SOURCE: Zoran Corporation

January 25, 2010 16:02 ET

Zoran Corporation Reports Fourth Quarter and Year End 2009 Results

Zoran's US DTV Market Share Grows to Over 30 Percent in the Fourth Quarter(1)

SUNNYVALE, CA--(Marketwire - January 25, 2010) - 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 fourth quarter and year ended December 31, 2009.

Revenues for the fourth quarter were $93.3 million, compared to $115.5 million last quarter and $74.7 million for the fourth quarter of 2008. The Company reported a fourth quarter GAAP net loss of $2.9 million, or $0.06 per share, which compares with a GAAP net income of $4.9 million, or $0.09 per diluted share, for the previous quarter and a GAAP net loss of $20.2 million, or $0.40 per share, for the fourth quarter of the prior year.

Non-GAAP net income for the fourth quarter was $0.5 million, or $0.01 per diluted share, which excludes $107 thousand of amortization of acquired intangible assets, $2.6 million of stock-based compensation expenses, but includes an adjustment of $760 thousand for the tax provision to a non-GAAP rate. This compares with non-GAAP net income of $8.7 million, or $0.17 per diluted share, for the previous quarter, and a non-GAAP net loss of $10.5 million, or $0.21 per share for the same period last year.

For the full year ended December 31, 2009, revenues were $380.1 million, compared to $438.5 million for 2008. GAAP net loss for 2009 was $33.0 million, or $0.64 per share, compared to a GAAP net loss of $215.7 million or $4.20 per share for the prior year. As a reminder, 2008 GAAP results include $22.4 million of in-process research and development expense and a non-cash charge of $167.6 million for impairment of intangible assets. Non-GAAP net loss for 2009 was $12.7 million, or $0.25 per share. This compares with non-GAAP net income of $8.4 million, or $0.16 per diluted share for 2008.

"We exit 2009 having grown our US DTV market share to over 30 percent(1), increasing TV revenues by 40 percent from 2008," said Dr. Levy Gerzberg, Zoran's president and chief executive officer. "We believe we can achieve similar success in the coming year as we expand into Europe and Asia. Our market share also grew in digital cameras, as we continued to win key customers away from the competition. In DVD, market share gains were driven by targeting new and growing segments such as HD media players, TV combos, automobile and portables as well as emerging BRIC markets. In printer imaging, we maintained our leading position with our IPS software. And, significantly, we managed our balance sheet despite the economic challenges, ending the year with approximately $399 million in cash and cash equivalents and achieved major improvements in our accounts receivables, inventory balances and other financial indicators. As we enter the New Year, we are enthusiastic about our position and believe we will see continued success in 2010."

Recent Highlights
    -- Revenues by product line for the fourth quarter of 2009 were 37
       percent Digital Camera, 29 percent DTV (includes set-top-box), 15
       percent DVD, 15 percent Printer Imaging and 4 percent mobile phone
       processors
    -- Over 80 new Products Powered by Zoran were on display at CES 2010
       in Las Vegas
    -- 3 CES Innovation Awards for Zoran's COACH-based digital camera
       products
       - Samsung DualView Digital Camera Model TL225
       - Samsung Touch-Screen AMOLED Digital Camera Model ST5500
       - Kodak Slice Touch-Screen Digital Camera Model R Series
    -- Zoran demonstrates new HDTV, Set-top Box, Blu-Ray and HD Media
       Player, Digital Camera and Printer Technologies at CES 2010
    -- CEO Levy Gerzberg delivers vision for CE industry on "Big Thinkers
       Disruptive Technologies" panel at CES 2010
    -- Zoran powers JVC's new HD Media Player for HD Camcorders
    -- Zoran teams with LSI to provide Fax technology for Multifunction
       Printer Manufacturers
    -- Gary Shapiro, President and CEO of Consumer Electronics
       Association, addresses China's Top CE Manufacturers at Zoran's
       Customer Conference in Shenzhen

Future Outlook

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

The Company is currently expecting first quarter 2010 revenues to range between $90 million and $94 million, with gross margins ranging between 52 and 53 percent. Excluding acquisition related amortization costs and stock-based compensation expense, non-GAAP operating expenses are expected to be in a range of $49.5 million to $50.5 million. Acquisition-related amortization costs are expected to be approximately $108 thousand and stock-based compensation expense is expected to range between $2.0 million and $2.5 million. The Company expects to record a first quarter GAAP loss in the range of $0.06 to $0.10 per share on approximately 51.5 million shares. On a non-GAAP basis, which excludes acquisition-related amortization costs and stock-based compensation expenses, the Company expects to record a first quarter loss of $0.02 to $0.05 per share.

Zoran will provide more commentary on its fourth 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) and EPS that excludes charges such as impairment of intangible assets, acquisition related in-process research and development expenses, amortization of acquired intangible assets, stock-based compensation expense, restructuring expense, non-recurring IP licensing related settlements and associated income tax adjustments. Non-GAAP results are reconciled to GAAP results on the attached Schedule.

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 its fourth quarter and year end 2009 results. To listen to the call, please call 617-614-2702 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 January 25, until 4:30 p.m. PT on January 31, 2010. The access number for the replay is 617-801-6888, confirmation number 27603608. 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.

(1) According to DisplaySearch research.

Company Profile

Zoran Corporation, based in Sunnyvale, California, is a leading provider of digital solutions in the digital entertainment and digital imaging markets. With over 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 DTV, set-top-box, DVD, digital camera, 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 China, England, France, India, Israel, Japan, Korea, Sweden 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 the continuing global economic slowdown that could continue to reduce demand for consumer electronic and other products; continued tightening in global credit markets, which could result in insolvency of key suppliers, customers, or retailers 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; the Company's dependence on sales to a limited number of large customers; 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 the Company's markets and in the markets in which its 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; 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, Quarterly Report on Form 10-Q, and other filings with the SEC.

Zoran and the Zoran logo 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       Year Ended
                                    December 31,         December 31,
                                -------------------  ---------------------
                                  2009      2008       2009        2008
                                --------  ---------  ---------  ----------

Revenues:
   Hardware product revenues    $ 81,775  $  59,808  $ 334,895  $  379,823
   Software and other revenues    11,559     14,881     45,186      58,716
                                --------  ---------  ---------  ----------
      Total revenues              93,334     74,689    380,081     438,539

Costs and expenses:
   Cost of hardware product
    revenues                      46,343     36,413    196,497     229,008
   Research and development       26,959     30,342    110,453     117,948
   Selling, general and
    administrative                23,178     21,010    107,425      94,562
   Amortization of intangibles       107        109        434      23,096
   Restructuring expense               -          -      2,053           -
   Impairment of intangible
    assets                             -          -          -     167,579
   In-process research and
    development                        -          -          -      22,383
                                --------  ---------  ---------  ----------
      Total costs and expenses    96,587     87,874    416,862     654,576

Operating loss                    (3,253)   (13,185)   (36,781)   (216,037)

Interest and other income, net     2,040      2,925      9,423      12,589
                                --------  ---------  ---------  ----------
Loss before income taxes          (1,213)   (10,260)   (27,358)   (203,448)

Provision for income taxes         1,710      9,949      5,600      12,279
                                --------  ---------  ---------  ----------
Net loss                        $ (2,923) $ (20,209) $ (32,958) $ (215,727)
                                ========  =========  =========  ==========

Net loss per share              $  (0.06) $   (0.40) $   (0.64) $    (4.20)
                                ========  =========  =========  ==========

Shares used to compute net loss
 per share                        51,496     51,018     51,464      51,350
                                ========  =========  =========  ==========




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

                   Three Months Ended                 Year Ended
                       December 31,                 December 31,
                 -----------------------      -------------------------
                   2009          2008           2009            2008
                 --------      ---------      ---------      ----------

GAAP net loss    $ (2,923)     $ (20,209)     $ (32,958)     $ (215,727)

Adjusting items
 to GAAP net
 loss:

  Operating expenses
   related to
   stock based
   compensation
   expense          2,570 (a)      3,117 (a)     11,631 (a)      13,106 (a)
  Operating expenses
   related to IP
   licensing related
   settlements          -              -         11,000 (b)           -
  Amortization
   of intangibles     107 (c)        109 (c)        434 (c)      23,096 (c)
  Restructuring
   expense              -              -          2,053 (d)           -
  Impairment of
   intangible
   assets               -              -              -         167,579 (e)
  In-process
   research and
   development
   expense              -              -              -          22,383 (f)
  Provision for
   income taxes       760 (g)      6,486 (g)     (4,900)(g)      (2,044)(g)
                 --------      ---------      ---------      ----------

Non-GAAP net
 income (loss)   $    514 (h)  $ (10,497)(h)  $ (12,740)(h)  $    8,393 (h)
                 ========      =========      =========      ==========

Non-GAAP basic
 net income
 (loss) per
 share           $   0.01 (h)  $   (0.21)(h)  $   (0.25)(h)  $     0.16 (h)
                 ========      =========      =========      ==========
Non-GAAP diluted
 net income
 (loss) per
 share           $   0.01 (h)  $   (0.21)(h)  $   (0.25)(h)  $     0.16 (h)
                 ========      =========      =========      ==========

Shares used to
 compute non-GAAP
 basic net income
 (loss) per share  51,496         51,018         51,464          51,350
                 ========      =========      =========      ==========
Shares used to
 compute non-GAAP
 diluted net
 income (loss)
 per share         52,310         51,018         51,464          51,548
                 ========      =========      =========      ==========

(a) This adjustment reflects the stock-based compensation expense recorded
under ASC Topic 718-10.  The Company excludes this item 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 (h) below)

(b) This adjustment reflects a non-recurring expense recorded during the
quarter ended June 30, 2009 as a result of IP licensing related
settlements.  The Company excludes this item 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 (h) below)

(c) 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, the
acquisition of Oren Semiconductor in June 2005 and the aquisition of Let It
Wave, Inc. in June 2008.  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 (h) below)

(d) This adjustment reflects the restructuring expense recorded by the
Company as part of closing its facility in Netanya, Israel during the
quarter ended March 31, 2009 and the restructuring of its Mobile division
and closing of its Toronto facility during the quarter ended September 30,
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 (h)
below)

(e) This adjustment represents the impairment of acquisition related to
goodwill and intangible assets recorded by the Company as part of the
annual analysis under ASC Topic 350-20 and ASC Topic 360-10.  The
impairment of goodwill and intangible assets does not impact the Company's
ongoing cash flows and is excluded by management when evaluating our core
operating results. (see (h) below)

(f) This adjustment reflects the in process research and development charge
recorded by the Company as part of the acquisition of Let It Wave in June
2008.  This in process research and development charge does not impact the
Company's ongoing cash flows and is excluded by management when evaluating
our core operating results. (see (h) below)

(g) 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 (h)
below)

(h) 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)

                                                  December 31, December 31,
                                                      2009         2008
                                                  -----------  -----------

ASSETS

   Current assets:
         Cash and short-term investments          $   398,686  $   358,527
         Accounts receivable, net                      21,997       22,845
         Inventory                                     27,162       37,365
         Prepaid expenses and other current
          assets                                       20,519       25,549
                                                  -----------  -----------
            Total current assets                      468,364      444,286

   Property and equipment, net                         12,456       15,811
   Long-term investments                                    -       37,425
   Other assets                                        66,804       69,659
   Intangible assets, net                               4,832        5,266
                                                  -----------  -----------

         Total assets                             $   552,456  $   572,447
                                                  ===========  ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

   Current liabilities:
         Accounts payable                         $    29,090  $    29,918
         Accrued expenses and other liabilities        30,701       36,134
                                                  -----------  -----------
            Total current liabilities                  59,791       66,052

   Long term liabilities                               32,397       26,985

   Stockholders' equity:
         Common stock                                      51           51
         Additional paid-in capital                   867,139      858,429
         Accumulated other comprehensive income
          (loss)                                        2,634       (2,472)
         Accumulated deficit                         (409,556)    (376,598)
                                                  -----------  -----------
            Total stockholders' equity                460,268      479,410

         Total liabilities and stockholders'
          equity                                  $   552,456  $   572,447
                                                  ===========  ===========

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