Linear Technology Reports Sequential Quarterly Declines, but Modest Year Over Year Quarterly Increases in Revenues and Net Income and Guides for Sequential Quarterly Improvement.

MILPITAS, Calif.--(BUSINESS WIRE)--Linear Technology Corporation (NASDAQ:LLTC), a leading, independent manufacturer of high performance linear integrated circuits, today reported financial results for the fiscal quarter ended December 30, 2012. Quarterly revenues of $305.3 million for the second quarter of fiscal year 2013 decreased $29.9 million or 8.9% from the previous quarter's revenue of $335.1 million and increased $10.9 million or 3.7% over $294.3 million reported in the second quarter of fiscal year 2012. Net income of $88.8 million decreased $16.3 million or 15.5% from the first quarter of fiscal year 2013 and increased $0.9 million or 1% over the second quarter of fiscal year 2012. Diluted earnings per share of $0.38 per share in the second quarter of fiscal year 2013 decreased $0.07 per share or 16% from the first quarter of fiscal year 2013 and was flat compared to the second quarter of fiscal year 2012.

During the second quarter the Company's cash, cash equivalents and marketable securities decreased by $20.6 million to $1.299 billion from the first quarter of fiscal year 2013. The Company's cash, cash equivalents and marketable securities balance decreased primarily due to the Company accelerating the payment of its March quarterly dividend payment into the December quarter to benefit shareholders due to fiscal cliff tax rate uncertainties. Concurrent with the December payout, the Company's Board of Directors approved an increase in the Company's quarterly dividend from $0.25 per share to $0.26 per share. This marked the 21st consecutive year the Company has increased its dividend. At the current stock price the Company's dividend yield is approximately 3%.

According to Lothar Maier, CEO, “As we reported at this time last quarter, we expected a difficult second fiscal quarter given the tough economic climate existing domestically and globally. Revenue declined 9% compared to the preceding quarter. This was within our guidance, though at the low end, as bookings continued to be weak throughout the first two months of the quarter. Though we were disappointed in the revenue decline, we are encouraged that we saw stronger bookings momentum exiting the quarter and this improvement has continued through the early stage of the current quarter. Innovation is prevalent in our end markets and our product positioning is strong. Based upon our current bookings rate, and assuming business confidence improves, we expect to resume moderate revenue growth. We currently estimate that fiscal third quarter revenues will grow in the range of 1% to 4% over the second quarter.”

Except for historical information contained herein, the matters set forth in this press release are forward-looking statements. In particular, the statements regarding the demand for our products, our customers' ordering patterns and the anticipated trends in our sales and profits are forward-looking statements. The forward-looking statements are dependent on certain risks and uncertainties, including such factors, among others, as the timing, volume and pricing of new orders received and shipped, the timely introduction of new processes and products, general and country specific conditions in the world economy and financial markets and other factors described in our 10-Q for the quarterly period ended September 30, 2012.

Company officials will be discussing these results in greater detail in a conference call tomorrow, Wednesday, January 16, 2013 at 8:30 a.m. Pacific Coast Time. Those investors wishing to listen in may call 719-325-4833, or toll free 877-741-4249 before 8:15 a.m. to be included in the audience. There will be a live webcast of this conference call that can be accessed through www.linear.com or www.streetevents.com. A replay of the conference call will be available from January 16, 2013 through January 22, 2013. You may access the archive by calling [phone] or toll free [phone] and entering reservation #1296943. An archive of the webcast will also be available at www.linear.com and www.streetevents.com as of January 16, 2013 until the second quarter earnings release next year.

Linear Technology Corporation, a member of the S&P 500, has been designing, manufacturing and marketing a broad line of high performance analog integrated circuits for major companies worldwide for three decades. The Company's products provide an essential bridge between our analog world and the digital electronics in communications, networking, industrial, automotive, computer, medical, instrumentation, consumer, and military and aerospace systems. Linear Technology produces power management, data conversion, signal conditioning, RF and interface ICs, µModule subsystems, and wireless sensor network products. For more information, visit www.linear.com.

For further information contact Paul Coghlan at Linear Technology Corporation, 1630 McCarthy Blvd., Milpitas, California 95035-7417, [phone].

LINEAR TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) U.S. GAAP (unaudited)
	Three Months Ended									Six Months Ended
	December 30, 2012			September 30, 2012			January 1, 2012			December 30, 2012			January 1, 2012
Revenues	$	305,281		$	335,148		$	294,333		$	640,429		$	624,253
Cost of sales ^(1)	78,185			83,758			73,821			161,943			153,614
Gross profit	227,096			251,390			220,512			478,486			470,639
Expenses:
Research & development ^(1)	57,304			58,803			52,519			116,107			107,408
Selling, general & administrative ^(1)	37,090			37,504			34,922			74,594			72,594
	94,394			96,307			87,441			190,701			180,002
Operating income	132,702			155,083			133,071			287,785			290,637
Interest expense	(6,835		)	(6,855		)	(6,925		)	(13,690		)	(13,866		)
Amortization of debt discount ^(2)	(5,219		)	(5,146		)	(4,931		)	(10,365		)	(9,793		)
Acquisition related costs	—			—			(3,195		)	—			(3,195		)
Interest and other income	1,043			1,003			1,146			2,046			2,367
Income before income taxes	121,691			144,085			119,166			265,776			266,150
Provision for income taxes	32,857			38,903			31,281			71,760			69,864
Net income	$	88,834		$	105,182		$	87,885		$	194,016		$	196,286
Earnings per share:
Basic	$	0.38		$	0.45		$	0.38		$	0.82		$	0.85
Diluted	$	0.38		$	0.45		$	0.38		$	0.82		$	0.84
Shares used in determining earnings per share:
Basic	235,852			234,990			232,209			235,613			232,051
Diluted	236,850			236,010			233,565			236,636			233,347
Includes the following non-cash charges:
^(1) Stock-based compensation
Cost of sales	$	1,984		$	1,970		$	1,844		$	3,954		$	3,748
Research & development	9,255			9,196			8,609			18,451			17,496
Selling, general & administrative	4,778			4,745			4,442			9,523			9,028
^(2) Amortization of debt discount (non-cash interest expense)	5,219			5,146			4,931			10,365			9,793

LINEAR TECHNOLOGY CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands) U.S. GAAP (unaudited)
	December 30, 2012			July 1, 2012
ASSETS:
Current assets:
Cash, cash equivalents and marketable securities	$	1,299,402		$	1,203,059
Accounts receivable, net of allowance for doubtful accounts of $1,891 ($2,035 at July 1, 2012)	145,174			153,090
Inventories	85,166			79,664
Deferred tax assets and other current assets	69,334			69,597
Total current assets	1,599,076			1,505,410
Property, plant & equipment, net	303,520			320,222
Other noncurrent assets	20,558			25,436
Total assets	$	1,923,154		$	1,851,068
LIABILITIES & STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	11,857		$	11,459
Accrued income taxes, payroll & other accrued liabilities	108,785			117,789
Deferred income on shipments to distributors	42,291			41,333
Total current liabilities	162,933			170,581
Convertible senior notes	815,965			805,599
Deferred tax and other noncurrent liabilities	151,749			138,380
Stockholders’ equity:
Common stock	1,641,590			1,588,045
Accumulated deficit	(849,490		)	(851,702		)
Accumulated other comprehensive income	407			165
Total stockholders’ equity	792,507			736,508
	$	1,923,154		$	1,851,068

LINEAR TECHNOLOGY CORPORATION RECONCILIATION OF U.S. GAAP NET INCOME TO NON-GAAP NET INCOME (In thousands, except per share amounts) (unaudited)
	Three Months Ended									Six Months Ended
	December 30, 2012			September 30, 2012			January 1, 2012			December 30, 2012			January 1, 2012
Reported net income
(GAAP basis)	$	88,834		$	105,182		$	87,885		$	194,016		$	196,286
Stock-based compensation	16,017			15,911			14,895			31,928			30,272
Amortization of debt discount^(1)	5,219			5,146			4,931			10,365			9,793
Acquisition related costs	—			—			3,195			—			3,195
Income tax effect of non-GAAP adjustments	(5,734		)	(5,685		)	(6,043		)	(11,419		)	(11,356		)
Non-GAAP net income	$	104,336		$	120,554		$	104,863		$	224,890		$	228,190
Non-GAAP earnings per share
Basic	$	0.44		$	0.51		$	0.45		$	0.95		$	0.98
Diluted	$	0.44		$	0.51		$	0.45		$	0.95		$	0.98

⁽¹⁾ Amortization of debt discount is non-cash interest expense related to the Company’s Convertible Senior Notes.

The Company’s non-GAAP measures set forth above exclude charges related to stock-based compensation and the amortization of the Company’s debt discount which is a non-cash interest expense. In addition, the Company's non-GAAP measures exclude the special expense items related to the acquisition. The Company’s management uses non-GAAP net income and non-GAAP earnings per share to evaluate the Company’s current operating results and financial results and to compare them against historical financial results. The Company excludes stock-based compensation, non-cash interest expenses, acquisition related costs and the related tax effects primarily because they are significant special expense estimates, which management separates for consideration when evaluating and managing business operations. In addition management believes it is useful to investors because it is frequently used by securities analysts, investors and other interested parties in evaluating the Company and provides further clarity on its profitability.

In addition, the Company believes that providing investors with these non-GAAP measurements enhances their ability to compare the Company’s business against that of its many competitors who employ and disclose similar non-GAAP measures. This financial measure may be different from non-GAAP methods of accounting and reporting used by the Company’s competitors to the extent their non-GAAP measures include other items. The presentation of this additional information should not be considered a substitute for net income or net income per diluted share prepared in accordance with GAAP.