Texas Instruments Incorporated : TI reports financial results for 1Q12
04/23/2012| 04:35pm US/Eastern
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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.
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TXN-F
SOURCE Texas Instruments Incorporated
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