10-QPeriod: Q1 FY2014

MICROCHIP TECHNOLOGY INC Quarterly Report for Q1 Ended Jun 30, 2013

Filed August 9, 2013For Securities:MCHPMCHPP

Summary

Microchip Technology Inc. reported solid financial results for the quarter ended June 30, 2013. Net sales increased by 31.4% year-over-year to $462.8 million, largely driven by the acquisition of SMSC and continued market share gains. The company demonstrated strong operational execution, with gross profit margins remaining robust at 57.6%. While the acquisition of SMSC significantly contributed to revenue growth, it also led to an increase in operating expenses, particularly in R&D and amortization of acquired intangibles. Despite these increases, operating income remained stable at $98.4 million. The company also strengthened its financial flexibility by entering into a new $2.0 billion credit agreement. Microchip continues to prioritize shareholder returns through consistent dividend payments.

Financial Highlights

56 data points
Beta

Revenue

$462.79M

57.6% Gross Margin

Net Income

$78.58M

17.0% Net Margin

EPS (Diluted)

$0.18

Total Assets

$3.88B

Cash & Equivalents

$403.23M

Free Cash Flow

$167.37M

Financial Statements
Beta
Revenue$462.79M
Cost of Revenue$196.22M
Gross Profit$266.57M
R&D Expenses$73.08M
SG&A Expenses$65.71M
Operating Expenses$168.17M
Operating Income$98.40M
Interest Expense$11.86M
Net Income$78.58M
EPS (Basic)$0.20
EPS (Diluted)$0.18
Shares Outstanding (Basic)393.90M
Shares Outstanding (Diluted)424.53M

Key Highlights

  • 1Net sales grew 31.4% year-over-year to $462.8 million, boosted by the SMSC acquisition and market share gains.
  • 2Gross profit margin remained strong at 57.6%, despite a slight decrease from the prior year's 58.2%.
  • 3Operating income was $98.4 million, showing resilience despite increased operating expenses.
  • 4Acquisition of SMSC significantly impacted revenue and operational costs, particularly R&D and amortization.
  • 5The company secured a new $2.0 billion credit agreement, enhancing its financial flexibility.
  • 6Consistent dividend payments to shareholders demonstrate a commitment to returning value.
  • 7Cash and cash equivalents decreased by $125.1 million to $403.2 million, primarily due to investing and financing activities.

Frequently Asked Questions

The primary driver of the significant increase in net sales was the acquisition of SMSC on August 2, 2012. This acquisition, combined with general economic and semiconductor industry conditions and market share gains, led to a 31.4% year-over-year increase in net sales.

The SMSC acquisition led to an increase in operating expenses, notably in Research and Development (R&D) and the amortization of acquired intangible assets. R&D expenses rose significantly due to additional costs from the acquisition, while amortization of acquired intangible assets increased substantially because of the intangible assets recognized from the SMSC transaction.

As of June 30, 2013, Microchip Technology Inc. had $403.2 million in cash and cash equivalents, a decrease of $125.1 million from the prior quarter. This decrease was primarily due to cash used in investing activities (such as purchases and sales of investments) and financing activities (like debt repayments and dividend payments).

Microchip Technology Inc. has a policy of paying quarterly cash dividends and expects to continue doing so. A dividend of $0.3535 per share was paid in June 2013, and another of $0.354 per share was declared for September 2013. The continuation and amount of future dividends depend on market conditions, results of operations, and other factors deemed relevant by the Board of Directors.