Skyworks Improves Upon Level of Operating Profitability and Delivers on Guidance; Gross Margin Exceeds 40 Percent
WOBURN, Mass., Apr 16, 2003 (BUSINESS WIRE) -- Skyworks Solutions, Inc. (Nasdaq: SWKS), the industry's leading wireless semiconductor company focused on radio frequency (RF) and complete cellular system solutions for mobile communications applications, today announced revenues of $157.4 million for the second fiscal quarter ended March 28, 2003, up 22 percent versus combined company revenues of $128.5 million in the same period last year and compared to $160.2 million in the first fiscal quarter. Pro forma operating income was $4.0 million as compared to combined company losses of $22.7 million in the same period last year and $3.7 million of operating income last quarter. Second quarter fiscal 2003 pro forma loss per share was $0.01 and in-line with consensus estimates. Operating loss in accordance with GAAP for the second fiscal quarter was $0.9 million, which includes amortization of intangible assets and costs to implement consolidations. GAAP loss per share was $0.04. "Despite the seasonally weak March quarter, Skyworks was able to maintain revenues in our wireless business driven by the ramp of new design wins, particularly within our direct conversion transceiver and cellular systems product areas, resulting in capture of an increasing amount of semiconductor content within the handset," said David J. Aldrich, Skyworks' president and chief executive officer. "At the same time, we leveraged our module manufacturing capability and low cost structure to achieve gross margin of 44 percent in our wireless business and 40 percent on an aggregate basis, yielding a higher level of operating profitability." Business Accomplishments
-- Completed all facility consolidations and shifted GaAs HBT
production from Sunnyvale, Calif. to Newbury Park, Calif. and
manufacturing from Haverhill, Mass. to Mexicali, Mexico
-- Reduced Mexicali cycle times to less than five days
-- Maintained module manufacturing yields of greater than 95
percent
-- Expanded gross margin by 270 basis points sequentially to 40
percent on an aggregate basis and to 44 percent when excluding
assembly and test service revenues
Product Highlights
Front-End Modules
-- Introduced the world's most highly integrated RF transmit
front-end module for quad-band GSM/GPRS cellular handsets,
combining the company's power amplifier (PA) and switch
functions into a single low-cost module
-- Scored 20 design wins based on the company's quad-band
GSM/GPRS 8mm x 10mm iPAC(TM) PA module
-- Launched the industry's smallest 3mm x 3mm PA modules for CDMA
cellular handsets, PCS and wireless local loop applications
RF Subsystems
-- Delivered record single-chip direct conversion transceiver
unit shipments
-- Qualified complete GSM/GPRS RF subsystem with the new Intel(R)
PXA800F cellular processor
-- Secured initial design wins for the GSM/GPRS Single Package
Radio(TM) Solution, the world's first complete handset radio
system that fits into a single, dime-sized package
Cellular Systems
-- Increased complete cellular systems chipset units by 15
percent sequentially
-- Captured 5 additional OEM, ODM and contract manufacturer
customers
-- Unveiled a GSM/GPRS three-chip system solution incorporating a
baseband processor, mixed-signal device and Single Package
Radio
Third Quarter Fiscal 2003 Outlook
"Although we enter the June quarter with strong design win momentum, given the current economic environment, coupled with reported wireless softness in China, Korea and India, we are planning for June quarterly revenues within our wireless business to be flat to down five percent sequentially," said Paul E. Vincent, Skyworks' chief financial officer. "In parallel, per our supply agreement with Conexant and based on their outsourcing needs, we anticipate that revenue from our assembly and test operation will be approximately $11 million, versus $13 million in the March quarter. "Operationally, we expect our gross margin to be roughly 41 to 42 percent within our wireless business and 38 percent on an aggregate basis. Meanwhile, we are projecting operating expenses to decline to slightly less than $57 million as we continue to execute on our cost reduction initiatives and tap additional merger synergies. In turn, during a time of market uncertainty, we intend to maintain operating profitability," Vincent concluded. Skyworks' Second Quarter Conference Call Skyworks will host a conference call at 5 p.m. Eastern Time today to discuss second quarter fiscal year 2003 financial results. To listen to the call via telephone, dial 888/207-9995 (domestic) or 334/323-9852 (international), password: Skyworks. To listen to the call over the Internet, 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 p.m. Eastern Time, April 23, 2003. 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 began operations in June 2002, following the completion of the merger between Alpha Industries, Inc. and Conexant Systems, Inc.'s wireless communications business. Skyworks is focused on providing front-end modules, RF subsystems and cellular systems to wireless handset and infrastructure customers worldwide. 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 and Asia Pacific. 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 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: iPAQ, Single Package Radio, Skyworks and Skyworks Solutions 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) Three Months Ended
(in thousands, except
per share data) Pro Forma Pro Forma GAAP GAAP
March 28, Adjustments March 28, March 29,
2003 2003 2002
Net sales $157,364 $ -- $157,364 $100,356
Cost of sales 93,845 -- 93,845 70,923
Research and
development
expenses 40,109 -- 40,109 31,620
Selling and
administrative
expenses 19,386 3,849(a) 23,235 11,431
Amortization of
intangible assets -- 1,108 1,108 4,007
Operating income (loss) 4,024 (4,957) (933) (17,625)
Interest expense 5,047 -- 5,047 --
Other income, net 626 -- 626 7
Income (loss) before
income taxes (397) (4,957) (5,354) (17,618)
Provision for income
taxes 601 601 721
Net income (loss) $(998) $(4,957) $(5,955)$(18,339)
Net income (loss) per
share, basic $(0.01) $(0.04)
Net income (loss) per
share, diluted $(0.01) $(0.04)
Weighted average
shares, basic 138,141 138,141
Weighted average
shares, diluted 138,141 138,141
(a) Represents certain costs incurred to implement consolidations. Basis of Presentation -- The above operating results for the three months ended March 29, 2002 reflect the application of reverse merger accounting principles under GAAP which provide that the historical results of Conexant Systems, Inc.'s wireless communications business be treated as the historical results of the Company. The pro forma presentation above and the supplemental information below are not intended to present results of operations in accordance with GAAP. However, the Company believes this information is useful in understanding the results of operations because the Company does not believe the costs in the pro forma adjustments column to be indicative of the Company's ongoing operations. Accordingly, the Company measures its operating profitability on a pro forma operating income basis. Supplemental Information -- The following table sets forth revenue and operating results for the eight previous fiscal quarters, excluding amortization of intangible assets, costs to implement consolidations and one-time items, assuming Alpha Industries, Inc. and Conexant Systems, Inc.'s wireless business had been combined for all periods presented. (See attached reconciliation to GAAP): (unaudited)
(in millions)
Quarter ended Revenue Operating income (loss)
March 2003 $157.4 $4.0
December 2002 $160.2 $3.7
September 2002 $150.7 $0.5
June 2002 $137.0 ($19.0)
March 2002 $128.5 ($22.7)
December 2001 $126.9 ($30.8)
September 2001 $99.4 ($23.1)
June 2001 $83.3 ($59.4)
(unaudited) Six Months Ended
(in thousands, except Pro Forma Pro Forma GAAP GAAP
per share data) March 28, Adjustments March 28, March 29,
2003 2003 2002
Net sales $317,558 $ -- $317,558 $194,116
Cost of sales 193,724 (4,805) (a) 188,919 148,729
Research and
development
expenses 77,410 -- 77,410 63,801
Selling and
administrative
expenses 38,681 4,806(b) 43,487 22,067
Amortization of
intangible assets -- 2,235 2,235 7,944
Operating income (loss) 7,743 (2,236) 5,507 (48,425)
Interest expense 10,781 -- 10,781 --
Other income, net 1,449 -- 1,449 59
Income (loss) before
income taxes (1,589) (2,236) (3,825) (48,366)
Provision for income
taxes 1,339 1,339 4,270
Net income (loss) $(2,928) $(2,236) $(5,164) $(52,636)
Net income (loss) per
share, basic $(0.02) $(0.04)
Net income (loss) per
share, diluted $(0.02) $(0.04)
Weighted average
shares, basic 138,019 138,019
Weighted average
shares, diluted 138,019 138,019
(a) Represents a change in the estimate of certain merger-related
reserves.
(b) Represents certain costs incurred to implement consolidations.
SKYWORKS SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited) March 28, Sept 27,
(in thousands) 2003 2002
Assets
Current assets:
Cash, cash equivalents and
short-term investments $84,327 $53,358
Accounts receivable, net 122,127 94,425
Inventories 56,821 55,643
Prepaid expenses and other
current assets 18,322 23,970
Property, plant and
equipment, net 151,761 143,773
Goodwill and intangible
assets, net(a) 939,906 940,686
Other assets 47,789 35,057
Total assets $1,421,053 $1,346,912
Liabilities and Equity
Current liabilities:
Current portion of
long-term debt $99 $129
Accounts payable 69,332 45,350
Accrued liabilities and
other current liabilities 58,961 102,148
Long-term debt 275,000 180,039
Other long-term
liabilities 4,320 4,270
Stockholders' equity 1,013,341 1,014,976
Total liabilities and
equity $1,421,053 $1,346,912
(a) The Company has adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." As a result of the adoption of SFAS No. 142, the
Company is required to evaluate for impairment goodwill and intangible
assets that have indefinite lives. Based on an initial evaluation, the
Company has determined that its goodwill and intangible assets are
impaired and expects to record a significant non-cash charge to
earnings in the second half of fiscal 2003. The amount of this charge
has not yet been determined.
SKYWORKS SOLUTIONS, INC.
RECONCILIATION OF SUPPLEMENTAL INFORMATION TO GAAP
(unaudited)
(in millions)
Revenue
Supplemental Less:
Quarter ended information Alpha(1) GAAP
March 2003 $157.4 $- $157.4
December 2002 160.2 - 160.2
September 2002 150.7 - 150.7
June 2002 137.0 24.0 113.0
March 2002 128.5 28.1 100.4
December 2001 126.9 33.1 93.8
September 2001 99.4 33.0 66.4
June 2001 83.3 32.3 51.0
Operating income (loss)
Supplemental Less:
Quarter ended information Alpha Adjustments GAAP
(1) (2)
March 2003 $4.0 $-- $(4.9) $(0.9)
December 2002 3.7 -- 2.7 6.4
September 2002 0.5 -- 2.4 2.9
June 2002 (19.0) (9.1) (196.0)(205.9)
March 2002 (22.7) (13.7) (8.6) (17.6)
December 2001 (30.8) (6.1) (6.1) (30.8)
September 2001 (23.1) (5.3) (4.3) (22.1)
June 2001 (59.4) (7.7) (90.4)(142.1)
(1) The supplemental information assumes Alpha and Conexant's wireless
business had been combined for all periods presented. The GAAP
results reflect the application of reverse merger accounting
principles which provide that the historical results of Conexant's
wireless business be treated as the historical results of the combined
entity. Therefore, the GAAP results reflect the Conexant wireless
business only for all periods through June 25, 2002, the date the
merger closed, and combined results for all periods thereafter.
(2) These amounts consist primarily of costs incurred to implement
consolidations, the recording of and changes in estimates of
merger-related and restructuring expenses and reserves, purchased
in-process research and development, write-downs of goodwill and
manufacturing assets, and amortization of intangible assets.
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"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Skyworks' business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.