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Form 8-K MAXIM INTEGRATED PRODUCT For: Apr 27

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April 27, 2021 4:08 PM EDT

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Press Release

Contact
Kathy Ta
Vice President, Investor Relations
(408) 601-5697

MAXIM INTEGRATED REPORTS RESULTS FOR THE THIRD QUARTER OF FISCAL 2021

•Revenue: $665 million
•Gross Margin: 66.6% GAAP (67.4% excluding special items)
•EPS: $0.81 GAAP ($0.82 excluding special items)

SAN JOSE, CA – April 27, 2021 – Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $665 million for its third quarter of fiscal 2021 ended March 27, 2021, a 6% increase from the $628 million revenue recorded in the prior quarter, and a 18% increase from the same quarter of last year.

“Maxim delivered record revenue in the March quarter, with sequential growth in all end markets. On a year-over-year basis, Automotive and Industrial revenue grew the strongest and comprised 64 percent of the total, up from 58 percent in the same quarter last year. In addition, progress toward closure of our merger with Analog Devices is on track,” said Tunc Doluca, President and Chief Executive Officer.






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Fiscal Year 2021 Third Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the March quarter was $0.81. The results were affected by $8 million in pre-tax special items which primarily consisted of $3 million in charges related to the upcoming combination with Analog Devices, and $11 million of expenses related to prior acquisitions, which were partially offset by $7 million of other income from settlement of extinguished debt. GAAP earnings per share, excluding special items was $0.82. An analysis of GAAP versus GAAP excluding special items is provided in this press release.

Cash Flow Items
At the end of the third quarter of fiscal 2021, total cash, cash equivalents and short-term investments were $2.0 billion, up $228 million from the prior quarter.
Notable items included:
•    Cash flow from operations: $271 million
•    Capital expenditures: $16 million

Trailing twelve months free cash flow was $796 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 June and September and our stock repurchase program remains suspended.



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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 with Analog Devices.

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CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 27,
2021		December 26,
2020		March 28,
2020
(in thousands, except per share data)
Net revenues$665,029 $628,288 $561,916 
Cost of goods sold
222,144 211,866 195,479 
Gross margin442,885 416,422 366,437 
Operating expenses:
Research and development109,228 114,802 109,091 
Selling, general and administrative76,544 80,153 71,643 
Intangible asset amortization846 943 756 
Severance and restructuring expenses 155 3,327 523 
Other operating expenses (income), net 8,848 3,532 1,077 
Total operating expenses 195,621 202,757 183,090 
Operating income 247,264 213,665 183,347 
Interest and other income (expense), net (2)(3,202)(1,622)
Income before taxes 247,262 210,463 181,725 
Provision for (benefit from) income taxes27,199 26,518 20,535 
Net income $220,063 $183,945 $161,190 
Earnings per share:
Basic$0.82 $0.69 $0.60 
Diluted$0.81 $0.68 $0.59 
Shares used in the calculation of earnings per share:
Basic267,892 267,299 269,003 
Diluted271,396 270,792 271,579 
Dividends paid per share$— $— $0.48 
SCHEDULE OF SPECIAL ITEMS
(Unaudited)
Three Months Ended
March 27,
2021		December 26,
2020		March 28,
2020
(in thousands)
Cost of goods sold:
Intangible asset amortization $4,430 $5,569 $3,111 
Merger-related expenses (1)
— 1,059 — 
Cost of COVID-19 response programs638 565 2,025 
 Total$5,068 $7,193 $5,136 
Operating expenses:
Merger-related expenses (1)
$2,546 $8,161 $— 
Intangible asset amortization846 943 756 
Severance and restructuring155 3,327 523 
Other operating expenses (income), net6,302 120 1,077 
 Total$9,849 $12,551 $2,356 
Interest and other expense (income), net $(7,359)$(5,131)$(587)
Total$(7,359)$(5,131)$(587)
(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.

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CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 27,
2021		December 26,
2020		March 28,
2020
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents$2,033,973 $1,796,961 $1,638,667 
Short-term investments— 8,879 47,109 
Total cash, cash equivalents and short-term investments2,033,973 1,805,840 1,685,776 
Accounts receivable, net571,042 485,773 378,273 
Inventories242,343 261,476 220,686 
Other current assets27,440 36,004 25,288 
Total current assets2,874,798 2,589,093 2,310,023 
Property, plant and equipment, net543,848 541,013 564,636 
Intangible assets, net70,891 76,166 44,642 
Goodwill562,541 562,540 532,251 
Other assets120,149 114,058 97,383 
TOTAL ASSETS$4,172,227 $3,882,870 $3,548,935 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$102,263 $96,959 $83,519 
Price adjustment and other revenue reserves214,366 180,215 111,235 
Income taxes payable53,694 35,197 39,809 
Accrued salary and related expenses128,553 99,057 122,220 
Accrued expenses35,627 44,969 31,143 
Total current liabilities534,503 456,397 387,926 
Long-term debt995,100 994,741 993,663 
Income taxes payable351,738 362,214 434,415 
Other liabilities141,721 143,457 112,988 
Total liabilities2,023,062 1,956,809 1,928,992 
Stockholders' equity:
Common stock268 268 267 
Additional paid-in capital47,801 42,963 — 
Retained earnings2,117,161 1,897,098 1,632,325 
Accumulated other comprehensive loss(16,065)(14,268)(12,649)
Total stockholders' equity2,149,165 1,926,061 1,619,943 
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY$4,172,227 $3,882,870 $3,548,935 


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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 27,
2021		December 26,
2020		March 28,
2020
(in thousands, except per share data)
Cash flows from operating activities:
Net income$220,063 $183,945 $161,190 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation20,878 31,209 23,403 
Depreciation and amortization24,552 24,141 24,141 
Deferred taxes1,601 (1,782)(3,161)
Loss from disposal of property, plant and equipment124 164 145 
Fair value of contingent consideration5,835 — — 
Other adjustments2,413 (1,220)3,265 
Changes in assets and liabilities:
Accounts receivable(85,236)(36,401)(29,931)
Inventories18,950 4,042 3,308 
Other assets(4,875)(9,868)(4,710)
Accounts payable(719)8,945 (2,655)
Price adjustment and other revenue reserves34,118 35,964 5,998 
Income taxes payable8,021 (16,408)2,174 
All other accrued liabilities25,715 (12,232)26,624 
Net cash provided by operating activities271,440 210,499 209,791 
Cash flows from investing activities:
Purchases of property, plant and equipment(16,229)(16,485)(17,068)
Proceeds from sales of property, plant and equipment16 63 97 
Proceeds from sales of available-for-sale securities— 1,500 — 
Proceeds from maturity of available-for-sale securities8,876 6,600 15,485 
Purchases of investments in privately-held companies(1,235)(26)(120)
Proceeds from sale of investments in privately-held companies— 14 173 
Other investing activities— — (50)
Net cash provided by (used in) investing activities(8,572)(8,334)(1,483)
Cash flows from financing activities:
Contingent consideration paid(10,000)— — 
Net issuance of restricted stock units and awards(15,932)(18,966)(11,570)
Proceeds from stock options exercised76 175 7,810 
Issuance of common stock under employee stock purchase program— 18,498 — 
Repurchase of common stock— — (157,003)
Dividends paid— — (129,072)
Net cash used in financing activities(25,856)(293)(289,835)
Net increase (decrease) in cash, cash equivalents and restricted cash237,012 201,872 (81,527)
Cash, cash equivalents and restricted cash
Beginning of period$1,803,719 $1,601,847 $1,720,194 
End of period$2,040,731 $1,803,719 $1,638,667 
Total cash, cash equivalents, and short-term investments$2,033,973 $1,805,840 $1,685,776 
Cash, cash equivalents and restricted cash:
Cash and cash equivalents$2,033,973 $1,796,961 $1,638,667 
Restricted cash in Other assets6,758 6,758 — 
Total cash, cash equivalents and restricted cash$2,040,731 $1,803,719 $1,638,667 

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ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES
(Unaudited)
Three Months Ended
March 27,
2021		December 26,
2020		March 28,
2020
(in thousands, except per share data)
Reconciliation of GAAP gross profit to GAAP gross profit excluding special items:
GAAP gross profit$442,885 $416,422 $366,437 
GAAP gross profit %66.6 %66.3 %65.2 %
Special items:
Intangible asset amortization 4,430 5,569 3,111 
Merger-related expenses (1)
— 1,059 — 
Cost of COVID-19 response programs638 565 2,025 
Total special items5,068 7,193 5,136 
 GAAP gross profit excluding special items$447,953 $423,615 $371,573 
 GAAP gross profit % excluding special items67.4 %67.4 %66.1 %
Reconciliation of GAAP operating expenses to GAAP operating expenses excluding special items:
GAAP operating expenses$195,621 $202,757 $183,090 
Special items:
Merger-related expenses (1)
2,546 4,750 — 
Intangible asset amortization846 943 756 
Severance and restructuring 155 3,327 523 
Other operating expenses (income), net6,302 3,531 1,077 
 Total special items9,849 12,551 2,356 
 GAAP operating expenses excluding special items$185,772 $190,206 $180,734 
Reconciliation of GAAP net income to GAAP net income excluding special items:
GAAP net income $220,063 $183,945 $161,190 
Special items:
Intangible asset amortization 5,276 6,512 3,867 
Merger-related expenses (1)
2,546 9,220 — 
Cost of COVID-19 response programs638 565 2,025 
Severance and restructuring 155 3,327 523 
Other operating expenses (income), net6,302 120 1,077 
Interest and other expense (income), net (7,359)(5,131)(587)
 Pre-tax total special items7,558 14,613 6,905 
Other income tax effects and adjustments (2)
(5,928)(1,616)(2,101)
 GAAP net income excluding special items$221,693 $196,942 $165,994 
 GAAP net income per share excluding special items:
Basic$0.83 $0.74 $0.62 
Diluted$0.82 $0.73 $0.61 
Shares used in the calculation of earnings per share excluding special items:
Basic267,892 267,299 269,003 
Diluted271,396 270,792 271,579 
(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.

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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:







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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.




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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
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uncertainty. Actual results could differ materially from those forecasted, based upon, among other things, general market and economic conditions, regulatory approvals, supply constraints, 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.

Source: Maxim Integrated Investor Relations
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