TI reports financial results for 4Q12 and 2012 Conference call on TI website at 4:30 p.m. Central time today

www.ti.com/ir

DALLAS, Jan. 22, 2013 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today announced fourth-quarter revenue of $2.98 billion, net income of $264 million and earnings per share of 23 cents.  

EPS includes 6 cents of charges associated with the company's 2011 acquisition of National Semiconductor Corporation and restructuring that was included in the company's outlook provided in December.  EPS also includes 23 cents of charges associated with the recently announced restructuring of the company's Wireless business of which 21 cents was included in the company's outlook.  In addition, EPS includes 15 cents for a discrete tax benefit and associated interest that was not included in the company's outlook.  Excluding these items, non-GAAP EPS rounds to 36 cents.

"We continue to operate in a weak demand environment," said Rich Templeton, TI's chairman, president and CEO.  "Our visibility into future demand remains limited as our lead times are short and our customers are reluctant to commit to extended backlog.  On the positive side, we believe customers and distributors are operating with lean inventory.  Our own operations are disciplined and performing well, with gross margin up despite increased underutilization costs, and with operating expenses down from a year ago.

"Even in the current economy, our strategy is yielding high free cash flow and strong returns to our shareholders.  For the full year, free cash flow of almost $3 billion grew 20 percent and was 23 percent of our revenue.  We returned 90 percent of this free cash flow to our shareholders through our continued share repurchases and higher dividend payments.  Our strong free cash flow is the result of more of our revenue coming from Analog and Embedded Processing, which offer solid growth and high margins and have low capital needs.  Our free cash flow will also benefit from our strategic purchases of manufacturing capacity during the past few years.  We have almost half of our manufacturing capacity available to support future growth, which means we can maintain our capital spending at very low levels in the years ahead, even as our revenue grows."

4Q12 financial summary

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










4Q12


4Q11

Change


3Q12

Change

Revenue

$ 2,979


$  3,420

-13%


$ 3,390

-12%

Operating profit

$    139


$     365

-62%


$    840

-83%

Net income

$    264


$     298

-11%


$    784

-66%

Earnings per share

$     .23


$      .25

-8%


$     .67

-66%

Cash flow from operations

$ 1,085


$     970

12%


$ 1,204

-10%

Capital expenditures

$      96


$     152

-37%


$    149

-36%

Free cash flow*

 

$    989

 


$     818

 

21%

 


$ 1,055

 

-6%

 

*  Non-GAAP; Cash flow from operations minus Capital expenditures.

Acquisition charges associated with TI's acquisition of National Semiconductor in 2011 were $88 million in the fourth quarter, primarily amortization of intangibles.  Included in Restructuring charges/other are charges of $351 million associated with restructuring the Wireless business, including $90 million of non-tax deductible goodwill impairment, and $12 million associated with the previously announced planned closure of several older factories.

Compared with a year ago, gross profit declined due to lower revenue and the costs associated with lower levels of factory utilization. These were partially offset by lower manufacturing costs and the non-recurrence of the $103 million in cost of revenue in the year-ago quarter attributable primarily to the fair value write-up of acquired inventory associated with the National acquisition. Compared with the prior quarter, gross profit declined due to lower revenue, including the non-recurrence of $60 million in business interruption insurance proceeds associated with the 2011 earthquake in Japan. 

Operating profit decreased from a year ago as the combination of higher restructuring charges and lower gross profit more than offset lower acquisition charges and operating expenses.  Compared with the prior quarter, operating profit declined primarily due to higher Restructuring charges/other, including the Wireless restructuring charge and the non-recurrence of a $144 million benefit in the prior quarter associated with a change in a Japan pension program, as well as lower gross profit. 

Other income (expense) included $38 million of income for interest associated with a discrete tax benefit. This tax benefit was $147 million and primarily consists of additional U.S. tax benefits for manufacturing related to the years 2000 through 2006. 

4Q12 segment results










   4Q12


4Q11

Change


3Q12

Change

Analog:








       Revenue

$ 1,669


$ 1,695

-2%


$ 1,843

-9%

       Operating profit

$    419


$    414

1%


$    460

-9%

Embedded Processing:








      Revenue

$    469


$    442

6%


$    520

-10%

      Operating profit

$      16


$      12

33%


$      63

-75%

Wireless:








      Revenue

$    317


$    722

-56%


$    325

-2%

      Operating profit (loss)*

$   (396)


$    112

n/a


$    (53)

-647%

Other:








      Revenue

$    524


$    561

-7%


$    702

-25%

      Operating profit (loss)*

$    100


$   (173)

n/a


$    370

-73%

 

*  Includes Restructuring charges/other and/or Acquisition charges.

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

  • Compared with the year-ago quarter, revenue decreased due to lower Silicon Valley Analog and High Performance Analog revenue.  Power Management revenue increased while High Volume Analog & Logic was about even. 
  • Compared with the prior quarter, revenue decreased across all product lines.    
  • Operating profit increased from the year-ago quarter as lower operating expenses more than offset lower gross profit.  Operating profit declined from the prior quarter due to lower gross profit, which more than offset lower operating expenses.    

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 quarter, the increase in revenue was primarily due to higher revenue from products sold into communications infrastructure applications.  Revenue from catalog products and products sold into automotive applications also increased.
  • Compared with the prior quarter, revenue declined across all product lines.      
  • Operating profit increased from a year ago primarily due to lower operating expenses, as well as higher gross profit.  Operating profit decreased from the prior quarter 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 lower baseband revenue.  Revenue from OMAP applications processors and connectivity products also declined.
  • Compared with the prior quarter, revenue declined due to lower connectivity product revenue, which more than offset an increase in baseband revenue.  Revenue from OMAP applications processors was even. 
  • Operating profit in the year-ago quarter became an operating loss due to higher Restructuring charges/other and lower revenue.  Compared with the prior quarter, the operating loss increased due to higher Restructuring charges/other. 

Other:  (includes DLP® products, custom ASIC products, calculators and royalties)

  • Compared with the year-ago quarter, revenue was down primarily due to the expiration of transitional supply agreements associated with previously acquired factories.  Revenue from DLP products declined while revenue from custom ASIC products and royalties increased.  Revenue from calculators was about even.
  • Compared with the prior quarter, revenue declined primarily due to the seasonal decline in calculators.  Revenue from DLP products and custom ASIC products also declined, while royalties increased.  The prior quarter also included proceeds that did not recur from business interruption insurance associated with the Japan earthquake.    
  • Operating profit increased from a year ago primarily due to lower total acquisition-related charges, as well as lower Restructuring charges/other.  Operating profit decreased from the prior quarter primarily due to lower gross profit resulting from lower revenue, including lower business interruption insurance proceeds.  In addition, the prior quarter included the $144 million benefit from a Japan pension program change.

Beginning with the first-quarter 2013 financial report, TI will transition its segment reporting to align with the company's strategic focus and new organizational structure.  The Wireless segment will be eliminated, as the company has announced that it is winding down investment in Wireless products for the smartphone and consumer tablet markets.  Financial results for these products will be included in the Other segment for the remainder of their lives.  Financial results for Wireless products that address embedded applications, a strategic focus for the company, will be reported in the Embedded Processing segment.

4Q12 additional financial information

  • Orders were $2.72 billion, down 5 percent from the year-ago quarter and down 16 percent from the prior quarter.
  • Inventory was $1.76 billion at the end of the quarter, down $31 million from a year ago and down $91 million from the prior quarter. 
  • The company used $600 million in the quarter to repurchase 20.6 million shares of its common stock and paid dividends of $235 million.
  • The financial results for 4Q12 and 2012 are based on tax law in effect at the end of the reporting period and, therefore, do not include the impact of the retroactive reinstatement of the federal R&D tax credit, which was signed into law in January 2013.

Year 2012 financial summary


 

2012


 

2011


Change

Revenue

$ 12,825


$ 13,735


-7%

Operating profit

$   1,973


$   2,992


-34%

 Net income

$   1,759


$   2,236


-21%

Earnings per share

$     1.51


$     1.88


-20%

Cash flow from operations

$   3,414


$   3,256


5%

Capital expenditures

$      495


$      816


-39%

Free cash flow*

$   2,919


$   2,440


20%

 

*  Non-GAAP; Cash flow from operations minus Capital expenditures.

Results include total acquisition-related charges of $471 million in 2012, including $21 million in cost of revenue, and $426 million in 2011, including $111 million in cost of revenue.  Results also include Restructuring charges/other of $264 million in 2012 and $112 million in 2011.

TI's operating profit declined in 2012 primarily due to the combination of lower gross profit and higher operating expenses.  Gross profit declined as a result of lower revenue.  Operating expenses were higher as a result of the acquisition of National Semiconductor. 

Year 2012 segment results


 

2012


 

2011

Change


 

Note

Analog:







      Revenue

$   6,998


$   6,375

10%


(1)

      Operating profit

$   1,650


$   1,693

-3%



Embedded Processing:







      Revenue

$   1,971


$   2,110

-7%


(2)

      Operating profit

$      166


$      368

-55%



Wireless:







      Revenue

$   1,357


$   2,518

-46%


(3)

      Operating profit (loss)

$     (525)


$      412

n/a



Other:







      Revenue

$   2,499


$    2,732

-9%


(4)

      Operating profit

$      682


$       519

31%



 

(1)   Analog revenue increased primarily due to the inclusion of Silicon Valley Analog revenue, as well as growth in Power Management.  High Performance Analog revenue declined and High Volume Analog & Logic revenue was about even.    

(2)   Embedded Processing revenue declined primarily due to lower revenue from products sold into communications infrastructure applications, as well as lower revenue from catalog products.  Revenue was higher from products sold into automotive applications.

(3)   Wireless revenue declined primarily due to the company's exit from baseband products.  Revenue from connectivity products and, to a lesser extent, OMAP applications processors also declined.   

(4)   Other revenue declined primarily due to the expiration of transitional supply agreements and lower revenue from DLP products.  Revenue from calculators and royalties also declined.  Revenue from custom ASIC products increased. 

2012 additional financial information

  • The company used $1.80 billion to repurchase 59.8 million shares of its common stock and paid dividends of $819 million.

Outlook

For the first quarter of 2013, TI expects:

  • Revenue:  $2.69 – 2.91 billion
  • Earnings per share:  $0.24 – 0.32

At the middle of this range, revenue is expected to be down $179 million sequentially.  About $135 million, or about 75 percent, of this decline is expected to come from Wireless products for the smartphone and consumer tablet markets from which the company is exiting.

The first quarter's EPS will be negatively affected by about 6 cents from acquisition and restructuring charges.  EPS will include a discrete tax benefit of 6 cents resulting from the reinstatement of the R&D tax credit that was retroactive to the beginning of 2012.

TI will update its first-quarter outlook on March 7, 2013.

For the full year of 2013, TI expects approximately the following:

  • R&D expense:  $1.6 billion
  • Capital expenditures:  $0.5 billion
  • Depreciation:  $0.9 billion
  • Annual effective tax rate:  22%

The tax rate estimate is based on current law and includes the reinstatement of the federal R&D tax credit for 2013. 


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,

 2012


Dec. 31,

2011


Sept. 30,

2012


Dec. 31,

 2012


Dec. 31,

 2011














Revenue


$     2,979


$     3,420


$     3,390


$   12,825


$   13,735


Cost of revenue


1,534


1,872


1,650


6,457


6,963


Gross profit


1,445


1,548


1,740


6,368


6,772


Research and development (R&D)


425


475


463


1,877


1,715


Selling, general and administrative (SG&A)


430


443


453


1,804


1,638


Acquisition charges


88


153


106


450


315


Restructuring charges/other


363


112


(122)


264


112


Operating profit


139


365


840


1,973


2,992


Other income (expense), net


39


5


24


47


5


Interest and debt expense


23


21


21


85


42


Income before income taxes


155


349


843


1,935


2,955


Provision (benefit) for income taxes


(109)


51


59


176


719


Net income


$         264


$        298


$        784


$     1,759


$     2,236














Earnings per common share:












  Basic


$          .23


$          .26


$          .68


$       1.53


$       1.91


  Diluted


$          .23


$          .25


$          .67


$       1.51


$       1.88














Average shares outstanding (millions):












  Basic


1,113


1,138


1,130


1,132


1,151


  Diluted


1,124


1,155


1,141


1,146


1,171














Cash dividends declared per share of common stock


$          .21


$          .17


$          .17


$          .72


$          .56














Percentage of revenue:












Gross profit


48.5%


45.3%


51.3%


49.6%


49.3%


R&D


14.3%


13.9%


13.6%


14.6%


12.5%


SG&A


14.4%


13.0%


13.4%


14.1%


11.9%


Operating profit


4.7%


10.7%


24.8%


15.4%


21.8%


As required by accounting rule ASC 260, net income allocated to unvested restricted stock units (RSUs), on which we pay dividend equivalents, is excluded from the calculation of EPS.  The amount excluded is $4 million, $5 million and $14 million for the quarters ending December 31, 2012, December 31, 2011, and September 30, 2012, respectively; and $31 million and $34 million for years ending December 31, 2012, and December 31, 2011, respectively.