MAXIM INTEGRATED PRODUCTS, INC. 
By SAN JOSE, Calif., Jan. 23, 2014 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $620 million for its second quarter of fiscal 2014 ended December 28, 2013, a 6% increase from the $585 million revenue recorded in the prior quarter. Reported revenue included $35 million from Volterra. Excluding Volterra, revenue was flat compared to the prior quarter.
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Tunc Doluca, President and Chief Executive Officer, commented, "We achieved good revenue performance in a soft quarter for our industry." Mr. Doluca continued, "We are pleased with our diversification efforts, with strength in both communication and industrial businesses, the addition of Volterra and broadening of our mobility business."
Fiscal Year 2014 Second Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the December quarter was $0.17. The results were negatively affected by the following pre-tax charges:
-- $40 million for Volterra acquisition-related items
-- $13 million for items related to prior acquisitions
-- $5 million for impairment of long-lived assets
-- $18 million for warranty expense
GAAP earnings per share, excluding special items was $0.36, after a $0.05 reduction due to the warranty expense. In addition, the warranty expense caused our GAAP gross margin, excluding special items to be 2.9 percentage points lower for the quarter. An analysis of GAAP versus GAAP excluding special items is provided in the last table of this press release. Warranty expense is not considered a special item and is not included in the analysis.
Cash Flow Items
At the end of the second quarter of fiscal 2014, total cash, cash equivalents and short term investments was $1.15 billion, an increase of $115 million from the prior quarter. Notable items included:
-- Cash flow from operations: $234 million
-- Net capital expenditures: $46 million
-- Dividends: $73 million ($0.26 per share)
-- Stock repurchases: $59 million
-- Volterra acquisition: $454 million
-- Proceeds from debt issuance: $494 million
Business Outlook
The Company's 90-day backlog at the beginning of the third fiscal quarter of 2014 was $366 million. Based on the beginning backlog and expected turns, results for the March 2014 quarter are expected to be as follows:
-- Revenue: $590 million to $620 million
-- Gross Margin: 56% to 58% GAAP (60% to 62% excluding special items)
-- EPS: $0.28 to $0.32 GAAP ($0.37 to $0.41 excluding special items)
Maxim Integrated's business outlook does not include the potential impact of any restructuring activity or mergers, acquisitions, or other business combinations that may be completed during the quarter.
Dividend
A cash dividend of $0.26 per share will be paid on March 6, 2014, to stockholders of record on February 20, 2014.
Conference Call
Maxim Integrated has scheduled a conference call on January 23, 2014, at 2:00 p.m. Pacific Time to discuss its financial results for the second quarter of fiscal 2014 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 www.maximintegrated.com/company/investor.
CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited)
Three Months Ended
------------------
December 28, September 28, December 29,
2013 2013 2012
---- ---- ----
(in thousands, except per
share data)
Net revenues $620,274 $585,241 $605,306
Cost of goods sold 291,602 238,045 241,931
------- ------- -------
Gross margin 328,672 347,196 363,375
------- ------- -------
Operating expenses:
Research and
development 142,971 129,902 135,742
Selling, general and
administrative 83,471 77,430 80,058
Intangible asset
amortization 4,968 3,436 3,903
Impairment of long-
lived assets (1) 5,197 - 22,222
Severance and
restructuring
expenses (2) 10,227 5,547 2,236
Acquisition-related
costs 4,137 2,934 -
Other operating
expenses (income),
net (3) 1,306 (662) 1,666
Total operating
expenses 252,277 218,587 245,827
------- ------- -------
Operating income 76,395 128,609 117,548
Interest and other
income (expense),
net (5,833) (3,463) (2,798)
------ ------ ------
Income before
provision for
income taxes 70,562 125,146 114,750
Provision for income
taxes 21,240 22,026 38,128
------ ------ ------
Net income $49,322 $103,120 $76,622
======= ======== =======
Earnings per share:
Basic $0.17 $0.36 $0.26
===== ===== =====
Diluted $0.17 $0.36 $0.26
===== ===== =====
Shares used in the
calculation of
earnings per share:
Basic 282,664 284,654 292,075
======= ======= =======
Diluted 288,565 290,260 298,759
======= ======= =======
Dividends paid per
share $0.26 $0.26 $0.24
===== ===== =====
SCHEDULE OF SPECIAL EXPENSE
ITEMS
(Unaudited)
Three Months Ended
------------------
December 28, September 28, December 29,
2013 2013 2012
---- ---- ----
(in thousands)
Cost of goods sold:
Intangible asset
amortization $19,098 $8,092 $8,986
Acquisition-related
inventory write-up 13,066 - -
Total $32,164 $8,092 $8,986
======= ====== ======
Operating expenses:
Intangible asset
amortization $4,968 $3,436 $3,903
Impairment of long-
lived assets (1) 5,197 - 22,222
Severance and
restructuring (2) 10,227 5,547 2,236
Acquisition-related
costs 4,137 2,934 -
Other operating
expenses (income),
net (3) 1,306 (662) 1,666
Total $25,835 $11,255 $30,027
======= ======= =======
Provision for income
taxes:
International
restructuring
implementation $ - $ - $18,726
------------------ -------------------- -------
Total $ - $ - $18,726
================== ==================== =======
(1) Includes impairment
charges relating to fab
tools, land and buildings
held-for-sale, and end
of line manufacturing
equipment.
(2) Includes severance &
retention charges and
lease abandonment charges
related to the Volterra
acquisition, and severance
charges related to the
reorganization of various
business units and
manufacturing operations.
(3) Other operating
expenses (income), net are
primarily for contingent
consideration adjustments
related to certain
acquisitions and certain
payroll taxes.
STOCK-BASED COMPENSATION BY TYPE OF AWARD
(in thousands)
(Unaudited)
Three Months
Ended
December
28, 2013 Stock Options Restricted Stock Units Employee Stock Purchase Plan Total
------------- ---------------------- ---------------------------- -----
Cost of
goods sold $438 $2,395 $533 $3,366
Research and
development
expense 2,616 8,728 1,153 12,497
Selling,
general and
administrative
expense 1,476 4,996 534 7,006
Total $4,530 $16,119 $2,220 $22,869
====== ======= ====== =======
Three Months
Ended
September
28, 2013
Cost of
goods sold $349 $1,918 $475 $2,742
Research and
development
expense 1,836 6,440 1,322 9,598
Selling,
general and
administrative
expense 1,264 4,527 609 6,400
Total $3,449 $12,885 $2,406 $18,740
====== ======= ====== =======
Three Months
Ended
December
29, 2012
Cost of
goods sold $477 $2,572 $634 $3,683
Research and
development
expense 2,288 8,401 1,451 12,140
Selling,
general and
administrative
expense 1,286 5,152 584 7,022
Total $4,051 $16,125 $2,669 $22,845
====== ======= ====== =======
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 28, September 28, December 29,
2013 2013 2012
---- ---- ----
(in thousands)
ASSETS
Current assets:
Cash and cash
equivalents $1,149,909 $1,009,547 $955,107
Short-term investments - 25,036 75,192
--- ------ ------
Total cash, cash
equivalents and short-
term investments 1,149,909 1,034,583 1,030,299
Accounts receivable,
net 288,285 297,888 264,545
Inventories 297,234 278,218 257,690
Deferred tax assets 69,154 54,854 80,991
Other current assets 84,522 116,225 90,470
------ ------- ------
Total current assets 1,889,104 1,781,768 1,723,995
Property, plant and
equipment, net 1,372,393 1,374,544 1,359,014
Intangible assets, net 404,652 145,618 182,521
Goodwill 596,898 422,004 422,083
Other assets 42,803 40,063 50,940
TOTAL ASSETS $4,305,850 $3,763,997 $3,738,553
========== ========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $99,009 $101,060 $110,495
Income taxes payable 21,717 21,799 22,146
Accrued salary and
related expenses 140,738 124,954 152,122
Accrued expenses 85,145 55,561 58,900
Current portion of
long-term debt 2,965 4,804 304,794
Deferred income on
shipments to
distributors 25,542 27,179 25,362
------ ------ ------
Total current
liabilities 375,116 335,357 673,819
Long-term debt 1,000,871 500,955 3,997
Income taxes payable 337,053 294,728 260,770
Deferred tax
liabilities 202,435 205,221 192,434
Other liabilities 29,343 29,300 26,321
Total liabilities 1,944,818 1,365,561 1,157,341
--------- --------- ---------
Stockholders' equity:
Common stock 283 283 7,040
Retained earnings 2,373,318 2,412,262 2,589,619
Accumulated other
comprehensive loss (12,569) (14,109) (15,447)
Total stockholders'
equity 2,361,032 2,398,436 2,581,212
--------- --------- ---------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $4,305,850 $3,763,997 $3,738,553
========== ========== ==========
CONSOLIDATED
STATEMENTS
OF
CASH
FLOWS
(Unaudited)
Three Months Ended
------------------
December 28, September 28, December 29,
2013 2013 2012
---- ---- ----
(in thousands)
Cash
flows
from
operating
activities:
Net
income $49,322 $103,120 $76,622
Adjustments
to activities:
reconcile
net
income
to
net
cash
provided
by
operating
Stock-
based
compensation 22,869 18,740 22,845
Depreciation
and
amortization 64,404 51,133 51,880
Deferred
taxes (11,705) 25,529 (12,979)
Loss
(gain)
from
sale
of
property,
plant
and
equipment 265 36 (88)
Tax
benefit
(shortfall)
related
to
stock-
based
compensation (726) (3,488) 5,187
Impairment
of
long-
lived
assets 5,197 - 22,222
Excess
tax
benefit
from
stock-
based
compensation (2,459) (1,697) (6,615)
Changes
in
assets
and
liabilities:
Accounts
receivable 33,056 (12,450) 51,993
Inventories 14,030 (2,301) 570
Other
current
assets 31,362 (18,546) 4,091
Accounts
payable (3,252) (9,162) (9,536)
Income
taxes
payable 19,002 11,393 37,477
Deferred
revenue
on
shipments
to
distributors (1,637) 622 (1,663)
All
other
accrued
liabilities 14,704 (67,035) 13,091
Net
cash
provided
by
(used
in)
operating
activities 234,432 95,894 255,097
------- ------ -------
Cash
flows
from
investing
activities:
Purchase
of
property,
plant
and
equipment (46,133) (36,329) (62,102)
Proceeds
from
sales
of
property,
plant
and
equipment - 3,048 4,115
Payments
in
connection
with
business
acquisition,
net
of
cash
acquired (453,506) - -
Proceeds
from
maturity
of
available-
for-
sale
securities 27,000 - -
Net
cash
provided
by
(used
in)
investing
activities (472,639) (33,281) (57,987)
-------- ------- -------
Cash
flows
from
financing
activities:
Excess
tax
benefit
from
stock-
based
compensation 2,459 1,697 6,615
Contingent
consideration
paid (4,601) - (7,476)
Dividends
paid (73,325) (73,744) (70,063)
Repayment
of
notes
payable (1,839) - (74)
Issuance
of
debt 497,795 100 -
Debt
issuance
cost (3,431) - -
Repurchase
of
common
stock (59,101) (154,386) (50,435)
Issuance
of
ESPP
shares
under
employee
stock
purchase
program 19,096 - 16,768
Net
issuance
of
restricted
stock
units (7,106) (6,966) (6,538)
Proceeds
from
stock
options
exercised 8,622 5,247 19,350
Net
cash
provided
by
(used
in)
financing
activities 378,569 (228,052) (91,853)
------- -------- -------
Net
increase
(decrease)
in
cash
and
cash
equivalents 140,362 (165,439) 105,257
Cash
and
cash
equivalents:
Beginning
of
period 1,009,547 1,174,986 849,850
--------- --------- -------
End
of
period $1,149,909 $1,009,547 $955,107
========== ========== ========
Total
cash,
cash
equivalents,
and
short-
term
investments $1,149,909 $1,034,583 $1,030,299
========== ========== ==========
ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES
(Unaudited)
Three Months Ended
------------------
December 28, September 28, December 29,
2013 2013 2012
---- ---- ----
(in thousands, except per share data)
Reconciliation of
GAAP gross profit
to GAAP gross
profit excluding
special items:
------------------
GAAP gross profit $328,672 $347,196 $363,375
GAAP gross profit % 53.0% 59.3% 60.0%
Special items:
Intangible asset
amortization 19,098 8,092 8,986
Acquisition-related
inventory write-up 13,066 - -
Total special items 32,164 8,092 8,986
------ ----- -----
GAAP gross profit
excluding special
items $360,836 $355,288 $372,361
GAAP gross profit %
excluding special
items 58.2% 60.7% 61.5%
Reconciliation of
GAAP operating
expenses to GAAP
operating expenses
excluding special
items:
-------------------
GAAP operating
expenses $252,277 $218,587 $245,827
Special items:
Intangible asset
amortization 4,968 3,436 3,903
Impairment of long-
lived assets (1) 5,197 - 22,222
Severance and
restructuring (2) 10,227 5,547 2,236
Acquisition-related
costs 4,137 2,934 -
Other operating
expenses (income),
net (3) 1,306 (662) 1,666
Total special items 25,835 11,255 30,027
------ ------ ------
GAAP operating
expenses excluding
special items $226,442 $207,332 $215,800
======== ======== ========
Reconciliation of
GAAP net income to
GAAP net income
excluding special
items:
-------------------
GAAP net income $49,322 $103,120 $76,622
Special items:
Intangible asset
amortization 24,066 11,528 12,889
Acquisition-related
inventory write-up 13,066 - -
Impairment of long-
lived assets (1) 5,197 - 22,222
Severance and
restructuring (2) 10,227 5,547 2,236
Acquisition-related
costs 4,137 2,934 -
Other operating
expenses (income) ,
net (3) 1,306 (662) 1,666
----- ---- -----
Pre-tax total
special items 57,999 19,347 39,013
Tax effect of
special items (4,862) (2,981) (9,555)
International
restructuring
implementation - - 18,726
GAAP net income
excluding special
items $102,459 $119,486 $124,806
======== ======== ========
GAAP net income per
share excluding
special items:
Basic $0.36 $0.42 $0.43
===== ===== =====
Diluted $0.36 $0.41 $0.42
===== ===== =====
Shares used in the
calculation of
earnings per share
excluding special
items:
Basic 282,664 284,654 292,075
======= ======= =======
Diluted 288,565 290,260 298,759
======= ======= =======
(1) Includes impairment charges relating to fab tools, land and buildings held-for-sale, and end of line
manufacturing equipment.
(2) Includes severance & retention charges and lease abandonment charges related to the Volterra acquisition, and
severance charges related to the reorganization of various business units and manufacturing operations.
(3) Other operating expenses (income), net are primarily for contingent consideration adjustments related to
certain acquisitions and certain payroll taxes.
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; acquisition-related inventory write-up; impairment of long-lived assets; severance and restructuring; acquisition-related costs; contingent consideration adjustments relating to certain acquisitions; certain payroll taxes; and the tax provision impacts due to implementation of international restructuring. 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 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; severance and restructuring; acquisition-related costs; contingent consideration adjustments relating to certain acquisitions; and certain payroll taxes. 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; acquisition-related inventory write-up; impairment of long-lived assets; severance and restructuring; acquisition-related costs; contingent consideration adjustments relating to certain acquisitions; certain payroll taxes; and the tax provision impacts due to implementation of international restructuring. 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 2014 ending in March 2014, which includes revenue, gross margin and earnings per share. These statements involve risk and uncertainty. Actual results could differ materially from those forecasted based upon, among other things, general market and economic conditions and 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 29, 2013 (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
At Maxim Integrated, we put analog together in a way that sets our customers apart. In Fiscal 2013, we reported revenues of $2.4 billion. For more information, go to www.maximintegrated.com.
Contact
Kathy Ta
Managing Director, Investor Relations
(408) 601-5697
SOURCE Maxim Integrated Products, Inc.
