SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of
-------- the Securities Exchange Act of 1934
For the Quarterly Period Ended July 2, 1995
-------------------------------------------
or
-------- Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
-------- --------
Commission File No. 0-8866
MICROSEMI CORPORATION
---------------------
(Exact name of registrant as specified in its charter)
Delaware 95-2110371
------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2830 South Fairview Street, Santa Ana, California 92704
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(714) 979-8220
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 month
period (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the issuer's Common Stock, $.20
par value, on July 20, 1995 was 7,693,981.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited consolidated financial information for the
thirteen and thirty-nine weeks ended July 2, 1995 of Microsemi
Corporation (the "Company") and the unaudited consolidated
financial information for the corresponding periods of the prior
year, together with the balance sheet as of October 2, 1994 are
attached hereto and incorporated herein by this reference.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Introduction
Microsemi Corporation is a multinational supplier of high
reliability power semiconductors, surface mount and custom
diode assemblies for the electronics, computer, telecommunications,
defense/aerospace and medical markets. The company's
semiconductor products include diodes, transistors and silicon
controlled rectifiers (SCR's) which can be used in virtually all
electrical and electronic circuits. Typical functions include
solid state switching, signal processing, voltage and power
regulation, circuit protection and absorption of electrical surges
and transient voltage spikes. Technologies for these devices range
from the very mature mesa rectifier diodes still used in all power
supply applications to the newly designed micro-miniature transient
absorbers, which are mounted within the cables used to connect
computer and telecommunications equipment.
Capital Resources and Liquidity
The Company's operations in the first nine months of fiscal
year 1995 were funded with internally generated funds and
borrowings under its line of credit. Under the current line of
credit, the Company can borrow up to $20,000,000, based upon
percentages of accounts receivable and inventory balances at
certain of its operations. As of July 2, 1995, $7,737,000 was
borrowed under this credit facility. A $10,000,000 equipment
financing loan was obtained in October 1989; however, in March
1994, the Company refinanced the balance of $1,948,000 then owing
on this loan with a new term loan by utilizing funds
available under its present line of credit. This portion of the
line of credit requires monthly payments of $100,000 plus interest
at a rate of prime plus three percent. At July 2, 1995, the
Company had $3,562,000 in cash and cash equivalents.
A letter of credit for the Microsemi Santa Ana Industrial
Development Bond is carried by a bank in the amount of
$5,557,000. This letter of credit, which expires on February 1,
1998, unless extended, guarantees the repayment of a $5,350,000
Industrial Development Bond which was originally issued in April
1985 through the City of Santa Ana for the purchase of the
Company's Corporate Headquarters and for the construction of
improvements and new facilities at the Santa Ana plant. The Bond
was remarketed, effective February 1, 1995, reducing the existing
interest rate from 9.25% to an average rate of 6.75% per
annum. The new terms required principal payments of $350,000 on
February 1, 1995. Additional principal payments are due
on February 1 as follows: $1,050,000 in 1998, an annual amount of
$100,000 from 1999 to 2004 and $3,700,000 in 2005.
The Company has no other significant capital commitments
The Company believes that it can meet its current operating
cash requirements and debt service with internally generated
funds together with its available borrowing capacity.
The average collection period of accounts receivable was 54
days for the first nine months of both fiscal years 1995 and
1994. Sales and accounts receivable of the business that was sold
in fiscal year 1994 have been excluded from this calculation.
The average days sales of products in inventories decreased to
155 days for the first nine months of fiscal year 1995 from
198 days for the corresponding period of fiscal year 1994. This
primarily resulted from a lower inventory base due to the
writedowns of military related inventories in the fourth quarter of
fiscal year 1994. Cost of sales and inventories of the business
that was sold in fiscal year 1994 have been excluded from this
calculation.
The following factors should be considered carefully in
evaluating the Company and its business, together with all of
the other information set forth or incorporated by reference
herein.
Declining Defense Procurement Sales and Changes in DOD Procurement
Policy
A substantial portion of the Company's sales are to military
and aerospace markets which are subject to the business risk
of changes in governmental appropriations and national defense
policies and priorities. These sales are derived from direct and
indirect U.S. Department of Defense ("DOD") business and business
with other U.S. government agencies. Since fiscal 1990,
the Company has experienced declining defense-related sales,
resulting in contract award delays and reduced military program
funding. Furthermore, there have been recent DOD announcements of
major changes in defense procurement policy, which
included official notification, on August 22, 1994, of DOD
acquisition reform to utilize best commercial practices instead of
mandatory use of military standard parts. The final impact of
these most recent changes in DOD procurement practices is not
known. Management believes that these trends could continue and
that the Company's growth could be dependent upon
commercial, industrial, medical, telecommunications and space
business. The Company estimates that from fiscal year 1990 to
fiscal year 1994 military and aerospace related business has
declined from approximately 65% to 40% of total revenues.
Although this decline in military revenues has been offset by the
increase in shipments to other customers, no assurances can be
made that the Company will be able to avoid a significant adverse
impact on future revenues, results of operations or cash flows.
Competition
The Company competes primarily in the high reliability power
semiconductor market. The Company has numerous
competitors across all of its product lines. In the defense market
sector, the Company believes that it has a major share of the
market. In the commercial/industrial market sector, there are
numerous competitors, such as Motorola, Inc., General Instruments
Corp., ITT Corp. and National Semiconductor, who are significantly
larger than the Company and have greater resources.
Competition in certain of its product lines is dependent on price
and performance. Competition in the high reliability area is
dependent less on price and more on product reliability and
performance. The Company believes that it competes effectively
in all areas of business in which it is engaged. There can be no
assurance that the Company will not experience increased
competition in the future from these or other companies which may
adversely affect the Company's marketing of its products
and services.
Changes in Technology
The power semiconductor market is subject to technological
change and changes in industry standards. To remain
competitive, the Company must continue to devote resources to
advance process technologies, to increase product performance,
to improve manufacturing yields and to improve the mix between the
Company's shipment of military and commercial product
and between its high cost and low cost product. There can be no
assurance that the Company's competitors will not develop new
technologies that are substantially equivalent or superior to the
Company's technology.
Proprietary Rights
The Company generally does not have, nor does it generally
intend to apply for, patent protection on any aspect of its
technology. The Company believes that patents often provide only
narrow protection and patents require public disclosure of
information which may otherwise be subject to trade secret
protection. The Company's reliance upon protection of some of its
technology as "trade secrets" will not necessarily protect the
Company from the use by other persons of its technology, or their
use of technology that is similar or superior to that which is
embodied in the Company's trade secrets. There can be no assurance
that others will not be able to independently duplicate or exceed
the Company's technology in whole or in part. No assurances
can be made that the Company will be able to maintain the
confidentiality of the Company's technology, dissemination of which
could have a material adverse effect on the Company's business. In
addition, litigation may be necessary to determine the scope
and validity of the Company's proprietary rights. In instances in
which the Company holds any patents on a product line, the
patents are not known to have any material current value. Also
there can be no assurance that any patents held by the Company
will not be challenged, invalidated or circumvented, or that the
rights granted thereunder will provide competitive advantages
to the Company.
Foreign Operations
The Company conducts a portion of its operations outside the
United States and its business is subject to risks associated
with many factors beyond its control, such as fluctuations in
foreign currency rates, instability of foreign economies and
governments, and changes in U.S. and foreign laws and policies
affecting trade and investment. The Company owns or leases
manufacturing and assembling facilities in Ennis, Ireland; Bombay,
India and Hong Kong and is in the process of establishing
a joint venture in The People's Republic of China. Although the
Company has not experienced any materially adverse effects
with respect to its foreign operations arising from such factors,
there can be no assurance that such problems will not arise in the
future. In addition, although the Company seeks to hedge its
exposure to currency exchange rate fluctuations, the Company's
competitive position relative to non-U.S. suppliers can be affected
by the exchange rate of the U.S. dollar against other currencies.
Sales to Foreign Customers
Sales to foreign customers represented approximately 17%, 12%
and 8% of net sales for the 1994, 1993 and 1992 fiscal
years, respectively. Foreign sales may be subject to political and
economic risks, including political instability, changes in
import/export regulations, tariffs and freight rates and
difficulties in collecting receivables and enforcing contracts
generally. Changes in current tariff structures, exchange rates or
other trade policies could adversely affect the Company's sales to
foreign customers or the collection of receivables generated from
such sales.
Environmental Regulation
While the Company believes that it has all environmental
permits necessary to conduct its business and that its activities
conform to present environmental regulations, increased public
attention has been focused on the environmental impact of
semiconductor operations. The Company in the conduct of its
manufacturing operations has handled and does handle materials
that are considered hazardous, toxic or volatile under federal,
state and local laws, and, therefore, are subject to regulations
relating to their use, storage, discharge and disposal. No
assurances can be made that the risk of accidental release of such
materials can be completely eliminated. In addition, the Company
operates or owns facilities located on or near real property
that may formerly have been used in ways that involved such
materials. In the event of a violation of environmental laws, the
Company could be held liable for damages and the costs of
remediation, and, along with the rest of the semiconductor
industry, is subject to variable interpretations and governmental
priorities concerning environmental laws and regulations.
Environmental statutes have been interpreted to provide for joint
and several liability and strict liability regardless of actual
fault. There can be no assurance that the Company and its
subsidiaries will not be required to incur costs to comply with,or
that the operations, business, or financial condition of the
Company will not be materially adversely affected by, current or
future environmental laws or regulations.
In Broomfield, Colorado, the owner of a property located
adjacent to a manufacturing facility owned by a subsidiary
of the Company has filed suit against the subsidiary and other
parties, claiming that contaminants migrated to his property,
thereby diminishing its value. In August 1995, the subsidiary,
together with former owners of the manufacturing facility, agreed
to settle the claim and to indemnify the owner of the adjacent
property from remediation costs. Although TCE and other
contaminants previously used at the facility are present in soil
and groundwater on the subsidiary's property, the Company
vigorously contests any assertion that the subsidiary is the cause
of the contamination; however, there can be no assurance that
recourse will be available against third parties. State and local
agencies in Colorado are reviewing current data and considering
study and cleanup options, and it is not yet possible to predict
costs for remediation or the allocation thereof among potentially
responsible parties.
Manufacturing Risks
The Company's manufacturing processes are highly complex,
require advanced and costly equipment and are continuously being
modified in an effort to improve yields and product performance.
Minute impurities or other difficulties in the manufacturing
process can lower yields. In addition, California and the Pacific
Rim are known to contain various earthquake faults. The Company's
operations could be materially adversely affected if production at
any of its major facilities were interrupted. There can be no
assurance that the Company will not experience manufacturing
difficulties in the future.
Concentration of Suppliers
Although the Company generally uses materials and parts
available from multiple suppliers, the Company has only a
limited number of suppliers for certain basic materials used in the
Company's products. The Company has not experienced any
substantial production delays from materials or parts shortages in
the past. The Company believes that alternate suppliers for
these materials and parts are available, but there can be no
assurance that the Company will not experience interruption of such
supplies in the future.
Order Backlog
Order backlog at July 2, 1995 increased to $57,500,000
from $46,000,000 in the prior year. Lead times for
the release of purchase orders depend upon the scheduling practices
of individual customers, and delivery times of new or non-standard
products can be affected by scheduling factors and other
manufacturing considerations. The rate of booking new orders
can vary significantly from month to month. For these reasons, and
because of the possibility of customer changes in delivery
schedules or cancellations of orders or other factors, the
Company's backlog as of any particular date may not be
representative of actual sales for any succeeding period.
Dependence on Key Personnel
The Company's future performance is significantly dependent on
the continued active participation of members of its
current management. The Company does not have written employment
contracts with its employees. Should one or more of
the Company's key management employees leave or otherwise become
unavailable to the Company, the Company's business and
results of operations may be materially adversely affected.
Possible Volatility of Stock Prices
The market prices of securities issued by technology
companies, including the Company, have been volatile. The
securities of many technology companies have experienced extreme
price and volume fluctuations, which have often been not
necessarily related to the companies' respective operating
performances. Quarter to quarter variations in operating results,
changes in earnings estimates by analysts, announcements of
technological innovations or new products, announcements of major
contract awards, events involving other companies in the industry
and other events or factors may have a significant impact on
the market price of the Company's Common Stock.
Product Liability
The Company's business exposes it to potential liability risks
that are inherent in the manufacturing and marketing of
high-reliability electronic components for critical applications.
No assurances can be made that the Company's product liability
insurance coverage is adequate or that present coverage will
continue to be available at acceptable costs, or that a product
liability claim would not adversely affect the business or
financial condition of the Company.
Change of Control Provisions
The Company's Certificate of Incorporation, Bylaws,
Shareholder Rights Plan and certain employment compensation
plans contain provisions that make it more difficult for a third
party to acquire, or that discourage a third party from attempting
to acquire, control of the Company. In addition, as a Delaware
corporation, the Company is subject to the restrictions imposed
under Section 203 of the Delaware General Corporation Law which
prevent the Company from engaging in certain change of
control transactions with certain of its stockholders under certain
circumstances.
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED JULY 2, 1995
COMPARED TO THE THIRTEEN WEEKS ENDED JULY 3, 1994.
Net sales for the third quarter of fiscal year 1995 increased
19% to $36,138,000, from $30,336,000 for the third quarter
of fiscal year 1994. The increase of $5,802,000 was due to an
increase of $6,355,000 from higher volume of shipments of
commercial and industrial products of the continuing businesses;
partially offset by the elimination of sales of approximately
$553,000 from the subsidiary that was sold in fiscal year 1994.
Gross profit increased $1,704,000. This resulted from an
increase of $1,449,000 from the continuing businesses due to
higher sales and from the elimination of $255,000 of gross losses
from the business sold in fiscal year 1994.
Operating expenses for the third quarter of fiscal year 1995
increased $541,000, compared to the corresponding period
of the prior year; however, operating expense decreased to 15% of
sales in the current quarter compared to 16% of sales in the
corresponding period of fiscal year 1994.
The effective tax rates of 40% and 41% in the third quarters
of fiscal years 1995 and 1994, respectively, are the combined
result of taxes computed on foreign and domestic income.
RESULTS OF OPERATIONS FOR THE THIRTY-NINE WEEKS ENDED JULY 2, 1995
COMPARED TO THE THIRTY-NINE WEEKS ENDED JULY 3, 1994.
Net sales for the first thirty-nine weeks of fiscal year 1995
increased 9% to $96,236,000, from $87,970,000 for the same
period of fiscal year 1994. The increase of $8,266,000 was due to
an increase of $10,634,000, from higher volumes of shipments
of commercial and industrial products of the continuing businesses;
partially offset by the elimination of sales of $2,368,000 from
the business that was sold in fiscal 1994.
Gross profit increased $2,715,000. This resulted from the
elimination of gross losses of $538,000 from the subsidiary
that was sold in fiscal 1994 and from an increase of $2,177,000 due
to higher sales from the continuing businesses.
Operating expenses for the first nine months of fiscal year
1995 increased $255,000 compared to the same period of
the prior fiscal year. This $255,000 included an increase of
$1,004,000 from the continuing businesses primarily due to higher
sales volumes; partially offset by the elimination of $749,000 of
expenses from the business that was sold in fiscal year 1994.
The effective tax rates of 39% and 40% in the first nine
months of fiscal years 1995 and 1994, respectively, are the
combined results of taxes computed on foreign and domestic income.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In August 1995, Microsemi Corp.-Colorado, a subsidiary
of Microsemi, together with other parties, agreed to settle
the law suit Clayton Curphy v. Microsemi Corp. , Colorado, et
al, Case No. 94 CV167, Division 2, and to indemnify the owner
of the adjacent property from remediation costs. Although TCE
and other contaminants, previously used at the facility, are
present in soil and groundwater on the subsidiary's property,
the Company intends to vigorously contest any assertions that
the subsidiary was a cause of this contamination and to
enforce any rights it may have of indemnification or
contribution from any third party who may be responsible.
State and local agencies in Colorado are reviewing current
data and considering study and cleanup options. It is not yet
possible to predict a possible range of the total costs that
may be incurred in connection with the subsidiary's property.
Item 2. Changes in Securities
Inapplicable.
Item 3. Defaults Upon Senior Securities
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders
(a) Inapplicable.
(b) Inapplicable.
(c) Inapplicable.
(d) Inapplicable.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.77 Amendments of the 1987 Microsemi
Corporation Stock Plan. Adopted on May 16, 1995.
Exhibit 11.1 Unaudited computation of Earnings Per
Share for the thirteen and thirty-nine weeks ended July
2, 1995 and July 3, 1994
Exhibit 27.1 Unaudited Financial Data Schedule for
the nine months ended July 2, 1995
(b) Reports on Form 8-K:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
MICROSEMI CORPORATION
By:
-------------------
David R. Sonksen
Vice President -
Finance and Chief
Financial Officer
(Principal Financial
Officer and Chief
Accounting Officer
and duly authorized to
sign on behalf of the
Registrant)
DATED: August 15, 1995
<PAGE>
MICROSEMI CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
PART 1, ITEM 1
July 2, 1995
F-1
<PAGE>
MICROSEMI CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in 000's)
[CAPTION]
July 2, 1995 October 2, 1994
------------ ---------------
(Unaudited) (Audited)
[S] [C] [C]
ASSETS
Current assets
Cash and cash equivalents $ 3,562 $ 3,994
Accounts receivable less allowance
for doubtful accounts, $2,402 at
July 2, 1995 and $2,173 at
October 2, 1994 20,489 17,772
Inventories 41,112 40,058
Deferred income taxes 4,076 4,076
Other current assets 1,305 1,197
------- -------
Total current assets 70,544 67,097
------- -------
Property and equipment, at cost 52,695 50,776
Less: Accumulated depreciation (28,699) (26,559)
------- -------
23,996 24,217
------- -------
Deferred income taxes 1,725 1,725
Other assets 6,244 7,110
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$ 102,509 $ 100,149
======= =======
[S] [C] [C]
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to banks and others $ 7,113 $ 9,584
Current maturities of long-term debt 3,337 3,578
Accounts payable and accrued
liabilities 18,133 16,879
Income taxes payable 2,883 1,212
Deferred income taxes 716 716
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Total current liabilities 32,182 31,969
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Deferred income taxes 1,568 1,568
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Long-term debt 48,609 50,568
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Other long-term liabilities 1,167 1,256
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Stockholders' equity
Common stock, $.20 par value;
authorized 20,000 shares; issued
7,670 shares at July 2, 1995 and
7,595 shares at October 2, 1994 1,534 1,519
Paid-in capital 14,520 14,397
Retained earnings (accumulated
deficit) 2,929 (1,128)
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Total stockholders' equity 18,983 14,788
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$ 102,509 $ 100,149
======= =======
[FN]
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-2
<PAGE>
MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(amounts in 000's, except earnings per share)
[CAPTION]
13 Weeks Ended 13 Weeks Ended
July 2, 1995 July 3, 1994
-------------- --------------
[S] [C] [C]
Net sales $ 36,138 $ 30,336
Cost of sales 26,536 22,438
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Gross profit 9,602 7,898
------ ------
Operating expenses
Selling 2,045 1,947
General and administrative 3,127 2,692
Amortization of goodwill and
other intangible assets 58 50
------ ------
Total operating expenses 5,230 4,689
------ ------
Income from operations 4,372 3,209
------ ------
Other income (expense)
Interest expense (1,260) (1,223)
Interest income 23 10
Other (289) (134)
------ ------
Total other expense (1,526) (1,347)
------ ------
Earnings before income taxes 2,846 1,862
Provision for income taxes 1,148 766
------ ------
Net earnings $ 1,698 $ 1,096
====== ======
Earnings per share
- Primary $ 0.21 $ 0.14
====== ======
- Fully diluted $ 0.17 $ 0.12
====== ======
Common and common equivalent
shares outstanding
- Primary 8,099 7,989
- Fully diluted 11,752 11,550
[FN]
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-3
<PAGE>
MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(amounts in 000's, except earnings per share)
[CAPTION]
39 Weeks Ended 39 Weeks Ended
July 2, 1995 July 3, 1994
------------ ------------
[S] [C] [C]
Net sales $ 96,236 $ 87,970
Cost of sales 71,516 65,965
------ ------
Gross profit 24,720 22,005
------ ------
Operating expenses
Selling 5,923 5,674
General and administrative 8,084 8,026
Amortization of goodwill and other
intangible assets 151 203
------ ------
Total operating expenses 14,158 13,903
------ ------
Income from operations 10,562 8,102
------ ------
Other income (expense)
Interest expense (3,769) (3,887)
Interest income 38 48
Other (177) (234)
------ ------
Total other expense (3,908) (4,073)
------ ------
Earnings before income taxes 6,654 4,029
Provision for income taxes 2,595 1,612
------ ------
Net earnings $ 4,059 $ 2,417
====== ======
Earnings per share
- Primary $ 0.50 $ 0.30
====== ======
- Fully Diluted $ 0.43 $ 0.28
====== ======
Common and common equivalent
shares outstanding
- Primary 8,053 7,967
- Fully diluted 11,752 9,093
[FN]
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-4
<PAGE>
MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Retained Earnings
(Accumulated Deficit)
(amounts in 000's)
[CAPTION]
39 Weeks Ended 39 Weeks Ended
July 2, 1995 July 3, 1994
-------------- --------------
[S] [C] [C]
Retained earnings (accumulated
deficit) at beginning of period $ (1,128) $ 1,007
Net earnings 4,059 2,417
Translation loss from foreign currency (2) (5)
------ ------
Retained earnings at end of period $ 2,929 $ 3,419
====== ======
[FN]
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-5
<PAGE>
MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
(amounts in 000's)
[CAPTION]
39 Weeks Ended 39 Weeks Ended
July 2, 1995 July 3, 1994
-------------- --------------
[S] [C] [C]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 4,059 $ 2,417
Adjustments to reconcile net
earnings to net cash provided
from operating activities:
Depreciation and amortization 2,937 3,213
Decrease in allowance for doubtful
accounts 229 121
Loss on sales and retirements of
assets - 49
Changes in assets and liabilities:
Accounts receivable (2,946) 563
Inventories (1,054) (3,254)
Other current assets (108) (471)
Other assets 713 351
Accounts payable and accrued
liabilities 1,254 378
Income taxes payable 1,671 348
------ ------
Net cash provided from operating
activities 6,755 3,715
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of assets - 200
Additions to property and equipment (2,565) (1,526)
------ ------
Net cash used for investing activities (2,565) (1,326)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable
to banks and others (2,471) 205
Reduction of long-term debt (2,200) (1,919)
Reduction of other long-term
liabilities (89) (86)
Exercise of employee stock options 138 52
------ ------
Net cash used for financing activities (4,622) (1,748)
------ ------
Net increase (decrease) in cash and
cash equivalents (432) 641
Cash and cash equivalents at beginning
of period 3,994 2,080
------ ------
Cash and cash equivalents at end
of period $ 3,562 $ 2,721
====== ======
[FN]
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-6
<PAGE>
MICROSEMI CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
July 2, 1995
1. PRESENTATION OF FINANCIAL INFORMATION
The financial information furnished herein is unaudited, but, in
the opinion of the management of Microsemi Corporation, includes
all adjustments (all of which are normal, recurring adjustments)
necessary for a fair presentation of the results of operations for
the periods indicated. The results of operations for the third
fiscal quarter or the first thirty-nine weeks of the current fiscal
year are not necessarily indicative of the results to be expected
for the full year.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all information and footnotes necessary
for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted
accounting principles. The financial statements and notes should,
therefore, be read in conjunction with the financial statements and
notes thereto in the Annual Report on the Form 10-K for the fiscal
year ended October 2, 1994.
Certain reclassifications have been made to the unaudited financial
statements for the thirteen and thirty-nine weeks ended July 3,
1994 to conform to the 1995 presentation.
2. INVENTORIES
For interim reporting purposes, cost of goods sold and inventories
are estimated based upon the use of the gross profit method applied
to each product line.
Inventories used in the computation of cost of goods sold were:
July 2, October 2,
1995 1994
---- ----
(amounts in 000's)
Raw materials $ 9,410 $ 9,306
Work in progress 20,236 18,678
Finished goods 11,466 12,074
------ ------
$ 41,112 $ 40,058
====== ======
3. LONG-TERM DEBT
Long-term debt consisted of:
July 2, October 2,
1995 1994
---- ----
(amounts in 000's)
Industrial Development Bond-bearing
interest at 7.875% due in
installments from 1996 to 2000;
secured by first deed of trust $ 2,905 $ 3,075
Industrial Development Bond-bearing
interest at 6.75% due in
installments from 1998 to 2005;
secured by first deed of trust 5,350 5,700
Convertible Subordinated Debentures
-bearing interest at 5.875% due 2012 33,281 33,281
Convertible Subordinated Notes-bearing
interest at 10% due 1999 2,000 2,000
Notes payable-bearing interest at
ranges of 5% - 13% due between
August 1995 and July 2002 8,410 10,090
------ ------
51,946 54,146
Less current portion (3,337) (3,578)
------ ------
$ 48,609 $ 50,568
====== ======
The Company's 5.875% Convertible Subordinated Debentures
require annual sinking fund payments in the amount of 5% of the
principal amount thereof, commencing in March 1997, less the
principal amount of converted or redeemed debentures, and the
balance matures on March 1, 2012.
4. EARNINGS PER SHARE
Earnings per share for the primary basis have been computed based
upon the weighted average number of common and common equivalent
shares outstanding during the respective periods. Earnings per
share for the fully diluted basis have been computed, when the
result is dilutive, based upon the assumption that the convertible
subordinated debt had been converted to common stock at the date of
issuance, with a corresponding increase in net income to reflect a
reduction in related interest expense, net of applicable taxes.
5. STATEMENT OF CASH FLOWS
For purposes of the Consolidated Statements of Cash Flows, the
Company considers all short-term, highly liquid investments with
maturities of three months or less at the date of acquisition to be
cash equivalents.
Supplementary information 39 weeks ended 39 weeks ended
July 2, 1995 July 3, 1994
------------ ------------
Cash paid during the period for:
(amounts in 000's)
Interest $ 4,477 $ 3,218
Income taxes $ 747 $ 1,317
6. DISPOSITIONS
On June 8, 1994, the Company completed a transaction with
Technology Marketing Incorporated (TMI) to dispose of substantially
all of the assets of Omni Technology Corporation (Omni), a wholly
owned subsidiary of the Company. The Company received $200,000
cash, a $300,000 term note receivable, $2,000,000 in 4% redeemable
preferred stock and warrants to purchase up to 250,000 shares of
TMI's common stock at $1.00 per share. The note receivable,
preferred stock and warrants are recorded at their estimated net
realizable values.
7. SUBSEQUENT EVENTS
In Broomfield, Colorado, an owner of property located adjacent
to a manufacturing facility owned by a subsidiary of the Company
had filed suit against the subsidiary and other parties, claiming
that contaminants migrated to his property, thereby diminishing its
value. In August 1995, the subsidiary, together with former
owners of the manufacturing facility, agreed to settle the claim
and to indemnify the owner of the adjacent property from
remediation costs. Although TCE and other contaminants previously
used at the facility are present in soil and groundwater on the
subsidiary's property, the Company vigorously contests any
assertion that the subsidiary is the cause of the contamination;
however, the can be no assurance that recourse will be available
against third parties. State and local agencies in Colorado are
reviewing current data and considering studu and clean up options,
and it is not yet possible to predict costs for remediation or the
allocation thereof among potentially responsible parties.
Exhibit 10.77
AMENDMENTS OF THE 1987 MICROSEMI CORPORATION STOCK PLAN
Adopted May 16, 1995
Section 5 (e) of the 1987 Microsemi Corporation Stock Plan
("1987 Plan") is hereby amended and restated in full as follows:
5. (e) Satisfaction of Option Price. The Grantee shall pay
the Option Price (i) in cash, or (ii) with the Committee's
permission, by delivering shares of Microsemi Stock already owned
by the Grantee and having a fair market value on the date of
exercise equal to the Option Price, or a combination of cash and
shares, or (iii) with the Committee's permission, by Microsemi
withholding from the Grantee out of the Microsemi Stock otherwise
deliverable upon exercise a number of shares having a fair market
value equal to the aggregate Option Price, or (iv) with the
Committee's permission, by the execution and delivery of Grantee's
promissory note in the principal amount of the exercise price, with
such term, interest rate and other terms and provisions, including,
without limitation, requiring the Microsemi Stock acquired upon
exercise to be pledged to the Company to secure payment of the
note, as the Board of Directors may specify; (v) by cancellation of
indebtedness of the Company to Grantee, equal to the amount of the
exercise price; (vi) by waiver of compensation due or accrued to
Grantee for services rendered, equal to the amount of the exercise
price; (vii) provided that a public market for the Company's stock
exists, through a "same day sale" commitment from the Grantee and
a broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD" Dealer), whereby the Grantee
irrevocably elects to exercise his Option and to sell a portion of
the Microsemi Stock so purchased to pay for the exercise price and
whereby the NASD Dealer irrevocably commits upon receipt of such
Microsemi Stock to forward the exercise price directly to the
Company; (viii) provided that a public market for the
Company's stock exists, through a "margin" commitment from the
Grantee and NASD Dealer whereby the Grantee irrevocably elects to
exercise this Option and to pledge the Microsemi Stock so purchased
to the NASD Dealer in a margin account as security for a loan from
the NASD Dealer in the amount of the exercise price, and whereby
the NASD Dealer irrevocably commits upon receipt of such Microsemi
Stock to forward the exercise price directly to the Company; or
(ix) any combination of (i), (ii), (iii), (iv), (v), (vi), (vii) or
(viii) above. The Grantee shall pay the Option Price not later
than thirty (30) days after the date of a statement from the
Company following exercise setting forth the Option Price,
fair market value of Microsemi Stock on the exercise date, the
number of shares of Microsemi Stock that may be delivered in
payment of the Option Price, and the amount of withholding tax due,
if any. If the Grantee fails to pay the Option Price within the
thirty (30) day period, the Committee shall have the right to take
whatever action it deems appropriate, including voiding the option
exercise. The Company shall not issue or transfer shares of
Microsemi Stock upon exercise of a Stock Option until the Option
Price is fully paid.
Exhibit 11.1
Microsemi Corporation and Subsidiaries
Unaudited Earnings Per Share
(in thousands, except per share data)
13 weeks 13 weeks 39 weeks 39 weeks
ended ended ended ended
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
---- ---- ---- ----
PRIMARY
Net earnings $1,698 $1,096 $4,059 $2,417
===== ===== ===== =====
Outstanding shares 7,670 7,576 7,670 7,576
Equivalent shares 429 413 383 391
----- ----- ----- -----
Primary common and common
equivalent shares 8,099 7,989 8,053 7,967
===== ===== ===== =====
Primary earnings per share $0.21 $0.14 $0.50 $0.30
===== ===== ===== =====
FULLY DILUTED
Net earnings $1,698 $1,096 $4,059 $2,417
Interest savings from conversion
of convertible debt 334 332 1,000 90
------ ------ ------ -----
Fully diluted earnings $2,032 $1,428 $5,059 $2,507
====== ====== ====== =====
Outstanding shares 7,670 7,576 7,670 7,576
Equivalent shares 559 451 559 451
Convertible shares 3,523 3,523 3,523 1,066
------ ------ ------ -----
Fully diluted common and common
equivalent shares 11,752 11,550 11,752 9,093
====== ====== ====== =====
Fully diluted earnings per share $0.17 $0.12 $0.43 $0.28
====== ====== ====== =====
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-01-1995
<PERIOD-START> OCT-03-1994
<PERIOD-END> JUL-02-1995
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0
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<OTHER-SE> 17449
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<CGS> 71516
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