Maxim Q4'12 EPR

Press Release

Contact

Venk Nathamuni

Managing Director, Investor Relations

(408) 601-5293

MAXIM INCREASES DIVIDEND 9% AND REPORTS RESULTS FOR THE FOURTH QUARTER OF FISCAL 2012


•	Revenue: $605 million


•	Gross Margin: 61.5% GAAP (63.0% excluding special expense items)


•	EPS: $0.37 GAAP ($0.45 excluding special items)


•	Cash, cash equivalents, and short term investments: $956 million


•	Fiscal first quarter revenue outlook: $605 million to $635 million


•	Quarterly dividend increased 9% to $0.24 per share

SAN JOSE, CA - July 26, 2012 - Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $605 million for its fiscal 2012 fourth quarter ended June 30, 2012, a 6% increase from $571 million revenue recorded in the prior quarter.

The Company announced that its Board of Directors approved an increase in its quarterly dividend from $0.22 per share to $0.24 per share.

Tunc Doluca, President and Chief Executive Officer, commented, “During our just completed fiscal year, Maxim's unique approach to innovation and integration enabled us to perform well in an uncertain economic environment. We are confident that our balanced business model is sustainable, and as a result we increased our quarterly dividend by 9%.”

Fiscal Year 2012 Fourth Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the June quarter was $0.37. The results were affected by certain items which primarily consisted of:


•	$13.4 million pre-tax charge for acquisition related items


•	$22.4 million pre-tax charge for impairment of long-lived assets

GAAP earnings per share, excluding special expense items, was $0.45. An analysis of GAAP versus GAAP excluding special items is provided in the last table of this press release.

Cash Flow Items

At the end of our fiscal 2012 fourth quarter, total cash, cash equivalents and short term investments was $956 million, an increase of $20 million from the prior quarter. Notable items include:


•	Cash flow from operations: $190 million (31% of revenue)


•	Net capital expenditures: $75 million


•	Dividends: $64 million ($0.22 per share)


•	Stock repurchases: $56 million

Business Outlook

The Company's 90 day backlog at the beginning of the first fiscal quarter was $393 million. Based on our beginning backlog and expected turns, results for the September 2012 quarter are expected to be:


•	Revenue: $605 million to $635 million


•	Gross Margin: 59% to 62% GAAP (61% to 64% excluding special expense items)


•	EPS: $0.38 to $0.42 GAAP ($0.41 to $0.45 excluding special expense items)

Maxim's Business Outlook does not include the potential impact of any restructuring activity or mergers, acquisitions, divestitures, or other business combinations that may be completed during the quarter.

Dividend

A cash dividend of $0.24 per share will be paid on September 5, 2012, to stockholders of record on August 22, 2012.

Conference Call

Maxim has scheduled a conference call on July 26, 2012, at 2:00 p.m. Pacific Time to discuss its financial results for the fourth quarter of fiscal year 2012 and its business outlook. To listen via telephone, dial (866) 227-1582 (toll free) or (703) 639-1129. This call will be webcast by Shareholder.com and can be accessed at Maxim's website at www.maxim-ic.com/Investor.

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CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
	Three Months Ended									Year Ended
	June 30, 2012			March 31, 2012			June 25, 2011			June 30, 2012			June 25, 2011
	(in thousands, except per share data)
Net revenues	$	604,956		$	571,212		$	626,491		$	2,403,529		$	2,472,341
Cost of goods sold (1, 2, 3)	232,967			235,782			235,666			952,677			942,377
Gross profit	371,989			335,430			390,825			1,450,852			1,529,964
Operating expenses:
Research and development (1)	134,007			136,075			136,573			552,379			525,308
Selling, general and administrative (1)	79,980			78,011			74,537			321,273			292,494
Intangible asset amortization (2)	4,049			4,029			4,200			16,737			18,752
Impairment of long-lived assets (4)	22,383			7,712			—			30,095			—
Severance and restructuring	18			228			(423		)	6,785			1,247
Other operating (income) expenses, net (5)	(4,469		)	(2,511		)	(1,984		)	(11,214		)	19,124
Total operating expenses	235,968			223,544			212,903			916,055			856,925
Operating income	136,021			111,886			177,922			534,797			673,039
Interest and other (expense) income, net (6)	(108		)	(230		)	(2,022		)	(2,064		)	(11,368		)
Income before provision for income taxes	135,913			111,656			175,900			532,733			661,671
Provision for income taxes (7,8)	25,279			88,948			50,307			177,815			172,662
Income from continuing operations	110,634			22,708			125,593			354,918			489,009
Income from discontinued operations, net of tax (9)	—			31,809			—			31,809			—
Net income	$	110,634		$	54,517		$	125,593		$	386,727		$	489,009

Earnings per share: basic
From continuing operations	$	0.38		$	0.08		$	0.42		$	1.21		$	1.65
From discontinued operations, net of tax (9)	—			0.11			—			0.11			—
Basic	$	0.38		$	0.19		$	0.42		$	1.32		$	1.65

Earnings per share: diluted
From continuing operations	$	0.37		$	0.07		$	0.41		$	1.18		$	1.61
From discontinued operations, net of tax (9)	—			0.11			—			0.11			—
Diluted	$	0.37		$	0.18		$	0.41		$	1.29		$	1.61

Shares used in the calculation of earnings per share:
Basic	292,757			292,276			295,751			292,810			296,755
Diluted	299,793			300,221			303,944			300,002			303,377

Dividends paid per share	$	0.22		$	0.22		$	0.21		$	0.88		$	0.84

SCHEDULE OF SPECIAL EXPENSE ITEMS
(Unaudited)
	Three Months Ended									Year Ended
	June 30, 2012			March 31, 2012			June 25, 2011			June 30, 2012			June 25, 2011
	(in thousands)
Cost of goods sold:
Intangible asset amortization (2)	$	9,392		$	9,787		$	7,977		$	36,693		$	30,164
Acquisition related inventory write up (3)	—			—			—			1,801			5,677
Total	$	9,392		$	9,787		$	7,977		$	38,494		$	35,841

Operating expenses:
Intangible asset amortization (2)	$	4,049		$	4,029		$	4,200		$	16,737		$	18,752
Impairment of long-lived assets (4)	22,383			7,712			—			30,095			—
Severance and restructuring	18			228			(423		)	6,785			1,247
Other operating (income) expenses, net (5)	(4,469		)	(2,511		)	(1,984		)	(11,214		)	19,124
Total	$	21,981		$	9,458		$	1,793		$	42,403		$	39,123

Interest and other expense (income), net (6)	$	550		$	—		$	—		$	(1,226	)	$	—
Total	$	550		$	—		$	—		$	(1,226	)	$	—

Provision for income taxes:
Reversal of tax reserves (7)	$	—		$	(2,272	)	$	(1,624	)	$	(2,272	)	$	(38,947	)
International restructuring (8)	2,751			65,293			6,791			65,389			21,801
Total	$	2,751		$	63,021		$	5,167		$	63,117		$	(17,146	)

Discontinued operations:
Income from discontinued operations, net of tax (9)	$	—		$	(31,809	)	$	—		$	(31,809	)	$	—
Total	$	—		$	(31,809	)	$	—		$	(31,809	)	$	—


(1) Includes stock-based compensation charges.
(2) Includes intangible asset amortization related to acquisitions.
(3) Includes expense related to fair value write up of inventory acquired as part of acquisitions.
(4) Includes impairment charges relating to land and buildings held for sale, wafer fab and end of line manufacturing equipment.
(5) Other operating (income) expenses, net are primarily for loss (gain) on sale of land and buildings, contingent consideration adjustments related to certain acquisitions, stock option related litigation, certain payroll taxes, interest and penalties and in-process research and development written off.
(6) Includes gain on sale and impairment of privately-held companies.
(7) Includes reversal of tax reserves related to audit completion and expiration of statute of limitations.
(8) Includes impact due to implementation of international restructuring.
(9) Includes gain on sale, net of tax relating to certain businesses divested.

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STOCK-BASED COMPENSATION BY TYPE OF AWARD (in thousands)
(Unaudited)
Three Months Ended June 30, 2012	Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total
Cost of goods sold	$	462	$	2,206	$	423	$	3,091
Research and development expense	1,607		8,331		1,413		11,351
Selling, general and administrative expense	1,468		4,518		462		6,448
Total	$	3,537	$	15,055	$	2,298	$	20,890

Three Months Ended March 31, 2012
Cost of goods sold	$	470	$	2,217	$	412	$	3,099
Research and development expense	1,742		8,203		1,602		11,547
Selling, general and administrative expense	1,836		5,072		484		7,392
Total	$	4,048	$	15,492	$	2,498	$	22,038

Three Months Ended June 25, 2011
Cost of goods sold	$	516	$	2,101	$	405	$	3,022
Research and development expense	2,016		8,472		1,434		11,922
Selling, general and administrative expense	1,485		4,543		436		6,464
Total	$	4,017	$	15,116	$	2,275	$	21,408

Year Ended June 30, 2012
Cost of goods sold	$	2,014	$	9,387	$	1,738	$	13,139
Research and development expense	7,844		35,699		5,525		49,068
Selling, general and administrative expense	6,436		19,493		1,731		27,660
Total	$	16,294	$	64,579	$	8,994	$	89,867

Year Ended June 25, 2011
Cost of goods sold	$	2,625	$	9,819	$	1,557	$	14,001
Research and development expense	11,325		36,926		5,435		53,686
Selling, general and administrative expense	6,120		18,944		1,546		26,610
Total	$	20,070	$	65,689	$	8,538	$	94,297

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CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30, 2012			March 31, 2012			June 25, 2011
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	881,060		$	860,551		$	962,541
Short-term investments	75,326			75,405			50,346
Total cash, cash equivalents and short-term investments	956,386			935,956			1,012,887
Accounts receivable, net	317,461			296,255			297,632
Inventories	242,162			220,153			237,928
Deferred tax assets	98,180			105,298			113,427
Other current assets	85,177			79,584			65,978
Total current assets	1,699,366			1,637,246			1,727,852
Property, plant and equipment, net	1,353,606			1,361,300			1,308,850
Intangible assets, net	208,913			222,354			204,263
Goodwill	423,073			423,073			265,125
Other assets	52,988			26,264			21,653
TOTAL ASSETS	$	3,737,946		$	3,670,237		$	3,527,743

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	147,086		$	132,906		$	110,153
Income taxes payable	22,589			21,807			3,912
Accrued salary and related expenses	191,846			181,943			215,627
Accrued expenses	64,092			70,297			47,767
Current portion of long term debt	303,496			1,945			—
Deferred income on shipments to distributors	26,280			28,729			36,881
Total current liabilities	755,389			437,627			414,340
Long term debt	5,592			308,700			300,000
Income taxes payable	212,389			192,842			96,099
Deferred tax liabilities	198,502			205,727			183,715
Other liabilities	27,797			22,143			22,771
Total liabilities	1,199,669			1,167,039			1,016,925

Stockholders' equity:
Common stock	293			9,125			296
Retained earnings	2,553,418			2,507,298			2,524,790
Accumulated other comprehensive loss	(15,434		)	(13,225		)	(14,268		)
Total stockholders' equity	2,538,277			2,503,198			2,510,818
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	3,737,946		$	3,670,237		$	3,527,743

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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Three Months Ended									Year Ended
	June 30, 2012			March 31, 2012			June 25, 2011			June 30, 2012			June 25, 2011
	(in thousands)
Cash flows from operating activities:
Net income	$	110,634		$	54,517		$	125,593		$	386,727		$	489,009
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	20,890			22,038			21,408			89,867			94,297
Depreciation and amortization	53,554			53,476			50,016			211,096			205,062
Deferred taxes	1,224			(9,942		)	20,484			30,759			140,084
In-process research and development	—			1,600			—			1,600			—
(Gain) Loss from sale of property, plant and equipment	(1,412		)	(6,487		)	(1,797		)	(7,648		)	12,946
Gain from discontinued operations	—			(45,372		)	—			(45,372		)	—
Gain from sale of investments in privately-held companies	—			—			—			(1,811		)	—
Tax shortfall related to stock-based compensation plans	1,309			2,957			2,811			3,113			30,546
Impairment of long-lived assets	22,933			7,712			—			30,645			—
Excess tax benefit related to stock-based compensation	(5,247		)	(5,172		)	(4,792		)	(17,482		)	(12,869		)
Changes in assets and liabilities:
Accounts receivable	(21,206		)	(50,026		)	6,959			(19,262		)	43,256
Inventories	(22,090		)	12,412			(2,974		)	(432		)	(29,435		)
Other current assets	(5,634		)	2,332			16,031			(16,757		)	53,255
Accounts payable	11,802			27,228			(8,621		)	25,515			(4,746		)
Income taxes payable	20,329			98,321			2,538			134,967			(45,318		)
Deferred income on shipments to distributors	(2,449		)	(2,407		)	1,310			(10,601		)	11,102
Litigation Settlement	—			—			—			—			(173,000		)
All other accrued liabilities	5,457			33,312			17,308			(38,202		)	47,265
Net cash provided by operating activities	190,094			196,499			246,274			756,722			861,454

Cash flows from investing activities:
Payments for property, plant and equipment	(76,610		)	(70,053		)	(48,063		)	(264,348		)	(175,253		)
Proceeds from sales of property, plant and equipment	1,400			13,774			2,295			16,883			27,624
Acquisition	(2,257		)	—			(7,811		)	(168,544		)	(80,918		)
Discontinued operations	—			56,607			—			56,607			—
Purchases of privately-held companies	(1,500		)	(1,980		)	—			(3,480		)	—
Purchases of available-for-sale securities	—			—			—			(25,108		)	(49,787		)
Proceeds from sales of investments of privately-held companies	—			—			—			3,225			—
Net cash used in investing activities	(78,967		)	(1,652		)	(53,579		)	(384,765		)	(278,334		)

Cash flows from financing activities:
Excess tax benefit related to stock-based compensation	5,247			5,172			4,792			17,482			12,869
Mortgage liability	—			—			—			—			(3,237		)
Dividends paid	(64,408		)	(64,384		)	(62,077		)	(257,731		)	(249,145		)
Repayment of notes payable	(400		)	—			—			(20,806		)	(1,422		)
Repurchase of common stock	(56,282		)	(28,970		)	(59,008		)	(246,412		)	(231,012		)
Issuance of ESPP	18,807			—			16,281			33,772			28,850
Net issuance of restricted stock units	(6,929		)	(7,669		)	(7,781		)	(29,649		)	(28,839		)
Proceeds from stock options exercised	13,347			20,395			8,716			49,906			24,845
Net cash used in financing activities	(90,618		)	(75,456		)	(99,077		)	(453,438		)	(447,091		)




Net increase (decrease) in cash and cash equivalents	20,509		119,391		93,618		(81,481		)	136,029
Cash and cash equivalents:
Beginning of period	860,551		741,160		868,923		962,541			826,512
End of period	$	881,060	$	860,551	$	962,541	$	881,060		$	962,541

Total cash, cash equivalents, and short-term investments	$	956,386	$	935,956	$	1,012,887	$	956,386		$	1,012,887

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ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL EXPENSE ITEMS DISCLOSURES
(Unaudited)
	Three Months Ended									Year Ended
	June 30, 2012			March 31, 2012			June 25, 2011			June 30, 2012			June 25, 2011
	(in thousands, except per share data)
Reconciliation of GAAP gross profit to GAAP gross profit excluding special expense items:
GAAP gross profit	$	371,989		$	335,430		$	390,825		$	1,450,852		$	1,529,964
GAAP gross profit %	61.5		%	58.7		%	62.4		%	60.4		%	61.9		%

Special expense items:
Intangible asset amortization (1)	9,392			9,787			7,977			36,693			30,164
Acquisition related inventory write up (2)	—			—			—			1,801			5,677
Total special expense items	9,392			9,787			7,977			38,494			35,841
GAAP gross profit excluding special expense items	$	381,381		$	345,217		$	398,802		$	1,489,346		$	1,565,805
GAAP gross profit % excluding special expense items	63.0		%	60.4		%	63.7		%	62.0		%	63.3		%

Reconciliation of GAAP operating expenses to GAAP operating expenses excluding special expense items:
GAAP operating expenses	$	235,968		$	223,544		$	212,903		$	916,055		$	856,925

Special expense (income) items:
Intangible asset amortization (1)	4,049			4,029			4,200			16,737			18,752
Impairment of long-lived assets (3)	22,383			7,712			—			30,095			—
Severance and restructuring	18			228			(423		)	6,785			1,247
Other operating (income) expenses, net (4)	(4,469		)	(2,511		)	(1,984		)	(11,214		)	19,124
Total special expense items	21,981			9,458			1,793			42,403			39,123
GAAP operating expenses excluding special expense items	$	213,987		$	214,086		$	211,110		$	873,652		$	817,802

Reconciliation of GAAP net income to GAAP net income excluding special expense items:
GAAP net income	$	110,634		$	54,517		$	125,593		$	386,727		$	489,009

Special expense (income) items:
Intangible asset amortization (1)	13,441			13,816			12,177			53,430			48,916
Acquisition related inventory write up (2)	—			—			—			1,801			5,677
Impairment of long-lived assets (3)	22,383			7,712			—			30,095			—
Severance and restructuring	18			228			(423		)	6,785			1,247
Other operating (income) expenses, net (4)	(4,469		)	(2,511		)	(1,984		)	(11,214		)	19,124
Interest and other expense (income), net (5)	550			—			—			(1,226		)	—
Pre-tax total special expense items	31,923			19,245			9,770			79,671			74,964
Tax effect of special items	(10,613		)	(5,445		)	(3,315		)	(25,579		)	(26,481		)
Reversal of tax reserves (6)	—			(2,272		)	(1,624		)	(2,272		)	(38,947		)
International restructuring (7)	2,751			65,293			6,791			65,389			21,801
Discontinued operations, net of tax (8)	—			(31,809		)	—			(31,809		)	—
GAAP net income excluding special expense items	$	134,695		$	99,529		$	137,215		$	472,127		$	520,346

GAAP net income per share excluding special expense items:
Basic	$	0.46		$	0.34		$	0.46		$	1.61		$	1.75
Diluted	$	0.45		$	0.33		$	0.45		$	1.57		$	1.72

Shares used in the calculation of earnings per share excluding special expense items:
Basic	292,757			292,276			295,751			292,810			296,755
Diluted	299,793			300,221			303,944			300,002			303,377

(1) Includes intangible asset amortization related to acquisitions.
(2) Includes expense related to fair value write up of inventory acquired as part of acquisitions.

(3) Includes impairment charges relating to land and buildings held for sale, wafer fab and end of line manufacturing equipment.

(4) Other operating (income) expenses, net are primarily for loss (gain) on sale of land and buildings, contingent consideration adjustments related to certain acquisitions, stock option related litigation, certain payroll taxes, interest and penalties and in-process research and development written off.

(5) Includes gain on sale and impairment of privately-held companies.

(6) Includes reversal of tax reserves related to audit completion and expiration of statute of limitations.

(7) Includes impact due to implementation of international restructuring.

(8) Includes gain on sale, net of tax relating to certain businesses divested.

Non-GAAP Measures

To supplement the consolidated financial results prepared under GAAP, Maxim uses non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude special expense items related to intangible asset amortization; acquisition related inventory write up to fair value; impairment charges related to buildings and manufacturing equipment; severance and restructuring; stock option related litigation; certain payroll taxes, interest and penalties; contingent consideration adjustments relating to certain acquisitions; in-process research and development written off; gain on the sale of land and buildings; gain on sale and impairment of investments in privately-held companies; reversal of tax reserves related to audit completion and expiration of statute of limitations; the tax provision impacts due to implementation of international restructuring; and gain on sale, net of tax relating to certain businesses divested. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate Maxim's current performance. Many analysts covering Maxim use the non-GAAP measures as well. Given management's use of these non-GAAP measures, Maxim believes these measures are important to investors in understanding Maxim'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'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:

GAAP gross profit excluding special expense items

The use of GAAP gross profit excluding special expense 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 expense items including intangible asset amortization and acquisition related inventory write up to fair value. 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 expense items to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of revenue of Maxim's core businesses.

GAAP operating expenses excluding special expense items

The use of GAAP operating expenses excluding special expense 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 expense items including intangible asset amortization; impairment charges related to buildings and manufacturing equipment; severance and restructuring; stock option related litigation; certain payroll taxes, interest and penalties; contingent consideration adjustments relating to certain acquisitions; in-process research and development written off; and gain on the sale of land and buildings. 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 expense items to enable investors and analysts to evaluate our core business and its direct operating expenses.

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's core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization; acquisition related inventory write up to fair value; impairment charges related to buildings and manufacturing equipment; severance and restructuring; stock option related litigation; certain payroll taxes, interest and penalties; contingent consideration adjustments relating to certain acquisitions; in-process research and development written off; gain on the sale of land and buildings; gain on sale and impairment of investments in privately-held companies; reversal of tax reserves related to audit completion and expiration of statute of limitations; the tax provision impacts due to implementation of international restructuring and gain on sale, net of tax relating to certain businesses divested. 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's core businesses and to compare our results of operations on a more consistent basis against that of other companies in our industry.

“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 financial projections for its first quarter of fiscal 2013 ending in September 2012, which includes revenue, gross margin and earnings per share, as well as the Company's belief that its balanced business model is sustainable. These statements involve risk and uncertainty. Actual results could

differ materially from those forecasted based upon, among other things, general market and economic conditions and market developments that could adversely affect the growth of the mixed-signal analog market, product mix shifts, 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 25, 2011 (the “10-K”) and Quarterly Reports on Form 10-Q filed after the 10-K.

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 except as required by law.

About Maxim

Maxim makes highly integrated analog and mixed-signal semiconductors. Maxim reported revenue of approximately $2.4 billion for fiscal 2012. For more information, go to www.Maxim-ic.com.

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