Analog Devices, Inc. (ADI) Q3 2006 Earnings Report, Transcript and Summary

Thank you, Operator and again welcome to our Fiscal 3rd Quarter 2006 Earnings Conference Call. With me on the call today are Jack Gifford, our Chairman, President and Chief Executive Officer, and our two group Presidents, Tunc Delugha, and Peruz Pavarande, and also on the call is Alan Hill, Vice President of Dallas Semiconductor. There are some administrative items that I would like to take care of before we cover our results. First we will be forward-looking statements on this call. In light of the private securities litigation reformat, I would like to remind you that statements we make about the future, including our intentions or expectations or predictions of the future, including but not limited to possible statements regarding bookings and turn orders, revenues and earnings, inventory and spending levels, manufacturing efficiencies and capacity, projected in market consumption of our products and any other future financial results are forward-looking statements. If we use words like anticipate, believe, project, forecast, plan, estimate, or variations of these words or similar expressions relating to the future, they are intended to identify forward-looking statements. It is important to note that the company’s actual results could differ materially from those projected in the forward looking statements. Additional information about risks and uncertainties associated with the companies business, are contained in the company’s SEC filings on Form 10K for the year-ended June 25, 2005. Copies can be obtained from the company or the SEC. Second, and keeping with the SEC’s fair disclosure requirements, we have 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 next quarter. An operator will provide instructions at that time. I’ll begin today’s call by commenting on our financial performance before handing the call over to Jack, Tunc, and Peruz for their comments on end markets, strategy, and guidance for the 4th quarter. As stated in our Press Release, our fiscal Q3 2006 gross bookings were $537 million. These gross bookings are the equivalent of future net revenues of $512 million. Gross turns orders during Q3 were $245 million, of which $161 million was shipped for revenues within the quarter. For a comparison purposes, turns for Q2 were $230 million of which $158 million was shipped for revenues within the 2nd quarter. Net revenues for the 3rd quarter were a record $478 million, up 7% from the 2nd quarter and up 19% from the same quarter last year. As a result of our positive book to bill ratio, our 12-month backlog grew to $403 million at the end of Q3 from $370 million at the end of Q2. Our beginning 90-day backlog for Q4 is $348 million compared to the beginning 90-day backlog for Q3 of $329 million. Entries bookings, net sales, and backlog were supported by multiple markets, products, and customers. Tunc and Peruz will highlight specific areas of progress in their prepared remarks or comments later in today’s call. Regarding profit measures – please note that in our press release we have disclosed both GAAP and non-GAAP financial results. Non-GAAP results differ from GAAP results by the amount of total stock based compensation expense, calculating in accordance with financial accounting standards 123R. I will now highlight our fiscal Q3 2006 profit measures. Gross margins, excluding stock based compensation expense were 69%, down from 70.2% in the previous quarter. The decline in gross margin is a result of a few factors. Foremost, the margin decline is the result of executing our long term strategy of entering new product markets which are for gross margins that are lower than those with our product mix focus on smaller market applications. We are doing this in order to achieve greater earnings growth than would otherwise be possible. Also, we had two products in our cellular wireless business unit that did not meet our minimum gross margin goals. Additionally, we missed our manufacturing plan in three of our FABS by $3 million , due to ramping up capacity and related costs to support customer demand without getting sufficient throughput to lower unit cost. We expect significant improvement in this situation in our 4th and 1st quarter. Operating expenses, excluding stock based compensation expense, were 24.9% of net revenues; down from 26.1% for Q2 and 27% for the same period last year. As you can see from the declining percentages, these expenses have increased at a slower rate than sales growth over the past couple of quarters. We continue to believe that below the line spending will decrease as a percentage of net revenues more than gross margins. Operating margins, excluding stock based compensation expense, were 44%; relatively unchanged from the 44.1% reported for the past two quarters. This result is consistent with our plan to achieve excellent sales and earnings growth by expanding our served available markets, gaining market share, and simultaneously leveraging our operating expenses in order to maintain operating margins required to optimize our earnings growth. Earnings per share, excluding stock based compensation expense, was $0.45 per share; up 7% from the $0.42 per share reported in the second quarter and up 22% from the $0.37 per share for the same period a year ago. The option exchange program that we announced last quarter was completed. Employees tendered $11.8 million eligible options in exchange for $2.4 million restricted stock units or RSU’s. These RSU’s will vest over the next 4-6 quarters. With the exchange program and grants to new and existing employees of options and RSU’s, we expect stock based compensation on a pre-tax basis to be $52 million in the 4th quarter. Included in this amount is $37 million from employee stock options, $12 million from RSU’s, and $3 million from our employee stock purchase plan. I will now highlight a few items on our balance sheet. Accounts receivables grew $39 million during the quarter to $260 million. Our day sales outstanding or DSO grew from 45-days to 49-days as a result of a large share of the quarter shipment occurring later in the quarter as compared to Q2. Our inventories grew $7 million during the quarter as planned ending up at $205 million. Inventory days improved from 127-days in Q2 to 119-days in the 3rd quarter. Inventories at our distributors are still at relatively low levels and are turning approximately 7 ½ times per year. Order lead times on the company were approximately 8.4-weeks during the 3rd quarter, a slight increase over the 8-weeks in Q2. At the end of the 3rd quarter, cash and short term investments totaled $1.3 billion, unchanged from the 2nd quarter. 3rd quarter capital purchases were $64 million, consisting primarily of wafer fabrication and test equipment needed to support revenues in the 4th quarter and 1st quarter. 4th quarter capital will increase in order to expand FAB capacity in anticipation of expected continued growth in fiscal 2007. I will now hand the call over to Jack to provide additional highlights.

Thank you, Carl. For the quarter we are in now, we expect revenues will increase about 7% and at that level of sales we would expect to produce non-GAAP per share of $0.48, also a 7% increase. Markets such as automotive, digital communications, multimedia, and portable equipment are attractive to us because of their size and their ability to support higher long term earnings growth. As we expand into these new markets, we expect to sustain our operating margins and believe that with effective management review projects are today being selected that optimize profit growth without risk to profit quality. As Carl mentioned, we did have two cellular wireless products that affected our gross margins by ½ of a percent during the quarter. Unfortunately, the pricing collapsed in the CDMA handset market and this was the result of a strategy by handset manufacturers to compete on price with the GSM handsets. Consequently, these CDMA handsets are now in a price war with GSM. We are working with our customers to raise our gross margins or to reduce production on these parts. Should we be unsuccessful in our efforts, we may need to eliminate certain raw material and parts from production and inventory. Although Maxim is aggressively focusing on large, high volume growth markets, we will sacrifice corporate gross margins for growth of sales and market share only if the overall result assures us of an acceptable growth rate of our corporate profit. Importantly, we believe that in order to produce sustainable long term attractive growth for our investors, from an annual growth rate which today is now over two billion per year, we need continued success of our long term strategy of expanding our served available markets, increase in our penetration at the world’s leading manufacturer’s of electronic equipment, and we need to achieve operational excellence especially in terms of customer relationships, on time delivery, and quality. Last quarter, Maxim recorded record revenues exceeding the company’s peak quarterly revenues of Q2 of the fiscal 2001 year. This was the peak quarter before the .com/telecom bust. A recovery exceeds most of our competitors when compared to their comparable peak quarter. This includes companies like TI, ADI, LTC, Nashville, Ontario, and SC Micro. We believe examination of growth rates over this time period provide the most accurate snapshot of the relative strength in performance of the major IC companies. Now in order to give you a flavor of what markets we are targeting with our R&D investments, I’d like to turn the call over to our two group Presidents, first Tunc and the Peruz, who will address these markets and some specific comments.

Good afternoon, I am Tunc Delugha and I am the group President for portable computing and instrumentation electronics. To start with, Q3’s order and shipment strength was broadly supported by multiple markets, products, and customers. Geographically, the US and Europe were strongest, whereas the background being down slightly in Japan, being unchanged compared to Q2. Of the 20 end markets that we track, 16 recorded sequential bookings increases including industrial, telecom, computing and peripherals, home entertainment, PDA’s or personal digital assistants, instrumentation and measurements, datacom, base stations, and data storage. Orders declined in only 4 end markets including, but not surprising, a decline in orders for notebook products due to seasonal factors. Now I’d like to describe some of our more exciting and equipment opportunities and a sampling of new products. We’ve introduced to penetrate these markets which will fuel our planned growth. For instance, for the base station market we introduced the world’s highest speed digital to analog converter. It is 2.3 gigabyte per second conversion rate and selectable frequency response, enable direct digital to RS synthesis without up converter mixers. Again, for the same market, our new (inaudible) power amplifier bias controller provides the highest level of integration and ease of use. Our high voltage analog technology combined with an embedded micro controller was key to realizing this product. For music and video personal media players, we introduced a highly integrated complete charger and six output power management solution. We were already in mass production before formal announcement since we developed the product in close conjunction with a leading consumer electronics company. Another significant for the (inaudible) equipment was a complete stand alone stereo audio processor for volume and tone control. This product is an excellent fit for multimedia notebook personal computers as well as digital music players. For flat panel televisions and monitors, we introduced a soft video anti listening filter that can be configured on the fly for standard or high definition format. This product also fits very well in cable and satellite set up boxes. Our low voltage complete 3 amp DC/DC converter integrates power mass fits to form a complete point of load supply for powering ultra low voltage processors and networking and telecom markets. Our recently announce to ultra low supply voltage high accuracy temperature sensors will work all the way down to 1.7 volt and have been very well received in market leaders like Cisco. Additionally, we rolled out a full line of step down regulators for Intel graphics and memory controller hubs and A&D Canon micro processors. Some of the products were also in mass production sooner than formal announcement at multi notebook PC manufacturers. Targeted at the PD and smart phone market, we introduced a companion of integration master to last quarter’s integration product line up. This makes the implementation of battery and accessory as integration hassle free since customers need not develop any additional handheld or battery software or hardware. It is now very simple and very cost effective for the handset to verify the origin of the battery before it is charged or used improving consumer safety. Our strategy of partnering with the top 20 electronics companies of the world is continuing to bear fruit in terms of design wins. We see growth and high performance in consumer markets such as handsets, personal media players, and digital cameras especially from Japan, Korea, and Taiwan and we have multiple projects in mass production or in design as a direct result of such partnerships. As planned, many of these products were in full production in less than 2-years and many even less than 1-year from product launch. I would say that this effort is bearing fruit very well right now. Next I’d like to hand the phone over to Peruz Pavarande who’ll talk about some of his markets and products.

Good afternoon, my name is Peruz Pavarande. I am the President for the multimedia, automotive, and telecommunications electronics group. As Tunc noted in his remarks, I also see exciting growth opportunities in many different applications. Some of the segments that provide us with such growth opportunities consist of automotive electronics, flat panel TV’s, handsets, and personal media players to name a few. I would like to take a minute to describe some of the recent product introductions that serve these segments. For LCD TV’s, we introduced a dynamic Gamma buffer IC which eliminates the need for many external components while providing substantial performance improvements over existing solutions. This product enables higher picture quality in LCD TV’s. For cell phones and portable DVD players, we introduced the family of video filter amplifiers that are the first devices in their class to incorporate automatic power down and power up modes to minimize power consumption. We introduced a family of CCFL controllers for back lighting of automotive displays. These products are tailor made for the unique demands of the automotive environment, such as low EMI, electromagnetic interference, to avoid interference with onboard electronics – a very wide dimming ratio that allows comfortable viewing in both day and night lighting conditions. For cell phones, we introduced a USB transceiver that was defined and developed for a leading cell phone manufacturer. This product allows the multiplexing of different signals through a single connector; thereby minimizing connector size and cost. This product has received wide adoption across many platforms of this manufacturer. As you can see from the various examples that have been given, Maxim’s broad product offerings address many needs within these growing and exciting segments. Maxim’s strategy is working closely with our top customers, has and will continue to provide new opportunities for us. Maxim’s close partnership with equipment manufacturers who are leaders and innovators within their fields, coupled with our world class design capability, state of the art process and packaging technologies allows us to bring to the market products that are optimized to meet the needs of our customers. The combination of our strong customer partnerships are technology and the breadth of our product offerings makes Maxim very important to our customers and position us very well to successfully compete in the analog mixed signal market. I’ll hand the phone over to Carl.

Thank you, Peruz. That’s the end of our prepared comments. We will now welcome your questions. Operator will you now please begin calling for questions.

Ladies and gentlemen, if you have a question at this time, please press the 1 key on your touch tone telephone. If your question has been answered and you wish to remove yourself from the queue, please press the pound key – one moment for our first question. Our first question comes from Michael Mantea, Credit Suisse

Manufacturing is not something that normally causes you problems, you had a couple of quarters in a row here that with problems it sounds like. There is something structurally wrong or do you think this is just a blip?

No, we are always having trouble with manufacturing. When you are trying to put three or four new processes into production every year and they have to ramp into high volume production you are going to have these problems, we’ve had them chronically. I think, Mike, you probably just don’t remember but this is unfortunately – the analog business that we are in, the one that we have defined is a lot more complicated then if you are building random access memories or micro controllers where you are running an established high volume process that’s four cornered and it’s been running a long time without new products or changes to it. That isn’t the analog business. So it’s nothing chronic, well it is chronic in the sense that is does happen on occasion but it comes with the territory pretty much.

And then, in looking at these businesses, like you are looking at the wireless now, what is the time frame that you are going to give them and to clean up or make the changes?

About 90-days – we are not going to entertain businesses or products that we can’t make acceptable, corporately acceptable, gross margins, we bite those bullets pretty quick and this particular one, I think you are eluding to, the one I talked about is pretty dramatic. When we got into that business, when we first launched that product, that handset sold to the carrier for 2 ½ times they are selling it today and it was not our judgment at that point, in fact we didn’t believe that CDMA had to compete with the low end GSM handsets but apparently Qualcom thinks they have to and I guess the carriers our there that have CDMA installed services, are having trouble selling their features over GSM. All I know is that today the handset sells for about $29-30 whether it is GSM or CDMA and that’s not what we intended it to be.

This is the last question from me, if you look at your growth into these new markets, how important is integration and how then following on with that – if you look at your various pieces of your product portfolio is there anything that you are missing to drive those integration trends, anything you need to acquire or go out and buy some talent?

This is Tunc; I think I should probably answer that. I think the integration continues to be very important in these markets, especially the ones that we have been targeting the last few years. We went through a little bit of growing pains maybe a couple of years ago, but those products were executing on much better nowadays and I believe we do have to make some improvements in some of our design systems and we are already doing that. And, with those, I think we are going to be very competitive because we do have an excellent mixed signal process technology and we have the design staff that many of which have already transitioned to being able to do these larger shifts. I think most of the pains that we had we’ve probably gone over and solved probably in the last two years or so.

In fact I would add that, this is Jack again, that we are at the leading edge of that transition. I don’t think you’ll find another mixed signal company certainly including TI that has the mixed signal stimulation and cad techniques as well as process developments. It has been a huge transition and most companies really haven’t made it yet or won’t make it.

Do you see any other reason to do any sort of acquisition in terms of either a customer base or revenue footprint or anything like that?

Let me answer, and you guys obviously if have comments make them – but one of the comments I would make Mike is that, we are constantly clearly design and tests and definition talent. I think last year or last quarter we added 40 or 50 technologists in the disciplines I have described. So where we can find a company or a small business that has a high percentage of talent we are always interested in that sort of an acquisition. We are less interested in acquiring overhead and facilities and that sort of thing, we are more interested in the intellect.

Our next question comes from Adam Parker, Sanford Bernstein

Jack, do you guys think you over shipped consumption at all during the quarter or how do you think your current production is lining up verses consumption right now?

Adam, how is our production lining up with consumption?

Yes…

Well last quarter we made $490 million worth of product, it is pretty much identical to what we shipped. I would say that we are running; right now we are running pretty much right at our consumption rate. I think consumption is probably a little below our booking levels right now but probably not much.

So you are building a little bit in the channel?

No, no that is not what I said.

I am sorry, say that again…

I said that I think that our booking levels are probably a little above the consumption levels. In other words, I think our customers are probably placing orders that are a little higher than what their run rates are. But, I think we are shipping at the consumption levels.

So, do you have a reason why you think the customers are doing that?

I think their businesses are good. I think they are excited about the opportunities to sell the plethora of new products that we introduced in the last year and a half. I think there are some exciting new products and they are doing well. They have a hell of a time forecasting the demand. They want to be able to build as many as they can and so I think where they are enthusiastic, they have placed orders probably with the idea that if they have to, they’ll carry little inventory. But, that really hasn’t happened yet.

So, your guess is that they will build a little inventory this quarter?

Which quarter?

The June quarter…

No, I don’t think so.

Alright – I am just trying to figure out the bookings above consumption, maybe I will ask it another way – are your lead times changing at all right now?

Lead times have changed, but I told you that I thought we would ship about 7% more than last quarter. I think that is probably a pretty accurate number as far as consumption of our products. And I think we booked more than a little bit more than that – we probably booked about $530 million, I think, something like that. Yes, I think it is pretty much in balance, Adam.

Ok that is a good thing I suppose?

Yes…

Our next question comes from Tom Thornhill, UBS

Jack, could you elaborate a little bit more on the long term strategy of pursuing some of these larger markets, I think we are seeing some of the impact perhaps in the gross margin line and the orders look pretty good, but can you quantify a bit where you are seeing order increases from this new strategy?

I’ll take that, this is Tunc again. As I mentioned in my earlier talk, we are working very closely with the top 20 manufacturers and some of them we started programs earlier than others obviously. But, if you look at some of the highly integrated products that we are doing from markets like cameras for instance is one, also handsets we are making many products that are highly integrated. Those are the basic markets that we’ve gone into initially in order to start the strategy. There have been many cases where some of these customers have come to us and said here’s a problem we’ve got in terms of either battery life or heat dissipation and they’ve asked us to make products which usually didn’t happen if you looked at us 5-10 years ago. Those types of changes are occurring right now and I just named a couple of those markets. But, I am confident we are going to start seeing it in other markets very soon as well.

And I think Tom; the other thing is, as look at what Tunc said, when they are asking you to solve problems, they are not asking you to take fewer margins, they are asking for a way to have a market advantage. We are very careful about that and I think you are eluding to something that could be a problem and that is if there isn’t discrimination in terms of the projects that you take and understanding why you are taking them, well then you can certainly get yourself trapped into unattractive low value added products. I would tell you that maybe the cell phone base station or receiver market might be one of those markets where maybe when people started to build that stuff it was more attractive and the value added was higher than it is today. But, I use that as an example because that is a case although later than we would have liked, where we just won’t participate if we can’t see that we are adding value that the people will pay for.

One follow-up on this same subject – if there is a, let’s say a top 20 target list of customers that you trying to focus on, can you give us some milestones on where you are in this process of engaging with them for example could you say that you are in discussions with 18 of the top 20 targets and you are already shipping to some number of those along those line, Jack is there anything you can do in terms of…?

Yes, we are more than well along. We have active projects with every one of them and we are much ahead of our plan two years ago. We are very excited about our success rate and the acceptance of Maxim as a major partner for them. What I said in my prepared remarks, we what need to do to support our end of this partnership is to continue to offer technology for sure and a manufacturing capability, but we need to continue to focus on quality of customer service, application support, these are the other elements that we are growing in that we weren’t’ at that level two years ago. So, we are trying to get better and are getting better in these areas. But, as far as having the relationships, we have them now and we are working with these people in very serious ways on major projects.

Are these projects going to require more below the line support along the lines that you just mentioned?

No, our below the line numbers are – we are growing at a good rate of sales on a big number. We are able to drop a lot of money to the below the line spending and still have our below the line spending go down as a percent. That’s the nice thing about being a $2 billion dollar company, you can participate in these projects and do research for these companies it fits within your budget and that is something that Maxim or TI can do where the smaller companies, when we smaller you just couldn’t do it. It would affect your ability to produce results.

Our next question comes from Chris Casso, Friedman Billings Ramsey

I just wondered if you could come back to your comments on the CDMA market – could you give us a rough idea of the size of that market and potentially how much inventory you are carrying on that. And, looking forward to your June quarter guidance, what have you anticipated with this market in the guidance it sounds like you may have a decision on what you are going to do with that business going forward.

Well the CDMA market if you look at the market itself it is about $170 million handsets a year that’s its size. And, about I would say about 40% of that market is the US which has the more sophisticated phones like dual band and so on and the rest of it is distributed between Korea and the emerging countries like India and China and so on. This particular issue we are having really is mostly focused on or concentrated in the, I would call the rest of the world market, which is the single band less sophisticated phones, Jack, I think he mentioned the prices at the beginning of the call. But, in terms of us, our focus really is to make sure that we do have our CDMA plans and we do have products that are good for the high end market and the trouble we are having more is the low end market. But quantifying that right now is going to be a little bit difficult so I’d rather defer that.

You know Chris, the other thing I’ll to what Tunc said is that actually, one of the unfortunate things is that without the data phone taking off big time, most of the growth is in this low end phone and the growth is occurring in China and India and other countries. The market for the higher end phones is not where the growth really is. I think that the time will come but it is not here yet. Now, we have chipsets for that higher end market as do others but right now having growth strategy based on growing in CDMA in competing against GSM has to be a cautious one because unless the CDMA architecture and the network system has advantages it is just not going to compete with GSM because the chipset is more expensive. Base band is more sophisticated, the transceiver is more sophisticated all of the advantages of CDMA having to do with low power and operating at a higher dense environment and having better data carrying capability don’t have a lot of value to somebody in Argentina or India. They would like more power – so it doesn’t play into those markets real well is what we determined. Now, we may be a voice in the dark here but this is our view of that. And to answer your question as to its effect on us, it’s not a – it is a tactical thing. It is two products and we weren’t in that business to start with; we were just getting into it. I think we shipped 500,000 phones or chipsets last quarter; it isn’t like it is a big deal. We were going to get into it. We had an opportunity and we have an opportunity to get into it but we are not going to.

And so I guess the message is whether or not you decide to continue pursuing that market – that is not going to have an effect on what your expectations are for June quarter revenue.

We don’t believe it will. It is not going to be material in my view. It is not even, as I pointed out, there could be, prices could go up we could reduce our manufacturing volumes and it wouldn’t be an issue, but if we stayed on the plan we were on, which was to ship 250,000,000 chipsets that would have been material.

Understand. And, just a follow-on – with regard to how you guys are managing operating expenses and understand the strategy of growing the top line a little faster here, how are you managing the operating expenses? Are you looking at this sort of on a quarter-by-quarter basis where you are setting some expense levels according to where you think the revenue is coming in? Is it different than that? Maybe you can provide us with some targets, what we might look at for in the next couple of quarters, maybe the next fiscal year?

Chris, you are talking about below the line spending, right – is that what you are talking about?

Yes…

That as I said many times in these conference calls and the speeches that I have made, is that below the line spending and our mixed signal analog company is not capital cash intensive. We have trouble finding things to spend money on. And as revenue grows, you are generating as a percent of sales, you are generating a large amount of cash and expense you could take if you wanted to. We can increase our spending and still have, as you can see from the last several quarters and the history of the company, history of Dallas Semiconductor – we took below the line spending from 37% of sales in their case down to now it’s at 27% or something like that and they are not suffering at all from budgeting and spending, they are spending whatever they can spend. If you grow sales 20% to 30% a year you are going to generate a lot more money than you can spend relative to below the line spending. The short answer is, no we are not constrained below the line.

Well maybe one final just to clarify that, you’ve been running at about a 44% operating margin irate n the past couple of quarters – is that reasonable in the next couple of quarters?

Well I said that is reasonable as far as I can see out.

Our next question comes from Romit Shah, Lehman Brothers

Yes, hi can you just elaborate on the comment on the late shipment at the end of the quarter. Did that have an impact on what you’re ultimately able to record in revenues in March?

No, it did not hurt hitting the revenue. That was just the comment on the linearity of shipments throughout the quarter – obviously revenues grew. You have to grow your revenues each of the three months and just from a relative standpoint, we grew in Q2 and in Q3 so again it is from a percent standpoint most of those revenues show up in the 2nd and 3rd months – you collect them in the following quarter. It was an accounts receivable comment.

Well it look like your strategy to build dibank inventory has paid off. Do you think the current level of inventory is sufficient to service your turns business in the quarter or will you look to build additional inventory in June?

Well we shipped about 66% of our turns last quarter and I think that was a little bit down from the quarter before that which I think was 69%. I think this quarter we need to turn about 62% to meet our objective. We think that we have the dibank and we will be able to build a product this quarter to accomplish that. Again, in mix is always the issue and in our business it is very hard to manage inventories efficiently because our customers don’t tell us very much in advance what they want and often times we guess wrong. The short answer again is yes, we don’t expect a problem this quarter.

Can you just clarify why are you planning to ship a lower percentage of turns booked? I thought the reason why you guys built dibank inventory over the last year was so you could ship a higher percentage of turns?

Well, there’s a mix issue. It depends a lot on what the turns are. We are conservatively guessing that we only have to turn 62% of it. If the mix comes in better then that we can turn more.

Ok fair enough. Last question – a few companies in your space such as Intersil and National have generated a lot of attention regarding their momentum in analog particularly over the last. Is it any more difficult today then it was in years past?

Well I think it is more difficult then it was around 2000 and 1999. I think there are more people focusing on new signal analog. I think that we have had no real gain in our stock price for five years. We have to do things to compete with companies who can provide an opportunity for gain or at least a perceived opportunity for growth and i. e.: start-up companies, we have to do things that will put up on a level of playing with start-up companies. Companies that had big stock run ups even if the stocks may be over priced today based on what somebody might think a normal PE ratio should be. If an employee or prospective employee is looking historically, and well gee whiz, this company’s gone up doubled it’s sales and doubled it’s stock prices and maybe it will double it again, they lose sight of the fact that the PE is 40:1 and it might also go down to 30:1. But again, all of those things taken into account, it probably does favor the start up or the company that has turned itself around so to speak, it’s had a big run up in the short term. We have competed very well, like I said, we had a net increase I think (I don’t remember the exact number) but I would say 50 people technical people this quarter and as many last quarter and we expect to hire 80 people this quarter. Our professional head count is going up. I mean our technical professional head count.

Our next question is comes from Ross Seymour, Deutsche Bank

Just a question on the gross margin and it is helpful that you gave those three reasons as to why it dropped quarter-over-quarter. I don’t know if Carl is the right one to answer this – but, you gave the ½ point relative impact from the handsets CDMA business that you talked about and then you mentioned that the manufacturing plan was missed by about $3 million. Am I doing the math right to assume that that $3 million basically is another ½ point so the long term market strategy contribution to the drop in gross margin basically was only about 10 basis points?

Well actually the FAB miss was more like .7% of gross margin and the answer is yes, Ross. Those are the operational things that happen. I can’t promise you that they won’t happen again someday but they are not things you trend.

Well then I guess going forward – that color is helpful- but, going forward it sounds like you are pretty confident in the fiscal 4th quarter and 1st quarter that that .7$ should be reversed by some amount. Should we expect the gross margin to head up so that long term contribution of roughly 10 basis points out of the 120 would be applied in the next quarter but that would be overcome by the FAB’s being more efficient?

Well I think your general extrapolation conceptually is correct. Those two phenomena should disappear by Q1 for sure and I would expect not to have that point and a half or whatever it is of gross margin loss there. I expect that to come back.

Switching over to the revenues side of things – on the last conference call you talked about growth of at least 7%, did anything change during the quarter that was surprising to you to cause it to be at 7% instead of somewhat higher or what that just a general statement that at least qualifier?

Last quarter?

Yes, on your last conference call.

I am sorry; would you ask that question again?

Sure, when you gave your guidance last quarter you expected that the revenues for the March quarter would grow at least 7% sequentially. And I was just wondering, if there is anything that occurred during the quarter, maybe beyond the CDMA business, that caused you to come in right at the 7%, thereby making that at least statement appear like you might have expected something more that didn’t occur.

What I expected that didn’t occur is that I expected our bookings to be in a better mix then they were. We booked stuff that we didn’t have in dibank so they could have been higher.

Our next question comes from Bill Lewis, JPMorgan

Maybe a housekeeping thing first and then a question – typically I think you’ve given the Dallas bookings and how the units sit there. Could you comment on those in the March quarter?

Dallas bookings in the quarter before were I think up 18%, I think this quarter they were up 4%, if I am remembering it right. They booked, I can look that up.

You are correct; they are up 3% in the Q3 time frame.

And what were they in the Q2 time frame?

And they were at an 18% increase in Q2.

20% of our revenue and 20% of our profits were from Dallas.

Ok and just on the wireless – that was very helpful on the handset discussed around (inaudible), could you similarly comment on the infrastructure market? Are there any increased pricing or margin pressure that you are seeing for 3G on the infrastructure side or is it primarily contained on the handset side?

No, I think that the 3G market is a good market. I think there is value added for all suppliers in that market. The problem is that it hasn’t grown yet and whether it will reach into this volume that Tunc talked about in the other question; I think there could be some over estimation in the size of it because it has to get into these other countries like China and India to get the volume that people are projecting but we think it is a high margin business right now. Why don’t you answer the question, Tunc.

You are asking about the infrastructure markets, is that correct? Yes, so the infrastructure market in terms of base station is basically is actually we see a lot of growth in there and for my meetings I have had and we really have not seen enormous amount of pricing pressure. If you provide value, you get paid for it.

I didn’t answer the right question – the base station guys work for me, I can comment on that. We’ve seen a lot of design wins and I think linear technology talked about the design wins they’ve seen also. We are not seeing anything very much going into production right now – we think that they will in the future. I would not say that the telecommunications equipment market is exploding right now, that’s not happening. We think it will grow in the future but it is not right now.

And within the segment that we address, again we are not seeing margin pressure on those products.

Our next question comes from Tore Svanberg, Piper Jaffray

Yes, good afternoon. If I look at your guidance, it looks like you will get about $1.9 billion for fiscal 2006 and I assume that is fairly in line with what you were expecting for consumption. Do you have a number for consumption for 2007?

Yes, we think, Tore, that we will ship and it will be consumed in the neighborhood of $2.4-2.5 billion.

And could you also comment a little bit on bookings trend so far and this current June quarter?

What did I say last time, Tore, about that?

Well, I still have to try.

I know, I will, I’ll comment – again, I won’t stand behind any extrapolations. Our bookings are up about 30% from the first 4-weeks of this quarter verses the first 4-weeks of last quarter. But again you have to remember, in the first 4-weeks in that same period last quarter we had holidays that would distort that number. But, yes business continues and our opinion continues to be good.

And finally, if you look at your $0.48 EPS guidance, I think that would imply 30% earnings growth year-over-year, which I think goes with your target, how do you see that for the foreseeable future? Do you think you could stay at that pace?

A broken record again, I think Maxim will grow 20-30% year-over-year for as many years as our plan calls for that we have planned.

Our next question comes from Maggie East, Raymond James

It’s Steve Sayed calling in from Raymond James – I think they got my name wrong there a little bit. I was wondering if you could comment little bit just on opportunities in the data converter market. You mentioned one product but just in terms of a general strategy? Is there a specific direction you want to head with that, there’s been some more competitors coming into that market, I am just curious how that has impacted your – how you are looking at that?

Well if they are going into the data converter market then they made a big mistake. Five years ago that might have been a good idea. The data converter market as a stand alone market doesn’t exists. It exists but it is not what people are buying. Data converters today are embedded in application specific circuits and our data converter technology is significant. Both low frequency and high accuracy converters and high speed converters and we and analog devices are the leaders in the world in that area, but most of what we do with them is embed them in other things such as: analog front ends for cameras…

…smart battery products and many other applications in automotive.

We build them around micro controllers, embedded controllers. You might want to comment on some of the other things we do with them.

For electronic meters for power readings, many, many applications; tire pressure readings, all kinds of applications in automotive.

And data converter technology is also used in multimedia applications for Kodak, not only for audio but also for video as well.

Almost nothing that we do, doesn’t have some sort of a converter in it; they are important as a core element but we don’t think that the stand alone (inaudible).

We also have a new set of products that we actually began limited sampling for instance in power management where our analog (inaudible) are used for digital power.

All of the transceivers that are made have extensive converters in them, high speed converters. The base stations are possible in this direct conversion technology is possible because of high speed converters. They are everywhere, but they are already built in to very application specific (inaudible).

And so does that change your sale at all now that you are focusing somewhat on the top 20 so to speak or is it just built in application specific that is pretty much how you are doing it anyway?

Well that is what these people want. That is why we are important – we can do this. We can do this integration. There isn’t another company in the world that can do the level of mixed signal integration that Maxim can do with high performance converters, battery management circuits along with flash memory and micro controller. That is our strength and that is very valuable to these major corporations.

Our next question comes from David Wu, Global Crown Capital

Yes, good afternoon. I have a question actually about the notebook business and I was wondering whether there has been a lot of talk, well everybody want to have a slice of the Napa platform market and also the AMB notebook market. I was wondering whether that market which you dominated a couple of years back has now turned into a pretty competitive market and whether the same thing is going to happen there for you as it has happened in the main chipset business? Tunc Delugha, Group President: You said something that was interesting. You said it is a market that we dominated two years ago, we still dominate that market. It really hasn’t changed in terms of domination we are the number one supplier. But it is true that some of the sockets have become pretty competitive. But we continue to apply our engineering resources to areas that we feel there is value added inside the notebook. It seems to me like from conference calls, everybody is claiming victory on the Napa platform. So are we. We are going to claim victory as well. I think in terms of the notebook market we have the largest market share and our strategy in that market is to maintain it but at the same time expand to other functions in that market which we have successfully been doing. For instance, getting sockets and market share in smart battery, getting more functions in the monitor that is hooked up to it in notebook computers, so we are at the market that continues to be important for us and I think that our goal is to maintain in the areas that we are dominant and then expand the by looking at getting into other sockets that are inside of the notebook. We have got many design wins in audio, maybe Peruz you can comment on that too.

Sure I mean the audio experience is obviously is a very important part of the notebook these days and so we have put a tremendous amount of effort over the last several years in developing some very innovative products that solve a lot of problems, they provide a lot of value added to our customers. And I think we are addressing a lot of different needs within that notebook market. The audio is one of them and there are many others that have been mentioned here, temperature sensing is another, and so on.

Yes, but that business is still an attractive business for you.

The notebook?

Yes,

Equipment you mean?

No, the notebook power management and smart battery and all that. Tunc Delugha, Group President: Yes it is.

Our next question comes from Suma Dehonda, Banc of America Securities

A couple of questions - Jack, can you give us some idea if you were trying to disaggregate the growth that you are seeing in your business from this new strategy of addressing the higher volume segments verses the older baseline business. How much do you think that is contributing to growth on a sustainable basis or is it too soon to tell (inaudible)?

You know that is a good question. We think that it is contributing materially. I looked at, I commented on this briefly about over the last 5-years how much have we grown relative to our competitors taking the peak year in the 2nd quarter of 2001 and where are we from there. And, if you just took Maxim out of that number without adding Dallas in, Dallas hasn’t grown. Actually they haven’t grown at all from that time, they just barely recovered. But, we’ve grown 38% from that peak. Now if you look at where we’ve grown, if you look at our product mix and our customer base, it’s changed dramatically. It probably changed by at least 50% both in product mix and in customer base. That I think is what I am very interested in seeing. We are a much different company today then we were 5-years ago and it has to do with focusing on and being important to bigger pieces of equipment and being a bigger part of the equipment and I will leave you with that. But, our products and our customers have changed over 50%. Suma Dehonda I guess as a follow-up on that along with all the other excellent data that you provide, is there some way you could think about providing a sort of a segment of breakdown of revenues that we can try to triangulate what is occurring within your strategy. For example: maybe what you would call your standard catalog verses more ASSP template portfolio in your overall portfolio product.

We are going to have an analyst day or an investor day at the end of May and Tunc and Peruz and a couple of other people are going to be speaking and I am sure they can provide some of that sort of insight. That is a good question and we’ll kind of and they’ll try to do some of that.

A couple of follow-ups if that’s ok? You talked about 16 out of your 20 end markets growing in the quarter, any sense of (inaudible) spent in general and industrial and communication infrastructure and some evidence that that is going to pick up – are you seeing some more of that or not really?

This is Tunc. I should answer that question. So, when I look at that it is pretty broad. I can’t say that one market was completely dominating or was much larger than others, it really is pretty broad.

Let me see if I can comment on that. Rather than looking back one quarter, if you look back two quarters there are some noticeable things. I mean our industrial market has grown 50% in the last 6-months. The instrumentation in (inaudible) market is growing 100% in the last 6-months. Networking and datacom has grown over 35%. Base stations, although the number is not big enough yet, but it’s grown 70% in the last 6-months. And the digital camera market that’s grown about 60% and that pretty much describes where the major growths were.

And two housekeeping questions – first is there a cancellations number you could share with us and then second the RSU’s related charge you have talked about, is that occurring in (inaudible) I was wondering if you could comment on that on and how long is that?

The cancellations were about $9 million . Less than 2%, it was a very small number this quarter.

And what did you want on the RSU’s or exchange program? What was the question?

I guess is that going to occur, how many quarters is that going occur?

On the exchange that expense will occur over the next 6-quarters starting in Q4.

Our next question comes from Titus Menses, Jeffries and Co.

I am calling on behalf of John Lowe. Three questions if I may, firstly just getting back on the gross margins what was the weakness a result of in Q3? I may have dialed in late and missed some information, but if you could just throw some color on that I would appreciate that a lot.

I’ll tell you what why don’t you listen to the tape of it because I think everybody else has heard it already. We explained it, there were two elements one was a manufacturing issue and one was a couple of products that we are going to discontinue. But, there is more color on that in the text.

Give us an idea what trend do you see for gross margins on a GAAP basis going forward?

The GAAP gross margins will trend as the non-GAAP gross margins. They will trend together; they will correlate the GAAP and the non-GAAP gross margins. They will not diverge.

Alright so you see them staying the same along a GAAP basis or pro forma verves margins remain relatively stable for the end quarters. What I am trying to find out is going forward, gross margins being staying at 69% or checking up slightly?

Well we discussed that earlier in this call. I’d like to not repeat that. The answer we said we had some aberrations this quarter and we thought those would go away and during the next couple of quarters we should pick up a point 1 ½ to 1 point of gross margins.

And the last question I will ask is about the ESO. Can you give me some color, do you think ESO going forward into the fiscal 2007 era will be similar to what you are spending this year or will it be higher or lower?

We don’t know – I don’t have an answer for that one.

Our next question comes from Louis Garrity, Morgan Stanley

Good afternoon, just on the handset issue it sounded like you were talking about a transceiver but I am sure you have a lot more content in those phones, power management, battery chargers, etc. So, I am just wondering did you see the same pricing pressure on those products outside of the transceiver area as the ASP of the handset went down.

No, not really. You are right, Louis, there is our power management content is about equal – well that is not right. It’s about a half of the amount of the transceiver. But there is no pressure on the power management or battery management, the pressure is in the transceivers and the base stations.

And do you expect to be able to keep that business if you exit another part of the phone you are in?

It is not a big deal, it is a small number.

Just in general, sort of backing up some of the best growth in the handset market has been coming from emerging markets that need those type of really low ASP so if we just think about this in other markets in consumer electronics, why wouldn’t we see the same sort of thing happen say in MP3’s, you pick any product area.

I think you have - ok this is going to get into it; a subject and an area we don’t have any ownership but, I don’ think that the handset manufacturers and the carriers necessarily understand some of the same things that maybe an Apple computer or an HP or Sony understand about product definition and defining markets and understanding what profitability is. I think that is the basic difference. The carriers and the handset manufacturers are not, they haven’t demonstrated that kind of performance. I think they don’t manage their profitability that well. With regard to the situation that I described, Louis, there is a pretty logical reason for why CDMA prices are where they are; they are there because that why they sell the GSM phone for.

Just one question on the balance sheet – the cash balance is flat but the interest income was down a fair amount. I was just wondering if there was something else in that line that I might have missed given that interest rates are going up?

Actually, if you looked at our average cash balance between Q2 and Q3, that average went about $125 million. That has to do with the repurchases we did in Q2. If you recall we did 9.2 million shares. It is just an average cash balance the actual interest rate, you are right, is kicking up somewhat. But, our cash went down and it came back up with the average was lower.

Our next question comes from Jeff Rosenberg, William Blair and Co.

Hi I just have one question – Jack, when you talked about shipping 62% of the turns you get this quarter, I think that implies you got a pretty specific forecast of what you expect turns to grow this quarter. Can you say what that is? Jack Gifford, Chairman, President and Chief Executive Officer: Actually, Carl just corrected me – we are going ship, I think we are going to ship 66% of turns this quarter not 62% - I am sorry about that. But, your question was what? What was your question again?

Just do you have a forecast of what you expect turns orders to do; do you expect them to grow sequentially.

All I can tell you, I have no idea expect I know for 4-weeks our turns are up over 20% for what they were 4-weeks of last quarter. So, right now if I had to extrapolate, which I won’t, we are not worried. We think our turns are going to be at least as good as they were last quarter which would be fine.

If they are flat and you get 66% that would get you there?

No, I can’t do flat. They’d have to do more if they were flat.

Our next question comes from Ramesh Misra, CE Unterberg

Good afternoon gentlemen. First a quick bookkeeping question – Jack, what were factory utilization levels at your FAB’s and in the backend during the quarter? Jack Gifford, Chairman, President and Chief Executive Officer Yes, the FAB’s operated at 61% utilization last quarter; the end of line operating about 81%.

And then, as you get into these new product areas, this may be hard to gauge as to where your margins will eventually fall out, but as you make that decision to pursue these product opportunities and how much of a hit are you willing to take on gross margins at the onset of the expectation that it will bounce back up?

We don’t do that. We don’t bet on things getting better. We’ll start off good, but we are out of there – that is wishful thinking. It will never get better so we’ve been in business for a long time, sometimes we make mistakes and make bad judgments but we are like a trader on the Chicago board of trade. We are in it or we are out it if it does meet our goals.

So are still you in the high 60% range at that onset?

On the onset of what?

As you pursue those new product areas.

Yes. Anything that calculates out of the margin much below that we really will look hard at all of the other factors. It is not that we don’t launch products that have margins in the low 60’s, but when we do we are very, very careful of that and they don’t – I guess what I can probably say there are very few exceptions. Every product we launch has a margin above 60%. It is just that some of them do not end up there by the time they get introduced or even after getting introduced. That is what we talk about in terms of managing our business. We are not married to something if we invest money in developing it, if it doesn’t turn out the way it is supposed to we divorce it.

And then finally, I think Tunc might have mentioned this very briefly – your cross-town rival has put in some more investment into the digital power/integrated power arena, I wanted to get a sense as to where Maxim was going in that arena.

Well, first of all, digital power area is still in its infancy. The only interest that we seen from our customers or from some customers, were very high end applications in the US and we really haven’t seen too much of it in other countries. But, it is an area where we thought was important for us and we have developed our first generation products and actually we showed it at APEC and we have begun sampling it. It really was the result of not really acquiring the technology. We developed it in-house because we already have invented micro controller technology and as I mentioned before we have data converters so all it needed was to listen to the customers and put together a definition and it ended up with a product that we’ve seen very good response to it at the conference. We do have a solution to that market but is it going to become mainstream next year, probably not.

The other thing is that it is a selected market and as a general solution is probably not cost effective it is has to find its place and where it can be cost effective and that’s its biggest problem. It is versatile and that’s why we are selling it and designing it, it is because the customer needs this programmability in wants to really configure software configure the functions and they are willing, but they are giving up they are not getting the lowest cost solution. So, it’s not a one stop shopping thing. You have to know what is what and who you are building them for and for what application. I think the other thing that LTC talked about which was their module business and the success they’ve had on that and I think that is a good business. Modularizing some of the power management stuff they do.

Our next question comes from Demona Jenkowsky, Goldman Sachs

Hi, thanks for taking my call. I just wanted to follow-up on your previous comments on some of the end markets having grown very significantly over the 6-months ago; I think you mentioned things like industrial networking, base stations, etc. Is there anyway you can point out how much of that growth, do you think, has been due to some of your new product introductions from the last 2 or 3-years kind of hitting their stride and starting to ship to customers verses how much was due to perhaps some of the end markets rebuilding from very low levels of inventory.

This is Peruz speaking. I think that I haven’t really quantified this so it’s going to be a little bit of a guess from this point, but we are seeing all three combinations or effect or methods that you talked about. One of them is, and in all these segments they have been focused markets (inaudible) and we’ve had a lot of product development in them. I would guess that, I would say that probably half the growth that we’ve seen has been because of the market growth and the other half has probably been because of our market share growth. But, that would be my answer to that – I would refer to Tunc if he has another view of that.

Well in some of the ones that I do are in technology. For instance the camera market, which is one of the ones that Jack mentioned – that’s really a combination of that market growing although that the growth of that market is stabilizing. It is mostly because we’ve gained a tremendous amount of market share and I think that in the other markets, it is more difficult to say that one I know for sure.

I would think the telecom market; we got ourselves over the last 4-years design a lot of telecom equipment, and it was such at a low level of consumption, no equipment being bought at all. Now they started to build it. So we went from having not much of an install base to having a good install base and so even though the business is a small business we’ve seen some growth there. But, it’s not – again, it’s not one of the bigger numbers. The industrial instrumentation markets, those are growing actually and we are growing with them. I think I would be misstating to say that we had some remarkable market share gain, and not a lot of people participating in those markets; there are 3 or 4 companies. I think we’ve all grown well in those markets, linear technology, ADI, (inaudible). So that is more of the use of electronics worldwide is that industrial market. The automotive market has been a big emerging market and I think that most of us have yet to see the financial impact of the growth in that market, that is yet to come.

That is very helpful, thank you for that clarification. And then, related, your bookings I think were up about 6% last quarter. Can you maybe split that up between your OEM or direct bookings verses the distributor bookings?

I think they were up 7% - bookings are up 6% right? You may have to call back in.

Yes, no problem. And just a last quick one on the model – maybe for Carl, can you just comment on your diluted share count going forward and what is the impact of the stock option or receive exchange on that?

Ok, the option exchange program again you have the $2.4 million RSU’s that were granted. Those will meter in over the 4 and 6 quarters as they fit. You can just maybe straight line that number if you’d like. And then the rest has to do with how many exercises we have verses the repurchase program and what the stock prices are (inaudible). From an RSU and the exchange program, I would just straight line that number in.

Our next question comes from Craig Ellis, Citigroup

On the capital expenditure program, I think going into the first calendar quarter we were looking for about $130 million for the fiscal year. The guidance in the current quarter put me in that picked up. What are you seeing in the business that is causing it to raise capital?

We are going to spend; actually we spent about $65 million last quarter, this quarter extended. We’ll spend about $100 million in the quarter we are in right now and what we are doing is outfitting our FAB’s to handle the FY07 number of $2.4 billion . So we need to add equipment there and you have to do that 6-months in advance, so that is what we are spending money on right and paying for test equipment.

Any preliminary (inaudible) what we should expect in fiscal 2007?

No, I don’t have the number right now, but I would estimate it to be about what we did last year; maybe not that much in the FY06 year.

And then for the $100 million in the current quarter, how would that break down between front end and back end?

It is half and half.

Our next question is a follow-up question from David Wu, Global Crown Capital

I just wondered one thing, in terms of the orders that you are getting from both distributors and OEM’s have they changed in terms of the profile in terms of how far they give you orders out or are they basically the same profile? In other words, most of the orders are in the next 60-days and there is not much beyond that or have they changed in the last quarters?

No, they haven’t, David. The orders are basically all for turns in the next quarter and that is it. Nothing beyond 6-months and most of it is within 4-5-months. Actually, they are requesting deliveries of 8-weeks; that is the average delivery request that we get on our orders. That moved out about a week from last quarter. It was 7-weeks last quarter.

So they are not laying out longer orders because the lead times, I guess in the foundries are getting tighter.

The foundries, as we understand it, we are told their pretty much on allocation, but a lot of the (inaudible) companies have bought capacity so they are pretty much – that could be a problem but it is not a problem for us right now and there is no panic on the part of our customers right now as you pointed out. They are placing orders still within 4-months.

Our next question is a follow-up from Tore Svanberg, Piper Jaffray

Yes, just a quick one for Carl – Carl I think you gave us the pre-tax number for stock compensation expenses this quarter. Should we still assume about a 33% tax rate Carl Jasper, Vice President of Finance and Chief Financial Officer: That is correct. Operator, there are no further questions in the queue at this time.

Thank you, Operator. This does conclude Maxim’s conference call then, and we would like to thank you for your continued participation and interest in Maxim. Copyright policy: : THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. : THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.