Skyworks Announces Third Quarter Fiscal 2002 Results

Combined Business Delivers 7 Percent Sequential Revenue Increase; Up 65 Percent on a Year-Over-Year Basis; Expects 10 Percent Growth to $150 Million in September-Ending Quarter

WOBURN, Mass., Jul 31, 2002 (BUSINESS WIRE) -- Skyworks Solutions Inc. (Nasdaq:SWKS), the industry's leading wireless semiconductor company focused on radio frequency (RF) and complete semiconductor system solutions for mobile communications applications, today announced revenues of $113 million, and a net loss of $182 million for the third quarter of fiscal 2002, which ended on June 28, 2002.

In connection with the consummation of the merger between Alpha Industries Inc. and Conexant Systems Inc.'s wireless communications business, the results for the third quarter reflect the application of reverse merger accounting principles under GAAP which provide that the historical results of Conexant's wireless business be treated as the historical results of the combined entity.

Accordingly, the third quarter results reflect three months of Conexant's wireless business together with three days of Alpha's operations, which occurred after the merger closed on June 25, 2002. Also, the net loss contains a number of one-time items associated with the merger transaction and the implementation of cost-reduction initiatives.

"On a pro forma basis, assuming Alpha and Conexant's wireless business were together throughout the entire quarter, revenues would have been $137 million, up 7 percent sequentially, with a $19 million operating loss, excluding one-time items, in line with the guidance that both businesses established at the beginning of the quarter," said David J. Aldrich, Skyworks' president and chief executive officer.

"Overall I am extremely pleased with the performance of our newly combined business over the past few months, particularly given that we successfully completed the many merger-related tasks within the aggressive timetable set forth back in December," Aldrich added. "With the merger complete, we have intensified focus on our core strategic objectives of leveraging our product depth and breadth across our diversified customer base, growing significantly faster than the overall market, returning to operating profitability this year and steadily marching towards our target model of a 15 percent operating margin."

Business Accomplishments

  • Launched Skyworks on schedule and began trading under new "SWKS" ticker symbol
  • Integrated engineering, marketing and sales teams, support infrastructures and IT systems
  • Rationalized portfolio to focus on products with the highest growth potential and margin contribution
  • Streamlined organizational structure for better business agility
  • Implemented a set of cost reduction initiatives to return to profitability
  • Secured a $100 million line of credit

Product Highlights
Front-End Modules

  • Leveraged portfolio of multi-throw switches and currently participate in virtually every Motorola CDMA and GSM platform
  • Commenced initial switch volume shipments to Samsung, the first customer synergy resulting from the merger
  • Ramped the industry's smallest 4 x 4 mm CDMA power amplifier (PA) module across half a dozen OEMs
RF Subsystems

  • Extended GSM/GPRS direct conversion transceiver customer list to 20 and increased total design win tally to 35
  • Grew direct conversion transceiver unit volume by more than 125 percent sequentially
  • Launched development of next generation RF system -- integrating a direct conversion transceiver, PA module, switch and filter in a single package radio
Cellular Systems

  • Introduced AirForce -- a next generation GPRS system solution integrating all front-end, direct conversion transceiver and baseband processing functions as well as a software protocol stack approved on more than 60 networks in approximately 30 countries
  • Expanded Asia Pacific, European and Japanese OEM and ODM customer base with three additional customers
  • Reached a key milestone with shipment of 10 millionth chipset, marking initial success of the company's comprehensive design approach
Cost-Reduction Initiatives

During the quarter, Skyworks implemented a series of initiatives to take advantage of merger-related operational and product synergies. Previously announced actions include:

  • Closing an assembly and test facility in Haverhill, Mass. to take advantage of economies of scale at the company's Mexicali, Mexico operation
  • Consolidating a Frederick, Md. Trans-Tech Inc. subsidiary into the company's nearby Adamstown, Md. location
  • Combining numerous Newport Beach, Calif. facilities into one location in Irvine, Calif.

Subsequently, the company has taken the additional step of transferring its InGaP process technology, equipment and key personnel from its Sunnyvale, Calif. site to its Newbury Park, Calif. fabrication facility. When complete, the combination of these actions will reduce worldwide headcount by 11 percent, from approximately 4,200 employees at the time of the merger closing to 3,750, which includes 1,900 located at the company's assembly and test operation in Mexicali.

Fourth Quarter Fiscal 2002 Outlook

"Based on our current book-to-bill of 1.14, we expect sequential revenue growth of approximately 10 percent to $150 million in the September-ending quarter," Aldrich said. "Operationally, we anticipate that our gross margin will improve significantly and expand to the 35 to 37 percent range as a result of the initiatives we introduced last month.

"At the same time, we are projecting operating expenses of $60 million in the quarter. In turn, we expect to approach operating break-even this quarter. Further, we anticipate continued growth and operational improvements in the December quarter, enabling us to achieve operating profitability by year-end," Aldrich concluded.

Skyworks' Third Quarter Conference Call

Skyworks will host a conference call at 5 p.m. ET (2 p.m. PT) today to discuss its third quarter fiscal 2002 financial results. To listen to the conference call via telephone, call 866/710-0179 (domestic) or 334/323-9871 (international), security code: Skyworks.

To listen via the Internet, visit the investor relations section of Skyworks' Web site at www.skyworksinc.com. Playback of the conference call will begin at 9 p.m. ET on Wednesday, July 31, and end at 9 p.m. ET on Wednesday, Aug. 7, 2002.

The replay will be available on Skyworks' Web site or by calling 800/858-5309 (domestic) or 334/323-7226 (international); access code: 40784, pass code: 54932.

About Skyworks

Skyworks Solutions is the industry's leading wireless semiconductor company focused on RF and complete semiconductor system solutions for mobile communications applications. The company began operations in June 2002, following the completion of the merger between Alpha Industries and Conexant Systems' wireless communications business. Skyworks is focused on providing front-end modules, RF subsystems and cellular systems to wireless handset and infrastructure customers worldwide.

Skyworks has headquarters in Woburn with executive offices in Newport Beach. The company has design, engineering, manufacturing, marketing, sales and service facilities throughout North America, Europe, Japan and Asia Pacific. For more information 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). All such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, and may affect the company's future operating results, financial position and cash flows.

These risks and uncertainties include, but are not limited to: maintaining a consistent and reliable source of energy; 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:
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)
(in thousands, except per share data)
                                      Three Months Ended
                       Pro Forma      Pro Forma     June 28,  June 29,
                        June 28,      Adjustments      2002      2001
                          2002
Net sales              $ 112,980             $ --  $ 112,980  $ 51,045
    Cost of sales         79,584               --     79,584    63,459
    Research and
     development
     expenses             31,653               --     31,653    26,571
    Selling and
     administrative
     expenses             11,678               --     11,678    12,681
    Amortization of
     intangible
     assets                   --            3,579      3,579     3,808
    Purchased in-
     process
     research and
     development              --           65,500     65,500        --
    Impairment and
     restructuring            --       126,872 (a)   126,872    86,627
Operating income
 (loss)                   (9,935)        (195,951)  (205,886) (142,101)
Interest expense            (125)              --       (125)       --
Interest income and
 other, net                    8               --          8        23
Income (loss)
 before income
 taxes                   (10,052)        (195,951)  (206,003) (142,078)
Provision (credit)
 for income taxes           (964)     (23,094) (b)   (24,058)      347
Net income (loss)        $(9,088)       $(172,857) $(181,945)$(142,425)
Net income (loss)
 per share, basic
 and diluted             $ (0.10)                    $ (1.92)  $ (1.64)
Weighted average
 shares, basic and
 diluted (c)              94,519                      94,519    86,619
Basis of presentation -- The above operating results were derived
from three months of Conexant's wireless business plus three days of
Alpha's operations at the end of the quarter as the merger closed on
June 25, 2002. These results include allocations of certain Conexant
operating expenses. Assuming Alpha and Conexant's wireless business
had been combined throughout the entire quarter, revenue would have
been $137 million with a $19 million operating loss, excluding
one-time items.
(a) Impairment and restructuring charges consist primarily of a
write-down of goodwill associated with the acquisition of the Philsar
Bluetooth business, a write-down of assembly and test capacity, and
restructuring charges related to a reduction in force and
consolidation of facilities.
(b) Represents a deferred tax benefit related to the write-down of
assembly and test capacity.
(c) The weighted average shares for the three months ended June
28, 2002 include the weighted average shares of Conexant's wireless
business for three months and the weighted average of Alpha's shares
for three days at the end of the quarter as the merger closed on June
25, 2002. Assuming Alpha and Conexant's wireless business had been
combined throughout the entire quarter, the weighted average shares
would have been approximately 137 million.
(d) The company will adopt SFAS No. 142, "Goodwill and Other
Intangible Assets," at the beginning of fiscal 2003. Upon adoption,
the company will be required to evaluate for impairment goodwill and
intangible assets that have indefinite lives. This impairment review
may result in non-cash charges to earnings in fiscal 2003.
The pro forma presentation is not intended to present results of
operations in accordance with generally accepted accounting
principles. However, the company believes this information is useful
in understanding the results of operations.
Supplemental information -- The following table sets forth revenue for
the five most recent fiscal quarters, assuming Alpha and Conexant's
wireless business had been combined for all periods presented:
(unaudited)
(in thousands)
                   June 28,  March 29,  Dec. 28,  Sept. 28,  June 29,
                      2002       2002      2001       2001      2001
                  $137,022   $128,546  $126,850    $99,408   $83,266
SKYWORKS SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
                                       Nine Months Ended
                         Pro Forma    Pro Forma     June 28,  June 29,
                          June 28,   Adjustments       2002      2001
                            2002
Net sales              $ 307,096            $ --  $ 307,096  $ 194,044
    Cost of sales        228,313              --    228,313    259,904
    Research and
     development
     expenses             95,454              --     95,454     82,954
    Selling and
     administrative
     expenses             33,680              --     33,680     46,769
    Amortization of
     intangible
     assets                   --          11,523     11,523     11,352
    Purchased in-
     process
     research and
     development              --          65,500     65,500         --
    Impairment and
     restructuring            --      126,937 (a)   126,937     88,473
Operating income
 (loss)                  (50,351)       (203,960)  (254,311)  (295,408)
Interest expense            (125)             --       (125)        --
Interest income and
 other, net                   67              --         67         75
Income (loss)
 before income
 taxes                   (50,409)       (203,960)  (254,369)  (295,333)
Provision (credit)
 for income taxes          3,306     (23,094) (b)   (19,788)     1,216
Net income (loss)       $(53,715)      $(180,866) $(234,581) $(296,549)
Net income (loss)
 per share, basic
 and diluted             $ (0.57)                   $ (2.51)   $ (3.49)
Weighted average
 shares, basic and                 002              2001
Assets
   Current assets:
       Cash, cash
        equivalents
        and short-
        term
        investments                        $ 90,698           $ 1,998
       Accounts
        receivable,
        net                                  26,450            40,754
       Inventories                           59,503            37,383
       Prepaid
        expenses
        and other
        current
        assets                               17,438             3,225
   Property, plant
    and equipment,
    net                                     148,328           169,547
   Goodwill and
    intangible
    assets, net (d)                         957,376            57,606
   Other assets                              32,213             3,774
      Total assets                      $ 1,332,006         $ 314,287
Liabilities and
 Equity
    Current
     liabilities:
      Current
       portion of
       long-term
       debt                                   $ 129              $ --
      Short-term
       note payable                         150,000                --
      Accounts
       payable                               16,573             2,653
      Accrued
       liabilities
       and other
       current
       liabilities                          119,781            20,167
    Long-term debt                               73                --
    Other long-term
     liabilities                              4,472             3,806
    Stockholders'
     equity                               1,040,978           287,661
       Total
        liabilities
        and equity                      $ 1,332,006         $ 314,287
CONTACT:
Skyworks Solutions Inc.
Lisa Briggs, (media), 949/231-4553
or
Thomas Schiller, (investors), 949/231-4700

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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.
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