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Linear Technology Corporation (LLTC)’s Q2 2015 Earnings Conference Call Transcript

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Below is the transcript of the Linear Technology Corporation (NASDAQ:LLTC)’s Q2 2015 Earnings Conference Call, held on Wednesday, January 14th, 2015 at 11:30 a.m. EST.


Linear Technology Corporation LLTC

Linear Technology Corporation (NASDAQ:LLTC), a member of the S&P 500, has been designing, manufacturing and marketing a broad line of high performance analog integrated circuits for major companies worldwide for three decades. The Company’s products provide an essential bridge between our analog world and the digital electronics in communications, networking, industrial, automotive, computer, medical, instrumentation, consumer, and military and aerospace systems.


Company Executives:

Paul Coghlan, Vice President, Finance, Chief Financial Officer, Linear Technology Corporation.
Lothar Maier, Chief Executive Officer, Linear Technology Corporation.
Bob Swanson, Executive Chairman, Linear Technology Corporation.



Craig Hettenbach, Morgan Stanley
William Stein, SunTrust
Tore Svanberg, Stifel, Nicolaus
David Wong, Wells Fargo
John Pitzer through Bruce Miller , Credit Suisse
Jim Covello, Goldman Sachs
Amit Shah, Nomura Securities
Ross Seymore, Deutsche Bank
JoAnne Feeney, ABR Investment Strategy
Chris Caso, Susquehanna Financial Group
Chris Danely, JPMorgan
Ambrish Srivastava, BMO Capital Markets
Steve Smigie, Raymond James
CJ Muse thru representative, ISI Group
Craig Ellis, B. Riley
Vivek Arya, Bank of America Merrill Lynch
Doug Freedman, RBC Capital Markets
Gilbert Alexander, Darfil Associates.



Good day and welcome to the 2015 Fiscal Second Quarter Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the call over to Mr. Paul Coghlan. Please go ahead.


Paul Coghlan, Vice President, Finance, Chief Financial Officer

Good morning. Welcome to the Linear Technology conference call. I will be joined this morning by Bob Swanson, our Executive Chairman and Lothar Maier, our CEO. I will give you a brief overview of our recently completed second fiscal quarter and then address the current business climate. We will then open up the conference call to questions to be directed at Bob, Lothar and myself. I trust you all seen copies of our press release which was published yesterday.

First, however, I would like to remind you that except for historical information, the matters that we will be describing this morning will be forward-looking statements that are dependent on certain risks and uncertainties, including such factors, among others, as new orders received and shipped during the quarter, the timely introduction of new processes and products and general conditions in the world economy and financial markets. In addition to these risks, which we described in our press release issued yesterday, we refer you to the risk factors listed in the company’s Form 10-Q for the quarter ended September 28, 2014, particularly management’s discussion and analysis of financial condition and results of operations.

Secondly, SEC Regulation FD regarding selective disclosure influences our interaction with investors. We have opened up this conference call to enable all interested investors to listen in. The press release and this conference call will be our forum to respond to questions regarding our estimated financial performance going forward. Consequently, should you have any questions regarding our estimates of sales and profits or other financial matters for the upcoming quarter, as well as how they might impact our income statement model and our balance sheet, this is the time we are free to respond to these questions.

As you can tell from our press release, that just completed December quarter generally met our expectations with sales downs 5% sequentially, which approximated the midpoint of our guidance. Entering the December quarter, we had commented that the December quarter historically has been seasonally slow for us, particularly automotive and industrial customers who temporary tighten their demand to minimize calendar year and inventory levels and to compensate for annual shutdowns that coincide with December year-end holidays.

We noted that the December quarter has averaged being down 6% over the last four years. So this year’s down 5% results approximated the historical average and was more reflective of seasonality than any structural demand issues. Although quarterly sales declined 5% sequentially, they grew 5% year-over-year. Gross margin and operating margin were impacted by the reduction in sales although they were at the midpoint of the range we had forecasted. Net income was down 5% as a result of the 5% reduction in sales, partially offset by a lower tax rate. The US congress reinstated the Research and Development tax credit for 2014. This positively impacted our quarterly tax rate reducing it from an estimated 26% to an actual 22%.

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