Microchip Technology Announces Third Quarter Fiscal 2011 Financial Results
-- MICROCHIP CONSOLIDATED NET SALES OF $367.8 MILLION
-- ON A GAAP BASIS:
o GROSS MARGIN OF 58.8%; OPERATING INCOME OF 31.9%; NET INCOME FROM
CONTINUING OPERATIONS OF $101.9 MILLION AND 27.7% OF SALES; EPS FROM
CONTINUING OPERATIONS OF 52 CENTS PER DILUTED SHARE. THERE WAS NO
PUBLISHED FIRST CALL ESTIMATE FOR GAAP EPS.
-- ON A NON-GAAP BASIS:
o GROSS MARGIN OF 59.8%; OPERATING INCOME OF 35.6%; NET INCOME FROM
CONTINUING OPERATIONS OF $113.8 MILLION AND 30.9% OF SALES; EPS FROM
CONTINUING OPERATIONS OF 58 CENTS PER DILUTED SHARE. THE FIRST CALL
PUBLISHED ESTIMATE WAS 57 CENTS FOR NON-GAAP EPS.
-- RECORD NET SALES FOR TECHNOLOGY LICENSING DIVISION OF $19.1 MILLION
-- RECORD NET SALES OF 32-BIT MICROCONTROLLERS
-- DEVELOPMENT TOOL SHIPMENTS OF 40,303
CHANDLER, Ariz.--(BUSINESS WIRE)-- Microchip Technology Incorporated (NASDAQ: MCHP), a leading provider of microcontroller, analog and Flash-IP solutions, today reported results for the three months ended December 31, 2010 as summarized in the following table:
(in millions, except earnings per Microchip Consolidated Results1
diluted share and percentages) Three Months Ended December 31, 2010
% of Net Non- % of Net
GAAP Sales GAAP1 Sales
Net Sales $367.8 $367.8
Gross Margin $216.4 58.8% $219.9 59.8%
Operating Income $117.5 31.9% $131.1 35.6%
Other Expense including Gains on $3.1 $1.3
Equity Method Investments2
Income Tax Expense $12.5 $16.0
Net Income from Continuing $101.9 27.7% $113.8 30.9%
Operations
Earnings per Diluted Share from 52 cents 58 cents
Continuing Operations3
Net Income (Loss) from Discontinued ($1.2) (0.3%) ($1.2) (0.3%)
Operations
Loss per Diluted Share from (1) cent (1) cent
Discontinued Operations3
1 See the "Use of Non-GAAP Financial Measures" section of this release. 2 Gains on equity method investments for the three months ended December 31, 2010 were $280,000 on both a GAAP and non-GAAP basis. 3 Earnings per share have been calculated based on the diluted shares outstanding of Microchip on a consolidated basis.
Consolidated net sales for the third quarter of fiscal 2011 were $367.8 million, down 3.8% sequentially from net sales of $382.3 million in the immediately preceding quarter, and up 47.1% from net sales of $250.1 million in the prior year's third quarter. GAAP net income from continuing operations for the third quarter of fiscal 2011 was $101.9 million, or 52 cents per diluted share, down 2.7% from GAAP net income from continuing operations of $104.7 million, or 55 cents per diluted share, in the immediately preceding quarter, and up 46.9% from GAAP net income of $69.4 million, or 37 cents per diluted share, in the prior year's third quarter. Due to the appreciation in the price of our common stock in the December 2010 quarter, the dilutive share count reflects the effect of our convertible debentures, with the effect of an additional 4.4 million shares sequentially, which negatively impacted our GAAP diluted earnings per share by about 1.2 cents.
Consolidated non-GAAP net income from continuing operations for the third quarter of fiscal 2011 was $113.8 million, or 58 cents per diluted share, down 4.9% from consolidated non-GAAP net income from continuing operations of $119.6 million, or 63 cents per diluted share, in the immediately preceding quarter, and up 62.2% from consolidated non-GAAP net income of $70.1 million, or 38 cents per diluted share, in the prior year's third quarter. Due to the appreciation in the price of our common stock in the December 2010 quarter, the dilutive share count reflects the effect of our convertible debentures, with the effect of an additional 4.4 million shares sequentially, which negatively impacted our non-GAAP diluted earnings per share by about 1.3 cents. For the third 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), the tax benefit from tax audit settlements and tax law changes and non-cash interest expense on our convertible debentures. A reconciliation of our non-GAAP and GAAP results is included in this press release.
Microchip announced on November 4, 2010 that its Board of Directors accelerated the March 2011 quarterly cash dividend payment on its common stock of 34.5 cents per share into the December 31, 2010 quarter. Microchip's next dividend payment will be in June of 2011. Microchip initiated quarterly cash dividend payments in the third quarter of fiscal 2003.
"Microchip's performance in the December 2010 quarter exceeded our expectations. Net sales, gross margins, operating income and earnings per share were better than the mid-point of our guidance provided on November 30, 2010," said Steve Sanghi, President and CEO. "The gross margin upside was driven by ongoing cost reductions in our manufacturing processes, a favorable product mix and continued improvements in the product lines we acquired from SST. Operating expenses continue to be well managed and came in at the mid-point of our guidance at 24.1% of sales on a non-GAAP basis in the December quarter."
Mr. Sanghi added, "The SST acquisition has done exceptionally well for Microchip. The technology licensing business produced an all-time record high in revenue of $19.1 million, up 10.3% sequentially. Additionally, in the December quarter we continued to make outstanding progress in improving the operating models for the SuperFlash Memory division and the RF division through our hard work in partnering with customers, targeting markets, focusing on pricing, improving manufacturing costs and incorporating these divisions into Microchip's business structure. We believe there are significant improvements ahead of us for the gross margins of these divisions and we are well on our way to achieving 32 cents of non-GAAP earnings per share from the SST acquisition in fiscal 2011 and 40 cents in fiscal 2012."
"Our microcontroller business performed better than we expected in the December quarter with net sales only down 2.2% on a sequential basis and up 24% from the year ago quarter. We shipped our 9 billionth cumulative microcontroller in December and finished calendar 2010 shipping a record 1.3 billion microcontrollers. For calendar 2010 our microcontroller revenue was up 42.4% from the calendar 2009 levels," said Ganesh Moorthy, Chief Operating Officer. "Our 32-bit microcontroller line, which took a pause in the September quarter, had a strong quarter of revenue growth and was up 45% sequentially, achieving a new record. For calendar 2010, net sales for our 16-bit microcontroller business was up 113.6% and our 32-bit microcontroller business was up 260%. We believe we gained significant market share in all three microcontroller segments in calendar 2010."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "Microchip's inventory position improved significantly in the December quarter. Inventory on Microchip's balance sheet increased to $177.7 million, representing 107 days of inventory and a sequential increase of 10 days. We continue to make progress in moving towards our internal target of 115 days of inventory which will allow us to improve our lead times to levels in line with our historical performance and appropriately support our customers. Inventory days in the distribution channel grew by three days."
Mr. Bjornholt continued, "Microchip's net cash generation in the December quarter was $133.5 million prior to making the two dividend payments, which totaled $129.4 million. We ended the December 2010 quarter with $1.57 billion of cash and investments and we expect our cash generation in the March 2011 quarter to continue to be strong."
Mr. Sanghi added, "Looking back at calendar year 2010, Microchip had one of its best growth years ever with over 64% revenue growth, compared to calendar year 2009. As we enter calendar 2011, we believe we are exceptionally well-positioned for continued growth in all of our product lines. The March quarter will be seasonally impacted by the Lunar New Year holidays in Asia. Taking all of these factors into consideration we expect net sales to be flat to up 3% sequentially."
Microchip's Recent Highlights:
-- Microchip continues to make it easy for designers to tap into the fast
growing Smart Energy market with leading-edge energy efficiency
applications. It recently debuted the world's first RF Energy Harvesting
Kit to enable battery-free, perpetually powered wireless designs. The
kit allows designers to create applications that are reliably and
perpetually powered by radio waves, using Microchip's eXtreme Low Power
(XLP) PIC(R) Microcontrollers (MCUs) and wireless products--thus
eliminating the need for a battery.
-- The Company's first stand-alone Real-Time Clock/Calendar (RTCC) family
was announced, with vastly more features at a lower price point than any
other RTCC in its class. By integrating such a wide range of features
within a single device at a price of $0.70 each in 10,000-unit
quantities, Microchip's RTCC family reduces component counts and lowers
costs for a variety of applications.
-- Microchip licensed the MIPS32(R) M14K(TM) cores for its next-generation
32-bit PIC32 microcontrollers. The M14K cores deliver smaller code size,
increased performance and lower cost while enabling 100% code
compatibility with all PIC32 microcontrollers.
-- During the quarter, Microchip shipped 40,303 development systems,
demonstrating the continued strong interest in Microchip's products. The
total cumulative number of development systems shipped now stands at
1,068,542.
-- The expansion of Microchip's large and rapidly growing low-power analog
portfolio continues, with new 16-volt operational amplifiers that extend
battery life, enable improved noise performance and offer low current
consumption in space-saving packages. Additionally, Microchip's new
Smoke-Detector IC is the world's first to offer low-voltage operation
with programmable calibration and operating modes, which reduces cost
and component count while simplifying designs.
-- Microchip continues to be recognized for both business and product
excellence. In the business arena, Microchip was selected as one of the
Phoenix Business Journal's 2010 "Best Places to Work," for the fourth
straight year. Additionally, Gulf, a subsidiary of United Technology
Fire & Safety and a producer of industrial smoke detectors in China,
named Microchip one of its "Best Suppliers" for 2010--the only
semiconductor supplier to be recognized.
-- In the area of product excellence Microchip received two awards from EDN
China for its PIC32 MCUs and mTouch(TM) Projected Capacitive
Touch-Screen Sensing Technology; two awards from ECN Magazine for its
eXtreme Low Power MCUs with the world's lowest active-power and
sleep-power consumption; a "Green" award from Embedded Computing Design
Magazine for its dsPIC33 DC/DC Reference Designs; and Microchip's
Digital Potentiometers were named to EDN Magazine's 2010 "Hot 100" list
of the most significant new electronic products, in the "Analog"
category.
Fourth Quarter Fiscal Year 2011 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 $367.8 to $378.9 $367.8 to $378.9
million million
Gross Margin2 58.9% to 59.1% $3.7 to $3.8 million 59.9% to 60.1%
Operating Expenses2 26.5% to 26.75% $9.2 to $9.5 million 24.0% to 24.25%
Other Income ($4.65) million $1.75 million ($2.9) million
(Expense)
Tax Rate 12% to 12.5% $1.8 to $1.9 million 12% to 12.5%
Net Income from
Continuing $99.4 to $104.6 $12.8 to $13.2 $112.2 to $117.8
Operations million million million
Diluted Common
Shares 202.3 million 0.9 million shares 201.4 million
Outstanding3
Earnings per
Diluted Share 49 to 52 cents 6 to 7 cents 56 to 58 cents
From Continuing
Operations
-- Microchip's inventory at March 31, 2011 is expected to be about 115 days
as we continue to replenish our internal inventories to better 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 March 31, 2011 are expected
to be approximately $30 million. Capital expenditures for all of fiscal
year 2011 are anticipated to be approximately $130 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 March quarter of approximately
$125 million to $135 million. 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 December 31, 2010, 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 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.
3 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 or the sale of treasury shares. The diluted common shares outstanding presented in the guidance table above assumes an average Microchip stock price in the March 2011 quarter of $38.00 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 negative impact on the earnings per diluted share calculation from the difference in the assumed average stock price for the March 2011 quarter compared to the December 2010 quarter is about 1.7 to 1.8 cents, when combining the additional dilutive effect from our convertible debt, and the dilutive effect of outstanding equity awards.
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
2010 2009 2010 2009
Net sales $ 367,824 $ 250,099 $ 1,107,220 $ 669,709
Cost of sales 151,427 104,103 458,375 303,938
Gross profit 216,397 145,996 648,845 365,771
Operating expenses:
Research and development 42,198 30,332 126,448 87,536
Selling, general and 56,100 43,096 170,896 120,525
administrative
Special charges 646 - 1,679 1,238
98,944 73,428 299,023 209,299
Operating income 117,453 72,568 349,822 156,472
Gains on equity method 280 - 185 -
investments
Other expense, net (3,342 ) (2,689 ) (9,338 ) (2,656 )
Income from continuing
operations before income 114,391 69,879 340,669 153,816
taxes
Income tax provision 12,461 476 42,114 12,560
Net income from 101,930 69,403 298,555 141,256
continuing operations
Discontinued operations:
Loss from discontinued
operations before income (1,317 ) - (5,372 ) -
taxes
Income tax benefit (163 ) - (239 ) -
Net loss from (1,154 ) - (5,133 ) -
discontinued operations
Net income $ 100,776 $ 69,403 $ 293,422 $ 141,256
Basic net income per
common share continuing $ 0.54 $ 0.38 $ 1.60 $ 0.77
operations
Basic net loss per
common share (0.01 ) - (0.03 ) -
discontinued operations
Basic net income per $ 0.54 $ 0.38 $ 1.57 $ 0.77
common share
Diluted net income per
common share continuing $ 0.52 $ 0.37 $ 1.55 $ 0.76
operations
Diluted net loss per
common share (0.01 ) - (0.03 ) -
discontinued operations
Diluted net income per $ 0.51 $ 0.37 $ 1.53 $ 0.76
common share
Basic common shares 187,488 183,856 186,444 183,301
outstanding
Diluted common shares 196,255 187,861 192,344 186,770
outstanding
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
December 31, March 31,
2010 2010
(Unaudited)
Cash and short-term investments $ 1,191,184 $ 1,214,323
Accounts receivable, net 187,267 137,806
Inventories 177,705 116,579
Assets held for sale 1,109 -
Other current assets 181,179 142,261
Total current assets 1,738,444 1,610,969
Property, plant & equipment, net 528,215 493,039
Long-term investments 381,832 317,215
Other assets 180,235 95,090
Total assets $ 2,828,726 $ 2,516,313
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other current liabilities $ 157,250 $ 104,449
Deferred income on shipments to distributors 142,685 98,941
Total current liabilities 299,935 203,390
Convertible debentures 345,581 340,672
Long-term income tax payable 106,201 57,140
Deferred tax liability 415,807 376,713
Other long-term liabilities 11,257 5,018
Stockholders' equity 1,649,945 1,533,380
Total liabilities and stockholders' equity $ 2,828,726 $ 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 Nine Months Ended
December 31, December 31,
2010 2009 2010 2009
Gross profit, as reported $ 216,397 $ 145,996 $ 648,845 $ 365,771
Share-based compensation 1,708 1,266 5,416 4,845
expense
Acquisition-related
acquired inventory
valuation costs and 1,747 321 11,026 1,868
intangible asset
amortization
Non-GAAP gross profit $ 219,852 $ 147,583 $ 665,287 $ 372,484
Non-GAAP gross profit 59.8 % 59.0 % 60.1 % 55.6 %
percentage
RECONCILIATION OF GAAP RESEARCH AND DEVELOPMENT EXPENSES TO NON-GAAP RESEARCH
AND DEVELOPMENT EXPENSES
Three Months Ended Nine Months Ended
December 31, December 31,
2010 2009 2010 2009
Research and development $ 42,198 $ 30,332 $ 126,448 $ 87,536
expenses, as reported
Share-based compensation (3,324 ) (3,108 ) (9,516 ) (9,205 )
expense
Non-GAAP research and $ 38,874 $ 27,224 $ 116,932 $ 78,331
development expenses
Non-GAAP research and
development expenses as a 10.6 % 10.9 % 10.6 % 11.7 %
percentage of net sales
RECONCILIATION OF GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES TO NON-GAAP
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Three Months Ended Nine Months Ended
December 31, December 31,
2010 2009 2010 2009
Selling, general and
administrative expenses, $ 56,100 $ 43,096 $ 170,896 $ 120,525
as reported
Share-based compensation (4,377 ) (4,463 ) (12,853 ) (13,285 )
expense
Acquisition-related
intangible asset (1,861 ) (297 ) (6,732 ) (860 )
amortization and other
costs
Non-GAAP selling, general
and administrative $ 49,862 $ 38,336 $ 151,311 $ 106,380
expenses
Non-GAAP selling, general
and administrative 13.6 % 15.3 % 13.7 % 15.9 %
expenses as a percentage
of net sales
RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP OPERATING INCOME
Three Months Ended Nine Months Ended
December 31, December 31,
2010 2009 2010 2009
Operating income, as $ 117,453 $ 72,568 $ 349,822 $ 156,472
reported
Share-based compensation 9,409 8,837 27,785 27,335
expense
Acquisition-related
acquired inventory
valuation costs, 3,608 618 17,758 2,728
intangible asset
amortization and other
costs
Special charge - SST 646 - 1,679 -
severance costs
Special charge - patent - - - 1,238
license
Non-GAAP operating income $ 131,116 $ 82,023 $ 397,044 $ 187,773
Non-GAAP operating income
as a percentage of net 35.6 % 32.8 % 35.9 % 28.0 %
sales
RECONCILIATION OF GAAP OTHER EXPENSE, NET TO NON-GAAP OTHER EXPENSE, NET
Three Months Ended Nine Months Ended
December 31, December 31,
2010 2009 2010 2009
Other expense, net, as $ (3,342 ) $ (2,689 ) $ (9,338 ) $ (2,656 )
reported
Convertible debt non-cash 1,745 1,595 5,100 4,662
interest expense
Gain on trading securities - - - (7,518 )
Non-GAAP other expense, $ (1,597 ) $ (1,094 ) $ (4,238 ) $ (5,512 )
net
Non-GAAP other expense,
net, as a percentage of -0.4 % -0.4 % -0.4 % -0.8 %
net sales
RECONCILIATION OF GAAP INCOME TAX PROVISION FROM CONTINUING OPERATIONS TO
NON-GAAP INCOME TAX PROVISION FROM CONTINUING OPERATIONS
Three Months Ended Nine Months Ended
December 31, December 31,
2010 2009 2010 2009
Income tax provision, as $ 12,461 $ 476 $ 42,114 $ 12,560
reported
Income tax rate, as 10.9 % 0.7 % 12.4 % 8.2 %
reported
Share-based compensation 1,166 1,180 3,442 3,585
expense
Acquisition-related
acquired inventory
valuation costs, 146 83 563 357
intangible asset
amortization and other
costs
Special charge - SST 80 - 137 -
severance costs
Convertible debt non-cash 654 614 1,912 1,795
interest expense
R&D tax credit 1,534 - 1,534 -
reinstatement
Tax benefit on IRS - 8,452 - 8,452
settlement
Special charge - patent - - - 124
license
Gain on trading securities - - - (2,894 )
Non-GAAP income tax $ 16,041 $ 10,805 $ 49,702 $ 23,979
provision
Non-GAAP income tax rate 12.4 % 13.4 % 12.6 % 13.2 %
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 Nine Months
Three Months Ended Months Nine Months Ended Ended
Ended
December 31, December December 31, December
31, 31,
2010 2009 2010 2009
Consolidated Continuing Discontinued Consolidated Continuing Discontinued
Operations Operations Operations Operations Operations Operations
Net income (loss), $ 100,776 $ 101,930 $ (1,154 ) $ 69,403 $ 293,422 $ 298,555 $ (5,133 ) $ 141,256
as reported
Share-based
compensation 8,243 8,243 - 7,657 24,343 24,343 - 23,750
expense, net of tax
effect
Acquisition-related
acquired inventory
valuation costs,
intangible asset 3,462 3,462 - 535 19,883 17,195 2,688 2,371
amortization and
other costs, net of
tax effect
Special charge -
SST severance 566 566 - - 1,542 1,542 - -
costs, net of tax
effect
R&D tax credit (1,534 ) (1,534 ) - - (1,534 ) (1,534 ) - -
reinstatement
Tax benefit on IRS - - - (8,452 ) - - - (8,452 )
settlement
Convertible debt
non-cash interest 1,091 1,091 - 981 3,188 3,188 - 2,867
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 $ 112,604 $ 113,758 $ (1,154 ) $ 70,124 $ 340,844 $ 343,289 $ (2,445 ) $ 158,282
(loss)
Non-GAAP net income
(loss) as a 30.9 % 28.0 % 31.0 % 23.6 %
percentage of net
sales
Diluted net income
(loss) per share, $ 0.51 $ 0.52 $ (0.01 ) $ 0.37 $ 1.53 $ 1.55 $ (0.03 ) $ 0.76
as reported
Non-GAAP diluted
net income (loss) $ 0.58 $ 0.58 $ (0.01 ) $ 0.38 $ 1.78 $ 1.80 $ (0.01 ) $ 0.85
per share
Microchip will host a conference call today, January 27, 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 February 3, 2011.
A telephonic replay of the conference call will be available at approximately 7:00 p.m. (Eastern Time) January 27, 2011 and will remain available until 5:00 p.m. (Eastern Time) on February 3, 2011. Interested parties may listen to the replay by dialing 719-457-0820 and entering access code 6812664.
Cautionary Statement:
The statements in this release relating to our next dividend payment date, ongoing cost reductions in our manufacturing processes, continued improvements in the product lines we acquired from SST, managing operating expenses well, significant improvements ahead of us for the gross margins of the SuperFlash Memory and RF divisions, being well on our way to achieving 32 cents of non-GAAP earnings per share from the SST acquisition in fiscal 2011 and 40 cents in fiscal 2012, our belief that we gained significant market share in all three microcontroller segments in calendar 2010, progress in moving towards our internal target of 115 days of inventory, improving our lead times, appropriately supporting our customers, our expectation of cash generation in the March 2011 quarter to be strong, being exceptionally well-positioned for continued growth in all of our product lines, the March quarter being seasonally impacted by the Lunar New Year holidays in Asia, expecting net sales to be flat to up 3% sequentially, our assumed average stock price in the March 2011 quarter of $38.00, continued strong interest in our products, our fourth quarter fiscal 2011 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 March quarter and for fiscal 2011, taking actions to invest in the equipment needed to support our expected growth, and net cash generation 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; 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; difficulties associated with completing the integration of SST's business with our business and technologies; the risk that our customers may fail to continue to accept the SST product offerings; our actual average stock price in the March 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 January 27, 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 January 27, 2011