(1) |
Stock-Based Compensation Related Items: Stock-based compensation expense relates primarily to equity awards, such as stock options and restricted stock units. Stock-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond our control. As such, management excludes this item from our internal operating forecasts and models. Management believes that non-GAAP measures adjusted for stock-based compensation provide investors with a basis to measure our core performance against the performance of other companies without the variability created by stock-based compensation as a result of the variety of equity awards used by companies and the varying methodologies and subjective assumptions used in determining such non-cash expense. |
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(2) |
Strategic Initiatives and Acquisition Related Items: We exclude certain expense items resulting from our strategic initiatives and acquisitions including the following, when applicable: (i) amortization of purchased intangible assets associated with our acquisitions or relating to our unconsolidated affiliates, (ii) strategic initiatives and acquisition-related charges, and (iii) gain from business acquisition. The amortization of purchased intangible assets associated with our acquisitions results in our recording expenses in our GAAP financial statements that were already expensed by the acquired company before the acquisition and for which we have not expended cash. Moreover, had we internally developed the products acquired, the amortization of intangible assets, and the expenses of uncompleted research and development would have been expensed in prior periods. Accordingly, we analyze the performance of our operations in each period without regard to such expenses. In addition, our strategic initiatives and acquisitions result in non-continuing operating expenses, which would not otherwise have been incurred by us in the normal course of our business operations. In the second quarter of fiscal 2014, we finalized the acquisition of the remaining ownership interest in UpdateLogic, Inc., resulting in acquisition-related charges and gain from business acquisition. We do not expect expenses of similar nature to be paid or gain of similar nature to be received in our normal course of business and consider it infrequent and non-recurring. We believe that providing non-GAAP information for strategic initiatives and acquisition-related expense items and gain from business acquisition in addition to the corresponding GAAP information allows the users of our financial statements to better review and understand the historic and current results of our continuing operations, and also facilitates comparisons to less acquisitive peer companies. |
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(3) |
Other Items: We exclude certain other items that are the result of either unique or unplanned events including the following, when applicable: (i) other than temporary impairment of a privately held company investment, (ii ) other income from prepaid royalty settlement, (iii ) proceeds from legal settlement and (iv) restructuring and related costs. It is difficult to estimate the amount or timing of these items in advance. Other than temporary impairment of a privately held company investment was recorded due to the conclusion that the possibility is remote that we will exercise our warrants to purchase the entity’s preferred stock or that we will realize any other value from these investments. Other income from prepaid royalty settlement relates to the termination of an HDMI rebate agreement with one of the HDMI adopters. Proceeds from legal settlement relates to our acquisition of SiBEAM, Inc. on May 16, 2011. We do not expect other income or proceeds of similar nature to be recognized or received in our normal course of business and consider it infrequent and non-recurring. Restructuring charges result from events which arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Although these events are reflected in our GAAP financials, these unique transactions may limit the comparability of our on-going operations with prior and future periods. As such, we believe that these expenses do not accurately reflect the underlying performance of our continuing operations for the period in which they are incurred. We assess our operating performance both with these amounts included and excluded, and by providing this information, we believe the users of our financial statements are better able to understand the financial results of what we consider our continuing operations. |
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(4) |
Tax adjustments: For the three and six months ended June 30, 2014 and June 30, 2013 and the three months ended March 31, 2014, our non-GAAP tax rate was approximately 30% of non-GAAP pre-tax income. Non-GAAP tax rate is primarily based on net expected cash flow for income taxes. |
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SILICON IMAGE, INC. | ||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
(In thousands) | ||||||||||||
Unaudited | ||||||||||||
June 30, 2014 | December 31, 2013 | |||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | $ | 93,348 | $ | 82,220 | ||||||||
Short-term investments | 47,367 | 56,003 | ||||||||||
Accounts receivable, net | 25,963 | 34,729 | ||||||||||
Inventories | 23,710 | 11,727 | ||||||||||
Prepaid expenses and other current assets | 5,775 | 7,733 | ||||||||||
Deferred income taxes | 631 | 191 | ||||||||||
Total current assets | 196,794 | 192,603 | ||||||||||
Property and equipment, net | 14,369 | 14,676 | ||||||||||
Deferred income taxes, non-current | - | 4,368 | ||||||||||
Intangible assets, net | 18,250 | 10,348 | ||||||||||
Goodwill | 30,458 | 21,646 | ||||||||||
Other assets | 6,354 | 8,498 | ||||||||||
Total assets | $ | 266,225 | $ | 252,139 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable | $ | 16,580 | $ | 12,894 | ||||||||
Accrued and other current liabilities | 26,828 | 20,622 | ||||||||||
Deferred margin on sales to distributors | 11,086 | 9,634 | ||||||||||
Deferred license revenue | 1,889 | 2,742 | ||||||||||
Total current liabilities | 56,383 | 45,892 | ||||||||||
Other long-term liabilities | 13,650 | 16,522 | ||||||||||
Total liabilities | 70,033 | 62,414 | ||||||||||
Stockholders’ equity | 196,192 | 189,725 | ||||||||||
Total liabilities and stockholders’ equity | $ | 266,225 | $ | 252,139 | ||||||||
SILICON IMAGE, INC. | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
(In thousands) | |||||||||||||
Unaudited | |||||||||||||
Six Months Ended June 30, | |||||||||||||
2014 | 2013 | ||||||||||||
Cash flows from operating activities: | |||||||||||||
Net income | $ | 974 | $ | 3,489 | |||||||||
Adjustments to reconcile net income to cash provided by operating activities: |
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Depreciation | 3,106 | 3,127 | |||||||||||
Stock-based compensation expense | 5,395 | 5,342 | |||||||||||
Amortization of investment premium | 487 | 578 | |||||||||||
Tax benefits from employee stock-based transactions | 76 | 182 | |||||||||||
Other than temporary impairment of a privately held company investment | - | 1,500 | |||||||||||
Amortization of intangible assets | 1,798 | 1,384 | |||||||||||
Non-operating proceeds from legal settlement | - | (1,275 | ) | ||||||||||
Gain from business acquisition | (361 | ) | - | ||||||||||
Deferred income taxes | (440 | ) | - | ||||||||||
Excess tax benefits from employee stock-based transactions | (76 | ) | (182 | ) | |||||||||
Realized gain on sale of short-term investments | - | (143 | ) | ||||||||||
Equity in net loss of unconsolidated affiliate | 150 | 259 | |||||||||||
Others | (21 | ) | 283 | ||||||||||
Changes in assets and liabilities: | |||||||||||||
Accounts receivable | 9,108 | 10,421 | |||||||||||
Inventories | (11,983 | ) | (4,734 | ) | |||||||||
Prepaid expenses and other assets | 1,927 | 1,418 | |||||||||||
Accounts payable | 3,823 | 4,536 | |||||||||||
Accrued and other liabilities | 5,673 | (2,316 | ) | ||||||||||
Deferred margin on sales to distributors | 1,452 | 3,067 | |||||||||||
Deferred license revenue | (1,958 | ) | 41 | ||||||||||
Cash provided by operating activities | 19,130 | 26,977 | |||||||||||
Cash flows from investing activities: | |||||||||||||
Proceeds from sales of short-term investments | 13,796 | 48,330 | |||||||||||
Purchases of short-term investments | (5,798 | ) | (26,588 | ) | |||||||||
Cash used in business acquisition, net of cash acquired | (13,464 | ) | - | ||||||||||
Purchases of property and equipment | (2,797 | ) | (2,466 | ) | |||||||||
Proceeds from legal settlement | - | 1,275 | |||||||||||
Investment in privately-held companies | - | (500 | ) | ||||||||||
Cash paid for assets purchased from a privately-held company | - | (300 | ) | ||||||||||
Purchase of intellectual properties | - | (1,513 | ) | ||||||||||
Cash provided by (used in) investing activities | (8,263 | ) | 18,238 | ||||||||||
Cash flows from financing activities: | |||||||||||||
Proceeds from employee stock program | 3,453 | 3,090 | |||||||||||
Excess tax benefits from employee stock-based transactions | 76 | 182 | |||||||||||
Repurchase of restricted stock units for income tax withholding | (974 | ) | (1,332 | ) | |||||||||
Payment to acquire treasure shares | (2,377 | ) | - | ||||||||||
Cash paid to settle contingent consideration liabilities | (18 | ) | (45 | ) | |||||||||
Cash provided by financing activities | 160 | 1,895 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | 101 | (233 | ) | ||||||||||
Net increase in cash and cash equivalents | 11,128 | 46,877 | |||||||||||
Cash and cash equivalents — beginning of period | 82,220 | 29,069 | |||||||||||
Cash and cash equivalents — end of period | $ | 93,348 | $ | 75,946 | |||||||||
Supplemental cash flow information: | |||||||||||||
Cash payment for income taxes | $ | (3,710 | ) | $ | (2,705 | ) | |||||||
Restricted stock units vested | $ | 2,936 | $ | 3,902 | |||||||||
Property and equipment and other assets purchased but not paid for | $ | 603 | $ | 688 | |||||||||
Unrealized gain (loss) on short-term investments | $ | 13 | $ | (435 | ) | ||||||||