Microchip Technology Announces Record Net Sales and Fourth Quarter and Fiscal Year 2013 Financial Results
FOR FISCAL YEAR 2013:
RECORD NON-GAAP NET SALES OF $1.606 BILLION
RECORD GAAP NET SALES OF $1.582 BILLION
ON A NON-GAAP BASIS:
GROSS MARGIN OF 57.2%; OPERATING INCOME OF $459.5 MILLION; NET INCOME OF $388.5 MILLION AND 24.2% OF NET SALES; EPS OF $1.89 PER DILUTED SHARE
ON A GAAP BASIS:
NET GROSS MARGIN OF 53%; OPERATING INCOME OF $178.6 MILLION; NET INCOME OF $127.4 MILLION AND 8.1% OF NET SALES; EPS OF 62 CENTS PER DILUTED SHARE
FOR THE QUARTER ENDING MARCH 31, 2013:
RECORD NET SALES OF $430.1 MILLION ON BOTH A NON-GAAP AND GAAP BASIS
ON A NON-GAAP BASIS: GROSS MARGINS OF 56.4%; OPERATING INCOME OF $119.5 MILLION; NET INCOME OF $109.3 MILLION; AND EPS OF 52 CENTS PER DILUTED SHARE INCLUDING A 3 CENTS BENEFIT FROM THE RETROACTIVE REINSTATEMENT OF THE R&D TAX CREDIT. THE FIRST CALL PUBLISHED ESTIMATE FOR NON-GAAP EPS WAS 47 CENTS.
ON A GAAP BASIS: GROSS MARGINS OF 55.6%; OPERATING INCOME OF $56.7 MILLION; NET INCOME OF $59.7 MILLION; AND EPS OF 28 CENTS PER DILUTED SHARE INCLUDING A 3 CENTS BENEFIT FROM THE RETROACTIVE REINSTATEMENT OF THE R&D TAX CREDIT. THERE WAS NO PUBLISHED FIRST CALL ESTIMATE FOR GAAP EPS.
RECORD NET SALES FOR OVERALL MICROCONTROLLERS, 16-BIT MICROCONTROLLERS AND ANALOG PRODUCTS
LICENSING NET SALES OF $22.1 MILLION, UP 3.4% SEQUENTIALLY
CHANDLER, Ariz.--(BUSINESS WIRE)-- Microchip Technology Incorporated (NAS: MCHP) , a leading provider of microcontroller, mixed-signal, analog and Flash-IP solutions, today reported results for the three months and fiscal year ended March 31, 2013 as summarized in the following table:
Three Months Ended March 31, 2013
Year Ended March 31, 2013
(in millions, except earnings per diluted share and percentages)
Other Expense including Gains/Losses on Equity Method Investments
Income Tax (Benefit) Expense
Earnings per Diluted Share2
See the "Use of Non-GAAP Financial Measures" section of this release.
Consolidated net sales for the fourth quarter of fiscal year 2013 were $430.1 million, up 3.4% sequentially from net sales of $416.0 million in the immediately preceding quarter, and up 26.9% from net sales of $338.9 million in the prior year's fourth quarter. Consolidated GAAP net income for the fourth quarter of fiscal year 2013 was $59.7 million, or 28 cents per diluted share, up 486.7% from GAAP net income of $10.2 million, or 5 cents per diluted share, in the immediately preceding quarter, and down 26.0% from GAAP net income of $80.6 million, or 39 cents per diluted share, in the prior year's fourth quarter. In the fourth quarter of fiscal 2013, GAAP net income includes amortization of acquired intangibles of $39.9 million, special charges of $7.2 million and various non-recurring tax benefits of $9.5 million. In the fourth quarter of fiscal 2012, GAAP net income includes amortization of acquired intangibles of $2.8 million and special charges of $1.5 million.
Consolidated non-GAAP net income for the fourth quarter of fiscal year 2013 was $109.3 million, or 52 cents per diluted share, up 29.3% from non-GAAP net income of $84.5 million, or 41 cents per diluted share, in the immediately preceding quarter, and up 15.9% from non-GAAP net income of $94.3 million, or 46 cents per diluted share, in the prior year's fourth quarter. Fourth quarter GAAP and non-GAAP net income included a one-time tax benefit of $6.5 million for the retroactive reinstatement of the R&D tax credit for calendar year 2012. Additionally, for the fourth quarters of fiscal 2013 and fiscal 2012, our 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, earn out adjustments and legal and other general and administrative expenses associated with acquisitions), non-recurring tax events and non-cash interest expense on our convertible debentures. A reconciliation of our non-GAAP and GAAP results is included in this press release.
Consolidated GAAP net sales for the fiscal year ended March 31, 2013 were $1.582 billion, an increase of 14.4% from net sales of $1.383 billion in the prior fiscal year. On a GAAP basis, consolidated net income for the fiscal year ended March 31, 2013 was $127.4 million, or 62 cents per diluted share, a decrease of 62.2% from net income of $336.7 million, or $1.65 per diluted share in the prior fiscal year.
On a non-GAAP basis, consolidated net sales for the fiscal year ended March 31, 2013 were $1.606 billion, an increase of 16.1% from net sales of $1.383 billion in the prior fiscal year. Non-GAAP consolidated net income for the fiscal year ended March 31, 2013 was $388.5 million, or $1.89 per diluted share, an increase of 1.2% from net income of $383.7 million, or $1.89 per diluted share, in the prior fiscal year.
Microchip also announced today that its Board of Directors declared a quarterly cash dividend on its common stock of 35.35 cents per share. The quarterly dividend is payable on June 4, 2013 to stockholders of record on May 21, 2013.
"We were very pleased with our execution in the March quarter," said Steve Sanghi, President and CEO. "Our net sales were above the midpoint of our guidance and our gross margin, operating income and earnings per share all exceeded the high end of our guidance, as we more than delivered on our expectation that the December quarter would mark the bottom for this cycle."
Mr. Sanghi added, "Our net sales were up sequentially by 3.4%, fueled by broad based growth across our product lines. Our overall March quarter results were excellent and I thank all the employees of Microchip for their contributions to our success."
"Our microcontroller revenue grew 3.7% sequentially in the March quarter to achieve an all time record of $275.8 million," said Ganesh Moorthy, Chief Operating Officer. "Microcontroller revenue was also up 20.5% compared to the year ago quarter and for fiscal year 2013 our microcontroller business was up 12.4% compared to fiscal year 2012."
Mr. Moorthy continued, "Our 16-bit microcontroller revenue was up 7.7% sequentially in the March quarter, achieving a new record. For fiscal year 2013, our 16-bit microcontroller revenue was up 74% compared to fiscal year 2012. Fiscal year 2013 also marks the 8th consecutive year of revenue growth and new revenue records for our 16-bit microcontroller business. We continue to expand the breadth of innovative 16-bit solutions that we are offering, and customers that we are serving, as we continue to gain share in this market."
Mr. Moorthy concluded, "Our analog revenue grew 4.1% sequentially in the March quarter to achieve a new record, and continues to perform exceptionally well. For fiscal year 2013, our analog revenue was up 89.4% compared to fiscal year 2012, easily one of the best performing analog businesses in the industry. Analog revenue represented 22.6% of our overall revenue in the March quarter, the highest proportion we have ever achieved."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "We made great progress in reducing our inventory position in the March quarter. We ended the March quarter with 116 days of inventory which is in line with our target model. However, our internally produced inventory is still a bit high and the inventory we purchase from foundries is low. We will continue to work on right-sizing the various components of our inventory holdings in the June quarter."
Mr. Bjornholt added, "We had strong free cash flow generation in the March quarter at $123.3 million prior to our dividend payment of $69.2 million. We ended the quarter with $1.84 billion in cash and investments on the balance sheet."
Mr. Sanghi concluded, "We have continued to see exceptionally strong bookings and expedite requests in our business driven by strong demand and our design win pipeline. The bookings were an all time record in the March quarter. The starting backlog for the June quarter was significantly higher than the starting backlog for the March quarter. However, because of lead-times, many new bookings will be scheduled beyond the end of this quarter. Taking all these factors into account, we expect Microchip's total net sales in the June quarter to be up between 2% and 6% sequentially."
Microchip's Recent Highlights:
The Company made a major expansion of its embedded wireless portfolio with new Bluetooth®, Wi-Fi® and ZigBee® products. Included was a PIC32 Bluetooth Digital Audio Kit that showcases Microchip's 32-bit MCU capabilities, feature-rich Wi-Fi modules, an IEEE 802.15.4 and proprietary networking radio, and XBee® compatible Bluetooth and Wi-Fi modules.
In partnership with Digilent®, Microchip added the Arduino™ compatible chipKIT™ uC32™ development platform and Wi-Fi shield for its 32-bit PIC32 microcontrollers.
The latest microcontroller introductions included an expansion of the 16-bit PIC24 Lite portfolio with advanced analog integration, 5V operation and eXtreme Low Power Technology for cost-sensitive automotive, consumer, medical and industrial applications. Adding to Microchip's 8-bit portfolio is the smallest and lowest-cost PIC MCU with I2C™. In combination with low power consumption and a hardware CVD peripheral in an 8-pin package, this PIC12LF1552 MCU is ideal for general-purpose and touch-sensing applications.
In development-tool news, the Graphics Display Designer X is an enhanced visual design utility that provides a quick and easy way of creating Graphical User Interface screens for applications using 16 or 32-bit PIC MCUs. Additionally, it allows designers to work within the operating system of their choice, including Windows®, Linux or Mac OS®.
Microchip recently shipped its 12 billionth PIC® microcontroller, approximately 10 months after delivering its 11 billionth. This milestone demonstrates the industry's continued acceptance of Microchip's 8, 16 and 32-bit PIC microcontrollers as the high-performance, low-power, cost-effective solution for embedded-control designs.
Building on its SMSC acquisition, Microchip announced the world's first MOST150 Intelligent Network Interface Controller (INIC) with a USB 2.0 high-speed device port and an integrated coax transceiver. With this USB 2.0 port, including USB PHY and High-Speed Inter-Chip interface (HSIC), the OS81118 allows designers to create in-car mobile and Wi-Fi connectivity applications on the MOST150 network by connecting a standard Wi-Fi/3G/LTE module via USB.
Microchip introduced BodyCom™ technology, which is the world's first to use the human body as a secure, low-power communication channel. The BodyCom framework provides a short-range, low-data-rate communication solution for securely connecting to a wide range of wireless applications.
First Quarter Fiscal Year 2014 Outlook:
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Microchip Consolidated Guidance
$438.7 to $456 million
$438.7 to $456 million
56.0% to 56.5%
$2.2 to $2.3 million
56.5% to 57.0%
36.65% to 37.15%
$39 to $40.6 million
27.75% to 28.25%
Income Tax Expense
13.1% to 14.1%
$2.6 to $3.1 million
10.5% to 11.5%
$64.2 to $71.5 million
$40.4 to $42.5 million
$104.6 to $114.2 million
Diluted Common Shares
Earnings per Diluted Share
30 to 34 cents
about 20 cents
50 to 54 cents
See the "Use of Non-GAAP Financial Measures" section of this release.
Earnings per share have been calculated based on the diluted shares outstanding of Microchip on a consolidated basis.
See Footnote 2 under the "Use of Non-GAAP Financial Measures" section of this release.
Microchip's inventory days at June 30, 2013 are expected to be flat to up a few days. Our inventory position enables us to continue to service our customers with very short lead times while allowing us to control future capital expenditures. Our actual inventory level will depend on the inventory that our distributors decide to hold to support their customers, overall demand for our products and our production levels.
Capital expenditures for the quarter ending June 30, 2013 are expected to be approximately $35 million. Capital expenditures for all of fiscal year 2014 are anticipated to be approximately $80 million. We are continuing to take actions to selectively invest in the equipment needed to support the expected growth of our new products and technologies.
We expect net cash generation during the June quarter of approximately $100 million to $120 million prior to the dividend payment.
Use of Non-GAAP Financial Measures: Our Non-GAAP adjustments, where applicable, include the effect of share-based compensation, expenses related to our acquisition activities (including intangible asset amortization, inventory valuation costs, restructuring costs, severance costs, earn-out adjustments and legal and other general and administrative expenses associated with acquisitions), and non-cash interest expense on our convertible debentures, the related income tax implications of these items and nonrecurring tax events.
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 equity 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, legal settlements, nonrecurring tax events and a portion of our interest expense related to our convertible debentures are either non-cash expenses or non-recurring expenses related to such transactions. Accordingly, management excludes all of these items from its internal operating forecasts and models.
We are using non-GAAP net sales, 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, 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 distributor inventory acquired in an acquisition being recognized as net sales for non-GAAP purposes on sell-through to provide comparability between periods for the results of the acquired company, or in the case of our equity 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.
Diluted Common Shares Outstanding can vary for, among other things, the trading price of our common stock, the actual exercise of options or vesting of restricted stock units, the potential for incremental dilutive shares from our convertible debentures (additional information regarding our share count is available in the investor relations section of our website under the heading "Supplemental Financial Information"), and the repurchase or the issuance of stock. The diluted common shares outstanding presented in the guidance table above assumes an average Microchip stock price in the June 2013 quarter of $37 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).
Generally, gross margin fluctuates over time, driven primarily by the mix of microcontrollers, analog products and memory products sold and licensing revenue; variances in manufacturing yields; fixed cost absorption; wafer fab loading levels; inventory reserves; pricing pressures in our non-proprietary product lines; and competitive and economic conditions. Operating expenses fluctuate over time, primarily due to net sales and profit levels.
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
Three Months Ended
Twelve Months Ended
Cost of sales
Research and development
Selling, general and administrative
Amortization of acquired intangible assets
Special charges, net