(2) See the "Use of Non-GAAP Financial Measures" section of this release.
GAAP net sales for the fourth quarter of fiscal 2020 were $1.326 billion, down 0.3% from net sales of $1.330 billion in the prior year's fourth fiscal quarter.
GAAP net income for the fourth quarter of fiscal 2020 was $99.9 million, or $0.39 per diluted share, down from GAAP net income of $174.7 million, or $0.70 per diluted share, in the prior year's fourth fiscal quarter. For the fourth quarters of fiscal 2020 and fiscal 2019, 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 2020 was $375.5 million, or $1.46 per diluted share, up from non-GAAP net income of $370.4 million, or $1.48 per diluted share, in the prior year's fourth fiscal quarter. For the fourth quarters of fiscal 2020 and fiscal 2019, our non-GAAP results exclude the effect of share-based compensation, COVID-19 shelter-in-place restrictions on manufacturing activities, 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 including legal fees and expenses for litigation and investigations related to our Microsemi acquisition), professional services associated with certain legal matters, IT security remediation costs, non-cash interest expense on our convertible debentures, losses on the settlement of debt, and gains and losses related to available-for-sale investments. For the fourth quarters of fiscal 2020 and fiscal 2019, our non-GAAP income tax expense is presented based on projected cash taxes for the fiscal year, excluding transition tax payments under the Tax Cuts and Jobs Act. 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, 2020 were $5.274 billion, a decrease of 1.4% from net sales of $5.350 billion in the prior fiscal year.
GAAP net income for the fiscal year ended March 31, 2020 was $570.6 million, or $2.23 per diluted share, an increase of 60.3% from net income of $355.9 million, or $1.42 per diluted share in the prior fiscal year. Fiscal 2020 and fiscal 2019 GAAP net income were significantly adversely impacted by purchase accounting adjustments associated with our acquisitions. The current year's GAAP net income was significantly positively impacted by the tax benefit related to the intra-group transfer of certain intellectual property rights.
Non-GAAP net income for the fiscal year ended March 31, 2020 was $1.440 billion, or $5.62 per diluted share, a decrease of 7.3% from net income of $1.553 billion, or $6.21 per diluted share, in the prior fiscal year. See the "Use of Non-GAAP Financial Measures" section of this release.
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.
Microchip announced today that its Board of Directors has declared a record quarterly cash dividend on its common stock of 36.75 cents per share. The quarterly dividend is payable on June 4, 2020 to stockholders of record on May 21, 2020.
"The March quarter had unusual business challenges as the effects of COVID-19 pandemic unfolded in many dimensions," said Steve Sanghi, Chief Executive Officer. "I am proud of how rapidly the Microchip team adapted to the new constraints we faced so that our employees would be safe, our customers could be well served and our partners engaged to ensure mutual success despite the challenges we faced."
Mr. Sanghi added, "Despite the COVID-19 pandemic challenges, we delivered 3% sequential net sales growth compared to our early March updated guidance which was for net sales to be about flat. We also delivered outstanding non-GAAP gross margin of 62% and operating margin of 36.6%, while reducing our days of inventory from 129 days to 122 days. We believe our inventory is well-positioned to serve the needs of our customers."
"Last month Gartner reported their microcontroller market share data for calendar year 2019," said Ganesh Moorthy, President and Chief Operating Officer. "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 their respective markets. From an end-market demand standpoint, our 32-bit microcontrollers in the March quarter represented an all-time record of just over $340 million, or about 47% of our microcontroller end market demand. Our microcontroller portfolio and roadmap have never been stronger, and we believe we have the new product momentum and customer engagement to continue to gain even more share in 2020."
Mr. Moorthy added, "The COVID-19 pandemic created varying degrees of constraints on our global manufacturing operations and supply chain during the March quarter, starting with China shutting down for several weeks and expanding into many other locations that shut down with little notice. Our operations team nimbly adjusted to constraints as they emerged, and implemented our contingency plans where needed, to ensure that we continued to serve customer needs despite the challenges. The broader Microchip team also rapidly transformed business processes to run remotely, resulting in enhanced customer engagement for new designs and high effectiveness for internal collaboration to serve customers."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "We continued to aggressively pay down our debt with another $236.0 million of payments during the March quarter, reflecting a cumulative debt pay down of $2.222 billion over the past seven quarters, as we have actively managed the working capital requirements for the business. We also repurchased a portion of our convertible debt at attractive terms, which will significantly reduce share count dilution to the extent our stock price appreciates over time."
Mr. Sanghi concluded, "Microchip's book-to-bill ratio in the March quarter was very strong at 1.17. Although our backlog for the June quarter started out much higher than the opening backlog for the March quarter, we have seen a combination of deteriorating bookings, customer pushout of orders and cancellations since the middle of April. We believe our backlog position for the June quarter will continue to deteriorate compared to the March quarter due to the combined effect of supply chain disruptions, customer factory closures and demand destruction. Taking these factors into consideration, we expect our net sales in the June quarter to be down between 2% and 10% sequentially. The broad guidance range is to help account for the uncertainty caused by the COVID-19 pandemic."
Microchip's Highlights for the Quarter Ended March 31, 2020:
- Announced joining the Responsible Business Alliance (RBA), a nonprofit coalition of companies dedicated to the improvement of social, environmental and ethical conditions in their global supply chains.
- Expanded its Silicon Carbide family of power electronics to provide system level improvements in efficiency, size and reliability, with 700, 1200 and 1700V SBD-based power modules that maximize switching efficiency, reduce thermal rise and allow a smaller system footprint.
- Introduced a new cryptography-enabled microcontroller, the CEC1712 MCU with Soteria-G2 custom firmware, designed to stop malicious malware such as rootkit and bootkit for systems that boot from external Serial Peripheral Interface flash memory.
- Unveiled a range of embedded IoT solutions for rapid prototyping with enabling cloud connectivity to all MCUs and MPUs. When designing IoT solutions, developers can quickly, easily and securely connect to any cloud using Wi-Fi, Bluetooth and narrow band 5G technologies.
- Announced the PIC18-Q43 family which combines more Core Independent Peripherals and an extensive development tool ecosystem for improved designs in real-time control and connected applications.
- Announced TÜV SÜD certification of its MPLAB® XC compilers for functional safety, significantly simplifying the functional safety qualification process for Microchip’s PIC®, AVR® and SAM microcontrollers and dsPIC® Digital Signal Controllers. To further simplify testing and diagnostics, Microchip also introduced MPLAB Code Coverage license.
- Announced the industry’s first space-qualified Ethernet transceiver, a radiation-tolerant device based on a commercial off-the-shelf solution deployed in other industries now offering reliable performance for applications ranging from launch vehicles to satellite constellations and space stations. In addition to the VSC8541RT transceiver, the company received final qualification for the new SAM3X8ERT microcontroller.
- Introduced the MAC-SA5X miniaturized rubidium atomic clock, the industry’s highest performance atomic clock for its size and power. The device also delivers a wider thermal range, critical performance improvements and other enhancements over previously available technology.
