Maxim Integrated Reports Results For The First Quarter Of Fiscal 2017

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-- Revenue: $561 million

(PRNewswire) — Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $561 million for its first quarter of fiscal 2017 ended September 24, 2016, a 1% decrease from the $566 million revenue recorded in the prior quarter, and flat from the same quarter of last year.

Tunc Doluca, President and Chief Executive Officer, commented, "In the September quarter, our businesses performed in line with our improved profitability and revenue growth objectives. Despite the Note 7 smartphone cancellation, we are diverse in our revenue across a broad base of customers, end markets and applications, which is helping to lower variability in our revenue."

Fiscal Year 2017 First Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the September quarter was $0.48. The results were affected by pre-tax special items which primarily consisted of a $27 million gain on the sale of a business, $15 million in charges related to acquisitions, and $12 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.48. 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 2017, total cash, cash equivalents and short term investments were $2.27 billion, an increase of $37 million from the prior quarter.

Notable items included:

Cash flow from operations: $123 million
Capital expenditures: $14 million
Proceeds related to the sale of a manufacturing facility: $24.5 million
Dividends: $94 million ($0.33 per share)
Stock repurchases: $58 million

Business Outlook

The Company's 90-day backlog at the beginning of the December 2016 quarter was $371 million. Based on the beginning backlog and expected turns, results for the December 2016 quarter are expected to be as follows:

Revenue: $520 million to $560 million
Gross Margin: 61% to 63% GAAP (63% to 65% excluding special items)
EPS: $0.37 to $0.43 GAAP ($0.40 to $0.46 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 $0.33 per share will be paid on December 15, 2016, to stockholders of record on December 1, 2016.

Conference Call

Maxim Integrated has scheduled a conference call on October 20 at 2:00 p.m. Pacific Time to discuss its financial results for the first quarter of fiscal 2017 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 investor.maximintegrated.com.

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

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


CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
		Three Months Ended
		September 24,	June 25,	September 26,
		2016	2016	2015
		(in thousands, except per share data)
	Net revenues	$ 561,396	$ 566,126	$ 562,510
	Cost of goods sold (1)	215,664	219,099	276,159
	Gross margin	345,732	347,027	286,351
	Operating expenses:
	Research and development	112,746	113,491	121,392
	Selling, general and administrative	70,852	71,483	71,995
	Intangible asset amortization	2,443	2,538	3,591
	Impairment of long-lived assets (2)	6,134	429	157,697
	Impairment of goodwill and intangible assets	-	27,602	-
	Severance and restructuring expenses	9,965	4,149	7,126
	Other operating expenses (income), net (3)	(28,481)	4,962	315
	Total operating expenses (income), net	173,659	224,654	362,116
	Operating income (loss)	172,073	122,373	(75,765)
	Interest and other income (expense), net	(6,870)	(6,427)	(6,402)
	Income (loss) before provision for income taxes	165,203	115,946	(82,167)
	Income tax provision (benefit)	27,589	23,607	(10,024)
	Net income (loss)	$ 137,614	$ 92,339	$ (72,143)


	Earnings (loss) per share:
	Basic	$0.49	$0.32	($0.25)
	Diluted	$0.48	$0.32	($0.25)

	Shares used in the calculation of earnings (loss) per share:
	Basic	283,633	284,354	284,588
	Diluted (4)	288,574	288,544	284,588

	Dividends paid per share	$0.33	$0.30	$0.30


SCHEDULE OF SPECIAL ITEMS
(Unaudited)
		Three Months Ended
		September 24,	June 25,	September 26,
		2016	2016	2015
		(in thousands)
	Cost of goods sold:
	Intangible asset amortization	$12,602	$11,829	$ 16,638
	Accelerated depreciation (1)	1,178	4,098	43,631
	Total	$ 13,780	$ 15,927	$ 60,269

	Operating expenses:
	Intangible asset amortization	$2,443	$2,538	$3,591
	Impairment of long-lived assets (2)	6,134	429	157,697
	Impairment of goodwill and intangible assets	-	27,602	-
	Severance and restructuring	9,965	4,149	7,126
	Other operating expenses (income), net (3)	(28,481)	4,962	315
	Total	$ (9,939)	$ 39,680	$ 168,729


	Interest and other expense (income), net	$ (471)	$ (247)	$ (109)
	Total	$ (471)	$ (247)	$ (109)

	(1) Includes building and equipment accelerated depreciation related to San Jose and Dallas manufacturing facilities.
	(2) Includes impairment of investments in privately-held companies and other equipment impairment charges.
	(3) Includes gain on sale of micro-electromechanical systems (MEMS) business line during the first quarter of fiscal year 2017.
	(4) 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 for the first quarter of fiscal year 2016.


CONSOLIDATED BALANCE SHEETS
(Unaudited)
		September 24,	June 25,	September 26,
		2016	2016	2015
		(in thousands)
	ASSETS
	Current assets:
	Cash and cash equivalents	$ 2,092,073	$ 2,105,229	$ 1,508,347
	Short-term investments	175,441	125,439	100,285
	Total cash, cash equivalents and short-term investments	2,267,514	2,230,668	1,608,632
	Accounts receivable, net	253,518	256,531	282,471
	Inventories	223,484	227,929	290,712
	Deferred tax assets	-	-	50,604
	Other current assets	89,398	91,920	46,627
	Total current assets	2,833,914	2,807,048	2,279,046
	Property, plant and equipment, net	678,447	692,551	805,580
	Intangible assets, net	131,496	146,540	241,423
	Goodwill	491,015	490,648	511,647
	Other assets	54,890	84,100	36,226
	Assets held for sale	2,854	13,729	70,964
	TOTAL ASSETS	$ 4,192,616	$ 4,234,616	$ 3,944,886

	LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
	Accounts payable	$ 83,589	$ 82,535	$ 80,752
	Income taxes payable	3,138	21,153	59,479
	Accrued salary and related expenses	111,126	166,698	120,642
	Accrued expenses	48,572	50,521	49,990
	Deferred revenue on shipments to distributors	35,754	38,779	35,091
	Short term debt	249,788	249,717	-
	Total current liabilities	531,967	609,403	345,954
	Long-term debt	990,685	990,090	1,000,000
	Income taxes payable	497,360	480,645	419,805
	Other liabilities	37,368	46,664	64,326
	Total liabilities	2,057,380	2,126,802	1,830,085
	Stockholders' equity:
	Common stock and capital in excess of par value	284	284	10,819
	Retained earnings	2,141,326	2,121,749	2,121,582
	Accumulated other comprehensive loss	(6,374)	(14,219)	(17,600)
	Total stockholders' equity	2,135,236	2,107,814	2,114,801
	TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$ 4,192,616	$ 4,234,616	$ 3,944,886

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Three Months Ended
		September 24,	June 25,	September 26,
		2016	2016	2015
		(in thousands)
	Cash flows from operating activities:
	Net income (loss)	$ 137,614	$ 92,339	$ (72,143)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Stock-based compensation	17,120	16,444	16,963
	Depreciation and amortization	43,485	46,414	102,053
	Deferred taxes	14,895	(13,510)	(53,111)
	In-process research and development written-off	-	27,602	-
	Loss (gain) from sale of property, plant and equipment	652	5,048	(1,346)
	Loss (gain) on sale of business	(26,620)	-	-
	Tax benefit (shortfall) related to stock-based compensation	-	3,657	1,193
	Impairment of long-lived assets	6,134	-	157,697
	Excess tax benefit from stock-based compensation	-	(1,890)	(2,249)
	Changes in assets and liabilities:
	Accounts receivable	3,013	21,971	(3,627)
	Inventories	2,517	7,657	(2,167)
	Other current assets	(12,099)	8,012	4,796
	Accounts payable	(858)	5,076	(9,776)
	Income taxes payable	110	19,792	34,127
	Deferred revenue on shipments to distributors	(3,025)	4,322	4,764
	Accrued salary and related expenses	(55,572)	15,287	(60,718)
	All other accrued liabilities	(3,964)	(4,150)	883
	Net cash provided by (used in) operating activities	123,402	254,071	117,339
	Cash flows from investing activities:
	Purchase of property, plant and equipment	(14,310)	(22,488)	(15,821)
	Proceeds from sales of property, plant and equipment	205	34,691	606
	Proceeds from sale of available-for-sale securities	24,540	-	-
	Proceeds from maturity of available-for-sale securities	25,000	50,000	-
	Proceeds from sale of business	42,199	-	-
	Purchases of available-for-sale securities	(75,224)	(25,000)	(25,055)
	Purchases of privately-held companies' securities	(2,337)	(1,554)	(1,000)
	Net cash provided by (used in) investing activities	73	35,649	(41,270)
	Cash flows from financing activities:
	Excess tax benefit from stock-based compensation	-	1,890	2,249
	Issuance of debt	-	249,717	-
	Net issuance of restricted stock units	(5,206)	(2,687)	(4,822)
	Proceeds from stock options exercised	19,911	12,272	8,970
	Issuance of common stock under employee stock purchase program	-	19,625	-
	Repurchase of common stock	(57,709)	(90,438)	(39,697)
	Dividends paid	(93,627)	(85,210)	(85,387)
	Net cash provided by (used in) financing activities	(136,631)	105,169	(118,687)
	Net increase (decrease) in cash and cash equivalents	(13,156)	394,889	(42,618)
	Cash and cash equivalents:
	Beginning of period	2,105,229	1,710,340	1,550,965
	End of period	$ 2,092,073	$ 2,105,229	$ 1,508,347

	Total cash, cash equivalents, and short-term investments	$ 2,267,514	$ 2,230,668	$ 1,608,632


ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES
(Unaudited)
		Three Months Ended
		September 24,	June 25,	September 26,
		2016	2016	2015
		(in thousands, except per share data)
	Reconciliation of GAAP gross profit to GAAP gross profit excluding special items:
	GAAP gross profit	$ 345,732	$ 347,027	$ 286,351
	GAAP gross profit %	61.6%	61.3%	50.9%

	Special items:
	Intangible asset amortization	12,602	11,829	16,638
	Accelerated depreciation (1)	1,178	4,098	43,631
	Total special items	13,780	15,927	60,269
	GAAP gross profit excluding special items	$ 359,512	$ 362,954	$ 346,620
	GAAP gross profit % excluding special items	64.0%	64.1%	61.6%

	Reconciliation of GAAP operating expenses to GAAP operating expenses excluding special items:
	GAAP operating expenses	$ 173,659	$ 224,654	$ 362,116

	Special items:
	Intangible asset amortization	2,443	2,538	3,591
	Impairment of long-lived assets (2)	6,134	429	157,697
	Impairment of intangible assets	-	27,602	-
	Severance and restructuring	9,965	4,149	7,126
	Other operating expenses (income), net (3)	(28,481)	4,962	315
	Total special items	(9,939)	39,680	168,729
	GAAP operating expenses excluding special items	$ 183,598	$ 184,974	$ 193,387

	Reconciliation of GAAP net income (loss) to GAAP net income excluding special items:
	GAAP net income (loss)	$ 137,614	$ 92,339	$ (72,143)

	Special items:
	Intangible asset amortization	15,045	14,367	20,229
	Accelerated depreciation (1)	1,178	4,098	43,631
	Impairment of long-lived assets (2)	6,134	429	157,697
	Impairment of intangible assets	-	27,602	-
	Severance and restructuring	9,965	4,149	7,126
	Other operating expenses (income), net (3)	(28,481)	4,962	315
	Interest and other expense (income), net	(471)	(247)	(109)
	Pre-tax total special items	3,370	55,360	228,889
	Other income tax effects and adjustments (4)	(2,754)	(7,228)	(36,434)
	GAAP net income excluding special items	$ 138,230	$ 140,471	$ 120,312

	GAAP net income per share excluding special items:
	Basic	$ 0.49	$ 0.49	$ 0.42
	Diluted	$ 0.48	$ 0.49	$ 0.42

	Shares used in the calculation of earnings per share excluding special items:
	Basic	283,633	284,354	284,588
	Diluted (5)	288,574	288,544	288,897

	(1) Includes building and equipment accelerated depreciation related to San Jose and Dallas manufacturing facilities.
	(2) Includes impairment of investments in privately-held companies and other equipment impairment charges.
	(3) Includes gain on sale of micro-electromechanical systems (MEMS) business line during the first quarter of fiscal year 2017.
	(4) Includes tax effect of pre-tax special items and miscellaneous tax adjustments.
	(5) 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 for the first quarter of fiscal year 2016.

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 intangible assets; severance and restructuring; and other operating expenses (income), net, and other income tax effects and adjustments. 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 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 in 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 intangible assets; severance and restructuring; and other operating expenses (income), net, and other income tax effects and 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 second quarter of fiscal 2017 ending in December 2016, which includes revenue, gross margin and earnings per share, as well as the Company's belief in its ability to continue improving profitability, drive free cash flow growth, and maintain leadership in the return of cash to shareholders. 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 or more 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 25, 2016 (the "Form 10-K"). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331616000081/maxim10-kfy2016.htm.

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

About Maxim Integrated

Maxim develops innovative analog ICs for the automotive, industrial, healthcare, mobile consumer, and cloud data center markets. We make technology smaller, smarter, more secure and energy efficient, so that our customers can meet the demands of an integrated world. Learn more at http://www.maximintegrated.com.

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SOURCE Maxim Integrated Investor Relations

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Maxim Integrated Investor Relations
Web: http://www.maximintegrated.com