Skyworks Reports Second Fiscal Quarter 2006 Results; Delivers $185 Million in Revenue and $0.03 of Pro Forma Diluted EPS
Anticipates June Quarterly Revenue to Be up More Than 5 Percent Sequentially with 50 to 60 Percent Growth in Pro Forma Operating Income
Skyworks Solutions, Inc. (NASDAQ:SWKS), an industry leader in radio solutions and precision analog semiconductors, today announced revenue of $185.2 million for the second fiscal quarter ended March 31, 2006, compared to $198.3 million in the seasonally strong December quarter and $190.5 million in the same period a year ago. Excluding the company's baseband product area and legacy assembly and test services operation, revenue was up 11 percent year-over-year, from $154.9 million in the second fiscal quarter of 2005 to $172.3 million in the most recent period.
On a pro forma basis, operating income was $6.7 million in the second fiscal quarter, yielding net income of $4.6 million, or $0.03 of pro forma diluted earnings per share, $0.01 better than consensus estimates. GAAP operating income for the second fiscal quarter was $2.5 million and includes a $3.6 million charge related to the expensing of equity-based compensation in accordance with FASB Statement No. 123®, resulting in net income of $0.9 million or $0.01 in diluted earnings per share.
Pro forma results, which are a supplement to financial results based on GAAP, exclude certain charges including equity-based compensation, amortization of intangible assets and non-recurring items. The company believes these non-GAAP financial measures provide useful information to both management and investors by excluding certain charges and non-recurring items that may not be indicative of Skyworks' ongoing operations and economic performance.
"Strengthening demand across our portfolio of front-end modules, RF solutions and linear products offset typical handset seasonality of the second fiscal quarter and enabled us to deliver revenue and operating income above our guidance," said David J. Aldrich, Skyworks' president and chief executive officer. "Looking forward, we are in the midst of multiple strategic product ramps highlighted by Helios EDGE radios at Samsung, CDMA RF subsystems at LG, WEDGE front-end modules at Sony Ericsson, and several new platforms at Motorola. Additionally, we are introducing a suite of highly innovative analog semiconductors in support of a diverse set of customers. Accordingly, we are anticipating solid growth and operating margin leverage moving into the June quarter with an even stronger back half of 2006."
Corporate Highlights
- Retired $51 million of convertible debt at less than par value
in an accretive transaction
- Powered a suite of Samsung's recently introduced handsets,
including the E900, E770 and S400i series, with Helios
EDGE radios
- Supported LG's revolutionary "Chocolate" series of handsets
with complete radio solutions for both CDMA and GPRS model
versions
- Ramped front-end modules in support of Sony Ericsson's highly
successful family of GPRS, EDGE and WCDMA Walkman handsets
- Commenced WCDMA transmit module volume shipments at a fourth tier-one handset OEM
Business Outlook
"We are forecasting June quarterly revenue to increase more than 5 percent sequentially driven by increasing demand across our EDGE, CDMA and WCDMA portfolio coupled with the launch of our newest linear products," said Allan M. Kline, Skyworks' vice president and chief financial officer. "At the same time, we plan to improve pro forma operating income by approximately 50 to 60 percent sequentially and deliver $0.05 of pro forma diluted earnings per share, demonstrating our earnings leverage and setting the stage for a higher degree of profitability going forward." Pro forma operating income and diluted earnings per share excludes an estimated $4.0 million of FASB Statement No. 123® related expense.
Skyworks will discuss its business outlook in more detail on its conference call to be held with investors and analysts today at 5:00 p.m. eastern time (ET).
Skyworks' Second Fiscal Quarter 2006 Conference Call
Skyworks will host a conference call at 5:00 p.m. ET time today to discuss results for the second fiscal quarter of 2006 and current business prospects. To listen to the conference call via the Internet, please visit the Investor Relations section of Skyworks' Web site at www.skyworksinc.com. To listen to the conference call via telephone, please call 800.263.8506 (domestic) or 719.457.2681 (international), security code: Skyworks.
Playback of the conference call will begin at 9 p.m. ET on Monday, April 24, and end at 9 p.m. ET on Monday, May 1, 2006. The replay will be available on Skyworks' Web site or by calling 888.203.1112 (domestic) or 719.457.0820 (international); access code: 4478033#.
About Skyworks
Skyworks Solutions, Inc. is an industry leader in radio solutions and precision analog semiconductors servicing a diversified set of mobile communications applications. The company's power amplifiers, front-end modules and direct conversion transceivers are at the heart of many of today's leading-edge multimedia handsets, cellular base stations and wireless networking platforms. Skyworks also offers a portfolio of highly innovative linear products, supporting a diverse set of automotive, broadband, industrial and medical customers.
Headquartered in Woburn, Mass., Skyworks is worldwide with engineering, manufacturing, sales and service facilities throughout Asia, Europe and North America. For more information, please visit Skyworks' Web site at: www.skyworksinc.com.
Safe Harbor Statement
This news release includes "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include information relating to future results of Skyworks (including certain projections and business trends). Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "believes," "plans," "may," "will," "continue," similar expressions, and variations or negatives of these words. All such statements are subject to certain risks and uncertainties that could cause actual results to differ materially and adversely from those projected, and may affect our future operating results, financial position and cash flows.
These risks and uncertainties include, but are not limited to: global economic and market conditions, such as the cyclical nature of the semiconductor industry and the markets addressed by the company's and its customers' products; demand for and market acceptance of new and existing products; the ability to develop, manufacture and market innovative products in a rapidly changing technological environment; the ability to compete with products and prices in an intensely competitive industry; product obsolescence; losses or curtailments of purchases from key customers or the timing of customer inventory adjustments; the timing of new product introductions; the availability and extent of utilization of raw materials, critical manufacturing equipment and manufacturing capacity; pricing pressures and other competitive factors; changes in product mix; fluctuations in manufacturing yields; the ability to continue to grow and maintain an intellectual property portfolio and obtain needed licenses from third parties; the ability to attract and retain qualified personnel; labor relations of the company, its customers and suppliers; economic, social and political conditions in the countries in which Skyworks, its customers or its suppliers operate, including security and health risks, possible disruptions in transportation networks and fluctuations in foreign currency exchange rates; and the uncertainties of litigation, as well as other risks and uncertainties, including but not limited to those detailed from time to time in the company's filings with the Securities and Exchange Commission.
These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
Note to Editors: Skyworks, Skyworks Solutions and Helios are trademarks or registered trademarks of Skyworks Solutions, Inc. or its subsidiaries in the United States and in other countries. All other brands and names listed are trademarks of their respective companies.
SKYWORKS SOLUTIONS, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENT OF OPERATIONS
------------------- -------------------
Three Months Ended Six Months Ended
------------------- -------------------
March 31, April 1, March 31, April 1,
(in thousands, except per
share amounts) 2006 2005 2006 2005
--------- --------- --------- ---------
Net revenues $185,234 $190,505 $383,559 $410,665
Cost of goods sold 115,884 117,906 239,486 250,047
--------- --------- --------- ---------
Gross profit 69,350 72,599 144,073 160,618
Operating expenses:
Research and development 40,557 38,676 82,987 75,789
Selling, general and
administrative 25,710 25,058 48,963 52,282
Amortization of intangibles 536 545 1,072 1,282
--------- --------- --------- ---------
Total operating expenses 66,803 64,279 133,022 129,353
Operating income 2,547 8,320 11,051 31,265
Interest expense (4,446) (3,635) (8,258) (7,168)
Other income, net 2,430 1,067 4,749 2,188
--------- --------- --------- ---------
Income before income taxes 531 5,752 7,542 26,285
(Credit) provision for income
taxes (395) 4,508 2,329 11,124
--------- --------- --------- ---------
Net income $926 $1,244 $5,213 $15,161
========= ========= ========= =========
Earnings per share:
Basic $0.01 $0.01 $0.03 $0.10
Diluted $0.01 $0.01 $0.03 $0.10
Weighted average shares:
Basic 159,084 157,235 158,828 156,837
Diluted 159,629 158,435 159,212 158,426
SKYWORKS SOLUTIONS, INC.
UNAUDITED RECONCILIATION OF PRO FORMA NON-GAAP MEASURES
------------------ ------------------
Three Months Ended Six Months Ended
------------------ ------------------
March 31, April 1, March 31, April 1,
(in thousands) 2006 2005 2006 2005
--------- -------- --------- --------
GAAP operating income $2,547 $8,320 $11,051 $31,265
Stock-based compensation
expense (a) 3,588 - 6,619 -
Restructuring charges (b) - - 1,796 -
Lease and leasehold
improvements (c) - 886 - 886
Amortization of intangible
assets 536 545 1,072 1,282
--------- -------- --------- --------
Pro forma operating income $6,671 $9,751 $20,538 $33,433
========= ======== ========= ========
------------------ ------------------
Three Months Ended Six Months Ended
------------------ ------------------
March 31, April 1, March 31, April 1,
(in thousands) 2006 2005 2006 2005
--------- -------- --------- --------
GAAP net income $926 $1,244 $5,213 $15,161
Stock-based compensation
expense (a) 3,588 - 6,619 -
Restructuring charges (b) - - 1,796 -
Lease and leasehold
improvements (c) - 886 - 886
Amortization of intangible
assets 536 545 1,072 1,282
Deferred financing expense
adjustment (d) 572 - 572 -
Tax adjustments (e) (988) 3,299 179 9,189
--------- -------- --------- --------
Pro forma net income $4,634 $5,974 $15,451 $26,518
========= ======== ========= ========
------------------ ------------------
Three Months Ended Six Months Ended
------------------ ------------------
March 31, April 1, March 31, April 1,
2006 2005 2006 2005
--------- -------- --------- --------
GAAP net income per share,
diluted $0.01 $0.01 $0.03 $0.10
Stock-based compensation
expense (a) 0.02 - 0.04 -
Restructuring charges (b) - - 0.01 -
Lease and leasehold
improvements (c) - 0.01 - -
Amortization of intangible
assets - - 0.01 0.01
Deferred financing expense
adjustment (d) 0.01 - 0.01 -
Tax adjustments (e) (0.01) 0.02 - 0.06
--------- -------- --------- --------
Pro forma net income per share,
diluted $0.03 $0.04 $0.10 $0.17
========= ======== ========= ========
(a) These charges represent expense recognized in accordance with FASB
Statement No. 123R, Share-Based Payment. Approximately $0.6
million, $1.5 million and $1.5 million were included in cost of
goods sold, research and development expense and selling, general
and administrative expense, respectively, for the three months
ended March 31, 2006. Approximately $0.9 million, $2.9 million and
$2.8 million were included in cost of goods sold, research and
development expense and selling, general and administrative
expense, respectively, for the six months ended March 31, 2006.
(b) The charges recorded during the first quarter of fiscal 2006
primarily related to a continued reduction in the level of
activity within the Company's cellular baseband product area.
Approximately $0.4 million, $1.2 million and $0.2 million were
included in cost of goods sold, research and development expense
and selling, general and administrative expense, respectively.
(c) These charges represent an aggregate adjustment for the correction
of an error in the manner in which the Company accounted for
scheduled rent increases and amortization of leasehold
improvements.
(d) This charge represents a reduction in deferred financing costs
associated with the redemption of $50.7 million of the Company's
4.75% convertible subordinated notes.
(e) During the three months ended March 31, 2006, this adjustment
represents the reversal of the non-cash tax charge primarily
related to the utilization of pre-merger deferred tax assets
recorded in the first quarter of fiscal 2006. During the six
months ended March 31, 2006, this adjustment relates to foreign
exchange translation associated with the Company's foreign
deferred tax assets. During the second quarter of fiscal 2005 and
for the six months ended April 1, 2005, these charges primarily
represent non-cash charges related to the utilization of
pre-merger deferred tax assets and a reduction in the expected
benefit of foreign deferred tax assets resulting from a change in
regulated foreign tax rates.
The above pro forma non-GAAP measures are based upon our unaudited
consolidated statements of operations for the periods shown. These
non-GAAP financial measures are provided to enhance the user's overall
understanding of our current financial performance and our prospects
for the future. Specifically, we believe the non-GAAP financial
measures provide useful information to both management and investors
by excluding certain charges and non-recurring items that we believe
are not indicative of our ongoing operations and economic performance.
Additionally, since we have historically reported non- GAAP results to
the investment community, the inclusion of non-GAAP financial measures
provides consistency in our financial reporting. Further, these
non-GAAP financial measures are one of the primary indicators
management uses for planning and forecasting in future periods. The
presentation of this additional information should not be considered
in isolation or as a substitute for results prepared in accordance
with accounting principles generally accepted in the United States.
SKYWORKS SOLUTIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
March 31, Sept. 30,
(in thousands) 2006 2005
----------- -----------
Assets
Current assets:
Cash and cash equivalents $122,767 $122,535
Short-term investments 60,255 113,325
Accounts receivable, net 172,792 171,454
Inventories 92,840 77,400
Prepaid expenses and other current assets 12,469 11,268
Property, plant and equipment, net 158,986 150,838
Goodwill and intangible assets, net 508,630 511,119
Other assets 29,657 29,904
----------- -----------
Total assets $1,158,396 $1,187,843
=========== ===========
Liabilities and Equity
Current liabilities:
Short-term debt $50,000 $50,000
Accounts payable 74,732 72,276
Accrued liabilities and other current
liabilities 36,684 35,959
Long-term debt 179,335 230,000
Other long-term liabilities 7,279 7,044
Stockholders' equity 810,366 792,564
----------- -----------
Total liabilities and equity $1,158,396 $1,187,843
=========== ===========
CONTACT: Skyworks Solutions, Inc.
Pilar Barrigas (Media Relations), 949-231-3061
or
Thomas Schiller (Investor Relations), 949-231-4700
SOURCE: Skyworks Solutions, Inc.