Zarlink Third Quarter Fiscal 2010 Revenue Exceeds Guidance

As a supplement to Zarlink's consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), the Company provides additional non-GAAP measures for operating income, net income (loss), and basic and diluted net income (loss) per share.

A non-GAAP financial measure is a numerical measure of a company's 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. The Company believes that the additional non-GAAP measures are useful to investors for the purpose of financial analysis. Management uses these measures internally to evaluate the Company's in-period operating performance before gains, losses and other charges that are considered by management to be outside of the Company's core operating results. These non-GAAP financial measures should assist investors in understanding how management views our core results of operations on an on-going basis, as well as enhance comparisons of our core results of operations with historical periods. In addition, the measures are used for planning and forecasting of the Company's future periods. Investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures do not reflect all costs associated with our operations as determined in accordance with GAAP. Other companies may exclude or include different items in a particular non-GAAP financial measure, or provide different non-GAAP financial measures to those provided by Zarlink. Therefore, our non-GAAP financial measures are unlikely to be comparable to those presented by other companies.

Reconciliations of historical presentations of non-GAAP measures to their most directly comparable GAAP financial measures are provided in the following table. The Company is unable to reconcile these non-GAAP measures on a forward-looking basis primarily because it is impractical to project certain events, such as the impact of foreign exchange gains/losses.


Zarlink Semiconductor Inc.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
(Unaudited)

                                                        Three Months Ended
                                            ------------------------------
                                               Dec. 25, Sept. 25,  Dec. 26,
                                                  2009      2009      2008
                                            ------------------------------
                                                                          
GAAP net income                                $   631   $   720  $ 12,100
  Amortization of intangible assets              1,803     1,803     1,846
  Contract impairment (recovery)                   (94)        -       142
  Foreign exchange loss (gain)                   2,719     2,999   (10,302)
  Restructuring and supply chain                                          
   harmonization                                   592       889       604
  Impairment of asset held for sale                  -         -     1,200
  Impairment (recovery) of current asset             -      (768)    3,000
  Stock compensation expense                       475       325       575
  Gain on sale of assets                             -         -         -
  Loss (gain) on repurchase of convertible                                
   debentures                                        -       316    (3,593)
                                            ------------------------------
Non-GAAP net income                            $ 6,126   $ 6,284  $  5,572
                                                                          
GAAP operating income (loss)                   $ 4,493   $ 5,171  $   (956)
  Amortization of intangible assets              1,803     1,803     1,846
  Contract impairment (recovery)                   (94)        -       142
  Restructuring and supply chain                                          
   harmonization                                              592              889              604
    Impairment  of  asset  held  for  sale                                    -                  -          1,200
    Impairment  (recovery)  of  current  asset                          -            (768)        3,000
    Stock  compensation  expense                                              475              325              575
    Gain  on  sale  of  assets                                                          -                  -                  -
                                                                                        ------------------------------
Non-GAAP  operating  income                                            $  7,269      $  7,420    $    6,411
                                                                                                                                                    
GAAP  net  income  (loss)  per  common  share  -                                                            
  basic                                                                                  $    0.00      $    0.00    $      0.09
    Amortization  of  intangible  assets                              0.01            0.01            0.01
    Contract  impairment  (recovery)                                  (0.00)                -            0.00
    Foreign  exchange  loss  (gain)                                        0.02            0.02          (0.08)
    Restructuring  and  supply  chain                                                                                    
      harmonization                                                                    0.00            0.01            0.00
    Impairment  of  asset  held  for  sale                                    -                  -            0.01
    Impairment  (recovery)  of  current  asset                          -          (0.01)          0.02
    Stock  compensation  expense                                            0.00            0.00            0.00
    Gain  on  sale  of  assets                                                          -                  -                  -
    Loss  (gain)  on  repurchase  of  convertible                                                                
      debentures                                                                                -            0.00          (0.03)
                                                                                        ------------------------------
Non-GAAP  net  income  per  common  share  -                                                                      
  basic(i)                                                                            $    0.05      $    0.05      $    0.04
                                                                                                                                                    
GAAP  net  income  (loss)  per  common  share  -                                                                  
  diluted                                                                              $    0.00      $    0.00      $    0.08
    Amortization  of  intangible  assets                              0.01            0.01            0.01
    Contract  impairment  (recovery)                                  (0.00)                -            0.00
    Foreign  exchange  loss  (gain)                                        0.02            0.02          (0.07)
    Restructuring  and  supply  chain                                                                                    
      harmonization                                                                    0.00            0.01            0.00
    Impairment  of  asset  held  for  sale                                    -                  -            0.01
    Impairment  (recovery)  of  current  asset                          -          (0.01)          0.02
    Stock  compensation  expense                                            0.00            0.00            0.00
    Gain  on  sale  of  assets                                                          -                  -                  -
    Loss  (gain)  on  repurchase  of  convertible                                                                
      debentures                                                                                -            0.00          (0.02)
    Effect  of  dilutive  potential  common  shares            0.00            0.00                  -
                                                                                        ------------------------------
Non-GAAP  net  income  per  common  share  -                                                                        
  diluted(i)                                                                        $    0.04      $    0.04      $    0.04
                                                                                                                                                    
Shares  used  to  calculate  non-GAAP  net  income                                                            
  per  common  share  -  basic                                            122,293      122,426      123,942
Shares  used  to  calculate  non-GAAP  net  income                                                            
  per  common  share  -  diluted                                        152,576      152,436      154,297


                                                                                                                  Nine  Months  Ended
                                                                                                            --------------------
                                                                                                                  Dec.  25,    Dec.  26,
                                                                                                                        2009            2008
                                                                                                            --------------------
                                                                                                                                                    
GAAP  net  income                                                                                                                    
                                                                                                                $        835    $  20,432
    Amortization  of  intangible  assets                                                5,431          5,538
    Contract  impairment  (recovery)                                                          715              142
    Foreign  exchange  loss  (gain)                                                          9,598      (11,920)
    Restructuring  and  supply  chain                                                                                    
      harmonization                                                                                      2,573          3,884
    Impairment  of  asset  held  for  sale                                                        -          1,200
    Impairment  (recovery)  of  current  asset                                        (768)        3,000
    Stock  compensation  expense                                                              1,163          1,575
    Gain  on  sale  of  assets                                                                              -            (936)
    Loss  (gain)  on  repurchase  of  convertible                                                                
      debentures                                                                                                316        (3,593)
                                                                                                            --------------------
Non-GAAP  net  income                                                                          $  19,863    $  19,322
                                                                                                                                                    
GAAP  operating  income  (loss)                                                                                          
                                                                                                                $  14,064    $    5,214
    Amortization  of  intangible  assets                                                5,431          5,538
    Contract  impairment  (recovery)                                                          715              142
    Restructuring  and  supply  chain                                                                                    
      harmonization                                                                                      2,573          3,884
    Impairment  of  asset  held  for  sale                                                        -          1,200
    Impairment  (recovery)  of  current  asset                                        (768)        3,000
    Stock  compensation  expense                                                              1,163          1,575
    Gain  on  sale  of  assets                                                                              -            (936)
                                                                                                            --------------------
Non-GAAP  operating  income                                                              $  23,178    $  19,617
                                                                                                                                                    
GAAP  net  income  (loss)  per  common  share  -                                                            
  basic                                                                                                    $    (0.01)  $      0.15
    Amortization  of  intangible  assets                                                  0.04            0.04
    Contract  impairment  (recovery)                                                        0.01            0.00
    Foreign  exchange  loss  (gain)                                                            0.08        (0.10)
    Restructuring  and  supply  chain                                                                                    
      harmonization                                                                                        0.02            0.03
    Impairment  of  asset  held  for  sale                                                        -            0.01
    Impairment  (recovery)  of  current  asset                                      (0.01)          0.02
    Stock  compensation  expense                                                                0.01            0.01
    Gain  on  sale  of  assets                                                                              -          (0.01)
    Loss  (gain)  on  repurchase  of  convertible                                                                
      debentures                                                                                              0.00          (0.03)
                                                                                                            --------------------
Non-GAAP  net  income  per  common  share  -                                                                      
  basic(i)                                                                                              $      0.15    $      0.14
                                                                                                                                                    
GAAP  net  income  (loss)  per  common  share  -                                                                
  diluted                                                                                                $    (0.01)  $      0.13
    Amortization  of  intangible  assets                                                  0.04            0.04
    Contract  impairment  (recovery)                                                        0.00            0.00
    Foreign  exchange  loss  (gain)                                                            0.06          (0.08)
    Restructuring  and  supply  chain                                                                                    
      harmonization                                                                                        0.02            0.02
    Impairment  of  asset  held  for  sale                                                        -            0.01
    Impairment  (recovery)  of  current  asset                                      (0.01)          0.02
    Stock  compensation  expense                                                                0.01            0.01
    Gain  on  sale  of  assets                                                                              -          (0.01)
    Loss  (gain)  on  repurchase  of  convertible                                                                
      debentures                                                                                              0.00          (0.02)
    Effect  of  dilutive  potential  common  shares                                0.02                  -
                                                                                                            --------------------
Non-GAAP  net  income  per  common  share  -                                                                      
  diluted(i)                                                                                            $    0.13    $      0.13
                                                                                                                                                    
Shares  used  to  calculate  non-GAAP  net  income                                                            
  per  common  share  -  basic                                                                122,381      125,589
Shares  used  to  calculate  non-GAAP  net  income                                                          
  per  common  share  -  diluted                                                            152,321      157,136

(i)  Amounts  may  not  add  due  to  rounding.

 

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