Why was the net loss so large in fiscal 2003 when operating results improved?

The net loss of $451.4 million was driven mainly by a $397.1 million cumulative effect of a change in accounting principle. This transitional charge resulted from the company's adoption of SFAS No. 142 on October 1, 2002, which required it to write down goodwill from the June 2002 Merger. Excluding this charge, the loss before cumulative effect was $54.3 million, compared with $236.1 million in fiscal 2002.

How is Skyworks funding its operations and what debt does it carry?

At September 30, 2003, long-term debt was $275.0 million, consisting of $230 million of 4.75% convertible subordinated notes due 2007 and $45 million of 15% convertible senior subordinated notes due June 30, 2005. Short-term debt was $41.7 million under the Wachovia receivables facility. The company stated that existing liquidity and cash from operations will be sufficient for at least the next twelve months.

How concentrated is the company's customer base?

Samsung Electronics accounted for 15% of net revenues in fiscal 2003, down from 35% in fiscal 2002, and Motorola accounted for 11% in both years. Samsung also represented approximately 18% of gross accounts receivable at September 30, 2003. The filing notes that the loss of a major customer would materially and adversely affect the business.

What legal matters could affect Skyworks?

The company is in discussions with Qualcomm Incorporated over claims each party has filed against the other alleging violations of intellectual property rights. Skyworks believes Qualcomm's claims are without merit and states it is prepared to vigorously defend them if a resolution outside litigation is not reached. The company has also assumed responsibility for certain litigation against Conexant's wireless business in connection with the Merger.

Does Skyworks pay dividends?

No. Neither Skyworks nor its predecessor Alpha has paid cash dividends on common stock since a fiscal 1986 Alpha dividend, and the company does not anticipate paying cash dividends in the foreseeable future. It expects to retain future earnings to finance growth.

SWKS 10-K FY2003 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed December 22, 2003. Cited figures are marked; the original filing is the authoritative source.

Skyworks Solutions, Inc. (Woburn, Massachusetts) reported net revenues of $617.8 million^a for the fiscal year ended October 3, 2003, up 35.0% from $457.8 million in fiscal 2002, driven by demand for its wireless product portfolio and the exclusion of Alpha's pre-Merger revenues.

Gross margin improved to 38.4% of net revenues from 27.6%, but the company posted a net loss of $451.4 million^b, or $3.24 per share, which includes a $397.1 million cumulative effect of a change in accounting principle from the transitional goodwill impairment under SFAS No. 142. Operating loss narrowed to $33.5 million from $251.4 million in the prior year, and special charges fell to $34.5 million, principally related to impairment of infrastructure product assets. Balance sheet and liquidity changed meaningfully during the year.

Cash and cash equivalents rose to $161.5 million^c from $53.4 million, supported by a $230 million private placement of 4.75% convertible subordinated notes due 2007, a September 2003 common stock offering that generated approximately $102.2 million in net proceeds, and a $50 million receivables facility with Wachovia under which $41.7 million was borrowed. Total debt was approximately $325 million after giving effect to unused availability, and stockholders' equity declined to $673.2 million from $1.01 billion. Operating cash flow was negative $72.1 million.

Investors should note customer concentration, with Samsung Electronics at 15%^d and Motorola at 11% of fiscal 2003 revenues, compared with Samsung at 35% in fiscal 2002. The filing also discloses an ongoing intellectual property dispute with Qualcomm Incorporated, in which each company has filed claims against the other, and a stated expectation that existing liquidity will be sufficient for at least the next twelve months. The company paid no cash dividends and does not anticipate paying them.

02—Key points

Key Highlights

Net revenues rose 35.0% to $617.8 million in fiscal 2003, with Asia-Pacific accounting for $376.6 million of the total.
Gross margin improved to 38.4% from 27.6% of net revenues, reflecting higher revenues and improved manufacturing utilization.
Net loss of $451.4 million ($3.24 per share) includes a $397.1 million cumulative effect charge from the SFAS No. 142 transitional goodwill impairment.
Operating loss narrowed to $33.5 million from $251.4 million, with special charges of $34.5 million versus $116.3 million a year earlier.
Cash and cash equivalents increased to $161.5 million, aided by a $230 million 4.75% convertible note offering and about $102.2 million in net proceeds from a September 2003 common stock offering.
Customer concentration remains high: Samsung Electronics 15% and Motorola 11% of fiscal 2003 net revenues.
Qualcomm Incorporated has filed claims against the company over intellectual property, and the company is in discussions to resolve the matter outside of litigation.

03—Questions

Frequently Asked Questions

Why was the net loss so large in fiscal 2003 when operating results improved?
The net loss of $451.4 million was driven mainly by a $397.1 million cumulative effect of a change in accounting principle. This transitional charge resulted from the company's adoption of SFAS No. 142 on October 1, 2002, which required it to write down goodwill from the June 2002 Merger. Excluding this charge, the loss before cumulative effect was $54.3 million, compared with $236.1 million in fiscal 2002.
How is Skyworks funding its operations and what debt does it carry?
At September 30, 2003, long-term debt was $275.0 million, consisting of $230 million of 4.75% convertible subordinated notes due 2007 and $45 million of 15% convertible senior subordinated notes due June 30, 2005. Short-term debt was $41.7 million under the Wachovia receivables facility. The company stated that existing liquidity and cash from operations will be sufficient for at least the next twelve months.
How concentrated is the company's customer base?
Samsung Electronics accounted for 15% of net revenues in fiscal 2003, down from 35% in fiscal 2002, and Motorola accounted for 11% in both years. Samsung also represented approximately 18% of gross accounts receivable at September 30, 2003. The filing notes that the loss of a major customer would materially and adversely affect the business.
What legal matters could affect Skyworks?
The company is in discussions with Qualcomm Incorporated over claims each party has filed against the other alleging violations of intellectual property rights. Skyworks believes Qualcomm's claims are without merit and states it is prepared to vigorously defend them if a resolution outside litigation is not reached. The company has also assumed responsibility for certain litigation against Conexant's wireless business in connection with the Merger.
Does Skyworks pay dividends?
No. Neither Skyworks nor its predecessor Alpha has paid cash dividends on common stock since a fiscal 1986 Alpha dividend, and the company does not anticipate paying cash dividends in the foreseeable future. It expects to retain future earnings to finance growth.

04—Continue

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