ISSI (MM)

SANTA CLARA, Calif., April 25 /PRNewswire-FirstCall/ -- Integrated Silicon Solution, Inc. (NASDAQ:ISSI) today reported its financial results for the second fiscal quarter ended March 31, 2006. Revenue in the second fiscal quarter ending March 31, 2006 was $53.2 million, compared with $51.1 million in the December 2005 quarter and $35.7 million in the March 2005 quarter. The reported net loss for the March 2006 quarter of ($3.7) million or ($0.10) per diluted share includes a $5.8 million inventory write-down, a $1.56 million charge for FAS 123R stock option expense, a $0.3 million charge for a write-down of in-process technology as a result of acquiring additional shares of ICSI, and a $2.7 million gain related to the sale of investments and assets. These results compare with a net loss for the March 2005 quarter of $13.8 million or ($0.38) per share on a diluted share basis which included an inventory write-down of $1.3 million, a charge of $1.1 million against the Company's facility lease, and a charge of $9.3 million for the equity interest in ICSI in Taiwan prior to our acquisition. "Revenue grew 4% in the March 2006 quarter from the previous quarter and 49% over the same period last year," said Jimmy Lee, ISSI's Chairman and CEO. "The year to year revenue growth shows the benefit of our ICSI acquisition. Additionally, we exited the Bluetooth and Flash Controller markets which will reduce our total expenses, but resulted in an inventory write-down. We remain optimistic about our ability to grow in niche market segments such as automotive markets and DRAM die business which we expect will help to enhance our gross margins." About the Company ISSI is a fabless semiconductor company that designs and markets high performance integrated circuits for the following key markets: (i) digital consumer electronics, (ii) networking, (iii) mobile communications and (iv) automotive electronics. The Company's primary products are high speed and low power SRAM and low and medium density DRAM. The Company also designs and markets EEPROM, SmartCards and is developing selected non-memory products focused on its key markets. ISSI is headquartered in Silicon Valley with worldwide offices in China, Europe, Hong Kong, India, Korea and Taiwan. Visit our web site at http://www.issi.com/. Conference Call A conference call will be held today at 1:30 p.m. Pacific time to discuss this release. To access ISSI's conference call via telephone, dial 719-457-2617 by 1:20 p.m. Pacific time. The call will be webcast from ISSI's website at http://www.issi.com/. Safe Harbor Statement The statements in this press release regarding exiting markets, reducing our total expenses, and being optimistic about our ability to grow in niche markets and our expectations regarding enhanced gross margins are forward- looking statements that are subject to risks. Our actual results may differ materially from current expectations due to many factors, including supply and demand conditions in the market place, unexpected reductions in average selling prices, our ability to sell our products for the die business and automotive applications and the pricing and gross margins achieved on such sales, our ability to retain the revenue and customers of ICSI, our ability to control or reduce operating expenses, changes in manufacturing yields, order cancellations, order rescheduling, product warranty claims, competition, the level and value of inventory held by OEM customers, or other factors. Furthermore, the purchase accounting and valuation information in this release regarding the acquisition of additional shares of ICSI are preliminary and are subject to further review by the Company, its advisors, and its auditors. The valuation numbers could be changed as a result of further review. Stockholders of ISSI are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. ISSI does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances, or new information after this April 25, 2006 press release, or to reflect the occurrence of unanticipated events. Further information that could affect the Company's results is detailed in ISSI's periodic filings with the Securities and Exchange Commission, including its report on Form 10Q for the quarter ended December 31, 2005. Consolidated Statement of Operations and Consolidated Balance Sheet to follow. Integrated Silicon Solution, Inc. Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share data) Three Months Ended Six Months Ended March 31, March 31, 2006 2005 2006 2005 Net sales $53,245 $35,674 $104,338 $66,249 Cost of sales 47,607 31,148 91,317 67,499 Gross profit (loss) 5,638 4,526 13,021 (1,250) Operating expenses: Research and development 5,547 4,636 11,173 9,726 Selling, general and administrative 7,239 5,388 13,717 9,609 In-process technology 324 435 499 435 Total operating expenses 13,110 10,459 25,389 19,770 Operating loss (7,472) (5,933) (12,368) (21,020) Interest and other income (expense), net 1,696 820 2,745 1,426 Gain on sale of other investments 2,187 535 2,187 2,905 Loss before income taxes, minority interest and equity in net loss of affiliated companies (3,589) (4,578) (7,436) (16,689) Provision for income taxes 51 16 113 17 Loss before minority interest and equity in net loss of affiliated companies (3,640) (4,594) (7,549) (16,706) Minority interest in net loss of consolidated subsidiary 226 91 650 186 Equity in net loss of affiliated companies (253) (9,328) (476) (10,642) Net loss $(3,667) $(13,831) $(7,375) $(27,162) Basic and diluted net loss per share $(0.10) $(0.38) $(0.20) $(0.75) Shares used in per share calculation 37,371 36,460 37,306 36,346 Integrated Silicon Solution, Inc. Condensed Consolidated Balance Sheets (In thousands) March 31, September 30, 2006 2005 (unaudited) (1) ASSETS Current assets: Cash and cash equivalents $26,196 $27,484 Restricted cash -- 301 Short-term investments 84,145 96,427 Accounts receivable, net 30,020 28,508 Inventories 64,657 60,468 Other current assets 5,421 3,594 Total current assets 210,439 216,782 Investments -- 9,182 Property, equipment, and leasehold improvements, net 21,837 21,725 Goodwill 25,054 20,232 Purchased intangible assets, net 5,646 6,142 Other assets 9,404 10,053 Total assets $272,380 $284,116 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt and notes $9,704 $6,628 Accounts payable 35,798 35,705 Accrued compensation and benefits 2,676 2,467 Accrued expenses 8,211 8,029 Total current liabilities 56,389 52,829 Other long-term liabilities 1,725 1,793 Total liabilities 58,114 54,622 Minority interest 919 6,566 Stockholders' equity: Common stock 4 4 Additional paid-in capital 344,341 340,567 Accumulated deficit (139,110) (131,735) Unearned compensation -- (17) Accumulated comprehensive income 8,112 14,109 Total stockholders' equity 213,347 222,928 Total liabilities and stockholders' equity $272,380 $284,116 (1) Derived from audited financial statements. DATASOURCE: Integrated Silicon Solution, Inc. CONTACT: Scott Howarth, Vice-President & CFO, Investor Relations, of Integrated Silicon Solution, Inc., +1-408-969-4686 or Web site: http://www.issi.com/

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