SAN JOSE, Calif., July 30 /PRNewswire-FirstCall/ -- Zilog, Inc.
(NASDAQ: ZILG), a trusted supplier of application specific,
embedded system-on-chip (SoC) solutions for industrial and consumer
markets, today reported financial results for its first quarter
fiscal 2010 ended June 27, 2009. Net sales from continuing
operations for the fiscal 2010 first quarter were $7.2 million, a
sequential increase of 3 percent and a year over year decrease of
25 percent. The sequential increase exceeded the previously
announced guidance range and follows quarterly sequential declines
in the December, 2008 and March, 2009 fiscal quarters. The
sequential decline in the two previous quarters reflects the
worldwide fall in demand for end products as a result of the global
economic crisis. On February 18, 2009 the Company sold its
universal remote control and secured transaction processor
businesses. In accordance with FASB No. 144, the comparative
financial statements for its first fiscal quarter ended June 28,
2008 have been restated to reflect these sold businesses as
discontinued operations. GAAP net income for the fiscal first
quarter ended June 27, 2009 was $0.4 million, or 2 cents per share,
as compared to GAAP net income of $12.1 million in the previous
fiscal quarter, or 71 cents per share. Net income for the fiscal
2010 first quarter includes a credit to other income of $1.0
million, or 6 cents per share, reflecting the sale and assignment
to a third party of five patents and their associated intellectual
property rights. Net income for the fiscal 2009 fourth quarter
ended March 31, 2009 included a gain on sale of the two businesses
of $21.6 million, partially offset by certain special and one-time
charges of $3.5 million. The GAAP net income for Q1 fiscal 2010
compares to a GAAP net loss of $1.7 million for the first quarter
fiscal 2009 which included special charges of $0.6 million
reflecting costs associated with consolidation and manufacturing
outsource activities. "Our opening quarter of the 2010 fiscal year
highlighted profitability, sequential sales growth, increased cash
and a positive book-to-bill ratio. Following the sale of the
businesses in February, we have revitalized the company making it
leaner with a significantly lower breakeven sales level. Coupled
with a laser-focus on our new product development and our esteemed
industry brand from 35 years of microcontroller history, we believe
we are well positioned as the global economy recovers," said Darin
G. Billerbeck, Zilog's president and chief executive officer.
"While the current global economy continues to pose challenges and
uncertainties, we are excited by our continued development of
solutions for power management and sensing applications including
the use of wireless. We are also energized by our recently
announced 3.3 volt Serial Communications Controller product, which
extends further power saving capabilities to customers who have
long been pleased with our classic SCC portfolio," stated
Billerbeck. The company reported cash, cash equivalents and
long-term investments of $34.7 million at June 27, 2009, compared
to $33.3 million at March 31, 2009. Net cash provided by continuing
operating activities was $2.0 million for the fiscal 2010 first
quarter, as compared to $1.4 million for the first quarter in the
prior fiscal year and net cash used in continuing operating
activities of $8.1 million in the prior fiscal quarter. On a
non-GAAP basis, adjusted EBITDA from continuing operations, as
defined below, was positive $0.7 million for the fiscal 2010 first
quarter, as compared to negative $2.2 million in the first fiscal
quarter a year ago and negative $1.5 million in the prior fiscal
quarter. "In our first fiscal quarter, we generated positive
adjusted EBITDA and positive net income including the sale and
assignment of certain patent rights. As the market rapidly
deteriorated after September 2008, our quick and decisive actions
to sell two businesses and resize our core business resulted in a
significantly lower Adjusted EBITDA breakeven sales level,
including a 25 percent sequential reduction this quarter," said
Perry J. Grace, Zilog's executive vice President and chief
financial officer. "We have continued to diligently manage our
working capital, resulting in a fiscal Q1 increase in cash, cash
equivalents and long term investments of $1.4 million and an
expectation of a further increase again this quarter. In addition,
our balance sheet strength allows us to better determine our
strategic options as we move forward, regardless of the direction
the global economy may take," stated Grace. The Company expects net
sales for its fiscal 2010 second quarter ending September 26, 2009
to be consistent with or up to 5 percent higher than the fiscal
quarter ended June 27, 2009. Additionally, the Company expects
cash, cash equivalents and long-term investments to be
approximately $36 million to $37 million at September 26, 2009.
This includes $1.0 million in cash received in July, 2009 for the
patent sale and assignment and the expected receipt in August, 2009
of $1.55 million or 50 percent of the escrow funds from the
February sale of the two businesses. NON-GAAP FINANCIAL INFORMATION
(Unaudited) The Company may make reference to certain Non-GAAP
financial measures. Management believes that these Non-GAAP
measures are useful measures of operating performance and liquidity
because they may exclude the impact of certain items, such as
amortization of intangible assets, stock-based compensation,
depreciation, non-operating interest, income taxes and special
charges. However, these Non-GAAP measures should be considered in
addition to, not as a substitute for, or superior to, net income
(loss) and net cash provided by (used in) operating activities, or
other financial measures prepared in accordance with GAAP. Three
Months Ended Jun. 27, Mar. 31, Dec. 27, Sep. 27, Jun. 28, 2009 2009
2008 2008 2008 (in thousands) Reconciliation of Non-GAAP Net Loss
to GAAP Net Loss Non-GAAP net income (loss) from continuing
operations $394 ($1,776) ($2,871) ($2,563) ($2,397) Non-GAAP
adjustments on Continuing operations: Special charges and credits
135 3,478 1,696 554 590 Amortization of intangible assets - 174 209
209 209 Non-cash stock-based compensation COS 19 21 44 30 42
Non-cash stock-based compensation R&D 24 (24) 126 47 72
Non-cash stock-based compensation SG&A 183 201 297 211 257
Total non-GAAP adjustments 361 3,850 2,372 1,051 1,170 GAAP Net
loss from Continuing operations $33 ($5,626) ($5,243) ($3,614)
($3,567) Non-GAAP Net Income (Loss) from continuing operations
(Unaudited) Non-GAAP net income (loss) from continuing operations
(Non-GAAP net income (loss)) excludes special charges and non-cash
charges relating to the amortization of intangible assets and
stock-based compensation. Following the sale of the two businesses
in February, 2009, Non-GAAP net income (loss) was restated to
exclude amounts related to the Company's discontinued operations.
We believe that Non-GAAP net income (loss) is a useful measure as
it excludes certain special charge items as well as certain
non-cash charges, which facilitates a comparison of the Company's
operating performance. However, this Non-GAAP measure should be
considered in addition to, not as a substitute for, or superior to,
the net loss measured in accordance with GAAP. Three Months Ended
Jun. 27, Mar. 31, Dec. 27, Sep. 27, Jun. 28, 2009 2009 2008 2008
2008 (in thousands) Reconciliation of Net Loss and Cash Flows From
Operating Activities to EBITDA Reconciliation of net loss to
EBITDA: Net income (loss) from continuing operations $33 ($5,626)
($5,243) ($3,614) ($3,567) Depreciation and amortization 318 452
466 478 436 Interest income (3) (4) (24) (49) (70) Provision
(benefit) for income taxes 40 (2) 67 62 54 EBITDA from continuing
operations $388 ($5,180) ($4,734) ($3,123) ($3,147) Reconciliation
of EBITDA to net cash provided by (used in) continuing operating
activities: EBITDA $388 ($5,180) ($4,734) ($3,123) ($3,147)
Provision (benefit) for income taxes (40) 2 (67) (62) (54) Interest
income 3 4 24 49 70 Non-cash stock-based compensation 226 198 467
288 371 Loss on disposition of operating assets - 986 11 - 35
Changes in other operating assets and liabilities 1,457 (4,119)
(571) (577) 4,124 Net cash provided by (used in) continuing
operating activities $2,034 ($8,109) ($4,870) ($3,425) $1,399
Non-GAAP EBITDA (Unaudited) Management believes that Non-GAAP
EBITDA ("EBITDA"), that is Earnings or loss Before Interest, Taxes,
Depreciation and Amortization, is a useful measure of financial
performance. Following the sale of the two businesses in February,
2009, EBITDA was restated to exclude amounts related to the
Company's discontinued operations. We believe that the disclosure
of EBITDA helps investors more meaningfully evaluate our liquidity
position by the elimination of non-cash related items such as
depreciation and amortization. We believe that our investors
regularly use EBITDA as a measure of the liquidity of our business.
Our management uses EBITDA as a supplement to cash flows from
operations as a way to assess the cash generated from our business
available for capital expenditures and the servicing of other
requirements including working capital. Three Months Ended Jun. 27,
Mar. 31, Dec. 27, Sep. 27, Jun. 28, 2009 2009 2008 2008 2008 (in
thousands) Reconciliation of Net Loss and Cash Flows From Operating
Activities to Adjusted EBITDA Reconciliation of net income (loss)to
Adjusted EBITDA: Net income (loss) from continued operations $33
($5,626) ($5,243) ($3,614) ($3,567) Depreciation and amortization
318 452 466 478 436 Interest income (3) (4) (24) (49) (70)
Provision (benefit) for income taxes 40 (2) 67 62 54 Special
charges and credits 135 3,478 1,696 554 590 Non-cash stock-based
compensation 226 198 467 288 371 Adjusted EBITDA $749 ($1,504)
($2,571) ($2,281) ($2,186) Reconciliation of Adjusted EBITDA to net
cash provided by (used in) continuing operating activities:
Adjusted EBITDA, continuing operations $749 ($1,504) ($2,571)
($2,281) ($2,186) Special charges and credits (135) (3,478) (1,696)
(554) (590) Provision (benefit) for income taxes (40) 2 (67) (62)
(54) Interest income 3 4 24 49 70 Loss on disposition of operating
assets - 986 11 - 35 Changes in other operating assets and
liabilities 1,457 (4,119) (571) (577) 4,124 Net cash provided by
(used in) continuing operating activities $2,034 ($8,109) ($4,870)
($3,425) $1,399 Non-GAAP Adjusted EBITDA (Unaudited) EBITDA
reflects our Earnings or loss Before Interest, Taxes, Depreciation
and Amortization. Additionally, management uses separate "Adjusted
EBITDA" calculations for purposes of determining certain employees'
incentive compensation and, subject to meeting specified Adjusted
EBITDA amounts. Adjusted EBITDA, as we define it, excludes
interest, income taxes, effects of changes in accounting principles
and non-cash charges such as depreciation, amortization, in-process
research and development, and stock-based compensation expense. It
also excludes cash and non-cash charges associated with
reorganization items and special charges and credits, which
represent operational restructuring charges, including asset
write-offs, employee termination costs, relocation costs and lease
termination costs. Adjusted EBITDA also excludes changes in
operating assets and liabilities, which are included in net cash
provided by (used in) operating activities. Following the sale of
the two businesses in February, 2009, Adjusted EBITDA was restated
to exclude amounts related to the Company's discontinued
operations. Our management uses Adjusted EBITDA as a supplement to
cash flows from operations as a way to assess the cash generated
from our business available for capital expenditures and the
servicing of other requirements including working capital. This
Non-GAAP Adjusted EBITDA measure allows management to monitor cash
generated from the operations of the business. However, this
Non-GAAP measure should be considered in addition to, not as a
substitute for, or superior to, net loss and net cash provided or
used in operating activities prepared in accordance with GAAP.
About Zilog, Inc. Zilog is a trusted supplier of application
specific, embedded system-on-chip (SoC) solutions for the
industrial and consumer markets. From its roots as an award-winning
architect in the microprocessor and microcontroller industry, Zilog
has evolved its expertise beyond core silicon to include SoCs,
single board computers, application specific software stacks and
development tools that allow embedded designers quick time to
market in areas such as energy management, monitoring and metering
and motion detection. For more information, visit
http://www.zilog.com/. EZ80ACCLAIM!, Zilog, Z8, Z80, eZ80, Z8
ENCORE!, Encore!XP and Zneo are registered trademarks of Zilog,
Inc. in the United States and in other countries. Other product and
or service names mentioned herein may be trademarks of the
companies with which they are associated. Cautionary Statements
This release contains forward-looking statements (including those
related to our expectations for our September 2009 quarter and our
position as the global economy recovers) relating to expectations,
plans or prospects for Zilog, Inc. that are based upon the current
expectations and beliefs of Zilog's management and are subject to
certain risks and uncertainties that could cause actual results to
differ materially from those described in the forward-looking
statements. For example, weakness in our 8-bit classic or embedded
flash products could negatively impact our September 2009 fiscal
quarter. Non receipt of escrow amounts payable to us in our
September 2009 fiscal quarter related to the February, 2009 sale of
the two businesses could negatively impact our cash projections.
Changes in requirements for supporting the Transition Services
Agreement with Maxim Integrated Products, Inc. could impact our
cash projections. Additionally, our ability to attract and retain
technical employees may be negatively impacted by uncertainties
relating to potential future changes in the ownership and control
of the Company which may make it difficult to execute on our
long-term strategy. Design wins are defined as the projected
one-year net sales for a customer's new product design for which
the Company has received at least a $1,000 purchase order for its
devices. Design win estimates are determined based on projections
from customers and may or may not be realized. Whether or not Zilog
achieves anticipated revenue from design wins can be dependent on
the timeliness of customers to ramp and whether or not the project
in question is as commercially successful as the customers
anticipated. Notwithstanding changes that may occur with respect to
customer matters relating to the forward-looking statements, Zilog
does not expect to, and disclaims any obligation to update such
statements until release of its next quarterly earnings
announcement or in any other manner. Zilog, however, reserves the
right to update such statement, or any portion thereof, at any time
for any reason. The financial information presented herein is
unaudited and is subject to change as a result of subsequent events
or adjustments, if any, arising prior to the filing of the
Company's Form 10-Q for the period ended June 27, 2009. For a
detailed discussion of these and other cautionary statements,
please refer to the risk factors discussed in filings with the U.S.
Securities and Exchange Commission ("SEC"), including but not
limited to, the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2009, and any subsequently filed reports. All
documents also are available through the SEC's Electronic Data
Gathering Analysis and Retrieval system (EDGAR) at
http://www.sec.gov/ or from the Company's website at
http://www.zilog.com/. Contact: Daniel Francisco Francisco Group
Zilog Communications (916) 812-8814 Zilog, Inc. UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands) June 27, March 31, 2009
2009 ASSETS Current assets: Cash and cash equivalents $33,826
$32,230 Accounts receivable, net 2,203 1,698 Receivables under
transition services agreement 1,484 1,696 Escrow receivable, sold
business 3,100 3,100 Patent assignment receivable 1,000 -
Inventories 3,341 4,022 Deferred tax asset 10 10 Prepaid expenses
and other current assets 949 1,199 Current assets associated with
discontinued operations - 960 Total current assets 45,913 44,915
Long term investments 900 1,100 Property, plant and equipment, net
2,349 2,347 Goodwill 2,211 2,211 Other assets 1,126 1,079 Total
assets $52,499 $51,652 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Short term debt $ - $346 Accounts payable 2,456 1,939
Payables under transition services agreement 3,401 275 Income taxes
payable 196 195 Accrued compensation and employee benefits 1,433
1,349 Other accrued liabilities 3,094 3,828 Deferred income 6,853
8,024 Current liabilities associated with discontinued operations -
1,256 Total current liabilities 17,433 17,212 Deferred tax
liability 10 10 Other non-current tax liabilities 2,826 2,804 Total
liabilities 20,269 20,026 Stockholders' equity: Common stock 186
186 Additional paid-in capital 127,666 127,436 Treasury stock
(7,563) (7,563) Other comprehensive income 195 173 Accumulated
deficit (88,254) (88,606) Total stockholders' equity 32,230 31,626
Total liabilities and stockholders' equity $52,499 $51,652 Zilog,
Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands except per share data and percentages) Three Months Ended
Jun. 27, Jun. 28, 2009 2008 Net sales from continuing operations
$7,235 $9,604 Cost of sales 4,520 5,259 Gross margin 2,715 4,345
Gross margin % 38% 45% Operating expenses: Research and development
1,031 1,733 Selling, general and administrative 2,481 5,492 Special
charges 135 590 Amortization of intangible assets - 209 Total
operating expenses 3,647 8,024 Operating loss from continuing
operations (932) (3,679) Other income: Interest income 3 70 Other
income, net 1,002 96 Income (loss) from continuing operations
before provision for income taxes 73 (3,513) Provision for income
taxes 40 54 Net income (loss) from continuing operations $33
$(3,567) Net income from discontinued operations 320 1,826 Net
income (loss) $353 $(1,741) Basic and diluted net income (loss)
from continuing operations per share 0.00 (0.21) Basic and diluted
net income from discontinued operations per share 0.02 0.11 Basic
and diluted net income (loss) per share $0.02 $(0.10)
Weighted-average shares used in computing basic net income (loss)
per share 17,230 16,948 Weighted-average shares used in computing
diluted net income (loss) per share 17,230 16,972 Zilog, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in
thousands) Three Months Ended Jun. 27, Jun. 28, 2009 2008 CASH
FLOWS FROM OPERATING ACTIVITIES: Net income (loss) from continuing
operations $33 $(3,567) Adjustments to reconcile net income (loss)
to net cash provided by operating activities: Depreciation and
amortization 318 436 Disposition of operating assets - 34 Non-cash
stock-based compensation 226 371 Amortization of fresh-start
intangible assets - 208 Changes in operating assets and
liabilities: Accounts receivable, net (505) 392 Receivable under
transition services agreement 212 - Patent assignment receivable
(1,000) - Inventories 681 344 Prepaid expenses and other current
and non-current assets 225 (57) Accounts payable 517 1,688 Payable
under transition services agreement 3,126 - Accrued compensation
and employee benefits 84 736 Deferred income (1,171) (416) Accrued
and other current and non-current liabilities (712) 1,230 Net cash
provided by continuing operating activities 2,034 1,399 Net cash
provided by (used in) discontinued operating activities 24 (972)
CASH FLOWS FROM INVESTING ACTIVITIES: Redemption of long term
investments 200 425 Investment in long term securities - - Capital
expenditures (320) (359) Net cash provided by (used in) investing
activities (120) 66 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds
from short term debt - 665 Payments on short term debt (346) -
Proceeds from issuance of common stock under employee stock
purchase and stock option plans 4 45 Net cash provided by (used in)
financing activities (342) 710 Net cash provided by discontinued
financing activities - 1 Increase in cash and cash equivalents
1,596 1,204 Cash and cash equivalents at beginning of period 32,230
16,625 Cash and cash equivalents at end of period 33,826 17,829
Zilog, Inc. SELECTED UNAUDITED TRENDED FINANCIAL INFORMATION
(Amounts in thousands except percentages, selected key metrics and
per share amounts) Three Months Ended Jun. 27, Mar. 31, Dec. 27,
Sep. 27, Jun. 28, 2009 2009 2008 2008 2008 Sales & Expenses
Information: Net sales from continuing operations $7,235 $7,044
$9,035 $10,474 $9,604 Cost of sales 4,520 4,379 6,091 6,086 5,259
Gross margin 2,715 2,665 2,944 4,388 4,345 Gross margin % 38% 38%
33% 42% 45% Operating expenses: Research and development 1,031
1,118 1,657 1,757 1,733 Selling, general and administrative 2,481
3,442 4,696 5,723 5,492 Special charges and credits 135 3,478 1,696
554 590 Amortization of intangible assets - 174 209 209 209 Total
operating expenses 3,647 8,212 8,258 8,243 8,024 Operating loss
from Continuing operations (932) (5,547) (5,314) (3,855) (3,679)
Interest income 3 4 24 49 70 Other income (expense) 1,002 (85) 114
254 96 Income (loss) from continuing operations before provision
for income taxes 73 (5,628) (5,176) (3,552) (3,513) Provision
(benefit) for income taxes 40 (2) 67 62 54 Net income (loss) from
continuing operations 33 (5,626) (5,243) (3,614) (3,567) Net income
(loss) from discontinued operatons 320 (3,831) (425) 2,058 1,826
Gain (loss) from sale of discontinued oprations, net of tax -
21,606 - - - Net income (loss) $353 $12,149 ($5,668) ($1,556)
($1,741) Basic and diluted net income (loss) from continuing
operations per share - ($0.33) ($0.31) ($0.21) ($0.21) Basic and
diluted net income (loss) from discontinued operations per share
$0.02 ($0.22) ($0.02) $0.12 $0.11 Basic and diluted net income from
gasin on sale of discontinued operations per share - $1.26 - - -
Basic and diluted net income (loss) per share $0.02 $0.71 ($0.33)
($0.09) ($0.10) Weighted average basic shares 17,230 17,171 17,071
16,949 16,948 Weighted average diluted shares 17,230 17,171 17,071
16,949 16,972 Net Sales Information: Net Sales - by channel Direct
$1,685 $1,849 $1,625 $2,404 $1,629 Distribution 5,550 5,195 7,410
8,070 7,975 Total net sales $7,235 $7,044 $9,035 $10,474 $9,604 Net
Sales - by region Americas $2,840 $2,975 $3,569 $3,783 $3,961 Asia
(including Japan) 3,349 2,571 4,046 4,899 3,563 Europe 1,046 1,498
1,420 1,792 2,080 Total net sales $7,235 $7,044 $9,035 $10,474
$9,604 Selected Key Metrics (as defined in our Form 10-Q and 10-K)
Days sales outstanding 27 22 28 22 17 Net sales to inventory ratio
(annualized) 8.7 7.0 8.0 7.5 5.9 Current ratio 2.6 2.6 1.5 1.6 1.5
Distributor weeks of inventory 12 18 13 12 12 Other Selected
Financial Metrics Depreciation and amortization $318 $452 $466 $478
$436 Stock based compensation $226 $198 $467 $288 $371 Capital
expenditures $320 $107 $82 $78 $359 Cash and cash equivalents
$33,826 $32,230 $13,560 $16,899 $17,829 Long term investments $900
$1,100 $1,300 $1,450 $1,500 Cash and long term investments $34,726
$33,330 $14,860 $18,349 $19,329 Short term debt - $346 $693 $1,039
$1,385 Cash and long term investments, net of debt $34,726 $32,984
$14,168 $17,310 $17,944 EBITDA, adjusted $749 ($1,504) ($2,571)
($2,281) ($2,186) DATASOURCE: Zilog, Inc. CONTACT: Daniel Francisco
of Francisco Group, +1-916-812-8814, for Zilog, Inc. Web Site:
http://www.zilog.com/
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