ISSI Announces First Fiscal Quarter 2013 Results

SAN JOSE, Calif., Jan. 30, 2013 /PRNewswire/ -- Integrated Silicon Solution, Inc. (Nasdaq: ISSI) today reported financial results for the first fiscal quarter ended December 31, 2012.

First Fiscal Quarter and Recent Highlights:

  • Reported total revenue of $76.4 million, including $9.0 million in NOR flash revenue;
  • Achieved record automotive market revenue, increasing 2 percent sequentially and 45 percent over the prior year quarter;
  • Reported GAAP net income of $0.09 per diluted share and non-GAAP net income of $0.18 per diluted share;
  • Generated $8.1 million in cash flow from operations; and
  • Began production shipments of 65nm 36Mb and 72Mb Quad SRAM devices.

"During the first quarter, revenue reflected continued strength in sales for our automotive products, partially offset by end market demand weakness in our other markets," said Scott Howarth, ISSI's President and CEO. "Additionally, our NOR flash revenue exceeded our expectations for the first full quarter after closing our acquisition of Chingis in late September 2012. The addition of NOR flash further expands our addressable markets and creates significant cross-selling opportunities by providing a complementary memory product for many of our key customers."

"For the March quarter, we expect revenue to be down sequentially primarily due to typical seasonality across our end markets. Looking forward, we expect to continue increasing our share of content in the automotive market and exceed the overall growth of that market.  In addition, we are well positioned in the industrial, medical, and military and communications markets to benefit from our broadened product portfolio when conditions improve in such markets.  I believe our new product introductions and design win traction will contribute to future market share gains and expanded market opportunities in the coming year." 

First Fiscal Quarter 2013 Results:

Revenue in the first fiscal quarter ended December 31, 2012 was $76.4 million.  Revenue consisted of $65.8 million of SRAM and DRAM revenue, $9.0 million of NOR flash revenue, and $1.6 million of analog revenue.  SRAM and DRAM revenue decreased 4.9 percent from the September 2012 quarter and increased 3.2 percent from the December 2011 quarter.

GAAP gross margin for the first quarter was 32.1 percent, compared to 25.3 percent in the September 2012 quarter, and 33.5 percent in the December 2011 quarter. Non-GAAP gross margin was 32.9 percent in the December 2012 quarter. 

GAAP net income in the first quarter of fiscal 2013 was $2.5 million, or $0.09 per diluted share, compared to GAAP net loss of $13.2 million, or $0.48 per basic share, in the September 2012 quarter and GAAP net income of $3.8 million, or $0.13 per diluted share, in the December 2011 quarter.

Non-GAAP net income in the December 2012 quarter was $5.3 million, or $0.18 per diluted share, compared to $6.9 million, or $0.24 per diluted share, in the September 2012 quarter and $6.3 million, or $0.22 per diluted share, in the December 2011 quarter. 

Our Non-GAAP results exclude special items in the September 2012 quarter, stock based compensation, purchase price adjustments and amortization of intangibles related to acquisitions, and non-cash tax expense.  A reconciliation of our GAAP results to our non-GAAP results is provided in the financial statement tables following the text of this press release.

March Quarter Outlook

The Company expects total revenue for the March quarter to range between $70.0 and $75.0 million, consisting of SRAM and DRAM revenue of between $62.5 million and $66.0 million, NOR flash revenue between $6.0 million and $7.0 million, and analog revenue of between $1.5 million and $2.0 million. Gross margin for the March quarter is expected to range between 32.5 percent and 33.5 percent. Operating expenses are expected to range between $21.0 million and $22.0 million. GAAP net income is expected to be between $0.06 and $0.10 per diluted share and non-GAAP net income, which excludes non-cash tax expense related to the utilization of deferred tax assets, stock-based compensation, and amortization of intangibles related to the acquisition of Chingis, is expected to range between $0.14 and $0.18 per diluted share.

Conference Call Information

A conference call will be held today at 1:30 p.m. Pacific Time to discuss the Company's first fiscal quarter financial results. To access ISSI's conference call via telephone, dial 888-427-9411 by 1:20 p.m. Pacific Time. The participant passcode is 3401690. The call will also be webcast from ISSI's website at http://www.issi.com.

Non-GAAP Financial Information

In addition to disclosing results determined in accordance with GAAP, ISSI discloses its non-GAAP gross margin and net income (loss) for certain periods that exclude stock based compensation, the purchase price adjustments and amortization of intangibles related to acquisitions, the write-off of certain Si En tangible and intangible assets, expenses related to the acquisition of Chingis and the charge to recognize the decline in fair value of SMIC stock. When presenting non-GAAP results, the Company includes a reconciliation of the non-GAAP results to the results under GAAP. Management believes that including the non-GAAP results assists investors in assessing the Company's operational performance and its performance relative to its competitors. The Company has presented these non-GAAP results as a complement to its results provided in accordance with GAAP, and these results should not be regarded as a substitute for GAAP. Management uses non-GAAP measures to plan and forecast future periods, to establish operational goals, to compare with its business plan and individual operating budgets, to assist the public in measuring the Company's performance, to allocate resources and, relative to the Company's historical financial performance, to enable comparability between periods. Management also considers such non-GAAP results to be an important supplemental measure of its performance. The economic substance behind management's decision to use such non-GAAP measures relates to the non-GAAP measures being a useful measure of the potential future performance of the Company's business. In line with common industry practice and to help enable comparability with other technology companies, the Company's non-GAAP presentation excludes the impact of stock based compensation, the amortization of intangibles related to acquisitions, the write-off of certain Si En tangible and intangible assets, expenses related to the acquisition of Chingis and the charge to recognize the decline in fair value of SMIC stock. Other companies may calculate non-GAAP results differently than the Company, limiting its usefulness as a comparative measure. In addition, such non-GAAP measures may exclude financial information that some may consider important in evaluating the Company's performance. Management compensates for the foregoing limitations of non-GAAP measures by presenting certain information on both a GAAP and non-GAAP basis and providing reconciliations of the GAAP and non-GAAP measures.

About the Company

ISSI is a fabless semiconductor company that designs and markets high performance integrated circuits for the following key markets: (i) automotive, (ii) communications, (iii) industrial, medical, and military, and (iv) digital consumer. The Company's primary products are high speed and low power SRAM and low and medium density DRAM. The Company also designs and markets NOR flash products and high performance analog and mixed signal integrated circuits. ISSI is headquartered in Silicon Valley with worldwide offices in Taiwan, Japan, Singapore, China, Europe, Hong Kong, India, and Korea. Visit our web site at http://www.issi.com/.

Forward Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements concerning NOR flash expanding our addressable markets and creating significant cross-selling opportunities, expecting revenue for the March quarter to be down, increasing our share of content in the automotive market and exceeding the overall growth of such market, being well positioned in the IMM and communications markets, our belief that our new products and design win traction will contribute to future market share gains and expanded market opportunities, and our outlook for the March 2013 quarter with respect to revenue, SRAM and DRAM revenue, NOR flash revenue, analog revenue, gross margin, operating expenses and GAAP and Non-GAAP net income per share are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks and uncertainties include supply and demand conditions in the market place, unexpected reductions in average selling prices for our products, our ability to sell our products  for key applications and the pricing and gross margins achieved on such sales, our ability to control or reduce operating expenses, our ability to obtain a sufficient supply of wafers, wafer pricing, our ability to maintain sufficient inventory of products to satisfy customer orders, our ability to realize the expected benefits of our Chingis acquisition including maintaining relationships with key customers, vendors and employees, changes in manufacturing yields, order cancellations, order rescheduling, product warranty claims, competition, the level and value of inventory held by OEM customers or other risks listed from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended September 30, 2012. In addition, the financial information in this press release is unaudited and subject to any adjustments that may be made in connection with the year-end audit. The Company assumes no obligation to update or revise the forward-looking statements in this release because of new information, future events, or otherwise.

 

 

 

Integrated Silicon Solution, Inc.  

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)













Three Months Ended



Three Months Ended




December 31,



September 30,




2012


2011



2012



















Net sales



$    76,399


$    66,164



$    72,500

Cost of sales



51,908


43,966



54,172

Gross profit



24,491


22,198



18,328










Operating expenses:









  Research and development



10,023


7,601



10,062

  Selling, general and administrative



11,089


9,497



13,867

  Impairment of goodwill



-


-



4,261

    Total operating expenses



21,112


17,098



28,190










Operating income (loss)



3,379


5,100



(9,862)

Interest and other income (expense), net



268


213



(2,148)










Income (loss) before income taxes



3,647


5,313



(12,010)

Provision for income taxes



1,159


1,544



1,108










Consolidated net income (loss)



2,488


3,769



(13,118)










  Net (income) loss attributable to









     noncontrolling interests



11


21



(128)










Net income (loss) attributable to ISSI



$      2,499


$      3,790



$  (13,246)










Basic net income (loss) per share



$       0.09


$       0.14



$      (0.48)

Shares used in basic per share calculation



27,696


26,638



27,475










Diluted net income (loss) per share



$       0.09


$       0.13



$      (0.48)

Shares used in diluted per share calculation



29,106


28,333



27,475



















Reconciliation of GAAP to Non-GAAP Financial Measures














Gross Margin:









    GAAP gross profit



$    24,491


$    22,198



$    18,328

Adjustments:









    Chingis acquisition related inventory write up


492


-



-

    Chingis intangible asset amortization



148


-



-

    Si En intangible asset impairment



-


-



5,402

       Total adjustments



640


-



5,402

    Non-GAAP gross profit



25,131


22,198



23,730

    Non-GAAP gross margin



32.9%


33.5%



32.7%










Operating income:









    GAAP operating income (loss)



$      3,379


$      5,100



$    (9,862)

Adjustments:









    Chingis acquisition related inventory write up


492


-



-

    Chingis intangible asset amortization



339


-



-

    Chingis acquisition expenses and charges


-


-



1,284

    Si En intangible asset amortization and charge

-


404



291

    Si En intangible asset impairment



-


-



14,330

    Stock-based compensation expense



1,440


1,185



1,301

       Total adjustments



2,271


1,589



17,206

    Non-GAAP operating income



$      5,650


$      6,689



$      7,344










Provision for income taxes:









    On a GAAP basis



$      1,159


$      1,544



$      1,108

Adjustments:









    Non-cash tax expense



490


923



558

       Total adjustments



490


923



558

    Non-GAAP provision for income taxes



$        669


$        621



$        550










Net income (loss) attributable to ISSI:









    On a GAAP basis



$      2,499


$      3,790



$  (13,246)

Adjustments:









    Chingis acquisition related inventory write up


492


-



-

    Chingis intangible asset amortization



339


-



-

    Chingis acquisition expenses and charges


-


-



1,284

    Si En intangible asset amortization and charge

-


404



291

    Si En intangible asset impairment



-


-



14,330

    Stock-based compensation expense



1,440


1,185



1,301

    Impairment of investment



-


-



2,327

    Non-cash tax expense



490


923



601

       Total adjustments



2,761


2,512



20,134

    Non-GAAP net income



$      5,260


$      6,302



$      6,888










Shares used in Non-GAAP net income per share:






    Basic



27,696


26,638



27,475

    Diluted



29,106


28,333



29,160










Non-GAAP net income per share:









    Basic



$       0.19


$       0.24



$       0.25

    Diluted



$       0.18


$       0.22



$       0.24

 

 

 

Integrated Silicon Solution, Inc.

Condensed Consolidated Balance Sheets

(In thousands)










December 31,


September 30,




2012


2012




(unaudited)


(1)

ASSETS

Current assets:






  Cash and cash equivalents



$    79,797


$    75,497

  Restricted cash



-


-

  Short-term investments



7,237


6,541

  Accounts receivable, net



43,395


47,710

  Inventories



69,270


66,964

  Other current assets



19,445


21,204







Total current assets



219,144


217,916

Property, equipment and leasehold improvements, net


36,808


29,286

Purchased intangible assets, net



7,825


8,226

Goodwill



9,178


9,178

Other assets



59,460


52,465

Total assets



$  332,415


$  317,071







LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:






  Accounts payable



$    50,504


$    44,705

  Accrued compensation and benefits



6,221


9,420

  Accrued expenses



8,160


11,133

  Current portion of long-term debt



195


-







Total current liabilities 



65,080


65,258







Long-term debt



4,680


-

Other long-term liabilities



5,441


5,478







Total liabilities



75,201


70,736







Commitments and contingencies












Stockholders' equity:






  Common stock



3


3

  Additional paid-in capital



332,043


330,473

  Accumulated deficit



(87,547)


(90,046)

  Accumulated comprehensive income



9,220


2,399







Total ISSI stockholders' equity



253,719


242,829







  Noncontrolling interest



3,495


3,506







Total stockholders' equity



257,214


246,335

Total liabilities and stockholders' equity



$  332,415


$  317,071













(1) Derived from audited financial statements.

 

SOURCE Integrated Silicon Solution, Inc.



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