Alliance Semiconductor Reports Financial Results for the Quarter Ended June 27, 1998; Also Announces Restructuring Plan
Business Wire - July 21, 1998 16:17
SPECIAL ADVISORY: Except for historical information contained herein, the following material constitutes forward looking statements; actual results could differ materially from those projected in the forward looking statements, as set forth in the last paragraph of this communication.
SAN JOSE, Calif.--(BUSINESS WIRE)--July 21, 1998--Alliance Semiconductor Corporation (NASDAQ:ALSC) today reported net revenues of $10.2 million and net loss of $14.7 million or $0.36 per share for the quarter ended June 27, 1998.
The net loss includes a pre-tax charge of $17.0 million primarily to adjust the value of the Company's inventory and a valuation allowance of $8.4 million with respect to the Company's previously recorded deferred tax asset. The Company also did not recognize a deferred tax asset (which would have been $2.8 million) with respect to the first fiscal quarter's loss.
Also included in the results is a net profit of $3.5 million or $0.09 per share attributable to recognition of the Company's share of income from United Semiconductor Corporation (USC), based on approximately 15.5% ownership. The results also included a pre-tax gain of $15.8 million from the previously announced sale of 35 million shares of USC in April 1998. In the quarter, SRAMs accounted for 58% of revenues and DRAMs 41%.
These results compare to revenues of $36.3 million for the same quarter last year and net profit of $1.1 million or $0.03 per share, including a net profit of $1.9 million or $0.05 per share attributable to recognition of the Company's share of income from USC.
The Company has also instituted a restructuring plan, including a departure from its graphics accelerator product line and a workforce reduction of approximately 45 positions, or 30% of the Company's domestic workforce, including graphics and other personnel. The graphics accelerator product line contributed 7% to revenues in fiscal year 1998 and less than 1% in the quarter ended June 27, 1998.
"As we previously stated in our May 27, 1998 announcement, this quarter was a great disappointment for the Company," said N.D. Reddy, Chairman, President and CEO of Alliance. "Because of our heavy exposure to DRAM in prior quarters, our revenues and profits were hampered by rapidly falling average selling prices in the DRAM product line. Because of the current business environment, and to align the focus of the business with our long term strategies, we have taken a number of steps to greatly reduce our expenses, including exiting the graphics accelerator business and a headcount reduction.
"Due to increased competition, lack of significant revenue contribution, and high operating costs associated with the graphics product line, we felt it was in the best interest of the Company to take this action. We will instead refocus on our core strength in the high performance memory business and embedded memory and logic technologies for emerging high growth markets. The restructuring program is expected to result in significant cost savings and support the Company's goal to return to operating profitability."
Mr. Reddy continued, "Consistent with previous statements, visibility is expected to remain limited throughout the second half of this calendar year. The Company currently expects resumed growth in the third fiscal quarter of 1999, due to a number of factors including new product introductions in all memory product lines, the migration to more cost effective technologies and the introduction of embedded memory and logic based products for the networking market."
Mr. Reddy noted, "To the extent the Company generates sufficient taxable income in subsequent quarters, the $11.2 million of fully reserved deferred tax assets may be used to offset future tax liabilities. The Company believes that in light of the current business conditions, it is more conservative and appropriate to record the valuation allowance against the deferred tax asset and to not recognize further deferred tax assets at this time.
"The Company intends to reevaluate this position in the future in light of circumstances that may exist at that time. Moreover, as previously disclosed, the Company has the right to receive a payment of up to 665 million New Taiwan Dollars (US$19.4 million at recent exchange rates, which are subject to material change) in connection with its April 1998 sale of 35 million shares of USC."
Legal Update
The Company also announced that in June 1998, the District Court entered judgment dismissing the securities class action lawsuit that had been lodged against the Company in 1996. The one claim that had not previously been dismissed with prejudice was dismissed by plaintiff without prejudice, on the condition that if the Court's dismissal of the other claims is affirmed in its entirety, the remaining claim would be deemed dismissed with prejudice as well. Plaintiff has appealed the judgment.
"The Company is pleased with its success in this litigation to date, and will continue its aggressive defense. The Company believes it has meritorious arguments to make to the appeals court in favor of affirming the trial court," said Gregory Barton, the Company's General Counsel.
The Company also announced that it has recently learned that a default judgment might soon be entered against the Company in Canada, in the amount of approximately US$170 million, in a case filed in 1985. "The Company never participated in this case. The Company believes that it never was properly served with process in this action, and that the Canadian court lacks jurisdiction over the Company in this matter," said Mr. Barton.
To the best of the Company's knowledge today, the lawsuit relates to actions alleged to have occurred in 1985 and earlier. In addition to jurisdictional and procedural arguments, the Company also believes it may have grounds to argue that the claims against the Company should be deemed discharged by the Company's bankruptcy in 1991. "The Company is currently evaluating this matter, and intends to take vigorous action to defend itself," concluded Mr. Barton.
Company Information
Alliance Semiconductor Corporation is a leading worldwide supplier of high performance memory and memory intensive logic products. Alliance's product lines include Static Random Access Memory (SRAM), Dynamic Random Access Memory (DRAM), Flash memory and embedded memory and logic technologies.
Alliance designs, develops and markets its products to the desktop and portable computing, networking, telecommunications and instrumentation markets. Alliance manufactures its products through independent and joint venture manufacturing facilities, using advanced CMOS process technologies with line widths as narrow as 0.25 microns.
Alliance was founded in 1985 with headquarters in San Jose, California. Additional Company information can be found on our home page: alsc.com.
Except for historical information, the above statements of this press release (including, without limitation, expressions of expectation, belief, anticipation or estimation of the Company or its management) are forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward looking statements.
These risks and uncertainties include such factors, among others, as the potential for continued price erosion of the Company's products; decreased demand or increased competitive environment for the Company's products, including, without limitation, changes in the status of the SRAM, DRAM, Flash memory and embedded memory and logic markets and the demand for the Company's SRAM, DRAM, Flash memory and embedded memory and logic products; inability of the Company to obtain necessary capacity, timely delivery or acceptable yields from the entities that provide wafer fabrication, wafer sort, assembly and/or test services to the Company; increases in prices such entities charge the Company for wafer fabrication, wafer sort, assembly and/or test services; obsolescence of the Company's products; accumulation of excess inventory or price erosion or obsolescence of existing inventory, any of which may result in charges against the Company's earnings; inability to timely ramp up production of and deliver new or enhanced SRAM or DRAM products; inability to successfully develop and introduce Flash and embedded memory and logic products; inability to successfully recruit and retain qualified technical and other personnel; adverse effects of the recent financial and economic crisis in Asia; adverse developments in current or future litigation or administrative proceedings, including without limitation liquidation of antidumping duties imposed on the Company's importation of Taiwan-manufactured SRAMs; and the risk factors listed under Item 1: Business and Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Form 10-K for the fiscal year ended March 28, 1998 which has been filed with the Securities and Exchange Commission and each of which are available through the Company's home page, alsc.com.
These forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statement is based, in whole or in part.
ALLIANCE SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
June 30,
1998 1997
Net revenue $ 10,150 $ 36,339
Cost of revenue 27,491 29,615
Gross profit (17,341) 6,724
Operating expenses:
Research and development 4,216 4,107
Selling, general and administrative 4,011 4,055
Total operating expenses 8,227 8,162
Income (loss) from operations (25,568) (1,438)
Other income, net 15,740 189
Income (loss) before income taxes
and equity in income of USC (9,828) (1,249)
Expense (Benefit) for income taxes 8,397 (437)
Income (loss) before equity in
income of USC (18,225) (812)
Equity in income of USC 3,546 1,920
Net income (loss) ($14,679) $ 1,108
Net income (loss) per share:
Basic ($ 0.36) $ 0.03
Diluted ($ 0.36) $ 0.03
Weighted average number of common shares:
Basic 40,963 38,999
Diluted 40,963 41,042
ALLIANCE SEMICONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 30, March 31,
1998 1998
ASSETS
Current assets:
Cash and cash equivalents $ 12,670 $ 9,522
Accounts receivable, net 5,776 15,716
Inventory 27,648 32,375
Other current assets 20,408 27,214
Total current assets 66,502 84,827
Property and equipment, net 11,181 11,123
Investment in Chartered Semiconductor 51,596 51,596
Investment in United Semiconductor Corp. 73,642 85,935
Investment in United Silicon, Inc. 13,701 13,701
Other assets 1,832 1,083
$218,454 $248,265
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,110 $ 35,714
Accrued liabilities 7,298 7,771
Current portion of long
term obligations 1,258 1,463
Total current
liabilities 28,666 44,948
Long term obligations 1,012 1,276
Total liabilities 29,678 46,224
Stockholders' equity
Common stock 414 404
Additional paid-in capital 184,503 183,099
Retained earnings 3,859 18,538
Total stockholders'
equity 188,776 202,041
$218,454 $248,265
CONTACT: Allied Semiconductor
Janine Zanelli, 408/383-4900
investor@alsc.com |
