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Texas Instruments Incorporated : TI reports financial results for 1Q12

04/23/2012 | 05:35pm US/Eastern

DALLAS, April 23, 2012 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today announced first-quarter revenue of $3.12 billion, net income of $265 million and earnings per share of 22 cents. EPS includes 10 cents of charges associated with the company's acquisition of National Semiconductor and restructuring.

"As we expected, our business cycle bottomed in the first quarter, and early signs of growth began to emerge," said Rich Templeton, TI's chairman, president and CEO. "Orders were up 13 percent, and backlog is growing again. Particularly encouraging is the breadth of increased orders across geographical regions and markets, including the industrial sector.

"Sales in our Analog segment were about level with the prior quarter. We continue to make progress with Silicon Valley Analog, formerly National Semiconductor, as this product line gains traction with customers and holds a strong position in the important industrial market. Sales in Embedded Processing were up 7 percent led by growth in the automotive and communications infrastructure markets. Sales in our Wireless segment declined sharply as we entered the final phase of our exit from baseband products, which were less than 3 percent of total sales in the quarter. We are expanding the reach of our Wireless segment into multiple markets and experiencing strong diversity in our design-ins.

"We're poised for growth and share gains as markets rebound. Our product portfolio is strong, and our design position with customers is excellent. Our inventory is well-staged, and production in our factories is ramping. Our teams are confident and hungry, and we expect 2012 to be a good year for growth."

1Q12 financial summary

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

                                 1Q12   1Q11 Change    4Q11 Change
                                 ----   ---- ------    ---- ------
                       Revenue $3,121 $3,392     -8% $3,420     -9%
              Operating profit   $397   $908    -56%   $365      9%
                    Net income   $265   $666    -60%   $298    -11%
            Earnings per share   $.22   $.55    -60%   $.25    -12%
     Cash flow from operations   $449   $516    -13%   $970    -54%

Total acquisition-related charges associated with TI's September 2011 acquisition of National Semiconductor are $174 million in the first quarter. These charges include $21 million in cost of revenue associated with the contract termination of a distributor. The remainder, $153 million, includes amortization of intangibles, retention bonuses and other items. Results also include $10 million of restructuring charges associated with the planned closings of two older factories announced in January 2012.

Revenue in the quarter includes insurance proceeds of about $65 million related to interruption of TI's business operations as a result of the 2011 Japan earthquake.

Compared with a year ago, lower gross profit in the quarter primarily reflects lower revenue. Compared with the fourth quarter, lower gross profit reflects lower revenue, which was partially offset by lower charges to cost of revenue related to the National acquisition and an increase in insurance proceeds.

Operating profit declined from a year ago primarily due to lower gross profit, total acquisition-related charges and higher operating expenses due to the inclusion of Silicon Valley Analog. Compared with the prior quarter, operating profit was higher primarily due to lower restructuring charges and lower total acquisition-related charges.

    1Q12 segment results
    --------------------
                              1Q12    1Q11 Change    4Q11  Change
                              ----    ---- ------    ----  ------
    Analog:
           Revenue          $1,686  $1,536     10% $1,695      -1%
           Operating profit   $335    $418    -20%   $414     -19%
    Embedded Processing:
          Revenue             $473    $533    -11%   $442       7%
          Operating profit     $36    $102    -65%    $12     200%
    Wireless:
          Revenue             $373    $658    -43%   $722     -48%
          Operating profit    $(25)   $141    n/a    $112     n/a
    Other:
          Revenue             $589    $665    -11%   $561       5%
          Operating profit*    $51    $247    -79%  $(173)    n/a

    *  Includes total acquisition-
     related charges of $174 million
     and restructuring charges of
     $10 million in the first
     quarter of 2012, total
     acquisition-related charges of
     $256 million and restructuring
     charges of $112 million in the
     fourth quarter of 2011 and
     total acquisition-related
     charges of $2 million in the
     first quarter of 2011.

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.  Revenue from High
        Performance Analog, High Volume Analog & Logic and Power Management
        declined.
    --  Compared with the prior quarter, revenue was about even as growth in
        Silicon Valley Analog revenue was offset by a decline in High Volume
        Analog & Logic revenue.  Power Management and High Performance Analog
        were about even.
    --  Operating profit decreased from the year-ago quarter due to higher
        operating expenses that resulted from the inclusion of Silicon Valley
        Analog.  Operating profit decreased from the prior quarter primarily due
        to lower gross profit.

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 decline in revenue was due to
        lower revenue from products sold into communications infrastructure and
        from catalog products.  Revenue from products sold into automotive
        applications increased.
    --  Compared with the prior quarter, the increase in revenue was due to
        higher revenue from products sold into automotive applications and
        communications infrastructure.  Revenue from catalog products was about
        even.
    --  Operating profit decreased from a year ago primarily due to lower gross
        profit.  Operating profit increased from the prior quarter due to higher
        gross profit.

Wireless: (includes OMAP((TM) ) 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
        while revenue from OMAP applications processors increased.
    --  Compared with the prior quarter, revenue decreased primarily due to
        baseband products.  Revenue from OMAP applications processors and
        connectivity products also declined.
    --  Operating profit decreased from the year-ago and prior quarters due to
        lower gross profit.

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 lower demand
        for DLP products and expiration of transitional supply agreements.  The
        first quarter's results also included proceeds of about $65 million from
        business interruption insurance related to the 2011 Japan earthquake.
    --  Compared with the prior quarter, revenue was up primarily due to the
        insurance proceeds.
    --  Operating profit decreased from a year ago primarily due to total
        acquisition-related charges.  Operating profit increased from the prior
        quarter primarily due to lower restructuring charges and lower total
        acquisition-related charges.

1Q12 additional financial information

    --  Orders were $3.24 billion, down 9 percent from the year-ago quarter and
        up 13 percent from the prior quarter.
    --  Inventory was $1.85 billion at the end of the quarter, up $175 million
        from a year ago and $65 million from the prior quarter.  The increase
        was due to the company building inventory to support higher anticipated
        demand in future quarters.
    --  Capital expenditures were $103 million in the quarter compared with $194
        million a year ago and $152 million in the prior quarter.  Capital
        expenditures in the quarter were primarily for assembly/test and wafer
        manufacturing equipment.
    --  The company used $300 million to repay its commercial paper borrowings,
        reducing the outstanding commercial paper obligation to $700 million.
    --  The company used $300 million in the quarter to repurchase 9.1 million
        shares of its common stock and paid dividends of $195 million.

Outlook

For the second quarter of 2012, TI expects:

    --  Revenue:  $3.22 - 3.48 billion
    --  Earnings per share:  $0.30 - 0.38

The second quarter's results will be negatively affected by about $100 million of acquisition charges and about $10 million of restructuring charges. Combined, these items will impact EPS by about 6 cents.

TI will update its second-quarter outlook on June 11, 2012.

For the full year of 2012, TI continues to expect 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
                                     ----------------------

                                     Mar. 31,                           Mar. 31,        Dec. 31,
                                               2012                               2011            2011
                                               ----                               ----            ----

    Revenue                                  $3,121                             $3,392          $3,420
    Cost of revenue                           1,590                              1,664           1,872
                                              -----                              -----           -----
    Gross profit                              1,531                              1,728           1,548
    Research and
     development (R&D)                          509                                422             475
    Selling, general
     and administrative
     (SG&A)                                     462                                396             443
    Restructuring
     charges                                     10                                 --             112
    Acquisition charges                         153                                  2             153
                                                ---                                ---             ---
    Operating profit                            397                                908             365
    Other income
     (expense) net                              (14)                                10               5
    Interest and debt
     expense                                     21                                 --              21
                                                ---                                ---             ---
    Income before
     income taxes                               362                                918             349
    Provision for
     income taxes                                97                                252              51
                                                ---                                ---             ---
    Net income                                 $265                               $666            $298
                                               ====                               ====            ====

    Earnings per common
     share:
       Basic                                   $.23                               $.56            $.26
                                               ====                               ====            ====
       Diluted                                 $.22                               $.55            $.25
                                               ====                               ====            ====

    Average shares
     outstanding
     (millions):
       Basic                                  1,143                              1,167           1,138
                                              =====                              =====           =====
       Diluted                                1,165                              1,194           1,155
                                              =====                              =====           =====

    Cash dividends
     declared per share
     of common stock                           $.17                               $.13            $.17
                                               ====                               ====            ====

    Percentage of
     revenue:
    Gross profit                               49.0%                              50.9%           45.3%
    R&D                                        16.3%                              12.4%           13.9%
    SG&A                                       14.8%                              11.7%           13.0%
    Operating profit                           12.7%                              26.8%           10.7%

    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, $10 million
     and $5 million for the
     quarters ending March 31,
     2012, March 31, 2011 and
     December 31, 2011.


                                                                 TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                                                                           Consolidated Balance Sheets
                                                                   (Millions of dollars, except share amounts)

                                                                                        Mar. 31,                 Mar. 31,         Dec. 31,
                                                                                                   2012                     2011             2011
                                                                                                   ----                     ----             ----
    Assets
    Current assets:
       Cash and cash equivalents                                                                 $1,193                   $1,343             $992
       Short-term investments                                                                     1,572                    1,514            1,943
       Accounts receivable, net of allowances of ($32), ($20) and
        ($19)                                                                                     1,478                    1,568            1,545
       Raw materials                                                                                114                      132              115
       Work in process                                                                              996                      934            1,004
       Finished goods                                                                               743                      612              669
                                                                                                    ---                      ---              ---
       Inventories                                                                                1,853                    1,678            1,788
                                                                                                  -----                    -----            -----
       Deferred income taxes                                                                      1,192                      771            1,174
       Prepaid expenses and other current assets                                                    303                      170              386
                                                                                                    ---                      ---              ---
       Total current assets                                                                       7,591                    7,044            7,828
                                                                                                  -----                    -----            -----
    Property, plant and equipment at cost                                                         6,840                    6,712            7,133
       Less accumulated depreciation                                                             (2,562)                  (3,055)          (2,705)
                                                                                                 ------                   ------           ------
       Property, plant and equipment, net                                                         4,278                    3,657            4,428
                                                                                                  -----                    -----            -----
    Long-term investments                                                                           239                      449              265
    Goodwill                                                                                      4,452                      924            4,452
    Acquisition-related intangibles, net                                                          2,815                       69            2,900
    Deferred income taxes                                                                           302                      899              321
    Capitalized software licenses, net                                                              201                      193              206
    Overfunded retirement plans                                                                      37                       28               40
    Other assets                                                                                     94                       47               57
                                                                                                    ---                      ---              ---
    Total assets                                                                                $20,009                  $13,310          $20,497
                                                                                                =======                  =======          =======

    Liabilities and Stockholders' Equity
    Current liabilities:
       Commercial paper borrowings                                                                 $700            $          --             $999
       Current portion of long-term debt                                                            378                       --              382
       Accounts payable                                                                             589                      605              625
       Accrued compensation                                                                         382                      348              597
       Income taxes payable                                                                         106                      247              101
       Accrued expenses and other liabilities                                                       754                      593              795
                                                                                                    ---                      ---              ---
       Total current liabilities                                                                  2,909                    1,793            3,499
                                                                                                  -----                    -----            -----
    Long-term debt                                                                                4,207                       --            4,211
    Underfunded retirement plans                                                                    684                      527              701
    Deferred income taxes                                                                           622                       82              607
    Deferred credits and other liabilities                                                          516                      334              527
                                                                                                    ---                      ---              ---
    Total liabilities                                                                             8,938                    2,736            9,545
                                                                                                  -----                    -----            -----
    Stockholders' equity:
       Preferred stock, $25 par value.  Authorized - 10,000,000
        shares.                                                                                      --                       --               --
          Participating cumulative preferred.  None issued.
       Common stock, $1 par value.  Authorized - 2,400,000,000
        shares.                                                                                   1,741                    1,740            1,741
          Shares issued:  Mar. 31, 2012 - 1,740,814,489; Mar. 31,
           2011 -
          1,740,394,740; Dec. 31, 2011 - 1,740,630,391
       Paid-in capital                                                                            1,112                    1,068            1,194
       Retained earnings                                                                         26,345                   25,206           26,278
       Less treasury common stock at cost:                                                      (17,385)                 (16,738)         (17,485)
          Shares:  Mar. 31, 2012 - 596,461,198; Mar. 31, 2011 -
          579,225,953; Dec. 31, 2011 - 601,131,631
       Accumulated other comprehensive income (loss), net of taxes                                 (742)                    (702)            (776)
                                                                                                   ----                     ----             ----
       Total stockholders' equity                                                                11,071                   10,574           10,952
                                                                                                 ------                   ------           ------
    Total liabilities and stockholders' equity                                                  $20,009                  $13,310          $20,497
                                                                                                =======                  =======          =======


                                      TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                                           Consolidated Statements of Cash Flows
                                                   (Millions of dollars)

                                              For Three Months Ended
                                              ----------------------
                                                Mar. 31,                      Mar. 31,       Dec. 31,
                                                         2012                          2011            2011
                                                         ----                          ----            ----
    Cash flows from operating
     activities:
       Net income                                        $265                          $666            $298
       Adjustments to net income:
         Depreciation                                     243                           224             247
         Stock-based compensation                          69                            57              66
         Amortization of acquisition-
          related intangibles                              86                             7              86
         Deferred income taxes                             (4)                           31            (110)
       Increase (decrease) from
        changes in:
         Accounts receivable                               63                           (44)            236
         Inventories                                      (91)                         (158)            203
         Prepaid expenses and other
          current assets                                    5                            (9)            (18)
         Accounts payable and accrued
          expenses                                        (37)                          (83)            (68)
         Accrued compensation                            (211)                         (281)             65
         Income taxes payable                              67                           137               4
       Other                                               (6)                          (31)            (39)
                                                          ---                           ---             ---
    Cash flows from operating
     activities                                           449                           516             970
                                                          ---                           ---             ---

    Cash flows from investing
     activities:
       Additions to property, plant
        and equipment                                    (103)                         (194)           (152)
       Purchases of short-term
        investments                                      (242)                         (872)         (1,190)
       Proceeds from short-term
        investments                                       613                         1,111             301
       Purchases of long-term
        investments                                        (1)                           (1)             (2)
       Proceeds from long-term
        investments                                         3                            19              82
       Business acquisitions, net
        of cash acquired                                   --                            --             (35)
                                                          ---                           ---             ---
    Cash flows from investing
     activities                                           270                            63            (996)
                                                          ---                           ---            ----

    Cash flows from financing
     activities:
       Repayment of commercial
        paper borrowings                                 (300)                           --            (200)
       Dividends paid                                    (195)                         (153)           (193)
       Proceeds from common stock
        transactions                                      259                           350             127
       Excess tax benefit from
        share-based payments                               18                            19               3
       Stock repurchases                                 (300)                         (771)           (300)
                                                         ----                          ----            ----
    Cash flows from financing
     activities                                          (518)                         (555)           (563)
                                                         ----                          ----            ----

    Net change in cash and cash
     equivalents                                          201                            24            (589)
    Cash and cash equivalents,
     beginning of period                                  992                         1,319           1,581
                                                          ---                         -----           -----
    Cash and cash equivalents,
     end of period                                     $1,193                        $1,343            $992
                                                       ======                        ======            ====

    Certain amounts in prior
     periods' financial statements
     have been reclassified to
     conform to the current
     presentation.

Safe Harbor Statement

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as TI or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements herein that describe TI's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements.

We urge you to carefully consider the following important factors that could cause actual results to differ materially from the expectations of TI or its management:

    --  Market demand for semiconductors, particularly in key markets such as
        communications, computing, industrial and consumer electronics;
    --  TI's ability to maintain or improve profit margins, including its
        ability to utilize its manufacturing facilities at sufficient levels to
        cover its fixed operating costs, in an intensely competitive and
        cyclical industry;
    --  TI's ability to develop, manufacture and market innovative products in a
        rapidly changing technological environment;
    --  TI's ability to compete in products and prices in an intensely
        competitive industry;
    --  TI's ability to maintain and enforce a strong intellectual property
        portfolio and obtain needed licenses from third parties;
    --  Expiration of license agreements between TI and its patent licensees,
        and market conditions reducing royalty payments to TI;
    --  Economic, social and political conditions in the countries in which TI,
        its customers or its suppliers operate, including security risks, health
        conditions, possible disruptions in transportation networks and
        fluctuations in foreign currency exchange rates;
    --  Natural events such as severe weather and earthquakes in the locations
        in which TI, its customers or its suppliers operate;
    --  Availability and cost of raw materials, utilities, manufacturing
        equipment, third-party manufacturing services and manufacturing
        technology;
    --  Changes in the tax rate applicable to TI as the result of changes in tax
        law, the jurisdictions in which profits are determined to be earned and
        taxed, the outcome of tax audits and the ability to realize deferred tax
        assets;
    --  Changes in laws and regulations to which TI or its suppliers are or may
        become subject, such as those imposing fees or reporting or substitution
        costs relating to the discharge of emissions into the environment or the
        use of certain raw materials in our manufacturing processes;
    --  Losses or curtailments of purchases from key customers and the timing
        and amount of distributor and other customer inventory adjustments;
    --  Customer demand that differs from our forecasts;
    --  The financial impact of inadequate or excess TI inventory that results
        from demand that differs from projections;
    --  Impairments of our non-financial assets;
    --  Product liability or warranty claims, claims based on epidemic or
        delivery failure or recalls by TI customers for a product containing a
        TI part;
    --  TI's ability to recruit and retain skilled personnel;
    --  Timely implementation of new manufacturing technologies, installation of
        manufacturing equipment and the ability to obtain needed third-party
        foundry and assembly/test subcontract services;
    --  TI's obligation to make principal and interest payments on its debt; and
    --  TI's ability to successfully integrate National Semiconductor's
        operations, product lines and technologies, and to realize opportunities
        for growth and cost savings from the acquisition.

For a more detailed discussion of these factors, see the Risk Factors discussion in Item 1A of TI's most recent Form 10-K. The forward-looking statements included in this release are made only as of the date of this release, and TI undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

About Texas Instruments

Texas Instruments semiconductor innovations help 90,000 customers unlock the possibilities of the world as it could be - smarter, safer, greener, healthier and more fun. Our commitment to building a better future is ingrained in everything we do - from the responsible manufacturing of our semiconductors, to caring for our employees, to giving back inside our communities. This is just the beginning of our story. Learn more at www.ti.com.

TI trademarks:
OMAP
DLP
Other trademarks are the property of their respective owners.

TXN-F

SOURCE Texas Instruments Incorporated

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