10-QPeriod: Q1 FY2009

MICROCHIP TECHNOLOGY INC Quarterly Report for Q1 Ended Jun 30, 2008

Filed August 7, 2008For Securities:MCHPMCHPP

Summary

Microchip Technology Inc.'s (MCHP) 10-Q filing for the period ending June 30, 2008, indicates a modest increase in net sales to $268.2 million, up 1.6% year-over-year, despite a 4% decrease in average selling prices. This growth was driven by a 6% increase in unit volume, primarily in the microcontroller segment. The company maintained a strong gross profit margin of 61.0%, benefiting from cost reduction initiatives and a favorable product mix, although operating expenses saw a slight increase due to R&D and SG&A investments. Financially, Microchip reported robust operating cash flow of $123.1 million. The company's liquidity remains strong with $1.55 billion in cash, cash equivalents, and investments. A significant event during the quarter was the repurchase of $23.6 million in common stock. Investors should note the company's continued commitment to returning capital through dividends, with a $0.330 per share dividend paid and a slightly higher one declared for August. While overall financial health appears stable, the company faces ongoing risks typical of the semiconductor industry, including competitive pricing, product demand fluctuations, and potential impacts from global economic conditions.

Financial Highlights

29 data points
Beta

Revenue

$268.17M

61.0% Gross Margin

Net Income

$75.55M

28.2% Net Margin

EPS (Diluted)

$0.20

Cash & Equivalents

$685.58M

Free Cash Flow

$123.09M

Financial Statements
Beta
Revenue$268.17M
Cost of Revenue$104.58M
Gross Profit$163.60M
R&D Expenses$31.55M
SG&A Expenses$45.41M
Operating Expenses$76.97M
Operating Income$86.63M
Interest Expense$7.64M
Net Income$75.55M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)369.33M
Shares Outstanding (Diluted)382.10M

Key Highlights

  • 1Net sales increased by 1.6% to $268.2 million compared to the prior year's quarter, driven by a 6% increase in unit volume, offsetting a 4% decrease in average selling prices.
  • 2Gross profit margin remained strong at 61.0%, reflecting cost efficiencies and product mix improvements.
  • 3Operating income was $86.6 million, a slight increase from $85.0 million in the prior year's quarter.
  • 4The company generated strong operating cash flow of $123.1 million.
  • 5Total cash, cash equivalents, and investments stood at $1.55 billion, indicating solid liquidity.
  • 6The company paid a quarterly dividend of $0.330 per share, totaling $61.0 million, and declared a higher dividend for the next quarter.
  • 7Investments in auction rate securities experienced failed auctions, resulting in a reported impairment charge of $0.9 million in Q1 fiscal 2009, though the company maintains it will not materially impact liquidity.

Frequently Asked Questions

Microchip's net sales for the quarter ended June 30, 2008, were $268.2 million, an increase of 1.6% compared to $264.1 million in the same period of the prior year. This growth was achieved despite a 4% decline in average selling prices, thanks to a 6% increase in the number of units sold.

The company maintains a strong liquidity position with $1,552.7 million in cash, cash equivalents, and investments as of June 30, 2008. This provides ample resources to fund operations and capital expenditures. However, the company noted issues with some of its auction rate securities experiencing failed auctions, though it stated this would not materially impact liquidity.

Microchip continues its commitment to shareholder returns through regular quarterly cash dividends. A dividend of $0.330 per share was paid in May 2008, amounting to $61.0 million. Additionally, the company declared a dividend of $0.338 per share for August 2008, expected to be approximately $62.5 million. The company also repurchased $23.6 million of its common stock during the quarter.

Key risks include intense competition in the semiconductor market leading to pricing pressures and potential market share erosion, dependence on distributors with whom relationships can be terminated with little notice, the cyclical nature of the semiconductor industry, and potential impacts from global economic conditions. The company also highlighted specific risks related to its investments in auction rate securities and the potential accounting impacts of new FASB pronouncements on convertible debt.