Maxim Integrated Reports Results For The Second Quarter Of Fiscal 2014

- Revenue: $620 million

- Gross Margin: 53.0% GAAP (58.2% excluding special items, after a 2.9 percentage point reduction due to warranty expense)

- EPS: $0.17 GAAP ($0.36 excluding special items, after a $0.05 reduction due to warranty expense)

- Cash, cash equivalents, and short term investments: $1.15 billion

- Fiscal third quarter revenue outlook: $590 million to $620 million

Jan 23, 2014, 16:00 ET from Maxim Integrated Products, Inc.

SAN JOSE, Calif., Jan. 23, 2014 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $620 million for its second quarter of fiscal 2014 ended December 28, 2013, a 6% increase from the $585 million revenue recorded in the prior quarter. Reported revenue included $35 million from Volterra. Excluding Volterra, revenue was flat compared to the prior quarter.

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Tunc Doluca, President and Chief Executive Officer, commented, "We achieved good revenue performance in a soft quarter for our industry." Mr. Doluca continued, "We are pleased with our diversification efforts, with strength in both communication and industrial businesses, the addition of Volterra and broadening of our mobility business."

Fiscal Year 2014 Second Quarter Results Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the December quarter was $0.17. The results were negatively affected by the following pre-tax charges:

  • $40 million for Volterra acquisition-related items
  • $13 million for items related to prior acquisitions
  • $5 million for impairment of long-lived assets
  • $18 million for warranty expense

GAAP earnings per share, excluding special items was $0.36, after a $0.05 reduction due to the warranty expense. In addition, the warranty expense caused our GAAP gross margin, excluding special items to be 2.9 percentage points lower for the quarter. An analysis of GAAP versus GAAP excluding special items is provided in the last table of this press release. Warranty expense is not considered a special item and is not included in the analysis.   

Cash Flow Items At the end of the second quarter of fiscal 2014, total cash, cash equivalents and short term investments was $1.15 billion, an increase of $115 million from the prior quarter. Notable items included:

  • Cash flow from operations: $234 million
  • Net capital expenditures: $46 million
  • Dividends: $73 million ($0.26 per share)
  • Stock repurchases: $59 million
  • Volterra acquisition: $454 million
  • Proceeds from debt issuance: $494 million

Business Outlook The Company's 90-day backlog at the beginning of the third fiscal quarter of 2014 was $366 million. Based on the beginning backlog and expected turns, results for the March 2014 quarter are expected to be as follows:

  • Revenue: $590 million to $620 million
  • Gross Margin: 56% to 58% GAAP (60% to 62% excluding special items)
  • EPS: $0.28 to $0.32 GAAP ($0.37 to $0.41 excluding special items)

Maxim Integrated's business outlook does not include the potential impact of any restructuring activity or mergers, acquisitions, or other business combinations that may be completed during the quarter.

Dividend A cash dividend of $0.26 per share will be paid on March 6, 2014, to stockholders of record on February 20, 2014.

Conference Call Maxim Integrated has scheduled a conference call on January 23, 2014, at 2:00 p.m. Pacific Time to discuss its financial results for the second quarter of fiscal 2014 and its business outlook. To listen via telephone, dial (866) 802-4305 (toll free) or (703) 639-1317.  This call will be webcast by Shareholder.com and can be accessed at the Company's website at www.maximintegrated.com/company/investor.

 

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended

December 28,

September 28,

December 29,

2013

2013

2012

(in thousands, except per share data)

Net revenues

$   620,274

$    585,241

$   605,306

Cost of goods sold

291,602

238,045

241,931

        Gross margin

328,672

347,196

363,375

Operating expenses:

    Research and development

142,971

129,902

135,742

    Selling, general and administrative

83,471

77,430

80,058

    Intangible asset amortization

4,968

3,436

3,903

    Impairment of long-lived assets (1)

5,197

-

22,222

    Severance and restructuring expenses (2)

10,227

5,547

2,236

    Acquisition-related costs

4,137

2,934

-

    Other operating expenses (income), net (3)

1,306

(662)

1,666

       Total operating expenses 

252,277

218,587

245,827

          Operating income

76,395

128,609

117,548

Interest and other income (expense), net

(5,833)

(3,463)

(2,798)

Income before provision for income taxes

70,562

125,146

114,750

Provision for income taxes 

21,240

22,026

38,128

   Net income

$     49,322

$    103,120

$     76,622

Earnings per share:

    Basic 

$         0.17

$          0.36

$         0.26

    Diluted 

$         0.17

$          0.36

$         0.26

Shares used in the calculation of earnings per share: 

    Basic

282,664

284,654

292,075

    Diluted 

288,565

290,260

298,759

Dividends paid per share 

$         0.26

$          0.26

$         0.24

SCHEDULE OF SPECIAL EXPENSE ITEMS

(Unaudited)

Three Months Ended

December 28,

September 28,

December 29,

2013

2013

2012

(in thousands)

Cost of goods sold:

      Intangible asset amortization

$         19,098

$            8,092

$           8,986

      Acquisition-related inventory write-up

13,066

-

-

 Total 

$         32,164

$            8,092

$           8,986

 Operating expenses: 

    Intangible asset amortization

$           4,968

$            3,436

$           3,903

    Impairment of long-lived assets (1)

5,197

-

22,222

    Severance and restructuring (2)

10,227

5,547

2,236

     Acquisition-related costs

4,137

2,934

-

    Other operating expenses (income), net (3)

1,306

(662)

1,666

 Total 

$         25,835

$          11,255

$         30,027

Provision for income taxes:

     International restructuring implementation  

$                -

$                  -

$         18,726

 Total 

$                -

$                  -

$         18,726

(1) Includes impairment charges relating to fab tools, land and buildings held-for-sale, and end of line manufacturing equipment.

(2) Includes severance & retention charges and lease abandonment charges related to the Volterra acquisition, and severance charges related to the reorganization of various business units and manufacturing operations.

(3) Other operating expenses (income), net are primarily for contingent consideration adjustments related to certain acquisitions and certain payroll taxes.

 

STOCK-BASED COMPENSATION BY TYPE OF AWARD (in thousands)

(Unaudited)

Three Months Ended December 28, 2013

  Stock Options

  Restricted Stock Units

  Employee Stock Purchase Plan

  Total

Cost of goods sold 

$             438

$              2,395

$                533

$  3,366

Research and development expense

2,616

8,728

1,153

12,497

Selling, general and administrative expense

1,476

4,996

534

7,006

       Total

$          4,530

$            16,119

$             2,220

$22,869

Three Months Ended September 28, 2013

Cost of goods sold 

$             349

$              1,918

$                475

$  2,742

Research and development expense

1,836

6,440

1,322

9,598

Selling, general and administrative expense

1,264

4,527

609

6,400

       Total

$          3,449

$            12,885

$             2,406

$18,740

Three Months Ended December 29, 2012

Cost of goods sold 

$             477

$              2,572

$                634

$  3,683

Research and development expense

2,288

8,401

1,451

12,140

Selling, general and administrative expense

1,286

5,152

584

7,022

       Total

$          4,051

$            16,125

$             2,669

$22,845

 

CONSOLIDATED  BALANCE SHEETS

(Unaudited)

December 28,

September 28,

December 29,

2013

2013

2012

(in thousands) 

ASSETS

Current assets:

    Cash and cash equivalents

$1,149,909

$ 1,009,547

$   955,107

    Short-term investments

-

25,036

75,192

        Total cash, cash equivalents and short-term investments

1,149,909

1,034,583

1,030,299

    Accounts receivable, net 

288,285

297,888

264,545

    Inventories

297,234

278,218

257,690

    Deferred tax assets

69,154

54,854

80,991

   Other current assets

84,522

116,225

90,470

        Total current assets

1,889,104

1,781,768

1,723,995

Property, plant and equipment, net

1,372,393

1,374,544

1,359,014

Intangible assets, net

404,652

145,618

182,521

Goodwill

596,898

422,004

422,083

Other assets

42,803

40,063

50,940

              TOTAL ASSETS

$4,305,850

$ 3,763,997

$3,738,553

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

    Accounts payable 

$     99,009

$    101,060

$   110,495

    Income taxes payable

21,717

21,799

22,146

    Accrued salary and related expenses

140,738

124,954

152,122

    Accrued expenses 

85,145

55,561

58,900

    Current portion of long-term debt

2,965

4,804

304,794

    Deferred income on shipments to distributors

25,542

27,179

25,362

        Total current liabilities

375,116

335,357

673,819

Long-term debt

1,000,871

500,955

3,997

Income taxes payable

337,053

294,728

260,770

Deferred tax liabilities

202,435

205,221

192,434

Other liabilities

29,343

29,300

26,321

        Total liabilities 

1,944,818

1,365,561

1,157,341

Stockholders' equity:

    Common stock

283

283

7,040

    Retained earnings 

2,373,318

2,412,262

2,589,619

    Accumulated other comprehensive loss

(12,569)

(14,109)

(15,447)

        Total stockholders' equity

2,361,032

2,398,436

2,581,212

              TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$4,305,850

$ 3,763,997

$3,738,553

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

December 28,

September 28,

December 29,

2013

2013

2012

(in thousands)

Cash flows from operating activities: 

Net income

$     49,322

$    103,120

$     76,622

Adjustments to reconcile net income to net cash provided by operating activities: 

      Stock-based compensation 

22,869

18,740

22,845

      Depreciation and amortization 

64,404

51,133

51,880

      Deferred taxes 

(11,705)

25,529

(12,979)

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

265

36

(88)

      Tax benefit (shortfall) related to stock-based compensation 

(726)

(3,488)

5,187

      Impairment of long-lived assets

5,197

-

22,222

      Excess tax benefit from stock-based compensation 

(2,459)

(1,697)

(6,615)

      Changes in assets and liabilities: 

          Accounts receivable 

33,056

(12,450)

51,993

          Inventories 

14,030

(2,301)

570

          Other current assets 

31,362

(18,546)

4,091

          Accounts payable 

(3,252)

(9,162)

(9,536)

          Income taxes payable 

19,002

11,393

37,477

          Deferred revenue on shipments to distributors 

(1,637)

622

(1,663)

          All other accrued liabilities 

14,704

(67,035)

13,091

Net cash provided by (used in) operating activities 

234,432

95,894

255,097

Cash flows from investing activities: 

          Purchase of property, plant and equipment

(46,133)

(36,329)

(62,102)

          Proceeds from sales of property, plant and equipment

-

3,048

4,115

          Payments in connection with business acquisition, net of cash acquired

(453,506)

-

-

          Proceeds from maturity of available-for-sale securities

27,000

-

-

Net cash provided by (used in) investing activities 

(472,639)

(33,281)

(57,987)

Cash flows from financing activities: 

         Excess tax benefit from stock-based compensation

2,459

1,697

6,615

         Contingent consideration paid

(4,601)

-

(7,476)

         Dividends paid

(73,325)

(73,744)

(70,063)

         Repayment of notes payable

(1,839)

-

(74)

         Issuance of debt

497,795

100

-

         Debt issuance cost

(3,431)

-

-

         Repurchase of common stock

(59,101)

(154,386)

(50,435)

         Issuance of ESPP shares under employee stock purchase program 

19,096

-

16,768

         Net issuance of restricted stock units

(7,106)

(6,966)

(6,538)

         Proceeds from stock options exercised

8,622

5,247

19,350

Net cash provided by (used in) financing activities 

378,569

(228,052)

(91,853)

Net increase (decrease) in cash and cash equivalents 

140,362

(165,439)

105,257

Cash and cash equivalents: 

          Beginning of period

1,009,547

1,174,986

849,850

          End of period

$1,149,909

$ 1,009,547

$   955,107

Total cash, cash equivalents, and short-term investments

$1,149,909

$ 1,034,583

$1,030,299

 

 

ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES

(Unaudited)

Three Months Ended

December 28,

September 28,

December 29,

2013

2013

2012

(in thousands, except per share data)

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

GAAP gross profit

$       328,672

$        347,196

$       363,375

GAAP gross profit %

53.0%

59.3%

60.0%

Special items:

      Intangible asset amortization 

19,098

8,092

8,986

      Acquisition-related inventory write-up

13,066

-

-

 Total special items 

32,164

8,092

8,986

 GAAP gross profit excluding special items 

$       360,836

$        355,288

$       372,361

 GAAP gross profit % excluding special items 

58.2%

60.7%

61.5%

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

GAAP operating expenses

$       252,277

$        218,587

$       245,827

Special items:

   Intangible asset amortization 

4,968

3,436

3,903

   Impairment of long-lived assets (1) 

5,197

-

22,222

   Severance and restructuring (2) 

10,227

5,547

2,236

     Acquisition-related costs

4,137

2,934

-

   Other operating expenses (income), net (3) 

1,306

(662)

1,666

 Total special items 

25,835

11,255

30,027

 GAAP operating expenses excluding special items 

$       226,442

$        207,332

$       215,800

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

GAAP net income

$         49,322

$        103,120

$         76,622

Special items:

      Intangible asset amortization

24,066

11,528

12,889

      Acquisition-related inventory write-up

13,066

-

-

      Impairment of long-lived assets (1)

5,197

-

22,222

     Severance and restructuring (2) 

10,227

5,547

2,236

     Acquisition-related costs

4,137

2,934

-

     Other operating expenses (income) , net (3) 

1,306

(662)

1,666

                     Pre-tax total special items 

57,999

19,347

39,013

     Tax effect of special items 

(4,862)

(2,981)

(9,555)

     International restructuring implementation  

-

-

18,726

 GAAP net income excluding special items 

$       102,459

$        119,486

$       124,806

 GAAP net income per share excluding special items: 

    Basic 

$         0.36

$          0.42

$         0.43

    Diluted 

$         0.36

$          0.41

$         0.42

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

    Basic

282,664

284,654

292,075

    Diluted 

288,565

290,260

298,759

(1) Includes impairment charges relating to fab tools, land and buildings held-for-sale, and end of line manufacturing equipment.

(2) Includes severance & retention charges and lease abandonment charges related to the Volterra acquisition, and severance charges related to the reorganization of various business units and manufacturing operations.

(3) Other operating expenses (income), net are primarily for contingent consideration adjustments related to certain acquisitions and certain payroll taxes.

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; acquisition-related inventory write-up; impairment of long-lived assets; severance and restructuring; acquisition-related costs; contingent consideration adjustments relating to certain acquisitions; certain payroll taxes; and the tax provision impacts due to implementation of international restructuring. 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 acquisition-related inventory write-up.  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; acquisition-related costs; contingent consideration adjustments relating to certain acquisitions; and certain payroll taxes. 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 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; acquisition-related inventory write-up; impairment of long-lived assets; severance and restructuring; acquisition-related costs; contingent consideration adjustments relating to certain acquisitions; certain payroll taxes; and the tax provision impacts due to implementation of international restructuring. 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 2014 ending in March 2014, 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 and market developments that could adversely affect the growth of the mixed-signal analog market, product mix shifts, the loss of all or a substantial portion of our sales to one of our large customers,  customer cancellations and price competition, as well as other risks described in the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 2013 (the "10-K") and Quarterly Reports on Form 10-Q filed after the 10-K.

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

About Maxim Integrated At Maxim Integrated, we put analog together in a way that sets our customers apart. In Fiscal 2013, we reported revenues of $2.4 billion. For more information, go to www.maximintegrated.com.

Contact Kathy Ta Managing Director, Investor Relations (408) 601-5697

SOURCE Maxim Integrated Products, Inc.



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