GAAP and Non-GAAP net sales for the fourth quarter of fiscal 2019 were $1.330 billion, up 32.7% from net sales of $1.002 billion in the prior year's fourth fiscal quarter.
GAAP net income for the fourth quarter of fiscal 2019 was $174.7 million, or $0.70 per diluted share, up from GAAP net income of $146.7 million, or $0.58 per diluted share, in the prior year's fourth fiscal quarter. The current year's GAAP net income was significantly adversely impacted by purchase accounting adjustments associated with our acquisitions.
Non-GAAP net income for the fourth quarter of fiscal 2019 was $370.4 million, or $1.48 per diluted share, up 5.4% from non-GAAP net income of $351.3 million, or $1.40 per diluted share, in the prior year's fourth fiscal quarter. For the fourth quarters of fiscal 2019 and fiscal 2018, our non-GAAP results exclude the effect of share-based compensation, expenses related to our acquisition activities (including intangible asset amortization, inventory valuation costs, excess capacity charges to normalize acquired inventory levels, severance and other restructuring costs, and legal and other general and administrative expenses associated with acquisitions), non-cash interest expense on our convertible debentures, adjustments for a manufacturing excursion issue with one of our suppliers, losses on the settlement of debt, and losses and impairments on available-for-sale investments. For the fourth quarter of fiscal 2019, our non-GAAP income tax expense is presented based on projected cash taxes for fiscal 2019, excluding transition tax payments under the Tax Cuts and Jobs Act. For the fourth quarter of fiscal 2018, our non-GAAP income tax expense is presented in a manner that excludes the tax impact of non-GAAP adjustments calculated using the applicable tax rates in the jurisdictions where the adjustments occurred, tax adjustments in accordance with ASC 740-270, and one-time tax events. A reconciliation of our non-GAAP and GAAP results is included in this press release.
GAAP net sales for the fiscal year ended March 31, 2019 were $5.350 billion, an increase of 34.4% from net sales of $3.981 billion in the prior fiscal year. On a GAAP basis, consolidated net income for the fiscal year ended March 31, 2019 was $355.9 million, or $1.42 per diluted share, an increase of 39.4% from net income of $255.4 million, or $1.03 per diluted share in the prior fiscal year. The current year's GAAP net income was significantly adversely impacted by purchase accounting adjustments associated with our acquisitions. The prior year's GAAP net income results were significantly adversely impacted by one-time tax adjustments related to the Tax Cuts and Jobs Act of 2017.
Non-GAAP net sales for the fiscal year ended March 31, 2019 were $5.476 billion, an increase of 37.6% from net sales of $3.981 billion in the prior fiscal year. On a non-GAAP basis, net income for the fiscal year ended March 31, 2019 was $1.636 billion, or $6.55 per diluted share, an increase of 20.7% from net income of $1,355.6 million, or $5.45 per diluted share, in the prior fiscal year. Prior to the fourth quarter of fiscal 2019, we reported non-GAAP net sales based on end-market demand, which excluded the effect of our distributors increasing or decreasing their inventory holdings. Beginning with the fourth quarter of fiscal 2019, we changed the information included in our financial guidance and provide net sales guidance based on sell-in revenue recognition under the new GAAP standard. For the fiscal year ended March 31, 2019, our non-GAAP results are calculated as the sum of the non-GAAP results we disclosed previously for each of the first three quarters of fiscal 2019 plus the non-GAAP results for the fourth quarter of fiscal 2019 based on sell-in revenue recognition. See the "Use of Non-GAAP Financial Measures" section of this release.
Beginning with the fiscal quarter ending March 31, 2019, we changed the information included in our financial guidance. Please refer to the "First Quarter Fiscal Year 2020 Outlook" section of this release for details regarding our revised approach to providing guidance.
Microchip announced today that its Board of Directors has declared a record quarterly cash dividend on its common stock of 36.55 cents per share. The quarterly dividend is payable on June 4, 2019 to stockholders of record on May 21, 2019.
"Our March quarter financial results were very good in spite of a challenging economic backdrop," said Steve Sanghi, Chief Executive Officer. "Our net sales came in above the mid-point of our narrowed guidance range that we issued on March 5, 2019. Our GAAP and non-GAAP gross margin percentage were above the high-end of our guidance and our operating expenses as a percentage of sales were below the low-end of our guidance. As a result, our operating margins were well above the high-end of our guidance, reflecting the strength of our business model."
Mr. Sanghi added, "End-market demand, which reflects sell-through activities in the distribution channel, was $10.4 million higher than GAAP (sell-in) revenue in the March 2019 quarter. As a result, distribution inventory declined from 36 days to 35 days. We believe that barring any negative development on the U.S. China trade front, our distributors are carrying a reasonable level of inventory to support end-market demand."
"Last month Gartner reported their microcontroller market share data for calendar year 2018. We are pleased to report that we expanded our market share in 8-bit, 16-bit and 32-bit microcontrollers and grew faster in all three product categories when compared to our large competitors in these markets," said Ganesh Moorthy, President and Chief Operating Officer.
Mr. Moorthy added, "The integration of Microsemi with Microchip continues to progress at a rapid pace. We are achieving synergies in the business units, sales, operations and support functions, while we relentlessly march toward the long-term synergy targets we have outlined for our stockholders."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "We paid down $277.5 million of total debt during the March quarter, reflecting a cumulative pay down of $1.156 billion over the last nine months, as we continued to tightly manage our working capital requirements for the business. We will continue to use substantially all of our excess cash generation after dividends to reduce the amount of debt on our balance sheet as quickly as possible."
Mr. Sanghi added, "Last quarter we said that barring any negative development on the trade front, we expected the March 2019 quarter to mark the bottom of this cycle for Microchip. Secondly, we said last quarter that we did not know the shape of the recovery and it would depend somewhat on the outcome of the trade talks. Towards that end, the U.S. did not get a settlement on the trade front. In fact, in recent days, the rhetoric has turned more negative with 25% duties on $200 billion of Chinese goods expected to go into effect this Friday. Therefore, the uncertainty related to U.S. China trade relations continues."
Mr. Sanghi concluded, "Given the continued uncertainty, we expect weaker than seasonal business conditions for Microchip. We continue to operate our business prudently for long-term shareholder value and we believe that end market demand will continue to be stronger that GAAP sell-in revenue in the June quarter, and the channel and customer inventory will continue to decrease. We expect net sales for our products to be about flat sequentially plus or minus five percent in the June 2019 quarter."
Microchip's Highlights for the Quarter Ended March 31, 2019:
- Introduced the space industry's first Arm® -based microcontrollers (MCUs) that combine the low-cost and large ecosystem benefits of Commercial Off-the-Shelf (COTS) technology with space-qualified versions that have scalable levels of radiation performance.
- Announced the AcuEdge™ ZLK38AVS Development Kit for Amazon Alexa Voice Service (AVS), offering far-field voice pick up and the flexibility to build devices with multiple microphone array configurations.
- Introduced the PolarFire™ FPGA imaging and video solution that supports resolution as high as 4K in the small, low-power form factors necessary for a wide variety of imaging and video applications.
- Microchip's subsidiary, SST, announced AEC-Q100 Grade 1 qualification of its embedded SuperFlash ® memory on United Microelectronics Corporation's (UMC's) 55 nm platform.
- Announced the industry's smallest IEEE 802.15.4-compliant module that combines an ultra-low-power microcontroller (MCU) with a sub-GHz radio, accelerating time to market and providing long-lasting battery life in wireless-networked sensors.
- Announced a collaboration between Microchip's DIGI-G5 Optical Transport Network (OTN) processor and Acacia Communications Inc.'s AC1200 Coherent Module to enable the industry's first flexible rate system architectures to support the market's transition to 200G, 400G, 600G and flexible rate OTN networks built with the new Flexible Ethernet (FlexE) and OTUCn protocols.
- Announced new dual- and single-core dsPIC33C Digital Signal Controllers (DSCs) with more options to meet changing application requirements across memory, temperature and functional safety.
- Developed new SAR ADC family that enables high-speed, high-resolution analog-to-digital conversions in harsh environments.
- Unveiled a unified 32-bit MCU software framework with the release of MPLAB ® Harmony version 3.0 (v3), extending support for SAM MCUs for the first time.
- Announced the release of Libero SoC version 12.0, delivering new gains in runtime and quality of results, as well as one unified design suite for all the company's latest-generation FPGA families, including new production releases of PolarFire™ FPGAs.
- Announced the Switchtec™ PSX Gen3 PCIe programmable storage switches were included in a reference design from Tencent that was posted to the web site of the Open Data Center Committee (ODCC).
- Microchip's DIGI-G5 OTN Processor received a 2019 Lightwave Innovation Award.
- For the fourth consecutive year, Microchip was included in New York State SHRM's list of 2019 Best Companies to Work for in New York State.
