Infineon Reports Results for Third Quarter of Financial Year 2005
MUNICH, Germany--July 26, 2005--Infineon Technologies AG (FWB:IFX):-- Revenues of Euro 1.61 billion in the third quarter were stable compared to the second quarter, reflecting increased revenues of the Memory Products segment, offset by reduced revenues in the Communication and the Automotive, Industrial and Multimarket segments.
-- Third quarter EBIT loss included charges of Euro 81 million, primarily in connection with the planned phase-out of production at the company's Munich-Perlach facility and impairment charges in the Communication segment; third quarter EBIT loss increased to Euro 234 million from Euro 117 million in the prior quarter. Second quarter EBIT was negatively impacted by a net aggregate charge of Euro 74 million resulting primarily from reorganization measures in the Communication segment.
-- Net loss in the third quarter was Euro 240 million compared to a net loss of Euro 114 million in the prior quarter.
-- Total revenues for the first nine months of financial year 2005 were Euro 5.03 billion, down 3 percent from Euro 5.20 billion in the same period last year. EBIT loss in the first nine months of financial year 2005 was Euro 140 million, compared with positive Euro 143 million in the same period last year. Net loss for the first nine months amounted to Euro 212 million, compared to net income of Euro 17 million in the same period last year.
3 3 + /- in % 3 +/- in
months months sequential months %
ended ended ended year-
Jun 30, Mar 31, Jun 30, on-
In Euro million 2005 2005 2004 year
---------------------------- ------- ------- ---------- ------- ------
Revenues 1,606 1,606 +0% 1,908 -16%
---------------------------- ------- ------- ---------- ------- ------
EBIT (234) (117) -100% 2 - - -
---------------------------- ------- ------- ---------- ------- ------
Net loss (240) (114) - - - (56) - - -
---------------------------- ------- ------- ---------- ------- ------
Loss per share
(in Euro) (0.32) (0.15) - - - (0.08) - - -
---------------------------- ------- ------- ---------- ------- ------
For the third quarter of financial year 2005, Infineon Technologies AG (FWB:IFX) reported a stable overall development of revenues. Revenues of the Memory Products segment increased in the third quarter, primarily as a result of an approximate 45 percent bit-shipment growth, which more than offset a price-per-bit decline of approximately 30 percent compared to the previous quarter. In the Communication segment, revenues in the wireline business were stable in the third quarter, whereas demand for baseband components continued to decline. In the Automotive, Industrial and Multimarket segment, slight improvements in revenues of the automotive and industrial businesses could not fully offset further deterioration in the security and chip-card business.
As expected, sequential EBIT loss increased significantly. The EBIT loss increase was mainly driven by significantly lower price levels in the Memory Products segment compared to the previous quarter, as well as continuous pricing pressure primarily in the security and chip-card businesses. In addition, EBIT was negatively impacted by charges of Euro 81 million, primarily in connection with the planned phase-out of production at the company's Munich-Perlach facility and impairment charges in the Communication segment. Second quarter EBIT was negatively impacted by a net aggregate charge of Euro 74 million resulting primarily from reorganization measures in the Communication segment.
"We have made good progress in our corporate restructuring. However, in the third quarter we have seen adverse effects on memory products and security and chip-card ICs as well as at some of our baseband customers," said Dr. Wolfgang Ziebart, CEO and President of Infineon Technologies AG. "In spite of this, we expect an improved fourth quarter compared to the third quarter."
Business groups' 2005 third quarter performance and outlook
Infineon began to report its financial position and results of operations in accordance with its new organizational structure during the second quarter of financial year 2005. The former Mobile and Wireline Communication segments were combined into the new Communication segment to align the company's structure with market developments. At the same time, the company's security and chip-card activities and the ASIC & Design Solutions business were integrated into the extended Automotive, Industrial and Multimarket segment. The results of periods prior to the second quarter of financial year 2005 have been reclassified to conform to the new presentation.
Automotive, Industrial and Multimarket
3 3 + /- in % 3 +/-
months months sequential months in %
ended ended ended year-
Jun 30, Mar 31, Jun 30, on-
In Euro million 2005 2005 2004 year
----------------------------- ------- ------- ---------- ------- -----
Revenues 625 634 -1% 669 -7%
----------------------------- ------- ------- ---------- ------- -----
EBIT 23 36 -36% 74 -69%
----------------------------- ------- ------- ---------- ------- -----
In the third quarter of financial year 2005, revenues in the Automotive, Industrial and Multimarket segment decreased slightly compared to the previous quarter. This was mainly due to higher than expected pricing pressure in the security and chip-card business, primarily caused by a rapid decline of market demand during the third quarter. Despite strong pricing pressure in the industrial business, revenues in the company's automotive and industrial businesses increased slightly. EBIT in the Automotive, Industrial and Multimarket segment sequentially decreased. This was mainly due to very strong pricing pressure in the security and chip-card business, which was not fully offset by productivity measures. In addition, EBIT was negatively impacted by costs related to product transfer in connection with the planned phase-out of production at Munich-Perlach and the investment in the new production site in Kulim, Malaysia.
Automotive, Industrial and Multimarket's outlook for the fourth quarter of financial year 2005
In the fourth quarter of financial year 2005, Infineon expects to benefit from seasonal strengths in its automotive and industrial businesses. However, the company anticipates no improvement in the security and chip-card business during the fourth quarter and will continue to focus on productivity improvements. The planned phase-out of production at Munich-Perlach and start-up costs for the new production site in Kulim, Malaysia will negatively impact EBIT through the end of calendar year 2006. In the overall Automotive, Industrial and Multimarket segment, Infineon expects stable revenues and EBIT for the fourth quarter.
Communication
3 3 + /- in % 3 +/- in
months months sequential months %
ended ended ended year-
Jun 30, Mar 31, Jun 30, on-
In Euro million 2005 2005 2004 year
---------------------------- ------- ------- ---------- ------- ------
Revenues 314 332 -5% 419 -25%
---------------------------- ------- ------- ---------- ------- ------
EBIT (88) (142) +38% 2 - - -
---------------------------- ------- ------- ---------- ------- ------
In the Communication segment, revenues decreased sequentially primarily due to a further decline in demand from some customers for baseband components, as well as continued pricing pressure. In the company's wireline business, revenues were stable in the third quarter of financial year 2005 compared to the second quarter. The EBIT loss decreased significantly compared to the previous quarter, mainly because of a reduction of idle capacity costs, lower inventory charges, and lower expenses in research and development, which resulted from the successful implementation of efficiency programs initiated in the second quarter. Second-quarter EBIT included a net charge of Euro 44 million, resulting primarily from the reorganization of certain communication businesses. Third quarter EBIT was negatively impacted by impairment charges of Euro 37 million.
Communication's outlook for the fourth quarter of financial year 2005
In the fourth quarter of financial year 2005, the company expects revenues of its Communication segment to remain stable or slightly increase compared to the third quarter. The company expects the segment's EBIT loss to remain stable or decrease slightly compared to the EBIT loss excluding impairment charges in the third quarter of the financial year.
Memory Products
3 3 + /- in % 3 +/- in
months months sequential months %
ended ended ended year-
Jun 30, Mar 31, Jun 30, on-
In Euro million 2005 2005 2004 year
---------------------------- ------- ------- ---------- ------- ------
Revenues 659 633 +4% 811 -19%
---------------------------- ------- ------- ---------- ------- ------
EBIT (125) 17 - - - (50) - - -
---------------------------- ------- ------- ---------- ------- ------
Despite a significant price-per-bit decline of approximately 30 percent compared to the previous quarter, sequential revenues in the Memory Products segment increased in the third quarter of financial year 2005 as a result of an approximate 45 percent bit-shipment growth and weakening of the Euro compared to the US dollar. The greater than expected EBIT decrease was primarily due to greater than anticipated price erosion compared to the previous quarter, and ramp-up costs for the 300-millimeter production facility in Richmond, which could not be fully offset by the significant reduction in the cost-per-chip during the quarter. Third quarter EBIT was negatively impacted by a charge of Euro 9 million related primarily to impairment charges.
Memory Products' outlook for the fourth quarter of financial year 2005
For the fourth quarter of financial year 2005, Infineon expects a further increase in memory loads per system and worldwide demand for memory products, as well as only moderate growth of supply in the industry due to capacity shifts to non-DRAM products by some of the company's competitors. As a consequence, the company anticipates a rather balanced supply and demand environment in the market, facilitating price stability during the quarter. In addition, the company expects to gain further market share with its bit shipments further increasing at a rate above market growth, as a result of constantly increasing capacities at the company's joint venture and foundry partners and due to the start of ramp-up of the 300-millimeter production facility in Richmond. The company will continue to focus on the diversification of its memory product portfolio with the goal to improve margins and reduce price volatility.
Other Operating Segments
3 3 + /- in % 3 +/- in
months months sequential months %
ended ended ended year-
Jun 30, Mar 31, Jun 30, on-
In Euro million 2005 2005 2004 year
---------------------------- ------- ------- ---------- ------- ------
Revenues 3 4 -25% 1 + + +
---------------------------- ------- ------- ---------- ------- ------
EBIT (1) 11 - - - (9) + + +
---------------------------- ------- ------- ---------- ------- ------
EBIT results during the previous quarter were positively impacted by a gain of Euro 13 million realized on the sale of Infineon's venture capital activities, which did not recur in the current quarter.
Corporate and Reconciliation
3 3 + /- in % 3 +/- in
months months sequential months %
ended ended ended year-
Jun 30, Mar 31, Jun 30, on-
In Euro million 2005 2005 2004 year
---------------------------- ------- ------- ---------- ------- ------
Revenues 5 3 +67% 8 -38%
---------------------------- ------- ------- ---------- ------- ------
EBIT (43) (39) -10% (15) - - -
---------------------------- ------- ------- ---------- ------- ------
The sequential EBIT loss increased in the third quarter of financial year 2005 compared to the previous quarter, mainly due to charges of Euro 35 million, resulting primarily from the restructuring activities in connection with the planned phase-out of production at the Munich-Perlach facility.
For major business highlights of Infineon's segments in the third quarter of financial year 2005, click http://www.infineon.com/news/.
FINANCIAL INFORMATION
According to US GAAP - Unaudited
Condensed Consolidated Statements of Operations
3 months ended 9 months ended
Jun 30, Mar 31, Jun 30, Jun 30, Jun 30,
in Euro million 04 05 05 04 05
------------------------------ ------- ------- ------- ------- -------
Net sales 1,908 1,606 1,606 5,202 5,028
Cost of goods sold (1,213) (1,174) (1,347) (3,432) (3,636)
------------------------------ ------- ------- ------- ------- -------
Gross profit 695 432 259 1,770 1,392
------------------------------ ------- ------- ------- ------- -------
Research and development
expenses (308) (354) (320) (888) (1,003)
Selling, general and
administrative expenses (194) (164) (157) (544) (483)
Restructuring charges (5) (23) (30) (15) (55)
Other operating expense, net (183) (41) (24) (182) (59)
------------------------------ ------- ------- ------- ------- -------
Operating income (loss) 5 (150) (272) 141 (208)
------------------------------ ------- ------- ------- ------- -------
Interest (expense) income, net (24) - 9 (55) 14
Equity in earnings of
associated companies - 25 18 4 44
Gain on associated company
share issuance - - - 1 -
Other (expense) income, net (6) 9 22 (10) 21
Minority interests 3 (1) (2) 7 3
------------------------------ ------- ------- ------- ------- -------
Income (loss) before income
taxes (22) (117) (225) 88 (126)
------------------------------ ------- ------- ------- ------- -------
Income tax (expense) benefit (34) 3 (15) (71) (86)
------------------------------ ------- ------- ------- ------- -------
Net income (loss) (56) (114) (240) 17 (212)
------------------------------ ------- ------- ------- ------- -------
Earnings (loss) per share (EPS)
Shares in million
------------------------------ ------- ------- ------- ------- -------
Weighted average shares
outstanding - basic 748 748 748 730 748
------------------------------ ------- ------- ------- ------- -------
Weighted average shares
outstanding - diluted 748 748 748 741 748
------------------------------ ------- ------- ------- ------- -------
Earnings (loss) per share -
basic and diluted (in Euro) (0.08) (0.15) (0.32) 0.02 (0.28)
------------------------------ ------- ------- ------- ------- -------
EBIT
Infineon defines EBIT as earnings (loss) before interest and taxes.
Infineon management uses EBIT among other measures to establish
budgets and operational goals, to manage the Company's business and to
evaluate its performance. Infineon reports EBIT information because it
believes that it provides investors with meaningful information about
the operating performance of the company and especially about the
performance of its separate business segments.
EBIT is determined as follows from the statements of operations,
without adjustment to the US GAAP amounts presented:
---- ----- ----- ---- -----
3 months 9 months
ended ended
Jun Mar Jun Jun Jun
30, 31, 30, 30, 30,
in Euro million 04 05 05 04 05
----------------------------------------- ---- ----- ------ ---- -----
Net income (loss) (56) (114) (240) 17 (212)
- Income tax expense (benefit) 34 (3) 15 71 86
- Interest expense (income), net 24 - (9) 55 (14)
----------------------------------------- ---- ----- ----- ---- -----
EBIT 2 (117) (234) 143 (140)
----------------------------------------- ---- ----- ----- ---- -----
Segment Results
------ ------ ---- ------ ------ ----
3 months ended 9 months ended
Jun Jun +/- Jun Jun +/-
30, 30, in 30, 30, in
Net sales in Euro million 04* 05 % 04* 05 %
-------------------------------- ------ ------ ---- ------ ------ ----
Automotive, Industrial and
Multimarket 669 625 (7) 1,832 1,890 3
Communication 419 314 (25) 1,223 1,060 (13)
Memory Products 811 659 (19) 2,119 2,058 (3)
Other 1 3 +++ 8 10 25
Corporate and
Reconciliation 8 5 (38) 20 10 (50)
-------------------------------- ------ ------ ---- ------ ------ ----
Infineon consolidated 1,908 1,606 (16) 5,202 5,028 (3)
-------------------------------- ------ ------ ---- ------ ------ ----
------ ------ ---- ------ ------ ----
3 months ended 9 months ended
EBIT in Euro million Jun Jun +/- Jun Jun +/-
30, 30, in 30, 30, in
04* 05 % 04* 05 %
-------------------------------- ------ ------ ---- ------ ------ ----
Automotive, Industrial and
Multimarket 74 23 (69) 162 107 (34)
Communication 2 (88) --- 29 (249) ---
Memory Products (50) (125) --- 20 88 +++
Other (9) (1) +++ (40) 8 +++
Corporate and
Reconciliation (15) (43) --- (28) (94) ---
-------------------------------- ------ ------ ---- ------ ------ ----
Infineon consolidated** 2 (234) --- 143 (140) ---
-------------------------------- ------ ------ ---- ------ ------ ----
* Prior period segment results are reclassified to be consistent with
the current period presentation and organizational structure.
** Includes acquisition related expenses (amortization of acquired
intangible assets and deferred compensation) of Euro 17 million
and Euro 7 million for the three months ended June 30, 2004 and
2005 (primarily Communication), respectively, as well as Euro 33
million and Euro 23 million for the nine months ended June 30,
2004 and 2005 (primarily Communication).
------ ------ -----
3 months ended
Mar Jun +/-
31, 30, in %
Net sales in Euro million 05 05
-------------------------------------------------- ------ ------ -----
Automotive, Industrial and Multimarket 634 625 (1)
Communication 332 314 (5)
Memory Products 633 659 4
Other 4 3 (25)
Corporate and Reconciliation 3 5 67
-------------------------------------------------- ------ ------ -----
Infineon consolidated 1,606 1,606 ---
-------------------------------------------------- ------ ------ -----
------ ------ -----
3 months ended
Mar Jun +/-
31, 30, in %
EBIT in Euro million 05 05
-------------------------------------------------- ------ ------ -----
Automotive, Industrial and Multimarket 36 23 (36)
Communication (142) (88) 38
Memory Products 17 (125) ---
Other 11 (1) ---
Corporate and Reconciliation (39) (43) (10)
-------------------------------------------------- ------ ------ -----
Infineon consolidated* (117) (234) (100)
-------------------------------------------------- ------ ------ -----
* Includes acquisition related expenses of Euro 8 million and Euro 7
million for the second and third quarters of the 2005 financial
year (primarily Communication), respectively.
Regional Sales Development
------------- -------------- --------------
3 months ended
Regional sales in % Jun 30, 04 Mar 31, 05 Jun 30, 05
-------------------- ------------- -------------- --------------
Germany 22% 21% 20%
Other Europe 18% 19% 19%
North America 22% 23% 24%
Asia / Pacific 32% 30% 31%
Japan 5% 5% 4%
Other 1% 2% 2%
-------------------- ------------- -------------- --------------
Total 100% 100% 100%
-------------------- ------------- -------------- --------------
-------------------- ------------- -------------- --------------
Europe 40% 40% 39%
-------------------- ------------- -------------- --------------
-------------------- ------------- -------------- --------------
Outside-Europe 60% 60% 61%
-------------------- ------------- -------------- --------------
Condensed Consolidated Balance Sheets
------- -------
Sep 30, Jun 30,
in Euro million 04 05
------------------------------------------------------ ------- -------
Assets
Current assets:
Cash and cash equivalents 608 918
Marketable securities 1,938 1,466
Trade accounts receivable, net 1,056 870
Inventories 960 960
Deferred income taxes 140 136
Other current assets 590 565
------------------------------------------------------ ------- -------
Total current assets 5,292 4,915
------------------------------------------------------ ------- -------
Property, plant and equipment, net 3,587 3,855
Long-term investments, net 708 745
Restricted cash 109 89
Deferred income taxes 541 525
Other assets 627 566
------------------------------------------------------ ------- -------
Total assets 10,864 10,695
------------------------------------------------------ ------- -------
------- -------
Sep 30, Jun 30,
in Euro million 04 05
------------------------------------------------------ ------- -------
Liabilities and shareholders' equity
Current liabilities:
Short-term debt and current maturities of long-
term debt 571 548
Trade accounts payable 1,098 1,023
Accrued liabilities 555 477
Deferred income taxes 16 38
Other current liabilities 630 655
------------------------------------------------------ ------- -------
Total current liabilities 2,870 2,741
------------------------------------------------------ ------- -------
Long-term debt 1,427 1,524
Deferred income taxes 21 25
Other liabilities 568 634
------------------------------------------------------ ------- -------
Total liabilities 4,886 4,924
------------------------------------------------------ ------- -------
------------------------------------------------------ ------- -------
Total shareholders' equity 5,978 5,771
------------------------------------------------------ ------- -------
------------------------------------------------------ ------- -------
Total liabilities and shareholders' equity 10,864 10,695
------------------------------------------------------ ------- -------
Condensed Consolidated Statements of Cash Flows
----- ----- ----- ------ -------
3 months ended 9 months ended
Jun Mar Jun Jun Jun
30, 31, 30, 30, 30,
in Euro million 04 05 05 04 05
------------------------------------- ----- ----- ----- ------ -------
Net cash provided by operating
activities 506 164 202 1,289 789
------------------------------------- ----- ----- ----- ------ -------
------------------------------------- ----- ----- ----- ------ -------
Net cash (used in) provided by
investing activities (34) 18 (494) (909) (586)
------------------------------------- ----- ----- ----- ------ -------
------------------------------------- ----- ----- ----- ------ -------
Net cash provided by (used in)
financing activities (334) (19) 90 (255) 107
------------------------------------- ----- ----- ----- ------ -------
------------------------------------- ----- ----- ----- ------ -------
Net increase (decrease) in cash and
cash equivalents 138 163 (202) 125 310
------------------------------------- ----- ----- ----- ------ -------
------------------------------------- ----- ----- ----- ------ -------
Depreciation and amortization 329 317 326 986 977
------------------------------------- ----- ----- ----- ------ -------
------------------------------------- ----- ----- ----- ------ -------
Purchases of property, plant and
equipment (271) (385) (294) (740) (1,135)
------------------------------------- ----- ----- ----- ------ -------
Gross and Net Cash Position
Infineon defines gross cash position as cash and cash equivalents and
marketable securities, and net cash position as gross cash position
less short and long-term debt. Since restricted cash no longer
includes amounts for the repayment of debt, the gross and net cash
positions exclude restricted cash. Since Infineon holds a substantial
portion of its available monetary resources in the form of readily
marketable securities, which for US GAAP purposes are not considered
to be "cash", it reports its gross and net cash positions to provide
investors with an understanding of the company's overall liquidity.
The gross and net cash position is determined as follows from the
balance sheets, without adjustment to the US GAAP amounts presented:
------ ------ ------
Jun Mar Jun
30, 31, 30,
in Euro million 04 05 05
------------------------------------------------- ------ ------ ------
Cash and cash equivalents 1,094 1,120 918
Marketable securities 1,536 1,229 1,466
------------------------------------------------- ------ ------ ------
Gross Cash Position 2,630 2,349 2,384
------------------------------------------------- ------ ------ ------
Less: short-term debt 174 548 548
long-term debt 2,060 1,469 1,524
------------------------------------------------- ------ ------ ------
Net Cash Position 396 332 312
------------------------------------------------- ------ ------ ------
Free Cash Flow
Infineon defines free cash flow as cash from operating and investing
activities excluding purchases or sales of marketable securities.
Since Infineon holds a substantial portion of its available monetary
resources in the form of readily marketable securities, and operates
in a capital intensive industry, it reports free cash flow to provide
investors with a measure that can be used to evaluate changes in
liquidity after taking capital expenditures into account.
The free cash flow is determined as follows from the cash flow
statements, without adjustment to the US GAAP amounts presented:
------- ----- ----- ------ -----
3 months ended 9 months ended
Jun Mar Jun Jun Jun
30, 31, 30, 30, 30,
in Euro million 04 05 05 04 05
------------------------------------- ------- ----- ----- ------ -----
Net cash provided by operating
activities 506 164 202 1,289 789
Net cash (used in) provided by
investing activities (34) 18 (494) (909) (586)
Thereof: Purchase (sale) of
marketable securities, net (326) (379) 280 (244) (469)
------------------------------------- ------- ----- ----- ------ -----
Free cash flow 146 (197) (12) 136 (266)
------------------------------------- ------- ----- ----- ------ -----
-------
Jun 30,
Employee Data 05
------------------------------------- -------
Infineon worldwide 36,151
Thereof: Research and Development 7,254
------------------------------------- -------
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