ICST Integrated Circuit Systems (MM)

Integrated Circuit Systems, Inc. (NASDAQ: ICST)today announced financial results for the fourth quarter and fiscal year ended July 2, 2005. -0- *T ($ millions, except EPS) Q4FY Q4FY Y-Y Q3FY Q-Q 2005 2004 Growth 2005 Growth -------------------------------------- Revenue $58.3 $69.5 -16.1% $58.1 0.3% Gross Margin $34.4 $42.0 -18.1% $34.3 0.3% Operating Income $11.3 $21.7 -47.9% $13.7 -17.5% Net Income $10.3 $24.0 -57.1% $13.0 -20.8% Fully Diluted EPS $0.15 $0.33 -54.5% $0.18 -16.7% Pro Forma Operating Income (1) $14.5 $21.7 -33.2% $13.7 5.8% Pro Forma Net Income (1) $13.5 $24.0 -43.8% $13.0 3.8% Pro Forma Fully Diluted EPS (1) $0.19 $0.33 -42.4% $0.18 5.6% (1) Pro Forma operating income, net income and fully diluted EPS are derived by removing acquisition costs relating to the merger with IDT. Revenues Q4FY2005 Q4FY2004 Y-Y Q3FY2005 Q-Q % of % of Growth % of Growth Revenue Revenue Revenue -------------------------------------------- PC 46% 39% 0% 46% 0% Digital Consumer 18% 15% -5% 17% 6% Communications 31% 38% -31% 32% -2% Military 5% 8% -49% 5% 1% *T Revenues for the quarter were slightly up from the previous quarter driven by an increase in digital consumer sales, offset by declines in communications. Clocks into set-top boxes increased seasonally, and clocks into digital TVs ramped. Communications declined driven by a slowness of shipments of clocks into DDR II. While the quarter was slow for DDR II, we saw an increase in bookings for these products toward the end of the quarter. Product mix for Q4FY2005 was approximately the same as Q3FY2005, keeping gross margin at 59%. Operating expenses for the quarter were down compared to last quarter without the $3.2 million of expense associated with the proposed merger with IDT, which contributed to a pro forma operating income of $14.5 million, compared to $13.7 million in the previous quarter. Pro forma operating income was 25% of revenue for the quarter. Net income for the quarter was $10.3 million or $0.15 per share. Pro forma net income was $13.5 million or $0.19 per share. The accounts receivable balance declined 12% from the end of the third fiscal quarter, and inventory also decreased as inventory turns went from 4.4 times last quarter to 4.8 times this quarter. These both contributed to the increase in cash and investments of $26 million from last quarter. The ending balance for cash and investments at July 2, 2005 was $233 million. Hock Tan, President and CEO commented,"Despite flatness in communications and PC end demand, we continue to see strength in our business as the book-to-bill exceeded 1:1 in this quarter of weak seasonality. We ended the quarter with the strongest backlog of fiscal 2005 and, as fully expected, are benefiting from accelerating orders in PC and Digital Consumer as we enter fiscal 2006." -0- *T ($ millions, except EPS) FY2005 FY2004 Y-Y Growth --------------------------------- Revenue $243.1 $272.1 -11% Gross Margin $143.4 $163.4 -12% Operating Income $51.4 $84.8 -39% Net Income $47.4 $78.5 -40% Fully Diluted EPS $0.67 $1.08 -38% Pro Forma Operating Income (1) $61.6 $84.8 -27% Pro Forma Net Income (1) $57.7 $78.5 -26% Pro Forma Fully Diluted EPS (1) $0.81 $1.08 -25% (1) Pro Forma operating income, net income, and fully diluted EPS are derived by removing research and development expense related to the asset acquisition which occurred in the first quarter of fiscal 2005 and by removing costs relating to the merger with IDT. *T The company reported revenues of $243.1 million, an 11% decrease from fiscal year 2004. The downfall in revenue from last year is mostly attributed to the slowness in the communications markets in the first half of fiscal 2005. Gross margin for fiscal 2005 was 59%, compared to 60% in fiscal 2004, as the product mix shifted to the lower margin markets. Operating expenses increased during the year as non-cash charges increased by $2 million due to the purchase of the Video business unit in the first fiscal quarter; R&D decreased as variable compensation declined; and SG&A increased due to costs associated with Sarbanes-Oxley, legal fees and increased sales commission rates. Net Income for the year was $47.4 million and earnings per share of $0.67. Pro forma net income for the year was $57.7 million and earnings per share of $0.81. Fourth Quarter Fiscal 2005 Conference Call ICS will host a conference call to discuss the earnings results for the fourth quarter of fiscal year 2005 at 9:00AM eastern time August 11, 2005. The company will also discuss its strategic direction and market conditions. Interested parties are invited to listen to the conference call by dialing toll free 1-877-405-3430, or 1-706-634-6397 for international callers; conference ID# 7368389. The call will also be broadcast via the internet and can be accessed from ICS' corporate website at www.icst.com. About ICS Integrated Circuit Systems, Inc. is a leader in the design, development and marketing of silicon timing devices for communications, networking, computing and digital multimedia applications. The Company is headquartered in Norristown, PA, with key facilities in San Jose, CA; Tempe, AZ; Worcester, MA and Singapore. In our upcoming Annual Report for the fiscal year ended July 2, 2005, we will report on the effectiveness of our system of internal controls over financial reporting for such fiscal year, as required by Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations adopted pursuant thereto. We are endeavoring to complete our assessment and remediation procedures in a timely manner and expect to achieve this goal. We also would like to note that the results stated above are subject to change as the Company's independent registered public accounting firm completes its procedures with regard to the preparation of the Company's Annual Report on Form 10-K for the year ended July 2, 2005. Statements included in this release, to the extent they are forward looking, involve a number of risks and uncertainties related to competitive factors, technological developments and market demand. Further information on these and other potential factors that could affect the Company's financial results can be found in the Company's Form 10-K filed on September 16, 2004. -0- *T INTEGRATED CIRCUIT SYSTEMS, INC. CONSOLIDATED OPERATING RESULTS Unaudited Unaudited Three Months Ended Twelve Months Ended July 2, April 2, July 3, July 2, July 3, 2005 2005 2004 2005 2004 ---------------------------- ------------------- (In thousands) Revenues $58,262 $58,124 $69,496 $243,110 $272,140 Cost of sales 23,845 23,817 27,476 99,703 108,764 -------------------------------------------------- ------------------- Gross Margin 34,417 34,307 42,020 143,407 163,376 -------------------------------------------------- ------------------- -------------------------------------------------- ------------------- Expenses: Research and development 9,421 9,943 10,604 38,977 40,352 Research and development Video acquisition - - - 7,051 - Selling, general and administrative 9,407 9,495 9,138 38,372 35,218 Deferred compensation 1 60 - 162 731 Amortization of intangibles 1,114 1,115 575 4,277 2,300 Acquisition Costs 3,203 - - 3,203 - -------------------------------------------------- ------------------- 23,146 20,613 20,317 92,042 78,601 -------------------------------------------------- ------------------- Operating income 11,271 13,694 21,703 51,365 84,775 -------------------------------------------------- ------------------- Other income (expense) 1,400 1,234 606 4,173 2,241 -------------------------------------------------- ------------------- Income before income taxes 12,671 14,928 22,309 55,538 87,016 -------------------------------------------------- ------------------- Income taxes 2,404 1,921 (1,727) 8,135 8,501 -------------------------------------------------- ------------------- Net income 10,267 13,007 24,036 47,403 78,515 -------------------------------------------------- ------------------- Basic EPS: Net income $ 0.15 $ 0.19 $ 0.34 $ 0.68 $ 1.12 Diluted EPS: Net income $ 0.15 $ 0.18 $ 0.33 $ 0.67 $ 1.08 Weighted Shares: Basic 70,062 70,041 70,246 70,197 70,358 Diluted 70,751 70,718 71,913 71,109 72,578 Capital expenditures $ 1,005 $ 923 $ 2,758 $ 7,221 $ 8,587 Depreciation and amortization $ 2,795 $ 2,722 $ 2,144 $ 11,064 $ 8,436 Prepared in accordance with GAAP INTEGRATED CIRCUIT SYSTEMS, INC. PRO FORMA CONSOLIDATED OPERATING RESULTS Unaudited Unaudited Three Months Ended Twelve Months Ended July 2, April 2, July 3, July 2, July 3, 2005 2005 2004 2005 2004 ---------------------------- ------------------- (In thousands) Revenues $58,262 $58,124 $69,496 $243,110 $272,140 Cost of sales 23,845 23,817 27,476 99,703 108,764 -------------------------------------------------- ------------------- Gross margin 34,417 34,307 42,020 143,407 163,376 -------------------------------------------------- ------------------- Expenses: Research and development 9,421 9,943 10,604 38,977 40,352 Selling, general and administrative 9,407 9,495 9,138 38,372 35,218 Deferred compensation 1 60 - 162 731 Amortization of intangibles 1,114 1,115 575 4,277 2,300 -------------------------------------------------- ------------------- 19,943 20,613 20,317 81,788 78,601 -------------------------------------------------- ------------------- Operating income 14,474 13,694 21,703 61,619 84,775 -------------------------------------------------- ------------------- Other income (expense) 1,400 1,234 606 4,173 2,241 -------------------------------------------------- ------------------- Income before income taxes 15,874 14,928 22,309 65,792 87,016 -------------------------------------------------- ------------------- Income taxes 2,404 1,921 (1,727) 8,135 8,501 -------------------------------------------------- ------------------- Pro forma net income 13,470 13,007 24,036 57,657 78,515 -------------------------------------------------- ------------------- Basic EPS: Pro forma Net income $ 0.19 $ 0.19 $ 0.34 $ 0.82 $ 1.12 Diluted EPS: Pro forma Net income $ 0.19 $ 0.18 $ 0.33 $ 0.81 $ 1.08 Weighted Shares: Basic 70,062 70,041 70,246 70,197 70,358 Diluted 70,751 70,718 71,913 71,109 72,578 INTEGRATED CIRCUIT SYSTEMS, INC. PRO FORMA CONSOLIDATED OPERATING RESULTS (continued) Unaudited Unaudited Three Months Ended Twelve Months Ended (In thousands) July 2, April 2, July 3, July 2, July 3, 2005 2005 2004 2005 2004 ---------------------------- ----------------- Reconciliation of our GAAP Net Income to our Pro Forma Net Income: GAAP Net Income $10,267 $13,007 $24,036 $47,403 $78,515 Adjustments to Net Income: Research and development Video acquisition - - - 7,051 - Acquisition Costs 3,203 3,203 Pro Forma Net Income $13,470 $13,007 $24,036 $57,657 $78,515 Reconciliation of our GAAP Operating Income to our Pro Forma Operating Income: GAAP Operating Income $11,271 $13,694 $21,703 $51,365 $84,775 Adjustments to Operating Income: Research and development Video acquisition - - - 7,051 - Acquisition Costs 3,203 3,203 Pro Forma Operating Income $14,474 $13,694 $21,703 $61,619 $84,775 Reconciliation of our GAAP Basic Net Income per share to our Pro Forma Net Income Per Share: GAAP Basic Net Income per share $0.15 $0.19 $0.34 $0.68 $1.12 Adjustments to Basic Net Income per share: Research and development Video acquisition - - - 0.10 - Acquisition Costs 0.04 0.04 Pro Forma Basic Net Income Per Share $0.19 $0.19 $0.34 $0.82 $1.12 Reconciliation of our GAAP Diluted Net Income Per Share to our Pro Forma Diluted Net Income Per Share: GAAP Diluted Net Income per share $0.15 $0.18 $0.33 $0.67 $1.08 Adjustments to Diluted Net Income per share: Research and development Video acquisition - - 0.10 - Acquisition Costs 0.04 0.04 Pro Forma Diluted Net Income Per Share $0.19 $0.18 $0.33 $0.81 $1.08 To supplement the consolidated financial results prepared under generally accepted accounting principles ("GAAP"), ICS uses a non-GAAP conforming, or pro forma, measure of net income that is GAAP net income adjusted to exclude certain costs, expenses and gains. Pro forma net income gives an indication of ICS's baseline performance before gains, losses or other charges that are considered by management to be outside of the company's core operating results. In addition, pro forma net income (loss) is among the primary indicators management uses as a basis for planning and forecasting future periods. ICS computes pro forma net income (loss) by adjusting GAAP net income (loss) with the impact of non-recurring acquisition-related charges. ICS provides pro forma results as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from pro forma measures used by other companies. INTEGRATED CIRCUIT SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEET ---------------------------------------------------------------------- July 2, April 2, July 3, 2005 2005 2004 (in thousands, excluding Other (unaudited) (unaudited) Financial Data) ---------------------------------------------------------------------- ASSETS Current Assets: Cash and marketable securities $ 126,980 $ 68,072 $195,579 Accounts receivable, net 40,110 45,489 45,717 Inventory, net 17,430 18,431 18,772 Deferred tax assets 5,678 18,658 22,759 Other current assets 6,849 7,160 7,189 -------------------------------------------------------------------- Total current assets 197,047 157,810 290,016 -------------------------------------------------------------------- Property & equipment, net 19,416 20,417 19,254 Long term investments 105,865 139,001 5,000 Intangibles 40,943 42,077 27,842 Goodwill 35,422 35,422 35,422 Other assets, net 4,502 5,143 62 Deferred tax assets 4,527 - - -------------------------------------------------------------------- Total assets $ 407,722 $ 399,870 $377,596 -------------------------------------------------------------------- ---------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Lease payable $ 8 $ 38 $ 82 Accounts payable 14,103 13,879 17,557 Accrued expenses and other current liabilities 6,070 6,285 8,518 Income taxes payable 2,197 930 3,576 -------------------------------------------------------------------- Total current liabilities 22,378 21,132 29,733 -------------------------------------------------------------------- Other long term liabilities 3,751 12,448 11,638 -------------------------------------------------------------------- Total liabilities 26,129 33,580 41,371 -------------------------------------------------------------------- Shareholders' Equity: Common stock 734 731 727 Additional paid in capital 294,683 289,908 282,569 Retained earnings 154,543 144,276 107,140 Deferred compensation (543) (801) - Treasury stock (67,824) (67,824) (54,211) -------------------------------------------------------------------- Total shareholders' equity 381,593 366,290 336,225 -------------------------------------------------------------------- Total liabilities and shareholder's equity $ 407,722 $ 399,870 $377,596 -------------------------------------------------------------------- OTHER FINANCIAL DATA: Days sales outstanding 62 62 58 Inventory turns 4.8 4.4 5.2 *T