<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NO. 0-16538
MAXIM INTEGRATED PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2896096
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
Incorporation or Organization)
120 SAN GABRIEL DRIVE,
SUNNYVALE, CA 94086
(Address of Principal Executives Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(408) 737-7600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days:
YES [X] NO[ ]
CLASS: COMMON STOCK, OUTSTANDING AT OCTOBER 31, 1997
$.001 PAR VALUE 65,006,367 SHARES
<PAGE> 2
MAXIM INTEGRATED PRODUCTS, INC.
INDEX
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PART I. FINANCIAL INFORMATION
PAGE
----
ITEM 1. Financial Statements
Consolidated Balance Sheets 3
As of June 30, 1997 and September 27, 1997
Consolidated Statements of Income 4
for the three months ended
September 30, 1996 and September 27, 1997
Consolidated Statements of Cash Flows 5
for the three months ended September 30,
1996 and September 27, 1997
Notes to Consolidated Financial Statements 6-7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11-12
SIGNATURES 13
2
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
MAXIM INTEGRATED PRODUCTS, INC.
<TABLE>
<CAPTION>
June 30, September 27,
1997 1997
(Amounts in thousands) (Unaudited)
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,562 $ 22,197
Short-term investments 205,391 253,111
------------- -------------
Total cash, cash equivalents and short-term
investments 223,953 275,308
------------- -------------
Accounts receivable, net 91,642 95,762
Inventories 36,833 37,013
Deferred taxes and other current assets 24,579 25,551
------------- -------------
Total current assets 377,007 433,634
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Property, plant and equipment, at cost, less
accumulated depreciation 174,508 182,767
Other assets 4,871 4,706
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TOTAL ASSETS $ 556,386 $ 621,107
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,249 $ 28,228
Income taxes payable 10,916 --
Accrued salaries 16,408 18,604
Accrued expenses 16,312 22,301
Deferred income on shipments to distributors 16,336 15,033
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Total current liabilities 85,221 84,166
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Other liabilities 4,000 4,000
Deferred income taxes 1,600 1,600
Commitments
------------- -------------
Stockholders' equity:
Common stock 64 64
Additional paid-in capital 92,837 119,292
Retained earnings 373,770 413,734
Translation adjustment (1,106) (1,749)
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Total stockholders' equity 465,565 531,341
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 556,386 $ 621,107
============= =============
</TABLE>
See accompanying notes.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
MAXIM INTEGRATED PRODUCTS, INC.
<TABLE>
<CAPTION>
(Amounts in thousands, except per share data) Three Months Ended
(Unaudited September 30, September 27,
1996 1997
------------ ------------
<S> <C> <C>
Net revenues $ 101,000 $ 125,000
Cost of goods sold 33,027 41,500
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Gross margin 67,973 83,500
------------ ------------
Operating expenses:
Research and development 11,896 15,480
Selling, general and
administrative 9,948 10,934
------------ ------------
21,844 26,414
------------ ------------
Operating income 46,129 57,086
Interest income, net 1,434 3,466
------------ ------------
Income before provision for
income taxes 47,563 60,552
Provision for income taxes 16,171 20,588
------------ ------------
Net income $ 31,392 $ 39,964
------------ ------------
Income per share $ 0.45 $ 0.53
------------ ------------
Common and common equivalent shares 70,384 75,405
============ ============
</TABLE>
See accompanying notes
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
MAXIM INTEGRATED PRODUCTS, INC.
<TABLE>
<CAPTION>
For the three months ended
Increase (decrease) in cash and cash equivalents September 30, September 27,
(Amounts in thousands)(Unaudited) 1996 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 31,392 $ 39,964
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and translation adjustment 4,929 3,445
Changes in assets and liabilities:
Accounts receivable (1,338) (4,120)
Inventories (4,126) (180)
Prepaid taxes and other current assets 841 (972)
Accounts payable (4,983) 2,979
Income taxes payable (950) 14,901
Deferred income taxes -- --
Deferred income on shipments to distributors 2,332 (1,303)
All other accrued liabilities 4,900 8,185
------------- -------------
Net cash provided by operating activities 32,997 62,899
------------- -------------
Cash flows from investing activities:
Additions to property, plant and equipment (12,172) (12,206)
Deposits and other non-current assets (179) 24
Purchases of held-to-maturity securities (24,313) --
Purchases of available-for-sale securities -- (104,267)
Proceeds from maturities of held-to-maturity securities 14,409 5,800
Proceeds from sales/maturities of available-for-sale
securities -- 50,747
------------- -------------
Net cash used in investing activities (22,255) (59,902)
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Cash flows from financing activities:
Issuance of common stock 4,605 11,188
Repurchase of common stock (16,314) (10,550)
------------- -------------
Net cash used in/provided by financing activities (11,709) 638
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Net increase (decrease) in cash and cash equivalents (967) 3,635
Cash and cash equivalents:
Beginning of year 60,283 18,562
------------- -------------
End of period $ 59,316 $ 22,197
============= =============
</TABLE>
See accompanying notes
5
<PAGE> 6
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments (consisting of normal
recurring items) considered necessary for a fair presentation have been
included. The results of operations for the three months ended September 27,
1997 are not necessarily indicative of the results to be expected for the entire
year. These consolidated financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Annual Report on Form 10-K for the year ended June 30, 1997. Effective July
1,1997, the Company adopted a 52-53 week fiscal year that will end on the last
Saturday in June, and in which each accounting quarter will end on the last
Saturday of the quarter.
NOTE 2: INVENTORIES
Inventories consist of (in thousands):
June 30, September 27,
1997 1997
(unaudited)
------------ ------------
Raw materials $ 5,058 $ 4,550
Work in process 22,349 22,703
Finished goods 9,426 9,760
------------ ------------
$ 36,833 $ 37,013
============ ============
NOTE 3: INCOME PER SHARE
Net income per share is calculated based on the weighted average number of
common and dilutive common equivalent shares outstanding during each respective
period. The number of common equivalent shares which became issuable pursuant to
the grant of stock options has been calculated using the treasury stock method.
Fully diluted income per share is substantially the same as reported income per
share.
6
<PAGE> 7
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 4: INVESTMENT SECURITIES
All investment securities owned at September 27, 1997 are classified as
available-for-sale and are included in short-term investments. At September 27,
1997, all investment securities consist of U.S. Treasury and Federal Agency debt
securities maturing within one year. Securities identified as available-for-sale
are carried at fair market value. Unrealized gains and losses, net of tax, on
securities in this category are reportable as a separate component of
stockholders' equity. Because of the short term to maturity and relative price
insensitivity to changes in market interest rates, amortized cost approximates
fair market value and no unrealized gains or losses have been recorded at
September 27, 1997. The cost of securities sold is based on the specific
identification method. Interest earned on securities is included in investment
income.
NOTE 5: RECENT PRONOUNCEMENT
In February 1997, Financial Accounting Standard No. 128 (FAS 128) Earnings Per
Share was issued. The Company will be required to adopt this new pronouncement
in the quarter ending December 27, 1997. Under the new pronouncement the Company
is required to present on the face of the income statement both the net income
per common share outstanding and net income per common and common equivalent
shares outstanding. All prior periods will be restated to reflect this change.
Had the Company applied this change to the period ending September 27, 1997 the
pro forma amounts would be as follows.
Three Months ended
September 30, September 27,
1996 1997
---------------------------
Pro forma earnings per share:
Basic income per common share .51 .62
==== ====
Diluted income per share .45 .53
==== ====
Prior to this pronouncement the Company was required to present only the net
income per common and common equivalent shares outstanding (see note 3) which is
equivalent to Diluted income per share shown above.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net revenues for the three months ended September 27, 1997 increased 23.8%
compared to the same period a year ago. The increase is attributable primarily
to higher unit shipments resulting from continued introduction of new
proprietary products and increased market acceptance of the company's
proprietary and second source products.
During the quarter, 57% of net revenues were derived from customers outside of
the United States. While the majority of these sales are denominated in US
dollars, the Company does place foreign currency forward contracts to mitigate
its risks on firm commitments and net monetary assets denominated in foreign
currencies, and as a result, the net impact associated with changes in foreign
currency on the Company's operating results for the quarter was minimal.
Gross margin was 66.8% in the three months ended September 27, 1997, compared to
67.3% for the three months ended September 30, 1996. The decrease in gross
margin for the three month period ended September 27, 1997 was due to a change
in mix of products sold with a slightly lower gross margin.
Research and development expenses were 12.4% of net revenues in the three months
ended September 27, 1997, compared to 11.8% in the three months ended September
30, 1996. Research and development in absolute dollars increased $3,584 for the
three month period ended September 27, 1997 over the comparable period a year
ago. The increase is attributable to continued investments in product
development efforts.
Selling, general and administrative expenses were 8.7% of net revenues in the
three months ended September 27, 1997, compared to 9.8% for the three months
ended September 30, 1996. The decrease in percentage resulted from the growth in
net revenue, reflecting economies of scale.
The Company's operating income remained constant at 45.7% of net revenues for
both the three months ended September 27, 1997, and the three months ended
September 30, 1996.
Net interest income increased to $3.5 million in the three months ended
September 27, 1997 compared to $1.4 million for the comparable period a year
ago, as a result of higher invested cash balances at higher average interest
rates.
The effective income tax rate for both the three months ended September 27, 1997
and the three months ended September 30, 1996 was 34%. This rate differs from
the federal statutory rate primarily due to state income taxes and the federal
research and development tax credit.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D)
OUTLOOK
At the end of Q198, backlog shippable within the next twelve months was $182
million as compared to $152 million reported at the end of Q497. Orders
requested for delivery in Q298 remained high, representing 80% of the beginning
Q298 backlog.
Turns orders received in Q198 were $50.7 million. (Turns orders are customer
orders that are for delivery within the same quarter and may result in revenue
within the quarter if the Company has inventory available that matches those
orders.)
Worldwide net bookings were higher in Q198 than in Q497, with net bookings in
the Pacific Rim and Europe showing the greatest increase. Net bookings for all
product areas continue to be strong, particularly for those products based on
the Company's high-frequency bipolar technology. In addition, net bookings for
product lines focused on our broadest markets (instrumentation and process
control) continue to be strong.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds for the first three months of fiscal year
1998 have been the net cash generated from operating activities of $62.8 million
and the issuance of common stock of $11.2 million associated with the Company's
stock option programs. The principal uses of funds have been the repurchase of
$10.6 million of common stock, net purchases of $47.7 million in short-term
investments, and the purchase of $12.2 million in property, plant and equipment.
The Company anticipates that it will spend up to $100 million for capital
equipment in fiscal 1998 and believes that it possesses sufficient liquidity and
capital resources to fund these purchases and its operations for the foreseeable
future. In addition, the Company intends to use the proceeds from the exercise
of stock options and the resulting tax benefit to repurchase its common stock.
In fiscal 1998, the Company has repurchased $60 million of its common stock
under this program.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D)
FORWARD LOOKING INFORMATION
Forward-looking statements in this report, including this Management's
Discussion and Analysis section, involve risk and uncertainty. There are
numerous factors that could cause the Company's actual results to differ
materially from results predicted or implied. In this report the outlook section
includes forward looking statements regarding backlog, orders, turn orders, and
bookings that might imply anticipated revenue and revenue growth. Important
factors affecting whether the Company will achieve future revenue and revenue
growth include whether demand for the Company's products continues to increase
and reflects real end user demand; whether customer cancellations and delays of
outstanding orders increase (note that the Company's backlog of orders is
generally not based on legally binding customer contracts); and whether the
Company is able to manufacture in a correct mix to respond to orders on hand and
new orders received in the future. All forward-looking statements included in
this document 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.
Other important factors that could cause actual results to differ materially
from those predicted include overall economic conditions; demand for electronic
products and semiconductors generally; demand for the end-user products for
which the Company's semiconductors are suited; timely availability of raw
materials, equipment, supplies and services; unanticipated manufacturing
problems; technological and product development risks; competitors' actions; and
other risk factors described in the Company's filings with the Securities and
Exchange Commission and in particular its recent report on Form 10K.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit has been filed with this report:
11.1 Computation of Income per Share
27 Financial Data Schedule
(b) No Reports on Form 8-K were filed during the quarter ended
September 27, 1997
ITEMS 1, 2, 3, 4 AND 5 HAVE BEEN OMITTED AS THEY ARE NOT APPLICABLE.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
November 10, 1997 MAXIM INTEGRATED PRODUCTS, INC.
- ----------------- -------------------------------
(Date) (Registrant)
/s/ Michael J. Byrd
-------------------
MICHAEL J. BYRD
Vice President and Chief
Financial Officer (For the
Registrant and Principal
Financial Officer)
/s/ Richard E. Slater
---------------------
RICHARD E. SLATER
Vice President and Chief
Accounting Officer (Principal
Accounting Officer)
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
11.1 Computation of Income Per Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11.1
Maxim Integrated Products, Inc.
Computation of income per share
(amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
September 30, September 27,
1996 1997
------------- -------------
<S> <C> <C>
Weighted average common shares outstanding 61,075 64,282
Add weighted average shares from assumed
exercise of options and warrants when treasury
shares are reacquired at average stock market
price 14,214 16,747
Less weighted average shares assumed
repurchased from tax benefit from the assumed
exercise of non-qualified stock options (4,905) (5,624)
------------- -------------
Common and common equivalent shares used
in computing net income per share 70,384 75,405
============= =============
Net income applicable to computation of
income per share $ 31,392 $ 39,964
============= =============
Income per share $ 0.45 $ 0.53
============= =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-27-1997
<CASH> 275,308
<SECURITIES> 0
<RECEIVABLES> 97,069
<ALLOWANCES> (1,307)
<INVENTORY> 37,013
<CURRENT-ASSETS> 433,634
<PP&E> 253,690
<DEPRECIATION> (70,923)
<TOTAL-ASSETS> 621,107
<CURRENT-LIABILITIES> (84,166)
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 533,026
<TOTAL-LIABILITY-AND-EQUITY> 621,107
<SALES> 125,000
<TOTAL-REVENUES> 125,000
<CGS> 41,500
<TOTAL-COSTS> 41,500
<OTHER-EXPENSES> 26,414
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 60,552
<INCOME-TAX> 20,588
<INCOME-CONTINUING> 39,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,964
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
