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