Catalyst were satisfied with overall performance during the first quarter

Tag : Semiconductor

Total net revenues of Catalyst Semiconductor, Inc increased 6.3% in Q1 FY '09 to $18.6 millionfrom $17.5 million in Q4 FY '08, with the majority of the increasecoming from the sale of memory products. Total net revenuesdecreased by 6.2% compared to Q1 FY '08 revenues of $19.9 million.

Net revenues from analog/mixed-signal products were $2.7 million,representing 14.7% of net revenues in Q1 FY '09. This was flatcompared to net revenues from analog/mixed-signal products in Q4 FY'08 and Q1 FY '08, representing 15.5% and 13.4%, respectively, oftotal net revenues.

The gross margin percentage for Q1 FY '09 was 38.4%, compared with39.6% in Q4 FY '08 and 36.2% in Q1 FY '08. The decline in grossmargin percentage compared to the fourth quarter was primarily dueto a higher percentage of revenues from memory products.

Net income for Q1 FY '09 was $489,000, or $0.03 per diluted share,down from $820,000, or $0.05 per diluted share in Q4 FY '08 and$720,000, or $0.04 per diluted share in Q1 FY '08.

Excluding after-tax FAS 123R stock-based compensation charges of$599,000, and after-tax M&A related expenses of $115,000, netincome on a non-GAAP basis for Q1 FY '09 was $1.2 million, or $0.07per diluted share, compared with non-GAAP net income of $1.2million, or $0.07 per diluted share for Q4 FY '08, and non-GAAP netincome of $1.1 million, or $0.06 per diluted share for Q1 FY '08. Areconciliation of GAAP to non-GAAP results is provided in thesupplemental financial information attached to this release.

Management Comments

"Given the current economic climate, we were satisfied with ouroverall performance during the first quarter," said Gelu Voicu,Catalyst's president and chief executive officer.

"We capped off the quarter on July 16 with the signing of adefinitive agreement to merge with ON Semiconductor," Mr. Voicucontinued. "ON Semiconductor's global sales channels and customerbase will give us the size and scale needed to expand R&D andfurther penetrate the automotive, consumer and industrial markets.We are very excited about this new partnership and believe thecombined company will become a strong leader in the non-volatilememory and analog/mixed-signal arenas, enabling us to grow andsupport a deeper customer base and increase shareholder value."

Other highlights of Q1 FY '09 include the introduction of three newproducts: a voltage supervisor incorporating our patented QuantumCharge Programmable(TM) Technology, an ultra-low standby power I/Oexpander for battery-powered and "green" systems applications, anda 16-channel LED driver/blinker for the rapidly growing LED-basedsignage and industrial equipment markets.

Proposed Merger With ON Semiconductor

On July 17, 2008 we announced that we had signed a definitiveagreement to merge with ON Semiconductor in an all-stocktransaction in which Catalyst stockholders will receive 0.706shares of ON Semiconductor common stock for each share of Catalystcommon stock they own. At the time of the announcement, theproposed transaction represented an equity value of approximately$115 million and an enterprise value of approximately $85 million.

The transaction is subject to the approval of stockholders ofCatalyst Semiconductor, as well as other customary conditions. Theproposed transaction is expected to close during the fourthcalendar quarter of 2008.

About Catalyst Semiconductor

Headquartered in Santa Clara, California, Catalyst Semiconductordesigns and markets analog, mixed-signal and non-volatile memoryproducts, including Digitally Programmable Potentiometers(DPP(TM)), white and color LED drivers, DC/DC converters, LDOregulators, voltage supervisors, bus expanders, serial and parallelEEPROMs, Flash and NVRAM. Many of Catalyst's products incorporatethe Company's Quantum Charge Programmable(TM) technology, todeliver Adaptive Analog(TM) products, which offer a new level ofcustomer flexibility, lower power and smaller die size. Catalystproducts are used in telecommunications, computer, automotive,industrial and consumer markets. Typical applications include LCDdisplays, automotive lighting, optical networks, printers, modems,wireless LANs, network cards, DIMM modules, cellular telephones,navigation systems, set-top boxes and Internet routers.www.catsemi.com.

Forward-Looking Statements

This earnings release contains forward-looking statements withinthe meaning of the Private Securities Litigation Reform Act of1995. These forward-looking statements include, but are not limitedto, statements related to the benefits of the proposed transactionbetween ON Semiconductor Corporation ("ON") and CatalystSemiconductor, Inc. ("Catalyst Semiconductor") and the futurefinancial performance of Catalyst Semiconductor. Theseforward-looking statements are based on information available to ONand Catalyst Semiconductor as of the date of this release andcurrent expectations, forecasts and assumptions and involve anumber of risks and uncertainties that could cause actual resultsto differ materially from those anticipated by theseforward-looking statements. Such risks and uncertainties include avariety of factors, some of which are beyond ON's or CatalystSemiconductor's control. In particular, such risks anduncertainties include difficulties encountered in integratingmerged businesses; the risk that the transaction does not close,including the risk that the requisite stockholder and regulatoryapprovals may not be obtained; the variable demand and theaggressive pricing environment for semiconductor products;dependence on each company's ability to successfully manufacture inincreasing volumes on a cost-effective basis and with acceptablequality for its current products; the adverse impact of competitiveproduct announcements; revenues and operating performance; changesin overall economic conditions; the cyclical nature of thesemiconductor industry; changes in demand for our products; changesin inventories at customers and distributors; technological andproduct development risks; availability of raw materials;competitors' actions; pricing and gross margin pressures; loss ofkey customers; order cancellations or reduced bookings; changes inmanufacturing yields; control of costs and expenses; significantlitigation; risks associated with acquisitions and dispositions;risks associated with leverage and restrictive covenants in debtagreements; risks associated with international operations; thethreat or occurrence of international armed conflict and terroristactivities both in the United States and internationally; risks andcosts associated with increased and new regulation of corporategovernance and disclosure standards (including pursuant to Section404 of the Sarbanes-Oxley Act of 2002); and risks involvingenvironmental or other governmental regulation. Informationconcerning additional factors that could cause results to differmaterially from those projected in the forward-looking statementsis contained in ON's Annual Report on Form 10-K as filed with theSecurities and Exchange Commission (the "SEC") on February 12,2008, Quarterly Reports on Form 10-Q, Current Reports on Form 8-Kand other of ON's SEC filings, and Catalyst Semiconductor's AnnualReport on Form 10-K as filed with the SEC on July 3, 2008,Amendment No.1 to Annual Report on Form 10-K/A as filed with theSEC on August 14, 2008, Quarterly Reports on Form 10-Q, CurrentReports on Form 8-K and other of Catalyst Semiconductor's SECfilings. These forward-looking statements should not be relied uponas representing ON's or Catalyst Semiconductor's views as of anysubsequent date and neither undertake any obligation to updateforward-looking statements to reflect events or circumstances afterthe date they were made.

Additional Information and Where to Find It

In connection with the proposed transaction involving ON andCatalyst Semiconductor, ON has filed with the SEC a RegistrationStatement on Form S-4 containing a Proxy Statement of CatalystSemiconductor and a Prospectus of ON. The definitive ProxyStatement/ Prospectus will be mailed to stockholders of CatalystSemiconductor. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THEPROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SECCAREFULLY IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANTINFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and security holders may obtain free copies of theRegistration Statement and the Proxy Statement/Prospectus and otherdocuments filed with the SEC by ON and Catalyst Semiconductorthrough the web site maintained by the SEC at www.sec.gov. Inaddition, investors and security holders may obtain free copies ofthe Registration Statement and the Proxy Statement/Prospectus andother documents filed with the SEC from ON by directing a requestto ON Semiconductor Corporation, 5005 East McDowell Road, Phoenix,AZ, 85008, Attention: Investor Relations (telephone: (602)244-3437) or going to ON's corporate website at www.onsemi.com, orfrom Catalyst Semiconductor by directing a request to CatalystSemiconductor, Inc., 2975 Stender Way, Santa Clara, CA 94054,Attention: Investor Relations (telephone: (408)-542-1000) or goingto Catalyst Semiconductor's corporate website at www.catsemi.com.

ON and Catalyst Semiconductor, and their respective directors andexecutive officers, may be deemed to be participants in thesolicitation of proxies in respect of the proposed transaction.Information regarding ON's directors and executive officers iscontained in its annual proxy statement filed with the SEC on April4, 2008, and a Current Report on Form 8-K filed by ON with the SECon March 17, 2008. Information regarding Catalyst Semiconductor'sdirectors and executive officers is contained in CatalystSemiconductor's Form 10K/A that was filed with the SEC on August14, 2008. Additional information regarding the interests of suchpotential participants is included in the ProxyStatement/Prospectus and the other relevant documents filed withthe SEC. -0- *T CATALYST SEMICONDUCTOR, INC. UNAUDITED CONDENSEDCONSOLIDATED BALANCE SHEETS (In thousands) July 27, 2008 April 27,2008 ------------- -------------- ASSETS Current assets: Cash andshort-term investments $ 27,454 $ 29,625 Accounts receivable, net11,399 10,471 Inventories 15,289 13,174 Other assets 1,878 1,645------------- -------------- Total current assets 56,020 54,915Property and equipment, net 11,189 11,595 Deferred tax and otherassets 4,767 5,076 ------------- -------------- Total assets $71,976 $ 71,586 ============= ============== LIABILITIES ANDSTOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,261$ 9,293 Accrued expenses 2,003 2,680 Deferred gross profit onshipments to distributors 1,887 2,127 ------------- --------------Total current liabilities 13,151 14,100 Other non-currentliabilities 168 166 ------------- -------------- Total liabilities13,319 14,266 Total stockholders' equity 58,657 57,320------------- -------------- Total liabilities and stockholders'equity $ 71,976 $ 71,586 ============= ============== *T -0- *TUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Inthousands, except per share data) --------------------------- ThreeMonths Ended --------------------------- July 27, April 27, July29, 2008 2008 2007 -------- --------- -------- Net revenues $18,621$17,523 $19,856 Cost of revenues 11,466 10,583 12,674 ----------------- -------- Gross profit 7,155 6,940 7,182 Operatingexpenses: Research and development 2,158 2,341 2,103 Selling,general and administrative 4,402 3,832 4,337 -------- ----------------- Income from operations 595 767 742 Interest income, net117 231 429 -------- --------- -------- Income before income taxes712 998 1,171 Income tax provision 223 178 451 -------- ----------------- Net income $ 489 $ 820 $ 720 ======== ========= ========Net income per share: Basic $ 0.03 $ 0.05 $ 0.04 ======== ================= Diluted $ 0.03 $ 0.05 $ 0.04 ======== ========= ========Weighted average common shares: Basic 15,355 16,150 16,334 ================= ======== Diluted 16,410 17,176 17,390 ======== ================= *T -0- *T RECONCILIATION OF GAAP TO NON-GAAP NET INCOMEAND NET INCOME PER SHARE (UNAUDITED) (In thousands, except pershare data) --------------------------- Three Months Ended--------------------------- July 27, April 27, July 29, 2008 20082007 -------- --------- -------- GAAP Net Income $ 489 $ 820 $ 720Equity based compensation expense under SFAS No. 123(R), net of tax(Note 1) 599 346 351 Proposed merger activities, net of tax (Note2) 115 - - -------- --------- -------- Non-GAAP Net Income $ 1,203$ 1,166 $ 1,071 ======== ========= ======== Non-GAAP Net Income PerShare Basic $ 0.08 $ 0.07 $ 0.07 Diluted $ 0.07 $ 0.07 $ 0.06Shares Used in Net Income Per Share Basic 15,355 16,150 16,334Diluted 16,636 17,424 17,793 *T

These adjustments reconcile Catalyst's GAAP results of operationsto the reported non-GAAP results of operations. Catalyst believesthat presentation of net income and net income per share excludingnon-cash equity-based compensation and non-recurring professionalservice expense, as more fully described in Notes (1) and (2)below, provides meaningful supplemental information to investors,as well as management, which is indicative of Catalyst's coreoperating results and facilitates comparison of operating resultsacross multiple reporting periods. Catalyst uses these non-GAAPmeasures when evaluating its financial results as well as forinternal planning and budgeting purposes. Equity-based compensationis excluded from non-GAAP financial results since it is a non-cashbased charge. Professional service fees in connection with theproposed merger transaction are excluded from non-GAAP financialresults since these are infrequent and non-recurring and thereforemay not be considered directly related to our on-going businessoperations.

This non-GAAP measure should not be viewed as a substitute forCatalyst's GAAP results, and may be different than non-GAAPmeasures used by other companies.

Note (1):

For the three months ended July 27, 2008, non-cash equity basedcompensation was $767,000, allocated as follows: $14,000 to Cost ofRevenues, $311,000 to Research and Development and $442,000 toSales, General and Administrative expense.

For the three months ended April 27, 2008, non-cash equity basedcompensation was $439,000, allocated as follows: $13,000 to Cost ofRevenues, $169,000 to Research and Development and $257,000 toSales, General and Administrative expense.

For the three months ended July 29, 2007, non-cash equity basedcompensation was $451,000, allocated as follows: $13,000 to Cost ofRevenues, $120,000 to Research and Development and $318,000 toSales, General and Administrative expense.

Note (2):

On July 17, 2008 the Company announced that it had signed adefinitive agreement to merge with ON Semiconductor in an all-stocktransaction, which is subject to the approval of stockholders ofCatalyst Semiconductor, as well as customary regulatory approvals.The proposed merger transaction is expected to close during thefourth calendar quarter of 2008.

For the quarter ended July 27, 2008, approximately $179,000($115,000, net of tax) of non-recurring professional fees forinvestment banking and legal services are included in Selling,General and Administrative expense.