Investor Relations

Maxim Integrated Reports Results For The Fourth Quarter Of Fiscal 2016, Increases Dividend By 10%

July 21, 2016

- Revenue: $566 million
- Gross Margin: 61.3% GAAP (64.1% excluding special items)
- EPS: $0.32 GAAP profit ($0.49 profit excluding special items)
- Cash, cash equivalents, and short term investments: $2.23 billion
- Fiscal first quarter revenue outlook: $540 million to $580 million
- Quarterly dividend increased 10% to $0.33 per share

SAN JOSE, Calif., July 21, 2016 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $566 million for its fourth quarter of fiscal 2016 ended June 25, 2016, a 2% increase from the $555 million revenue recorded in the prior quarter, and a 3% decrease from the same quarter of last year.

Logo for Maxim Integrated Products Inc.

Tunc Doluca, President and Chief Executive Officer, commented, "In our June quarter, we surpassed the $100 million dollar quarterly revenue mark in Automotive, and the business grew 30% over the same quarter last year. Through solid execution on our manufacturing transformation, we achieved 64% gross margin and met a key milestone by exceeding 30% operating margin in the quarter." Mr. Doluca continued, "We are confident in our ability to continue improving profitability, drive free cash flow growth, and maintain leadership in the return of cash to shareholders.  As a result, we announced a 10% increase in our dividend."

Fiscal Year 2016 Fourth Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the June quarter was a $0.32 profit. The results were affected by pre-tax special items which primarily consisted of $42 million in charges related to acquisitions, and $14 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.49. 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 fourth quarter of fiscal 2016, total cash, cash equivalents and short term investments were $2.23 billion, an increase of $370 million from the prior quarter. Notable items included:

  • Cash flow from operations: $254 million
  • Proceeds from term loan: $250 million
  • Capital expenditures: $22 million
  • Proceeds from asset sales: $35 million
  • Dividends: $85 million ($0.30 per share)
  • Stock repurchases: $90 million

Business Outlook
The Company's 90-day backlog at the beginning of the September 2016 quarter was $363 million. Based on the beginning backlog and expected turns, results for the September 2016 quarter are expected to be as follows:

  • Revenue: $540 million to $580 million
  • Gross Margin: 61% to 63% GAAP (63% to 65% excluding special items)
  • EPS: $0.40 to $0.46 GAAP ($0.44 to $0.50 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 September 1, 2016, to stockholders of record on August 18, 2016. This represents a 10% increase in the dividend compared to the prior quarter.

Conference Call
Maxim Integrated has scheduled a conference call on July 21 at 2:00 p.m. Pacific Time to discuss its financial results for the fourth quarter of fiscal 2016 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.














CONSOLIDATED STATEMENTS OF INCOME



(Unaudited)




Three Months Ended


Year Ended




June 25,


March 26,


June 27,


June 25,


June 27,




2016


2016


2015


2016


2015




(in thousands, except per share data)



Net revenues

$      566,126


$      555,252


$      582,517


$       2,194,719


$       2,306,864



Cost of goods sold (1) (2)

219,099


236,411


278,816


950,331


1,034,997



Gross margin

347,027


318,841


303,701


1,244,388


1,271,867



Operating expenses:












Research and development 

113,491


119,178


121,552


467,161


521,772



Selling, general and administrative 

71,483


71,778


72,532


288,899


308,065



Intangible asset amortization 

2,538


2,538


3,618


12,205


16,077



Impairment of long-lived assets (3)

429


506


549


160,582


67,042



Impairment of goodwill and intangible assets

27,602


-


-


27,602


93,010



Severance and restructuring expenses 

4,149


2,552


12,798


24,479


30,642



Other operating expenses (income), net (4)

4,962


(55,419)


(2,296)


(50,389)


(2,021)



Total operating expenses (income), net

224,654


141,133


208,753


930,539


1,034,587



Operating income (loss)

122,373


177,708


94,948


313,849


237,280



Interest and other income (expense), net (5)

(6,427)


(6,373)


28,500


(28,795)


8,890



Income (loss) before provision for income taxes

115,946


171,335


123,448


285,054


246,170



Income tax provision (benefit)

23,607


31,525


24,789


57,579


40,132



Net income (loss)

$        92,339


$      139,810


$        98,659


$          227,475


$          206,038















Earnings (loss) per share:












Basic

$            0.32


$            0.49


$            0.35


$                0.80


$                0.73



Diluted

$            0.32


$            0.48


$            0.34


$                0.79


$                0.71















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












Basic

284,354


285,854


284,202


285,081


283,675



Diluted 

288,544


289,783


289,346


289,479


288,949















Dividends paid per share 

$            0.30


$            0.30


$            0.28


$                1.20


$                1.12



























SCHEDULE OF SPECIAL ITEMS



(Unaudited)




Three Months Ended


Year Ended




June 25,


March 26,


June 27,


June 25,


June 27,




2016


2016


2015


2016


2015




(in thousands)



Cost of goods sold:












Intangible asset amortization 

$        11,829


$        11,829


$        18,116


$            55,030


$            74,366



Accelerated depreciation (1)

4,098


4,066


32,765


53,827


51,494



Other cost of goods sold (2)

-


6,123


-


6,123


-



 Total 

$        15,927


$        22,018


$        50,881


$          114,980


$          125,860















 Operating expenses: 












Intangible asset amortization

$          2,538


$          2,538


$          3,618


$            12,205


$            16,077



Impairment of long-lived assets (3)

429


506


549


160,582


67,042



Impairment of goodwill and intangible assets 

27,602


-


-


27,602


93,010



Servance and restructuring

4,149


2,552


12,798


24,479


30,642



Other operating expenses (income), net (4)

4,962


(55,419)


(2,296)


(50,389)


(2,021)



 Total 

$        39,680


$      (49,823)


$        14,669


$          174,479


$          204,750















 Interest and other expense (income), net (5) 

$           (247)


$             (45)


$      (35,849)


$                 194


$          (36,066)



 Total 

$           (247)


$             (45)


$      (35,849)


$                 194


$          (36,066)















Income tax provision (benefit)












 Reversal of tax reserves (6) 

$                  -


$                  -


$                  -


$                     -


$          (21,747)



 Fiscal year 2015 & 2014 research & development tax credits 

-


-


-


(2,475)


(2,863)



 Total 

$                -


$                -


$                -


$            (2,475)


$          (24,610)



























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



(2) Includes expense related to patent license settlement.



(3) Includes impairment charges relating to the San Antonio wafer manufacturing facility and other wafer manufacturing equipment, end of line test equipment, and software.



(4) Includes gain on sale of energy metering business during the third quarter of fiscal year 2016, loss (gain) relating to sale of assets, and expected loss on lease abandonment.



(5) Includes sale of a business and impairment of investment in privately-held companies.



(6) Reversal of tax reserves related to the favorable settlement of a foreign tax issue.





 

 








CONSOLIDATED  BALANCE SHEETS


(Unaudited)



June 25,


March 26,


June 27,



2016


2016


2015



(in thousands) 


ASSETS


Current assets:







Cash and cash equivalents

$        2,105,229


$        1,710,340


$        1,550,965


Short-term investments

125,439


150,076


75,154


Total cash, cash equivalents and short-term investments

2,230,668


1,860,416


1,626,119


Accounts receivable, net 

256,531


278,502


278,844


Inventories

227,929


234,603


288,474


Deferred tax assets

-


-


77,306


Other current assets

91,920


80,792


48,660


Total current assets

2,807,048


2,454,313


2,319,403


Property, plant and equipment, net

692,551


748,781


1,090,739


Intangible assets, net

146,540


188,510


261,652


Goodwill

490,648


490,648


511,647


Other assets

84,100


74,972


24,422


Assets held for sale

13,729


13,733


8,208


       TOTAL ASSETS

$        4,234,616


$        3,970,957


$        4,216,071









LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:







Accounts payable 

$             82,535


$             82,696


$             88,322


Income taxes payable

21,153


30,907


34,779


Accrued salary and related expenses

166,698


151,411


181,360


Accrued expenses 

50,521


42,562


47,365


Deferred income on shipments to distributors

38,779


34,457


30,327


Short term debt

249,717


-


1,024


Total current liabilities

609,403


342,033


383,177


Long-term debt

990,090


989,489


987,687


Income taxes payable

480,645


451,099


410,378


Deferred tax liabilities

756


643


90,588


Other liabilities

45,908


48,930


54,221


Total liabilities 

2,126,802


1,832,194


1,926,051









Stockholders' equity:







Common stock

284


280


283


Additional paid-in capital 

-


-


27,859


Retained earnings 

2,121,749


2,154,767


2,279,112


Accumulated other comprehensive loss

(14,219)


(16,284)


(17,234)


Total stockholders' equity

2,107,814


2,138,763


2,290,020


        TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$        4,234,616


$        3,970,957


$        4,216,071









 


CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)




Three Months Ended


Year Ended




June 25,


March 26,


June 27,


June 25,


June 27,




2016


2016


2015


2016


2015




(in thousands)



Cash flows from operating activities: 












Net income (loss)

$           92,339


$         139,810


$           98,659


$         227,475


$         206,038



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












Stock-based compensation

16,444


17,875


17,709


69,701


79,491



Depreciation and amortization

46,414


47,088


92,639


244,637


299,396



Deferred taxes

(13,510)


(333)


(32,207)


(48,138)


(72,507)



In-process research and development written-off

27,602


-


-


27,602


8,900



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

5,048


3,098


(1,228)


2,283


419



Tax benefit (shortfall) related to stock-based compensation

3,657


545


(861)


7,375


8,155



Excess tax benefit from stock-based compensation

(1,890)


(1,491)


(2,372)


(9,550)


(12,549)



Impairment of long-lived assets

-


506


517


160,153


67,010



Impairment of goodwill and intangible assets

-


-


-


-


84,110



Impairment of investments in privately-held companies

-


-


94


-


94



Loss (gain) on sale of business

-


(58,944)


(35,849)


(58,944)


(35,849)



Changes in assets and liabilities: 












Accounts receivable 

21,971


(47,322)


(417)


22,313


16,984



Inventories 

7,657


22,785


10,105


44,086


2,163



Other current assets 

8,012


(8,947)


15,338


2,943


(8,783)



Accounts payable 

5,076


8,683


2,874


(3,676)


(4,201)



Income taxes payable 

19,792


29,597


39,217


56,641


62,350



Deferred revenue on shipments to distributors 

4,322


2,390


(223)


8,452


4,593



All other accrued liabilities 

11,137


12,646


17,793


(31,468)


(12,110)



Net cash provided by (used in) operating activities 

254,071


167,986


221,788


721,885


693,704















Cash flows from investing activities: 












Payments for property, plant and equipment

(22,488)


(17,530)


(15,360)


(69,369)


(75,816)



Proceeds from sales of property, plant and equipment

34,691


136


2,741


85,142


29,035



Proceeds from sale of business

-


105,000


35,550


105,000


35,550



Purchases of available-for-sale securities

(25,000)


(24,861)


-


(99,948)


(25,142)



Purchases of privately-held companies securities

(1,554)


(1,921)


-


(10,483)


(200)



Proceeds from maturity of available-for-sale securities

50,000


-


-


50,000


-



Proceeds from sales of investments of privately-held companies

-


-


-


-


500



Other investing activities

-


-


-


2,380


-



Net cash provided by (used in) investing activities 

35,649


60,824


22,931


62,722


(36,073)















Cash flows from financing activities: 












Excess tax benefit from stock-based compensation

1,890


1,491


2,372


9,550


12,549



Repayment of notes payable

-


-


-


-


(437)



Issuance of debt

249,717


-


-


249,717


-



Net issuance of restricted stock units

(2,687)


(8,853)


(7,428)


(24,084)


(30,657)



Proceeds from stock options exercised

12,272


9,889


12,328


79,608


61,453



Issuance of common stock under employee stock purchase program

19,625


-


22,298


33,975


40,951



Repurchase of common stock

(90,438)


(83,801)


(35,963)


(237,086)


(195,088)



Dividends paid

(85,210)


(85,714)


(79,558)


(342,023)


(317,909)



Net cash provided by (used in) financing activities 

105,169


(166,988)


(85,951)


(230,343)


(429,138)















Net increase (decrease) in cash and cash equivalents 

394,889


61,822


158,768


554,264


228,493



Cash and cash equivalents: 












Beginning of period

1,710,340


1,648,518


1,392,197


1,550,965


1,322,472



End of period

$      2,105,229


$      1,710,340


$      1,550,965


$      2,105,229


$      1,550,965















Total cash, cash equivalents and short-term investments

$      2,230,668


$      1,860,416


$      1,626,119


$      2,230,668


$      1,626,119














 















ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES



(Unaudited)





Three Months Ended


Year Ended





June 25,


March 26,


June 27,


June 25,


June 27,





2016


2016


2015


2016


2015





(in thousands, except per share data)



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













GAAP gross profit


$           347,027


$              318,841


$           303,701


$     1,244,388


$     1,271,867



GAAP gross profit %


61.3%


57.4%


52.1%


56.7%


55.1%
















Special items:













Intangible asset amortization


11,829


11,829


18,116


55,030


74,366



Accelerated depreciation (1)


4,098


4,066


32,765


53,827


51,494



Other cost of goods sold (2)


-


6,123


-


6,123


-



 Total special items 


15,927


22,018


50,881


114,980


125,860



 GAAP gross profit excluding special items 


$           362,954


$              340,859


$           354,582


$     1,359,368


$     1,397,727



 GAAP gross profit % excluding special items 


64.1%


61.4%


60.9%


61.9%


60.6%
















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













GAAP operating expenses


$           224,654


$              141,133


$           208,753


$        930,539


$     1,034,587
















Special items:













Intangible asset amortization 


2,538


2,538


3,618


12,205


16,077



Impairment of long-lived assets (3)


429


506


549


160,582


67,042



Impairment of goodwill and intangible assets 


27,602


-


-


27,602


93,010



 Severance and restructuring  


4,149


2,552


12,798


24,479


30,642



 Other operating expenses (income), net (4) 


4,962


(55,419)


(2,296)


(50,389)


(2,021)



 Total special items 


39,680


(49,823)


14,669


174,479


204,750



 GAAP operating expenses excluding special items 


$           184,974


$              190,956


$           194,084


$        756,060


$        829,837
















Reconciliation of GAAP net income to GAAP net income excluding special items:













GAAP net income (loss)


$             92,339


$              139,810


$             98,659


$        227,475


$        206,038
















Special items:













Intangible asset amortization 


14,367


14,367


21,734


67,235


90,443



Accelerated depreciation (1)


4,098


4,066


32,765


53,827


51,494



Other cost of goods sold (2)


-


6,123


-


6,123


-



Impairment of long-lived assets (3)


429


506


549


160,582


67,042



Impairment of goodwill and intangible assets 


27,602


-


-


27,602


93,010



Severance and restructuring


4,149


2,552


12,798


24,479


30,642



Other operating expenses (income), net (4)


4,962


(55,419)


(2,296)


(50,389)


(2,021)



Interest and other expense (income), net (5)


(247)


(45)


(35,849)


194


(36,066)



 Pre-tax total special items 


55,360


(27,850)


29,701


289,653


294,544



 Reversal of tax reserves (6) 


-


-


-


-


(21,747)



 Fiscal year 2015 & 2014 research & development tax credits 


-


-


-


(2,475)


(2,863)



 Other income tax effects and adjustments (7) 


(7,228)


5,698


(4,267)


(43,392)


(35,333)



 GAAP net income excluding special items 


$           140,471


$              117,658


$           124,093


$        471,261


$        440,639
















 GAAP net income per share excluding special items: 













Basic 


$             0.49


$                0.41


$             0.44


$          1.65


$          1.55



Diluted 


$             0.49


$                0.41


$             0.43


$          1.63


$          1.52
















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













Basic


284,354


285,854


284,202


285,081


283,675



Diluted 


288,544


289,783


289,346


289,479


288,949
















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



(2) Includes expense related to patent license settlement.



(3) Includes impairment charges relating to the San Antonio wafer manufacturing facility and other wafer manufacturing equipment, end of line test equipment, and software.



(4) Includes gain on sale of energy metering business during the third quarter of fiscal year 2016, loss (gain) relating to sale of assets, and expected loss on lease abandonment.



(5) Includes sale of a business and impairment of investment in privately-held companies.



(6) Reversal of tax reserves related to the favorable settlement of a foreign tax issue.



(7) 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; other costs of goods sold; impairment of long-lived assets; impairment of goodwill and other intangible assets; severance and restructuring; and other operating expenses (income), net; fiscal year 2015 and 2014 research & development tax credits, 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, 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; impairment of goodwill and other 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; other costs of goods sold; impairment of long-lived assets; impairment of goodwill and other intangible assets; severance and restructuring; and other operating expenses (income), net; fiscal year 2015 and 2014 research & development tax credits; 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 first quarter of fiscal 2017 ending in September 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 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 27, 2015 (the "10-K") and Quarterly Reports on Form 10-Q filed after the 10-K. The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331615000029/maxim10-kfy2015.htm.

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

About Maxim Integrated
Maxim is bringing new levels of analog integration to automotive, cloud data center, mobile consumer, and industrial applications. We're making technology smaller, smarter, and more energy efficient, so that our customers can meet the demands of an integrated world. Learn more at http://www.maximintegrated.com.

Contact
Kathy Ta
Managing Director, 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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