Maxim Integrated Reports Results For The Second Quarter Of Fiscal 2016

- Revenue: $511 million

- Gross Margin: 57.2% GAAP (60.5% excluding special items)

- EPS: $0.23 GAAP profit ($0.32 profit excluding special items)

- Cash, cash equivalents, and short term investments: $1.77 billion

- Fiscal third quarter revenue outlook: $535 million to $575 million

Jan 21, 2016, 16:01 ET from Maxim Integrated

SAN JOSE, Calif., Jan. 21, 2016 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $511 million for its second quarter of fiscal 2016 ended December 26, 2015, a 9% decrease from the $563 million revenue recorded in the prior quarter, and a 10% decrease from the same quarter of last year.

Tunc Doluca, President and Chief Executive Officer, commented, "Our second quarter financial performance was in line with our expectations, and we achieved several milestones in our $180 million cost reduction plan. " Mr. Doluca continued, "In our March quarter, we expect continued growth in Automotive, a sequential increase in our Communications & Data Center and Consumer businesses and a seasonal uptick in Industrial.  Long term, Maxim's strong technology franchise in power management positions us well for growth."

Fiscal Year 2016 Second Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the December quarter was a $0.23 profit. The results were affected by pre-tax special items which primarily consisted of $18 million in charges related to acquisitions and $13 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.32. 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 2016, total cash, cash equivalents and short term investments were $1.77 billion, an increase of $165 million from the prior quarter. Notable items included:

  • Cash flow from operations: $182 million
  • Capital expenditures: $14 million
  • Proceeds from asset sales: $50 million
  • Dividends: $86 million ($0.30 per share)
  • Stock repurchases: $23 million

Business Outlook

The Company's 90-day backlog at the beginning of the third fiscal quarter of 2016 was $329 million. Based on the beginning backlog and expected turns, results for the March 2016 quarter are expected to be as follows:

  • Revenue: $535 million to $575 million
  • Gross Margin: 57% to 60% GAAP (60% to 63% excluding special items)
  • EPS: $0.35 to $0.41 GAAP ($0.38 to $0.44 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 $0.30 per share will be paid on March 3, 2016, to stockholders of record on February 18, 2016.

Conference Call

Maxim Integrated has scheduled a conference call on January 21st, at 2:00 p.m. Pacific Time to discuss its financial results for the second quarter of fiscal 2016 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.

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

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended

December 26, 

September 26, 

December 27, 

2015

2015

2014

(in thousands, except per share data)

Net revenues

$        510,831

$         562,510

$        566,809

Cost of goods sold (1)

218,662

276,159

252,732

Gross margin

292,169

286,351

314,077

Operating expenses:

Research and development

113,100

121,392

135,945

Selling, general and administrative

73,643

71,995

79,778

Intangible asset amortization

3,538

3,591

4,155

Impairment of long-lived assets (2)

1,950

157,697

50,745

Impairment of goodwill and intangible assets (3)

-

-

93,010

Severance and restructuring expenses (4)

10,652

7,126

13,635

Other operating expenses (income), net

(247)

315

885

Total operating expenses (income), net

202,636

362,116

378,153

Operating income (loss)

89,533

(75,765)

(64,076)

Interest and other income (expense), net 

(9,593)

(6,402)

(7,599)

Income (loss) before provision for income taxes

79,940

(82,167)

(71,675)

Income tax provision (benefit) 

12,471

(10,024)

359

Net income (loss)

$          67,469

$         (72,143)

$        (72,034)

Earnings (loss) per share:

Basic

$              0.24

$             (0.25)

$            (0.25)

Diluted

$              0.23

$             (0.25)

$            (0.25)

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

Basic

285,526

284,588

282,992

Diluted

290,521

284,588

282,992

Dividends paid per share

$              0.30

$               0.30

$              0.28

SCHEDULE OF SPECIAL ITEMS

(Unaudited)

Three Months Ended

December 26, 

September 26, 

December 27, 

2015

2015

2014

(in thousands)

Cost of goods sold:

Intangible asset amortization

$          14,734

$           16,638

$          18,750

Accelerated depreciation (1)

2,032

43,631

8,895

  Total 

$          16,766

$           60,269

$          27,645

 Operating expenses: 

Intangible asset amortization

$            3,538

$             3,591

$            4,155

Impairment of long-lived assets (2)

1,950

157,697

50,745

Impairment of goodwill and intangible assets (3)

-

-

93,010

Severance and restructuring (4)

10,652

7,126

13,635

Other operating expenses (income), net 

(247)

315

885

  Total 

$          15,893

$         168,729

$        162,430

Interest and other expense (income), net 

$               595

$              (109)

$             (217)

 Total 

$               595

$              (109)

$             (217)

Income tax provision (benefit) :

 Fiscal year 2015 & 2014 research & development tax credits 

$          (2,475)

$                   -

$          (2,863)

  Total 

$          (2,475)

$                   -

$          (2,863)

(1) Building and equipment accelerated depreciation related to San Jose and Dallas manufacturing facilities.

(2) Includes impairment charges related to the San Antonio wafer manufacturing facility, MEMS wafer manufacturing equipment, end of line test equipment and certain research and development equipment.

(3) Includes impairment of goodwill and write-off of in-process research and development related to MEMS business unit.

(4) Includes severance charges associated with several reorganizations, primarily various business units and manufacturing operations.

 

CONSOLIDATED  BALANCE SHEETS

(Unaudited)

December 26, 

September 26, 

December 27, 

2015

2015

2014

(in thousands) 

ASSETS

Current assets:

Cash and cash equivalents

$ 1,648,518

$  1,508,347

$ 1,305,870

Short-term investments

124,955

100,285

75,012

Total cash, cash equivalents and short-term investments

1,773,473

1,608,632

1,380,882

Accounts receivable, net

231,180

282,471

258,506

Inventories

274,741

290,712

306,564

Deferred tax assets

-

50,604

59,794

Other current assets

47,235

46,627

67,244

Total current assets

2,326,629

2,279,046

2,072,990

Property, plant and equipment, net

770,548

805,580

1,195,323

Intangible assets, net

202,877

241,423

306,111

Goodwill

490,648

511,647

511,838

Other assets

64,105

36,056

36,997

Assets held for sale

82,674

71,134

1,268

       TOTAL ASSETS

$ 3,937,481

$  3,944,886

$ 4,124,527

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$      74,145

$       80,752

$      82,526

Income taxes payable

32,528

59,479

20,102

Accrued salary and related expenses

129,208

120,642

150,405

Accrued expenses

47,303

49,990

54,103

Deferred revenue on shipments to distributors

32,067

35,091

27,103

Total current liabilities

315,251

345,954

334,239

Long-term debt

1,000,000

1,000,000

1,000,000

Income taxes payable

419,881

419,805

363,251

Deferred tax liabilities

651

10,602

120,308

Other liabilities

52,874

53,724

64,988

Total liabilities

1,788,657

1,830,085

1,882,786

Stockholders' equity:

Common stock and capital in excess of par value

63,014

10,819

283

Retained earnings

2,103,339

2,121,582

2,259,997

Accumulated other comprehensive loss

(17,529)

(17,600)

(18,539)

Total stockholders' equity

2,148,824

2,114,801

2,241,741

        TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$ 3,937,481

$  3,944,886

$ 4,124,527

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

December 26, 

September 26, 

December 27, 

2015

2015

2014

(in thousands)

Cash flows from operating activities:

Net income (loss)

$      67,469

$     (72,143)

$    (72,034)

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

Stock-based compensation

18,419

16,963

20,776

Depreciation and amortization

49,082

102,053

71,625

Deferred taxes

18,816

(53,111)

(30,849)

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

(4,517)

(1,346)

1,844

Tax benefit (shortfall) related to stock-based compensation 

1,980

1,193

(229)

Impairment of long-lived assets

1,950

157,697

50,745

Impairment of goodwill and intangible assets

-

-

93,010

Excess tax benefit from stock-based compensation

(3,920)

(2,249)

(1,931)

Changes in assets and liabilities:

Accounts receivable

51,291

(3,627)

23,426

Inventories

15,811

(2,167)

(1,486)

Other current assets

(918)

4,796

1,009

Accounts payable

(7,659)

(9,776)

(12,007)

Income taxes payable

(26,875)

34,127

12,835

Deferred revenue on shipments to distributors

(3,024)

4,764

282

All other accrued liabilities

4,584

(59,835)

15,839

Net cash provided by (used in) operating activities

182,489

117,339

172,855

Cash flows from investing activities:

Payments for property, plant and equipment

(13,530)

(15,821)

(18,585)

Proceeds from sales of property, plant and equipment

49,709

606

24,467

Purchases of available-for-sale securities

(25,032)

(25,055)

-

Purchases of privately-held companies' securities

(6,008)

(1,000)

-

Other investing activities

2,380

-

-

Net cash provided by (used in) investing activities

7,519

(41,270)

5,882

Cash flows from financing activities:

Excess tax benefit from stock-based compensation 

3,920

2,249

1,931

Net issuance of restricted stock units

(7,722)

(4,822)

(6,822)

Proceeds from stock options exercised

48,477

8,970

8,323

Issuance of common stock under employee stock purchase program

14,350

-

18,653

Repurchase of common stock

(23,150)

(39,697)

(59,666)

Dividends paid

(85,712)

(85,387)

(79,169)

Net cash provided by (used in) financing activities

(49,837)

(118,687)

(116,750)

Net increase (decrease) in cash and cash equivalents

140,171

(42,618)

61,987

Cash and cash equivalents:

Beginning of period

1,550,965

1,550,965

1,243,883

End of period

$ 1,648,518

$  1,508,347

$ 1,305,870

Total cash, cash equivalents, and short-term investments

$ 1,773,473

$  1,608,632

$ 1,380,882

 

ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES

(Unaudited)

Three Months Ended

December 26, 

September 26, 

December 27, 

2015

2015

2014

(in thousands, except per share data)

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

GAAP gross profit

$        292,169

$         286,351

$        314,077

GAAP gross profit %

57.2%

50.9%

55.4%

Special items:

Intangible asset amortization

14,734

16,638

18,750

Accelerated depreciation (1)

2,032

43,631

8,895

 Total special items 

16,766

60,269

27,645

 GAAP gross profit excluding special items 

$        308,935

$         346,620

$        341,722

 GAAP gross profit % excluding special items 

60.5%

61.6%

60.3%

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

GAAP operating expenses

$        202,636

$         362,116

$        378,153

Special items:

Intangible asset amortization

3,538

3,591

4,155

Impairment of long-lived assets (2)

1,950

157,697

50,745

Impairment of goodwill and intangible assets (3)

-

-

93,010

Severance and restructuring (4)

10,652

7,126

13,635

Other operating expenses (income), net 

(247)

315

885

 Total special items 

15,893

168,729

162,430

 GAAP operating expenses excluding special items 

$        186,743

$         193,387

$        215,723

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

GAAP net income (loss)

$          67,469

$         (72,143)

$        (72,034)

Special items:

Intangible asset amortization

18,272

20,229

22,905

Accelerated depreciation (1)

2,032

43,631

8,895

Impairment of long-lived assets (2)

1,950

157,697

50,745

Impairment of goodwill and intangible assets (3) 

-

-

93,010

Severance and restructuring (4)

10,652

7,126

13,635

Other operating expenses (income), net 

(247)

315

885

Interest and other expense (income), net 

595

(109)

(217)

 Pre-tax total special items 

33,254

228,889

189,858

Fiscal year 2015 & 2014 research & development tax credits

(2,475)

-

(2,863)

Other income tax effects and adjustments (5)

(5,428)

(36,434)

(21,283)

 GAAP net income excluding special items 

$          92,820

$         120,312

$          93,678

 GAAP net income per share excluding special items: 

Basic

$              0.33

$               0.42

$              0.33

Diluted

$              0.32

$               0.42

$              0.33

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

Basic

285,526

284,588

282,992

Diluted (6)

290,521

288,897

287,954

(1) Building and equipment accelerated depreciation related to San Jose and Dallas manufacturing facilities.

(2) Includes impairment charges related to the San Antonio wafer manufacturing facility, MEMS wafer manufacturing equipment, end of line test equipment and certain research and development equipment.

(3) Includes impairment of goodwill and write-off of in-process research and development related to MEMS business unit.

(4) Includes severance charges associated with several reorganizations, primarily various business units and manufacturing operations.

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

(6) 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; impairment of goodwill and intangible assets; severance and restructuring; and other operating expenses (income), net; and fiscal year 2015 & 2014 research & development tax credit. 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; impairment of goodwill and intangible assets; severance and restructuring, and other operating expenses (income), net. In addition, it is an important component of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP operating expenses excluding special items to enable investors and analysts to evaluate our core business and its direct operating expenses.

GAAP Provision for Income Taxes Excluding Special Items

The use of a GAAP provision for income taxes excluding special items allows management to evaluate the provision for income taxes across different reporting periods on a consistent basis, independent of special items including the tax provision impact of pre-tax special items. In fiscal year 2016, we began using a long-term tax rate to compute the GAAP provision for income taxes excluding special items. This long-term tax rate considers the income tax impact of pre-tax special items; 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. We are using a long-term tax rate of 18%, which is 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. We will review the long-term tax rate on an annual basis and 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 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; impairment of goodwill and intangible assets; severance and restructuring; and other operating expenses (income), net; and fiscal year 2015 & 2014 research & development tax credit; tax effect of pre-tax special items and miscellaneous tax 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 2016 ending in March 2016, which includes revenue, gross margin and earnings per share, as well as the Company's expectation that it expects continued growth in Automotive, a sequential increase in Communications & Data Center and Consumer businesses and a seasonal uptick in Industrial in its third quarter of fiscal 2016.  Long term, the Company believes its strong technology franchise in power management positions it well for growth.  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 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 27, 2015 (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

Maxim is bringing new levels of analog integration to automotive, cloud data center, mobile consumer, and industrial applications. We're making technology smaller, smarter, and more energy efficient, so that our customers can meet the demands of an integrated world. Learn more at http://www.maximintegrated.com.

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

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SOURCE Maxim Integrated



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