Dave Bell – President, CEO, and Director
Jonathan Kennedy – SVP and CFO Analysts Sameer Kalucha - J.P. Morgan Ross Seymore - Deutsche Bank Craig Ellis – Caris & Company Joanne Feeney - Longbow Research Terence Whalen – Citi Patrick Wang – Evercore Steve Smigie - Raymond James Chris Caso - Susquehanna Financial Group Presentation Operator
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Please note that some 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 risks factors are discussed in detail in our filings with thee 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 reforms of business and should be considered by investors in conjunction with GAAP measures reported. Our agenda for the call today is thus follows. Dave Bell will discuss key highlights in the quarter, Jonathan Kennedy will review the quarter from a financial perspective, and Dave will follow up with additional commentary on each of our three key markets as well as our forward times. The Q&A session will follow. I would now like to turn the cal over to Dave Bell, President and CEO of Intersil. Dave Bell Thanks Brendan. Good afternoon and thank you for joining us today for Intersil's first quarter 2012 earnings conference call. I'll first quickly review the results of the first quarter and then I'll make detailed comments about each of our end markets after Jonathan Kennedy's financial report. We reported first quarter revenues of $156.0 million, a 22% decrease from 198.9 million in the first quarter of 2011 and a 6% decrease from 165.8 million in the fourth quarter of 2011. We continue to generate steady free cash flow, paid out our long-term debt, and reduced inventory. Jonathan will provide more financial details in his remarks. Although the overall market conditions in the first quarter remained weak, orders steadily improved and our book-to-bill ratio remained above 1 throughout the quarter. We believe the first quarter was the bottom of the cycle for Intersil and we expect to see steady growth in the second quarter as channel inventories stabilize at low levels and demand begins to recover.
During the quarter, we modified the composition of our reported end markets to better reflect the different characteristics of the market we serve. The industrial and communications markets have been combined and together with our computing server business now form the industrial and infrastructure end market. The new I&I end market category includes applications such as base stations, network switchers and routers, network attached storage and servers. It continues to include traditional industrial categories such as automotive, security surveillance, military, medical and factory automation. The average margin profile for the industrial and infrastructure market is above our corporate average, with product lines such as radiation-hardened and military delivering gross margins about 80%.The former computing end market has been renamed personal computing and is now comprised of notebook computers, ultrabooks, desktop PCs and PC peripherals. With servers moving to the I&I market, this segment now accurately represents Intersil’s participation in the highly competitive PC market and as expected, it delivers gross margins below our corporate average. The consumer market will remain the same as before and includes smartphones, tablets, displays and gaming. Gross margins in the consumer market are at or slightly below our corporate average. In just a few minutes I'll go over the percentage of sales in each end market as well as an apples-to-apples comparison with the fourth quarter of 2011. We've included historical detail of our revenue since 2007, allocated to the adjusted end markets, which is available in the press release on page nine and in the Investor Relation section of our website. ir.intersil.com. We are passionate about building a great company where our employees are inspired to create innovative products that will deliver shareholder value. Our Board of Directors is also committed to sustaining shareholder returns and is authorized a quarterly dividend of $0.12 per share of common stop.
At this time, I'd like to turn the call over to Jonathan Kennedy for the financial summary of the first quarter. I'll then discuss results from each of our end markets in more detail and finally provide comments on our second quarter 2012 outlook. Jonathan?Read the rest of this transcript for free on seekingalpha.com