Atmel Reports Third Quarter 2008 Financial Results (Revenue down 4%)

Achieves Highest Gross Profit Margins Since 2001

SAN JOSE, Calif., Oct. 29 /PRNewswire-FirstCall/ -- Atmel(R) Corporation (NASDAQ: ATML) today announced financial results for the quarter ended September 30, 2008.

 

 

    --  GAAP Basis:
        --  Revenues of $400.0 Million; Gross Profit Margin of 39.5%; Net Loss
            of $(4.7) Million, or $(0.01) per diluted share
        --  Third Quarter Operating Cash Flows of $67 Million

    --  Non-GAAP Basis:
        --  Revenues of $400.0 Million; Gross Profit Margin of 39.8%; Net
            Income of $42.6 Million, or $0.09 per diluted share After
            Previously Announced One-Time Conversion of European Distributors
            to Sell-Through Model

 

On a GAAP basis which includes a one-time reduction of approximately $19.9 million relating to the previously announced conversion of European distributors to a sell-through model from a sell-in model, revenues for the third quarter of 2008 were $400.0 million. As a result, third quarter revenues decreased 5.0% compared to $420.9 million for the second quarter of 2008 and decreased 4.3% compared to $418.1 million for the third quarter of 2007. Net loss for the third quarter of 2008 totaled $(4.7) million or $(0.01) per diluted share. This compares to net loss of $(4.9) million or $(0.01) per diluted share for the second quarter of 2008 and net income of $16.6 million or $0.03 per diluted share for the year-ago quarter.

Excluding the one-time conversion, management estimates third quarter revenues would have decreased 0.2% sequentially and grew 0.4% compared to the year-ago quarter. Management estimates the one-time revenue adjustment and associated margin impact had the effect of reducing net income by $10.0 million or $0.02 per diluted share for the third quarter of 2008 on both a GAAP and non-GAAP basis.

Non-GAAP net income (including the accounting adjustments for conversion of European distributors to sell-through model) for the third quarter of 2008 totaled $42.6 million or $0.09 per diluted share compared to $17.3 million or $0.04 per diluted share for the second quarter of 2008 and $22.8 million or $0.05 per diluted share for the year-ago quarter. Management estimates non-GAAP net income (excluding the accounting adjustments for conversion of European distributors to sell-through model) for the third quarter of 2008 would have totaled $52.7 million or $0.11 per diluted share.

"Atmel's significantly improved gross profit margins, the highest achieved in seven years, reflect the substantial improvement of our manufacturing operations as well as the strength of our microcontroller and other core businesses," said Steven Laub, Atmel's President and Chief Executive Officer. "During the quarter, we launched a number of new products in our microcontroller business that are receiving strong acceptance from Atmel's customers, and we anticipate continued market share gains. In addition, we took further steps to enhance the Company's manufacturing operations with the announced sale of our wafer fab in Germany and restructuring initiatives in France. While further actions are underway, the benefits we are already realizing from Atmel's transformation are a clear indication that we are making significant progress in unlocking Atmel's full potential and maximizing shareholder value."

Gross profit, as a percent of revenue, was 39.5% for the third quarter of 2008. This compares to gross profit of 36.5% for the second quarter of 2008 and 35.6% for the year-ago quarter. The 300 basis points sequential improvement to gross profit was driven primarily by improved manufacturing utilization as a result of the Company's strategic restructuring initiatives, productivity improvements, and by a stronger mix of higher margin microcontroller and other core products.

Operating loss was $(11.3) million for the third quarter of 2008, or (2.8)% of revenue. This compares to an operating profit of $0.2 million for the second quarter of 2008 and $25.4 million for the third quarter of 2007. Included in the third quarter 2008 operating loss was $41.6 million of charges related to restructuring, asset impairment, acquisition, and grant repayments. Stock-based compensation expense for the third quarter of 2008 was $7.4 million, compared to $6.4 million for the second quarter of 2008 and $4.9 million for the year-ago quarter.

Income tax benefit was $4.1 million for the third quarter of 2008. This compares to an income tax provision of $4.3 million for the second quarter of 2008 and $10.1 million for the third quarter of 2007.

Combined cash balances (cash and cash equivalents plus short-term investments) totaled $420.9 million at the end of the third quarter of 2008, an increase of $45.1 million from the end of the prior quarter and a decrease of $9.0 million from the year-end balance at December 31, 2007. Cash provided from operations totaled approximately $67.0 million for the third quarter of 2008 compared to $50.0 million for the second quarter of 2008 and $45.0 million for the third quarter of 2007.

The Company's effective average exchange rate in the third quarter of 2008 was $1.54 to the euro, compared to $1.56 to the euro in the second quarter of 2008 and $1.36 to the euro in the year-ago period.

 

    Third Quarter 2008 and Recent Operational Highlights
    --  Announced the Sale of the Manufacturing Operation in Heilbronn,
        Germany to TSH(UK) Limited
    --  Initiated Redundancy Plan in France
    --  Achieved highest gross profit margin in seven years and 400 basis
        point improvement since the first quarter of 2008
    --  On track to achieve more than $125 million of cost savings from
        transformation plan in 2008, well in excess of $80 million to
        $95 million target


    Recent Product Highlights
    --  Announced New Family of Touch Screen Solutions Enabling Two Touch
        Gestures for User Interfaces
    --  Announced 6-Channel Touch Controller With LED Driver Adding
        Reliability and Component Reduction
    --  ARM Embedded MPU Voted Top Five Microcontroller by 2008 Portable
        Design China Reader Survey
    --  Awarded Common Criteria EAL4+ Certification for Atmel's Secure 32-bit
        ARM Microcontroller
    --  Introduced a Single-chip Li-ion Battery Management Family Enhancing
        Battery Life and Safety
    --  Introduced World's First 1.8V 8-Megabit Serial Flash for Low Power
        Designs

 

Business Outlook

The Company currently anticipates fourth quarter 2008 revenues will be down 3% to up 3% from the $400.0 million recognized in the third quarter of 2008. Due to the continued actions underway as part of the Company's transformation plan, Atmel expects to see continued improvement in gross profit margins.

Non-GAAP

Non-GAAP net income excludes charges related to restructuring activities, acquisitions, grant repayments, asset impairment charges (recovery) and stock-based compensation, as well as the loss (gain) on the sale of assets and the income tax effect of these excluded 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 2:00 p.m. PT today to discuss the third quarter 2008 financial results. The conference call will be webcast live and can also be monitored by dialing 1-800-374-0405 or 1-706-634-5185. The conference ID number is 70428255 and participants are encouraged to initiate their calls at least 10 minutes in advance of the 2:00 p.m. PT start time to ensure a timely connection. The webcast can be accessed at http://www.atmel.com/ir/ and will be archived for 12 months.

A replay of the October 29, 2008 conference call will be available today at approximately 5:00 p.m. PT and will run 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 70428255.

About Atmel

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