Revenue increases to $870 million, Free Cash Flow margin in
the quarter increases over 600 basis points compared to the prior
year
Analog Devices, Inc. (NASDAQ: ADI), today announced financial
results for its third quarter of fiscal year 2016, which ended July
30, 2016.
“We executed well in the third quarter and delivered revenue and
diluted earnings per share results that exceeded our revised
guidance,” said Vincent Roche, President and CEO. “During the
quarter, we also announced the proposed acquisition of Linear
Technology Corporation, a combination that will create a trusted
analog industry leader, capable of delivering tremendous benefits
to our customers, our employees, and our shareholders.”
“Looking ahead to the October quarter, we are planning for
revenue to increase sequentially, and be in the range of $910
million to $970 million. By end market, we expect the industrial,
automotive, and communications infrastructure markets, in the
aggregate, to remain largely stable to their third quarter levels,
and to increase in the low-to-mid-single digits compared to the
prior year. In the consumer market, strong customer demand in the
portables sector leads us to plan for continued sequential revenue
growth in this market.”
ADI also announced that the Board of Directors has declared a
cash dividend of $0.42 per outstanding share of common
stock. The dividend will be paid on September 7, 2016 to all
shareholders of record at the close of business on August 26,
2016.
Results for the Third Quarter of Fiscal
Year 2016
- Revenue totaled $870 million, up 12%
sequentially, and up 1% year-over-year
- Revenue in ADI’s B2B markets of
industrial, automotive, and communications infrastructure totaled
$683 million, down 2% sequentially, and up 4% year-over-year
- GAAP gross margin of 65.8% of revenue;
Non-GAAP gross margin of 66.0% of revenue
- GAAP operating margin of 30.9% of
revenue; Non-GAAP operating margin of 34.1% of revenue
- GAAP diluted EPS of $0.74; Non-GAAP
diluted EPS of $0.82
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 2016, as well as the
immediately prior and year-ago quarters. Additional information on
revenue by end market is provided on Schedule D.
Outlook for the Fourth Quarter of
Fiscal Year 2016The following statements are based on
current expectations, and as indicated, are presented on a GAAP and
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.
GAAP
Non-GAAPAdjustments
Non-GAAP Revenue
$910 million to
$970million
-
$910 million to
$970million
Gross Margin approx. 65.2% $2.5 million
(1) approx. 65.5% Operating Expenses
Slightly upsequentially
$17.5 million (1)
Slightly upsequentially
Interest & Other Expense $20.0 million
- $20.0 million Tax Rate approx.
12.5% - approx. 12.0%
Earnings per
Share $0.78 to $0.88 $0.06
(2)
$0.84 to $0.94
1. Reflects estimated adjustments for amortization of purchased
intangible assets and depreciation of step up value on purchased
fixed assets.
2. Represents estimated impact of expenses associated with
non-GAAP adjustments on a per share basis.
Conference Call Scheduled for Today, Wednesday, August 17,
2016 at 10:00 am ETADI will host a conference call to discuss
third quarter fiscal 2016 results and short-term outlook today,
beginning at 10:00 am 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:
18291939, 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 E of this press release provides the reconciliation of
the Company’s historical non-GAAP revenue and earnings measures to
its GAAP measures.
Management uses non-GAAP measures 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 evaluating the
Company’s core business and trends across different reporting
periods on a consistent basis. Management also believes that
the presentation of these non-GAAP items is useful to investors
because it provides investors with the operating results that
management uses to manage the Company and enables investors and
analysts to evaluate the Company’s core business.
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:
Acquisition-Related Expenses: Expenses incurred as a result of
prior period acquisitions primarily include expense associated with
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. 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 operating
expenses, non-GAAP operating income, non-GAAP operating margin, and
non-GAAP diluted earnings per share:
Acquisition-Related Transaction Costs: Costs incurred as a
result of the Hittite acquisition and the proposed Linear
Technology acquisition, including legal, accounting and other
professional fees directly related to these acquisitions. We
excluded these costs from our non-GAAP measures because they relate
to specific transactions and are not reflective of our ongoing
financial performance.
Restructuring-Related Expenses: These expenses are incurred in
connection with facility closures, consolidation of manufacturing
facilities, severance, and other cost reduction efforts. We
excluded these expenses from our non-GAAP measures because 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.
The following items are excluded from our non-GAAP diluted
earnings per share:
Tax-Related Items: Tax adjustments associated with the non-GAAP
items discussed above. 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.
Analog Devices believes that these non-GAAP measures 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.
Free cash flow is defined as cash provided by (used in)
operating activities less capital expenditures. Schedule F of this
press release provides a calculation of supplemental free cash flow
measures.
About Analog DevicesAnalog Devices designs and
manufactures semiconductor products and solutions. We enable our
customers to interpret the world around us by intelligently
bridging the physical and digital with unmatched technologies that
sense, measure and connect. Visit http://www.analog.com.
Forward Looking StatementsThis press release contains
forward-looking statements, which address a variety of subjects
including, for example, our statements regarding expected revenue,
earnings per share, gross margin, operating expenses, interest and
other expense, tax rate, and other financial results, expected
operating leverage, production and inventory levels, expected
market trends, and expected customer demand and order rates for our
products, the proposed acquisition of Linear Technology Corporation
(“Linear Technology”), the expected benefits and synergies of the
transaction, expected growth rates of the combined companies,
Analog Devices’ expected product offerings, product development,
marketing position and technical advances resulting from the
transaction. Statements that are not historical facts, including
statements about our beliefs, plans and expectations, are
forward-looking statements. Such statements are based on our
current expectations and are subject to a number of factors and
uncertainties, which could cause actual results to differ
materially from those described in the forward-looking statements.
The following important factors and uncertainties, among others,
could cause actual results to differ materially from those
described in these forward-looking statements: 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, the ability to satisfy the conditions to closing of the
proposed transaction with Linear Technology, on the expected timing
or at all; the ability to obtain required regulatory approvals for
the proposed transaction, on the expected timing or at all,
including the potential for regulatory authorities to require
divestitures in connection with the proposed transaction; the
occurrence of any event that could give rise to the termination of
the merger agreement with Linear Technology; the risk of
stockholder litigation relating to the proposed transaction,
including resulting expense or delay; higher than expected or
unexpected costs associated with or relating to the transaction;
the risk that expected benefits, synergies and growth prospects of
the transaction may not be achieved in a timely manner, or at all;
the risk that Linear Technology’s business may not be successfully
integrated with Analog Devices’ following the closing; the risk
that Analog Devices and Linear Technology will be unable to retain
and hire key personnel; and the risk that disruption from the
transaction may adversely affect Linear Technology’s or Analog
Devices’ business and relationships with their customers, suppliers
or employees. For additional information about factors that could
cause actual results to differ materially from those described in
the forward-looking statements, please refer to both Analog
Devices’ and Linear Technology’s filings with the Securities and
Exchange Commission (“SEC”), including the risk factors contained
in each of Analog Devices’ and Linear Technology’s most recent
Quarterly Reports on Form 10-Q and Annual Report on Form 10-K.
Forward-looking statements represent management’s current
expectations and are inherently uncertain. Except as required by
law, we do not undertake any obligation to update forward-looking
statements made by us to reflect subsequent events or
circumstances.
Important Additional Information Will Be Filed With The
SECIn connection with the proposed transaction, Analog Devices
and Linear Technology intend to file relevant information with the
SEC, including a registration statement of Analog Devices on
Form S-4 (the “registration statement”) that will include a
prospectus of Analog Devices and a proxy statement of Linear
Technology (the “proxy statement/prospectus”). INVESTORS AND
SECURITY HOLDERS OF LINEAR TECHNOLOGY ARE URGED TO CAREFULLY READ
THE ENTIRE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS
AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME
AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
ANALOG DEVICES, LINEAR TECHNOLOGY AND THE PROPOSED TRANSACTION. A
definitive proxy statement/prospectus will be sent to Linear
Technology’s shareholders. The registration statement, proxy
statement/prospectus and other documents filed by Analog Devices
with the SEC may be obtained free of charge at Analog Devices’
website at www.analog.com or at the SEC’s website at www.sec.gov.
These documents may also be obtained free of charge from Analog
Devices by requesting them by mail at Analog Devices, Inc., One
Technology Way, P.O. Box 9106, Norwood, MA 02062-9106, Attention:
Investor Relations, or by telephone at (781) 461-3282. The
documents filed by Linear Technology with the SEC may be obtained
free of charge at Linear Technology’s website at www.linear.com or
at the SEC’s website at www.sec.gov. These documents may also be
obtained free of charge from Linear Technology by requesting them
by mail at Linear Technology Corporation, 1630 McCarthy Blvd.,
Milpitas, CA, 95035-7417, Attention: Investor Relations, or by
telephone at (408) 432-2407.
Participants in the SolicitationLinear Technology, Analog
Devices and certain of their directors, executive officers and
employees may be deemed participants in the solicitation of proxies
from Linear Technology shareholders in connection with the proposed
transaction. Information regarding the persons who may be deemed to
be participants in the solicitation of Linear Technology
shareholders in connection with the proposed transaction, including
a description of their direct or indirect interests, by security
holdings or otherwise, will be set forth in the proxy
statement/prospectus when it is filed with the SEC. Information
about the directors and executive officers of Analog Devices and
their ownership of Analog Devices’ common stock is set forth in the
definitive proxy statement for the Analog Devices’ 2016 annual
meeting of shareholders, as previously filed with the SEC on
January 28, 2016. Information about the directors and executive
officers of Linear Technology and their ownership of Linear
Technology common stock is set forth in the definitive proxy
statement for Linear Technology’s 2015 annual meeting of
shareholders, as previously filed with the SEC on September 17,
2015. Free copies of these documents may be obtained as described
in the paragraphs above.
Non-SolicitationThis communication shall not constitute
an offer to sell or the solicitation of an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
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 2016
Schedule
A
Revenue and Earnings Summary (Unaudited) (In thousands,
except per-share amounts)
Three Months Ended 3Q 16
2Q 16 3Q 15 July
30,2016 April 30,2016 Aug
1,2015 Revenue $ 869,591 $ 778,766 $ 863,365
Year-to-year change 1 % (5 )% 19 % Quarter-to-quarter change 12 % 1
% 5 % Cost of sales (1) 297,301 267,863
294,328 Gross margin 572,290 510,903 569,037
Gross margin percentage 65.8 % 65.6 % 65.9 % Year-to-year change
(basis points) (10 ) (80 ) 50 Quarter-to-quarter change (basis
points) 20 360 (50 )
Operating expenses: R&D (1) 163,227 160,235 160,784 Selling,
marketing and G&A (1) 122,909 112,186 120,030 Amortization of
intangibles 17,447 17,419 22,954 Special charges —
13,684 — Total operating
expenses 303,583 303,524 303,768 Total operating expenses
percentage 34.9 % 39.0 % 35.2 % Year-to-year change (basis points)
(30 ) 300 (240 ) Quarter-to-quarter change (basis points)
(410 ) 230 (80 ) Operating income
268,707 207,379 265,269 Operating income percentage 30.9 % 26.6 %
30.7 % Year-to-year change (basis points) 20 (370 ) 290
Quarter-to-quarter change (basis points) 430
130 40 Other expense
12,307 12,469 5,791 Income
before income tax 256,400 194,910 259,478 Provision for income
taxes 25,970 24,337 43,000 Tax rate percentage 10.1 %
12.5 % 16.6 % Net income $ 230,430
$ 170,573 $ 216,478
Shares used for EPS - basic 307,135 308,790 313,877 Shares used for
EPS - diluted 310,558 312,250 318,187 Earnings per share -
basic $ 0.75 $ 0.55 $ 0.69 Earnings per share - diluted $ 0.74 $
0.55 $ 0.68 Dividends paid per share $ 0.42
$ 0.42 $ 0.40 (1)
Includes stock-based compensation expense as follows: Cost of sales
$ 1,844 $ 1,986 $ 2,196 R&D $ 6,682 $ 6,646 $ 6,839 Selling,
marketing and G&A $ 8,093 $ 7,327 $ 7,329
Analog Devices, Third Quarter, Fiscal 2016
Schedule
B
Selected Balance Sheet Information (Unaudited) (In
thousands) 3Q 16 2Q
16 3Q 15 July 30,2016
April 30,2016 Aug 1,2015
Cash & short-term investments $ 3,803,434 $ 3,754,081 $
3,099,961 Accounts receivable, net 452,944 398,979 451,511
Inventories (1) 392,303 399,459 424,475 Other current assets
79,207 75,355 173,945 Total
current assets 4,727,888 4,627,874 4,149,892 PP&E, net 629,094
626,162 631,269 Investments 54,077 50,680 40,324 Goodwill 1,639,033
1,639,165 1,640,381 Intangible assets, net 529,035 548,374 601,882
Other 105,926 78,037
67,313 Total assets $ 7,685,053 $
7,570,292 $ 7,131,061 Deferred income on
shipments to distributors, net $ 327,444 $ 317,290 $ 307,265 Other
current liabilities 351,249 367,310 375,753 Debt, current — —
374,371 Long-term debt 1,731,758 1,731,336 495,189 Non-current
liabilities 291,269 280,655 513,322 Shareholders' equity
4,983,333 4,873,701 5,065,161
Total liabilities & equity $ 7,685,053
$ 7,570,292 $ 7,131,061
(1) Includes $2,554, $2,719, and $2,935 related to stock-based
compensation in 3Q16, 2Q16, and 3Q15, respectively.
Analog Devices, Third Quarter, Fiscal 2016
Schedule
C
Cash Flow Statement (Unaudited) (In thousands)
Three Months Ended 3Q 16
2Q 16 3Q 15 July 30,2016
April 30,2016 Aug 1,2015 Cash
flows from operating activities: Net Income $ 230,430 $ 170,573 $
216,478 Adjustments to reconcile net income to net cash provided by
operations: Depreciation 33,732 33,483 33,650 Amortization of
intangibles 18,916 18,440 23,898 Stock-based compensation expense
16,619 15,959 16,364 Other non-cash activity 1,127 500 3,827 Excess
tax benefit - stock options (2,982 ) (3,212 ) (6,373 ) Deferred
income taxes 12,250 539 (17,168 ) Changes in operating assets and
liabilities (56,089 ) 83,921
(73,537 ) Total adjustments 23,573
149,630 (19,339 ) Net cash provided by
operating activities 254,003
320,203 197,139 Percent of revenue
29.2 % 41.1 % 22.8 % Cash flows
from investing activities: Purchases of short-term
available-for-sale investments (2,284,166 ) (1,939,750 ) (1,403,600
) Maturities of short-term available-for-sale investments 2,078,716
1,522,688 1,083,474 Sales of short-term available-for-sale
investments 139,805 102,316 215,998 Additions to property, plant
and equipment (37,528 ) (25,517 ) (35,164 ) Payments for
acquisitions, net of cash acquired — (2,203 ) (6,947 ) Change in
other assets (8,591 ) (2,746 )
(1,180 ) Net cash used for investing activities
(111,764 ) (345,212 ) (147,419 ) Cash
flows from financing activities: Payments for deferred financing
fees (22,208 ) — — Dividend payments to shareholders (128,954 )
(129,925 ) (125,511 ) Repurchase of common stock (23,022 ) (213,650
) (31,340 ) Proceeds from employee stock plans 16,633 16,480 19,988
Excess tax benefit - stock options 2,982 3,212 6,373 Contingent
consideration payment — — (1,767 ) Change in other financing
activities (2,093 ) (2,786 )
4,327 Net cash used for financing activities
(156,662 ) (326,669 ) (127,930 ) Effect of
exchange rate changes on cash (1,569 )
898 (509 ) Net decrease in cash and cash
equivalents (15,992 ) (350,780 ) (78,719 ) Cash and cash
equivalents at beginning of period 1,119,662
1,470,442 636,216 Cash and cash
equivalents at end of period $ 1,103,670
$ 1,119,662 $ 557,497
Analog Devices, Third Quarter, Fiscal
2016
Schedule
D
Revenue Trends by End Market
(Unaudited)
(In
thousands)
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 July
30,2016 April 30,2016
Aug 1,2015 Revenue
%*
Q/Q % Y/Y %
Revenue Revenue Industrial $ 374,735 43 %
(3 )% (3 )% $ 384,973 $ 384,473 Automotive 134,617 15
% (2 )% 3 % 138,056 130,228 Consumer 186,101 21 % 131 % (10 )%
80,592 206,656 Communications 174,138 20 % (1
)% 23 % 175,145 142,008
Total Revenue $
869,591 100 % 12
% 1 % $ 778,766 $
863,365
* The sum of the individual percentages does not equal the total
due to rounding.
Analog Devices, Third Quarter, Fiscal 2016
Schedule
E
Reconciliation from GAAP to Non-GAAP
Revenue and Earnings Measures (In thousands, except per-share
amounts)(Unaudited)
See "Non-GAAP Financial Information" in
this press release for a description of the items excluded from our
non-GAAPmeasures.
Three Months Ended 3Q 16
2Q 16 3Q 15 July 30,2016
April 30,2016 Aug 1,2015 GAAP
Gross Margin $ 572,290 $ 510,903
$ 569,037 Gross Margin Percentage
65.8
%
65.6
%
65.9
% Acquisition-Related Expenses
1,888
1,476
1,307
Non-GAAP Gross Margin $ 574,178
$ 512,379 $
570,344 Gross Margin Percentage
66.0
%
65.8
%
66.1
% GAAP Operating Expenses $
303,583 $ 303,524 $ 303,768
Percent of Revenue
34.9
%
39.0
%
35.2
% Acquisition-Related Expenses
(17,582
)
(17,517
)
(23,490
) Acquisition-Related Transaction Costs
(8,310
)
—
(5,139
) Restructuring-Related Expense
—
(13,684
)
—
Non-GAAP Operating Expenses $ 277,691
$ 272,323 $
275,139
Percent of Revenue
31.9
%
35.0
%
31.9
% GAAP Operating Income/Margin $
268,707 $
207,379
$ 265,269 Percent of Revenue
30.9
%
26.6
%
30.7
% Acquisition-Related Expenses
19,470
18,993
24,797
Acquisition-Related Transaction Costs
8,310
—
5,139
Restructuring-Related Expense
—
13,684
—
Non-GAAP Operating Income/Margin $
296,487 $ 240,056
$ 295,205 Percent of Revenue
34.1
%
30.8
%
34.2
%
GAAP Diluted EPS
$
0.74
$
0.55
$
0.68
Acquisition-Related Expenses
0.06
0.06
0.08
Acquisition-Related Transaction Costs
0.02
—
0.02
Restructuring-Related Expense
—
0.04
—
Non-GAAP Diluted EPS (1)
$
0.82
$
0.64
$
0.77
(1) The sum of the individual per share amounts may not equal
the total due to rounding
Schedule
F
SUPPLEMENTAL CASH
FLOW MEASURES (Unaudited)
(In thousands)
Three Months Ended 3Q 16
2Q 16 3Q 15 July
30,2016 April 30,2016
Aug 1,2015 Net cash provided by operating
activities $ 254,003 $ 320,203 $ 197,139 Capital expenditures
(37,528 ) (25,517 ) (35,164 ) Free cash
flow $ 216,475 $ 294,686
$ 161,975 % of revenue 24.9 % 37.8 % 18.8 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160817005191/en/
Analog Devices, Inc.Mr. Ali Husain, 781-461-3282781-461-3491
(fax)Treasurer and Director of Investor
Relationsinvestor.relations@analog.com
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