10-QPeriod: Q1 FY2013

TEXAS INSTRUMENTS INC Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 3, 2013For Securities:TXN

Summary

Texas Instruments (TXN) reported first-quarter 2013 results with revenue of $2.89 billion, a decrease from the prior year's $3.12 billion, primarily due to a decline in revenue from its legacy wireless products. Despite the revenue dip, net income saw a significant increase to $362 million from $265 million in the prior year, resulting in diluted earnings per share (EPS) of $0.32, up from $0.22. This improvement in profitability was largely driven by a substantial reduction in restructuring and acquisition-related charges, as well as a discrete tax benefit from the reinstatement of the federal research tax credit. The company continues to strategically focus on its Analog and Embedded Processing segments, which together represented 77% of revenue in the quarter, up from 73% a year ago. Management highlighted strong operational cash flow and a commitment to returning capital to shareholders, evidenced by a 33% dividend increase and significant share repurchase activity. The balance sheet remains robust with $3.86 billion in cash and short-term investments.

Financial Highlights

52 data points
Beta

Revenue

$2.88B

47.6% Gross Margin

Net Income

$355.00M

12.3% Net Margin

EPS (Diluted)

$0.32

Total Assets

$19.70B

Cash & Equivalents

$1.39B

Free Cash Flow

$276.00M

Financial Statements
Beta
Revenue$2.88B
Cost of Revenue$1.51B
Gross Profit$1.37B
R&D Expenses$419.00M
SG&A Expenses$459.00M
Operating Income$395.00M
Net Income$355.00M
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)1.11B
Shares Outstanding (Diluted)1.12B

Key Highlights

  • 1Revenue declined 8% year-over-year to $2.89 billion, largely attributed to the wind-down of legacy wireless products.
  • 2Net income increased 37% to $362 million, driven by lower operating expenses, reduced acquisition and restructuring charges, and a significant tax benefit.
  • 3Diluted EPS rose to $0.32 from $0.22 in the prior year's quarter.
  • 4The strategic shift towards Analog and Embedded Processing segments is progressing, with these segments contributing 77% of revenue, up from 73% year-over-year.
  • 5Free cash flow for the trailing twelve months was $2.85 billion, representing 23% of revenue, demonstrating strong cash generation.
  • 6The company announced a 33% increase in its annualized dividend to $1.12 per share and authorized an additional $5 billion for stock repurchases.
  • 7Cash and cash equivalents plus short-term investments totaled $3.86 billion at the end of the quarter, with a significant portion held by U.S. entities.

Frequently Asked Questions

The primary reason for the year-over-year revenue decline was the company's strategic decision to wind down its legacy wireless products for the smartphone and consumer tablet markets, which are now included in the 'Other' segment.

The increase in net income was driven by several factors including lower operating expenses, particularly R&D due to the wireless business wind-down, significantly reduced acquisition and restructuring charges compared to the prior year, and a substantial $65 million discrete tax benefit from the reinstatement of the federal research tax credit.

Texas Instruments is strategically focusing on its Analog and Embedded Processing segments, viewing them as its primary growth engines. The company has reorganized its reporting structure to reflect this focus, eliminating the Wireless segment and reclassifying relevant products into Embedded Processing or Other.

Texas Instruments is actively returning capital to shareholders through dividends and share repurchases. In this quarter, they announced a 33% increase in the quarterly dividend to $1.12 per share annualized and significantly increased their stock repurchase authorization, returning a total of $911 million to shareholders in the first quarter.