Skyworks Reports Fiscal Fourth Quarter and Year End Results for 2005; Delivers on Revised Revenue and Operating Income Guidance; Projects 10 to 12 Percent Sequential Revenue Growth in RF Solutions and Linear Products Portfolio
GAAP operating income for the fourth fiscal quarter was $7.1 million, compared to $11.8 million in the third fiscal quarter of 2005 and versus $18.8 million in the corresponding period a year ago. On a pro forma basis, operating income for the fourth fiscal quarter was $8.9 million, compared to $12.3 million last quarter and versus $21.2 million for the same period a year ago. GAAP diluted earnings per share during the quarter was $0.02 while pro forma diluted earnings per share was $0.04, $0.01 ahead of consensus estimates.
For fiscal 2005, revenue grew to $792.4 million up from $784.0 million in the prior fiscal year. GAAP operating income was $50.1 million as compared to $42.7 million during the same period a year ago, while pro forma operating income was $54.6 million versus $64.0 million, respectively.
"Our modest revenue growth during fiscal 2005 somewhat masks the underlying strength of Skyworks' core business," said David J. Aldrich, Skyworks' president and chief executive officer. "Our performance was a function of three dynamics: first, we gained market share with our family of iPAC power amplifiers, Intera front-end modules and Helios EDGE radios throughout the year. Second, we launched our Linear Products business unit and introduced a suite of complementary products characterized by long life cycles and higher gross margins. Third, and somewhat offsetting this progress, our cellular baseband product line declined 14 percent year-over-year, as the addressable market for complete system solutions contracted given substantial share loss by tier-three handset OEMs and ODMs.
"As we enter fiscal 2006, we are experiencing strong demand across our RF Solutions and Linear Products portfolio. In fact, we expect these business areas to be up considerably in the December quarter, driven by market adoption of our newest solutions. Conversely, we anticipate that our cellular baseband product line will continue to exhibit volatility. As a result, we are now providing investors increased visibility into the financial performance of this business and our strategy going forward," concluded Aldrich.
Fourth Quarter 2005 Product Highlights
RF Solutions
- Initiated production volumes of Helios EDGE radios with two tier-one handset OEMs
- Doubled front-end modules shipments year-over-year with over 20 million units in the quarter
- Ramped production of CDMA direct conversion radios in support of a tier-one Korean handset supplier
- Supported Sony Ericsson's ramp of its award winning family of GPRS/EDGE Walkman handsets with highly customized power amplifier modules, and secured multiple WCDMA sockets leveraging proprietary load insensitive power amplifier (LIPA) technology
- Introduced the industry's first complete front-end module for WCDMA and HSDPA applications
Linear Products
- Ramped production of customized CMOS switch solutions in support of a large satellite operator in Europe
- Developed a portfolio of digital attenuators for cellular base stations
- Sampled first-generation bulk acoustic wave (BAW) filters for UMTS frequencies
- Expanded family of highly linear gain blocks, addressing medical equipment, test instrumentation, cellular infrastructure and broadband applications
- Received record orders for control semiconductor solutions enabling Bluetooth and wireless LAN applications
Business Outlook
"To illustrate the growth trajectory of our core business, we are providing a more detailed revenue breakdown and offering guidance by product area," said Allan M. Kline, Skyworks' vice president and chief financial officer. "For the first fiscal quarter of 2006, we anticipate revenue from our RF Solutions and Linear Products portfolio to be up 10 to 12 percent in the aggregate -- from $164 million last quarter to between $180 and $183 million in the December quarter. Meanwhile, we anticipate a sequential decline within our cellular baseband product area -- from $26 million last period to between $15 and $18 million in the first fiscal quarter, reflecting weakness across a base of tier-three handset suppliers.
"Operationally, we expect aggregate gross margin to approach 40 percent, enabling a 50 percent sequential improvement in operating income," concluded Kline.
Skyworks' Fourth Fiscal Quarter 2005 Conference Call
Skyworks will host a conference call at 5:00 p.m. Eastern time today to discuss results for the fourth fiscal quarter of 2005. 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 800-811-0667 (domestic) or 913-981-4901 (international), security code: Skyworks.
Playback of the conference call will begin at 9 p.m. Eastern time on Wednesday, Nov. 2, and end at 9 p.m. Eastern time on Wednesday, Nov. 9. The replay will be available on Skyworks' Web site or by calling 888-203-1112 (domestic) or 719-457-0820 (international); access code: 4953313#.
About Skyworks
Skyworks Solutions, Inc. is a global leader in analog, mixed signal and digital semiconductors for 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 the Skyworks Web site at www.skyworksinc.com.
Safe Harbor Statement
This press release, and related conference call, includes "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements included in this press release and related conference call, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements include information relating to future results of Skyworks (including certain projections and anticipated 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 expressed.
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 health and security 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.
Skyworks, Skyworks Solutions, iPAC, Intera, Helios and LIPA 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 Year Ended
------------------- -------------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
(in thousands, except per 2005 2004 2005 2004
share amounts) --------- --------- --------- ---------
Net revenues $190,174 $218,067 $792,371 $784,023
Cost of goods sold 120,894 130,407 484,599 470,807
--------- --------- --------- ---------
Gross profit 69,280 87,660 307,772 313,216
Operating expenses:
Research and development 36,603 38,383 152,215 152,633
Selling, general and
administrative 25,043 28,095 103,070 97,522
Special charges - 1,607 - 17,366
Amortization of
intangibles 536 737 2,354 3,043
--------- --------- --------- ---------
Total operating
expenses 62,182 68,822 257,639 270,564
Operating income 7,098 18,838 50,133 42,652
Interest expense (3,746) (3,561) (14,597) (17,947)
Other income, net 1,729 540 5,453 1,691
--------- --------- --------- ---------
Income before income taxes 5,081 15,817 40,989 26,396
Provision for income taxes 2,020 1,186 15,378 3,984
--------- --------- --------- ---------
Net income $3,061 $14,631 $25,611 $22,412
========= ========= ========= =========
Earnings per share:
Basic $0.02 $0.09 $0.16 $0.15
Diluted $0.02 $0.09 $0.16 $0.15
Weighted average shares:
Basic 158,488 155,860 157,453 152,090
Diluted 159,803 157,581 158,857 154,242
SKYWORKS SOLUTIONS, INC.
UNAUDITED RECONCILIATION OF PRO FORMA NON-GAAP MEASURES
Three Months Ended Year Ended
------------------ ------------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
(in thousands) 2005 2004 2005 2004
--------- -------- --------- --------
GAAP operating income $7,098 $18,838 $50,133 $42,652
Asset impairments (a) - - - 13,906
Restructuring charges (b) 1,265 1,607 1,265 4,434
Lease and leasehold
improvements (c) - - 886 -
Amortization of intangible
assets 536 737 2,354 3,043
--------- -------- --------- --------
Pro forma operating income $8,899 $21,182 $54,638 $64,035
========= ======== ========= ========
------------------ ------------------
Three Months Ended Year Ended
------------------ ------------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
(in thousands) 2005 2004 2005 2004
--------- -------- --------- --------
GAAP net income $3,061 $14,631 $25,611 $22,412
Asset impairments (a) - - - 13,906
Restructuring charges (b) 1,265 1,607 1,265 4,434
Lease and leasehold
improvements (c) - - 886 -
Amortization of intangible
assets 536 737 2,354 3,043
Tax adjustments (d) 1,850 2,462 12,550 3,445
--------- -------- --------- --------
Pro forma net income $6,712 $19,437 $42,666 $47,240
========= ======== ========= ========
------------------ ------------------
Three Months Ended Year Ended
------------------ ------------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
2005 2004 2005 2004
--------- -------- --------- --------
GAAP net income per share,
diluted $0.02 $0.09 $0.16 $0.15
Asset impairments (a) - - - 0.09
Restructuring charges (b) 0.01 0.01 0.01 0.03
Lease and leasehold
improvements (c) - - 0.01 -
Amortization of intangible
assets - - 0.01 0.02
Tax adjustments (d) 0.01 0.02 0.08 0.02
--------- -------- --------- --------
Pro forma net income per share,
diluted $0.04 $0.12 $0.27 $0.31
========= ======== ========= ========
(a) These charges primarily consist of a write-down of legacy
technology licenses related to the Company's cellular systems
business which was included in operating expenses, except for $0.9
million which was included in cost of goods sold.
(b) The charges recorded during the fourth quarter of fiscal 2005
related to the exit of Conexant's Assembly and Test business.
Approximately, $1.0 million and $0.3 million were included in cost
of goods sold and selling, general and administrative expenses,
respectively. For the fiscal year ended October 1, 2004, these
charges represent certain costs incurred to implement facility
consolidations and were included in special charges, except for
$0.3 million which was included in cost of goods sold.
(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) During the fourth quarter of fiscal 2005 and fiscal year ended
September 30, 2005, these charges primarily represent a non-cash
tax charge related to the utilization of pre-merger deferred tax
assets. During the fiscal year ended October 1, 2004, these
charges primarily represented a cumulative adjustment reducing the
foreign deferred tax asset.
The above pro forma non-GAAP measures are based upon our unaudited
consolidated statements of operations for the periods shown. These
measures are not in accordance with, or an alternative for, U.S.
Generally Accepted Accounting Principles (GAAP). However, the Company
believes this information is useful in understanding the results of
operations. Therefore, Skyworks provides this supplemental information
to enable investors to perform additional comparisons of operating
results and as a means to provide additional insight into the
Company's ongoing operations and economic performance.
SKYWORKS SOLUTIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
Sept. 30, Oct. 1,
(in thousands) 2005 2004
------------ -----------
Assets
Current assets:
Cash, cash equivalents and short-
term investments $235,860 $214,552
Accounts receivable, net 171,454 157,772
Inventories 77,400 79,572
Prepaid expenses and other current
assets 11,268 11,968
Property, plant and equipment, net 150,838 150,009
Goodwill and intangible assets, net 511,119 524,388
Other assets 29,904 30,545
------------ -----------
Total assets $1,187,843 $1,168,806
============ ===========
Liabilities and Equity
Current liabilities:
Short-term debt $50,000 $50,000
Accounts payable 72,276 73,405
Accrued liabilities and other current
liabilities 35,959 57,846
Long-term debt 230,000 230,000
Other long-term liabilities 7,044 5,932
Stockholders' equity 792,564 751,623
------------ -----------
Total liabilities and equity $1,187,843 $1,168,806
============ ===========
CONTACT: Skyworks Solutions, Inc.
Pilar Barrigas (Media), 949-231-3061
or
Thomas Schiller (Investors), 949-231-4700
SOURCE: Skyworks Solutions, Inc.