Maxim Integrated Reports Results For The First Quarter Of Fiscal 2018
SAN JOSE, Calif., Oct. 19, 2017 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $576 million for its first quarter of fiscal 2018 ended September 23, 2017, a 4% decrease from the $602 million revenue recorded in the prior quarter, and a 3% increase from the same quarter of last year.
Tunc Doluca, President and Chief Executive Officer, commented, "We are pleased with our performance in the September quarter. Revenue growth was led by double-digit increases in Industrial and Automotive from the same quarter last year." Mr. Doluca continued, "Looking forward, we expect strong growth in Automotive, Industrial and Data Center in the December quarter with continued solid profitability."
Fiscal Year 2018 First Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the September quarter was $0.54. The results were affected by pre-tax special items which primarily consisted of $13 million in charges related to acquisitions and $5 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.60. 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 2018, total cash, cash equivalents and short term investments were $2.77 billion, an increase of $29 million from the prior quarter.
Notable items included:
-- Cash flow from operations: $220 million
-- Gross capital expenditures: $14 million
-- Dividends paid: $101 million ($0.36 per share)
-- Stock repurchases: $75 million
Trailing twelve months free cash flow was $819 million. Free cash flow is a non-GAAP measure and is defined by net cash flow from operations less gross capital expenditures.
Business Outlook
The Company's 90-day backlog at the beginning of the December 2017 quarter was $426 million. Based on the beginning backlog and expected turns, the final transition to sell-in revenue accounting for distribution, and a 14-week quarter, our results for the December 2017 quarter are forecasted to be as follows:
-- Revenue: $600 to $640 million (including $18 to $22 million for sell-in
transition)
-- Gross Margin: 64% to 66% GAAP (66% to 68% excluding special items)
-- EPS: $0.57 to $0.63 GAAP ($0.61 to $0.67 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.
A cash dividend of $0.36 per share will be paid on December 14, 2017, to stockholders of record on November 30, 2017.
Conference Call
Maxim Integrated has scheduled a conference call on October 19 at 2:00 p.m. Pacific Time to discuss its financial results for the first 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
------------------
September 23, June 24, September 24,
2017 2017 2016
---- ---- ----
(in thousands, except per share data)
Net revenues $575,676 $602,005 $561,396
Cost of goods sold (1) 201,845 208,339 215,664
Gross margin 373,831 393,666 345,732
------- ------- -------
Operating expenses:
Research and development 108,601 114,011 112,746
Selling, general and administrative 73,681 75,129 70,852
Intangible asset amortization 1,752 2,050 2,443
Impairment of long-lived assets (2) 42 - 6,134
Severance and restructuring expenses 5,433 1,175 9,965
Other operating expenses (income), net
(3) (844) 1,923 (28,481)
Total operating expenses (income), net 188,665 194,288 173,659
------- ------- -------
Operating income (loss) 185,166 199,378 172,073
Interest and other income (expense), net (4,214) (3,798) (6,870)
------ ------ ------
Income (loss) before provision for income
taxes 180,952 195,580 165,203
Income tax provision (benefit) 26,419 32,271 27,589
Net income (loss) $154,533 $163,309 $137,614
======== ======== ========
Earnings (loss) per share:
Basic $0.55 $0.58 $0.49
===== ===== =====
Diluted $0.54 $0.57 $0.48
===== ===== =====
Shares used in the calculation of
earnings (loss) per share:
Basic 282,170 282,747 283,633
======= ======= =======
Diluted 286,437 287,494 288,574
======= ======= =======
Dividends paid per share $0.36 $0.33 $0.33
===== ===== =====
SCHEDULE OF SPECIAL ITEMS
(Unaudited)
Three Months Ended
------------------
September 23, June 24, September 24,
2017 2017 2016
---- ---- ----
(in thousands)
Cost of goods sold:
Intangible asset amortization $11,064 $11,064 $12,602
Accelerated depreciation (1) - - 1,178
Total $11,064 $11,064 $13,780
======= ======= =======
Operating expenses:
Intangible asset amortization $1,752 $2,050 $2,443
Impairment of long-lived assets (2) 42 - 6,134
Severance and restructuring 5,433 1,175 9,965
Other operating expenses (income), net
(3) (844) 1,923 (28,481)
Total $6,383 $5,148 $(9,939)
====== ====== =======
Interest and other expense (income), net $(84) $(90) $(471)
Total $(84) $(90) $(471)
==== ==== =====
(1) Includes building and equipment accelerated depreciation related to the
Dallas manufacturing facility.
(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.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 23, June 24, September 24,
2017 2017 2016
---- ---- ----
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $1,577,160 $2,246,121 $2,092,073
Short-term investments 1,196,827 498,718 175,441
--------- ------- -------
Total cash, cash equivalents and short-term investments 2,773,987 2,744,839 2,267,514
Accounts receivable, net 233,215 256,454 253,518
Inventories 245,347 247,242 223,484
Other current assets 55,033 57,059 89,398
------ ------ ------
Total current assets 3,307,582 3,305,594 2,833,914
Property, plant and equipment, net 595,622 606,581 678,447
Intangible assets, net 79,850 90,867 131,496
Goodwill 491,015 491,015 491,015
Other assets 59,246 72,974 54,890
Assets held for sale 2,691 3,202 2,854
TOTAL ASSETS $4,536,006 $4,570,233 $4,192,616
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $66,915 $77,373 $83,589
Income taxes payable 3,688 3,688 3,138
Accrued salary and related expenses 103,194 145,299 111,126
Accrued expenses 43,121 37,663 48,572
Deferred revenue on shipments to distributors 16,994 14,974 35,754
Short-term debt - - 249,788
--- --- -------
Total current liabilities 233,912 278,997 531,967
Long-term debt 1,488,406 1,487,678 990,685
Income taxes payable 573,831 557,498 497,360
Deferred tax liabilities 1,436 1,514 756
Other liabilities 40,677 41,852 36,612
Total liabilities 2,338,262 2,367,539 2,057,380
--------- --------- ---------
Stockholders' equity:
Common stock and capital in excess of par value 283 283 284
Retained earnings 2,207,052 2,212,301 2,141,326
Accumulated other comprehensive loss (9,591) (9,890) (6,374)
Total stockholders' equity 2,197,744 2,202,694 2,135,236
--------- --------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $4,536,006 $4,570,233 $4,192,616
========== ========== ==========
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 23, June 24, September 24,
2017 2017 2016
---- ---- ----
(in thousands)
Cash flows from operating activities:
Net income (loss) $154,533 $163,309 $137,614
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Stock-based compensation 17,287 17,624 17,120
Depreciation and amortization 36,754 38,194 43,485
Deferred taxes 12,115 1,697 14,895
Loss (gain) from sale of property, plant
and equipment 61 7,006 652
Loss (gain) on sale of business - - (26,620)
Impairment of long-lived assets 42 665 6,134
Changes in assets and liabilities:
Accounts receivable 23,239 1,138 3,013
Inventories 1,835 (5,715) 2,517
Other current assets 1,488 (727) (12,099)
Accounts payable (9,979) (5,235) (858)
Income taxes payable 16,333 22,619 110
Deferred revenue on shipments to
distributors 2,020 (20,751) (3,025)
Accrued salary and related expenses (42,105) 9,597 (55,572)
All other accrued liabilities 6,082 7,507 (3,964)
Net cash provided by (used in) operating
activities 219,705 236,928 123,402
------- ------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (14,321) (13,050) (14,310)
Proceeds from sales of property, plant and
equipment 1,473 7,576 205
Proceeds from sale of available-for-sale
securities 18,101 - 24,540
Proceeds from maturity of available-for-
sale securities - 50,000 25,000
Proceeds from sale of business - - 42,199
Purchases of available-for-sale securities (716,304) (49,891) (75,224)
Purchases of privately-held companies'
securities (606) - (2,337)
Net cash provided by (used in) investing
activities (711,657) (5,365) 73
-------- ------ ---
Cash flows from financing activities:
Issuance of debt - 500,000 -
Debt Issuance Cost - (3,688) -
Net issuance of restricted stock units (5,416) (7,471) (5,206)
Proceeds from stock options exercised 5,160 18,434 19,911
Issuance of common stock under employee
stock purchase program - 19,805 -
Repurchase of common stock (75,291) (75,853) (57,709)
Dividends paid (101,462) (93,396) (93,627)
Net cash provided by (used in) financing
activities (177,009) 357,831 (136,631)
-------- ------- --------
Net increase (decrease) in cash and cash
equivalents (668,961) 589,394 (13,156)
Cash and cash equivalents:
Beginning of period 2,246,121 1,656,727 2,105,229
End of period $1,577,160 $2,246,121 $2,092,073
========== ========== ==========
Total cash, cash equivalents, and short-
term investments $2,773,987 $2,744,839 $2,267,514
========== ========== ==========
ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES
(Unaudited)
Three Months Ended
------------------
September 23, June 24, September 24,
2017 2017 2016
---- ---- ----
(in thousands, except per share data)
Reconciliation of GAAP gross profit to
GAAP gross profit excluding special
items:
---------------------------------------
GAAP gross profit $373,831 $393,666 $345,732
GAAP gross profit % 64.9% 65.4% 61.6%
Special items:
Intangible asset amortization 11,064 11,064 12,602
Accelerated depreciation (1) - - 1,178
Total special items 11,064 11,064 13,780
------ ------ ------
GAAP gross profit excluding special items $384,895 $404,730 $359,512
GAAP gross profit % excluding special items 66.9% 67.2% 64.0%
Reconciliation of GAAP operating expenses
to GAAP operating expenses excluding
special items:
------------------------------------------
GAAP operating expenses $188,665 $194,288 $173,659
Special items:
Intangible asset amortization 1,752 2,050 2,443
Impairment of long-lived assets (2) 42 - 6,134
Severance and restructuring 5,433 1,175 9,965
Other operating expenses (income), net (3) (844) 1,923 (28,481)
Total special items 6,383 5,148 (9,939)
----- ----- ------
GAAP operating expenses excluding special
items $182,282 $189,140 $183,598
======== ======== ========
Reconciliation of GAAP net income (loss)
to GAAP net income excluding special
items:
-----------------------------------------
GAAP net income (loss) $154,533 $163,309 $137,614
Special items:
Intangible asset amortization 12,816 13,114 15,045
Accelerated depreciation (1) - - 1,178
Impairment of long-lived assets (2) 42 - 6,134
Severance and restructuring 5,433 1,175 9,965
Other operating expenses (income), net (3) (844) 1,923 (28,481)
Interest and other expense (income), net (84) (90) (471)
Pre-tax total special items 17,363 16,122 3,370
Other income tax effects and adjustments
(4) (1,345) 499 (2,754)
GAAP net income excluding special items $170,551 $179,930 $138,230
======== ======== ========
GAAP net income per share excluding
special items:
Basic $0.60 $0.64 $0.49
===== ===== =====
Diluted $0.60 $0.63 $0.48
===== ===== =====
Shares used in the calculation of earnings
per share excluding special items:
Basic 282,170 282,747 283,633
======= ======= =======
Diluted 286,437 287,494 288,574
======= ======= =======
(1) Includes building and equipment accelerated depreciation related to the Dallas
manufacturing facility.
(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.
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, accelerated depreciation, and other costs of goods sold. 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. This long-term tax rate considers the income tax impact of pre-tax special items and eliminates the effects of significant non-recurring and period specific tax items which vary in size and frequency. In the first quarter of fiscal year 2018, we used 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 includes the past three fiscal years plus the current fiscal year projection at the beginning of fiscal year 2018. We review the long-term tax rate on an annual basis and more frequently 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; 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 second quarter of fiscal 2018 ending in December 2017, which includes revenue, gross margin and earnings per share, as well as the Company's expectation of strong growth in Automotive, Industrial and Data Center in the December 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 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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