RF Micro Devices Inc. (RFMD) filed Quarterly Report for the period ended 2009-10-03.
RF Micro Devices, Inc. is a global leader in the design and manufacture of high-performance radio systems and solutions for applications that drive mobile communications. RFMD's power amplifiers, transmit modules, cellular transceivers and system-on-chip solutions enable worldwide mobility, provide enhanced connectivity and support advanced functionality in current and next-generation mobile handsets, cellular base stations, wireless local area networks, wireless personal area networks and global positioning systems. Recognized for its diverse portfolio of state-of-the-art semiconductor technologies and vast RF systems expertise, RFMD is a preferred supplier enabling the world's leading mobile device manufacturers to deliver advanced wireless capabilities that satisfy current and future market demands. Rf Micro Devices Inc. has a market cap of $1.18 billion; its shares were traded at around $4.41 with and P/S ratio of 1.4.
Highlight of Business Operations:
Operating income was approximately $24.1 million and $36.2 million for the three and six months ended October 3, 2009, respectively, compared to an operating loss of $19.0 million and an operating loss of $58.7 million for the three and six months ended September 27, 2008, respectively. The strategic and economic restructurings of fiscal 2009 generated significant cost reductions and are contributing to our improvement in operating income in fiscal 2010 (see Note 9 to the Condensed Consolidated Financial Statements). These cost reductions included both cost of sales and operating expense improvements. During the three and six months ended September 27, 2008, we recorded $17.1 million and $43.7 million, respectively, of expenses associated with the strategic restructuring. Also during fiscal 2009, we recorded acquisition-related charges (such as amortization expense for inventory step-up and acquired intangibles) resulting from our acquisitions of Sirenza in the third quarter of fiscal 2008, Filtronic in the fourth quarter of fiscal 2008, and UMC in the first quarter of fiscal 2009.
In the first quarter of fiscal 2009, we began execution of a strategic restructuring to reduce investments in wireless systems, including cellular transceivers and GPS solutions, in order to focus on our core RF component opportunities. Additionally, we have consolidated our production test facilities in order to reduce cycle time, better serve our customer base and improve our overall profitability. We have recorded restructuring charges of approximately $0.6 million and $0.8 million for the three and six months ended October 3, 2009, and $17.1 million and $43.7 million for the three and six months ended September 27, 2008, respectively, related to one-time employee termination expenses, impaired assets (including property and equipment) and lease and other contract termination costs. From the first quarter of fiscal 2009 through the second quarter of 2010, we incurred a total of $47.8 million in restructuring charges related to this plan. As of October 3, 2009, we expect to record approximately $1.6 million of additional restructuring charges associated with ongoing expenses related to exited leased facilities and one-time employee termination expenses, for a total expected cost of approximately $49.5 million. As of October 3, 2009, the restructuring to reduce or eliminate our investments in wireless systems is substantially completed (see Note 9 to the Condensed Consolidated Financial Statements).
During the first quarter of fiscal 2008, the $51.4 million valuation allowance against the domestic federal and state deferred tax assets that existed as of the end of fiscal 2007 was reduced by $43.6 million. Of this amount, $12.9 million was reversed in connection with the adoption of changes in accounting for uncertain income tax positions. The balance of $30.7 million consisted of a reversal of $31.6 million of the valuation allowance based on the evaluation by management of the ability in future years to realize the related domestic deferred tax assets and an increase of $0.9 million recorded in connection with state credit deferred tax assets acquired in connection with the Sirenza acquisition. The $31.6 million reversal was based on the determination by management that as of the end of the first quarter of fiscal 2008, the negative evidence that existed as of the end of fiscal 2007 was no longer applicable. Based on actual activity during the period, by the end of the first quarter we were able to better determine the impact of the slow-down in customer demand from the high per-unit dollar content major customer and positive evidence arose of actual increases in sales to other customers and the commencement of volume production of the POLARIS® 3 RF solution. The amount reversed consisted of $20.7 million recognized as an income tax benefit, $4.8 million reversed against equity related to the tax benefit of employee stock options, and $6.1 million reversed against goodwill related to the tax benefit of net operating losses, credits and deductions acquired from other companies. The majority of the subsequent increase in the valuation allowance to $38.8 million as of the end of fiscal 2008 consisted of $3.4 million recorded in connection with the Sirenza acquisition during the third quarter of fiscal 2008 and $27.0 million recorded in connection with the Filtronic acquisition during the fourth quarter of fiscal 2008.
As of the end of fiscal 2009, the valuation allowance against deferred tax assets had increased by $99.6 million from $38.8 million as of the end of fiscal 2008 to $138.4 million. This increase was comprised of: a $0.2 million increase related to state tax credits and net operating loss carryovers acquired in the Sirenza transaction which were not realizable as of the acquisition date and which increase was recorded in goodwill; increases of $90.8 million related to U.S. deferred tax assets, $1.8 million related to China deferred tax assets, and $14.1 million related to U.K. deferred tax assets for which there was a change in judgment about the realizability of the deferred tax assets during fiscal 2009 and which increases were recorded as an income tax expense during the fiscal year; a $0.3 million increase related to the tax benefit of employee stock compensation which was recorded in equity during the fiscal year; and a $7.6 million decrease related to the impact from the change in the exchange rate for the British pound on the valuation allowance for U.K. deferred tax assets existing as of the beginning of the fiscal year, which amount was offset by a corresponding decrease in the U.S. dollar denominated amount of the related U.K. deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES We have funded our operations to date through sales of equity and debt securities, bank borrowings, capital equipment leases and revenue from product sales. Through public and Rule 144A securities offerings, we have raised approximately $1,053.3 million, net of offering expenses. As of October 3, 2009, we had working capital of approximately $299.3 million, including $116.7 million in cash and cash equivalents, compared to working capital at September 27, 2008, of $472.4 million, including $169.3 million in cash and cash equivalents. The decrease in the working capital at October 3, 2009 as compared to September 27, 2008 is primarily due to the reclassification of our convertible subordinated notes due on July 1, 2010, totaling $206.5 million, to current debt from long-term debt.
Cash Flows from Operating Activities Operating activities for the six months ended October 3, 2009, generated cash of $83.6 million, compared to $36.7 million for the six months ended September 27, 2008. During the first six months of fiscal 2010, our net income increased $60.1 million year-over-year. This year-over-year increase was primarily attributable to improvements in profitability driven by the strategic and economic restructuring efforts during fiscal 2009 and decreased restructuring charges. In the first half of fiscal 2009, we recorded restructuring charges of $43.7 million compared to $3.1 million in the first half of fiscal 2010. Cash payments related to these restructurings totaled approximately $4.5 million during the first six months of fiscal 2010 compared to $13.0 million in the first half of fiscal 2009.
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