Trident Microsystems Reports Financial Results for Fourth Quarter and Fiscal Year 2005

Trident Microsystems Reports Financial Results for Fourth Quarter and Fiscal Year 2005

June Quarter Grew Sequentially by 29% September Guidance Raised to 35-40% Sequential Growth

SUNNYVALE, Calif., July 27 /PRNewswire-FirstCall/ -- Trident Microsystems, Inc. (NASDAQ:TRID) a leading provider of digital TV technology for the consumer digital video marketplace today announced for the fourth fiscal quarter of 2005, ending June 30, 2005, the Company achieved net revenues of $20,886,000, a sequential increase of 29% from the $16,136,000 reported in the March quarter and a 65% year over year increase from the $12,646,000 reported in the quarter ended June 30, 2004. The Company announced net revenue for all of fiscal 2005 of $69,011,000, a year over year increase of 31% from the $52,551,000 reported for fiscal 2004.

A net loss of $6,855,000 was recorded in the fourth quarter ended June 30, 2005, on a generally accepted accounting principles (GAAP) basis, or $0.27 per share on a diluted basis, which included $7,755,000 in amortization of stock based compensation relating to the purchase of the minority interest in our TTI subsidiary, $1,121,000 charged to cost of revenue relating to amortization of intangibles and $366,000 charged to cost of revenue relating to inventory sold from our acquisition of the minority interest in TTI. This compares to net income on a GAAP basis of $989,000 or $0.04 per share on a diluted basis in the June 30, 2004 quarter, which included $214,000 in amortization of stock based compensation relating to TTI options, and $733,000 in gains on the sales of investments.

Pro forma net income in the quarter ended June 30, 2005, was $2,421,000, or $0.09 per share on a diluted basis and excludes the items noted above. This compares to pro forma net income of $470,000 or $0.02 per share on a diluted basis in the fourth quarter of 2004.

For the year ended June 30, 2005 pro forma net income was $5,339,000, or $0.18 per share on a diluted basis which excludes a gain on investments of $331,000 in-process research and development expense of $5,171,000, and other TTI related charges of $9,512,000 in amortization of stock based compensation, $1,155,000 amortization of intangibles and $366,000 charge to cost of revenue. This compares to pro forma net income of $2,570,000 or $0.10 per fully diluted share for the fiscal year ended June 30, 2004, those amounts exclude $ 9,794,000 in gains on the disposition of certain investments and $2,170,000 in taxes related to those gains. A reconciliation between net income on a GAAP basis and pro forma net income/loss is provided in a table following the pro forma consolidated statement of operations.

"The continued successful ramp of our SVP-EX product -- leveraged with the large volume requirements from several top-tier OEM's, continues to fuel our strong growth momentum in the LCDTV market," said Frank Lin, Trident's CEO. "The LCDTV revenue has achieved a 50% sequential growth in the June quarter and Flat Panel television applications in total now contribute 73% of our total revenue. In the seasonally stronger half of the year, we are forecasting revenue from flat panel TV's to grow by approximately 50-55% in the September quarter. Based on relevant statistics from leading market survey organizations, the flat panel TV market is finally poised for a significant expansion in the next few years due to the advent of more affordable TV pricing combined with improved content available through HDTV broadcasting. As we look into 2006 our prospects for market share expansion are promising. We are planning to further solidify our existing strong position among the top six OEM's and based on that strong position, we are seeing many more opportunities across all screen sizes to work with important ODM suppliers and key second and third tier accounts. Our strong market position in larger screen sizes, in particular 23" and above, should serve us well as this screen size segment is forecast by Display Search, a leading independent market survey organization, to expand from 49% to 71% of all LCD TV's in calendar 2006. Being well positioned, with the right products at the right time, targeted at the right market segments, and being endorsed by the top customers with the influence this has on the rest of the market have been the critical components of our plan for success," continued Frank Lin.

"Overall, our revenues grew by 29% in the June quarter and we expect our total revenue in the September quarter to grow sequentially by 35 ~ 40%. We are also maintaining our previous guidance of 20 ~ 25% sequential growth from the September to the December quarter."

"On the development front, we have successfully begun sampling our next generation products for evaluation for Calendar 2006 product introductions. SVP-LX is our first product to support 1080P HD panel, and the SVP-PX -- which will have HDMI integrated, is the successor to the current SVP-EX. Both products have many video quality feature enhancements and have been well received by the top-tier OEM's. We believe the timely introduction of these two new products will leave us well positioned to hold and potentially gain market share for calendar 2006 product introductions."

We are also encouraged by the market penetration of our first generation HiDTV product for the integrated Digital TV market with nine different customers working on both ATSC and DVB implementations. We have been working closely with these customers for many months and we believe several are nearing successful product introductions. In addition, the FCC recently decided to pull-in the schedule of digital TV deployment. We believe this creates an advantage for our new HiDTV technology -- where we leverage our strong position in video display technologies by expanding to include HD Decode. We are on track to deliver our second generation HiDTV Pro product in the second half of calendar 2005. We believe this will position us for similar success among the top-tier OEMs as our SVP-EX/LX/PX product family.

About Pro Forma adjustments

To supplement the consolidated financial results prepared under generally accepted accounting principles ("GAAP"), Trident uses a non-GAAP conforming, or pro forma, measure of net income that is GAAP net income adjusted to exclude certain costs, expenses and gains. Pro forma net income gives an indication of Trident's baseline performance before gains, losses or other charges that are considered by management to be outside the company's core operating results. In addition, pro forma net income is among the primary indicators management uses as a basis for planning and forecasting future periods. These measures are not in accordance with, or an alternative for, GAAP and may be materially different from pro forma measures used by other companies. Trident computes pro forma net income by adjusting GAAP net income for the impact of certain investment gains (or losses) and excluding various items related to the acquisition of the TTI minority interest, including amortization of deferred stock compensation, amortization of intangible assets and charges for in-process research and development costs. A reconciliation between net income/loss on a GAAP basis and pro forma net income is provided in a table following pro forma consolidated financial statements.

Webcast, Teleconference and Taped Replay

The Company also announced that it will hold a conference call to discuss the earnings, which will be held on Wednesday, July 27, 2005 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Shareholders may participate in the call by calling 617-614-3672 passcode 38883238. The conference call will also be webcast by Thomson/CCBN and can be accessed at Trident's web site at: http://www.tridentmicro.com/ . A replay of the conference call will be available from 5:00 p.m. Pacific Time July 27, 2005 until midnight Pacific Time August 3, 2005, and can be accessed by calling 617-801-6888 using passcode 89979558.

Forward-Looking Information

This press release contains forward-looking statements, including statements which use the words "expect," "hope," "anticipate," "believe," "potential" and similar words, including our statements regarding financial expectations and our expectations regarding market leadership, product introductions and design-wins. The forward-looking statements above are subject to certain risks, and actual results could vary materially depending on a number of factors. These risks include, in particular, changes in trends in the DPTV industries, whether the Company is able to achieve timely product introductions, the failure to obtain design wins among major OEMs for the Company products, and competitive pressures, including pricing and competitors' new product introductions. Additional factors that may affect the Company's business are described in detail in the Company's filings with the Securities and Exchange Commission.

About Trident Microsystems, Inc.

Trident Microsystems, Inc., with headquarters in Sunnyvale, California, designs, develops and markets digital media for the masses in the form of integrated circuits (ICs) for HDTV, LCD TV, PDP TV, DLP TV, and DCRT. Trident's products are sold to a network of OEMs, original design manufacturers and system integrators worldwide. For further information about Trident and its products, please consult the company's web site: http://www.tridentmicro.com/ .

NOTE: Trident is a registered trademark of Trident Microsystems, Inc. All other company and product names are trademarks and/or registered trademarks of their respective owners. Features, pricing, availability and specifications are subject to change without notice.

Trident Microsystems, Inc.
Consolidated Statement of Operations

Three Months Ended

June 30, March 31, June 30,
(in thousands, except per
share data, unaudited) 2005 2005 2004

Net revenue $20,886 $16,136 $12,646

Cost of revenue 9,552 7,170 5,498

Amortization of intangibles 1,121 -- --

Gross profit 10,213 8,966 7,148
% of net revenue 48.9% 55.6% 56.5%

Research and development
expenses 10,311 5,481 3,599
% of net revenue 49.4% 34.0% 28.5%

Selling, general and
administrative expenses 6,472 2,940 2,739
% of net revenue 31.0% 18.2% 21.7%

In-process research and
development expenses -- 4,586 --
% of net revenue -- 28.4% --

Income (loss) from operations (6,570) (4,041) 810
% of net revenue (31.5)% (25.0)% 6.4%

Gain on investments, net -- -- 733

Interest and other
income(expense), net 205 209 152

Minority interests in
subsidiaries -- (263) (508)

Income (loss) before income
taxes (6,365) (4,095) 1,187
% of net revenue (30.5)% (25.4)% 9.4%

Provision for income taxes 490 420 198
% of net revenue 2.3% 2.6% 1.6%

Net income (loss) $(6,855) $(4,515) $989
% of net revenue (32.8)% (28.0)% 7.8%

Basic net income (loss) per
share $(0.27) $(0.19) $0.04

Common shares used in
computing basic
per share amounts 25,550 23,340 22,850

Diluted net income (loss) per
share $(0.27) $(0.19) $0.04

Common and common equivalent
shares used in computing
diluted per share amounts 25,550 23,340 25,265

Twelve Months Ended

June 30, June 30,
(in thousands, except per share data,
unaudited) 2005 2004

Net revenue $69,011 $52,551

Cost of revenue 31,029 23,674

Amortization of intangibles 1,121 --

Gross profit 36,861 28,877
% of net revenue 53.4% 55.0%

Research and development expenses 26,088 11,475
% of net revenue 37.8% 21.8%

Selling, general and administrative
expenses 14,503 12,968
% of net revenue 21.0% 24.7%

In-process research and development
expenses 5,171 --
% of net revenue 7.5% --

Income (loss) from operations (8,901) 4,434
% of net revenue (12.9)% 8.4%

Gain on investments, net 331 9,794

Interest and other income(expense),
net 641 (104)

Minority interests in subsidiaries (1,179) (1,832)

Income (loss) before income taxes (9,108) 12,292
% of net revenue (13.2)% 23.4%

Provision for income taxes 1,426 2,704
% of net revenue 2.1% 5.1%

Net income (loss) $(10,534) $9,588
% of net revenue (15.3)% 18.2%

Basic net income (loss) per share $(0.44) $0.43

Common shares used in computing
basic per share amounts 23,709 22,349

Diluted net income (loss) per share $(0.44) $0.38

Common and common equivalent shares
used in computing diluted per share
amounts 23,709 25,011

Trident Microsystems, Inc.
Pro Forma Consolidated Statement of Operations

Three Months Ended

June 30, March 31, June 30,
(in thousands, unaudited) 2005 2005 2004

Net revenue $20,886 $16,136 $12,646

Cost of revenue 9,186 7,170 5,498

Gross profit 11,700 8,966 7,148
% of net revenue 56.0% 55.6% 56.5%

Research and development
expenses 5,942 4,938 3,536
% of net revenue 28.4% 30.6% 28.0%

Selling, general and
administrative expenses 3,052 2,663 2,588
% of net revenue 14.6% 16.5% 20.5%

Income from operations 2,706 1,365 1,024
% of net revenue 13.0% 8.5% 8.1%

Interest and other
income(expense), net 205 209 152

Minority interests in
subsidiaries -- (263) (508)

Income before income taxes 2,911 1,311 668
% of net revenue 13.9% 8.1% 5.3%

Provision for income taxes 490 420 198
% of net revenue 2.3% 2.6% 1.6%

Net income $2,421 $891 $470
% of net revenue 11.6% 5.5% 3.7%

Basic net income per share $0.09 $0.04 $0.02

Common shares used in
computing basic
per share amounts 25,550 23,340 22,850
Diluted net income per share $0.09 $0.03 $0.02

Common and common equivalent
shares used in computing
diluted per
share amounts 28,007 25,643 25,265

Twelve Months Ended

June 30, June 30,
(in thousands, unaudited) 2005 2004

Net revenue $69,011 $52,551

Cost of revenue 30,663 23,674

Gross profit 38,348 28,877
% of net revenue 55.6% 55.0%

Research and development expenses 20,606 11,351
% of net revenue 29.9% 21.6%

Selling, general and administrative
expenses 10,439 12,486
% of net revenue 15.1% 23.8%

Income from operations 7,303 5,040
% of net revenue 10.6% 9.6%

Interest and other income(expense),
net 641 (104)

Minority interests in subsidiaries (1,179) (1,832)

Income before income taxes 6,765 3,104
% of net revenue 9.8% 5.9%

Provision for income taxes 1,426 534
% of net revenue 2.1% 1.0%

Net income $5,339 $2,570
% of net revenue 7.7% 4.9%

Basic net income per share $0.23 $0.11

Common shares used in computing
basic per share amounts 23,709 22,349
Diluted net income per share $0.18 $0.10

Common and common equivalent shares
used in computing diluted per share
amounts 26,002 25,011

A reconciliation between net income (loss) on a GAAP basis
and pro forma net income is as follows:

Three Months Ended

(in thousands, except per June 30, March 31, June 30,
share data, unaudited) 2005 2005 2004

GAAP net income (loss) $(6,855) $(4,515) $989

Adjustment to cost of revenue 366 -- --

Amortization of intangibles 1,155 -- --

In-process research and
development expenses -- 4,586 --

Amortization of stock-based
compensation 7,755 820 214

Gain on investments, net -- -- (733)

Income taxes on investments -- -- --

Pro forma net income $2,421 $891 $470

Basic net income per share $0.09 $0.04 $0.02

Common shares used in
computing basic
per share amounts 25,550 23,340 22,850

Diluted net income per share $0.09 $0.03 $0.02

Common and common equivalent
shares used in computing
diluted per share amounts 28,007 25,643 25,265

Twelve Months Ended

(in thousands, except per share data, June 30, June 30,
unaudited) 2005 2004

GAAP net income (loss) $(10,534) $9,588

Adjustment to cost of revenue 366 --

Amortization of intangibles 1,155 --

In-process research and development
expenses 5,171 --

Amortization of stock-based
compensation 9,512 606

Gain on investments, net (331) (9,794)

Income taxes on investments -- 2,170

Pro forma net income $5,339 $2,570

Basic net income per share $0.23 $0.11

Common shares used in computing
basic per share amounts 23,709 22,349

Diluted net income per share $0.18 $0.10

Common and common equivalent shares
used in computing diluted per share
amounts 26,002 25,011

Trident Microsystems, Inc.
Consolidated Balance Sheet

June 30, March 31, June 30,
(in thousands, unaudited) 2005 2005 2004

ASSETS
Current assets
Cash and cash
equivalents $37,598 $32,971 $32,488
Short-term investment
- UMC 54,555 45,454 51,843
Accounts receivable,
net 6,317 3,959 2,436
Inventories 2,735 2,838 2,737
Prepaid expenses and
other current assets 2,308 2,401 1,087

Total current
assets 103,513 87,623 90,591

Property and equipment, net 2,154 1,990 2,372
Long-term investments -
other 3,200 3,200 2,720
Other assets 1,397 1,562 573
Intangible assets 23,830 26,029 --

Total assets $134,094 $120,404 $96,256

LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $6,678 $5,583 $3,180
Accrued liabilities 10,009 8,950 8,287
Deferred income taxes 3,561 -- 2,694
Income taxes payable 5,181 5,187 4,260

Total current
liabilities 25,429 19,720 18,421
Minority interests in
subsidiaries 20 58 4,023

Total
liabilities 25,449 19,778 22,444

Stockholders' equity
Capital stock 125,959 123,444 48,453
Stock-based
compensation (36,280) (43,099) (2,687)
Retained earnings 13,625 20,480 24,159
Accumulated other
comprehensive income
(loss) 5,341 (199) 3,887

Total
stockholders'
equity 108,645 100,626 73,812

Total
liabilities
and
stockholders'
equity $134,094 $120,404 $96,256

Source: Trident Microsystems, Inc.

CONTACT: John Edmunds of Trident Microsystems, Inc., +1-408-991-8800, or
Investor@tridentmicro.com

Web site: http://www.tridentmicro.com/

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