Micrel Reports Increase in Fourth Quarter Revenues, Gross Margin and Net Income
biz.yahoo.com
Wednesday February 1, 4:05 pm ET
* Revenues of $65.1 million, Up 4% Sequentially and Up 10% From Year-Ago Period
* Gross Margin Increased to 57.5%, Third Highest Quarterly Gross Margin in Company History
* Earnings Per Diluted Share of $0.11 Compared With $0.09 in Q3 and $0.06 in the Year-Ago Period
SAN JOSE, Calif., Feb. 1 /PRNewswire-FirstCall/ -- Micrel, Incorporated (Nasdaq: MCRL), an industry leader in analog, high bandwidth communications and Ethernet IC solutions, today announced financial results for the fourth quarter and year ended December 31, 2005. Revenues for the fourth quarter were $65.1 million, an increase of 4% from $62.5 million in the third quarter and 10% above the revenues of $59.4 million in the year-ago period. Fourth quarter net income was $9.9 million, or $0.11 per diluted share. This compared to third quarter net income of $7.7 million, or $0.09 per share, and $5.1 million, or $0.06 per share in the year-ago period.
"We are encouraged by the strength in demand we experienced in the fourth quarter, especially from customers serving the industrial and communications end markets," said Ray Zinn, president and CEO of Micrel. "Micrel's order rates increased nicely on a sequential basis in the fourth quarter resulting in a book-to-bill ratio above one. This order strength has continued into January. Three years ago we made a commitment to get Micrel's gross margins back to pre-bubble levels. In the fourth quarter our gross margin once again improved significantly. At 57.5%, our gross margin has returned to levels we experienced in 2000, even though quarterly revenues and factory utilization are about one-third less today. We view this as a significant achievement especially considering that Micrel's gross margins were in the mid-30% range three years ago."
Total revenues for 2005 were $250.4 million, a decrease of 3% from $257.6 million in 2004. The primary reason for the decline in Micrel's revenues in 2005 was that the Company could not remain price competitive in the small office/home office (SOHO) Ethernet business without affecting its gross margin objectives. While Micrel's SOHO Ethernet products are technically superior, the majority of customers remain more focused on price than performance in this market. The Company believes the reduction in revenue from low margin Ethernet business, which amounted to approximately $7 million to $9 million in 2005, did not significantly impact overall profitability, but rather resulted in higher over all gross margins.
For the year ended December 31, 2005, net income was $25.4 million, or $0.29 per diluted share. The 2005 results include a $9.3 million pre-tax charge related to an unfavorable jury award related to a contract dispute, which reduced earnings per share by $0.07. Micrel is currently appealing this verdict. Net income in 2004 was $31.3 million, or $0.34 per diluted share. In 2004, net income benefited from the reversal of accruals for potential payroll tax and income tax liabilities upon the resolution of a tax audit which resulted in an aggregate, one-time increase in net income of $6.3 million, or $0.07 per diluted share.
Zinn continued, "Micrel significantly increased its gross margin in all four quarters of 2005. We are extremely pleased that our gross margin is now well above the average for all analog semiconductor companies. We believe Micrel's fourth quarter gross margin is now at least in the top one-fourth of all semiconductor companies."
Outlook
The Company's first quarter 2006 beginning backlog is higher than the beginning backlog for the fourth quarter of 2005. However, order lead times for the Company's products remain extremely short and a relatively high proportion of quarterly revenue must be booked and shipped within the quarter to OEM customers or resold through the Company's distributors. As a result, it remains difficult to accurately predict future revenues. Based upon current backlog levels and demand projections, the Company believes first quarter revenues will increase sequentially by 3% to 8%.
Zinn concluded, "As we enter 2006, it is encouraging to see broad-based strength in customer demand combined with what appears to be lean channel inventories and disciplined supply chain inventory management. In this environment, we are encouraged with the economic prospects for Micrel, especially given that the first quarter is usually seasonally weak for the industry."
Conference Call
The Company will host a conference call at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) today, February 1, 2006. Chief Executive Officer Raymond Zinn and Chief Financial Officer Richard Crowley will present an overview of fourth quarter and fiscal year 2005 financial results, discuss current business conditions and then respond to questions.
The call is available, live, to any interested party on a listen-only basis by dialing (800) 218-0530. For international callers, please dial (303) 275-2170. Interested callers should dial in at least five minutes before the scheduled start time and ask to be connected to the Micrel, Incorporated Conference Call. A live webcast will also be available through www.vcall.com. An audio replay of the conference call will be available through February 8, 2006, by dialing (303) 590-3000 or (800) 405-2236 and entering access code number 11050714. The webcast replay will also be available on the Company's website at www.micrel.com. |
