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Semtech Announces Third Quarter of Fiscal Year 2012 Results and Expansion of Stock Repurchase Plan


CAMARILLO, Calif.--(BUSINESS WIRE)-- Semtech Corporation (Nasdaq: SMTC), a leading supplier of analog and mixed-signal semiconductors, today reported unaudited financial results for its third quarter of fiscal year 2012, which ended October 30, 2011. The company also announced that its Board of Directors approved increasing the existing stock repurchase authorization by $50 million. Prior to the increase, the company had $20 million remaining in the authorization implemented in March 2008 and amended in August 2011.

Net revenue for the third quarter of fiscal year 2012 was $123.9 million, up 0.7 percent from the third quarter of fiscal year 2011 and down 4.8 percent from the second quarter of fiscal year 2012.

Net income for the third quarter of fiscal year 2012, computed in accordance with U.S. generally accepted accounting principles (GAAP), was $27.0 million or 40 cents per diluted share. This compares to GAAP net income of $16.1 million or 25 cents per diluted share in the third quarter of fiscal year 2011 and GAAP net income of $27.1 million or 40 cents per diluted share in the second quarter of fiscal year 2012. Net income for the third quarter of fiscal year 2012 was impacted by several discrete items, including reorganization charges, expenses associated with evaluating potential acquisition targets, and the impairment of acquired intangible assets, offset by a tax benefit from the release of certain reserves for uncertain tax positions.

GAAP gross profit margin for the third quarter of fiscal year 2012 was 59.2 percent compared to 60.0 percent in the third quarter of fiscal year 2011 and 60.4 percent in the second quarter of fiscal year 2012.

To facilitate the complete understanding of comparable financial performance between periods, Semtech also presents performance results net of certain non-cash and one-time items. Semtech's non-GAAP results exclude the following items:

Excluding the items listed above, non-GAAP net income for the third quarter of fiscal year 2012 was $35.0 million or 52 cents per diluted share. Non-GAAP net income was $30.4 million or 47 cents per diluted share in the third quarter of fiscal year 2011 and was $33.2 million or 49 cents per diluted share in the second quarter of fiscal year 2012. The release of reserves for uncertain tax positions benefited non-GAAP net income by approximately 5 cents per diluted share in the third quarter of fiscal year 2012.

Non-GAAP gross profit margin for the third quarter of fiscal year 2012 was 59.4 percent. Non-GAAP gross profit margin for the third quarter of fiscal year 2011 was 60.2 percent and 60.6 percent in the second quarter of fiscal year 2012.

Semtech had $317.5 million of cash, cash equivalents and marketable securities as of October 30, 2011, which is net of $30 million used to repurchase 1.4 million shares of stock in the quarter. This compares to $313.6 million in cash, cash equivalents and marketable securities at the end of the second quarter of fiscal year 2012.

Mohan Maheswaran, Semtech's President and Chief Executive Officer, stated, "During the third quarter of fiscal year 2012, we posted revenue in line with our prior expectations and carefully managed expenses in light of the overall softness in orders. In Q3 we posted a record number of design wins and released 25 new products which are positive indicators for future growth. As we enter our seasonally weakest quarter, we see continued macro-economic uncertainty. In addition we also expect our Q4 results to be adversely impacted by the recent floods in Thailand."

The results announced today are preliminary, as they are subject to customary quarterly review procedures by the Company's independent registered public accounting firm. As such, these results are subject to revision until the Company will have filed its quarterly report on Form 10-Q for the third quarter of fiscal year 2012.

Fourth Quarter of Fiscal Year 2012 Outlook

Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements prepared in accordance with GAAP, this release includes a non-GAAP presentation of gross profit, net income and earnings per diluted share and free cash flow. To provide additional insight into the Company's fourth quarter outlook, this release includes a presentation of forward-looking non-GAAP earnings per diluted share. All of these non-GAAP measures exclude stock-based compensation, amortization of acquired intangible assets, and the other items detailed above. The non-GAAP measures for the third quarter of fiscal year 2012 also include reorganization charges and transaction and other expenses associated with evaluating potential acquisition targets. These non-GAAP measures are provided to enhance the user's overall understanding of the Company's comparable financial performance between periods. In addition, the Company's management generally excludes such items in managing and evaluating the performance of the business. A further discussion of these non-GAAP financial measures can be found above. Reconciliations of GAAP results for the third quarter of fiscal years 2012 and 2011 and the second quarter of fiscal year 2012, as well as a reconciliation of forward-looking earnings per diluted share for the fourth quarter of fiscal year 2012, appear with the financial statements included with this release. These additional financial measures should not be considered substitutes for any measures derived in accordance with GAAP and may be inconsistent with similar measures presented by other companies.

Forward-Looking and Cautionary Statements

This report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than historical information or statements of current condition and relate to matters such as future financial performance, future operational performance, the anticipated impact of specific items on future earnings, and our plans, objectives and expectations. These forward-looking statements are identified by the use of such terms and phrases as "intends," "goal," "estimate," "expect," "project," "plans," "anticipates," "should," "will," "designed to," "believe," and other similar expressions which generally identify forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and events to differ materially from those projected. Important factors that could cause actual results to differ materially include, but are not limited to: the continuation and/or pace of key trends considered to be main contributors to the Company's growth, such as demand for increased network bandwidth, demand for increasing energy efficiency in the Company's products or end use applications of the products, demand for increasing miniaturization of electronic components; shifts in demand among target customers, and other comparable changes in projected or anticipated markets; adequate supply of components and materials from our suppliers, and of our products from our third-party manufacturers, to include disruptions due to natural causes or disasters, or related extraordinary weather events; the Company's ability to forecast and achieve anticipated revenues and earnings estimates in light of periodic economic uncertainty, to include impacts arising from European and global economic dynamics; the Company's ability to manage expenses to achieve anticipated amounts; and the amount and timing of expenditures for capital equipment deemed necessary or advisable by the Company. Additionally, forward-looking statements should be considered in conjunction with the cautionary statements contained in the "Risk Factors" section and elsewhere in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2011, in the Company's other filings with the SEC, and in material incorporated therein by reference. In light of the significant uncertainties inherent in the forward-looking information included herein, any such forward-looking information should not be regarded as representations by the Company that its objectives or plans will be achieved or that any of its operating expectations or financial forecasts will be realized. Investors are cautioned not to place undue reliance on any forward-looking information contained herein. The Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About Semtech

Semtech Corporation is a leading supplier of analog and mixed-signal semiconductors for high-end consumer, computing, communications and industrial equipment. Products are designed to benefit the engineering community as well as the global community. The company is dedicated to reducing the impact it, and its products, have on the environment. Internal green programs seek to reduce waste through material and manufacturing control, use of green technology and designing for resource reduction. Publicly traded since 1967, Semtech is listed on the NASDAQ Global Select Market under the symbol SMTC. For more information, visit http://www.semtech.com.

Semtech and the Semtech logo are marks of Semtech Corporation.

 
SEMTECH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Table in thousands - except per share amount)
           
Three Months Ended Nine Months Ended
October 30, July 31, October 31, October 30, October 31,
  2011     2011     2010   2011   2010
Q3 2012 Q2 2012 Q3 2011 FY 2012 FY 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Net sales $ 123,944 $ 130,254 $ 123,125 $ 376,569 $ 338,232
Cost of sales   50,537     51,534     49,304   150,588   139,932
Gross profit 73,407 78,720 73,821 225,981 198,300
 
Operating costs and expenses:
Selling, general and administrative 25,110 22,481 35,501 74,296 86,767
Product development and engineering 20,489 22,228 18,400 61,242 51,107
Intangible amortization   4,573     2,103     2,406   8,778   7,216
Total operating costs and expenses   50,172     46,812     56,307   144,316   145,090
 
Operating income 23,235 31,908 17,514 81,665 53,210
Interest and other income (expense), net   729     (117 )   3   172   508
Income before taxes 23,964 31,791 17,517 81,837 53,718
Provision for taxes (benefits)   (3,015 )   4,653     1,412   5,138   7,149
Net income $ 26,979   $ 27,138   $ 16,105 $ 76,699 $ 46,569
 
Earnings per share:
Basic $ 0.41 $ 0.41 $ 0.26 $ 1.18 $ 0.75
Diluted $ 0.40 $ 0.40 $ 0.25 $ 1.14 $ 0.73
 
Weighted average number of shares:
Basic 65,440 65,547 62,493 65,180 61,950
Diluted 67,314 68,186 64,555 67,539 63,723
 

     
SEMTECH CORPORATION
CONSOLIDATED BALANCE SHEETS
(Table in thousands)
 
October 30, Jan 30,
  2011   2011
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 183,140 $ 119,019
Temporary investments 109,006 112,237
Accounts receivable, net 59,614 50,610
Inventories 47,152 47,719
Deferred tax assets 13,369 13,369
Other current assets   14,090   10,744
Total current assets 426,371 353,698
 
Property, plant and equipment, net 68,512 56,778
Long-term investments 25,314 27,086
Goodwill 129,651 129,651
Other intangible assets, net 68,945 74,823
Other assets   21,919   17,907
Total assets $ 740,712 $ 659,943
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 36,599 $ 29,629
Accrued liabilities 26,155 55,842
Deferred revenue 4,623 5,020
Deferred tax liabilities   3,334   3,334
Total current liabilities 70,711 93,825
 
Deferred tax liabilities - non-current 18,889 11,120
Other long-term liabilities 25,728 26,383
 
Shareholders' equity   625,384   528,615
Total liabilities & shareholders' equity $ 740,712 $ 659,943
 

     
SEMTECH CORPORATION

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Table in thousands)
 
 
Nine Months Ended
October 30, October 31,
  2011     2010  
 
Cash flows from operating activities:
Net income $ 76,699 $ 46,569
Adjustments to reconcile net income to net cash provided by operations
Depreciation and amortization 13,614 12,267
Impairment of acquired intangible assets 2,470 -
Deferred income taxes 5,209 1,909
Stock-based compensation 17,149 22,925
Excess tax benefits on stock based compensation (2,327 ) (281 )
Loss on disposition of property, plant, and equipment (6 ) 69
Changes in assets and liabilities   (39,240 )   (18,852 )
Net cash provided by operations activities 73,568 64,606
 
 
Cash flows from investing activities:
Purchase of available-for-sale investments (90,331 ) (148,802 )
Proceeds from sales and maturities of available-for-sale investments 95,122 84,961
Proceeds from sales of property, plant, and equipment 18 76
Purchase of property, plant, and equipment (18,007 ) (18,016 )
Purchase of intangible assets   (3,000 )   -  
Net cash used in investing activities (16,198 ) (81,781 )
 
 
Cash flows from financing activities:
Excess tax benefits on stock based compensation 2,327 281
Proceeds from issuance of common stock 35,005 22,218
Repurchase of outstanding common stock   (30,579 )   (2,714 )
Net cash provided by financing activities 6,753 19,785
Effect of foreign currency translation on cash and cash equivalents   (2 )   1  
 
Net increase in cash and cash equivalents 64,121 2,611
Cash and cash equivalents at beginning of period 119,019 80,598
   
Cash and cash equivalents at end of period $ 183,140   $ 83,209  
 

 
SEMTECH CORPORATION
SUPPLEMENTAL INFORMATION - NOTES TO CONSOLIDATED GAAP STATEMENTS OF INCOME
(Tables in thousands - except per share amounts)
           
Three Months Ended Nine Months Ended
October 30, July 31, October 31, October 30, October 31,
  2011     2011     2010     2011     2010  
Stock-based Compensation Expense Q3 2012 Q2 2012 Q3 2011 FY 2012 FY 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cost of sales $ 238 $ 195 $ 305 $ 712 $ 1,477
Selling, general and administrative 2,757 2,666 5,206 11,041 15,512
Product development and engineering   2,046     1,760     1,908     5,396     5,936  
Total stock-based compensation expense $ 5,041   $ 4,621   $ 7,419   $ 17,149   $ 22,925  
 
 
Three Months Ended Nine Months Ended
October 30, July 31, October 31, October 30, October 31,
  2011     2011     2010     2011     2010  
Gross Profit - Reconciliation GAAP to Non-GAAP Q3 2012 Q2 2012 Q3 2011 FY 2012 FY 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
GAAP gross profit $ 73,407 $ 78,720 $ 73,821 $ 225,981 $ 198,300
Adjustments to GAAP gross profit:
Stock-based compensation expense 238 195 305 712 1,477
Fair value adjustment related to acquired inventory   -     -     -     -     2,311  
Non-GAAP gross profit $ 73,645   $ 78,915   $ 74,126   $ 226,693   $ 202,088  
 
 
Three Months Ended Nine Months Ended
October 30, July 31, October 31, October 30, October 31,
  2011     2011     2010     2011     2010  
Net Income - Reconciliation GAAP to Non-GAAP Q3 2012 Q2 2012 Q3 2011 FY 2012 FY 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
GAAP net income $ 26,979 $ 27,138 $ 16,105 $ 76,699 $ 46,569
 
Adjustments to GAAP net income:
Stock-based compensation expense 5,041 4,621 7,419 17,149 22,925
Transaction and other expenses 921 - - 921 -
Legal expenses related to stock option matters 8 55 10,613 194 13,301
Fair value adjustment related to acquired inventory - - - - 2,311
Amortization of acquired intangible assets 2,103 2,103 2,406 6,308 7,216
Impairment of acquired intangible assets 2,470 - - 2,470 -
Reorganization costs   1,981     -     -     1,981     -  
Total before taxes 12,524 6,779 20,438 29,023 45,753
Associated tax effect   (4,460 )   (703 )   (6,116 )   (7,502 )   (13,123 )
Total of supplemental information net of taxes   8,064     6,076     14,322     21,521     32,630  
Non-GAAP net income $ 35,043   $ 33,214   $ 30,427   $ 98,220   $ 79,199  
 
Diluted GAAP earnings per share $ 0.40 $ 0.40 $ 0.25 $ 1.14 $ 0.73
Adjustments per above   0.12     0.09     0.22     0.31     0.51  
Diluted non-GAAP earnings per share $ 0.52   $ 0.49   $ 0.47   $ 1.45   $ 1.24  
 
 
Three Months Ended Nine Months Ended
October 30, July 31, October 31, October 30, October 31,
  2011     2011     2010     2011     2010  
Tax Impact Associated With Supplemental Information Q3 2012 Q2 2012 Q3 2011 FY 2012 FY 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Adjustments to GAAP net income:
Stock-based compensation expense $ 2,798 $ 150 $ 2,881 $ 4,757 $ 6,619
Transaction and other expenses 156 - - 156 -
Legal expenses related to stock option matters 8 23 3,235 75 4,114
Fair value adjustment related to acquired inventory - - - - 878
Amortization of acquired intangible assets 674 530 - 1,690 1,512
Impairment of acquired intangible assets 256 - - 256 -
Reorganization costs   568     -     -     568     -  
Total of associated tax effect $ 4,460   $ 703   $ 6,116   $ 7,502   $ 13,123  
 
 
Three Months Ended
October 30, July 31, October 31,
  2011     2011     2010  
Q3 2012 Q2 2012 Q3 2011
(Unaudited) (Unaudited) (Unaudited)
Free Cash Flow:
 
Cash Flow from Operations 32,982 34,245 29,579
Net Capital Expenditure   (2,735 )   (7,790 )   (7,649 )
Free Cash Flow:   30,247     26,455     21,930  
 
Q4 FY12 Earnings Per Share Guidance
GAAP to Non-GAAP Reconciliation (net of tax)
Low High
GAAP EPS 0.18 0.24
 
Stock based compensation expense 0.07 0.07
Amortization of acquired intangibles 0.02 0.02
   
Non-GAAP EPS $ 0.27   $ 0.33  
 

Semtech Corporation
Linda Brewton, 805-480-2004
webir@semtech.com

Source: Semtech Corporation

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