TI reports financial results for 4Q11 and 2011 Conference call on TI website at 4:30 p.m. Central time today

www.ti.com/ir

DALLAS, Jan. 23, 2012 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today announced fourth-quarter revenue of $3.42 billion, net income of $298 million and earnings per share of 25 cents.  EPS includes 16 cents in charges associated with the company's acquisition of National Semiconductor and 7 cents in charges associated with the closure of two older manufacturing facilities (details below).

"Revenue in the fourth quarter was higher than expected across all our major product lines, reinforcing our belief that we're at the bottom of this downturn.  I'm pleased to say that despite the downturn and the lower factory utilization that came with it, cash flow from operations was strong and well above levels as compared with similar points in prior downturns.  Our strategic focus on our core businesses and efficient investment in capacity are key to our strong generation of cash," said Rich Templeton, chairman, president and chief executive officer.  "As we move into 2012, we enter the final phase of our planned exit from the baseband market, and thus further tighten our focus on Analog, Embedded Processing and Wireless."

In addition to financial results, TI also announced plans to close two older semiconductor manufacturing facilities in Hiji, Japan, and Houston, Texas, over the course of the next 18 months.  Production from these sites will be moved to other more advanced TI facilities.  Combined, these factories supported about 4 percent of TI's revenue in 2011, and each employs about 500 people.  The total charge for these closures is estimated at about $215 million, of which $112 million was incurred in the fourth quarter and the remainder will occur over the next seven quarters.  Annual savings will be about $100 million once the transition is complete.  "These sites have made strong, high-quality contributions over the 30-plus years each has operated," said Templeton.  "They demonstrate the tremendous cash flow potential associated with analog products, where factory lives are literally measured in decades.  However, we're now at the point where each of these sites requires significant upgrades, and it makes financial sense to shift production to larger, more advanced facilities."

 

4Q11 financial summary

Amounts are in millions of dollars, except per-share amounts. 

 

 

 

4Q11  

 

 

4Q10  vs. 4Q10

 

 

3Q11  vs. 3Q11

Revenue

 

$ 3,420

 

$ 3,525

-3%

 

$ 3,466

-1%

Operating profit

 

$    365

 

$ 1,230

-70%

 

$    814

-55%

Net income

 

$    298

 

$    942

-68%

 

$    601

-50%

Earnings per share

 

$     .25

 

$     .78

-68%

 

$     .51

-51%

Cash flow from operations

 

$    970

 

$ 1,230

-21%

 

$ 1,140

-15%

TI closed its acquisition of National Semiconductor on September 23, 2011, and from that date began to consolidate the results of the acquired operations into TI's Analog segment under the name Silicon Valley Analog.  Total acquisition-related charges in the fourth quarter are $256 million.  As required by the acquisition method of accounting for business combinations, these charges include $103 million in cost of revenue attributable primarily to the fair value write-up of acquired inventory.  The remainder, $153 million, includes amortization of intangibles, retention bonuses and restructuring costs.  

Results also include $112 million of restructuring charges associated with the planned facility closings announced today.

In addition to the impact from acquisition-related charges, TI's fourth-quarter 2011 gross profit was negatively impacted by costs associated with low levels of factory utilization in the quarter, as well as charges for Wireless baseband inventory.    

Operating profit declined from a year ago primarily due to acquisition-related charges, lower gross profit and restructuring charges in the fourth quarter of 2011, as well as a gain on the sale of a product line in the year-ago quarter.  Compared with the prior quarter, operating profit was lower primarily due to higher total acquisition-related charges and restructuring charges, as well as lower gross profit.  

TI's annual effective tax rate declined to 24 percent from the previously estimated 25 percent.  Results include a cumulative adjustment for this rate change, as well as a net discrete tax benefit of $11 million.

 

4Q11 segment results

 

4Q11   

 

4Q10    vs. 4Q10

 

3Q11    vs. 3Q11

Analog:

 

 

 

 

 

 

 

       Revenue

$ 1,695

 

$ 1,518

12%

 

$ 1,557

9%

       Operating profit

$    414

 

$    486

-15%

 

$    414

0%

Embedded Processing:

 

 

 

 

 

 

 

      Revenue

$    442

 

$    538

-18%

 

$    539

-18%

      Operating profit

$      12

 

$    143

-92%

 

$    113

-89%

Wireless:

 

 

 

 

 

 

 

      Revenue

$    722

 

$    767

-6%

 

$    580

24%

      Operating profit

$    112

 

$    180

-38%

 

$      78

44%

Other*:

 

 

 

 

 

 

 

      Revenue

$    561

 

$    702

-20%

 

$    790

-29%

      Operating profit

$   (173)

 

$    421

-141%

 

$    209

-183%

 

 

 

 

 

 

 

 

*  Includes total acquisition-related charges of $256 million and restructuring charges of $112 million in the fourth quarter of 2011, total acquisition-related charges of $154 million in the third quarter of 2011 and a gain on the sale of a product line of $144 million in the fourth quarter of 2010.

Analog:  (includes High Volume Analog & Logic, Power Management, High Performance Analog and Silicon Valley Analog) 

  • Compared with the year-ago quarter, revenue increased due to the inclusion of Silicon Valley Analog revenue.  High Volume Analog & Logic and Power Management were about even, while revenue from High Performance Analog declined.
  • Compared with the prior quarter, revenue increased due to the inclusion of Silicon Valley Analog revenue for all of the fourth quarter compared with only a few days in the third quarter.  Revenue from High Performance Analog, Power Management and High Volume Analog & Logic declined. 
  • Operating profit decreased from the year-ago quarter due to higher operating expenses and was even with the prior quarter.  Operating expenses were higher in both comparisons due to the inclusion of a full quarter of Silicon Valley Analog results.

Embedded Processing:  (includes digital signal processor and microcontroller catalog products that are sold across a wide variety of markets as well as application-specific products that are used in communications infrastructure and automotive electronics)

  • Compared with the year-ago and prior quarters, the decline in revenue was primarily due to lower revenue from products sold into communications infrastructure applications, as well as lower revenue from catalog products.  Revenue from products sold into automotive applications increased from the year-ago quarter and was about even with the prior quarter.    
  • Operating profit declined from the year-ago and prior quarters primarily due to lower gross profit.

Wireless:  (includes OMAP™ applications processors, connectivity products and baseband products) 

  • Compared with the year-ago quarter, revenue declined primarily due to baseband products.  Revenue from connectivity products also declined to a much lesser extent.  Revenue from OMAP applications processors doubled over this period. 
  • Compared with the prior quarter, revenue increased primarily due to OMAP applications processors.  Baseband and connectivity product revenue increased to a lesser extent. 
  • Operating profit decreased from the year-ago quarter due to lower gross profit.  Operating profit increased from the prior quarter due to higher gross profit.  Gross profit in the quarter was negatively impacted by charges for baseband inventory.

Other:  (includes DLP® products, custom ASIC products, calculators and royalties as well as products sold under transitional supply agreements associated with recently acquired factories)

  • Compared with the year-ago quarter, revenue was down due to declines across all areas.
  • Compared with the prior quarter, revenue was down primarily due to the seasonal decline in calculator revenue and lower DLP revenue, as well as lower custom ASIC revenue.   
  • Operating profit decreased from the year-ago and prior quarters primarily due to higher acquisition-related charges, a gain on the sale of a product line in the year-ago quarter and restructuring charges in the fourth quarter of 2011.

 

4Q11 additional financial information

  • Orders were $2.86 billion, down 9 percent from the year-ago quarter and down 7 percent from the prior quarter.
  • Inventory was $1.79 billion at the end of the quarter, up $268 million from a year ago and down $177 million from the prior quarter.  The increase from a year ago was primarily due to the company rebuilding inventory to support higher customer service levels with shorter lead times, as well as inventory associated with the acquisition of National Semiconductor.  The decrease from the prior quarter was primarily due to recognizing the fair value write-up of inventory acquired from National Semiconductor as it was sold, as well as lower production loadings and a charge for Wireless baseband inventory. 
  • Capital expenditures were $152 million in the quarter compared with $301 million a year ago and $193 million in the prior quarter.  Capital expenditures in the quarter were primarily for assembly/test and wafer manufacturing equipment.
  • The company used $300 million in the quarter to repurchase 10.4 million shares of its common stock and paid dividends of $193 million.

 

Year 2011 financial summary

 

 

2011

 

2010   vs. 2010

Revenue

 

$ 13,735

 

$ 13,966

-2%

Operating profit

 

$   2,992

 

$   4,514

-34%

 Net income

 

$   2,236

 

$   3,228

-31%

Earnings per share

 

$     1.88

 

$     2.62

-28%

Cash flow from operations

 

$   3,256

 

$   3,820

-15%

Results include total acquisition-related charges of $426 million in 2011 and a gain on the sale of a product line of $144 million in 2010.  Results also include restructuring charges of $112 million in 2011 compared with $33 million in 2010.

TI's operating profit declined in 2011 primarily due to lower gross profit and higher total acquisition-related charges, higher operating expenses that resulted primarily from the inclusion of Silicon Valley Analog, and a gain on the sale of a product line in 2010.  Gross profit was negatively impacted primarily by a combination of lower revenue, lower average levels of factory utilization, acquisition-related charges and inventory charges.   

 

Year 2011 segment results

 

2011

 

2010   vs. 2010

 

Note

Analog:

 

 

 

 

 

 

      Revenue

$  6,375

 

$  5,979

7%

 

(1)

      Operating profit

$  1,693

 

$  1,876

-10%

 

 

Embedded Processing:

 

 

 

 

 

 

      Revenue

$  2,110

 

$  2,073

2%

 

(2)

      Operating profit

$     368

 

$     491

-25%

 

 

Wireless:

 

 

 

 

 

 

      Revenue

$  2,518

 

$  2,978

-15%

 

(3)

      Operating profit

$     412

 

$     683

-40%

 

 

Other:

 

 

 

 

 

 

      Revenue

$  2,732

 

$  2,936

-7%

 

(4)

      Operating profit

$     519

 

$  1,464

-65%

 

 

 

 

 

 

 

 

 

(1)   Analog revenue increased primarily due to the inclusion of Silicon Valley Analog revenue, as well as growth in Power Management and High Volume

        Analog & Logic.  High Performance Analog revenue declined.

(2)   Embedded Processing revenue increased primarily due to higher revenue from products sold into automotive applications, as well as higher revenue

        from products sold into communications infrastructure applications.  Revenue from catalog products declined. 

(3)   Wireless revenue declined due to baseband products and, to a much lesser extent, connectivity products.  Revenue from OMAP applications processors

        increased.    

(4)   Other revenue declined due to lower revenue across most areas. 

2011 additional financial information

  • Capital expenditures were $816 million in 2011, down from $1.20 billion in 2010.    
  • The company used $1.97 billion to repurchase 59.5 million shares of its common stock and paid dividends of $644 million.

Outlook

For the first quarter of 2012, TI expects:

  • Revenue:  $3.02 – 3.28 billion
  • Earnings per share:  $0.16 – 0.24

Baseband revenue is expected to decline from $279 million in the fourth quarter to about $75 million in the first quarter, and range from $50 million to $100 million in each remaining quarter of 2012.  EPS will be negatively impacted by about 9 cents from $170 million of total acquisition-related charges that will include about $150 million of acquisition charges and, additionally, about $20 million included in cost of revenue.  Restructuring charges will negatively impact EPS by about 1 cent

TI will update its first-quarter outlook on March 8, 2012.

For the full year of 2012, TI expects approximately the following:

  • R&D expense:  $2.0 billion
  • Capital expenditures:  $0.7 billion
  • Depreciation:  $1.0 billion
  • Annual effective tax rate:  28%

The tax rate estimate is based on current tax law and does not assume reinstatement of the federal R&D tax credit, which expired at the end of 2011.

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Income

(Millions of dollars, except share and per-share amounts)

 

 

 

For Three Months Ended

 

For Years Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

Dec. 31,

 2011

 

Dec. 31, 2010

 

Sept. 30, 2011

 

Dec. 31,

 2011

 

Dec. 31,

 2010

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$     3,420

 

$     3,525

 

$     3,466

 

$   13,735

 

$   13,966

Cost of revenue

 

1,872

 

1,656

 

1,722

 

6,963

 

6,474

Gross profit

 

1,548

 

1,869

 

1,744

 

6,772

 

7,492

Research and development (R&D)

 

475

 

393

 

395

 

1,715

 

1,570

Selling, general and administrative (SG&A)

 

443

 

389

 

388

 

1,638

 

1,519

Restructuring charges

 

112

 

1

 

--

 

112

 

33

Acquisition charges/divestiture (gain)

 

153

 

(144)

 

147

 

315

 

(144)

Operating profit

 

365

 

1,230

 

814

 

2,992

 

4,514

Other income (expense) net

 

5

 

18

 

(19)

 

5

 

37

Interest and debt expense

 

21

 

--

 

15

 

42

 

--

Income before income taxes

 

349

 

1,248

 

780

 

2,955

 

4,551

Provision for income taxes

 

51

 

306

 

179

 

719

 

1,323

Net income

 

$        298

 

$        942

 

$        601

 

$     2,236

 

$     3,228

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

  Basic

 

$          .26

 

$          .79

 

$          .52

 

$       1.91

 

$       2.66

  Diluted

 

$          .25

 

$          .78

 

$          .51

 

$       1.88

 

$       2.62

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding (millions):

 

 

 

 

 

 

 

 

 

 

  Basic

 

1,138

 

1,170

 

1,144

 

1,151

 

1,199

  Diluted

 

1,155

 

1,189

 

1,157

 

1,171

 

1,213

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share of common stock

 

$          .17

 

$          .13

 

$          .13

 

$          .56

 

$          .49

 

 

 

 

 

 

 

 

 

 

 

Percentage of revenue:

 

 

 

 

 

 

 

 

 

 

Gross profit

 

45.3%

 

53.0%

 

50.3%

 

49.3%

 

53.6%

R&D

 

13.9%

 

11.1%

 

11.4%

 

12.5%

 

11.2%

SG&A

 

13.0%

 

11.1%

 

11.2%

 

11.9%

 

10.9%

Operating profit

 

10.7%

 

34.9%

 

23.5%

 

21.8%

 

32.3%

 

As required by accounting rule ASC 260, net income allocated to unvested restricted stock units (RSUs), on which TI pays dividend equivalents, is excluded from the calculation of EPS.  The amount excluded from earnings per common share was $5 million, $14 million and $10 million for the quarters ended December 31, 2011, December 31, 2010, and September 30, 2011, respectively; and $34 million and $44 million for years ended December 31, 2011, and December 31, 2010, respectively.

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of dollars, except share amounts)

 

 

 

Dec. 31,
2011

 

Dec. 31,
2010

 

Sept. 30,
2011

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

   Cash and cash equivalents

 

$       992

 

$   1,319

 

$   1,581

 

   Short-term investments

 

1,943

 

1,753

 

1,037

 

   Accounts receivable, net of allowances of ($19), ($18) and ($26)

 

1,545

 

1,518