Analog Devices Reports Third Quarter Fiscal Year 2013 Results - Board declares $0.34 per share cash dividend Business Wire NORWOOD, Mass. -- August 20, 2013 Analog Devices, Inc. (NASDAQ: ADI), a global leader in high-performance semiconductors for signal processing applications, today announced financial results for its third quarter of fiscal year 2013, which ended August 3, 2013. “ADI delivered solid results for the third quarter. Compared to the prior quarter, revenue increased by 2% and our operating model produced excellent leverage, driving diluted EPS growth of 10%, excluding special items,” said Vincent Roche, President and CEO. “Profitability and cash flow were very strong, and we returned $105 million to our shareholders through cash dividends.” By end market, industrial applications totaled 47% of revenue, communications infrastructure was 21% of revenue, and automotive and consumer applications were 18% and 15% of revenue, respectively. “Order rates improved across all of our end markets during the third quarter, and we saw the strongest sequential revenue growth from products used in communications infrastructure applications. It appears that customer order rates were in-line with consumption, keeping inventories low,” continued Mr. Roche. “There are signs that a gradual recovery in the macroeconomic environment is underway and we are in a strong position to benefit from the return of capital investments in communications and industrial infrastructure programs. As a result our outlook for the fourth quarter is for our sales to grow in the range of $675 million to $700 million, up from $674 million in the third quarter,” said Mr. Roche. ADI also announced that its Board of Directors has declared a cash dividend of $0.34 per outstanding share of common stock. The dividend will be paid on September 11, 2013 to all shareholders of record at the close of business on August 30, 2013. Results for the Third Quarter of Fiscal 2013 *Revenue totaled $674 million *Gross margin was 64.5% of revenue *Operating margin was 30.9% of revenue *Diluted EPS was $0.57, excluding special items *Cash flow from operations was $220 million, or 32.6% of revenue Please refer to the schedules provided for a summary of revenue and earnings, selected balance sheet information, and the cash flow statement for the third quarter of fiscal year 2013, as well as the immediately prior and year-ago quarters. Additional information on revenue by end market and revenue by product type is provided on Schedules D and E. A more complete table covering prior periods is available at investor.analog.com. Outlook for the Fourth Quarter of Fiscal 2013 The following statements are based on current expectations. These statements are forward- looking and actual results may differ materially, as a result of, among other things, the important factors discussed at the end of this release. These statements supersede all prior statements regarding our business outlook set forth in prior ADI news releases, and ADI disclaims any obligation to update these forward-looking statements. *Revenue estimated to be in the range of $675 to $700 million *Gross margin estimated to be approximately 65% *Operating expenses estimated to increase by approximately 1% *Tax rate estimated to be between 14% and 15% *Diluted EPS estimated at $0.55 to $0.61 Conference Call Scheduled for 5:00 pm ET ADI will host a conference call to discuss the third quarter results and short-term outlook today, beginning at 5:00 pm ET. Investors may join via webcast, accessible at investor.analog.com, or by telephone (call 706-634-7193 ten minutes before the call begins and provide the password "ADI."). A replay will be available two hours after the completion of the call. The replay may be accessed for up to two weeks by dialing 855-859-2056 (replay only) and providing the conference ID: 18639688, or by visiting investor.analog.com. Non-GAAP Financial Information This release includes non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Schedule F of this press release provides the reconciliation of the Company’s non-GAAP measures to its GAAP measures. Manner in Which Management Uses the Non-GAAP Financial Measures Management uses non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, non-GAAP other expense, and non-GAAP diluted earnings per share to evaluate the Company’s operating performance from continuing operations against past periods and to budget and allocate resources in future periods. These non-GAAP measures also assist management in understanding and evaluating the Company’s operating results and trends in the Company’s business. Economic Substance Behind Management’s Decision to Use Non-GAAP Financial Measures The items excluded from the non-GAAP measures were excluded because they are of a non-recurring or non-cash nature. The following items are excluded from our non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin, and non-GAAP diluted earnings per share: Restructuring-Related Expenses. These expenses are incurred in connection with facility closures, consolidation of manufacturing facilities, and other cost reduction efforts. Apart from ongoing expense savings as a result of such items, these expenses and the related tax effects have no direct correlation to the operation of our business in the future. Stock-based Compensation Expense. In the second quarter of fiscal 2013, following the death of the Company’s CEO, the Company recorded $6.3 million of stock-based compensation expense due to the accelerated vesting of restricted stock units in accordance with the terms of his restricted stock unit agreement. This stock-based compensation expense and the related tax effect have no direct correlation to the operation of our business in the future. The following item is excluded from our non-GAAP other expense and non-GAAP diluted earnings per share: Debt Extinguishment Costs: In the third quarter of fiscal 2013, the Company redeemed its outstanding 5.0% senior unsecured notes due July1, 2014. The Company recognized a net loss on debt extinguishment of approximately $10.2 million, which was comprised of a make-whole premium, the recognition of unamortized proceeds received on an interest rate swap associated with the debt and the write off of unamortized debt issuance and discount costs. We excluded these costs from our non-GAAP measures because they are one time in nature and have no direct correlation to the operation of our business in the future. The following items are excluded from our non-GAAP diluted earnings per share: Tax-Related Items. In the third quarter of fiscal 2012, the Company recorded a one-time $3.4 million tax benefit related to the release of a tax reserve for an expired tax year. In the second quarter of fiscal 2013, the Company recorded a $6.6 million tax benefit as a result of the reversal of prior period tax liabilities. In the third quarter of fiscal 2013, the Company recorded a one-time $1.7 million tax benefit related to the release of a tax reserve for an expired tax year. We excluded these tax-related items from our non-GAAP measures because they are not associated with the tax expense on our current operating results. Why Management Believes the Non-GAAP Financial Measures Provide Useful Information to Investors Management believes that the presentation of non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, non-GAAP other expense, and non-GAAP diluted EPS is useful to investors because it provides investors with the operating results that management uses to manage the Company. Material Limitations Associated with Use of the Non-GAAP Financial Measures Analog Devices believes that non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, non-GAAP other expense, and non-GAAP diluted EPS have material limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. In addition, our non-GAAP measures may not be comparable to the non-GAAP measures reported by other companies. The Company’s use of non-GAAP measures, and the underlying methodology when excluding certain items, is not necessarily an indication of the results of operations that may be expected in the future, or that the Company will not, in fact, record such items in future periods. Management’s Compensation for Limitations of Non-GAAP Financial Measures Management compensates for these material limitations in non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, non-GAAP other expense, and non-GAAP diluted EPS by also evaluating our GAAP results and the reconciliations of our non-GAAP measures to the most directly comparable GAAP measures. Investors should consider our non-GAAP financial measures in conjunction with the corresponding GAAP measures. About Analog Devices Innovation, performance, and excellence are the cultural pillars on which Analog Devices has built one of the longest standing, highest growth companies within the technology sector. Acknowledged industry-wide as the world leader in data conversion and signal conditioning technology, Analog Devices serves over 60,000 customers, representing virtually all types of electronic equipment. Analog Devices is headquartered in Norwood, Massachusetts, with design and manufacturing facilities throughout the world. Analog Devices' common stock is included in the S&P 500 Index. This release may be deemed to contain forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, our statements regarding expected revenue, earnings per share, operating expenses, gross margin, tax rate, and other financial results, expected production and inventory levels, expected market trends, and expected customer demand and order rates for our products, that are based on our current expectations, beliefs, assumptions, estimates, forecasts, and projections about our business and the industry and markets in which Analog Devices operates. The statements contained in this release are not guarantees of future performance, are inherently uncertain, involve certain risks, uncertainties, and assumptions that are difficult to predict, and do not give effect to the potential impact of any mergers, acquisitions, divestitures, or business combinations that may be announced or closed after the date hereof. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements, and such statements should not be relied upon as representing Analog Devices’ expectations or beliefs as of any date subsequent to the date of this press release. We do not undertake any obligation to update forward-looking statements made by us. Important factors that may affect future operating results include: sovereign debt issues globally, any faltering in global economic conditions or the stability of credit and financial markets, erosion of consumer confidence and declines in customer spending, unavailability of raw materials, services, supplies or manufacturing capacity, changes in geographic, product or customer mix, adverse results in litigation matters, and other risk factors described in our most recent filings with the Securities and Exchange Commission. Our results of operations for the periods presented in this release are not necessarily indicative of our operating results for any future periods. Any projections in this release are based on limited information currently available to Analog Devices, which is subject to change. Although any such projections and the factors influencing them will likely change, we will not necessarily update the information, as we will only provide guidance at certain points during the year. Such information speaks only as of the original issuance date of this release. Analog Devices and the Analog Devices logo are registered trademarks or trademarks of Analog Devices, Inc. All other trademarks mentioned in this document are the property of their respective owners. Analog Devices, Third Quarter, Fiscal 2013 Schedule A Revenue and Earnings Summary (GAAP) (In thousands, except per-share amounts) Three Months Ended 3Q 13 2Q 13 3Q 12 Aug. 3, 2013 May 4, 2013 Aug. 4, 2012 Revenue $ 674,172 $ 659,250 $ 683,026 Year-to-year change -1 % -2 % -10 % Quarter-to-quarter change 2 % 6 % 1 % Cost of sales (1) 239,110 237,055 235,152 Gross margin 435,062 422,195 447,874 Gross margin percentage 64.5 % 64.0 % 65.6 % Year-to-year change (basis -110 -120 -160 points) Quarter-to-quarter change 50 130 40 (basis points) Operating expenses: R&D (1) 128,947 128,110 129,694 Selling, marketing and G&A 97,773 102,703 99,873 (1) Special charges - - 5,836 Total operating expenses 226,720 230,813 235,403 Total operating expenses 33.6 % 35.0 % 34.5 % percentage Year-to-year change (basis -90 130 400 points) Quarter-to-quarter change -140 -310 80 (basis points) Operating income 208,342 191,382 212,471 Operating income 30.9 % 29.0 % 31.1 % percentage Year-to-year change (basis -20 -250 -570 points) Quarter-to-quarter change 190 430 -40 (basis points) Other expense 13,301 3,721 3,002 Income before income tax 195,041 187,661 209,469 Provision for income taxes 18,802 23,189 39,701 Tax rate percentage 9.6 % 12.4 % 19.0 % Net income $ 176,239 $ 164,472 $ 169,768 Shares used for EPS - 309,117 307,444 298,445 basic Shares used for EPS - 315,307 313,368 305,359 diluted Earnings per share - basic $ 0.57 $ 0.53 $ 0.57 Earnings per share - $ 0.56 $ 0.52 $ 0.56 diluted Dividends paid per share $ 0.34 $ 0.34 $ 0.30 (1) Includes stock-based compensation expense as follows: Cost of sales $ 1,672 $ 1,517 $ 1,871 R&D $ 5,536 $ 5,044 $ 5,999 Selling, marketing and G&A $ 5,539 $ 11,395 $ 5,921 Analog Devices, Third Quarter, Fiscal 2013 Schedule B Selected Balance Sheet Information (GAAP) (In thousands) 3Q 13 2Q 13 3Q 12 Aug. 3, 2013 May 4, 2013 Aug. 4, 2012 Cash & short-term $ 4,450,293 $ 4,172,141 $ 3,765,045 investments Accounts receivable, net 345,437 333,924 345,795 Inventories (1) 284,342 298,967 312,079 Other current assets 164,418 158,180 138,366 Total current assets 5,244,490 4,963,212 4,561,285 PP&E, net 492,421 490,047 490,581 Investments 20,056 18,678 29,615 Goodwill and intangible 309,198 311,587 308,190 assets Other 72,461 57,512 66,951 Total assets $ 6,138,626 $ 5,841,036 $ 5,456,622 Deferred income on shipments to distributors, $ 259,003 $ 244,202 $ 246,674 net Other current liabilities 232,806 264,960 261,868 Long-term debt, 872,104 757,855 842,540 non-current Non-current liabilities 131,477 113,429 76,934 Shareholders' equity 4,643,236 4,460,590 4,028,606 Total liabilities & equity $ 6,138,626 $ 5,841,036 $ 5,456,622 (1) Includes $2,126, $2,123, and $2,361 related to stock-based compensation in 3Q13, 2Q13, and 3Q12, respectively. Analog Devices, Third Quarter, Fiscal 2013 Schedule C Cash Flow Statement (GAAP) (In thousands) Three Months Ended 3Q 13 2Q 13 3Q 12 Aug. 3, 2013 May 4, 2013 Aug. 4, 2012 Cash flows from operating activities: Net Income $ 176,239 $ 164,472 $ 169,768 Adjustments to reconcile net income to net cash provided by operations: Depreciation 27,448 27,478 27,107 Amortization of 55 55 56 intangibles Stock-based compensation 12,747 17,956 13,791 expense Loss on extinguishment of 10,205 - - debt Excess tax benefit (6,265 ) (2,833 ) (5,054 ) - stock options Deferred income (739 ) (767 ) 34 taxes Noncash portion of - - 219 special charges Other non-cash 310 (20 ) (1,380 ) activity Changes in operating assets 25 45,845 (66,835 ) and liabilities Total adjustments 43,786 87,714 (32,062 ) Net cash provided by operating 220,025 252,186 137,706 activities Percent of total 32.6 % 38.3 % 20.2 % revenue Cash flows from investing activities: Purchases of short-term (2,123,826 ) (2,203,316 ) (1,854,249 ) available-for-sale investments Maturities of short-term 1,493,806 1,726,488 1,534,235 available-for-sale investments Sales of short-term available-for-sale 216,312 91,351 76,330 investments Additions to property, plant and (30,068 ) (26,179 ) (39,239 ) equipment Payments for acquisitions, net (2,475 ) - - of cash acquired (Increase) decrease (1,540 ) (478 ) 408 in other assets Net cash used for investing (447,791 ) (412,134 ) (282,515 ) activities Cash flows from financing activities: Payment of senior (392,790 ) - - unsecured notes Proceeds from 493,880 - - long-term debt Proceeds from derivative 10,952 - - instruments Term loan - - (3,625 ) repayments Dividend payments (104,923 ) (104,415 ) (89,511 ) to shareholders Repurchase of - (4,519 ) (17,480 ) common stock Proceeds from employee stock 89,653 62,255 23,465 plans Excess tax benefit 6,265 2,833 5,054 - stock options (Decrease) increase in other financing (10,643 ) 4,184 (4,755 ) activities Net cash provided by (used for) 92,394 (39,662 ) (86,852 ) financing activities Effect of exchange rate changes on (191 ) (556 ) (1,256 ) cash Net decrease in cash and cash (135,563 ) (200,166 ) (232,917 ) equivalents Cash and cash equivalents at 595,631 795,797 695,066 beginning of period Cash and cash equivalents at end $ 460,068 $ 595,631 $ 462,149 of period Analog Devices, Third Quarter, Fiscal 2013 Schedule D Revenue Trends by End Market The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the "ship to" customer information and the end customer product or application into which our product will be incorporated. As data systems for capturing and tracking this data evolve and improve, the categorization of products by end market can vary over time. When this occurs we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market. Three Months Ended Aug. 3, May 4, Aug. 4, 2013 2012 2013 Revenue %* Q/Q Y/Y Revenue Revenue % % Industrial $ 314,196 47 % 1 % -3 % $ 311,502 $ 323,621 Automotive 120,386 18 % -2 % 5 % 122,437 114,876 Consumer 100,163 15 % -1 % -6 % 101,259 106,940 Communications 139,427 21 % 12 % 1 % 124,052 137,589 Total Revenue $ 674,172 100 % 2 % -1 % $ 659,250 $ 683,026 * The sum of the individual percentages does not equal the total due to rounding Analog Devices, Third Quarter, Fiscal 2013 Schedule E Revenue Trends by Product Type The categorization of our products into broad categories is based on the characteristics of the individual products, the specification of the products and in some cases the specific uses that certain products have within applications. The categorization of products into categories is therefore subject to judgment in some cases and can vary over time. In instances where products move between product categories we reclassify the amounts in the product categories for all prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each product category. Three Months Ended Aug. 3, May 4, Aug. 4, 2013 2012 2013 Revenue %* Q/Q Y/Y Revenue Revenue % % Converters $ 306,347 45 % 1 % 2 % $ 301,887 $ 299,736 Amplifiers / Radio 171,588 25 % 4 % -5 % 164,793 180,989 Frequency Other 92,278 14 % 0 % -6 % 91,906 98,075 analog Subtotal Analog 570,213 85 % 2 % -1 % 558,586 578,800 Signal Processing Power management 45,611 7 % 5 % 0 % 43,623 45,403 & reference Total Analog $ 615,824 91 % 2 % -1 % $ 602,209 $ 624,203 Products Digital Signal 58,348 9 % 2 % -1 % 57,041 58,823 Processing Total $ 674,172 100 % 2 % -1 % $ 659,250 $ 683,026 Revenue * The sum of the individual percentages does not equal the total due to rounding Analog Devices, Third Quarter, Fiscal 2013 Schedule F Reconciliation from Non-GAAP to GAAP Data (In thousands, except per-share amounts) See "Non-GAAP Financial Information" in this press release for a description of the items excluded from our non-GAAP measures. Three Months Ended 3Q 13 2Q 13 3Q 12 Aug. 3, 2013 May 4, 2013 Aug. 4, 2012 GAAP Operating $ 226,720 $ 230,813 $ 235,403 Expenses Percent of Revenue 33.6 % 35.0 % 34.5 % Restructuring-Related - - (5,836 ) Expense Stock-Based - (6,273 ) - Compensation Expense Non-GAAP Operating $ 226,720 $ 224,540 $ 229,567 Expenses Percent of Revenue 33.6 % 34.1 % 33.6 % - GAAP Operating $ 208,342 $ 191,382 $ 212,471 Income/Margin Percent of Revenue 30.9 % 29.0 % 31.1 % Restructuring-Related - - 5,836 Expense Stock-Based - 6,273 - Compensation Expense Non-GAAP Operating $ 208,342 $ 197,655 $ 218,307 Income/Margin Percent of Revenue 30.9 % 30.0 % 32.0 % GAAP Other Expense $ 13,301 $ 3,721 $ 3,002 Percent of Revenue 2.0 % 0.6 % 0.4 % Loss on Extinguishment (10,205 ) - - of Debt Non-GAAP Other Expense $ 3,096 $ 3,721 $ 3,002 Percent of Revenue 0.5 % 0.6 % 0.4 % GAAP Diluted EPS $ 0.56 $ 0.52 $ 0.56 Impact of Loss on 0.02 Extinguishment of Debt Restructuring-Related - - 0.01 Expense Impact of the Reversal of Prior Period Tax - (0.02 ) - Liabilities Stock-Based - 0.01 - Compensation Expense Impact of Expired Tax (0.01 ) - (0.01 ) Statute Non-GAAP Diluted EPS $ 0.57 $ 0.52 $ 0.56 (1) (1) The sum of the individual per share amounts may not equal the total due to rounding Contact: Analog Devices, Inc. Mr. Ali Husain, 781-461-3282 Director of Investor Relations Fax: 781-461-3491 email@example.com
Analog Devices Reports Third Quarter Fiscal Year 2013 Results
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