<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 DECEMBER 31, 1996
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, 94086
SUNNYVALE, CA (Zip Code)
(Address of Principal Executive Offices)
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 FEBRUARY 10, 1997
$.001 PAR VALUE 63,756,551 SHARES
<PAGE> 2
MAXIM INTEGRATED PRODUCTS, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
ITEM 1. Financial Statements
Consolidated Balance Sheets 3
As of June 30, 1996 and December 31, 1996
Consolidated Statements of Income 4
for the three and six months ended
December 31, 1995 and 1996
Consolidated Statements of Cash Flows 5
for the six months ended December 31,
1995 and 1996
Notes to Consolidated Financial Statements 6-7
ITEM 2. Management's Discussion and Analysis of Financial 8-10
Condition and Results of Operations
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 11
ITEM 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
2
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
MAXIM INTEGRATED PRODUCTS, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
June 30, December 31,
(Amounts in thousands) 1996 1996
==============================================================================================
ASSETS (Audited) (Unaudited)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 60,283 $ 35,869
Short-term investments 68,970 142,903
- --------------------------------------------------------------------------------------------
Total cash, cash equivalents and short-term investments 129,253 178,772
Accounts receivable, net 80,664 81,556
Inventories 30,471 37,470
Prepaid taxes and other current assets 24,163 23,753
- --------------------------------------------------------------------------------------------
Total current assets 264,551 321,551
- --------------------------------------------------------------------------------------------
Property, plant and equipment, at cost, less
accumulated depreciation 147,068 162,015
Other assets 6,175 6,438
- --------------------------------------------------------------------------------------------
$ 417,794 $ 490,004
============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 29,738 $ 19,068
Income taxes payable 19,323 7,174
Accrued salaries 12,897 11,838
Accrued expenses 11,880 14,679
Deferred income on shipments to distributors 14,531 15,930
- --------------------------------------------------------------------------------------------
Total current liabilities 88,369 68,689
- --------------------------------------------------------------------------------------------
Other liabilities 4,000 4,000
Commitments and Contingencies
- --------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock 62 64
Additional paid-in capital 89,939 115,839
Retained earnings 236,796 301,502
Translation adjustment (1,372) (90)
- --------------------------------------------------------------------------------------------
Total stockholders' equity 325,425 417,315
- --------------------------------------------------------------------------------------------
$ 417,794 $ 490,004
============================================================================================
</TABLE>
See accompanying notes.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
MAXIM INTEGRATED PRODUCTS, INC.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
(Amounts in thousands, except per share data) December 31, December 31,
----------------------------------------------
(Unaudited) 1995 1996 1995 1996
==================================================================================================
<S> <C> <C> <C> <C>
Net revenues $ 106,182 $ 104,686 $ 202,625 $ 205,686
Cost of goods sold 36,330 35,530 74,927 68,557
- --------------------------------------------------------------------------------------------------
Gross margin 69,852 69,156 127,698 137,129
- --------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 12,302 11,471 24,502 23,367
Selling, general and administrative 9,661 9,039 20,530 18,987
- --------------------------------------------------------------------------------------------------
21,963 20,510 45,032 42,354
- --------------------------------------------------------------------------------------------------
Operating income 47,889 48,646 82,666 94,775
Interest income, net 1,148 1,830 2,220 3,264
- --------------------------------------------------------------------------------------------------
Income before provision for income taxes 49,037 50,476 84,886 98,039
Provision for income taxes 17,163 17,162 30,427 33,333
- --------------------------------------------------------------------------------------------------
Net income $ 31,874 $ 33,314 $ 54,459 $ 64,706
- --------------------------------------------------------------------------------------------------
Income per share $ 0.45 $ 0.46 $ 0.77 $ 0.91
- --------------------------------------------------------------------------------------------------
Common and common equivalent shares 70,827 72,422 70,689 71,403
==================================================================================================
</TABLE>
See accompanying notes.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
MAXIM INTEGRATED PRODUCTS, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
For the six months ended December 31,
Increase (decrease) in cash and cash equivalents
(Amount in thousands)(unaudited) 1995 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows provided by operating activities:
Net income $54,459 $64,706
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,419 9,874
Reduction of equipment value 1,344 0
Changes in assets and liabilities:
Accounts receivable (37,659) (892)
Inventories (728) (6,999)
Prepaid taxes and other current assets (3,416) 410
Accounts payable 18,731 (10,670)
Income taxes payable 24,969 14,255
Deferred income taxes (4,450) 0
Deferred income on shipments to distributors 7,622 1,399
All other accrued liabilities (5,223) 1,740
- -----------------------------------------------------------------------------------------------
Net cash provided by operating activities 62,068 73,823
- -----------------------------------------------------------------------------------------------
Cash flows provided by investing activities:
Additions to property, plant and equipment (29,968) (23,539)
Deposits and other non-current assets 3,229 (263)
Purchases of held-to-maturity securities (59,396) (24,313)
Purchases of available-for-sale securities 0 (81,469)
Proceeds from maturities of held-to-maturity securities 50,217 31,849
- -----------------------------------------------------------------------------------------------
Net cash used in investing activities (35,918) (97,735)
- -----------------------------------------------------------------------------------------------
Cash flows provided by financing activities:
Issuance of common stock 7,766 16,586
Repurchase of Common Stock (27,371) (17,088)
- -----------------------------------------------------------------------------------------------
Net cash used in financing activities (19,605) (502)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 6,545 (24,414)
Cash and cash equivalents:
Beginning of year 54,966 60,283
- -----------------------------------------------------------------------------------------------
End of period $61,511 $35,869
- -----------------------------------------------------------------------------------------------
</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 December 31,
1996 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, 1996.
NOTE 2: INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of (in thousands): June 30, December 31,
1996 1996
---- ----
(audited) (unaudited)
<S> <C> <C>
Raw materials $ 3,720 $ 5,826
Work in process 16,908 20,947
Finished goods 9,843 10,697
-------- --------
$ 30,471 $ 37,470
======== ========
</TABLE>
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
At December 31, 1996, all debt securities consist of U.S. Treasury securities
maturing within one year. Securities designated as held-to- maturity are
carried at amortized cost which approximates market value. The amortized cost
of debt securities in this category is adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization is included in
investment income. Realized gains and losses and declines in value judged to
be other-than-temporary on held-to-maturity securities are included in
investment income. 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 December 31, 1996. The
cost of securities sold is based on the specific identification method.
Interest earned on securities is included in investment income.
All securities are included in short-term investments at December 31, 1996.
There were no gross realized gains or losses for the six months ended December
31, 1996.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net revenues decreased by 1.4% for the three months ended December 31, 1996
compared to the same period a year ago, and increased by 1.5% for the six
months ended December 31, 1996 compared to the same period a year ago. Net
revenues for the three and six months period ended December 31, 1996 were
essentially flat with the comparable periods a year ago. The Company believes
this was primarily a result of an inventory accumulation by the Company's
customers during fiscal 1996 which reduced their requirement for Maxim's
products over the last six months.
During the quarter 56% 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 contracts to mitigate its
risks on its backlog and 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 increased to 66.1% and 66.7% in the three and six months ended
December 31, 1996, compared to 65.8% and 63.0% for the three and six months
ended December 31, 1995. The improvement as compared to the comparable periods
a year ago was principally due to increases in manufacturing productivity.
Research and development expenses were 11.0% and 11.4% of net revenues in the
three and six months ended December 31, 1996, compared to 11.6% and 12.1% in
the three and six months ended December 31, 1995. The decline reflects the
absence of certain non-recurring expenses recorded in the comparable periods of
1996 offset by slightly higher spending in 1997.
Selling, general and administrative expenses were 8.6% and 9.2% of net revenues
in the three and six months ended December 31, 1996, compared to 9.1% and 10.1%
in the three and six months ended December 31, 1995. This decline was a result
of the Company's cost control measures and savings realized through the
establishment of a direct sales force in the United States during the latter
half of fiscal 1996.
The Company's operating income increased to 46.5% of net revenues in the three
months ended December 31, 1996, compared to 45.1% in the three months ended
December 31, 1995 and increased to 46.1% of net revenues in the six months
ended December 31, 1996, compared to 40.8% for the six months ended December
31, 1995, as a result of all the factors cited above.
Net interest income increased to $1.8 million in the three months and $3.3
million in the six months ended December 31, 1996 compared to $1.1 million and
$2.2 million the same periods a year ago, primarily as a result of higher
invested cash balances and to a lesser extent higher average interest rates.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont'd)
The decrease in the effective tax rate to 34% in the three months and the six
months ended December 31, 1996, was primarily attributable to the restoration
of the Federal research and development tax credit.
OUTLOOK
Gross margins for the second quarter were 66.1% compared to 65.8% in Q296 and
67.3% in Q197. The decrease in gross margins from Q197 reflects the Company's
strategy to selectively trade gross margin for incremental sales growth. The
Company anticipates that to the extent revenue growth resumes, gross margin
will trend lower over time as the Company continues to take advantage of
business opportunities to increase total profitability.
Backlog shippable in the next 12 months remained flat at Q197 levels of $103
million. Orders requested for delivery in the next three months increased to
77% of the backlog at December 31, 1996, compared to 72% at the end of Q197 and
59% at the end of Q496.
Turns orders received in Q297 increased significantly over those received in
Q197. (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.) The Company believes that the
higher level of turns orders experienced in Q1 and Q2 of fiscal 1997 reflects
the relatively short lead times (8-10 weeks) for integrated circuits and
customers' belief that shortages will not reappear in the near future. The
Company now believes that Q496 represented an inflection point in the inventory
correction that began in the second half of FY96.
Booking levels in the United States, Europe and Japan were higher in Q297 than
the previous two quarters and the Pacific Rim continued to show strong
sequential quarter-over-quarter growth. Customer cancellations were $17
million in Q297 and, while still higher than normal, were lower than the
previous six quarters. Booking levels, when analyzed by product line, were
higher than the previous two quarters in all product lines except the Company's
high-frequency business unit, where bookings have been flat for the past two
quarters. Growth in the high-frequency product lines has been hampered by an
inventory-based slowdown in the wireless and fiber optic markets and a
demand-based slowdown in the automatic test equipment market. Maxim's ability
to achieve satisfactory yields and production levels on its state-of-the-art
high-speed bipolar processes also has affected Q297 shipments. The Company
believes it has made significant progress on improving the manufacturability of
these processes, which should result in increased high-frequency shipments in
Q397.
While the Company is encouraged by the higher business levels experienced in
Q297, continued revenue growth in Q3 and Q4 of fiscal 1997 is dependent upon
booking rates increasing over the Q297 levels and continued high levels of
turns orders that match available supply.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont'd)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds for the first six months of fiscal year
1997 have been the net cash generated from operating activities of $73,823,000
and the issuance of common stock of $16,586,000 associated with the Company's
stock option programs. The principal uses of funds have been the repurchase of
$17,088,000 of common stock, net purchases of $73,933,000 in short-term
investments, and the purchase of $23,539,000 in property, plant and equipment.
The Company anticipates that it will spend up to $40 million for capital
equipment in fiscal 1997 and believes that it possesses sufficient liquidity
and capital resources to fund these purchases and its operations for the
foreseeable future.
FORWARD LOOKING INFORMATION
Safe harbor statement under the Private Securities Litigation Reform Act of
1995: The statements in this Outlook section are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All forward-looking statements are
made based on information available to the Company as of the date hereof, and
the Company assumes no duty to update any forward-looking statements.
Forward-looking statements in this document involve risk and uncertainty.
Important factors, including overall economic conditions, demand for electronic
products and semiconductors generally, demand for the Company's products in
particular, availability of raw material, 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 could cause actual results
to differ materially from those stated in the forward-looking statements.
10
<PAGE> 11
PART II: OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held an Annual Meeting of Stockholders on November 14, 1996.
The Stockholders elected the Board's nominees as directors by the votes
indicated:
<TABLE>
<CAPTION>
Nominee Votes in Favor Votes Withheld
- ------- -------------- --------------
<S> <C> <C>
James R. Bergman 54,725,179 76,620
John F. Gifford 54,717,439 75,420
Robert F. Graham 54,707,945 75,420
A.R. Wazzan 54,721,959 76,620
</TABLE>
The Company's 1996 Stock Incentive Plan, 1987 Employee Stock Participation
Plan, under which an additional 3,500,000 shares of common stock are reserved
for issuance, each as amended, were approved with 39,099,609 votes in favor,
11,853,799 against, 23,146 absentions and 4,508,174 non-votes.
The Company's 1988 Nonemployee Director Stock Option Plan under which an
additional 15,000 shares of common stock are reserved for issuance, each as
amended, were approved with 40,084,889 votes in favor, 10,862,387 against,
132,210 absentions and 4,405,242 non-votes.
The selection of Ernst & Young LLP as the Company's independent auditors for
fiscal 1997 was ratified with 55,462,213 votes in favor, 9,167 votes against,
13,348 abstentions and no non-votes.
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
(b) No Reports on Form 8-K were filed during the quarter ended
December 31, 1996
Items 1, 2, 3, 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.
FEBRUARY 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)
12
<PAGE> 1
Maxim Integrated Products, Inc. Exhibit 11.1
Computation of income per share
(amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
------- ------- ------- -------
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average shares outstanding . . . . . . . . . . . 59,627 62,276 59,524 61,675
Add weighted average shares from assumed exercise
of options and warrants when treasury shares are
reacquired at average stock market price . . . . . . . 17,355 15,492 17,425 14,853
Less weighted average shares assumed repurchased
from tax benefit from the assumed exercise
of non-qualified stock options . . . . . . . . . . . . (6,155) (5,346) (6,260) (5,125)
------- ------- ------- -------
Common and common equivalent shares used
in computing net income per share . . . . . . . . . . 70,827 72,422 70,689 71,403
======= ======= ======= =======
Net income applicable to computation of
income per share $31,874 $33,314 $54,459 $64,706
======= ======= ======= =======
Income per share $0.45 $0.46 $0.77 $0.91
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 178,772
<SECURITIES> 0
<RECEIVABLES> 82,898
<ALLOWANCES> (1,342)
<INVENTORY> 37,470
<CURRENT-ASSETS> 321,551
<PP&E> 220,962
<DEPRECIATION> (58,947)
<TOTAL-ASSETS> 490,004
<CURRENT-LIABILITIES> 68,689
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 417,341
<TOTAL-LIABILITY-AND-EQUITY> 490,004
<SALES> 205,686
<TOTAL-REVENUES> 205,686
<CGS> 68,557
<TOTAL-COSTS> 68,557
<OTHER-EXPENSES> 42,354
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26
<INCOME-PRETAX> 98,039
<INCOME-TAX> 33,333
<INCOME-CONTINUING> 64,706
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,706
<EPS-PRIMARY> 0.91
<EPS-DILUTED> 0.91
</TABLE>
