SGTL Sigmatel (MM)

SigmaTel, Inc. (NASDAQ:SGTL) today announced results for the quarter ended March 31, 2007. First Quarter Financial Review Revenues for the first quarter of 2007 were $22.0 million with a GAAP net loss of $18.1 million or $0.51 per share. The non-GAAP adjusted net loss for the first quarter of 2007 was $14.6 million or a net loss of $0.41 per share. GAAP gross margins for the quarter were 35 percent and non-GAAP gross margins were 37 percent. See the reconciling charges set forth in the reconciliation of GAAP to non-GAAP results provided below. As of March 31, 2006, SigmaTel had cash, cash equivalents, restricted cash and short-term investments of $81.2 million. Executive Summary �In January, we committed to evaluating the business to improve our financial stability. We consolidated office space, reduced staff and made additional expense controls. Executive Staff roles were redefined and the organization focused their efforts on major OEMs for the PMP, Printer, and TV Audio product lines,� said Phil Pompa, CEO of SigmaTel. Tier one OEM design win announcements during the first quarter of 2007: TV Audio design win at Samsung Ink-jet AIO EasyShare� printer design win at Kodak STMP3600-based SanDisk player Second Quarter 2007 Guidance For the second quarter of 2007, the company anticipates revenue of $24 to $28 million with non-GAAP gross margins of approximately 38 percent, plus or minus a couple of points. SigmaTel�s gross margin percentage varies primarily with product mix, pricing, and unit costs. GAAP diluted loss per share is expected to be $0.36 to $0.42 with non-GAAP loss per share expected to be $0.30 to $0.36, based on 35.5 million diluted weighted average shares outstanding. Our effective tax rate for the second quarter is expected to be approximately 10%. Significant operating expenditure reductions were initiated during the first quarter and are expected to continue into the third quarter. Once completed, these reductions are expected to result in a total decrease of our quarterly operating expenses of $5.0 to $7.0 million. �The management team will continue evaluating our businesses and managing our costs,� said Mr. Pompa. �Our goal is to rapidly minimize the cash burn, without jeopardizing future revenue.� Conference Call Today A conference call will be held today, May 3, 2007, at 3:30 p.m. Central Standard Time (CDT) and will be simulcast over the Internet at www.streetevents.com and www.sigmatel.com. A replay will be available after the call until June 1, 2007, at the websites listed above or by calling 888-203-1112 for domestic calls or 719-457-0820 for international and entering passcode number 2154838. For more information on SigmaTel, please visit www.sigmatel.com. About SigmaTel: SigmaTel is a fabless semiconductor company which designs, develops, and markets mixed-signal ICs for the consumer electronics market. The Company�s target market segments include portable media players, printers and digital televisions. SigmaTel provides complete, system-level solutions that include highly integrated ICs, customizable firmware and software, software development tools and reference designs. The Company's focus is on enabling customers to rapidly introduce and offer electronic products that are small, light-weight, power-efficient, reliable, and cost-effective. SigmaTel is ISO 9001:2000 certified and is committed to providing customers with high-performance, quality products along with superior, worldwide customer service. Cautionary Language: This press release contains forward-looking statements based on current SigmaTel expectations. The words "expect," "will," "should," "would," "anticipate," "project," "outlook," "believe," "intend," and similar phrases as they relate to SigmaTel or future events are intended to identify such forward-looking statements. These forward-looking statements reflect the current views and assumptions of SigmaTel, but are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. A number of important factors could cause actual results to differ materially from those in the forward-looking statements, and there will be events in the future that SigmaTel is not able to accurately predict or control. These risks and uncertainties include, but are not limited to: the ability of SigmaTel to effectively implement changes which will increase operational efficiencies, reduce costs, and ultimately improve SigmaTel�s financial results and return SigmaTel to profitability; our ability to execute on implementation of new products to support existing and new customer relationships and achieve new design wins; our ability to cut costs, as currently contemplated, without jeopardizing SigmaTel�s ability to retain key employees and continue supporting customers and new development efforts; and, market acceptance of our customers� end products which incorporate our products. For a more detailed discussion of factors that could impact SigmaTel's financial results and cause actual results to differ materially from those in the forward-looking statements, please refer to recent SigmaTel filings with the SEC, particularly the Form 10-K that was filed on March 16, 2007. SigmaTel provides a non-GAAP measure of gross profit, net income (loss) and net income (loss) per share in its earnings release. The presentation of gross profit, net income (loss) and net income (loss) per share is intended to be a supplemental measure of performance and excludes: (i) a non-cash charge related to amortization of intangible assets from acquisitions; (ii) a non-cash charge related to stock-based compensation; (iii) a charge related to the abandonment of leased facilities; and (iv) a loss on the disposition of assets in conjunction with the lease abandonment. SigmaTel believes that excluding these items represents a better basis for the comparison of its current results to past, present, and future operating results, and a better means to highlight the results of core ongoing operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP. The non-GAAP financial measures included in the press release have been reconciled to the corresponding GAAP financial measures as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures. SigmaTel is a registered trademark of SigmaTel, Inc. All other products and brand names as they appear in this release are trademarks or registered trademarks of their respective holders. All specifications may be changed without notice. SIGMATEL, INC. RECONCILIATION of GAAP to NON-GAAP RESULTS (in thousands, except per share data) (unaudited) � � Three Months Ended March 31, 2007 2006 Gross profit as reported $7,728� $14,730� Non-GAAP adjustments: Amortization of intangible assets from acquisitions 456� 783� � Adjusted gross profit $8,184� $15,513� � Adjusted gross profit percentage 37.2% 47.0% � Three Months Ended March 31, 2007 2006 Net loss as reported $(18,136) $(24,726) Non-GAAP adjustments (tax effected): Amortization of intangible assets from acquisitions 505� 840� Stock-based compensation 1,866� 2,057� Loss on asset disposition 594� �� Lease abandonment charge 619� �� � Adjusted net loss $(14,552) $(21,829) � Diluted weighted average shares outstanding 35,533� 35,787� Diluted net loss per share, non-GAAP $(0.41) $(0.61) SIGMATEL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) � March 31, 2007 December 31, 2006 ASSETS Current assets: Cash and cash equivalents $35,114� $30,686� Restricted cash 7,608� 7,354� Short-term investments 38,501� 62,800� Accounts receivable, net 12,730� 12,556� Inventories, net 17,349� 20,794� Income tax receivable 3,766� 3,365� Prepaid expenses and other assets 4,917� 5,591� Total current assets 119,985� 143,146� Property, equipment and software, net 12,205� 13,301� Intangible assets, net 14,978� 15,370� Non-current income tax receivable 1,871� �� Other assets 1,065� 1,574� Total assets $150,104� $173,391� LIABILITIES AND STOCKHOLDERS� EQUITY Current liabilities: Accounts payable $11,910� $16,338� Accrued compensation 5,470� 8,712� Other accrued expenses 6,532� 8,056� Deferred revenue 1,749� 1,242� Current portion of long-term obligations 644� 229� Total current liabilities 26,305� 34,577� Non-current income taxes payable 5,933� 4,453� Other liabilities 2,497� 809� Total liabilities 34,735� 39,839� Stockholders' equity: Common stock, $0.0001 par value; 170,000 shares authorized; shares issued and outstanding: 35,878 and 35,788 at March 31, 2007 and 35,603 and 35,513 at December 31, 2006, respectively 4� 4� Additional paid-in capital 199,822� 197,711� Notes receivable from stockholders �� (5) Treasury stock, 90 common shares at cost (741) (741) Accumulated deficit (84,033) (63,687) Accumulated other comprehensive income 317� 270� Total stockholders' equity 115,369� 133,552� Total liabilities and stockholders' equity $150,104� $173,391� SIGMATEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) � Three Months Ended March 31, 2007 2006 Revenues, net $22,019� $33,021� Cost of goods sold 14,291� 18,291� Gross profit 7,728� 14,730� � Operating expenses: Research and development 18,321� 22,192� Selling, general and administrative 9,838� 13,993� Loss on asset disposition 594� �� Total operating expenses 28,753� 36,185� Operating loss (21,025) (21,455) � Interest income, net 999� 783� Foreign exchange loss (74) (52) Total other income 925� 731� � Loss before income taxes (20,100) (20,724) � Income tax (benefit) expense (1,964) 4,002� � � Net loss $(18,136) $(24,726) � BASIC NET LOSS PER SHARE $(0.51) $(0.69) DILUTED NET LOSS PER SHARE $(0.51) $(0.69) � WEIGHTED AVERAGE SHARES USED TO COMPUTE: Basic net loss per share 35,533� 35,787� Diluted net loss per share 35,533� 35,787�