0000310568-95-000022.txt : 19950817 0000310568-95-000022.hdr.sgml : 19950817 ACCESSION NUMBER: 0000310568-95-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950702 FILED AS OF DATE: 19950816 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROSEMI CORP CENTRAL INDEX KEY: 0000310568 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 952110371 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08866 FILM NUMBER: 95564490 BUSINESS ADDRESS: STREET 1: 2830 S FAIRVIEW ST STREET 2: PO BOX 26890 CITY: SANTA ANA STATE: CA ZIP: 92704 BUSINESS PHONE: 7149798220 FORMER COMPANY: FORMER CONFORMED NAME: MICROSEMICONDUCTOR CORP DATE OF NAME CHANGE: 19830323 10-Q 1 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 the Quarterly Period Ended July 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 July 20, 1995 was 7,693,981. PART I - FINANCIAL INFORMATION Item 1. Financial Statements The unaudited consolidated financial information for the thirteen and thirty-nine weeks ended July 2, 1995 of Microsemi Corporation (the "Company") and the unaudited consolidated financial information for the corresponding periods of 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 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 nine months of fiscal year 1995 were funded with internally generated funds and borrowings under its line of credit. Under the current line of credit, the Company can borrow up to $20,000,000, based upon percentages of accounts receivable and inventory balances at certain of its operations. As of July 2, 1995, $7,737,000 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 July 2, 1995, the Company had $3,562,000 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, which expires on February 1, 1998, unless extended, 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 an average rate of 6.75% per annum. The new terms required principal payments of $350,000 on February 1, 1995. Additional principal payments are due on February 1 as follows: $1,050,000 in 1998, an annual amount of $100,000 from 1999 to 2004 and $3,700,000 in 2005. The Company has no other significant capital commitments 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 average collection period of accounts receivable was 54 days for the first nine months of both fiscal years 1995 and 1994. 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 155 days for the first nine months of fiscal year 1995 from 198 days for the corresponding period of fiscal year 1994. This primarily resulted from a lower inventory base due to the writedowns 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. The following factors should be considered carefully in evaluating the Company and its business, together with all of the other information set forth or incorporated by reference herein. Declining Defense Procurement Sales and Changes in DOD Procurement Policy A substantial portion of the Company's sales are to military and aerospace markets which are subject to the business risk of changes in governmental appropriations and national defense policies and priorities. These sales are derived from direct and indirect U.S. Department of Defense ("DOD") business and business with other U.S. government agencies. Since fiscal 1990, the Company has experienced declining defense-related sales, resulting in contract award delays and reduced military program funding. Furthermore, there have been recent DOD announcements of major changes in defense procurement policy, which included official notification, on August 22, 1994, of DOD acquisition reform to utilize best commercial practices instead of mandatory use of military standard parts. The final impact of these most recent changes in DOD procurement practices is not known. Management believes that these trends could continue and that the Company's growth could be dependent upon commercial, industrial, medical, telecommunications and space business. The Company estimates that from fiscal year 1990 to fiscal year 1994 military and aerospace related business has declined from approximately 65% to 40% of total revenues. Although this decline in military revenues has been offset by the increase in shipments to other customers, no assurances can be made that the Company will be able to avoid a significant adverse impact on future revenues, results of operations or cash flows. Competition The Company competes primarily in the high reliability power semiconductor market. The Company has numerous competitors across all of its product lines. In the defense market sector, the Company believes that it has a major share of the market. In the commercial/industrial market sector, there are numerous competitors, such as Motorola, Inc., General Instruments Corp., ITT Corp. and National Semiconductor, who are significantly larger than the Company and have greater resources. Competition in certain of its product lines is dependent on price and performance. Competition in the high reliability area is dependent less on price and more on product reliability and performance. The Company believes that it competes effectively in all areas of business in which it is engaged. There can be no assurance that the Company will not experience increased competition in the future from these or other companies which may adversely affect the Company's marketing of its products and services. Changes in Technology The power semiconductor market is subject to technological change and changes in industry standards. To remain competitive, the Company must continue to devote resources to advance process technologies, to increase product performance, to improve manufacturing yields and to improve the mix between the Company's shipment of military and commercial product and between its high cost and low cost product. There can be no assurance that the Company's competitors will not develop new technologies that are substantially equivalent or superior to the Company's technology. Proprietary Rights The Company generally does not have, nor does it generally intend to apply for, patent protection on any aspect of its technology. The Company believes that patents often provide only narrow protection and patents require public disclosure of information which may otherwise be subject to trade secret protection. The Company's reliance upon protection of some of its technology as "trade secrets" will not necessarily protect the Company from the use by other persons of its technology, or their use of technology that is similar or superior to that which is embodied in the Company's trade secrets. There can be no assurance that others will not be able to independently duplicate or exceed the Company's technology in whole or in part. No assurances can be made that the Company will be able to maintain the confidentiality of the Company's technology, dissemination of which could have a material adverse effect on the Company's business. In addition, litigation may be necessary to determine the scope and validity of the Company's proprietary rights. In instances in which the Company holds any patents on a product line, the patents are not known to have any material current value. Also there can be no assurance that any patents held by the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide competitive advantages to the Company. Foreign Operations The Company conducts a portion of its operations outside the United States and its business is subject to risks associated with many factors beyond its control, such as fluctuations in foreign currency rates, instability of foreign economies and governments, and changes in U.S. and foreign laws and policies affecting trade and investment. The Company owns or leases manufacturing and assembling facilities in Ennis, Ireland; Bombay, India and Hong Kong and is in the process of establishing a joint venture in The People's Republic of China. Although the Company has not experienced any materially adverse effects with respect to its foreign operations arising from such factors, there can be no assurance that such problems will not arise in the future. In addition, although the Company seeks to hedge its exposure to currency exchange rate fluctuations, the Company's competitive position relative to non-U.S. suppliers can be affected by the exchange rate of the U.S. dollar against other currencies. Sales to Foreign Customers Sales to foreign customers represented approximately 17%, 12% and 8% of net sales for the 1994, 1993 and 1992 fiscal years, respectively. Foreign sales may be subject to political and economic risks, including political instability, changes in import/export regulations, tariffs and freight rates and difficulties in collecting receivables and enforcing contracts generally. Changes in current tariff structures, exchange rates or other trade policies could adversely affect the Company's sales to foreign customers or the collection of receivables generated from such sales. Environmental Regulation While the Company believes that it has all environmental permits necessary to conduct its business and that its activities conform to present environmental regulations, increased public attention has been focused on the environmental impact of semiconductor operations. The Company in the conduct of its manufacturing operations has handled and does handle materials that are considered hazardous, toxic or volatile under federal, state and local laws, and, therefore, are subject to regulations relating to their use, storage, discharge and disposal. No assurances can be made that the risk of accidental release of such materials can be completely eliminated. In addition, the Company operates or owns facilities located on or near real property that may formerly have been used in ways that involved such materials. In the event of a violation of environmental laws, the Company could be held liable for damages and the costs of remediation, and, along with the rest of the semiconductor industry, is subject to variable interpretations and governmental priorities concerning environmental laws and regulations. Environmental statutes have been interpreted to provide for joint and several liability and strict liability regardless of actual fault. There can be no assurance that the Company and its subsidiaries will not be required to incur costs to comply with,or that the operations, business, or financial condition of the Company will not be materially adversely affected by, current or future environmental laws or regulations. In Broomfield, Colorado, the owner of a property located adjacent to a manufacturing facility owned by a subsidiary of the Company has filed suit against the subsidiary and other parties, claiming that contaminants migrated to his property, thereby diminishing its value. In August 1995, the subsidiary, together with former owners of the manufacturing facility, agreed to settle the claim and to indemnify the owner of the adjacent property from remediation costs. Although TCE and other contaminants previously used at the facility are present in soil and groundwater on the subsidiary's property, the Company vigorously contests any assertion that the subsidiary is the cause of the contamination; however, there can be no assurance that recourse will be available against third parties. State and local agencies in Colorado are reviewing current data and considering study and cleanup options, and it is not yet possible to predict costs for remediation or the allocation thereof among potentially responsible parties. Manufacturing Risks The Company's manufacturing processes are highly complex, require advanced and costly equipment and are continuously being modified in an effort to improve yields and product performance. Minute impurities or other difficulties in the manufacturing process can lower yields. In addition, California and the Pacific Rim are known to contain various earthquake faults. The Company's operations could be materially adversely affected if production at any of its major facilities were interrupted. There can be no assurance that the Company will not experience manufacturing difficulties in the future. Concentration of Suppliers Although the Company generally uses materials and parts available from multiple suppliers, the Company has only a limited number of suppliers for certain basic materials used in the Company's products. The Company has not experienced any substantial production delays from materials or parts shortages in the past. The Company believes that alternate suppliers for these materials and parts are available, but there can be no assurance that the Company will not experience interruption of such supplies in the future. Order Backlog Order backlog at July 2, 1995 increased to $57,500,000 from $46,000,000 in the prior year. Lead times for the release of purchase orders depend upon the scheduling practices of individual customers, and delivery times of new or non-standard products can be affected by scheduling factors and other manufacturing considerations. The rate of booking new orders can vary significantly from month to month. For these reasons, and because of the possibility of customer changes in delivery schedules or cancellations of orders or other factors, the Company's backlog as of any particular date may not be representative of actual sales for any succeeding period. Dependence on Key Personnel The Company's future performance is significantly dependent on the continued active participation of members of its current management. The Company does not have written employment contracts with its employees. Should one or more of the Company's key management employees leave or otherwise become unavailable to the Company, the Company's business and results of operations may be materially adversely affected. Possible Volatility of Stock Prices The market prices of securities issued by technology companies, including the Company, have been volatile. The securities of many technology companies have experienced extreme price and volume fluctuations, which have often been not necessarily related to the companies' respective operating performances. Quarter to quarter variations in operating results, changes in earnings estimates by analysts, announcements of technological innovations or new products, announcements of major contract awards, events involving other companies in the industry and other events or factors may have a significant impact on the market price of the Company's Common Stock. Product Liability The Company's business exposes it to potential liability risks that are inherent in the manufacturing and marketing of high-reliability electronic components for critical applications. No assurances can be made that the Company's product liability insurance coverage is adequate or that present coverage will continue to be available at acceptable costs, or that a product liability claim would not adversely affect the business or financial condition of the Company. Change of Control Provisions The Company's Certificate of Incorporation, Bylaws, Shareholder Rights Plan and certain employment compensation plans contain provisions that make it more difficult for a third party to acquire, or that discourage a third party from attempting to acquire, control of the Company. In addition, as a Delaware corporation, the Company is subject to the restrictions imposed under Section 203 of the Delaware General Corporation Law which prevent the Company from engaging in certain change of control transactions with certain of its stockholders under certain circumstances. RESULTS OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED JULY 2, 1995 COMPARED TO THE THIRTEEN WEEKS ENDED JULY 3, 1994. Net sales for the third quarter of fiscal year 1995 increased 19% to $36,138,000, from $30,336,000 for the third quarter of fiscal year 1994. The increase of $5,802,000 was due to an increase of $6,355,000 from higher volume of shipments of commercial and industrial products of the continuing businesses; partially offset by the elimination of sales of approximately $553,000 from the subsidiary that was sold in fiscal year 1994. Gross profit increased $1,704,000. This resulted from an increase of $1,449,000 from the continuing businesses due to higher sales and from the elimination of $255,000 of gross losses from the business sold in fiscal year 1994. Operating expenses for the third quarter of fiscal year 1995 increased $541,000, compared to the corresponding period of the prior year; however, operating expense decreased to 15% of sales in the current quarter compared to 16% of sales in the corresponding period of fiscal year 1994. The effective tax rates of 40% and 41% in the third 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 THIRTY-NINE WEEKS ENDED JULY 2, 1995 COMPARED TO THE THIRTY-NINE WEEKS ENDED JULY 3, 1994. Net sales for the first thirty-nine weeks of fiscal year 1995 increased 9% to $96,236,000, from $87,970,000 for the same period of fiscal year 1994. The increase of $8,266,000 was due to an increase of $10,634,000, from higher volumes of shipments of commercial and industrial products of the continuing businesses; partially offset by the elimination of sales of $2,368,000 from the business that was sold in fiscal 1994. Gross profit increased $2,715,000. This resulted from the elimination of gross losses of $538,000 from the subsidiary that was sold in fiscal 1994 and from an increase of $2,177,000 due to higher sales from the continuing businesses. Operating expenses for the first nine months of fiscal year 1995 increased $255,000 compared to the same period of the prior fiscal year. This $255,000 included an increase of $1,004,000 from the continuing businesses primarily due to higher sales volumes; partially offset by the elimination of $749,000 of expenses from the business that was sold in fiscal year 1994. The effective tax rates of 39% and 40% in the first nine 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 In August 1995, Microsemi Corp.-Colorado, a subsidiary of Microsemi, together with other parties, agreed to settle the law suit Clayton Curphy v. Microsemi Corp. , Colorado, et al, Case No. 94 CV167, Division 2, and to indemnify the owner of the adjacent property from remediation costs. Although TCE and other contaminants, previously used at the facility, are present in soil and groundwater on the subsidiary's property, the Company intends to vigorously contest any assertions that the subsidiary was a cause of this contamination and to enforce any rights it may have of indemnification or contribution from any third party who may be responsible. State and local agencies in Colorado are reviewing current data and considering study and cleanup options. It is not yet possible to predict a possible range of the total costs that may be incurred in connection with the subsidiary's property. 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) Inapplicable. (b) Inapplicable. (c) Inapplicable. (d) Inapplicable. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 10.77 Amendments of the 1987 Microsemi Corporation Stock Plan. Adopted on May 16, 1995. Exhibit 11.1 Unaudited computation of Earnings Per Share for the thirteen and thirty-nine weeks ended July 2, 1995 and July 3, 1994 Exhibit 27.1 Unaudited Financial Data Schedule for the nine months ended July 2, 1995 (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 (Principal Financial Officer and Chief Accounting Officer and duly authorized to sign on behalf of the Registrant) DATED: August 15, 1995 MICROSEMI CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS PART 1, ITEM 1 July 2, 1995 F-1 MICROSEMI CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (amounts in 000's) [CAPTION] July 2, 1995 October 2, 1994 ------------ --------------- (Unaudited) (Audited) [S] [C] [C] ASSETS Current assets Cash and cash equivalents $ 3,562 $ 3,994 Accounts receivable less allowance for doubtful accounts, $2,402 at July 2, 1995 and $2,173 at October 2, 1994 20,489 17,772 Inventories 41,112 40,058 Deferred income taxes 4,076 4,076 Other current assets 1,305 1,197 ------- ------- Total current assets 70,544 67,097 ------- ------- Property and equipment, at cost 52,695 50,776 Less: Accumulated depreciation (28,699) (26,559) ------- ------- 23,996 24,217 ------- ------- Deferred income taxes 1,725 1,725 Other assets 6,244 7,110 ------- ------- $ 102,509 $ 100,149 ======= ======= [S] [C] [C] LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable to banks and others $ 7,113 $ 9,584 Current maturities of long-term debt 3,337 3,578 Accounts payable and accrued liabilities 18,133 16,879 Income taxes payable 2,883 1,212 Deferred income taxes 716 716 ------- ------- Total current liabilities 32,182 31,969 ------- ------- Deferred income taxes 1,568 1,568 ------- ------- Long-term debt 48,609 50,568 ------- ------- Other long-term liabilities 1,167 1,256 ------- ------- Stockholders' equity Common stock, $.20 par value; authorized 20,000 shares; issued 7,670 shares at July 2, 1995 and 7,595 shares at October 2, 1994 1,534 1,519 Paid-in capital 14,520 14,397 Retained earnings (accumulated deficit) 2,929 (1,128) ------- ------- Total stockholders' equity 18,983 14,788 ------- ------- $ 102,509 $ 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 July 2, 1995 July 3, 1994 -------------- -------------- [S] [C] [C] Net sales $ 36,138 $ 30,336 Cost of sales 26,536 22,438 ------ ------ Gross profit 9,602 7,898 ------ ------ Operating expenses Selling 2,045 1,947 General and administrative 3,127 2,692 Amortization of goodwill and other intangible assets 58 50 ------ ------ Total operating expenses 5,230 4,689 ------ ------ Income from operations 4,372 3,209 ------ ------ Other income (expense) Interest expense (1,260) (1,223) Interest income 23 10 Other (289) (134) ------ ------ Total other expense (1,526) (1,347) ------ ------ Earnings before income taxes 2,846 1,862 Provision for income taxes 1,148 766 ------ ------ Net earnings $ 1,698 $ 1,096 ====== ====== Earnings per share - Primary $ 0.21 $ 0.14 ====== ====== - Fully diluted $ 0.17 $ 0.12 ====== ====== Common and common equivalent shares outstanding - Primary 8,099 7,989 - Fully diluted 11,752 11,550 [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] 39 Weeks Ended 39 Weeks Ended July 2, 1995 July 3, 1994 ------------ ------------ [S] [C] [C] Net sales $ 96,236 $ 87,970 Cost of sales 71,516 65,965 ------ ------ Gross profit 24,720 22,005 ------ ------ Operating expenses Selling 5,923 5,674 General and administrative 8,084 8,026 Amortization of goodwill and other intangible assets 151 203 ------ ------ Total operating expenses 14,158 13,903 ------ ------ Income from operations 10,562 8,102 ------ ------ Other income (expense) Interest expense (3,769) (3,887) Interest income 38 48 Other (177) (234) ------ ------ Total other expense (3,908) (4,073) ------ ------ Earnings before income taxes 6,654 4,029 Provision for income taxes 2,595 1,612 ------ ------ Net earnings $ 4,059 $ 2,417 ====== ====== Earnings per share - Primary $ 0.50 $ 0.30 ====== ====== - Fully Diluted $ 0.43 $ 0.28 ====== ====== Common and common equivalent shares outstanding - Primary 8,053 7,967 - Fully diluted 11,752 9,093 [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] 39 Weeks Ended 39 Weeks Ended July 2, 1995 July 3, 1994 -------------- -------------- [S] [C] [C] Retained earnings (accumulated deficit) at beginning of period $ (1,128) $ 1,007 Net earnings 4,059 2,417 Translation loss from foreign currency (2) (5) ------ ------ Retained earnings at end of period $ 2,929 $ 3,419 ====== ====== [FN] See accompanying Notes to Unaudited Consolidated Financial Statements. F-5 MICROSEMI CORPORATION AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows (amounts in 000's) [CAPTION] 39 Weeks Ended 39 Weeks Ended July 2, 1995 July 3, 1994 -------------- -------------- [S] [C] [C] CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 4,059 $ 2,417 Adjustments to reconcile net earnings to net cash provided from operating activities: Depreciation and amortization 2,937 3,213 Decrease in allowance for doubtful accounts 229 121 Loss on sales and retirements of assets - 49 Changes in assets and liabilities: Accounts receivable (2,946) 563 Inventories (1,054) (3,254) Other current assets (108) (471) Other assets 713 351 Accounts payable and accrued liabilities 1,254 378 Income taxes payable 1,671 348 ------ ------ Net cash provided from operating activities 6,755 3,715 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of assets - 200 Additions to property and equipment (2,565) (1,526) ------ ------ Net cash used for investing activities (2,565) (1,326) ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in notes payable to banks and others (2,471) 205 Reduction of long-term debt (2,200) (1,919) Reduction of other long-term liabilities (89) (86) Exercise of employee stock options 138 52 ------ ------ Net cash used for financing activities (4,622) (1,748) ------ ------ Net increase (decrease) in cash and cash equivalents (432) 641 Cash and cash equivalents at beginning of period 3,994 2,080 ------ ------ Cash and cash equivalents at end of period $ 3,562 $ 2,721 ====== ====== [FN] See accompanying Notes to Unaudited Consolidated Financial Statements. F-6 MICROSEMI CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS July 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 third fiscal quarter or the first thirty-nine 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 on the Form 10-K for the fiscal year ended October 2, 1994. Certain reclassifications have been made to the unaudited financial statements for the thirteen and thirty-nine weeks ended July 3, 1994 to conform to the 1995 presentation. 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: July 2, October 2, 1995 1994 ---- ---- (amounts in 000's) Raw materials $ 9,410 $ 9,306 Work in progress 20,236 18,678 Finished goods 11,466 12,074 ------ ------ $ 41,112 $ 40,058 ====== ====== 3. LONG-TERM DEBT Long-term debt consisted of: July 2, October 2, 1995 1994 ---- ---- (amounts in 000's) Industrial Development Bond-bearing interest at 7.875% due in installments from 1996 to 2000; secured by first deed of trust $ 2,905 $ 3,075 Industrial Development Bond-bearing interest at 6.75% due in installments from 1998 to 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 Notes-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 8,410 10,090 ------ ------ 51,946 54,146 Less current portion (3,337) (3,578) ------ ------ $ 48,609 $ 50,568 ====== ====== The Company's 5.875% Convertible Subordinated Debentures require annual sinking fund payments in the amount of 5% of the principal amount thereof, commencing in March 1997, less the principal amount of converted or redeemed debentures, and the balance matures on March 1, 2012. 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 debt 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 39 weeks ended 39 weeks ended July 2, 1995 July 3, 1994 ------------ ------------ Cash paid during the period for: (amounts in 000's) Interest $ 4,477 $ 3,218 Income taxes $ 747 $ 1,317 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 note receivable, preferred stock and warrants are recorded at their estimated net realizable values. 7. SUBSEQUENT EVENTS In Broomfield, Colorado, an owner of property located adjacent to a manufacturing facility owned by a subsidiary of the Company had filed suit against the subsidiary and other parties, claiming that contaminants migrated to his property, thereby diminishing its value. In August 1995, the subsidiary, together with former owners of the manufacturing facility, agreed to settle the claim and to indemnify the owner of the adjacent property from remediation costs. Although TCE and other contaminants previously used at the facility are present in soil and groundwater on the subsidiary's property, the Company vigorously contests any assertion that the subsidiary is the cause of the contamination; however, the can be no assurance that recourse will be available against third parties. State and local agencies in Colorado are reviewing current data and considering studu and clean up options, and it is not yet possible to predict costs for remediation or the allocation thereof among potentially responsible parties. EX-10.77 2 Exhibit 10.77 AMENDMENTS OF THE 1987 MICROSEMI CORPORATION STOCK PLAN Adopted May 16, 1995 Section 5 (e) of the 1987 Microsemi Corporation Stock Plan ("1987 Plan") is hereby amended and restated in full as follows: 5. (e) Satisfaction of Option Price. The Grantee shall pay the Option Price (i) in cash, or (ii) with the Committee's permission, by delivering shares of Microsemi Stock already owned by the Grantee and having a fair market value on the date of exercise equal to the Option Price, or a combination of cash and shares, or (iii) with the Committee's permission, by Microsemi withholding from the Grantee out of the Microsemi Stock otherwise deliverable upon exercise a number of shares having a fair market value equal to the aggregate Option Price, or (iv) with the Committee's permission, by the execution and delivery of Grantee's promissory note in the principal amount of the exercise price, with such term, interest rate and other terms and provisions, including, without limitation, requiring the Microsemi Stock acquired upon exercise to be pledged to the Company to secure payment of the note, as the Board of Directors may specify; (v) by cancellation of indebtedness of the Company to Grantee, equal to the amount of the exercise price; (vi) by waiver of compensation due or accrued to Grantee for services rendered, equal to the amount of the exercise price; (vii) provided that a public market for the Company's stock exists, through a "same day sale" commitment from the Grantee and a broker-dealer that is a member of the National Association of Securities Dealers (an "NASD" Dealer), whereby the Grantee irrevocably elects to exercise his Option and to sell a portion of the Microsemi Stock so purchased to pay for the exercise price and whereby the NASD Dealer irrevocably commits upon receipt of such Microsemi Stock to forward the exercise price directly to the Company; (viii) provided that a public market for the Company's stock exists, through a "margin" commitment from the Grantee and NASD Dealer whereby the Grantee irrevocably elects to exercise this Option and to pledge the Microsemi Stock so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of such Microsemi Stock to forward the exercise price directly to the Company; or (ix) any combination of (i), (ii), (iii), (iv), (v), (vi), (vii) or (viii) above. The Grantee shall pay the Option Price not later than thirty (30) days after the date of a statement from the Company following exercise setting forth the Option Price, fair market value of Microsemi Stock on the exercise date, the number of shares of Microsemi Stock that may be delivered in payment of the Option Price, and the amount of withholding tax due, if any. If the Grantee fails to pay the Option Price within the thirty (30) day period, the Committee shall have the right to take whatever action it deems appropriate, including voiding the option exercise. The Company shall not issue or transfer shares of Microsemi Stock upon exercise of a Stock Option until the Option Price is fully paid. EX-11.1 3 Exhibit 11.1 Microsemi Corporation and Subsidiaries Unaudited Earnings Per Share (in thousands, except per share data) 13 weeks 13 weeks 39 weeks 39 weeks ended ended ended ended July 2, July 3, July 2, July 3, 1995 1994 1995 1994 ---- ---- ---- ---- PRIMARY Net earnings $1,698 $1,096 $4,059 $2,417 ===== ===== ===== ===== Outstanding shares 7,670 7,576 7,670 7,576 Equivalent shares 429 413 383 391 ----- ----- ----- ----- Primary common and common equivalent shares 8,099 7,989 8,053 7,967 ===== ===== ===== ===== Primary earnings per share $0.21 $0.14 $0.50 $0.30 ===== ===== ===== ===== FULLY DILUTED Net earnings $1,698 $1,096 $4,059 $2,417 Interest savings from conversion of convertible debt 334 332 1,000 90 ------ ------ ------ ----- Fully diluted earnings $2,032 $1,428 $5,059 $2,507 ====== ====== ====== ===== Outstanding shares 7,670 7,576 7,670 7,576 Equivalent shares 559 451 559 451 Convertible shares 3,523 3,523 3,523 1,066 ------ ------ ------ ----- Fully diluted common and common equivalent shares 11,752 11,550 11,752 9,093 ====== ====== ====== ===== Fully diluted earnings per share $0.17 $0.12 $0.43 $0.28 ====== ====== ====== ===== EX-27.1 4 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QUARTER 1995
5 1000 9-MOS OCT-01-1995 OCT-03-1994 JUL-02-1995 3562 0 22891 2402 41112 70544 52695 28699 102509 32182 48609 1534 0 0 17449 102509 96236 96236 71516 71516 177 0 3769 6654 2595 2595 0 0 0 2595 .50 .43