SOURCE: Micrel

Micrel

October 23, 2014 16:01 ET

Micrel Reports 2014 Third Quarter Financial Results

SAN JOSE, CA--(Marketwired - Oct 23, 2014) - Micrel, Incorporated (NASDAQ: MCRL)

  • Revenues of $67.5 million, compared to $62.3 million for the second quarter of 2014
    • Revenues of $62.4 million without a one-time revenue conversion of $5.1 million
  • GAAP 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 2014
    • Net income of $0.04 per diluted share without the one-time revenue conversion
  • Non-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 2014
  • Gross margin of 51.0%, compared to 52.6% for the second quarter of 2014
    • Gross margin of 49.5% without the one-time revenue conversion
  • Repurchased 0.6 million shares of Micrel common stock for a total of $7.5 million for the quarter
  • Declared 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."

Outlook
Mr. 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."

Dividend
The 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 Plan
In 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 Call
The 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 1995
This 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 Reporting
The 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 Micrel
Micrel, 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 30,     June 30,     September 30,     September 30,     September 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 30,     June 30,     September 30,     September 30,     September 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 30,     June 30,     September 30,     September 30,     September 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,
 2014
  December 31,
 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 Information

  • Contact:
    Bob DeBarr
    Micrel, Incorporated
    2180 Fortune Drive
    San Jose, CA 95131
    Phone: (408) 944-0800