Vitesse Reports Third Quarter Fiscal Year 2014 Results

In deriving non-GAAP operating expenses from GAAP operating expenses, we exclude stock-based compensation charges and amortization of intangible assets. In deriving non-GAAP income (loss) from operations from GAAP income (loss) from operations, we exclude stock-based compensation charges and amortization of intangible assets. In deriving non-GAAP net income (loss) from GAAP net income (loss), we further exclude loss on extinguishment of debt and gain on the embedded derivative. Stock-based compensation charges, amortization of intangible assets, loss on extinguishment of debt, and gain on the embedded derivative represent charges that recur in amounts unrelated to the Company’s operations.

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. Non-GAAP operating expenses, non-GAAP income (loss) from operations and non-GAAP net income (loss) are in addition to, and are not a substitute for or superior to, operating expenses, income (loss) from operations and net income (loss), which are prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. A detailed reconciliation of the non-GAAP measures to the most directly comparable GAAP measure is set forth below. Investors are encouraged to review these reconciliations to appropriately incorporate the non-GAAP measures and the limitations of these measures into their analyses. For complete information on stock-based compensation, amortization of intangible assets, loss on extinguishment of debt, and the change in the fair value of our embedded derivatives, please see our Form 10-Q for the quarterly period ended June 30, 2014 and Form 10-K for the year ended September 30, 2013.

   
VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
June 30, 2014 September 30, 2013
(in thousands, except par value)
ASSETS
Current assets:
Cash $ 70,812 $ 68,863
Accounts receivable 10,101 9,807
Inventory, net 11,237 10,692
Restricted cash 793 101
Prepaid expenses and other current assets 2,175   1,796  
Total current assets 95,118 91,259
Property, plant and equipment, net 2,944 3,107
Other intangible assets, net 1,569 1,170
Other assets 3,548   3,425  
$ 103,179   $ 98,961  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 7,693 $ 7,436
Accrued expenses and other current liabilities 12,060 12,245
Current portion of debt, net 32,375
Deferred revenue 3,030   2,215  
Total current liabilities 55,158 21,896
Other long-term liabilities 470 407
Long-term debt, net 16,328 16,366
Convertible subordinated debt, net   44,384  
Total liabilities 71,956 83,053
Stockholders’ equity:
Preferred stock, $0.01 par value: 10,000 shares authorized; no shares issued or outstanding
Common stock, $0.01 par value: 250,000 shares authorized; 67,342 and 57,545 shares outstanding at June 30, 2014 and September 30, 2013, respectively 673 575
Additional paid-in-capital 1,922,468 1,891,661
Accumulated deficit (1,891,918 ) (1,876,328 )
Total stockholders’ equity 31,223   15,908  
$ 103,179   $ 98,961  
 
   

VITESSE SEMICONDUCTOR CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three months ended June 30, Nine Months Ended June 30,
2014     2013   2014     2013  
(in thousands, except per share data)
Net revenues:
Product revenues $ 26,012 $ 26,285 $ 75,744 $ 74,879
Intellectual property revenues 1,139   133   4,082   2,019  
Net revenues 27,151   26,418   79,826   76,898  
Costs and expenses:
Cost of product revenues 12,254 11,666 33,909 34,010
Engineering, research and development 10,006 11,706 31,581 31,987
Selling, general and administrative 7,330 7,257 23,189 22,617
Amortization of intangible assets 88   80   267   266  
Costs and expenses 29,678   30,709   88,946   88,880  
Loss from operations (2,527 ) (4,291 ) (9,120 ) (11,982 )
Other expense (income):
Interest expense, net 1,510 1,983 4,706 5,919
Gain on compound embedded derivative (803 )
Loss on extinguishment of debt 1,594
Other expense, net 18   31   111   5  
Other expense, net 1,528   2,014   6,411   5,121  
Loss before income tax expense (benefit) (4,055 ) (6,305 ) (15,531 ) (17,103 )
Income tax expense (benefit) 333   129   59   (790 )
Net loss $ (4,388 ) $ (6,434 ) $ (15,590 ) $ (16,313 )
 
Net loss per common share - basic and diluted $ (0.07 ) $ (0.17 ) $ (0.27 ) $ (0.47 )
Weighted average common shares outstanding - basic and diluted 59,965 38,630 58,631 34,601
 
 
VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
 
Three Months Ended June 30, Nine Months Ended June 30,
2014     2013   2014     2013  
(in thousands, except per share data)
UNAUDITED RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS
 
GAAP net loss $ (4,388 ) $ (6,434 ) $ (15,590 ) $ (16,313 )
 
Adjustments:
Stock-based compensation charges 1,586 1,156 4,466 3,305
Amortization of intangible assets 88 80 267 266
Gain on compound embedded derivative (803 )
Loss on extinguishment of debt     1,594    
Total GAAP to non-GAAP adjustments 1,674   1,236   6,327   2,768  
 
Non-GAAP net loss $ (2,714 ) $ (5,198 ) $ (9,263 ) $ (13,545 )
 
Net loss per common share - basic and diluted:
GAAP net loss per common share $ (0.07 ) $ (0.17 ) $ (0.27 ) $ (0.47 )
Adjustments 0.03     0.04   0.11   0.08  
Non-GAAP net loss per common share $ (0.04 ) $ (0.13 ) $ (0.16 ) $ (0.39 )
 
UNAUDITED RECONCILIATION OF GAAP LOSS FROM OPERATIONS TO NON-GAAP LOSS FROM OPERATIONS
 
GAAP loss from operations $ (2,527 ) $ (4,291 ) $ (9,120 ) $ (11,982 )
Adjustments:
Stock-based compensation charges 1,586 1,156 4,466 3,305
Amortization of intangible assets 88   80   267   266  
Total GAAP to non-GAAP adjustments 1,674   1,236   4,733   3,571  
 
Non-GAAP loss from operations $ (853 ) $ (3,055 ) $ (4,387 ) $ (8,411 )
 
UNAUDITED RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES
 
GAAP operating expenses:
Engineering, research and development $ 10,006 $ 11,706 $ 31,581 $ 31,987
Selling, general and administrative 7,330 7,257 23,189 22,617
Amortization of intangible assets 88   80   267   266  
Total GAAP operating expenses 17,424   19,043   55,037   54,870  
Adjustments:
Stock-based compensation charges 1,376 995 3,847 2,846
Amortization of intangible assets 88   80   267   266  
Total GAAP to non-GAAP adjustments 1,464   1,075   4,114   3,112  
 
Non-GAAP operating expenses $ 15,960   $ 17,968   $ 50,923   $ 51,758  
 



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