Silicon Laboratories Inc.
Feb 3, 2010

Silicon Laboratories Reports Record Results

Company Grows Revenue, Earnings and Improves Margins

AUSTIN, Texas, Feb 03, 2010 (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 $127.2 million, which far exceeded the pre-recession peak and represented a 28 percent increase over the same period in 2008. Revenue for the year totaled $441 million, a six percent increase over 2008, and a very strong result compared to the decline in the overall industry during the same period. Even more notable is the combination of revenue growth, further gross margin improvement and earnings expansion enabling the company to make upward revisions to its financial model.

2009 Highlights

Fourth Quarter Financial Results

Fourth quarter revenue of $127.2 million represented a record for the company. GAAP results showed significant improvement over the course of the year. Fourth quarter GAAP gross margin increased considerably to 65.5 percent and 63.4 percent for the full year. R&D investment for the fourth quarter was $26.6 million. SG&A increased to $30.6 million. Other income, principally interest income on invested cash, was under $1 million. GAAP operating income was more than 20 percent in the fourth quarter, up from 7 percent in the same period in 2008. Fully diluted earnings per share was 84 cents for the fourth quarter and $1.57 for the full year, up dramatically from 14 cents and 67 cents, respectively, in 2008.

The earnings results reflect a 40 cent impact from an Advance Pricing Agreement the company entered into with the IRS that covers historical tax years from 2005 through 2009, allowing the immediate reversal of tax reserves established for each of those periods as well as providing more certainty regarding the company's future effective tax rate.

The following non-GAAP results exclude the impact of stock compensation expense and other one-time charges. Non-GAAP gross margin for the quarter was up again to 65.7 percent. Non-GAAP gross margin for the year was 63.8 percent, an industry-leading result when paired with the company's revenue growth. Non-GAAP operating expenses increased as expected to 36 percent of the company's revenue as R&D investment increased slightly to $23.2 million and SG&A expense increased to $22.5 million. Non-GAAP operating income was nearly 30 percent of revenue for the fourth quarter and 25.2 percent for the year. Non-GAAP diluted earnings per share for the fourth quarter was $1.06 and $2.40 for the full year, compared to $1.89 for all of 2008. The reconciling charges are set forth in the financial measures table included below.

Business Summary

Strong performance for the quarter was led by the company's Broad-based products, which were up 12 percent sequentially. The MCU products had another record quarter as demand for high-end precision mixed-signal and small form factor devices continued to rebound. The Timing products had another record quarter as well. Clock and oscillator design wins in the quarter increased by 50 percent sequentially, signaling continued momentum.

The company's Access products were up eight percent sequentially in the fourth quarter. Both embedded modems and SLICs grew quarter to quarter due to strength in demand in set-top boxes and voice over DSL gateways, respectively. And as expected, the Broadcast products were down 10 percent sequentially. Anticipated softness at the company's largest customer was partially offset by ramps at new, major customers.

"We executed well in 2009, making progress on the critical projects and design wins needed to position the business to outperform again in 2010 and beyond," said Necip Sayiner, president and CEO of Silicon Laboratories. "We believe we have visibility into continued gross and operating margin strength as all three of our product groups, Access, Broadcast and Broad-based, deliver solid growth in 2010."

The company guided revenues for the first quarter in the range of $120 to $125 million.

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 1-888-662-6658 or +1 203-369-2037 (international). Replays will be available through February 17th, 2010.

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, difficulties developing new products that achieve market acceptance; dependence on a limited number of products and customers; intellectual property litigation risks; inventory-related risks; risks associated with acquisitions; difficulties managing international activities; difficulties managing our manufacturers and subcontractors; risks that Silicon Laboratories may not be able to manage strains associated with its growth; credit risks associated with our accounts receivable; dependence on key personnel; risks associated with divestitures; 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; 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 Year Ended
January 2,

2010

January 3,

2009

January 2,

2010

January 3,

2009

Revenues $ 127,190 $ 99,348 $ 441,020 $ 415,630
Cost of revenues 43,930 39,252 161,267 159,845
Gross margin 83,260 60,096 279,753 255,785
Operating expenses:
Research and development 26,553 27,369 104,394 101,205
Selling, general and administrative 30,629 25,639 108,848 100,674
In-process research and development -- -- -- 10,250
Operating expenses 57,182 53,008 213,242 212,129
Operating income 26,078 7,088 66,511 43,656
Other income (expense):
Interest income 640 1,172 2,725 10,449
Interest expense (25 ) (108 ) (180 ) (433 )
Other income (expense), net (388 ) (16 ) (90 ) (556 )
Income before income taxes 26,305 8,136 68,966 53,116
Provision for income taxes (13,946 ) 1,812 (4,126 ) 20,181

Net income

$ 40,251 $ 6,324 $ 73,092 $ 32,935
Earnings per share:
Basic $ 0.88 $ 0.14 $ 1.62 $ 0.68
Diluted $ 0.84 $ 0.14 $ 1.57 $ 0.67

Weighted-average common shares outstanding:

Basic 45,650 45,256 45,023 48,109
Diluted 47,786 45,635 46,542 48,989

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

Non-GAAP Income
Statement Items

Three Months Ended

January 2, 2010

GAAP

Measure

GAAP
Percent of
Revenue

Stock
Compensation
Expense

Non-GAAP

Measure

Non-GAAP
Percent of
Revenue

Revenues $ 127,190
Gross margin 83,260 65.5 % $ 315 $ 83,575 65.7 %
Research and development 26,553 20.9 % 3,366 23,187 18.2 %
Selling, general and

administrative

30,629

24.1

%

8,117

22,512

17.7 %
Operating expenses 57,182 45.0 % 11,483 45,699 35.9 %
Operating income 26,078 20.5 % 11,798 37,876 29.8 %

Non-GAAP Income
Statement Items

Year Ended

January 2, 2010

GAAP

Measure

GAAP
Percent of
Revenue

Stock
Compensation
Expense

Termination
Costs and
Impairments

Non-GAAP
Measure

Non-GAAP
Percent of
Revenue

Revenues $ 441,020
Gross margin 279,753 63.4 % $ 1,457 $ 10 $ 281,220 63.8 %
Operating income 66,511 15.0 % 43,974 821 111,306 25.2 %

Non-GAAP Diluted
Earnings Per Share

Year Ended

January 2, 2010

GAAP

Measure

Stock
Compensation

Expense

Termination
Costs and
Impairments

Non-GAAP

Measure

Net income $ 73,092 $ 37,753 $ 732 $ 111,577

Diluted shares outstanding

46,542 -- -- 46,542
Diluted earnings per share $ 1.57 $ 2.40

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

(Continued)

Non-GAAP Income
Statement Items

Year Ended

January 3, 2009

GAAP
Measure

GAAP
Percent of
Revenue

Stock
Compensation
Expense

Cost of Sales
Fair Value
Adjustment

Non-GAAP
Measure

Non-GAAP
Percent of
Revenue

Revenues $ 415,630
Gross margin 255,785 61.5 % $ 1,437 $ 2,159 $ 259,381 62.4 %

Non-GAAP Diluted
Earnings Per Share

Year Ended

January 3, 2009

GAAP
Measure

Termination
Costs and
Impairments

Stock
Compensation
Expense

Cost of Sales
Fair Value
Adjustment

Acquisition
Tax
Expense

IPR&D

Non-GAAP
Measure

Net income $ 32,935 $ 1,208 $ 35,022 $ 1,403 $ 11,756 $ 10,250 $ 92,574
Diluted shares outstanding 48,989 -- -- -- -- -- 48,989
Diluted earnings per share $ 0.67 $ 1.89

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

(Continued)

Non-GAAP Diluted Earnings Per Share

Three Months Ended

January 2, 2010

GAAP

Measure

Stock

Compensation Expense

Non-GAAP

Measure

Net income $40,251 $10,234 $50,485
Diluted shares outstanding 47,786 -- 47,786
Diluted earnings per share $ 0.84 $ 1.06

Tax impact of prior period

adjustments

$ (0.40)
Diluted earnings per share $ 0.66

Silicon Laboratories Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

January 2,

2010

January 3,

2009

Assets
Current assets:
Cash and cash equivalents $ 195,737 $ 172,272
Short-term investments 214,486 101,267

Accounts receivable, net of allowance for doubtful accounts of
$567 at January 2, 2010 and $1,011 at January 3, 2009

56,128 36,144
Inventories 31,512 28,293
Deferred income taxes 7,620 6,439
Prepaid expenses and other current assets 18,515 18,297
Total current assets 523,998 362,712
Long-term investments 24,676 51,821
Property and equipment, net 27,785 30,496
Goodwill 105,109 105,515
Other intangible assets, net 41,886 49,728
Other assets, net 19,384 23,973
Total assets $ 742,838 $ 624,245
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 28,759 $ 22,274
Accrued expenses 25,399 29,119
Deferred income on shipments to distributors 28,470 21,599
Income taxes 6,011 4
Total current liabilities 88,639 72,996
Long-term obligations and other liabilities 24,403 48,789
Total liabilities 113,042 121,785
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;
45,772 and 44,613 shares issued and outstanding at January 2, 2010
and January 3, 2009, respectively

5 4
Additional paid-in capital 128,262 75,711
Retained earnings 505,885 432,793
Accumulated other comprehensive loss (4,356 ) (6,048 )
Total stockholders' equity 629,796 502,460
Total liabilities and stockholders' equity $ 742,838 $ 624,245

SOURCE: Silicon Laboratories Inc.

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

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