Agere Systems Reports Net Income of $47 Million, or $0.27 Per Share, for Third Quarter; Announces New Stock Repurchase Program
ALLENTOWN, Pa., July 25 /PRNewswire-FirstCall/ — Agere Systems today reported GAAP net income of $47 million, or $0.27 per share, for the third quarter of fiscal 2006, above the company’s April guidance. In the third quarter of fiscal 2005, Agere reported GAAP net income of $120 million, or $0.65 per share. The latest quarter included a $27 million tax benefit; the year-ago quarter had a tax benefit of $120 million. Revenue for the third quarter of fiscal 2006 totaled $382 million.
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On a non-GAAP basis*, Agere reported net income of $37 million, or $0.22 per share, in the third quarter of fiscal 2006, compared to $43 million, or $0.23 per share, in the same period for fiscal 2005.
Richard Clemmer, President and CEO, said, “Agere Systems turned in a solid third quarter, demonstrating the leverage we have created in our business model and the clear progress we are making in our turnaround plan. Moreover, we expanded our customer base during the quarter, giving us a firm foundation for driving revenue growth.
“During the quarter,” Clemmer added, “we completed a strategic plan that will drive success in our three businesses. Our vision for the company is captured in our new tagline, ‘Perfecting the Connected Lifestyle.’ By this, we mean that we will work to transform the performance of networks and consumer electronics to enable people to stay connected — more reliably, in more places, and more often than ever before. We are confident in our plans and believe that Agere shares remain undervalued. Consequently, we have authorized a new $200 million share repurchase program.”
The following chart shows quarterly revenue, including revenue from the licensing of intellectual property, by business segment:
Jun 30 Mar 31 Jun 30 2006 2006 2005 ($ in millions) Consumer segment: Storage $135 $171 $146 Mobility 105 95 125 Consumer segment 240 266 271 Networking segment 142 131 162 Total $382 $397 $433 Product and Customer Highlights Recent company highlights include: Networking: – TrueONE portfolio launched. These scaleable, turn-key solutions are based on Agere’s packet processing, switching, digital processing and systems software capabilities. These solutions enable the delivery of carrier-class voice, data, IPTV and HDTV services over a single converged, broadband network and allow Agere to provide solutions for the market. – Ericsson selected Agere’s packet processing technology for DSLAM equipment. – NEC chose Agere for its third-generation wireless infrastructure Node B equipment. – 3Com and Lenovo chose Agere’s Ethernet solutions for their enterprise switching applications. Mobility: – Agere delivered platform solutions for Samsung’s ultra-thin X820 model, marketed as the world’s slimmest mobile phone, offering a 2-megapixel digital video camera, document viewer and TV-output function, and Bluetooth capability. – The company finalized an agreement with u-Nav Microelectronics, a best- in-class provider of Global Positioning System (GPS) solutions. This agreement gives Agere the capability to offer proven GPS solutions along with Agere’s baseband solutions to enable value-added functionality like Location Based Services and satisfy future regulatory requirements for E-911 emergency services. Storage: – Agere expanded its customer base by providing technology for a new 2.5-inch HDD-Flash combo drive to a leading disk drive manufacturer, beating a major competitor. – The company sampled an ARM-based SoC for use in a production platform to a lead customer, further building on Agere’s significant experience in developing ARM-based cores across the company’s three businesses and strengthening the customer relationship. Outlook
In the September quarter, the company expects to report revenues in the range of $375 million to $400 million. The company expects GAAP net income to be in the range of $0.08 to $0.13 per share. Non-GAAP net income* is expected to be in the range of $0.21 to $0.26 per share.
Earnings Webcast
Agere Systems will host a conference call today at 8:30 a.m. EDT to discuss its financial results and outlook. To listen to the conference call via the Internet, visit http://www.agere.com/webcast. Subsequent to the conference call, a replay will be available at the same web address.
About Agere Systems
Agere Systems is a global leader in semiconductors and software solutions for storage, mobility and networking markets. The company’s products enable a broad range of services and capabilities, from cell phones, PCs and hard disk drives to the world’s most sophisticated wireless and wireline networks. Agere’s customers include top manufacturers of consumer electronics, communications and computing equipment. Agere works to transform the performance of networks and consumer electronics by integrating systems knowledge and leading technology that enable people to stay connected — perfecting the connected lifestyle.
About non-GAAP Financial Measures
* Non-GAAP financial measures exclude gain or loss from the sale of, and income or loss from, discontinued operations; restructuring-related charges included in costs; primarily increased depreciation; certain other non-cash charges including equity compensation; net restructuring and other charges; purchased in-process research and development charges, amortization of acquired intangible assets, net gain or loss from the sale of operating assets, certain tax adjustments, cumulative effect of accounting changes, and certain nonrecurring charges. Reconciliations of non-GAAP financial measures used in this press release to corresponding GAAP amounts are attached.
Agere, Agere Systems and the Agere Systems logo are registered trademarks and TrueONE is a trademark of Agere Systems Inc.
This release contains forward-looking statements based on information currently available to Agere. Agere’s actual results could differ materially from the results stated or implied by those forward-looking statements due to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, our reliance on major customers and suppliers, our ability to keep pace with technological change, our dependence on new product development, price and product competition, availability of manufacturing capacity, customer demand for our products and services, and general industry and market conditions. For a further discussion of these and other risks and uncertainties, see our annual report on Form 10-K for the fiscal year ended September 30, 2005, and our quarterly report on Form 10-Q for the quarter ended March 31, 2006. Agere disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Agere Systems Inc. Unaudited Condensed Consolidated Statements of Operations (Dollars in millions except per share amounts) Quarter Ended Jun 30 Mar 31 Jun 30 2006 2006 2005 Revenue $382 $397 $433 Costs 188 208 248 Gross profit – $ 194 189 185 Gross profit – % 50.8% 47.6% 42.7% Operating Expenses Selling, general and administrative 56 60 65 Research and development 107 118 119 Amortization of acquired intangible assets 2 1 1 Restructuring and other charges – net 6 28 1 Gain on sale of operating assets – net (2) (3) (4) Total operating expenses 169 204 182 Operating Income (Loss) 25 (15) 3 Other income – net 5 6 4 Interest expense 6 6 6 Income (Loss) before income taxes 24 (15) 1 Provision (benefit) for income taxes (23) 6 (119) Net Income (Loss) $47 $(21) $120 Basic income (loss) per share information Net income (loss) $0.28 $(0.11) $0.66 Weighted average shares outstanding — (in millions) 171 178 181 Diluted income (loss) per share information Net income (loss) $0.27 $(0.11) $0.65 Weighted average shares outstanding — (in millions) 172 178 193 Agere Systems Inc. Reconciliation of Non-GAAP to Unaudited GAAP Measures (Dollars in millions except per share amounts) Quarter Ended Jun 30 Mar 31 Jun 30 2006 2006 2005 Reconciliation of Non-GAAP Net Income (Loss) to Net Income (Loss) Non-GAAP Net Income (Loss) $37 $17 $43 Restructuring related charges, including increased depreciation (2) (2) (38) Stock-based compensation expenses (excludes $2 included in restructuring and other charges – net in 1QFY2006) (10) (10) – Amortization of acquired intangible assets (2) (1) (1) Restructuring and other charges – net (6) (28) (1) Expenses related to reverse split and loss on guarantee 1 – (7) Gain on sale of operating assets – net 2 3 4 Taxes excluded from Non-GAAP 27 – 120 Net Income (Loss) $47 $(21) $120 Reconciliation of Non-GAAP Net Income (Loss) Per Share to Net Income (Loss) Per Share Non-GAAP Net Income (Loss) per share-diluted $0.22 $0.10 $0.23 Restructuring related charges, including increased depreciation (0.01) (0.01) (0.21) Stock-based compensation expenses (excludes $0.01 included in restructuring and other charges – net in 1QFY2006) (0.06) (0.06) – Amortization of acquired intangible assets (0.01) – – Restructuring and other charges – net (0.04) (0.16) (0.01) Expenses related to reverse split and loss on guarantee – – (0.04) Gain on sale of operating assets – net 0.01 0.02 0.02 Taxes excluded from Non-GAAP 0.16 – 0.66 Net Income (Loss) per share- diluted $0.27 $(0.11) $0.65 Agere Systems Inc. Unaudited Condensed Consolidated Balance Sheets (Dollars in Millions) Jun 30 Mar 31 2006 2006 ASSETS CURRENT ASSETS Cash and cash equivalents $490 $620 Trade receivables 215 227 Inventories 135 132 Other current assets 24 38 TOTAL CURRENT ASSETS 864 1,017 Property, plant and equipment – net 421 423 Goodwill 196 196 Acquired intangible assets – net 11 13 Other assets 91 93 TOTAL ASSETS $1,583 $1,742 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $171 $188 Other current liabilities 235 268 TOTAL CURRENT LIABILITIES 406 456 Long-term debt 362 372 Other liabilities 471 594 TOTAL LIABILITIES 1,239 1,422 STOCKHOLDERS’ EQUITY 344 320 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $1,583 $1,742 Agere Systems Inc. Unaudited Condensed Consolidated Statements Of Cash Flows (Dollars in Millions) Three Months Ended Jun 30 Mar 31 2006 2006 OPERATING ACTIVITIES Net income (loss) $47 $(21) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Restructuring and other charges – net of cash payments (22) 8 Depreciation and amortization 28 29 Pension plan contributions (35) – Decrease in receivables 12 26 Increase in inventories (6) (11) Decrease in accounts payable (17) (8) Other operating activities – net (19) 17 NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (12) 40 INVESTING ACTIVITIES Capital expenditures (22) (18) Other investing activities 6 6 NET CASH USED BY INVESTING ACTIVITIES (16) (12) FINANCING ACTIVITIES Purchase of treasury stock (100) (59) Principal repayments of long-term debt (10) – Other financing – net 8 2 NET CASH USED BY FINANCING ACTIVITIES (102) (57) Net decrease in cash and cash equivalents (130) (29) Cash and cash equivalents at beginning period 620 649 Cash and cash equivalents at end of period $490 $620 Agere Systems Inc. Unaudited Net Income (Loss) Per Share Guidance Quarter Ending Sep 30 2006 Non-GAAP Net Income (High End of Range) $0.26 Non-GAAP Net Income (Low End of Range) $0.21 Less: Restructuring and related costs 0.06 Stock-based compensation expenses 0.06 Amortization of acquired intangible assets 0.01 0.13 Net Income (High End of Range) $0.13 Net Income (Low End of the Range) $0.08
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Agere Systems
CONTACT: Media: Robert Guenther, +1-610-712-1514,+1-908-457-3360 – Mobile, rguenther@agere.com, Investor: Sujal Shah,+1-610-712-5471, sujal@agere.com
Web site: http://www.agere.com/webcast