Intersil Corporation Reports Fourth Quarter and Full Year Results

Jan 27, 2016, 16:05 ET from Intersil Corporation

MILPITAS, Calif., Jan. 27, 2016 /PRNewswire/ -- Intersil Corporation (NASDAQ: ISIL), a leading provider of innovative power management and precision analog solutions, today announced financial results for the fourth quarter and the year ended January 1, 2016. Fourth quarter revenue of $126.6 million was down 1.4% sequentially, resulting in revenue of $521.6 million for 2015. Gross margin increased again in 2015, and consistently solid operating results and spending controls throughout the year allowed the company to sustain strong profits and cash generation.

Company Highlights

  • 2015 gross margin increased year-over-year by 90 and 100 basis points respectively to 59.0% on a GAAP basis and 59.3% on a non-GAAP basis.
  • The company again reported solid profitability, with non-GAAP operating margin of 20% or greater for the 10th consecutive quarter.
  • Cash and cash equivalents increased to $247 million at year-end, and the company continued to return a majority of free cash flow to shareholders through one of the sector's highest yielding dividends.

Quarterly Results Revenue for the fourth quarter declined as anticipated driven by lower demand in industrial and infrastructure end markets. Industrial and Infrastructure (I&I) revenue declined 6% sequentially, with all of the major product categories except automotive declining in the quarter. Automotive product demand remained strong and automotive revenue was a record for the quarter and for the year. Fourth quarter Computing and Consumer (C&C) revenue increased 7.5% sequentially and 3% year-over-year. The company's new display and power management ICs shipped into ramping mobile platforms, which drove the growth for the quarter. The breakdown by end market follows:

Q4 2015

Q3 2015

Q4 2014

End Market Revenue

$M

%

$M

%

$M

%

Industrial & Infrastructure

79.1

62%

84.2

66%

85.0

65%

Consumer & Computing

47.5

38%

44.2

34%

46.1

35%

Total Revenue

$126.6

$128.4

$131.1

Table 1. Intersil End Market Mix

GAAP gross margin for the quarter was 57.6% and 59.0% for the full year. Fourth quarter GAAP operating expenses declined to $57 million. R&D expense was $30.0 million and SG&A expense was $22.8 million. Fourth quarter GAAP operating income was $15.9 million or 12.5% of revenue. GAAP net income was $21.3 million, and fully diluted GAAP earnings per share were $0.16.

For the full year, GAAP operating expenses totaled $322 million, increasing year-over-year as a result of an adverse jury verdict that the company is contesting. This resulted in a GAAP operating loss of $14.2 million. GAAP net income was $7.2 million due to an income tax benefit arising from the release of tax reserves from prior years. Fully diluted 2015 GAAP earnings per share were $0.05.

The following non-GAAP results exclude amortization of purchased intangibles, equity-based compensation expense, certain legal judgments and governmental penalties, gain on recovery of auction rate securities and related tax effects. Fourth quarter non-GAAP gross margin declined as expected to 57.8% as a result of manufacturing variances and mix. Non-GAAP operating expenses declined to $47.9 million as the company continued to closely manage spending. R&D expense was $27.6 million and SG&A expense was $20.3 million. Q4 non-GAAP operating income was $25.3 million, resulting in non-GAAP operating margin of 20%.  Fully diluted Q4 earnings per share on a non-GAAP basis were $0.20.

For 2015, non-GAAP gross margin increased for the third consecutive year to 59.3%. Non-GAAP operating expenses declined year-over-year and totaled $201.6 million. Non-GAAP operating income was $107.6 million or 20.6% of revenue. Fully diluted 2015 earnings per share on a non-GAAP basis were $0.68.

For a complete reconciliation of GAAP and non-GAAP results, please see the "Non-GAAP Results" tables included at the end of this release.

Cash and cash equivalents increased again to $247 million at the end of the fourth quarter. Intersil's board of directors authorized payment of a quarterly dividend of $0.12 per share of common stock. The payment of this dividend will be made on or about February 26, 2016, to shareholders of record as of the close of business on February 16, 2016.

"It was a good year for Intersil in terms of progress made towards improving the competitiveness and financial strength of the company, and new design wins helped us to offset some of the end market weakness that persisted for most of the year," said Necip Sayiner, president and CEO of Intersil. "We believe stabilization in demand and a solid financial position will allow us to get the new year off to a good start."

First Quarter 2016 Outlook

The following forward-looking guidance is for the first quarter ending April 1, 2016, based on current business trends and conditions:

GAAP

Non-GAAP

Revenue

$125 - $131 million

Gross margin

Up 50 to 100 bps

Operating expenses

Approx. $59M

Approx. $50M

Earnings per share

$0.08 to $0.10

$0.14 to $0.16

Table 2. Intersil Q1 2016 Outlook

Earnings Call Webcast Intersil will be hosting a webcast to discuss the quarterly results and outlook today at 1:30 p.m. Pacific Time. To access the webcast, please visit the investor relations page of the company's website at ir.intersil.com. Participants can also dial (877) 703-6110 or +1 (857) 244-7309 and enter the passcode 22634365. A replay of the webcast will be available for two weeks following the conference call on the company website, or may be accessed by dialing (888) 286-8010, international dial +1 (617) 801-6888, using the pass code 98625303.

About Intersil Intersil Corporation is a leading provider of innovative power management and precision analog solutions. The company's products form the building blocks of increasingly intelligent, mobile and power hungry electronics, enabling advances in power management to improve efficiency and extend battery life. With a deep portfolio of intellectual property and a rich history of design and process innovation, Intersil is the trusted partner to leading companies in some of the world's largest markets, including industrial and infrastructure, mobile computing, automotive and aerospace. For more information about Intersil, visit our website at www.intersil.com.

FORWARD-LOOKING STATEMENTS Some of the statements included in this press release constitute forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, in connection with the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current expectations, estimates, beliefs, assumptions, and projections of our senior management about future events with respect to our business and our industry in general.  Statements that include words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "potential," "continue," "goals," "targets" and variations of these words (or negatives of these words) or similar expressions of a future or forward-looking nature identify forward-looking statements. In addition, any statements that refer to projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.

These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Therefore, there are or will be important factors that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. We believe that the factors that may affect our business, future operating results and financial condition include, but are not limited to, the following: any faltering in global economic conditions, the highly cyclical nature of the semiconductor industry, intense competition in the semiconductor industry, unsuccessful product development or failure to obtain market acceptance of our products, downturns in the end markets we serve, failure to make or deliver products in a timely manner, unavailability of raw materials, services, supplies or manufacturing capacity, delays in production or in implementing new production techniques, product defects, or unreliability of products, and adverse results in litigation matters. For a more detailed discussion of how these and other risks and uncertainties could cause our actual results to differ materially from those indicated in our forward-looking statements, see our reports filed with the U.S. Securities and Exchange Commission (which you may obtain for free at the SEC's web site at http://www.sec.gov), including our Annual Report on Form 10-K for the year ended January 2, 2015. These forward-looking statements are made only as of the date of this communication and Intersil undertakes no obligation to update or revise these forward-looking statements.

Non-GAAP Reporting To supplement its consolidated financial results presented in accordance with GAAP, Intersil uses non-GAAP financial measures, which are adjusted from the most directly comparable GAAP financial measures to exclude certain items, as described in detail below. Management believes that these non-GAAP financial measures reflect an additional and useful way of viewing aspects of the Company's operations that, when viewed in conjunction with Intersil's GAAP results, provide a more comprehensive understanding of the various factors and trends affecting the Company's business and operations. It should also be noted that Intersil's non-GAAP information may be different from the non-GAAP information provided by other companies. Non-GAAP financial measures used by Intersil include:

  • Gross profit;
  • Operating expenses;
  • Provision (benefit) for income taxes;
  • Operating income (loss);
  • Net income (loss);
  • Diluted earnings (loss) per share; and
  • Weighted average shares outstanding – diluted.

The Company presents non-GAAP financial measures because the investor community uses non-GAAP results in its analysis and comparison of historical results and projections of the Company's future operating results. These non-GAAP results exclude acquisition-related expense, restructuring and related costs, equity-based compensation expense, and certain other expenses and benefits. Management uses these non-GAAP measures to manage and assess the profitability of the business. These non-GAAP results are also consistent with the way management internally analyzes Intersil's financial results.

There are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures. The non-GAAP financial measures supplement, and should be viewed in conjunction with, GAAP financial measures. Investors should review the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the accompanying press release.

As presented in the "Non-GAAP Results" tables in the accompanying press release, each of the non-GAAP financial measures excludes one or more of the following items:

Acquisition related.  Acquisition-related charges are not factored into management's evaluation of potential acquisitions or Intersil's performance after completion of acquisitions, because they are not related to the Company's core operating performance. Adjustments of these items provide investors with a basis to compare Intersil's performance to other companies without the variability caused by purchase accounting. Acquisition-related expenses primarily include:

  • Amortization of purchased intangibles, which include purchased intangibles such as purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements.

Other adjustments. These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and on-going future operating performance of Intersil. Excluding this data allows investors to better compare Intersil's period-over-period performance without such expense, which Intersil believes may be useful to the investor community. Other adjustments primarily include:

  • Equity-based compensation expense.
  • Legal judgments, awards, or governmental fines or penalties.
  • Income from IP agreements.
  • Restructuring and related costs.
  • Write-offs (recoveries) related to Auction Rate Securities.
  • Tax effects of non-GAAP adjustments.
  • Diluted weighted average shares non-GAAP adjustment, for purposes of calculating non-GAAP diluted earnings per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of equity-based compensation expense attributable to future services not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.

Comparability. The above criteria has been consistently applied when calculating the non-GAAP financial measures for all periods presented in this press release and accompanying tables.

 

Intersil Corporation

Condensed Consolidated Statements of Income

Unaudited

(In thousands, except percentages and per share amounts)

Quarter Ended

Year Ended

Jan. 1,

Oct. 2,

Jan. 2,

Jan. 1,

Jan. 2,

2016

2015

2015

2016

2015

Q4 2015

Q3 2015

Q4 2014

Revenue

$     126,626

$     128,396

$     131,126

$ 521,616

$    562,555

Cost of revenue

53,707

52,338

52,933

213,820

235,800

Gross profit

72,919

76,058

78,193

307,796

326,755

Gross margin %

57.6%

59.2%

59.6%

59.0%

58.1%

Expenses:

Research and development 

29,983

31,252

30,367

126,350

125,851

Selling, general and administrative 

22,784

23,532

24,840

96,963

99,926

Amortization of purchased intangibles

4,261

3,777

5,559

17,625

22,241

Provision for TAOS litigation

-

-

-

81,100

-

Provision for export compliance settlement

-

-

-

-

4,000

Total expenses

57,028

58,561

60,766

322,038

252,018

Operating income (loss)

15,891

17,497

17,427

(14,242)

74,737

Other income / (expense)

(257)

(215)

511

(530)

(204)

Income (loss) before income taxes

15,634

17,282

17,938

(14,772)

74,533

Income tax (benefit) expense

(5,668)

298

664

(21,958)

19,721

Net income

$       21,302

$       16,984

$       17,274

$     7,186

$      54,812

Earnings per share: 

Basic

$           0.16

$           0.13

$           0.13

$       0.05

$          0.42

Diluted

$           0.16

$           0.13

$           0.13

$       0.05

$          0.41

Weighted average shares outstanding:

Basic

132,608

132,133

130,138

131,793

129,149

Diluted

134,288

132,445

132,276

133,273

132,657

 

Intersil Corporation

Condensed Consolidated Balance Sheets

Unaudited

(in thousands)

Jan. 1,

Oct. 2,

Jan. 2,

2016

2015

2015

Assets

Current assets:

  Cash and cash equivalents 

$    247,403

$   228,898

$      211,216

  Trade receivables, net

42,684

51,158

55,585

  Inventories

65,334

68,967

73,770

  Prepaid expenses and other current assets

7,176

7,647

9,779

  Income taxes receivable

7,584

1,030

1,162

  Deferred income tax assets

-

20,977

20,433

     Total current assets

370,181

378,677

371,945

Non-current assets:

  Property, plant and equipment, net

71,044

72,227

72,272

  Purchased intangibles, net

32,507

36,768

34,400

  Goodwill

571,770

571,770

565,424

  Deferred income tax assets

63,139

39,916

39,334

  Other non-current assets

29,977

32,289

70,885

     Total non-current assets

768,437

752,970

782,315

Total assets

$ 1,138,618

$1,131,647

$   1,154,260

Liabilities and shareholders' equity

Current liabilities:

  Trade payables

23,382

24,011

26,246

  Deferred income

14,482

14,632

11,631

  Income taxes payable

3,270

1,689

2,790

  Provision for TAOS litigation

77,988

78,014

-

  Other accrued expenses

48,913

52,844

64,847

    Total current liabilities

168,035

171,190

105,514

Non-current liabilities:

  Income taxes payable

1,609

3,199

59,745

  Other non-current liabilities

14,224

13,947

7,453

    Total non-current liabilities

15,833

17,146

67,198

Total shareholders' equity

954,750

943,311

981,548

Total liabilities and shareholders' equity

$ 1,138,618

$1,131,647

$   1,154,260

 

Intersil Corporation

Condensed Consolidated Statements of Cash Flows

Unaudited

(In thousands)

Quarter Ended

Year Ended

Jan. 1,

Oct. 2,

Jan. 2,

Jan. 1,

Jan. 2,

2016

2015

2015

2016

2015

Q4 2015

Q3 2015

Q4 2014

Operating activities:

Net income

$           21,302

$      16,984

$      17,274

$             7,186

$      54,812

   Depreciation

3,557

3,635

4,930

15,285

19,423

   Amortization of purchased intangibles

4,261

3,777

5,559

17,625

22,241

   Equity-based compensation

5,148

5,565

5,009

23,158

18,688

   Deferred income taxes

(2,247)

1,412

(1,327)

(6,285)

35,569

   Other

(2,300)

(771)

8,024

(4,194)

(2,162)

   Net changes in operating assets and liabilities

1,467

4,193

(21,158)

64,229

(75,182)

    Net cash flows provided by operating activities

31,188

34,795

18,311

117,004

73,389

Investing activities:

   Cash paid for acquisition, net of cash acquired

-

(15,948)

-

(15,948)

-

   Proceeds from investments

150

460

615

1,198

1,075

   Net capital expenditures

(1,214)

(1,764)

(3,857)

(12,965)

(9,857)

    Net cash flows used in investing activities

(1,064)

(17,252)

(3,242)

(27,715)

(8,782)

Financing activities:

   Proceeds from equity-based awards, net

4,610

2,587

1,794

13,403

16,939

   Dividends paid

(16,008)

(15,959)

(15,685)

(64,860)

(62,910)

     Net cash flows used in financing activities

(11,398)

(13,372)

(13,891)

(51,457)

(45,971)

Effect of exchange rates on cash and cash equivalents

(221)

(235)

(544)

(1,645)

(2,207)

     Net change in cash and cash equivalents

18,505

3,936

634

36,187

16,429

Cash and cash equivalents as of the beginning of the period

228,898

224,962

210,582

211,216

194,787

    Cash and cash equivalents as of the end of the period

$         247,403

$    228,898

$    211,216

$         247,403

$    211,216

 

Intersil Corporation

Non-GAAP Results

Unaudited

(In thousands, except percentages)

Quarter Ended

Year Ended

Jan. 1,

Oct. 2,

Jan. 2,

Jan. 1,

Jan. 2,

2016

2015

2015

2016

2015

Q4 2015

Q3 2015

Q4 2014

Non-GAAP gross profit:

  GAAP gross profit

$  72,919

$ 76,058

$ 78,193

$  307,796

$  326,755

  Equity-based compensation COS

268

304

319

1,400

1,326

Non-GAAP gross profit

$  73,187

$ 76,362

$ 78,512

$  309,196

$  328,081

Non-GAAP gross margin:

GAAP gross margin

57.6%

59.2%

59.6%

59.0%

58.1%

  Equity-based compensation COS

0.2%

0.3%

0.2%

0.3%

0.2%

Non-GAAP gross margin

57.8%

59.5%

59.8%

59.3%

58.3%

Non-GAAP R&D expenses:

  GAAP R&D expenses

$  29,983

$ 31,252

$ 30,367

$  126,350

$  125,851

Equity-based compensation

(2,368)

(2,390)

(2,500)

(10,167)

(8,468)

Non-GAAP R&D expenses:

$  27,615

$ 28,862

$ 27,867

$  116,183

$  117,383

Non-GAAP SG&A expenses:

GAAP SG&A expenses

$  22,784

$ 23,532

$ 24,840

$    96,963

$    99,926

Equity-based compensation

(2,512)

(2,871)

(2,190)

(11,591)

(8,894)

Non-GAAP SG&A expenses:

$  20,272

$ 20,661

$ 22,650

$    85,372

$    91,032

Non-GAAP operating expenses:

GAAP operating expenses

$  57,028

$ 58,561

$ 60,766

$  322,038

$  252,018

  Provision for export compliance settlement

-

-

-

-

(4,000)

  Provision for TAOS litigation

-

-

-

(81,100)

-

  Equity-based compensation (excl. COS)

(4,880)

(5,261)

(4,690)

(21,758)

(17,362)

  Amortization of purchased intangibles

(4,261)

(3,777)

(5,559)

(17,625)

(22,241)

Non-GAAP operating expenses

$  47,887

$ 49,523

$ 50,517

$  201,555

$  208,415

Non-GAAP operating income:

GAAP operating income (loss)

$  15,891

$ 17,497

$ 17,427

$  (14,242)

$    74,737

  Provision for export compliance settlement

-

-

-

-

4,000

  Provision for TAOS litigation

-

-

-

81,100

-

  Equity-based compensation

5,148

5,565

5,009

23,158

18,688

  Amortization of purchased intangibles

4,261

3,777

5,559

17,625

22,241

Non-GAAP operating income

$  25,300

$ 26,839

$ 27,995

$  107,641

$  119,666

Non-GAAP operating margin:

GAAP operating margin

12.5%

13.6%

13.3%

(2.7%)

13.3%

  Excluded items as a percent of revenue

7.5%

7.3%

8.0%

23.3%

8.0%

Non-GAAP operating margin 

20.0%

20.9%

21.3%

20.6%

21.3%

 

Intersil Corporation

Non-GAAP Results

Unaudited

(In thousands, except per share amounts)

Quarter Ended

Year Ended

Jan. 1,

Oct. 2,

Jan. 2,

Jan. 1,

Jan. 2,

2016

2015

2015

2016

2015

Q4 2015

Q3 2015

Q4 2014

Non-GAAP net income:

GAAP net income

$      21,302

$      16,984

$      17,274

$        7,186

$      54,812

  Tax impact of Non-GAAP adjustments

(2,668)

(5,049)

(2,025)

(34,140)

173

  Provision for export compliance settlement

-

-

-

-

4,000

  Gain on recovery from auction rate securities

(150)

(460)

(615)

(1,198)

(1,075)

  Equity-based compensation

5,148

5,565

5,009

23,158

18,688

  Amortization of purchased intangibles

4,261

3,777

5,559

17,625

22,241

  Provision for TAOS litigation

-

-

-

81,100

-

Non-GAAP net income

$      27,893

$      20,817

$      25,202

$      93,731

$      98,839

GAAP weighted average shares - diluted

134,288

132,445

132,276

133,273

132,657

  Non-GAAP adjustment

4,314

5,273

4,099

3,795

2,117

Non-GAAP weighted average shares - diluted

138,602

137,718

136,375

137,068

134,774

Non-GAAP earnings per diluted share:

GAAP earnings per diluted share

$          0.16

$          0.13

$          0.13

$          0.05

$          0.41

  Excluded items per share impact

0.04

0.02

0.05

0.63

0.32

Non-GAAP earnings per diluted share

$          0.20

$          0.15

$          0.18

$          0.68

$          0.73

Equity-based compensation expense by classification:

Cost of revenue ("COS")

$           268

$           304

$           319

$        1,400

$        1,326

Research and development 

$        2,368

$        2,390

$        2,500

$      10,167

$        8,468

Selling, general and administrative 

$        2,512

$        2,871

$        2,190

$      11,591

$        8,894

 

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SOURCE Intersil Corporation



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