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Micrel Reports 2014 Fourth Quarter and Full Year Financial Results

SAN JOSE, CA -- (Marketwired) -- Jan 29, 2015 -- Micrel, Incorporated (NASDAQ: MCRL)

Micrel, Incorporated (NASDAQ: MCRL), a leading global manufacturer of IC solutions for the worldwide high performance linear and power, LAN and timing and communications markets, today announced financial results for the fourth quarter and full year ended December 31, 2014.

Revenues for 2014 for the total year were $247.6 million, compared to $237.1 million in 2013. Revenues for the fourth quarter of 2014 were $57.9 million, a $9.6 million or 14.2% decrease, compared to $67.5 million for the third quarter of 2014. Compared to the fourth quarter of 2013, revenues were $2.1 million, or 3.5% lower. 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, as explained below, under "Non-GAAP Reporting."

GAAP net income was $3.1 million, or $0.05 per diluted share, for the fourth quarter of 2014, compared to net income of $4.7 million, or $0.08 per diluted share, for the third quarter of 2014, and net income of $3.4 million, or $0.06 per diluted share, for the fourth quarter of 2013. Net income was $0.04 per diluted share without the one-time revenue conversion for the third quarter of 2014. During the fourth quarter of 2014, the Company recorded restructuring charges of $0.5 million related to employee severances.

Non-GAAP net income was $4.8 million, or $0.08 per diluted share, for the fourth quarter of 2014, compared to non-GAAP net income of $4.2 million, or $0.07 per diluted share, for the third quarter of 2014, and non-GAAP net income of $4.8 million, or $0.08 per diluted share, for the fourth quarter of 2013.

GAAP net income was $13.5 million, or $0.24 per diluted share, for 2014, compared to net income of $17.6 million, or $0.30 per diluted share, for 2013. Non-GAAP net income was $17.8 million, or $0.31 per diluted share, for 2014, compared to $23.0 million, or $0.39 per diluted share, for 2013. GAAP gross margin was 51.7% for 2014, compared to 51.5% for 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 and R&D tax credit. 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 fourth quarter of 2013 and for the twelve 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.

Commenting on the fourth quarter and full-year 2014 results, Micrel's President and CEO Ray Zinn said, "Fourth quarter revenues of $57.9 million declined on a sequential quarter basis, primarily due to a slowdown in LTE build-out and the seasonal weakness from the wireline communications end market in Asia. This was partially offset by improving revenues from our timing and communications products where we saw particularly strong demand for our products in the fiber optic market. Operationally, fourth quarter gross margin was 51.1%, and efforts to improve efficiencies and reduce costs resulted in a $1.4 million per quarter reduction in total operating expenses. Although the semiconductor industry faced a difficult global macroeconomic environment throughout 2014, Micrel generated solid full-year financial and operational results with year-over-year growth in revenues, improving gross margins and strong cash flow from operations. In addition, I am very happy with the record design win momentum and we are quite pleased with the traction that our new products continue to receive in the marketplace."

Outlook

Mr. Zinn continued, "Quarter one is typically a flat to down quarter for Micrel and the industry overall. With that in mind, we believe Micrel's revenue for the quarter will be in the range of down 2% to up 4% from the fourth quarter of 2014. First quarter gross margin is expected to be in the range of 50% to 51% and GAAP net income is projected to be in the range of $0.02 to $0.04 per share, with non-GAAP income projected to be in the range of $0.04 to $0.07."

Dividend

The Company announced today that Micrel's Board of Directors has authorized a quarterly cash dividend of $0.05 per share of common stock. The payment of this dividend will be made on February 25, 2015 to shareholders of record as of February 11, 2015.

Share Repurchase Plan

In the fourth quarter of 2014, the Company repurchased 0.5 million shares for a total of $6.7 million at an average price of $12.33 per share. For the full year, the Company repurchased 1.7 million shares for a total of $20.2 million at an average price of $11.55 per share. On August 20, 2014, the Company announced that its Board of Directors had authorized the repurchase of an additional $25.0 million of the Company's common stock. This most recent authorization is in addition to the approximately $17.7 million of the Board of Directors' previous authorization remaining as of August 19, 2014. On December 31, 2014, Micrel had approximately $30.7 million remaining under its repurchase authorization. Stock repurchases may occur from time to time in the open market or in privately negotiated transactions; provided that the repurchases are made in accordance with the terms of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The timing and amount of any repurchase of shares will be determined by the Company's management, based on its evaluation of market conditions, cash on hand and other factors. The authorization will stay in effect until the aggregate authorized amount is expended or the authorization is modified by the Board of Directors.

Conference Call

The Company will host a conference call today, January 29, 2015, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). President and Chief Executive Officer, Raymond Zinn, and Chief Financial Officer, Bob DeBarr, will present an overview of the 2014 fourth quarter and full-year financial results; discuss current business conditions and then respond to questions.

The call is available, live, to any interested party, on a listen-only basis, by dialing (877) 407-0789. For international callers, please dial (201) 689-8562. A live webcast will also be available on the 'Investors' section of Micrel's website at: www.micrel.com. An audio replay of the conference call will be available for all interested parties through February 5, 2015, by dialing (877) 870-5176 and entering the participant code 13597696. For international callers, please dial (858) 384-5517 and enter participant code 13597696. The webcast replay will also be available on the Company's website.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This press release includes statements that qualify as forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about the following topics: future financial results, including revenues, customer demand and inventories, order lead times, backlog, turns-fill requirements, net income, earnings per share, gross margin, average selling prices, the effect of cost-control efforts, use of free cash flow, stock buyback and dividend programs, supply chain constraints, channel inventory levels and trends, capacity utilization, development of new products, design wins and customer order patterns, and the nature and extent of macro-economic and industry trends. Forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially. Those risks and uncertainties include, but are not limited to, such factors as: softness in demand for Micrel products; customer decisions to cancel, reschedule, or delay orders for Micrel's products; the effect that lead times and channel inventories have on the demand for Micrel's products; distributor acceptance of changing contract terms; economic or financial difficulties experienced by Micrel customers; the effect of business conditions in the computing, wireless, telecommunications and industrial markets; the impact of any previous or future acquisitions; challenges involving integration of acquired businesses and utilization of acquired technology, market adoption, revenue growth and margins of acquired products; changes in demand for the Company's products; the impact of competitive products and pricing and alternative technological advances; the accuracy of estimates used to prepare the Company's financial statements and forecasts; the global economic situation; the ability of the Company's vendors and subcontractors to supply or manufacture the Company's products in a timely manner; the timely and successful development and market acceptance of new products and upgrades to existing products; softness in the economy and the U.S. stock markets as a whole; fluctuations in the market price of Micrel's common stock and other market conditions; the difficulty of predicting Micrel's future cash needs; the nature of other investment opportunities available to the Company from time to time; Micrel's operating cash flow, and economic and industry projections. For further discussion of these risks and uncertainties, please refer to the documents the Company files with the SEC from time to time, including the Company's Annual Report on Form 10-K for the year ended December 31, 2013. All forward-looking statements are made as of today, and the Company disclaims any duty to update such statements.

Non-GAAP Reporting

The Company presents non-GAAP financial measures because the Company believes it is helpful information for investors and financial analysts in their analysis of historical results and projections of the Company's future operating results. 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 certain distributors to a sell-in revenue recognition model, share-based compensation, restructuring charges and amortization of acquisition-related intangible assets with the related income tax effects and R&D tax credit. Non-GAAP results without the one-time adjustment exclude the impact of revenues and the related cost of revenues from the conversion of distributors to a sell-in revenue recognition model with the related income tax effects. The Company believes this provides a better comparison of results in the current period to those in prior periods as well as provides information regarding the Company's on-going operating performance after exclusion of these items. The Company has reconciled such non-GAAP financial measures to the most directly comparable GAAP financial measures in the financial tables at the end of this press release.

References to these non-GAAP financial measures should be considered in addition to results that are prepared under current accounting standards, but should not be considered a substitute for results that are presented in accordance with GAAP. The Company's non-GAAP financial measures may differ from non-GAAP financial measures provided by other companies.

About Micrel

Micrel, Inc. is a leading global manufacturer of IC solutions for the worldwide high-performance linear and power, LAN and timing and communications markets. The Company's products include advanced mixed-signal, analog and power semiconductors; high performance communication, clock management, MEMs-based clock oscillators and crystal-less clock generators, Ethernet switch and physical layer transceiver ICs. Company customers include leading manufacturers of enterprise, consumer, industrial, mobile, telecommunications, automotive, and computer products. Corporation headquarters and state-of-the-art wafer fabrication facilities are located in San Jose, CA, with regional sales and support offices and advanced technology design centers situated throughout the Americas, Europe and Asia. In addition, the Company maintains an extensive network of distributors and reps worldwide. Web: www.micrel.com.

-Financial Tables to Follow-

                                                                            
                            MICREL, INCORPORATED                            
            GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS            
                    (In thousands, except share amounts)                    
                                 (Unaudited)                                
                                                                            
                              Three Months Ended        Twelve Months Ended 
                        -----------------------------  -------------------- 
                        December  September  December   December   December 
                        31, 2014   30, 2014  31, 2013   31, 2014   31, 2013 
                        --------  ---------  --------  ---------  --------- 
Net revenues            $ 57,918  $  67,480  $ 60,007  $ 247,594  $ 237,080 
Cost of revenues *        28,308     33,072    29,594    119,566    115,034 
                        --------  ---------  --------  ---------  --------- 
Gross profit              29,610     34,408    30,413    128,028    122,046 
Gross profit %              51.1%      51.0%     50.7%      51.7%      51.5%
                                                                            
Operating expenses:                                                         
 Research and                                                               
  development *           15,103     16,013    14,526     62,033     55,853 
 Selling, general and                                                       
  administrative *        11,721     12,218    11,325     48,351     45,803 
 Restructuring charges       508        484     1,376        992      1,376 
                        --------  ---------  --------  ---------  --------- 
  Total Operating                                                           
   Expenses               27,332     28,715    27,227    111,376    103,032 
Income from operations     2,278      5,693     3,186     16,652     19,014 
 Interest and other                                                         
  (expense) income:                                                         
 Interest income              84         80       109        359        482 
 Other expense               (97)      (120)      (34)      (297)      (264)
                        --------  ---------  --------  ---------  --------- 
  Interest and other                                                        
   (expense) income,                                                        
   net                       (13)       (40)       75         62        218 
Income before (benefit                                                      
 from) provision for                                                        
 income taxes              2,265      5,653     3,261     16,714     19,232 
(Benefit from)                                                              
 provision for income                                                       
 taxes                      (789)       978      (103)     3,167      1,584 
                        --------  ---------  --------  ---------  --------- 
Net income              $  3,054  $   4,675  $  3,364  $  13,547  $  17,648 
                        ========  =========  ========  =========  ========= 
                                                                            
Net income per share:                                                       
 Basic                  $   0.05  $    0.08  $   0.06  $    0.24  $    0.31 
                        ========  =========  ========  =========  ========= 
 Diluted                $   0.05  $    0.08  $   0.06  $    0.24  $    0.30 
                        ========  =========  ========  =========  ========= 
                                                                            
Shares used in                                                              
 computing per share                                                        
 amounts:                                                                   
 Basic                    56,490     56,642    56,908     56,508     57,803 
                        ========  =========  ========  =========  ========= 
 Diluted                  57,710     57,708    57,546     57,538     58,506 
                        ========  =========  ========  =========  ========= 
                                                                            
* Share-based                                                               
 compensation expense                                                       
 included in:                                                               
 Cost of revenues       $    249  $     271  $    276  $     997  $   1,060 
 Research and                                                               
  development                800        874       867      3,197      2,875 
 Selling, general and                                                       
  administrative             895        864       878      3,430      3,162 
                        --------  ---------  --------  ---------  --------- 
                        $  1,944  $   2,009  $  2,021  $   7,624  $   7,097 
                        ========  =========  ========  =========  ========= 
                                                                            
                                                                            
                            MICREL, INCORPORATED                            
          SUPPLEMENTAL RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS          
                    (In thousands, except share amounts)                    
                                 (Unaudited)                                
                                                                            
                              Three Months Ended        Twelve Months Ended 
                        -----------------------------  -------------------- 
                        December  September  December   December   December 
                        31, 2014   30, 2014  31, 2013   31, 2014   31, 2013 
                        --------  ---------  --------  ---------  --------- 
Net revenues            $ 57,918  $  67,480  $ 60,007  $ 247,594  $ 237,080 
Revenue from conversion                                                     
 of distributors to                                                         
 sell-in revenue                                                            
 recognition model             -     (5,064)        -     (5,064)         - 
                        --------  ---------  --------  ---------  --------- 
Net revenues without                                                        
 one-time adjustment    $ 57,918  $  62,416  $ 60,007  $ 242,530  $ 237,080 
                        ========  =========  ========  =========  ========= 
                                                                            
Cost of revenues        $ 28,308  $  33,072  $ 29,594  $ 119,566  $ 115,034 
Cost of revenues from                                                       
 conversion of                                                              
 distributors to sell-                                                      
 in revenue recognition                                                     
 model                         -     (1,566)        -     (1,566)         - 
                        --------  ---------  --------  ---------  --------- 
Cost of revenues                                                            
 without one-time                                                           
 adjustment             $ 28,308  $  31,506  $ 29,594  $ 118,000  $ 115,034 
                        ========  =========  ========  =========  ========= 
                                                                            
Gross profit            $ 29,610  $  34,408  $ 30,413  $ 128,028  $ 122,046 
Revenues from                                                               
 conversion of                                                              
 distributors to sell-                                                      
 in revenue recognition                                                     
 model                         -     (5,064)        -     (5,064)         - 
Cost of revenues from                                                       
 conversion of                                                              
 distributors to sell-                                                      
 in revenue recognition                                                     
 model                         -      1,566         -      1,566          - 
                        --------  ---------  --------  ---------  --------- 
Gross profit without                                                        
 one-time adjustment    $ 29,610  $  30,910  $ 30,413  $ 124,530  $ 122,046 
                        ========  =========  ========  =========  ========= 
Gross profit % without                                                      
 one-time adjustment        51.1%      49.5%     50.7%      51.3%      51.5%
                                                                            
Net income                 3,054      4,675     3,364     13,547     17,648 
Revenues from                                                               
 conversion of                                                              
 distributors to sell-                                                      
 in revenue recognition                                                     
 model                         -     (5,064)        -     (5,064)         - 
Cost of revenues from                                                       
 conversion of                                                              
 distributors to sell-                                                      
 in revenue recognition                                                     
 model                         -      1,566         -      1,566          - 
Tax effect of one-time                                                      
 adjustments                   -      1,088         -      1,088          - 
                        --------  ---------  --------  ---------  --------- 
Net income without one-                                                     
 time adjustment           3,054      2,265     3,364     11,137     17,648 
                        ========  =========  ========  =========  ========= 
                                                                            
Net income per share -                                                      
 diluted                $   0.05  $    0.08  $   0.06  $    0.24  $    0.30 
Total adjustments to                                                        
 net income             $      -  $   (0.04) $      -  $   (0.05) $       - 
                        --------  ---------  --------  ---------  --------- 
Net income per share                                                        
 without one-time                                                           
 adjustment - diluted   $   0.05  $    0.04  $   0.06  $    0.19  $    0.30 
                        ========  =========  ========  =========  ========= 
                                                                            
Shares used in                                                              
 computing net income                                                       
 per share:                                                                 
 Basic                    56,490     56,642    56,908     56,508     57,803 
                        ========  =========  ========  =========  ========= 
 Diluted                  57,710     57,708    57,546     57,538     58,506 
                        ========  =========  ========  =========  ========= 
                                                                            
                                                                            
Reconciliation to Full Non-GAAP Results:                                    
                                                                            
                              Three Months Ended        Twelve Months Ended 
                        -----------------------------  -------------------- 
                        December  September  December   December   December 
                        31, 2014   30, 2014  31, 2013   31, 2014   31, 2013 
                        --------  ---------  --------  ---------  --------- 
                                                                            
                                                                            
GAAP net income         $  3,054  $   4,675  $  3,364  $  13,547  $  17,648 
Revenues from                                                               
 conversion of                                                              
 distributors to sell-                                                      
 in revenue recognition                                                     
 model                         -     (5,064)        -     (5,064)         - 
Cost of revenues from                                                       
 conversion of                                                              
 distributors to sell-                                                      
 in revenue recognition                                                     
 model                         -      1,566         -      1,566          - 
Share-based                                                                 
 compensation included                                                      
 in:                                                                        
 Cost of revenue             249        271       276        997      1,060 
 Research and                                                               
  development                800        874       867      3,197      2,875 
 Selling, general and                                                       
  administrative             895        864       878      3,430      3,162 
Restructuring charges        508        484     1,376        992      1,376 
Amortization of                                                             
 acquisition-related                                                        
 intangible assets           295        301       330      1,327      1,186 
Tax effect of                                                               
 adjustments to GAAP                                                        
 net income                 (961)       219    (1,229)    (2,233)    (3,218)
R&D tax credit                 -          -    (1,062)         -     (1,062)
                        --------  ---------  --------  ---------  --------- 
Non-GAAP net income*    $  4,840  $   4,190  $  4,800  $  17,759  $  23,027 
                        ========  =========  ========  =========  ========= 
                                                                            
GAAP net income per                                                         
 share - diluted        $   0.05  $    0.08  $   0.06  $    0.24  $    0.30 
Total adjustments to                                                        
 GAAP net income        $   0.03  $   (0.01) $   0.02  $    0.07  $    0.09 
                        --------  ---------  --------  ---------  --------- 
Non-GAAP net income per                                                     
 share - diluted        $   0.08  $    0.07  $   0.08  $    0.31  $    0.39 
                        ========  =========  ========  =========  ========= 
                                                                            
Shares used in computing non-GAAP net income per share:                     
 Basic                    56,490     56,642    56,908     56,508     57,803 
                        ========  =========  ========  =========  ========= 
 Diluted                  57,710     57,708    57,546     57,538     58,506 
                        ========  =========  ========  =========  ========= 
                                                                            
* Non-GAAP net income was reached by excluding revenues and the related cost
of revenues from the conversion of distributors to sell-in revenue          
recognition model, share-based compensation expense, restructuring charges  
and amortization of acquisition-related intangible assets with related      
income tax effects and R&D tax credit. Non-GAAP results were presented to   
supplement our GAAP consolidated financial statements to allow a better     
comparison of results in the current period to those in prior periods and to
provide meaningful insight to the Company's on-going operating performance  
after exclusion of these items.                                             
                                                                            
                                                                            
                            MICREL, INCORPORATED                            
                    CONDENSED CONSOLIDATED BALANCE SHEETS                   
                    (In thousands, except share amounts)                    
                                 (Unaudited)                                
                                                                            
                                                        December   December 
                                                        31, 2014   31, 2013 
                                                       ---------- ----------
ASSETS                                                                      
                                                                            
CURRENT ASSETS:                                                             
  Cash, cash equivalents and short-term investments    $   86,611 $   88,593
  Restricted cash                                              44      1,116
  Accounts receivable, net                                 30,523     29,437
  Inventories                                              44,136     43,201
  Prepaid taxes                                             5,633      4,513
  Prepaid expenses and other                                1,612      2,698
  Deferred income taxes                                    22,356     21,662
                                                       ---------- ----------
    Total current assets                                  190,915    191,220
                                                                            
LONG-TERM INVESTMENTS                                       1,436      4,195
PROPERTY, PLANT AND EQUIPMENT, NET                         60,453     57,779
LONG-TERM PREPAID TAXES                                     1,711          -
DEFERRED INCOME TAXES                                       2,707      1,581
GOODWILL                                                    8,655      8,554
INTANGIBLE ASSETS, NET                                      9,792     11,749
OTHER ASSETS                                                1,511      1,046
                                                       ---------- ----------
TOTAL                                                  $  277,180 $  276,124
                                                       ========== ==========
                                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
                                                                            
CURRENT LIABILITIES:                                                        
  Accounts payable                                     $   17,376 $   13,502
  Deferred income on shipments to distributors             22,947     27,026
  Accrued liabilities                                      12,869     12,874
                                                       ---------- ----------
    Total current liabilities                              53,192     53,402
                                                                            
LONG-TERM INCOME TAXES PAYABLE                              3,511      3,575
LONG-TERM DEFERRED INCOME TAXES                               807        973
OTHER LONG-TERM LIABILITIES                                   162        201
                                                                            
SHAREHOLDERS' EQUITY                                                        
TOTAL SHAREHOLDERS' EQUITY                                219,508    217,973
                                                       ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             $  277,180 $  276,124
                                                       ========== ==========
                                                                            
                                                                            

Contact: 
Bob DeBarr
Micrel, Incorporated
2180 Fortune Drive
San Jose, CA 95131
Phone: (408) 944-0800