ADI

Analog Devices, Inc. (ADI)

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Analog Devices (ADI)

Q2 2013 Earnings Call

May 21, 2013 5:00 pm ET

Executives

Ali Husain

Vincent T. Roche - Chief Executive Officer, President and Director

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

Analysts

James Covello - Goldman Sachs Group Inc., Research Division

Terence R. Whalen - Citigroup Inc, Research Division

Shawn R. Webster - Macquarie Research

Aashish Rao - BofA Merrill Lynch, Research Division

Blayne Curtis - Barclays Capital, Research Division

William Stein - SunTrust Robinson Humphrey, Inc., Research Division

Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division

Sumit Dhanda - ISI Group Inc., Research Division

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

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

Joseph Moore - Morgan Stanley, Research Division

Ross Seymore - Deutsche Bank AG, Research Division

Romit J. Shah - Nomura Securities Co. Ltd., Research Division

John W. Pitzer - Crédit Suisse AG, Research Division

Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division

Steven Eliscu - UBS Investment Bank, Research Division

Presentation

Operator

Good afternoon. My name is Terry, and I will be your conference facilitator. At this time, I would like to welcome everyone to Analog Devices' Second Quarter Fiscal Year 2013 Earnings Conference Call. [Operator Instructions] Mr. Husain, you may begin your conference.

Ali Husain

Great. Thanks, Terry, and good afternoon, everyone. This is Ali Husain, Director of Investor Relations. If listeners haven't yet seen our second quarter 2013 press release or our Form 10-Q, they can be found on ADI's IR website at investor.analog.com. This conference call can also be accessed 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 on our Investor Relations website. We've also updated the financial schedules on our IR website, which include the historical quarterly and annual summary P&Ls 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 Vincent Roche, ADI's President and CEO; Dave Zinsner, Vice President of Finance and CFO; and Maria Tagliaferro, Director of Corporate Communications. During the first part of the call, Vince and Dave will present our second quarter 2013 results, as well as our short-term outlook. The second part of our call will be devoted to answering questions from our analyst 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'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 the 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 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 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 the date of the live broadcast, which is May 21, 2013.

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

Vincent T. Roche

Thanks, Ali, and hello, everyone. Thank you for joining our call today. Before we talk about our operating results and the outlook for the coming quarter, it is true to say that a lot has happened since our last earnings call at the end of February. Many of you sent deep condolences upon learning of Jerry Fishman's sudden passing, and we thank you very much for those.

I worked beside Jerry for many years and while, of course, we all miss him greatly on a personal level, Dave and I, along with our senior management team, and the many talented employees of ADI, will continue to do great things together.

Our employees are engaged, our customers rely on us more and more as a preferred partner, and the market opportunities for us are vast. Our business priorities remain the same: leadership innovation in our core signal processing technologies; continuously assessing where we play, how we win and aligning our resources accordingly; and emphasizing strong profitability as a measure of the quality and sustainability of our innovation.

We believe that our operating performance, supplemented with cash dividends and share repurchases, will continue to drive strong returns for shareholders. As you've seen from our press release, our results for the second quarter were solid. So let's take a look at what actually happened in more detail.

Revenue totaled $659 million, up 6% from the previous quarter and down 2% from the same period a year ago. Diluted earnings per share, excluding special items, was $0.52, up 18% from previous quarter. Both results were at the midpoint of the guidance we have provided.

Our end markets, the revenue growth this quarter was led by Industrial and Automotive customers. Our industrial end markets, which are typically strong in the second quarter, grew 11% sequentially and made up 47% of our sales. The increase was broad-based across all regions and all major application areas within that segment, but was particularly strong in instrumentation and industrial automation applications.

A significant portion of our Industrial revenue is serviced through our distribution partners, and during the second quarter, order momentum through the channel was strong and higher than in the prior quarter. It appears that orders and shipments were in good equilibrium as the inventory in the channel remained low.

Now while we cannot predict with certainty regarding the short term, these order trends and low inventory levels are positive signs for our Industrial business. Longer term, we are driving innovation to higher levels to ensure that ADI increases our share of the industrial market.

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