Skyworks Delivers Record Revenues and Operating Income in Second Fiscal Quarter of 2004; Exceeds Top and Bottom Line Expectations
On a pro forma basis, excluding amortization of intangible assets and special items, operating income for the second fiscal quarter was $13.1 million, up 18 percent sequentially and up 226 percent year-over-year. Second fiscal quarter pro forma earnings per share was $0.05, and $0.01 better than First Call consensus estimates.
Second fiscal quarter GAAP operating loss was $4.4 million, including $17.5 million in charges primarily related to the write-down of legacy baseband technology licenses that were established prior to the merger between Alpha Industries and Conexant's wireless business, and the consolidation of software development design centers. These charges result from the company's intensified focus in its Cellular Systems business on the advanced multimedia applications required by a growing roster of customers, thus invalidating older technology licenses. Including these items, GAAP loss per share for the second fiscal quarter was $0.06.
"Despite seasonality in the wireless handset market, Skyworks delivered record results, solidly growing both our top and bottom lines. We gained market share in key product areas, highlighted by the ramp of our portfolio of next generation power amplifiers, front-end modules, RF solutions and cellular systems," said David J. Aldrich, Skyworks' president and chief executive officer. "Our ability to outpace the growth of the overall wireless industry demonstrates the tremendous efforts of product development, marketing and operations teams as customers increasingly turn to our highly integrated wireless semiconductor solutions. The product pipeline has never looked better and we believe last quarter's performance is a precursor to an exceptional year."
Corporate Achievements
-- Received LG Electronics' 2003 Best Quality Award for
outstanding product quality and customer service
-- Generated approximately $19 million of cash flow from
operations
-- Ended the quarter with $197 million in cash
Product Highlights
Front-End Modules
-- Delivered more than four million of the industry's most highly
integrated front-end module solution, integrating switch and
power amplifier (PA) functionality
-- Commenced shipments of GSM/GPRS PA modules at Samsung
Electronics, supporting more than a dozen new feature-rich
handsets
-- Gained PA module market share, with unit shipments up by more
than 40 percent on a year-over-year basis
RF Subsystems
-- Unveiled the world's smallest single chip GSM/GPRS quad-band
direct conversion transceiver
-- Scored Ningbo Bird, China's largest domestic handset supplier,
as a new front-end module plus direct conversion transceiver
customer
-- Captured initial EDGE RF subsystem design wins at leading OEMs
and ODMs
-- Ramped high volume CDMA 1X transmit and receive chain
solutions at LG Electronics
Cellular Systems
-- Supported NEC's ramp of their N910 family of handsets
-- Added Arima, one of Taiwan's leading ODMs, to the growing list
of system customers
-- Introduced GSM/GPRS system solution at China-based CEC Telecom
-- Provided enabling platform to Mio Technology for new 8390
smartphones
Cellular Infrastructure and Wireless Data
-- Shipped more than 30 million wireless LAN (WLAN) switches
-- Received initial high volume WLAN front-end module production
orders in support of a tier-one supplier
-- Increased GPRS, EDGE and 3G linear base station component
shipments driven by service provider deployments throughout
China, India and South America
Third Fiscal Quarter 2004 Outlook
"Based on record backlog and order trends across the business, we expect to grow revenues another 5 percent sequentially in the June quarter," said Allan M. Kline, Skyworks' vice president and chief financial officer. "Operationally, we anticipate that gross margins will expand with operating expenses declining as a percentage of sales. In turn, we expect to further demonstrate our business model's leverage by improving operating profitability by roughly 15 percent sequentially and delivering EPS of $0.07.
"Additionally, we have notified the holder of our $45 million, 15 percent note, that on May 12, 2004 we intend to call this debt which has a conversion price of $7.87 per share. This transaction will eliminate $45 million of long-term debt, reduce our quarterly interest expense by $1.8 million and be accretive to EPS going forward," concluded Kline.
Skyworks' Second Quarter Conference Call
Skyworks will host a conference call at 5:00 p.m. Eastern Time today to discuss second quarter FY04 results. To listen to the call, please visit the "Investor Relations" section of Skyworks' web site at www.skyworksinc.com or www.companyboardroom.com. The webcast will be recorded and available for replay on Skyworks' web site until 9:00 p.m. Eastern Time, May 5, 2004.
About Skyworks
Skyworks Solutions, Inc. is the industry's leading wireless semiconductor company focused on RF and complete cellular system solutions for mobile communications applications. The company provides front-end modules, RF subsystems and cellular systems to handset, WLAN and infrastructure customers.
Skyworks is headquartered in Woburn, Mass., with executive offices in Irvine, Calif. The company has design, engineering, manufacturing, marketing, sales and service facilities throughout North America, Europe, Japan, Korea, Taiwan and India. For more information please visit 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 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 Securities and Exchange Commission filings.
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 is a trademark or registered trademark of Skyworks Solutions, Inc. or its subsidiaries in the U.S. and in other countries. All other brands and names listed are trademarks of their respective companies.
SKYWORKS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) Three Months Ended
(in thousands,
except per share data) Pro Forma Pro Forma GAAP GAAP
April 2, Adjustments April 2, March 28,
2004 2004 2003
Net sales $183,471 $- $183,471 $157,364
Cost of sales 113,193 974 (a) 114,167 93,845
Research and development
expenses 35,992 - 35,992 40,109
Selling and administrative
expenses 21,154 - 21,154 19,386
Amortization of intangible
assets - 769 769 1,108
Impairment and
restructuring (a) - 15,759 15,759 3,849
Operating income (loss) 13,132 17,502 (4,370) (933)
Interest expense (5,403) - (5,403) (5,047)
Other income, net 303 - 303 626
Income (loss) before income
taxes 8,032 17,502 (9,470) (5,354)
Provision (credit) for income
taxes 431 (480) (b) (49) 601
Net income (loss) $7,601 $17,022 $(9,421) $(5,955)
Net income (loss) per share,
basic $0.05 $(0.06) $(0.04)
Net income (loss) per share,
diluted $0.05 $(0.06)
Weighted average shares, basic 149,396 149,396 138,141
Weighted average shares,
diluted 152,709 149,396 138,141
(a) Impairment and restructuring charges consist primarily of a write-
down of legacy technology licenses related to the Company's cellular
systems business and certain costs incurred to implement facility
consolidations.
(b) Represents the reversal of the non-cash tax charge related to the
utilization of pre-merger deferred tax assets recorded in the first
quarter of fiscal 2004.
Although the pro forma presentation is not intended to present results
of operations in accordance with GAAP, 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.
(unaudited) Six Months Ended
(in thousands, except Pro Forma Pro Forma GAAP GAAP
per share data) April 2, Adjustments April 2, March 28,
2004 2004 2003
Net sales $358,579 $- $358,579 $317,558
Cost of sales 221,561 974 (a) 222,535 188,919
Research and
development expenses 72,686 - 72,686 77,410
Selling and
administrative
expenses 40,058 - 40,058 38,681
Amortization of
intangible assets - 1,538 1,538 2,235
Impairment and
restructuring (a) - 15,759 15,759 4,806
Operating income 24,274 18,271 6,003 5,507
Interest expense (10,777) - (10,777) (10,781)
Other income, net 756 - 756 1,449
Income (loss) before
income taxes 14,253 18,271 (4,018) (3,825)
Provision for income
taxes 1,231 - 1,231 1,339
Income (loss) before
cumulative effect of
change in accounting
principle $13,022 $18,271 $(5,249) $(5,164)
Cumulative effect of
change in accounting
principle (b) $- $- $- $(397,139)
Net income (loss) $13,022 $18,271 $(5,249)$(402,303)
Loss per share before cumulative effect of change in
accounting principle, basic and diluted $(0.04)
Cumulative effect of change in accounting
principle per share, basic and diluted $(2.88)
Net income (loss) per
share, basic $0.09 $(0.04) $(2.91)
Net income (loss) per
share, diluted $0.09 $(0.04) $(2.91)
Weighted average shares,
basic 149,090 149,090 138,019
Weighted average shares,
diluted 151,737 149,090 138,019
(a) Impairment and restructuring charges consist primarily of a write-
down of legacy technology licenses related to the Company's cellular
systems business and certain costs incurred to implement facility
consolidations.
(b) The Company adopted SFAS No. 142, "Goodwill and Other Intangible
Assets" during fiscal 2003. As a result of the adoption of SFAS No.
142, the Company was required to evaluate for impairment goodwill and
intangible assets that have indefinite lives. Based on this
evaluation, the Company determined that its goodwill was impaired.
The amount of this impairment charge was $397.1 million.
SKYWORKS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) April 2, Oct. 3,
(in thousands) 2004 2003
Assets
Current assets:
Cash, cash
equivalents and
short-term
investments $197,085 $170,806
Accounts
receivable, net 142,708 144,267
Inventories 72,334 58,168
Prepaid expenses
and other current
assets 11,868 12,854
Property, plant and
equipment, net 133,204 127,765
Goodwill and
intangible assets,
net 526,056 527,695
Other assets 34,940 49,113
Total assets $1,118,195 $1,090,668
Liabilities and Equity
Current liabilities:
Short-term debt $45,054 $41,681
Accounts payable 70,032 50,369
Accrued liabilities
and other current
liabilities 47,709 44,766
Long-term debt 275,000 275,000
Other long-term
liabilities 5,756 5,677
Stockholders' equity 674,644 673,175
Total liabilities
and equity $1,118,195 $1,090,668
CONTACT:
Skyworks Solutions, Inc.
Pilar Barrigas (Media), 949-231-3061
or
Thomas Schiller (Investors), 949-231-4700
SOURCE: Skyworks Solutions, Inc.