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If we use words like anticipate, believe, project, forecast, plan, estimate or variations of these words and similar expressions relating to the future, they are intended to identify forward-looking statements. It’s important to note that the company’s actual results could differ materially from those projected in the forward-looking statements. During the quarter, Maxim’s corporate representatives may reiterate the business outlook during private meetings with investors, investment analysts, the media and others.Additional information about risks and uncertainties associated with the company’s business are contained in the company’s SEC filing on Form 10-K for the year ended June 25, 2011. Copies can be obtained from the company or the SEC. Second, in keeping with the SEC’s fair disclosure requirements, we made time available for a question-and-answer period at the end of today’s call. This will be your opportunity to ask questions of management concerning the quarterly results and expectations for the next quarter. An operator will provide instructions at that time. We again request that participants limit themselves to one question and one follow-up question during the Q&A session. I will now pass the call over to Bruce. Bruce E. Kiddoo Thanks, Paresh. I will review our second quarter financial results. Revenue for the second quarter was $591 million, down 7% from the first quarter. All end markets were down equally. Our revenue mix by major market in Q2 was approximately 41% for consumer, 26% industrial, 17% communications and 16% computing. Our consumer market declined due to normal year end inventory management. Our industrial, communication and computing markets were down due to overall industry weakness. Gross margin excluding special items was 60.5%, down approximately three points from the prior quarter due to lower utilization and higher inventory reserves. Special items in Q2 gross margin were intangible asset amortization and inventory write up post some acquisitions.
Operating expenses excluding special items were $223 million, flat with Q1. Salary expense increased due to the 14 th week, but was offset by lower acquisition and mass expenses. Special items in Q2 operating expenses were primarily restructuring charges and intangible asset amortization from acquisitions.Q2 GAAP operating income excluding special items was $135 million or 23% of revenue. The Q2 GAAP tax rate excluding special items was 26% compared to 23% in the prior quarter, which benefited from certain discrete items. GAAP earnings per share excluding special items was $0.34 down from $0.46 in Q1 due to lower revenue and gross margin. Turning to the balance sheet and cash flow, during the quarter cash flow from operations was $249 million or 42% of revenue. Inventory declined to 91 days from 100 days in the prior quarter. Inventory in the channel excluding catalog distributors declined significantly to 56 days from 67 days in the prior quarter. In dollar terms, channel inventory declined by 16%. Net capital expenditures totaled $77 million in Q2 as we invested in long-term manufacturing capacity and new facilities. As a result, free cash flow was $183 million or 31% of revenue. Share repurchases totaled $72 million in Q2 as we bought back2.9 million shares. Finally, in Q2, we paid $64 million in dividends to our shareholders. Overall, total cash, cash equivalents and short-term investments increased by $56 million in the second quarter to $817 million. Moving onto guidance. Our beginning Q3 backlog is $365 million. Based on this beginning backlog and expected turns, we forecast Q3 revenue of $555 million to $585 million or down 1% to 6% from Q2. This is consistent with our current mix of businesses. Q3 gross margin excluding special items is estimated at 57% to 60%, down from our normal range due to lower projected revenue and associated lower utilization. Other variables that may influence Q3 gross margin include product mix and inventory reserves.
Based on the increasing bookings and lower inventory levels both internal and in the channel, we expect gross margin to return to its normal range above 60% after utilizations increased. Special items in Q3 gross margin are estimated at $9 million, primarily for amortization of intangible assets. This excludes potential restructuring activities in Q3.Read the rest of this transcript for free on seekingalpha.com