INTERSIL CORP MILPITAS, Calif., Jan. 28, 2015 /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 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:
Q4 2014 Q3 2014 Q4 2013
------- ------- -------
End Market
Revenue $M % $M % $M %
--- --- --- --- --- ---
Industrial
&
Infrastructure 85.0 65% 91.1 63% 87.1 60%
Computing 25.9 20% 31.4 22% 30.5 21%
Consumer 20.2 15% 21.1 15% 28.4 19%
Total
Revenue $131.1 $143.6 $146.0
====== ====== ======
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:
GAAP Reconciling items Non-GAAP
---- ----------------- --------
Revenue $131-$136 million $131-$136 million
------- ----------------- -----------------
Gross margin Down 50 to 100 bps Down 50 to 100 bps
------------ ------------------ ------------------
Operating
expenses $63-$64 million $4-$5 million equity-based compensation $53-$54 million
$5.6 million amortization of purchased intangibles
--- ------------------------------------
Earnings per
share $0.07 to $0.08 $0.14 to $0.16
------------ -------------- --------------
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.
Gross Margin >= 60%
------------ -----
R&D Expense 20-21% of Revenue
----------- -----------------
SG&A Expense 14-15% of Revenue
------------ -----------------
Operating Margin 25%
---------------- ---
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.
Intersil Corporation
Condensed Consolidated Statements of Operations
Unaudited
(In thousands, except percentages and per share amounts)
Quarter Ended Year Ended
------------- ----------
Jan. 2, Oct. 3, Jan. 3, Jan. 2, Jan. 3,
2015 2014 2014 2015 2014
---- ---- ---- ---- ----
Q4 2014 Q3 2014 Q4 2013
Revenue $131,126 $143,612 $145,993 $562,555 $575,195
Cost of revenue 52,933 59,763 64,848 235,800 258,588
------ ------ ------ ------- -------
Gross profit 78,193 83,849 81,145 326,755 316,607
Gross margin % 59.6% 58.4% 55.6% 58.1% 55.0%
Expenses:
Research and
development 30,367 31,194 27,482 125,851 130,541
Selling, general and
administrative 24,840 25,243 26,915 99,926 113,333
Amortization of
purchased
intangibles 5,559 5,561 5,561 22,241 24,579
Provision for export
compliance
settlement - - - 4,000 6,000
Restructuring and
related costs - - - - 28,694
Total expenses 60,766 61,998 59,958 252,018 303,147
------ ------ ------ ------- -------
Operating income 17,427 21,851 21,187 74,737 13,460
Interest income /
(expense) and other (316) (554) (395) (1,742) (1,901)
Gain /(loss) on
investments 827 (148) 470 1,538 2,318
Income before income
taxes 17,938 21,149 21,262 74,533 13,877
Income tax expense 664 7,262 13,753 19,721 11,022
Net income $17,274 $13,887 $7,509 $54,812 $2,855
======= ======= ====== ======= ======
Earnings per share:
Basic $0.13 $0.11 $0.06 $0.42 $0.02
===== ===== ===== ===== =====
Diluted $0.13 $0.10 $0.06 $0.41 $0.02
===== ===== ===== ===== =====
Weighted average shares outstanding:
Basic 130,138 129,620 127,699 129,149 127,151
======= ======= ======= ======= =======
Diluted 132,276 132,626 129,158 132,657 127,998
======= ======= ======= ======= =======
Intersil Corporation
Condensed Consolidated Balance Sheets
Unaudited
(in thousands)
Jan. 2, Oct. 3, Jan. 3,
2015 2014 2014
---- ---- ----
Assets
Current assets:
Cash and short-term
investments $211,216 $210,582 $194,787
Trade receivables, net 55,585 58,680 49,466
Inventories 73,770 67,651 62,408
Prepaid expenses and
other current assets 9,779 9,945 9,752
Income taxes receivable 1,162 1,450 1,091
Deferred income tax
assets 20,433 14,337 22,328
------ ------ ------
Total current assets 371,945 362,645 339,832
------- ------- -------
Non-current assets:
Property, plant and
equipment, net 72,272 73,755 81,867
Purchased intangibles,
net 34,400 39,959 56,641
Goodwill 565,424 565,424 565,424
Deferred income tax
assets 39,334 53,455 73,008
Other non-current assets 70,885 71,720 74,624
------ ------ ------
Total non-current
assets 782,315 804,313 851,564
------- ------- -------
Total assets $1,154,260 $1,166,958 $1,191,396
========== ========== ==========
Liabilities and shareholders' equity
Current liabilities:
Trade payables $26,246 $26,809 $26,248
Deferred income 11,631 10,821 11,936
Income taxes payable 2,790 6,105 14,588
Other accrued expenses 64,847 66,151 77,117
------ ------ ------
Total current
liabilities 105,514 109,886 129,889
------- ------- -------
Non-current liabilities:
Income taxes payable 59,745 72,887 90,102
Other non-current
liabilities 7,453 8,991 13,603
----- ----- ------
Total non-current
liabilities 67,198 81,878 103,705
------ ------ -------
Total shareholders'
equity 981,548 975,194 957,802
------- ------- -------
Total liabilities and
shareholders' equity $1,154,260 $1,166,958 $1,191,396
========== ========== ==========
Intersil Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited
(In thousands)
Quarter Ended Year Ended
------------- ----------
Jan. 2, Oct. 3, Jan. 3, Jan. 2, Jan. 3,
2015 2014 2014 2015 2014
---- ---- ---- ---- ----
Q4 2014 Q3 2014 Q4 2013
Operating activities:
Net income $17,274 $13,887 $7,509 $54,812 $2,855
Depreciation 4,930 4,898 4,210 19,423 18,950
Amortization of purchased
intangibles 5,559 5,561 5,561 22,241 24,579
Equity-based compensation 5,009 4,385 3,868 18,688 19,091
Other (1,327) (195) (123) (2,162) 5,948
Deferred income taxes 8,024 2,985 (1,804) 35,569 10,196
Net changes in operating
assets and liabilities (21,158) (7,505) 27,049 (75,182) 25,095
Net cash flows from
operating activities 18,311 24,016 46,270 73,389 106,714
------ ------ ------ ------ -------
Investing activities:
Proceeds from investments 615 192 - 1,075 5,616
Net capital expenditures (3,857) (3,150) (2,809) (9,857) (18,581)
Net cash flows from
investing activities (3,242) (2,958) (2,809) (8,782) (12,965)
------ ------ ------ ------ -------
Financing activities:
Proceeds from equity-
based awards, net 1,794 5,700 82 16,939 4,353
Dividends paid (15,685) (15,634) (15,366) (62,910) (61,920)
Net cash flows from
financing activities (13,891) (9,934) (15,284) (45,971) (57,567)
------- ------ ------- ------- -------
Effect of exchange rates
on cash and cash
equivalents (544) (1,783) (190) (2,207) (205)
---- ------ ---- ------ ----
Net change in cash and
cash equivalents 634 9,341 27,987 16,429 35,977
--- ----- ------ ------ ------
Cash and cash equivalents
as of the beginning of
the period 210,582 201,241 166,800 194,787 158,810
------- ------- ------- ------- -------
Cash and cash equivalents
as of the end of the
period $211,216 $210,582 $194,787 $211,216 $194,787
======== ======== ======== ======== ========
Intersil Corporation
Non-GAAP Results
Unaudited
(In thousands, except percentages)
Quarter Ended Year Ended
------------- ----------
Jan. 2, Oct. 3, Jan. 3, Jan. 2, Jan. 3,
2015 2014 2014 2015 2014
---- ---- ---- ---- ----
Q4 2014 Q3 2014 Q4 2013
Non-GAAP gross profit:
GAAP gross profit $78,193 $83,849 $81,145 $326,755 $316,607
Equity-based
compensation COS 319 294 298 1,326 1,387
Non-GAAP gross
profit $78,512 $84,143 $81,443 $328,081 $317,994
======= ======= ======= ======== ========
Non-GAAP gross margin:
GAAP gross margin 59.6% 58.4% 55.6% 58.1% 55.0%
Equity-based
compensation COS 0.2% 0.2% 0.2% 0.2% 0.3%
--- --- --- --- ---
Non-GAAP gross
margin 59.8% 58.6% 55.8% 58.3% 55.3%
==== ==== ==== ==== ====
Non-GAAP operating expenses:
GAAP operating
expenses $60,766 $61,998 $59,958 $252,018 $303,147
Restructuring and
related costs - - - - (28,694)
Provision for export
compliance
settlement - - - (4,000) (6,000)
Equity-based
compensation (excl.
COS) (4,690) (4,091) (3,570) (17,362) (17,704)
Amortization of
purchased
intangibles (5,559) (5,561) (5,561) (22,241) (24,579)
Non-GAAP operating
expenses $50,517 $52,346 $50,827 $208,415 $226,170
======= ======= ======= ======== ========
Non-GAAP operating income:
GAAP operating
income $17,427 $21,851 $21,187 $74,737 $13,460
Restructuring and
related costs - - - - 28,694
Provision for export
compliance
settlement - - - 4,000 6,000
Equity-based
compensation 5,009 4,385 3,868 18,688 19,091
Amortization of
purchased
intangibles 5,559 5,561 5,561 22,241 24,579
Non-GAAP operating
income $27,995 $31,797 $30,616 $119,666 $91,824
======= ======= ======= ======== =======
Non-GAAP operating margin:
GAAP operating
margin 13.3 % 15.2 % 14.5 % 13.3 % 2.3 %
Excluded items as a
percent of revenue 8.0 % 6.9 % 6.5 % 8.0 % 13.7 %
---- ---- ---- ---- -----
Non-GAAP operating
margin 21.3 % 22.1 % 21.0 % 21.3 % 16.0 %
===== ===== ===== ===== =====
Intersil Corporation
Non-GAAP Results
Unaudited
(In thousands, except per share amounts)
Quarter Ended Year Ended
------------- ----------
Jan. 2, Oct. 3, Jan. 3, Jan. 2, Jan. 3,
2015 2014 2014 2015 2014
---- ---- ---- ---- ----
Q4 2014 Q3 2014 Q4 2013
Non-GAAP net income:
GAAP net income $17,274 $13,887 $7,509 $54,812 $2,855
Tax adjustments from
non-cash and discrete
items (2,025) 1,821 8,570 173 (3,452)
Restructuring and
related costs - - - - 28,694
Provision for export
compliance settlement - - - 4,000 6,000
Gain on recovery from
auction rate securities (615) (191) - (1,075) (866)
Equity-based
compensation 5,009 4,385 3,868 18,688 19,091
Amortization of
purchased intangibles 5,559 5,561 5,561 22,241 24,579
Non-GAAP net income $25,202 $25,463 $25,508 $98,839 $76,901
======= ======= ======= ======= =======
GAAP weighted average
shares -diluted 132,276 132,626 129,158 132,657 127,998
Non-GAAP adjustment 4,099 4,409 2,423 2,117 2,689
Non-GAAP weighted
average shares -
diluted 136,375 137,035 131,581 134,774 130,687
======= ======= ======= ======= =======
Non-GAAP earnings per diluted share:
GAAP earnings per
diluted share $0.13 $0.10 $0.06 $0.41 $0.02
Excluded items per share
impact 0.05 0.09 0.13 0.32 0.57
Non-GAAP earnings per
diluted share $0.18 $0.19 $0.19 $0.73 $0.59
===== ===== ===== ===== =====
Equity-based compensation expense by classification:
Cost of revenue ("COS") $319 $294 $298 $1,326 $1,387
Research and development $2,500 $1,967 $1,642 $8,468 $7,777
Selling, general and
administrative $2,190 $2,124 $1,928 $8,894 $9,927
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SOURCE Intersil Corporation
