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Pericom Semiconductor Reports Fiscal Fourth Quarter and Annual 2011 Financial Results

SAN JOSE, CA -- (Marketwire) -- 08/09/11 -- Pericom Semiconductor Corporation (NASDAQ: PSEM)

  • Q4 revenues increased 10% sequentially and 4% year-over-year, and annual revenues increased 13% from FY10.
  • Q4 GAAP gross margin increased by 374 bps sequentially and decreased 175 bps year-over-year, while annual gross margin decreased 108 bps from FY10.
  • Q4 GAAP net income increased 203% sequentially and decreased 59% year-over-year, and annual net income increased 25% from FY10.

Pericom Semiconductor Corporation (NASDAQ: PSEM), a worldwide supplier of high-speed integrated circuits and frequency control products, today announced results for its fiscal fourth quarter ended July 2, 2011.

Net revenues for the fourth quarter were $43.3 million, an increase of 10% from the $39.6 million reported in the third quarter of fiscal 2011, and up 4% from the $41.5 million reported in the comparable period last year. Net revenues for fiscal year 2011 were $166.3 million, an increase of 13% from the $146.9 million reported for fiscal year 2010. When normalizing for the additional, fourteenth week, during the fourth quarter of fiscal 2010, the fourth quarter net revenues increased by 12% year-over-year and increased by 16% for the full fiscal year. The sequential quarter revenue increase primarily resulted from networking and enterprise computing end-market strength. The fiscal year 2011 results included Pericom Technology, Inc. ("PTI") operations, which was acquired on August 31, 2010. The first quarter included only one month of PTI results due to the timing of the acquisition.

GAAP gross margin was 35.0% in the fourth quarter, up from 31.3% last quarter and down from 36.7% in the comparable period last year. On a non-GAAP basis, gross margin was 36.2% in the fourth 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 32.6% last quarter and 37.0% in the comparable period last year. The improvement in sequential gross margin primarily reflects favorable product mix from higher networking and lower consumer end-market shipments, as well as lower absorption charges from increased volume. For the full fiscal year 2011, GAAP gross margin was 33.5% compared with 34.6% for fiscal year 2010. On a non-GAAP basis, gross margin was 35.1% for fiscal year 2011 compared with 34.8% for fiscal year 2010.

GAAP net income attributable to Pericom shareholders for the fourth quarter was $1.6 million, or $0.06 per diluted share, compared with net income of $0.5 million, or $0.02 per diluted share in the third quarter, and net income of $3.9 million, or $0.15 per diluted share in the comparable period last year. GAAP net income attributable to Pericom shareholders for the fiscal year 2011 was $13.5 million, or $0.53 per diluted share, compared with net income of $10.8 million, or $0.42 per diluted share in fiscal year 2010. GAAP net income for all periods of fiscal 2011 included share-based compensation, amortization of intangible assets, amortization of fair value adjustments, and other PTI acquisition related expenses, and for fiscal year 2010, GAAP net income included share-based compensation and amortization of intangible assets. Excluding these items, non-GAAP net income for the fourth quarter was $3.6 million or $0.14 per diluted share, compared with $2.5 million or $0.10 per diluted share in the third quarter, and non-GAAP net income of $4.8 million, or $0.19 per diluted share in the comparable period last year. For the fiscal year 2011, non-GAAP net income was $14.4 million, or $0.56 per diluted share compared with $14.3 million, or $0.55 per diluted share for fiscal year 2010.

The balance sheet remained very strong with cash and investments in marketable securities of $128 million at the end of the fourth quarter, and cash and investments per basic share was $5.12 for the fourth quarter. Our cash position improved by $7 million during the quarter, net of $3 million of share repurchases. Working capital was $129 million and the current ratio was 4.2 to 1.

"For the fourth quarter, we were pleased to see nice sequential revenue growth and improvement in gross margin," said Alex Hui, President and CEO of Pericom. "We were also pleased by the 14% reduction of in-house inventory while channel inventory remained flat in the 7 week range at the end of the fourth quarter. This is important as the overall industry slows down a bit due to the macro-economic conditions."

New Products

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

  • Signal Integrity: We expanded our solutions for high-speed serial protocol signal integrity by introducing 5 new ReDriver™ products for SATA3, SAS2, and the new USB3 (SuperSpeed) protocols. These products address volume notebook, server, storage, and embedded market segments, with all five redrivers offering low power consumption from a competitive standpoint. The new USB3 products are specifically designed to meet the latest industry compliance testing requirements for next generation platforms with integrated USB3 controllers.
  • Connectivity: Adding to our high-speed connectivity solutions, we introduced 3 products for the new Thunderbolt, Display Port and USB protocols. These products are specifically aimed at next generation notebook, tablet, and embedded market segments.
  • Timing: Expanding our timing solutions for next generation platforms, we introduced 9 new products in the HiFlex™ crystal oscillator (XO) and clock generator product families. These product families offer attractively low jitter and package footprints and target server, storage, networking and embedded market segments.

Share Repurchase Update

On April 29, 2008, our Board of Directors authorized the repurchase of $30 million of our common stock. Pursuant to the 2008 authority, the Company repurchased 334,452 shares in the three months ended July 2, 2011 for an aggregate cost of $2,966,297 and an average per share purchase price of $8.87. The remaining balance of potential share repurchases under the 2008 authority is approximately $12.3 million.

Fiscal Q1 2012 Outlook

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

The overall macro environment has been weak the past few months and we have seen a slowdown in demand. Q4's book-to-bill ratio was slightly less than 1:1, which resulted in lower backlog entering fiscal Q1 2012 than the prior sequential quarter. Below are the estimates for fiscal Q1 2012.

  • Revenues in the first fiscal quarter are expected to be in the range of $38.0 million to $41.5 million.
  • GAAP gross margins are expected to be between 33.5% and 35.5%, and adjusting for share-based compensation, amortization of intangibles, fair value adjustments, and compensation accruals that are expected to total approximately 1.0%, non-GAAP gross margins are expected to be in the 34.5% to 36.5% range.
  • GAAP operating expenses are expected to be between $12.2 and $12.8 million, and adjusting for share-based compensation, amortization of intangibles, fair value adjustments, and compensation accruals that are expected to total approximately $1.4 million, non-GAAP operating expenses are expected to be in the range of $10.8 to $11.4 million.
  • Other income is expected to be between $0.6 and $0.7 million on a GAAP basis and on a non-GAAP basis.
  • The effective tax rate is expected to be approximately 34-36% on a GAAP basis and 32-34% 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 August 9, 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, August 16th. To listen to the replay, dial toll-free (855) 859-2056 and reference conference ID 87723981.

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 Q1 2012 Outlook", which regard the anticipated revenues, gross margin, operating expenses, other income, and effective tax rate in the first fiscal quarter of 2012, and statements from our CEO regarding revenue growth and normalized margin levels, reductions in in-house inventories and channel inventories being flat, potential industry slowdown due to macro-economic conditions, 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 April 2, 2011, 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       Twelve Months Ended
                         ------------------------------ -------------------
                          July 2,   April 2,   July 3,   July 2,   July 3,
                            2011      2011       2010      2011      2010
                         --------- ---------  --------- --------- ---------

Net revenues             $  43,342 $  39,555  $  41,495 $ 166,343 $ 146,913

Cost of revenues            28,173    27,190     26,246   110,661    96,146
                         --------- ---------  --------- --------- ---------

  Gross profit              15,169    12,365     15,249    55,682    50,767

Operating expenses:

  Research and
   development               5,535     5,238      4,575    20,230    17,208

  Selling, general and
   administrative            7,487     7,231      7,413    29,447    26,478
                         --------- ---------  --------- --------- ---------

    Total operating
     expenses               13,022    12,469     11,988    49,677    43,686
                         --------- ---------  --------- --------- ---------

Income (loss) from
 operations                  2,147      (104)     3,261     6,005     7,081

Interest and other
 income                        695     1,132      1,072    14,377     5,222
                         --------- ---------  --------- --------- ---------

Income before income
 taxes                       2,842     1,028      4,333    20,382    12,303

Income tax expense           1,281       514      1,174     7,619     3,911
                         --------- ---------  --------- --------- ---------

Net income from
 consolidated companies      1,561       514      3,159    12,763     8,392

Equity in net income of
 unconsolidated
 affiliates                     48        17        759       700     2,430
                         --------- ---------  --------- --------- ---------

Net income                   1,609       531      3,918    13,463    10,822

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

Net income attributable
 to Pericom shareholders $   1,609 $     531  $   3,918 $  13,463 $  10,794
                         ========= =========  ========= ========= =========

Basic income per share
 to Pericom shareholders $    0.06 $    0.02  $    0.16 $    0.54 $    0.42
                         ========= =========  ========= ========= =========

Diluted income per share
 to Pericom shareholders $    0.06 $    0.02  $    0.15 $    0.53 $    0.42
                         ========= =========  ========= ========= =========

Shares used in computing
 basic income per share     24,917    24,993     25,210    24,923    25,412
                         ========= =========  ========= ========= =========

Shares used in computing
 diluted income per
 share                      25,140    25,341     25,582    25,254    25,717
                         ========= =========  ========= ========= =========









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

                                  Three Months Ended     Twelve Months Ended
                              -------------------------- -------------------
                               July 2, April 2,  July 3,  July 2,   July 3,
                                2011     2011     2010      2011      2010
                              -------- -------- -------- --------- ---------

Share-based compensation
  Cost of revenues            $     58 $     62 $     88 $     250 $     286
  Research and development         372      421      441     1,536     1,506
  Selling, general and
   administrative                  601      708      659     2,500     2,257
                              -------- -------- -------- --------- ---------
    Share-based compensation
     expense                  $  1,031 $  1,191 $  1,188 $   4,286 $   4,049

Amortization of intangible
 assets
  Cost of revenues            $    342 $    338 $     29 $   1,513 $     116
  Research and development         246        -        -       246         -
  Selling, general and
   administrative                  294      290       54       998       216
                              -------- -------- -------- --------- ---------
    Amortization of
     intangible assets        $    882 $    628 $     83 $   2,757 $     332







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

                              Three Months Ended        Twelve Months Ended
                         ----------------------------  --------------------
                          July 2,  April 2,   July 3,   July 2,    July 3,
                           2011      2011      2010       2011       2010
                         --------  --------  --------  ---------  ---------
GAAP net income
 attributable to Pericom
 shareholders            $  1,609  $    531  $  3,918  $  13,463  $  10,794
Reconciling items:
  Share-based
   compensation expense     1,031     1,191     1,188      4,286      4,049
  Amortization of
   intangible assets          882       628        83      2,757        332
  Fair value adjustment
   amortization on
   acquired inventory           -         -         -        614          -
  Gain on previously
   held interest at PTI         -         -         -    (11,004)         -
  Acquisition-related
   costs                        -         -         -        598          -
  Interest expense
   accrual relating to
   PTI acquisition
   earnout                    206       204         -        688          -
  Fair value adjustment
   to depreciation
   expense on acquired
   fixed assets                49        49         -        159          -
  Compensation expense
   accrual relating to
   PTI acquisition            364       360         -      1,211          -
  Restructuring charge          -       118         -        118
  Tax effect of
   adjustments               (569)     (606)     (380)     1,549       (917)
                         --------  --------  --------  ---------  ---------
    Total reconciling
     items                  1,963     1,944       891        976      3,464
                         --------  --------  --------  ---------  ---------
Non-GAAP net income
 attributable to Pericom
 shareholders            $  3,572  $  2,475  $  4,809  $  14,439  $  14,258
                         ========  ========  ========  =========  =========




         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   $   0.06  $   0.02  $   0.15  $   0.53  $    0.42
  Adjustments:
  Share-based
   compensation expense       0.04      0.05      0.05      0.17       0.16
  Amortization of
   intangible assets          0.03      0.02         -      0.09       0.01
  Fair value adjustment
   amortization on
   acquired inventory            -         -         -      0.03          -
  Gain on previously held
   interest at PTI               -         -         -     (0.43)         -
  Acquisition-related
   costs                         -         -         -      0.02          -
  Interest expense
   accrual relating to
   earnout                    0.01      0.01         -      0.03          -
  Fair value adjustment
   to depreciation
   expense on acquired
   fixed assets                  -         -         -      0.01          -
  Compensation expense
   accrual relating to
   PTI acquisition            0.01      0.01         -      0.04          -
  Restructuring charge           -      0.01         -         -          -
  Tax effect of
   adjustments               (0.02)    (0.02)    (0.01)     0.06      (0.04)
  Difference in share
   count                         -         -         -      0.01
                          --------  --------  --------  --------  ---------
    Total adjustments         0.08      0.08      0.04      0.03       0.13
                          --------  --------  --------  --------  ---------
  Non-GAAP diluted income
   per share attributable
   to Pericom
   shareholders           $   0.14  $   0.10  $   0.19  $   0.56  $    0.55
                          ========  ========  ========  ========  =========

Shares used in diluted
 net income per share
 calculation:
  GAAP                      25,140    25,341    25,582    25,248     25,762
    Exclude the benefit
     of share-based
     compensation expense
     (1)                       369       362       265       332        154

                          --------  --------  --------  --------  ---------
  Non-GAAP                  25,509    25,703    25,847    25,580     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       Twelve Months Ended
                          ----------------------------  -------------------
                           July 2,  April 2,   July 3,   July 2,   July 3,
                            2011      2011      2010      2011       2010
                          --------  --------  --------  --------  ---------
GAAP gross margin         $ 15,169  $ 12,365  $ 15,249  $ 55,682  $  50,767
  - % of revenues             35.0%     31.3%     36.7%     33.5%      34.6%
Reconciling items:
  Share-based
   compensation                 58        62        88       250        286
  Amortization of
   intangible assets           342       338        29     1,513        116
  Fair value adjustment
   amortization on
   acquired inventory            -         -         -       614          -
  Fair value adjustment
   to depreciation
   expense on acquired
   fixed assets                 10        10         -        30          -
  Compensation expense
   accrual relating to
   PTI acquisition             106       105         -       352          -
                          --------  --------  --------  --------  ---------
    Total reconciling
     items                     516       515       117     2,759        402
                          --------  --------  --------  --------  ---------
Non-GAAP gross margin     $ 15,685  $ 12,880  $ 15,366  $ 58,441  $  51,169
                          ========  ========  ========  ========  =========
  - % of revenues             36.2%     32.6%     37.0%     35.1%      34.8%




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

GAAP research and
 development expenses     $  5,535  $  5,238  $  4,575  $ 20,230  $  17,208
  - % of revenues             12.8%     13.2%     11.0%     12.2%      11.7%
Reconciling items:
  Share-based
   compensation               (372)     (421)     (441)   (1,536)    (1,506)
  Amortization of
   intangible assets          (246)        -         -      (246)         -
  Fair value adjustment
   to depreciation
   expense on acquired
   fixed assets                (10)      (10)        -       (37)         -
  Compensation expense
   accrual relating to
   PTI acquisition            (119)     (117)        -      (395)         -
                          --------  --------  --------  --------  ---------
    Total reconciling
     items                    (747)     (548)     (441)   (2,214)    (1,506)
                          --------  --------  --------  --------  ---------
Non-GAAP research and
 development expenses     $  4,788  $  4,690  $  4,134  $ 18,016  $  15,702
                          ========  ========  ========  ========  =========
  - % of revenues             11.0%     11.9%     10.0%     10.8%      10.7%




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

GAAP selling, general and
 administrative expenses  $  7,487  $  7,231  $  7,413  $ 29,447  $  26,478
  - % of revenues             17.3%     18.3%     17.9%     17.7%      18.0%
Reconciling items:
  Share-based
   compensation               (601)     (708)     (659)   (2,500)    (2,257)
  Amortization of
   intangible assets          (294)     (290)      (54)     (998)      (216)
  Acquisition-related
   costs                         -         -         -      (598)         -
  Fair value adjustment
   to depreciation
   expense on acquired
   fixed assets                (29)      (29)        -       (92)         -
  Restructuring cost             -      (118)        -      (118)         -
  Compensation expense
   accrual relating to
   PTI acquisition            (139)     (138)        -      (464)         -
                          --------  --------  --------  --------  ---------
    Total reconciling
     items                  (1,063)   (1,283)     (713)   (4,770)    (2,473)
                          --------  --------  --------  --------  ---------
Non-GAAP selling, general
 and administrative
 expenses                 $  6,424  $  5,948  $  6,700  $ 24,677  $  24,005
                          ========  ========  ========  ========  =========
  - % of revenues             14.8%     15.0%     16.1%     14.8%      16.3%







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

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

Current assets:

  Cash and cash equivalents                        $     30,023 $     29,495
  Restricted cash                                         2,947            -
  Short-term investments                                 76,266       76,454
  Accounts receivable - trade                            28,185       25,365
  Inventories                                            21,942       23,431
  Prepaid expenses and other current assets               7,788        6,825
  Deferred income taxes                                   2,564        3,119
                                                   ------------ ------------
      Total current assets                              169,715      164,689

Property, plant and equipment-net                        60,859       50,760
Investments in unconsolidated affiliates                  2,596       13,183
Deferred income taxes non-current                         4,324        3,868
Long-term investments in marketable securities           21,282       12,977
Goodwill                                                 16,669        1,681
Intangible assets                                        15,690        1,452
Other assets                                              9,881        7,438
                                                   ------------ ------------
      Total assets                                 $    301,016 $    256,048
                                                   ============ ============


      Liabilities and Shareholders' Equity

Current liabilities:

  Accounts payable                                 $     12,221 $     15,585
  Accrued liabilities and other                          19,645       10,781
  Short-term debt                                         8,671            -
                                                   ------------ ------------
      Total current liabilities                          40,537       26,366

Industrial development subsidy                            9,075        6,577
Other long-term liabilities                               8,679        1,199
                                                   ------------ ------------
      Total liabilities                                  58,291       34,142

Shareholders' equity:
  Common stock and paid in capital                      130,960      130,536
  Retained earnings and other comprehensive income      111,765       91,370
                                                   ------------ ------------
      Total shareholders' equity                        242,725      221,906
                                                   ------------ ------------

      Total liabilities and shareholders' equity   $    301,016 $    256,048
                                                   ============ ============


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