Vimicro International Corporation (Nasdaq: VIMC), a leading fabless semiconductor company that designs and develops multimedia semiconductor products and solutions, today announced its unaudited financial results for the second quarter of 2006, ended June 30, 2006.
Net revenue in the second quarter of 2006 was $32.9 million, up 24 percent from the $26.4 million reported in the first quarter of 2006 and up 32 percent from the $24.8 million reported in the second quarter of 2005.
Second quarter 2006 net income prepared in accordance with generally accepted accounting principles ("GAAP") was $1.8 million, compared with net income of $3.8 million in the first quarter of 2006 and net income of $4.2 million in the second quarter of 2005. Fully diluted earnings per ADS (each representing four ordinary shares) were $0.05, compared with $0.10 in the first quarter of 2006 and $0.14 in the second quarter of 2005. Second quarter 2006 net income was impacted by $1.3 million in inventory write-downs and $2.3 million in unexpected professional fees incurred as previously announced on July 17, 2006.
Non-GAAP net income in the second quarter, which excludes an $832,000 non- cash share-based compensation charge, was $2.6 million compared with $4.5 million in the first quarter of 2006 and $4.6 million in the second quarter of 2005. Non-GAAP diluted net earnings per ADS for the second quarter of 2006 were $0.07 compared with $0.12 in the first quarter of 2006 and $0.15 in the second quarter of 2005.
"We are pleased with our second quarter results, especially with record revenue in our PC, notebook and mobile multimedia product segments," said Dr. John Deng, president and chief executive officer. "We believe we are gaining market share in all key areas, as demand for our products continues to increase," he said.
Conference Call
Vimicro will broadcast its conference call discussion of its second quarter fiscal year 2006 financial results today, Thursday, Aug. 10, 2006 at 2:00 p.m. Pacific time (5:00 p.m. Eastern time).
To listen to the call, please dial 517-623-4755 approximately 10 minutes prior to the start time. The pass code is: Vimicro. A taped replay will be available approximately one hour after the conclusion of the call and will remain available for one week. To access the replay, dial 402-220-2193.
The Vimicro financial results conference call will be available via a live webcast on the investor relations section of the company's web site at http://www.vimicro.com. Please access the web site approximately 15 minutes prior to the start of the call to download and install any necessary audio software. An archived webcast replay of the call will be available at the web site for one year.
About Vimicro International Corporation
Vimicro International Corporation is a worldwide leading fabless semiconductor company that designs, develops and markets proprietary embedded multimedia signal processing chips and solutions that enable multimedia applications for mobile phones over 2.5G/3G networks and PCs over broadband Internet. Vimicro's ADSs, each of which represents four ordinary shares, are currently trading on the NASDAQ global market under the ticker symbol "VIMC".
Forward-Looking Statements
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the quotations from management in this announcement, as well as Vimicro's strategic and operational plans, contain forward-looking statements. Vimicro may also make written or oral forward- looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Vimicro's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward- looking statement, including but not limited to the following: our limited history of achieving net profit; our growth strategies; our future business development, results of operations and financial condition; our ability to develop and sell mobile multimedia processors that meet changing consumer preferences and industry standards; decrease in the demand for our notebook and PC camera multimedia processors and third-party image sensors which we bundle with some of our PC camera multimedia processors; our ability to secure sufficient foundry capacity in a timely manner; our ability to maintain existing customers and attract new customers; and the expected growth of the mobile multimedia processor market. Further information regarding these and other risks is included in our annual report on Form 20-F filed with the Securities and Exchange Commission. Vimicro does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
Non-GAAP Measures
To supplement the consolidated financial statements presented in accordance with GAAP, Vimicro uses non-GAAP measures of non-GAAP net income and non-GAAP diluted net earnings per ADS, which are adjusted from the most directly comparable financial measures calculated and presented in accordance with GAAP to exclude amortization of share-based compensation expenses. These non-GAAP financial measures are provided to enhance investors' overall understanding of the company's financial performance as they exclude certain expenses that are not expected to result in future cash payments. The non- GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. A limitation of using these non-GAAP financial measures is that these non-GAAP measures exclude share-based compensation charges that have been and will continue to be significant recurring expenses in our business for the foreseeable future. We compensate for these limitations by providing the relevant disclosure of our share-based compensation charges in our reconciliations to the GAAP measures. For more information on the non-GAAP financial measures, please see the tables captioned "Reconciliation of non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth at the end of this release.
Vimicro believes that both management and investors benefit from referring to these non-GAAP measures in assessing the performance of Vimicro's liquidity and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Vimicro's historical liquidity. Vimicro computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The accompanying tables have more details on the GAAP financial measures that are most comparable to non-GAAP financial measures and the related reconciliations between financial measures.
Currency Translation
This announcement contains translations of certain RMB amounts into U.S. dollars. Unless otherwise noted, all translations from RMB to U.S. dollars are based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York as of June 30, 2006 (the last business day of second quarter 2006), which was RMB 7.9956 to US$1.00.
Vimicro International Corporation
Consolidated Statements of Income
(Amounts expressed in thousands of U.S. dollars, except number of shares
and per share data)
Three months ended
June 30, March 31, June 30,
2006 2006 2005
(unaudited) (unaudited) (unaudited)
Net revenue 32,864 26,405 24,807
Cost of revenue (22,485) (16,297) (16,034)
Gross profit 10,379 10,108 8,773
Operating expenses
Research and
development, net (3,849) (3,102) (1,646)
Selling and
marketing (1,434) (1,440) (1,353)
General and
administrative (4,061) (2,135) (1,299)
Income from
operations 1,035 3,431 4,475
Other income
(expense):
Interest income 1,100 965 176
Others, net (127) (185) --
Income before income
taxes and share of
loss of associated
company 2,008 4,211 4,651
Income taxes expense (221) (379) (410)
Net income before
share of loss of
associated company 1,787 3,832 4,241
Share of loss of
associated company,
net of tax (1) (2) (1)
Net income 1,786 3,830 4,240
Amount allocated to
participating
preferred
shareholders -- -- (663)
Other comprehensive
loss:
Foreign currency
translation
adjustment 113 236 --
Comprehensive income 1,899 4,066 3,577
Income per share
-Basic 0.01 0.03 0.04
-Diluted 0.01 0.03 0.04
Income per ADS
-Basic 0.05 0.11 0.17
-Diluted 0.05 0.10 0.14
Weighted average
number of ordinary
shares outstanding
-Basic 136,915,297 136,656,027 82,147,440
-Diluted 148,648,334 146,845,607 100,172,004
Weighted average
number of ADS
outstanding
-Basic 34,228,824 34,164,007 20,536,860
-Diluted 37,162,083 36,711,402 25,043,001
*Components of share-
based compensation
expenses for
employees and non-
employees
are included in the
following expense
captions:
Research and
development (573) (440) (131)
Selling and
marketing (205) (131) (80)
General and
administrative (54) (60) (148)
Total (832) (631) (359)
Vimicro International Corporation
Consolidated Balance Sheets
(Amounts expressed in thousands of U.S. dollars, except number of shares
data)
June 30, 2006 December 31, 2005
(Unaudited) (Audited)
Assets
Current assets:
Cash 101,114 100,610
Accounts receivable, net 5,665 4,003
Notes receivable 310 1,001
Inventories, net 26,512 21,173
Prepayments and other current
assets, net 3,330 1,930
Deferred tax assets 3,235 3,208
Total current assets 140,166 131,925
Investment in associated company 170 171
Intangible assets 100 --
Property, equipment and software,
net 5,633 4,960
Other assets 388 327
Total assets 146,457 137,383
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable 7,871 4,228
Taxes payable 3,487 3,550
Advances from customers 377 171
Due to an associated company 65 64
Accrued expenses and other current
liabilities 7,497 9,080
Deferred grants 326 895
Total current liabilities 19,623 17,988
Non-current liabilities:
Deferred tax liabilities 230 230
Total liabilities 19,853 18,218
Commitments and contingencies
Shareholders' equity:
Ordinary shares, $.0001 par value.
138,682,797 and 138,606,027 shares
issued and outstanding as of
June 30, 2006 and December 31, 2005,
respectively 14 14
Additional paid-in capital 128,294 127,502
Deferred share-based compensation -- (682)
Accumulated other comprehensive
income 945 596
Accumulated deficit (2,649) (8,265)
Total shareholders' equity 126,604 119,165
Total liabilities and
shareholders' equity 146,457 137,383
Reconciliations of non-GAAP results of operations measures to the
nearest comparable GAAP measures (*) (in USD thousands, unaudited)
Three Three
months months
ended ended
June 30, March 31,
2006 2006
GAAP Non-GAAP GAAP Non-GAAP
Result Adjustment Results Result Adjustment Results
Income
from
operations 1,035 832 1,867 3,431 631 4,062
Net income 1,786 832 2,618 3,830 631 4,461
Diluted income
per ADS 0.05 0.02 0.07 0.10 0.02 0.12
Three
months
ended
June 30,
2005
GAAP Non-GAAP
Result Adjustment Results
Income from operations 4,475 359 4,834
Net income 4,240 359 4,599
Diluted income per ADS 0.14 0.01 0.15
(*) The adjustment is to exclude non-cash for share-based compensation
for employees and non-employees.