TI Reports Silicon Valley Analog (Formerly National Semi) Leading Analog Growth

July 21, 2013 by Jeff Shepard

Texas Instruments Incorporated (TI) today reported second-quarter revenue of $3.05 billion, net income of $660 million and earnings per share of 58 cents. Results include a gain associated with the transfer of wireless connectivity technology to a customer and higher-than-expected charges associated with previously announced restructuring. The net impact of these items was a benefit of 16 cents to EPS.

Rich Templeton, TI's chairman, president and CEO, made the following comments in a statement: "Our revenue ended the quarter as expected, up 6 percent sequentially. Excluding legacy wireless, revenue grew 8 percent; our positions in industrial and automotive markets were important contributors to the sequential growth in revenue. Additionally, backlog increased, and with it, visibility into the second half improved.

"Analog and Embedded Processing are now 78 percent of revenue, 6 points higher than a year ago. Our legacy wireless products declined to less than 5 percent of revenue and should be below 2 percent in the third quarter. Silicon Valley Analog (formerly National Semiconductor) led our Analog growth and is gaining share, one year ahead of plan.

Compared with a year ago, Analog revenue (includes High Volume Analog & Logic, Power Management, High Performance Analog and Silicon Valley Analog) decreased by 3% to $1.74 billion from $1.80 billion, primarily due to lower Power Management revenue. High Performance Analog revenue also declined, while Silicon Valley Analog and High Volume Analog & Logic revenue were about even. Compared with the prior quarter Analog, revenue grew by 6% from $1.65 billion to $1.74 billion, due to higher revenue from Silicon Valley Analog, High Volume Analog & Logic and High Performance Analog. Revenue from Power Management was about even. Operating profit from Analog decreased by 5% from $437 million from a year ago to $416 million, primarily due to lower revenue and associated gross profit. Operating profit increased from the prior quarter due to higher gross profit.

TI’s total revenue of $3.05 billion was 9% lower than the $3.33 billion reported in the year-earlier quarter. At the same time, operating profit was up 52% to $906 million compared to $598 million a year earlier and net income was up 48% year-over-year, hitting $660 million in the most recent period. Earnings per share also showed significant growth of 53%, rising to $0.58 in the current quarter compared with $0.38 a year ago.

Templeton further commented: "Our business model continues to generate strong cash flow from operations. Free cash flow for the trailing 12 months was almost $3 billion, up 10 percent compared with a year ago. Free cash flow comprised 24 percent of revenue, which is consistent with our target of 20-25 percent.

"We returned $1.0 billion to shareholders through dividends and stock repurchases in the second quarter. For the trailing 12 months, the return to shareholders totaled $3.6 billion, or 123 percent of free cash flow. Our strategy to return to shareholders all of our free cash flow not needed for debt repayment reflects our confidence in the long-term sustainability of our Analog and Embedded Processing business model.

"Our balance sheet remains strong, with $3.2 billion of cash and short-term investments at the end of the quarter, 82 percent of which is owned by the company's U.S. entities, even after reducing debt by $500 million. Inventory days were 105, up from 101 a year ago, and consistent with our model of 105-115."