Investor Relations

Maxim Integrated Reports Results For The First Quarter Of Fiscal 2018

October 19, 2017

- Revenue: $576 million
- Gross Margin: 64.9% GAAP (66.9% excluding special items)
- EPS: $0.54 GAAP ($0.60 excluding special items)
- Fiscal second quarter revenue outlook: $600 to $640 million (see Business Outlook section)

SAN JOSE, Calif., Oct. 19, 2017 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $576 million for its first quarter of fiscal 2018 ended September 23, 2017, a 4% decrease from the $602 million revenue recorded in the prior quarter, and a 3% increase from the same quarter of last year.

Logo for Maxim Integrated Products Inc. (PRNewsFoto/Maxim Integrated Products, Inc.)

Tunc Doluca, President and Chief Executive Officer, commented, "We are pleased with our performance in the September quarter. Revenue growth was led by double-digit increases in Industrial and Automotive from the same quarter last year." Mr. Doluca continued, "Looking forward, we expect strong growth in Automotive, Industrial and Data Center in the December quarter with continued solid profitability."

Fiscal Year 2018 First Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the September quarter was $0.54. The results were affected by pre-tax special items which primarily consisted of $13 million in charges related to acquisitions and $5 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.60. An analysis of GAAP versus GAAP excluding special items is provided in the last table of this press release.

Cash Flow Items
At the end of the first quarter of fiscal 2018, total cash, cash equivalents and short term investments were $2.77 billion, an increase of $29 million from the prior quarter.

Notable items included:

  • Cash flow from operations: $220 million
  • Gross capital expenditures: $14 million
  • Dividends paid: $101 million ($0.36 per share)
  • Stock repurchases: $75 million

Trailing twelve months free cash flow was $819 million. Free cash flow is a non-GAAP measure and is defined by net cash flow from operations less gross capital expenditures.

Business Outlook
The Company's 90-day backlog at the beginning of the December 2017 quarter was $426 million. Based on the beginning backlog and expected turns, the final transition to sell-in revenue accounting for distribution, and a 14-week quarter, our results for the December 2017 quarter are forecasted to be as follows:

  • Revenue: $600 to $640 million (including $18 to $22 million for sell-in transition)
  • Gross Margin: 64% to 66% GAAP (66% to 68% excluding special items)
  • EPS: $0.57 to $0.63 GAAP ($0.61 to $0.67 excluding special items)

Maxim Integrated's business outlook does not include the potential impact of any special items related to restructuring activity, acquisitions, or other business combinations that may be completed during the quarter.

A cash dividend of $0.36 per share will be paid on December 14, 2017, to stockholders of record on November 30, 2017.

Conference Call
Maxim Integrated has scheduled a conference call on October 19 at 2:00 p.m. Pacific Time to discuss its financial results for the first quarter of fiscal 2018 and its business outlook. This call will be webcast by Shareholder.com and can be accessed at the Company's website at investor.maximintegrated.com.

A presentation summarizing financial information to be discussed on the conference call is posted at investor.maximintegrated.com.










CONSOLIDATED STATEMENTS OF INCOME



(Unaudited)




Three Months Ended




September 23, 


June 24, 


September 24, 




2017


2017


2016




(in thousands, except per share data)



Net revenues

$               575,676


$     602,005


$               561,396



Cost of goods sold (1) 

201,845


208,339


215,664



Gross margin

373,831


393,666


345,732



Operating expenses:








Research and development

108,601


114,011


112,746



Selling, general and administrative

73,681


75,129


70,852



Intangible asset amortization

1,752


2,050


2,443



Impairment of long-lived assets (2)

42



6,134



Severance and restructuring expenses 

5,433


1,175


9,965



Other operating expenses (income), net (3)

(844)


1,923


(28,481)



Total operating expenses (income), net

188,665


194,288


173,659



Operating income (loss)

185,166


199,378


172,073



Interest and other income (expense), net 

(4,214)


(3,798)


(6,870)



Income (loss) before provision for income taxes 

180,952


195,580


165,203



Income tax provision (benefit)

26,419


32,271


27,589



Net income (loss)

$               154,533


$     163,309


$               137,614



















Earnings (loss) per share:








Basic

$                     0.55


$           0.58


$                     0.49



Diluted

$                     0.54


$           0.57


$                     0.48











Shares used in the calculation of earnings (loss) per share:








Basic

282,170


282,747


283,633



Diluted

286,437


287,494


288,574











Dividends paid per share

$                     0.36


$           0.33


$                     0.33



















SCHEDULE OF SPECIAL ITEMS



(Unaudited)




Three Months Ended




September 23, 


June 24, 


September 24, 




2017


2017


2016




(in thousands)



Cost of goods sold:








Intangible asset amortization 

$                 11,064


$       11,064


$                 12,602



Accelerated depreciation (1)



1,178



  Total 

$                 11,064


$       11,064


$                 13,780











 Operating expenses: 








Intangible asset amortization

$                   1,752


$         2,050


$                   2,443



Impairment of long-lived assets (2)

42



6,134



Severance and restructuring

5,433


1,175


9,965



Other operating expenses (income), net (3)

(844)


1,923


(28,481)



  Total 

$                   6,383


$         5,148


$                  (9,939)



















Interest and other expense (income), net

$                       (84)


$             (90)


$                     (471)



 Total 

$                       (84)


$             (90)


$                     (471)











(1) Includes building and equipment accelerated depreciation related to the Dallas manufacturing facility.



(2) Includes impairment of investments in privately-held companies and other equipment impairment charges.



(3) Includes gain on sale of micro-electromechanical systems (MEMS) business line during the first quarter of fiscal year 2017.





 










CONSOLIDATED  BALANCE SHEETS



(Unaudited)




September 23, 


June 24, 


September 24, 




2017


2017


2016




(in thousands) 



ASSETS



Current assets:








Cash and cash equivalents

$  1,577,160


$2,246,121


$  2,092,073



Short-term investments

1,196,827


498,718


175,441



Total cash, cash equivalents and short-term investments

2,773,987


2,744,839


2,267,514



Accounts receivable, net

233,215


256,454


253,518



Inventories

245,347


247,242


223,484



Other current assets

55,033


57,059


89,398



Total current assets

3,307,582


3,305,594


2,833,914



Property, plant and equipment, net

595,622


606,581


678,447



Intangible assets, net

79,850


90,867


131,496



Goodwill

491,015


491,015


491,015



Other assets

59,246


72,974


54,890



Assets held for sale

2,691


3,202


2,854



TOTAL ASSETS

$  4,536,006


$4,570,233


$  4,192,616











LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:








Accounts payable

$       66,915


$     77,373


$       83,589



Income taxes payable

3,688


3,688


3,138



Accrued salary and related expenses

103,194


145,299


111,126



Accrued expenses

43,121


37,663


48,572



Deferred revenue on shipments to distributors

16,994


14,974


35,754



Short-term debt



249,788



Total current liabilities

233,912


278,997


531,967



Long-term debt

1,488,406


1,487,678


990,685



Income taxes payable

573,831


557,498


497,360



Deferred tax liabilities

1,436


1,514


756



Other liabilities

40,677


41,852


36,612



Total liabilities

2,338,262


2,367,539


2,057,380



Stockholders' equity:








Common stock and capital in excess of par value

283


283


284



Retained earnings

2,207,052


2,212,301


2,141,326



Accumulated other comprehensive loss

(9,591)


(9,890)


(6,374)



Total stockholders' equity

2,197,744


2,202,694


2,135,236



        TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$  4,536,006


$4,570,233


$  4,192,616










 


CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)




Three Months Ended




September 23, 


June 24, 


September 24, 




2017


2017


2016




(in thousands)



Cash flows from operating activities:








Net income (loss)

$            154,533


$          163,309


$            137,614



Adjustments to reconcile net income (loss) to net cash provided by operating activities:








Stock-based compensation

17,287


17,624


17,120



Depreciation and amortization

36,754


38,194


43,485



Deferred taxes

12,115


1,697


14,895



Loss (gain) from sale of property, plant and equipment

61


7,006


652



Loss (gain) on sale of business



(26,620)



Impairment of long-lived assets

42


665


6,134



Changes in assets and liabilities:








Accounts receivable

23,239


1,138


3,013



Inventories

1,835


(5,715)


2,517



Other current assets

1,488


(727)


(12,099)



Accounts payable

(9,979)


(5,235)


(858)



Income taxes payable

16,333


22,619


110



Deferred revenue on shipments to distributors

2,020


(20,751)


(3,025)



Accrued salary and related expenses

(42,105)


9,597


(55,572)



All other accrued liabilities

6,082


7,507


(3,964)



Net cash provided by (used in) operating activities

219,705


236,928


123,402



Cash flows from investing activities:








Purchase of property, plant and equipment

(14,321)


(13,050)


(14,310)



Proceeds from sales of property, plant and equipment

1,473


7,576


205



Proceeds from sale of available-for-sale securities

18,101



24,540



Proceeds from maturity of available-for-sale securities


50,000


25,000



Proceeds from sale of business



42,199



Purchases of available-for-sale securities

(716,304)


(49,891)


(75,224)



Purchases of privately-held companies' securities

(606)



(2,337)



Net cash provided by (used in) investing activities

(711,657)


(5,365)


73



Cash flows from financing activities:








Issuance of debt


500,000




Debt Issuance Cost


(3,688)




Net issuance of restricted stock units

(5,416)


(7,471)


(5,206)



Proceeds from stock options exercised

5,160


18,434


19,911



Issuance of common stock under employee stock purchase program


19,805




Repurchase of common stock

(75,291)


(75,853)


(57,709)



Dividends paid

(101,462)


(93,396)


(93,627)



Net cash provided by (used in) financing activities

(177,009)


357,831


(136,631)



Net increase (decrease) in cash and cash equivalents

(668,961)


589,394


(13,156)



Cash and cash equivalents:








Beginning of period

2,246,121


1,656,727


2,105,229



End of period

$         1,577,160


$       2,246,121


$         2,092,073











Total cash, cash equivalents, and short-term investments

$         2,773,987


$       2,744,839


$         2,267,514


















 











ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES



(Unaudited)





Three Months Ended





September 23, 


June 24, 


September 24, 





2017


2017


2016





(in thousands, except per share data)



Reconciliation of GAAP gross profit to GAAP gross profit excluding special items:









GAAP gross profit


$                 373,831


$       393,666


$                 345,732



GAAP gross profit %


64.9%


65.4%


61.6%












Special items:









Intangible asset amortization 


11,064


11,064


12,602



Accelerated depreciation (1)




1,178



 Total special items 


11,064


11,064


13,780



  GAAP gross profit excluding special items 


$                 384,895


$       404,730


$                 359,512



  GAAP gross profit % excluding special items 


66.9%


67.2%


64.0%












Reconciliation of GAAP operating expenses to GAAP operating expenses excluding special items:









GAAP operating expenses


$                 188,665


$       194,288


$                 173,659












Special items:









Intangible asset amortization


1,752


2,050


2,443



Impairment of long-lived assets (2)


42



6,134



Severance and restructuring 


5,433


1,175


9,965



Other operating expenses (income), net (3)


(844)


1,923


(28,481)



  Total special items 


6,383


5,148


(9,939)



  GAAP operating expenses excluding special items 


$                 182,282


$       189,140


$                 183,598












Reconciliation of GAAP net income (loss) to GAAP net income excluding special items:









GAAP net income (loss)


$                 154,533


$       163,309


$                 137,614












Special items:









Intangible asset amortization 


12,816


13,114


15,045



Accelerated depreciation (1)




1,178



Impairment of long-lived assets (2)


42



6,134



Severance and restructuring 


5,433


1,175


9,965



Other operating expenses (income), net (3)


(844)


1,923


(28,481)



Interest and other expense (income), net 


(84)


(90)


(471)



 Pre-tax total special items


17,363


16,122


3,370



 Other income tax effects and adjustments (4) 


(1,345)


499


(2,754)



 GAAP net income excluding special items 


$                 170,551


$       179,930


$                 138,230












 GAAP net income per share excluding special items: 









Basic


$                       0.60


$             0.64


$                       0.49



Diluted


$                       0.60


$             0.63


$                       0.48












Shares used in the calculation of earnings per share excluding special items: 









Basic


282,170


282,747


283,633



Diluted


286,437


287,494


288,574












(1) Includes building and equipment accelerated depreciation related to the Dallas manufacturing facility.



(2) Includes impairment of investments in privately-held companies and other equipment impairment charges.



(3)  Includes gain on sale of micro-electromechanical systems (MEMS) business line during the first quarter of fiscal year 2017.



(4) Includes tax effect of pre-tax special items and miscellaneous tax adjustments.





 

Non-GAAP Measures
To supplement the consolidated financial results prepared under GAAP, Maxim Integrated uses non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude special items related to intangible asset amortization; accelerated depreciation; impairment of long-lived assets; severance and restructuring; other operating expenses (income), net; interest and other expense (income), net; and other income tax effects and adjustments. We defined free cash flow as net cash provided from operations less gross capital expenditures. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate Maxim Integrated's current performance. Many analysts covering Maxim Integrated use the non-GAAP measures as well. Given management's use of these non-GAAP measures, Maxim Integrated believes these measures are important to investors in understanding Maxim Integrated's current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in Maxim Integrated's core business across different time periods. These non-GAAP measures are not in accordance with or an alternative to GAAP financial data and may be different from non-GAAP measures used by other companies. Because non-GAAP financial measures are not standardized it may not be possible to compare these financial measures with other companies' non-GAAP financial measures, even if they have similar names. The non-GAAP measures displayed in the table above include the following:

GAAP Gross Profit Excluding Special Items
The use of GAAP gross profit excluding special items allows management to evaluate the gross margin of the Company's core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization, accelerated depreciation, and other costs of goods sold. In addition, it is an important component of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP gross profit excluding special items to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of revenue of Maxim Integrated's core businesses.

GAAP Operating Expenses Excluding Special Items
The use of GAAP operating expenses excluding special items allows management to evaluate the operating expenses of the Company's core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization; impairment of long-lived assets; severance and restructuring, and other operating expenses (income), net. In addition, it is an important component of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP operating expenses excluding special items to enable investors and analysts to evaluate our core business and its direct operating expenses.

GAAP Provision for Income Taxes Excluding Special Items
The use of a GAAP provision for income taxes excluding special items allows management to evaluate the provision for income taxes across different reporting periods on a consistent basis, independent of special items including the tax provision impact of pre-tax special items. In fiscal year 2016, we began using a long-term tax rate to compute the GAAP provision for income taxes excluding special items. This long-term tax rate considers the income tax impact of pre-tax special items and eliminates the effects of significant non-recurring and period specific tax items which vary in size and frequency. In the first quarter of fiscal year 2018, we used a long-term tax rate of 14%, which was our forecast of the weighted average of our normalized fiscal year GAAP tax rate excluding special items over a four-year period, that includes the past three fiscal years plus the current fiscal year projection at the beginning of fiscal year 2018. We review the long-term tax rate on an annual basis and more frequently whenever events occur that may materially affect the long-term tax rate such as tax law changes; significant changes in our geographic earnings mix; or changes in our corporate structure.

GAAP Net Income and GAAP Net Income per Share Excluding Special Items
The use of GAAP net income and GAAP net income per share excluding special items allow management to evaluate the operating results of Maxim Integrated's core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization; accelerated depreciation; impairment of long-lived assets; severance and restructuring; other operating expenses (income), net; interest and other expense (income), net; and other income tax effects and adjustments. In addition, they are important components of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP net income and GAAP net income per share excluding special items to enable investors and analysts to understand the results of operations of Maxim Integrated's core businesses and to compare our results of operations on a more consistent basis against that of other companies in our industry.

"Safe Harbor" Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include the Company's business outlook and financial projections for its second quarter of fiscal 2018 ending in December 2017, which includes revenue, gross margin and earnings per share, as well as the Company's expectation of strong growth in Automotive, Industrial and Data Center in the December quarter. These statements involve risk and uncertainty. Actual results could differ materially from those forecasted, based upon, among other things, general market and economic conditions, market developments that could adversely affect the growth of the mixed-signal analog market, product mix shifts, the loss of all or a substantial portion of our sales to one or more of our large customers, customer cancellations and price competition, as well as other risks described in the Company's Annual Report on Form 10-K for the fiscal year ended June 24, 2017 (the "Form 10-K"). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331617000028/maxim10-kfy2017.htm.

All forward-looking statements included in this news release are made as of the date hereof and based on the information available to the Company as of the date hereof. The Company assumes no obligation to update any forward-looking statement except as required by law.

About Maxim Integrated
Maxim Integrated develops innovative analog and mixed-signal products and technologies to make systems smaller and smarter, with enhanced security and increased energy efficiency. We are empowering design innovation for our automotive, industrial, healthcare, mobile consumer, and cloud data center customers to deliver industry-leading solutions that help change the world. Learn more at http://www.maximintegrated.com.

Contact
Kathy Ta
Vice President, Investor Relations
(408) 601-5697

 

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SOURCE Maxim Integrated Investor Relations

Contact Investor Relations

Kathy Ta Vice President, Investor Relations 408-601-5697 Kathy.Ta@maximintegrated.com
Mike Chu Director, Investor Relations 408-601-3370 Michael.Chu@maximintegrated.com

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