ATML

Atmel Corporation (ATML)

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Atmel Corp. (ATML)

Q4 2009 Earnings Call

February 08, 2010 5:00 pm ET

Executives

Robert Pursel – Director of Investor Relations

Stephen Cumming - VP of Finance and CFO

Steve Laub - President and CEO

Analysts

Suji De Silva - Kaufman Bros.

Doug Freedman – Broadpoint

Steve Eliscu - UBS

Anthony Staff – Craig Hallum

James Schneider – Goldman Sachs

Craig Berger - FBR Capital Markets

Presentation

Operator

Good afternoon. My name is Bonnie and I’ll be your conference operator today. At this time I would like to welcome everyone to the Atmel fourth quarter 2009 earnings conference call. (Operator Instructions). Mr. Pursel, you may begin your conference.

Robert Pursel

Good afternoon and thank you for joining us for Atmel’s fourth quarter and fiscal year 2009 earnings conference call. A copy of the press release issued today is available on our investor relations website. A 48-hour telephone replay of this call will be available after 5:00 pm today Pacific Time, and the webcast will be archived on the company website for one year. Access information is provided in today’s press release.

Joining us for the call today are Steve Laub, Atmel’s President and CEO, and Stephen Cumming, Vice President of Finance and Chief Financial Officer. Stephen will begin the call with a review of our fourth quarter financial results, and Steve will then provide additional color on the business. At the conclusion of Steve’s remarks, Stephen will discuss our financial guidance for the first quarter of 2010, and then we’ll open the call for questions.

During the course of this conference call, we may make forward-looking statements about Atmel’s business outlook, including statements regarding our expectations for revenues, target gross and operating margins, as well as cost savings for 2010 and beyond.

Our forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the Safe Harbor discussion found in today’s press release.

During the call, we will also discuss non-GAAP financial measures. The non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in today’s press release.

I would now like to turn the call over to Stephen Cumming for a discussion of our fourth quarter financial results.

Stephen Cumming

Let me provide some details about our statement of operations. Revenues for the fourth quarter increased 8% sequentially to $344 million, exceeding the top end of our guidance range of up 3-7% and up 3% as compared to revenues of $335 million in Q4 2008. For the full year 2009, sales were $1.22 billion compared to $1.57 billion for 2008. Gross profit as a percent of revenue was 37%, a 590 basis point improvement from the 31.1% we reported last quarter, exceeding our guidance range of 33% to 35%. Driving the gross profit expansion this quarter was a more favorable mix of higher margin microcontroller products as well as improved factory utilization at our Colorado fab.

R&D expense was $56 million for the fourth quarter, compared to $51 million for the prior quarter and $62 million the year-ago period. The sequential increase in spending reflects a more normalized quarter compared to Q3 which had the seasonal effect of the European summer holidays and our continued focus on R&D investments in core high growth products.

SG&A expense was $59 million, compared to $57 million for the third quarter and $77 million for the same period last year. The slight increase in SG&A spending this quarter is primarily a result of higher selling expenses associated with the increased revenue this quarter. Total operating expense for the fourth quarter was $114 million, within our guidance range of $112 million, plus or minus $2 million.

Included in operating results was $11 million of stock-based compensation expense, of which $2 million was related to manufacturing, $4 million to R&D, and approximately $5 million to SG&A.

Operating loss was $72 million for the fourth quarter. Included in the operating loss was a non-cash impairment charge of $80 million related to the Rousset wafer fabrication business. Also included was $5 million of charges related to acquisition, restructuring and grant repayments.

The company’s effective average exchange rate in the fourth quarter was approximately $1.48 to the euro. This compares to $1.41 to the euro in the third quarter and $1.35 to the euro in the year-ago period.

Income tax provision totaled approximately $4.2 million for the quarter. The higher income tax was due to an out of period expense of $4.8 million for tax reserves related to withholding tax on deemed dividends associated with certain foreign intercompany loans. This compares to an income tax provision of $400,000 for the prior quarter and a provision of $4 million for the fourth quarter of 2008. Net loss on a GAAP basis for the fourth quarter totaled $77 million or a loss of $0.17 per diluted share. On a non-GAAP basis, we had net income of $18 million or $0.04 per diluted share.

Turning to the balance sheet, we entered 2010 with even stronger balance sheet. Cash provided from operations totaled approximately $55 million for the fourth quarter, and combined cash balances, cash and cash equivalents plus short-term investments, totaled $476 million, an increase of $30 million from the third quarter.

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