updated 1/31/2011 7:16:27 AM ET 2011-01-31T12:16:27

SAN JOSE, Calif., Jan. 31, 2011 (GLOBE NEWSWIRE) -- DSP Group, Inc. (Nasdaq:DSPG), a leading global provider of wireless chipset solutions for converged communications at home, announced today its results for the fourth quarter ended December 31, 2010.

Fourth Quarter Results:

Revenues for the fourth quarter of 2010 were $43,372,000, a decrease of 21% from revenues of $54,720,000 for the fourth quarter of 2009. Net loss for the fourth quarter of 2010 was $8,792,000, as compared to net loss of $2,871,000 for the fourth quarter of 2009. Loss per share for the fourth quarter of 2010 was $0.38, as compared to a loss per share of $0.13 for the fourth quarter of 2009.

Year End Results:

Revenues for the year ended December 31, 2010 were $225,482,000, an increase of 6% over 2009 revenues of $212,186,000. Net loss for 2010 was $7,425,000, compared to a net loss of $8,436,000 for 2009. Loss per share for 2010 was $0.32, compared to a loss per share of $0.36 for 2009.

Non-GAAP Results:

Non-GAAP net loss and loss per share for the fourth quarter of 2010 were $4,017,000 and $0.17, respectively, as compared to non-GAAP net income of $2,827,000 and diluted EPS of $0.12 for the fourth quarter of 2009. Non-GAAP net loss and loss per share for the fourth quarter of 2010 excluded the impact of amortization of acquired intangible assets of $2,495,000 associated with the acquisition of NXP's CIPT business; equity-based compensation expenses of $2,211,000; and restructuring expenses of $69,000 associated with the reorganization of our operations. Non-GAAP net income and diluted EPS for the fourth quarter of 2009 excluded the impact of amortization of acquired intangible assets of $3,081,000 associated with the acquisition of NXP's CIPT business and equity-based compensation expenses of $2,617,000.

Non-GAAP net income and diluted EPS for the year ended December 31, 2010 were $9,495,000 and $0.40, respectively, representing an increase of 191% from the non-GAAP net income of $3,258,000 and an increase of 186% from the non-GAAP diluted EPS of $0.14 for the year ended December 31, 2009. Non-GAAP net income and diluted EPS for the year ended December 31, 2010 excluded the impact of amortization of acquired intangible assets of $9,975,000 associated with the acquisition of NXP's CIPT business; equity-based compensation expenses of $9,553,000; restructuring expenses of $463,000 associated with the reorganization of our operations; a tax benefit of $571,000 resulting from the reversal of an income tax contingency reserve that was determined to be no longer needed due to the expiration of applicable statutes of limitation; and income of $2,500,000 resulting from the reversal of a reserve that was determined to be no longer needed due to the expiration of applicable statutes of limitation included in the cost of goods sold.

Non-GAAP net income and diluted EPS for the year ended December 31, 2009 excluded the impact of amortization of acquired intangible assets of $12,258,000 associated with the acquisition of NXP's CIPT business; equity-based compensation expenses of $11,100,000; gains from realization of previously impaired available-for-sale securities of $531,000; a tax benefit of $3,488,000 resulting from a settlement agreement with the tax authorities and a tax benefit of $7,645,000 resulting from the reversal of certain income tax contingency reserves that were determined to be no longer needed due to the expiration of applicable statutes of limitation.

Ofer Elyakim, CEO of DSP Group, stated: "Despite the overhang and depletion of excess inventory at several ODM and OEM customers during the fourth quarter, we were able to execute and deliver on our 2010 business plan as reflected in the year-on-year improvements in all of our annual financial metrics. In addition, we generated $17 million of free cash flow during the year and ended the year with a strong cash position of approximately $140 million in cash and cash equivalents."

Mr. Elyakim also added: "The Consumer Electronics Show in January displayed a number of new products which will be based on DSP Group platforms. We expect that these new products based on our XpandR, CAT iq and VOIP platforms will be commercially launched during the course of the year, with more product launches expected in the second half of the year. As we look to 2011, we expect conditions in our markets to improve and based on forecasts and prospects received from customers, we project annual revenues in the range of $227 million to $245 million, representing approximately an increase of 5% in revenues in 2011 as compared to 2010."

The Company believes that the non-GAAP presentation of net income, loss per share and diluted EPS presented in this press release is useful to investors in comparing results for the quarter and year ended December 31, 2010 to the same periods in 2009 because the exclusion of the above noted expenses may provide a more meaningful analysis of the Company's core operating results. Further, the Company believes it is useful to investors to understand how the expenses associated with equity-based compensations expenses are reflected on its statements of income.

Forward-Looking Statements

This press release contains statements that qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, including Mr. Elyakim's statements about commercial launches of products based on DSP Group technology in 2011, improvements in market conditions in 2011 and annual revenue guidance for 2011. 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 as a result of various factors, including the impact of reductions in lead times and inventory levels by DSP Group customers and their customers; assumption that excess inventory would be completely depleted by the end of the first quarter of 2011; unexpected delays in the introduction of new products, especially the new generation of multimedia products; the sustainability of the market recovery; fluctuations in gross margins associated with the sale of existing products; slower than expected change in the nature of residential communications domain; DSP Group's inability to develop and produce new products at competitive costs and in a timely manner or failure of such products to achieve broad market acceptance; and general market demand for products that incorporate DSP Group's technology in the market. These factors and other factors which may affect future operating results or DSP Group's stock price are discussed under "RISK FACTORS" in the Form 10‑K for fiscal 2009 as well as other reports DSP Group has filed with the Securities and Exchange Commission and which are available on DSP Group's Web site ( www.dspg.com ) under Investor Relations.

About DSP Group

DSP Group, Inc. (Nasdaq:DSPG) is a leading global provider of wireless chipset solutions for converged communications at home. Delivering system solutions that combine semiconductors and software with reference designs, DSP Group enables consumer electronics (CE) manufacturers to cost-effectively develop new revenue-generating applications with fast time to market. At the forefront of semiconductor innovation and operational excellence for over two decades, and with a growing share of the wireless home telephony market, DSP Group provides a broad portfolio of wireless chipsets integrating DECT, Wi-Fi, PSTN and VoIP technologies with state-of-the-art application processors. Enabling converged voice, audio, video and data connectivity across diverse consumer products – from cordless and VoIP phones to home gateways and connected multimedia screens – DSP Group proactively partners with CE manufacturers to shape the future of converged communications at home. For more information, visit www.dspg.com .

The DSP Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6171

Earnings conference call

DSP Group has scheduled a conference call for 8:30 AM ET today to discuss the financial results for the fourth quarter of 2010 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 www.dspg.com or link to: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=101665&eventID=3660099.

If you cannot join the call, you may listen to the replay, which will be available for one week after the call on DSP Group's Web site or by calling the following numbers:

-- US Dial-In # 1-888-286-8010 (passcode: 94886247)
-- International Dial-In #    1-617-801-6888  (passcode: 94886247) 
 
 
DSP GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 
  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2010 2009 2010 2009
  (Unaudited) (Unaudited) (Unaudited) (Audited)
         
Product revenues and other $ 43,372 $ 54,720 $ 225,482 $ 212,186
Cost of product revenues and other 27,652 33,339 137,571 133,590
         
Gross profit 15,720 21,381 87,911 78,596
Operating expenses:        
Research and development 14,491 13,557 55,588 56,148
Sales and marketing 4,196 4,423 17,199 17,889
General and administrative 3,499 3,833 14,362 15,228
Amortization of intangible assets 2,495 3,081 9,975 12,258
Restructuring costs 69 -- 463 --
         
Total operating expenses 24,750 24,894 97,587 101,523
         
Operating loss (9,030) (3,513) (9,676) (22,927)
Other income:        
Interest and other income , net 398 559 1,468 2,857
         
Loss before income tax benefit (8,632) (2,954) (8,208) (20,070)
Income tax expense (benefit) 160 (83) (783) (11,634)
         
Net loss $ (8,792) $ (2,871) $ (7,425) $ (8,436)
         
Net loss per share:        
Basic $ (0.38) $ (0.13) $ (0.32) $ (0.36)
Diluted $ (0.38) $ (0.13) $ (0.32) $ (0.36)
         
Weighted average number of shares of common stock used in the computation of:        
Basic 23,308 22,901 23,229 23,655
Diluted 23,308 22,901 23,229 23,655
 
 
DSP GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (NON-GAAP)
(In thousands, except per share amounts)
 
 
  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2010 2009 2010 2009
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Product revenues and other $ 43,372 $ 54,720 $ 225,482 $ 212,186
Cost of product revenues and other 27,486 33,175 139,367 132,812
         
Gross profit 15,886 21,545 86,115 79,374
Operating expenses:        
Research and development 13,394 12,410 50,876 50,895
Sales and marketing 3,841 4,029 15,706 16,116
General and administrative 2,906 2,921 11,718 11,932
         
Total operating expenses 20,141 19,360 78,300 78,943
         
Operating income (loss) (4,255) 2,185 7,815 431
Other income:        
Interest and other income, net 398 559 1,468 2,326
         
Income before provision for income taxes (3,857) 2,744 9,283 2,757
Provision for income taxes (income tax benefit) 160 (83) (212) (501)
         
Net income (loss) $ (4,017) $ 2,827 $ 9,495 $ 3,258
         
Net earnings (loss) per share:        
Basic $ (0.17) $ 0.12 $ 0.41 $ 0.14
Diluted $ (0.17) $ 0.12 $ 0.40 $ 0.14
         
Weighted average number of shares of common stock used in the computation of:        
Basic 23,308 22,901 23,229 23,655
Diluted 23,308 23,058 23,623 23,926
 
 
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts)
 
  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2010 2009 2010 2009
  Unaudited Unaudited Unaudited Unaudited
GAAP net income (loss) $ (8,792) $ (2,871) $ (7,425) $ (8,436)
Equity-based compensation expense included in cost of product revenues 166 164 704 778
         
Equity-based compensation expense included in R&D 1,097 1,147 4,712 5,253
         
Equity-based compensation expense included in SG&A 948 1,306 4,137 5,069
         
Amortization of intangible assets related to NXP transaction 2,495 3,081 9,975 12,258
         
Restructuring costs 69 -- 463 --
         
Unrealized loss (realized gain) related to certain available-for-sale marketable securities -- -- -- (531)
         
Reversal of income tax contingency reserve that was determined to be no longer needed due to the expiration of applicable statutes of limitation -- -- (571) (7,645)
         
Reversal of a reserve that was determined to be no longer needed due to the expiration of applicable statutes of limitation included in costs of goods sold -- -- (2,500) --
         
Tax benefit resulting from settlement agreement with tax authorities -- -- -- (3,488)
         
Non-GAAP net income (loss)  $ (4,017)  $ 2,827  $ 9,495  $ 3,258
Non-GAAP diluted earnings (loss) per share $ (0.17) $ 0.12 $ 0.40 $ 0.14
 
 
DSP GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
  December 31, December 31,
   2010 2009
   (Unaudited) (Audited)
Assets     
Current assets:    
Cash and cash equivalents $33,912 $37,986
Restricted deposits 121 120
Marketable securities and short term deposits 29,903 19,567
Trade receivables, net 25,170 28,352
Inventories 18,803 12,427
Other accounts receivable and prepaid expenses 6,302 12,162
Deferred income taxes   --   178 
Total current assets 114,211 110,792
     
Property and equipment, net 7,786 10,090
     
Long term marketable securities and deposits 75,825 5,392
Severance pay fund 11,336 9,521
Deferred income taxes  121  15
     
Intangible assets, net 10,434 20,473
     
Investment in other companies 2,200 2,200
Long term prepaid expenses and lease deposits  642    1,286 
  100,558 98,887
     
Total assets $ 222,555 $ 219,769
   
Liabilities and Stockholders' Equity  
Current liabilities:    
Trade payables $ 19,206 $ 18,309
Other current liabilities 23,053  24,470
Total current liabilities 42,259 42,779
     
Accrued severance pay 12,419 10,572
Accrued pensions  774   929 
Total long term liabilities 13,193 11,501
     
Stockholders' equity:    
Common stock 23 23
Additional paid-in capital 335,132 325,579
Accumulated other comprehensive income 355  2,174
Less -- Cost of treasury stock  (119,280)  (123,350)
Accumulated deficit  (49,127)  (38,937)
Total stockholders' equity 167,103  165,489
     
Total liabilities and stockholders' equity $ 222,555 $ 219,769
CONTACT: DSP Group, Inc
         Orly Garini-Dil,
         +1-408-240-6839
         orly.garini@dspg.com

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