10-QPeriod: Q3 FY2010

MICROCHIP TECHNOLOGY INC Quarterly Report for Q3 Ended Dec 31, 2009

Filed February 9, 2010For Securities:MCHPMCHPP

Summary

Microchip Technology Inc. reported its financial results for the third quarter of fiscal year 2010, ending December 31, 2009. The company experienced a significant rebound in net sales, increasing by 30.1% year-over-year to $250.1 million. This growth was driven by improving semiconductor industry conditions and market share gains, particularly in its core microcontroller segment, which represented over 80% of sales. Despite a year-to-date decrease in net sales of 8.3% to $669.7 million, the quarterly performance signals a positive trend reversing the adverse impacts of the prior year's global economic downturn. The company maintained a strong gross profit margin of 58.4% for the quarter, benefiting from increased capacity utilization compared to the prior year's periods of reduced production. Research and development expenses were maintained at healthy levels (12.1% of net sales) to support ongoing innovation. Microchip also continued its commitment to shareholder returns, paying a quarterly cash dividend of $0.34 per share. The company ended the quarter with a solid liquidity position, demonstrating its resilience and ability to navigate market challenges.

Financial Highlights

51 data points
Beta

Revenue

$250.10M

58.4% Gross Margin

Net Income

$69.40M

27.8% Net Margin

EPS (Diluted)

$0.18

Total Assets

$2.44B

Cash & Equivalents

$361.29M

Free Cash Flow

$100.93M

Financial Statements
Beta
Revenue$250.10M
Cost of Revenue$104.10M
Gross Profit$146.00M
R&D Expenses$30.33M
SG&A Expenses$43.10M
Operating Expenses$73.43M
Operating Income$72.57M
Interest Expense$7.76M
Net Income$69.40M
EPS (Basic)$0.19
EPS (Diluted)$0.18
Shares Outstanding (Basic)368K
Shares Outstanding (Diluted)376K

Key Highlights

  • 1Net sales increased by 30.1% year-over-year to $250.1 million for the third quarter of fiscal year 2010.
  • 2Microcontrollers remain the dominant product category, accounting for approximately 80.9% of net sales.
  • 3Gross profit margin improved to 58.4% compared to 54.5% in the prior year's quarter, aided by increased capacity utilization.
  • 4The company paid a quarterly cash dividend of $0.34 per share, indicating a commitment to shareholder returns.
  • 5Cash and cash equivalents, along with short-term and long-term investments, totaled $1,499.6 million, providing a strong liquidity position.
  • 6The company is proceeding with the acquisition of Silicon Storage Technology, Inc. for approximately $275 million, expected to close in the first quarter of fiscal year 2011.

Frequently Asked Questions

The increase in net sales was primarily driven by improving semiconductor industry conditions and market share gains in Microchip's strategic product lines, particularly microcontrollers.

The gross profit margin was 58.4% for the three months ended December 31, 2009, an improvement from 54.5% in the same period last year. This was largely due to higher capacity utilization in manufacturing facilities compared to the previous year.

Microchip holds $43.2 million in ARS as of December 31, 2009. These investments have experienced failed auctions due to credit market liquidity issues. The company has recognized impairment charges on some of these ARS and has a put option agreement for a portion, with the intention to hold them until market recovery or exercise the option.

Microchip anticipates spending approximately $60 million over the next twelve months on equipment and facilities to maintain and selectively increase capacity. They expect to finance these expenditures through existing cash balances and operating cash flows.