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Maxim Integrated Reports Results For The Second Quarter Of Fiscal 2015

- Revenue: $567 million

(PRNewswire) —  Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $567 million for its second quarter of fiscal 2015 ended December 27, 2014, a 2% decrease from the $580 million revenue recorded in the prior quarter, and a 9% decrease year over year.

Logo for Maxim Integrated Products Inc.

Tunc Doluca, President and Chief Executive Officer, commented, "We are pleased with our December quarter revenue performance, driven by our diversification in Consumer and continued strength in our Automotive business." Mr. Doluca continued, "We are on track to achieve our previously announced cost reduction plans, which will enable us to reduce spending while we focus investment in our growth businesses. We also decided to stop investment in Consumer MEMS and Touch technology."

Fiscal Year 2015 Second Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the December quarter was a $0.25 loss. The results were affected by pre-tax special items which primarily consisted of $138 million in charges related to impairment of goodwill and other assets  related to our MEMS business,  $28 million in charges related to restructuring activities and $23 million in charges related to acquisitions.  GAAP earnings per share, excluding special items was $0.33. 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 2015, total cash, cash equivalents and short term investments was $1.38 billion, an increase of $62 million from the prior quarter. Notable items included:

Business Outlook
The Company's 90-day backlog at the beginning of the third fiscal quarter of 2015 was $378 million. Based on the beginning backlog and expected turns, results for the March 2015 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 March 5, 2015, to stockholders of record on February 19, 2015.   

Conference Call
Maxim Integrated has scheduled a conference call on January 22, 2015, at 2:00 p.m. Pacific Time to discuss its financial results for the second 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





December 27,


September 27,


December 28,





2014


2014


2013





(in thousands, except per share data)



Net revenues


$       566,809


$        580,275


$       620,274



Cost of goods sold (1)


252,732


241,454


291,602



        Gross margin


314,077


338,821


328,672



Operating expenses:









    Research and development 


135,945


140,362


142,971



    Selling, general and administrative 


79,778


79,989


83,471



    Intangible asset amortization 


4,155


4,327


4,968



    Impairment of long-lived assets (2)


50,745


10,226


5,197



    Impairment of goodwill and intangible assets (3)


93,010


-


-



    Severance and restructuring expenses (4)


13,635


1,385


10,227



Acquisition-related costs


-


-


4,137



    Other operating expenses (income), net  (5)


885


1,574


7,307



       Total operating expenses 


378,153


237,863


258,278



          Operating income (loss)


(64,076)


100,958


70,394



Interest and other income (expense), net


(7,599)


(6,477)


(5,833)



Income (loss) before provision for income taxes


(71,675)


94,481


64,561



Provision (benefit) for income taxes (6)


359


(5,499)


20,208



       Net Income (loss)


$       (72,034)


$          99,980


$         44,353












Earnings (loss) per share:









    Basic


$           (0.25)


$              0.35


$             0.16



    Diluted


$           (0.25)


$              0.35


$             0.15












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









    Basic


282,992


284,086


282,664



    Diluted 


282,992


289,430


288,565












Dividends paid per share 


$             0.28


$              0.28


$             0.26





















SCHEDULE OF SPECIAL ITEMS



(Unaudited)





Three Months Ended





December 27,


September 27,


December 28,





2014


2014


2013





(in thousands)



Cost of goods sold:









      Intangible asset amortization 


$         18,750


$          18,750


$           19,098



      Accelerated depreciation (1)


8,895


-


-



      Acquisition-related inventory write-up


-


-


13,066



 Total 


$         27,645


$          18,750


$           32,164












 Operating expenses: 









      Intangible asset amortization


$           4,155


$            4,327


$             4,968



      Impairment of long-lived assets (2)


50,745


10,226


5,197



      Impairment of goodwill and intangible assets (3)


93,010


-


-



     Severance and restructuring (4) 


13,635


1,385


10,227



 Acquisition-related costs 


-


-


4,137



     Other operating expenses (income), net (5)


885


1,574


7,307



 Total 


$       162,430


$          17,512


$         31,836












      Interest and other expense (income), net 


$            (217)


$                    -


$                   -



 Total 


$            (217)


$                    -


$                   -












Provision (benefit) for income taxes: 









 Reversal of tax reserves (6) 


$                  -


$        (21,747)


$                  -



 Fiscal year 2014 research & development tax credits 


(2,863)


-


-



 Total 


$         (2,863)


$        (21,747)


$                  -












(1) Accelerated depreciation related to San Jose wafer manufacturing building and equipment.



(2) Includes impairment charges related to MEMS and non-MEMS wafer manufacturing equipment and end of line test 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 closure of San Jose wafer manufacturing facility and  reorganization of various business units, and severance & retention and lease abandonment charges related to Volterra acquisition.



(5) Includes loss related to sale of land & buildings, expected loss on rent expense for vacated office space, legal settlement,  and contingent consideration adjustments related to certain acquisitions.



(6) Includes reversal of tax reserves related to a favorable settlement of a foreign tax issue.







 

 










CONSOLIDATED  BALANCE SHEETS



(Unaudited)




December 27,


September 27,


December 28,




2014


2014


2013




(in thousands) 



ASSETS



Current assets:








    Cash and cash equivalents

$1,305,870


$ 1,243,883


$1,149,909



    Short-term investments

75,012


75,094


-



        Total cash, cash equivalents and short-term investments

1,380,882


1,318,977


1,149,909



    Accounts receivable, net 

258,506


281,932


288,285



    Inventories

306,564


305,108


297,234



    Deferred tax assets

59,794


54,379


69,154



    Other current assets

67,244


67,383


85,554



        Total current assets

2,072,990


2,027,779


1,890,136



Property, plant and equipment, net

1,195,323


1,303,861


1,372,393



Intangible assets, net

306,111


337,917


404,652



Goodwill

511,838


595,441


596,898



Other assets

38,265


40,127


42,803



       TOTAL ASSETS

$4,124,527


$ 4,305,125


$4,306,882











LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:








    Accounts payable 

$     82,526


$      96,347


$     99,009



    Income taxes payable

20,102


20,122


21,717



    Accrued salary and related expenses

150,405


126,624


140,738



    Accrued expenses 

54,103


65,216


94,110



    Deferred revenue on shipments to distributors

27,103


26,821


25,542



        Total current liabilities

334,239


335,130


381,116



Long-term debt

1,000,000


1,001,026


1,000,871



Income taxes payable

363,251


350,396


337,053



Deferred tax liabilities

120,308


145,597


202,435



Other liabilities

64,988


61,572


29,343



        Total liabilities 

1,882,786


1,893,721


1,950,818











Stockholders' equity:








    Common stock and capital in excess of par value

283


284


283



    Retained earnings 

2,259,997


2,430,194


2,368,350



    Accumulated other comprehensive loss

(18,539)


(19,074)


(12,569)



        Total stockholders' equity

2,241,741


2,411,404


2,356,064



        TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$4,124,527


$ 4,305,125


$4,306,882










 

 


CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)




Three Months Ended




December 27,


September 27,


December 28,




2014


2014


2013




(in thousands)



Cash flows from operating activities: 








Net income (loss)

$    (72,034)


$      99,980


$     44,353



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








      Stock-based compensation 

20,776


22,420


22,869



      Depreciation and amortization 

71,625


63,693


64,404



      Deferred taxes 

(30,849)


6,207


(11,705)



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

1,844


244


265



      Tax benefit (shortfall) related to stock-based compensation 

(229)


1,610


(726)



      Impairment of long-lived assets

50,745


10,226


5,197



      Impairment of goodwill and intangible assets

93,010


-


-



      Excess tax benefit from stock-based compensation

(1,931)


(2,249)


(2,459)



      Changes in assets and liabilities: 








          Accounts receivable 

23,426


13,896


33,056



          Inventories 

(1,486)


(15,650)


14,030



          Other current assets 

1,009


(24,974)


30,330



          Accounts payable 

(12,007)


4,455


(3,252)



          Income taxes payable 

12,835


(12,289)


19,002



          Deferred revenue on shipments to distributors 

282


1,087


(1,637)



          All other accrued liabilities 

15,839


(51,659)


20,704



Net cash provided by (used in) operating activities 

172,855


116,997


234,431











Cash flows from investing activities: 








          Purchase of property, plant and equipment

(18,585)


(31,686)


(46,133)



          Proceeds from sales of property, plant and equipment

24,467


212


-



          Payments in connection with business acquisition, net of cash acquired

-


-


(453,506)



          Purchases of available-for-sale securities

-


(25,142)


-



          Proceeds from maturity of available-for-sale securities

-


-


27,000



Net cash provided by (used in) investing activities 

5,882


(56,616)


(472,639)











Cash flows from financing activities: 








         Excess tax benefit from stock-based compensation

1,931


2,249


2,459



 Contingent consideration paid

-


-


(4,601)



         Repayment of notes payable

-


(437)


(1,839)



         Issuance of debt

-


-


497,795



 Debt issuance cost

-


-


(3,431)



         Net issuance of restricted stock units

(6,822)


(8,038)


(7,106)



         Proceeds from stock options exercised

8,323


9,704


8,622



         Issuance of ESPP shares under employee stock purchase program

18,653


-


19,096



         Repurchase of common stock

(59,666)


(62,685)


(59,101)



         Dividends paid

(79,169)


(79,763)


(73,324)



Net cash provided by (used in) financing activities 

(116,750)


(138,970)


378,570



Net increase (decrease) in cash and cash equivalents 

61,987


(78,589)


140,362



Cash and cash equivalents: 








          Beginning of period

1,243,883


1,322,472


1,009,547



          End of period

$1,305,870


$ 1,243,883


$1,149,909











Total cash, cash equivalents and short-term investments

$1,380,882


$ 1,318,977


$1,149,909










 











ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES



(Unaudited)





Three Months Ended





December 27,


September 27,


December 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


$       314,077


$        338,821


$       328,672



GAAP gross profit %


55.4%


58.4%


53.0%












Special items:









      Intangible asset amortization


18,750


18,750


19,098



      Accelerated depreciation (1)


8,895


-


-



      Acquisition-related inventory write-up


-


-


13,066



 Total special items 


27,645


18,750


32,164



 GAAP gross profit excluding special items 


$       341,722


$        357,571


$       360,836



 GAAP gross profit % excluding special items 


60.3%


61.6%


58.2%












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









GAAP operating expenses


$       378,153


$        237,863


$       258,278












Special items:









      Intangible asset amortization 


4,155


4,327


4,968



      Impairment of long-lived assets (2)


50,745


10,226


5,197



      Impairment of goodwill and intangible assets (3)


93,010


-


-



     Severance and restructuring (4) 


13,635


1,385


10,227



 Acquisition-related costs 


-


-


4,137



     Other operating expenses (income), net (5) 


885


1,574


7,307



 Total special items 


162,430


17,512


31,836



 GAAP operating expenses excluding special items 


$       215,723


$        220,351


$       226,442












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









GAAP net income (loss)


$       (72,034)


$          99,980


$         44,353












Special items:









      Intangible asset amortization 


22,905


23,077


24,066



      Accelerated depreciation (1)


8,895


-


-



 Acquisition-related inventory write-up


-


-


13,066



      Impairment of long-lived assets (2)


50,745


10,226


5,197



      Impairment of goodwill and intangible assets (3)


93,010


-


-



     Severance and restructuring (4) 


13,635


1,385


10,227



 Acquisition-related costs 


-


-


4,137



     Other operating expenses (income), net (5) 


885


1,574


7,307



     Interest and other expense (income), net 


(217)


-


-



              Pre-tax total special items 


189,858


36,262


64,000



     Tax effect of special items  


(21,283)


(5,873)


(5,894)



 Reversal of tax reserves (6) 


-


(21,747)


-



 Fiscal year 2014 research & development tax credits 


(2,863)


-


-



 GAAP net income excluding special items 


$         93,678


$        108,622


$       102,459












 GAAP net income per share excluding special items: 









    Basic 


$             0.33


$              0.38


$             0.36



    Diluted 


$             0.33


$              0.38


$             0.36












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









    Basic


282,992


284,086


282,664



    Diluted 


287,954


289,430


288,565












(1) Accelerated depreciation related to San Jose wafer manufacturing building and equipment.



(2) Includes impairment charges related to MEMS and non-MEMS wafer manufacturing equipment and end of line test 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 closure of San Jose wafer manufacturing facility and  reorganization of various business units, and severance & retention and lease abandonment charges related to Volterra acquisition.



(5) Includes loss related to sale of land & buildings, expected loss on rent expense for vacated office space, legal settlement,  and contingent consideration adjustments related to certain acquisitions.



(6) Includes reversal of tax reserves related to a 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; accelerated depreciation; acquisition-related inventory write-up; impairment of long-lived assets; impairment of goodwill and intangible assets; severance and restructuring; acquisition-related costs; contingent consideration adjustments relating to certain acquisitions; expected loss on rent expense for vacated office space; legal settlement;  loss related to sale of land and buildings; tax provision impacts due to 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, accelerated depreciation 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; impairment of goodwill and intangible assets; 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 for vacated office space; legal settlement;  loss related to sale of land and buildings. 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; accelerated depreciation; acquisition-related inventory write-up; impairment of long-lived assets; impairment of goodwill and intangible assets; severance and restructuring; acquisition-related costs; contingent consideration adjustments relating to certain acquisitions; expected loss on rent expense for vacated office space; loss related to sale of land and buildings; tax provision impacts due to 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 third quarter of fiscal 2015 ending in March 2015, which includes revenue, gross margin and earnings per share, as well as the  belief that the Company is on track to achieve its previously announced cost reduction plans, which will enable the Company to reduce spending while the Company focuses investment in its growth businesses. 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 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.

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