8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

October 26, 2004

(Date of earliest event reported)

INTEGRATED CIRCUIT SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	0-19299	23-2000174
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No.)

2435 Boulevard of the Generals Norristown, Pennsylvania	19403
(Address of principal executive offices)	(Zip Code)

(610) 630-5300

(Registrant’s telephone number including area code)

Not Applicable

(Former name former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On October 26, 2004, Integrated Circuit Systems, Inc. issued a press release and held a broadly accessible conference call to discuss its financial results for the first fiscal quarter ended October 2, 2004. A copy of the press release is filed as Exhibit 99.1 hereto. Exhibit 99.2 hereto sets forth certain financial information discussed on the conference call that was not included in the press release. The disclosure in this Current Report, including the exhibits hereto, of any financial information shall not constitute an admission that such information is material.

Item 9.01. Financial Statements and Exhibits

The following exhibits are filed with this Form 8-K:

Exhibit No.	Description
99.1	Press Release dated October 26, 2004
99.2	Supplemental financial information

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: October 29, 2004	INTEGRATED CIRCUIT SYSTEMS, INC.
	By:	/s/ Justine F. Lien
		Justine F. Lien
		Vice President and CFO

EX-99.1

EXHIBIT 99.1

Integrated Circuit Systems, Inc.

Corporate Headquarters

2435 Boulevard of the Generals

Norristown, PA 19403

Phone: 610-630-5300

Fax: 610-630-5399

Web Site: http://www.icst.com

Company Contact:

Justine Lien, CFO

Integrated Circuit Systems, Inc.

610-630-5300

INTEGRATED CIRCUIT SYSTEMS, INC. ANNOUNCES

FISCAL 2005 FIRST QUARTER RESULTS

Norristown, PA –October 26, 2004 – Integrated Circuit Systems, Inc. (NASDAQ: ICST) today announced financial results for the first quarter of fiscal 2005, ending on October 2, 2004.

($millions, except EPS)	Q1FY 2005		Q1FY 2004		Y-Y Growth		Q4FY 2004		Q-Q Growth
Revenue	$	66.1	$	65.3	1.2	%	$	69.5	-4.9	%
Gross Margin	$	39.3	$	38.8	1.2	%	$	42.0	-6.4	%
Operating Income	$	11.1	$	19.8	-43.9	%	$	21.7	-48.9	%
Fully Diluted EPS	$	0.13	$	0.24	-45.8	%	$	0.33	-60.6	%
Pro Forma Operating Income (1)	$	18.1	$	19.8	-8.2	%	$	21.7	-16.5	%
Pro Forma Fully Diluted EPS (1)	$	0.23	$	0.24	-4.2	%	$	0.33	-30.3	%

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

Revenues for the quarter were $66.1 million, down 4.9% from the previous quarter and up 1.2% from the same period last year. Quarter on quarter growth in our shipments to the PC and Digital Consumer markets grew, but were offset by declines in Communications and Military during the quarter.

Revenues	Q1FY2005 % of Revenue		Q1FY2004 % of Revenue		Y-Y Growth		Q4FY2004 % of Revenue		Q-Q Growth
PC	43	%	46	%	-6	%	39	%	5	%
Digital Consumer	17	%	16	%	8	%	15	%	4	%
Communications	34	%	29	%	20	%	38	%	-13	%
Military	6	%	9	%	-37	%	8	%	-30	%

Seasonal upturn in PC products shifted product mix toward lower margin products producing gross margin of 59.5% for the quarter, compared to 60.5% for the previous quarter and 59.5% for the same period last year.

During the quarter the Company acquired assets and formed the Video Business Unit. This purchase gives the Company the capability to develop a family of high performance mixed signal products for the high definition and digital video/imaging market. Some of the assets acquired had short useful lives and resulted in a $7 million charge to R&D expense in the first quarter of fiscal 2005. Pro forma operating income without this charge was $18.1 million or 27.4% of revenue. GAAP net income for the quarter was $9 million or $0.13 per share compared to $0.33 per share last quarter, and $0.24 per share for the first quarter fiscal 2004. Pro forma net income was $16 million or $0.23 EPS as guided.

The cash and investment balances on October 2, 2004 were $184.8 million, compared to the beginning of the fiscal year balance of $200.6 million. The Company spent $24.5 million purchasing assets to set up the Video Business Unit during the quarter. Reflecting the increased demand toward the end of the first quarter, arising from Christmas seasonality, accounts receivable and inventory increased.

“As we indicated in our earnings pre-announcement on September 16, 2004, demand for our products from the communications sector has been weaker than originally expected and continues to be weak as we head into the December quarter. Military spending for our products has slowed or been pushed out. Nevertheless, we perceive this situation to be temporary. Our execution continues to excel and we will continue to invest in the future”, stated Hock Tan, President and CEO.

“All of us at ICS remain focused on making inroads into the many exciting opportunities that lie ahead.”

First Quarter Fiscal 2005 Conference Call

ICS will host a conference call to discuss the earnings results for the first quarter of fiscal year 2005 at 9:30 AM eastern time October 26, 2004. The company will also discuss its strategic direction and market conditions. Any 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 128521. The call will also be broadcast via the internet and can be accessed from ICS’s 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 Three Months Ended
(In thousands except EPS)	October 02, 2004		July 03, 2004			September 27, 2003
Revenues	$	66,096	$	69,496		$	65,285
Cost of sales		26,772		27,476			26,436
Gross margin		39,324		42,020			38,849
Expenses:
Research and development		10,187		10,604			9,308
Research and development Video acquisition		7,051		—			—
Selling, general and administrative		10,030		9,138			8,971
Deferred compensation		40		—			244
Amortization of intangibles		935		575			575
		28,243		20,317			19,098
Operating income		11,081		21,703			19,751
Other income (expense)		666		606			745
Income before income taxes		11,747		22,309			20,496
Income taxes		2,714		(1,727	)		3,215
Net income	$	9,033	$	24,036		$	17,281
Basic EPS
Net income	$	0.13	$	0.34		$	0.25
Diluted EPS
Net income	$	0.13	$	0.33		$	0.24
Weighted Shares
Basic		70,263		70,246			70,453
Diluted		71,373		71,913			73,279
Capital expenditures	$	2,811	$	2,758		$	2,163
Depreciation and amortization	$	2,623	$	2,144		$	2,105

Prepared in accordance with GAAP

INTEGRATED CIRCUIT SYSTEMS, INC.

PRO FORMA CONSOLIDATED OPERATING RESULTS

	Unaudited Three Months Ended
(In thousands except EPS)	October 02, 2004		July 03, 2004			September 27, 2003
Revenues	$	66,096	$	69,496		$	65,285
Cost of sales		26,772		27,476			26,436
Gross margin		39,324		42,020			38,849
Expenses:
Research and development		10,187		10,604			9,308
Selling, general and administrative		10,030		9,138			8,971
Deferred compensation		40		—			244
Amortization of intangibles		935		575			575
		21,192		20,317			19,098
Pro forma operating income		18,132		21,703			19,751
Other income (expense)		666		606			745
Pro forma income before income taxes		18,798		22,309			20,496
Income taxes		2,714		(1,727	)		3,215
Pro forma net income	$	16,084	$	24,036		$	17,281
Basic EPS
Pro forma net income	$	0.23	$	0.34		$	0.25
Diluted EPS
Pro forma net income	$	0.23	$	0.33		$	0.24
Weighted Shares
Basic		70,263		70,246			70,453
Diluted		71,373		71,913			73,279

INTEGRATED CIRCUIT SYSTEMS, INC.

PRO FORMA CONSOLIDATED OPERATING RESULTS

(continued)

(In thousands except EPS)
Reconciliation of our GAAP Net Income to our Pro forma Net Income:
GAAP Net Income	$	9,033	$	24,036	$	17,281
Adjustments to Net Income:
Research and development Video acquisition	$	7,051		—		—
Pro forma net income	$	16,084	$	24,036	$	17,281
Reconciliation of our GAAP Operating Income to our Pro forma Operating Income:
GAAP Operating Income	$	11,081	$	21,703	$	19,751
Adjustments to Operating Income:
Research and development Video acquisition	$	7,051		—		—
Pro forma operating income	$	18,132	$	21,703	$	19,751
Reconciliation of our GAAP Basic Net Income per Share to our Pro forma Basic Net Income per Share:
GAAP Basic Net Income per Share	$	0.13	$	0.34	$	0.25
Adjustments to Basic Net Income per Share:
Research and development Video acquisition	$	0.10		—		—
Pro forma basic net income per share	$	0.23	$	0.34	$	0.25
Reconciliation of our GAAP Diluted Net Income per Share to our Pro forma Diluted Net Income per Share:
GAAP Diluted Net Income per Share	$	0.13	$	0.33	$	0.24
Adjustments to Diluted Net Income per Share:
Research and development Video acquisition	$	0.10		—		—
Pro forma diluted net income per share	$	0.23	$	0.33	$	0.24

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

(in thousands, excluding Other Financial Data)	October 2, 2004			July 3, 2004
	(unaudited)
ASSETS
Current Assets:
Cash and marketable securities	$	179,767		$	195,579
Accounts receivable, net		50,367			45,717
Inventory, net		21,446			18,772
Deferred & prepaid taxes		22,759			22,759
Other current assets		9,797			7,189
Total current assets		284,136			290,016
Property & equipment, net		20,364			19,254
Long term investments		5,000			5,000
Intangibles		44,307			27,842
Goodwill		35,422			35,422
Other assets, net		57			62
Total assets	$	389,286		$	377,596
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term obligations	$	119		$	82
Accounts payable		18,012			17,557
Accrued expenses and other current liabilities		7,347			8,518
Income taxes payable		5,310			3,576
Total current liabilities		30,788			29,733
Other long term liabilities		11,733			11,638
Total liabilities		42,521			41,371
Shareholders’ Equity:
Common stock		728			727
Additional paid in capital		284,996			282,569
Retained earnings		116,173			107,140
Deferred compensation		(921	)		—
Treasury stock		(54,211	)		(54,211	)
Total shareholders’ equity		346,765			336,225
Total liabilities and shareholder’s equity	$	389,286		$	377,596
OTHER FINANCIAL DATA:
Days sales outstanding		65			58
Inventory turns		4.8			5.2

EX-99.2

EXHIBIT 99.2

Integrated Circuit Systems, Inc.

SUPPLEMENTAL FINANCIAL INFORMATION

The following additional financial information was disclosed in our broadly accessible conference call on October 26, 2004:

Business Outlook:

Revenues are expected to be flat to down 8% in our second quarter of fiscal 2005 in comparison to our first quarter of fiscal 2005. Gross margin will be 58.5% to 59.5% for the quarter. Operating expenses for the second quarter of fiscal 2005 are expected to remain flat as compared to the first quarter of fiscal 2005. We expect fully diluted earnings per share to be $0.20 to $0.23 for the second quarter of fiscal 2005.

Business Update:

Book to bill ratio for the first fiscal quarter was .93 in all major business segments. The Board of Directors approved the increase of the Company’s stock buy back program by 2,000,000 shares for a total of 5,000,000 shares authorized for repurchase. There are 2,525,000 shares available for repurchase in the Company’s buy back program.