Texas Instruments beat revenue and EPS expectations for the fourth quarter, a month after it slashed guidance and its shares took a tumble.
The chipmaker saw 3.42 billion in revenues last quarter versus expectations $3.25 billion, and earnings per share of 25 cents versus an estimated 23 cents.
Even so, however, it lowered first quarter guidance because it expects to take a hit of about 9 cents from a $170 million acquisition. It expects EPS for 1Q to be $0.16-$0.24.
Shares are up 0.27% in after-hours trading.
Read excerpts from the release below:
TI reports financial results for 4Q11 and 2011
Conference call on TI website at 4:30 p.m. Central time today
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
“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 analogue, 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 per cent 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 analogue 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.”
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 analogue segment under the name Silicon
Valley analogue. 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
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 per cent from the
previously estimated 25 per cent. Results include a cumulative
adjustment for this rate change, as well as a net discrete tax benefit
of $11 million…
Compared with the year-ago quarter, revenue increased due to the
inclusion of Silicon Valley analogue revenue. High Volume analogue &
Logic and Power Management were about even, while revenue from High
Performance analogue declined.
Compared with the prior quarter, revenue increased due to the
inclusion of Silicon Valley analogue revenue for all of the fourth
quarter compared with only a few days in the third quarter. Revenue
from High Performance analogue, Power Management and High Volume analogue
& 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 analogue results.
Embedded Processing: (includes digital signal processor and
microcontroller catalogue 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 catalogue 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 per cent from the year-ago quarter
and down 7 per cent 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 recognising 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…
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
analogue, 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…
(1) analogue revenue increased primarily due to the inclusion of
Silicon Valley analogue revenue, as well as growth in Power Management
and High Volume
analogue & Logic. High Performance analogue revenue declined.
(2) Embedded Processing revenue increased primarily due to higher
revenue from products sold into automotive applications, as well as
from products sold into communications infrastructure
applications. Revenue from catalogue products declined.
(3) Wireless revenue declined due to baseband products and, to a
much lesser extent, connectivity products. Revenue from OMAP
(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.
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