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Analog Devices Reports Fourth Quarter And Fiscal Year 2013 Results
 
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Analog Devices Reports Fourth Quarter And Fiscal Year 2013 Results  
 
   
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Wednesday, November 27, 2013 Analog Devices, Inc. (NASDAQ: ADI), a global leader in high-performance semiconductors for signal processing applications, today announced financial results for its fiscal fourth quarter and fiscal year which ended November 2, 2013.






“Revenue for the fourth quarter increased 1% sequentially, a good result in an uncertain macroeconomic climate,” said Vincent Roche, President and CEO. “Operationally, the business performed well. Excluding special items, margins expanded relative to the prior quarter, operating cash flow was very strong at 42% of sales, and we returned $149 million to shareholders in the form of dividends and share repurchases.”

“Given the strength of our technology portfolio and customer relationships, we are optimistic about our future. However, in the near-term we are entering a slower seasonal period, with customer shutdowns and inventory reductions coinciding with the holidays in December and January. As a result, our plan is for revenue to decline in the first quarter compared to the prior quarter,” said Mr. Roche. “By reducing factory utilization rates and keeping expenses under tight control, we will be in a strong position for operating leverage when growth resumes.”

ADI also announced that its Board of Directors has declared a cash dividend of $0.34 per outstanding share of common stock. The dividend will be paid on December 17, 2013 to all shareholders of record at the close of business on December 6, 2013.

Results for the Fourth Quarter of Fiscal Year 2013

Revenue totaled $678 million

Gross margin was 65.6% of revenue

Operating margin was 31.8% of revenue, excluding special items

Diluted EPS was $0.62, excluding special items

Cash flow from operations was $282 million, or 41.6% of revenue

Results for Fiscal Year 2013

Revenue totaled $2.6 billion

Gross margin was 64.3% of revenue

Operating margin was 30% of revenue, excluding special items

Diluted EPS was $2.15, excluding special items

Free cash flow was $789 million, or 30% of revenue

Repurchases of common stock and dividend payments to shareholders totaled $466 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 of fiscal year 2013, as well as the immediately prior and year-ago quarters. Additional information on revenue by end market and revenue by product type is provided on Schedules D and E. A more complete table covering prior periods is available at investor.analog.com.

Outlook for the First Quarter of Fiscal Year 2014

The following statements are based on current expectations. 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.

Revenue estimated to decrease in the range of -5% to -10%

Gross margin estimated to be between 64% and 65%

Operating expenses estimated to decrease approximately $3 million to $226 million

Tax rate estimated to be approximately 13%

Diluted EPS estimated at $0.44 to $0.52

Conference Call Scheduled for 5:00 pm ET

ADI will host a conference call to discuss the fourth quarter 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: 78682523, 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 F of this press release provides the reconciliation of the Company’s non-GAAP measures to its GAAP measures.

Manner in Which Management Uses the Non-GAAP Financial Measures

Management uses non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, non-GAAP other (income) 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.

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 items are excluded from our non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin, and 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.

Stock-based Compensation Expense. In the second quarter of fiscal 2013, following the death of the Company’s CEO, the Company recorded $6.3 million of stock-based compensation expense due to the accelerated vesting of restricted stock units in accordance with the terms of his restricted stock unit agreement. This stock-based compensation expense 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 other (income) expense and non-GAAP diluted earnings per share:

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.

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.

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

Tax-Related Items. In the third quarter of fiscal 2012, the Company recorded a $3.4 million tax benefit related to the release of a tax reserve for an expired tax year. In the first quarter of fiscal year 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 fiscal 2013, the Company completed the sale of its microphone product line, resulting in $26.7 million of income tax expense. 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.

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, non-GAAP operating margins, non-GAAP other (income) expense, 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, non-GAAP operating margins, non-GAAP other (income) expense, 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.

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, non-GAAP operating margins, non-GAAP other (income) expense, 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.



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