Amid 1,100 Job Cuts TI sees Increased Earnings and Sustainability
Texas Instruments Incorporated (TI) reported fourth-quarter revenue of $3.03 billion, net income of $511 million and earnings per share of 46 cents. Results include charges of $49 million, which reduced earnings by 3 cents per share, for a restructuring action that was not included in the company's prior guidance. TI's fourth-quarter results and first-quarter outlook include restructuring charges for cost-saving actions in Embedded Processing and in Japan.
The company is not exiting any markets or discontinuing any existing products but will reduce investments in markets that do not offer sustainable growth and returns. The savings will reflect the elimination of about 1,100 jobs worldwide. The charges are expected to be about $80 million, of which $49 million was included in the fourth quarter of 2013 and about $30 million will be included in the first quarter of 2014. The company expects to achieve annualized savings of about $130 million by the end of 2014.
Regarding the company's performance and returns to shareholders, Rich Templeton, TI's chairman, president and CEO, made the following comments: "Our fourth quarter capped a year in which each quarter's performance increasingly reflected the impact of structural changes we've made to focus TI on Analog and Embedded Processing, where the diversity and longevity of our positions are assets. The combined revenue from Analog and Embedded Processing grew 12 percent over last year's fourth quarter and comprised 82 percent of total revenue. Individually, Analog was up 12 percent and Embedded Processing was up 11 percent from a year ago.
"Earnings in the quarter benefited from revenue that was in the upper half of our guidance range and excellent fall through to gross profit. Gross margin of 54.2 percent remained near its record high, reflecting the quality of our Analog and Embedded Processing portfolio and the efficiency of our manufacturing strategy.
"Our business model continues to generate strong cash flow from operations. Free cash flow for the full year of 2013 was $3 billion, or 24 percent of revenue, consistent with our target of 20-25 percent. We returned $4 billion, or 136 percent of free cash flow, to shareholders in 2013 through dividends and stock repurchases. Our strategy to return to shareholders all free cash flow not needed for debt repayment reflects our confidence in the long-term sustainability of our business model.
"Our balance sheet remains strong, with $3.8 billion of cash and short-term investments at the end of the year, 82 percent of which was owned by the company's U.S. entities. Inventory days were 112, consistent with our model of 105-115 days. TI's outlook for the first quarter of 2014 is for revenue in the range of $2.83 billion to $3.07 billion and earnings per share between $0.36 and $0.44, including charges. The annual effective tax rate for 2014 is expected to be about 27 percent, which reflects the expiration of the R&D tax credit."