SOURCE: Verigy, Ltd.

Verigy, Ltd.

May 23, 2011 17:15 ET

Verigy Reports Second Quarter 2011 Financial Results

CUPERTINO, CA--(Marketwire - May 23, 2011) - 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
                                =======  =======  ====== ======  =========




Contact Information

  • 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