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Maxim Integrated Products, Inc$51.73$.45.88%

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 Maxim Integrated Reports Results For The First Quarter Of Fiscal 2017
   Thursday, October 20, 2016 4:04:00 PM ET

Maxim Integrated Products, Inc. (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.

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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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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/maxim-integrated-reports-results-for-the-first-quarter-of-fiscal-2017-300348749.html

SOURCE Maxim Integrated Investor Relations

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