IRVINE, Calif., July 26, 2007 (PRIME NEWSWIRE) -- Microsemi Corporation (Nasdaq:MSCC) today reported results for its third quarter of fiscal year 2007.
* Net Sales Set New Record at $113.6 Million * Net Sales Increased 6.5 Percent over Second Quarter * Non-GAAP Gross Margin Increased 50 basis points over Second Quarter to 50.9 Percent * GAAP Gross Margin Increased 250 basis points over Second Quarter to 41.7 Percent * Positive Book-to-Bill Ratio of 1.13 to 1.00 for Third Quarter
Net sales for Microsemi's third quarter, ended July 1, 2007, were $113.6 million, up 13.4 percent from net sales of $100.2 million in the third quarter of 2006, and up 6.5 percent from net sales of $106.7 million in the second quarter of 2007. Non-GAAP gross margin was 50.9 percent, compared to 50.4 percent in the second quarter of 2007 and 50.3 percent in the third quarter of 2006. Non-GAAP operating margins were 24.9 percent in the third quarter compared to 30.0 percent in the third quarter of 2006 and 22.1 percent in the second quarter of 2007. For the third quarter, non-GAAP net income was $20.5 million, compared to $16.7 million in the second quarter of 2007 and $20.1 million in the third quarter of 2006. The non-GAAP effective tax rate was 28.8 percent. The non-GAAP effective tax rate was favorably impacted by return-to-provision true-up adjustments associated with the filing of our 2006 tax returns amounting to approximately $0.01 of diluted earnings per share. Non-GAAP diluted earnings per share in the third quarter were $0.26, up $0.04 compared to $0.22 in the second quarter of 2007, and compared to $0.28 in the third quarter of 2006.
For the third quarter, GAAP gross margin was 41.7 percent compared to 39.2 percent in the second quarter of 2007 and 43.4 percent in the third quarter of 2006. GAAP results in the third quarter included non-cash, acquisition-related charges and other one-time items consisting of $10.5 million for transitional idle capacity and $3.9 million in amortization of acquisition-related intangibles and $2.8 million related to compensation charges for stock awards. The GAAP effective tax rate was 29.5 percent. The GAAP effective tax rate was favorably impacted by return-to-provision true-up adjustments associated with the filing of our 2006 tax returns. Third quarter GAAP net income was $8.7 million compared to net income of $0.1 million in the third quarter of 2006 and net loss of $19.6 million in the second quarter of 2007. GAAP diluted earnings per share this quarter were $0.11 compared to $0.00 for the third quarter of 2006 and a net diluted loss per share of $0.26 for the second quarter of 2007.
James J. Peterson, President and Chief Executive Officer, stated, "We are very pleased with our growth in revenue this quarter and the corresponding increases in gross, operating and net margins. We continue to be well positioned with our new products and are capitalizing on a number of opportunities to introduce existing products into new applications and new markets. We remain confident that we will exceed overall industry growth expectations in both our high reliability semiconductor and high performance analog mixed signal markets."
The book-to-bill ratio for the quarter was 1.13 to 1.00.
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, amortization of intangible assets, stock option compensation, IPR&D, gain on disposition of assets and restructuring and other special charges.
Business Outlook
Microsemi expects that for the fourth quarter of fiscal year 2007 our sales will increase between 4 to 6 percent, sequentially. On a non-GAAP basis, we expect earnings for the fourth quarter of fiscal year 2007 to be $0.26 to $0.28 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, with corporate headquarters in Irvine, California, 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, optimizing battery performance, reducing size or protecting circuits. The principal markets the company serves include defense, commercial air, satellite, medical, notebook computers, LCD TVs, mobile, and 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.primenewswire.com/newsroom/prs/?pkgid=1233
Information for 3rd Quarter Earnings Conference Call and Webcast
Date: Thursday, July 26, 2007 Time: 4:45 pm Eastern Daylight Time (1:45 pm Pacific Daylight Time)
To access the Webcast, please log on to: www.microsemi.com and go to Investors and then to Webcasts. To listen to the live Webcast, please go to this website approximately fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live Webcast, a replay will be available shortly after the call on the website for 30 days.
To participate in the conference call by telephone, please call: (877) 264-1110 or (706) 634-1357 at approximately 4:35 pm EDT (1:35 pm PDT). Please provide the following ID Number: 6847225.
A telephonic replay will be available from 6:00 pm EDT (3:00 pm PDT) on Thursday, July 26, 2007 through 11:59 pm EDT (8:59 pm PDT) on Thursday, August 2, 2007. To access the replay, please call (800) 642-1687, or (706) 645-9291. Please enter the following ID Number: 6847225.
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, uncertainty as to the future profitability of acquired businesses, delays in the realization of any accretion from acquisition transactions, any circumstances that adversely impact the end markets of acquired businesses, difficulties in closing or disposing of operations or assets, 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 circumstances in any of our end 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, health advisories, disasters, national emergencies, wars or potential future effects of the tragic events of September 11, 2001, political instability, currency fluctuations, 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. 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 all 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, 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' financial information 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 Nine months ended
------------------- -------------------
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
-------- -------- -------- --------
NET SALES $113,553 $100,221 $322,519 $267,233
Cost of sales 66,198 56,748 189,168 146,072
-------- -------- -------- --------
GROSS MARGIN 47,355 43,473 133,351 121,161
Operating expenses:
Selling, general and
administrative 22,101 14,238 63,772 41,531
Research and development 10,577 6,678 30,517 16,397
Amortization of intangible
assets 3,895 1,403 9,793 1,846
Restructuring
charges/(credits) (1,507) 1,137 368 2,298
In-process research
and development -- 15,300 21,770 15,300
(Gain)/loss on dispositions
of assets 253 (15) 250 (17)
-------- -------- -------- --------
Total operating expenses 35,319 38,741 126,470 77,355
-------- -------- -------- --------
OPERATING INCOME 12,036 4,732 6,881 43,806
Interest and other
income, net 322 1,291 3,275 3,228
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 12,358 6,023 10,156 47,034
Provision for income taxes 3,647 5,906 10,436 19,481
-------- -------- -------- --------
NET INCOME (LOSS) $ 8,711 $ 117 $ (280) $ 27,553
======== ======== ======== ========
Earnings (loss) per share
Basic $ 0.11 $ 0.00 $ (0.00) $ 0.40
======== ======== ======== ========
Diluted $ 0.11 $ 0.00 $ (0.00) $ 0.38
======== ======== ======== ========
Common and common
equivalent shares
outstanding:
Basic 76,367 69,397 74,407 68,569
Diluted 78,564 72,006 74,407 71,721
MICROSEMI CORPORATION
Schedule Reconciling Non-GAAP Income to GAAP Income
(in thousands, except per share amounts)
Quarter ended Nine months ended
----------------- -----------------
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
------- ------- ------- -------
GAAP NET INCOME (LOSS) $ 8,711 $ 117 $ (280) $27,553
======= ======= ======= =======
The non-GAAP amounts have
been adjusted to exclude the
following items:
Excluded from cost of sales
Transitional idle capacity
and inventory
abandonments (a) $10,488 $ 4,225 $28,632 $10,941
Manufacturing profit in
acquired inventory (e) -- 2,743 710 2,743
Excluded from operating
expenses
Amortization of intangible
assets (b) 3,895 1,403 9,793 1,846
Stock option compensation (c) 2,775 501 7,068 484
(Gain)/loss on disposition
of assets (a) 253 (15) 250 (17)
In-process research and
development (d) -- 15,300 21,770 15,300
Bad debt (f) -- -- 1,514 --
Restructuring and other
special charges (a) (942) 1,137 933 3,427
------- ------- ------- -------
16,469 25,294 70,670 34,724
Income tax effect on
non-GAAP adjustments 4,653 5,274 15,018 8,451
------- ------- ------- -------
Net effect of adjustments
to GAAP net income $11,816 $20,020 $55,652 $26,273
======= ======= ======= =======
NON-GAAP NET INCOME $20,527 $20,137 $55,372 $53,826
======= ======= ======= =======
(a) - (f) Please refer to corresponding footnotes below.
MICROSEMI CORPORATION
Schedule Reconciling Reported Financial Ratios
Quarter ended
--------------------------------------------
July 1, April 1, July 2,
2007 2007 2006
------------ -------------- ------------
GAAP gross
margin 41.7 percent 39.2 percent 43.4 percent
Effect of reconciling
items on gross margin 9.2 percent 11.2 percent 6.9 percent
Non-GAAP gross margin 50.9 percent 50.4 percent 50.3 percent
GAAP operating margin 10.6 percent (18.0) percent 4.7 percent
Effect of reconciling
items on operating
margin 14.3 percent 40.1 percent 25.3 percent
Non-GAAP operating
margin 24.9 percent 22.1 percent 30.0 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' financial information 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 all transition activities
are completed. 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 and one-time events. The third quarter of 2007
includes a $0.3 million loss on liquidation of PowerDsine's
marketable investments and $0.3 million related to a legal
settlement with a former distributor. 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 as 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 PowerDsine 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 PowerDsine. Manufacturing profit in
acquired inventory from the PowerDsine acquisition will not
materially impact gross margins beyond the second quarter of
fiscal year 2007.
(f) Bad debt represents write off of accounts receivable from a minor
distributor. This amount is excluded from our GAAP results
because it is highly unusual and has never occurred previously.
MICROSEMI CORPORATION
Selected Non-GAAP Financial Information
(in thousands except for per share amounts)
Quarter ended Nine months ended
---------------- ------------------
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
------- ------- -------- --------
GAAP gross margin $47,355 $43,473 $133,351 $121,161
Transitional idle capacity and
inventory abandonments (a) 10,488 4,225 28,632 10,941
Manufacturing profit in
acquired inventory (e) -- 2,743 710 2,743
------- ------- -------- --------
Non-GAAP gross margin $57,843 $50,441 $162,693 $134,845
------- ------- -------- --------
GAAP operating expenses $35,319 $38,741 $126,470 $ 77,355
Amortization of intangible
assets (b) (3,895) (1,403) (9,793) (1,846)
Stock option compensation (c) (2,775) (501) (7,068) (484)
Gain/(loss) on disposition
of assets (a) (253) 15 (250) 17
In-process research and
development -- (15,300) (21,770) (15,300)
Bad debt (f) -- -- (1,514) --
Restructuring and other
special charges (a) 1,227 (1,137) (648) (3,427)
------- ------- -------- --------
Non-GAAP operating expenses $29,623 $20,415 $ 85,427 $ 56,315
------- ------- -------- --------
GAAP operating income $12,036 $ 4,732 $ 6,881 $ 43,806
Transitional idle capacity and
inventory abandonments (a) 10,488 4,225 28,632 10,941
Manufacturing profit in
acquired inventory (e) -- 2,743 710 2,743
Amortization of intangible
assets (b) 3,895 1,403 9,793 1,846
Stock option compensation (c) 2,775 501 7,068 484
(Gain)/loss on disposition
of assets (a) 253 (15) 250 (17)
In-process research and
development -- 15,300 21,770 15,300
Bad debt (f) -- -- 1,514 --
Restructuring and other
special charges (a) (1,227) 1,137 648 3,427
------- ------- -------- --------
Non-GAAP operating income $28,220 $30,026 $ 77,266 $ 78,530
------- ------- -------- --------
GAAP income before taxes $12,358 $ 6,023 $ 10,156 $ 47,034
Transitional idle capacity and
inventory abandonments (a) 10,488 4,225 28,632 10,941
Manufacturing profit in
acquired inventory (e) -- 2,743 710 2,743
Amortization of intangible
assets (b) 3,895 1,403 9,793 1,846
Stock option compensation (c) 2,775 501 7,068 484
(Gain)/loss on disposition
of assets (a) 253 (15) 250 (17)
In-process research and
development -- 15,300 21,770 15,300
Bad debt (f) -- -- 1,514 --
Restructuring and other
special charges (a) (942) 1,137 933 3,427
------- ------- -------- --------
Non-GAAP income before taxes $28,827 $31,317 $ 80,826 $ 81,758
------- ------- -------- --------
GAAP net income (loss) $ 8,711 $ 117 $ (280) $ 27,553
Transitional idle capacity and
inventory abandonments (a) 10,488 4,225 28,632 10,941
Manufacturing profit in
acquired inventory (e) -- 2,743 710 2,743
Amortization of intangible
assets (b) 3,895 1,403 9,793 1,846
Stock option compensation (c) 2,775 501 7,068 484
(Gain)/loss on disposition of
assets (a) 253 (15) 250 (17)
In-process research and
development -- 15,300 21,770 15,300
Bad debt (f) -- -- 1,514 --
Restructuring and other special
charges (a) (942) 1,137 933 3,427
Income tax effect on non-GAAP
adjustments (4,653) (5,274) (15,018) (8,451)
------- ------- -------- --------
Non-GAAP net income $20,527 $20,137 $ 55,372 $ 53,826
------- ------- -------- --------
GAAP diluted earnings (loss)
per share $ 0.11 $ 0.00 $ (0.00) $ 0.38
Impact of non-GAAP adjustments
on diluted earnings per share $ 0.15 $ 0.28 $ 0.72 $ 0.37
------- ------- -------- --------
Non-GAAP diluted earnings
per share $ 0.26 $ 0.28 $ 0.72 $ 0.75
------- ------- -------- --------
(a) - (f) Please refer to corresponding footnotes above.
MICROSEMI CORPORATION
Condensed Unaudited Consolidated Balance Sheets
(in thousands)
July 1, October 1,
2007 2006
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents $ 82,236 $165,415
Accounts receivable, net 75,107 70,260
Inventories 115,578 88,643
Deferred income taxes 14,067 13,482
Other current assets 12,292 8,223
-------- --------
Total current assets 299,280 346,023
Property and equipment, net 69,464 65,018
Deferred income taxes 1,450 --
Goodwill 174,824 51,546
Other intangible assets, net 61,290 45,253
Other assets 6,745 2,150
-------- --------
TOTAL ASSETS $613,053 $509,990
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 58,071 $ 51,988
Long-term liabilities 7,340 4,875
Shareholders' equity 547,642 453,127
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $613,053 $509,990
======== ========