In attendance with me today are: Steve Sanghi, Microchip's President and CEO; Ganesh Moorthy, Microchip's COO; and Gordon Parnell, Vice President Business Development and Investor Relations.I will comment on our second quarter of fiscal year 2012 financial performance, and Steve and Ganesh will then give their comments on the results, discuss the current business environment and discuss our guidance. We will then be available to respond to specific investor and analyst questions. We are including information in our press release in this conference call on various GAAP and non-GAAP measures. We have posted a full GAAP to non-GAAP reconciliation on the Investor Relation page of our website at www.microchip.com, which we believe you will find useful when comparing GAAP and non-GAAP results. I will now go through some of the operating results. I will be referring to gross margin and operating expenses on a non-GAAP basis prior to the effects of share base compensation and acquisition-related expenses. Net sales in the September quarter were $340.6 million, and were down sequentially 9.1% from net sales of $374.5 million in the immediately preceding quarter, and were down 10.9% from net sales of $382.3 million in the September 2010 quarter. Looking at revenue by geography for the September quarter, Americas were down 9.4% sequentially, Europe was down 8.5% sequentially and Asia was down 9.2% sequentially. All geographies were impacted by the business conditions we experienced with Asia being the weakest as compared to our expectations. On a non-GAAP basis, gross margins were 58.2% in the September quarter, and non-GAAP operating expenses were 25.9% of sales. Operating income was 32.3% of sales, and net income was $92.6 million or $0.46 per diluted share. On a full GAAP basis, gross margins, including share-based compensation and acquisition-related intangible amortization were 57.2% in the September quarter. Total operating expenses were $97.4 million or 28.6% of sales, and includes share-based compensation of $7.9 million and acquisition-related expenses of $1.1 million. GAAP net income was $79.3 million, or $0.40 per diluted share.
In the September quarter, the non-GAAP tax rate was 12.9%, and the GAAP tax rate was 12.2%. Our tax rate is impacted by the mix of geographical profits, withholding taxes associated with our licensing business, gains or losses on trading securities and a percentage of our cash that is invested in tax advantage securities. We expect our combined forward-looking effective tax rate on both the GAAP and non-GAAP bases to be about 12.75% to 13.25%.To summarize the after-tax impact of the non-GAAP adjustments had on Microchip's earnings per share in the September quarter, share-based compensation was about $0.041, acquisition-related items were about $0.014, losses on trading securities was about $0.006 and noncash interest expense was about $0.006. The dividend declared today of $0.348 per share will be paid on December 5, 2011, to shareholders of record on November 21, 2011. The cash payment associated with this dividend will be approximately $66.7 million. Moving on to the balance sheet. Microchip's inventory at September 30, 2011, was $211.2 million or 132 days, up 13 days from the prior quarter level. Inventory at our distributors was 46 days, which is up 3 days from the prior quarter level. We continue to see an increasing trend of large OEM customers using distribution to hold bonded inventory on their behalf, in order to achieve 0 lead times without having to carry inventory on their balance sheets. This has resulted in a general increase over time in the amount of inventory our distributors carry. However, I remind you that our distribution revenue throughout the world is recognized on a sell-through basis. At September 30, Microchip's accounts receivables balance was $142.4 million, a decrease of 27.4% from the balance as of the end of June. The decrease in receivables was driven by the sequential revenue decline and differences in the shipment linearity between the June and September quarters. Receivable balances continue to be in great condition, with excellent payment performance from our customers. As of September 30, Microchip's cash and total investment position was approximately $1.78 billion, and was up $58.1 million from the prior quarter levels. Our total cash and investment position is projected to grow by approximately $75 million to $85 million in the December quarter, prior to our dividend payment. Read the rest of this transcript for free on seekingalpha.com