EXHIBIT 99.1
Microsemi Reports Third Quarter 2009 Results
IRVINE, Calif., July 23, 2009 (GLOBE NEWSWIRE) -- Microsemi Corporation (Nasdaq:MSCC) today reported unaudited results for its third quarter of fiscal year 2009.
* Net Sales for Third Quarter Totaled $107.0 Million * GAAP Gross Margin Increased 1,120 Basis Points Over Prior Quarter * Non-GAAP Gross Margin Increased 10 Basis Points Over Prior Quarter * GAAP Operating Expenses Reduced 16.4 Percent Over Prior Quarter * Non-GAAP Operating Expenses Reduced 7.9 Percent Over Prior Quarter * Operating Cash Flow for Third Quarter Increased 20.5 Percent Over Prior Quarter to $29.0 Million
Net sales for Microsemi's third quarter ended June 28, 2009 were $107.0 million, down 17.2 percent from net sales of $129.3 million in the third quarter of 2008, and up 1.2 percent from net sales of $105.7 million in the second quarter of 2009.
Non-GAAP gross margin in the third quarter of 2009 was 47.2 percent, compared to 51.9 percent in the third quarter of 2008 and 47.1 percent in the second quarter of 2009. Non-GAAP operating margin was 20.0 percent in the third quarter of 2009 compared to 27.5 percent in the third quarter of 2008 and 17.2 percent in the second quarter of 2009. For the third quarter of 2009, non-GAAP net income was $16.7 million, compared to $27.0 million in the third quarter of 2008 and $14.8 million the second quarter of 2009. For the third quarter of 2009, the non-GAAP effective tax rate was 21.5 percent. Non-GAAP diluted earnings per share in the third quarter of 2009 were $0.21 compared to $0.34 in the third quarter of 2008 and $0.19 in the second quarter of 2009.
GAAP gross margin for the third quarter of 2009 was 42.2 percent compared to 45.0 percent in the third quarter of 2008 and 31.0 percent in the second quarter of 2009. GAAP operating margin was 3.5 percent in the third quarter of 2009 compared to 14.0 percent in the third quarter of 2008 and compared to a loss of 15.9 percent in the second quarter of 2009. GAAP results in the third quarter of 2009 included $5.3 million for transitional idle capacity, a reduction of $1.0 million from the previous quarter, acquisition-related charges of $1.3 million for in process research and development and $0.5 million in restructuring and other charges and a net gain of $0.4 million related to exceptional legal matters. Also included in the third quarter of 2009 were $5.7 million related to stock based compensation and $4.2 million in amortization of acquisition-related intangibles. For the third quarter of 2009, GAAP net income was $7.8 million compared to $13.9 million in the third quarter of 2008 and a GAAP net loss of $ 16.6 million in the second quarter of 2009. For the third quarter of 2009, the GAAP effective tax rate benefit was 65.3 percent. The effective tax benefit was primarily due to higher tax benefit from losses incurred in higher tax rate jurisdictions relative to tax expense from income generated in lower tax rate jurisdictions. GAAP diluted earnings per share in the third quarter of 2009 were $0.10, compared to $0.17 per share in the third quarter of 2008, and a GAAP diluted loss per share of $0.21 in the second quarter of 2009.
James J. Peterson, President and Chief Executive Officer, stated, "We are pleased with the results of our third quarter. Our net sales increased from last quarter and, coupled with our enhanced factory utilization, improved operational efficiencies and focus on spending controls, allowed us to show meaningful improvement in our gross, operating and net margin metrics. These improvements were reflected in a meaningful increase to operating cash flow, which reached $29.0 million, giving us increased leverage for continued strategic initiatives."
Business Outlook
Microsemi expects that for the fourth quarter of fiscal year 2009, our net sales will increase between a range of 1 percent and 4 percent, sequentially. On a non-GAAP basis, we expect earnings for the fourth quarter of fiscal year 2009 to be $0.22 to $0.23 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.
Non-GAAP results are explained and reconciled to GAAP results in the attached tables. Non-GAAP financial measures exclude items such as transitional idle capacity, inventory reserves due to restructuring activities, impairment of restructuring related fixed assets, effects of manufacturing profit in acquired inventory, amortization of acquisition-related intangible assets, stock based compensation, in process research and development, restructuring, exceptional legal matters and other special charges or credits.
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. Microsemi'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 Microsemi serves include defense, commercial air, satellite, medical, notebook computers, LCD TVs, mobile, and connectivity applications. More information may be obtained by contacting Microsemi directly or by visiting its website at http://www.microsemi.com.
The Microsemi Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1233
Information for Third Quarter 2009 Earnings Conference Call and Webcast
Date: Thursday, July 23, 2009 Time: 4:45 pm Eastern Daylight Time (1:45 pm Pacific Daylight Time)
To access the webcast, please log on to: http://www.microsemi.com and go to Investors and then to Events and Presentations. 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 90 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: 20793714.
A telephonic replay will be available from 6:00 pm EDT (3:00 pm PDT) on Thursday, July 23, 2009 through 11:59 pm EDT (8:59 pm PDT) on Thursday, July 30th. To access the replay, please call (800) 642-1687 or (706) 645-9291. Please enter the following ID Number: 20793714.
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 our expectations regarding our business outlook, our performance and competitive position during the coming quarter and year, expectation regarding the change in our end markets, our belief that we will continue to make operational and efficiency improvements in order to better service our customers, our expectation that the increase in our operating cash flow will give us increased leverage for continued strategic initiatives, and any other statements of belief or about our plans or expectations. These forward-looking statements are based on our 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 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, 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 Microsemi'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 instabili ty, currency fluctuations, principal and liquidity risks associated with our investments including auction rate securities, variations in customer order preferences, fluctuations in market prices of Microsemi'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 Microsemi's most recent Form 10-K and all 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 Form 10-Q.
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 that exclude transitional idle capacity, inventory reserves due to restructuring activities, impairment of restructuring related fixed assets, effects of manufacturing profit in acquired inventory, amortization of acquisition-related intangible assets, stock based compensation, in process research and development, restructuring, exceptional legal matters and other special charges or credits. Management excludes these items because it believes that the non-GAAP measures enhance an investor's overall understanding of Microsemi's financial performance and future prospects by being more reflective of Microsemi'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, forecastin g 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 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. By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of Microsemi'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: Robert C. Adams, Microsemi Corporation, Irvine, CA (949) 221-7100.
MICROSEMI CORPORATION Consolidated Income Statements (Unaudited, in thousands, except per share amounts) Quarter ended Nine months ended -------------------- -------------------- June 28, June 29, June 28, June 29, 2009 2008 2009 2008 --------- --------- --------- --------- NET SALES $ 107,007 $ 129,255 $ 343,294 $ 379,394 Cost of sales 61,838 71,103 204,980 213,509 --------- --------- --------- --------- GROSS MARGIN 45,169 58,152 138,314 165,885 Operating expenses: Selling, general and administrative 25,748 25,811 87,571 79,066 Research and development 10,032 11,013 31,008 33,462 Amortization of intangible assets 4,154 2,815 10,960 8,730 Restructuring charges 151 364 6,584 2,577 In process research and development 1,310 -- 1,310 440 --------- --------- --------- --------- Total operating expenses 41,395 40,003 137,433 124,275 --------- --------- --------- --------- OPERATING INCOME 3,774 18,149 881 41,610 Interest and other income, net 969 489 1,912 2,310 --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 4,743 18,638 2,793 43,920 Provision (benefit) for income taxes (3,099) 4,701 (1,646) 11,555 --------- --------- --------- --------- NET INCOME $ 7,842 $ 13,937 $ 4,439 $ 32,365 ========= ========= ========= ========= Earnings per share Basic $ 0.10 $ 0.18 $ 0.06 $ 0.42 ========= ========= ========= ========= Diluted $ 0.10 $ 0.17 $ 0.06 $ 0.41 ========= ========= ========= ========= Common and common equivalent shares outstanding: Basic 79,696 78,324 79,376 77,274 Diluted 80,410 80,476 80,077 79,359 MICROSEMI CORPORATION Schedule Reconciling Non-GAAP Net Income to GAAP Net Income (Unaudited, in thousands) Quarter ended Nine months ended ------------------ ------------------ June 28, June 29, June 28, June 29, 2009 2008 2009 2008 -------- -------- -------- -------- GAAP NET INCOME $ 7,842 $ 13,937 $ 4,439 $ 32,365 ======== ======== ======== ======== The non-GAAP amounts have been adjusted to exclude the following items: Excluded from cost of sales Transitional idle capacity (a) $ 5,250 $ 8,934 $ 18,451 $ 29,675 Inventory reserves due to restructuring activities (a) -- -- 10,204 -- Impairment of restructuring related fixed assets (a) -- -- 590 -- Manufacturing profit in acquired inventory (b) 132 -- 375 -- Excluded from operating and other expenses Amortization of intangible assets (c) 4,154 2,815 10,960 8,730 Stock based compensation (d) 5,723 4,838 20,614 16,163 In process research and development (e) 1,310 -- 1,310 440 Exceptional legal matters (f) (360) -- 2,197 -- Restructuring and other special charges (a) 319 768 7,959 4,274 -------- -------- -------- -------- 16,528 17,355 72,660 59,282 Income tax effect on non-GAAP adjustments (g) 7,672 4,261 16,867 14,878 -------- -------- -------- -------- Net effect of adjustments to GAAP net income $ 8,856 $ 13,094 $ 55,793 $ 44,404 ======== ======== ======== ======== NON-GAAP NET INCOME $ 16,698 $ 27,031 $ 60,232 $ 76,769 ======== ======== ======== ======== (a) - (g) Please refer to corresponding footnotes below. MICROSEMI CORPORATION Schedule Reconciling Reported Non-GAAP Financial Ratios to Comparable GAAP Financial Ratios (Unaudited) Quarter ended -------------------------------------------- June 28, March 29, June 29, 2009 2009 2008 ------------- ------------- ------------- GAAP gross margin 42.2 percent 31.0 percent 45.0 percent Effect of reconciling items on gross margin 5.0 percent 16.1 percent 6.9 percent Non-GAAP gross margin 47.2 percent 47.1 percent 51.9 percent GAAP operating margin 3.5 percent (15.9) percent 14.0 percent Effect of reconciling items on operating margin 16.5 percent 33.1 percent 13.5 percent Non-GAAP operating margin 20.0 percent 17.2 percent 27.5 percent MICROSEMI CORPORATION Selected Non-GAAP Financial Measures and Schedule Reconciling Selected Non-GAAP Financial Measures to Comparable GAAP Financial Measures (Unaudited, in thousands except for per share amounts) -------------------- -------------------- Quarter ended Nine months ended -------------------- -------------------- June 28, June 29, June 28, June 29, 2009 2008 2009 2008 --------- --------- --------- --------- GAAP gross margin $ 45,169 $ 58,152 $ 138,314 $ 165,885 Transitional idle capacity (a) 5,250 8,934 18,451 29,675 Inventory reserves due to restructuring activities (a) -- -- 10,204 -- Impairment of restructuring related fixed assets (a) -- -- 590 -- Manufacturing profit in acquired inventory (b) 132 -- 375 -- --------- --------- --------- --------- Non-GAAP gross margin $ 50,551 $ 67,086 $ 167,934 $ 195,560 --------- --------- --------- --------- GAAP operating income $ 3,774 $ 18,149 $ 881 $ 41,610 Transitional idle capacity (a) 5,250 8,934 18,451 29,675 Inventory reserves due to restructuring activities (a) -- -- 10,204 -- Impairment of restructuring related fixed assets (a) -- -- 590 -- Manufacturing profit in acquired inventory (b) 132 -- 375 -- Amortization of intangible assets (c) 4,154 2,815 10,960 8,730 Stock based compensation (d) 5,723 4,838 20,614 16,163 In process research and development (e) 1,310 -- 1,310 440 Exceptional legal matters (f) 740 -- 3,297 -- Restructuring and other special charges (a) 319 768 7,959 4,274 --------- --------- --------- --------- Non-GAAP operating income $ 21,402 $ 35,504 $ 74,641 $ 100,892 --------- --------- --------- --------- GAAP net income $ 7,842 $ 13,937 $ 4,439 $ 32,365 Transitional idle capacity (a) 5,250 8,934 18,451 29,675 Inventory reserves due to restructuring activities (a) -- -- 10,204 -- Impairment of restructuring related fixed assets (a) -- -- 590 -- Manufacturing profit in acquired inventory (b) 132 -- 375 -- Amortization of intangible assets (c) 4,154 2,815 10,960 8,730 Stock based compensation (d) 5,723 4,838 20,614 16,163 In process research and development (e) 1,310 -- 1,310 440 Exceptional legal matters (f) (360) -- 2,197 -- Restructuring and other special charges (a) 319 768 7,959 4,274 Income tax effect on non-GAAP adjustments (g) (7,672) (4,261) (16,867) (14,878) --------- --------- --------- --------- Non-GAAP net income $ 16,698 $ 27,031 $ 60,232 $ 76,769 --------- --------- --------- --------- GAAP diluted earnings per share $ 0.10 $ 0.17 $ 0.06 $ 0.41 Impact of non-GAAP adjustments on diluted earnings per share 0.11 0.17 0.69 0.56 --------- --------- --------- --------- Non-GAAP diluted earnings per share $ 0.21 $ 0.34 $ 0.75 $ 0.97 --------- --------- --------- --------- Diluted common and common equivalent shares outstanding used in calculating non-GAAP diluted earnings per share 80,410 80,476 80,077 79,359 (a) - (g) Please refer to corresponding footnotes below. MICROSEMI CORPORATION Condensed Consolidated Balance Sheets (Unaudited, in thousands) June 28, Sept. 28, 2009 2008 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 180,543 $ 107,197 Investment in auction rate securities -- 62,000 Accounts receivable, net 75,022 103,467 Inventories 112,144 121,726 Other current assets 34,679 24,296 --------- --------- Total current assets 402,388 418,686 Investment in auction rate securities 46,550 -- Other non-current assets 375,480 341,922 --------- --------- TOTAL ASSETS $ 824,418 $ 760,608 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 56,360 $ 67,226 Auction rate securities credit facility 46,550 -- Other long-term liabilities 21,131 20,212 Stockholders' equity 700,377 673,170 --------- ========= TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 824,418 $760,608 ========= =========
Balance Sheet Note
At June 28, 2009 and September 28, 2008, our investment in auction rate securities consisted of auction rate bonds backed by student loans. We have entered into a settlement agreement with the financial institution where we hold these investments and per the terms of the settlement agreement: a) in the quarter ended December 28, 2008, the financial institution repurchased our $15.5 million investment in auction rate preferred shares at par plus accrued interest; b) we hold rights to sell our $46.6 million investment in auction rate bonds back to the financial institution at par plus accrued interest beginning June 30, 2010; and c) we have the ability to borrow from the financial institution via a "no net cost" credit facility, the full par value of our investment in auction rate bonds.
During the quarter ended March 29, 2009, we monetized all auction rate securities at full par value of $46.6 million via the "no net cost" credit facility, which resulted in an increase in the balance of our cash and cash equivalents and a corresponding increase in borrowing under our auction rate securities credit facility of $46.6 million, respectively. While the financial institution where we hold our investment in auction-rate securities may repurchase them prior to June 30, 2010, we intend to put these securities back to the financial institution and use the proceeds to repay the credit facility no later than June 30, 2010, the earliest date allowed by the settlement agreement. As such, in the current quarter, we have classified both the investment and credit facility as non-current.
Notes Reconciling Non-GAAP Financial Information to GAAP Financial Information
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 that transitional idle capacity, inventory reserves due to restructuring activities, impairment of restructuring related fixed assets, effects of manufacturing profit in acquired inventory, amortization of acquisition-related intangible assets, stock based compensation, in process research and development, restructuring, exceptional legal matters and other special charges or credits. Management excludes these items because it believes that the non-GAAP measures enhance an investor's overall understanding of Microsemi's financial performance and future prospects by being more reflective of Microsemi'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 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. By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of Microsemi'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) Restructuring activities involve the closure and consolidation of certain of our manufacturing facilities. As these facilities are not expected to have a continuing contribution to operations or are expected to have a diminishing contribution during the transition phase, management believes excluding such items from Microsemi's operations provides investors with a means of evaluating Microsemi's on-going operations. Restructuring activities also include cost reduction measures to balance our operations to meet customer demand. 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 reserves due to restructuring activities and impairment of restructuring related fixed assets relate to the exiting of product that do not meet profitability metrics or products with recent substantial declines in projected demand. Restructuring and other special charges include 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) Manufacturing profit in acquired inventory resulted from purchase-accounting adjustments 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 margin. The manufacturing profit in acquired inventory has been excluded to facilitate comparability of gross margin 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 acquired operations. (c) While amortization of acquisition related intangible assets is expected to continue in the future, for internal analysis of Microsemi's operations, management does not view this expense as reflective of the business' current performance. (d) Stock based 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. (e) In process research and development has been excluded to facilitate the comparability of expenses between periods. In addition, management does not include IPR&D, an acquisition- related charge, in measuring core research and development costs, nor does it believe that IPR&D is indicative of current or future spending. (f) Amounts are related to expenses from previously disclosed matters and actions related the Department of Justice, International Trade Commission and an independent inquiry conducted by our Board of Directors, as well as, gains on litigation settlement net of settlement costs. Management excludes these expenses when evaluating core operating activities and for strategic decision making, forecasting future results and evaluating current performance. (g) The tax effect on non-GAAP adjustments represent 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.
CONTACT: Microsemi Corporation Financial Contact: John W. Hohener, Vice President and CFO (949) 221-7100 Investor Relations: Robert C. Adams, Vice President Business Development & Investor Relations (949) 221-7100