Investor Relations

Maxim Integrated Reports Results For The Second Quarter Of Fiscal 2017

January 26, 2017

- Revenue: $551 million
- Gross Margin: 61.7% GAAP (64.1% excluding special items)
- EPS: $0.45 GAAP profit ($0.46 profit excluding special items)
- Cash, cash equivalents, and short term investments: $2.09 billion
- Fiscal third quarter revenue outlook: $555 million to $595 million

SAN JOSE, Calif., Jan. 26, 2017 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $551 million for its second quarter of fiscal 2017 ended December 24, 2016, a 2% decrease from the $561 million revenue recorded in the prior quarter, and an 8% increase from the same quarter of last year.

Tunc Doluca, President and Chief Executive Officer, commented, "Our December quarter marked the beginning of our return to revenue growth, as Automotive, Core Industrial and diversification in Consumer all contributed gains from the same quarter last year." Mr. Doluca continued, "In the March quarter, we expect to build upon our growth momentum in our Automotive and Industrial businesses."

Fiscal Year 2017 Second Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the December quarter was $0.45. The results were affected by pre-tax special items which primarily consisted of $14 million in charges related to acquisitions, a $5 million gain on the sale of available-for-sale securities, and $4 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.46. 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 second quarter of fiscal 2017, total cash, cash equivalents and short term investments were $2.09 billion, a decrease of $181 million from the prior quarter.

Notable items included:

  • Cash flow from operations: $193 million
  • Proceeds related to the sale of a manufacturing facility: $26.5 million
  • Repayment of short-term loan: $250 million
  • Gross capital expenditures: $16 million
  • Dividends: $94 million ($0.33 per share)
  • Stock repurchases: $61 million

Business Outlook
The Company's 90-day backlog at the beginning of the March 2017 quarter was $388 million. Based on the beginning backlog and expected turns, results for the March 2017 quarter are expected to be as follows:

  • Revenue: $555 million to $595 million
  • Gross Margin: 61% to 63% GAAP (63% to 65% excluding special items)
  • EPS: $0.43 to $0.49 GAAP ($0.49 to $0.55 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 March 16, 2017, to stockholders of record on March 2, 2017.

Conference Call
Maxim Integrated has scheduled a conference call on January 26 at 2:00 p.m. Pacific Time to discuss its financial results for the second quarter of fiscal 2017 and its business outlook. To listen via telephone, dial (844) 512-3769 (toll free) or (478) 219-0890. 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




December 24, 


September 24, 


December 26, 




2016


2016


2015




(in thousands, except per share data)



Net revenues

$              550,998


$               561,396


$              510,831



Cost of goods sold (1)

210,820


215,664


218,662



Gross margin

340,178


345,732


292,169



Operating expenses:








Research and development

114,057


112,746


113,100



Selling, general and administrative

71,543


70,852


73,643



Intangible asset amortization

2,348


2,443


3,538



Impairment of long-lived assets (2)

383


6,134


1,950



Severance and restructuring expenses 

864


9,965


10,652



Other operating expenses (income), net (3)

1,909


(28,481)


(247)



Total operating expenses (income), net

191,104


173,659


202,636



Operating income (loss)

149,074


172,073


89,533



Interest and other income (expense), net (4)

(636)


(6,870)


(9,593)



Income (loss) before provision for income taxes 

148,438


165,203


79,940



Income tax provision (benefit)

17,961


27,589


12,471



Net income (loss)

$              130,477


$               137,614


$                67,469



















Earnings (loss) per share:








Basic

$                    0.46


$                     0.49


$                    0.24



Diluted

$                    0.45


$                     0.48


$                    0.23











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








Basic

283,294


283,633


285,526



Diluted

288,106


288,574


290,521











Dividends paid per share

$                    0.33


$                     0.33


$                    0.30



















SCHEDULE OF SPECIAL ITEMS



(Unaudited)




Three Months Ended




December 24, 


September 24, 


December 26, 




2016


2016


2015




(in thousands)



Cost of goods sold:








Intangible asset amortization 

$                11,755


$                 12,602


$                14,734



Accelerated depreciation (1)

1,178


1,178


2,032



  Total 

$                12,933


$                 13,780


$                16,766











 Operating expenses: 








Intangible asset amortization

$2,348


$2,443


$3,538



Impairment of long-lived assets (2)

383


6,134


1,950



Severance and restructuring

864


9,965


10,652



Other operating expenses (income), net (3)

1,909


(28,481)


(247)



  Total 

$                  5,504


$                  (9,939)


$                15,893



















Interest and other expense (income), net (4)

$                 (5,052)


$                     (471)


$                     595



 Total 

$                 (5,052)


$                     (471)


$                     595











(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 gain on sale of shares received for the sale of the wafer manufacturing facility in San Antonio, Texas.





 










CONSOLIDATED  BALANCE SHEETS



(Unaudited)




December 24, 


September 24, 


December 26, 




2016


2016


2015




(in thousands) 



ASSETS



Current assets:








Cash and cash equivalents

$ 1,687,435


$  2,092,073


$ 1,648,518



Short-term investments

399,461


175,441


124,955



Total cash, cash equivalents and short-term investments

2,086,896


2,267,514


1,773,473



Accounts receivable, net

224,342


253,518


231,180



Inventories

236,040


223,484


274,741



Other current assets

75,284


89,398


47,235



Total current assets

2,622,562


2,833,914


2,326,629



Property, plant and equipment, net

660,660


678,447


770,548



Intangible assets, net

117,393


131,496


202,877



Goodwill

491,015


491,015


490,648



Other assets

55,188


54,890


64,105



Assets held for sale

1,156


2,854


82,674



TOTAL ASSETS

$ 3,947,974


$  4,192,616


$ 3,937,481











LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:








Accounts payable

$      70,505


$       83,589


$      74,145



Income taxes payable

3,138


3,138


32,528



Accrued salary and related expenses

109,475


111,126


129,208



Accrued expenses

41,418


48,572


47,303



Deferred revenue on shipments to distributors

36,137


35,754


32,067



Current portion of debt


249,788




Total current liabilities

260,673


531,967


315,251



Long-term debt

991,281


990,685


1,000,000



Income taxes payable

514,498


497,360


419,881



Other liabilities

37,331


37,368


53,525



Total liabilities

1,803,783


2,057,380


1,788,657



Stockholders' equity:








Common stock and capital in excess of par value

284


284


63,014



Retained earnings

2,155,698


2,141,326


2,103,339



Accumulated other comprehensive loss

(11,791)


(6,374)


(17,529)



Total stockholders' equity

2,144,191


2,135,236


2,148,824



        TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$ 3,947,974


$  4,192,616


$ 3,937,481










 


CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)




Three Months Ended




December 24, 


September 24, 


December 26, 




2016


2016


2015




(in thousands)



Cash flows from operating activities:








Net income (loss)

$    130,477


$     137,614


$      67,469



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








Stock-based compensation

18,073


17,120


18,419



Depreciation and amortization

42,140


43,485


49,082



Deferred taxes

(7,520)


14,895


18,816



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

3,898


652


(4,517)



Loss (gain) on sale of business


(26,620)




Tax benefit (shortfall) related to stock-based compensation 



1,980



Impairment of long-lived assets

383


414


1,950



Impairment of investements in privately-held companies


5,720




Excess tax benefit from stock-based compensation



(3,920)



Changes in assets and liabilities:








Accounts receivable

29,176


3,013


51,291



Inventories

(12,512)


2,517


15,811



Other current assets

(7,583)


(12,099)


(918)



Accounts payable

(11,999)


(858)


(7,659)



Income taxes payable

17,138


110


(26,875)



Deferred revenue on shipments to distributors

383


(3,025)


(3,024)



Accrued salary and related expenses

(1,651)


(55,572)


8,566



All other accrued liabilities

(7,773)


(3,964)


(3,982)



Net cash provided by (used in) operating activities

192,630


123,402


182,489



Cash flows from investing activities:








Purchase of property, plant and equipment

(15,775)


(14,310)


(13,530)



Proceeds from sales of property, plant and equipment

2,224


205


49,709



Proceeds from sale of available-for-sale securities

26,454


24,540




Proceeds from maturity of available-for-sale securities


25,000




Proceeds from sale of business


42,199




Purchases of available-for-sale securities

(225,622)


(75,224)


(25,032)



Purchases of privately-held companies' securities

(326)


(2,337)


(6,008)



Other investing activities



2,380



Net cash provided by (used in) investing activities

(213,045)


73


7,519



Cash flows from financing activities:








Excess tax benefit from stock-based compensation 



3,920



Repayment of notes payable

(250,000)





Net issuance of restricted stock units

(4,239)


(5,206)


(7,722)



Proceeds from stock options exercised

7,155


19,911


48,477



Issuance of common stock under employee stock purchase program

17,658



14,350



Repurchase of common stock

(61,235)


(57,709)


(23,150)



Dividends paid

(93,562)


(93,627)


(85,712)



Net cash provided by (used in) financing activities

(384,223)


(136,631)


(49,837)



Net increase (decrease) in cash and cash equivalents

(404,638)


(13,156)


140,171



Cash and cash equivalents:








Beginning of period

2,092,073


2,105,229


1,550,965



End of period

$ 1,687,435


$  2,092,073


$ 1,648,518











Total cash, cash equivalents, and short-term investments

$ 2,086,896


$  2,267,514


$ 1,773,473


















 











ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES



(Unaudited)





Three Months Ended





December 24, 


September 24, 


December 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


$        340,178


$         345,732


$        292,169



GAAP gross profit %


61.7%


61.6%


57.2%












Special items:









Intangible asset amortization 


11,755


12,602


14,734



Accelerated depreciation (1)


1,178


1,178


2,032



 Total special items 


12,933


13,780


16,766



  GAAP gross profit excluding special items 


$        353,111


$         359,512


$        308,935



  GAAP gross profit % excluding special items 


64.1%


64.0%


60.5%












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









GAAP operating expenses


$        191,104


$         173,659


$        202,636












Special items:









Intangible asset amortization


2,348


2,443


3,538



Impairment of long-lived assets (2)


383


6,134


1,950



Severance and restructuring 


864


9,965


10,652



Other operating expenses (income), net  (3)


1,909


(28,481)


(247)



  Total special items 


5,504


(9,939)


15,893



  GAAP operating expenses excluding special items 


$        185,600


$         183,598


$        186,743












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









GAAP net income (loss)


$        130,477


$         137,614


$          67,469












Special items:









Intangible asset amortization 


14,103


15,045


18,272



Accelerated depreciation (1)


1,178


1,178


2,032



Impairment of long-lived assets (2)


383


6,134


1,950



Severance and restructuring 


864


9,965


10,652



Other operating expenses (income), net (3)


1,909


(28,481)


(247)



Interest and other expense (income), net (4)


(5,052)


(471)


595



  Pre-tax total special items 


13,385


3,370


33,254



Other income tax effects and adjustments (5)


(11,167)


(2,754)


(7,903)



 GAAP net income excluding special items 


$        132,695


$         138,230


$          92,820












 GAAP net income per share excluding special items: 









Basic


$              0.47


$               0.49


$              0.33



Diluted


$              0.46


$               0.48


$              0.32












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









Basic


283,294


283,633


285,526



Diluted


288,106


288,574


290,521












(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 gain on sale of shares received for the sale of the wafer manufacturing facility in San Antonio, Texas.




(5) 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; and other operating expenses (income), net; interest and other expense (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; 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. 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 in 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; 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 third quarter of fiscal 2017 ending in March 2017, which includes revenue, gross margin and earnings per share, as well as the Company's expectation to build upon its growth momentum in its Automotive and Industrial businesses. 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.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/maxim-integrated-reports-results-for-the-second-quarter-of-fiscal-2017-300397622.html

SOURCE Maxim Integrated Products, Inc.

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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