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Synaptics Reports Third Quarter Results

SANTA CLARA, Calif., April 20, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Synaptics (Nasdaq: SYNA), a leader in interface solutions for mobile computing, communications, and entertainment devices, today reported financial results for the third fiscal quarter ended March 31, 2006. The Company's GAAP results reflect the adoption of SFAS 123(R) regarding the expensing of non-cash share- based compensation.

Net revenue for the third quarter of fiscal 2006 was $40.4 million, compared with $56.7 million of net revenue for the third quarter of fiscal 2005. Net income for the third quarter of fiscal 2006 was $1.6 million, or $0.06 per diluted share, compared with $11.7 million, or $0.38 per diluted share, for the third quarter of fiscal 2005.

Non-GAAP net income for the third quarter of fiscal 2006, which excludes non-cash share-based compensation net of tax, was $4.1 million, or $0.15 per diluted share, compared with non-GAAP net income of $11.7 million, or $0.38 per diluted share, for the third quarter of fiscal 2005.

"Revenue for the third quarter was below our expectations primarily due to weaker than expected demand in the digital music player market, which has been broadly reported within the industry. Our performance in the notebook sector was within our anticipated range, but at the lower end of our expectations. Despite this near-term shortfall, we believe that our market leadership in notebooks and ongoing activity within the PC industry positions us well moving forward. At the same time, we continue to capitalize on growing opportunities to leverage our technology within emerging digital lifestyle applications," stated Francis Lee, President and Chief Executive Officer of Synaptics.

Russ Knittel, Synaptics' Chief Financial Officer, added, "Based on current indicators and our backlog entering the fourth fiscal quarter, we anticipate top-line growth of up to 10% sequentially. This outlook is predicated on expected seasonality and strength within our core PC market. As we look out into the September quarter, we anticipate continued strong demand for our PC solutions, where we see increasing interest for our multi-media oriented products offering dual functionality in notebook computers, and anticipate that our revenue may grow 10% to 20% from June quarter guidance. Our visibility in the portable digital entertainment market remains very limited, but any meaningful increased demand would represent upside to our current outlook."

Earnings Call Information

The Synaptics third quarter teleconference and webcast is scheduled to begin at 2:00 p.m., Pacific Time, on Thursday, April 20, 2006, during which the Company will provide forward-looking information. To participate on the live call, analysts and investors should dial 800-240-2430 at least ten minutes prior to the call. Synaptics will also offer a live and archived webcast of the conference call, accessible from the "Investor Relations" section of the Company's Web site at .

About Synaptics Incorporated

Synaptics is a leading developer of interface solutions for the mobile computing, communications and entertainment industries. The company creates interface solutions for a variety of devices including notebook PCs, PC peripherals, digital music players, and mobile phones. The TouchPad(TM), Synaptics' flagship product, is integrated into more than 50 percent of today's notebook computers. Consumer electronics and computing manufacturers use Synaptics' solutions to enrich the interaction between humans and intelligent devices through improved usability, functionality and industrial design. The company is headquartered in Santa Clara, California.

Use of Non-GAAP Financial Information

Synaptics discloses non-GAAP financial measures of net income and net income per share and believes that this non-GAAP information provides historical comparability of its core operating results over multiple reporting periods. These non-GAAP financial measures should not be considered an alternative to net income and net income per share presented in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). Further, these non-GAAP financial measures are unlikely to be comparable to non-GAAP information provided by other companies. In accordance with SEC regulations, reconciliation of the Synaptics U.S. GAAP information to the non-GAAP information is provided in the tables attached. We will also make available on the investor relations page of our web site at this press release, which includes a reconciliation of the U.S. GAAP to non-GAAP financial measures and a replay of the webcast.

Forward-Looking Statements

This press release contains "forward-looking" statements about Synaptics, as that term is defined under the federal securities laws. Synaptics intends such forward-looking statements to be subject to the safe harbor created by those laws. Such forward-looking statements include, but are not limited to, statements regarding Synaptics' anticipated revenue for the third and forth quarters of fiscal 2006, its beliefs regarding the markets it serves, its assessment of market demands and trends in target markets, its view of its operating fundamentals, its assessment of consumer demands for various applications, its assessment of market conditions, and its competitive position in the notebook computer and portable audio and video device markets. Synaptics cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained herein. Such factors include, but are not limited to, (a) demand for Synaptics' products in the PC and portable digital entertainment markets, (b) market demand for OEMs' products using Synaptics' solutions, (c) the failure of Synaptics' products and OEMs' products to deliver commercially acceptable performance, (d) changing market demand trends in the markets it serves, and consumer demand, and (e) other risks as identified from time to time in Synaptics' SEC reports, including Quarterly Reports on Form 10-Q and current reports on Form 8-K as well as the Annual Report on Form 10-K for the fiscal year ended June 30, 2005. All forward-looking statements are based on information available to Synaptics on the date hereof, and Synaptics assumes no obligation to update such statements.

For more information contact:

     Jennifer Jarman
     The Blueshirt Group

                            SYNAPTICS INCORPORATED
                         CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share data)

                                        March 31,          June 30,
                                          2006               2005
    Current assets:
       Cash and cash equivalents         $57,254            $72,232
       Short term investments            180,214            156,689
          Total cash, cash equivalents,
           and short-term investments    237,468            228,921
       Receivables, net of allowances of
        $189 and $165, respectively       29,720             33,790
       Inventories                        10,646              7,731
       Prepaid expenses and other
        current assets                     3,692              3,046
    Total current assets                 281,526            273,488

    Property and equipment, net           15,786             14,615
    Goodwill                               1,927              1,927
    Other assets                          23,819             21,175
    Total assets                        $323,058           $311,205

    Liabilities and stockholders' equity
    Current liabilities:
       Accounts payable                  $14,007            $12,390
       Accrued compensation                4,889              5,638
       Income taxes payable               11,489             14,867
       Other accrued liabilities           5,483              5,353
    Total current liabilities             35,868             38,248

    Note payable to a related party        1,500              1,500
    Convertible senior subordinated
     notes                               125,000            125,000
    Other liabilities                      1,888              1,797

    Commitments and contingencies

    Stockholders' equity:
       Preferred stock;
          $.001 par value; 10,000,000
          shares authorized; no shares
          issued and outstanding              --                 --
       Common stock;
          $.001 par value; 60,000,000
          shares authorized; 27,212,044
          and 26,419,447 shares
          issued, respectively                27                 26
       Additional paid in capital        127,629            106,686
       Less: 2,306,100 and 1,139,000
        treasury shares, respectively,
        at cost                          (39,999)           (21,180)
       Deferred stock compensation            --               (303)
       Retained earnings                  71,498             59,560
       Accumulated other comprehensive
        loss                                (353)              (129)
    Total stockholders' equity           158,802            144,660
    Total liabilities and stockholders'
     equity                             $323,058           $311,205

                            SYNAPTICS INCORPORATED
                    (In thousands, except per share data)

                                      Three Months Ended   Nine Months Ended
                                           March 31,           March 31,
                                        2006      2005      2006       2005

    Net revenue                        $40,365   $56,668  $140,645   $151,302
    Cost of revenue (1)                 22,257    30,481    76,694     81,535
    Gross margin                        18,108    26,187    63,951     69,767
    Operating expenses
      Research and development (1)       9,106     6,157    25,740     18,448
      Selling, general, and
       administrative (1)                6,952     4,937    20,593     13,091
      Amortization of deferred stock
        compensation                        --        71        --        258
    Total operating expenses            16,058    11,165    46,333     31,797

    Operating income                     2,050    15,022    17,618     37,970
    Interest income                      2,179     1,118     5,631      1,783
    Interest expense                      (485)     (483)   (1,454)      (660)
    Income before income taxes           3,744    15,657    21,795     39,093
    Provision for income taxes (2)       2,121     3,983     9,857     13,264
    Net income                          $1,623   $11,674   $11,938    $25,829

    Net income per share:
      Basic                              $0.07     $0.44     $0.49      $1.00
      Diluted                            $0.06     $0.38     $0.44      $0.88

    Shares used in computing net income
     per share:
      Basic                             24,737    26,315    24,602     25,743
      Diluted                           29,201    31,464    29,002     29,588

    (1) Includes share-based compensation charges of:

        Cost of revenue                   $145       $--      $525        $--
        Research and development         1,165        --     3,700         --
        Selling, general, and
         administrative                  1,967        --     5,752         --
                                        $3,277       $--    $9,977        $--

    (2) Includes tax benefit for share-based compensation charges of:

                                          $771       $--    $2,185        $--

    Non-GAAP net income per share
        Basic                            $0.17     $0.45     $0.80      $1.01
        Diluted                          $0.15     $0.38     $0.70      $0.89

                            SYNAPTICS INCORPORATED
            Computation of Basic and Diluted Net Income Per Share
                     (in thousands except per share data)

                                                Three              Nine
                                             Months Ended      Months Ended
                                               March 31,        March 31,
                                             2006    2005     2006     2005
      Basic net income                      $1,623  $11,674  $11,938  $25,829
      Interest expense and amortization of
       debt issuance costs on convertible
       notes (net of tax)                      266      266      798      335
      Diluted net income                    $1,889  $11,940  $12,736  $26,164

      Shares, basic                         24,737   26,315   24,602   25,743
      Effect of dilutive stock based awards  1,990    2,675    1,926    2,857
      Effect of convertible notes            2,474    2,474    2,474      988
      Shares, diluted                       29,201   31,464   29,002   29,588

    Net income per share:
      Basic                                  $0.07    $0.44    $0.49    $1.00
      Diluted                                $0.06    $0.38    $0.44    $0.88

    Computation of non-GAAP basic and diluted
     net income per share (unaudited):

      Reported net income                   $1,623  $11,674  $11,938  $25,829
      Non-GAAP adjustments:
         Amortization of deferred stock
          compensation (net of tax)             --       58       --      170
         Share-based compensation
          (net of tax)                       2,506       --    7,792       --
      Non-GAAP basic net income              4,129   11,732   19,730   25,999
      Interest expense and amortization of
       debt issuance costs on convertible
       notes (net of tax)                      266      266      798      335
      Non-GAAP diluted net income           $4,395  $11,998  $20,528  $26,334

      Shares, basic                         24,737   26,315   24,602   25,743
      Effect of dilutive stock based awards  2,334    2,675    2,196    2,857
      Effect of convertible notes            2,474    2,474    2,474      988
      Shares, diluted                       29,545   31,464   29,272   29,588

    Non-GAAP net income per share:
      Basic                                  $0.17    $0.45    $0.80    $1.01
      Diluted                                $0.15    $0.38    $0.70    $0.89

SOURCE Synaptics Incorporated

Jennifer Jarman of The Blueshirt Group, +1-415-217-7722, or, for Synaptics

Copyright (C) 2006 PR Newswire. All rights reserved.

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