IRVINE, Calif., Nov. 16, 2006 (PRIMEZONE) -- Microsemi Corporation (Nasdaq:MSCC) today reported results for its fourth quarter and fiscal year 2006.
-- Net Sales Increased 24.6 Percent to $370.5 Million for Fiscal Year 2006 -- GAAP Net Income Increased 22.3 Percent to $35.7 Million for Fiscal Year 2006 -- Non-GAAP Net Income Increased 61.4 Percent to $72.0 Million for Fiscal Year 2006 -- Net Sales for Fourth Quarter Increased 30.3 Percent over Prior Year Quarter -- GAAP Gross Margins 42.3 Percent for Fourth Quarter -- Non-GAAP Gross Margins 50.3 Percent for Fourth Quarter -- Positive Book-to-Bill Ratio of 1.04 to 1 for Fourth Quarter
Net sales for Microsemi's fourth quarter, ended October 1, 2006, were $103.2 million, up 30.3 percent from net sales of $79.2 million in the fourth quarter of 2005, and up 3.0 percent from net sales of $100.2 million in the third quarter of 2006. GAAP gross margins were 42.3 percent in the fourth quarter, down from 48.3 percent in the fourth quarter of 2005 and 43.4 percent in the third quarter of 2006. GAAP results in the fourth quarter of 2006 include $1.4 million for manufacturing profit in acquired inventory and a $0.6 million increase in amortization expense over the third quarter. Fourth quarter GAAP net income was $8.1 million compared to $8.2 million in the fourth quarter of 2005 and $0.1 million in the third quarter of 2006. GAAP diluted earnings per share were $0.11 for the fourth quarter, compared to $0.12 in the fourth quarter of 2005 and $0.00 in the third quarter of 2006. After the effects of restructuring costs and other special charges and credits, our GAAP operating margins were 13.6 percent in the fourth quarter, compared to 14.3 percent in the fourth quarter of 2005 and 4.7 percent in the third quarter of 2006.
Net sales for the full fiscal year 2006 were $370.5 million, up 24.6 percent from the $297.4 million for fiscal year 2005.
GAAP net income for fiscal year 2006 was up 22.3 percent at $35.7 million, compared to $29.2 million in fiscal year 2005, or $0.50 per share diluted in fiscal year 2006 compared to $0.45 per share diluted in fiscal year 2005.
For the fourth quarter, non-GAAP net income was $18.2 million, up 29.1 percent from $14.1 million in the fourth quarter of 2005 and down 9.5 percent from $20.1 million in the third quarter of 2006. Non-GAAP diluted earnings per share in the fourth quarter were $0.25, up from $0.21 in the fourth quarter of 2005 and down from $0.28 in the third quarter of 2006. Non-GAAP gross margins were 50.3 percent in the fourth quarter, compared to 49.0 percent in the fourth quarter of 2005 and 50.3 percent in the third quarter of 2006. Non-GAAP operating margins were 25.8 percent in the fourth quarter, up from 25.2 percent in the fourth quarter of 2005 and down from 30.0 percent in the third quarter of 2006. Non-GAAP results are explained and reconciled to GAAP results in the attached tables. Non-GAAP income and non-GAAP operating margins exclude transitional idle capacity and inventory abandonments, manufacturing profit in acquired inventory, in-process research and development, amortization of intangible assets, stock option compensation, gain or loss on disposition of assets and restructuring and other special charges.
Non-GAAP net income for fiscal year 2006 was up 61.4 percent at $72.0 million compared to $44.6 million in 2005, or $1.00 per share diluted in fiscal year 2006, compared to $0.68 per share diluted in fiscal year 2005.
James J. Peterson, President and Chief Executive Officer, concluded, "We remain confident that we will exceed overall industry growth expectations in both our high reliability semiconductor and high performance analog mixed signal businesses. We remain focused on driving growth with the acceptance of our new products and leveraging efficiencies going forward to further improve profitability in the coming years."
He further stated, "The integration of PPG's operations is ahead of plan, and we anticipate that its positive contributions will have a greater impact on operations in 2007."
The book-to-bill ratio for the quarter was 1.04 to 1.
Business - Outlook
We expect that for the first quarter of fiscal year 2007, our sales will be within a range of 2 percent up or down, sequentially. On a non-GAAP basis, we expect earnings for the first quarter of fiscal year 2007 to be $0.24 to $0.26 per diluted share.
Microsemi regularly announces a quarterly outlook in the form of issuing a news release and does not undertake to update any of this information between such public announcements. Please refer to the "SAFE HARBOR" STATEMENT below for risks that may affect future actual results.
About Microsemi Corporation
Microsemi is a leading designer, manufacturer and marketer of high performance analog and mixed signal integrated circuits and high reliability semiconductors. The company's semiconductors manage and control or regulate power, protect against transient voltage spikes and transmit, receive and amplify signals.
Microsemi's products include individual components as well as integrated circuit solutions that enhance customer designs by improving performance and reliability, battery optimization, reducing size or protecting circuits. The principal markets the company serves included implanted medical, defense/aerospace and satellite, notebook computers, monitors and LCD TVs, automotive and mobile connectivity applications. More information may be obtained by contacting the company directly or by visiting its web site at http://www.microsemi.com.
The Microsemi Corporation logo is available at http://www.primezone.com/newsroom/prs/?pkgid=1233
PLEASE READ THE FOLLOWING FACTORS THAT CAN MATERIALLY AFFECT MICROSEMI'S FUTURE RESULTS.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Any statements set forth in the news release that are not entirely historical and factual in nature are forward-looking statements. For instance, all statements of belief and all statements about plans or expectations are forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. The potential risks and uncertainties include, but are not limited to, such factors as changes in generally accepted accounting principles, the difficulties regarding the making of estimates and projections, the hiring and retention of qualified personnel in a competitive labor market, acquiring, managing and integrating new operations, businesses or assets, closing or disposing of operations or assets, or possible difficulties in transferring work from one plant to another, rapidly changing technology and product obsolescence, difficulties predicting the timing and amount of plant closure costs, the potential inability to realize cost savings or productivity gains and to improve capacity utilization, potential cost increases, weakness or competitive pricing environment of the marketplace, uncertain demand for and acceptance of the company's products, adverse impacts on analog / mixed-signal markets, results of in-process or planned development or marketing and promotional campaigns, changes in demand for products, difficulties foreseeing future demand, effects of limited visibility of future sales, potential non-realization of expected orders or non-realization of backlog, product returns, product liability, and other potential unexpected business and economic conditions or adverse changes in current or expected industry conditions, business disruptions, epidemics, disasters, wars or potential future effects of the tragic events of September 11, 2001, variations in customer order preferences, fluctuations in market prices of the company's common stock and potential unavailability of additional capital on favorable terms, difficulties in implementing company strategies, dealing with environmental or other regulatory matters or litigation, or any matters involving litigation, contingent liabilities or other claims, difficulties and costs imposed by law, including under the Sarbanes-Oxley Act of 2002, difficulties in determining the scope of, and procuring and maintaining, adequate insurance coverage, difficulties, and costs, of protecting patents and other proprietary rights, work stoppages, labor issues, inventory obsolescence and, difficulties regarding customer qualification of products, manufacturing facilities and processes, and other difficulties managing consolidation or growth, including in the maintenance of internal controls, the implementation of information systems, and the training of personnel. Potential risks and uncertainties regarding the proposed acquisition by Microsemi of PowerDsine, Ltd. include, but are not limited to, the inability to close the acquisition transaction for failure to obtain Israeli court approval, regulatory approval, shareholder approval, or any other reason, uncertainty as to the future profitability, if any, of the combined company following the transaction, delays in the realization of accretion, if any, from the acquisition transaction, and adverse impacts on the PoE markets or the speed of growth of the PoE market. In addition to these factors and any other factors mentioned elsewhere in this news release, the reader should refer as well to the factors, uncertainties or risks identified in the company's most recent Form 10-K and subsequent Form 10-Q reports filed by Microsemi with the SEC. Additional risk factors shall be identified from time to time in Microsemi's future filings. Microsemi does not undertake to supplement or correct any information in this release that is or becomes incorrect.
To supplement the consolidated financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), we use non-GAAP financial measures (non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP income before taxes, non-GAAP net income, and non-GAAP diluted earnings per share) that exclude transitional idle capacity and inventory abandonments, manufacturing profit in acquired inventory, in-process research and development, amortization of intangible assets, stock option compensation, gain or loss on disposition of assets and restructuring and other special charges. Management excludes these items because it believes that the non-GAAP measures enhance an investor's overall understanding of the Company's financial performance and future prospects by being more reflective of the Company's core operational activities and to be more comparable with the results of the Company over various periods. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. Guidance is provided only on a non-GAAP basis due to the inherent difficulty of forecasting the timing or amount of such items. These items could be materially significant in our GAAP results in any period. By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of the Company's core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
Investor Inquiries: David R. Sonksen, Microsemi Corporation, Irvine, CA (949) 221-7101.
MICROSEMI CORPORATION Unaudited Consolidated Income Statements (In thousands, except per share amounts) Quarter ended Fiscal Year ended ------------------- ------------------- Oct. 1, Oct. 2, Oct. 1, Oct. 2, 2006 2005 2006 2005 -------- -------- -------- -------- NET SALES $103,244 $ 79,154 $370,477 $297,440 Cost of sales 59,604 40,945 205,676 171,748 -------- -------- -------- -------- GROSS MARGIN 43,640 38,209 164,801 125,692 Operating expenses: Selling, general and administrative 18,261 14,995 60,354 54,362 Charge for acceleration of stock options -- 5,463 -- 5,463 In-process research & development -- -- 15,300 -- Research and development 8,633 4,751 25,030 18,937 Amortization of intangible assets 2,004 231 3,850 919 Restructuring charges 708 905 2,444 3,632 Loss on dispositions of assets 30 550 13 1,097 -------- -------- -------- -------- Total operating expenses 29,636 26,895 106,991 84,410 -------- -------- -------- -------- OPERATING INCOME 14,004 11,314 57,810 41,282 Interest and other income, net 1,539 783 4,767 1,564 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 15,543 12,097 62,577 42,846 Provision for income taxes 7,431 3,937 26,912 13,623 -------- -------- -------- -------- NET INCOME $ 8,112 $ 8,160 $ 35,665 $ 29,223 ======== ======== ======== ======== Earnings per share Basic $ 0.11 $ 0.13 $ 0.52 $ 0.47 ======== ======== ======== ======== Diluted $ 0.11 $ 0.12 $ 0.50 $ 0.45 Common and common equivalent shares outstanding: Basic 71,241 63,013 68,887 61,639 Diluted 73,499 66,688 71,816 65,233 MICROSEMI CORPORATION Schedule Reconciling Non-GAAP Income to GAAP Income (in thousands, except per share amounts) Quarter ended Fiscal Year ended ----------------- ----------------- Oct. 1, Oct. 2, Oct. 1, Oct. 2, 2006 2005 2006 2005 ------- ------- ------- ------- GAAP NET INCOME $ 8,112 $ 8,160 $35,665 $29,223 ======= ======= ======= ======= The non-GAAP amounts have been adjusted to exclude the following items: Excluded from cost of sales Transitional idle capacity and inventory abandonments (a) $ 6,889 $ 566 $17,830 $ 9,580 Manufacturing profit in acquired inventory (e) 1,372 -- 4,115 -- Excluded from operating expenses In-process research & development (d) -- -- 15,300 -- Amortization of intangible assets (b) 2,004 231 3,850 919 Charge for acceleration of stock options (c) -- 5,463 -- 5,463 Stock option compensation (c) 1,090 -- 1,574 -- Loss on disposition of assets (a) 30 550 13 1,097 Restructuring and other special charges (a) 1,288 1,799 4,715 5,576 ------- ------- ------- ------- 12,673 8,609 47,397 22,635 Income tax effect on non-GAAP adjustments 2,577 2,689 11,028 7,280 ------- ------- ------- ------- Net effect of adjustments to GAAP net income $10,096 $ 5,920 $36,369 $15,355 ======= ======= ======= ======= NON-GAAP NET INCOME $18,208 $14,080 $72,034 $44,578 ======= ======= ======= ======= (a) - (e) Please refer to corresponding footnotes below. MICROSEMI CORPORATION Schedule Reconciling Reported Financial Ratios Quarter ended ------------------------------------------ October 1, July 2, October 2, 2006 2006 2005 ------------ ------------ ------------ GAAP gross margin 42.3 percent 43.4 percent 48.3 percent Effect of reconciling items on gross margin 8.0 percent 6.9 percent 0.7 percent Non-GAAP gross margin 50.3 percent 50.3 percent 49.0 percent GAAP operating margin 13.6 percent 4.7 percent 14.3 percent Effect of reconciling items on operating margin 12.2 percent 25.3 percent 10.9 percent Non-GAAP operating margin 25.8 percent 30.0 percent 25.2 percent To supplement the consolidated financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), we use non-GAAP financial measures (non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP income before taxes, non-GAAP net income, and non-GAAP diluted earnings per share) that exclude transitional idle capacity and inventory abandonments, manufacturing profit in acquired inventory, in-process research and development, amortization of intangible assets, stock option compensation, gain or loss on disposition of assets and restructuring and other special charges. Management excludes these items because it believes that the non-GAAP measures enhance an investor's overall understanding of the Company's financial performance and future prospects by being more reflective of the Company's core operational activities and to be more comparable with the results of the Company over various periods. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. Guidance is provided only on a non-GAAP basis due to the inherent difficulty of forecasting the timing or amount of such items. These items could be materially significant in our GAAP results in any period. By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of the Company's core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. The items excluded from GAAP financial results in calculating non-GAAP financial results, are set forth below: (a) The restructuring activities involve the closure and consolidation of our manufacturing facilities. As these facilities are not expected to have a continuing contribution to operations or have a diminishing contribution during the transition phase, management believes excluding such items from the Company's operations provides investors with a means of evaluating the Company's on-going operations. Transitional idle capacity relates to unused manufacturing capacity and non-productive manufacturing expenses during the period from when shutdown activities commence to when a facility is closed. Inventory abandonments relate to identification and disposal of inventory that will not be utilized after a product line is transferred to a new manufacturing location. Loss on disposition of assets results from abandonment of non-productive assets in accordance with a restructuring plan. Restructuring and other special charges includes severance and other costs related to facilities in the process of closing or already closed. Management excludes these expenses when evaluating core operating activities and for strategic decision making, forecasting future results and evaluating current performance. (b) While amortization of acquisition related intangible assets is expected to continue in the future, for internal analysis of the Company's operations, management does not view this expense as reflective of the business' current performance. (c) Stock option compensation in connection with the SFAS123R has been excluded to facilitate the comparability of the current quarter and fiscal year-to-date with results from prior periods when stock option compensation was not expensed in accordance with accounting rules applicable in such periods. In addition, management excludes these expenses when evaluating core operating activities and for strategic decision making, forecasting future results and evaluating current performance. (d) In-process research and development has been excluded to facilitate the comparability of expenses between periods. In addition, management does not include IPR&D, a one-time acquisition-related charge, in measuring core research and development costs, nor does it believe that IPR&D is indicative of current or future spending. (e) Manufacturing profit in acquired inventory resulted from purchase-accounting adjustments to increase the value of inventory acquired in the APT transaction to its fair value. As the acquired inventory is sold, the associated manufacturing profit in acquired inventory increases cost of goods sold and reduces gross margins. The manufacturing profit in acquired inventory has been excluded to facilitate comparability of gross margins between periods. In addition, management excludes the impact of manufacturing profit in acquired inventory in internal measurements of gross margin as it does not reflect continuing operations at APT. Manufacturing profit in acquired inventory from the APT acquisition will not materially impact gross margins beyond the fourth quarter of fiscal year 2006. MICROSEMI CORPORATION Selected Non-GAAP Financial Information (in thousands except for per share amounts) Quarter ended Fiscal Year ended ------------------- ------------------- Oct. 1, Oct. 2, Oct. 1, Oct. 2, 2006 2005 2006 2005 -------- -------- -------- -------- GAAP gross margin $ 43,640 $ 38,209 $164,801 $125,692 Transitional idle capacity and inventory abandonments (a) 6,889 566 17,830 9,580 Manufacturing profit in acquired inventory (e) 1,372 -- 4,115 -- -------- -------- -------- -------- Non-GAAP gross margin $ 51,901 $ 38,775 $186,746 $135,272 -------- -------- -------- -------- GAAP operating expenses $ 29,636 $ 26,895 $106,991 $ 84,410 In-process research & development (d) -- -- (15,300) -- Amortization of intangible assets (b) (2,004) (231) (3,850) (919) Charge for acceleration of stock options(c) -- (5,463) -- (5,463) Stock option compensation (c) (1,090) -- (1,574) -- Loss on disposition of assets (a) (30) (550) (13) (1,097) Restructuring and other special charges (a) (1,288) (1,799) (4,715) (5,576) -------- -------- -------- -------- Non-GAAP operating expenses $ 25,224 $ 18,852 $ 81,539 $ 71,355 -------- -------- -------- -------- GAAP operating income $ 14,004 $ 11,314 $ 57,810 $ 41,282 Transitional idle capacity and inventory abandonments (a) 6,889 566 17,830 9,580 Manufacturing profit in acquired inventory (e) 1,372 -- 4,115 -- In-process research & development (d) -- -- 15,300 -- Amortization of intangible assets (b) 2,004 231 3,850 919 Charge for acceleration of stock options (c) -- 5,463 -- 5,463 Stock option compensation (c) 1,090 -- 1,574 -- Loss on disposition of assets (a) 30 550 13 1,097 Restructuring and other special charges (a) 1,288 1,799 4,715 5,576 -------- -------- -------- -------- Non-GAAP operating income $ 26,677 $ 19,923 $105,207 $ 63,917 -------- -------- -------- -------- GAAP income before taxes $ 15,543 $ 12,097 $ 62,577 $ 42,846 Transitional idle capacity and inventory abandonments (a) 6,889 566 17,830 9,580 Manufacturing profit in acquired inventory (e) 1,372 -- 4,115 -- In-process research & development (d) -- -- 15,300 -- Amortization of intangible assets (b) 2,004 231 3,850 919 Charge for acceleration of stock options (c) -- 5,463 -- 5,463 Stock option compensation (c) 1,090 -- 1,574 -- Loss on disposition of assets (a) 30 550 13 1,097 Restructuring and other special charges (a) 1,288 1,799 4,715 5,576 -------- -------- -------- -------- Non-GAAP income before taxes $ 28,216 $ 20,706 $109,974 $ 65,481 -------- -------- -------- -------- GAAP net income $ 8,112 $ 8,160 $ 35,665 $ 29,223 Transitional idle capacity and inventory abandonments (a) 6,889 566 17,830 9,580 Manufacturing profit in acquired inventory (e) 1,372 -- 4,115 -- In-process research & development (d) -- -- 15,300 -- Amortization of intangible assets (b) 2,004 231 3,850 919 Charge for acceleration of stock options (c) -- 5,463 -- 5,463 Stock option compensation (c) 1,090 -- 1,574 -- Loss on disposition of assets (a) 30 550 13 1,097 Restructuring and other special charges (a) 1,288 1,799 4,715 5,576 Income tax effect on non-GAAP adjustments (2,577) (2,689) (11,028) (7,280) -------- -------- -------- -------- Non-GAAP net income $ 18,208 $ 14,080 $ 72,034 $ 44,578 -------- -------- -------- -------- GAAP diluted earnings per share $ 0.11 $ 0.12 $ 0.50 $ 0.45 Impact of non-GAAP adjustments on diluted earnings per share 0.14 0.09 0.50 0.23 -------- -------- -------- -------- Non-GAAP diluted earnings per share $ 0.25 $ 0.21 $ 1.00 $ 0.68 -------- -------- -------- -------- (a) - (e) Please refer to corresponding footnotes above. MICROSEMI CORPORATION Condensed Unaudited Consolidated Balance Sheets (in thousands) October 1, October 2, 2006 2005 ---------- ---------- ASSETS Current Assets: Cash and cash equivalents $165,415 $ 98,149 Accounts receivable, net 70,260 53,233 Inventories 88,643 55,917 Deferred income taxes 14,965 12,921 Other current assets, including assets held for disposition 8,223 2,101 -------- -------- Total current assets 347,506 222,321 Property and equipment, net 65,018 58,366 Deferred income taxes -- 8,074 Goodwill 54,120 3,258 Other intangible assets, net 45,253 4,493 Other assets 2,150 4,069 -------- -------- TOTAL ASSETS $514,047 $300,581 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities $ 54,255 $ 42,378 Non-current liabilities 6,701 3,617 Shareholders' equity 453,091 254,586 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $514,047 $300,581 ======== ========