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Microsemi Management Discusses Q3 2012 Results - Earnings Call Transcript

Stocks in this article: MSCC

Our GAAP gross margin, which incorporates only noncash purchase accounting adjustments from our recent acquisitions, was 55.8%, a sequential increase of 290 basis points. In Q4, we don't expect any further noncash purchase accounting adjustments. This quarter, non-GAAP selling, general and administrative expenses were $41 million or 15.8% of sales compared to $40 million or 16% of sales in the prior quarter and compared to $37.3 million or 17.2% of sales reported a year ago. For the next quarter, we expect total SG&A to decrease slightly as a percentage of revenue.

Research and development costs were $44 million or 17% of sales compared to $42.2 million or 16.9% of sales in the prior quarter and compared to $29.6 million or 13.6% of sales reported a year ago. The increase compared to prior year was due primarily in our investment of new product development. For the next quarter, we expect total R&D to decrease slightly as a percentage of revenue.

Our non-GAAP operating income was $60.7 million or 23.4% of sales compared to $54.9 million or 22% of sales in the second quarter and $56.8 million or 26.2% recorded last year. We recorded $8.8 million in non-GAAP interest and other expense compared to $10.1 million last quarter, reflecting a full quarter's impact from the refinancing we completed last quarter. In addition, subsequent to our quarter end, we paid down $30 million of our term debt. This pay-down will allow us to see a decrease in interest and other expense of approximately $200,000 next quarter.

Non-GAAP net income was $48.3 million or $0.55 per diluted share compared to $40.3 million or $0.46 per diluted share last quarter, an increase of 20%, and $42 million or $0.49 per diluted share reported a year ago. Our non-GAAP effective tax rate for the quarter was 7%, reflecting ongoing improvements in our tax structure. We expect this tax rate will continue next quarter.

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