10-QPeriod: Q1 FY2016

ANALOG DEVICES INC Quarterly Report for Q1 Ended Jan 30, 2016

Filed February 17, 2016For Securities:ADI

Summary

Analog Devices, Inc. (ADI) reported financial results for the first quarter of fiscal year 2016 ending January 30, 2016. The company experienced a slight decrease in revenue compared to the prior year, driven by a decline in the communications segment, partially offset by growth in the consumer and automotive sectors. Gross margin also saw a decrease, primarily due to lower operating levels and increased inventory reserves. Despite the revenue dip, ADI demonstrated strong operational cash flow generation. The company also strategically managed its balance sheet, issuing new long-term debt while redeeming a portion of its existing debt, and continued its commitment to returning capital to shareholders through dividends and share repurchases. Management expressed confidence in the company's liquidity and ability to fund operations and capital expenditures for the foreseeable future.

Financial Highlights

56 data points
Beta

Revenue

$769.43M

62.0% Gross Margin

Net Income

$164.50M

21.4% Net Margin

EPS (Diluted)

$0.52

Total Assets

$7.60B

Cash & Equivalents

$1.47B

Free Cash Flow

$196.58M

Financial Statements
Beta
Revenue$769.43M
Cost of Revenue$292.14M
Gross Profit$477.29M
R&D Expenses$157.43M
SG&A Expenses$107.46M
Operating Expenses$282.25M
Operating Income$195.04M
Interest Expense$13.06M
Net Income$164.50M
EPS (Basic)$0.53
EPS (Diluted)$0.52
Shares Outstanding (Basic)311.17M
Shares Outstanding (Diluted)314.79M

Key Highlights

  • 1Revenue for the three months ended January 30, 2016, was $769.4 million, a slight decrease of 0.3% from $772.0 million in the prior year period.
  • 2Net income decreased by 8% to $164.5 million, resulting in diluted EPS of $0.52, down from $0.57 in the comparable prior year period.
  • 3Gross margin percentage declined to 62.0% from 65.2% year-over-year, attributed to lower operating levels and increased inventory reserves.
  • 4The company generated robust net cash provided by operating activities of $219.7 million, an increase from $168.7 million in the prior year.
  • 5ADI issued $1.25 billion in new long-term debt and redeemed $375 million of existing notes, strengthening its balance sheet and extending debt maturities.
  • 6The company continued its capital return program, declaring a cash dividend of $0.42 per share and increasing its stock repurchase authorization by $600 million.
  • 7Revenue from the Industrial and Communications end markets saw slight declines, while Consumer and Automotive segments showed growth.

Frequently Asked Questions

The primary driver for the slight revenue decrease was a 16% decline in revenue from the Communications end market, largely due to reduced demand for products used in wireless base stations. This was partially offset by growth in the Consumer (32% increase) and Automotive (2% increase) segments.

Analog Devices strategically managed its debt by issuing $1.25 billion in new senior unsecured notes (2025 and 2045 notes) and using a portion of the proceeds to redeem its $375 million of 2016 Notes. This action strengthened the balance sheet and extended the company's debt maturity profile.

The company expects capital expenditures for fiscal year 2016 to be in the range of $130.0 million to $150.0 million, funded by cash on hand and operational cash flow. Management believes current liquidity and anticipated future operations will be sufficient to fund operations, capital expenditures, R&D, dividends, and stock repurchases for at least the next twelve months.

The gross margin percentage decreased by 3.2 percentage points to 62.0% compared to the prior year. This was primarily due to lower operating levels in manufacturing facilities and an increase in inventory reserves, particularly related to consumer products.