LLTC Linear Technology Corp.

Linear Technology Corporation (NASDAQ:LLTC), a leading, independent manufacturer of high performance linear integrated circuits, today reported financial results for the fiscal quarter ended October 2, 2016. Quarterly revenues of $373.9 million for the first quarter of fiscal year 2017 increased $32.0 million or 9.4% over the $341.9 million reported in the first quarter of fiscal year 2016 and is generally the same as the sequential quarter's revenue of $373.8 million.

On a GAAP basis, net income of $115.1 million increased $3.1 million or 2.7% over the first quarter of fiscal year 2016 and decreased $17.3 million or 13.0% from the sequential quarter’s net income of $132.4 million. Diluted earnings per share of $0.47 per share in the first quarter of fiscal year 2017 increased $0.01 per share or 2% over the first quarter of fiscal year 2016 and decreased $0.07 per share or 13% from the fourth quarter of fiscal year 2016.

According to Lothar Maier, CEO, “Revenue for our first fiscal quarter came in as we expected at $373.9 million. This is generally the same as the prior quarter on a sequential basis but represents 9.4% revenue growth on an annual basis. Gross margin, operating margin and earnings per share on a GAAP basis were impacted by a total of $19.8 million of merger-related charges associated with our pending merger with Analog Devices, Inc. Excluding these merger-related charges, Non-GAAP gross margin, operating margin and earnings per share were 76.0%, 45.2% and $0.53, respectively.

Looking forward, the December quarter is typically a seasonally weaker quarter due to a slower European market and in particular a weaker Industrial market that historically often results in a sequential quarterly revenue decline. Given a slightly positive first quarter book-to-bill ratio and based upon our current bookings rate, we are anticipating relatively flat sequential revenue in our fiscal second quarter representing growth in the 7% to 8.5% range on a year-over-year basis.”

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

              Non-GAAP GAAP    

(In thousands,

Q1 Q1     Q4     Q1 except per share amounts) FY2017 FY2017 FY2016 FY2016 Revenues $ 373,895 $ 373,895 $ 373,766 $ 341,917 Gross profit $ 284,069 $ 282,069 $ 285,514 $ 256,712 Gross margin   76.0%   75.4%   76.4%   75.1% Operating income $ 169,095 $ 149,301 $ 171,701 $ 149,917 Operating margin   45.2%   39.9%   45.9%   43.8% Net income $ 130,165 $ 115,122 $ 132,375 $ 112,047 Earnings per share - Diluted $ 0.53 $ 0.47 $ 0.54 $ 0.46

Cash, cash equivalents and marketable securities increased by $72.9 million over the fourth quarter of fiscal year 2016 to $1.52 billion. A cash dividend of $0.32 per share will be paid on November 30, 2016 to stockholders of record on November 18, 2016. During the first quarter the Company generated positive cash flows from operations of $167.8 million or 45% of total revenues. During the first quarter of fiscal year 2017 the Company paid $78.6 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 first 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 October 2, July 3, September 27, 2016 2016 2015   Revenues $ 373,895 $ 373,766 $ 341,917 Cost of sales (1)(2)   91,826   88,252   85,205 Gross profit   282,069   285,514   256,712 Expenses: Research and development (1)(2) 76,359 70,331 66,602 Selling, general and administrative (1)(2)   56,409   43,482   40,193 Total operating expenses   132,768   113,813   106,795 Operating income 149,301 171,701 149,917 Interest income and other income   2,173   1,795   987 Income before income taxes 151,474 173,496 150,904 Provision for income taxes   36,352   41,121   38,857 Net income $ 115,122 $ 132,375 $ 112,047   Earnings per share: Basic $ 0.47 $ 0.54 $ 0.46 Diluted $ 0.47 $ 0.54 $ 0.46   Shares used in determining earnings per share: Basic   245,271   244,608   244,863 Diluted   245,709   244,933   245,234   Includes the following non-cash charges: (1) Stock-based compensation Cost of sales $ 2,547 $ 2,535 $ 2,342 Research and development 11,868 11,793 10,922 Selling, general and administrative 6,129 6,096 5,638 Includes the following pre-tax impact of items: (2) Merger-related charges Cost of sales $ 2,000 $ — $ — Research and development 5,000 — — Selling, general and administrative 12,794 — —           LINEAR TECHNOLOGY CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands) U.S. GAAP (unaudited)     October 2, July 3, As of 2016 2016 Assets Cash, cash equivalents and marketable securities $ 1,521,146 $ 1,448,275 Accounts receivable, net of allowances ($1,649 as of October 2, 2016) and ($1,649 as of July 3, 2016) 162,434 157,460 Inventories 98,073 97,251 Prepaid expenses and other current assets   53,337     51,744  

Total current assets

  1,834,990     1,754,730     Property, plant & equipment, net 281,571 285,866 Other noncurrent assets   8,835     9,385   Total assets $ 2,125,396   $ 2,049,981     Liabilities Accounts payable $ 17,019 $ 17,465 Accrued income taxes, payroll & other accrued liabilities 138,528 113,800 Deferred income on shipments to distributors   48,759     48,701   Total current liabilities   204,306     179,966     Deferred tax and other noncurrent liabilities 112,489 110,840   Stockholders’ equity Common stock and additional paid-in capital 2,159,864 2,137,150 Accumulated deficit (351,883 ) (379,210 ) Accumulated other comprehensive income, net of tax   620     1,235   Total stockholders’ equity   1,808,601     1,759,175   Total liabilities and stockholders’ equity $ 2,125,396   $ 2,049,981                   LINEAR TECHNOLOGY CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (unaudited)     Three Months Ended October 2, July 3, September 27, 2016 2016 2015 Cash flow from operating activities: Net income $ 115,122 $ 132,375 $ 112,047 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,176 12,770 13,248 Stock-based compensation 20,544 20,424 18,902 Excess tax benefit from stock-based compensation (3,783) (3,242) (1,627) Change in operating assets and liabilities   22,718   12,587   33,172 Cash provided by operating activities   167,777   174,914   175,742   Cash flow from investing activities: Net purchases of available-for-sale securities (120,367) (70,201) (19,804) Purchase of property, plant and equipment   (8,332)   (13,027)   (10,160) Cash used in investing activities   (128,699)   (83,228)   (29,964)   Cash flow from financing activities: Excess tax benefit from stock-based compensation 3,783 3,242 1,627 Issuance of common stock under employee stock plans — 5,705 4,253 Purchase of common stock (10,800) (8,054) (56,557) Payment of cash dividends   (78,608)   (78,367)   (73,312) Cash used in financing activities   (85,625)   (77,474)   (123,989)   (Decrease) increase in cash and cash equivalents (46,547) 14,212 21,789 Cash and cash equivalents, beginning of period   263,682   249,470   195,679 Cash and cash equivalents, end of period $ 217,135 $ 263,682 $ 217,468                 LINEAR TECHNOLOGY CORPORATION CONSOLIDATED SUPPLEMENTAL INFORMATION (In thousands, except per share amounts) Non-GAAP (unaudited)     Three Months Ended October 2, July 3, September 27, 2016 2016 2015   GAAP gross profit $ 282,069 $ 285,514 $ 256,712

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

Add: Merger-related charges   2,000     —   — Non-GAAP gross profit   284,069     285,514   256,712   GAAP operating income 149,301 171,701 149,917

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

Add: Merger-related charges   19,794     —   — Non-GAAP operating income   169,095     171,701   149,917   GAAP net income 115,122 132,375 112,047

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

Add: Merger-related charges 19,794 — — Less: Income tax effect of non-GAAP adjustments   (4,751 )   —   — Non-GAAP net income $ 130,165   $ 132,375 $ 112,047 GAAP net income per diluted share $ 0.47   $ 0.54 $ 0.46 Non-GAAP net income per diluted share $ 0.53   $ 0.54 $ 0.46  

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.

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