TMCnet News

Micrel Reports 2014 Third Quarter Financial Results
[October 23, 2014]

Micrel Reports 2014 Third Quarter Financial Results


(Marketwire Via Acquire Media NewsEdge) SAN JOSE, CA -- (Marketwired) -- 10/23/14 -- Micrel, Incorporated (NASDAQ: MCRL) Revenues of $67.5 million, compared to $62.3 million for the second quarter of 2014Revenues of $62.4 million without a one-time revenue conversion of $5.1 millionGAAP net income of $4.7 million, or $0.08 per diluted share, compared to $3.5 million, or $0.06 per diluted share for the second quarter of 2014Net income of $0.04 per diluted share without the one-time revenue conversionNon-GAAP net income of $4.2 million, or $0.07 per diluted share, compared to $5.0 million, or $0.09 per diluted share for the second quarter of 2014Gross margin of 51.0%, compared to 52.6% for the second quarter of 2014Gross margin of 49.5% without the one-time revenue conversionRepurchased 0.6 million shares of Micrel common stock for a total of $7.5 million for the quarterDeclared quarterly dividend of $0.05 per share Micrel, Incorporated (NASDAQ: MCRL), a leading global manufacturer of IC solutions for the worldwide high performance linear and power, LAN and timing and communications markets, today announced financial results for the quarter ended September 30, 2014.



Revenues for the third quarter of 2014 were $67.5 million, a $5.2 million or 8.2% increase, compared to $62.3 million for the second quarter of 2014. Compared to the third quarter of 2013, revenues were $9.3 million, or 16% higher. During the third quarter of 2014, the Company converted certain distributors to a sell-in revenue recognition model following changes to the terms of Micrel distribution agreements. Revenues for the third quarter of 2014 included a one-time increase of $5.1 million, which represented the amount of inventory at these distributors on June 30, 2014. This one-time increase in revenues and related income is excluded from non-GAAP results, as explained below under "Non-GAAP Reporting." GAAP net income was $4.7 million, or $0.08 per diluted share, for the third quarter of 2014, compared to net income of $3.5 million, or $0.06 per diluted share, for the second quarter of 2014, and net income of $4.0 million, or $0.07 per diluted share, for the third quarter of 2013. Net income was $0.04 per diluted share without the one-time revenue conversion. During the third quarter of 2014, the Company recorded restructuring charges of $0.5 million related to employee severances.

Non-GAAP net income was $4.2 million, or $0.07 per diluted share, for the third quarter of 2014, compared to non-GAAP net income of $5.0 million, or $0.09 per diluted share, for the second quarter of 2014, and non-GAAP net income of $5.4 million, or $0.09 per diluted share, for the third quarter of 2013. A reconciliation of the GAAP net income to non-GAAP net income is provided in the financial tables at the end of this press release. Non-GAAP net income and non-GAAP earnings per diluted share exclude the impact of revenues and the related cost of revenues from the conversion of distributors to a sell-in revenue recognition model as well as share-based compensation, restructuring charges and amortization of acquisition-related intangible assets with the related income tax effects. Beginning in the first quarter of 2014, the Company changed the presentation of non-GAAP net income from that previously reported to exclude the impact of the amortization of acquisition-related intangible assets and the related tax effect. The non-GAAP net income for the third quarter of 2013 and for the first nine months of 2013 have been revised from previously reported amounts to exclude the impact of the amortization of acquisition-related intangible assets and the related tax effect to conform with the current period presentation.


Commenting on the third quarter 2014 results, Micrel's President and CEO Ray Zinn said, "Excluding one-time distributor conversion revenue, Micrel benefited from sequential quarter growth of timing and communications and LAN solutions product sales. Gross margin declined to 51.0% from 52.6% in the previous quarter due to a shift in the product mix, price erosion, and utilization. Gross margin was 49.5% without the one-time revenue conversion. In addition, we remain focused on increasing shareholder value through our stock repurchase program and quarterly dividend payments. During the first nine months of 2014, Micrel spent $13.4 million to repurchase approximately 1.2 million shares of common stock, and maintained its quarterly dividend." OutlookMr. Zinn continued, "Consistent with the rest of the industry, Micrel saw bookings soften in the third quarter as the global economy remained lackluster. Looking ahead, without the benefit of any significant economic momentum, we believe that the demand for semiconductors in the fourth quarter of 2014 will follow the typical seasonal pattern of flat to down from the third quarter. Based on this, we expect fourth quarter revenue for Micrel to be in the range of $60.5 million to $58.7 million or down 3% to down 6% from the base business of $62.4 million, which does not include the one-time conversion of some of the distributors. Ultimately, we remain optimistic for Micrel, going forward, due to the number of world class products that are being introduced and the traction that they are receiving." DividendThe Company announced today that Micrel's Board of Directors has authorized a quarterly cash dividend of $0.05 per share of common stock. The payment of this dividend will be made on November 20, 2014 to shareholders of record as of November 6, 2014.

Share Repurchase PlanIn the third quarter of 2014, the Company repurchased 0.6 million shares for a total of $7.5 million at an average price of $12.04 per share. On August 20, 2014, the Company announced its Board of Directors authorized the repurchase of an additional $25.0 million of the Company's common stock. This most recent authorization is in addition to the approximately $17.7 million of the Board of Directors' previous authorization remaining as of August 19, 2014. On September 30, 2014, Micrel had approximately $37.4 million remaining under its repurchase authorization. Stock repurchases may occur from time to time in the open market or in privately negotiated transactions; provided that the repurchases are made in accordance with the terms of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The timing and amount of any repurchase of shares will be determined by the Company's management, based on its evaluation of market conditions, cash on hand and other factors. The authorization will stay in effect until the aggregate authorized amount is expended or the authorization is modified by the Board of Directors.

Conference CallThe Company will host a conference call today, October 23, 2014, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). President and Chief Executive Officer, Raymond Zinn, and Chief Financial Officer, Bob DeBarr, will present an overview of the 2014 third quarter financial results; discuss current business conditions and then respond to questions.

The call is available, live, to any interested party, on a listen-only basis, by dialing (877) 407-0789. For international callers, please dial (201) 689-8562. A live webcast will also be available on the 'Investors' section of Micrel's website at: www.micrel.com. An audio replay of the conference call will be available for all interested parties through October 30, 2014, by dialing (877) 870-5176 and entering the participant code 13591867. For international callers, please dial (858) 384-5517 and enter participant code 13591867. The webcast replay will also be available on the Company's website.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995This press release includes statements that qualify as forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about the following topics: future financial results, including revenues, customer demand and inventories, order lead times, backlog, turns-fill requirements, net income, earnings per share, gross margin, average selling prices, the effect of cost-control efforts, use of free cash flow, stock buyback and dividend programs, supply chain constraints, channel inventory levels and trends, capacity utilization, development of new products, design wins and customer order patterns, and the nature and extent of macro-economic and industry trends. Forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially. Those risks and uncertainties include, but are not limited to, such factors as: softness in demand for Micrel products; customer decisions to cancel, reschedule, or delay orders for Micrel's products; the effect that lead times and channel inventories have on the demand for Micrel's products; distributor acceptance of changing contract terms; economic or financial difficulties experienced by Micrel customers; the effect of business conditions in the computing, wireless, telecommunications and industrial markets; the impact of any previous or future acquisitions; challenges involving integration of acquired businesses and utilization of acquired technology, market adoption, revenue growth and margins of acquired products; changes in demand for the Company's products; the impact of competitive products and pricing and alternative technological advances; the accuracy of estimates used to prepare the Company's financial statements and forecasts; the global economic situation; the ability of the Company's vendors and subcontractors to supply or manufacture the Company's products in a timely manner; the timely and successful development and market acceptance of new products and upgrades to existing products; softness in the economy and the U.S. stock markets as a whole; fluctuations in the market price of Micrel's common stock and other market conditions; the difficulty of predicting Micrel's future cash needs; the nature of other investment opportunities available to the Company from time to time; Micrel's operating cash flow, and economic and industry projections. For further discussion of these risks and uncertainties, please refer to the documents the Company files with the SEC from time to time, including the Company's Annual Report on Form 10-K for the year ended December 31, 2013. All forward-looking statements are made as of today, and the Company disclaims any duty to update such statements.

Non-GAAP ReportingThe Company presents non-GAAP financial measures because the Company believes it is helpful information for investors and financial analysts in their analysis of historical results and projections of the Company's future operating results. Non-GAAP net income and non-GAAP earnings per diluted share exclude the impact of revenues and the related cost of revenues from the conversion of certain distributors to a sell-in revenue recognition model, share-based compensation, restructuring charges and amortization of acquisition-related intangible assets with the related income tax effects. Non-GAAP results without the one-time adjustment exclude the impact of revenues and the related cost of revenues from the conversion of distributors to a sell-in revenue recognition model with the related income tax effects. The Company believes this provides a better comparison of results in the current period to those in prior periods as well as provides information regarding the Company's on-going operating performance after exclusion of these items. The Company has reconciled such non-GAAP financial measures to the most directly comparable GAAP financial measures in the financial tables at the end of this press release.

References to these non-GAAP financial measures should be considered in addition to results that are prepared under current accounting standards, but should not be considered a substitute for results that are presented in accordance with GAAP. The Company's non-GAAP financial measures may differ from non-GAAP financial measures provided by other companies.

About MicrelMicrel, Inc. is a leading global manufacturer of IC solutions for the worldwide high-performance linear and power, LAN and timing and communications markets. The Company's products include advanced mixed-signal, analog and power semiconductors; high performance communication, clock management, MEMs-based clock oscillators and crystal-less clock generators, Ethernet switch and physical layer transceiver ICs. Company customers include leading manufacturers of enterprise, consumer, industrial, mobile, telecommunications, automotive, and computer products. Corporation headquarters and state-of-the-art wafer fabrication facilities are located in San Jose, CA, with regional sales and support offices and advanced technology design centers situated throughout the Americas, Europe and Asia. In addition, the Company maintains an extensive network of distributors and reps worldwide. Web: www.micrel.com.

-Financial Tables to Follow- MICREL, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share amounts) (Unaudited) Three Months Ended Nine Months Ended ------------------------------- -------------------- September September September September 30, June 30, 30, 30, 30, 2014 2014 2013 2014 2013 --------- --------- --------- --------- --------- Net revenues $ 67,480 $ 62,339 $ 58,169 $ 189,676 $ 177,073 Cost of revenues * 33,072 29,548 28,698 91,258 85,440 --------- --------- --------- --------- --------- Gross profit 34,408 32,791 29,471 98,418 91,633 Gross profit % 51.0% 52.6% 50.7% 51.9% 51.7% Operating expenses: Research and development * 16,013 15,436 14,055 46,930 41,327 Selling, general and administrative * 12,218 11,976 11,184 36,630 34,478 Restructuring charges 484 -- -- 484 -- --------- --------- --------- --------- --------- Total operating expenses 28,715 27,412 25,239 84,044 75,805 Income from operations 5,693 5,379 4,232 14,374 15,828 Interest and other (expense) income: Interest income 80 92 121 275 373 Other expense (120) (8) (87) (200) (230) --------- --------- --------- --------- --------- Interest and other (expense) income, net (40) 84 34 75 143 Income before provision for income taxes 5,653 5,463 4,266 14,449 15,971 Provision for income taxes 978 1,934 262 3,956 1,687 --------- --------- --------- --------- --------- Net income $ 4,675 $ 3,529 $ 4,004 $ 10,493 $ 14,284 ========= ========= ========= ========= ========= Net income per share: Basic $ 0.08 $ 0.06 $ 0.07 $ 0.19 $ 0.25 ========= ========= ========= ========= ========= Diluted $ 0.08 $ 0.06 $ 0.07 $ 0.18 $ 0.24 ========= ========= ========= ========= ========= Shares used in computing per share amounts: Basic 56,642 56,537 57,752 56,514 58,107 ========= ========= ========= ========= ========= Diluted 57,708 57,448 58,440 57,463 58,826 ========= ========= ========= ========= ========= * Share-based compensation expense included in: Cost of revenues $ 271 $ 243 $ 270 $ 748 $ 784 Research and development 874 833 704 2,397 2,008 Selling, general and administrative 864 873 789 2,535 2,284 --------- --------- --------- --------- --------- $ 2,009 $ 1,949 $ 1,763 $ 5,680 $ 5,076 ========= ========= ========= ========= ========= MICREL, INCORPORATED SUPPLEMENTAL RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS (In thousands, except share amounts) (Unaudited) Three Months Ended Nine Months Ended ------------------------------- -------------------- September September September September 30, June 30, 30, 30, 30, 2014 2014 2013 2014 2013 --------- --------- --------- --------- --------- Net revenues $ 67,480 $ 62,339 $ 58,169 $ 189,676 $ 177,073 Revenues from conversion of distributors to sell-in revenue recognition model (5,064) -- -- (5,064) -- --------- --------- --------- --------- --------- Net revenues without one-time adjustment $ 62,416 $ 62,339 $ 58,169 $ 184,612 $ 177,073 ========= ========= ========= ========= ========= Cost of revenues $ 33,072 $ 29,548 $ 28,698 $ 91,258 $ 85,440 Cost of revenues from conversion of distributors to sell-in revenue recognition model (1,566) -- -- (1,566) -- --------- --------- --------- --------- --------- Cost of revenues without one-time adjustment $ 31,506 $ 29,548 $ 28,698 $ 89,692 $ 85,440 ========= ========= ========= ========= ========= Gross profit $ 34,408 $ 32,791 $ 29,471 $ 98,418 $ 91,633 Revenues from conversion of distributors to sell-in revenue recognition model (5,064) -- -- (5,064) -- Cost of revenues from conversion of distributors to sell-in revenue recognition model 1,566 -- -- 1,566 -- --------- --------- --------- --------- --------- Gross profit without one-time adjustment $ 30,910 $ 32,791 $ 29,471 $ 94,920 $ 91,633 ========= ========= ========= ========= ========= Gross profit % without one-time adjustment 49.5% 52.6% 50.7% 51.4% 51.7% Net income $ 4,675 $ 3,529 $ 4,004 $ 10,493 $ 14,284 Revenues from conversion of distributors to sell-in revenue recognition model (5,064) -- -- (5,064) -- Cost of revenues from conversion of distributors to sell-in revenue recognition model 1,566 -- -- 1,566 -- Tax effect of one- time adjustments 1,088 -- -- 1,088 -- --------- --------- --------- --------- --------- Net income without one-time adjustment $ 2,265 $ 3,529 $ 4,004 $ 8,083 $ 14,284 ========= ========= ========= ========= ========= Net income per share - diluted $ 0.08 $ 0.06 $ 0.07 $ 0.18 $ 0.24 Total adjustments to net income (0.04) -- -- (0.04) -- --------- --------- --------- --------- --------- Net income per share without one-time adjustment - diluted $ 0.04 $ 0.06 $ 0.07 $ 0.14 $ 0.24 ========= ========= ========= ========= ========= Shares used in computing net income per share: Basic 56,642 56,537 57,752 56,514 58,107 ========= ========= ========= ========= ========= Diluted 57,708 57,448 58,440 57,463 58,826 ========= ========= ========= ========= ========= Reconciliation To Full Non-GAAP Results: Three Months Ended Nine Months Ended ------------------------------- -------------------- September September September September 30, June 30, 30, 30, 30, 2014 2014 2013 2014 2013 --------- --------- --------- --------- --------- GAAP net income $ 4,675 $ 3,529 $ 4,004 $ 10,493 $ 14,284 Revenues from conversion of distributors to sell-in revenue recognition model (5,064) -- -- (5,064) -- Cost of revenues from conversion of distributors to sell-in revenue recognition model 1,566 -- -- 1,566 -- Share-based compensation included in: Cost of revenues 271 243 270 748 784 Research and development 874 833 704 2,397 2,008 Selling, general and administrative 864 873 789 2,535 2,284 Restructuring charges 484 -- -- 484 -- Amortization of acquisition-related intangible assets 301 305 307 1,032 856 Tax effect of adjustments to GAAP net income 219 (783) (704) (1,272) (1,989) --------- --------- --------- --------- --------- Non-GAAP net income* $ 4,190 $ 5,000 $ 5,370 $ 12,919 $ 18,227 ========= ========= ========= ========= ========= GAAP net income per share - diluted $ 0.08 $ 0.06 $ 0.07 $ 0.18 $ 0.24 Total adjustments to GAAP net income (0.01) 0.03 0.02 0.04 0.07 --------- --------- --------- --------- --------- Non-GAAP net income per share - diluted $ 0.07 $ 0.09 $ 0.09 $ 0.22 $ 0.31 ========= ========= ========= ========= ========= Shares used in computing non-GAAP net income per share: Basic 56,642 56,537 57,752 56,514 58,107 ========= ========= ========= ========= ========= Diluted 57,708 57,448 58,440 57,463 58,826 ========= ========= ========= ========= ========= * Non-GAAP net income was reached by excluding revenues and the related cost of revenues from the conversion of distributors to sell-in revenue recognition model, share-based compensation expense, restructuring charges and amortization of acquisition-related intangible assets with related income tax effects. Non-GAAP results were presented to supplement our GAAP consolidated financial statements to allow a better comparison of results in the current period to those in prior periods and to provide meaningful insight to the Company's on-going operating performance after exclusion of these items.

MICREL, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) (Unaudited) September 30, December 31, 2014 2013 ------------- ------------- ASSETS CURRENT ASSETS: Cash, cash equivalents and short-term investments $ 100,720 $ 88,593 Restricted cash 133 1,116 Accounts receivable, net 29,058 29,437 Inventories 41,967 43,201 Prepaid taxes 4,018 4,513 Prepaid expenses and other 1,580 2,698 Deferred income taxes 22,794 21,662 ------------- ------------- Total current assets 200,270 191,220 LONG-TERM INVESTMENTS 1,683 4,195 PROPERTY, PLANT AND EQUIPMENT, NET 58,225 57,779 LONG-TERM PREPAID TAXES 1,711 -- DEFERRED INCOME TAXES 2,322 1,581 GOODWILL 8,655 8,554 INTANGIBLE ASSETS, NET 10,159 11,749 OTHER ASSETS 1,628 1,046 ------------- ------------- TOTAL $ 284,653 $ 276,124 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 17,774 $ 13,502 Deferred income on shipments to distributors 26,365 27,026 Accrued liabilities 15,020 12,874 ------------- ------------- Total current liabilities 59,159 53,402 LONG-TERM INCOME TAXES PAYABLE 2,982 3,575 LONG-TERM DEFERRED INCOME TAXES 745 973 OTHER LONG-TERM LIABILITIES 168 201 SHAREHOLDERS' EQUITY TOTAL SHAREHOLDERS' EQUITY 221,599 217,973 ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 284,653 $ 276,124 ============= ============= Contact: Bob DeBarr Micrel, Incorporated 2180 Fortune Drive San Jose, CA 95131 Phone: (408) 944-0800 Source: Micrel

[ Back To TMCnet.com's Homepage ]