 6,865 | $ | 19,700 | $ | 41,703 | ||||||||||
| Service revenues | 1,292 | 1,810 | 3,229 | 8,555 | 8,119 | |||||||||||||||
| Total net revenues | 6,310 | 6,665 | 10,094 | 28,255 | 49,822 | |||||||||||||||
| Cost of revenues: | ||||||||||||||||||||
| Cost of product revenues | 2,131 | 1,425 | 2,492 | 6,641 | 17,992 | |||||||||||||||
| Provision for excess and obsolete inventories | 42 | 26 | 116 | 228 | 773 | |||||||||||||||
| Cost of service revenues | 499 | 917 | 1,057 | 3,454 | 3,259 | |||||||||||||||
| Total cost of revenues | 2,672 | 2,368 | 3,665 | 10,323 | 22,024 | |||||||||||||||
| Gross profit | 3,638 | 4,297 | 6,429 | 17,932 | 27,798 | |||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Research and development | 5,158 | 4,672 | 4,572 | 18,885 | 15,994 | |||||||||||||||
| Marketing and sales | 1,499 | 1,772 | 2,114 | 7,335 | 7,784 | |||||||||||||||
| General and administrative | 1,758 | 1,925 | 1,768 | 7,457 | 7,479 | |||||||||||||||
| Restructuring charges | (6,949 | ) | 924 | — | (5,558 | ) | 398 | |||||||||||||
| Impairment of goodwill and intangibles | 14,312 | — | — | 14,312 | — | |||||||||||||||
| Reversal of accrued royalties | (333 | ) | (455 | ) | (418 | ) | (2,363 | ) | (418 | ) | ||||||||||
| Total operating expenses | 15,445 | 8,838 | 8,036 | 40,068 | 31,237 | |||||||||||||||
| Operating loss (Note 1) | (11,807 | ) | (4,541 | ) | (1,607 | ) | (22,136 | ) | (3,439 | ) | ||||||||||
| Other (expense) income: | ||||||||||||||||||||
| Other (expense) income | 8 | 23 | 325 | 18 | 426 | |||||||||||||||
| Interest income (expense): | ||||||||||||||||||||
| Interest income | 25 | 8 | 30 | 125 | 84 | |||||||||||||||
| Interest expense | (6 | ) | (44 | ) | (157 | ) | (243 | ) | (704 | ) | ||||||||||
| Interest expense, net | 19 | (36 | ) | (127 | ) | (118 | ) | (620 | ) | |||||||||||
| Total other expense, net | 27 | (13 | ) | 198 | (100 | ) | (194 | ) | ||||||||||||
| Loss before income taxes | (11,780 | ) | (4,554 | ) | (1,409 | ) | (22,236 | ) | (3,633 | ) | ||||||||||
| Income tax expense | 157 | 233 | 419 | 636 | 976 | |||||||||||||||
| Net loss | $ | (11,937 | ) | $ | (4,787 | ) | $ | (1,828 | ) | $ | (22,872 | ) | $ | (4,609 | ) | |||||
| Net loss per common share – basic and diluted | $ | (0.39 | ) | $ | (0.16 | ) | $ | (0.08 | ) | $ | (0.82 | ) | $ | (0.21 | ) | |||||
| Weighted average common shares outstanding – basic and diluted | 30,555 | 30,475 | 23,428 | 27,911 | 22,162 | |||||||||||||||
| Note 1: Stock-based compensation expense included in cost of revenues and operating expenses is as follows: | ||||||||||||||||||||
| Cost of revenues | $ | 6 | $ | 11 | $ | 39 | $ | 54 | $ | 111 | ||||||||||
| Research and development | 156 | 195 | 270 | 780 | 877 | |||||||||||||||
| Marketing and sales | 107 | 111 | 147 | 468 | 384 | |||||||||||||||
| General and administrative | 269 | 286 | 308 | 1,172 | 986 | |||||||||||||||
| Total | $ | 538 | $ | 603 | $ | 764 | $ | 2,474 | $ | 2,358 | ||||||||||
TranSwitch Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
| December 31, 2011 | December 31, 2010 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash, cash equivalents, restricted cash and short-term investments | $ | 7,554 | $ | 7,835 | ||||
| Accounts receivable, net | 6,375 | 7,907 | ||||||
| Inventories | 1,988 | 2,555 | ||||||
| Prepaid expenses and other current assets | 1,876 | 2,089 | ||||||
| Total current assets | 17,793 | 20,386 | ||||||
| Property and equipment, net | 1,355 | 1,239 | ||||||
| Goodwill | 5,271 | 14,144 | ||||||
| Other intangible assets, net | 1,461 | 8,254 | ||||||
| Other assets | 1,738 | 1,795 | ||||||
| Total assets | $ | 27,618 | $ | 45,818 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 10,932 | $ | 14,120 | ||||
| Current portion of restructuring liabilities | 1,995 | 891 | ||||||
| Current portion of 5.45% Convertible Notes | — | 3,758 | ||||||
| | ||||||||
| Total current liabilities | 12,927 | 18,769 | ||||||
| Restructuring liabilities | 2,485 | 10,317 | ||||||
| Total liabilities | 15,412 | 29,086 | ||||||
| Total stockholders’ equity | 12,206 | 16,732 | ||||||
| Total liabilities and stockholders’ equity | $ | 27,618 | $ | 45,818 | ||||
TRANSWITCH CORPORATION
Supplemental Reconciliation of GAAP Results to Non-GAAP
(Unaudited)
(In thousands, except per share data)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| Dec 31, | Sep 30, | Dec 31, | Dec 31, | Dec 31, | ||||||||||||||||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
| GAAP gross profit | 3,638 | $ | 4,297 | $ | 6,429 | $ | 17,932 | $ | 27,798 | |||||||||||
| Add: | ||||||||||||||||||||
| Stock-based compensation | 6 | 11 | 39 | 54 | 111 | |||||||||||||||
| Non-GAAP gross profit | 3,644 | $ | 4,308 | $ | 6,468 | $ | 17,986 | $ | 27,909 | |||||||||||
| GAAP gross margin | 57.7 | % | 64.5 | % | 63.7 | % | 63.5 | % | 55.8 | % | ||||||||||
| Stock-based compensation | 0.1 | % | 0.2 | % | 0.4 | % | 0.2 | % | 0.2 | % | ||||||||||
| Non-GAAP gross margin | 57.7 | % | 64.6 | % | 64.1 | % | 63.7 | % | 56.0 | % | ||||||||||
| GAAP research and development expenses | 5,158 | $ | 4,672 | $ | 4,572 | $ | 18,885 | $ | 15,994 | |||||||||||
| Less: | ||||||||||||||||||||
| Amortization of purchase accounting intangibles | 39 | 114 | 114 | 379 | 454 | |||||||||||||||
| Stock-based compensation | 156 | 195 | 270 | 780 | 877 | |||||||||||||||
| Non-GAAP research and development expenses | 4,963 | $ | 4,363 | $ | 4,188 | $ | 17,726 | $ | 14,663 | |||||||||||
| GAAP selling, general, and administrative expenses | 3,257 | $ | 3,697 | $ | 3,882 | $ | 14,792 | $ | 15,263 | |||||||||||
| Less: | ||||||||||||||||||||
| Amortization of purchase accounting intangibles | 127 | 283 | 282 | 976 | 1,131 | |||||||||||||||
| Stock-based compensation | 376 | 397 | 455 | 1,640 | 1,370 | |||||||||||||||
| Non-GAAP selling, general, and administrative expenses | 2,754 | $ | 3,017 | $ | 3,145 | $ | 12,176 | $ | 12,762 | |||||||||||
| GAAP operating expenses | 15,445 | $ | 8,838 | $ | 8,036 | $ | 40,068 | $ | 31,237 | |||||||||||
| Less: | ||||||||||||||||||||
| Amortization of purchase accounting intangibles | 166 | 397 | 396 | 1,355 | 1,585 | |||||||||||||||
| Stock-based compensation | 532 | 592 | 725 | 2,420 | 2,247 | |||||||||||||||
| Reversal of accrued royalties | (333 | ) | (455 | ) | (418 | ) | (2,363 | ) | (418 | ) | ||||||||||
| Impairment of goodwill and intangibles | 14,312 | — | — | 14,312 | — | |||||||||||||||
| Restructuring charges | (6,949 | ) | 924 | — | (5,558 | ) | 398 | |||||||||||||
| Non-GAAP operating expenses | 7,717 | $ | 7,380 | $ | 7,333 | $ | 29,902 | $ | 27,425 | |||||||||||
| Non-GAAP operating (loss) income | (4,073 | ) | $ | (3,072 | ) | $ | (865 | ) | $ | (11,916 | ) | $ | 484 | |||||||
| GAAP net loss | (11,937 | ) | $ | (4,787 | ) | $ | (1,828 | ) | $ | (22,872 | ) | $ | (4,609 | ) | ||||||
| Add: | ||||||||||||||||||||
| Amortization of purchase accounting intangibles | 166 | 397 | 396 | 1,355 | 1,585 | |||||||||||||||
| Stock-based compensation | 538 | 603 | 764 | 2,474 | 2,358 | |||||||||||||||
| Reversal of accrued royalties | (333 | ) | (455 | ) | (418 | ) | (2,363 | ) | (418 | ) | ||||||||||
| Impairment of goodwill and intangibles | 14,312 | — | — | 14,312 | — | |||||||||||||||
| Restructuring charges | (6,949 | ) | 924 | — | (5,558 | ) | 398 | |||||||||||||
| Non-GAAP net (loss) income | (4,203 | ) | $ | (3,318 | ) | $ | (1,086 | ) | $ | (12,652 | ) | $ | (686 | ) | ||||||
| Non-GAAP basic net (loss) income per share | (0.14 | ) | $ | (0.11 | ) | $ | (0.05 | ) | $ | (0.45 | ) | $ | (0.03 | ) | ||||||
| Basic shares used to calculate non-GAAP net loss per share | 30,555 | 30,475 | 23,428 | 27,911 | 22,162 | |||||||||||||||