PR Newswire | Oct 27, 2020 04:03PM EDT

10/27 15:03 CDT

Maxim Integrated Reports Results For The First Quarter Of Fiscal 2021- Revenue: $619 million- Gross Margin: 67.3% GAAP (68.4% excluding special items)- EPS: $0.63 GAAP ($0.72 excluding special items) SAN JOSE, Calif., Oct. 27, 2020

SAN JOSE, Calif., Oct. 27, 2020 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $619 million for its first quarter of fiscal 2021 ended September 26, 2020, a 14% increase from the $545 million revenue recorded in the prior quarter, and a 16% increase from the same quarter of last year.

"Revenue in the September quarter increased strongly in Consumer and Automotive on a sequential basis. The robust uptick was driven by infotainment, driver assistance and electric vehicle content in Automotive, and across smartphones, gaming, wearables, tablets and broad-based personal electronics in Consumer. Revenue also grew across all of our major end markets compared to the same quarter a year ago, with double-digit growth in Communications and Data Center, Industrial and Automotive. Additionally, we are progressing per plan towards closure of our merger with Analog Devices," said Tunc Doluca, President and Chief Executive Officer.

Fiscal Year 2021 First Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the September quarter was $0.63. The results were affected by $30 million in pre-tax special items which primarily consisted of $15 million in charges related to the upcoming combination with Analog Devices, $9 million in restructuring costs unrelated to the merger, and $5 million of expenses related to prior acquisitions. GAAP earnings per share, excluding special items was $0.72. An analysis of GAAP versus GAAP excluding special items is provided in this press release.

Cash Flow Items

At the end of the first quarter of fiscal 2021, total cash, cash equivalents and short-term investments were $1.6 billion, down $2 million from the prior quarter.

Notable items included:

* Cash flow from operations: $163 million * Capital expenditures: $13 million * Dividends paid: $128 million ($0.48 per share) * Stock repurchases: $9 million

Trailing twelve months free cash flow was $763 million. Free cash flow is a non-GAAP measure and is defined by cash flow from operations less capital expenditures.

Dividend and Stock Repurchase

Per the terms of the Merger Agreement between the Company and Analog Devices, we will not declare dividends that would have been paid in the upcoming months of December, March, June and September and have suspended our open market stock repurchase program.

Due to the pending merger with Analog Devices, Maxim Integrated will not be hosting a quarterly earnings conference call and has suspended the practice of providing forward-looking guidance. Investors are requested to review our Investor Relations website for the quarterly financial highlights and SEC filings for the latest updates on the pending transaction.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended

September 26, 2020 June 27, 2020 September 28, 2019

(in thousands, except per share data)

Net revenues $ 619,357 $ 545,369 $ 533,040

Cost of goods sold 202,343 183,001 189,717

Gross margin 417,014 362,368 343,323

Operating expenses:

Research and development 115,466 110,173 108,989

Selling, general and administrative 82,954 72,893 76,115

Intangible asset amortization 919 810 756

Severance and restructuring expenses 8,813 678 1,434

Other operating expenses (income), net 7,428 (173) 25

Total operating expenses 215,580 184,381 187,319

Operating income 201,434 177,987 156,004

Interest and other income (expense), net (7,037) (8,488) 1,829

Income before taxes 194,397 169,499 157,833

Provision for (benefit from) income taxes ^(1)(2) 24,883 (37,799) 17,677

Net income $ 169,514 $ 207,298 $ 140,156

Earnings per share:

Basic $ 0.64 $ 0.78 $ 0.52

Diluted $ 0.63 $ 0.77 $ 0.51

Shares used in the calculation of earnings per share:

Basic 266,831 266,639 271,388

Diluted 269,529 268,777 274,436

Dividends paid per share $ 0.48 $ 0.48 $ 0.48

SCHEDULE OF SPECIAL ITEMS

(Unaudited)

Three Months Ended

September 26, 2020 June 27, 2020 September 28, 2019

(in thousands)

Cost of goods sold:

Intangible asset amortization $ 4,363 $ 3,528 $ 3,111

Merger related expenses ^(3) 1,335 - -

Cost of COVID-19 response programs 938 1,591 -

Total $ 6,636 $ 5,119 $ 3,111

Operating expenses:

Merger related expenses ^(3) $ 6,607 $ - $ -

Intangible asset amortization 918 810 756

Severance and restructuring 8,813 678 1,434

Other operating expenses (income), net ^(3) 7,428 (173) 25

Total $ 23,766 $ 1,315 $ 2,215

Interest and other expense (income), net $ (535) $ 1,484 $ 207

Total $ (535) $ 1,484 $ 207

Provision for (benefit from) for income taxes:

Impact of U.S. tax legislation ^(1) $ - $ 6,486 $ -

Impact of income tax audit settlements ^(2) - (51,197) -

Total $ - $ (44,711) $ -

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

(2) Includes effect of income tax audit settlements.

(3) Includes ADI merger related expenses such as accelerated stock-based compensation expense resulting from the acceleration of certain RSAs for tax withholding purposes, as well as other legal and professional services.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 26, 2020 June 27, 2020 September 28, 2019

(in thousands)

ASSETS

Current assets:

Cash and cash equivalents $ 1,595,089 $ 1,578,670 $ 1,695,191

Short-term investments 17,022 35,536 98,176

Total cash, cash equivalents and short-term investments 1,612,111 1,614,206 1,793,367

Accounts receivable, net 449,376 404,778 370,316

Inventories 265,664 259,626 235,959

Other current assets 29,816 39,219 24,982

Total current assets 2,356,967 2,317,829 2,424,624

Property, plant and equipment, net 542,421 550,406 574,097

Intangible assets, net 82,679 87,959 52,376

Goodwill 562,540 562,540 532,251

Other assets 108,920 110,569 97,439

TOTAL ASSETS $ 3,653,527 $ 3,629,303 $ 3,680,787

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 86,831 $ 91,982 $ 81,794

Price adjustment and other revenue reserves 144,255 148,916 90,206

Income taxes payable 53,655 43,457 31,704

Accrued salary and related expenses 115,460 126,751 96,168

Accrued expenses 46,119 42,228 42,644

Total current liabilities 446,320 453,334 342,516

Long-term debt 994,381 994,022 992,944

Income taxes payable 360,164 385,072 446,138

Other liabilities 141,643 139,418 117,903

Total liabilities 1,942,508 1,971,846 1,899,501

Stockholders' equity:

Common stock and capital in excess of par value 12,461 266 271

Retained earnings 1,713,153 1,671,786 1,793,012

Accumulated other comprehensive loss (14,595) (14,595) (11,997)

Total stockholders' equity 1,711,019 1,657,457 1,781,286

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 3,653,527 $ 3,629,303 $ 3,680,787

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

September 26, 2020 June 27, 2020 September 28, 2019

(in thousands)

Cash flows from operating activities:

Net income $ 169,514 $ 207,298 $ 140,156

Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation 35,730 23,290 24,671

Depreciation and amortization 24,199 36,384 23,921

Deferred taxes (1,103) 14,386 453

Loss from sale of property, plant and equipment 63 557 376

Other Adjustments 1,867 2,127 27

Changes in assets and liabilities:

Accounts receivable (44,798) (24,078) (10,300)

Inventories (5,986) (34,562) 10,578

Other assets 4,159 (25,769) (52,443)

Accounts payable (3,423) 5,405 1,242

Price adjustment and other revenue reserves (4,461) 37,681 (10,284)

Income taxes payable (14,710) (45,855) (25,341)

All other accrued liabilities 1,460 15,465 38,214

Net cash provided by operating activities 162,511 212,329 141,270

Cash flows from investing activities:

Purchases of property, plant and equipment (12,728) (15,680) (20,631)

Proceeds from sales of property, plant and equipment 4 124 43

Proceeds from sales of available-for-sale securities - 1,290 -

Proceeds from maturity of available-for-sale securities 18,425 10,734 42,921

Payment in connection with business acquisition, net of cash acquired - (69,270) -

Purchases of investments in privately-held companies (84) (1,840) -

Proceeds from sale of investments in privately-held companies 25 205 516

Other investing activities - 2 (35)

Net cash provided by (used in) investing activities 5,642 (74,435) 22,814

Cash flows from financing activities:

Net issuance of restricted stock units and awards (17,018) (6,741) (9,943)

Proceeds from stock options exercised 2,632 2,240 7,482

Issuance of common stock under employee stock purchase program - 23,725 -

Repurchase of common stock (9,201) (82,299) (93,552)

Dividends paid (128,147) (128,058) (130,222)

Net cash used in financing activities (151,734) (191,133) (226,235)

Net increase (decrease) in cash, cash equivalents and restricted cash 16,419 (53,239) (62,151)

Cash, cash equivalents and restricted cash

Beginning of period $ 1,585,428 $ 1,638,667 $ 1,757,342

End of period $ 1,601,847 $ 1,585,428 $ 1,695,191

Total cash, cash equivalents, and short-term investments $ 1,612,111 $ 1,614,206 $ 1,793,367

Cash, cash equivalents and restricted cash:

Cash and cash equivalents $ 1,595,089 $ 1,578,670 $ 1,695,191

Restricted cash in Other assets 6,758 6,758 -

Total cash, cash equivalents and restricted cash $ 1,601,847 $ 1,585,428 $ 1,695,191

ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES

(Unaudited)

Three Months Ended

September 26, 2020 June 27, 2020 September 28, 2019

(in thousands, except per share data)

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

GAAP gross profit $ 417,014 $ 362,368 $ 343,323

GAAP gross profit % 67.3% 66.4% 64.4%

Special items:

Intangible asset amortization 4,363 3,528 3,111

Merger related expenses ^(1) 1,335 - -

Cost of COVID-19 response programs 938 1,591 -

Total special items 6,636 5,119 3,111

GAAP gross profit excluding special items $ 423,650 $ 367,487 $ 346,434

GAAP gross profit % excluding special items 68.4% 67.4% 65.0%

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

GAAP operating expenses $ 215,580 $ 184,381 $ 187,319

Special items:

Merger related expenses ^(1) 6,607 - -

Intangible asset amortization 918 810 756

Severance and restructuring 8,813 678 1,434

Other operating expenses (income), net ^(1) 7,428 (173) 25

Total special items 23,766 1,315 2,215

GAAP operating expenses excluding special items $ 191,814 $ 183,066 $ 185,104

Reconciliation of GAAP net income to GAAP net income excluding special items:

GAAP net income $ 169,514 $ 207,298 $ 140,156

Special items:

Intangible asset amortization 5,281 4,338 3,867

Merger related expenses ^(1) 7,942 - -

Cost of COVID-19 response programs 938 1,591 -

Severance and restructuring 8,813 678 1,434

Other operating expenses (income), net ^(1) 7,428 (173) 25

Interest and other expense (income), net (535) 1,484 (207)

Pre-tax total special items 29,867 7,918 5,119

Other income tax effects and adjustments ^(2) (4,272) (14,378) (3,506)

Impact of U.S. tax legislation ^(3) - 6,486 -

Impact of income tax audit settlements ^(4) - (51,197) -

GAAP net income excluding special items $ 195,109 $ 156,127 $ 141,769

GAAP net income per share excluding special items:

Basic $ 0.73 $ 0.59 $ 0.52

Diluted $ 0.72 $ 0.58 $ 0.52

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

Basic 266,831 266,639 271,388

Diluted 269,529 268,777 274,436

(1) Includes ADI merger related expenses such as accelerated stock-based compensation expense resulting from the acceleration of certain RSAs for tax withholding purposes, as well as other legal and professional services.

(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) Includes effect of income tax audit settlements.

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 the cost of COVID-19 response programs; ADI merger related expenses; 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 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, ADI merger related expenses and cost of COVID-19 response programs. 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; ADI merger related expenses; cost of COVID-19 response programs; 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

Except for historical information, this press release may contain 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 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 27, 2020 (the "Form 10-K"). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331620000025/0000743316-20-000025-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.

ContactKathy TaVice President, Investor Relations (408) 601-5697

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SOURCE Maxim Integrated Investor Relations