Analog Devices (ADI)
Q1 2013 Earnings Call
February 19, 2013 5:00 pm ET
Jerald G. Fishman - Chief Executive Officer and Director
Vincent T. Roche - President
David A. Zinsner - Chief Financial Officer and Vice President of Finance
Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division
James Covello - Goldman Sachs Group Inc., Research Division
Christopher B. Danely - JP Morgan Chase & Co, Research Division
Romit J. Shah - Nomura Securities Co. Ltd., Research Division
Steven Eliscu - UBS Investment Bank, Research Division
Shawn R. Webster - Macquarie Research
Aashish Rao - BofA Merrill Lynch, Research Division
Joseph Moore - Morgan Stanley, Research Division
Harsh N. Kumar - Stephens Inc., Research Division
Craig A. Ellis - Caris & Company, Inc., Research Division
Doug Freedman - RBC Capital Markets, LLC, Research Division
Previous Statements by ADI
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Thanks, Terry, and good afternoon, everyone. This is Ali Husain, Director of Investor Relations. Thanks for joining us for today's call.
If listeners haven't yet seen our first quarter fiscal year 2013 press release, Form 10-Q or the release regarding the increase in our dividend, you can find them in our IR website at investor.analog.com. You can also access this conference call from the same page. A recording of this conference call will be available within 2 hours of this call's completion. It will remain available via telephone playback for 2 weeks, and it will also be archived in our Investor Relations website. We've also updated the financial schedules on our IR website, which include the historical quarterly and annual summary P&L for continuing operations, as well as for revenue from continuing operations by end market and product type.
Participating with me in today's call are Jerry Fishman, CEO; Vince Roche, President; and Dave Zinsser, Vice President of Finance and CFO. During the first part of the call, Jerry, Vince and Dave will present our first quarter FY '13 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 nonrecurring items in order to provide investors with useful information regarding our results. We're 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 the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. And these forward-looking statements include risks and uncertainties, and our actual results could differ materially from those we'll 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 quarterly report on Form 10-Q 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 these 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 the date of the live broadcast, which is February 19, 2013.
And with that, I'll turn the call over to ADI's CEO for opening remarks.
Jerald G. Fishman
Okay, Ali. You can take a deep breath.
I just want you to have more time is all, Jerry.
Jerald G. Fishman
Okay, good. Glad to hear. Well, hi and good afternoon to everybody who's joining the call. As you know from the press release, our revenues for Q1 were about $622 million, which was down about 10% from the previous quarter and also down about 4% from the same period last year, which you might remember, the first quarter last year was a 14-week quarter. The diluted earnings per share, which exclude a few special items, was $0.44, which was at approximately the midpoint of our guidance that we provided last quarter.
Overall, the order and sales patterns were very challenging during the first 2 months of our Q1, as our customers continued to reduce their inventories and industrial and infrastructure capital spending remained very muted going into the end of the calendar year. In January, order rates began to improve and remained strong so far this quarter. Our belief is that the current order strength is the result of our customers becoming more confident about their prospects as 2013 unfolds and also the end of inventory de-stocking. This has certainly been a pretty tough cycle, particularly in the industrial market where we believe that customers ordering has been well below consumption now for several quarters. Based on historically low customer inventory levels and feedback we get from our largest customers and also our largest distributors, we expect that Q1 will likely be the trough quarter for ADI in this cycle.
Over the past few quarters when demand weakened, we very carefully managed our business, keeping production levels low and our inventory under very tight control. Inventory dollars actually went down in Q1, although days increased as a result of the sales decline. We also managed operating costs very tightly, and we moved strategic resources to the most important programs. And finally, by design, our variable compensation costs were lower as business conditions weakened. So this all, in combination, produced very respectable margins and very strong cash flow during a very challenging quarter and has also set up significant upside operating leverage as business conditions improve.