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Analog Devices Inc. (



F4Q2010 Earnings Call Transcript

November 22, 2010 5:00 pm ET


Mindy Kohl – Director, IR

Jerry Fishman – President and CEO

David Zinsner – VP, Finance and CFO

Vincent Roche – VP, Strategic Market Segments Group


Tim Luke – Barclays Capital

Terence Whalen – Citigroup

Jim Covello – Goldman Sachs

Doug Freedman – Gleacher & Company

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John Pitzer – Credit Suisse

Shawn Webster – Macquarie

Uche Orji – UBS

Christopher Danely – JP Morgan

Ross Seymore – Deutsche Bank

David Wong – Wells Fargo

Stacy Rasgon – Sanford Bernstein

Sandy Evanji [ph] – Raymond James

Craig Ellis – Caris & Company

Vijay Rakesh – Sterne Agee



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Good afternoon. My name is Marcello, and I'll be your conference facilitator. At this time, I would like to welcome everyone to Analog Devices fourth quarter and fiscal year 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the opening remarks, there will be a question-and-answer period with our analyst participants. Thank you.

Ms. Kohl, you may begin your conference.

Mindy Kohl

Thanks, and good afternoon, everyone. This is Mindy Kohl, Director of Investor Relations. We appreciate you joining us for today's call. If you haven't yet seen our fourth quarter and fiscal year 2010 release, you can access it by visiting our website at, and clicking on the headline on the homepage.

This conference call is also being webcast live. From, select Investor Relations, and follow the instructions shown next to the microphone icon. A recording of this conference call will be available today within about two hours of this call's completion, and will remain available via telephone playback for one week. This webcast will also be archived on our IR website.

Participating in today's call are Jerry Fishman, President and CEO; Dave Zinsner, Vice President of Finance and CFO; and Vincent Roche, Vice President of Strategic Market Segments and Worldwide Sales.

During the first part of today's call, Jerry and Dave will present our fourth quarter and fiscal 2010 results, as well as our short-term outlook. The remainder of the time will be devoted to Jerry, Dave, and Vince answering questions for our analyst participants.

During today's call we may refer to certain 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 have included the reconciliation of these non-GAAP measurers to their most directly comparable GAAP measures in today's earnings release which is posted on the IR website.

In addition, we have updated the schedules on our IR website, which includes the historical quarterly and annual summary of P&Ls for continuing operations, as well as historical quarterly and annual information for revenue from continuing operations by end market and by product type.

Next, I'd ask you to please note that the information we are about to discuss includes forward-looking statements, which include risks and uncertainties. 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.

The forward-looking statement that is 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 maybe accurate only as of the date of the live broadcast, which is November 22, 2010.

With that, let's begin with opening remarks from our CEO, Jerry Fishman.

Jerry Fishman

Well, good afternoon and thanks for joining us on today's fourth quarter earnings call. The fourth quarter was another very strong quarter for ADI and really the culmination of a year of very significant achievement for the Company. Revenues for the fourth quarter increased 7% sequentially, 35% year-over-year to $770 million, which was the upper end of the guidance we provided you last quarter.

We experienced strong demand across virtually every market that we serve. Profitability reached record levels as we achieved gross margins for the quarter of 67%, operating margins for the quarter at 37.1%, and earnings per share of $0.73. We also generated 36% of our sales or $274 million in operating cash flow for the quarter.

Communications and automotive revenues were particularly strong during the quarter. We also experienced sequential growth in the industrial market and also the consumer market. And I'll elaborate a little bit more on the end market details after Dave discusses the financial results in a bit more detail.

Driving our success in Q4 and throughout the entire fiscal year is our operating model which we structured to get the upside while simultaneously protecting against the downside. Getting the upside is about maximizing our ability to capitalize on key strategic opportunities in front of us with sustainable proprietary advantages ensuring that we can deliver the products as required by our customers and provide them with very high levels of technical support and great service around the world.

Clearly, our new organizational structure, which fundamentally reorganized ADI into product and market groups has aligned – increased our alignment with our customers. It's heightened our understanding of their applications and their systems architecture. It's enabled us to provide much more complete solutions, and at the same time, it's helped us further refocus on our investments on those products and those markets where our innovations add sustainable value and we can get paid for them.

During 2010, this new team operated at extremely high performance levels and has already had a very significant impact on our strategic planning and our execution. This year we also continued to implement a fundamentally lower and more variable cost structure that not only optimizes our profitability under favorable marketing conditions, but also affords us considerable downside protection if the market turns negative.

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