Press Release

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Analog Devices Reports Fourth Quarter And Fiscal Year 2014 Results

Revenue increases to a record $814 million, non-GAAP diluted earnings per share increases to $0.69

Nov 24 2014 - Norwood, MA
  • Norwood, MA (11/25/2014) - Analog Devices, Inc. (NASDAQ: ADI), a global leader in high-performance semiconductors for signal processing applications, today announced financial results for its fourth quarter and fiscal year 2014, which ended November 1, 2014.

    "During the fourth quarter order rates were stable and ADI executed very well, resulting in record revenue and earnings growth that was near the high end of our guidance," said Vincent Roche, President and CEO. "Our cash flow and balance sheet remained strong and we returned $304 million to shareholders through dividends and increased share repurchases."

     

    “We are planning for revenue in the first quarter to be in the range of $745 million to $775 million, which at the mid-point represents an increase of 21% year-over-year,” said Mr. Roche. “We are carefully managing factory utilization rates and expenses, and positioning ADI for better operating leverage, which is likely to come as early as our second quarter.”

     

    ADI also announced that its Board of Directors has declared a cash dividend of $0.37 per outstanding share of common stock. The dividend will be paid on December 16, 2014 to all shareholders of record at the close of business on December 5, 2014.

     

    Results for the Fourth Quarter of Fiscal Year 2014
    Results for the fourth quarter and fiscal year 2014 include contributions from Hittite Microwave. The acquisition was announced on June 9, 2014 and closed on July 22, 2014.

     

    • Revenue totaled $814 million, up 12% sequentially
    • GAAP gross margin of 59.7% of revenue; Non-GAAP gross margin of 66.4% of revenue
    • GAAP operating margin of 18.4% of revenue; Non-GAAP operating margin of 33.2% of revenue
    • GAAP diluted EPS of $0.34; Non-GAAP diluted EPS of $0.69

    Results for Fiscal Year 2014
    Please refer to the schedules provided for a summary of revenue and earnings, selected balance sheet information, and the cash flow statement for the fourth quarter and fiscal year 2014, as well as the immediately prior and year-ago quarters. Additional information on revenue by end market is provided on Schedule D. A more complete table covering prior periods is available at investor.analog.com.

     

    • Revenue totaled $2.9 billion, up 9% year-over-year
    • GAAP gross margin of 63.9% of revenue; Non-GAAP gross margin of 66% of revenue
    • GAAP operating margin of 26.3% of revenue; Non-GAAP operating margin of 31.8% of revenue
    • GAAP diluted EPS of $1.98 per share; Non-GAAP diluted EPS of $2.39 per share
    • Free cash flow of $694 million, or 24% of revenue
    • Share repurchases and dividend payments to shareholders totaled $811 million

     

    Please refer to the schedules provided for a summary of revenue and earnings, selected balance sheet information, and the cash flow statement for the fourth quarter and fiscal year 2014, as well as the immediately prior and year-ago quarters. Additional information on revenue by end market is provided on Schedule D. A more complete table covering prior periods is available at investor.analog.com.

     

    Outlook for the First Quarter of Fiscal Year 2015
    The 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  $745 to $775 million -- $745 to $775 million
    Gross Margin approx. 64.7% $2.6 million 1 approx. 65.0%
    Operating Expenses approx. $288 million $25 million 2 approx. $263 million
    Interest & Other Expense $5.0 million -- $5.0 million
    Tax Rate approx. 16.5% $4 million 3 approx. 14.5%
    Earnings per Share $0.50 to $0.56 $0.08 4

    $0.58 to $0.64

     

    1. Reflects estimated adjustments for amortization of intangible assets of $1 million and step-up charges to record Hittite inventory and fixed assets of $1.6 million at fair value as part of the purchase accounting for the Hittite acquisition.
    2. Reflects estimated adjustments for amortization of intangible assets.
    3. Represents the tax effect for the items noted above.
    4. Represents the expenses and associated tax impact of the amortization of purchased intangibles and step-up charges on a per share basis.


    Conference Call Scheduled for 5:00 pm ET

    ADI will host a conference call to discuss the fourth quarter and full year 2014 results and short-term outlook today, beginning at 5:00 pm 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: 17076906, or by visiting investor.analog.com.

     

    Non-GAAP Financial Information
    This 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.

     

    Schedule E of this press release provides the reconciliation of the Company’s historical non-GAAP measures to its GAAP measures.


    Management uses non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, non-GAAP other expense, and non-GAAP diluted earnings per share 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 understanding and evaluating the Company’s operating results and trends in the Company’s business.

     

    The following item is excluded from our Non-GAAP revenue:
    Hittite Operations: The results of operations of Hittite from July 22, 2014 through August 2, 2014 have been excluded from our non-GAAP measures in the third quarter of 2014 because they are not reflective of ongoing operating results.

     

    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:


    Hittite Operations: The results of operations of Hittite from July 22, 2014 through August 2, 2014 have been excluded from our non-GAAP measures in the third quarter of 2014 because they are not reflective of ongoing operating results.

     

    Acquisition-Related Expenses: Expenses incurred as a result of the Hittite acquisition in the third and fourth quarter of fiscal 2014 primarily include: severance payments; expense associated with the fair value adjustments to inventory, property, plant and equipment, and distributor deferred costs; and amortization of acquisition related intangibles, which include acquired intangibles such as purchased technology and customer relationships. 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.

     

    Stock-Based Compensation Expense: In the fourth quarter of 2014, the Company canceled certain stock awards in conjunction with the restructuring charge which resulted in the recognition of income for stock-based compensation expense recorded in prior periods for these awards. This stock-based compensation income and the related tax effect have no direct correlation to the operation of our business in the future.

     

    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:


    The exclusion of these items allows management to evaluate the Company’s core business and trends across different reporting periods on a consistent basis. Management presents these Non-GAAP items to enable investors and analysts to evaluate our core business.

     

    Acquisition-Related Transaction Costs: Costs incurred as a result of the Hittite acquisition in the third and fourth quarter of fiscal 2014 include legal, accounting and other professional fees directly related to the Hittite 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.

     

    Restructuring-Related Expenses: These expenses are incurred in connection with facility closures, consolidation of manufacturing facilities, severance, 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.

     

    The following items are excluded from our non-GAAP other expense and non-GAAP diluted earnings per share:


    Acquisition-Related Debt Costs: The Company incurred debt financing costs during the third and fourth quarters of fiscal 2014 on its 90-day term loan facility used to finance the Hittite acquisition. We excluded these costs from our non-GAAP measures because they are not reflective of our ongoing financial performance.

     

    Gain on Sale of Product Line: In the fourth quarter of fiscal 2013, the Company completed the sale of its microphone product line and recorded a gain of $85.4 million in non-operating income. We excluded the gain and related tax effect from our non-GAAP measures as these items have no direct correlation to the operation of our business in the future.

     

    Debt Extinguishment Costs: In the third quarter of fiscal 2013, the Company redeemed its outstanding 5.0% senior unsecured notes due July 1, 2014. The Company recognized a net loss on debt extinguishment of approximately $10.2 million, which was comprised of a make-whole premium, the recognition of unamortized proceeds received on an interest rate swap associated with the debt and the write off of unamortized debt issuance and discount costs. We excluded these costs from our non-GAAP measures because they are one time in nature and have no direct correlation to the operation of our business in the future.

     

    The following item is excluded from our non-GAAP diluted earnings per share:


    Tax-Related Items: In the first quarter of fiscal 2013, the Company recorded a $6.3 million tax benefit related to the reinstatement of the R&D tax credit in January 2013, retroactive to January 1, 2012. In the second quarter of fiscal 2013, the Company recorded a $6.6 million tax benefit as a result of the reversal of prior period tax liabilities. In the third quarter of fiscal 2013, the Company recorded a $1.7 million tax benefit related to the release of a tax reserve for an expired tax year. In the fourth quarter of fiscal 2013, as a result of a ruling by the U.S. Tax Court in a matter not involving the Company, the Company recorded a potential liability for $36.5 million plus $4.6 million of interest related to its petition with the U.S. Tax Court regarding the beneficial tax treatment of dividends paid from foreign owned companies under The American Jobs Creation Act. The Company also recorded a $2.2 million tax benefit as a result of the reversal of prior period tax liabilities. Also in the fourth quarter of 2013, the Company completed the sale of its microphone product line, resulting in $26.7 million of income tax expense. In the fourth quarter of 2014, the Company recorded $5.5 million of tax adjustments related to the Hittite acquisition. 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.

     

    Management believes that the presentation of non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, non-GAAP other expenses and non-GAAP diluted EPS is useful to investors because it provides investors with the operating results that management uses to manage the Company.

     

    Analog Devices believes that non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, non-GAAP other expenses 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 when 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.

     

    Investors should consider our non-GAAP financial measures in conjunction with the corresponding GAAP measures.

     

    4Q'14 Financials

  • 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 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 intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, our statements regarding expected revenue, earnings per share, operating expenses, gross margin, tax rate, and other financial results, including inventories, other current assets and goodwill, expected operating leverage, production and inventory levels, objectives, plans and goals, expected market trends, and expected customer demand and order rates for our products, that are based on our current expectations, beliefs, assumptions, estimates, forecasts, and projections about our business and 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: 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, our ability to successfully integrate acquired businesses and technologies, adverse results in litigation matters, the finalization of our purchase price accounting relating to our acquisition of Hittite Microwave Corporation 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.
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