-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UeLYgjCC0azBNRIwNtjGqpQ/OM/sUP+wBjJufDEDLkY+asXLGUMgzTZUS3S3x+YG qLEFn5NZJOMYJ1oDwATksQ== 0001017062-97-000934.txt : 19970515 0001017062-97-000934.hdr.sgml : 19970515 ACCESSION NUMBER: 0001017062-97-000934 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970514 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: 97603343 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 FORM 10-Q / DATED 3/30/97 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 March 30, 1997 --------------------------------------------- or Transition Report Pursuant to Section 13 or 15(d) of the ----- Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission File No. 0-8866 MICROSEMI CORPORATION --------------------- (Exact name of registrant as specified in its charter) Delaware 95-2110371 -------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2830 South Fairview Street, Santa Ana, California 92704 ------------------------------------------------------- (Address of principal executive offices) (Zip Code) (714) 979-8220 ------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 month period (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- The number of shares outstanding of the issuer's Common Stock, $.20 par value, on April 25, 1997 was 8,709,000. 1 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The unaudited consolidated financial information for the quarter and six months ended March 30, 1997 of Microsemi Corporation and Subsidiaries (the "Company") and the comparative unaudited consolidated financial information for the corresponding periods of the prior year, together with the balance sheet as of September 29, 1996 are attached hereto and incorporated herein by this reference. 2 MICROSEMI CORPORATION AND SUBSIDIARIES Unaudited Consolidated Balance Sheets (amounts in 000's)
March 30, 1997 September 29, 1996 -------------- ------------------ ASSETS Current assets Cash and cash equivalents $ 5,904 $ 4,059 Accounts receivable less allowance for doubtful accounts, $2,530 at March 30, 1997 and $2,159 at September 29, 1996 24,542 24,740 Inventories 49,935 47,279 Deferred income taxes 6,952 6,952 Other current assets 1,135 1,202 -------- -------- Total current assets 88,468 84,232 -------- -------- Property and equipment, at cost 62,549 57,278 Less: Accumulated depreciation (33,424) (31,637) -------- -------- 29,125 25,641 -------- -------- Deferred income taxes 675 675 Other assets 4,447 3,891 -------- -------- $122,715 $114,439 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable to banks and others $ 8,077 $ 4,552 Current maturity of long-term debt 2,957 1,625 Accounts payable and accrued liabilities 22,973 23,055 Income taxes payable 4,672 4,694 Deferred income taxes 750 750 -------- -------- Total current liabilities 39,429 34,676 -------- -------- Deferred income taxes 1,973 1,973 -------- -------- Long-term debt 44,391 46,420 -------- -------- Other long-term liabilities 1,904 1,962 -------- -------- Stockholders' equity Common stock, $.20 par value; authorized 20,000 shares; issued 8,702 shares at March 30, 1997 and 7,908 shares at September 29, 1996 1,741 1,582 Paid-in capital 16,068 14,895 Retained earnings 17,209 12,931 -------- -------- Total stockholders' equity 35,018 29,408 -------- -------- $122,715 $114,439 ======== ========
See accompanying Notes to Unaudited Consolidated Financial Statements. 3 MICROSEMI CORPORATION AND SUBSIDIARIES Unaudited Consolidated Statements of Operations (amounts in 000's, except earnings per share)
13 Weeks Ended 13 Weeks Ended March 30, 1997 March 31, 1996 --------------- --------------- Net sales $40,657 $39,107 Cost of sales 29,615 28,798 ------- ------- Gross profit 11,042 10,309 ------- ------- Operating expenses Selling 2,441 2,289 General and administrative 3,437 3,618 ------- ------- Total operating expenses 5,878 5,907 ------- ------- Income from operations 5,164 4,402 ------- ------- Other expense Interest expense (net) (960) (1,184) Other (134) (67) ------- ------- Total other expense (1,094) (1,251) ------- ------- Income before income taxes 4,070 3,151 Provision for income taxes 1,675 1,323 ------- ------- Net income $ 2,395 $ 1,828 ======= ======= Earnings per share -Primary $ 0.27 $ 0.22 ======= ======= -Fully diluted $ 0.23 $ 0.18 ======= ======= Common and common equivalent shares outstanding -Primary 8,905 8,232 -Fully diluted 11,893 11,755
See accompanying Notes to Unaudited Consolidated Financial Statements. 4 MICROSEMI CORPORATION AND SUBSIDIARIES Unaudited Consolidated Statements of Operations (amounts in 000's, except earnings per share)
26 Weeks Ended 26 Weeks Ended March 30, 1997 March 31, 1996 --------------- --------------- Net sales $76,416 $74,406 Cost of sales 55,630 54,894 ------- ------- Gross profit 20,786 19,512 ------- ------- Operating expenses Selling 4,590 4,365 General and administrative 6,781 6,846 ------- ------- Total operating expenses 11,371 11,211 ------- ------- Income from operations 9,415 8,301 ------- ------- Other expense Interest expense (net) (1,920) (2,412) Other (168) (274) ------- ------- Total other expense (2,088) (2,686) ------- ------- Income before income taxes 7,327 5,615 Provision for income taxes 3,043 2,358 ------- ------- Net income $ 4,284 $ 3,257 ======= ======= Earnings per share -Primary $ 0.49 $ 0.39 ======= ======= -Fully diluted $ 0.41 $ 0.33 ======= ======= Common and common equivalent shares outstanding -Primary 8,732 8,264 -Fully diluted 11,960 11,787
See accompanying Notes to Unaudited Consolidated Financial Statements. 5 MICROSEMI CORPORATION AND SUBSIDIARIES Unaudited Consolidated Statements of Retained Earnings (amounts in 000's)
26 Weeks Ended 26 Weeks Ended March 30, 1997 March 31, 1996 -------------- -------------- Retained earnings at beginning of period $12,931 $4,908 Net income 4,284 3,257 Translation loss from foreign currency (6) (51) ------- ------ Retained earnings at end of period $17,209 $8,114 ======= ======
See accompanying Notes to Unaudited Consolidated Financial Statements. 6 MICROSEMI CORPORATION AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows (amounts in 000's)
26 Weeks Ended 26 Weeks Ended March 30, 1997 March 31, 1996 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,284 $ 3,257 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 1,893 2,012 Increase in allowance for doubtful accounts 371 474 Changes in assets and liabilities, net of acquisition: Accounts receivable (173) (2,675) Inventories (1,556) (3,286) Other current assets 67 1,549 Other assets (457) 29 Accounts payable and accrued (82) 1,487 liabilities Income taxes payable (22) (789) Other (6) (51) ------- ------- Net cash provided from operating activities 4,319 2,007 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Payment for acquisition (2,200) - Purchase of property and equipment (3,676) (2,901) ------- ------- Net cash used for investing activities (5,876) (2,901) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in notes payable to banks and others 3,525 1,513 Proceeds from issuance of long-term debt 655 - Payments of long-term debt (882) (1,502) Increase in (reduction of) other long-term liabilities (58) 79 Exercise of employee stock options 162 80 ------- ------- Net cash provided from financing activities 3,402 170 ------- ------- Net increase (decrease) in cash and cash equivalents 1,845 (724) Cash and cash equivalents at beginning of period 4,059 3,965 ------- ------- Cash and cash equivalents at end of period $ 5,904 $ 3,241 ======= =======
See accompanying Notes to Unaudited Consolidated Financial Statements. 7 MICROSEMI CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March 30, 1997 1. PRESENTATION OF FINANCIAL INFORMATION The financial information furnished herein is unaudited, but, in the opinion of the management of Microsemi Corporation, includes all adjustments (all of which are normal, recurring adjustments) necessary for a fair presentation of the results of operations for the periods indicated. The results of operations for the first six months 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 unaudited consolidated financial statements and notes should, therefore, be read in conjunction with the financial statements and notes thereto in the Annual Report on Form 10-K for the fiscal year ended September 29, 1996. 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:
March 30, 1997 September 29, 1996 ------------------ ------------------ (amounts in 000's) Raw materials $15,844 $14,310 Work in process 19,272 19,493 Finished goods 14,819 13,476 ------- ------- $49,935 $47,279 ======= =======
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
March 30, 1997 September 29, 1996 ------------------ ------------------ (amounts in 000's) Accounts payable $ 8,447 $ 8,013 Accrued payroll, profit sharing, 7,067 7,980 benefits and related taxes Other accrued liabilities 7,459 7,062 ------- -------- $22,973 $23,055 ======= ========
8 4. BORROWINGS Long-term debt consisted of:
March 30, 1997 September 29, 1996 ------------------ ------------------ (amounts in 000's) Broomfield Industrial Development Bond-bearing interest at 7.875% due in installments from 1996 to 2000; secured by the first deed of trust $ 2,720 $ 2,720 Santa Ana Industrial Development Bond-bearing interest at 6.75% due in installments from 1998 to 2005; secured by the first deed of trust 5,350 5,350 Convertible Subordinated Debentures-bearing interest at 33,261 33,281 5.875% due 2012 Convertible Subordinated Notes-bearing interest at 10% due 1999 750 1,900 Notes payable-bearing interest at rates in ranges of 0% - 13% due between April 1997 and July 2002 5,267 4,794 ----------- ----------- 47,348 48,045 Less current portion (2,957) (1,625) ----------- ----------- $ 44,391 $ 46,420 =========== ===========
The Company maintains a line of credit with a bank, from which the Company can borrow up to $15,000,000. As of March 30, 1997 $7,464,000 was borrowed under this credit facility. The $5,350,000 Industrial Development Revenue Bond was originally issued in April 1985, through the City of Santa Ana Industrial Development Authority for the construction of improvements and new facilities at the Santa Ana plant. It was re-marketed in 1995 and carries an average interest rate of 6.75% per annum. The terms of the bond require principal payments of $1,050,000 in 1998, $100,000 annually from 1999 to 2004 and $3,700,000 in 2005. A $5,557,000 letter of credit is carried by a bank to guarantee the repayment of this bond. There are no compensating balance requirements, however, the letter of credit agreement requires the Company to make annual collateral payments of $350,000 on February 1, 1996, 1997 and 1998, totaling $1,050,000, to complete the payment of principal scheduled for February 1, 1998. The Company's 5.875% Convertible Subordinated Debentures, originally issued for $40,250,000, 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. As of March 30, 1997, the amount of redeemed debentures would have satisfied this requirement through March 1, 1999. 9 5. 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 as of the beginning of the respective periods, with a corresponding increase in net income to reflect a reduction in related interest expense, net of applicable taxes. 6. STATEMENT OF CASH FLOWS For purposes of the unaudited Consolidated Statements of Cash Flows, the Company considers all short-term, highly liquid investments having a maturity of three months or less at the date of acquisition to be cash equivalents.
Supplementary information - ------------------------- 26 weeks ended 26 weeks ended March 30, 1997 March 31, 1996 --------------- -------------- Cash paid during the period for: Interest $1,629 $1,900 ======== ======== Income taxes $2,550 $3,147 ======== ======== Non-cash financing activities: Conversion of subordinated debt into 615,000 shares of common stock (See Note 4) $1,170 $ - ======== ======== Business acquired in purchase transaction (See Note 8): $2,900 $ - Fair values of assets acquired Less debt issued (700) - -------- -------- Cash paid for acquisition $2,200 $ - ======== --------
7. CONTINGENCY In Broomfield, Colorado, the owner of a 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 the 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 assertions 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. In the opinion of management, based on the limited information currently available and assumptions believed by management to be reasonable, the final outcome of the Broomfield, Colorado environmental matter likely will not have a materially adverse effect on the Company's financial position or results of operations. 10 8. ACQUISITION On October 25, 1996, Microsemi RF Products, Inc. (RF), formerly known as Micro Acquisition Corp., a wholly owned subsidiary of the Company, purchased certain assets and the right to manufacture a selected group of products of the high- reliability portion of SGS Thompson's Radio Frequency Semiconductor business in Montgomeryville, Pennsylvania. The purchase price included approximately $2,200,000 in cash and a $700,000 promissory note, which carries no interest and has scheduled payments of $200,000 due on January 15, 1997, $200,000 due on January 15, 1998 and $300,000 due on January 15, 1999. The acquisition has been accounted for by the purchase method. Accordingly, the cost of the acquisition was allocated to the assets acquired based on their estimated fair market values to the extent of the purchase price. The Company's consolidated results of operations include the operations of the RF business since the date of acquisition. 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 types of power supply applications to the newly designed micro-miniature transient absorbers, which are mounted within the cables used to connect computer or telecommunications equipment. Capital Resources and Liquidity Microsemi Corporation's operations in the first six months of fiscal year 1997 were funded with internally generated funds and borrowings from the Company's line of credit. Under the current line of credit, the Company can borrow up to $15,000,000. As of March 30, 1997, $7,464,000 was borrowed under this credit facility. At March 30, 1997, the Company had $5,904,000 in cash and cash equivalents. A $5,350,000 Industrial Development Revenue Bond was originally issued in April 1985, through the City of Santa Ana Industrial Development Authority for the construction of improvements and new facilities at the Santa Ana plant. It was re-marketed in 1995 and carries an average interest rate of 6.75% per annum. The terms of the bond require principal payments of $1,050,000 in 1998, $100,000 annually from 1999 to 2004 and $3,700,000 in 2005. A $5,557,000 letter of credit is carried by a bank to guarantee the repayment of this bond. There are no compensating balance requirements, however, the letter of credit agreement requires the Company to make annual collateral payments of $350,000 on February 1, 1996, 1997 and 1998, totaling $1,050,000, to complete the payment of principal scheduled for February 1, 1998. On October 25, 1996, Microsemi RF Products, Inc., formerly known as Micro Acquisition Corp., a wholly owned subsidiary of the Company, purchased certain assets and the right to manufacture a selected group of products of the high- reliability portion of SGS Thompson's Radio Frequency 11 Semiconductor business in Montgomeryville, Pennsylvania. The purchase price included approximately $2,200,000 in cash and a $700,000 note payable. The average collection period of accounts receivable was 59 days for the first six months of fiscal year 1997 compared to 52 days for the same period of fiscal year 1996. The longer collection period was mainly caused by higher sales in the current period and by the increase in foreign sales. The average days sales of products in inventories was 159 for the first twenty six weeks of fiscal year 1997 compared to 149 days for the corresponding period of fiscal year 1996. This increase was primarily caused by higher raw material inventories, due to longer lead time to order supplies and by the inventories included in the acquisition during the current period. The Company has no other significant capital commitments. Important factors related to forward-looking statements and associated risks This Form 10-Q contains certain forward-looking statements that are based on current expectations and involve a number of risks and uncertainties. The forward looking statements included herein are, among other items, based on current assumptions that the Company will be able to meet its current operating cash and debt service requirements with internally generated funds and its available line of credit, that it will be able to successfully resolve disputes and other business matters as anticipated, that competitive conditions within the semiconductor, surface mount and custom diode assembly industries will not change materially or adversely, that the Company will retain existing key personnel, that the Company's forecasts will reasonably anticipate market demand for its products, and that there will be no materially adverse change in the Company's operations or business. Assumptions relating to the foregoing involve judgments that are difficult to predict and are subject to many factors that can adversely affect results. Forecasting and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause the Company to alter its forecasts, which may in turn affect the Company's results of operations. In light of the factors that can affect the forward-looking information included herein and other risks referred to in this Form 10-Q, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. Foreign Operations The Company conducts a portion of its operations outside the United States that 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 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 (PRC). In July 1997, Hong Kong will be returned to the PRC. To the Company's knowledge, the government of the PRC has not announced any significant changes in the conduct of businesses in Hong Kong; however, there can be no assurance that changes will not be made in the future or that the transition of Hong Kong to the PRC will not have any adverse effect on the Company's assets in Hong Kong or the results of operations of the Company. 12 Sales to Foreign Customers 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. Changes in 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. Order Backlog The Company's consolidated order backlog was $70,000,000 as of March 30, 1997, compared to $70,100,000 at March 31, 1996 and $68,000,000 at September 29, 1996. Lead times for the release of the orders depend upon the scheduling practices of individual customers. The delivery times of new or non-standard products can be affected by scheduling factors and other manufacturing circumstances. 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, the Company's backlog as of any particular date may not be representative of actual sales for any succeeding period. A portion of the Company's sales are to military and aerospace markets which are subject to the business risk of changes in government appropriations and changes in national defense policies and priorities. All of the Company's contracts with prime U.S. Government contractors contain customary provisions permitting termination at any time at the convenience of the U.S. Government or the prime contractors upon payment to the Company for cost incurred plus a reasonable profit. Certain contracts are also subject to price re-negotiation in accordance with the U.S. Government sole source procurement provisions. No material contract of the Company has been terminated or re-negotiated; however, there can be no assurance that customers will not terminate or re-negotiate their contracts. Competition The Company competes primarily in the discrete semiconductor market, particularly in the area of high reliability components. The Company has numerous competitors across all of its product lines. In the defense market sector, the Company possesses the major share of the market. In the commercial/industrial arena, there are numerous competitors such as Motorola, Inc., General Instruments Corp., ITT Corp. and National Semiconductor which are significantly larger than Microsemi and have greater resources and larger market shares. Competition in certain of its product lines is dependent on price and performance. 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 allocate 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 products and between its high cost and low cost products. 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. 13 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, of 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 assurance can be made that the Company will be able to maintain the confidentiality of the Company's technology, dissemination of which could have an adverse effect on the Company's business. In addition, litigation may be necessary to determine the scope and the validity of the Company's proprietary rights. 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. Manufacturing Risks The Company's manufacturing processes are highly complex, require advanced and costly equipment and are continuously 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 it major facilities were interrupted. There can be no assurance that the Company will not experience manufacturing difficulties in the future. 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. 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 may 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 14 201 of the Delaware General Corporation Law which may deter the Company from engaging in certain change of control transactions with certain of its stockholders under certain circumstances. Environmental Regulation While the Company believes that is has the 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, is 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 properties 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 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. Effect of Inflation The Company continuously attempts to minimize any effect of inflation on earnings by controlling its operating costs and selling prices. During the past few years, the rate of inflation has been low and has not had a material impact on the Company's results of operations. Higher inflation may adversely affect the Company's results of operations. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 30, 1997 COMPARED TO THE QUARTER ENDED MARCH 31, 1996. Net sales for the second quarter of fiscal year 1997 increased $1,550,000 to $40,657,000, from $39,107,000 for the second quarter of fiscal year 1996; this increase was primarily due to strong demand for the space market related products; partially off set by reductions in telecommunications and commercial products. Gross profit increased $733,000 to $11,042,000 or 27.2% of sales for the second quarter of fiscal year 1997 from $10,309,000 or 26.4% of sales for the second quarter of fiscal year 1996. This improvement resulted from a greater concentration in higher profit space market and other high performance products; whereas the prior year included a greater proportion of lower margin commercial products. Operating expenses for the second quarter of fiscal year 1997 remained relatively constant compared to that of the corresponding period of the prior year. Interest expense decreased $224,000 in the current quarter, compared to the prior year's corresponding period, due to lower average borrowings during the quarter and a lower interest rate on the credit line. 15 The effective tax rates of 41% and 42% in the second quarters of fiscal years 1997 and 1996 are the combined result of taxes computed on foreign and domestic income. RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 30, 1997 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 1996. Net sales for the first six months of fiscal year 1997 increased $2,010,000 to $76,416,000, from $74,406,000 for the first six months of fiscal year 1996. This increase reflects the continuing strong demand for the company's space market products; partially off set by reductions in telecommunications and commercial products. Gross profit increased $1,274,000 to $20,786,000 or 27.2% of sales for the first half of fiscal year 1997 from $19,512,000 or 26.2% of sales for the same period of fiscal year 1996. This improvement resulted from a greater concentration in higher margin space and other high performance products. Operating expenses for the first six months of fiscal year 1997 remained relatively constant compared to that of the corresponding period of the prior year. Interest expense decreased $492,000 in the current six months, compared to the prior year's corresponding period, due to lower average borrowings during the quarter and a lower interest rate on the credit line. The effective tax rate of 42% in the first twenty six weeks of fiscal years 1997 and 1996 are the combined result of taxes computed on foreign and domestic income. PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS ----------------- Previously reported Item 2. CHANGES IN SECURITIES --------------------- Inapplicable Item 3. DEFAULTS UPON SENIOR SECURITIES ------------------------------- Inapplicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- (a) An election of the Board of Directors was held at the annual meeting of Stockholders on February 25, 1997. (b) Names and personal information about the nominees to the Board of Directors were included in the Proxy Statement dated January 17, 1997. 16 (c) Votes were received for each of the nominees to the Board of Directors as follows:
For Withheld Philip Frey, Jr. 7,826,000 44,000 Jiri Sandera 7,824,000 46,000 Joseph M. Scheer 7,824,000 46,000 Brad Davidson 7,825,000 45,000 Robert B. Phinizy 7,825,000 45,000 Martin H. Jurick 7,826,000 44,000
(d) Inapplicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits: Exhibit 11 Unaudited computation of Earnings Per Share for the thirteen and twenty six weeks ended March 30, 1997 and March 31, 1996. Exhibit 27 Unaudited Financial Data Schedule for the six months ended March 30, 1997. (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: /s/ DAVID R. SONKSEN ----------------------------------- 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: May 9, 1997 17 EX-11 2 UNAUDITED COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 Microsemi Corporation and Subsidiaries Unaudited Earnings Per Share Calculation (in thousands, except earnings per share)
13 Weeks Ended 26 Weeks Ended March 30, 1997 March 31, 1996 March 30, 1997 March 31,1996 -------------- -------------- -------------- ------------- (amounts in 000's) (amounts in 000's) PRIMARY Net income $ 2,395 $ 1,828 $ 4,284 $ 3,257 ======= ======= ======= ======= Equivalent shares outstanding 8,568 7,824 8,363 7,824 Equivalent shares from stock options 337 408 369 440 ------- ------- ------- ------- Primary common and common equivalent shares 8,905 8,232 8,732 8,264 ======= ======= ======= ======= Primary earnings per share $ 0.27 $ 0.22 $ 0.49 $ 0.39 ======= ======= ======= ======= FULLY DILUTED Net income $ 2,395 $ 1,828 $ 4,284 $ 3,257 Interest savings from conversion of convertible debt, net of income taxes 305 323 626 646 ------- ------- ------- ------- Fully diluted net income $ 2,700 $ 2,151 $ 4,910 $ 3,903 ======= ======= ======= ======= Equivalent shares outstanding 8,568 7,824 8,363 7,824 Equivalent shares from stock options 337 408 403 440 Convertible shares 2,988 3,523 3,194 3,523 ------- ------- ------- ------- Fully diluted common and common equivalent shares 11,893 11,755 11,960 11,787 ======= ======= ======= ======= Fully diluted earnings per share $ 0.23 $ 0.18 $ 0.41 $ 0.33 ======= ======= ======= =======
EX-27 3 FINANCIAL DATA SCHEDULE
5 1000 6-MOS SEP-28-1997 SEP-30-1996 MAR-30-1997 5904 0 27,072 2,530 49,935 84,468 62,549 33,424 122,715 39,429 44,391 0 0 1,741 33,277 122,715 76,416 76,416 55,630 55,630 168 0 1,920 7,327 3,043 4,284 0 0 0 4,284 0.49 0.41
-----END PRIVACY-ENHANCED MESSAGE-----