Investor Relations

Maxim Integrated Reports Results For The Fourth Quarter Of Fiscal 2017, Increases Dividend By 9%

July 20, 2017

- Revenue: $602 million
- Gross Margin: 65.4% GAAP (67.2% excluding special items)
- EPS: $0.57 GAAP ($0.63 excluding special items)
- Cash, cash equivalents, and short term investments: $2.74 billion
- Fiscal first quarter revenue outlook: $555 to $595 million
- Quarterly dividend increased 9% to $0.36 per share
- New share repurchase authorization: $1 billion

SAN JOSE, Calif., July 20, 2017 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $602 million for its fourth quarter of fiscal 2017 ended June 24, 2017, a 4% increase from the $581 million revenue recorded in the prior quarter, and a 6% 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, "The June quarter marked the third consecutive quarter in our return to year-over-year growth, led by double-digit increases in Industrial and Automotive. Through solid execution in our manufacturing strategy, we exceeded our profitability targets and demonstrated strong earnings power and cash flow growth." Mr. Doluca continued, "Today, we are announcing a 9% increase in our dividend, reflecting our continued commitment to return cash to shareholders and confidence in our long-term outlook."

Fiscal Year 2017 Fourth Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the June quarter was $0.57. The results were affected by pre-tax special items which primarily consisted of $13 million in charges related to acquisitions and $3 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.63. 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 2017, total cash, cash equivalents and short term investments were $2.74 billion, an increase of $589 million from the prior quarter.

Notable items included:

  • Cash flow from operations: $237 million
  • Gross capital expenditures: $13 million
  • Bond offering: $496 million
  • Dividends: $93 million ($0.33 per share)
  • Stock repurchases: $76 million

Business Outlook
The Company's 90-day backlog at the beginning of the September 2017 quarter was $389 million. Based on the beginning backlog and expected turns, our results for the September 2017 quarter are forecasted to be as follows:

  • Revenue: $555 to $595 million
  • Gross Margin: 63% to 66% GAAP (65% to 68% excluding special items)
  • EPS: $0.48 to $0.54 GAAP ($0.52 to $0.58 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 and Share Repurchase
Our Board of Directors approved a 9% increase in the quarterly dividend and a new share repurchase authorization of $1 billion. A cash dividend of $0.36 per share will be paid on September 14, 2017, to stockholders of record on August 31, 2017.

Conference Call
Maxim Integrated has scheduled a conference call on July 20 at 2:00 p.m. Pacific Time to discuss its financial results for the fourth quarter of fiscal 2017 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


Year Ended




June 24,


March 25, 


June 25,


June 24,


June 25,




2017


2017


2016


2017


2016




(in thousands, except per share data)



Net revenues

$     602,005


$      581,216


$    566,126


$     2,295,615


$    2,194,719



Cost of goods sold (1) (2)

208,339


214,312


219,099


849,135


950,331



Gross margin

393,666


366,904


347,027


1,446,480


1,244,388



Operating expenses:












Research and development

114,011


113,163


113,491


453,977


467,161



Selling, general and administrative

75,129


73,987


71,483


291,511


288,899



Intangible asset amortization

2,050


2,348


2,538


9,189


12,205



Impairment of long-lived assets (3)


1,000


429


7,517


160,582



Impairment of goodwill and intangible assets



27,602



27,602



Severance and restructuring expenses 

1,175


450


4,149


12,453


24,479



Other operating expenses (income), net (4)

1,923


1,704


4,962


(22,944)


(50,389)



Total operating expenses (income), net

194,288


192,652


224,654


751,703


930,539



Operating income (loss)

199,378


174,252


122,373


694,777


313,849



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

(3,798)


(3,884)


(6,427)


(15,188)


(28,795)



Income (loss) before provision for income taxes 

195,580


170,368


115,946


679,589


285,054



Income tax provision (benefit)

32,271


30,155


23,607


107,976


57,579



Net income (loss)

$     163,309


$      140,213


$      92,339


$        571,613


$       227,475



























Earnings (loss) per share:












Basic

$           0.58


$            0.50


$          0.32


$              2.02


$             0.80



Diluted

$           0.57


$            0.49


$          0.32


$              1.98


$             0.79















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












Basic

282,747


282,903


285,354


283,147


285,081



Diluted

287,494


287,882


288,544


287,974


289,479















Dividends paid per share

$           0.33


$            0.33


$          0.30


$              1.32


$             1.20



























SCHEDULE OF SPECIAL ITEMS



(Unaudited)



Three Months Ended


Year Ended




June 24,


March 25, 


June 25,


June 24,


June 25,




2017


2017


2016


2017


2016




(in thousands)



Cost of goods sold:












Intangible asset amortization 

$       11,064


$        11,064


$      11,829


$          46,485


$        55,030



Accelerated depreciation (1)


1,103


4,098


3,459


53,827



Other cost of goods sold (2)





6,123



  Total 

$       11,064


$        12,167


$      15,927


$          49,944


$       114,980















 Operating expenses: 












Intangible asset amortization

$         2,050


$          2,348


$        2,538


$            9,189


$12,205



Impairment of long-lived assets (3)


1,000


429


7,517


160,582



Impairment of goodwill and intangible assets 



27,602



27,602



Severance and restructuring

1,175


450


4,149


12,453


24,479



Other operating expenses (income), net (4)

1,923


1,704


4,962


(22,944)


(50,389)



  Total 

$         5,148


$          5,502


$      39,680


$            6,215


$       174,479



























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

$            (90)


$             (48)


$          (247)


$          (5,661)


$              194



 Total 

$            (90)


$             (48)


$          (247)


$          (5,661)


$              194















 Income tax provision (benefit) 












Fiscal year 2015 & 2014 research & development tax credits





(2,475)



 Total 

$               -


$               -


$              -


$                 -


$         (2,475)















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


(2) Includes expense related to a patent license settlement.





(3) Includes impairment of investments in privately-held companies and other equipment impairment charges relating to the San Antonio wafer manufacturing facility.


(4) Includes gain on sale of micro-electromechanical systems (MEMS) business line during the first quarter of fiscal year 2017, 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 gain on sale of shares received for the sale of the wafer manufacturing facility in San Antonio, Texas.



 










CONSOLIDATED  BALANCE SHEETS



(Unaudited)




June 24,


March 25, 


June 25,




2017


2017


2016




(in thousands) 



ASSETS



Current assets:








Cash and cash equivalents

$2,246,121


$1,656,727


$2,105,229



Short-term investments

498,718


499,154


125,439



Total cash, cash equivalents and short-term investments

2,744,839


2,155,881


2,230,668



Accounts receivable, net

256,454


257,592


256,531



Inventories

247,242


241,439


227,929



Other current assets

57,059


60,195


91,920



Total current assets

3,305,594


2,715,107


2,807,048



Property, plant and equipment, net

606,581


636,835


692,551



Intangible assets, net

90,867


103,981


146,540



Goodwill

491,015


491,015


490,648



Other assets

72,974


69,689


84,100



Assets held for sale

3,202


1,156


13,729



TOTAL ASSETS

$4,570,233


$4,017,783


$4,234,616











LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:








Accounts payable

$     77,373


$     82,938


$     82,535



Income taxes payable

3,688


4,538


21,153



Accrued salary and related expenses

145,299


135,702


166,698



Accrued expenses

37,663


35,208


50,521



Deferred revenue on shipments to distributors

14,974


35,724


38,779



Short term debt



249,717



Total current liabilities

278,997


294,110


609,403



Long-term debt

1,487,678


991,877


990,090



Income taxes payable

557,498


534,028


480,645



Other liabilities

43,366


37,459


46,664



Total liabilities

2,367,539


1,857,474


2,126,802



Stockholders' equity:








Common stock and capital in excess of par value

283


284


284



Retained earnings

2,212,301


2,169,760


2,121,749



Accumulated other comprehensive loss

(9,890)


(9,735)


(14,219)



Total stockholders' equity

2,202,694


2,160,309


2,107,814



        TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$4,570,233


$4,017,783


$4,234,616










 


CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)




Three Months Ended


Year Ended




June 24,


March 25, 


June 25,


June 24,


June 25,




2017


2017


2016


2017


2016




(in thousands)



Cash flows from operating activities:












Net income (loss)

$       163,309


$       140,213


$         92,339


$       571,613


$       227,475



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












Stock-based compensation

17,624


18,300


16,444


71,117


69,701



Depreciation and amortization

38,194


40,473


46,414


164,292


244,637



Deferred taxes

1,697


(16,967)


(13,510)


(7,895)


(48,138)



In Process Research & Development written-off



27,602



27,602



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

7,006


4,809


5,048


16,365


2,283



Loss (gain) on sale of business




(26,620)


(58,944)



Tax benefit (shortfall) related to stock-based compensation 



3,657



7,375



Impairment of long-lived assets

665




1,462


160,153



Impairment of investments in privately-held companies


1,000



6,720




Excess tax benefit from stock-based compensation



(1,890)



(9,550)



Changes in assets and liabilities:












Accounts receivable

1,138


(33,249)


21,971


78


22,313



Inventories

(5,715)


(5,505)


7,657


(21,215)


44,086



Other current assets

(727)


16,862


8,012


(3,547)


2,943



Accounts payable

(5,235)


11,887


5,076


(6,205)


(3,676)



Income taxes payable

22,619


20,931


19,792


60,798


56,641



Deferred revenue on shipments to distributors

(20,751)


(412)


4,322


(23,805)


8,452



Accrued salary and related expenses

9,597


26,227



(21,399)




All other accrued liabilities

7,507


(3,872)


11,137


(8,102)


(31,468)



Net cash provided by (used in) operating activities

236,928


220,697


254,071


773,657


721,885



Cash flows from investing activities:












Purchase of property, plant and equipment

(13,050)


(8,286)


(22,488)


(51,421)


(69,369)



Proceeds from sales of property, plant and equipment

7,576


787


34,691


10,792


85,142



Proceeds from sale of available-for-sale securities




50,994




Proceeds from maturity of available-for-sale securities

50,000



50,000


75,000


50,000



Proceeds from sale of business




42,199


105,000



Purchases of available-for-sale securities

(49,891)


(99,398)


(25,000)


(450,135)


(99,948)



Purchases of privately-held companies' securities


(162)


(1,554)


(2,825)


(10,483)



Proceeds from other investing activities





2,380



Net cash provided by (used in) investing activities

(5,365)


(107,059)


35,649


(325,396)


62,722



Cash flows from financing activities:












Excess tax benefit from stock-based compensation 



1,890



9,550



Repayment of notes payable




(250,000)




Issuance of debt

500,000



250,000


500,000


250,000



Debt issuance cost

(3,688)



(283)


(3,688)


(283)



Net issuance of restricted stock units

(7,471)


(8,268)


(2,687)


(25,183)


(24,084)



Proceeds from stock options exercised

18,434


17,502


12,272


63,003


79,608



Issuance of common stock under employee stock purchase program

19,805


(3,194)


19,625


34,269


33,975



Repurchase of common stock

(75,853)


(56,999)


(90,438)


(251,799)


(237,086)



Dividends paid

(93,396)


(93,387)


(85,210)


(373,971)


(342,023)



Net cash provided by (used in) financing activities

357,831


(144,346)


105,169


(307,369)


(230,343)



Net increase (decrease) in cash and cash equivalents

589,394


(30,708)


394,889


140,892


554,264



Cash and cash equivalents:












Beginning of period

1,656,727


1,687,435


1,710,340


2,105,229


1,550,965



End of period

$    2,246,121


$    1,656,727


$    2,105,229


$    2,246,121


$    2,105,229















Total cash, cash equivalents, and short-term investments

$    2,744,839


$    2,155,881


$    2,230,668


$    2,744,839


$    2,230,668


























 














ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES



(Unaudited)




Three Months Ended


Year Ended




June 24,


March 25, 


June 25,


June 24,


June 25,




2017


2017


2016


2017


2016




(in thousands, except per share data)



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












GAAP gross profit

$      393,666


$      366,904


$      347,027


$     1,446,480


$     1,244,388



GAAP gross profit %

65.4%


63.1%


61.3%


63.0%


56.7%















Special items:












Intangible asset amortization 

11,064


11,064


11,829


46,485


55,030



Accelerated depreciation (1)


1,103


4,098


3,459


53,827



Other cost of goods sold (2)





6,123



 Total special items 

11,064


12,167


15,927


49,944


114,980



  GAAP gross profit excluding special items 

$      404,730


$      379,071


$      362,954


$     1,496,424


$     1,359,368



  GAAP gross profit % excluding special items 

67.2%


65.2%


64.1%


65.2%


61.9%















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












GAAP operating expenses

$      194,288


$      192,652


$      224,654


$        751,703


$        930,539















Special items:












Intangible asset amortization

2,050


2,348


2,538


9,189


12,205



Impairment of long-lived assets (3)


1,000


429


7,517


160,582



Impairment of goodwill and intangible assets 



27,602



27,602



Severance and restructuring 

1,175


450


4,149


12,453


24,479



Other operating expenses (income), net (4)

1,923


1,704


4,962


(22,944)


(50,389)



  Total special items 

5,148


5,502


39,680


6,215


174,479



  GAAP operating expenses excluding special items 

$      189,140


$      187,150


$      184,974


$        745,488


$        756,060















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












GAAP net income (loss)

$      163,309


$      140,213


$        92,339


$        571,613


$        227,475















Special items:












Intangible asset amortization 

13,114


13,412


14,367


55,674


67,235



Accelerated depreciation (1)


1,103


4,098


3,459


53,827



Other cost of goods sold (2)





6,123



Impairment of long-lived assets (3)


1,000


429


7,517


160,582



Impairment of goodwill and intangible assets



27,602



27,602



Severance and restructuring 

1,175


450


4,149


12,453


24,479



Other operating expenses (income), net (4)

1,923


1,704


4,962


(22,944)


(50,389)



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

(90)


(48)


(247)


(5,661)


194



  Pre-tax total special items 

16,122


17,621


55,360


50,498


289,653



  Fiscal year 2015 & 2014 research & development tax credits  





(2,475)



Other income tax effects and adjustments (6)

499


1,957


(7,228)


(11,465)


(43,392)



 GAAP net income excluding special items 

$      179,930


$      159,791


$      140,471


$        610,646


$        471,261















 GAAP net income per share excluding special items: 












Basic

$            0.64


$            0.56


$            0.49


$              2.16


$              1.65



Diluted

$            0.63


$            0.56


$            0.49


$              2.12


$              1.63















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












Basic

282,747


282,903


285,354


283,147


285,081



Diluted

287,494


287,882


288,544


287,974


289,479















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


(2) Includes expense related to a patent license settlement.





(3) Includes impairment of investments in privately-held companies and other equipment impairment charges relating to the San Antonio wafer manufacturing facility.


(4) Includes gain on sale of micro-electromechanical systems (MEMS) business line during the first quarter of fiscal year 2017, 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 gain on sale of shares received for the sale of the wafer manufacturing facility in San Antonio, Texas.


(6) 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; other operating expenses (income), net; interest and other expense (income), net; fiscal year 2016 research and 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 and eliminates the effects of significant non-recurring and period specific tax items which vary in size and frequency. In the first and second quarter of fiscal year 2017, we used a long-term tax rate of 18%, 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 2017. 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. Starting in the third quarter of fiscal year 2017, we transitioned to a long-term tax rate of 15%, which reflects the impact of changes in our manufacturing structure and focused research and development expenditures, resulting in improved projections for fiscal year 2017 and future periods.

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; other operating expenses (income), net; interest and other expense (income), net; fiscal year 2016 research and 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 2018 ending in September 2017, which includes revenue, gross margin and earnings per share. 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 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
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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