RF Micro Devices, Inc. Announces Fiscal 2002 First Quarter Results

Source: RF Micro Devices, Inc.

Quarterly Highlights

-- Revenues Grow 27.3% Sequentially To $70.1 Million

-- Excluding Special Charge, Quarterly Loss Per Share Is ($0.05)

-- Company Incurs $22.1 Million Special Charge

-- Module Revenues Increase 29% Sequentially

-- Company Is 100% Booked For Approximately 10% Sequential Revenue Growth

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 2002 first quarter, ended June 30, 2001.

Financial Results

The Company incurred a $22.1 million special charge that was the result of two business trends. First, as a result of an ongoing shift in customer demand from individual integrated circuits, also known as microwave monolithic integrated circuits (MMICs), to module products, the Company recorded a $15.3 million inventory reserve and a $2.8 million asset impairment charge related to MMIC test handlers.

Second, the Company recorded a $4 million asset impairment charge as a result of the decision to outsource all production packaging, and the subsequent transitioning of the Company s packaging line to an all-R&D facility. RF Micro Devices believes these actions better position the Company for the future and improve its competitiveness.

Revenues for the quarter were approximately $70.1 million, a sequential increase of approximately 27.3% versus revenues of $55.0 million for the quarter ended March 31, 2001 and a decrease of approximately 28.7% versus revenues of $98.2 million for the corresponding quarter of fiscal 2001. Revenues were ahead of the Company s prior guidance for the quarter, which was provided on April 17, 2001 and indicated 20% sequential growth. Power amplifier (PA) module revenues increased 29% sequentially and represented 33% of revenues in the June quarter, versus 32% of revenues in the March quarter.

Excluding the special charge, gross profit for the quarter would have increased 43.1% sequentially to $19.4 million, versus $13.6 million for the quarter ended March 31, 2001, and decreased 61.6%, versus $50.6 million for the prior year period. The year-over-year decrease in gross profit was primarily attributable to the decrease in the Company s revenues, the initial higher cost of goods sold associated with the Company s module products, and greater than normal yield losses associated with the steep ramp of the module business.

The sequential increase in gross profit was primarily attributable to the sequential increase in the Company s revenues as well as the result of cost reduction and yield improvement initiatives. Gross profit margin excluding the special charge increased sequentially 300 basis points to 27.7% from 24.7% in the prior quarter. Including the special charge, gross profit was $4.2 million.

During the June quarter, other operating expenses totaled $4.9 million. Other operating expenses represent startup costs associated with the Company s second wafer fab facility and the Company s recently announced facility in China. Currently, the wafer fab is expected to commence operations late in the September quarter, and construction of the China facility is expected to be complete in the fall of 2002.

Excluding the effect of the special charge, net loss for the quarter would have been $7.5 million, or ($0.05) per share, based on a 33% tax rate, compared to net income of $16.2 million, or $0.09 per diluted share, for the first quarter of fiscal 2001, based on a 38% tax rate. This compares sequentially to a net loss of $6.8 million, or ($0.04) per share, for the fourth quarter of fiscal 2001, based on a 33% tax rate. The special charge incurred during the June quarter reduced earnings by approximately $22.1 million, or ($0.13) per share, and reversed a tax benefit of $3.9 million, or ($0.02) per share, for a total impact of ($0.15) per share. Including the effect of the special charge, net loss for the quarter was $33.5 million, or ($0.20) per share.

Business Outlook And Financial Guidance

Order visibility improved during the June quarter. The Company currently is fully booked to support approximately 10% sequential revenue growth in the September quarter. Gross margin for the September quarter is currently expected to range from 28% to 33%. Operating expenses in the September quarter, excluding other operating expenses associated with the Company s second wafer fab facility and its China facility, are currently expected to increase sequentially approximately 3%, due mainly to increased investments in the Company s R&D activities. Other operating expenses are anticipated to range from $5.0 million to $5.5 million.

Because of the special charge taken in the June quarter, the Company now anticipates its tax rate will be approximately 0.0% for the quarter and the year. This is an update to previous guidance that suggested the Company would recognize a tax benefit in the second fiscal quarter. The updated tax guidance increases the anticipated loss per share in the September quarter by ($0.01). Taking these factors into account, the Company currently expects a net loss per share for the September 2001 quarter of approximately ($0.03).

The Company expects module shipments will represent an increasing percentage of total revenues in the September quarter, driven primarily by market share gains and the ongoing shift in customer demand to module products.

Management continues to anticipate a return to profitability in calendar 2001. Near-term variables that could impact the Company s ability to return to profitability include wafer fab capacity utilization, module product margin improvements, product mix and other items outside the control of the Company.

Comments From Management

David Norbury, President and Chief Executive Officer of RF Micro Devices, said, "We are very pleased to report better-than-forecasted sequential revenue growth particularly since the macro environment remains challenging. The growth was driven primarily by market share gains by our PA modules and continued demand for certain MMIC products. There continues to be particularly strong interest in our module products, and we currently believe we are on track to begin production shipments of new power amplifier modules for both TDMA and GSM/GPRS handsets during the September quarter.

"During the June quarter, the Company experienced increased order activity and growth in backlog. Given these factors, and our ongoing communications with customers, we believe our visibility has improved into the September quarter. We continue to expect near-term revenue growth and market share gains, and we are optimistic about multiple opportunities in handset and non-handset markets. Our wireless local area network (WLAN) chipset, for example, is currently being evaluated by several leading companies. Initial feedback has been positive, and we expect WLAN revenues will begin to reach meaningful levels this fiscal year.

"Finally, we anticipate September revenues will increase approximately ten percent sequentially, and we are very pleased to be fully booked to reach that goal."

Dean Priddy, CFO and vice president of administration, stated, "Regarding the increased inventory reserves, recent forecast analysis and customer inputs indicate a strengthening of our module business and continued strength in certain MMIC products but an overall excess of MMIC products in total. The decision to write down the value of MMIC based test handlers was based on the same analysis. The shift in our business from MMICs to modules has happened rapidly, and we anticipate module revenue will represent approximately 50% of total revenue in the September quarter. The write-down of production packaging equipment reflects the growing industry trend to outsource non-core manufacturing. Our assembly partners have capacity and are working to reduce costs, so economically it now makes sense for us to outsource all packaging. However, based on customer input, we believe it s also a competitive advantage to maintain a strong packaging R&D group, which drove our decision to transition our packaging line to an all-R&D facility."

Priddy continued, "We were cash-flow positive for the quarter despite a difficult business environment. Our balance sheet remains strong and we have sufficient cash to execute on our business plan for the foreseeable future."

RF Micro Devices will conduct a conference call at 5:00 p.m. (ET) today to discuss fiscal first quarter results and comment on the Company s outlook. The conference call will be broadcast live over the Internet and can be accessed by any interested party at www.streetevents.com or www.rfmd.com.

RF Micro Devices, Inc., an ISO 9001-certified manufacturer, designs, develops, manufactures and markets proprietary radio frequency integrated circuits (RFICs) primarily for wireless communications products and applications such as cellular and PCS phones, base stations, wireless LANs, and cable television modems. The Company offers a broad array of products - including amplifiers, mixers, modulators/demodulators, and single-chip receivers, transmitters and transceivers - representing a substantial majority of the RFICs required in wireless subscriber equipment. The Company s strategy is to focus on wireless markets by offering a broad range of standard and custom-designed RFICs in order to position itself as a "one-stop" solution for its customers RFIC needs. In the September 4, 2000 issue of Fortune Magazine, RF Micro Devices was ranked second among Fortune s "100 Fastest Growing Companies." RF Micro Devices, Inc., is traded on the Nasdaq National Market under the symbol RFMD.

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 probable variability in quarterly operating results, the rate of growth and development of wireless markets, risks associated with the operation of wafer fabrication facilities, its ability to manage rapid growth and to attract and retain skilled personnel, variability in production yields, raw material availability, manufacturing capacity constraints, 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(R)and RFMD(R)are trademarks of RF Micro Devices, Inc. All other tradenames, trademarks and registered trademarks are the property of their respective owners. For further information about RFMD, please visit our web site at http://www.rfmd.com.

CONTACT: RF Micro Devices Dean Priddy, Chief Financial Officer Tel: 336/931-7152 or Doug DeLieto, Dir., Investor Relations Tel: 336/931-7968 or At the Financial Relations Board Maura Gedid, (general info.) or Nicole Engel, (investor info.) Tel: 212/661-8030