Analog Devices Announces Results for Third Quarter of Fiscal Year 2006.NORWOOD Norwood. 1 Town (1990 pop. 28,700), Norfolk co., E Mass.; settled 1678, set off from Dedham and Walpole and inc. 1872. Chiefly residential, its industries include printing and publishing and the manufacture of plastics, apparel, computer software, and , Mass. -- Analog Devices Analog Devices (NYSE: ADI) is an American multinational producer of semiconductor devices. Analog specializes in ADC, DAC, MEMS, and DSP chips for consumer and industrial goods. Analog is presently designing circuits in the 65 nanometer to 3 µm process feature sizes range. , Inc. (NYSE NYSE See: New York Stock Exchange : ADI): --Board of Directors declares quarterly dividend of $0.16 per share; --Financial results for the third quarter and guidance for the fourth quarter of fiscal 2006 will be discussed via conference call today at 4:30 pm. Analog Devices, Inc. (NYSE: ADI), a global leader in high-performance Adj. 1. high-performance - modified to give superior performance; "a high-performance car" superior - of high or superior quality or performance; "superior wisdom derived from experience"; "superior math students" semiconductors for signal processing See DSP. applications, today announced revenue of $663.7 million for the third quarter of fiscal 2006, an increase of approximately 14% compared to the same period one year ago and an increase of approximately 3% compared to the immediately prior quarter. Net income under generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) was $144.7 million for the third quarter. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of (EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. ) was $0.39 for the third quarter. The GAAP results for the third quarter of fiscal 2006 include the following items: expenses of $5.7 million included in cost of sales related to previously-announced restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). actions; expenses of $6.2 million included in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. related to previously-announced acquisitions; $19 million of non-cash stock option expenses; and $16.8 million of tax benefits. In total, these items reduced diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS by $0.04 in the third quarter. Excluding these items, diluted EPS was $0.43 in the third quarter. The Board of Directors declared a cash dividend for the third quarter of fiscal 2006 of $0.16 per outstanding share of common stock. The dividend will be paid on September September: see month. 13, 2006 to all shareholders of record at the close of business on August 25, 2006. "Revenue from our broad base of industrial customers continued to be strong in the third quarter, increasing 16% year-over-year and 3% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen ," said Jerald G. Fishman Jerald G. Fishman has served as Chief Executive Officer and President of Analog Devices since November 1996. He is a 35 year veteran of Analog Devices and also serves on the Board of Directors of Cognex Corporation and Xilinx Inc. , ADI's president and chief executive officer. "Revenue from communications customers increased 26% year-over-year and 6% sequentially. Within communications, revenue from wireless base station customers was particularly strong, while revenue from wireless handset The part of the telephone that contains the speaker and the microphone. On a desktop phone, the part you hold in your hand is the handset. On a cellphone, the entire phone is the handset. See multihandset cordless and headset. customers was approximately equal to the immediately prior quarter. In the third quarter, revenue from consumer customers increased 14% year-over-year and 3% sequentially while revenue from computer customers declined compared to the immediately prior quarter." Profit Margins Gross margin for the third quarter of fiscal 2006 was $390.1 million, or 58.8% of sales. In the third quarter of fiscal 2006, gross margin was reduced by $8.7 million, or 1.3% of sales, as a result of stock option expense and previously announced manufacturing restructuring-related expense. Excluding these items, gross margin for the third quarter was 60.1% of sales. Operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. for the third quarter of fiscal 2006 totaled $148.9 million, or approximately 22.4% of sales. In the third quarter of fiscal 2006, operating profit was reduced by $30.9 million, or 4.7% of sales, as a result of stock option expense and previously announced restructuring- and acquisition-related expense. Excluding these items, operating profit for the third quarter was 27.1% of sales. Uses of Cash Capital expenditures totaled $38.4 million in the third quarter of fiscal year 2006. The company repurchased approximately 9.3 million shares of ADI common stock for $305.2 million and paid $57.5 million in cash dividends. Balance Sheet Cash and short term investments totaled approximately $2.5 billion at the end of the third quarter. In the third quarter, inventory increased by approximately $18 million compared to the immediately prior quarter. Approximately $9 million of the inventory increase was planned as part of the closure of the company's wafer (1) A small, thin continuous-loop magnetic tape cartridge that has been used from time to time for data storage and specialized applications. (2) The base unit of chip making. It is a slice taken from a salami-like silicon crystal ingot up to 12" (300mm) in diameter. manufacturing facility in Sunnyvale, California Sunnyvale ([sʌniveil]) is a city in Santa Clara County, California, United States. It is one of the major cities that make up the Silicon Valley. As of the 2000 census, the city population was 131,760. , which is on schedule to be shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down in October October: see month. of 2006. Days cost of sales in inventory was 126 days at the end of the third quarter of fiscal 2006, compared to 129 days one year ago and 125 days at the end of the immediately prior quarter. Days sales in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying were 49 days at the end of the third quarter, compared to 47 days one year ago and 51 days at the end of the immediately prior quarter. Revenue Analysis by Product During the third quarter of fiscal year 2006, analog products totaled 84% of sales and digital signal processing See DSP. Digital Signal Processing - (DSP) Computer manipulation of analog signals (commonly sound or image) which have been converted to digital form (sampled). (DSP (1) (Digital Signal Processor) A special-purpose CPU used for digital signal processing applications (see definition #2 below). It provides ultra-fast instruction sequences, such as shift and add, and multiply and add, which are commonly used in math-intensive ) products totaled 16% of sales. Revenue from analog products grew 15% compared to the same period one year ago and 4% compared to the immediately prior quarter. Compared to the same period one year ago, data converter Noun 1. data converter - converter for changing information from one code to another computer, computing device, computing machine, data processor, electronic computer, information processing system - a machine for performing calculations automatically product sales grew 12%, amplifier product sales grew 20%, and other analog product sales grew 16%. Compared to the immediately prior quarter, data converter product sales grew 4%, amplifier sales grew 5%, and other analog product sales grew 2%. Revenue from DSP products grew 11% compared to the same period one year ago and was flat compared to the immediately prior quarter. General-purpose gen·er·al-pur·pose adj. Designed for or suitable to more than one use; broadly useful: a general-purpose loan. general-purpose Adjective DSP product sales grew 15% compared to the same period one year ago and 11% compared to the immediately prior quarter. Revenue from other DSP products grew 7% compared to the same period one year ago and declined 8% compared to the immediately prior quarter. Outlook for the Fourth Quarter of Fiscal 2006 Guidance for the fourth quarter of fiscal 2006 is based on GAAP and is only current as of today, Thursday Thursday: see week. , August 10, 2006. The company undertakes no obligation to update its estimates. ADI has provided a table of supplemental information with this release, and on its website, which includes estimates of the impact of stock option expense and previously announced acquisition- and restructuring-related expense on the company's 2006 fourth quarter financial statements. Revenue in the fourth quarter is planned to be approximately equal to the third quarter of fiscal 2006. Gross margin in the fourth quarter is expected to be approximately equal to the third quarter of fiscal 2006. Operating expenses are planned to increase by approximately $21.9 million compared to the third quarter, primarily due to the previously announced restructuring and acquisition related expenses. Diluted EPS is planned to be $0.33 to $0.34 for the fourth quarter of fiscal 2006, which includes approximately $0.04 for stock option expenses, $0.02 for previously announced restructuring expenses, and $0.03 for previously announced acquisition related expenses. Supplemental Information In order to help investors compare current results to ADI's historical results and thereby better understand the underlying trends in the company's business and ongoing operating results, ADI has provided a table of supplemental information with this release, and on its website, which includes estimates of the impact of stock option expense, the impact of previously announced restructuring-related expenses, the impact of the gain from the sale of the DSP-based DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary ASIC (Application Specific Integrated Circuit) Pronounced "a-sick." A chip that is custom designed for a specific application rather than a general-purpose chip such as a microprocessor. and network processor product line, the impact of expenses associated with previously announced acquisitions, and the impact of tax benefits on the company's 2006 quarterly financial statements. Conference Call Scheduled for 4:30 Mr. Fishman Fishman may refer to:
adj. Of, for, or involving a short period of time in the near future. outlook via webcast, accessible from www.analog.com, today beginning at 4:30 pm EST EST electroshock therapy. EST abbr. electroshock therapy . Investors who prefer to join by telephone may call 706-634-7193 ten minutes before the call begins and provide the password A secret word or code used to serve as a security measure against unauthorized access to data. It is normally managed by the operating system or DBMS. However, the computer can only verify the legitimacy of the password, not the legitimacy of the user. See NCSC. "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: 377542 or by visiting the Investor Relations Investor relations The process by which the corporation communicates with its investors. 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 Imagine feeding the output of a temperature sensor, which is in millivolts, to an Analog-to-digital converter to be processed. Is it possible for the Analog-to-Digital converter to process such a minute voltage amplitude? The answer is probably no. 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 Integrated circuits Miniature electronic circuits produced within and upon a single semiconductor crystal, usually silicon. Integrated circuits range in complexity from simple logic circuits and amplifiers, about 1/20 in. (1. used in analog and digital signal processing applications, Analog Devices is headquartered in Norwood, Massachusetts Norwood is a town and census-designated place in Norfolk County, Massachusetts, USA. As of the 2000 census, the population was 28,587. The community was named after Norwood, England. , with design and manufacturing facilities throughout the world. Analog Devices' common stock is listed on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the ticker ticker An automated quotation system on which security transactions are reported after they occur on an exchange floor. Even though the newer systems are electronic and no longer actually tick, the name of the old mechanical device has stuck. "ADI" and is included in the S&P 500 Index. Safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , including our statements regarding expected sales growth, revenue, earnings, operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , and other financial results, expected increases in customer demand for our products, and expected cash dividends, 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 contraction, in physics contraction, in physics: see expansion. contraction, in grammar contraction, in writing: see abbreviation. contraction - reduction of the markets we serve, demand for semiconductors generally and for our products in particular, the risk that our backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. could decline significantly, adverse results in various litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. matters, our ability to hire engineers, salespeople sales·peo·ple pl.n. Persons who are employed to sell merchandise in a store or in a designated territory. 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 ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , the occurrence and frequency of inventory and lead-time lead-time n. The time between the initial stage of a project or policy and the appearance of results: a long lead-time in oil production because of the need for new exploration and drilling. 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 Form 10-Q See 10-Q. for the fiscal quarter ended April 29, 2006, as filed with the Securities and Exchange Commission.
Analog Devices, Third Quarter, Fiscal 2006
Sales/Earnings Summary (GAAP)
(In thousands, except per-share amounts)
3Q 06 2Q 06 3Q 05
----------------------------------------------------------------------
Three Months Ended July 29, April 29, July 30,
2006 2006 2005
----------------------------------------------------------------------
Net Sales $ 663,660 $ 643,872 $ 582,416
Y/Y Growth 14% 7% -19%
Q/Q Growth 3% 4% -4%
Cost of Sales 273,550 263,201 244,178
Gross Margin 390,110 380,671 338,238
Percent of Sales 58.8% 59.1% 58.1%
----------------------------------------------------------------------
Operating Expenses:
R&D 136,061 131,848 119,217
Selling, Marketing and G&A 99,663 97,432 84,407
Purchased In-Process Research and
Development 5,500 - -
----------------------------------------------------------------------
Operating Income 148,886 151,391 134,614
Percent of Sales 22.4% 23.5% 23.1%
----------------------------------------------------------------------
Other Income (26,277) (39,225) (19,062)
----------------------------------------------------------------------
Income Before Tax 175,163 190,616 153,676
Provision for Taxes 30,478 44,795 32,272
Tax Rate 17.4% 23.5% 21%
----------------------------------------------------------------------
Net Income $ 144,685 $ 145,821 $ 121,404
Percent of Sales 21.8% 22.6% 20.8%
----------------------------------------------------------------------
Shares used for EPS - Basic 357,887 364,225 370,985
Shares used for EPS - Diluted 369,542 376,811 382,830
Earnings per Share - Basic $ 0.40 $ 0.40 $ 0.33
Earnings per Share - Diluted $ 0.39 $ 0.39 $ 0.32
Dividends paid per share $ 0.16 $ 0.12 $ 0.10
----------------------------------------------------------------------
Supplemental Information
Our GAAP Financial Statements Include 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
(in thousands, except per-share amounts)
4Q 05 1Q 06 2Q 06 3Q 06 4Q 06
Actual Actual Actual Actual Estimate
COST OF SALES
Stock-based
compensation expense $ - $ 954 $ 990 $ 2,949 $ 2,841
Restructuring related
expenses - 5,903 5,877 5,736 6,096
----------------------------------------------------------------------
GROSS MARGIN - (6,857) (6,867) (8,685) (8,937)
% Sales 0.0% -1.1% -1.1% -1.3%
----------------------------------------------------------------------
OPERATING EXPENSE
R&D - stock-based
compensation expense - 9,562 8,282 7,971 7,422
Selling, Marketing, G&A
- stock-based
compensation expense - 10,090 7,684 8,055 7,414
R&D - acquisition
related costs - - - 733 3,300
Acquisition related
costs - - - 5,500 12,000
Special charges -
restructuring related 31,480 1,013 - - 7,407
----------------------------------------------------------------------
TOTAL OPERATING EXPENSE 31,480 20,665 15,966 22,259 37,543
% Sales 5.1% 3.3% 2.5% 3.4%
----------------------------------------------------------------------
OPERATING PROFIT (LOSS)
BEFORE TAX (31,480) (27,522) (22,833) (30,944) (46,480)
% Sales -5.1% -4.4% -3.5% -4.7%
----------------------------------------------------------------------
Non-operating gain on
sale of product line - - (13,027) - -
% Sales 0.0% 0.0% -2.0% 0.0%
----------------------------------------------------------------------
Tax benefit of above
items (10,118) (8,344) (2,279) (8,315) (14,531)
Tax benefit associated
with IRS Settlement - - - (8,494) -
Tax expense associated
with the repatriation of
foreign earnings 48,768 - - - -
----------------------------------------------------------------------
NET INCOME (LOSS) $(70,130)$(19,178)$ (7,527)$(14,135)$(31,949)
% Sales -11.3% -3.1% -1.2% -2.1%
----------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE
Repatriation of foreign
earnings $ (0.128)$ - $ - $ - $ -
Gain on sale of a product
line - - 0.022 - -
Stock-based compensation - (0.039) (0.032) (0.036) (0.035)
Restructuring related
expenses (0.054) (0.012) (0.010) (0.010) (0.024)
Tax benefit associated
with IRS Settlement - - - 0.023 -
Acquisition related costs - - - (0.015) (0.030)
----------------------------------------------------------------------
EARNINGS (LOSS)
PER SHARE $ (0.182)$ (0.051)$ (0.020)$ (0.038)$ (0.089)
----------------------------------------------------------------------
Analog Devices, Third Quarter, Fiscal 2006
Selected Balance Sheet Information (GAAP)
(In thousands)
3Q 06 2Q 06 3Q 05
----------------------------------------------------------------------
July 29, April 29, July 30,
2006 2006 2005
----------------------------------------------------------------------
Cash & Short-term Investments $ 2,516,061 $ 2,692,796 $ 2,783,886
Accounts Receivable, Net 359,774 357,880 302,375
Inventories (1) 377,434 359,420 345,949
Other Current Assets 179,659 147,380 135,564
----------------------------------------------------------------------
Total Current Assets 3,432,928 3,557,476 3,567,774
PP&E, Net 558,054 561,538 617,038
Investments 30,317 30,532 280,110
Intangible Assets 180,933 166,795 167,404
Other 90,015 87,006 67,735
----------------------------------------------------------------------
Total Assets $ 4,292,247 $ 4,403,347 $ 4,700,061
----------------------------------------------------------------------
Deferred Income-Shipments to
Distributors $ 165,850 $ 152,864 $ 131,031
Other Current Liabilities 419,314 542,820 423,361
Non-Current Liabilities 59,649 64,732 310,950
Stockholders' Equity 3,647,434 3,642,931 3,834,719
----------------------------------------------------------------------
Total Liabilities & Equity $ 4,292,247 $ 4,403,347 $ 4,700,061
----------------------------------------------------------------------
Days Sales Outstanding 49 51 47
Days Cost of Sales in Inventory 126 125 129
(1) includes $4,066 and $3,947 related to stock-based compensation
expense in 3Q06 and 2Q06, respectively.
Cash Flow Statement (GAAP)
(In thousands)
3Q 06 2Q 06 3Q 05
----------------------------------------------------------------------
Three Months Ended July 29, April 29, July 30,
2006 2006 2005
----------------------------------------------------------------------
Cash flows from operating
activities:
Net Income $ 144,685 $ 145,821 $ 121,404
Adjustments to reconcile net
income
to net cash provided by
operations:
Depreciation 42,181 42,687 37,801
Amortization of intangibles 1,145 404 672
Stock-based compensation 19,306 17,217 -
Gain on sale of a product
line - (13,027) -
Purchased in-process
research and development 5,500 - -
Other non-cash expense 84 23 1,340
Non-cash tax benefit - FAS
123R (141,220) (14,736) -
Deferred income taxes (11,985) (4,776) 1,736
Changes in operating assets
and liabilities 14,277 31,526 17,357
----------------------------------------------------------------------
Total adjustments (70,712) 59,318 58,906
----------------------------------------------------------------------
Net cash provided by operating
activities 73,973 205,139 180,310
----------------------------------------------------------------------
Percent of Sales 11.1% 31.9% 31.0%
----------------------------------------------------------------------
Cash flows from investing
activities:
Additions to property, plant and
equipment, net (38,360) (28,822) (18,912)
Purchases of short-term
available-for-sale investments (689,130) (421,103) (841,486)
Maturities of short-term
available-for-sale investments 989,638 441,630 606,305
Proceeds from sale of a product
line - 23,070 -
Payments for acquisitions, net of
cash acquired (14,913) - -
Decrease in other assets 269 330 205
----------------------------------------------------------------------
Net cash provided (used) by
investing activities 247,504 15,105 (253,888)
----------------------------------------------------------------------
Cash flows from financing
activities:
Dividend payments to shareholders (57,524) (44,191) (37,034)
Repurchase of common stock (305,163) (237,709) -
Net proceeds from employee stock
plans 20,173 20,994 43,969
Non-cash tax benefit - FAS 123R 141,220 14,736 -
----------------------------------------------------------------------
Net cash (used for) provided by
financing activities (201,294) (246,170) 6,935
----------------------------------------------------------------------
Effect of exchange rate changes on
cash 451 562 328
----------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 120,634 (25,364) (66,315)
Cash and cash equivalents at
beginning of period 402,491 427,855 314,368
----------------------------------------------- ----------------------
Cash and cash equivalents at end of
period $ 523,125 $ 402,491 $ 248,053
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