The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. We are not able to predict whether inventory at our distributors will increase or decrease during the quarter and are therefore providing a range of GAAP net sales guidance. In recent years, we have seen net inventory at our distributors increase or decrease by a significant amount in a single quarter.
| Microchip Consolidated Guidance | |||
| Net Sales | $1.205 to $1.310 billion | ||
| GAAP | Non-GAAP Adjustments | Non-GAAP(1) | |
| Gross Margin | 60.5% to 61.5% | $8.3 to $9.3 million | 61.2% to 62.2% |
| Operating Expenses(2) | 45.3% to 47.9% | $285.7 to $289.7 million | 23.2% to 24.2% |
| Operating Income | 12.6% to 16.2% | $294.0 to $299.0 million | 37.0% to 39.0% |
| Other Expense, net | $96.4 to $98.4 million | $19.4 million | $77 to $79 million |
| Income Tax Provision | $9.3 to $13.5 million(3) | $10.3 to $14.7 million | $23.7 to $24.0 million(4) |
| Net Income | $46.2 to $100.0 million | $298.7 to $308.0 million | $344.9 to $408.0 million |
| Diluted Common Shares
Outstanding | Approximately 264.6 to 268.6 million shares | Approximately 264.6 to 268.6 million shares | |
| Earnings per Diluted Share | $0.17 to $0.37 | $1.13 to $1.15 | $1.30 to $1.52 |
(1) See the "Use of Non-GAAP Financial Measures" section of this release for information regarding our non-GAAP guidance.
(2) We are not able to estimate the amount of certain Special Charges and Other, net that may be incurred during the quarter ending September 30, 2020. Therefore, our estimate of GAAP operating expenses excludes certain amounts that may be recognized as Special Charges and Other, net in the quarter ending September 30, 2020.
(3) The forecast for GAAP tax expense excludes any unexpected tax events that may occur during the quarter, as these amounts cannot be forecasted.
(4) Represents expected cash tax rate for fiscal 2021 excluding any transition tax payments associated with the Tax Cuts and Jobs Act.
- Microchip's inventory days in the September 2020 quarter are expected to be in the range of 118 to 130 days, compared to 117 days at June 30, 2020. 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 September 30, 2020 are expected to be about $15 million. Capital expenditures for all of fiscal 2021 are expected to be between $50 million and $70 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 and to bring in-house more of the assembly and test operations that are currently outsourced.
Under the new GAAP revenue recognition standard which we adopted on April 1, 2018, we are required to recognize revenue when control of the product changes from us to a customer or distributor. We focus our sales and marketing efforts on creating demand for our products in the end markets we serve and not on moving inventory into our distribution network. Therefore, the elements of our internal performance and executive and employee compensation metrics that are based on sales and operating results are measured using the value of the end-market demand for our products. We use end-market demand for these purposes because we do not believe that the underlying value of our business benefits from increases in the value of inventory that is held in the supply chain. As many of our products are designed into customer applications with relatively long lives, such value is only realized when the end-market demand is created and the supply chain sells the inventory to the end customer. We define end-market demand as the net dollar amount of our products, licensing revenue and other services delivered to our direct (non-distributor) customers and by our distributors to their customers. We are able to calculate end-market demand based on information that our distributors provide us about their product shipments to their customers and inventory holdings. The value of end-market demand from our distributors is calculated as the net transaction value of these shipments. We believe that our end-market demand metric reflects true end-market demand based on when product is sold to direct customers or by our distributors to an end customer. We believe the use of end-market demand is also important to investors and users of our financial statements as it reflects the final outcome of our sales activities whereas our GAAP net sales are based on estimates made earlier in (or before the end of) the process of creating and fulfilling demand is complete. We also manage our manufacturing and supply chain operations, including our distributor relationships, towards the goal of having our products available at the time and location the end customer desires. Management uses end-market demand to manage and assess the profitability of our business and when developing and monitoring our budgets and spending. Many of our investors have requested that we disclose end-market demand metric because they believe it is useful in understanding our performance as it provides better information regarding end-market demand for our products. Therefore, we believe that it is useful to investors for us to disclose end-market demand. Our determination of end-market demand metric might not be the same as similarly titled measures used by other companies.
