MICROCHIP TECHNOLOGY INCORPORATED (Exact Name Of Registrant As Specified In Its Charter) |
Delaware | 0-21184 | 86-0629024 |
(State Or Other Jurisdiction Of Incorporation) | (Commission File No.) | (IRS Employer Identification No.) |
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¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits | |
99.1 | Microchip Technology Announces Record Net Sales and Financial Results for Second Quarter Fiscal Year 2014 |
Dated: October 30, 2013 | Microchip Technology Incorporated (Registrant) |
By: /s/ J. Eric Bjornholt | |
J. Eric Bjornholt Vice President, Chief Financial Officer (Principal Accounting and Financial Officer) |
99.1 | Microchip Technology Announces Record Net Sales and Financial Results for Second Quarter Fiscal Year 2014 |
EXHIBIT 99.1 NEWS RELEASE NVESTOR RELATIONS CONTACT: J. Eric Bjornholt -- CFO..... (480) 792-7804 |
▪ | Record net sales of $492.7 million, up 6.5% sequentially and up 28.5% from net sales in the year ago quarter. |
▪ | On a non-GAAP basis: gross margins of 59.0%; Record operating income of $156.6 million; Record net income of $136.4 million; and Record EPS of 63 cents per diluted share. The First Call published estimate for non-GAAP diluted EPS was 60 cents. |
▪ | On a GAAP basis: gross margins of 58.6%; operating income of $117.5 million; net income of $99.8 million; and EPS of 46 cents per diluted share. There was no published first call estimate for GAAP EPS. |
▪ | Record net sales of 8-bit microcontrollers, 16-bit microcontrollers, 32-bit microcontrollers and analog products |
▪ | Record licensing revenue of $24.8 million |
(in millions, except earnings per diluted share and percentages) | Three Months Ended September 30, 2013 | |||
GAAP | % of Net Sales | Non-GAAP1 | % of Net Sales | |
Net Sales | $492.7 | $492.7 | ||
Gross Margin | $288.9 | 58.6% | $290.7 | 59.0% |
Operating Income | $117.5 | 23.9% | $156.6 | 31.8% |
Other Expense (including Gains/Losses on Equity Method Investments) | $6.3 | $4.1 | ||
Income Tax Expense | $11.4 | $16.2 | ||
Net Income | $99.8 | 20.3% | $136.4 | 27.7% |
Earnings per Diluted Share | 46 cents | 63 cents |
1 | See the “Use of Non-GAAP Financial Measures” section of this release. |
• | Microchip introduced two new development kits for its 32-bit PIC32 microcontrollers. The Verizon Wireless-Certified, Machine-to-Machine (M2M) Development Platform for CDMA enables custom embedded firmware application development with local-area and remote cellular connectivity. The PIC32 Bluetooth® Audio Development Kit eases the development of Bluetooth enabled smartphone docks and speakers. |
• | In the area of 16-bit microcontrollers, Microchip introduced an analog system-on-a-chip MCU family that integrates a full analog signal chain. It includes Microchip’s first on-chip precision 16-bit ADC, plus a DAC and dual operational amplifiers, along with eXtreme Low Power technology for extended battery life in portable medical and industrial applications. |
• | Microchip announced its Lighting Communications Development Platform, to enable engineers to design intelligent lighting and control systems with its 8, 16 and 32-bit PIC® microcontrollers; as well as its analog, wireless, and human-interface solutions. This full-featured, universal platform provides everything required to create a lighting network-using DMX512A or DALI which are the most prevalent standards. |
• | The Company also created a Cloud-Based Development Platform, including the Wi-Fi® Client Module Development Kit (Part # DM182020), which is now available on the Amazon Web Services Marketplace. It allows embedded engineers to easily connect their designs to the Amazon Elastic Compute Cloud (EC2) service, bridging the cloud and embedded worlds to further enable the Internet of Things. |
• | In other wireless news, Microchip’s new 2.4 GHz RF high-power amplifier supports 256-QAM modulation, extending the range of ultra-high data rate WLAN systems, such as Wi-Fi access points, routers and set-top boxes. |
• | The Company also continued to grow its very broad portfolio of analog products, including the world’s first programmable USB port power controllers for active connectors, such as the Apple® Lightning™ connector, along with 12W charging. Additionally, Microchip introduced the world’s first temperature-sensor family with 1.8V SMBus and I2C™ interfaces for the latest smartphone, tablet and PC chipsets. |
• | Microchip and element14 announced their 32-bit PIC32 MCU-based Raspberry Pi® chipKIT™ Expansion Board, which is the world’s first to offer Raspberry Pi users Arduino™ compatibility using an MCU in a prototyping-friendly packaging. |
• | Overall, Microchip shipped 48,049 development systems during the September quarter, which offers further evidence for the continued strong interest in its products. The total cumulative number of development systems shipped now stands at 1,577,448. |
• | Selling Power magazine named Microchip to its annual “Selling Power 50 Best Companies to Sell For” list for 2013. Microchip ranked 19th, and is the only semiconductor company on the list. |
Microchip Consolidated Guidance | |||
GAAP | Non-GAAP Adjustments | Non-GAAP1 | |
Net Sales | $463.1 to $492.7 million | $463.1 to $492.7 million | |
Gross Margin2 | 58.3% to 58.7% | $2.3 to $2.5 million | 58.8% to 59.2% |
Operating Expenses2 | 34.25% to 34.75% | $33.6 to $35.7 million | 27.0% to 27.5% |
Other Expense | $7.3 million | $2.3 million | $5.0 million |
Income Tax Expense | 11.8% to 12.8% | $2.6 to $2.9 million | 10.5% to 11.5% |
Net Income | $88.7 to $99.8 million | $35.2 to $37.7 million | $123.9 to $137.5 million |
Diluted Common Shares Outstanding3 | Approximately 218.4 million shares | Approximately 0.6 million shares | Approximately 217.8 million shares |
Earnings per Diluted Share | 40 to 46 cents | About 7 cents | 57 to 63 cents |
1 | See the “Use of Non-GAAP Financial Measures” section of this release. |
2 | Earnings per share have been calculated based on the diluted shares outstanding of Microchip on a consolidated basis. |
3 | See Footnote 2 under the “Use of Non-GAAP Financial Measures” section of this release. |
• | Microchip’s inventory days at December 31, 2013 are expected to be flat to up eight days compared to the September 30, 2013 levels. We believe our inventory position will enable us to continue to service our customers effectively 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 December 31, 2013 are expected to be approximately $35 million. Capital expenditures for all of fiscal year 2014 are anticipated to be approximately $115 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 December quarter of approximately $110 million to $130 million prior to the dividend payment. |
1 | 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. |
2 | 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 December 2013 quarter of $41 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). |
3 | 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) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net sales | $ | 492,669 | $ | 383,298 | $ | 955,461 | $ | 735,432 | ||||||||
Cost of sales | 203,806 | 189,103 | 400,024 | 336,440 | ||||||||||||
Gross profit | 288,863 | 194,195 | 555,437 | 398,992 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 78,254 | 64,082 | 151,339 | 112,908 | ||||||||||||
Selling, general and administrative | 69,368 | 71,767 | 135,078 | 127,359 | ||||||||||||
Amortization of acquired intangible assets | 23,744 | 27,858 | 51,421 | 31,904 | ||||||||||||
Special (income) charges | (11 | ) | 22,394 | 1,690 | 22,394 | |||||||||||
171,355 | 186,101 | 339,528 | 294,565 | |||||||||||||
Operating income | 117,508 | 8,094 | 215,909 | 104,427 | ||||||||||||
Losses on equity method investments | (101 | ) | (32 | ) | (361 | ) | (153 | ) | ||||||||
Other expense, net | (6,201 | ) | (5,943 | ) | (14,006 | ) | (11,291 | ) | ||||||||
Income before income taxes | 111,206 | 2,119 | 201,542 | 92,983 | ||||||||||||
Income tax provision | 11,400 | 23,303 | 23,157 | 35,457 | ||||||||||||
Net income (loss) | $ | 99,806 | (21,184 | ) | $ | 178,385 | $ | 57,526 | ||||||||
Basic net income (loss) per common share | $ | 0.50 | $ | (0.11 | ) | $ | 0.90 | $ | 0.30 | |||||||
Diluted net income (loss) per common share | $ | 0.46 | $ | (0.11 | ) | $ | 0.83 | $ | 0.28 | |||||||
Basic common shares outstanding | 197,825 | 194,060 | 197,388 | 193,756 | ||||||||||||
Diluted common shares outstanding | 216,475 | 194,060 | 214,371 | 204,627 | ||||||||||||
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) | |||||||||
ASSETS | |||||||||
September 30, | March 31, | ||||||||
2013 | 2013 | ||||||||
(Unaudited) | |||||||||
Cash and short-term investments | $ | 1,151,911 | $ | 1,578,597 | |||||
Accounts receivable, net | 230,493 | 229,955 | |||||||
Inventories | 275,124 | 242,334 | |||||||
Other current assets | 163,378 | 185,484 | |||||||
Total current assets | 1,820,906 | 2,236,370 | |||||||
Property, plant & equipment, net | 518,191 | 514,544 | |||||||
Long-term investments | 829,656 | 257,450 | |||||||
Other assets | 796,398 | 843,041 | |||||||
Total assets | $ | 3,965,151 | $ | 3,851,405 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
Accounts payable and other current liabilities | $ | 179,469 | $ | 202,659 | |||||
Short-term borrowings | 8,375 | - | |||||||
Deferred income on shipments to distributors | 151,049 | 138,952 | |||||||
Total current liabilities | 338,893 | 341,611 | |||||||
Long-term line of credit | 290,000 | 620,000 | |||||||
Long-term borrowings | 340,379 | - | |||||||
Convertible debentures | 367,533 | 363,385 | |||||||
Long-term income tax payable | 192,007 | 182,723 | |||||||
Deferred tax liability | 379,761 | 388,250 | |||||||
Other long-term liabilities | 38,039 | 21,966 | |||||||
Stockholders’ equity | 2,018,539 | 1,933,470 | |||||||
Total liabilities and stockholders’ equity | $ | 3,965,151 | $ | 3,851,405 |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net sales, as reported | $ | 492,669 | $ | 383,298 | $ | 955,461 | $ | 735,432 | |||||||
Distributor revenue recognition adjustment | - | 24,496 | - | 24,748 | |||||||||||
Non-GAAP net sales | $ | 492,669 | $ | 407,794 | $ | 955,461 | $ | 760,180 |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Gross profit, as reported | $ | 288,863 | $ | 194,195 | $ | 555,437 | $ | 398,992 | |||||||
Distributor revenue recognition adjustment | - | 15,737 | - | 15,868 | |||||||||||
Share-based compensation expense | 1,864 | 2,614 | 3,833 | 3,924 | |||||||||||
Acquisition-related acquired inventory valuation other costs | - | 22,650 | - | 24,150 | |||||||||||
Non-GAAP gross profit | $ | 290,727 | $ | 235,196 | $ | 559,270 | $ | 442,934 | |||||||
Non-GAAP gross profit percentage | 59.0 | % | 57.7 | % | 58.5 | % | 58.3 | % |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Research and development expenses, as reported | $ | 78,254 | $ | 64,082 | $ | 151,339 | $ | 112,908 | |||||||
Share-based compensation expense | (6,931 | ) | (6,358 | ) | (12,621 | ) | (10,390 | ) | |||||||
Acquisition-related costs | - | (17 | ) | - | (17 | ) | |||||||||
Non-GAAP research and development expenses | $ | 71,323 | $ | 57,707 | $ | 138,718 | $ | 102,501 | |||||||
Non-GAAP research and development expenses as a percentage of net sales | 14.5 | % | 14.2 | % | 14.5 | % | 13.5 | % |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Selling, general and administrative expenses, as reported | $ | 69,368 | $ | 71,767 | $ | 135,078 | $ | 127,359 | |||||||
Share-based compensation expense | (6,205 | ) | (11,581 | ) | (11,202 | ) | (16,225 | ) | |||||||
Acquisition-related costs | (383 | ) | (1,832 | ) | (1,271 | ) | (5,019 | ) | |||||||
Non-GAAP selling, general and administrative expenses | $ | 62,780 | $ | 58,354 | $ | 122,605 | $ | 106,115 | |||||||
Non-GAAP selling, general and administrative expenses as a percentage of net sales | 12.7 | % | 14.3 | % | 12.8 | % | 14.0 | % |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Operating expenses, as reported | $ | 171,355 | $ | 186,101 | $ | 339,528 | $ | 294,565 | |||||||
Share-based compensation expense | (13,136 | ) | (17,956 | ) | (23,823 | ) | (26,632 | ) | |||||||
Acquisition-related costs | (383 | ) | (1,832 | ) | (1,271 | ) | (5,019 | ) | |||||||
Amortization of acquired intangible assets | (23,744 | ) | (27,858 | ) | (51,421 | ) | (31,904 | ) | |||||||
Special income (charges) | 11 | (22,394 | ) | (1,690 | ) | (22,394 | ) | ||||||||
Non-GAAP operating expenses | $ | 134,103 | $ | 116,061 | $ | 261,323 | $ | 208,616 | |||||||
Non-GAAP operating expenses as a percentage of net sales | 27.2 | % | 28.5 | % | 27.4 | % | 27.4 | % |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Operating income, as reported | $ | 117,508 | $ | 8,094 | $ | 215,909 | $ | 104,427 | |||||||
Distributor revenue recognition adjustment | - | 15,737 | - | 15,868 | |||||||||||
Share-based compensation expense | 15,000 | 20,553 | 27,656 | 30,539 | |||||||||||
Acquisition-related acquired inventory valuation and other costs | 383 | 24,499 | 1,271 | 29,186 | |||||||||||
Amortization of acquired intangible assets | 23,744 | 27,858 | 51,421 | 31,904 | |||||||||||
Special (income) charges | (11 | ) | 22,394 | 1,690 | 22,394 | ||||||||||
Non-GAAP operating income | $ | 156,624 | $ | 119,135 | $ | 297,947 | $ | 234,318 | |||||||
Non-GAAP operating income as a percentage of net sales | 31.8 | % | 29.2 | % | 31.2 | % | 30.8 | % |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Other expense, net, as reported | $ | (6,201 | ) | $ | (5,943 | ) | $ | (14,006 | ) | $ | (11,291 | ) | |||
Convertible debt non-cash interest expense | 2,235 | 2,042 | 4,396 | 4,017 | |||||||||||
Non-GAAP other expense, net | $ | (3,966 | ) | $ | (3,901 | ) | $ | (9,610 | ) | $ | (7,274 | ) | |||
Non-GAAP other expense, net, as a percentage of net sales | -0.8 | % | -1.0 | % | -1.0 | % | -1.0 | % |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Income tax provision, as reported | $ | 11,400 | $ | 23,303 | $ | 23,157 | $ | 35,457 | |||||||
Income tax rate, as reported | 10.3 | % | 1099.7 | % | 11.5 | % | 38.1 | % | |||||||
Distributor revenue recognition adjustment | - | 3,387 | - | 3,404 | |||||||||||
Share-based compensation expense | 1,589 | 3,419 | 2,991 | 4,741 | |||||||||||
Acquisition-related acquired inventory valuation costs, intangible asset amortization and other costs | 357 | 4,818 | 780 | 5,387 | |||||||||||
Special (income) charges | (4 | ) | 11,476 | 633 | 11,476 | ||||||||||
Convertible debt non-cash interest expense | 837 | 766 | 1,646 | 1,507 | |||||||||||
Non-recurring tax events | 1,995 | (29,716 | ) | 1,995 | (29,716 | ) | |||||||||
Non-GAAP income tax provision | $ | 16,174 | $ | 17,453 | $ | 31,202 | $ | 32,256 | |||||||
Non-GAAP income tax rate | 10.6 | % | 15.1 | % | 10.8 | % | 14.2 | % |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income (loss), as reported | $ | 99,806 | $ | (21,184 | ) | $ | 178,385 | $ | 57,526 | ||||||
Distributor revenue recognition adjustment, net of tax effect | - | 12,350 | - | 12,464 | |||||||||||
Share-based compensation expense, net of tax effect | 13,411 | 17,134 | 24,665 | 25,798 | |||||||||||
Acquisition-related acquired inventory valuation costs, intangible asset amortization and other costs, net of tax effect | 23,770 | 47,539 | 51,912 | 55,703 | |||||||||||
Special (income) charges, net of tax effect | (7 | ) | 10,918 | 1,057 | 10,918 | ||||||||||
Convertible debt non-cash interest expense, net of tax effect | 1,398 | 1,276 | 2,750 | 2,510 | |||||||||||
Non-recurring tax events | (1,995 | ) | 29,716 | (1,995 | ) | 29,716 | |||||||||
Non-GAAP net income | $ | 136,383 | $ | 97,749 | $ | 256,774 | $ | 194,635 | |||||||
Non-GAAP net income as a percentage of net sales | 27.7 | % | 24.0 | % | 26.9 | % | 25.6 | % | |||||||
Diluted net income (loss) per share, as reported | $ | 0.46 | $ | (0.11 | ) | $ | 0.83 | $ | 0.28 | ||||||
Non-GAAP diluted net income per share | $ | 0.63 | $ | 0.48 | $ | 1.20 | $ | 0.95 | |||||||
Diluted common shares outstanding, as reported | 216,475 | 194,060 | 214,371 | 204,627 | |||||||||||
Diluted common shares outstanding Non-GAAP | 215,764 | 205,286 | 213,691 | 204,285 |