Presentation of Financial Information

The unaudited consolidated financial statements include the accounts of Microsemi Corporation and its subsidiaries. Intercompany transactions have been eliminated in consolidation.

The consolidated financial statements are unaudited, but in the opinion of our management, include all adjustments (all of which are normal or recurring adjustments) necessary for a fair statement of the results of operations for the periods indicated. The results of operations for the most recently reported quarter ended December 31, 2017 are not necessarily indicative of the results to be expected for the full year.

The unaudited consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q and Article 10 of SEC Regulation S-X, and therefore do not include all information and note disclosures necessary for a fair statement of our consolidated financial position, results of operations and cash flows in conformity with United States generally accepted accounting principles. The unaudited consolidated financial statements and notes thereto must be read in their entirety in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended October 1, 2017.

The unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, which require us to make estimates and assumptions that may materially affect the reported amounts of assets and liabilities at the date of the unaudited consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ materially from those estimates. Information with respect to our accounting policies that we believe could have the most significant effect on our reported results and require subjective or complex judgments is contained in the notes to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended October 1, 2017. In referencing a year, we are referring to the fiscal year ended on the Sunday closest to September 30. Except for per-share amounts, dollar amounts are presented in millions unless otherwise stated.

Earnings Per Share

Basic earnings per share have been computed based upon the weighted-average number of common shares outstanding during the respective periods. Diluted earnings per share have been computed, when the result is dilutive, using the treasury stock method for stock awards outstanding during the respective periods. Earnings per share were calculated as follows:



	Quarter Ended
	December 31, 2017		January 1, 2017
Basic
Net income	$	47.9	$	19.5
Weighted-average common shares outstanding	116.9		114.0
Basic earnings per share	$	0.41	$	0.17

Diluted
Net income	$	47.9	$	19.5
Weighted-average common shares outstanding for basic	116.9		114.0
Dilutive effect of stock awards	2.0		2.3
Weighted-average common shares outstanding on a diluted basis	118.9		116.3
Diluted earnings per share	$	0.40	$	0.17

For the quarter ended December 31, 2017, we excluded 1.2 million of stock awards in the computation of diluted earnings per share as these stock awards would have been anti-dilutive. For the quarter ended January 1, 2017, we excluded 0.3 million of stock awards in the computation of diluted earnings per share as these stock awards would have been anti-dilutive.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09 which provides guidance on how an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Entity expects to be entitled in exchange for those goods or services and on accounting for costs to obtain or fulfill a contract with a customer. The ASU also requires expanded disclosure regarding the nature, amount, timing and uncertainty of revenue that is recognized. In July 2015, the FASB decided to delay the effective date of this ASU by one year. This ASU, as amended, will be effective for the Company beginning in the first quarter of fiscal 2019 and can be adopted either full retrospective or modified retrospective with the cumulative effect recognized as of the date of adoption. Early adoption is permitted, but no earlier than fiscal 2018. We intend to adopt this ASU on a modified retrospective basis in the first quarter of fiscal 2019. We are still in the process of finalizing our analysis on the impact of the provisions of the new standards. Our assessment process consists of reviewing our current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to our revenue contracts and identifying appropriate changes to our business processes, systems and controls to support revenue recognition and disclosure requirements under the new standard. Based on our preliminary assessments, we do not expect the new guidance to have a material impact on the nature, amount, and timing of our revenue recognition. As we continue to assess the impact of the new guidance on our revenue contracts with our customers and finalize our evaluation of any changes to our accounting policies, internal controls and footnote disclosures, we may identify additional areas of impact and may revise the results of our preliminary assessment.

The FASB since issued additional updates of its new standard on revenue recognition issued in May 2014. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606) - Principal versus Agent Considerations, which clarifies the implementation guidance for principal versus agent considerations in ASU 2014-09. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing, which amends the guidance in ASU 2014-09 related to identifying performance obligations and accounting for licenses of intellectual property. We are currently assessing the adoption and impact of these ASUs on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which modified lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing arrangements. This ASU will be effective for us beginning in the first quarter of 2020 on a modified retrospective basis. Early adoption is permitted. We are currently evaluating the impact of adopting the new lease standard on our consolidated financial statements.