<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 MARCH 28, 1998
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 MARCH 28, 1998
$.001 PAR VALUE 131,153,788 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 March 28, 1998 and June 30, 1997
Consolidated Statements of Income 4
for the three and nine months ended
March 28, 1998 and March 31, 1997
Consolidated Statements of Cash Flows 5
for the nine months ended March 28,
1998 and March 31, 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. Reports on Form 8-K 11
SIGNATURE 12
</TABLE>
2
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
MAXIM INTEGRATED PRODUCTS, INC.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
March 28, June 30,
1998 1997
(Amounts in thousands) (Unaudited)
=============================================================================================
<S> <C> <C>
ASSETS
- ---------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 35,033 $ 18,562
Short-term investments 249,167 205,391
- ---------------------------------------------------------------------------------------------
Total cash, cash equivalents and short-term
investments 284,200 223,953
- ---------------------------------------------------------------------------------------------
Accounts receivable, net 107,128 91,642
Inventories 40,948 36,833
Prepaid taxes and other current assets 29,951 24,579
- ---------------------------------------------------------------------------------------------
Total current assets 462,227 377,007
- ---------------------------------------------------------------------------------------------
Property, plant and equipment, at cost, less
accumulated depreciation 239,735 174,508
Other assets 6,681 4,871
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS $708,643 $556,386
=============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,697 $ 25,249
Income taxes payable 0 10,916
Accrued salaries 21,363 16,408
Accrued expenses 17,375 16,312
Deferred income on shipments to distributors 21,204 16,336
- ---------------------------------------------------------------------------------------------
Total current liabilities 93,639 85,221
- ---------------------------------------------------------------------------------------------
Deferred income taxes 1,600 1,600
Other liabilities 4,000 4,000
- ---------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock 131 128
Additional paid-in capital 108,774 92,773
Retained earnings 502,713 373,770
Translation adjustment (2,214) (1,106)
- ---------------------------------------------------------------------------------------------
Total stockholders' equity 609,404 465,565
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $708,643 $556,386
=============================================================================================
</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 Nine months ended
- -----------------------------------------------------------------------------------------------------
March 28, March 31, March 28, March 31,
(Unaudited) 1998 1997 1998 1997
=====================================================================================================
<S> <C> <C> <C> <C>
Net revenues $145,039 $111,005 $405,039 $316,691
Cost of goods sold 47,250 37,437 133,300 105,994
- -----------------------------------------------------------------------------------------------------
Gross margin 97,789 73,568 271,739 210,697
- -----------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 18,710 13,092 51,203 36,459
Selling, general and
administrative 12,837 9,298 35,582 28,285
- -----------------------------------------------------------------------------------------------------
Total operating expenses 31,547 22,390 86,785 64,744
- -----------------------------------------------------------------------------------------------------
Operating income 66,242 51,178 184,954 145,953
Interest income, net 3,682 2,462 10,414 5,726
- -----------------------------------------------------------------------------------------------------
Income before provision for
income taxes 69,924 53,640 195,368 151,679
Provision for income taxes 23,774 18,237 66,425 51,570
- -----------------------------------------------------------------------------------------------------
Net income $ 46,150 $ 35,403 $128,943 $100,109
- -----------------------------------------------------------------------------------------------------
Basic income per share $ 0.35 $ 0.28 $ 1.00 $ 0.80
- -----------------------------------------------------------------------------------------------------
Shares used in the calculation of
basic income per share 130,510 127,474 129,269 124,725
- -----------------------------------------------------------------------------------------------------
Diluted income per share $ 0.31 $ 0.24 $ 0.86 $ 0.69
- -----------------------------------------------------------------------------------------------------
Shares used in the calculation of
diluted income per share 151,223 148,750 150,594 144,788
=====================================================================================================
</TABLE>
See accompanying notes.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
MAXIM INTEGRATED PRODUCTS, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents For the nine months ended
March 28, March 31,
(Amounts in thousands)(unaudited) 1998 1997
====================================================================================================
<S> <C> <C>
Cash flows from operating activities:
Net income $ 128,943 $ 100,109
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and translation adjustment 11,158 12,702
Reduction of equipment value 10,842 0
Changes in assets and liabilities:
Accounts receivable, net (15,486) (2,637)
Inventories (4,115) (5,992)
Prepaid taxes and other current assets (5,372) (4,111)
Accounts payable 8,448 (7,651)
Income taxes payable 55,747 30,635
Deferred income on shipments to distributors 4,868 299
All other accrued liabilities 6,018 4,020
- ----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 201,051 127,374
- ----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (88,335) (32,566)
Other assets (1,810) (318)
Purchases of held-to-maturity securities 0 (24,313)
Purchases of available-for-sale securities (276,433) (168,547)
Proceeds from maturities of held-to-maturity securities 5,800 58,688
Proceeds from sales/maturities of available-for-sale
securities 226,857 11,868
- ----------------------------------------------------------------------------------------------------
Net cash used in investing activities (133,921) (155,188)
- ----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Issuance of common stock 30,860 25,202
Repurchase of common stock (81,519) (46,135)
- ----------------------------------------------------------------------------------------------------
Net cash used in financing activities (50,659) (20,933)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 16,471 (48,747)
Cash and cash equivalents:
Beginning of year 18,562 60,283
- ----------------------------------------------------------------------------------------------------
End of period $ 35,033 $ 11,536
====================================================================================================
</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 and nine months ended March
28, 1998 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):
<TABLE>
<CAPTION>
March 28, June 30,
--------- --------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Raw materials $ 4,803 $ 5,058
Work in process 25,007 22,349
Finished goods 11,138 9,426
------- -------
$40,948 $36,833
======= =======
</TABLE>
NOTE 3: SHORT-TERM INVESTMENTS
All short-term investments owned at March 28, 1998 are classified as
available-for-sale. At March 28, 1998, all short-term investments consist of
U.S. Treasury and Federal Agency debt securities maturing within one year.
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 March 28, 1998. The cost of securities sold is
based on the specific identification method. Interest earned on securities is
included in interest income, net on the consolidated statements of income.
6
<PAGE> 7
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 4: INCOME PER SHARE
Beginning in the second quarter of fiscal 1998, the Company was required to
report two separate income per share numbers, basic and diluted, in compliance
with the Financial Accounting Standard No. 128 (FAS 128) Earnings Per Share
which was issued in February 1997. Basic income per share is calculated based
only on weighted average common shares outstanding. Diluted 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
dilutive common equivalent shares which became issuable pursuant to the grant of
stock options has been calculated using the treasury stock method. Diluted
income per share is the same number the Company previously reported as income
per share.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 28, March 31, March 28, March 31,
1998 1997 1998 1997
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
Numerator for basic income per share and
diluted income per share:
Net income $ 46,150 $ 35,403 $128,943 $ 100,109
======== ======== ======== ===========
Denominator:
Denominator for basic income per share
130,510 127,474 129,269 124,725
Effect of dilutive securities:
Stock options and warrants 20,713 21,276 21,325 20,063
-------- -------- -------- -----------
Denominator for diluted income per share
151,223 148,750 150,594 144,788
======== ======== ======== ===========
Basic income per share $ 0.35 $ 0.28 $ 1.00 $ 0.80
======== ======== ======== ===========
Diluted income per share $ 0.31 $ 0.24 $ 0.86 $ 0.69
======== ======== ======== ===========
</TABLE>
On December 5, 1997, the Company effected a two-for-one stock split in the form
of a stock dividend, thereby doubling the number of outstanding shares of common
stock. All share and per share amounts for the prior periods have been adjusted
to reflect the split.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net revenues increased by 30.7% and 27.9% for the three and nine months ended
March 28, 1998 compared to the three and nine months ended March 31, 1997. 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 third quarter of fiscal 1998, 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 its firm sales commitments 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 was 67.4% and 67.1% in the three and nine months ended March 28,
1998, compared to 66.3% and 66.5% for the three and nine months ended March 31,
1997. The increase in gross margin for the three and nine months ended March 28,
1998 was principally due to production efficiencies obtained through economies
of scale partially offset by the charges related to equipment writedowns
discussed below.
Research and development expenses were 12.9% and 12.6% of net revenues in the
three and nine months ended March 28, 1998, compared to 11.8% and 11.5% in the
three and nine months ended March 31, 1997. The increase was primarily
attributable to continued investments in product development efforts and the
charges related to equipment writedowns as discussed below.
Selling, general and administrative expenses were 8.9% and 8.8% of net revenues
in the three and nine months ended March 28, 1998, compared to 8.4% and 8.9% for
the three and nine months ended March 31, 1997. Selling, general and
administrative expenses increased in absolute dollars as a result of increased
headcount and related expenses primarily associated with the Company's direct
sales efforts.
During the three and nine months ended March 28, 1998, the Company recorded
charges of $6.0 million and $10.8 million to reduce the carrying value of
certain pieces of capital equipment. For the third quarter, $3.9 million was
charged to cost of goods sold, and $2.1 million was charged to research and
development expenses. For the year-to-date period, $6.7 million was charged to
cost of goods sold, $3.1 million was charged to research and development
expenses, and $1.0 million was charged to selling, general and administrative
expenses.
The Company's operating income decreased slightly to 45.7% for both the three
and nine months ended March 28, 1998, compared to 46.1% for both the three and
nine months ended March 31, 1997 for the reasons noted above.
Net interest income increased to $3.7 million in the three months and $10.4
million in the nine months ended March 28, 1998 compared to $2.5 million and
$5.7 million for the three and nine months ended March 31, 1997, as a result of
higher invested cash and short-term investments balances at higher average
interest rates.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D)
The effective income tax rate for both the three and nine months ended March 28,
1998 and March 31, 1997 was 34%. This rate differs from the federal statutory
rate primarily due to state income taxes and the federal research and
development tax credit.
OUTLOOK
During the third quarter of fiscal 1998, backlog shippable within the next 12
months increased to $216 million from the $208 million reported at the end of
the second quarter of fiscal 1998. Seventy-three percent of the ending third
quarter of fiscal 1998 backlog consists of orders that were requested for
shipment in the fourth quarter of fiscal 1998 or earlier. Net bookings in the
third quarter of fiscal 1998 were below the record level for the second quarter
of fiscal 1998 but consistent with the Company's estimates of customer
consumption of its products. Total cancellations for the quarter were $21
million, up from $19 million in the second quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash for the first nine months of fiscal 1998
have been from net cash generated from operating activities of $201.1 million
and the issuance of common stock of $30.9 million associated with the Company's
stock option programs. The principal uses of cash have been the purchase of
$88.3 million in property, plant and equipment, of which $42 million was for a
sub-micron wafer fabrication facility located in San Jose, California. The uses
of cash also included repurchase of $81.5 million of common stock, and net
purchases of $43.8 million in short-term investments.
During the nine month period ended March 28, 1998, the Company's accounts
receivable, inventories and accounts payable increased as a result of higher
revenue levels and purchases of capital equipment.
The Company anticipates that it will spend approximately $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 continue to
repurchase its common stock from time to time consistent with its policy and
practice of using the proceeds from the exercise of stock options and the
resulting tax benefit to repurchase its common stock.
9
<PAGE> 10
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D)
STOCK SPLIT
On December 5, 1997, the Company effected a two-for-one stock split in the form
of a stock dividend, thereby doubling the number of outstanding shares of common
stock. All share and per share amounts for the prior periods have been adjusted
to reflect the split.
YEAR 2000 ISSUE
The Company has recently commenced a Year 2000 date conversion project to assess
possible impact of Year 2000 Issues on its business. The Company is looking at
(a) its internal information and operating systems, (b) possible effects on the
Company of third parties' failure to fix their own Year 2000 Issues, and (c)
whether any material contingencies may exist related to products sold by the
Company. The Company expects that these assessments will enable it to develop
plans for any required changes, testing and implementation; to make estimates of
likely time involved, and costs of any required changes; and to determine
whether Year 2000 Issues are likely to have a material impact on future
financial results or financial condition.
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, and bookings that
might imply anticipated revenue and revenue growth, and the Liquidity and
Capital Resources section includes forward looking statements regarding future
capital expenditures and sufficiency of the Company's liquidity. 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, such as the currency
of and other economic issues affecting Asian countries, 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 10-K.
10
<PAGE> 11
PART II: OTHER INFORMATION
ITEM 6: REPORTS ON FORM 8-K
(a) No Reports on Form 8-K were filed during the quarter ended March 28,
1998.
ITEMS 1,2,3,4 AND 5 HAVE BEEN OMITTED AS THEY ARE NOT APPLICABLE.
11
<PAGE> 12
SIGNATURE
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.
MAY 11, 1998 MAXIM INTEGRATED PRODUCTS,INC.
- ------------ ------------------------------
(Date) (Registrant)
/s/ Michael J. Byrd
------------------------------
MICHAEL J. BYRD
Vice President and Chief
Financial Officer (Authorized
on behalf of the Registrant
and as Principal Financial
Officer)
12
<PAGE> 13
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-28-1998
<CASH> 284,200
<SECURITIES> 0
<RECEIVABLES> 109,033
<ALLOWANCES> (1,905)
<INVENTORY> 40,948
<CURRENT-ASSETS> 462,227
<PP&E> 318,629
<DEPRECIATION> (78,894)
<TOTAL-ASSETS> 708,643
<CURRENT-LIABILITIES> 93,639
<BONDS> 0
0
0
<COMMON> 131
<OTHER-SE> 609,273
<TOTAL-LIABILITY-AND-EQUITY> 708,643
<SALES> 405,039
<TOTAL-REVENUES> 405,039
<CGS> 133,300
<TOTAL-COSTS> 133,300
<OTHER-EXPENSES> 86,785
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105
<INCOME-PRETAX> 195,368
<INCOME-TAX> 66,425
<INCOME-CONTINUING> 128,943
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,943
<EPS-PRIMARY> 1.00<F1>
<EPS-DILUTED> 0.86
<FN>
<F1>For Purposes of This Exhibit, Primary means Basic.
</FN>
</TABLE>
