In addition, this call is being web cast live over the Internet and may be accessed via the investor relations section of our website. A telephonic replay of the conference call and web cast will be available for two weeks through November 9. Questions during the call may also be submitted online via the web cast but will be answered by e-mail after the call.Please note that some of the comments made during this conference call may contain forward-looking statements. I’d like to remind you that while these statements reflect our best current judgment, they are subject to risks and uncertainties that could cause our actual results to vary. These risk factors are discussed in detail in our filings with the Securities and Exchange Commission. In addition, during this call, we may refer to financial measures that are not prepared according to Generally Accepted Accounting Principles. We sometimes use these measures because we believe they provide useful information about the performance of our business and should be considered by investors in conjunction with GAAP measures reported. Our agenda for the call today is as follows, Dave Bell will discuss key highlights from the quarter, Jonathan Kennedy will review the quarter from a financial perspective, and Dave will follow with additional comments on each of our four key markets, as well as our forward-looking guidance. A Q&A session will follow. I will now turn the call over to Dave Bell, President and CEO of Intersil. David Bell Thanks, Brendan. Good afternoon and thank you for joining us today for Intersil’s third quarter 2011 earnings conference call. The third quarter was challenging as the worldwide economic environment weakened and demand for our products softened significantly. Various economic problems around the world as well as the tightening of credit in China have resulted in customers reducing inventory levels throughout their supply chains. This has driven both stockings and shipments below demand, as excess inventory is consumed, repeating the pattern seen in many past cycles.
However, unlike prior cycles, the industrial and communications infrastructure market softened quickly, almost in concert with the drop of the computing and consumer markets. This unusual behavior contributed to the surprisingly rapid drop in the third quarter.We reported third quarter revenues of $186.8 million, an 11% decrease from the second quarter, and a 15% decrease from the third quarter of 2010. The combination of seasonal shifts in product mix and lower manufacturing utilization resulted in our gross margin dropping by 120 basis points to 57%. In reaction to the downturn, Intersil’s management team reacted swiftly to reduce our operating expenses by 7% compared to our third quarter guidance. This prompt response to the downturn significantly reduced the drop in our earnings, and I have every expectation that we will see further reductions in the coming quarter. During the quarter, we refinanced our long term debt. This reduced our already low interest expense even further, which will improve EPS by a penny in future quarters. However, as Jonathan will detail, there were approximately $8.4 million in expenses associated with the early retirement of our prior debt, which will negatively impact our GAAP net income and EPS for the third quarter. As a result, we reported net income of $7.2 million, or $0.06 per diluted share. Our non-GAAP net income and EPS for the third quarter was $25.8 million or $0.20 per diluted share. We generated approximately $24.8 million in free cash flow during the third quarter, and as a result our board of directors has authorized a quarterly dividend of $0.12 per share of common stock. During last quarter’s conference call, I introduced a top 10 list of growth drivers that we expect will result in an estimated $700 million of additional annual revenue within five years. I’m not going to review this entire list every quarter, but you will see this list as a recurring theme in our strategy, and we will occasionally update you on our progress in those key product areas. The power of 10 is a simple but powerful concept, which has resonated with the investment community and helped focus our resources internally as well.
Our entire executive team clearly understands what our top 10 focus items are. In addition, sales VPs cascading all the way down to each individual sales person has a top 10 account list. Our senior management keeps a constant focus on these priorities, and tracks our progress on a daily basis making tough decisions when necessary to maintain our focus. Despite a quarter that was softer than expected, we continue to focus our investments in the top priorities programs that will drive above average growth in the future.Read the rest of this transcript for free on seekingalpha.com