Analog Devices Reports Results for the Fourth Quarter and Fiscal Year 2002.Business Editors/High-Tech Writers NORWOOD, Mass.--(BUSINESS WIRE)--Nov. 19, 2002 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) today announced revenues of $456 million for the fourth quarter of fiscal 2002 and $1.7 billion for fiscal year 2002, ended November 2. Quarterly revenues of $456 million increased 8% compared to the same quarter one year ago and increased 2% compared to 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. ) 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). ) were $0.09 for the fourth quarter, up from $0.06 reported for the same quarter one year ago and up from $0.08 reported in the immediately prior quarter. Sales for the full year were $1.7 billion, a decline of 25% from sales of $2.3 billion in fiscal 2001. Diluted earnings per share under GAAP were $0.28 for fiscal 2002, versus $0.93 for the prior year. Adjusting for acquisition-related charges and other special charges, pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma 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 were $0.16 in the fourth quarter, compared to pro forma diluted EPS of $0.15 recorded in the third quarter. Gross margins increased sequentially by 50 basis points to 54.5% and operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improved by 40 basis points to 15.8%. Pro forma diluted EPS for fiscal year 2002 were $0.54, compared to pro forma diluted EPS of $1.12 for fiscal year 2001. "Sales of both analog and 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 grew sequentially, marking three quarters of sequential growth for our analog business and four quarters of sequential growth for our DSP business. During the fourth quarter, our strongest sales growth was from our broad base of distribution channel customers, increasing 6% sequentially, following a pattern of mid single-digit quarterly increases that began earlier in the year," 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. . "The last quarter of the year began in August with a seasonally slow order rate that improved in September and grew significantly in October for our analog and DSP products in both the distribution and 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 channels." Turning to the balance sheet, Mr. Fishman continued, "Our balance sheet remained strong during the fourth quarter. Cash flow this quarter was $58 million before spending $16 million on capital expenditures and $98 million on the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of approximately 4.4 million shares of ADI stock at an average price of $22.48 per share." ADI ended the year with cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investment balances of $2.9 billion. 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 days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). remained at 46 days during the fourth quarter despite the difficult economic environment. The combination of internal die bank builds and external 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. purchases resulted in fourth quarter inventories growing, as planned, to 135 days cost of sales from 126 days last quarter. "We continued to build die bank inventory during the fourth quarter to prepare for the transfer of production from our 4-inch wafer fabs to our existing 6- and 8-inch fabs. This program is nearing completion and as a result, inventory is expected to be flat next quarter," Mr. Fishman explained. Regarding the near-term outlook, Mr. Fishman said, "We are currently planning for approximately flat sales in the first quarter of fiscal 2003. If the recent strength in order rates continues, we could potentially show some sequential growth in the first quarter. However, mindful mind·ful adj. Attentive; heedful: always mindful of family responsibilities. See Synonyms at careful. mind of the still-volatile market conditions and because our first quarter includes a two-week holiday period for many of our customers, we are planning for revenues, gross margins and operating margins to be approximately flat in the first quarter and pro forma diluted EPS to be approximately $0.16. Assuming favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. market conditions continue throughout our first quarter, we would expect a seasonally strong second quarter." The fourth quarter results under GAAP include $16.4 million for amortization of intangibles and other acquisition-related expenses, accelerated depreciation Accelerated Depreciation Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. Notes: The straight-line depreciation method spreads the cost evenly over the life of an asset. of $5.5 million related to the transfer of manufacturing from our older 4-inch wafer fabs to our existing 6- and 8-inch wafer fabs, and other charges of $8.4 million related to 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). activities and the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of investments. During the first quarter, ADI will adopt the new goodwill accounting rules. As a result, the Company will no longer have charges related to the amortization of goodwill and will incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. only $3.0 million of acquisition-related charges in the first quarter. Since the fab transition program is nearing completion, the Company will not incur additional charges for accelerated depreciation. Therefore GAAP diluted EPS is planned to be approximately $0.15 in the first quarter. Regarding the long-term outlook, Mr. Fishman concluded, "We believe that signal processing See DSP. is rapidly becoming the primary growth driver for the semiconductor industry over the next ten years. There is little doubt that high-performance analog and DSP will be the enabling signal processing technologies at the heart of many of the semiconductor industry's highest growth opportunities. Our number one market share position in the critical product categories of data converters 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 and amplifiers, bolstered bol·ster n. A long narrow pillow or cushion. tr.v. bol·stered, bol·ster·ing, bol·sters 1. To support or prop up with or as if with a long narrow pillow or cushion. 2. by our expanding position in DSP, RF (radio frequency) and power management, gives all of us at ADI and our stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. cause for optimism over the long term." Mr. Fishman will discuss the fourth quarter's results and the near-term outlook via webcast, accessible from www.analog.com, today beginning at 4:30pm 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: 5756896 or by visiting the Investor Relations Investor relations The process by which the corporation communicates with its investors. page on the Company's web site. Analog Devices, Inc. is a leading manufacturer of precision 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. The Company 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. and employs approximately 8,600 people worldwide. It has manufacturing facilities in Massachusetts, California, North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. , Ireland, the Philippines, Taiwan and the United Kingdom. Analog Devices' 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. and the company 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 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 revenues, 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. Important factors that may affect future operating results include the effects of adverse changes in overall economic conditions, 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 and other qualified employees needed to meet the expected demands of our largest 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 annual report on 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. and quarterly reports on Form 10-Q Form 10-Q See 10-Q. .
Analog Devices Supplemental Information,
Fourth Quarter, Fiscal 2002
Sales/Earnings Summary (GAAP Basis)
(In thousands of dollars, except per-share amounts)
4Q 02 4Q 01 3Q 02
Three Months Ended November 2, November 3, August 3,
2002 2001 2002
Net Sales $455,718 $423,313 $445,448
Cost of Sales 213,084 203,432 208,182
Gross Margin 242,634 219,881 237,266
Percent of Sales 53.2% 51.9% 53.3%
Operating Expenses:
R&D 109,299 106,054 107,040
Selling, Marketing and G&A 69,204 57,447 67,138
Amortization of Intangibles 14,207 14,487 14,327
Restructuring Costs 6,315 18,350 5,634
Investment Impairment 2,090 2,500 3,779
Goodwill Impairment - - 3,426
Operating Income 41,519 21,043 35,922
Other (Income) Expense (4,841) (11,664) (3,740)
Income Before Tax 46,360 32,707 39,662
Provision for Taxes 11,590 8,506 8,249
Net Income $34,770 $24,201 $31,413
Shares used for EPS - Basic 364,019 361,110 365,065
Shares used for EPS - Diluted 377,285 381,775 380,770
Earnings per Share - Basic $0.10 $0.07 $0.09
Earnings per Share - Diluted $0.09 $0.06 $0.08
Twelve Months Ended November 2, November 3,
2002 2001
Net Sales $1,707,508 $2,276,915
Cost of Sales 802,980 1,008,095
Gross Margin 904,528 1,268,820
Percent of Sales 53.0% 55.7%
Operating Expenses:
R&D 423,869 464,686
Selling, Marketing and G&A 257,054 287,146
Amortization of Intangibles 56,873 52,795
In-process R&D write-off - 9,500
Restructuring Costs 37,399 44,507
Investment Impairment 7,669 2,500
Goodwill Impairment 3,426 -
Operating Income 118,238 407,686
Other (Income) Expense (22,112) (99,558)
Income Before Tax 140,350 507,244
Provision for Taxes 35,051 150,867
Net Income $105,299 $356,377
Shares used for EPS - Basic 364,194 359,113
Shares used for EPS - Diluted 381,245 381,962
Earnings per Share - Basic $0.29 $1.00
Earnings per Share - Diluted $0.28 $0.93
Analog Devices Supplemental Information, Fourth Quarter, Fiscal 2002
GAAP to Pro Forma Adjustments
(In thousands of dollars, except per-share amounts)
Management believes that pro forma financial information provides a
more meaningful comparison of trends in quarterly and annual results.
Pro forma income information is prepared by beginning with the
Consolidated Statements of Income, which comply with U.S. generally
accepted accounting principles (GAAP), and then excluding amortization
of intangibles, acquisition-related expenses, in-process R&D
write-offs, restructuring costs, investment and goodwill impairments
and realized gains on investments. The provision for taxes has been
adjusted, as appropriate, to reflect the tax effect of these items.
Adjustments to GAAP 4Q 02 4Q 01 3Q 02
Three Months Ended November 2, November 3, August 3,
2002 2001 2002
Cost of Sales:
Restructuring-Additional
Depreciation $(5,513) $ - $(3,196)
Gross Margin 5,513 - 3,196
Operating Expenses:
R&D - Acquisition related (2,195) (2,443) (2,241)
Amortization of Intangibles (14,207) (14,487) (14,327)
Restructuring Costs (6,315) (18,350) (5,634)
Investment Impairment (2,090) (2,500) (3,779)
Goodwill Impairment - - (3,426)
Operating Income 30,320 37,780 32,603
Other (Income) Expense - - -
Income Before Tax 30,320 37,780 32,603
Provision for Taxes 5,280 9,116 7,649
Net Income $25,040 $28,664 $24,954
Earnings per Share - Diluted $0.07 $0.08 $0.07
Shares used for EPS - Diluted 377,285 381,775 380,770
Adjustments to GAAP
Twelve Months Ended November 2, November 3,
2002 2001
Cost of Sales:
Restructuring-Additional
Depreciation $(8,709) $ -
Gross Margin 8,709 -
Operating Expenses:
R&D - Acquisition related (13,753) (8,234)
Amortization of Intangibles (56,873) (52,795)
In-process R&D write-off - (9,500)
Restructuring Costs (37,399) (44,507)
Investment Impairment (7,669) (2,500)
Goodwill Impairment (3,426) -
Operating Income 127,829 117,536
Other Income - Investment Gains - 28,085
Income Before Tax 127,829 89,451
Provision for Taxes 27,525 21,342
Net Income $100,304 $68,109
Earnings per Share - Diluted $0.26 $0.19
Shares used for EPS - Diluted 381,245 381,962
Analog Devices Supplemental Information, Fourth Quarter, Fiscal 2002
Pro Forma Financial Information
(In thousands of dollars, except per-share amounts)
Pro Forma Information 4Q 02 4Q 01 3Q 02
Three Months Ended November 2, November 3, August 3,
2002 2001 2002
Net Sales $455,718 $423,313 $445,448
Y/Y Growth 8% -47% -7%
Q/Q Growth 2% -12% 8%
Cost of Sales 207,571 203,432 204,986
Gross Margin 248,147 219,881 240,462
Percent of Sales 54.5% 51.9% 54.0%
Operating Expenses:
R&D 107,104 103,611 104,799
Selling, Marketing and G&A 69,204 57,447 67,138
Operating Income 71,839 58,823 68,525
Percent of Sales 15.8% 13.9% 15.4%
Other (Income) Expense (4,841) (11,664) (3,740)
Income Before Tax 76,680 70,487 72,265
Provision for Taxes 16,870 17,622 15,898
Tax Rate 22% 25% 22%
Net Income $59,810 $52,865 $56,367
Percent of Sales 13% 13% 13%
Earnings per Share - Diluted $0.16 $0.14 $0.15
Shares used for EPS - Diluted 377,285 381,775 380,770
Pro Forma Information
Twelve Months Ended November 2, November 3,
2002 2001
Net Sales $1,707,508 $2,276,915
Y/Y Growth -25% -12%
Cost of Sales 794,271 1,008,095
Gross Margin 913,237 1,268,820
Percent of Sales 53.5% 55.7%
Operating Expenses:
R&D 410,116 456,452
Selling, Marketing and G&A 257,054 287,146
Operating Income 246,067 525,222
Percent of Sales 14.4% 23.1%
Other (Income) Expense (22,112) (71,473)
Income Before Tax 268,179 596,695
Provision for Taxes 62,576 172,209
Tax Rate 23% 29%
Net Income $205,603 $424,486
Percent of Sales 12% 19%
Earnings per Share - Diluted $0.54 $1.12
Shares used for EPS - Diluted 381,245 381,962
Analog Devices Supplemental Information, Fourth Quarter, Fiscal 2002
Selected Balance Sheet Information (GAAP Basis)
(In thousands of dollars)
November 2, November 3, August 3,
2002 2001 2002
Cash, Short-term Investments $2,898,023 $2,793,227 $2,953,855
Accounts Receivable, Net 228,338 218,151 223,308
Inventories 306,391 246,852 284,044
Other Current Assets 191,473 176,689 192,492
Total Current Assets 3,624,225 3,434,919 3,653,699
PP&E, Net 780,904 907,942 814,334
Investments 279,605 246,505 274,333
Intangible Assets 174,637 229,330 188,848
Other 120,820 66,167 92,492
Total Assets $4,980,191 $4,884,863 $5,023,706
Current Liabilities $373,364 $385,937 $388,247
Deferred income-shipments
to distributors 110,271 142,011 112,433
Long-term Debt 1,274,020 1,200,000 1,230,577
Non-Current Lease Obligations 467 6,038 1,377
Non-Current Liabilities 322,053 307,851 330,372
Stockholders' Equity 2,900,016 2,843,026 2,960,700
Total Liabilities & Equity $4,980,191 $4,884,863 $5,023,706
Capital Expenditures, Depreciation & Amortization
(In thousands of dollars)
4Q 02 4Q 01 3Q 02
Three Months Ended November 2, November 3, August 3,
2002 2001 2002
Capital Expenditures $15,930 $18,599 $14,284
Depreciation - GAAP $48,567 $41,722 $45,347
Less:
Accelerated Depreciation-4" Fabs (5,513) - (3,196)
Depreciation - Pro Forma $43,054 $41,722 $42,151
Amortization of Goodwill &
Intangibles $14,207 $14,487 $14,327
Twelve Months Ended November 2, November 3,
2002 2001
Capital Expenditures $57,412 $297,236
Depreciation - GAAP $181,129 $157,645
Less:
Accelerated Depreciation-4" Fabs (8,709) -
Depreciation - Pro Forma $172,420 $157,645
Amortization of Goodwill &
Intangibles $56,873 $52,795
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