PR Newswire | Jan 26, 2021 04:03PM EST

01/26 15:03 CST

Maxim Integrated Reports Results For The Second Quarter Of Fiscal 2021- Revenue: $628 million- Gross Margin: 66.3% GAAP (67.4% excluding special items)- EPS: $0.68 GAAP ($0.73 excluding special items) SAN JOSE, Calif., Jan. 26, 2021

SAN JOSE, Calif., Jan. 26, 2021 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $628 million for its second quarter of fiscal 2021 ended December 26, 2020, a 1% increase from the $619 million revenue recorded in the prior quarter, and a 14% increase from the same quarter of last year.

"Our strong performance in the December quarter relative to the same quarter last year benefitted from robust demand from automotive, industrial and consumer customers. Automotive and Industrial reached a record revenue level and comprised 63 percent of Maxim's total revenue. In addition, progress toward closure of our merger with Analog Devices is on track," said Tunc Doluca, President and Chief Executive Officer.

Fiscal Year 2021 Second Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the December quarter was $0.68. The results were affected by $15 million in pre-tax special items which primarily consisted of $9 million in charges related to the upcoming combination with Analog Devices, $3 million in restructuring costs unrelated to the merger, and $7 million of expenses related to prior acquisitions, which were partially offset by $5 million of unrealized other income from private company investments. GAAP earnings per share, excluding special items was $0.73. 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 2021, total cash, cash equivalents and short-term investments were $1.8 billion, up $194 million from the prior quarter.

Notable items included:

* Cash flow from operations: $210 million * Capital expenditures: $16 million

Trailing twelve months free cash flow was $733 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 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

December 26, 2020 September 26, 2020 December 28, 2019

(in thousands, except per share data)

Net revenues $ 628,288 $ 619,357 $ 551,070

Cost of goods sold 211,866 202,343 190,546

Gross margin 416,422 417,014 360,524

Operating expenses:

Research and development 114,802 115,466 111,914

Selling, general and administrative 80,153 82,954 76,071

Intangible asset amortization 943 919 756

Severance and restructuring expenses 3,327 8,813 2,728

Other operating expenses (income), net 3,532 7,428 (1)

Total operating expenses 202,757 215,580 191,468

Operating income 213,665 201,434 169,056

Interest and other income (expense), net (3,202) (7,037) (17)

Income before taxes 210,463 194,397 169,039

Provision for (benefit from) income taxes 26,518 24,883 22,989

Net income $ 183,945 $ 169,514 $ 146,050

Earnings per share:

Basic $ 0.69 $ 0.64 $ 0.54

Diluted $ 0.68 $ 0.63 $ 0.53

Shares used in the calculation of earnings per share:

Basic 267,299 266,831 270,330

Diluted 270,792 269,529 273,269

Dividends paid per share $ - $ 0.48 $ 0.48

SCHEDULE OF SPECIAL ITEMS

(Unaudited)

Three Months Ended

December 26, 2020 September 26, 2020 December 28, 2019

(in thousands)

Cost of goods sold:

Intangible asset amortization $ 5,569 $ 4,363 $ 3,111

Merger-related expenses ^(1) 1,059 1,335 -

Cost of COVID-19 response programs 565 938 -

Total $ 7,193 $ 6,636 $ 3,111

Operating expenses:

Merger-related expenses ^(1) $ 4,750 $ 6,607 $ -

Intangible asset amortization 943 918 756

Severance and restructuring 3,327 8,813 2,728

Other operating expenses (income), net ^(1) 3,531 7,428 (1)

Total $ 12,551 $ 23,766 $ 3,483

Interest and other expense (income), net $ (5,131) $ (535) $ (1,230)

Total $ (5,131) $ (535) $ (1,230)

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

CONSOLIDATED BALANCE SHEETS

(Unaudited)

December 26, 2020 September 26, 2020 December 28, 2019

(in thousands)

ASSETS

Current assets:

Cash and cash equivalents $ 1,796,961 $ 1,595,089 $ 1,720,194

Short-term investments 8,879 17,022 63,006

Total cash, cash equivalents and short-term investments 1,805,840 1,612,111 1,783,200

Accounts receivable, net 485,773 449,376 348,342

Inventories 261,476 265,664 223,958

Other current assets 36,004 29,816 23,797

Total current assets 2,589,093 2,356,967 2,379,297

Property, plant and equipment, net 541,013 542,421 571,359

Intangible assets, net 76,166 82,679 48,509

Goodwill 562,540 562,540 532,251

Other assets 114,058 108,920 95,413

TOTAL ASSETS $ 3,882,870 $ 3,653,527 $ 3,626,829

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 96,959 $ 86,831 $ 89,449

Price adjustment and other revenue reserves 180,215 144,255 105,237

Income taxes payable 35,197 53,655 38,307

Accrued salary and related expenses 99,057 115,460 94,739

Accrued expenses 44,969 46,119 32,739

Total current liabilities 456,397 446,320 360,471

Long-term debt 994,741 994,381 993,303

Income taxes payable 362,214 360,164 433,743

Other liabilities 143,457 141,643 112,803

Total liabilities 1,956,809 1,942,508 1,900,320

Stockholders' equity:

Common stock and capital in excess of par value 43,231 12,461 270

Retained earnings 1,897,098 1,713,153 1,737,528

Accumulated other comprehensive loss (14,268) (14,595) (11,289)

Total stockholders' equity 1,926,061 1,711,019 1,726,509

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 3,882,870 $ 3,653,527 $ 3,626,829

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

December 26, 2020 September 26, 2020 December 28, 2019

(in thousands)

Cash flows from operating activities:

Net income $ 183,945 $ 169,514 $ 146,050

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

Stock-based compensation 31,209 35,730 24,067

Depreciation and amortization 24,141 24,199 24,087

Deferred taxes (1,782) (1,103) (2,684)

Loss from disposal of property, plant and equipment 164 63 113

Other adjustments (1,220) 1,867 5,934

Changes in assets and liabilities:

Accounts receivable (36,401) (44,798) 21,974

Inventories 4,042 (5,986) 12,005

Other assets (9,868) 4,159 (3,377)

Accounts payable 8,945 (3,423) 3,602

Price adjustment and other revenue reserves 35,964 (4,461) 15,031

Income taxes payable (16,408) (14,710) (5,792)

All other accrued liabilities (12,232) 1,460 (3,545)

Net cash provided by operating activities 210,499 162,511 237,465

Cash flows from investing activities:

Purchases of property, plant and equipment (16,485) (12,728) (13,670)

Proceeds from sales of property, plant and equipment 63 4 128

Proceeds from sales of available-for-sale securities 1,500 - -

Proceeds from maturity of available-for-sale securities 6,600 18,425 35,146

Purchases of investments in privately-held companies (26) (84) (516)

Proceeds from sale of investments in privately-held companies 14 25 -

Other investing activities - - (33)

Net cash provided by (used in) investing activities (8,334) 5,642 21,055

Cash flows from financing activities:

Contingent consideration paid - - (8,000)

Net issuance of restricted stock units and awards (18,966) (17,018) (7,623)

Proceeds from stock options exercised 175 2,632 1,338

Issuance of common stock under employee stock purchase program 18,498 - 18,535

Repurchase of common stock - (9,201) (107,957)

Dividends paid - (128,147) (129,810)

Net cash used in financing activities (293) (151,734) (233,517)

Net increase (decrease) in cash, cash equivalents and restricted cash 201,872 16,419 25,003

Cash, cash equivalents and restricted cash

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

End of period $ 1,803,719 $ 1,601,847 $ 1,720,194

Total cash, cash equivalents, and short-term investments $ 1,805,840 $ 1,612,111 $ 1,783,200

Cash, cash equivalents and restricted cash:

Cash and cash equivalents $ 1,796,961 $ 1,595,089 $ 1,720,194

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

Total cash, cash equivalents and restricted cash $ 1,803,719 $ 1,601,847 $ 1,720,194

ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES

(Unaudited)

Three Months Ended

December 26, 2020 September 26, 2020 December 28, 2019

(in thousands, except per share data)

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

GAAP gross profit $ 416,422 $ 417,014 $ 360,524

GAAP gross profit % 66.3% 67.3% 65.4%

Special items:

Intangible asset amortization 5,569 4,363 3,111

Merger-related expenses ^(1) 1,059 1,335 -

Cost of COVID-19 response programs 565 938 -

Total special items 7,193 6,636 3,111

GAAP gross profit excluding special items $ 423,615 $ 423,650 $ 363,635

GAAP gross profit % excluding special items 67.4% 68.4% 66.0%

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

GAAP operating expenses $ 202,757 $ 215,580 $ 191,468

Special items:

Merger-related expenses ^(1) 4,750 6,607 -

Intangible asset amortization 943 918 756

Severance and restructuring 3,327 8,813 2,728

Other operating expenses (income), net ^(1) 3,531 7,428 (1)

Total special items 12,551 23,766 3,483

GAAP operating expenses excluding special items $ 190,206 $ 191,814 $ 187,985

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

GAAP net income $ 183,945 $ 169,514 $ 146,050

Special items:

Intangible asset amortization 6,512 5,281 3,867

Merger-related expenses ^(1) 5,809 7,942 -

Cost of COVID-19 response programs 565 938 -

Severance and restructuring 3,327 8,813 2,728

Other operating expenses (income), net ^(1) 3,531 7,428 (1)

Interest and other expense (income), net (5,131) (535) (1,230)

Pre-tax total special items 14,613 29,867 5,364

Other income tax effects and adjustments ^(2) (1,616) (4,272) 317

GAAP net income excluding special items $ 196,942 $ 195,109 $ 151,731

GAAP net income per share excluding special items:

Basic $ 0.74 $ 0.73 $ 0.56

Diluted $ 0.73 $ 0.72 $ 0.56

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

Basic 267,299 266,831 270,330

Diluted 270,792 269,529 273,269

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

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

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; ADI merger-related expenses 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, including but not limited to the Company's belief that progress toward closure of its merger with Analog Devices is on track. These statements involve risk and uncertainty. Actual results could differ materially from those forecasted, based upon, among other things, general market and economic conditions, regulatory approvals, 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, an engineer's engineering company, exists to solve the designer's toughest problems in order to empower design innovation. Our broad portfolio of high-performance semiconductors, combined with world-class tools and support, delivers essential analog solutions including efficient power, precision measurement, reliable connectivity and robust protection along with intelligent processing. Designers in application areas such as automotive, communications, consumer, data center, healthcare, industrial and IoT trust Maxim to help them quickly develop smaller, smarter and more secure designs. Learn more at https://www.maximintegrated.com.

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

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