Microchip Technology Announces Record Fiscal Year 2011 Financial Results
-- FOR FISCAL YEAR 2011:
o RECORD NET SALES OF $1.487 BILLION, UP 56.9% SEQUENTIALLY FROM THE
YEAR ENDED MARCH 31, 2010
o ON A GAAP BASIS:
# GROSS MARGIN OF 58.8%; RECORD OPERATING INCOME OF $474.2 MILLION;
RECORD NET INCOME FROM CONTINUING OPERATIONS OF $429.2 MILLION AND
28.9% OF NET SALES; RECORD EPS FROM CONTINUING OPERATIONS OF $2.20
PER DILUTED SHARE.
o ON A NON-GAAP BASIS:
# GROSS MARGINS OF 60.1%; RECORD OPERATING INCOME OF $534.3 MILLION;
RECORD NET INCOME FROM CONTINUING OPERATIONS OF $462.3 MILLION AND
31.1% OF SALES; RECORD EPS FROM CONTINUING OPERATIONS OF $2.39 PER
DILUTED SHARE.
o RECORD FISCAL YEAR REVENUE IN 8-BIT MICROCONTROLLERS, 16-BIT
MICROCONTROLLERS, 32-BIT MICROCONTROLLERS AND ANALOG
-- FOR THE QUARTER ENDING MARCH 31, 2011:
o NET SALES OF $380.0 MILLION, UP 3.3% SEQUENTIALLY AND UP 36.7% FROM
THE QUARTER ENDED MARCH 31, 2010
o ON A GAAP BASIS:
# GROSS MARGIN OF 59.4%; RECORD OPERATING INCOME OF $124.4 MILLION;
RECORD NET INCOME FROM CONTINUING OPERATIONS OF $130.6 MILLION AND
34.4% OF NET SALES; RECORD EPS FROM CONTINUING OPERATIONS OF 65
CENTS PER DILUTED SHARE, WHICH INCLUDES FAVORABLE ONE-TIME TAX
EVENTS. THERE WAS NO PUBLISHED FIRST CALL ESTIMATE FOR GAAP EPS.
o ON A NON-GAAP BASIS:
# GROSS MARGINS OF 60.2%; OPERATING INCOME OF $137.3 MILLION; NET
INCOME FROM CONTINUING OPERATIONS OF $119.0 MILLION AND 31.3% OF
SALES; EPS FROM CONTINUING OPERATIONS OF 59 CENTS PER DILUTED SHARE.
THE FIRST CALL PUBLISHED ESTIMATE WAS 57 CENTS FOR NON-GAAP EPS.
o RECORD QUARTERLY REVENUE IN MICROCONTROLLERS, 16-BIT MICROCONTROLLERS,
32-BIT MICROCONTROLLERS, AND LICENSING
CHANDLER, Ariz.--(BUSINESS WIRE)-- Microchip Technology Incorporated (NASDAQ: MCHP), a leading provider of microcontroller and analog semiconductors, today reported results for the three months and fiscal year ended March 31, 2011 as summarized in the following table:
Three Months Ended March 31, 2011 Year Ended March 31, 2011
(in
millions,
except % of Non- % of % of Non- % of
earnings per GAAP Net GAAP1 Net GAAP Net GAAP1 Net
diluted Sales Sales Sales Sales
share and
percentages)
Net Sales $ 380.0 $ 380.0 $ 1,487.2 $ 1,487.2
Gross Margin $ 225.6 59.4 % $ 228.9 60.2 % $ 874.4 58.8 % $ 894.1 60.1 %
Operating $ 124.4 32.7 % $ 137.3 36.1 % $ 474.2 31.9 % $ 534.3 35.9 %
Income
Other
Expense
including
Gains/Losses $ 4.3 $ 2.6 $ 13.5 $ 6.6
on Equity
Method
Investments
Income Tax
Expense $ (11.0 ) $ 15.7 $ 31.1 $ 65.4
(benefit)
Net Income
from $ 130.6 34.4 % $ 119.0 31.3 % $ 429.2 28.9 % $ 462.3 31.1 %
Continuing
Operations
Earnings per
Diluted 65 59
Share from cents cents $ 2.20 $ 2.39
Continuing
Operations2
Net Income
(Loss) from $ (5.1 ) (1.3 )% $ (5.1 ) (1.3 )% $ (10.2 ) (0.7 )% $ (7.5 ) (0.5 )%
Discontinued
Operations
Loss per
Diluted 3
Share from cents 3cents 5 cents 4 cents
Discontinued
Operations2
1 See the "Use of Non-GAAP Financial Measures" section of this release.
2 Earnings per share have been calculated based on the diluted shares outstanding of Microchip on a consolidated basis.
Consolidated net sales for the fourth quarter of fiscal year 2011 were $380.0 million, up 3.3% sequentially from net sales of $367.8 million in the immediately preceding quarter, and up 36.7% from net sales of $278.0 million in the prior year's fourth quarter. GAAP net income from continuing operations for the fourth quarter of fiscal year 2011 was $130.6 million, or 65 cents per diluted share, up 28.1% from GAAP net income of $101.9 million, or 52 cents per diluted share, in the immediately preceding quarter, and up 72.4% from GAAP net income of $75.7 million, or 40 cents per diluted share, in the prior year's fourth quarter. GAAP net income includes a one-time favorable tax benefit of $24.4 million which includes the settlement of an IRS audit for tax years through March 31, 2008, and other one-time tax events.
Consolidated non-GAAP net income from continuing operations for the fourth quarter of fiscal year 2011 was $119.0 million, or 59 cents per diluted share, up 4.6% from non-GAAP net income of $113.8 million, or 58 cents per diluted share, in the immediately preceding quarter, and up 37.3% from non-GAAP net income of $86.7 million, or 46 cents per diluted share, in the prior year's fourth quarter. For the fourth fiscal quarter of both fiscal 2010 and fiscal 2011, our consolidated non-GAAP results exclude the effect of share-based compensation, expenses related to our acquisition activities (including intangible asset amortization, inventory valuation costs, severance costs and legal and other administrative expenses associated with acquisitions), non-recurring tax events and non-cash interest expense on our convertible debentures. A reconciliation of our non-GAAP and GAAP results is included in this press release.
Consolidated net sales for the fiscal year ended March 31, 2011 were a record $1.487 billion, an increase of 56.9% from net sales of $947.7 million in the prior fiscal year. On a GAAP basis, net income from continuing operations for the fiscal year ended March 31, 2011 was a record $429.2 million, or $2.20 per diluted share, an increase of 97.8% from net income of $217.0 million, or $1.16 per diluted share in the prior fiscal year.
On a non-GAAP basis, consolidated net income from continuing operations for the fiscal year ended March 31, 2011 was a record $462.3 million, or $2.39 per diluted share, an increase of 88.7% from net income of $245.0 million, or $1.32 per diluted share, in the prior fiscal year.
Microchip also announced today that its Board of Directors has declared a quarterly cash dividend on its common stock of 34.6 cents per share. The quarterly dividend is payable on June 2, 2011 to stockholders of record on May 19, 2011. Microchip initiated quarterly cash dividend payments in the third quarter of fiscal 2003.
"Microchip's performance in the March 2011 quarter and in fiscal year 2011 was outstanding. We exceeded the high end of our gross margin and earnings per share guidance, even with the challenging backdrop of the world economy and the Japan crisis," said Steve Sanghi, President and CEO. "The March quarter marked our 82nd consecutive quarter of profitability and is a testimony to the resiliency of our business model."
Mr. Sanghi added, "Fiscal 2011 was a record year for Microchip in sales, profitability and earnings per share. Our 8-bit, 16-bit, 32-bit and analog product lines all achieved new full year revenue records and our licensing business achieved a record quarterly revenue in the March 2011 quarter."
"In the March 2011 quarter our microcontroller business performed at the high end of our expectations, with revenue up 4% on a sequential basis, and up 17% from the year-ago quarter," said Ganesh Moorthy, Chief Operating Officer. "Our 16-bit microcontroller business was up 24% sequentially and was up 86% from the year-ago quarter. Our 32-bit microcontroller business was up 35% sequentially and was up 226% from the year-ago quarter. Our analog business was up 3.5% sequentially, and was up 45% from the year-ago quarter."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "Inventory on Microchip's balance sheet at March 31, 2011 was $180.8 million, representing 107 days of inventory, which was flat in days to the prior quarter level. Our internal target for inventory days is 115, and we plan to continue to build inventory towards that target to maintain short lead times and support our customer's delivery requirements. Inventory days at our distributors increased to 40 days, compared to 39 days at the end of the prior quarter."
Mr. Bjornholt continued, "Microchip's net cash and investment balance grew by $135.3 million in the March quarter. We ended fiscal 2011 with $1.71 billion of cash and investments and we expect continued strong cash generation in the June 2011 quarter."
Mr. Sanghi concluded, "We continue to evaluate the effects that the tragedy in Japan may have on our business. We have a strong backlog position for the June quarter, but there is still some uncertainty regarding the impact from the Japan crisis on the world economy. Taking these factors into consideration, we expect net sales in the June 2011 quarter to be up sequentially between 1% and 6%."
Microchip's Recent Highlights:
-- Microchip was named to the 2011 Forbes Global 2000, which is Forbes
Magazine's list of the world's largest companies based on a composite
ranking of sales, profits, assets and market value.
-- Microchip was awarded EDN Magazine's 2010 Innovation Award in the "Human
Machine Interface Technology" category, for our mTouch(TM) Metal Over
Cap technology at the Embedded Systems Conference in San Jose, CA.
Technical editors at EDN nominate the most unique, state-of-the-art
electronics products, and collect readership votes via an online
balloting process. EDN uses a combination of audience votes, balloting
by the EDN Editorial Advisory Board, and voting by EDN's editorial staff
to determine the ultimate winner in each category.
-- The Company continued to expand its 32-bit PIC32 microcontroller
portfolio with cost-effective memory options, while maintaining
Ethernet, CAN and USB connectivity and best-in-class performance.
Microchip's six new 32-bit microcontrollers also feature lower power
consumption and higher Flash memory endurance.
-- During the March quarter, Microchip shipped 44,657 development systems,
demonstrating the continued strong interest in Microchip's products. The
total cumulative number of development systems shipped now stands at
1,113,199.
-- Microchip acquired Silicon Storage Technology, Inc. (SST) on April 8,
2010, and Microchip's March 31, 2011 financial results include the
finalization of all purchase accounting related adjustments associated
with the acquisition. Microchip's fiscal 2011 financial results include
the results of SST and the fiscal 2010 financial results do not.
-- In the 16-bit arena, Microchip added eXtreme Low Power PIC(R)
microcontrollers that feature 5V supply voltage, more memory in low pin
counts, and mTouch(TM) capacitive sensing that works in Sleep.
-- In order to provide developers with quick and easy methods for adding
connectivity to their embedded designs, Microchip released three new
tools for its 16- and 32-bit microcontrollers. Microchip's Bluetooth(R)
kit provides an easy and cost-effective method for evaluating and adding
Bluetooth connectivity to embedded designs. The Company's new
consumer-band power-line soft-modem development kit features a 7.2 kbps
software modem that enables low-cost communication and control in
consumer and industrial applications. In the area of wireless
Machine-to-Machine (M2M) communication, Microchip added a daughter board
with GPS and GSM modules that makes it easy to create low-cost M2M
applications with location-awareness capabilities.
-- Microchip's 8-bit microcontroller expansion also continued at a rapid
pace, with three new families announced during the March quarter. The
first was a cost-effective addition to Microchip's CAN microcontroller
line, featuring 5.5V operation, eXtreme Low Power consumption and 16
MIPS performance, while enabling capacitive-touch-sensing user
interfaces. The second was 20-pin family, featuring low cost, low power
consumption and self-write Flash program memory. The third was a
low-cost family with eXtreme Low Power consumption and integrated LCD
control.
-- Microchip made two additions to its broad analog and interface
portfolio. Its non-volatile Digital-to-Analog Converter (DAC) family was
expanded with low-power, single-channel DACs that feature 8-, 10- and
12-bit voltage options and integrated non-volatile memory in small, 2 mm
x 2 mm packages. New low-side devices were added to the Company's MOSFET
Driver family, with peak output currents from 2A to 4.5A and an Enable
Input Pin for shutdown, in popular packages. Additionally, Microchip's
smoke-detector ICs, which enable 10-year operating life with a single
Lithium battery, received UL certification.
-- Microchip continued to expand its newest product category--Real-Time
Clock/Calendars--with a low-cost device that features battery
switchover, digital trimming and SRAM memory.
First Quarter Fiscal Year 2012 Outlook:
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Microchip Consolidated Guidance
GAAP Non-GAAP Non-GAAP1
Adjustments1
Results from
Continuing
Operations:
Net Sales $383.8 to $402.8 $383.8 to $402.8
million million
Gross Margin3 about 59.3% $3.8 to $4.0 million about 60.3%
Operating Expenses3 26.25% to 26.5% $8.6 to $9.1 million 24.0% to 24.25%
Other Income ($4.5) million $1.8 million ($2.7) million
(Expense)
Tax Rate about 12.25% $1.7 to $1.8 million about 12.25%
Net Income $106.5 to $112.9 $12.5 to $13.1 $119.0 to $125.9
million million million
Diluted Common
Shares 205.2 million 0.7 million shares 204.5 million
Outstanding2
Earnings per
Diluted Share 52 to 55 cents 6 to 7 cents 58 to 62 cents
From Continuing
Operations
1 See the "Use of Non-GAAP Financial Measures" section of this release.
2 Earnings per share have been calculated based on the diluted shares outstanding of Microchip on a consolidated basis.
-- The diluted common shares outstanding presented in the guidance table
above assumes an average Microchip stock price in the June 2011 quarter
of $40.00 per share. The estimated negative impact on our earnings per
diluted share calculation resulting from the difference in our assumed
average stock price for the June 2011 quarter as compared to the March
2011 quarter is about one cent, when combining the additional dilutive
effect from our convertible debt, and the dilutive effect of outstanding
equity awards.
-- Microchip's inventory at June 30, 2011 is expected to be 112 to 118 days
as we continue to replenish our internal inventories to support our
customers' needs. The actual inventory level will depend on the
inventory that our distributors decide to hold to support their
customers, overall demand for our products and our production levels.
-- Capital expenditures for the quarter ending June 30, 2011 are expected
to be approximately $37 million. Capital expenditures for all of fiscal
year 2012 are anticipated to be approximately $125 million. We are
continuing to take actions to invest in the equipment needed to support
the expected net sales growth of our new products and technologies.
-- We expect net cash generation during the June quarter of approximately
$115 million to $125 million prior to the dividend payment. The amount
of expected net cash generation is also 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 March 31, 2011, approximately 2.5
million shares remained available for purchase under this program.
Future purchases will depend upon market conditions, interest rates and
corporate considerations.
1 Use of Non-GAAP Financial Measures: Our Non-GAAP adjustments, where applicable, include the effect of share-based compensation, any gain or loss on trading securities, expenses related to our acquisition activities (including intangible asset amortization, purchased inventory costs, severance costs and legal and other general and administrative expenses associated with acquisitions), patent portfolio licenses, non-recurring tax events and non-cash interest expense on our convertible debentures and the related income tax implications of these items.
We are required to estimate the cost of certain forms of share-based compensation, including employee stock options, restricted stock units and our employee stock purchase 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 the price of our stock at the date of grant. The price of our stock is affected by market forces that are difficult to predict and are not within the control of management. The value of our trading securities varies in amount from period to period and is affected by fluctuations in the market prices of such securities that we cannot predict and are not within the control of management. The non-GAAP adjustments related to the impact of our acquisitions and a portion of our interest expense related to our convertible debentures are non-cash expenses related to such transactions. Our acquisitions of patent portfolio licenses and tax events related to IRS settlements, changes in tax regulations and the reinstatement of the R&D tax credit are non-recurring events in our business. Accordingly, management excludes all of these items from its internal operating forecasts and models.
We are using non-GAAP gross profit, non-GAAP gross profit percentage, non-GAAP operating expenses in dollars and as a percentage of sales including non-GAAP research and development expenses and non-GAAP selling, general and administrative expenses, non-GAAP operating income, non-GAAP other expense, net including gains (losses) on equity method investments, non-GAAP income tax/tax rate, non-GAAP net income, and non-GAAP diluted earnings per share which exclude the items noted in the immediately preceding paragraph, as applicable, 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 charges that many investors feel may obscure our underlying operating results. Management uses these non-GAAP measures to manage and assess the profitability of its business. Specifically, we do not consider such items when developing and monitoring our budgets and spending. As described above, the economic substance behind our decision to exclude such items relates either to these charges being non-cash in nature or to the one-time nature of the events or, in the case of our trading securities, because such item is difficult to predict and not within the control of management. 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 amounts 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.
2 Diluted Common Shares Outstanding can vary for, among other things, the trading price of our common stock, the actual exercise of options or vesting of restricted stock units, the potential for incremental dilutive shares from our convertible debentures (additional information regarding our share count is available in the investor relations section of our website under the heading "Supplemental Financial Information"), and the repurchase or the issuance of stock. The diluted common shares outstanding presented in the guidance table above assumes an average Microchip stock price in the June 2011 quarter of $40.00 per share (however, we make no prediction as to what our actual share price will be for such period or any other period and we cannot estimate what our stock option exercise activity will be during the quarter). The estimated negative impact on our earnings per diluted share calculation resulting from the difference in our assumed average stock price for the June 2011 quarter as compared to the March 2011 quarter is about one cent, when combining the additional dilutive effect from our convertible debt, and the dilutive effect of outstanding equity awards.
3 Generally, gross margin fluctuates over time, driven primarily by the mix of microcontrollers, analog products and memory products sold and licensing revenue; variances in manufacturing yields; fixed cost absorption; wafer fab loading levels; inventory reserves; pricing pressures in our non-proprietary product lines; and competitive and economic conditions. Operating expenses fluctuate over time, primarily due to net sales and profit levels.
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
March 31, March 31,
2011 2010 2011 2010
Net sales $ 379,985 $ 278,020 $ 1,487,205 $ 947,729
Cost of sales 154,394 109,549 612,769 413,487
Gross profit 225,591 168,471 874,436 534,242
Operating expenses:
Research and development 44,159 33,287 170,607 120,823
Selling, general and 56,885 46,697 227,781 167,222
administrative
Special charges 186 - 1,865 1,238
101,230 79,984 400,253 289,283
Operating income 124,361 88,487 474,183 244,959
(Losses) gains on equity (28 ) - 157 -
method investments
Other expense, net (4,304 ) (4,490 ) (13,642 ) (7,146 )
Income from continuing
operations before income 120,029 83,997 460,698 237,813
taxes
Income tax (benefit) (10,583 ) 8,248 31,531 20,808
provision
Net income from 130,612 75,749 429,167 217,005
continuing operations
Discontinued operations:
Loss from discontinued
operations before income (5,754 ) - (11,126 ) -
taxes
Income tax benefit (670 ) - (909 ) -
Net loss from (5,084 ) - (10,217 ) -
discontinued operations
Net income $ 125,528 $ 75,749 $ 418,950 $ 217,005
Basic net income per
common share continuing $ 0.69 $ 0.41 $ 2.29 $ 1.18
operations
Basic net loss per
common share (0.03 ) - (0.05 ) -
discontinued operations
Basic net income per $ 0.66 $ 0.41 $ 2.24 $ 1.18
common share
Diluted net income per
common share continuing $ 0.65 $ 0.40 $ 2.20 $ 1.16
operations
Diluted net loss per
common share (0.03 ) - (0.05 ) -
discontinued operations
Diluted net income per $ 0.62 $ 0.40 $ 2.15 $ 1.16
common share
Basic common shares 188,933 184,665 187,066 183,642
outstanding
Diluted common shares 201,829 189,048 194,715 187,339
outstanding
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
March 31, March 31,
2011 2010
(Unaudited)
Cash and short-term investments $ 1,243,496 $ 1,214,323
Accounts receivable, net 181,202 137,806
Inventories 180,800 116,579
Other current assets 188,169 142,261
Total current assets 1,793,667 1,610,969
Property, plant & equipment, net 540,513 493,039
Long-term investments 464,838 317,215
Other assets 187,724 95,090
Total assets $ 2,986,742 $ 2,516,313
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other current liabilities $ 200,272 $ 104,449
Deferred income on shipments to distributors 140,044 98,941
Total current liabilities 340,316 203,390
Convertible debentures 347,334 340,672
Long-term income tax payable 58,125 57,140
Deferred tax liability 418,211 376,713
Other long-term liabilities 10,318 5,018
Stockholders' equity 1,812,438 1,533,380
Total liabilities and stockholders' equity $ 2,986,742 $ 2,516,313
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands except per share amounts and percentages)
(Unaudited)
RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT
Three Months Ended Twelve Months Ended
March 31, March 31,
2011 2010 2011 2010
Gross profit, as reported $ 225,591 $ 168,471 $ 874,436 $ 534,242
Share-based compensation 1,409 2,209 6,825 7,054
expense
Acquisition-related
acquired inventory
valuation costs and 1,861 669 12,887 2,537
intangible asset
amortization
Non-GAAP gross profit $ 228,861 $ 171,349 $ 894,148 $ 543,833
Non-GAAP gross profit 60.2 % 61.6 % 60.1 % 57.4 %
percentage
RECONCILIATION OF GAAP RESEARCH AND DEVELOPMENT EXPENSES TO NON-GAAP RESEARCH
AND DEVELOPMENT EXPENSES
Three Months Ended Twelve Months Ended
March 31, March 31,
2011 2010 2011 2010
Research and development $ 44,159 $ 33,287 $ 170,607 $ 120,823
expenses, as reported
Share-based compensation (3,358 ) (2,989 ) (12,874 ) (12,194 )
expense
Non-GAAP research and $ 40,801 $ 30,298 $ 157,733 $ 108,629
development expenses
Non-GAAP research and
development expenses as a 10.7 % 10.9 % 10.6 % 11.5 %
percentage of net sales
RECONCILIATION OF GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES TO NON-GAAP
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Three Months Ended Twelve Months Ended
March 31, March 31,
2011 2010 2011 2010
Selling, general and
administrative expenses, $ 56,885 $ 46,697 $ 227,781 $ 167,222
as reported
Share-based compensation (4,260 ) (4,245 ) (17,113 ) (17,530 )
expense
Acquisition-related
intangible asset (1,861 ) (1,006 ) (8,593 ) (1,866 )
amortization and other
costs
Non-GAAP selling, general
and administrative $ 50,764 $ 41,446 $ 202,075 $ 147,826
expenses
Non-GAAP selling, general
and administrative 13.4 % 14.9 % 13.6 % 15.6 %
expenses as a percentage
of net sales
RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP OPERATING INCOME
Three Months Ended Twelve Months Ended
March 31, March 31,
2011 2010 2011 2010
Operating income, as $ 124,361 $ 88,487 $ 474,183 $ 244,959
reported
Share-based compensation 9,027 9,443 36,812 36,778
expense
Acquisition-related
acquired inventory
valuation costs, 3,722 1,675 21,480 4,403
intangible asset
amortization and other
costs
Special charge - SST 186 - 1,865 -
severance costs
Special charge - patent - - - 1,238
license
Non-GAAP operating income $ 137,296 $ 99,605 $ 534,340 $ 287,378
Non-GAAP operating income
as a percentage 36.1 % 35.8 % 35.9 % 30.3 %
of net sales
RECONCILIATION OF GAAP OTHER EXPENSE, NET TO NON-GAAP OTHER EXPENSE, NET
Three Months Ended Twelve Months Ended
March 31, March 31,
2011 2010 2011 2010
Other expense, net, as $ (4,304 ) $ (4,490 ) $ (13,642 ) $ (7,146 )
reported
Convertible debt non-cash 1,746 1,596 6,846 6,258
interest expense
Gain on trading securities - - - (7,518 )
Non-GAAP other expense, $ (2,558 ) $ (2,894 ) $ (6,796 ) $ (8,406 )
net
Non-GAAP other expense,
net, as a percentage -0.7 % -1.0 % -0.5 % -0.9 %
of net sales
RECONCILIATION OF GAAP INCOME TAX (BENEFIT) PROVISION FROM CONTINUING OPERATIONS
TO NON-GAAP INCOME TAX PROVISION FROM CONTINUING OPERATIONS
Three Months Ended Twelve Months Ended
March 31, March 31,
2011 2010 2011 2010
Income tax (benefit) $ (10,583 ) $ 8,248 $ 31,531 $ 20,808
provision, as reported
Income tax rate, as -8.8 % 9.8 % 6.9 % 8.7 %
reported
Share-based compensation 1,051 978 4,493 4,563
expense
Acquisition-related
acquired inventory
valuation costs, 151 173 714 530
intangible asset
amortization and other
costs
Special charge - SST 22 - 159 -
severance costs
Convertible debt non-cash 655 614 2,567 2,409
interest expense
Net tax benefit of IRS
settlement, R&D tax credit 24,395 - 25,929 8,452
reinstatement, and other
tax matters
Special charge - patent - - - 124
license
Gain on trading securities - - - (2,894 )
Non-GAAP income tax $ 15,691 $ 10,013 $ 65,393 $ 33,992
provision
Non-GAAP income tax rate 11.6 % 10.4 % 12.4 % 12.2 %
RECONCILIATION OF GAAP NET INCOME AND DILUTED NET INCOME PER SHARE TO NON-GAAP NET INCOME AND NON-GAAP DILUTED NET INCOME PER
SHARE
Three Twelve
Three Months Ended Months Twelve Months Ended Months
Ended Ended
March 31, March 31, March 31, March 31,
2011 2010 2011 2010
Consolidated Continuing Discontinued Consolidated Continuing Discontinued
Operations Operations Operations Operations Operations Operations
Net income (loss), $ 125,528 $ 130,612 $ (5,084 ) $ 75,749 $ 418,950 $ 429,167 $ (10,217 ) $ 217,005
as reported
Share-based
compensation 7,976 7,976 - 8,465 32,319 32,319 - 32,215
expense, net of tax
effect
Acquisition-related
acquired inventory
valuation costs,
intangible asset 3,571 3,571 - 1,502 23,454 20,766 2,688 3,873
amortization and
other costs, net of
tax effect
Special charge -
SST severance 164 164 - - 1,706 1,706 - -
costs, net of tax
effect
Net tax benefit of
IRS settlement, R&D
tax credit (24,395 ) (24,395 ) - - (25,929 ) (25,929 ) - (8,452 )
reinstatement, and
other tax matters
Convertible debt
non-cash interest 1,091 1,091 - 982 4,279 4,279 - 3,849
expense, net of tax
effect
Special charge -
patent license, net - - - - - - - 1,114
of tax effect
Gain on trading
securities, net of - - - - - - - (4,624 )
tax effect
Non-GAAP net income $ 113,935 $ 119,019 $ (5,084 ) $ 86,698 $ 454,779 $ 462,308 $ (7,529 ) $ 244,980
(loss)
Non-GAAP net income
(loss) as a 31.3 % 31.2 % 31.1 % 25.8 %
percentage of net
sales
Diluted net income
(loss) per share, $ 0.62 $ 0.65 $ (0.03 ) $ 0.40 $ 2.15 $ 2.20 $ (0.05 ) $ 1.16
as reported
Non-GAAP diluted
net income (loss) $ 0.57 $ 0.59 $ (0.02 ) $ 0.46 $ 2.35 $ 2.39 $ (0.04 ) $ 1.32
per share
Microchip will host a conference call today, May 5, 2011 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 May 12, 2011.
A telephonic replay of the conference call will be available at approximately 7:00 p.m. (Eastern Time) May 5, 2011 and will remain available until 5:00 p.m. (Eastern Time) on May 12, 2011. Interested parties may listen to the replay by dialing 719-457-0820 and entering access code 8085360.
Cautionary Statement:
The statements in this release relating to the resiliency of our business model, our internal target for 115 inventory days, our plan to build our inventory levels towards our target to maintain short lead times and support our customer's delivery requirements, the impact that the tragedy in Japan may have on our business and the world economy, expected continued strong cash generation in the June 2010 quarter, expecting net sales to be up between 1% and 6% sequentially, continued strong interest in our products, our assumed average stock price in the June 2011 quarter of $40.00, our first quarter fiscal 2012 guidance including GAAP and non-GAAP data as applicable for net sales, gross margin, operating expenses, other income (expense), tax rate, net income from continuing operations, diluted common shares outstanding, earnings per diluted share from continuing operations, inventory levels, capital expenditures for the June quarter and for fiscal 2011, taking actions to invest in the equipment needed to support our expected growth, net cash generation and the estimated negative impact on our earnings per share calculation from the difference in our assumed average stock price 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: the continued strength of the economic recovery or any unexpected fluctuations or weakness in the U.S. and global economies, changes in demand or market acceptance of our products (including our licensed technology) and the products of our customers; the mix of inventory we hold and our ability to satisfy short-term orders from our inventory; changes in utilization of our manufacturing capacity and our ability to effectively ramp our production levels; 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; the impact of the events in Japan on the economy and our business; foreign currency effects on our business; the impact of any significant acquisitions that we make; costs and outcome of any current or future tax audit or any litigation involving intellectual property, customers or other issues; the risk that our customers may fail to continue to accept the SST product offerings; our actual average stock price in the June 2011 quarter and the impact such price will have on our share count; 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 website (www.microchip.com) or the SEC's website (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 May 5, 2011 press release, or to reflect the occurrence of unanticipated events.
About Microchip:
Microchip Technology Incorporated is a leading provider of microcontroller, analog and Flash-IP solutions, 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 website at www.microchip.com.
Note: The Microchip name and logo, and PIC are registered trademarks of Microchip Technology Inc. in the USA and other countries. mTouch is a trademark of Microchip Technology Inc. in the USA and other countries. All other trademarks mentioned herein are the property of their respective companies.
Source: Microchip Technology Incorporated
Released May 5, 2011