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): May 22, 2013
Analog Devices, Inc.
(Exact Name of Registrant as Specified in Charter)
| Massachusetts | 1-7819 | 04-2348234 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer 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
Not Applicable
(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:
| ¨ | 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 7.01. | Regulation FD Disclosure |
Attached hereto as Exhibit 99.1 are slides being presented to investors by Analog Devices, Inc.
The information in this Item 7.01, and the slide presentation in Exhibit 99.1 attached to this Form 8-K, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section; nor shall this Item 7.01, such Exhibit 99.1, or any of the information contained herein or therein be deemed incorporated by reference in any filing under the Securities Exchange Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits |
| (d) | Exhibits |
| See Exhibit Index attached hereto. |
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.
| ANALOG DEVICES, INC. | ||||||||
| Date: May 22, 2013 | By: | /s/ David A. Zinsner | ||||||
| Name: | David A. Zinsner | |||||||
| Title: | Vice President, Finance and Chief Financial Officer | |||||||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Slide presentation (such Exhibit 99.1 is furnished and not filed). | |
 Analog Devices, Inc.
Analog Devices, Inc.
$500 million Senior Notes Offering
$500 million Senior Notes Offering
May 2013
May 2013
Today’s Presenters
David Zinsner, VP, Finance & CFO
Bill Martin, Treasurer and Director of M&A
Exhibit 99.1 |
 1
This presentation 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 financial results, tax rate and
shareholder returns, expected production and inventory levels, expected
market trends, growth opportunities and business strategy, and expected 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 presentation are not
guarantees of future performance, are inherently uncertain, involve certain risks,
uncertainties, and assumptions that are difficult to predict, and do not
give effect to the potential impact of any mergers, acquisitions, divestitures, or business
combinations that may be announced or closed after the date hereof.
Therefore, actual outcomes and results may differ materially from what is
expressed in such forward-looking statements, and such statements should not be relied upon as
representing Analog Devices’
expectations or beliefs as of any date subsequent to the date of this
presentation. We do not undertake
any
obligation
to
update
forward-looking
statements
made
by
us.
Important
factors
that
may
affect
actual
outcomes and results include: sovereign debt issues globally, any faltering in
global economic conditions or the stability of credit
and
financial
markets,
erosion
of
consumer
confidence
and
declines
in
customer
spending,
unavailability
of
raw
materials,
services,
supplies
or
manufacturing
capacity,
changes
in
geographic,
product
or
customer
mix,
adverse
results
in
litigation
matters,
and
other
risk
factors
described
in
our
most
recent
filings
with
the
Securities
and
Exchange
Commission. Our results of operations for the periods presented in this
presentation are not necessarily indicative of our operating results for
future periods. Any projections in this presentation are based on limited information currently available
to
Analog
Devices,
which
is
subject
to
change.
Although
any
such
projections
and
the
factors
influencing
them
will
likely
change, we will not necessarily update the information, as we will only provide
guidance at certain points during the year. Such information speaks only as
of the original issuance date of the presentation. During this presentation,
we may refer to non-GAAP financial measures that have been adjusted for
one-time items in order to provide investors with useful information
regarding our results of operations and business trends. Reconciliations of these non-GAAP measures to their
most directly comparable GAAP measures can be found in the Appendix to this
presentation and our earnings releases which are posted on our IR
website. Safe Harbor Statement |
 2
Offering Summary
Issuer:
Analog Devices, Inc.
Securities:
Senior Unsecured Notes
Size:
$500 million “will not grow”
Form of Offering:
SEC Registered
Maturity:
10 years
Ratings:
Moody’s: A3 (Stable)
S&P: A-
(Stable)
Covenants:
Standard Investment Grade Covenants including
Change of Control Put
Use of Proceeds:
Redemption of outstanding 2014 notes and general
corporate purposes, which may include capital
expenditures, repurchases of common stock under our
stock repurchase program, dividend payments, and
acquisitions
Joint Book-runners:
J.P. Morgan, BofA Merrill Lynch, and Credit Suisse |
 3
About Analog Devices
Source:
Company
data
Notes:
(1)
Free
Cash
Flow
defined
as
net
cash
provided
by
operations
minus
CAPEX
Analog Devices Overview
FY2012 revenue of $2,701 million and FCF
(1)
of $682 million
A global leader in analog products with #1 market share position
in converters and high performance
amplifiers
Over 60,000 customers worldwide
Broad IP portfolio with over 2,700 U.S. patents and applications
9,200 employees worldwide as of December 2012
Founded in 1965 with headquarters in Norwood, MA, ADI has manufacturing facilities
in Massachusetts, Ireland, and the Philippines and more than 30 design
facilities worldwide Diversified End Markets
FY 2012 Revenue by End Market ($2.7 billion)
Industrial &
Instrumentation
Automotive
Communications
Consumer
FY 2012 Revenue by Customer ($2.7 billion)
Top 20 customers
All other customers
Broad Customer Base |
 4
Key Investment Highlights
Highly diversified business model with broad exposure to multiple products,
customers, end markets and geographies
Leading market position with attractive growth prospects
Highly-proprietary products with long product life cycles and high
margin profile
Efficient cost structure and low capital requirements
Consistently high-quality financial results with proven ability to generate
strong cash flows through the cycle
Conservative capital structure strategy
Experienced management team with demonstrated ability to steer business
through cycles |
 5
What Does Analog Devices Do? |
 6
General-Purpose Analog Product Category Attractiveness
Worldwide General-Purpose Analog IC
Revenue Forecast by Market Segment from 2010 to 2018E
Source:
DataBeans,
May
2013
Long product life cycles
Proprietary products
Large customer base
Strong customer loyalty
High fragmentation
Stable ASPs
High barriers to entry
Low capital intensity
Less volatile, higher margins than digital
6
$17.8
$17.1
$15.6
$16.6
$18.8
$20.4
$22.4
$23.8
$25.2
2010
2011
2012
2013E
2014E
2015E
2016E
2017E
2018E
Automotive
Computer
Consumer
Communications
Industrial
($ billion)
ADI has 14% share
#2 overall position
2012 to 2018E
CAGR: 8% |
 Product Diversification
7
ADI has a Diversified Product Portfolio
FY 2012 Revenue by Product Type ($2.7 billion)
Source:
Company
data.
Note,
the
sum
of
the
individual
percentages
does
not
equal
100%
due
to
rounding
26%
44%
7%
15%
9%
Converters
Amplifiers/RF
Other Analog
Signal
Processing
Power Management
and References
DSP
Greater than 60% of product revenue
is proprietary
No one product currently accounts for
more than 2% of total revenue
Over 10,000 parts limiting reliance on
any specific product |
 8
ADI’s Products have a Long Lifecycle
Source:
Company
data |
 9
Source:
Databeans,
May
2013
2012 Converter Market Share
Converter Market Share: 2002-2012
ADI leads in market share, brand
awareness and brand preference
Greatest breadth and depth of
product portfolio
2,000+ products
$1.2 billion sales in FY12
Growing market
Proliferation of digital systems that need
data conversion
More channels of conversion per system
Converters determine system
performance
Worldwide Leader in Converters |
 Source:
Databeans,
May
2013.
High
performance
includes
high
speed,
high
precision,
and
instrumentation
amplifiers
Worldwide Leader in High Performance Amplifier Market
ADI leads the high performance
amplifier market segment, a $1.2
billion market
High-speed amplifiers
High-precision amplifiers
Instrumentation amplifiers
Circuit design, manufacturing process
innovation, and applications expertise
drive differentiation
High-performance amplifiers often
work in tandem with converters to
create system-level advantages
10 |
 11
Fab-Lite Manufacturing Strategy
Diversified manufacturing strategy utilizing internal and external
capabilities Internal capacity where process technology matters and product
life cycles are long; external capacity for everything else
Analog chip manufacturing does not require leading edge factories
Completed the necessary investments to consolidate fabrication facilities over
the past several years
Results in low capital expenditure requirements |
 12
ADI’s Financial Model
Stable, consistent revenue growth
High margins
Low capital spending
High cash flow conversion
Strong operating leverage
Positioned effectively for recovery or continued recessionary environment
Emphasis on organic growth and a conservative acquisition strategy
|
 13
Solid Long Term History of Revenue Growth
Revenue ($ millions)
0
400
800
1,200
1,600
2,000
2,400
2,800
3,200
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY97 to FY12
Revenue CAGR: 5%
Source:
Company
data
Note:
FY05 –
FY11 metrics reflect revenue from continuing operations
|
 14
Strong Margin Profile
Gross Margin Improvement Drivers
(%)
0
10
20
30
40
50
60
70
FY97
FY00
FY03
FY06
FY09
FY12
Gross Margin
Operating Margin
27%+ average operating margin over the last 5 years
Source:
Company data
Note:
FY05 –
FY11 metrics are calculated as a percentage of revenue from continuing
operations Operating
Expenses
Improvement
Drivers
Fab consolidations
Lower capital spending
Improving mix
Increasing utilization
Pricing for value
Product portfolio management
Increased focus on ROI
Better organizational alignment
Reduced complexity |
 15
Operating Ratio Comparisons
ADI vs. SOX and S&P Index Averages
Operating Margin (excl special items)
Gross Margin
64.4
49
31.1
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
CY 2012
30.4
19.6
12.9
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
CY 2012
(%)
(%)
Source:
ADI
10Q’s
and
10-K
–
Continuing
Ops.
SOX
and
S&P500
provided
by
FactSet
Market
Aggregates
ADI
SOX
S&P 500
ADI
SOX
S&P 500 |
 16
Low Capital Spending Requirements…
($ millions)
0
50
100
150
200
250
300
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
0
5
10
15
20
25
30
(%)
CAPEX $’s
CAPEX as a % of Revenue
ADI's capital expenditures have moderated since the completion of the consolidation
of its mfg facilities in FY10 Source:
Company data
Note:
FY05 –
FY11 metrics are calculated as a percentage of revenue from continuing
operations |
 17
…Leads to Significant Free Cash Flow Generation
Free Cash Flow ($ millions)
0
100
200
300
400
500
600
700
800
900
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
-10
-5
0
5
10
15
20
25
30
35
(% of Sales)
Free Cash Flow
(1)(2)
Free Cash Flow as a % of Revenues
(1)(3)
Source:
Company data
Notes:
(1)
Free
Cash
Flow
defined
as
net
cash
provided
by
operations
minus
CAPEX
(2) FY05 -
FY11 free cash flow includes free cash flow from discontinued operations
(3) FY05 -
FY11 free cash flow as a % of revenue calculated as free cash flow divided by
total revenue, including revenue provided by discontinued operations |
 18
…
and High Cash Flow Conversion
(%)
Source:
Company
data
Note:
FY05-FY11 free cash flow & net income metrics include results from
discontinued operations and are calculated as a percentage of revenue, including revenue from
discontinued operations
(1)
Free Cash Flow defined as net cash provided by operations minus CAPEX
(10)
0
10
20
30
40
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
Net Income as a % of Revenue
Free Cash Flow as a % of Revenue (1) |
 ADI
Free Cash Flow Trend vs. Other “A” Rated Semi’s
(%)
10
20
30
40
50
CY 2008
CY 2009
CY 2010
CY2011
CY2012
ADI
Intel
Texas Instruments
Applied Materials
Broadcom
Altera
% of Sales
Source:
Company
data
and
SEC
filings
19 |
 Revenue of $659 million up 6% q-o-q
•
Industrial growth driven by a rebound in sales in all
geographies
•
Automotive growth driven by broad strength in NA & China
markets, growth in worldwide luxury vehicles, and a
reversal in end of year inventory reductions
•
Consumer decline primarily related to product transitions in
the portable products segment
•
Communications decline related to delays in carrier capital
spending
GAAP gross margin of 64%
•
130 bps q-o-q increase primarily due to decreased
inventory reserve requirements
GAAP operating margin of 29%
•
Increase from prior quarter due to sequential increase in
revenue and improved gross margins
Cash flow from operations of $252 million
Cash and marketable securities of $4.2 billion
•
US balance of $1.2 billion
Q2 2013 Highlights
20
Source:
Company
data.
See
the
reconciliation
table
in
the
Appendix |
 21
Conservative Capital Structure
Debt
Maintain a conservative balance sheet with a strong investment grade credit
profile Cash balance
Fund operations (e.g. R&D) through potential industry downturns
Maintain strong balance for opportunistic M&A
Dividend
Maintain prudent/affordable increases in-line with increases in free cash
flow Maintain dividend yield in-line with similarly rated peers
Share repurchase
Deploy excess free cash flow towards share repurchases at opportunistic prices
Periodic repurchases primarily to offset option dilution
|
 22
Appendix |
 23
Historical Income Statement
($ millions)
FY08
(1)
FY09
(1)
FY10
(1)
FY11
(1)
FY12
Revenue (Continuing Operations)
2,583
2,015
2,761
2,993
2,701
COGS
1,006
896
962
1,007
960
Gross Profit
1,577
1,119
1,799
1,986
1,741
Sales (%)
61
56
65
66
64
R&D
533
447
492
505
512
Sales (%)
21
22
18
17
19
SMG&A
416
333
391
407
397
Sales (%)
16
17
14
14
15
In–process R&D
–
–
–
–
–
Special Charges
3
54
16
2
8
Operating Profit
625
285
900
1,072
824
Sales (%)
24
14
33
36
31
Net interest (Inc.) / exp
(41)
(11)
1
10
12
Other Nop (Inc.) / exp
–
(1)
(2)
1
(1)
Profit Before Tax
666
297
901
1,061
813
Income Taxes
141
50
190
201
162
Tax Rate (%)
21
17
21
19
20
Net Income -
Continuing Ops ($)
525
247
711
860
651
Sales (%)
20
12
26
29
24
Income / (Loss) –
Disc. Ops
261
1
1
7
0
Net Income ($)
786
248
712
867
651
Notes:
(1) Discontinued operations results included with “Income / (Loss)
- Disc. Ops.”
Source:
Company
data |
 24
Historical Balance Sheet
($ millions)
FY08
(1)
FY09
(1)
FY10
FY11
FY12
Cash and ST Investments
1,310
1,816
2,688
3,593
3,900
Trade Receivables
315
301
387
348
340
Inventory
315
253
277
295
314
Net PP&E
567
477
473
479
501
Goodwill and intangibles
247
257
257
287
313
Other assets
327
265
247
276
252
Total Assets ($)
3,081
3,369
4,329
5,278
5,620
Accounts Payable
131
107
133
113
117
Debt
–
380
401
886
822
Other liabilities
530
353
595
483
516
Total Liabilities ($)
661
840
1,129
1,482
1,455
Stockholders Equity
2,420
2,529
3,200
3,796
4,165
Total Liabilities and Equity ($)
3,081
3,369
4,329
5,278
5,620
Note:
(1)
Assets
and
liabilities
of
discontinued
operations
included
with
“other
assets”
and
“other
liabilities”
Source:
Company
data |
 25
Historical Cash Flow
($ millions)
FY08
FY09
FY10
FY11
FY12
Net Income
786
248
712
867
651
Depreciation and Amortization
153
140
121
118
110
Stock-based Comp Net of Tax Benefit
32
49
51
7
41
Working Capital and Other (Inc.) / dec
(54)
(5)
108
(84)
16
(G) / L on Sale of Business & other non-cash
(248)
–
(1)
(7)
(4)
Cash from Operations
669
432
991
901
814
(%) Sales (incl. disc ops)
25
21
36
30
30
Capital Expenditures
(157)
(56)
(112)
(123)
(132)
Free Cash Flow
512
376
879
778
682
(%) Sales (incl. disc ops)
19
19
32
26
25
Source:
Company data |
 26
Pro forma Capitalization
($ millions)
Actual
2Q 13A
Adjustments
For Note Offering
Pro forma
2Q 13A
(%) of
Capitalization
Cash, Cash Equivalents and Short-term Investments
(1) (2)
4,172
497
4,669
Senior Unsecured Notes at Par Value
(2)
750
500
1,250
Total Debt
(2) (3)
($)
750
1,250
22
Shareholders Equity
(2)
4,461
(3)
4,458
78
Total Capitalization ($)
(2)
5,211
5,708
100
Operating Statistics
LTM 5/4/13 EBITDA
(4)
($)
975
975
Credit Statistics
Total Debt / LTM EBITDA
(2)
0.8x
1.3x
Notes:
(1) Includes $595.6 million in cash and cash equivalents and $3,576.5 million in
short-term investments (2)
In
3Q13
the
company
intends
to
use
a
portion
of
the
net
proceeds
from
the
note
offering
to
redeem
the
$375
million
par
value
notes
maturing
in
July
2014.
As
a
result,
the senior senior unsecured notes at par value and total debt will be reduced by
$375 million to $875 million, cash, cash equivalents and short-term investments and total
capitalization is expected to be reduced by approximately $393 million to $4,276
million and $5,315 million respectively, shareholders equity is expected to be reduced by
approximately
$18
million
to
$4,440
million,
and
total
debt
/
LTM
EBITDA
will
be
0.9x
for
the
pro
forma
2Q13
period
after
giving
effect
to
the
redemption
(3) Excludes a five-year, $500 million unsecured revolving credit facility
(entered into in December 2012) of which there is no amount outstanding as of 2Q13
(4) LTM EBITDA is a non-GAAP measure calculated from ADI's GAAP measure of net
income, net of tax for the period presented of $644.7 million and adding back taxes of
$115.1 million, interest expense of $25.7 million, depreciation of $109.9 million,
amortization of intangibles of $0.4 million, stock-based compensation of $59.2 million, and
special
charges
of
$19.9
million.
See
the
reconciliation
table
in
this
Appendix
Source:
Company data |
 27
This
presentation
includes
a
non-GAAP
financial
measure
for
prior
periods
that
is
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,
this
non-GAAP
measure
is
not
based
on
any
comprehensive
set
of
accounting
rules
or
principles.
Manner
in
Which
Management
Uses
the
Non-GAAP
Financial
Measure
Management
uses
non-GAAP
financial
measures
such
as
non-GAAP
EBITDA
to
evaluate
the
Company's
operating
performance
against
past
periods
and
to
budget
and
allocate
resources
in
future
periods.
This
non-GAAP
measure
also
assists
management
in
understanding
and
evaluating
the
underlying
baseline
operating
results
and
trends
in
the
Company's
business.
Economic
Substance
Behind
Management's
Decision
to
Use
the
Non-GAAP
Financial
Measure
The
items
excluded
from
the
non-GAAP
measure
presented
were
excluded
because
they
are
of
a
non-recurring
or
non-cash
nature:
Restructuring-Related
Expenses.
These
expenses
are
incurred
in
connection
with
facility
closures,
consolidation
of
manufacturing
facilities,
and
other
cost
reduction
efforts.
Apart
from
ongoing
expense
savings
as
a
result
of
such
items,
these
expenses
and
the
related
tax
effects
have
no
direct
correlation
to
the
operation
of
our
business
in
the
future.
Why
Management
Believes
the
Non-GAAP
Financial
Measure
Provides
Useful
Information
to
Investors
Management
believes
that
the
presentation
of
non-GAAP
EBITDA
is
useful
to
investors
because
it
provides
investors
with
the
operating
results
that
management
uses
to
manage
the
Company.
Material
Limitations
Associated
with
Use
of
the
Non-GAAP
Financial
Measure
Analog
Devices
believes
that
non-GAAP
EBITDA
has
material
limitations
in
that
it
does
not
reflect
all
of
the
amounts
associated
with
our
results
of
operations
as
determined
in
accordance
with
GAAP
and
that
this
measure
should
only
be
used
to
evaluate
our
results
of
operations
in
conjunction
with
the
corresponding
GAAP
measures.
In
addition,
our
non-GAAP
measures
may
not
be
comparable
to
the
non-GAAP
measures
reported
by
other
companies.
The
Company's
use
of
non-GAAP
measures,
and
the
underlying
methodology
in
excluding
certain
items,
is
not
necessarily
an
indication
of
the
results
of
operations
that
may
be
expected
in
the
future,
or
that
the
Company
will
not,
in
fact,
record
such
items
in
future
periods.
Management's
Compensation
for
Limitations
of
the
Non-GAAP
Financial
Measure
Management
compensates
for
this
material
limitation
in
non-GAAP
EBITDA
by
also
evaluating
our
GAAP
results
and
the
reconciliation
of
our
non-GAAP
measure
to
the
most
directly
comparable
GAAP
measure.
Investors
should
consider
our
non-GAAP
financial
measure
in
conjunction
with
the
corresponding
GAAP
measure.
Non-GAAP Financial Information |
 28
Reconciliation of Non-GAAP Financial Information
Table of Reconciliation of GAAP LTM Net Income to Non-GAAP LTM EBITDA
ADI Financial Results
LTM Quarter Ended
($ millions) (unaudited)
2Q12
3Q12
4Q12
1Q13
2Q13
GAAP LTM Net Income
705.7
655.6
651.3
643.1
644.7
Plus: LTM Taxes
191.7
176.5
162.3
140.5
115.1
Plus: LTM Interest Expense
25.9
26.2
26.5
26.2
25.7
Plus: LTM Depreciation
113.0
111.0
109.7
109.3
109.9
Plus: LTM Amortization of Intangibles
0.6
0.4
0.2
0.3
0.4
Plus: LTM Stock-Based Compensation
52.3
52.8
53.5
53.3
59.2
Plus: LTM Special Charges
4.8
10.6
8.4
19.9
19.9
Non-GAAP LTM EBITDA
1,094.0
1,033.1
1,011.9
992.6
974.9
Source:
Company
data |
 |