Analog Devices Third-Quarter Revenues Increase 8% Sequentially to $445 Million.Business/Technology Editors NORWOOD, Mass.--(BUSINESS WIRE)--Aug. 15, 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 $445 million for the third quarter of fiscal 2002, which ended August 3rd. Revenues increased 8% 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 $0.08 for the third quarter, up from the $0.04 recorded in the second quarter. The third quarter results under GAAP include $16.6 million for amortization of intangibles and other acquisition-related expenses and other charges of $16 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. to the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of investments and intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . Adjusting for these items, 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 from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the were $0.15 in the third quarter, an increase of 15% compared to pro forma diluted EPS of $0.13 recorded in the second quarter. All remaining financial information in the text of this release refers to pro forma results. "Our revenues and earnings for the third quarter were in line with the guidance we communicated on May 16," 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. . "Gross margin was 54% for the quarter, up 60 basis points from the prior quarter and 110 basis points from the year-ago quarter. In addition, we continue to benefit from operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. as sales increase. This quarter operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improved sequentially by 120 basis points to 15.4%. "High performance 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 revenues both grew versus the prior quarter, and we believe both grew faster than the overall semiconductor industry. Revenue for high-performance analog products increased 6% sequentially and accounted for 79% of sales. DSP product revenue grew 17% sequentially and accounted for 21% of sales. Direct sales to OEMs increased 12% from second quarter to third quarter, substantially contributing to our sequential growth for the quarter." Turning to the markets and applications, Mr. Fishman added, "Regionally, sales were strongest in Japan and Southeast Asia Southeast Asia, region of Asia (1990 est. pop. 442,500,000), c.1,740,000 sq mi (4,506,600 sq km), bounded roughly by the Indian subcontinent on the west, China on the north, and the Pacific Ocean on the east. . Consumer and communications applications that touch the consumer were the strongest contributors to growth." Regarding the near-term outlook, Mr. Fishman said, "We began the fourth quarter with a 13-week 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. totaling $285 million, up 6% from the previous quarter. As a result, we are planning for continued sequential revenue growth in the fourth quarter. We estimate fourth quarter revenues will be in the range of $450 to $460 million. This will require approximately 38% from `turns', i.e. orders booked and shipped within the same quarter, down from 44% turns business in the third quarter. Gross margin is planned to continue to improve and 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. are planned to increase only nominally, resulting in pro forma diluted earnings per share increasing to approximately $0.16." He concluded, "Since this cycle began in early 1999, we are one of the very few companies that is operating today at revenues well above early 1999 levels. We are pleased with our performance during this cycle, having produced excellent margins while continuing to introduce record numbers of new products. We believe that high-performance analog and DSP are likely to be the highest growth categories in the semiconductor market as signal processing See DSP. technology drives the highest growth end markets. We believe we have gained market share during this cycle, and as the end markets turn up -- and there is increasing evidence that they are doing so, albeit slowly -- we are well positioned to continue to outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. the semiconductor market as we have over the past four years." The company will discuss the third quarter's results and the near-term outlook via webcast, accessible from www.analog.com, today beginning at 4:30pm. Investors who prefer to join by telephone may call 706-634-7193 ten minutes before the call begins and provide the password "analog." 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: 5155034 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 8,800 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 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, Third Quarter, Fiscal 2002
Sales/Earnings Summary (GAAP Basis)
(In thousands of dollars, except per-share amounts)
3Q 02 3Q 01 2Q 02
Three Months Ended Aug 3, 2002 Aug 4, 2001 May 4, 2002
Net Sales $445,448 $479,886 $413,368
Cost of Sales 208,182 226,008 192,537
Gross Margin 237,266 253,878 220,831
Percent of Sales 53.3% 52.9% 53.4%
Operating Expenses:
R&D 107,040 112,101 102,821
Selling, Marketing, G&A 67,138 66,583 62,354
Amortization of Intangibles 14,327 14,006 14,234
Restructuring Costs 5,634 26,157 25,450
Investment Impairment 3,779 - 1,800
Goodwill Impairment 3,426 - -
Operating Income 35,922 35,031 14,172
Other (Income) Expense (3,740) (14,654) (5,864)
Income Before Tax 39,662 49,685 20,036
Provision for Taxes 8,249 10,382 5,610
Net Income $31,413 $39,303 $14,426
Shares used for EPS - Basic 365,065 359,535 364,545
Shares used for EPS - Diluted 380,770 381,903 383,455
Earnings per Share - Basic $0.09 $0.11 $0.04
Earnings per Share - Diluted $0.08 $0.10 $0.04
Nine Months Ended Aug 3, 2002 Aug 4, 2001
Net Sales $1,251,790 $1,853,602
Cost of Sales 589,896 804,663
Gross Margin 661,894 1,048,939
Percent of Sales 52.9% 56.6%
Operating Expenses:
R&D 314,570 358,632
Selling, Marketing, G&A 187,850 229,699
Amortization of Intangibles 42,666 38,308
In-process R&D write-off - 9,500
Restructuring Costs 31,084 26,157
Investment Impairment 5,579 -
Goodwill Impairment 3,426 -
Operating Income 76,719 386,643
Other (Income) Expense (17,271) (87,894)
Income Before Tax 93,990 474,537
Provision for Taxes 23,461 142,361
Net Income $70,529 $332,176
Shares used for EPS - Basic 364,253 358,448
Shares used for EPS - Diluted 382,565 382,024
Earnings per Share - Basic $0.19 $0.93
Earnings per Share - Diluted $0.18 $0.87
Analog Devices Supplemental Information, Third 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 complies 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 3Q 02 3Q 01 2Q 02
Three Months Ended Aug 3, 2002 Aug 4, 2001 May 4, 2002
Cost of Sales:
Restructuring-Additional
Depreciation (3,196) - -
Gross Margin 3,196 - -
Operating Expenses:
R&D - Acquisition related (2,241) (1,792) (3,058)
Amortization of Intangibles (14,327) (14,006) (14,234)
Restructuring Costs (5,634) (26,157) (25,450)
Investment Impairment (3,779) - (1,800)
Goodwill Impairment (3,426) - -
Operating Income 32,603 41,955 44,542
Other (Income) Expense - - -
Income Before Tax 32,603 41,955 44,542
Provision for Taxes 7,649 16,560 10,534
Net Income $24,954 $25,395 $34,008
Earnings per Share - Diluted $0.07 $0.07 $0.09
Adjustments to GAAP
Nine Months Ended Aug 3, 2002 Aug 4, 2001
Cost of Sales:
Restructuring-Additional Depreciation (3,196) -
Gross Margin 3,196 -
Operating Expenses:
R&D - Acquisition related (11,558) (5,791)
Amortization of Intangibles (42,666) (38,308)
In-process R&D write-off - (9,500)
Restructuring Costs (31,084) (26,157)
Investment Impairment (5,579) -
Goodwill Impairment (3,426) -
Operating Income 97,509 79,756
Other Income - Investment Gains - 28,085
Income Before Tax 97,509 51,671
Provision for Taxes 22,245 12,226
Net Income $75,264 $39,445
Earnings per Share - Diluted $0.20 $0.11
Analog Devices Supplemental Information, Third Quarter, Fiscal 2002
Pro Forma Financial Information
(In thousands of dollars, except per-share amounts)
Pro Forma Information 3Q 02 3Q 01 2Q 02
Three Months Ended Aug 3, 2002 Aug 4, 2001 May 4, 2002
Net Sales $445,448 $479,886 $413,368
Y/Y Growth -7% -32% -31%
Q/Q Growth 8% -20% 5%
Cost of Sales 204,986 226,008 192,537
Gross Margin 240,462 253,878 220,831
Percent of Sales 54.0% 52.9% 53.4%
Operating Expenses:
R&D 104,799 110,309 99,763
Selling, Marketing and G&A 67,138 66,583 62,354
Operating Income 68,525 76,986 58,714
Percent of Sales 15.4% 16.0% 14.2%
Other (Income) Expense (3,740) (14,654) (5,864)
Income Before Tax 72,265 91,640 64,578
Provision for Taxes 15,898 26,942 16,144
Tax Rate 22% 29% 25%
Net Income $56,367 $64,698 $48,434
Percent of Sales 13% 13% 12%
Earnings per Share - Diluted $0.15 $0.17 $0.13
Pro Forma Information
Nine Months Ended Aug 3, 2002 Aug 4, 2001
Net Sales $1,251,790 $1,853,602
Y/Y Growth -32% 5%
Cost of Sales 586,700 804,663
Gross Margin 665,090 1,048,939
Percent of Sales 53.1% 56.6%
Operating Expenses:
R&D 303,012 352,841
Selling, Marketing and G&A 187,850 229,699
Operating Income 174,228 466,399
Percent of Sales 13.9% 25.2%
Other (Income) Expense (17,271) (59,809)
Income Before Tax 191,499 526,208
Provision for Taxes 45,706 154,587
Tax Rate 24% 29%
Net Income $145,793 $371,621
Percent of Sales 12% 20%
Earnings per Share - Diluted $0.38 $0.98
Analog Devices Supplemental Information, Third Quarter, Fiscal 2002
Selected Balance Sheet Information (GAAP Basis)
(In thousands of dollars)
Aug 3, 2002 Aug 4, 2001 May 4, 2002
Cash & Short-term Investments $2,953,855 $2,671,510 $2,908,964
Accounts Receivable, Net 223,308 270,403 221,524
Inventories 284,044 278,477 253,151
Other Current Assets 192,492 138,257 182,596
Total Current Assets 3,653,699 3,358,647 3,566,235
PP&E, Net 814,334 942,571 845,683
Investments 274,333 233,223 275,516
Intangible Assets 188,848 242,177 203,455
Other 92,492 52,336 61,877
Total Assets $5,023,706 $4,828,954 $4,952,766
Total Current Liabilities $500,680 $614,960 $523,660
Long-term Debt 1,230,577 1,200,000 1,191,199
Non-Current Lease Obligations 1,377 7,494 2,592
Non-Current Liabilities 330,372 298,863 326,367
Stockholders' Equity 2,960,700 2,707,637 2,908,948
Total Liabilities & Equity $5,023,706 $4,828,954 $4,952,766
Depreciation and Capital Expenditures
(In thousands of dollars)
3Q 02 3Q 01 2Q 02
Three Months Ended Aug 3, 2002 Aug 4, 2001 May 4, 2002
Depreciation $45,347 $39,437 $44,718
Capital Expenditures $14,284 $43,792 $15,679
Nine Months Ended Aug 3, 2002 Aug 4, 2001
Depreciation $132,562 $115,923
Capital Expenditures $ 41,482 $278,637
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