Gennum Reports 2011 Third Quarter Results

Revenue Growth of 7% and Adjusted EPS* of $0.14

BURLINGTON, ON, Sept. 21, 2011 /CNW/ - Gennum Corporation (TSX: GND) today reported unaudited financial results for the third quarter of fiscal 2011. Third quarter revenue of $36.7 million, a record, increased 7% over each of the third quarter of 2010 and the second quarter of 2011. Diluted earnings per share was $0.10 compared to $0.15 in 2010 and $0.10 in the second quarter of 2011. Net earnings per share adjusted for non-recurring items after tax, was $0.14.

Third Quarter
(in millions of U.S. dollars except per share amounts)       August 31, 2011     August 31, 2010
Revenue       36.7     34.4
Gross margin       26.0     25.1
Gross margin as a percentage of revenue       70.9%     72.9%
Restructuring charge       1.5     ---
Operating income       5.0     7.6
Net earnings       3.3     5.3
Net earnings per share (basic and diluted)       $0.10     $0.15
Net earnings per share adjusted for non-recurring
   items after tax (basic and diluted)
      $0.14     $0.15

"We achieved solid results, delivering record quarterly revenue with 7% sequential and year-over-year growth and net earnings adjusted for non-recurring items after tax of $0.14 per share. We also generated over $6 million in cash during the quarter," said Dr. Franz Fink, President and CEO. "Looking forward, our fourth quarter order book is at this time in a range between the second and third quarter order books at a similar point. While there is more near-term economic uncertainty than usual in the semiconductor market, I remain confident in our strategy and ability to capitalize on our solid position in broadcast, data communications and consumer markets."

Today, in a separate news release, the Company announced its intention to commence a normal course issuer bid to acquire common shares of the Company. The normal course issuer bid is subject to the acceptance of the Toronto Stock Exchange.

Financial Results

Gennum recorded revenue of $36.7 million in the third quarter of 2011 compared to $34.4 million in the third quarter of 2010. Net earnings in the third quarter of 2011 was $3.3 million or $0.10 per share compared to $5.3 million or $0.15 per share in the third quarter of 2010. Year to date, net earnings was $11.5 million or diluted earnings per share of $0.33 compared to $13.4 million or $0.39 per share for the first nine months of 2010.

Third quarter net earnings adjusted for non-recurring items after tax*, which excludes restructuring charges and short term purchase accounting adjustments related to the Nanotech acquisition, was $4.9 million or $0.14 per share. Year to date, net earnings adjusted for non-recurring items after tax was $13.9 million or $0.40 per share. Please refer to "Non-GAAP Reporting" in our management's discussion and analysis for our third quarter ended August 31, 2011 as filed on SEDAR at www.sedar.com, for further information describing net earnings adjusted for non-recurring items after tax, Nanotech acquisition charges and restructuring charges.

The $1.5 million restructuring charge in the quarter relates to the plan announced in June to outsource the Company's test and logistics capabilities. The plan is expected to be completed over the next year and is expected to enable Gennum to improve its production capacity, customer lead times, logistical support, and to remain cost competitive in its marketplace.

Cash and cash equivalents increased $6.6 million to $20.8 million as of August 31, 2011 compared to May 31, 2011.

____________________________________
* "Adjusted EPS" or "net earnings per share adjusted for non-recurring items after tax", and "net earnings adjusted for non-recurring items after tax" are non-GAAP financial measures that do not have any standardized meanings under GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Adjusted EPS and net earnings per share adjusted for non-recurring items after tax are the same measure. An explanation of these terms, a description of why we believe them to be useful measures, and a quantitative reconciliation to the most directly comparable measures calculated in accordance with GAAP are set forth under the heading "Non-GAAP Reporting" in our management's discussion and analysis for our third quarter ended August 31, 2011 as filed on SEDAR at www.sedar.com and on our web site at www.gennum.com.

Outlook

Despite the current uncertain economic environment, our new product design-in activities remain strong across all regions and our current fourth quarter order book is between order levels experienced to this point in our second and third quarters of this year.

During the quarter, we have made good progress on our previously announced manufacturing outsourcing project. We are now expecting restructuring charges, during the life of the project, to be between $2.5 million and $3.0 million, of which $1.5 has been accrued to date. This is a reduction in the expected level of restructuring charges of approximately $0.8 million from our previous preliminary estimate. We continue to expect to incur between $0.5 million and $0.8 million of incremental operating expenses over the life of the project, which is unchanged from our prior expectations.

We expect that the manufacturing outsourcing project will achieve an annual cost savings of between $4.0 and $5.0 million when fully implemented, strengthen our operational capability, and maintain our financial competitiveness in the face of expected pressure on prices and margins.

We continue to evolve our Company, leveraging the strong foundation we have put in place. The investments we have made are strengthening our core market position and expanding our capability to address faster growing data communication and consumer connectivity markets.

Business Developments

During the quarter, Gennum announced the following product related developments:

  • Advanced 3Gb/s cable drivers for the broadcast video market. These next-generation 3Gb/s cable drivers feature industry-first signal pre-emphasis on non-inverted outputs which helps further extend the reach offered by our long reach equalizers introduced at NAB 2011.
  • Third generation of silicon-proven Multi-Standard PHY IP Platform on TSMC 28nm which is capable of supporting a number of different high-speed serial standards up to 12.5 Gb/s.
  • Hitachi Ltd., Information & Telecommunication Systems Company-Micro Device Division selected Gennum's PCI Express ® 3.0 PHY IP and the Inventure Z-core PCI Express 3.0 Controller for its next generation chips.

Dividend

Gennum's Board of Directors has declared a regular cash dividend of 3.5 cents per share Canadian to be paid on October 19, 2011 to shareholders of record on October 5, 2011.

Our interim financial statements for the third quarter of 2011 and related management's discussion and analysis have been filed and may be viewed on our website www.gennum.com and on SEDAR at www.sedar.com.

Download the complete financial results (PDF)
http://www.gennum.com/extranet/file/q3fy11-financials.pdf

Gennum will hold a conference call to discuss 2011 third quarter results on Wednesday, September 21, 2011 at 5:30 pm (ET). To access the call, participants should dial 1-800-814-4860. The conference call will also be webcast live at www.gennum.com or www.newswire.ca and subsequently archived on the Gennum site. A rebroadcast of the call will be available until October 21, 2011. To access the rebroadcast, dial 1-877-289-8525 and enter the passcode 4471537#. Download a slide presentation to accompany the discussion: http://www.gennum.com/q3fy11-downloads.

About Gennum Corporation
Gennum Corporation (TSX: GND) designs innovative semiconductor solutions and intellectual property (IP) cores for the world's most advanced consumer connectivity, enterprise, video broadcast and data communications products. Leveraging the company's proven optical, analog and mixed-signal products and IP, Gennum enables multimedia and data communications products to send and receive information without compromising the signal integrity. Recognized as an award winner for advances in high definition (HD) broadcasting, Gennum is headquartered in Burlington, Canada, and has global design, research and development and sales offices in Canada, Mexico, Japan, Germany, United States, Taiwan, India and the United Kingdom. www.gennum.com

Caution Regarding Forward-Looking Statements

This document contains statements which constitute forward-looking statements. These forward-looking statements are not descriptive of historical matters and may refer to management's expectations or plans. These statements include but are not limited to statements concerning: Gennum's business objectives and plans including Gennum's corporate strategy and strategic priorities; Gennum's future financial performance and prospects including revenues, gross margins and earnings, and ability to achieve operating earnings, cash flow and other business model targets, as well as expected cost savings and reductions in operating expenses; the expected results and benefits of Gennum's acquisition of Nanotech (including the expected impact of the acquisition on Gennum's revenues, earnings, business and market position); future trends in the semiconductor products and intellectual property licensing industries and, in particular, market trends for analog and mixed-signal products, optical products and intellectual property products and licensing; Gennum's expectations for sales and licensing of its products in these markets including anticipated costs and fees, sales, product prices, size, duration, growth or decline of market opportunities and competitive and pricing pressures in these markets; Gennum's product roadmap and the speed at which Gennum is able to introduce new products; the adoption of new standards in the markets in which Gennum competes and the ability of Gennum to anticipate these changes and successfully address new opportunities; sales and capital spending plans and estimates, shipment levels and operating expenses; the anticipating savings from, and the anticipated costs and related charges and operating expenses associated with, the planned outsourcing of test and logistics operations; exchange rate fluctuations in, and the relative values of, the Canadian dollar, the U.S. dollar and the Japanese yen; Gennum's ability to finance its growth plans and make necessary investments; and litigation in which Gennum is involved.

Inherent in forward-looking statements are risks and uncertainties beyond Gennum's ability to predict or control including, but not limited to, risks associated with: competitive and pricing pressures in the increasingly competitive environment in which Gennum operates; changes in the mix of products sold which, due to associated margins, can impact Gennum's financial results; the successful integration of and realization of benefits from acquisitions, including the acquisition of Nanotech; economic cycles in the semiconductor industry including downturns which can result from adverse general economic conditions; the effects of the recent earthquake and tsunami in Japan and the resultant impact upon Gennum's sales in Japan, which comprise approximately 25% of Gennum's revenues; our ability to anticipate needs for future products and successfully execute our product roadmap, including the possibility of the emergence of disruptive technologies which negatively impact our positioning in the marketplace; the risk that unforeseen factors may arise that result in us not being able to achieve our operating income, cash flow and other business model targets, or to achieve expected cost savings and reductions in operating expenses; possible impairments of assets which could be required in the future; fluctuations in foreign exchange rates and their potential adverse impact upon our financial results; our reliance on external foundries and suppliers and the potential adverse effects of disruptions in any of these arrangements; our ability to attract and retain key personnel necessary for our business; our ability to successfully protect our intellectual property rights; and the initiation and outcome of legal proceedings.  Readers should also refer to the sections entitled "Risks and Uncertainties" in our 2010 management's discussion and analysis and "Risk Factors" in our most recent annual information form, each as filed on SEDAR at www.sedar.com.

Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this document.  Such statements are based on a number of assumptions which may prove to be incorrect including, but not limited to, the following assumptions: there is no material deterioration in the business and economic conditions in the marketplace for Gennum's products; Gennum is able to successfully integrate acquisitions (including the acquisition of Nanotech) and the results of such acquisitions are not materially different from those anticipated by Gennum; the effects of the recent earthquake and tsunami in Japan will not have a material adverse impact upon Gennum's revenues; Gennum's expectations regarding market trends for analog and mixed-signal products, optical products and intellectual property products and licensing are not materially incorrect; Gennum is able to execute its product roadmap without delays or disruptions having a material impact on Gennum; Gennum's expectations relating to the needs and direction of the marketplace for its products are within reasonable bounds of accuracy and Gennum is able to introduce products and capitalize on new opportunities generally as expected; Gennum's expectations relating to its future operating expenses and its anticipated cost savings in connection with its manufacturing outsourcing and other projects, as well as the capital required to conduct its business in the future, are not materially incorrect; significant impairments of assets will not arise; material disruptions in the manufacture and supply of products and services to Gennum by foundries and suppliers will not materialize; Gennum's expectations relating to competitive pressures, including pricing pressures, as well as Gennum's expectations relating to the mix of products to be sold by it, are not materially incorrect; the actual savings from, and costs and related charges and operating expenses associated with, the planned outsourcing of test and logistics operations are not materially different from those anticipated by Gennum; significant fluctuations in foreign exchange rates which materially adversely affect Gennum's financial results do not arise; customer demand for Gennum's products remains generally as anticipated; and Gennum is able to continue to retain and attract technical and other key employees.

Readers are cautioned that the foregoing list of important factors and assumptions is not exhaustive. Forward-looking statements are not guarantees of future performance. Events or circumstances could cause Gennum's actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. Consequently, readers should not place any undue reliance on these forward-looking statements. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. In addition, these forward-looking statements relate to the date on which they are made. We disclaim any intention or obligation to update or revise any forward-looking statements or the foregoing list of factors, whether as a result of new information, future events or otherwise, except to the extent required by law.

SOURCE Gennum Corporation

For further information:

Gennum Investor Relations Contact 
Gregory Miller
Senior Vice-President, Finance & Administration and Chief Financial Officer
Gennum Corporation
Tel:  905-632-2999 ext. 3060
Email: greg.miller@gennum.com

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Gennum Corporation

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