Analog Devices Reports Increased Revenue and Profits for the Second Quarter of Fiscal Year 2005; Board raises cash dividend to $0.10 from $0.06 per share and increases share repurchase program by $500 million.NORWOOD, 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), a global leader in high-performance semiconductors for signal processing See DSP. applications, today announced financial results for the second quarter of fiscal 2005, which ended April 30, 2005. For the second quarter, revenue was $604 million, 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 $0.31, and net income totaled $118 million, or 19% of sales. ADI also announced that the company's Board of Directors declared a cash dividend of $0.10 per outstanding share of common stock for the second quarter, up from $0.06 in the first quarter. The dividend is payable on June 15, 2005 to all stockholders of record at the close of business on May 27, 2005. The Board also approved a $500 million increase to the company's share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program. "Our second quarter turned out to be a good quarter for ADI. Revenue increased 4% sequentially and 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 increased 11% to $0.31," said Mr. 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. , President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "Revenue increased sequentially in every geographic region, except China, as customer inventory declines appear to be completed after a six-month correction. Revenue increased sequentially in both the OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and and distributor channels. "Looking at the end markets, the highest growth on a dollar basis came from the industrial end markets, which grew 11% sequentially, driven by growth from our instrumentation instrumentation, in music: see orchestra and orchestration. instrumentation In technology, the development and use of precise measuring, analysis, and control equipment. and automotive customers and the resumption RESUMPTION. To reassume; to promise again; as, the resumption of payment of specie by the banks is general. It also signifies to take things back; as the government has resumed the possession of all the lands which have not been paid for according to the requisitions of the law, and the of growth from some automatic test equipment (ATE) customers. Sales to consumer customers grew 16% sequentially, primarily as a result of increased market share in digital cameras and advanced digital TVs. Computer product revenue was down sequentially. Revenue from communications applications was approximately flat sequentially, as strong gains in wireless infrastructure were offset by continuing weakness in wireless handsets, particularly among customers in China," Mr. Fishman explained. By end market, approximately 41% of second quarter revenue was from industrial applications, which span a broad range of medical, security, automotive, instrumentation, and defense electronics applications, 31% from communications applications, 15% from consumer applications, and 13% from computer applications. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Mr. Fishman, "Revenue from analog products increased by 6% compared to the immediately prior quarter and totaled 81% of sales. Most noteworthy was 12% sequential revenue growth in converters and 10% sequential revenue growth in amplifiers -- two product areas at the heart of ADI's franchise and where our market share is very high. Sales of other analog products, including power management, declined sequentially. 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 revenue, which was 19% of sales in the second quarter, declined 4% sequentially, as strong sequential growth in general-purpose DSP products was offset primarily by sequential declines in wireless handsets and broadband products. Gross margins for the second quarter were 57.4%, down 40 basis points from the immediately prior quarter as a result of lower factory utilization. "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. were approximately flat for the second quarter compared to both the immediately prior quarter and the same quarter last year. We kept tight control of expenses, despite absorbing the effect of annual salary increases and higher employee bonus accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. ," said Mr. Fishman. "As a result, operating profits 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 second quarter increased to approximately $134 million or 22% of sales." Turning to the balance sheet, Mr. Fishman explained, "Our balance sheet continued to strengthen in the second quarter. Inventories declined sequentially by $5 million. Days cost of sales in inventory was 124 days in the second quarter, down from 132 days in the first 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 decreased to 48 days compared to 51 days in the immediately prior quarter. "Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses totaled $175 million or 29% of sales. In the second quarter, we spent $22 million on capital expenditures and we returned $146 million to shareholders by repurchasing approximately 3.4 million shares of ADI common stock for $124 million and by paying $22 million in dividends. As a result, cash, cash equivalents, and short-term investments increased slightly to $2.62 billion at the end of the second quarter. "For the past three quarters, since we announced the share repurchase program in August of 2004, ADI has generated approximately $474 million of cash flow from operations. We have spent $84 million on capital expenditures and returned $489 million to our shareholders through dividends and share repurchases. The total number of shares repurchased to date under this program represents approximately 3% of shares outstanding. We are planning for cash flow to remain strong for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future. "Orders increased sequentially during the second quarter and were particularly strong in April. Cancellations declined in the second quarter to the lowest levels in the most recent four quarters. At the end of the second quarter, our backlog of products requested for shipment during the third quarter increased by 4% compared to the backlog at the end of first quarter." Regarding the near-term outlook, Mr. Fishman said, "We continue to believe we are in the early stages of a gradual recovery after six months of inventory corrections at many of our customers worldwide. Demand in many of our end markets is good, with particular strength in the consumer market and across the industrial end markets, which represent tens of thousands of customers worldwide. Our converter (1) A device that changes one set of codes, modes, sequences or frequencies to a different set. See A/D converter. (2) A device that changes current from 60Hz to 50Hz and vice versa. , amplifier, and general-purpose DSP products have resumed growth. 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. and ATE products, which were responsible for a large portion of our sales decline for the past few quarters, appear to be stabilizing stabilizing, v to hold a limb motionless in order to ground its energy; a standard isometric resistance technique, it releases tension and lengthens muscle fibers. . Our lead times are short and we intend to keep them short to minimize order volatility throughout the cycle. "While it is difficult to plan at this stage of the business cycle, based on our opening backlog, our turns order estimates, and assuming normal seasonality, we are planning for third quarter revenue to be flat to up 3% sequentially. "We are planning for third quarter gross margins to improve toward 58%, depending on product mix. We are planning for inventory to remain approximately flat in the third quarter. We are also planning to hold operating expenses in the third quarter relatively flat to the second quarter levels. This should produce diluted EPS in the range of $0.31 to $ 0.33 for the third quarter of fiscal year 2005." Mr. Fishman will discuss the second quarter's results and the near-term 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 "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: 5738082 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 See DSP. Digital Signal Processing - (DSP) Computer manipulation of analog signals (commonly sound or image) which have been converted to digital form (sampled). 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. For more information, visit our web site at www.analog.com. 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 planned revenue, earnings, and operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , 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 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. 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 could decline significantly, our ability to hire engineers 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 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 January 29, 2005, as filed with the Securities and Exchange Commission.
Analog Devices Supplemental Information, Second Quarter, Fiscal 2005
Sales/Earnings Summary
(In thousands, except per-share amounts)
2Q 05 1Q 05 2Q 04
--------------------------------- ----------- ------------- ----------
April 30, January 29, May 1,
Three Months Ended 2005 2005 2004
--------------------------------- ----------- ------------- ----------
Net Sales $ 603,726 $ 580,536 $ 678,530
Y/Y Growth -11% -4% 35%
Q/Q Growth 4% -8% 12%
Cost of Sales 257,327 245,008 277,008
Gross Margin 346,399 335,528 401,522
Percent of Sales 57.4% 57.8% 59.2%
--------------------------------- ---------- ------------ ---------
Operating Expenses:
R&D 126,642 127,534 128,478
Selling, Marketing and G&A 85,813 83,341 85,282
--------------------------------- ---------- ------------ ---------
Operating Income 133,944 124,653 187,762
Percent of Sales 22.2% 21.5% 27.7%
--------------------------------- ---------- ------------ ---------
Other (Income) Expense (16,768) (13,983) (7,232)
--------------------------------- ---------- ------------ ---------
Income Before Tax 150,712 138,636 194,994
Provision for Taxes 33,113 31,193 42,411
Tax Rate 22% 22% 22%
--------------------------------- ---------- ------------ ---------
Net Income $ 117,599 $ 107,443 $ 152,583
Percent of Sales 19% 19% 22%
--------------------------------- ---------- ------------ ---------
Shares used for EPS - Basic 370,674 375,561 374,864
Shares used for EPS - Diluted 382,337 388,107 395,052
Earnings per Share - Basic $ 0.32 $ 0.29 $ 0.41
Earnings per Share - Diluted $ 0.31 $ 0.28 $ 0.39
Dividends declared per share $ 0.06 $ 0.06 $ 0.04
--------------------------------- ---------- ------------ ---------
Six Months Ended April 30, 2005 May 1, 2004
---------------------------------------- --------------- -------------
Net Sales $ 1,184,262 $ 1,283,883
Y/Y Growth -8% 32%
Cost of Sales 502,335 536,896
Gross Margin 681,927 746,987
Percent of Sales 57.6% 58.2%
---------------------------------------- -------------- ------------
Operating Expenses:
R&D 254,176 249,108
Selling, Marketing and G&A 169,154 164,520
---------------------------------------- -------------- ------------
Operating Income 258,597 333,359
Percent of Sales 21.8% 26.0%
---------------------------------------- -------------- ------------
Other (Income) Expense (30,751) (11,429)
---------------------------------------- -------------- ------------
Income Before Tax 289,348 344,788
Provision for Taxes 64,306 75,366
Tax Rate 22% 22%
---------------------------------------- -------------- ------------
Net Income $ 225,042 $ 269,422
Percent of Sales 19% 21%
---------------------------------------- -------------- ------------
Shares used for EPS - Basic 373,117 373,458
Shares used for EPS - Diluted 385,222 393,978
Earnings per Share - Basic $ 0.60 $ 0.72
Earnings per Share - Diluted $ 0.58 $ 0.68
Dividends declared per share $ 0.12 $ 0.08
---------------------------------------- -------------- ------------
Analog Devices Supplemental Information, Second Quarter, Fiscal 2005
Selected Balance Sheet Information
(In thousands)
2Q 05 1Q 05 2Q 04
---------------------------------- ----------- ----------- -----------
April 30, January 29, May 1,
2005 2005 2004
---------------------------------- ----------- ----------- -----------
Cash & Short-term Investments $2,617,259 $2,598,372 $2,541,582
Accounts Receivable, Net 320,366 324,033 328,318
Inventories 348,446 353,291 308,539
Other Current Assets 160,611 164,796 171,815
---------------------------------- ----------- ----------- -----------
Total Current Assets 3,446,682 3,440,492 3,350,254
PP&E, Net 636,249 653,608 666,826
Investments 303,806 318,813 307,638
Intangible Assets 168,063 168,723 170,700
Other 30,470 30,499 22,902
---------------------------------- ----------- ----------- -----------
Total Assets $4,585,270 $4,612,135 $4,518,320
---------------------------------- ----------- ----------- -----------
Deferred Income-Shipments to
Distributors $128,957 $152,112 $150,429
Other Current Liabilities 407,410 381,018 429,437
Non-Current Liabilities 333,035 344,575 339,559
Stockholders' Equity 3,715,868 3,734,430 3,598,895
---------------------------------- ----------- ----------- -----------
Total Liabilities & Equity $4,585,270 $4,612,135 $4,518,320
---------------------------------- ----------- ----------- -----------
Capital Expenditures, Depreciation & Amortization
(In thousands)
2Q 05 1Q 05 2Q 04
April 30, January 29, May 1,
Three Months Ended 2005 2005 2004
---------------------------------- ----------- ----------- -----------
Capital Expenditures $21,632 $23,884 $43,353
Depreciation $39,013 $38,313 $37,272
Amortization of Intangibles $685 $684 $676
April 30, May 1,
Six Months Ended 2005 2004
---------------------------------- ----------- -----------
Capital Expenditures $45,516 $70,426
Depreciation $77,326 $74,837
Amortization of Intangibles $1,369 $1,353
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