Applied Micro Circuits Corporation Announces Second Quarter Fiscal 2005 Financial Results; Revenue Up 143%

SAN DIEGO, Oct. 19 /PRNewswire-FirstCall/ -- Applied Micro Circuits Corporation (NASDAQ: AMCC) today reported its financial results for the second quarter of fiscal 2005.

Net revenues for the second quarter of fiscal 2005 were $61.1 million compared to $67.4 million reported in the first quarter of fiscal 2005 and $25.1 million reported in the second quarter of fiscal 2004.

For the second quarter of fiscal 2005, on a generally accepted accounting principles (GAAP) basis, the net loss was $18.3 million or $(0.06) per share, compared with a net loss of $21.8 million or $(0.07) per share for the first quarter of fiscal 2005 and a net loss of $22.9 million or $(0.08) per share for the second quarter of fiscal 2004.

The pro forma net loss for the second quarter of fiscal 2005 was $4.1 million or $(0.01) per share, compared to the pro forma net income of $2.1 million or $0.01 per share in the first quarter of fiscal 2005 and the pro forma net loss of $6.9 million or $(0.02) per share in the second quarter of fiscal 2004.

Net revenues for the six months ended September 30, 2004 were $128.5 million compared to $45.6 million reported for the six months ended September 30, 2003.

The GAAP net loss for the six months ended September 30, 2004 was $40.1 million or $(0.13) per share, compared to the net loss of $76.3 million or $(0.25) per share for the six months ended September 30, 2003. The pro forma net loss for the six months ended September 30, 2004 was $2.0 million or $(0.01) per share, compared with the pro forma net loss of $15.9 million or $(0.05) per share for the six months ended September 30, 2003.

Commenting on the results, Tom Tullie, Chief Operating Officer, said, "The operating results we announced today are in-line with our revised expectations. Although the current economic condition of our markets is challenging, I believe that our strategy of expanding our presence in our existing markets and diversifying our revenue stream into new and emerging markets will position us for long-term success."

On August 12, 2004, the Company announced that the board of directors had authorized a stock repurchase program for the repurchase of up to $200,000,000 of its common stock. During the second quarter of fiscal 2005, the Company repurchased and retired 5.4 million shares of its common stock for approximately $16.9 million. In addition, the Company entered into a series of agreements totaling $50.0 million that could result in the repurchase and retirement of additional shares of its common stock. On the expiration date of each agreement, depending on the closing price of the Company's common stock, the Company will receive either a predetermined number of shares of its common stock, or a predetermined amount of cash. Collectively, under the agreements, the Company could receive up to $56.8 million of cash, or the delivery of up to 16.7 million shares of its common stock.

During the first quarter of fiscal 2005, AMCC completed the acquisition of 3ware, Inc. and the acquisition of certain intellectual property and a portfolio of assets associated with IBM's 400 series of embedded PowerPC(R) standard products for approximately $145 million in cash and $228 million in cash, respectively.

AMCC reports its financial results in accordance with GAAP and additionally on a non-GAAP basis referred to as pro forma. These pro forma measures are not in accordance with, nor are they a substitute for, GAAP measures and may not be consistent with the presentation used by other companies. AMCC uses the pro forma financial measures to evaluate and manage the Company's operations. AMCC is providing this information to investors to allow for the performance of additional financial analysis and because it is consistent with the financial models and estimates published by analysts who follow the Company.

The pro forma results exclude the following items which are required by GAAP: restructuring costs, on-going amortization of purchased intangibles, acquired in-process research and development charges, stock-based compensation charges related to acquired companies and payroll tax effects of certain stock option exercises. Income taxes are adjusted to an estimated pro forma effective tax rate. See the attached reconciliation of the GAAP net loss to the pro forma net income or loss, which quantifies the amounts excluded from pro forma basis results.

For More Information

AMCC management will be holding a conference call today, October 19, 2004, at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time to discuss additional details regarding the Company's performance for the second quarter of fiscal 2005 and to provide guidance for the third quarter of fiscal 2005. You may access the conference call via any of the following:

   Teleconference:    913-981-4901
   Conference ID:     886200
   Web Broadcast:     
http://www.amcc.com/
   Replay:            719-457-0820
                      (available for 7 days following the call)

  AMCC Overview

AMCC provides the essential building blocks for the processing, moving and storing of information worldwide. The company blends systems and software expertise with high-performance, high-bandwidth silicon integration to deliver silicon, hardware and software solutions for global wide area networks (WAN), embedded applications, storage area networks (SAN), and high-growth storage markets such as Serial ATA (SATA) RAID. AMCC's corporate headquarters are located in San Diego, California. Sales and engineering offices are located throughout the world. For further information regarding AMCC, please visit our web site at http://www.amcc.com/.

This news release contains forward-looking statements that are subject to certain risks and uncertainties, including, but not limited to, customer demand for the Company's products, the businesses of the Company's major customers, reductions, rescheduling or cancellation of orders by the Company's customers, successful and timely development of products, integration of acquired businesses, market acceptance of new products, manufacturing capacity and execution and general economic conditions. More information about potential factors that could affect the Company's business and financial results is included in the "Risk Factors" set forth in the Company's Annual Report on Form 10-K for the year ended March 31, 2004, and the Company's other filings with the Securities and Exchange Commission. Actual results could differ materially, as a result of such factors, from those set forth in the forward-looking statements.

                      APPLIED MICRO CIRCUITS CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                               ($ in thousands)

                                                  Sept 30,      March 31,
  ASSETS                                            2004          2004
                                                (unaudited)

  Current assets:
    Cash, cash equivalents and short-term
     investments                                  $410,576       $861,041
    Accounts receivable, net                        27,872         23,284
    Inventories                                                                          18,842                    8,490
        Other  current  assets                                                        17,362                  16,208
            Total  current  assets                                                  474,652                909,023
    Property  and  equipment,  net                                              39,762                  37,271
    Other  assets                                                                              1,769                    1,616
    Purchased  intangibles                                                        578,206                240,193
            Total  assets                                                            $1,094,389          $1,188,103

    LIABILITIES  AND  STOCKHOLDERS'  EQUITY

    Current  liabilities:
        Accounts  payable                                                              $26,163                $18,164
        Other  current  liabilities                                              44,820                  49,089
        Current  portion  of  long-term  debt  &  capital
          leases                                                                                        171                        303
            Total  current  liabilities                                          71,154                  67,556
    Stockholders'  equity                                                      1,023,235            1,120,547
            Total  liabilities  and  stockholders'
              equity                                                                      $1,094,389          $1,188,103


                                            APPLIED  MICRO  CIRCUITS  CORPORATION
                          GAAP  CONDENSED  CONSOLIDATED  STATEMENTS  OF  OPERATIONS
                                                                  (unaudited)
                                        (in  thousands,  except  per  share  data)

                                                          Three  months  ended                    Six  Months  ended
                                            Sept  30,      June  30,      Sept  30,      Sept  30,    Sept  30,
                                                2004              2004              2003              2004            2003

    Net  revenues                  $61,069        $67,402        $25,119      $128,471    $45,634
    Cost  of  revenues            31,529          31,492            9,485          63,021      19,268
    Gross  profit                    29,540          35,910          15,634          65,450      26,366
    Operating  expenses:
        Research  and
          development                31,702          30,990          26,102          62,692      55,228
        Selling,  general
          and
          administrative          15,298          14,378          11,037          29,676      21,399
        Stock-based
          compensation:
            Research  and
              development                  915            1,032            3,579            1,947      12,704
            Selling,
              general  and
              administrative        2,202            1,323            1,043            3,525        4,451
        Amortization
          of  purchased
          intangibles                  1,962            1,557                  --            3,519              --
        Acquired
          in-process
          research  and
          development                        --          13,400            5,700          13,400        5,700
        Restructuring
          charges                              310                  --                  --                310      23,498
            Total
              operating
              expenses                  52,389          62,680          47,461        115,069    122,980
    Operating  loss              (22,849)      (26,770)      (31,827)      (49,619)  (96,614)
    Interest  and
      other  income,  net          4,530            5,281            8,919            9,811      20,314
    Loss  before
      income  taxes                (18,319)      (21,489)      (22,908)      (39,808)  (76,300)
    Income  tax
      expense                                    --                335                  --                335              --
    Net  loss                        $(18,319)    $(21,824)    $(22,908)    $(40,143)$(76,300)

    Basic  and
      diluted  loss
      per  share:
        Loss
          per  share                    $(0.06)        $(0.07)        $(0.08)        $(0.13)    $(0.25)
        Shares  used
          in
          calculating
          diluted  loss
          per  share                  310,128        311,519        305,195        310,824    304,498


                                            APPLIED  MICRO  CIRCUITS  CORPORATION
                              PRO  FORMA  CONSOLIDATED  STATEMENTS  OF  OPERATIONS
                                                                  (unaudited)
                                        (in  thousands,  except  per  share  data)

                                                            Three  months  ended                  Six  months  ended
                                                Sept  30,    June  30,    Sept  30,    Sept  30,    Sept  30,
                                                    2004            2004            2003            2004            2003

    Net  revenues                      $61,069      $67,402      $25,119    $128,471    $45,634
    Cost  of  revenues                23,823        24,635          8,795        48,458      16,788
    Gross  profit                        37,246        42,767        16,324        80,013      28,846
    Operating  expenses:
        Research  and
          development                    31,702        30,990        26,099        62,692      55,223
        Selling,  general
          and  administrative      15,298        14,376        11,036        29,674      21,396
            Total  operating
              expenses                      47,000        45,366        37,135        92,366      76,619
    Operating  loss                    (9,754)      (2,599)    (20,811)    (12,353)  (47,773)
    Interest  and  other
      income,  net                          4,530          5,281          8,919          9,811      20,314
    Income  (loss)
      before  income  taxes        (5,224)        2,682      (11,892)      (2,542)  (27,459)
    Income  tax  expense
      (benefit)                            (1,149)            590        (4,994)          (559)  (11,532)
    Net  income  (loss)            $(4,075)      $2,092      $(6,898)    $(1,983)$(15,927)

    Diluted  income
      (loss)  per  share:
        Income  (loss)
          per  share                        $(0.01)        $0.01        $(0.02)      $(0.01)    $(0.05)
        Shares  used  in
          calculating
          diluted  income
          (loss)  per  share        310,128      318,327      305,195      310,824    304,498

      The  above  pro  forma  statements  are  based  on  the  Company's  consolidated
      statements  of  operations  for  the  periods  presented.    This  pro  forma
      information  is  not  prepared  in  accordance  with  generally  accepted
      accounting  principles  and  may  not  be  consistent  with  the  presentation
      used  by  other  companies.    The  pro  forma  operating  results  are  used  by  the
      Company's  management  to  evaluate  the  operating  performance  of  the  Company
      and  are  also  consistent  with  the  financial  models  and  estimates  published
      by  analysts  who  follow  the  Company.    See  the  schedule  of  pro  forma
      adjustments  for  a  reconciliation  of  the  pro  forma  results  to  the  GAAP
      basis  results.


                                            APPLIED  MICRO  CIRCUITS  CORPORATION
                          RECONCILIATION  OF  GAAP  TO  PRO  FORMA  NET  INCOME/LOSS
                                                                  (unaudited)
                                                                (in  thousands)

                                                    Three  months  ended                    Six  months  ended
                                      Sept  30,      June  30,      Sept  30,      Sept  30,    Sept  30,
                                          2004              2004              2003              2004            2003

    GAAP  net  loss        $(18,319)    $(21,824)    $(22,908)    $(40,143)  $(76,300)
    Adjustments:
        Stock-based
          compensation
          related  to
          acquired
          companies                3,246            2,510            4,793            5,756        17,544
        Amortization
          of  purchased
          intangibles            9,539            8,259            1,572          17,798          3,143
        Restructuring
          costs                            310                  --                  --                310        23,498
        Excess
          inventory
          benefit                          --                  --          (1,053)                --        (1,053)
        Acquired
          in-process
          research  and
          development                  --          13,400            5,700          13,400          5,700
        Payroll  taxes
          on  certain
          stock  option
          exercises                      --                    2                    4                    2                  9
        Income  tax
          adjustments            1,149              (255)          4,994                894        11,532
    Total  GAAP  to
      pro  forma
      adjustments              14,244          23,916          16,010          38,160        60,373

    Pro  forma
      net  income
      (loss)                      $(4,075)        $2,092        $(6,898)      $(1,983)  $(15,927)


                                            APPLIED  MICRO  CIRCUITS  CORPORATION
                                    SCHEDULE  OF  SELECTED  PRO  FORMA  ADJUSTMENTS
                                                                  (unaudited)
                                                                (in  thousands)

      The  following  schedule  reconciles  selected  line  items  from  the  GAAP  basis
      statements  of  operations  to  the  pro  forma  statements  of  operations:

                                                            Three  months  ended                Six  months  ended
                                                Sept  30,      June  30,    Sept  30,    Sept  30,    Sept  30,
                                                    2004              2004            2003            2004            2003
    GROSS  PROFIT:
    GAAP  gross  profit          $29,540      $35,910      $15,634      $65,450      $26,366
        Amortization  of
          purchased
          intangibles                    7,577          6,702          1,572        14,279          3,143
        Excess  inventory
          charge  (benefit)                --                --        (1,053)              --        (1,053)
        Stock-based
          compensation
          related  to
          acquired  companies          129              155              171              284              389
        Payroll  taxes
          on  certain
          stock  option
          exercises                              --                --                --                --                  1
    Pro  forma  gross
      profit                              $37,246      $42,767      $16,324      $80,013      $28,846

    OPERATING  EXPENSES:
    GAAP  operating
      expenses                          $52,389      $62,680      $47,461    $115,069    $122,980
        Amortization  of
          purchased
          intangibles                    1,962          1,557                --          3,519              --
        Acquired
          in-process
          research  and
          development                          --        13,400          5,700        13,400          5,700
        Stock-based
          compensation
          related  to
          acquired  companies      3,117          2,355          4,622          5,472        17,155
        Restructuring  costs          310                --                --              310        23,498
        Payroll  taxes
          on  certain  stock
          option  exercises                --                  2                  4                  2                  8
    Pro  forma  operating
      expenses                          $47,000      $45,366      $37,135      $92,366      $76,619

    INCOME  TAX  EXPENSE
      (BENEFIT):
        GAAP  income  tax
          expense  (benefit)            $--            $335              $--            $335            $--
            Income  tax
              adjustments              (1,149)            255        (4,994)          (894)    (11,532)
    Pro  forma  income
      tax  expense
      (benefit)                        $(1,149)          $590      $(4,994)        $(559)  $(11,532)
 


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