Microchip Technology Posts Record Net Sales for Fiscal Second Quarter 2009
CHANDLER, Ariz.--(BUSINESS WIRE)--
Microchip Technology Incorporated (NASDAQ: MCHP):
-- RECORD NET SALES OF $269.7 MILLION
-- RECORD NET SALES OF 16-BIT MICROCONTROLLERS
-- RECORD NET SALES OF ANALOG PRODUCTS
-- RECORD NUMBER OF DEVELOPMENT TOOLS SHIPPED
-- ON A GAAP BASIS:
-- GROSS MARGIN OF 60.9%; OPERATING PROFIT OF 32.3%; EPS OF 41
CENTS PER DILUTED SHARE
-- ON A NON-GAAP BASIS:
-- RECORD GROSS MARGIN OF 61.6%; OPERATING PROFIT OF 35.5%; RECORD
EPS OF 45 CENTS PER DILUTED SHARE
-- NET CASH GENERATED OF $129.4 MILLION FOR THE SEPTEMBER QUARTER,
BEFORE DIVIDEND PAYMENT OF $62.2 MILLION AND STOCK BUY-BACK
ACTIVITY OF $100.3 MILLION
-- INCREASED DIVIDEND TO A RECORD 33.9 CENTS PER SHARE
Microchip Technology Incorporated (NASDAQ: MCHP), a leading provider of microcontroller and analog semiconductors, today reported results for the three months ended September 30, 2008. Net sales for the second quarter of fiscal 2009 were a record $269.7 million, up 0.6% sequentially from net sales of $268.2 million in the immediately preceding quarter, and up 4.3% from net sales of $258.6 million in the prior year's second quarter. GAAP earnings per diluted share for the second quarter of fiscal 2009 was 41 cents, up 1.9% from GAAP earnings per diluted share of 40 cents in the immediately preceding quarter, and up 48.9% from GAAP earnings per diluted share of 27 cents in the prior year's second quarter.
Non-GAAP earnings per diluted share for the second quarter of fiscal 2009 were a record 45 cents, up 2.7% from non-GAAP earnings per diluted share of 44 cents in the immediately preceding quarter, and up 18.8% from non-GAAP earnings per diluted share of 38 cents in the prior year's second quarter. Non-GAAP results exclude the effect of share-based compensation and a charge related to the sale of Fab 3 in the second quarter of fiscal 2008. A reconciliation of non-GAAP and GAAP results is included in this press release.
Microchip also announced today that its Board of Directors declared a quarterly cash dividend on its common stock of 33.9 cents per share. The quarterly dividend is payable on November 28, 2008 to stockholders of record on November 14, 2008. Microchip initiated quarterly cash dividend payments in the third quarter of fiscal 2003.
"Despite business conditions being extremely challenging in the September quarter, we were able to grow net sales sequentially to new record levels, with 16-bit microcontrollers and analog products also achieving new record net sales levels," said Steve Sanghi, Microchip's President and CEO. "Geographically, Asia grew approximately 6% sequentially, but net sales in the Americas and Europe regions were both down sequentially."
Mr. Sanghi continued, "In the September quarter, we achieved record level non-GAAP gross margins of 61.6%, and non-GAAP operating margins were 35.5%, both indicating the success of our proprietary products. Non-GAAP diluted EPS in September of 45 cents per share was a record, meeting the high end of our guidance."
"Net cash generated in the September quarter was $129.4 million, and for the first half of fiscal 2008 net cash generated was $247.7 million," Mr. Sanghi added. "Our strong cash flow continues to be the cornerstone of our dividend commitment to our shareholders, allowing an increase in the dividend of 9.4% from the level one year ago, to 33.9 cents per share."
"We achieved several highlights in our September quarter performance, despite challenging business conditions. Our 16-bit microcontroller net sales grew 16.8% sequentially and 76.0% year over year, and analog net sales grew 11.7% sequentially and 20.7% year over year, both achieving new record levels. Our Flash microcontroller net sales also achieved a new record with sequential growth of over 2% and were up 14% year over year," said Ganesh Moorthy, Executive Vice President. "Market demand for our development tools continued to be very strong, with shipments achieving record levels for the fourth quarter in a row. We shipped 35,282 development tools in the September quarter, with cumulative shipments exceeding 700,000."
Mr. Gordon Parnell, Microchip's Chief Financial Officer, said, "Inventory levels were essentially flat as of the end of September relative to the June quarter, representing 110 days. Inventory in the distribution channel grew modestly to 35 days of inventory as of the end of September."
Mr. Sanghi concluded, "Global economic conditions are creating significant difficulties in the market, as consumers and businesses deal with liquidity and credit concerns. Determining demand levels in the current climate is extremely challenging, as we endeavor to establish customer order patterns based on market conditions. Based on current business conditions, we will be taking actions in the current quarter relating to expenses and inventory levels including a two-week wafer fab shutdown and reductions in discretionary and variable costs. We currently expect net sales in the December quarter to be down 8% to 16%. Diluted EPS is expected to be approximately 31 to 37 cents per share on a GAAP basis, and diluted EPS on a non-GAAP basis is expected to be approximately 35 to 41 cents per share."
Microchip's Recent Highlights:
-- On October 2, 2008, Microchip and ON Semiconductor Corporation
announced that they had sent a proposal to the Board of
Directors of Atmel Corporation to acquire Atmel for $5.00 per
share in cash. At this point, Microchip and ON are awaiting a
response from Atmel.
-- Microchip announced an addition to its mTouch(TM) capacitive
touch-sensing offerings, the PICDEM(TM) Touch Sense 2 Demo
Board. The easy-to-use board comes populated with a 16-bit
PIC24FJ256GB110 microcontroller, which features an integrated
Charge Time Measurement Unit peripheral for fast capacitive
touch sensing without the need for external components.
-- Bel Power Inc. selected Microchip's MCP6291 low-power,
high-bandwidth operational amplifier (op amp) and 8-bit
PIC12F675 microcontroller for its next-generation Power over
Ethernet half-brick DC-to-DC converter power supply. Bel Power
selected Microchip because of its broad product portfolio,
excellent development tools and superior technical support.
-- Microchip's MCP4725 digital-to-analog converter won a Design
News Magazine 2008 Golden Mousetrap Award, in the "Analog
Control" category. A number of other Microchip products gained
finalist status in a variety of categories, including the
32-bit PIC32 microcontroller family.
-- The Company announced single-output, 1.5A MOSFET drivers in
SOT-23 packages. The inverting MCP1415 and non-inverting
MCP1416 devices have operating voltage ranges of 4.5V to 18V
and excellent latch-up immunity, making them ideal for a wide
variety of power-supply applications.
-- Microchip introduced a USB/AC load-sharing Li-Ion/Li-Polymer
battery charger. The MCP73871's intelligent charge-management
feature enables simultaneous AC-DC adapter or USB-port battery
charging and power sourcing for portable electronic
applications.
-- The Company also announced the MCP202X OEM-compliant,
automotive-certified LIN/SAE J2602 transceivers. These
transceivers meet the stringent requirements of European,
Asian and North American automotive manufacturers for the
Local Interconnection Networking of electronic modules within
vehicles.
-- On October 15, 2008, the Company announced the acquisition of
Hampshire Company, a leader in the touch screen controller
market. Microchip already has very strong market momentum with
its mTouch(TM) sensing product portfolio. Hampshire's touch
screen product portfolio enables the Company to extend this
momentum and offer its customers a broader range of industry
leading user interface solutions. Microchip intends to
capitalize on Hampshire's leading technology to accelerate
touch screen R&D for the next generation of touch screen
controllers.
Third Quarter Fiscal 2009 Outlook:
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
-- Net sales for the quarter ending December 31, 2008 are
currently anticipated to be down 8% to 16% compared to the
September 2008 quarter.
-- Gross margins for the quarter ending December 31, 2008 are
anticipated to be approximately 58.3% to 59.3% on a GAAP
basis, and approximately 59.0% to 60.0% on a non-GAAP basis,
prior to the effect of share-based compensation. Generally,
gross margin fluctuates over time, driven primarily by the mix
of microcontroller, analog and memory products sold; variances
in manufacturing yields; fixed cost absorption; wafer fab
loading levels; pricing pressures in our non-proprietary
product lines; and competitive and economic conditions.
-- Operating expenses for the quarter ending December 31, 2008
are expected to be approximately 29.0% to 30.0% on a GAAP
basis, and approximately 26.0% to 27.0% on a non-GAAP basis,
prior to the effect of share-based compensation expense.
Operating expenses fluctuate over time, primarily due to net
sales and profit levels.
-- The tax rate for the quarter ending December 31, 2008 is
anticipated to be approximately 18.0% to 18.2% prior to a $1.8
million impact from the retroactive reinstatement of the
Research and Development tax credit.
-- Earnings per diluted share for the quarter ending December 31,
2008 are anticipated to be approximately 31 to 37 cents on a
GAAP basis, and approximately 35 to 41 cents on a non-GAAP
basis, excluding the effect of share-based compensation
expense. The GAAP EPS guidance does not include any potential
charges associated with the acquisition of Hampshire Company,
as a purchase price allocation has not been completed at this
time.
-- The level of inventories fluctuates over time, primarily due
to sales volume and overall capacity utilization. Based on our
net sales guidance, on both a GAAP and non-GAAP basis,
inventories at December 31, 2008 are anticipated to be up 15
to 25 days.
-- Capital expenditures for fiscal 2009 are expected to total
approximately $115 million, and include over $35 million for
the construction of new buildings in Thailand and in India.
The level of capital expenditures varies from time to time as
a result of actual and anticipated business conditions.
-- Based on cash projected to be generated from operations and
current projected capital expenditure levels, we expect net
cash generation during the December quarter of approximately
$85 to $95 million before the dividend payment of
approximately $62 million announced today. The amount of
expected cash generation is before the effect of any stock buy
back activity.
-- Microchip's Board of Directors authorized a stock buy back of
up to 10.0 million shares in December 2007. At September 30,
2008, approximately 2.5 million shares remained available for
purchase under this program. Future purchases will depend upon
market conditions, interest rates and corporate
considerations.
-- During the September quarter, Microchip purchased 3,282,832
shares of its stock at an average price of $30.55 per share
for a total of $100.3 million. The share count for the
December quarter is expected to be approximately $184.9 to
186.0 million shares on a GAAP basis, and $182.6 to 183.3
million shares on a non-GAAP basis.
Use of Non-GAAP Financial Measures:
SFAS 123(R) requires us to estimate the cost of certain forms of share-based compensation, including employee stock options and awards under our employee stock purchase plan (ESPP Plan), and to record a commensurate expense in our income statement. Share-based compensation expense is a non-cash expense that varies in amount from period to period and is affected by market forces that are difficult to predict and are not within the control of management, such as the price of our common stock. Our sale of Fab 3 in Puyallup, Washington is a one-time event in our business. Accordingly, management excludes these items from its internal operating forecasts and models.
We are using non-GAAP profit, non-GAAP research and development expenses, non-GAAP selling, general and administration expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP diluted earnings per share, which excludes share-based compensation expense and our sale of Fab 3 in the second quarter of fiscal 2008, to permit additional analysis of our performance. Management believes these non-GAAP measures are useful to investors because they enhance the understanding of our historical financial performance and comparability between periods. Many of our investors have requested that we disclose this non-GAAP information because they believe it is useful in understanding our performance as it excludes non-cash and other special charges that many investors feel may obscure our true operating costs. Management uses these non-GAAP measures to manage and assess the profitability of its business. Specifically, we do not consider share-based compensation expense when developing and monitoring budgets and spending. The economic substance behind our decision to exclude share-based compensation relates to these charges being non-cash in nature. The exclusion of our sale of Fab 3 in our non-GAAP disclosures is based on the one-time nature of this event. Our determination of the above non-GAAP measures might not be the same as similarly titled measures used by other companies, and it should not be construed as a substitute for gross margin; research and development expenses; selling, general and administrative expenses; operating income; net income and diluted earnings per share determined in accordance with GAAP. There are limitations associated with using non-GAAP measures, including that they exclude financial information that some may consider important in evaluating our performance. Management compensates for this by presenting information on both a GAAP and non-GAAP basis for investors and providing reconciliations of the GAAP and non-GAAP results.
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
September 30, September 30,
2008 2007 2008 2007
--------- -------- -------- --------
Net sales $269,706 $258,647 $537,878 $522,719
Cost of sales 105,553 103,935 210,128 209,462
--------- -------- -------- --------
Gross profit 164,153 154,712 327,750 313,257
Operating expenses:
Research and development 31,343 29,306 62,895 59,052
Selling, general and
administrative 45,629 42,969 91,042 86,749
Special charge - sale of Fab 3 - 26,763 - 26,763
--------- -------- -------- --------
76,972 99,038 153,937 172,564
Operating income 87,181 55,674 173,813 140,693
Other income, net 6,241 14,470 12,784 30,194
--------- -------- -------- --------
Income before income taxes 93,422 70,144 186,597 170,887
Income taxes 16,910 9,465 33,775 29,915
--------- -------- -------- --------
Net income $ 76,512 $ 60,679 $152,822 $140,972
--------- -------- -------- --------
Basic net income per share $ 0.42 $ 0.28 $ 0.83 $ 0.65
--------- -------- -------- --------
Diluted net income per share $ 0.41 $ 0.27 $ 0.81 $ 0.63
--------- -------- -------- --------
Basic shares used in calculation 183,615 216,797 184,139 217,432
========= ======== ======== ========
Diluted shares used in
calculation 187,936 222,004 189,493 222,806
========= ======== ======== ========
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
September 30, March 31,
2008 2008
------------- ----------
(Unaudited)
Cash and short-term investments $1,108,415 $1,324,790
Accounts receivable, net 120,888 138,319
Inventories 126,835 124,483
Other current assets 130,422 130,138
------------- ----------
Total current assets 1,486,560 1,717,730
Property, plant & equipment, net 543,122 522,305
Long-term investments 411,281 194,274
Other assets 76,021 77,998
------------- ----------
Total assets $2,516,984 $2,512,307
============= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other accrued
liabilities $ 117,972 $ 95,640
Deferred income on shipments to distributors 103,507 95,441
------------- ----------
Total current liabilities 221,479 191,081
Convertible debentures 1,149,504 1,150,128
Long-term income tax payable 122,830 112,311
Deferred tax liability 32,941 21,460
Other long-term liabilities 1,062 1,104
Stockholders' equity 989,168 1,036,223
------------- ----------
Total liabilities and stockholders' equity $2,516,984 $2,512,307
============= ==========
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited)
(in thousands except per share amounts and percentages)
RECONCILIATION OF GROSS PROFIT TO NON-GAAP GROSS PROFIT
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Gross profit, as reported $164,153 $154,712 $327,750 $313,257
Share-based compensation
expense 2,053 1,493 3,678 3,083
--------- --------- --------- ---------
Non-GAAP gross profit $166,206 $156,205 $331,428 $316,340
Non-GAAP gross profit
percentage 61.6% 60.4% 61.6% 60.5%
RECONCILIATION OF RESEARCH AND DEVELOPMENT EXPENSES TO NON-GAAP
RESEARCH AND DEVELOPMENT EXPENSES
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Research and development
expenses, as reported $ 31,343 $ 29,306 $ 62,895 $ 59,052
Share-based compensation
expense (2,640) (2,509) (5,075) (5,095)
--------- --------- --------- ---------
Non-GAAP research and
development expenses $ 28,703 $ 26,797 $ 57,820 $ 53,957
Non-GAAP research and
development expenses as a
percentage of net sales 10.6% 10.4% 10.7% 10.3%
RECONCILIATION OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES TO NON-
GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Selling, general and
administrative expenses, as
reported $ 45,629 $ 42,969 $ 91,042 $ 86,749
Share-based compensation
expense (3,800) (3,769) (7,439) (7,626)
--------- --------- --------- ---------
Non-GAAP selling, general and
administrative expenses $ 41,829 $ 39,200 $ 83,603 $ 79,123
Non-GAAP selling, general and
administrative expenses as a
percentage of net sales 15.5% 15.2% 15.5% 15.1%
RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Operating income, as reported $ 87,181 $ 55,674 $173,813 $140,693
Share-based compensation
expense 8,493 7,771 16,192 15,804
Special charge - sale of Fab 3 - 26,763 - 26,763
--------- --------- --------- ---------
Non-GAAP operating income $ 95,674 $ 90,208 $190,005 $183,260
Non-GAAP operating income as a
percentage of net sales 35.5% 34.9% 35.3% 35.1%
RECONCILIATION OF NET INCOME AND DILUTED NET INCOME PER SHARE TO NON-
GAAP NET INCOME AND NON-GAAP DILUTED NET INCOME PER SHARE
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Net income, as reported $ 76,512 $ 60,679 $152,822 $140,972
Share-based compensation
expense, net of tax effect 6,956 6,185 13,262 12,587
Special charge - sale of Fab 3 - 16,459 - 16,459
--------- --------- --------- ---------
Non-GAAP net income $ 83,468 $ 83,323 $166,084 $170,018
========= ========= ========= =========
Non-GAAP net income as a
percentage of net sales 30.9% 32.2% 30.9% 32.5%
Diluted net income per share,
as reported $ 0.41 $ 0.27 $ 0.81 $ 0.63
Share-based compensation
expense, net of tax effect 0.04 0.04 0.07 0.07
Special charge - sale of Fab 3 0.00 0.07 0.00 0.07
--------- --------- --------- ---------
Non-GAAP diluted net income
per share $ 0.45 $ 0.38 $ 0.88 $ 0.77
========= ========= ========= =========
Conference Call and Updates:
Microchip will host a conference call today, October 23, 2008 at 5:00 p.m. (Eastern Time) to discuss this release. This call will be simulcast over the Internet at www.microchip.com. The webcast will be available for replay until October 30, 2008.
A telephonic replay of the conference call will be available at approximately 7:00 p.m. (Eastern Time) on October 23, 2008 and will remain available until 5:00 p.m. (Eastern Time) on October 30, 2008. Interested parties may listen to the replay by dialing 719-457-0820 and entering access code 6704607.
Cautionary Statement:
The statements in this release relating to our dividend commitment to our shareholders, global economic conditions creating significant difficulties in the market, it being extremely challenging to determine demand levels, our endeavor to establish customer order patterns based on market conditions, taking actions relating to expenses and inventory levels, expectation of net sales being down 8% to 16% in the December quarter, GAAP EPS of approximately 31 to 37 cents per diluted share and non-GAAP EPS of approximately 35 to 41 cents per diluted share for the December quarter, potential charges associated with the acquisition of Hampshire Company, our expectation that the Hampshire acquisition will be accretive to non-GAAP earnings, having very strong market momentum with our mTouch product portfolio, extending that mTouch market momentum, our intention to capitalize on Hampshire's leading technology, and the statements containing our GAAP and non-GAAP guidance (as applicable) for the quarter ending December 31, 2008 with respect to net sales, gross margins, operating expenses, tax rate, earnings per diluted share, days of inventory, capital expenditures for fiscal 2009, net cash generation and share count are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause our actual results to differ materially, including, but not limited to: changes in demand or market acceptance of our products and the products of our customers due to difficulties in the market, liquidity and credit concerns or other factors; the mix of inventory we hold and our ability to satisfy short-term orders from our inventory; changes in utilization of our manufacturing capacity; our ability to continue to secure sufficient assembly and testing capacity; competitive developments including pricing pressures; the level of orders that are received and can be shipped in a quarter; the level of sell-through of our products through distribution; changes or fluctuations in customer order patterns and seasonality; foreign currency effects on our business; costs and outcome of any current or future tax audit or any litigation involving intellectual property, customers or other issues; disruptions in our business or the businesses of our customers or suppliers due to natural disasters, terrorist activity, armed conflict, war, worldwide oil prices and supply, public health concerns or disruptions in the transportation system; and general economic, industry or political conditions in the United States or internationally.
For a detailed discussion of these and other risk factors, please refer to Microchip's filings on Forms 10-K and 10-Q. You can obtain copies of Forms 10-K and 10-Q and other relevant documents for free at Microchip's Web site (www.microchip.com) or the SEC's Web site (www.sec.gov) or from commercial document retrieval services.
Stockholders of Microchip are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. Microchip does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after this October 23, 2008 press release, or to reflect the occurrence of unanticipated events.
About Microchip:
Microchip Technology Inc. is a leading provider of microcontroller and analog semiconductors, providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide. Headquartered in Chandler, Arizona, Microchip offers outstanding technical support along with dependable delivery and quality. For more information, visit the Microchip Web site at www.microchip.com.
The Microchip name and logo and PIC are registered trademarks of
Microchip Technology Inc. in the USA and other countries. mTouch and
PICDEM are trademarks of Microchip Technology Inc. Hampshire is a
registered trademark of Hampshire Company in the U.S.A. and other countries. ON Semiconductor is a trademark of Semiconductor Components
Industries, L.L.C. in the U.S.A. and other countries. Atmel is a
registered trademark of Atmel Corporation or its subsidiaries. All other trademarks mentioned herein are the property of their respective
companies.
Source: Microchip Technology Incorporated
Released October 23, 2008