Microchip Technology Announces Strong Third Quarter Fiscal 2003 Results

1/30/2003 - Microchip Technology Incorporated reported net sales and earnings for the third fiscal quarter ended December 31, 2002. Net sales for the quarter were $171.0 million, an increase of approximately 1% from sales of $169.7 million in the immediately preceding quarter, and an increase of approximately 21% from sales of $141.9 million in the quarter ended December 31, 2001. Net income for the quarter was $37.0 million, or 18 cents per diluted share, up approximately 5% from pro-forma net income of $35.2 million (prior to the effects of net impairment charges of $24.9 million), or 17 cents per diluted share in the immediately preceding quarter, and up approximately 56% from net income of $23.6 million, or 11 cents per diluted share in the quarter ended December 31, 2001. During the quarter ended December 31, 2002, the Company generated net positive cash flow of approximately $57 million. Total cash and cash equivalents as of December 31, 2002 were $198 million.

The Company expects to declare a quarterly cash dividend within the next week. The Company initiated cash dividend payments in the third quarter of fiscal 2003, and paid its first quarterly cash dividend in the amount of $.02 per share on December 6, 2002.

“We met the high end of our earnings per share guidance despite net sales being at the lower end of our expectations, primarily driven by strong gross margins, which were up 100 basis points sequentially from the quarter ended September 30, 2002. Our revenue from commodity serial EEPROM products was down 15% sequentially from the quarter ended September 30, 2002, this being the principal area of weakness in our sales performance. However, revenue from our proprietary product lines of both microcontroller and analog products grew by approximately 3% each, from the quarter ended September 30, 2002. Our microcontrollers also achieved record sales levels in the December quarter, with revenues of approximately $137 million, a year over year increase of over 24%. Our analog products continue to benefit from sales opportunities attached to our microcontrollers, and achieved a year over year sales increase of approximately 34%,” said Steve Sanghi, Microchip’s President and CEO.

“We were very encouraged with the increasing proprietary content of our product sales mix and our manufacturing performance. Our gross margins reached record levels of 54.9%, driven by these factors. Our product gross margins, excluding approximately $3 million in start-up expenses of Fab 4, were 56.7%,” added Mr. Sanghi.

“As we enter our final quarter of fiscal year 2003, which has historically been the seasonally weakest quarter for Microchip, we continue to focus on demand creation for our proprietary products. The economic climate continues to be challenging. We are expecting net sales for the fourth fiscal quarter ending March 31, 2003 to be approximately flat to up low single digits, and earnings per share for the fourth quarter of fiscal 2003 to be flat at 18 cents,” concluded Mr. Sanghi.

Microchip’s Third Quarter Highlights:

About Microchip
Microchip Technology Inc. manufactures the popular PICmicro® field-programmable RISC microcontrollers, which serve 8- and 16-bit embedded control applications, and a broad spectrum of high-performance linear and mixed-signal, power management and thermal management devices. The Company also offers complementary microperipheral products including interface devices; microID® RFID devices; serial EEPROMs; and the patented KEELOQ® security devices. This synergistic product portfolio targets thousands of applications and a growing demand for high-performance designs in the automotive, communications, computing, consumer and industrial control markets.

The Company's quality systems are ISO 9001 (1994 version) and QS9000 (1998 version) certified. Microchip is headquartered in Chandler, Arizona with design facilities in Mountain View, California, Bangalore, India, and Lausanne, Switzerland; semiconductor fabrication facilities in Tempe and Chandler, Arizona; Puyallup, Washington; and Gresham, Oregon, and assembly and test operations near Bangkok, Thailand. Microchip employs approximately 3,350 people worldwide and has sales offices throughout Asia, Europe, Japan and the Americas. More information on the Company can be found at www.microchip.com.

The Microchip logo and name, PICmicro®, MPLAB®, KEELOQ® , microID® and PowerSmart® are registered trademarks of Microchip Technology Incorporated. dsPICTM and rfPICTM are trademarks of Microchip Technology Incorporated. SPI is a trademark of Motorola Inc. Microwire is a trademark of National Semiconductor Corporation.

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