Norwood, MA (05/19/2009) - Analog Devices, Inc. (NYSE: ADI), a global leader in high-performance semiconductors for signal processing applications, today announced financial results for the second quarter of fiscal 2009, which ended May 2, 2009.
Results of Operations for the Second Quarter of Fiscal 2009
The table reconciling the Company’s non-GAAP financial results to GAAP financial results is provided in this release on Schedule F.
“ADI’s second quarter results were better than planned as we benefited from increased sales to communications infrastructure and consumer customers and a general abatement of inventory reductions by our customers. In addition, our second quarter expenses were significantly lower than originally planned as we aggressively reduced spending in response to ongoing economic uncertainty,” said President and CEO Jerald G. Fishman. “Despite the challenging environment, our business model continues to allow us to generate solid profits and cash flow as it has done for many years, giving us the flexibility to execute the strategic investment and cost reduction initiatives that we expect will drive significant operating leverage when demand recovers.”
Outlook for the Third Quarter of Fiscal 2009
The following statements are based on current expectations. These statements are forward looking and actual results may differ materially, including as a result of the important factors discussed at the end of this release. These statements supersede all prior statements regarding business outlook set forth in prior ADI news releases.
Regarding the outlook for the third quarter of fiscal 2009, Mr. Fishman stated, “Orders to ADI and our distributors recovered significantly in the second quarter, as customer inventory reductions subsided. Our book-to-bill ratio for the second quarter, as measured by end customer bookings, was slightly above one for the first time since the third quarter of fiscal 2008, and our third quarter opening backlog was up from last quarter. In addition, order levels were stable throughout the second quarter and have remained at these levels through the first two weeks of May. Nevertheless, our lead times remain short and we are still receiving a significant portion of new orders as turns orders, thereby limiting visibility.”
Mr. Fishman continued, “Given these factors, we’re planning for our third quarter revenue to be approximately flat on a sequential basis. We plan to continue to reduce inventories in the third quarter, and to keep very tight control over operating expenses. As a result, we expect gross margins to be approximately 54% to 55%, depending on end market revenue mix and factory utilization, and are planning for operating expenses to remain approximately flat sequentially. In addition, we expect our tax rate to be approximately 21% for the remainder of the fiscal year. As a result, we are planning for diluted EPS from continuing operations for the third quarter to be approximately $0.17 to $0.19.”
Conference Call Scheduled for 5:00 pm ET
Mr. Fishman will discuss the second fiscal quarter’s results and short-term outlook via webcast, accessible at investor.analog.com, today, beginning at 5:00 pm ET. 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: 98539131, or by visiting investor.analog.com.
Non-GAAP Financial Information
This release includes non-GAAP financial measures for prior periods 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. A table reconciling the Company’s non-GAAP measures to GAAP measures is provided in this release.
Manner in Which Management Uses the Non-GAAP Financial Measures
Management uses non-GAAP operating expenses, non-GAAP operating income, and non-GAAP diluted earnings per share to evaluate the Company’s operating performance against past periods and to budget and allocate resources in future periods. These non-GAAP measures also assist management in understanding and evaluating the underlying baseline operating results and trends in the Company’s business.
Economic Substance Behind Management’s Decision to Use Non-GAAP Financial Measures
The items excluded from the non-GAAP measures were excluded because they are of a non-recurring or non-cash nature.
The following item is excluded from our non-GAAP operating expenses, our non-GAAP operating income, and our non-GAAP diluted earnings per share:
Restructuring-Related Expenses.These expenses are incurred in connection with facility closures, consolidation of manufacturing facilities, and other cost reduction efforts. Apart from ongoing expense savings as a result of such items, these expenses and the related tax effects have no direct correlation to the operation of our business in the future.
Why Management Believes the Non-GAAP Financial Measures Provide Useful Information to Investors
Management believes that the presentation of non-GAAP operating expenses, non-GAAP operating income, and non-GAAP diluted EPS is useful to investors because it provides investors with the operating results that management uses to manage the Company.
Material Limitations Associated with Use of the Non-GAAP Financial Measures
Analog Devices believes that non-GAAP operating expenses, non-GAAP operating income, and non-GAAP diluted EPS have material limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. In addition, our 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 in 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.
Management’s Compensation for Limitations of Non-GAAP Financial Measures
Management compensates for these material limitations in non-GAAP operating expenses, non-GAAP operating income, and non-GAAP diluted EPS by also evaluating our GAAP results and the reconciliations of our non-GAAP measures to the most directly comparable GAAP measures. Investors should consider our non-GAAP financial measures in conjunction with the corresponding GAAP measures.
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 technology, Analog Devices serves over 60,000 customers, representing virtually all types of electronic equipment. Analog Devices is headquartered in Norwood, Massachusetts, with design and manufacturing facilities throughout the world. Analog Devices is included in the S&P 500 Index.
This release may be deemed to contain forward-looking statements which include, among other things, our statements regarding expected revenue, earnings, operating expenses, gross margins, restructuring charges, and other financial results, expected customer demand for our products, and expected results of our ongoing expense reduction efforts, 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, are inherently uncertain, involve certain risks, uncertainties, and assumptions that are difficult to predict, and do not give effect to the potential impact of any mergers, acquisitions, divestitures, or business combinations that may be announced or closed after the date hereof. 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. We do not undertake any obligation to update forward-looking statements made by us. Important factors that may affect future operating results include: continuing adversity in economic conditions in the United States and internationally as a result of the ongoing crisis in global credit and financial markets, further erosion of consumer confidence and further declines in customer spending, the effects of declines in customer demand for our products and for end products that incorporate our products, competitive pricing pressures, unavailability of raw materials or wafer fabrication, assembly and test capacity, any delay or cancellation of significant customer orders, changes in geographic, product or customer mix, adverse results in litigation matters, and other risk factors described in our most recent filings with the Securities and Exchange Commission. Our results of operations for the periods presented in this release are not necessarily indicative of our operating results for any future periods. Any projections in this release are based on limited information currently available to Analog Devices, which is subject to change. Although any such projections and the factors influencing them will likely change, we will not necessarily update the information, as we will only provide guidance at certain points during the year. Such information speaks only as of the original issuance date of this release.
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. The use of the word partner does not imply a partnership relationship between Analog Devices and any other company.