OTTAWA, June 28 /PRNewswire-FirstCall/ -- MOSAID Technologies Incorporated (TSX:MSD) today announced financial results for the fourth quarter and fiscal year ended April 30, 2007.
During the fourth quarter of fiscal 2007, MOSAID completed the sale of certain assets of its Systems Division test equipment business to Teradyne, Inc. and, as planned, exited the business. MOSAID also announced the focused strategic review of its Semiconductor Intellectual Property (Semi IP) product business and subsequently decided to divest the assets of this business. Accordingly, the financial results for both the Systems and Semi IP businesses have been reported as discontinued operations in the current and comparative periods, leaving the patent licensing business, including memory technology R&D, as the sole continuing operation.
Revenues for continuing operations for the fourth quarter of fiscal 2007 were $12.2 million, up 24% from $9.8 million in the fourth quarter of fiscal 2006.
Income from continuing operations for the fourth quarter of fiscal 2007 was $1.3 million compared to $3.0 million in the same period a year ago. Operating expenses in the fourth quarter included $2.2 million in amortization associated with acquired patents, $2.8 million in corporate restructuring charges and Special Committee costs of $848,000 related to the Company's strategic alternatives initiative. There were no such expenses in the fourth quarter of fiscal 2006. As such, excluding these charges, income from continuing operations for the fourth quarter of fiscal 2007 was $4.9 million on an after tax basis.
Discontinued operations contributed a net profit of $7.7 million in the fourth quarter of fiscal 2007. Included in this result was a $17.8 million gain on sale of assets to Teradyne and restructuring charges of $8.0 million related to the Systems Division and the Semi IP product business.
Net income for the fiscal 2007 fourth quarter was $9.0 million or $0.81 per diluted share, compared with $3.1 million or $0.27 per diluted share reported in the fourth quarter of fiscal 2006.
Revenues from continuing operations for fiscal 2007 were $59.9 million, up 56% from $38.5 million in fiscal 2006. Fiscal 2007 revenues included an $8.9 million non-recurring payment from PortalPlayer, Inc. Net income from continuing operations for fiscal 2007 was $20.5 million compared with $14.6 million in the prior year. For the current year, operating expenses included $3.3 million in amortization associated with acquired patents, $2.8 million in restructuring charges and $2.8 million in Special Committee costs. There were no such comparable costs in the prior year. As such, excluding these charges from fiscal 2007, income from continuing operations was $26.0 million on an after tax basis.
During fiscal 2007, discontinued operations contributed $4.2 million to net income compared with $851,000 in fiscal 2006.
Net income for fiscal 2007 was $24.7 million or $2.18 per diluted share, up 60% from net income of $15.5 million or $1.34 per diluted share in fiscal 2006.
"I am very pleased to report that in fiscal 2007, MOSAID delivered the best financial operating results in its 32 year history, which we achieved during a year of substantial organizational restructuring," said John C. Lindgren, President and Chief Executive Officer, MOSAID. "We are moving into fiscal 2008 on solid financial ground, with a new senior management team, a more robust patent portfolio, and a clear focus as a pure-play intellectual property company."
"We have strengthened our patent portfolio by acquiring fundamental wireless patents, entering into partnerships that open up exciting licensing opportunities, and filing patents on internally developed memory technology," said Lindgren. "Our immediate goal is to complete the current restructuring plan by divesting our Semi IP product business and our real estate. This will enable us to further concentrate our resources on the patent licensing and innovation strategy that will fuel the next stage of MOSAID's growth, as demonstrated by last week's announcement of a patent licensing agreement with Etron Technology."
The Company's cash balance and marketable securities at the end of fourth quarter was $50.3 million, compared with $63.6 million at the end of the third quarter of fiscal 2007. During the fourth quarter of fiscal 2007, the Company made a US$25.0 million payment to Agere Systems in relation to the acquired wireless patent portfolio.
On June 28, 2007, MOSAID Technologies declared a quarterly dividend of $0.25 per share. The dividend, which is an eligible dividend, is payable on July 26, 2007 to shareholders of record as of July 12, 2007.
Today MOSAID also announced the sale of its Ottawa head office campus, consisting of a 77,000 square foot office building and 11.3 acres of land, for $14.0 million. The building and land carry a book value of $5.4 million. As part of the transaction, MOSAID has agreed to lease back 15,000 square feet of office space for a five year period and has agreed to remain in the facility as a lead tenant. Conditions of the sale include satisfactory completion of due diligence.
Fourth Quarter Business Highlights
----------------------------------
Operating highlights during the fourth quarter of fiscal 2007 included:
- The acquisition of 20 wireless patents and three applications from
Agere Systems, now LSI Corporation. MOSAID has now notified 24
companies of MOSAID's purchase and current ownership of this wireless
patent portfolio;
- Completion of the sale of certain assets of the Systems Division to
Teradyne, Inc. for $20 million cash;
- Stopped the development of one Semi IP product and announced an ongoing
review of strategic alternatives for that business; and
- The appointments of Carl Schlachte as Chairman of the Board, John
Lindgren as President and Chief Executive Officer, and Joseph Brown as
Vice President and Chief Financial Officer.
Guidance
--------
As a result of the strategic alternatives process, the Company's acquisition of patents from Agere Systems, and other non-cash items of income and expense, the Company is changing the way it reports earnings on a going-forward basis in order to more closely reflect the financial management of the Company. As a result of this meaningful change in its financial model, the Company will also reformat the income statement.
Going forward, earnings will be reported using Generally Accepted Accounting Principles and on a pro forma earnings per share basis. The difference between pro forma earnings and GAAP earnings is due to stock-based compensation expense, amortization of intangibles and non-recurring items, on an after tax basis. There is no adjustment for changes in working capital items.
For the first quarter of fiscal 2008, MOSAID anticipates revenues of $12.0 million to $12.5 million, income from continuing operations of $2.2 million to $2.5 million, and GAAP net income of $8.1 million to $8.4 million. The Company expects pro forma earnings of $4.5 million to $4.8 million. For fiscal 2008, MOSAID is guiding for revenues in the range of $55 million, income from continuing operations of $11.0 million to $12.0 million and GAAP net income of $16.0 million to $17.0 million. The Company anticipates pro forma earnings of approximately $20.0 million to $22.0 million.
On February 22, 2007, MOSAID issued guidance for revenues in the fourth quarter of fiscal 2007 of $13.5 million to $14.0 million and net earnings of $5.5 million to $6.5 million. As a result of reporting Semi IP as discontinued operations for the fourth quarter and fiscal year, for comparison purposes, the Company is tabling reformatted guidance for the fourth quarter. Accordingly, for the fourth quarter, guidance for operating expenses would have been $8.1 million.
-------------------------------------------------------------------------
Conference Call and Webcast
Management will hold a conference call and webcast on Thursday, June 28,
2007 at 5:00 p.m. (ET). Participants wishing to access the conference
call should dial 1-800-926-5068. The webcast will be live at
http://www.mosaid.com/ and will be available on MOSAID's web sit for 90 days
following the event.
-------------------------------------------------------------------------
About MOSAID
MOSAID Technologies Inc. is one of the world's leading intellectual property companies. MOSAID develops semiconductor memory technology, and licenses patented intellectual property in the areas of semiconductors, and wired and wireless communications systems. MOSAID counts many of the world's largest semiconductor companies among its customers. Founded in 1975, MOSAID is based in Ottawa, Ontario. For more information, visit http://www.mosaid.com/.
Forward Looking Information
This document and certain other public documents incorporated by reference in this document, contain forward-looking statements to the extent they relate to MOSAID or its management, including those identified by the expressions "anticipate," "believe," "foresee," "estimate," "expect," "intend," "could," "may,", "plan," "will," "would" and similar expressions. Similarly, statements in this document that describe MOSAID's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. These forward-looking statements are not historical facts, but rather reflect MOSAID's current expectations regarding future events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results, performance or achievements to differ materially from those in such forward-looking statements. Assumptions made in preparing forward-looking statements and financial guidance include, but are not limited to, the following: MOSAID's continued expansion of its patent portfolio and of its opportunities for future patent licensing revenue as a result of MOSAID's acquisition of patents from third parties and from development of new inventions; DRAM manufacturers continuing to infringe MOSAID's patents; the timing and amount of MOSAID's litigation expenses; MOSAID's ability to sign new patent licensees; the value proposition associated with MOSAID's products relative to its competition in the market; the timing and amount of MOSAID's Research & Development expenses; the timing of MOSAID's new product introductions; MOSAID's ability to develop, manufacture, and market innovative products in a rapidly changing technological environment; and MOSAID's ability to maintain and enhance existing customer relationships.
Factors that could cause actual results to differ materially from expected results include, but are not limited to, the following: declines or unexpected variations in market growth rates for MOSAID's products; the extent of embedded DRAM proliferation in the System-on-a-Chip markets; variability in customer deployment schedules from quarter to quarter; shifts in the mix of MOSAID products sold; unfavorable legal rulings in MOSAID's patent litigations; economic, social, and political conditions in the countries in which MOSAID, its customers, suppliers, or patent licensees operate, including security risks, health conditions, possible disruptions in transportation networks and fluctuations in foreign currency exchange rates; non-payment or delays in payment by customers/licensees; failure to maintain and enforce MOSAID's existing patent portfolio, or failure to obtain valuable patents as a result of research and development activities, or failure to acquire valuable patents from third parties; MOSAID's ability to recruit and retain skilled personnel; change in MOSAID's financial position; obsolescence of products or inappropriate targeting to markets that fail to materialize; inability to transition to new technologies to meet customer demand; variations in average sales cycles; key component supply restrictions and/or cost increases; critical industry transitions; consolidation of MOSAID's customers and/or licensees; natural events, such as severe weather and earthquakes in the locations in which MOSAID, its customers, suppliers, or patent licensees operate; and changes in the tax rate applicable to MOSAID as the result of changes in the tax law in the jurisdictions in which profits are determined to be earned and taxed, the outcome of tax audits and the ability to realize deferred tax assets.
MOSAID assumes no obligation to update or revise any forward-looking statements. Additional information identifying risks and uncertainties affecting MOSAID's business and other factors that could cause MOSAID's financial results to fluctuate are contained in MOSAID's Annual Information Form, under the section entitled "Risk Factors," and in MOSAID's other public filings available online at http://www.sedar.com/.
FINANCIAL STATEMENTS AND NOTES TO FOLLOW
MOSAID TECHNOLOGIES INCORPORATED
(SUBJECT TO THE CANADA BUSINESS CORPORATIONS ACT)
Consolidated Balance Sheets
(in thousands of Canadian Dollars)
April 30, April 30,
2007 2006
(audited) (audited)
-------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 23,396 $ 15,542
Marketable securities 26,876 55,788
Accounts receivable 12,626 7,113
Income taxes receivable - 381
Inventories - 1,779
Prepaid expenses 618 1,700
Future income taxes recoverable 10,278 11,910
-------------------------------------------------------------------------
73,794 94,213
Capital assets 1,067 9,328
Acquired intangibles 76,823 5,385
Long-term receivable 1,734 -
Goodwill 1,786 1,786
Long-term assets held for sale 7,028 -
Future income taxes recoverable 24,468 27,439
-------------------------------------------------------------------------
$ 186,700 $ 138,151
-------------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued liabilities $ 16,091 $ 7,653
Income taxes payable - 381
Deferred revenue 542 10,545
Mortgage payable 4,346 244
Current portion of other long-term liabilities 5,239 -
-------------------------------------------------------------------------
26,218 18,823
Mortgage payable - 4,346
Other long-term liabilities 38,313 -
-------------------------------------------------------------------------
64,531 23,169
-------------------------------------------------------------------------
Shareholders' Equity
Share capital 102,276 102,476
Contributed surplus 2,992 2,630
Retained earnings 16,901 9,876
-------------------------------------------------------------------------
122,169 114,982
-------------------------------------------------------------------------
$ 186,700 $ 138,151
-------------------------------------------------------------------------
See accompanying Notes to the Consolidated Financial Statements.
MOSAID TECHNOLOGIES INCORPORATED
Consolidated Statements of Operations and Retained Earnings
(in thousands of Canadian Dollars, except per share amounts)
Quarter Quarter Year Year
ended ended ended ended
April 30, April 30, April 30, April 30,
2007 2006 2007 2006
(unaudited) (unaudited) (audited) (audited)
-------------------------------------------------------------------------
Revenues $ 12,204 $ 9,803 $ 59,981 $ 38,528
Operating Expenses
Research
and development 1,549 1,201 7,335 4,169
Selling and marketing 4,190 2,382 8,928 6,351
General and
administration 1,140 1,807 6,827 6,561
Restructuring 2,764 - 2,764 -
Special Committee 848 - 2,812 -
-------------------------------------------------------------------------
10,491 5,390 28,666 17,081
-------------------------------------------------------------------------
Income from operations 1,713 4,413 31,315 21,447
Net interest income
(Note 2) 559 421 2,399 1,422
Write-down of long-term
investment - 67 - 67
-------------------------------------------------------------------------
Income before income
tax expense and
discontinued
operations 2,272 4,767 33,714 22,802
Income tax expense 1,001 1,795 13,189 8,170
-------------------------------------------------------------------------
Income before
discontinued
operations 1,271 2,972 20,525 14,632
Discontinued
operations
(net of tax) 7,772 163 4,184 851
-------------------------------------------------------------------------
Net income 9,043 3,135 24,709 15,483
Dividends 2,757 2,267 11,102 7,450
Normal course issuer bid - 3,379 6,582 6,320
Retained earnings,
beginning of period 10,615 12,387 9,876 8,163
-------------------------------------------------------------------------
Retained earnings,
end of period $ 16,901 $ 9,876 $ 16,901 $ 9,876
-------------------------------------------------------------------------
Earnings per share
Basic - before
discontinued
operations $ 0.12 $ 0.26 $ 1.85 $ 1.28
Diluted - before
discontinued
operations $ 0.11 $ 0.26 $ 1.81 $ 1.26
Basic -
net earnings $ 0.82 $ 0.28 $ 2.23 $ 1.35
Diluted -
net earnings $ 0.81 $ 0.27 $ 2.18 $ 1.34
-------------------------------------------------------------------------
Weighted average
number of shares
Basic 11,023,860 11,317,302 11,103,185 11,441,201
Diluted 11,216,133 11,508,277 11,321,298 11,572,706
-------------------------------------------------------------------------
See accompanying Notes to the Consolidated Financial Statements.
MOSAID TECHNOLOGIES INCORPORATED
Consolidated Statements of Cash Flows
(in thousands of Canadian Dollars)
Quarter Quarter Year Year
ended ended ended ended
April 30, April 30, April 30, April 30,
2007 2006 2007 2006
(unaudited) (unaudited) (audited) (audited)
-------------------------------------------------------------------------
Operating
Income before
discontinued
operations $ 1,271 $ 2,972 $ 20,525 $ 14,632
Items not
affecting cash
Amortization 1,772 89 3,025 372
Stock-based
compensation 765 396 1,831 1,347
Writedown of
capital assets 1,652 61 1,794 85
Future income
tax recoverable 474 (1,270) 4,603 764
Write-down of
investments - 67 - 67
-------------------------------------------------------------------------
5,934 2,315 31,778 17,267
Change in non-cash
working capital items
from continuing
operations 13,433 10,571 (1,837) 8,867
-------------------------------------------------------------------------
19,367 12,886 29,941 26,134
-------------------------------------------------------------------------
Investing
Acquisition of
capital assets
and acquired
intangibles (30,654) (10) (36,175) (153)
Acquisition of
marketable
securities (10,656) (20,094) (88,638) (192,508)
Proceeds on maturity/
disposal of marketable
securities 35,876 23,457 117,550 195,434
-------------------------------------------------------------------------
(5,434) 3,353 (7,263) 2,773
-------------------------------------------------------------------------
Financing
Repayment of mortgage (61) (57) (244) (225)
Repurchase of shares - (5,031) (9,996) (9,997)
Dividends (2,757) (2,267) (11,102) (7,450)
Issue of common shares 575 1,893 1,745 3,259
-------------------------------------------------------------------------
(2,243) (5,462) (19,597) (14,413)
-------------------------------------------------------------------------
Net cash inflow from
continuing operations 11,690 10,777 3,081 14,494
Net cash inflow
(outflow)
from discontinued
operations 235 (2,152) 4,773 (6,035)
-------------------------------------------------------------------------
Net cash inflow 11,925 8,625 7,854 8,459
Cash and cash
equivalents,
beginning
of period 11,471 6,917 15,542 7,083
-------------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 23,396 $ 15,542 $ 23,396 $ 15,542
-------------------------------------------------------------------------
See accompanying Notes to the Consolidated Financial Statements.
MOSAID TECHNOLOGIES INCORPORATED
Discontinued Operations
(in thousands of Canadian Dollars)
Quarter Ended Year Ended
April 30 April 30 April 30 April 30
2007 2006 2007 2006
(unaudited) (unaudited) (audited) (audited)
Revenues $ 8,553 $ 7,070 $ 22,084 $ 25,371
Expenses
Labour and materials 2,073 1,963 5,736 7,571
Research and development 5,849 4,076 16,240 10,824
Selling and marketing 2,868 1,727 7,899 6,624
Bad debt - - 88 (446)
Restructuring 7,991 - 7,991 -
18,781 7,766 37,954 24,573
Earnings (loss)
from operations (10,228) (696) (15,870) 798
Gain on sale of assets 17,806 - 17,806 -
-------------------------------------------------------------------------
Earnings before tax 7,578 (696) 1,936 798
Tax (recovery) (194) (859) (2,248) (53)
-------------------------------------------------------------------------
Discontinued operations
(net of tax) $ 7,772 $ 163 $ 4,184 $ 851
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MOSAID TECHNOLOGIES INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended April 30, 2007
(tabular dollar amounts in thousands of Canadian Dollars, except per
share amounts)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements.
In the opinion of management, all adjustments consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows have been included. Operating results for the interim period presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the full fiscal year ending April 30, 2007.
The accounting policies used in preparing these interim financial statements are consistent with those used in preparing the annual financial statements.
2. Net Interest Income
Net interest income comprises the following:
Quarter Quarter Year Year
ended ended ended ended
April 30, April 30, April 30, April 30,
2007 2006 2007 2006
----------------------------------------------------
Interest income $647 $546 $2,760 $1,835
----------------------------------------------------
Interest expense 88 125 361 413
----------------------------------------------------
$559 $421 $2,399 $1,422
----------------------------------------------------
3. Stock-based Compensation
The Company has an Employee Stock Purchase Plan (ESPP) whereby employees may elect to designate up to 5% of their annual salary to purchase common shares of the Company (Shares). For two six month periods commencing on the second business day after the Company's second quarter or fiscal year end financial results are publicly announced (each an "Offering Period"), eligible employees are given an opportunity to request that a percentage of their salary be deducted each pay period for the purpose of acquiring Shares. The purchase price under the ESPP is the lesser of 90% of the fair market value of the Shares, as determined by calculating the weighted average sale price for board lots as posted on the TSX the ten trading days immediately preceding (i) the first day of the Offering Period in which the purchase date falls or (ii) the purchase date. The Shares are not considered to be issued by the Company until the end of the six month period.
Also, the Company has an Employee and Director Stock Option Plan. The exercise price is no lower than the market price on the date of grant. Options granted under the Plan expire within a period of six years of granting, with vesting periods determined by the Human Resource Committee.
The Company employs a fair value method of accounting for all options issued to employees or directors on or after April 27, 2002. The fair value of options issued in the quarter was calculated using the Black-Scholes option pricing model and the following assumptions:
Quarter Quarter
ended ended
April 30, April 30,
2007 2006
--------------------------
Risk free interest rate 4.1% 4.1%
Expected life in years 5.5 5.5
Expected dividend yield 3.6% 3.1%
Volatility 57.49% 78.69%
4. Business Segment Information
Based upon the Company's internal reporting structure, the following operating segments have been assigned:
Intellectual Property (IP): A developer and licensor of semiconductor
intellectual property.
Systems: A supplier of engineering memory test and
analysis systems.
The significant accounting policies of the above segments are the same as those described in Note 1. Intersegment sales are recorded at cost.
Segment information
(in thousands of Canadian Dollars)
Year ended
April 30, 2007 IP Discontinued
(audited) Division Operations Totals
and
Held for
Sale
------------------------------------------------------------------------
Revenues from external customers $ 59,981 $ 22,084 $ 82,065
Segment profit $ 20,525 $ 4,184 $ 24,709
Segment assets (x) $ 77,890 $ 7,028 $ 84,918
Expenditure on segment assets (x) $ 79,727 $ 798 $ 80,525
Amortization and write-down of
segment assets (x) $ 3,170 $ 7,150 $ 10,320
Goodwill $ - $ 1,786 $ 1,786
------------------------------------------------------------------------
-------------------------------------------------------------------------
Year ended
April 30, 2006 IP Discontinued
(audited) Division Operations Totals
-------------------------------------------------------------------------
Revenues from external customers $ 38,528 $ 25,371 $ 63,899
Segment profit $ 14,632 $ 851 $ 15,483
Segment assets (x) $ 1,333 $ 13,380 $ 14,713
Expenditure on segment assets (x) $ 219 $ 7,557 $ 7,776
Amortization and write-down of
segment assets (x) $ 457 $ 2,024 $ 2,481
Goodwill $ - $ 1,786 $ 1,786
-------------------------------------------------------------------------
Quarter ended
April 30, 2007 IP Discontinued
(unaudited) Division Operations Totals
-------------------------------------------------------------------------
Revenues from external customers $ 12,204 $ 8,553 $ 20,757
Segment profit $ 1,271 $ 7,772 $ 9,043
Segment assets (x) $ 77,890 $ 7,028 $ 84,918
Expenditure on segment assets (x) $ 62,528 $ 14 $ 62,542
Amortization and write-down of
segment assets (x) $ 1,817 $ 5,276 $ 7,093
Goodwill $ - $ 1,786 $ 1,786
-------------------------------------------------------------------------
Quarter ended
April 30, 2006 IP Discontinued
(unaudited) Division Operations Totals
-------------------------------------------------------------------------
Revenues from external customers $ 9,803 $ 7,070 $ 16,873
Segment profit $ 14,632 $ 851 $ 15,483
Segment assets (x) $ 1,333 $ 13,380 $ 14,713
Expenditure on segment assets (x) $ 10 $ 575 $ 585
Amortization and write-down of
segment assets (x) $ 150 $ 653 $ 803
Goodwill $ - $ 1,786 $ 1,786
-------------------------------------------------------------------------
(x) Segment assets includes acquired intangibles but not goodwill
