Verigy Ltd. (NASDAQ: VRGY), a premier semiconductor test company,
today reported financial results for its second quarter ended April
30, 2011. Revenue for the second quarter was $112 million, a
decrease of $8 million, or 7 percent, from the $120 million
reported in both the prior quarter and the comparable quarter a
year ago. Orders grew approximately 30 percent sequentially to $127
million in the second quarter, resulting in a book-to-bill ratio of
1.13.
GAAP net loss for the second quarter was $40 million or ($0.66)
per share, compared to a net loss of $5 million, or ($0.08) per
share in the first quarter, and a net loss of $1 million or ($0.02)
per share in the same period a year ago.
Second quarter results included approximately $36 million of
charges associated with the company's transaction-related costs,
incremental excess and obsolete inventory charges and restructuring
actions. After excluding these items, Verigy reported non-GAAP net
loss of $4 million, or ($0.06) per share, including $3.7 million of
share-based compensation expense.
A reconciliation between GAAP and non-GAAP results is provided
following the financial statements that are part of this press
release.
"While the second quarter's results were slightly below our
guidance, we have not experienced any significant impact to our
supply chain from the tragedy in Japan, and our strong order growth
was driven by continued momentum in our RF and HSM products," said
Jorge Titinger, Verigy president and chief executive officer.
"I also want to congratulate the entire Verigy team for the
recent customer and product recognitions we have received. In the
2011 VLSIresearch Customer Satisfaction Survey, we ranked first
among the world's test equipment suppliers for the third
consecutive year. On the product front, we won three Test &
Measurement World Best in Test 2011 awards. This industry
recognition highlights the significant value that Verigy brings to
the market through its innovative products and customer focus.
"We continue to believe that the Advantest transaction will be
beneficial to our customers, employees and shareholders. Advantest
and Verigy have both complied with the Department of Justice's
second request and are actively working to facilitate their review
of the transaction. We filed the definitive proxy statement with
the SEC on May 20, 2011, and will hold our shareholder meeting on
June 17th to approve the transaction. Once all of the closing
conditions are satisfied, including shareholder approval and
regulatory clearance, we intend to close the transaction as quickly
as possible."
Due to the pending transaction with Advantest Corporation
announced on March 28, 2011, management will not be issuing
financial guidance for the third quarter or hosting a conference
call to discuss the financial results announced today.
About Verigy
Verigy provides advanced semiconductor test systems and
solutions used by leading companies worldwide in design validation,
characterization, and high-volume manufacturing test. Verigy offers
scalable platforms for a wide range of system-on-chip (SOC) test
solutions, and memory test solutions for Flash, DRAM including
high-speed memories, as well as multi-chip packages (MCP). Verigy
also provides advanced analysis tools that accelerate design debug
and yield ramp processes. Additional information about Verigy can
be found at www.verigy.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains statements that may be deemed to be
forward-looking statements within the meaning of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995,
including statements regarding the proposed Advantest transaction,
the expected benefits of the transaction for Verigy and its
stakeholders, the expected date of our shareholder meeting and the
closing of the transaction. These statements are based on Verigy's
current beliefs and are subject to a number of factors and
uncertainties that could cause actual results to differ materially
from those described in these statements. The following factors,
among others, could cause actual results to differ materially from
those described in any forward-looking statements: failure of the
Verigy shareholders to approve the proposed transaction; failure of
the parties to obtain required antitrust clearances or required
third party consents; failure to satisfy other conditions to
closing; the challenges and costs of closing, integrating,
restructuring and achieving anticipated synergies from the
Advantest and Verigy transaction; the ability to retain key
employees; order cancellations or delays; and other economic,
business, competitive, and/or regulatory factors affecting the
businesses of Advantest and Verigy generally, including those set
forth in the filings of Verigy with the SEC, especially in the
"Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections of Verigy's
annual reports on Form 10-K and quarterly reports on Form 10-Q and
its current reports on Form 8-K, as well as other SEC filings.
Verigy is under no obligation to (and expressly disclaims any such
obligation to) update or alter any forward-looking statements as a
result of developments occurring after the date of this press
release.
Information About Non-GAAP Measures
Verigy is supplementing its financial measures presented on a
GAAP basis by providing non-GAAP measures to provide additional
meaningful comparisons between current results and results in prior
operating periods to evaluate the operating performance of the
company. Management believes that these non-GAAP financial measures
can provide additional meaningful information of underlying trends
of the business because they provide a comparison of historical
information that excludes certain items that impact the overall
comparability. Non-GAAP net loss for the quarter ended April 30,
2011 excludes the effects of charges related to the company's
transaction-related costs, incremental excess and obsolete
inventory charges and restructuring actions. Management uses this
information to make operational decisions and for comparisons to
historical operating results and the operating results of its
competitors. Management finds the non-GAAP information to be useful
and believes that its investors may also benefit from seeing the
company's results "through the eyes" of management in addition to
seeing its GAAP results. A reconciliation between the company's
GAAP and non-GAAP measures is provided in the attached tables.
Non-GAAP numbers are merely a supplement to, and not a replacement
for, GAAP financial measures. They should be read and evaluated in
conjunction with the GAAP financial measures.
Additional Information and Where You Can Find It
On March 28, 2011, Advantest and Verigy entered into a
definitive agreement providing for a business combination of the
two companies. In connection with the proposed transaction, Verigy
filed a definitive proxy statement with the U.S. Securities and
Exchange Commission ("SEC") on May 20, 2011 and expects to hold a
special meeting of shareholders on June 17, 2011 to approve the
proposed transaction. Investors and shareholders of Verigy are
urged to read the proxy statement because it contains important
information about Verigy and the proposed transaction. The proxy
statement, and any other documents filed by Advantest or Verigy
with the SEC, may be obtained free of charge at the SEC's website
at www.sec.gov. In addition, investors and shareholders may obtain
free copies of the documents filed with the SEC by Advantest by
contacting Advantest Investor Relations Section by e-mail at
satsuki.tsuruta@jp.advantest.com or by telephone at (813) 214-7570,
or filed with the SEC by Verigy by contacting Verigy Investor
Relations by e-mail at annie@streetsmartir.com or by telephone at
(415) 775-1788. Investors and shareholders are urged to read the
proxy statement and the other relevant materials before making any
decision with respect to the proposed transaction.
Each of Advantest, Verigy and their respective directors and
executive officers may be deemed to be participants in the
solicitation of proxies from Verigy shareholder in favor of the
proposed transaction. Information regarding Advantest's directors
and executive officers who may be considered to be participants is
available in the Schedule 14A filed with the SEC by Advantest on
March 22, 2011. Information about the directors and executive
officers of Verigy and their respective interests in the proposed
transaction is available in the definitive proxy statement filed by
Verigy on May 20, 2011. The proxy statement will be mailed to
shareholders of record beginning on May 25, 2011. As of May 16,
2011, Verigy's directors and executive officers beneficially owned
approximately 2,066,651 shares, or 3.3 percent, of Verigy's
ordinary shares. These documents are available free of charge at
the SEC's web site at www.sec.gov and from Advantest and Verigy at
the e-mail addresses and phone numbers listed above.
VERIGY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
Net revenue:
Products $ 77 $ 88 $ 160 $ 164
Services 35 32 72 62
--------- --------- --------- ---------
Total net revenue 112 120 232 226
Cost of sales:
Cost of products (*) 50 42 92 82
Cost of services (*) 22 21 44 40
--------- --------- --------- ---------
Total cost of sales 72 63 136 122
Operating expenses:
Research and development (*) 23 23 46 45
Selling, general and
administrative (*) 29 32 58 61
Transaction related deal
costs 23 - 32 -
Restructuring charges 2 1 2 2
--------- --------- --------- ---------
Total operating expenses 77 56 138 108
(Loss) income from operations (37) 1 (42) (4)
Other (expense) income, net (1) (1) (1) (2)
Impairment of investments - (1) - (1)
--------- --------- --------- ---------
Loss before income taxes (38) (1) (43) (7)
Provision for income taxes 2 - 2 -
--------- --------- --------- ---------
Net loss $ (40) $ (1) $ (45) $ (7)
========= ========= ========= =========
Net loss per share- basic: $ (0.66) $ (0.02) $ (0.74) $ (0.12)
Net loss per share- diluted: $ (0.66) $ (0.02) $ (0.74) $ (0.12)
Weighted average shares
(presented in thousands) used
in computing net loss per
share:
Basic 60,766 59,353 60,608 59,249
Diluted 60,766 59,353 60,608 59,249
* Share-based compensation
expense by function:
Cost of products $ 0.2 $ 0.6 $ 0.5 $ 1.1
Cost of services $ 0.5 $ 0.2 $ 1.0 $ 0.5
Research and development $ 0.5 $ 0.6 $ 1.0 $ 1.0
Selling, general and
administrative $ 2.5 $ 3.6 $ 8.5 $ 7.0
VERIGY LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
April 30, October 31,
2011 2010
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 244 $ 296
Short-term marketable securities 153 135
Trade accounts receivable, net 77 94
Inventory 93 85
Other current assets 55 47
----------- -----------
Total current assets 622 657
Property, plant and equipment, net 43 45
Long-term marketable securities 24 38
Goodwill and other intangibles, net 14 14
Other long-term assets 64 63
----------- -----------
Total assets $ 767 $ 817
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 65 $ 69
Employee compensation and benefits 23 35
Deferred revenue, current 37 44
Income taxes and other taxes payable 3 6
Other current liabilities 21 18
----------- -----------
Total current liabilities 149 172
Long-term liabilities:
Convertible senior notes 138 138
Income taxes payable 19 18
Other long-term liabilities 60 60
----------- -----------
Total liabilities 366 388
Shareholders' equity
Ordinary shares, no par value, 60,804,148 and
60,015,188 issued and outstanding at April 30,
2011 and October 31, 2010, respectively
Additional paid in capital 462 449
Accumulated deficit (52) (7)
Accumulated other comprehensive loss (9) (13)
----------- -----------
Total shareholders' equity 401 429
----------- -----------
Total liabilities and shareholders' equity $ 767 $ 817
=========== ===========
VERIGY LTD.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
------------------------------------------
April 30, 2011
Net Gross Gross Operating
loss EPS (*) profit margin expenses
------- ------- ------ ------ ---------
GAAP $ (40) $ (0.66) $ 40 36% $ 77
Non-GAAP adjustments:
Restructuring charges in
cost of sales 1.3 0.02 1.3 1.2% -
Restructuring charges in
operating expenses 1.7 0.03 - (1.7)
Gain on sale of investments - - -
Transaction related deal
costs in operating
expenses, net of tax 22.9 0.38 - (22.9)
Incremental excess and
obsolescence inventory
charges in cost of sales 8.6 0.14 8.6 7.6%
Acquisition related charges
in cost of sales 0.1 - 0.1 0.1%
Acquisition related charges
in operating expenses 0.1 - - (0.1)
Transition related charges
in cost of sales 0.2 - 0.2 0.2%
Transition related charges
in operating expenses 0.3 0.01 - (0.3)
Other non-recurring charges
in operating expenses 0.3 - - (0.3)
Tax impact 1.0 0.02
------- ------- ------ ------ ---------
Non-GAAP $ (4) (0.06) $ 50 45% $ 52
======= ======= ====== ====== =========
* Weighted average shares (presented in thousands) used in computing net
loss per share for the three months ended April 30, 2011:
Basic 60,766
Diluted 60,766
Six Months Ended
------------------------------------------
April 30, 2011
Net Gross Gross Operating
loss EPS (*) profit margin expenses
------- ------- ------ ------ ---------
GAAP $ (45) $ (0.74) $ 96 41% $ 138
Non-GAAP adjustments:
Restructuring charges in
cost of sales 1.3 0.02 1.3 0.6% -
Restructuring charges in
operating expenses 2.1 0.04 - - (2.1)
Gain on sale of investments (1.6) (0.03) - - -
Transaction related deal
costs in operating
expenses, net of tax 31.8 0.52 - - (31.8)
Incremental excess and
obsolescence inventory
charges in cost of sales 8.6 0.14 8.6 3.7% -
Acquisition related charges
in cost of sales 0.1 - 0.1 0.1% -
Acquisition related charges
in operating expenses 0.1 - - - (0.1)
Transition related charges
in cost of sales 0.2 - 0.2 0.1% -
Transition related charges
in operating expenses 0.3 0.01 - - (0.3)
Other non-recurring charges
in operating expenses 0.3 0.01 - - (0.3)
Tax impact 1.0 0.02 -
------- ------- ------ ------ ---------
Non-GAAP $ (1) (0.01) $ 106 46% $ 103
======= ======= ====== ====== =========
* Weighted average shares (presented in thousands) used in computing net
loss per share for the six months ended April 30, 2011:
Basic 60,608
Diluted 60,608
Three Months Ended
------------------------------------------
April 30, 2010
Net
income Gross Gross Operating
(loss) EPS profit margin expenses
------- ------- ------ ------ ---------
GAAP $ (1) $ (0.02) $ 57 48% $ 56
Non-GAAP adjustments:
Restructuring charges in
cost of sales 0.5 0.01 0.5 0.0% -
Restructuring charges in
operating expenses 0.7 0.01 - - (0.7)
Impairment of auction rate
securities 1.0 0.02 - -
Gain on sale of investments (0.0) - - -
Non-Recurring operating
expenses 0.4 0.01 - - (0.4)
Acquisition related charges
in cost of sales 0.1 - 0.1 0.0% -
Acquisition related charges
in operating expenses 0.1 - - - (0.1)
Transition related charges
in cost of sales 0.7 0.01 0.7 1.0% -
Transition related charges
in operating expenses 0.5 0.01 - - (0.5)
------- ------- ------ ------ ---------
Non-GAAP $ 3 $ 0.05 $ 58 49% $ 54
======= ======= ====== ====== =========
Six Months Ended
------------------------------------------
April 30, 2010
Net
income Gross Gross Operating
(loss) EPS profit margin expenses
------- ------- ------ ------ ---------
GAAP $ (7) (0.12) $ 104 46% $ 165
Non-GAAP adjustments:
Restructuring charges in
cost of sales 0.8 0.01 0.8 0.4% -
Restructuring charges in
operating expenses 1.6 0.03 - - (1.6)
Impairment of auction rate
securities 1.0 0.02 -
Gain on sale of investments (0.5) (0.01) - - -
Non-Recurring operating
expenses 0.4 0.01 (0.4)
Acquisition related charges
in cost of sales 0.1 - 0.1 0.0% -
Acquisition related charges
in operating expenses 0.1 - - - (0.1)
Transition related charges
in cost of sales 4.1 0.07 4.1 1.8% -
Transition related charges
in operating expenses 0.6 0.01 - - (0.6)
------- ------- ------ ------ ---------
Non-GAAP $ 1 $ 0.02 $ 109 48% $ 162
======= ======= ====== ====== =========
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INVESTOR CONTACT: Annie Leschin/Vanessa Lehr Investor Relations
(415) 775-1788 Email Contact/Email Contact PROXY SOLICITER:
Innisfree M&A Incorporated 501 Madison Avenue, 20th Floor New
York, NY 10022 Shareholders may call Toll-free: (877) 456-3510
Banks and Brokers may call Collect: (212) 750-5833
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