Microchip Technology Incorporated (MCHP) recently announced that it entered into a new $750 million unsecured credit agreement with a group of lenders.
Management expects to use the loans under this facility for general corporate purposes. The five-year agreement also has an option to increase the amount available to $1 billion.
Management stated that facility will provide the company with additional flexibility to pursue its business objectives.
Earlier, Microchip reported net revenues of $374.5 million in the first quarter of fiscal 2012, down 1.4% sequentially but up 4.9% year-over-year.
Management stated that the company saw broad based weakness in business due to a number of factors. The automotive business was down significantly from the March 2011 quarter due to lower automotive production activities including supply issues from other manufacturers associated with the earthquake in Japan.
The company also witnessed inventory correction in the June quarter. Microchip stated that some of the revenue upside that the company saw in the March quarter was the result of customers being cautious and accelerating purchasing activities to minimize supply chain disruptions.
In addition, consumer business was soft due to weak global economic conditions high unemployment, high oil prices and the resulting low consumer confidence. The computing business was also weaker-than-management’s expectations as the company saw reduced purchases by multiple large customers in the sector.
Net income of $99.3 million was down 24% sequentially but up 8.1% year over year. Earnings per share came in at $0.49 per share, missing the Zacks Consensus Estimate by a penny.
We recently downgraded our recommendation to Underperform from Neutral. Our recommendation is supported by Zacks #4 Rank, which translates into a short-term rating of Sell.
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