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Pericom Semiconductor Reports Fiscal First Quarter 2015 Financial Results

MILPITAS, CA -- (Marketwired) -- Oct 28, 2014 -- Pericom Semiconductor Corporation (NASDAQ: PSEM)

FIRST QUARTER HIGHLIGHTS

Pericom Semiconductor Corporation (NASDAQ: PSEM), a worldwide supplier of high performance connectivity and timing solutions, today announced results for its fiscal 2015 first quarter ended September 27, 2014.

Net revenues for the first quarter were $33.3 million, an increase of 1.6% from the $32.7 million reported in the fourth quarter of fiscal 2014, and up 2.0% from the $32.6 million reported in the comparable period last year. The revenue increase from the prior quarter reflects strength from primarily the embedded, PC/notebook and server end-market segments.

GAAP gross margin was 42.3% in the first quarter, an increase from 41.4% last quarter and from 39.3% for the comparable period last year.

GAAP net income for the first quarter was $2.5 million, or $0.11 per diluted share, compared with net income of $0.9 million, or $0.04 per diluted share in the fourth quarter, and net income of $0.4 million, or $0.02 per diluted share in the comparable period last year. The current quarter benefited from foreign exchange gains of approximately $0.6 million.

To facilitate the complete understanding of comparable financial performance between periods, Pericom also presents performance results net of certain non-cash and one-time items as non-GAAP measures.

On a non-GAAP basis, gross margin was 44.2% in the first quarter, an increase from 43.0% last quarter and 40.9% in the comparable period last year.

On a non-GAAP basis, net income for the first quarter was $3.7 million, or $0.16 per diluted share, compared with non-GAAP net income of $2.8 million or $0.12 per diluted share in the fourth quarter, and non-GAAP net income of $1.9 million, or $0.08 per diluted share in the comparable period last year.

"We are pleased to deliver strong sequential earnings growth driven by a combination of higher revenues, higher gross margins and lower operating expenses. Our gross margins continue to benefit from a more favorable product and market segment mix," said Alex Hui, President and CEO of Pericom. "A few years ago, we embarked on a strategy to transform our business by increasing sales from those market segments offering higher gross margins and growth potential. Achieving double digit operating margins this quarter is a validation of that strategy. We will continue to focus on growing our customer base in networking, cloud computing and embedded applications with our serial connectivity and timing solutions."

New Products

In the first quarter of fiscal 2015, Pericom introduced a total of 23 new products in our Signal Integrity, Connectivity, Switching and Timing product areas. All of these products are targeted to our focus market segments, and were sampled to key customers during the quarter.

For Signal Integrity, we introduced 4 new products, a new family of low voltage USB3 5Gb redrivers for mobile platforms, and a 12Gb SAS3 redriver for high performance enterprise storage platforms.

We introduced 7 new products across our Connectivity product families which included new additions to the 'Mezzo' family of medium size port/lane count PCIe GEN2 packet switches aimed at enterprise, cloud computing, and embedded applications, and a family of Microprocessor Supervisory IC's for consumer applications.

We introduced 4 new products across our Switching product families, which included PCIe GEN3 (8Gb), DDR4 memory, and power management switches, targeting server, storage, and mobile platform applications.

We expanded our Timing solutions for next generation enterprise and cloud computing platforms with 8 new products, including very low jitter, high performance clock generators and buffers, and real time clocks for mobile applications.

Share Repurchase Update

On April 26, 2012, the Board authorized a repurchase program for up to $25 million of shares of our common stock, and on April 24, 2014, the Board authorized an additional $20 million of share repurchases. Pursuant to these authorizations, the Company repurchased 250,547 shares in the three months ended September 27, 2014 for an aggregate cost of $2.3 million at an average per share purchase price of $9.19. The remaining balance of potential share repurchases under the authorization is approximately $24.3 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 October 24, 2014, Pericom had approximately 21.8 million shares of common stock outstanding.

Fiscal Q2 2015 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 October 28, 2014. To listen to the call, dial (877) 377-7103 and provide the operator with conference ID 25292130. 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 also be available via a live webcast on the investor relations section of the website at http://www.pericom.com. Access the website 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 website 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, restructuring charge, lease restructuring and moving costs, write-off of government subsidy, tax provision on intercompany transactions, the corresponding tax effects 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, restructuring charge, lease restructuring and moving costs, write-off of government subsidy, 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 Q2 2015 Outlook", which regard the anticipated revenues, gross margin, operating expenses, other income, and effective tax rate in the second fiscal quarter of 2015. 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 28, 2014, and in particular, the risk factors section contained in that report.

                                                                            
                     Pericom Semiconductor Corporation                      
        Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit        
                   (In thousands, except per share data)                    
                                (unaudited)                                 
                                                                            
                                                Three Months Ended          
                                      ------------------------------------- 
                                      September 27, June 28,  September 28, 
                                           2014       2014         2013     
                                      ------------- --------  ------------- 
                                                                            
Net revenues                          $      33,259 $ 32,739  $      32,608 
                                                                            
Cost of revenues                             19,179   19,188         19,800 
                                      ------------- --------  ------------- 
                                                                            
  Gross profit                               14,080   13,551         12,808 
                                                                            
Operating expenses:                                                         
                                                                            
  Research and development                    4,588    4,782          5,045 
                                                                            
  Selling, general and administrative         7,300    7,257          7,687 
                                                                            
  Write off of government subsidy                                           
   receivable                                     -      843              - 
                                      ------------- --------  ------------- 
                                                                            
    Total operating expenses                 11,888   12,882         12,732 
                                      ------------- --------  ------------- 
                                                                            
Income from operations                        2,192      669             76 
                                                                            
Interest and other income, net                  691      742            682 
                                                                            
Foreign exchange gain (loss)                    583     (286)          (196)
                                      ------------- --------  ------------- 
                                                                            
Income before income taxes                    3,466    1,125            562 
                                                                            
Income tax expense                            1,010      291            231 
                                      ------------- --------  ------------- 
                                                                            
Net income from consolidated                                                
 companies                                    2,456      834            331 
                                                                            
Equity in net income of                                                     
 unconsolidated affiliates                       39       50             43 
                                      ------------- --------  ------------- 
                                                                            
Net income                            $       2,495 $    884  $         374 
                                      ============= ========  ============= 
                                                                            
Basic income per share                $        0.11 $   0.04  $        0.02 
                                      ============= ========  ============= 
                                                                            
Diluted income per share              $        0.11 $   0.04  $        0.02 
                                      ============= ========  ============= 
                                                                            
Shares used in computing basic income                                       
 per share                                   21,936   22,123         22,794 
                                      ============= ========  ============= 
                                                                            
Shares used in computing diluted                                            
 income per share                            22,262   22,338         22,951 
                                      ============= ========  ============= 
                                                                            
                                                                            
                      Pericom Semiconductor Corporation                     
                          Supplemental Information                          
                               (In thousands)                               
                                 (unaudited)                                
                                                                            
                                                 Three Months Ended         
                                        ------------------------------------
                                        September 27, June 28, September 28,
                                             2014       2014        2013    
                                        ------------- -------- -------------
                                                                            
Share-based compensation                                                    
  Cost of revenues                      $          33 $     37 $          36
  Research and development                        218      229           297
  Selling, general and administrative             458      329           396
                                        ------------- -------- -------------
    Share-based compensation expense    $         709 $    595 $         729
                                                                            
Amortization of intangible assets                                           
  Cost of revenues                      $         478 $    478 $         488
  Research and development                          -        -            50
  Selling, general and administrative             247      247           247
                                        ------------- -------- -------------
    Amortization of intangible assets   $         725 $    725 $         785
                                                                            
                                                                            
                     Pericom Semiconductor Corporation                      
          Reconciliation of GAAP Net Income to Non-GAAP Net Income          
                               (In thousands)                               
                                (unaudited)                                 
                                                                            
                                               Three Months Ended           
                                     -------------------------------------- 
                                     September 27,  June 28,  September 28, 
                                          2014        2014         2013     
                                     -------------  --------  ------------- 
GAAP net income                      $       2,495  $    884  $         374 
Reconciling items:                                                          
  Share-based compensation expense             709       595            729 
  Amortization of intangible assets            725       725            785 
  Fair value adjustment to                                                  
   depreciation expense on acquired                                         
   fixed assets                                 51        51             51 
  Restructuring charge                         112        44              - 
  Write off of government subsidy                                           
   receivable                                    -       843              - 
  Tax on intercompany transaction                -         -             15 
  Lease restructuring and moving                                            
   costs                                         -         -            522 
  Tax effect of adjustments                   (377)     (321)          (543)
                                     -------------  --------  ------------- 
    Total reconciling items                  1,220     1,937          1,559 
                                     -------------  --------  ------------- 
Non-GAAP net income                  $       3,715  $  2,821  $       1,933 
                                     =============  ========  ============= 
                                                                            
         Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS         
                                (unaudited)                                 
                                                                            
Diluted net income per share:                                               
  GAAP diluted income per share      $        0.11  $   0.04  $        0.02 
  Adjustments:                                                              
  Share-based compensation expense            0.03      0.03           0.03 
  Amortization of intangible assets           0.03      0.03           0.03 
  Fair value adjustment to                                                  
   depreciation expense on acquired                                         
   fixed assets                                  -         -              - 
  Restructuring charge                        0.01         -              - 
  Write off of government subsidy                                           
   receivable                                    -      0.04              - 
  Tax on intercompany transaction                -         -              - 
  Lease restructuring and moving                                            
   costs                                         -         -           0.02 
  Tax effect of adjustments                  (0.02)    (0.02)         (0.02)
                                     -------------  --------  ------------- 
      Total adjustments                       0.05      0.08           0.06 
                                     -------------  --------  ------------- 
  Non-GAAP diluted income per share  $        0.16  $   0.12  $        0.08 
                                     =============  ========  ============= 
                                                                            
Shares used in diluted net income                                           
 per share calculation:                                                     
  GAAP                                      22,262    22,338         22,951 
    Exclude the benefit of share-                                           
     based compensation expense (1)            413       486            390 
                                     -------------  --------  ------------- 
  Non-GAAP                                  22,675    22,824         23,341 
                                     =============  ========  ============= 
                                                                            
(1) For purposes of calculating non-GAAP diluted net income per share, the  
 GAAP diluted weighted average sharesoutstanding is adjusted to exclude the 
 benefits of unamortized stock compensation costs that are treated as       
 proceedsassumed to be used to repurchase shares under the GAAP treasury    
 stock method.                                                              
                                                                            
                                                                            
                     Pericom Semiconductor Corporation                      
        Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit        
                               (In thousands)                               
                                (unaudited)                                 
                                                                            
                                               Three Months Ended           
                                     -------------------------------------- 
                                     September 27,  June 28,  September 28, 
                                          2014        2014         2013     
                                     -------------  --------  ------------- 
GAAP gross profit                    $      14,080  $ 13,551  $      12,808 
  - % of revenues                             42.3%     41.4%          39.3%
Reconciling items:                                                          
  Share-based compensation                      33        37             36 
  Amortization of intangible assets            478       478            488 
  Fair value adjustment to                                                  
   depreciation expense on acquired                                         
   fixed assets                                 10        10             10 
  Restructuring charge                          84         -              - 
                                     -------------  --------  ------------- 
    Total reconciling items                    605       525            534 
                                     -------------  --------  ------------- 
Non-GAAP gross profit                $      14,685  $ 14,076  $      13,342 
                                     =============  ========  ============= 
  - % of revenues                             44.2%     43.0%          40.9%
                                                                            
        Reconciliation of GAAP R&D Expenses to Non-GAAP R&D Expenses        
                                (unaudited)                                 
                                                                            
GAAP research and development                                               
 expenses                            $       4,588  $  4,782  $       5,045 
  - % of revenues                             13.8%     14.6%          15.5%
Reconciling items:                                                          
  Share-based compensation                    (218)     (229)          (297)
  Amortization of intangible assets              -         -            (50)
  Fair value adjustment to                                                  
   depreciation expense on acquired                                         
   fixed assets                                (10)      (10)           (10)
  Restructuring charge                         (28)      (28)             - 
                                     -------------  --------  ------------- 
    Total reconciling items                   (256)     (267)          (357)
                                     -------------  --------  ------------- 
Non-GAAP research and development                                           
 expenses                            $       4,332  $  4,515  $       4,688 
                                     =============  ========  ============= 
  - % of revenues                             13.0%     13.8%          14.4%
                                                                            
       Reconciliation of GAAP SG&A Expenses to Non-GAAP SG&A Expenses       
                                (unaudited)                                 
                                                                            
GAAP selling, general and                                                   
 administrative expenses             $       7,300  $  7,257  $       7,687 
  - % of revenues                             21.9%     22.2%          23.6%
Reconciling items:                                                          
  Share-based compensation                    (458)     (329)          (396)
  Amortization of intangible assets           (247)     (247)          (247)
  Fair value adjustment to                                                  
   depreciation expense on acquired                                         
   fixed assets                                (31)      (31)           (31)
  Restructuring cost                             -       (16)             - 
  Lease restructuring and moving                                            
   costs                                         -         -           (522)
    Total reconciling items                   (736)     (623)        (1,196)
                                     -------------  --------  ------------- 
Non-GAAP selling, general and                                               
 administrative expenses             $       6,564  $  6,634  $       6,491 
                                     =============  ========  ============= 
  - % of revenues                             19.7%     20.3%          19.9%
                                                                            
                                                                            
                      Pericom Semiconductor Corporation                     
                    Condensed Consolidated Balance Sheets                   
                               (In thousands)                               
                                 (unaudited)                                
                                                                            
                                                     As of                  
                                                 September 27,     As of    
                                                      2014     June 28, 2014
                                                                            
                                                                            
    Assets                                                                  
                                                                            
Current assets:                                                             
                                                                            
  Cash and cash equivalents                      $      27,587 $      33,020
  Short-term investments                                96,248        86,104
  Accounts receivable - trade                           24,863        24,036
  Inventories                                           11,918        12,288
  Prepaid expenses and other current assets              3,935         5,336
  Deferred income taxes                                    795           726
                                                 ------------- -------------
    Total current assets                               165,346       161,510
                                                                            
Property, plant and equipment-net                       58,083        58,537
Investments in unconsolidated affiliates                 2,495         2,445
Deferred income taxes non-current                        2,576         2,460
Intangible assets                                        6,285         7,009
Other assets                                             8,062         8,118
                                                 ------------- -------------
    Total assets                                 $     242,847 $     240,079
                                                 ============= =============
                                                                            
                                                                            
    Liabilities and Shareholders' Equity                                    
                                                                            
Current liabilities:                                                        
                                                                            
  Accounts payable                               $       9,697 $       8,927
  Accrued liabilities                                   10,120         9,934
                                                 ------------- -------------
    Total current liabilities                           19,817        18,861
                                                                            
Industrial development subsidy                           6,133         6,354
Deferred tax liabilities                                 5,577         5,460
Other long-term liabilities                              1,929         1,912
                                                 ------------- -------------
    Total liabilities                                   33,456        32,587
                                                                            
Shareholders' equity:                                                       
  Common stock and paid in capital                     113,039       113,118
  Retained earnings and other comprehensive                                 
   income                                               96,352        94,374
                                                 ------------- -------------
    Total shareholders' equity                         209,391       207,492
                                                 ------------- -------------
                                                                            
    Total liabilities and shareholders' equity   $     242,847 $     240,079
                                                 ============= =============
                                                                            

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

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