Integrated Circuit Systems, Inc. Announces Fiscal 2005 Second Quarter

    Business Editors/Technology Writers

    NORRISTOWN, Pa.--(BUSINESS WIRE)--Jan. 21, 2005--Integrated Circuit Systems, Inc. (NASDAQ:ICST) today announced financial results for the second quarter of fiscal 2005, ending on January 1, 2005.

($ millions, except EPS) Q2FY Q2FY Y-Y Q1FY Q-Q 2005 2004 Growth 2005 Growth -------------------------------------- Revenue $60.6 $69.6 -12.9% $66.1 - 8.3% Gross Margin $35.4 $41.5 -14.7% $39.3 - 9.9% Operating Income $15.3 $21.8 -29.8% $11.1 37.8% Net Income $14.0 $18.7 -25.1% $10.1 38.6% Diluted EPS $0.20 $0.26 -23.1% $0.14 42.9% Pro Forma Operating Income (1) $15.3 $21.8 -29.8% $18.1 -15.5% Pro Forma Net Income (1) $14.0 $18.7 -25.1% $17.2 -18.6% Pro Forma Diluted EPS (1) $0.20 $0.26 -23.1% $0.24 -16.7%

(1) Pro forma operating income, net income, and diluted EPS is derived by removing research and development expense related to the asset acquisition which occurred in the first quarter of fiscal 2005.

    Revenue declined 8% from the September quarter to the December quarter representing weak market conditions in digital consumer and communications. PC revenue grew 4% quarter-on-quarter as seasonally expected. Reflecting such product mix, gross margin compressed to 58.3% for the December quarter. During the previous quarter the Company took a charge of $7.1 million for the acquisition of research and development relating to the Video business unit. This charge is the largest component drop in operating expenses from the previous quarter. Operating expenses were cut during the quarter to reflect the downturn in business. Net income for the quarter on a GAAP basis is $14.0 million or $0.20 earnings per share, compared to $0.14 in the preceding quarter.

Revenues Q2FY2005 Q2FY2004 Y-Y Q1FY2005 Q-Q % of % of Growth % of Growth Revenue Revenue Revenue ----------------------------------------- PC 48% 46% - 8% 43% 4% Digital Consumer 16% 13% 3% 17% -12% Communications 30% 32% -19% 34% -21% Military 6% 9% -40% 6% - 8%

    While we continued to invest in R&D spending during the December quarter, we took steps to control operating expenses through headcount reductions and by reducing manufacturing capacity in the Military business.
    Also during the quarter we repurchased 287,500 shares and we plan on continuing our stock buyback program this current quarter.
    Hock Tan, President and CEO, stated, "We believe that the weaknesses in Digital Consumer and Communications during the December quarter reflect temporary demand pullback, because inventories are being consumed in the pipeline. Once this is over, we continue to have confidence in the strong growth potential of our end markets."

    Second Quarter Fiscal 2005 Conference Call

    ICS will host a conference call to discuss the earnings results for the second quarter of fiscal year 2005 at 9:30 AM eastern time January 21, 2005. The company will also discuss its strategic direction and market conditions. Interested parties are invited to listen to the conference call by dialing (877) 405-3430, or (706) 634-6397 for international callers; the conference ID is 2985136. 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.

    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.

INTEGRATED CIRCUIT SYSTEMS, INC. CONSOLIDATED OPERATING RESULTS

Unaudited Unaudited Three Months Ended Six Months Ended

Jan. 1, Oct. 2, Dec. 27, Jan. 1, Dec. 27, 2005 2004 2003 2005 2003 -------------------------- ------------------ (In thousands) Revenues $60,628 $66,096 $69,565 $126,724 $134,850 Cost of sales 25,269 26,772 28,107 52,041 54,543 --------------------------------------------------- ------------------ Gross margin 35,359 39,324 41,458 74,683 80,307 --------------------------------------------------- ------------------

Expenses: Research and development 9,426 10,187 10,014 19,613 19,322 Research and development Video acquisition - 7,051 - 7,051 - Selling, general and administrative 9,440 10,030 8,819 19,470 17,790 Deferred compensation 60 40 244 100 488 Amortization of intangibles 1,114 935 575 2,049 1,150 --------------------------------------------------- ------------------ 20,040 28,243 19,652 48,283 38,750

--------------------------------------------------- ------------------ Operating income 15,319 11,081 21,806 26,400 41,557 --------------------------------------------------- ------------------

Other income (expense) 873 666 379 1,539 1,124

--------------------------------------------------- ------------------ Income before income taxes 16,192 11,747 22,185 27,939 42,681 --------------------------------------------------- ------------------

Income taxes 2,212 1,598 3,533 3,810 6,748

--------------------------------------------------- ------------------ Net income $13,980 $10,149 $18,652 $24,129 $35,933 --------------------------------------------------- ------------------

Basic EPS: Net income $0.20 $0.14 $0.26 $0.34 $0.51

Diluted EPS: Net income $0.20 $0.14 $0.26 $0.34 $0.49

Weighted Shares: Basic 70,348 70,263 70,422 70,306 70,437 Diluted 71,468 71,373 72,882 71,421 73,087

Capital expenditures $2,557 $2,736 $2,295 $5,293 $4,458 Depreciation and amortization $2,923 $2,623 $2,192 $5,546 $4,297

Prepared in accordance with GAAP

INTEGRATED CIRCUIT SYSTEMS, INC. PRO FORMA CONSOLIDATED OPERATING RESULTS

Unaudited Unaudited Three Months Ended Six Months Ended

Jan. 1, Oct. 2, Dec. 27, Jan. 1, Dec. 27, 2005 2004 2003 2005 2003 -------------------------- ------------------ (In thousands) Revenues $60,628 $66,096 $69,565 $126,724 $134,850 Cost of sales 25,269 26,772 28,107 52,041 54,543 --------------------------------------------------- ------------------ Gross margin 35,359 39,324 41,458 74,683 80,307 --------------------------------------------------- ------------------

Expenses: Research and development 9,426 10,187 10,014 19,613 19,322 Selling, general and administrative 9,440 10,030 8,819 19,470 17,790 Deferred compensation 60 40 244 100 488 Amortization of intangibles 1,114 935 575 2,049 1,150 --------------------------------------------------- ------------------ 20,040 21,192 19,652 41,232 38,750

--------------------------------------------------- ------------------ Operating income 15,319 18,132 21,806 33,451 41,557 --------------------------------------------------- ------------------

Other income (expense) 873 666 379 1,539 1,124

--------------------------------------------------- ------------------ Income before income taxes 16,192 18,798 22,185 34,990 42,681 --------------------------------------------------- ------------------

Income taxes 2,212 1,598 3,533 3,810 6,748

--------------------------------------------------- ------------------ Pro forma net income $13,980 $17,200 $18,652 $31,180 $35,933 --------------------------------------------------- ------------------

Basic EPS: Pro forma Net income $0.20 $0.24 $0.26 $0.44 $0.51

Diluted EPS: Pro forma Net income $0.20 $0.24 $0.26 $0.44 $0.49

Weighted Shares: Basic 70,348 70,263 70,422 70,306 70,437 Diluted 71,468 71,373 72,882 71,421 73,087

Reconciliation of our GAAP Net Income to our Pro Forma Net Income: GAAP Net Income $13,980 $10,149 $18,652 $24,129 $35,933 Adjustments to Net Income: Research and development Video acquisition 7,051 7,051 Pro forma net income $13,980 $17,200 $18,652 $31,180 $35,933

Reconciliation of our GAAP Operating Income to our Pro Forma Operating Income: GAAP Operating Income $15,319 $11,081 $21,806 $26,400 $41,557 Adjustments to Operating Income: Research and development Video acquisition 7,051 7,051 Pro forma operating income $15,319 $18,132 $21,806 $33,451 $41,557

Reconciliation of our GAAP Basic Net Income per share to our Pro Forma Net Income per share: GAAP Basic Net Income per share $0.20 $0.14 $0.26 $0.34 $0.51 Adjustments to Basic Net Income per share: Research and development Video acquisition 0.10 0.10 Pro forma basic net income per share $0.20 $0.24 $0.26 $0.44 $0.51

Reconciliation of our GAAP Diluted Net Income per share to our Pro Forma Diluted Net Income per share: GAAP Diluted Net Income per share $0.20 $0.14 $0.26 $0.34 $0.49 Adjustments to Diluted Net Income per share: Research and development Video acquisition 0.10 0.10 Pro forma diluted net income per share $0.20 $0.24 $0.26 $0.44 $0.49

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

---------------------------------------------------------------------- January 1, October 2, July 3, (in thousands, excluding Other 2005 2004 2004 Financial Data) (unaudited) (unaudited) ---------------------------------------------------------------------- ASSETS Current Assets: Cash and marketable securities $192,753 $179,767 $195,579 Accounts receivable, net 46,934 50,367 45,717 Inventory, net 20,880 21,446 18,772 Deferred income taxes 19,738 22,759 22,759 Other current assets 4,180 5,016 7,189 ------------------------------------------------------------------- Total current assets 284,485 279,355 290,016 -------------------------------------------------------------------

Property & equipment, net 21,096 20,364 19,254 Long term investments 5,000 5,000 5,000 Intangibles 43,187 44,307 27,842 Goodwill 35,422 35,422 35,422 Prepaid long-term maintenance contracts 4,400 4,781 - Other assets, net 52 57 62 ------------------------------------------------------------------- Total assets $393,642 $389,286 $377,596 -------------------------------------------------------------------

---------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Lease payable $73 $119 $82 Accounts payable 15,559 18,012 17,557 Accrued expenses and other current liabilities 5,260 7,348 8,518 Income taxes payable 1,946 4,193 3,576 ------------------------------------------------------------------- Total current liabilities 22,838 29,672 29,733 -------------------------------------------------------------------

Other long term liabilities 11,846 11,733 11,638 ------------------------------------------------------------------- Total liabilities 34,684 41,405 41,371 -------------------------------------------------------------------

Shareholders' Equity: Common stock 731 728 727 Additional paid in capital 288,207 284,996 282,569 Retained earnings 131,269 117,289 107,140 Deferred compensation (861) (921) - Treasury stock (60,388) (54,211) (54,211) ------------------------------------------------------------------- Total shareholders' equity 358,958 347,881 336,225 ------------------------------------------------------------------- Total liabilities and shareholder's equity $393,642 $389,286 $377,596 -------------------------------------------------------------------

OTHER FINANCIAL DATA: Days sales outstanding 72 65 58 Inventory turns 4.1 4.8 5.2

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CONTACT: Integrated Circuit Systems, Inc., Norristown Justine Lien, CFO, 610-630-5300 Web Site: http://www.icst.com

KEYWORD: PENNSYLVANIA INDUSTRY KEYWORD: HARDWARE TELECOMMUNICATIONS NETWORKING EARNINGS CONFERENCE CALLS SOURCE: Integrated Circuit Systems, Inc.

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