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Maxim Integrated Reports Results For The Third Quarter Of Fiscal 2020

- Revenue: $562 million

SAN JOSE, Calif., April 28, 2020 — (PRNewswire) —  Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $562 million for its third quarter of fiscal 2020 ended March 28, 2020, a 2% increase from the $551 million revenue recorded in the prior quarter, and a 4% increase from the same quarter of last year.

"Our test operations were impacted in the last two weeks of the March quarter as precautionary measures were implemented to protect employees against the spread of COVID-19. However, solid execution by our manufacturing resulted in March quarter financials within the range of our guidance," said Tunc Doluca, President and Chief Executive Officer. "Looking ahead to the June quarter, we expect our manufacturing operations will run at less than full capacity as we continue to safeguard employee health and expedite product shipments for our Medical customers. We anticipate revenue declines in Automotive and Consumer products, and sequential growth in Industrial as well as Communications and Data Center."

Fiscal Year 2020 Third Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the March quarter was $0.59. The results were affected by $7 million in pre-tax special items which primarily consisted of charges related to acquisitions and expenses related to COVID-19 response programs. GAAP earnings per share, excluding special items was $0.61. An analysis of GAAP versus GAAP excluding special items is provided in this press release.

Cash Flow Items

At the end of the third quarter of fiscal 2020, total cash, cash equivalents and short-term investments were $1.7 billion, down $97 million from the prior quarter.

Notable items included:

Trailing twelve months free cash flow was $744 million. Free cash flow is a non-GAAP measure and is defined by cash flow from operations less capital expenditures.

Business Outlook

The Company's 90-day backlog at the beginning of the June 2020 quarter was $509 million. Based on the beginning backlog, expected turns and constraints on our manufacturing operations, our results for the June 2020 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 $0.48 per share will be paid on June 12, 2020, to stockholders of record on May 28, 2020. 

Conference Call

Maxim Integrated has scheduled a conference call on April 28 at 2:00 p.m. Pacific Time to discuss its financial results for the third quarter of fiscal 2020 and its business outlook. An audio webcast of this call 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 28,
2020

December 28,
2019

March 30,
2019


(in thousands, except per share data)

Net revenues

$

561,916

$

551,070

$

542,383


Cost of goods sold

195,479

190,546

201,552


Gross margin

366,437

360,524

340,831


Operating expenses:






Research and development

109,091

111,914

107,075


Selling, general and administrative

71,643

76,071

74,116


Intangible asset amortization

756

756

756


Severance and restructuring expenses

523

2,728

1,744


Other operating expenses (income), net

1,077

(1)

—


Total operating expenses (income), net

183,090

191,468

183,691


Operating income (loss)

183,347

169,056

157,140


Interest and other income (expense), net

(1,622)

(17)

3,318


Income (loss) before provision for income taxes

181,725

169,039

160,458


Income tax provision (benefit)

20,535

22,989

29,845


Net income

$

161,190

$

146,050

$

130,613


Earnings per share:






Basic

$

0.60

$

0.54

$

0.48


Diluted

$

0.59

$

0.53

$

0.47


Shares used in the calculation of earnings per share:






Basic

269,003

270,330

273,221


Diluted

271,579

273,269

276,610










Dividends paid per share

$

0.48

$

0.48

$

0.46










SCHEDULE OF SPECIAL ITEMS

(Unaudited)


Three Months Ended


March 28,
2020

December 28,
2019

March 30,
2019


(in thousands)

Cost of goods sold:






Intangible asset amortization

$

3,111

$

3,111

$

5,008


Cost of COVID-19 response programs

2,025

—

—


 Total

$

5,136

$

3,111

$

5,008


Operating expenses:






Intangible asset amortization

$

756

$

756

$

756


Severance and restructuring

523

2,728

1,744


Other operating expenses (income), net

1,077

(1)

(1)

—


 Total

$

2,356

$

3,483

$

2,500


Interest and other expense (income), net

$

(587)

$

(1,230)

$

(857)


Total

$

(587)

$

(1,230)

$

(857)


Income tax provision (benefit):






Impact of U.S. tax legislation  (2)

$

—

$

—

$

(1,056)


Total

$

—

$

—

$

(1,056)










(1) Includes approximately $0.5 million of acquisition-related costs and $0.5 million of cost related to COVID-19 response programs.

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








 


CONSOLIDATED BALANCE SHEETS

(Unaudited)


March 28,
2020

December 28,
2019

March 30,
2019


(in thousands)

ASSETS

Current assets:






Cash and cash equivalents

$

1,638,667

$

1,720,194

$

1,654,563


Short-term investments

47,109

63,006

243,864


Total cash, cash equivalents and short-term investments

1,685,776

1,783,200

1,898,427


Accounts receivable, net

378,273

348,342

381,152


Inventories

220,686

223,958

272,832


Other current assets

25,288

23,797

24,358


Total current assets

2,310,023

2,379,297

2,576,769


Property, plant and equipment, net

564,636

571,359

571,955


Intangible assets, net

44,642

48,509

61,036


Goodwill

532,251

532,251

532,251


Other assets

97,383

95,413

61,843


TOTAL ASSETS

$

3,548,935

$

3,626,829

$

3,803,854










LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:






Accounts payable

$

83,519

$

89,449

$

86,798


Price adjustment and other revenue reserves

111,235

105,237

106,011


Income taxes payable

39,809

38,307

44,179


Accrued salary and related expenses

122,220

94,739

128,365


Accrued expenses

31,143

32,739

33,644


Total current liabilities

387,926

360,471

398,997


Long-term debt

993,663

993,303

992,225


Income taxes payable

434,415

433,743

688,780


Other liabilities

112,988

112,803

61,105


Total liabilities

1,928,992

1,900,320

2,141,107










Stockholders' equity:






Common stock and capital in excess of par value

267

270

279


Retained earnings

1,632,325

1,737,528

1,672,938


Accumulated other comprehensive loss

(12,649)

(11,289)

(10,470)


Total stockholders' equity

1,619,943

1,726,509

1,662,747


TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

$

3,548,935

$

3,626,829

$

3,803,854









 


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three Months Ended


March 28,
2020

December 28,
2019

March 30,
2019


(in thousands)

Cash flows from operating activities:






Net income

$

161,190

$

146,050

$

130,613


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






Stock-based compensation

23,403

24,067

22,820


Depreciation and amortization

24,141

24,087

27,182


Deferred taxes

(3,161)

(2,684)

(3,955)


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

145

113

428


Other adjustments

3,265

5,934

(371)


Changes in assets and liabilities:






Accounts receivable

(23,933)

37,005

(14,323)


Inventories

3,308

12,005

6,123


Other assets

(4,710)

(3,377)

3,561


Accounts payable

(2,655)

3,602

(13,372)


Income taxes payable

2,174

(5,792)

20,401


Accrued salary and related expenses

27,481

(1,429)

25,938


Other liabilities

(857)

(2,116)

1,893


Net cash provided by (used in) operating activities

209,791

237,465

206,938


Cash flows from investing activities:






Purchase of property, plant and equipment

(17,068)

(13,670)

(21,257)


Proceeds from sales of property, plant and equipment

97

128

32


Proceeds from sale of available-for-sale securities

—

—

2,939


Proceeds from maturity of available-for-sale securities

15,485

35,146

308,529


Purchases of private company investments

(120)

(516)

(770)


Proceeds from sale of private company investments

173

—

—


Other investing activities

(50)

(33)

(540)


Net cash provided by (used in) investing activities

(1,483)

21,055

288,933


Cash flows from financing activities:






Contingent consideration paid

—

(8,000)

(1,052)


Net issuance of restricted stock units

(11,570)

(7,623)

(9,582)


Proceeds from stock options exercised

7,810

1,338

5,143


Issuance of common stock under employee stock purchase program

—

18,535

—


Repurchase of common stock

(157,003)

(107,957)

(116,991)


Dividends paid

(129,072)

(129,810)

(125,566)


Net cash provided by (used in) financing activities

(289,835)

(233,517)

(248,048)


Net increase (decrease) in cash and cash equivalents

(81,527)

25,003

247,823


Cash and cash equivalents:






Beginning of period

1,720,194

1,695,191

1,406,740


End of period

$

1,638,667

$

1,720,194

$

1,654,563


Total cash, cash equivalents, and short-term investments

$

1,685,776

$

1,783,200

$

1,898,427









 


ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES

(Unaudited)



Three Months Ended



March 28,
2020

December 28,
2019

March 30,
2019



(in thousands, except per share data)

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







GAAP gross profit

$

366,437

$

360,524

$

340,831


GAAP gross profit %

65.2

%

65.4

%

62.8

%

Special items:







Intangible asset amortization

3,111

3,111

5,008


Cost of COVID-19 response programs

2,025

—

—


Total special items

5,136

3,111

5,008


 GAAP gross profit excluding special items

$

371,573

$

363,635

$

345,839


 GAAP gross profit % excluding special items

66.1

%

66.0

%

63.8

%

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







GAAP operating expenses

$

183,090

$

191,468

$

183,691


Special items:







Intangible asset amortization

756

756

756


Severance and restructuring

523

2,728

1,744


Other operating expenses (income), net

1,077

(1)

(1)

—


 Total special items

2,356

3,483

2,500


 GAAP operating expenses excluding special items

$

180,734

$

187,985

$

181,191


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







GAAP net income

$

161,190

$

146,050

$

130,613


Special items:







Intangible asset amortization

3,867

3,867

5,764


Cost of COVID-19 response programs

2,025

—

—


Severance and restructuring

523

2,728

1,744


Other operating expenses (income), net

1,077

(1)

(1)

—


Interest and other expense (income), net

(587)

(1,230)

(857)


 Total pre-tax special items

6,905

5,364

6,651


Other income tax effects and adjustments (2)

(2,101)

317

7,506


Impact of U.S. tax legislation (3)

—

—

(1,056)


 GAAP net income excluding special items

$

165,994

$

151,731

$

143,714











 GAAP net income per share excluding special items:







Basic

$

0.62

$

0.56

$

0.53


Diluted

$

0.61

$

0.56

$

0.52


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







Basic

269,003

270,330

273,221


Diluted

271,579

273,269

276,610











(1) Includes approximately $0.5 million of acquisition-related costs and $0.5 million of cost related to COVID-19 response programs.

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

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









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 the cost of COVID-19 response programs; intangible asset amortization; 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 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 cost of COVID-19 response programs. 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; 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. Special items include the tax impact of pre-tax special items, significant tax audit settlements, significant prior year tax reserve adjustments, significant tax legislation, and significant non-recurring and period specific tax items, which vary in size and frequency.

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; cost of COVID-19 response programs; 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 2020 ending June 2020, which includes revenue, gross margin and earnings per share, as well as the Company's expectation that its  manufacturing operations will run at less than full capacity as it continues to safeguard employee health and expedites product shipments for Medical customers. Further, the Company anticipates revenue declines in Automotive and Consumer products, and sequential growth in Industrial as well as Communications and Data Center for its fourth fiscal quarter.  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, price competition and the impact of the recent coronavirus (COVID-19) pandemic, as well as other risks described in the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 2019 (the "Form 10-K"). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331619000024/0000743316-19-000024-index.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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