Trident Microsystems Reports Results for Second Quarter Ended June 30, 2011

Trident Microsystems Reports Results for Second Quarter Ended June 30, 2011

SUNNYVALE, Calif., July 28, 2011 /PRNewswire/ -- Trident Microsystems, Inc. (Nasdaq: TRID), a leader in high-performance semiconductor system solutions for the connected home, today announced results for its second quarter ended June 30, 2011.

For the quarter, the company reported net revenues of $69.6 million, which compares with $88.3 million in the prior sequential quarter and $171.6 million in the quarter ended June 30, 2010. On a generally accepted accounting principles ("GAAP") basis, the company reported a net loss for the quarter of $26.9 million, or $0.15 per share. This compares with a net loss of $40.8 million, or $0.23 per share in the prior sequential quarter and a net loss of $48.8 million, or $0.28 per share, in the quarter ended June 30, 2010.

Non-GAAP Results

Non-GAAP net loss for the quarter was $21.7 million, or $0.12 per share, which compares with a non-GAAP net loss of $22.4 million, or $0.13 per share, in the prior sequential quarter and a non-GAAP net loss of $14.6 million, or $0.08 per share, in the quarter ended June 30, 2010. A detailed reconciliation between GAAP and non-GAAP net income (loss) is provided as a supplement to the attached financial statements.

"Although financial results for the second quarter were in-line with the company's guidance range, the negative trends for both revenue and profitability underscore the need for a comprehensive turnaround," said Dr. Bami Bastani, Trident's chief executive officer and president. "The turnaround's aim is to restore Trident to profitable growth by focusing resources on the key capabilities that differentiate us in the highly attractive connected home market and achieving an appropriate cost structure."

Bastani continued, "In set-top box, we are building positive momentum with multiple customer programs such as our solutions for OTT (Over-the-Top) Android-based set-top boxes that we expect to ramp in the current quarter as well as new design wins achieved in the second quarter with North American cable operators and OEMs, which we expect will ramp into volume deployments by year end and into next year. In TV, in the third quarter we anticipate initial production shipments of our SXL connected SOCs and two new Tier-One customers in production with our TV550 mid-range connected SOC. We expect that all of these programs will support a more robust revenue run-rate entering 2012, augmented by additional new products that are sampling in the second half of 2011."

Outlook

The company's outlook for any period is based on current expectations and is subject to various factors, including those set forth in the Forward-Looking Information statement below. Actual results may differ materially. For the third quarter ending Sept. 30, 2011, the company offered the following guidance:

-- Net revenues are expected to be in the range of $72 million to $78
million.
-- GAAP gross margins are expected to be in the range of 23% to 26%,
including the impact of approximately $8 million of amortization of
acquired intangibles. Non-GAAP gross margins are expected to be in the
range of 34% to 36%.
-- GAAP operating expenses are expected to be in the range of $45 million
to $48 million, including the impact of approximately $2 million of
stock compensation expense and $1 million of amortization of acquired
intangibles. Non-GAAP operating expenses are expected to be in the
range of $42 million to $45 million.
-- GAAP operating loss is expected to be in the range of $28 million to $34
million. This reflects the impact of an expected $12 million to $15
million of total GAAP adjustments, which include expected restructuring
charges of $1 million to $4 million.
-- Non-GAAP operating loss is expected to be in the range of $16 million to
$19 million.
-- Provision for income taxes is expected to be approximately $1 million.
-- Cash balance as of the end of the quarter is expected to be in the range
of $30 million to $40 million.

Investor Conference Call Date: Thursday, July 28, 2011Time: 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time)Domestic Dial-In: 866-783-2144International Dial-In: 857-350-1603Passcode: 48461624

A replay of the conference call will be available for two weeks, beginning on July 28, 2011 and will be accessible by calling 888-286-8010 (domestic) or +1-617-801-6888 (international) using access code 12118988.

This call is being webcast by Thomson/CCBN and can be accessed at Trident's web site at: http://www.tridentmicro.com. The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at www.fulldisclosure.com, Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).

Use of Non-GAAP Financial Information

To supplement the consolidated financial results prepared under GAAP, Trident uses a non-GAAP conforming, or non-GAAP, measure of net income (loss) that is GAAP net income (loss) adjusted to exclude certain costs, expenses and gains. Non-GAAP net loss, non-GAAP gross margin and non-GAAP expenses give 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, these non-GAAP measures as a percentage of net revenues are used to identify key trends in performance and measure key results against objectives. These non-GAAP measures are 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 non-GAAP measures used by other companies. Trident computes non-GAAP net income (loss) by adjusting GAAP net income (loss) for acquisition-related expenses, stock-based compensation expense, expenses related to the stock option investigation and related matters, legal settlements, restructuring charges, expenses related to software license fees, amortization and impairment of intangible assets from acquisitions, impairment loss, backlog amortization, capital gains and losses and dividend income. A detailed reconciliation between net loss on a GAAP basis and non-GAAP net income (loss) is provided in an attached table.

Forward-Looking Information

This press release contains forward-looking statements, including statements regarding financial expectations for the third quarter of fiscal year 2011, expected restructuring activity, and our outlook for the second half of 2011. The forward-looking statements made above are subject to certain risks and uncertainties, and actual results could vary materially depending on a number of factors. These risks include, in particular, our ability to realize the benefits from our acquisition of product lines and IP from NXP, our ability to reduce expenses, the timing of new product introductions, the ability to obtain design wins among major OEMs for Trident's products, the availability of wafers from our suppliers, and competitive pressures, including pricing and competitors' new product introductions, the impact of the uncertain global macroeconomic environment, the increasingly competitive TV and Set Top Box semiconductor markets and our ability to retain key employees globally. Additional factors that may affect Trident's business are described in detail in Trident's filings with the Securities and Exchange Commission available at http://www.sec.gov.

About Trident Microsystems, Inc.

Trident Microsystems, Inc., with headquarters in Sunnyvale, California, is a leading force in the digital home entertainment market, delivering an extensive range of platform solutions that enhance the consumer experience in the Connected Home. As one of the top-three semiconductor providers to both the TV and set-top box markets, Trident's solutions can be found in the products of leading OEMs and channel partners worldwide. For further information about Trident and its products, please consult the Company's web site: www.tridentmicro.com.

NOTE: Trident is a 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.

TRID-IR

TRIDENT MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended
------------------
June 30, March 31, June 30,
(In thousands, except per share
data) 2011 2011 2010
---- ---- ----
Net revenues $69,569 $88,333 $171,648
Cost of revenues 51,567 68,456 138,722
---- ---- -----
Gross profit 18,002 19,877 32,926
% of net revenues 25.9% 22.5% 19.2%
Research and development expenses 35,491 35,859 49,653
% of net revenues 51.0% 40.6% 28.9%
Selling, general and
administrative expenses 16,519 19,864 22,311
% of net revenues 23.7% 22.5% 13.0%
Goodwill impairment 0 0 7,851
% of net revenues 0.0% 0.0% 4.6%
Restructuring charges 601 4,725 4,470
% of net revenues 0.9% 5.3% 2.6%
Operating loss (34,609) (40,571) (51,359)
% of net revenues (49.7)% (45.9)% (29.9)%
Gain (loss) on investment 2,098 - -
Gain on acquisition - - -
Interest and other income
(expense), net 5,024 853 287
----- --- ---
Loss before income taxes (27,487) (39,718) (51,072)
% of net revenues (39.5)% (45.0)% (29.8)%
Provision for (benefit from)
income taxes (554) 1,055 (2,255)
% of net revenues (0.8)% 1.2% (1.3)%
Net loss ($26,933) ($40,773) ($48,817)
======== ======== ========
% of net revenues (38.7)% (46.2)% (28.4)%

Basic and diluted net loss per
share ($0.15) ($0.23) ($0.28)
Shares used in basic and diluted
per share computation 176,056 175,502 174,018

Six Months Ended
----------------
June 30, June 30,
(In thousands, except per share
data) 2011 2010
---- ----
Net revenues $157,902 $262,051
Cost of revenues 120,023 215,340
----- -----
Gross profit 37,879 46,711
% of net revenues 24.0% 17.8%
Research and development expenses 71,350 86,717
% of net revenues 45.2% 33.1%
Selling, general and
administrative expenses 36,383 42,447
% of net revenues 23.0% 16.2%
Goodwill impairment 0 7,851
% of net revenues 0.0% 3.0%
Restructuring charges 5,326 12,865
% of net revenues 3.4% 4.9%
Operating loss (75,180) (103,169)
% of net revenues (47.6)% (39.4)%
Gain (loss) on investment 2,098 (209)
Gain on acquisition - 43,402
Interest and other income
(expense), net 5,877 850
----- ---
Loss before income taxes (67,205) (59,126)
% of net revenues (42.6)% (22.6)%
Provision for (benefit from)
income taxes 501 (1,530)
% of net revenues 0.3% (0.6)%
Net loss ($67,706) ($57,596)
======== ========
% of net revenues (42.9)% (22.0)%

Basic and diluted net loss per
share ($0.38) ($0.38)
Shares used in basic and diluted
per share computation 175,862 152,059

TRIDENT MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

June March December
30, 31, 31,
(In thousands) 2011 2011 2010
---- ---- ----

ASSETS
Current assets
Cash and cash equivalents $51,619 $69,656 $93,224
Accounts receivable, net 32,699 43,234 62,328
Accounts receivable from related
parties 6,402 5,839 7,337
Inventories 13,406 13,222 23,025
Note receivable from related party 20,884 20,884 20,884
Prepaid expenses and other current
assets 15,418 20,688 18,330
------ ------ ------

Total current assets 140,428 173,523 225,128

Property and equipment, net 31,076 32,876 31,566
Intangible assets, net 60,861 71,212 82,921
Long-term receivable from related
party 500 1,000 1,500
Other assets 32,978 37,355 29,826

Total assets $265,843 $315,966 $370,941
======== ======== ========

LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable $8,145 $16,295 $7,828
Accounts payable to related
parties 16,816 16,539 26,818
Accrued expenses and other
current liabilities 51,174 64,389 79,305
Income taxes payable 3,683 4,014 2,077
----- ----- -----

Total current liabilities 79,818 101,237 116,028
Long-term income taxes payable 23,681 25,850 25,476
Deferred income tax liabilities 200 200 200
Other long-term liabilities 2,376 3,585 4,933

Total liabilities 106,075 130,872 146,637
------- ------- -------

Stockholders' equity
Preferred stock - - -
Common stock 180 178 177
Additional paid-in capital 437,992 436,387 434,825
Accumulated deficit (278,404) (251,471) (210,698)
-------- -------- --------

Total stockholders' equity 159,768 185,094 224,304

Total liabilities and
stockholders' equity $265,843 $315,966 $370,941
======== ======== ========

TRIDENT MICROSYSTEMS, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)

Three Months Ended
------------------
June 30, March 31, June 30,
(In thousands, except per share
data) 2011 2011 2010
---- ---- ----

GAAP Gross profit $18,002 $19,877 $32,926
Amortization of acquisition-
related intangible assets (1) 8,760 9,117 16,972
Stock-based compensation expense
(2) 62 88 86
Impairment of intangible assets
other than goodwill (3) - - 863
Non-GAAP Gross profit $26,824 $29,082 $50,847
======= ======= =======
% of Net revenues 38.6% 32.9% 29.6%

GAAP Research and development
expenses (R&D) $35,491 $35,859 $49,653
Amortization of acquisition-
related intangible assets (1) (664) (696) (824)
Stock-based compensation expense
(2) (885) (726) (902)
Impairment of intangible assets
other than goodwill (3) - (698) -
Non-GAAP Research and development
expenses $33,942 $33,739 $47,927
======= ======= =======
% of Net revenues 48.8% 38.2% 27.9%

GAAP Selling, general and
administrative expenses (SG&A) $16,519 $19,864 $22,311
Amortization of acquisition-
related intangible assets (1) (926) (1,198) (1,339)
Stock-based compensation expense
(2) (734) (901) (1,246)
Stock options related professional
fees (4) (142) (211) (525)
Acquisition-related expenses (5) - (18) (790)
Non-GAAP Selling, general and
administrative expenses $14,717 $17,536 $18,411
======= ======= =======
% of Net revenues 21.2% 19.9% 10.7%

GAAP Operating Loss $(34,609) $(40,571) $(51,359)
Total of above adjustments to Gross
profit, R&D and SG&A 12,173 13,653 23,547
Restructuring Charges (6) 601 4,725 4,470
Impairment of goodwill (3) - - 7,851
Non-GAAP Operating Loss $(21,835) $(22,193) $(15,491)
======== ======== ========
% of Net revenues -31.4% -25.1% -9.0%

GAAP Net loss $(26,933) $(40,773) $(48,817)
Total operating loss adjustments 12,774 18,378 35,868
Legal settlements (9) (5,412) - (1,674)
(Gain) loss on investment (8) (2,098) - -
(Gain) on acquisition (7) - - -
Non-GAAP Net income (loss) $(21,669) $(22,395) $(14,623)
======== ======== ========
% of Net revenues -31.1% -25.4% -8.5%

GAAP basic and diluted net income
(loss) per share $(0.15) $(0.23) $(0.28)
------ ------ ------
GAAP shares - basic and dilutive 176,056 175,502 174,018

Six Months Ended
----------------
June 30, June 30,
(In thousands, except per share
data) 2011 2010
---- ----

GAAP Gross profit $37,879 $46,711
Amortization of acquisition-
related intangible assets (1) 17,877 27,188
Stock-based compensation expense
(2) 150 190
Impairment of intangible assets
other than goodwill (3) - 2,093
Non-GAAP Gross profit $55,906 $76,182
======= =======
% of Net revenues 35.4% 29.1%

GAAP Research and development
expenses (R&D) $71,350 $86,717
Amortization of acquisition-
related intangible assets (1) (1,360) (1,309)
Stock-based compensation expense
(2) (1,611) (1,782)
Impairment of intangible assets
other than goodwill (3) (698) -
Non-GAAP Research and development
expenses $67,681 $83,626
======= =======
% of Net revenues 42.9% 31.9%

GAAP Selling, general and
administrative expenses (SG&A) $36,383 $42,447
Amortization of acquisition-
related intangible assets (1) (2,124) (2,093)
Stock-based compensation expense
(2) (1,635) (925)
Stock options related professional
fees (4) (353) (751)
Acquisition-related expenses (5) (18) (5,149)
Non-GAAP Selling, general and
administrative expenses $32,253 $33,529
======= =======
% of Net revenues 20.4% 12.8%

GAAP Operating Loss $(75,180) $(103,169)
Total of above adjustments to Gross
profit, R&D and SG&A 25,826 41,480
Restructuring Charges (6) 5,326 12,865
Impairment of goodwill (3) - 7,851
Non-GAAP Operating Loss $(44,028) $(40,973)
======== ========
% of Net revenues -27.9% -15.6%

GAAP Net loss $(67,706) $(57,596)
Total operating loss adjustments 31,152 62,196
Legal settlements (9) (5,412) (1,674)
(Gain) loss on investment (8) (2,098) 209
(Gain) on acquisition (7) - (43,402)
Non-GAAP Net income (loss) $(44,064) $(40,267)
======== ========
% of Net revenues -27.9% -15.4%

GAAP basic and diluted net income
(loss) per share $(0.38) $(0.38)
------ ------
GAAP shares - basic and dilutive 175,862 152,059

(1) Amortization of acquisition-related intangible assets represents
the amortization of identifiable intangible assets. Management
deemed that
these acquisition-related charges are not related to Trident's core
operating performance and it is appropriate to exclude those charges
from Trident's non-GAAP financial measures, as it enhances the
ability of investors to compare Trident's period-over-period
operating results.

(2) Stock-based compensation expense relates primarily to the equity
awards such as stock options and restricted stock. This is non-cash
expense that
varies in amount from period to period and is dependent on market
forces that are often beyond Trident's control. Hence, management
excludes this item
from the GAAP financial measures.

(3) Charges for impairment of goodwill and intangible assets.
Management believes that these charges are not directly associated
with the Company's core operating performance.

(4) Stock options related professional fees are excluded from the
non-GAAP net loss calculation. Management believes that these
professional fees are
not related to the Company's ongoing business and operating
performance of Trident.

(5) Acquisition-related expenses represent external costs incurred
in connection with our acquisition, which we generally would not
have incurred in the
normal course of business.
(6) Management believes that restructuring charges are not directly
associated with the Company's core operating performance.

(7) The purchase price allocation assigned $43.4 million to gain on
acquisition. Management believes that gain on acquisition
is not related to the ongoing business and operating performance of
Trident.

(8) Management believes that (Gain) loss on investments are not
related to the ongoing business and operating performance of
Trident.

(9) Management believes that legal settlements are not related to
the ongoing business and operating performance of Trident.

SOURCE Trident Microsystems, Inc.

Trident Microsystems, Inc.

CONTACT: John Swenson, Director, Investor Relations, +1-408-962-8252, john.swenson@tridentmicro.com

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

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