Financial Releases
RF Micro Devices Announces March 2009 Quarterly Results
Business Highlights:
- Cash Flow From Operations Totaled Approximately$29 Million
- RFMD Repurchased Approximately
- RFMD Has Reduced Its Net Debt Position By Approximately
- Quarterly GAAP Diluted Loss Per Share Totaled (
- RFMD Grew Sequentially In Multiple 3G Markets In The March Quarter
- RFMD Is Currently Booked For Sequential Revenue Growth And Expects Gross Margin Expansion And Approximately Breakeven Operating Profitability On A Non-GAAP Basis In The June Quarter
RFMD(R) Product Group HighlightsCellular Products Group (CPG)
-- CPG grew 3G revenue sequentially and continued to diversify its 3G
customer base with multiple 3G multimode design wins
-- CPG secured major GSM/GPRS design wins at top-five handset OEMs and
leading platform providers
-- CPG shipped production volumes of cellular components to all five of
the world's top-five handset OEMs
-- CPG expanded its smartphone customer base and increased its smartphone
content opportunity across cellular front ends, cellular switches and
low noise amplifiers (LNAs)
-- CPG supported the launch of multiple 2G and 3G multimode handsets at a
leading Korean handset OEM
-- CPG expects near-term market share gains inChina , Korea andTaiwan ,
based upon existing design activity
-- CPG currently forecasts sequential growth in excess of the handset
industry growth rate in the June quarterMulti-Market Products Group (MPG)
-- MPG released 24 new RF components and 59 derivative products in the
March quarter
-- MPG received its first order to supply highly integrated multi-chip
modules into new multi-standard wireless base stations, which can
support 2G, 3G, 4G/LTE and WiMAX air interface standards
-- MPG announced the formation of its GaN Foundry Services business unit
featuring RFMD's state-of-the-art GaN semiconductor technology
-- MPG anticipates increasing GaN-based revenue in fiscal 2010 related to
CATV line amplifiers and defense and commercial power applications
-- MPG enjoyed robust design activity supporting 3G cellular
infrastructure inChina , automatic meter reading (AMR), WiFi, defense
and commercial power, electronic toll collection (ETC) and other
applications
-- MPG currently forecasts sequential growth in the June quarter
GAAP RESULTS
(in millions,
except
percentages
and per % Change Q4 % Change
share data) Q4 Fiscal Q3 Fiscal vs. Q3 Fiscal vs. Q4
2009 2009 2009 2008 2008
Revenue $172.3 $202.0 (14.7)% $220.6 (21.9)%
Gross Margin 17.3% 19.0% (1.7)ppt 25.2% (7.9)ppt
Operating Loss $(56.5) $(754.0) (92.5) % $(32.8) 72.2%
Net Loss $(49.4) $(813.3) (93.9)% $(17.2) 186.4%
Diluted LPS $(0.19) $ (3.09) (93.9)% $(0.06) 200.2%
NON-GAAP RESULTS (excluding share-based compensation, amortization of
intangibles, impairment of goodwill and intangibles, amortization of
acquisition-related inventory step-up, manufacturing start-up costs, gain
on retirement of convertible subordinated notes, restructuring and
integration charges, and tax adjustment)
(in millions,
except
percentages
and per % Change Q4 % Change
share data) Q4 Fiscal Q3 Fiscal vs. Q3 Fiscal vs. Q4
2009 2009 2009 2008 2008
Gross Margin 19.8% 22.6% (2.8)ppt 30.6% (10.8)ppt
Operating Loss $(21.4) $(8.3) 156.2% $(13.4) 59.7%
Net (Loss)Income $(25.4) $(12.9) 97.3% $2.2 (1,254.2)%
Diluted (LPS )EPS $(0.10) $(0.05) 97.1% $0.01 (1,318.3)%
Business Outlook
RFMD believes excess customer inventories were reduced in the March quarter, and demand activity has stabilized. RFMD is currently booked for sequential growth in the June quarter and expects to outpace the rate of growth of its primary markets during the same period.
-- RFMD currently expects significant gross margin expansion in the June
quarter, with factory utilization rates approaching normalized levels
-- RFMD currently expects approximately breakeven operating profitability
on a non-GAAP basis in the June quarter
-- RFMD currently expects its cash, cash equivalents and short-term
investments will increase during the June quarter
-- RFMD continues to anticipate$80-$120 million in free cash flow (net
cash provided by operating activities minus property and equipment
expenditures) during fiscal 2010
RFMD's actual quarterly and annual results may differ from these expectations and projections, and such differences may be material.
Comments From Management
Bob Bruggeworth, president and CEO of RFMD, said, "Despite the challenging macroeconomic environment, the RFMD team executed extremely well on a number of important Company goals. We took decisive steps to reduce manufacturing costs and operating expenses, and we lowered our requirements for future capital expenditures significantly.
"In the June quarter, we currently expect sequential revenue growth and significant gross margin expansion, resulting in approximately breakeven operating performance on a non-GAAP basis. Beyond the June quarter, we anticipate continued gross margin improvement, and we reiterate our gross margin target of 40%."
"In addition, RFMD has reduced non-GAAP operating expenses by more than 30% year-over-year, and we are making progress converging on our expense model of 25% of sales. In total, RFMD has reduced annualized manufacturing costs and operating expenses by more than
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, to assess our liquidity and capital position 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 adverse macroeconomic conditions, adjustments for restructuring and integration charges and an adjustment for amortization of acquisition-related inventory step-up. 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 business acquisitions (amortization of acquisition-related inventory step-up), restructuring and integration charges and adverse macroeconomic conditions 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 and integration charges, impairment of goodwill and intangibles, amortization of acquisition-related inventory step-up and manufacturing start-up costs. We believe that presentation of a measure of operating 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, impairment of goodwill and intangibles, manufacturing start-up costs and amortization of acquisition-related inventory step-up 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 income has economic substance because the excluded expenses are either non-recurring in nature or do not represent current cash expenditures.
Non-GAAP net (loss) income and non-GAAP net (loss) income per diluted share. Non-GAAP net (loss) income and non-GAAP net (loss) income per diluted share exclude the effects of share-based compensation expense, amortization of intangible assets, restructuring and integration charges, impairment of goodwill and intangibles, manufacturing start-up costs, amortization of acquisition-related inventory step-up and gain on retirement of convertible subordinated notes and also reflect an adjustment of income taxes. We believe that presentation of measures of net (loss) income and net (loss) 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 (loss) income. We believe disclosure of non-GAAP net (loss) income and non-GAAP net (loss) 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.
Free cash flow. RFMD defines free cash flow as net cash provided by operating activities during the period minus property and equipment expenditures made during the period. We use free cash flow as a supplemental financial measure in our evaluation of liquidity and financial strength. Management believes that this measure is useful as an indicator of our ability to service our debt, meet other payment obligations and make strategic investments. Free cash flow should be considered in addition to, rather than as a substitute for, net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. Additionally, our definition of free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our entire statement of cash flows.
Net debt. RFMD defines net debt as total convertible debt at par less cash, cash equivalents and short-term investments. Management believes that this measure provides useful information regarding the level of RFMD's indebtedness by reflecting cash and investments that could be used to repay debt at or prior to maturity.
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 (loss) income, non-GAAP net (loss) income per diluted share, free cash flow and net debt as compared to the most directly comparable GAAP financial measures of gross margin, operating (loss) income, net (loss) income, net (loss) income per diluted share, net cash provided by operating activities and total long-term debt 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, net (loss) income per diluted share, net cash provided by operating activities and total long-term debt.
About RFMD
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® and RFMD® are trademarks of
RF MICRO DEVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended March 28, 2009 March 29, 2008 Total revenue $172,320 $220,644 Costs and expenses: Cost of goods sold 142,486 164,961 Research and development 35,744 56,941 Marketing and selling 13,760 17,817 General and administrative 10,900 12,460 Other operating expense 25,952 1,297 Total costs and expenses 228,842 253,476 Operating loss (56,522) (32,832) Other income 9,333 3,581 Loss before income taxes $(47,189) $(29,251) Income tax (expense) benefit (2,190) 12,011 Net loss $(49,379) $(17,240) Net loss per share, diluted $(0.19) $(0.06) Weighted average outstanding diluted shares 263,409 276,085 RF MICRO DEVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Twelve Months Ended March 28, 2009 March 29, 2008 (Unaudited) (Audited) Total revenue $886,506 $956,270 Costs and expenses: Cost of goods sold 669,163 681,314 Research and development 170,778 207,362 Marketing and selling 64,946 57,330 General and administrative 50,352 42,080 Other operating expense 800,563 19,085 Total costs and expenses 1,755,802 1,007,171 Operating loss (869,296) (50,901) Other income 12,781 22,992 Loss before income taxes $(856,515) $(27,909) Income tax (expense) benefit (42,109) 33,655 Net (loss) income $(898,624) $5,746 Net (loss) income per share, diluted $(3.42) $0.02 Weighted average outstanding diluted shares 262,493 230,299 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 28, December 27, March 29, 2009 2008 2008 GAAP operating loss $(56,522) $(754,026) $(32,832) Share-based compensation expense 5,302 5,328 4,645 Amortization of intangible assets 3,873 7,239 7,682 Amortization of acquisition-related inventory step-up - - 5,482 Restructuring charges related to fiscal 2009 strategic restructuring and adverse macroeconomic conditions 12,401 59,903 - Impairment of goodwill and intangibles 13,485 673,027 - Other restructuring, integration
charges and manufacturing start-up
costs 75 182 1,634
Non-GAAP operating loss (21,386) (8,347) (13,389)
GAAP net loss (49,379) (813,343) (17,240)
Share-based compensation expense 5,302 5,328 4,645
Amortization of intangible assets 3,873 7,239 7,682
Amortization of acquisition-related
inventory step-up - - 5,482
Restructuring charges related to
fiscal 2009 strategic restructuring
and adverse macroeconomic conditions 12,401 59,903 -
Impairment of goodwill and intangibles 13,485 673,027 -
Other restructuring, integration
charges and manufacturing start-up
costs 75 182 1,634
Gain on retirement of convertible
subordinated notes (11,480) (10,667) -
Tax adjustments 290 65,439 -
Non-GAAP net (loss) income (25,433) (12,892) 2,203
Plus: Income impact of assumed
Conversions for interest
on 1.50% convertible notes - - -
Non-GAAP net (loss) income plus
assumed conversion of notes-Numerator
for diluted income per share $(25,433) $(12,892) $2,203
GAAP weighted average outstanding
diluted shares 263,409 263,227 276,085
Adjustments:
Diluted stock options - - 1,952
Assumed conversion of 1.50%
convertible notes - - -
Non-GAAP weighted average outstanding
diluted shares 263,409 263,227 278,037
Non-GAAP net (loss) income per share,
diluted $(0.10) $(0.05) $0.01
GAAP gross margin percentage 17.3% 19.0% 25.2%
Adjustment for intangible
amortization 1.8% 2.5% 2.5%
Adjustment for adverse
macroeconomic conditions - 0.7% -
Adjustment for amortization of
acquisition-related inventory
step-up - - 2.5%
Adjustment for share-based
compensation 0.7% 0.3% 0.2%
Other restructuring and integration
charges - 0.1% 0.2%
Non-GAAP gross margin percentage 19.8% 22.6% 30.6%
RF MICRO DEVICES, INC. AND SUBSIDIARIES
ADDITIONAL SELECTED NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
(In millions)
(Unaudited)
Estimated Range for
Fiscal Year Ending
April 3, 2010
Free Cash Flow(1)
Net cash provided by operating activities $90 $140
Purchases of property and equipment (10) (20)
Free Cash Flow $80 $120
Net Debt (2) March 28, 2009 June 28, 2008
Total convertible debt at par $550 $605
Cash and cash equivalents (173) (117)
Short-term investments (94) (80)
Net Debt $283 $408
(1) Free Cash Flow is calculated as net cash provided by operating
activities minus property and equipment expenditures.
(2) Net Debt is calculated as total convertible debt at par less cash,
cash equivalents and short-term investments.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 28, March 29,
2009 2008
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $172,989 $129,750
Restricted cash 63 504
Short-term investments 93,527 100,841
Accounts receivable, net 90,231 115,629
Inventories 113,611 190,753
Other current assets 37,883 84,556
Total current assets 508,304 622,033
Property and equipment, net 315,127 430,237
Goodwill 95,628 701,317
Long-term investments 20,183 26,336
Intangible assets, net 121,191 205,072
Other assets 19,446 32,200
Total assets $1,079,879 $2,017,195
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $98,004 $130,785
Current portion - long-term debt 156 233
Other short-term liabilities, net 5,606 4,573
Total current liabilities 103,766 135,591
Long-term debt, net 573,029 616,698
Other long-term liabilities 39,044 26,269
Total liabilities 715,839 778,558
Shareholders' equity:
Total shareholders' equity 364,040 1,238,637
Total liabilities and
shareholders' equity $1,079,879 $2,017,195
SOURCERF Micro Devices, Inc. -0-04/28/2009 /CONTACT:Dean Priddy , CFO, +1-336-678-7975, or Doug DeLieto, VP,
Investor Relations, +1-336-678-7968, both of RFMD; orJoe Calabrese ,
+1-212-827-3772 of the Financial Relations Board/
/Web Site: http://www.rfmd.com /
(RFMD)
CO:RF Micro Devices, Inc. ST:North Carolina ,New York IN: SEM ECP CPR SU: ERN ERP CCA PR -- NY06761 -- 676104/28/2009 16:00 EDT http://www.prnewswire.com