Analog Devices, Inc. has announced financial results for the first quarter of fiscal 2007, which ended February 3, 2007.
Total revenue for the first quarter of fiscal 2007 was $692 million, which included $657 million of product revenue and $35 million of revenue from a one-time technology license. Product revenue for the first quarter of fiscal year 2007 increased approximately 6% compared to the same period one year ago and increased approximately 2% compared to the immediately prior quarter.
Net income for the first quarter of fiscal 2007, under generally accepted accounting principles (GAAP), was $153 million, or 22% of total revenue, compared to $121 million for the same period one year ago and $138 million for the immediately prior quarter.
The operating results for the first quarter of fiscal 2007 include the following items:
-$35 million of revenue from a one-time technology license fee.
-$8 million of non-operating income from the sale of an investment.
-$20 million of non-cash stock option expenses.
-$5.2 million of expenses related to restructuring actions.
-$3.1 million of expenses related to previously-announced acquisitions.
-An adjustment to the provision for taxes to reflect the tax effect of these items.
-$10 million of tax savings associated with the reinstatement of the federal research and development (R&D) tax credit.
Together these items increased diluted EPS by $0.04. A reconciliation between the non-GAAP financial measures presented in this release to their most directly comparable GAAP measures is provided in a table below.
Diluted earnings per share (EPS) for the first quarter of fiscal 2007, on a GAAP basis, was $0.44, compared to $0.32 for the same period one year ago and $0.39 for the immediately prior quarter. Non-GAAP diluted EPS for the first quarter of fiscal 2007 was $0.40, compared to $0.37 for the same period one year ago and $0.39 for the immediately prior quarter.
The Board of Directors declared a cash dividend for the first quarter of fiscal 2007 of $0.18 per outstanding share of common stock, an increase of $0.02 from the dividend paid on December 13, 2006. The dividend will be paid on March 28, 2007 to all shareholders of record at the close of business on March 9, 2007.
Gross margin for the first quarter of fiscal 2007, on a GAAP basis, was $417 million. Non-GAAP gross margin was $387 million, or 59.0% of product revenue, for the first quarter of fiscal 2007, compared to 59.2% of product revenue in the same period one year ago and 59.4% of product revenue in the immediately prior quarter. Non-GAAP gross margin declined slightly compared to the immediately prior quarter primarily as a result of higher sales of products for consumer electronics and cellular handset applications, which carry relatively lower gross margin. Non-GAAP gross margin was also constrained by continued low utilization rates in ADI factories.
Operating profit for the first quarter of fiscal 2007, on a GAAP basis, totalled $163 million. Non-GAAP operating profit was $156 million, or 23.8% of product revenue, for the first quarter of fiscal 2007, compared to 25.7% of product revenue in the same period one year ago and 24.7% of product revenue in the immediately prior quarter. Non-GAAP operating profit declined compared to the immediately prior quarter primarily as a result of higher operating expenses associated with an additional week of expenses in the 14-week first quarter of fiscal 2007 as compared to the 13-week fourth quarter of fiscal 2006.
Net cash provided by operating activities in the first quarter of fiscal 2007 totalled $208 million, or 30.1% of total revenue, compared to $175 million, or 28.2% of total revenue, in the same period one year ago and compared to $167 million, or 25.9% of total revenue, in the immediately prior quarter.
-Capital expenditures for the first quarter of fiscal year 2007 totalled $38 million.
-Cash dividends paid during the first quarter of fiscal 2007 totalled $54.7 million.
-Share repurchases during the first quarter of fiscal 2007 of approximately 10.1 million shares of ADI common stock (approximately 3% of total shares outstanding) totalled $333 million.
-The share repurchase program authorized by the Board of Directors had approximately $979 million remaining at the end of the first quarter of 2007.
Balance Sheet
-Cash and short-term investments at the end of the first quarter of fiscal 2007 totalled approximately $1.95 billion.
-Inventory at the end of the first quarter of fiscal 2007 increased 2% compared to the immediately prior quarter, consistent with the increase in product revenue over the same period.
-Accounts receivable at the end of the first quarter of fiscal 2007 increased 5% compared to accounts receivable at the end of the immediately prior quarter. A high rate of shipments in the last month of the first quarter was the primary reason for the increase.
Revenue Analysis By End Market
-Revenue from customers in the industrial market represented approximately 44% of product revenue in the first quarter of fiscal 2007. Revenue from the industrial market, which includes factory automation, medical and scientific instrumentation, automotive, security, and defense applications, increased by 3% compared to the immediately prior quarter and increased by 14% compared to the same period one year ago. Comparing the first quarter of fiscal 2007 to the immediately prior quarter, revenue from automotive and defense applications increased, while other areas of the industrial market were approximately flat.
-Revenue from customers in the communications market represented approximately 26% of product revenue in the first quarter of fiscal 2007. Revenue from the communications market increased by 7% compared to the immediately prior quarter and declined by 9% compared to the same period one year ago. Comparing the first quarter of fiscal 2007 to the immediately prior quarter, revenue from base station and wireless handset applications increased, while revenue from other areas of the communications market was approximately flat or decreased.
-Revenue from customers in the consumer market represented approximately 20% of product revenue in the first quarter of fiscal 2007. Revenue from the consumer market increased by 3% compared to the immediately prior quarter and increased by 35% compared to the same period one year ago primarily as a result of increased sales to manufacturers of digital home applications, including flat screen televisions and new video game controllers.
-Revenue from customers in the computer market represented approximately 10% of product revenue in the first quarter of fiscal 2007. Revenue from the computer market declined by 14% compared to the immediately prior quarter and declined by 20% compared to the same period one year ago primarily as a result of ADI’s strategy to refocus power management products on portable applications and also due to a generally weak computer market in the first quarter of fiscal 2007.
Revenue Analysis By Product Category
Revenue from analog products totalled approximately $547 million, or 83% of product revenue, an increase of 1% compared to the immediately prior quarter and an increase of 13% compared to the same period one year ago.
-During the first quarter of fiscal 2007, revenue from converter and amplifier products represented approximately 61% of product revenue and, compared to the immediately prior quarter, revenue from converter and amplifier products declined slightly. Compared to the same period one year ago, revenue from converter and amplifier products increased by 13% and 14%, respectively.
-Revenue from other analog products such as micro-electro mechanical systems (MEMS) products and radio frequency (RF) integrated circuits increased significantly in the first quarter of fiscal 2007 compared to both the immediately prior quarter and the same period one year ago.
Revenue from digital signal processing (DSP) products totalled approximately $110 million, or 17% of product revenue, an increase of 9% compared to the immediately prior quarter and a decrease of 20% compared to the same period one year ago. A significant portion of the year-to-year decline was due to the divestiture of the DSP-based digital subscriber line (DSL) application-specific integrated circuit (ASIC) and network processor product line.
-Compared to the immediately prior quarter, DSP wireless chipset revenue increased in the first quarter of fiscal 2007 after declining in the prior quarter when customers’ inventory corrections negatively impacted DSP product revenue. DSP wireless chipset revenue comprised 7% of product revenue in the first quarter of fiscal 2007.
-During the first quarter of fiscal 2007, revenue from general-purpose DSP products represented 9% of product revenue, was approximately flat compared to the immediately prior quarter and increased by 18% compared to the same period one year ago.
Outlook for the Second Quarter of Fiscal 2007
“Orders from customers and distributors began strengthening in January and have continued to be strong, which we believe is a positive sign of improving industry conditions,” said Jerald G. Fishman, ADI’s president and chief executive officer. “Therefore, we are planning for good growth in our second fiscal quarter.”
-Revenue for the second quarter of fiscal 2007 is planned to be approximately $640 to $670 million.
-Non-GAAP gross margins for the second quarter of fiscal 2007 are planned to be approximately 58.5% to 59% of revenue.
-Operating expenses are planned to increase slightly in the second quarter of fiscal 2007 as a result of annual salary increases that take effect in the second quarter of fiscal year 2007 and increased R&D spending on new analog products.
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