Linear Technology Reports Sequential Increases in Revenue, Net Income, and Earnings Per Share. The Company Increases the Quarterly Dividend $0.01 to $0.33 Per Share

MILPITAS, Calif.--()--Linear Technology Corporation (NASDAQ:LLTC), a leading, independent manufacturer of high performance linear integrated circuits, today reported financial results for the fiscal quarter ended January 1, 2017. Quarterly revenues of $375.8 million for the second quarter of fiscal year 2017 increased $1.9 million or 0.5% over the previous quarter’s revenue of $373.9 million and increased $28.7 million or 8.3% over the $347.1 million reported in the second quarter of fiscal year 2016.

On a GAAP basis, net income of $124.0 million increased $8.9 million or 7.7% over the previous quarter’s net income of $115.1 million and increased $2.5 million or 2.0% over the second quarter of fiscal year 2016. Diluted earnings per share of $0.50 per share in the second quarter of fiscal year 2017 increased $0.03 per share or 6% over the previous quarter and was unchanged from the second quarter of fiscal year 2016.

According to Lothar Maier, CEO, “Revenue for our second fiscal quarter of $375.8 million was slightly higher than we guided and is up 8.3% over the second quarter of fiscal year 2016. This is a good result in what historically has been a weaker seasonal quarter for us. On a non-GAAP basis excluding merger-related charges totaling $10.8 million, non-GAAP gross margin, operating margin and earnings per share were 76.3%, 45.5% and $0.54, respectively, all increases over the prior quarter. The increase in revenue was aided by an increase in our Communication and Industrial markets while gross margin was up slightly primarily due to a richer product mix.

Due to the pending merger with Analog Devices, Inc., we expect that this will be our final earnings release as an independent company. We would like to thank our long-term investors who trusted our long-term market and operational strategies. Finally, we would like to thank the employees of Linear Technology who together over the course of 35 years helped to create a truly special company.”

The following table summarizes the key GAAP and non-GAAP financial results:

 
  Non-GAAP   GAAP
(In thousands, Q2   Q1 Q2   Q1   Q2
except per share amounts) FY2017 FY2017 FY2017 FY2017 FY2016
Revenues $ 375,817   $ 373,895   $ 375,817   $ 373,895   $ 347,128  
Gross profit $ 286,827   $ 284,069   $ 284,827   $ 282,069   $ 262,744  
Gross margin   76.3 %   76.0 %   75.8 %   75.4 %   75.7 %
Operating income $ 171,073   $ 169,095   $ 160,245   $ 149,301   $ 149,457  
Operating margin   45.5 %   45.2 %   42.6 %   39.9 %   43.1 %
Net income $ 132,242   $ 130,165   $ 123,986   $ 115,122   $ 121,532  
Earnings per share - Diluted $ 0.54   $ 0.53   $ 0.50   $ 0.47   $ 0.50  
 

Cash, cash equivalents and marketable securities increased by $88.7 million over the first quarter of fiscal year 2017 to $1.61 billion. The Company's Board of Directors approved an increase in the Company's quarterly dividend from $0.32 per share to $0.33 per share. This marked the 25th consecutive year the Company has increased its dividend. A cash dividend of $0.33 per share will be paid on March 7, 2017 to stockholders of record on February 24, 2017. During the second quarter the Company generated positive cash flows from operations of $179.5 million or 48% of total revenues. During the second quarter of fiscal year 2017 the Company paid $78.7 million to shareholders in the form of dividends, representing $0.32 per share. There were no open market stock repurchases as the Analog Merger Agreement restricts the ability of the Company to repurchase shares of its common stock.

As a result of the pending transaction with Analog Devices, the Company will not hold a quarterly earnings conference call.

In lieu of a conference call, additional supplemental financial information regarding operational performance and earnings for the fiscal second quarter of 2017, in addition to bookings by end market and revenue by geography, has been made available under the Investor Relations section of the Company’s website that can be accessed through www.linear.com

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 revenue 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-K for the year ended July 3, 2016.

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 over 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 Donald P. Zerio at Linear Technology Corporation, 1630 McCarthy Blvd., Milpitas, California 95035-7417, (408) 432-1900.

 
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
U.S. GAAP (unaudited)
 
  Three Months Ended   Six Months Ended
January 1,   October 2,   January 3, January 1,   January 3,
2017 2016 2016 2017 2016
 
Revenues $ 375,817 $ 373,895 $ 347,128 $ 749,712 $ 689,045
Cost of sales (1)(2)   90,990   91,826   84,384   182,816   169,589
Gross profit   284,827   282,069   262,744   566,896   519,456
Expenses:
Research and development (1)(2) 77,030 76,359 69,884 153,389 136,486
Selling, general and administrative (1)(2)   47,552   56,409   43,403   103,961   83,596
Total operating expenses   124,582   132,768   113,287   257,350   220,082
Operating income 160,245 149,301 149,457 309,546 299,374
Interest income and other income   2,361   2,173   1,521   4,534   2,508
Income before income taxes 162,606 151,474 150,978 314,080 301,882
Provision for income taxes   38,620   36,352   29,446   74,972   68,303
Net income $ 123,986 $ 115,122 $ 121,532 $ 239,108 $ 233,579
 
Earnings per share:
Basic $ 0.50 $ 0.47 $ 0.50 $ 0.97 $ 0.95
Diluted $ 0.50 $ 0.47 $ 0.50 $ 0.97 $ 0.95
 
Shares used in determining earnings per share:
Basic   245,804   245,271   244,591   245,561   244,831
Diluted   246,280   245,709   244,880   246,026   245,178
 
Includes the following non-cash charges:
(1) Stock-based compensation
Cost of sales $ 2,496 $ 2,547 $ 2,557 $ 5,043 $ 4,899
Research and development 13,572 11,868 11,731 25,440 22,653
Selling, general and administrative 6,990 6,129 5,968 13,119 11,606
Includes the following pre-tax impact of items:
(2) Merger-related charges
Cost of sales $ 2,000 $ 2,000 $ $ 4,000 $
Research and development 5,000 5,000 10,000
Selling, general and administrative 3,828 12,794 16,622
 
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
U.S. GAAP (unaudited)
 
  January 1,   July 3,
As of 2017 2016
Assets
Cash, cash equivalents and marketable securities $ 1,609,825 $ 1,448,275
Accounts receivable, net of allowances ($1,649 as of January 1, 2017) and ($1,649 as of July 3, 2016) 145,135 157,460
Inventories 98,548 97,251
Prepaid expenses and other current assets   48,539     51,744  
Total current assets   1,902,047     1,754,730  
 
Property, plant & equipment, net 281,149 285,866
Other noncurrent assets   8,285     9,385  
Total assets $ 2,191,481   $ 2,049,981  
 
Liabilities
Accounts payable $ 17,197 $ 17,465
Accrued income taxes, payroll & other accrued liabilities 132,931 113,800
Deferred income on shipments to distributors   49,489     48,701  
Total current liabilities   199,617     179,966  
 
Deferred tax and other noncurrent liabilities 114,052 110,840
 
Stockholders’ equity
Common stock and additional paid-in capital 2,192,469 2,137,150
Accumulated deficit (314,459 ) (379,210 )
Accumulated other comprehensive (loss) income, net of tax   (198 )   1,235  
Total stockholders’ equity   1,877,812     1,759,175  
Total liabilities and stockholders’ equity $ 2,191,481   $ 2,049,981  
 
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
 

Three Months Ended

  Six Months Ended
January 1,   October 2,   January 3, January 1,   January 3,
2017 2016 2016 2017 2016
Cash flow from operating activities:
Net income $ 123,986 $ 115,122 $ 121,532 $ 239,108 $ 233,579
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 13,076 13,176 12,779 26,252 26,027
Stock-based compensation 23,058 20,544 20,256 43,602 39,158
Excess tax benefit from stock-based compensation (3,131 ) (3,783 ) (3,053 ) (6,914 ) (4,680 )
Change in operating assets and liabilities   22,471     22,718     5,486     45,189     38,658  
Cash provided by operating activities   179,460     167,777     157,000     347,237     332,742  
 
Cash flow from investing activities:
Net proceeds from sales and maturities and (purchases) of available-for-sale securities 22,928 (120,367 ) (104,339 ) (97,439 ) (124,143 )
Purchase of property, plant and equipment   (12,104 )   (8,332 )   (10,952 )   (20,436 )   (21,112 )
 
Cash provided by (used in) investing activities   10,824     (128,699 )   (115,291 )   (117,875 )   (145,255 )
 
Cash flow from financing activities:
Excess tax benefit from stock-based compensation 3,131 3,783 3,053 6,914 4,680
Issuance of common stock under employee stock plans 7,400 11,976 7,400 16,229
Purchase of common stock (9,237 ) (10,800 ) (22,598 ) (20,037 ) (79,155 )
 
Payment of cash dividends   (78,707 )   (78,608 )   (73,498 )   (157,315 )   (146,810 )
 
Cash used in financing activities   (77,413 )   (85,625 )   (81,067 )   (163,038 )   (205,056 )
 
Increase (decrease) in cash and cash equivalents 112,871 (46,547 ) (39,358 ) 66,324 (17,569 )
Cash and cash equivalents, beginning of period   217,135     263,682     217,468     263,682     195,679  
Cash and cash equivalents, end of period $ 330,006   $ 217,135   $ 178,110   $ 330,006   $ 178,110  
 
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED SUPPLEMENTAL INFORMATION
(In thousands, except per share amounts)
Non-GAAP (unaudited)
 
  Three Months Ended
January 1,   October 2,   January 3,
2017 2016 2016
 
GAAP gross profit $ 284,827 $ 282,069 $ 262,744

Adjustments to reconcile GAAP gross profit to non-GAAP gross profit

Add: Merger-related charges   2,000     2,000    
Non-GAAP gross profit   286,827     284,069     262,744
 
GAAP operating income 160,245 149,301 149,457

Adjustments to reconcile GAAP operating income to non-GAAP operating income

Add: Merger-related charges   10,828     19,794    
Non-GAAP operating income   171,073     169,095     149,457
 
GAAP net income 123,986 115,122 121,532

Adjustments to reconcile GAAP net income to non-GAAP net income

Add: Merger-related charges 10,828 19,794
Less: Income tax effect of non-GAAP adjustments   (2,572 )   (4,751 )  
Non-GAAP net income $ 132,242   $ 130,165   $ 121,532
GAAP net income per diluted share $ 0.50   $ 0.47   $ 0.50
Non-GAAP net income per diluted share $ 0.54   $ 0.53   $ 0.50
 

To supplement the condensed consolidated financial statements presented in accordance with GAAP, certain non-GAAP financial information is provided, which is adjusted from results based on GAAP to exclude certain costs and expenses, and adjusted for their tax effects. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics (e.g., determining which costs and expenses to exclude when calculating such a metric) are inherently subject to judgement. The non-GAAP and supplemental information is provided to enhance the user’s overall understanding of operating performance and prospects in the future. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP. The following charges are presented as a non-GAAP financial metric as they are considered to be non-recurring by nature, and therefore are not indicative of core operating results, as they represent costs incurred as a result of the pending merger between Linear Technology and Analog Devices as announced on July 26, 2016:

Merger-related charges that are directly related to the pending merger between Linear Technology and Analog Devices. Charges primarily include costs for advisory services, appraisals, legal services, employee-related expense and auditing services. Management believes that it is appropriate to exclude these items as they are not indicative of ongoing operating results and therefore limit comparability and excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

Income tax effect of non-GAAP adjustments. Includes the income tax effects of the excluded item noted above. Management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.

Contacts

Linear Technology Corporation
Donald P. Zerio, 408-432-1900
Vice President, Finance, Chief Financial Officer

Release Summary

Q2 FY'17 Earnings Release

Contacts

Linear Technology Corporation
Donald P. Zerio, 408-432-1900
Vice President, Finance, Chief Financial Officer