ZORAN
CORPORATION REPORTS RECORD REVENUE FOR
SECOND QUARTER 2004
Company
Achieves Sequential Pro Forma Net Income of 189 percent Growth and
Sequential
Revenue Growth of 29 percent;
Raises
Annual Revenue Guidance to $435 to $443 million, up 94 to 98 percent from Pro
Forma
Revenues
of $224 million for 2003
SUNNYVALE, Calif. (July 27, 2004) — Zoran Corporation (Nasdaq NM: ZRAN), a
leading provider of digital solutions-on-a-chip for applications in the growing
digital entertainment and digital imaging markets, today reported results for
its second quarter ended June 30, 2004.
Revenues for the second quarter were $103.7 million, an increase of 29
percent, compared with $80.6 million last quarter and an increase of 132
percent from $44.7 million for the same quarter in 2003. Under generally accepted accounting
principles, the Company reported a net loss for the second quarter of $6.1
million, or $0.14 per share, compared with a net loss of $10.7 million, or
$0.25 per share, for the previous quarter and net income of $4.2 million, or
$0.15 per diluted share, for the second quarter last
year. Included
in the net loss for the quarter were charges of $12.5 million related to the
acquisition of Oak Technology for certain ongoing expenses such as the
amortization of purchased intangible assets and deferred stock compensation.
Excluding
amortization of acquisition-related purchased intangibles and deferred stock
compensation charges from reported operating expenses
, pro forma net income for the second quarter
increased 189 percent to $6.3 million, or $0.14 per diluted share, compared
with pro forma net income of $2.2 million, or $0.05 per diluted share, for the
previous quarter and up 21 percent from $5.2 million, or $0.18 per
diluted share, for the second quarter of 2003.
“The second quarter was an exceptionally strong
period for Zoran,” said Dr. Levy Gerzberg, Zoran’s President and Chief
Executive Officer. “In the Digital Entertainment market, we shipped record
units and achieved record revenues for our DVD product line and continued to
successfully transition customers to our Generation 9 HDTV product family. In the Digital Imaging market, we secured
many new design wins
for our COACH 7 digital camera processor and expect
to see cameras with this solution on retail shelves soon. There were multiple new deployments of
Zoran’s flagship Integrated Print System (IPS) software and we began volume
shipments of the Quatro 4100 all-in-one multifunction peripheral (MFP)
processor, also with many new design wins during the quarter. We are now expecting various
Inkjet MFP and photo printer products based
on this system to be introduced from a number of OEMs throughout the remainder
of the year.”
“In
addition, Zoran entered a new market,” continued Dr. Gerzberg. “T
hrough the acquisition of Emblaze
Semiconductor, Zoran has gained high performance application processors with
lower power consumption, technology and products for the fast growing
multimedia mobile phone market. We
believe this acquisition will
provide an excellent opportunity for additional synergistic growth for Zoran in
the coming years.”
Recent Highlights
•
Zoran entered the multimedia mobile phone
market through it’s acquisition of Emblaze Semiconductor, a subsidiary of
Emblaze Ltd. (LSE: BLZ) and a provider of semiconductor-based solutions for high
quality multimedia mobile phones.
•
Zoran’s seventh generation Vaddis processor
went into mass production at multiple customers including Samsung and products
using the Vaddis 7 are already in retail stores.
•
Zoran’s recently introduced HDXtreme DVD
upscaler with a High Definition Multimedia Interface (HDMI) secured multiple
new design wins from major brand manufacturers.
•
Zoran’s Generation 9 HDTV processor is now
shipping in products from 7 of the world’s leading digital television and set
top box manufacturers: Sony, Funai,
Thomson, Pioneer, JVC and now Sanyo and Samsung.
•
Zoran and Oren Semiconductor co-developed a
series of high definition digital television (HDTV) reference designs that
accelerate time to market for digital television manufacturers.
•
Zoran’s SupraTV standard definition digital
TV processor powers MiCO Electric’s recently launched slim line STB-220
free-to-air terrestrial set-top box targeted for European living rooms.
•
Zoran hosted FCC Chairman Michael K. Powell
at its corporate headquarters to demonstrate its newest high definition digital
technologies produced for consumer electronics manufacturers.
•
Zoran secured multiple new design wins with
high profile and high-volume customers and new models with the COACH 6 digital
camera processor began shipping during the quarter.
•
Zoran’s fast growing Imaging business
achieved record results, growing over 20 percent sequentially. The Quatro 4100 multifunction printer
processor secured multiple new design wins
and
the Company expects to see a number of new models from OEMs introduced during
the summer and fall of 2004.
•
Zoran’s Quatro PM-1100 laser engine IC is
featured in Canon’s newly shipping color networked digital multifunction
imaging system, the imageRUNNER C6800, for the fast growing color laser office
printer market.
•
Zoran’s flagship Integrated Print System
(IPS) software was included in new machines from tier-one customers, and total
deployments for IPS increased to 170 at the end of the quarter, up from 160 at
the end of the previous quarter.
Future
Outlook
The
following statements are based on current expectations. These statements are
forward-looking, and actual results may differ materially.
The Company is currently expecting third quarter 2004 revenues to
increase to $128 million to $133 million or 23 to 28 percent from second
quarter levels with gross margins ranging between 43.0 and 43.5 percent.
Operating expenses, excluding acquisition related costs, are expected to be in
a range of $41.0 million to $42.0 million. Pro forma earnings per share are
expected to range between $0.27 and $0.30 per diluted share, on 45.3 million
shares. Acquisition-related costs to be
included under GAAP, including the impact of the
acquisition of Emblaze
Semiconductor which will generate additional non-cash charges, including a one
time in-process research and development charge and additional amortization of
purchased intangibles, are expected to be approximately $21.8 to $27.5 million,
or between $0.51 and $0.64 per share for third quarter.
However, the actual amounts of the
charges related to the acquisition of Emblaze have not been finalized pending
the completion of a valuation analysis currently underway.
For the full year the Company is raising its annual revenue growth
forecast to approximately $435 to $443 million, or 94 to 98 percent over 2003
pro forma revenues. In addition, the
Company is raising its full year 2004 pro forma earnings per share forecast to
between $0.69 and $0.76.
Acquisition-related costs to be included under GAAP for the full year,
again including an approximation for the impact of the acquisition of Emblaze,
are expected to range between $60.8 million to $66.8 million, or $1.41 to $1.55
per share. The Company will provide
updated GAAP forecasts for the year upon completion of its valuation analysis
of Emblaze Semiconductor.
Zoran will provide more
commentary on its second quarter results and full year 2004 outlook during the
earnings conference call.
About Pro
Forma Adjustments
To
supplement the consolidated financial results prepared under generally accepted
accounting principles (“GAAP”), the Company uses a pro forma measure of net
income that consists of GAAP net income adjusted to include or exclude certain
revenues, costs, expenses and gains. The
Company computes pro forma net income by adjusting GAAP net income for the
impact of amortization of acquisition-related charges and other non-recurring
charges and gains.
Pro
forma net income gives an indication of the Company’s baseline performance
before gains, losses or other charges that are considered by management to be
outside of our core operating results. In addition, pro forma net income 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 pro forma measures
used by other companies.
Earnings Conference Call
Zoran Corporation has scheduled a conference call for
5:00 p.m. ET today to discuss second quarter results.
To listen to the call, please call 617-786-4501 approximately five
minutes prior to the start of the call.
For those who are not available to listen to the live conference call, a
replay will be available via telephone from approximately 7:00 p.m. ET on
July 27 until 7:00 p.m. ET on August 2. The access number for the
replay is 617-801-6888; confirmation number 26436552.
Additionally,
the conference call will be broadcast live over the Internet and can be accessed
by all interested parties through the investor relations section of
Zoran’s website at www.zoran.com. Please access the website at least fifteen
minutes prior to the start of the call to register and to download, and install
any necessary audio software.
Company
Profile
Zoran Corporation, based
in Sunnyvale, California, is a leading provider of digital solutions-on-a-chip
for 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 and Share 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 peripheral printer products have
received recognition for excellence and are now in millions of homes and
offices worldwide. With headquarters in
the U.S. and operations
in Canada, China, England, Germany, Israel, Japan, Korea, and Taiwan, Zoran may
be contacted on the World Wide Web at www.zoran.com or at 408-523-6500.
Forward-Looking Statements
This press release
includes a number of 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: the rapidly
evolving markets for the Company’s products and uncertainty regarding the development
of these markets; new product development, the ongoing introduction of new and
enhanced products by the Company and its competitors and the transition from
older products; intensive competition in markets in which the Company competes;
the Company’s reliance on independent foundries and contractors for its wafer
supplies and product assembly and testing and its ability to ramp up
manufacturing capacity to meet changing customer requirements; the effects of
changes in revenue and product mix on the Company’s gross margins; the
Company’s historic dependence on sales to a limited number of large customers
and fluctuations in customer and product mix among those customers; the
dependence on key Company personnel; the reliance on international sales and operations,
particularly the Company’s operations in Israel; potential problems related to
the integration of the business and operations of Emblaze Semiconductor
following its recent acquisition; and the effects of general business and
changing economic conditions on the markets that the Company serves. 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
that have been made with the SEC.
###
ZORAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2004
2003
2004
2003
Revenues:
Hardware product
revenues
$
89,681
$
41,510
$
157,710
$
78,607
Software and
other revenues
14,035
3,221
26,643
3,957
Total revenues
103,716
44,731
184,353
82,564
Costs and
expenses:
Cost of hardware
product revenues
58,838
26,227
104,166
52,937
Research and
development
21,136
6,231
39,782
10,710
Selling, general
and administrative
16,485
7,796
31,302
14,738
Amortization of
intangibles
10,343
944
20,686
1,887
Deferred stock
compensation
2,117
10
4,648
20
Total costs and
expenses
108,919
41,208
200,584
80,292
Operating income
(loss)
(5,203
)
3,523
(16,231
)
2,272
Interest &
other income, net
172
1,286
897
2,857
Income (loss)
before income taxes
(5,031
)
4,809
(15,334
)
5,129
Provision for
income taxes
1,114
576
1,500
703
Net income
(loss)
$
(6,145
)
$
4,233
$
(16,834
)
$
4,426
Basic net income
(loss) per share
$
(0.14
)
$
0.15
$
(0.40
)
$
0.16
Diluted net
income (loss) per share
$
(0.14
)
$
0.15
$
(0.40
)
$
0.15
Shares used to
compute basic net income (loss) per share
42,697
27,481
42,610
27,452
Shares used to
compute diluted net income (loss) per share
42,697
28,991
42,610
28,588
-more-
ZORAN
CORPORATION
PRO
FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except per share data)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2004
2003
2004
2003
Revenues:
Hardware product
revenues
$
89,681
$
41,510
$
157,710
$
78,607
Software and
other revenues
14,035
3,221
26,643
3,957
Total revenues
103,716
44,731
184,353
82,564
Costs and
expenses:
Cost of hardware
product revenues
58,838
26,227
104,166
52,937
Research and
development
21,136
6,231
39,782
10,710
Selling, general
and administrative
16,485
7,796
31,302
14,738
Total costs and
expenses
96,459
40,254
175,250
78,385
Operating income
7,257
4,477
9,103
4,179
Interest &
other income, net
172
1,286
897
2,857
Income before
income taxes
7,429
5,763
10,000
7,036
Provision for
income taxes
1,114
576
1,500
703
Net income
$
6,315
$
5,187
$
8,500
$
6,333
Basic net income
per share
$
0.15
$
0.19
$
0.20
$
0.23
Diluted net
income per share
$
0.14
$
0.18
$
0.19
$
0.22
Shares used to
compute basic net income per share
42,697
27,481
42,610
27,452
Shares used to
compute diluted net income per share
45,034
28,991
45,036
28,588
Note: The above
unaudited pro forma condensed consolidated statements of operations are not
intended to be in accordance with generally accepted accounting principles and
may differ from pro forma presentations or computations used by other
companies. See reconciliation of GAAP to
pro forma financial information on the following page.
ZORAN
CORPORATION
RECONCILIATION
OF PRO FORMA NET INCOME TO GAAP NET INCOME (LOSS)
(in
thousands)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2004
2003
2004
2003
Pro forma net
income
$
6,315
$
5,187
$
8,500
$
6,333
Adjusting items
to pro forma net income:
Amortization of
other intangibles (1)
(10,343
)
(944
)
(20,686
)
(1,887
)
Deferred stock
compensation (2)
(2,117
)
(10
)
(4,648
)
(20
)
GAAP net income
(loss)
$
(6,145
)
$
4,233
$
(16,834
)
$
4,426
(1) Amortization
of intangible assets for the quarter and six month period ended June 30, 2004
is associated with the acquisition of Oak Technology, Inc. in August 2003. Amortization of intangible assets for the
quarter and six month period ended June 30, 2003 is associated with the
acquisitions of PixelCam Inc. in June 2000 and the acquisition of Nogatech Inc.
in October of 2000.
(2) Deferred stock
compensation is primarily a result of the acquisition of Oak Technology, Inc.
in August 2003.
ZORAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 30,
2004
December 31,
2003
ASSETS
Current assets:
Cash and
short-term investments
$
100,074
$
126,366
Accounts
receivable, net
71,298
65,224
Inventory
36,644
16,805
Prepaid expenses
& other current assets
11,906
12,151
Total current
assets
219,922
220,546
Property &
equipment, net
19,592
20,029
Other assets
108,025
69,311
Intangible
assets, net
287,820
307,976
Total assets
$
635,359
$
617,862
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current
liabilities:
Accounts payable
$
54,610
$
29,038
Accrued expenses
and other liabilities
45,015
45,182
Total current
liabilities
99,625
74,220
Long term
liabilities
8,215
9,363
Stockholders'
equity:
Common Stock
43
42
Additional
paid-in capital
708,452
703,812
Deferred
stock-based compensation
(8,366
)
(13,014
)
Accumulated
other comprehensive income (loss)
694
(91
)
Accumulated
deficit
(173,304
)
(156,470
)
Total
stockholders' equity
527,519
534,279
Total
liabilities and stockholders' equity
$
635,359
$
617,862
Contact:
Karl Schneider, Chief Financial Officer of Zoran
Corporation, 408-523-6510, or
ir@zoran.com; or Kristyn Hutzell, 925-946-9392, or
khutzell@hfgcg.com, for
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