The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
| Microchip Consolidated Guidance | |||||||||
| GAAP |
Non-GAAP
|
Non-GAAP1 | |||||||
| Net Sales | $500.9 to $528.2 million | $7.1 million | $508.0 to $535.3 million | ||||||
| Gross Margin2 | 56.5% to 56.7% | $11.6 to $12.1 million | 58.0% to 58.2% | ||||||
| Operating Expenses 2 | 39.55% to 40.05% | $60.9 to $64.4 million | 27.0% to 27.5% | ||||||
| Other Expense | $9.8 million | $2.5 million | $7.3 million | ||||||
| Income Tax Expense | 11.4% to 11.8% | $7.7 million | 10.6% to 11.0% | ||||||
| Net Income before noncontrolling interest | $64.0 to $71.6 million | $67.4 to $71.2 million | $131.4 to $142.8 million | ||||||
|
Less Net Income (Loss) from
noncontrolling interest |
($1.5 million) | $1.9 million | $0.3 million | ||||||
| Net Income | $65.5 to $73.1 million | $65.5 to $69.3 million | $131.1 to $142.5 million | ||||||
|
Diluted Common Shares Outstanding 3 |
Approximately 222.7 million shares | Approximately 0.7 million shares | Approximately 222 million shares | ||||||
| Earnings per Diluted Share | 29 to 33 cents | 30 to 31 cents | 59 to 64 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 3 under the "Use of Non-GAAP Financial Measures" section of this release. |
- Excluding any purchase accounting impacts from the Supertex and ISSC acquisitions, Microchip's inventory days at December 31, 2014 are expected to increase to between 2 days and 13 days. 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, 2014 are expected to be approximately $40 million and capital expenditures for all of fiscal year 2015 are anticipated to be approximately $150 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 $110 million to $140 million prior to the dividend payment and our acquisition related activities.
| 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, severance costs, and legal and other general and administrative expenses associated with acquisitions), non-cash interest expense on our convertible debentures, the related income tax implications of these items and non-recurring tax events. Our non-GAAP net sales reflect revenue from product in the acquired companies' distribution channel at the acquisition date that is not included in GAAP net sales. | |
| 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. Our other non-GAAP adjustments 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 (benefit)/tax rate, non-GAAP net income, and non-GAAP diluted earnings per share which exclude the items noted above, 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 our business. Specifically, we do not consider such items when developing and monitoring our budgets and spending. 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. | ||
| 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 2014 quarter of $43 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, 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. |
| MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES | ||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
| (in thousands except per share amounts) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Net sales | $ | 546,243 | $ | 492,669 | $ | 1,075,119 | $ | 955,461 | ||||||||||
| Cost of sales | 238,789 | 203,806 | 461,146 | 400,024 | ||||||||||||||
| Gross profit | 307,454 | 288,863 | 613,973 | 555,437 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| Research and development | 88,814 | 78,254 | 173,184 | 151,339 | ||||||||||||||
| Selling, general and administrative | 71,114 | 69,368 | 140,369 | 135,078 | ||||||||||||||
| Amortization of acquired intangible assets | 45,433 | 23,744 | 82,077 | 51,421 | ||||||||||||||
| Special charges (income) | 775 | (11 | ) | 1,079 | 1,690 | |||||||||||||
| 206,136 | 171,355 | 396,709 | 339,528 | |||||||||||||||
| Operating income | 101,318 | 117,508 | 217,264 | 215,909 | ||||||||||||||
| Losses on equity method investments | (35 | ) | (101 | ) | (67 | ) | (361 | ) | ||||||||||
| Other expense, net | (10,579 | ) | (6,201 | ) | (19,502 | ) | (14,006 | ) | ||||||||||
| Income before income taxes | 90,704 | 111,206 | 197,695 | 201,542 | ||||||||||||||
| Income tax (benefit) provision | (1,334 | ) | 11,400 | 15,748 | 23,157 | |||||||||||||
| Net income | 92,038 | 99,806 | 181,947 | 178,385 | ||||||||||||||
| Less: Net loss attributable to noncontrolling interests | 1,603 | — | 1,603 | — | ||||||||||||||
| Net income attributable to Microchip Technology | $ | 93,641 | $ | 99,806 | $ | 183,550 | $ | 178,385 | ||||||||||
| Basic net income per common share attributable to Microchip Technology stockholders | $ | 0.47 | $ | 0.50 | $ | 0.92 | $ | 0.90 | ||||||||||
| Diluted net income per common share attributable to Microchip Technology stockholders | $ | 0.42 | $ | 0.46 | $ | 0.82 | $ | 0.83 | ||||||||||
| Basic common shares outstanding | 200,629 | 197,825 | 200,408 | 197,388 | ||||||||||||||
| Diluted common shares outstanding | 225,284 | 216,475 | 224,906 | 214,371 | ||||||||||||||
|
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) |
||||||||
| ASSETS | ||||||||
| September 30, | March 31, | |||||||
| 2014 | 2014 | |||||||
| (Unaudited) | ||||||||
| Cash and short-term investments | $ | 1,283,109 | $ | 1,344,785 | ||||
| Accounts receivable, net | 287,473 | 242,405 | ||||||
| Inventories | 275,746 | 262,725 | ||||||
| Deferred tax assets | 62,411 | 67,490 | ||||||
| Other current assets | 70,226 | 51,994 | ||||||
| Total current assets | 1,978,965 | 1,969,399 | ||||||
| Property, plant & equipment, net | 585,102 | 531,967 | ||||||
| Long-term investments | 841,277 | 798,712 | ||||||
| Other assets | 1,205,283 | 767,552 | ||||||
| Total assets | $ | 4,610,627 | $ | 4,067,630 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Accounts payable and other current liabilities | $ | 208,399 | $ | 170,781 | ||||
| Short-term borrowings | 17,500 | 17,500 | ||||||
| Deferred income on shipments to distributors | 159,585 | 147,798 | ||||||
| Total current liabilities | 385,484 | 336,079 | ||||||
| Long-term line of credit | 624,375 | 300,000 | ||||||
| Long-term borrowings, net | 322,767 | 331,385 | ||||||
| Convertible debentures | 376,729 | 371,873 | ||||||
| Long-term income tax payable | 139,343 | 179,966 | ||||||
| Long-term deferred tax liability | 469,370 | 375,316 | ||||||
| Other long-term liabilities | 40,351 | 37,550 | ||||||
| Microchip Technology stockholders' equity | 2,203,421 | 2,135,461 | ||||||
| Noncontrolling interests | 48,787 | — | ||||||
| Total equity | 2,252,208 | 2,135,461 | ||||||
| Total liabilities and stockholders' equity | $ | 4,610,627 | $ | 4,067,630 | ||||
|
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
|
|||||||||||||||||
|
RECONCILIATION OF GAAP NET SALES TO NON-GAAP NET SALES |
|||||||||||||||||
| Three months ended | Six months ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| Net sales, as reported | $ | 546,243 | $ | 492,669 | $ | 1,075,119 | $ | 955,461 | |||||||||
| Distributor revenue recognition adjustment | — | — | 2,469 | — | |||||||||||||
| Non-GAAP net sales | $ | 546,243 | $ | 492,669 | $ | 1,077,588 | $ | 955,461 | |||||||||
|
RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT |
||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Gross profit, as reported | $ | 307,454 | $ | 288,863 | $ | 613,973 | $ | 555,437 | ||||||||||
| Distributor revenue recognition adjustment | — | — | 1,362 | — | ||||||||||||||
| Share-based compensation expense | 2,640 | 1,864 | 4,695 | 3,833 | ||||||||||||||
| Acquisition-related acquired inventory valuation costs | 12,690 | — | 20,501 | — | ||||||||||||||
| Non-GAAP gross profit | $ | 322,784 | $ | 290,727 | $ | 640,531 | $ | 559,270 | ||||||||||
| Non-GAAP gross profit percentage | 59.1 | % | 59.0 | % | 59.4 | % | 58.5 | % | ||||||||||
|
RECONCILIATION OF GAAP RESEARCH AND DEVELOPMENT EXPENSES TO NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES |
||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Research and development expenses, as reported | $ | 88,814 | $ | 78,254 | $ | 173,184 | $ | 151,339 | ||||||||||
| Share-based compensation expense | (7,261 | ) | (6,931 | ) | (13,570 | ) | (12,621 | ) | ||||||||||
| Non-GAAP research and development expenses | $ | 81,553 | $ | 71,323 | $ | 159,614 | $ | 138,718 | ||||||||||
| Non-GAAP research and development expenses as a percentage of net sales | 14.9 |
% |
14.5 | % | 14.8 | % | 14.5 | % | ||||||||||
|
RECONCILIATION OF GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES TO NON-GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Selling, general and administrative expenses, as reported | $ | 71,114 | $ | 69,368 | $ | 140,369 | $ | 135,078 | ||||||||||
| Share-based compensation expense | (5,372 | ) | (6,205 | ) | (10,329 | ) | (11,202 | ) | ||||||||||
| Acquisition-related costs | (1,801 | ) | (383 | ) | (2,737 | ) | (1,271 | ) | ||||||||||
| Non-GAAP selling, general and administrative expenses | $ | 63,941 | $ | 62,780 | $ | 127,303 | $ | 122,605 | ||||||||||
| Non-GAAP selling, general and administrative expenses as a percentage of net sales | 11.7 | % | 12.7 | % | 11.8 | % | 12.8 | % | ||||||||||
|
RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES |
||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Operating expenses, as reported | $ | 206,136 | $ | 171,355 | $ | 396,709 | $ | 339,528 | ||||||||||
| Share-based compensation expense | (12,633 | ) | (13,136 | ) | (23,899 | ) | (23,823 | ) | ||||||||||
| Acquisition-related costs | (1,801 | ) | (383 | ) | (2,737 | ) | (1,271 | ) | ||||||||||
| Amortization of acquired intangible assets | (45,433 | ) | (23,744 | ) | (82,077 | ) | (51,421 | ) | ||||||||||
| Special charges | (775 | ) | 11 | (1,079 | ) | (1,690 | ) | |||||||||||
| Non-GAAP operating expenses | $ | 145,494 | $ | 134,103 | $ | 286,917 | $ | 261,323 | ||||||||||
| Non-GAAP operating expenses as a percentage of net sales | 26.6 | % | 27.2 | % | 26.6 | % | 27.4 | % | ||||||||||
|
RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP OPERATING INCOME |
||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Operating income, as reported | $ | 101,318 | $ | 117,508 | $ | 217,264 | $ | 215,909 | ||||||||||
| Distributor revenue recognition adjustment | — | — | 1,362 | — | ||||||||||||||
| Share-based compensation expense | 15,273 | 15,000 | 28,594 | 27,656 | ||||||||||||||
| Acquisition-related acquired inventory valuation and other costs | 14,491 | 383 | 23,238 | 1,271 | ||||||||||||||
| Amortization of acquired intangible assets | 45,433 | 23,744 | 82,077 | 51,421 | ||||||||||||||
| Special charges (income) | 775 | (11 | ) | 1,079 | 1,690 | |||||||||||||
| Non-GAAP operating income | $ | 177,290 | $ | 156,624 | $ | 353,614 | $ | 297,947 | ||||||||||
| Non-GAAP operating income as a percentage of net sales | 32.5 | % | 31.8 | % | 32.8 | % | 31.2 | % | ||||||||||
|
RECONCILIATION OF GAAP OTHER EXPENSE, NET TO NON-GAAP OTHER EXPENSE, NET |
||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Other expense, net, as reported | $ | (10,579 | ) | $ | (6,201 | ) | $ | (19,502 | ) | $ | (14,006 | ) | ||||||
| Convertible debt non-cash interest expense | 2,445 | 2,235 | 4,810 | 4,396 | ||||||||||||||
| Non-GAAP other expense, net | $ | (8,134 | ) | $ | (3,966 | ) | $ | (14,692 | ) | $ | (9,610 | ) | ||||||
| Non-GAAP other expense, net, as a percentage of net sales | -1.5 | % | -0.8 | % | -1.4 | % | -1.0 | % | ||||||||||
|
RECONCILIATION OF GAAP INCOME TAX (BENEFIT) PROVISION TO NON-GAAP INCOME TAX PROVISION |
||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Income tax (benefit) provision, as reported | $ | (1,334 | ) | $ | 11,400 | $ | 15,748 | $ | 23,157 | |||||||||
| Income tax rate, as reported | -1.5 | % | 10.3 | % | 8.0 | % | 11.5 | % | ||||||||||
| Distributor revenue recognition adjustment | — | — | 375 | — | ||||||||||||||
| Share-based compensation expense | 1,833 | 1,589 | 3,253 | 2,991 | ||||||||||||||
| Acquisition-related acquired inventory valuation costs, intangible asset amortization and other costs | 6,201 | 357 | 8,897 | 780 | ||||||||||||||
| Special charges (income) | 271 | (4 | ) | 384 | 633 | |||||||||||||
| Convertible debt non-cash interest expense | 908 | 837 | 1,787 | 1,646 | ||||||||||||||
| Non-recurring tax events | 10,517 | 1,995 | 6,052 | 1,995 | ||||||||||||||
| Non-GAAP income tax provision | $ | 18,396 | $ | 16,174 | $ | 36,496 | $ | 31,202 | ||||||||||
| Non-GAAP income tax rate | 10.9 | % | 10.6 | % | 10.8 | % | 10.8 | % | ||||||||||
|
RECONCILIATION OF GAAP NET INCOME ATTRIBUTABLE TO MICROCHIP TECHNOLOGY AND GAAP DILUTED NET INCOME PER COMMON SHARE ATTRIBUTABLE TO MICROCHIP TECHNOLOGY STOCKHOLDERS TO NON-GAAP NET INCOME ATTRIBUTABLE TO MICROCHIP TECHNOLOGY AND NON-GAAP DILUTED NET INCOME PER COMMON SHARE ATTRIBUTABLE TO MICROCHIP TECHNOLOGY STOCKHOLDERS |
||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Net income attributable to Microchip Technology, as reported | $ | 93,641 | $ | 99,806 | $ | 183,550 | $ | 178,385 | ||||||||||
| Noncontrolling interests | (2,090 | ) | — | (2,090 | ) | — | ||||||||||||
| Distributor revenue recognition adjustment, net of tax effect | — | — | 987 | — | ||||||||||||||
| Share-based compensation expense, net of tax effect | 13,440 | 13,411 | 25,341 | 24,665 | ||||||||||||||
| Acquisition-related acquired inventory valuation costs, intangible asset amortization and other costs, net of tax effect | 53,723 | 23,770 | 96,418 | 51,912 | ||||||||||||||
| Special charges (income), net of tax effect | 504 | (7 | ) | 695 | 1,057 | |||||||||||||
| Convertible debt non-cash interest expense, net of tax effect | 1,537 | 1,398 | 3,023 | 2,750 | ||||||||||||||
| Non-recurring tax events | (10,517 | ) | (1,995 | ) | (6,052 | ) | (1,995 | ) | ||||||||||
| Non-GAAP net income attributable to Microchip Technology | $ | 150,238 | $ | 136,383 | $ | 301,872 | $ | 256,774 | ||||||||||
| Non-GAAP net income attributable to Microchip Technology as a percentage of net sales | 27.5 | % | 27.7 | % | 28.0 | % | 26.9 | % | ||||||||||
| Diluted net income per common share attributable to Microchip Technology stockholders, as reported | $ | 0.42 | $ | 0.46 | $ | 0.82 | $ | 0.83 | ||||||||||
| Non-GAAP diluted net income per common share attributable to Microchip Technology stockholders | $ | 0.67 | $ | 0.63 | $ | 1.35 | $ | 1.20 | ||||||||||
| Diluted common shares outstanding, as reported | 225,284 | 216,475 | 224,906 | 214,371 | ||||||||||||||
| Diluted common shares outstanding Non-GAAP | 224,682 | 215,764 | 224,286 | 213,691 | ||||||||||||||
