Silicon Laboratories Inc.
Feb 4, 2009

Silicon Laboratories Reports Fourth Quarter and Year-End Results

Company Grows 2008 Revenue by 23 Percent, Achieves Near Model Performance and Reduces Operating Expenses

AUSTIN, Texas--(BUSINESS WIRE)--

Silicon Laboratories Inc. (Nasdaq: SLAB), a leader in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), today reported fourth quarter revenue of $99.3 million, bringing year-end revenue to $415.6 million, a 23 percent year over year increase. In the fourth quarter, the company delivered solid operating performance and strong gross margins while reducing operating expenses in response to the decline in industry-wide demand.

On a GAAP basis, the company reported 2008 gross margins of 61.5 percent, operating expenses of $212 million and operating income of $43.7 million. Diluted earnings per share for the year were $0.67.

2008 Business Highlights

Fourth Quarter Financial Results

Fourth quarter revenue of $99.3 million represented a 12.5 percent sequential decrease. GAAP gross margin was 60.5 percent of revenue. On a GAAP basis, R&D investment for the period was $27.4 million and SG&A expense was $25.6 million, totaling $53 million in operating expenses. Fourth quarter GAAP operating income was $7.1 million. Other income, principally interest on invested cash, was approximately $1 million. GAAP diluted earnings per share were $0.14.

The following non-GAAP results exclude the impact of stock compensation expense and $2.6 million in other one-time charges. Non-GAAP gross margin was 61.8 percent, at the high end of the company’s target range of 60 to 62 percent. Non-GAAP operating expenses declined from the fourth quarter forecast by more than six percent to $41.4 million. Non-GAAP operating income was $20 million or 20.1 percent of revenue. Non-GAAP diluted earnings per share were $0.37. The reconciling charges are set forth in the financial measures table included below.

During the fourth quarter, both accounts receivables and inventory declined. Inventory decreased by 18 percent sequentially as the company reacted quickly to changing demand. In the fourth quarter, the company repurchased $38 million or 1.7 million shares and ended the year with a cash, cash equivalents and investments balance of $325 million.

Business Summary

The company’s RF business experienced a sequential decline in the fourth quarter. Consumer demand weakness impacted the business, particularly sales into portable navigation devices. However, design activity remained strong, with approximately 100 new audio design wins during the quarter and significant tier-one design wins in both video and short-range wireless.

The Access business experienced a single-digit sequential decline in the fourth quarter driven by weakness among residential gateway and PON terminal customers. The Broad-based business was also down sequentially, with the MCU products most heavily impacted by the macro economic weakness and declining significantly across most end-market segments.

“Despite the effects of macro economic weakness, we executed well in 2008, increasing share and further diversifying,” said Necip Sayiner , president and CEO of Silicon Laboratories. “While ongoing inventory contraction and a deteriorating demand environment are expected to result in a sequential revenue decline of 20 to 25 percent for the first quarter, we believe we are building significant market share momentum due to very compelling new products and a strong position at our customers. We intend to contain costs and preserve cash flow while continuing to invest in key programs to build upon these hard-earned market share gains.”

Webcast and Conference Call

A conference call discussing the results will follow this press release today at 7:30 a.m. Central Time. An audio webcast will be available simultaneously on Silicon Laboratories’ website under Investor Relations (www.silabs.com). A replay will be available after the call at the same website listed above or by calling 1-866-516-0673 or +1 203-369-2037 (international). Replays will be available through February 18th, 2009.

About Silicon Laboratories Inc.

Silicon Laboratories Inc. is a leading designer of high-performance, analog-intensive, mixed-signal integrated circuits (ICs) for a broad range of applications. Silicon Laboratories’ diverse portfolio of highly integrated, patented solutions is developed by a world-class engineering team with expertise in cutting-edge mixed-signal design. The company has design, engineering, marketing, sales and applications offices throughout North America, Europe and Asia. For more information about Silicon Laboratories, please visit www.silabs.com.

Forward Looking Statements

This press release contains forward-looking statements based on Silicon Laboratories’ current expectations. The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “plan,” “project,” “will” and similar phrases as they relate to Silicon Laboratories are intended to identify such forward-looking statements. These forward-looking statements reflect the current views and assumptions of Silicon Laboratories and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are the following: risks that Silicon Laboratories may not be able to maintain its historical growth; quarterly fluctuations in revenues and operating results; volatile stock price; average selling prices of products may decrease significantly and rapidly, dependence on a limited number of products and customers; difficulties developing new products that achieve market acceptance; risks that Silicon Laboratories may not be able to manage strains associated with its growth; dependence on key personnel; difficulties managing our manufacturers and subcontractors; difficulties managing international activities; credit risks associated with our accounts receivable; geographic concentration of manufacturers, assemblers, test service providers and customers in Asia that subjects Silicon Laboratories’ business and results of operations to risks of natural disasters, epidemics, war and political unrest; product development risks; inventory-related risks; intellectual property litigation risks; risks associated with acquisitions (including risks that acquisitions may not yield the expected benefits due to the failure to properly integrate the acquired businesses and employees; risks that the customer base and revenue of the acquired businesses may cease to expand or may decline; risks that the acquired business’ products under development may fail to achieve market acceptance; risks of disputes regarding the acquired business; risks that the performance of Silicon Laboratories’ existing business may not offset the dilutive effect of an acquisition); risks associated with divestitures; the competitive and cyclical nature of the semiconductor industry and other factors that are detailed in Silicon Laboratories’ filings with the SEC. Silicon Laboratories disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Note to editors: Silicon Laboratories, Silicon Labs and the Silicon Labs logo are trademarks of Silicon Laboratories Inc. All other product names noted herein may be trademarks of their respective holders.

Silicon Laboratories Inc.

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

Three Months Ended Twelve Months Ended

January 3,
2009

December 29,
2007

January 3,
2009

December 29,
2007

Revenues $ 99,348 $ 100,111 $ 415,630 $ 337,461
Cost of revenues

39,252

36,565 159,845 130,225
Gross margin 60,096 63,546 255,785 207,236
Operating expenses:
Research and development 27,369 21,524 101,205 89,320
Selling, general and administrative 25,639 27,551 100,674 94,819
In-process research and development -- -- 10,250 --
Operating expenses 53,008 49,075 212,129 184,139
Operating income 7,088 14,471 43,656 23,097
Other income (expense):
Interest income 1,172 6,523 10,449 24,525
Interest expense (108 ) (101 ) (433 ) (628 )
Other income (expense), net (16 ) (87 ) (556 ) (469 )

Income from continuing operations before income taxes

8,136 20,806 53,116 46,525
Provision (benefit) for income taxes 1,812 4,888 20,181 6,838
Income from continuing operations 6,324 15,918 32,935 39,687

Income from discontinued operations, net of income taxes

-- 5,399 -- 165,149

Net income

$ 6,324 $ 21,317 $ 32,935 $ 204,836
Basic earnings per share:
Income from continuing operations $ 0.14 $ 0.29 $ 0.68 $ 0.72
Net income $ 0.14 $ 0.39 $ 0.68 $ 3.74
Diluted earnings per share:
Income from continuing operations $ 0.14 $ 0.28 $ 0.67 $ 0.70
Net income $ 0.14 $ 0.38 $ 0.67 $ 3.64

Weighted-average common shares outstanding:

Basic 45,256 54,377 48,109 54,826
Diluted 45,635 55,901 48,989 56,321

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

Non-GAAP Income
Statement Items

Three Months Ended

January 3, 2009

GAAP
Measure

GAAP
Percent of
Revenue

Stock
Compensation
Expense

Termination
Costs and
Impairments

Cost of Sales
Fair Value
Adjustment

Non-GAAP
Measure

Non-GAAP
Percent of
Revenue

Revenues $ 99,348
Gross margin 60,096 60.5 % $ 586 $ -- $ 761 $ 61,443 61.8 %
Operating expenses 53,008 53.4 % 9,690 1,859 -- 41,459 41.7 %
Operating income 7,088 7.1 % 10,276 1,859 761 19,984 20.1 %

Non-GAAP Diluted
Earnings Per Share

Three Months Ended

January 3, 2009

GAAP
Measure

Stock
Compensation
Expense

Termination
Costs and
Impairments

Cost of Sales
Fair Value
Adjustment

Non-GAAP
Measure

Income from continuing
operations

$ 6,324 $ 8,691 $ 1,208 $ 495

$

16,718

Diluted shares outstanding 45,635 -- -- -- 45,635

Diluted earnings per share
from continuing operations

$ 0.14

$

0.37

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

Non-GAAP Income
Statement Items

Twelve Months Ended

January 3, 2009

GAAP
Measure

GAAP
Percent of
Revenue

Stock
Compensation
Expense

Termination
Costs and
Impairments

Cost of Sales
Fair Value
Adjustment

IPR&D

Non-
GAAP
Measure

Non-GAAP
Percent of
Revenue

Revenues $ 415,630
Operating income 43,656 10.5 % $ 40,669 $ 1,859 $ 2,159 $ 10,250 $ 98,593 23.7 %

Non-GAAP Diluted
Earnings Per Share

Twelve Months Ended

January 3, 2009

GAAP
Measure

Stock
Compensation
Expense

Termination
Costs and
Impairments

Cost of Sales
Fair Value
Adjustment

Acquisition
Tax Expense

IPR&D

Non-
GAAP
Measure

Income from continuing
operations

$ 32,935 $ 35,022 $ 1,208 $ 1,403

$

11,756

$

10,250

$

92,574

Diluted shares outstanding 48,989 -- -- -- -- -- 48,989

Diluted earnings per share
from continuing operations

$ 0.67

$

1.89

Non-GAAP Diluted
Earnings Per Share

Twelve Months Ended

December 29, 2007

GAAP
Measure

Stock
Compensation
Expense

Relocation
Charges

Non-GAAP
Measure

Income from continuing
operations

$ 39,687 $ 33,223 $ 523 $ 73,433
Diluted shares outstanding 56,321 -- -- 56,321

Diluted earnings per share
from continuing operations

$ 0.70 $ 1.30

Silicon Laboratories Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

January 3,

2009

December 29,

2007

Assets
Current assets:
Cash and cash equivalents $ 172,272 $ 264,408
Short-term investments 101,267 308,566

Accounts receivable, net of allowance for doubtful accounts of
$1,011 at January 3, 2009 and $517 at December 29, 2007

36,144 51,211
Inventories 28,293 28,587
Deferred income taxes 6,439 6,025
Prepaid expenses and other current assets 18,297 33,895
Total current assets 362,712 692,692
Long-term investments 51,821 --
Property, equipment and software, net 30,496 28,157
Goodwill 105,515 73,199
Other intangible assets, net 49,728 18,077
Other assets, net 23,973 28,121
Total assets $ 624,245 $ 840,246
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 22,274 $ 33,321
Accrued expenses 29,119 26,397
Deferred income on shipments to distributors 21,599 28,448
Income taxes 4 5,226
Total current liabilities 72,996 93,392
Long-term obligations and other liabilities 48,789 43,309
Total liabilities 121,785 136,701
Commitments and contingencies
Stockholders' equity:

Preferred stock--$0.0001 par value; 10,000 shares authorized; no
shares issued and outstanding

-- --

Common stock--$0.0001 par value; 250,000 shares authorized;
44,613 and 52,810 shares issued and outstanding at
January 3, 2009 and December 29, 2007, respectively

4 5
Additional paid-in capital 75,711 303,682
Retained earnings 432,793 399,858
Accumulated other comprehensive loss (6,048 ) --
Total stockholders' equity 502,460 703,545
Total liabilities and stockholders' equity $ 624,245 $ 840,246

 

Source: Silicon Laboratories Inc.

Silicon Laboratories Inc.
Shannon Pleasant, 512-464-9254
shannon.pleasant@silabs.com