Investor Relations

Maxim Integrated Reports Results For The First Quarter Of Fiscal 2017

October 20, 2016

-- Revenue: $561 million
-- Gross Margin: 61.6% GAAP (64.0% excluding special items)
-- EPS: $0.48 GAAP profit ($0.48 profit excluding special items)
-- Cash, cash equivalents, and short term investments: $2.27 billion
-- Fiscal second quarter revenue outlook: $520 million to $560 million

SAN JOSE, Calif., Oct. 20, 2016 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $561 million for its first quarter of fiscal 2017 ended September 24, 2016, a 1% decrease from the $566 million revenue recorded in the prior quarter, and flat from the same quarter of last year.

Logo for Maxim Integrated Products Inc.

Tunc Doluca, President and Chief Executive Officer, commented, "In the September quarter, our businesses performed in line with our improved profitability and revenue growth objectives. Despite the Note 7 smartphone cancellation, we are diverse in our revenue across a broad base of customers, end markets and applications, which is helping to lower variability in our revenue."

Fiscal Year 2017 First Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the September quarter was $0.48. The results were affected by pre-tax special items which primarily consisted of a $27 million gain on the sale of a business, $15 million in charges related to acquisitions, and $12 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.48. 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 2017, total cash, cash equivalents and short term investments were $2.27 billion, an increase of $37 million from the prior quarter.

Notable items included:

  • Cash flow from operations: $123 million
  • Capital expenditures: $14 million
  • Proceeds related to the sale of a manufacturing facility: $24.5 million
  • Dividends: $94 million ($0.33 per share)
  • Stock repurchases: $58 million

Business Outlook

The Company's 90-day backlog at the beginning of the December 2016 quarter was $371 million. Based on the beginning backlog and expected turns, results for the December 2016 quarter are expected to be as follows:

  • Revenue: $520 million to $560 million
  • Gross Margin: 61% to 63% GAAP (63% to 65% excluding special items)
  • EPS: $0.37 to $0.43 GAAP ($0.40 to $0.46 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.

Dividend

A cash dividend of $0.33 per share will be paid on December 15, 2016, to stockholders of record on December 1, 2016.

Conference Call

Maxim Integrated has scheduled a conference call on October 20 at 2:00 p.m. Pacific Time to discuss its financial results for the first quarter of fiscal 2017 and its business outlook. To listen via telephone, dial (866) 802-4305 (toll free) or (703) 639-1317. 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.

Contact
Kathy Ta
Managing Director, Investor Relations
(408) 601-5697










CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



Three Months Ended




September 24, 


June 25, 


September 26, 




2016


2016


2015




(in thousands, except per share data)



Net revenues

$                  561,396


$                  566,126


$                  562,510



Cost of goods sold (1)

215,664


219,099


276,159



Gross margin

345,732


347,027


286,351



Operating expenses:








Research and development

112,746


113,491


121,392



Selling, general and administrative

70,852


71,483


71,995



Intangible asset amortization

2,443


2,538


3,591



Impairment of long-lived assets (2)

6,134


429


157,697



Impairment of goodwill and intangible assets

-


27,602


-



Severance and restructuring expenses 

9,965


4,149


7,126



Other operating expenses (income), net (3)

(28,481)


4,962


315



Total operating expenses (income), net

173,659


224,654


362,116



Operating income (loss)

172,073


122,373


(75,765)



Interest and other income (expense), net 

(6,870)


(6,427)


(6,402)



Income (loss) before provision for income taxes 

165,203


115,946


(82,167)



Income tax provision (benefit)

27,589


23,607


(10,024)



Net income (loss)

$                  137,614


$                    92,339


$                  (72,143)



















Earnings (loss) per share:








Basic

$0.49


$0.32


($0.25)



Diluted

$0.48


$0.32


($0.25)











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








Basic

283,633


284,354


284,588



Diluted (4)

288,574


288,544


284,588











Dividends paid per share

$0.33


$0.30


$0.30


















SCHEDULE OF SPECIAL ITEMS

(Unaudited)



Three Months Ended




September 24, 


June 25, 


September 26, 




2016


2016


2015




(in thousands)



Cost of goods sold:








Intangible asset amortization 

$12,602


$11,829


$                    16,638



Accelerated depreciation (1)

1,178


4,098


43,631



  Total 

$                    13,780


$                    15,927


$                    60,269











 Operating expenses: 








Intangible asset amortization

$2,443


$2,538


$3,591



Impairment of long-lived assets (2)

6,134


429


157,697



Impairment of goodwill and intangible assets

-


27,602


-



Severance and restructuring

9,965


4,149


7,126



Other operating expenses (income), net (3)

(28,481)


4,962


315



  Total 

$                    (9,939)


$                    39,680


$                  168,729



















Interest and other expense (income), net 

$                       (471)


$                       (247)


$                       (109)



 Total 

$                       (471)


$                       (247)


$                       (109)




(1) Includes building and equipment accelerated depreciation related to San Jose and Dallas manufacturing facilities.



(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) Shares used in diluted earnings per share excluding special items differs from GAAP loss per share due to net income on a non-GAAP basis for the first quarter of fiscal year 2016.





 









CONSOLIDATED  BALANCE SHEETS

(Unaudited)



September 24, 


June 25, 


September 26, 




2016


2016


2015




(in thousands) 



ASSETS



Current assets:








Cash and cash equivalents

$        2,092,073


$        2,105,229


$        1,508,347



Short-term investments

175,441


125,439


100,285



Total cash, cash equivalents and short-term investments

2,267,514


2,230,668


1,608,632



Accounts receivable, net

253,518


256,531


282,471



Inventories

223,484


227,929


290,712



Deferred tax assets

-


-


50,604



Other current assets

89,398


91,920


46,627



Total current assets

2,833,914


2,807,048


2,279,046



Property, plant and equipment, net

678,447


692,551


805,580



Intangible assets, net

131,496


146,540


241,423



Goodwill

491,015


490,648


511,647



Other assets

54,890


84,100


36,226



Assets held for sale

2,854


13,729


70,964



TOTAL ASSETS

$        4,192,616


$        4,234,616


$        3,944,886











LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:








Accounts payable

$             83,589


$             82,535


$             80,752



Income taxes payable

3,138


21,153


59,479



Accrued salary and related expenses

111,126


166,698


120,642



Accrued expenses

48,572


50,521


49,990



Deferred revenue on shipments to distributors

35,754


38,779


35,091



Short term debt

249,788


249,717


-



Total current liabilities

531,967


609,403


345,954



Long-term debt

990,685


990,090


1,000,000



Income taxes payable

497,360


480,645


419,805



Other liabilities

37,368


46,664


64,326



Total liabilities

2,057,380


2,126,802


1,830,085



Stockholders' equity:








Common stock and capital in excess of par value

284


284


10,819



Retained earnings

2,141,326


2,121,749


2,121,582



Accumulated other comprehensive loss

(6,374)


(14,219)


(17,600)



Total stockholders' equity

2,135,236


2,107,814


2,114,801



        TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$        4,192,616


$        4,234,616


$        3,944,886










 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



Three Months Ended




September 24, 


June 25, 


September 26, 




2016


2016


2015




(in thousands)



Cash flows from operating activities:








Net income (loss)

$         137,614


$           92,339


$         (72,143)



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








Stock-based compensation

17,120


16,444


16,963



Depreciation and amortization

43,485


46,414


102,053



Deferred taxes

14,895


(13,510)


(53,111)



In-process research and development written-off

-


27,602


-



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

652


5,048


(1,346)



Loss (gain) on sale of business

(26,620)


-


-



Tax benefit (shortfall) related to stock-based compensation 

-


3,657


1,193



Impairment of long-lived assets

6,134


-


157,697



Excess tax benefit from stock-based compensation

-


(1,890)


(2,249)



Changes in assets and liabilities:








Accounts receivable

3,013


21,971


(3,627)



Inventories

2,517


7,657


(2,167)



Other current assets

(12,099)


8,012


4,796



Accounts payable

(858)


5,076


(9,776)



Income taxes payable

110


19,792


34,127



Deferred revenue on shipments to distributors

(3,025)


4,322


4,764



Accrued salary and related expenses

(55,572)


15,287


(60,718)



All other accrued liabilities

(3,964)


(4,150)


883



Net cash provided by (used in) operating activities

123,402


254,071


117,339



Cash flows from investing activities:








Purchase of property, plant and equipment

(14,310)


(22,488)


(15,821)



Proceeds from sales of property, plant and equipment

205


34,691


606



Proceeds from sale of available-for-sale securities

24,540


-


-



Proceeds from maturity of available-for-sale securities

25,000


50,000


-



Proceeds from sale of business

42,199


-


-



Purchases of available-for-sale securities

(75,224)


(25,000)


(25,055)



Purchases of privately-held companies' securities

(2,337)


(1,554)


(1,000)



Net cash provided by (used in) investing activities

73


35,649


(41,270)



Cash flows from financing activities:








Excess tax benefit from stock-based compensation 

-


1,890


2,249



Issuance of debt

-


249,717


-



Net issuance of restricted stock units

(5,206)


(2,687)


(4,822)



Proceeds from stock options exercised

19,911


12,272


8,970



Issuance of common stock under employee stock purchase program

-


19,625


-



Repurchase of common stock

(57,709)


(90,438)


(39,697)



Dividends paid

(93,627)


(85,210)


(85,387)



Net cash provided by (used in) financing activities

(136,631)


105,169


(118,687)



Net increase (decrease) in cash and cash equivalents

(13,156)


394,889


(42,618)



Cash and cash equivalents:








Beginning of period

2,105,229


1,710,340


1,550,965



End of period

$      2,092,073


$      2,105,229


$      1,508,347











Total cash, cash equivalents, and short-term investments

$      2,267,514


$      2,230,668


$      1,608,632


















 











ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES

(Unaudited)




Three Months Ended





September 24, 


June 25, 


September 26, 





2016


2016


2015





(in thousands, except per share data)



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









GAAP gross profit


$                345,732


$                347,027


$                286,351



GAAP gross profit %


61.6%


61.3%


50.9%












Special items:









Intangible asset amortization 


12,602


11,829


16,638



Accelerated depreciation (1)


1,178


4,098


43,631



 Total special items 


13,780


15,927


60,269



  GAAP gross profit excluding special items 


$                359,512


$                362,954


$                346,620



  GAAP gross profit % excluding special items 


64.0%


64.1%


61.6%












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









GAAP operating expenses


$                173,659


$                224,654


$                362,116












Special items:









Intangible asset amortization


2,443


2,538


3,591



Impairment of long-lived assets (2)


6,134


429


157,697



Impairment of intangible assets 


-


27,602


-



Severance and restructuring 


9,965


4,149


7,126



Other operating expenses (income), net  (3)


(28,481)


4,962


315



  Total special items 


(9,939)


39,680


168,729



  GAAP operating expenses excluding special items 


$                183,598


$                184,974


$                193,387












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









GAAP net income (loss)


$                137,614


$                  92,339


$                (72,143)












Special items:









Intangible asset amortization 


15,045


14,367


20,229



Accelerated depreciation (1)


1,178


4,098


43,631



Impairment of long-lived assets (2)


6,134


429


157,697



Impairment of intangible assets 


-


27,602


-



Severance and restructuring 


9,965


4,149


7,126



Other operating expenses (income), net (3)


(28,481)


4,962


315



Interest and other expense (income), net 


(471)


(247)


(109)



  Pre-tax total special items 


3,370


55,360


228,889



Other income tax effects and adjustments (4)


(2,754)


(7,228)


(36,434)



 GAAP net income excluding special items 


$                138,230


$                140,471


$                120,312












 GAAP net income per share excluding special items: 









Basic


$                  0.49


$                  0.49


$                  0.42



Diluted


$                  0.48


$                  0.49


$                  0.42












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









Basic


283,633


284,354


284,588



Diluted (5)


288,574


288,544


288,897




(1) Includes building and equipment accelerated depreciation related to San Jose and Dallas manufacturing facilities.



(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.



(5) Shares used in diluted earnings per share excluding special items differs from GAAP loss per share due to net income on a non-GAAP basis for the first quarter of fiscal year 2016.





 

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; impairment of intangible assets; severance and restructuring; and other operating expenses (income), net, and other income tax effects and adjustments. 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 and accelerated depreciation. 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; impairment of intangible 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; assumes the Federal research tax credit remains in effect throughout the entire year, and eliminates the effects of significant non-recurring and period specific tax items which vary in size and frequency. We are using a long-term tax rate of 18%, which is 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. We will review the long-term tax rate on an annual basis and 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; impairment of intangible assets; severance and restructuring; and other operating expenses (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 2017 ending in December 2016, which includes revenue, gross margin and earnings per share, as well as the Company's belief in its ability to continue improving profitability, drive free cash flow growth, and maintain leadership in the return of cash to shareholders. 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 25, 2016 (the "Form 10-K"). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331616000081/maxim10-kfy2016.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 develops innovative analog ICs for the automotive, industrial, healthcare, mobile consumer, and cloud data center markets. We make technology smaller, smarter, more secure and energy efficient, so that our customers can meet the demands of an integrated world. Learn more at http://www.maximintegrated.com.

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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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