10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on August 12, 1996
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JUNE 30, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from________________to_______________.
Commission File Number: 0-21184
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MICROCHIP TECHNOLOGY INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
Delaware 86-0629024
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2355 W. Chandler Blvd., Chandler, AZ 85224-6199
(602) 786-7200
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's
Principal Executive Offices)
The registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to the filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the issuer's common stock, as of August 5,
1996:
Common Stock, $.001 Par Value: 33,873,514 shares
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MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1996 and March 31, 1996..........................3
Condensed Consolidated Statements of Income -
Three Months Ended June 30, 1996 and June 30, 1995........4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended June 30, 1996 and June 30, 1995........5
Notes to Condensed Consolidated Financial Statements..........6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................11
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.........................20
SIGNATURES ................................................................21
EXHIBITS
11 Computation of Net Income Per Share......................23
2
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
ASSETS
See accompanying notes to condensed consolidated financial statements
3
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
Three Months Ended June 30,
----------------------------
1996 1995
-------- --------
(Unaudited)
Net sales $ 74,161 $ 64,499
Cost of sales 37,525 31,004
-------- --------
Gross profit 36,636 33,495
Operating expenses:
Research and development 6,920 6,285
Selling, general and administrative 12,627 11,049
Restructuring cost 5,969 --
Write-off of in-process technology 1,575 --
-------- --------
27,091 17,334
Operating income 9,545 16,161
Other income (expense):
Interest income 414 491
Interest expense (759) (601)
Other, net (39) 36
-------- --------
Income before income taxes 9,161 16,087
Income taxes 2,475 4,584
-------- --------
Net income $ 6,686 $ 11,503
======== ========
Net income per common and
common equivalent share $ 0.18 $ 0.32
======== ========
Shares used in per share calculation 36,282 36,208
======== ========
See accompanying notes to condensed consolidated financial statements
4
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
See accompanying notes to condensed consolidated financial statements
5
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying condensed consolidated financial statements include
the accounts of Microchip Technology Incorporated and its wholly-owned
subsidiaries (the "Company"). All intercompany balances and transactions have
been eliminated in consolidation.
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of the
Company, the accompanying financial statements include all adjustments of a
normal recurring nature which are necessary for a fair presentation of the
results for the interim periods presented. Certain information and footnote
disclosures normally included in financial statements have been condensed or
omitted pursuant to such rules and regulations. It is suggested that these
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's Annual Report on Form
10-K for the year ended March 31, 1996. The results of operations for the three
months ended June 30, 1996 are not necessarily indicative of the results to be
expected for the full fiscal year.
(2) ASiC Acquisition
On June 25, 1996 the Company acquired ASiC Technical Solutions, Inc., a
fabless provider of quick turn gate array devices (the "Acquisition"). The
Acquisition was treated as a purchase for accounting purposes. The amount paid
for the Acquisition and related costs was $1,750,000. As part of the
Acquisition, Microchip allocated a substantial portion of the purchase price to
in-process research and development costs, which is consistent with the
Company's on-going treatment of research and development costs. The total
one-time write-off in the quarter associated with the Acquisition was
$1,575,000, with the balance to be treated as purchased technology related to
current product and amortized over the appropriate period. The impact of the
Acquisition to the Company's reported
6
financial data is immaterial to the Company's results of operations. Therefore,
pro-forma information illustrating the combined results after the Acquisition
has not been provided.
(3) Restructuring Charges
During the quarter ended June 30, 1996, primarily in response to
inventory correction activities at the Company's customers, the Company
implemented a series of actions to temporarily reduce production capacity,
curtail the growth of inventories and reduce operating expenses. These actions
included delaying capital expansion plans and deferring capital spending, a 15%
production cutback in wafer fabrication, a headcount reduction in early April,
1996, representing approximately 3% of the Company's worldwide employees, and a
two-week wafer fab shut down in early July, 1996. As a result of these actions,
the Company recorded a pre-tax restructuring charge of $5,969,000 in the quarter
ended June 30, 1996 to cover costs primarily related to idling part of the
Company's 5-inch wafer fab capacity, paying continuing expenses during the wafer
fab shutdown and paying severance costs associated with the April, 1996
headcount reduction.
(4) Accounts Receivable
Accounts receivable consists of the following (amounts in thousands):
June 30, March 31,
1996 1996
----------------------------------
Trade accounts receivable $ 46,384 $ 47,799
Other 973 1,243
--------------- ---------------
47,357 49,042
Less allowance for doubtful accounts 2,005 1,834
--------------- ---------------
$ 45,352 $ 47,208
=============== ===============
(5) Inventories
The Company utilizes the LIFO (last-in-first-out) accounting method and
has consistently presented its results of operations on this basis for all
periods presented.
7
The components of inventories are as follows (amounts in thousands):
June 30, March 31,
1996 1996
-----------------------------------
Raw materials $ 2,537 $ 2,038
Work in process 48,344 43,036
Finished goods 19,346 21,430
--------------- ---------------
70,227 66,499
Less allowance for inventory valuation 10,424 10,372
--------------- ---------------
$ 59,803 $ 56,127
=============== ===============
(6) Property, Plant and Equipment
Property, plant and equipment consists of the following (amounts in
thousands):
June 30, March 31,
1996 1996
-----------------------------------
Land $ 10,518 $ 10,518
Building and building improvements 41,428 36,939
Machinery and equipment 187,460 185,580
Projects in process 41,864 26,389
--------------- ---------------
281,270 259,426
Less accumulated depreciation
and amortization 69,324 62,043
--------------- ---------------
$ 211,946 $ 197,383
=============== ===============
(7) Lines of Credit
Lines of credit consist of the following (amounts in thousands):
June 30, March 31,
1996 1996
-----------------------
Unsecured line of credit with a syndicate of
U.S. banks for up to $90,000,000, bearing
interest at the Prime Rate or the London
Interbank Offered Rate (LIBOR) plus 75
basis points (8.25% and 5-1/2%-5-5/8%
respectively, at June 30, 1996) expiring
January, 1997. $ 29,100 $ 21,000
8
Unsecured lines of credit with various
Taiwan financial institutions for
up to $14,920,000 (U.S. dollar equivalent),
borrowings predominately denominated
in New Taiwan Dollars, bearing interest
at the Taiwan money market rate (6.80%
at June 30, 1996), expiring on various
dates through April, 1997. $ --- $ ---
----------- --------
$ 29,100 $ 21,000
=========== ========
The agreement between the Company and the syndicate of U.S. banks requires the
Company to achieve certain financial ratios and operating results. The Company
was in compliance with these covenants as of June 30, 1996.
The line of credit with the syndicate of U.S. banks converts borrowings
into a term loan at the expiration date of the line of credit, if the parties do
not mutually agree to extend the line for an additional period. The line of
credit is split into two components of $45,000,000 each, with amortization of
each component being repaid in eight quarterly payments of principal plus
interest and twenty quarterly payments of principal plus interest, respectively.
The term facilities will bear interest at the prime rate for the period of the
borrowings.
(8) Stockholders' Equity
Stock Repurchase Activity. In connection with a stock repurchase
program during the quarter ended June 30, 1996, the Company purchased a total of
182,500 shares of the Company's common stock at a total cost of $4,100,000.
Subsequent to June 30, 1996, and through August 5, 1996, the Company purchased
an additional 697,500 shares of common stock of the Company, at a total cost of
$15,253,000.
Also in connection with the stock repurchase program, as of June 30,
1996, the Company held unexpired put options for 125,000 shares. The unexpired
put options have expiration dates ranging from October 4 to October 9, 1996 at
prices ranging from $27.375 to 29.875. The net proceeds from sale and repurchase
of put options has been credited to paid-in capital. For the quarter ended June
30, 1996, $770,000 was charged to paid-in capital due to the repurchase of put
options. Subsequent to June 30,
9
1996, the Company entered into 250,000 put options at prices ranging from $22.50
to $24.875. These put options have expiration dates ranging from January 10,
1997 to July 10, 1997.
(9) Supplemental Cash Flow Information
Cash paid for income taxes amounted to $189,000 and $1,923,000 during
the three months ended June 30, 1996 and 1995 respectively. Cash paid for
interest amounted to $599,000 for each of the three month periods ended June 30,
1996 and 1995.
10
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
During the quarter ended June 30, 1996, primarily in response to
inventory correction activities at the Company's customers, the Company
implemented a series of actions to temporarily reduce production capacity,
curtail the growth of inventories and reduce operating expenses. These actions
included delaying capital expansion plans and deferring capital spending, a 15%
production cutback in wafer fabrication, a headcount reduction in early April,
1996, representing approximately 3% of the Company's worldwide employees, and a
two-week wafer fab shut down in early July, 1996. As a result of these actions,
the Company recorded a pre-tax restructuring charge of $5,969,000 in the quarter
ended June 30, 1996 to cover costs primarily related to idling part of the
Company's 5-inch wafer fab capacity, paying continuing expenses during the wafer
fab shutdown and paying severance costs associated with the April, 1996
headcount reduction. The production cutback impacted the Company's production
efficiency and reduced gross margins during the quarter.
On June 25, 1996, the Company acquired ASiC Technical Solutions, Inc.,
a fabless provider of quick turn gate array devices (the "Acquisition"). The
Acquisition was treated as a purchase for accounting purposes. The amount paid
for the Acquisition and related costs was $1,750,000. As part of the
Acquisition, Microchip allocated a substantial portion of the purchase price to
in-process research and development costs, which is consistent with the
Company's on-going treatment of research and development costs. The total
one-time write-off in the quarter associated with the Acquisition was
$1,575,000, with the balance to be treated as purchased technology related to
current product and amortized over the appropriate period. The impact of the
Acquisition to the Company's reported financial data is immaterial to the
Company's results of operations. Therefore, pro-forma information illustrating
the combined results after the Acquisition has not been provided.
11
Results of Operations
The Company's net sales for the quarter ended June 30, 1996 were $74.2
million, an increase of 15.0% over sales of $64.5 million for the corresponding
quarter of the previous fiscal year, and an increase of 2.9% from the previous
quarter's sales of $72.1 million. The Company experienced growth in sales of
8-bit microcontrollers and serial and parallel EEPROM memories over these
periods and a moderate decline in sales of its de-emphasized products. The
improvements in overall sales mix is primarily due to the Company's emphasis on
higher margin products. The Company does not expect the sales mix of its
products to change substantially in future periods.
Microchip resumed growth in sales during the quarter ended June 30,
1996, and the Company believes that the inventory correction activities at the
Company's customers are subsiding. The Company also currently believes that the
effects of the inventory corrections at OEM customers will be substantially
completed by the second half of calendar 1996. The foregoing statements are
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, and are subject to the safe harbors created thereby. Actual results
could differ materially because of the following factors, among others: general
economic conditions in the United States and worldwide markets served by the
Company; customer inventory levels, order patters and seasonality; the cyclical
nature of both the semiconductor industry and the markets addressed by the
Company's products; the level of orders which are received and can be shipped in
a quarter; market acceptance of the products of both the Company and its
customers; customer demand for the Company's products; competition and
competitive pressures on pricing; and product availability.
The Company's family of 8-bit microcontrollers represents the largest
component of Microchip's total net sales. Microcontrollers and associated
application development systems accounted for 61% and 58% of total net sales in
the quarters ending June 30, 1996 and 1995, respectively. A related component of
the Company's product sales consists of serial and parallel EEPROM memories.
These products
12
accounted for 33% and 34% of net sales in the quarters ending June 30, 1996 and
1995, respectively. The remaining components of total net sales were the
Company's commodity memory and other miscellaneous products which accounted for
6% and 8% of net sales in the quarters ending June 30, 1996 and 1995,
respectively.
During the past three years, the Company's overall average selling
prices for its embedded control products have remained relatively constant,
although the Company experienced increased pricing pressure on its non-volatile
memory products during the quarter ended June 30, 1996. While a decrease in
average selling prices could adversely affect the Company's operating results,
the Company believes that operating margins will be maintained at historical
levels as (i) the Company transitions over time to products with higher average
selling prices and (ii) the Company transitions to higher yielding manufacturing
processes. There can be no assurance that average selling prices or operating
margins for the Company's embedded control products will remain constant in the
future due to competitive and other pressures. The foregoing statements
regarding average selling prices and operating margins are forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
are subject to the safe harbors created thereby. Actual results could differ
materially because of the following factors, among others: competition and
competitive pressures on pricing and product availability; customer inventory
levels, order patterns and seasonality; the cyclical nature of both the
semiconductor industry and the markets addressed by the Company's products; the
level of orders that are received and can be shipped in a quarter; market
acceptance of the products of both the Company and its customers; demand for the
Company's products; fluctuations in production yields; production efficiencies;
overall capacity utilization; changes in product mix; and absorption of fixed
costs, labor and other fixed manufacturing costs.
Foreign sales represented 67% of net sales in the current fiscal
quarter, 66% of net sales in the
13
corresponding quarter of the previous fiscal year and 66% of net sales in the
previous quarter. The Company's foreign sales have been predominantly in Asia,
Europe and Japan which the Company attributes to the manufacturing strength in
those areas for consumer, automotive, office automation, communications and
industrial products. The majority of foreign sales are U.S. dollar denominated.
The Company has entered into and, from time to time, will enter into, hedging
transactions in order to minimize exposure to currency rate fluctuations.
Although none of the countries in which the Company conducts significant foreign
operations has had a highly inflationary economy in the last five years, there
can be no assurance that inflation rates or fluctuations in foreign currency
rates in countries where the Company conducts operations will not adversely
affect the Company's operating results in the future.
Additional Factors Affecting Operations. The Company generally produces
standard products that can be shipped from inventory within a short time after
receipt of an order. Accordingly, the Company's net sales in any given quarter
are dependent upon a combination of shipments from backlog and orders received
in that quarter for shipment in that quarter ("turns orders"). Over the past
several quarters, the Company has been increasing its inventory levels so that
it can shorten delivery times which it believes is an important competitive
factor. Current industry conditions are resulting in customers' orders being
placed covering a short period of delivery, limiting the Company's visibility on
net sales in future quarters. Because turns orders are more difficult to
predict, there can be no assurance that the combination of backlog and turns
orders in any quarter will be sufficient to achieve growth in net sales.
The Company believes the future growth of its 8-bit family of
microcontroller products and related memory products sales will depend largely
upon the Company's success in having its products designed into high-volume
customer applications. Design wins typically precede the Company's volume
shipment of products for such applications by 15 months or more. The Company
also believes that shipment levels of its proprietary application development
systems are an indicator of potential future microcontroller sales. During the
quarter ended June 30, 1996, the Company achieved an increasing number of design
wins and shipped increasing levels of application development systems as
compared to
14
previous fiscal periods. However, there can be no assurance that any particular
development system sale will result in an embedded control product design win or
that any particular design win will result in future microcontroller product
sales.
The Company's operating results are affected by a wide variety of
factors which could adversely impact its net sales and profitability, many of
which are beyond the control of the Company. These factors include, among
others, the Company's ability to design and introduce new products on a timely
basis, market acceptance of products of both the Company and its customers,
customer order patterns and seasonality, the amount of any product returns,
industry pricing trends, availability and utilization of manufacturing capacity,
the availability and cost of raw materials, equipment and other supplies, and
the cyclical nature of the semiconductor industry and economic, political or
other conditions in the United States, Taiwan, Thailand or worldwide markets.
Gross Profit. The Company's gross profit was $36.6 million for the
quarter ended June 30, 1996 compared with $33.5 million in the corresponding
quarter of the prior year and $37.3 million in the previous quarter. Gross
profit as a percent of sales was 49.4% in the current quarter, 51.9% in the
corresponding quarter of the prior fiscal year and 51.8% in the previous
quarter. Gross profit was down primarily as a result of the reduced level of
5-inch wafer production at one of the Company's wafer fabs during the quarter.
Wafer loading is not anticipated to return to the previous levels during the
quarter ending September 30, 1996 and, consequently, the Company currently
believes that gross margins will remain in the present range for the quarter
ending September 30, 1996. The Company anticipates that its cost of sales will
fluctuate over time, driven primarily by the product mix of higher-margin 8-bit
microcontroller products and related memory and commodity memory products,
manufacturing yields, wafer fab loading levels and competitive and economic
conditions. The Company anticipates that its gross profit percentage will
fluctuate over time, driven primarily by product mix, manufacturing yields and
competitive and economic conditions. The foregoing statements relating to
anticipated gross margins and costs of sale are forward-looking statements
within the meaning of Section 27A of the
15
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to the safe harbors created thereby.
Actual results could differ materially because of the following factors, among
others: fluctuations in production yields; production efficiencies; overall
capacity utilization; cost and availability of raw materials; absorption of
fixed costs, labor and other direct manufacturing costs; changes in product mix;
competitive pressures on prices; and other economic conditions in the United
States and other worldwide markets.
The Company has consistently presented its results of operations for
all periods on the last-in first-out (LIFO) method and has assessed the net
realizable value of inventory based on LIFO costs. LIFO has the effect of
matching current costs of production with sales generated during the same
period. Production costs have decreased over time due to improvements in
manufacturing productivity and yields, resulting in lower cost of sales. This
downward trend in production costs has resulted in lower cost of sales on a LIFO
basis than would have been recognized had a first-in, first-out (FIFO) basis
been utilized, decreasing cost of sales $879,000 for the three months ended June
30, 1996. As a result of changes in sales and product mix which affected
production costs, the LIFO inventory decreased and cost of sales increased by
$250,000 for the three months ended June 30, 1995.
The Company relies on the assembly and test capability of third-party
contractors in order to meet rising product shipment requirements. Such reliance
on third-parties involves some reduction in the Company's level of control over
the assembly portion of its business. While the Company reviews the
availability, quality, delivery and cost performance of these third-party
contractors, there can be no assurance that such reliance on third-party
contractors will not adversely impact results in future reporting periods if any
third-party contractor is unable to maintain availability, assembly yields and
cost at approximately their current level.
During the second half of fiscal 1997, the Company expects to bring its
wholly-owned Bangkok, Thailand test facility on line for production volumes.
While the Company believes the long term costs at this facility will be at or
below existing costs for similar activities, there may be a short term impact in
16
fiscal 1997 to gross profit margins relating to production efficiencies
and yields, operation levels, fixed cost absorption and operating cost levels.
It is anticipated that the facility will reach optimum loading by the beginning
of fiscal 1998. The foregoing statement is a forward-looking statement within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and is subject
to the safe harbors created thereby. Actual results could differ materially
because of the following factors, among others: delays in construction and
facilitation of the Thailand facility; production yields and efficiencies;
factory absorption rates; capacity loading; political instability and
expropriation; supply disruption; operating cost levels; and the rate of revenue
growth.
Research and Development. The Company is committed to continued
investment in new and enhanced products, including its development systems
software and in its design and manufacturing process technology. The dollar
investment in research and development increased 10% in the current fiscal
quarter relative to the corresponding quarter of the prior fiscal year, and was
equal to the investment in the prior quarter. The Company will continue to
invest in research and development in the future, including an investment in
process and product development associated with the capacity expansion of the
Company's fabrication facilities.
Selling, General and Administrative. Through expense controls and
operating efficiencies, the Company has maintained selling, general and
administrative expenses in the current fiscal quarter at 17.0% of sales as
compared to 17.1% of sales in the corresponding quarter of the prior fiscal
year. Selling, general and administrative expenses in the prior quarter were
17.0% of sales. This has been achieved while the Company has continued to invest
significantly in incremental worldwide sales and technical support resources to
promote the Company's embedded control products. As the Company returns to a
pattern of growth, which the Company believes began in the quarter ended June
30, 1996, it is anticipated that further efficiencies in selling, general and
administrative expenses will be realized. However, there can be no assurance
that revenue growth in the future will be sufficient to achieve further
reduction in selling, general and administrative expenses as a percentage of
sales.
17
Other Income (Expense). Interest income of $414,000 in the current
fiscal quarter decreased from $491,000 in the corresponding quarter of the prior
fiscal year and from $519,000 in the previous quarter. The decrease in both
instances is attributable to lower invested cash balances.
Interest expense of $759,000 in the current fiscal quarter increased
from $601,000 in the corresponding quarter of the prior fiscal year and from
$725,000 in the previous quarter. The increase in interest expense is related to
additional borrowings associated with the Company's equipment additions. Other
income represents numerous immaterial non-operating items. The Company
anticipates its interest expense will increase in fiscal 1997 as the Company
increases its borrowings. In addition, interest expense could be adversely
impacted by an increase in interest rates.
The use of available cash and debt to fund expected capital
expenditures in future periods, without additional capital provided from
financing activities, will result in an increase in interest expense.
Provision for Income Taxes. Provisions for income taxes reflect taxes
on foreign earnings and federal and state income taxes on U.S. earnings. The
Company had an effective tax rate of 27% and 28.5% for the three month periods
ended June 30, 1996 and 1995, respectively. The Company currently believes that
the tax rate for the foreseeable future will be approximately 27%.
Liquidity and Capital Resources
The Company had $22.6 million in cash as of June 30, 1996, a decrease
of $8.5 million from the March 31, 1996 balance. The Company has an unsecured
short-term line of credit totaling $14.9 million with certain foreign banks.
There were no borrowings under the line of credit with the foreign banks as of
June 30, 1996. There are no covenants related to the foreign line of credit. The
Company also has an unsecured line of credit with a syndicate of U.S. banks
totaling $90.0 million. As of June 30, 1996, $29.1 million had been utilized
under the financing arrangements. The domestic line of credit requires the
Company to achieve certain financial ratios and operating results. The Company
was in compliance with these covenants at June 30, 1996.
18
At June 30, 1996, an aggregate of $75.8 million of these facilities was
available, subject to financial covenants and ratios with which the Company is
in compliance. Subsequent to June 30, 1996, the Company has utilized an
additional $16.7 million, resulting in an aggregate of $59.1 million available.
The Company's ability to fully utilize these facilities is dependent on the
Company remaining in compliance with such covenants and ratios.
In the three months ended June 30, 1996, the Company generated $14.9
million of cash from operating activities, a decrease of $4.8 million from the
corresponding period of the previous fiscal year. The reduction in cash flow
from operations was primarily due to the reduction in net income, depreciation
charges and changes in accounts payable and accrued liabilities.
The Company's level of capital expenditures varies from time to time as
a result of actual and anticipated business conditions. Capital expenditures in
the three months ended June 30, 1996 and 1995, were $26.8 million and $17.1
million, respectively. Capital expenditures were primarily for the expansion of
production capacity and the addition of research and development equipment in
each of these periods. The Company currently anticipates spending approximately
$100 million during the next twelve months, primarily for additional capital
equipment to increase capacity at its wafer fabrication facilities, to construct
additional facilities and to expand assembly and test operations. Capital
expenditures will be financed by cash flow from operations, existing cash,
available debt arrangements and other sources of financing, including debt or
equity financing. The Company believes that the capital expenditures anticipated
to be incurred over the next twelve months will provide sufficient additional
manufacturing capacity to meet its needs for that period.
Net cash provided by financing activities was $3.4 million and $1.3
million for the three months ended June 30, 1996 and 1995, respectively.
Proceeds from sale of stock and put options were $0.9 million and $1.5 million
for the three months ended June 30, 1996 and 1995, respectively. Proceeds from
the issuance of long term debt were $1.2 million for the three months ended June
30, 1995. Payments on long term debt and capital lease obligations were $1.5
million for the three months ended
19
June 30, 1996 and 1995. Net proceeds from lines of credit were $8.1
million for the three months ended June 30, 1996.
The Company believes that its existing sources of liquidity combined
with cash generated from operations will be sufficient to meet the Company's
currently anticipated cash requirements for at least the next twelve months.
However, due to the capital intensive nature of the semiconductor industry, the
Company expects to seek additional equity or debt financing during the next
twelve months. There can be no assurance that such financing will be available
on acceptable terms, and any additional equity financing would result in
additional dilution to existing stockholders.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 11 Computation of Net Income Per Share
(b) Reports on Form 8-K.
The registrant did not file any reports on
Form 8-K during the quarter ended June 30,
1996.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICROCHIP TECHNOLOGY INCORPORATED
Date: August 12, 1996 By: /s/ C. Philip Chapman
--------------- -----------------------------------------------
C. Philip Chapman
Vice President, Chief Financial Officer
and Secretary (Duly Authorized Officer, and
Principal Financial and Accounting Officer)
21
EXHIBIT INDEX
Exhibit No. Page No.
----------- --------
11 Computation of Net Income Per Share............... 23
22