Atmel Reports Fourth Quarter and Full Year 2008 Financial Results

Microcontroller Revenues Grew 14% in 2008 Full Year Gross Profit Margins Reach Highest Level Since 2000

SAN JOSE, Calif., Feb. 4 /PRNewswire-FirstCall/ -- Atmel(R) Corporation (NASDAQ: ATML) today announced financial results for the fourth quarter and fiscal year ended December 31, 2008.

Revenues for the fourth quarter of 2008 were $334.6 million, a 16.3% decrease compared to $400.0 million for the third quarter of 2008 and a 21.4% decrease compared to $425.6 million for the fourth quarter ended December 31, 2007. Revenues for the full year 2008 were $1.57 billion compared to $1.64 billion for 2007 and were impacted by the slowdown in demand, particularly of non-volatile memory and automotive product shipments in the fourth quarter. During 2008, Atmel exited the RF-CDMA foundry business which resulted in a revenue decline of approximately $50 million from 2007. Our core Microcontroller business continued to experience double-digit revenue growth, rising 14% in 2008, compared to 2007, with 32-bit microcontrollers growing 30%.

Net loss, on a GAAP basis, for the fourth quarter of 2008 totaled $(24.4) million or $(0.05) per diluted share. This compares to a net loss of $(4.7) million or $(0.01) per diluted share for the third quarter of 2008 and net income of $1.7 million or $0.00 per diluted share for the year-ago quarter. Net loss for the full year 2008 was $(27.2) million or $(0.06) per diluted share compared to net income of $47.9 million or $0.10 per diluted share for 2007.

Non-GAAP net income for the fourth quarter of 2008 totaled $4.8 million or $0.01 per diluted share compared to net income of $42.6 million or $0.09 per diluted share for the third quarter of 2008 and $19.8 million or $0.04 per diluted share for the year-ago quarter. For the full year 2008, non-GAAP net income was $78.0 million or $0.17 per diluted share compared to $77.8 million or $0.16 per diluted share for 2007.

"The actions we have taken to focus on core technologies and optimize Atmel's manufacturing operations have supported the microcontroller revenue growth and gross profit improvement we realized this year, despite the challenging macroeconomic environment," said Steven Laub, Atmel's President and Chief Executive Officer. "While the global recessionary slowdown is impacting demand across the entire semiconductor industry, Atmel continues to gain market share with its microcontroller products driven by our proprietary AVR(R) Flash-based MCUs. Having initiated our restructuring program ahead of the global downturn, Atmel is well positioned to drive profitable growth as demand recovers, while continuing to deliver innovative products to our customers and value to our shareholders."

Gross profit, as a percent of revenue, was 39.7% for the fourth quarter of 2008, the highest level achieved since the first quarter of 2001. This compares to gross profit of 39.5% for the third quarter of 2008 and 35.2% for the year-ago quarter. For the full year 2008, gross profit was 37.7%, a 230 basis points improvement over the 35.4% reported for 2007.

Operating loss was $(18.2) million for the fourth quarter of 2008, or 5.5% of revenue. This compares to an operating loss of $(11.3) million for the third quarter of 2008 and an operating profit of $6.4 million for the fourth quarter of 2007. Included in the fourth quarter 2008 operating loss was $12.2 million of net charges related to restructuring, gain on sale of assets, acquisition and grant repayments.

For the full year 2008, operating loss was $(13.9) million, compared to operating profit of $51.7 million reported for 2007. Included in the full year operating results were net charges of $71.0 million for 2008 and $13.6 million for 2007, respectively, related to restructuring, asset impairment, acquisition, gain on sale of assets and grant repayments.

Stock-based compensation expense was $9.1 million for the fourth quarter of 2008, compared to $7.4 million for the third quarter of 2008 and $5.1 million for the year-ago quarter. For the full year 2008, stock-based compensation was $29.1 million, compared to $16.7 million for the full year 2007.

Income tax provision was $3.5 million for the fourth quarter of 2008. This compares to an income tax benefit of $4.1 million for the third quarter of 2008 and an income tax provision of $5.8 million for the fourth quarter of 2007. For the full year 2008, the income tax provision was $7.0 million, compared to $7.8 million for 2007.

Combined cash balances (cash and cash equivalents plus short-term investments) totaled $440.6 million at the end of the fourth quarter of 2008, an increase of $19.7 million from the end of the prior quarter and an increase of $10.7 million from the fourth quarter of 2007. Cash provided from operations totaled approximately $30.7 million for the fourth quarter of 2008 compared to $67.2 million for the third quarter of 2008 and $90.4 million for the fourth quarter of 2007.

The Company's effective average exchange rate in the fourth quarter of 2008 was approximately $1.35 to the euro, compared to $1.54 to the euro in the third quarter of 2008 and $1.43 to the euro in the year-ago period. A $0.01 decrease in the dollar/euro exchange rate increases operating income by approximately $0.5 million each quarter.

 

    Fourth Quarter 2008 and Recent Operational Highlights
     --   Achieved highest full year gross profit margin since 2000, 450 basis
          point improvement during 2008
     --   Completed the sale of the Heilbronn, Germany manufacturing operation
          to TSH(UK) Limited
     --   Completed the previously announced headcount reduction activities in
     --   France with an expected annual savings of $14 million
     --   Implemented cost reduction actions in North America with an expected
          annual savings of $18 million
     --   Opened new Chinese design center and regional sales operations in
          Shanghai


    Recent Product Highlights
     --   Awarded Product of the Year by Electronic Products Magazine for
          XMEGA(TM) Microcontroller
     --   Awarded EDN China Innovation Award for XMEGA(TM) Microcontroller
     --   Expanded QTouch product offering with a Touch-Library for AVR
          microcontrollers
     --   Launched New Family of Secure Microcontrollers for Machine-to-
          Machine Communication Modules
     --   Acquired MeshNetics(R) ZigBee Products and Intellectual Property
          Rights from LuxLabs BVI

 

Business Outlook

In light of the uncertainty and limited visibility in the current macroeconomic environment, the Company is not providing revenue guidance at this time. For internal purposes, we are planning first quarter 2009 revenues to be approximately $290 million.

Non-GAAP

Non-GAAP net income excludes charges related to restructuring activities, acquisitions, grant repayments, asset impairment charges (recovery), gain on sale of assets, and stock-based compensation, as well as pension benefit related to fab sale, distributor bad debt expense, unsolicited M&A expense 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.

Conference Call

Atmel will hold a teleconference at 2:00 p.m. PT today to discuss the fourth quarter and full year 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 81448211 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 February 4, 2009 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 81448211.

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.

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