Analog Devices Reports First Quarter 2016 Results
Revenue in the first quarter totaled
"Despite an uneven macroeconomic backdrop and significant weakness in
the consumer market, our business to business (B2B) markets of
industrial, automotive, and communications infrastructure were resilient
in the first quarter," said
"With order flows in the B2B markets trending largely in-line with seasonal patterns, we are planning for combined revenue in these markets to grow at a mid-to-high single digit rate sequentially in the second quarter, offsetting expected weakness in the portable consumer market. In total, we expect revenue in the second quarter to be in the range of -2% to +4% sequentially."
Results for the First Quarter of Fiscal Year 2016
-
Revenue totaled
$769 million , down 21% sequentially, and stable year-over-year -
Revenue in ADI's B2B markets of industrial, automotive, and
communications infrastructure totaled
$644 million , down 3% sequentially, and down 5% year-over-year - GAAP gross margin of 62.0% of revenue; Non-GAAP gross margin of 62.2% of revenue
- GAAP operating margin of 25.3% of revenue; Non-GAAP operating margin of 27.8% of revenue
-
GAAP diluted EPS of
$0.52 ; Non-GAAP diluted EPS of$0.56
Please refer to the schedules provided for a summary of revenue and earnings, selected balance sheet information, and the cash flow statement for the first 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.
ADI Increases Dividend by
ADI also announced on
In addition, the Board of Directors approved an increase to the
Company's share repurchase authorization to
For additional information please visit ADI's financial press release page.
Outlook for the Second 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 |
-2% to +4% |
- |
-2% to +4% |
|||
| Gross Margin | approx. 65.3% |
|
approx. 65.5% | |||
| Operating Expenses |
Slightly up |
|
Slightly up |
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Interest & Other |
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- |
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| Tax Rate | approx. 14% | - | approx. 13% | |||
| Earnings per Share |
|
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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 first
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: 95215509, 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 in the first quarter of fiscal 2016 and the fourth and first quarters of fiscal 2015 as a result of the Hittite acquisition primarily include: severance payments, expense associated with the fair value adjustments to inventory and 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.
Stock-Based Compensation Expense: In the first quarter of fiscal
2015, the Company recorded
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:
Other Operating Expense: Costs incurred in the fourth quarter of fiscal 2015 as a result of the conversion of the benefits provided to participants in the Company's Irish defined benefit pension plan to benefits provided under the Company's Irish defined contribution plan including settlement charges, legal, accounting and other professional fees. 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.
Acquisition-Related Transaction Costs: Costs incurred as a result of the Hittite acquisition in the first quarter of fiscal 2015 including 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 item is excluded from our non-GAAP other expense and non-GAAP diluted earnings per share:
Loss on Extinguishment of Debt: In the first quarter of fiscal
2016, the Company redeemed its outstanding 3.0% senior unsecured notes
due
The following items are excluded from our non-GAAP diluted earnings per share:
Tax-Related Items: In the first quarter of 2016, the Company
recorded a
Schedule F of this press release provides the reconciliation of the Company's historical adjusted cash flow measures to its cash flow measures.
Management uses adjusted free cash flow to measure the liquidity of its continuing operations and evaluate the Company's operating cash performance against past periods. Free cash flow is defined as cash provided by (used in) operating activities less capital expenditures. Adjusted free cash flow is defined by the Company as free cash flow adjusted for payments (refunds) that are not reflective of our ongoing operating cash performance. Management believes that the presentation of this adjusted financial measure is useful to investors because it provides investors with the operating cash flow results that management uses to manage the Company and enables investors and analysts to evaluate the Company's liquidity from continuing operations.
The following item is excluded from our fourth quarter fiscal 2015 adjusted free cash flow and adjusted free cash flow margin:
Pension Conversion Payments: Costs incurred as a result of the conversion of the benefits provided to participants in the Company's Irish defined benefit pension plan to benefits provided under the Company's Irish defined contribution plan including settlement charges, legal, accounting, tax and other professional fees. We excluded these costs from our adjusted financial measures because they relate to a specific transaction and are not reflective of our ongoing financial performance.
Investors should consider our non-GAAP financial measures in conjunction with the corresponding GAAP measures.
About
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, 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, that are based on our current expectations,
beliefs, assumptions, estimates, forecasts, and projections about our
business and the industry and markets in which
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Schedule A |
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| Revenue and Earnings Summary (Unaudited) | |||||||||||||||
| (In thousands, except per-share amounts) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| 1Q 16 | 4Q 15 | 1Q 15 | |||||||||||||
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| Revenue | $ | 769,429 | $ | 978,722 | $ | 771,986 | |||||||||
| Year-to-year change | (0 | )% | 20 | % | 23 | % | |||||||||
| Quarter-to-quarter change | (21 | )% | 13 | % | (5 | )% | |||||||||
| Cost of sales (1) | 292,136 | 336,926 | 268,379 | ||||||||||||
| Gross margin | 477,293 | 641,796 | 503,607 | ||||||||||||
| Gross margin percentage | 62.0 | % | 65.6 | % | 65.2 | % | |||||||||
| Year-to-year change (basis points) | (320 | ) | 590 | 10 | |||||||||||
| Quarter-to-quarter change (basis points) | (360 | ) | (30 | ) | 550 | ||||||||||
| Operating expenses: | |||||||||||||||
| R&D (1) | 157,428 | 170,736 | 151,706 | ||||||||||||
| Selling, marketing and G&A (1) | 107,462 | 121,400 | 120,171 | ||||||||||||
| Amortization of intangibles | 17,358 | 17,358 | 23,796 | ||||||||||||
| Other operating expense | — | 223,672 | — | ||||||||||||
| Total operating expenses | 282,248 | 533,166 | 295,673 | ||||||||||||
| Total operating expenses percentage | 36.7 | % | 54.5 | % | 38.3 | % | |||||||||
| Year-to-year change (basis points) | (160 | ) | 1,320 | 180 | |||||||||||
| Quarter-to-quarter change (basis points) | (1,780 | ) | 1,930 | (300 | ) | ||||||||||
| Operating income | 195,045 | 108,630 | 207,934 | ||||||||||||
| Operating income percentage | 25.3 | % | 11.1 | % | 26.9 | % | |||||||||
| Year-to-year change (basis points) | (160 | ) | (730 | ) | (170 | ) | |||||||||
| Quarter-to-quarter change (basis points) | 1,420 | (1,960 | ) | 850 | |||||||||||
| Other expense | 12,868 | 3,953 | 7,164 | ||||||||||||
| Income before income tax | 182,177 | 104,677 | 200,770 | ||||||||||||
| Provision for income taxes | 17,673 | 8,372 | 22,013 | ||||||||||||
| Tax rate percentage | 9.7 | % | 8.0 | % | 11.0 | % | |||||||||
| Net income | $ | 164,504 | $ | 96,305 | $ | 178,757 | |||||||||
| Shares used for EPS - basic | 311,166 | 312,829 | 311,274 | ||||||||||||
| Shares used for EPS - diluted | 314,793 | 316,571 | 315,684 | ||||||||||||
| Earnings per share - basic | $ | 0.53 | $ | 0.31 | $ | 0.57 | |||||||||
| Earnings per share - diluted | $ | 0.52 | $ | 0.30 | $ | 0.57 | |||||||||
| Dividends paid per share | $ | 0.40 | $ | 0.40 | $ | 0.37 | |||||||||
| (1) Includes stock-based compensation expense as follows: | |||||||||||||||
| Cost of sales | $ | 2,092 | $ | 2,188 | $ | 2,392 | |||||||||
| R&D | $ | 6,704 | $ | 6,487 | $ | 6,874 | |||||||||
| Selling, marketing and G&A | $ | 6,813 | $ | 7,408 | $ | 11,105 | |||||||||
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Schedule B |
||||||||||||
| Selected Balance Sheet Information (Unaudited) | ||||||||||||
| (In thousands) | ||||||||||||
| 1Q 16 | 4Q 15 | 1Q 15 | ||||||||||
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| Cash & short-term investments | $ | 3,789,468 | $ | 3,028,928 | $ | 2,873,281 | ||||||
| Accounts receivable, net | 375,087 | 466,527 | 402,350 | |||||||||
| Inventories (1) | 404,852 | 412,314 | 367,238 | |||||||||
| Other current assets | 74,727 | 171,779 | 160,168 | |||||||||
| Total current assets | 4,644,134 | 4,079,548 | 3,803,037 | |||||||||
| PP&E, net | 633,362 | 644,110 | 612,472 | |||||||||
| Investments | 46,321 | 41,235 | 34,989 | |||||||||
|
|
1,631,233 | 1,636,526 | 1,641,793 | |||||||||
| Intangible assets, net | 564,839 | 583,517 | 646,400 | |||||||||
| Other | 78,192 | 73,841 | 78,346 | |||||||||
| Total assets | $ | 7,598,081 | $ | 7,058,777 | $ | 6,817,037 | ||||||
| Deferred income on shipments to distributors, net | $ | 298,272 | $ | 300,087 | $ | 278,228 | ||||||
| Other current liabilities | 295,833 | 438,904 | 354,681 | |||||||||
| Debt, current | — | 374,594 | — | |||||||||
| Long-term debt | 1,730,948 | 495,341 | 868,807 | |||||||||
| Non-current liabilities | 278,166 | 376,892 | 509,111 | |||||||||
| Shareholders' equity | 4,994,862 | 5,072,959 | 4,806,210 | |||||||||
| Total liabilities & equity | $ | 7,598,081 | $ | 7,058,777 | $ | 6,817,037 | ||||||
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(1) Includes |
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| 1Q16, 4Q15, and 1Q15, respectively. | ||||||||||||
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Schedule C |
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| Cash Flow Statement (Unaudited) | |||||||||||||||
| (In thousands) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| 1Q 16 | 4Q 15 | 1Q 15 | |||||||||||||
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| Cash flows from operating activities: | |||||||||||||||
| Net Income | $ | 164,504 | $ | 96,305 | $ | 178,757 | |||||||||
| Adjustments to reconcile net income | |||||||||||||||
| to net cash provided by operations: | |||||||||||||||
| Depreciation | 33,209 | 32,688 | 31,773 | ||||||||||||
| Amortization of intangibles | 18,347 | 18,302 | 24,739 | ||||||||||||
| Stock-based compensation expense | 15,609 | 16,083 | 20,371 | ||||||||||||
| Loss on extinguishment of debt | 3,290 | — | — | ||||||||||||
| Other non-cash activity | 744 | (2,428 | ) | 3,743 | |||||||||||
| Excess tax benefit - stock options | (986 | ) | (2,895 | ) | (4,635 | ) | |||||||||
| Deferred income taxes | (7,717 | ) | (25,650 | ) | (2,915 | ) | |||||||||
| Changes in operating assets and liabilities | (7,295 | ) | 65,570 | (83,180 | ) | ||||||||||
| Total adjustments | 55,201 | 101,670 | (10,104 | ) | |||||||||||
| Net cash provided by operating activities | 219,705 | 197,975 | 168,653 | ||||||||||||
| Percent of revenue | 28.6 | % | 20.2 | % | 21.8 | % | |||||||||
| Cash flows from investing activities: | |||||||||||||||
| Purchases of short-term available-for-sale investments | (1,632,014 | ) | (1,808,202 | ) | (1,211,021 | ) | |||||||||
| Maturities of short-term available-for-sale investments | 1,409,538 | 2,045,945 | 701,149 | ||||||||||||
| Sales of short-term available-for-sale investments | 47,950 | 159,546 | 583,750 | ||||||||||||
| Additions to property, plant and equipment | (23,128 | ) | (45,807 | ) | (23,760 | ) | |||||||||
| Payments for acquisitions, net of cash acquired | — | — | (118 | ) | |||||||||||
| Change in other assets | (6,711 | ) | 1,102 | (3,729 | ) | ||||||||||
| Net cash (used for) provided by investing activities | (204,365 | ) | 352,584 | 46,271 | |||||||||||
| Cash flows from financing activities: | |||||||||||||||
| Payments of senior unsecured notes | (378,156 | ) | — | — | |||||||||||
| Payments of derivative instruments | (33,430 | ) | — | — | |||||||||||
| Proceeds from debt | 1,235,331 | — | — | ||||||||||||
| Dividend payments to shareholders | (124,658 | ) | (125,582 | ) | (115,084 | ) | |||||||||
| Repurchase of common stock | (131,977 | ) | (111,702 | ) | (59,636 | ) | |||||||||
| Proceeds from employee stock plans | 6,229 | 7,760 | 42,793 | ||||||||||||
| Excess tax benefit - stock options | 986 | 2,895 | 4,635 | ||||||||||||
| Change in other financing activities | (2,544 | ) | 3,724 | (3,988 | ) | ||||||||||
| Net cash provided by (used for) financing activities | 571,781 | (222,905 | ) | (131,280 | ) | ||||||||||
| Effect of exchange rate changes on cash | (1,032 | ) | (798 | ) | (2,675 | ) | |||||||||
| Net increase in cash and cash equivalents | 586,089 | 326,856 | 80,969 | ||||||||||||
| Cash and cash equivalents at beginning of period | 884,353 | 557,497 | 569,233 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 1,470,442 | $ | 884,353 | $ | 650,202 | |||||||||
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Schedule D |
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Revenue Trends by End Market (Unaudited) |
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(In thousands) |
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| 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 | ||||||||||||||||||
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| Revenue | % * | Q/Q % | Y/Y % | Revenue | Revenue | |||||||||||||
| Industrial |
|
45 % | (5)% | (1)% |
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| Automotive | 126,631 | 16 % | (4)% | 2 % | 132,323 | 123,938 | ||||||||||||
| Consumer | 125,702 | 16 % | (60)% | 32 % | 317,016 | 95,546 | ||||||||||||
| Communications | 167,962 | 22 % | 4 % | (16)% | 161,315 | 199,723 | ||||||||||||
| Total Revenue |
|
100 % | (21)% | (0)% |
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| * The sum of the individual percentages does not equal the total due to rounding. | ||||||||||||||||||
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Schedule E |
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| 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-GAAP measures. | |||||||||||||||
| Three Months Ended | |||||||||||||||
| 1Q 16 | 4Q 15 | 1Q 15 | |||||||||||||
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| GAAP Gross Margin | $ | 477,293 | $ | 641,796 | $ | 503,607 | |||||||||
| Gross Margin Percentage | 62.0 | % | 65.6 | % | 65.2 | % | |||||||||
| Acquisition-Related Expenses | 1,445 | 1,399 | 2,973 | ||||||||||||
| Stock-Based Compensation Expense | — | — | 113 | ||||||||||||
| Non-GAAP Gross Margin | $ | 478,738 | $ | 643,195 | $ | 506,693 | |||||||||
| Gross Margin Percentage | 62.2 | % | 65.7 | % | 65.6 | % | |||||||||
| GAAP Operating Expenses | $ | 282,248 | $ | 533,166 | $ | 295,673 | |||||||||
| Percent of Revenue | 36.7 | % | 54.5 | % | 38.3 | % | |||||||||
| Other Operating Expense | — | (223,672 | ) | — | |||||||||||
| Acquisition-Related Expenses | (17,457 | ) | (17,682 | ) | (24,132 | ) | |||||||||
| Acquisition-Related Transaction Costs | — | — | (3,057 | ) | |||||||||||
| Stock-Based Compensation Expense | — | — | (4,164 | ) | |||||||||||
| Non-GAAP Operating Expenses | $ | 264,791 | $ | 291,812 | $ | 264,320 | |||||||||
| Percent of Revenue | 34.4 | % | 29.8 | % | 34.2 | % | |||||||||
| GAAP Operating Income/Margin | $ | 195,045 | $ | 108,630 | $ | 207,934 | |||||||||
| Percent of Revenue | 25.3 | % | 11.1 | % | 26.9 | % | |||||||||
| Other Operating Expense | — | 223,672 | — | ||||||||||||
| Acquisition-Related Expenses | 18,902 | 19,081 | 27,105 | ||||||||||||
| Acquisition-Related Transaction Costs | — | — | 3,057 | ||||||||||||
| Stock-Based Compensation Expense | — | — | 4,277 | ||||||||||||
| Non-GAAP Operating Income/Margin | $ | 213,947 | $ | 351,383 | $ | 242,373 | |||||||||
| Percent of Revenue | 27.8 | % | 35.9 | % | 31.4 | % | |||||||||
| GAAP Other Expense (Income) | $ | 12,868 | $ | 3,953 | $ | 7,164 | |||||||||
| Percent of Revenue | 1.7 | % | 0.4 | % | 0.9 | % | |||||||||
| Loss on Extinguishment of Debt | (3,289 | ) | — | — | |||||||||||
| Non-GAAP Other Expense | $ | 9,579 | $ | 3,953 | $ | 7,164 | |||||||||
| Percent of Revenue | 1.2 | % | 0.4 | % | 0.9 | % | |||||||||
| GAAP Diluted EPS | $ | 0.52 | $ | 0.30 | $ | 0.57 | |||||||||
| Other Operating Expense | — | 0.71 | — | ||||||||||||
| Acquisition-Related Expenses | 0.06 | 0.06 | 0.08 | ||||||||||||
| Acquisition-Related Transaction Costs | — | — | 0.01 | ||||||||||||
| Acquisition-Related Tax Impact | — | — | (0.01 | ) | |||||||||||
| Stock-Based Compensation Expense | — | — | 0.01 | ||||||||||||
| Loss on Extinguishment of Debt | 0.01 | — | — | ||||||||||||
| Impact of Reversal of Prior Period Tax Liabilities | — | (0.04 | ) | — | |||||||||||
| Impact of the Reinstatement of the R&D Tax Credit | (0.02 | ) | — | (0.02 | ) | ||||||||||
| Non-GAAP Diluted EPS (1) | $ | 0.56 | $ | 1.03 | $ | 0.63 | |||||||||
| (1) The sum of the individual per share amounts may not equal the total due to rounding | |||||||||||||||
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Schedule F |
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| SUPPLEMENTAL CASH FLOW MEASURES (Unaudited) | |||||||||||||||
| See "Non-GAAP Financial Information" in this press release for a description of the items excluded from our supplemental cash flow measures. | |||||||||||||||
| (In thousands) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| 1Q 16 | 4Q 15 | 1Q 15 | |||||||||||||
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| Net cash provided by operating activities | $ | 219,705 | $ | 197,975 | $ | 168,653 | |||||||||
| Non-GAAP adjustments: | |||||||||||||||
| Pension conversion payments | — | 223,672 | — | ||||||||||||
| Adjusted cash flows from operations | $ | 219,705 | $ | 421,647 | $ | 168,653 | |||||||||
| Capital expenditures | (23,128 | ) | (45,807 | ) | (23,760 | ) | |||||||||
| Adjusted free cash flow | $ | 196,577 | $ | 375,840 |
$ |
144,893 |
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| % of revenue | 25.5 | % | 38.4 | % | 18.8 | % | |||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160217005319/en/
Mr.
781-461-3491
(fax)
Treasurer and Director of Investor Relations
investor.relations@analog.com
Source:
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