Intersil Corporation Reports Solid Second Quarter Results

Company Adopts New Strategic Framework to Focus on Power Management Expertise

Marketwired

MILPITAS, CA--(Marketwired - Jul 30, 2013) -  Intersil Corporation (NASDAQ: ISIL), a leading provider of innovative power management and precision analog solutions, today announced financial results for the second quarter that spanned 14 weeks and ended July 5, 2013. 

Quarterly Highlights

  • Revenue of $144.8 million increased 10% sequentially
  • Gross margin increased to 55.2% on a GAAP-basis and to 55.4% on a non-GAAP basis
  • Operating income improved to 5% on a GAAP basis and 15.3% on a non-GAAP basis
  • GAAP EPS was $0.01 per share and non-GAAP EPS nearly doubled on both a year-on-year and sequential basis to $0.14

Revenue for the second quarter was $144.8 million, an increase of 10% sequentially and a decrease of 11% year over year. Intersil's industrial and infrastructure revenue grew quarter-on-quarter by more than 10%, due primarily to strong demand for products in automotive, industrial and aerospace markets. Consumer revenue recovered during the quarter, increasing 25% sequentially and reflecting improved demand for products sold into handsets, tablets and gaming consoles. Computing revenue was down as expected as PC market conditions remained challenging. The breakdown by end market was as follows:

             
    Q2 2013   Q1 2013   Q2 2012
End Market:   Revenue $M   % of Revenue   Revenue $M   % of Revenue   Revenue $M   % of Revenue
Industrial & infrastructure   $ 87.0   60 %   $ 77.5   59 %   $ 95.8   59 %
Personal computing     28.6   20 %     30.9   23 %     40.0   24 %
Consumer     29.2   20 %     23.3   18 %     27.2   17 %
Revenue   $ 144.8         $ 131.7         $ 163.0      
                                     

Financial Results

On a GAAP basis, gross margin of 55.2% improved from 53.8% the previous quarter and from 54.5% the same period last year. Operating expenses declined to $72.6 million resulting in income from operations of $7.3 million or 5.0% for the quarter. Net income of $1.0 million represent $0.01 earnings per diluted share.

Non-GAAP gross margin rose to 55.4%, up from 54.1% in Q1 and 54.8% in Q2 of 2012. The sequential improvement was due primarily to the lower mix of computing revenue. Non-GAAP operating expenses decreased to $58.2 million, resulting in operating margin of 15.3% of revenue. Non-GAAP net income increased to $18.4 million or $0.14 per diluted share from $7.2 million or $0.06 per diluted share in the previous quarter. For a complete overview of the differences between GAAP and non-GAAP results, please see the tables included at the end of this release.

The balance sheet remained strong. Cash flow from operations was $24.7 million and contributed to cash and short-term investment balances of $161.7 million at the end of the 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 August 30, 2013 to shareholders of record as of the close of business on August 20, 2013.

Business Assessment and Strategic Direction

Following the appointment of Necip Sayiner as president and CEO, Intersil conducted a comprehensive review of its product lines and resource investments.

"Our goal has been to identify areas where we have clearly differentiated core capabilities and significant growth prospects so that we can align our investments to capitalize on those opportunities," said Dr. Sayiner. "We have now established a strategic framework and implemented a set of immediate measures to redirect the company on a path to sustainable success."

Going forward the company will be leveraging its strong IP position and heritage to:

  • Expand its power management portfolio for the infrastructure and industrial markets, a significant growth opportunity characterized by longer life cycles and quality margins
  • Establish a meaningful presence in power management solutions for mobile devices by capitalizing on the increasingly complex power requirements of these applications
  • Build upon its leadership position in automotive infotainment and aerospace markets where Intersil's brand, capability and portfolio drive sustained value

In addition, Intersil announced a resource rebalancing initiative to better align the company's operating expenses with these strategic growth areas to improve competitiveness and execution across the business. The actions will shift more resources to product development, reducing expenses in manufacturing and sales operations as well as administrative functions.

"Greater discipline in how we apply our investment dollars, improved execution, and alignment of resources with where we can establish leading market share are all elements of our long-term success model," concluded Dr. Sayiner.

Third Quarter 2013 Outlook

The following forward looking guidance is for the third quarter ending October 4, 2013, which is a typical 13-week period, and is based on current business trends and conditions:

             
    GAAP   Reconciling items   Non-GAAP
Revenue   $146-$152 million       $146-$152 million
Gross margin   Flat       Flat
Operating expenses   $74-$81 million   $5-$6 million equity-based compensation

$6 million amortization of purchased intangibles

$8-$12 million of restructuring and related costs
  $55-$57 million
(Loss) earnings per share   $(0.03) to $(0.01)       $0.15 to $0.18
             

Earnings Call Webcast
Intersil will be hosting a webcast to discuss the quarterly results and outlook on July 30th at 1:45 p.m. Pacific Time. To access the conference call, please visit the company's investor relations website at ir.intersil.com. Participants can also dial (877) 415-3179 or +1 (857) 244-7322 and enter the pass code 14955703. A replay of the call 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 21890967.

About Intersil
Intersil Corporation is a leading provider of innovative power management and precision analog solutions. The Company's products address some of the largest markets within the industrial and infrastructure, personal computing and high-end consumer markets. For more information about Intersil or to find out how to become a member of our winning team, visit our website at www.intersil.com.

About Non-GAAP Financial Results
The presentation of non-GAAP financial information is intended to be considered together with the financial information prepared and presented in accordance with GAAP. For more information on non-GAAP financial measures, please see the reconciliations of such measures in the tables of this release. Management uses non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Management believes that non-GAAP financial measures provide meaningful supplemental information regarding Intersil's performance and liquidity by excluding certain expenses and expenditures that may not be indicative of recurring core business operating results.

FORWARD-LOOKING STATEMENTS
Intersil Corporation press releases and other related comments may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, in connection with the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon Intersil's management's current expectations, estimates, beliefs, assumptions and projections about Intersil's business and industry. 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, are intended to 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, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various risk factors. Intersil does not adopt and is not responsible for any forward-looking statements and projections made by others in this press release. Intersil's Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other Intersil filings 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) discuss some of the important risk factors that may affect our business, results of operations and financial condition. 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.

   
   
Intersil Corporation  
Condensed Consolidated Statements of Operations  
Unaudited  
(In thousands, except percentages and per share amounts)  
                   
    Quarter Ended  
    Jul. 5,     Mar. 29,     Jun. 29,  
    2013     2013     2012  
    Q2 2013     Q1 2013     Q2 2012  
                         
Revenue   $ 144,834     $ 131,724     $ 162,993  
Cost of revenue     64,941       60,791       74,187  
Gross margin     79,893       70,933       88,806  
  Gross margin %     55.2 %     53.8 %     54.5 %
                           
Expenses:                        
  Research and development     34,400       37,348       46,213  
  Selling, general and administrative     28,950       30,385       36,373  
  Amortization of purchased intangibles     6,442       6,496       7,217  
  Restructuring and related costs     2,793       16,834       8,253  
Total expenses     72,585       91,063       98,056  
                         
Operating income (loss)     7,308       (20,130 )     (9,250 )
  Gain (loss) on investments     498       457       (496 )
  Interest income     43       53       123  
  Interest expense and fees     (479 )     (694 )     (1,788 )
Income (loss) before income taxes     7,370       (20,314 )     (11,411 )
  Income tax expense (benefit)     6,368       (22,836 )     3,081  
Net income (loss)   $ 1,002     $ 2,522     $ (14,492 )
                         
Earnings (loss) per share:                        
  Basic   $ 0.01     $ 0.02     $ (0.11 )
  Diluted   $ 0.01     $ 0.02     $ (0.11 )
                         
Weighted average shares outstanding:                        
  Basic     127,223       126,336       127,506  
  Diluted     127,230       126,568       127,506  
                         
                         
                         
Intersil Corporation  
Non-GAAP Results  
Unaudited  
(In thousands, except percentages and per share amounts)  
                   
    Quarter Ended  
    Jul. 5,     Mar. 29,     Jun. 29,  
    2013     2013     2012  
    Q2 2013     Q1 2013     Q2 2012  
                         
Revenue   $ 144,834     $ 131,724     $ 162,993  
                         
Non-GAAP gross margin:                        
  GAAP gross margin   $ 79,893     $ 70,933     $ 88,806  
  Equity-based compensation COS     393       372       555  
    Non-GAAP gross margin   $ 80,286     $ 71,305     $ 89,361  
                         
Non-GAAP gross margin:                        
  GAAP gross margin     55.2 %     53.8 %     54.5 %
  Equity-based compensation COS     0.2 %     0.3 %     0.3 %
    Non-GAAP gross margin     55.4 %     54.1 %     54.8 %
                         
Non-GAAP operating expenses:                        
  GAAP operating expenses   $ 72,585     $ 91,063     $ 98,056  
  Restructuring and related costs     (2,793 )     (16,834 )     (8,253 )
  Equity-based compensation (excl. COS)     (5,193 )     (4,978 )     (8,095 )
  Amortization of purchased intangibles     (6,442 )     (6,496 )     (7,217 )
    Non-GAAP operating expenses   $ 58,157     $ 62,755     $ 74,491  
                         
Non-GAAP operating income:                        
  GAAP operating income(loss)   $ 7,308     $ (20,130 )   $ (9,250 )
  Restructuring and related costs     2,793       16,834       8,253  
  Equity-based compensation     5,586       5,350       8,650  
  Amortization of purchased intangibles     6,442       6,496       7,217  
    Non-GAAP operating income   $ 22,129     $ 8,550     $ 14,870  
                         
Non-GAAP operating margin:                        
  GAAP operating margin     5.0 %     (15.3 )%     (5.7 )%
  Excluded items as a percent of revenue     10.3 %     21.8 %     14.8 %
    Non-GAAP operating margin     15.3 %     6.5 %     9.1 %
                             
                             
                             
Intersil Corporation  
Non-GAAP Results  
Unaudited  
(In thousands, except per share amounts)  
                   
    Quarter Ended  
    Jul. 5,     Mar. 29,     Jun. 29,  
    2013     2013     2012  
    Q2 2013     Q1 2013     Q2 2012  
                         
Non-GAAP net income:                        
  GAAP net income (loss)   $ 1,002     $ 2,522     $ (14,492 )
  Tax adjustments from non-cash and discrete items     3,169       (24,007 )     (174 )
  Restructuring and related costs     2,793       16,834       8,253  
  Gain on recovery from auction rate securities     (625 )     -       -  
  Equity-based compensation     5,586       5,350       8,650  
  Amortization of purchased intangibles     6,442       6,496       7,217  
    Non-GAAP net income   $ 18,367     $ 7,195     $ 9,454  
                         
Diluted shares outstanding     127,230       126,568       127,506  
                         
Non-GAAP earnings per diluted share:                        
  GAAP earnings (loss) per diluted share   $ 0.01     $ 0.02     $ (0.11 )
  Excluded items per share impact     0.13       0.04       0.19  
    Non-GAAP earnings per diluted share   $ 0.14     $ 0.06     $ 0.08  
                         
                         
Equity-based compensation expense by classification:                  
  Cost of revenue ("COS")   $ 393     $ 372     $ 555  
  Research and development     2,136       2,308       3,734  
  Selling, general and administrative     3,057       2,670       4,361  
                           
                           
                           
Intersil Corporation  
Condensed Consolidated Statements of Cash Flows  
Unaudited  
(In thousands)  
                   
    Quarter Ended  
    Jul. 5,     Mar. 29,     Jun. 29,  
    2013     2013     2012  
    Q2 2013     Q1 2013     Q2 2012  
Operating activities:                        
  Net income (loss)   $ 1,002     $ 2,522     $ (14,492 )
    Depreciation     4,708       5,652       4,844  
    Amortization of purchased intangibles     6,442       6,496       7,217  
    Equity-based compensation     5,586       5,350       8,650  
    Provision for inventory obsolescence     2,532       2,562       1,675  
    Other     1,210       (326 )     311  
    Deferred income taxes     1,085       (1,113 )     11,828  
    Net changes in operating assets and liabilities     2,155       (4,993 )     (52,144 )
      Net cash flows from operating activities     24,720       16,150       (32,111 )
                         
Investing activities:                        
  Proceeds from investments     2,625       -       -  
  Net capital expenditures     (7,030 )     (5,281 )     (3,102 )
      Net cash flows from investing activities     (4,405 )     (5,281 )     (3,102 )
                         
Financing activities:                        
  Tax payments and proceeds from equity-based awards     (1,884 )     2,895       1,666  
  Fees on credit facilities     -       -       (425 )
  Repayments of long-term debt     -       -       (25,000 )
  Dividends paid     (15,932 )     (15,283 )     (16,028 )
      Net cash flows from financing activities     (17,816 )     (12,388 )     (39,787 )
                         
Effect of exchange rates on cash and cash equivalents     (71 )     (803 )     (604 )
                         
      Net change in cash and cash equivalents     2,428       (2,322 )     (75,604 )
                         
Cash and cash equivalents as of the beginning of the period     156,488       158,810       389,657  
                         
      Cash and cash equivalents as of the end of the period   $ 158,916     $ 156,488     $ 314,053  
                               
                               
                               
Intersil Corporation
Condensed Consolidated Balance Sheets
Unaudited
(In thousands)
             
    Jul. 5,   Mar. 29,   Dec. 28,
    2013   2013   2012
Assets                  
Current assets:                  
  Cash and short-term investments   $ 161,666   $ 161,238   $ 163,561
  Trade receivables, net     49,358     52,416     54,684
  Inventories     74,365     72,582     74,868
  Prepaid expenses and other current assets     11,963     12,512     14,504
  Income taxes receivable     1,420     22,635     -
  Deferred income tax assets     30,893     20,046     20,006
    Total current assets     329,665     341,429     327,623
Non-current assets:                  
  Property, plant and equipment, net     85,619     83,486     85,374
  Purchased intangibles, net     68,283     76,501     82,998
  Goodwill     565,424     565,424     565,424
  Deferred income tax assets     74,666     86,600     85,526
  Other non-current assets     76,802     78,795     80,841
    Total non-current assets     870,794     890,806     900,163
Total assets   $ 1,200,459   $ 1,232,235   $ 1,227,786
                   
Liabilities and shareholders' equity                  
Current liabilities:                  
  Trade payables   $ 26,353   $ 25,303   $ 22,220
  Deferred income     9,720     9,733     9,572
  Income taxes payable     13,196     5,883     1,293
  Other accrued expenses     69,615     72,263     67,227
    Total current liabilities     118,884     113,182     100,312
Non-current liabilities:                  
  Income taxes payable     86,168     110,998     111,724
  Other non-current liabilities     17,373     19,257     21,142
    Total non-current liabilities     103,541     130,255     132,866
Total shareholders' equity     978,034     988,798     994,608
Total liabilities and shareholders' equity   $ 1,200,459   $ 1,232,235   $ 1,227,786
                   
Contact:
Media
Shannon Pleasant
Intersil Corporation
(408) 546-3399
investor@intersil.com
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