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

Twelve months ended

March 31,

March 31,

2016

2015

2016

2015

Net sales, as reported

$

557,647

$

543,207

$

2,173,334

$

2,147,036

Distributor revenue recognition adjustment

10,791

3,983

40,501

13,570

Non-GAAP net sales

$

568,438

$

547,190

$

2,213,835

$

2,160,606

RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT

Three months ended

Twelve months ended

March 31,

March 31,

2016

2015

2016

2015

Gross profit, as reported

$

302,779

$

313,632

$

1,205,464

$

1,229,564

Distributor revenue recognition adjustment, net of product cost

5,395

1,792

23,794

6,357

Share-based compensation expense

1,927

2,025

8,252

9,010

Manufacturing excursion

3,624

—

3,624

—

Acquisition-related restructuring and acquired inventory valuation costs

18,197

1,511

45,646

26,203

Non-GAAP gross profit

$

331,922

$

318,960

$

1,286,780

$

1,271,134

Non-GAAP gross profit percentage

58.4

%

58.3

%

58.1

%

58.8

%

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

Three months ended

Twelve months ended

March 31,

March 31,

2016

2015

2016

2015

Research and development expenses, as reported

$

95,638

$

87,662

$

372,596

$

349,543

Share-based compensation expense

(8,399)

(7,519)

(32,022)

(28,164)

Non-GAAP research and development expenses

$

87,239

$

80,143

$

340,574

$

321,379

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

15.3

%

14.6

%

15.4

%

14.9

%

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

Three months ended

Twelve months ended

March 31,

March 31,

2016

2015

2016

2015

Selling, general and administrative expenses, as reported

$

78,293

$

67,778

$

301,670

$

274,815

Share-based compensation expense

(6,991)

(5,639)

(31,146)

(21,422)

Acquisition-related costs

(5,040)

(741)

(9,738)

(4,001)

Non-GAAP selling, general and administrative expenses

$

66,262

$

61,398

$

260,786

$

249,392

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

11.7

%

11.2

%

11.8

%

11.5

%

RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

Three months ended

Twelve months ended

March 31,

March 31,

2016

2015

2016

2015

Operating expenses, as reported

$

222,833

$

203,285

$

853,119

$

803,944

Share-based compensation expense

(15,390)

(13,158)

(63,168)

(49,586)

Acquisition-related costs

(5,040)

(741)

(9,738)

(4,001)

Amortization of acquired intangible assets

(48,132)

(47,087)

(174,896)

(176,746)

Special charges, net

(770)

(758)

(3,957)

(2,840)

Non-GAAP operating expenses

$

153,501

$

141,541

$

601,360

$

570,771

Non-GAAP operating expenses as a percentage of net sales

27.0

%

25.9

%

27.2

%

26.4

%

RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP OPERATING INCOME

Three months ended

Twelve months ended

March 31,

March 31,

2016

2015

2016

2015

Operating income, as reported

$

79,946

$

110,347

$

352,345

$

425,620

Distributor revenue recognition adjustment

5,395

1,792

23,794

6,357

Share-based compensation expense

17,317

15,183

71,420

58,596

Manufacturing excursion

3,624

—

3,624

—

Acquisition-related restructuring, acquired inventory valuation and other costs

23,237

2,252

55,384

30,204

Amortization of acquired intangible assets

48,132

47,087

174,896

176,746

Special charges, net

770

758

3,957

2,840

Non-GAAP operating income

$

178,421

$

177,419

$

685,420

$

700,363

Non-GAAP operating income as a percentage of net sales

31.4

%

32.4

%

31.0

%

32.4

%

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

Three months ended

Twelve months ended

March 31,

March 31,

2016

2015

2016

2015

Other expense, net, as reported

$

(22,277)

$

(48,138)

$

(70,707)

$

(79,396)

Loss on retirement of convertible debentures

—

50,631

—

50,631

Gain on equity securities and equity method investment

—

(18,469)

(16,147)

(18,469)

Non-cash other expense, net

15,920

6,854

53,005

14,165

Impairment on available-for-sale investment

—

—

3,995

—

Other expenses on acquisition restructuring

—

—

501

—

Non-GAAP other expense, net

$

(6,357)

$

(9,122)

$

(29,353)

$

(33,069)

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

(1.1)

%

(1.7)

%

(1.3)

%

(1.5)

%

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

Three months ended

Twelve months ended

March 31,

March 31,

2016

2015

2016

2015

Income tax benefit, as reported

$

(9,742)

$

(36,559)

$

(42,632)

$

(19,418)

Income tax rate, as reported

(16.9)%

(58.9)%

(15.2)%

(5.6)%

Distributor revenue recognition adjustment

1,911

251

8,721

1,074

Share-based compensation expense

5,446

3,755

23,012

10,640

Manufacturing excursion

1,324

—

1,324

—

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

2,018

3,365

34,799

18,061

Special charges, net

31

239

1,445

962

Loss on retirement of convertible debentures

—

18,809

—

18,809

Non-cash other expense, net

5,692

2,546

19,426

5,262

Gain on equity securities and equity method investment

—

—

(31)

—

Impairment on available-for-sale investment

—

—

1,472

—

Non-recurring tax events

12,300

26,735

24,706

36,718

Non-GAAP income tax provision

$

18,980

$

19,141

$

72,242

$

72,108

Non-GAAP income tax rate

11.0

%

11.4

%

11.0

%

10.8

%

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

Twelve months ended

March 31,

March 31,

2016

2015

2016

2015

Net income attributable to Microchip Technology, as reported

$

67,355

$

99,402

$

324,132

$

369,009

Noncontrolling interests

—

(995)

(375)

(4,618)

Distributor revenue recognition adjustment, net of tax effect

3,484

1,541

15,073

5,283

Share-based compensation expense, net of tax effect

11,871

11,428

48,408

47,956

Manufacturing excursion, net of tax effect

2,300

—

2,300

—

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

69,351

45,974

195,982

188,889

Special charges, net of tax effect

739

519

2,512

1,878

Loss on retirement of convertible debentures, net of tax effect

—

31,822

—

31,822

Non-cash other expense, net of tax effect

10,228

4,308

33,579

8,903

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

—

(18,469)

(16,116)

(18,469)

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

—

—

2,523

—

Non-recurring tax events

(12,300)

(26,735)

(24,706)

(36,718)

Non-GAAP net income attributable to Microchip Technology

$

153,028

$

148,795

$

583,312

$

593,935

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

26.9

%

27.2

%

26.3

%

27.5

%

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

$

0.31

$

0.45

$

1.49

$

1.65

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

$

0.70

$

0.68

$

2.68

$

2.66

Diluted common shares outstanding, as reported

217,711

220,947

217,388

223,561

Diluted common shares outstanding Non-GAAP

217,711

220,420

217,260

223,017