Intersil Corporation Reports Third Quarter Results

Delivers Another Meaningful Gross Margin Improvement

Milpitas, CA, Oct. 29, 2014 – Intersil Corporation (NASDAQ:ISIL), a leading provider of innovative power management and precision analog solutions, today announced financial results for the third quarter ended October 3, 2014. Revenue of $143.6 million was lower than expected, reflecting weaker end market demand at the end of the quarter. Earnings per share results were within expectations as continued improvement in gross margin and lower operating expenses supported profitability.

Company Highlights

Revenue for the third quarter of $143.6 million decreased 3% sequentially due primarily to weaker than anticipated demand in consumer and industrial and infrastructure markets. Up 4% year over year, Intersil’s industrial and infrastructure revenue decreased broadly sequentially across most end markets. Consumer revenue was down 8% sequentially reflecting the continued transition from non-strategic to new product revenue. Computing demand was strong, but excess inventory at distributors will contribute to steep declines in the fourth quarter.  The breakdown by end market was as follows:

Financial Results

The Company’s solid operating results despite lower revenue reflected the improved health of the business. In the third quarter, GAAP operating expenses decreased by 5% sequentially to $62.0 million. GAAP gross margin increased to 58.4%. Operating income improved to $21.9 million, or 15.2% of revenue compared to 3.3% in Q3 2013. GAAP net income for the quarter increased to $13.9 million or $0.10 per diluted share, compared to a loss in the same period last year.

The non-GAAP results also showed meaningful improvement. Non-GAAP gross margin improved to 58.6% in the third quarter. Third quarter non-GAAP operating expenses declined to $52.3 million, down 4% sequentially and year over year. Third quarter non-GAAP operating income increased sequentially to $31.8 million, resulting in non-GAAP operating margin of 22.1%. Third quarter non-GAAP net income of $25.5 million resulted in non-GAAP earnings per diluted share of $0.19. For a complete reconciliation of GAAP and non-GAAP results, please see the “Non-GAAP Results” tables included at the end of this release.

Cash flow from operating activities was $24.0 million, contributing to a sequential increase in cash and short-term investments to $211 million. 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 November 29, 2014, to shareholders of record as of the close of business on November 18, 2014.

“We are staying focused on the things we can control,” said Necip Sayiner, president and CEO of Intersil. “We’re operating our business to protect profitability, we’re continuing to introduce new products and we’re securing the design wins that we believe will allow us to grow and drive earnings higher in 2015.”

Fourth Quarter 2014 Outlook

The following forward looking guidance is for the fourth quarter ending January 2, 2015, based on current business trends and conditions:

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 conference call, please visit the company’s investor relations website at ir.intersil.com. Participants can also dial (866) 277-1184 or +1 (617) 597-5360 and enter the pass code 42634846. 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 34839042.

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. 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.

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

•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:

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:

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:

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.