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Maxim Integrated Reports Results For The Second Quarter Of Fiscal 2019

- Revenue: $577 million

- Gross Margin: 64.7% GAAP (65.9% excluding special items)

- EPS: $0.47 GAAP ($0.60 excluding special items)

- Fiscal third quarter revenue outlook: $520 to $560 million

SAN JOSE, Calif., Jan. 29, 2019 /PRNewswire/ -- Maxim Integrated Products, Inc. (MXIM) reported net revenue of $577 million for its second quarter of fiscal 2019 ended December 29, 2018, a 10% decrease from the $638 million revenue recorded in the prior quarter, and a 7% decrease from the same quarter of last year. The same quarter of last year was a 14-week quarter and included revenue from the transition to sell-in accounting.

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

Tunc Doluca, President and Chief Executive Officer, commented, "Our December quarter results came in below expectations, due to the soft environment.  However, we are encouraged to see bookings return to normal levels in recent weeks. We believe our business model enables us to be successful in any environment, and we continue to generate strong free cash flow despite current conditions."

Fiscal Year 2019 Second Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the December quarter was $0.47. The results were affected by $22 million in charges due to the impact of U.S. tax legislation and $9 million in pre-tax special items which primarily consisted of charges related to acquisitions. GAAP earnings per share, excluding special items was $0.60. An analysis of GAAP versus GAAP excluding special items is provided in this press release.

Cash Flow Items
At the end of the second quarter of fiscal 2019, total cash, cash equivalents and short-term investments were $1.96 billion, a decrease of $603 million from the prior quarter.
Notable items included:

  • Cash flow from operations: $224 million
  • Capital expenditures: $13 million
  • Bond payment: $500 million
  • Dividends paid: $127 million ($0.46 per share)
  • Stock repurchases: $208 million

Adjusted trailing twelve months free cash flow was $919 million, which excludes a one-time tax payment of $178 million in the fourth quarter of fiscal 2018. 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 March 2019 quarter was $372 million. Based on the beginning backlog and expected turns, our results for the March 2019 quarter are forecasted to be as follows:

  • Revenue: $520 to $560 million
  • Gross Margin: 63% to 65% GAAP (64% to 66% excluding special items)
  • EPS: $0.44 to $0.50 GAAP ($0.49 to $0.55 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 $0.46 per share will be paid on March 14, 2019, to stockholders of record on February 28, 2019. 

Conference Call
Maxim Integrated has scheduled a conference call on January 29 at 2:00 p.m. Pacific Time to discuss its financial results for the second quarter of fiscal 2019 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.

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


CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)



Three Months Ended




December 29,
 2018


September 29,
 2018


December 30,
 2017




(in thousands, except per share data)



Net revenues

$

576,906



$

638,495



$

622,637




Cost of goods sold

203,858



208,259



212,961




Gross margin

373,048



430,236



409,676




Operating expenses:








Research and development

110,303



112,708



115,896




Selling, general and administrative

77,853



81,518



85,323




Intangible asset amortization

756



773



995




Impairment of long-lived assets

753





850




Severance and restructuring expenses

1,179



994



6,523




Other operating expenses (income), net



60



(959)




Total operating expenses (income), net

190,844



196,053



208,628




Operating income (loss)

182,204



234,183



201,048




Interest and other income (expense), net

472



(546)



(3,121)




Income (loss) before provision for income taxes

182,676



233,637



197,927




Income tax provision (benefit)

50,784



36,214



272,942




Net income (loss)

$

131,892



$

197,423



$

(75,015)




Earnings (loss) per share:








Basic

$

0.48



$

0.71



$

(0.27)




Diluted

$

0.47



$

0.70



$

(0.27)




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








Basic

276,252



278,045



281,560




Diluted

280,008



282,454



281,560




Dividends paid per share

$

0.46



$

0.46



$

0.36












SCHEDULE OF SPECIAL ITEMS



(Unaudited)




Three Months Ended




December 29,
 2018


September 29,
 2018


December 30,
 2017




(in thousands)



Cost of goods sold:








Intangible asset amortization

$

6,868



$

6,915



$

11,139




 Total

$

6,868



$

6,915



$

11,139




Operating expenses:








Intangible asset amortization

756



$

773



$

995




Impairment of long-lived assets (1)

753





850




Severance and restructuring

1,179



994



6,523




Other operating expenses (income), net



60



(959)




 Total

$

2,688



$

1,827



$

7,409




Interest and other expense (income), net

$

(351)



$

(378)



$

(119)




Total

$

(351)



$

(378)



$

(119)




Income tax provision (benefit):

 








Impact of U.S. tax legislation (2)

$

22,082



$



$

243,550




Total

$

22,082



$



$

243,550












(1) Includes impairment of investments in privately-held companies and other equipment charges.



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










 


CONSOLIDATED BALANCE SHEETS



(Unaudited)




December 29,
 2018


September 29,
 2018


December 30,
 2017




(in thousands)



ASSETS



Current assets:








Cash and cash equivalents

$

1,406,740



$

1,598,772



$

1,631,510




Short-term investments

553,901



964,643



1,191,765




Total cash, cash equivalents and short-term investments

1,960,641



2,563,415



2,823,275




Accounts receivable, net

391,419



439,407



235,695




Inventories

278,925



275,374



259,597




Other current assets

26,933



33,329



24,153




Total current assets

2,657,918



3,311,525



3,342,720




Property, plant and equipment, net

571,983



573,014



597,818




Intangible assets, net

67,161



74,785



67,716




Goodwill

532,251



532,251



491,015




Other assets

59,614



56,977



65,243




TOTAL ASSETS

$

3,888,927



$

4,548,552



$

4,564,512












LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:








Accounts payable

$

99,577



$

84,087



$

84,770




Price adjustment and other revenue reserves

130,601



135,187






Income taxes payable

39,507



60,877



10,523




Accrued salary and related expenses

102,427



106,273



113,716




Accrued expenses

34,368



42,091



37,687




Current portion of debt



499,762



498,694




Total current liabilities

406,480



928,277



745,390




Long-term debt

991,866



991,506



990,428




Income taxes payable

673,051



652,163



801,260




Other liabilities

62,116



64,283



41,736




Total liabilities

2,133,513



2,636,229



2,578,814












Stockholders' equity:








Common stock and capital in excess of par value

279



279



283




Retained earnings

1,766,471



1,924,764



1,997,207




Accumulated other comprehensive loss

(11,336)



(12,720)



(11,792)




Total stockholders' equity

1,755,414



1,912,323



1,985,698




TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

$

3,888,927



$

4,548,552



$

4,564,512











 


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)




Three Months Ended




December 29,
 2018


September 29,
 2018


December 30,
 2017




(in thousands)



Cash flows from operating activities:








Net income (loss)

$

131,892



$

197,423



$

(75,015)




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








Stock-based compensation

21,656



20,497



21,040




Depreciation and amortization

26,803



31,191



35,813




Deferred taxes

(5,174)



(3,032)



(3,188)




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

2,275



621



(649)




Impairment of investments in privately-held companies

753





850




Other adjustments



(117)






Changes in assets and liabilities:








Accounts receivable

43,402



(23,604)



(2,480)




Inventories

(3,505)



7,002



(14,125)




Other current assets

6,038



(12,625)



31,459




Accounts payable

7,664



(5,263)



13,643




Income taxes payable

(482)



33,743



234,264




Deferred margin on shipments to distributors





(16,994)




Accrued salary and related expenses

(375)



(45,408)



10,523




All other accrued liabilities

(6,697)



6,757



(5,266)




Net cash provided by (used in) operating activities

224,250



207,185



229,875




Cash flows from investing activities:








Purchase of property, plant and equipment

(12,597)



(18,316)



(22,413)




Proceeds from sales of property, plant and equipment

1



1



1,444




Proceeds from sale of available-for-sale securities

18,815



8,438



21,895




Proceeds from maturity of available-for-sale securities

416,720



301,834



118,211




Payment in connection with business acquisition, net of cash acquired



(2,949)






Purchases of available-for-sale securities

(23,707)



(190,880)



(137,166)




Purchases of privately-held companies' securities

(156)



(750)



(1,500)




Net cash provided by (used in) investing activities

399,076



97,378



(19,529)




Cash flows from financing activities:








Repayment of debt

(500,000)








Contingent consideration paid



(8,000)






Net issuance of restricted stock units

(5,916)



(7,528)



(6,104)




Proceeds from stock options exercised

7,235



6,608



13,507




Issuance of common stock under employee stock purchase program

17,689





14,975




Repurchase of common stock

(207,558)



(112,498)



(76,953)




Dividends paid

(126,808)



(127,857)



(101,421)




Net cash provided by (used in) financing activities

(815,358)



(249,275)



(155,996)




Net increase (decrease) in cash and cash equivalents

(192,032)



55,288



54,350




Cash and cash equivalents:








Beginning of period

$

1,598,772



$

1,543,484



$

1,577,160




End of period

$

1,406,740



$

1,598,772



$

1,631,510




Total cash, cash equivalents, and short-term investments

$

1,960,641



$

2,563,415



$

2,823,275











 


ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES



(Unaudited)





Three Months Ended





December 29,
 2018


September 29,
 2018


December 30,
 2017





(in thousands, except per share data)



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









GAAP gross profit


$

373,048



$

430,236



$

409,676




GAAP gross profit %


64.7

%


67.4

%


65.8

%



Special items:









Intangible asset amortization


6,868



6,915



11,139




Total special items


6,868



6.915



11,139




 GAAP gross profit excluding special items


$

379,916



$

437.151



$

420,815




 GAAP gross profit % excluding special items


65.9

%


68.5

%


67.6

%



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









GAAP operating expenses


$

190,844



$

196,053



$

208,628




Special items:









Intangible asset amortization


756



773



995




Impairment of long-lived assets


753





850




Severance and restructuring


1,179



994



6,523




Other operating expenses (income), net




60



(959)




 Total special items


2,688



1.827



7,409




 GAAP operating expenses excluding special items


$

188,156



$

194.226



$

201,219




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









GAAP net income (loss)


$

131,892



$

197,423



$

(75,015)




Special items:









Intangible asset amortization


7,624



7,688



12,134




Impairment of long-lived assets (1)


753





850




Severance and restructuring


1,179



994



6,523




Other operating expenses (income), net




60



(959)




Interest and other expense (income), net


(351)



(378)



(119)




 Total pre-tax special items


9,205



8,364



18,429




Other income tax effects and adjustments (2)


3,758



4,754



(897)




Impact of U.S. tax effects and adjustments (3)


22,082





243,550




 GAAP net income excluding special items


$

166,937



$

210,541



$

186,067













 GAAP net income per share excluding special items:









Basic


$

0.60



$

0.76



$

0.66




Diluted


$

0.60



$

0.75



$

0.65




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









Basic


276,252



278,045



281,560




Diluted (4)


280,008



282,454



286,356













(1) Includes impairment of investments in privately-held companies and other equipment impairment charges.



(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.



(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.












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; 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. 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.  Special items include the tax impact of pre-tax special items, significant tax audit settlements, significant prior year tax reserve adjustments, and significant non-recurring and period specific tax items, which vary in size and frequency, including certain tax charges resulting from U.S. tax legislation that was enacted on December 22, 2017.   We used a long-term average tax rate to compute the GAAP tax provision excluding special items for the second quarter of fiscal year 2018; that long-term average tax rate was the weighted average of our normalized fiscal year GAAP tax rate, excluding special items over a four-year period, that included fiscal year 2018 and the three prior fiscal years.  A long-term average tax rate was not used for the first and second quarters of fiscal year 2019 because, due to the impacts of tax reform, a long-term average tax rate was no longer appropriate.

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; 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 third quarter of fiscal 2019 ended March 2019, which includes revenue, gross margin and earnings per share as well as the Company's belief that its business model enables it to be successful in any environment.  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 30, 2018 (the "Form 10-K"). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331618000031/maxim10-kfy2018.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.

 

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