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.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ 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)) |
Dated: February 6, 2018 | Microchip Technology Incorporated (Registrant) |
By: /s/ J. Eric Bjornholt | |
J. Eric Bjornholt Vice President, Chief Financial Officer (Principal Accounting and Financial Officer) |
EXHIBIT 99.1 NEWS RELEASE INVESTOR RELATIONS CONTACT: J. Eric Bjornholt -- CFO..... (480) 792-7804 |
• | GAAP net sales of $994.2 million, down 1.8% sequentially and up 19.2% from the year ago quarter. The midpoint of our guidance provided on November 6, 2017 was net sales of $991.9 million. |
• | Non-GAAP net sales of $994.2 million, down 1.8% sequentially and up 12.8% from the year ago quarter. The midpoint of our guidance provided on November 6, 2017 was net sales of $991.9 million. |
• | On a GAAP basis: gross margins of 61.1%; record operating income of $245.2 million; net loss of $251.1 million, impacted by a one-time tax expense of $439.8 million primarily related to the Tax Cuts and Jobs Act; and loss per share of $1.07 per diluted share. Our guidance provided on November 6, 2017 was EPS of 73 to 81 cents per diluted share and did not include the impact of the Tax Cuts and Jobs Act. |
• | On a non-GAAP basis: gross margins of 61.4%; record operating income of $391.7 million and 39.4% of net sales; net income of $341.2 million and record EPS of $1.36 per diluted share, up 29.5% from the year ago quarter. Our guidance provided on November 6, 2017 was EPS of $1.30 to $1.40 per diluted share. |
• | Record cash flow from operations of $365.0 million. |
• | Record quarterly dividend declared of 36.30 cents per share. |
(in millions, except per share amounts and percentages) | Three Months Ended December 31, 2017 | |||
GAAP | % of Net Sales | Non-GAAP1 | % of Net Sales | |
Net Sales | $994.2 | $994.2 | ||
Gross Margin | $607.1 | 61.1% | $610.6 | 61.4% |
Operating Income | $245.2 | 24.7% | $391.7 | 39.4% |
Other Expense | $(48.6) | $(18.7) | ||
Income Tax Provision | $447.7 | $31.9 | ||
Net (Loss) Income | $(251.1) | (25.3)% | $341.2 | 34.3% |
(Loss) Earnings per Diluted Share | $(1.07) | $1.36 |
• | Expanded our collaboration with Amazon Web Services (AWS), including support for Amazon FreeRTOS, AWS Greengrass and AWS IoT, providing a robust product portfolio and toolchain to support the creation of connected designs with enhanced security from the node to the cloud. |
• | New ATmegaS64M1 microcontroller (MCU) decreases time to market and cost for the NewSpace market by using radiation-tolerant solutions based on COTS devices. |
• | Unveiled the ATECC608A secure element as well as a Security Design Partner Program that provide the parts and partners needed to protect IP and design secure solutions. |
• | New USB smart hub integrated circuits (ICs) enable smartphone-connected automotive infotainment and provide unparalleled flexibility to fit customers’ designs. |
• | Announced the PIC18 K83, an 8-bit MCU with Core Independent Peripherals (CIPs) that improves response time to critical system events on CAN networks while making CAN-based designs simpler and more cost effective. |
• | Enabled remote identification with the AT21CS11, a single-wire EEPROM which extends voltage range to accommodate lithium-ion battery applications. |
• | The MPLAB® Mindi™ software update included over 300 device models and schematics, reducing design risk and time to market. |
• | Our CEO, Steve Sanghi, was honored as the 2017 Business Person of the Year by the Phoenix Business Journal, and Microchip was also named a Best Place to Work in the publication’s annual awards program. Additionally, Microchip was named one of Austin’s Top Places to Work by the Austin American-Statesman, and the company was selected as a finalist for Company of the Year in the EE Times’ Ace Awards. Seven of Microchip’s products were included in EDN’s 2017 Hot 100 list across four categories. |
Microchip Consolidated Guidance | |||
GAAP | Non-GAAP Adjustments | Non-GAAP1 | |
Net Sales | $964.4 to $1,004.1 million | $964.4 to $1,004.1 million | |
Gross Margin2 | 60.95% to 61.35% | $3.4 to $3.5 million | 61.3% to 61.7% |
Operating Expenses | 36.7% to 37.1% | $141.8 to $147.6 million | 22.0% to 22.4% |
Operating Income | 23.85% to 24.65% | $145.1 to $151.1 million | 38.9% to 39.7% |
Other Expense | $43.0 to $45.0 million | $28.2 million | $14.8 to $16.8 million |
Income Tax Expense | 0.5% to 3.0% | $26.7 to $29.7 million | 8% to 9% |
Net Income | $179.5 to $203.5 million | $146.6 to $149.6 million | $326.1 to $353.1 million |
Diluted Common Shares Outstanding3 | Approximately 250.7 to 254.3 million shares | Approximately 250.7 to 254.3 million shares | |
Earnings per Diluted Share3 | 72 to 80 cents | 58 to 59 cents | $1.30 to $1.39 |
• | Microchip's inventory days in the March 2018 quarter are expected to be in the range of our longer-term target model of 115 to 120 days of inventory. 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 March 31, 2018 are expected to be between $50 million and $60 million. Capital expenditures for all of fiscal year 2018 are expected to be between $200 million and $210 million. We are continuing to invest in the equipment needed to support the growth of our production capabilities for fast growing new products and technologies. |
1 | Use of Non-GAAP Financial Measures: Our non-GAAP adjustments, where applicable, include the effect of discontinued operations, share-based compensation, expenses related to our acquisition activities (including intangible asset amortization, inventory valuation costs, severance costs, and legal and other general and administrative expenses associated with acquisitions), revenue recognition changes related to Atmel distributors resulting from changes to business practices with those distributors, non-cash interest expense on our convertible debentures, a loss on the settlement of our convertible debentures, an impairment on an available-for-sale investment, the related income tax implications of these items, tax adjustments in accordance with ASC 740-270 and non-recurring tax events including the impact of the Tax Cuts and Jobs Act of 2017. Our year-to-date non-GAAP results include all of the aforementioned adjustments plus the effect of a manufacturing excursion issue with one of our suppliers, preclusion of revenue recognition under GAAP for inventory in the distribution channel |
2 | Generally, gross margin fluctuates over time, driven primarily by the mix of microcontrollers, mixed-signal products, analog products and memory products sold and licensing revenue; variances in manufacturing yields; fixed cost absorption; wafer fab loading levels; costs of wafers from foundries; 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. |
3 | Diluted Common Shares Outstanding can vary for, among other things, the trading price of our common stock, the 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 repurchases or issuances of shares of our common stock. The diluted common shares outstanding presented in the guidance table above assumes an average Microchip stock price in the March 2018 quarter between $90 and $100 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). |
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share amounts) (unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net sales | $ | 994,205 | $ | 834,366 | $ | 2,978,485 | $ | 2,505,141 | ||||||||
Cost of sales | 387,146 | 369,107 | 1,172,893 | 1,280,771 | ||||||||||||
Gross profit | 607,059 | 465,259 | 1,805,592 | 1,224,370 | ||||||||||||
Research and development | 131,555 | 132,433 | 395,656 | 418,111 | ||||||||||||
Selling, general and administrative | 109,059 | 111,017 | 337,620 | 388,651 | ||||||||||||
Amortization of acquired intangible assets | 121,003 | 82,791 | 362,761 | 243,356 | ||||||||||||
Special charges and other, net | 196 | 20,944 | 17,312 | 52,522 | ||||||||||||
Operating expenses | 361,813 | 347,185 | 1,113,349 | 1,102,640 | ||||||||||||
Operating income | 245,246 | 118,074 | 692,243 | 121,730 | ||||||||||||
Losses on equity method investments | (56 | ) | (55 | ) | (167 | ) | (167 | ) | ||||||||
Other expense, net | (48,540 | ) | (34,521 | ) | (142,985 | ) | (103,578 | ) | ||||||||
Income before income taxes | 196,650 | 83,498 | 549,091 | 17,985 | ||||||||||||
Income tax provision (benefit) | 447,736 | (23,837 | ) | 440,434 | (15,699 | ) | ||||||||||
Net (loss) income from continuing operations | (251,086 | ) | 107,335 | 108,657 | 33,684 | |||||||||||
Discontinued operations: | ||||||||||||||||
Loss from discontinued operations | — | (191 | ) | — | (7,514 | ) | ||||||||||
Income tax benefit | — | (31 | ) | — | (1,561 | ) | ||||||||||
Net loss from discontinued operations | — | (160 | ) | — | (5,953 | ) | ||||||||||
Net (loss) income | $ | (251,086 | ) | $ | 107,175 | $ | 108,657 | $ | 27,731 | |||||||
Basic net (loss) income per common share | ||||||||||||||||
Net (loss) income from continuing operations | $ | (1.07 | ) | $ | 0.50 | $ | 0.47 | $ | 0.16 | |||||||
Net loss from discontinued operations | — | — | — | (0.03 | ) | |||||||||||
Net (loss) income | $ | (1.07 | ) | $ | 0.50 | $ | 0.47 | $ | 0.13 | |||||||
Diluted net (loss) income per common share | ||||||||||||||||
Net (loss) income from continuing operations | $ | (1.07 | ) | $ | 0.46 | $ | 0.44 | $ | 0.14 | |||||||
Net loss from discontinued operations | — | — | — | (0.02 | ) | |||||||||||
Net (loss) income | $ | (1.07 | ) | $ | 0.46 | $ | 0.44 | $ | 0.12 | |||||||
Basic common shares outstanding | 234,106 | 216,210 | 232,278 | 215,360 | ||||||||||||
Diluted common shares outstanding | 234,106 | 235,424 | 248,024 | 233,351 |
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) | |||||||
ASSETS | |||||||
December 31, | March 31, | ||||||
2017 | 2017 | ||||||
(Unaudited) | |||||||
Cash and short-term investments | $ | 1,099,593 | $ | 1,302,772 | |||
Accounts receivable, net | 553,135 | 478,373 | |||||
Inventories | 487,065 | 417,202 | |||||
Assets held for sale | — | 6,459 | |||||
Other current assets | 113,648 | 100,234 | |||||
Total current assets | 2,253,441 | 2,305,040 | |||||
Property, plant and equipment, net | 754,780 | 683,338 | |||||
Long-term investments | 885,392 | 107,457 | |||||
Other assets | 4,230,180 | 4,591,046 | |||||
Total assets | $ | 8,123,793 | $ | 7,686,881 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Accounts payable and accrued liabilities | $ | 421,127 | $ | 361,683 | |||
Deferred income on shipments to distributors | 335,705 | 292,815 | |||||
Current portion of long-term debt | — | 49,952 | |||||
Total current liabilities | 756,832 | 704,450 | |||||
Long-term debt | 3,039,623 | 2,900,524 | |||||
Long-term income tax payable | 694,777 | 184,945 | |||||
Long-term deferred tax liability | 208,823 | 409,045 | |||||
Other long-term liabilities | 238,663 | 217,206 | |||||
Stockholders' equity | 3,185,075 | 3,270,711 | |||||
Total liabilities and stockholders' equity | $ | 8,123,793 | $ | 7,686,881 |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales, as reported | $ | 994,205 | $ | 834,366 | $ | 2,978,485 | $ | 2,505,141 | |||||||
Distributor revenue recognition adjustment | — | 46,821 | — | 93,879 | |||||||||||
Non-GAAP net sales | $ | 994,205 | $ | 881,187 | $ | 2,978,485 | $ | 2,599,020 |
Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
Gross profit, as reported | $ | 607,059 | $ | 465,259 | $1,805,592 | $1,224,370 | |||||||
Distributor revenue recognition adjustment, net of product cost | — | 25,985 | — | 50,323 | |||||||||
Share-based compensation expense | 3,494 | 3,468 | 10,587 | 15,465 | |||||||||
Manufacturing excursion | — | — | (660 | ) | 800 | ||||||||
Acquisition-related restructuring and acquired inventory valuation costs | — | 15,008 | — | 189,774 | |||||||||
Non-GAAP gross profit | $ | 610,553 | $ | 509,720 | $1,815,519 | $1,480,732 | |||||||
Non-GAAP gross profit percentage | 61.4 | % | 57.8 | % | 61.0 | % | 57.0 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Research and development expenses, as reported | $ | 131,555 | $ | 132,433 | $ | 395,656 | $ | 418,111 | |||||||
Share-based compensation expense | (10,921 | ) | (9,881 | ) | (31,797 | ) | (37,569 | ) | |||||||
Acquisition-related and other costs | — | (723 | ) | — | 25 | ||||||||||
Non-GAAP research and development expenses | $ | 120,634 | $ | 121,829 | $ | 363,859 | $ | 380,567 | |||||||
Non-GAAP research and development expenses as a percentage of net sales | 12.1 | % | 13.8 | % | 12.2 | % | 14.6 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Selling, general and administrative expenses, as reported | $ | 109,059 | $ | 111,017 | $ | 337,620 | $ | 388,651 | |||||||
Share-based compensation expense | (9,588 | ) | (8,771 | ) | (27,637 | ) | (53,055 | ) | |||||||
Acquisition-related and other costs | (1,221 | ) | (3,444 | ) | (4,798 | ) | (21,992 | ) | |||||||
Non-GAAP selling, general and administrative expenses | $ | 98,250 | $ | 98,802 | $ | 305,185 | $ | 313,604 | |||||||
Non-GAAP selling, general and administrative expenses as a percentage of net sales | 9.9 | % | 11.2 | % | 10.2 | % | 12.1 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating expenses, as reported | $ | 361,813 | $ | 347,185 | $ | 1,113,349 | $ | 1,102,640 | |||||||
Share-based compensation expense | (20,509 | ) | (18,652 | ) | (59,434 | ) | (90,624 | ) | |||||||
Acquisition-related and other costs | (1,221 | ) | (4,167 | ) | (4,798 | ) | (21,967 | ) | |||||||
Amortization of acquired intangible assets | (121,003 | ) | (82,791 | ) | (362,761 | ) | (243,356 | ) | |||||||
Special charges and other, net | (196 | ) | (20,944 | ) | (17,312 | ) | (52,522 | ) | |||||||
Non-GAAP operating expenses | $ | 218,884 | $ | 220,631 | $ | 669,044 | $ | 694,171 | |||||||
Non-GAAP operating expenses as a percentage of net sales | 22.0 | % | 25.0 | % | 22.5 | % | 26.7 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating income, as reported | $ | 245,246 | $ | 118,074 | $ | 692,243 | $ | 121,730 | |||||||
Distributor revenue recognition adjustment | — | 25,985 | — | 50,323 | |||||||||||
Share-based compensation expense | 24,003 | 22,120 | 70,021 | 106,089 | |||||||||||
Manufacturing excursion | — | — | (660 | ) | 800 | ||||||||||
Acquisition-related restructuring, acquired inventory valuation and other costs | 1,221 | 19,175 | 4,798 | 211,741 | |||||||||||
Amortization of acquired intangible assets | 121,003 | 82,791 | 362,761 | 243,356 | |||||||||||
Special charges and other, net | 196 | 20,944 | 17,312 | 52,522 | |||||||||||
Non-GAAP operating income | $ | 391,669 | $ | 289,089 | $ | 1,146,475 | $ | 786,561 | |||||||
Non-GAAP operating income as a percentage of net sales | 39.4 | % | 32.8 | % | 38.5 | % | 30.3 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Other expense, net, as reported | $ | (48,540 | ) | $ | (34,521 | ) | $ | (142,985 | ) | $ | (103,578 | ) | |||
Loss on settlement of convertible debt | 2,140 | — | 15,966 | — | |||||||||||
Non-cash other expense, net | 27,799 | 12,955 | 81,866 | 38,244 | |||||||||||
Gain on equity method investment | — | — | — | (468 | ) | ||||||||||
Impairment on available-for-sale investment | — | 1,433 | — | 1,433 | |||||||||||
Non-GAAP other expense, net | $ | (18,601 | ) | $ | (20,133 | ) | $ | (45,153 | ) | $ | (64,369 | ) | |||
Non-GAAP other expense, net, as a percentage of net sales | (1.9 | )% | (2.3 | )% | (1.5 | )% | (2.5 | )% |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Income tax provision (benefit) | $ | 447,736 | $ | (23,837 | ) | $ | 440,434 | $ | (15,699 | ) | |||||
Income tax rate, as reported | 227.7 | % | (28.5 | )% | 80.2 | % | (87.3 | )% | |||||||
Distributor revenue recognition adjustment | — | (20 | ) | — | 4,164 | ||||||||||
Share-based compensation expense | 6,604 | 7,376 | 21,878 | 36,622 | |||||||||||
Manufacturing excursion | — | — | (241 | ) | 295 | ||||||||||
Acquisition-related restructuring, acquired inventory valuation costs, intangible asset amortization and other costs | 8,371 | 8,688 | 29,414 | 28,630 | |||||||||||
Special charges and other, net | (29 | ) | 8,557 | 5,959 | 18,069 | ||||||||||
Loss on settlement of convertible debt | 152 | — | 5,205 | — | |||||||||||
Non-cash other expense, net | 8,001 | 4,698 | 27,763 | 14,017 | |||||||||||
Gain on equity method investment | — | — | — | (172 | ) | ||||||||||
Impairment on available-for-sale investment | — | 526 | — | 526 | |||||||||||
Non-recurring tax events | (439,828 | ) | 7,524 | (428,592 | ) | 10,335 | |||||||||
Tax adjustment in accordance with ASC 740-270 | 854 | 8,841 | (4,970 | ) | (34,901 | ) | |||||||||
Non-GAAP income tax provision | $ | 31,861 | $ | 22,353 | $ | 96,850 | $ | 61,886 | |||||||
Non-GAAP income tax rate | 8.5 | % | 8.3 | % | 8.8 | % | 8.6 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net (loss) income from continuing operations | $ | (251,086 | ) | $ | 107,335 | $ | 108,657 | $ | 33,684 | ||||||
Distributor revenue recognition adjustment, net of tax effect | — | 26,005 | — | 46,159 | |||||||||||
Share-based compensation expense, net of tax effect | 17,399 | 14,744 | 48,143 | 69,467 | |||||||||||
Manufacturing excursion, net of tax effect | — | — | (419 | ) | 505 | ||||||||||
Acquisition-related restructuring, acquired inventory valuation costs, intangible asset amortization and other costs, net of tax effect | 113,853 | 93,278 | 338,145 | 426,467 | |||||||||||
Special charges and other, net | 225 | 12,387 | 11,353 | 34,453 | |||||||||||
Loss on settlement of convertible debt, net of tax effect | 1,988 | — | 10,761 | — | |||||||||||
Non-cash other expense, net of tax effect | 19,798 | 8,257 | 54,103 | 24,227 | |||||||||||
Gain on equity method investment, net of tax effect | — | — | — | (296 | ) | ||||||||||
Impairment on available-for-sale investment, net of tax effect | — | 907 | — | 907 | |||||||||||
Non-recurring tax events | 439,828 | (7,524 | ) | 428,592 | (10,335 | ) | |||||||||
Tax adjustment in accordance with ASC 740-270 | (854 | ) | (8,841 | ) | 4,970 | 34,901 | |||||||||
Non-GAAP net income from continuing operations | $ | 341,151 | $ | 246,548 | $ | 1,004,305 | $ | 660,139 | |||||||
Non-GAAP net income from continuing operations as a percentage of net sales | 34.3 | % | 28.0 | % | 33.7 | % | 25.4 | % | |||||||
GAAP net (loss) income from continuing operations as a percentage of net sales | (25.3) | % | 12.9 | % | 3.6 | % | 1.3 | % | |||||||
Diluted net (loss) income per common share from continuing operations, as reported | $ | (1.07 | ) | $ | 0.46 | $ | 0.44 | $ | 0.14 | ||||||
Non-GAAP diluted net income per common share from continuing operations | $ | 1.36 | $ | 1.05 | $ | 4.05 | $ | 2.83 | |||||||
Diluted common shares outstanding, as reported | 234,106 | 235,424 | 248,024 | 233,351 | |||||||||||
Diluted common shares outstanding Non-GAAP | 250,825 | 235,424 | 248,024 | 233,351 |