Zarlink encouraged by sequential improvement

Zarlink Semiconductor has released fourth quarter and fiscal 2003 results for the year ended 28th March 2003.

Zarlink Semiconductor has released fourth quarter and fiscal 2003 results for the year ended 28th March 2003.

Fourth quarter revenue was US $52.8 million, up 13% from US $46.8 million for the previous quarter and slightly higher than the US $52.1 million reported for the same period last year.

Improvements from the previous quarter were noted across all segments of the company's operations.

As expected, Zarlink recorded a fourth quarter net loss of US $23.6 million, or US $0.19 per share.

In comparison, the company recorded a net loss of US $22.3 million or US $0.18 per share for the same period in fiscal 2002.

Fourth quarter results included two previously announced items: the US $11.5 million non-cash write-down of an investment and the US $6.6 million impact of settling a defined benefit pension plan in the UK.

"We are encouraged by our sequential improvement in revenue and gross margin", said Patrick J Brockett, President and Chief Executive Officer, Zarlink Semiconductor.

"We also continued our commitment to R and D investment in fiscal 2003 which fuelled the release of a record number of new products for the year".

The company's net loss in fiscal 2003 was US $57.9 million, or US $0.47 per share and improves on the net loss of US $120.8 million, or US $0.98 per share, in fiscal 2002.

Gross margin for the fourth quarter improved to 50% of revenue, up from 45% in the previous quarter and the 44% recorded in the same period last year.

The improvement reflects the higher plant usage and other favourable manufacturing variances.

Order backlog continued to improve for the third consecutive quarter.

At the end of the fourth quarter, 90-day order backlog was US $38 million, up from US $36 million in the previous quarter.

Cash at the end of the fourth quarter was in line with expectations at US $119 million, down from US $133 million in the previous quarter.

The decrease was principally due to the settlement of the UK defined benefit pension plan and to the settlement of certain foreign currency contracts for the pounds Sterling as against the US dollar in the fourth quarter.

R and D investments in the fourth quarter were US $21.1 million or 40% of revenue.

This was in line with the US $23.8 million spent in the previous quarter, which included severance charges of US $2.5 million, and up from US $20.6 million for the same period in Fiscal 2002.

R and D spending in the fourth quarter included higher material costs as a result of increased activity.

Selling and administrative expenses were US $12.6 million, including severance costs of US $1.6 million, in line with US $11.5 million for the previous quarter, and down from US $13.7 million for the same period last year.

The company is keenly focused on cost control in line with business expectations.

Other expenses amounted to US $21.3 million in the fourth quarter.

Major items included US $6.8 million of mostly non-cash foreign exchange charges, principally related to holding significant US dollar cash balances in the Canadian parent company, and the previously disclosed charges for the settlement of the UK defined benefit plan and the impairment of an investment.

This was partially offset by a cash settlement gain of US $3.7 million on the early termination of a lease by a tenant.

In the first quarter of fiscal 2004, the company expects revenue to be approximately US $55 million.

The company also expects to record a net loss of approximately US $0.05 per share.

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