Maxim Integrated Reports Results For The Second Quarter Of Fiscal 2020

SAN JOSE, Calif., Jan. 28, 2020 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $551 million for its second quarter of fiscal 2020 ended December 28, 2019, a 3% increase from the $533 million revenue recorded in the prior quarter, and a 4% decrease from the same quarter of last year.

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

"Our December quarter results met our expectations, while also maintaining lean inventory levels," said Tunc Doluca, President and Chief Executive Officer. "Looking forward to the March quarter, we expect a return to revenue growth for the company from the same quarter last year, driven by growth in Communications and Data Center, Industrial and Automotive markets."

Fiscal Year 2020 Second Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the December quarter was $0.53. The results were affected by $5 million in pre-tax special items which primarily consisted of charges related to acquisitions. GAAP earnings per share, excluding special items was $0.56. 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 2020, total cash, cash equivalents and short-term investments were $1.8 billion, down $10 million from the prior quarter.

Notable items included:

  • Cash flow from operations: $237 million
  • Capital expenditures: $14 million
  • Dividends paid: $130 million ($0.48 per share)
  • Stock repurchases: $108 million

Trailing twelve months free cash flow was $737 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 March 2020 quarter was $456 million. Based on the beginning backlog and expected turns, our results for the March 2020 quarter are forecasted to be as follows:

  • Revenue: $555 to $595 million
  • Gross Margin: 65% to 67% GAAP (65.5% to 67.5% excluding special items)
  • EPS: $0.56 to $0.64 GAAP ($0.57 to $0.65 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 $0.48 per share will be paid on March 13, 2020, to stockholders of record on February 27, 2020. 

Conference Call

Maxim Integrated has scheduled a conference call on January 28 at 2:00 p.m. Pacific Time to discuss its financial results for the second 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




December 28, 2019


September 28, 2019


December 29, 2018




(in thousands, except per share data)



Net revenues

$                          551,070


$                          533,040


$                   576,906



Cost of goods sold

190,546


189,717


203,858



Gross margin

360,524


343,323


373,048



Operating expenses:








Research and development

111,914


108,989


110,303



Selling, general and administrative

76,071


76,115


77,853



Intangible asset amortization

756


756


756



Impairment of long-lived assets



753



Severance and restructuring expenses

2,728


1,434


1,179



Other operating expenses (income), net

(1)


25




Total operating expenses (income), net

191,468


187,319


190,844



Operating income (loss)

169,056


156,004


182,204



Interest and other income (expense), net

(17)


1,829


472



Income (loss) before provision for income taxes

169,039


157,833


182,676



Income tax provision (benefit)

22,989


17,677


50,784



Net income (loss)

$                          146,050


$                          140,156


$                   131,892



Earnings (loss) per share:








Basic

$                                0.54


$                                0.52


$                         0.48



Diluted

$                                0.53


$                                0.51


$                         0.47



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








Basic

270,330


271,388


276,252



Diluted

273,269


274,436


280,008











Dividends paid per share

$                                0.48


$                                0.48


$                         0.46











SCHEDULE OF SPECIAL ITEMS



(Unaudited)




Three Months Ended




December 28, 2019


September 28, 2019


December 29, 2018




(in thousands)



Cost of goods sold:








Intangible asset amortization

$                              3,111


$                              3,111


$                       6,868



Total

$                              3,111


$                              3,111


$                       6,868



Operating expenses:








Intangible asset amortization

$                                 756


$                                 756


$                          756



Impairment of long-lived assets 



753



Severance and restructuring

2,728


1,434


1,179



Other operating expenses (income), net

(1)


25




Total

$                              3,483


$                              2,215


$                       2,688



Interest and other expense (income), net

$                            (1,230)


$                               (207)


$                        (351)



Total

$                            (1,230)


$                               (207)


$                        (351)



Income tax provision (benefit):








Impact of U.S. tax legislation (1)

$                                 —


$                                 —


$                     22,082



 Total 

$                                 —


$                                 —


$                     22,082











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











 


CONSOLIDATED BALANCE SHEETS



(Unaudited)




December 28, 2019


September 28, 2019


December 29, 2018




(in thousands)



ASSETS



Current assets:








Cash and cash equivalents

$                      1,720,194


$                        1,695,191


$                      1,406,740



Short-term investments

63,006


98,176


553,901



Total cash, cash equivalents and short-term investments

1,783,200


1,793,367


1,960,641



Accounts receivable, net

348,342


370,316


391,419



Inventories

223,958


235,959


278,925



Other current assets

23,797


24,982


26,933



Total current assets

2,379,297


2,424,624


2,657,918



Property, plant and equipment, net

571,359


574,097


571,983



Intangible assets, net

48,509


52,376


67,161



Goodwill

532,251


532,251


532,251



Other assets

95,413


97,439


59,614



TOTAL ASSETS

$                      3,626,829


$                        3,680,787


$                      3,888,927











LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:








Accounts payable

$                           89,449


$                             81,794


$                           99,577



Price adjustment and other revenue reserves

105,237


90,206


130,601



Income taxes payable

38,307


31,704


39,507



Accrued salary and related expenses

94,739


96,168


102,427



Accrued expenses

32,739


42,644


34,368



Total current liabilities

360,471


342,516


406,480



Long-term debt

993,303


992,944


991,866



Income taxes payable

433,743


446,138


673,051



Other liabilities

112,803


117,903


62,116



Total liabilities

1,900,320


1,899,501


2,133,513











Stockholders' equity:








Common stock and capital in excess of par value

270


271


279



Retained earnings

1,737,528


1,793,012


1,766,471



Accumulated other comprehensive loss

(11,289)


(11,997)


(11,336)



Total stockholders' equity

1,726,509


1,781,286


1,755,414



TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

$                      3,626,829


$                        3,680,787


$                      3,888,927










 


CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)




Three Months Ended




December 28, 2019


September 28, 2019


December 29, 2018




(in thousands)



Cash flows from operating activities:








Net income (loss)

$                         146,050


$                           140,156


$                         131,892



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








Stock-based compensation

24,067


24,671


21,656



Depreciation and amortization

24,087


23,921


26,803



Deferred taxes

(2,684)


453


(5,174)



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

113


376


2,275



Other adjustments

5,934


27


753



Changes in assets and liabilities:








Accounts receivable

37,005


(20,584)


43,402



Inventories

12,005


10,578


(3,505)



Other assets

(3,377)


(52,443)


6,038



Accounts payable

3,602


1,242


7,664



Income taxes payable

(5,792)


(25,341)


(482)



Accrued salary and related expenses

(1,429)


(22,536)


(375)



Other liabilities

(2,116)


60,750


(6,697)



Net cash provided by (used in) operating activities

237,465


141,270


224,250



Cash flows from investing activities:








Purchase of property, plant and equipment

(13,670)


(20,631)


(12,597)



Proceeds from sales of property, plant and equipment

128


43


1



Proceeds from sale of available-for-sale securities



18,815



Proceeds from maturity of available-for-sale securities

35,146


42,921


416,720



Purchases of available-for-sale securities



(23,707)



Purchases of private company investments

(516)



(156)



Proceeds from private company investments


516




Other investing activities

(33)


(35)




Net cash provided by (used in) investing activities

21,055


22,814


399,076



Cash flows from financing activities:








Repayment of debt



(500,000)



Contingent consideration paid

(8,000)





Net issuance of restricted stock units

(7,623)


(9,943)


(5,916)



Proceeds from stock options exercised

1,338


7,482


7,235



Issuance of common stock under employee stock purchase program

18,535



17,689



Repurchase of common stock

(107,957)


(93,552)


(207,558)



Dividends paid

(129,810)


(130,222)


(126,808)



Net cash provided by (used in) financing activities

(233,517)


(226,235)


(815,358)



Net increase (decrease) in cash and cash equivalents

25,003


(62,151)


(192,032)



Cash and cash equivalents:








Beginning of period

$                      1,695,191


$                        1,757,342


$                      1,598,772



End of period

$                      1,720,194


$                        1,695,191


$                      1,406,740



Total cash, cash equivalents, and short-term investments

$                      1,783,200


$                        1,793,367


$                      1,960,641










 


ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES



(Unaudited)





Three Months Ended





December 28, 2019


September 28, 2019


December 29, 2018





(in thousands, except per share data)



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









GAAP gross profit


$                         360,524


$                           343,323


$                         373,048



GAAP gross profit %


65.4%


64.4%


64.7%



Special items:









Intangible asset amortization


3,111


3,111


6,868



 Total special items 


3,111


3,111


6,868



 GAAP gross profit excluding special items 


$                         363,635


$                           346,434


$                         379,916



 GAAP gross profit % excluding special items 


66.0%


65.0%


65.9%



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









GAAP operating expenses


$                         191,468


$                           187,319


$                         190,844



Special items:









Intangible asset amortization


756


756


756



Impairment of long-lived assets




753



Severance and restructuring


2,728


1,434


1,179



Other operating expenses (income), net


(1)


25




 Total special items 


3,483


2,215


2,688



 GAAP operating expenses excluding special items 


$                         187,985


$                           185,104


$                         188,156



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









GAAP net income (loss)


$                         146,050


$                           140,156


$                         131,892



Special items:









Intangible asset amortization


3,867


3,867


7,624



Impairment of long-lived assets




753



Severance and restructuring


2,728


1,434


1,179



Other operating expenses (income), net


(1)


25




Interest and other expense (income), net


(1,230)


(207)


(351)



Total pre-tax special items


5,364


5,119


9,205



Other income tax effects and adjustments(1)


317


(3,506)


3,758



Impact of U.S. tax legislation(2)




22,082



GAAP net income excluding special items


$                         151,731


$                           141,769


$                         166,937












GAAP net income per share excluding special items:









Basic


$                               0.56


$                                 0.52


$                               0.60



Diluted


$                               0.56


$                                 0.52


$                               0.60



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









Basic


270,330


271,388


276,252



Diluted


273,269


274,436


280,008












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




(2) 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 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 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; 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; 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 2020 ending March 2020, which includes revenue, gross margin and earnings per share, as well as the Company's expectation of a return to revenue growth for the Company from the same quarter last year, driven by growth in Communications and Data Center, Industrial and Automotive markets.  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 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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SOURCE Maxim Integrated Investor Relations

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