Micrel, Incorporated announced financial results for the quarter ended September 30, 2014 including revenue of 2014 were $67.5 million, a $5.2 million or 8.2% increase, compared to $62.3 million for the second quarter of 2014. Compared to the third quarter of 2013, revenues were $9.3 million, or 16% higher. During the third quarter of 2014, the Company converted certain distributors to a sell-in revenue recognition model following changes to the terms of Micrel distribution agreements. Revenues for the third quarter of 2014 included a one-time increase of $5.1 million, which represented the amount of inventory at these distributors on June 30, 2014. This one-time increase in revenues and related income is excluded from non-GAAP results.
GAAP net income was $4.7 million, or $0.08 per diluted share, for the third quarter of 2014, compared to net income of $3.5 million, or $0.06 per diluted share, for the second quarter of 2014, and net income of $4.0 million, or $0.07 per diluted share, for the third quarter of 2013. Net income was $0.04 per diluted share without the one-time revenue conversion. During the third quarter of 2014, the Company recorded restructuring charges of $0.5 million related to employee severances.
Commenting on the third quarter 2014 results, Micrel's President and CEO Ray Zinn said, "Excluding one-time distributor conversion revenue, Micrel benefited from sequential quarter growth of timing and communications and LAN solutions product sales. Gross margin declined to 51.0% from 52.6% in the previous quarter due to a shift in the product mix, price erosion, and utilization. Gross margin was 49.5% without the one-time revenue conversion. In addition, we remain focused on increasing shareholder value through our stock repurchase program and quarterly dividend payments. During the first nine months of 2014, Micrel spent $13.4 million to repurchase approximately 1.2 million shares of common stock, and maintained its quarterly dividend."
Mr. Zinn continued, "Consistent with the rest of the industry, Micrel saw bookings soften in the third quarter as the global economy remained lackluster. Looking ahead, without the benefit of any significant economic momentum, we believe that the demand for semiconductors in the fourth quarter of 2014 will follow the typical seasonal pattern of flat to down from the third quarter. Based on this, we expect fourth quarter revenue for Micrel to be in the range of $60.5 million to $58.7 million or down 3% to down 6% from the base business of $62.4 million, which does not include the one-time conversion of some of the distributors. Ultimately, we remain optimistic for Micrel, going forward, due to the number of world class products that are being introduced and the traction that they are receiving."
Non-GAAP net income was $4.2 million, or $0.07 per diluted share, for the third quarter of 2014, compared to non-GAAP net income of $5.0 million, or $0.09 per diluted share, for the second quarter of 2014, and non-GAAP net income of $5.4 million, or $0.09 per diluted share, for the third quarter of 2013. A reconciliation of the GAAP net income to non-GAAP net income is provided in the financial tables at the end of this press release.
Non-GAAP net income and non-GAAP earnings per diluted share exclude the impact of revenues and the related cost of revenues from the conversion of distributors to a sell-in revenue recognition model as well as share-based compensation, restructuring charges and amortization of acquisition-related intangible assets with the related income tax effects. Beginning in the first quarter of 2014, the Company changed the presentation of non-GAAP net income from that previously reported to exclude the impact of the amortization of acquisition-related intangible assets and the related tax effect. The non-GAAP net income for the third quarter of 2013 and for the first nine months of 2013 have been revised from previously reported amounts to exclude the impact of the amortization of acquisition-related intangible assets and the related tax effect to conform with the current period presentation.
