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

Operator

We will take our next question from Ross Seymore. Go ahead. Your line is open.

Ross Seymore, Deutsche Bank

I just want to switch the conversation over onto the cash usage perspective. You raised the dividend, which is great. Congratulations on that. Can you just talk about what is your goal into returning cash to shareholders is? Specifically, I wanted to get into the percentage of your ongoing cash flow and even the cash that is on your balance sheet that is domestically held. It seems like every dollar of your domestically held cash flow is going back to shareholders, but the vast majority of that is going to be in the dividends, so any color around your framework there would be helpful.

Paul Coghlan

The percentage of our cash that originates domestically is probably somewhere in the 70% to 75%. The amount of that 70% to 75% needs to fund the corporate expenditures, so we can’t use our offshore cash to pay the dividend and we can’t use our offshore cash to buy back stock. We have to use our domestic cash to do that. If you were to look at our balance sheet, you would not get the same proportion — 70% of the cash being onshore and 30% offshore — because just a few months ago, we paid off a big piece of debt. We extinguished the debt. So on our balance sheet may be as little as 10% or 15% of our cash is onshore, whereas cash that gets generated is dramatically higher percentage of that. So, when we look at the cash we have, we don’t need to accumulate more cash to pay off debt as we had been doing for several quarters. And I’ll remind you, that was for several years, that was to pay off debt that was incurred to buy back 27% of their shares outstanding. When we look at we no longer have that need for cash, and we look at the dividend and repurchasing of shares, our top priority is to continue to have a strong dividend and to increase it every year. Our concurrent, but somewhat secondary priority would be to buy back stock.

Ross Seymore, Deutsche Bank

Thank you. Shifting gears a little bit to a different topic. The Comm.’s business, you answered earlier the question about what was going on in comm. infrastructure to at least take your best at it, as you joked about. Out of that 19% or 20% of sales, can you give us a rough estimate on how that splits between wireless infrastructure and, I guess, wireline would be the other category.

Paul Coghlan

This is a guess, because we accumulate the data by customers. As you might imagine, some customers, you could pick a large Chinese customer and that customer be both in networking and wireless infrastructure for example. But with a rough cut my guess is wireless infrastructure is maybe 40% of our Comm.’s and networking and the cloud and all of those good opportunities for us at roughly 60%.

Ross Seymore

Perfect. Thank you.

Paul Coghlan

60% of our business in communications.

Ross Seymore

Got it. Thanks again.

Paul Coghlan

You’re welcome.