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Press release from Business Wire

Semtech Announces Third Quarter of Fiscal Year 2013 Results

<ul> <li class='bwlistitemmargb'> <b>Record quarterly revenue of $161M, up 30% from prior year quarter</b> </li> <li class='bwlistitemmargb'> <b>Net income up 66% from prior quarter</b> </li> <li class='bwlistitemmargb'> <b>Record cash flow from operations of $55M, representing 34% of revenue</b> </li> </ul>

Wednesday, November 28, 2012

Semtech Announces Third Quarter of Fiscal Year 2013 Results16:30 EST Wednesday, November 28, 2012 CAMARILLO, Calif. (Business Wire) -- Semtech Corporation (Nasdaq: SMTC), a leading supplier of analog and mixed-signal semiconductors, today reported unaudited financial results for its third quarter of fiscal year 2013, which ended October 28, 2012. Net revenue for the third quarter of fiscal year 2013 was $160.9 million, up 29.8 percent from the third quarter of fiscal year 2012 and up 6.8 percent from the second quarter of fiscal year 2013. Third quarter revenue included $8.1 million of IP licensing revenue. Gross profit margin, computed in accordance with U.S. generally accepted accounting principles (GAAP), for the third quarter of fiscal year 2013 was 60.2 percent compared to 59.2 percent in the third quarter of fiscal year 2012 and 49.5 percent in the second quarter of fiscal year 2013. GAAP net income for the third quarter of fiscal year 2013 was $16.6 million, or approximately 25 cents per diluted share. This compares to GAAP net income of $27.0 million or 40 cents per diluted share in the third quarter of fiscal year 2012 and GAAP net income of $10.0 million or 15 cents per diluted share in the second quarter of fiscal year 2013. To facilitate the complete understanding of comparable financial performance between periods, Semtech also presents performance results net of certain non-cash and one-time items. Semtech's non-GAAP results exclude the following items: Stock-based compensation expense Acquisition related fair value adjustments Option and restatement related expenses Transaction and other acquisition related expenses Intangible amortization and impairments Reorganization and integration related expenses Environmental monitoring and remediation reserves Release of prior accrued taxes on foreign earnings Non-GAAP gross profit margin for the third quarter of fiscal year 2013 was 63.1 percent. Non-GAAP gross profit margin for the third quarter of fiscal year 2012 was 59.4 percent and 61.2 percent in the second quarter of fiscal year 2013. Non-GAAP net income for the third quarter of fiscal year 2013 was $36.1 million or 53 cents per diluted share. Non-GAAP net income was $35.0 million or 52 cents per diluted share in the third quarter of fiscal year 2012 and was $27.5 million or 41 cents per diluted share in the second quarter of fiscal year 2013. As of October 28, 2012 Semtech had $218.0 million in cash, cash equivalents and marketable securities and $336.2 million in debt, compared to $173.4 million in cash, cash equivalents and marketable securities and $341.6 million in debt at the end of the second quarter of fiscal year 2013. Mohan Maheswaran, Semtech's President and Chief Executive Officer, said, "Despite a challenging macroeconomic environment, Semtech posted record revenue, expanded margins and grew profits in the third quarter of fiscal year 2013. The integration of Gennum Corporation continues to progress quite well, and Q3 was a record quarter for Gennum for both bookings and revenue. Our relentless focus on identifying growth opportunities and executing well continues to yield positive results for the company.” The results announced today are preliminary, as they are subject to customary quarterly review procedures by the Company's independent registered public accounting firm. As such, these results are subject to revision until the Company will have filed its quarterly report on Form 10-Q for the third quarter of fiscal year 2013. Fourth Quarter of Fiscal Year 2013 Outlook Net sales are expected to be in the range of $146.0 million to $152.0 million GAAP gross profit margin is expected to be between 58.3 percent and 58.9 percent The amortization of the fair value adjustment for acquired inventory, which is included in the above GAAP estimate, is expected to be approximately $4.4 million Non-GAAP gross profit margin is expected to be between 61.5 percent and 62.0 percent GAAP SG&A expense is expected to be in the range of $32.3 million to $32.8 million GAAP R&D expense is expected to be in the range of $31.6 million to $32.1 million Stock-based compensation expense, which is included in the preceding GAAP estimates, is expected to be approximately $6.9 million, categorized as follows: $0.4 million cost of sales, $4.1 million SG&A, and $2.4 million R&D Amortization of acquired intangible assets is expected to be approximately $8.2 million Transaction and other acquisition related expenses of approximately $1.3 million Reorganization and integration related expenses of approximately $1.2 million Interest and other expense is expected to be approximately $4.4 million GAAP tax rate is expected to be between 0 percent and 2 percent GAAP earnings are expected to be in the range of 13 cents to 17 cents per diluted share Non-GAAP earnings are expected to be in the range of 41 cents to 45 cents per diluted share Fully diluted share count is expected to be approximately 68.0 million shares Capital expenditures are expected to be approximately $7.0 million Non-GAAP Financial Measures To supplement the Company's consolidated financial statements prepared in accordance with GAAP, this release includes a non-GAAP presentation of gross profit, net income and earnings per diluted share. To provide additional insight into the Company's fourth quarter outlook, this release includes a presentation of forward-looking non-GAAP gross profit and earnings per diluted share. A further discussion of these non-GAAP financial measures can be found above. The non-GAAP gross profit, net income and earnings per diluted share measures exclude stock-based compensation, amortization of acquired intangible assets, and the other items detailed above. Free cash flow is defined as total cash provided (used in) by operating activities less additions to property and equipment. This non-GAAP financial measure assists investors in making a ready comparison of the company's expected free cash flow against the company's results for the respective prior periods and against management's previously provided expectations. These non-GAAP measures are provided to enhance the user's overall understanding of the Company's comparable financial performance between periods. In addition, the Company's management generally excludes the items noted above when managing and evaluating the performance of the business. The financial statements provided with this release include reconciliations of GAAP results for the third quarter of fiscal years 2013 and 2012 and the second quarter of fiscal year 2013; and a reconciliation of forward-looking earnings per diluted share for the fourth quarter of fiscal year 2013. These additional financial measures should not be considered substitutes for any measures derived in accordance with GAAP and may be inconsistent with similar measures presented by other companies. Forward-Looking and Cautionary Statements This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than historical information or statements of current condition and relate to matters such as future financial performance, future operational performance, the anticipated impact of specific items on future earnings, and our plans, objectives and expectations. These forward-looking statements are identified by the use of such terms and phrases as "intends," "goal," "estimate, "expect," "project," "plans," "anticipates," "should," "will," "designed to," "believe," and other similar expressions which generally identify forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and events to differ materially from those projected. Important factors that could cause actual results to differ materially include, but are not limited to: the continuation and/or pace of key trends considered to be main contributors to the Company's growth, such as demand for increased network bandwidth, demand for increasing energy efficiency in the Company's products or end use applications of the products, demand for increasing miniaturization of electronic components; shifts in demand among target customers, and other comparable changes in projected or anticipated markets; the success of near and longer term efforts to integrate Gennum into the Company; unexpected acquisition-related costs and expenses; competitive changes in the market place applicable to the products of Gennum, as well as the products of the Company in its pre-Gennum “organic” product lines, including, but not limited to the pace of growth or adoption rates of applicable products or technologies; shifts in focus among target customers, and other comparable changes in projected or anticipated markets; adequate supply of components and materials from our suppliers, and of our products from our third-party manufacturers, to include disruptions due to natural causes or disasters, or related extraordinary weather events; the Company's ability to forecast and achieve anticipated revenues and earnings estimates in light of periodic economic uncertainty, to include impacts arising from European and global economic dynamics; the Company's ability to manage expenses to achieve anticipated amounts; and the amount and timing of expenditures for capital equipment deemed necessary or advisable by the Company. Additionally, forward-looking statements should be considered in conjunction with the cautionary statements contained in the "Risk Factors" section and elsewhere in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2012, in the Company's other filings with the SEC, and in material incorporated therein by reference. In light of the significant uncertainties inherent in the forward-looking information included herein, any such forward-looking information should not be regarded as representations by the Company that its objectives or plans will be achieved or that any of its operating expectations or financial forecasts will be realized. Investors are cautioned not to place undue reliance on any forward-looking information contained herein. The Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. About Semtech Semtech Corporation is a leading supplier of analog and mixed-signal semiconductors for high-end consumer, computing, communications and industrial equipment. Products are designed to benefit the engineering community as well as the global community. The company is dedicated to reducing the impact it, and its products, have on the environment. Internal green programs seek to reduce waste through material and manufacturing control, use of green technology and designing for resource reduction. Publicly traded since 1967, Semtech is listed on the NASDAQ Global Select Market under the symbol SMTC. For more information, visit http://www.semtech.com. Semtech and the Semtech logo are marks of Semtech Corporation.             SEMTECH CORPORATIONCONSOLIDATED STATEMENTS OF INCOME (Table in thousands - except per share amount)   Three Months Ended Nine Months Ended October 28, July 29, October 30, October 28, October 30,   2012     2012     2011     2012     2011 Q3 2013 Q2 2013 Q3 2012 FY 2013 FY 2012 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)   Net sales$160,878$150,704$123,944$428,224$376,569 Cost of sales   64,085     76,179     50,537     201,569     150,588 Gross profit96,79374,52573,407226,655225,981 Operating costs and expenses: Selling, general and administrative 35,646 31,220 25,110 111,684 74,296 Product development and engineering 33,354 32,613 20,489 90,050 61,242 Intangible amortization and impairments   8,212     7,977     4,573     21,767     8,778 Total operating costs and expenses   77,212     71,810     50,172     223,501     144,316 Operating income19,5812,71523,2353,15481,665 Interest expense (4,172 ) (4,194 ) - (10,208 ) - Interest income and other (expense), net   (1,071 )   162     729     (696 )   172 Income (loss) before taxes14,338(1,317)23,964(7,750)81,837 (Benefit) provision for taxes   (2,252 )   (11,339 )   (3,015 )   (36,571 )   5,138 Net income$16,590   $10,022   $26,979   $28,821   $76,699   Earnings per share: Basic $ 0.25 $ 0.15 $ 0.41 $ 0.44 $ 1.18 Diluted $ 0.25 $ 0.15 $ 0.40 $ 0.43 $ 1.14   Weighted average number of shares used in computing earnings per share: Basic 65,996 65,587 65,440 65,622 65,180 Diluted 67,465 67,165 67,314 67,306 67,539       SEMTECH CORPORATIONCONSOLIDATED BALANCE SHEETS (Table in thousands)   October 28,Jan 29,   2012   2012(Unaudited)ASSETS Current assets: Cash and cash equivalents $ 204,954 $ 227,022 Temporary investments 5,017 83,121 Accounts receivable, net 72,804 49,644 Inventories 73,825 46,995 Deferred tax assets 13,800 5,339 Prepaid taxes 31,740 9,580 Other current assets   18,342   5,611 Total current assets 420,482 427,312   Property, plant and equipment, net 100,390 69,713 Long-term investments 8,012 17,522 Deferred income taxes 47,917 - Goodwill 394,508 129,651 Other intangible assets, net 212,043 66,720 Other assets   21,321   15,403 Total assets$1,204,673$726,321   LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 51,131 $ 26,699 Accrued liabilities 46,697 32,389 Deferred revenue 4,565 3,853 Current portion - long term debt 46,845 - Deferred tax liabilities   4,157   4,041 Total current liabilities 153,395 66,982   Deferred tax liabilities - non-current 52,316 1,000 Long term debt - less current 289,323 - Other long-term liabilities 27,713 28,151 - Shareholders' equity   681,926   630,188 Total liabilities & shareholders' equity$1,204,673$726,321       SEMTECH CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Table in thousands)     Nine Months EndedOctober 28,October 30,   2012     2011   (Unaudited)(Unaudited)   Cash flows from operating activities: Net income $28,821$76,699Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions Depreciation, amortization and impairments 35,300 16,084 Effect of acquisition fair value adjustments 33,251 - Accretion of deferred financing costs and debt discount 1,819 - Accrued interest expense 186 - Deferred income taxes (12,586 ) 5,209 Stock-based compensation 16,727 17,149 Excess tax benefits on stock based compensation (3,335 ) (2,327 ) Loss (gain) on disposition of property, plant, and equipment 85 (6 ) Changes in assets and liabilities   (33,489 )   (39,240 ) Net cash provided by operating activities 66,779 73,568     Cash flows from investing activities: Purchase of available-for-sale investments (17,122 ) (90,331 ) Proceeds from sales and maturities of available-for-sale investments 104,699 95,122 Proceeds from sales of property, plant, and equipment - 18 Purchase of property, plant, and equipment (18,115 ) (18,007 ) Purchase of intangible assets (250 ) (3,000 ) Acquisitions, net of cash acquired   (491,717 )   -   Net cash used in investing activities (422,505 ) (16,198 )     Cash flows from financing activities: Proceeds from debt issuance, net of discount 347,000 - Deferred financing cost (8,962 ) - Payment for interest rate cap (1,100 ) - Excess tax benefits on stock based compensation 3,335 2,327 Proceeds from issuance of common stock 4,839 35,005 Repurchase of outstanding common stock (269 ) (30,579 ) Payment of long term debt   (11,250 )   -   Net cash provided by financing activities 333,593 6,753 Effect of exchange rate increase (decrease) on cash and cash equivalents   65     (2 )   Net (decrease) increase in cash and cash equivalents (22,068 ) 64,121 Cash and cash equivalents at beginning of period 227,022 119,019     Cash and cash equivalents at end of period$204,954   $183,140               SEMTECH CORPORATIONSUPPLEMENTAL INFORMATION - NOTES TO CONSOLIDATED GAAP STATEMENTS OF INCOME (Tables in thousands - except per share amounts)   Three Months Ended Nine Months Ended October 28, July 29, October 30, October 28, October 30,   2012     2012     2011     2012     2011   Stock-based Compensation Expense Q3 2013 Q2 2013 Q3 2012 FY 2013 FY 2012 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Cost of sales $ 313 $ 297 $ 238 $ 841 $ 712 Selling, general and administrative 3,970 2,657 2,757 9,852 11,041 Product development and engineering   2,199     1,965     2,046     6,034     5,396   Total stock-based compensation expense $ 6,482   $ 4,919   $ 5,041   $ 16,727   $ 17,149       Three Months Ended Nine Months Ended October 28, July 29, October 30, October 28, October 30,   2012     2012     2011     2012     2011   Gross Profit - Reconciliation GAAP to Non-GAAP Q3 2013 Q2 2013 Q3 2012 FY 2013 FY 2012 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)   GAAP gross profit$96,793$74,525$73,407$226,655$225,981 Adjustments to GAAP gross profit: Stock-based compensation expense 313 297 238 841 712 Expiration of acquired return rights - (371 ) - (676 ) - Fair value adjustment related to acquired inventory   4,382     17,726     -     35,024     -   Non-GAAP gross profit$101,488   $92,177   $73,645   $261,844   $226,693       Three Months Ended Nine Months Ended October 28, July 29, October 30, October 28, October 30,   2012     2012     2011     2012     2011   Net Income - Reconciliation GAAP to Non-GAAP Q3 2013 Q2 2013 Q3 2012 FY 2013 FY 2012 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)   GAAP net income$16,590$10,022$26,979$28,821$76,699   Adjustments to GAAP net income: Stock-based compensation expense 6,482 4,919 5,041 16,727 17,149 Acquisition related fair value adjustments 4,721 18,065 - 35,918 - Option and restatement related expenses - - 8 - 194 Transaction and other acquisition related expenses 1,099 606 921 4,737 921 Environmental monitoring and remediation reserves 2,540 - - 2,540 - Intangible amortization and impairments 8,212 7,977 4,573 21,767 8,778 Reorganization and integration related expenses 1,310 1,151 1,981 16,996 1,981           Total before taxes 24,364 32,718 12,524 98,685 29,023 Associated tax effect   (4,884 )   (15,276 )   (4,460 )   (46,034 )   (7,502 ) Total of supplemental information net of taxes   19,480     17,442     8,064     52,651     21,521   Non-GAAP net income$36,070   $27,464   $35,043   $81,472   $98,220     Diluted GAAP earnings per share $ 0.25 $ 0.15 $ 0.40 $ 0.43 $ 1.14 Adjustments per above   0.28     0.26     0.12     0.78     0.31   Diluted non-GAAP earnings per share $ 0.53   $ 0.41   $ 0.52   $ 1.21   $ 1.45       Three Months Ended Nine Months Ended October 28, July 29, October 30, October 28, October 30,   2012     2012     2011     2012     2011   Tax Impact Associated With Supplemental Information Q3 2013 Q2 2013 Q3 2012 FY 2013 FY 2012 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Adjustments to GAAP net income: Stock-based compensation expense $ 119 $ 4,029 $ 2,798 $ 4,884 $ 4,757 Acquisition related fair value adjustments 1,249 4,238 - 6,433 - Option and restatement related expenses - - 8 - 75 Transaction and other acquisition related expenses 322 296 156 883 156 Environmental monitoring and remediation reserves 707 - - 707 - Intangible amortization and impairments 1,664 1,495 930 3,388 1,946 Reorganization and integration related expenses 823 2,174 568 3,252 568 Release of prior accrued taxes on foreign earnings - - - 23,443 - Effect of enacted tax rate changes   -     3,044     -     3,044     -   Total of associated tax effect $ 4,884   $ 15,276   $ 4,460   $ 46,034   $ 7,502       Three Months Ended October 28, July 29, October 30,   2012     2012     2011   Q3 2013 Q2 2013 Q3 2012 (Unaudited) (Unaudited) (Unaudited) Free Cash Flow:   Cash Flow from Operations 54,908 23,605 32,982 Net Capital Expenditure   (7,400 )   (6,085 )   (2,735 ) Free Cash Flow:   47,508     17,520     30,247         Q4 FY13 Earnings Per Share GuidanceGAAP to Non-GAAP Reconciliation (net of tax)LowHigh GAAP EPS 0.13 0.17   Stock based compensation expense 0.09 0.09 Acquisition related fair value adjustments 0.08 0.08 Amortization of acquired intangibles 0.11 0.11     Non-GAAP EPS $ 0.41 $ 0.45   Semtech CorporationLinda Brewton(805) 480-2004webir@semtech.com