Skyworks Posts 19 Percent Top Line and 50 Percent Bottom Line Sequential Growth in Q4 FY09

The diluted earnings per share calculation for the fiscal year ended October 3, 2008 includes the impact of the Company's 4.75% convertible subordinated notes which were retired during the first quarter of fiscal 2008.

Our earnings release contains the following financial measures which have not been calculated in accordance with United States Generally Accepted Accounting Principles (GAAP): (i) non-GAAP gross profit, (ii) non-GAAP operating income and operating margin, (iii) non-GAAP net income, and (iv) non-GAAP net income per share (diluted). As set forth in the "Unaudited Reconciliation of Non-GAAP Financial Measures" table found above, we derive each non-GAAP financial measure by excluding certain expenses and other items from the respective GAAP financial measure that is most directly comparable to each non-GAAP financial measure. Management uses these non-GAAP financial measures to evaluate our operating performance and compare it against past periods, make operating decisions, forecast for future periods, compare operating performance against peer companies and determine payments under certain compensation programs. These non-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in our ongoing business by eliminating certain non-recurring expenses (which may not occur in each period presented) and other items that management believes might otherwise make comparisons of our ongoing business with prior periods more difficult, obscure trends in ongoing operations or reduce management's ability to make useful forecasts.

We provide investors with non-GAAP gross margin, non-GAAP operating income and operating margin and non-GAAP net income because we believe it is important for investors to be able to closely monitor and understand changes in our ability to generate income from ongoing business operations. We believe these non-GAAP financial measures give investors a more effective method to evaluate historical operating performance and identify trends, additional means of evaluating period-over-period operating performance and a method to facilitate certain comparisons of operating results to peer companies. We also believe that providing non-GAAP operating income and operating margin allows investors to better assess the extent to which ongoing operations impact our overall financial performance. We further believe that providing non-GAAP net income and non-GAAP net income per share (diluted) allows investors to better assess the overall financial performance of ongoing operations by eliminating the impact of certain financing decisions related to our convertible debt and changes in tax valuation allowances which may not occur in each period for which financial information is presented and which represent gains or losses unrelated to our ongoing operations. We believe that disclosing these non-GAAP financial measures contributes to enhanced financial reporting transparency and provides investors with added clarity about complex financial performance measures.

We calculate non-GAAP gross margin by excluding from GAAP gross margin, stock compensation expense, restructuring-related charges and acquisition-related expenses. We calculate non-GAAP operating income by excluding from GAAP operating income, stock compensation expense, restructuring-related charges, acquisition-related expenses and certain deferred executive compensation. We calculate non-GAAP operating margin by dividing non-GAAP operating income by GAAP revenue. We calculate non-GAAP net income by excluding from GAAP net income stock compensation expense, restructuring-related charges, acquisition-related expenses and certain deferred executive compensation, as well as certain items related to the retirement of convertible debt and certain non-cash tax items, which may not occur in all periods for which financial information is presented. We also present non-GAAP net income per share on a fully diluted basis. We exclude the items identified above from the respective non-GAAP financial measure referenced above for the reasons set forth with respect to each such excluded item below:

Stock Compensation - because (1) the total amount of expense is partially outside of our control because it is based on factors such as stock price volatility and interest rates, which may be unrelated to our performance during the period in which the expense is incurred, (2) it is an expense based upon a valuation methodology premised on assumptions that vary over time, and (3) the amount of the expense can vary significantly between companies due to factors that can be outside of the control of such companies.

Restructuring-Related Charges - because, to the extent such charges impact a period presented, we believe that they have no direct correlation to future business operations and including such charges does not accurately reflect the performance of our ongoing operations for the period in which such charges are incurred.

Acquisition-Related Expenses - including, when applicable, amortization of acquired intangible assets, because they are not considered by management in making operating decisions and we believe that such expenses do not have a direct correlation to future business operations and thereby including such charges does not accurately reflect the performance of our ongoing operations for the period in which such charges are incurred.

Deferred Executive Compensation - including charges related to any contingent obligation pursuant to an executive severance agreement because we believe the period over which the obligation is amortized may not reflect the period of benefit and that such expense has no direct correlation with our recurring business operations and including such expenses does not accurately reflect the compensation expense for the period in which incurred.

Gains and Losses on Retirement of Convertible Debt - because, to the extent that gains or losses from such repurchases impact a period presented, we do not believe that they reflect the underlying performance of ongoing business operations for such period.

Certain Income Tax Items - including benefits related to any reversals of our valuation allowances recorded against deferred tax assets because we believe such reversals are not indicative of ongoing business operations.

The non-GAAP financial measures presented in the table above should not be considered in isolation and are not an alternative for, the respective GAAP financial measure that is most directly comparable to each such non-GAAP financial measure. Investors are cautioned against placing undue reliance on these non-GAAP financial measures and are urged to review and consider carefully the adjustments made by management to the most directly comparable GAAP financial measures to arrive at these non-GAAP financial measures. Non-GAAP financial measures may have limited value as analytical tools because they may exclude certain expenses that some investors consider important in evaluating operating performance or ongoing business. Further, non-GAAP financial measures are likely to have limited value for purposes of drawing comparisons between companies because different companies may calculate similarly titled non-GAAP financial measures in different ways because non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

Our earnings release also contains our forward looking estimates of non-GAAP operating margin and non-GAAP diluted earnings per share for the first quarter of our 2010 fiscal year, or Q1 2010. We provide these non-GAAP measures to investors on a prospective basis for the same reasons (set forth above) that we provide them to investors on a historical basis. We have provided a reconciliation of our forward looking estimate of Q1 2010 non-GAAP operating margin to our forward looking estimate of Q1 2010 GAAP operating margin in the table below. We calculate our forward looking estimate of non-GAAP operating margin in the same manner that we calculate our historical non-GAAP operating margin, except that in the forward looking estimate we may not exclude all of the items that we would otherwise exclude in calculating the historical measure because we are unable to make reasonable predictions about the amounts of certain excluded items. We are unable to provide a reconciliation of our forward looking estimate of Q1 2010 non-GAAP diluted earnings per share to a forward looking estimate of Q1 2010 GAAP diluted earnings per share because certain information needed to make a reasonable forward looking estimate of GAAP diluted earnings per share for Q1 2010 (other than estimated stock compensation expense of $0.05 per diluted share, estimated acquisition related expense of $0.01 per diluted share and estimated deferred executive compensation expense with a de minimis impact per diluted share) is difficult to predict and estimate and is primarily dependent on future events outside of our control. Our forward looking estimates of both GAAP and non-GAAP measures of our financial performance may differ materially from our actual results and should not be relied upon as statements of fact.

These charges represent expense recognized in accordance with Accounting Standards Codification 718 - Compensation- Stock Compensation. Approximately $0.9 million, $1.8 million and $4.4 million were included in cost of goods sold, research and development expense and selling, general and administrative expense, respectively, for the three months ended October 2, 2009. Approximately $3.1 million, $6.2 million and $14.2 million were included in cost of goods sold, research and development expense and selling, general and administrative expense, respectively, for the fiscal year ended October 2, 2009.

For the three months ended October 3, 2008, approximately $0.8 million, $2.5 million and $3.1 million were included in cost of goods sold, research and development expense and selling, general and administrative expense, respectively. For the fiscal year ended October 3, 2008, approximately $3.0 million, $8.7 million and $11.5 million were included in cost of goods sold, research and development expense and selling, general and administrative expense, respectively.

During the second quarter of fiscal 2009, the Company implemented a restructuring plan to reduce global headcount by approximately 4%, or 150 employees.

The total charges related to the plan were $19.4 million. Due to accounting classifications, the charges associated with the plan are recorded in various lines and are summarized as follows:

Restructuring and other charges primarily consisted of $4.5 million related to severance and benefits, $5.6 million related to the impairment of long-lived assets, $2.0 million related to lease obligations, $2.3 million related to the impairment of technology licenses and design software and $1.5 million related to other charges.

Restructuring and other charges of $0.6 million recorded during the three months and fiscal year ended October 3, 2008 relate to lease obligations associated with the closure of certain locations related to the baseband product area.

During the third quarter of fiscal 2009, Skyworks acquired Axiom Microdevices. The acquisition-related expenses recognized during the three months and twelve months ended October 2, 2009 include $0.9 million and $1.2 million amortization of acquisition related intangibles, respectively. Amortization expense of $1.3 million and $4.9 million, respectively, relates to previous business combinations.

The acquisition-related expenses recognized during the three months ended October 3, 2008 include $0.8 million amortization of acquisition related intangibles. Of the $0.8 million, $0.3 million was included in cost of sales. Amortization expense of $0.6 million relates to a previous business combination.

The acquisition-related expenses recognized during the fiscal year ended October 3, 2008 include a $0.7 million charge to cost of sales related to the sale of acquisition related inventory and $4.5 million amortization of acquisition related intangibles. Of the $4.5 million, $0.9 million was included in cost of sales. Amortization expense of $2.4 million relates to a previous business combination.

On October 2, 2006, the Company announced that it was exiting its baseband product area. For the fiscal year ended October 2, 2009, selling, general and administrative adjustments of $0.5 million represent a recovery of bad debt expense on specific accounts receivable associated with baseband product.

For the three months and fiscal year ended October 3, 2008, selling, general and administrative adjustments of $0.8 million and $1.3 million, respectively, represent a recovery of bad debt expense on specific accounts receivable associated with baseband product.

The $6.1 million loss recorded during the three months ended October 2, 2009 relates to the early retirement of $17.4 million of the Company's 1.25% convertible subordinated notes due in 2010.

The net loss of $4.1 million recorded for the fiscal year ended October 2, 2009 represents the $6.1 million loss recorded during the three months ended October 2, 2009 offset by a $2.0 million gain recorded during the first quarter of fiscal 2009. The gain relates to the early retirement of $40.5 million of the Company's 1.50% convertible subordinated notes due in 2012. These notes were retired at a gain of approximately $2.9 million offset by a $0.9 million write-off of deferred financing costs.

The $6.8 million loss recorded during the three months ended October 3, 2008 relates to the early retirement of $62.4 million of the Company's 1.25% and 1.50% convertible subordinated notes due in 2010 and 2012, respectively. Approximately $5.8 million represents a premium paid and $1.0 million represents a write-off of deferred financing costs.

During the three months and fiscal years ended October 2, 2009 and October 3, 2008, these adjustments primarily relate to the reversal of a valuation allowance against our deferred tax assets.