8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 25, 2017

MICROSEMI CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	0-8866	95-2110371
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

One Enterprise, Aliso Viejo, California	92656
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code

(949) 380-6100

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

INFORMATION TO BE INCLUDED IN THE REPORT

Item 1.01 Entry into a Material Definitive Agreement

Amendment No. 3 to Credit Agreement

On April 25, 2017, Microsemi Corporation, a Delaware corporation ("Microsemi") entered into Amendment No. 3 to Credit Agreement ("Amendment No. 3") to its existing Credit Agreement dated as of January 15, 2016, as amended by that certain Amendment No. 1 to Credit Agreement, dated as of June 29, 2016, and that certain Amendment No. 2 to Credit Agreement, dated as of January 25, 2017, and as supplemented by that certain Increase Term Joinder to Credit Agreement, dated as of June 29, 2016, and that certain Increase Term Joinder No. 2 to Credit Agreement dated as of January 25, 2017 (as amended and supplemented, the "Existing Credit Agreement" and as amended by Amendment No. 3, the "Credit Agreement"), with Morgan Stanley Senior Funding, Inc., as administrative agent, the subsidiary guarantors party thereto and the lenders party thereto.

Pursuant to the Existing Credit Agreement, certain lenders provided senior secured first lien credit facilities, consisting of term loan facilities and a revolving credit facility. Amendment No. 3 provides for, among other things (i) new pricing terms for any revolving loans that may be outstanding from time to time under the Existing Credit Agreement (after giving effect to the amendment, the "Repriced Revolving Loans") and (ii) new pricing terms for the $778,138,750 in aggregate principal amount of term A loans (the "Existing Term A Loans") outstanding under the Existing Credit Agreement immediately prior to the effectiveness of Amendment No. 3 (after giving effect to the amendment, the "Repriced Term A Loans" and together with the Repriced Revolving Loans, the "Repriced Loans"), which Repriced Term A Loans replace the Existing Term A Loans. Immediately prior to and after giving effect to Amendment No. 3, there were no revolving loans outstanding under the Existing Credit Agreement or the Credit Agreement, as applicable.

The Repriced Loans mature January 15, 2021. The Repriced Loans bear interest at Microsemi’s option at Base Rate or LIBOR, plus a margin. The margin for Base Rate Term A Loans is 0.75% and the margin for LIBOR Term A Loans is 1.75%. The Repriced Loans are subject to a 0.00% LIBOR floor.

Except as modified by Amendment No. 3 as described above, the terms of the Repriced Term A Loans are the same as the terms of the Existing Term A Loans and the terms of any Repriced Revolving Loans will be the same as any revolving loans that would have been outstanding under the Credit Agreement immediately prior to the effectiveness of Amendment No. 3.

Certain of the lenders party to the Credit Agreement, as well as certain of their respective affiliates, have performed, and may in the future perform, commercial banking, investment banking, underwriting and other financial advisory services for Microsemi, for which they have received, and will receive, customary fees and expenses.

The foregoing summary of Amendment No. 3 does not purport to be complete and is subject to, and qualified in its entirety by, the full text of Amendment No. 3, a copy of which is included as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 2.02 Results of Operations and Financial Condition.

On April 27, 2017, Microsemi Corporation issued a press release reporting its second quarter results, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information provided in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
10.1	Amendment No. 3 to Credit Agreement, dated as of April 25, 2017, among Microsemi Corporation, the subsidiary guarantors party thereto, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent
99.1	Press release dated April 27, 2017, reporting second quarter results

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MICROSEMI CORPORATION (Registrant)
Date: April 27, 2017	By:	/s/ John W. Hohener
		John W. Hohener Executive Vice President, Chief Financial Officer, and Treasurer

EXHIBIT INDEX

Exhibit No.	Description
10.1	Amendment No. 3 to Credit Agreement, dated as of April 25, 2017, among Microsemi Corporation, the subsidiary guarantors party thereto, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent
99.1	Press release dated April 27, 2017, reporting second quarter results

EX-10.1

AMENDMENT NO. 3

TO CREDIT AGREEMENT

AMENDMENT NO. 3 TO CREDIT AGREEMENT, dated as of April 25, 2017 (this “Amendment”), entered into by and among MICROSEMI CORPORATION, a Delaware corporation (the “Borrower”), the undersigned Subsidiary Guarantors, MORGAN STANLEY SENIOR FUNDING, INC. (“MSSF”), as administrative agent (in such capacity, the “Administrative Agent”), the undersigned Term A Lenders, the undersigned Revolving Lenders, and MSSF, as Swingline Lender.

PRELIMINARY STATEMENTS:

WHEREAS, the Borrower, the several banks and other financial institutions or entities party thereto as lenders, the Administrative Agent and Morgan Stanley Senior Funding, Inc., as collateral agent, entered into that certain Credit Agreement, dated as of January 15, 2016 (as amended, amended and restated, supplemented, restated or otherwise modified from time to time prior to the date hereof, the “Credit Agreement”; capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Credit Agreement);

WHEREAS, the Borrower desires to amend the Credit Agreement to decrease the Applicable Margin in respect of the Term A Loans and the Revolving Loans, and to make certain other amendments as may be agreed by the Borrower, the Term A Lenders party hereto, the Revolving Lenders party hereto, the Swingline Lender, and the Administrative Agent;

WHEREAS, the Borrower, the undersigned Term A Lenders, the undersigned Revolving Lenders, the Swingline Lender, and the Administrative Agent have agreed to amend the Credit Agreement as hereinafter set forth; and

WHEREAS, MSSF is acting as sole arranger and sole bookrunner for this Amendment (in such capacities, the “Sole Arranger”).

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto hereby agree as follows:

SECTION 1.    Amendments to Credit Agreement. The Credit Agreement is, effective as of the date hereof and subject to the satisfaction (or waiver) of the conditions precedent set forth in Section 3, hereby amended as follows:

(a)    Section 1.1 of the Credit Agreement shall be amended by adding the following new definitions thereto in proper alphabetical order:

“Amendment No. 3”: that certain Amendment No. 3 to Credit Agreement, dated as of April 25, 2017, among the Borrower, the Subsidiary Guarantors, the Administrative Agent, the Term A Lenders party thereto, and the Revolving Lenders party thereto.

“Amendment No. 3 Effective Date”: the date on which all of the conditions contained in Section 3 of Amendment No. 3 have been satisfied or waived by the Administrative Agent.

(b)    The definition of “Applicable Margin” in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Applicable Margin”: for each Type of Loan, the rate per annum set forth under the relevant column heading below:

	Eurodollar Loans	Base Rate Loans
Term A Loans, Revolving Loans and Swingline Loans	1.75%	0.75%
Term B Loans	2.25%	1.25%

(c)    The definition of “Commitment Fee” in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Commitment Fee Rate”: means a rate of 0.25% per annum.”

(d)    The definition of “Loan Documents” in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Loan Documents”: this Agreement, the Security Documents, the Notes, the Fee Letter, Amendment No. 1, the 2016 Increase Term Joinder, Amendment No. 2, the 2017 Increase Term Joinder, Amendment No. 3, and each Issuer Document.”

(e)    Section 1.1 of the Credit Agreement is hereby amended by deleting the following definitions: “Adjustment Date” and “Pricing Grid”.

(f)    Annex A of the Credit Agreement is hereby deleted in its entirety.

SECTION 2.    Reference to and Effect on the Loan Documents

(a)    On and after the Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the “Credit Agreement”, shall mean and be a reference to the Credit Agreement, as amended by this Amendment.

(b)    The Credit Agreement, as specifically amended by this Amendment, and the other Loan Documents are, and shall continue to be, in full force and effect, and are hereby in all respects ratified and confirmed.

(c)    Except as expressly provided herein, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under the Credit Agreement or any other Loan Document, nor shall it constitute a waiver of any provision of the Credit Agreement or any Loan Document.

(d)    The Borrower and each other Loan Party hereby (i) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Loan Documents (including, without limitation, Amendment No. 1, the 2016 Increase Term Joinder, Amendment No. 2 and the 2017 Increase Term Joinder)to which it is a party, (ii) ratifies and reaffirms each grant of a lien on, or security interest in, its property made pursuant to the Loan Documents (including, without limitation, the grant of security made by such Loan Party pursuant to the Guarantee and Collateral Agreement) and confirms that such liens and security interests continue to secure the Secured Obligations under the Loan Documents, including without limitation, all Secured Obligations resulting from or incurred pursuant to this Amendment, in each case subject to the terms thereof, and (iii) in the case of each Subsidiary Guarantor, ratifies and reaffirms its guaranty of the Guarantor Obligations (as defined in the Guarantee and Collateral Agreement) pursuant to the Guarantee and Collateral Agreement.

(e)    This Amendment shall be deemed a Loan Document for all purposes under the Credit Agreement.

SECTION 3.    Conditions to Effectiveness of Section 1 of the Amendment. Section 1 of this Amendment shall become effective as of the date on which the following conditions shall have been satisfied (or waived) (the “Effective Date”):

(a)    The Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrower, the Subsidiary Guarantors, the Term A Lenders party hereto, and the Revolving Lenders party hereto (which Term A Lenders and Revolving Lenders shall constitute all of the Term A Lenders and Revolving Lenders under the Credit Agreement after giving effect to Sections 5(a) and 5(b) below));

(b)    After giving effect to this Amendment and the transactions contemplated hereby (i) each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of the Effective Date as if made on and as of such date (except to the extent made as of a specific date, in which case such representation and warranty shall be true and correct in all material respects on and as of such specific date), and (ii) no Default or Event of Default shall have occurred and be continuing or would result from the borrowings to be made on the Effective Date;

(c)    The Administrative Agent shall have received a legal opinion of O’Melveny & Myers LLP, counsel to the Loan Parties, addressed to the Administrative Agent, the Term A Lenders

and the Revolving Lenders, in form and substance reasonably satisfactory to the Administrative Agent;

(d)    The Administrative Agent shall have received a certificate of the Borrower substantially in the form of Exhibit F to the Credit Agreement (with such modifications as necessary to make such certificate applicable to the transactions contemplated pursuant to this Amendment) with appropriate insertions and attachments including the certificate of incorporation of the Borrower certified by the relevant authority of the jurisdiction of organization of the Borrower;

(e)    The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower confirming compliance with the conditions precedent set forth in clause (b) of this Section 3; and

(f)    The Borrower shall have paid (or substantially concurrently with the satisfaction of the other conditions set forth herein, on the Effective Date, shall pay) (i) the arrangement fee set forth in the engagement letter, dated April 17, 2017, executed by the Borrower and the Sole Arranger, and (ii) all reasonable and documented costs and expenses of the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Amendment (including the reasonable and documented fees, disbursements and other charges of Shearman & Sterling LLP as special New York counsel to the Administrative Agent) to the extent invoiced one (1) Business Day prior to the Effective Date.

SECTION 4.    Representations and Warranties. The Borrower hereby represents and warrants to the Administrative Agent that:

(a)    on and as of the date hereof (i) it has all requisite corporate or other power and authority to enter into and perform its obligations under this Amendment, the Credit Agreement as amended hereby and the other Loan Documents to which it is a party, and (ii) this Amendment has been duly authorized, executed and delivered by it; and

(b)    this Amendment, and the Credit Agreement as amended hereby, constitute legal, valid and binding obligations of the Borrower, enforceable against it in accordance with their respective terms, subject only to any limitation under Laws relating to (i) bankruptcy, insolvency, reorganization, moratorium or creditors’ rights generally; and (ii) general equitable principles including the discretion that a court may exercise in the granting of equitable remedies.

SECTION 5.    Replacement of Lenders. (a) If any Term A Lender declines or fails to consent to this Amendment by returning an executed counterpart of this Amendment to the Administrative Agent on, or prior to, 12:00 p.m. (noon) New York City time, on April 21, 2017 (the “Consent Deadline”), then pursuant to and in compliance with the terms of Sections 4.13, 11.1 and 11.6 of the Credit Agreement, such Term A Lender may be replaced and its commitments and/or obligations purchased and assumed by either a new Term A Lender or an existing Term A Lender which is willing to consent to this Amendment upon execution of this Amendment (which will also be deemed to be the execution of an Assignment and Assumption Agreement substantially in the form of Exhibit A hereto).

(b)     If any Revolving Lender declines or fails to consent to this Amendment by returning an executed counterpart of this Amendment to the Administrative Agent on, or prior to, the Consent Deadline, then pursuant to and in compliance with the terms of Sections 4.13, 11.1 and 11.6 of the Credit Agreement, such Revolving Lender may be replaced and its commitments and/or obligations purchased and assumed by either a new Revolving Lender or an existing Revolving Lender which is willing to consent to this Amendment upon execution of this Amendment (which will also be deemed to be the execution of an Assignment and Assumption Agreement substantially in the form of Exhibit A hereto).

SECTION 6.    Costs and Expenses The Borrower agrees that all reasonable out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and the other instruments and documents to be delivered hereunder or in connection herewith (including, without limitation, the reasonable fees, charges and disbursements of counsel for the Administrative Agent (provided that such fees, charges and disbursements shall not include fees, charges and disbursements for more than one counsel plus one local counsel in each relevant jurisdiction)), are expenses that the Borrower is required to pay or reimburse pursuant to Section 11.5 of the Credit Agreement.

SECTION 7.    Execution in Counterparts. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by facsimile transmission or electronic mail (in “.pdf” or similar format) shall be effective as delivery of an original executed counterpart hereof.

SECTION 8.    GOVERNING LAW.THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SECTION 9.    WAIVER OF RIGHT OF TRIAL BY JURY. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED

HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to Credit Agreement to be executed by their respective authorized officers as of the date first above written.

MICROSEMI CORPORATION,

as Borrower

By: ____/s/_John W. Hohener________________Name: John W. Hohener
Title: Executive Vice President, Chief Financial          Officer, and Treasurer

MICROSEMI CORP. - MASSACHUSETTS,

as Subsidiary Guarantor

By: ____/s/_John W. Hohener________________Name: John W. Hohener
Title: Chief Financial Officer, Treasurer, and           Secretary

MICROSEMI CORP. – POWER PRODUCTS GROUP, as Subsidiary Guarantor

By:____/s/_John W. Hohener________________Name: John W. Hohener
Title: Chief Financial Officer and Secretary

MICROSEMI CORP. – RF POWER PRODUCTS,

as Subsidiary Guarantor

By: ____/s/ Steven G. Litchfield_______________Name: Steven G. Litchfield
Title: President, Chief Executive Officer, Chief           Financial Officer and Secretary

MICROSEMI CORP. – ANALOG MIXED SIGNAL GROUP, as Subsidiary Guarantor

By:____/s/_John W. Hohener________________Name: John W. Hohener
Title: Vice President, Chief Financial Officer,      Secretary, and Treasurer

MICROSEMI FREQUENCY AND TIME CORPORATION, as Subsidiary Guarantor

By: ____/s/_John W. Hohener________________Name: John W. Hohener
Title: Secretary

MICROSEMI SEMICONDUCTOR (U.S.) INC.,

as Subsidiary Guarantor

By: ____/s/_John W. Hohener________________Name: John W. Hohener
Title: Chief Financial Officer and Corporate          Secretary

MICROSEMI STORAGE SOLUTIONS, INC.,

as Subsidiary Guarantor

By: ____/s/_John W. Hohener________________Name: John W. Hohener
Title: Chief Financial Officer and Treasurer

MICROSEMI SOLUTIONS (U.S.), INC., as Subsidiary Guarantor

By: ____/s/_John W. Hohener________________Name: John W. Hohener
Title: Chief Financial Officer and Treasurer

MICROSEMI CORP. – POWER MANAGEMENT GROUP, as Subsidiary Guarantor

By: ____/s/_John W. Hohener________________Name: John W. Hohener
Title: Vice President, Chief Financial Officer,          Secretary, and Treasurer

MICROSEMI SOC CORP., as Subsidiary Guarantor

By: ____/s/_Esam Elashmawi________________Name: Esam Elashmawi
Title: President, Chief Financial Officer and          Secretary

MORGAN STANLEY SENIOR FUNDING, INC., as Administrative Agent

By: /s/ Jonathan Rauen______________ Name: Jonathan Rauen
Title: Authorized Signatory

MORGAN STANLEY SENIOR FUNDING, INC., as Swingline Lender

By:     /s/ Jonathan Rauen___________Name: Jonathan Rauen
Title: Authorized Signatory

Term A Lender Signature Pages to Amendment No. 3 to Credit Agreement

Term A Loans

[On file with the Administrative Agent.]

Revolving Lender Signature Pages to Amendment No. 3 to Credit Agreement

Term A Loans

[On file with the Administrative Agent.]

EXHIBIT A
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

Reference is made to the Credit Agreement, dated as of January 15, 2016 (as amended, amended and restated, supplemented, restated or otherwise modified from time to time, the “Credit Agreement”), among Microsemi Corporation, a Delaware corporation (the “Borrower”), Morgan Stanley Senior Funding, Inc., as collateral agent (in such capacity, and together with its successors and assigns in such capacity, the “Collateral Agent”), the Lenders from time to time party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent (in such capacity, and together with its successors and assigns in such capacity, the “Administrative Agent”). Capitalized terms used herein that are not defined herein shall have the meanings given to them in the Credit Agreement.

1.    The Assignor identified on Schedule l hereto (the “Assignor”) and the Assignee identified on Schedule 1 hereto (the “Assignee”) agree as follows:

2.    The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Assignment Effective Date (as defined below), the interest described in Schedule 1 hereto (the “Assigned Interest”) in and to the Assignor’s rights and obligations under the Credit Agreement with respect to the Facilities contained in the Credit Agreement as are set forth on Schedule 1 hereto, in the principal amount for the Facilities as set forth on Schedule 1 hereto.

3.    The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that (i) the Assignor is the legal and beneficial owner of the Assigned Interest, (ii) the Assignor has full organizational power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and (iii) the interest being assigned by the Assignor hereunder is free and clear of any lien, encumbrance or other adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its respective Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its respective Subsidiaries or any other obligor of any of their respective obligations under the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; and (c) attaches any Notes held by it evidencing the Facilities and (i) requests that the Administrative Agent, upon request by the Assignee, exchange the attached Notes, if any, for a new Note or Notes payable to the Assignee and (ii) if the Assignor has retained any interest in the Facilities, requests that the Administrative Agent exchange the attached Notes, if any, for a new Note or Notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Assignment Effective Date).

4.    The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Assumption and has full organizational power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements delivered pursuant to Section 5.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption; (c) agrees that it will, independently and without reliance upon the Assignor, the Agents or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Agents to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Agents by the terms thereof, together with such powers as are incidental thereto; (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, if it is organized under the laws of a jurisdiction outside the United States, its obligations pursuant to Section 4.10(g) of the Credit Agreement; (f) confirms that it satisfies the requirements set forth in Section 11.6(b) of the Credit Agreement; (g) represents and warrants that it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type; (h) if it is a Non‑U.S. Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to Sections 4.10(g) and 11.6(g) of the Credit Agreement, duly completed and executed by such Assignee; and (j) it is an “Eligible Assignee”.

5.    The effective date of this Assignment and Assumption shall be the Effective Date of Assignment and Assumption or the Trade Date described in Schedule 1 hereto (the “Assignment Effective Date”). Following the execution of this Assignment and Assumption, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to the Credit Agreement, effective as of the Assignment Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five (5) Business Days after the date of such acceptance and recording by the Administrative Agent).

6.    Upon such acceptance and recording, from and after the Assignment Effective Date, the Administrative Agent shall make all payments under the Credit Agreement in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued to but excluding the Assignment Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Assignment Effective Date. Notwithstanding the foregoing, the Administrative Agent shall make all payments of interest, fees or other amounts paid or payable in kind from and after the Assignment Effective Date to [the][the relevant] Assignee.

7.    From and after the Assignment Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Assumption, have the rights and obligations of a Lender thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Assumption, relinquish its rights and be released from its obligations under the Credit Agreement, (and, to the extent this Assignment and Assumption covers all of the Assignor’s rights and obligations under the Credit Agreement, the Assignor shall cease to be a party to the Credit Agreement but shall continue to be entitled to the benefits of Sections 4.9, 4.10, 4.11 and 11.5 of the Credit Agreement; provided, to the extent applicable, that the Assignor continues to comply with the requirements of Section 4.10(g) of the Credit Agreement).

This Assignment and Assumption shall be governed by and construed in accordance with the laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto.

Schedule 1 to
Assignment and Assumption

Name of Assignor: _________________

Name of Assignee: _________________

[Effective Date of Assignment and Assumption] [Trade Date]: ______________

Facility Assigned	Aggregate Amount of Commitment/Loans for all Lenders
[Term A/Revolving] [Commitment/Loan]
	[$__________]

Principal Amount Assigned	Commitment/Loans Percentage Assigned
$_____	___.______%

[Name of Assignee]	[Name of Assignor]
By: Name: Title:	By: Name: Title:

Accepted:

MORGAN STANLEY SENIOR FUNDING, INC.,
as Administrative Agent

By: Name:
Title:

[Consented To:]

[MICROSEMI CORPORATION,
as Borrower]

By: Name:
Title:

[MORGAN STANLEY SENIOR FUNDING, INC.,
as Administrative Agent]

By: Name:
Title:

[    ],
as Issuing Lender]

By: Name:
Title:

[MORGAN STANLEY SENIOR FUNDING, INC.,
as Swingline Lender]

By: Name:
Title:

EX-99.1

FINANCIAL CONTACT: John W. Hohener Executive Vice President and Chief Financial Officer Tel: 949-380-6100 INVESTORS CONTACT: Robert C. Adams Senior Vice President of Corporate Development Tel: 949-380-6100

Microsemi Reports Second Quarter 2017 Results

- Net Sales of $442.9 Million, up 1.7% Sequentially

- Record GAAP Gross Margin of 64.1 Percent, up 1,900 Basis Points from Prior Year and up 60 Basis Points Sequentially

- GAAP Operating Margin of 15.6 Percent, up 3,760Basis Points from Prior Year and up 280 Basis Points Sequentially

- Record Non-GAAP Operating Margin of 31.1 Percent, up 500Basis Points from Prior Year and up 60 Basis Points Sequentially

ALISO VIEJO, Calif.—April 27, 2017—Microsemi Corporation (Nasdaq: MSCC), a leading provider of semiconductor solutions differentiated by power, security, reliability and performance, today reported unaudited results for its second quarter of fiscal year 2017 ended April 2, 2017.

Net sales for Microsemi's second quarter of fiscal year 2017 were $442.9 million, up 1.7 percent from $435.5 million in the first quarter of 2017.

GAAP gross margin for the second quarter of 2017 was a record 64.1 percent, up 1,900 basis points from the 45.1 percent in the second quarter of 2016 and up 60 basis points from the 63.5 percent in the first quarter of 2017. GAAP operating income and net income for the second quarter of 2017 were $69.1 million and $41.2 million, respectively, and included restructuring, severance and other charges of $6.3 million. Also included in net income were amortization of intangible assets of $46.5 million, stock based compensation of $15.6 million and other non-cash charges of $3.5 million. GAAP operating margin for the second quarter of 2017 was 15.6 percent, up 3,760 basis points compared to a loss of 22.0 percent for the second quarter of 2016 and up 280 basis points compared to 12.8 percent for the first quarter of 2017. GAAP net income per diluted share was $0.35 for the second quarter of 2017 compared to a net loss of $1.93 per diluted share for the second quarter of 2016 and net income of $0.17 per diluted share for the first quarter of 2017.

Non-GAAP gross margin for the second quarter of 2017 was a record 64.1 percent, up 310 basis points from the 61.0 percent in the second quarter of 2016 and up 60 basis points from the 63.5 percent reported in the first quarter of 2017. Non-GAAP operating income for the second quarter of 2017 was $137.5 million, up 18.4 percent from the second quarter of 2016 and up 3.6 percent from the first quarter of 2017. Non-GAAP operating margin for the second quarter of 2017 was 31.1 percent, up 500 basis points from the 26.1 percent reported in the second quarter of 2016 and up 60 basis points from the 30.5 percent report in the first quarter of 2017. Non-GAAP net income for the second quarter of 2017 was $106.2 million or $0.91 per diluted share.

Operating and free cash flows for the second quarter of 2017 were at $121.5 million and $105.5 million, respectively. Cash and cash equivalents at the end of the second quarter of 2017 were $191.2 million following $75.4 million in credit facility principal payments.

"I am pleased our second fiscal quarter of 2017 delivered record non-GAAP gross and operating margins and we strengthened our position across all our end markets," said James J. Peterson, Microsemi’s chairman and CEO. "With the ongoing realization of market share gains, design wins and integration synergies, we are well-positioned to continue our strategic execution to the benefit of our shareholders."

Business Outlook

Microsemi currently expects net sales in the third quarter of fiscal year 2017 of between $448 million and $468 million, and expects non-GAAP diluted earnings per share of between $0.94 and $1.04.

Guidance on diluted earnings per share 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 without unreasonable effort.

Microsemi regularly announces a quarterly outlook in the form of issuing a news release and does not undertake to update any of this information between such public announcements to reflect subsequent events or circumstances. Please refer to the "SAFE HARBOR" STATEMENT below for risks that may affect future actual results.

Non-GAAP Financial Measures

For further information regarding Microsemi's non-GAAP financial measures, please refer to "Notes on Non-GAAP Financial Measures" below. Non-GAAP financial measures are reconciled to comparable GAAP financial measures in the accompanying financial tables and notes.

Information for Second Quarter 2017 Earnings Conference Call and Webcast

Date:    Thursday, April 27, 2017

Time:    4:45 p.m. EDT (1:45 p.m. PDT)

To access the webcast, log on to www.microsemi.com, go to the Investors section, and then to IR Events and Presentations. To listen to the live webcast, visit this website approximately 15 minutes prior to the start of the call to register, download and install any necessary audio software. For those unable to participate during the live webcast, a replay will be available shortly after the call on the Microsemi website for 90 days.

To participate in the conference call by telephone, call 877-264-1110 at approximately 4:30 p.m. EDT (1:30 p.m. PDT). International callers can call 706-634-1357. Please provide the following ID number: 99390756.

About Microsemi

Microsemi Corporation (Nasdaq: MSCC) offers a comprehensive portfolio of semiconductor and system solutions for aerospace & defense, communications, data center and industrial markets. Products include high-performance and radiation-hardened analog mixed-signal integrated circuits, FPGAs, SoCs and ASICs; power management products; timing and synchronization devices and precise time solutions, setting the world's standard for time; voice processing devices; RF solutions; discrete components; enterprise storage and communication solutions; security technologies and scalable anti-tamper products; Ethernet solutions; Power-over-Ethernet ICs and midspans; as well as custom design capabilities and services. Microsemi is headquartered in Aliso Viejo, California, and has approximately 4,800 employees globally. Learn more at www.microsemi.com.

PLEASE READ THE FOLLOWING FACTORS THAT CAN MATERIALLY AFFECT MICROSEMI'S FUTURE RESULTS.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Any statements set forth in the news release that are not entirely historical and factual in nature are forward-looking statements, including without limitation statements concerning Microsemi's net sales and earnings guidance, our favorable positioning to continue our strategic execution to the benefit of our shareholders and any other statements or beliefs regarding our plans or expectations. These forward-looking statements are based on Microsemi's current expectations and are inherently subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. The potential risks and uncertainties include, but are not limited to, such factors as continued negative or worsening worldwide economic conditions or market instability; risks related to Microsemi's international operations and sales, including divergent laws and regulations, political instability, trade restrictions and sanctions, restrictions in the transfer or repatriation of funds, currency fluctuations and availability of transportation services; downturns in the highly cyclical semiconductor industry that may cause us to trigger financial covenants in our debt agreements, increase the cost of borrowing, and decrease the amount available under our credit facilities; our ability to successfully implement our acquisitions and divestitures strategy or integrate acquired companies; uncertainty as to the future profitability of acquired businesses, and delays in the realization of, or the failure to realize, any accretion from acquisition transactions; acquiring, managing and integrating new operations, businesses or assets, and the associated diversion of management attention or other related costs or difficulties; difficulties and costs of protecting patents and other proprietary rights; Microsemi's reliance on government contracts for a significant portion of its sales,

including impacts of any termination or renegotiation of such contracts, uncertainties of governmental appropriations and national defense policies and priorities and effects of any past or future government shutdowns; potential non-realization of expected orders or non-realization of backlog; failure to make sales indicated by the Microsemi's book-to-bill ratio; intense competition in the semiconductor industry and resultant downward price pressure; the effect of events such as natural disasters and related disruptions on our operations; the concentration of the facilities that service the semiconductor industry; delays in beginning production, implementing production techniques, resolving problems associated with technical equipment malfunctions, or issues related to government or customer qualification of facilities; our dependence on third parties for key functions; utilization of channel partners over which we have limited control for product distribution; increases in the costs of credit and the availability of credit or additional capital only under more restrictive conditions or not at all; changes to laws or regulations; unanticipated changes in Microsemi's tax obligations, results of tax examinations or exposure to additional income tax liabilities; changes in generally accepted accounting principles; principal, liquidity and counterparty risks related to Microsemi's holdings in securities; inability to develop new technologies and products to satisfy changes in customer demand or the development by our competitors of products that decrease the demand for Microsemi's products; unfavorable or declining conditions in end markets; inability of Microsemi's compound semiconductor products to compete successfully with silicon-based products; production delays related to new compound semiconductors; variability of our manufacturing yields; potential effects of system outages or data security breaches; inability by Microsemi to fulfill customer demand and resulting loss of customers; variations in customer order preferences; difficulties foreseeing future demand; rises in inventory levels and inventory obsolescence; environmental or other regulatory matters or litigation, or any matters involving contingent liabilities or other claims; the uncertainty of litigation, the costs and expenses of litigation, the potential material adverse effect litigation could have on Microsemi's business and results of operations if an adverse determination in litigation is made, and the time and attention required of management to attend to litigation; difficulties in determining the scope of, and procuring and maintaining, adequate insurance coverage; difficulties in the hiring and retention of qualified personnel in a competitive labor market; any circumstances that adversely impact the end markets of acquired businesses; and difficulties in closing or disposing of operations or assets or transferring work, assets or inventory from one plant to another. In addition to these factors and any other factors mentioned elsewhere in this news release, the reader should refer as well to the factors, uncertainties or risks identified in Microsemi's most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q reports filed by Microsemi with the SEC. Additional risk factors may be identified from time to time in Microsemi's future filings. The forward-looking statements included in this release speak only as of the date hereof, and Microsemi does not undertake any obligation to update these forward-looking statements to reflect subsequent events or circumstances. Amounts reported in this release are preliminary and subject to finalization prior to the filing of our next Quarterly Report on Form 10-Q.

(Financial Tables Follow)

Selected GAAP & Non-GAAP Financial Measures

(unaudited, in millions, except for percentages and per share amounts)

	Quarter Ended									Six Months Ended
	Apr 2, 2017			Jan 1, 2017			Apr 3, 2016			Apr 2, 2017			Apr 3, 2016
Net sales	$	442.9		$	435.5		$	444.3		$	878.4		$	773.5
Selected GAAP Financial Measures
Gross profit	$	284.1		$	276.5		$	200.6		$	560.6		$	388.5
Gross margin	64.1		%	63.5		%	45.1		%	63.8		%	50.2		%
Operating income (loss)	$	69.1		$	55.8		$	(97.9	)	$	124.9		$	(61.3	)
Operating margin	15.6		%	12.8		%	(22.0		)%	14.2		%	(7.9		)%
Net income (loss)	$	41.2		$	19.5		$	(212.0	)	$	60.6		$	(188.3	)
Diluted earnings (loss) per share	$	0.35		$	0.17		$	(1.93	)	$	0.52		$	(1.85	)
Selected Non-GAAP Financial Measures
Gross profit	$	284.1		$	276.5		$	270.8		$	560.6		$	458.7
Gross margin	64.1		%	63.5		%	61.0		%	63.8		%	59.3		%
Operating income	$	137.5		$	132.7		$	116.2		$	270.3		$	200.0
Operating margin	31.1		%	30.5		%	26.1		%	30.8		%	25.9		%
Net income	$	106.2		$	99.8		$	74.7		$	206.0		$	144.0
Diluted earnings per share	$	0.91		$	0.86		$	0.67		$	1.77		$	1.39

Additional details reconciling the selected GAAP financial measure to the selected non-GAAP financial measure may be found in the "Schedule Reconciling Selected Non-GAAP Financial Measures" and "Notes on Non-GAAP Financial Measures."

Schedule Reconciling Selected Non-GAAP Financial Measures

(unaudited, in millions, except for per share amounts)

	Quarter Ended									Six Months Ended
	Apr 2, 2017			Jan 1, 2017			Apr 3, 2016			Apr 2, 2017			Apr 3, 2016
GAAP and Non-GAAP gross profit	$	284.1		$	276.5		$	200.6		$	560.6		$	388.5
Manufacturing profit in acquired inventory (1)	—			—			66.2			—			66.2
Inventory write-offs from restructuring activities (2)	—			—			4.0			—			4.0
Non-GAAP gross profit	$	284.1		$	276.5		$	270.8		$	560.6		$	458.7
GAAP operating income (loss)	$	69.1		$	55.8		$	(97.9	)	$	124.9		$	(61.3	)
Adjustments to GAAP gross profit	—			—			70.2			—			70.2
Restructuring, severance, facilities and other special charges (1)	5.9			2.4			51.9			8.3			53.7
Amortization of intangible assets (2)	46.5			45.5			45.3			92.1			70.7
Stock based compensation (3)	15.6			28.3			24.4			43.9			38.4
Acquisition and divestiture related costs (4)	0.4			0.7			22.3			1.1			28.3
Non-GAAP operating income	$	137.5		$	132.7		$	116.2		$	270.3		$	200.0
GAAP net income (loss)	$	41.2		$	19.5		$	(212.0	)	$	60.6		$	(188.3	)
Adjustments to GAAP gross profit and operating income	68.4			76.9			214.1			145.4			261.3
Adjustment to gain on divestiture (4)	—			1.2			—			1.2			—
Credit facility issuance and debt extinguishment costs (5)	2.4			2.1			78.2			4.5			78.9
Fair value change in foreign tax liabilities (6)	1.1			(1.0		)	3.0			0.1			3.0
Income tax effect on non-GAAP adjustments (7)	(6.9		)	1.1			(8.6		)	(5.8		)	(10.9		)
Non-GAAP net income	$	106.2		$	99.8		$	74.7		$	206.0		$	144.0
GAAP diluted earnings (loss) per share	$	0.35		$	0.17		$	(1.93	)	$	0.52		$	(1.85	)
Effect of non-GAAP adjustments on diluted earnings per share	$	0.56		$	0.69		$	2.60		$	1.25		$	3.24
Non-GAAP diluted earnings per share	$	0.91		$	0.86		$	0.67		$	1.77		$	1.39
Weighted-average diluted shares used in calculating non-GAAP diluted earnings per share	117.0			116.3			111.6			116.6			103.8
Operating cash flow	$	121.5		$	77.6		$	5.4		$	199.1		$	88.3
Payments for capital expenditures	(16.0		)	(10.5		)	(12.5		)	(26.5		)	(23.1		)
Free cash flow (8)	$	105.5		$	67.1		$	(7.1	)	$	172.6		$	65.2

Additional details reconciling the selected non-GAAP financial measure to the selected GAAP financial measure may be found in "Notes on Non-GAAP Financial Measures."

Summary of Schedule Reconciling Selected Non-GAAP Financial Measures

(unaudited, in millions, except for per share amounts)

	Quarter Ended April 2, 2017
	GAAP		Non-GAAP Adjustments		Non-GAAP
Net sales	$	442.9	$	—	$	442.9
Gross profit	$	284.1	$	—	$	284.1
Operating income	$	69.1	$	68.4	$	137.5
Net income	$	41.2	$	65.0	$	106.2
Diluted earnings per share	$	0.35	$	0.56	$	0.91

Additional details reconciling the selected non-GAAP financial measure to the selected GAAP financial measure may be found in the "Schedule Reconciling Selected Non-GAAP Financial Measures" and "Notes on Non-GAAP Financial Measures."

Consolidated Condensed Statements of Income

(unaudited, in millions, except for per share amounts)

	Quarter Ended									Six Months Ended
	Apr 2, 2017			Jan 1, 2017			Apr 3, 2016			Apr 2, 2017			Apr 3, 2016
Net sales	$	442.9		$	435.5		$	444.3		$	878.4		$	773.5
Cost of sales	158.8			159.0			243.7			317.8			385.0
Gross profit	$	284.1		$	276.5		$	200.6		$	560.6		$	388.5
Operating expenses
Selling, general and administrative	$	75.4		$	89.8		$	91.4		$	165.2		$	154.7
Research and development	86.9			82.3			87.8			169.2			142.7
Amortization of intangible assets	46.5			45.5			45.3			92.1			70.7
Restructuring, severance and facilities charges	5.8			2.4			51.7			8.2			53.4
Acquisition and divestiture related costs	0.4			0.7			22.3			1.0			28.3
Total operating expenses	$	215.0		$	220.7		$	298.5		$	435.7		$	449.8
Operating income (loss)	$	69.1		$	55.8		$	(97.9	)	$	124.9		$	(61.3	)
Interest and other expense, net	(26.2		)	(27.2		)	(115.8		)	(53.4		)	(124.6		)
Income (loss) before income taxes	$	42.9		$	28.6		$	(213.7	)	$	71.5		$	(185.9	)
Provision for (benefit from) income taxes	1.7			9.1			(1.7		)	10.9			2.4
Net income (loss)	$	41.2		$	19.5		$	(212.0	)	$	60.6		$	(188.3	)
Earnings (loss) per share
Basic	$	0.36		$	0.17		$	(1.93	)	$	0.53		$	(1.85	)
Diluted	$	0.35		$	0.17		$	(1.93	)	$	0.52		$	(1.85	)
Weighted-average common shares outstanding
Basic	114.7			114.0			109.6			114.4			102.0
Diluted	117.0			116.3			109.6			116.6			102.0

Consolidated Condensed Balance Sheets

(unaudited, in millions)

	Apr 2, 2017		Oct 2, 2016
Assets
Current assets
Cash and cash equivalents	$	191.2	$	189.5
Accounts receivable, net	232.4		245.2
Inventories	213.6		213.1
Other current assets	104.0		87.1
Total current assets	$	741.2	$	734.9
Property and equipment, net	183.5		174.9
Goodwill	2,483.6		2,479.4
Intangible assets, net	842.5		934.6
Deferred income taxes	33.7		37.3
Other assets	75.7		61.9
Total assets	$	4,360.2	$	4,423.0
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	112.7	$	112.8
Accrued liabilities	148.6		166.1
Current maturity of credit facility	40.7		40.7
Total current liabilities	$	302.0	$	319.6
Credit facility	1,991.1		2,138.5
Deferred income taxes	109.3		120.2
Other long-term liabilities	127.9		115.8
Stockholders' equity	1,829.9		1,728.9
Total liabilities and stockholders' equity	$	4,360.2	$	4,423.0

Notes on Non-GAAP Financial Measures

To supplement the consolidated financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), this press release and its attachments include non-GAAP financial measures which are adjusted for the items listed in the footnotes below. Management reports the following non-GAAP financial measures:

• non-GAAP gross profit and gross margin;

• non-GAAP operating income and operating margin;

• non-GAAP net income and diluted earnings per share; and

• free cash flow.

Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies' financial information and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Management believes it is useful to provide these non-GAAP financial measures and a reconciliation to comparable GAAP financial measures as we believe they enhance an investor's overall understanding of our financial performance and future prospects by being more reflective of our core operational activities and more comparable with our results over various periods. By disclosing non-GAAP financial measures, management intends to provide investors with an alternate measure to evaluate and compare Microsemi's operating results and trends for the periods presented. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. The items reconciling non-GAAP financial measures to GAAP financial measures and additional comments and the usefulness of each item are set forth below:

(1) In Microsemi’s effort to streamline our product lines and strategic focus, as well as integrate product lines from acquisitions, we have periodically exited or deemphasized several areas which has improved operating expense from various cost reductions. We periodically evaluate the profitability of our various offerings. Should the actual or expected profitability fall below an acceptable threshold, we may decide to stop offering a product, in part to reallocate manufacturing, operations, engineering, sales and support resources to products we expect to generate greater returns. We believe that for many of these products, market dynamics dictate that price is the primary differentiator rather than our value-added core competencies of power, reliability, security and performance.

Restructuring, severance, facilities and other special charges consist of severance and other costs related to the consolidation of operations and strategic discontinuation of products. Other special charges also include gains or losses on litigation, net of settlement costs, primarily related to acquisition-related matters.

Related to the streamlining of our operations, we also recorded charges and gains related to facility consolidation and equipment on both leased and owned properties and engineering equipment for development projects we are no longer pursuing. Facilities consisted of manufacturing sites, as well as sales, engineering and administrative space.

As the operations and products referred to above are not expected to have a continuing contribution to operations or they are expected to have a diminishing contribution during the transition phase, management believes excluding such items from Microsemi's operations is useful to investors as it provides a means of evaluating Microsemi's on-going operations. Management believes that utilizing non-GAAP financial measures that exclude these items is useful in providing an alternate measure to evaluate core operating activities and management excludes these items in its evaluation of operations and for strategic decision making, forecasting future results and evaluating current performance.

(2) Amortization of acquisition related intangible assets is excluded from internal analysis of Microsemi's operations and management does not view this non-cash expense as reflective of the business' current performance. Management believes that utilizing non-GAAP financial measures that exclude this non-cash item is useful in providing an alternate measure that excludes the variability caused by purchase accounting factors.

(3) Stock based compensation is excluded by management when evaluating operating activities and for strategic decision making, forecasting future results and evaluating current performance. Management believes that utilizing non-GAAP financial measures that exclude this non-cash item is useful in providing an alternate measure that excludes the variability caused by different methodologies and subjective assumptions used in the valuation of equity awards across different companies.

(4) In accordance with business combination and other relevant accounting guidance, we expense acquisition and divestiture costs as incurred and recognize gains on divestitures upon consummation of the transaction. During the first quarter of 2017, we reduced the $125.5 million gain recognized from our third quarter 2016 divestitures by $1.2 million. Management excludes these expenses and gains when evaluating operating activities and for strategic decision making, forecasting future results and evaluating current performance. Management believes that utilizing non-GAAP financial measures that exclude this item is useful in providing an alternate measure that excludes the variability caused by purchase accounting factors.

(5) Credit facility issuance and debt extinguishment costs have been excluded as they are discrete charges we incurred to issue our credit facility. Management excludes these expenses from internal measurements of credit facility interest rates and in evaluating current performance. Management believes that utilizing non-GAAP financial measures that exclude these items is useful in providing an alternate measure that is reflective of the ongoing characteristics of the amended credit facility.

(6) These amounts represent the foreign exchange effect on non-current foreign tax liabilities recorded for possible assessments by tax authorities. Changes in foreign exchange rates are a non-cash impact to these liabilities that management excludes from internal measurements and from forecasting future results and are not viewed by management as being reflective of the business' ongoing tax position.

(7) The tax effect of non-GAAP adjustments represents the difference in the provision for income taxes that resulted from non-GAAP adjustments to pretax income and also certain acquisition related and nondeductible stock based compensation items, and non-cash valuation allowance charges and releases related to deferred tax assets. These amounts are excluded as non-GAAP adjustments as the restructuring activities and acquisitions are not viewed by management as being reflective of the business' ongoing tax position.

(8) Free cash flow is a non-GAAP financial measure defined as operating cash flow less cash paid for capital expenditures. We consider free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after our capital expenditures, which can then be used for strategic opportunities including, among others, investing in Microsemi’s business, making strategic acquisitions, reducing debt principal and strengthening the balance sheet. Management uses free cash flow as a supplemental measure to the net change in cash and cash equivalents as presented in Microsemi’s consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.

# # #

Source: Microsemi Corporation