PRESS RELEASE 4-23-03
Published on April 23, 2003
EXHIBIT 99.1
NEWS RELEASE
[LOGO]
MICROCHIP INVESTOR RELATIONS CONTACT:
Gordon Parnell - CFO ... (480) 792-7374
MICROCHIP TECHNOLOGY FOURTH QUARTER AND FISCAL YEAR 2003 FINANCIAL RESULTS
* FY03 NET SALES UP 14% OVER FY02
* FY03 PRO FORMA NET INCOME UP 41% OVER FY02
CHANDLER, Arizona - April 23, 2003 - (NASDAQ: MCHP) - Microchip Technology
Incorporated, a leading provider of microcontroller and analog semiconductors,
today reported results for the three months ended March 31, 2003 and the fiscal
year ended March 31, 2003. Net sales for the fourth quarter were $159.7 million,
down 5% sequentially from $167.5 million in the immediately preceding quarter,
and up 7% from sales of $148.8 million in the prior year's fourth quarter. Net
income for the fourth quarter was $33.0 million or 16 cents per diluted share,
down 9% sequentially from net income of $36.4 million or 17 cents per diluted
share in the immediately preceding quarter, and up 25% from net income of $26.3
million or 13 cents per diluted share in the prior year's fourth quarter.
Net sales for the fiscal year ended March 31, 2003 were $651.5 million, an
increase of 14% from net sales of $571.3 million in the prior fiscal year. On a
pro forma basis, net income for the fiscal year ended March 31, 2003 was $133.9
million, or 64 cents per diluted share, an increase of 41% from net income of
$94.8 million, or 45 cents per diluted share in the prior year. On a GAAP basis,
net income for the fiscal year ended March 31, 2003 was $88.2 million, or 42
cents per diluted share, a decrease of 7% from net income of $94.8 million, or
45 cents per diluted share in the prior year. Pro forma diluted earnings per
share for fiscal year 2003 exclude the effects of the Fab 3 (Puyallup, WA)
impairment charge, an in process research and development charge (related to the
acquisition of PowerSmart) and the cumulative effect of the change in accounting
principle related to the Company's revenue recognition policy associated with
sales to regional Asian distributors. A reconciliation of the Company's GAAP
results to its pro forma results is included later in this press release.
On March 18, 2003, Microchip announced a change in its revenue recognition
policy relating to sales to regional Asian distributors. Microchip changed from
recognizing revenue when product is shipped to these distributors (Point of
Purchase "POP") to recognizing revenue when these distributors sell the
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MICROCHIP TECHNOLOGY
REPORTS FOURTH QUARTER AND
FISCAL YEAR 2003 RESULTS
product to their customers (Point of Sale "POS"). Historically, Microchip has
recognized revenue from its Americas, European and multinational Asian
distributors at POS, but has recognized revenue from regional Asian distributors
at POP. The focus on demand creation and sell-through to end customers is in the
long-term best interest of Microchip. Revenue recognition at POS as Microchip's
sole revenue recognition policy is a more reflective measure of end customer
demand. Instituting this change at this point will result in a revenue
recognition policy that is uniform throughout the Company. To implement the
change in revenue recognition, Microchip has recorded a cumulative effect of
change in accounting principle of $11.4 million as of April 1, 2002, which was
the beginning of fiscal year 2003. This represents the amount of income that is
now deferred as of that date under the POS method. Quarterly operating results
for the first three quarters of fiscal year 2003 have been adjusted to conform
to this change in accounting policy. These adjustments resulted in a cumulative
revenue reduction of $8.7 million for the first three quarters of fiscal year
2003, and a cumulative net income reduction of $2.4 million for the same period.
The Company expects to declare a quarterly cash dividend within the next week.
Microchip initiated quarterly cash dividend payments in the third quarter of
fiscal year 2003, and has made two cash dividend payments of $.02 per share
each.
"Microchip's performance in a very difficult environment reflects the hard work,
determination and commitment of our global enterprise. In fiscal year 2003, we
delivered year over year revenue growth of 14%, achieved substantial market
share gains in the 8-bit microcontroller market, attained operating profits
among the highest in the industry, and maintained a healthy, debt-free balance
sheet. While the year did not finish as we anticipated, our fiscal year 2003
achievements validate that our business model is working solidly. Looking ahead,
our business is expected to generate between $175 and $200 million in free cash
flows in fiscal year 2004, confirming the overall continued strength of our
business enterprise," said Steve Sanghi, Microchip's President and CEO.
"As announced in our April 7, 2003 press release, we are focusing on the closure
of Fab 1 (Chandler, AZ) and integrating certain personnel, equipment and
processes into our Fab 2 (Tempe, AZ)," Mr. Sanghi continued. "After the
completion of the integration process, our gross margins are expected to be
approximately 54%, with further improvement anticipated after Fab 4 commences
production.
"Visibility in the current global economic and geopolitical environment
continues to be very difficult. Despite the current uncertainties, we remain
confident in the long-term performance of our proprietary microcontroller and
analog products," Mr. Sanghi concluded.
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MICROCHIP TECHNOLOGY
REPORTS FOURTH QUARTER AND
FISCAL YEAR 2003 RESULTS
MICROCHIP'S FOURTH QUARTER HIGHLIGHTS:
* Microchip announced initial high yields from its Fab 4 semiconductor
manufacturing facility in Gresham, Oregon. All of the necessary
manufacturing processes are working, the qualification wafers are in
progress and the first wafers produced yielded 91% usable die.
* Expanding its industry-leading power-managed portfolio, Microchip debuted
seven PIC16F Flash microcontrollers that feature NANOWATT TECHNOLOGY. These
devices offer the flexibility of reprogrammable Flash memory coupled with
new power-managed features and are designed to reduce the overall power
consumption within embedded systems.
* Microchip introduced a highly flexible PICmicro(R) microcontroller family
that helps simplify motor-control design. The PIC18F2439/2539/4439/4539
Flash microcontrollers increase flexibility for variable speed control,
reduce noise and maximize energy efficient operation in single-phase motor
control applications.
* The MPLAB(R) In-Circuit Emulator (ICE) 4000 debuted to support Microchip's
high-end PIC18F Flash microcontrollers and dsPIC(TM) digital signal
controllers. The MPLAB ICE 4000 provides full speed, low voltage emulation,
interchangeable processor modules and device adapters.
* The low-cost PICkit(TM) 1 Flash Starter Kit for low-pin count PICmicro
Flash microcontrollers was introduced. Available for only $36 (US), the
PICkit 1 Flash Starter Kit is an easy-to-use programmer, evaluation and
development kit for the Company's popular 8- and 14-pin Flash
microcontrollers.
* The Company expanded its analog portfolio with a new family of low voltage,
low cost operational amplifiers. These 1 MHz op amps reduce supply voltage
demand, making them ideal for extending battery life and other low-voltage
applications.
* The TC72/77 serial output temperature sensors were selected by ANALOGZONE
as the recipient of its annual "Product of the Year" award for 2002.
Twenty-six products were recognized this year, and Microchip was one of two
companies to bring home the award in the sensor category.
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MICROCHIP TECHNOLOGY
REPORTS FOURTH QUARTER AND
FISCAL YEAR 2003 RESULTS
* Microchip introduced a 500mA Synchronous Buck-DC-to-DC synchronous
step-down converter that operates over a multitude of input and output
conditions. The MCP1601 provides designers with an efficient method of
transforming battery or bus voltage to system requirements.
* Microchip unveiled its first PowerSmart(R) battery monitoring device
featuring Accuron(TM) technology for Nickel Metal Hydride (NiMH)
applications. The new PS402 is a Smart Battery System-compliant, battery
management integrated circuit that integrates all rechargeable battery
monitoring functions for NiMH batteries on a single chip. With accuracy to
within +/-1 percent, the PS402 provides the host system and user with
valuable information that can be utilized for enhanced power management
while providing the system's user with optimum predictability.
* The Arizona Association of Industries awarded Microchip the 2003
Co-Manufacturer of the Year in the Large Manufacturer category for the
Company's consistent, steady growth and success, and strong support of
education in Arizona.
Q1 FY2004 OUTLOOK:
The following statements are based on current expectations. These statements are
forward-looking, and actual results may differ materially.
Continuing uncertainty in the global semiconductor industry and low visibility
make it very difficult to predict demand and other related matters. Microchip
will provide a mid-quarter update on June 10, 2003. See "Conference Call and
Updates" section below for details.
As indicated below, certain of the Q1 FY2004 Outlook line items are pro forma
and exclude the effect of accelerated depreciation due to the announced closure
of Fab 1 and other related expenses. Microchip expects these charges will be
taken in the first quarter of fiscal year 2004, and are currently expected to be
between $27 and $33 million, for which Microchip estimates $24 to $29 million
will represent accelerated depreciation, and $3 to $4 million will be other
related expenses. The majority of the total charges will be reflected in cost of
sales.
* Net sales for the first fiscal quarter ending June 30, 2003 is currently
anticipated to be between $157 and $164 million (down approximately 2% to
up approximately 3% compared to the immediately preceding quarter).
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MICROCHIP TECHNOLOGY
REPORTS FOURTH QUARTER AND
FISCAL YEAR 2003 RESULTS
* Pro forma gross margins for the first fiscal quarter ending June 30, 2003
are expected to be approximately 54%(1). Generally, gross margins will
fluctuate over time, driven primarily by the mix of microcontrollers,
analog products and memory products sold, 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 first fiscal quarter ending June 30, 2003 are
expected to be between $44.2 and $44.7 million. Operating expenses
fluctuate over time, primarily due to revenue and profit levels.
* The pro forma tax rate for the first fiscal quarter ending June 30, 2003 is
anticipated to be approximately 25.5%.(2)
* Pro forma earnings per diluted share for the first fiscal quarter ending
June 30, 2003 are anticipated to be between 15 and 16 cents.(3)
* Inventories at June 30, 2003 are anticipated to be approximately 141 days.
The level of inventories fluctuates over time, primarily due to sales
volume and overall capacity utilization.
* Capital expenditures for the quarter ending June 30, 2003 are expected to
be approximately $15 million, and capital expenditures for fiscal year 2004
are expected to total approximately $40 to $45 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 to add approximately $50
million to our existing cash balances during the quarter ending June 30,
2003.
* Microchip announced on August 7, 2002 that its Board of Directors had
authorized a stock buy-back of up to 2.5 million shares. Microchip has been
buying stock in the open market since that date. To date, 1,264,700 shares
have been repurchased at a cost of $27.1 million. Future purchases will
depend upon market conditions and corporate considerations.
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(1) GAAP gross margins for the first fiscal quarter ending June 30, 2003 are
expected to be between 35% and 39%.
(2) GAAP tax rate for the first fiscal quarter ending June 30, 2003 is expected
to be between -17% and 8%.
(3) GAAP earnings per diluted share for the first fiscal quarter ending June
30, 2003 are expected to be between 5 and 8 cents.
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MICROCHIP TECHNOLOGY
REPORTS FOURTH QUARTER AND
FISCAL YEAR 2003 RESULTS
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands except per share amounts)
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MICROCHIP TECHNOLOGY
REPORTS FOURTH QUARTER AND
FISCAL YEAR 2003 RESULTS
The following table sets forth a reconciliation of pro forma results to GAAP
results:
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF PRO FORMA NET INCOME TO REPORTED RESULTS
(unaudited)
(in thousands except per share amounts)
(a) Impairment charge on Fab 3.
(b) In process research and development charge associated with the PowerSmart
acquisition.
(c) Tax effect based on impairment charge on Fab 3 based on U.S. statutory tax
rate. There is no tax benefit related to the in process R&D charge.
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MICROCHIP TECHNOLOGY
REPORTS FOURTH QUARTER AND
FISCAL YEAR 2003 RESULTS
CONFERENCE CALL AND UPDATES:
Microchip will host a conference call today, April 23, 2003 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
April 30, 2003.
A telephonic replay of the conference call will be available at approximately
9:00 p.m. (Eastern Time) April 23, 2003 and will remain available until 5:00
p.m. (Eastern Time) on Wednesday, April 30, 2003. Interested parties may listen
to the replay by dialing 719-457-0820 and entering access code 784887.
Microchip will make a first quarter business update available after market close
on Tuesday, June 10, 2003. This update will be posted on the Company's website
at www.microchip.com. Those who do not have access to the Internet may contact
Microchip's Investor Relations department directly 480-792-7761 to hear a
recorded summary of the business update.
CAUTIONARY STATEMENT:
The statements in this release relating to the expected declaration of a
quarterly cash dividend within the next week, our fiscal year 2003 achievements
validating that our business model is working solidly, our business generating
between $175 and $200 million in free cash flows (operating cash flow net of
working capital investments, capital expenditures and dividends) in fiscal year
2004 confirming the overall continued strength of our business enterprise, the
closure of Fab 1 and integration of certain personnel, equipment and processes
into Fab 2, our expected gross margins after the completion of the integration
process, further improvement in our gross margins after Fab 4 commences
production, visibility in the current global economic and geopolitical
environment continuing to be very difficult, our confidence in the long-term
performance of our proprietary microcontroller and analog products, our
expectations related to the timing, amount and composition of the charges
related to the Fab 1 closure and the statements containing our guidance for the
quarter ending June 30, 2003 with respect to net sales, pro forma revenue, gross
margins, operating expenses, pro forma tax rate, pro forma earnings per share,
days of inventory, capital expenditures for the quarter ending June 30, 2003 and
for fiscal year 2004, additions to cash balances, any potential future stock
repurchases and anticipated GAAP gross margins, tax rate and
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earnings per share 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 actual results to
differ materially, including, but not limited to: our ability to effectively
carry out the closure of Fab 1 and the integration of certain personnel,
equipment and processes into Fab 2 and to realize the savings and operational
efficiencies expected from these actions; the rate of the recovery in the
overall economy and the uncertainty of current economic and political
conditions; the potential for unanticipated results from the closure of Fab 1 on
our performance, including customer concerns, productivity and the retention of
key employees; changes in customer order patterns and seasonality; changes in
demand for our products and the products of our customers; pricing pressures;
levels of inventories at our distributors and other customers; inventory mix and
timing of customer orders; the level of orders that are received and can be
shipped in a quarter; the level and timing at which design wins become actual
orders and sales; fluctuations in our business during the last month of the
quarter; the level of sell-through of our products through distribution in any
particular fiscal period; disruptions in international transport or delivery
occasioned by terrorist activity, armed conflict, war or an unexpected increase
in the price of, or decrease in supply of, oil; impact of events outside the
United States, such as the business impact of fluctuating currency rates or
unrest or political instability; general industry, economic and political
conditions; the impact on our business and on customer order patterns due to
major health concerns (such as the spread of the SARS virus); our ability to
maintain operating margins; market acceptance of our new products and those of
our customers; competitive factors, such as competing architectures and
manufacturing technologies and acceptance of new products in the markets we
generally serve; the costs and outcome of any litigation involving intellectual
property, customer and other issues; changes in utilization of our current
manufacturing capacity; unanticipated costs in bringing Fab 4 on-line; timely
facilitization of Fab 4, including the availability of equipment and other
supplies; our ability to ramp products into volume production at Fab 4; and the
ability to attract and retain qualified personnel in the Gresham, OR area.
For a detailed discussion of these and other risk factors, please refer to
Microchip's filings on Form 10-K and 10-Q. You can obtain copies of Forms 10-K
and 10-Q and any 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.
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MICROCHIP TECHNOLOGY
REPORTS FOURTH QUARTER AND
FISCAL YEAR 2003 RESULTS
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 April 23, 2003 press release, or to reflect the occurrence of
unanticipated events.
ABOUT MICROCHIP:
Microchip Technology Inc. manufactures the popular PICmicro(R)
field-programmable RISC microcontrollers, which serve 8- and 16-bit embedded
control applications, and a broad spectrum of high-performance linear and
mixed-signal, power management and thermal management devices. The Company also
offers complementary microperipheral products including interface devices;
microID(R) RFID devices; serial EEPROMs; and the patented KEELOQ(R) security
devices. This synergistic product portfolio targets thousands of applications
and a growing demand for high-performance designs in the automotive,
communications, computing, consumer and industrial control markets. The
Company's quality systems are ISO 9001 (1994 version) and QS9000 (1998 version)
certified. Microchip is headquartered in Chandler, Arizona with design
facilities in Mountain View, California, Plano, Texas, Bangalore, India, and
Lausanne, Switzerland; semiconductor fabrication facilities in Tempe and
Chandler, Arizona, Puyallup, Washington, and Gresham, Oregon, and assembly and
test operations near Bangkok, Thailand. Microchip employs approximately 3,350
people worldwide and has sales offices throughout Asia, Europe, Japan and the
Americas. More information on the Company can be found at www.microchip.com.
The Microchip logo and name, PICmicro(R), KEELOQ(R) , MPLAB(R), microID(R), and
PowerSmart(R) are registered trademarks of Microchip Technology Incorporated.
dsPIC(TM), Accuron(TM) and PICkit(TM) are trademarks of
Microchip Technology Incorporated. All rights reserved.
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MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in thousands except per share amounts)
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
March 31, March 31,
2003 2002
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(Unaudited)
Cash and short-term investments $ 216,511 $ 280,647
Accounts receivable, net 95,387 80,747
Inventories 102,344 88,615
Other current assets 194,867 99,167
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Total current assets 609,109 549,176
Property, plant & equipment, net 767,933 715,960
Other assets 51,233 10,464
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Total assets $1,428,275 $1,275,600
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other accrued liabilities $ 144,142 $ 127,165
Deferred income on shipments to distributors 70,988 40,800
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Total current liabilities 215,130 167,965
Long-term debt and deferred taxes 34,196 31,856
Stockholders' equity 1,178,949 1,075,779
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Total liabilities and stockholders' equity $1,428,275 $1,275,600
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MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in thousands except per share amounts)