| Contact: | Paul Coghlan | 6:00 EST | |
| | Vice President, Finance, Chief Financial Officer | Friday, February 6, 2009 | |
| | (408) 432-1900 | NATIONAL DISTRIBUTION | |
LINEAR TECHNOLOGY REVISES THE CHARGE TAKEN FOR ACCELERATING THE VESTING OF ALL “OUT-OF-THE-MONEY” STOCK OPTIONS AND ISSUES REVISED SECOND QUARTER 2009 RESULTS INCREASING DILUTED EARNINGS PER SHARE BY $0.05.
Milpitas, California, February 6, 2009, Linear Technology Corporation (NASDAQ-LLTC), a leading, independent manufacturer of high performance linear integrated circuits, today announced that its previously reported results for the second quarter of fiscal 2009 ended December 28, 2008 have been revised to exclude a non-cash charge of $15.0 million pertaining to accelerating the vesting of stock options for 1.4 million shares representing all of the “out-of-the-money” stock options previously awarded to it’s non-officer and non-director employees under its stock option plans. The effect of this change in the Consolidated Statements of Income for the second quarter and the first six month period of fiscal year 2009 was to increase GAAP operating income by $15.0 million, GAAP net income by $11.0 million and to increase GAAP diluted earnings per share by $0.05. For the reconciliation between the previously announced results on January 13, 2009 and the revised results, see Table 1 for the impact to the Consolidated Statements of Income, and Table 2, for the impact to the Consolidated Condensed Balance Sheets. These revised results will be included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 28, 2008 filed this afternoon.
In the Company’s press release dated January 13, 2009, the Company announced its quarterly results for the second quarter ended December 28, 2008. While in the process of performing quarterly review procedures in accordance with Statement on Auditing Standard No. 100 (SAS 100), the Company’s independent registered public accounting firm had not taken exception to the Company’s accounting and disclosure of its treatment of the acceleration of stock options prior to the issuance of the Company’s press release. In its release the Company stated that “The Company accelerated the vesting of all “out-of-the-money” stock options previously awarded to its non-officer and non-director employees under its stock option plans. The unvested options to purchase approximately 1.4 million shares became exercisable as a result of the vesting acceleration on December 17, 2008. The additional non-cash charge to the income statement as a result of the acceleration totaled $15.0 million. This incremental charge increased Cost of Sales by $2.3 million; Research and Development expense by $7.5 million; and Selling, General and Administrative expense by $5.2 million.”
Subsequent to the issuance of the press release and prior to the completion of its SAS 100 review of the second fiscal quarter ended December 28, 2008, the Company’s independent registered public accounting firm informed the Company that it believed the Company’s accounting treatment for the option acceleration did not comply with SFAS No. 123(R), “Share-Based Payment,” (“FAS 123(R)”).
The Company has been advised by its independent registered public accounting firm that it and other large registered public accounting firms, who we understand do not all share the same views on this issue, are jointly in the process of seeking the views of the staff of the Securities and Exchange Commission (“SEC”) with respect to the application of certain provisions of FAS123(R), specifically to treatment of accelerating the vesting of “out-of-the-money” stock options. We understand that the meeting between the SEC and the Company’s independent registered public accounting firm, as well as the other large registered public accounting firms, is occurring to provide clarity in the application of these certain provisions.
The Company has nevertheless decided not to wait for the SEC’s decision as the Company has chosen to file its Form 10-Q within the legal deadline of 40 calendar days. Accordingly, the Company has revised its second quarter fiscal 2009 results to eliminate the $15.0 million non-cash charge related to these options. The $15.0 million charge will now be recognized over the next 2.5 years. As a result of this change, the non-cash charge for all stock-based compensation was approximately $14.7 million in the just completed second fiscal quarter and is estimated to approximate $18 million in the current March quarter.
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, data converters, communications interface circuits, RF signal conditioning circuits, uModuleTM products, 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
RECONCILIATION TO PREVIOUSLY ISSUED PRESS RELEASE
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
GAAP (unaudited)
Table 1
| | | Three Months Ended | | Six Months Ended | |
| | | Dec. 28, | Adjustment to exclude accelerated stock-based | Dec. 28, | | Dec. 28, | Adjustment to exclude accelerated stock-based | Dec. 28, | |
| | | 2008 | compensation | 2008 | | 2008 | compensation | 2008 | |
| Revenues | | $ 249,196 | $ - | $ 249,196 | | $ 559,547 | $ - | $ 559,547 | |
Cost of sales (1) | | 62,512 | (2,234) | 60,278 | | 133,984 | (2,234) | 131,750 | |
Gross profit | | 186,684 | 2,234 | 188,918 | | 425,563 | 2,234 | 427,797 | |
| | | | | | | | | | |
| Expenses: | | | | | | | | | |
Research & development (1) | | 53,272 | (7,479) | 45,793 | | 104,132 | (7,479) | 96,653 | |
Selling, general & administrative (1) | | 37,807 | (5,234) | 32,573 | | 74,914 | (5,234) | 69,680 | |
Restructuring | | 1,564 | - | 1,564 | | 1,564 | - | 1,564 | |
| | | 92,643 | (12,713) | 79,930 | | 180,610 | (12,713) | 167,897 | |
| Operating income | | 94,041 | 14,947 | 108,988 | | 244,953 | 14,947 | 259,900 | |
| Interest expense | | (13,246) | - | (13,246) | | (27,653) | - | (27,653) | |
| Interest income | | 6,113 | - | 6,113 | | 13,087 | - | 13,087 | |
| Gain on early retirement of convertible | | | | | | | | | |
senior notes | | 20,989 | - | 20,989 | | 20,989 | - | 20,989 | |
| | | | | | | | | | |
| Income before income taxes | | 107,897 | 14,947 | 122,844 | | 251,376 | 14,947 | 266,323 | |
| Provision for income taxes | | 23,737 | 3,903 | 27,640 | | 59,607 | 3,903 | 63,510 | |
| | | | | | | | | | |
| Net income | | $ 84,160 | $ 11,044 | $ 95,204 | | $ 191,769 | $ 11,044 | $ 202,813 | |
| | | | | | | | | | |
| Earnings per share: | | | | | | | | | |
Basic | | $ 0.38 | $ 0.05 | $ 0.43 | | $ 0.87 | $ 0.05 | $ 0.92 | |
Diluted | | $ 0.38 | $ 0.05 | $ 0.43 | | $ 0.86 | $ 0.05 | $ 0.91 | |
| | | | | | | | | | |
| Shares used in the calculation of earnings per share: | | | | | | |
| Basic | | 221,563 | - | 221,563 | | 221,516 | | 221,516 | |
| Diluted | | 221,657 | - | 221,657 | | 222,133 | | 222,133 | |
| | | | | | | | | | |
(1) Includes stock-based compensation charges as follows: | | | | | | |
| | | | | | | | | | |
| Cost of sales | | $ 4,167 | $ (2 ,234) | $ 1,933 | | $ 6,053 | $ (2 ,234) | $ 3,819 | |
| Research & development | | 15,715 | (7,479) | 8,236 | | 23,701 | (7,479) | 16,222 | |
| Sales, general & administrative | | 9,829 | (5,234) | 4,595 | | 14,331 | (5,234) | 9,097 | |
| LINEAR TECHNOLOGY CORPORATION | |
| RECONCILIATION TO PREVIOUSLY ISSUED PRESS RELEASE | |
| CONSOLIDATED CONDENSED BALANCE SHEETS | |
| |
| |
| | | December 28, | | | Adjustment to exclude accelerated | | | December 28, | |
| | | 2008 | | | stock-based | | | 2008 | |
| | | (unaudited) | | | compensation | | | (unaudited) | |
| ASSETS: | | | | | | | | | |
| Current assets: | | | | | | | | | |
Cash, cash equivalents and | | | | | | | | | |
marketable securities | | $ | 900,155 | | | $ | | | | $ | 900,155 | |
| | | | | | | | | | | | | |
Accounts receivable, net of | | | | | | | | | | | | |
allowance for doubtful | | | | | | | | | | | | |
accounts of $1,752 ($1,752 | | | | | | | | | | | | |
at June 29, 2008) | | | 127,833 | | | | - | | | | 127,833 | |
| | | | | | | | | | | | | |
Inventories | | | 54,940 | | | | - | | | | 54,940 | |
| | | | | | | | | | | | | |
Deferred tax assets and | | | | | | | | | | | | |
| other current assets | | | 65,453 | | | | - | | | | 65,453 | |
Total current assets | | | 1,148,381 | | | | - | | | | 1,148,381 | |
| | | | | | | | | | | | | |
| Property, plant & equipment, net | | | 270,769 | | | | - | | | | 270,769 | |
| | | | | | | | | | | | | |
| Other noncurrent assets | | | 78,686 | | | | (4,298 | ) | | | 74,388 | |
| Total assets | | $ | 1,497,836 | | | $ | (4,298 | ) | | $ | 1,493,538 | |
| | | | | | | | | | | | | |
| LIABILITIES & STOCKHOLDERS’ | | | | | | | | | | | | |
| EQUITY: | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | |
Accounts payable | | $ | 9,274 | | | $ | | | | $ | 9,274 | |
| | | | | | | | | | | | | |
Accrued income taxes, payroll & other accrued liabilities | | | 116,395 | | | | (395 | ) | | | 116,000 | |
Deferred income on shipments | | | | | | | | | | | | |
to distributors | | | 31,266 | | | | | | | | 31,266 | |
Total current liabilities | | | 156,935 | | | | (395 | ) | | | 156,540 | |
| | | | | | | | | | | | | |
Convertible senior notes | | | 1,500,000 | | | | | | | | 1,500,000 | |
| | | | | | | | | | | | | |
Deferred tax and other long-term | | | | | | | | | | | | |
liabilities | | | 146,609 | | | | | | | | 146,609 | |
| | | | | | | | | | | | | |
Stockholders’ equity: | | | | | | | | | | | | |
Common stock | | | 1,098,683 | | | | (14,947 | ) | | | 1,083,736 | |
Accumulated deficit | | | (1,409,565 | ) | | | 11,044 | | | | (1,398,521 | ) |
Accumulated other | | | | | | | | | | | | |
comprehensive income | | | 5,174 | | | | | | | | 5,174 | |
Total stockholders’ deficit | | | (305,708 | ) | | | (3,903 | ) | | | (309,611 | ) |
| | | $ | 1,497,836 | | | $ | (4,298 | ) | | $ | 1,493,538 | |
