Microtune Files 10-K Report on Fiscal Year 2002 Results; Company Also Issues Its 10-Q Report for Q1, 2003
PLANO, Texas--July 31, 2003--Microtune(R), Inc. announced today that it has filed its Form 10-K for the year ended December 31, 2002 and its Form 10-Q for the three months ended March 31, 2003.In February 2003, the Company's Audit Committee, under the direction of its Board of Directors, retained John M. Fedders, a former Director of the Division of Enforcement of the Securities and Exchange Commission, as independent counsel to inquire into the events related to negative adjustments to preliminarily recorded revenue for products shipped in the third and fourth quarters of 2002. The inquiry was subsequently expanded to cover all of 2001 and 2002, and concluded in July 2003.
The inquiry concluded that in certain instances the Company recognized revenue earlier than appropriate under accounting principles generally accepted in the United States (GAAP). On April 29, 2003, based on preliminary findings of the inquiry, the Board determined to restate the Company's previously reported financial statements for 2001 and for quarters ended September 30, 2001, December 31, 2001, March 31, 2002, June 30, 2002 and September 30, 2002. Based on the preliminary findings, the Board also determined to revise financial results that were reported via a press release on February 20, 2003, and a related current report on Form 8-K filed with the SEC.
The Board's determinations are based upon summary findings from the inquiry set forth below:
-- The Company shipped product to customers at the end of
quarters in excess of orders received at the time of shipment,
including shipments of unfinished product. It recognized
revenue for these shipments even though it had not received
purchase orders for the product shipped.
-- The Company granted extended payment terms, including
"flexible payment terms," to customers, including customers
who were delinquent in their obligations. The Company
recognized revenue despite collections of the related accounts
receivable being questionable, and reserves were not
established.
-- The Company granted "price protection" arrangements to
distributors whereby (a) profits were guaranteed and (b)
credits were promised to the Company's distributors if the
product was resold for less than what the Company was to be
paid. While "price protection" arrangements are not improper,
the Company recognized revenue when it should not have been
under GAAP.
-- The Company granted rights of return, or extraordinary stock
rotation privileges, to distributors. These included the right
to return any product not sold. Despite these rights of
return, it recognized revenue at the time of shipment.
In addition, in preparing its restated financial statements, the Company determined that, in some cases, it recognized revenue in the wrong quarter because delivery of products was not in accordance with customers' shipping terms and shipment had been made to a third party warehouse rather than to the customer.
Financial Results Summary
Financial Results Summary for the Quarter ended March 31, 2003:
-- Revenue for the quarter ended March 31, 2003 was $12.6
million, a decrease of 31.1% as compared to $18.3 million
(restated) for the first quarter of 2002 and an increase of
5.0% compared to $12.0 for the fourth quarter of 2002.
-- Gross Margin was 17.6% as compared to 38.7% (restated) for the
first quarter of 2002 and compared to a gross loss margin of
(103.1)% for the fourth quarter of 2002.
-- Research and Development expense in the first quarter of 2003
was $7.8 million, a decrease of 33.3% as compared to $11.7
million (restated) for the same period in 2002 and a decrease
of 19.6% compared to $9.7 million for the fourth quarter of
2002.
-- Cash balance was $96.7 million on March 31, 2003, as compared
to $164.2 million (restated) on March 31, 2002 and $106.3
million on December 31, 2002.
Q2 Conference Call
The Company will hold a conference call to announce its financial results for the quarter ended June 30, 2003 in mid-August.
About Microtune
Microtune, Inc. is a silicon and subsystems company that designs and markets radio frequency (RF)-based solutions for the worldwide broadband communications and transportation electronics markets. Inventors of the MicroTuner(TM) single-chip broadband tuner, the Company offers a portfolio of advanced tuner, amplifier, and transceiver products that enable the delivery of information and entertainment across new classes of consumer electronics devices. The Company currently holds 25 U.S. patents for its technology, with approximately 50 applications pending approval that span its RF products, containing more than 2000 supporting claims. Founded in 1996, Microtune is headquartered in Plano, Texas, with key design and sales centers located around the world. The web site is www.microtune.com.
Microtune Forward Looking Statement
This press release contains forward-looking statements that are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. Such forward-looking statements are generally accompanied by words such as "plan", "if", "estimate", "expect", "believe", "could", "would", "anticipate", "may", or other words that convey uncertainty of future events or outcomes. These forward-looking statements and other statements made elsewhere in this release are made in reliance on the Private Securities Litigation Reform Act of 1995. Factors which could cause actual results to differ include the Company's ability to successfully prosecute, defend and win the lawsuits and the ability of the Company to recover the actual costs of the litigation , any of which may cause the Company's financial results to fluctuate. Readers are referred to the reports and documents filed by Microtune with the Securities and Exchange Commission from time to time, including its Form 10-K for the year ended December 31, 2002 and Form 10Q for the quarter ended March 31, 2003.
MICROTUNE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
------------------------------
2002 2001 2000
---------- -------- --------
(Restated - Note 2)
Net revenue $ 65,806 $ 55,528 $ 70,829
Cost of revenue 57,888 40,547 46,369
--------- -------- --------
Gross margin 7,918 14,981 24,460
Operating expenses:
Research and development:
Stock option compensation 10,522 2,199 1,360
Other 36,832 17,551 13,472
--------- -------- --------
47,354 19,750 14,832
Acquired in-process research and
development -- 34,106 12,692
Selling, general and administrative:
Stock option compensation 2,874 1,875 2,838
Other 21,238 15,683 16,443
--------- -------- --------
24,112 17,558 19,281
Restructuring costs 11,383 3,013 --
Amortization of intangible assets
and goodwill 11,178 8,011 8,414
Impairments of intangible assets and
goodwill 97,616 -- --
--------- -------- --------
Total operating expenses 191,643 82,438 55,219
Loss from operations (183,725) (67,457) (30,759)
Other income (expense):
Interest income 2,828 3,092 2,727
Foreign currency, net (1,406) (2,103) (2,451)
Other (46) (933) 723
--------- -------- --------
Loss before provision (benefit) for
income taxes (182,349) (67,401) (29,760)
Income tax expense (benefit) 513 (182) 2,034
--------- -------- --------
Net loss $(182,862) $(67,219) $(31,794)
========= ======== ========
Basic and diluted loss per common share $ (3.50) $ (1.67) $ (1.57)
========= ======== ========
Weighted-average shares used in
computing basic and diluted loss per
common share 52,291 40,277 20,229
========= ======== ========
MICROTUNE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
December 31,
-------------------------
2002 2001
----------- -----------
Assets (Restated -
Note 2)
Current assets:
Cash and cash equivalents $ 106,278 $ 173,149
Accounts receivable, net 7,625 10,479
Inventories 11,852 10,150
Other current assets 2,008 3,017
--------- ---------
Total current assets 127,763 196,795
Property and equipment, net 17,805 19,269
Intangible assets, net 10,599 64,136
Goodwill, net -- 51,040
Other assets and deferred charges 929 1,113
--------- ---------
Total assets $ 157,096 $ 332,353
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 8,681 $ 7,856
Accrued compensation 1,434 2,355
Accrued expenses 15,009 13,098
--------- ---------
Total current liabilities 25,124 23,309
Other non-current liabilities 1,283 2,286
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value
Authorized - 25,000 shares
Issued and outstanding shares - none -- --
Common stock, $0.001 par value
Authorized - 150,000 shares
Issued and outstanding shares --
49,917 and 52,737 respectively 50 53
Additional paid-in capital 437,787 450,081
Unearned stock compensation (8,865) (28,317)
Loans receivable from stockholders (397) (35)
Accumulated other comprehensive loss (988) (988)
Accumulated deficit (296,898) (114,036)
--------- ---------
Total stockholders' equity 130,689 306,758
--------- ---------
Total liabilities and stockholders'
equity $ 157,096 $ 332,353
========= =========
Microtune, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
-------------------------
2003 2002-Restated
-------------------------
Net revenue $ 12,622 $ 18,264
Cost of revenue 10,401 11,189
-------- --------
Gross margin 2,221 7,075
Operating expenses:
Research and development:
Stock option compensation 1,205 2,577
Other 6,565 9,077
-------- --------
7,770 11,654
Selling, general and administrative:
Stock option compensation 413 758
Other 6,447 5,260
-------- --------
6,860 6,018
Restructuring costs 1,403 54
Amortization of intangible assets 1,081 2,684
-------- --------
Total operating expenses 17,114 20,410
-------- --------
Loss from operations (14,893) (13,335)
Other income (expense):
Interest income 412 821
Foreign currency losses, net (150) (348)
Other 78 (118)
-------- --------
Loss before provision for income taxes (14,553) (12,980)
Income tax expense 163 71
-------- --------
Net loss $(14,716) $(13,051)
======== ========
Basic and diluted loss per common share $ (0.30) $ (0.25)
======== ========
Weighted-average shares used in computing
basic and diluted loss per common share 49,773 52,389
======== ========
Microtune, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
(unaudited)
Assets March 31, 2003 December 31, 2002
---------------- -----------------
Current assets:
Cash and cash equivalents $ 96,727 $ 106,278
Accounts receivable, net 6,920 7,625
Inventories 6,986 11,852
Other current assets 8,178 2,008
-------- --------
Total current assets 118,811 127,763
Property and equipment, net 12,814 17,805
Intangible assets, net 9,636 10,599
Other assets and deferred charges 928 929
-------- --------
Total assets $ 142,189 $ 157,096
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 8,611 $ 8,681
Accrued compensation 1,547 1,434
Accrued expenses 12,752 15,009
-------- --------
Total current liabilities 22,910 25,124
Other non-current liabilities 1,575 1,283
Commitments and contingencies
Stockholders' equity 117,704 130,689
-------- --------
Total liabilities and
stockholders' equity $ 142,189 $ 157,096
======== ========
Quarterly Financial Information
The following table presents our quarterly financial information for
each of the quarters in the years ended December 31, 2002, and 2001.
2002
--------------------------------
Dec. 31 September 30
--------------------------------
(Reported) (Restated)
Consolidated Statements of operations
data:
(in thousands, except per share data)
Net revenue $ 11,965 $ 24,003 $ 13,543
Cost of revenue 24,297 15,098 8,311
--------- -------- --------
Gross margin (12,332) 8,905 5,232
Operating expenses:
Research and development:
Stock option compensation 2,793 2,575 2,575
Other 6,864 9,729 9,729
--------- -------- --------
9,657 12,304 12,304
Acquired in-process research and
development -- -- --
Selling, general and administrative:
Stock option compensation 708 706 706
Other 5,102 5,906 5,906
--------- -------- --------
5,810 6,612 6,612
Restructuring costs 6,872 4,457 4,457
Amortization of intangible assets and
goodwill 3,100 2,691 2,691
Impairment of intangible assets and
goodwill 97,616 -- --
--------- -------- --------
Total operating expenses 123,055 26,064 26,064
--------- -------- --------
Loss from operations (135,387) (17,159) (20,832)
Other income (expense) 852 (319) (319)
--------- -------- --------
Loss before income taxes (134,535) (17,478) (21,151)
Income tax expense (benefit) (271) 386 386
--------- -------- --------
Net Loss $(134,264) $(17,864) $(21,537)
========= ======== ========
Basic and diluted loss per common
share $ (2.66) $ (0.33) $ (0.40)
========= ======== ========
2002
-------------------------------------------
June 30 March 31
-------------------------------------------
(Reported) (Restated) (Reported) (Restated)
Consolidated Statements of
operations data:
(in thousands, except per
share data)
Net revenue $ 23,179 $ 22,034 $ 18,243 $ 18,264
Cost of revenue 14,801 14,091 11,450 11,189
-------- -------- -------- --------
Gross margin 8,378 7,943 6,793 7,075
Operating expenses:
Research and development:
Stock option compensation 2,577 2,577 2,577 2,577
Other 10,862 11,162 8,777 9,077
-------- -------- -------- --------
13,439 13,739 11,354 11,654
Acquired in-process
research and development -- -- -- --
Selling, general and
administrative:
Stock option compensation 702 702 758 758
Other 4,970 4,970 5,344 5,260
-------- -------- -------- --------
5,672 5,672 6,102 6,018
Restructuring costs -- -- 54 54
Amortization of intangible
assets and goodwill 2,703 2,703 2,684 2,684
Impairment of intangible
assets and goodwill -- -- -- --
-------- -------- -------- --------
Total operating expenses 21,814 22,114 20,194 20,410
-------- -------- -------- --------
Loss from operations (13,436) (14,171) (13,401) (13,335)
Other income (expense) 488 488 355 355
-------- -------- -------- --------
Loss before income taxes (12,948) (13,683) (13,046) (12,980)
Income tax expense
(benefit) 327 327 71 71
-------- -------- -------- --------
Net Loss $(13,275) $(14,010) $(13,117) $(13,051)
======== ======== ======== ========
Basic and diluted loss per
common share $ (0.25) $ (0.26) $ (0.25) $ (0.25)
======== ======== ======== ========
2002
----------------------------------
Dec. 31 September 30
--------- ----------------------
(Reported) (Restated)
Consolidated Balance sheet data:
(in thousands)
Accounts receivable, net $ 7,625 $ 24,701 $ 13,999
Inventories 11,852 14,572 17,907
Total current assets 127,763 177,358 169,772
Total current liabilities 25,124 24,695 23,031
Accumulated deficit (296,898) (155,260) (162,633)
Total stockholders' equity 130,689 275,419 268,045
2002
-------------------------------------------
June 30 March 31
-------------------- ----------------------
(Reported) (Restated) (Reported) (Restated)
Consolidated Balance
sheet data:
(in thousands)
Accounts receivable, net $ 16,432 $ 11,842 $ 13,853 $ 9,768
Inventories 15,014 15,907 9,498 10,322
Total current assets 183,347 179,331 189,089 185,441
Total current
liabilities 22,086 20,557 20,505 18,758
Accumulated deficit (137,399) (141,097) (124,125) (127,087)
Total stockholders'
equity 290,423 286,725 299,838 296,876
2001
-------------------------------------------
December 31 September 30
--------------------- ---------------------
(Reported) (Restated) (Reported) (Restated)
Consolidated Statements of
operations data:
(in thousands, except per
share data)
Net revenue $ 15,976 $ 11,266 $ 15,015 $ 12,148
Cost of revenue 10,413 8,082 9,981 8,276
------- ------- ------- -------
Gross margin 5,563 3,184 5,034 3,872
Operating expenses:
Research and development:
Stock option compensation 1,185 1,185 335 335
Other 6,235 5,635 4,383 4,383
------- ------- ------- -------
7,420 6,820 4,178 4,178
Acquired in-process
research and development 34,106 34,106 -- --
Selling, general and
administrative:
Stock option compensation 478 478 363 363
Other 4,296 4,385 3,180 3,180
------- ------- ------- -------
4,774 4,863 3,543 3,543
Restructuring costs 3,013 3,013 -- --
Amortization of intangible
assets and goodwill 2,602 2,601 1,804 1,804
Impairment of intangible
assets and goodwill -- -- -- --
------- ------- ------- -------
Total operating expenses 51,915 51,403 10,065 10,065
------- ------- ------- -------
Loss from operations (46,352) (48,219) (5,031) (6,193)
Other income (expense) (354) (354) (358) (358)
------- ------- ------- -------
Loss before income taxes (46,706) (48,573) (5,389) (6,551)
Income tax expense (benefit) 297 296 14 14
------- ------- ------- -------
Net Loss $ (47,003) $ (48,869) $ (5,403) $ (6,565)
======= ======= ======= =======
Basic and diluted loss per
common share $ (1.09) $ (1.13) $ (0.14) $ (0.17)
======= ======= ======= =======
2001
-----------------------
June 30 March 31
------------ ----------
Consolidated Statements of operations data:
(in thousands, except per share data)
Net revenue $ 14,455 $ 17,659
Cost of revenue 10,101 14,088
------- -------
Gross margin 4,354 3,571
Operating expenses:
Research and development:
Stock option compensation 339 340
Other 3,579 3,954
------- -------
3,918 4,294
Acquired in-process research and development -- --
Selling, general and administrative:
Stock option compensation 420 614
Other 4,249 3,869
------- -------
4,669 4,483
Restructuring costs -- --
Amortization of intangible assets and goodwill 1,804 1,802
Impairment of intangible assets and goodwill -- --
-------- --------
Total operating expenses 10,391 10,579
-------- --------
Loss from operations (6,037) (7,008)
Other income (expense) (389) 1,157
-------- --------
Loss before income taxes (6,426) (5,851)
Income tax expense (benefit) (185) (307)
-------- --------
Net Loss $ (6,241) $ (5,544)
======== ========
Basic and diluted loss per common
share $ (0.16) $ (0.14)
======== ========
2001
-------------------------------------------
December 31 September 30
---------------------- --------------------
(Reported) (Restated) (Reported)(Restated)
Consolidated Balance sheet
data:
(in thousands)
Accounts receivable, net $ 14,580 $ 10,479 $ 10,297 $ 8,490
Inventories 9,401 10,150 9,855 10,501
Total current assets 200,725 196,795 93,740 91,960
Total current liabilities 25,310 23,309 13,781 13,944
Accumulated deficit (111,008) (114,036) (64,004) (65,167)
Total stockholders' equity 309,786 306,758 120,749 119,586
2001
---------------------
June 30 March 31
-------- --------
Consolidated Balance sheet data:
(in thousands)
Accounts receivable, net $ 9,403 $ 11,190
Inventories 13,203 17,169
Total current assets 96,269 102,386
Total current liabilities 15,679 15,476
Accumulated deficit (58,601) (52,361)
Total stockholders' equity 124,457 129,051
Editor's Note: Microtune is a registered trademark and MicroTuner, MicroStreamer and VideoCaster are trademarks of Microtune, Inc.