[GRAPHIC OMITTED]
NEWS RELEASE
Press Contact: Bob McMullan
Chief Financial Officer
GlobeSpan, Inc.
+ 1-732-345-7558
GlobeSpan Announces Results for Second Quarter
Net Revenues $75.9 Million, Sequential Growth 144 Percent
Red Bank, New Jersey - July 31, 2000 -- GlobeSpan, Inc. (NASDAQ:GSPN), a
leading provider of integrated circuit, software, and system designs for digital
subscriber line (DSL) applications, today announced its results for the second
quarter and six months ended June 30, 2000.
GlobeSpan reported net revenues of $75,901,000, an increase of 704.5% over
net revenues of $9,434,000 for the second quarter of 1999, and an increase of
144.4% from the net revenues of $31,060,000 for the first quarter of 2000. Fully
taxed, pro forma net income was $7,886,000 or pro forma diluted earnings per
common share of $0.11, compared to a pro forma net loss of $2,364,000 or a pro
forma basic loss per share of $0.06 in the 1999 period.
Including acquisition related expenses, which include non-cash
compensation, amortization of intangible assets, non-cash interest expense for
the beneficial conversion feature for a convertible note issued as merger
consideration (which is measured by the price of our common stock on the
announcement of an acquisition and the conversion price) and in process research
and development, the reported net loss for the second quarter ended June 30,
2000 was $88,700,000 or $1.42 basic loss per share. The reported net loss
attributable to common stockholders for the second quarter ended June 30, 1999
was $5,830,000 or $0.15 basic loss per share including a preferred stock deemed
dividend of $3,466,000.
For the six months ended June 30, 2000, net revenues totaled $106,961,000,
an increase of 491.8% over net revenues of $18,075,000 for the six months ended
June 30, 1999. Including acquisition related expenses, which include non-cash
compensation, amortization of intangible assets, non-cash interest expense for
the beneficial conversion feature for a convertible note issued as merger
consideration and in process research and development, the reported net loss for
the six months ended June 30, 2000 was $111,599,000 or $1.84 basic loss per
share. The reported net loss attributable to common stockholders for the six
months ended June 30, 1999 was $9,699,000 or $0.25 basic loss per share
including a preferred stock deemed dividend of $3,466,000.
Results of Operations for the three months ended June 30, 2000 and 1999
Net Revenues. Our net revenues were $75.9 million and $9.4 million in the
three months ended June 30, 2000 and 1999, respectively. This amounts to an
increase of 704.5%. This increase in net revenues was primarily due to the
increase in unit volume shipments to existing customers, expansion of our
customer base, introduction of new products and, to a lesser extent, net
revenues from acquired businesses.
Cost of Sales and Gross Profit. Our gross profit was $46.5 million and $6.2
million in the three months ended June 30, 2000 and 1999, respectively. This
amount represents an increase of 650.0%. Our gross margin was 61.3% and 65.7% in
the three months ended June 30, 2000 and 1999, respectively. The decrease in
gross margin was related to lower average selling prices due to increased unit
volume shipped. The increase in gross profit dollars was the result of higher
net revenues. We expect gross margins may decrease in the future due to a number
of factors, including pressures on average selling prices, product mix and
customer mix.
Research and Development. Our research and development expenses were $23.2
million and $5.5 million in the three months June 30, 2000 and 1999,
respectively. This amount represents an increase of 321.8%. Research and
development expenses represented 30.6% and 58.2% of net revenues for the three
months ended June 30, 2000 and 1999, respectively. The increase in dollars is
the result of the inclusion of an acquisition completed during the three months
ended June 30, 2000 and from an increase in development efforts in advance of
anticipated revenues from such efforts. In addition, we added new personnel and
related support from acquisitions and new hiring and incurred higher amounts of
non-recurring engineering expenses and one-time licensing fees related to new
products. The decrease in research and development expense as a percentage of
net revenues was due to higher net revenues. Our research and development
expense may increase due to planned additional increases in personnel and
related support expenses, prototyping costs and depreciation resulting from
increased capital investment.
Selling, General and Administrative. Our selling, general and
administrative expense was $11.1 and $3.0 million for the three months ended
June 30, 2000 and 1999, respectively. This amount represents an increase of
277.4%. Selling, general and administrative expense represented 14.7% and 31.3%
of net revenues for the three months ended June 30, 2000 and 1999, respectively.
The increase in dollars resulted from the increase in sales, marketing and
administrative personnel and related expenses including expenses from our
acquisition, increased commissions and administrative costs. This decrease in
the percentage of selling, general and administrative expense as a percentage of
net revenues was due to higher net revenues. Our selling, general and
administrative expense may increase due to increases in personnel, higher
commissions and administrative costs.
Amortization of Intangible Assets. During the three months ended June 30,
2000, we completed the acquisitions of T.sqware, Inc. on April 27, 2000 and
iCompression, Inc. on June 30, 2000. The increase in dollar amount and
percentage of amortization expense is the result of our amortizing the
intangible assets acquired.
Non-cash Compensation. During the three months ended June 30, 2000, we
granted certain employees stock options at less than fair market value. The
deferred stock recorded is being amortized over the respective vesting period of
four years. The increase in the dollar amount and percentage of non-cash
compensation is the result of our amortizing the deferred compensation.
In Process Research and Development. During the three months ended June 30,
2000, our acquisitions, T.sqware and iCompression, each had development projects
not yet complete. The increase in dollars and percentage of IPR&D is the result
of our expensing the IPR&D acquired.
Interest Income (Expense), Net. Interest expense for the three months ended
June 30, 2000 was $1.2 million, offset by interest income of $1.0 million for a
net interest expense of $0.2 million. The increase in interest expense was the
result of higher borrowings and interest on our convertible note. The increase
in interest income was the result of investment of excess cash balances.
Interest expense for the three months ended June 30, 1999 was $0.1 million and
was the result of interest on borrowings.
Interest Expense Non-cash. We are amortizing the beneficial conversion
feature of approximately $48.0 million, over our call period through August
2000. The increase in the dollar amount and percentage of interest expense
non-cash is the result of our amortization.
Results of Operations for the six months ended June 30, 2000 and 1999
Net Revenues. Our net revenues were $107.0 million and $18.1 million in the
six months ended June 30, 2000 and 1999, respectively. This amounts to an
increase of 491.8%. This increase in net revenues was primarily due to the
increase in unit volume shipments to existing customers, expansion of our
customer base, introduction of new products and, to a lesser extent, net
revenues from acquired businesses.
Cost of Sales and Gross Profit. Our gross profit was $66.1 million and
$10.9 million in the six months ended June 30, 2000 and 1999, respectively. This
amount represents an increase of 511.2%. Our gross margin was 61.8% and 59.9% in
the six months ended June 30, 2000 and 1999, respectively. The increase in gross
margin was due to a one-time termination charge related to the termination of a
royalty agreement with Paradyne Corporation in the six months ended June 30,
1999. Without this termination charge, our gross margins would have decreased
from 66.0% to 61.8%. The decrease in gross margin was related to lower average
selling prices due to increased unit volume shipped. The increase in gross
profit dollars was the result of higher net revenues. We expect gross margins
may decrease in the future due to a number of factors, including pressures on
average selling prices, product mix and customer mix.
Research and Development. Our research and development expenses were $34.1
million and $10.9 million in the six months June 30, 2000 and 1999,
respectively. This amount represents an increase of 213.5%. Research and
development expense represented 31.9% and 60.2% of net revenues for the six
months ended June 30, 2000 and 1999, respectively. The increase in dollars is
the result of the inclusion of acquisitions completed during the six months
ended June 30, 2000 and from an increase in development efforts in advance of
anticipated revenues from such efforts. In addition, we added new personnel and
related support from acquisitions and new hiring and incurred higher amounts of
non-recurring engineering expenses and one-time licensing fees related to new
products. The decrease in research and development expense as a percentage of
net revenues was due to higher net revenues. Our research and development
expense may increase due to planned additional increases in personnel and
related support expenses, prototyping costs and depreciation resulting from
increased capital investment.
Selling, General and Administrative. Our selling, general and
administrative expense was $17.4 and $5.9 million for the six months ended June
30, 2000 and 1999, respectively. This amount represents an increase of 195.6%.
Selling, general and administrative expense represented 16.2% and 32.5% of net
revenues for the six months ended June 30, 2000 and 1999, respectively. The
increase in dollars resulted from the increase in sales, marketing and
administrative personnel and related expenses including expenses from our
acquisitions, increased commissions and administrative costs. The decrease in
the percentage of selling, general and administrative expense as a percentage of
net revenues was due to higher net revenues. Our selling, general and
administrative expense may increase due to increases in personnel, higher
commissions and administrative costs.
Amortization of Intangible Assets. During the six months ended June 30,
2000, we completed four acquisitions Ficon Technologies, Inc. on January 31,
2000, asset purchase of the microelectronics group of PairGain Technologies on
February 24, 2000, T.sqware, Inc. and iCompression, Inc. The increase in dollar
amount and percentage of amortization expense is the result of our amortizing
the intangible assets acquired.
Non-cash Compensation. During the six months ended June 30, 2000, we
exchanged our common stock with employee principals of an acquisition which was
considered compensation and we granted certain employees stock options at less
than fair market value. The deferred stock recorded is being amortized over the
respective vesting periods of three and four years. The increase in the dollar
amount and percentage in non-cash compensation is the result of our amortizing
the deferred compensation.
In Process Research and Development. During the six months ended June 30,
2000, our acquisitions, Ficon Technologies, Inc., T.sqware, Inc. and
iCompression, Inc., each had development projects not yet complete. The increase
in dollars and percentage of IPR&D is the result of our expensing the IPR&D
acquired.
Interest Income (Expense), Net. Interest expense for the six months ended
June 30, 2000 was $1.7 million offset by interest income of $1.6 million for a
net interest expense of $0.1 million. The increase in interest expense was the
result of higher borrowings and interest on our convertible note. The increase
in interest income was the result of investment of excess cash balances.
Interest expense for the six months ended June 30, 1999 was $0.3 million and was
the result of interest on borrowings.
Interest Expense Non-cash. We are amortizing the beneficial conversion
feature of approximately $48.0 million, over our call period through August
2000. The increase in the dollar amount and percentage of interest expense,
non-cash is the result of our amortization.
About GlobeSpan
GlobeSpan, Inc. is based at 100 Schulz Drive, Red Bank, New Jersey 07701
and can be reached by phone at + 1-732-345-7500 or at www.globespan.net.
-----------------
This press release contains forward-looking information within the meaning
of Section 21E of the Securities Exchange Act of 1934, and is subject to the
safe harbors created by this section. These forward-looking statements concern,
among other things, the future market for DSL chipsets. The matters discussed in
this news release involve risks and uncertainties described from time to time in
the company's filings with the Securities and Exchange Commission, particularly
in the Risk Factors section relating to the rapid changes in the DSL market,
competition and limited protection of the company's intellectual property set
forth in the company's most recent Annual Report on Form 10-K. The Company
assumes no obligation to update the forward-looking information contained in
this press release.
TABLES ATTACHED
<PAGE>
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Page 1 of 3
GLOBESPAN, INC
Statements of Operations - Unaudited Pro Forma
(in thousands, except per share data)
Pro Forma Pro Forma
For three months For six months and
Ended June 30, Ended June 30,
----------------------------- -----------------------------
2000 1999 2000 1999
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net revenues $ 75,901 $ 9,434 $ 106,961 $ 18,075
----------------------------- -----------------------------
Cost of sales 29,353 3,236 40,833 6,137
----------------------------- -----------------------------
Gross profit 46,548 6,198 66,128 11,938
----------------------------- -----------------------------
Operating expenses
Research and development 23,212 5,494 34,092 10,874
Selling, general and administrative 11,134 2,950 17,375 5,878
----------------------------- -----------------------------
Total operating expenses 34,346 8,444 51,467 16,752
----------------------------- -----------------------------
Income (loss) from operations 12,202 (2,246) 14,661 (4,814)
Foreign exchange gain 4 -- 4 --
Interest income (expense), net 938 (118) 1,482 (300)
----------------------------- -----------------------------
Income (loss) before income taxes 13,144 (2,364) 16,147 (5,114)
Income tax provision 5,258 -- 6,459 --
----------------------------- -----------------------------
Net income (loss) $ 7,886 $ (2,364) $ 9,688 $ (5,114)
============================= =============================
Basic earnings (loss) per share - Pro Forma $ 0.13 $ (0.06) $ 0.16 $ (0.13)
============================= =============================
Diluted earnings per share - Pro Forma $ 0.11 $ -- $ 0.14 $ --
============================= =============================
Weighted average shares of common stock outstanding
used in computing basic earnings per share - Pro Forma 62,634 40,221 60,514 38,150
============================= =============================
Weighted average shares of common stock outstanding
used in computing diluted earnings per share - Pro Forma 72,105 -- 69,554 --
============================= =============================
</TABLE>
Note: Unaudited pro forma excluding acquisition related expenses of
amortization of intangibles, non-cash compensation, IPR&D and non-cash interest
expense.
<PAGE>
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Page 2 of 3
GLOBESPAN, INC.
Statements of Operations - Unaudited
(in thousands, except per share data)
For three months For six months
Ended June 30, Ended June 30,
----------------------------- -----------------------------
2000 1999 2000 1999
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net revenues $ 75,901 $ 9,434 $ 106,961 $ 18,075
----------------------------- -----------------------------
Cost of sales 29,353 3,236 40,833 6,137
Cost of sales related to termination charge -- -- -- 1,119
----------------------------- -----------------------------
Gross profit 46,548 6,198 66,128 10,819
Operating expenses
Research and development (exclusive of non-cash
compensation of $3,560 and $5,440, for the three
and six months ended June 30, 2000, respectively) 23,212 5,494 34,092 10,874
Selling, general and administrative (exclusive of non-cash
compensation of $2,972 and $4,541, for the three
and six months ended June 30, 2000, respectively) 11,134 2,950 17,375 5,878
Amortization of intangible assets 27,009 -- 38,319 --
Non-cash compensation expense 6,532 -- 9,981 --
In process research and development 43,511 -- 44,854 --
----------------------------- -----------------------------
Total operating expenses 111,398 8,444 144,621 16,752
----------------------------- -----------------------------
(Loss) from operations (64,850) (2,246) (78,493) (5,933)
Foreign exchange gain 4 -- 4 --
Interest income (expense), net (184) (118) (75) (300)
Interest (expense), non-cash (23,670) -- (33,035) --
----------------------------- -----------------------------
Net (loss) (88,700) (2,364) (111,599) (6,233)
============================= =============================
Preferred stock deemed dividend and accretion -- (3,466) -- (3,466)
----------------------------- -----------------------------
Net loss attributable to common stockholders $ (88,700) $ (5,830) $ (111,599) $ (9,699)
============================= =============================
Basic and fully diluted (loss) attributable to common
stockholders per share $ (1.42) $ (0.15) $ (1.84) $ (0.25)
============================= =============================
Weighted average shares of common stock outstanding
used in computing basic and fully diluted
(loss) per common share 62,634 40,221 60,515 38,151
============================= =============================
</TABLE>
<PAGE>
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Page 3 of 3
June 30, 2000 December 31, 1999
------------- -----------------
Balance sheet data: (unaudited)
<S> <C> <C>
Cash and cash equivalents and
short-term investments $ 73,297 $ 36,668
Accounts receivable, net 28,621 9,306
Inventories 19,824 10,656
Intangible assets, net 667,688 --
Total assets 813,940 70,991
Convertible note, long-term borrowings
and long-term capital lease obligations 79,951 443
Stockholders' equity 671,668 55,433
</TABLE>
