Microsemi Corporation (NASDAQ:MSCC) Q1 2015 Earnings Conference Call - Final Transcript

Jan 22, 2015 • 04:45 pm ET


Microsemi Corporation (NASDAQ:MSCC) Q1 2015 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by, and welcome to the Microsemi Fiscal First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

I would now like to turn today's conference over to Terri Donnelly, conference call coordinator. Please go ahead.

Terri Donnelly

Good afternoon, and welcome to Microsemi's earnings conference call for the first quarter of fiscal year 2015. I am Terri Donnelly, coordinator of this call. In a few moments, you will hear from, and have an opportunity to ask questions of, Jim Peterson, our Chairman of the Board and Chief Executive Officer; of Paul Pickle, our President and Chief Operating Officer; of John Hohener, our Executive Vice President and Chief Financial Officer; and of Steve Litchfield, our Executive Vice President and Chief Strategy Officer. A recording of this conference call will be available on the Microsemi website under the Investors section. Our website is located at www.microsemi.com.

Microsemi issues guidance in the form of a limited business outlook on our expectations for the next quarter. This business outlook reflects our current expectations and is continually subject to reassessment due to changing market conditions and other factors, therefore, must be considered only as management's present opinion. (Forward-looking Cautionary Statement)

With that said, I am going to turn the call over to John to discuss our financial results, and then Jim will address our end markets and overall business strategy. Here's John Hohener.

John Hohener

Thank you, Terri. We recorded a record $303.6 million in net sales for our first fiscal quarter ended Decembers 28, 2014, up 18.8% from the $255.6 million we reported a year ago. GAAP gross margin for the quarter, which included the effect of non-cash acquisitions related to purchase accounting, was 55.4% compared to 56.4% in the prior quarter and up 130 basis points from the 54.1% we recorded in the year-ago first quarter.

GAAP operating margin for the quarter was 9.8% compared to 11% from the prior quarter and 2.8% in the prior year first quarter. GAAP net income for the first quarter was $19.7 million or $0.21 per diluted share, up substantially from a year ago first quarter of $0.01 per diluted share.

John Hohener

For the first quarter, our GAAP results included non-cash expense of $2.4 million for manufacturing profit and acquired inventory and we expect to report Q2 non-cash expense of $600,000 for the same category. We also recorded non-cash expenses of $23.6 million in amortization of intangibles and $1.7 million in stock based compensation. We estimate that stock based compensation expense for the second quarter of 2015 will be approximately $12.8 million, reflecting the timing of certain grants and grant date fair values.

For the first quarter, we also recorded restructuring charges and other special charges of $4.2 million, primarily reflecting severance costs and $3.5 million in facility and equipment consolidation charges, reflecting our streamlining of operations. We will continue to consolidate select facilities to improve on our long-term