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

CONTACT: investor relations, Debra Hart of Applied Micro Circuits
Corporation, +1-858-535-4217, Email Contact; or media/editorial, Angela
Edgerton of The Ardell Group, +1-858-792-2941, Email Contact, for
Applied Micro Circuits Corporation

Web site: http://www.amcc.com/