SOURCE: Pericom Semiconductor Corporation

Pericom Semiconductor Corporation

May 04, 2011 16:05 ET

Pericom Semiconductor Reports Fiscal Third Quarter 2011 Financial Results

Revenues and Operating Expenses Were in Line With Guidance; Gross Margin Was Below Guidance Due to Higher Absorption Charges From Lower Production Volume

SAN JOSE, CA--(Marketwire - May 4, 2011) - Pericom Semiconductor Corporation (NASDAQ: PSEM), a worldwide supplier of high-speed integrated circuits and frequency control products, today announced results for its fiscal third quarter ended April 2, 2011.

Net revenues for the third quarter were $39.6 million, a decrease of 3% from the $40.7 million reported in the second quarter of fiscal 2011, and up 8% from the $36.7 million reported in the comparable period last year. The sequential revenue decline primarily resulted from lower volume associated with customer inventory adjustments to align with end user demand, an adjustment period that we believe has now been completed. The second and third quarters of fiscal 2011 included a full three months of Pericom Technology, Inc. ("PTI") operations, acquired on August 31, 2010.

GAAP gross margin was 31.3% in the third quarter, down from 33.5% last quarter and from 35.3% in the comparable period last year. On a non-GAAP basis, gross margin was 32.6% in the third 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. The comparable non-GAAP gross margins were 36.3% last quarter and 35.6% in the comparable period last year. The decline in gross margin primarily reflects higher absorption charges from lower production volumes.

GAAP net income attributable to Pericom shareholders for the third quarter was $531,000, or $0.02 per diluted share, compared with net income of $1.8 million, or $0.07 per diluted share in the second quarter, and net income of $3.1 million, or $0.12 per diluted share in the comparable period last year. GAAP net income for the second and third quarters of fiscal 2011 included share-based compensation, amortization of intangible assets, amortization of fair value adjustments, and other PTI acquisition related expenses. Excluding these items, non-GAAP net income for the third quarter was $2.5 million or $0.10 per diluted share, compared with $4.1 million or $0.16 per diluted share in the second quarter, and non-GAAP net income of $3.8 million, or $0.15 per diluted share in the comparable period last year.

"We believe the inventory corrections are largely complete as our book-to-bill ratio exceeded 1.0 for the first time in three quarters. We reduced in-house inventory 11% and reduced channel inventory by one week to seven weeks at the end of the third quarter. In addition, sales out of our distribution channel increased by 3% from the previous quarter, signaling healthy end user demand," said Alex Hui, President and CEO of Pericom.

"We continue to see strong adoption of our second and third generation serial connectivity and timing products for computer, communication and consumer applications. Our near term outlook is positive for all Pericom product areas and end markets and we expect to resume revenue growth and gross margin improvement in the remaining quarters of CY2011."

New Products

In the March quarter, Pericom introduced a total of 17 new products across the Signal Integrity, Timing, and Connectivity product areas.

--  We expanded our solutions for high-speed serial protocol signal
    integrity by introducing 6 new ReDriver™ products for SATA3, SAS2,
    and PCIe 2.0/5Gb protocols. These products address volume notebook,
    server, storage, and embedded market segments, with the SATA3 and
    SAS2 redrivers offering low power consumption from a competitive
    standpoint. The PCIe 5Gb ReDriver is optimized for the longer
    transmission distances in networking and embedded applications.

--  Adding to our high-speed connectivity solutions, we introduced 3 new
    products with highly integrated features for PCIe 3.0 lane and signal
    switching, HDMI active switching, and USB port charging. The PCIe 3.0
    switch targets server, storage, and embedded markets, the HDMI switch
    targets digital media applications, and the USB Sleep and Charge™
    product for mobile device charging targets the notebook and tablet
    computing segments.

--  Expanding our timing solutions for next generation platforms, we
    introduced 8 new products across 2 new HiFlex™ crystal oscillator
    (XO) and clock generator product families. These 2 new families offer
    attractively low jitter and package footprints and target server,
    storage, networking and embedded market segments.

Fiscal Q4 2011 Outlook

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

--  Revenues in the fourth fiscal quarter are expected to be in the range
    of $41.5 million to $43.5 million.

--  GAAP gross margins are expected to be between 33.3% and 35.3%, and
    adjusting for share-based compensation, amortization of intangibles,
    fair value adjustments, and compensation accruals that are expected to
    total approximately 1.2%, non-GAAP gross margins are expected to be in
    the 34.5% to 36.5% range.

--  GAAP operating expenses are expected to be between $12.4 and $13.0
    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 $10.7 to $11.3 million.

--  Other income is expected to be between $0.4 and $0.7 million on a GAAP
    basis and $0.6 and $0.9 million on a non-GAAP basis.

--  The effective tax rate is expected to be approximately 30-33% on a GAAP
    basis and 27-30% 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 May 4, 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 Wednesday, May 11th. To listen to the replay, dial (800) 642-1687 and reference conference ID 62720092.

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, restructuring expenses, 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, restructuring expenses associated with headcount reductions, 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 Q4 2011 Outlook", which regard the anticipated revenues, gross margin, operating expenses, other income, net income and effective tax rate in the fourth fiscal quarter of 2011, and statements from our CEO quoted on the second page of this press release regarding revenue growth and margin improvement, the completion of inventory adjustments, end user demand, strong adoption of Pericom products, the positive outlook for products and markets, 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 January 2, 2010, and, in particular, the risk factors sections contained in that report.

See Attached Tables

                    Pericom Semiconductor Corporation
              Condensed Consolidated Statements of Operations
                  (In thousands, except per share data)
                                (unaudited)

                           Three Months Ended           Nine Months Ended
                     -------------------------------  ---------------------
                     April 2,   January 1, March 27,  April 2,   March 27,
                       2011       2011       2010       2011       2010
                     ---------  ---------- ---------- ---------- ---------

Net revenues         $  39,555  $   40,671 $   36,661 $  123,001 $ 105,418

Cost of revenues        27,190      27,058     23,723     82,488    69,900
                     ---------  ---------- ---------- ---------- ---------

   Gross profit         12,365      13,613     12,938     40,513    35,518

Operating expenses:

   Research and
    development          5,238       5,060      4,251     14,695    12,633

   Selling, general and
    administrative       7,231       6,986      6,201     21,960    19,065
                     ---------  ---------- ---------- ---------- ---------

      Total operating
       expenses         12,469      12,046     10,452     36,655    31,698
                     ---------  ---------- ---------- ---------- ---------

Income (loss) from
 operations               (104)      1,567      2,486      3,858     3,820

Interest and other
 income                  1,132         614      1,219     13,683     4,150
                     ---------  ---------- ---------- ---------- ---------

Income before income
 taxes                   1,028       2,181      3,705     17,541     7,970

Income tax expense         514         446      1,260      6,338     2,737
                     ---------  ---------- ---------- ---------- ---------

Net income from
 consolidated
 companies                 514       1,735      2,445     11,203     5,233

Equity in net income
 of unconsolidated
 affiliates                 17          77        608        651     1,671
                     ---------  ---------- ---------- ---------- ---------

Net income                 531       1,812      3,053     11,854     6,904

Net income attributable
 to noncontrolling
 interests                   -           -          -          -       (28)
                     ---------  ---------- ---------- ---------- ---------

Net income
 attributable to
 Pericom
 shareholders        $     531  $    1,812 $    3,053 $   11,854 $   6,876
                     =========  ========== ========== ========== =========

Basic income per
 share to Pericom
 shareholders        $    0.02  $     0.07 $     0.12 $     0.48 $    0.27
                     =========  ========== ========== ========== =========

Diluted income per
 share to Pericom
 shareholders        $    0.02  $     0.07 $     0.12 $     0.47 $    0.27
                     =========  ========== ========== ========== =========

Shares used in
 computing basic
 income per share       24,993      24,894     25,386     24,926    25,479
                     =========  ========== ========== ========== =========

Shares used in
 computing diluted
 income per share       25,341      25,270     25,697     25,291    25,762
                     =========  ========== ========== ========== =========



                    Pericom Semiconductor Corporation
              Condensed Consolidated Statements of Operations
                              (In thousands)
                               (unaudited)

                               Three Months Ended       Nine Months Ended
                          ----------------------------- -------------------
                          April 2, January 1, March 27, April 2,  March 27,
                            2011      2011      2010      2011      2010
                          --------- --------- --------- --------- ---------
Share-based compensation
   Cost of revenues       $      62 $      57 $      70 $     192 $     198
   Research and
    development                 421       353       371     1,164     1,065
   Selling, general and
    administrative              708       591       557     1,899     1,598
                          --------- --------- --------- --------- ---------
      Share-based
       compensation
       expense            $   1,191 $   1,001 $     998 $   3,255 $   2,861

Amortization of
 intangible assets
   Cost of revenues       $     338 $     564 $      29 $   1,171 $      87
   Selling, general and
    administrative              290       285        54       704       160
                          --------- --------- --------- --------- ---------
      Amortization of
       intangible assets  $     628 $     849 $      83 $   1,875 $     247





                    Pericom Semiconductor Corporation
         Reconciliation of GAAP Net Income to Non-GAAP Net Income
                              (In thousands)
                               (unaudited)

                               Three Months Ended       Nine Months Ended
                          ----------------------------  ------------------

                          April 2, January 1, March 27, April 2,  March 27,
                            2011      2011      2010      2011      2010
                          --------  --------  --------  --------  --------
GAAP net income
 attributable to Pericom
 shareholders             $    531  $  1,812  $  3,053  $ 11,854  $  6,876
Reconciling items:
  Share-based compensation
   expense                   1,191     1,001       998     3,255     2,861
  Amortization of
   intangible assets           628       849        83     1,875       247
  Fair value adjustment
   amortization on
   acquired inventory            -       412         -       614         -
  Gain on previously held
   interest at PTI               -         -         -   (11,004)        -
  Acquisition-related costs      -         4         -       598         -
  Interest expense accrual
   relating to PTI
   acquisition earnout         204       204         -       482         -
  Fair value adjustment to
   depreciation expense on
   acquired fixed assets        49        46         -       110         -
  Compensation expense
   accrual relating to PTI
   acquisition                 360       359         -       847         -
  Restructuring charge         118         -         -       118
  Tax effect of
   adjustments                (606)     (618)     (318)    2,118      (855)
                          --------  --------  --------  --------  --------
        Total reconciling
         items              1,944     2,257       763      (987)    2,253
                          --------  --------  --------  --------  --------
Non-GAAP net income
 attributable to Pericom
 shareholders             $  2,475  $  4,069  $  3,816  $ 10,867  $  9,129
                          ========  ========  ========  ========  ========

          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   $   0.02  $   0.07  $   0.12  $   0.47  $   0.27
  Adjustments:
  Share-based compensation
   expense                    0.05      0.04      0.04      0.13      0.11
  Amortization of
   intangible assets          0.02      0.03      0.00      0.07      0.01
  Fair value adjustment
   amortization on
   acquired inventory            -      0.02         -      0.02         -
  Gain on previously held
   interest at PTI               -         -         -     (0.44)        -
  Acquisition-related costs      -      0.00         -      0.02         -
  Interest expense accrual
   relating to earnout        0.01      0.01         -      0.02         -
  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         -      0.03         -
  Restructuring charge        0.01         -         -      0.01         -
  Tax effect of
   adjustments               (0.02)    (0.02)    (0.01)     0.08     (0.03)
                          --------  --------  --------  --------  --------
        Total adjustments     0.08      0.09      0.03     (0.04)     0.09
                          --------  --------  --------  --------  --------
 Non-GAAP diluted income
  per share attributable
  to Pericom shareholders $   0.10  $   0.16  $   0.15  $   0.43  $   0.35
                          ========  ========  ========  ========  ========

Shares used in diluted
 net income per share
 calculation:
  GAAP                      25,341    25,270    25,697    25,291    25,762
    Exclude the benefit of
     share-based compensation
     expense (1)               362       346       206       324       154

                          --------  --------  --------  --------  --------
  Non-GAAP                  25,703    25,616    25,903    25,616    25,916
                          ========  ========  ========  ========  ========

(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       Nine Months Ended
                          ----------------------------  ------------------

                          April 2, January 1, March 27, April 2,  March 27,
                            2011      2011      2010      2011      2010
                          --------  --------  --------  --------  --------
GAAP gross margin         $ 12,365  $ 13,613  $ 12,938  $ 40,513  $ 35,518
  - % of revenues             31.3%     33.5%     35.3%     32.9%     33.7%
Reconciling items:
   Share-based compensation     62        57        70       192       198
   Amortization of
    intangible assets          338       564        29     1,171        87
   Fair value adjustment
    amortization on
    acquired inventory           -       412         -       614         -
   Fair value adjustment to
    depreciation expense on
    acquired fixed assets       10         9         -        20         -
   Compensation expense
    accrual relating to PTI
    acquisition                105       104         -       246         -
                          --------  --------  --------  --------  --------
       Total reconciling
        items                  515     1,146        99     2,243       285
                          --------  --------  --------  --------  --------
Non-GAAP gross margin     $ 12,880  $ 14,759  $ 13,037  $ 42,756  $ 35,803
                          ========  ========  ========  ========  ========
  - % of revenues             32.6%     36.3%     35.6%     34.8%     34.0%

           Reconciliation of GAAP R&D Expenses to Non-GAAP R&D Expenses
                                    (unaudited)

GAAP research and
 development expenses     $  5,238  $  5,060  $  4,251  $ 14,695  $ 12,633
  - % of revenues             13.2%     12.4%     11.6%     11.9%     12.0%
Reconciling items:
   Share-based compensation   (421)     (353)     (371)   (1,164)   (1,065)
   Fair value adjustment to
    depreciation expense on
    acquired fixed assets      (10)       (9)        -       (27)        -
   Compensation expense
    accrual relating to PTI
    acquisition               (117)     (117)        -      (276)        -
                          --------  --------  --------  --------  --------
       Total reconciling
        items                 (548)     (479)     (371)   (1,467)   (1,065)
                          --------  --------  --------  --------  --------
Non-GAAP research and
 development expenses     $  4,690  $  4,581  $  3,880  $ 13,228  $ 11,568
                          ========  ========  ========  ========  ========
  - % of revenues             11.9%     11.3%     10.6%     10.8%     11.0%

         Reconciliation of GAAP SG&A Expenses to Non-GAAP SG&A Expenses
                                     (unaudited)

GAAP selling, general and
 administrative expenses  $  7,231  $  6,986  $  6,201  $ 21,960  $ 19,065
  - % of revenues             18.3%     17.2%     16.9%     17.9%     18.1%
Reconciling items:
   Share-based compensation   (708)     (591)     (557)   (1,899)   (1,598)
   Amortization of
    intangible assets         (290)     (285)      (54)     (704)     (160)
   Acquisition-related
    costs                        -        (4)        -      (598)        -
   Fair value adjustment to
    depreciation expense on
    acquired fixed assets      (29)      (28)        -       (63)        -
   Restructuring cost         (118)        -         -      (118)        -
   Compensation expense
    accrual relating to PTI
    acquisition               (138)     (138)        -      (325)        -
                          --------  --------  --------  --------  --------
       Total reconciling
        items               (1,283)   (1,046)     (611)   (3,707)   (1,758)
                          --------  --------  --------  --------  --------
Non-GAAP selling, general
 and administrative
 expenses                 $  5,948  $  5,940  $  5,590  $ 18,253  $ 17,307
                          ========  ========  ========  ========  ========
  - % of revenues             15.0%     14.6%     15.2%     14.8%     16.4%



                    Pericom Semiconductor Corporation
                  Condensed Consolidated Balance Sheets
                              (In thousands)
                               (unaudited)


                                                    As of         As of
                                                April 2, 2011 July 3, 2010
                                                ------------- -------------
                      Assets

Current assets:

    Cash and cash equivalents                   $      23,324 $      29,495
    Restricted cash                                     2,947             -
    Short-term investments                             61,997        76,454
    Accounts receivable - trade                        25,007        25,365
    Inventories                                        25,452        23,431
    Prepaid expenses and other current assets           8,929         6,825
    Deferred income taxes                               3,184         3,119
                                                ------------- -------------
          Total current assets                        150,840       164,689

Property, plant and equipment-net                      60,247        50,760
Investments in unconsolidated affiliates                2,507        13,183
Deferred income taxes non current                       3,904         3,868
Long-term investments in marketable securities         35,532        12,977
Goodwill                                               16,443         1,681
Intangible assets                                      16,359         1,452
Other assets                                            9,894         7,438
                                                ------------- -------------
          Total assets                          $     295,726 $     256,048
                                                ============= =============


          Liabilities and Shareholders' Equity

Current liabilities:

    Accounts payable                            $      12,518 $      15,585
    Accrued liabilities and other                      17,983        10,781
    Short-term debt                                     6,995             -
                                                ------------- -------------
          Total current liabilities                    37,496        26,366

Industrial development subsidy                          8,811         6,577
Other long-term liabilities                             8,638         1,199
                                                ------------- -------------
          Total liabilities                            54,945        34,142

Shareholders' equity:
    Common stock and paid in capital                  132,351       130,536
    Retained earnings and other comprehensive
     income                                           108,430        91,370
                                                ------------- -------------
          Total shareholders' equity                  240,781       221,906
                                                ------------- -------------

          Total liabilities and shareholders'
           equity                               $     295,726 $     256,048
                                                ============= =============

Contact Information

  • Contact:
    Aaron Tachibana
    Pericom Semiconductor
    Tel: 408 435-0800
    Email Contact