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Xilinx Inc. F4Q10 (Qtr End 04/03/10) Earnings Call Transcript

Xilinx Inc. F4Q10 (Qtr End 04/03/10) Earnings Call Transcript

Xilinx Inc. (XLNX)

F4Q10 (Qtr End 04/03/10) Earnings Call Transcript

April 28, 2009 5:00 pm ET


Maria Quillard – IR

Jon Olson – SVP and CFO

Moshe Gavrielov – President and CEO


Tim Luke – Barclays Capital

Adam Benjamin – Jefferies

Glen Yeung – Citi

Uche Orji – UBS

John Pitzer – Credit Suisse

James Schneider – Goldman Sachs

Shawn Webster – Macquarie

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Tristan Gerra – Robert Baird

Christopher Danely – JP Morgan

Mahesh Sanganeria – RBC Capital Markets

Srini Pajjuri – CLSA

David Wong – Wells Fargo Securities

Apurva Patel – Ticonderoga Securities

Sabi [ph] – Raymond James



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Good afternoon. My name is Tiffany and I will be your conference operator. I would now like to welcome everyone to the Xilinx fourth quarter fiscal year 2010 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Please limit your questions to one to ensure that management has adequate time to speak to everyone.

I would now like to turn today’s call over to Maria Quillard. Thank you, Ms. Quillard. You may begin your conference.

Maria Quillard

Thank you and good afternoon. With me are Moshe Gavrielov, CEO; and Jon Olson, CFO. We will provide a financial and business review of the March quarter then we’ll open the call for questions.

Let me remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially.

We refer you to the documents the company files with the SEC, including our 10-Ks, 10-Qs and 8-Ks. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This conference call is open to all and is being webcast live. It can be accessed from our Investor Relations website.

Now let me turn the call over to Jon Olson.

Jon Olson

Thank you, Maria. During today's commentary, I will review our March quarter and fiscal 2010 business results. I will conclude my remarks by providing guidance for the June quarter. For the second consecutive quarter, Xilinx achieved record sales. In addition, gross and operating margins increased to their highest level in nearly six years. These results speak not only to the increased customer acceptance of Xilinx PLD solutions but also to our increased focus on expense management and return on investment.

After bottoming in the June quarter of this most recent fiscal year, sales increased in each of the remaining fiscal quarters. Fiscal 2010 sales were $1.8 billion, flat with the prior year. Gross and operating margin improved in each consecutive quarter of the fiscal year.

SG&A expense declined by 5% for the year, due to restructuring efforts as well as continued cost improvement efforts. R&D expense for the year increased by 4%, primarily due to increased expenses associated with the roll-out of 40-nanometer products. From an end market perspective, wireless, defense and automotive sales increased during the fiscal year while all other end markets declined.

Turning to the March quarter, which was a 13-week quarter; sales were $520 million, a sequential increase of 3% and a year-over-year increase of 34%. Gross margin of 64.9% was up from 62.1% in the same quarter of the prior year.

Operating margin of 29.5% was up from 19.8% in the same quarter of the prior year. Operating expenses were $187 million, including approximately $3 million in restructuring charges. In addition, operating expenses for the quarter were impacted by the resolution of a litigation matter and increases in variable spending driven by revenue and profit improvement. New product sales increased 13% sequentially, while mainstream products decreased 4% sequentially and base products remained flat.

European sales were particularly strong during the March quarter, increasing 25% sequentially. Most of the incremental sales growth was related to wired and wireless communications, but sales from nearly all other end market categories in Europe increased.

Asia-Pacific sales increased 1% sequentially to 35% of total sales, with gains from communications and storage, slightly offsetting declines from consumer.

North American sales decreased 5% sequentially to 33% of sales, with sales from communication and industrial and other decreasing sequentially, but partially offset by strong audio/video broadcast sales.

Lastly, sales from Japan declined 4% sequentially, primarily related to declines from wired communications and consumer applications. Overall, communication sales increased 7% sequentially, driven by increases in wireless sales. Wireline sales were essentially flat for the quarter after a very strong December quarter.

Industrial sales decreased 4% sequentially, as an anticipated decline in defense sales more than offset increases in industrial, scientific and medical and test and measurement applications.

Consumer and automotive sales increased 5% sequentially, driven by strength in automotive and audio/video broadcast applications. Sales from pure consumer applications declined as expected. And lastly, sales from data processing increased by 7% sequentially, as increases in storage more than offset decreases in computing and data processing.

Net income during the quarter was $149 million, or $0.54 per diluted share including $3 million or approximately $0.01 per diluted share in restructuring charges. Included in the Q4 net income is a tax benefit of $23 million or $0.08 per diluted share, primarily related to the impact of our recent favorable ruling in the Ninth Circuit that dealt with the treatment of stock option expense.

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