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Gennum Reports 2011 Second Quarter Results

^{Published on 2011-06-22 13:35:44 - Market Wire}
 

BURLINGTON, ON, June 22, 2011 /CNW/ - Gennum Corporation (TSX: GND) today reported unaudited financial results for the second quarter of fiscal 2011. Second quarter revenue of $34.4 million increased 9% over the second quarter of 2010 and diluted earnings per share was $0.10 compared to $0.12 in 2010.

"Our second quarter performance delivered solid revenue and profitability. With our acquisition of Nanotech Semiconductor, we continue to see excellent market momentum for our data communications products across all regions," said Dr. Franz Fink, President and CEO, Gennum. "Our third quarter order book at this time is modestly ahead of second quarter order levels. We continue to monitor the situation in Japan, and we may experience a continued moderate impact to our business during the quarter as customers work through production issues. I remain confident in our strategy and ability to capitalize on our solid position in broadcast, data communications and consumer markets."

Gennum will be embarking on the final phase of its strategy to become a completely fabless semiconductor company. During the third quarter of 2011, the Company will formalize and begin executing its plan to fully outsource its test and logistics capabilities. This transition of its operations and logistics is expected to enable Gennum to improve its production capacity, customer lead time and logistical support, and to remain cost competitive in its marketplace.

Financial Results

Gennum recorded revenue of $34.4 million in the second quarter of 2011, which included $2.2 million of revenue from the acquisition of Nanotech.  EBITDA¹ in the second quarter was $9.3 million, compared to $9.2 million in the second quarter of 2010 and $9.3 million in the prior quarter.  The 2011 second quarter results represented an EBITDA of 27% of revenue, down 2 percentage points compared to the second quarter of 2010 and sequentially lower by 3 percentage points compared to the first quarter of 2011.

Operating income in the second quarter of 2011 was $4.6 million compared to $5.8 million in the second quarter of 2010.  Gennum Pre-Nanotech Consolidated Statement of Earnings¹ resulted in $5.3 million in operating income, net income of $4.4 million and earnings per share of $0.13.  Refer to our management discussion and analysis, as filed on SEDAR, at [ www.sedar.com ], for further information describing the Nanotech acquisition.

Net income in the second quarter of 2011 was $3.6 million or $0.10 per share compared to $4.1 million or $0.12 per share in the second quarter of 2010.  Year to date, net income was $8.1 million or diluted earnings per share of $0.23 compared to $8.0 million or $0.23 per share the first half of 2010.

Cash and cash equivalents decreased to $14.2 million as of May 31, 2011 compared to $52.7 million as of November 30, 2010 mainly due to the use of $35.9 million to acquire Nanotech and $2.8 million in deferred compensation awarded to Nanotech employees immediately following the acquisition.  The Company believes that its current cash and cash equivalents and working capital position are sufficient to meet its obligations.

Outlook

Our current third quarter order book, including Nanotech, is modestly ahead compared to the order book at the same time in the second quarter of 2011. While our overall order book remains solid, we continue to closely monitor the situation with our customers in Japan. We expect there still could be some moderate impact on demand as customers in Japan work through production issues during the third quarter, with this improving over the balance of the year.

Today we announced the final stage of our strategy to complete the outsourcing of our manufacturing operations.  This process began in 2007 with the decision to outsource wafer manufacturing and will be completed with the outsourcing of our product testing and logistics. This program will be formalized during the Company's third quarter and implemented over the next year.  The full impact and cost of the program are still being finalized.  The cost savings from this program are part of our overall program to maintain our competitive position in the marketplace. Currently, costs to implement the program are expected to result in restructuring charges of between $3.3 million and $3.8 million and between $0.5 million and $0.7 million of operating expenses.  The majority of the restructuring charges are expected to be accrued during the third quarter.

We continue to evolve our company leveraging the strong foundation we have put in place. The investments we have made are strengthening our core market position and expanding our capability to address faster growing data communication and consumer connectivity markets. We are encouraged by the strong design-in activities of many of our new products across all global regions and the opportunities the Company has to drive greater shareholder value.

Business Developments

• Gennum acquired Nanotech Semiconductor, which significantly strengthens Gennum's mixed-signal and optical portfolio and its ability to capitalize on fast growing consumer connectivity markets.
• Gennum expanded its sales network by adding new distributors Retronic, Leading Light Technologies, and D-Tech. This extends the company's presence in South America and Europe.
• Gennum and NuMedia introduced a new Aviia™ HD CODEC for industrial connectivity which provides a turnkey solution for the transmission of high-definition video over long runs of coaxial cable greater than 300 meters.
• Gennum appointed Mamoru Tomozane as President of Gennum Japan. Mr. Tomozane will manage Gennum's operations in Japan, including leadership of the Company's Japanese sales efforts.
• Gennum launched its new long-reach and high-density equalizers at NAB 2011. The next-generation adaptive equalizers provide cable reach beyond 200 meters, best-in-class density and simplify connector options.
• Gennum Corporation announced the industry's first in-connector transceiver chip for Thunderbolt™ active copper cables. The new GN2033, the world's first signal conditioner chip for Thunderbolt, enables data and display across a copper cable at cutting edge speeds.

Dividend

Gennum's Board of Directors has declared a regular cash dividend of 3.5 cents per share Canadian to be paid on July 20, 2011 to shareholders of record on July 6, 2011.

Our interim financial statements for the second quarter of 2011 and related management's discussion and analysis have been filed and may be viewed on our website [ www.gennum.com ] and on SEDAR [ www.sedar.com ].

Download the complete financial results (PDF)
[ http://www.gennum.com/extranet/file/q2fy11-financials.pdf ]

About Gennum Corporation

Gennum Corporation (TSX: GND) designs innovative semiconductor solutions and intellectual property (IP) cores for the world's most advanced consumer connectivity, enterprise, video broadcast and data communications products. Leveraging the company's proven optical, analog and mixed-signal products and IP, Gennum enables multimedia and data communications products to send and receive information without compromising the signal integrity. Recognized as an award winner for advances in high definition (HD) broadcasting, Gennum is headquartered in Burlington, Canada, and has global design, research and development and sales offices in Canada, Mexico, Japan, Germany, United States, Taiwan, India and the United Kingdom. [ www.gennum.com ]

Caution Regarding Forward-Looking statements
This document contains statements which constitute forward-looking statements. These forward-looking statements are not descriptive of historical matters and may refer to management's expectations or plans. These statements include but are not limited to statements concerning: Gennum's business objectives and plans including Gennum's corporate strategy and strategic priorities; Gennum's future financial performance and prospects including revenues, gross margins and earnings, and ability to achieve operating earnings, cash flow and other business model targets; the expected results and benefits of Gennum's acquisition of Nanotech (including the expected impact of the acquisition on Gennum's revenues, earnings, business and market position); future trends in the semiconductor products and intellectual property licensing industries and, in particular, market trends for analog and mixed-signal products, optical products and intellectual property products and licensing; Gennum's expectations for sales and licensing of its products in these markets including anticipated costs and fees, sales, product prices, size, duration, growth or decline of market opportunities and competitive and pricing pressures in these markets; Gennum's product roadmap and the speed at which Gennum is able to introduce new products; the adoption of new standards in the markets in which Gennum competes and the ability of Gennum to anticipate these changes and successfully address new opportunities; sales and capital spending plans and estimates, shipment levels and operating expenses; the anticipating savings from, and the anticipated costs and related charges and operating expenses associated with, the planned outsourcing of test and logistics operations; exchange rate fluctuations in, and the relative values of, the Canadian dollar, the U.S. dollar and the Japanese yen; Gennum's ability to finance its growth plans and make necessary investments; and litigation in which Gennum is involved.

Inherent in forward-looking statements are risks and uncertainties beyond Gennum's ability to predict or control including, but not limited to, risks associated with: competitive and pricing pressures in the increasingly competitive environment in which Gennum operates; changes in the mix of products sold which, due to associated margins, can impact Gennum's financial results; the successful integration of and realization of benefits from acquisitions, including the acquisition of Nanotech; economic cycles in the semiconductor industry including downturns which can result from adverse general economic conditions; the effects of the recent earthquake and tsunami in Japan and the resultant impact upon Gennum's sales in Japan, which comprise approximately 25% of Gennum's revenues; our ability to anticipate needs for future products and successfully execute our product roadmap, including the possibility of the emergence of disruptive technologies which negatively impact our positioning in the marketplace; the risk that unforeseen factors may arise that result in us not being able to achieve our operating income, cash flow and other business model targets; possible impairments of assets which could be required in the future; fluctuations in foreign exchange rates and their potential adverse impact upon our financial results; our reliance on external foundries and suppliers and the potential adverse effects of disruptions in any of these arrangements; our ability to attract and retain key personnel necessary for our business; our ability to successfully protect our intellectual property rights; and the initiation and outcome of legal proceedings.  Readers should also refer to the sections entitled "Risks and Uncertainties" in our 2010 management's discussion and analysis and "Risk Factors" in our most recent annual information form, each as filed on SEDAR at [ www.sedar.com ].

Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this document.  Such statements are based on a number of assumptions which may prove to be incorrect including, but not limited to, the following assumptions: there is no material deterioration in the business and economic conditions in the marketplace for Gennum's products; Gennum is able to successfully integrate acquisitions (including the acquisition of Nanotech) and the results of such acquisitions are not materially different from those anticipated by Gennum; the effects of the recent earthquake and tsunami in Japan will not have a material adverse impact upon Gennum's revenues; Gennum's expectations regarding market trends for analog and mixed-signal products, optical products and intellectual property products and licensing are not materially incorrect; Gennum is able to execute its product roadmap without delays or disruptions having a material impact on Gennum; Gennum's expectations relating to the needs and direction of the marketplace for its products are within reasonable bounds of accuracy and Gennum is able to introduce products and capitalize on new opportunities generally as expected; Gennum's expectations relating to its future operating expenses, as well as the capital required to conduct its business in the future, are not materially incorrect; significant impairments of assets will not arise; material disruptions in the manufacture and supply of products and services to Gennum by foundries and suppliers will not materialize; Gennum's expectations relating to competitive pressures, including pricing pressures, as well as Gennum's expectations relating to the mix of products to be sold by it, are not materially incorrect; the actual savings from, and costs and related charges and operating expenses associated with, the planned outsourcing of test and logistics operations are not materially different from those anticipated by Gennum; significant fluctuations in foreign exchange rates which materially adversely affect Gennum's financial results do not arise; customer demand for Gennum's products remains generally as anticipated; and Gennum is able to continue to retain and attract technical and other key employees.

Readers are cautioned that the foregoing list of important factors and assumptions is not exhaustive. Forward-looking statements are not guarantees of future performance. Events or circumstances could cause Gennum's actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. Consequently, readers should not place any undue reliance on these forward-looking statements. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. In addition, these forward-looking statements relate to the date on which they are made. We disclaim any intention or obligation to update or revise any forward-looking statements or the foregoing list of factors, whether as a result of new information, future events or otherwise, except to the extent required by law.

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¹ "EBITDA" and "Gennum Pre-Nanotech Consolidated Statement of Earnings" are non-GAAP financial measures that do not have any standardized meanings under GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. A definition of these terms, a description of why we believe them to be useful measures, and a quantitative reconciliation to the most directly comparable measures calculated in accordance with GAAP is set forth under the heading "Non-GAAP Reporting" in our management's discussion and analysis as filed on SEDAR at [ www.sedar.com ] and on our web site at [ www.gennum.com ].