Financial: Maxim Q3 Fiscal 1999 Results - Company Financial Information

Edge: Work-Group Computing Report, May 3, 1999

Maxim Integrated Products, Inc., (Nasdaq:MXIM) reported net revenues of $147.2 million for the third quarter of fiscal 1999 ending March 27 1999, compared to $145 million for the same quarter in fiscal 1998. Net income was $47.7 million in Q399, compared to $46.1 million for the third quarter of fiscal 1998. Income per share was $0.31 for Q399, compared to $0.31 for the same period a year ago.

During the quarter, the Company increased cash and short-term investments by $72.4 million after paying $18.2 million for 400,000 shares of its common stock and $6.9 million for capital equipment. Inventories declined slightly during the quarter. Accounts receivable declined $2.7 million during the quarter. Annualized return on average stockholders' equity during the quarter was 24.8%, one of the highest in the industry today.

Bookings on the Company were $171 million in Q399, a 21% increase over the Q299 level of $141 million. During the quarter, customers continued their trend of ordering for near-term delivery. Turns orders received during the quarter were $69.2 million, a 33% increase over the Q299 level (turns orders are customer orders that are for delivery within the same quarter and may result in revenue within the same quarter if the Company has available inventory that matches those orders).

Order cancellations during the quarter were approximately $10 million, the lowest level since Q496. Third quarter ending backlog shippable within the next 12 months was approximately $148 million, including $120 million requested for shipment by the end of Q499.

During Q399, bookings grew in the Pacific Rim, United States, and Japan. Growth was strongest in the Pacific Rim, primarily related to Korean OEM customers. In the U.S., there was double-digit bookings growth across a broad cross section of OEM and distribution customers, product lines, and end markets. While market conditions in Japan improved slightly during the quarter, bookings in that region are still not reaching prior business levels. Bookings in Europe during Q399 were down slightly from a strong bookings quarter in Q299.

Bookings continued to improve in the communications-related end markets during Q399. In addition, bookings for the Company's computer-related (primarily notebook) product lines and those products that traditionally sell into the industrial markets increased from Q299.

Gross margins for Q399 were 69.1%, an increase from the 68.7% reported in Q299. During the quarter, the Company expensed $1.6 million of costs that were in excess of the costs achieved by the Company's lowest cost wafer fabrication facility (Beaverton). In addition, the Company increased inventory reserves by $0.8 million and increased its reserve by $1.3 million for the closure of a 4-inch wafer fabrication facility, further increasing cost of sales in Q399. The Company also recorded a charge to selling, general and administrative expenses of $1.5 million related to technology licensing matters.

Jack Gifford, Chairman, President and Chief Executive Officer, commented on the quarter: "Q399 was an excellent quarter. Our sales and profits grew sequentially, we increased cash and short-term investments by over $72 million, and our bookings grew to near record levels. Q199 now appears to have been the low point of a three-quarter trend of declining bookings. We hope the current trend continues. In addition, we remain on plan to introduce over 300 new products during our product announcement year ending in July."

Mr. Gifford continued: "Although turns and bookings grew by 33% and 21%, respectively, we believe our Q399 booking level now approximates our estimates of the current quarter's consumption of products by our customers. Accordingly, assuming that market conditions remain positive, we would expect the average sequential growth rate in bookings to be more consistent with a growth model of 5% to 6% per quarter."

During the quarter, Maxim was named by The Wall Street Journal as the 15th best performing company of the past 10 years, with an average compound annual return of 49% per year. Maxim was the top semiconductor company on the list. In addition, in a recent San Jose Mercury News listing of the largest 150 companies in the Silicon Valley, Maxim was listed as the 13th most profitable and the 16th most valuable of all the companies on the list and ranked 2nd with regard to profit as a percentage of sales.

Maxim Integrated Products is a leading international supplier of quality analog products for applications that require real world signal processing.

Consolidated Balance Sheets
(In thousands)                             3/27/99      6/27/98
                                         (unaudited)   (audited)

Assets
 Current assets:
  Cash and cash equivalents                $ 45,190     $ 16,739
  Short-term investments                    419,615      306,209
  Total cash, cash equivalents
   and short-term investments               464,805      322,948
  Accounts receivable, net                   84,744      101,921
  Inventories                                43,057       44,707
  Deferred income taxes
   and other current assets                  48,319       38,439
    Total current assets                    640,925      508,015

  Property, plant and equipment,
   at cost                                  366,220      339,202
  Less accumulated depreciation             (93,333)     (83,749)
  Net property, plant and equipment         272,887      255,453
  Other assets                                6,622        6,024

    Total assets                           $920,434     $769,492

Liabilities and Stockholders' Equity
 Current liabilities:
  Accounts payable                         $ 23,970     $ 35,169
  Accrued expenses                           61,116       44,025
  Deferred income on
   shipments to distributors                 24,238       23,686
  Income taxes payable                           20       27,412
    Total current liabilities               109,344      130,292

  Deferred income taxes                       4,200        4,200
  Other liabilities                           4,000        4,000

    Total liabilities                       117,544      138,492

 Stockholders' equity:
  Common stock                              108,889       81,249
  Retained earnings                         695,470      551,914
  Translation adjustment                     (1,469)      (2,163)
    Total stockholders' equity              802,890      631,000

    Total liabilities and
     stockholders' equity                  $920,434     $769,492


Consolidated Statements of Income

(In thousands,       Three Months Ending     Nine Months Ending
except per share
  data)              3/27/99     3/28/98     3/27/99     3/28/98
                   (unaudited) (unaudited) (unaudited) (unaudited)

Net revenues        $147,188    $145,039    $447,481    $405,039
Cost of goods sold    45,538      47,250     141,400     133,300
 Gross margin        101,650      97,789     306,081     271,739
                       69.1%       67.4%       68.4%       67.1%

Operating expenses:
 Research and
  development         21,848      18,710      64,284      51,203
 Selling, general and
  administrative      12,798      12,837      38,928      35,582

  Operating income    67,004      66,242     202,869     184,954
                       45.5%       45.7%       45.3%       45.7%
Interest income, net   5,222       3,682      14,640      10,414

  Income before provision
   for income taxes   72,226      69,924     217,509     195,368
Provision for income
 taxes                24,557      23,774      73,953      66,425

  Net income        $ 47,669    $ 46,150    $143,556    $128,943

Basic income
 per share          $   0.36    $   0.35    $   1.09    $   1.00

Shares used in the
 calculation of basic
 income per share    133,762     130,510     131,884     129,269

Diluted income per
 share              $   0.31    $   0.31    $   0.95   $    0.86

Shares used in the
 calculation of diluted
 income per share    153,981     151,223     150,871     150,594