EXHIBIT 99.1
Published on July 20, 2006
|
Exhibit
99.1
NEWS
RELEASE
INVESTOR
RELATIONS CONTACT:
Gordon
Parnell - CFO . . . (480) 792-7374
|
MICROCHIP
TECHNOLOGY ANNOUNCES RECORD NET SALES AND
NET
INCOME FOR FIRST QUARTER FISCAL YEAR 2007
AND
RECORD QUARTERLY CASH DIVIDEND
|
·
|
Record
net sales of $262.6 million for the June quarter, first time to
achieve a
one billion dollar revenue run rate; net sales increased 6.2%
sequentially
|
|
·
|
In
the June quarter, on a non-GAAP basis, prior to share-based
compensation:
|
|
·
|
Record
gross margins of 60.4%
|
|
·
|
Record
operating profit of 36.4%
|
|
·
|
Record
net income of $81.4 million and
30.9%
|
|
·
|
On
a GAAP basis, gross margins of 60.4%, operating profit of 34.2%
and record
net income of $77.0 million and
29.3%
|
|
·
|
Record
net cash generated of $136.5 million during the June quarter before
dividend payment of $46.1
million
|
|
·
|
Increased
dividend by 9.3% to a record 23.5 cents per share; Represents an
increase
of 88% from dividend level one year
ago
|
CHANDLER,
Arizona - July 20, 2006 - (NASDAQ: MCHP) - Microchip Technology Incorporated,
a
leading provider of microcontroller and analog semiconductors, today reported
results for the three months ended June 30, 2006. Net sales for the first
quarter of fiscal 2007 were $262.6 million, up 6.2% sequentially from $247.2
million in the immediately preceding quarter, and up 20.2% from sales of
$218.5
million in the prior year’s first fiscal quarter. The Company adopted SFAS No.
123 (revised 2004), “Share-Based Payment” at the beginning of the quarter and
this is the first period that costs associated with the Company’s stock option
and employee stock purchase plans are included within its financial statements.
As such, the Company has included additional information in its disclosures
to
assist shareholders with appropriate comparative information. Non-GAAP net
income for the first quarter of fiscal 2007, which excludes the effect of
all
share-based compensation expense, was a record $81.4 million, or 37 cents
per
diluted share, up 7.7% from GAAP net income of $75.6 million, or 35 cents
per
diluted share, in the immediately preceding quarter; and up 33% from GAAP
net
income of $61.0 million, or 29 cents per diluted share, in the prior year’s
first fiscal quarter. GAAP net income for the first quarter of fiscal 2007
was a
record $77.0 million or 35 cents per diluted share. A reconciliation of GAAP
to
non-GAAP earnings per share is included as part of this press
release.
-
- more - -
Microchip
Technology Incorporated 2355 West Chandler
Blvd. Chandler, AZ 85224-6199 Main Office 480•792•7200 FAX
480•899•9210
Microchip
Technology
Reports
First Quarter
Fiscal
Year 2007 Results
Microchip
also announced today that its Board of Directors has declared a quarterly
cash
dividend on its common stock of 23.5 cents per share. The quarterly dividend
is
payable on August 17, 2006 to stockholders of record on August 3, 2006.
Microchip initiated quarterly cash dividend payments in the third quarter
of
fiscal 2003.
“We
are
very pleased to have delivered yet another record quarter in nearly every
respect. Net sales exceeded the one billion dollar run rate for the first
time
in our history,” said Steve Sanghi, Microchip’s President and CEO. “Net sales
also exceeded the high end of our guidance. The revenue growth was driven
by our
microcontroller business which grew a robust 8.2% sequentially and was up
21.0%
over the year ago quarter. Our Flash microcontroller business was even stronger
and grew 12.1% sequentially and over 46% from the year ago
quarter.”
“We
also
achieved another record quarter in development system shipments. We shipped
a
record 20,921 development tools in the quarter, demonstrating continued strong
customer interest in our products,” said Ganesh Moorthy, Vice President,
Advanced Microcontroller and Memory Division.
Mr.
Sanghi continued, “Our revenue growth was very broad-based, as we grew in all
major geographies. Growth was led by Asia which was up 11% sequentially,
followed by Europe which grew by 3.8% sequentially, and Americas grew 1.8%
sequentially.”
Mitch
Little, Microchip’s Vice President of Worldwide Sales and Applications said,
“Our continued strong performance was directly influenced by several initiatives
over the last 3 years, where Microchip has taken an increasingly higher level
of
direct control of demand creation for our products. Microchip has significantly
added to its technical sales, application engineering and customer training
resources to accelerate design-in activity for our products. At the same
time,
we have added several regional distributors and catalog houses. These regional
distributors have dedicated significant technical resources applied to creating
demand specifically for Microchip. We are definitely pleased with the results.
Our success and growth are vindicating this strategy.”
“We
achieved record gross margins and non-GAAP operating margins of 60.4% and
36.4%,
respectively, in the June 2006 quarter,” Mr. Sanghi added.
Sanghi
continued, “We are also pleased to be increasing our quarterly dividend payment
to our shareholders by 9.3% sequentially, to 23.5 cents per share. We continue
to believe, based on investor feedback, that increasing dividends is a highly
desirable way of returning additional value to shareholders.”
-
- more - -
Microchip
Technology
Reports
First Quarter
Fiscal
Year 2007 Results
Gordon
Parnell, Microchip’s Chief Financial Officer, said, “Inventory days on our
balance sheet at the end of June, prior to the effects of share-based
compensation expense, were 101 days, down 5 days from inventory levels at
March
31, 2006. Inventory days including the effects of share-based compensation
were
102 days. Inventory in the distribution channel at the end of June was 2.0
months, which is at the lower end of the historical range of 1.9 to 3.3
months.”
“We
generated a record net cash flow for the June 2006 quarter of $136.5 million,
before the payment of $46.1 million in dividends,” Mr. Parnell
added.
Mr.
Sanghi concluded, “With broad-based strength and low inventory in the channels,
we expect net sales in the September 2006 quarter to be up about 4%
sequentially. With decreasing inventory at Microchip, we are also preparing
our
factories with equipment and personnel to execute the needed ramp. Earnings
per
share are expected to be about 39 cents on a non-GAAP basis, excluding the
effect of share-based compensation expense. EPS on a GAAP basis is expected
to
be about 37 cents.”
Microchip’s
Recent Highlights:
|
·
|
Microchip
received six additional awards for product and organizational leadership.
For example, Lear Corporation (NYSE: LEA) selected Microchip as
one of 10
global recipients of the “2005 Lear Supplier Hall of Fame Award” from a
pool of more than 3,200 companies, and Microchip received honorable
mention for workplace flexibility at the recent Arizona Alfred
P. Sloan
awards ceremony.
|
|
·
|
In
the realm of product innovation, Design News magazine’s editors nominated
and its readers named Microchip the winner of two 2005 Golden Mousetrap
awards: the ENC28J60 Ethernet Controller as “Best Product: Electronics,
Digital Control/Embedded Computing”; and Microchip’s entire product
portfolio as “Best Value, Electronics”.
|
|
·
|
During
the quarter, Microchip shipped 20,921 new development systems—a new
company record. This brisk pace demonstrates the continued strong
acceptance of Microchip’s products. The total cumulative number of
development systems shipped now stands at
452,937.
|
|
·
|
During
the quarter, Microchip released to production 20 more 16-bit
microcontrollers and digital signal controllers. These product
releases
bring the total number of 16-bit microcontrollers and digital signal
controllers in production to
65.
|
-
- more - -
Microchip
Technology
Reports
First Quarter
Fiscal
Year 2007 Results
| · |
During
the quarter, Microchip introduced three new dsPIC®
digital signal controllers designed to power the next generation
of
Switch-Mode Power Supplies via low-cost, ultra-fast PWM and A/D-converter
peripherals that enable complete digital-loop
control.
|
|
·
|
For
development with its analog products, Microchip introduced the
Mindi™
simulation tool, which is a free, easy-to-use Web-based battery
and power
circuit simulator. This tool saves time in developing circuits
and
selecting components, by providing circuits that can be downloaded
and
ported directly into system
diagrams.
|
|
·
|
The
Company expanded its 20-pin 8-bit PIC microcontroller family with
the new
PIC16F631/677 microcontrollers to provide a compelling option for
migrating up from its 8- and 14-pin
devices.
|
Second
Quarter Fiscal 2007 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 September 30, 2006 are currently anticipated
to be up about 4% from the June 2006
quarter.
|
|
·
|
Gross
margins for the quarter ending September 30, 2006 are expected
to be
approximately 60.6%. Gross margins will not be impacted by share-based
compensation until the third quarter of fiscal 2007, based on the
timing
of conversion of inventory to sales. Generally, gross margins fluctuate
over time, driven primarily by the mix of microcontrollers, analog
products 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 on a GAAP basis for the quarter ending September 30, 2006
are
anticipated to be approximately 26.2%. Non-GAAP operating expenses
for the
quarter ending September 30, 2006 are expected to be approximately
24%,
prior to the effects of all share-based compensation expense associated
with stock options and the employee stock purchase plan. Operating
expenses fluctuate over time, primarily due to revenue, foreign
currency
effects on our business, and profit levels.
|
|
·
|
The
tax rate for the quarter ending September 30, 2006 is anticipated
to be
approximately 24%.
|
-
- more - -
Microchip
Technology
Reports
First Quarter
Fiscal
Year 2007 Results
| · |
Earnings
per diluted share for the quarter ending September 30, 2006 are
anticipated to be about 37 cents on a GAAP basis, and approximately
39
cents on a non-GAAP basis, excluding the effect of all share-based
compensation expense.
|
|
·
|
On
a GAAP basis, inventories at September 30, 2006 are anticipated
to be
approximately 97 days, down approximately 5 days compared with
the June
2006 quarter. On a non-GAAP basis, excluding the effects of share-based
compensation, inventory days are expected to be approximately 95
days as
of September 30, 2006, down approximately 6 days compared to June
30,
2006. The level of inventories fluctuates over time, primarily
due to
sales volume and overall capacity
utilization.
|
|
·
|
Capital
expenditures for the quarter ending September 30, 2006 are expected
to be
approximately $20 million, and capital expenditures for fiscal
2007 are
expected to total approximately $80 million. 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
September quarter of approximately $125 million before the dividend
payment of $50.5 million announced today. This amount is before
the effect
of any stock buy-back activity.
|
|
·
|
Microchip
announced on April 22, 2004 that its Board of Directors had authorized
a
stock buy-back of up to 2.5 million shares. At June 30, 2006,
approximately 1.5 million shares remained available for purchase
under
this program. Future purchases will depend upon market conditions,
interest rates and corporate
considerations.
|
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
the
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.
-
- more - -
Microchip
Technology
Reports
First Quarter
Fiscal
Year 2007 Results
Accordingly,
management excludes this item from its internal operating forecasts and models.
We are showing non-GAAP gross margin, non-GAAP research and development
expenses, non-GAAP selling, general and administration expenses, non-GAAP
net
income, and non-GAAP diluted earnings per share, all of which excludes all
share-based compensation expense, 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, which we believe is useful to investors.
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 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 and does not consider share-based compensation
expense, which is a non-cash charge, in managing its operations. Specifically,
we do not consider share-based compensation expense when developing and
monitoring budgets and spending. Our measure 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; 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.
-
- more - -
MICROCHIP
TECHNOLOGY INCORPORATED AND SUBSIDIARIES
RECONCILIATION
OF GAAP TO NON-GAAP
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
(in
thousands except per share amounts)
|
Three
Months Ended June 30, 2006
|
Three
Months Ended June 30, 2005
|
||||||||||||||||||
|
GAAP
|
Adjustments
(1)
|
Non-GAAP
|
GAAP
|
Adjustments
(2)
|
Non-GAAP
|
||||||||||||||
|
Net
sales
|
$
|
262,557
|
---
|
262,557
|
218,527
|
---
|
218,527
|
||||||||||||
|
Cost
of sales
|
104,073
|
---
|
104,073
|
91,022
|
---
|
91,022
|
|||||||||||||
|
Gross
profit
|
158,484
|
---
|
158,484
|
127,505
|
---
|
127,505
|
|||||||||||||
|
60.36
|
%
|
60.36
|
%
|
58.35
|
%
|
58.35
|
%
|
||||||||||||
|
Operating
expenses:
|
|||||||||||||||||||
|
Research
and development
|
28,024
|
(2,291
|
)
|
25,733
|
23,395
|
---
|
23,395
|
||||||||||||
|
Selling,
general and administrative
|
40,779
|
(3,514
|
)
|
37,265
|
31,081
|
---
|
31,081
|
||||||||||||
|
68,803
|
(5,805
|
)
|
62,998
|
54,476
|
---
|
54,476
|
|||||||||||||
|
Operating
income
|
89,681
|
5,805
|
95,486
|
73,029
|
---
|
73,029
|
|||||||||||||
|
34.16
|
%
|
36.37
|
%
|
33.42
|
%
|
33.42
|
%
|
||||||||||||
|
Other
income, net
|
11,614
|
---
|
11,614
|
7,268
|
---
|
7,268
|
|||||||||||||
|
Income
before income taxes
|
101,295
|
5,805
|
107,100
|
80,297
|
---
|
80,297
|
|||||||||||||
|
Income
taxes
|
24,311
|
1,393
|
25,704
|
19,273
|
---
|
19,273
|
|||||||||||||
|
Net
income
|
$
|
76,984
|
$
|
4,412
|
$
|
81,396
|
$
|
61,024
|
---
|
$
|
61,024
|
||||||||
|
Basic
net income per share
|
$
|
0.36
|
$
|
0.02
|
$
|
0.38
|
$
|
0.29
|
$
|
0.00
|
$
|
0.29
|
|||||||
|
Diluted
net income per share
|
$
|
0.35
|
$
|
0.02
|
$
|
0.37
|
$
|
0.29
|
$
|
0.00
|
$
|
0.29
|
|||||||
|
Basic
shares used in calculation
|
214,175
|
---
|
214,175
|
208,396
|
---
|
208,396
|
|||||||||||||
|
Diluted
shares used in calculation
|
219,791
|
(459
|
)
|
219,332
|
213,105
|
---
|
213,105
|
||||||||||||
-
- more - -
MICROCHIP
TECHNOLOGY INCORPORATED AND SUBSIDIARIES
RECONCILIATION
OF GAAP TO NON-GAAP
CONSOLIDATED
BALANCE SHEETS
(in
thousands except per share amounts)
|
ASSETS
|
||||||||||||||||||||||
|
June
30, 2006 (Unaudited)
|
March
31, 2006
|
|||||||||||||||||||||
|
GAAP
|
Adjustments
(1)
|
Non-GAAP
|
GAAP
|
Adjustments
(2)
|
Non-GAAP
|
|||||||||||||||||
|
Cash
and short-term investments
|
$
|
753,789
|
$
|
---
|
$
|
753,789
|
$
|
764,764
|
$
|
---
|
$
|
764,764
|
||||||||||
|
Accounts
receivable, net
|
137,196
|
---
|
137,196
|
139,361
|
---
|
139,361
|
||||||||||||||||
|
Inventories
|
116,642
|
(1,667
|
)
|
114,975
|
115,024
|
---
|
115,024
|
|||||||||||||||
|
Other
current assets
|
98,342
|
(2,154
|
)
|
96,188
|
99,680
|
---
|
99,680
|
|||||||||||||||
|
Total
current assets
|
1,105,969
|
(3,821
|
)
|
1,102,148
|
1,118,829
|
---
|
1,118,829
|
|||||||||||||||
|
Property,
plant & equipment, net
|
648,542
|
---
|
648,542
|
659,972
|
---
|
659,972
|
||||||||||||||||
|
Long-term
investments
|
490,268
|
---
|
490,268
|
520,360
|
---
|
520,360
|
||||||||||||||||
|
Other
assets
|
49,912
|
---
|
49,912
|
51,435
|
---
|
51,435
|
||||||||||||||||
|
Total
assets
|
$
|
2,294,691
|
$
|
(3,821
|
)
|
$
|
2,290,870
|
$
|
2,350,596
|
$
|
---
|
$
|
2,350,596
|
|||||||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||
|
Short-term
debt
|
$
|
137,500
|
$
|
---
|
$
|
137,500
|
$
|
268,954
|
$
|
---
|
$268,954
|
|||||||||||
|
Accounts
payable and other accrued liabilities
|
246,288
|
---
|
246,288
|
240,534
|
---
|
240,534
|
||||||||||||||||
|
Deferred
income on shipments to distributors
|
110,911
|
---
|
110,911
|
99,481
|
---
|
99,481
|
||||||||||||||||
|
Total
current liabilities
|
494,699
|
---
|
494,699
|
608,969
|
---
|
608,969
|
||||||||||||||||
|
Pension
accrual
|
836
|
---
|
836
|
801
|
---
|
801
|
||||||||||||||||
|
Deferred
tax liability
|
11,347
|
---
|
11,347
|
14,637
|
---
|
14,637
|
||||||||||||||||
|
Stockholders'
equity
|
1,787,809
|
(3,821
|
)
|
1,783,988
|
1,726,189
|
---
|
1,726,189
|
|||||||||||||||
|
Total
liabilities and stockholders' equity
|
$
|
2,294,691
|
$
|
(3,821
|
)
|
$
|
2,290,870
|
$
|
2,350,596
|
$
|
---
|
$2,350,596
|
||||||||||
|
(1)
|
Adjustments
consist of share-based compensation, related tax effect, and the
impact on
the treasury stock method under SFAS 123(R). The
treasury stock method used to calculate GAAP weighted average shares
outstanding requires amounts related to compensation costs attributable
to
future services and not yet recognized in the financial statements
to be
treated as proceeds that are assumed to be used to repurchase shares.
As a
result, this reduces the total number of weighted average shares
for
purposes of calculating GAAP weighted average shares outstanding
(diluted). Since Microchip does not include the effects of these
compensation costs in its non-GAAP net income, management believes
these
amounts should not be applied to the repurchase of shares in calculating
non-GAAP net income per share, and, accordingly, adds such shares
back
into weighted average shares outstanding for purposes of calculating
non-GAAP net income per share.
|
|
(2)
|
For
the three months ended June 30, 2005, no share-based compensation
was
recorded for stock options or for our employee stock purchase
plan.
|
-
- more - -
MICROCHIP
TECHNOLOGY INCORPORATED AND SUBSIDIARIES
RECONCILIATION
OF NET INCOME AND DILUTED EARNINGS PER SHARE
TO
NON-GAAP NET INCOME AND NON-GAAP DILUTED EARNINGS PER
SHARE
(in
thousands except per share amounts)
|
Three
Months Ended
June
30,
|
|||||||
|
2006
|
2005
|
||||||
|
GAAP
net income
|
$
|
76,984
|
$
|
61,024
|
|||
|
Share-based
compensation expense, net of tax
|
4,412
|
---
|
|||||
|
Non-GAAP
net income
|
$
|
81,396
|
$
|
61,024
|
|||
|
Diluted
GAAP net income per share
|
$
|
0.35
|
$
|
0.29
|
|||
|
Diluted
non-GAAP net income per share
|
$
|
0.37
|
$
|
0.29
|
|||
|
Diluted
GAAP shares used in calculation
|
219,791
|
213,105
|
|||||
|
Diluted
non-GAAP shares used in calculation
|
219,332
|
213,105
|
|||||
(1)
-
- more - -
Microchip
Technology
Reports
First Quarter
Fiscal
Year 2007
Conference
Call and Updates:
Microchip
will host a conference call today, July 20, 2006 at 6:00 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 July 27, 2006.
A
telephonic replay of the conference call will be available at approximately
8:00
p.m. (Eastern Time) July 20, 2006 and will remain available until 5:00 p.m.
(Eastern Time) on July 27, 2006. Interested parties may listen to the replay
by
dialing 719-457-0820 and entering access code 2014447.
Cautionary
Statement:
The
statements in this release relating to a one billion dollar revenue run
rate,
development
tools demonstrating continued strong customer interest in our products,
accelerating design-in activity, vindicating our strategy, that increasing
dividends is a highly desirable way of returning additional value to
shareholders, our expectation of net sales growth of about 4% sequentially,
decreasing inventory, preparing our factories for a ramp in production, our
expectation of GAAP EPS of approximately 37 cents and non-GAAP EPS of
approximately 39 cents for the September 30, 2006 quarter, the continued
strong
acceptance of Microchip’s products, and the statements containing our guidance
for the quarter ending September 30, 2006 with respect to net sales, gross
margins, operating expenses, tax rate, earnings per diluted share, days of
inventory, capital expenditures for the quarter ending September 30, 2006
and
for fiscal 2007, net cash generation and future stock repurchases 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; 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.
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Microchip
Technology
Reports
First Quarter
Fiscal
Year 2007
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
July
20, 2006 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, PIC and dsPIC are registered trademarks of Microchip
Technology Incorporated in the U.S.A. and in other countries.
All
other
trademarks mentioned herein are property of their respective
companies.