Analog Devices Reports Third Quarter 2016 Results
Revenue increases to
"We executed well in the third quarter and delivered revenue and diluted
earnings per share results that exceeded our revised guidance," said
"Looking ahead to the October quarter, we are planning for revenue to
increase sequentially, and be in the range of
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
2016
The 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-GAAP |
Non-GAAP | |||||||
Revenue |
|
- |
|
||||||
Gross Margin | approx. 65.2% |
|
approx. 65.5% | ||||||
Operating Expenses |
Slightly up |
|
Slightly up |
||||||
Interest & Other Expense |
|
- |
|
||||||
Tax Rate | approx. 12.5% | - | approx. 12.0% | ||||||
Earnings per Share |
|
|
|
||||||
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,
ADI will host a conference call to discuss third
quarter fiscal 2016 results and short-term outlook today, beginning at
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 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 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.
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
Forward Looking Statements
This 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
Important Additional Information Will Be Filed With The
In
connection with the proposed transaction,
Participants in the Solicitation
Linear Technology,
Non-Solicitation
This 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.
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Schedule A |
|||||||||||||
Revenue and Earnings Summary (Unaudited) | |||||||||||||
(In thousands, except per-share amounts) | |||||||||||||
|
|||||||||||||
Three Months Ended | |||||||||||||
3Q 16 | 2Q 16 | 3Q 15 | |||||||||||
2016 |
2016 |
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 | |||||||
|
||||||||||||
Schedule B |
||||||||||||
Selected Balance Sheet Information (Unaudited) | ||||||||||||
(In thousands) | ||||||||||||
3Q 16 | 2Q 16 | 3Q 15 | ||||||||||
2016 |
2016 |
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 | |||||||||
|
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
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Schedule C |
||||||||||||||
Cash Flow Statement (Unaudited) | ||||||||||||||
(In thousands) | ||||||||||||||
Three Months Ended | ||||||||||||||
3Q 16 | 2Q 16 | 3Q 15 | ||||||||||||
2016 |
2016 |
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 | ||||||||
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 | ||||||||||||||||||||||||||
2016 |
2016 |
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.
|
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Schedule E |
||||||||||||||
Reconciliation from GAAP to Non-GAAP Revenue and Earnings
Measures (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 |
||||||||||||||
|
||||||||||||||
Three Months Ended | ||||||||||||||
3Q 16 | 2Q 16 | 3Q 15 | ||||||||||||
2016 |
2016 |
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 | |||||||||||||
2016 |
2016 |
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/
Mr.
781-461-3491
(fax)
Treasurer and Director of Investor Relations
investor.relations@analog.com
Source:
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