Microcontroller Revenues Reach New Record Rise 9% Sequentially and 29% Compared to the Year-Ago Quarter
Revenues for the second quarter of 2008 were $420.9 million, a 2.4% increase compared to $411.2 million for the first quarter of 2008 and a 4.1% increase compared to $404.2 million for the second quarter ended June 30, 2007. Microcontrollers, a core business, continued to deliver solid revenue growth rising 9% sequentially and 29% compared to the year-ago quarter, driven by the Company's proprietary AVR(R), standard ARM(R) and touch sensing products.
Net loss for the second quarter of 2008 totaled $(4.9) million or $(0.01) per diluted share. This compares to net income of $6.8 million or $0.02 per diluted share for the first quarter of 2008 and net income of $0.7 million or $0.00 per diluted share for the year-ago quarter.
Non-GAAP net income for the second quarter of 2008 totaled $17.3 million or $0.04 per diluted share compared to $13.3 million or $0.03 per diluted share for the first quarter of 2008 and $1.3 million or $0.00 per diluted share for the year-ago quarter. Non-GAAP net income excludes charges (credits) related to restructuring activities, acquisitions, grant repayments, and stock-based compensation, as well as the loss (gain) on 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.
"We are pleased to have reached the upper end of our revenue guidance in spite of the challenging macroeconomic environment," said Steven Laub, Atmel's President and Chief Executive Officer. "In addition to achieving record microcontroller revenues, gross profit continued to increase. The restructuring initiatives and manufacturing disciplines we've implemented are enabling Atmel to drive technological leadership with innovative and cost- effective products that offer the best opportunity for profitable growth."
Gross profit, as a percent of revenue, was 36.5% for the second quarter of 2008. This compares to gross profit of 35.5% for the first quarter of 2008 and 35.0% for the year-ago quarter. Gross profit for the second quarter of 2008 was influenced by a favorable mix of higher margin core products as well as improved wafer fab utilization following the closure of the North Tyneside, United Kingdom manufacturing facility.
Operating profit was $0.2 million for the second quarter of 2008, or 0.1% of revenue, which includes charges of $16.5 million primarily related to restructuring and charges resulting from the Quantum Research Group acquisition completed in March of this year. This compares to an operating profit of $15.4 million for the first quarter of 2008 and $7.1 million for the second quarter of 2007. Included in the prior period operating results were net charges of $0.7 million for the first quarter related to the North Tyneside restructuring and Quantum Research acquisition and a benefit of $2.6 million for the second quarter of 2007 for restructuring related adjustments. Stock-based compensation expense was $6.4 million for the second quarter of 2008, compared to $6.3 million for the first quarter of 2008 and $3.3 million for the year-ago quarter.
Income tax provision was $4.3 million for the second quarter of 2008. This compares to an income tax provision of $3.2 million for the first quarter of 2008 and $7.1 million for the second quarter of 2007.
Combined cash balances (cash and cash equivalents plus short-term investments) totaled $375.8 million at the end of the second quarter of 2008, an increase of $39.0 million from the end of the prior quarter and a $54.2 million decrease from $429.9 million at December 31, 2007. Cash provided from operations totaled approximately $50.0 million for the second quarter of 2008 compared to cash used in operations of $40.2 million for the first quarter of 2008 and $1.5 million for the second quarter of 2007. In the first quarter of 2008, cash used in operations included approximately $54.0 million of cash used for repayment of grants and for restructuring charges that required cash payments related to the closure of North Tyneside. Also, in the first quarter of 2008, the Company received approximately $82.0 million of proceeds from the sale of North Tyneside fabrication equipment, which was classified as proceeds from investing activities.
The Company's effective average exchange rate in the second quarter of 2008 was approximately $1.56 to the euro, compared to $1.47 to the euro in the first quarter of 2008 and $1.35 to the euro in the year-ago period. A $0.01 increase in the dollar/euro exchange rate reduced operating income by approximately $0.5 million during the second quarter of 2008, which was an improvement over the $1.0 million impact to operating income at the end of 2007 as a result of the dollar/euro exchange rate.
Second Quarter 2008 and Recent Highlights
-- Achieved Highest Level of Gross Profit Since the First Quarter of 2001
-- Appointed Stephen Cumming as Vice President Finance and Chief Financial
Officer
-- Introduced a Touch Controller for Slider and Buttons with Integrated
LED Control and GPIO Functions
-- Introduced a Family of AVR Microcontrollers for Automotive LIN
Networking Applications
-- Introduced picoPower tinyAVR Microcontrollers for Battery-based and
Cost-sensitive Applications
-- Won Reader's Choice Award in Indian Electronics Magazine for AVR
Microcontrollers
-- Introduced 800/900 MHz IEEE 802.15.4 Compliant Transceiver for Zigbee
-- Won the Electron d'Or Award for CAP Customizable Microcontroller
Business Outlook
To better manage distribution resources, on July 1, 2008 Atmel implemented a change in revenue recognition with regards to its independent distributors in Europe converting from a sell-in to a sell-through revenue model. As a result, the Company expects that there will be a one time revenue reduction of approximately $28 million to $34 million to third quarter revenues. Including this one time accounting adjustment, third quarter 2008 revenues are expected to be down 3% to 7% sequentially. Exclusive of this change and consistent with business seasonality and macro economic trends, the Company anticipates third quarter 2008 revenues would be up 1% to 4% on a sequential basis.
Atmel is continuing to evaluate ways to safeguard its ability to compete in the market. In this context, the French management is commencing a consultation procedure with the works councils in France in relation to potential redundancies in the operations in Rousset and Nantes, France. Atmel is also continually reviewing potential changes in its business and asset portfolio throughout its worldwide operations, including those located in Europe in order to enhance its overall competitiveness and viability.
Conference Call
Atmel will hold a teleconference at 2:00 p.m. PT today to discuss the second 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 55624651 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 July 30, 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 55624651.
About Atmel
Atmel is a worldwide leader in the design and manufacture of microcontrollers, advanced logic, mixed-signal, nonvolatile memory and radio frequency (RF) components. Leveraging one of the industry's broadest intellectual property (IP) technology portfolios, Atmel provides the electronics industry with complete system solutions focused on consumer, industrial, security, communications, computing and automotive markets.
Safe Harbor for Forward-Looking Statements
