01—Abstract
Summary
Summary of the 10-K filed November 22, 2016. Cited figures are marked; the original filing is the authoritative source.
Analog Devices, Inc. (ADI) reported stable revenue of $3.42 billiona for fiscal year 2016, a slight decrease of 0.4% from the previous year, but demonstrated significant profit growth with net income rising 24% to $861.7 million and diluted earnings per share increasing 25% to $2.76.
This improved profitability was driven by a substantial decrease in "Other operating expense" due to a one-time Irish pension plan settlement charge in the prior year, alongside a slight improvement in gross margin percentage and controlled operating expenses. The most transformative event discussed is the definitive agreement to acquire Linear Technology Corporation for approximately $14.8 billionb, announced in July 2016.
This acquisition, expected to be funded by a mix of stock and debt, is poised to significantly expand ADI's portfolio and market reach. The company also reported ongoing investments in Research and Development, underscoring its commitment to innovation in key markets like Industrial, Automotive, Consumer, and Communications.
02—Key points
Key Highlights
- Revenue remained stable year-over-year at $3.42 billion, with a slight decrease of 0.4%.
- Net income saw a significant increase of 24% to $861.7 million.
- Diluted earnings per share (EPS) grew by 25% to $2.76, indicating improved profitability.
- Announced a major acquisition of Linear Technology Corporation for approximately $14.8 billion, a transaction expected to close in fiscal 2017.
- Research and Development expenses increased to $653.8 million, highlighting continued investment in innovation.
- Industrial segment remained the largest revenue contributor at 44% of total revenue.
- The company temporarily suspended its share repurchase program due to the pending acquisition of Linear Technology.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Analog Devices kept $0.25.
- Revenue$3.42B100.0%
- Cost of revenue−$1.19B34.9%
- Gross profit$2.23B65.1%
- Operating costs−$1.20B35.0%
- Operating income$1.03B30.0%
- Interest, other & tax−$166.4M4.9%
- Net income$861.7M25.2%
Where FY2016 revenue went
$3.42B- Cost of revenue: $1.19B, 35% of revenue
- Net income: $861.7M, 25% of revenue
- R&D: $653.8M, 19% of revenue
- SG&A: $461.4M, 13% of revenue
- Other operating costs: $83.8M, 2.4% of revenue
- Interest, other & tax: $166.4M, 4.9% of revenue
Kept 25% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed November 22, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $3.42B$3.44B | −0.4% |
| Cost of Revenue | $1.19B$1.18B | +1.6% |
| Gross Profit | $2.23B$2.26B | −1.4% |
| R&D Expenses | $653.82M$637.46M | +2.6% |
| SG&A Expenses | $461.44M$478.97M | −3.7% |
| Operating Expenses | $1.20B$1.43B | −16.1% |
| Operating Income | $1.03B$830.84M | +23.7% |
| Interest Expense | $88.76M$27.03M | +228.4% |
| Net Income | $861.66M$696.88M | +23.6% |
| EPS (Basic) | $2.79$2.23 | +25.1% |
| EPS (Diluted) | $2.76$2.20 | +25.5% |
| Shares Outstanding (Basic) | 308.74M312.66M | −1.3% |
| Shares Outstanding (Diluted) | 312.31M316.87M | −1.4% |
05—Questions
Frequently Asked Questions
What is the primary business of Analog Devices, Inc.?
Analog Devices, Inc. (ADI) is a global leader in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits (ICs), algorithms, software, and subsystems. Their products are crucial for converting, conditioning, and processing real-world phenomena into electrical signals for a wide array of electronic devices.
What are the key end markets for Analog Devices?
ADI focuses on four key strategic markets: Industrial (44% of FY2016 revenue), Communications (20%), Consumer (20%), and Automotive (16%). Their products are embedded in various applications within these sectors, from factory automation and medical imaging to wireless infrastructure and automobiles.
What significant corporate development occurred in fiscal year 2016?
The most significant development was the announcement of the definitive agreement to acquire Linear Technology Corporation (Linear) for approximately $14.8 billion. This transaction is expected to close in the second quarter of fiscal 2017 and aims to create a larger, more diversified analog technology company.
How did the company's financial performance change in fiscal year 2016 compared to 2015?
While revenue remained relatively flat, Analog Devices saw a substantial improvement in profitability. Net income increased by 24% to $861.7 million, and diluted EPS grew by 25% to $2.76. This improvement was largely due to a significant decrease in 'Other operating expense' compared to the prior year, which included a one-time pension plan settlement charge.
06—Continue