SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Reports Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Period Ended January 1, 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
(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 February 3, 1995 was 7,623,271.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The financial information for the quarter ended January 1, 1995
and comparative financial information for 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
Capital Resources and Liquidity
Microsemi Corporation's operations in the first quarter of fiscal
year 1995 were funded with internally generated funds and
borrowings under the Company's line of credit. Under the current
line of credit, the Company can borrow up to $15,000,000, based
upon percentages of accounts receivable and inventory balances
at certain of the Company's operations. As of January 1, 1995,
$8,838,000 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. The new loan requires
monthly payments of $100,000 plus interest. At January 1, 1995,
the Company had $3,618,000 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 $5,937,000.
This letter of credit guarantees the repayment of a $5,700,000
Industrial Development Bond which was issued in April 1985 at 9.25%
per annum through the City of Santa Ana for the construction of
improvements and new facilities at the Santa Ana plant. (See
also Note 7 to the unaudited consolidated financial statements -
Subsequent Events)
The Company believes that it can meet its current operating cash
requirements and debt service with internally generated funds
together with its available borrowing.
The Company's revenues continue to be highly dependent on
military and aerospace programs. Recent reductions in defense
spending had and will continue to have a negative impact on the
Company's operations. Furthermore, there have been recent
Department of Defense (DOD) announcements of major changes in
defense procurement policy, which included official notification,
on August 22, 1994, of Department of Defense acquisitions reform to
utilize best commercial practices instead of mandatory use of
military standard parts. In the past two years, military related
business has declined from approximately 60% to 40% of total
revenues. This has been more than offset by increases in shipments
of commercial, industrial, medical and space related products. In
addition, the Company continues to develop commercial applications
for its products to offset this decrease. Although the final
impact of these most recent changes in Department of Defense
procurement practices is not known, management believes that,
either through associated cost reductions or increases in shipments
of non Department of Defense products, it will not have a
significant impact on total future revenues, operations or cash flows.
The average collection period on accounts receivable was 55 days
for the current three months compared to 57 days for the same
period of the last fiscal year. 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
179 days for the first three months of fiscal year 1995 compared to
214 for the corresponding period of fiscal year 1994. This
resulted from a lower inventory base, due to the writeoffs 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.
Order backlog at January 1, 1995 increased to $49,700,000 from
$46,300,000 in the prior year.
The Company has no significant capital commitments.
Certain operations of the Company utilize chemicals considered as
hazardous substances. The Company believes that it complies with
the procedures required for usage and disposition of the
substances; however, improper disposal thereof could have an
adverse effect upon the Company's future liquidity or results of
operations.
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED JANUARY 1, 1995
COMPARED TO THE THIRTEEN WEEKS ENDED JANUARY 2, 1994.
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.
Net sales for the first quarter of fiscal year 1995 increased to
$27,657,000, or 3%, from $26,929,000 for the first quarter of
fiscal year 1994. The increase of $728,000 was due to an increase
of $1,643,000 from the continuing businesses as the Company
continues to shift more emphasis to the commercial applications of
the Company's products, partially offset by the elimination of
sales of approximately $915,000 from a subsidiary which was sold in
fiscal year 1994.
Gross profit increased $212,000, due to an increase of $92,000 from
the continuing businesses and to the elimination of $120,000 of gross
losses from the business sold in fiscal year 1994.
Operating expense for the first quarter of fiscal year 1995
decreased $331,000, compared to the corresponding period of the
prior year. The decrease was primarily due to the elimination of
operating expenses of the subsidiary that was sold in fiscal 1994.
Interest expense decreased $129,000 for the current quarter,
compared to the same quarter of the prior fiscal year. This
decrease was primarily due to less borrowings to finance
operations, resulting from cash generated from profitable
operations.
The effective tax rate of 38% in the first quarters of fiscal
years 1995 and 1994 is the combined result of taxes computed on
foreign and domestic income.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable.
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:
None
(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
DATED: February 14, 1995
<PAGE>
MICROSEMI CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
PART 1, ITEM 1
January 1, 1995
F-1
<PAGE>
<TABLE> MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
(amounts in 000's)
<CAPTION> January 1, 1995 October 2, 1994
<S>
ASSETS <C> <C>
Current assets
Cash and equivalents $ 3,618 $ 3,994
Accounts receivable less
allowance for doubtful
accounts, $2,096 at
January 1, 1995 and
$2,173 at October 2, 1994 15,612 17,772
Inventories 41,052 40,058
Deferred income taxes 4,076 4,076
Other current assets 1,377 1,197
------ ------
Total current assets 65,735 67,097
------ ------
Property and equipment, at cost 51,073 50,776
Less: Accumulated depreciation (27,414) (26,559)
------ ------
23,659 24,217
------ ------
Deferred income taxes 1,725 1,725
Other assets 7,180 7,110
------ -------
$ 98,299 $100,149
====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
<S>
Current liabilities <C> <C>
Notes payable to banks
and others $ 7,793 $ 9,584
Current maturities of
long-term debt 3,490 3,578
Accounts payable and accrued
liabilities 16,075 16,879
Income taxes payable 1,702 1,212
Deferred income taxes 716 716
------ -------
Total current liabilities 29,776 31,969
Deferred income taxes 1,568 1,568
Long-term debt 49,868 50,568
Other long-term liabilities 1,253 1,256
Stockholders' equity
Common stock, $.20 par value;
authorized 20,000 shares;
issued 7,615 shares at
January 1, 1995 and 7,595
shares at October 2, 1994 1,523 1,519
Paid-in capital 14,428 14,397
Accumulated deficit (117) (1,128)
------ -------
Total stockholders' equity 15,834 14,788
------ -------
$ 98,299 $100,149
====== =======
<FN>
See accompanying Notes to Unaudited Consolidated Financial
Statements.
F-2
<PAGE>
</TABLE>
<TABLE>
MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(amounts in 000's, except earnings per share)
<CAPTION>
13 Weeks Ended 13 Weeks Ended
January 1, 1995 January 2, 1994
<S> <C> <C>
Net sales $ 27,657 $ 26,929
Cost of sales 20,653 20,137
------ ------
Gross profit 7,004 6,792
Operating expenses
Selling 1,895 1,789
General and administrative 2,318 2,738
Amortization of goodwill and
other intangible assets 49 66
------ ------
Total operating expenses 4,262 4,593
------ ------
Income from operations 2,742 2,199
------ ------
Other income (expense)
Interest expense (1,167) (1,296)
Interest income 50 -
Other 9 (48)
Total other expense (1,108) (1,344)
------ ------
Earnings before income taxes 1,634 855
Provision for income taxes 621 324
------ ------
Net earnings $ 1,013 $ 531
====== ======
Earnings per share - Primary $ 0.13 $ 0.07
- Fully diluted $ 0.12 $ 0.06
Common and common equivalent
shares outstanding
- Primary 7,971 7,946
- Fully diluted 11,511 9,013
<FN>
See accompanying Notes to Unaudited Consolidated Financial Statements.
</TABLE>
F-3
<PAGE>
<TABLE> MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of
Retained Earnings (Accumulated Deficit)
(amounts in 000's)
<CAPTION>
13 Weeks Ended 13 Weeks Ended
January 1, 1995 January 2, 1994
<S> <C> <C>
Retained earnings (accumulated
deficit) at beginning of period $ (1,128) $ 1,007
Net earnings 1,013 531
Translation loss from foreign
currency (2) -
------ -----
Retained earnings (accumulated
deficit) at end of period $ (117) $ 1,538
<FN>
See accompanying Notes to Unaudited Consolidated Financial
Statements.
</TABLE> F-4
<PAGE>
<TABLE> MICROSEMI CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
(amounts in 000's)
<CAPTION>
13 Weeks Ended 13 Weeks Ended
January 1, 1995 January 2, 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,013 $ 531
Adjustments to reconcile net
earnings to net cash provided
from operating activities:
Depreciation and amortization 900 1,137
Reduction in allowance for
doubtful accounts (77) (3)
Changes in assets and liabilities:
Accounts receivable 2,237 2,325
Inventories (994) (1,003)
Other current assets (180) 175
Other assets (117) 83
Accounts payable and
accrued liaibilities (804) (1,213)
Income taxes payable 490 26
------ ------
Net cash provided from operating
activities 2,468 2,058
------ ------
CASH FLOWS FROM INVESTING ACTIVITY:
Additions to property and equipment (297) (580)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable
to bank and others (1,791) 739
Reduction of long-term debt (788) (1,102)
Reduction of other long-term
liabilities (3) -
Exercise of employee stock options 35 21
------ ------
Net cash used for financing
activities (2,547) (342)
------ ------
Net increase (decrease) in cash
and equivalents (376) 1,136
Cash and equivalents at beginning
of period 3,994 2,080
Cash and equivalents at end of ------ ------
period $ 3,618 $ 3,216
====== ======
<FN>
See accompanying Notes to Unaudited Consolidated Financial
Statements.
</TABLE> F-5
<PAGE>
MICROSEMI CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
January 1, 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 first
thirteen weeks of the current fiscal year are not necessarily
indicative of the results to be expected for the full year.
The accompanying consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore,
do not include all informaton 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 for the fiscal year ended October 2, 1994.
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:
January 1, October 2,
1995 1994
(amounts in 000's)
Raw materials $ 8,961 $ 9,306
Work in progress 19,717 18,678
Finished goods 12,374 12,074
------ ------
$ 41,052 $ 40,058
====== ======
<PAGE>
3. LONG-TERM DEBT
Long-term debt consisted of:
January 1, October 2,
1995 1994
(amounts in 000's)
Industrial Development Bond
-bearing interest at 7.875%
due May 2000; secured by
first deed of trust $ 3,075 $ 3,075
Industrial Development Bond
-bearing interest at 9.25%
through January 1995, at
which time the interest rate
will be reset to a rate not
to exceed 12%, maturing
February 2005; secured by first
deed of trust (See Note 7-
Subsequent Events) 5,700 5,700
Convertible Subordinated
Debentures-bearing interest at
5.875% due 2012 33,281 33,281
Convertible Subordinated Debentures
-bearing interest at 10% due 1999 2,000 2,000
Notes payable-bearing interest at
ranges of 5-13% due between
January 1995 and July 2002 9,302 10,090
------ ------
53,358 54,146
Less current portion (3,490) (3,578)
------ ------
$ 49,868 $ 50,568
====== ======
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 debentures 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.
<PAGE>
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
13 weeks ended 13 weeks ended
January 1, 1995 January 2, 1994
Cash paid during the period for: (amounts in 000's)
Interest $ 755 $ 815
Income taxes $ 123 $ 354
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, Inc. (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 preferred stock is
subject to mandatory redemption over a period of between 10 to 20
years based upon the achievement of certain performance objectives
by TMI. No gain or loss was recognized on the transaction.
7. SUBSEQUENT EVENTS
Effective February 1, 1995 the Company remarketed its Santa Ana
Industrial Development Bond, maturing in February 2005, at a
reduced principal amount of $5,350,000 which bears interest at
6.75% per annum.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-02-1994
<PERIOD-START> OCT-03-1994
<PERIOD-END> JAN-01-1995
<CASH> 3618
<SECURITIES> 0
<RECEIVABLES> 17708
<ALLOWANCES> 2096
<INVENTORY> 41052
<CURRENT-ASSETS> 65735
<PP&E> 51073
<DEPRECIATION> 27414
<TOTAL-ASSETS> 98299
<CURRENT-LIABILITIES> 29776
<BONDS> 35281
<COMMON> 1523
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 98299
<SALES> 27657
<TOTAL-REVENUES> 27657
<CGS> 20653
<TOTAL-COSTS> 20653
<OTHER-EXPENSES> 4262
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1167
<INCOME-PRETAX> 1634
<INCOME-TAX> 621
<INCOME-CONTINUING> 1013
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1013
<EPS-PRIMARY> .13
<EPS-DILUTED> .12
</TABLE>
