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Maxim Integrated Products Management Discusses Q4 2012 Results - Earnings Call Transcript

Special items in Q4 gross margin were intangible asset amortization from acquisitions.

Operating expenses, excluding special items, were $214 million, flat with Q3. And fully benefit year-end accrual credits offset higher employee profit sharing expense.

Special items in Q4 operating expenses included a $22 million impairment for buildings held for sale, plus the normal acquisition-related charges, offset by a reduction in the payroll tax accrual.

Q4 GAAP operating income, excluding special items, was $167 million or 28% of revenue. The Q4 GAAP tax rate, excluding special items, was 20% compared to 24% in the prior quarter due to normal variations from our international structure. GAAP earnings per share, excluding special items, was $0.45, up from $0.33 in Q3 due to higher revenue and gross margin and a lower tax rate.

Turning to the balance sheet and cash flow. During the quarter, cash flow from operations was $190 million or 31% of revenue.

Inventory increased to 99 days from 89 days in the prior quarter, within our target range of 90 to 100 days. We are at the high-end of our range due to an inventory build to meet seasonally strong demand in our consumer business. Inventory in the channel, excluding catalog distributors, declined from 57 days to 53 days, well below our target of approximately 65 days. In dollar terms, general inventory declined by 1%.

Net capital additions totaled $78 million in Q4, as we invested in long-term manufacturing capacity and new facilities. Free cash flow was $115 million. Share repurchases totaled $56 million in Q4 as we bought back 2.1 million shares. Finally, in Q4, we paid $64 million in dividends to our shareholders.

Overall, total cash, cash equivalents and short-term investments increased by $20 million in the fourth quarter to $956 million.

Moving on to guidance. Our beginning Q1 backlog is $393 million. Based on this beginning backlog and expected turns, we forecast Q1 revenue of $605 million to $635 million or flat to up 5% from Q4.

Q1 gross margin, excluding special items, is estimated at 61% to 64%. Variables that may influence Q1 gross margin include utilization, product mix and inventory reserves.

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