10-QPeriod: Q1 FY2013

MICROCHIP TECHNOLOGY INC Quarterly Report for Q1 Ended Jun 30, 2012

Filed August 9, 2012For Securities:MCHPMCHPP

Summary

Microchip Technology Inc. reported net sales of $352.1 million for the three months ended June 30, 2012, a decrease of 6.0% compared to $374.5 million in the same period of the prior year. This decline was primarily attributed to general economic and semiconductor industry conditions, impacting both average selling prices and unit volumes. Despite the revenue decrease, the company maintained a strong gross profit margin of 57.7%, albeit slightly lower than the previous year's 58.7%, influenced by lower capacity utilization in manufacturing facilities. The company also highlighted its strategic acquisition of Roving Networks on April 18, 2012, for approximately $20.6 million, aimed at expanding its Wi-Fi and Bluetooth solutions. Financially, Microchip ended the quarter with a robust liquidity position, including $779.8 million in cash and cash equivalents, and demonstrated solid cash flow from operations of $129.0 million. The company continued its commitment to shareholders by paying quarterly dividends.

Financial Highlights

52 data points
Beta

Revenue

$352.13M

58.2% Gross Margin

Net Income

$78.71M

22.4% Net Margin

EPS (Diluted)

$0.20

Total Assets

$3.14B

Cash & Equivalents

$779.85M

Free Cash Flow

$128.97M

Financial Statements
Beta
Revenue$352.13M
Cost of Revenue$147.34M
Gross Profit$204.80M
R&D Expenses$48.83M
SG&A Expenses$55.59M
Operating Expenses$108.46M
Operating Income$96.33M
Interest Expense$9.15M
Net Income$78.71M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)386.90M
Shares Outstanding (Diluted)407.40M

Key Highlights

  • 1Net sales decreased by 6.0% year-over-year to $352.1 million for the quarter ended June 30, 2012.
  • 2Gross profit margin remained strong at 57.7%, though slightly down from 58.7% in the prior year, impacted by reduced manufacturing capacity utilization.
  • 3Acquired Roving Networks for approximately $20.6 million to enhance Wi-Fi and Bluetooth offerings.
  • 4Maintained a strong liquidity position with $779.8 million in cash and cash equivalents as of June 30, 2012.
  • 5Generated $129.0 million in net cash from operating activities, an increase from $83.3 million in the prior year's comparable quarter.
  • 6Continued returning capital to shareholders through quarterly dividend payments.

Frequently Asked Questions

The primary drivers for the 6.0% year-over-year revenue decrease to $352.1 million were challenging general economic and semiconductor industry conditions. These factors led to a decrease in both average selling prices (down approximately 4%) and unit volumes (down approximately 3%) for their semiconductor products.

Microchip operated its wafer fabrication and assembly/test facilities below normal capacity levels in response to weaker global economic conditions. This resulted in approximately $3.8 million of unabsorbed capacity costs being charged to cost of sales in the three months ended June 30, 2012, impacting gross margins.

Microchip maintains a strong financial position. As of June 30, 2012, the company held $779.8 million in cash and cash equivalents and $1,821.2 million in total cash, cash equivalents, and investments. Net cash provided by operating activities was robust at $129.0 million for the quarter, and the company has a $750 million revolving credit facility, though no amounts were outstanding at the end of the quarter.

Yes, Microchip acquired Roving Networks, a company specializing in low-power embedded Wi-Fi and Bluetooth solutions, on April 18, 2012, for approximately $20.6 million. This acquisition is expected to expand their product portfolio in connectivity solutions.