SOURCE: Zoran Corporation

Zoran Corporation

April 28, 2009 16:03 ET

Zoran Corporation Reports First Quarter 2009 Results

DTV Revenues Increase 39 Percent Sequentially

SUNNYVALE, CA--(Marketwire - April 28, 2009) - Zoran Corporation (NASDAQ: ZRAN), a leading provider of digital solutions for applications in the digital entertainment and digital imaging markets, today reported results for its first quarter ended March 31, 2009.

Revenues for the first quarter were $68.5 million, compared to $74.7 million last quarter and $109.0 million for the first quarter of 2008. The Company reported a first quarter GAAP net loss of $21.1 million, or $0.41 per share, which includes $2.9 million for stock-based compensation expense, $109 thousand for amortization of acquired intangible assets, restructuring expense of $859 thousand attributable to the closing of our facility in Netanya, Israel, and an adjustment of the tax provision to a non-GAAP rate of $460 thousand. This compares with a net loss of $20.2 million, or $0.40 per share, for the previous quarter and a net loss of $4.7 million, or $0.09 per diluted share, for the first quarter last year.

Non-GAAP net loss for the first quarter was $17.6 million, or $0.34 per share, which excludes charges related to the amortization of acquired intangible assets, stock-based compensation expenses, restructuring expense and the adjustment of the tax provision to a non-GAAP rate. This compares with a non-GAAP net loss of $10.5 million, or $0.21 per diluted share, for the previous quarter, and non-GAAP net income of $3.5 million, or $0.07 per diluted share, for the same period last year.

"In light of the worldwide recession and subsequent decline in consumer spending, we are pleased that the results we are reporting today are better than initial expectations," said Dr. Levy Gerzberg, Zoran's president and chief executive officer. "We achieved 39 percent sequential revenue growth in DTV, driven by increasing demand for low- to mid-range LCD TVs, where we have a leading position. Several of our largest customers have successfully expanded their presence in major US retail channels, a trend we expect to continue to benefit from in the future. In digital cameras, we saw a strong increase in demand towards the end of the quarter, indicating that channel inventory has been substantially reduced. While consumer spending is far from previous levels and visibility into the second half remains limited, we are encouraged by these positive trends and are currently expecting a stronger second quarter."

Recent Highlights

--  Revenues by product line for the first quarter of 2009 were 35 percent
    DTV, 25 percent Digital Camera, 21 percent Printer Imaging, 11 percent DVD,
    7 percent mobile phone processors and 1 percent other
--  Zoran demonstrated new COACH 12 digital camera processors with Noise
    Reduction and Real-time Lens Distortion Compensation for enhanced video
    capture at PMA 2009
--  Zoran's COACH processors powered over 60 digital camera models on
    display at PMA 2009 from manufacturers such as Casio, Emerson, Fujifilm,
    Kodak, Nikon, Olympus, Pure Digital, Samsung, Sony, Vivitar and others
--  Zoran demonstrated highest image and video quality processor for
    Multimedia Camera Phones at Mobile World Congress 2009
--  Zoran launched next-generation IPS Print Language Software for digital
    printing market
--  Zoran's Quatro® 4230 processor deployed in Konica Minolta's
    Magicolor 1650N printer
--  Printing devices using Zoran's IPS Software Solution won industry
    awards again for 2008
--  Zoran demonstrated new HDTV, Set-Top Box, Digital Camera, HD DVD,
    Multimedia Mobile Phone, Printer and Connected Technologies at CES 2009
    

Future Outlook

The following forward-looking statements are based on our current expectations, and actual results may differ materially.

The Company is currently expecting second quarter 2009 revenues to range between $85 million and $90 million, with gross margins ranging between 45 and 46 percent. Excluding acquisition related amortization costs and stock-based compensation expense, non-GAAP operating expenses are expected to be in a range of $52 million to $53 million. Acquisition-related amortization costs are expected to be approximately $109 thousand and stock-based compensation expense is expected to range between $2.9 and $3.4 million. The Company expects to record a second quarter loss in the range of $0.25 to $0.30 per share on approximately 52 million shares. On a non-GAAP basis, which excludes acquisition-related amortization costs and stock-based compensation expense, the Company expects to record a loss in the range of $0.20 and $0.24 per share. With this outlook, cash is expected to decline between $4.0 million and $8.0 million.

Zoran will provide more commentary on its first quarter results during the quarterly conference call.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Zoran provides non-GAAP financial information, consisting of non-GAAP operating expense and non-GAAP net income (loss) that excludes impairment of intangible assets, acquisition related in-process research and development expenses, amortization of acquired intangible assets and stock-based compensation expense and associated income tax adjustments.

The Company believes that its non-GAAP financial information provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations because it excludes items that management considers to be outside of the Company's core operating results. The Company believes that this non-GAAP net income (loss), in combination with the Company's financial results calculated in accordance with GAAP, provides investors with additional perspective and a more meaningful understanding of the Company's ongoing operating performance. In addition, the Company's management uses these non-GAAP measures to review and assess the financial performance of the Company, to determine executive officer incentive compensation, and to plan and forecast performance in future periods. The Company's non-GAAP net income (loss) is not prepared in accordance with GAAP, is not an alternative to GAAP financial information, and may be calculated differently than non-GAAP financial information disclosed by other companies.

Quarterly Conference Call

Zoran Corporation has scheduled a conference call for 2:00 p.m. PT today to discuss first quarter results. To listen to the call, please call 617-896-9871 approximately five minutes prior to the start of the call. For those who are not available to listen to the live conference call, a replay will be available from approximately 4:30 p.m. PT on April 28, until 4:30 p.m. PT on May 4, 2009. The access number for the replay is 617-801-6888, confirmation number 86251166. The conference call will be broadcast live over the Internet and can be accessed by all interested parties through the investor relations section of Zoran's website at www.zoran.com. Please access the website at least fifteen minutes prior to the start of the call to register and to download and install any necessary audio software. This press release will be furnished to the SEC on a form 8-K and posted to the company's website prior to the conference call.

Company Profile

Zoran Corporation, based in Sunnyvale, California, is a leading provider of digital solutions for applications in the growing digital entertainment and digital imaging markets. With two decades of expertise developing and delivering digital signal processing technologies, Zoran has pioneered high-performance digital audio and video, imaging applications, and Connect Share Entertain™ technologies for the digital home. Zoran's proficiency in integration delivers major benefits for OEM customers, including greater capabilities within each product generation, reduced system costs, and shorter time to market. Zoran-based DVD, digital camera, DTV, multimedia mobile phone, and multifunction printer products have received recognition for excellence and are now in hundreds of millions of homes and offices worldwide. With headquarters in the U.S. and additional operations in Canada, China, England, France, India, Israel, Japan, Korea and Taiwan, Zoran may be contacted on the World Wide Web at www.zoran.com or at 408-523-6500.

Forward-Looking Statements

This press release includes forward-looking statements, including the chief executive officer quotation and the material presented under "Future Outlook," that reflect the Company's current views with respect to future events and future financial performance. These forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from what is currently expected, including risks associated with: potential declines in the Company's sales as a result of a global economic slowdown that could reduce demand for consumer electronic and other products; recent tightening in global credit markets, which could result in insolvency of key suppliers or customers, and customer inability to finance purchases of our products; the rapidly evolving markets for the Company's products and uncertainty regarding the pace and direction of development of those markets; cost and length of time required for new product development; timing and impact of new product introductions by the Company and its competitors, and of transitions away from older products; intense competition in our markets and in the markets in which our customers operate; the Company's reliance on other parties for wafer supplies, product assembly and testing, and manufacturing capacity; the effects of changes in revenue and product mix on the Company's gross margins; the Company's dependence on sales to large customers; fluctuations in tax rate caused by projections of the geographic sources of Company income; dependence on key personnel; and reliance on international operations, particularly operations in Israel. Further information regarding these and other risks and uncertainties can be found under the caption "Risk Factors" and elsewhere in the Company's most recently filed Annual Report on Form 10-K and other filings with the SEC.

Zoran, the Zoran logo and Quatro are trademarks or registered trademarks of Zoran Corporation and/or its subsidiaries in the United States and/or other countries. All other brands or names may be claimed as property of others.

                            ZORAN CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands, except per share data)
                                (unaudited)



                                                     Three Months Ended
                                                         March 31,
                                                 -------------------------
                                                     2009          2008
                                                 -----------   -----------
Revenues:
   Hardware product revenues                     $    55,961   $    94,297
   Software and other revenues                        12,526        14,734
                                                 -----------   -----------
      Total revenues                                  68,487       109,031

Costs and expenses:
   Cost of hardware product revenues                  35,998        57,789
   Research and development                           29,005        27,887
   Selling, general and administrative                24,295        25,639
   Amortization of intangibles                           109         9,237
   Restructuring expense                                 859             -
                                                 -----------   -----------
      Total costs and expenses                        90,266       120,552

Operating loss                                       (21,779)      (11,521)

Interest and other income, net                         3,452         3,813
                                                 -----------   -----------
Loss before income taxes                             (18,327)       (7,708)

Provision (benefit) for income taxes                   2,740        (3,030)
                                                 -----------   -----------
Net loss                                         $   (21,067)  $    (4,678)
                                                 ===========   ===========

Basic and diluted net loss per share             $     (0.41)  $     (0.09)
                                                 ===========   ===========

Shares used to compute basic and diluted net
 loss per share                                       51,176        51,445
                                                 ===========   ===========




                            ZORAN CORPORATION
                     NON-GAAP ADJUSTMENTS TO NET LOSS
                  (in thousands, except per share data)
                                (unaudited)



                                                 Three Months Ended
                                                      March 31,
                                              ------------------------
                                                2009           2008
                                              ---------      ---------
GAAP net loss                                 $ (21,067)     $  (4,678)

Adjusting items to GAAP net loss:

  Operating expenses related to stock based
   compensation expense                           2,922 (a)      2,943 (a)
  Amortization of intangibles                       109 (b)      9,237 (b)
  Restructuring expense                             859 (c)          -
  Provision (benefit) for income taxes             (460)(d)     (4,009)(d)
                                              ---------      ---------

Non-GAAP net income (loss)                    $ (17,637)(e)  $   3,493 (e)
                                              =========      =========

Non-GAAP basic net income (loss) per share    $   (0.34)(e)  $    0.07 (e)
                                              =========      =========
Non-GAAP diluted net income (loss) per share  $   (0.34)(e)  $    0.07 (e)
                                              =========      =========

Shares used to compute non-GAAP basic net
 income (loss) per share                         51,176         51,445
                                              =========      =========
Shares used to compute non-GAAP diluted net
 income (loss) per share                         51,176         52,034
                                              =========      =========



(a) This adjustment reflects the stock-based compensation expense recorded
    under SFAS 123R.  The Company excludes these items when it evaluates
    the continuing operational performance of the Company as management
    believes this GAAP measure is not indicative of its core operating
    performance. (see (e) below)

(b) For 2008, this adjustment represents the amortization of intangibles
    assets primarily associated with the acquisition of Oak Technology,
    Inc. in August 2003, the acquisition of Emblaze Semiconductor in
    July 2004 and the acquisition of Oren Semiconductor in June 2005.
    For 2009, this adjustment represents the amortization of intangible
    assets associated with the acquisition of Let It Wave, Inc. in
    June 2008. Such amortization expense does not impact the Company's
    cash flows and is excluded by management when evaluating our core
    operating results. (see (e) below)


(c) This adjustment reflects the restucturing expense recorded by the
    Company as part of closing its facility in Netanya, Israel during the
    quarter ended March 31, 2009. The Company excludes these items when it
    evaluates the continuing operational performance of the Company as
    management believes this GAAP measure is not indicative of its core
    operating performance.  (see (e) below)

(d) This adjustment represents the difference between the non-GAAP income
    tax rate and the GAAP income tax rate. This adjustment is made by the
    Company when it evaluates its continuing operational performance.
    (see (e) below)

(e) The Company believes that its non-GAAP financial information provides
    useful information to management and investors regarding financial and
    business trends relating to its financial condition and results of
    operations because it excludes charges that management considers to be
    outside of the Company's core operating results. The Company believes
    that this non-GAAP net income (loss), in combination with the Company's
    financial results calculated in accordance with GAAP, provides
    investors with additional perspective and a more meaningful
    understanding of the Company's ongoing operating performance. In
    addition, the Company's management uses these non-GAAP measures to
    review and assess the financial performance of the Company, to
    determine executive officer incentive compensation and to plan and
    forecast performance in future periods. The Company's non-GAAP net
    income (loss) is not prepared in accordance with GAAP, is not an
    alternative to GAAP financial information, and may be calculated
    differently than non-GAAP financial information disclosed by other
    companies.



                            ZORAN CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (in thousands)
                                (unaudited)


                                                  March 31,    December 31,
                                                     2009          2008
                                                 -----------   -----------
ASSETS

   Current assets:
       Cash and short-term investments           $   344,462   $   358,527
       Accounts receivable, net                       35,987        22,845
       Inventory                                      33,843        37,365
       Prepaid expenses and other current
        assets                                        28,683        25,549
                                                 -----------   -----------
           Total current assets                      442,975       444,286

   Property and equipment, net                        13,920        15,811
   Long-term investments                              37,425        37,425
   Other assets                                       65,026        69,659
   Intangible assets, net                              5,157         5,266
                                                 -----------   -----------

       Total assets                              $   564,503   $   572,447
                                                 ===========   ===========



LIABILITIES AND STOCKHOLDERS' EQUITY

   Current liabilities:
       Accounts payable                          $    39,065   $    29,918
       Accrued expenses and other liabilities         38,132        36,134
                                                 -----------   -----------
           Total current liabilities                  77,197        66,052

   Long term liabilities                              26,212        26,985

   Stockholders' equity:
       Common stock                                       51            51
       Additional paid-in capital                    861,386       858,429
       Accumulated other comprehensive loss           (2,678)       (2,472)
       Accumulated deficit                          (397,665)     (376,598)
                                                 -----------   -----------
           Total stockholders' equity                461,094       479,410

       Total liabilities and stockholders'
        equity                                   $   564,503   $   572,447
                                                 ===========   ===========

Contact Information