Microsemi Reports Fourth Quarter and Fiscal Year 2006 Results
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 pe rcent 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, st ock 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 comm on 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 ina bility 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 in ternally 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
======== ========
CONTACT: Microsemi Corporation
FINANCIAL:
David R. Sonksen, Executive Vice President and CFO
(949) 221-7101
EDITORIAL:
Cliff Silver, Manager, Corporate Communications
(949) 221-7112
