ISSI (MM)

SAN JOSE, Calif., Oct. 28 /PRNewswire-FirstCall/ -- Integrated Silicon Solution, Inc. (NASDAQ:ISSI) today reported its financial results for the fourth fiscal quarter and fiscal year ended September 30, 2008. Revenue in the fourth fiscal quarter ended September 30, 2008 was $55.3 million, a 5.4% decrease from revenue of $58.5 million in the June 2008 quarter and a 12.6% decrease from revenue of $63.3 million in the September 2007 quarter. Gross margin for the fourth quarter was 24.2%, compared with 22.8% in the June 2008 quarter and 20.2% in the September 2007 quarter. Based on its annual impairment analysis performed in accordance with FASB Statement No. 142, "Goodwill and Other Intangible Assets," the Company recorded a non-cash charge of $25.3 million in the fourth quarter of fiscal 2008 to write-off the carrying amount of all of its goodwill. A key indicator of this impairment was the Company's market capitalization which had dropped below the Company's net book value at fiscal year end. The goodwill write-off does not affect the Company's day-to-day business operations, cash balance or competitive position. Reflecting the goodwill charge, the Company reported a net loss for the fourth quarter of $24.7 million or ($0.92) per diluted share. On a non-GAAP basis, without the effect of the goodwill charge, net income in the fourth quarter was $0.6 million, or $0.02 per diluted share. These results compare with GAAP net income for the September 2007 fourth quarter of $3.3 million, or $0.09 per diluted share. Revenue in the fiscal year ended September 30, 2008 was $235.2 million, a decrease of 4.1% from revenue of $245.4 million in fiscal 2007. Gross margin for fiscal 2008 was 22.6%, compared with 19.7% in fiscal 2007. Net loss for fiscal 2008 was $17.8 million, or ($0.60) per diluted share which included the $25.3 million goodwill write-off. On a non-GAAP basis, without the effect of the goodwill charge, net income was $7.6 million, or $0.25 per share. This compares to GAAP net income of $15.4 million, or $0.40 per diluted share for fiscal 2007. The Company had gains on sales of investments of $1.8 million in fiscal 2008 compared to gains of $12.0 million in fiscal 2007. The Company's cash, cash equivalents and short-term investments totaled $50.0 million at September 30, 2008, compared to $50.8 million at June 30, 2008. In addition, the Company had long-term investments of $19.3 million at September 30, 2008. The Company's inventory at September 30, 2008 totaled $39.2 million, a reduction of $1.6 million from June 30, 2008. "End market demand weakened considerably in the month of September due to the sudden worldwide economic crisis. As a result, our DRAM revenue declined from the prior quarter and we missed our revenue guidance. However, we were able to achieve the highest quarterly gross margin in several years," said Scott Howarth, ISSI's President and CEO. "For the year, we increased our non-commodity revenue by 8% over fiscal 2007, increased margins, and remained profitable, excluding the goodwill impairment, during a difficult period in the DRAM industry, and now a difficult economy worldwide. Our balance sheet remains very strong as we had $69.3 million in cash and investments at September 30," added Mr. Howarth. Non-GAAP Financial Information In addition to disclosing results determined in accordance with GAAP, ISSI has disclosed in this press release its non-GAAP net income for the September quarter and fiscal year 2008 that excludes a goodwill write-off. When presenting non-GAAP results, the Company includes a reconciliation of the non-GAAP results to the results under GAAP. Management believes that including the non-GAAP results assists investors in assessing the Company's operational performance and its performance relative to its competitors. The Company has presented these non-GAAP results as a complement to its results provided in accordance with GAAP, and these results should not be regarded as a substitute for GAAP. Management uses these non-GAAP measures to manage and assess the profitability and performance of its business and does not consider the goodwill write-off which is a non-cash charge in managing its operations. Specifically, management uses non-GAAP measures to plan and forecast future periods, to establish operational goals, to compare with its business plan and individual operating budgets, to measure management performance for purposes of executive compensation including payments to be made under bonus plans, to assist the public in measuring the Company's performance, to allocate resources and, relative to the Company's historical financial performance, to enable comparability between periods. Management also considers such non-GAAP results to be an important supplemental measure of its performance. The economic substance behind management's decision to use such non-GAAP measures relates to the goodwill charge being non-cash in nature and the non-GAAP measures being a useful measure of the potential future performance of the Company's business. In line with common industry practice and to help enable comparability with other technology companies, the Company's non-GAAP presentation excludes the impact of the goodwill write-off. Other companies may calculate non-GAAP results differently than the Company, limiting its usefulness as a comparative measure. In addition, such non-GAAP measures may exclude financial information that some may consider important in evaluating the Company's performance. Management compensates for the foregoing limitations of non-GAAP measures by presenting certain information on both a GAAP and non-GAAP basis and providing reconciliations of these certain GAAP and non-GAAP measures. 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 1-719-325-4746 by 1:20 p.m. Pacific time. The call will be webcast from ISSI's website at http://www.issi.com/. 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, (iv) automotive electronics, and (v) industrial. 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 Taiwan, Japan, Singapore, China, Europe, Hong Kong, India, and Korea. Visit our web site at http://www.issi.com/. Forward Looking Statements This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements concerning our strong balance sheet are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks and uncertainties include supply and demand conditions in the market place resulting from difficulties in the market, liquidity and credit concerns or other factors, unexpected reductions in average selling prices for our products, our ability to sell our products for key applications and the pricing and gross margins achieved on such sales, 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 risks listed from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's Form 10-K for the period ended September 30, 2007 and our Quarterly Report on Form 10-Q for the period ended June 30, 2008. In addition, the financial information in this press release is unaudited and subject to any adjustments that may be made in connection with the year end audit. The Company assumes no obligation to update or revise the forward-looking statements in this release because of new information, future events, or otherwise. Integrated Silicon Solution, Inc. Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share data) Three Months Ended Year Ended September 30, September 30, 2008 2007 2008 2007 (1) Net sales $55,341 $63,329 $235,229 $245,395 Cost of sales 41,953 50,567 182,033 196,959 Gross profit 13,388 12,762 53,196 48,436 Operating expenses: Research and development 5,598 4,694 20,848 20,174 Selling, general and administrative 8,202 7,016 31,429 32,660 Impairment of goodwill 25,338 - 25,338 - Total operating expenses 39,138 11,710 77,615 52,834 Operating income (loss) (25,750) 1,052 (24,419) (4,398) Interest and other income (expense), net 1,160 1,621 5,102 7,993 Gain on sale of investments - 603 1,814 12,032 Income (loss) before income taxes, minority interest and equity in net loss of affiliated companies (24,590) 3,276 (17,503) 15,627 Provision (benefit) for income taxes 56 (41) 197 4 Income (loss) before minority interest and equity in net loss of affiliated companies (24,646) 3,317 (17,700) 15,623 Minority interest in net income of consolidated subsidiary (65) (65) (63) (170) Equity in net loss of affiliated companies - - - (92) Net income (loss) $(24,711) $3,252 $(17,763) $15,361 Basic net income (loss) per share $(0.92) $0.09 $(0.60) $0.41 Shares used in basic per share calculation 26,756 37,680 29,541 37,631 Diluted net income (loss) per share $(0.92) $0.09 $(0.60) $0.40 Shares used in diluted per share calculation 26,756 37,999 29,541 37,975 Reconciliation of GAAP to Non-GAAP Financial Measures Net income (loss): On a GAAP basis $(24,711) $3,252 $(17,763) $15,361 Goodwill impairment 25,338 - 25,338 - On a non-GAAP basis $627 $3,252 $7,575 $15,361 Diluted net income (loss) per share: On a GAAP basis $(0.92) $0.09 $(0.60) $0.40 Goodwill impairment 0.94 - 0.85 - On a non-GAAP basis $0.02 $0.09 $0.25 $0.40 (1) Derived from audited financial statements. Integrated Silicon Solution, Inc. Condensed Consolidated Balance Sheets (In thousands) September 30, September 30, 2008 2007 (unaudited) (1) ASSETS Current assets: Cash and cash equivalents $42,175 $53,722 Short-term investments 7,840 80,093 Accounts receivable, net 34,741 37,030 Inventories 39,222 32,056 Other current assets 4,717 6,134 Total current assets 128,695 209,035 Property, equipment and leasehold improvements, net 24,555 23,284 Long-term investments 19,304 - Goodwill - 25,338 Purchased intangible assets, net 2,000 3,538 Other assets 1,397 1,520 Total assets $175,951 $262,715 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt and notes $- $614 Accounts payable 35,171 36,509 Accrued compensation and benefits 3,729 3,588 Accrued expenses 8,157 6,734 Total current liabilities 47,057 47,445 Other long-term liabilities 715 793 Total liabilities 47,772 48,238 Commitments and contingencies Minority interest 789 726 Stockholders' equity: Common stock 3 4 Additional paid-in capital 310,712 376,998 Accumulated deficit (180,431) (162,668) Accumulated comprehensive loss (2,894) (583) Total stockholders' equity 127,390 213,751 Total liabilities and stockholders' equity $175,951 $262,715 (1) Derived from audited financial statements. DATASOURCE: Integrated Silicon Solution, Inc. CONTACT: Investor Relations, John M. Cobb, Chief Financial Officer of Integrated Silicon Solution, Inc., +1-408-969-6600, Web site: http://www.issi.com/

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