1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from______ to _________
Commission File No. 1-7819
ANALOG DEVICES, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2348234
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Technology Way, Norwood, MA 02062-9106
(Address of principal executive offices) (Zip Code)
(617) 329-4700
(Registrant's telephone number, including area code)
________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
The number of shares outstanding of each of the issuer's classes
of Common Stock as of February 24, 1995 was 75,498,177 shares of
Common Stock.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands except per share amounts)
Three Months Ended
------------------
January 28, 1995 January 29, 1994
---------------- ----------------
Net sales $208,005 $181,088
Cost of sales 103,145 94,593
------- -------
Gross margin 104,860 86,495
Operating expenses:
Research and development 30,250 24,256
Selling, marketing, general
and administrative 43,671 40,997
------- -------
73,921 65,253
------- -------
Operating income 30,939 21,242
Nonoperating expenses (income):
Interest expense 1,282 1,830
Interest income (2,191) (593)
Other 732 565
------- -------
(177) 1,802
------- -------
Income before income taxes 31,116 19,440
Provision for income taxes 7,468 4,180
------- -------
Net income $ 23,648 $ 15,260
======= =======
Shares used to compute
earnings per share 78,431 76,455
======= =======
Earnings per share of common stock $ 0.30 $ 0.20
======= =======
See accompanying notes.
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ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(thousands except share amounts)
Assets January 28, 1995 October 29, 1994 January 29, 1994
---------------- ---------------- ----------------
Cash and cash equivalents $101,133 $109,113 $ 94,363
Short-term investments 57,548 72,652 -
Accounts receivable, net 169,752 162,337 151,056
Inventories:
Finished good 40,448 45,678 47,960
Work in process 68,055 69,771 79,939
Raw materials 18,184 15,277 15,160
-------- -------- --------
126,687 130,726 143,059
Prepaid income taxes 25,000 25,587 22,500
Prepaid expenses 6,424 5,042 5,932
-------- -------- --------
Total current assets 486,544 505,457 416,910
-------- -------- --------
Property, plant and equipment,
at cost:
Land and buildings 122,040 111,857 81,900
Machinery and equipment 510,608 477,339 452,549
Office equipment 34,040 36,613 38,607
Leasehold improvements 37,620 33,070 27,616
-------- -------- --------
704,308 658,879 600,672
Less accumulated depreciation
and amortization 382,567 377,064 357,258
-------- -------- --------
Net property, plant and
equipment 321,741 281,815 243,414
-------- -------- --------
Intangible assets, net 18,754 19,262 20,794
Deferred charges and other
assets 9,381 9,337 5,497
-------- -------- --------
Total other assets 28,135 28,599 26,291
-------- -------- --------
$836,420 $815,871 $686,615
======== ======== ========
See accompanying notes.
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ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(thousands except share amounts)
Liabilities and
Stockholders' Equity January 28, 1995 October 29, 1994 January 29, 1994
---------------- ---------------- ----------------
Short-term borrowings and
current portion of long-
term debt $ 3,938 $ 22,917 $ 23,531
Obligations under capital leases 191 236 342
Accounts payable 86,655 74,506 43,501
Deferred income on shipments to
domestic distributors 21,450 18,881 17,263
Income taxes payable 32,171 29,425 15,410
Accrued liabilities 57,072 60,221 43,014
-------- -------- --------
Total current liabilities 201,477 206,186 143,061
-------- -------- --------
Long-term debt 80,000 80,000 80,000
Noncurrent obligations under
capital leases 24 61 209
Deferred income taxes 3,250 3,225 9,025
Other noncurrent liabilities 4,746 4,484 4,868
-------- -------- --------
Total noncurrent liabilities 88,020 87,770 94,102
-------- -------- --------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $1.00 par value,
500,000 shares authorized,
none outstanding - - -
Common stock, $.16 2/3 par value,
150,000,000 shares authorized,
75,438,343 shares issued
(75,252,112 in October 1994,
51,048,855 in January 1994) 12,573 12,542 8,508
Capital in excess of par
value 142,621 141,159 144,358
Retained earnings 385,842 362,194 302,958
Cumulative translation
adjustment 5,964 6,020 5,657
-------- -------- --------
547,000 521,915 461,481
Less 3,433 shares in
treasury, at cost
(none in October 1994 and
1,573,917 in January 1994) 77 - 12,029
-------- -------- --------
Total stockholders' equity 546,923 521,915 449,452
-------- -------- --------
$836,420 $815,871 $686,615
======== ======== ========
See accompanying notes.
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ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(thousands)
Three Months Ended
------------------
January 28, 1995 January 29, 1994
---------------- ----------------
OPERATIONS
Cash flows from operations:
Net income $ 23,648 $15,260
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 15,023 15,301
Deferred income taxes 43 493
Other noncash expenses 402 816
Changes in operating assets and liabilities 10,868 (10,555)
-------- -------
Total adjustments 26,336 6,055
-------- -------
Net cash provided by operations 49,984 21,315
-------- -------
INVESTMENTS
Cash flows from investments:
Additions to property, plant and equipment, net (54,764) (10,047)
Maturities of short-term investments 50,192 -
Purchase of short-term investments (35,088) -
-------- -------
Net cash used for investments (39,660) (10,047)
-------- -------
FINANCING ACTIVITIES
Cash flows from financing activities:
Payments on fixed rate borrowings (20,000) -
Net increase in variable rate borrowings 1,035 1,500
Proceeds from employee stock plans 685 869
Payments on capital lease obligations (82) (81)
-------- -------
Net cash provided by (used for) financing
activities (18,362) 2,288
-------- -------
Effect of exchange rate changes on cash 58 139
-------- -------
Net increase (decrease) in cash and cash
equivalents (7,980) 13,695
Cash and cash equivalents at beginning of period 109,113 80,668
-------- -------
Cash and cash equivalents at end of period $101,133 $94,363
======== =======
SUPPLEMENTAL INFORMATION
Cash paid during the period for:
Income taxes $ 2,954 $ 3,323
======== =======
Interest $ 135 $ 794
======== =======
See accompanying notes.
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Analog Devices, Inc.
Notes to Condensed Consolidated Financial Statements
January 28, 1995
Note 1 - In the opinion of management, the information furnished in the
accompanying financial statements reflects all adjustments, consisting only of
normal recurring adjustments, which are necessary to a fair statement of the
results for this interim period and should be read in conjunction with the
most recent Annual Report to Stockholders.
Note 2 - Litigation
As previously reported in the Company's Annual Report on Form 10-K for the
fiscal year ended October 29, 1994 and as set forth in Item 1, "Legal
Proceedings" in this Form 10-Q for the fiscal quarter ended January 28,
1995, the Company is engaged in patent infringement litigation with Texas
Instruments, Inc. and a related enforcement proceeding brought by the
International Trade Commission, and antitrust litigation with Maxim Integrated
Products, Inc.
Although the Company believes it should prevail in these matters, the Company
is unable to determine their ultimate outcome or estimate the ultimate amount
of liability, if any, at this time. An adverse resolution of these matters
could have a material adverse effect on the Company's consolidated financial
position or on its consolidated results of operations or cash flows in the
period in which the matters are resolved.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
First Quarter of Fiscal 1995 Compared to the First Quarter of Fiscal 1994
Net sales increased 15% to $208.0 million for the first quarter of fiscal 1995,
compared to net sales of $181.1 million for the first quarter of fiscal 1994.
The sales increase resulted primarily from higher sales volumes of standard
linear IC products, particularly for high-speed data converters and amplifiers.
The Company also continued to experience strong demand for system-level ICs.
Total IC sales, including both standard linear and system-level IC products,
grew 18% over the prior year to comprise approximately 91% of total sales for
the first quarter of fiscal 1995. Sales of assembled products declined 10% from
the first quarter of 1994 to the first quarter of 1995.
On a geographic basis, the strongest year-over-year sales gains were registered
in Europe and Japan with sales growth in both regions aided by the translation
of local currency sales to a weaker average U.S. dollar exchange rate. Sales to
European customers recovered from a weak first quarter one year ago as European
industrial economies improved. Revenue increases in Japan were largely
attributable to increased demand for standard linear IC products. Sales
through the North American distribution channel also grew significantly from
the comparable quarter of 1994 due to the Company's increased penetration of
this channel for its standard linear IC products.
Gross margin improved to 50.4% of sales from 47.8% in the first quarter of
1994. This increase resulted principally from a greater mix of higher-margined
standard linear IC products as well as continued improvement in gross margins
of system-level IC products year-over-year as further volume efficiencies have
been realized in the system-level IC product area.
R&D expense for the first quarter of 1995 grew 24.7% over the same quarter
last year to 14.5% of sales as the Company continued investment in high growth
opportunities available in communications, digital signal processing and
micromachining technology. Selling, marketing, general and administrative
(SMG&A) expense growth was contained to 6.5% compared to the first quarter of
1994, increasing at a lower rate than sales. As a result, SMG&A as a percentage
of sales decreased to 21.0% from 22.6% for the year ago period.
Operating income increased 46% reaching 14.9% of sales compared to 11.7% for
the first quarter of fiscal 1994. This performance gain was attributable to
higher sales, improvement in gross margin and continued efforts in further
reducing the SMG&A expense to sales ratio.
Nonoperating expenses decreased $2.0 million, benefiting from increased
interest income on a higher level of cash, cash equivalents and short-term
investments as interest income increased from $593,000 in the first quarter of
fiscal 1994 to $2.2 million in the first quarter of fiscal 1995. A reduction in
interest expense related to the maturity of the Company's $20.0 term loan early
in the first quarter of 1995 also contributed to the decrease in nonoperating
expenses from the first quarter of 1994 to the first quarter of 1995.
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The effective income tax rate increased from 21.5% of sales for the year ago
quarter to 24.0% for the first quarter of fiscal 1995 due to a shift in the
mix of worldwide profits.
The growth in sales, improved operating performance and lower nonoperating
expenses led to a 55% increase in net income to $23.6 million for the first
quarter of fiscal 1995. Earnings per share increased to $.30 from $.20 for
last year's first quarter.
First Quarter of Fiscal 1995 Compared to the Fourth Quarter of Fiscal 1994
Continued strength in orders coupled with a strong backlog led to an increase
in net sales from $203.3 million for the previous quarter to $208.0 million for
the first quarter, a traditionally weak seasonal quarter. First quarter sales
growth was due principally to greater sales volumes of both standard linear IC
and system-level IC products, with the highest growth for both in the
communications and computer sectors. The largest sales increases occurred in
Europe, continuing the recovery begun in the fourth quarter.
Gross margin improved slightly from the fourth quarter's 50.1% of sales to
50.4% for the first quarter of 1995. Gross margin for the Company's standard
linear IC products remained at a high level, while gross margin for
system-level IC products improved.
R&D expenses for the first quarter of 1995 increased $1.2 million over the
preceding quarter as the funding of new product development continued. As a
percentage of sales, R&D expenses were relatively unchanged at 14.5% compared
to 14.3% for the fourth quarter. SMG&A expenses were flat to the prior quarter
in dollars and as a percentage of sales decreased from 21.5% to 21.0% for the
first quarter of fiscal 1995.
The higher sales, improved gross margin and tight control over operating
expenses generated a sequential gain in operating income of 6.7% with operating
income reaching 14.9% of sales compared to 14.3% in the previous quarter.
Interest expense was reduced from $1.7 million in the fourth quarter to $1.3
million in the first quarter of 1995 due to a reduction in debt during the
first quarter. The effective income tax rate for the first quarter remained at
24.0% compared to the prior quarter.
Net income grew 9.1%, increasing from $21.7 million or $.28 for the fourth
quarter of fiscal 1994 to $23.6 million or $.30 per share for the first quarter
of fiscal 1995. As a percentage of sales, net income improved to 11.4% from
10.7% for the fourth quarter.
Liquidity and Capital Resources
At January 28, 1995, cash and cash equivalents and short-term investments
totaled $158.7 million, a decrease of $23.1 million compared to $181.8 million
at the end of the fourth quarter of fiscal 1994 and an increase of $64.3
million compared to $94.4 million at the end of the first quarter of fiscal
1994. The decrease in cash, cash equivalents and short-term investments from
the fourth quarter of fiscal 1994 resulted from cash used to fund a portion
of capital expenditures as well as reduce debt in the first quarter of fiscal
1995. The increase over the first quarter of fiscal 1994 primarily represented
continued generation of cash flow from operations.
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Cash provided by operating activities was $50.0 million or 24.0% of sales in
the first quarter of 1995 compared to $21.3 million or 11.8% of sales in the
first quarter of 1994. The increase in operating cash flows from the year
earlier period was principally attributable to higher net income together with
an increase in accounts payable. The increase in accounts payable compared to
the first quarter of 1994 primarily reflected expenditures associated with the
expansion of the Company's wafer fabrication facilities in Limerick, Ireland.
Net additions to property, plant and equipment of $54.8 million for the first
quarter of fiscal 1995 were funded with both internally generated cash flow
from operations and cash on hand. The majority of these expenditures related
to the addition of 6-inch submicron wafer fabrication capability at the
Company's facility in Limerick, Ireland. Capital expenditures for fiscal 1995
are currently expected to be approximately $150 million, including capital
expenditures associated with the Limerick wafer fabrication expansion.
In the first quarter of fiscal 1995, the Company's 7.18%, $20.0 million loan
matured and was repaid in full with cash on hand. At January 28, 1995,
substantially all of the Company's lines of credit were unused, including its
four-year, $60 million credit facility.
The Company believes that its strong financial condition, existing sources
of liquidity, available capital resources and cash expected to be generated
from operations leave it well positioned to obtain the funds required to meet
its current and future operating requirements.
Litigation
As set forth in Note 2 to the Condensed Consolidated Financial Statements and
Item 1., "Legal Proceedings" contained in this Form 10-Q for the fiscal quarter
ended January 28, 1995, the Company is engaged in patent infringement
litigation with Texas Instruments, Inc. and a related enforcement proceeding
brought by the International Trade Commission, and antitrust litigation with
Maxim Integrated Products, Inc.
Although the Company believes it should prevail in these matters, the Company
is unable to determine their ultimate outcome or estimate the ultimate amount
of liability, if any, at this time. An adverse resolution of these matters
could have a material adverse effect on the Company's consolidated financial
position or on its consolidated results of operations or cash flows in the
period in which the matters are resolved.
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PART II - OTHER INFORMATION
ANALOG DEVICES, INC.
Item 1. Legal Proceedings
Texas Instruments Litigation
As previously reported in the Company's Annual Report on Form 10-K for
the fiscal year ended October 29, 1994 (the "1994 10-K"), the Company
is a defendant in a lawsuit brought by Texas Instruments, Inc. ("TI")
on July 9, 1990 in the United States District Court for the Western
District of Texas (Dallas Division). The complaint alleges patent
infringement arising from certain plastic encapsulation processes and
seeks an injunction and unspecified damages. The trial of this action
is now scheduled to begin on April 18, 1995. In addition, the
enforcement proceeding brought by the International Trade Commission
(the "ITC") alleging that the Company had violated a cease and desist
order of the ITC did not commence in February 1995 as previously
reported. The initial hearing in this proceeding has been deferred to
an as yet unspecified date.
On January 10, 1995, TI commenced a new lawsuit in the United States
District Court for the Eastern District of Texas (Marshall Division)
naming the Company as a defendant. The complaint alleges infringement
of two TI patents relating to digital signal processing technology not
at issue in the previously noted litigation and seeks an injunction
and unspecified damages. The Company has recently filed an answer and
counterclaim denying infringement and challenging the validity of the
TI patents. The Company has also filed a motion to transfer this
action to the United States District Court for the District of
Massachusetts. This case is proceeding and is in its preliminary
stages.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed for the three months
ended January 28, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Analog Devices, Inc.
--------------------
(Registrant)
Date: March 10, 1995 By:/s/ Ray Stata
--------------------
Ray Stata
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: March 10, 1995 By:/s/ Joseph E. McDonough
--------------------
Joseph E. McDonough
Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
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5
1,000
U.S. DOLLARS
3-MOS
OCT-28-1995
OCT-30-1994
JAN-28-1995
1
101,133
57,548
169,752
0
126,687
486,544
704,308
382,567
836,420
201,477
80,024
12,573
0
0
534,350
836,420
208,005
208,005
103,145
103,145
73,921
0
1,282
31,116
7,468
23,648
0
0
0
23,648
.30
.30
