Maxim Integrated Reports Results For The Third Quarter Of Fiscal 2014

- Revenue: $606 million

- Gross Margin: 56.1% GAAP (60.1% excluding special items)

- EPS: $0.42 GAAP ($0.43 excluding special items)

- Cash, cash equivalents, and short term investments: $1.23 billion

- Fiscal fourth quarter revenue outlook: $635 million to $665 million

24 Apr, 2014, 16:01 ET from Maxim Integrated Products, Inc.

SAN JOSE, Calif., April 24, 2014 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $606 million for its third quarter of fiscal 2014 ended March 29, 2014, a 2% decrease from the $620 million revenue recorded in the prior quarter.

Tunc Doluca, President and Chief Executive Officer, commented, "We achieved better-than-seasonal results for our mix of businesses, driven by growth in automotive, industrial and communications, as market requirements converge on the need for lower power, higher functionality, and more integrated designs. " Mr. Doluca continued, "Looking forward, we expect continued growth in these businesses, accompanied by strength in mobility."

Fiscal Year 2014 Third Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the March quarter was $0.42. Earnings per share included an intellectual property licensing income amount of $17 million, included in Interest and Other Income. 

The results were affected by special items which primarily consisted of a $35 million pre-tax charge for items related to acquisitions and a $35 million benefit for income taxes. GAAP earnings per share, excluding special items was $0.43. 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 third quarter of fiscal 2014, total cash, cash equivalents and short term investments was $1.23 billion, an increase of $81 million from the prior quarter. Notable items included:

  • Cash flow from operations: $212 million
  • Net capital expenditures: $26 million
  • Dividends: $73 million ($0.26 per share)
  • Stock repurchases: $51 million

Business Outlook

The Company's 90-day backlog at the beginning of the fourth fiscal quarter of 2014 was $413 million. Based on the beginning backlog and expected turns, results for the June 2014 quarter are expected to be as follows:

  • Revenue: $635 million to $665 million
  • Gross Margin: 58% to 60% GAAP (61% to 63% excluding special items)
  • EPS: $0.38 to $0.42 GAAP ($0.45 to $0.49 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 June 5, 2014, to stockholders of record on May 22, 2014.

Conference Call

Maxim Integrated has scheduled a conference call on April 24, 2014, at 2:00 p.m. Pacific Time to discuss its financial results for the third quarter of fiscal 2014 and its business outlook. To listen via telephone, dial (866) 804-3547 (toll free) or (703) 639-1328.  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

March 29,

December 28,

March 30,

2014

2013

2013

(in thousands, except per share data)

Net revenues

$  605,681

$       620,274

$  604,884

Cost of goods sold

265,744

291,602

228,782

        Gross margin

339,937

328,672

376,102

Operating expenses:

    Research and development

141,493

142,971

134,138

    Selling, general and administrative

80,680

83,471

81,954

    Intangible asset amortization

4,863

4,968

3,903

    Impairment of long-lived assets

-

5,197

-

    Severance and restructuring expenses (1)

3,338

10,227

151

    Acquisition-related costs

(88)

4,137

-

    Other operating expenses (income), net (2)

2,913

7,307

1,678

       Total operating expenses 

233,199

258,278

221,824

          Operating income

106,738

70,394

154,278

Interest and other income (expense), net (3)

5,174

(5,833)

(2,669)

Income before provision for income taxes

111,912

64,561

151,609

Provision (benefit) for income taxes (4)

(10,632)

20,208

22,824

    Income from continuing operations

122,544

44,353

128,785

    Income from discontinued operations, net of tax 

-

-

2,603

    Net income

$  122,544

$         44,353

$  131,388

Earnings per share: Basic

    From continuing operations

$        0.43

$             0.16

$        0.44

    From discontinued operations, net of tax

-

-

0.01

    Basic

$        0.43

$             0.16

$        0.45

Earnings per share: Diluted

    From continuing operations

$        0.42

$             0.15

$        0.43

    From discontinued operations, net of tax

-

-

0.01

    Diluted

$        0.42

$             0.15

$        0.44

Shares used in the calculation of earnings per share: 

    Basic

282,627

282,664

292,888

    Diluted 

288,575

288,565

300,082

Dividends paid per share 

$        0.26

$             0.26

$        0.24

(1)  Includes severance, retention and lease abandonment charges related to acquisitions, and severance charges related to the reorganization of various business units and manufacturing operations.

(2) Other operating expenses (income), net are primarily for legal settlement, in-process research and development abandoned, contingent consideration adjustments related to certain acquisitions and legal expenses related to Volterra acquisition.

(3) Includes impairment of investments in privately-held companies.

(4) Includes one-time fixed asset tax basis adjustments relating to prior year depreciation expense.

 

 

SCHEDULE OF SPECIAL EXPENSE ITEMS

(Unaudited)

Three Months Ended

March 29,

December 28,

March 30,

2014

2013

2013

(in thousands)

Cost of goods sold:

      Intangible asset amortization

$    18,542

$         19,098

$      7,777

      Acquisition-related inventory write-up

5,518

13,066

-

 Total 

$    24,060

$         32,164

$      7,777

 Operating expenses: 

   Intangible asset amortization

$      4,863

$           4,968

$      3,903

   Impairment of long-lived assets

-

5,197

-

   Severance and restructuring (1)

3,338

10,227

151

    Acquisition-related costs

(88)

4,137

-

   Other operating expenses (income), net (2)

2,913

7,307

1,678

 Total 

$    11,026

$         31,836

$      5,732

     Interest and other expense (income), net (3) 

$      3,723

$                   -

$              -

 Total 

$      3,723

$                   -

$              -

Provision (benefit) for income taxes:

     Fixed assets tax basis adjustment (4) 

$   (34,562)

$                    -

$              -

     Research & development tax credits 

-

-

(3,899)

 Total 

$   (34,562)

$                    -

$     (3,899)

Discontinued operations:

     Income from discontinued operations, net of tax 

$              -

$                    -

$     (2,603)

 Total 

$              -

$                    -

$     (2,603)

(1)  Includes severance, retention and lease abandonment charges related to acquisitions, and severance charges related to the reorganization of various business units and manufacturing operations.

(2) Other operating expenses (income), net are primarily for legal settlement, in-process research and development abandoned, contingent consideration adjustments related to certain acquisitions and legal expenses related to Volterra acquisition.

(3) Includes impairment of investments in privately-held companies.

(4) Includes one-time fixed asset tax basis adjustments relating to prior year depreciation expense.

 

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

(Unaudited)

Three Months Ended March 29, 2014

  Stock Options

  Restricted Stock Units

  Employee Stock Purchase Plan

  Total

Cost of goods sold 

$                 451

$                  2,108

$                    594

$     3,153

Research and development expense

2,124

7,917

1,623

11,664

Selling, general and administrative expense

1,391

5,186

663

7,240

       Total

$              3,966

$                15,211

$                 2,880

$   22,057

Three Months Ended December 28, 2013

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 March 30, 2013

Cost of goods sold 

$                 337

$                  2,120

$                    598

$     3,055

Research and development expense

1,440

7,116

1,480

10,036

Selling, general and administrative expense

1,157

4,764

601

6,522

       Total

$              2,934

$                14,000

$                 2,679

$   19,613

 

CONSOLIDATED  BALANCE SHEETS

(Unaudited)

March 29,

December 28,

March 30,

2014

2013

2013

(in thousands) 

ASSETS

Current assets:

    Cash and cash equivalents

$   1,231,248

$    1,149,909

$   1,547,980

    Short-term investments

-

-

25,095

        Total cash, cash equivalents and short-term investments

1,231,248

1,149,909

1,573,075

    Accounts receivable, net 

304,128

288,285

300,046

    Inventories

290,518

297,234

268,018

    Deferred tax assets

74,038

69,154

81,809

    Other current assets

79,346

85,554

113,010

        Total current assets

1,979,278

1,890,136

2,335,958

Property, plant and equipment, net

1,355,268

1,372,393

1,368,905

Intangible assets, net

384,167

404,652

165,591

Goodwill

597,676

596,898

422,004

Other assets

38,176

42,803

41,660

              TOTAL ASSETS

$   4,354,565

$    4,306,882

$   4,334,118

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

    Accounts payable 

$        94,315

$         99,009

$      114,629

    Income taxes payable

20,720

21,717

20,200

    Accrued salary and related expenses

168,336

140,738

182,894

    Accrued expenses 

81,232

91,145

59,075

    Current portion of long-term debt

2,526

2,965

304,314

    Deferred income on shipments to distributors

24,259

25,542

25,851

        Total current liabilities

391,388

381,116

706,963

Long-term debt

1,000,871

1,000,871

503,573

Income taxes payable

352,294

337,053

271,815

Deferred tax liabilities

171,431

202,435

213,138

Other liabilities

37,977

29,343

26,063

        Total liabilities 

1,953,961

1,950,818

1,721,552

Stockholders' equity:

    Common stock and capital in excess of par value

283

283

292

    Retained earnings 

2,412,627

2,368,350

2,629,895

    Accumulated other comprehensive loss

(12,306)

(12,569)

(17,621)

        Total stockholders' equity

2,400,604

2,356,064

2,612,566

              TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$   4,354,565

$    4,306,882

$   4,334,118

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

March 29,

December 28,

March 30,

2014

2013

2013

(in thousands)

Cash flows from operating activities: 

    Net income

$             122,544

$         44,353

$      131,388

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

        Stock-based compensation 

22,057

22,869

19,613

        Depreciation and amortization 

64,665

64,404

50,391

        Deferred taxes 

(36,482)

(11,705)

18,392

        In-process research and development written-off

2,580

-

2,800

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

818

265

(2,397)

        Tax benefit (shortfall) related to stock-based compensation 

3,204

(726)

1,317

        Impairment of long-lived assets

-

5,197

-

        Impairment of investments in privately-held companies

3,723

-

-

        Excess tax benefit from stock-based compensation 

(5,139)

(2,459)

(4,297)

        Loss (gain) on sale of discontinued operations

-

-

(3,285)

        Changes in assets and liabilities: 

            Accounts receivable 

(15,566)

33,056

(35,501)

            Inventories 

7,717

14,030

(12,143)

            Other current assets 

7,194

30,330

(14,653)

            Accounts payable 

(4,044)

(3,252)

10,453

            Income taxes payable 

14,244

19,002

9,100

            Deferred revenue on shipments to distributors 

(1,283)

(1,637)

489

            All other accrued liabilities 

25,466

20,704

40,026

Net cash provided by (used in) operating activities 

211,698

234,431

211,693

Cash flows from investing activities: 

        Purchase of property, plant and equipment

(26,407)

(46,133)

(54,945)

        Proceeds from sales of property, plant and equipment

618

-

10,199

        Payments in connection with business acquisition, net of cash acquired

(5,750)

(453,506)

-

        Proceeds from maturity of available-for-sale securities

-

27,000

50,000

Net cash provided by (used in) investing activities 

(31,539)

(472,639)

5,254

Cash flows from financing activities: 

        Excess tax benefit from stock-based compensation

5,139

2,459

4,297

        Contingent consideration paid

(104)

(4,601)

-

        Dividends paid

(73,481)

(73,324)

(70,421)

        Repayment of notes payable

(439)

(1,839)

(903)

        Issuance of debt

-

497,795

491,145

        Debt issuance cost

-

(3,431)

-

        Repurchase of common stock

(51,083)

(59,101)

(66,330)

        Issuance of ESPP shares under employee stock purchase program 

-

19,096

-

        Net issuance of restricted stock units

(8,390)

(7,106)

(7,941)

        Proceeds from stock options exercised

29,538

8,622

26,079

Net cash provided by (used in) financing activities 

(98,820)

378,570

375,926

Net increase (decrease) in cash and cash equivalents 

81,339

140,362

592,873

Cash and cash equivalents: 

          Beginning of period

1,149,909

1,009,547

955,107

          End of period

$          1,231,248

$    1,149,909

$   1,547,980

Total cash, cash equivalents, and short-term investments

$          1,231,248

$    1,149,909

$   1,573,075

 

ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES

(Unaudited)

Three Months Ended

March 29,

December 28,

March 30,

2014

2013

2013

(in thousands, except per share data)

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

GAAP gross profit

$     339,937

$       328,672

$     376,102

GAAP gross profit %

56.1%

53.0%

62.2%

Special items:

      Intangible asset amortization 

18,542

19,098

7,777

      Acquisition-related inventory write-up

5,518

13,066

-

 Total special items 

24,060

32,164

7,777

 GAAP gross profit excluding special items 

$     363,997

$       360,836

$     383,879

 GAAP gross profit % excluding special items 

60.1%

58.2%

63.5%

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

GAAP operating expenses

$     233,199

$       258,278

$     221,824

Special items:

    Intangible asset amortization 

4,863

4,968

3,903

    Impairment of long-lived assets 

-

5,197

-

    Severance and restructuring (1) 

3,338

10,227

151

     Acquisition-related costs

(88)

4,137

-

   Other operating expenses (income), net (2) 

2,913

7,307

1,678

 Total special items 

11,026

31,836

5,732

 GAAP operating expenses excluding special items 

$     222,173

$       226,442

$     216,092

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

GAAP net income

$     122,544

$         44,353

$     131,388

Special items:

      Intangible asset amortization

23,405

24,066

11,680

      Acquisition-related inventory write-up

5,518

13,066

-

      Impairment of long-lived assets

-

5,197

-

     Severance and restructuring (1) 

3,338

10,227

151

     Acquisition-related costs

(88)

4,137

-

     Other operating expenses (income), net (2) 

2,913

7,307

1,678

     Interest and other expense, net (3) 

3,723

-

-

                     Pre-tax total special items 

38,809

64,000

13,509

     Tax effect of special items 

(3,658)

(5,894)

(3,806)

     Fixed asset tax basis adjustment (4) 

(34,562)

-

-

     Research & development tax credits 

-

-

(3,899)

     Discontinued operations, net of tax 

-

-

(2,603)

 GAAP net income excluding special items 

$     123,133

$       102,459

$     134,589

 GAAP net income per share excluding special items: 

    Basic 

$           0.44

$             0.36

$           0.46

    Diluted 

$           0.43

$             0.36

$           0.45

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

    Basic

282,627

282,664

292,888

    Diluted 

288,575

288,565

300,082

(1)  Includes severance, retention and lease abandonment charges related to acquisitions, and severance charges related to the reorganization of various business units and manufacturing operations.

(2) Other operating expenses (income), net are primarily for legal settlement, in-process research and development abandoned, contingent consideration adjustments related to certain acquisitions and legal expenses related to Volterra acquisition.

(3) Includes impairment of investments in privately-held companies.

(4) Includes one-time fixed asset tax basis adjustments relating to prior year depreciation expense.

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; legal settlement; in-process research and development abandoned; legal expenses related to Volterra; impairment of investments in privately-held companies; tax provision impacts due to fixed asset tax basis adjustments; research and development tax credits; and discontinued operations, net of tax. 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; in-process research and development abandoned; legal settlement; and legal expenses related to Volterra. 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; legal settlement; in-process research and development abandoned; legal expenses related to Volterra; impairment of investments in privately-held companies; research and development tax credits; discontinued operations, net of tax; and the tax provision impacts due to fixed asset tax basis 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 fourth quarter of fiscal 2014 ending in June 2014, which includes revenue, gross margin and earnings per share, as well as looking forward, the Company's expects continued growth in its automotive, industrial and communications businesses, accompanied by strength in mobility." 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

Photo - http://photos.prnewswire.com/prnh/20120912/SF71654LOGO

SOURCE Maxim Integrated Products, Inc.



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