MICROCHIP TECHNOLOGY INC Quarterly Report for Q2 Ended Sep 30, 2013

Summary

Microchip Technology Inc. reported a significant increase in net sales for the three and six months ended September 30, 2013, compared to the prior year, largely driven by the acquisition of SMSC in August 2012. Net sales for the quarter rose 28.5% year-over-year to $492.7 million, and for the six-month period, increased by 29.9% to $955.5 million. This growth was fueled by a combination of the SMSC acquisition, general economic conditions in the semiconductor industry, and market share gains. The company's gross profit margin also saw a substantial improvement, reaching 58.6% for the quarter and 58.1% for the six-month period, up from 50.7% and 54.3% respectively in the prior year. This improvement was attributed to the integration of SMSC, favorable product mix, and cost reduction efforts, partially offset by underutilization of manufacturing capacity. Despite increased R&D spending and higher interest expenses related to recent borrowings, Microchip maintained strong operating income and delivered solid net income, highlighting its ability to effectively integrate acquisitions and manage operations.

Key Highlights

• 1Net sales increased by 28.5% for the three months ended September 30, 2013, reaching $492.7 million.
• 2Net sales for the six months ended September 30, 2013, increased by 29.9% to $955.5 million, primarily due to the SMSC acquisition.
• 3Gross profit margin improved significantly to 58.6% for the quarter and 58.1% for the six-month period.
• 4Operating income showed strong growth, indicating effective operational management post-acquisition.
• 5R&D expenses increased, reflecting continued investment in product development.
• 6The company maintained a strong cash position, with $344.2 million in cash and cash equivalents as of September 30, 2013.
• 7A new $2.0 billion credit agreement was established in June 2013, providing enhanced financial flexibility.

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