On a year-over-year basis, fiscal 2006 third quarter total revenues of $278,888,000 decreased 4% from total revenues of $290,734,000 for the third quarter of the previous year. Included in last year's quarterly revenues was a royalty payment of $40,000,000, which represented past royalties under terms of a settlement and license agreement with another company. Subsequent quarterly royalty payments have been immaterial to each individual quarter's total revenues. Net income for the quarter of $110,555,000 or $0.35 diluted earnings per share, ($119,742,000 or $0.38 per share pro forma excluding stock-based compensation as noted below) decreased 9% as compared to $121,633,000 or $0.39 diluted earnings per share ($126,562,000 or $0.40 per share pro forma) reported for the third quarter of last year. Net income for the third quarter of last year was also positively affected by the $40,000,000 royalty payment.
During this fiscal year, the Company implemented Financial Accounting Standard No. 123R (FAS123R), "Share-based Payment," which requires companies to estimate the cost of all forms of stock-based compensation, including stock options, restricted stock and employee stock purchase plans, and record a commensurate expense in their income statement. For Linear Technology, the total amount of stock-based compensation during this quarter was $13,218,000. Under FAS123R calculations, there was also an increase in estimated diluted shares outstanding. Consequently, pro forma diluted earnings per share, excluding stock-based compensation accounting estimates, would have been $0.38 for the quarter ended April 2, 2006 versus $0.40 on a similar basis for the prior year's quarter.
According to Lothar Maier, CEO, "Sales and profits for the March quarter increased sequentially from the December quarter. Demand increased resulting in a positive book to bill ratio. Our return on sales was a strong 40%, or 43% on a pro forma basis prior to the impact of stock-based compensation accounting, and we continue to be cash flow positive.
As we had anticipated, strong sales for domestic and European distributors signaled a solid improvement in our broad based industrial business. Looking ahead, we currently expect this to continue into the June quarter and we are expecting sales and profits to again increase roughly 5%."
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 growth of 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 conditions in the world economy and financial markets and other factors described in our 10-K for the fiscal year ended July 3, 2005.
Company officials will be discussing these results in greater detail in a conference call tomorrow, Wednesday, April 19, 2006 at 8:30 a.m. Pacific Coast Time. Those investors wishing to listen in may call (719) 234-0008 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 April 19 through April 25, 2006. You may access this post view by calling (719) 457-0820 and entering reservation #2022842. An archive of the webcast will also be available at www.linear.com and www.streetevents.com as of April 19, 2006 until the third quarter earnings release next year.
Linear Technology Corporation, a manufacturer of high performance linear integrated circuits, was founded in 1981, became a public company in 1986 and joined the S&P 500 index of major public companies in 2000. Linear Technology products include high performance amplifiers, comparators, voltage references, monolithic filters, linear regulators, DC-DC converters, battery chargers, power supply modules, data converters, communications interface circuits, RF signal conditioning circuits, and many other analog functions. Applications for Linear Technology's high performance circuits include telecommunications, cellular telephones, networking products such as optical switches, notebook and desktop computers, computer peripherals, video/multimedia, industrial instrumentation, security monitoring devices, high-end consumer products such as digital cameras and MP3 players, complex medical devices, automotive electronics, factory automation, process control, and military and space systems. For more information, visit www.linear.com.
For further information contact Paul Coghlan 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)
GAAP (unaudited)
Three Months Ended Nine Months Ended
April 2, April 3, April 2, April 3,
2006 2005 2006 2005
Net sales $278,888 $250,734 $800,047 $753,883
Royalty revenue -- 40,000 -- 40,000
Total revenue 278,888 290,734 800,047 793,883
Cost of sales (1) 60,021 56,600 174,785 165,329
Gross profit 218,867 234,134 625,262 628,554
Expenses:
Research &
development (1) 40,982 36,002 116,801 99,049
Selling, general &
administrative (1) 32,252 32,172 95,733 81,551
73,234 68,174 212,534 180,600
Operating income 145,633 165,960 412,728 447,954
Interest income, net 13,439 7,802 37,633 20,514
Income before
income taxes 159,072 173,762 450,361 468,468
Provision for
income taxes 48,517 52,129 137,361 140,541
Net income $110,555 $121,633 $313,000 $327,927
Earnings per share:
Basic $0.36 $0.39 $1.02 $1.07
Diluted $0.35 $0.39 $1.00 $1.04
Shares used in the
calculation of
earnings per share:
Basic 306,136 307,960 305,873 307,811
Diluted 314,046 315,617 314,326 316,452
Pro forma earnings
per share excluding
the effects of stock-based
compensation:
Basic $0.39 $0.41 $1.11 $1.10
Diluted $0.38 $0.40 $1.09 $1.07
Pro forma shares used
in the calculation
of pro forma earnings
per share:
Basic 306,136 307,960 305,873 307,811
Diluted 312,088 315,617 312,383 316,452
(1) Includes stock-based compensation charges as follows:
Cost of sales 2,323 720 5,836 2,016
Research and development 5,878 1,849 17,331 5,218
Sales, general and
administrative 5,017 4,473 17,120 7,905
Total stock-based
compensation 13,218 7,042 40,287 15,139
LINEAR TECHNOLOGY CORPORATION
RECONCILIATION OF NET INCOME TO PRO FORMA NET INCOME
(In thousands, except per share amounts)
NON-GAAP (unaudited)
Three Months Ended Nine Months Ended
April 2, April 3, April 2, April 3,
2006 2005 2006 2005
Net income $110,555 $121,633 $313,000 $327,927
Adjustments to
reconcile net income
to pro forma net income:
Stock-based
compensation 13,218 7,042 40,287 15,139
Tax effect (4,031) (2,113) (12,287) (4,542)
Pro forma net income 119,742 126,562 341,000 338,524
Pro forma earnings per
share excluding
the effects of
stock-based compensation:
Basic $0.39 $0.41 $1.11 $1.10
Diluted $0.38 $0.40 $1.09 $1.07
Shares used in the calculation of pro
forma earnings per share:
Basic 306,136 307,960 305,873 307,811
Diluted 312,088(1) 315,617 312,383(1) 316,452
(1) Excludes 1,958 and 1,943 shares for the three and nine months ended
April 2, 2006, respectively, to conform diluted outstanding shares
calculated under FAS123R to diluted shares calculated under prior
accounting standards
FAS123R - Share-Based Payment became effective and was adopted by the Company during the quarter ended October 2, 2005. FAS123R requires the Company to estimate the cost of all forms of stock-based compensation, including employee stock options, and to record a commensurate expense in the income statement. To supplement our consolidated financial statements presented in accordance with GAAP, we have shown above a non-GAAP (pro forma) presentation of the Company's earnings per share, which is adjusted to reflect the GAAP results to exclude all stock-based compensation. This non-GAAP presentation of earnings per share is provided to enhance the user's overall understanding of the Company's historical financial performance and comparability between periods. We believe the non-GAAP results provide useful information to investors by excluding stock-based compensation particularly during this transitional period when many companies are initially adopting the provisions of FAS123R.
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
April 2, July 3,
2006 2005
(unaudited) (audited)
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $1,915,721 $1,790,912
Accounts receivable, net of
allowance for doubtful
accounts of $1,808 ($1,713
at July 3, 2005) 148,597 125,864
Inventories 37,986 34,328
Deferred tax assets and other current
assets 73,040 56,205
Total current assets 2,175,344 2,007,309
Property, plant & equipment, net 242,722 221,028
Other noncurrent assets 48,663 57,897
Total assets $2,466,729 $2,286,234
April 2, July 3,
2006 2005
(unaudited) (audited)
LIABILITIES & STOCKHOLDERS ' EQUITY
Current liabilities:
Accounts payable $13,762 $11,800
Accrued income taxes, payroll
& other accrued liabilities 151,771 152,231
Deferred income on shipments
to distributors 47,764 43,708
Total current liabilities 213,297 207,739
Deferred tax and other long-term liabilities 68,066 71,461
Stockholders' equity:
Common stock 1,030,970 926,763
Retained earnings 1,159,514 1,083,110
Accumulated other comprehensive
income (5,118) (2,839)
Total stockholders' equity 2,185,366 2,007,034
$2,466,729 $2,286,234
CONTACT: Paul Coghlan, Vice President, Finance, +1-408-432-1900
Web site: http://www.linear.com/