MICROSEMI CORPORATION 
By ALISO VIEJO, Calif., April 24, 2014 /PRNewswire/ -- Microsemi Corporation (Nasdaq: MSCC), a leading provider of semiconductor solutions differentiated by power, security, reliability and performance, today reported unaudited results for its second quarter of fiscal 2014 ended March 30, 2014.
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Net sales for Microsemi's second quarter of fiscal 2014 were $287.0 million. GAAP gross margin, reflecting the effect of non-cash purchase accounting adjustments, was 50.7 percent and GAAP operating margin was 1.4 percent. GAAP net loss for the second quarter of fiscal 2014 was $8.7 million or $0.09 per diluted share. Subsequent to the end of the second quarter, Microsemi completed term loan principal payments of $70.0 million, for a total of $100.0 million for fiscal year 2014 to date.
For the second quarter of fiscal 2014, non-GAAP gross margin was 55.2 percent and favorable to post-acquisition targets for the quarter. Non-GAAP operating margin was 20.7 percent in the second quarter of fiscal 2014. Non-GAAP net income was $47.7 million or $0.51 per diluted share.
"Microsemi made significant progress on a number of fronts in the second quarter," said James J. Peterson, chairman of the board and CEO of Microsemi. "Our integration efforts are on target; our defense end market stabilized; and our focused investments in FPGAs, timing products and mixed signal-RF solutions are gaining traction with industry-leading customers. We look forward to continuing this momentum throughout the rest of the year driving shareholder return."
Business Outlook
Microsemi currently expects net sales in the third quarter of fiscal year 2014 of between $287 million and $293 million and expects non-GAAP diluted earnings per share of between $0.55 and $0.61.
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 to reflect subsequent events or circumstances. Please refer to the "SAFE HARBOR" STATEMENT below for risks that may affect future actual results.
Non-GAAP Financial Measures
For further information regarding Microsemi's non-GAAP financial measures, please refer to "Notes on Non-GAAP Financial Measures" below. GAAP results are reconciled to non-GAAP results in the accompanying financial tables.
Information for Second Quarter 2014 Earnings Conference Call and Webcast:
Date: Thursday, April 24, 2014
Time: 4:45 p.m. EDT (1:45 p.m. PDT)
To access the webcast, log on to www.microsemi.com, go to the Investors section, and then to IR Events and Presentations. To listen to the live webcast, visit this website approximately 15 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 Microsemi website for 90 days.
To participate in the conference call by telephone, call 877-264-1110 at approximately 4:30 p.m. EDT (1:30 p.m. PDT). International callers can call 706-634-1357. Please provide the following ID number: 28611806.
About Microsemi
Microsemi Corporation (Nasdaq: MSCC) offers a comprehensive portfolio of semiconductor and system solutions for communications, defense & security, aerospace and industrial markets. Products include high-performance and radiation-hardened analog mixed-signal integrated circuits, FPGAs, SoCs and ASICs; power management products; timing and synchronization devices and precise time solutions, setting the world's standard for time; voice processing devices; RF solutions; discrete components; security technologies and scalable anti-tamper products; Power-over-Ethernet ICs and midspans; as well as custom design capabilities and services. Microsemi is headquartered in Aliso Viejo, Calif., and has approximately 3,400 employees globally. Learn more at www.microsemi.com.
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, including without limitation statements concerning Microsemi's net sales and earnings guidance, our belief that our overall strategy continues to bring benefit to our shareholders, and any other statements or beliefs regarding the company's plans or expectations. These forward-looking statements are based on Microsemi's current expectations and are inherently subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. The potential risks and uncertainties include, but are not limited to, such factors as continued negative or worsening worldwide economic conditions or market instability; downturns in the highly cyclical semiconductor industry; our ability to successfully implement our acquisitions strategy or integrate acquired companies; uncertainty as to the future profitability of acquired businesses, and delays in the realization of, or the failure to realize, any accretion from acquisition transactions; acquiring, managing and integrating new operations, businesses or assets, and the associated diversion of management attention or other related costs or difficulties; intense competition in the semiconductor industry and resultant downward price pressure; Microsemi's reliance on government contracts for a portion of its sales, including impacts of sequestration under the Budget Control Act of 2011, and any past or future government shutdowns; the effect of events such as natural disasters and related disruptions on our operations; the concentration of the factories that service the semiconductor industry; delays in beginning production, implementing production techniques, resolving problems associated with technical equipment malfunctions, or issues related to government or customer qualification of facilities; our dependence on third parties for key functions; increases in the costs of credit and the availability of credit or additional capital only under more restrictive conditions or not at all; changes to laws or regulations; unanticipated changes in Microsemi's tax obligations, results of tax examinations or exposure to additional income tax liabilities; risks related to the company's international operations and sales, including availability of transportation services, political instability and currency fluctuations; changes in generally accepted accounting principles; principal, liquidity and counterparty risks related to Microsemi's holdings in securities; inability to develop new technologies and products to satisfy changes in customer demand or the development by the company's competitors of products that decrease the demand for Microsemi's products; unfavorable or declining conditions in end markets; inability of Microsemi's compound semiconductor products to compete successfully with silicon-based products; production delays related to new compound semiconductors; variability of the company's manufacturing yields; potential effects of system outages; inability by Microsemi to fulfill customer demand and resulting loss of customers; variations in customer order preferences; difficulties foreseeing future demand; rises in inventory levels and inventory obsolescence; potential non-realization of expected orders or non-realization of backlog; failure to make sales indicated by the company's book-to-bill ratio; environmental or other regulatory matters or litigation, or any matters involving contingent liabilities or other claims; the uncertainty of litigation, the costs and expenses of litigation, the potential material adverse effect litigation could have on Microsemi's business and results of operations if an adverse determination in litigation is made, and the time and attention required of management to attend to litigation; difficulties in determining the scope of, and procuring and maintaining, adequate insurance coverage; difficulties and costs of protecting patents and other proprietary rights; the hiring and retention of qualified personnel in a competitive labor market; any circumstances that adversely impact the end markets of acquired businesses; and difficulties in closing or disposing of operations or assets or transferring work, assets or inventory from one plant to another. 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 Microsemi's most recent Form 10-K and any subsequent Form 10-Q reports filed by Microsemi with the SEC. Additional risk factors may be identified from time to time in Microsemi's future filings. The forward-looking statements included in this release speak only as of the date hereof, and Microsemi does not undertake any obligation to update these forward-looking statements to reflect subsequent events or circumstances. Amounts reported in this release are preliminary and subject to finalization prior to the filing of our next Form 10-Q.
(Financial Tables Follow)
MICROSEMI CORPORATION
Selected GAAP and Non-GAAP Financial Measures
(unaudited, in millions, except for percentages and per share amounts)
Quarter Ended Six Months Ended
------------- ----------------
Mar 30, Dec 29, Mar 31, Mar 30, Mar 31,
2014 2013 2013 2014 2013
---- ---- ---- ---- ----
Net sales $287.0 $255.6 $235.3 $542.6 $482.9
Selected GAAP Financial
Measures
Gross profit $145.4 $138.3 $133.5 $283.7 $276.1
Gross margin 50.7% 54.1% 56.7% 52.3% 57.2%
Operating income $4.1 $7.2 $11.8 $11.2 $37.3
Operating margin 1.4% 2.8% 5.0% 2.1% 7.7%
Net income (loss) $(8.7) $1.4 $(2.9) $(7.3) $11.3
Diluted earnings (loss)
per share $(0.09) $0.01 $(0.03) $(0.08) $0.12
Selected Non-GAAP
Financial Measures
Gross profit $158.3 $143.1 $133.5 $301.4 $276.1
Gross margin 55.2% 56.0% 56.7% 55.5% 57.2%
Operating income $59.3 $54.1 $50.0 $113.4 $106.7
Operating margin 20.7% 21.2% 21.2% 20.9% 22.1%
Net income $47.7 $42.9 $38.9 $90.6 $83.9
Diluted earnings per
share $0.51 $0.46 $0.43 $0.97 $0.93
Additional details reconciling
the selected GAAP financial
measure to the selected non-
GAAP financial measure may be
found in the "Schedule
Reconciling Selected Non-GAAP
Financial Measures to
Comparable GAAP Financial
Measures" and "Notes on Non-
GAAP Financial Measures."
MICROSEMI CORPORATION
Schedule Reconciling Selected Non-GAAP Financial Measures
to Comparable GAAP Financial Measures
(unaudited, in millions, except for per share amounts)
Quarter Ended Six Months Ended
------------- ----------------
Mar 30, Dec 29, Mar 31, Mar 30,
2014 2013 2013 2014
Mar 31,
2013
GAAP gross profit $145.4 $138.3 $133.5 $283.7 $276.1
Manufacturing profit in
acquired inventory (1) 12.9 4.8 - 17.7 -
Non-GAAP gross profit $158.3 $143.1 $133.5 $301.4 $276.1
------ ------
GAAP operating income $4.1 $7.2 $11.8 $11.2 $37.3
Adjustments to GAAP gross
profit 12.9 4.8 - 17.7 -
Restructuring and other
special charges (2) 6.2 8.3 6.9 14.5 8.3
Amortization of intangible
assets (3) 24.3 22.0 21.1 46.3 42.8
Stock based compensation (4) 11.4 10.1 10.2 21.5 18.3
Acquisition costs (5) 0.4 1.7 - 2.2 -
--- --- --- --- ---
Non-GAAP operating income $59.3 $54.1 $50.0 $113.4 $106.7
----- ----- ----- ------ ------
GAAP net income (loss) $(8.7) $1.4 $(2.9) $(7.3) $11.3
Adjustments to GAAP gross
profit and operating income 55.2 46.9 38.2 102.2 69.4
Loss from facility closure and
asset disposal (2) - - 0.2 - 0.2
Credit facility issuance and
refinancing costs (6) 0.9 0.2 3.3 1.1 3.6
(Gain) in debt and derivative
instruments (7) (0.1) (0.3) (0.3) (0.4) (0.6)
Income tax effect on non-GAAP
adjustments (8) 0.4 (5.3) 0.4 (5.0) -
--- ---- --- ---- ---
Non-GAAP net income $47.7 $42.9 $38.9 $90.6 $83.9
----- ----- ----- ----- -----
GAAP diluted earnings (loss)
per share $(0.09) $0.01 $(0.03) $(0.08) $0.12
Effect of non-GAAP
adjustments on diluted
earnings per share $0.60 $0.45 $0.46 $1.05 $0.81
----- ----- ----- ----- -----
Non-GAAP diluted earnings per
share $0.51 $0.46 $0.43 $0.97 $0.93
----- ----- ----- ----- -----
Weighted average diluted
shares used in calculating
non-GAAP diluted earnings
per share 94.1 93.5 91.1 93.8 90.5
Operating cash flow $30.2 $62.5 $31.9 $92.7 $60.0
Capital expenditures (8.7) (12.1) (9.0) (20.8) (17.5)
Free cash flow $21.5 $50.4 $22.9 $71.9 $42.5
----- ----- ----- ----- -----
Additional details
reconciling the selected
non-GAAP financial measure
to the selected GAAP
financial measure may be
found in "Notes on Non-GAAP
Financial Measures."
MICROSEMI CORPORATION
Summary of Schedule Reconciling Selected Non-GAAP Financial Measures
to Comparable GAAP Financial Measures
(unaudited, in millions, except for per share amounts)
Quarter Ended March 30, 2014
----------------------------
GAAP Non-GAAP
Adjustments Non-GAAP
---- ----------- --------
Net sales $287.0 $ - $287.0
Gross profit $145.4 $12.9 $158.3
Operating income $4.1 $55.2 $59.3
Net income (loss) $(8.7) $56.4 $47.7
Diluted earnings
(loss) per share $(0.09) $0.60 $0.51
Additional details reconciling
the selected non-GAAP
financial measure to the
selected GAAP financial measure
may be found in the "Schedule
Reconciling Selected Non-GAAP
Financial Measures to
Comparable GAAP Financial
Measures" and "Notes on Non-
GAAP Financial Measures."
MICROSEMI CORPORATION
Consolidated Condensed Statement of Income
(unaudited, in millions, except per share amounts)
Quarter Ended Six Months Ended
------------- ----------------
Mar 30, Dec 29, Mar 31, Mar 30, Mar 31,
2014 2013 2013 2014 2013
---- ---- ---- ---- ----
Net sales $287.0 $255.6 $235.3 $542.6 $482.9
Cost of sales 141.6 117.3 101.8 258.9 206.8
----- ----- ----- ----- -----
Gross profit $145.4 $138.3 $133.5 $283.7 $276.1
------ ------ ------ ------ ------
Operating expenses
Selling, general and
administrative $62.5 $55.6 $52.3 $118.2 $103.6
Research and development 49.3 44.1 42.0 93.4 85.2
Amortization of intangible
assets 24.3 22.0 21.1 46.3 42.8
Restructuring charges 4.8 7.7 6.3 12.4 7.2
Acquisition costs 0.4 1.7 - 2.2 -
Total operating expenses $141.3 $131.1 $121.7 $272.5 $238.8
------ ------ ------ ------ ------
Operating income $4.1 $7.2 $11.8 $11.2 $37.3
---- ---- ----- ----- -----
Interest and other (expense),
net (8.8) (7.9) (11.3) (16.7) (19.6)
---- ---- ----- ----- -----
Income (loss) before income
taxes $(4.7) $(0.7) $0.5 $(5.5) $17.7
Provision (benefit) for income
taxes 4.0 (2.1) 3.4 1.8 6.4
Net income (loss) $(8.7) $1.4 $(2.9) $(7.3) $11.3
===== ==== ===== ===== =====
Earnings (loss) per share
Basic $(0.09) $0.01 $(0.03) $(0.08) $0.13
Diluted $(0.09) $0.01 $(0.03) $(0.08) $0.12
Weighted average common shares
outstanding
Basic 92.8 92.1 89.4 92.5 89.0
Diluted 92.8 93.5 89.4 92.5 90.5
MICROSEMI CORPORATION
Consolidated Condensed Balance Sheet
(unaudited, in millions)
Mar 30, Sep 29,
2014 2013
---- ----
ASSETS
Current assets
Cash and cash equivalents $205.2 $256.4
Accounts receivable, net 193.8 162.1
Inventories, net 202.1 162.0
Deferred income taxes 24.1 15.9
Other current assets 41.5 26.2
---- ----
Total current assets $666.7 $622.6
Property and equipment, net 148.2 125.2
Goodwill 848.6 790.2
Intangible assets, net 377.7 315.2
Deferred income taxes 31.8 30.2
Other assets 31.4 29.3
TOTAL ASSETS $2,104.4 $1,912.7
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable $80.0 $69.6
Accrued liabilities 88.5 63.0
Current maturity of long-term
liabilities 2.1 0.6
--- ---
Total current liabilities $170.6 $133.2
Credit facility 794.5 676.0
Deferred income taxes 35.5 27.0
Other long-term liabilities 50.6 44.4
Stockholders' equity 1,053.2 1,032.1
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,104.4 $1,912.7
======== ========
As of March 30, 2014, we had
$796.0 million in term loan
borrowings. Subsequent to the
end of the quarter, we
completed optional principal
prepayments on our term loan
totaling $70.0 million
resulting in a term loan
balance of $726.0 million.
Notes on Non-GAAP Financial Measures
To supplement the consolidated
financial results prepared in
accordance with Generally Accepted
Accounting Principles ("GAAP"),
this press release and its
attachments include non-GAAP
financial measures which are
adjusted for the items listed in
the footnotes below. Management
reports the following non-GAAP
financial measures:
-- non-GAAP gross profit and
gross margin;
-- non-GAAP operating income and
operating margin;
-- non-GAAP net income and
diluted earnings per share; and
-- free cash flow.
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.
Management believes it is useful to
provide these non-GAAP financial
measures and a reconciliation to
comparable GAAP financial measures
as we believe they enhance an
investor's overall understanding of
our financial performance and
future prospects by being more
reflective of our core operational
activities and more comparable with
our results over various periods.
By disclosing non-GAAP financial
measures, management intends to
provide investors with an alternate
measure to evaluate and compare
Microsemi's operating results and
trends for the periods presented.
Management uses non-GAAP financial
measures internally for strategic
decision making, forecasting future
results and evaluating current
performance. The items reconciling
GAAP financial measures to non-
GAAP financial measures and
additional comments and the
usefulness of each item are set
forth below:
(1) Manufacturing profit in acquired
inventory results from purchase
accounting entries to increase the
value of inventory acquired 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 profit.
Management believes it is useful to
exclude manufacturing profit in
acquired inventory as it does not
reflect continuing operations of
acquired entities and to facilitate
comparability of gross profit
between periods. In addition,
management excludes the impact of
manufacturing profit in acquired
inventory in internal measurements
of gross profit.
(2) Restructuring activities relate to
efforts to reduce costs and involve
the closure, sale and consolidation
of certain facilities. As these
facilities are not expected to have
a continuing contribution to
operations or are they expected to
have a diminishing contribution
during the transition phase,
management believes excluding such
items from Microsemi's operations is
useful to investors as it provides a
means of evaluating Microsemi's on-
going operations. Restructuring and
other special charges include
severance and other costs related to
these facilities. Other special
charges also include gains or losses
on litigation, net of settlement
costs, primarily related to
acquisition-related matters.
Management believes that utilizing
non-GAAP financial measures that
exclude these items is useful in
providing an alternate measure to
evaluate core operating activities
and management excludes these items
in its evaluation of operations and
for strategic decision making,
forecasting future results and
evaluating current performance.
(3) Amortization of acquisition related
intangible assets is excluded from
internal analysis of Microsemi's
operations and management does not
view this non-cash expense as
reflective of the business' current
performance. Management believes
that utilizing non-GAAP financial
measures that exclude this non-cash
item is useful in providing an
alternate measure that excludes the
variability caused by purchase
accounting factors.
(4) Stock based compensation is excluded
by management when evaluating
operating activities and for
strategic decision making,
forecasting future results and
evaluating current performance.
Management believes that utilizing
non-GAAP financial measures that
exclude this non-cash item is
useful in providing an alternate
measure that excludes the
variability caused by different
methodologies and subjective
assumptions used in the valuation of
equity awards across different
companies.
(5) Acquisition costs for business
combinations are expensed as
incurred, in accordance with
relevant accounting guidance, rather
than capitalized into the purchase
price of an acquisition. Management
excludes these expenses when
evaluating operating activities and
for strategic decision making,
forecasting future results and
evaluating current performance.
Management believes that utilizing
non-GAAP financial measures that
exclude this item is useful in
providing an alternate measure that
excludes the variability caused by
purchase accounting factors.
(6) Debt issuance and refinancing costs
have been excluded as they are
discrete charges we incurred to
issue or refinance our credit
facility. Management excludes these
expenses from internal measurements
of credit facility interest rates
and in evaluating current
performance. Management believes
that utilizing non-GAAP financial
measures that exclude this item is
useful in providing an alternate
measure that is reflective of the
ongoing characteristics of the
amended credit facility.
(7) Changes in the fair value of term
loan balances outstanding and
related interest rate swaps do not
result in a change to the principal
we owe and are non-cash amounts
that management excludes from
internal measurements and from
forecasting future results. We
elected the fair value option in
accounting for term loan balances
outstanding under Microsemi's credit
facility prior to the October 2011
amendment of our credit facility and
changes in fair value of the loan
balances and related interest rate
swaps were reflected as adjustments
to the income statement. We did not
elect the fair value option on
subsequent amendments and are
reporting the current term loan
balance at par. Subsequent to the
first quarter of 2012, only our
interest rate swaps were recorded
under fair value accounting. We
entered into interest rate swaps as
a cash flow hedge on our variable
rate term loan, but as these swaps
did not qualify for hedge
accounting, we record gains and
losses for the change in fair value.
Management excludes these gains and
losses from internal measurements
and in evaluating current
performance. Management believes
that utilizing non-GAAP financial
measures that exclude this item is
useful in providing an alternate
measure that excludes these non-
cash fair value adjustments that do
not reflect ongoing operations or
the ultimate settlement amount of
our term loan.
(8) The tax effect of non-GAAP
adjustments represents the
difference in the provision for
income taxes that resulted from non-
GAAP adjustments to pretax income
and also certain acquisition-
related and nondeductible stock-
based compensation items, and non-
cash valuation allowance charges and
releases related to deferred tax
assets. These amounts are excluded
as non-GAAP adjustments as the
restructuring activities and
acquisitions are not viewed by
management as being reflective of
the business' ongoing tax position.
Free cash flow is a non-GAAP financial measure
defined as operating cash flow less capital
expenditures. We consider free cash flow to be a
liquidity measure which provides useful
information to management and investors about
the amount of cash generated by the business
after our capital expenditures, which can then
be used for strategic opportunities including,
among others, investing in Microsemi's business,
making strategic acquisitions, and strengthening
the balance sheet. Management uses free cash
Guidance is provided only on a non-GAAP basis
due to the inherent difficulty of forecasting
the timing or amount of certain items that have
been excluded from the forward-looking non-
GAAP measures, and a reconciliation to the
comparable GAAP guidance has not been provided
because certain factors that are materially
significant to Microsemi's ability to estimate
the excluded items are not accessible or
estimable on a forward-looking basis.
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SOURCE Microsemi Corporation
