RF Micro Devices, Inc. News
RFMD(R) Announces Fiscal 2008 Fourth Quarter Results
Separately today, RFMD announced that it is focusing its investments on RF components, including cellular front ends and other cellular handset components in its Cellular Products Group (CPG) and MPG's high-value RF components. RFMD is reducing its expenses in wireless systems, including cellular transceivers and GPS solutions. RFMD will continue to support current generations of POLARIS(R) products, including POLARIS 2 and POLARIS 3, at leading customers. RFMD expects these actions will eliminate approximately
RFMD Product Group Highlights CPG — As a result of the strategic restructuring, RFMD expects to eliminate approximately $75 million in annual product development expenses related to wireless systems — CPG revenue for the quarter was approximately $171 million, or 77% of total revenue — RFMD experienced a mid-quarter improvement in GSM/GPRS front end unit volume, related primarily to a major customer platform ramp — RFMD experienced increased design activity during the March 2008 quarter and estimates channel inventory levels have improved significantly, especially in Asia — RFMD commenced the production ramp of its industry-leading EDGE front ends at a leading handset original equipment manufacturer (OEM) in the March quarter, resulting in production volume shipments to all five of the world's leading handset OEMs — RFMD experienced strong bookings and increased design activity in WCDMA, driven by multiple customers — RFMD previously announced the consolidation of its production test facilities for high volume cellular products and anticipates these actions will improve cash flow and profitability by $3.0 million to $3.5 million per year MPG — MPG revenue for the quarter was approximately $51 million, or 23% of total revenue — The sequential increase in MPG revenue contributed to the 140-basis point improvement in non-GAAP gross margin — RFMD's March 2008 quarterly results included approximately $7 million in annualized operating expense savings, in line with the previously identified \"hard synergies\" from the Sirenza Microdevices acquisition — RFMD expanded its industry-leading RF product portfolio to include microwave and millimeter wave components and introduced InGaP HBT power amplifiers for wireless infrastructure applications across all cellular standards and frequencies — MPG is on track to release more than 100 new products in fiscal 2009 — MPG is currently booked for double-digit sequential revenue growth in the June quarter and is on track for its fiscal 2009 revenue goal of $250 million
GAAP and non-GAAP financial measures are presented in the tables below, and non-GAAP financial measures are reconciled to the corresponding GAAP financial measures in the financial statement portion of this press release.
GAAP RESULTS (in millions, Q4 Fiscal Q3 Fiscal % Change Q4 Fiscal % Change except percentages 2008 2008 vs. Q3 2007 vs. Q4 and per share data) 2008 2007 Revenue $221.9 $268.2 (17.2)% $257.3 (13.7)% Gross Margin 25.7% 26.2% (0.5)ppt 35.2% (9.5)ppt Operating (Loss) Income $(31.6) $(24.4) 29.2% $21.4 (247.2)% Net (Loss) Income $(16.5) $(15.1) 9.1% $30.1 (154.6)% Diluted (LPS) EPS $(0.06) $(0.06) (3.2)% $0.14 (143.8)%
NON-GAAP RESULTS (excluding share-based compensation, amortization of intangibles, amortization of acquisition-related inventory step-up, acquired in process research and development charge, manufacturing facility relocation and related costs, discontinuation of WLAN chipset development efforts, impairment of intangible license, manufacturing start-up costs, loss on investment, gain on sale of substantially all Bluetooth(R) assets, restructuring charges, and the tax effect on certain non-GAAP adjustments)
(in millions, Q4 Fiscal Q3 Fiscal % Change Q4 Fiscal % Change except percentages 2008 2008 vs. Q3 2007 vs. Q4 and per share data) 2008 2007 Gross Margin 31.0% 29.6% 1.4ppt 35.7% (4.7)ppt Operating (Loss) Income $(12.1) $6.1 (298.2)% $25.7 (147.1)% Net Income $3.0 $15.4 (80.6)% $29.2 (89.7)% Diluted EPS $0.01 $0.06 (82.8)% $0.13 (91.8)% Financial Guidance And Business Outlook — Revenue in the June 2008 quarter is currently expected to be in the range of $230 million to $245 million, representing 4% to 10% sequential growth — RFMD forecasts MPG revenue will increase sequentially approximately 15% to 20% in the June 2008 quarter as a result of strength in wireless infrastructure, CATV amplifiers, wireless LAN front ends, RF components for point-to-point digital radio applications and standard, or catalog RF, components — RFMD forecasts CPG cellular front end revenue will increase 10% to 15% sequentially in the June 2008 quarter, and RFMD expects POLARIS(R) 3 revenue will increase sequentially in the June quarter, driven by new and existing handset models — RFMD's CPG revenue guidance reflects significantly reduced expectations for transceiver revenue at RFMD's largest POLARIS 2 customer — RFMD is engaged in discussions with strategic and financial buyers for some of its wireless systems assets, but is not commenting currently on any potential transactions, including possible proceeds — RFMD projects approximately $40 million - $50 million in restructuring charges, approximately two-thirds of which is expected to be non-cash, over the next two quarters — GAAP net loss in the June 2008 quarter is currently expected to be in the range of ($0.03) to ($0.04) per diluted share and does not reflect any restructuring charges resulting from today's announcement — Non-GAAP net income in the June 2008 quarter is currently expected to be in the range of $0.01 to $0.02 per diluted share, excluding estimated share-based compensation expense and amortization of intangibles of approximately $13 million in the aggregate
The methodology used by RFMD to estimate share-based compensation expense does not factor in items such as new grants, terminations or amounts that may be capitalized in inventory, and the methodology used to estimate amortization of intangibles assumes no additional intangible assets are recorded. RFMD does not estimate the impact of share-based compensation expense on gross margin or operating expenses and will provide this information with its
Comments From Management
"Looking forward, RFMD is eliminating all product development expenses related to wireless systems, including cellular transceivers and GPS solutions, and this is expected to unleash the value of a very profitable core RF components business, highlighted by CPG's cellular front ends and other cellular components and MPG's multi-market RF, microwave and millimeter wave components. As a result, we believe RFMD is positioned for the largest increase in profitability in our Company's history. Our RF components business consistently generates superior profitability and financial returns in excess of our cost of capital. We are increasing our focus on this core business and deploying the full force of our assets and resources behind it. We will continue to support our wireless systems currently in production, including POLARIS 2 and POLARIS 3, and we expect these products to contribute significant operating profit and cash flow over their multi-year product lifecycles."
Non-GAAP Financial Measures
In addition to disclosing financial results calculated in accordance with
In managing RFMD's business on a consolidated basis, management develops an annual operating plan, which is approved by our Board of Directors, using non-GAAP financial measures. In developing and monitoring performance against this plan, management considers the actual or potential impacts on these non-GAAP financial measures from actions taken to reduce unit costs with the goal of increasing gross margin. In addition, management relies upon these non-GAAP financial measures to assess whether research and development efforts are at an appropriate level, and when making decisions about product spending, administrative budgets, and marketing programs. In addition, we believe that non-GAAP financial measures provide useful supplemental information to investors and enable investors to analyze the results of operations in the same way as management. We have chosen to provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance excluding the effect of certain non-cash expenses, unusual items and share-based compensation expense, which may obscure trends in RFMD's underlying performance.
We believe that these non-GAAP financial measures offer an additional view of RFMD's operations that, when coupled with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of RFMD's results of operations and the factors and trends affecting RFMD's business. However, these non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
Our rationale for using these non-GAAP financial measures, as well as their impact on the presentation of RFMD's operations, are outlined below:
Non-GAAP gross margin. Non-GAAP gross margin excludes share-based compensation expense, amortization of intangible assets, an adjustment for amortization of acquisition-related inventory step-up and an adjustment for manufacturing facility relocation and related costs. We believe that exclusion of these costs in presenting non-GAAP gross margin gives management and investors a more effective means of evaluating RFMD's historical performance and projected costs and the potential for realizing cost efficiencies. We believe that the majority of RFMD's purchased intangibles are not relevant to analyzing current operations because they generally represent costs incurred by the acquired company to build value prior to acquisition, and thus are effectively part of transaction costs rather than ongoing costs of operating RFMD's business. In this regard, we note that (i) once the intangibles are fully amortized, the intangibles will not be replaced with cash costs and therefore, the exclusion of these costs provides management and investors with better visibility into the actual costs required to generate revenues over time, and (ii) although we set the amortization expense based on useful life of the various assets at the time of the transaction, we cannot influence the timing and amount of the future amortization expense recognition once the lives are established. Similarly, we believe that presentation of non-GAAP gross margin and other non-GAAP financial measures that exclude the impact of share-based compensation expense assists management and investors in evaluating the period-over-period performance of RFMD's ongoing operations because (i) the expenses are non-cash in nature, and (ii) although the size of the grants is within our control, the amount of expense varies depending on factors such as short-term fluctuations in stock price volatility and prevailing interest rates, which can be unrelated to the operational performance of RFMD during the period in which the expense is incurred and generally is outside the control of management. Moreover, we believe that the exclusion of share-based compensation expense in presenting non-GAAP gross margin and other non-GAAP financial measures is useful to investors to understand the impact of the expensing of share-based compensation to RFMD's gross margins and other financial measures in comparison to both prior periods as well as to its competitors. We also believe that the adjustments to margin related to the acquisition of Sirenza (amortization of acquisition-related inventory step-up and an adjustment for manufacturing facility relocation and related costs), do not constitute part of RFMD's ongoing operations and therefore, the exclusion of these costs provides management and investors with better visibility into the actual costs required to generate revenues over time and gives management and investors a more effective means of evaluating our historical and projected performance.
We believe disclosure of non-GAAP gross margin has economic substance because the excluded expenses do not represent continuing cash expenditures and, as described above, we have little control over the timing and amount of the expenses in question.
Non-GAAP operating (loss) income. Non-GAAP operating (loss) income excludes share-based compensation expense, amortization of intangible assets, restructuring charges, gain on sale of substantially all Bluetooth(R) assets, acquired in process research and development, amortization of acquisition-related inventory step-up, impairment of intangible license, costs associated with the relocation of a manufacturing facility, manufacturing start-up costs, and adjustments associated with the discontinuation of our WLAN chipset development efforts. We believe that presentation of a measure of operating (loss) income that excludes amortization of intangible assets and share-based compensation expense is useful to both management and investors for the same reasons as described above with respect to our use of non-GAAP gross margin. We believe that restructuring charges, as well as the expenses and adjustments associated with the discontinuation of our WLAN chipset development efforts, manufacturing start-up costs, gain on sale of substantially all Bluetooth(R) assets, acquired in process research and development, amortization of acquisition-related inventory step-up, impairment of intangible license, and costs associated with the relocation of a manufacturing facility, do not constitute part of RFMD's ongoing operations and therefore, the exclusion of these costs provides management and investors with better visibility into the actual costs required to generate revenues over time and gives management and investors a more effective means of evaluating our historical and projected performance. We believe disclosure of non-GAAP operating (loss) income has economic substance because the excluded expenses are either non-recurring in nature or do not represent current cash expenditures.
Non-GAAP net income and non-GAAP net income per diluted share. Non-GAAP net income and non-GAAP net income per diluted share exclude the effects of share-based compensation expense, amortization of intangible assets, restructuring charges, manufacturing start-up costs, gain on sale of substantially all Bluetooth(R) assets, acquired in process research and development, amortization of acquisition-related inventory step-up, impairment of intangible license, costs associated with the relocation of a manufacturing facility, adjustments associated with the discontinuation of our WLAN chipset development efforts, loss on investment, and also reflect an adjustment of income tax expense associated with the exclusion of certain of these non-GAAP adjustments. We believe that presentation of measures of net income and net income per diluted share that exclude these items is useful to both management and investors for the reasons described above with respect to non-GAAP gross margin and non-GAAP operating income. We believe disclosure of non-GAAP net income and non-GAAP net income per diluted share has economic substance because the excluded expenses are either non-recurring in nature, do not represent current cash expenditures, or are variable in nature and thus unlikely to become recurring expenses.
Limitations of non-GAAP financial measures. The primary material limitations associated with the use of non-GAAP gross margin, non-GAAP operating (loss) income, non-GAAP net income and non-GAAP net income per diluted share as compared to the most directly comparable GAAP financial measures of gross margin, operating (loss) income, net (loss) income and net (loss) income per diluted share are (i) they may not be comparable to similarly titled measures used by other companies in RFMD's industry, and (ii) they exclude financial information that some may consider important in evaluating our performance. We compensate for these limitations by providing full disclosure of the differences between these non-GAAP financial measures and the corresponding GAAP financial measures, including a reconciliation of the non-GAAP financial measures to the corresponding GAAP financial measures, to enable investors to perform their own analysis of our gross margin, operating (loss) income, net (loss) income and net (loss) income per diluted share.
RF Micro Devices will conduct a conference call at
About RFMD: RF Micro Devices, Inc. (Nasdaq: RFMD) is a global leader in the design and manufacture of high-performance semiconductor components. RFMD's products enable worldwide mobility, provide enhanced connectivity and support advanced functionality in the cellular handset, wireless infrastructure, wireless local area network (WLAN), CATV/broadband and aerospace and defense markets. RFMD is recognized for its diverse portfolio of semiconductor technologies and RF systems expertise and is a preferred supplier to the world's leading mobile device, customer premises and communications equipment providers.
Headquartered in
This press release includes "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions and are not historical facts and typically are identified by use of terms such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue" and similar words, although some forward-looking statements are expressed differently. You should be aware that the forward-looking statements included herein represent management's current judgment and expectations, but our actual results, events and performance could differ materially from those expressed or implied by forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as is required under the federal securities laws. RF Micro Devices' business is subject to numerous risks and uncertainties, including variability in quarterly operating results, the rate of growth and development of wireless markets, risks associated with our planned exit from our wireless systems business, including cellular transceivers and GPS solutions, the risk that restructuring charges may be greater than originally anticipated and that the cost savings and other benefits from the restructuring may not be achieved, risks associated with the operation of our wafer fabrication facilities, molecular beam epitaxy facility, assembly facility and test and tape and reel facilities, our ability to complete acquisitions and integrate acquired companies, including the risk that we may not realize expected synergies from our business combinations, our ability to attract and retain skilled personnel and develop leaders, variability in production yields, our ability to reduce costs and improve gross margins by implementing innovative technologies, our ability to bring new products to market, our ability to adjust production capacity in a timely fashion in response to changes in demand for our products, dependence on a limited number of customers, and dependence on third parties. These and other risks and uncertainties, which are described in more detail in RF Micro Devices' most recent Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission, could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements.
RF MICRO DEVICES(R), RFMD(R) and POLARIS(TM) TOTAL RADIO(TM) are trademarks of
RFMD, LLC. All other trade names, trademarks and registered trademarks are the property of their respective owners. Tables To Follow RF MICRO DEVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended March 29, 2008(1) March 31, 2007 Total revenue $221,926 $257,270 Costs and expenses: Cost of goods sold 164,961 166,704 Research and development 56,941 47,095 Marketing and selling 17,817 12,963 General and administrative 12,460 8,448 Other operating expense 1,297 625 Total costs and expenses 253,476 235,835 Operating (loss) income (31,550) 21,435 Other income 3,580 2,047 (Loss) Income before income taxes $(27,970) $23,482 Income tax benefit 11,519 6,651 Net (loss) income $(16,451) $30,133 Net (loss) income per share, diluted $(0.06) $0.14 Weighted average outstanding diluted shares 276,085 228,937 (1) Management is currently evaluating the impact, if any, on fiscal 2008 financial results related to the strategic restructuring announced today. Accordingly, financial results shown may be impacted. RF MICRO DEVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Twelve Months Ended March 29, 2008 March 31, 2007 (Unaudited)(1) (Audited) Total revenue $957,552 $1,023,615 Costs and expenses: Cost of goods sold 681,314 666,755 Research and development 207,362 184,979 Marketing and selling 57,330 53,863 General and administrative 42,080 37,301 Other operating expense (income) 19,085 (33,834) Total costs and expenses 1,007,171 909,064 Operating (loss) income (49,619) 114,551 Loss on investment (521) (33,959) Other income 23,512 5,807 (Loss) Income before income taxes $(26,628) $86,399 Income tax benefit (expense) 33,163 (2,983) Net income $6,535 $83,416 Net income per share, diluted $0.03 $0.39 Weighted average outstanding diluted shares 230,450 226,513 (1) Management is currently evaluating the impact, if any, on fiscal 2008 financial results related to the strategic restructuring announced today. Accordingly, financial results shown may be impacted. RF MICRO DEVICES, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (Unaudited) Three Months Ended March 29, December 29, March 31, 2008(1) 2007 2007 GAAP operating (loss) income $(31,550) $(24,416) $21,435 Share-based compensation expense 4,645 4,711 3,088 Amortization of intangible assets 7,682 4,706 567 Acquired in process research and development - 13,860 - Gain on sale of substantially all Bluetooth(R) assets - - (67) Amortization of acquisition-related inventory step-up 5,482 3,980 - Restructuring charges related to sale of substantially all Bluetooth(R) assets - - 668 Impairment of intangible license - 1,221 - Restructuring charges related to the integration of Sirenza 975 691 - Manufacturing start-up costs 299 838 - Manufacturing facility relocation and related costs 337 488 - Discontinuation of WLAN chipset development efforts 23 31 26 Non-GAAP operating (loss) income (12,107) 6,110 25,717 GAAP net (loss) income (16,451) (15,077) 30,133 Share-based compensation expense 4,645 4,711 3,088 Amortization of intangible assets 7,682 4,706 567 Acquired in process research and development - 13,860 - Gain on sale of substantially all Bluetooth(R) assets - - (67) Amortization of acquisition-related inventory step-up 5,482 3,980 - Restructuring charges related to sale of substantially all Bluetooth(R) assets - - 668 Impairment of intangible license - 1,221 - Restructuring charges related to the integration of Sirenza 975 691 - Manufacturing start-up costs 299 838 - Manufacturing facility relocation and related costs 337 488 - Discontinuation of WLAN chipset development efforts 23 31 26 Loss on investment - - 94 Tax effect on certain non-GAAP adjustments - - (5,316) Non-GAAP net income 2,992 15,449 29,193 Plus: Income impact of assumed conversions for interest on 1.50% convertible notes - 669 1,015 Non-GAAP net income plus assumed conversion of notes-Numerator for diluted income per share $2,992 $16,118 $30,208 GAAP weighted average outstanding diluted shares 276,085 244,985 228,937 Adjustments: Diluted stock options 1,793 4,408 - Assumed conversion of 1.50% convertible notes - 30,144 - Non-GAAP weighted average outstanding diluted shares 277,878 279,537 228,937 Non-GAAP net income per share, diluted $0.01 $0.06 $0.13 GAAP gross margin percentage 25.7% 26.2% 35.2% Adjustment for amortization of acquisition-related inventory step-up 2.5% 1.5% - Adjustment for share-based compensation 0.2% 0.4% 0.3% Adjustment for manufacturing facility relocation and related costs 0.1% 0.2% - Adjustment for intangible amortization 2.5% 1.3% 0.2% Non-GAAP gross margin percentage 31.0% 29.6% 35.7% (1) Management is currently evaluating the impact, if any, on fiscal 2008 financial results related to the strategic restructuring announced today. Accordingly, financial results shown may be impacted. RF MICRO DEVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) March 29, March 31, 2008 2007 (Unaudited)(2) (Audited) ASSETS Current assets: Cash and cash equivalents $129,750 $229,034 Short-term investments 99,877 89,678 Accounts receivable, net 115,629 102,307 Inventories 190,753 112,975 Other current assets 61,935 46,445 Total current assets 597,944 580,439 Property and equipment, net 430,237 373,455 Goodwill 720,289 114,897 Long-term investments 27,300 617 Intangible assets, net 205,072 8,486 Other assets 140,156 11,740 Total assets $2,120,998 $1,089,634 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $133,731 $108,929 Current portion - long-term debt 4,523 4,151 Other short-term liabilities, net 283 136 Total current liabilities 138,537 113,216 Long-term debt, net 616,698 245,709 Other long-term liabilities 126,337 11,042 Total liabilities 881,572 369,967 Shareholders' equity: Total shareholders' equity 1,239,426 719,667 Total liabilities and shareholders' equity $2,120,998 $1,089,634 (2) Management is currently evaluating the impact, if any, on fiscal 2008 financial results related to the strategic restructuring announced today, and management is currently evaluating balance sheet classification adjustments related to deferred taxes and purchase accounting adjustments. Accordingly, financial results shown may be impacted.
SOURCE RF Micro Devices, Inc.
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