As presented in the “Reconciliation of GAAP to Non-GAAP” tables in the accompanying press release, each of the non-GAAP financial measures excludes one or more of the following items:
Acquisition related. Acquisition-related charges are not factored into management’s evaluation of potential acquisitions or IDT’s performance after completion of acquisitions, because they are not related to the Company’s core operating performance. Adjustments of these items provide investors with a basis to compare IDT’s performance to other companies without the variability caused by purchase accounting. Acquisition-related expenses primarily include:
- Amortization of acquisition related intangibles, which include acquired intangibles such as purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements.
- Acquisition related costs such as legal, accounting and other professional or consulting fees directly related to an acquisition.
- Fair market value adjustment to acquired inventory sold.
Restructuring related. Restructuring charges primarily relate to changes in IDT’s infrastructure in efforts to reduce costs and expenses (gains) associated with strategic divestitures and restructuring in force actions. Restructuring charges (gains) are excluded from non-GAAP financial measures because they are not considered core operating activities. Although IDT has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. As such, management believes that it is appropriate to exclude restructuring charges (gains) from IDT’s non-GAAP financial measures as it enhances the ability of investors to compare the Company’s period-over-period operating results from continuing operations. Restructuring-related charges (gains) primarily include:
- Severance and retention costs directly related to a restructuring action.
- Facility closure costs consist of ongoing costs associated with the exit of our leased and owned facilities.
- Gain on divestiture consists of gains recognized upon the strategic sale of business units.
- Assets impairments including accelerated depreciation of certain assets no longer in use and impairment charge related to a note receivable and subsequent recoveries.
Other adjustments. These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and on-going future operating performance of IDT. Excluding this data allows investors to better compare IDT’s period-over-period performance without such expense, which IDT believes may be useful to the investor community. Other adjustments primarily include:
- Stock based compensation expense.
- Compensation expense (benefit) – deferred compensation, consists of gains and losses on marketable equity securities related to our deferred compensation arrangements.
- Loss (gain) on deferred compensation plan securities represents the changes in the fair value of the assets in a separate trust that is invested in corporate owned life insurance under our deferred compensation plan.
- Life insurance proceeds received, represents proceeds received under corporate owned life insurance under our deferred compensation plan.
- Tax effects of non-GAAP adjustments. Effective first quarter of fiscal 2016, the Company changed its methodology for reporting non-GAAP taxes to be based on estimated cash tax expense and reserves. The Company forecasts its annual cash tax liability and allocates the tax to each quarter in proportion to earnings for that period. This approach is designed to enhance the ability of investors to understand the impact of the Company's tax expense on its current operations, provide improved modeling accuracy, and substantially reduce fluctuations caused by GAAP to non-GAAP adjustments, which may not reflect actual cash tax expense. Non-GAAP tax amounts for periods prior to March 30, 2015 have not been adjusted to reflect the new methodology.
- Diluted weighted average shares non-GAAP adjustment, for purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of stock compensation expense attributable to future services not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury method.
IDT and the IDT logo are trademarks or registered trademarks of Integrated Device Technology, Inc. All other brands, product names and marks are or may be trademarks or registered trademarks used to identify products or services of their respective owners.
| INTEGRATED DEVICE TECHNOLOGY, INC. | ||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
| (Unaudited) | ||||||||||||
| (In thousands, except per share data) | ||||||||||||
| Three Months Ended | ||||||||||||
|
June 28, |
Mar. 29, | June 29, | ||||||||||
| 2015 | 2015 | 2014 | ||||||||||
| Revenues | $ | 160,907 | $ | 158,350 | $ | 126,302 | ||||||
| Cost of revenues | 61,673 | 60,295 | 52,293 | |||||||||
| Gross profit | 99,234 | 98,055 | 74,009 | |||||||||
| Operating expenses: | ||||||||||||
| Research and development | 33,754 | 32,071 | 32,050 | |||||||||
| Selling, general and administrative | 28,143 | 27,050 | 25,459 | |||||||||
| Total operating expenses | 61,897 | 59,121 | 57,509 | |||||||||
| Operating income | 37,337 | 38,934 | 16,500 | |||||||||
| Other income, net | 1,818 | 1,966 | 862 | |||||||||
| Income from continuing operations before income taxes | 39,155 | 40,900 | 17,362 | |||||||||
| Provision for income taxes | 435 | 517 | 251 | |||||||||
| Net income from continuing operations | 38,720 | 40,383 | 17,111 | |||||||||
| Discontinued operations: | ||||||||||||
| Gain from divestiture | - | - | 16,840 | |||||||||
| Loss from discontinued operations | (547 | ) | (799 | ) | (12,153 | ) | ||||||
| Provision for (benefit from) income taxes | 15 | 318 | (45 | ) | ||||||||
| Net income (loss) from discontinued operations | (562 | ) | (1,117 | ) | 4,732 | |||||||
| Net income | $ | 38,158 | $ | 39,266 | $ | 21,843 | ||||||
| Basic net income per share - continuing operations | $ | 0.26 | $ | 0.27 | $ | 0.11 | ||||||
| Basic net income (loss) per share - discontinued operations | - | (0.01 | ) | 0.04 | ||||||||
| Basic net income per share | $ | 0.26 | $ | 0.26 | $ | 0.15 | ||||||
| Diluted net income per share - continuing operations | $ | 0.25 | $ | 0.26 | $ | 0.11 | ||||||
| Diluted net income (loss) per share - discontinued operations | - | (0.01 | ) | 0.03 | ||||||||
| Diluted net income per share | $ | 0.25 | $ | 0.25 | $ | 0.14 | ||||||
| Weighted average shares: | ||||||||||||
| Basic | 148,396 | 148,326 | 149,283 | |||||||||
| Diluted | 153,758 | 154,111 | 153,741 | |||||||||
| INTEGRATED DEVICE TECHNOLOGY, INC. | ||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (a) | ||||||||||||
| (Unaudited) | ||||||||||||
| (In thousands, except per share data) | ||||||||||||
| Three Months Ended | ||||||||||||
| June 28, | Mar. 29, | June 29, | ||||||||||
| 2015 | 2015 | 2014 | ||||||||||
| GAAP net income from continuing operations | $ | 38,720 |
|
$ | 40,383 | $ | 17,111 | |||||
| GAAP diluted net income per share continuing operations | $ | 0.25 |
|
$ | 0.26 | $ | 0.11 | |||||
| Acquisition related: | ||||||||||||
| Amortization of acquisition related intangibles | 832 |
|
1,001 | 2,549 | ||||||||
| Restructuring related: | ||||||||||||
| Severance and retention costs | 921 |
|
- | 526 | ||||||||
| Facility closure costs | - |
|
- | 47 | ||||||||
| Assets impairment and other | 147 |
|
265 | 2,302 | ||||||||
| Other: | ||||||||||||
| Stock-based compensation expense | 7,866 |
|
5,684 | 4,962 | ||||||||
| Gain from divestiture | (51 | ) | (168 | ) | - | |||||||
| Assets impairment and other | (325 | ) | - | - | ||||||||
| Compensation expense - deferred compensation plan | 115 |
|
213 | 494 | ||||||||
| Gain on deferred compensation plan securities | (108 | ) |
|
(205 | ) | (480 | ) | |||||
| Non-GAAP tax adjustments | 83 |
|
(1,391 | ) | (859 | ) | ||||||
| Non-GAAP net income from continuing operations | $ | 48,200 |
|
$ | 45,782 | $ | 26,652 | |||||
| GAAP weighted average shares - diluted | 153,758 |
|
154,111 | 153,741 | ||||||||
| Non-GAAP adjustment | 1,836 |
|
1,558 | 1,867 | ||||||||
| Non-GAAP weighted average shares - diluted | 155,594 |
|
155,669 | 155,608 | ||||||||
| Non-GAAP diluted net income per share continuing operations | $ | 0.31 |
|
$ | 0.29 | $ | 0.17 | |||||
| GAAP gross profit | $ | 99,234 |
|
$ | 98,055 | $ | 74,009 | |||||
| Acquisition related: | ||||||||||||
| Amortization of acquisition related intangibles | 617 |
|
625 | 1,686 | ||||||||
| Restructuring related: | ||||||||||||
| Severance and retention costs | 182 |
|
- | 23 | ||||||||
| Assets impairment and other | 147 |
|
220 | 1,935 | ||||||||
| Other: | ||||||||||||
| Compensation expense - deferred compensation plan | 42 |
|
78 | 147 | ||||||||
| Stock-based compensation expense | 682 |
|
589 | 319 | ||||||||
| Non-GAAP gross profit | $ | 100,904 |
|
$ | 99,567 | $ | 78,119 | |||||
| GAAP R&D expenses: | $ | 33,754 |
|
$ | 32,071 | $ | 32,050 | |||||
| Restructuring related: | ||||||||||||
| Severance and retention costs | (347 | ) |
|
- | (240 | ) | ||||||
| Assets impairment and other | - | (45 | ) | (367 | ) | |||||||
| Other: | ||||||||||||
| Compensation expense - deferred compensation plan | (45 | ) |
|
(83 | ) | (240 | ) | |||||
| Stock-based compensation expense | (3,632 | ) |
|
(2,266 | ) | (2,521 | ) | |||||
| Non-GAAP R&D expenses | $ | 29,730 |
|
$ | 29,677 | $ | 28,682 | |||||
| GAAP SG&A expenses: | $ | 28,143 |
|
$ | 27,050 | $ | 25,459 | |||||
| Acquisition related: | ||||||||||||
| Amortization of acquisition related intangibles | (215 | ) |
|
(376 | ) | (863 | ) | |||||
| Restructuring related: | ||||||||||||
| Severance and retention costs | (392 | ) |
|
- | (263 | ) | ||||||
| Facility closure costs | - |
|
- | (47 | ) | |||||||
| Other: | ||||||||||||
| Compensation expense - deferred compensation plan | (28 | ) |
|
(52 | ) | (107 | ) | |||||
| Stock-based compensation expense | (3,552 | ) |
|
(2,829 | ) | (2,122 | ) | |||||
| Non-GAAP SG&A expenses | $ | 23,956 |
|
$ | 23,793 | $ | 22,057 | |||||
| GAAP interest income and other, net | $ | 1,818 |
|
$ | 1,966 | $ | 862 | |||||
| Gain from divestiture | (51 | ) | (168 | ) | - | |||||||
| Gain on deferred compensation plan securities | (108 | ) |
|
(205 | ) | (480 | ) | |||||
| Assets impairment and other | (325 | ) |
|
- | - | |||||||
| Non-GAAP interest income and other, net | $ | 1,334 |
|
$ | 1,593 | $ | 382 | |||||
| GAAP provision for income taxes - continuing operations | $ | 435 |
|
$ | 517 | $ | 251 | |||||
| Non-GAAP tax adjustments | (83 | ) |
|
1,391 | 859 | |||||||
| Non-GAAP provision for income taxes - continuing operations | $ | 352 |
|
$ | 1,908 | $ | 1,110 | |||||
| (a) Refer to the accompanying “Notes to Non-GAAP Financial Measures” for a detailed discussion of management’s use of non-GAAP financial measures. |
| INTEGRATED DEVICE TECHNOLOGY, INC. | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (Unaudited) | ||||||
| June 28, | Mar. 29, | |||||
| (In thousands) | 2015 | 2015 | ||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 101,141 | $ | 116,945 | ||
| Short-term investments | 439,859 | 438,115 | ||||
| Accounts receivable, net | 70,395 | 63,618 | ||||
| Inventories | 42,703 | 45,410 | ||||
| Prepaid and other current assets | 15,647 | 16,041 | ||||
| Total current assets | 669,745 | 680,129 | ||||
| Property, plant and equipment, net | 64,421 | 65,508 | ||||
| Goodwill | 135,644 | 135,644 | ||||
| Acquisition-related intangibles | 4,703 | 5,535 | ||||
| Other assets | 26,681 | 26,843 | ||||
| TOTAL ASSETS | $ | 901,194 | $ | 913,659 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 21,752 | $ | 28,006 | ||
| Accrued compensation and related expenses | 23,809 | 43,649 | ||||
| Deferred income on shipments to distributors | 10,380 | 15,694 | ||||
| Deferred taxes liabilities | 1,491 | 1,401 | ||||
| Other accrued liabilities | 11,003 | 17,582 | ||||
| Total current liabilities | 68,435 | 106,332 | ||||
| Deferred tax liabilities | 1,114 | 1,121 | ||||
| Long term income taxes payable | 286 | 347 | ||||
| Other long-term obligations | 20,764 | 17,605 | ||||
| Total liabilities | 90,599 | 125,405 | ||||
| Stockholders' equity | 810,595 | 788,254 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 901,194 | $ | 913,659 | ||
