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Maxim Integrated Products Inc. Reports Operating Results (10-K)

August 19, 2010 | About:

Maxim Integrated Products Inc. (NASDAQ:MXIM) filed Annual Report for the period ended 2010-06-26.

Maxim Integrated Products Inc. has a market cap of $5.14 billion; its shares were traded at around $17 with a P/E ratio of 17.1 and P/S ratio of 9.1. The dividend yield of Maxim Integrated Products Inc. stocks is 4.8%.MXIM is in the portfolios of Dodge & Cox, First Pacific Advisors of First Pacific Advisors, LLC, Louis Moore Bacon of Moore Capital Management, LP, Paul Tudor Jones of The Tudor Group, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

The parties to the derivative litigation in the Delaware Court of Chancery entered into a stipulated settlement agreement on September 16, 2008, conditioned upon final approval by the Delaware Court of Chancery, and subject to enforcement of the final judgment in Delaware approving the settlement to obtain dismissals of all other pending derivative lawsuits in California. On January 2, 2009, the Delaware Court of Chancery issued a Memorandum Opinion approving the settlement in the Ryan, et al. vs. Gifford, et al. action and entered a Final Order and Judgment. The time for appeal of the Final Order and Judgment expired on February 2, 2009, with no party appealing any aspect of the Delaware Final Order and Judgment. All derivative actions pending in the California Superior Court have since been dismissed, with prejudice. All preconditions to distribution of the Delaware settlement proceeds in escrow on behalf of Maxim were met and the net settlement proceeds of $18.9 million were received on September 10, 2009. The Company recognized an increase to additional paid in capital of $2.5 million related to excess gains while the remainder of the proceeds of $16.4 million was recorded as a reduction in Other operating expenses, net.

On May 3, 2010, Lead Plaintiffs and the Company entered into a memorandum of understanding reflecting an agreement in principle to settle all claims asserted against all defendants in the action, which provided for the payment of $173 million in cash by the Company. In connection with this memorandum of understanding, the Company recorded a charge for the three and nine months ended March 27, 2010, to accrue the $173 million settlement amount, which has been recorded in Other operating expenses, net in the Condensed Consolidated Statements of Operations and in Accrual for litigation settlement in the Condensed Consolidated Balance Sheets. On June 18, 2010, Lead Plaintiffs and the Company entered into, and Lead Plaintiffs filed with the Court, a formal stipulation of settlement memorializing the agreement to settle all claims against all defendants in the action.

During fiscal year 2010, the Company repurchased approximately 10.3 million shares of its common stock for $190.1 million. As of the end of fiscal year 2010, the Company was authorized to repurchase up to $324.8 million of the Company's common stock. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company's common stock and general market and business conditions.

The Company estimates potential future returns and sales allowances related to current period product revenue. Management analyzes historical returns, changes in customer demand and acceptance of products when evaluating the adequacy of returns and sales allowances. Estimates made by us may differ from actual returns and sales allowances. These differences may materially impact reported revenue and amounts ultimately collected on accounts receivable. Historically, such differences have not been material. At June 26, 2010 and June 27, 2009, the Company had $15.0 million and $10.3 million accrued for returns and allowances,

respectively. During fiscal years 2010 and 2009, the Company recorded $67.5 million and $45.2 million for estimated returns and allowances against revenues, respectively. These amounts were offset by $62.8 million and $46.9 million actual returns and allowances given during fiscal years 2010 and 2009, respectively.

Inventories are stated at the lower of (i) standard cost, which approximates actual cost on a first-in-first-out basis, or (ii) market value. Our standard cost revision policy is to continuously monitor manufacturing variances and revise standard costs when necessary. Because of the cyclical nature of the market, inventory levels, obsolescence of technology, and product life cycles, we generally write-down inventories to net realizable value based on 12 months forecasted product demand. Actual demand and market conditions may be lower than those projected by us. This difference could have a material adverse effect on our gross margin should inventory write-downs beyond those initially recorded become necessary. Alternatively, should actual demand and market conditions be more favorable than those estimated by us, gross margin could be favorably impacted. Historically, such differences have not been material. During fiscal years 2010, 2009 and 2008, we had inventory write-downs of $3.7 million, $38.6 million and $38.1 million, respectively.

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