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Pericom Semiconductor Reports Fiscal Third Quarter 2014 Financial Results

MILPITAS, CA -- (Marketwired) -- Apr 29, 2014 -- Pericom Semiconductor Corporation (NASDAQ: PSEM)

Pericom Semiconductor Corporation (NASDAQ: PSEM), a worldwide supplier of high performance connectivity and timing solutions, today announced results for its fiscal 2014 third quarter ended March 29, 2014.

Net revenues for the third quarter were $30.7 million, a decrease of 4.2% from the $32.0 million reported in the second quarter, and an increase of 1.0% from the $30.4 million reported in the comparable period last year. The revenue increase from the prior year is the result of volume increases in the consumer sector, notably digital media and ultramobility.

GAAP gross margin was 40.8% in the third quarter, an increase from 38.1% last quarter and an increase from 35.7% in the comparable period last year. On a non-GAAP basis, gross margin was 42.5% in the third quarter, which excludes share-based compensation, amortization of intangible assets and amortization of fair value adjustments on acquired fixed assets. The comparable non-GAAP gross margins were 39.8% last quarter and 37.5% in the comparable period last year. The improvement in gross margin primarily reflects improved product mix in target applications.

GAAP net income for the third quarter was $1.6 million, or $0.07 per diluted share, compared with net income of $1.2 million, or $0.05 per diluted share in the second quarter, and net loss of $0.7 million, or $0.03 per diluted share in the comparable period last year. On a non-GAAP basis, net income for all periods excludes share-based compensation, amortization of intangible assets, and amortization of fair value adjustments, and the current quarter also excludes a restructuring charge and the benefit of a release of tax reserves. The resulting non-GAAP net income for the third quarter was $1.8 million, or $0.08 per diluted share, compared with non-GAAP net income of $1.9 million or $0.08 per diluted share in the second quarter, and non-GAAP net income of $1.0 million, or $0.04 per diluted share in the comparable period last year.

The balance sheet remained very strong with cash and cash equivalents and investments in marketable securities of $120.6 million or $5.39 per share outstanding ($5.27 per diluted share) at the end of the third quarter. At quarter-end, working capital was $114.5 million and the current ratio was 6.7.

"The strong improvement in gross margin has been driven by increased shipments into embedded, networking and high-end consumer markets and aligns with our strategy," said Alex Hui, President and CEO of Pericom. "We are introducing a wave of new products in timing, switching and connectivity. We believe these products strengthen our solution to target applications and will contribute significantly to our future revenue growth and margin improvement"

New Products

In the third quarter of fiscal 2014, Pericom introduced a total of 18 new products targeted at our focus market segments that were also sampled to key customers during the quarter.

We introduced 10 new products across our Connectivity/Switching product families which included power management, USB chargers, analog switches, video decoders and UART bridges.

We also expanded our Timing solutions for next generation platforms with 3 new products, including high performance clock buffers and a low jitter clock generator.

For Signal Integrity, we introduced 5 new products, including PCIe GEN3 for cloud computing and advanced USB3 redrivers for next generation mobility platforms.

Share Repurchase Update and Additional Authorization

On April 26, 2012, the Board authorized a repurchase program for up to $25 million of shares of our common stock. Pursuant to this authorization, the Company repurchased 443,368 shares in the three months ended March 29, 2014 for an aggregate cost of $3,735,000 and an average per share purchase price of $8.42. The remaining balance of potential share repurchases under the authorization is approximately $11.1 million. Shares may be repurchased from time to time in the open market or through private transactions, at the discretion of Pericom management. As of April 24, 2014, Pericom had approximately 22.2 million shares of common stock outstanding.

On April 24, 2014, the Board authorized an additional $20 million of share repurchases. We have had share repurchase programs in place since 2007, and through the quarter ended March 29, 2014 we have repurchased approximately 7.5 million shares under these programs.

Fiscal Q4 2014 Outlook

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

Conference Call

The press release will be followed by a conference call beginning at 1:30 p.m. Pacific time on April 29, 2014. 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.

About Pericom
Pericom Semiconductor Corporation (NASDAQ: PSEM) enables serial connectivity with the industry's most complete solutions for the computing, communications, consumer and embedded 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 Milpitas, California, with design centers and technical sales and support offices globally. Pericom and the Pericom logo are trademarks or registered trademarks of Pericom Semiconductor Corp in the U.S. and/or other countries. Our website is 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 on acquired fixed assets, write-off of property and equipment, restructuring charge, lease restructuring and moving costs, release of tax reserves, tax provision on intercompany transactions 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 fair value adjustments on acquired fixed assets, write-off of property and equipment, restructuring charge, lease restructuring and moving costs, release of tax reserves, tax provision on intercompany transactions and the corresponding tax effects because we do not consider them to be related to our core operating performance. We also use non-GAAP data in calculating certain metrics such as non-GAAP cost of goods sold in computing inventory days of supply.

We use the non-GAAP financial measures that exclude these items to make strategic decisions, forecast future results and evaluate the Company's current operating 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 statements by our CEO concerning future business and revenue growth and margin improvement and the statements under the captions "Fiscal Q4 2014 Outlook", which regard the anticipated revenues, gross margin, operating expenses, other income, and effective tax rate in the fourth fiscal quarter of 2014. 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 annual report on Form 10-K for the year ended June 29, 2013, our quarterly report on Form 10-Q for the quarter ended December 28, 2013, and in particular, the risk factors sections contained in those reports.

                     Pericom Semiconductor Corporation                      
              Condensed Consolidated Statements of Operations               
                   (In thousands, except per share data)                    
                                (unaudited)                                 
                                                                            
                             Three Months Ended          Nine Months Ended  
                      -------------------------------  -------------------- 
                                  December                                  
                      March 29,     28,     March 30,  March 29,  March 30, 
                         2014       2013       2013       2014       2013   
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Net revenues          $  30,681  $  32,040  $  30,366  $  95,329  $  97,548 
                                                                            
Cost of revenues         18,175     19,820     19,521     57,795     61,597 
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
 Gross profit            12,506     12,220     10,845     37,534     35,951 
                                                                            
Operating expenses:                                                         
                                                                            
 Research and                                                               
  development             4,694      5,274      5,277     15,013     15,697 
                                                                            
 Selling, general and                                                       
  administrative          7,407      7,126      7,193     22,220     22,364 
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
  Total operating                                                           
   expenses              12,101     12,400     12,470     37,233     38,061 
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Income (loss) from                                                          
 operations                 405       (180)    (1,625)       301     (2,110)
                                                                            
Interest and other                                                          
 income, net                802      1,047      1,318      2,336      2,748 
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Income (loss) before                                                        
 income taxes             1,207        867       (307)     2,637        638 
                                                                            
Income tax expense                                                          
 (benefit)                 (421)      (331)       395       (521)     5,652 
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Net income (loss)                                                           
 from consolidated                                                          
 companies                1,628      1,198       (702)     3,158     (5,014)
                                                                            
Equity in net income                                                        
 of unconsolidated                                                          
 affiliate                   13         27         21         82        186 
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Net income (loss)     $   1,641  $   1,225  $    (681) $   3,240  $  (4,828)
                      =========  =========  =========  =========  ========= 
                                                                            
Basic income (loss)                                                         
 per share            $    0.07  $    0.05  $   (0.03) $    0.14  $   (0.21)
                      =========  =========  =========  =========  ========= 
                                                                            
Diluted income (loss)                                                       
 per share            $    0.07  $    0.05  $   (0.03) $    0.14  $   (0.21)
                      =========  =========  =========  =========  ========= 
                                                                            
Shares used in                                                              
 computing basic                                                            
 income (loss) per                                                          
 share                   22,659     22,800     23,162     22,751     23,407 
                      =========  =========  =========  =========  ========= 
                                                                            
Shares used in                                                              
 computing diluted                                                          
 income (loss) per                                                          
 share                   22,880     23,019     23,162     22,950     23,407 
                      =========  =========  =========  =========  ========= 
                                                                            
                                                                            
                      Pericom Semiconductor Corporation                     
                          Supplemental Information                          
                               (In thousands)                               
                                 (unaudited)                                
                                                                            
                             Three Months Ended          Nine Months Ended  
                      -------------------------------- ---------------------
                                  December                                  
                       March 29,     28,     March 30,  March 29,  March 30,
                         2014       2013       2013       2014       2013   
                      ---------- ---------- ---------- ---------- ----------
                                                                            
Share-based                                                                 
 compensation                                                               
 Cost of revenues     $       40 $       50 $       51 $      126 $      146
 Research and                                                               
  development                257        313        317        867        972
 Selling, general and                                                       
  administrative             420        388        474      1,204      1,425
                      ---------- ---------- ---------- ---------- ----------
  Share-based                                                               
   compensation                                                             
   expense            $      717 $      751 $      842 $    2,197 $    2,543
                                                                            
Amortization of                                                             
 intangible assets                                                          
 Cost of revenues     $      483 $      481 $      482 $    1,452 $    1,440
 Research and                                                               
  development                  -         17         51         67        156
 Selling, general and                                                       
  administrative             249        249        242        745        727
                      ---------- ---------- ---------- ---------- ----------
  Amortization of                                                           
   intangible assets  $      732 $      747 $      775 $    2,264 $    2,323
                                                                            
                                                                            
                                                                            
                                                                            
                     Pericom Semiconductor Corporation                      
      Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income       
                               (In thousands)                               
                                (unaudited)                                 
                                                                            
                             Three Months Ended          Nine Months Ended  
                      -------------------------------  -------------------- 
                                  December                                  
                      March 29,     28,     March 30,  March 29,  March 30, 
                         2014       2013       2013       2014       2013   
                      ---------  ---------  ---------  ---------  --------- 
GAAP net income                                                             
 (loss)               $   1,641  $   1,225  $    (681) $   3,240  $  (4,828)
Reconciling items:                                                          
 Share-based                                                                
  compensation                                                              
  expense                   717        751        842      2,197      2,543 
 Amortization of                                                            
  intangible assets         732        747        775      2,264      2,323 
 Fair value                                                                 
  adjustment to                                                             
  depreciation                                                              
  expense on acquired                                                       
  fixed assets               51         51         50        153        150 
 Restructuring charge        95         95          -        190          - 
 Write-off of                                                               
  property and                                                              
  equipment                   -        210          -        210          - 
 Release of tax                                                             
  reserves               (1,035)      (741)         -     (1,776)         - 
 Tax on intercompany                                                        
  transaction                 -          -        382         15      5,369 
 Lease restructuring                                                        
  and moving costs            -          -          -        522          - 
 Tax effect of                                                              
  adjustments              (383)      (452)      (403)    (1,378)    (1,213)
                      ---------  ---------  ---------  ---------  --------- 
  Total reconciling                                                         
   items                    177        661      1,646      2,397      9,172 
                      ---------  ---------  ---------  ---------  --------- 
Non-GAAP net income   $   1,818  $   1,886  $     965  $   5,637  $   4,344 
                      =========  =========  =========  =========  ========= 
                                                                            
                                                                            
                                                                            
                                                                            
         Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS         
                                (unaudited)                                 
                                                                            
Diluted net income                                                          
 (loss) per share:                                                          
 GAAP diluted income                                                        
  (loss) per share    $    0.07  $    0.05  $   (0.03) $    0.14  $   (0.21)
 Adjustments:                                                               
 Share-based                                                                
  compensation expense     0.03       0.03       0.04       0.09       0.12 
 Amortization of                                                            
  intangible assets        0.03       0.03       0.03       0.10       0.09 
 Fair value adjustment                                                      
  to depreciation                                                           
  expense on acquired                                                       
  fixed assets                -          -          -       0.01          - 
 Restructuring charge      0.01       0.01          -       0.01          - 
 Write-off of property                                                      
  and equipment               -       0.01          -       0.01          - 
 Release of tax                                                             
  reserves                (0.04)     (0.03)         -      (0.08)         - 
 Tax on intercompany                                                        
  transaction                 -          -       0.02          -       0.23 
 Lease restructuring                                                        
  and moving costs            -          -          -       0.02          - 
 Tax effect of                                                              
  adjustments             (0.02)     (0.02)     (0.02)     (0.06)     (0.06)
 Difference in share                                                        
  count                       -          -          -          -       0.01 
                      ---------  ---------  ---------  ---------  --------- 
  Total adjustments        0.01       0.03       0.07       0.10       0.39 
                      ---------  ---------  ---------  ---------  --------- 
 Non-GAAP diluted                                                           
  income per share    $    0.08  $    0.08  $    0.04  $    0.24  $    0.18 
                      =========  =========  =========  =========  ========= 
                                                                            
Shares used in diluted                                                      
 net income (loss) per                                                      
 share calculation:                                                         
GAAP                     22,880     23,019     23,162     22,950     23,407 
 Change in diluted                                                          
  shares from GAAP net                                                      
  loss to non-GAAP net                                                      
  income                      -          -         99          -        120 
 Exclude the benefit                                                        
  of share-based                                                            
  compensation expense                                                      
  (1)                       526        426        523        447        446 
                      ---------  ---------  ---------  ---------  --------- 
Non-GAAP                 23,406     23,445     23,784     23,397     23,973 
                      =========  =========  =========  =========  ========= 
                                                                            
(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  
                      --------------------------------- ------------------- 
                      March 29,  December 28, March 30, March 29, March 30, 
                         2014        2013        2013      2014      2013   
                      --------- ------------- --------- --------- --------- 
GAAP gross margin     $  12,506 $      12,220 $  10,845 $  37,534 $  35,951 
- % of revenues            40.8%         38.1%     35.7%     39.4%     36.9%
Reconciling items:                                                          
 Share-based                                                                
  compensation               40            50        51       126       146 
 Amortization of                                                            
  intangible assets         483           481       482     1,452     1,440 
 Fair value adjustment                                                      
  to depreciation                                                           
  expense on acquired                                                       
  fixed assets               10            10        10        30        30 
                      --------- ------------- --------- --------- --------- 
  Total reconciling                                                         
   items                    533           541       543     1,608     1,616 
                      --------- ------------- --------- --------- --------- 
Non-GAAP gross margin $  13,039 $      12,761 $  11,388 $  39,142 $  37,567 
                      ========= ============= ========= ========= ========= 
- % of revenues            42.5%         39.8%     37.5%     41.1%     38.5%
                                                                            
                                                                            
                                                                            
                                                                            
        Reconciliation of GAAP R&D Expenses to Non-GAAP R&D Expenses        
                                (unaudited)                                 
                                                                            
GAAP research and                                                           
 development expenses $   4,694  $   5,274  $   5,277  $  15,013  $  15,697 
- % of revenues            15.3%      16.5%      17.4%      15.7%      16.1%
Reconciling items:                                                          
 Share-based                                                                
  compensation             (257)      (313)      (317)      (867)      (972)
 Amortization of                                                            
  intangible assets           -        (17)       (51)       (67)      (156)
 Fair value adjustment                                                      
  to depreciation                                                           
  expense on acquired                                                       
  fixed assets              (10)       (10)       (10)       (30)       (30)
 Restructuring charge       (59)       (78)         -       (137)         - 
 Write-off of property                                                      
  and equipment               -       (210)         -       (210)         - 
                      ---------  ---------  ---------  ---------  --------- 
  Total reconciling                                                         
   items                   (326)      (628)      (378)    (1,311)    (1,158)
                      ---------  ---------  ---------  ---------  --------- 
Non-GAAP research and                                                       
 development expenses $   4,368  $   4,646  $   4,899  $  13,702  $  14,539 
                      =========  =========  =========  =========  ========= 
- % of revenues            14.2%      14.5%      16.1%      14.4%      14.9%
                                                                            
                                                                            
                                                                            
       Reconciliation of GAAP SG&A Expenses to Non-GAAP SG&A Expenses       
                                (unaudited)                                 
                                                                            
GAAP selling, general                                                       
 and administrative                                                         
 expenses             $   7,407  $   7,126  $   7,193  $  22,220  $  22,364 
- % of revenues            24.1%      22.2%      23.7%      23.3%      22.9%
Reconciling items:                                                          
 Share-based                                                                
  compensation             (420)      (388)      (474)    (1,204)    (1,425)
 Amortization of                                                            
  intangible assets        (249)      (249)      (242)      (745)      (727)
 Fair value adjustment                                                      
  to depreciation                                                           
  expense on acquired                                                       
  fixed assets              (31)       (31)       (30)       (93)       (90)
 Restructuring charge       (36)       (17)         -        (53)         - 
 Lease restructuring                                                        
  and moving costs            -          -          -       (522)         - 
                      ---------  ---------  ---------  ---------  --------- 
  Total reconciling                                                         
   items                   (736)      (685)      (746)    (2,617)    (2,242)
                      ---------  ---------  ---------  ---------  --------- 
Non-GAAP selling,                                                           
 general and                                                                
 administrative                                                             
 expenses             $   6,671  $   6,441  $   6,447  $  19,603  $  20,122 
                      =========  =========  =========  =========  ========= 
- % of revenues            21.7%      20.1%      21.2%      20.6%      20.6%
                                                                            
                                                                            
                                                                            
                                                                            
                      Pericom Semiconductor Corporation                     
                    Condensed Consolidated Balance Sheets                   
                               (In thousands)                               
                                 (unaudited)                                
                                                                            
                                                  As of           As of     
                                              March 29, 2014  June 29, 2013 
                                             --------------- ---------------
                   Assets                                                   
                                                                            
Current assets:                                                             
                                                                            
 Cash and cash equivalents                   $        34,386 $        30,844
 Short-term investments                               57,677          29,447
 Accounts receivable - trade                          22,765          22,105
 Inventories                                          13,281          14,844
 Prepaid expenses and other current assets             6,209           5,886
 Deferred income taxes                                   425             585
                                             --------------- ---------------
   Total current assets                              134,743         103,711
                                                                            
Property, plant and equipment-net                     58,874          60,959
Investments in unconsolidated affiliates               2,614           2,525
Deferred income taxes non-current                      3,187           3,411
Long-term investments in marketable                                         
 securities                                           28,569          57,392
Intangible assets                                      7,708           9,944
Other assets                                           8,162           8,625
                                             --------------- ---------------
   Total assets                              $       243,857 $       246,567
                                             =============== ===============
                                                                            
                                                                            
    Liabilities and Shareholders' Equity                                    
                                                                            
Current liabilities:                                                        
                                                                            
 Accounts payable                            $        10,705 $        12,184
 Accrued liabilities                                   9,491           8,731
                                             --------------- ---------------
   Total current liabilities                          20,196          20,915
                                                                            
Industrial development subsidy                         6,582           7,263
Deferred tax liabilities                               5,848           5,798
Other long-term liabilities                            1,948           3,700
                                             --------------- ---------------
 Total liabilities                                    34,574          37,676
                                                                            
Shareholders' equity:                                                       
 Common stock and paid in capital                    116,824         119,591
 Retained earnings and other comprehensive                                  
  income                                              92,459          89,300
                                             --------------- ---------------
   Total shareholders' equity                        209,283         208,891
                                             --------------- ---------------
                                                                            
   Total liabilities and shareholders'                                      
    equity                                   $       243,857 $       246,567
                                             =============== ===============
                                                                            
                                                                            

Contact: 
Kevin Bauer
Pericom Semiconductor
Tel: 408 232-9100 

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