Skyworks Solutions, Inc. (NASDAQ: SWKS), an innovator of high
reliability analog and mixed signal semiconductors enabling a broad
range of end markets, today reported first fiscal quarter 2010
results. Revenue for the quarter was $245.1 million, representing a
17 percent year-over-year increase when compared to $210.2 million
in the first fiscal quarter of 2009, and exceeding the Company’s
guidance range of $238 million to $242 million.
On a non-GAAP basis, operating income for the first fiscal
quarter was $52.3 million, up from $28.6 million in the prior-year
period, representing an 83 percent increase and a 21.3 percent
operating margin. Non-GAAP diluted earnings per share for the
quarter was a record $0.27, $0.02 better than guidance and a 59
percent improvement when compared to $0.17 for the first fiscal
quarter of 2009. On a GAAP basis, operating income for the first
fiscal quarter was $42.5 million versus $21.0 million in the first
fiscal quarter of 2009. GAAP diluted earnings per share for the
quarter was $0.16 versus $0.14 in the prior year period.
“Skyworks’ strong performance is being driven by several key
trends including the exploding demand for mobile Internet
applications, increasingly diversified linear products and the
rapid adoption of smart grid technologies,” said David J. Aldrich,
president and chief executive officer of Skyworks. “More
importantly, as our improving gross and operating margins
demonstrate, our innovative solutions are allowing us to further
differentiate Skyworks, positioning us to create even greater
competitive advantages and shareholder value.”
Business Highlights
- Increased non-GAAP gross and
operating margins to 42.2 percent and 21.3 percent, respectively
(41.8 percent and 17.4 percent on a GAAP basis)
- Exited the quarter with $402
million of cash and equivalents
- Supported launch of Google’s
Nexus One Android-based smart phone
- Commenced volume production of
custom solutions supporting Itron’s OpenWay® energy management
module
- Introduced a family of highly
integrated CMOS switches with high isolation capability for the
direct broadcast satellite TV market
- Launched the industry’s broadest
frequency range voltage control oscillator for 3G and 4G base
station infrastructure applications
- Successfully ramped analog
control devices for Intel’s wireless local area networking
applications
- Extended key ISO/TS 16949
automotive certification to Mexicali manufacturing facility,
allowing further penetration into new markets
Second Fiscal Quarter 2010 Outlook
“2010 is off to a solid start for Skyworks. Based on broad-based
business strength and new applications, we anticipate 30 percent
year-over-year revenue growth in the second fiscal quarter of
2010,” said Donald W. Palette, vice president and chief financial
officer of Skyworks. “Specifically, we expect approximately $225
million in revenue, significantly better than normal seasonality
for the March quarter, with non-GAAP diluted earnings per share of
$0.21---representing a 75 percent year-over-year improvement in
bottom line profitability.”
For further information regarding use of non-GAAP measures in
this press release, please refer to the Discussion Regarding the
Use of Non-GAAP Financial Measures set forth below.
Skyworks' First Fiscal Quarter 2010 Conference Call
Skyworks will host a conference call with analysts to discuss
its first fiscal quarter 2010 results and business outlook today 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 877-208-2391 (domestic) or 913-312-0391
(international), confirmation code: 6415309.
Playback of the conference call will begin at 9:00 p.m. ET on
January 20, and end at 9:00 p.m. ET on January 27. The replay will
be available on Skyworks' Web site or by calling 888-203-1112
(domestic) or 719-457-0820 (international), pass code: 6415309.
About Skyworks
Skyworks Solutions, Inc. is an innovator of high reliability
analog and mixed signal semiconductors. Leveraging core
technologies, Skyworks offers diverse standard and custom linear
products supporting automotive, broadband, cellular infrastructure,
energy management, industrial, medical, military and mobile handset
applications. The Company’s portfolio includes amplifiers,
attenuators, detectors, diodes, directional couplers, front-end
modules, hybrids, infrastructure RF subsystems,
mixers/demodulators, phase shifters, PLLs/synthesizers/VCOs, power
dividers/combiners, receivers, switches and technical ceramics.
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 without limitation information
relating to future results and expectations of Skyworks (including
without limitation certain projections and business trends).
Forward-looking statements can often be identified by words such as
"anticipates," "expects," "forecasts," "intends," "believes,"
"plans," "may," "will," or "continue," and similar expressions and
variations or negatives of these words. All such statements are
subject to certain risks, uncertainties and other important factors
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, uncertainties and other important factors include,
but are not limited to: uncertainty regarding global economic and
financial market conditions; the susceptibility of the wireless
semiconductor industry and the markets addressed by our, and our
customers', products to economic downturns; the timing,
rescheduling or cancellation of significant customer orders and our
ability, as well as the ability of our customers, to manage
inventory; losses or curtailments of purchases or payments from key
customers, or the timing of customer inventory adjustments; changes
in laws, regulations and/or policies in the United States that
could adversely affect financial markets and our ability to raise
capital; our ability to develop, manufacture and market innovative
products in a highly price competitive and rapidly changing
technological environment; 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; fluctuations in our manufacturing yields
due to our complex and specialized manufacturing processes; delays
or disruptions in production due to equipment maintenance, repairs
and/or upgrades; our reliance on 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;
uncertainties of litigation, including potential disputes over
intellectual property infringement and rights, as well as payments
related to the licensing and/or sale of such rights; 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; 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; and our ability
to continue to grow and maintain an intellectual property portfolio
and obtain needed licenses from third parties, 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 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. UNAUDITED CONSOLIDATED STATEMENT
OF OPERATIONS Quarter Ended Jan. 1,
Jan. 2, (in thousands) 2010
2009 (1)
Net revenues $ 245,138 $ 210,228 Cost of goods sold
142,584 126,361 Gross profit 102,554 83,867
Operating expenses: Research and development 31,789 34,644
Selling, general and administrative 26,731 27,101 Amortization of
intangible assets 1,501 1,149 Total
operating expenses 60,021 62,894 Operating income 42,533
20,973 Interest expense (1,569 ) (2,456 ) (Loss) gain on
early retirement of convertible debt (51 ) 4,913 Other (loss)
income, net (111 ) 1,402 Income before income
taxes 40,802 24,832 Provision for income taxes 12,792
1,247 Net income $ 28,010 $ 23,585
Earnings per share: Basic $ 0.16 $ 0.14 Diluted $ 0.16 $
0.14 Weighted average shares: Basic 172,717 164,855 Diluted 179,404
165,188
(1) Effective October 3,
2009, we adopted ASC 470-20 - Debt, Debt with Conversions and Other
Options ("ASC 470-20") in accordance with GAAP. Our financial
statements for the three months ended January 2, 2009 have been
adjusted to reflect the retrospective adoption of this new
accounting principle. Further details about the impact of ASC
470-20 on our financial statements will be set forth in our Form
10-Q to be filed with the SEC on or before February 10, 2010.
SKYWORKS SOLUTIONS, INC. UNAUDITED RECONCILIATION
OF NON-GAAP FINANCIAL MEASURES
Quarter Ended Jan. 1, Jan. 2, (in thousands) 2010
2009 GAAP gross profit $ 102,554 $
83,867 Share-based compensation expense [a] 987
909 Non-GAAP gross profit $ 103,541 $ 84,776
Non-GAAP gross margin % 42.2 % 40.3 % Quarter
Ended Jan. 1, Jan. 2, (in thousands) 2010
2009 GAAP operating income $ 42,533 $ 20,973
Share-based compensation expense [a] 8,084 6,589
Selling, general and
administrative adjustments [b]
-
(249 ) Amortization of intangible assets 1,501 1,149 Deferred
executive compensation 173 163 Non-GAAP
operating income $ 52,291 $ 28,625 Non-GAAP
operating margin % 21.3 % 13.6 % Quarter Ended Jan.
1, Jan. 2, (in thousands) 2010
2009 (1)
GAAP net income $ 28,010 $ 23,585 Share-based compensation
expense [a] 8,084 6,589
Selling, general and
administrative adjustments [b]
-
(249 ) Amortization of intangible assets 1,501 1,149 Deferred
executive compensation 173 163
Loss (gain) on early retirement of
convertible debt [c]
51
(4,913 )
Amortization of discount on
convertible debt [d]
989
1,317 Tax adjustments [e] 8,922 -
Non-GAAP net income $ 47,730 $ 27,641 Quarter
Ended Jan. 1, Jan. 2, 2010
2009 (1)
GAAP net income per share, diluted $ 0.16 $ 0.14 Share-based
compensation expense [a] 0.04 0.04 Amortization of intangible
assets 0.01 0.01
Loss (gain) on early retirement of
convertible debt [c]
-
(0.03 )
Amortization of discount on
convertible debt [d]
0.01
0.01 Tax adjustments [e] 0.05 -
Non-GAAP net income per share, diluted $ 0.27 $ 0.17
(1) Effective October 3, 2009, we
adopted ASC 470-20 - Debt, Debt with Conversions and Other Options
("ASC 470-20") in accordance with GAAP. Our financial statements
for the three months ended January 2, 2009 have been adjusted to
reflect the retrospective adoption of this new accounting
principle. Further details about the impact of ASC 470-20 on our
financial statements will be set forth in our Form 10-Q to be filed
with the SEC on or before February 10, 2010.
SKYWORKS SOLUTIONS,
INC.
DISCUSSION REGARDING THE USE OF
NON-GAAP FINANCIAL MEASURES
Our earnings release contains the
following financial measures which have not been calculated in
accordance with United States Generally Accepted Accounting
Principles (GAAP): (i) non-GAAP gross profit and gross margin, (ii)
non-GAAP operating income and operating margin, (iii) non-GAAP net
income, and (iv) non-GAAP net income per share (diluted). As set
forth in the "Unaudited Reconciliation of Non-GAAP Financial
Measures" table found above, we derive such non-GAAP financial
measure by excluding certain expenses and other items from the
respective GAAP financial measure that is most directly comparable
to each non-GAAP financial measure. Management uses these non-GAAP
financial measures to evaluate our operating performance and
compare it against past periods, make operating decisions, forecast
for future periods, compare operating performance against peer
companies and determine payments under certain compensation
programs. These non-GAAP financial measures provide management with
additional means to understand and evaluate the operating results
and trends in our ongoing business by eliminating certain
non-recurring expenses (which may not occur in each period
presented) and other items that management believes might otherwise
make comparisons of our ongoing business with prior periods more
difficult, obscure trends in ongoing operations or reduce
management's ability to make useful forecasts.
We provide investors with non-GAAP
gross profit and gross margin, non-GAAP operating income and
operating margin and non-GAAP net income because we believe it is
important for investors to be able to closely monitor and
understand changes in our ability to generate income from ongoing
business operations. We believe these non-GAAP financial measures
give investors a more effective method to evaluate historical
operating performance and identify trends, additional means of
evaluating period-over-period operating performance and a method to
facilitate certain comparisons of operating results to peer
companies. We also believe that providing non-GAAP operating income
and operating margin allows investors to better assess the extent
to which ongoing operations impact our overall financial
performance. We further believe that providing non-GAAP net income
and non-GAAP net income per share (diluted) allows investors to
better assess the overall financial performance of ongoing
operations by eliminating the impact of certain financing decisions
related to our convertible debt and certain tax items which may not
occur in each period for which financial information is presented
and which represent gains or losses unrelated to our ongoing
operations. We believe that disclosing these non-GAAP financial
measures contributes to enhanced financial
reporting transparency and provides investors with added
clarity about complex financial performance measures.
We calculate non-GAAP gross profit
by excluding from GAAP gross profit, stock compensation expense,
restructuring-related charges and acquisition-related expenses. We
calculate non-GAAP operating income by excluding from GAAP
operating income, stock compensation expense, restructuring-related
charges, acquisition-related expenses and certain deferred
executive compensation. We calculate non-GAAP operating margin by
dividing non-GAAP operating income by GAAP revenue. We calculate
non-GAAP net income by excluding from GAAP net income, stock
compensation expense, restructuring-related charges,
acquisition-related expenses, amortization of discount on
convertible debt, and certain deferred executive compensation, as
well as certain items related to the retirement of convertible
debt, and certain tax items, which may not occur in all periods for
which financial information is presented. We also present non-GAAP
net income per share on a fully diluted basis. We exclude the items
identified above from the respective non-GAAP financial measure
referenced above for the reasons set forth with respect to each
such excluded item below:
Stock Compensation - because (1)
the total amount of expense is partially outside of our control
because it is based on factors such as stock price volatility and
interest rates, which may be unrelated to our performance during
the period in which the expense is incurred, (2) it is an expense
based upon a valuation methodology premised on assumptions that
vary over time, and (3) the amount of the expense can vary
significantly between companies due to factors that can be outside
of the control of such companies.
Restructuring-Related Charges -
because, to the extent such charges impact a period presented, we
believe that they have no direct correlation to future business
operations and including such charges does not accurately reflect
the performance of our ongoing operations for the period in which
such charges are incurred.
Acquisition-Related Expenses -
including, when applicable, amortization of acquired intangible
assets, because they are not considered by management in making
operating decisions and we believe that such expenses do not have a
direct correlation to future business operations and thereby
including such charges does not accurately reflect the performance
of our ongoing operations for the period in which such charges are
incurred.
Amortization of Discount on
Convertible Debt - comprised of the amortization of the debt
discount recorded at inception of the convertible debt borrowing
related to the adoption of ASC 470-20, because the expense is
dependent on fair value assessments and is not considered by
management when making operating or financing decisions.
Deferred Executive Compensation -
including charges related to any contingent obligation pursuant to
an executive severance agreement because we believe the period over
which the obligation is amortized may not reflect the period of
benefit and that such expense has no direct correlation with our
recurring business operations and including such expenses does not
accurately reflect the compensation expense for the period in which
incurred.
Gains and Losses on Retirement of
Convertible Debt - because, to the extent that gains or losses from
such repurchases impact a period presented, we do not believe that
they reflect the underlying performance of ongoing business
operations for such period.
Certain Income Tax Items -
including certain deferred tax charges and benefits which do not
result in a current tax payment or tax refund and other adjustments
which are not indicative of ongoing business operations.
The non-GAAP financial measures
presented in the table above should not be considered in isolation
and are not an alternative for, the respective GAAP financial
measure that is most directly comparable to each such non-GAAP
financial measure. Investors are cautioned against placing undue
reliance on these non-GAAP financial measures and are urged to
review and consider carefully the adjustments made by management to
the most directly comparable GAAP financial measures to arrive at
these non-GAAP financial measures. Non-GAAP financial measures may
have limited value as analytical tools because they may exclude
certain expenses that some investors consider important in
evaluating operating performance or ongoing business. Further,
non-GAAP financial measures are likely to have limited value for
purposes of drawing comparisons between companies because different
companies may calculate similarly titled non-GAAP financial
measures in different ways because non-GAAP measures are not based
on any comprehensive set of accounting rules or principles.
Our earnings release contains
forward looking estimates of non-GAAP diluted earnings per share
for the second quarter of our 2010 fiscal year, or Q2 2010. We
provide this non-GAAP measure to investors on a prospective basis
for the same reasons (set forth above) that we provide them to
investors on a historical basis. We are unable to provide a
reconciliation of our forward looking estimate of Q2 2010 non-GAAP
diluted earnings per share to a forward looking estimate of Q2 2010
GAAP diluted earnings per share because certain information needed
to make a reasonable forward looking estimate of GAAP diluted
earnings per share for Q2 2010 (other than estimated stock
compensation expense of $0.05 per diluted share, certain tax items
of $0.04 per diluted share, estimated acquisition related expense
of $0.01 per diluted share and estimated deferred executive
compensation expense with a de minimis impact per diluted share) is
difficult to predict and estimate and is often dependent on future
events which may be uncertain or outside of our control (e.g. gains
and losses on retirement of convertible debt). Our forward looking
estimates of both GAAP and non-GAAP measures of our financial
performance may differ materially from our actual results and
should not be relied upon as statements of fact.
[a]
These charges represent expense
recognized in accordance with ASC 718 - Compensation, Stock
Compensation. Approximately $1.0 million, $1.8 million and $5.3
million were included in cost of goods sold, research and
development expense and selling, general and administrative
expense, respectively, for the three months ended January 1,
2010.
For the three months ended January
2, 2009, approximately $0.9 million, $1.7 million and $4.0 million
were included in costs of goods sold, research and development
expense and selling, general and administrative expense,
respectively.
[b]
On October 2, 2006, the Company
announced it was exiting its baseband product area. For the three
months ended January 2, 2009, selling, general and administrative
adjustments of $0.2 million represents a recovery of bad debt
expense on specific accounts receivable associated with baseband
product.
[c]
The loss recorded during the three
months ended January 1, 2010 relates to the early retirement of
$5.0 million of the Company's 1.25% convertible subordinated notes
due in 2010.
The gain recorded during the three
months ended January 2, 2009 relates to the early retirement of
$40.5 million of the Company's 1.50% convertible subordinated
notes. The notes were retired at a gain of $5.8 million offset by a
$0.9 million write-off of deferred financing costs. Please note
that this amount has been adjusted to reflect the retrospective
adoption of ASC 470-20. Further details about the impact of ASC
470-20 on our financial statements will be set forth in our Form
10-Q to be filed with the SEC on or before February 10, 2010.
[d]
These charges represent the
amortization expense recognized in accordance with ASC 470-20 which
was adopted in Q1 2010. Approximately $1.0 million of amortization
expense was recognized during the three month period ended January
1, 2010.
Our financial statements for the
three months ended January 2, 2009 have been adjusted to reflect
the retrospective adoption of ASC 470-20. For the three months
ended January 2, 2009, approximately $1.3 million of amortization
expense was recognized.
[e] During the three months ended January 1, 2010, these
amounts primarily represent the utilization of net operating loss
carryforwards.
SKYWORKS SOLUTIONS, INC. UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEET Jan. 1, Oct.
2, (in thousands) 2010 2009 (1)
Assets Current assets: Cash
and cash equivalents $ 402,454 $ 370,084 Accounts receivable, net
119,220 115,034 Inventories 97,940 86,097 Prepaid expenses and
other current assets 16,239 18,912 Property, plant and equipment,
net 166,035 162,299 Goodwill and intangible assets, net 499,637
501,138 Other assets 90,879 99,027 Total assets $
1,392,404 $ 1,352,591
Liabilities and Equity Current
liabilities: Credit facility $ 50,000 $ 50,000 Convertible notes
27,360 31,865 Accounts payable 76,946 69,098 Accrued liabilities
and other current liabilities 42,490 45,280 Long-term debt 42,023
41,483 Other long-term liabilities 6,689 6,086 Stockholders' equity
1,146,896 1,108,779 Total liabilities and equity $
1,392,404 $ 1,352,591
(1) Effective October 3, 2009, we
adopted ASC 470-20 - Debt, Debt with Conversions and Other Options
("ASC 470-20") in accordance with GAAP. Our financial statements at
October 2, 2009 have been adjusted to reflect the retrospective
adoption of this new accounting principle. Further details will be
published in our Form 10-Q to be filed with the SEC on or before
February 10, 2010.
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