Filed by Microchip Technology Incorporated
Pursuant to Rule 425 under the Securities Act of 1933
And deemed filed pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: Atmel Corporation
Commission File No. 000-19032
Filing Date: March 14, 2016
|
|
Susquehanna
Technology, Media and Telecom Conference
Eric Bjornholt, Vice President and CFO
©March 2016
|
|
Today’s Agenda
Microchip’s business characteristics
1.Consistent growth
2.Perennial market share gains
3.High margin business model
4.Shareholder friendly with consistently increasing
dividends and free cash flow
Microchip’s acquisition strategy has been a
success
Breaking out organic versus inorganic growth
Atmel acquisition
Opportunity for significant accretion as margins
expand towards updated business model
©March 2016
2
|
|
Annual Net Sales Growth
2500
2400
2300 101 consecutive quarters of profitability!
2200
2100
2000MCUMemoryAnalogLicensingOther
1900
1800
1700
1600
1500
Million1400
1300
$1200
1100
1000
900
800
700
600
500
400
300
200
100
0
FY93 FY94 FY95 FY96 FY97FY98 FY99 FY00FY01 FY02 FY03FY04 FY05 FY06 FY07FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15FY16
RR
©March 2016
3
|
|
Total MCU (8/16/32)
Market Share%
%
10
9 8 7 6 5 4 3 2 1 0
CY94
CY95
CY96
CY97
CY98
CY99
CY00
CY01
CY02
CY03
CY04
CY05
CY06
CY07
CY08
CY09
CY10
CY11
CY12
CY13
CY14
©March 2016
4
|
|
AnalogYearlyRevenue (k$)
$700,000
$650,000
$600,000
$550,000
$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
FY02FY03FY04FY05FY06FY07FY08FY09FY10FY11FY12FY13FY14FY15RR
FY16
©March 2016
5
|
|
Gross Margin % (Non-GAAP*)
Higher Utilization
Richer Product Mix
6461.5% Long-term
RecordGM goal
62(pre-Atmel)
6059% Long-term
58GM goal
(post-Atmel)
56SST
(%)54 Acquisition
52
50
48Fab 4 Production startBusiness
46WorldwideDownturn
44Financial
42Crisis
40
Q1FY02 Q2FY02 Q3FY02 Q4FY02 Q1FY03 Q2FY03 Q3FY03 Q4FY03 Q1FY04 Q2FY04 Q3FY04 Q4FY04 Q1FY05 Q2FY05 Q3FY05 Q4FY05 Q1FY06 Q2FY06 Q3FY06 Q4FY06 Q1FY07 Q2FY07 Q3FY07 Q4FY07 Q1FY08 Q2FY08 Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY12 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16
*Excludes share-based compensation and acquisition-related expenses. A reconciliation of our GAAP to non-GAAAP results is available at
www.microchip.com.
©March 2016
6
|
|
> $4B Returned To
Shareholders
$80,000 $0.40
Total DividendDividend per Share
$70,000 $0.35
$60,000 $0.30
$50,000 $0.25
$40,000 $0.20
$30,000 $0.15
$20,000 $0.10
$10,000 $0.05
$0 $0.00
Q1FY07 Q2FY07 Q3FY07 Q4FY07 Q1FY08 Q2FY08 Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 **Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16
~$2.7B in dividends and ~$1.4B in share buy-backs!
©March 2016
7
|
|
ExpandingMicrochipSolutions
Through Acquisitions
Bluetooth®&
Development ToolsEmbedded Wi-Fi®High-Voltage Analog &
Compiler Motor DriveMixed-Signal Products
Products
Hampshire
LSS
Low-Power
Touch Screen Embedde High-SpeedNon-volatileAnalog & mixed-signal,
Controllers Wi-Fi® ADCsMemory IPtiming, power
management
2008 2009 201020112012201320142015
Equalizer &
Coaxial
Transceiver
3D Gesture CaptureProducts
& Proximity Detect
Bluetooth®
Security & Life High-DensityLow Energy
Safety ASICs
Flash & IPAssembly &MOST®, USB &
Test CapacityEthernet Wireless
ExpansionAudio PC Controllers
©March 2016
8
|
|
6 Yr CAGR Comparison
of Net Sales*
Microchip Technology (Total) 17.3%
Microchip Technology (Organic) 8.3%
Linear Technology 8.1%
Analog Devices 8.1%
Semiconductor Industry 6.8%
Silicon Labs 6.5%
Maxim 5.1%
Freescale 4.1%
Texas Instruments 3.7%
Atmel - 0.6%
* See Explanatory Notes Slide
©March 2016
9
|
|
5 Yr CAGR Comparison
of Net Sales*
Microchip Technology (Total) 9.6%
Silicon Labs 5.5%
Analog Devices 3.4%
Semiconductor Industry 2.4%
Microchip Technology (Organic) 2.1%
Freescale 0.0%
Linear Technology -0.1%
Maxim -0.7%
Texas Instruments -1.4%
Atmel - 6.5%
* See Explanatory Notes Slide
©March 2016
10
|
|
Explanatory Notes
Non GAAP Financial Measures:
We are using non-GAAP net sales and non-GAAP diluted earnings per share which exclude the items noted below, as applicable, to permit additional
analysis of our performance. Our non-GAAP adjustments, where applicable, include the effect of share-based compensation, expenses related to our
acquisition activities (including intangible asset amortization, inventory valuation costs, severance costs, and legal and other general and administrative
expenses associated with acquisitions), GAAP non recognition of revenue for inventory in the distribution channel at the acquisition dates for our
acquisitions, non-cash interest expense on our convertible debentures, the related income tax implications of these items and non-recurring tax events.
We believe that our disclosure of non-GAAP net sales provides investors with useful information regarding the actual end market demand for our products.
Management believes these non-GAAP measures are useful to investors because they enhance the understanding of our historical financial performance
and comparability between periods. Many of our investors have requested that we disclose this non-GAAP information because they believe it is useful in
understanding our performance as it excludes non-cash and other charges that many investors feel may obscure our underlying operating results.
Management uses these non-GAAP measures to manage and assess the profitability of our business. Specifically, we do not consider such items when
developing and monitoring our budgets and spending. Our determination of the above non-GAAP measures might not be the same as similarly titled
measures used by other companies, and it should not be construed as a substitute for amounts determined in accordance with GAAP. There are
limitations associated with using non-GAAP measures, including that they exclude financial information that some may consider important in evaluating
our performance. Management compensates for this by presenting information on both a GAAP and non-GAAP basis for investors and providing
reconciliations of the GAAP and non-GAAP results.
A reconciliation of Microchip’s GAAP to non-GAAP revenue and diluted earnings per share can be found on Microchip’s website at www.microchip.com
Explanation of Organic Net Sales, non-GAAP Earnings Per Share and Comparisons of Net Sales:
For purposes of separating Microchip’s organic revenue and earnings from revenue and earnings from acquisitions, Microchip takes the first full quarter of
revenue and earnings from an acquired company following the date of acquisition as its baseline revenue and earnings. Any increases or decreases in
revenue and earnings after the first full quarter are included as organic revenue and earnings.
Revenue for each of the companies listed is based on publicly available information from such companies for the periods ended December 31, 2015;
Semiconductor Industry revenue CAGR:
The information presented for the semiconductor industry CAGR is from www.semiconductor.org.
©March 2016
11
|
|
Cautionary Statement:
Statements about the expected timing, financial impact and effects of the proposed transaction, and other statements in this
presentation that are not historical facts, are forward-looking statements made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ
materially from such forward looking statements. Such risks and uncertainties include the actual timing of the closing of the
acquisition, the satisfaction of the conditions to closing in the acquisition agreement, any termination of the acquisition agreement,
the effect of the acquisition on Microchip’s and Atmel’s existing relationships with customers, employees and vendors and on
Microchip’s and Atmel’s respective operating results and businesses; general economic, industry or political conditions in th e U.S.
or internationally; and the risks described from time to time in SEC reports including filings on Forms 10-K, 10-Q and 8-K. You can
obtain copies of applicable Forms 10-K, 10-Q and 8-K and other relevant documents for free at Microchip’s website
(www.microchip.com), at Atmel’s website (www.atmel.com) or the SEC’s website (www.sec.gov) or from commercial document
retrieval services. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the
date such statements are made. We do not undertake any obligation to publicly update any forward -looking statements to reflect
events, circumstances or new information after the date hereof.
Additional Information and Where to Find It
Microchip will file a Registration Statement on Form S-4 that will include a proxy statement of Atmel in connection with the
acquisition transaction. Investors and security holders are urged to read such document when it becomes available because it will
contain important information about the transaction. Investors and security holders may obtain free copies of such document
(when it becomes available) and other documents filed with the SEC at the SEC’s web site at www.sec.gov. Microchip, Atmel and
their directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Atmel
in connection with the acquisition transaction. Information regarding the special interests of these directors and executive officers
in the transaction will be included in the proxy statement/prospectus described above. Additional information regarding the
directors and executive officers of Microchip is also included in Microchip’s proxy statement for its 2015 Annual Meeting of
Stockholders, which was filed with the SEC on July 10, 2015. Additional information regarding the directors and executive officers
of Atmel is also included in Atmel’s proxy statement for its 2015 Annual Meeting of Stockholders, which was filed with the SE C on
April 3, 2015. These documents are available free of charge at the SEC’s web site at www.sec.gov and as described above.
©March 2016
12
|
|
Atmel Overview
Synergistic Embedded Control franchise with attractive
broad-based product portfolio spanning Microcontroller,
Wireless, Touch, Automotive, Security and Memory
solutions
Diversified global customer base with over 80% of revenue
from Asia and Europe
Diversified channels with ~60% of revenue through
distribution
Tradition of technology leadership and innovation
CY2015 revenue of ~$1.17B as of 12/31/2015
47.5% non-GAAP gross margin; 12.0% non-GAAP operating margin
$155M cash and investments, net of debt, on the balance
sheet at 12/31/2015
Headquartered in San Jose, CA
Approximately 4700 employees worldwide
©March 2016
13
|
|
Strategically and Financially
Compelling Transaction
Creates a Microcontroller powerhouse with #3 market
share position worldwide
Creates a market leader in IoT by adding to
Microchip’s strong IoT solutions more products in
wireless including WiFi, Bluetooth, BLE and other RF
protocols
Expands Microchip’s portfolio of Automotive, Touch,
Memory and Security solutions
Drives further scale in manufacturing, customer reach
and sales channels
Adds a patent portfolio of over 2400 patents to
Microchip’s strong IP portfolio
Significant EPS accretion through growth and synergy
with over $200 million in synergies in fiscal year 2020
©March 2016
14
|
|
Highly Profitable
Financial Model*
Microchip AtmelMicrochip +Long Term
AtmelModel
Revenue ($M) $2,208 $1,046$3,254
Gross Margin (%) 57.9% 47.5%54.6%59%
R&D (%) 16.2% 19.5%17.3%14.5%
SG&A (%) 12.3% 18.4%14.3%11.5%
Op Income ($M) $649 $100$750
Op Income (%) 29.4% 9.6%23.0%33%
* In millions, except percentages. All figures are non-GAAP and are based on
preliminary results for the December 31, 2015 quarter contained in Microchip’s
press release dated January 19, 2016 and Atmel’s press release dated January 13,
2016. Revenue and operating income dollars are based on preliminary December
2015 quarter results which were annualized by multiplying the December quarter
numbers by four.
©March 2016
15
|
|
Synergy and Accretion
Expectations
Transaction is expected to be immediately accretive to our non GAAP
earnings per share
Microchip expects to buyback all the shares issued in the transaction
subject to market conditions, but will not buy back shares immediately,
based on investor concerns on leverage
Short term: Targeting 20% growth in non-GAAP EPS from FY16 to FY17
with accretion from Micrel and Atmel.
Atmel adds ~25 cents in FY 2017 (Assuming May 2016 close and no stock buyback)
Long term: 3rd year after close (FY2019), we expect:
$170M in synergy from cost savings and revenue growth
Atmel to contribute ~90 cents/share of non GAAP EPS
Targeting consolidated Microchip non GAAP EPS of $4.25/share
Represents non GAAP EPS growth of over 17% per year for Microchip
over the next 3 years.
Full synergy of over $200M in the 4th year (FY 2020)
Extends Microchip’s record of organic as well as acquisition driven
revenue and non GAAP EPS growth
©March 2016
16
|
|
Transaction Summary
And Financing
Transaction value of $3.56B representing $8.15/share
$3.4B net of Atmel’s cash, investments and debt at 12/31/2015
Atmel stockholders will receive $7.00/share in cash and $1.15/share in Microchip stock
Transaction is being funded through a combination of:
Approximately $2.175B of cash from our balance sheet
Approximately $786M cash from our existing line of credit
Approximately $485M in Microchip stock
The $114M difference in the funding amounts and the transaction value represents the
assumed value of employee equity awards
Blended cost of capital ~ 1.8% per annum
Pro forma Gross Debt/EBITDA leverage well below line of credit
covenants:
Senior leverage = 2.2 (covenant 3.0) before synergy
Total leverage = 4 (covenant 5.0) before synergy
Synergy and paying down debt with profits will decrease leverage further
Expect transaction to close in CQ2 2016, subject to customary closing
conditions, and stockholder as well as regulatory approvals
©March 2016
17
|
|
Microchip’s Projected Net
Debt/EBITDA Ratio*
With Stock Buyback
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
At transaction close End of FY17 End of FY18End of FY19
Total Net Debt/EBITDA Senior Net Debt/EBITDA
*Includes projected cash and investments on Microchip’s balance sheet and assumes stock issued in Atmel transaction is repurchased immediately
©March 2016
18
|
|
Microchip’s Projected Net
Debt/EBITDA Ratio*
Without Stock Buyback
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
At transaction close
End of FY17
End of FY18
End of FY19
Total Net Debt/EBITDA
Senior Net Debt/EBITDA
*Includes projected cash and investments on Microchip’s balance sheet and assumes stock issued in Atmel transaction is not repurchased
©March 2016
19
|
|
Microchip Vision and
Growth Strategy
Our Vision
Be The Very Best Embedded Control
Solutions Company Ever
Our Strategy
Enable the growing market for Smart, Connected
and Secure solutions for Automotive, Industrial,
Office Automation, Consumer and Telecom
markets
Be a powerhouse solutions provider for the
emerging Internet of Things (IoT) market
©March 2016
20
|
|
Summary
Atmel acquisition is a strong strategic fit
aligned with our vision and strategy
Adds operational and customer scale in a
consolidating industry
Creates significant stockholder value from
strong non GAAP EPS accretion
Atmel acquisition is the next step in
Microchip’s track record of successful M&A
A Compelling Transaction!
©March 2016
21
|
|
MCHP Financial Information
Consolidated
Actual Guidance
Q4FY16Long-Term
Actual GuidanceModel With
Dec. 31, 2015 Mar. 31, 2016Atmel
Net Sales
($MM Non-GAAP) $552.0 $552.0 – 568.5
Gross Margin* 57.9% 57.9%—58.1%~ 59%
Operating Expenses*
(% of Sales) 28.4% 27.3%—27.9%~ 26%
Operating Profit 29.5% 30.0%—30.8%~ 33%
EPS (Non-GAAP**) $0.64 $0.65 – 0.69
EPS (GAAP) $0.28
* Excludes share-based compensation, acquisition related charges, non-recurring items and adoption of ASC Subtopic 470-20.
**A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com.
©March 2016
22
|
|
Thank You!