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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 last year, 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 fourth quarter of fiscal 2012. Aaron? Aaron Tachibana Thank you Bob, and good afternoon everyone. Our consolidated net revenues for the third quarter were $33.4 million, an increase by 10% from the 30.5 million reported last quarter, and decrease by 16% from the 39.6 million for the same period last year. All end market segments were up sequentially except for consumer. The mobility and home appliance areas within consumer were flat quarter-to-quarter. PC and notebook shipments were up 12%, and approximately half of this growth came from initial shipments of our USB 3.0 products for the Ivy Bridge platform. The server segment was up 8% and storage increased 17%, as the shipments for hard disk drives improved. Networking and telecom continued to perform well, and was up 11%, while embedded grew 10% on a sequential basis. Sales by channel were: international distribution 64%; contract manufacturers 25%; OEM 9%; and U.S. distribution 2%. Consolidated non-GAAP gross profit was $12.1 million for Q3, compared with 11.4 million last quarter and 12.9 million last year. Non-GAAP gross margin for the third quarter was 36.2%, and was down 110 basis points from last quarter’s 37.3%, and 360 basis points higher than last year’s 32.6%. The sequential quarter gross margin decline was a result of unfavorable absorption expenses related to our FCP factories. Although the FCP volume increased 9% sequentially, the factories remained underutilized during Q3, at roughly 73% utilization. On a positive note, our IC gross margins exceeded 47% and PTI margins exceed 55%. If we exclude the FCP under-absorption expenses, we are not too far away from the targeted margin level of 38 to 40%. Our strategy is to increase penetration of our Gen Three USB PCI Express and clock products across server, networking and embedded applications for margin accretion and sustainable revenue growth.
Non-GAAP operating expenses were $11.1 million for Q3, and was up .1 million sequentially. Going forward, our operating expenses could vary plus or minus a few percentage points in any given quarter, but we don’t expect to see any significant changes from this run rate at this point in time.On the product development front, we have been, and we will continue to, invest in next generation solutions that will drive both growth and margin expansion for applications in server, embedded, networking and telecom and mobile computing. The non-GAAP effective tax rate was 11% for Q3, compared with 9% last quarter. The Q3 tax rate included the impact of a favorable year-to-date (inaudible) of approximately $.2 million. Our tax rate has fluctuated a bit during the past few quarters, primarily due to the mixture of foreign versus domestic income, as well as having a lower pre-tax income amount as the basis for calculation. Non-GAAP net income was $1.7 million, or $0.07 per diluted share for Q3, compared with 1 million, or $0.04 per share last quarter. Half of the net income increase came from the higher revenue volume, and the other half from cash investment income and tax. Exiting Q3, our balance sheet remained in excellent shape, and we continued to generate positive cash flow. Cash, including both short- and long-term investments in marketable securities, was $125 million, which equated to $5.20 per share. During the quarter, we repurchased 426,000 shares for $3.4 million, at an average price of $8.03 per share. The balance remaining under the 2008 share repurchase plan was $3.1 million as of quarter-end. On that note, we are pleased to announce that our board of directors have approved and authorized us to repurchase an additional $25 million of common stock, commencing when the current plan ends. Read the rest of this transcript for free on seekingalpha.com