RF MICRO DEVICES
NEWS RELEASE
At RF Micro Devices At the Financial Relations Board
Dean Priddy Alison Ziegler
Chief Financial Officer (212) 445-8432
(336) 931-7152
Doug DeLieto
Dir., Investor Relations
(336) 931-7968
For Immediate Release
October 26, 2004
RF MICRO DEVICES ANNOUNCES FINANCIAL RESULTS
September Quarter Highlights:
- -----------------------------
- - Financial Results Consistent With Revised Guidance Provided September
21, 2004
- Quarterly Revenue Totals $149.1 Million
- Quarterly GAAP Loss Per Share Equals ($0.04) And Pro Forma Loss Per
Share Equals ($0.02)
- - RFMD Commences Volume Production Shipments of POLARIS-TRADEMARK-
TOTAL RADIO-TRADEMARK- And Provides Upward Revision To POLARIS Shipment
Forecast For December Quarter
- - Bluetooth Product Shipments Grow More Than 250%
- - RFMD Currently Expects December Quarterly Revenue Of Approximately
$160 Million To $165 Million, And Anticipates Quarterly Earnings (Loss) Per
Share Of ($0.02) To $0.00 On A GAAP Basis And $0.00 To $0.02 On A Pro Forma
Basis
Greensboro, NC, October 26, 2004 -- RF Micro Devices, Inc. (Nasdaq: RFMD), a
leading provider of proprietary radio frequency integrated circuits (RFICs) for
wireless communications applications, today reported financial results for its
fiscal 2005 second quarter ended September 30, 2004.
Financial Results
Revenue for the quarter was $149.1 million, a decrease of 8.8% versus revenue
of $163.5 million for the corresponding quarter of fiscal 2004, and a
sequential decrease of 10.1% versus revenue of $165.8 million for the quarter
ended June 30, 2004. Consistent with the revised quarterly guidance provided
by the Company on September 21, 2004, the quarterly revenue decline reflected
weakness in the market for GSM/GPRS cellular handsets in Asia, offset partially
by strength among certain top-tier handset manufacturers.
Gross profit for the quarter was $49.1 million, a decrease of 23.1% versus
$63.8 million for the prior year period, and a sequential decrease of
approximately 24.4% from $64.9 million for the quarter ended June 30, 2004.
Gross profit margin decreased sequentially to 32.9%, versus 39.1% in the prior
quarter and 39.0% in the corresponding quarter of fiscal 2004. The year-over-
year decrease in gross profit margin was primarily attributable to lower
volumes, and the sequential decrease in gross profit margin was primarily
attributable to lower volumes and aggressive new product ramps.
Net loss in accordance with U.S. generally accepted accounting principles
(GAAP) for the quarter ended September 30, 2004 was ($6.7) million, or ($0.04)
per diluted share, compared with GAAP net income of $10.6 million, or $0.05 per
diluted share, for the quarter ended September 30, 2003. This compares
sequentially to GAAP net income of $3.0 million, or $0.02 per diluted share,
for the prior quarter ended June 30, 2004.
In addition to reporting net (loss) income and net (loss) income per share in
accordance with GAAP, RFMD separately reports these items on a non-GAAP basis,
referred to as pro forma, in order to exclude the effect of certain non-
recurring and non-cash items. For the purposes of this press release, all
references to "pro forma" results reflect non-GAAP financial information. In
the quarter ended September 30, 2004, pro forma results excluded approximately
$3.6 million in non-cash expenses related primarily to the amortization of
deferred stock-based compensation and the amortization of transaction-related
intangibles.
After excluding these items, pro forma net loss for the quarter ended September
30, 2004 was ($3.0) million, or ($0.02) per diluted share. This compares with
pro forma net income of $17.3 million, or $0.08 per diluted share, for the
quarter ended September 30, 2003, and pro forma net income of $12.7 million, or
$0.06 per share, for the quarter ended June 30, 2004.
In the quarter ended September 30, 2003, pro forma results excluded
approximately $2.6 million in non-cash charges associated with the repurchase
of 3.75% convertible subordinated notes and approximately $4.1 million in non-
cash expenses related to the amortization of deferred stock-based compensation
and the amortization of transaction-related intangibles. In the quarter ended
June 30, 2004, pro forma results excluded $9.7 million in expenses, including
an in-process R&D charge of approximately $6.2 million related to the
acquisition of SiliconWave, as well as approximately $3.5 million in non-cash
expenses related to the amortization of deferred stock-based compensation and
the amortization of transaction-related intangibles. A reconciliation of the
Company's GAAP financial results to pro forma financial results is provided in
the financial statement portion of this release.
RF Micro Devices believes pro forma reporting provides useful supplemental
information to the investment community and facilitates a better understanding
of its results of operations. RF Micro Devices has chosen to provide this
supplemental information to investors to enable them to perform additional
comparisons of operating results and as a means to analyze its financial
performance without the impact of certain non-cash expenses or unusual items
that may obscure trends in the Company's underlying performance. These
disclosures should not be viewed as a substitute for operating results
determined in accordance with GAAP, nor are they necessarily comparable to non-
GAAP performance measures that may be presented by other companies.
Business Outlook And Financial Guidance
RF Micro Devices currently expects sequential quarterly revenue in the range of
$160 million to $165 million in the fiscal 2005 third quarter ending December
2004. Additionally, the Company currently anticipates quarterly GAAP net
income (loss) in the range of ($0.02) to $0.00 per share and quarterly pro
forma net income in the range of $0.00 to $0.02 per share.
Comments From Management
Bob Bruggeworth, president and CEO of RF Micro Devices, said, "Although
seasonally weak order flow in our primary market of handsets negatively
impacted our September quarter, we were very pleased with the success of our
diversification initiatives in new product segments. Most notably, we
commenced production shipments of our POLARIS-TRADEMARK- TOTAL RADIO-TRADEMARK-
cellular transceivers and began high-volume customer shipments for use in
multiple wireless devices. As we have stated previously, the transceiver
market doubles our potential market to over $2.5 billion. We currently have
backlog to support greater than one-and-a-half million POLARIS shipments in the
December quarter, which represents an upward revision of approximately 50% over
previous guidance. We expect significant share gains in the transceiver market
in calendar year 2005.
"We are very pleased to see our diversification strategy unfolding as planned.
On the strength of our market leading position in PAs and next-generation air
interface standards, we are achieving success in our new product initiatives.
Our POLARIS products are ramping and our Bluetooth products are ramping. RF
Micro Devices is uniquely positioned to capitalize on the growth in handsets
and the proliferation of multiple radios protocols in mobile and portable
wireless devices."
Dean Priddy, CFO and vice president of administration, said, "During the
September quarter, the combination of reduced sales volume and aggressive new
product ramps negatively impacted our quarterly gross margin. However, the
Company is aggressively executing on margin improvement initiatives, and we are
pleased to announce we achieved two significant margin improvement milestones
during the quarter. First, we began ramping volume production of our first PA
modules containing silicon control chips from Jazz Semiconductor, reaping the
benefit of our investment in a silicon foundry. Second, we received customer
qualification for our Beijing assembly operation, and we expect reduced-cost
shipments from this facility will begin this quarter and will ramp over the
next 12 months. We anticipate these and other initiatives, along with
anticipated increases in sales volume, will allow us to significantly improve
gross margin over the next 12 months.
"Our inventory levels increased in the September quarter, as we built inventory
to support the POLARIS ramp and as some GSM sales to Asia did not materialize
as planned. We currently anticipate our inventory levels will decline in the
December quarter as POLARIS ramps and the environment in Asia continues to
improve."
RF Micro Devices will conduct a conference call at 5:00 p.m. ET today to
discuss today's press release. The conference call will be broadcast live over
the Internet and can be accessed by any interested party at
www.fulldisclosure.com or www.rfmd.com (under Investor Info). The call will
also be available live by dialing 303-205-0044, and a replay will be
available by dialing (303) 590-3000 and entering pass code 110011439.
RF Micro Devices, Inc., an ISO 9001- and ISO 14001-certified manufacturer,
designs, develops, manufactures and markets proprietary radio frequency
integrated circuits (RFICs) for wireless communications products and
applications. The Company is a leading supplier of power amplifiers, one of
the most critical radio frequency (RF) components in cellular phones. The
Company is also the leading manufacturer of GaAs HBT, which offers distinct
advantages over other technologies for the manufacture of current- and next-
generation power amplifiers. The Company's products are included primarily in
cellular phones, base stations, wireless local area networks (WLANs), cable
television modems and global positioning systems (GPS). The Company derives
revenue from the sale of standard and custom-designed products. The Company
offers a broad array of products including amplifiers, mixers,
modulators/demodulators and single-chip transmitters, Bluetooth(r) products and
receivers and transceivers that represent a substantial majority of the RFICs
required in wireless subscriber equipment. The Company's goal is to be the
premier supplier of low-cost, high-performance integrated circuits and
solutions for applications that enable wireless connectivity. RF Micro
Devices, Inc., is traded on the Nasdaq National Market under the symbol RFMD.
For more information about RFMD, please visit www.rfmd.com.
This press release contains forward-looking statements that relate to RF Micro
Devices' plans, objectives, estimates and goals. Words such as "expects,"
"anticipates," "intends," "plans," "projects," "believes" and "estimates," and
variations of these words and similar expressions, identify these forward-
looking statements. 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 the
operation of wafer fabrication, molecular beam epitaxy and other foreign and
domestic manufacturing facilities, 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 increase production
capacity quickly in response to increases 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 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-REGISTERED TRADEMARK- and RFMD-REGISTERED TRADEMARK- are
trademarks of RFMD, LLC. BLUETOOTH is a trademark owned by Bluetooth SIG,
Inc., U.S.A. and licensed for use by RF Micro Devices, Inc. All other
tradenames, trademarks and registered trademarks are the property of their
respective owners.
Financial Tables Follow
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
- ---
Total revenue $ 149,108 $ 163,464 $ 314,881 $ 294,985
Costs and expenses:
Cost of goods sold 100,041 99,653 200,927 189,936
Research and development 37,143 30,568 72,489 61,903
Marketing and selling 11,406 11,437 22,539 21,734
General and administrative 5,339 5,219 11,174 9,771
Other operating expense 453 527 7,056 1,054
------ ------- ------- -------
Total costs and expenses 154,382 147,404 314,185 284,398
Operating (loss) income (5,274) 16,060 696 10,587
Loss in equity method investee -- (818) (1,761) (956)
Other (expense) income, net (1,173) (4,470) (2,364) (6,932)
------- ------- ------- -------
(Loss) income before
income taxes $ (6,447) $ 10,772 $ (3,429) $ 2,699
Income tax expense 220 183 225 332
------- ------- -------- -------
Net (loss) income $ (6,667) $ 10,589 $ (3,654) $ 2,367
======= ======= ======= =======
Net (loss) income per share,
diluted $ (0.04) $ 0.05 $ (0.02) $ 0.01
======= ======= ======= =======
Weighted average outstanding
diluted shares 186,639 219,238 186,513 189,041
======= ======= ======= =======
RF MICRO DEVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2004 2003 2004 2003
----------------------- --------------------
- -
GAAP net (loss) income $ (6,667) $ 10,589 $ (3,654) $ 2,367
======= ======= ======= =======
Adjustments:
Amortization of deferred
stock compensation $ 948 $ 2,140 $ 2,812 $ 3,891
Amortization of intangible assets 1,649 1,994 3,266 3,855
Discount and issuance cost write-off
related to the extinguishments
of the 3.75% convertible debt 642 2,579 642 2,579
Impairment charge 391 -- 391 --
In process research and
development charge -- -- 6,201 --
------- ------- ------- -------
Pro forma net (loss) income $ (3,037) $ 17,302 $ 9,658 $ 12,692
Plus: Income impact of assumed
conversions for interest on
1.50% convertible notes -- 990 -- --
------- ------- ------- -------
Pro forma net (loss) income plus
assumed conversion of notes -
Numerator for diluted (loss)
income per share $ (3,037) $ 18,292 $ 9,658 $ 12,692
======= ======= ======= =======
GAAP weighted average outstanding
diluted shares 186,639 219,238 186,513 189,041
Adjustments:
Dilutive stock options -- -- -- --
Assumed conversion of 1.50%
convertible notes -- -- -- --
------- ------- ------- -------
Pro forma weighted average
outstanding diluted shares 186,639 219,238 186,513 189,041
======= ======= ======= =======
Pro forma net (loss) income
per share, diluted $ (0.02) $ 0.08 $ 0.05 $ 0.07
======= ======= ======= =======
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, March 31,
2004 2004
(Unaudited) (Audited)
--------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 93,247 $ 220,915
Short-term investments 117,491 106,930
Accounts receivable, net 86,495 86,287
Inventories 81,072 58,552
Other current assets 11,542 10,098
--------- ---------
Total current assets 389,847 482,782
Property and equipment, net 288,219 280,356
Goodwill 114,806 110,006
Long-term investments 59,621 62,908
Intangible assets, net 51,027 50,165
Other assets 1,835 1,799
--------- ---------
Total assets $ 905,355 $ 988,016
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $ 69,876 $ 55,548
Other short-term
liabilities, net 456 336
--------- ---------
Total current liabilities 70,332 55,884
Long-term debt, net 225,798 324,626
Other long-term liabilities 4,404 4,368
--------- ---------
Total liabilities 300,534 384,878
Shareholders' equity:
Total shareholders' equity 604,821 603,138
--------- ---------
Total liabilities and
shareholders' equity $ 905,355 $ 988,016
========= =========