Board declares $0.37 per share cash dividend
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 2014, which ended August 2, 2014.
“ADI had another good quarter of revenue growth led by the
industrial and communications infrastructure markets,”
said Vincent Roche, President and CEO. “Profitability and cash
flow continued to be strong and we returned $173 million to
shareholders through cash dividends and share repurchases.”
“Near the end of our third quarter, we completed the acquisition
of Hittite Microwave Corporation which adds critical radio
frequency, microwave and millimeter wave technology to our product
portfolio. This helps ADI bring more complete solutions to our
industrial, aerospace and defense, communications, and automotive
customers, where ever-increasing design challenges are creating
significant growth opportunities for ADI,” Mr. Roche continued.
“With the addition of Hittite, we are planning for revenue in the
fourth quarter to be in the range of $790 million to $820
million.”
Results for the Third Quarter of Fiscal
Year 2014The non-GAAP results below exclude Hittite
operations and acquisition-related items.
- GAAP revenue totaled $728 million;
Non-GAAP revenue totaled $722.4, up 4% sequentially
- GAAP gross margin of 65.4% of revenue;
Non-GAAP gross margin of 66.5% of revenue
- GAAP operating margin of 27.8%;
Non-GAAP operating margin of 32.5% of revenue
- GAAP Diluted EPS of $0.57; Non-GAAP
diluted EPS of $0.63
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 2014, 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.
ADI also announced that the Board of Directors has declared a
cash dividend of $0.37 per outstanding share of common stock. The
dividend will be paid on September 17, 2014 to all
shareholders of record at the close of business on September
5, 2014.
Outlook for the Fourth Quarter of
Fiscal Year 2014The following statements are based on
current expectations, and as indicated, are presented on a non-GAAP
basis. 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 increase in the
range of $790 million to $820 million
- Non-GAAP gross margin expected to be
approximately 66.2%
- Non-GAAP operating expenses expected to
be between $268 million to $271 million
- Non-GAAP interest and other expense
expected to be approximately $6 million
- Non-GAAP tax rate expected to be 15.5%
to 16%
- Non-GAAP diluted EPS estimated to be
$0.66 to $0.70/share
With respect to the forward-looking information presented on a
non-GAAP basis, the Company is unable to provide a quantitative
reconciliation to GAAP because the items that would be included or
excluded, other than those described below, are difficult to
predict and estimate and are primarily dependent on future events.
Known reconciling items are:
- Non-GAAP gross margin excludes $8
million of amortization of intangible assets and $48
million of inventory and fixed asset step-up charges to record
Hittite inventory and fixed assets at fair value, as part
of the purchase accounting for the Hittite acquisition;
- Non-GAAP operating expenses
exclude $5 million of amortization of intangible assets
and $15 million of acquisition-related costs, primarily
for bank and other advisory fees related to the Hittite
acquisition;
- Non-GAAP interest and other expense
excludes $5 million of debt financing costs; and
- Non-GAAP tax rate excludes $18-$19
million provision for income taxes which represents the tax
effects of the reconciling items noted in the three bullets
above.
Conference Call Scheduled for 5:00 pm ETADI 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:
79312911, or by visiting investor.analog.com.
Non-GAAP Financial
InformationThis 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 historical non-GAAP measures to its GAAP
measures.
Management uses non-GAAP revenue, non-GAAP gross margin,
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.
The following item is excluded from our Non-GAAP
revenue:
Hittite Operations: The results of operations of Hittite from
July 22, 2014 through August 2, 2014 have been excluded from our
non-GAAP measures because they are not reflective of ongoing
operating results.
The following items are excluded from our Non-GAAP gross
margin, non-GAAP operating expenses, non-GAAP operating income,
non-GAAP operating margin, and non-GAAP diluted earnings per
share:
Hittite Operations: The results of operations of Hittite from
July 22, 2014 through August 2, 2014 have been excluded from our
non-GAAP measures because they are not reflective of ongoing
operating results.
Acquisition-Related Expenses: Expenses incurred as a result of
the Hittite acquisition in the third quarter of fiscal 2014
primarily include: severance payments, amortization of the fair
value adjustment to inventory; amortization of the fair value
adjustments to property, plant and equipment and amortization of
acquisition related intangibles, which include acquired intangibles
such as purchased technology and customer relationships.
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:
The exclusion of these items allows management to evaluate the
Company’s core business and trends across different reporting
periods on a consistent basis. Management presents these
Non-GAAP items to enable investors and analysts to evaluate our
core business.
Acquisition-Related Transaction Costs: Costs incurred as a
result of the Hittite acquisition in the third quarter of fiscal
2014 include legal, accounting and other professional fees directly
related to the Hittite acquisition. We excluded these costs from
our non-GAAP measures because they relate to a specific transaction
and are not reflective of our ongoing financial performance.
The following items are excluded from our non-GAAP other
expense and non-GAAP diluted earnings per share:
Acquisition-Related Debt Costs: The Company incurred debt
financing costs and interest expense during the third quarter of
fiscal 2014 on its 90-day term loan facility used to finance the
Hittite acquisition. We excluded these costs from our non-GAAP
measures because they are not reflective of our ongoing financial
performance.
Debt Extinguishment Costs: In the third quarter of fiscal 2013,
the Company redeemed its outstanding 5.0% senior unsecured notes
due July 1, 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 item is excluded from our non-GAAP diluted
earnings per share:
Tax-Related Items. 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.
Management believes that the presentation of non-GAAP revenue,
non-GAAP gross margin, non-GAAP operating expenses, non-GAAP
operating income, non-GAAP operating margins, non-GAAP other
expenses and non-GAAP diluted EPS is useful to investors because it
provides investors with the operating results that management uses
to manage the Company.
Analog Devices believes that non-GAAP revenue, non-GAAP gross
margin, non-GAAP operating expenses, non-GAAP operating income,
non-GAAP operating margins, non-GAAP other expenses 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.
Investors should consider our non-GAAP financial measures in
conjunction with the corresponding GAAP measures.
About Analog DevicesInnovation, 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, objectives,
plans and goals, 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:
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, our ability to successfully
integrate acquired businesses and technologies, 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
2014
Schedule
A
Revenue and Earnings Summary
(GAAP)(In thousands, except per-share amounts)
Three Months Ended 3Q 14 2Q 14
3Q 13 Aug.
2,
2014
May 3,2014
Aug. 3,
2013
Revenue $ 727,752 $ 694,536 $ 674,172 Year-to-year change 8 % 5 %
-1 % Quarter-to-quarter change 5 % 11 % 2 % Cost of sales (1)
251,462
235,793 239,110
Gross margin 476,290 458,743 435,062 Gross margin percentage 65.4 %
66.1 % 64.5 % Year-to-year change (basis points) 90 210 -110
Quarter-to-quarter change (basis points)
-70 100
50 Operating expenses: R&D (1)
140,095 136,203 128,892 Selling, marketing and G&A (1) 132,989
102,085 97,773 Amortization of Intangibles
660 55
55 Total operating expenses 273,744
238,343 226,720 Total operating expenses percentage 37.6 % 34.3 %
33.6 % Year-to-year change (basis points) 400 -70 -90
Quarter-to-quarter change (basis points)
330 -220
-140 Operating income 202,546 220,400
208,342 Operating income percentage 27.8 % 31.7 % 30.9 %
Year-to-year change (basis points) -310 270 -20 Quarter-to-quarter
change (basis points)
-390 310
190 Other expense
5,158 3,032
13,301 Income before income tax 197,388 217,368 195,041
Provision for income taxes 16,782 29,935 18,802 Tax rate percentage
8.5 %
13.8 % 9.6 % Net income
$ 180,606 $ 187,433
$ 176,239 Shares used for EPS -
basic 314,190 313,488 309,117 Shares used for EPS - diluted 318,876
318,347 315,307 Earnings per share - basic $ 0.57 $ 0.60 $
0.57 Earnings per share - diluted $ 0.57 $ 0.59 $ 0.56
Dividends paid per share $ 0.37
$ 0.37 $ 0.34
(1) Includes stock-based compensation expense as follows:
Cost of sales $ 1,724 $ 1,417 $ 1,672 R&D $ 5,415 $ 4,278 $
5,536 Selling, marketing and G&A $ 6,331 $ 4,847 $ 5,539
Analog Devices, Third Quarter, Fiscal
2014
Schedule
B
Selected Balance Sheet Information (GAAP) (In
thousands)
3Q 14 2Q 14 3Q 13
Aug. 2,
2014
May 3,
2014
Aug. 3,
2013
Cash & short-term investments $ 4,932,259 $ 4,807,225 $
4,450,293 Accounts receivable, net 394,762 360,847 345,437
Inventories (1) (2) 415,098 298,432 284,342 Other current assets
181,765
171,528 164,418 Total current assets
5,923,884 5,638,032 5,244,490 PP&E, net 609,937 545,485 492,421
Investments 32,022 30,080 20,056 Goodwill 1,631,890 287,341 280,591
Intangible assets, net 695,832 28,442 28,607 Other
79,900 65,571
72,461 Total assets
$ 8,973,465 $ 6,594,951 $ 6,138,626 Deferred
income on shipments to distributors, net $ 285,832 $ 267,933 $
259,003 Current debt 1,995,398 - - Other current liabilities
341,296 303,269 232,806 Long-term debt, non-current 872,652 872,515
872,104 Non-current liabilities 471,090 219,711 131,477
Shareholders' equity
5,007,197 4,931,523
4,643,236 Total liabilities & equity
$ 8,973,465 $ 6,594,951 $
6,138,626
(1) Includes $2,094, $1,982, and $2,126 related to stock-based
compensation in 3Q14, 2Q14, and 3Q13, respectively.
(2) Includes $103,795 of acquired inventory in 3Q14
Analog Devices, Third Quarter, Fiscal 2014
Schedule
C
Cash Flow Statement (GAAP) (In thousands)
Three Months Ended 3Q 14 2Q 14 3Q
13 Aug. 2,
2014
May 3,
2014
Aug. 3,
2013
Cash flows from operating activities: Net Income $ 180,606 $
187,433 $ 176,239 Adjustments to reconcile net income to net cash
provided by operations: Depreciation 28,353 27,459 27,448
Amortization of intangibles 1,610 55 55 Stock-based compensation
expense 13,470 10,542 12,747 Loss on extinguishment of debt - -
10,205 Other non-cash activity 1,006 1,400 310 Excess tax benefit -
stock options (9,322 ) (4,423 ) (6,265 ) Deferred income taxes
(6,380 ) 1,068 (739 ) Changes in operating assets and liabilities
4,099
14,824 25 Total
adjustments 32,836
50,925 43,786
Net cash provided by operating activities (1)
213,442
238,358 220,025 Percent of total
revenue 29.3 %
34.3 % 32.6 % Cash flows
from investing activities: Purchases of short-term
available-for-sale investments (1,028,781 ) (2,275,241 ) (2,123,826
) Maturities of short-term available-for-sale investments 1,815,862
1,966,158 1,493,806 Sales of short-term available-for-sale
investments 1,298,044 189,267 216,312 Additions to property, plant
and equipment (42,315 ) (44,058 ) (30,068 ) Payments for
acquisitions, net of cash acquired (1,943,704 ) - (2,475 ) Change
in other assets (340 )
(6,076 ) (1,540 ) Net
cash provided by (used for) investing activities
98,766
(169,950 ) (447,791 ) Cash flows from
financing activities: Payment of senior unsecured notes - -
(392,790 ) Proceeds from debt 1,995,398 - 493,880 Proceeds from
derivative instruments - - 10,952 Dividend payments to shareholders
(116,098 ) (115,795 ) (104,923 ) Repurchase of common stock (57,394
) (22,614 ) - Proceeds from employee stock plans 36,045 62,936
89,653 Excess tax benefit - stock options 9,322 4,423 6,265
Contingent consideration payment (1,803 ) - - Change in other
financing activities
5,406 (11,284 )
(10,643 ) Net cash provided by (used for) financing activities
1,870,876
(82,334 ) 92,394 Effect
of exchange rate changes on cash
(433 ) (511 ) (191
) Net increase (decrease) in cash and cash equivalents
2,182,651 (14,437 ) (135,563 ) Cash and cash equivalents at
beginning of period
402,790 417,227
595,631 Cash and cash equivalents at end of period
$ 2,585,441
$ 402,790 $ 460,068
(1) Includes $18,303 of net cash used by operating activities
for Hittite operations in 3Q14
Analog Devices, Third Quarter, Fiscal 2014
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. The results below are inclusive of the Hittite acquisition
from the acquisition date, July 22, 2014 and the consumer end
market results are reflective of the sale of the Company's
microphone product line in the fourth quarter of fiscal 2013.
Three Months Ended Aug. 2,
2014
May 3, 2014 Aug. 3,
2013
Revenue
%
Q/Q % Y/Y %
Revenue Revenue Industrial* $ 350,578 48 % 8 % 12 % $
325,802 $ 312,970 Automotive 130,052 18 % -4 % 8 % 135,828 120,925
Consumer 80,870 11 % 4 % -19 % 77,821 100,254 Communications*
166,252 23 % 7 % 19 % 155,085
140,023
Total Revenue $ 727,752
100 % 5 % 8 % $
694,536 $ 674,172
* Includes $2,296 and $3,096 of revenue in 3Q14 related to
Hittite in the industrial and communications end markets,
respectively.
Analog Devices, Third Quarter, Fiscal 2014
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. The results below are
inclusive of the Hittite acquisition from the acquisition date,
July 22, 2014, and the other analog product category market results
are reflective of the sale of the Company's microphone product line
in the forth quarter of fiscal 2013.
Three Months Ended Aug. 2,
2014
May 3,
2014
Aug. 3,
2013
Revenue % Q/Q
% Y/Y % Revenue Revenue
Converters $ 327,538 45 % 3 % 9 % $ 317,915 $ 300,484 Amplifiers /
Radio Frequency 194,017 27 % 4 % 9 % 186,287 177,451 Other analog
95,964 13 % 9 % 4 % 88,103
92,278 Subtotal Analog Signal Processing 617,519
85 % 4 % 8 % 592,305 570,213 Power management
& reference 45,913 6 % 6 % 1 %
43,138 45,611
Total Analog Products $
663,432 91 % 4 %
8 % $ 635,443 $ 615,824
Digital Signal Processing 64,320 9 % 9 % 10 %
59,093 58,348
Total Revenue $
727,752 100 % 5 %
8 % $ 694,536 $ 674,172
Analog Devices, Third Quarter,
Fiscal 2014
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 14
2Q 14 3Q 13 Aug.
2,
2014
May 3, 2014 Aug. 3,
2013
GAAP Revenue $727,752 $694,536
$674,172 Q/Q Revenue growth % 5% 11%
2% Hittite Operations (5,392) - -
Non-GAAP Revenue
$ 722,360 $ 694,536 $ 674,172 Q/Q Revenue
growth % 4% 11% 2% GAAP Gross
Margin $476,290 $458,743 $435,062 Gross
Margin Pergentage 65.4% 66.1% 64.5%
Hittite Operations (3,015) - - Acquistion-Related Expenses 6,837
- -
Non-GAAP Gross Margin $ 480,112
$ 458,743 $ 435,062 Gross Margin
Percentage 66.5% 66.1% 64.5%
GAAP Operating Expenses $ 273,744 $ 238,343
$ 226,720 Percent of Revenue 37.6%
34.3% 33.6% Hittite Operations (2,033) - -
Acquistion-Related Expenses (5,284) - - Acquistion-Related
Transaction Costs (21,123) - -
Non-GAAP Operating
Expenses $ 245,304 $ 238,343 $
226,720 Percent of Revenue 34.0% 34.3%
33.6% GAAP Operating Income/Margin $
202,546 $ 220,400 $ 208,342 Percent of
Revenue 27.8% 31.7% 30.9% Hittite
Operations (982) - - Acquistion-Related Expenses 12,121 - -
Acquistion-Related Transaction Costs 21,123 - -
Non-GAAP Operating Income/Margin $ 234,808
$ 220,400 $ 208,342 Percent of Revenue
32.5% 31.7% 30.9% GAAP Other
Expense $ 5,158 $ 3,032 $ 13,301
Percent of Revenue 0.7% 0.4% 2.0%
Acquistion-Related Debt Costs (1,513) - - Loss on Extinguishment of
Debt - - (10,205)
Non-GAAP Other Expense $
3,645 $ 3,032 $ 3,096 Percent of
Revenue 0.5% 0.4% 0.5% GAAP
Diluted EPS $ 0.57 $ 0.59 $ 0.56 Impact of
Loss on Extinguishment of Debt - - 0.02 Hittite Operations - - -
Acquistion-Related Expenses 0.02 - - Acquistion-Related Transaction
Costs 0.04 - - Acquistion-Related Debt Costs - - - Impact of
Expired Tax Statute - - (0.01)
Non-GAAP Diluted
EPS (1) $ 0.63 $ 0.59 $ 0.57
(1) The sum of the individual per share amounts may not equal
the total due to rounding.
Analog Devices, Inc.Mr. Ali Husain, 781-461-3282
(phone)781-461-3491 (fax)investor.relations@analog.com
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