MAXIM INTEGRATED PRODUCTS INC - FORM 8-K - EX-99.1 - PRESS RELEASE

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EX-99.1 - PRESS RELEASE - MAXIM INTEGRATED PRODUCTS INC	ex991042414.pdf
8-K - 8-K - MAXIM INTEGRATED PRODUCTS INC	maximq314form8-k.htm

Press Release

Contact

Kathy Ta

Managing Director, Investor Relations

(408) 601-5697

MAXIM INTEGRATED REPORTS RESULTS FOR THE THIRD QUARTER OF FISCAL 2014


•	Revenue: $606 million


•	Gross Margin: 56.1% GAAP (60.1% excluding special items)


•	EPS: $0.42 GAAP ($0.43 excluding special items)


•	Cash, cash equivalents, and short term investments: $1.23 billion


•	Fiscal fourth quarter revenue outlook: $635 million to $665 million

SAN JOSE, CA - April 24, 2014 - Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $606 million for its third quarter of fiscal 2014 ended March 29, 2014, a 2% decrease from the $620 million revenue recorded in the prior quarter.

Tunc Doluca, President and Chief Executive Officer, commented, “We achieved better than seasonal results for our mix of businesses, driven by growth in automotive, industrial and communications, as market requirements converge on the need for lower power, higher functionality, and more integrated designs. ” Mr. Doluca continued, “Looking forward, we expect continued growth in these businesses, accompanied by strength in mobility.”

Fiscal Year 2014 Third Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the March quarter was $0.42. Earnings per share included an intellectual property licensing income amount of $17 million, included in Interest and Other Income.

The results were affected by special items which primarily consisted of a $35 million pre-tax charge for items related to acquisitions and a $35 million benefit for income taxes. GAAP earnings per share, excluding special

items was $0.43. 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 third quarter of fiscal 2014, total cash, cash equivalents and short term investments was $1.23 billion, an increase of $81 million from the prior quarter. Notable items included:


•	Cash flow from operations: $212 million


•	Net capital expenditures: $26 million


•	Dividends: $73 million ($0.26 per share)


•	Stock repurchases: $51 million

Business Outlook

The Company’s 90-day backlog at the beginning of the fourth fiscal quarter of 2014 was $413 million. Based on the beginning backlog and expected turns, results for the June 2014 quarter are expected to be as follows:


•	Revenue: $635 million to $665 million


•	Gross Margin: 58% to 60% GAAP (61% to 63% excluding special items)


•	EPS: $0.38 to $0.42 GAAP ($0.45 to $0.49 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 June 5, 2014, to stockholders of record on May 22, 2014.

Conference Call

Maxim Integrated has scheduled a conference call on April 24, 2014, at 2:00 p.m. Pacific Time to discuss its financial results for the third quarter of fiscal 2014 and its business outlook. To listen via telephone, dial (866) 804-3547 (toll free) or (703) 639-1328. This call will be webcast by Shareholder.com and can be accessed at the Company’s website at www.maximintegrated.com/company/investor.

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CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
	Three Months Ended
	March 29, 2014			December 28, 2013			March 30, 2013
	(in thousands, except per share data)
Net revenues	$	605,681		$	620,274		$	604,884
Cost of goods sold	265,744			291,602			228,782
Gross margin	339,937			328,672			376,102
Operating expenses:
Research and development	141,493			142,971			134,138
Selling, general and administrative	80,680			83,471			81,954
Intangible asset amortization	4,863			4,968			3,903
Impairment of long-lived assets	—			5,197			—
Severance and restructuring expenses (1)	3,338			10,227			151
Acquisition-related costs	(88		)	4,137			—
Other operating expenses (income), net (2)	2,913			7,307			1,678
Total operating expenses	233,199			258,278			221,824
Operating income	106,738			70,394			154,278
Interest and other income (expense), net (3)	5,174			(5,833		)	(2,669		)
Income before provision for income taxes	111,912			64,561			151,609
Provision (benefit) for income taxes (4)	(10,632		)	20,208			22,824
Income from continuing operations	122,544			44,353			128,785
Income from discontinued operations, net of tax	—			—			2,603
Net income	$	122,544		$	44,353		$	131,388

Earnings per share: Basic
From continuing operations	$	0.43		$	0.16		$	0.44
From discontinued operations, net of tax	—			—			0.01
Basic	$	0.43		$	0.16		$	0.45

Earnings per share: Diluted
From continuing operations	$	0.42		$	0.15		$	0.43
From discontinued operations, net of tax	—			—			0.01
Diluted	$	0.42		$	0.15		$	0.44

Shares used in the calculation of earnings per share:
Basic	282,627			282,664			292,888
Diluted	288,575			288,565			300,082

Dividends paid per share	$	0.26		$	0.26		$	0.24

(1) Includes severance, retention and lease abandonment charges related to acquisitions, and severance charges related to the reorganization of various business units and manufacturing operations.
(2) Other operating expenses (income), net are primarily for legal settlement, in-process research and development abandoned, contingent consideration adjustments related to certain acquisitions and legal expenses related to Volterra acquisition.
(3) Includes impairment of investments in privately-held companies.
(4) Includes one-time fixed asset tax basis adjustments relating to prior year depreciation expense.

SCHEDULE OF SPECIAL EXPENSE ITEMS
(Unaudited)
	Three Months Ended
	March 29, 2014			December 28, 2013			March 30, 2013
	(in thousands)
Cost of goods sold:
Intangible asset amortization	$	18,542		$	19,098		$	7,777
Acquisition-related inventory write-up	5,518			13,066			—
Total	$	24,060		$	32,164		$	7,777

Operating expenses:
Intangible asset amortization	$	4,863		$	4,968		$	3,903
Impairment of long-lived assets	—			5,197			—
Severance and restructuring (1)	3,338			10,227			151
Acquisition-related costs	(88		)	4,137			—
Other operating expenses (income), net (2)	2,913			7,307			1,678
Total	$	11,026		$	31,836		$	5,732

Interest and other expense (income), net (3)	$	3,723		$	—		$	—
Total	$	3,723		$	—		$	—

Provision (benefit) for income taxes:
Fixed assets tax basis adjustment (4)	$	(34,562	)	$	—		$	—
Research & development tax credits	—			—			(3,899		)
Total	$	(34,562	)	$	—		$	(3,899	)

Discontinued operations:
Income from discontinued operations, net of tax	$	—		$	—		$	(2,603	)
Total	$	—		$	—		$	(2,603	)


(1) Includes severance, retention and lease abandonment charges related to acquisitions, and severance charges related to the reorganization of various business units and manufacturing operations.
(2) Other operating expenses (income), net are primarily for legal settlement, in-process research and development abandoned, contingent consideration adjustments related to certain acquisitions and legal expenses related to Volterra acquisition.
(3) Includes impairment of investments in privately-held companies.
(4) Includes one-time fixed asset tax basis adjustments relating to prior year depreciation expense.

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STOCK-BASED COMPENSATION BY TYPE OF AWARD (in thousands)
(Unaudited)
Three Months Ended March 29, 2014	Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total
Cost of goods sold	$	451	$	2,108	$	594	$	3,153
Research and development expense	2,124		7,917		1,623		11,664
Selling, general and administrative expense	1,391		5,186		663		7,240
Total	$	3,966	$	15,211	$	2,880	$	22,057

Three Months Ended December 28, 2013
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 March 30, 2013
Cost of goods sold	$	337	$	2,120	$	598	$	3,055
Research and development expense	1,440		7,116		1,480		10,036
Selling, general and administrative expense	1,157		4,764		601		6,522
Total	$	2,934	$	14,000	$	2,679	$	19,613

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CONSOLIDATED BALANCE SHEETS
(Unaudited)
	March 29, 2014			December 28, 2013			March 30, 2013
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,231,248		$	1,149,909		$	1,547,980
Short-term investments	—			—			25,095
Total cash, cash equivalents and short-term investments	1,231,248			1,149,909			1,573,075
Accounts receivable, net	304,128			288,285			300,046
Inventories	290,518			297,234			268,018
Deferred tax assets	74,038			69,154			81,809
Other current assets	79,346			85,554			113,010
Total current assets	1,979,278			1,890,136			2,335,958
Property, plant and equipment, net	1,355,268			1,372,393			1,368,905
Intangible assets, net	384,167			404,652			165,591
Goodwill	597,676			596,898			422,004
Other assets	38,176			42,803			41,660
TOTAL ASSETS	$	4,354,565		$	4,306,882		$	4,334,118

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	94,315		$	99,009		$	114,629
Income taxes payable	20,720			21,717			20,200
Accrued salary and related expenses	168,336			140,738			182,894
Accrued expenses	81,232			91,145			59,075
Current portion of long-term debt	2,526			2,965			304,314
Deferred income on shipments to distributors	24,259			25,542			25,851
Total current liabilities	391,388			381,116			706,963
Long-term debt	1,000,871			1,000,871			503,573
Income taxes payable	352,294			337,053			271,815
Deferred tax liabilities	171,431			202,435			213,138
Other liabilities	37,977			29,343			26,063
Total liabilities	1,953,961			1,950,818			1,721,552

Stockholders' equity:
Common stock and capital in excess of par value	283			283			292
Retained earnings	2,412,627			2,368,350			2,629,895
Accumulated other comprehensive loss	(12,306		)	(12,569		)	(17,621		)
Total stockholders' equity	2,400,604			2,356,064			2,612,566
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	4,354,565		$	4,306,882		$	4,334,118

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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Three Months Ended
	March 29, 2014			December 28, 2013			March 30, 2013
	(in thousands)
Cash flows from operating activities:
Net income	$	122,544		$	44,353		$	131,388
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	22,057			22,869			19,613
Depreciation and amortization	64,665			64,404			50,391
Deferred taxes	(36,482		)	(11,705		)	18,392
In-process research and development written-off	2,580			—			2,800
Loss (gain) from sale of property, plant and equipment	818			265			(2,397		)
Tax benefit (shortfall) related to stock-based compensation	3,204			(726		)	1,317
Impairment of long-lived assets	—			5,197			—
Impairment of investments in privately-held companies	3,723			—			—
Excess tax benefit from stock-based compensation	(5,139		)	(2,459		)	(4,297		)
Loss(gain) on sale of discontinued operations	—			—			(3,285		)
Changes in assets and liabilities:
Accounts receivable	(15,566		)	33,056			(35,501		)
Inventories	7,717			14,030			(12,143		)
Other current assets	7,194			30,330			(14,653		)
Accounts payable	(4,044		)	(3,252		)	10,453
Income taxes payable	14,244			19,002			9,100
Deferred revenue on shipments to distributors	(1,283		)	(1,637		)	489
All other accrued liabilities	25,466			20,704			40,026
Net cash provided by (used in) operating activities	211,698			234,431			211,693

Cash flows from investing activities:
Purchase of property, plant and equipment	(26,407		)	(46,133		)	(54,945		)
Proceeds from sales of property, plant and equipment	618			—			10,199
Payments in connection with business acquisition, net of cash acquired	(5,750		)	(453,506		)	—
Proceeds from maturity of available-for-sale securities	—			27,000			50,000
Net cash provided by (used in) investing activities	(31,539		)	(472,639		)	5,254

Cash flows from financing activities:
Excess tax benefit from stock-based compensation	5,139			2,459			4,297
Contingent consideration paid	(104		)	(4,601		)	—
Dividends paid	(73,481		)	(73,324		)	(70,421		)
Repayment of notes payable	(439		)	(1,839		)	(903		)
Issuance of debt	—			497,795			491,145
Debt issuance cost	—			(3,431		)	—
Repurchase of common stock	(51,083		)	(59,101		)	(66,330		)
Issuance of ESPP shares under employee stock purchase program	—			19,096			—
Net issuance of restricted stock units	(8,390		)	(7,106		)	(7,941		)
Proceeds from stock options exercised	29,538			8,622			26,079
Net cash provided by (used in) financing activities	(98,820		)	378,570			375,926

Net increase (decrease) in cash and cash equivalents	81,339			140,362			592,873
Cash and cash equivalents:
Beginning of period	1,149,909			1,009,547			955,107
End of period	$	1,231,248		$	1,149,909		$	1,547,980

Total cash, cash equivalents, and short-term investments	$	1,231,248		$	1,149,909		$	1,573,075

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ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES
(Unaudited)
	Three Months Ended
	March 29, 2014			December 28, 2013			March 30, 2013
	(in thousands, except per share data)
Reconciliation of GAAP gross profit to GAAP gross profit excluding special items:
GAAP gross profit	$	339,937		$	328,672		$	376,102
GAAP gross profit %	56.1		%	53.0		%	62.2		%

Special items:
Intangible asset amortization	18,542			19,098			7,777
Acquisition-related inventory write-up	5,518			13,066			—
Total special items	24,060			32,164			7,777
GAAP gross profit excluding special items	$	363,997		$	360,836		$	383,879
GAAP gross profit % excluding special items	60.1		%	58.2		%	63.5		%

Reconciliation of GAAP operating expenses to GAAP operating expenses excluding special items:
GAAP operating expenses	$	233,199		$	258,278		$	221,824

Special items:
Intangible asset amortization	4,863			4,968			3,903
Impairment of long-lived assets	—			5,197			—
Severance and restructuring (1)	3,338			10,227			151
Acquisition-related costs	(88		)	4,137			—
Other operating expenses (income), net (2)	2,913			7,307			1,678
Total special items	11,026			31,836			5,732
GAAP operating expenses excluding special items	$	222,173		$	226,442		$	216,092

Reconciliation of GAAP net income to GAAP net income excluding special items:
GAAP net income	$	122,544		$	44,353		$	131,388

Special items:
Intangible asset amortization	23,405			24,066			11,680
Acquisition-related inventory write-up	5,518			13,066			—
Impairment of long-lived assets	—			5,197			—
Severance and restructuring (1)	3,338			10,227			151
Acquisition-related costs	(88		)	4,137			—
Other operating expenses (income), net (2)	2,913			7,307			1,678
Interest and other expense, net (3)	3,723			—			—
Pre-tax total special items	38,809			64,000			13,509
Tax effect of special items	(3,658		)	(5,894		)	(3,806		)
Fixed asset tax basis adjustment (4)	(34,562		)	—			—
Research & development tax credits	—			—			(3,899		)
Discontinued operations, net of tax	—			—			(2,603		)
GAAP net income excluding special items	$	123,133		$	102,459		$	134,589

GAAP net income per share excluding special items:
Basic	$	0.44		$	0.36		$	0.46
Diluted	$	0.43		$	0.36		$	0.45

Shares used in the calculation of earnings per share excluding special items:
Basic	282,627			282,664			292,888
Diluted	288,575			288,565			300,082


(1) Includes severance, retention and lease abandonment charges related to acquisitions, and severance charges related to the reorganization of various business units and manufacturing operations.
(2) Other operating expenses (income), net are primarily for legal settlement, in-process research and development abandoned, contingent consideration adjustments related to certain acquisitions and legal expenses related to Volterra acquisition.
(3) Includes impairment of investments in privately-held companies.
(4) Includes one-time fixed asset tax basis adjustments relating to prior year depreciation expense.

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; legal settlement; in-process research and development abandoned; legal expenses related to Volterra; impairment of investments in privately-held companies; tax provision impacts due to fixed asset tax basis adjustments; research and development tax credits; and discontinued operations, net of tax. 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; in-process research and development abandoned; legal settlement; and legal expenses related to Volterra. 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; legal settlement; in-process research and development abandoned; legal expenses related to Volterra; impairment of investments in privately-held companies; research and development tax credits; discontinued operations, net of tax; and the tax provision impacts due to fixed asset tax basis 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 2014 ending in June 2014, which includes revenue, gross margin and earnings per share, as well as looking forward, the Company’s expects continued growth in its automotive, industrial and communications businesses, accompanied by strength in mobility.” 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.

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