Skyworks Exceeds Earnings Expectations for the Third Fiscal Quarter of 2007
On a pro forma basis, third fiscal quarter operating income was $17.0 million, versus $10.1 million in the third fiscal quarter of the prior year, while net income was $16.8 million compared to $8.0 million in the year-ago period. Pro forma diluted earnings per share for the third fiscal quarter was $0.11, two cents ahead of consensus estimates and up 120 percent when compared to $0.05 in the third fiscal quarter of 2006. GAAP operating income for the third fiscal quarter was $12.4 million versus $5.9 million a year ago. GAAP net income and diluted earnings per share for the third fiscal quarter were $11.4 million and $0.07, respectively, versus $3.0 million and $0.02 in the same period in 2006.
"Skyworks' ability to exceed earnings per share expectations despite the dynamics at a large tier-one handset OEM demonstrates the diversity of our portfolio and the strength of the company's new business model," said David J. Aldrich, Skyworks' president and chief executive officer. "Looking forward, linear products momentum coupled with multiple 3G product ramps spanning both new and existing customers, are positioning Skyworks to outpace market growth. At the same time, we believe crisp operational execution will enable further gross margin expansion and bottom-line improvement."
Third Fiscal Quarter Highlights
-- Expanded pro forma gross margin 50 basis points sequentially
to 38.8 percent (39.2 percent on a GAAP basis)
-- Awarded Supplier of the Year by Sony Ericsson and Nortel
-- Unveiled a host of new linear products for WiMAX, high
definition television tuner, remote meter reading and medical
imaging applications
-- Captured key sockets at Huawei with highly integrated base
station solutions
-- Launched CDMA and EDGE front-end modules in support of
Motorola's recently introduced RAZR 2 series
-- Ramped Intera(TM) front-end modules and Helios(TM) radios for
LG's record-selling Shine(TM) phone and Samsung's new SGH-U600
Ultra Series handsets, respectively
-- Supported Sony Ericsson's recent debut of their HSDPA-capable
handset platforms including the multiband, WEDGE K850
cybershot camera phone
Fourth Fiscal Quarter Outlook
"We anticipate top line growth of 6 to 10 percent on a sequential basis fueled by new, multimode product launches and the transition of several key design wins into high volume production," said Allan M. Kline, Skyworks' vice president and chief financial officer. "Operationally, we plan to expand our gross margin and record pro forma earnings per share of $0.12 to $0.14."
Estimated pro forma diluted earnings per share exclude approximately $3.5 million of FASB Statement No. 123R-related expenses.
Pro forma results, which are a supplement to financial results based on GAAP, exclude certain charges including equity-based compensation, amortization of intangible assets, baseband exit charges, 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.
Skyworks' Third Fiscal Quarter 2007 Conference Call
Skyworks will host a conference call with analysts to discuss its third fiscal quarter 2007 results and current business prospects on July 18, 2007, at 5:00 p.m. Eastern time (ET). To listen to the conference call via the Internet, please visit the Investor Relations section of Skyworks' Web site. To listen to the conference call via telephone, please call 866.409.1555 (domestic) or 913.312.1235 (international), confirmation code: 4509631.
Playback of the conference call will begin at 9:00 p.m. ET on July 18, and end at 9:00 p.m. ET on July 25, 2007. The replay will be available on Skyworks' Web site or by calling 888.203.1112 (domestic) or 719.457.0820 (international); pass code: 4509631.
About Skyworks
Skyworks Solutions, Inc. is an innovator of high performance analog and mixed signal semiconductors enabling mobile connectivity. The company's power amplifiers, front-end modules and direct conversion radios are at the heart of many of today's leading-edge multimedia handsets. Leveraging core technologies, Skyworks also offers a diverse portfolio of linear products that support automotive, broadband, cellular infrastructure, industrial and medical applications.
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 and expectations 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 our, and our customers', products; our ability to develop, manufacture and market innovative products in a highly price competitive and rapidly changing technological environment; fluctuations in our manufacturing yields due to our complex and specialized manufacturing processes; our reliance on a several key customers for a large percentage of our sales; fluctuations in the manufacturing yields of our third party semiconductor foundries and other problems or delays in the fabrication, assembly, testing or delivery of our products; the availability and pricing of third party semiconductor foundry, assembly and test capacity and raw materials; our ability to timely and accurately predict market requirements and evolving industry standards, and to identify opportunities in new markets; losses or curtailments of purchases or payments from key customers, or the timing of customer inventory adjustments; our ability to rapidly develop new products and avoid product obsolescence; our ability to retain, recruit and hire key executives, technical personnel and other employees in the positions and numbers, with the experience and capabilities, and at the compensation levels needed to implement our business and product plans; lengthy product development cycles that impact the timing of new product introductions; the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory; unfavorable changes in product mix; the quality of our products and any remediation costs; shorter than expected product life cycles; problems or delays that we may face in shifting our products to smaller geometry process technologies and in achieving higher levels of design integration; economic, social and political conditions in the countries in which we, our customers or our suppliers operate, including security and health risks, possible disruptions in transportation networks and fluctuations in foreign currency exchange rates; our ability to continue to grow and maintain an intellectual property portfolio and obtain needed licenses from third parties; and the uncertainties of litigation, including disputes over intellectual property, as well as other risks and uncertainties, including but not limited to those detailed from time to time in our filings with the Securities and Exchange Commission.
These forward-looking statements are made only as of the date hereof, and we undertake 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, Helios and Intera 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 CONSOLIDATED STATEMENT OF OPERATIONS
-------- --------- -------- ---------
Three Months Ended Nine Months Ended
------------------ ------------------
June 29, June 30, June 29, June 30,
(in thousands, except per
share amounts) 2007 2006 2007 2006
-------- -------- -------- --------
Net revenues $175,050 $197,058 $551,290 $580,617
Cost of goods sold 106,418 123,711 338,640 363,197
-------- -------- -------- --------
Gross profit 68,632 73,347 212,650 217,420
Operating expenses:
Research and development 30,549 40,619 92,344 123,606
Selling, general and
administrative 24,874 26,333 72,652 75,296
Restructuring & other
charges 257 - 5,730 -
Amortization of intangibles 536 536 1,608 1,608
-------- -------- -------- --------
Total operating expenses 56,216 67,488 172,334 200,510
Operating income 12,416 5,859 40,316 16,910
Interest expense (2,565) (3,231) (9,928) (11,489)
Other income, net 2,766 1,822 7,824 6,571
-------- -------- -------- --------
Income before income taxes 12,617 4,450 38,212 11,992
Provision for income taxes 1,194 1,445 2,555 3,774
-------- -------- -------- --------
Net income $ 11,423 $ 3,005 $ 35,657 $ 8,218
======== ======== ======== ========
Earnings per share:
Basic $ 0.07 $ 0.02 $ 0.22 $ 0.05
Diluted $ 0.07 $ 0.02 $ 0.22 $ 0.05
Weighted average shares:
Basic 158,606 159,699 160,159 159,119
Diluted 160,032 160,876 161,278 159,739
SKYWORKS SOLUTIONS, INC.
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES
-------- --------- -------- ---------
Three Months Ended Nine Months Ended
------------------ ------------------
June 29, June 30, June 29, June 30,
(in thousands) 2007 2006 2007 2006
-------- -------- -------- --------
GAAP operating income $ 12,416 $ 5,859 $ 40,316 $ 16,910
Share-based compensation
expense (a) 3,645 3,670 9,716 10,289
Revenue adjustments (b) 105 - 105 -
Cost of goods sold
adjustments (b) (1,249) - (1,249) -
Selling, general and
administrative adjustments
(b) 1,287 - 1,287 -
Restructuring & other
charges (b) 257 - 5,730 1,796
Amortization of intangible
assets 536 536 1,608 1,608
-------- -------- -------- --------
Pro forma operating income $ 16,997 $ 10,065 $ 57,513 $ 30,603
======== ======== ======== ========
-------- --------- -------- ---------
Three Months Ended Nine Months Ended
------------------ ------------------
June 29, June 30, June 29, June 30,
(in thousands) 2007 2006 2007 2006
-------- -------- -------- --------
GAAP net income $ 11,423 $ 3,005 $ 35,657 $ 8,218
Share-based compensation
expense (a) 3,645 3,670 9,716 10,289
Revenue adjustments (b) 105 - 105 -
Cost of goods sold
adjustments (b) (1,249) - (1,249) -
Selling, general and
administrative adjustments
(b) 1,287 - 1,287 -
Restructuring & other
charges (b) 257 - 5,730 1,796
Amortization of intangible
assets 536 536 1,608 1,608
Deferred financing expense
adjustment (c) - - 564 572
Tax adjustments (d) 842 793 1,515 972
-------- -------- -------- --------
Pro forma net income $ 16,846 $ 8,004 $ 54,933 $ 23,455
======== ======== ======== ========
-------- --------- -------- ---------
Three Months Ended Nine Months Ended
------------------ ------------------
June 29, June 30, June 29, June 30,
2007 2006 2007 2006
-------- -------- -------- --------
GAAP net income per share,
diluted $ 0.07 $ 0.02 $ 0.22 $ 0.05
Share-based compensation
expense (a) 0.03 0.02 0.06 0.06
Revenue adjustments (b) - - - -
Cost of goods sold
adjustments (b) (0.01) - (0.01) -
Selling, general and
administrative adjustments
(b) 0.01 - 0.01 -
Restructuring & other
charges (b) - - 0.04 0.01
Amortization of intangible
assets - - 0.01 0.01
Deferred financing expense
adjustment (c) - - - 0.01
Tax adjustments (d) 0.01 0.01 0.01 0.01
-------- -------- -------- --------
Pro forma net income per
share, diluted $ 0.11 $ 0.05 $ 0.34 $ 0.15
======== ======== ======== ========
------------------------------ --------- --------- --------- ---------
(a) These charges represent expense recognized in accordance with FASB
Statement No. 123R, Share-Based Payment. Approximately $0.5 million,
$1.5 million and $1.6 million were included in cost of goods sold,
research and development expense and selling, general and
administrative expense, respectively, for the three months ended June
29, 2007. Approximately $0.9 million, $3.6 million and $5.2 million
were included in cost of goods sold, research and development expense
and selling, general and administrative expense, respectively, for
the nine months ended June 29, 2007.
For the three months ended June 30, 2006, approximately $0.6 million,
$1.5 million and $1.6 million were included in cost of goods sold,
research and development and selling, general and administrative
expense, respectively. For the nine months ended June 30, 2006,
approximately $1.5 million, $4.5 million and $4.3 million were
included in cost of goods sold, research and development and selling,
general and administrative expense, respectively.
(b) On October 2, 2006, the Company announced that it was exiting its
baseband product area in order to focus on its core business
encompassing linear products, power amplifiers, front-end modules and
radio solutions. Due to accounting classifications, the adjustments
recorded during the three months ended June 29, 2007 associated with
the baseband product area are recorded in various lines and are
summarized as follows:
Revenue adjustments of $0.1 million resulted from the exit of our
baseband product area.
Cost of goods sold adjustments include a credit of $1.2 million of
inventory related to contractual obligations.
Selling, general and administrative adjustments of $1.3 million
represent bad debt expense on specific accounts receivable associated
with baseband product.
Restructuring and other charges recorded during the three months ended
June 29, 2007 primarily consisted of $0.5 million related to
severance and benefits, $0.4 million related to lease obligations
associated with the closure of certain locations and $1.5 million
credit related to other charges associated with the baseband area. In
addition, an $0.8 million charge was recorded that related to a lease
obligation that expires in 2008 which was assumed from Alpha
Industries, Inc. in connection with the Merger in 2002.
In addition to the charges recorded in the third quarter of fiscal
2007, the nine months ended June 29, 2007 included $1.4 million
related to the write-down of technology licenses and design software
associated with the baseband product area and $4.1 million related to
lease obligations associated with the closure of certain locations
associated with the baseband product area.
The charges recorded during the nine months ended June 30, 2006
primarily related to a continued reduction in the level of activity
with 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) The charge recorded during the nine months ended June 29, 2007
represents a write-off in deferred financing costs associated with
the redemption of $130.0 million of the Company's 4.75% convertible
subordinated notes.
The charge recorded during the nine months ended June 30, 2006
represents a write-off in deferred financing costs associated with
the retirement of $50.7 million of the Company's 4.75% convertible
subordinated notes.
(d) During the three months and nine months ended June 29, 2007, these
non-cash tax adjustments related to the utilization of pre-merger
deferred tax assets.
During the three months and nine months ended June 30, 2006, this
adjustment primarily relates to foreign exchange translation
associated with the Company's foreign deferred tax assets.
The above 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
June 29, Sept. 29,
(in thousands) 2007 2006
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 159,697 $ 143,051
Short-term investments 74,900 28,150
Accounts receivable, net 164,343 158,798
Inventories 83,783 81,529
Prepaid expenses and other current assets 8,500 9,315
Property, plant and equipment, net 151,893 150,383
Goodwill and intangible assets, net 505,852 508,975
Other assets 15,579 10,295
--------- ---------
Total assets $1,164,547 $1,090,496
========= =========
Liabilities and Equity
Current liabilities:
Credit facility $ 50,000 $ 50,000
Convertible notes 49,335 -
Accounts payable 57,676 73,071
Accrued liabilities and other current
liabilities 45,200 52,549
Long-term debt 200,000 179,335
Other long-term liabilities 6,959 6,448
Stockholders' equity 755,377 729,093
--------- ---------
Total liabilities and equity $1,164,547 $1,090,496
========= =========
CONTACT: Skyworks Media Relations:
Pilar Barrigas, 949-231-3061
or
Skyworks Investor Relations:
Thomas Schiller, 949-231-4700
SOURCE: Skyworks Solutions, Inc.