SANTA ANA, Calif., March 14 /PRNewswire-FirstCall/ -- SRS Labs
(NASDAQ:SRSL), a leading provider of innovative audio and voice
technology solutions, announced today that licensing revenue for
the twelve-month period ended December 31, 2005 grew 37 percent to
$14.8 million from $10.8 million in fiscal 2004. This growth was
driven by the company's success in accessing more broadly its five
target market segments, which resulted in increased sales in such
product categories as portable audio devices, mobile phones and
PCs, as well as continued demand in the home theater market.
Revenues from the licensing business in the fourth quarter of 2005
increased 59 percent to $4.3 million from $2.7 million in the same
period in 2004. Consolidated net sales for the fiscal year ended
December 31, 2005, including the company's Hong Kong-based
semiconductor business, increased by 7.5 percent to $23.2 million
from $21.6 million for fiscal 2004. On March 1, 2006, SRS announced
that it intends to sell its semiconductor business to focus
increased management attention and resources on what it believes to
be a large and expanding market for its core licensing business. As
a result, beginning with the first quarter ending March 31, 2006,
SRS will account for the semiconductor business segment as a
discontinued operation. The company reported a net loss of $1.4
million, or ($0.10) per diluted share for fiscal 2005, compared to
net income of $1.6 million, or $.10 per diluted share, for the
prior year. The loss in 2005 was primarily due to a non-cash and
nonrecurring after-tax impairment charge of $3.3 million, which was
announced on March 1, 2006, related to the company's investment in
a joint venture alliance with Coming Home Studios. Gross margins in
2005 for SRS Labs' consolidated business were 72 percent compared
to 82 percent in 2004. This decline was attributable primarily to
the company's decision to record an asset impairment charge
associated with its joint venture with Coming Home Studios. Gross
margins in the licensing segment of the business were 78 percent.
Excluding the asset impairment charge related to Coming Home
Studios, the gross margins for the licensing business were 97
percent for 2005. Management believes that referencing both gross
margins in the licensing business provides important perspective
related to the operating performance of the business going forward.
Consolidated operating expenses increased from $15.9 million in
2004 to $18.0 million in 2005 due to increased sales and marketing
headcount, commissions on increased licensing revenues, and
increased professional fees and public company expenses. According
to SRS Labs' chairman and chief executive officer, Thomas C. K.
Yuen, "We are pleased to have achieved such strong and steady
growth in our core licensing business throughout 2005, and we
believe we are well positioned to continue to build on this
strength in 2006. Our innovative audio and voice technology is
well-suited to the unique design requirements of today's thinner,
more compact and miniaturized electronic products and offers a
solution, which enables a high-quality listening experience for
consumers. "We believe our technology provides a way for
manufacturers of such products as flat panel TVs, cell phones, MP3
and DVD players as well as laptop computers and car audio systems,
to deliver a noticeably improved sound quality and as a result
differentiate their devices in the market. For example, using our
technology, electronics manufacturers of portable media players
have a cost-effective, quick-to-market means for recapturing some
of the sound quality lost when music is compressed into digital
files. And for the mobile phones games market, our XSPACE 3D(TM)
generates a vivid, life-like audio environment achieved with the
precise placement of sound as well as multi-dimensional sound
movement. "As we go forward, our new team of senior executives is
committed to focusing on expanding our market opportunities with
both consumer electronics manufacturers and chip
manufacturers/platform partners, while our highly expert audio
technologists and scientists expect to continue to expand our
portfolio of innovative audio and voice technology," Yuen said.
Conference Call SRS will host a conference call and web cast at 2
p.m. Pacific Time today (5 p.m. Eastern Time) to review its 2005
year-end and fourth quarter results. The dial-in number for the
call in North America is 866-259-6033 and 703-639-1219 for
international callers. The call will also be web cast live over the
Internet. Simply log-on to http://www.srslabs.com/. The web cast
will be archived on the company's website for 60 days following the
call. An audio replay of the conference call will be available for
seven days beginning at 5 p.m. Pacific Time on March 14. The audio
replay dial-in number for North American is 866-837-8032 and
703-925-2474 for international callers. The replay pass code is
867016. About SRS Labs, Inc. SRS Labs is a recognized leader in the
advancement of audio and voice technology. The company works with
the world's top manufacturers to provide a richer entertainment
experience through patented sound techniques. SRS Labs'
technologies can be heard through products ranging from
televisions, LCD and plasma monitors, cell phones, MP3 players, car
audio systems, and notebook and desktop computers. The company also
offers hardware and software tools to professionals and consumers
for the creation, production and broadcast of content featuring SRS
Labs' technologies. Valence Technology Limited, a Hong-Kong based
subsidiary of SRS Labs, is a semiconductor company that designs and
sells custom ASICs and standard ICs to leading manufacturers
worldwide. Based in Santa Ana, Calif., the company also has
licensing representation in Hong Kong, Japan, Europe, and Korea.
For more information about SRS Labs, Inc. please visit
http://www.srslabs.com/. The information on the aforementioned
website is not incorporated by reference into this press release.
Except for historical information contained in this release,
statements in this release, including those of Mr. Yuen are
forward-looking statements and projections (which include
statements concerning plans and objectives of management for future
operations) that are based on management's belief, as well as
assumptions made by, and information currently available to,
management. While the company believes that its expectations are
based upon reasonable assumptions, there can be no assurances that
the company's goals and strategy will be realized. Numerous
factors, including risks and uncertainties, may affect the
company's actual results and may cause results to differ materially
from those expressed in forward-looking statements made by or on
behalf of the company. Some of these factors include uncertainties
related to the sale of Valence Technology Limited and the
divestiture of the company's equity investment in the joint
venture, the general market conditions concerning the semiconductor
business, the acceptance of new SRS Labs' products and
technologies, the impact of competitive products and pricing, the
timely development and release of technologies by the company,
general business and economic conditions, especially in Asia, and
other factors detailed in the company's Form 10-K and other
periodic reports filed with the SEC. SRS Labs specifically
disclaims any obligation to update or revise any forward-looking
statement whether as a result of new information, future
developments or otherwise. Contact: Connie Chandler Investor
Relations Tele: 714-573-1115 Email: SRS LABS, INC. CONSOLIDATED
STATEMENTS OF OPERATIONS Years Ended December 31, 2005 2004 2003
Revenue: Licensing $14,795,810 $10,831,704 $9,101,399 Semiconductor
8,432,449 10,770,684 10,712,382 Total revenues 23,228,259
21,602,388 19,813,781 Cost of sales: Licensing 446,849 228,147
102,979 Write-off of capitalized production costs 2,757,172 -- --
Semiconductor 3,411,649 3,725,062 3,953,100 Total cost of sales
6,615,670 3,953,209 4,056,079 Gross margin 16,612,589 17,649,179
15,757,702 Operating expenses Sales and marketing 6,890,666
5,445,224 5,487,159 Research and development 4,700,016 4,767,004
4,263,682 General and administrative 6,401,021 5,675,294 5,053,387
Total operating expenses 17,991,703 15,887,522 14,804,228 Income
(loss) from operations (1,379,114) 1,761,657 953,474 Write-off of
investment (185,304) -- -- Equity in income of investee 91,096
32,358 -- Other income, net 669,830 594,922 538,278 Minority
interest -- -- 5,430 Income (loss) before income tax expense
(803,492) 2,388,937 1,497,182 Income tax expense 620,893 810,416
1,038,463 Net income (loss) $(1,424,385) $1,578,521 $458,719 Net
income (loss) per common share: Basic $(0.10) $0.11 $0.04 Diluted
$(0.10) $0.10 $0.03 Weighted average shares used in the calculation
of net income per common share: Basic 14,117,795 13,950,457
13,033,002 Diluted 14,117,795 15,781,206 14,420,810 SRS LABS, INC.
CONSOLIDATED BALANCE SHEETS December 31, December 31, 2005 2004
ASSETS Current Assets Cash and cash equivalents $8,752,339
$7,011,912 Accounts receivable, net of allowance for doubtful
accounts of $99,203 in 2005 and $32,962 in 2004 2,789,551 1,318,665
Inventories, net of reserve of $127,007 in 2005 and $240,825 in
2004 614,647 571,280 Prepaid expenses and other current assets,
including other receivables of $8,817 in 2005 and $9,004 in 2004
944,556 1,337,506 Deferred income taxes -- 23,406 Total Current
Assets 13,101,093 10,262,769 Investments available for sale
17,077,170 17,261,267 Investment in LLC -- 2,596,090 Furniture,
fixtures and equipment, net 1,485,919 1,995,579 Intangible assets,
net 2,487,066 2,660,955 Goodwill 533,031 533,031 Deferred income
taxes 380,386 192,750 Total Assets $35,064,665 $35,502,441
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts
payable $1,597,370 $984,805 Accrued liabilities 2,117,040 1,640,714
Deferred revenue 537,636 436,910 Income taxes payable -- 8,628
Total Current Liabilities 4,252,046 3,071,057 Commitments,
contingencies and subsequent events Stockholders' Equity Preferred
stock-$0.001 par value; 2,000,000 shares authorized; no shares
issued and outstanding -- -- Common stock-$0.001 par value;
56,000,000 shares authorized; 14,953,690 and 14,671,416 shares
issued; 14,279,592 and 14,229,541 outstanding for 2005 and 2004,
respectively 14,955 14,672 Additional paid-in capital 63,574,518
62,523,292 Accumulated other comprehensive loss (496,021) (309,722)
Accumulated deficit (29,277,388) (27,853,003) Treasury stock at
cost 674,098 and 441,875 shares at December 31,2005 and 2004,
respectively (3,003,445) (1,943,855) Total Stockholders' Equity
30,812,619 32,431,384 Total Liabilities And Stockholders' Equity
$35,064,665 $35,502,441 DATASOURCE: SRS Labs CONTACT: Connie
Chandler, Investor Relations of SRS Labs, +1-714-573-1115, Web
site: http://www.srslabs.com/
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