Linear Technology Corporation (NASDAQ: LLTC), a leading, independent manufacturer of high performance linear integrated circuits, today reported financial results for the quarter and fiscal year ended July 3, 2011. Quarterly revenues of $358.6 million for the fourth quarter of fiscal year 2011 increased $5.4 million or 1.5% over the previous quarter's revenue of $353.2 million and decreased $7.6 million or 2% from $366.2 million reported in the fourth quarter of fiscal year 2010. Net income of $158.2 million increased $16.7 million or 12% over the third quarter of fiscal year 2011 and increased $33.7 million or 27% over the fourth quarter of fiscal year 2010. Net income for the fourth quarter of fiscal year 2011 benefited from a lower tax rate of 9.5% compared to the third quarter of fiscal year 2011 rate of 17% and the fourth quarter of fiscal year 2010 rate of 26%. The Company's tax rate in its fiscal third and fourth quarters just ended includes a quarterly tax benefit from a settlement with the IRS related to its audit of prior fiscal years.

Diluted earnings per share of $0.68 per share in the fourth quarter of fiscal year 2011 increased $0.07 per share or 11% over the third quarter of fiscal year 2011 and increased $0.14 per share or 26% over the fourth quarter of fiscal year 2010.

Revenue for fiscal year 2011 was $1.48 billion, an increase of 27% or $314 million over revenue of $1.17 billion for the previous fiscal year. Net income of $580.8 million for fiscal year 2011 increased $219.4 million or 61% over $361.3 million reported in the previous fiscal year. Diluted earnings per share for fiscal year 2011 was $2.50, an increase of 58% or $0.92 per share over the prior fiscal year.

During the fourth quarter the Company's cash, cash equivalents and marketable securities increased by $112 million to $922.5 million. A cash dividend of $0.24 will be paid on August 31, 2011 to stockholders of record on August 19, 2011.

According to Lothar Maier, CEO, “We met the midpoint of our revenue guidance for our fourth fiscal quarter of 2011, as sales grew 1.5% compared to the preceding third quarter. We are pleased with our annual results as the Company achieved record annual revenues and earnings per share while maintaining industry leading profitability. However, in the short-term we experienced declining bookings demand towards the end of the quarter. We had anticipated that the Japan tragedies and the related supply disruptions would continue to impact our customers, particularly in the automotive and industrial markets. Now that these industry-wide supply issues have been largely resolved, customers have been reducing their inventories more than anticipated. The impact of these events and general economic sluggishness relating to US and European debt issues appear to have left customers cautious and delaying orders and shipments until the current economic picture becomes clearer. On a positive note, end-demand expectations at our customers appears generally unchanged and automotive production is expected to pick-up in the fall.

“We continue to be optimistic about our long-term growth prospects as our business is healthy and we are encouraged by the high level of interest in our products that indicate they are well targeted to meet the needs of our customers and their demand for innovative high performance analog solutions. Although forecasting is difficult in the current environment, we agree with recent industry analysis that suggests that demand should accelerate as we proceed toward the end of the calendar year. However, in the short-term we are cautious and anticipate some headwinds as we react to declining orders that have not improved meaningfully in the first month of our new fiscal year. As a result, we currently are forecasting our revenues to decline sequentially 6%-8% in our first fiscal quarter of 2012.”

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-K for the fiscal year ended June 27, 2010.

Company officials will be discussing these results in greater detail in a conference call tomorrow, Wednesday, July 27, 2011 at 8:30 a.m. Pacific Coast Time. Those investors wishing to listen in may call (785) 830-1924, or toll free (800) 533-7954 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 July 27, 2011 through August 2, 2011.

You may access the archive by calling (719) 457-0820 or toll free (888) 203-1112 and entering reservation #1016534. An archive of the webcast will also be available at www.linear.com and www.streetevents.com as of July 27, 2011 until the fourth 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, and µModule subsystems. 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 Twelve Months Ended
July 3,2011   April 3,

2011
  June 27,2010 July 3,

2011
  June 27,

2010
Revenues $ 358,557 $ 353,192 $ 366,165 $ 1,483,962 $ 1,169,988
Cost of sales (1) 79,011   79,100   79,071   324,445   269,076  
Gross profit 279,546   274,092   287,094   1,159,517   900,912  
Expenses:
Research & development (1) 55,950 55,363 55,050 226,516 198,957
Selling, general & administrative (1) 40,958   39,693   37,716   165,691   138,544  
96,908   95,056   92,766   392,207   337,501  
Operating income 182,638 179,036 194,328 767,310 563,411
Interest expense (6,968 ) (6,981 ) (11,143 ) (32,501 ) (46,353 )
Amortization of debt discount (2) (4,793 ) (4,726 ) (7,079 ) (21,675 ) (29,003 )
Interest and other income (4) 3,965 3,221 2,604 10,704 12,814
Loss on early retirement of convertible senior notes (3)     (10,458 )   (10,458 )
Income before income taxes 174,842 170,550 168,252 723,838 490,411
Provision for income taxes 16,610   28,993   43,746   143,056   129,070  
Net income $ 158,232   $ 141,557   $ 124,506   $ 580,782   $ 361,341  
 
Earnings per share:
Basic $ 0.68   $ 0.61   $ 0.54   $ 2.52   $ 1.59  
Diluted $ 0.68   $ 0.61   $ 0.54   $ 2.50   $ 1.58  
 
Shares used in determining earnings per share:
Basic 231,771   231,225   228,508   230,806   227,363  
Diluted 233,598   233,277   229,938   232,772   228,860  
 
Includes the following non-cash charges:
(1) Stock-based compensation
Cost of sales $ 2,062 $ 2,202 $ 2,275 $ 8,785 $ 9,082
Research & development 9,192 9,869 10,019 39,359 39,130
Selling, general & administrative 4,940 5,282 5,453 21,077 21,708

(2) Amortization of debt discount (non-cash interest expense)
4,793 4,726 7,079 21,675 29,003
(3) Non-cash charge on early retirement of convertible senior notes 10,458 10,458
 
Includes the following:
(4) Gain on legal settlement 2,500 1,700 4,200

LINEAR TECHNOLOGY CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

(Unaudited)
 
July 3,2011 June 27,2010
ASSETS:
Current assets:
Cash, cash equivalents and marketable securities 922,537 958,069
Accounts receivable, net of allowance for doubtful
accounts of $2,043 ($2,043 at June 27, 2010) 169,637 176,874
Inventories 72,195 54,044
Deferred tax assets and other current assets 81,921   75,314  
Total current assets 1,246,290   1,264,301  
 
Property, plant & equipment, net 332,969 257,035
Other noncurrent assets 51,907   69,382  
Total assets $ 1,631,166   $ 1,590,718  
 
LIABILITIES & STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable $ 11,606 $ 21,235
Accrued income taxes, payroll & other accrued liabilities 123,613 134,649
Deferred income on shipments to distributors 47,587 33,700
Convertible senior notes- current portion (1)   392,926  

Total current liabilities
182,806   582,510  
 
Convertible senior notes (1) 785,732 766,960
Deferred tax and other noncurrent liabilities 157,017 201,463
 
Stockholders’ equity:
Common stock 1,466,098 1,331,888
Accumulated deficit (961,617 ) (1,294,077 )
Accumulated other comprehensive income 1,130   1974
Total stockholders’ equity 505,611   39,785  
$ 1,631,166   $ 1,590,718  
 

(1) Principal owed on Convertible Senior Notes at July 3, 2011 and June 27, 2010 is $845.1 million and $1,241 million, respectively.The above amounts include non-cash adjustments of $59.4 million at July 3, 2011 and $81 million at June 27, 2010.

LINEAR TECHNOLOGY CORPORATION

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

(In thousands, except per share amounts)
 
Three Months Ended Twelve Months Ended
July 3,2011   April 3,2011   June 27,2010 July 3,2011   June 27,2010
Reported net income
(GAAP basis) $ 158,232 $ 141,557 $ 124,506 $ 580,782 $ 361,341
 
Stock-based compensation 16,194 17,353 17,747 69,221 69,920
Amortization of debt
discount(1) 4,793 4,726 7,079 21,675 29,003
Non-cash charge on early retirement of convertible senior notes 10,458 10,458
Income tax effect of
non-GAAP adjustments (1,994 ) (3,753 ) (9,174 ) (17,964 ) (28,788 )
 
Non-GAAP net income $ 177,225   $ 159,883   $ 150,616   $ 653,714   $ 441,934  
 
Non-GAAP earnings per share
Basic $ 0.76   $ 0.69   $ 0.66   $ 2.83   $ 1.94  
Diluted $ 0.76   $ 0.69   $ 0.66   $ 2.81   $ 1.93  

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, the amortization of the Company’s debt discount which is a non-cash interest expense and the non-cash charge on early retirement of convertible senior notes. 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 and non-cash interest expenses and the related tax effects primarily because they are significant non-cash 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.

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