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Press Release Source: TranSwitch Corporation
TranSwitch Corporation Announces Third Quarter Results
Wednesday October 16, 4:05 pm ET
SHELTON, Conn.--(BUSINESS WIRE)--Oct. 16, 2002--TranSwitch Corporation (NASDAQ: TXCC - News) announced today that it posted third quarter 2002 net revenues of $3.7 million and a net loss on a GAAP (Generally Accepted Accounting Principles) basis, of ($157.2) million, or ($1.74) per basic and diluted share.
The net loss includes the following:
a $61.4 million charge related to the valuation allowance for deferred income taxes;
a $59.9 million charge to reflect the impairment of goodwill;
a $7.7 million charge to reflect the impairment of investments in non-publicly traded companies;
a $5.5 million restructuring charge related to the July 2002 workforce reduction and design center consolidations;
a $4.8 million write-down for excess inventory based on the Company's assessment of demand for current products; and
a benefit of $0.2 million related to the sale of previously reserved inventory.
The pro forma net loss for the third quarter of 2002 was ($17.9) million, or ($0.20) per diluted share. The Company also announced that it is no longer presenting loss per share figures on a "diluted, as adjusted" basis as the likelihood of the conversion of its convertible notes is remote.
For comparison purposes, the net loss on a GAAP basis (as restated due to changing from the cost to the equity method of accounting for the Company's investment in OptiX Networks, Inc.) for the relevant 2001 and 2002 quarters was:
for the third quarter of 2001, the net loss was ($22.8) million, or ($.26) per basic and diluted share; and
for the second quarter of 2002, the net loss was ($9.0) million, or ($.10) per basic and diluted share.
For comparison purposes, the net loss on a pro-forma basis (as restated for OptiX Networks, Inc.) for the relevant 2001 and 2002 quarters was:
for the third quarter of 2001, the net loss was ($10.2) million, or ($.12) per diluted share; and
for the second quarter of 2002, the net loss was ($10.7) million, or ($.12) per diluted share.
The Company anticipates that fourth quarter, 2002, net revenues will be approximately $3.0 million and that fourth quarter, 2002 pro forma diluted loss per share will be in the range of ($0.20-$0.21) per share.
"While our third quarter results have been disappointing and industry conditions continue to be challenging, TranSwitch is winning significant design wins among our worldwide customer base. This is due to our ability to define the targeted solutions that the marketplace requires as our end market emerges from this unprecedented downturn," stated Dr. Santanu Das, Chairman of the Board, Chief Executive Officer and President of TranSwitch Corporation.
"In the third quarter, we secured 48 design wins at 30 customers with increasing Tier 1 success," stated Dr. Das. "Ethernet over SONET (EoS) products are a strong focus for TranSwitch and our new EtherMap-3 product has recently shipped to multiple customers. Several customers are testing their new generation systems based on our solution. Furthermore, our OMNI chip set has shipped in pilot production quantities to a customer that is in evaluation with a major carrier," continued Dr. Das.
"Our strategy is to deliver focused solutions, such as the EtherMap-3, that allow telecommunication carriers to immediately enhance their revenue from the existing SONET/SDH infrastructure. These solutions include additional EtherMap products, our CUBIT and ASPEN family of products and the new packet processing products that we are rapidly developing. Worldwide customer feedback indicates that our approach is right on target," continued Dr. Das. "This focused approach will enable us to deploy our research and development resources in the most efficient manner and further reduce our operating expenses. While 2002 will have been the toughest year in our industry's history, our customer's reception of our new family of products leads us to have positive anticipation for the future," concluded Dr. Das.
There will be a conference call regarding this announcement on Wednesday, October 16, 2002 at 5:30 PM EDT. The dial-in number is 1-703-736-7293, the conference passcode is 6241225. The call will be recorded and a replay will be available for 15 days at 1-703-925-2533 using the same passcode information beginning at 8:30 PM EDT. Interested parties can also access the webcast via www.vcall.com by clicking on the TranSwitch Corporation conference call link. This audio webcast will also be available on a replay basis for 15 days.
About TranSwitch Corporation:
TranSwitch Corporation, headquartered in Shelton, Connecticut, is a leading developer and global supplier of innovative high-speed VLSI semiconductor solutions - Connectivity Engines (TM)- to original equipment manufacturers who serve three end-markets: the Worldwide Public Network Infrastructure, the Internet Infrastructure, and corporate Wide Area Networks (WANs). Combining its in-depth understanding of applicable global communication standards and its world-class expertise in semiconductor design, TranSwitch Corporation implements communications standards in VLSI solutions that deliver high levels of performance. Committed to providing high-quality products and service, TranSwitch is ISO 9001 registered. Detailed information on TranSwitch products, news announcements, seminars, service and support is available on TranSwitch's home page at the World Wide Web site - transwitch.com.
Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements regarding TranSwitch, its operations and its financial results involve risks and uncertainties, including without limitation risks of downturns in economic conditions generally and in the telecommunications and data communications markets and the semiconductor industry specifically; risks associated with foreign sales and high customer concentration; risks associated with competition and competitive pricing pressures; risks associated with acquiring new businesses; risks relating to TranSwitch's indebtedness; risks in product development and market acceptance of and demand for TranSwitch's products and products developed by TranSwitch's customers; risks of dependence on third-party VLSI fabrication facilities; risks related to intellectual property rights and litigation; risks in technology development and commercialization; risks of failing to attract and retain key managerial and technical personnel; and other risks detailed in TranSwitch's filings with the Securities and Exchange Commission.
TranSwitch Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
------ ------ ------ ------
Net Revenues:
Product revenues $ 3,635 $ 4,486 $ 12,430 $ 53,773
Service revenues 23 16 579 411
------- ------- -------- -------
Total net revenues 3,658 4,502 13,009 54,184
Cost of revenues:
Cost of product revenues 1,604 1,163 4,149 18,843
Cost of service revenues - - 846 222
Provision for excess
inventories 4,832 - 4,832 24,694
------- ------- -------- -------
Total cost of revenues 6,436 1,163 9,827 43,759
Gross (loss) profit (2,778) 3,339 3,182 10,425
Operating expenses:
Research and development 13,972 11,658 40,487 34,638
Marketing and sales 3,393 4,712 10,070 18,222
General and administrative 1,618 2,026 5,814 6,547
Impairment and amortization
of goodwill 59,901 630 59,901 1,806
Restructuring charges and
asset impairments 5,532 1,891 4,052 1,891
In-process research
and development - 22,000 2,000 22,000
------- ------- ------- -------
Total operating expenses 84,416 42,917 122,324 85,104
------- ------- ------- -------
Operating loss (87,194) (39,578) (119,142) (74,679)
Other income (expense):
Impairment of investments
in non-publicly traded
companies, at cost (7,719) - (7,719) -
Equity losses in affiliates (733) (501) (1,848) (1,240)
Interest income (expense), net (27) 196 (1,522) 3,881
------ ------- ------- -------
Total other income (expense)(8,479) (305) (11,089) 2,641
Loss before income taxes
and extraordinary gain (95,673) (39,883) (130,231) (72,038)
Income tax provision (benefit) 61,478 (6,215) 49,752 (17,210)
------ ------- ------- -------
Loss before
extraordinary gain (157,151) (33,668) (179,983) (54,828)
Extraordinary gain from
repurchase of 4.5% convertible
notes, net of income taxes
of $0 and $5,709 for the
third quarter and $19,491
and $12,247 for the nine
months, respectively - 10,918 32,485 23,060
------- ------- ------- -------
Net loss $ (157,151)$ (22,750) $(147,498) $(31,768)
======= ======= ======= =======
Basic and diluted loss
per common share:
Loss before
extraordinary gain $ (1.74) $ (0.39) $ (2.00) $ (0.64)
Extraordinary gain - 0.13 0.36 0.27
------- ------- ------- -------
Net loss $ (1.74) $ (0.26) $ (1.64) $ (0.37)
======= ======= ======= =======
Basic and diluted average
shares outstanding 90,085 87,300 90,023 85,682
1. These unaudited Consolidated Statements of Operations are
presented in accordance with GAAP (Generally Accepted Accounting
Principles).
2. For purposes of calculating diluted loss per common share, the
assumed exercise of options and conversion of convertible notes
into common stock are not taken into consideration as their effect
is anti-dilutive for all periods presented.
3. Historical results have been restated to reflect the change from
the cost to the equity method of accounting for the Company's
investment in OptiX Networks, Inc., as required by GAAP.
TranSwitch Corporation
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
------ ------ ------ ------
Net Revenues:
Product revenues $ 3,635 $ 4,486 $ 12,430 $ 53,773
Service revenues 23 16 579 411
------- ------- ------- -------
Total net revenues 3,658 4,502 13,009 54,184
Cost of revenues:
Cost of product revenues 1,786 1,163 5,884 18,843
Cost of service revenues - - 846 222
------- ------- ------- -------
Total cost of revenues 1,786 1,163 6,730 19,065
Gross profit 1,872 3,339 6,279 35,119
Operating expenses:
Research and development 13,889 11,658 40,152 34,638
Marketing and sales 3,393 4,712 10,070 18,222
General and administrative 1,618 2,026 5,814 6,547
------- ------- ------- -------
Total operating expenses 18,900 18,396 56,036 59,407
------- ------- ------- -------
Operating loss (17,028) (15,057) (49,757) (24,288)
Other income (expense):
Equity losses in affiliates (733) (501) (1,848) (1,240)
Interest income (expense), net (27) 196 (1,522) 3,881
------- ------- ------- -------
Total other income (expense) (760) (305) (3,370) 2,641
Loss before income taxes (17,788) (15,362) (53,127) (21,647)
Income tax provision (benefit) 92 (5,201) (11,886) (7,380)
------- ------- ------- -------
Net loss $ (17,880)$ (10,161) $(41,241) $(14,267)
======= ======= ======= =======
Diluted loss per common share $ (0.20) $ (0.12) $ (0.46) $ (0.17)
Diluted average shares
outstanding 90,085 87,300 90,023 85,682
1. For purposes of preparing these Pro Forma Consolidated Statements
of Operations, certain pro forma adjustments have been made and
are included in the Reconciliation of Unaudited Consolidated
Statements of Operations to the Unaudited Pro Forma Consolidated
Statements of Operations (on page 5 of this release). This is not
a GAAP presentation.
2. For purposes of calculating diluted loss per common share, the
assumed exercise of options and conversion of convertible notes
into common stock are not taken into consideration as their effect
is anti-dilutive for all periods presented.
3. Historical results have been restated to reflect the change from
the cost to the equity method of accounting for the Company's
investment in OptiX Networks, Inc., as required by GAAP.
TranSwitch Corporation
Reconciliation of Unaudited Consolidated Statements of operations to
the Unaudited Pro forma Consolidated
Statements of Operations
(amounts in thousands)
Three Months Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
------ ------ ------ ------
Net loss, Unaudited
Consolidated Statements
of Operations $(157,151) $(22,750) $(147,498) $(31,768)
Provision for excess
inventories 4,832 - 4,832 24,694
Benefit from the sale of
excess inventories (182) - (1,735) -
Amortization of unearned
compensation, goodwill and
purchased intangible assets 83 630 335 1,806
Impairment of goodwill 59,901 - 59,901 -
Purchased in-process
research & development - 22,000 2,000 22,000
Impairment of investments in
non-publicly traded companies,
at cost 7,719 - 7,719 -
Restructuring expense 5,532 1,891 4,052 1,891
Difference in benefit for
income taxes 61,386 (1,014) 61,638 (9,830)
Extraordinary gain from
repurchase of 4.5%
convertible notes, net of
income taxes - (10,918) (32,485) (23,060)
------ ------- ------- -------
Net loss, Unaudited Pro Forma
Statements of Operations $(17,880) $(10,161) $(41,241) $(14,267)
====== ======= ======= =======
1. The purpose of the above schedule is to reconcile GAAP (Generally
Accepted Accounting Principles) basis net loss from the
"Consolidated Statements of Operations" (on page 3 of this
release) to pro forma net loss from the "Pro Forma Consolidated
Statements of Operations" (on page 4 of this release).
2. Historical results have been restated to reflect the change from
the cost to the equity method of accounting for the Company's
investment in OptiX Networks, Inc., as required by GAAP.
TranSwitch Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
September 30, December 31,
2002 2001
------------- ------------
Assets
Cash and short-term investments $ 200,960 $ 409,592
Accounts receivable, net 2,498 3,525
Inventories 3,798 8,227
Other current assets 4,159 5,959
-------- --------
Total current assets 211,415 427,303
-------- --------
Long-term investments
(marketable securities) 19,579 26,582
Property and equipment, net 18,643 18,946
Deferred income taxes, net 74 65,536
Goodwill and purchased intangible
assets, net 1,710 56,107
Other assets 8,918 21,890
-------- --------
Total assets $ 260,339 $ 616,364
======== ========
Liabilities and stockholders' equity
Accounts payable, accrued expenses
and other current liabilities $ 14,731 $ 22,246
Deferred revenues - 51
Restructuring liabilities 2,916 2,999
-------- --------
Total current liabilities 17,647 25,296
-------- --------
Restructuring liabilities 25,462 26,925
Convertible notes 114,113 314,050
-------- --------
Total liabilities 157,222 366,271
-------- --------
Total stockholders' equity 103,117 250,093
-------- --------
Total liabilities and
stockholders' equity $ 260,339 $ 616,364
======== ========
1. Historical results have been restated to reflect the change from
the cost to the equity method of accounting for the Company's
investment in OptiX Networks, Inc., as required by GAAP.
--------------------------------------------------------------------------------
Contact:
TranSwitch Corporation, Shelton
Peter J. Tallian, 203/929-8810, ext. 2427
Fax: 203/926-9453
www.transwitch.com
--------------------------------------------------------------------------------
Source: TranSwitch Corporation |
