Pericom Semiconductor (PSEM) 8-K Fiscal First Quarter 2012 Financial Results

PERICOM SEMICONDUCTOR REPORTS

FISCAL FIRST QUARTER 2012 FINANCIAL RESULTS

§ Q1 revenues decreased 18% sequentially and 17% year-over-year primarily as a result of economic softness and distribution inventory reductions.

§ Q1 GAAP gross margin increased by 50 bps sequentially and 150 bps year-over-year.

§ Q1 GAAP net income decreased 72% sequentially and 95% year-over-year.

San Jose, Calif. – November 1, 2011 - Pericom Semiconductor Corporation (NASDAQ: PSEM), a worldwide supplier of high performance connectivity and timing solutions, today announced results for its fiscal 2012 first quarter ended October 1, 2011.

Net revenues for the first quarter were $35.3 million, a decrease of 18% from the $43.3 million reported in the fourth quarter of fiscal 2011, and down 17% from the $42.8 million reported in the comparable period last year. The revenue decrease primarily resulted from reduced end user demand due to economic softness and inventory reduction activities by our distributors and customers.

GAAP gross margin was 35.5% in the first quarter, up from 35.0% last quarter and from 34.0% in the comparable period last year. On a non-GAAP basis, gross margin was 36.9% in the first quarter, which reflects exclusion of share-based compensation, amortization of intangible assets, and amortization of fair value adjustments and compensation expense accruals from the PTI acquisition. The comparable non-GAAP gross margins were 36.2% last quarter and 35.3% in the comparable period last year. The improvement in sequential gross margin primarily reflects favorable product mix from lower PC and consumer end-market shipments.

GAAP net incomefor the first quarter was $445,000, or $0.02 per diluted share, compared with net income of $1.6 million, or $0.06 per diluted share in the fourth quarter, and net income of $9.5 million, or $0.38 per diluted share in the comparable period last year. GAAP net income for all periods included share-based compensation, amortization of intangible assets, amortization of fair value adjustments, and other PTI acquisition related expenses. The comparable period last year included an $11.0 million gain on previously held shares of PTI. Excluding these items, non-GAAP net income for the first quarter was $1.8 million or $0.07 per diluted share, compared with $3.6 million or $0.14 per diluted share in the fourth quarter, and non-GAAP net income of $4.3 million, or $0.17 per diluted share in the comparable period last year.

The balance sheet remained very strong with cash and investments in marketable securities of $124 million or $5.06 per diluted share at the end of the first quarter.  Inventory decreased by $3.5 million or 16% in the first quarter, and it was the fourth consecutive quarter of a reduction in Pericom owned inventory. Trade accounts receivable decreased by $5.5 million as a result of lower volume, and DSO remained steady at 58.  At quarter-end, working capital was $106 million and the current ratio was 4.0.

”We were pleased about our gross magin improvement despite the lower revenue volume associated with the weak macro environment,” said Alex Hui, President and CEO of Pericom. ”The margin expansion reflects our strategic initiative to transition from low-margin commodity applications to higher value add platforms in enterprise computing and embedded segments.  Also, our continued reduction of inventory and overall strength of our balance sheet will allow us to deliver solid results once again when the rebound occurs.”

New Products

In the first quarter of fiscal 2012, Pericom introduced a total of 31 new products across the Signal Integrity, Timing, and Connectivity product areas.

NEWS RELEASE November 1, 2011

· Signal Integrity: We expanded our solutions for serial protocol signal integrity by introducing 4 new ReDriverTM products for SATA3, SAS2, and the new USB3 (SuperSpeed) protocols. These products address volume notebook, server, storage, and embedded market segments, with all four redrivers offering low power consumption. The new USB3 products are specifically designed to meet the latest industry compliance requirements for next generation platforms with integrated USB3 controllers, and the new SATA/SAS product is our first to offer I2C programmability which expands our applications reach.

· Connectivity:  Adding to our high-speed connectivity solutions, we introduced 6 products supporting DisplayPort, USB charging, DDR switching, and PCIe GEN2 packet switching. These products target notebook, embedded, and networking market segments.

· Timing:  Expanding our timing solutions for next generation platforms, we introduced 21 new products including 5 HiFlexTM multi-output clock generators, 13 ASSP VCXO oscillators, and 3 IP phone clock generators. These new products target networking, telecom, and server/storage market segments.

Share Repurchase Update

On April 29, 2008, our Board of Directors authorized the repurchase of $30 million of our common stock.  Pursuant to the 2008 authority, the Company repurchased 456,346 shares in the three months ended October 1, 2011 for an aggregate cost of $3,498,759 and an average per share purchase price of $7.67.  The remaining balance of potential share repurchases under the 2008 authority is approximately $8.8 million.

Fiscal Q2 2012 Outlook

The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially.

The overall macro environment has been weak the past few months and we have experienced a slowdown in demand.  Below are the estimates for fiscal Q2 2012.

· Revenues in the second fiscal quarter are expected to be in the range of $30.0 million to $34.0 million.

· GAAP gross margins are expected to be between 33.5% and 35.5%, and adjusting for share-based compensation, amortization of intangibles and fair value adjustments that are expected to total approximately 1.5%, non-GAAP gross margins are expected to be in the 35.0% to 37.0% range.

· GAAP operating expenses are expected to be between $12.2 and $12.8 million, and adjusting for share-based compensation, amortization of intangibles and fair value adjustments that are expected to total approximately $1.4 million, non-GAAP operating expenses are expected to be in the range of $10.8 to $11.4 million.

· Other income is expected to be between $0.6 and $0.7 million on a GAAP basis and on a non-GAAP basis.

· The effective tax rate is expected to be approximately 55-60%on a GAAP basis and 34-36% on a non-GAAP basis.

Conference Call

The press release will be followed by a conference call beginning at 1:30 p.m. Pacific time on November 1, 2011. To listen to the call, dial (877) 377-7103 and reference “Pericom”. A slide presentation will accompany the conference call.  To view the slides, please visit the investor relations section of www.pericom.com.

The Pericom financial results conference call will be available via a live webcast on the investor relations section of the web site at http://www.pericom.com.  Access the web site 15 minutes prior to the start of the call to download and install any necessary audio software. An archived webcast replay will be available on the web site for approximately 90 days.

3545 North Second Street     San Jose, CA   95134     (408) 435-0800

NEWS RELEASE November 1, 2011

A taped replay of the conference call will be made available for the period from this evening through midnight on Tuesday, November 8th. To listen to the replay, dial toll-free (855) 859-2056 and reference conference ID 21198191.

About Pericom

Pericom Semiconductor Corporation (NASDAQ: PSEM) enables serial connectivity with the industry's most complete solutions for the computing, communications and consumer market segments. Pericom's analog, digital and mixed-signal integrated circuits, along with its frequency control products are essential in the timing, switching, bridging and conditioning of high-speed signals required by today's ever-increasing speed and bandwidth demanding applications. Company headquarters is in San Jose, California, with design centers and technical sales and support offices globally. http://www.pericom.com.

Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), this announcement of operating results contains non-GAAP financial measures that exclude the income statement effects of share-based compensation, amortization of intangible assets, fair value adjustments of acquired inventory,  acquisition-related expenses, a one-time gain on the previously held interest in PTI, and the effects of excluding share-based compensation upon the number of diluted shares used in calculating non-GAAP earnings per share.

We have excluded share-based compensation expense in calculating these non-GAAP financial measures.  These expenses are non-cash in nature and rely on valuations of the future market price of our common stock that is difficult to predict and is affected by market factors that are largely not within the control of management. We have excluded amortization of intangible assets, amortization of the fair value adjustments related to acquired inventory, acquisition related expenses, the gain on the previously held interest in PTI, and the corresponding tax effect because we do not consider them to be related to our core operating performance.

We use the non-GAAP financial measures that exclude these items to make strategic decisions, forecast future results and evaluate the Company’s current operating performance. We believe that the presentation of non-GAAP financial measures that exclude these items is useful to investors because we do not consider these charges either part of the day-to-day business or reflective of the core operational activities of the Company that are within the control of management or that are used to evaluate the Company’s operating performance.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

Safe Harbor Statement

This press release contains forward-looking statements as defined under The Securities Litigation Reform Act of 1995. Forward-looking statements in this release include the statements under the captions ”Fiscal Q2 2012 Outlook”, which regard the anticipated revenues, gross margin, operating expenses, other income, and effective tax rate in the second fiscal quarter of 2012, and statements from our CEO regarding margin expansion, reductions in Pericom owned inventories, channel inventories reducing, potential industry slowdown due to macro-economic conditions, and other future expectations. The Company’s actual results could differ materially from what is set forth in such forward-looking statements due to a variety of risk factors, including softness in demand for our products, price erosion for certain of our products, unexpected difficulties in developing new products, customer decisions to reduce inventory, economic or financial difficulties experienced by our customers, or technological and market changes. All forward-looking statements included in this document are made as of the date hereof, based on information available to the Company as of the date hereof, and Pericom assumes no obligation to update any forward-looking statements. Parties receiving this release are encouraged to review our annual report on Form 10-K for the year ended July 2, 2011, and in particular, the risk factors sections contained in that report.

3545 North Second Street     San Jose, CA   95134     (408) 435-0800

NEWS RELEASE November 1, 2011

Contact: Aaron Tachibana

Pericom Semiconductor

Tel: 408 435-0800

atachibana@pericom.com

- See Attached Tables -

3545 North Second Street     San Jose, CA   95134     (408) 435-0800

NEWS RELEASE, November 1, 2011

Pericom Semiconductor Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

	Three Months Ended
	October 1,			July 2,		October 2,
	2011			2011		2010
Net revenues	$	35,332		$	43,342	$	42,775
Cost of revenues		22,795			28,173		28,240
Gross profit		12,537			15,169		14,535
Operating expenses:
Research and development		5,316			5,535		4,397
Selling, general and administrative		7,339			7,487		7,742
Total operating expenses		12,655			13,022		12,139
Income (loss) from operations		(118	)		2,147		2,396
Interest and other income, net		1,070			695		11,936
Income before income taxes		952			2,842		14,332
Income tax expense		534			1,281		5,378
Net income from consolidated companies		418			1,561		8,954
Equity in net income of unconsolidated affiliates		27			48		556
Net income	$	445		$	1,609	$	9,510
Basic income per share	$	0.02		$	0.06	$	0.38
Diluted income per share	$	0.02		$	0.06	$	0.38
Shares used in computing basic income per share		24,491			24,917		24,890
Shares used in computing diluted income per share		24,583			25,140		25,263

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3545 North First Street San Jose, CA 95134 (408) 435-0800

NEWS RELEASE, November 1, 2011

Pericom Semiconductor Corporation

Condensed Consolidated Statements of Operations

(In thousands)

(unaudited)

	Three Months Ended
	October 1		July 2,		October 2,
	2011		2011		2010
Share-based compensation
Cost of revenues	$	54	$	58	$	73
Research and development		371		372		390
Selling, general and administrative		549		601		600
Share-based compensation expense	$	974	$	1,031	$	1,063
Amortization of intangible assets
Cost of revenues	$	454	$	342	$	269
Research and development		160		304		53
Selling, general and administrative		239		236		76
Amortization of intangible assets	$	853	$	882	$	398

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3545 North First Street San Jose, CA 95134 (408) 435-0800

NEWS RELEASE, November 1, 2011

Pericom Semiconductor Corporation

Reconciliation of GAAP Net Income to Non-GAAP Net Income

(In thousands)

(unaudited)

	Three Months Ended
	October 1			July 2,			October 2,
	2011			2011			2010
GAAP net income attributable to Pericom shareholders	$	445		$	1,609		$	9,510
Reconciling items:
Share-based compensation expense		974			1,031			1,063
Amortization of intangible assets		853			882			398
Fair value adjustment amortization on acquired inventory		-			-			202
Gain on previously held interest at PTI		-			-			(11,004	)
Acquisition-related costs		-			-			594
Interest expense accrual relating to PTI acquisition earnout		-			206			74
Fair value adjustment to depreciation expense on acquired fixed assets		50			49			15
Compensation expense accrual relating to PTI acquisition		-			364			128
Tax effect of adjustments		(478	)		(569	)		3,341
Total reconciling items		1,399			1,963			(5,189	)
Non-GAAP net income attributable to Pericom shareholders	$	1,844		$	3,572		$	4,321

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS

(unaudited)

Diluted net income per share:
GAAP diluted income per share	$	0.02		$	0.06		$	0.38
Adjustments:
Share-based compensation expense		0.04			0.04			0.04
Amortization of intangible assets		0.03			0.04			0.02
Fair value adjustment amortization on acquired inventory		-			-			0.01
Gain on previously held interest at PTI		-			-			(0.44	)
Acquisition-related costs		-			-			0.02
Interest expense accrual relating to earnout		-			0.01			-
Fair value adjustment to depreciation expense on acquired fixed assets		-			-			-
Compensation expense accrual relating to PTI acquisition		-			0.01			0.01
Tax effect of adjustments		(0.02	)		(0.02	)		0.13
Difference in share count		-			-			-
Total adjustments		0.05			0.08			(0.21	)
Non-GAAP diluted income per share	$	0.07		$	0.14		$	0.17
Shares used in diluted net income per share calculation:
GAAP		24,583			25,140			25,263
Exclude the benefit of share-based compensation expense (1)		423			369			265
Non-GAAP		25,006			25,509			25,528

(1) For purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares  outstanding is adjusted to exclude the benefits of unamortized stock compensation costs that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.

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3545 North First Street San Jose, CA 95134 (408) 435-0800

NEWS RELEASE, November 1, 2011

Pericom Semiconductor Corporation

Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin

(In thousands)

(unaudited)

	Three Months Ended
	October 1			July 2,			October 2,
	2011			2011			2010
GAAP gross margin	$	12,537		$	15,169		$	14,535
- % of revenues		35.5	%		35.0	%		34.0	%
Reconciling items:
Share-based compensation		54			58			73
Amortization of intangible assets		454			342			269
Fair value adjustment amortization on acquired inventory		-			-			202
Fair value adjustment to depreciation expense on acquired fixed assets		10			10			1
Compensation expense accrual relating to PTI acquisition		-			106			37
Total reconciling items		518			516			582
Non-GAAP gross margin	$	13,055		$	15,685		$	15,117
- % of revenues		36.9	%		36.2	%		35.3	%

Reconciliation of GAAP R&D Expenses to Non-GAAP R&D Expenses

(unaudited)

GAAP research and development expenses	$	5,316		$	5,535		$	4,397
- % of revenues		15.0	%		12.8	%		10.3	%
Reconciling items:
Share-based compensation		(371	)		(372	)		(390	)
Amortization of intangible assets		(160	)		(304	)		(53	)
Fair value adjustment to depreciation expense on acquired fixed assets		(10	)		(10	)		(8	)
Compensation expense accrual relating to PTI acquisition		-			(119	)		(42	)
Total reconciling items		(541	)		(805	)		(493	)
Non-GAAP research and development expenses	$	4,775		$	4,730		$	3,904
- % of revenues		13.5	%		10.9	%		9.1	%

Reconciliation of GAAP SG&A Expenses to Non-GAAP SG&A Expenses

(unaudited)

GAAP selling, general and administrative expenses	$	7,339		$	7,487		$	7,742
- % of revenues		20.8	%		17.3	%		18.1	%
Reconciling items:
Share-based compensation		(549	)		(601	)		(600	)
Amortization of intangible assets		(239	)		(236	)		(76	)
Acquisition-related costs		-			-			(594	)
Fair value adjustment to depreciation expense on acquired fixed assets		(30	)		(29	)		(6	)
Compensation expense accrual relating to PTI acquisition		-			(139	)		(49	)
Total reconciling items		(818	)		(1,005	)		(1,325	)
Non-GAAP selling, general and administrative expenses	$	6,521		$	6,482		$	6,417
- % of revenues		18.5	%		15.0	%		15.0	%

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3545 North First Street San Jose, CA 95134 (408) 435-0800

NEWS RELEASE, November 1, 2011

Pericom Semiconductor Corporation

Condensed Consolidated Balance Sheets

(In thousands)

(unaudited)

	As of		As of
	October 1, 2011		July 2, 2011
Assets
Current assets:
Cash and cash equivalents	$	26,497	$	30,023
Restricted cash		7,721		2,947
Short-term investments		55,662		76,266
Accounts receivable - trade		22,667		28,185
Inventories		18,439		21,942
Prepaid expenses and other current assets		7,555		7,788
Deferred income taxes		2,501		2,564
Total current assets		141,042		169,715
Property, plant and equipment-net		58,961		60,859
Investments in unconsolidated affiliates		2,654		2,596
Deferred income taxes non-current		4,686		4,324
Long-term investments in marketable securities		42,316		21,282
Goodwill		16,551		16,669
Intangible assets		14,906		15,690
Other assets		9,945		9,881
Total assets	$	291,061	$	301,016
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt	$	7,079	$	8,671
Accounts payable		8,983		12,221
Accrued liabilities		18,885		19,645
Total current liabilities		34,947		40,537
Industrial development subsidy		8,742		9,075
Deferred tax liabilities		6,574		6,605
Other long-term liabilities		2,031		2,074
Total liabilities		52,294		58,291
Shareholders' equity:
Common stock and paid in capital		128,435		130,960
Retained earnings and other comprehensive income		110,332		111,765
Total shareholders' equity		238,767		242,725
Total liabilities and shareholders' equity	$	291,061	$	301,016

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3545 North First Street San Jose, CA 95134 (408) 435-0800