Record Operating Margins of 21% and Pro Forma Net Income of 21.2% of Revenues
SANTA CLARA, Calif., Oct. 19 /PRNewswire-FirstCall/ -- DSP Group, Inc.
(Nasdaq: DSPG) today announced its results for the quarter ended
September 30, 2004.
Revenues for the third quarter of 2004 were $46,232,000, a slight decrease
of 2% from revenues of $47,178,000 for the third quarter of 2003. Net income
for the third quarter of 2004 was $20,380,000, as compared to $9,640,000 for
the third quarter of 2003. Diluted earnings per share (EPS) for the third
quarter of 2004 were $0.69, as compared to $0.32 for the third quarter of
2003.
Results for the third quarter of 2004 included a capital gain of
$15,460,000 under "Other income" in the Company's statements of income,
resulting from the sale of 1,650,000 shares of AudioCodes Ltd. stock.
Following the aforementioned sale, DSP Group no longer owns any AudioCodes
stock. The related taxes on the capital gain were $4,865,000.
Pro-forma net income for the third quarter of 2004, excluding the effects
of the capital gain and related taxes associated with the sale of AudioCodes
stock, was $9,785,000, a 1% increase compared to $9,640,000 in the third
quarter of 2003. Pro-forma diluted earnings per share (EPS) were $0.33 in the
third quarter of 2004, a 3% increase over $0.32 in the third quarter of 2003.
The Company believes that this pro forma presentation of net income and
diluted EPS is useful to investors in comparing results for the quarter ended
September 30, 2004 to the same period during 2003, because it excludes items
that management does not consider meaningful for purposes of analyzing the
Company's operating results and making budget-planning decisions.
Eli Ayalon, Chairman and CEO of DSP Group, stated: "The second half of
2004 can be characterized as a challenging environment for the consumer
electronics industry. The industry is encountering demand and inventory issues
across different product lines which impact our business. In spite of this, we
managed to provide solid results for the third quarter of 2004, and we reached
record high operating margins of 21% of revenues, and pro forma net income of
21.2% of revenues."
Mr. Ayalon added: "In the last few weeks we reached a significant and
strategic milestone for the company by introducing our first DECT
standard -- 1.9GHz chip sets for the European market -- and by delivering our
first shipment of initial quantities to a key customer. We believe that the
European market represents meaningful growth opportunities for DSP Group in
the years to come. In addition, in the line with the Company's strategy to
provide a complete short range residential wireless offering, we anticipate
closing today the acquisition of WiFi technology assets developed by Bermai,
Inc for approximately $6 Million in cash and expect to add 30 - 40 additional
employees in connection with the acquisition. We will provide further details
on this acquisition in our conference call scheduled today."
The Company also announced that in light of the Company's strong cash
position and its focus on shareholder value, its Board of Directors has
authorized management to repurchase an additional 2.5 million shares of the
Company's common stock in open-market and privately negotiated transactions.
In the third quarter of 2004 the Company repurchased 1,488,000 shares of its
common stock at an average price of $ 20.10 per share, representing an
aggregate repurchase of approximately $29.9 million worth of company shares.
As of September 30, 2004, approximately 1.3 million shares remained available
for repurchase from previous Board authorizations. Accordingly, the total
number of shares currently authorized for repurchase following the recent
Board authorization is approximately 3.8 million shares.
About DSP Group
DSP Group, Inc. is a fabless semiconductor company, offering advanced
Integrated Circuit (IC) solutions. DSP Group is a world leader in the
short-range wireless communication market, enabling home networking
convergence for voice, video & data. By combining its in-house technologies of
Digital Signal Processors, portfolio of wireless communication protocols,
including DECT and Bluetooth, most advanced Radio Frequency CMOS and SiGe, as
well as VoIP ICs, DSP Group is a world leader and a one-stop-shop for a wide
range of applications. These applications include: ISM band digital 900MHz,
2.4GHz and 5.8GHz telephony; European DECT (1.9GHz) telephony; and Bluetooth
systems for voice, data and video communication, which are employed in
residential, SOHO, SME, enterprise and automotive applications. DSP Group's
ICs provide solutions for MP3 players, VoIP phones, gateways, and Integrated
Access Devices (IADs) and are widely used in Digital Voice Recorders (DVRs).
More information about DSP Group is available at http://www.dspg.com.
Earnings conference call
DSP Group has scheduled a conference call for 8:30 a.m. EDT today to
discuss the financial results for the third quarter of 2004 and invites you to
listen to a live broadcast over the Internet. The broadcast can be accessed by
all interested parties through the Investor Relations section (investor
message board) of DSP Group's Web site at http://www.dspg.com or link to:
http://ir.dspg.com./phoenix.zhtml?c=101665&p=irol-calendar .
If you cannot join the call, please listen to the replay, which will be
available for approximately two weeks after the call on DSP Group's Web site
or by calling the following numbers:
-- US Dial-In # 888-286-8010 (passcode: 21339699)
-- International Dial-In # +1-617-801-6888 (passcode: 21339699)
Forward-Looking Statements
This press release may contain statements that qualify as "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995,
including statements made by Mr. Ayalon about the European market representing
meaningful growth opportunities for DSP Group in the years to come. These
forward-looking statements are based on current expectations and DSP Group
assumes no obligation to update this information. In addition, the events
described in these forward-looking statements may not actually arise. DSP
Group's actual results could differ materially from those described in this
press release as a result of various factors, including unexpected delays in
the introduction of new products; failure of DSP Group's new products to
achieve broad market acceptance, especially in the European markets; DSP
Group's inability to develop and produce new products at competitive costs and
in a timely manner; declines or fluctuations in gross margins as a result of
entry into new markets; and general market demand for products that
incorporate DSP Group's technology. These and other factors which may affect
future operating results and DSP Group's stock price are discussed under "RISK
FACTORS" in the Form 10-K for the year ended December 31, 2003, as well as
other reports, including Form 10-Qs, DSP Group has filed with the Securities
and Exchange Commission and which are available on DSP Group's Web site
(http://www.dspg.com) under Investor Relations.
CONTACT: Yaniv Arieli, President of U.S. Operations, Investor Relations,
of DSP Group Inc., +1-408-986-4423, or yarieli@dspg.com.
DSP GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME - US GAAP
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Product revenues
and other $46,232 $47,178 $128,956 $114,739
Cost of product
revenues and other 23,401 25,643 66,177 63,626
Gross profit 22,831 21,535 62,779 51,113
Operating expenses:
Research and development 8,463 6,704 23,327 17,402
Sales and marketing 2,929 3,429 9,014 8,616
General and
administrative 1,718 1,899 5,258 5,006
Impairment of goodwill -- -- 4,304 --
In-process research
and development
write-off -- -- -- 2,727
Total operating
expenses 13,110 12,032 41,903 33,751
Operating income 9,721 9,503 20,876 17,362
Other income:
Interest and
other income, net 2,069 2,112 6,353 5,945
Capital gains 15,460 -- 44,448 241
Income before
provision for income
taxes 27,250 11,615 71,677 23,548
Provision for
income taxes 6,870 1,975 21,812 4,154
Net income $ 20,380 $9,640 $49,865 $19,394
Net earnings per share:
Basic $0.72 $0.34 $1.73 $0.70
Diluted $0.69 $0.32 $1.64 $0.66
Weighted average number
of shares of Common
Stock used in
the computation of:
Basic 28,411 28,168 28,779 27,677
Diluted 29,358 30,142 30,337 29,343
DSP GROUP, INC.
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Product revenues and other $46,232 $47,178 $128,956 $114,739
Cost of product revenues
and other 23,401 25,643 66,177 63,626
Gross profit 22,831 21,535 62,779 51,113
Operating expenses:
Research and development 8,463 6,704 23,327 17,402
Sales and marketing 2,929 3,429 9,014 8,616
General and administrative 1,718 1,899 5,258 5,006
Total operating expenses 13,110 12,032 37,599 31,024
Operating income 9,721 9,503 25,180 20,089
Other income:
Interest and other
income, net 2,069 2,112 6,353 5,945
Income before provision
for income taxes 11,790 11,615 31,533 26,034
Provision for income taxes 2,005 1,975 5,362 4,426
Net income $9,785 $9,640 $26,171 $21,608
Net earnings per share:
Basic $0.34 $0.34 $0.91 $0.78
Diluted $0.33 $0.32 $0.86 $0.74
Weighted average number of
shares of Common Stock
used in the computation of:
Basic 28,411 28,168 28,779 27,677
Diluted 29,358 30,142 30,337 29,343
The above pro forma consolidated
statements of income have
been adjusted to exclude
the following items to
US GAAP reported net income:
Reported net income
per US GAAP $20,380 $9,640 $49,865 $19,394
Adjustments:
Impairment of goodwill -- -- 4,304 --
In-process research &
development write-off -- -- -- 2,727
Capital gains (15,460) -- (44,448) (241)
Tax expenses (benefit) 4,865 -- 16,450 (272)
Pro forma net
income $9,785 $9,640 $26,171 $21,608
DSP GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2004 2003
Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $91,272 $36,812
Marketable securities and cash deposits 52,252 42,490
Trade receivables, net 16,151 15,844
Inventories 8,549 8,466
Other accounts receivable 1,440 1,462
Deferred income taxes 1,326 1,326
Total current assets 170,990 106,400
Property and equipment, net 6,556 7,108
Long term marketable securities 193,540 197,071
Investment in equity securities
of traded companies -- 47,138
Severance pay fund 3,019 2,360
Long term pre-paid expenses and lease deposits 583 513
Goodwill 1,500 5,804
Deferred income taxes 641 --
Other intangible assets 1,616 2,076
Total assets $378,445 $368,470
Liabilities and Stockholders' Equity
Current liabilities:
Trade payable $13,937 $11,221
Other current liabilities 46,501 34,292
Total current liabilities 60,438 45,513
Long term liabilities:
Accrued severance pay 3,353 2,555
Long term liability -- 1,429
Deferred income taxes -- 14,592
Total long term liabilities 3,353 18,576
Stockholders' equity:
Common Stock 28 29
Additional paid-in capital 186,906 174,700
Accumulated other comprehensive income 70 23,045
Retained earnings 156,968 107,799
Less - Cost of treasury stock (29,318) (1,192)
Total stockholders' equity 314,654 304,381
Total liabilities and stockholders' equity $378,445 $368,470
SOURCE DSP Group, Inc.
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Related links:
http://www.dspg.com
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CONTACT:
Yaniv Arieli, President of US Operations,
Investor Relations for DSP Group Inc., +1-408-986-4423, or
yarieli@dspg.com
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