Texas Instruments Incorporated (TXN)

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Texas Instruments Inc. (TXN)

Q1 2013 Mid-Quarter Update Conference

March 07, 2013 5:00 pm ET


Ron Slaymaker


Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division

Ross Seymore - Deutsche Bank AG, Research Division

Christopher B. Danely - JP Morgan Chase & Co, Research Division

James Covello - Goldman Sachs Group Inc., Research Division

Ambrish Srivastava - BMO Capital Markets U.S.

Blayne Curtis - Barclays Capital, Research Division

Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division

Sumit Dhanda - ISI Group Inc., Research Division

David M. Wong - Wells Fargo Securities, LLC, Research Division



Good day, ladies and gentlemen. Welcome to the Texas Instruments First Quarter 2013 Mid-Quarter Update Conference. Today's call is being recorded. At this time, I'd like to turn the conference over to Mr. Ron Slaymaker. Please go ahead, sir.

Ron Slaymaker

Good afternoon. Thank you for joining TI's mid-quarter financial update for the first quarter of 2013. In a moment, I'll provide a short summary of TI's current expectations for the quarter, updating the revenue and EPS estimate ranges for the company.

In general, I will not provide detailed information on revenue trends by segment or end markets, and I will not address details of profit margins. In our earnings release at the end of the quarter, we will provide this information.

As usual with our mid-quarter update, we will not be taking follow-up calls this evening. Considering the limited information available at this point in the quarter and in consideration of everyone's time, we will limit this call to 30 minutes. For any of you who missed the release, you can find it on our website at ti.com/ir.

This call is broadcast live over the web and can be accessed through TI's website. A replay will be available through the web.

This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the news release published today, as well as TI's most recent SEC filings for a more complete description.

We have narrowed our expected ranges for TI's revenue and earnings to the upper half of our previous ranges. We now expect TI revenue between $2.80 billion and $2.91 billion. We expect earnings per share between $0.28 and $0.32 on a GAAP basis. As in our original guidance, EPS still includes about $0.06 of acquisition and restructuring charges and about $0.06 from a discrete tax benefit that is resulting from the reinstatement of the R&D tax credit that was retroactive to the beginning of 2012.

Since the net impact from the acquisition and restructuring charges and the discreet tax benefit is essentially 0, EPS on a GAAP basis and on a non-GAAP basis should be the same this quarter. Looking ahead, the vast majority of our ongoing acquisition charges, or about $80 million per quarter, will be from amortization of intangibles, an amount that will remain consistent for the next 7 years or so. We also expect that restructuring charges will remain low from here.

In consideration of this, we recommend that those of you that submit estimates to organizations that compile consensus estimates, such as First Call or FactSet, should now transition over to GAAP submissions only. While the non-GAAP estimates were beneficial over the past 6 quarters to help out [ph] investors understand the underlying trends of our business operations without the noise of acquisition and restructuring charges, we believe they will be unnecessary going forward. Of course, we will continue to provide full transparency for you into these expenses as they will continue to be reported as separate lines on our income statement.

Operator, you can now open the lines for questions. [Operator Instructions] Operator?

Question-and-Answer Session


We'll take our first question from Stacy Rasgon with Sanford Bernstein.

Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division

Ron, I had a -- I wanted to dig into the order trajectory a little bit. On your last earnings call, you had said that, I guess, orders had bottomed in December, and January, on a sequential basis, was looking better. Could you give us some feeling how that trend is -- has it moved through February and even through the little bit we've seen in March so far?

Ron Slaymaker

Okay. Sure, Stacy. Let me just say, in general, the stronger demand environment that we discussed back in January has continued through the quarter and, overall, is tracking better than our initial expectation. So we see this in our revenue trends and even more so in our orders, as we are now building backlog for the first time in several quarters. So I would just say, quarter-to-date, orders have been growing strongly and turns levels have been high as we're able to support our customers with short lead times. And also, our good inventory position clearly is contributing to that. So as I noted, we're building backlog. I would note that given the high turns, visibility remains low, but we have no reason to believe that the strength we've seen thus far will not continue as we go forward. Do you have a follow-on, Stacy?

Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division

I do. If you could give us a little bit of color on where the strength is coming from, or at least areas that might be stronger or weaker versus your initial expectations?

Ron Slaymaker

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