Intersil Corporation Reports Fourth Quarter and Year End Results

MILPITAS, Calif., Jan. 28, 2015 /PRNewswire/ -- Intersil Corporation 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 2, 2015.  

Company Highlights

• 2014 revenue stabilized and was $562.6 million, down 2% compared to the prior year.
• Gross margin improved again in the fourth quarter, and for the year was up 310 basis points on a GAAP basis and 300 basis points on a non-GAAP basis compared to 2013.
• Operating income increased significantly from the prior year, resulting in a non-GAAP operating margin of 21.3% for 2014 compared to 16% in 2013.
• Diluted GAAP earnings per share increased from $0.02 to $0.41 in 2014 and non-GAAP earnings per share increased from $0.59 to $0.73.

Financial Results
Revenue for the fourth quarter was down as expected to $131.1 million, a nine percent sequential decline. Intersil's consumer, computing, and industrial and infrastructure revenue declined sequentially in the fourth quarter due in part to weaker than seasonal demand.  For the full year, industrial and infrastructure grew by nearly six percent as a result of strong growth in power management and automotive products. Consumer revenue was down meaningfully for the year primarily due to weakness in gaming and the deliberate de-emphasis of low margin products. Revenue from the computing end market was down one percent for the year. The breakdown by end market for the quarter was as follows:

Table 1. Intersil End Market Mix

For the fourth quarter, GAAP operating expenses decreased to $60.8 million. GAAP gross margin increased to 59.6% and GAAP operating income was $17.4 million or 13.3% of sales. GAAP net income for the quarter increased to $17.3 million or $0.13 per diluted share.  For the full year, GAAP gross margin of 58.1% improved 310 bps from 55% in 2013. GAAP operating expenses declined to $252.0 million. GAAP net income increased to $54.8 million resulting in GAAP diluted earnings per share of $0.41, up from $0.02 in 2013.

Non-GAAP gross margin improved again for the seventh consecutive quarter to 59.8% due to favorable mix. The company controlled spending and reduced total operating expenses to $50.5 million. Q4 non-GAAP operating income was $28 million resulting in operating margin of 21.3%. Including Q4, the company met or exceeded its 20 percent non-GAAP operating income goal in each of the last six quarters.  Fully diluted Q4 earnings per share on a non-GAAP basis were $0.18, which included a three cent benefit from the reinstatement of the US R&D tax credit. For the full year, non-GAAP gross margin improved to 58.3% from 55.3% in 2013 reflecting improving mix within each of the major product categories. Non-GAAP operating expenses declined to $208.4 million.

Non-GAAP diluted earnings per share for the full year increased from $0.59 to $0.73, a 24% improvement. For a complete reconciliation of GAAP and non-GAAP results, please see the "Non-GAAP Results" table included at the end of this release.

Cash and short-term investments totaled $211 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 February 27, 2015, to shareholders of record as of the close of business on February 17, 2015.

First Quarter 2015 Outlook

The following forward looking guidance is for the first quarter ending April 3, 2015, based on current business trends and conditions:

Table 2. Intersil Q1 2015 Outlook

Non-GAAP Long-term Target Model Introduced

Entering a new phase in the company's development and anticipating a return to growth, the management team introduced a new target operating model outlined below. The new long-term, non-GAAP target was provided to help investors evaluate management's progress towards improving the business over time.

Table 3. Intersil Non-GAAP Long-term Target Operating Model Introduced Today

"With a number of revenue transitions behind us and the R&D investments in new products poised to begin generating revenue, we're starting 2015 with a strong foundation," said Necip Sayiner, president and CEO of Intersil. "Our newly introduced target model raises the bar for profitability and underscores the confidence we have as a team in Intersil's potential."

Earnings Call Webcast
Intersil will be hosting a webcast to discuss the quarterly results and outlook today at 1:45 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 (800) 798-2864 or +1 (617) 614-6206 and enter the pass code 85043075. 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 15087044.

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
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.

Important factors that may affect our business, future operating results and financial condition include: 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 computing market, 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, adverse results in litigation matters, and other risk factors described in 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). 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 does not adopt and is not responsible for any forward-looking statements and projections made by others in this press release.

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 net income (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 acquisition related intangibles, which include acquired intangibles such as purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements.

Restructuring and related costs. Restructuring charges primarily relate to changes in Intersil's infrastructure in efforts to reduce costs and rebalance its workforce. Restructuring charges (gains) are excluded from non-GAAP financial measures because they are not considered core operating activities. Although Intersil has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. As such, management believes that it is appropriate to exclude restructuring charges (gains) from Intersil's non-GAAP financial measures as it enhances the ability of investors to compare the Company's period-over-period operating results from continuing operations. Restructuring-related charges (gains) primarily include:

• Severance and retention costs directly related to a restructuring action.
• Facility closure costs consist of ongoing costs associated with the exit of our leased and owned facilities.
• Other write-offs such as intangibles related to a restructuring action.

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 or governmental judgments, awards, fines or penalties
• Income from IP agreement
• 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. During the second quarter of fiscal 2013 we revised our non-GAAP financial information to reduce the types of items excluded from our non-GAAP presentation in an effort to increase comparability of our results with published earnings estimates widely available on the Internet.  In the past we excluded other items such as the compensation expense(benefit) associated with our non-qualified deferred compensation plan, CEO severance costs, loss on interest-rate swaps, and related tax effects of these items, from our non-GAAP financial information. As a result, a non-GAAP financial measure presented in the accompanying press release tables may be different from that presented in a prior press release.

 

 

 

 

 

 

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SOURCE Intersil Corporation