IDT Reports Q4 and Fiscal Year 2014 Financial Results

As presented in the “Reconciliation of GAAP to Non-GAAP” tables in the accompanying press release, each of the non-GAAP financial measures excludes one or more of the following items:

Acquisition related. Acquisition-related charges are not factored into management’s evaluation of potential acquisitions or IDT’s performance after completion of acquisitions, because they are not related to the Company’s core operating performance. Adjustments of these items provide investors with a basis to compare IDT’s performance to other companies without the variability caused by purchase accounting. Acquisition-related expenses primarily include:

Amortization of acquisition related intangibles, which include acquired intangibles such as purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements.
Acquisition related costs such as legal, accounting and other professional or consulting fees directly related to an acquisition.
Other acquisition related costs which consists of an accrued deferred closing date fee associated with the acquisition of NXP’s high-speed data converter assets.
Fair market value adjustment to acquired inventory sold.

Restructuring related. Restructuring charges primarily relate to changes in IDT’s infrastructure in efforts to reduce costs and expenses (gains) associated with strategic divestitures and restructuring in force actions. Restructuring charges (gains) are excluded from non-GAAP financial measures because they are not considered core operating activities. Although IDT has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. As such, management believes that it is appropriate to exclude restructuring charges (gains) from IDT’s non-GAAP financial measures as it enhances the ability of investors to compare the Company’s period-over-period operating results from continuing operations. Restructuring-related charges (gains) primarily include:

Severance and retention costs directly related to a restructuring action.
Facility closure costs consist of ongoing costs associated with the exit of our leased and owned facilities.
Gain on divestiture consists of gains recognized upon the strategic sale of business units.
Assets impairments consists of an impairment charge related to a note receivable and subsequent recoveries.
Asset impairments, consists of the accelerated depreciation of certain design tools no longer in use

Other adjustments. These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and on-going future operating performance of IDT. Excluding this data allows investors to better compare IDT’s period-over-period performance without such expense, which IDT believes may be useful to the investor community. Other adjustments primarily include:

Stock based compensation expense.
Expenses related to stockholder activities reflect advisory fees related to inquiries of Starboard Value LP.
Compensation expense (benefit) – deferred compensation, consists of gains and losses on marketable equity securities related to our deferred compensation arrangements.
Loss (gain) on deferred compensation plan securities represents the changes in the fair value of the assets in a separate trust that is invested in corporate owned life insurance under our deferred compensation plan.
Life insurance proceeds received, represents proceeds received under corporate owned life insurance under our deferred compensation plan.
Tax effects of non-GAAP adjustments.
Diluted weighted average shares non-GAAP adjustment, for purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of stock compensation expense attributable to future services not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury method.

IDT and the IDT logo are trademarks or registered trademarks of Integrated Device Technology, Inc. All other brands, product names and marks are or may be trademarks or registered trademarks used to identify products or services of their respective owners.



INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
	Three Months Ended									Twelve Months Ended
	Mar. 30,			Dec. 29,			Mar. 31,			Mar. 30,			Mar. 31,
	2014			2013			2013			2013			2013
Revenues	$	118,640		$	124,628		$	107,779		$	484,779		$	484,452
Cost of revenues		57,509			49,689			48,256			211,826			214,728
Gross profit		61,131			74,939			59,523			272,953			269,724
Operating expenses:
Research and development		32,656			31,063			42,096			140,595			159,471
Selling, general and administrative		23,213			23,687			27,784			101,039			117,648
Total operating expenses		55,869			54,750			69,880			241,634			277,119

Operating income (loss)		5,262			20,189			(10,357	)		31,319			(7,395	)

Gain (loss) from divestiture		(302	)		(3,415	)		7,986			78,632			7,986
Other-than-temporary impairment loss on investments		-			-			(1,708	)		-			(1,708	)
Other income (expense), net		786			1,108			258			2,707			1,708
Income (loss) from continuing operations before income taxes		5,746			17,882			(3,821	)		112,658			591
Provision (benefit) for income taxes		320			543			1,648			981			(2,120	)

Net income (loss) from continuing operations		5,426			17,339			(5,469	)		111,677			2,711

Discontinued operations:
Gain from divestiture		-			-			-			-			886
Loss from discontinued operations		(5,016	)		(10,123	)		(4,995	)		(22,938	)		(23,653	)
Provision (benefit) for income taxes		17			268			163			11			116
Net income (loss) from discontinued operations		(5,033	)		(10,391	)		(5,158	)		(22,949	)		(22,883	)

Net income (loss)	$	393		$	6,948		$	(10,627	)	$	88,728		$	(20,172	)

Basic net income (loss) per share continuing operations	$	0.04		$	0.11		$	(0.04	)	$	0.75		$	0.02
Basic net income (loss) per share discontinued operations		(0.04	)		(0.06	)		(0.03	)		(0.16	)		(0.16	)
Basic net income (loss) per share	$	-		$	0.05		$	(0.07	)	$	0.59		$	(0.14	)

Diluted net income (loss) per share continuing operations	$	0.04		$	0.11		$	(0.04	)	$	0.73		$	0.02
Diluted net income (loss) per share discontinued operations		(0.04	)		(0.07	)		(0.03	)		(0.15	)		(0.16	)
Diluted net income (loss) per share	$	-		$	0.04		$	(0.07	)	$	0.58		$	(0.14	)

Weighted average shares:
Basic		150,033			151,018			145,626			149,480			144,014
Diluted		154,390			155,035			145,626			153,369			145,678


INTEGRATED DEVICE TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (a)
(Unaudited)
(In thousands, except per share data)
	Three Months Ended									Twelve Months Ended
	Mar. 30,			Dec. 29,			Mar. 31,			Mar. 30,			Mar. 31,
	2014			2013			2013			2013			2013

GAAP net income (loss) from continuing operations	$	5,426		$	17,339		$	(5,469	)	$	111,677		$	2,711
GAAP diluted net income (loss) per share continuing operations	$	0.04		$	0.11		$	(0.04	)	$	0.73		$	0.02
Acquisition related:
Amortization of acquisition related intangibles		11,999			3,322			4,097			21,964			16,339
Impairment of acquired in-process R&D		2,433			-			-			2,433			-
Acquisition related legal and consulting fees		73			21			1,009			802			11,238
Fair market value adjustment to acquired inventory sold		-			-			-			-			358
Restructuring related:
Severance and retention costs		383			400			1,662			6,456			5,522
Facility closure costs		107			6			2			134			62
Gain on divestiture		302			3,415			(7,986	)		(78,632	)		(7,986	)
Assets impairment and other		334			(265	)		5,687			4,113			6,096
Other:
Other-than-temporary impairment loss on investments		-			-			1,708			-			1,708
Stock-based compensation expense		2,368			3,169			3,813			12,677			13,054
Expenses related to stockholder activities		-			-			(1,000	)		-			1,614
Compensation expense (benefit)—deferred compensation plan		185			557			704			1,265			1,135
Loss (gain) on deferred compensation plan securities		(171	)		(627	)		(696	)		(1,316	)		(941	)
Life insurance proceeds received		-			-			-			-			(2,313	)
Tax effects of Non-GAAP adjustments		(1,331	)		(1,402	)		1,381			(4,389	)		(7,910	)
Non-GAAP net income from continuing operations	$	22,108		$	25,935		$	4,912		$	77,184		$	40,687
GAAP weighted average shares - diluted		154,390			155,035			145,626			153,369			145,678
Non-GAAP adjustment		1,492			2,099			5,026			1,981			1,934
Non-GAAP weighted average shares - diluted		155,882			157,134			150,652			155,350			147,612
Non-GAAP diluted net income per share continuing operations	$	0.14		$	0.17		$	0.03		$	0.50		$	0.28

GAAP gross profit		61,131			74,939			59,523			272,953			269,724
Acquisition and divestiture related:
Amortization of acquisition related intangibles		11,016			2,435			2,740			18,321			12,413
Fair market value adjustment to acquired inventory sold		-			-			-			-			358
Restructuring related:
Severance and retention costs		117			-			-			204			607
Facility closure costs		-			2			(9	)		8			4
Assets impairment and other		105			(142	)		(37	)		(111	)		372
Other:
Compensation expense (benefit)—deferred compensation plan		55			172			217			388			324
Stock-based compensation expense		61			403			263			1,189			1,113
Non-GAAP gross profit		72,485			77,809			62,697			292,952			284,915

GAAP R&D expenses:		32,656			31,063			42,096			140,595			159,471
Acquisition and divestiture related:
Impairment of acquired in-process R&D		(2,433	)		-			-			(2,433	)		-
Restructuring related:
Severance and retention costs		(264	)		(86	)		(1,560	)		(4,193	)		(3,882	)
Facility closure costs		-			(2	)		(6	)		(9	)		(43	)
Assets impairment and other		(63	)		123			(3,203	)		(4,058	)		(3,203	)
Other:
Compensation expense (benefit)—deferred compensation plan		(90	)		(289	)		(365	)		(650	)		(626	)
Stock-based compensation expense		(1,389	)		(1,514	)		(2,001	)		(5,601	)		(6,691	)
Non-GAAP R&D expenses		28,417			29,295			34,961			123,651			145,026

GAAP SG&A expenses:		23,213			23,687			27,784			101,039			117,648
Acquisition and divestiture related:
Amortization of acquisition related intangibles		(983	)		(887	)		(1,357	)		(3,643	)		(3,926	)
Acquisition related legal and consulting fees		(73	)		(21	)		(1,009	)		(802	)		(11,238	)
Restructuring related:
Severance and retention costs		(2	)		(314	)		(102	)		(2,059	)		(1,033	)
Facility closure costs		(107	)		(2	)		(5	)		(117	)		(15	)
Assets impairment and other		(166	)		-			(2,521	)		(166	)		(2,521	)
Other:
Compensation expense (benefit)—deferred compensation plan		(40	)		(96	)		(122	)		(227	)		(185	)
Stock-based compensation expense		(918	)		(1,252	)		(1,549	)		(5,887	)		(5,250	)
Expenses related to stockholder activities		-			-			1,000			-			(1,614	)
Non-GAAP SG&A expenses		20,924			21,115			22,119			88,138			91,866

GAAP interest income and other, net		786			1,108			258			2,707			1,708
Loss (gain) on deferred compensation plan securities		(171	)		(627	)		(696	)		(1,316	)		(941	)
Life insurance proceeds received		-			-			-			-			(2,313	)
Non-GAAP interest income and other, net		615			481			(438	)		1,391			(1,546	)

GAAP provision (benefit) for income taxes continuing operations		320			543			1,648			981			(2,120	)
Tax effects of Non-GAAP adjustments (7)		1,331			1,402			(1,381	)		4,389			7,910
Non-GAAP provision for income taxes continuing operations		1,651			1,945			267			5,370			5,790

(a) Refer to the accompanying “Notes to Non-GAAP Financial Measures” for a detailed discussion of management’s use of non-GAAP financial measures.


INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

	Mar. 30,		March 31,
(In thousands)	2014		2013

ASSETS
Current assets:
Cash and cash equivalents	$	91,211	$	130,837
Short-term investments		362,604		166,333
Accounts receivable, net		68,904		62,083
Inventories		49,622		56,555
Prepaid and other current assets		13,034		24,697
Total current assets		585,375		440,505

Property, plant and equipment, net		69,827		74,988
Goodwill		135,644		144,924
Acquisition-related intangibles		18,741		48,602
Other assets		21,373		19,560
TOTAL ASSETS	$	830,960	$	728,579

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	25,442	$	23,244
Accrued compensation and related expenses		24,343		21,090
Deferred income on shipments to distributors		14,006		14,539
Deferred taxes liabilities		1,346		1,000
Other accrued liabilities		11,160		14,652
Total current liabilities		76,297		74,525

Deferred tax liabilities		1,494		1,552
Long term income taxes payable		266		454
Other long term obligations		18,683		22,022
Total liabilities		96,740		98,553

Stockholders' equity		734,220		630,026

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	830,960	$	728,579

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