MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(in thousands except per share amounts and percentages)

(Unaudited)

RECONCILIATION OF GAAP NET SALES TO NON-GAAP NET SALES

Three months ended

Nine months ended

December 31,

December 31,

2015

2014

2015

2014

Net sales, as reported

$

540,344

$

528,710

$

1,615,687

$

1,603,829

Distributor revenue recognition adjustment

11,669

7,118

29,710

9,587

Non-GAAP net sales

$

552,013

$

535,828

$

1,645,397

$

1,613,416

RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT

Three months ended

Nine months ended

December 31,

December 31,

2015

2014

2015

2014

Gross profit, as reported

$

292,718

$

301,959

$

902,685

$

915,932

Distributor revenue recognition adjustment, net of product cost

6,936

3,203

18,399

4,565

Share-based compensation expense

2,270

2,290

6,325

6,985

Acquisition-related restructuring and acquired inventory valuation costs

17,817

4,191

27,449

24,692

Non-GAAP gross profit

$

319,741

$

311,643

$

954,858

$

952,174

Non-GAAP gross profit percentage

57.9

%

58.2

%

58.0

%

59.0

%

RECONCILIATION OF GAAP RESEARCH AND DEVELOPMENT EXPENSES TO NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES

Three months ended

Nine months ended

December 31,

December 31,

2015

2014

2015

2014

Research and development expenses, as reported

$

97,022

$

88,697

$

276,958

$

261,881

Share-based compensation expense

(7,855)

(7,075)

(23,623)

(20,645)

Non-GAAP research and development expenses

$

89,167

$

81,622

$

253,335

$

241,236

Non-GAAP research and development expenses as a percentage of net sales

16.2

%

15.2

%

15.4

%

15.0

%

RECONCILIATION OF GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES TO NON-GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Three months ended

Nine months ended

December 31,

December 31,

2015

2014

2015

2014

Selling, general and administrative expenses, as reported

$

76,270

$

66,668

$

223,377

$

207,037

Share-based compensation expense

(6,840)

(5,454)

(24,155)

(15,783)

Acquisition-related costs

(1,461)

(523)

(4,698)

(3,260)

Non-GAAP selling, general and administrative expenses

$

67,969

$

60,691

$

194,524

$

187,994

Non-GAAP selling, general and administrative expenses as a percentage of net sales

12.3

%

11.3

%

11.8

%

11.7

%

RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

Three months ended

Nine months ended

December 31,

December 31,

2015

2014

2015

2014

Operating expenses, as reported

$

216,586

$

203,950

$

630,286

$

600,659

Share-based compensation expense

(14,695)

(12,529)

(47,778)

(36,428)

Acquisition-related costs

(1,461)

(523)

(4,698)

(3,260)

Amortization of acquired intangible assets

(48,312)

(47,582)

(126,764)

(129,659)

Special income (charges), net

5,018

(1,003)

(3,187)

(2,082)

Non-GAAP operating expenses

$

157,136

$

142,313

$

447,859

$

429,230

Non-GAAP operating expenses as a percentage of net sales

28.5

%

26.6

%

27.2

%

26.6

%

RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP OPERATING INCOME

Three months ended

Nine months ended

December 31,

December 31,

2015

2014

2015

2014

Operating income, as reported

$

76,132

$

98,009

$

272,399

$

315,273

Distributor revenue recognition adjustment

6,936

3,203

18,399

4,565

Share-based compensation expense

16,965

14,819

54,103

43,413

Acquisition-related restructuring, acquired inventory valuation and other costs

19,278

4,714

32,147

27,952

Amortization of acquired intangible assets

48,312

47,582

126,764

129,659

Special (income) charges, net

(5,018)

1,003

3,187

2,082

Non-GAAP operating income

$

162,605

$

169,330

$

506,999

$

522,944

Non-GAAP operating income as a percentage of net sales

29.5

%

31.6

%

30.8

%

32.4

%

RECONCILIATION OF GAAP OTHER EXPENSE, NET TO NON-GAAP OTHER EXPENSE, NET

Three months ended

Nine months ended

December 31,

December 31,

2015

2014

2015

2014

Other expense, net, as reported

$

(25,918)

$

(11,756)

$

(48,430)

$

(31,258)

Gain on equity securities and equity method investment

(83)

—

(16,147)

—

Non-cash other expense, net

12,813

2,501

37,085

7,311

Impairment on available-for-sale investment

3,995

—

3,995

—

Other expenses on acquisition restructuring

501

—

501

—

Non-GAAP other expense, net

$

(8,692)

$

(9,255)

$

(22,996)

$

(23,947)

Non-GAAP other expense, net, as a percentage of net sales

(1.6)

%

(1.7)

%

(1.4)

%

(1.5)

%

RECONCILIATION OF GAAP INCOME TAX (BENEFIT) PROVISION TO NON-GAAP INCOME TAX PROVISION

Three months ended

Nine months ended

December 31,

December 31,

2015

2014

2015

2014

Income tax (benefit) provision, as reported

$

(11,053)

$

1,393

$

(32,890)

$

17,141

Income tax rate, as reported

(22.0)

%

1.6

%

(14.7)

%

6.0

%

Distributor revenue recognition adjustment

2,556

448

6,810

823

Share-based compensation expense

5,460

3,632

17,566

6,885

Acquisition-related restructuring, acquired inventory valuation costs, intangible asset amortization and other costs

12,797

5,799

32,781

14,696

Special (income) charges, net

(201)

339

1,414

723

Non-cash other expense, net

4,722

929

13,734

2,716

Gain on equity securities and equity method investment

(31)

—

(31)

—

Impairment on available-for-sale investment

1,472

—

1,472

—

Non-recurring tax events

(301)

3,931

12,406

9,983

Non-GAAP income tax provision

$

15,421

$

16,471

$

53,262

$

52,967

Non-GAAP income tax rate

10.0

%

10.3

%

11.0

%

10.6

%

RECONCILIATION OF GAAP NET INCOME ATTRIBUTABLE TO MICROCHIP TECHNOLOGY AND GAAP DILUTED NET INCOME PER COMMON SHARE ATTRIBUTABLE TO MICROCHIP TECHNOLOGY STOCKHOLDERS TO NON-GAAP NET INCOME ATTRIBUTABLE TO MICROCHIP TECHNOLOGY AND NON-GAAP DILUTED NET INCOME PER COMMON SHARE ATTRIBUTABLE TO MICROCHIP TECHNOLOGY STOCKHOLDERS

Three months ended

Nine months ended

December 31,

December 31,

2015

2014

2015

2014

Net income attributable to Microchip Technology, as reported

$

61,211

$

86,057

$

256,777

$

269,607

Noncontrolling interests

—

(1,533)

(375)

(3,623)

Distributor revenue recognition adjustment, net of tax effect

4,380

2,755

11,589

3,742

Share-based compensation expense, net of tax effect

11,505

11,187

36,537

36,528

Acquisition-related restructuring, acquired inventory valuation costs, intangible asset amortization and other costs, net of tax effect

55,294

46,497

126,631

142,915

Special (income) charges, net of tax effect

(4,817)

664

1,773

1,359

Gain on equity securities and equity method investment, net of tax effect

(52)

—

(16,116)

—

Non-cash other expense, net of tax effect

8,091

1,572

23,351

4,595

Impairment on available-for-sale investment, net of tax effect

2,523

—

2,523

—

Non-recurring tax events

301

(3,931)

(12,406)

(9,983)

Non-GAAP net income attributable to Microchip Technology

$

138,436

$

143,268

$

430,284

$

445,140

Non-GAAP net income attributable to Microchip Technology as a percentage of net sales

25.1

%

26.7

%

26.2

%

27.6

%

Diluted net income per common share attributable to Microchip Technology stockholders, as reported

$

0.28

$

0.39

$

1.18

$

1.20

Non-GAAP diluted net income per common share attributable to Microchip Technology stockholders

$

0.64

$

0.64

$

1.98

$

1.99

Diluted common shares outstanding, as reported

217,975

223,487

217,280

224,433

Diluted common shares outstanding Non-GAAP

217,975

223,077

217,109

223,883