10-K/APeriod: FY2011

MICROCHIP TECHNOLOGY INC Annual Report (Amendment), Year Ended Mar 31, 2011

Filed June 21, 2011For Securities:MCHPMCHPP

Summary

Microchip Technology Inc.'s 2011 10-K highlights a year of significant growth, with net sales increasing by 56.9% to $1.49 billion, largely driven by the strategic acquisition of Silicon Storage Technology (SST) in April 2010. This acquisition bolstered Microchip's memory product offerings and added a technology licensing segment. The company's core microcontroller business also saw robust growth, increasing by 32.1%, demonstrating continued market share gains and favorable industry conditions. Despite the strong top-line performance, investors should note the increasing reliance on third-party wafer foundries, which now account for 20% of production, a shift from previous years. While Microchip maintains its commitment to R&D investment ($170.6 million in fiscal 2011) and its integrated manufacturing strategy, the competitive semiconductor landscape and global economic factors continue to present risks. The company also continues its practice of returning capital to shareholders through consistent quarterly dividends.

Financial Highlights

54 data points
Beta

Revenue

$1.49B

59.3% Gross Margin

Net Income

$418.95M

28.2% Net Margin

EPS (Diluted)

$1.07

Total Assets

$2.97B

Cash & Equivalents

$703.92M

Free Cash Flow

$582.66M

Financial Statements
Beta
Revenue$1.49B
Cost of Revenue$612.77M
Gross Profit$881.25M
R&D Expenses$170.61M
SG&A Expenses$222.18M
Operating Expenses$407.07M
Operating Income$474.18M
Interest Expense$31.52M
Net Income$418.95M
EPS (Basic)$1.12
EPS (Diluted)$1.07
Shares Outstanding (Basic)374.13M
Shares Outstanding (Diluted)389.43M

Key Highlights

  • 1Net sales surged by 56.9% to $1.49 billion in fiscal year 2011, primarily due to the acquisition of SST and a recovery in semiconductor industry conditions.
  • 2The acquisition of SST significantly expanded Microchip's memory product portfolio and introduced a technology licensing segment, contributing substantially to overall revenue.
  • 3Microcontroller sales grew by 32.1%, demonstrating continued strength in the core business, supported by market share gains and new product introductions.
  • 4R&D expenses increased to $170.6 million, reflecting a commitment to innovation and maintaining a competitive edge in specialized semiconductor products.
  • 5The company relies on a strong distributor network, which accounted for 58% of net sales in fiscal 2011, though it notes the absence of long-term agreements with these partners.
  • 6International sales represent a significant portion of revenue (80% in fiscal 2011), with Asia being the largest market, largely influenced by the SST acquisition.
  • 7Microchip continued to return capital to shareholders, declaring and paying consistent quarterly cash dividends throughout the fiscal year.

Frequently Asked Questions

The primary driver of Microchip's significant revenue growth in fiscal year 2011 was the acquisition of Silicon Storage Technology (SST) in April 2010. This acquisition expanded the company's product portfolio, particularly in memory products and technology licensing, and contributed substantially to the 56.9% increase in net sales.

Microchip continues to emphasize its strategy of owning its manufacturing resources for high levels of control and cost efficiency. However, the acquisition of SST has increased reliance on third-party wafer foundries, which accounted for approximately 20% of production in fiscal 2011. The company also utilizes third-party assembly and test contractors for a portion of its needs.

Key risks highlighted include intense competition in the semiconductor industry leading to pricing pressures, dependence on distributors (with no long-term agreements), potential disruptions in the supply chain (including reliance on foundries), fluctuations in global economic conditions impacting demand, and the company's ability to effectively integrate acquisitions and introduce new products in a timely manner.

Yes, Microchip demonstrates a strong commitment to R&D, with expenses increasing to $170.6 million in fiscal 2011. The company believes these investments are crucial for developing new and enhanced products, including microcontrollers, digital signal controllers, and memory products, as well as improving design and manufacturing process technologies to maintain its competitive position.