Atmel Reports Third Quarter 2010 Financial Results

Revenues Increased 13% Sequentially

(PRNewswire) — Atmel® Corporation (Nasdaq: ATML), a leader in microcontroller and touch solutions, today announced financial results for its third quarter ended September 30, 2010.

Revenues in the third quarter of 2010 were $444.3 million, up 13 percent from $393.4 million in the second quarter of 2010 and up 40 percent from $317.7 million in the third quarter of 2009.

Net income on a GAAP basis was $219.8 million or $0.47 per diluted share in the third quarter of 2010. Included in net income for the third quarter was a significant tax benefit from the settlement of an IRS tax audit of $150.4 million. The third quarter net income compares with a GAAP net loss of $36.4 million or a loss of $(0.08) per diluted share in the second quarter of 2010 and a net loss of $17.5 million or a loss of $(0.04) per diluted share in the third quarter of 2009.

Non-GAAP net income in the third quarter of 2010 totaled $88.6 million or $0.18 per diluted share, compared with non-GAAP net income of $50.8 million or $0.11 per diluted share in the second quarter of 2010 and a non-GAAP net loss of $4.0 million or a loss of $(0.01) per diluted share in the third quarter of 2009.

Gross margin increased to 47 percent in the third quarter of 2010, the highest level achieved since the fourth quarter of 1996, compared to 41 percent in the second quarter of 2010 and 31 percent in the third quarter of 2009. The sequential gross margin improvement was the result of the sale during the second quarter of the Rousset manufacturing operations, increased factory utilization levels, and a favorable mix of higher margin microcontroller products.

“The strong financial results are a reflection of our outstanding product portfolio, streamlined manufacturing operations and our focus on growing higher margin businesses.   Our microcontroller business achieved record revenues again in the third quarter and gained substantial market share as our products continue to be the preferred choice among design engineers.  Atmel’s touchscreen shipments experienced a particularly strong ramp as customers continue to demand the superior performance offered by our maXTouch™ products,” said Steve Laub, President and Chief Executive Officer of Atmel.  “Additionally, we are pleased to have completed the sale of the Smart Card business increasing our focus on our core microcontroller business.”

Third quarter 2010 income from operations of $77.7 million compared with a second quarter loss from operations of $78.9 million and a loss from operations of $14.7 million in the third quarter of 2009.  Third quarter income from operations included a $5.7 million loss from the sale of the Smart Card business.

Stock-based compensation expense was $13.2 million in the third quarter of 2010, compared with $21.7 million in the second quarter of 2010 and $7.6 million in the third quarter of 2009.

Income tax benefit of $136.6 million in the third quarter of 2010 included a $150.4 million, or $0.32 per diluted share, tax benefit from the settlement of an IRS tax audit resulting from the release of tax reserves of approximately $102.0 million, plus a $48.4 million tax refund.  This compares to an income tax benefit of $39.7 million in the second quarter of 2010 and an income tax provision of $0.4 million in the third quarter of 2009.

Cash provided from operations totaled approximately $95.3 million in the third quarter of 2010, compared with $49.2 million in the second quarter of 2010, and $59.4 million in the third quarter of 2009. Combined cash balances (cash and cash equivalents plus short-term investments) totaled $597.4 million at the end of the third quarter of 2010, an increase of $45.1 million from the end of the prior quarter, and the company had a record net cash balance (cash balances less the current and long-term debt) of $513.3 million at the end of third quarter 2010.   

Third Quarter Operational and Company Highlights

  • Record microcontroller revenues of $255.5 million, up 29% sequentially
  • Gross margin of 47%, highest since fourth quarter of 1996
  • Completed the sale of the Smart Card (SMS) business based in Rousset, France and East Kilbride, UK
  • Record net cash balance of $513.3 million

Recent Product Highlights

  • maXTouch began shipping in Samsung’s GALAXY Tab, Pantech IZAR, VEGA, and EASE smartphone, and Nikon’s COOLPix S80 camera
  • maXTouch won Electronic Product of the Year at the British Engineering Excellence Awards
  • Atmel maXTouch technology received the “Compatible with Windows 7” logo for 10 multi-touches
  • Launched the Atmel QTouch Studio 4.3 software tool for touch designs
  • Introduced industry’s smallest car radio antenna IC

Stock Repurchase

During the third quarter of 2010, Atmel purchased 7.0 million shares of its common stock in the open market at an average price of $5.79.

Non-GAAP Metrics

Non-GAAP net income (loss) excludes charges related to restructuring activities, acquisitions, grant repayments, pension charge related to fab sale, loss (gain) on sale of assets, asset impairment charges and stock-based compensation, as well as the income tax effect of these excluded items and other unusual and non-recurring income tax items. A reconciliation of GAAP results to non-GAAP results is included following the financial statements below.

Conference Call

Atmel will hold a teleconference at 3:00 p.m. PT today to discuss the third quarter 2010 financial results. The conference call will be webcast live and can also be monitored by dialing 1-800-374-0405 or 1-706-758-4519. The conference ID number is 16863024 and participants are encouraged to initiate their calls 10 minutes in advance of the 3 p.m. PT start time to ensure a timely connection. The webcast and earnings release will be accessible at http://www.atmel.com/ir/ and will be archived for 12 months.

A replay of the November 4, 2010 conference call will be available the same day at approximately 5:00 p.m. PT and will be archived for 48 hours. The replay access numbers are 1-800-642-1687 within the U.S. and 1-706-645-9291 for all other locations. The access code is 16863024.

About Atmel

Atmel is a worldwide leader in the design and manufacture of microcontrollers, capacitive touch solutions, advanced logic, mixed-signal, nonvolatile memory and radio frequency (RF) components. Leveraging one of the industry's broadest intellectual property (IP) technology portfolios, Atmel is able to provide the electronics industry with complete system solutions focused on industrial, consumer, security, communications, computing and automotive markets.  

Safe Harbor for Forward-Looking Statements

Information in this release regarding Atmel's forecasts, business outlook, expectations and beliefs are forward-looking statements that involve risks and uncertainties. These statements include statements about our future operating and financial performance including our outlook for 2010 and expectations regarding market share and product revenue growth, and Atmel's strategies. All forward-looking statements included in this release are based upon information available to Atmel as of the date of this release, which may change. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include general economic conditions; the inability to realize the anticipated benefits of transactions regarding Atmel's Smart Card business and related manufacturing assets or of our other recent strategic transactions, restructuring plans and other initiatives in a timely manner or at all; the impact of competitive products and pricing; timely design acceptance by our customers; timely introduction of new products and technologies; ability to ramp new products into volume production; industry wide shifts in supply and demand for semiconductor products; industry and/or company overcapacity; effective and cost efficient utilization of manufacturing capacity; financial stability in foreign markets and the impact of foreign exchange rates; unanticipated costs and expenses or the inability to identify expenses which can be eliminated; the market price of our common stock; compliance with U.S. and international laws and regulations by us and our distributors; unfavorable results of legal proceedings; and other risks detailed from time to time in Atmel's SEC reports and filings, including our Form 10-K for the year ended December 31, 2009 , filed on March 1, 2010 , and our subsequent Form 10-Q reports. Atmel assumes no obligation and does not intend to update the forward-looking statements provided, whether as a result of new information, future events or otherwise.

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