SAN JOSE, Calif., Oct. 20, 2016 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ: MXIM) reported net revenue of $561 million for its first quarter of fiscal 2017 ended September 24, 2016, a 1% decrease from the $566 million revenue recorded in the prior quarter, and flat from the same quarter of last year.

Tunc Doluca, President and Chief Executive Officer, commented, 'In the September quarter, our businesses performed in line with our improved profitability and revenue growth objectives. Despite the Note 7 smartphone cancellation, we are diverse in our revenue across a broad base of customers, end markets and applications, which is helping to lower variability in our revenue.'

Fiscal Year 2017 First Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the September quarter was $0.48. The results were affected by pre-tax special items which primarily consisted of a $27 million gain on the sale of a business, $15 million in charges related to acquisitions, and $12 million in charges related to restructuring activities. GAAP earnings per share, excluding special items was $0.48. 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 2017, total cash, cash equivalents and short term investments were $2.27 billion, an increase of $37 million from the prior quarter.

Notable items included:

  • Cash flow from operations: $123 million
  • Capital expenditures: $14 million
  • Proceeds related to the sale of a manufacturing facility: $24.5 million
  • Dividends: $94 million ($0.33 per share)
  • Stock repurchases: $58 million

Business Outlook

The Company's 90-day backlog at the beginning of the December 2016 quarter was $371 million. Based on the beginning backlog and expected turns, results for the December 2016 quarter are expected to be as follows:

  • Revenue: $520 million to $560 million
  • Gross Margin: 61% to 63% GAAP (63% to 65% excluding special items)
  • EPS: $0.37 to $0.43 GAAP ($0.40 to $0.46 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 $0.33 per share will be paid on December 15, 2016, to stockholders of record on December 1, 2016.

Conference Call

Maxim Integrated has scheduled a conference call on October 20 at 2:00 p.m. Pacific Time to discuss its financial results for the first quarter of fiscal 2017 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 investor.maximintegrated.com.

A presentation summarizing financial information to be discussed on the conference call is posted at investor.maximintegrated.com.

Contact
Kathy Ta
Managing Director, Investor Relations
(408) 601-5697

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended

September 24,

June 25,

September 26,

2016

2016

2015

(in thousands, except per share data)

Net revenues

$ 561,396

$ 566,126

$ 562,510

Cost of goods sold (1)

215,664

219,099

276,159

Gross margin

345,732

347,027

286,351

Operating expenses:

Research and development

112,746

113,491

121,392

Selling, general and administrative

70,852

71,483

71,995

Intangible asset amortization

2,443

2,538

3,591

Impairment of long-lived assets (2)

6,134

429

157,697

Impairment of goodwill and intangible assets

-

27,602

-

Severance and restructuring expenses

9,965

4,149

7,126

Other operating expenses (income), net (3)

(28,481)

4,962

315

Total operating expenses (income), net

173,659

224,654

362,116

Operating income (loss)

172,073

122,373

(75,765)

Interest and other income (expense), net

(6,870)

(6,427)

(6,402)

Income (loss) before provision for income taxes

165,203

115,946

(82,167)

Income tax provision (benefit)

27,589

23,607

(10,024)

Net income (loss)

$ 137,614

$ 92,339

$ (72,143)

Earnings (loss) per share:

Basic

$0.49

$0.32

($0.25)

Diluted

$0.48

$0.32

($0.25)

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

Basic

283,633

284,354

284,588

Diluted (4)

288,574

288,544

284,588

Dividends paid per share

$0.33

$0.30

$0.30

SCHEDULE OF SPECIAL ITEMS

(Unaudited)

Three Months Ended

September 24,

June 25,

September 26,

2016

2016

2015

(in thousands)

Cost of goods sold:

Intangible asset amortization

$12,602

$11,829

$ 16,638

Accelerated depreciation (1)

1,178

4,098

43,631

Total

$ 13,780

$ 15,927

$ 60,269

Operating expenses:

Intangible asset amortization

$2,443

$2,538

$3,591

Impairment of long-lived assets (2)

6,134

429

157,697

Impairment of goodwill and intangible assets

-

27,602

-

Severance and restructuring

9,965

4,149

7,126

Other operating expenses (income), net (3)

(28,481)

4,962

315

Total

$ (9,939)

$ 39,680

$ 168,729

Interest and other expense (income), net

$ (471)

$ (247)

$ (109)

Total

$ (471)

$ (247)

$ (109)

(1) Includes building and equipment accelerated depreciation related to San Jose and Dallas manufacturing facilities.

(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) 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 for the first quarter of fiscal year 2016.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 24,

June 25,

September 26,

2016

2016

2015

(in thousands)

ASSETS

Current assets:

Cash and cash equivalents

$ 2,092,073

$ 2,105,229

$ 1,508,347

Short-term investments

175,441

125,439

100,285

Total cash, cash equivalents and short-term investments

2,267,514

2,230,668

1,608,632

Accounts receivable, net

253,518

256,531

282,471

Inventories

223,484

227,929

290,712

Deferred tax assets

-

-

50,604

Other current assets

89,398

91,920

46,627

Total current assets

2,833,914

2,807,048

2,279,046

Property, plant and equipment, net

678,447

692,551

805,580

Intangible assets, net

131,496

146,540

241,423

Goodwill

491,015

490,648

511,647

Other assets

54,890

84,100

36,226

Assets held for sale

2,854

13,729

70,964

TOTAL ASSETS

$ 4,192,616

$ 4,234,616

$ 3,944,886

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$ 83,589

$ 82,535

$ 80,752

Income taxes payable

3,138

21,153

59,479

Accrued salary and related expenses

111,126

166,698

120,642

Accrued expenses

48,572

50,521

49,990

Deferred revenue on shipments to distributors

35,754

38,779

35,091

Short term debt

249,788

249,717

-

Total current liabilities

531,967

609,403

345,954

Long-term debt

990,685

990,090

1,000,000

Income taxes payable

497,360

480,645

419,805

Other liabilities

37,368

46,664

64,326

Total liabilities

2,057,380

2,126,802

1,830,085

Stockholders' equity:

Common stock and capital in excess of par value

284

284

10,819

Retained earnings

2,141,326

2,121,749

2,121,582

Accumulated other comprehensive loss

(6,374)

(14,219)

(17,600)

Total stockholders' equity

2,135,236

2,107,814

2,114,801

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

$ 4,192,616

$ 4,234,616

$ 3,944,886

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

September 24,

June 25,

September 26,

2016

2016

2015

(in thousands)

Cash flows from operating activities:

Net income (loss)

$ 137,614

$ 92,339

$ (72,143)

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

Stock-based compensation

17,120

16,444

16,963

Depreciation and amortization

43,485

46,414

102,053

Deferred taxes

14,895

(13,510)

(53,111)

In-process research and development written-off

-

27,602

-

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

652

5,048

(1,346)

Loss (gain) on sale of business

(26,620)

-

-

Tax benefit (shortfall) related to stock-based compensation

-

3,657

1,193

Impairment of long-lived assets

6,134

-

157,697

Excess tax benefit from stock-based compensation

-

(1,890)

(2,249)

Changes in assets and liabilities:

Accounts receivable

3,013

21,971

(3,627)

Inventories

2,517

7,657

(2,167)

Other current assets

(12,099)

8,012

4,796

Accounts payable

(858)

5,076

(9,776)

Income taxes payable

110

19,792

34,127

Deferred revenue on shipments to distributors

(3,025)

4,322

4,764

Accrued salary and related expenses

(55,572)

15,287

(60,718)

All other accrued liabilities

(3,964)

(4,150)

883

Net cash provided by (used in) operating activities

123,402

254,071

117,339

Cash flows from investing activities:

Purchase of property, plant and equipment

(14,310)

(22,488)

(15,821)

Proceeds from sales of property, plant and equipment

205

34,691

606

Proceeds from sale of available-for-sale securities

24,540

-

-

Proceeds from maturity of available-for-sale securities

25,000

50,000

-

Proceeds from sale of business

42,199

-

-

Purchases of available-for-sale securities

(75,224)

(25,000)

(25,055)

Purchases of privately-held companies' securities

(2,337)

(1,554)

(1,000)

Net cash provided by (used in) investing activities

73

35,649

(41,270)

Cash flows from financing activities:

Excess tax benefit from stock-based compensation

-

1,890

2,249

Issuance of debt

-

249,717

-

Net issuance of restricted stock units

(5,206)

(2,687)

(4,822)

Proceeds from stock options exercised

19,911

12,272

8,970

Issuance of common stock under employee stock purchase program

-

19,625

-

Repurchase of common stock

(57,709)

(90,438)

(39,697)

Dividends paid

(93,627)

(85,210)

(85,387)

Net cash provided by (used in) financing activities

(136,631)

105,169

(118,687)

Net increase (decrease) in cash and cash equivalents

(13,156)

394,889

(42,618)

Cash and cash equivalents:

Beginning of period

2,105,229

1,710,340

1,550,965

End of period

$ 2,092,073

$ 2,105,229

$ 1,508,347

Total cash, cash equivalents, and short-term investments

$ 2,267,514

$ 2,230,668

$ 1,608,632

ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES

(Unaudited)

Three Months Ended

September 24,

June 25,

September 26,

2016

2016

2015

(in thousands, except per share data)

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

GAAP gross profit

$ 345,732

$ 347,027

$ 286,351

GAAP gross profit %

61.6%

61.3%

50.9%

Special items:

Intangible asset amortization

12,602

11,829

16,638

Accelerated depreciation (1)

1,178

4,098

43,631

Total special items

13,780

15,927

60,269

GAAP gross profit excluding special items

$ 359,512

$ 362,954

$ 346,620

GAAP gross profit % excluding special items

64.0%

64.1%

61.6%

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

GAAP operating expenses

$ 173,659

$ 224,654

$ 362,116

Special items:

Intangible asset amortization

2,443

2,538

3,591

Impairment of long-lived assets (2)

6,134

429

157,697

Impairment of intangible assets

-

27,602

-

Severance and restructuring

9,965

4,149

7,126

Other operating expenses (income), net (3)

(28,481)

4,962

315

Total special items

(9,939)

39,680

168,729

GAAP operating expenses excluding special items

$ 183,598

$ 184,974

$ 193,387

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

GAAP net income (loss)

$ 137,614

$ 92,339

$ (72,143)

Special items:

Intangible asset amortization

15,045

14,367

20,229

Accelerated depreciation (1)

1,178

4,098

43,631

Impairment of long-lived assets (2)

6,134

429

157,697

Impairment of intangible assets

-

27,602

-

Severance and restructuring

9,965

4,149

7,126

Other operating expenses (income), net (3)

(28,481)

4,962

315

Interest and other expense (income), net

(471)

(247)

(109)

Pre-tax total special items

3,370

55,360

228,889

Other income tax effects and adjustments (4)

(2,754)

(7,228)

(36,434)

GAAP net income excluding special items

$ 138,230

$ 140,471

$ 120,312

GAAP net income per share excluding special items:

Basic

$ 0.49

$ 0.49

$ 0.42

Diluted

$ 0.48

$ 0.49

$ 0.42

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

Basic

283,633

284,354

284,588

Diluted (5)

288,574

288,544

288,897

(1) Includes building and equipment accelerated depreciation related to San Jose and Dallas manufacturing facilities.

(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.

(5) 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 for the first quarter of fiscal year 2016.

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; impairment of intangible assets; severance and restructuring; and other operating expenses (income), net, and other income tax effects and adjustments. 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 accelerated depreciation. 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; impairment of intangible 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; assumes the Federal research tax credit remains in effect throughout the entire year, and eliminates the effects of significant non-recurring and period specific tax items which vary in size and frequency. We are using a long-term tax rate of 18%, which is 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. We will review the long-term tax rate on an annual basis and 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; impairment of intangible assets; severance and restructuring; and other operating expenses (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 2017 ending in December 2016, which includes revenue, gross margin and earnings per share, as well as the Company's belief in its ability to continue improving profitability, drive free cash flow growth, and maintain leadership in the return of cash to shareholders. 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 25, 2016 (the 'Form 10-K'). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331616000081/maxim10-kfy2016.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 develops innovative analog ICs for the automotive, industrial, healthcare, mobile consumer, and cloud data center markets. We make technology smaller, smarter, more secure and energy efficient, so that our customers can meet the demands of an integrated world. Learn more at http://www.maximintegrated.com.

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