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Maxim Integrated Reports Results For The First Quarter Of Fiscal 2015

- Revenue: $580 million

(PRNewswire) — Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $580 million for its first quarter of fiscal 2015 ended September 27, 2014, a 10% decrease from the $642 million revenue recorded in the prior quarter, and a 1% decrease year over year.

Logo for Maxim Integrated Products Inc.

Tunc Doluca, President and Chief Executive Officer, commented, "Our September quarter revenue performance was at the low end of our expectations, driven by weakness in smartphone revenue. This continued weakness was the catalyst for our decision to lower operating spending and reduce our manufacturing cost structure.  These actions will enable us to improve Maxim's profitability and focus our investment in opportunities with higher returns." Mr. Doluca continued, "I am confident in our strategy in mixed-signal and analog integration, which is bearing fruit, as evidenced by the strong year-over-year revenue growth performance of every one of our segments outside of Consumer."

Fiscal Year 2015 First Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the September quarter was $0.35. The results were affected by special items which primarily consisted of $24 million in pre-tax charges related to acquisitions, $13 million in pre-tax charges related to impairment of long-lived assets and other items, and a $22 million benefit for income taxes.  GAAP earnings per share, excluding special items was $0.38. 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 2015, total cash, cash equivalents and short term investments was $1.32 billion, a decrease of $53 million from the prior quarter. Notable items included:

Business Outlook
The Company's 90-day backlog at the beginning of the second fiscal quarter of 2015 was $379 million. Based on the beginning backlog and expected turns, results for the December 2014 quarter are expected to be as follows:

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

Dividend
A cash dividend of $0.28 per share will be paid on December 4, 2014, to stockholders of record on November 20, 2014.   

Conference Call
Maxim Integrated has scheduled a conference call on October 23, 2014, at 2:00 p.m. Pacific Time to discuss its financial results for the first quarter of fiscal 2015 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.  

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





September 27,


June 28,


September 28,





2014


2014


2013





(in thousands, except per share data)



Net revenues


$ 580,275


$ 642,467


$ 585,241



Cost of goods sold 


241,454


273,507


238,045



        Gross margin


338,821


368,960


347,196



Operating expenses:









    Research and development 


140,362


143,802


129,902



    Selling, general and administrative 


79,989


83,153


77,430



    Intangible asset amortization 


4,327


4,423


3,436



    Impairment of long-lived assets (1)


10,226


6,447


-



    Severance and restructuring expenses (2)


1,385


5,790


5,547



    Other operating expenses (income), net (3)


1,574


8,795


2,272



       Total operating expenses 


237,863


252,410


218,587



          Operating income


100,958


116,550


128,609



Interest and other income (expense), net (4)


(6,477)


(8,943)


(3,463)



Income before provision for income taxes


94,481


107,607


125,146



Provision (benefit) for income taxes (5,6)


(5,499)


22,814


22,026



       Net Income


$   99,980


$   84,793


$ 103,120












Earnings per share:









    Basic


$       0.35


$       0.30


$       0.36



    Diluted


$       0.35


$       0.29


$       0.36












Shares used in the calculation of earnings per share: 









    Basic


284,086


283,431


284,654



    Diluted 


289,430


289,487


290,260












Dividends paid per share 


$       0.28


$       0.26


$       0.26





















SCHEDULE OF SPECIAL ITEMS



(Unaudited)





Three Months Ended





September 27,


June 28,


September 28,





2014


2014


2013





(in thousands)



Cost of goods sold:









      Intangible asset amortization 


$   18,750


$   18,750


$     8,092



      Acquisition-related inventory write-up 


-


371


-



 Total 


$   18,750


$   19,121


$     8,092












 Operating expenses: 









      Intangible asset amortization


$     4,327


$     4,423


$     3,436



      Impairment of long-lived assets (1)


10,226


6,447


-



     Severance and restructuring (2) 


1,385


5,790


5,547



     Other operating expenses (income), net (3)


1,574


8,795


2,272



 Total 


$   17,512


$   25,455


$   11,255












      Interest and other expense (income), net (4) 


$           -


$     2,432


$           -



 Total 


$           -


$     2,432


$           -












Provision (benefit) for income taxes: 









 Fixed assets tax basis adjustment (5) 


$           -


$   (1,041)


$           -



 Reversal of tax reserves (6) 


(21,747)


-


-



 Total 


$ (21,747)


$   (1,041)


$           -












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



(2) include severance charges associated with the reorganizaton of various business units and manufacturing operations.



(3) Other operating expenses (income), net are primarily for loss (gain) relating to sale of land and buildings, reserve for uncollectible note related to a divestiture, expected loss on rent expense, and contingent consideration adjustments related to certain acquisitions.



(4) Includes impairment of investment in a privately-held company.



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



(6) Reversal of tax reserves related to the favorable settlement of a foreign tax issue.





 

 










CONSOLIDATED  BALANCE SHEETS



(Unaudited)




September 27,


June 28,


September 28,




2014


2014


2013




(in thousands) 



ASSETS



Current assets:








    Cash and cash equivalents

$1,243,883


$1,322,472


$1,009,547



    Short-term investments

75,094


49,953


25,036



        Total cash, cash equivalents and short-term investments

1,318,977


1,372,425


1,034,583



    Accounts receivable, net 

281,932


295,828


297,888



    Inventories

305,108


289,292


278,218



    Deferred tax assets

54,379


74,597


54,854



    Other current assets

67,383


54,560


116,225



        Total current assets

2,027,779


2,086,702


1,781,768



Property, plant and equipment, net

1,303,861


1,331,519


1,374,544



Intangible assets, net

337,917


360,994


145,618



Goodwill

595,441


596,637


422,004



Other assets

40,127


29,766


40,063



       TOTAL ASSETS

$4,305,125


$4,405,618


$3,763,997











LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:








    Accounts payable 

$     96,347


$   102,076


$   101,060



    Income taxes payable

20,122


20,065


21,799



    Accrued salary and related expenses

126,624


186,732


124,954



    Accrued expenses 

65,216


63,656


55,561



    Current portion of long-term debt

-


372


4,804



    Deferred income on shipments to distributors

26,821


25,734


27,179



        Total current liabilities

335,130


398,635


335,357



Long-term debt

1,001,026


1,001,026


500,955



Income taxes payable

350,396


362,802


294,728



Deferred tax liabilities

145,597


159,879


205,221



Other liabilities

61,572


53,365


29,300



        Total liabilities 

1,893,721


1,975,707


1,365,561











Stockholders' equity:








    Common stock par value

284


285


283



  Additional paid-in capital 

-


23,005


-



    Retained earnings 

2,430,194


2,423,794


2,412,262



    Accumulated other comprehensive loss

(19,074)


(17,173)


(14,109)



        Total stockholders' equity

2,411,404


2,429,911


2,398,436



        TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$4,305,125


$4,405,618


$3,763,997










 

 


CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)




Three Months Ended




September 27,


June 28,


September 28,




2014


2014


2013




(in thousands)



Cash flows from operating activities: 








Net income

$     99,980


$     84,793


$   103,120



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








      Stock-based compensation 

22,420


21,786


18,740



      Depreciation and amortization 

63,693


64,391


51,133



      Deferred taxes 

6,207


(9,501)


25,529



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

244


1,068


36



      Tax benefit (shortfall) related to stock-based compensation 

1,610


942


(3,488)



      Impairment of long-lived assets

10,226


6,447


-



      Excess tax benefit from stock-based compensation

(2,249)


(4,897)


(1,697)



      Impairment of investments in privately-held companies

-


6,537


-



      Changes in assets and liabilities: 








          Accounts receivable 

13,896


8,300


(12,450)



          Inventories 

(15,650)


1,226


(2,301)



          Other current assets 

(24,974)


26,579


(18,546)



          Accounts payable 

4,455


5,203


(9,162)



          Income taxes payable 

(12,289)


9,853


11,393



          Deferred revenue on shipments to distributors 

1,087


1,475


622



          All other accrued liabilities 

(51,659)


9,882


(67,035)



Net cash provided by (used in) operating activities 

116,997


234,084


95,894











Cash flows from investing activities: 








          Purchase of property, plant and equipment

(31,686)


(23,654)


(36,329)



          Proceeds from sales of property, plant and equipment

212


1,627


3,048



          Purchases of available-for-sale securities

(25,142)


(49,953)


-



Net cash provided by (used in) investing activities 

(56,616)


(71,980)


(33,281)











Cash flows from financing activities: 








         Excess tax benefit from stock-based compensation

2,249


4,897


1,697



         Repayment of notes payable

(437)


(2,430)


-



         Issuance of debt

-


-


100



         Net issuance of restricted stock units

(8,038)


(8,922)


(6,966)



         Proceeds from stock options exercised

9,704


26,232


5,247



         Repurchase of common stock

(62,685)


(40,744)


(154,386)



         Issuance of ESPP shares under employee stock purchase program

-


23,713


-



         Dividends paid

(79,763)


(73,626)


(73,744)



Net cash provided by (used in) financing activities 

(138,970)


(70,880)


(228,052)











Net increase (decrease) in cash and cash equivalents 

(78,589)


91,224


(165,439)



Cash and cash equivalents: 








          Beginning of period

1,322,472


1,231,248


1,174,986



          End of period

$1,243,883


$1,322,472


$1,009,547











Total cash, cash equivalents and short-term investments

$1,318,977


$1,372,425


$1,034,583










 

 











ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES



(Unaudited)





Three Months Ended





September 27,


June 28,


September 28,





2014


2014


2013





(in thousands, except per share data)



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









GAAP gross profit


$ 338,821


$ 368,960


$ 347,196



GAAP gross profit %


58.4%


57.4%


59.3%












Special items:









      Intangible asset amortization


18,750


18,750


8,092



      Acquisition-related inventory write-up


-

-

371


-



 Total special items 


18,750


19,121


8,092



 GAAP gross profit excluding special items 


$ 357,571


$ 388,081


$ 355,288



 GAAP gross profit % excluding special items 


61.6%


60.4%


60.7%












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









GAAP operating expenses


$ 237,863


$ 252,410


$ 218,587












Special items:









      Intangible asset amortization 


4,327


4,423


3,436



      Impairment of long-lived assets (1)


10,226


6,447


-



     Severance and restructuring (2) 


1,385


5,790


5,547



     Other operating expenses (income), net (3) 


1,574


8,795


2,272



 Total special items 


17,512


25,455


11,255



 GAAP operating expenses excluding special items 


$ 220,351


$ 226,955


$ 207,332












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









GAAP net income


$   99,980


$   84,793


$ 103,120












Special items:









      Intangible asset amortization 


23,077


23,173


11,528



      Acquisition-related inventory write-up 


-


371


-



      Impairment of long-lived assets (1)


10,226


6,447


-



     Severance and restructuring (2) 


1,385


5,790


5,547



     Other operating expenses (income), net (3) 


1,574


8,795


2,272



      Interest and other expense, net (4) 


-


2,432


-



              Pre-tax total special items 


36,262


47,008


19,347



     Tax effect of special items 


(5,873)


(6,850)


(2,981)



     Fixed asset tax basis adjustment (5) 


-


(1,041)


-



   Reversal of tax reserves (6) 


(21,747)


-


-



 GAAP net income excluding special items 


$ 108,622


$ 123,910


$ 119,486












 GAAP net income per share excluding special items: 









    Basic 


$   0.38


$   0.44


$   0.42



    Diluted 


$   0.38


$   0.43


$   0.41












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









    Basic


284,086


283,431


284,654



    Diluted 


289,430


289,487


290,260












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



(2) include severance charges associated with the reorganizaton of various business units and manufacturing operations.



(3) Other operating expenses (income), net are primarily for loss (gain) relating to sale of land and buildings, reserve for uncollectible note related to a divestiture, expected loss on rent expense, and contingent consideration adjustments related to certain acquisitions.



(4) Includes impairment of investment in a privately-held company.



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



(6) Reversal of tax reserves related to the favorable settlement of a foreign tax issue.





 

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; contingent consideration adjustments relating to certain acquisitions; expected loss on rent expense; reserve for uncollectible note related to a divestiture;  loss (gain) relating to sale of land and buildings; impairment of investments in privately-held companies; tax provision impacts due to fixed asset tax basis adjustments; and reversal of tax reserves related to a favorable settlement of a foreign tax issue. 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; acquisition-related inventory write-up; impairment of long-lived assets; severance and restructuring; contingent consideration adjustments relating to certain acquisitions; expected loss on rent expense; reserve for uncollectible note related to a divestiture;  loss (gain) relating to sale of land and buildings and impairment of investments in privately-held companies. 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; contingent consideration adjustments relating to certain acquisitions; expected loss on rent expense; reserve for uncollectible note related to a divestiture;  loss (gain) relating to sale of land and buildings; impairment of investments in privately-held companies; tax provision impacts due to fixed asset tax basis adjustments; and reversal of tax reserves related to a favorable settlement of a foreign tax issue. 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 2015 ending in December 2014, which includes revenue, gross margin and earnings per share, as well as the Company's belief that, its decisions to lower operating spending R&D spending and reduce its manufacturing cost structure, will enable it to improve Maxim's profitability and enable focused investment in opportunities with higher returns. 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 28, 2014 (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 the leader in analog integration. From mobile to industrial solutions, we're making analog smaller, smarter, and more energy efficient. Learn more at www.maximintegrated.com.

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

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SOURCE Maxim Integrated Products, Inc.

Contact:
Maxim Integrated Products, Inc.
Web: http://www.maxim-ic.com