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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 14, 2006
Analog Devices, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 1-7819 04-2348234
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation File Number) Identification No.)
One Technology Way, Norwood, MA 02062
- ----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 329-4700
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On November 14, 2006, Analog Devices, Inc. (the "Registrant") announced its
financial results for its fiscal fourth quarter and fiscal year ended October
28, 2006. The full text of the press release issued by the Registrant concerning
the foregoing results is furnished herewith as Exhibit 99.1.
The information contained herein and in the accompanying exhibit shall not
be incorporated by reference into any filing of the Registrant, whether made
before or after the date hereof, regardless of any general incorporation
language in such filing, unless expressly incorporated by specific reference to
such filing. The information in this report, including the exhibit hereto, shall
not be deemed to be "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities of
that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as
amended.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
- ---------- -----------
99.1 Press release dated November 14, 2006
SIGNATURE
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 hereunto duly authorized.
Date: November 14, 2006 ANALOG DEVICES, INC.
By: /s/ Joseph E. McDonough
---------------------------------
Joseph E. McDonough
Vice President, Finance and Chief
Financial Officer
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
99.1 Press release dated November 14, 2006
Exhibit 99.1
Analog Devices Announces Fourth Quarter
of Fiscal Year 2006 Financial Results
NORWOOD, Mass.--(BUSINESS WIRE)--Nov. 14, 2006--Analog Devices,
Inc. (NYSE: ADI):
-- Board of Directors declares quarterly dividend of $0.16 per
share;
-- Financial results for the fourth quarter of fiscal 2006 and
guidance for the first quarter of fiscal 2007 will be
discussed via conference call today at 4:30 pm.
Analog Devices, Inc. (NYSE: ADI), a global leader in
high-performance semiconductors for signal processing applications,
today announced revenue of $644.3 million for the fourth quarter of
fiscal 2006, which ended October 28, 2006, an increase of
approximately 4% compared to the same period one year ago and a
decrease of approximately 3% compared to the immediately prior
quarter. For the year, revenue was $2.57 billion, an increase of
approximately 8% compared to fiscal 2005.
Net income under generally accepted accounting principles (GAAP)
was $138.4 million for the fourth quarter, or 21.5% of sales, and
diluted earnings per share (EPS) was $0.39. For fiscal year 2006, GAAP
net income was $549.5 million, or 21.4% of sales, and diluted EPS was
$1.48.
Non-GAAP net income was $139.4 million for the fourth quarter, or
21.6% of sales, and diluted EPS was $0.39. For fiscal year 2006,
non-GAAP net income was $591.3 million, or 23% of sales, and diluted
EPS was $1.59.
The non-GAAP operating results for the fourth quarter of fiscal
2006 exclude the following items: $17.3 million of non-cash stock
option expenses associated with the adoption of FAS123R; expenses of
$3.6 million related to restructuring actions; expenses of $19.1
million related to previously-announced acquisitions; and $26.7
million of tax benefits which resulted from the completion of a tax
examination.
The Board of Directors declared a cash dividend for the fourth
quarter of fiscal 2006 of $0.16 per outstanding share of common stock.
The dividend will be paid on December 13, 2006 to all shareholders of
record at the close of business on November 24, 2006.
"Revenue from consumer customers grew 13% in the fourth quarter
compared to the third quarter of fiscal 2006. This revenue growth was
driven by strong sales of digital cameras, home entertainment systems,
and new video game consoles where ADI technology continues to enable
new sight, sound, and other user experiences in our customers'
products," said Jerald G. Fishman, ADI's president and chief executive
officer. "Revenue from computer customers also increased sequentially
during the quarter, while revenue from our broad base of industrial
customers was approximately flat sequentially. In the fourth quarter
of fiscal 2006, revenue from communications customers declined 18%
compared to the immediately prior quarter, primarily as a result of
lower revenue from wireless handset customers."
"For fiscal year 2006, analog product revenue climbed to over $2
billion primarily due to strong growth in converters and amplifiers.
Overall, in fiscal 2006, our analog product sales grew 13%
year-to-year," said Mr. Fishman. "While revenue from general-purpose
digital signal processing (DSP) products grew 10% in fiscal 2006
compared to fiscal 2005, this increase was offset by declines in
revenue from application-specific DSP products."
Profit Margins
Under GAAP, gross margin was $374.6 million, or 58.1% of sales,
for the fourth quarter of fiscal 2006 and $1.51 billion, or 58.5% of
sales, for fiscal year 2006.
Non-GAAP gross margin for the fourth quarter was $382.5 million,
or 59.4% of sales, compared to 58.3% of sales in the same period one
year ago and 60.1% of sales in the immediately prior quarter. For
fiscal year 2006, non-GAAP gross margin was $1.54 billion, or 59.7% of
sales, compared to 57.9% of sales in fiscal 2005. The increase from
year to year was primarily related to increased factory utilization
and the result of increased sales of higher margin products in fiscal
2006 compared to fiscal 2005.
Under GAAP, operating profit for the fourth quarter of fiscal 2006
totaled $119.3 million, or approximately 18.5% of sales. For the year,
GAAP operating profit was $551.8 million, or approximately 21.4% of
sales.
Non-GAAP operating profit for the fourth quarter was $159.4
million, or 24.7% of sales, compared to 24.8% of sales in the same
period one year ago and 27.1% of sales in the immediately prior
quarter. The sequential decline in non-GAAP operating profit was
primarily due to lower revenue in the fourth quarter of fiscal 2006,
as compared to the immediately prior quarter. For the year, non-GAAP
operating profit was $673.2 million, or 26.2% of sales, compared to
22.9% of sales in fiscal year 2005.
Uses of Cash
Capital expenditures totaled $41.8 million in the fourth quarter
of fiscal year 2006, or 6.5% of sales. For the year, capital
expenditures totaled $129.3 million, or 5% of sales.
During the fourth quarter of fiscal 2006, ADI paid $55.6 million
in cash dividends. For the year, dividend payments to shareholders
totaled $201.5 million.
During the fourth quarter of fiscal 2006, the company repurchased
approximately 11.9 million shares of ADI common stock for $357.0
million. During the 2006 fiscal year, the company repurchased
approximately 30.7 million shares of ADI common stock, or 9% of shares
outstanding, for $1.03 billion.
ADI has repurchased a cumulative total of approximately 14% of
shares outstanding for $1.69 billion under the $2 billion stock
repurchase program previously authorized by the Board of Directors.
Balance Sheet
Cash and short term investments totaled approximately $2.1 billion
at the end of the fourth quarter.
In the fourth quarter, inventory increased by approximately $1.2
million compared to the immediately prior quarter. Days cost of sales
in inventory was 128 days at the end of the fourth quarter of fiscal
2006, compared to 126 days at the end of the immediately prior
quarter.
Days sales in accounts receivable were 47 days at the end of the
fourth quarter, compared to 49 days at the end of the immediately
prior quarter.
Revenue Analysis by Product
During the fourth quarter of fiscal year 2006, revenue from analog
products totaled 84% of sales and revenue from DSP products totaled
16% of sales.
During the fourth quarter, revenue from analog products grew 14%
compared to the same period one year ago and 2% compared to the
immediately prior quarter. Compared to the same period one year ago,
data converter product sales grew 10%, amplifier product sales grew
22%, power management product sales grew 3%, and other analog product
sales grew 27%. Compared to the immediately prior quarter, data
converter product sales declined 1%, primarily due to more moderate
sales to base station applications after very strong growth in the
prior quarter and also due to continued weakness in the semiconductor
automatic test equipment market. Amplifier product sales and power
management product sales each grew 2% compared to the immediately
prior quarter. Other analog product sales grew 12% compared to the
immediately prior quarter due to increased demand for
micro-electromechanical systems (MEMS) products and the acquisition of
the Integrant RF tuner product line.
During the fourth quarter, revenue from DSP products declined 31%
compared to the same period one year ago and declined 21% compared to
the immediately prior quarter. DSP product sales were significantly
impacted by the divesture during the second quarter of fiscal 2006 of
the DSP-based digital subscriber line (DSL) application-specific
integrated circuit (ASIC) product line and also by an inventory
correction among customers of our DSP-based wireless chipset products
for cellular handsets. Approximately 9% of the Company's sales in the
fourth quarter were from general-purpose DSP products, which grew 15%
compared to the same period one year ago and 3% compared to the
immediately prior quarter.
For the year, revenue from analog products grew 13%. Approximately
61% of sales in fiscal 2006 were attributed to converters and
amplifiers, which, compared to the previous year, grew 10% and 19%,
respectively.
DSP product sales during fiscal year 2006 declined 11% compared to
fiscal year 2005, primarily due to the divestiture during the second
quarter of fiscal 2006 of the DSP-based DSL ASIC product line which
had $55 million in revenue in 2005 and $14 million in revenue in 2006.
Excluding this product line, DSP product sales declined approximately
4% in fiscal 2006 compared to fiscal 2005, as the 10% annual revenue
growth of general-purpose DSP products was offset by declines in
application-specific DSP product revenue.
We have provided a four year summary of our revenue by product
type and end market on the investor relations page of our website to
help investors better understand the long term trends in our business.
Outlook for the First Quarter of Fiscal 2007
The following statements are based on current expectations. These
statements are forward looking, and actual results may differ
materially. These statements 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.
These statements supersede all prior statements regarding business
outlook set forth in prior ADI news releases.
Product sales in the first quarter of fiscal 2007 are planned to
be approximately $635 to $670 million. This includes an additional
week of operations as the first quarter of fiscal 2007 will have a
total of 14 weeks. In addition, revenue in the first quarter of fiscal
2007 will include a $35 million one-time, non-recurring payment
received by the Company on November 9, 2006 in exchange for granting a
license of certain intellectual property rights to a third party.
Total revenue in the first quarter of fiscal 2007 is expected to range
from $670 to $705 million.
Non-GAAP gross margin in the first quarter of fiscal 2007 is
planned to be approximately 60% to 60.5% of sales. Due primarily to
the fact that the one-time $35 million payment will not have any cost
of sales associated with it, GAAP gross margin is planned to be
approximately 61.2% to 61.6% of sales.
Non-GAAP operating expenses are planned to increase by
approximately $11 million primarily as a result of expenses associated
with the additional week of operations within the first quarter of
fiscal 2007.
GAAP diluted EPS is planned to be approximately $0.36 to $0.42 for
the first quarter of fiscal 2007, which includes approximately $0.02
of various net expenses detailed in the Summary of Estimated Non-GAAP
Data for the First Quarter Ending February 3, 2007 Table provided with
this release. Non-GAAP diluted EPS is planned to be approximately
$0.38 to $0.44 for the first quarter of fiscal 2007.
Non-GAAP Financial Information
This release includes non-GAAP financial measures, for revenue,
net income, diluted EPS, gross margin and operating income, which
exclude the effects of charges related to stock-based compensation,
restructuring related expenses, acquisition related expenses, income
tax benefits associated with the settlement of an IRS examination,
gain on the sale of a product line, the tax expense associated with
the repatriation of foreign earnings, and non-recurring revenue
associated with the license of certain intellectual property rights to
a third party. These non-GAAP measures are not in accordance with, or
an alternative for, 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.
Analog Devices believes that non-GAAP measures have 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.
Analog Devices believes that the presentation of non-GAAP net
income and non-GAAP net income per share data, when shown in
conjunction with the corresponding GAAP measures, provides useful
information to investors regarding financial and business trends
relating to its financial condition and results of operations. The
Company's usage of non-GAAP measures, and the underlying methodology
in excluding certain charges, 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, incur such charges in future periods.
Tables reconciling our non-GAAP measures to GAAP are provided in
this release. The items excluded from the non-GAAP measures were
excluded because they are of a non-operational nature. The company
believes that the exclusion of these items provides an enhanced
understanding to investors of the underlying baseline operating
results and trends of the company's business. Management uses these
non-GAAP measures to evaluate the company's operating performance.
As described above, Analog Devices excludes the following items
from our non-GAAP measures:
Stock-based compensation related to employee stock options. These
expenses consist of expenses for employee stock options under FAS123R.
We exclude these stock-based compensation expenses from our non-GAAP
measures primarily because they are non-cash expenses. Further, as we
implemented FAS 123R beginning in fiscal 2006, we believe it is useful
to investors to understand the impact of the application of FAS 123R
to our results of operations.
Restructuring Related Expense. These expenses are incurred in
connection with facility closures and other reorganization efforts.
Apart from ongoing expense savings as a result of such items, these
expenses have no direct correlation to the operation of our business
in the future.
Acquisition Related Expense. We incur in-process research and
development expenses when technological feasibility for acquired
technology has not been established and no future alternative use for
such technology exists. We also incur amortization of purchased
intangible assets in connection with acquisitions. We exclude these
items because these expenses are not reflective of ongoing operating
results in the period incurred.
Gain on the Sale of a Product Line. We realized a gain on the sale
of our DSP-based DSL ASIC and network processor product line that we
sold in the second quarter of fiscal 2006. This amount arose from
prior activities and has no direct correlation to the ongoing business
operations.
Tax Benefit Associated with IRS Tax Settlement. The United States
Internal Revenue Service (the IRS) has completed its examination of
fiscal years 2001, 2002 and 2003 and issued their report. The Company
has agreed to accept this report and has filed its 2005 tax return and
an amended return for 2004 to conform to the methodologies agreed to
during the 2001-2003 examination. The completion of this examination
and the filing of refund claims in other jurisdictions associated with
the completion of the IRS audit have resulted in an income tax
benefit. We exclude these income tax benefits from our non-GAAP
results because they are not associated with the income tax expense on
our current operating results.
Tax Expense Associated with the Repatriation of Foreign Earnings.
On October 22, 2004, the American Jobs Creation Act of 2004, or the
AJCA, was signed into law. The AJCA created a temporary incentive for
US multinational corporations to repatriate accumulated foreign income
by providing an 85% dividends received deduction for certain dividends
from controlled foreign corporations. During fiscal 2005, we
repatriated $1,055 million of accumulated foreign earnings. Under
current tax law, the earnings repatriated prior to October 29, 2005
were taxed at a reduced effective tax rate. We exclude this item from
our non-GAAP results because it was a temporary incentive and is not
associated with the ongoing operations of our business.
Non-Recurring Revenue Associated with the License of Certain
Intellectual Property Rights to a Third Party. On November 9, 2006, we
received a one-time, non-recurring payment of $35 million in exchange
for granting a license of certain intellectual property rights to a
third party. This payment will increase revenue in the first quarter
of fiscal 2007 by $35 million. We exclude this item from our non-GAAP
results because it is a one-time item not associated with the ongoing
operations of our business.
Conference Call Scheduled for 4:30
Mr. Fishman will discuss the fourth quarter's results and the
near-term outlook via webcast, accessible from www.analog.com, today
beginning at 4:30 pm EST. Investors who prefer to join by telephone
may call 706-634-7193 ten minutes before the call begins and provide
the password "ADI."
A replay will be available almost immediately after the call. The
replay may be accessed for up to one week by dialing 800-642-1687
(replay only) and providing the conference ID: 1249895 or by visiting
the Investor Relations page on ADI's web site.
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. Celebrating
40 years as a leading global manufacturer of high-performance
integrated circuits used in analog and digital signal processing
applications, Analog Devices is headquartered in Norwood,
Massachusetts, with design and manufacturing facilities throughout the
world. Analog Devices' common stock is listed on the New York Stock
Exchange under the ticker "ADI" and is included in the S&P 500 Index.
Safe harbor statement under the Private Securities Litigation
Reform Act of 1995
This release may be deemed to contain forward-looking statements,
which are subject to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements include, among other things, our statements regarding
expected sales growth, revenue, earnings, operating margins, and other
financial results, and expected increases in customer demand for our
products that are based on our current expectations, beliefs,
assumptions, estimates, forecasts, and projections about the industry
and markets in which Analog Devices operates. The statements contained
in this release are not guarantees of future performance, are
inherently uncertain, and involve certain risks, uncertainties, and
assumptions that are difficult to predict. 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 the
effects of adverse changes in overall economic conditions, currency
exchange rate fluctuations, the timing and duration of market upturns
and downturns, the growth or contraction of the markets we serve,
demand for semiconductors generally and for our products in
particular, the risk that our backlog could decline significantly,
adverse results in various litigation matters, our ability to hire
engineers, salespeople and other qualified employees needed to meet
the expected demands of our customers, reversals or slowdowns in the
markets or customers served by our products, the adverse effects of
building inventories to meet planned growth that fails to materialize,
the occurrence and frequency of inventory and lead-time reduction
cycles, raw material availability, availability of both internal and
external manufacturing capacity, technological and product development
risks, competitors' actions and technological innovations, and other
risk factors described in our most recent Form 10-Q, as filed 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, since 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. The use of the word partner does not imply a partnership
relationship between Analog Devices and any other company.
Analog Devices, Fourth Quarter, Fiscal 2006
Sales/Earnings Summary (GAAP)
(In thousands, except per-share amounts)
----------------------------- -----------------------
Three Months Ended Twelve Months Ended
----------------------------- -----------------------
4Q 06 3Q 06 4Q 05 FY06 FY05
Oct. 28 July 29 Oct. 29 Oct. 28 Oct. 29
2006 2006 2005 2006 2005
--------- --------- --------- ----------- -----------
Net Sales $644,342 $663,660 $622,130 $2,573,176 $2,388,808
Y/Y Growth 4% 14% -2% 8% -9%
Q/Q Growth -3% 3% 7%
Cost of Sales 269,770 273,550 259,455 1,067,036 1,005,968
Gross Margin 374,572 390,110 362,675 1,506,140 1,382,840
Percent of
Sales 58.1% 58.8% 58.3% 58.5% 57.9%
- ---------------- --------- --------- --------- ----------- -----------
Operating
Expenses:
R&D 137,550 136,061 123,704 536,747 497,097
Selling,
Marketing
and G&A 100,710 99,663 84,715 394,086 338,276
Purchased In-
Process
Research and
Development 16,211 5,500 - 21,711 -
Special
Charges 777 - 31,480 1,790 31,480
- ---------------- --------- --------- --------- ----------- -----------
Operating Income 119,324 148,886 122,776 551,806 515,987
Percent of
Sales 18.5% 22.4% 19.7% 21.4% 21.6%
- ---------------- --------- --------- --------- ----------- -----------
Other Income (24,495) (26,277) (21,890) (110,589) (71,703)
- ---------------- --------- --------- --------- ----------- -----------
Income Before
Tax 143,819 175,163 144,666 662,395 587,690
Provision for
Taxes 6,148 30,478 76,325 113,661 172,903
Tax Rate 4.3% 17.4% 52.8% 17.2% 29.4%
- ---------------- --------- --------- --------- ----------- -----------
Minority
Interest 748 - - 748 -
- ---------------- --------- --------- --------- ----------- -----------
Net Income $138,419 $144,685 $ 68,341 $ 549,482 $ 414,787
Percent of
Sales 21.5% 21.8% 11.0% 21.4% 17.4%
- ---------------- --------- --------- --------- ----------- -----------
Shares used for
EPS - Basic 346,803 357,887 369,945 358,762 371,791
Shares used for
EPS - Diluted 357,164 369,542 380,607 370,964 383,474
Earnings per
Share - Basic $ 0.40 $ 0.40 $ 0.18 $ 1.53 $ 1.12
Earnings per
Share - Diluted $ 0.39 $ 0.39 $ 0.18 $ 1.48 $ 1.08
Dividends paid
per share $ 0.16 $ 0.16 $ 0.10 $ 0.56 $ 0.32
- ---------------- --------- --------- --------- ----------- -----------
Analog Devices, Fourth Quarter, Fiscal 2006
Reconciliation from GAAP to Non-GAAP Data
(In thousands, except per-share amounts)
Management believes that non-GAAP financial information enhances an
investor's understanding of the Company's historical financial
performance. Non-GAAP financial information excludes the following
amounts of stock-based compensation expense related to the adoption
of FAS123R, restructuring related expense, tax expense associated
with the repatriation of foreign earnings, gain on sale of a product
line, tax benefit associated with IRS settlement and acquisition
related costs. The provision for taxes has been adjusted, as
appropriate, to reflect the tax effect of these items.
For the Three Months Ended October 28, 2006
- ----------------------------------------------------------------------
Stock-Based Restructuring
Compensation Related
GAAP Expense Expense
- ----------------------------------------------------------------------
Net Sales $644,342 $ - $ -
Cost of Sales 269,770 (2,821) (2,804)
- ----------------------------------------------------------------------
Gross Margin 374,572 2,821 2,804
Percent of Sales 58.1%
- ----------------------------------------------------------------------
Operating Expenses:
R&D 137,550 (7,148) -
Selling, Marketing and G&A 100,710 (7,364) -
Purchased In-Process
Research and Development 16,211 - -
Special Charges 777 - (777)
- ----------------------------------------------------------------------
Operating Income 119,324 17,333 3,581
Percent of Sales 18.5%
- ----------------------------------------------------------------------
Other Income (24,495) - -
- ----------------------------------------------------------------------
Income Before Tax 143,819 17,333 3,581
Provision for Taxes 6,148 5,027 1,254
- ----------------------------------------------------------------------
Minority interest 748 - -
- ----------------------------------------------------------------------
Net Income $138,419 $ 12,306 $ 2,327
======================================================================
Earnings per Share - Diluted $ 0.39 $ 0.034 $ 0.007
For the Three Months Ended October 28, 2006
- ----------------------------------------------------------------------
Tax Benefit
Associated
Acquisition with IRS
Related Tax
Expense Settlement Non-GAAP
- ----------------------------------- ----------------------------------
Net Sales $ - $ - $644,342
Cost of Sales (2,271) - 261,874
- ----------------------------------- ----------------------------------
Gross Margin 2,271 - 382,468
Percent of Sales 59.4%
- ----------------------------------- ----------------------------------
Operating Expenses:
R&D - - 130,402
Selling, Marketing and G&A (650) - 92,696
Purchased In-Process Research
and Development (16,211) - -
Special Charges - - -
- ----------------------------------- ----------------------------------
Operating Income 19,132 - 159,370
Percent of Sales 24.7%
- ----------------------------------- ----------------------------------
Other Income - (24,495)
- ----------------------------------- ----------------------------------
Income Before Tax 19,132 - 183,865
Provision for Taxes 6,086 26,664 45,179
- ----------------------------------- ----------------------------------
Minority interest - - 748
- ----------------------------------- ----------------------------------
Net Income $ 13,046 $ (26,664) $139,434
=================================== ==================================
Earnings per Share - Diluted $ 0.037 $ (0.075) $ 0.39
For the Three Months Ended July 29, 2006
- ----------------------------------------------------------------------
Stock-Based Restructuring
Compensation Related
GAAP Expense Expense
- ----------------------------------------------------------------------
Net Sales $663,660 $ - $ -
Cost of Sales 273,550 (2,949) (5,736)
- ----------------------------------------------------------------------
Gross Margin 390,110 2,949 5,736
Percent of Sales 58.8%
- ----------------------------------------------------------------------
Operating Expenses:
R&D 136,061 (7,971) -
Selling, Marketing and G&A 99,663 (8,055) -
Purchased In-Process
Research and Development 5,500 - -
- ----------------------------------------------------------------------
Operating Income 148,886 18,975 5,736
Percent of Sales 22.4%
- ----------------------------------------------------------------------
Other Income (26,277) - -
- ----------------------------------------------------------------------
Income Before Tax 175,163 18,975 5,736
Provision for Taxes 30,478 5,527 2,008
- ----------------------------------------------------------------------
Net Income $144,685 $ 13,448 $ 3,728
======================================================================
Earnings per Share - Diluted $ 0.39 $ 0.036 $ 0.010
For the Three Months Ended July 29, 2006
- ----------------------------------------------------------------------
Tax Benefit
Associated
Acquisition with IRS
Related Tax
Expense Settlement Non-GAAP
- ----------------------------------- ----------------------------------
Net Sales $ - $ - $663,660
Cost of Sales 264,865
- ----------------------------------- ----------------------------------
Gross Margin - - 398,795
Percent of Sales 60.1%
- ----------------------------------- ----------------------------------
Operating Expenses:
R&D (733) - 127,357
Selling, Marketing and G&A - - 91,608
Purchased In-Process Research
and Development (5,500) - -
- ----------------------------------- ----------------------------------
Operating Income 6,233 - 179,830
Percent of Sales 27.1%
- ----------------------------------- ----------------------------------
Other Income - - (26,277)
- ----------------------------------- ----------------------------------
Income Before Tax 6,233 - 206,107
Provision for Taxes 780 8,494 47,287
- ----------------------------------- ----------------------------------
Net Income $ 5,453 $ (8,494) $158,820
=================================== ==================================
Earnings per Share - Diluted $ 0.015 $ (0.023) $ 0.43
For the Three Months Ended October 29, 2005
- ----------------------------------------------------------------------
Tax Expense
Associated
with the
Restructuring Repatriation
Related of Foreign
GAAP Expense Earnings Non-GAAP
- -------------------- --------- -------------- -------------- ---------
Net Sales $622,130 $ - $ - $622,130
Cost of Sales 259,455 - - 259,455
- -------------------- --------- -------------- -------------- ---------
Gross Margin 362,675 - - 362,675
Percent of Sales 58.3% 58.3%
- -------------------- --------- -------------- -------------- ---------
Operating Expenses:
R&D 123,704 - - 123,704
Selling,
Marketing and
G&A 84,715 - - 84,715
Special Charges 31,480 (31,480) - -
- -------------------- --------- -------------- -------------- ---------
Operating Income 122,776 31,480 - 154,256
Percent of Sales 19.7% 24.8%
- -------------------- --------- -------------- -------------- ---------
Other Income (21,890) - - (21,890)
- -------------------- --------- -------------- -------------- ---------
Income Before Tax 144,666 31,480 - 176,146
Provision for Taxes 76,325 10,118 (48,768) 37,675
- -------------------- --------- -------------- -------------- ---------
Net Income $ 68,341 $ 21,362 $ 48,768 $138,471
==================== ========= ============== ============== =========
Earnings per Share -
Diluted $ 0.18 $ 0.056 $ 0.128 $ 0.36
Analog Devices, Fourth Quarter, Fiscal 2006
Reconciliation from GAAP to Non-GAAP Data
(In thousands, except per-share amounts)
Management believes that non-GAAP financial information enhances an
investor's understanding of the Company's historical financial
performance. Non-GAAP financial information excludes the following
amounts of stock-based compensation expense related to the adoption
of FAS123R, restructuring related expense, tax expense associated
with the repatriation of foreign earnings, gain on sale of a product
line, tax benefit associated with IRS settlement and acquisition
related costs. The provision for taxes has been adjusted, as
appropriate, to reflect the tax effect of these items.
For the Twelve Months Ended October 28, 2006
- ----------------------------------------------------------------------
Stock-Based Restructuring
Compensation Related
GAAP Expense Expense
- ----------------------------------------------------------------------
Net Sales $2,573,176 $ - $ -
Cost of Sales 1,067,036 (7,714) (20,320)
- ----------------------------------------------------------------------
Gross Margin 1,506,140 7,714 20,320
Percent of Sales 58.5%
- ----------------------------------------------------------------------
Operating Expenses:
R&D 536,747 (32,963) -
Selling, Marketing and
G&A 394,086 (33,193) -
Purchased In-Process
Research and Development 21,711 - -
Special Charges 1,790 - (1,790)
- ----------------------------------------------------------------------
Operating Income 551,806 73,870 22,110
Percent of Sales 21.4%
- ----------------------------------------------------------------------
Other Income (110,589) - -
- ----------------------------------------------------------------------
Income Before Tax 662,395 73,870 22,110
Provision for Taxes 113,661 21,260 7,739
- ----------------------------------------------------------------------
Minority Interest 748 - -
- ----------------------------------------------------------------------
Net Income $ 549,482 $ 52,610 $ 14,371
======================================================================
Earnings per Share - Diluted $ 1.48 $ 0.142 $ 0.039
For the Twelve Months Ended October 28, 2006
- ----------------------------------------------------------------------
Tax Benefit
Gain on Associated
Acquisition Sale of with IRS
Related Product Tax
Expense Line Settlement Non-GAAP
- ----------------------- ----------------------------------------------
Net Sales $ - $ - $ - $2,573,176
Cost of Sales (2,271) - - 1,036,731
- ----------------------- ----------------------------------------------
Gross Margin 2,271 - - 1,536,445
Percent of Sales 59.7%
- ----------------------- ----------------------------------------------
Operating Expenses:
R&D (733) - - 503,051
Selling, Marketing
and G&A (650) - - 360,243
Purchased In-Process
Research and
Development (21,711) - - -
Special Charges - - - -
- ----------------------- ----------------------------------------------
Operating Income 25,365 - - 673,151
Percent of Sales 26.2%
- ----------------------- ----------------------------------------------
Other Income - 13,027 - (97,562)
- ----------------------- ----------------------------------------------
Income Before Tax 25,365 (13,027) - 770,713
Provision for Taxes 6,865 (4,559) 35,158 180,124
- ----------------------- ----------------------------------------------
Minority Interest - - - 748
- ----------------------- ----------------------------------------------
Net Income $ 18,500 $ (8,468) $ (35,158) $ 591,337
======================= ==============================================
Earnings per Share -
Diluted $ 0.050 $ (0.023) $ (0.095) $ 1.59
For the Twelve Months Ended October 29, 2005
- ----------------------------------------------------------------------
Tax Expense
Associated
with the
Restructuring Repatriation
Related of Foreign
GAAP Expense Earnings Non-GAAP
- ---------------- ----------- -------------- -------------- -----------
Net Sales $2,388,808 $ - $ - $2,388,808
Cost of Sales 1,005,968 - - 1,005,968
- ---------------- ----------- -------------- -------------- -----------
Gross Margin 1,382,840 - - 1,382,840
Percent of
Sales 57.9% 57.9%
- ---------------- ----------- -------------- -------------- -----------
Operating
Expenses:
R&D 497,097 - - 497,097
Selling,
Marketing
and G&A 338,276 - - 338,276
Special
Charges 31,480 (31,480) - -
- ---------------- ----------- -------------- -------------- -----------
Operating Income 515,987 31,480 - 547,467
Percent of
Sales 21.6% 22.9%
- ---------------- ----------- -------------- -------------- -----------
Other Income (71,703) - - (71,703)
- ---------------- ----------- -------------- -------------- -----------
Income Before
Tax 587,690 31,480 - 619,170
Provision for
Taxes 172,903 10,118 (48,768) 134,253
- ---------------- ----------- -------------- -------------- -----------
Net Income $ 414,787 $ 21,362 $ 48,768 $ 484,917
================ =========== ============== ============== ===========
Earnings per
Share - Diluted $ 1.08 0.056 0.128 $ 1.26
Summary of Estimated Non-GAAP Data
(In thousands, except per-share amounts)
Management believes that non-GAAP financial information enhances an
investor's understanding of the Company's historical financial
performance. Our Non-GAAP income statement will exclude the following
estimated amounts of stock-based compensation expense related to the
adoption of FAS123R, restructuring related expense, acquisition
related costs and a one-time payment associated with the licensing of
intellectual property. The provision for taxes has been adjusted, as
appropriate, to reflect the estimated tax effect of these items.
Estimate for the Three Months Ended February 3, 2007
- ----------------------------------------------------------------------
Stock-Based Restructuring Acquisition
Compensation Related Related
Expense Expense Expense
- ----------------------------- ------------- -------------- -----------
Net Sales $ - $ - $ -
Cost of Sales (2,796) (572) (2,446)
- ----------------------------- ------------- -------------- -----------
Gross Margin 2,796 572 2,446
- ----------------------------- ------------- -------------- -----------
Operating Expenses:
R&D (8,673) - -
Selling, Marketing and G&A (8,021) - (744)
Purchased In-Process
Research and Development - - -
Special Charges - (10,832) -
- ----------------------------- ------------- -------------- -----------
Operating Income 19,490 11,404 3,190
- ----------------------------- ------------- -------------- -----------
Other Income - - -
- ----------------------------- ------------- -------------- -----------
Income Before Tax 19,490 11,404 3,190
Provision for Taxes 5,652 3,992 (4,677)
- ----------------------------- ------------- -------------- -----------
Minority interest - - -
- ----------------------------- ------------- -------------- -----------
Net Income $ 13,838 $ 7,412 $ 7,867
============================= ============= ============== ===========
Earnings per Share - Diluted
(Decrease)/Increase $ 0.040 $ 0.021 $ 0.023
One-time Total
Payment Estimated
Associated Impact on
with the GAAP
Licensing Income
of IP Statement
- ----------------------------------------------- ----------- ----------
Net Sales $ (35,000) $ (35,000)
Cost of Sales - (5,814)
- ----------------------------------------------- ----------- ----------
Gross Margin (35,000) (29,186)
- ----------------------------------------------- ----------- ----------
Operating Expenses:
R&D - (8,673)
Selling, Marketing and G&A - (8,765)
Purchased In-Process Research and
Development - -
Special Charges - (10,832)
- ----------------------------------------------- ----------- ----------
Operating Income (35,000) (916)
- ----------------------------------------------- ----------- ----------
Other Income - -
- ----------------------------------------------- ----------- ----------
Income Before Tax (35,000) (916)
Provision for Taxes (12,250) (7,283)
- ----------------------------------------------- ----------- ----------
Minority interest - -
- ----------------------------------------------- ----------- ----------
Net Income $ (22,750) $ 6,367
=============================================== =========== ==========
Earnings per Share - Diluted
(Decrease)/Increase $ (0.066) $ 0.018
Analog Devices, Fourth Quarter, Fiscal 2006
Selected Balance Sheet Information (GAAP)
(In thousands)
4Q 06 3Q 06 4Q 05
----------- ----------- -----------
Oct. 28 July 29 Oct. 29
2006 2006 2005
- ---------------------------------- ----------- ----------- -----------
Cash & Short-term Investments $2,128,334 $2,516,061 $2,705,942
Accounts Receivable, Net 329,393 359,774 320,523
Inventories (1) 378,651 377,434 325,605
Other Current Assets 174,924 179,659 380,386
- ---------------------------------- ----------- ----------- -----------
Total Current Assets 3,011,302 3,432,928 3,732,456
PP&E, Net 562,625 558,054 599,906
Investments 31,429 30,317 45,365
Intangible Assets 299,017 180,933 167,576
Other 82,478 90,015 37,908
- ---------------------------------- ----------- ----------- -----------
Total Assets $3,986,851 $4,292,247 $4,583,211
- ---------------------------------- ----------- ----------- -----------
Deferred Income-Shipments to
Distributors $149,543 $165,850 $121,802
Other Current Liabilities 341,400 419,314 697,121
Non-Current Liabilities 60,115 59,649 72,787
Stockholders' Equity 3,435,793 3,647,434 3,691,501
- ---------------------------------- ----------- ----------- -----------
Total Liabilities & Equity $3,986,851 $4,292,247 $4,583,211
- ---------------------------------- ----------- ----------- -----------
Accounts Receivable - Days Sales
Outstanding 47 49 47
Days Cost of Sales in Inventory 128 126 115
(1) includes $3,703 and $4,066 related to stock-based compensation
expense in 4Q06 and 3Q06, respectively.
Analog Devices, Fourth Quarter, Fiscal 2006
Cash Flow Statement (GAAP)
(In thousands)
---------------------------------
Three Months Ended
---------------------------------
4Q 06 3Q 06 4Q 05
---------- ---------- -----------
Oct. 28 July 29 Oct. 29
2006 2006 2005
---------- ---------- -----------
Cash flows from operating
activities:
Net Income $ 138,419 $ 144,685 $ 68,341
Adjustments to reconcile net
income to net cash provided by
operations:
Depreciation 38,904 42,181 38,054
Amortization of intangibles 3,359 1,145 342
Stock-based compensation 17,599 19,306 983
Excess tax benefit - stock
options (25,222) (141,220) -
Tax benefit - stock options - - 50,374
Non-cash portion of special
charge - - -
Other non-cash expense 120 84 898
Gain on sale of a product line - - -
Purchased in-process research
and development 16,211 5,500 -
Minority interest (748) - -
Deferred income taxes 3,932 (11,985) 5,667
Changes in operating assets and
liabilities (25,839) 14,277 35,660
- ------------------------------------ ---------- ---------- -----------
Total adjustments 28,316 (70,712) 131,978
- ------------------------------------ ---------- ---------- -----------
Net cash provided by operating
activities 166,735 73,973 200,319
- ------------------------------------ ---------- ---------- -----------
Percent of Sales 25.9% 11.1% 32.2%
- ------------------------------------ ---------- ---------- -----------
Cash flows from investing
activities:
Additions to property, plant and
equipment, net (41,755) (38,360) (21,029)
Purchases of short-term available-
for-sale investments (418,019) (689,130) (875,189)
Maturities of short-term
available-for-sale investments 630,642 989,638 1,331,742
Proceeds from sale of a product
line - - -
Proceeds from sale of fixed assets 1,735 - -
Payments for acquisitions, net of
cash acquired (142,104) (14,913) -
Decrease in other assets (3,402) 269 3,976
- ------------------------------------ ---------- ---------- -----------
Net cash provided (used) by
investing activities 27,097 247,504 439,500
- ------------------------------------ ---------- ---------- -----------
Cash flows from financing
activities:
Dividend payments to shareholders (55,642) (57,524) (37,128)
Repurchase of common stock (357,012) (305,163) (240,796)
Net proceeds from employee stock
plans 14,540 20,173 17,004
Excess tax benefit - stock options 25,222 141,220 -
- ------------------------------------ ---------- ---------- -----------
Net cash used for financing
activities (372,892) (201,294) (260,920)
- ------------------------------------ ---------- ---------- -----------
Effect of exchange rate changes on
cash (118) 451 639
- ------------------------------------ ---------- ---------- -----------
Net (decrease) increase in cash and
cash equivalents (179,178) 120,634 379,538
Cash and cash equivalents at
beginning of period 523,125 402,491 248,053
- ------------------------------------ ---------- ---------- -----------
Cash and cash equivalents at end of
period $ 343,947 $ 523,125 $ 627,591
- ------------------------------------ ---------- ---------- -----------
-------------------------
Twelve Months Ended
-------------------------
FY06 FY05
------------ ------------
Oct. 28 2006 Oct. 29 2005
------------- ------------
Cash flows from operating activities:
Net Income $ 549,482 $ 414,787
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 166,851 153,181
Amortization of intangibles 5,312 2,383
Stock-based compensation 75,429 4,870
Excess tax benefit - stock options (181,178) -
Tax benefit - stock options - 50,374
Non-cash portion of special charge 459 -
Other non-cash expense 784 1,822
Gain on sale of a product line (13,027) -
Purchased in-process research and
development 21,711 -
Minority interest (748) -
Deferred income taxes (28,454) 14,604
Changes in operating assets and
liabilities 24,481 30,683
- -------------------------------------------- ------------ ------------
Total adjustments 71,620 257,917
- -------------------------------------------- ------------ ------------
Net cash provided by operating activities 621,102 672,704
- -------------------------------------------- ------------ ------------
Percent of Sales 24.1% 28.2%
- -------------------------------------------- ------------ ------------
Cash flows from investing activities:
Additions to property, plant and
equipment, net (129,297) (85,457)
Purchases of short-term available-for-sale
investments (2,483,123) (3,457,017)
Maturities of short-term available-for-
sale investments 2,788,717 3,526,871
Proceeds from sale of a product line 23,070 -
Proceeds from sale of fixed assets 1,735 -
Payments for acquisitions, net of cash
acquired (157,017) -
Decrease in other assets 723 5,644
- -------------------------------------------- ------------ ------------
Net cash provided (used) by investing
activities 44,808 (9,959)
- -------------------------------------------- ------------ ------------
Cash flows from financing activities:
Dividend payments to shareholders (201,451) (118,998)
Repurchase of common stock (1,024,982) (525,493)
Net proceeds from employee stock plans 94,392 89,402
Excess tax benefit - stock options 181,178 -
- -------------------------------------------- ------------ ------------
Net cash used for financing activities (950,863) (555,089)
- -------------------------------------------- ------------ ------------
Effect of exchange rate changes on cash 1,309 995
- -------------------------------------------- ------------ ------------
Net (decrease) increase in cash and cash
equivalents (283,644) 108,651
Cash and cash equivalents at beginning of
period 627,591 518,940
- -------------------------------------------- ------------ ------------
Cash and cash equivalents at end of period $ 343,947 $ 627,591
- -------------------------------------------- ------------ ------------
The following table summarizes sales trends by product categories
showing what proportion of our total sales are represented by each
product category as well as the annual sequential growth rates for
each product category. 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 restate the product
categories for all prior periods in order to ensure the trends by
product category continue to be meaningful.
Revenue Trends by Product
- --------------------------------- ---- -------------------------------
3 Yr Fiscal Year
-------------------------------
CAGR 2006 2005 2004 2003
- --------------------------------- ---- ------- ------- ------- -------
Converters 16% $1,023 $ 927 $ 884 $ 663
% Total Sales 40% 39% 33% 32%
Y-Y 10% 5% 33% 13%
- --------------------------------- ---- ------- ------- ------- -------
Amplifiers 13% $ 532 $ 446 $ 467 $ 371
% Total Sales 21% 19% 18% 18%
Y-Y 19% -5% 26% 8%
- --------------------------------- ---- ------- ------- ------- -------
Power Management & References -3% $ 220 $ 214 $ 264 $ 243
% Total Sales 8% 9% 10% 12%
Y-Y 3% -19% 9% 29%
- --------------------------------- ---- ------- ------- ------- -------
Other Analog 16% $ 302 $ 243 $ 286 $ 194
% Total Sales 12% 10% 11% 9%
Y-Y 24% -15% 47% 6%
- --------------------------------- ---- ------- ------- ------- -------
Total Analog Products 12% $2,077 $1,830 $1,901 $1,471
% Total Sales 81% 77% 72% 72%
Y-Y 13% -4% 29% 13%
- --------------------------------- ---- ------- ------- ------- -------
- --------------------------------- ---- ------- ------- ------- -------
General Purpose DSP 9% $ 205 $ 187 $ 176 $ 160
% Total Sales 8% 8% 7% 8%
Y-Y 10% 6% 10% 7%
- --------------------------------- ---- ------- ------- ------- -------
DSP-based DSL ASIC and Network
Processor Product Line(a) -40% $ 14 $ 55 $ 56 $ 65
% Total Sales 1% 2% 2% 3%
Y-Y -74% -2% -13% 8%
- --------------------------------- ---- ------- ------- ------- -------
Wireless Handset Chipsets -5% $ 239 $ 267 $ 433 $ 275
% Total Sales 9% 11% 16% 14%
Y-Y -10% -38% 56% 145%
- --------------------------------- ---- ------- ------- ------- -------
Other DSP -21% $ 38 $ 50 $ 68 $ 76
% Total Sales 1% 2% 3% 4%
Y-Y -25% -26% -10% -6%
- --------------------------------- ---- ------- ------- ------- -------
Total DSP Products -5% $ 496 $ 559 $ 733 $ 576
% Total Sales 19% 23% 28% 28%
Y-Y -11% -24% 27% 43%
- --------------------------------- ---- ------- ------- ------- -------
- --------------------------------- ---- ------- ------- ------- -------
TOTAL ADI 8% $2,573 $2,389 $2,634 $2,047
% Total Sales 100% 100% 100% 100%
Y-Y 8% -9% 29% 20%
- --------------------------------- ---- ------- ------- ------- -------
(a) Disposed of DSP-based DSL ASIC and network processor product line
in the second quarter of fiscal 2006
CONTACT: Analog Devices, Inc.
Maria Tagliaferro, 781-461-3282
781-461-3491 (fax)
Director of Corporate Communications
investor.relations@analog.com