ADI

Analog Devices, Inc. (ADI)

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Analog Devices (ADI)

F4Q 2012 Earnings Call

November 27, 2012 5:00 pm ET

Executives

Ali Husain - Director of Investor Relations

Jerald G. Fishman - Chief Executive Officer and Director

Vincent T. Roche - President

David A. Zinsner - Chief Financial Officer and Vice President of Finance

Analysts

Terence R. Whalen - Citigroup Inc, Research Division

Ross Seymore - Deutsche Bank AG, Research Division

Aashish Rao - BofA Merrill Lynch, Research Division

James Covello - Goldman Sachs Group Inc., Research Division

Christopher B. Danely - JP Morgan Chase & Co, Research Division

Christopher J. Muse - Barclays Capital, Research Division

Tristan Gerra - Robert W. Baird & Co. Incorporated, Research Division

Doug Freedman - RBC Capital Markets, LLC, Research Division

Sumit Dhanda - ISI Group Inc., Research Division

Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division

Craig A. Ellis - Caris & Company, Inc., Research Division

Steven Eliscu - UBS Investment Bank, Research Division

Shawn R. Webster - Macquarie Research

Presentation

Operator

Good afternoon. My name is Samantha, and I will be your conference facilitator. At this time, I would like to welcome everyone to Analog Devices' Fourth Quarter and Fiscal Year 2012 Earnings Conference Call. [Operator Instructions]

Thank you. Mr. Husain, you may begin your conference.

Ali Husain

Thanks, Samantha. Good afternoon, everyone. This is Ali Husain, Director of Investor Relations. We appreciate you joining us for today's call. If listeners haven't yet seen our fourth quarter and fiscal year 2012 press release, or our form 10-K, both may be accessed through our website at investor.analog.com. This conference call is also accessible from the same page. A recording of this conference call will be available today within about 2 hours of this call's completion. It will remain available via telephone playback for a period of time and it will also be archived on the IR website.

In addition, we've updated the schedules on our IR website, which include the historical quarterly and annual summary P&L for continuing operations, as well as historical quarterly and annual information per revenue from continued operations by end market and product type.

Participating with me on today's call are Jerry Fishman, Chief Executive Officer; Vincent Roche, President; and Dave Zinsner, Vice President of Finance and CFO. During the first part the call, Jerry, Vince and Dave will present our fourth quarter and fiscal year 2012 results, as well as our short-term outlook. The remainder of the time will be devoted to answering questions from our analysts and investor participants.

During today's call, we may refer to non-GAAP financial measures that have been adjusted for certain non-recurring items in order to provide investors with useful information regarding our results of operations and business trends. We've included reconciliations of these non-GAAP measures to their most directly comparable GAAP measures in today's earnings release, which is posted on the IR website.

I'd ask you to please note that the information we're about to discuss includes forward-looking statements intended to qualify for Safe Harbor from liability, established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include risks and uncertainties, and our actual results could differ materially from those we will be discussing. Factors that could contribute to such differences include, but are not limited to, those described in our SEC filings, including our most recent annual report on Form 10-K filed earlier today.

The forward-looking information that's provided on this call represents our outlook as of today, and we do not undertake any obligation to update the forward-looking statements made by us. Subsequent events and developments may cause our outlook to change. Therefore, this conference call will include time-sensitive information that may be accurate only as of date of the live broadcast, which is November 27, 2012.

And with that, I'll turn the call over to ADI's CEO for opening remarks.

Jerald G. Fishman

Well, good afternoon to everybody, and thanks for joining our call. As the press release said, our revenues for Q4 totaled about $695 million, which was up approximately 2% from the previous quarter and down about 3% from the same quarter last year. These results were within the guidance range that we provided last quarter and are relatively strong results in what has turned out to be a very challenging environment. The diluted earnings per share were $0.58, which was slightly above the midpoint of our earlier guidance.

For the full year of 2012, revenue declined just under 10% to about $2.7 billion, which was a reflection of a poor economic environment for most of our fiscal year, coupled with unprecedented global uncertainty, which severely constrained capital spending in virtually all of our served markets. The only exception was our automotive business, which actually grew 11% year-over-year. But even in automotive, we showed some signs of a slowdown in the second half of 2012. Vince, our new President, our newly appointed President, will describe in much more detail the current trends and the outlooks that we see in each of our end markets.

Despite the lower revenues and the uncertainty throughout the year, ADI still produced a very credible result for the year, with gross margins of approximately 65%, operating margins of approximately 31% and operating cash flow of over $800 million, or about 30% of sales. In addition, we enhanced shareholder returns with dividends and share repurchases that totaled over $500 million during the fiscal year. We also ended the fiscal year with net cash -- or the gross cash we have less our debt, at over $3.1 billion.

Today, it's still a very challenging environment in virtually every region of the world. During Q4, the overall orders decreased at ADI, as customers became increasingly more cautious and our distributors reduced their inventories. We believe in Analog today that our current order rates are below the consumption rates of our products. Our book to bill for the quarter fell below 1, and we're entering Q1 with lower opening backlog than we had when we entered Q4 of 2012.

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