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In accordance with regulations of Fair Disclosure, Pericom will continue to only provide guidance via its earnings release and its conference calls. The company will not provide further guidance or updates during the quarter, unless it does so via a press release.Please note that we are reporting non-GAAP financial measures for net income, gross profit and operating expenses in addition to our GAAP financial results. Due to the PTI acquisition, we have a significant amount of non-cash and non-operating expense items included in the income statement, which are not reflective of the performance for our normal business operations. Aaron will discuss the financial performance for the quarter, and Alex will give his comments on the industry and on Pericom’s business. Then, Aaron will provide guidance for the third quarter of fiscal 2012. Aaron? Aaron Tachibana Thank you, Bob, and good afternoon, everyone. Our consolidated net revenues for the second quarter were $30.5 million, and decreased by 14% from the $35.3 million reported last quarter and decreased by 25% from the $40.7 million for the same period last year. Most of the sequential decline in revenue was due to PC, notebooks, and consumer end-market demand and also lower storage volume due to the Thailand flood which had a negative 3% impact on revenues. On a positive note, our networking and telecom revenue increased by 3% over last quarter. Sales by channel were, international distribution 63%, contract manufacturers 24%, OEMs 10%, and U.S. distribution 3%. Consolidated non-GAAP gross profit was $11.4 million for Q2, compared with $13.1 million last quarter and $14.8 million last year. Non-GAAP gross margin for the second quarter was 37.3%, and was up 40 basis points from last quarter’s 36.9% and 100 basis points higher than last year’s 36.3%. The sequential quarter gross margin improvement was a result of favorable product mix from less PC, storage and consumer shipments that have a lower gross margin percentage than our consolidated average. We remain on track to achieve our target gross margin range of 38% to 40% four to five quarters out although there could be some fluctuation along the way due to product, or end-market mix.
Non-GAAP operating expenses were $11 million for Q2 compared with $11.3 million last quarter. We have been controlling our discretionary spending to reflect current business levels and for the current quarter of Q3, our OpEx will decline a few hundred thousand dollars or so due to reducing our worldwide headcount by 5% to 7%. Going forward, our non-GAAP operating expenses should remain within this range aside from fluctuations for variable selling cost.The non-GAAP effective tax rate was 9% for Q2 compared with 36% last quarter. The Q2 tax rate was unusually low due to the GAAP net loss for the quarter which resulted in some year-to-date true-ups. The tax rate was also affected by the mixture of income between foreign and domestic locations. Non-GAAP net income was $1 million, or $0.04 per diluted share for Q2, compared with $1.8 million, or $0.07 per share, last quarter. Most of the net income decline was a result of the lower revenue volume. Although our net earnings decreased sequentially, we remained profitable and this has been the case the last five plus years. Exiting Q2, our balance sheet remained in excellent shape and the cash generation of our business remains strong. Cash including both short and long-term investments and marketable securities was $124 million which equated to $5.13 per share. During the quarter, we repurchased $302,000 shares for $2.3 million at an average price of $7.63 per share. Since starting the buyback program in 2007, we have repurchased over 4.8 million shares for $48 million. Net inventory was $18.3 million at the end of Q2 which is flat from last quarter and equated to 87 days of supply. Compared with the peak five quarters ago, we have reduced in-house inventory by 41% and we are well positioned when an uptick returned. Distributor inventory decreased 9% sequentially and we had 7.3 weeks of supply at the end of Q2, which was within the normal range of six to eight weeks. Capital equipment additions were $1.1 million for Q2 and depreciation expense was $2 million. Read the rest of this transcript for free on seekingalpha.com