Analog Devices Reports Second Quarter Fiscal Year 2013 Results

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Analog Devices Reports Second Quarter Fiscal Year 2013 Results

- Board declares $0.34 per share cash dividend

NORWOOD, Mass.--(BUSINESS WIRE)-- Analog Devices, Inc. (NASDAQ: ADI), a global leader in high-performance semiconductors for signal processing applications, today announced financial results for its second quarter of fiscal year 2013, which ended May 4, 2013.


"We had a solid second quarter led by strong sequential revenue growth from industrial and automotive applications," said Vincent Roche, President and CEO. "Excluding special items, operating margins expanded 300 basis points compared to the prior quarter and diluted earnings per share grew three times faster than revenue over the same period, demonstrating the strength of our operating model."

"Orders were higher in the second quarter compared to the prior quarter, but customers remain cautious given the uncertain macroeconomic environment. As a result, our outlook for the third quarter is for revenue to be approximately flat to up 4%," continued Mr. Roche. "We are planning for margins to expand as factory utilization improves and for expenses to remain under tight control, which we believe will generate good earnings leverage and strong free cash flow."

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 June 11, 2013 to all shareholders of record at the close of business on May 31, 2013.

Results for the Second Quarter of Fiscal 2013

  • Revenue totaled $659 million
  • Gross margin was 64% of revenue
  • Operating margin was 30% of revenue, excluding special items, and was 29% on a GAAP basis
  • Diluted EPS was $0.52
  • Cash flow from operations was $252 million, or 38% 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 second 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 Third 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 $655 to $685 million
  • Gross margin estimated to be approximately 64.5%
  • Operating expenses estimated to be approximately $226 million
  • Tax rate estimated to be approximately 16.5%
  • Diluted EPS estimated at $0.51 to $0.56

Conference Call Scheduled for 5:00 pm ET

ADI will host a conference call to discuss the second 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: 50465143, 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, 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 items are excluded from our non-GAAP diluted earnings per share:

Tax-Related Items. In the first quarter of fiscal year 2013, the Company recorded a $6.3 million tax benefit related to the reinstatement of the R&D tax credit in January 2013, retroactive to January 1, 2012. 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. 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, 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, 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, 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, Second Quarter, Fiscal 2013

Schedule A
Revenue and Earnings Summary (GAAP)
(In thousands, except per-share amounts)

 
 
Three Months Ended
   

2Q 13
May 4,
2013

  

1Q 13
Feb. 2,
2013

  

2Q 12
May 5,
2012

Revenue$659,250$622,134$675,094
Year-to-year change-2%-4%-15%
Quarter-to-quarter change6%-10%4%
Cost of sales (1)   237,055    231,850    234,639 
Gross margin422,195390,284440,455
Gross margin percentage64.0%62.7%65.2%
Year-to-year change (basis points)-120-50-240
Quarter-to-quarter change (basis points)   130    -110    200 
Operating expenses:
R&D (1)128,110125,164127,537
Selling, marketing and G&A (1)102,70397,56099,992
Special charges   -    14,071    - 
Total operating expenses230,813236,795227,529
Total operating expenses percentage35.0%38.1%33.7%
Year-to-year change (basis points)130320390
Quarter-to-quarter change (basis points)   -310    530    -120 
Operating income191,382153,489212,926
Operating income percentage29.0%24.7%31.5%
Year-to-year change (basis points)-250-360-620
Quarter-to-quarter change (basis points)   430    -630    320 
Other expense   3,721    3,380    1,472 
Income before income tax187,661150,109211,454
Provision for income taxes23,18918,88748,555
Tax rate percentage   12.4%   12.6%   23.0%
Net income  $164,472   $131,222   $162,899 
 
Shares used for EPS - basic307,444303,484298,130
Shares used for EPS - diluted313,368310,275305,921
 
Earnings per share - basic$0.53$0.43$0.55
Earnings per share - diluted$0.52$0.42$0.53
 
Dividends paid per share  $0.34   $0.30   $0.30 
 
(1) Includes stock-based compensation expense as follows:
Cost of sales$1,517$1,667$1,671
R&D$5,044$5,600$5,162
Selling, marketing and G&A$11,395$5,794$5,267

      

Analog Devices, Second Quarter, Fiscal 2013

Schedule B

Selected Balance Sheet Information (GAAP)
(In thousands)

 
   

2Q 13
May 4,
2013

  

1Q 13
Feb. 2,
2013

  

2Q 12
May 5,
2012

Cash & short-term investments$4,172,141$3,986,979$3,752,625
Accounts receivable, net333,924329,578330,282
Inventories (1)298,967307,263303,742
Other current assets   158,180   190,115   135,880
Total current assets4,963,2124,813,9354,522,529
PP&E, net490,047491,431478,959
Investments18,67832,72030,209
Goodwill and intangible assets311,587313,084309,092
Other   57,512   65,638   71,701
Total assets  $5,841,036  $5,716,808  $5,412,490
 
Deferred income on shipments to distributors, net$244,202$243,396$244,150
Other current liabilities264,960265,139314,424
Long-term debt, non-current757,855759,672847,983
Non-current liabilities113,429124,80480,793
Shareholders' equity   4,460,590   4,323,797   3,925,140
Total liabilities & equity  $5,841,036  $5,716,808  $5,412,490
 

(1) Includes $2,123, $2,381, and $2,318 related to stock-based compensation in 2Q13, 1Q13, and 2Q12, respectively.

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Analog Devices, Second Quarter, Fiscal 2013

Schedule C
Cash Flow Statement (GAAP)
(In thousands)

 
       
Three Months Ended

2Q 13
May 4,
2013

  

1Q 13
Feb. 2,
2013

  

2Q 12
May 5,
2012

Cash flows from operating activities:
Net Income$164,472$131,222$162,899
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation27,47827,75526,871
Amortization of intangibles555518
Stock-based compensation expense17,95613,06112,100
Gain on sale of investments--(1,231)
Excess tax benefit - stock options(2,833