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Form 8-K VITESSE SEMICONDUCTOR For: Feb 03

February 3, 2015 4:02 PM EST


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form�8-K
CURRENT REPORT
Pursuant to Section�13 or 15(d)�of the

Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February�3, 2015
VITESSE SEMICONDUCTOR CORPORATION
(Exact name of issuer as specified in its charter)
Delaware

(State or other jurisdiction of incorporation)
1-31614
77-0138960
(Commission File Number)
(IRS Employer Identification No.)
4721 Calle Carga

Camarillo, California 93012

(Address of Principal Executive Offices)
Registrants telephone number, including area code (805) 388-3700
N/A

(Former Name or Former Address, if Changed Since Last Report.)
Check the appropriate box below if the Form�8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o����������������� Written communications pursuant to Rule�425 under the Securities Act
o����������������� Soliciting material pursuant to Rule�14a-12 under the Exchange Act
o����������������� Pre-commencement communications pursuant to Rule�14d-2(b)�under the Exchange Act
o����������������� Pre-commencement communications pursuant to Rule�13e-4(c)�under the Exchange Act






Item 2.02.��������������������������������������������� Results of Operations and Financial Condition.
On February�3, 2015, Vitesse Semiconductor Corporation (the Company) issued a press release reporting its financial results for the quarter ended December�31, 2014.� A copy of the press release issued by the Company is attached hereto as Exhibit�99.1 and is incorporated herein by reference.
The Company will host a conference call today February�3, 2015, at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time. To listen to the conference call via telephone, dial 888.312.3048 (U.S. toll-free) or 719.325.2244 (International) and provide the passcode 8306732. Participants should dial in at least 10 minutes prior to the start of the call. To listen via the Internet, the webcast can be accessed through the investor section of the Vitesse corporate web site at www.vitesse.com. The playback of the conference call will be available approximately two hours after the call concludes and will be accessible on the Vitesse corporate web site or by calling 877.870.5176 (U.S. toll-free) or 858.384.5517 (International) and entering the passcode 8306732. The audio replay will be available for seven days.

The information in Item 2.02 of this Current Report on Form�8-K and Exhibit�99.1 attached hereto shall not be deemed to be filed for the purposes of Section�18 of the Securities Exchange Act of 1934 (the Exchange Act), or otherwise subject to the liabilities of such section, nor shall such information or exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01  Financial Statements and Exhibits
(d)���������� Exhibits.
The following exhibits are filed herewith:
Exhibit
Number
Description
99.1

Press Release issued by Vitesse Semiconductor Corporation, dated February�3, 2015.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
VITESSE SEMICONDUCTOR CORPORATION
Date:
February�3, 2015
By:
/s/ Martin S. McDermut
Martin S. McDermut
Chief Financial Officer
EXHIBIT�INDEX
Exhibit
Number
Description
99.1

Press Release issued by Vitesse Semiconductor Corporation, dated February 3, 2015.


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Exhibit 99.1
FOR IMMEDIATE RELEASE
Company Contact:
Agency Contact:
Marty McDermut
Kirsten Chapman
Vitesse Semiconductor
LHA
www.vitesse.com
www.lhai.com
1.805.388.3700
1.415.433.3777
Vitesse Reports First Quarter Fiscal Year 2015 Results
"
Revenues of $24.8 million
"
New product revenue of $16.2 million, representing 82% year-to-year growth and 68% of total product revenue in the quarter
"
Opportunities created at new customers were double the rate of fiscal year 2014
"
Record pace for design wins, IoT wins representing 40% of total

CAMARILLO, Calif. February 3, 2015 Vitesse Semiconductor Corporation (Nasdaq: VTSS), a leading provider of IC solutions to advance Ethernet Everywhere in Carrier, Enterprise and Internet of Things (IoT) networks, reported its financial results for the first quarter fiscal year 2015, ended December 31, 2014.
New product revenue continues on a solid trajectory reaching $16.2 million in the quarter, up 82% on a year to year basis. New products now represent 68% of our total product revenue, said Chris Gardner, CEO of Vitesse. Our customer profile continues to grow and evolve as our position strengthens in new, adjacent markets such as IoT and storage, which are literally reshaping our business and expanding our market opportunity. Our expanded sales team dramatically increased both opportunities and design wins, more than doubling the number of new customers in the pipeline, setting us on pace for another record year. As Ethernet propagates into new markets, our total addressable market will triple from approximately $1 billion today to over $3 billion by 2020.
����
As anticipated, we saw a meaningful decrease in revenue from our legacy products in the first quarter and expect another smaller decline in the second quarter. These declines will be more than offset by new product revenue growth of 50% to 75% for the full fiscal year. We continue to manage expenses carefully as we move through the transition and remain on target to deliver gross product margins of 60% in fiscal year 2015. All told, the leading indicators of our business are strong and we are well positioned with the technology, products, market position, and customers to capitalize on the exciting growth opportunities we are seeing in the market.

First Quarter Fiscal Year 2015 Financial Results Summary
"
Total net revenues were $24.8 million, compared to $28.7 million in the fourth quarter of fiscal year 2014 and $27.1 million in the first quarter of fiscal year 2014.
"
Product revenues were $24.0 million, compared to $27.0 million in the fourth quarter of fiscal year 2014 and $24.9 million in the first quarter of fiscal year 2014. Revenues by market contributed the following as a percentage of product revenues as compared to the fourth quarter of fiscal year 2014:
"
Carrier networking products: 47.4% versus 45.1%
"
Enterprise networking products: 43.7% versus 39.9%
"
Industrial-IoT networking products: 8.9% versus 15.0%
"
Intellectual property revenues totaled $0.8 million, compared to $1.7 million in the fourth quarter of fiscal year 2014 and $2.2 million in the first quarter of fiscal year 2014.

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"
Product margins were 58.1%, compared to 60.9% in the fourth quarter of fiscal year 2014 and 57.1% in the first quarter of fiscal year 2014. Total gross margins were 59.4%, compared to 63.1% in the fourth quarter of fiscal year 2014 and 60.6% in the first quarter of fiscal year 2014.
"
Operating expenses were $18.9 million, compared to operating expenses of $18.8 million in the fourth quarter of fiscal year 2014 and $18.6 million in the first quarter of fiscal year 2014.
"
Operating loss was $4.2 million, compared to operating loss of $0.7 million in the fourth quarter of fiscal year 2014 and $2.2 million in the first quarter of fiscal year 2014.
"
Non-GAAP operating loss was $2.2 million, compared to non-GAAP operating income of $1.0 million in the fourth quarter of fiscal year 2014 and non-GAAP operating loss of $0.9 million in the first quarter of fiscal year 2014.
"
Net loss was $5.0 million, or $0.07 per basic and fully diluted share. This compares to net loss of $2.5 million, or $0.04 per basic and fully diluted share, in the fourth quarter of fiscal year 2014, and net loss of $5.4 million, or $0.09 per basic and fully diluted share, in the first quarter of fiscal year 2014.
"
Non-GAAP net loss was $3.1 million, or $0.04 per basic and fully diluted share, compared to non-GAAP net loss of $0.8 million, or $0.01 per basic and fully diluted share, for the fourth quarter of fiscal year 2014, and non-GAAP net loss of $2.4 million, or $0.04 per basic and fully diluted share, in the first quarter of fiscal year 2014.
Balance Sheet Data at December 31, 2014 as Compared to September 30, 2014
"
Cash and restricted cash were $33.4 million, compared to $72.7 million, reflecting the $32.8 million debt repayment in October 2014.
"
Accounts receivable was $10.1 million, compared to $10.9 million.
"
Inventories were $15.7 million, compared to $12.8 million.
Financial Outlook
For the second quarter of fiscal year 2015, ending March 31, 2015, Vitesse expects revenues to be in the range of $24.0 million to $26.0 million and product margins to be between 58% and 61%. GAAP operating expenses are expected to be between $17.5 million and $18.5 million.
February 3, 2015 Conference Call Information
A conference call is scheduled for today, February 3, 2015, at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time to review financial results for the first quarter of fiscal year 2015. To listen to the conference call via telephone, dial 888.312.3048 (U.S. toll-free) or 719.325.2244 (International) and provide the passcode 8306732. Participants should dial in at least 10 minutes prior to the start of the call. To listen via the Internet, the webcast can be accessed through the investor section of the Vitesse corporate web site at www.vitesse.com.
The playback of the conference call will be available approximately two hours after the call concludes and will be accessible on the Vitesse corporate web site or by calling 877.870.5176 (U.S. toll-free) or 858.384.5517 (International) and entering the passcode 8306732. The audio replay will be available for seven days.
About Vitesse
Vitesse (Nasdaq: VTSS) designs a diverse portfolio of high-performance semiconductors, application software, and integrated turnkey systems solutions for Carrier, Enterprise and Internet of Things (IoT) networks worldwide. Vitesse products enable the fastest-growing network infrastructure markets including Mobile Access/IP Edge, Enterprise Cloud Access, and Industrial-IoT Networking. Visit www.vitesse.com or follow us on Twitter @VitesseSemi.
###
Vitesse is a registered trademark of Vitesse Semiconductor Corporation in the United States and other jurisdictions. All other trademarks or registered trademarks mentioned herein are the property of their respective holders.


VTSS-F

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Cautions Regarding Forward Looking Statements
All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements that are based on our current expectations, estimates and projections about our business and industry, managements beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as anticipates, believes, estimates, expects, intends, plans, predicts, and similar terms, and variations or negatives of these words. Examples of forward-looking statements in this release include the Companys financial outlook for its second quarter of fiscal year 2015, potential new markets for the Companys products and size of addressable markets, and anticipated new product, design win and new customer growth in fiscal year 2015. Forward-looking statements are not guarantees of future performance and the Companys actual results may differ significantly from the results discussed in the forward-looking statements. Factors and uncertainties that could affect the Companys forward-looking statements include, among other things: identification of feasible new product initiatives, management of R&D efforts and the resulting successful development of new products and product platforms; acceptance by customers of the Companys products; reliance on key suppliers; rapid technological change in the industries in which the Company operates; and competitive factors, including pricing pressures and the introduction by others of new products with similar or better functionality than the Companys products. These and other risks are more fully described in the Companys filings with the Securities and Exchange Commission, including the Companys Annual Report on Form 10-K that was filed on December 4, 2014, which should be read in conjunction herewith for a further discussion of important factors that could cause actual results to differ materially from those in the forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Measures
A non-GAAP financial measure is a numerical measure of a companys performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures.�Other companies may use different non-GAAP measures and presentation of results.

We provide non-GAAP measures of non-GAAP operating expenses, non-GAAP income (loss) from operations and non-GAAP net income (loss) as a supplement to financial results based on GAAP operating expenses, GAAP income (loss) from operations and GAAP net income (loss). The Company believes that the additional non-GAAP measures are useful to investors for the purpose of financial analysis.�We believe the presentation of non-GAAP measures provides investors with additional insight into underlying operating results and prospects for the future by excluding gains, losses and other charges that are considered by management to be outside of the Companys core operating results. Management uses these measures internally to evaluate the Companys in-period operating performance before taking into account these non-operating gains, losses and charges.�In addition, the measures are used for planning and forecasting of the Companys performance in future periods.

In deriving non-GAAP operating expenses from GAAP operating expenses, we exclude stock-based compensation charges and amortization of intangible assets. In deriving non-GAAP income (loss) from operations from GAAP income (loss) from operations, we exclude stock-based compensation charges and amortization of intangible assets. In deriving non-GAAP net income (loss) from GAAP net income (loss), we further exclude loss on extinguishment of debt. Stock-based compensation charges, amortization of intangible assets, and loss on extinguishment of debt represent charges that recur in amounts unrelated to the Companys operations.

The non-GAAP financial measures we provide have certain limitations because they do not reflect all of the costs associated with the operation of our business as determined in accordance with GAAP. Non-GAAP operating expenses, non-GAAP income (loss) from operations and non-GAAP net income (loss) are in addition to, and are not a substitute for or superior to, operating expenses, income (loss) from operations and net income (loss), which are prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. A detailed reconciliation of the non-GAAP measures to the most directly comparable GAAP measure is set forth below. Investors are encouraged to review these reconciliations to appropriately incorporate the non-GAAP measures and the limitations of these measures into their analyses. For complete information on stock-based compensation, amortization of intangible assets, and loss on extinguishment of debt, please see our Form 10-Q for the quarterly period ended December 31, 2014 and Form 10-K for the year ended September 30, 2014.


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VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS

December�31,
2014
September�30,
2014
(in�thousands, except par value)
ASSETS


Current assets:


Cash
$
31,745

$
71,903

Accounts receivable
10,081

10,850

Inventories
15,705

12,792

Restricted cash
1,608

794

Prepaid expenses and other current assets
2,170

1,047

Total current assets
61,309

97,386

Property, plant and equipment, net
2,913

2,858

Other intangible assets, net
1,811

1,476

Other assets
1,511

3,104

$
67,544

$
104,824

LIABILITIES AND STOCKHOLDERS EQUITY


Current liabilities:


Accounts payable
$
7,947

$
6,814

Accrued expenses and other current liabilities
9,548

12,472

Current portion of debt, net


32,727

Deferred revenue
6,302

4,902

Total current liabilities
23,797

56,915

Other long-term liabilities
225

234

Long-term debt, net
16,508

16,417

Convertible subordinated debt, net




Total liabilities
40,530

73,566

Stockholders equity:


Preferred stock, $0.01 par value: 10,000 shares authorized; no shares issued or outstanding




Common stock, $0.01 par value: 250,000 shares authorized; 68,426 and 67,703 shares outstanding at December 31, 2014 and September 30, 2014, respectively
684

677

Additional paid-in-capital
1,925,774

1,924,984

Accumulated deficit
(1,899,444
)
(1,894,403
)
Total stockholders equity
27,014

31,258

$
67,544

$
104,824



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VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months ended
December 31,
September 30,
December 31,
2014
2014
2013
Net revenues:
(in thousands, except per share data)
Product revenues
$
23,969

$
27,007

$
24,863

Intellectual property revenues
786

1,664

2,220

Net revenues
24,755

28,671

27,083

Costs and expenses:


Cost of product revenues
10,053

10,571

10,676

Engineering, research and development
11,337

10,869

10,679

Selling, general and administrative
7,415

7,792

7,854

Amortization of intangible assets
100

93

88

Costs and expenses
28,905

29,325

29,297

Loss from operations
(4,150
)
(654
)
(2,214
)
Other expense:
Interest expense, net
818

1,521

1,704

Loss on extinguishment of debt




1,594

Other, net
28

28

61

Other expense, net
846

1,549

3,359

Loss before income tax expense (benefit)
(4,996
)
(2,203
)
(5,573
)
Income tax expense (benefit)
45

282

(202
)
Net loss
$
(5,041
)
$
(2,485
)
$
(5,371
)
Net loss per common share - basic and diluted
$
(0.07
)
$
(0.04
)
$
(0.09
)
Weighted average common shares outstanding - basic and diluted
67,974

67,580

57,610



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VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
Three Months Ended
December 31,
September 30,
December 31,
2014
2014
2013
(in thousands, except per share data)
UNAUDITED RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS
GAAP net loss
$
(5,041
)
$
(2,485
)
$
(5,371
)
Adjustments:
Stock-based compensation charges
1,831

1,609

1,265

Amortization of intangible assets
100

93

88

Loss on extinguishment of debt




1,594

Total GAAP to non-GAAP adjustments
1,931

1,702

2,947

Non-GAAP net loss
$
(3,110
)
$
(783
)
$
(2,424
)
Net loss per common share - basic and diluted:
GAAP net loss per common share
$
(0.07
)
$
(0.04
)
$
(0.09
)
Adjustments
0.03

0.03

0.05

Non-GAAP net loss per common share
$
(0.04
)
$
(0.01
)
$
(0.04
)
UNAUDITED RECONCILIATION OF GAAP LOSS FROM OPERATIONS TO NON-GAAP (LOSS) INCOME FROM OPERATIONS
GAAP loss from operations
$
(4,150
)
$
(654
)
$
(2,214
)
Adjustments:
Stock-based compensation charges
1,831

1,609

1,265

Amortization of intangible assets
100

93

88

Total GAAP to non-GAAP adjustments
1,931

1,702

1,353

Non-GAAP (loss) income from operations
$
(2,219
)
$
1,048

$
(861
)
UNAUDITED RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES
GAAP operating expenses:
Engineering, research and development
$
11,337

$
10,869

$
10,679

Selling, general and administrative
7,415

7,792

7,854

Amortization of intangible assets
100

93

88

Total GAAP operating expenses
18,852

18,754

18,621

Adjustments:
Stock-based compensation charges
1,601

1,405

1,081

Amortization of intangible assets
100

93

88

Total GAAP to non-GAAP adjustments
1,701

1,498

1,169

Non-GAAP operating expenses
$
17,151

$
17,256

$
17,452



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