Analog Devices, Inc. (NASDAQ: ADI), today announced financial
results for its third quarter of fiscal year 2017, which ended July
29, 2017.
“The third quarter of 2017 was another excellent quarter for
ADI, with strong revenue and earnings performance that exceeded the
high end of our guidance,” said Vincent Roche, President and CEO.
“Revenue increased to $1.43 billion on a GAAP basis, and $1.46
billion on a non-GAAP basis, with broad-based year-over-year growth
led by the highly diverse and profitable industrial market.”
“The third quarter also represented our first full quarter with
contributions from Linear Technology, and we are pleased with the
early returns. Customers are engaged and excited by the value
creation possibilities enabled by the combination, and we are
making excellent progress on realizing our cost synergy
targets.”
“Looking ahead to the October quarter, we continue to see signs
of positive business conditions and are planning for revenue in the
fourth quarter to be in the range of $1.45 billion to $1.55
billion, with strong profitability.”
ADI also announced that the Board of Directors has declared a
quarterly cash dividend of $0.45 per outstanding share of
common stock, representing an annual dividend per share of $1.80.
The dividend will be paid on September 19, 2017 to all
shareholders of record at the close of business on September
8, 2017.
Supplemental web schedules relating to ADI’s third quarter
fiscal 2017 financial results are also available on the quarterly
results section of ADI’s investor site at investor.analog.com.
Results for the Third Quarter of Fiscal
Year 2017
- GAAP revenue totaled $1.43 billion;
Non-GAAP revenue totaled $1.46 billion
- GAAP gross margin of 53.5% of revenue;
Non-GAAP gross margin of 70.5% of revenue
- GAAP operating margin of 13.6% of
revenue; Non-GAAP operating margin of 40.5% of revenue
- GAAP diluted EPS of $0.18; Non-GAAP
diluted EPS of $1.26
Please refer to the schedules provided for a summary of revenue
and earnings, selected balance sheet information, and the cash flow
statement for the third quarter of fiscal year 2017, as well as the
immediately prior and year-ago quarters. Additional information on
revenue by end market is provided on Schedule D.
Outlook for the Fourth Quarter of
Fiscal Year 2017The following statements are based on
current expectations, and as indicated, are presented on a GAAP and
non-GAAP basis. These statements are forward-looking and actual
results may differ materially, as a result of, among other things,
the important factors discussed at the end of this release. These
statements supersede all prior statements regarding our business
outlook set forth in prior ADI news releases, and ADI disclaims any
obligation to update these forward-looking statements.
GAAP
Non-GAAP Adjustments Non-GAAP
Revenue $1.45B to $1.55B
-
$1.45B to $1.55B Gross
Margin Approx. 66% $71
million (1) Approx. 70.5% Operating Expenses
Down approx. 3% to flat
$125 million (2) Down approx. 3% to flat
Operating Margins Approx. 28% to 30%
$196 million (3) Approx. 41% to
42% Interest & Other Expense Approx. $65
million - Approx. $65
million Tax Rate Approx. 8%
$28 million (4) Approx. 10%
Earnings
per Share* $0.84 to $0.98
$0.45 (5)
$1.29 to $1.43
(1) Non-GAAP gross margin excludes $71 million of costs
comprised of the following:
- $27 million related to the final
amortization of step up through cost of sales
- $35 million of recurring amortization
of purchased intangible assets
- $8 million of recurring depreciation of
step up value on purchased fixed assets
- $1 million of recurring fair value
adjustment associated with the replacement of share-based awards in
ADI’s acquisition of Linear Technology
(2) Non-GAAP operating expenses exclude $125
million of costs comprised of the following:
- $112 million of recurring amortization
of purchased intangible assets
- $8 million of recurring fair value
adjustment associated with the replacement of share-based awards in
ADI’s acquisition of Linear Technology
- $5 million of transaction related costs
associated with ADI’s acquisition of Linear Technology
(3) Non-GAAP operating margin excludes the reconciling
adjustments noted in the two footnotes above
(4) Non-GAAP tax rate excludes the tax effects of the
reconciling adjustments noted in the three footnotes above
(5) Non-GAAP earnings per share includes $0.45, which represents
the net impact of the non-GAAP adjustments noted above on a per
share basis consisting of:
- acquisition-related expenses including
amortization of step up value of inventory and purchased intangible
assets, depreciation of step up value on purchased fixed
assets, and the fair value adjustment associated with the
replacement of share-based awards in ADI’s acquisition of Linear
Technology ($0.51)
- acquisition-related transaction costs
($0.01)
- the effect on income tax of the prior
items ($0.07)
Conference Call Scheduled for Today, Wednesday, August 30,
2017 at 10:00 am ETADI will host a conference call to discuss
third quarter fiscal 2017 results and short-term outlook today,
beginning at 10:00 am ET. Investors may join via webcast,
accessible at investor.analog.com, or by telephone (call
706-634-7193 ten minutes before the call begins and provide the
password "ADI").
A replay will be available two hours after the completion of the
call. The replay may be accessed for up to two weeks by dialing
855-859-2056 (replay only) and providing the conference ID:
33638977, or by visiting investor.analog.com.
Non-GAAP Financial
InformationThis release includes non-GAAP financial
measures that are not in accordance with, nor an alternative to,
generally accepted accounting principles and may be different from
non-GAAP measures used by other companies. In addition, these
non-GAAP measures are not based on any comprehensive set of
accounting rules or principles.
Schedules E and F of this press release provides the
reconciliation of the Company’s historical non-GAAP measures to
their most comparable GAAP measures.
Management uses non-GAAP measures internally to evaluate the
Company’s operating performance from continuing operations against
past periods and to budget and allocate resources in future
periods. These non-GAAP measures also assist management in
evaluating the Company’s core business and trends across different
reporting periods on a consistent basis. Management also uses
these non-GAAP measures as the primary performance measurement when
communicating with analysts and investors regarding the Company’s
earnings results and outlook and believes that the presentation of
these non-GAAP measures is useful to investors because it provides
investors with the operating results that management uses to manage
the Company and enables investors and analysts to evaluate the
Company’s core business. Management also believes that the non-GAAP
liquidity measure free cash flow is useful both internally and to
investors because it provides information about the amount of cash
generated after capital expenditures that is then available to
repay debt obligations, make investments and fund acquisitions, and
for certain other activities.
The following item is included in our Non-GAAP revenue,
non-GAAP gross margin, non-GAAP operating income, non-GAAP
operating margin, and non-GAAP diluted earnings per share:
Acquisition-Related Deferred Revenue: Deferred revenue related
to shipments of Linear Technology products by distributors to end
customers that were received by the distributors prior to the
Company’s acquisition of Linear Technology. Business combination
accounting principles require the write down of deferred revenue in
conjunction with the acquisition. We included these revenues in our
non-GAAP measures because they relate to a specific transaction and
are reflective of our ongoing financial performance.
The following items are excluded from our non-GAAP gross
margin, non-GAAP operating expenses, non-GAAP operating income,
non-GAAP operating margin, and non-GAAP diluted earnings per
share:
Acquisition-Related Expenses: Expenses incurred as a result of
current and prior period acquisitions and primarily include
expenses associated with the fair value adjustments to inventory,
property, plant and equipment and amortization of acquisition
related intangibles, which include acquired intangibles such as
purchased technology and customer relationships. Expenses also
include severance payments, equity award accelerations and the fair
value adjustment associated with the replacement of share-based
awards related to the Linear Technology acquisition. We excluded
these costs from our non-GAAP measures because they relate to
specific transactions and are not reflective of our ongoing
financial performance.
The following items are excluded from our non-GAAP operating
expenses, non-GAAP operating income, non-GAAP operating margin, and
non-GAAP diluted earnings per share:
Acquisition-Related Transaction Costs: Costs incurred as a
result of the Linear Technology acquisition, including legal,
accounting and other professional fees directly related to the
acquisition. We excluded these costs from our non-GAAP measures
because they relate to a specific transaction and are not
reflective of our ongoing financial performance.
The following items are excluded from our non-GAAP diluted
earnings per share:
Tax-Related Items: Tax adjustments associated with the non-GAAP
items discussed above. In addition, in the third quarter of fiscal
2017, the Company released $50 million of reserves associated with
a favorable ruling on its petition with the U.S. Tax Court
regarding the beneficial treatment of dividends paid from foreign
owned companies under The American Jobs Creation Act. Also, in the
third quarter of fiscal 2017, the Company recorded $98 million of
tax expense associated with the remittance of cash held outside of
the United States related to the post-acquisition integration of
Linear Technology. We excluded these tax-related items from our
non-GAAP measures because they are not associated with the tax
expense on our current operating results.
The following items are excluded from our calculation of
non-GAAP free cash flow:
One Time Tax Payment: In the third quarter of fiscal 2017, the
Company paid $750 million in income taxes associated with the
acquisition of Linear. These payments were principally related to
pre-acquisition liabilities but also included $98 million
associated with the remittance of cash held outside of the United
States related to the post-acquisition integration of Linear
Technology. We excluded these payments from our non-GAAP free cash
flow measure because they relate to a specific transaction and are
not reflective of our ongoing financial performance.
These non-GAAP measures have material limitations in that they
do not reflect all of the amounts associated with the Company’s
results of operations as determined in accordance with GAAP and
should not be considered in isolation from, or as a substitute for,
the Company’s financial results presented in accordance with GAAP.
In addition, the Company’s non-GAAP measures may not be comparable
to the non-GAAP measures reported by other companies. The Company’s
use of non-GAAP measures, and the underlying methodology when
including or excluding certain items, is not necessarily an
indication of the results of operations that may be expected in the
future, or that the Company will not, in fact, record such items in
future periods.
About Analog DevicesAnalog Devices (NASDAQ: ADI) is the
leading global high-performance analog technology company dedicated
to solving the toughest engineering challenges. We enable our
customers to interpret the world around us by intelligently
bridging the physical and digital with unmatched technologies that
sense, measure, power, connect and interpret.
Visit http://www.analog.com
Forward Looking StatementsThis press release contains
forward-looking statements, which address a variety of subjects
including, for example, our statements regarding expected revenue,
earnings per share, gross margin, operating expenses, interest and
other expense, tax rate, and other financial results, expected
operating leverage, production and inventory levels, expected
market trends, and expected customer demand and order rates for our
products and expected benefits and synergies of the acquisition of
Linear Technology Corporation (“Linear Technology”), including
expected growth rates of the combined companies, expected product
offerings, product development, marketing position and technical
advances resulting from the transaction. Statements that are not
historical facts, including statements about our beliefs, plans and
expectations, are forward-looking statements. Such statements are
based on our current expectations and are subject to a number of
factors and uncertainties, which could cause actual results to
differ materially from those described in the forward-looking
statements. The following important factors and uncertainties,
among others, could cause actual results to differ materially from
those described in these forward-looking statements: any faltering
in global economic conditions or the stability of credit and
financial markets, erosion of consumer confidence and declines in
customer spending, unavailability of raw materials, services,
supplies or manufacturing capacity, changes in geographic, product
or customer mix, higher than expected or unexpected costs
associated with or relating to the acquisition of Linear Technology
and the integration of the businesses; the risk that expected
benefits, synergies and growth prospects of the acquisition may not
be fully achieved in a timely manner, or at all; the risk that
Linear Technology’s business may not be successfully integrated
with Analog Devices’; the risk that we will be unable to retain and
hire key personnel; and the risk that disruption resulting from the
acquisition may adversely affect our business and relationships
with our customers, suppliers or employees. For additional
information about factors that could cause actual results to differ
materially from those described in the forward-looking statements,
please refer to our filings with the Securities and Exchange
Commission (“SEC”), including the risk factors contained in our
most recent Quarterly Report on Form 10-Q and Annual Report on Form
10-K. Forward-looking statements represent management’s current
expectations and are inherently uncertain. Except as required by
law, we do not undertake any obligation to update forward-looking
statements made by us to reflect subsequent events or
circumstances.
Analog Devices and the Analog Devices logo are registered
trademarks or trademarks of Analog Devices, Inc. All other
trademarks mentioned in this document are the property of their
respective owners.
Analog Devices, Third Quarter, Fiscal
2017
Schedule
A
Revenue and Earnings Summary
(Unaudited)
(In thousands, except per-share
amounts)
Three Months Ended 3Q 17
2Q 17 3Q 16
July 29,2017 April
29,2017 July 30,2016
Revenue $ 1,433,902 $ 1,147,982 $ 869,591 Year-to-year change 65 %
47 % 1 % Quarter-to-quarter change 25 % 17 % 12 % Cost of sales (1)
667,278 507,539
297,301 Gross margin 766,624
640,443 572,290 Gross margin percentage 53.5 % 55.8 % 65.8 %
Year-to-year change (basis points) (1,230 ) (980 ) (10 )
Quarter-to-quarter change (basis points) (230
) (1,010 ) 20
Operating expenses: R&D (1) 275,670 235,232 163,227 Selling,
marketing and G&A (1) 183,980 190,686 122,909 Amortization of
intangibles 112,153
68,690 17,447 Total
operating expenses 571,803 494,608 303,583 Total operating expenses
percentage 39.9 % 43.1 % 34.9 % Year-to-year change (basis points)
500 410 (30 ) Quarter-to-quarter change (basis points)
(320 ) 430
(410 ) Operating income 194,821 145,835 268,707 Operating
income percentage 13.6 % 12.7 % 30.9 % Year-to-year change (basis
points) (1,730 ) (1,390 ) 20 Quarter-to-quarter change (basis
points) 90 (1,430
) 430 Other expense
68,023 59,121
12,307 Income before income tax 126,798 86,714
256,400 Provision (benefit) for income taxes 57,882 (6,850 ) 25,970
Tax rate percentage 45.6 %
(7.9 )% 10.1 % Net income (2)
$ 68,916 $ 93,564
$ 230,430 Shares used for EPS -
basic 367,315 341,316 307,135 Shares used for EPS - diluted 371,159
345,654 310,558 Earnings per common share - basic $ 0.18 $
0.27 $ 0.75 Earnings per common share - diluted $ 0.18 $ 0.27 $
0.74 Dividends paid per share $ 0.45
$ 0.45 $
0.42
(1) Includes stock-based compensation
expense as follows:
Cost of sales
$ 4,375 $ 2,566 $ 1,844 R&D $ 15,781 $ 11,910 $ 6,682 Selling,
marketing and G&A $ 12,668 $ 8,010 $ 8,093
(2) Under the two-class method, earnings per share is calculated
using net earnings allocable to common shares, which is derived by
reducing net income by the income allocable to participating
securities. Net income allocable to common shares used in the basic
and diluted earnings per share calculation was $67,935 for the
three months ended July 29, 2017. There was no net income allocated
to participating securities in the three months ended April 29,
2017 or July 30, 2016.
Analog Devices, Third Quarter, Fiscal
2017
Schedule
B
Selected Balance Sheet Information
(Unaudited)
(In thousands)
3Q 17 2Q 17 3Q 16
July 29,2017 April
29,2017 July 30,2016
Cash & short-term investments $ 908,569 $ 6,188,372 $ 3,803,434
Accounts receivable, net 692,552 630,353 452,944 Inventories (1)
519,695 647,858 392,303 Other current assets
67,827 68,884
79,207 Total current assets 2,188,643 7,535,467 4,727,888
PP&E, net 1,098,848 1,089,319 629,094 Investments 60,464 55,815
54,077 Goodwill 12,241,815 12,269,501 1,639,033 Intangible assets,
net 5,440,692 5,587,862 529,035 Other 84,533
84,719
105,926 Total assets $ 21,114,995
$ 26,622,683 $
7,685,053 Deferred income on shipments to distributors, net
$ 449,663 $ 377,792 $ 327,444 Other current liabilities 651,414
750,321 351,249 Debt, current — 4,321,169 — Long-term debt
8,199,230 8,572,364 1,731,758 Deferred income taxes 1,730,253
2,431,410 133,412 Other non-current liabilities 161,535 203,032
157,857 Shareholders' equity 9,922,900
9,966,595
4,983,333 Total liabilities & equity $
21,114,995 $ 26,622,683
$ 7,685,053
(1) Includes $4,628, $3,007, and $2,554 related to stock-based
compensation in 3Q17, 2Q17, and 3Q16, respectively.
Analog Devices, Third Quarter, Fiscal
2017
Schedule C
Cash Flow Statement (Unaudited)
(In thousands)
Three Months Ended 3Q 17
2Q 17 3Q 16 July
29,2017 April 29,2017
July 30,2016 Cash flows from
operating activities: Net Income $ 68,916 $ 93,564 $ 230,430
Adjustments to reconcile net income to net cash provided by
operations: Depreciation 55,217 48,772 33,732 Amortization of
intangibles 147,238 88,770 18,916 Stock-based compensation expense
32,824 22,486 16,619 Cost of goods sold for inventory acquired
195,565 121,113 — Other non-cash activity (42,762 ) 11,078 1,127
Excess tax benefit - stock options (4,282 ) (17,851 ) (2,982 )
Deferred income taxes 98,510 (79,980 ) 12,250 Changes in operating
assets and liabilities (915,509 )
233,512 (56,089 ) Total
adjustments (433,199 )
427,900 23,573 Net cash (used
for) provided by operating activities (364,283
) 521,464 254,003
Percent of revenue (25.4 )%
45.4 % 29.2 % Cash flows
from investing activities: Purchases of short-term
available-for-sale investments (37 ) (378,540 ) (2,284,166 )
Maturities of short-term available-for-sale investments 270,918
1,247,493 2,078,716 Sales of short-term available-for-sale
investments 219,799 69,787 139,805 Additions to property, plant and
equipment (63,617 ) (46,929 ) (37,528 ) Payments for acquisitions,
net of cash acquired 70 (9,686,497 ) — Change in other assets
(1,062 ) (6,117 )
(8,591 ) Net cash provided by (used for) investing
activities 426,071
(8,800,803 ) (111,764 ) Cash flows from
financing activities: Proceeds from debt — 9,083,858 — Debt
repayments (4,700,000 ) — — Payments for deferred financing fees —
— (22,208 ) Dividend payments to shareholders (166,265 ) (139,314 )
(128,954 ) Repurchase of common stock (8,955 ) (23,874 ) (23,022 )
Proceeds from employee stock plans 17,971 52,841 16,633 Excess tax
benefit - stock options 4,282 17,851 2,982 Change in other
financing activities 9
(2,237 ) (2,093 ) Net cash (used for)
provided by financing activities (4,852,958 )
8,989,125 (156,662
) Effect of exchange rate changes on cash
1,996 694
(1,569 ) Net (decrease) increase in cash and cash
equivalents (4,789,174 ) 710,480 (15,992 ) Cash and cash
equivalents at beginning of period 5,697,743
4,987,263
1,119,662 Cash and cash equivalents at end of period
$ 908,569 $ 5,697,743
$ 1,103,670
Analog Devices, Third Quarter, Fiscal
2017
Schedule
DRevenue Trends by End Market
(Unaudited)(In
thousands)
The categorization of revenue by end
market is determined using a variety of data points including the
technical characteristics of the product, the “sold to” customer
information, the "ship to" customer information and the end
customer product or application into which our product will be
incorporated. As data systems for capturing and tracking this data
evolve and improve, the categorization of products by end market
can vary over time. When this occurs we reclassify revenue by end
market for prior periods. Such reclassifications typically do not
materially change the sizing of, or the underlying trends of
results within, each end market.
Three Months Ended July 29,2017
April 29,2017
July 30,2016 Revenue
% * Q/Q %
Y/Y % Revenue Revenue Industrial $
700,213 49% 29%
87% $ 542,742 $ 373,923 Automotive 227,462 16% 25%
69% 181,768 134,804 Consumer 252,498 18% 19% 36% 211,311 186,171
Communications 253,729 18% 20% 45% 212,161 174,693
Total Revenue $ 1,433,902
100% 25% 65% $ 1,147,982
$ 869,591
____________* The sum of the individual percentages does not
equal the total due to rounding.
Analog Devices, Third Quarter, Fiscal
2017
Schedule
E
Reconciliation of Non-GAAP to GAAP
Revenue and Earnings Measures (In thousands, except per-share
amounts)(Unaudited)
See "Non-GAAP Financial Information" in
this press release for a description of the items excluded from our
non-GAAPmeasures.
Three Months Ended 3Q 17
2Q 17 3Q 16 July
29,2017 April 29,2017 July
30,2016 GAAP Revenue $ 1,433,902
$ 1,147,982 $ 869,591 Y/Y Revenue
growth % 65 % 47 % 1
% Q/Q Revenue growth % 25 % 17
% 12 % Acquisition-Related Deferred Revenues
24,576 60,759 —
Non-GAAP
Revenue $ 1,458,478 $
1,208,741 $ 869,591
Y/Y Revenue growth % 68 % 55 %
1 % Q/Q Revenue growth % 21 %
23 % 12 % GAAP Gross
Margin $ 766,624 $ 640,443 $
572,290 Gross Margin Percentage 53.5 %
55.8 % 65.8 % Acquisition-Related
Deferred Revenues 19,782 46,480 — Acquisition-Related Expenses
241,554 150,732 1,888
Non-GAAP Gross Margin $ 1,027,960
$ 837,655 $
574,178 Gross Margin Percentage 70.5
% 69.3 % 66.0 % GAAP
Operating Expenses $ 571,803 $
494,608 $ 303,583 Percent of Revenue
39.9 % 43.1 % 34.9 %
Acquisition-Related Expenses (126,732 ) (75,361 ) (17,582 )
Acquisition-Related Transaction Costs (8,017 ) (39,266 )
(8,310 )
Non-GAAP Operating Expenses $
437,054 $ 379,981
$ 277,691 Percent of Non-GAAP Revenue
30.0 % 31.4 % 31.9 %
GAAP Operating Income/Margin $ 194,821
$ 145,835 $ 268,707 Percent of
Revenue 13.6 % 12.7 % 30.9
% Acquisition-Related Revenues 19,782 46,480 —
Acquisition-Related Expenses 368,286 225,392 19,470
Acquisition-Related Transaction Costs 8,017 39,966
8,310
Non-GAAP Operating Income/Margin
$
590,906 $ 457,673
$ 296,487 Percent of Non-GAAP Revenue
40.5 % 37.9 % 34.1 %
GAAP Diluted EPS
$
0.18
$
0.27
$
0.74
Acquisition-Related Deferred Revenue
0.05
0.13
—
Acquisition-Related Expenses
0.99
0.65
0.06
Acquisition-Related Transaction Costs
0.02
0.12
0.03
Income Tax Effect of Above Items
(0.10
)
(0.09
)
(0.01
)
Impact of State Tax Valuation Release
—
(0.05
)
—
Impact of Reversal of Prior Period Tax
Liabilities
(0.14
)
— —
Impact of Tax Remittance for Linear
Integration
0.26
—
—
Non-GAAP Diluted EPS
$
1.26
$
1.03
$
0.82
Analog Devices, Third Quarter, Fiscal
2017
Schedule
F
Reconciliation of Adjusted Free Cash
Flow to Adjusted Net Cash Flows Provided by Operating
Activities
(Unaudited)
(In thousands)
Three Months Ended 3Q 17 2Q
17 3Q 16 July 29,2017
April 29,2017
July 30,2016 Net cash (used for) provided by
operating activities $ (364,283 ) $ 521,464 $ 254,003 Net cash
(used for) provided by operating activities as a % of Revenue (25.4
)% 45.4 % 29.2 % Non-GAAP adjustments: Federal income tax payments
750,000 — —
Adjusted cash flows from operations $ 385,717 $ 521,464 $
254,003 % of Revenue 26.4 % (1 ) 43.1 % (1 ) 29.2 % Capital
expenditures (63,617 ) (46,929 )
(37,528 ) Adjusted free cash flow $ 322,100
$ 474,535 $ 216,475
% of Revenue 22.1 % (1 ) 39.3 % (1 ) 24.9 %
(1) 3Q17 and 2Q17 Revenue on a non-GAAP basis and includes
acquisition-related deferred revenue outlined on Schedule E.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170830005364/en/
Analog Devices, Inc.Mr. Ali Husain, 781-461-3282781-461-3491
(fax)Treasurer and Head of Investor
Relationsinvestor.relations@analog.com
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