Analog Devices Reports Results for the First 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 dividend of $0.12 per share for the quarter. --Financial results for the first quarter and guidance for the second quarter to be discussed on 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 $621.3 million for the first quarter of fiscal 2006, an increase of 7% compared to the same period one year ago and approximately even with the immediately prior quarter's $622.1 million in revenue. 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 $120.6 million for the first quarter, compared to $107.4 million in the same period one year ago and $68.3 million in the immediately prior 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 $0.32 for the first quarter, compared to $0.28 for the same period one year ago and $0.18 for the fourth quarter of fiscal 2005. The results for the first quarter of fiscal 2006 include expenses of $6.9 million associated with the 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 and $20.6 million of stock option expense which together impacted 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 $0.05. The Board of Directors declared a cash dividend for the first quarter of fiscal 2006 of $0.12 per outstanding share of common stock. The dividend will be paid on March 15, 2006 to all shareholders of record at the close of business on February February: see month. 24, 2006. Gross margins for the first quarter of fiscal 2006 were $360.8 million or 58.1% of sales. In the first quarter of fiscal 2006, gross margins were reduced by $6.9 million, or 1.1% of sales, related to stock option expense and previously announced manufacturing restructuring-related expense. 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 first quarter totaled $132.2 million, or approximately 21.3% of sales, which includes $27.5 million, or 4.4% of sales, for stock option expense and previously announced restructuring-related expense. 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 $175.3 million, or approximately 28.2% of sales for the first quarter. Capital expenditures totaled $20.4 million. The company repurchased approximately 3.3 million shares of ADI common stock for $125.1 million and paid $44.1 million in cash dividends. In the first quarter, inventory increased sequentially by approximately $12 million, $2 million of which was related to stock option expense. The remaining increase in inventory was primarily due to the purchase of wafers wafers compressed roughage in flat plates useful for feeding to animals in transit. from external foundries. During the quarter, ADI's factory utilization levels were approximately the same as the prior quarter. Days cost of sales in inventory was 118 days for the first quarter of fiscal 2006, compared to 132 days for the same period one year ago and 115 days for the immediately prior quarter. 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 balances remained low, consistent with prior quarters. Days sales in accounts receivable were 47 days for the first quarter, compared to 51 days for the same period one year ago and 47 days for the immediately prior quarter. "The first quarter results were in line with our plan for the quarter, although gross margins were somewhat stronger than planned," 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. , 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. of Analog Devices, Inc. "Our highest sequential growth came from sales to communications and industrial customers. In line with normal seasonal trends, sales to consumer and computer customers were down sequentially. "Revenue from industrial customers grew 16% in the first quarter of fiscal 2006 compared to the same period last year. These customers represent a diverse collection of instrumentation instrumentation, in music: see orchestra and orchestration. instrumentation In technology, the development and use of precise measuring, analysis, and control equipment. , medical, factory process control, test equipment, automotive, and defense applications. We believe that this growth reflects generally good worldwide economic conditions which are stimulating higher capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. at industrial companies with strong cash flow. In the aggregate, sales to this broad group of industrial customers represented 41% of sales in the first quarter of fiscal 2006. "Revenue from consumer customers represented 15% of sales during the first quarter and grew 18% year-over-year, fueled by a broad array of audio and video products sold to leading consumer customers around the world. ADI is well positioned in digital cameras, flat screen televisions and monitors, as well as a range of stereo See stereophonic. and home theatre sound systems. "In the first quarter of 2006, revenue from computer customers represented 13% of sales and declined year-over-year. The computer market has lagged for ADI as we continue to address the market for portable products but still have an installed base of slower growing desktop products. Clearly computer products and the power management products, in particular, which account for a high percentage of our sales to computer customers, represent growth opportunities for ADI going forward. "Overall, revenue from communications customers, which represented 31% of sales, grew slightly compared to the first quarter one year ago. Growth in sales of products used in infrastructure equipment for wireless, broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). , and optical networking Communications between computers, telephones and other electronic devices using light. An optical network is far more reliable and has far greater potential transmission capacity than networking in the electrical domain. See optical fiber. was partially offset by a decline in sales to 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. "In the first quarter, analog product revenue was 11% above the same period one year ago, 2% above the immediately prior quarter, and represented 82% of total sales. Revenue from 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 (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, which represented approximately 7% of ADI's total revenue, grew 19% year-over-year. In aggregate, DSP product revenue represented 18% of first quarter sales, declined 9% compared to the same period one year ago and declined 8% from the immediately prior quarter." Regarding the near-term outlook, Mr. Fishman said, "Orders were strong in the first quarter, particularly for our analog products. As a result, we are planning for 5% to 6% sequential sales growth in our analog products, driven by good seasonal strength from industrial, consumer, and communications customers. This will be somewhat offset by a sequential decline in sales of DSP products, primarily as a result of our divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). 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 (digital subscriber line See DSL. (communications, protocol) Digital Subscriber Line - (DSL, or Digital Subscriber Loop, xDSL - see below) A family of digital telecommunications protocols designed to allow high speed data communication over the existing copper telephone lines between end-users and ) 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 products, which represented approximately $12 million of revenue in the first quarter of fiscal 2006. As a result, we are planning for second quarter revenue in the range of $635 to $650 million. "We are also planning for gross margins to continue to improve during the second quarter. Our plan is for operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: to improve sequentially and for diluted EPS to be $0.34-$0.36, which includes approximately $0.05 of previously announced restructuring-related expense and stock option expense. "We are also expecting the previously announced sale of the DSP-based DSL ASIC and network processor products to close in the near future, and are anticipating the recognition of a small gain on the sale during the second quarter. This gain is not included in the diluted EPS estimate mentioned above." ADI began expensing stock-based compensation in the first quarter of 2006. The company has provided a table of supplemental information with this release at www.analog.com by clicking on "Investor Relations Investor relations The process by which the corporation communicates with its investors. " which includes estimates of the impact of stock option expense and the impact of previously announced restructuring-related expenses on the company's 2006 quarterly financial statements. Mr. Fishman will discuss the first 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: 4297505 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 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. 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, 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 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, 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 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-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended October 29, 2005, as filed with the Securities and Exchange Commission.
Analog Devices, First Quarter, Fiscal 2006
Sales/Earnings Summary (GAAP)
(In thousands, except per-share amounts)
1Q 06 4Q 05 1Q 05
----------------------------------------------------------------------
Three Months Ended January 28, October 29, January 29,
2006 2005 2005
----------------------------------------------------------------------
Net Sales $ 621,302 $ 622,130 $ 580,536
Y/Y Growth 7% -2% -4%
Q/Q Growth 0% 7% -8%
Cost of Sales 260,515 259,455 245,008
Gross Margin 360,787 362,675 335,528
Percent of Sales 58.1% 58.3% 57.8%
----------------------------------------------------------------------
Operating Expenses:
R&D 131,288 123,704 127,534
Selling, Marketing and G&A 96,281 84,715 83,341
Special Charges 1,013 31,480 -
----------------------------------------------------------------------
Operating Income 132,205 122,776 124,653
Percent of Sales 21.3% 19.7% 21.5%
----------------------------------------------------------------------
Other Income (20,592) (21,890) (13,983)
----------------------------------------------------------------------
Income Before Tax 152,797 144,666 138,636
Provision for Taxes 32,240 76,325 31,193
Tax Rate 21.1% 52.8% 22.5%
----------------------------------------------------------------------
Net Income $ 120,557 $ 68,341 $ 107,443
Percent of Sales 19.4% 11.0% 18.5%
----------------------------------------------------------------------
Shares used for EPS - Basic 366,135 369,945 375,561
Shares used for EPS - Diluted 380,337 380,607 388,107
Earnings per Share - Basic $ 0.33 $ 0.18 $ 0.29
Earnings per Share - Diluted $ 0.32 $ 0.18 $ 0.28
Dividends paid per share $ 0.12 $ 0.10 $ 0.06
----------------------------------------------------------------------
Supplemental Information
Impact of Stock-based Compensation Expense Related to the Adoption of
FAS123R, Restructuring Related Expense and Tax Expense Associated with
the Repatriation of Foreign Earnings
(in thousands, except per-share amounts)
1Q 06 4Q 05 1Q 05
----------------------------------------------------------------------
Three Months Ended January 28, October 29, January 29,
2006 2005 2005
----------------------------------------------------------------------
Cost of Sales
Stock-based compensation
expense $ 954 $ - $ -
Restructuring related expenses 5,903 - -
----------------------------------------------------------------------
Impact on Gross Margin (6,857) - -
Percent of Sales -1.1% - -
----------------------------------------------------------------------
Operating Expense
Engineering - stock-based
compensation expense 9,562 - -
Selling, Marketing, G&A -
stock-based compensation
expense 10,090 - -
Special Charges - restructuring 1,013 31,480 -
----------------------------------------------------------------------
Impact on Total Operating Expense 20,665 31,480 -
Percent of Sales 3.3% 5.1% -
----------------------------------------------------------------------
Impact on Operating Income (27,522) (31,480) -
Percent of Sales -4.4% -5.1% -
----------------------------------------------------------------------
Tax benefit of above items (8,344) (10,118) -
Tax expense associated with
repatriation of foreign earnings - 48,768 -
---------------------------------- ----------- -----------------------
Impact on Net Income $ (19,178)$ (70,130)$ -
Percent of Sales -3.1% -11.3% -
----------------------------------------------------------------------
Impact on Earnings per Share -
Diluted
Repatriation of foreign earnings $ - $ 0.13 $ -
Stock-based compensation 0.04 - -
Restructuring-related expense 0.01 0.05 -
----------------------------------------------------------------------
Impact on Earnings per Share -
Diluted $ (0.05)$ (0.18)$ -
----------------------------------------------------------------------
Analog Devices, First Quarter, Fiscal 2006
Selected Balance Sheet Information (GAAP)
(In thousands)
1Q 06 4Q 05 1Q 05
----------------------------------------------------------------------
January 28, October 29, January 29,
2006 2005 2005
----------------------------------------------------------------------
Cash & Short-term Investments $ 2,735,114 $ 2,705,942 $ 2,598,372
Accounts Receivable, Net 317,730 320,523 326,723
Inventories (1) 337,835 325,605 355,195
Other Current Assets 151,302 380,386 127,739
----------------------------------------------------------------------
Total Current Assets 3,541,981 3,732,456 3,408,029
PP&E, Net 576,798 599,906 653,608
Investments 29,249 45,365 315,556
Intangible Assets 167,186 167,576 168,723
Other 58,964 37,908 70,813
----------------------------------------------------------------------
Total Assets $ 4,374,178 $ 4,583,211 $ 4,616,729
----------------------------------------------------------------------
Deferred Income-Shipments to
Distributors $ 132,332 $ 121,802 $ 152,112
Other Current Liabilities 471,851 697,121 388,869
Non-Current Liabilities 60,366 72,787 341,318
Stockholders' Equity 3,709,629 3,691,501 3,734,430
----------------------------------------------------------------------
Total Liabilities & Equity $ 4,374,178 $ 4,583,211 $ 4,616,729
----------------------------------------------------------------------
(1) includes $1,937 related to stock-based compensation expense in
1Q06
Cash Flow Statement (GAAP)
(In thousands)
1Q 06 4Q 05 1Q 05
----------------------------------------------------------------------
Three Months Ended January 28, October 29, January 29,
2006 2005 2005
----------------------------------------------------------------------
Cash flows from operating
activities:
Net Income $ 120,557 $ 68,341 $ 107,443
Adjustments to reconcile net
income
to net cash provided by
operations:
Depreciation 43,079 38,054 38,313
Amortization of intangibles 404 342 684
Stock-based compensation 21,307 983 1,798
Non-cash portion of special
charge 459 - -
Other non-cash expense 557 762 718
Tax benefit - stock option
exercises - 50,374 -
Deferred income taxes (15,625) 5,667 778
Changes in operating assets
and liabilities 4,517 35,796 (32,860)
----------------------------------------------------------------------
Total adjustments 54,698 131,978 9,431
----------------------------------------------------------------------
Net cash provided by operating
activities 175,255 200,319 116,874
----------------------------------------------------------------------
Cash flows from investing
activities:
Additions to property, plant and
equipment, net (20,360) (21,029) (23,884)
Purchases of short-term
available-for-sale investments (954,871) (875,189) (797,655)
Maturities of short-term
available-for-sale investments 726,807 1,331,742 763,960
Decrease in other assets 3,526 3,976 1,559
----------------------------------------------------------------------
Net cash (used) provided by
investing activities (244,898) 439,500 (56,020)
----------------------------------------------------------------------
Cash flows from financing
activities:
Dividend payments to
shareholders (44,094) (37,128) (22,579)
Repurchase of common stock (125,098) (240,796) (161,204)
Net proceeds from employee stock
plans 38,685 17,004 13,611
----------------------------------------------------------------------
Net cash used for financing
activities (130,507) (260,920) (170,172)
----------------------------------------------------------------------
Effect of exchange rate changes on
cash 414 639 (286)
----------------------------------------------------------------------
Net (decrease) increase in cash
and cash equivalents (199,736) 379,538 (109,604)
Cash and cash equivalents at
beginning of period 627,591 248,053 518,940
----------------------------------------------------------------------
Cash and cash equivalents at end
of period $ 427,855 $ 627,591 $ 409,336
----------------------------------------------------------------------
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