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Oct 20, 2017 6:10 AM ET

Maxim Integrated Reports Results For The First Quarter Of Fiscal 2018

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iCrowdNewswire - Oct 20, 2017

SAN JOSE, Calif. — Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $576 million for its first quarter of fiscal 2018 ended September 23, 2017, a 4% decrease from the $602 million revenue recorded in the prior quarter, and a 3% increase from the same quarter of last year.

 

Tunc Doluca, President and Chief Executive Officer, commented, “We are pleased with our performance in the September quarter. Revenue growth was led by double-digit increases in Industrial and Automotive from the same quarter last year.” Mr. Doluca continued, “Looking forward, we expect strong growth in Automotive, Industrial and Data Center in the December quarter with continued solid profitability.”

Fiscal Year 2018 First Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the September quarter was $0.54. The results were affected by pre-tax special items which primarily consisted of $13 million in charges related to acquisitions and $5 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.60. An analysis of GAAP versus GAAP excluding special items is provided in the last table of this press release.

Cash Flow Items
At the end of the first quarter of fiscal 2018, total cash, cash equivalents and short term investments were $2.77 billion, an increase of $29 million from the prior quarter.

Notable items included:

  • Cash flow from operations: $220 million
  • Gross capital expenditures: $14 million
  • Dividends paid: $101 million ($0.36 per share)
  • Stock repurchases: $75 million

Trailing twelve months free cash flow was $819 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 December 2017 quarter was $426 million. Based on the beginning backlog and expected turns, the final transition to sell-in revenue accounting for distribution, and a 14-week quarter, our results for the December 2017 quarter are forecasted to be as follows:

  • Revenue: $600 to $640 million (including $18 to $22 million for sell-in transition)
  • Gross Margin: 64% to 66% GAAP (66% to 68% excluding special items)
  • EPS: $0.57 to $0.63 GAAP ($0.61 to $0.67 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.

A cash dividend of $0.36 per share will be paid on December 14, 2017, to stockholders of record on November 30, 2017.

Conference Call
Maxim Integrated has scheduled a conference call on October 19 at 2:00 p.m. Pacific Time to discuss its financial results for the first 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

 
  

September 23, 

 

June 24, 

 

September 24, 

 
  

2017

 

2017

 

2016

 
  

(in thousands, except per share data)

 
 

Net revenues

$               575,676

 

$     602,005

 

$               561,396

 
 

Cost of goods sold (1) 

201,845

 

208,339

 

215,664

 
 

Gross margin

373,831

 

393,666

 

345,732

 
 

Operating expenses:

      
 

Research and development

108,601

 

114,011

 

112,746

 
 

Selling, general and administrative

73,681

 

75,129

 

70,852

 
 

Intangible asset amortization

1,752

 

2,050

 

2,443

 
 

Impairment of long-lived assets (2)

42

 

 

6,134

 
 

Severance and restructuring expenses 

5,433

 

1,175

 

9,965

 
 

Other operating expenses (income), net (3)

(844)

 

1,923

 

(28,481)

 
 

Total operating expenses (income), net

188,665

 

194,288

 

173,659

 
 

Operating income (loss)

185,166

 

199,378

 

172,073

 
 

Interest and other income (expense), net 

(4,214)

 

(3,798)

 

(6,870)

 
 

Income (loss) before provision for income taxes 

180,952

 

195,580

 

165,203

 
 

Income tax provision (benefit)

26,419

 

32,271

 

27,589

 
 

Net income (loss)

$               154,533

 

$     163,309

 

$               137,614

 
        
        
 

Earnings (loss) per share:

      
 

Basic

$                     0.55

 

$           0.58

 

$                     0.49

 
 

Diluted

$                     0.54

 

$           0.57

 

$                     0.48

 
        
 

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

      
 

Basic

282,170

 

282,747

 

283,633

 
 

Diluted

286,437

 

287,494

 

288,574

 
        
 

Dividends paid per share

$                     0.36

 

$           0.33

 

$                     0.33

 
        
        
 

SCHEDULE OF SPECIAL ITEMS

 
 

(Unaudited)

 
  

Three Months Ended

 
  

September 23, 

 

June 24, 

 

September 24, 

 
  

2017

 

2017

 

2016

 
  

(in thousands)

 
 

Cost of goods sold:

      
 

Intangible asset amortization 

$                 11,064

 

$       11,064

 

$                 12,602

 
 

Accelerated depreciation (1)

 

 

1,178

 
 

  Total 

$                 11,064

 

$       11,064

 

$                 13,780

 
        
 

 Operating expenses: 

      
 

Intangible asset amortization

$                   1,752

 

$         2,050

 

$                   2,443

 
 

Impairment of long-lived assets (2)

42

 

 

6,134

 
 

Severance and restructuring

5,433

 

1,175

 

9,965

 
 

Other operating expenses (income), net (3)

(844)

 

1,923

 

(28,481)

 
 

  Total 

$                   6,383

 

$         5,148

 

$                  (9,939)

 
        
        
 

Interest and other expense (income), net

$                       (84)

 

$             (90)

 

$                     (471)

 
 

 Total 

$                       (84)

 

$             (90)

 

$                     (471)

 
        
 

(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.

 
   

 

        
 

CONSOLIDATED  BALANCE SHEETS

 
 

(Unaudited)

 
  

September 23, 

 

June 24, 

 

September 24, 

 
  

2017

 

2017

 

2016

 
  

(in thousands) 

 
 

ASSETS

 
 

Current assets:

      
 

Cash and cash equivalents

$  1,577,160

 

$2,246,121

 

$  2,092,073

 
 

Short-term investments

1,196,827

 

498,718

 

175,441

 
 

Total cash, cash equivalents and short-term investments

2,773,987

 

2,744,839

 

2,267,514

 
 

Accounts receivable, net

233,215

 

256,454

 

253,518

 
 

Inventories

245,347

 

247,242

 

223,484

 
 

Other current assets

55,033

 

57,059

 

89,398

 
 

Total current assets

3,307,582

 

3,305,594

 

2,833,914

 
 

Property, plant and equipment, net

595,622

 

606,581

 

678,447

 
 

Intangible assets, net

79,850

 

90,867

 

131,496

 
 

Goodwill

491,015

 

491,015

 

491,015

 
 

Other assets

59,246

 

72,974

 

54,890

 
 

Assets held for sale

2,691

 

3,202

 

2,854

 
 

TOTAL ASSETS

$  4,536,006

 

$4,570,233

 

$  4,192,616

 
        
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 
 

Current liabilities:

      
 

Accounts payable

$       66,915

 

$     77,373

 

$       83,589

 
 

Income taxes payable

3,688

 

3,688

 

3,138

 
 

Accrued salary and related expenses

103,194

 

145,299

 

111,126

 
 

Accrued expenses

43,121

 

37,663

 

48,572

 
 

Deferred revenue on shipments to distributors

16,994

 

14,974

 

35,754

 
 

Short-term debt

 

 

249,788

 
 

Total current liabilities

233,912

 

278,997

 

531,967

 
 

Long-term debt

1,488,406

 

1,487,678

 

990,685

 
 

Income taxes payable

573,831

 

557,498

 

497,360

 
 

Deferred tax liabilities

1,436

 

1,514

 

756

 
 

Other liabilities

40,677

 

41,852

 

36,612

 
 

Total liabilities

2,338,262

 

2,367,539

 

2,057,380

 
 

Stockholders’ equity:

      
 

Common stock and capital in excess of par value

283

 

283

 

284

 
 

Retained earnings

2,207,052

 

2,212,301

 

2,141,326

 
 

Accumulated other comprehensive loss

(9,591)

 

(9,890)

 

(6,374)

 
 

Total stockholders’ equity

2,197,744

 

2,202,694

 

2,135,236

 
 

        TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY 

$  4,536,006

 

$4,570,233

 

$  4,192,616

 
        

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
 

(Unaudited)

 
  

Three Months Ended

 
  

September 23, 

 

June 24, 

 

September 24, 

 
  

2017

 

2017

 

2016

 
  

(in thousands)

 
 

Cash flows from operating activities:

      
 

Net income (loss)

$            154,533

 

$          163,309

 

$            137,614

 
 

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

      
 

Stock-based compensation

17,287

 

17,624

 

17,120

 
 

Depreciation and amortization

36,754

 

38,194

 

43,485

 
 

Deferred taxes

12,115

 

1,697

 

14,895

 
 

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

61

 

7,006

 

652

 
 

Loss (gain) on sale of business

 

 

(26,620)

 
 

Impairment of long-lived assets

42

 

665

 

6,134

 
 

Changes in assets and liabilities:

      
 

Accounts receivable

23,239

 

1,138

 

3,013

 
 

Inventories

1,835

 

(5,715)

 

2,517

 
 

Other current assets

1,488

 

(727)

 

(12,099)

 
 

Accounts payable

(9,979)

 

(5,235)

 

(858)

 
 

Income taxes payable

16,333

 

22,619

 

110

 
 

Deferred revenue on shipments to distributors

2,020

 

(20,751)

 

(3,025)

 
 

Accrued salary and related expenses

(42,105)

 

9,597

 

(55,572)

 
 

All other accrued liabilities

6,082

 

7,507

 

(3,964)

 
 

Net cash provided by (used in) operating activities

219,705

 

236,928

 

123,402

 
 

Cash flows from investing activities:

      
 

Purchase of property, plant and equipment

(14,321)

 

(13,050)

 

(14,310)

 
 

Proceeds from sales of property, plant and equipment

1,473

 

7,576

 

205

 
 

Proceeds from sale of available-for-sale securities

18,101

 

 

24,540

 
 

Proceeds from maturity of available-for-sale securities

 

50,000

 

25,000

 
 

Proceeds from sale of business

 

 

42,199

 
 

Purchases of available-for-sale securities

(716,304)

 

(49,891)

 

(75,224)

 
 

Purchases of privately-held companies’ securities

(606)

 

 

(2,337)

 
 

Net cash provided by (used in) investing activities

(711,657)

 

(5,365)

 

73

 
 

Cash flows from financing activities:

      
 

Issuance of debt

 

500,000

 

 
 

Debt Issuance Cost

 

(3,688)

 

 
 

Net issuance of restricted stock units

(5,416)

 

(7,471)

 

(5,206)

 
 

Proceeds from stock options exercised

5,160

 

18,434

 

19,911

 
 

Issuance of common stock under employee stock purchase program

 

19,805

 

 
 

Repurchase of common stock

(75,291)

 

(75,853)

 

(57,709)

 
 

Dividends paid

(101,462)

 

(93,396)

 

(93,627)

 
 

Net cash provided by (used in) financing activities

(177,009)

 

357,831

 

(136,631)

 
 

Net increase (decrease) in cash and cash equivalents

(668,961)

 

589,394

 

(13,156)

 
 

Cash and cash equivalents:

      
 

Beginning of period

2,246,121

 

1,656,727

 

2,105,229

 
 

End of period

$         1,577,160

 

$       2,246,121

 

$         2,092,073

 
        
 

Total cash, cash equivalents, and short-term investments

$         2,773,987

 

$       2,744,839

 

$         2,267,514

 
        
        

 

         
 

ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES

 
 

(Unaudited)

 
   

Three Months Ended

 
   

September 23, 

 

June 24, 

 

September 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

 

$                 373,831

 

$       393,666

 

$                 345,732

 
 

GAAP gross profit %

 

64.9%

 

65.4%

 

61.6%

 
         
 

Special items:

       
 

Intangible asset amortization 

 

11,064

 

11,064

 

12,602

 
 

Accelerated depreciation (1)

 

 

 

1,178

 
 

 Total special items 

 

11,064

 

11,064

 

13,780

 
 

  GAAP gross profit excluding special items 

 

$                 384,895

 

$       404,730

 

$                 359,512

 
 

  GAAP gross profit % excluding special items 

 

66.9%

 

67.2%

 

64.0%

 
         
 

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

       
 

GAAP operating expenses

 

$                 188,665

 

$       194,288

 

$                 173,659

 
         
 

Special items:

       
 

Intangible asset amortization

 

1,752

 

2,050

 

2,443

 
 

Impairment of long-lived assets (2)

 

42

 

 

6,134

 
 

Severance and restructuring 

 

5,433

 

1,175

 

9,965

 
 

Other operating expenses (income), net (3)

 

(844)

 

1,923

 

(28,481)

 
 

  Total special items 

 

6,383

 

5,148

 

(9,939)

 
 

  GAAP operating expenses excluding special items 

 

$                 182,282

 

$       189,140

 

$                 183,598

 
         
 

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

       
 

GAAP net income (loss)

 

$                 154,533

 

$       163,309

 

$                 137,614

 
         
 

Special items:

       
 

Intangible asset amortization 

 

12,816

 

13,114

 

15,045

 
 

Accelerated depreciation (1)

 

 

 

1,178

 
 

Impairment of long-lived assets (2)

 

42

 

 

6,134

 
 

Severance and restructuring 

 

5,433

 

1,175

 

9,965

 
 

Other operating expenses (income), net (3)

 

(844)

 

1,923

 

(28,481)

 
 

Interest and other expense (income), net 

 

(84)

 

(90)

 

(471)

 
 

 Pre-tax total special items

 

17,363

 

16,122

 

3,370

 
 

 Other income tax effects and adjustments (4) 

 

(1,345)

 

499

 

(2,754)

 
 

 GAAP net income excluding special items 

 

$                 170,551

 

$       179,930

 

$                 138,230

 
         
 

 GAAP net income per share excluding special items: 

       
 

Basic

 

$                       0.60

 

$             0.64

 

$                       0.49

 
 

Diluted

 

$                       0.60

 

$             0.63

 

$                       0.48

 
         
 

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

       
 

Basic

 

282,170

 

282,747

 

283,633

 
 

Diluted

 

286,437

 

287,494

 

288,574

 
         
 

(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 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; 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. In the first quarter of fiscal year 2018, we used 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.

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 second quarter of fiscal 2018 ending in December 2017, which includes revenue, gross margin and earnings per share, as well as the Company’s expectation of strong growth in Automotive, Industrial and Data Center in the December quarter. 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

 

SOURCE Maxim Integrated Investor Relations

Related Links

http://www.maximintegrated.com

Contact Information:

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

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