Trident Microsystems Reports Results for Third Quarter Ended Sept. 30, 2010

Trident Microsystems Reports Results for Third Quarter Ended Sept. 30, 2010

SUNNYVALE, Calif., Oct. 26 /PRNewswire-FirstCall/ -- Trident Microsystems, Inc. (Nasdaq: TRID), a leader in high-performance semiconductor system solutions for the connected home, today announced results for its third quarter ended Sept. 30, 2010.

For the quarter, the company reported net revenues of $176.6 million, which compares with $171.6 million in the prior sequential quarter and $31.1 million in the quarter ended Sept. 30, 2009. On a generally accepted accounting principles ("GAAP") basis, the company reported a net loss for the quarter of $17.5 million, or $0.10 per share. This compares with a net loss of $48.8 million, or $0.28 per share in the prior sequential quarter and a net loss of $17.2 million, or $0.25 per share, in the quarter ended Sept. 30, 2009.

Non-GAAP Results

Non-GAAP net loss for the quarter was $0.0 million, or $0.00 per share, which compares with a non-GAAP net loss of $14.6 million, or $0.08 per share, in the prior sequential quarter and a non-GAAP net loss of $11.6 million, or $0.17 per share, in the quarter ended Sept. 30, 2009. A detailed reconciliation between GAAP and non-GAAP net income (loss) is provided as a supplement to the attached financial statements.

Sylvia Summers, Trident's chief executive officer, said, "Results for the quarter were in line with our guidance. We achieved increases in both our TV and Set-Top Box product revenues, along with improved gross margins and lower operating expenses in line with our integration plans. In addition, we achieved non-GAAP operating breakeven and positive cash flow a full quarter ahead of the plan we outlined upon announcing the acquisition of the NXP product lines one year ago."

Ms. Summers continued, "Looking to the fourth quarter, we expect Trident revenues will be down 20 to 25 percent from the seasonally strong third quarter as our TV business is impacted by both industry softness and share loss from supply constraints earlier in the year, partially offset by a modest increase in our Set-Top Box business. In total, we expect to be cash flow neutral in the fourth quarter as the decline in revenues is offset by further spending reductions from our acquisition-related restructuring activities. Based on a preliminary view of 2011 demand and design wins, we currently expect the TV industry softness to continue into the seasonally weak first quarter, while we expect full year Trident revenues to be similar to 2010 and operations to be cash flow positive for the year. Just as importantly, over the next few quarters we expect to begin sampling the first products that feature the best of Trident's impressive IP portfolio acquired over the past 18 months. These are the products that we believe will drive market share and revenue gains coming out of next year."

Outlook

For the quarter ending Dec. 31, 2010, Trident is providing the following outlook. The company's outlook for any period is based on current expectations and is subject to various factors, including those set forth in the Forward-Looking Information statement below. Actual results may differ materially.

-- Quarter ending Dec. 31, 2010:
-- Net revenues are expected to be in the range of $130 million to $140
million.
-- Non-GAAP gross margins are expected to be in the range of 33% to
34%.
-- Non-GAAP operating expenses are expected to be in the range of $51
million to $54 million, with research and development expenses in
the range of $37 million to $39 million and selling, general and
administrative expenses of approximately $14 million to $15 million.
-- Non-GAAP operating loss is expected to be in the range of $4 million
to $8 million.
-- Provision for income taxes is expected to be approximately $1
million.
-- Adjustments to GAAP net income are expected to be in the range of
$20 million to $25 million, including restructuring charges in the
range of $6 million to $8 million. These charges are not included
in the guidance for non-GAAP operating loss.

Investor Conference Call
Date: Tuesday, Oct. 26, 2010
Time: 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time)
Domestic Dial-In: 866-730-5770
International Dial-In: 857-350-1594
Passcode: 80541204

A replay of the conference call will be available for two weeks, beginning on Oct. 26, 2010 and will be accessible by calling 888-286-8010 (domestic) or +1-617-801-6888 (international) using access code 71562115. This call is being webcast by Thomson/CCBN and can be accessed at Trident's web site at: http://www.tridentmicro.com. The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at www.fulldisclosure.com, Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).

Use of Non-GAAP Financial Information

To supplement the consolidated financial results prepared under GAAP, Trident uses a non-GAAP conforming, or non-GAAP, measure of net income (loss) that is GAAP net income (loss) adjusted to exclude certain costs, expenses and gains. Non-GAAP net income (loss) gives an indication of Trident's baseline performance before gains, losses or other charges that are considered by management to be outside the company's core operating results. In addition, non-GAAP net income (loss) is among the primary indicators management uses as a basis for planning and forecasting future periods. These measures are not in accordance with, or an alternative for, GAAP and may be materially different from non-GAAP measures used by other companies. Trident computes non-GAAP net income (loss) by adjusting GAAP net income (loss) for acquisition-related expenses, stock-based compensation expense, expenses related to the stock option investigation and related matters, legal settlements, restructuring charges, expenses related to software license fees adjustment, amortization and impairment of intangible assets from acquisitions, impairment loss, backlog amortization, capital gains and losses and dividend income. A detailed reconciliation between net loss on a GAAP basis and non-GAAP net income (loss) is provided in an attached table.

Forward-Looking Information

This press release contains forward-looking statements, including statements regarding financial expectations for the fourth quarter of fiscal year 2010, expected restructuring activity, and our outlook for 2011. The forward-looking statements made above are subject to certain risks and uncertainties, and actual results could vary materially depending on a number of factors. These risks include, in particular, our ability to realize the benefits from our acquisition of product lines and IP from NXP, our ability to reduce expenses, the timing of new product introductions, the ability to obtain design wins among major OEMs for Trident's products, the availability of wafers from our suppliers, and competitive pressures, including pricing and competitors' new product introductions, the impact of the uncertain global macroeconomic environment, the increasingly competitive TV and Set Top Box semiconductor markets and our ability to retain key employees globally. Additional factors that may affect Trident's business are described in detail in Trident's filings with the Securities and Exchange Commission available at http://www.sec.gov.

About Trident Microsystems, Inc.

Trident Microsystems, Inc., with headquarters in Sunnyvale, California, is a leading force in the digital home entertainment market, delivering an extensive range of platform solutions that enhance the consumer experience in the Connected Home. As one of the top-three semiconductor providers to both the TV and set-top box markets, Trident's solutions can be found in the products of leading OEMs and channel partners worldwide. The company's extensive IP portfolio of more than 2,000 patents has been driving key innovations in image quality, 3D TV, low power consumption, and 45nm designs. For further information about Trident and its products, please consult the Company's web site: www.tridentmicro.com.

NOTE: Trident is a trademark of Trident Microsystems, Inc. All other company and product names are trademarks and/or registered trademarks of their respective owners. Features, pricing, availability and specifications are subject to change without notice.

TRID-IR

TRIDENT MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended
------------------
September 30, June 30, September 30,
(In
thousands,
except per
share data) 2010 2010 2009
---- ---- ----
Net
revenues $176,568 $171,648 $31,093
Cost of
revenues 128,398 138,722 20,592
------- ------- ------
Gross
profit 48,170 32,926 10,501
% of net
revenues 27.3% 19.2% 33.8%
Research and
development
expenses 44,709 49,653 16,350
% of net
revenues 25.3% 28.9% 52.6%
Selling,
general and
administrative
expenses 19,459 22,311 8,837
% of net
revenues 11.0% 13.0% 28.4%
In-process
research
and
development - - -
% of net
revenues 0.0% 0.0% 0.0%
Goodwill
impairment 0 7,851 0
% of net
revenues 0.0% 4.6% 0.0%
Restructuring
charges 2,301 4,470 1,508
% of net
revenues 1.3% 2.6% 4.8%
Operating
loss (18,299) (51,359) (16,194)
% of net
revenues (10.4)% (29.9)% (52.1)%
Loss on
investment (94) - -
Gain on
acquisition - - -
Interest and
other
income
(expense),
net 2,628 287 (533)
----- --- ----
Loss before
income
taxes (15,765) (51,072) (16,727)
% of net
revenues (8.9)% (29.8)% (53.8)%
Provision
for
(benefit
from)
income
taxes 1,749 (2,255) 429
% of net
revenues 1.0% (1.3)% 1.4%
--- ----- ---
Net loss ($17,514) ($48,817) ($17,156)
======== ======== ========
% of net
revenues (9.9)% (28.4)% (55.2)%

Basic and
diluted net
loss per
share ($0.10) ($0.28) ($0.25)
Shares used
in basic
and diluted
per share
computation 174,553 174,018 69,237

Nine Months Ended
-----------------
September 30, September 30,
(In thousands, except
per share data) 2010 2009
---- ----
Net revenues $438,619 $52,857
Cost of revenues 343,738 37,273
------- ------
Gross profit 94,881 15,584
% of net revenues 21.6% 29.5%
Research and development
expenses 131,427 43,586
% of net revenues 30.0% 82.5%
Selling, general and
administrative expenses 61,906 19,884
% of net revenues 14.1% 37.6%
In-process research and
development - 697
% of net revenues 0.0% 1.3%
Goodwill impairment 7,851 1,432
% of net revenues 1.8% 2.7%
Restructuring charges 15,166 1,557
% of net revenues 3.5% 2.9%
Operating loss (121,469) (51,572)
% of net revenues (27.7)% (97.6)%
Loss on investment (303) -
Gain on acquisition 43,402 -
Interest and other
income (expense), net 3,479 (52)
----- ---
Loss before income taxes (74,891) (51,624)
% of net revenues (17.1)% (97.7)%
Provision for (benefit
from) income taxes 219 3,211
% of net revenues 0.0% 6.1%
--- ---
Net loss ($75,110) ($54,835)
======== ========
% of net revenues (17.1)% (103.7)%

Basic and diluted net
loss per share ($0.47) ($0.84)
Shares used in basic and
diluted per share
computation 159,624 65,143

TRIDENT MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

September 30,
(In thousands) 2010
----

ASSETS
Current assets
Cash and cash equivalents $102,711
Accounts receivable, net 96,443
Accounts receivable from related
parties 4,941
Inventories 26,998
Note receivable from related party 20,884
Prepaid expenses and other current
assets 28,286
------

Total current assets 280,263

Property and equipment, net 30,776
Goodwill -
Intangible assets, net 94,330
Long-term note receivable from
related party -
Other assets 18,504

Total assets $423,873
========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $12,494
Accounts payable to related parties 28,364
Accrued expenses and other current
liabilities 77,907
Income taxes payable 2,651
-----

Total current liabilities 121,416
Long-term income taxes payable 23,495
Deferred income tax liabilities 94
Other long-term liabilities 3,024

Total liabilities 148,029
-------

Stockholders' equity
Preferred stock -
Common stock 177
Additional paid-in capital 432,586
Accumulated deficit (156,919)
--------

Total stockholders' equity 275,844

Total liabilities and stockholders'
equity $423,873
========

June 30,
(In thousands) 2010
----

ASSETS
Current assets
Cash and cash equivalents $96,915
Accounts receivable, net 97,813
Accounts receivable from related
parties 8,488
Inventories 32,475
Note receivable from related party 7,476
Prepaid expenses and other current
assets 26,812
------

Total current assets 269,979

Property and equipment, net 32,561
Goodwill -
Intangible assets, net 108,046
Long-term note receivable from
related party 20,882
Other assets 18,664

Total assets $450,132
========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $20,242
Accounts payable to related parties 38,362
Accrued expenses and other current
liabilities 71,235
Income taxes payable 2,532
-----

Total current liabilities 132,371
Long-term income taxes payable 22,265
Deferred income tax liabilities 94
Other long-term liabilities 3,767

Total liabilities 158,497
-------

Stockholders' equity
Preferred stock -
Common stock 176
Additional paid-in capital 430,864
Accumulated deficit (139,405)
--------

Total stockholders' equity 291,635

Total liabilities and stockholders'
equity $450,132
========

December
31,
(In thousands) 2009
----

ASSETS
Current assets
Cash and cash equivalents $147,995
Accounts receivable, net 4,582
Accounts receivable from related
parties -
Inventories 14,536
Note receivable from related party -
Prepaid expenses and other current
assets 13,962
------

Total current assets 181,075

Property and equipment, net 26,168
Goodwill 7,851
Intangible assets, net 5,635
Long-term note receivable from
related party -
Other assets 7,764

Total assets $228,493
========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $18,883
Accounts payable to related parties 2,401
Accrued expenses and other current
liabilities 27,068
Income taxes payable 1,696
-----

Total current liabilities 50,048
Long-term income taxes payable 22,262
Deferred income tax liabilities 94
Other long-term liabilities -

Total liabilities 72,404
------

Stockholders' equity
Preferred stock -
Common stock 71
Additional paid-in capital 237,827
Accumulated deficit (81,809)
-------

Total stockholders' equity 156,089

Total liabilities and stockholders'
equity $228,493
========

TRIDENT MICROSYSTEMS, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)

Three Months Ended
------------------
September 30, June 30,
(In thousands,
except per share
data) 2010 2010
---- ----

GAAP Gross profit $48,170 $32,926
Amortization of
acquisition-
related
intangible assets
(1) 11,612 16,972
Stock-based
compensation
expense (2) 82 86
Impairment of
intangible assets
other than
goodwill (3) (337) 863
---- ---
Non-GAAP Gross
profit $59,527 $50,847
======= =======
% of Net revenues 33.7% 29.6%

GAAP Research and
development
expenses (R&D) $44,709 $49,653
Amortization of
acquisition-
related
intangible assets
(1) (775) (824)
Stock-based
compensation
expense (2) (841) (902)
Impairment of
intangible assets
other than
goodwill (3) - -
Software license
fees (4) - -
--- ---
Non-GAAP Research
and development
expenses $43,093 $47,927
======= =======
% of Net revenues 24.4% 27.9%

GAAP Selling,
general and
administrative
expenses (SG&A) $19,459 $22,311
Amortization of
acquisition-
related
intangible assets
(1) (1,329) (1,339)
Stock-based
compensation
expense (2) (938) (1,246)
Stock options
related
professional fees
(5) (471) (525)
Acquisition-
related expenses
(6) (188) (790)
Non-GAAP Selling,
general and
administrative
expenses $16,533 $18,411
======= =======
% of Net revenues 9.4% 10.7%

GAAP Operating
Loss $(18,299) $(51,359)
Total of above
adjustments to
Gross profit, R&D
and SG&A 15,899 23,547
In-process
research and
development - -
Restructuring
Charges (7) 2,301 4,470
Impairment of
goodwill (3) - 7,851
Non-GAAP
Operating Loss $(99) $(15,491)
==== ========
% of Net revenues -0.1% -9.0%

GAAP Net loss $(17,514) $(48,817)
Total operating
loss adjustments 18,200 35,868
Legal settlements
(10) (817) (1,674)
(Gain) loss on
investment (9) 94 -
(Gain) on
acquisition (8) - -
Non-GAAP Net loss $(37) $(14,623)
==== ========
% of Net revenues 0.0% -8.5%

GAAP basic and
diluted net loss
per share $(0.10) $(0.28)
------ ------
GAAP shares -
basic and
dilutive 174,553 174,018

Non-GAAP basic
and diluted net
income (loss) per
share $(0.00) $(0.08)
------ ------
Non-GAAP shares -
basic and
diluted 174,553 174,018

Three Months Ended
------------------
September 30,
(In thousands, except per share data) 2009
----

GAAP Gross profit $10,501
Amortization of acquisition-related intangible
assets (1) 970
Stock-based compensation expense (2) 3
Impairment of intangible assets other than
goodwill (3) -
---
Non-GAAP Gross profit $11,474
=======
% of Net revenues 36.9%

GAAP Research and development expenses (R&D) $16,350
Amortization of acquisition-related intangible
assets (1) (719)
Stock-based compensation expense (2) -
Impairment of intangible assets other than
goodwill (3) -
Software license fees (4) -
---
Non-GAAP Research and development expenses $15,631
=======
% of Net revenues 50.3%

GAAP Selling, general and administrative expenses
(SG&A) $8,837
Amortization of acquisition-related intangible
assets (1) (51)
Stock-based compensation expense (2) (521)
Stock options related professional fees (5) 979
Acquisition-related expenses (6) (2,800)
Non-GAAP Selling, general and administrative
expenses $6,444
======
% of Net revenues 20.7%

GAAP Operating Loss $(16,194)
Total of above adjustments to Gross profit, R&D
and SG&A 4,085
In-process research and development -
Restructuring Charges (7) 1,508
Impairment of goodwill (3) -
Non-GAAP Operating Loss $(10,601)
========
% of Net revenues -34.1%

GAAP Net loss $(17,156)
Total operating loss adjustments 5,593
Legal settlements (10)
(Gain) loss on investment (9) -
(Gain) on acquisition (8) -
Non-GAAP Net loss $(11,563)
========
% of Net revenues -37.2%

GAAP basic and diluted net loss per share $(0.25)
------
GAAP shares - basic and dilutive 69,237

Non-GAAP basic and diluted net income (loss) per
share $(0.17)
------
Non-GAAP shares - basic and diluted 69,237

Nine Months Ended
-----------------
September 30, September 30,
(In thousands, except
per share data) 2010 2009
---- ----

GAAP Gross profit $94,881 $15,584
Amortization of
acquisition-related
intangible assets (1) 38,800 2,385
Stock-based
compensation expense
(2) 272 297
Impairment of intangible
assets other than
goodwill (3) 1,756 -
----- ---
Non-GAAP Gross profit $135,709 $18,266
======== =======
% of Net revenues 30.9% 34.6%

GAAP Research and
development expenses
(R&D) $131,427 $43,586
Amortization of
acquisition-related
intangible assets (1) (2,084) (719)
Stock-based
compensation expense
(2) (2,623) (3,050)
Impairment of intangible
assets other than
goodwill (3) - (1,706)
Software license fees
(4) - 788
--- ---
Non-GAAP Research and
development expenses $126,720 $38,899
======== =======
% of Net revenues 28.9% 73.6%

GAAP Selling, general
and administrative
expenses (SG&A) $61,906 $19,884
Amortization of
acquisition-related
intangible assets (1) (3,422) (178)
Stock-based
compensation expense
(2) (1,863) (3,240)
Stock options related
professional fees (5) (1,222) 3,950
Acquisition-related
expenses (6) (5,337) (2,800)
Non-GAAP Selling,
general and
administrative expenses $50,062 $17,616
======= =======
% of Net revenues 11.4% 33.3%

GAAP Operating Loss $(121,469) $(51,572)
Total of above
adjustments to Gross
profit, R&D and SG&A 57,379 9,637
In-process research and
development - 697
Restructuring Charges
(7) 15,166 1,557
Impairment of goodwill
(3) 7,851 1,432
Non-GAAP Operating Loss $(41,073) $(38,249)
======== ========
% of Net revenues -9.4% -72.4%

GAAP Net loss $(75,110) $(54,835)
Total operating loss
adjustments 80,396 12,626
Legal settlements (10) (2,491) -
(Gain) loss on
investment (9) 303 (19)
(Gain) on acquisition
(8) (43,402) -
Non-GAAP Net loss $(40,304) $(42,228)
======== ========
% of Net revenues -9.2% -79.9%

GAAP basic and diluted
net loss per share $(0.47) $(0.84)
------ ------
GAAP shares -basic and
dilutive 159,624 65,143

Non-GAAP basic and
diluted net income
(loss) per share $(0.25) $(0.65)
------ ------
Non-GAAP shares -
basic and diluted 159,624 65,143

(1) Amortization of acquisition-related intangible assets represents
the amortization of identifiable intangible assets. Management
deemed that these acquisition-related charges are not related to
Trident's core operating performance and it is appropriate to
exclude those charges
from Trident's non-GAAP financial measures, as it enhances the
ability of investors to compare Trident's period-over-period
operating results.
(2) Stock-based compensation expense relates primarily to the equity
awards such as stock options and restricted stock. This is non-cash
expense that varies in amount from period to period and is dependent
on market forces that are often beyond Trident's control. Hence,
management excludes this item from the non-GAAP financial measures.
(3) Charges for impairment of goodwill and intangible assets incurred
as a result of their carrying value exceeding the fair value.
Management believes that these charges are not directly associated
with the Company's core operating performance.
(4) Software license fees represent an adjustment for prior years'
software usage.
(5) Stock options related professional fees are excluded from the
non-GAAP net loss calculation. Management believes that these
professional fees are not related to the Company's ongoing business
and operating performance of Trident.
(6) Acquisition-related expenses represent external costs incurred
in connection with our acquisition, which we generally would not
have incurred in the normal course of business.
(7) Management believes that restructuring charges are not directly
associated with the Company's core operating performance.
(8) The preliminary purchase price allocation assigned $48.5 million
to gain on acquisition. Subsequently, in accordance with applicable
accounting guidance, the preliminary estimate was reduced by $5.1
million as a result of new information received by the Company
subsequent to March 31, 2010. Management believes that gain on
acquisition is not related to the ongoing business and operating
performance of Trident.
(9) Management believes that (Gain) loss on investments are not
related to the ongoing business and operating performance of
Trident.
(10) Management believes that legal settlements are not related to
the ongoing business and operating performance of Trident.

SOURCE Trident Microsystems, Inc.

Trident Microsystems, Inc.

CONTACT: John Swenson, Director, Corporate Finance & Investor Relations of Trident Microsystems, Inc., +1-408-962-8252, john.swenson@tridentmicro.com

Web Site: http://www.tridentmicro.com

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