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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

Non-GAAP Reconciliation

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, w