Microchip Announces First Quarter Fiscal Year 2013 Financial Results and Completes SMSC Acquisition

Microchip Technology Inc. reported results for the three months ended June 30, 2012. GAAP net sales for the first quarter of fiscal 2013 were $352.1 million, up 3.9% sequentially from net sales of $338.9 million in the immediately preceding quarter, and down 6.0% from net sales of $374.5 million in the prior year’s first fiscal quarter. GAAP net income for the first quarter of fiscal 2013 was $78.7 million, or 39 cents per diluted share, down 2.4% from GAAP net income of $80.6 million, or 39 cents per diluted share, in the immediately preceding quarter, and down 20.7% from GAAP net income of $99.3 million, or 49 cents per diluted share, in the prior year’s first fiscal quarter.

Non-GAAP net sales for the first quarter of fiscal 2013 were $352.4 million, up 4.0% sequentially from net sales of $338.9 million in the immediately preceding quarter, and down 5.9% from net sales of $374.5 million in the prior year’s first fiscal quarter. Non-GAAP net sales in the first quarter of fiscal 2013 were $0.3 million higher than GAAP net sales due to the sell-through of inventory held by distributors of Roving Networks at the date Microchip acquired the company not being included in our GAAP results. Non-GAAP net income for the first quarter of fiscal 2013 was $96.9 million, or 48 cents per diluted share, up 2.7% from non-GAAP net income of $94.3 million, or 46 cents per diluted share, in the immediately preceding quarter, and down 13.0% from non-GAAP net income of $111.4 million, or 55 cents per diluted share, in the prior year’s first fiscal quarter. For the first quarters of fiscal 2013 and fiscal 2012, Microchip’s non-GAAP results exclude the effect of share-based compensation, expenses related to its 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), and non-cash interest expense on its convertible debentures.

Microchip also announced that its Board of Directors declared a quarterly cash dividend on its common stock of 35.1 cents per share. The quarterly dividend is payable on September 5, 2012 to stockholders of record on August 22, 2012.

"Our June quarter results were consistent with what we had guided during our last earnings call. The quarter started out strong, but the negative effects of Europe and weaker economic activity in the U.S. led us to finish the quarter slightly lower than the mid-point of our revenue guidance," said Steve Sanghi, President and CEO. "Non-GAAP gross margins were up 85 basis points sequentially, leading to an improvement in operating profit, which was 32.7% of sales."

Mr. Sanghi added, "We were pleased with the strong performance from our microcontroller and analog businesses where revenue from our strategic products of 8-bit, 16-bit and 32-bit microcontrollers and analog were up sequentially. Net sales on microcontrollers and analog were up sequentially 5.1% and 9%, respectively."

Mr. Sanghi added, "We are excited to have closed the acquisition of SMSC today. Now we begin the next phase, which is integrating the two companies together to bring the combined power of these two innovative companies to the marketplace."

"Our 16-bit business was up 23.7% sequentially in the June quarter, and up 18.6% from the year ago quarter, to achieve an all-time record," said Ganesh Moorthy, Chief Operating Officer. "After a pause in the March quarter, our 32-bit business was up an outstanding 71.5% sequentially in the June quarter to achieve another new record. Both the 16-bit and 32-bit microcontroller businesses continue to benefit from the many demand creation actions we have taken as more customers who have selected the PIC® microcontroller platform have either commenced production or ramped their volumes. Our design-win momentum remains strong, and while we are not immune to macro business conditions, we continue to outgrow the secular growth patterns for these businesses."

Eric Bjornholt, Microchip’s Chief Financial Officer, said, "Microchip’s inventory at June 30, 2012 was $221.5 million or 136 days, down 1 day from the prior quarter level. Inventory at distribution was flat sequentially at 31 days and is very low compared to historical levels. The inventory held on our balance sheet provides very short lead times and allows us to respond quickly to the needs of our customers."

Mr. Sanghi concluded, "Our September quarter guidance includes SMSC from August 2 to September 30, 2012. Our economic assumptions are that the U.S. economic recovery has stalled, the Europe economic situation will continue to be challenged and China, which has been the engine of growth, is starting to slow down. Based on our analysis, we expect our net sales in the September quarter to be up from 17% to 22% sequentially. This guidance includes estimated non-GAAP net sales of $65 million to $70 million from SMSC products from August 2 to the end of the quarter."