Analog Devices Reports Third Quarter Fiscal Year 2014 Results
Board declares
"ADI had another good quarter of revenue growth led by the industrial and communications infrastructure markets," said Vincent Roche, President and CEO. "Profitability and cash flow continued to be strong and we returned $173 million to shareholders through cash dividends and share repurchases."
"Near the end of our third quarter, we completed the acquisition of
Results for the Third Quarter of Fiscal Year
2014
The non-GAAP results below exclude Hittite
operations and acquisition-related items.
-
GAAP revenue totaled
$728 million ; Non-GAAP revenue totaled$722.4 , up 4% sequentially - GAAP gross margin of 65.4% of revenue; Non-GAAP gross margin of 66.5% of revenue
- GAAP operating margin of 27.8%; Non-GAAP operating margin of 32.5% of revenue
-
GAAP Diluted EPS of
$0.57 ; Non-GAAP diluted EPS of$0.63
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 2014, 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.
ADI also announced that the Board of Directors has declared a cash
dividend of
Outlook for the Fourth Quarter of Fiscal Year
2014
The following statements are based on current
expectations, and as indicated, are presented on a 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.
-
Revenue estimated to increase in the range of
$790 million to$820 million - Non-GAAP gross margin expected to be approximately 66.2%
-
Non-GAAP operating expenses expected to be between
$268 million to$271 million -
Non-GAAP interest and other expense expected to be approximately
$6 million - Non-GAAP tax rate expected to be 15.5% to 16%
-
Non-GAAP diluted EPS estimated to be
$0.66 to$0.70 /share
With respect to the forward-looking information presented on a non-GAAP basis, the Company is unable to provide a quantitative reconciliation to GAAP because the items that would be included or excluded, other than those described below, are difficult to predict and estimate and are primarily dependent on future events. Known reconciling items are:
-
Non-GAAP gross margin excludes $8 million of amortization of
intangible assets and $48 million of inventory and fixed asset step-up
charges to record Hittite inventory and fixed assets at fair value, as
part of the purchase accounting for the Hittite acquisition;
- Non-GAAP operating expenses exclude $5 million of amortization of intangible assets and $15 million of acquisition-related costs, primarily for bank and other advisory fees related to the Hittite acquisition;
-
Non-GAAP interest and other expense excludes
$5 million of debt financing costs; and -
Non-GAAP tax rate excludes
$18-$19 million provision for income taxes which represents the tax effects of the reconciling items noted in the three bullets above.
Conference Call Scheduled for
ADI will host a
conference call to discuss the third quarter 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: 79312911, 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 historical non-GAAP measures to its GAAP measures.
Management uses non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, non-GAAP other expense, 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.
The following item is excluded from our Non-GAAP revenue:
Hittite Operations: The results of operations of Hittite from
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:
Hittite Operations: The results of operations of Hittite from
Acquisition-Related Expenses: Expenses incurred as a result of the Hittite acquisition in the third quarter of fiscal 2014 primarily include: severance payments, amortization of the fair value adjustment to inventory; amortization of 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.
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:
The exclusion of these items allows management to evaluate the Company's core business and trends across different reporting periods on a consistent basis. Management presents these Non-GAAP items to enable investors and analysts to evaluate our core business.
Acquisition-Related Transaction Costs: Costs incurred as a result of the Hittite acquisition in the third quarter of fiscal 2014 include 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 items are excluded from our non-GAAP other expense and non-GAAP diluted earnings per share:
Acquisition-Related Debt Costs: The Company incurred debt financing costs and interest expense during the third quarter of fiscal 2014 on its 90-day term loan facility used to finance the Hittite acquisition. We excluded these costs from our non-GAAP measures because they are not reflective of our ongoing financial performance.
Debt Extinguishment Costs: In the third quarter of fiscal 2013,
the Company redeemed its outstanding 5.0% senior unsecured notes due
July 1, 2014. The Company recognized a net loss on debt extinguishment
of approximately
The following item is excluded from our non-GAAP diluted earnings per share:
Tax-Related Items. In the third quarter of fiscal 2013, the
Company recorded a one-time
Management believes that the presentation of non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, non-GAAP other expenses and non-GAAP diluted EPS is useful to investors because it provides investors with the operating results that management uses to manage the Company.
Investors should consider our non-GAAP financial measures in conjunction with the corresponding GAAP measures.
About
Innovation, performance, and excellence
are the cultural pillars on which
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, objectives, plans and goals, 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 (GAAP) |
||||||||||||||||||
Three Months Ended | ||||||||||||||||||
3Q 14 | 2Q 14 | 3Q 13 | ||||||||||||||||
2014 |
|
2013 |
||||||||||||||||
Revenue | $ | 727,752 | $ | 694,536 | $ | 674,172 | ||||||||||||
Year-to-year change | 8 | % | 5 | % | -1 | % | ||||||||||||
Quarter-to-quarter change | 5 | % | 11 | % | 2 | % | ||||||||||||
Cost of sales (1) | 251,462 | 235,793 | 239,110 | |||||||||||||||
Gross margin | 476,290 | 458,743 | 435,062 | |||||||||||||||
Gross margin percentage | 65.4 | % | 66.1 | % | 64.5 | % | ||||||||||||
Year-to-year change (basis points) | 90 | 210 | -110 | |||||||||||||||
Quarter-to-quarter change (basis points) | -70 | 100 | 50 | |||||||||||||||
Operating expenses: | ||||||||||||||||||
R&D (1) | 140,095 | 136,203 | 128,892 | |||||||||||||||
Selling, marketing and G&A (1) | 132,989 | 102,085 | 97,773 | |||||||||||||||
Amortization of Intangibles | 660 | 55 | 55 | |||||||||||||||
Total operating expenses | 273,744 | 238,343 | 226,720 | |||||||||||||||
Total operating expenses percentage | 37.6 | % | 34.3 | % | 33.6 | % | ||||||||||||
Year-to-year change (basis points) | 400 | -70 | -90 | |||||||||||||||
Quarter-to-quarter change (basis points) | 330 | -220 | -140 | |||||||||||||||
Operating income | 202,546 | 220,400 | 208,342 | |||||||||||||||
Operating income percentage | 27.8 | % | 31.7 | % | 30.9 | % | ||||||||||||
Year-to-year change (basis points) | -310 | 270 | -20 | |||||||||||||||
Quarter-to-quarter change (basis points) | -390 | 310 | 190 | |||||||||||||||
Other expense | 5,158 | 3,032 | 13,301 | |||||||||||||||
Income before income tax | 197,388 | 217,368 | 195,041 | |||||||||||||||
Provision for income taxes | 16,782 | 29,935 | 18,802 | |||||||||||||||
Tax rate percentage | 8.5 | % | 13.8 | % | 9.6 | % | ||||||||||||
Net income | $ | 180,606 | $ | 187,433 | $ | 176,239 | ||||||||||||
Shares used for EPS - basic | 314,190 | 313,488 | 309,117 | |||||||||||||||
Shares used for EPS - diluted | 318,876 | 318,347 | 315,307 | |||||||||||||||
Earnings per share - basic | $ | 0.57 | $ | 0.60 | $ | 0.57 | ||||||||||||
Earnings per share - diluted | $ | 0.57 | $ | 0.59 | $ | 0.56 | ||||||||||||
Dividends paid per share | $ | 0.37 | $ | 0.37 | $ | 0.34 | ||||||||||||
(1) Includes stock-based compensation expense as follows: | ||||||||||||||||||
Cost of sales | $ | 1,724 | $ | 1,417 | $ | 1,672 | ||||||||||||
R&D | $ | 5,415 | $ | 4,278 | $ | 5,536 | ||||||||||||
Selling, marketing and G&A | $ | 6,331 | $ | 4,847 | $ | 5,539 | ||||||||||||
|
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Schedule B |
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Selected Balance Sheet Information (GAAP) | |||||||||||||||
(In thousands) | |||||||||||||||
3Q 14 | 2Q 14 | 3Q 13 | |||||||||||||
2014 |
2014 |
2013 |
|||||||||||||
Cash & short-term investments | $ | 4,932,259 | $ | 4,807,225 | $ | 4,450,293 | |||||||||
Accounts receivable, net | 394,762 | 360,847 | 345,437 | ||||||||||||
Inventories (1) (2) | 415,098 | 298,432 | 284,342 | ||||||||||||
Other current assets | 181,765 | 171,528 | 164,418 | ||||||||||||
Total current assets | 5,923,884 | 5,638,032 | 5,244,490 | ||||||||||||
PP&E, net | 609,937 | 545,485 | 492,421 | ||||||||||||
Investments | 32,022 | 30,080 | 20,056 | ||||||||||||
Goodwill | 1,631,890 | 287,341 | 280,591 | ||||||||||||
Intangible assets, net | 695,832 | 28,442 | 28,607 | ||||||||||||
Other | 79,900 | 65,571 | 72,461 | ||||||||||||
Total assets | $ | 8,973,465 | $ | 6,594,951 | $ | 6,138,626 | |||||||||
Deferred income on shipments to distributors, net | $ | 285,832 | $ | 267,933 | $ | 259,003 | |||||||||
Current debt | 1,995,398 | - | - | ||||||||||||
Other current liabilities | 341,296 | 303,269 | 232,806 | ||||||||||||
Long-term debt, non-current | 872,652 | 872,515 | 872,104 | ||||||||||||
Non-current liabilities | 471,090 | 219,711 | 131,477 | ||||||||||||
Shareholders' equity | 5,007,197 | 4,931,523 | 4,643,236 | ||||||||||||
Total liabilities & equity | $ | 8,973,465 | $ | 6,594,951 | $ | 6,138,626 | |||||||||
(1) Includes
(2) Includes
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Schedule C |
||||||||||||||||||
Cash Flow Statement (GAAP) | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
3Q 14 | 2Q 14 | 3Q 13 | ||||||||||||||||
2014 |
2014 |
2013 |
||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||
Net Income | $ | 180,606 | $ | 187,433 | $ | 176,239 | ||||||||||||
Adjustments to reconcile net income | ||||||||||||||||||
to net cash provided by operations: | ||||||||||||||||||
Depreciation | 28,353 | 27,459 | 27,448 | |||||||||||||||
Amortization of intangibles | 1,610 | 55 | 55 | |||||||||||||||
Stock-based compensation expense | 13,470 | 10,542 | 12,747 | |||||||||||||||
Loss on extinguishment of debt | - | - | 10,205 | |||||||||||||||
Other non-cash activity | 1,006 | 1,400 | 310 | |||||||||||||||
Excess tax benefit - stock options | (9,322 | ) | (4,423 | ) | (6,265 | ) | ||||||||||||
Deferred income taxes | (6,380 | ) | 1,068 | (739 | ) | |||||||||||||
Changes in operating assets and liabilities | 4,099 | 14,824 | 25 | |||||||||||||||
Total adjustments | 32,836 | 50,925 | 43,786 | |||||||||||||||
Net cash provided by operating activities (1) | 213,442 | 238,358 | 220,025 | |||||||||||||||
Percent of total revenue | 29.3 | % | 34.3 | % | 32.6 | % | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||||
Purchases of short-term available-for-sale investments | (1,028,781 | ) | (2,275,241 | ) | (2,123,826 | ) | ||||||||||||
Maturities of short-term available-for-sale investments | 1,815,862 | 1,966,158 | 1,493,806 | |||||||||||||||
Sales of short-term available-for-sale investments | 1,298,044 | 189,267 | 216,312 | |||||||||||||||
Additions to property, plant and equipment | (42,315 | ) | (44,058 | ) | (30,068 | ) | ||||||||||||
Payments for acquisitions, net of cash acquired | (1,943,704 | ) | - | (2,475 | ) | |||||||||||||
Change in other assets | (340 | ) | (6,076 | ) | (1,540 | ) | ||||||||||||
Net cash provided by (used for) investing activities | 98,766 | (169,950 | ) | (447,791 | ) | |||||||||||||
Cash flows from financing activities: | ||||||||||||||||||
Payment of senior unsecured notes | - | - | (392,790 | ) | ||||||||||||||
Proceeds from debt | 1,995,398 | - | 493,880 | |||||||||||||||
Proceeds from derivative instruments | - | - | 10,952 | |||||||||||||||
Dividend payments to shareholders | (116,098 | ) | (115,795 | ) | (104,923 | ) | ||||||||||||
Repurchase of common stock | (57,394 | ) | (22,614 | ) | - | |||||||||||||
Proceeds from employee stock plans | 36,045 | 62,936 | 89,653 | |||||||||||||||
Excess tax benefit - stock options | 9,322 | 4,423 | 6,265 | |||||||||||||||
Contingent consideration payment | (1,803 | ) | - | - | ||||||||||||||
Change in other financing activities | 5,406 | (11,284 | ) | (10,643 | ) | |||||||||||||
Net cash provided by (used for) financing activities | 1,870,876 | (82,334 | ) | 92,394 | ||||||||||||||
Effect of exchange rate changes on cash | (433 | ) | (511 | ) | (191 | ) | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 2,182,651 | (14,437 | ) | (135,563 | ) | |||||||||||||
Cash and cash equivalents at beginning of period | 402,790 | 417,227 | 595,631 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 2,585,441 | $ | 402,790 | $ | 460,068 | ||||||||||||
(1) Includes
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Schedule D |
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Revenue Trends by End Market |
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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. The
results below are inclusive of the Hittite acquisition from the
acquisition date, |
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Three Months Ended | ||||||||||||||||||||||||||||
2014 |
|
2013 |
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Revenue |
% |
Q/Q % | Y/Y % | Revenue | Revenue | |||||||||||||||||||||||
Industrial* | $ | 350,578 | 48 | % | 8 | % | 12 | % | $ | 325,802 | $ | 312,970 | ||||||||||||||||
Automotive | 130,052 | 18 | % | -4 | % | 8 | % | 135,828 | 120,925 | |||||||||||||||||||
Consumer | 80,870 | 11 | % | 4 | % | -19 | % | 77,821 | 100,254 | |||||||||||||||||||
Communications* | 166,252 | 23 | % | 7 | % | 19 | % | 155,085 | 140,023 | |||||||||||||||||||
Total Revenue | $ | 727,752 | 100 | % | 5 | % | 8 | % | $ | 694,536 | $ | 674,172 | ||||||||||||||||
* Includes
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Schedule E |
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Revenue Trends by Product Type |
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The categorization of our products into broad categories is based on
the characteristics of the individual products, the specification of
the products and in some cases the specific uses that certain
products have within applications. The categorization of products
into categories is therefore subject to judgment in some cases and
can vary over time. In instances where products move between product
categories we reclassify the amounts in the product categories for
all prior periods. Such reclassifications typically do not
materially change the sizing of, or the underlying trends of results
within, each product category. The results below are inclusive of
the Hittite acquisition from the acquisition date, |
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Three Months Ended | |||||||||||||||||||||||||||
2014 |
2014 |
2013 |
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Revenue | % | Q/Q % | Y/Y % | Revenue | Revenue | ||||||||||||||||||||||
Converters | $ | 327,538 | 45 | % | 3 | % | 9 | % | $ | 317,915 | $ | 300,484 | |||||||||||||||
Amplifiers / Radio Frequency | 194,017 | 27 | % | 4 | % | 9 | % | 186,287 | 177,451 | ||||||||||||||||||
Other analog | 95,964 | 13 | % | 9 | % | 4 | % | 88,103 | 92,278 | ||||||||||||||||||
Subtotal Analog Signal Processing | 617,519 | 85 | % | 4 | % | 8 | % | 592,305 | 570,213 | ||||||||||||||||||
Power management & reference | 45,913 | 6 | % | 6 | % | 1 | % | 43,138 | 45,611 | ||||||||||||||||||
Total Analog Products | $ | 663,432 | 91 | % | 4 | % | 8 | % | $ | 635,443 | $ | 615,824 | |||||||||||||||
Digital Signal Processing | 64,320 | 9 | % | 9 | % | 10 | % | 59,093 | 58,348 | ||||||||||||||||||
Total Revenue | $ | 727,752 | 100 | % | 5 | % | 8 | % | $ | 694,536 | $ | 674,172 | |||||||||||||||
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Schedule F |
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Reconciliation from Non-GAAP to GAAP Data (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 measures. | ||||||||||||||
Three Months Ended | ||||||||||||||
3Q 14 | 2Q 14 | 3Q 13 | ||||||||||||
2014 |
|
2013 |
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GAAP Revenue |
|
|
|
|||||||||||
Q/Q Revenue growth % | 5% | 11% | 2% | |||||||||||
Hittite Operations | (5,392) | - | - | |||||||||||
Non-GAAP Revenue |
|
|
|
|||||||||||
Q/Q Revenue growth % | 4% | 11% | 2% | |||||||||||
GAAP Gross Margin |
|
|
|
|||||||||||
Gross Margin Pergentage | 65.4% | 66.1% | 64.5% | |||||||||||
Hittite Operations | (3,015) | - | - | |||||||||||
Acquistion-Related Expenses | 6,837 | - | - | |||||||||||
Non-GAAP Gross Margin |
|
|
|
|||||||||||
Gross Margin Percentage | 66.5% | 66.1% | 64.5% | |||||||||||
GAAP Operating Expenses |
|
|
|
|||||||||||
Percent of Revenue | 37.6% | 34.3% | 33.6% | |||||||||||
Hittite Operations | (2,033) | - | - | |||||||||||
Acquistion-Related Expenses | (5,284) | - | - | |||||||||||
Acquistion-Related Transaction Costs | (21,123) | - | - | |||||||||||
Non-GAAP Operating Expenses |
|
|
|
|||||||||||
Percent of Revenue | 34.0% | 34.3% | 33.6% | |||||||||||
GAAP Operating Income/Margin |
|
|
|
|||||||||||
Percent of Revenue | 27.8% | 31.7% | 30.9% | |||||||||||
Hittite Operations | (982) | - | - | |||||||||||
Acquistion-Related Expenses | 12,121 | - | - | |||||||||||
Acquistion-Related Transaction Costs | 21,123 | - | - | |||||||||||
Non-GAAP Operating Income/Margin |
|
|
|
|||||||||||
Percent of Revenue | 32.5% | 31.7% | 30.9% | |||||||||||
GAAP Other Expense |
|
|
|
|||||||||||
Percent of Revenue | 0.7% | 0.4% | 2.0% | |||||||||||
Acquistion-Related Debt Costs | (1,513) | - | - | |||||||||||
Loss on Extinguishment of Debt | - | - | (10,205) | |||||||||||
Non-GAAP Other Expense |
|
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Percent of Revenue | 0.5% | 0.4% | 0.5% | |||||||||||
GAAP Diluted EPS |
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Impact of Loss on Extinguishment of Debt | - | - | 0.02 | |||||||||||
Hittite Operations | - | - | - | |||||||||||
Acquistion-Related Expenses | 0.02 | - | - | |||||||||||
Acquistion-Related Transaction Costs | 0.04 | - | - | |||||||||||
Acquistion-Related Debt Costs | - | - | - | |||||||||||
Impact of Expired Tax Statute | - | - | (0.01) | |||||||||||
Non-GAAP Diluted EPS (1) |
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(1) The sum of the individual per share amounts may not equal the total due to rounding.
Mr.
781-461-3491
(fax)
investor.relations@analog.com
Source:
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