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CORRECTION FROM SOURCE: Zarlink Releases Second Quarter Fiscal 2009 Results Earnings per share of US$0.05 exceeds guidance range of US$0.01-US$0.03 OTTAWA, CANADA--(MARKET WIRE)--Oct 22, 2008 -- The following document corrects and replaces the release
sent earlier today at 4:25 PM EDT. In the Third Quarter
Fiscal 2009 Guidance section, "Zarlink expects second quarter
earnings of between break-even and US$0.02 per share" should
be "Zarlink expects third quarter earnings of between break-even
and US$0.02 per share". Complete corrected version follows.
Zarlink Semiconductor Inc. (Toronto:ZL.TO - News) today issued results for the Fiscal 2009 second quarter ended September 26, 2008, prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Second quarter revenue was US$61.8 million, up 2 percent compared with revenue of US$60.5 million in the Fiscal 2009 first quarter, and up approximately 25 percent compared with revenue of US$49.6 million in the second quarter of Fiscal 2008. Zarlink recorded net income of US$7.2 million or US$0.05 per share, exceeding expected second quarter earnings of US$0.01 to US$0.03 per share. The Company recorded Fiscal 2009 first quarter net income of US$1.1 million or US$0.00 per share, and a net loss of US$15.9 million or US$0.13 per share in the Fiscal 2008 second quarter. "I am pleased with the progress made this quarter, and believe we have successfully positioned the Company to target markets where we expect continued customer investments, such as voice-over-packet, medical telemetry and high-speed optical interconnect," said Kirk Mandy, President and CEO, Zarlink Semiconductor. "The current global economic slowdown has created limited visibility for revenue in the third quarter and beyond. However, our focus on the above market opportunities and firm cost control should allow Zarlink to be profitable in the third quarter." Second quarter results include a gain of US$2.4 million related to income tax recovery, and integration and severance costs of US$1.2 million related to the acquisition of Legerity (US$0.8 million in cost of good sold, US$0.3 million in S&A, and US$0.1 million in R&D). At the end of the second quarter, cash and short-term investments increased to US$46.1 million and restricted cash was US$15.5 million. This compares to cash and short-term investments of US$40.3 million and restricted cash of US$17.3 million at the end of the Fiscal 2009 first quarter. Business review Revenue from Zarlink's Communication Products group was US$39.7 million compared with revenue of US$39.1 million in the previous quarter. The acquisition of Legerity Holdings, Inc. accounted for US$24.6 million in revenue in the second quarter, compared to US$23.2 million in the Fiscal 2009 first quarter. Medical Products revenue in the second quarter of Fiscal 2009 was US$7.8 million, compared with US$9.2 million in the previous quarter. Optical Products revenue in the second quarter was US$6.8 million, compared with US$6.2 million in the Fiscal 2009 first quarter. Custom and Other revenue in the second quarter of Fiscal 2009 was US$7.5 million, compared with Fiscal 2009 first quarter of US$6.0 million. The Company made several important corporate and technology announcements in the second quarter, including: - The appointment of Dr. Adam Chowaniec as vice-chair of Zarlink's Board of Directors; - The introduction of the VoiceEdge VE792 Next-Generation Chipset (NGCC), a chipset solution that supports carrier-class video and voice services over Internet Protocol (IP) networks, in combination with carrier-grade line testing and low power consumption. On October 21st, 2008, Zarlink declared a quarterly dividend of CDN$0.50 per share on its preferred shares (Toronto:ZL-PA.TO - News) payable on December 23rd, 2008 to preferred shareholders of record as of December 5th, 2008. This dividend is fully eligible for Canadian tax purposes. Review of Operations Gross margin in the second quarter was 50%, which included integration costs of US$0.8 million. This compares with gross margin of 46% in the previous quarter, which included integration costs of US$1.3 million. R&D expenses in the second quarter were US$11.2 million or 18% of revenue, which included integration costs of US$0.1 million. This compares with R&D expenses in the previous quarter of US$12.0 million or 20% of revenue. S&A expenses in the second quarter were US$13.6 million or 22% of revenue, which included proxy contest costs of US$1.2 million and severance and integration costs of US$0.3 million. This compares with Fiscal 2009 first quarter S&A expenses of US$12.4 million or 20% of revenue, which included severance and integration costs of US$0.1 million. In addition, second quarter earnings include a US$1.9 million non-cash foreign exchange gain related mainly to Zarlink's Canadian dollar denominated debenture, based on an exchange rate of CDN$1.00 to US$0.97 at September 26, 2008. Third Quarter Fiscal 2009 Guidance The opening backlog at the start of the Fiscal 2009 third quarter was approximately US$53 million, compared with a US$56 million opening backlog in the second quarter. Given current economic uncertainties, Zarlink is forecasting Fiscal 2009 third quarter revenue will be between US$53 million and US$58 million. Gross margins are expected to be 49% to 51% and operating expenses are expected to be approximately US$23 million to US$24 million excluding amortization of intangibles. Excluding any potential impact of foreign exchange gains/losses related to the Company's Canadian dollar denominated debenture, Zarlink expects third quarter earnings of between break-even and US$0.02 per share. About Zarlink Semiconductor For over 30 years, Zarlink Semiconductor has delivered semiconductor solutions that drive the capabilities of voice, enterprise, broadband and wireless communications. The Company's success is built on its technology strengths including voice and data networks, optoelectronics and ultra low-power communications. 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 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 anticipated economic slow down, 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; 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. An open conference call for analysts will be held today beginning at 5:00 p.m. EDT. Access the call by dialing 1-800-733-7571 or 416-644-3414. Investors, media and other parties are listen-only. For a replay, call 1-877-289-8525, passcode 21285785# or 416-640-1917, passcode 21285785#. The replay is available until midnight November 5th, 2008. A live audio webcast will be available through www.marketwire.com (Marketwire) or from the Company's website at www.zarlink.com.
Zarlink Semiconductor Inc.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) DATA
(in millions of U.S dollars, except per share amounts, U.S. GAAP)
(Unaudited)
Three months ended Six months ended
-------------------------------------------------------------------------
Sept. 26, June 27, Sept. 28, Sept. 26, Sept. 28,
2008 2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue $61.8 $60.5 $49.6 $122.3 $80.2
Cost of revenue 31.2 32.9 27.0 64.1 44.4
-------------------------------------------------------------------------
Gross margin 30.6 27.6 22.6 58.2 35.8
-------------------------------------------------------------------------
Expenses:
Research and
development 11.2 12.0 12.0 23.2 20.8
Selling and
administrative 13.6 12.4 13.6 26.0 23.5
Acquired
in-process R&D - - 20.3 - 20.3
Amortization of
intangible assets 1.9 1.8 1.2 3.7 1.4
Contract
impairment
& other - - 0.7 - 1.2
-------------------------------------------------------------------------
26.7 26.2 47.8 52.9 67.2
-------------------------------------------------------------------------
Operating
income (loss) 3.9 1.4 (25.2) 5.3 (31.4)
Gain on sale of
Mitel investment - - 12.9 - 12.9
Gain on sale
of assets - 0.9 - 0.9 -
Interest income 0.3 0.4 0.9 0.7 2.4
Interest expense (1.1) (1.2) (0.7) (2.3) (0.7)
Amortization of
debt issue costs (0.2) (0.2) (0.1) (0.4) (0.1)
Foreign exchange
gain (loss) 1.9 (0.3) (3.5) 1.6 (3.8)
-------------------------------------------------------------------------
Income (loss)
before income
taxes 4.8 1.0 (15.7) 5.8 (20.7)
Income tax
recovery
(expense) 2.4 0.1 (0.2) 2.5 (0.2)
-------------------------------------------------------------------------
Net income (loss) $7.2 $1.1 $(15.9) $8.3 $(20.9)
-------------------------------------------------------------------------
Net income (loss)
attributable
to common
shareholders $6.5 $0.4 $(16.7) $6.9 $(22.8)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss)
per common
share:
Basic and
diluted $0.05 $- $(0.13) $0.05 $(0.18)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average
number of
common shares
outstanding
(millions):
Basic 125.6 127.2 127.3 126.4 127.3
Diluted 157.7 127.2 127.3 158.6 127.3
Percentage
of revenue:
Gross margin 50% 46% 46% 48% 45%
Research and
development 18% 20% 24% 19% 26%
Selling and
administrative 22% 20% 27% 21% 29%
Zarlink Semiconductor Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS DATA
(in millions of U.S. dollars, U.S. GAAP)
(Unaudited)
Three months ended Six months ended
-------------------------------------------------------------------------
Sept. 26, June 27, Sept. 28, Sept. 26, Sept. 28,
2008 2008 2007 2008 2007
-------------------------------------------------------------------------
CASH PROVIDED
BY (USED IN)
Operating
activities:
Net income
(loss) $7.2 $1.1 $(15.9) $8.3 $(20.9)
Depreciation
of fixed assets 1.2 1.2 1.5 2.4 2.7
Amortization
of intangible
assets 1.9 1.8 1.2 3.7 1.4
Stock
compensation
expense 0.5 0.5 0.5 1.0 1.0
Other non-cash
changes in
operating
activities (0.9) (0.3) 10.9 (1.2) 10.9
Deferred
income taxes 1.0 (0.1) 1.8 0.9 1.4
Decrease
(increase)
in working
capital:
Trade accounts
and other
receivables (2.9) (2.8) (5.3) (5.7) (3.6)
Inventories 0.6 0.4 (1.0) 1.0 (2.3)
Prepaid
expenses
and other 0.2 1.3 (0.9) 1.5 (0.6)
Payables and
accrued
liabilities (2.1) (2.7) 1.8 (4.8) (2.1)
Deferred
credits 2.3 (0.3) 1.2 2.0 1.1
-------------------------------------------------------------------------
Total 9.0 0.1 (4.2) 9.1 (11.0)
-------------------------------------------------------------------------
Investing
activities:
Acquisition
of business - - (135.9) - (135.9)
Matured
short-term
investments - - 3.3 - 3.3
Expenditures
for fixed
assets (0.7) (1.6) (1.7) (2.3) (2.4)
Proceeds from
sale of
investment - - 12.9 - 12.9
Proceeds from
disposal of
fixed assets - 1.0 - 1.0 -
-------------------------------------------------------------------------
Total (0.7) (0.6) (121.4) (1.3) (122.1)
-------------------------------------------------------------------------
Financing
activities:
Increase in
long term debt - - 74.5 - 74.5
Payment of
dividends on
preferred shares (0.6) (0.5) (0.6) (1.1) (1.2)
Repurchase of
preferred shares (0.4) (0.5) (1.1) (0.9) (1.6)
Repurchase of
common shares (1.0) (0.8) - (1.8) -
Debt issue costs - - (3.5) - (3.5)
Decrease in
restricted cash
and cash
equivalents - - - - -
-------------------------------------------------------------------------
Total (2.0) (1.8) 69.3 (3.8) 68.2
-------------------------------------------------------------------------
Effect of
currency
translation
on cash (0.5) - 1.1 (0.5) 1.2
Increase (decrease)
in cash and
cash equivalents 5.8 (2.3) (55.2) 3.5 (63.7)
Cash and cash
equivalents,
beginning
of period 40.1 42.4 102.8 42.4 111.3
-------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $45.9 $40.1 $47.6 $45.9 $47.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Zarlink Semiconductor Inc.
CONSOLIDATED BALANCE SHEET DATA
(in millions of U.S. dollars, U.S. GAAP)
(Unaudited)
Sept. 26, June 27, March 28,
2008 2008 2008
---------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $45.9 $40.1 $42.4
Short-term investments 0.2 0.2 0.2
Restricted cash and
cash equivalents 15.5 17.3 17.3
Trade accounts receivable - net 30.6 27.7 23.4
Other receivables - net 8.5 8.5 10.0
Inventories 27.8 28.4 28.8
Prepaid expenses and other 6.7 6.9 8.2
Deferred tax assets -
current portion 1.1 1.2 1.3
Current assets held for sale 3.1 3.1 3.1
---------------------------------------------------------------------
139.4 133.4 134.7
Fixed assets - net 13.4 14.3 14.7
Deferred income tax assets - net 6.6 7.6 7.5
Goodwill 46.9 46.9 46.9
Intangible assets - net 52.8 54.6 56.5
Other assets 3.2 3.4 3.6
---------------------------------------------------------------------
$262.3 $260.2 $263.9
---------------------------------------------------------------------
---------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $17.5 $13.9 $13.3
Employee-related accruals 10.4 11.9 12.7
Income and other taxes payable 0.4 0.4 0.4
Current portion of provisions
for exit activities 1.1 3.2 3.5
Other accrued liabilities 8.0 6.7 9.6
Deferred credits 2.5 0.3 0.6
Deferred income tax liabilities
- current portion - 0.1 0.1
---------------------------------------------------------------------
39.9 36.5 40.2
Long-term debt -
convertible debentures 76.2 77.8 77.4
Long-term portion of provisions
for exit activities 0.3 0.4 0.4
Pension liabilities 17.8 19.9 19.9
Deferred income tax
liabilities - long-term portion - 0.1 0.2
Long-term accrued income taxes 7.2 10.7 10.9
Other long-term liabilities 0.9 0.9 0.8
---------------------------------------------------------------------
142.3 146.3 149.8
---------------------------------------------------------------------
Redeemable preferred shares,
unlimited shares authorized;
1,104,000 shares issued and
outstanding as at
September 26, 2008 14.1 14.4 14.7
---------------------------------------------------------------------
Shareholders' equity:
Common shares, unlimited shares
authorized; no par value;
125,425,682 shares issued and
outstanding as at
September 26, 2008 756.9 763.1 768.5
Additional paid-in capital 15.6 10.0 5.1
Deficit (631.2) (637.8) (638.4)
Accumulated other
comprehensive loss (35.4) (35.8) (35.8)
---------------------------------------------------------------------
105.9 99.5 99.4
---------------------------------------------------------------------
$262.3 $260.2 $263.9
---------------------------------------------------------------------
---------------------------------------------------------------------
Zarlink Semiconductor Inc.
SUPPLEMENTARY SCHEDULES
(in millions 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 Three Three
Months Months Months
Ended Ended Ended
Sept. 26, % of June 27, % of Sept. 28, % of
2008 Total 2008 Total 2007 Total
-------------------------------------------------------------------------
Asia - Pacific $32.8 53% $29.5 49% $26.3 53%
Europe 15.1 24 17.0 28 12.6 25
Americas 13.9 23 14.0 23 10.7 22
-------------------------------------------------------------------------
$61.8 100% $60.5 100% $49.6 100%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six Six
Months Months
Ended Ended
Sept.26, % of Sept. 28, % of
2008 Total 2007 Total
-------------------------------------------------------------------------
Asia - Pacific $62.3 51% $36.9 46%
Europe 32.1 27 24.4 30
Americas 27.9 22 18.9 24
-------------------------------------------------------------------------
$122.3 100% $80.2 100%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Product Group Information:
Revenue, based on product group, was distributed as follows:
Three Three Three
Months Months Months
Ended Ended Ended
Sept. 26, % of June 27, % of Sept. 28, % of
2008 Total 2008 Total 2007 Total
-------------------------------------------------------------------------
Communication
Products $ 39.7 64% $39.1 65% $33.7 68%
Medical Products 7.8 13 9.2 15 6.3 13
Optical Products 6.8 11 6.2 10 3.6 7
Custom & Other 7.5 12 6.0 10 6.0 12
-------------------------------------------------------------------------
$61.8 100% $60.5 100% $49.6 100%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six Six
Months Months
Ended Ended
Sept.26, % of Sept. 28, % of
2008 Total 2007 Total
-------------------------------------------------------------------------
Communication Products $78.8 64% $48.6 61%
Medical Products 17.0 14 12.8 16
Optical Products 13.0 11 7.1 9
Custom & Other 13.5 11 11.7 14
-------------------------------------------------------------------------
$122.3 100% $80.2 100%
-------------------------------------------------------------------------
-------------------------------------------------------------------------Contact: Contacts:
Zarlink Semiconductor Inc.
Ed Goffin
Media Relations and Investor Relations
613-270-7112
edward.goffin@zarlink.com
Source: Zarlink Semiconductor Inc.
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