- Company files reports with restated financial information and is now
current with its SEC reporting obligations
- Achieves net income of $16.3 million for 2006
- Non-GAAP net income grows 94% to $52.1 million, or $1.03 per diluted
share
SUNNYVALE, Calif., April 20 /PRNewswire-FirstCall/ -- Zoran Corporation
(Nasdaq: ZRAN), a leading provider of digital solutions for applications in
the growing digital entertainment and digital imaging markets, today
reported its 2006 financial results, including detail for each of the
quarters of 2006. The Company also filed its 2006 Annual Report on Form
10-K, containing restated financial statements reflecting accounting
adjustments required as a result of the Company's recently-completed
independent review of historical stock option practices. In this report the
Company is restating prior fiscal periods to reflect $11.7 million of
additional stock-based compensation expense relating to stock option grants
made during the period January 1, 1997 to December 31, 2003, a well as
certain other adjustments.
For the full year 2006, total revenues grew 25 percent to $495.8
million, up from $395.8 million for 2005. 2006 revenues include $35.8
million received pursuant to the settlement of litigation reached during
the first quarter. Excluding that settlement amount, 2006 revenues were
$460.0 million, an increase of 16 percent over 2005. The Company reported
2006 net income of $16.3 million, or $0.33 per diluted share, compared with
a 2005 net loss of $30.3 million, or $0.68 per share. Non-GAAP net income
for 2006 was $52.1 million, or $1.03 per diluted share, compared with $26.8
million, or $0.59 per diluted share for 2005. Non-GAAP net income excludes
the proceeds from the litigation settlement revenues and the associated
provision for income tax expense, charges related to the amortization of
acquisition-related purchased intangible assets, stock-based compensation
expenses recorded under FAS 123R.
Additionally, Zoran released the following financial information:
-- Net income for the first, second, third quarters of 2006 was $20.7
million, $4.8 million and $1.8 million, respectively, and net loss for
the fourth quarter was $11.0 million.
-- Non-GAAP net income for the first, second, third and fourth quarters of
2006 was $14.8 million, $14.6 million, $18.0 million and $4.7 million,
respectively.
-- Hardware product revenues for the first, second, third and fourth
quarters of 2006 were $99.2 million, $108.2 million, $115.6 million and
$80.7 million, respectively. Hardware product revenues declined in the
fourth quarter in line with the seasonally weak period as well as
increased price erosion in the DVD market and delays in customer
product launches in the DTV business.
-- Software royalties, licensing and other revenues were $12.9 million,
$14.1 million, $13.8 million and $15.5 million, for the first, second,
third and fourth quarters of 2006, respectively.
-- Excluding litigation settlement revenues, overall gross margin was 52%,
51%, 48% and 53% for the first, second, third and fourth quarters of
2006, respectively. Overall gross margin in the third quarter was
impacted by a mix shift towards DVD as well as pricing erosion.
-- Hardware gross margin was 46%, 44%, 42% and 44% for the first, second,
third and fourth quarters of 2006, respectively.
-- Expenses under FAS 123R were allocated as follows: For the first
quarter, $0.2 million was allocated to manufacturing overhead included
in the cost of sales, $1.6 million was allocated to research and
development (R&D) and $3.0 million was allocated to sales, general and
administration (SG&A); for the second quarter, $0.1 million was
allocated to manufacturing overhead included in the cost of sales, $1.4
million was allocated to R&D and $3.6 million was allocated to SG&A;
for the third quarter, $0.1 million was allocated to manufacturing
overhead included in the cost of sales, $1.2 million was allocated to
R&D and $2.4 million was allocated to SG&A; and, for the fourth
quarter, $0.1 million was allocated to manufacturing overhead included
in the cost of sales, $1.2 million was allocated to R&D and $2.2
million was allocated to SG&A.
-- Operating income was $26.7 million for the first quarter of 2006 and
operating losses were $0.5 million, $1.0 million and $14.6 million for
the second, third and fourth quarters of 2006, respectively.
-- Legal and accounting expenses in connection with the stock option
review included in net income for the third and fourth quarters were
$3.3 million $2.5 million respectively.
-- 2006 sales by geographic region were 33% China, 22% Japan, 26% Taiwan,
19% Korea, United States, Europe and other.
Zoran also filed its Quarterly Reports on Form 10-Q for the three-month
periods ended September 30, 2006 and June 30, 2006, and an amendment to its
previously-filed Quarterly Report on Form 10-Q for the three month period
ended March 31, 2006. With today's filings, the Company is now current it
its SEC reporting obligations and believes that it has satisfied all of the
conditions of the NASDAQ Listing Qualifications Panel for the continued
listing of its common stock on the NASDAQ Global Select Market.
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, Zoran reports non-GAAP financial
information, consisting of non-GAAP net income (loss) that excludes
proceeds received as part of litigation settlements and the associated
provision for income taxes, amortization of acquisition-related intangibles
and stock-based compensation expenses.
The Company believes that its non-GAAP financial information provides
useful information to management and investors regarding financial and
business trends relating to its financial condition and results of
operations because it excludes charges that management considers to be
outside of the Company's core operating results. The Company believes that
this non-GAAP net income (loss), in combination with the Company's
financial results calculated in accordance with GAAP, provides investors
with additional perspective and a more meaningful understanding of the
Company's ongoing operating performance. In addition, the Company's
management uses these non-GAAP measures to review and assess the financial
performance of the Company and to plan and forecast performance in future
periods. The Company's non-GAAP net income (loss) is not prepared in
accordance with GAAP, is not an alternative to GAAP financial information,
and may be calculated differently than non-GAAP financial information
disclosed by other companies.
Company Profile
Zoran Corporation, based in Sunnyvale, California, is a leading
provider of digital solutions for applications in the growing digital
entertainment and digital imaging markets. With two decades of expertise
developing and delivering digital signal processing technologies, Zoran has
pioneered high- performance digital audio and video, imaging applications,
and Connect Share Entertain technologies for the digital home. Zoran's
proficiency in integration delivers major benefits for OEM customers,
including greater capabilities within each product generation, reduced
system costs, and shorter time to market. Zoran-based DVD, digital camera,
DTV, multimedia mobile phone, and multifunction printer products have
received recognition for excellence and are now in hundreds of millions of
homes and offices worldwide. With headquarters in the U.S. and operations
in Canada, China, England, Germany, India, Israel, Japan, Korea and Taiwan.
Zoran may be contacted on the World Wide Web at http://www.zoran.com or at
408-523-6500.
Forward-Looking Statements
This press release includes forward-looking statements that reflect the
Company's current view with respect to future events and financial
performance. These forward-looking statements are subject to a variety of
risks and uncertainties that could cause actual results to differ
materially from those projected in the forward-looking statements,
including risks associated with: potential litigation or regulatory action
associated with our review of historical stock option practices and related
financial restatements; the rapidly evolving markets for the Company's
products and uncertainty regarding the development of these markets; new
product development, introductions of new products by the Company and its
competitors and transitions away from older products; intense competition
in multiple markets; the Company's reliance on third parties for wafer
supplies, product assembly and testing, and scalable manufacturing
capacity; the effects of changes in revenue and product mix on the
Company's gross margins; the Company's dependence on sales to large
customers; fluctuations in product mix; dependence on key Company
personnel; and reliance on international sales and operations, particularly
operations in Israel. Further information regarding these and other risks
and uncertainties can be found in the Company's most recently filed Annual
Report on Form 10-K and other filings with the SEC. Zoran, the Zoran logo,
SupraHD, SupraTV, Vaddis, and Quatro are trademarks of Zoran Corporation in
the United States and/or other countries. All other brands or names may be
claimed as property of others.
ZORAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share data)
(unaudited)
Three months ended Year Ended
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
2006 2006 2006 2006 2006
Revenues:
Hardware product
revenues $99,169 $108,236 $115,602 $80,737 $403,744
Software and other
revenues 12,909 14,069 13,777 15,514 56,269
License litigation
settlement revenues 30,168 5,624 - - 35,792
Total revenues 142,246 127,929 129,379 96,251 495,805
Costs and expenses:
Cost of hardware
product revenues 53,650 60,355 66,810 45,445 226,260
Research and
development 24,248 25,226 25,255 24,373 99,102
Selling, general and
administrative 24,901 30,109 25,907 28,908 109,825
Amortization of
intangibles 12,735 12,735 12,423 12,169 50,062
Total costs and
expenses 115,534 128,425 130,395 110,895 485,249
Operating income (loss) 26,712 (496) (1,016) (14,644) 10,556
Interest & other income,
net 2,786 2,451 2,798 3,499 11,534
Income (loss) before
income taxes 29,498 1,955 1,782 (11,145) 22,090
Provision (benefit) for
income taxes 8,815 (2,824) (70) (159) 5,762
Net income (loss) $20,683 $4,779 $1,852 $(10,986) $16,328
Basic net income (loss)
per share $0.45 $0.10 $0.04 $(0.22) $0.34
Diluted net income (loss)
per share $0.43 $0.09 $0.04 $(0.22) $0.33
Shares used to compute
basic net income (loss)
per share 46,207 48,461 49,333 49,426 48,353
Shares used to compute
diluted net income
(loss) per share 48,487 51,311 50,712 49,426 50,099
ZORAN CORPORATION
RECONCILIATION OF GAAP NET INCOME (LOSS) TO
NON-GAAP NET INCOME
(in thousands, except per share data)
(unaudited)
Three months ended Year Ended
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
2006 2006 2006 2006 2006
GAAP net income (loss) $20,683 $4,779 $1,852 $(10,986) $16,328
GAAP basic net
income per share $0.45 $0.10 $0.04 $(0.22) $0.34
GAAP diluted net
income per share $0.43 $0.09 $0.04 $(0.22) $0.33
Shares used to
compute GAAP basic net
income per share 46,207 48,461 49,333 $49,426 48,353
Shares used to compute
GAAP diluted
net income per share 48,487 51,311 50,712 $49,426 50,099
GAAP net income (loss) $20,683 $4,779 $1,852 $(10,986) $16,328
Adjusting items to
GAAP net income
(loss):
Litigation settlement
revenues (net) (23,479)(a)(8,067)(a) - - (31,546)(a)
Amortization of
intangibles 12,735(b) 12,735(b) 12,423(b) 12,169(b) 50,062(b)
Operating expenses
related to stock
based
compensation 4,813(c) 5,145(c) 3,770(c) 3,566(c) 17,294(c)
Non-GAAP net
income $14,752 $14,592 $18,045 $4,749 $52,138
Non-GAAP basic net
income per share $0.32 $0.30 $0.37 $0.10 $1.08
Non-GAAP diluted net
income per share $0.30 $0.28 $0.35 $0.09 $1.03
Shares used to compute
non-GAAP basic
net income per share 46,207 48,461 49,333 49,426 48,353
Shares used to
compute non-GAAP
diluted net income
per share 49,264 51,864 51,028 50,396 50,619
(a) This adjustment reflects the proceeds received from the settlement of
a license litigation net of associated fees and estimated income taxes.
This amount is excluded by management when evaluating our core operating
results as it is considered a non-recurring item which is not part of our
ordinary, ongoing and customary course of operations. (see (d) below)
(b) This adjustment reflects the amortization of intangible assets
associated with the acquisitions of Oak Technology, Inc. in August 2003,
Emblaze Semiconductor in July 2004 and Oren Semiconductor, Inc. in June
2005. These acquired intangible assets are amortized over their
estimated useful lives. Such amortization expense does not impact the
Company's cash flows and is excluded by management when evaluating our
core operating results. (see (d) below)
(c) This adjustment reflects the stock-based compensation expense
recorded under SFAS 123R, the incremental stock based compensation
expense as a result of the remeasurement of certain stock options as part
of the Company's stock option review and the related expenses under IRS
409(A) that will be incurred by the Company. The Company excludes these
item when it evaluates the continuing operational performance of the
Company as management believes this GAAP measure is not indicative of its
core operating performance. (see (d) below)
(d) The Company believes that its non-GAAP financial information provides
useful information to management and investors regarding financial and
business trends relating to its financial condition and results of
operations because it excludes charges that management considers to be
outside of the Company's core operating results. The Company believes
that this non-GAAP net income (loss), in combination with the Company's
financial results calculated in accordance with GAAP, provides investors
with additional perspective and a more meaningful understanding of the
Company's ongoing operating performance. In addition, the Company's
management uses these non-GAAP measures to review and assess the
financial performance of the Company and to plan and forecast performance
in future periods. The Company's non-GAAP net income (loss) is not
prepared in accordance with GAAP, is not an alternative to GAAP financial
information, and may be calculated differently than non-GAAP financial
information disclosed by other companies.
SOURCE Zoran Corporation
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Related links:
http://www.zoran.com
CONTACT:
Karl Schneider, Chief Financial Officer of
Zoran Corporation, +1-408-523-6500, ir@zoran.com; Investors,
Bonnie McBride, +1-323-466-0960, +1-415-806-0385,
bonnie@mcbridegrp.com
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