UNITED STATES
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 June 29, 2003

or

o    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 incorporation or organization)	(I.R.S. Employer Identification No.)
2381 Morse Avenue, Irvine, California	92614
(Address of principal executive offices)	(Zip Code)
(949) 221-7100
(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 months (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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o

The number of shares of the issuer’s Common Stock, $0.20 par value, outstanding on July 18, 2003 was 28,977,385.

PART I - FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS

The unaudited consolidated income statements for the quarter and nine months ended June 29, 2003 of Microsemi Corporation and Subsidiaries (“Microsemi” or the “Company”), the Company’s unaudited consolidated statements of cash flows for the nine months ended June 29, 2003, and the comparative unaudited consolidated financial information for the corresponding periods of the prior year, together with the Company’s unaudited balance sheets as of June 29, 2003 and as of September 29, 2002, are attached hereto and incorporated herein.

2

MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
(amounts in thousands, except per share data)

	September 29, 2002			June 29, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	23,060		$	25,270
Accounts receivable, net of allowance for doubtful accounts, $1,740 at September 29, 2002 and $1,331 at June 29, 2003		32,435			27,016
Inventories		52,040			52,854
Deferred income taxes		3,736			3,736
Other current assets		2,698			2,479
Total current assets		113,969			111,355
Property and equipment, net		65,608			62,543
Deferred income taxes		1,641			9,691
Goodwill and other intangible assets, net		33,824			10,183
Other assets		1,726			4,291
TOTAL ASSETS	$	216,768		$	198,063
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable	$	144		$	121
Current maturities of long-term debt		167			89
Accounts payable		12,559			10,289
Accrued liabilities		17,052			15,437
Income taxes payable		—			714
Total current liabilities		29,922			26,650
Long-term debt		4,356			474
Other long-term liabilities		4,044			4,028
Commitments and contingencies (Note 3)
Stockholders’ equity:
Preferred stock		—			—
Common stock, $.20 par value; authorized 100,000 shares; issued and outstanding 28,895 and 28,977 at September 29, 2002 and June 29, 2003, respectively		5,779			5,796
Capital in excess of par value of common stock		118,451			118,752
Retained earnings		55,387			42,363
Accumulated other comprehensive loss		(1,171	)		—
Total stockholders’ equity		178,446			166,911
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	216,768		$	198,063

The accompanying notes are an integral part of these statements.

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MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Income Statements
(amounts in thousands, except per share data)

	Quarter Ended
	June 30, 2002			June 29, 2003
Net sales	$	51,466		$	50,534
Cost of sales		35,740			34,230
Gross profit		15,726			16,304
Operating expenses:
Selling, general and administrative		9,895			9,351
Research and development		6,116			4,974
Amortization of goodwill and other intangible assets		965			303
Restructuring charges		335			—
Gain on sale of asset, net		(2,865	)		—
Asset Impairment		80			—
Total operating expenses		14,526			14,628
Operating income		1,200			1,676
Other income (expense):
Interest, net		(159	)		67
Other, net		63			2
Total other income (expense)		(96	)		69
Income before income taxes		1,104			1,745
Provision for income taxes		364			576
Net income	$	740		$	1,169
Earnings per share:
-Basic	$	0.03		$	0.04
-Diluted	$	0.03		$	0.04
Weighted average common and common equivalent shares outstanding:
-Basic		28,877			28,955
-Diluted		29,423			29,578

The accompanying notes are an integral part of these statements.

4

MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Income Statements
(amounts in thousands, except per share data)

	Nine Months Ended
	June 30, 2002			June 29, 2003
Net sales	$	163,453		$	144,620
Cost of sales		107,554			100,560
Gross profit		55,899			44,060
Operating expenses:
Selling, general and administrative		29,102			27,459
Research and development		17,063			14,762
Amortization of goodwill and other intangible assets		2,901			1,016
Restructuring charges		4,070			686
Gain on sales of assets, net		(2,865	)		(2,393	)
Asset impairments		1,687			—
Total operating expenses		51,958			41,530
Operating income		3,941			2,530
Other income (expense):
Interest, net		(491	)		(71	)
Other, net		79			(25	)
Total other expense		(412	)		(96	)
Income before income taxes		3,529			2,434
Provision for income taxes		1,165			803
Income before cumulative effect of a change in accounting principle		2,364			1,631
Cumulative effect of change in accounting principle, net of income taxes.		—			(14,655	)
Net income (loss)	$	2,364		$	(13,024	)
Earnings (loss) per share:
-Basic
Income before cumulative effect of change in accounting principle	$	0.08		$	0.06
Cumulative effect of change in accounting principle		—			(0.51	)
Net income (loss)	$	0.08		$	(0.45	)
-Diluted
Income before cumulative effect of change in accounting principle	$	0.08		$	0.06
Cumulative effect of change in accounting principle		—			(0.50	)
Net income (loss)	$	0.08		$	(0.44	)
Weighted average common and common equivalent shares outstanding:
-Basic		28,605			28,931
-Diluted		29,799			29,275

The accompanying notes are an integral part of these statements.

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MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
(amounts in thousands)

	Nine Months Ended
	June 30, 2002			June 29, 2003
Cash flows from operating activities:
Net income (loss)	$	2,364		$	(13,024	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,593			7,936
Provision for doubtful accounts		663			220
Gain on retirement and disposition of assets, net		(3,088	)		(850	)
Impairment of assets		1,679			—
Impairment of Goodwill, net of income taxes		—			14,655
Changes in assets and liabilities:
Accounts receivable		5,025			3,699
Inventories		(1,536	)		(1,002	)
Other current assets		(448	)		(120	)
Accounts payable		(2,977	)		(2,263	)
Accrued liabilities		(4,851	)		(561	)
Income taxes payable		(1,668	)		714
Other long-term liabilities		(329	)		(16	)
Net cash provided by operating activities		3,063			9,388
Cash flow from investing activities:
Purchases of property and equipment		(16,158	)		(8,504	)
Changes in other assets		(227	)		1,338
Proceeds from sales of assets		12,643			3,627
Net cash used in investing activities		(3,742	)		(3,539	)
Cash flows from financing activities:
Payments of long-term debt		(2,567	)		(3,960	)
Exercise of employee stock options		2,478			318
Net cash used in financing activities		(89	)		(3,642	)
Effect of exchange rate changes on cash		(64	)		3
Net increase in cash and cash equivalents		1,532			2,210
Cash and cash equivalents at beginning of period		24,808			23,060
Cash and cash equivalents at end of period	$	26,340		$	25,270

In March 2002, we issued 333,333 shares of our common stock as payment in full for a $2.5 million convertible note related to the acquisition of certain assets from Infinesse Corp.

The accompanying notes are an integral part of these statements.

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MICROSEMI CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2003

1.    PRESENTATION OF FINANCIAL INFORMATION

The financial information furnished herein is unaudited, but in the opinion of 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 nine 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 be read in conjunction with the consolidated financial statements and notes thereto in the Annual Report on Form 10-K for the fiscal year ended September 29, 2002.

2.    INVENTORIES

Inventories used in the computation of cost of goods sold were (amounts in thousands):

	September 29, 2002		June 29, 2003
Raw materials	$	9,561	$	10,729
Work in process		24,864		25,192
Finished goods		17,615		16,933
	$	52,040	$	52,854

3.    CONTINGENCY

In Broomfield, Colorado, the owner of a property located adjacent to a manufacturing facility owned by a subsidiary of the Company had notified the subsidiary and other parties, claiming that contaminants migrated to his property, thereby diminishing its value.  In August 1995, the subsidiary, together with former owners of the manufacturing facility, agreed to settle the claim and to indemnify the owner of the adjacent property for remediation costs.  Although TCE and other contaminants previously used at the facility are present in soil and groundwater on the subsidiary’s property, we vigorously contest any assertion that the subsidiary is the cause of the contamination. In November 1998, we signed an agreement with three former owners of this facility whereby the former owners 1) reimbursed us for $530,000 of past costs, 2) assumed responsibility for 90% of all future clean-up costs, and 3) agreed to indemnify and protect us against any and all third-party claims relating to the contamination of the facility.  An Integrated Corrective Action Plan has been submitted to the State of Colorado. Sampling and free phase management plans are in preparation for the Colorado Department of Public Heath & Environment.  State and local agencies in Colorado are reviewing current data and considering study and cleanup options, and it is not yet possible to predict actual costs for remediation.  Based upon currently available data, management believes that the final outcome of the Broomfield, Colorado environmental matter will not have a material adverse effect on our financial position, results of operations or cash flows.

We are involved in various pending litigation matters, arising out of the normal conduct of our business, including from time to time litigation relating to commercial transactions, contracts, and environmental matters.  In the opinion of management, the final outcome of these matters will not have a material adverse effect on our financial position, results of operations or cash flows.

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4.    COMPREHENSIVE INCOME

Comprehensive income is defined as the change in equity (net assets) of a business enterprise during the period from transactions and other events and circumstances from non-owner sources.  Accumulated other comprehensive loss consists of the change in the cumulative translation adjustment.  Total comprehensive income for the quarters ended June 30, 2002 and June 29, 2003 was $733,000 and $1,172,000, respectively.  Total comprehensive income (loss) for the nine months ended June 30, 2002 and June 29, 2003 was $2,300,000 and ($13,021,000), respectively.

5.    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 options outstanding and giving effect to issuance of shares upon conversion of debt during the respective periods.

Earnings per share (“EPS”) for the respective quarters and respective nine months ended June 30, 2002 and June 29, 2003 were calculated as follows (amounts in thousands, except per share data):

	Quarters Ended				Nine Months Ended
	June 30, 2002		June 29, 2003		June 30, 2002		June 29, 2003
BASIC
Net income (loss)	$	740	$	1,169	$	2,364	$	(13,024	)
Weighted-average common shares Outstanding		28,877		28,955		28, 605		28,931
Basic earnings (loss) per share	$	0.03	$	0.04	$	0.08	$	(0.45	)
DILUTED
Net income (loss)	$	740	$	1,169	$	2,364	$	(13,024	)
Interest savings from assumed conversions of convertible debt, net of income taxes		—		—		53		—
Net income (loss) assuming conversions	$	740	$	1,169	$	2,417	$	(13,024	)
Weighted-average common shares outstanding for basic		28,877		28,955		28, 605		28,931
Dilutive effect of stock options		546		624		1,000		—
Dilutive effect of convertible debt		—		—		194		344
Weighted-average common shares outstanding on a diluted basis		29,423		29,578		29,799		29,275
Diluted earnings (loss) per share	$	0.03	$	0.04	$	0.08	$	(0.44	)

Approximately 3,362,000 and 2,917,000 options were not included in the computation of diluted EPS in the third quarters of fiscal years 2002 and 2003, respectively, and 1,728,000 and 3,984,000 options were not included in the computation of diluted EPS in the first nine months of fiscal years 2002 and 2003 respectively, as they would have been antidilutive.

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6.    RECENTLY ADOPTED ACCOUNTING STANDARDS

Effective September 30, 2002, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). Under SFAS No. 142, goodwill will no longer be amortized, but will be subject to a periodic test for impairment based upon fair values. SFAS No. 142 requires that goodwill be tested at least annually for impairment, using a two-step process. The first step is to identify a potential impairment. The second step is to measure the amount of the impairment loss. In the year of adoption, the initial testing must be done as of the beginning of the fiscal year. For this transition testing, the first step must be completed within six months of adoption and if an impairment exists, it must be recorded (the second step) by the end of the Company’s fiscal year.

We completed the first step of the transition testing by March 30, 2003 and completed the second step in the quarter ended June 29, 2003. As a result, a pre-tax transition impairment charge related to goodwill as of September 30, 2002 was determined to be $22.7 million. The impairment charge related to acquisitions of businesses in prior years. As required by SFAS No. 142, a $14.7 million transition impairment charge was recorded, net of its associated $8.0 million tax benefit, as a cumulative effect of a change in accounting principle, effective as of September 30, 2002.  This charge was reflected in net loss for the nine months ended June 29, 2003.

At the beginning of fiscal year 2003, we had approximately $26.0 million of unamortized goodwill and assembled work force that resulted from our previous acquisitions, of which $22.7 million was subject to the transition impairment charge as discussed above. On a prospective basis and in accordance with SFAS 142, we will not amortize the remaining $3.3 million of goodwill unless it is determined to be impaired during our periodic evaluations, which will be performed at least annually.  The goodwill amortization charge to earnings was approximately $2.3 million during fiscal year 2002. The following table shows, on a pro-forma basis, what net income and earnings per share would have been for the quarter and nine months ended June 30, 2002 if the new accounting standards had been applied beginning October 1, 2001 (amounts in thousands, except per share data):

	Quarter Ended June 30, 2002		Nine Months Ended June 30, 2002
Net income, as reported	$	740	$	2,364
Add back: goodwill amortization, net of tax effect		465		1,414
Pro-forma net income	$	1,205	$	3,778
Basic and diluted earnings per share, as reported	$	0.03	$	0.08
Add back: goodwill amortization, net of tax effect		0.01		0.05
Pro-forma basic and diluted earnings per share	$	0.04	$	0.13

In July 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”.  SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  This Statement was adopted in the first quarter of fiscal year 2003.  The adoption of this Statement did not have a material effect on our financial position, results of operations and cash flows.

In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.  This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets.  This Statement was adopted in the first quarter of fiscal year 2003.  The adoption of this Statement did not have a material effect on our financial position, results of operations and cash flows.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”), which nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring) (“EITF 94-3”).  SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, whereas EITF 94-3 required that such liability be recognized on the date on which we had committed to an exit plan.  We are required to adopt the provisions of SFAS 146 effective for exit or disposal activities initiated after December 31, 2002.  The adoption of SFAS 146 did not have a significant effect on our financial position, results of operations and cash flows.

9

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (“SFAS No. 148”). SFAS No. 148 amends the disclosure requirements of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123), to require disclosures in both interim and annual financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 also amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. We have commenced quarterly footnote disclosure of the fair value based method of accounting for stock-based employee compensation beginning with the quarter ended March 30, 2003. The pro forma effect to net income (loss) is presented in Note 7 as if the fair value method had been applied. As we decided not to adopt the SFAS No. 123 fair value method of accounting for stock-based employee compensation, the new transition alternatives of SFAS No. 148 did not have an effect on our consolidated financial statements.

7.    STOCK-BASED COMPENSATION

During the second quarter of fiscal 2003, we adopted the fair value interim disclosure provisions of SFAS No. 148, Accounting for Stock-Based Compensation, for stock-based employee compensation, effective as of the beginning of the fiscal year. Under the modified prospective method of adoption selected by the company, stock-based employee compensation cost recognized in 2003 is the same as that which would have been recognized had the fair value recognition provisions of SFAS No. 148 been applied to all awards granted after October 1, 1995. The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding awards in each period (amounts in thousands):

	Quarter Ended						Nine Months Ended
	June 30, 2002			June 29, 2003			June 30, 2002			June 29, 2003
Net income (loss), as reported	$	740		$	1,169		$	2,364		$	(13,024	)
Deduct: Total stock-based employee compensation  expense determined under fair value based method for all awards, net of related tax effects		(1,732	)		(1,536	)		(5,195	)		(3,984	)
Pro forma net income (loss)	$	(992	)	$	(367	)	$	(2,831	)	$	(17,008	)
Earnings (loss) per share:
Basic - as reported	$	0.03		$	0.04		$	0.08		$	(0.45	)
Basic - pro forma	$	(0.03	)	$	(0.01	)	$	(0.10	)	$	(0.59	)
Diluted - as reported	$	0.03		$	0.04		$	0.08		$	(0.44	)
Diluted - pro forma	$	(0.03	)	$	(0.01	)	$	(0.10	)	$	(0.58	)

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8.    SEGMENT INFORMATION

Our reportable operating segments are based on geographic locations and the measure of segment profit is income from operations.  We operate predominantly in a single industry segment as a manufacturer of discrete semiconductors and whole-circuit semiconductor solutions.  Geographic areas in which we operate include the United States, Europe and Asia.  Inter-geographic sales primarily represent intercompany sales that are accounted for based on established sales prices between the related companies and are eliminated in consolidation.

Financial information by geographic segments is as follows (amounts in thousands):

	Nine Months Ended
	June 30, 2002			June 29, 2003
Net sales:
United States
Sales to unaffiliated customers	$	145,249		$	127,202
Intergeographic sales		15,882			13,931
Europe
Sales to unaffiliated customers		18,131			17,328
Intergeographic sales		2,233			112
Asia
Sales to unaffiliated customers		73			90
Intergeographic sales		803			713
Eliminations of intergeographic sales		(18,918	)		(14,756	)
	$	163,453		$	144,620
Income (loss) from operations:
United States	$	2,204		$	2,414
Europe		2,142			632
Asia		(405	)		(516	)
Total	$	3,941		$	2,530
Capital expenditures:
United States	$	15,952		$	8,228
Europe		206			34
Asia		—			242
Total	$	16,158		$	8,504
Depreciation and amortization:
United States	$	10,340		$	7,733
Europe		182			165
Asia		71			38
Total	$	10,593		$	7,936

	September 29, 2002		June 29, 2003
Identifiable assets:
United States	$	202,581	$	186,482
Europe		10,831		9,575
Asia		3,356		2,006
Total	$	216,768	$	198,063

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9.    RESTRUCTURING CHARGES AND ASSET IMPAIRMENTS

In January 2002, we announced our Factory Utilization and Profit Enhancement Programs to increase company-wide capacity utilization and operating efficiencies through consolidations and realignments of operations.

During the first nine months of fiscal year 2003, we recorded restructuring charges of $686,000 for employee severance. The employee severance costs include termination benefits of approximately $370,000 for 10 exempt employees and $316,000 for 19 non-exempt employees as part of our involuntary termination plans at the Watertown and Lawrence, Massachusetts and Garden Grove, California facilities.

The following table reflects the activities that resulted in the liabilities included in Accrued Liabilities in the consolidated balance sheets at June 29, 2003 (amounts in 000s):

	Workforce Reductions			Plant Closures			Total
Balance at September 29, 2002	$	2,161		$	726		$	2,887
Provisions		686			—			686
Cash expenditures		(2,406	)		(385	)		(2,791	)
Other non-cash write-off		(417	)		—			(417	)
Balance at June 29, 2003	$	24		$	341		$	365

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Item 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q includes current beliefs, expectations and other forward looking statements, the realization of which may be adversely impacted by any of the factors discussed or referenced under the heading “Important Factors Related to Forward-Looking Statements and Associated Risks,” found below.  This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the accompanying unaudited consolidated financial statements and notes should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto in the Annual Report on Form 10-K for the fiscal year ended September 29, 2002.

INTRODUCTION

Microsemi is a leading designer, manufacturer and marketer of analog and mixed-signal integrated circuits and power and discrete semiconductors. Our semiconductors manage and regulate power, protect against transient voltage spikes and transmit, receive and amplify signals.

Our products include individual components as well as complete circuit solutions that enhance customer designs by providing battery optimization, reducing size or protecting circuits. We serve the mobile connectivity, automotive, digital media, computer/peripherals, telecommunications, medical, industrial/commercial, aerospace/satellite and military markets.

Our customers include Boeing, Guidant/Cardiac Pace Makers, Seagate Technology, Compaq, Dell, Lockheed Martin, Raytheon Systems, and Medtronic.

RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2002 COMPARED TO THE QUARTER ENDED JUNE 29, 2003.

Net sales decreased $1.0 million, or 2%, from $51.5 million for the third quarter of fiscal year 2002 to $50.5 million for the third quarter of fiscal year 2003.  The decrease included $1.9 million lower sales of space and commercial aircraft products and $1.9 million lower sales of telecommunication products, partially offset by a $2.8 million increase in sales of medical products.  We sold the assets of Microsemi RF Products, Inc. (“RF”) in the quarter ended June 30, 2002. RF had revenues of $1.4 million in the quarter ended June 30, 2002, which was included in the decrease in sales of telecommunication products. The decrease in revenues in the third quarter of this fiscal year reflected the general decline of the space, commercial aircraft and telecommunications markets. The increase in revenues from our medical products represented higher demands for our high reliability medical components used in MRI systems, pacemakers and implantable cardio defibrillators.

Gross profit increased $0.6 million, or 4.0%, from $15.7 million for the third quarter of fiscal year 2002 to $16.3 million for the third quarter of fiscal year 2003.  As a percentage of sales, gross profit was 30.6% for the third quarter of fiscal year 2002 compared to 32.3% for the third quarter of fiscal year 2003.  Gross profit increased primarily as a result of higher utilization rates of our facilities.  RF had a gross profit of $0.4 million in the quarter ended June 30, 2002.

Selling, general and administrative expenses decreased $0.5 million, or 5%, from $9.9 million for the third quarter of fiscal year 2002 to $9.4 million for the third quarter of fiscal year 2003. The decrease was primarily a result of the elimination of expenses of RF and the consolidations of our Watertown and Melrose, Massachusetts facilities into our Lowell and Lawrence, Massachusetts facilities; partially offset by an increase in insurance and other employee benefits.

Research and development expenses decreased $1.1 million, or 18%, from $6.1 million for the third quarter of fiscal year 2002 to $5.0 million for the third quarter of fiscal year 2003.  The decrease was primarily due to the elimination of expenses from the Carlsbad design center, which was sold in the fourth quarter of fiscal year 2002.

Amortization of goodwill and other intangible assets decreased $0.7 million because we ceased the amortization of goodwill upon adoption of SFAS No. 142, effective September 30, 2002, which changes the accounting for goodwill from an amortization method to an impairment only approach.

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We had $0.2 million of interest expense in the quarter ended June 30, 2002 compared to $0.1 million of interest income in the quarter ended June 29, 2003 because we only paid interest on approximately $0.6 million of debt in the current quarter, which was more than offset by interest income from our short-term investments. 

The effective tax rate for each of the respective fiscal quarters ended June 30, 2002 and June 29, 2003 was 33.0%.

Results Of Operations For The Nine Months Ended June 30, 2002 Compared To The Nine Months Ended June 29, 2003.

Net sales decreased $18.9 million or 12% from $163.5 million for the first nine months of fiscal year 2002 to $144.6 million for the first nine months of fiscal year 2003.  The decrease included $20.3 million lower sales of space and commercial aircraft products, $9.0 million lower sales to telecom and commercial customers, partially offset by a $10.4 million increase of sales of medical products.   The above decrease included the elimination of sales of RF, which had revenues of $6.0 million in the first nine months of fiscal year 2002 and was sold in the third quarter of last year.  The decease in revenues in the first nine months of this fiscal year reflected the general decline of the space, commercial aircraft and telecommunications markets. The increase in revenues from our medical products represented higher demands for our high reliability medical components used in MRI systems, pacemakers and implantable cardio defibrillators.

Gross profit decreased $11.8 million, from $55.9 million for the first nine months of fiscal year 2002 to $44.1 million for the first nine months of fiscal year 2003. Cost of sales in the nine months ended June 29, 2003 included a write-off of $0.3 million of leasehold improvements at our Melrose, Massachusetts facility, $0.7 million for cancellations of contracts and closures of facilities and $0.5 million of asset impairments.  RF had $1.5 million of gross profit in the nine months ended June 30, 2002. Excluding these factors, gross profit decreased from 34.5% of sales for the first nine months of fiscal year 2002 to 31.5% of sales for the corresponding period of fiscal year 2003 primarily as a result of the decline in sales.

Selling, general and administrative expenses decreased $1.6 million from $29.1 million for the first nine months of fiscal year 2002 to $27.5 million for the first nine months of fiscal year 2003, due to lower commission expenses as a result of lower sales, the elimination of expenses associated with RF and the consolidations of our Watertown and Melrose, Massachusetts facilities into our Lowell and Lawrence, Massachusetts facilities; partially offset by an increase in insurance and other employee benefits.

Research and development expenses decreased $2.3 million, from $17.1 million for the first nine months of fiscal year 2002 to $14.8 million for the first nine months of fiscal year 2003. The decrease was primarily due to the disposition of our Carlsbad design center, partially offset by an increase in R&D spending for Power Management products.

Amortization of goodwill and other intangible assets decreased $1.9 million because we ceased the amortization of goodwill upon adoption of SFAS No. 142, effective September 30, 2002, which changes the accounting for goodwill from an amortization method to an impairment only approach.

We had $0.5 million of interest expense in the nine months ended June 30, 2002 compared to $0.1 million of interest expense in the nine months ended June 29, 2003 due to lower balances of debt. 

The effective income tax rate was 33.0% in the nine months ended June 30, 2002 and June 29, 2003, respectively.

We adopted the provisions of SFAS 142, “Goodwill and Other Intangible Assets,” effective September 30, 2002.  We recorded a transition impairment charge of $14.7 million, net of income tax effect of $8.0 million, which was reflected as a cumulative effect of a change in accounting principle, effective as of the beginning of fiscal year 2003.  The transition impairment charge related to acquisitions of businesses in prior years. (See Note 6 to the unaudited consolidated financial statements).

FINANCIAL CONDITION

Net cash provided by operating activities was $3.1 million and $9.4 million for the first nine months of fiscal years 2002 and 2003, respectively.  The $6.3 million increase in net cash provided by operating activities

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was a net result of a $15.4 million decline in net income, which was more than offset by the combined net effect of lower accounts receivable, higher other current assets, lower accounts payable and the positive net effect of other non-cash expenses on income, including a $14.7 million transition impairment charge to goodwill.

Net cash used in investing activities was $3.7 million and $3.5 million for the first nine months of fiscal years 2002 and 2003, respectively.  The decrease of net cash used in investing activities was primarily due to a lower amount of purchases of property and equipment combined with receipts of $1.3 million from a note receivable and less cash received from sales of assets in 2003.

Net cash used in financing activities was $0.09 million and $3.6 million for the first nine months of fiscal years 2002 and 2003, respectively.  The increase was due to a $1.4 million higher payment of debt and $2.1 million lower proceeds from exercises of employee stock options.

At June 29, 2003, we had $26.7 million of current liabilities and $4.5 million of total long-term portion of long-term debt and other long-term liabilities.

Accounts receivable decreased from $32.4 million at September 29, 2002 to $27.0 million at the end of the third quarter.  This decrease was primarily due to lower sales and better collection efforts, resulting in lower DSO from 60 days to 51 days.

Inventory increased from $52.0 million at September 29, 2002 to $52.9 million at the end of the third quarter.  The higher inventory reflects some inventory build-up to cover for the transitional period when certain products are transferred to offshore locations as part of our cost reduction programs.

As a result of the foregoing, at June 29, 2003, we had $25.3 million in cash and cash equivalents, an increase of $2.2 million, or 10%, from $23.1 million in cash and cash equivalents at September 29, 2002.

At June 29, 2003, we had a current ratio of 4.2 to 1, an increase from 3.8 to 1 at September 29, 2002.

We have a $30.0 million credit line with a bank, which includes a facility to issue letters of credit.  As of June 29, 2003, we had an outstanding letter of credit of $0.4 million; consequently, $29.6 million was available under this credit facility. The credit line expires in March 2004 and is collateralized by substantially all assets of the Company.

As of June 29, 2003, we were in compliance with the covenants required by our bank and lessors.

We also continued the program of consolidating our facilities.  During the balance of fiscal year 2003, we do not expect any material commitments in connection with this program.

In January 2003, we received $1.2 million, net of expenses, from the sale of real property in Watertown, Massachusetts.

Consistent with our strategy, further plant consolidations are anticipated in the future.

Based upon information currently available, we believe that we can meet our current cash requirements and capital commitments with cash balances and internally generated funds from ongoing operations. 

Please read the information under the heading “IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS” below, which describes and refers to some of the important risks and uncertainties.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We regularly evaluate our estimates and assumptions related to allowances related to revenue recognition, sale returns, doubtful accounts, inventory valuation, goodwill and other intangible asset valuations, accounting for income taxes and accounting for stock-based compensation. Estimates and assumptions are based upon historical experience as well as various

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other factors that our management considers to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent there are material differences between estimates and actual results, our future financial position, results of operations and cash flow will be affected.

Revenue recognition, sales returns and allowances

SEC Staff Accounting Bulletin No. 101 “Revenue Recognition in Financial Statements” (“SAB 101”) requires that these four basic criteria have been met before revenue can be recognized: 1) evidence of an arrangement exists; 2) delivery has occurred; 3) the fee is fixed or determinable; and 4) collectibility is reasonably assured. We recognize revenue upon a determination that all criteria for revenue recognition have been met.  For instance, at the time of shipment to distributors, we simultaneously record revenues and reductions to revenue for estimated allowances for returns, rebate or price proctection programs. If actual returns, rebate and/or pricing adjustments exceed estimates, additional reductions to revenue would result. 

For a further discussion of our accounting policies regarding revenue recognition see the section below entitled “Our operating results may be affected to the extent actual results differ from accounting estimates” under “IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS.”

Allowance for doubtful accounts

Management analyzes specific customer accounts receivable, customer credit-worthiness, historical bad debt expenses, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. If the financial condition of any of our customers were to deteriorate to the point of impairing the customer’s ability to make payments on its account, additional allowances would be required. While credit losses have been generally within management’s expectations and the provisions established, significant deterioration in the liquidity or financial position of any of our major customers or any group of customers could have a material adverse impact on the collectibility of accounts receivable and future operating results.

For a further discussion of our accounting policies regarding reserves for bad debts see the section below entitled “Our operating results may be affected to the extent actual results differ from accounting estimates” under “IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS.”

Inventories

Inventories are stated at the lower of cost, as determined using the first-in, first-out (“FIFO”) method, or market. Costs include materials, labor and manufacturing overhead. We evaluate the carrying value of our inventories taking into account such factors as historical and anticipated future sales compared with quantities on hand and the price we expect to obtain for our products in their respective markets. We also evaluate the composition of our inventories to identify any slow-moving or obsolete products. These evaluations require material management judgments, including estimates of future sales, continuing market acceptance of our products, and current market and economic conditions. Inventory reserves are established based upon such judgments for any inventories that are identified as having a net realizable value less than their cost. Historically, the net realizable value of our inventories has generally been within management’s estimates. However, if we are unable to meet our sales expectations, or if market conditions deteriorate significantly from management’s estimates, reductions in the net realizable value of our inventories could have a material adverse impact on future operating results.

For a further discussion of our accounting policies regarding inventory valuation see the section below entitled “Our operating results may be affected to the extent actual results differ from accounting estimates” under “IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS.”

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Long-lived assets

We have determined that our goodwill was impaired as of the beginning of fiscal year 2003, and we have determined the amount of impairment to be $22.7 million.  See Note 6 to the unaudited consolidated financial statements for further discussion on impairment of goodwill.

For a discussion of our accounting policies regarding long-lived assets see the section below entitled “There are anticipated good-will impairments that adversely affect Microsemi” under “IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS.”

Accounting for income taxes

As part of the process of preparing the consolidated financial statements, we estimate our income taxes for each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. We must assess the likelihood that deferred tax assets will be recovered from future taxable income and to the extent that recovery is not likely, a valuation allowance must be established. If we establish or increase any valuation allowance in a period, it will adversely affect the tax provision in the income statement.

Stock-based compensation

For a discussion of our accounting policies regarding stock-based compensation see the section below entitled “We use APB Opinion No. 25 to account for equity compensation, which may not fully reflect the economic consequences of granting options or other equity compensation” under “IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS.”

Presentation of pro forma financial information

In addition to reporting financial results in accordance with Generally Accepted Accounting Principles (“GAAP”), we may publicly present, in both earnings news releases and our business outlooks, financial information in the form of a non-GAAP financial measure, which we call pro forma earnings. Our pro forma earnings measurement excludes and adjusts for various items.  We do not include amortization of non-goodwill acquisition related intangible assets, restructuring charges, or any asset impairments, and we exclude other items we consider out of the ordinary.  Our management believes that the presentation of pro forma earnings provides useful information to investors in order to evaluate our results of operation as they change from period to period because in some respects pro forma earnings should be a better comparative basis than quarterly earnings measured under GAAP.  However, pro forma measures we use are not standardized against the pro forma measures of other companies.  Our pro forma earnings measurements have involved the exercise of our management’s judgment and discretion, including as to which items would be excluded or included.  Items excluded from pro forma earnings have in some instances occurred previously or may recur again.

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

Some of the statements in this report or incorporated by reference are forward-looking, including, without limitation, the statements under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.  Forward-looking statements include those that contain words like “may,” “will,” “could,” “should,” “project,” “believe,” “anticipate,” “expect,” “plan,” “estimate,” “forecast,” “potential,” “intend,” “maintain,”  “continue” and variations of these words or comparable words.  In addition, all of the non-historical information herein is forward-looking, including any statement or implication about a future time, result or other circumstance. Forward-looking statements are not a guarantee of future performance and involve risks and uncertainties.  Actual results may differ substantially from the results that the forward-looking statements suggest for various reasons. These forward-looking statements are made only as of the date of this report. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

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The forward-looking statements included in this report are based on, among other items, current assumptions that we will be able to meet our current operating cash and debt service requirements, that we will be able to successfully resolve disputes and other business matters as anticipated, that competitive conditions within the analog, mixed signal and discrete semiconductor, integrated circuit or custom component assembly industries will not affect us materially or adversely, that we will retain existing key personnel, that our forecasts will reasonably anticipate market demand for our products, and that there will be no other material adverse change in our operations or business. Other factors that could cause results to vary materially from current expectations are referred to elsewhere in this report. Assumptions relating to the foregoing involve judgments that are difficult to make and future circumstances that are difficult to predict accurately or correctly. 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 us to alter our internal forecasts, which may in turn affect expectations or future results.  We do not undertake to announce publicly the changes that may occur in our expectations.  Readers are cautioned against giving undue weight to any of the forward-looking statements.

Adverse changes to our results could result from any number of factors, including but not limited to fluctuations in economic conditions, potential effects of inflation, lack of earnings visibility, dependence upon certain customers or markets, dependence upon suppliers, future capital needs, rapid technological changes, difficulties in integrating acquired businesses, ability to realize cost savings or productivity gains, potential cost increases, dependence on key personnel, difficulties regarding hiring and retaining qualified personnel in a competitive labor market, risks of doing business in international markets, and problems of third parties. 

The inclusion of forward-looking information should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.  Additional factors that could cause results to vary materially from current expectations are discussed under the heading “Important Factors Related to Forward-Looking Statements and Associated Risks” in the Annual Report in the Form 10-K as filed with the Securities and Exchange Commission on December 19, 2002, and elsewhere in that Form 10-K, including but not limited to, under the headings, “Legal Proceedings,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the notes to the financial statements included therein.

Although the readers may also refer to the risk factors in our previous filings, we are setting out some of the more relevant risk factors below in full for the convenience of the readers:

Downturns in the highly cyclical semiconductor industry have adversely affected the operating results and the value of our business.

The semiconductor industry is highly cyclical, and the value of our business has declined during the “down” portion of these cycles. During recent years, we as well as many others in our industry, experienced significant declines in the pricing of, as well as demand for, products. The market for semiconductors has experienced severe and prolonged downturns. In the future, these downturns may prove to be as, or possibly more, severe. The markets for our products depend on continued demand in the mobile connectivity, automotive, digital media, telecommunications, computers/peripherals, military and aerospace, space/satellite, industrial/commercial and medical markets, and these end-markets have experienced changes in demand that have adversely affected our operating results and financial condition. Relevant portions of the semiconductor industry, and those that serve or supply this industry, tend somewhat to be concentrated in certain areas of the world, and therefore, the semiconductor industry has from time to time been, and may from time to time be adversely affected by natural disasters in various locale, epidemics and health advisories such as those related to Sudden Acute Respiratory Syndrome.

The semiconductor business is highly competitive and increased competition could reduce the value of Microsemi.

The semiconductor industry, including the areas in which we do business, is highly competitive.  We expect intensified competition from existing competitors and new entrants. Competition is based on price, product performance, product availability, quality, reliability and customer service. Pricing pressures may emerge. For instance, competitors may attempt to gain a greater market share by lowering prices. The market for commercial products is characterized by declining selling prices.  We anticipate that our

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average selling prices will decrease in future periods, although the timing and amount of these decreases cannot be predicted with any certainty. The pricing pressure in the semiconductor industry in recent years has been due primarily to the Asian currency crisis, industry-wide excess manufacturing capacity, weak economic growth, the slowdown in capital spending that followed the “dot-com” collapse, the reduction in capital spending by telecom companies and satellite companies, and certain effects of the tragic events of terrorism on September 11, 2001.  We compete in various markets with companies of various sizes, many of which are larger and have greater resources than we have, and thus may be better able to pursue acquisition candidates and to withstand adverse economic or market conditions. In addition, companies not currently in direct competition with us may introduce competing products in the future.  We have numerous competitors. Some of our current major competitors are Motorola, Inc., National Semiconductor Corporation, Texas Instruments, Inc., Philips Electronics, ON Semiconductor, L.L.C., Fairchild Semiconductor Corporation, Micrel Incorporated, International Rectifier Corporation, Semtech Corporation, Linear Technology Corp., Maxim Integrated Products, Inc., Skyworks Solutions, Inc., Diodes, Inc., Vishay Intertechnology, Inc. and its subsidiary Siliconix Incorporated. Some of our competitors in developing markets are Triquint Semiconductor, Inc., Mitel Corporation, RF Micro Devices, Inc., Conexant Systems, Inc., Anadigics, Inc. and Skyworks Solutions, Inc.  We may not be able to compete successfully in the future or competitive pressures may harm our financial condition, operating results or cash flows.

New technologies could result in the development of competing products and a decrease in demand for our products.

Our financial performance depends on our ability to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and cost-effective basis.  Our failure to develop new technologies or to react to changes in existing technologies could materially delay our development of new products, which could result in product obsolescence, decreased revenues and/or a loss of our market share to competitors. Rapidly changing technologies and industry standards, along with frequent new product introductions, characterize much of the semiconductor industry. A fundamental shift in technologies in our product markets could have a material adverse effect on our competitive position within the industry.

For instance, presently we are challenged to develop new products for use with various alternative wireless LAN standards, such as 802.11a, 802.11b and 802.11g and combinations thereof. Although this development has already resulted in design wins related to 802.11a, the solutions related to the other standards and the combination of all of the standards are still in development. The success of products using various standards is subject to rapid changes in market preferences and advancements in competing technologies.

Failure to protect our proprietary technologies or maintain the right to use certain technologies may negatively affect our ability to compete.

We rely heavily on our proprietary technologies. Our future success and competitive position may depend in part upon our ability to obtain or maintain protection of certain proprietary technologies used in our principal products.  We do not have significant patent protection on many aspects of our technology.  Our reliance upon protection of some of our technology as “trade secrets” will not necessarily protect us from the use by other persons of our technology, or their use of technology that is similar or superior to that which is embodied in our trade secrets.  Others may be able to independently duplicate or exceed our technology in whole or in part.  We may not be successful in maintaining the confidentiality of our technology, dissemination of which could have a material adverse effect on our business. In addition, litigation may be necessary to determine the scope and validity of our proprietary rights. In instances in which we hold any patents or patent licenses, any patents held by us may be challenged, invalidated or circumvented, or the rights granted under any patents may not provide us with competitive advantages. Patents often provide only narrow protection and require public disclosure of information that may otherwise be subject to trade secret protection. Also patents expire and are not renewable. Obtaining or protecting our proprietary rights may require us to defend claims of intellectual property infringement by our competitors. While we are not currently engaged as a defendant in intellectual property litigation that we believe will have a material adverse effect, we could become subject to lawsuits in which it is alleged that we have infringed upon the intellectual property rights of others.

If any such infringements exist, arise or are claimed in the future, we may be exposed to substantial liability for damages and may need to obtain licenses from the patent owners, discontinue or change our processes or products or expend significant resources to develop or acquire non-infringing technologies.

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We may not be successful in such efforts or such licenses may not be available under reasonable terms. Our failure to develop or acquire non-infringing technologies or to obtain licenses on acceptable terms or the occurrence of related litigation itself could have a material adverse effect on our operating results, financial condition and cash flows.

Future business could be adversely affected by delays in production of compound semiconductor technology.

We utilize process technology to manufacture compound semiconductors such as gallium arsenide (GaAs), indium gallium phosphide (InGaP), silicon germanium (SiGe), and indium gallium arsenide phosphide (InGaAsP) primarily to manufacture semiconductor components.  We are pursuing this development effort internally as well as with third party foundries. Our efforts sometimes may not result in commercially successful products. Certain of our competitors offer this capability and our customers may purchase our competitors’ products. The third party foundries that we use may delay or fail to deliver technology and products to us.  Our business and prospects could be materially and adversely affected by delay or by our failure to produce these products.

Compound semiconductor products may not successfully compete with silicon-based products.

Our choices of technologies for development and future implementation may not reflect future market demand. The production of GaAs, InGaP, SiGe, InGaAsP or SiC integrated circuits is more costly than the production of silicon circuits, and we believe it will continue in the future to be more costly. The costs differ because of higher costs of raw materials, lower production yields and higher unit costs associated with lower production volumes. Silicon semiconductor technologies are widely used in process technologies for integrated circuits, and these technologies continue to improve in performance. As a result, we must offer compound semiconductor products that provide vastly superior performance to that of silicon for specific applications in order for them to be competitive with silicon products. If we do not offer compound semiconductor products that provide sufficiently superior performance to offset the cost differential and otherwise successfully compete with silicon-based products, our operating results may be materially and adversely affected. In addition, other alternatives exist and are being developed, and may have superior performance or lower cost.

We may not be able to develop new products to satisfy changes in demand.

We may be unsuccessful in our efforts to identify new product opportunities and develop and bring products to market in a timely and cost-effective manner. Products or technologies developed by others may render our products or technologies obsolete or non-competitive. In addition, to remain competitive, we must continue to reduce package sizes, improve manufacturing yields and expand sales.  We may not be able to accomplish these goals. For instance, we have developed and introduced approximately 40 new products in fiscal year 2002. Designs that we have introduced recently include primarily integrated circuits and subsystems such as class D audio subsystems for newly-introduced home theatre DVD players supporting 5.1 surround sound, PDA backlighting subsystems, backlight control and power management solutions for the automotive market, LED driver solutions and power amplifiers for certain wireless LAN components. Their success will be subject to various risks and uncertainties.

We must commit resources to production prior to receipt of purchase commitments and could lose some or all of the associated investment.

We sell products primarily pursuant to purchase orders for current delivery, rather than pursuant to long-term supply contracts. Many of these purchase orders may be revised or cancelled without penalty. As a result, we must commit resources to the production of products without any advance purchase commitments from customers.  Our inability to sell products after we devote significant resources to them could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Variability of our manufacturing yields may affect our gross margins.

Our manufacturing yields vary significantly among products, depending on the complexity of a particular integrated circuit’s design and our experience in manufacturing that type of integrated circuit.  We have in the past experienced difficulties in achieving planned yields, which have adversely affected our gross margins. 

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The fabrication of integrated circuits is a highly complex and precise process. Problems in the fabrication process can cause a substantial percentage of wafers to be rejected or numerous integrated circuits on each wafer to be non-functional, thereby reducing yields. These difficulties include:

• Defects in masks, which are used to transfer circuit patterns onto our wafers;

• Impurities in the materials used;

• Contamination of the manufacturing environment; and

• Equipment failure.

Because a large portion of our costs of manufacturing is relatively fixed, and average selling prices for our products tend to decline over time, it is critical for us to improve the number of shippable integrated circuits per wafer and increase the production volume of wafers in order to maintain and improve our results of operations. Yield decreases can result in substantially higher unit costs, which could materially and adversely affect our operating results and have done so in the past. Moreover, our process technology has primarily used standard silicon semiconductor manufacturing equipment, and production yields of compound integrated circuits have been relatively low compared with silicon integrated circuit devices.  We may be unable to continue to improve yields in the future, and we may suffer periodic yield problems, particularly during the early production of new products or introduction of new process technologies. In either case, our results of operations could be materially and adversely affected.

Our inventories may become obsolete and other assets may be subject to risks.

The life cycles of some of our products depend heavily upon the life cycles of the end products into which our products are designed. Products with short life cycles require us to manage closely our production and inventory levels.  We estimate that current life cycles for most of our products are approximately 6 to 24 months.  Inventory may also become obsolete because of adverse changes in end-market demand.  We may in the future be adversely affected by obsolete or excess inventories which may result from unanticipated changes in the estimated total demand for our products or the estimated life cycles of the end products into which our products are designed.  The asset values determined under Generally Accepted Accounting Principles for inventory and other assets each involve the making of material estimates by us, many of which could be based on mistaken assumptions or judgments.  See “There may be potential impairments that could adversely affect our balance sheet and earnings”

International operations and sales expose us to material risks.

Revenues from foreign markets represent a significant portion of total revenues.  We maintain facilities or contracts with entities in China, Ireland, Thailand, the Philippines, and Taiwan. There are risks inherent in doing business internationally, including:

• Changes in, or impositions of, legislative or regulatory requirements, including tax laws in the United States and in the countries in which we manufacture or sell  our products;

• Trade restrictions;

• Transportation delays;

• Work stoppages;

• Economic and political instability;

• Terrorist activities;

• Changes in import/export regulations, tariffs and freight rates;

• Difficulties in collecting receivables and enforcing contracts generally; and

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• Currency exchange rate fluctuations.

In addition, the laws of certain foreign countries may not protect our products, assets or intellectual property rights to the same extent as do U.S. laws. Therefore, the risk of piracy of our technology and products may be greater in those foreign countries.  We may experience a material adverse effect on our financial condition, operating results and cash flows in the future.

Delays in beginning production at new facilities, implementing new production techniques or resolving problems associated with technical equipment malfunctions could adversely affect our manufacturing efficiencies.

Our manufacturing efficiency will be an important factor in our future profitability, and we may be unsuccessful in our efforts to maintain or increase our manufacturing efficiency. Our manufacturing processes are highly complex, require advanced and costly equipment and are continually being modified in an effort to improve yields and product performance. We have from time to time experienced difficulty in beginning production at new facilities or in effecting transitions to new manufacturing processes. As a consequence, we have experienced delays in product deliveries and reduced yields. We may experience manufacturing problems in achieving acceptable yields or experience product delivery delays in the future as a result of, among other things, capacity constraints, construction delays, upgrading or expanding existing facilities or changing our process technologies, any of which could result in a loss of future revenues.  Our operating results also could be adversely affected by the increase in fixed costs and operating expenses related to increases in production capacity if revenues do not increase proportionately.

Interruptions, delays or cost increases affecting our materials, parts, equipment or subcontractors may impair our competitive position.

Our manufacturing operations depend upon obtaining adequate supplies of materials, parts and equipment, including silicon, mold compounds and lead frames, on a timely basis from third parties. Our results of operations could be adversely affected if we are unable to obtain adequate supplies of materials, parts and equipment in a timely manner or if the costs of materials, parts or equipment increase significantly. From time to time, suppliers may extend lead times, limit supplies or increase prices due to capacity constraints or other factors. Although we generally use materials, parts and equipment available from multiple suppliers, we have a limited number of suppliers for some materials, parts and equipment. While we believe that alternate suppliers for these materials, parts and equipment are available, an interruption could adversely affect our operations.

Some of our products are assembled and tested by third-party subcontractors.  We generally do not have any long-term agreements with these subcontractors. As a result, we may not have direct control over product delivery schedules or product quality. Due to the amount of time typically required to qualify assemblers and testers, we could experience delays in the shipment of our products if we are forced to find alternate third parties to assemble or test our products. Any product delivery delays in the future could have a material adverse effect on our operating results, financial condition and cash flows. Our operations and ability to satisfy customer obligations could be adversely affected if our relationships with these subcontractors were disrupted or terminated.

We depend on third party subcontractors in Asia for assembly and packaging of a portion of our products. The packaging of our products is performed by a limited group of subcontractors and some of the raw materials included in our products are obtained from a limited group of suppliers. Although we seek to reduce our dependence on sole or limited source suppliers, disruption or termination of any of these sources could occur and such disruptions or terminations could harm our business and operating results. In the event that any of our subcontractors were to experience financial, operational, production or quality assurance difficulties resulting in a reduction or interruption in supply to us, our operating results could suffer until alternate subcontractors, if any, were to become available.

We anticipate that many of our next-generation products may be manufactured by third party subcontractors in Asia, and to the extent that such potential manufacturing relationships develop, they may be with a limited group of manufacturers. Therefore, any disruptions or terminations of manufacturing could harm our business and operating results.

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Fixed costs may reduce operating results if our sales fall below expectations.

Our expense levels are based, in part, on our expectations as to future sales. Many of our expenses, particularly those relating to capital equipment and manufacturing overhead, are relatively fixed. Decreases in lead times between orders and shipments and customers’ ordering practices could adversely affect our ability to project future sales.  We might be unable to reduce spending quickly enough to compensate for reductions in sales. Accordingly, shortfalls in sales could materially and adversely affect our operating results.

Reliance on government contracts for a portion of our sales could have a material adverse effect on results of operations.

Some of our sales are derived from customers whose principal sales are to the United States Government. We estimate the amount at about 28% of our revenues in fiscal year 2002. If we experience significant reductions or delays in procurements of our products by the United States Government or terminations of government contracts or subcontracts, our operating results could be materially and adversely affected. Generally, the United States Government and its contractors and subcontractors may terminate their contracts with us for cause or for convenience.  We have in the past experienced one termination of a contract due to the termination of the underlying government contracts. All government contracts are also subject to price renegotiation in accordance with U.S. Government procurement provisions. By reference to such contracts, all of the purchase orders we receive that are related to government contracts are subject to these possible events. There is no guarantee that we will not experience contract terminations or price renegotiations of government contracts in the future. A significant portion of our sales are to military and aerospace markets, which are subject to the uncertainties of governmental appropriations and national defense policies and priorities. These sales are derived from direct and indirect business with the U.S. Department of Defense, or DOD, and other U.S. government agencies.  From time to time, we have experienced declining defense-related sales, primarily as a result of contract award delays and reduced military program funding.  Military-related business is and has been anticipated to increase; however, the actual timing and amount of an increase has been occurring at a rate that has been slower than expected. The effects of defense spending increases are difficult to estimate and subject to many sources of delay. Our prospects for additional defense-related sales may be adversely affected in a material manner by numerous events or actions outside our control.

There may be unanticipated costs associated with increasing our capacity.

We anticipate that future growth of our business could require increased manufacturing capacity. Expansion activities are subject to a number of risks, including:

• Unavailability or late delivery of the advanced, and often customized, equipment used in the production of our products;

• Delays in bringing new production equipment on-line;

• Delays in supplying products to our existing customers; and

• Unforeseen environmental or engineering problems relating to existing or new facilities.

These and other risks may affect the ultimate cost and timing of our present or future expansion of our capacity.

We may fail to attract or retain the qualified technical, sales, marketing and managerial personnel required to operate our business successfully.

Our future success depends, in part, upon our ability to attract and retain highly qualified technical, sales, marketing and managerial personnel. Personnel with the necessary expertise are scarce and competition for personnel with proper skills is intense. Also, attrition in personnel can result from, among other things, changes related to acquisitions, as well as retirement or disability. We may not be able to retain existing key technical, sales, marketing and managerial employees or be successful in attracting, assimilating or retaining other highly qualified technical, sales, marketing and managerial personnel in the future. If we are unable to retain existing key employees or are unsuccessful in attracting new highly qualified employees, our business, financial condition and results of operations could be materially and adversely affected.

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Failure to manage consolidation of operations effectively could adversely affect our ability to increase revenues and improve earnings.

Our ability to successfully offer our products in the semiconductor market requires effective planning and management processes. Our Factory Utilization and Profit Enhancement Program, with consolidations and realignments of operations, and expected future growth, may place a significant strain on our management systems and resources, including our financial and managerial controls, reporting systems and procedures. In addition, we will need to continue to train and manage our workforce worldwide.

We may engage in future acquisitions that dilute the ownership interests of our stockholders and cause us to incur debt or to assume contingent liabilities.

As a part of our business strategy, we expect to review acquisition prospects that would complement our current product offerings, enhance our design capability or offer other growth opportunities. While we have no current agreements and no active negotiations underway with respect to any acquisitions, we may acquire businesses, products or technologies in the future. In the event of future acquisitions, we could:

• Use a significant portion of our available cash;

• Issue equity securities, which would dilute current stockholders’ percentage ownership;

• Incur substantial debt;

• Incur or assume contingent liabilities, known or unknown;

• Incur impairment charges related to goodwill or other intangibles; and

• Incur large, immediate accounting write-offs.

Such actions by us could impact our operating results and/or the price of our common stock.

We have acquired and may acquire other companies and may be unable successfully to integrate such companies with existing operations.

We have in the past acquired a number of businesses or companies, and additional product lines and assets. We may continue to expand and diversify our operations with additional acquisitions. If we are unsuccessful in integrating these companies or product lines with existing operations, or if integration is more difficult or more costly than anticipated, we may experience disruptions that could have a material adverse effect on our business, financial condition and results of operations. Some of the risks that may affect our ability to integrate or realize any anticipated benefits from the acquired companies, businesses or assets include those associated with:

• Unexpected losses of key employees or customers of the acquired company;

• Conforming the acquired company’s standards, processes, procedures and controls with our operations;

• Coordinating new product and process development;

• Hiring additional management and other critical personnel;

• Increasing the scope, geographic diversity and complexity of our operations;

• Difficulties in consolidating facilities and transferring processes and know-how;

• Other difficulties in the assimilation of acquired operations, technologies or products;

• Diversion of management’s attention from other business concerns; and

• Adverse effects on existing business relationships with customers.

We have sold or disposed of certain subsidiaries or divisions which reduced volume that may not be replaceable in the ordinary course.

Since the beginning of fiscal year 2001, we closed Microsemi PPC Inc. and ceased the operations at Microsemi (H.K.) Ltd. (Hong Kong). We also sold the business of Microsemi RF Products, Inc. in fiscal year 2002, which management believes would have contributed revenues of approximately $9.0 million to $11.0 million per year to Microsemi’s consolidated revenues. We also sold our Carlsbad, California Design Center in September 2002 and our equity interest in Semcon Electronics Private Limited of Mumbai, India in October 2002.  We currently anticipate closure or sale of additional facilities, resulting in loss of revenues and net income. We may be unsuccessful in our efforts to replace the revenues and income of those operations. While we hope to increase our manufacturing capacity utilization rates at remaining operations, the remaining operations also will bear the corporate administrative and overhead costs that had been allocated to the discontinued business units.

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Our products may be found to be defective and we may not have sufficient liability insurance.

One or more of our products may be found to be defective after we have already shipped the products in volume, requiring a product replacement or recall. We may also be subject to product returns that could impose substantial costs and have a material and adverse effect on our business, financial condition and results of operations. Our aerospace (including aircraft), military, medical and satellite businesses in particular expose us to potential liability risks that are inherent in the manufacturing and marketing of high reliability electronic components for critical applications. Production of many of these products is sensitive to minute impurities, which can be introduced inadvertently in manufacture. Any production mistakes can result in large and unanticipated product returns, product liability and warranty liability.

We may be subject to product liability claims with respect to our products. Our product liability insurance coverage may be insufficient to pay all such claims. Product liability insurance may become too costly for us or may become unavailable to us in the future. We may not have sufficient resources to satisfy any product liability claims not covered by insurance which would materially and adversely affect our financial position.

Environmental liabilities could adversely impact our financial position.

Federal, state and local laws and regulations impose various restrictions and controls on the discharge of materials, chemicals and gases used in our semiconductor manufacturing processes. In addition, under some laws and regulations, we could be held financially responsible for remedial measures if our properties are contaminated or if we send waste to a landfill or recycling facility that becomes contaminated, even if we did not cause the contamination. Also, we may be subject to common law claims if we release substances that damage or harm third parties. Further, future changes in environmental laws or regulations may require additional investments in capital equipment or the implementation of additional compliance programs in the future. Any failure to comply with environmental laws or regulations could subject us to serious liabilities and could have a material adverse effect on our operating results and financial condition.

In the conduct of our manufacturing operations, we have handled and do handle materials that are considered hazardous, toxic or volatile under federal, state and local laws. The risk of accidental release of such materials cannot be completely eliminated. In addition, we operate or own facilities located on or near real property that was formerly owned and operated by others. These properties were used in ways that involved hazardous materials. Contaminants may migrate from or within or through property. These risks may give rise to claims. Where third parties are responsible for contamination, the third parties may not have funds, or make funds available when needed, to pay remediation costs imposed under environmental laws and regulations.

In Broomfield, Colorado, we have an agreement with prior owners of our property concerning clean-up costs associated with TCE and other contaminants present in the soil and groundwater. We have agreed to pay 10% and they have agreed to pay 90% of these costs. They have also agreed to indemnify us from claims by third parties. In the event that these third parties were to default on their contractual obligations to us, we would be exposed to a total cost that we most recently estimate at about $4,200,000.

Some of our facilities are located near major earthquake fault lines.

Our headquarters and two of our major operating facilities, and certain other critical business operations are located near earthquake fault lines. We presently do not have earthquake insurance. We could be materially and adversely affected in the event of an earthquake.

Delaware law and our charter documents contain provisions that could discourage or prevent a potential takeover of Microsemi that might otherwise result in our stockholders receiving a premium over the market price for their shares.

Provisions of Delaware law and our certificate of incorporation and bylaws could make the acquisition of use more difficult by means of a tender offer, a proxy contest, or otherwise, and the removal of incumbent officers and directors. These provisions include:

• The Shareholder Rights Plan, which provides that an acquisition of 20% or more of the outstanding

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	shares without our Board’s approval or ratification results in dilution to the acquiror;
•	Section 203 of the Delaware General Corporation Law, which prohibits a merger with a 15%-or-greater stockholder, such as a party that has completed a successful tender offer, until three years after that party became a 15%-or-greater stockholder; and
•	The authorization in the certificate of incorporation of undesignated preferred stock, which could be issued without stockholder approval in a manner designed to prevent or discourage a takeover or in a way which may dilute an investment in the Common Stock.

In connection with our charter, we have a Shareholder Rights Plan, and each share of Common Stock, par value $.20, entitles the holder to one redeemable and cancelable Right (not presently exercisable) to acquire a fractional share of Series A Junior Participating Preferred Stock, under the terms and conditions as set forth in a Shareholder Rights Agreement. The existence of the Rights may make more difficult or impracticable for hostile change of control of us, which therefore may affect the anticipated return on an investor’s investment in the Common Stock.

We may have increasing difficulty to attract and hold outside Board members.

The directors and management of publicly traded corporations are increasingly concerned with the extent of their personal exposure to lawsuits and shareholder claims, as well as governmental and creditor claims which may be made against them in connection with their positions with publicly-held companies. Outside directors are becoming increasingly concerned with the availability of directors and officer’s liability insurance to pay on a timely basis the costs incurred in defending shareholder claims. Directors and officers liability insurance has recently become much more expensive and difficult to obtain than it had been. It has become increasingly more difficult to attract and retain qualified outside directors to serve on our Board.

We may not make the sales that are indicated by the order backlog or our book-to-bill ratio and the backlog number or book-to-bill ratio may become less meaningful.

Lead times for the release of purchase orders depend upon the scheduling practices of individual customers, and delivery times of new or non-standard products can be affected by scheduling factors and other manufacturing considerations. The rate of booking new orders can vary significantly from month to month. Customers frequently change their delivery schedules or cancel orders. For these various reasons, our order backlog or book-to-bill ratio may not be an indication of future sales.

The percentage of our business represented by space/satellite and military products may decline. If this occurs, we anticipate that backlog and book-to-bill ratio will become less meaningful. Our space/satellite business is characterized by long lead times; however, our other end markets tend to place orders with short lead times. Prospective investors should not place undue reliance on our backlog numbers or book-to-bill ratios or changes in backlog numbers or book-to-bill ratios. We determine backlog and bookings based on firm orders which are scheduled for delivery within 12 months.

There may be some potential effects of system outages.

Risks are presented by electrical or telecommunications outages, computer hacking or other general system failure. We rely heavily on our internal information and communications systems and on systems or support services from third parties to manage our operations efficiently and effectively. Any of these are subject to failure. System-wide or local failures that affect our information processing could have material adverse effects on our business, financial condition, results of operations and cash flows. In addition, insurance coverage for the risks described above may be unavailable.

There are anticipated good-will impairments that adversely affect Microsemi.

All public companies have been required to adopt Statement of Financial Accounting Standards No. 142 (“SFAS 142”), which changes the accounting for goodwill from an amortization method to an impairment-only approach. We adopted this standard at the beginning of fiscal year 2003. Consequently, goodwill and other intangible assets with indefinite lives will no longer be amortized, while those intangible assets with known useful lives will continue to be amortized over their respective useful lives.  At least annually, we are required to reassess whether there has been an impairment of goodwill in any one or more business units, which would, if we determine that an impairment exists, result in a charge to earnings and a

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reduction in goodwill on our balance sheet. Whenever we determine that there has been an impairment of goodwill or other intangible assets with indefinite lives, we will record an impairment loss equal to the excess of the carrying value of goodwill over its then fair value.  The identification of intangible assets and determination of the fair value and useful lives of goodwill and other intangible assets are subjective in nature and often involve the use of significant estimates and assumptions. The judgments made in determining the estimated useful lives assigned to each class of assets can significantly affect net income. The rules of SFAS 142 are complex and very restrictive.  SFAS 142 is more restrictive than the previously followed SFAS 131.   As a result, impairment is likely to occur as a result of the change in the method of determination of impairments due to adoption of SFAS 142.  For instance, SFAS 142 uses a restrictive unit-by-unit approach, while the previous approach of SFAS 131 was a more flexible company-wide approach. 

We completed the first step of the transition testing by March 30, 2003 and completed the second step by June 16, 2003. As a result, the pre-tax impairment charge related to goodwill as of September 30, 2002 was determined to be $22.7 million. As required by SFAS No. 142, a $14.7 million of impairment charge was recorded, net of its associated $8.0 tax benefit, as a cumulative change in accounting principle, effective as of September 30, 2002. Net income for the nine months ended June 29, 2003 included this after-tax impairment charge.

At the beginning of fiscal year 2003, we had approximately $26.0 million of unamortized goodwill and assembled work force that resulted from our previous acquisitions, of which $22.7 was impaired as discussed above. On a going-forward basis and in accordance with SFAS 142, we will not amortize the remaining $3.3 million of goodwill; however, up to 100% of the remaining goodwill could be determined to be impaired during the annual evaluations required by FAS 142.  (Please see Note 6 to the financial statements included in this report on Form 10-Q).

We have used an independent valuation firm to assist in evaluating goodwill and other intangible assets. Various methods were used for the estimation of the value of intangibles acquired, and these methods rely on a number of estimates and assumptions, including projected future cash flows, residual growth rates and discount factors. Some of these assumptions were made based on available historical information and industry averages.    The estimates and assumptions described above, as well as the determination as to how goodwill will be allocated to different operating segments, will affect the impairments to be recognized by us in the future. 

The value of intangible assets, including goodwill, is exposed to future adverse changes if we experience any declines in operating results or if any negative industry or economic trends or other factors in future performance are below projections that we currently use in making estimates. The estimates that are used in the evaluation of goodwill and other intangible assets are consistent with the plans and estimates that we use to manage our business. If new products fail to gain market acceptance or if market projections are otherwise too high, revenue and other forecasts will not be achieved, and additional impairment charges to goodwill may be recorded as a result.

To the extent the non-impaired goodwill and to the extent of any goodwill of any business that we acquire in the future, a future impairment could also affect our future results and balances in a similar way. 

However, our results will no longer be affected by periodic charges for amortization of goodwill and other intangible assets with indefinite useful lives.

Our operating results may be affected to the extent actual results differ from accounting estimates.

Our critical accounting policies, including our policies regarding revenue recognition, reserves for bad debt and inventory valuation, are based on estimates and judgments by us from time to time.

We record reductions to revenue for estimated allowances such as returns, rebate and competitive pricing programs.  If actual returns, rebate and/or pricing adjustments exceed estimates, additional reductions to revenue would result.

Credit losses have been generally within our expectations and the established provisions; however, significant deterioration in the liquidity or financial position of any of our major customers or any group of

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our customers could have a material adverse impact on the collectibility of our accounts receivable and our future operating results.

Historically, the net realizable value of our inventories has generally been within our estimates.  However, if we are not able to meet our sales expectations, or if market conditions deteriorate significantly from our estimates, reductions in the net realizable value of our inventories could have a material adverse impact on future operating results.

We use APB Opinion No. 25 to account for equity compensation, which may not fully reflect the economic consequences of granting options or other equity compensation.

There is more than one way under Generally Accepted Accounting Principles to account for the economic consequences of granting options or other equity compensation, and many accounting experts believe that charging earnings pursuant to FASB Statement 123 (“FASB 123”) would account better for the economic consequences of granting an option or other equity compensation than APB Opinion No. 25 (“APB 25”) would. We account for employee options for financial and accounting purposes under APB 25, which often does not count the grant of stock or options as an expense in the way that FASB 123 would. The latter standard creates a charge to earnings arising from the grant of stock or options and subsequent changes in the value of the grant. These compensation charges are not included in our financial statements, except for the disclosure required by FASB123 that we have set forth in Notes 6 and 7.  We have adopted FASB 123 to the extent that it requires disclosure in the notes.

The volatility of our stock price could affect the value of an investment in our stock and our future financial position.

The market price of our stock has fluctuated widely. Between October 1, 2001 and June 29, 2003, the closing price of our common stock ranged between a low of $5.00 and a high of $38.97. The current market price of our common stock may not be indicative of future market prices, and we may not be able to sustain or increase the value of our common stock. Declines in the market price of our stock could adversely affect our ability to retain personnel with higher-priced stock incentives, to acquire businesses or assets in exchange for stock and/or to conduct future financing activities with the sale of stock.

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Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including changes in foreign currency exchange rates and changes in interest rates. Market risk is the potential loss arising from adverse changes in exchange rates and prices.

We conduct business in a number of foreign currencies, principally those of Europe and Asia, directly or in our foreign operations. We may receive some revenues in foreign currencies and purchase some inventory in foreign currencies.  Accordingly, we are exposed to transaction gains and losses that could result from changes in exchange rates of foreign currencies relative to the U.S. dollar.  Transactions in foreign currencies have represented a relatively small portion of our business.  Also these currencies have been relatively stable against the U.S. dollar for the past several years.  As a result, foreign currency fluctuations have not had a material impact historically on our revenues or results of operations. However, there can be no assurance that those currencies will remain stable relative to the U.S. dollar or that future fluctuations in the value of foreign currencies will not have material adverse effects on the results of our operations, cash flows and financial condition.  Our largest foreign currency exposure results from activities in British pounds and the European Union Euro. We have not conducted a foreign currency hedging program thus far.  We have considered and may continue to consider the adoption of a foreign currency hedging program.

We have not entered into derivative financial instruments and have not entered into any other financial instruments for trading, speculative purposes or managing our interest rate risk.  Our financial instruments consist primarily of cash, accounts receivable, accounts payable and long-term obligations. Our exposure to market risk for changes in interest rates relates primarily to short-term investments and short-term obligations.  As a result, we do not expect fluctuations in interest rates to have a material impact on the fair value of these instruments.  We did not engage in transactions intended to hedge our exposure to changes in interest rates.

We maintain a $30.0 million revolving line of credit, which expires in March 2004.  The line of credit is collateralized by substantially all of our assets.  It bears interest at the bank’s prime rate plus 0.75% to 1.5% per annum or, at our option, at the Eurodollar rate plus 1.75% to 2.5% per annum.  The interest rate is determined by the ratio of total funded debt to Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). 

Item 4.    CONTROLS AND PROCEDURES.

Our Chief Executive Officer and Chief Financial Officer, with the assistance of other management, conducted an evaluation of our disclosure controls and procedures as of the end of the period covered by this Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

During the period covered by this Report, there have been no significant changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We review our internal controls for effectiveness on an ongoing basis, including routine reviews during the period covered by this Report. We plan to continue our review process, including both internal and external audit examinations, as part of our future evaluation of our disclosure controls and procedures and internal controls.

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PART II - OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS
		We are involved from time to time in ordinary routine litigation incidental to our business, none of which, individually or collectively, involves claims for damages that would be material to our financial condition.  In our most recent Form 10-K as filed with the SEC on December 19, 2002, we previously reported litigation in which we are involved, and no material changes in such litigation occurred during the fiscal period that is the subject of this report on Form 10-Q.
Item 2.	CHANGES IN SECURITIES
		Inapplicable
Item 3.	DEFAULTS UPON SENIOR SECURITIES
		Inapplicable
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
		None
Item 5.	OTHER INFORMATION
		None
Item 6.	EXHIBITS AND REPORTS ON FORM 8-K
	(a)	Exhibits:
		31.1 Certifications pursuant to Exchange Act Rule 13a-14(a)
		32.1 Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. 1350
	(b)	Reports on Form 8-K:
		We filed a Form 8-K on July 24, 2003, reporting under Item 9, the news release related to our earnings for the quarter and nine months ended June 29, 2003.
		We filed a Form 8-K on April 24, 2003, reporting under Item 9, the news release related to our earnings for the quarter and six months ended March 30, 2003

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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
DATED:  August 12, 2003	By:	/s/ DAVID R. SONKSEN
		David R. Sonksen Executive Vice President and Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer and duly authorized to sign on behalf of the Registrant)

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EXHIBIT INDEX

Ex. No.	Exhibit Description
31.1	Certifications pursuant to Exchange Act Rule 13a-14(a)
32.1	Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. 1350

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