IDT Reports Fiscal Third Quarter 2008 Results

IDT® (Integrated Device Technology, Inc.)(NASDAQ:IDTI), a leading provider of essential mixed-signal semiconductor solutions that enrich the digital media experience, today announced results for the fiscal third quarter ended December 30, 2007. "We experienced broad strength in sales of timing devices across our computing, consumer and communications end markets. Increased sales of PC audio and PCI Express® devices, combined with robust timing product sales and sequential improvement in gross margin, allowed us to post EPS that was in line with the mid-point of our previous expectations,” stated Greg Lang, president and CEO of IDT. "While revenue growth in these markets was more than offset by weaker demand for our communications and server products, we continue to see strong design win momentum across many of our new product lines including PCI Express and PC audio, and we look forward to a strong second half of calendar year 2008 as these design wins ramp.” The following highlights the Company’s financial performance on both a GAAP and non-GAAP basis. The GAAP results include certain costs, charges, gains and losses in accordance with GAAP which are excluded from non-GAAP results based on management’s determination that they are not directly reflective of on-going operations. A complete reconciliation of GAAP to non-GAAP results is attached to this press release. Revenue for the fiscal third quarter of 2008 was $201.2 million, compared to $206.2 million reported in the same period one year ago. GAAP net income for the fiscal third quarter of 2008 was $13.4 million or $0.07 per diluted share, compared to a GAAP net loss of $1.9 million or approximately $0.01 per diluted share in same period one year ago. Fiscal third quarter 2008 GAAP results include $24.9 million of acquisition-related charges (including $24.5 million in amortization of intangibles and $0.4 million of other acquisition-related charges), and $9.4 million of stock-based compensation. Non-GAAP net income for the fiscal third quarter of 2008 was $46.7 million or $0.25 per diluted share, compared to non-GAAP net income of $51.7 million or $0.25 per diluted share reported in the same period one year ago. GAAP gross profit for the fiscal third quarter of 2008 was $88.3 million, compared to GAAP gross profit of $85.8 million in the same period one year ago. Non-GAAP gross profit for the fiscal third quarter of 2008 was $105.2 million, compared to non-GAAP gross profit of $109.6 million reported in the same period one year ago. GAAP R&D expense for the fiscal third quarter of 2008 was $40.6 million, compared with GAAP R&D expense of $43.5 million in the same period one year ago. Non-GAAP R&D expense for the fiscal third quarter of 2008 was $35.7 million, compared to non-GAAP R&D expense of $36.4 million in the same period one year ago. GAAP SG&A expense for the fiscal third quarter of 2008 was $38.9 million, compared to GAAP SG&A expense of $46.8 million in the same period one year ago. Non-GAAP SG&A expense for the fiscal third quarter of 2008 was $24.9 million, compared to non-GAAP SG&A expense of $24.5 million in the same period one year ago. Stock Repurchase Program Update During the fiscal third quarter of 2008, the Company repurchased approximately $102 million of IDT shares. The Company has approximately $135 million dollars remaining under its authorized repurchase program. Board of Directors Transition The Company also announced the addition of Mr. Gordon W. Parnell to its Board of Directors. Mr. Parnell currently serves as Vice President and Chief Financial Officer for Microchip Technology Inc. IDT also announced that its Board of Directors unanimously agreed to reduce the size of the Board. In connection with this reduction, John Bolger, John Howard, Ken Kannappan and Hock Tan have resigned from the IDT Board. "The integration of IDT and ICS has been successfully completed and now is a good time to streamline the Board,” said John Schofield, newly appointed Chairman of the Board. "On behalf of the Company, I would like to thank each of the departing directors for their dedicated service and valuable contributions. We are also extremely pleased to welcome Gordon Parnell to the Board and believe that his background and skill set make him an ideal successor to John Bolger as Chairman of the Audit Committee,” added Schofield. Webcast and Conference Call Information Investors can listen to a live or replay webcast of the Company’s quarterly financial conference call at http://www.IDT.com. The live webcast will begin at 1:30 p.m. Pacific time on January 24, 2008. The webcast replay will be available after 5:00 p.m. Pacific time on January 24, 2008. Investors can also listen to the live call at 1:30 p.m. Pacific time on January 24, 2008 by calling (888) 428-4478 or (651) 291-0618. The conference call replay will be available after 5:00 p.m. Pacific time on January 24, 2008 through 11:59 p.m. Pacific time on January 31, 2008 at (800) 475-6701 or (320) 365-3844. The access code is 905608. About IDT With the goal of continuously improving the digital media experience, IDT integrates its fundamental semiconductor heritage with essential innovation, developing and delivering low-power, mixed-signal solutions that solve customer problems. Headquartered in San Jose, Calif., IDT has design, manufacturing and sales facilities throughout the world. IDT stock is traded on the Nasdaq Global Select Stock Market® under the symbol "IDTI." Additional information about IDT is accessible at www.IDT.com. Forward Looking Statements Investors are cautioned that forward-looking statements in this release involve a number of risks and uncertainties that could cause actual results to differ materially from current expectations. Risks include, but are not limited to, global business and economic conditions, fluctuations in product demand, manufacturing capacity and costs, inventory management, competition, pricing, patent and other intellectual property rights of third parties, timely development and supply of new products and manufacturing processes, dependence on one or more customers for a significant portion of sales, successful integration of acquired businesses and technology, availability of capital, cash flow and other risk factors detailed in the Company’s Securities and Exchange Commission filings. The Company urges investors to review in detail the risks and uncertainties in the Company’s Securities and Exchange Commission filings, including but not limited to the Annual Report on Form 10-K for the fiscal year ended April 1, 2007 and Quarterly Report on Form 10-Q for the period ended September 30, 2007. IDT and the IDT logo are 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   Nine Months Ended   Dec. 30,   Sept. 30,   Dec. 31, Dec. 30,   Dec. 31,   2007     2007     2006     2007     2006     Revenues $ 201,228 $ 204,127 $ 206,196 604,371 596,908   Cost of revenues   112,904     115,937     120,406     342,969     340,213     Gross profit   88,324     88,190     85,790     261,402     256,695     Operating expenses:   Research and development 40,616 41,876 43,474 127,191 123,941   Selling, general and administrative 38,929 43,615 46,791 127,658 143,771   Acquired in-process research and development   -     -     -     -     500     Total operating expenses   79,545     85,491     90,265     254,849     268,212     Operating income (loss) 8,779 2,699 (4,475 ) 6,553 (11,517 )   Interest expense (20 ) (28 ) (59 ) (89 ) (210 )   Interest income and other, net   3,443     4,446     4,027     13,741     11,268     Income (loss) before income taxes 12,202 7,117 (507 ) 20,205 (459 )   Provision (benefit) for income taxes   (1,216 )   2,358     1,433     3,124     3,708     Net income (loss) $ 13,418   $ 4,759   $ (1,940 )   17,081     (4,167 )     Net Income (loss) per share:   Basic $ 0.07 $ 0.02 $ (0.01 ) $ 0.09 $ (0.02 )   Diluted $ 0.07 $ 0.02 $ (0.01 ) $ 0.09 $ (0.02 )   Weighted average shares:   Basic 186,720 190,745 197,332 190,240 198,633   Diluted 188,545 195,923 197,332 194,130 198,633 INTEGRATED DEVICE TECHNOLOGY, INC. RECONCILIATION OF GAAP TO NON-GAAP (Unaudited) (In thousands)     Three Months Ended Nine Months Ended Dec. 30, Sept. 30, Dec. 31, Dec. 30, Dec. 31,   2007     2007     2006     2007     2006       GAAP Net Income (Loss) $ 13,418   $ 4,759   $ (1,940 ) $ 17,081   $ (4,167 )   GAAP Diluted Income (Loss) Per Share $ 0.07   $ 0.02   $ (0.01 ) $ 0.09   $ (0.02 ) Acquisition Related:   Amortization of acquisition related intangibles (1) 24,492 29,942 39,664 85,509 116,125   Inventory FMV write-up (1) - - 207 - 3,722   Acquired In-process research and development (1) - - - - 500   Acquisition related costs (2) 398 540 727 2,046 3,719   Restructuring Related:   Severance and retention costs (3) 1,503 - 814 1,494 2,153   Assembly transition costs (4) - 193 427 468 427   Facility closure costs (5) (39 ) 183 232 295 761   Asset impairment (6) - - - - 2,482   Other:   Stock-based compensation expense (7) 9,391 11,800 11,178 33,021 35,419   Tax effects of Non-GAAP adjustments (8)   (2,415 )   853     366     (761 )   366     Non-GAAP Net Income $ 46,748   $ 48,270   $ 51,675   $ 139,153   $ 161,507     Non-GAAP Diluted Earnings Per Share $ 0.25   $ 0.25   $ 0.25   $ 0.72   $ 0.79     Weighted average shares:   Basic 186,720 190,745 197,332 190,240 198,633   Diluted 188,545 195,923 202,904 194,130 203,335       GAAP gross profit   88,324     88,190     85,790     261,402     256,695     Acquisition Related:   Amortization of acquisition related intangibles (1) 15,529 15,614 20,878 46,773 59,843   Inventory FMV write-up (1) - - 207 - 3,722   Acquisition related costs (2) 369 442 515 1,264 1,570   Restructuring Related:   Severance and retention costs (3) - - 574 (9 ) 1,407   Assembly transition costs (4) - 193 427 468 427   Facility closure costs (5) (8 ) 120 150 204 495   Asset impairment (6) - - - - 2,482   Other:   Stock-based compensation expense (7)   947     1,189     1,107     3,189     2,489     Non-GAAP gross profit   105,161     105,748     109,648     313,291     329,130       GAAP R&D Expenses:   40,616     41,876     43,474     127,191     123,941     Acquisition Related:   Amortization of acquisition related intangibles (1) (19 ) (19 ) (125 ) (100 ) (375 )   Acquisition related costs (2) 124 (77 ) (148 ) (49 ) (1,822 )   Restructuring Related:   Severance and retention costs (3) (262 ) - (240 ) (262 ) (559 )   Facility closure costs (5) 20 (36 ) (47 ) (57 ) (152 )   Other:   Stock-based compensation expense (7)   (4,782 )   (6,615 )   (6,510 )   (18,128 )   (19,321 )   Non-GAAP R&D Expenses   35,697     35,129     36,404     108,595     101,712       GAAP SG&A Expenses:   38,929     43,615     46,791     127,658     143,771     Acquisition Related:   Amortization of acquisition related intangibles (1) (8,944 ) (14,309 ) (18,661 ) (38,636 ) (55,907 )   Acquisition related costs (2) (153 ) (21 ) (64 ) (733 ) (327 )   Restructuring Related:   Severance and retention costs (3) (1,241 ) - - (1,241 ) (187 )   Facility closure costs (5) 11 (27 ) (35 ) (34 ) (114 )   Other:   Stock-based compensation expense (7)   (3,662 )   (3,996 )   (3,561 )   (11,704 )   (13,609 )   Non-GAAP SG&A Expenses   24,940     25,262     24,470     75,310     73,627       GAAP Interest income and other, net   3,423     4,418     3,968     13,652     11,058     Non-GAAP Interest income and other, net   3,423     4,418     3,968     13,652     11,058       GAAP Provision (benefit) for Income Taxes   (1,216 )   2,358     1,433     3,124     3,708     Tax effects of Non-GAAP adjustments (8) 2,415 (853 ) (366 ) 761 (366 )   Non-GAAP Provision for Income Taxes   1,199     1,505     1,067     3,885     3,342       (1) Consists of acquisition-related charges including amortization of intangible assets and the FMV adjustment of acquired inventory sold. In addition, the nine month ended December 31, 2007 includes acquired IPR&D related to our acquisition of Sigmatel's PC audio business in Q2 2007.   (2) Consists of costs incurred in connection with merger and acquisiton-related activities, including legal and accounting fees. Also includes costs associated with our merger with ICS and the acquisition of Freescale assets in Q2 2006, such as additional depreciation resulting from purchase accounting and costs associated with the exit of previously leased facilities.   (3) Consists of costs associated with restructuring actions initiated by the Company, primarily composed of severance and retention costs. Q3 2008 includes expenses related to the executive transition agreement with our Chief Executive Officer.   (4) Consists of the costs incurred as the Company transitions its assembly operations in Malaysia to a third-party.   (5) Consists of ongoing costs associated with the exit of our leased facilities in Santa Clara and Salinas and the closure of our manufacturing facility in the Philippines.   (6) Consists of an impairment charge related to our manufacturing facility in the Philippines.   (7) Consists of stock-based compensation expense.   (8) Consists of the tax effects of acquisition-related non-GAAP adjustments. Q3 2008 includes an adjustment to the deferred taxes established in connection with the ICS merger, as a result of a decrease in enacted foreign jurisdiction tax rate in the quarter. INTEGRATED DEVICE TECHNOLOGY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)     Dec. 30, Apr. 1, (In thousands)   2007   2007   ASSETS   Current assets:   Cash and cash equivalents $ 170,035 $ 246,589   Short-term investments 114,695 113,344   Accounts receivable, net 92,278 89,986   Inventories 79,403 85,076   Deferred Taxes 7,910 7,308   Prepaid and other current assets   29,301   29,437   Total current assets 493,622 571,740   Property, plant and equipment, net 83,176 93,058   Goodwill 1,034,118 1,038,064   Acquisition-related intangibles 228,974 314,484   Other assets   29,652   24,386   TOTAL ASSETS $ 1,869,542 $ 2,041,732   LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities:   Accounts payable $ 45,082 $ 47,854   Accrued compensation and related expenses 23,802 30,882   Deferred income on shipments to distributors 28,806 34,343   Income taxes payable 8,807 30,514   Other accrued liabilities   17,069   22,445   Total current liabilities 123,566 166,038     Deferred tax liabilities 20,521 20,603   Long term income taxes payable 21,400 -   Long term liabilities   17,277   16,001   Total liabilities 182,764 202,642     Stockholders' equity   1,686,778   1,839,090   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,869,542 $ 2,041,732