Maxim Integrated Reports Results For The Second Quarter Of Fiscal 2014

SAN JOSE, Calif., Jan. 23, 2014 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $620 million for its second quarter of fiscal 2014 ended December 28, 2013, a 6% increase from the $585 million revenue recorded in the prior quarter. Reported revenue included $35 million from Volterra. Excluding Volterra, revenue was flat compared to the prior quarter.

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Tunc Doluca, President and Chief Executive Officer, commented, "We achieved good revenue performance in a soft quarter for our industry." Mr. Doluca continued, "We are pleased with our diversification efforts, with strength in both communication and industrial businesses, the addition of Volterra and broadening of our mobility business."

Fiscal Year 2014 Second Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the December quarter was $0.17. The results were negatively affected by the following pre-tax charges:

• $40 million for Volterra acquisition-related items
• $13 million for items related to prior acquisitions
• $5 million for impairment of long-lived assets
• $18 million for warranty expense

GAAP earnings per share, excluding special items was $0.36, after a $0.05 reduction due to the warranty expense. In addition, the warranty expense caused our GAAP gross margin, excluding special items to be 2.9 percentage points lower for the quarter. An analysis of GAAP versus GAAP excluding special items is provided in the last table of this press release. Warranty expense is not considered a special item and is not included in the analysis.

Cash Flow Items
At the end of the second quarter of fiscal 2014, total cash, cash equivalents and short term investments was $1.15 billion, an increase of $115 million from the prior quarter. Notable items included:

• Cash flow from operations: $234 million
• Net capital expenditures: $46 million
• Dividends: $73 million ($0.26 per share)
• Stock repurchases: $59 million
• Volterra acquisition: $454 million
• Proceeds from debt issuance: $494 million

Business Outlook
The Company's 90-day backlog at the beginning of the third fiscal quarter of 2014 was $366 million. Based on the beginning backlog and expected turns, results for the March 2014 quarter are expected to be as follows:

• Revenue: $590 million to $620 million
• Gross Margin: 56% to 58% GAAP (60% to 62% excluding special items)
• EPS: $0.28 to $0.32 GAAP ($0.37 to $0.41 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 March 6, 2014, to stockholders of record on February 20, 2014.

Conference Call
Maxim Integrated has scheduled a conference call on January 23, 2014, at 2:00 p.m. Pacific Time to discuss its financial results for the second quarter of fiscal 2014 and its business outlook. To listen via telephone, dial [phone] (toll free) or [phone]. This call will be webcast by Shareholder.com and can be accessed at the Company's website at www.maximintegrated.com/company/investor.

	CONSOLIDATED STATEMENTS OF INCOME
	(Unaudited)
			Three Months Ended
			December 28,		September 28,		December 29,
			2013		2013		2012
			(in thousands, except per share data)
	Net revenues		$ 620,274		$ 585,241		$ 605,306
	Cost of goods sold		291,602		238,045		241,931
	Gross margin		328,672		347,196		363,375
	Operating expenses:
	Research and development		142,971		129,902		135,742
	Selling, general and administrative		83,471		77,430		80,058
	Intangible asset amortization		4,968		3,436		3,903
	Impairment of long-lived assets (1)		5,197		-		22,222
	Severance and restructuring expenses (2)		10,227		5,547		2,236
	Acquisition-related costs		4,137		2,934		-
	Other operating expenses (income), net (3)		1,306		(662)		1,666
	Total operating expenses		252,277		218,587		245,827
	Operating income		76,395		128,609		117,548
	Interest and other income (expense), net		(5,833)		(3,463)		(2,798)
	Income before provision for income taxes		70,562		125,146		114,750
	Provision for income taxes		21,240		22,026		38,128
	Net income		$ 49,322		$ 103,120		$ 76,622
	Earnings per share:
	Basic		$ 0.17		$ 0.36		$ 0.26
	Diluted		$ 0.17		$ 0.36		$ 0.26
	Shares used in the calculation of earnings per share:
	Basic		282,664		284,654		292,075
	Diluted		288,565		290,260		298,759
	Dividends paid per share		$ 0.26		$ 0.26		$ 0.24
	SCHEDULE OF SPECIAL EXPENSE ITEMS
	(Unaudited)
			Three Months Ended
			December 28,		September 28,		December 29,
			2013		2013		2012
			(in thousands)
	Cost of goods sold:
	Intangible asset amortization		$ 19,098		$ 8,092		$ 8,986
	Acquisition-related inventory write-up		13,066		-		-
	Total		$ 32,164		$ 8,092		$ 8,986
	Operating expenses:
	Intangible asset amortization		$ 4,968		$ 3,436		$ 3,903
	Impairment of long-lived assets (1)		5,197		-		22,222
	Severance and restructuring (2)		10,227		5,547		2,236
	Acquisition-related costs		4,137		2,934		-
	Other operating expenses (income), net (3)		1,306		(662)		1,666
	Total		$ 25,835		$ 11,255		$ 30,027
	Provision for income taxes:
	International restructuring implementation		$ -		$ -		$ 18,726
	Total		$ -		$ -		$ 18,726
	(1) Includes impairment charges relating to fab tools, land and buildings held-for-sale, and end of line manufacturing equipment.
	(2) Includes severance & retention charges and lease abandonment charges related to the Volterra acquisition, and severance charges related to the reorganization of various business units and manufacturing operations.
	(3) Other operating expenses (income), net are primarily for contingent consideration adjustments related to certain acquisitions and certain payroll taxes.

	STOCK-BASED COMPENSATION BY TYPE OF AWARD (in thousands)
	(Unaudited)
	Three Months Ended December 28, 2013	Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total
	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 September 28, 2013
	Cost of goods sold	$ 349		$ 1,918		$ 475		$ 2,742
	Research and development expense	1,836		6,440		1,322		9,598
	Selling, general and administrative expense	1,264		4,527		609		6,400
	Total	$ 3,449		$ 12,885		$ 2,406		$18,740
	Three Months Ended December 29, 2012
	Cost of goods sold	$ 477		$ 2,572		$ 634		$ 3,683
	Research and development expense	2,288		8,401		1,451		12,140
	Selling, general and administrative expense	1,286		5,152		584		7,022
	Total	$ 4,051		$ 16,125		$ 2,669		$22,845

	CONSOLIDATED BALANCE SHEETS
	(Unaudited)
		December 28,		September 28,		December 29,
		2013		2013		2012
		(in thousands)
	ASSETS
	Current assets:
	Cash and cash equivalents	$1,149,909		$ 1,009,547		$ 955,107
	Short-term investments	-		25,036		75,192
	Total cash, cash equivalents and short-term investments	1,149,909		1,034,583		1,030,299
	Accounts receivable, net	288,285		297,888		264,545
	Inventories	297,234		278,218		257,690
	Deferred tax assets	69,154		54,854		80,991
	Other current assets	84,522		116,225		90,470
	Total current assets	1,889,104		1,781,768		1,723,995
	Property, plant and equipment, net	1,372,393		1,374,544		1,359,014
	Intangible assets, net	404,652		145,618		182,521
	Goodwill	596,898		422,004		422,083
	Other assets	42,803		40,063		50,940
	TOTAL ASSETS	$4,305,850		$ 3,763,997		$3,738,553
	LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
	Accounts payable	$ 99,009		$ 101,060		$ 110,495
	Income taxes payable	21,717		21,799		22,146
	Accrued salary and related expenses	140,738		124,954		152,122
	Accrued expenses	85,145		55,561		58,900
	Current portion of long-term debt	2,965		4,804		304,794
	Deferred income on shipments to distributors	25,542		27,179		25,362
	Total current liabilities	375,116		335,357		673,819
	Long-term debt	1,000,871		500,955		3,997
	Income taxes payable	337,053		294,728		260,770
	Deferred tax liabilities	202,435		205,221		192,434
	Other liabilities	29,343		29,300		26,321
	Total liabilities	1,944,818		1,365,561		1,157,341
	Stockholders' equity:
	Common stock	283		283		7,040
	Retained earnings	2,373,318		2,412,262		2,589,619
	Accumulated other comprehensive loss	(12,569)		(14,109)		(15,447)
	Total stockholders' equity	2,361,032		2,398,436		2,581,212
	TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$4,305,850		$ 3,763,997		$3,738,553

	CONSOLIDATED STATEMENTS OF CASH FLOWS
	(Unaudited)
		Three Months Ended
		December 28,		September 28,		December 29,
		2013		2013		2012
		(in thousands)
	Cash flows from operating activities:
	Net income	$ 49,322		$ 103,120		$ 76,622
	Adjustments to reconcile net income to net cash provided by operating activities:
	Stock-based compensation	22,869		18,740		22,845
	Depreciation and amortization	64,404		51,133		51,880
	Deferred taxes	(11,705)		25,529		(12,979)
	Loss (gain) from sale of property, plant and equipment	265		36		(88)
	Tax benefit (shortfall) related to stock-based compensation	(726)		(3,488)		5,187
	Impairment of long-lived assets	5,197		-		22,222
	Excess tax benefit from stock-based compensation	(2,459)		(1,697)		(6,615)
	Changes in assets and liabilities:
	Accounts receivable	33,056		(12,450)		51,993
	Inventories	14,030		(2,301)		570
	Other current assets	31,362		(18,546)		4,091
	Accounts payable	(3,252)		(9,162)		(9,536)
	Income taxes payable	19,002		11,393		37,477
	Deferred revenue on shipments to distributors	(1,637)		622		(1,663)
	All other accrued liabilities	14,704		(67,035)		13,091
	Net cash provided by (used in) operating activities	234,432		95,894		255,097
	Cash flows from investing activities:
	Purchase of property, plant and equipment	(46,133)		(36,329)		(62,102)
	Proceeds from sales of property, plant and equipment	-		3,048		4,115
	Payments in connection with business acquisition, net of cash acquired	(453,506)		-		-
	Proceeds from maturity of available-for-sale securities	27,000		-		-
	Net cash provided by (used in) investing activities	(472,639)		(33,281)		(57,987)
	Cash flows from financing activities:
	Excess tax benefit from stock-based compensation	2,459		1,697		6,615
	Contingent consideration paid	(4,601)		-		(7,476)
	Dividends paid	(73,325)		(73,744)		(70,063)
	Repayment of notes payable	(1,839)		-		(74)
	Issuance of debt	497,795		100		-
	Debt issuance cost	(3,431)		-		-
	Repurchase of common stock	(59,101)		(154,386)		(50,435)
	Issuance of ESPP shares under employee stock purchase program	19,096		-		16,768
	Net issuance of restricted stock units	(7,106)		(6,966)		(6,538)
	Proceeds from stock options exercised	8,622		5,247		19,350
	Net cash provided by (used in) financing activities	378,569		(228,052)		(91,853)
	Net increase (decrease) in cash and cash equivalents	140,362		(165,439)		105,257
	Cash and cash equivalents:
	Beginning of period	1,009,547		1,174,986		849,850
	End of period	$1,149,909		$ 1,009,547		$ 955,107
	Total cash, cash equivalents, and short-term investments	$1,149,909		$ 1,034,583		$1,030,299

ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES
(Unaudited)
		Three Months Ended
		December 28,		September 28,		December 29,
		2013		2013		2012
		(in thousands, except per share data)
Reconciliation of GAAP gross profit to GAAP gross profit excluding special items:
GAAP gross profit		$ 328,672		$ 347,196		$ 363,375
GAAP gross profit %		53.0%		59.3%		60.0%
Special items:
Intangible asset amortization		19,098		8,092		8,986
Acquisition-related inventory write-up		13,066		-		-
Total special items		32,164		8,092		8,986
GAAP gross profit excluding special items		$ 360,836		$ 355,288		$ 372,361
GAAP gross profit % excluding special items		58.2%		60.7%		61.5%
Reconciliation of GAAP operating expenses to GAAP operating expenses excluding special items:
GAAP operating expenses		$ 252,277		$ 218,587		$ 245,827
Special items:
Intangible asset amortization		4,968		3,436		3,903
Impairment of long-lived assets (1)		5,197		-		22,222
Severance and restructuring (2)		10,227		5,547		2,236
Acquisition-related costs		4,137		2,934		-
Other operating expenses (income), net (3)		1,306		(662)		1,666
Total special items		25,835		11,255		30,027
GAAP operating expenses excluding special items		$ 226,442		$ 207,332		$ 215,800
Reconciliation of GAAP net income to GAAP net income excluding special items:
GAAP net income		$ 49,322		$ 103,120		$ 76,622
Special items:
Intangible asset amortization		24,066		11,528		12,889
Acquisition-related inventory write-up		13,066		-		-
Impairment of long-lived assets (1)		5,197		-		22,222
Severance and restructuring (2)		10,227		5,547		2,236
Acquisition-related costs		4,137		2,934		-
Other operating expenses (income) , net (3)		1,306		(662)		1,666
Pre-tax total special items		57,999		19,347		39,013
Tax effect of special items		(4,862)		(2,981)		(9,555)
International restructuring implementation		-		-		18,726
GAAP net income excluding special items		$ 102,459		$ 119,486		$ 124,806
GAAP net income per share excluding special items:
Basic		$ 0.36		$ 0.42		$ 0.43
Diluted		$ 0.36		$ 0.41		$ 0.42
Shares used in the calculation of earnings per share excluding special items:
Basic		282,664		284,654		292,075
Diluted		288,565		290,260		298,759
(1) Includes impairment charges relating to fab tools, land and buildings held-for-sale, and end of line manufacturing equipment.
(2) Includes severance & retention charges and lease abandonment charges related to the Volterra acquisition, and severance charges related to the reorganization of various business units and manufacturing operations.
(3) Other operating expenses (income), net are primarily for contingent consideration adjustments related to certain acquisitions and certain payroll taxes.

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; certain payroll taxes; and the tax provision impacts due to implementation of international restructuring. 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; and certain payroll taxes. 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; certain payroll taxes; and the tax provision impacts due to implementation of international restructuring. 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 2014 ending in March 2014, which includes revenue, gross margin and earnings per share. 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.

Contact
Kathy Ta
Managing Director, Investor Relations
[phone]

SOURCE Maxim Integrated Products, Inc.