Zilog Inc., Campbell, Calif., today reported net sales of $44 million for the second quarter of 2001, as compared to $61.1 million in net sales during the second quarter of 2000 and $44.3 million in the first quarter of 2001.
Gross margin for the second quarter of 2001 was 19% of net sales, compared to 41% in the second quarter of 2000 and 14 percent in the first quarter of 2001. The decline in gross margin during the second quarter of 2001 compared to the same period in 2000 reflects continued under-absorption of fixed manufacturing costs in Zilog's wafer fabrication facilities.
Overall, Zilog reported an operating loss of $19.7 million during the second quarter of 2001, compared to a $600,000 operating income reported during the second quarter of 2000.
The second quarter of 2001 operating loss includes special charges of $8.1 million comprised of severance-related costs of $4 million, fixed asset write-offs of $3.3 million and professional service fees of $800,000. These restructuring actions resulted in elimination of approximately 200 positions worldwide and are expected to yield annual payroll savings of approximately $7 million. In the second quarter of 2000 severance-related special charges totaled $1.2 million.
"With our sales essentially flat from Q1 to Q2 of this year, Zilog's sequential revenue performance is doing well in relation to the rest of the industry," said Jim Thorburn, acting chief executive, in a released statement.
"We have a strong core business and are demonstrating significant improvement in operations. In addition, we have announced further steps to cut costs -- including consolidating our manufacturing and streamlining our worldwide organization -- that we expect will result in cash savings of nearly $50 million on an annualized basis."
The company ended the second quarter of 2001 with $22.7 million of cash and cash equivalents.
Zilog reported negative EBITDA of $1.5 million for the second quarter of 2001, compared with EBITDA of $12.1 million for the second quarter of 2000 and negative EBITDA of $7.1 million in the first quarter of 2001. EBITDA represents Earnings Before Interest, Taxes, Depreciation, Amortization of intangible assets, equity in loss of Qualcore, non-cash stock compensation expenses, special charges and cumulative effect of change in accounting principle. EBITDA as presented by Zilog may not be comparable to similarly titled measures reported by other companies, the company added.
During the second quarter of 2001, research and development expenses and selling, general and administrative expenses declined by 21% and 10%, respectively, compared to the same period in 2000. These declines primarily reflect lower compensation-related expenses associated with reduced headcount and savings from spending reduction initiatives throughout the company.