Atmel Reports Second Quarter 2010 Financial Results

Company Revenues Grow 13% Sequentially.

Record Microcontroller Revenues Up 31% Sequentially.

SAN JOSE, Calif., -- Atmel® Corporation (Nasdaq: ATML), a leader in microcontroller and touch solutions, announced financial results for its second quarter ended June 30, 2010.

Revenues in the second quarter of 2010 were $393.4 million, up 13 percent from $348.5 million in the first quarter of 2010 and up 38 percent from $284.5 million in the second quarter of 2009.

Net loss, on a GAAP basis, was $36.4 million or $(0.08) per diluted share in the second quarter of 2010. Included in net loss for the quarter were charges related to the sale of the company’s manufacturing operations in Rousset, France of $107.6 million. The second quarter net loss compares with a GAAP net income of $16.6 million or $0.04 per diluted share in the first quarter of 2010 and a net loss of $12.4 million or $(0.03) per diluted share in the second quarter of 2009.

Non-GAAP net income in the second quarter of 2010 totaled $50.8 million or $0.11 per diluted share, compared with non-GAAP net income of $25.5 million or $0.05 per diluted share in the first quarter of 2010 and non-GAAP net loss of $(0.6) million or $(0.00) per diluted share in the second quarter of 2009.

Gross margin increased to 41 percent in the second quarter of 2010, the highest level achieved since the fourth quarter of 2000, compared to 38 percent in the first quarter of 2010 and 32 percent in the second quarter of 2009. The sequential gross margin improvement was the result of higher business volumes, increased factory utilization levels, and an improved mix, as greater than half of all product shipments during the quarter were higher margin microcontroller products.

“Our transformation to a higher growth and higher margin company is reflected in our increased revenues, improved gross margin, and strong cash flow from operations. We continue to build momentum in the microcontroller and touch businesses with increased design wins, particularly for our maXTouch™ solutions,” said Steve Laub, President and Chief Executive Officer of Atmel. “We are also pleased to have achieved two major strategic milestones during the second quarter with the closing of the sale of our wafer manufacturing operations in Rousset, France, and the execution of a definitive agreement for the sale of our Smart Card business.”

Second quarter 2010 loss from operations of $(78.9) million compared with first quarter income from operations of $14.9 million and a loss from operations of $(17.6) million in the second quarter of 2009. The sale of the manufacturing operations in Rousset resulted in a loss on the sale of assets as well as related restructuring and impairment charges totaling $107.6 million.

Stock-based compensation expense was $21.7 million in the second quarter of 2010, compared with $10.0 million in the first quarter of 2010 and $6.4 million in the second quarter of 2009.

Income tax benefit totaled $39.7 million in the second quarter of 2010, compared to an income tax provision of $2.6 million in the first quarter of 2010 and an income tax benefit of $9.7 million in the second quarter of 2009. The income tax benefit for the second quarter of 2010 was the result of discrete tax benefits related to the taxable losses from the Rousset fab transaction and related changes to deferred tax liabilities.

Cash provided from operations totaled approximately $49.2 million in the second quarter of 2010, compared with $70.4 million in the first quarter of 2010 and $1.6 million in the second quarter of 2009. Combined cash balances (cash and cash equivalents plus short-term investments) totaled $552.2 million at the end of the second quarter of 2010, an increase of $31.0 million from the end of the prior quarter, and the company had a record net cash balance (cash balances less the current and long-term debt) of $468.6 million at the end of second quarter 2010.

The company's effective average exchange rate in the second quarter of 2010 was approximately $1.31 to the Euro, compared with $1.42 to the Euro in the first quarter of 2010 and $1.33 to the Euro in the year-ago period. During the second quarter 2010 a $0.01 decrease in the Euro/dollar exchange rate increased operating income by $0.2 million.

Recent Operational and Company Highlights

* Record microcontroller revenues of $197.6 million, up 31% sequentially
* Highest gross margin since fourth quarter 2000
* Completed sale of manufacturing operations in Rousset, France
* Entered into a definitive agreement to sell the company’s Smart Card (SMS) business based in Rousset, France and East Kilbride, UK
* Record net cash balance of $468.6 million
* Announced $200 million stock repurchase program


Recent Product Highlights

* Announced maXTouch solutions support touchscreens up to 15 inches with general availability in the fourth quarter 2010
* maXTouch began shipping with Motorola’s DROID X, Samsung’s Galaxy S smartphone and Samsung’s new ‘Touch Control’ remote
* Shipping 32-Bit AVR UCL3 microcontrollers with up to 90 percent lower static power consumption
* Announced BitCloud® Profile Suite for development of ZigBee® applications
* Won Embedded Computing Design editor’s choice product for the SAM9M10 ARM-based microcontroller


Stock Repurchase

Atmel also announced today, in a separate release, that its Board of Directors has authorized up to $200 million for a common stock repurchase program. The program authorizes the purchase of Atmel common stock in the open market, depending upon market conditions and other factors. The program does not have an expiration date and the number of shares repurchased and the timing of repurchases will be based on the level of the company’s cash balances, general business, market conditions, regulatory requirements and other factors, including alternative investment opportunities.

Non-GAAP Metrics

Non-GAAP net income (loss) excludes charges related to restructuring activities, acquisitions, grant repayments, pension charge related to fab sale, (loss) gain on sale of assets, asset impairment charges and stock-based compensation, as well as distributor bad debt recovery, unsolicited M&A expense, the income tax effect of these excluded items and other unusual and non-recurring income tax items. A reconciliation of GAAP results to non-GAAP results is included following the financial statements below.

Conference Call

Atmel will hold a teleconference at 2:00 p.m. PT today to discuss the second quarter 2010 financial results. The conference call will be webcast live and can also be monitored by dialing 1-800-374-0405 or 706-758-4519. The conference ID number is 87360106 and participants are encouraged to initiate their calls at least 10 minutes in advance of the 2:00 p.m. PT start time to ensure a timely connection. The webcast can be accessed at http://www.atmel.com/ir/ and will be archived for 12 months.

A replay of the conference call will be available today at approximately 5:00 p.m. PT and will run for 48 hours. The replay access numbers are 1-800-642-1687 within the U.S. and 1-706-645-9291 for all other locations. The access code is 87360106.

About Atmel

Atmel is a worldwide leader in the design and manufacture of microcontrollers, capacitive touch solutions, advanced logic, mixed-signal, nonvolatile memory and radio frequency (RF) components. Leveraging one of the industry's broadest intellectual property (IP) technology portfolios, Atmel is able to provide the electronics industry with complete system solutions focused on industrial, consumer, security, communications, computing and automotive markets.