Intersil Corporation Reports Solid Second Quarter Results

Company Adopts New Strategic Framework to Focus on Power Management Expertise

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
This email address is being protected from spambots. You need JavaScript enabled to view it.

Intersil Corporation ( ISIL )

Intersil Corporation Reports Solid Second Quarter Results