SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of
_____ the Securities Exchange Act of 1934
_____ For Quarter Period Ended April 2, 1995
______________________________________
or
Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to ___________
Commission File No. 0-8866
MICROSEMI CORPORATION
_____________________
(Exact name of registrant as specified in its charter)
Delaware 95-2110371
________ __________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2830 South Fairview Street, Santa Ana, California 92704
_______________________________________________________
(Address of principal executive offices) (Zip Code)
(714) 979-8220
______________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 month
period (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
_____ _____
The number of shares outstanding of the issuer's Common Stock, $.20
par value, on April 20, 1995 was 7,643,521.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The financial information for the thirteen and twenty-six
weeks ended April 2, 1995 of Microsemi Corporation (the
"Company") and the comparative financial information for the prior
year, together with the Balance Sheet as of October 2, 1994 are
attached hereto and incorporated herein by this reference.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations Capital Resources and Liquidity
Introduction
____________
Microsemi Corporation is a multinational supplier of high
reliability power semiconductors, surface mount and custom diode
assemblies for the electronics, computer, telecommunications,
defense/aerospace and medical markets. The company's semiconductor
products include diodes, transistors and silicon controlled
rectifiers(SCR's) which can be used in virtually all electrical and
electronic circuits. Typical functions include solid state
switching, signal processing, voltage and power regulation, circuit
protection and absorption of electrical surges and transient
voltage spikes. Technologies for these devices range from the very
mature mesa rectifier diodes still used in all power supply
applications to the newly designed micro-miniature transient
absorbers which are mounted within the cables used to connect
computer and telecommunications equipment.
Capital resources and liquidity
_______________________________
The Company's operations in the first half of fiscal year 1995
were funded with internally generated funds and borrowings
under the Company's line of credit. Under the current line of
credit, the Company can borrow up to $15,000,000, based upon
percentages of accounts receivable and inventory balances at
certain of the Company s operations. As of April 2, 1995,
$9,834,000 was borrowed under this credit facility. A $10,000,000
equipment financing loan was obtained in October 1989; however, in
March 1994, the Company refinanced the balance of $1,948,000 then
owing on this loan with a new term loan by utilizing funds
available under its present line of credit. This portion of the
line of credit requires monthly payments of $100,000 plus interest
at a rate of prime plus three percent. At April 2, 1995, the
Company had $2,998,000 in cash and cash equivalents.
A letter of credit for the Microsemi Santa Ana Industrial
Development Bond is carried by a bank in the amount of
$5,557,000. This letter of credit guarantees the repayment of a
$5,350,000 Industrial Development Bond which was originally issued
in April 1985 through the City of Santa Ana for the purchase of the
Company's Corporate Headquarters and for the construction of
improvements and new facilities at the Santa Ana plant. The Bond
was remarketed, effective February 1, 1995, reducing the existing
interest rate from 9.25% to 6.75% per annum and extending the
maturity date to February 1, 2005.
The Company believes that it can meet its current operating
cash requirements and debt service with internally generated
funds together with its available borrowing capacity.
The Company's revenues continue to be partially dependent on
military and aerospace programs. Recent reductions in defense
spending had and may continue to have a negative impact on the
Company s operations. Furthermore, there have been Department
of Defense (DOD) announcements of major changes in defense
procurement policy, which included official notification, on August
22, 1994, of Department of Defense acquisitions reform to utilize
best commercial practices instead of mandatory use of military
standard parts. In the past two years, military related business
has declined from approximately 60% to 40% of total revenues. This
has been more than offset by increases in shipments of commercial,
industrial, medical and space related products. In addition, the
Company continues to develop commercial applications for its
products to offset this decrease. Although the final impact of
these most recent changes in Department of Defense procurement
practices is not known, management believes that, either through
associated cost reductions or increases in shipments of non
Department of Defense products, it will not have a significant
impact on total future revenues, operations or cash flows.
The average collection period on accounts receivable was 55
days for the current six months compared to 57 days for the
same period of the last fiscal year. Sales and accounts receivable
of the business that was sold in fiscal year 1994 have been
excluded from this calculation.
The average days sales of products in inventories decreased to
166 days for the first six months of fiscal year 1995 compared
to 203 for the corresponding period of fiscal year 1994. This
primarily resulted from a lower inventory base due to the writeoffs
of military related inventories in the fourth quarter of fiscal
year 1994. Cost of sales and inventories of the business that was
sold in fiscal year 1994 have been excluded from this calculation.
Order backlog at April 2, 1995 increased to $52,100,000 from
$47,800,000 in the prior year. Order backlog at April 3,
1994 included $1,000,000 from the business that was sold in fiscal
year 1994.
The Company has no other significant capital commitments.
Certain operations of the Company utilize chemicals considered
as hazardous substances. The Company believes that it
complies with the procedures required for usage and disposition of
the substances; however, improper disposal thereof could have
an adverse effect upon the Company's future liquidity or results of
operations.
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED APRIL 2, 1995
COMPARED TO THE THIRTEEN WEEKS ENDED APRIL 3, 1994.
Net sales for the second quarter of fiscal year 1995 increased
to $32,441,000, or 6%, from $30,705,000 for the second
quarter of fiscal year 1994. The increase of $1,736,000 was due to
an increase of $2,636,000 from the continuing businesses as the
Company continues to shift more emphasis to the commercial
applications of the Company s products, partially offset by the
elimination of sales of approximately $900,000 from the subsidiary
that was sold in fiscal year 1994.
Gross profit increased $280,000. This resulted from an
increase of $117,000 from the continuing businesses due to higher
sales and from the elimination of $163,000 of gross losses from the
business sold in fiscal year 1994.
Operating expense for the first quarter of fiscal year 1995
decreased $474,000, compared to the corresponding period of
the prior year. The decrease was primarily due to the elimination
of operating expenses of the subsidiary that was sold in fiscal
1994.
The effective tax rates of 38% and 40% in the second quarters
of fiscal years 1995 and 1994, respectively, are the combined
result of taxes computed on foreign and domestic income.
RESULTS OF OPERATIONS FOR THE TWENTY-SIX WEEKS ENDED APRIL 2, 1995
COMPARED TO THE TWENTY-SIX WEEKS ENDED APRIL 3, 1994.
Net sales for the first half of fiscal year 1995 increased to
$60,098,000, or 4%, from $57,634,000 for the same period of
fiscal year 1994. The increase of $2,464,000 was due to $4,279,000
from the continuing businesses, partially offset by the elimination
of sales of $1,815,000 from the business that was sold in fiscal
1994.
Gross profit increased $492,000. This resulted from the
elimination of gross losses of $283,000 from the subsidiary that
was sold in fiscal 1994 and from an increase of $209,000 due to
higher sales from the continuing businesses.
Operating expense for the first six months of fiscal year 1995
decreased $805,000 compared to the corresponding period
of the prior year. The decrease was primarily due to the
elimination of expenses of the subsidiary that was sold in fiscal
1994.
The effective tax rates of 38% and 39% in the first six months
of fiscal years 1995 and 1994, respectively, are the combined
results of taxes computed on foreign and domestic income.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable.
Item 2. Changes in Securities
Inapplicable.
Item 3. Defaults Upon Senior Securities
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders
(a) An election of the Board of Directors was held at
the
annual meeting of Stockholders on February 8, 1995.
(b) Names and personal information about the nominees to
the Board of Directors were included in the Proxy
Statement dated January 24, 1995.
(c) 6,501,875 votes were received for each of the
nominees
to the Board of Directors as follows:
For Withheld
Philip Frey, Jr. 6,480,086 21,789
Jiri Sandera 6,481,580 20,295
Joseph M. Scheer 6,480,180 21,695
Brad Davidson 6,481,680 20,195
Robert B. Phinizy 6,480,180 21,695
Martin H. Jurick 6,479,680 22,195
(d) Inapplicable.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.74 Agreement of Sale and License between Raytheon
Company and Microsemi Corporation
10.75 Bill of Sale and Purchase Agreement between
Telcom Universal Inc. and Microsemi Corporation
10.76 Supplement to financing documents (Indenture of
Trust and Loan Agreement) relating to Industrial
Development Authority of the City of Santa Ana,
1985 Industrial Development Revenue Bonds
Microsemi Corporation Project) dated as of
January 15, 1995.
27 Financial data schedule.
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
MICROSEMI CORPORATION
By:
___________________________
David R. Sonksen
Vice President - Finance
and Chief Financial Officer
DATED: May 9, 1995
MICROSEMI CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
PART 1, ITEM 1
April 2, 1995
F-1
MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
(amounts in 000's)
[CAPTION] April 2, 1995 October 2, 1994
------------- ---------------
[S] [C] [C]
ASSETS
Current assets
Cash and equivalents $ 2,998 $ 3,994
Accounts receivable less allowance
for doubtful accounts, $2,025 at
April 2, 1995 and $2,173 at
October 2, 1994 18,593 17,772
Inventories 41,971 40,058
Deferred income taxes 4,076 4,076
Other current assets 1,292 1,197
------- -------
Total current assets 68,930 67,097
------- -------
Property and equipment, at cost 52,171 50,776
Less: Accumulated depreciation (28,272) (26,559)
------- -------
23,899 24,217
------- -------
Deferred income taxes 1,725 1,725
Other assets 6,390 7,110
------- -------
$ 100,944 $ 100,149
======= =======
[S] [C] [C]
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to banks and others $ 8,894 $ 9,584
Current maturities of long-term debt 4,255 3,578
Accounts payable and accrued
liabilities 15,879 16,879
Income taxes payable 2,335 1,212
Deferred income taxes 716 716
------- -------
Total current liabilities 32,079 31,969
------- -------
Deferred income taxes 1,568 1,568
------- -------
Long-term debt 48,840 50,568
------- -------
Other long-term liabilities 1,250 1,256
------- -------
Stockholders' equity
Common stock, $.20 par value;
authorized 20,000 shares; issued
7,630 shares at April 2, 1995 and
7,595 shares at October 2, 1994 1,526 1,519
Paid-in capital 14,450 14,397
Retained earnings (accumulated deficit) 1,231 (1,128)
------- -------
Total stockholders' equity 17,207 14,788
------- -------
$ 100,944 $ 100,149
======= =======
[FN]
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-2
MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(amounts in 000's, except earnings per share)
[CAPTION] 13 Weeks Ended 13 Weeks Ended
April 2, 1995 April 3, 1994
-------------- -------------
[S] [C] [C]
Net sales $ 32,441 $ 30,705
Cost of sales 24,327 22,871
------ ------
Gross profit 8,114 7,834
------ ------
Operating expenses
Selling 1,983 1,938
General and administrative 2,639 3,115
Amortization of goodwill and
other intangible assets 44 87
------ ------
Total operating expenses 4,666 5,140
------ ------
Income from operations 3,448 2,694
------ ------
Other income (expense)
Interest expense (1,342) (1,368)
Interest income - 38
Other 68 (52)
------ ------
Total other expense (1,274) (1,382)
------ ------
Earnings before income taxes 2,174 1,312
Provision for income taxes 826 522
------ ------
Net earnings $ 1,348 $ 790
====== ======
Earnings per share
- Primary $ 0.17 $ 0.10
====== ======
- Fully diluted $ 0.15 $ 0.09
====== ======
Common and common equivalent
shares outstanding
- Primary 7,993 7,936
- Fully diluted 11,573 9,009
[FN]
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-3
MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(amounts in 000's, except earnings per share)
[CAPTION] 26 Weeks Ended 26 Weeks Ended
April 2, 1995 April 3, 1994
-------------- --------------
[S] [C] [C]
Net sales $ 60,098 $ 57,634
Cost of sales 44,980 43,008
------ ------
Gross profit 15,118 14,626
------ ------
Operating expenses
Selling 3,878 3,727
General and administrative 4,957 5,853
Amortization of goodwill and
other intangible assets 93 153
------ ------
Total operating expenses 8,928 9,733
------ ------
Income from operations 6,190 4,893
------ ------
Other income (expense)
Interest expense (2,509) (2,664)
Interest income 15 38
Other 112 (100)
------ ------
Total other expense (2,382) (2,726)
------ ------
Earnings before income taxes 3,808 2,167
Provision for income taxes 1,447 846
------ ------
Net earnings $ 2,361 $ 1,321
====== ======
Earnings per share
- Primary $ 0.30 $ 0.17
====== ======
- Fully Diluted $ 0.26 $ 0.15
====== ======
Common and common equivalent
shares outstanding
- Primary 7,989 7,941
- Fully diluted 11,573 9,009
[FN]
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-4
MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of
Retained Earnings (Accumulated Deficit)
(amounts in 000's)
[CAPTION] 26 Weeks Ended 26 Weeks Ended
April 2, 1995 April 3, 1994
-------------- --------------
[S] [C] [C]
Retained earnings (accumulated
deficit) at beginning of period $ (1,128) $ 1,007
Net earnings 2,361 1,321
Translation loss from foreign
currency (2) (4)
------ ------
Retained earnings at end of period $ 1,231 $ 2,324
====== ======
[FN]
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-5
MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
Unaudited
(amounts in 000's)
[CAPTION] 26 Weeks Ended 26 Weeks Ended
April 2, 1995 April 3, 1994
-------------- --------------
[S] [C] [C]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,361 $ 1,321
Adjustments to reconcile net
earnings to net cash provided
from (used for) operating
activities:
Depreciation and amortization 1,800 2,129
(Increase) decrease in allowance
for doubtful accounts (148) 131
Changes in assets and liabilities:
Accounts receivable (673) (745)
Inventories (1,913) (2,461)
Other current assets (95) 236
Other assets 631 325
Accounts payable and accrued
liabilities (1,000) (577)
Income taxes payable 1,123 (230)
------ ------
Net cash provided from operating
activities 2,086 129
------ ------
CASH FLOWS FROM INVESTING ACTIVITY:
Additions to property and equipment (1,395) (1,171)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes
payable to bank and others (690) 1,999
Reduction of long-term debt (1,051) (1,185)
Reduction of other long-term
liabilities (6) -
Exercise of employee stock options 60 45
------ ------
Net cash provided from (used for)
financing activities (1,687) 859
------ ------
Net decrease in cash and cash equivalents (996) (183)
Cash and cash equivalents at beginning
of period 3,994 2,080
------ ------
Cash and cash equivalents at end
of period $ 2,998 $ 1,897
====== ======
[FN]
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-6
MICROSEMI CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
April 2, 1995
1. PRESENTATION OF FINANCIAL INFORMATION
The financial information furnished herein is unaudited, but, in
the opinion of the management of Microsemi Corporation, includes
all adjustments (all of which are normal, recurring adjustments)
necessary for a fair presentation of the results of operations for
the periods indicated. The results of operations for the first
twenty-six weeks of the current fiscal year are not necessarily
indicative of the results to be expected for the full year.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all information and footnotes necessary
for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted
accounting principles. The financial statements and notes should,
therefore, be read in conjunction with the financial statements and
notes thereto in the Annual Report for the fiscal year ended
October 2, 1994.
2. INVENTORIES
For interim reporting purposes, cost of goods sold and inventories
are estimated based upon the use of the gross profit
method applied to each product line.
Inventories used in the computation of cost of goods sold were:
April 2, October 2,
1995 1994
-------- ----------
(amounts in 000's)
Raw materials $ 9,219 $ 9,306
Work in progress 21,074 18,678
Finished goods 11,678 12,074
------ ------
$ 41,971 $ 40,058
====== ======
3. LONG-TERM DEBT
Long-term debt consisted of:
April 2, October 2,
1995 1994
-------- ----------
(amounts in 000's)
Industrial Development Bond-bearing
interest at 7.875% due May 2000;
secured by first deed of trust $ 3,075 $ 3,075
Industrial Development Bond-bearing
interest at 6.75% due February 2005;
secured by first deed of trust 5,350 5,700
Convertible Subordinated Debentures
-bearing interest at 5.875% due 2012 33,281 33,281
Convertible Subordinated Debentures
-bearing interest at 10% due 1999 2,000 2,000
Notes payable-bearing interest at
ranges of 5%-13% due between
August 1995 and July 2002 9,389 10,090
------ ------
53,095 54,146
Less current portion (4,255) (3,578)
------ ------
$ 48,840 $ 50,568
====== ======
4. EARNINGS PER SHARE
Earnings per share for the primary basis have been computed based
upon the weighted average number of common and common equivalent
shares outstanding during the respective periods. Earnings per
share for the fully diluted basis have been computed, when the
result is dilutive, based upon the assumption that the convertible
subordinated debentures had been converted to common stock at the
date of issuance, with a corresponding increase in net income to
reflect a reduction in related interest expense, net of applicable
taxes.
5. STATEMENT OF CASH FLOWS
For purposes of the Consolidated Statements of Cash Flows, the
Company considers all short-term, highly liquid investments with
maturities of three months or less at the date of acquisition to be
cash equivalents.
Supplementary information 26 weeks ended 26 weeks ended
April 2, 1995 April 3, 1994
Cash paid during the period for: (amounts in 000's)
Interest $ 3,262 $ 2,497
Income taxes $ 144 $ 1,112
6. DISPOSITIONS
On June 8, 1994, the Company completed a transaction with
Technology Marketing Incorporated (TMI) to dispose of substantially
all of the assets of Omni Technology Corporation (Omni), a wholly
owned subsidiary of the Company. The Company received $200,000
cash, a $300,000 term note receivable, $2,000,000 in 4% redeemable
preferred stock and warrants to purchase up to 250,000 shares of
TMI s common stock at $1.00 per share. The preferred stock is
subject to mandatory redemption over a period of between 10 to 20
years based upon the achievement of certain performance
objectives by TMI. The note receivable, preferred stock and
warrants are recorded at net realizable values.