Zilog Announces First Quarter Fiscal 2010 Financial Results
[ Back ]   [ More News ]   [ Home ]
Zilog Announces First Quarter Fiscal 2010 Financial Results

SAN JOSE, Calif., July 30 /PRNewswire-FirstCall/ -- Zilog, Inc. (NASDAQ: ZILG), a trusted supplier of application specific, embedded system-on-chip (SoC) solutions for industrial and consumer markets, today reported financial results for its first quarter fiscal 2010 ended June 27, 2009.

Net sales from continuing operations for the fiscal 2010 first quarter were $7.2 million, a sequential increase of 3 percent and a year over year decrease of 25 percent. The sequential increase exceeded the previously announced guidance range and follows quarterly sequential declines in the December, 2008 and March, 2009 fiscal quarters. The sequential decline in the two previous quarters reflects the worldwide fall in demand for end products as a result of the global economic crisis. On February 18, 2009 the Company sold its universal remote control and secured transaction processor businesses. In accordance with FASB No. 144, the comparative financial statements for its first fiscal quarter ended June 28, 2008 have been restated to reflect these sold businesses as discontinued operations.

GAAP net income for the fiscal first quarter ended June 27, 2009 was $0.4 million, or 2 cents per share, as compared to GAAP net income of $12.1 million in the previous fiscal quarter, or 71 cents per share. Net income for the fiscal 2010 first quarter includes a credit to other income of $1.0 million, or 6 cents per share, reflecting the sale and assignment to a third party of five patents and their associated intellectual property rights. Net income for the fiscal 2009 fourth quarter ended March 31, 2009 included a gain on sale of the two businesses of $21.6 million, partially offset by certain special and one-time charges of $3.5 million. The GAAP net income for Q1 fiscal 2010 compares to a GAAP net loss of $1.7 million for the first quarter fiscal 2009 which included special charges of $0.6 million reflecting costs associated with consolidation and manufacturing outsource activities.

"Our opening quarter of the 2010 fiscal year highlighted profitability, sequential sales growth, increased cash and a positive book-to-bill ratio. Following the sale of the businesses in February, we have revitalized the company making it leaner with a significantly lower breakeven sales level. Coupled with a laser-focus on our new product development and our esteemed industry brand from 35 years of microcontroller history, we believe we are well positioned as the global economy recovers," said Darin G. Billerbeck, Zilog's president and chief executive officer.

"While the current global economy continues to pose challenges and uncertainties, we are excited by our continued development of solutions for power management and sensing applications including the use of wireless. We are also energized by our recently announced 3.3 volt Serial Communications Controller product, which extends further power saving capabilities to customers who have long been pleased with our classic SCC portfolio," stated Billerbeck.

The company reported cash, cash equivalents and long-term investments of $34.7 million at June 27, 2009, compared to $33.3 million at March 31, 2009. Net cash provided by continuing operating activities was $2.0 million for the fiscal 2010 first quarter, as compared to $1.4 million for the first quarter in the prior fiscal year and net cash used in continuing operating activities of $8.1 million in the prior fiscal quarter. On a non-GAAP basis, adjusted EBITDA from continuing operations, as defined below, was positive $0.7 million for the fiscal 2010 first quarter, as compared to negative $2.2 million in the first fiscal quarter a year ago and negative $1.5 million in the prior fiscal quarter.

"In our first fiscal quarter, we generated positive adjusted EBITDA and positive net income including the sale and assignment of certain patent rights. As the market rapidly deteriorated after September 2008, our quick and decisive actions to sell two businesses and resize our core business resulted in a significantly lower Adjusted EBITDA breakeven sales level, including a 25 percent sequential reduction this quarter," said Perry J. Grace, Zilog's executive vice President and chief financial officer.

"We have continued to diligently manage our working capital, resulting in a fiscal Q1 increase in cash, cash equivalents and long term investments of $1.4 million and an expectation of a further increase again this quarter. In addition, our balance sheet strength allows us to better determine our strategic options as we move forward, regardless of the direction the global economy may take," stated Grace.

The Company expects net sales for its fiscal 2010 second quarter ending September 26, 2009 to be consistent with or up to 5 percent higher than the fiscal quarter ended June 27, 2009. Additionally, the Company expects cash, cash equivalents and long-term investments to be approximately $36 million to $37 million at September 26, 2009. This includes $1.0 million in cash received in July, 2009 for the patent sale and assignment and the expected receipt in August, 2009 of $1.55 million or 50 percent of the escrow funds from the February sale of the two businesses.

NON-GAAP FINANCIAL INFORMATION (Unaudited)

The Company may make reference to certain Non-GAAP financial measures. Management believes that these Non-GAAP measures are useful measures of operating performance and liquidity because they may exclude the impact of certain items, such as amortization of intangible assets, stock-based compensation, depreciation, non-operating interest, income taxes and special charges. However, these Non-GAAP measures should be considered in addition to, not as a substitute for, or superior to, net income (loss) and net cash provided by (used in) operating activities, or other financial measures prepared in accordance with GAAP.

                                             Three Months Ended
                             Jun. 27,  Mar. 31,  Dec. 27,  Sep. 27,  Jun. 28,
                               2009      2009      2008      2008      2008
                                               (in thousands)
    Reconciliation of
     Non-GAAP Net Loss
     to GAAP Net Loss

    Non-GAAP net income
     (loss) from continuing
     operations                $394   ($1,776)   ($2,871)  ($2,563)  ($2,397)
    Non-GAAP adjustments on
     Continuing operations:
      Special charges and
       credits                  135     3,478      1,696       554       590
      Amortization of
       intangible assets          -       174        209       209       209
      Non-cash stock-based
       compensation COS          19        21         44        30        42
      Non-cash stock-based
       compensation R&D          24       (24)       126        47        72
      Non-cash stock-based
       compensation SG&A        183       201        297       211       257
     Total non-GAAP
      adjustments               361     3,850      2,372     1,051     1,170
    GAAP Net loss from
     Continuing operations      $33   ($5,626)   ($5,243)  ($3,614)  ($3,567)

Non-GAAP Net Income (Loss) from continuing operations (Unaudited)

Non-GAAP net income (loss) from continuing operations (Non-GAAP net income (loss)) excludes special charges and non-cash charges relating to the amortization of intangible assets and stock-based compensation. Following the sale of the two businesses in February, 2009, Non-GAAP net income (loss) was restated to exclude amounts related to the Company's discontinued operations. We believe that Non-GAAP net income (loss) is a useful measure as it excludes certain special charge items as well as certain non-cash charges, which facilitates a comparison of the Company's operating performance. However, this Non-GAAP measure should be considered in addition to, not as a substitute for, or superior to, the net loss measured in accordance with GAAP.

                                             Three Months Ended
                             Jun. 27,  Mar. 31,   Dec. 27,  Sep. 27,  Jun. 28,
                               2009      2009       2008      2008      2008
                                               (in thousands)
    Reconciliation of
     Net Loss and Cash
     Flows From Operating
     Activities to EBITDA

    Reconciliation of net
     loss to EBITDA:
       Net income (loss)
        from continuing
        operations              $33   ($5,626)   ($5,243)   ($3,614)  ($3,567)
       Depreciation and
        amortization            318       452        466        478       436
       Interest income           (3)       (4)       (24)       (49)      (70)
       Provision (benefit)
        for income taxes         40        (2)        67         62        54
    EBITDA from continuing
     operations                $388   ($5,180)   ($4,734)   ($3,123)  ($3,147)

    Reconciliation of EBITDA
     to net cash provided by
     (used in) continuing
     operating activities:

        EBITDA                 $388   ($5,180)   ($4,734)   ($3,123)  ($3,147)
        Provision (benefit)
         for income taxes       (40)        2        (67)       (62)      (54)
        Interest income           3         4         24         49        70
        Non-cash stock-based
         compensation           226       198        467        288       371
        Loss on disposition
         of operating assets      -       986         11          -        35
        Changes in other
         operating assets
         and liabilities      1,457    (4,119)      (571)      (577)    4,124
     Net cash provided by
      (used in) continuing
      operating activities   $2,034   ($8,109)   ($4,870)   ($3,425)   $1,399

Non-GAAP EBITDA (Unaudited)

Management believes that Non-GAAP EBITDA ("EBITDA"), that is Earnings or loss Before Interest, Taxes, Depreciation and Amortization, is a useful measure of financial performance. Following the sale of the two businesses in February, 2009, EBITDA was restated to exclude amounts related to the Company's discontinued operations. We believe that the disclosure of EBITDA helps investors more meaningfully evaluate our liquidity position by the elimination of non-cash related items such as depreciation and amortization. We believe that our investors regularly use EBITDA as a measure of the liquidity of our business. Our management uses EBITDA as a supplement to cash flows from operations as a way to assess the cash generated from our business available for capital expenditures and the servicing of other requirements including working capital.

                                           Three Months Ended
                             Jun. 27,  Mar. 31,  Dec. 27,  Sep. 27,  Jun. 28,
                               2009     2009       2008      2008      2008
                                              (in thousands)
    Reconciliation of Net
     Loss and Cash Flows
     From Operating
     Activities to
     Adjusted EBITDA

    Reconciliation of net
     income (loss)to
     Adjusted EBITDA:
        Net income (loss)
         from continued
         operations             $33   ($5,626)   ($5,243)   ($3,614)  ($3,567)
        Depreciation and
         amortization           318       452        466        478       436
        Interest income          (3)       (4)       (24)       (49)      (70)
        Provision (benefit)
         for income taxes        40        (2)        67         62        54
        Special charges and
         credits                135     3,478      1,696        554       590
        Non-cash stock-based
         compensation           226       198        467        288       371
     Adjusted EBITDA           $749   ($1,504)   ($2,571)   ($2,281)  ($2,186)

    Reconciliation of
     Adjusted EBITDA to net
     cash provided by
     (used in) continuing
     operating activities:
       Adjusted EBITDA,
        continuing operations  $749   ($1,504)   ($2,571)   ($2,281)  ($2,186)
       Special charges and
        credits                (135)   (3,478)    (1,696)      (554)     (590)
       Provision (benefit)
        for income taxes        (40)        2        (67)       (62)      (54)
       Interest income            3         4         24         49        70
       Loss on disposition
        of operating assets       -       986         11          -        35
       Changes in other
        operating assets
        and liabilities       1,457    (4,119)      (571)      (577)    4,124
     Net cash provided by
      (used in) continuing
      operating activities   $2,034   ($8,109)   ($4,870)   ($3,425)   $1,399

Non-GAAP Adjusted EBITDA (Unaudited)

EBITDA reflects our Earnings or loss Before Interest, Taxes, Depreciation and Amortization. Additionally, management uses separate "Adjusted EBITDA" calculations for purposes of determining certain employees' incentive compensation and, subject to meeting specified Adjusted EBITDA amounts. Adjusted EBITDA, as we define it, excludes interest, income taxes, effects of changes in accounting principles and non-cash charges such as depreciation, amortization, in-process research and development, and stock-based compensation expense. It also excludes cash and non-cash charges associated with reorganization items and special charges and credits, which represent operational restructuring charges, including asset write-offs, employee termination costs, relocation costs and lease termination costs. Adjusted EBITDA also excludes changes in operating assets and liabilities, which are included in net cash provided by (used in) operating activities. Following the sale of the two businesses in February, 2009, Adjusted EBITDA was restated to exclude amounts related to the Company's discontinued operations. Our management uses Adjusted EBITDA as a supplement to cash flows from operations as a way to assess the cash generated from our business available for capital expenditures and the servicing of other requirements including working capital. This Non-GAAP Adjusted EBITDA measure allows management to monitor cash generated from the operations of the business. However, this Non-GAAP measure should be considered in addition to, not as a substitute for, or superior to, net loss and net cash provided or used in operating activities prepared in accordance with GAAP.

About Zilog, Inc.

Zilog is a trusted supplier of application specific, embedded system-on-chip (SoC) solutions for the industrial and consumer markets. From its roots as an award-winning architect in the microprocessor and microcontroller industry, Zilog has evolved its expertise beyond core silicon to include SoCs, single board computers, application specific software stacks and development tools that allow embedded designers quick time to market in areas such as energy management, monitoring and metering and motion detection. For more information, visit http://www.zilog.com/.

EZ80ACCLAIM!, Zilog, Z8, Z80, eZ80, Z8 ENCORE!, Encore!XP and Zneo are registered trademarks of Zilog, Inc. in the United States and in other countries.

Other product and or service names mentioned herein may be trademarks of the companies with which they are associated.

Cautionary Statements

This release contains forward-looking statements (including those related to our expectations for our September 2009 quarter and our position as the global economy recovers) relating to expectations, plans or prospects for Zilog, Inc. that are based upon the current expectations and beliefs of Zilog's management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For example, weakness in our 8-bit classic or embedded flash products could negatively impact our September 2009 fiscal quarter. Non receipt of escrow amounts payable to us in our September 2009 fiscal quarter related to the February, 2009 sale of the two businesses could negatively impact our cash projections. Changes in requirements for supporting the Transition Services Agreement with Maxim Integrated Products, Inc. could impact our cash projections. Additionally, our ability to attract and retain technical employees may be negatively impacted by uncertainties relating to potential future changes in the ownership and control of the Company which may make it difficult to execute on our long-term strategy.

Design wins are defined as the projected one-year net sales for a customer's new product design for which the Company has received at least a $1,000 purchase order for its devices. Design win estimates are determined based on projections from customers and may or may not be realized. Whether or not Zilog achieves anticipated revenue from design wins can be dependent on the timeliness of customers to ramp and whether or not the project in question is as commercially successful as the customers anticipated. Notwithstanding changes that may occur with respect to customer matters relating to the forward-looking statements, Zilog does not expect to, and disclaims any obligation to update such statements until release of its next quarterly earnings announcement or in any other manner. Zilog, however, reserves the right to update such statement, or any portion thereof, at any time for any reason.

The financial information presented herein is unaudited and is subject to change as a result of subsequent events or adjustments, if any, arising prior to the filing of the Company's Form 10-Q for the period ended June 27, 2009.

For a detailed discussion of these and other cautionary statements, please refer to the risk factors discussed in filings with the U.S. Securities and Exchange Commission ("SEC"), including but not limited to, the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2009, and any subsequently filed reports. All documents also are available through the SEC's Electronic Data Gathering Analysis and Retrieval system (EDGAR) at www.sec.gov or from the Company's website at www.Zilog.com.

    Contact:
    Daniel Francisco
    Francisco Group
    Zilog Communications
    (916) 812-8814

Zilog, Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

June 27, March 31,

2009 2009

ASSETS

Current assets:

Cash and cash equivalents $33,826 $32,230

Accounts receivable, net 2,203 1,698

Receivables under transition

services agreement 1,484 1,696

Escrow receivable, sold business 3,100 3,100

Patent assignment receivable 1,000 -

Inventories 3,341 4,022

Deferred tax asset 10 10

Prepaid expenses and other current assets 949 1,199

Current assets associated with discontinued

operations - 960

Total current assets 45,913 44,915

Long term investments 900 1,100

Property, plant and equipment, net 2,349 2,347

Goodwill 2,211 2,211

Other assets 1,126 1,079

Total assets $52,499 $51,652

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short term debt $ - $346

Accounts payable 2,456 1,939

Payables under transition services agreement 3,401 275

Income taxes payable 196 195

Accrued compensation and employee benefits 1,433 1,349

Other accrued liabilities 3,094 3,828

Deferred income 6,853 8,024

Current liabilities associated with

discontinued operations - 1,256

Total current liabilities 17,433 17,212

Deferred tax liability 10 10

Other non-current tax liabilities 2,826 2,804

Total liabilities 20,269 20,026

Stockholders' equity:

Common stock 186 186

Additional paid-in capital 127,666 127,436

Treasury stock (7,563) (7,563)

Other comprehensive income 195 173

Accumulated deficit (88,254) (88,606)

Total stockholders' equity 32,230 31,626

Total liabilities and stockholders' equity $52,499 $51,652

Zilog, Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data and percentages)

Three Months Ended

Jun. 27, Jun. 28,

2009 2008

Net sales from continuing operations $7,235 $9,604

Cost of sales 4,520 5,259

Gross margin 2,715 4,345

Gross margin % 38% 45%

Operating expenses:

Research and development 1,031 1,733

Selling, general and administrative 2,481 5,492

Special charges 135 590

Amortization of intangible assets - 209

Total operating expenses 3,647 8,024

Operating loss from continuing operations (932) (3,679)

Other income:

Interest income 3 70

Other income, net 1,002 96

Income (loss) from continuing operations

before provision for income taxes 73 (3,513)

Provision for income taxes 40 54

Net income (loss) from continuing operations $33 $(3,567)

Net income from discontinued operations 320 1,826

Net income (loss) $353 $(1,741)

Basic and diluted net income (loss) from

continuing operations per share 0.00 (0.21)

Basic and diluted net income from

discontinued operations per share 0.02 0.11

Basic and diluted net income (loss) per share $0.02 $(0.10)

Weighted-average shares used in

computing basic net income

(loss) per share 17,230 16,948

Weighted-average shares used in

computing diluted net income

(loss) per share 17,230 16,972

Zilog, Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended

Jun. 27, Jun. 28,

2009 2008

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) from continuing operations $33 $(3,567)

Adjustments to reconcile net income (loss) to net

cash provided by operating activities:

Depreciation and amortization 318 436

Disposition of operating assets - 34

Non-cash stock-based compensation 226 371

Amortization of fresh-start intangible assets - 208

Changes in operating assets and liabilities:

Accounts receivable, net (505) 392

Receivable under transition services agreement 212 -

Patent assignment receivable (1,000) -

Inventories 681 344

Prepaid expenses and other current and

non-current assets 225 (57)

Accounts payable 517 1,688

Payable under transition services agreement 3,126 -

Accrued compensation and employee benefits 84 736

Deferred income (1,171) (416)

Accrued and other current and non-current

liabilities (712) 1,230

Net cash provided by continuing operating

activities 2,034 1,399

Net cash provided by (used in) discontinued

operating activities 24 (972)

CASH FLOWS FROM INVESTING ACTIVITIES:

Redemption of long term investments 200 425

Investment in long term securities - -

Capital expenditures (320) (359)

Net cash provided by (used in) investing

activities (120) 66

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short term debt - 665

Payments on short term debt (346) -

Proceeds from issuance of common stock under

employee stock purchase and stock option plans 4 45

Net cash provided by (used in) financing activities (342) 710

Net cash provided by discontinued financing

activities - 1

Increase in cash and cash equivalents 1,596 1,204

Cash and cash equivalents at beginning of period 32,230 16,625

Cash and cash equivalents at end of period 33,826 17,829

Zilog, Inc.

SELECTED UNAUDITED TRENDED FINANCIAL INFORMATION

(Amounts in thousands except percentages, selected

key metrics and per share amounts)

Three Months Ended

Jun. 27, Mar. 31, Dec. 27, Sep. 27, Jun. 28,

2009 2009 2008 2008 2008

Sales & Expenses

Information:

Net sales from

continuing operations $7,235 $7,044 $9,035 $10,474 $9,604

Cost of sales 4,520 4,379 6,091 6,086 5,259

Gross margin 2,715 2,665 2,944 4,388 4,345

Gross margin % 38% 38% 33% 42% 45%

Operating expenses:

Research and

development 1,031 1,118 1,657 1,757 1,733

Selling, general and

administrative 2,481 3,442 4,696 5,723 5,492

Special charges and

credits 135 3,478 1,696 554 590

Amortization of

intangible assets - 174 209 209 209

Total operating

expenses 3,647 8,212 8,258 8,243 8,024

Operating loss from

Continuing operations (932) (5,547) (5,314) (3,855) (3,679)

Interest income 3 4 24 49 70

Other income (expense) 1,002 (85) 114 254 96

Income (loss) from

continuing operations

before provision for

income taxes 73 (5,628) (5,176) (3,552) (3,513)

Provision (benefit) for

income taxes 40 (2) 67 62 54

Net income (loss) from

continuing operations 33 (5,626) (5,243) (3,614) (3,567)

Net income (loss) from

discontinued operatons 320 (3,831) (425) 2,058 1,826

Gain (loss) from sale of

discontinued oprations,

net of tax - 21,606 - - -

Net income (loss) $353 $12,149 ($5,668) ($1,556) ($1,741)

Basic and diluted net

income (loss) from

continuing operations

per share - ($0.33) ($0.31) ($0.21) ($0.21)

Basic and diluted net

income (loss) from

discontinued operations

per share $0.02 ($0.22) ($0.02) $0.12 $0.11

Basic and diluted net

income from gasin on

sale of discontinued

operations per share - $1.26 - - -

Basic and diluted net

income (loss) per share $0.02 $0.71 ($0.33) ($0.09) ($0.10)

Weighted average basic

shares 17,230 17,171 17,071 16,949 16,948

Weighted average

diluted shares 17,230 17,171 17,071 16,949 16,972

Net Sales Information:

Net Sales - by channel

Direct $1,685 $1,849 $1,625 $2,404 $1,629

Distribution 5,550 5,195 7,410 8,070 7,975

Total net sales $7,235 $7,044 $9,035 $10,474 $9,604

Net Sales - by region

Americas $2,840 $2,975 $3,569 $3,783 $3,961

Asia (including Japan) 3,349 2,571 4,046 4,899 3,563

Europe 1,046 1,498 1,420 1,792 2,080

Total net sales $7,235 $7,044 $9,035 $10,474 $9,604

Selected Key Metrics

(as defined in our Form

10-Q and 10-K)

Days sales outstanding 27 22 28 22 17

Net sales to inventory

ratio (annualized) 8.7 7.0 8.0 7.5 5.9

Current ratio 2.6 2.6 1.5 1.6 1.5

Distributor weeks of

inventory 12 18 13 12 12

Other Selected Financial

Metrics

Depreciation and

amortization $318 $452 $466 $478 $436

Stock based compensation $226 $198 $467 $288 $371

Capital expenditures $320 $107 $82 $78 $359

Cash and cash

equivalents $33,826 $32,230 $13,560 $16,899 $17,829

Long term investments $900 $1,100 $1,300 $1,450 $1,500

Cash and long term

investments $34,726 $33,330 $14,860 $18,349 $19,329

Short term debt - $346 $693 $1,039 $1,385

Cash and long term

investments, net

of debt $34,726 $32,984 $14,168 $17,310 $17,944

EBITDA, adjusted $749 ($1,504) ($2,571) ($2,281) ($2,186)

SOURCE Zilog, Inc.

Web site: http://www.zilog.com/