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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 30, 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
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CLASS: COMMON STOCK, OUTSTANDING AT NOVEMBER 1, 1996
$.001 PAR VALUE 61,522,890 SHARES
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MAXIM INTEGRATED PRODUCTS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. Financial Statements
Consolidated Balance Sheets 3
As of June 30, 1996 and September 30, 1996
Consolidated Statements of Income 4
for the three months ended
September 30, 1995 and 1996
Consolidated Statements of Cash Flows 5
for the three months ended September 30,
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 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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CONSOLIDATED BALANCE SHEETS
MAXIM INTEGRATED PRODUCTS, INC.
June 30, September 30,
(Amounts in thousands) 1996 1996
===============================================================================================
(Unaudited)
ASSETS
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Current assets:
Cash and cash equivalents $ 60,283 $ 59,316
Short-term investments 68,970 78,874
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Total cash, cash equivalents and short-term investments 129,253 138,190
Accounts receivable, net 80,664 82,002
Inventories 30,471 34,597
Prepaid taxes and other current assets 24,163 23,322
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Total current assets 264,551 278,111
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Property, plant and equipment, at cost, less
accumulated depreciation 147,068 154,896
Other assets 6,175 6,354
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$ 417,794 $ 439,361
================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable 29,738 24,755
Income taxes payable 19,323 15,078
Accrued salaries 12,897 13,549
Accrued expenses 11,880 16,128
Deferred income on shipments to distributors 14,531 16,863
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Total current liabilities 88,369 86,373
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Other liabilities 4,000 4,000
Commitments and Contingencies
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Stockholders' equity:
Common stock 62 62
Additional paid-in capital 89,939 81,525
Retained earnings 236,796 268,188
Translation adjustment (1,372) (787)
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Total stockholders' equity 325,425 348,988
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$ 417,794 $ 439,361
================================================================================================
See accompanying notes.
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CONSOLIDATED STATEMENTS OF INCOME
MAXIM INTEGRATED PRODUCTS, INC.
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For the three months ended September 30, 1995 1996
(Amounts in thousands, except per share data) (unaudited) (unaudited)
===============================================================================================
Net revenues $ 96,443 $ 101,000
Cost of goods sold 38,597 33,027
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Gross margin 57,846 67,973
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Operating expenses:
Research and development 12,200 11,896
Selling, general and administrative 10,869 9,948
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23,069 21,844
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Operating income 34,777 46,129
Interest income, net 1,072 1,434
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Income before provision for income taxes 35,849 47,563
Provision for income taxes 13,264 16,171
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Net income $ 22,585 $ 31,392
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Income per share $ 0.32 $ 0.45
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Common and common equivalent shares 70,551 70,384
===============================================================================================
See accompanying notes.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
MAXIM INTEGRATED PRODUCTS, INC.
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For the three months ended September 30,
Increase (decrease) in cash and cash equivalents 1995 1996
(Amounts in thousands) (unaudited) (unaudited)
====================================================================================================
Cash flows provided by operating activities:
Net income $ 22,585 $ 31,392
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 2,558 4,929
Reduction of equipment value 816 0
Changes in assets and liabilities:
Accounts receivable (25,971) (1,338)
Inventories 4,617 (4,126)
Prepaid taxes and other current assets (152) 841
Accounts payable (1,808) (4,983)
Income taxes payable 12,977 (950)
Deferred income taxes (4,450) 0
Deferred income on shipments to distributors 7,170 2,332
All other accrued liabilities 1,108 4,900
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Net cash provided by operating activities 19,450 32,997
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Cash flows provided by investing activities:
Additions to property, plant and equipment (8,746) (12,172)
Deposits and other non-current assets 4,556 (179)
Purchases of held-to-maturity securities (37,492) (24,313)
Proceeds from maturities of held-to maturity securities 20,882 14,409
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Net cash used in investing activities (20,800) (22,255)
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Cash flows provided by financing activities:
Issuance of common stock 6,083 4,605
Principal payments on capital lease obligations (29) 0
Repurchase of Common Stock (11,772) (16,314)
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Net cash used in financing activities (5,718) (11,709)
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Net increase (decrease) in cash and cash equivalents (7,068) (967)
Cash and cash equivalents:
Beginning of year 54,966 60,283
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End of period $ 47,898 $ 59,316
====================================================================================================
See accompanying notes.
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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 30,
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
Inventories consist of (in thousands): June 30, September 30,
------- ------------
1996 1996
---- ----
(audited) (unaudited)
Raw materials $ 3,720 $ 5,067
Work in process 16,908 19,224
Finished goods 9,843 10,306
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$ 30,471 $ 34,597
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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.
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MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 4: INVESTMENT SECURITIES
At September 30, 1996, all debt securities, which consist of U.S. Treasury
securities and various municipal bond obligations collaterized by U.S. Treasury
Securities all maturing within one year, are designated as held-to-maturity and
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. The cost of securities sold is based on the specific identification
method. Interest on securities classified as held-to-maturity is included in
investment income.
Investment in held-to-maturity securities at September 30, 1996 is as follows:
(Amounts in thousands) Cost
------------------------ -------
U.S. Treasury securities $76,028
Municipal bonds 2,846
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$78,874
=======
All held-to-maturity securities are included in short-term investment at
September 30, 1996. There were no gross realized gains or losses for the three
months ended September 30, 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net revenues increased 4.7% in the three months ended September 30, 1996
compared to the same period a year ago. The increase related primarily to higher
unit shipments as a result of continued introduction of new proprietary products
and increased market acceptance of the Company's proprietary and second source
products. 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 denominated in foreign currencies, and as a result, the
impact due to changes in foreign currency on the Company's operating results for
the quarter was minimal.
Gross margin increased to 67.3% in the three months ended September 30, 1996,
compared to 60% for the three months ended September 30, 1995. The improvement
was principally due to increases in manufacturing productivity in the Company's
Beaverton, Oregon manufacturing facilities and improvements in the Company's
other manufacturing areas obtained through increased economies of scale. In
addition, Q196 gross margins were negatively affected by $3.5 million of
non-recurring costs associated with the Company's expansion of its Beaverton
facility.
Research and development expenses were 11.8% of net revenues in the three months
ended September 30, 1996, compared to 12.6% in the three months ended September
30, 1995. Research and development expenses in Q197 reflect higher spending
associated with the Company's new product development efforts offset by certain
expenses recorded in Q196 that did not reoccur in the current quarter.
In absolute dollars, from Q196 to Q197, selling, general and administrative
expenses declined $921,000 to $9.9 million. This decline was a result of the
Company's cost control measures and savings realized through the establishment
of direct sales force.
The Company's operating income increased 9.6 percentage points to 45.7% of net
revenues in the three months ended September 30, 1996, compared to the three
months ended September 30, 1995 as a result of the factors cited above.
Net interest income increased to $1.4 million in the three months ended
September 30, 1996 compared to $1.1 million the same period a year ago, as a
result of higher invested cash balances.
The decrease in the effective tax rate to 34% in the three months ended
September 30, 1996, compared to 37% in the three months ended September 30,
1995, was primarily attributable to the restoration of Federal research and
development tax credit.
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OUTLOOK
As expected, backlog shippable in the next 12 months continued to decline,
ending at $103 million. However, orders requested for near-term delivery
represent a higher percentage of current backlog than they did one year ago. Of
our ending Q197 backlog, 72% is shippable in the next three months, compared to
59% in Q496. The Company also experienced a substantial increase in turns orders
over Q496 levels. (Turns orders are customer orders that are for delivery within
the same quarter and can be shipped within the quarter if the Company has
inventory available that matches those orders.) Since the majority of Q197
bookings were requested by our customers for delivery in Q1 and Q2 of FY97, we
believe that end-equipment manufacturers continued to reduce their semiconductor
inventories during Q1.
The Company had $23 million in customer cancellations during Q1, down from $32.6
million in Q496. Since Q1 cancellation rates have reduced from Q496 levels, we
also believe that customer inventory adjustments are approaching an end. Based
on current Q2 order cancellation rates, we expect to have fewer total
cancellations in Q2 than in any of the previous three quarters.
To date in Q297, weekly booking rates have increased to the point that they are
now approaching our Q197 revenue levels. While higher booking and lower
cancellation rates are encouraging, our ability to maintain and increase
revenues from Q197 levels is dependent upon the turns orders the Company
receives during Q2 and the degree to which those orders match with inventories
that are available for shipment within the current quarter. Further revenue
growth in Q3 and Q4 will be dependent upon booking rates continuing to increase
from current levels.
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.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds for the first three months of fiscal year
1997 have been the net cash generated from operating activities of $32,997,000
and the issuance of common stock of $4,605,000. The principal uses of funds have
been the repurchase of common stock of $16,314,000, purchase of $9,904,000 in
short-term investments, and the purchase of $12,172,000 in property, plant and
equipment.
The Company believes it possesses sufficient liquidity and capital resources to
fund its operations in the current fiscal year.
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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
(b) No Reports on Form 8-K were filed during the quarter ended
September 30, 1996
ITEMS 1, 2, 3, 4, AND 5 HAVE BEEN OMITTED AS THEY ARE NOT APPLICABLE.
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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 13, 1996 MAXIM INTEGRATED PRODUCTS, INC.
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(Date) (Registrant)
/s/ Michael J. Byrd
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Michael J. Byrd
Vice President and Chief Financial
Officer (For the Registrant and
Principal Financial Officer)
/s/ Richard E. Slater
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Richard E. Slater
Vice President and Chief Accounting
Officer (Principal Accounting Officer)
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