Maxim Integrated Products (MXIM)
Q1 2013 Earnings Call
October 25, 2012 5:00 pm ET
Bruce E. Kiddoo - Chief Financial Officer and Senior Vice President
Tunc Doluca - Chief Executive Officer, President and Director
Romit J. Shah - Nomura Securities Co. Ltd., Research Division
Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division
Vernon P. Essi - Needham & Company, LLC, Research Division
Blayne Curtis - Barclays Capital, Research Division
Terence R. Whalen - Citigroup Inc, Research Division
Ryan Carver - Crédit Suisse AG, Research Division
Craig A. Ellis - Caris & Company, Inc., Research Division
Gabriela Borges - Goldman Sachs Group Inc., Research Division
Christopher Caso - Susquehanna Financial Group, LLLP, Research Division
JoAnne Feeney - Longbow Research LLC
Craig Berger - FBR Capital Markets & Co., Research Division
Sameer Kalucha - JP Morgan Chase & Co, Research Division
Previous Statements by MXIM
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I would now like to introduce your host for today's program, Mr. Venk Nathamuni, Managing Director of Investor Relations. Please go ahead, sir.
Thank you, operator, and welcome, everyone, to Maxim Integrated's Fiscal First Quarter 2013 Earnings Conference Call. With me on the call today are Chief Executive Officer, Tunç Doluca; and Chief Financial Officer, Bruce Kiddoo.
During today's call, we will be making some forward-looking statements. In light of the Private Securities Litigation Reform Act, I would like to remind you that these statements must be considered in conjunction with the cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements in this call involve risks and uncertainty and that future events may differ materially from the statements made. For additional information, please refer to the company's Securities and Exchange Commission filings, which are posted on our website or available from the company without charge.
Now, I'll turn the call over to Bruce.
Bruce E. Kiddoo
Thanks, Venk. I will review our first quarter financial results.
Revenue for the first quarter was $623 million, up 3% from the fourth quarter. Our revenue mix by major market in Q1 was approximately 47% for Consumer, 24% Industrial, 15% Communications and 14% Computing.
Our Consumer business was up strongly due to smartphones. Industrial was down due to broad-based weakness. Our Communication business was down to our Fiber Optics business, and Computing was down due to our notebook and peripherals businesses. Gross margin, excluding special items, was 63.4%, up from 63% in the prior quarter. Special items in Q1 gross margin were intangible asset amortization from acquisitions. Operating expenses, excluding special items, were $213 million, down slightly from the prior quarter. The one month impact of our annual compensation adjustment was offset by spending controls.
Special items in Q1 operating expenses included the normal acquisition-related charges, plus a minor impairment charge for buildings held for sale.
Q1 GAAP operating income, excluding special items, was $182 million or 29% of revenue. The Q1 GAAP tax rate, excluding special items, was 21%, compared to 20% in the prior quarter.
GAAP earnings per share, excluding special items, was $0.47, up from $0.45 in Q4 due to higher revenue and gross margin.
Turning to the balance sheet and cash flow. During the quarter, cash flow from operations was $137 million. This is lower than normal levels, as we pay our annual employee bonus for the prior fiscal year in Q1.
Inventory was 103 days, up from 99 days in the prior quarter, as we focus on improving delivery performance to our customers. Inventory in the channel, excluding catalog distributors, declined from 53 days to 51 days, well below our target of approximately 65 days.
In dollar terms, channel inventory declined by 2%.
Net capital additions totaled $57 million in Q1, down significantly from Q4, as we are completing investments in long-term manufacturing capacity and new facilities.
Share repurchases totaled $65 million in Q1, as we bought back 2.5 million shares. Finally, in Q1, we paid $70 million in dividends to our shareholders. This is a 9% increase over the $64 million paid in the prior quarter. Overall, total cash, cash equivalents and short-term investments decreased by $31 million in the first quarter to $925 million.
Moving on to guidance. Our beginning Q2 backlog increased to $400 million. Based on this beginning backlog and lower expected turns, we forecast Q2 revenue of $595 million to $625 million, or down 2% from Q1 at the midpoint.
Q2 gross margin, excluding special items, is estimated at 60% to 63%, down from Q1 due to lower utilization. Q1 fab utilization was down as expected, due to a process technology transition impacting both Q1 and Q2 gross margin.
Q2 test utilization is expected to be down, due to lower revenue and planned inventory reduction due to the uncertain environment.
Other variables that may influence Q2 gross margin include product mix and inventory reserves.
Special items in Q2 gross margin are estimated at $8.5 million, primarily for amortization of intangible assets.
Q2 operating expenses, excluding special items, are expected to be up around 2% sequentially. The increase in OpEx is due primarily to higher compensation costs for the full quarter impact of our annual merit process.
Special items in Q2 operating expenses are estimated at $4 million for amortization of intangible assets. This excludes potential items that may occur during the quarter.
Our Q2 in fiscal year '13 tax rate, excluding special items, is estimated at 20% to 22%. For Q2 GAAP earnings per share, excluding special items, we expect a range of $0.39 to $0.43.