EX-99.1 2 maximq418epr.htm EXHIBIT 99.1 Exhibit


image0a17.jpg
Press Release

Contact
Kathy Ta
Vice President, Investor Relations
(408) 601-5697

MAXIM INTEGRATED REPORTS RESULTS FOR THE FOURTH QUARTER OF FISCAL 2018, INCREASES DIVIDEND BY 10%

•
Revenue: $633 million
•
Gross Margin: 66.1% GAAP (68.0% excluding special items)
•
EPS: $0.68 GAAP ($0.73 excluding special items)
•
Fiscal first quarter revenue outlook: $615 to $655 million
•
Quarterly dividend increased 10% to $0.46 per share

SAN JOSE, CA – July 26, 2018 – Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $633 million for its fourth quarter of fiscal 2018 ended June 30, 2018, a 2% decrease from the $649 million revenue recorded in the prior quarter, and a 5% increase from the same quarter of last year.  

Tunc Doluca, President and Chief Executive Officer, commented, “We are pleased with our June quarter results.  Our power management franchise in Automotive and Industrial is producing sustainable and profitable growth.” Mr. Doluca continued, “This execution against our strategy is resulting in strong and predictable cash flows, which support our industry-leading dividend and stock repurchase plans. Today, we are announcing a 10% increase in our dividend, reflecting our continued commitment to return cash to shareholders and confidence in our long-term outlook.” 

Fiscal Year 2018 Fourth Quarter Results
Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the June quarter was $0.68. The results were affected by $12 million in pre-tax special items which primarily consisted of charges related to acquisitions. GAAP earnings per share, excluding special items was $0.73. An analysis of GAAP versus GAAP excluding special items is provided in the last table of this press release.

1



Cash Flow Items
At the end of the fourth quarter of fiscal 2018, total cash, cash equivalents and short-term investments were $2.63 billion, a decrease of $98 million from the prior quarter.
Notable items included: 
•
Cash flow from operations: $147 million
•
Capital expenditures: $12 million
•
Dividends paid: $117 million ($0.42 per share)
•
Stock repurchases: $128 million

Adjusted trailing twelve months free cash flow was $932 million, which excludes a one-time tax payment of $178 million in the fourth quarter of fiscal 2018. Free cash flow is a non-GAAP measure and is defined by cash flow from operations less capital expenditures. 

Business Outlook
The Company’s 90-day backlog at the beginning of the September 2018 quarter was $441 million. Based on the beginning backlog and expected turns, our results for the September 2018 quarter are forecasted to be as follows:
•
Revenue: $615 to $655 million
•
Gross Margin: 65% to 67% GAAP (66.5% to 68.5% excluding special items)
•
EPS: $0.67 to $0.73 GAAP ($0.72 to $0.78 excluding special items)

Maxim Integrated’s business outlook does not include the potential impact of any special items related to restructuring activity, acquisitions, or other business combinations that may be completed during the quarter.

2



Dividend
Our Board of Directors approved a 10% increase in the quarterly dividend. A cash dividend of $0.46 per share will be paid on September 13, 2018, to stockholders of record on August 30, 2018.

Conference Call
Maxim Integrated has scheduled a conference call on July 26 at 1:15 p.m. Pacific Time to discuss its financial results for the fourth quarter of fiscal 2018 and its business outlook. This call will be webcast by Shareholder.com and can be accessed at the Company’s website at investor.maximintegrated.com.

A presentation summarizing financial information to be discussed on the conference call is posted at investor.maximintegrated.com.

3


 
CONSOLIDATED BALANCE SHEETS
 
 
(Unaudited)
 
 
 
June 30,
2018
 
March 31,
2018
 
June 24,
2017
 
 
 
(in thousands)
 
 
ASSETS
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,543,484

 
$
1,629,593

 
$
2,246,121

 
 
Short-term investments
1,082,915

 
1,094,801

 
498,718

 
 
Total cash, cash equivalents and short-term investments
2,626,399

 
2,724,394

 
2,744,839

 
 
Accounts receivable, net
280,072

 
320,553

 
256,454

 
 
Inventories
282,390

 
273,616

 
247,242

 
 
Other current assets
21,548

 
22,275

 
57,059

 
 
Total current assets
3,210,409

 
3,340,838

 
3,305,594

 
 
Property, plant and equipment, net
579,364

 
589,177

 
606,581

 
 
Intangible assets, net
78,246

 
90,848

 
90,867

 
 
Goodwill
532,251

 
532,904

 
491,015

 
 
Other assets
51,291

 
69,428

 
76,176

 
 
TOTAL ASSETS
$
4,451,561

 
$
4,623,195

 
$
4,570,233

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
Current liabilities:
 
 
 
 
 
 
 
Accounts payable
$
92,572

 
$
84,407

 
$
77,373

 
 
Income taxes payable
17,961

 
24,339

 
3,688

 
 
Accrued salary and related expenses
151,682

 
147,771

 
145,299

 
 
Accrued expenses
35,774

 
48,384

 
37,663

 
 
Deferred margin on shipments to distributors
—

 
—

 
14,974

 
 
Current portion of long-term debt
499,406

 
499,050

 
—

 
 
Total current liabilities
797,395

 
803,951

 
278,997

 
 
Long-term debt
991,147

 
990,787

 
1,487,678

 
 
Income taxes payable
661,336

 
817,969

 
557,498

 
 
Other liabilities
70,743

 
59,497

 
43,366

 
 
Total liabilities
2,520,621

 
2,672,204

 
2,367,539

 
 
 
 
 
 
 
 
 
 
Stockholders' equity:
 
 
 
 
 
 
 
Common stock and capital in excess of par value
279

 
283

 
283

 
 
Retained earnings
1,945,646

 
1,963,912

 
2,212,301

 
 
Accumulated other comprehensive loss
(14,985
)
 
(13,204
)
 
(9,890
)
 
 
Total stockholders' equity
1,930,940

 
1,950,991

 
2,202,694

 
 
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
$
4,451,561

 
$
4,623,195

 
$
4,570,233

 
 
 
 
 
 
 
 
 



4


    
 
CONSOLIDATED STATEMENTS OF INCOME
 
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
 
June 30,
2018
 
March 31,
2018
 
June 24,
2017
 
June 30,
2018
 
June 24,
2017
 
 
 
(in thousands, except per share data)
 
 
Net revenues
$
633,154

 
$
648,599

 
$
602,005

 
$
2,480,066

 
$
2,295,615

 
 
Cost of goods sold (1)
214,486

 
224,653

 
208,339

 
853,945

 
849,135

 
 
Gross margin
418,668

 
423,946

 
393,666

 
1,626,121

 
1,446,480

 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Research and development
112,056

 
114,390

 
114,011

 
450,943

 
453,977

 
 
Selling, general and administrative
82,611

 
81,304

 
75,129

 
322,918

 
291,511

 
 
Intangible asset amortization
844

 
876

 
2,050

 
4,467

 
9,189

 
 
Impairment of long-lived assets (2)
—

 
—

 
—

 
892

 
7,517

 
 
Severance and restructuring expenses
833

 
2,272

 
1,175

 
15,060

 
12,453

 
 
Other operating expenses (income), net (3)
(71
)
 
266

 
1,923

 
(1,607
)
 
(22,944
)
 
 
Total operating expenses (income), net
196,273

 
199,108

 
194,288

 
792,673

 
751,703

 
 
Operating income (loss)
222,395

 
224,838

 
199,378

 
833,448

 
694,777

 
 
Interest and other income (expense), net (4)
1,305

 
(2,534
)
 
(3,798
)
 
(8,563
)
 
(15,188
)
 
 
Income (loss) before provision for income taxes
223,700

 
222,304

 
195,580

 
824,885

 
679,589

 
 
Income tax provision (benefit) (5)
29,528

 
28,677

 
32,271

 
357,567

 
107,976

 
 
Net income (loss)
$
194,172

 
$
193,627

 
$
163,309

 
$
467,318

 
$
571,613

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.70

 
$
0.69

 
$
0.58

 
$
1.66

 
$
2.02

 
 
Diluted
$
0.68

 
$
0.68

 
$
0.57

 
$
1.64

 
$
1.98

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares used in the calculation of earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
 
Basic
279,304

 
280,850

 
282,747

 
280,979

 
283,147

 
 
Diluted
283,934

 
285,881

 
287,494

 
285,674

 
287,974

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends paid per share
$
0.42

 
$
0.42

 
$
0.33

 
$
1.56

 
$
1.32

 
 
 
 
 
 
 
 
 
 
 
 
 
 
SCHEDULE OF SPECIAL ITEMS
 
 
(Unaudited)
 
 
 
Three Months Ended
 
Year Ended
 
 
 
June 30,
2018
 
March 31,
2018
 
June 24,
2017
 
June 30,
2018
 
June 24,
2017
 
 
 
(in thousands)
 
 
Cost of goods sold:
 
 
 
 
 
 
 
 
 
 
 
Intangible asset amortization
$
11,759

 
$
12,101

 
$
11,064

 
$
46,064

 
$
46,485

 
 
Accelerated depreciation (1)
—

 
—

 
—

 
—

 
3,459

 
 
 Total
$
11,759

 
$
12,101

 
$
11,064

 
$
46,064

 
$
49,944

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Intangible asset amortization
$
844

 
$
876

 
$
2,050

 
$
4,467

 
$
9,189

 
 
Impairment of long-lived assets (2)
—

 
—

 
—

 
892

 
7,517

 
 
Severance and restructuring
833

 
2,272

 
1,175

 
15,060

 
12,453

 
 
Other operating expenses (income), net (3)
(71
)
 
266

 
1,923

 
(1,607
)
 
(22,944
)
 
 
 Total
$
1,606

 
$
3,414

 
$
5,148

 
$
18,812

 
$
6,215

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and other expense (income), net (4)
$
(941
)
 
$
(97
)
 
$
(90
)
 
$
(1,243
)
 
$
(5,661
)
 
 
Total
$
(941
)
 
$
(97
)
 
$
(90
)
 
$
(1,243
)
 
$
(5,661
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision (benefit) for income taxes:
 
 
 
 
 
 
 
 
 
 
 
Impact of U.S. tax legislation (5)
$
—

 
$
—

 
$
—

 
$
243,550

 
$
—

 
 
 Total
$
—

 
$
—

 
$
—

 
$
243,550

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes building and equipment accelerated depreciation related to the Dallas manufacturing facility during fiscal year 2017.
 
(2) Includes impairment of investments in privately-held companies and other equipment impairment charges.
 
(3) Includes gain on sale of the micro-electromechanical systems (MEMS) business line during fiscal year 2017.
 
(4) Includes gain on sale of shares received for the sale of the wafer manufacturing facility in San Antonio, Texas during fiscal year 2017.
 
(5) Includes effect of U.S. tax legislation enacted on December 22, 2017.
 
 


5


 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
(Unaudited)
 
 
 
Three Months Ended
 
Year Ended
 
 
 
June 30,
2018
 
March 31,
2018
 
June 24,
2017
 
June 30,
2018
 
June 24,
2017
 
 
 
(in thousands)
 
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$
194,172

 
$
193,627

 
$
163,309

 
$
467,318

 
$
571,613

 
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation
19,753

 
20,605

 
17,624

 
78,685

 
71,117

 
 
Depreciation and amortization
36,083

 
36,324

 
38,194

 
144,974

 
164,292

 
 
Deferred taxes
21,458

 
(2,670
)
 
1,697

 
27,715

 
(7,895
)
 
 
Loss (gain) from sale of property, plant and equipment
423

 
1,160

 
7,006

 
995

 
16,365

 
 
Loss (gain) on sale of business
—

 
—

 
—

 
—

 
(26,620
)
 
 
Impairment of long-lived assets
—

 
—

 
665

 
42

 
1,462

 
 
Impairment of investment in privately-held companies
—

 
—

 
—

 
850

 
6,720

 
 
Changes in assets and liabilities:
 
 
 
 
 
 
 
 
 
 
 
Accounts receivable
40,480

 
(80,953
)
 
1,138

 
(19,714
)
 
78

 
 
Inventories
(9,450
)
 
(11,036
)
 
(5,715
)
 
(32,776
)
 
(21,215
)
 
 
Other current assets
(212
)
 
(367
)
 
(727
)
 
32,368

 
(3,547
)
 
 
Accounts payable
6,131

 
(235
)
 
(5,235
)
 
9,560

 
(6,205
)
 
 
Income taxes payable
(163,010
)
 
30,067

 
22,619

 
117,654

 
60,798

 
 
Deferred margin on shipments to distributors
—

 
—

 
(20,751
)
 
(14,974
)
 
(23,805
)
 
 
Accrued salary and related expenses
3,911

 
33,408

 
9,597

 
5,737

 
(21,399
)
 
 
All other accrued liabilities
(3,080
)
 
3,295

 
7,507

 
1,030

 
(8,102
)
 
 
Net cash provided by (used in) operating activities
146,659

 
223,225

 
236,928

 
819,464

 
773,657

 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Purchase of property, plant and equipment
(12,118
)
 
(16,930
)
 
(13,050
)
 
(65,782
)
 
(51,421
)
 
 
Proceeds from sales of property, plant and equipment
62

 
2,844

 
7,576

 
5,823

 
10,792

 
 
Proceeds from sale of available-for-sale securities
7,287

 
60,008

 
—

 
107,291

 
50,994

 
 
Proceeds from maturity of available-for-sale securities
330,749

 
304,289

 
50,000

 
753,249

 
75,000

 
 
Proceeds from sale of business
—

 
—

 
—

 
—

 
42,199

 
 
Payment in connection with business acquisition, net of cash acquired
—

 
(57,773
)
 
—

 
(57,773
)
 
—

 
 
Purchases of available-for-sale securities
(325,063
)
 
(268,821
)
 
(49,891
)
 
(1,447,354
)
 
(450,135
)
 
 
Purchases of privately-held companies' securities
(2,164
)
 
(1,250
)
 
—

 
(5,520
)
 
(2,825
)
 
 
Net cash provided by (used in) investing activities
(1,247
)
 
22,367

 
(5,365
)
 
(710,066
)
 
(325,396
)
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Net issuance of restricted stock units
(9,148
)
 
(9,642
)
 
(7,471
)
 
(30,310
)
 
(25,183
)
 
 
Repayment of notes payable
—

 
—

 
—

 
—

 
(250,000
)
 
 
Issuance of debt
—

 
—

 
500,000

 
—

 
500,000

 
 
Debt issuance cost
—

 
—

 
(3,688
)
 
—

 
(3,688
)
 
 
Proceeds from stock options exercised
1,626

 
7,716

 
18,434

 
28,009

 
63,003

 
 
Issuance of common stock under employee stock purchase program
21,346

 
—

 
19,805

 
36,321

 
34,269

 
 
Repurchase of common stock
(128,024
)
 
(127,700
)
 
(75,853
)
 
(407,968
)
 
(251,799
)
 
 
Dividends paid
(117,321
)
 
(117,883
)
 
(93,396
)
 
(438,087
)
 
(373,971
)
 
 
Net cash provided by (used in) financing activities
(231,521
)
 
(247,509
)
 
357,831

 
(812,035
)
 
(307,369
)
 
 
Net increase (decrease) in cash and cash equivalents
(86,109
)
 
(1,917
)
 
589,394

 
(702,637
)
 
140,892

 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
Beginning of period
$
1,629,593

 
$
1,631,510

 
$
1,656,727

 
$
2,246,121

 
$
2,105,229

 
 
End of period
$
1,543,484

 
$
1,629,593

 
$
2,246,121

 
$
1,543,484

 
$
2,246,121

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total cash, cash equivalents, and short-term investments
$
2,626,399

 
$
2,724,394

 
$
2,744,839

 
$
2,626,399

 
$
2,744,839

 
 
 
 
 
 
 
 
 
 
 
 
 


6


 
ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES
 
 
(Unaudited)
 
 
 
 
Three Months Ended
 
Year Ended
 
 
 
 
June 30,
2018
 
March 31,
2018
 
June 24,
2017
 
June 30,
2018
 
June 24,
2017
 
 
 
 
(in thousands, except per share data)
 
 
Reconciliation of GAAP gross profit to GAAP gross profit excluding special items:
 
 
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
418,668

 
$
423,946

 
$
393,666

 
$
1,626,121

 
$
1,446,480

 
 
GAAP gross profit %
 
66.1
%
 
65.4
%
 
65.4
%
 
65.6
%
 
63.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special items:
 
 
 
 
 
 
 
 
 
 
 
 
Intangible asset amortization
 
11,759

 
12,101

 
11,064

 
46,064

 
46,485

 
 
Accelerated depreciation (1)
 
—

 
—

 
—

 
—

 
3,459

 
 
Total special items
 
11,759

 
12,101

 
11,064

 
46,064

 
49,944

 
 
 GAAP gross profit excluding special items
 
$
430,427

 
$
436,047

 
$
404,730

 
$
1,672,185

 
$
1,496,424

 
 
 GAAP gross profit % excluding special items
 
68.0
%
 
67.2
%
 
67.2
%
 
67.4
%
 
65.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP operating expenses to GAAP operating expenses excluding special items:
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating expenses
 
$
196,273

 
$
199,108

 
$
194,288

 
$
792,674

 
$
751,703

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special items:
 
 
 
 
 
 
 
 
 
 
 
 
Intangible asset amortization
 
844

 
876

 
2,050

 
4,467

 
9,189

 
 
Impairment of long-lived assets (2)
 
—

 
—

 
—

 
892

 
7,517

 
 
Severance and restructuring
 
833

 
2,272

 
1,175

 
15,060

 
12,453

 
 
Other operating expenses (income), net (3)
 
(71
)
 
266

 
1,923

 
(1,607
)
 
(22,944
)
 
 
 Total special items
 
1,606

 
3,414

 
5,148

 
18,812

 
6,215

 
 
 GAAP operating expenses excluding special items
 
$
194,667

 
$
195,694

 
$
189,140

 
$
773,862

 
$
745,488

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP net income (loss) to GAAP net income excluding special items:
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net income (loss)
 
$
194,172

 
$
193,627

 
$
163,309

 
$
467,318

 
$
571,613

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special items:
 
 
 
 
 
 
 
 
 
 
 
 
Intangible asset amortization
 
12,603

 
12,977

 
13,114

 
50,531

 
55,674

 
 
Accelerated depreciation (1)
 
—

 
—

 
—

 
—

 
3,459

 
 
Impairment of long-lived assets (2)
 
—

 
—

 
—

 
892

 
7,517

 
 
Severance and restructuring
 
833

 
2,272

 
1,175

 
15,060

 
12,453

 
 
Other operating expenses (income), net (3)
 
(71
)
 
266

 
1,923

 
(1,607
)
 
(22,944
)
 
 
Interest and other expense (income), net (4)
 
(941
)
 
(97
)
 
(90
)
 
(1,243
)
 
(5,661
)
 
 
 Pre-tax total special items
 
12,424

 
15,418

 
16,122

 
63,633

 
50,498

 
 
Other income tax effects and adjustments (5)
 
1,194

 
151

 
499

 
(898
)
 
(11,465
)
 
 
Impact of U.S. tax legislation (6)
 
—

 
—

 
—

 
243,550

 
—

 
 
 GAAP net income excluding special items
 
$
207,790

 
$
209,196

 
$
179,930

 
$
773,603

 
$
610,646

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 GAAP net income per share excluding special items:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.74

 
$
0.74

 
$
0.64

 
$
2.75

 
$
2.16

 
 
Diluted
 
$
0.73

 
$
0.73

 
$
0.63

 
$
2.71

 
$
2.12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares used in the calculation of earnings per share excluding special items:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
279,304

 
280,850

 
282,747

 
280,979

 
283,147

 
 
Diluted
 
283,934

 
285,881

 
287,494

 
285,674

 
287,974

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes building and equipment accelerated depreciation related to the Dallas manufacturing facility during fiscal year 2017.
 
 
(2) Includes impairment of investments in privately-held companies and other equipment impairment charges.
 
 
(3) Includes gain on sale of the micro-electromechanical systems (MEMS) business line during fiscal year 2017.
 
 
(4) Includes gain on sale of shares received for the sale of the wafer manufacturing facility in San Antonio, Texas during fiscal year 2017.
 
 
(5) Includes tax effect of pre-tax special items and miscellaneous tax adjustments.
 
 
(6) Includes effect of U.S. tax legislation enacted on December 22, 2017.
 
 
 
 
 
 
 
 
 
 
 
 
 
 

7



Non-GAAP Measures
To supplement the consolidated financial results prepared under GAAP, Maxim Integrated uses non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude special items related to intangible asset amortization; accelerated depreciation; impairment of long-lived assets; severance and restructuring; other operating expenses (income), net; interest and other expense (income), net; and other income tax effects and adjustments. We defined free cash flow as net cash provided from operations less gross capital expenditures. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate Maxim Integrated’s current performance. Many analysts covering Maxim Integrated use the non-GAAP measures as well. Given management’s use of these non-GAAP measures, Maxim Integrated believes these measures are important to investors in understanding Maxim Integrated’s current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in Maxim Integrated’s core business across different time periods. These non-GAAP measures are not in accordance with or an alternative to GAAP financial data and may be different from non-GAAP measures used by other companies. Because non-GAAP financial measures are not standardized it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures, even if they have similar names. The non-GAAP measures displayed in the table above include the following: 

8



GAAP Gross Profit Excluding Special Items
The use of GAAP gross profit excluding special items allows management to evaluate the gross margin of the Company’s core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization and accelerated depreciation. In addition, it is an important component of management’s internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP gross profit excluding special items to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of revenue of Maxim Integrated’s core businesses. 


GAAP Operating Expenses Excluding Special Items
The use of GAAP operating expenses excluding special items allows management to evaluate the operating expenses of the Company’s core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization; impairment of long-lived assets; severance and restructuring, and other operating expenses (income), net. In addition, it is an important component of management’s internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP operating expenses excluding special items to enable investors and analysts to evaluate our core business and its direct operating expenses.

9



GAAP Provision for Income Taxes Excluding Special Items
The use of a GAAP provision for income taxes excluding special items allows management to evaluate the provision for income taxes across different reporting periods on a consistent basis, independent of special items including the tax provision impact of pre-tax special items. In fiscal year 2016, we began using a long-term tax rate to compute the GAAP provision for income taxes excluding special items. We reviewed the long-term tax rate on an annual basis and more frequently whenever events occurred that may have materially affected the long-term tax rate such as tax law changes; significant changes in our geographic earnings mix; or changes in our corporate structure. This long-term tax rate considered the income tax impact of pre-tax special items and eliminated the effects of significant non-recurring and period specific tax items which varied in size and frequency, including certain one-time tax charges resulting from U.S. tax legislation that was enacted on December 22, 2017. In the first quarter of fiscal year 2018, we began using a long-term tax rate of 14%, which was our forecast of the weighted average of our normalized fiscal year GAAP tax rate excluding special items over a four-year period, that included the past three fiscal years plus the current fiscal year projection at the beginning of fiscal year 2018. In the third quarter of fiscal year 2018, we modified our approach and began using a 12% tax rate for fiscal year 2018.  Because of the impacts of tax reform, a long-term average tax rate is no longer appropriate for the remainder of fiscal year 2018.  The tax rate of 12% best reflects the tax rate excluding special items for fiscal year 2018 as a single year.
   

10



GAAP Net Income and GAAP Net Income per Share Excluding Special Items
The use of GAAP net income and GAAP net income per share excluding special items allow management to evaluate the operating results of Maxim Integrated’s core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization; accelerated depreciation; impairment of long-lived assets; severance and restructuring; other operating expenses (income), net; interest and other expense (income), net; and other income tax effects and adjustments. In addition, they are important components of management’s internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP net income and GAAP net income per share excluding special items to enable investors and analysts to understand the results of operations of Maxim Integrated’s core businesses and to compare our results of operations on a more consistent basis against that of other companies in our industry. 


11



“Safe Harbor” Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include the Company’s business outlook and financial projections for its first quarter of fiscal 2019 ending in September 2018, which includes revenue, gross margin and earnings per share.  These statements involve risk and uncertainty. Actual results could differ materially from those forecasted, based upon, among other things, general market and economic conditions, market developments that could adversely affect the growth of the mixed-signal analog market, product mix shifts, the loss of all or a substantial portion of our sales to one or more of our large customers, customer cancellations and price competition, as well as other risks described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 24, 2017 (the “Form 10-K”). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331617000028/maxim10-kfy2017.htm. 
 
All forward-looking statements included in this news release are made as of the date hereof and based on the information available to the Company as of the date hereof. The Company assumes no obligation to update any forward-looking statement except as required by law.

About Maxim Integrated 
Maxim Integrated develops innovative analog and mixed-signal products and technologies to make systems smaller and smarter, with enhanced security and increased energy efficiency. We are empowering design innovation for our automotive, industrial, healthcare, mobile consumer, and cloud data center customers to deliver industry-leading solutions that help change the world. Learn more at http://www.maximintegrated.com.  
 

Source: Maxim Integrated Investor Relations 

12