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Maxim Integrated Reports Results For The Third Quarter Of Fiscal 2018

- Revenue: $649 million

SAN JOSE, Calif., April 26, 2018 — (PRNewswire) — Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $649 million for its third quarter of fiscal 2018 ended March 31, 2018, a 4% increase from the $623 million revenue recorded in the prior quarter, and a 12% increase from the same quarter of last year.

Logo for Maxim Integrated Products Inc. (PRNewsfoto/Maxim Integrated)

Tunc Doluca, President and Chief Executive Officer, commented, "We are pleased with our performance in the March quarter. Compared to the same quarter last year, revenue grew strongly, driven by our power management products in Consumer, Automotive and Industrial with continued solid profitability." Mr. Doluca continued, "Looking forward, we continue to expect significant growth drivers in Automotive, Industrial and Data Center."

Fiscal Year 2018 Third Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the March quarter was $0.68. The results were affected by pre-tax special items which primarily consisted of $13 million in charges related to acquisitions and $3 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.73. 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 2018, total cash, cash equivalents and short term investments were $2.72 billion, a decrease of $99 million from the prior quarter.

Notable items included:

Trailing twelve months free cash flow was $843 million. Free cash flow is a non-GAAP measure and is defined by net cash flow from operations less capital expenditures.

Business Outlook
The Company's 90-day backlog at the beginning of the June 2018 quarter was $436 million. Based on the beginning backlog and expected turns, our results for the June 2018 quarter are forecasted to be as follows:

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 $0.42 per share will be paid on June 14, 2018, to stockholders of record on May 31, 2018.

Conference Call
Maxim Integrated has scheduled a conference call on April 26 at 2:00 p.m. Pacific Time to discuss its financial results for the third quarter of fiscal 2018 and its business outlook. 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.










CONSOLIDATED STATEMENTS OF INCOME



(Unaudited)




Three Months Ended




March 31, 


December 30, 


March 25, 




2018


2017


2017




(in thousands, except per share data)



Net revenues

$                     648,599


$              622,637


$                     581,216



Cost of goods sold (1) 

224,653


212,961


214,312



Gross margin

423,946


409,676


366,904



Operating expenses:








Research and development

114,390


115,896


113,163



Selling, general and administrative

81,304


85,323


73,987



Intangible asset amortization

876


995


2,348



Impairment of long-lived assets (2)


850


1,000



Severance and restructuring expenses 

2,272


6,523


450



Other operating expenses (income), net

266


(959)


1,704



Total operating expenses (income), net

199,108


208,628


192,652



Operating income (loss)

224,838


201,048


174,252



Interest and other income (expense), net 

(2,534)


(3,121)


(3,884)



Income (loss) before provision for income taxes 

222,304


197,927


170,368



Income tax provision (benefit) (3)

28,677


272,942


30,155



Net income (loss)

$                     193,627


$               (75,015)


$                     140,213



















Earnings (loss) per share:








Basic

$                           0.69


$                   (0.27)


$                           0.50



Diluted

$                           0.68


$                   (0.27)


$                           0.49











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








Basic

280,850


281,560


282,903



Diluted

285,881


281,560


287,882











Dividends paid per share

$                           0.42


$                    0.36


$                           0.33



















SCHEDULE OF SPECIAL ITEMS



(Unaudited)




Three Months Ended




March 31, 


December 30, 


March 25, 




2018


2017


2017




(in thousands)



Cost of goods sold:








Intangible asset amortization 

$                       12,101


$                11,139


$                       11,064



Accelerated depreciation (1)



1,103



  Total 

$                       12,101


$                11,139


$                       12,167











 Operating expenses: 








Intangible asset amortization

$                            876


$                     995


$                         2,348



Impairment of long-lived assets (2)


850


1,000



Severance and restructuring

2,272


6,523


450



Other operating expenses (income), net

266


(959)


1,704



  Total 

$                         3,414


$                  7,409


$                         5,502



















Interest and other expense (income), net

$                             (97)


$                    (119)


$                             (48)



 Total 

$                             (97)


$                    (119)


$                             (48)











 Provision (benefit) for income taxes: 








Impact of U.S. tax legislation (3)

$                      —


$              243,550


$                      —



  Total 

$                      —


$              243,550


$                      —











(1) Includes building and equipment accelerated depreciation related to the Dallas manufacturing facility during the third quarter of fiscal year 2017.



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



(3) Includes effect of U.S. tax legislation enacted on December 22, 2017.





 










CONSOLIDATED  BALANCE SHEETS



(Unaudited)




March 31, 


December 30, 


March 25, 




2018


2017


2017




(in thousands) 



ASSETS



Current assets:








Cash and cash equivalents

$1,629,593


$ 1,631,510


$1,656,727



Short-term investments

1,094,801


1,191,765


499,154



Total cash, cash equivalents and short-term investments

2,724,394


2,823,275


2,155,881



Accounts receivable, net

320,553


235,695


257,592



Inventories

273,616


259,597


241,439



Other current assets

22,275


24,153


60,195



Total current assets

3,340,838


3,342,720


2,715,107



Property, plant and equipment, net

589,177


597,818


636,835



Intangible assets, net

90,848


67,716


103,981



Goodwill

532,904


491,015


491,015



Other assets

69,428


65,243


70,845



TOTAL ASSETS

$4,623,195


$ 4,564,512


$4,017,783











LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:








Accounts payable

$     84,407


$      84,770


$     82,938



Income taxes payable

24,339


10,523


4,538



Accrued salary and related expenses

147,771


113,716


135,702



Accrued expenses

48,384


37,687


35,208



Deferred margin on shipments to distributors



35,724



Current portion of debt

499,050


498,694




Total current liabilities

803,951


745,390


294,110



Long-term debt

990,787


990,428


991,877



Income taxes payable

817,969


801,260


534,028



Other liabilities

59,497


41,736


37,459



Total liabilities

2,672,204


2,578,814


1,857,474



Stockholders' equity:








Common stock and capital in excess of par value

283


283


284



Retained earnings

1,963,912


1,997,207


2,169,760



Accumulated other comprehensive loss

(13,204)


(11,792)


(9,735)



Total stockholders' equity

1,950,991


1,985,698


2,160,309



        TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$4,623,195


$ 4,564,512


$4,017,783










 


CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)




Three Months Ended




March 31, 


December 30, 


March 25, 




2018


2017


2017




(in thousands)



Cash flows from operating activities:








Net income (loss)

$   193,627


$    (75,015)


$   140,213



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








Stock-based compensation

20,605


21,040


18,300



Depreciation and amortization

37,201


35,813


40,473



Deferred taxes

(2,670)


(3,188)


(16,967)



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

1,160


(649)


4,809



Impairment of of investment in privately-held companies


850


1,000



Changes in assets and liabilities:








Accounts receivable

(80,953)


(2,480)


(33,249)



Inventories

(11,036)


(14,125)


(5,505)



Other current assets

(1,244)


31,459


16,862



Accounts payable

(235)


13,643


11,887



Income taxes payable

30,067


234,264


20,931



Deferred revenue on shipments to distributors


(16,994)


(412)



Accrued salary and related expenses

33,408


10,523


26,227



All other accrued liabilities

3,295


(5,266)


(3,872)



Net cash provided by (used in) operating activities

223,225


229,875


220,697



Cash flows from investing activities:








Purchase of property, plant and equipment

(16,930)


(22,413)


(8,286)



Proceeds from sales of property, plant and equipment

2,844


1,444


787



Proceeds from sale of available-for-sale securities

60,008


21,895




Proceeds from maturity of available-for-sale securities

304,289


118,211




Payment in connection with business acquisition, net of cash acquired

(57,773)





Purchases of available-for-sale securities

(268,821)


(137,166)


(99,398)



Purchases of privately-held companies' securities

(1,250)


(1,500)


(162)



Net cash provided by (used in) investing activities

22,367


(19,529)


(107,059)



Cash flows from financing activities:








Net issuance of restricted stock units

(9,642)


(6,104)


(8,268)



Proceeds from stock options exercised

7,716


13,507


17,502



Issuance of common stock under employee stock purchase program


14,975


(3,194)



Repurchase of common stock

(127,700)


(76,953)


(56,999)



Dividends paid

(117,883)


(101,421)


(93,387)



Net cash provided by (used in) financing activities

(247,509)


(155,996)


(144,346)



Net increase (decrease) in cash and cash equivalents

(1,917)


54,350


(30,708)



Cash and cash equivalents:








Beginning of period

1,631,510


1,577,160


1,687,435



End of period

$1,629,593


$ 1,631,510


$1,656,727











Total cash, cash equivalents, and short-term investments

$2,724,394


$ 2,823,275


$2,155,881


















 











ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES



(Unaudited)





Three Months Ended





March 31, 


December 30, 


March 25, 





2018


2017


2017





(in thousands, except per share data)



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









GAAP gross profit


$   423,946


$        409,676


$   366,904



GAAP gross profit %


65.4%


65.8%


63.1%












Special items:









Intangible asset amortization 


12,101


11,139


11,064



Accelerated depreciation (1)




1,103



 Total special items 


12,101


11,139


12,167



  GAAP gross profit excluding special items 


$   436,047


$        420,815


$   379,071



  GAAP gross profit % excluding special items 


67.2%


67.6%


65.2%












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









GAAP operating expenses


$   199,108


$        208,628


$   192,652












Special items:









Intangible asset amortization


876


995


2,348



Impairment of long-lived assets (2)



850


1,000



Severance and restructuring 


2,272


6,523


450



Other operating expenses (income), net


266


(959)


1,704



  Total special items 


3,414


7,409


5,502



  GAAP operating expenses excluding special items 


$   195,694


$        201,219


$   187,150












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









GAAP net income (loss)


$   193,627


$        (75,015)


$   140,213












Special items:









Intangible asset amortization 


12,977


12,134


13,412



Accelerated depreciation (1)




1,103



Impairment of long-lived assets (2)



850


1,000



Severance and restructuring 


2,272


6,523


450



Other operating expenses (income), net


266


(959)


1,704



Interest and other expense (income), net 


(97)


(119)


(48)



 Pre-tax total special items


15,418


18,429


17,621



Other income tax effects and adjustments (3)


151


(897)


1,957



Impact of U.S. tax legislation (4)



243,550




 GAAP net income excluding special items 


$   209,196


$        186,067


$   159,791












 GAAP net income per share excluding special items: 









Basic


$         0.74


$              0.66


$         0.56



Diluted


$         0.73


$              0.65


$         0.56












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









Basic


280,850


281,560


282,903



Diluted (5)


285,881


286,356


287,882












(1) Includes building and equipment accelerated depreciation related to the Dallas manufacturing facility during the third quarter of fiscal year 2017.



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



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



(4) Includes effect of  U.S. tax legislation enacted on December 22, 2017.



(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 during second quarter of fiscal year 2018.





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; severance and restructuring; other operating expenses (income), net; interest and other expense (income), net; and other income tax effects and adjustments. We defined free cash flow as net cash provided from operations less gross capital expenditures. 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; 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. We reviewed the long-term tax rate on an annual basis and more frequently whenever events occurred that may have materially affected the long-term tax rate such as tax law changes; significant changes in our geographic earnings mix; or changes in our corporate structure. This long-term tax rate considered the income tax impact of pre-tax special items and eliminated the effects of significant non-recurring and period specific tax items which varied in size and frequency, including certain one-time tax charges resulting from U.S. tax legislation that was enacted on December 22, 2017. In the first quarter of fiscal year 2018, we began using a long-term tax rate of 14%, which was our forecast of the weighted average of our normalized fiscal year GAAP tax rate excluding special items over a four-year period, that included the past three fiscal years plus the current fiscal year projection at the beginning of fiscal year 2018. In the third quarter of fiscal year 2018, we modified our approach and began using a 12% tax rate for fiscal year 2018.  Because of the impacts of tax reform, a long-term average tax rate is no longer appropriate for the remainder of fiscal year 2018.  The tax rate of 12% best reflects the tax rate excluding special items for fiscal year 2018 as a single year. We continue to reevaluate our long-term expected tax rate for fiscal year 2019 and future years in light of the U.S. tax legislation that was enacted on December 22, 2017.

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; severance and restructuring; other operating expenses (income), net; interest and other expense (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 fourth quarter of fiscal 2018 ending in June 2018, which includes revenue, gross margin and earnings per share, as well as the Company's expectation of significant growth drivers in Automotive, Industrial and Data Center.  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 24, 2017 (the "Form 10-K"). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331617000028/maxim10-kfy2017.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 Integrated develops innovative analog and mixed-signal products and technologies to make systems smaller and smarter, with enhanced security and increased energy efficiency. We are empowering design innovation for our automotive, industrial, healthcare, mobile consumer, and cloud data center customers to deliver industry-leading solutions that help change the world. Learn more at http://www.maximintegrated.com.

Contact
Kathy Ta
Vice President, Investor Relations
(408) 601-5697

 

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