-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FvTuctqbjafbPjoC4TlEss2Wl/KZcYMPEc7UMYne+6mkwnVrAtiPgbLgCGCQVgjP /UCKwSpbipN1XwIrfND8xg== 0001157523-07-011664.txt : 20071127 0001157523-07-011664.hdr.sgml : 20071127 20071127164035 ACCESSION NUMBER: 0001157523-07-011664 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20071127 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20071127 DATE AS OF CHANGE: 20071127 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEMTECH CORP CENTRAL INDEX KEY: 0000088941 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 952119684 STATE OF INCORPORATION: DE FISCAL YEAR END: 0127 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06395 FILM NUMBER: 071269295 BUSINESS ADDRESS: STREET 1: 200 FLYNN ROAD CITY: CAMARILLO STATE: CA ZIP: 93012-8790 BUSINESS PHONE: 8054982111 MAIL ADDRESS: STREET 1: 200 FLYNN ROAD CITY: CAMARILLO STATE: CA ZIP: 93012-8790 8-K 1 a5555145.txt SEMTECH CORPORATION 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) November 26, 2007 ------------------------ Semtech Corporation - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware - -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 1-6395 95-2119684 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 200 Flynn Road Camarillo, California 93012-8790 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) 805-498-2111 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01. Entry into a Material Definitive Agreement On November 26, 2007, Semtech Corporation entered into a written Settlement Agreement with National Union Fire Insurance Company of Pittsburgh, PA ("National Union"), under which Semtech will receive $6,500,000 in settlement of claims brought against National Union in a lawsuit regarding insurance coverage for a customer dispute settled in March 2003. The Settlement Agreement provides for payment of the settlement in two installments in fiscal year 2009, contains mutual releases with respect to the lawsuit and underlying insurance claims, and provides for dismissal of the lawsuit. This is the third and final insurance settlement related to the customer dispute. Information on the $1,000,000 first settlement and $2,050,000 second settlement is contained in the Form 8-Ks filed by Semtech on July 7, 2005 and July 19, 2005. Legal expenses from the inception of the litigation through the third quarter of fiscal year 2008 total approximately $5 million. On a net basis, Semtech has recovered approximately $4.5 million of the $12 million paid to the customer. The foregoing description of the terms of the Settlement Agreement does not purport to be complete and is qualified in its entirety by the Settlement Agreement attached as Exhibit 10.1 and incorporated herein by reference. Item 2.02. Results of Operations and Financial Condition. On November 27, 2007, the Company issued a press release announcing preliminary unaudited financial results for its third quarter of fiscal year 2008 that ended October 28, 2007. A copy of the press release is attached hereto as Exhibit 99.1. The information contained in this Item 2.02 (including the exhibit hereto) is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 2.02 (including the exhibit hereto) shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference to this Item 2.02 in such filing. Item 7.01. Regulation FD Disclosure On November 27, 2007, the Company issued a press release containing forward looking statements, including with respect to its future performance and financial results and the effect of the above-mentioned insurance settlement on its future performance and financial results. A copy of the press release is attached hereto as Exhibit 99.1. The information contained in this Item 7.01 (including the exhibit hereto) is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 7.01 (including the exhibit hereto) shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference to this Item 7.01 in such filing. 2 Item 9.01. Financial Statements and Exhibits. (c) Exhibits Exhibit 10.1 Settlement Agreement between National Union Fire Insurance Company of Pittsburgh, PA and Semtech Corporation Exhibit 99.1 Press Release of the Company dated November 27, 2007 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. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and events to differ materially from those projected. 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 28, 2007, in the Company's other filings with the SEC, and in material incorporated therein by reference. Forward-looking statements 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. The Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: November 27, 2007 SEMTECH CORPORATION By: /s/ Emeka Chukwu -------------------------------- Emeka Chukwu Chief Financial Officer 3 INDEX TO EXHIBITS Exhibit Number Description of Document - -------------- ----------------------- 10.1 Settlement Agreement between National Union Fire Insurance Company of Pittsburgh, PA and Semtech Corporation 99.1 Press Release of the Company dated November 27, 2007 4 EX-10.1 2 a5555145ex10-1.txt EXHIBIT 10.1 Exhibit 10.1 SETTLEMENT AGREEMENT -------------------- This Settlement Agreement and Mutual Release ("Agreement") is made by and between Semtech Corporation ("Semtech") and National Union Fire Insurance Company of Pittsburgh, PA ("National Union"). Semtech and National Union each shall be referred to herein individually as a "Party" and collectively as the "Parties." The "Effective Date" of this Agreement is November 5, 2007. RECITALS -------- WHEREAS, National Union provided policies of insurance to Semtech, including commercial umbrella liability insurance policies BE 8712603 (effective 4/01/01 - 4/01/02) and BE 1391856 (effective 4/01/02 - 4/01/03) (collectively, the "National Union Policies"); and WHEREAS, one of Semtech's customers (the "Customer") made a claim against Semtech for damages from allegedly defective computer chips manufactured by Semtech and incorporated into certain of the Customer's products; and WHEREAS, the Customer and Semtech, with National Union's consent, entered into a settlement agreement in or around March 2003 that, inter alia, obligated Semtech to make payments to the Customer totaling $12 million in exchange for a release; and WHEREAS, Semtech sought coverage under the National Union Policies for the Customer's claim, including indemnity coverage for the settlement with the Customer (the "Insurance Claim"); and WHEREAS, on April 8, 2003, Semtech filed a lawsuit against National Union and others in the United States District Court for the Central District of California (the "Court"), entitled Semtech Corporation v. Royal Insurance Company of America, et al., Case No. CV03-2460 GAF (PJWx), seeking declaratory relief and damages for breach of contract (the "Coverage Action"); and WHEREAS, Semtech and National Union desire to settle any disputes between them which they now have relating to the Coverage Action and/or the Insurance Claim; NOW, THEREFORE, in consideration of the mutual promises, covenants, obligations, agreements, and other undertakings set forth herein, and for good and valuable consideration, the sufficiency of which is hereby acknowledged, the Parties agree by and between themselves, each with the other, as follows: AGREEMENT --------- 1. PAYMENT BY NATIONAL UNION. -------------------------- 1.1. On or before February 15, 2008, National Union shall deliver to Semtech a payment of Three Million Two Hundred Fifty Thousand U.S. Dollars ($3,250,000.00). 1.2. On or before March 15, 2008, National Union shall deliver to Semtech a second payment of Three Million Two Hundred Fifty Thousand U.S. Dollars ($3,250,000.00) ("Final Settlement Payment"). 1.3. The foregoing payments, totaling Six Million Five Hundred Thousand U.S. Dollars ($6,500,000.00), shall be referred to herein as the "Settlement Payments." 2. RELEASES. --------- 2.1. Release by Semtech. In consideration of the Settlement Payments, Semtech and each of its parents, subsidiaries, affiliates, predecessors, trustees, successors and assigns (the "Semtech Releasors"), do forever release and absolutely and forever discharge and covenant not to sue National Union and, with respect to claims relating to the National Union Policies and any other insurance policies issued by National Union to Semtech, each of its past, present and future businesses, affiliates, parents, subsidiaries, joint venturers, assigns, trustees, owners, liquidators, principals, officers, directors, shareholders, agents, employees, independent contractors, suppliers, reinsurers, attorneys, and representatives, and each of them (collectively, the "National Union Releasees"), of and from any and all liability, claims, defenses, causes of action, obligations, duties, penalties, attorneys' fees, costs, damages, injuries, or liabilities of any nature whatsoever, whether based on contract, tort, statute or other legal or equitable theory of recovery, whether contingent or liquidated, which the Semtech Releasors have relating to or arising out of the Insurance Claim or the Coverage Action, including, without limitation, any such claims assigned to the Semtech Releasors by American Manufacturers Mutual Insurance Company ("AMM") or -2- Lumbermens Mutual Casualty Company ("LMCC"), any such claims for insurance coverage under the National Union Policies, any such claims for breach of the National Union Policies, any such claims for breach of any implied covenant of good faith and fair dealing, and any such claims for bad faith and violations of the Unfair Practices Act (i.e., Insurance Code ss. 790, et seq.), arising from the Insurance Claim. Notwithstanding anything else in this Section, the Semtech Releasors are not releasing: (1) any reinsurer of any of the National Union Releasees in its capacity as an insurer of any of the Semtech Releasors; or (2) any of the National Union Releasees from any duties or obligations under this Agreement. 2.2. Release by National Union. In exchange for the foregoing release and other valuable consideration, National Union, and each of its respective parents, subsidiaries, affiliates, predecessors, trustees, successors and assigns (the "National Union Releasors"), do forever release and absolutely and forever discharge and covenant not to sue Semtech and, with respect to claims relating to the National Union Policies, each of its past, present and future businesses, affiliates, parents, subsidiaries, joint venturers, assigns, trustees, owners, principals, officers, directors, shareholders, agents, employees, independent contractors, suppliers, insurers (including AMM, LMCC, Royal Insurance Company of America, and their affiliated and related entities, successors and assigns), reinsurers, attorneys, and representatives, and each of them (collectively, the "Semtech Releasees"), of and from any and all liability, claims, defenses, causes of action, obligations, duties, penalties, attorneys' fees, costs, damages, injuries, or liabilities of any nature whatsoever, whether based on contract, tort, statute or other legal or equitable theory of recovery, whether contingent or liquidated, which the National Union Releasors have relating to or arising out of the Insurance Claim or the Coverage Action, including, without limitation, any such claims for breach of the National Union Policies, any such claims for breach of any implied covenant of good faith and fair dealing, any such claims for bad faith, any such claims relating to the Settlement Payments, any such claims relating to the tender or investigation of the Insurance Claim, and any claims for subrogation, indemnity or contribution. Notwithstanding anything else in this Section, the National Union Releasors are not releasing: (1) any reinsurer of any of the Semtech Releasees in its capacity as a reinsurer of any of the National Union Releasors; or (2) any of the Semtech Releasees from any duties or obligations under this Agreement. -3- 2.3. All Claims Included. With respect to the claims specifically released in Sections 2.1 and 2.2 above, the Parties agree that this Agreement includes all claims of every kind and nature relating to the Insurance Claim or the Coverage Action. As it pertains to such released claims, the Parties hereby expressly waive any and all rights and benefits conferred upon them by the provisions of Section 1542 of the California Civil Code and all similar provisions of the laws of any other State, Territory or other jurisdiction. Section 1542 reads in pertinent part: "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor." The Parties each hereby acknowledge that the foregoing waiver of the provisions of Section 1542 of the California Civil Code and all similar provisions of the laws of any other State, Territory or other jurisdiction was separately bargained for and that they would not enter into this Agreement unless it included a broad release of all unknown claims relating to the Insurance Claim or the Coverage Action, including specifically any claim of fraud or misrepresentation in the inducement of this Agreement. The Parties each expressly agree that all release provisions in this Agreement shall be given full force and effect in accordance with each and all of their express terms and provisions, including those terms and provisions relating to unknown, unsuspected or future claims, demands and causes of action. The Parties each assume for themselves the risk of the subsequent discovery or understanding of any matter, fact or law, that if now known or understood, would in any respect have affected his, her or its entering into this Agreement. 3. DISMISSALS. ----------- 3.1. Stipulated Dismissal With Prejudice. Within five (5) business days of its receipt of National Union's executed signature page for this Agreement, Semtech will deliver to counsel for National Union an executed stipulation and proposed order of dismissal under FRCP 41(a) of National Union with prejudice from the Coverage Action without costs, sanctions or attorneys' fees against any of the Parties. National Union shall sign and file such stipulation and proposed order of dismissal in the Court upon receipt of Semtech's acknowledgement that it received the Final Settlement Payment. -4- 4. REPRESENTATIONS AND WARRANTIES. ------------------------------- 4.1. The Parties, and each of them, represent and warrant that in executing this Agreement they rely solely upon their own judgment, belief and knowledge, and the advice and recommendations of their own independently selected counsel, concerning the nature, extent and duration of their rights and claims hereunder and regarding all matters which relate in any way to the subject matter hereof, and that, except as provided herein, they have not been influenced to any extent whatsoever in executing this Agreement by any representations, statements or omissions pertaining to any of the foregoing matters by any Party or by any person representing any Party to this Agreement. The Parties, and each of them, further represent and warrant to each other that he, she or it has made such investigation of the facts pertaining to the settlement, this Agreement and all of the matters pertaining thereto, as he, she or it deems necessary. Each Party assumes the risk of mistake as to facts or law. 4.2. Authority to Extinguish and Assign Claims. Each person executing this Agreement on behalf of any other person or entity does hereby personally represent and warrant to the other Parties that the Party for which he or she is signing has taken all necessary action to approve the making and performance of this Agreement, that he or she is competent to execute this instrument and that he or she is duly authorized, and has the full right and authority, to execute this Agreement on such Party's behalf. 4.3. No Assignment or Transfer of Claims. The Parties, and each of them, warrant and represent to each other that they retain the sole right to and ownership of all rights, title and interest in and to every claim they release or assign herein and that they have not assigned, committed, or permitted, or agreed to any sale, encumbrance, hypothecation or transfer, whether by operation of law or otherwise, or otherwise transferred any interest in any of the claims they release or assign herein to any other person or entity. 5. CONFIDENTIALITY. ---------------- 5.1. The Parties agree that the terms and provisions of this Agreement shall be, and remain, confidential as provided in this Section 5.1. Accordingly, neither this Agreement, nor any of its terms, shall be disclosed, published or -5- in any way used in any proceeding, except: (a) in any action or proceeding where one of the Parties is seeking enforcement of this Agreement; (b) as required by law, regulation or court order; (c) to any member, subsidiary, affiliate, associated, or parent companies of the Parties and their counsel; (d) by written consent of the Parties hereto, such consent not to be unreasonably withheld; (e) to current, former, or prospective insurers of Semtech or the insurers, reinsurers or prospective insurers and reinsurers of National Union; or (f) disclosures determined necessary by a Party to comply with state and/or federal regulatory requirements, and to respond to direct inquiries related to such disclosures. 6. MISCELLANEOUS. -------------- 6.1. Headings. Section headings are for convenience only and shall not be construed to change or affect the text of this Agreement. 6.2. Integration. This Agreement contains the entire agreement between the Parties relating to the settlement of the Insurance Claim and the Coverage Action, and all prior agreements, understandings, representations and statements, oral or written, relating to those matters are merged into this Agreement. 6.3. Governing Law. This Agreement is governed by California law, without regard to California's conflict of law principles. 6.4. Survival of Representations and Warranties. All representations and warranties set forth in this Agreement shall be deemed continuing and shall survive the Effective Date of this Agreement. 6.5. Further Assurances. The Parties agree to execute such other documents and take such actions as may reasonably be necessary to further the purpose of this Agreement. 6.6. No Admissions. None of the Parties have made, nor shall they be deemed to have made, any admission of any kind by their negotiation of or entry into this Agreement. Neither this Agreement nor any provision contained herein shall be construed by any person as an admission by any of the Parties of any liability for, related to or arising out of any of the claims released herein or any other claims of any other nature. The Parties are entering into this Agreement for the purpose of resolving disputed issues between them and to avoid the costs and risks of litigation. -6- 6.7. Counterpart Originals. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which shall constitute one agreement. Facsimile signatures shall be considered the same as originals. 6.8. Binding Effect. This Agreement binds and inures to the benefit of the Parties, their assigns, heirs, administrators, executors, representatives, beneficiaries and successors, and each of them. 6.9. Modification. This Agreement cannot be modified or amended except by written agreement signed on behalf of each of the Parties. 6.10. Waiver. No portion of this Agreement may be waived except by written agreement of the Parties. A waiver of one provision is not a waiver of any other. Failure to enforce any provision of this Agreement shall not waive that provision or any other. 6.11. Construction. Any rule of construction to the effect that ambiguities in a writing are to be construed against the drafting party does not apply in the interpretation of this Agreement, or any portion hereof, which has actively been negotiated and drafted by counsel for each of the Parties. 6.12. Severability. Provided the remainder of this document does not frustrate the purpose and intent of the law and the Parties in entering into this Agreement, in the event that any portion of this Agreement shall be judicially determined to be invalid or unenforceable to any extent, the same shall to that extent be deemed severable from this Agreement and the invalidity or unenforceability thereof shall not affect the validity and enforceability of the remaining portion of this Agreement. 7. DECLARATIONS ------------ BY SIGNING THIS AGREEMENT, EACH PARTY ACKNOWLEDGES AND DECLARES: (A) THAT THE PARTY HAS FULLY AND CAREFULLY READ THE AGREEMENT; (B) THAT THE PARTY CLEARLY -7- UNDERSTANDS THAT THE AGREEMENT IS A COMPLETE AND FINAL SETTLEMENT; (C) THAT THE PARTY CLEARLY UNDERSTANDS THE MEANING, PURPOSE, AND INTENT OF EACH PROVISION OF THE AGREEMENT, AND THAT EACH PROVISION IS CLEAR AND DEFINITE; (D) THAT SEMTECH ON THE ONE HAND, AND NATIONAL UNION ON THE OTHER, HAVE NOT RELIED UPON ANY REPRESENTATION OF THE OTHER NOT CONTAINED HEREIN IN AGREEING TO THE TERMS OF THIS AGREEMENT; AND (E) THAT THE PARTY HAS BEEN REPRESENTED BY COMPETENT LEGAL COUNSEL WITH RESPECT TO NEGOTIATING, EXPLAINING, AND ENTERING INTO THIS AGREEMENT. IN WITNESS WHEREOF, the Parties, and each of them, hereby execute this Settlement Agreement and Mutual Release in consideration of the mutual promises made herein, as of the dates indicated below. APPROVED AND AGREED TO: SEMTECH CORPORATION Dated: 11/26/2007 By: /s/ M. Maheswaran ----------------- Its: President and CEO NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA Dated: 11/26/2007 By: /s/ Megan C. Watt ----------------- Its: Vice President -8- EX-99.1 3 a5555145ex991.txt EXHIBIT 99.1 Exhibit 99.1 Semtech Announces Fiscal Year 2008 Third Quarter Results -- Q3 Orders Highest in Semtech History -- Q3 Revenue Highest in Semtech History -- Revenue up 17% over Previous Quarter -- 85% Sequential Increase in GAAP EPS CAMARILLO, Calif.--(BUSINESS WIRE)--November 27, 2007--Semtech Corporation (NASDAQ: SMTC), a leading producer of high performance analog and mixed-signal semiconductors, today reported un-audited financial results for its third quarter of fiscal year 2008 that ended October 28, 2007. Net sales for the third quarter of fiscal year 2008 were $78.6 million, up 23.3 percent from the third quarter of fiscal year 2007 and up 17.2 percent when compared to the second quarter of fiscal year 2008. Net income for the third quarter of fiscal year 2008, computed in accordance with U.S. generally accepted accounting principles (GAAP), was $16.0 million or 24 cents per diluted share. GAAP net income was $6.3 million or 9 cents per diluted share in the third quarter of fiscal year 2007 and was $9.0 million or 13 cents per diluted share in the second quarter of fiscal year 2008. Gross profit margin for the third quarter of fiscal year 2008 was 54.6 percent compared to 54.2 percent in the third quarter of fiscal year 2007 and 55.2 percent in the second quarter of fiscal year 2008. The company's tax rate for the fiscal third quarter was favorably impacted by a beneficial shift in regional income and favorable tax treatment in Switzerland due to the weakening US dollar in relation to the Swiss Franc. On a GAAP and Non-GAAP basis, these factors contributed approximately 5 cents to fully diluted earnings per share in the third quarter. Non-GAAP net income for the third quarter of fiscal year 2008 was $19.4 million or 29 cents per diluted share. Non-GAAP net income was $14.1 million or 19 cents per diluted share in the third quarter of fiscal year 2007 and was $12.5 million or 18 cents per diluted share in the second quarter of fiscal year 2008. Non-GAAP gross profit margin for the third quarter of fiscal year 2008 was 55.0 percent. Non-GAAP gross profit margin for the third quarter of fiscal year 2007 was 54.7 percent and 55.4 percent in the second quarter of fiscal year 2008. Non-GAAP results exclude the impact of stock based compensation, the amortization of acquisition-related intangibles, expenses associated with a now settled litigation against an insurer, the gain on sale of an unused parcel of land, and expenses related to the Company's now completed investigation into its historical stock option practices, and now completed restatement of past financial statements. Non-GAAP results also exclude the impact of ongoing stock option related matters including an inquiry by the SEC, a federal grand jury subpoena, and derivative and class action litigation. New orders exceeded shipments, resulting in a book-to-bill ratio above one. Demand was strongest in the areas of computing, industrial and handheld equipment. Operating expenses for the third quarter of fiscal year 2008 included approximately $0.8 million related to the SEC inquiry, the grand jury subpoena, the derivative and class action litigation, and other matters related to historical stock option practices. In the second quarter of fiscal year 2008 these expenses were $0.9 million. Semtech had $265.8 million of cash, cash equivalents and marketable securities as of October 28, 2007, which was up from $234.4 million at the end of the second quarter of fiscal year 2008. Mohan Maheswaran, Semtech's President and Chief Executive Officer, commented, "Semtech had a great third quarter performance resulting in the highest quarterly revenue in the company's 47 year history. In addition, the very strong sequential increase in GAAP EPS demonstrates that the strategic and execution improvements we have put in place are resulting in the operating leverage we anticipated." The results announced today are preliminary, as they are subject to customary quarterly independent auditor review procedures. As such, these results are subject to revision until the Company files its Quarterly report on Form 10-Q for the third quarter of fiscal year 2008. Fourth Quarter Outlook Semtech estimates net sales for the fourth quarter, which ends January 27, 2008, will be flat to down four percent compared to the third quarter. GAAP earnings for the fourth quarter of fiscal year 2008 are expected to be 25 to 26 cents per diluted share including the impact of the insurance recovery discussed below. Non-GAAP earnings for the fourth quarter are expected to be 24 to 25 cents per diluted share. Non-GAAP earnings for the fourth quarter are prior to stock-based compensation expense, net impact of insurance litigation settlement, amortization of intangibles and certain legal expenses. Settlement of Insurance Litigation Yesterday, Semtech entered into a written settlement agreement under which it will receive $6.5 million from an insurer in settlement of litigation brought by Semtech to recover $12 million it paid in fiscal year 2004 to resolve a dispute with a customer. Details of the settlement are contained in the Form 8-K Semtech filed today. This settlement with the third, and final, defendant fully resolves the litigation and is payable in cash in two installments in fiscal year 2009. The entire amount of the third settlement is expected to be recognized as income in the fourth quarter of fiscal year 2008. Net of related legal expenses, the settlement is expected to contribute approximately 7 cents to GAAP fully diluted earnings per share in the fourth quarter. Information on the first two settlements, which totaled slightly over $3 million, is contained in Semtech's Form 8-Ks filed on July 7, 2005 and July 19, 2005. Legal expenses from the inception of the litigation through the third quarter of fiscal year 2008 have been expensed as incurred and total approximately $5 million. On a net basis, Semtech has recovered approximately $4.5 million of the $12 million paid to the customer. About 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 margin, net income and earnings per diluted share. All of these non-GAAP measures exclude stock-based compensation, acquisition related amortization of intangibles, and other items detailed above. 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, and reconciliations of GAAP results for the third quarter of fiscal year 2008 and 2007, respectively and the second quarter of fiscal 2008, appear with the financial statements later in 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. About Semtech Semtech Corporation is a leading supplier of analog and mixed-signal semiconductors used in a wide range of computer, industrial and communication applications. Forward-Looking and Cautionary Statements This release 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. Some forward-looking statements may be identified by use of terms such as "expects," "anticipates," "intends," "estimates," "believes," "projects," "should," "will," "plans" and similar words. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include worldwide economic and political conditions, the timing and duration of semiconductor market upturns or downturns, demand for cellular phones, personal computers and automated test equipment, demand for semiconductor devices in general, demand for the Company's products in particular, competitors' actions, supply from key third-party silicon wafer foundries and assembly contractors, manufacturing costs and yields, relations with strategic customers, and risks associated with the businesses of major customers. In addition to considering these risks and uncertainties, 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 28, 2007, in the Company's other filings with the SEC, and in material incorporated therein by reference. In light of the risks and uncertainties inherent in forecasts of revenue and gross margin and in other projected matters, forward-looking statements 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. The Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. SEMTECH CORPORATION GAAP CONSOLIDATED STATEMENTS OF INCOME (Table in thousands - except per share amount) Three Months Ended Nine Months Ended ----------------------- ----------------------- Oct 28, Oct 29, Oct 28, Oct 29, 2007 2006 2007 2006 ----------- ----------- ----------- ----------- Q3 2008 Q3 2007 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net sales $78,556 $63,711 $206,170 $194,575 Cost of sales 35,695 29,188 93,066 86,778 ----------- ----------- ----------- ----------- Gross profit 42,861 34,523 113,104 107,797 Operating costs and expenses: Selling, general and administrative 17,764 19,952 53,888 52,588 Product development and engineering 11,206 9,628 31,792 30,519 Acquisition related items 276 276 827 916 Insurance recovery litigation legal expenses 416 32 915 298 ----------- ----------- ----------- ----------- Total operating costs and expenses 29,662 29,888 87,422 84,321 Operating income 13,199 4,635 25,682 23,476 Interest and other income, net 3,055 3,509 12,312 9,592 ----------- ----------- ----------- ----------- Income before taxes 16,254 8,144 37,994 33,068 Provision/(credit) for taxes 284 1,798 5,071 6,535 ----------- ----------- ----------- ----------- Net income $15,970 $ 6,346 $ 32,923 $ 26,533 =========== =========== =========== =========== Earnings per share: Basic $ 0.25 $ 0.09 $ 0.49 $ 0.37 Diluted $ 0.24 $ 0.09 $ 0.47 $ 0.36 Weighted average number of shares: Basic 63,726 72,298 67,692 72,388 Diluted 66,347 73,718 69,612 74,095 SEMTECH CORPORATION CONSOLIDATED BALANCE SHEETS (Table in thousands) Oct 28, January 28, 2007 2007 ----------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $220,908 $162,674 Temporary investments 35,675 125,979 Receivables, less allowances 31,821 25,588 Inventories 24,219 20,493 Deferred income taxes 2,732 3,495 Other current assets 8,953 17,698 ----------- ----------- Total Current Assets 324,308 355,927 Property, plant and equipment, net 35,055 40,573 Long-term investments 9,253 49,827 Other assets 7,497 10,166 Goodwill 32,541 32,687 Other Intangibles 3,457 4,284 Deferred income taxes 35,100 28,190 ----------- ----------- Total Assets $447,211 $521,654 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 14,331 $ 9,909 Accrued liabilities 17,188 14,950 Deferred revenue 1,452 2,151 Deferred income taxes 1,483 1,500 Income taxes payable 1,497 1,974 ----------- ----------- Total Current Liabilities 35,951 30,484 Other long-term liabilities 7,682 7,450 Accrued Taxes 5,266 - Deferred income taxes - Non Current 2,522 2,539 Shareholders' equity 395,790 481,181 ----------- ----------- Total Liabilities & Equity $447,211 $521,654 =========== =========== SEMTECH CORPORATION Supplemental Information - Notes to Consolidated GAAP Statements of Income (Table in thousands - except per share amounts) FAS 123R requiring the expensing of stock based compensation was adopted starting in the quarter ended April 30, 2006. GAAP based results include pre-tax stock based compensation charges as follows: Three Months Nine Months Ended Ended --------------- --------------- Oct 28, Oct 29, Oct 28, Oct 29, 2007 2006 2007 2006 ------- ------- ------- ------- Stock Option Expense Q3 2008 Q3 2007 - -------------------------------------- ------- ------- ------- ------- Cost of sales $ 379 $ 351 $ 871 $ 857 Selling, general and administrative $2,627 2,470 $ 6,705 7,892 Product development and engineering $ 994 942 $ 2,848 3,202 ------- ------- ------- ------- Total stock-based compensation $4,000 $3,763 $10,424 $11,951 ======= ======= ======= ======= SEMTECH CORPORATION Financial bridge - GAAP to Non-GAAP Statements of Income (Table in thousands - except per share amounts) RECONCILIATION OF GAAP TO NON-GAAP GROSS PROFIT: Three Months Ended Nine Months Ended ----------------------- ----------------------- Oct 28, Oct 29, Oct 28, Oct 29, 2007 2006 2007 2006 ----------- ----------- ----------- ----------- Q3 2008 Q3 2007 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Gross profit, as reported (GAAP) $42,861 $34,523 $113,104 $107,797 Adjustments to GAAP gross profit: Stock-based compensation expense 379 351 871 857 ----------- ----------- ----------- ----------- Non-GAAP Gross profit $43,240 $34,874 $113,975 $108,654 =========== =========== =========== =========== RECONCILIATION OF GAAP TO NON-GAAP NET INCOME: Three Months Ended Nine Months Ended ----------------------- ----------------------- Oct 28, Oct 29, Oct 28, Oct 29, 2007 2006 2007 2006 ----------- ----------- ----------- ----------- Q3 2008 Q3 2007 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net Income, as reported (GAAP) $15,970 $ 6,346 $32,923 $26,533 Adjustments to GAAP net income: Acquisition related items 276 276 827 916 Insurance related legal expenses 416 32 915 298 Option and restatement related expenses 787 4,893 3,738 7,166 Stock based compensation expense 4,000 3,763 10,424 11,951 Land Sale - - (1,300) - Associated tax effect (2,069) (1,253) (5,036) (2,344) ----------- ----------- ----------- ----------- Net Income on a Non- GAAP basis $19,380 $14,057 $42,491 $44,520 =========== =========== =========== =========== Diluted GAAP earnings per share $ 0.24 $ 0.09 $ 0.47 $ 0.36 Adjustments per above $ 0.05 $ 0.10 $ 0.14 $ 0.24 ----------- ----------- ----------- ----------- Diluted non-GAAP earnings per share $ 0.29 $ 0.19 $ 0.61 $ 0.60 CONTACT: Semtech Corporation Todd German, Investor Relations, 805-480-2004 -----END PRIVACY-ENHANCED MESSAGE-----