Silicon Image, Inc. (NASDAQ: SIMG), a leading provider of
multimedia connectivity solutions and services, today reported
financial results for its fourth quarter and full year 2014.
Revenue for the fourth quarter of 2014, ended December 31, 2014,
was $66.6 million, compared with $70.3 million in the third quarter
of 2014 and $61.4 million in the fourth quarter of 2013. Full year
2014 revenue was $258.1 million compared to $276.4 million for full
year 2013.
GAAP net income for the fourth quarter of 2014 was $30.8
million, or $0.39 per diluted share, compared with a GAAP net
income of $10.3 million, or $0.13 per diluted share, for the third
quarter of 2014 and a GAAP net loss of $1.0 million, or ($0.01) per
diluted share, for the fourth quarter of 2013. Full year 2014 GAAP
net income was $42.1 million or $0.53 per diluted share compared to
$11.5 million or $0.15 per diluted share for full year 2013.
During the fourth quarter of 2014, we concluded that the
valuation allowance for certain of our U.S. federal and state
deferred tax assets, with the exception of the deferred tax assets
related to R&D credits and foreign tax credits, as well as our
California deferred tax assets, is no longer required. Accordingly,
we recognized a non-recurring, non-cash tax benefit of $30.1
million related to the valuation allowance reversal.
Non-GAAP net income for the fourth quarter of 2014 was $6.9
million, or $0.09 per diluted share, compared with a non-GAAP net
income of $8.8 million, or $0.11 per diluted share, for the third
quarter of 2014, and a non-GAAP net income of $4.1 million, or
$0.05 per diluted share, for the fourth quarter of 2013. Full year
2014 non-GAAP net income was $23.3 million or $0.29 per diluted
share compared to $22.9 million or $0.29 per diluted share for full
year 2013. Non-GAAP net income for these periods excludes
stock-based compensation expense, amortization of intangible
assets, business acquisition related expenses, gain from business
acquisition, gain from sale of a privately held company investment,
restructuring expense, other than temporary impairment of a
privately-held company investment, impairment of intangible assets,
recovery related to previously written-down inventory, proceeds
from a legal settlement, other income from prepaid royalty
settlement and non-cash tax benefit related to the valuation
allowance reversal.
A reconciliation of GAAP and non-GAAP items is provided in a
table following the Condensed Consolidated Statements of
Operations.
Lattice Semiconductor Tender Offer
On January 26, 2015, we signed a definitive agreement, pursuant
to which Lattice Semiconductor Corporation (NASDAQ: LSCC) will
acquire Silicon Image in an all-cash tender offer of $7.30 per
share. The transaction has been unanimously approved by the boards
of directors of both companies and is expected to close by the end
of March 2015. Closing of the tender offer is subject to customary
closing conditions, including the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act and there being validly tendered and not withdrawn
a number of shares of Silicon Image common stock equal to at least
a majority of the total outstanding shares of Silicon Image common
stock.
First Quarter 2015 Outlook and Conference Call
Due to the pending acquisition of Silicon Image by Lattice
Semiconductor Corporation, Silicon Image will not provide guidance
for the first quarter 2015 and has canceled its customary earnings
conference call.
Use of Non-GAAP Financial Information
Silicon Image presents and discusses gross margin, operating
expenses, net income (loss) and basic and diluted net income (loss)
per share in accordance with Generally Accepted Accounting
Principles (GAAP), and on a non-GAAP basis for informational
purposes only. Silicon Image believes that non-GAAP reporting,
giving effect to the adjustments shown in the attached
reconciliation, provides meaningful information and therefore uses
non-GAAP reporting to supplement its GAAP reporting and internally
in evaluating operations, managing and monitoring performance, and
determining bonus compensation. Further, Silicon Image uses
non-GAAP information as certain non-cash charges such as
stock-based compensation expense, amortization of intangible
assets, business acquisition related expenses, gain from business
acquisition, gain from sale of a privately held company investment,
restructuring expense, other than temporary impairment of a
privately held company investment, impairment of intangible assets,
recovery related to previously written-down inventory, proceeds
from a legal settlement, other income from prepaid royalty
settlement and non-cash tax benefit related to the valuation
allowance reversal which do not reflect the cash operating results
of the business. Silicon Image also excludes certain items that are
unusual and one-time events such as business acquisition related
expenses, gain from sale of a privately held company investment and
proceeds from a legal settlement. Silicon Image has chosen to
provide this supplemental information to investors, analysts and
other interested parties to enable them to perform additional
analyses of its operating results and to illustrate the results of
operations giving effect to such non-GAAP adjustments. The non-GAAP
financial information presented herein should be considered
supplemental to, and not as a substitute for, or superior to,
financial measures calculated in accordance with GAAP.
About Silicon Image, Inc.
Silicon Image (NASDAQ: SIMG) is a leading provider of multimedia
connectivity solutions and services for mobile, consumer
electronics and PC markets. Silicon Image’s semiconductor and
intellectual property products feature wireless and wired
technologies that deliver connectivity across a wide array of
devices in the home, office and on the go. Silicon Image has driven
the creation of the industry standards HDMI®, DVI™, MHL® and
WirelessHD®, and offers manufacturers comprehensive standards
interoperability and compliance testing services via its
wholly-owned subsidiary, Simplay Labs. For more information, visit
http://www.siliconimage.com/.
Silicon Image and the Silicon Image logo are
trademarks, registered trademarks or service marks of Silicon
Image, Inc. in the United States and/or other
countries. All other trademarks and registered trademarks are
the property of their respective owners in the United States
and/or other countries.
SILICON IMAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In
thousands, except per share amounts) Unaudited
Three
Months Ended Twelve Months Ended
December 31,2014
September 30,2014
December 31,2013
December 31,2014
December 31,2013
Revenue: Product
$ 44,421 $ 56,003 $ 46,949
$ 198,128 $ 227,308 Licensing
22,206
14,325 14,428
59,924 49,098 Total
revenue
66,627 70,328
61,377
258,052
276,406
Cost of revenue and operating
expenses: Cost of product revenue (1)(2)(3)
23,093
27,760 22,897
100,462 112,940 Cost of licensing revenue
- 10 267
30 881 Research and development (4)
19,867 17,772 19,787
72,012 76,994 Selling, general
and administrative (5)
16,534 15,101 16,046
63,666
64,736 Restructuring expense (6)
3,702 (463 ) 1,307
3,481 1,783 Amortization and impairment of
acquisition-related intangible assets
606
1,168 230
2,492 1,116 Total cost of
revenue and operating expenses
63,802
61,348 60,534
242,143 258,450 Income from
operations
2,825 8,980 843
15,909 17,956 Gain from
sale of a privately held company investment
- 4,071 -
4,071 - Proceeds from legal settlement
- - -
-
1,275 Other than temporary impairment of a privately-held company
investment
- - -
- (1,500 ) Interest income and
other, net
(76 ) 260
144
1,245
1,203 Income before provision for income taxes and equity in
net loss of an unconsolidated affiliate
2,749 13,311 987
21,225 18,934 Income tax expense (benefit)
(28,034
) 3,013 1,837
(20,980 ) 6,955 Equity in net
loss of an unconsolidated affiliate
-
- 114
150
489 Net income (loss)
30,783 10,298
(964 )
42,055 11,490 Less: Net income (loss) attributable to
noncontrolling interest
(51 ) -
-
(51 )
- Net income (loss) attributable to the stockholders
$ 30,834 $ 10,298 $ (964
)
$ 42,106 $ 11,490 Net
income (loss) per share – basic
$ 0.40 $ 0.13 $ (0.01
)
$ 0.54 $ 0.15 Net income (loss) per share – diluted
$ 0.39 $ 0.13 $ (0.01 )
$ 0.53 $ 0.15
Weighted average shares – basic
77,568 78,297 77,417
77,967 77,399 Weighted average shares – diluted
78,889 79,670 77,417
79,571 79,065 (1)
Includes restructuring expense
$ 343 $ - $ 284
$ 343 $ 284 (2) Includes amortization of
acquisition-related intangible assets
$ 225 $ 225 $
225
$ 900 $ 975 (3) Includes stock-based compensation
expense
$ 159 $ 154 $ 152
$ 634 $ 603
(4) Includes stock-based compensation expense
$ 807 $
845 $ 852
$ 3,357 $ 3,576 (5) Includes stock-based
compensation expense
$ 1,172 $ 1,355 $ 1,687
$
5,822 $ 6,336 (6) Includes stock-based compensation expense
$ 67 $ 52 $ -
$ 193 $ -
SILICON IMAGE, INC.
GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME RECONCILIATION
(In thousands, except per share amounts) Unaudited
Three
Months Ended Twelve Months Ended
December 31,2014
September 30,2014
December 31,2013
December 31,2014
December 31,2013
GAAP net income (loss)
$ 30,783 $ 10,298 $ (964 )
$ 42,055 $ 11,490 Non-GAAP adjustments: Stock-based
compensation expense (1)
2,205 2,406 2,691
10,006
10,515 Amortization of intangible assets (2)
831 917 455
2,916 1,916 Amortization of intangible assets of an
unconsolidated affiliate (2)
- - 40
40 168 Strategic
initiative and acquisition related expenses (2)
- - 1,000
138 1,000 Gain from business acquisition (2)
- - -
(361 ) - Gain from sale of a privately held company
investment (2)
- (4,071 ) -
(4,071 ) -
Restructuring expense (3)
3,978 (515 ) 1,591
3,631
2,067 Other than temporary impairment of a privately-held company
investment (3)
- - -
- 1,500 Impairment of intangible
asset (3)
- 476 -
476 175 Recovery of certain
unsalable inventory (3)
- - (825 )
- (1,785 )
Proceeds from legal settlement (3)
- - -
- (1,275 )
Other income from prepaid royalty settlement (3)
-
- -
(639 ) - Non-GAAP net income
before tax adjustments
37,797 9,511 3,988
54,191
25,771 Tax adjustments (4)
(30,963 )
(744 ) 89
(30,943
) (2,864 ) Non-GAAP net income
6,834
8,767 4,077
23,248 22,907 Less: Net income (loss)
attributable to noncontrolling interest
(51 )
- -
(51
) - Net income attributable to the
stockholders
$ 6,885 $ 8,767
$ 4,077
$ 23,299 $ 22,907
Non-GAAP net income per share — basic
$
0.09 $ 0.11 $ 0.05
$ 0.30 $ 0.30 Non-GAAP net
income per share — diluted
$ 0.09 $ 0.11 $ 0.05
$ 0.29 $ 0.29 Weighted average shares — basic
77,568 78,297 77,417
77,967 77,399 Weighted average
shares — diluted
78,889 79,670 78,990
79,571 79,065
Stock-based compensation expense is composed of the
following: Cost of revenue
$ 159 $ 154 $ 152
$
634 $ 603 Research and development
807 845 852
3,357 3,576 Selling, general and administrative
1,172
1,355 1,687
5,822 6,336 Restructuring expense
67 52 -
193 - Total
$
2,205 $ 2,406 $ 2,691
$ 10,006 $ 10,515
Discussion of Non-GAAP Financial
Measures
(1)
Stock-Based Compensation Related Items:
Stock-based compensation expense relates primarily to equity
awards, such as stock options and restricted stock units.
Stock-based compensation is a non-cash expense that varies in
amount from period to period and is dependent on market forces that
are often beyond our control. As such, management excludes this
item from our internal operating forecasts and models. Management
believes that non-GAAP measures adjusted for stock-based
compensation expense provide investors with a basis to measure our
core performance against the performance of other companies without
the variability created by stock-based compensation expense as a
result of the variety of equity awards used by companies and the
varying methodologies and subjective assumptions used in
determining such non-cash expense.
(2)
Strategic Initiative and Acquisition
Related Items: We exclude certain expense items resulting from our
strategic initiative and acquisitions including the following, when
applicable: (i) amortization of purchased intangible assets
associated with our acquisitions; or relating to our unconsolidated
affiliate, (ii) strategic initiative and acquisition-related
charges, (iii) gain from business acquisition and
(iv) gain from sale of a privately held company investment.
The amortization of purchased intangible assets associated with our
acquisitions results in our recording expenses in our GAAP
financial statements that were already expensed by the acquired
company before the acquisition and for which we have not expended
cash. Moreover, had we internally developed the products acquired,
the amortization of intangible assets, and the expenses of
uncompleted research and development would have been expensed in
prior periods. Accordingly, we analyze the performance of our
operations in each period without regard to such expenses. In
addition, our strategic initiatives and acquisitions result in
non-continuing operating expenses, which would not otherwise have
been incurred by us in the normal course of our business
operations. In the second quarter of fiscal 2014, we finalized the
acquisition of the remaining ownership interest in UpdateLogic,
Inc., resulting in acquisition-related charges and gain from
business acquisition. In the third quarter of fiscal 2014, we
finalized the sale of our minority interest in a privately held
company to another entity resulting in a gain. We do not expect
expenses of similar nature to be paid or gain of similar nature to
be received in our normal course of business and consider it
infrequent and non-recurring. We believe that providing non-GAAP
information for strategic initiatives and acquisition-related
expense items, gain from business acquisition and gain from sale of
a privately held company investment in addition to the
corresponding GAAP information allows the users of our financial
statements to better review and understand the historic and current
results of our continuing operations, and also facilitates
comparisons to less acquisitive peer companies.
(3)
Other Items: We exclude certain other
items that are the result of either unique or unplanned events
including the following, when applicable: (i) restructuring
and related costs, (ii) other than temporary impairment of a
privately held company investment, (iii) impairment of
intangible assets, (iv) recovery related to previously
written-down inventory, (v) proceeds from a legal settlement
and (vi) other income from prepaid royalty settlement. It is
difficult to estimate the amount or timing of these items in
advance. Restructuring charges result from events which arise from
unforeseen circumstances, which often occur outside of the ordinary
course of continuing operations. Other than temporary impairment of
a privately held company investment was recorded due to the
conclusion that the possibility is remote that we will exercise our
warrants to purchase the entity’s preferred stock or that we will
realize any other value from these investments. We recognized
impairment of an intangible asset because the sum of its estimated
future undiscounted cash flows used to test for recoverability is
less than its carrying value. We entered into a settlement with a
vendor and received a recovery related to previously written-down
inventory. Proceeds from a legal settlement relates to our
acquisition of SiBEAM, Inc. on May 16, 2011. Other income from
prepaid royalty settlement relates to the termination of an HDMI
rebate agreement with one of the HDMI adopters. We do not expect
other income or proceeds of similar nature to be recognized or
received in our normal course of business and consider it
infrequent and non-recurring. Although these events are reflected
in our GAAP financials, these unique transactions may limit the
comparability of our on-going operations with prior and future
periods. As such, we believe that these expenses do not accurately
reflect the underlying performance of our continuing operations for
the period in which they are incurred. We assess our operating
performance both with these amounts included and excluded, and by
providing this information, we believe the users of our financial
statements are better able to understand the financial results of
what we consider our continuing operations.
(4)
Tax adjustments: For the three and twelve
months ended December 31, 2014 and 2013 and the three months ended
September 30, 2014, our non-GAAP tax rate was approximately 30% of
non-GAAP pre-tax income. Non-GAAP tax rate is primarily based on
net expected cash flow for income taxes. During the fourth quarter
of 2014, we recognized a non-recurring, non-cash tax benefit of
$30.1 million related to the valuation allowance reversal.
SILICON IMAGE, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (In thousands) Unaudited
December 31,
2014 December 31, 2013 ASSETS Current Assets:
Cash and cash equivalents
$ 116,219 $ 82,220
Short-term investments
48,116 56,003 Accounts receivable,
net
23,693 34,729 Inventories
17,146 11,727 Prepaid
expenses and other current assets
6,912 7,733 Deferred
income taxes
2,095 191 Total current assets
214,181 192,603 Property and equipment, net
15,295
14,676 Deferred income taxes, non-current
28,106 4,368
Intangible assets, net
15,729 10,348 Goodwill
30,333
21,646 Other assets
1,644 8,498 Total assets
$ 305,288 $ 252,139
LIABILITIES AND
STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable
$ 13,461 $ 12,894 Accrued and other current
liabilities
25,473 20,622 Deferred margin on sales to
distributors
8,663 9,634 Deferred license revenue
2,254 2,742 Total current liabilities
49,851
45,892 Other long-term liabilities
13,905
16,522 Total liabilities
63,756 62,414 Redeemable
noncontrolling interest
7,000 - Stockholders’ equity
234,532 189,725
Total liabilities, redeemable
noncontrolling interest and stockholders’ equity
$ 305,288 $ 252,139
SILICON IMAGE,
INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands) Unaudited
Year Ended December 31,
2014 2013 Cash flows from operating
activities: Net income
$ 42,055 $ 11,490
Adjustments to reconcile net income to cash provided by operating
activities: Depreciation
6,477 6,270 Stock-based
compensation expense
10,006 10,515 Amortization of
investment premium
876 1,048 Tax benefits from employee
stock-based transactions
130
354 Amortization and impairment of intangible assets
5,119
3,124 Gain from business acquisition
(361 ) -
Deferred income taxes
(31,166
) 426 Excess tax benefits from employee stock-based
transactions
(130
)
(354 ) Non-operating proceeds from legal settlement
- (1,275
) Other than temporary impairment of a privately-held company
investment
- 1,500 Equity in net loss of unconsolidated
affiliate
150 489 Others
270 152 Changes in assets
and liabilities: Accounts receivable
11,248 2,818
Inventories
(5,419 ) (459 ) Prepaid expenses and
other assets
(1,791 ) 94 Accounts payable
895
2,208 Accrued and other liabilities
4,645 941 Deferred
margin on sales to distributors
(971 ) 557 Deferred
license revenue
(1,468 ) (706 )
Cash provided by operating activities
40,565
39,192 Cash flows from
investing activities: Proceeds from sales of short-term
investments
27,192 62,699 Purchases of short-term
investments
(20,263 ) (41,053 ) Cash used in business
acquisition, net of cash acquired
(13,464 ) -
Purchases of property and equipment
(7,739 ) (5,761 )
Proceeds from sale of a privately held company investment
7,571 - Proceeds from legal settlement
- 1,275
Investment in privately-held companies
- (1,500 ) Cash paid
for assets purchased from a privately-held company
- (300 )
Advances for intellectual properties
(915 ) (2,031 )
Other
- 103 Cash provided
by (used in) investing activities
(7,618 )
13,432
Cash flows from financing
activities: Proceeds from employee stock program
6,467
5,545 Excess tax benefits from employee stock-based transactions
130
354 Repurchase of restricted stock units for income tax withholding
(1,645 ) (1,981 ) Payment to acquire treasure shares
(10,832 ) (3,005 ) Proceeds from redeemable
noncontrolling interest
7,000 - Cash paid to settle
contingent consideration liabilities
(27 )
(81 ) Cash provided by (used in) financing activities
1093
832 Effect of exchange rate changes on cash
and cash equivalents
(41 ) (305
) Net increase in cash and cash equivalents
33,999 53,151
Cash and cash equivalents — beginning of year
82,220
29,069 Cash and cash equivalents — end
of year
$ 116,219 $ 82,220
Supplemental cash flow information: Cash payment for income
taxes
$ (7,420 ) $ (6,476 ) Restricted stock
units vested
$ 4,992 $ 5,617 Property and equipment
and other assets purchased but not paid for
$ 348 $
668
Unrealized loss on available-for-sale
securities
$ (36 ) $ (223 )
MEDIA CONTACT:Silicon Image, Inc.Sherrie Gutierrez,
408-616-4017Sherrie.Gutierrez@siliconimage.comorINVESTOR
RELATIONS CONTACT:Silicon Image, Inc.Alex Chervet,
408-616-4153Alex.Chervet@siliconimage.com
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