Applied Micro Circuits Corporation Announces Third Quarter Fiscal 2005 Financial Results
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Applied Micro Circuits Corporation Announces Third Quarter Fiscal 2005 Financial Results

SAN DIEGO, Jan. 26 /PRNewswire-FirstCall/ -- Applied Micro Circuits Corporation (NASDAQ: AMCC) today reported its financial results for the third quarter of fiscal 2005.

Net revenues for the third quarter of fiscal 2005 were $61.1 million compared to $61.1 million reported in the second quarter of fiscal 2005 and $38.2 million reported in the third quarter of fiscal 2004.

For the third quarter of fiscal 2005, on a generally accepted accounting principles (GAAP) basis, the net loss was $81.9 million or $(0.27) per share, compared with a net loss of $18.3 million or $(0.06) per share for the second quarter of fiscal 2005 and a net loss of $26.4 million or $(0.09) per share for the third quarter of fiscal 2004.

The pro forma net loss for the third quarter of fiscal 2005 was $4.1 million or $(0.01) per share, compared to the pro forma net loss of $4.1 million or $(0.01) per share in the second quarter of fiscal 2005 and the pro forma net loss of $7.1 million or $(0.02) per share in the third quarter of fiscal 2004.

Net revenues for the nine months ended December 31, 2004 were $189.6 million compared to $83.8 million reported for the nine months ended December 31, 2003.

The GAAP net loss for the nine months ended December 31, 2004 was $122.0 million or $(0.39) per share, compared to the net loss of $102.7 million or $(0.34) per share for the nine months ended December 31, 2003. The pro forma net loss for the nine months ended December 31, 2004 was $6.0 million or $(0.02) per share, compared with the pro forma net loss of $23.1 million or $(0.08) per share for the nine months ended December 31, 2003.

Commenting on the results, Tom Tullie, Chief Operating Officer, said, "The operating results we announced today are in-line with our expectations for the quarter. I am encouraged that our Communications, Storage and Embedded Products groups all saw sequential revenue growth. In addition, our recent actions to reduce operating expenses position us to achieve pro forma EPS profitability in the near future."

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.

During the third quarter ended December 31, 2004, AMCC recorded a $27.3 million charge for the impairment of purchased intangibles, a $28.9 million net charge for settlement of pending securities class-action litigation, and an $8.1 million charge for restructuring costs associated with the November workforce reduction.

The pro forma results exclude the following items which are required by GAAP: restructuring costs, amortization and impairments of purchased intangibles, excess inventory benefit, acquired in-process research and development charges, stock-based compensation charges related to acquired companies, litigation settlement costs, real estate gains, realized gains and losses on strategic equity investments, and payroll tax effects of 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, January 26, 2005, at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time to discuss additional details regarding the Company's performance for the third quarter of fiscal 2005 and to provide guidance for the fourth quarter of fiscal 2005. You may access the conference call via any of the following:

   Teleconference:     913-981-4910
   Conference ID:      624714
   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 such as PowerPC and programmable SOC architectures, storage area networks (SAN), and high-growth storage markets such as Serial ATA (SATA), and 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, including, but not limited to, statements regarding the company's expectations of future profitability and the magnitude of charges resulting from the settlement of pending litigation. These forward looking statements are only predictions based on current information and expectations and 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, market acceptance of new products, integration of acquired businesses, manufacturing capacity and execution, the risk that the settlement will not be approved by the court or that the charges resulting from the settlement will be higher than expected due to inability to obtain the company's insurers' agreed upon contribution to the settlement 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)

                                                Dec 31,           March 31,
    ASSETS                                       2004               2004
                                              (unaudited)
    Current assets:
     Cash, cash equivalents and short-
      term investments                          $405,970           $861,041
     Accounts receivable, net                     22,304             23,284
     Inventories                                  19,847              8,490
     Other current assets                         46,623             16,208
      Total current assets                       494,744            909,023
    Property and equipment, net                   47,102             37,271
    Other assets                                   1,999              1,616
    Purchased intangibles                        544,892            240,193
      Total assets                            $1,088,737         $1,188,103

    LIABILITIES AND STOCKHOLDERS'
     EQUITY

    Current liabilities:
     Accounts payable                            $14,164            $18,164
     Other current liabilities                   109,657             49,089
     Current portion of long-term debt
      & capital leases                               103                303
      Total current liabilities                  123,924             67,556
    Stockholders' equity                         964,813          1,120,547
      Total liabilities and
       stockholders' equity                   $1,088,737         $1,188,103



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

                            Three months ended          Nine Months ended
                        Dec 31,  Sept 30,  Dec 31,     Dec 31,     Dec 31,
                         2004      2004      2003        2004        2003

  Net revenues         $61,081   $61,069    $38,189    $189,552   $83,823
  Cost of revenues      30,159    31,529     17,471      93,180    36,739
  Gross profit          30,922    29,540     20,718      96,372    47,084
  Operating expenses:
   Research and
    development         31,411    31,702     30,052      94,103    85,280
   Selling, general
   and administrative   15,887    15,298     13,493      45,563    34,892
   Stock-based
    compensation:
     Research and
      development          752       915      2,142       2,699    14,846
     Selling, general
      and
      administrative       876     2,202        375       4,401     4,826
   Amortization of
    purchased
    intangibles          1,833     1,962        689       5,352       689
   Impairment of
    purchased
    intangibles         27,330        --         --      27,330        --
   Acquired in-process
    research and
    development             --        --     16,100      13,400    21,800
   Restructuring
    charges(benefits)    8,079       310       (200)      8,389    23,298
   Litigation
   settlement, net      28,900        --         --      28,900        --
    Total operating
     expenses          115,068    52,389     62,651     230,137   185,631
  Operating loss       (84,146)  (22,849)   (41,933)   (133,765)  (138,547)
  Interest and other
   income, net           4,780     4,530     15,493      14,591    35,807
  Loss before income
   taxes               (79,366)  (18,319)   (26,440)   (119,174)  (102,740)
  Income tax expense     2,526        --         --       2,861         --
  Net loss            $(81,892) $(18,319)  $(26,440)  $(122,035) $(102,740)

  Basic and diluted
   loss per share:
    Loss per share      $(0.27)   $(0.06)    $(0.09)     $(0.39)    $(0.34)
    Shares used in
     calculating
     basic and
     diluted loss
     per share         307,729   310,128    306,823     309,792    305,273



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

                              Three months ended         Nine months ended
                          Dec 31,   Sept 30,  Dec 31,    Dec 31,    Dec 31,
                           2004      2004      2003       2004       2003

    Net revenues          $61,081   $61,069   $38,189   $189,552    $83,823
    Cost of revenues       23,761    23,823    14,132     72,219     30,920
    Gross profit           37,320    37,246    24,057    117,333     52,903
    Operating expenses:
     Research and
      development          31,411    31,702    30,038     94,103     85,261
     Selling, general
      and
      administrative       15,887    15,298    13,414     45,561     34,810
            Total
             operating
             expenses      47,298    47,000    43,452    139,664    120,071
    Operating loss         (9,978)   (9,754)  (19,395)   (22,331)   (67,168)
    Interest and other
     income, net            4,780     4,530     7,080     14,591     27,394
    Loss before income
     taxes                 (5,198)   (5,224)  (12,315)    (7,740)   (39,774)
    Income tax benefit     (1,144)   (1,149)   (5,171)    (1,703)   (16,703)
    Net loss              $(4,054)  $(4,075)  $(7,144)   $(6,037)  $(23,071)

    Diluted loss per
     share:
     Loss per share        $(0.01)   $(0.01)   $(0.02)    $(0.02)    $(0.08)
     Shares used in
      calculating
      diluted
     loss per share       307,729   310,128   306,823    309,792    305,273

    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           Nine Months ended
                        Dec 31,  Sept 30,  Dec 31,      Dec 31,     Dec 31,
                         2004      2004      2003        2004        2003

  GAAP net loss       $(81,892) $(18,319)  $(26,440)  $(122,035) $(102,740)
  Adjustments:
   Stock-based
    compensation
    related to
    acquired
    companies            1,975     3,246      2,670       7,731     20,214
   Amortization of
    purchased
    intangibles          7,884     9,539      3,865      25,682      7,008
   Impairments of
    purchased
    intangibles         27,330        --         --      27,330         --
   Restructuring
    costs(benefits)      8,079       310       (200)      8,389     23,298
   Litigation
    settlement, net     28,900        --         --      28,900         --
   Gain on the sale
    of real estate          --        --     (7,551)         --     (7,551)
   Realized gains
    on strategic
    equity investments      --        --       (862)         --       (862)
   Excess inventory
    benefit                 --        --         --          --     (1,053)
   Acquired
    in-process
    research and
    development             --        --     16,100      13,400     21,800
   Payroll taxes
    on certain
    stock option
    exercises               --        --        103           2        112
   Income tax
    adjustments          3,670     1,149      5,171       4,564     16,703
  Total GAAP to
   pro forma
   adjustments          77,838    14,244     19,296     115,998     79,669

  Pro forma
   net loss            $(4,054)  $(4,075)   $(7,144)    $(6,037)  $(23,071)


  Per share reconciliation:
  GAAP loss per
   share                $(0.27)   $(0.06)    $(0.09)     $(0.39)    $(0.34)
  GAAP to pro
   forma adjustments      0.26      0.05       0.07        0.37       0.26
  Pro forma loss
   per share            $(0.01)   $(0.01)    $(0.02)     $(0.02)    $(0.08)



                       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          Nine months ended
                          Dec 31,   Sept 30,   Dec 31,   Dec 31,    Dec 31,
                           2004       2004      2003      2004       2003
    GROSS PROFIT:
    GAAP gross profit     $30,922   $29,540   $20,718    $96,372    $47,084
     Amortization of
      purchased
      intangibles           6,051     7,577     3,176     20,330      6,319
     Excess inventory
      charge (benefit)         --        --        --         --     (1,053)
     Stock-based
      compensation
      related to
       acquired
       companies              347       129       153        631        542
     Payroll taxes on
      certain
      stock option
       exercises               --        --        10         --         11
    Pro forma gross
     profit               $37,320   $37,246   $24,057   $117,333    $52,903

    OPERATING EXPENSES:
    GAAP operating
     expenses            $115,068   $52,389   $62,651   $230,137   $185,631
     Amortization of
      purchased
      intangibles           1,833     1,962       689      5,352        689
     Impairment of
      purchased
      intangibles          27,330        --        --     27,330         --
     Acquired in-
      process research
      and development          --        --    16,100     13,400     21,800
     Stock-based
      compensation
      related to
       acquired
       companies            1,628     3,117     2,517      7,100     19,672
     Restructuring
      costs (benefits)      8,079       310      (200)     8,389     23,298
     Litigation
      settlement, net      28,900        --        --     28,900         --
     Payroll taxes on
      certain stock
      option exercises         --        --        93          2        101
    Pro forma operating
     expenses             $47,298   $47,000   $43,452   $139,664   $120,071

    INTEREST AND OTHER
     INCOME,
     NET
     GAAP interest and
      other income, net    $4,780    $4,530   $15,493    $14,591    $35,807
      Gain on the sale
       of real estate          --        --    (7,551)        --     (7,551)
      Realized gains on
       strategic
        equity
         investments           --        --      (862)        --       (862)
     Pro forma interest
      and other income,
      net                  $4,780    $4,530    $7,080    $14,591    $27,394

    INCOME TAX BENEFIT:
     GAAP income tax
      expense              $2,526       $--       $--    $2,861         $--
      Income tax
       adjustments         (3,670)   (1,149)   (5,171)    (4,564)   (16,703)
     Pro forma income
      tax benefit         $(1,144)  $(1,149)  $(5,171)   $(1,703)  $(16,703)

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/