Investor Relations

Maxim Integrated Reports Results For The Second Quarter Of Fiscal 2018; Increases Dividend By 17%

January 25, 2018

- Revenue: $623 million
- Gross Margin: 65.8% GAAP (67.6% excluding special items)
- EPS: $0.27 GAAP loss ($0.65 gain, excluding special items)
- Fiscal third quarter revenue outlook: $620 to $660 million
- Quarterly dividend increased 17% to $0.42 per share

SAN JOSE, Calif., Jan. 25, 2018 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $623 million for its second quarter of fiscal 2018 ended December 30, 2017, an 8% increase from the $576 million revenue recorded in the prior quarter, and a 13% increase from the same quarter of last year.

Logo for Maxim Integrated Products Inc. (PRNewsfoto/Maxim Integrated)

Tunc Doluca, President and Chief Executive Officer, commented, "We are pleased with our performance in the December quarter. Compared to the same quarter last year, revenue growth was led by double-digit increases in Industrial and Automotive with continued solid company profitability." Mr. Doluca continued, "Looking forward, we expect another strong revenue quarter in our March quarter with significant growth in Automotive, Industrial and Consumer compared to the same quarter last year. Our profitability and revenue growth are enabling exceptionally strong earnings performance and cash flow, giving us confidence to increase our return of capital to shareholders."

Fiscal Year 2018 Second Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), loss per share in the December quarter was $0.27. The results were affected by pre-tax special items which primarily consisted of $12 million in charges related to acquisitions and $6 million in charges related to restructuring activities as well as tax special items consisting of $244 million in charges due to corporate tax reform. GAAP earnings per share, excluding special items was $0.65. 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 2018, total cash, cash equivalents and short term investments were $2.82 billion, an increase of $49 million from the prior quarter.

Notable items included:

  • Cash flow from operations: $230 million
  • Capital expenditures: $22 million
  • Dividends paid: $101 million ($0.36 per share)
  • Stock repurchases: $77 million

Trailing twelve months free cash flow was $849 million. Free cash flow is a non-GAAP measure and is defined by net cash flow from operations less gross capital expenditures.

Business Outlook

The Company's 90-day backlog at the beginning of the March 2018 quarter was $446 million. Based on the beginning backlog and expected turns, our results for the March 2018 quarter are forecasted to be as follows:

  • Revenue: $620 to $660 million
  • Gross Margin: 64% to 66% GAAP (66% to 68% excluding special items)
  • EPS: $0.63 to $0.69 GAAP ($0.66 to $0.72 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

Our Board of Directors approved a 17% increase in the quarterly dividend. A cash dividend of $0.42 per share will be paid on March 15, 2018, to stockholders of record on March 1, 2018.

Conference Call

Maxim Integrated has scheduled a conference call on January 25 at 2:00 p.m. Pacific Time to discuss its financial results for the second quarter of fiscal 2018 and its business outlook. This call will be webcast by Shareholder.com and can be accessed at the Company's website at investor.maximintegrated.com.

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








CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)



Three Months Ended



December 30, 


September 23, 


December 24, 



2017


2017


2016



(in thousands, except per share data)


Net revenues

$              622,637


$                  575,676


$                  550,998


Cost of goods sold (1) 

212,961


201,845


210,820


Gross margin

409,676


373,831


340,178


Operating expenses:







Research and development

115,896


108,601


114,057


Selling, general and administrative

85,323


73,681


71,543


Intangible asset amortization

995


1,752


2,348


Impairment of long-lived assets (2)

850


42


383


Severance and restructuring expenses 

6,523


5,433


864


Other operating expenses (income), net

(959)


(844)


1,909


Total operating expenses (income), net

208,628


188,665


191,104


Operating income (loss)

201,048


185,166


149,074


Interest and other income (expense), net 

(3,121)


(4,214)


(636)


Income (loss) before provision for income taxes 

197,927


180,952


148,438


Income tax provision (benefit)

272,942


26,419


17,961


Net income (loss)

$               (75,015)


$                  154,533


$                  130,477
















Earnings (loss) per share:







Basic

$                   (0.27)


$                        0.55


$                        0.46


Diluted

$                   (0.27)


$                        0.54


$                        0.45









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







Basic

281,560


282,170


283,294


Diluted

281,560


286,437


288,106









Dividends paid per share

$                    0.36


$                        0.36


$                        0.33
















SCHEDULE OF SPECIAL ITEMS


(Unaudited)



Three Months Ended



December 30, 


September 23, 


December 24, 



2017


2017


2016



(in thousands)


Cost of goods sold:







Intangible asset amortization 

$                11,139


$                    11,064


$                    11,755


Accelerated depreciation (1)



1,178


  Total 

$                11,139


$                    11,064


$                    12,933









 Operating expenses: 







Intangible asset amortization

$                     995


$                      1,752


$                      2,348


Impairment of long-lived assets (2)

850


42


383


Severance and restructuring

6,523


5,433


864


Other operating expenses (income), net

(959)


(844)


1,909


  Total 

$                  7,409


$                      6,383


$                      5,504
















Interest and other expense (income), net

$                    (119)


$                         (84)


$                    (5,052)


 Total 

$                    (119)


$                         (84)


$                    (5,052)









 Provision (benefit) for income taxes: 







Impact of U.S. tax legislation (3)

$              243,550




  Total 

$              243,550


$                      —


$                      —









(1) Includes building and equipment accelerated depreciation related to the Dallas manufacturing facility during the second quarter of fiscal year 2017.


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


(3) Includes effect of  U.S. tax legislation enacted on December 22, 2017.




 








CONSOLIDATED  BALANCE SHEETS


(Unaudited)



December 30, 


September 23, 


December 24, 



2017


2017


2016



(in thousands) 


ASSETS






Current assets:







Cash and cash equivalents

$ 1,631,510


$  1,577,160


$ 1,687,435


Short-term investments

1,191,765


1,196,827


399,461


Total cash, cash equivalents and short-term investments

2,823,275


2,773,987


2,086,896


Accounts receivable, net

235,695


233,215


224,342


Inventories

259,597


245,347


236,040


Other current assets

24,153


55,033


75,284


Total current assets

3,342,720


3,307,582


2,622,562


Property, plant and equipment, net

597,818


595,622


660,660


Intangible assets, net

67,716


79,850


117,393


Goodwill

491,015


491,015


491,015


Other assets

65,243


61,937


56,344


TOTAL ASSETS

$ 4,564,512


$  4,536,006


$ 3,947,974









LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:







Accounts payable

$      84,770


$       66,915


$      70,505


Income taxes payable

10,523


3,688


3,138


Accrued salary and related expenses

113,716


103,194


109,475


Accrued expenses

37,687


43,121


41,418


Deferred revenue on shipments to distributors


16,994


36,137


Current portion of debt

498,694




Total current liabilities

745,390


233,912


260,673


Long-term debt

990,428


1,488,406


991,281


Income taxes payable

801,260


573,831


514,498


Other liabilities

41,736


42,113


37,331


Total liabilities

2,578,814


2,338,262


1,803,783


Stockholders' equity:







Common stock and capital in excess of par value

283


283


284


Retained earnings

1,997,207


2,207,052


2,155,698


Accumulated other comprehensive loss

(11,792)


(9,591)


(11,791)


Total stockholders' equity

1,985,698


2,197,744


2,144,191


        TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$ 4,564,512


$  4,536,006


$ 3,947,974









 


CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)




Three Months Ended




December 30, 


September 23, 


December 24, 




2017


2017


2016




(in thousands)



Cash flows from operating activities:








Net income (loss)

$    (75,015)


$     154,533


$    130,477



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








Stock-based compensation

21,040


17,287


18,073



Depreciation and amortization

35,813


36,754


42,140



Deferred taxes

(3,188)


12,115


(7,520)



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

(649)


61


3,898



Impairment of long-lived assets


42


383



Impairment of of investment in privately-held companies

850





Changes in assets and liabilities:








Accounts receivable

(2,480)


23,239


29,176



Inventories

(14,125)


1,835


(12,512)



Other current assets

31,459


1,488


(7,583)



Accounts payable

13,643


(9,979)


(11,999)



Income taxes payable

234,264


16,333


17,138



Deferred revenue on shipments to distributors

(16,994)


2,020


383



Accrued salary and related expenses

10,523


(42,105)


(1,651)



All other accrued liabilities

(5,266)


6,082


(7,773)



Net cash provided by (used in) operating activities

229,875


219,705


192,630



Cash flows from investing activities:








Purchase of property, plant and equipment

(22,413)


(14,321)


(15,775)



Proceeds from sales of property, plant and equipment

1,444


1,473


2,224



Proceeds from sale of available-for-sale securities

21,895


18,101


26,454



Proceeds from maturity of available-for-sale securities

118,211





Purchases of available-for-sale securities

(137,166)


(716,304)


(225,622)



Purchases of privately-held companies' securities

(1,500)


(606)


(326)



Net cash provided by (used in) investing activities

(19,529)


(711,657)


(213,045)



Cash flows from financing activities:








Repayment of notes payable



(250,000)



Net issuance of restricted stock units

(6,104)


(5,416)


(4,239)



Proceeds from stock options exercised

13,507


5,160


7,155



Issuance of common stock under employee stock purchase program

14,975



17,658



Repurchase of common stock

(76,953)


(75,291)


(61,235)



Dividends paid

(101,421)


(101,462)


(93,562)



Net cash provided by (used in) financing activities

(155,996)


(177,009)


(384,223)



Net increase (decrease) in cash and cash equivalents

54,350


(668,961)


(404,638)



Cash and cash equivalents:








Beginning of period

1,577,160


2,246,121


2,092,073



End of period

$ 1,631,510


$  1,577,160


$ 1,687,435











Total cash, cash equivalents, and short-term investments

$ 2,823,275


$  2,773,987


$ 2,086,896


















 









ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES


(Unaudited)




Three Months Ended




December 30, 


September 23, 


December 24, 




2017


2017


2016




(in thousands, except per share data)


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








GAAP gross profit


$        409,676


$         373,831


$        340,178


GAAP gross profit %


65.8%


64.9%


61.7%










Special items:








Intangible asset amortization 


11,139


11,064


11,755


Accelerated depreciation (1)




1,178


 Total special items 


11,139


11,064


12,933


 GAAP gross profit excluding special items 


$        420,815


$         384,895


$        353,111


 GAAP gross profit % excluding special items 


67.6%


66.9%


64.1%










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








GAAP operating expenses


$        208,628


$         188,665


$        191,104










Special items:








Intangible asset amortization


995


1,752


2,348


Impairment of long-lived assets (2)


850


42


383


Severance and restructuring 


6,523


5,433


864


Other operating expenses (income), net


(959)


(844)


1,909


  Total special items 


7,409


6,383


5,504


 GAAP operating expenses excluding special items 


$        201,219


$         182,282


$        185,600










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








GAAP net income (loss)


$        (75,015)


$         154,533


$        130,477










Special items:








Intangible asset amortization 


12,134


12,816


14,103


Accelerated depreciation (1)




1,178


Impairment of long-lived assets (2)


850


42


383


Severance and restructuring 


6,523


5,433


864


Other operating expenses (income), net


(959)


(844)


1,909


Interest and other expense (income), net 


(119)


(84)


(5,052)


 Pre-tax total special items


18,429


17,363


13,385


Other income tax effects and adjustments (3)


(897)


(1,345)


(11,167)


Impact of U.S. tax legislation (4)


243,550




 GAAP net income excluding special items 


$        186,067


$         170,551


$        132,695










 GAAP net income per share excluding special items: 








Basic


$              0.66


$               0.60


$              0.47


Diluted


$              0.65


$               0.60


$              0.46










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








Basic


281,560


282,170


283,294


Diluted (5)


286,356


286,437


288,106










(1) Includes building and equipment accelerated depreciation related to the Dallas manufacturing facility during the second quarter of fiscal year 2017.


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


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


(4) Includes effect of  U.S. tax legislation enacted on December 22, 2017.


(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.




Non-GAAP Measures

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

GAAP Gross Profit Excluding Special Items

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

GAAP Operating Expenses Excluding Special Items

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

GAAP Provision for Income Taxes Excluding Special Items

The use of a GAAP provision for income taxes excluding special items allows management to evaluate the provision for income taxes across different reporting periods on a consistent basis, independent of special items including the tax provision impact of pre-tax special items. In fiscal year 2016, we began using a long-term tax rate to compute the GAAP provision for income taxes excluding special items. This long-term tax rate considers the income tax impact of pre-tax special items and eliminates the effects of significant non-recurring and period specific tax items which vary in size and frequency, including certain one time tax charges resulting from the U.S. tax legislation that was enacted on December 22, 2017. In the first quarter of fiscal year 2018, we began using a long-term tax rate of 14%, which was our forecast of the weighted average of our normalized fiscal year GAAP tax rate excluding special items over a four-year period, that includes the past three fiscal years plus the current fiscal year projection at the beginning of fiscal year 2018. We review the long-term tax rate on an annual basis and more frequently whenever events occur that may materially affect the long-term tax rate such as tax law changes; significant changes in our geographic earnings mix; or changes in our corporate structure. We are currently in the process of reevaluating our long-term rate in light of the U.S. tax legislation that was enacted on December 22, 2017.

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 2018 ending in March 2018, which includes revenue, gross margin and earnings per share, as well as the Company's expectation of strong revenue growth in Consumer, Industrial and Automotive  compared to the same quarter last year. These statements involve risk and uncertainty. Actual results could differ materially from those forecasted, based upon, among other things, general market and economic conditions, market developments that could adversely affect the growth of the mixed-signal analog market, product mix shifts, the loss of all or a substantial portion of our sales to one or more of our large customers, customer cancellations and price competition, as well as other risks described in the Company's Annual Report on Form 10-K for the fiscal year ended June 24, 2017 (the "Form 10-K"). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331617000028/maxim10-kfy2017.htm.

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

About Maxim Integrated

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

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

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/maxim-integrated-reports-results-for-the-second-quarter-of-fiscal-2018-increases-dividend-by-17-300588507.html

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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