Linear Technology Corp. Reports Operating Results (10-Q)

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May 06, 2010
Linear Technology Corp. (LLTC, Financial) filed Quarterly Report for the period ended 2010-03-28.

Linear Technology Corp. has a market cap of $6.5 billion; its shares were traded at around $29.06 with a P/E ratio of 21.9 and P/S ratio of 6.6. The dividend yield of Linear Technology Corp. stocks is 3.1%. Linear Technology Corp. had an annual average earning growth of 9% over the past 10 years. GuruFocus rated Linear Technology Corp. the business predictability rank of 2.5-star.LLTC is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC, Manning & Napier Advisors, Inc.

Highlight of Business Operations:

Quarterly revenues of $311.3 million achieved during the third quarter of fiscal year 2010 increased $55.0 million or 21% over the second quarter of fiscal year 2010 and increased 55% or $110.4 million over $200.9 million reported in the third quarter of fiscal year 2009. The Company has recovered from the global economic downturn more quickly than anticipated as third quarter revenues exceeded pre-recession highs. The increase in revenues was broad-based by major geographical region and end-market. Third quarter operating income increased $38.3 million or 33% over the second quarter of fiscal year 2010 and increased 111% over the third quarter of last year. Net income of $100.6 million increased $25.1 million or 33% over the second quarter of fiscal year 2010 and increased $51.3 million or 104% over the third quarter of fiscal year 2009, which had a gain on the early retirement of debt of $1.0 million and a lower tax rate of 17.2% compared to 27.0% this quarter. The resulting third quarter diluted earnings per share (“EPS”) increased $0.11 cents per share over the second quarter of fiscal year 2010 and increased $0.22 cents per share over the third quarter of fiscal year 2009.

Revenue for the quarter ended March 28, 2010 was $311.3 million, an increase of $110.4 million or 55% over revenue of $200.9 million for the same quarter of the previous fiscal year. The average selling price (“ASP”) of $1.62 per unit in the third quarter of fiscal year 2010 was higher as compared to the third quarter of fiscal year 2009 ASP of $1.59 per unit. The slight increase in ASP was due to minor product mix changes across the Company s product lines. Geographically, international revenues were $223.3 million or 72% of revenues, an increase of $87.6 million as compared to international revenues of $135.7 million or 68% of revenues for the same quarter of the previous fiscal year. Internationally, revenues to Rest of the World (“ROW”), which is primarily Asia excluding Japan, represented $123.3 million or 40% of revenues, while sales to Europe and Japan were $58.6 million or 19% of revenues and $41.4 million or 13% of revenues, respectively. Domestic revenues were $88.0 million or 28% of revenues in the third quarter of fiscal year 2010, an increase of $22.8 million over $65.2 million or 32% of revenues in the same period in fiscal year 2009.

Revenue for the nine months ended March 28, 2010 was $803.8 million, an increase of $43.3 million or 6% over revenue of $760.5 million for the same period of the previous fiscal year. The ASP for the first nine-month period of fiscal year 2010 was higher at $1.57 per unit as compared to $1.53 per unit in the same period of fiscal year 2009. The increase in the Company s ASP for the nine-month period was due to similar factors as for the three-month period discussed above. Geographically, international revenues were $572.2 million or 71% of revenues, an increase of $39.4 million over international revenues of $532.8 million or 70% of revenues for the same period of the previous fiscal year. Internationally, revenues to ROW represented $321.6 million or 40% of revenues, while sales to Europe and Japan were $134.8 million or 17% of revenues and $115.8 million or 14% of revenues, respectively. Domestic revenues were $231.6 million or 29% of revenues in the first nine-month period of fiscal year 2010, an increase of $3.9 million, compared to $227.7 million or 30% of revenues in the same period in fiscal year 2009.

Research and development (“R&D”) expenses for the quarter ended March 28, 2010 were $51.9 million, an increase of $7.2 million or 16% over R&D expenses of $44.7 million for the same period in the previous fiscal year. The increase in R&D expenses was primarily due to a $4.6 million increase in employee profit sharing and a $1.6 million increase in compensation costs related to the impact of employees taking more required time-off in the previous period than in the current quarter. In addition, the increase in R&D expense was due to a $0.3 million increase in stock-based compensation and a $0.7 million increase in other R&D expenses.

R&D expenses for the nine months ended March 28, 2010 were $143.9 million, an increase of $2.5 million or 2% over R&D expenses of $141.4 million for the same period in the previous fiscal year. The increase in R&D expenses was primarily due to a $3.3 million increase in stock-based compensation and a $2.8 million increase in profit sharing. Offsetting these increases to R&D expenses was a $2.7 million decrease in compensation costs related to the reductions in workforce that occurred in the second and fourth quarters of fiscal year 2009 and due to the 10% temporary reduction in base pay that occurred during the fourth quarter of fiscal year 2009 and continued through the beginning of the current quarter. In addition, there was an additional $0.9 million decrease in other R&D expenses.

At March 28, 2010, the Company s cash, cash equivalents and marketable securities balances were $1,022.1 million in aggregate, representing an increase of $153.4 million over the June 28, 2009 balances of $868.7 million. This increase was primarily due to positive cash flows from operations of $333.6 million. Working capital as of March 28, 2010 was $742.7 million. During the first nine months of fiscal year 2010, significant cash expenditures included $17.7 million for capital additions; $9.8 million face value to purchase and retire a portion of the 3.125% Convertible Senior Notes; $10.0 million to purchase its common stock; and $152.4 million for the payment of three quarterly cash dividends, representing $0.67 per share for fiscal 2010.

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