Maxim Reports 50% EPS Increase Year-Over-Year for the Second Quarter o

    Business Editors/High-Tech Writers

    SUNNYVALE, Calif.--(BUSINESS WIRE)--Feb. 1, 2005--Maxim Integrated Products, Inc., (Nasdaq:MXIM) reported net revenues of $436.1 million for its fiscal second quarter ending December 25, 2004, a 29.0% increase over the $338.1 million reported for the second quarter of fiscal year 2004. Diluted earnings per share were $0.42 for the second quarter, a 50.0% increase over the $0.28 reported for the same period a year ago. Net income for the second quarter was $144.6 million, a 46.8% increase over the $98.5 million reported for the second quarter of last year. Net revenues, net income, and diluted earnings per share for the second quarter were similar to those reported for the first quarter of fiscal year 2005. The Company's free cash flow was $122 million, or $0.36 per diluted share, for the second quarter, compared to $102 million, or $0.29 per diluted share, for the second quarter of fiscal year 2004. Free cash flow is defined as cash from operating activities less additions to property, plant and equipment as reported in the Company's statements of cash flows.
    During the quarter, cash and short-term investments increased $101.1 million after the Company repurchased 317,816 shares of its common stock for $13.8 million, paid dividends of $32.6 million, and acquired $31.4 million in capital equipment. Accounts receivable decreased $20.8 million to $179.7 million, accounts payable decreased $28.3 million to $61.7 million, and inventories increased $10.8 million to $146.6 million in the second quarter.
    Gross margin for the second quarter was 72.6%, an increase over the 72.4% reported for the first quarter of fiscal year 2005. The gross margin increase was the result of continued improvement in manufacturing efficiencies. Research and development expense was $81.0 million or 18.6% of net revenues in the second quarter, compared to $79.1 million or 18.2% of net revenues in the first quarter of fiscal year 2005. Selling, general and administrative expenses increased slightly from $25.1 million in the first quarter to $25.3 million in the second quarter and were 5.8% of net revenues for both quarters. Below-the-line spending for the second quarter was 24.4% of net revenues.
    Second quarter bookings were approximately $353 million, a 6% decrease from the first quarter's level of $377 million. Turns orders received in the quarter were approximately $122 million or 35% of net bookings, a 4% increase over the $117 million or 31% of net bookings received in the prior quarter (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). Bookings decreased in all geographic locations except Europe, where bookings improved modestly. Second quarter ending backlog shippable within the next 12 months was approximately $370 million, including approximately $300 million requested for shipment in the third quarter of fiscal year 2005. The Company's first quarter ending backlog shippable within the next 12 months was approximately $458 million, including approximately $377 million that was requested for shipment in the second quarter of fiscal year 2005.
    The following reconciles free cash flow to net income, and it depicts the Company's free cash flow for the three and six months ended December 25, 2004 and December 27, 2003, respectively.

RECONCILIATION OF FREE CASH FLOW TO NET INCOME

For the For the For the For the three three six six (in millions, except per share months months months months data) ended ended ended ended 12/25/04 12/27/03 12/25/04 12/27/03 --------- --------- --------- ---------

Net income, as reported $145 $ 99 $289 $186 Add adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and other 19 14 38 29 Tax benefit related to stock plans 34 42 58 76 Accounts receivable 21 (2) 17 (7) Accounts payable (28) 8 (32) 15 Inventories (11) 7 (29) 13 Income taxes payable (21) (3) 4 (4) Other assets and liabilities (6) 7 16 20 --------- --------- --------- --------- Total of adjustments 8 73 72 142 --------- --------- --------- --------- Cash generated by operating activities, as reported 153 172 361 328 Deduct: Capital expenditures (31) (70) (98) (93) --------- --------- --------- --------- Free cash flow $122 $102 $263 $235

Fully diluted shares, as reported 343 354 344 351 --------- --------- --------- --------- Free cash flow per fully diluted share $0.36 $0.29 $0.76 $0.67 ========= ========= ========= ========= Fully diluted earnings per share, as reported $0.42 $0.28 $0.84 $0.53 ========= ========= ========= =========

Free cash flow should not be construed as a substitute for net income or as a better measure of liquidity than cash flow from operating activities, both of which are determined in accordance with GAAP. Free cash flow excludes components that are significant in understanding and assessing the Company's results of operations and cash flows. In addition, free cash flow is not a term defined by GAAP and as a result the Company's measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow is used by management to evaluate, assess, and benchmark the Company's operating results, and the Company believes that free cash flow is relevant and useful information that is often widely used by analysts, investors, and other interested parties in the semiconductor industry. Accordingly, the Company is disclosing this information to permit a more comprehensive and objective analysis of the Company's operating performance, to provide an additional measure of performance and liquidity, and to provide additional information with respect to the Company's ability to meet future share repurchases, dividend payments, and working capital requirements.

    Jack Gifford, Chairman, President, and Chief Executive Officer, commented: "As expected, second quarter bookings were below our estimate of consumption of our products as a result of IC inventories accumulated over the past three quarters. We believe that this inventory should be consumed in the next one or two quarters. While some customers have moderated their forecasts for the first half of calendar year 2005, they continue to project growth for the calendar year. We believe that some of our fourth quarter fiscal year 2004 growth was the result of inventory accumulation at our customers. We expect solid income growth in fiscal year 2005 but below fiscal year 2004's growth rate of over 35%."
    Mr. Gifford continued: "Maxim's proprietary products continue to be well accepted in the marketplace, and we are encouraged by the rate of design-in activities in both existing and emerging markets."
    Mr. Gifford concluded: "The Company's Board of Directors has declared a quarterly cash dividend of $0.10 per share. Payment will be made on March 1, 2005 to stockholders of record on February 14, 2005."

    Certain statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risk and uncertainty. They include statements regarding the Company's profitability and business outlook, the Company's belief that customers will consume their inventories of the Company's products in the next one or two quarters, the Company's belief that customers are projecting growth for the calendar year, the Company's belief that it will have solid income growth in fiscal year 2005 over the income reported for fiscal year 2004, and the Company's belief that the Company's proprietary products will continue to be well accepted in the marketplace. Actual results could differ materially from those forecasted based upon, among other things, general market conditions and market developments that could adversely affect the growth of the mixed-signal analog market, including, without limitation, declines in customer forecasts or greater than expected cyclical downturns within the mixed-signal analog segment of the semiconductor market; the inability of the Company's customers to consume their inventory of Maxim products in the next one or two quarters; an unexpected decrease in revenue or increase in expenses; and the Company's success in the markets its products are introduced in and the Company's ability to effectively and successfully manage manufacturing operations, as well as other risks described in the Company's Annual Report on Form 10K filed with the SEC for the fiscal year ended June 26, 2004.
    All forward-looking statements included in this news release 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.
    Maxim Integrated Products is a leading international supplier of quality analog and mixed-signal products for applications that require real world signal processing.

---------------------------------------------------------------------- Consolidated Balance Sheets ---------------------------------------------------------------------- (In thousands) 12/25/04 6/26/04 (unaudited) (audited) ---------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 164,414 $ 147,734 Short-term investments 1,122,270 948,879 ----------------------------------------------------- Total cash, cash equivalents and short-term investments 1,286,684 1,096,613 ----------------------------------------------------- Accounts receivable, net 179,682 197,158 Inventories 146,582 117,785 Deferred tax assets and other current assets 164,247 166,558 ----------------------------------------------------- Total current assets 1,777,195 1,578,114 ----------------------------------------------------- Property, plant and equipment, at cost, less accumulated depreciation 1,003,965 942,186 Other assets 27,694 29,162 ----------------------------------------------------- Total assets $2,808,854 $2,549,462 ---------------------------------------------------------------------- Liabilities and Current liabilities: Stockholders' Accounts payable $ 61,740 $ 93,856 Equity Accrued expenses 191,122 182,692 Deferred income on shipments to distributors 21,351 22,858 Income taxes payable 23,384 19,339 ----------------------------------------------------- Total current liabilities 297,597 318,745 ----------------------------------------------------- Deferred tax liabilities 122,569 114,399 Other liabilities 4,000 4,000 ----------------------------------------------------- Total liabilities 424,166 437,144 ----------------------------------------------------- Stockholders' equity: Common stock 121,011 80,462 Retained earnings 2,269,462 2,038,820 Accumulated other comprehensive loss (5,785) (6,964) ----------------------------------------------------- Total stockholders' equity 2,384,688 2,112,318 ----------------------------------------------------- Total liabilities and stockholders' equity $2,808,854 $2,549,462 -----------------------------------------------------

---------------------------------------------------------------------- Consolidated Statements of Income ---------------------------------------------------------------------- (In thousands except per share data) Three Months Ending Six Months Ending 12/25/2004 12/27/2003 12/25/2004 12/27/2003 (unaudited) (unaudited) (unaudited) (unaudited) ---------------------------------------------------------------------- Net revenues $436,061 $338,108 $871,128 $648,277 Cost of goods sold 119,437 103,029 239,689 196,057 ---------------------------------------------------------------------- Gross margin 316,624 235,079 631,439 452,220 72.6% 69.5% 72.5% 69.8% ---------------------------------------------------------------------- Operating expenses: Research and development 81,035 71,211 160,132 141,307 Selling, general and administrative 25,324 22,193 50,386 43,582 ---------------------------------------------------------------------- Operating income 210,265 141,675 420,921 267,331 48.2% 41.9% 48.3% 41.2% Interest income, net 6,225 5,369 11,954 10,120 ---------------------------------------------------------------------- Income before provision for income taxes 216,490 147,044 432,875 277,451 Provision for income taxes 71,875 48,525 143,715 91,559 ---------------------------------------------------------------------- Net income $144,615 $ 98,519 $289,160 $185,892 ---------------------------------------------------------------------- Basic earnings per share $0.44 $0.30 $0.89 $0.57 ---------------------------------------------------------------------- Shares used in the calculation of basic earnings per share 325,660 329,188 325,164 327,718 ---------------------------------------------------------------------- Diluted earnings per share $0.42 $0.28 $0.84 $0.53 ---------------------------------------------------------------------- Shares used in the calculation of diluted earnings per share 343,226 353,888 344,051 350,611 ---------------------------------------------------------------------- Dividends declared per share $0.10 $0.08 $0.18 $0.16 ----------------------------------------------------------------------

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CONTACT: Maxim Integrated Products, Inc. John F. Gifford, 408-737-7600

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE COMPUTERS/ELECTRONICS MANUFACTURING EARNINGS DIVIDEND SOURCE: Maxim Integrated Products, Inc.

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