ATML

Atmel Corporation (ATML)

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Atmel Corp. (ATML)

Q4 2009 Earnings Call

February 08, 2010 5:00 pm ET

Executives

Deborah Stapleton - President, Stapleton Communications

Steven Cumming - VP of Finance and CFO

Steve Laub - President and CEO

Analysts

Anthony Stoss - Craig-Hallum Capital

James Schneider - Goldman Sachs

Steven Eliscu - UBS

Suji De Silva - Kaufman Bros.

Craig Berger - FBR Capital Markets

Raj Gill - Needham & Company

Hans Mosesmann - Raymond James

Presentation

Operator

At this time, I would like to welcome everyone to the Atmel Q1 earnings conference call. (Operator Instructions) Mr. Deborah Stapleton.

Deborah Stapleton

Good afternoon. Thank you for joining us for Atmel's first quarter 2010 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 p.m. 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 President and CEO; and Steven Cumming, Vice President of Finance and Chief Financial Officer. Steven will begin the call with a review of our first quarter financial results, and Steve will then provide additional color on the business. At the conclusion of Steve's remarks, Steven will discuss our financial guidance for the first quarter of 2010 and then 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 Steven Cumming for a discussion of our first quarter results.

Steven Cumming

Let me provide some details of our statement of operations. Revenues for the first quarter increased 1% sequentially to $349 million, exceeding the top end of our guidance range of flat to down 4%; compared with revenues of $344 million in the prior quarter and $271 million in the first quarter a year ago. The strength in our revenues was broad-based with particular upside in consumer, automotive and industrial.

Gross profit as a percent of revenue was 38.4%, a 140 basis points improvement from 37% we reported last quarter, exceeding our guidance range of 38%. 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 $58 million in the first quarter compared with $56 million in the prior quarter and $53 million in the year-ago period. The sequential increase in spending reflects our continued focus on R&D investments in core high-growth microcontroller-based projects.

SG&A expense was $61 million for the first quarter compared with $59 million in the prior quarter and $55 million in the same period last year. The slight increase in SG&A spending this quarter is primarily a result of higher legal costs associated with the Rousset fab and asset divestitures and incremental payroll taxes for the start of the year.

Total operating expense in the first quarter was $120 million, within our guidance range. Included in operating expenses was $10 million of stock-based compensation expense, of which $2 million was related to manufacturing, $3 million to R&D and $5 million to SG&A.

Operating income was $50 million in the first quarter, including a net credit of $700,000 related to acquisition, restructuring and grant repayments. This compares with an operating loss of $72 million in the prior quarter, which included an asset impairment charge of $80 million relating to the Rousset wafer fabrication business.

The company's effective average exchange rate in the first quarter was approximately $1.42 to the euro. This compares to $1.48 to the euro in the fourth quarter and $1.32 to the euro in the first quarter a year ago.

Income tax provisions totaled approximately $3 million in the third quarter. This compares with an income tax provision of $10 million in the fourth quarter and a benefit of $28 million in the first quarter of last year.

GAAP net income in the first quarter totaled $17 million or $0.04 per diluted share. This compares with a net loss of $83 million or a loss of $0.18 per diluted share in the last quarter and net income of $4 million or $0.01 per diluted share in the same period last year.

On a non-GAAP basis, we had net income of $25 million or $0.05 per diluted share. This compares with a net income of $11 million or $0.02 per diluted share for the fourth quarter and $20 million or $0.04 per diluted share in the first quarter of 2009.

Turning to the balance sheet, cash from operations totaled approximately $70 million in the first quarter and combined cash balances, cash and cash equivalents plus short-term investments totaled $521 million, an increase of $45 million from the fourth quarter.

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