“While general economic and semiconductor industry conditions have continued to be difficult and visibility continues to be limited, we have progressed according to our internal plan for this quarter,” said Steve Sanghi, Microchip’s President and CEO. “We saw our total backlog bottom out early in the quarter and it has since shown gradual growth. As a result of actions that we implemented during this quarter, we have reduced manufacturing output by approximately 29% from the December 2008 level or down approximately 43% from the peak level of September 2008. For the March 2009 quarter, GAAP operating expenses are expected to be down about 7% from the December 2008 quarter and down approximately 23% from the quarter ending September 30, 2008, excluding acquisition-related expenses. For the March 2009 quarter, non-GAAP operating expenses are expected to be down about 7% from the December 2008 quarter and down approximately 25% from the quarter ending September 30, 2008,” Mr. Sanghi continued.
“We are seeing a high level of expedite requests from our customers, despite relatively short lead times on all of our products. We believe this indicates that customer inventories are depleted and that customer order patterns are now trying to catch up to actual demand. While it is too early to call this a trend, we are encouraged by these signs, and hope that the current quarter can be the bottom of this cycle,” added Mr. Sanghi.
“In response to the current environment, Microchip dramatically cut its capital expenditure budget to only $15 million for fiscal year 2010, consisting primarily of maintenance-type capital items. Even under a very conservative revenue scenario we have modeled, we expect our free cash flow for fiscal year 2010 to be sufficient to support the current level of dividend. Although many blue chip companies have significantly cut their dividends, Microchip’s Board of Directors has reaffirmed its commitment to the current dividend levels,” concluded Mr. Sanghi.
The Company is not able to provide a reconciliation of its GAAP and non-GAAP guidance for the March 31, 2009 quarter at this time but will include such reconciliation and related information as part of its earnings announcement.
The statements in this release relating to our guidance for net sales, GAAP and non-GAAP earnings per share and GAAP and non-GAAP operating expenses for the quarter ending March 31, 2009, a high level of expedite requests from our customers, our belief that customer inventories are depleted and that customer order patterns are now trying to catch up to demand, our hope that the current quarter is the bottom of this cycle, free cash flow for fiscal year 2010 being sufficient to support the dividend, and the Board of Director’s commitment to the current dividend level are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause our actual results to differ materially, including, but not limited to: further unexpected changes in economic conditions or the ordering patterns of our customers; changes in demand or market acceptance of our products and the products of our customers; the mix of inventory we hold and our ability to satisfy short-term orders from our inventory; changes in utilization of our manufacturing capacity; competitive developments including pricing pressures; the level of orders that are received and can be shipped in a quarter; the level of sell-through of our products through distribution; changes or fluctuations in customer order patterns and seasonality; foreign currency effects on our business; costs and outcome of any current or future tax audit or any litigation involving intellectual property, customers or other issues; disruptions in our business or the businesses of our customers or suppliers due to natural disasters, terrorist activity, armed conflict, war, worldwide oil prices and supply, public health concerns or disruptions in the transportation system; and general economic, industry or political conditions in the United States or internationally.
For a detailed discussion of these and other risk factors, please refer to Microchip's filings on Forms 10-K and 10-Q. You can obtain copies of Forms 10-K and 10-Q and other relevant documents for free at Microchip’s Web site ( www.microchip.com) or the SEC's Web site ( www.sec.gov) or from commercial document retrieval services.
Stockholders of Microchip are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. Microchip does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after this March 10, 2009 press release, or to reflect the occurrence of unanticipated events.
Microchip Technology Inc. is a leading provider of microcontroller and analog semiconductors, providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide. Headquartered in Chandler, Arizona, Microchip offers outstanding technical support along with dependable delivery and quality. For more information, visit the Microchip Web site at www.microchip.com.
The Microchip logo and name are registered trademarks of Microchip Technology Incorporated.
Investor Relations Contacts:
Microchip Technology Incorporated
J. Eric Bjornholt, CFO, 480-792-7804
Gordon Parnell, 480-792-7374
Vice President of Business Development and Investor Relations