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MIPS Technologies Reports Second Quarter Fiscal 2013 Financial Results



MIPS Technologies Reports Second Quarter Fiscal 2013 Financial Results

SUNNYVALE, Calif., Jan. 30, 2013 (GLOBE NEWSWIRE) -- MIPS Technologies, Inc.
(Nasdaq:MIPS), a leading provider of industry-standard processor architectures
and cores for home entertainment, networking, mobile and embedded
applications, today reported consolidated financial results for its second
fiscal quarter of 2013 ended December 31, 2012. All financial results are
reported in U.S. GAAP unless otherwise noted.

Summary Second Quarter Fiscal 2013 Financial Metrics:

  * Revenue was $14.6 million
  * Licensee royalty units grew to 194 million units from 182 million units in
    Q1 '13
  * GAAP net loss was $6.4 million or $0.12 per share; non-GAAP net loss was
    $0.5 million or $0.01 per share
  * Cash and investment balances ended the quarter at $131.3 million

Transaction Update

As previously announced, on November 5, 2012, MIPS entered into a patent sale
agreement with Bridge Crossing, LLC ("Bridge Crossing"), an acquisition
vehicle of Allied Security Trust ("AST"), and a merger agreement with
Imagination Technologies Group plc (LSE:IMG) ("Imagination"), with anticipated
net proceeds of approximately $7.31 per share in cash to each holder of MIPS
common stock. On December 9, 2012, MIPS entered into an amendment to its
merger agreement with Imagination that increased the purchase price being paid
by Imagination to $80 million and removed the conditions to closing requiring
the approval of the Committee on Foreign Investment in the United States and
that MIPS is not a real property holding corporation. As a result of the
amendment, the net proceeds to each holder of MIPS common stock following the
consummation of the proposed patent sale transaction with Bridge Crossing, the
proposed recapitalization and the proposed merger, increased to approximately
$7.64 per share in cash. On December 16, 2012, MIPS entered into a second
amendment to its merger agreement with Imagination that increased the purchase
price being paid by Imagination to $100 million. As a result of the amendment,
the net proceeds to each holder of MIPS common stock, following the
consummation of the proposed patent sale transaction with Bridge Crossing, the
proposed recapitalization and the proposed merger, increased to approximately
$7.94 per share in cash.

Both the patent sale transaction and the merger transaction are subject to
customary closing conditions, including the approval of MIPS Technologies'
shareholders, who will vote separately on each of the transactions and the
recapitalization. Approval of the patent sale transaction is not subject to
stockholder approval of the Imagination merger transaction. The merger is
subject to stockholder approval of the patent sale transaction and the
recapitalization. The proceeds of the transactions, which are subject to a
fixed holdback of approximately $100 million to cover tax and other
liabilities, will be distributed to MIPS' stockholders on a pro-rata basis
through a recapitalization of MIPS common stock. MIPS expects the transactions
to close during the month of February 2013.

For more information on the proposed transactions, please visit
www.mips.com/company/investor-relations/.

Conference Call and Webcast

In light of the pending transactions with Bridge Crossing and Imagination,
MIPS will not conduct an investor conference call or webcast following the
release of this earnings information, nor provide financial guidance. To
access the Company's first quarter results and other financial information,
please visit www.mips.com/company/investor-relations/.

About MIPS Technologies, Inc.

MIPS Technologies, Inc. (Nasdaq:MIPS) is a leading provider of
industry-standard processor architectures and cores for home entertainment,
networking, mobile and embedded applications. The MIPS architecture powers
some of the world's most popular products. Our technology is broadly used in
products such as digital televisions, set-top boxes, Blu-ray players,
broadband customer premises equipment (CPE), WiFi access points and routers,
networking infrastructure and portable/mobile communications and entertainment
products. Founded in 1998, MIPS Technologies is headquartered in Sunnyvale,
California, with offices worldwide. For more information, contact (408)
530-5000 or visit www.mips.com.

The MIPS Technologies, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=11351

Additional Information and Where You Can Find It

This communication may be deemed to be solicitation material in respect of the
proposed transactions between MIPS and Bridge Crossing, and MIPS and
Imagination. In connection with the proposed transactions, MIPS has filed a
definitive proxy statement and other relevant materials with the SEC. The
proxy statement and other relevant materials, and any other documents to be
filed by MIPS with the SEC, may be obtained free of charge at the SEC's
website at www.sec.gov or from MIPS' website at www.mips.com or by contacting
MIPS Investor Relations at: ir@mips.com. Investors and security holders of
MIPS are urged to read the proxy statement and the other relevant materials
before making any voting or investment decision with respect to the proposed
transactions because they will contain important information about the
transactions and the parties to the transactions.

MIPS and its executive officers, directors, other members of its management
and employees, under SEC rules, may be deemed to be participants in the
solicitation of proxies from MIPS' stockholders in favor of the proposed
transactions. A list of the names of MIPS' executive officers and directors
and a description of their respective interests in MIPS are set forth in the
definitive proxy statement for MIPS' 2012 Annual Meeting of Stockholders,
MIPS' 2012 Annual Report on Form 10-K and Amendment No. 1 and Amendment No. 2
thereto, in any documents subsequently filed by its directors and executive
officers under the Securities Exchange Act of 1934, as amended, and other
relevant materials filed with the SEC in connection with the transactions when
they become available. Certain executive officers and directors of MIPS have
interests in the proposed transaction that may differ from the interests of
stockholders generally, including benefits conferred under retention,
severance and change in control arrangements and continuation of director and
officer insurance and indemnification. These interests and any additional
benefits in connection with the proposed transactions are described in the
definitive proxy statement relating to the transactions.

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. These statements are
based on MIPS' and its Board of Directors' current expectations and 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.
These statements include the statements regarding the ability to complete the
transactions considering the various closing conditions and the other
statements regarding the proposed transactions. Any statements that are not
statements of historical fact (including statements containing the words
"believes," "should," "plans," "anticipates," "expects," "estimates" and
similar expressions) should also be considered to be forward-looking
statements. These statements are not guarantees of future performance, involve
certain risks, uncertainties and assumptions that are difficult to predict,
and are based upon assumptions as to future events that may not prove
accurate. Therefore, actual outcomes and results may differ materially from
what is expressed herein. The following factors, among others, could cause
actual results to differ materially from those described in any
forward-looking statements: actions and decisions of the respective boards of
directors of MIPS, Bridge Crossing and Imagination following their respective
evaluations of each other's further actions; the impact of actions of other
parties with respect to any discussions and the potential consummation of the
proposed transactions with Bridge Crossing and Imagination; the commencement
or results of litigation relating to the discussions or to the proposed
transactions with Bridge Crossing and Imagination; failure of the MIPS
stockholders to approve the proposed transactions with Bridge Crossing and
Imagination; the challenges and costs of closing the transactions with Bridge
Crossing and Imagination; the ability to retain key employees; and other
economic, business, competitive, and/or regulatory factors affecting the
businesses of MIPS or Imagination Technologies generally, including those set
forth in the filings of MIPS with the Securities and Exchange Commission,
especially in the "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections of MIPS annual reports
on Form 10-K, including any amendments thereto, and quarterly reports on Form
10-Q, MIPS current reports on Form 8-K and other SEC filings. MIPS 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.

MIPS and MIPS-Based are trademarks or registered trademark of MIPS
Technologies, Inc. in the United States and other countries.

 
MIPS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands)
 
                                           December 31, 2012 June 30, 2012
                                           (unaudited)        
Assets                                                        
Current assets:                                               
Cash and cash equivalents                  $131,299          $76,242
Short-term investments                     --                34,642
Accounts receivable, net                   1,068             27,044
Prepaid expenses and other current assets  2,985             1,793
Total current assets                       135,352           139,721
Equipment, furniture and property, net     3,214             2,892
Goodwill                                   565               565
Other assets                               10,591            11,962
Total assets                               $149,722          $155,140 
                                                              
Liabilities and Stockholders' Equity                          
Current liabilities:                                          
Accounts payable                           $1,619            $2,578
Accrued liabilities                        13,093            11,852
Deferred revenue                           769               1,259
Total current liabilities                  15,481            15,689
Long-term liabilities                      8,874             9,815
Stockholders' equity                       125,367           129,636
Total liabilities and stockholders' equity $149,722          $155,140

 
 
MIPS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(In thousands, except per share data)
(unaudited)
 
                                     Three Months Ended Six Months Ended
                                     December 31,       December 31,
                                     2012      2011     2012      2011
Revenue:                                                           
Royalties                            $10,751   $13,224  $21,224   $26,203
License and contract revenue         3,840     2,077    7,310     6,315
Total revenue                        14,591    15,301   28,534    32,518
Costs and expenses:                                                
Cost of sales                        332       344      694       605
Research and development             9,031     8,278    17,329    16,184
Sales and marketing                  4,141     3,892    8,566     8,723
General and administrative           5,478     3,339    11,044    6,603
Transaction related costs            1,918     --       1,918     --
Total costs and expenses             20,900    15,853   39,551    32,115
Operating income (loss)              (6,309)   (552)    (11,017)  403
Other income, net                    52        14       60        67
Income (loss) before income taxes    (6,257)   (538)    (10,957)  470
Provision (benefit) for income taxes 130       434      (244)     919
Net loss                             $(6,387)  $(972)   $(10,713) $(449)
Net loss per share, basic            $(0.12)   $(0.02)  $(0.20)   $(0.01)
Net loss per share, diluted          $(0.12)   $(0.02)  $(0.20)   $(0.01)
Common shares outstanding, basic     54,109    52,886   53,904    52,773
Common shares outstanding, diluted   54,109    52,886   53,904    52,773

 
 
MIPS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
(In thousands)
 
                                                            Six Months Ended
                                                            December 31,
                                                            2012      2011
Operating activities:                                                  
Net loss                                                    $(10,713) $(449)
Adjustments to reconcile net loss to cash provided by                  
operations
Depreciation                                                724       471
Stock-based compensation                                    3,762     2,953
Excess tax benefits from stock-based compensation           (168)     --
Amortization of intangible assets                           340       252
Amortization of investment premium, net                     164       265
Other non-cash charges                                      124       139
Changes in operating assets and liabilities:                           
Accounts receivable                                         25,976    1,500
Prepaid expenses                                            (1,260)   (230)
Other assets                                                1,459     791
Accounts payable                                            (1,074)   (613)
Accrued liabilities                                         1,283     (3,620)
Deferred revenue                                             (572)    (488)
Long-term liabilities                                       (1,196)   53
Net cash provided by operating activities                   18,849    1,024
Investing activities:                                                  
Purchases of marketable securities                          (16,857)  (22,588)
Proceeds from sales of marketable securities                27,032    2,613
Proceeds from maturities of marketable securities           24,419    26,000
Capital expenditures                                        (966)     (659)
Net cash provided by investing activities                   33,628    5,366
Financing activities:                                                  
Net proceeds from issuance of common stock                  2,410     1,269
Excess tax benefits from stock-based compensation           168       --
Net cash provided by financing activities                   2,578     1,269
Effect of exchange rates on cash                            2         (32)
Net increase in cash and cash equivalents                   55,057    7,627
Cash and cash equivalents, beginning of period              76,242    69,202
Cash and cash equivalents, end of period                    $131,299  $76,829
                                                                       
                                                                       

MIPS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS) and
NET INCOME (LOSS) PER SHARE
 
(In thousands, except per share data)
(unaudited)
 
                                       Three Months Three Months  Three Months
                                       Ended        Ended         Ended
                                       December 31, September 30, December 31,
                                       2012         2012          2011
    GAAP net loss                      $(6,387)     $(4,326)      $(972)
    Net loss per basic share           $(0.12)      $(0.08)       $(0.02)
    Net loss per diluted share         $(0.12)      $(0.08)       $(0.02)
(a) Stock-based compensation expense   1,898        1,864         1,412
(b) Severance adjustment               --           44            49
(c) Expenses related to stockholder    --           --            158
    activities
(d) Expenses related to strategic      2,046        1,934         --
    opportunities
(e) Transaction related costs          1,918        --            --
    Non-GAAP net income  (loss)        $(525)       $(484)        $647
    Non-GAAP net income (loss) per     $(0.01)      $(0.01)       $0.01
    basic share
    Non-GAAP net income (loss) per     $(0.01)      $(0.01)       $0.01
    diluted share
    Common shares outstanding – basic  54,109       53,699        52,886
    Common shares outstanding –        54,109       53,699        53,658
    diluted

These adjustments reconcile the Company's GAAP results of operations to the
reported non-GAAP results of operations. The Company believes that
presentation of net loss and net loss per share excluding stock-based
compensation expense, severance adjustment, expenses related to stockholder
activities, expenses related to strategic opportunities, and transaction
related costs provides meaningful supplemental information to investors, as
well as management, that is indicative of the Company's ongoing operating
results and facilitates comparison of operating results across reporting
periods. The Company uses these non-GAAP measures when evaluating its
financial results as well as for internal planning and budgeting
purposes. These non-GAAP measures should not be viewed as a substitute for the
Company's GAAP results, and may be different than non-GAAP measures used by
other companies.

(a) This adjustment reflects the stock-based compensation expense. For the
second quarter of fiscal 2013 ending December 31, 2012, $1.9 million
stock-based compensation expense was allocated as follows: $710,000 to
research and development, $434,000 to sales and marketing and $754,000 to
general and administrative. For the first quarter of fiscal 2013 ending
September 30, 2012, $1.9 million stock-based compensation expense was
allocated as follows: $683,000 to research and development, $499,000 to sales
and marketing and $682,000 to general and administrative. For the second
quarter of fiscal 2012 ending December 31, 2011, $1.4 million stock-based
compensation expense was allocated as follows: $532,000 to research and
development, $239,000 to sales and marketing and $641,000 to general and
administrative. 

(b) This adjustment reflects the severance to the Company's former executives.
 For the first quarter of fiscal 2013 ending September 30, 2012, $44,000 was
allocated to general and administrative. For the second quarter of fiscal 2012
ending December 31, 2011, $49,000 was allocated to general and administrative.

(c) This adjustment reflects the expenses in response to our activities and
inquiries of Starboard Value LP allocated to general and administrative.

(d) This adjustment reflects the expenses incurred in connection with the
Company's exploration of options related to patent monetization and other
opportunities for increasing shareholder value prior to the announcement of
the transaction on November 5, 2012, allocated to general and administrative.

(e) This adjustment reflects the transaction related costs primarily
consisting of legal, banking fees and other professional charges subsequent to
the announcement of the transaction on November 5, 2012.

MIPS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS) and
NET INCOME (LOSS) PER SHARE
 
(In thousands, except per share data)
(unaudited)
 
                                           Six Months Ended  Six Months Ended
                                           December 31, 2012 December 31, 2011
    GAAP net loss                          $(10,713)         $(449)
    Net loss per basic share               $(0.20)           $(0.01)
    Net loss per diluted share             $(0.20)           $(0.01)
(f) Stock-based compensation expense       3,762             2,953
(g) Severance adjustment                   44                361
(h) Expenses related to stockholder        --                423
    activities
(i) Expenses related to strategic          3,980             --
    opportunities
(j) Transaction related costs              1,918             --
    Non-GAAP net income  (loss)            $(1,009)          $3,288
    Non-GAAP net income (loss) per basic   $(0.02)           $0.06
    share
    Non-GAAP net income (loss) per diluted $(0.02)           $0.06
    share
    Common shares outstanding – basic      53,904            52,773
    Common shares outstanding – diluted    53,904            53,702

These adjustments reconcile the Company's GAAP results of operations to the
reported non-GAAP results of operations. The Company believes that
presentation of net loss and net loss per share excluding stock-based
compensation expense, severance adjustment, expenses related to stockholder
activities, expenses related to strategic opportunities, and transaction
related costs provides meaningful supplemental information to investors, as
well as management, that is indicative of the Company's ongoing operating
results and facilitates comparison of operating results across reporting
periods. The Company uses these non-GAAP measures when evaluating its
financial results as well as for internal planning and budgeting
purposes. These non-GAAP measures should not be viewed as a substitute for the
Company's GAAP results, and may be different than non-GAAP measures used by
other companies.

(f) This adjustment reflects the stock-based compensation expense. For the six
months ending December 31, 2012, $3.8 million stock-based compensation expense
was allocated as follows: $1.4 million to research and development, $933,000
to sales and marketing and $1.4 million to general and administrative. For the
six months ending December 31, 2011, $3.0 million stock-based compensation
expense was allocated as follows: $995,000 to research and development,
$735,000 to sales and marketing and $1.2 million to general and
administrative. 

(g) This adjustment reflects the severance to the Company's former
executives. For the six months ending December 31, 2012, $44,000 was allocated
to general and administrative. For the six months ending December 31, 2011,
$361,000 was allocated as follows: $312,000 to sales and marketing and $49,000
to general and administrative.

(h) This adjustment reflects the expenses in response to our activities and
inquiries of Starboard Value LP allocated to general and administrative.

(i) This adjustment reflects the expenses incurred in connection with the
Company's exploration of options related to patent monetization and other
opportunities for increasing shareholder value prior to the announcement of
the transaction on November 5, 2012 allocated to general and administrative.

(j) This adjustment reflects the transaction related costs primarily
consisting of legal, banking fees and other professional charges subsequent to
the announcement of the transaction on November 5, 2012.
 

CONTACT: Media Contact:
         Jen Bernier-Santarini
         MIPS Technologies, Inc.
         +1 408-530-5178
         jenb@mips.com
        
         Investor Contact:
         Bill Slater
         MIPS Technologies, Inc.
         +1 408-530-5200
         ir@mips.com

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