IRVINE, Calif., April 26, 2007 (PRIME NEWSWIRE) -- Microsemi Corporation (Nasdaq:MSCC) today reported results for its second quarter of fiscal year 2007.
* Net Sales for Quarter Set New Record at $106.7 Million * Net Sales for Quarter Increased 25.7 Percent over Prior Year Quarter * Non-GAAP Gross Margins 50.4 Percent * GAAP Gross Margins 39.2 Percent * Positive Book-to-Bill Ratio of 1.12 to 1.00 for Second Quarter
Net sales for Microsemi's second quarter, ended April 1, 2007, were $106.7 million, up 25.7 percent from net sales of $84.9 million in the second quarter of 2006, and up 4.3 percent from net sales of $102.3 million in the first quarter of 2007. Non-GAAP gross margin percentage was 50.4 percent, compared to 50.0 percent in the first quarter of 2007 and 51.1 percent in the second quarter of 2006. Non-GAAP operating margins were 22.1 percent in the second quarter compared to 30.7 percent in the second quarter of 2006 and 24.9 percent in the first quarter of 2007. For the second quarter, non-GAAP net income was $16.7 million. This compares to $18.1 million in the first quarter of 2007 and $17.7 million in the second quarter of 2006. The non-GAAP effective tax rate is 33.3 percent. Non-GAAP diluted earnings per share in the second quarter were $0.22 compared to $0.26 in the second quarter of 2006 and $0.25 in the first quarter of 2007.
For the second quarter, GAAP gross margins were 39.2 percent compared to 45.0 percent in the second quarter of 2006 and 43.2 percent in the first quarter of 2007. GAAP results in the second quarter include non-cash, acquisition-related charges and other one-time items consisting of $11.1 million for transitional idle capacity and inventory abandonments, $21.8 million for in-process research and development (IPR&D), $0.7 million for manufacturing profit in acquired inventory, $3.9 million in amortization of acquisition-related intangibles, $1.5 million associated with the insolvency of a minor distributor, $1.0 million related to restructuring and special charges, and $2.7 million related to compensation charges for stock options. Second quarter GAAP net loss was $19.6 million compared to net income of $13.6 million in the second quarter of 2006 and $10.6 million in the first quarter of 2007. GAAP diluted loss per share this quarter was $0.26 compared with GAAP diluted earnings per share of $0.20 and $0.14 for the second quarter of 2006 and the first quarter of 2007, respectively.
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.
James J. Peterson, President and Chief Executive Officer, stated, "We are very pleased that our earnings for the quarter were ahead of analyst estimates. We are well positioned with our new products and see a number of opportunities to introduce existing products into new applications and new markets; and this coupled with what some in the industry characterize as a broad recovery, leads us to believe we should see continued improvement in the coming quarter."
The book-to-bill ratio for the quarter was 1.12 to 1.00.
Business Outlook
Microsemi expects that for the third 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 third quarter of fiscal year 2007 to be $0.23 to $0.25 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, optimizing battery performance, reducing size or protecting circuits. The principal markets the company serves include implantable medical, defense/aerospace and satellite, notebook computers, monitors and LCD TVs, and 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
Information for 2nd Quarter Earnings Conference Call and Webcast
Date: Thursday, April 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: 6440325.
A telephonic replay will be available from 6:00 pm EST (3:00 pm PST) on Thursday, April 26, 2007 through 11:59 pm EST (8:59 pm PST) on Thursday, May 3, 2007. To access the replay, please call (800) 642-1687, or (706) 645-9291. Please enter the following ID Number: 6440325.
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 including the challenging conditions in our 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, health advisories, disasters, national emergencies, 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. 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 Six months ended
--------------------- ---------------------
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
--------- --------- --------- ---------
NET SALES $ 106,677 $ 84,853 $ 208,966 $ 167,012
Cost of sales 64,839 46,712 122,970 89,324
--------- --------- --------- ---------
GROSS MARGIN 41,838 38,141 85,996 77,688
Operating expenses:
Selling, general and
administrative 23,246 12,906 41,671 27,293
Research and
development 11,116 4,642 19,940 9,719
Amortization of
intangible assets 3,895 214 5,898 443
Restructuring charges 972 520 1,875 1,161
In-process research
and development 21,770 - 21,770 -
(Gain)/loss on dispositions
of assets (3) (36) (3) (2)
--------- --------- --------- ---------
Total operating
expenses 60,996 18,246 91,151 38,614
--------- --------- --------- ---------
OPERATING INCOME (LOSS) (19,158) 19,895 (5,155) 39,074
Interest and other
income, net 1,490 1,126 2,953 1,937
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES (17,668) 21,021 (2,202) 41,011
Provision for
income taxes 1,917 7,378 6,789 13,575
--------- --------- --------- ---------
NET INCOME (LOSS) $ (19,585) $ 13,643 $ (8,991) $ 27,436
========= ========= ========= =========
Earnings (loss)
per share
Basic $ (0.26) $ 0.21 $ (0.12) $ 0.42
========= ========= ========= =========
Diluted $ (0.26) $ 0.20 $ (0.12) $ 0.40
========= ========= ========= =========
Common and common equivalent
shares outstanding:
Basic 75,254 65,321 75,404 64,659
Diluted 75,254 68,618 75,404 68,083
MICROSEMI CORPORATION
Schedule Reconciling Non-GAAP Income to GAAP Income
(in thousands, except per share amounts)
Quarter ended Six months ended
------------------ ------------------
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
-------- -------- -------- --------
GAAP NET INCOME (LOSS) $(19,585) $ 13,643 $ (8,991) $ 27,436
======== ======== ======== ========
The non-GAAP amounts have
been adjusted to exclude
the following items:
Excluded from cost
of sales
Transitional idle
capacity and
inventory
abandonments (a) $ 11,172 $ 5,204 $ 18,144 $ 6,716
Manufacturing profit
in acquired
inventory (e) 710 -- 710 --
Excluded from
operating expenses
Amortization of
intangible
assets (b) 3,895 214 5,898 443
Charge for
acceleration
of stock
options (c) -- (1,065) -- (1,065)
Stock option
compensation (c) 2,708 1,048 4,293 1,048
(Gain)/loss on
disposition of
assets (a) (3) (36) (3) (2)
In-process research
and development (d) 21,770 -- 21,770 --
Bad debt (f) 1,514 -- 1,514 --
Restructuring and
other special
charges (a) 972 820 1,875 2,290
-------- -------- -------- --------
42,738 6,185 54,201 9,430
Income tax effect on
non-GAAP adjustments 6,431 2,171 10,365 3,177
-------- -------- -------- --------
Net effect of
adjustments to GAAP
net income $ 36,307 $ 4,014 $ 43,836 $ 6,253
======== ======== ======== ========
NON-GAAP NET INCOME $ 16,722 $ 17,657 $ 34,845 $ 33,689
======== ======== ======== ========
(a) -- (f) Please refer to corresponding footnotes below.
MICROSEMI CORPORATION
Schedule Reconciling Reported Financial Ratios
Quarter ended
--------------------------------------------
April 1, December 31, April 2,
2007 2006 2006
------------ ------------ ------------
GAAP gross
margin 39.2 percent 43.2 percent 45.0 percent
Effect of
reconciling
items on
gross margin 11.2 percent 6.8 percent 6.1 percent
Non-GAAP
gross margin 50.4 percent 50.0 percent 51.1 percent
GAAP operating
margin (18.0 percent) 13.7 percent 23.5 percent
Effect of
reconciling
items on
operating margin 40.1 percent 11.2 percent 7.2 percent
Non-GAAP
operating margin 22.1 percent 24.9 percent 30.7 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, 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. 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 happened before.
MICROSEMI CORPORATION
Selected Non-GAAP Financial Information
(in thousands except for per share amounts)
Quarter ended Six months ended
----------------------- -----------------------
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
--------- --------- --------- ---------
GAAP gross margin $ 41,838 $ 38,141 $ 85,996 $ 77,688
Transitional idle
capacity and
inventory
abandonments (a) 11,172 5,204 18,144 6,716
Manufacturing profit
in acquired
inventory (e) 710 - 710 -
--------- --------- --------- ---------
Non-GAAP gross margin $ 53,720 $ 43,345 $ 104,850 $ 84,404
--------- --------- --------- ---------
GAAP operating expenses $ 60,996 $ 18,246 $ 91,151 $ 38,614
Amortization of
intangible
assets (b) (3,895) (214) (5,898) (443)
Charge for acceleration
of stock options (c) - 1,065 - 1,065
Stock option
compensation (c) (2,708) (1,048) (4,293) (1,048)
Gain/(loss) on
disposition of
assets (a) 3 36 3 2
In-process research
and development (21,770) - (21,770) -
Bad debt (f) (1,514) - (1,514) -
Restructuring and
other special
charges (a) (972) (820) (1,875) (2,290)
--------- --------- --------- ---------
Non-GAAP operating
expenses $ 30,140 $ 17,265 $ 55,804 $ 35,900
--------- --------- --------- ---------
GAAP operating income
(loss) $ (19,158) $ 19,895 $ (5,155) $ 39,074
Transitional idle
capacity and
inventory
abandonments (a) 11,172 5,204 18,144 6,716
Manufacturing profit
in acquired
inventory (e) 710 - 710 -
Amortization of
intangible assets (b) 3,895 214 5,898 443
Charge for acceleration
of stock options (c) - (1,065) - (1,065)
Stock option
compensation (c) 2,708 1,048 4,293 1,048
(Gain)/loss on
disposition
of assets (a) (3) (36) (3) (2)
In-process research
and development 21,770 - 21,770 -
Bad debt (f) 1,514 - 1,514 -
Restructuring and
other special
charges (a) 972 820 1,875 2,290
--------- --------- --------- ---------
Non-GAAP operating
income $ 23,580 $ 26,080 $ 49,046 $ 48,504
--------- --------- --------- ---------
GAAP income (loss)
before taxes $ (17,668) $ 21,021 $ (2,202) $ 41,011
Transitional idle
capacity and
inventory
abandonments (a) 11,172 5,204 18,144 6,716
Manufacturing profit
in acquired
inventory (e) 710 - 710 -
Amortization of
intangible assets (b) 3,895 214 5,898 443
Charge for acceleration
of stock options (c) - (1,065) - (1,065)
Stock option
compensation (c) 2,708 1,048 4,293 1,048
(Gain)/loss on
disposition
of assets (a) (3) (36) (3) (2)
In-process research
and development 21,770 - 21,770 -
Bad debt (f) 1,514 - 1,514 -
Restructuring and
other special
charges (a) 972 820 1,875 2,290
--------- --------- --------- ---------
Non-GAAP income before
taxes $ 25,070 $ 27,206 $ 51,999 $ 50,441
--------- --------- --------- ---------
GAAP net income (loss) $ (19,585) $ 13,643 $ (8,991) $ 27,436
Transitional idle
capacity and
inventory
abandonments (a) 11,172 5,204 18,144 6,716
Manufacturing profit
in acquired
inventory (e) 710 - 710 -
Amortization of
intangible assets (b) 3,895 214 5,898 443
Charge for acceleration
of stock options (c) - (1,065) - (1,065)
Stock option
compensation (c) 2,708 1,048 4,293 1,048
(Gain)/loss on
disposition
of assets (a) (3) (36) (3) (2)
In-process research
and development 21,770 - 21,770 -
Bad debt (f) 1,514 - 1,514 -
Restructuring and
other special
charges (a) 972 820 1,875 2,290
Income tax effect
on non-GAAP
adjustments (6,431) (2,171) (10,365) (3,177)
--------- --------- --------- ---------
Non-GAAP net income $ 16,722 $ 17,657 $ 34,845 $ 33,689
--------- --------- --------- ---------
GAAP diluted earnings
(loss) per share $ (0.26) $ 0.20 $ (0.12) $ 0.40
Impact of non-GAAP
adjustments on
diluted earnings
per share $ 0.48 $ 0.06 $ 0.57 $ 0.12
--------- --------- --------- ---------
Non-GAAP diluted
earnings per share $ 0.22 $ 0.26 $ 0.45 $ 0.52
--------- --------- --------- ---------
(a)--(f) Please refer to corresponding footnotes above.
MICROSEMI CORPORATION
Condensed Unaudited Consolidated Balance Sheets
(in thousands)
April 1, October 1,
2007 2006
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 72,188 $165,415
Accounts receivable, net 74,828 70,260
Inventories 104,833 88,643
Deferred income taxes 13,872 13,482
Other current assets 14,830 8,223
-------- --------
Total current assets 280,551 346,023
Property and equipment, net 69,489 65,018
Deferred income taxes 553 --
Goodwill 177,134 51,546
Other intangible assets, net 65,185 45,253
Long-term investment 33,937 --
Other assets 6,825 2,150
-------- --------
TOTAL ASSETS $633,674 $509,990
======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities $ 58,232 $ 51,988
Long-term liabilities 42,611 4,875
Shareholders' equity 532,831 453,127
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $633,674 $509,990
======== ========