Vitesse Reports Second 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 March 31, 2014 and Form 10-K for the year ended September 30, 2013.

   
VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
March 31, 2014 September 30, 2013
(in thousands, except par value)
ASSETS
Current assets:
Cash $ 48,201 $ 68,863

Accounts receivable

9,921 9,807
Inventory, net 11,347 10,692
Prepaid expenses and other current assets 2,067   1,897  
Total current assets 71,536 91,259
Property, plant and equipment, net 3,308 3,107
Other intangible assets, net 1,502 1,170
Other assets 3,652   3,425  
$ 79,998   $ 98,961  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 7,748 $ 7,436
Accrued expenses and other current liabilities 12,588 12,245
Current portion of debt, net 32,031
Deferred revenue 3,529   2,215  
Total current liabilities 55,896 21,896
Other long-term liabilities 497 407
Long-term debt, net 16,243 16,366
Convertible subordinated debt, net   44,384  
Total liabilities 72,636 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; 58,716 and 57,545 shares outstanding at March 31, 2014 and September 30, 2013, respectively 587 575
Additional paid-in-capital 1,894,305 1,891,661
Accumulated deficit (1,887,530 ) (1,876,328 )
Total stockholders’ equity 7,362   15,908  
$ 79,998   $ 98,961  
 
 
VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three months ended March 31, Six Months Ended March 31,
2014     2013   2014     2013  
(in thousands, except per share data)
Net revenues:
Product revenues $ 24,869 $ 24,689 $ 49,732 $ 48,594
Intellectual property revenues 723   64   2,943   1,886  
Net revenues 25,592   24,753   52,675   50,480  
Costs and expenses:

Cost of product revenues

10,979 11,369 21,655 22,344
Engineering, research and development 10,896 9,777 21,575 20,281
Selling, general and administrative 8,005 7,390 15,859 15,360
Amortization of intangible assets 91   89   179   186  
Costs and expenses 29,971   28,625   59,268   58,171  
Loss from operations (4,379 ) (3,872 ) (6,593 ) (7,691 )
Other expense (income):
Interest expense, net 1,492 1,966 3,196 3,936
Gain on compound embedded derivative (803 )
Loss on extinguishment of debt 1,594
Other expense (income), net 32   5   93   (26 )
Other expense, net 1,524   1,971   4,883   3,107  
Loss before income tax benefit (5,903 ) (5,843 ) (11,476 ) (10,798 )
Income tax benefit (72 ) (996 ) (274 ) (919 )
Net loss $ (5,831 ) $ (4,847 ) $ (11,202 ) $ (9,879 )
 
Net loss per common share - basic and diluted $ (0.10 ) $ (0.13 ) $ (0.19 ) $ (0.30 )
Weighted average common shares outstanding - basic and diluted 58,327 37,215 57,965 32,587
 
 
VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
 
Three Months Ended March 31, Six Months Ended March 31,

 

2014     2013   2014     2013  
(in thousands, except per share data)
UNAUDITED RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS
 
GAAP net loss $ (5,831 ) $ (4,847 ) $ (11,202 ) $ (9,879 )
 
Adjustments:
Stock-based compensation charges 1,615 1,006 2,880

 

2,149

Amortization of intangible assets 91 89 179

 

186

Gain on compound embedded derivative

 

(803

)
Loss on extinguishment of debt     1,594  

 

 
Total GAAP to non-GAAP adjustments 1,706   1,095   4,653  

 

1,532

 
 
Non-GAAP net loss $ (4,125 ) $ (3,752 ) $ (6,549 ) $ (8,347 )
 
Net loss per common share - basic and diluted:
GAAP net loss per common share $ (0.10 ) $ (0.13 ) $ (0.19 ) $ (0.30 )
Adjustments 0.03     0.03   0.08  

 

0.05

 
Non-GAAP net loss per common share $ (0.07 ) $ (0.10 ) $ (0.11 ) $ (0.25 )
 
UNAUDITED RECONCILIATION OF GAAP LOSS FROM OPERATIONS TO NON-GAAP LOSS FROM OPERATIONS
 
GAAP loss from operations $ (4,379 ) $ (3,872 ) $ (6,593 )

$

(7,691

)
Adjustments:
Stock-based compensation charges 1,615 1,006 2,880

 

2,149

Amortization of intangible assets 91   89   179  

 

186

 
Total GAAP to non-GAAP adjustments 1,706   1,095   3,059  

 

2,335

 
 
Non-GAAP loss from operations $ (2,673 ) $ (2,777 ) $ (3,534 ) $ (5,356 )
 
UNAUDITED RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES
 
GAAP operating expenses:
Engineering, research and development $ 10,896 $ 9,777 $ 21,575

$

20,281

Selling, general and administrative 8,005 7,390 15,859

 

15,360

Amortization of intangible assets 91   89   179  

 

186

 
Total GAAP operating expenses 18,992   17,256   37,613  

 

35,827

 
Adjustments:
Stock-based compensation charges 1,390 862 2,471

 

1,851

Amortization of intangible assets 91   89   179  

 

186

 
Total GAAP to non-GAAP adjustments 1,481   951   2,650  

 

2,037

 
 
Non-GAAP operating expenses $ 17,511   $ 16,305   $ 34,963   $ 33,790  



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