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Pericom Semiconductor Reports Fiscal Second Quarter 2011 Financial Results

^{Published on 2011-02-01 13:10:21 - Market Wire}
 

SAN JOSE, CA--(Marketwire - February 1, 2011) - Pericom Semiconductor Corporation (NASDAQ: [ PSEM ]), a worldwide supplier of high-speed integrated circuits and frequency control products, today announced results for its fiscal second quarter ended January 1, 2011.

Net revenues for the second quarter were $40.7 million, a decrease of 5% from the $42.8 million reported in the first quarter of fiscal 2011, and up 14% from the $35.8 million reported in the comparable period last year. The sequential revenue decline primarily resulted from customer inventory adjustments to align with end user demand. The second quarter of fiscal 2011 included a full three months of Pericom Technology, Inc. ("PTI") operations, acquired on August 31, 2010.

GAAP gross margin was 33.5% in the second quarter, down from 34.0% last quarter and from 33.6% in the comparable period last year. On a non-GAAP basis, gross margin was 36.3% in the second quarter, which reflects exclusion of share-based compensation, amortization of intangible assets, and amortization of fair value adjustments and compensation expense accruals from the PTI acquisition.

GAAP net income attributable to Pericom shareholders for the second quarter was $1.8 million, or $0.07 per diluted share, compared with net income of $9.5 million, or $0.38 per diluted share in the first quarter, and net income of $2.5 million, or $0.10 per diluted share in the comparable period last year. GAAP net income for the second quarter of fiscal 2011 included share based compensation, amortization of intangible assets, amortization of fair value adjustments, and other PTI acquisition related expenses. GAAP net income for the first quarter of fiscal 2011 included these same items and in addition a one-time gain on the previously held interest in PTI. Excluding these items, non-GAAP net income for the second quarter was $4.1 million or $0.16 per diluted share, compared with $4.3 million or $0.17 per diluted share in the first quarter, and non-GAAP net income of $3.2 million, or $0.12 per diluted share in the comparable period last year.

"We are pleased to deliver good operating results in the quarter. Pericom generated strong cash flow with our operating profit, reduction in inventory and better DSOs," said Alex Hui, President and CEO of Pericom.

"The design activities for our serial connectivity and timing product solutions continue to be strong. We see an expanding adoption of our first and second generation serial connectivity and timing solutions across computer, communication and consumer applications. We also see strong interest and design in activities for our third generation solutions from computing/storage customers who are early adaptors of next generation high speed serial connectivity designs. We believe these design activities position us well for healthy growth as the industry completes its inventory adjustment cycle."

New Products

In the December quarter, Pericom introduced a total of 9 new products across the Signal Integrity, Timing, and Connectivity product areas.

 -- We expanded our solutions for high-speed serial protocol signal integrity by introducing 2 new ReDriver™ products for SATA3, SAS2, and eSATA protocols. These products address volume notebook, server, storage, and embedded market segments. -- Adding to our high-speed connectivity solutions, we introduced 4 new products; 2 are advanced HDMI and LVDS graphics display switches targeted to consumer video and computing segments, and 2 are next generation USB 'sleep and charge' (mobile device charging) products for the NB computing segment. -- Expanding our timing solutions for next generation platforms, we introduced 3 new products: 2 advanced crystal oscillators (XO) targeting the networking and mobile computing (tablet) segments, and 1 very small footprint xtal for wireless networking applications. 

Fiscal Q3 2011 Outlook

The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially.

 -- Revenues in the third fiscal quarter are expected to be in the range of $38 million to $41 million. -- GAAP gross margins are expected to be between 33.2% and 35.2%, and adjusting for share-based compensation, amortization of intangibles, fair value adjustments, and compensation accruals that are expected to total approximately 1.3%, non-GAAP gross margins are expected to be in the 34.5% to 36.5% range. -- GAAP operating expenses are expected to be between $12.3 and $12.7 million, and adjusting for share-based compensation, amortization of intangibles, fair value adjustments, and compensation accruals that are expected to total approximately $1.7 million, non-GAAP operating expenses are expected to be in the range of $10.6 to $11.0 million. -- Other income is expected to be approximately $0.8 million on a GAAP basis and $1.0 million on a non-GAAP basis. -- The effective tax rate is expected to be approximately 27-30% on a GAAP basis and 23-25% on a non-GAAP basis. 

Conference Call

The press release will be followed by a conference call beginning at 1:30 p.m. Pacific time on February 1, 2011. To listen to the call, dial (877) 377-7103 and reference "Pericom". A slide presentation will accompany the conference call. To view the slides, please visit the investor relations section of [ www.pericom.com ].

The Pericom financial results conference call will be available via a live webcast on the investor relations section of the web site at [ http://www.pericom.com ]. Access the web site 15 minutes prior to the start of the call to download and install any necessary audio software. An archived webcast replay will be available on the web site for approximately 90 days.

A taped replay of the conference call will be made available for the period from this evening through midnight on Tuesday, February 8th. To listen to the replay, dial (800) 642-1687 and reference conference ID 20773068.

About Pericom

Pericom Semiconductor Corporation (NASDAQ: [ PSEM ]) enables serial connectivity with the industry's most complete solutions for the computing, communications and consumer market segments. Pericom's analog, digital and mixed-signal integrated circuits, along with its frequency control products are essential in the timing, switching, bridging and conditioning of high-speed signals required by today's ever-increasing speed and bandwidth demanding applications. Company headquarters is in San Jose, California, with design centers and technical sales and support offices globally. [ http://www.pericom.com ].

Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), this announcement of operating results contains non-GAAP financial measures that exclude the income statement effects of share-based compensation, amortization of intangible assets, fair value adjustments of acquired inventory, acquisition-related expenses, a one-time gain on the previously held interest in PTI, and the effects of excluding share-based compensation upon the number of diluted shares used in calculating non-GAAP earnings per share.

We have excluded share-based compensation expense in calculating these non-GAAP financial measures. These expenses are non-cash in nature and rely on valuations of the future market price of our common stock that is difficult to predict and is affected by market factors that are largely not within the control of management. We have excluded amortization of intangible assets, amortization of the fair value adjustments related to acquired inventory, acquisition related expenses, the gain on the previously held interest in PTI, and the corresponding tax effect because we do not consider them to be related to our core operating performance.

We use the non-GAAP financial measures that exclude these items to make strategic decisions, forecast future results and evaluate the Company's current performance. We believe that the presentation of non-GAAP financial measures that exclude these items is useful to investors because we do not consider these charges either part of the day-to-day business or reflective of the core operational activities of the Company that are within the control of management or that are used to evaluate the Company's operating performance.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

Safe Harbor Statement

This press release contains forward-looking statements as defined under The Securities Litigation Reform Act of 1995. Forward-looking statements in this release include the statements under the captions "Fiscal Q3 2011 Outlook", which regard the anticipated revenues, gross margin, operating expenses, other income, net income and effective tax rate in the third fiscal quarter of 2011, and statements from our CEO quoted on the first page of this press release regarding revenue growth and other future expectations. The Company's actual results could differ materially from what is set forth in such forward-looking statements due to a variety of risk factors, including softness in demand for our products, price erosion for certain of our products, unexpected difficulties in developing new products, customer decisions to reduce inventory, economic or financial difficulties experienced by our customers, or technological and market changes. All forward-looking statements included in this document are made as of the date hereof, based on information available to the Company as of the date hereof, and Pericom assumes no obligation to update any forward-looking statements. Parties receiving this release are encouraged to review our quarterly report on Form 10-Q for the quarter ended October 2, 2010, and, in particular, the risk factors sections contained in that report.

 Pericom Semiconductor Corporation Condensed Consolidated Statements of Operations (In thousands, except per share data) (unaudited) Three Months Ended Six Months Ended ----------------------------- ------------------- January October December January December 1, 2, 26, 1, 26, 2011 2010 2009 2011 2009 --------- --------- -------- --------- -------- Net revenues $ 40,671 $ 42,775 $ 35,805 $ 83,446 $ 68,757 Cost of revenues 27,058 28,240 23,762 55,298 46,178 --------- --------- -------- --------- -------- Gross profit 13,613 14,535 12,043 28,148 22,579 Operating expenses: Research and development 5,060 4,397 4,336 9,457 8,382 Selling, general and administrative 6,986 7,742 6,035 14,728 12,863 --------- --------- -------- --------- -------- Total operating expenses 12,046 12,139 10,371 24,185 21,245 --------- --------- -------- --------- -------- Income from operations 1,567 2,396 1,672 3,963 1,334 Interest and other income 614 11,936 1,288 12,550 2,931 --------- --------- -------- --------- -------- Income before income taxes 2,181 14,332 2,960 16,513 4,265 Income tax expense 446 5,378 1,002 5,824 1,477 --------- --------- -------- --------- -------- Net income from consolidated companies 1,735 8,954 1,958 10,689 2,788 Equity in net income of unconsolidated affiliates 77 556 536 633 1,063 --------- --------- -------- --------- -------- Net income 1,812 9,510 2,494 11,322 3,851 Net income attributable to noncontrolling interests - - (6) - (28) --------- --------- -------- --------- -------- Net income attributable to Pericom shareholders $ 1,812 $ 9,510 $ 2,488 $ 11,322 $ 3,823 ========= ========= ======== ========= ======== Basic income per share to Pericom shareholders $ 0.07 $ 0.38 $ 0.10 $ 0.45 $ 0.15 ========= ========= ======== ========= ======== Diluted income per share to Pericom shareholders $ 0.07 $ 0.38 $ 0.10 $ 0.45 $ 0.15 ========= ========= ======== ========= ======== Shares used in computing basic income per share 24,894 24,890 25,543 24,892 25,526 ========= ========= ======== ========= ======== Shares used in computing diluted income per share 25,270 25,263 25,911 25,267 25,795 ========= ========= ======== ========= ======== Pericom Semiconductor Corporation Condensed Consolidated Statements of Operations (In thousands) (unaudited) Three Months Ended Six Months Ended ----------------------------- ------------------- January October December January December 1, 2, 26, 1, 26, 2011 2010 2009 2011 2009 --------- --------- --------- --------- --------- Share-based compensation Cost of revenues $ 57 $ 73 $ 65 $ 130 $ 128 Research and development 353 390 342 743 694 Selling, general and administrative 591 600 526 1,191 1,041 --------- --------- --------- --------- --------- Share-based compensation expense $ 1,001 $ 1,063 $ 933 $ 2,064 $ 1,863 Amortization of intangible assets Cost of revenues $ 564 $ 269 $ 29 $ 833 $ 58 Selling, general and administrative 285 129 53 414 106 --------- --------- --------- --------- --------- Amortization of intangible assets $ 849 $ 398 $ 82 $ 1,247 $ 164 Pericom Semiconductor Corporation Reconciliation of GAAP Net Income to Non-GAAP Net Income (In thousands) (unaudited) Three Months Ended Six Months Ended ---------------------------- ------------------ January October December January December 1, 2, 26, 1, 26, 2011 2010 2009 2011 2009 -------- -------- -------- -------- -------- GAAP net income attributable to Pericom shareholders $ 1,812 $ 9,510 $ 2,488 $ 11,322 $ 3,823 Reconciling items: Share-based compensation expense 1,001 1,063 933 2,064 1,863 Amortization of intangible assets 849 398 82 1,247 164 Fair value adjustment amortization on acquired inventory 412 202 - 614 - Gain on previously held interest at PTI - (11,004) - (11,004) - Acquisition-related costs 4 594 - 598 - Interest expense accrual relating to PTI acquisition earnout 204 74 - 278 - Fair value adjustment to depreciation expense on acquired fixed assets 46 15 - 61 - Compensation expense accrual relating to PTI acquisition 359 128 - 487 - Tax effect of adjustments (618) 3,341 (282) 2,723 (537) -------- -------- -------- -------- -------- Total reconciling items 2,257 (5,189) 733 (2,932) 1,490 -------- -------- -------- -------- -------- Non-GAAP net income attributable to Pericom shareholders $ 4,069 $ 4,321 $ 3,221 $ 8,390 $ 5,313 ======== ======== ======== ======== ======== Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS (unaudited) Diluted net income per share: GAAP diluted income per share attributable to Pericom shareholders $ 0.07 $ 0.38 $ 0.10 $ 0.45 $ 0.15 Adjustments: Share-based compensation expense 0.04 0.04 0.03 0.08 0.07 Amortization of intangible assets 0.03 0.02 0.00 0.05 0.01 Fair value adjustment amortization on acquired inventory 0.02 0.01 - 0.03 - Gain on previously held interest at PTI - (0.44) - (0.44) - Acquisition-related costs 0.00 0.02 - 0.02 - Interest expense accrual relating to earnout 0.01 0.00 - 0.01 - Fair value adjustment to depreciation expense on acquired fixed assets 0.00 0.00 - 0.00 - Compensation expense accrual relating to PTI acquisition 0.01 0.01 - 0.02 - Tax effect of adjustments (0.02) 0.13 (0.01) 0.11 (0.02) -------- -------- -------- -------- -------- Total adjustments 0.09 (0.21) 0.02 (0.12) 0.06 -------- -------- -------- -------- -------- Non-GAAP diluted income per share attributable to Pericom shareholders $ 0.16 $ 0.17 $ 0.12 $ 0.33 $ 0.21 ======== ======== ======== ======== ======== Shares used in diluted net income per share calculation: GAAP 25,270 25,263 25,911 25,267 25,795 Exclude the benefit of share-based compensation expense (1) 346 265 123 306 129 -------- -------- -------- -------- -------- Non-GAAP 25,616 25,528 26,034 25,572 25,923 ======== ======== ======== ======== ======== (1) For purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of unamortized stock compensation costs that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method. Pericom Semiconductor Corporation Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin (In thousands) (unaudited) Three Months Ended Six Months Ended ---------------------------- ------------------ January October December January December 1, 2, 26, 1, 26, 2011 2010 2009 2011 2009 -------- -------- -------- -------- -------- GAAP gross margin $ 13,613 $ 14,535 $ 12,043 $ 28,148 $ 22,579 - % of revenues 33.5% 34.0% 33.6% 33.7% 32.8% Reconciling items: Share-based compensation 57 73 65 130 128 Amortization of intangible assets 564 269 29 833 58 Fair value adjustment amortization on acquired inventory 412 202 - 614 - Fair value adjustment to depreciation expense on acquired fixed assets 9 1 - 10 - Compensation expense accrual relating to PTI acquisition 104 37 - 141 - -------- -------- -------- -------- -------- Total reconciling items 1,146 582 94 1,728 186 -------- -------- -------- -------- -------- Non-GAAP gross margin $ 14,759 $ 15,117 $ 12,137 $ 29,876 $ 22,765 ======== ======== ======== ======== ======== - % of revenues 36.3% 35.3% 33.9% 35.8% 33.1% Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (unaudited) GAAP operating expenses $ 12,046 $ 12,139 $ 10,371 $ 24,185 $ 21,245 - % of revenues 29.6% 28.4% 29.0% 29.0% 30.9% Reconciling items: Share-based compensation (944) (990) (868) (1,934) (1,735) Amortization of intangible assets (285) (129) (53) (414) (106) Acquisition-related costs (4) (594) - (598) - Fair value adjustment to depreciation expense on acquired fixed assets (37) (14) - (51) - Compensation expense accrual relating to PTI acquisition (255) (91) - (346) - -------- -------- -------- -------- -------- Total reconciling items (1,525) (1,818) (921) (3,343) (1,841) -------- -------- -------- -------- -------- Non-GAAP operating expenses $ 10,521 $ 10,321 $ 9,450 $ 20,842 $ 19,404 ======== ======== ======== ======== ======== - % of revenues 25.9% 24.1% 26.4% 25.0% 28.2% Pericom Semiconductor Corporation Condensed Consolidated Balance Sheets (In thousands) (unaudited) As of As of January 1, July 3, 2011 2010 ------------ ------------ Assets Current assets: Cash and cash equivalents $ 33,719 $ 29,495 Restricted cash 2,947 - Short-term investments 64,674 76,454 Accounts receivable - trade 22,049 25,365 Inventories 28,523 23,431 Prepaid expenses and other current assets 8,805 6,825 Deferred income taxes 3,261 3,119 ------------ ------------ Total current assets 163,978 164,689 Property, plant and equipment-net 61,482 50,760 Investments in unconsolidated affiliates 2,467 13,183 Deferred income taxes non current 3,754 3,868 Long-term investments in marketable securities 22,513 12,977 Goodwill 16,457 1,681 Intangible assets 16,912 1,452 Other assets 9,707 7,438 ------------ ------------ Total assets $ 297,270 $ 256,048 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 12,248 $ 15,585 Accrued liabilities and other 20,764 10,781 Short-term debt 7,371 - ------------ ------------ Total current liabilities 40,383 26,366 Industrial development subsidy 8,900 6,577 Other long-term liabilities 7,872 1,199 ------------ ------------ Total liabilities 57,155 34,142 Shareholders' equity: Common stock and paid in capital 132,157 130,536 Retained earnings and other comprehensive income 107,958 91,370 ------------ ------------ Total Pericom shareholders' equity 240,115 221,906 ------------ ------------ Total liabilities and shareholders' equity $ 297,270 $ 256,048 ============ ============