- Published: 28 May 2010
- Written by Editor
Zarlink Delivers Strong Fiscal 2010 and Fourth Quarter Results
-- Accelerating customer demand for network timing and line circuit products drives year-on-year increases in net income, gross margin and cash
-- Quarter-on-quarter revenue increases by $4.1 million or 8% in Q4 Fiscal 2010, Company anticipates continuing growth in Q1, Fiscal 2011
Zarlink Semiconductor (TSX:ZL) today issued Fiscal 2010 year end and fourth quarter results for the 12- and three-month periods ended March 26, 2010. All figures are is U.S. dollars unless otherwise noted.
Fiscal 2010 Financial Highlights
-- Operating efficiencies and expense reductions drove GAAP net income of $7.7 million, or $0.05 per basic share, compared with a GAAP net loss of $29.5 million or $0.25 per share in Fiscal 2009;
-- Growing customer adoption of new higher margin products combined with supply chain efficiencies drove gross margin improvements, which increased to 51% of revenue, up from 48% in Fiscal 2009; -- Cash increased by $29.4 million to $74.4 million, as at March 26, 2010; -- The Company decreased operating expenses by more than $10 million, while maintaining R&D investments in core communications and medical programs.
Q4 Fiscal 2010 Financial Highlights
-- Revenue grew to $58.5 million, up $4.1 million or 8% compared with revenue of $54.4 million in Q3 Fiscal 2010 and exceeded the Company's guidance range of $56 million to $58 million; -- Revenue for the Company's Communication Products group was $40.7 million in Q4 Fiscal 2010, up 20% from Q3 Fiscal 2010 and 48% from the same quarter last year; -- Gross margin increased to 53%, up from 52% in the previous quarter; -- GAAP earnings per share of $0.05 exceeded the Company's guidance range of $0.02 to $0.04 per share excluding foreign exchange.
"Fiscal 2010 was a strong year for Zarlink in terms of financial and operational performance, with sales accelerating in the fourth quarter and now extending into Fiscal 2011," said Kirk Mandy, President and CEO, Zarlink Semiconductor. "During the year we increased our gross margins, strengthened our bottom-line results and generated significant cash from operations, despite a challenging economic environment. Sales gained momentum as the year progressed, resulting in significant year-over-year and sequential growth in the fourth quarter, which we expect to continue in Fiscal 2011 with first quarter revenue growing sequentially by another 3% to 5%."
Mr. Mandy continued: "Through customer design wins and the launch of new products throughout the year, we grew our presence in the key network timing and line circuit segments of the communication market, and solidified our position in the medical wireless market. In each of these areas, we believe there are immediate and emerging opportunities where we can leverage our expertise to grow the business. Our leading position in these market segments, combined with our improving balance sheet and cost structure, provide a technology roadmap and a solid financial footing to support our continued progress."
Fiscal 2010 Financial Results
Fiscal 2010 revenue was $220.1 million, compared with $227.2 million in Fiscal 2009. Communication Products group revenue increased to $141.4 million from $140.0 million in Fiscal 2009 as a result of ramping demand for Zarlink's network timing and line circuit products in the second half of the year.
Medical Products revenue was $30.0 million compared with $34.7 million in Fiscal 2009. The decline in revenue was due to uncertainty on the part of medical device manufacturers in the United States concerning healthcare reform, and an extended FDA qualification approval for a customer-specific platform lengthened certain product sales timelines.
Custom and Other revenue for Fiscal 2010 increased to $33.2 million, from $29.7 million in Fiscal 2009. Optical Products revenue for Fiscal 2010 was $15.5 million, compared with $22.7 million in Fiscal 2009. On May 17, 2010, Zarlink announced the sale of its Optical Products group to Tyco Electronics. Subsequent to the sale of the Optical Products Group, Zarlink expects to settle its Swedish pension liability in Q1, Fiscal 2011. This will utilize the restricted cash balance of $15.7 million, plus additional cash of $500,000.
Gross margin increased to 51% of revenue in Fiscal 2010, up from 48% of revenue in Fiscal 2009 and 45% of revenue in Fiscal 2008.
The Company continued to reduce expenses in Fiscal 2010, with improvements including:
-- R&D expenses of $43.0 million, a decrease of $3.0 million or 7% compared with $46.0 million in Fiscal 2009; -- S&A expenses of $43.0 million, a decrease of $7.7 million or 15% compared with $50.6 million in Fiscal 2009.
Fiscal 2010 operating income was $19.1 million, with net income of $7.7 million or $0.05 per basic share and $0.04 per diluted share. Fiscal 2010 results include:
-- A non-cash foreign exchange loss of $10.8 million related primarily to Zarlink's Canadian dollar denominated debenture; -- Net interest expense of $3.7 million; -- Supply chain harmonization costs of $2.9 million related to transferring production with the Company's foundry partners; -- Income tax recovery of $4.1 million; -- Impairment of asset held for sale of $1.2 million, which was partially offset by a $1.1 million recovery of current asset.
For Fiscal 2009, Zarlink recorded an operating loss of $44.4 million and a net loss of $29.5 million, or $0.25 per share, primarily due to a non-cash impairment charge of $46.9 million to write-off the book value of goodwill.
As a supplement to Zarlink's consolidated financial statements presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), the Company provides additional non-GAAP measures for operating income, net income (loss), and basis and diluted net earnings (loss) per share. For full reconciliation of GAAP to non-GAAP measures, refer to the schedule included with this press release.
Non-GAAP operating income for Fiscal 2010 was $31.0 million, compared with Fiscal 2009 non-GAAP operating income of $23.4 million. Non-GAAP net income in Fiscal 2010 was $26.8 million, or $0.20 per basic share and $0.18 per diluted share. For Fiscal 2009 non-GAAP net income was $20.7 million, or $0.15 per basic share and $0.14 per diluted share.
As at March 26, 2010, Zarlink had cash and short-term investments totaling $74.4 million, compared with $45.0 million at the end of Fiscal 2009.
Fourth Quarter Fiscal 2010 Financial Results
Fourth quarter revenue was $58.5 million, an increase of $4.1 million or 8% compared with Q3 Fiscal 2010 revenue of $54.4 million, and an increase of $7.4 million or 15% compared with Q4 Fiscal 2009 revenue of $51.1 million. Fourth quarter revenue exceeded the Company's guidance of $56 million to $58 million.
Gross margin in Q4 Fiscal 2010 was 53% of revenue which included $0.3 million in supply chain harmonization costs, compared with 52% of revenue in the previous quarter which included $0.6 million in supply chain harmonization costs. Gross margin in Q4 Fiscal 2009 was 48% of revenue, which included severance costs of $0.8 million.
R&D expenses in Q4 Fiscal 2010 were $11.9 million, or 20% of revenue, compared with Q3 Fiscal 2010 R&D expenses of $10.9 million, or 20% of revenue. Increased R&D expenses in the quarter reflect material spend related to two significant product platform introductions. S&A expenses in Q4 Fiscal 2010 were $11.3 million, or 19% of revenue, compared with Q3 Fiscal 2010 S&A expenses of $11.2 million, or 21% of revenue.
Fourth quarter Fiscal 2010 operating income was $5.0 million, compared with Q3 Fiscal 2010 operating income of $4.5 million and Q4 Fiscal 2009 operating loss of $49.6 million. Net income in Q4 Fiscal 2010 was $6.8 million or $0.05 per share, which included a non-cash foreign exchange loss of $1.2 million related primarily to Zarlink's Canadian dollar denominated debenture. Earnings per share exceed Q4 guidance of $0.02 to $0.04 per share, which excluded the impact of foreign exchange. In Q3 Fiscal 2010 Zarlink recorded net income of $0.6 million or break-even per share, which included a non-cash foreign exchange loss of $2.7 million. In Q4 Fiscal 2009 Zarlink recorded a net loss of $50.0 million, or $0.41 per share.
Non-GAAP operating income for Q4 Fiscal 2010 was $7.9 million, compared with Q3 Fiscal 2010 non-GAAP operating income of $7.3 million and Q4 Fiscal 2009 non-GAAP operating income of $3.8 million. Non-GAAP net income in Q4 Fiscal 2010 was $6.9 million, or $0.05 per share. For Q3 Fiscal 2010 non-GAAP net income was $6.1 million, or $0.05 per basic share and $0.04 per diluted share. For Q4 Fiscal 2009 non-GAAP net income was $1.3 million, or $0.01 per share.
On May 27, 2010 Zarlink declared a quarterly dividend of CDN$0.50 per share on its preferred shares (TSX:ZL.PR.A - News) payable on June 29, 2010 to preferred shareholders of record as of June 4, 2010. Dividends paid by Zarlink to Canadian residents are eligible dividends for Canadian income tax purposes.
Fourth Quarter Fiscal 2010 Business Summary
Fourth quarter revenue from Zarlink's Communication Products Group was $40.7 million, up 20% compared with revenue of $33.8 million in Q3 Fiscal 2010 and 48% from revenue of $27.6 million in Q4 Fiscal 2009. The increase was due to very strong customer design activity for Zarlink's line circuit and packet timing products. In the quarter, Zarlink introduced a Timing over Packet reference design with Freescale Semiconductor that simplifies and speeds the development of new equipment for wireless service providers evolving to packet networks to support bandwidth-intense smartphone applications.
Q4 Fiscal 2010 revenue for the Company's Medical Products Group was $5.3 million, compared with Q3 Fiscal 2010 revenue of $7.9 million and Q4 Fiscal 2009 revenue of $9.5 million.
Custom and Other revenue in Q4 Fiscal 2010 was $9.2 million, compared with $8.2 million in Q3 Fiscal 2010 and $9.8 million in Q4 Fiscal 2009. Optical Products revenue in Q4 Fiscal 2010 was $3.3 million, compared with revenue of $4.5 million in Q3 Fiscal 2010 and Q4 Fiscal 2009 revenue of $4.2 million.
First Quarter Fiscal 2011 Guidance
"Design activity with new and existing customers across key areas of our portfolio is approaching record levels," said Mr. Mandy. "As a result, we expect sequential revenue growth of 3% to 5%, excluding revenue from our divested Optical Products group, based on continuing design wins for our packet network timing and new Clockcenter solutions, ramping demand for our line circuit products, and a strengthening end-market for our medical wireless technologies."
The opening backlog at the start of Q1 Fiscal 2011, adjusted to exclude optical products, was $58 million. Opening backlog at the start of Q4 Fiscal 2010, adjusted to exclude optical products, was $52 million. For Q1 Fiscal 2011 Zarlink is forecasting:
-- Revenue between $57.0 million and $58.5 million; -- Gross margins between 50% and 51%, excluding supply chain harmonization costs of approximately $0.2 million; -- Operating expenses between $21 million and $22 million, excluding amortization of intangibles; -- A one-time charge of $2.0 million related to the settlement of the Swedish pension liability, which will utilize the restricted cash balance of $15.7 million plus additional cash of $500,000; -- Excluding any potential impact of foreign exchange, and including a $0.07 per share gain on sale of the Optical Products Group and a $0.02 per share loss on the settlement of the Swedish pension liability, Zarlink expects Q1 earnings of $0.07 to $0.09 per share.
Analyst Conference Call
An open conference call for analysts will be held on May 27, 2010 beginning at 5:00 p.m. EDT. Access the call by dialing 1-877-974-0447. Investors, media and other parties are listen-only. For a replay, call 1-877-289-8525, Access Code 4301420# or 416-640-1917, Access Code 4301420#.The replay is available until midnight on June 10th, 2010. A live audio webcast will be available through http://www.marketwire.com/ (Marketwire) or from the Company's website at http://www.zarlink.com/.
About Zarlink Semiconductor
Zarlink Semiconductor delivers world-leading, mixed-signal chip technologies for a broad range of communication and medical applications. The company's core capabilities include network timing solutions that manage time-sensitive communication applications over wireless and wired networks, line circuits supporting high-quality voice services over cable and broadband connections, and ultra low-power radios enabling new wireless medical devices and therapies. Serving the world's largest original equipment manufacturers, Zarlink's highly integrated chip solutions help customers simplify design, lower costs and reach market quickly. For more information, visit www.zarlink.com.
Shareholders and other individuals wishing to receive, free of charge, copies of the reports filed with the U.S. Securities and Exchange Commission and Canadian Securities Regulatory Authorities, should visit the Company's web site at www.zarlink.com or contact Investor Relations.
Certain statements in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and assumptions include, among others, the following: our dependence on the successful development and market introduction of new products; our ability to integrate any business, technologies, product lines or services that we have or will acquire; our dependence on revenue generation from our legacy products in order to fund development of our new products; current market conditions, including the lack of liquidity in the markets and economic slowdown, may increase our operating costs or reduce our revenue, thereby negatively impacting our operating results; our ability to operate profitably and generate positive cash flows in the future; the impact of the current economic crisis on our suppliers and customers and our ability to transfer parts to other suppliers; our dependence on our foundry suppliers and third-party subcontractors; order cancellations and deferrals by our customers; our substantial indebtedness could adversely affect our financial position; the cost and accounting implications of compliance with new accounting standards; and other factors referenced in our Annual Report on Form 20-F. Investors are encouraged to consider the risks detailed in this filing.
Zarlink and the Zarlink Semiconductor logo are trademarks of Zarlink Semiconductor Inc.
Zarlink Semiconductor Inc. CONSOLIDATED STATEMENTS OF INCOME (LOSS) DATA (in thousands of U.S dollars, except per share amounts, U.S. GAAP) (Unaudited) Three Months Ended Year Ended ------------------------------------------------- Mar. 26, Dec. 25, Mar. 27, Mar. 26, Mar. 27, 2010 2009 2009 2010 2009 ------------------------------------------------- Revenue $ 58,512 $ 54,425 $ 51,101 $ 220,141 $ 227,165 Cost of revenue 27,544 26,074 26,745 107,028 118,131 ------------------------------------------------- Gross margin 30,968 28,351 24,356 113,113 109,034 ------------------------------------------------- Expenses: Research and development 11,909 10,930 12,434 42,976 45,994 Selling and administrative 11,345 11,219 13,683 42,981 50,643 Amortization of intangible assets 1,803 1,803 1,846 7,234 7,384 Contract impairment (recovery) - (94) 138 715 280 Impairment (recovery) of current asset (284) - - (1,052) 3,000 Impairment of asset held for sale 1,185 - - 1,185 1,200 Goodwill impairment - - 46,887 - 46,887 Gain on sale of business - - (1,000) - (1,000) Gain on sale of assets - - - - (936) ------------------------------------------------- 25,958 23,858 73,988 94,039 153,452 ------------------------------------------------- Operating income (loss) 5,010 4,493 (49,632) 19,074 (44,418) Gain (loss) on repurchase of convertible debentures - - - (316) 3,593 Amortization of debt issue costs (160) (161) (160) (641) (689) Interest income 27 69 76 184 1,184 Interest expense (1,006) (985) (852) (3,867) (4,145) Foreign exchange gain (loss) (1,245) (2,719) 2,108 (10,843) 14,028 ------------------------------------------------- Net income (loss) before income taxes 2,626 697 (48,460) 3,591 (30,447) Income tax recovery (expense) 4,193 (66) (1,516) 4,063 903 ------------------------------------------------- Net income (loss) $ 6,819 $ 631 $ (49,976)$ 7,654 $ (29,544) ------------------------------------------------- Net income (loss) attributable to common shareholders $ 6,268 $ 112 $ (50,304)$ 5,510 $ (31,717) ------------------------------------------------- ------------------------------------------------- Net income (loss) per common share: Basic $ 0.05 $ 0.00 $ (0.41)$ 0.05 $ (0.25) ------------------------------------------------- ------------------------------------------------- Diluted $ 0.05 $ 0.00 $ (0.41)$ 0.04 $ (0.25) ------------------------------------------------- ------------------------------------------------- Weighted average number of common shares outstanding (thousands): Basic 121,518 122,293 122,426 122,163 124,798 Diluted 152,754 123,652 122,426 123,444 124,798 Percentage of revenue: Gross margin 53% 52% 48% 51% 48% Research and development 20% 20% 24% 20% 20% Selling and administrative 19% 21% 27% 20% 22% Zarlink Semiconductor Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS DATA (in thousands of U.S. dollars, U.S. GAAP) (Unaudited) Three Months Ended Year Ended ------------------------------------------------------ Mar. 26, Dec. 25, Mar. 27, Mar. 26, Mar. 27, 2010 2009 2009 2010 2009 ------------------------------------------------------ CASH PROVIDED BY (USED IN) ------------------- Operating activities: Net income (loss)$ 6,819 $ 631 $ (49,976)$ 7,654 $ (29,544) Depreciation of fixed assets 916 939 1,118 3,780 4,706 Amortization of other assets 1,963 1,964 2,006 7,875 8,073 Stock compensation expense 423 475 540 1,586 2,115 Deferred income taxes (4,056) 162 632 (3,811) 2,813 Other non-cash changes in operating activities 2,651 2,802 (2,019) 12,508 (12,808) Goodwill impairment - - 46,887 - 46,887 Decrease (increase) in working capital: Trade accounts and other receivables 3,054 (6,615) 621 (2,482) 3,712 Inventories 310 3,809 307 1,596 992 Prepaid expenses and other (258) 951 (364) 376 3,380 Payables and other accrued liabilities 3,396 1,671 1,117 3,188 (15,153) Deferred revenue (53) 1,770 (565) 3,632 292 ------------------------------------------------------ Total 15,165 8,559 304 35,902 15,465 ------------------------------------------------------ Investing activities: Expenditures for fixed assets (281) (998) (524) (2,265) (3,594) Increase in restricted cash and cash equivalents (930) - (517) (930) (517) Proceeds from sale of fixed assets 15 - - 15 984 Matured short- term investments - - 240 - 240 Proceeds from sale of business - - 1,000 - 1,000 ------------------------------------------------------ Total (1,196) (998) 199 (3,180) (1,887) ------------------------------------------------------ Financing activities: Repurchase of convertible debentures - - - (13) (2,594) Payment of dividends on preferred shares - (474) (417) (1,417) (1,939) Repurchase of preferred shares (174) (144) (206) (1,023) (1,386) Repurchase of common shares (162) (642) - (804) (2,707) Repurchase of treasury shares (1,289) - - (1,289) - Exercise of stock options 75 - - 75 - ------------------------------------------------------ Total (1,550) (1,260) (623) (4,471) (8,626) ------------------------------------------------------ Effect of currency translation on cash 45 (102) (153) 1,112 (2,307) ------------------------------------------------------ Increase (decrease) in cash and cash equivalents 12,464 6,199 (273) 29,363 2,645 Cash and cash equivalents, beginning of period 61,905 55,706 45,279 45,006 42,361 ------------------------------------------------------ Cash and cash equivalents, end of period $ 74,369 $ 61,905 $ 45,006 $ 74,369 $ 45,006 ------------------------------------------------------ ------------------------------------------------------ Zarlink Semiconductor Inc. CONSOLIDATED BALANCE SHEETS DATA (in thousands of U.S. dollars, U.S. GAAP) (Unaudited) Mar. 26, Dec. 25, Mar. 27, 2010 2009 2009 -------------------------------- ASSETS Current assets: Cash and cash equivalents $ 74,369 $ 61,905 $ 45,006 Restricted cash and cash equivalents 15,720 14,704 13,145 Trade accounts receivable - net 27,038 30,352 24,556 Other accounts receivable - net 4,248 3,987 4,300 Inventories - net 26,225 26,535 27,821 Prepaid expenses and other 2,305 2,048 2,681 Current assets held for sale 750 1,935 1,935 Deferred income tax assets - current portion 2,000 - - -------------------------------- 152,655 141,466 119,444 Fixed assets - net 10,992 11,528 12,530 Deferred income tax assets - net 7,584 5,561 5,800 Intangible assets - net 41,871 43,674 49,106 Other assets 1,603 2,081 2,655 -------------------------------- $ 214,705 $ 204,310 $ 189,535 -------------------------------- -------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 15,178 $ 11,885 $ 12,018 Employee-related payables 13,452 10,269 9,478 Income and other taxes payable 1,006 746 482 Current portion of provisions for exit activities 379 1,574 3,645 Other accrued liabilities 7,123 8,332 6,454 Deferred revenue 4,493 4,546 861 Deferred income tax liabilities - current portion 29 31 28 -------------------------------- 41,660 37,383 32,966 Long-term debt - convertible debentures 68,900 67,567 57,203 Long-term portion of provisions for exit activities 246 323 200 Pension liabilities 16,636 16,208 14,690 Deferred income tax liabilities - long- term portion - 31 28 Long-term accrued income taxes 2,208 2,192 2,408 Other long-term liabilities 569 545 830 -------------------------------- 130,219 124,249 108,325 -------------------------------- Redeemable preferred shares, unlimited shares authorized; 1,001,600 shares issued and 999,000 outstanding as at March 26, 2010 12,787 12,884 13,558 -------------------------------- Shareholders' equity: Common shares, unlimited shares authorized; no par value; 121,606,782 shares issued and 120,906,782 outstanding as at March 26, 2010 733,357 734,337 738,818 Treasury shares, at cost, 700,000 shares (1,289) - - Additional paid-in capital 39,838 38,795 33,969 Deficit (664,110) (670,454) (669,872) Accumulated other comprehensive loss (36,097) (35,501) (35,263) -------------------------------- 71,699 67,177 67,652 -------------------------------- $ 214,705 $ 204,310 $ 189,535 -------------------------------- -------------------------------- Zarlink Semiconductor Inc. SUPPLEMENTARY SCHEDULES (in thousands of U.S. dollars, U.S. GAAP) (Unaudited)
Geographic Information:
Revenue, based on the geographic location of Zarlink's customers, was distributed as follows:
Three Months Three Months Three Months Ended % of Ended % of Ended % of Mar. 26, Dec. 25, Mar. 27, 2010 Total 2009 Total 2009 Total ----------------------------------------------------------- Asia - Pacific $ 31,563 54% $ 26,487 49% $ 24,434 48% Europe 15,323 26 16,617 31 12,659 25 Americas 11,626 20 11,321 20 14,008 27 ----------------------------------------------------------- $ 58,512 100% $ 54,425 100% $ 51,101 100% ----------------------------------------------------------- ----------------------------------------------------------- Year Year Ended % of Ended % of Mar. 26, Mar. 27, 2010 Total 2009 Total --------------------------------------- Asia - Pacific $115,622 53% $113,659 50% Europe 59,625 27 59,276 26 Americas 44,894 20 54,230 24 --------------------------------------- $220,141 100% $227,165 100% --------------------------------------- ---------------------------------------
Product Group Information:
Revenue, based on product group, was distributed as follows:
Three Three Three Months Months Months Ended % of Ended % of Ended % of Mar. 26, Dec. 25, Mar. 27, 2010 Total 2009 Total 2009 Total ----------------------------------------------------------- Communication Products $ 40,724 69% $ 33,818 62% $ 27,572 54% Medical Products 5,266 9 7,937 15 9,488 19 Optical Products 3,279 6 4,463 8 4,209 8 Custom & Other 9,243 16 8,207 15 9,832 19 ----------------------------------------------------------- $ 58,512 100% $ 54,425 100% $ 51,101 100% ----------------------------------------------------------- ----------------------------------------------------------- Year Year Ended % of Ended % of Mar. 26, Mar. 27, 2010 Total 2009 Total --------------------------------------- Communication Products $141,386 64% $140,036 62% Medical Products 29,986 14 34,683 15 Optical Products 15,525 7 22,700 10 Custom & Other 33,244 15 29,746 13 --------------------------------------- $220,141 100% $227,165 100% --------------------------------------- ---------------------------------------
Non-GAAP Measures
As a supplement to Zarlink's consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), the Company provides additional non-GAAP measures for operating income, net income (loss), and basic and diluted net income (loss) per share.
A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The Company believes that the additional non-GAAP measures are useful to investors for the purpose of financial analysis. Management uses these measures internally to evaluate the Company's in-period operating performance before gains, losses and other charges that are considered by management to be outside of the Company's core operating results. These non-GAAP financial measures should assist investors in understanding how management views our core results of operations on an on-going basis, as well as enhance comparisons of our core results of operations with historical periods. In addition, the measures are used for planning and forecasting of the Company's future periods. Investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures do not reflect all costs associated with our operations as determined in accordance with GAAP. Other companies may exclude or include different items in a particular non-GAAP financial measure, or provide different non-GAAP financial measures to those provided by Zarlink. Therefore, our non-GAAP financial measures are unlikely to be comparable to those presented by other companies.
Reconciliations of historical presentations of non-GAAP measures to their most directly comparable GAAP financial measures are provided in the following table. The Company is unable to reconcile these non-GAAP measures on a forward-looking basis primarily because it is impractical to project certain events, such as the impact of foreign exchange gains/losses.
Zarlink Semiconductor Inc. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (in thousands, except per share amounts) (Unaudited) Three Months Ended Year Ended ------------------------------------------------- Mar. 26, Dec. 25, Mar. 27, Mar. 26, Mar. 27, 2010 2009 2009 2010 2009 ------------------------------------------------- GAAP net income (loss) $ 6,819 $ 631 $(49,976) $ 7,654 $(29,544) Amortization of intangible assets 1,803 1,803 1,846 7,234 7,384 Goodwill impairment - - 46,887 - 46,887 Contract impairment (recovery) - (94) 138 715 280 Foreign exchange loss (gain) 1,245 2,719 (2,108) 10,843 (14,028) Restructuring and supply chain harmonization (282) 592 5,018 2,291 8,902 Impairment of asset held for sale 1,185 - - 1,185 1,200 Impairment (recovery) of current asset (284) - - (1,052) 3,000 Stock compensation expense 423 475 540 1,586 2,115 Gain on sale of business - - (1,000) - (1,000) Gain on sale of assets - - - - (936) Loss (gain) on repurchase of convertible debentures - - - 316 (3,593) Recovery related to deferred tax asset (4,000) - - (4,000) - ------------------------------------------------- Non-GAAP net income $ 6,909 $ 6,126 $ 1,345 $ 26,772 $ 20,667 GAAP operating income (loss) $ 5,010 $ 4,493 $(49,632) $ 19,074 $(44,418) Amortization of intangible assets 1,803 1,803 1,846 7,234 7,384 Goodwill impairment - - 46,887 - 46,887 Contract impairment (recovery) - (94) 138 715 280 Restructuring and supply chain harmonization (282) 592 5,018 2,291 8,902 Impairment of asset held for sale 1,185 - - 1,185 1,200 Impairment (recovery) of current asset (284) - - (1,052) 3,000 Stock compensation expense 423 475 540 1,586 2,115 Gain on sale of business - - (1,000) - (1,000) Gain on sale of assets - - - - (936) ------------------------------------------------- Non-GAAP operating income $ 7,855 $ 7,269 $ 3,797 $ 31,033 $ 23,414 GAAP net income (loss) per common share - basic $ 0.05 $ 0.00 $ (0.41) $ 0.05 $ (0.25) Amortization of intangible assets 0.01 0.01 0.02 0.06 0.06 Goodwill impairment - - 0.38 - 0.38 Contract impairment (recovery) - (0.00) 0.00 0.01 0.00 Foreign exchange loss (gain) 0.01 0.02 (0.02) 0.09 (0.11) Restructuring and supply chain harmonization (0.00) 0.00 0.04 0.02 0.07 Impairment of asset held for sale 0.01 - - 0.01 0.01 Impairment (recovery) of current asset (0.00) - - (0.01) 0.02 Stock compensation expense 0.00 0.00 0.00 0.01 0.02 Gain on sale of business - - (0.01) - (0.01) Gain on sale of assets - - - - (0.01) Loss (gain) on repurchase of convertible debentures - - - 0.00 (0.03) Recovery related to deferred tax asset (0.03) - - (0.03) - ------------------------------------------------- Non-GAAP net income per common share - basic(i) $ 0.05 $ 0.05 $ 0.01 $ 0.20 $ 0.15 GAAP net income (loss) per common share - diluted $ 0.05 $ 0.00 $ (0.41) $ 0.04 $ (0.25) Amortization of intangible assets 0.01 0.01 0.02 0.05 0.05 Goodwill impairment - - 0.38 - 0.30 Contract impairment (recovery) - (0.00) 0.00 0.00 0.00 Foreign exchange loss (gain) 0.01 0.02 (0.02) 0.07 (0.09) Restructuring and supply chain harmonization (0.00) 0.00 0.04 0.02 0.06 Impairment of asset held for sale 0.01 - - 0.01 0.01 Impairment (recovery) of current asset (0.00) - - (0.01) 0.02 Stock compensation expense 0.00 0.00 0.00 0.01 0.01 Gain on sale of business - - (0.01) - (0.01) Gain on sale of assets - - - - (0.01) Loss (gain) on repurchase of convertible debentures - - - 0.00 (0.02) Recovery related to deferred tax asset (0.03) - - (0.03) - Effect of dilutive potential common shares - 0.00 - 0.01 0.07 ------------------------------------------------- Non-GAAP net income per common share - diluted(i) $ 0.05 $ 0.04 $ 0.01 $ 0.18 $ 0.14 Shares used to calculate non-GAAP net income per common share - basic 121,518 122,293 122,426 122,163 124,798 Shares used to calculate non-GAAP net income per common share - diluted 152,754 152,576 122,426 152,371 153,731
(i) Amounts may not add due to rounding.
Contact:
Contacts:
Zarlink Semiconductor
Ed Goffin
Media Relations and Investor Relations
613-270-7112
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