Diluted earnings per share for the quarter were 17 cents on 139.1 million average shares outstanding, up approximately 5% from diluted earnings per share of 16 cents in the immediately preceding quarter.
Net sales for the quarter ended September 30, 2001 were down 27.2% from sales of $194.5 million in the prior year’s September quarter. Diluted earnings per share for the September quarter of fiscal 2002 decreased approximately 51% from diluted earnings per share of 34 cents in the prior year’s September quarter.
I believe our September quarter results are exceptional, particularly in light of current semiconductor business conditions and the overall economic climate, said Steve Sanghi, Microchip’s President and CEO. Despite these challenging times, our second quarter results were at the upper end of the original guidance provided during our first quarter earnings release in July. The performance of our proprietary products was especially encouraging, with sequential revenue growth in both our microcontroller and analog product lines of 3% and 18%, respectively. Orders in the September quarter were up 15% sequentially, with the book-to-bill ratio being very close to parity.
Microchip’s gross margins remained strong at 50% and our operating profits grew to over 21.5% in the September quarter. We continue to have a debt-free balance sheet, having added $33 million in cash this quarter. We also reduced inventories by approximately $2 million in the quarter. All of these factors demonstrate the strength of our enterprise and business model, Mr. Sanghi continued.
The number of months of inventory at our distributors is at the lowest level we have seen in almost five years. We believe that our channel partners are well-positioned in each of the geographies to continue to gain market share in the current industry conditions. Inventory at our OEM customers has also reduced significantly over the last several quarters, further evidencing the strength in demand for applications featuring our products, Mr. Sanghi said.
Mr. Sanghi concluded, Despite our performance in the September quarter, making projections in the current environment is remarkably difficult as we all try to come to terms with factors that we have never experienced in our professional careers. With the level of uncertainty in the business environment, we remain cautious in our short term positioning and extremely positive on our longer term outlook, driven primarily by the market strength of our proprietary products.
Microchip’s Second Quarter Highlights:
On July 19, Microchip kicked off Microchip’s Annual Summer Technical Exchange Review (MASTER’s) in Phoenix, Arizona with more than 500 leading worldwide embedded designers attending the four-day event. In its fifth year, MASTER’s provides design engineers with an annual forum for sharing and exchanging technical information on the Company’s PICmicro microcontrollers, high-performance linear and mixed-signal solutions, KEELOQ security devices, and dsPICä digital signal controllers. Several hundred engineers attended the MASTER’s conferences that were held in Shanghai, China and Bangalore, India in September.
Microchip’s Automotive Products Group continues to win new designs from Tier 1 suppliers. In the quarter, Microchip received a sourcing notification from a leading transportation components and systems supplier which could total more than $40 million revenue over three years. This customer plans to use Microchip’s innovative Flash and OTP microcontroller technology for airbag sensors starting in model year 2005 vehicles.
Microchip formed the Analog & Interface Products Division, which now offers more than 260 high-performance mixed-signal, power management, thermal management and interface solutions for embedded systems applications. The new division results from our January 2001 merger with TelCom Semiconductor.
In August, Microchip launched the MCP604x family of operational amplifiers with unity gain stability and rail-to-rail input and output, providing an ideal solution for battery-operated applications requiring low current and low voltage operation. The low voltage operation down to 1.4 volts eliminates the need for voltage doubler circuitry, and a low quiescent current (Iq) further reduces demand on the batteryadvantages that shrink design time, component cost and board space.
At the Embedded Systems Conference in September, Microchip announced the implementation of a unique manufacturing technology that eliminates the traditional industry design barriers associated with Flash microcontrollers, including price premiums, endurance reliability and long programming times. This technology innovation positions Microchip’s growing PICmicro Flash solutions for many new high-volume, cost-sensitive markets and applications. At the same time, Microchip featured 12 new high performance Flash microcontrollers based on this advanced technology:
PIC18FXX8: These four 28- and 40-lead self-programmable Flash memory devices provide an intelligent CAN 2.0B active interface and an abundant peripheral set. The 28-lead package is the smallest and most powerful CAN solution in the market today.
PIC18FXX2: These powerful PICmicro Flash devices offer 10 MIPS at 10 MHz performance and an operating range of 2.0-5.0v. The devices feature up to 32K bytes of self-programmable Flash memory, 1.5K bytes of user SRAM and 256 bytes of data EEPROM. Possessing a 10-bit analog-to-digital converter (ADC) with up to 8 input channels, the devices also provide a C-compiler-friendly development environment.
PIC16F87XA: Microchip expanded its popular PIC16F87X family with two analog comparators on its advanced enhanced Flash technology, enabling further cost reductions for high volume embedded control applications.
