Silicon Laboratories Reports Third Quarter Results

October 27, 2010

AUSTIN, Texas, Oct 27, 2010 (BUSINESS WIRE) -- Silicon Laboratories Inc. (Nasdaq: SLAB), a leader in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), today reported revenue of $120.2 million for the third quarter, and better than anticipated earnings per share of $0.40.

Financial Highlights

Third quarter revenue of $120.2 million represented a five percent decrease from the same period in 2009. Third quarter GAAP gross margin was 65.5 percent. R&D investment for the third quarter was nearly flat sequentially at $30.8 million. SG&A expense declined to $28.6 million. GAAP operating income was 16.1 percent. The GAAP tax rate was six percent, resulting in fully diluted earnings per share of $0.40.

The following non-GAAP results exclude the impact of stock compensation expense and other one-time items. Non-GAAP gross margin for the quarter was down slightly as expected to 65.8 percent, but still above the company's target model. Non-GAAP operating expenses declined to $49.4 million. Specifically, R&D was about flat at $26.4 million and SG&A decreased to $23.0 million. Non-GAAP operating income totaled 24.7 percent of revenue. Non-GAAP diluted earnings per share were at the high end of revised guidance at $0.53. The reconciling charges are set forth in the financial measures table included below.

Share repurchases during the quarter totaled $40 million, bringing the year-to-date total to $140 million. The company ended the quarter with $365 million in cash, cash equivalents and investments due to continued healthy cash flow from operations.

Business Summary

The revenue decline in the quarter was due in part to demand weakness and inventory misalignment for the company's products shipping into consumer-oriented applications. The Access business was down as anticipated. The Broadcast business experienced a market-related slowdown in the company's Consumer Audio products as well as the expected declines in handsets. The Broad-based business was also impacted by end market weakness, particularly Embedded Mixed-Signal products, which were down sequentially, while Timing products enjoyed another record quarter.

The company continued to secure strategic design wins across its growth businesses, including new wins in wireless, timing, isolation, human interface, microcontroller, consumer audio and video products, providing strong evidence of the company's ability to return to revenue growth as the end markets recover. New Class D amplifier and human interface products announced during the quarter also represent expansions of the company's portfolio in key end markets. Research and development hiring and investment continued, with new products in development at a record high.

"While this retreat in revenue is uncharacteristic, we believe the fourth quarter represents a trough, and the composition of the business that will emerge in 2011 will be even more growth oriented," said Necip Sayiner, President and CEO of Silicon Laboratories. "We're very optimistic about progress in our emerging video product line and continue to view our Broad-based business as a strategic growth engine in 2011 and beyond."

The company guided revenue for the fourth quarter in the range of $105 to $111 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 ( A replay will be available after the call at the same website listed above or by calling 1 (800) 642-1687 or +1 (706) 645-9291 (international). Replays will be available through November 10, 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

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.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
    Three Months Ended     Nine Months Ended
    October 2,   October 3,     October 2,   October 3,
    2010   2009     2010   2009
Revenues   $120,154   $125,913     $381,450   $313,830
Cost of revenues   41,484   44,878     128,297   117,336
Gross margin   78,670   81,035     253,153   196,494
Operating expenses:                  
Research and development   30,769   25,904     91,200   77,841
Selling, general and administrative   28,556   28,592     86,296   78,221
Operating expenses   59,325   54,496     177,496   156,062
Operating income   19,345   26,539     75,657   40,432
Other income (expense):                  
Interest income   540   546     1,839   2,083
Interest expense   (21)   (51)     (66)   (154)
Other income (expense), net   (394)   8     (1,277)   298
Income before income taxes   19,470   27,042     76,153   42,659
Provision for income taxes   1,237   4,603     15,794   9,819

Net income

  $ 18,233   $ 22,439     $ 60,359   $ 32,840
Earnings per share:                  
Basic   $ 0.41   $ 0.50     $ 1.34   $ 0.73
Diluted   $ 0.40   $ 0.47     $ 1.28   $ 0.71
Weighted-average common shares outstanding:                  
Basic   44,341   45,170     45,182   44,814
Diluted   46,009   47,322     47,103   46,127
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
Non-GAAP Income   Three Months Ended
Statement Items   October 2, 2010
        GAAP   Stock       Non-GAAP
    GAAP   Percent of   Compensation   Non-GAAP   Percent of
    Measure   Revenue   Expense   Measure   Revenue
Revenues   $ 120,154                
Gross margin     78,670     65.5 %   $ 368     $ 79,038   65.8 %
Research and development     30,769     25.6 %     4,371       26,398   22.0 %
Selling, general and







  19.1 %
Operating expenses     59,325     49.4 %     9,962       49,363   41.1 %
Operating income     19,345     16.1 %     10,330       29,675   24.7 %
Non-GAAP Diluted   Three Months Ended    
Earnings Per Share   October 2, 2010    
    GAAP   Compensation   Acquisition   Non-GAAP    
    Measure   Expense   Tax Reversal   Measure    
Net income   $ 18,233   $ 9,009     $ (2,713 )   $ 24,529    
Diluted shares outstanding     46,009     --       --       46,009    
Diluted earnings per share   $ 0.40           $ 0.53    
Silicon Laboratories Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)

October 2,


January 2,

    2010   2010
Current assets:        
Cash and cash equivalents   $107,651   $195,737
Short-term investments   238,341   214,486

Accounts receivable, net of allowance for doubtful accounts of $771 at October 2, 2010 and $567 at January 2, 2010

  63,801   56,128
Inventories   38,140   31,512
Deferred income taxes   10,318   7,620
Prepaid expenses and other current assets   29,960   18,515
Total current assets   488,211   523,998
Long-term investments   19,313   24,676
Property and equipment, net   25,910   27,785
Goodwill   109,222   105,109
Other intangible assets, net   46,156   41,886
Other assets, net   21,328   19,384
Total assets   $710,140   $742,838
Liabilities and Stockholders' Equity        
Current liabilities:        
Accounts payable   $ 26,837   $ 28,759
Accrued expenses   27,751   25,399
Deferred income on shipments to distributors   33,193   28,470
Income taxes   298   6,011
Total current liabilities   88,079   88,639
Long-term obligations and other liabilities   21,661   24,403
Total liabilities   109,740   113,042
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; 43,720 and 45,772 shares issued and outstanding at October 2, 2010 and January 2, 2010, respectively

  4   5
Additional paid-in capital   37,175   128,262
Retained earnings   566,244   505,885
Accumulated other comprehensive loss   (3,023)   (4,356)
Total stockholders' equity   600,400   629,796
Total liabilities and stockholders' equity   $710,140   $742,838

SOURCE: Silicon Laboratories Inc.

Silicon Laboratories Inc.
Shannon Pleasant, 512-464-9254

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