x | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 75-0289970 |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
12500 TI Boulevard, P.O. Box 660199, Dallas, Texas | 75266-0199 |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | x | Accelerated filer | ¨ | |
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
For Three Months Ended June 30, | For Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenue | $ | 3,047 | $ | 3,335 | $ | 5,932 | $ | 6,456 | |||||||
Cost of revenue (COR) | 1,477 | 1,684 | 2,988 | 3,274 | |||||||||||
Gross profit | 1,570 | 1,651 | 2,944 | 3,182 | |||||||||||
Research and development (R&D) | 389 | 480 | 808 | 989 | |||||||||||
Selling, general and administrative (SG&A) | 471 | 456 | 931 | 918 | |||||||||||
Acquisition charges | 86 | 104 | 171 | 257 | |||||||||||
Restructuring charges/other | (282 | ) | 13 | (267 | ) | 23 | |||||||||
Operating profit | 906 | 598 | 1,301 | 995 | |||||||||||
Other income (expense), net (OI&E) | — | (2 | ) | 2 | (17 | ) | |||||||||
Interest and debt expense | 24 | 20 | 47 | 41 | |||||||||||
Income before income taxes | 882 | 576 | 1,256 | 937 | |||||||||||
Provision for income taxes | 222 | 130 | 234 | 226 | |||||||||||
Net income | $ | 660 | $ | 446 | $ | 1,022 | $ | 711 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | .59 | $ | .38 | $ | .91 | $ | .61 | |||||||
Diluted | $ | .58 | $ | .38 | $ | .90 | $ | .60 | |||||||
Average shares outstanding (millions): | |||||||||||||||
Basic | 1,103 | 1,140 | 1,105 | 1,142 | |||||||||||
Diluted | 1,117 | 1,154 | 1,120 | 1,159 | |||||||||||
Cash dividends declared per share of common stock | $ | .28 | $ | .17 | $ | .49 | $ | .34 |
For Three Months Ended June 30, | For Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income | $ | 660 | $ | 446 | $ | 1,022 | $ | 711 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Available-for-sale investments: | |||||||||||||||
Unrealized gains (losses), net of taxes | — | — | — | 2 | |||||||||||
Net actuarial gains (losses) of defined benefit plans: | |||||||||||||||
Adjustment, net of taxes | 48 | (12 | ) | 80 | 11 | ||||||||||
Reclassification of recognized transactions, net of taxes | 16 | 12 | 33 | 23 | |||||||||||
Prior service cost of defined benefit plans: | |||||||||||||||
Adjustment, net of taxes | (1 | ) | 1 | (2 | ) | — | |||||||||
Reclassification of recognized transactions, net of taxes | (2 | ) | — | (2 | ) | — | |||||||||
Derivative instrument: | |||||||||||||||
Change in fair value, net of taxes | (1 | ) | — | (1 | ) | (1 | ) | ||||||||
Reclassification of recognized transactions, net of taxes | — | — | 1 | — | |||||||||||
Other comprehensive income (loss), net of taxes | 60 | 1 | 109 | 35 | |||||||||||
Total comprehensive income | $ | 720 | $ | 447 | $ | 1,131 | $ | 746 |
June 30, 2013 | December 31, 2012 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,180 | $ | 1,416 | |||
Short-term investments | 2,064 | 2,549 | |||||
Accounts receivable, net of allowances of ($31) and ($31) | 1,491 | 1,230 | |||||
Raw materials | 101 | 116 | |||||
Work in process | 926 | 935 | |||||
Finished goods | 693 | 706 | |||||
Inventories | 1,720 | 1,757 | |||||
Deferred income taxes | 1,070 | 1,044 | |||||
Prepaid expenses and other current assets | 513 | 234 | |||||
Total current assets | 8,038 | 8,230 | |||||
Property, plant and equipment at cost | 6,679 | 6,891 | |||||
Less accumulated depreciation | (3,068 | ) | (2,979 | ) | |||
Property, plant and equipment, net | 3,611 | 3,912 | |||||
Long-term investments | 203 | 215 | |||||
Goodwill, net | 4,362 | 4,362 | |||||
Acquisition-related intangibles, net | 2,388 | 2,558 | |||||
Deferred income taxes | 253 | 280 | |||||
Capitalized software licenses, net | 159 | 142 | |||||
Overfunded retirement plans | 106 | 68 | |||||
Other assets | 278 | 254 | |||||
Total assets | $ | 19,398 | $ | 20,021 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 1,000 | $ | 1,500 | |||
Accounts payable | 437 | 444 | |||||
Accrued compensation | 463 | 524 | |||||
Income taxes payable | 218 | 79 | |||||
Deferred income taxes | 2 | 2 | |||||
Accrued expenses and other liabilities | 682 | 881 | |||||
Total current liabilities | 2,802 | 3,430 | |||||
Long-term debt | 4,165 | 4,186 | |||||
Underfunded retirement plans | 240 | 269 | |||||
Deferred income taxes | 584 | 572 | |||||
Deferred credits and other liabilities | 539 | 603 | |||||
Total liabilities | 8,330 | 9,060 | |||||
Stockholders’ equity: | |||||||
Preferred stock, $25 par value. Authorized – 10,000,000 shares. Participating cumulative preferred. None issued. | — | — | |||||
Common stock, $1 par value. Authorized – 2,400,000,000 shares. Shares issued – 1,740,815,939 | 1,741 | 1,741 | |||||
Paid-in capital | 1,117 | 1,176 | |||||
Retained earnings | 27,677 | 27,205 | |||||
Less treasury common stock at cost. Shares: June 30, 2013 – 639,643,135; December 31, 2012 – 632,636,970 | (18,877 | ) | (18,462 | ) | |||
Accumulated other comprehensive income (loss), net of taxes | (590 | ) | (699 | ) | |||
Total stockholders’ equity | 11,068 | 10,961 | |||||
Total liabilities and stockholders’ equity | $ | 19,398 | $ | 20,021 |
For Six Months Ended June 30, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 1,022 | $ | 711 | |||
Adjustments to net income: | |||||||
Depreciation | 449 | 484 | |||||
Amortization of acquisition-related intangibles | 170 | 171 | |||||
Stock-based compensation | 150 | 133 | |||||
Gains on sales of assets | (3 | ) | — | ||||
Deferred income taxes | (39 | ) | 17 | ||||
Increase (decrease) from changes in: | |||||||
Accounts receivable | (272 | ) | (88 | ) | |||
Inventories | 37 | (123 | ) | ||||
Prepaid expenses and other current assets | (283 | ) | 55 | ||||
Accounts payable and accrued expenses | (280 | ) | (114 | ) | |||
Accrued compensation | (59 | ) | (136 | ) | |||
Income taxes payable | 144 | (36 | ) | ||||
Changes in funded status of retirement plans | 52 | 53 | |||||
Other | (53 | ) | (3 | ) | |||
Cash flows from operating activities | 1,035 | 1,124 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (182 | ) | (249 | ) | |||
Proceeds from asset sales | 18 | — | |||||
Purchases of short-term investments | (2,402 | ) | (657 | ) | |||
Proceeds from short-term investments | 2,883 | 1,466 | |||||
Purchases of long-term investments | (1 | ) | (1 | ) | |||
Proceeds from long-term investments | 15 | 32 | |||||
Cash flows from investing activities | 331 | 591 | |||||
Cash flows from financing activities: | |||||||
Proceeds from issuance of long-term debt | 986 | — | |||||
Repayment of debt and commercial paper borrowings | (1,500 | ) | (875 | ) | |||
Dividends paid | (541 | ) | (390 | ) | |||
Stock repurchases | (1,400 | ) | (600 | ) | |||
Proceeds from common stock transactions | 797 | 327 | |||||
Excess tax benefit from share-based payments | 63 | 23 | |||||
Other | (7 | ) | — | ||||
Cash flows from financing activities | (1,602 | ) | (1,515 | ) | |||
Net change in cash and cash equivalents | (236 | ) | 200 | ||||
Cash and cash equivalents, beginning of period | 1,416 | 992 | |||||
Cash and cash equivalents, end of period | $ | 1,180 | $ | 1,192 |
1. | Description of business and significant accounting policies and practices |
For Three Months Ended June 30, 2013 | For Three Months Ended June 30, 2012 | ||||||||||||||||||||
Net Income | Shares | EPS | Net Income | Shares | EPS | ||||||||||||||||
Basic EPS: | |||||||||||||||||||||
Net income | $ | 660 | $ | 446 | |||||||||||||||||
Less income allocated to RSUs | (11 | ) | (8 | ) | |||||||||||||||||
Income allocated to common stock for basic EPS calculation | $ | 649 | 1,103 | $ | .59 | $ | 438 | 1,140 | $ | .38 | |||||||||||
Adjustment for dilutive shares: | |||||||||||||||||||||
Stock-based compensation plans | 14 | 14 | |||||||||||||||||||
Diluted EPS: | |||||||||||||||||||||
Net income | $ | 660 | $ | 446 | |||||||||||||||||
Less income allocated to RSUs | (11 | ) | (8 | ) | |||||||||||||||||
Income allocated to common stock for diluted EPS calculation | $ | 649 | 1,117 | $ | .58 | $ | 438 | 1,154 | $ | .38 |
For Six Months Ended June 30, 2013 | For Six Months Ended June 30, 2012 | ||||||||||||||||||||
Net Income | Shares | EPS | Net Income | Shares | EPS | ||||||||||||||||
Basic EPS: | |||||||||||||||||||||
Net income | $ | 1,022 | $ | 711 | |||||||||||||||||
Less income allocated to RSUs | (18 | ) | (12 | ) | |||||||||||||||||
Income allocated to common stock for basic EPS calculation | $ | 1,004 | 1,105 | $ | .91 | $ | 699 | 1,142 | $ | .61 | |||||||||||
Adjustment for dilutive shares: | |||||||||||||||||||||
Stock-based compensation plans | 15 | 17 | |||||||||||||||||||
Diluted EPS: | |||||||||||||||||||||
Net income | $ | 1,022 | $ | 711 | |||||||||||||||||
Less income allocated to RSUs | (18 | ) | (12 | ) | |||||||||||||||||
Income allocated to common stock for diluted EPS calculation | $ | 1,004 | 1,120 | $ | .90 | $ | 699 | 1,159 | $ | .60 |
2. | Acquisition-related charges |
For Three Months Ended June 30, | For Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Acquisition charges: | |||||||||||||||
Amortization of intangible assets | $ | 81 | $ | 81 | $ | 162 | $ | 162 | |||||||
Retention bonuses | 2 | 7 | 3 | 48 | |||||||||||
Severance and other benefits | — | 3 | — | 15 | |||||||||||
Stock-based compensation | 3 | 4 | 6 | 10 | |||||||||||
Transaction and other costs | — | 9 | — | 22 | |||||||||||
As recorded in Acquisition charges | 86 | 104 | 171 | 257 | |||||||||||
Distributor contract termination recorded in COR | — | — | — | 21 | |||||||||||
Total acquisition-related costs | $ | 86 | $ | 104 | $ | 171 | $ | 278 |
3. | Restructuring charges/other |
For Three Months Ended June 30, | For Six Months Ended June 30, | Cumulative since Actions Initiated | |||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||
Restructuring charges: | |||||||||||||||||||
2012 Wireless action | |||||||||||||||||||
Severance and benefits cost | $ | 26 | $ | — | $ | 30 | $ | — | $ | 275 | |||||||||
Accelerated depreciation | 3 | — | 6 | — | 9 | ||||||||||||||
Other exit costs | — | — | 2 | — | 105 | ||||||||||||||
29 | — | 38 | — | 389 | |||||||||||||||
2011 actions | |||||||||||||||||||
Severance and benefits cost | 1 | — | 1 | — | 114 | ||||||||||||||
Accelerated depreciation | — | 4 | 5 | 9 | 28 | ||||||||||||||
Other exit costs | 3 | 9 | 4 | 14 | 29 | ||||||||||||||
4 | 13 | 10 | 23 | 171 | |||||||||||||||
Total restructuring charges | 33 | 13 | 48 | 23 | $ | 560 | |||||||||||||
Other: | |||||||||||||||||||
Gain on technology transfer | (315 | ) | — | (315 | ) | — | |||||||||||||
Total Restructuring charges/other | $ | (282 | ) | $ | 13 | $ | (267 | ) | $ | 23 |
2012 Wireless Action | 2011 Actions | Prior Actions | |||||||||||||||||||||||||
Severance and Benefits | Other Charges | Severance and Benefits | Other Charges | Severance and Benefits | Other Charges | Total | |||||||||||||||||||||
Remaining accrual at December 31, 2012 | $ | 241 | $ | — | $ | 94 | $ | 3 | $ | 5 | $ | 6 | $ | 349 | |||||||||||||
Restructuring charges | 30 | 8 | 1 | 9 | — | — | 48 | ||||||||||||||||||||
Non-cash items (a) | — | (6 | ) | — | (5 | ) | — | — | (11 | ) | |||||||||||||||||
Payments | (44 | ) | (2 | ) | (41 | ) | (4 | ) | (3 | ) | — | (94 | ) | ||||||||||||||
Remaining accrual at June 30, 2013 | $ | 227 | $ | — | $ | 54 | $ | 3 | $ | 2 | $ | 6 | $ | 292 |
4. | Income taxes |
5. | Valuation of debt and equity investments and certain liabilities |
June 30, 2013 | December 31, 2012 | ||||||||||||||||||||||
Cash and Cash Equivalents | Short-term Investments | Long-term Investments | Cash and Cash Equivalents | Short-term Investments | Long-term Investments | ||||||||||||||||||
Measured at fair value: | |||||||||||||||||||||||
Available-for-sale securities | |||||||||||||||||||||||
Money market funds | $ | 277 | $ | — | $ | — | $ | 211 | $ | — | $ | — | |||||||||||
Corporate obligations | 73 | 271 | — | 188 | 325 | — | |||||||||||||||||
U.S. Government agency and Treasury securities | 675 | 1,793 | — | 795 | 2,224 | — | |||||||||||||||||
Trading securities | |||||||||||||||||||||||
Mutual funds | — | — | 159 | — | — | 159 | |||||||||||||||||
Total | $ | 1,025 | $ | 2,064 | $ | 159 | $ | 1,194 | $ | 2,549 | $ | 159 | |||||||||||
Other measurement basis: | |||||||||||||||||||||||
Equity-method investments | $ | — | $ | — | $ | 25 | $ | — | $ | — | $ | 34 | |||||||||||
Cost-method investments | — | — | 19 | — | — | 22 | |||||||||||||||||
Cash on hand | 155 | — | — | 222 | — | — | |||||||||||||||||
Total | $ | 1,180 | $ | 2,064 | $ | 203 | $ | 1,416 | $ | 2,549 | $ | 215 |
Due | Fair Value | |||
One year or less | $ | 2,799 | ||
One to three years | 290 |
Fair Value | |||||||||||
June 30, 2013 | Level 1 | Level 2 | |||||||||
Assets: | |||||||||||
Money market funds | $ | 277 | $ | 277 | $ | — | |||||
Corporate obligations | 344 | — | 344 | ||||||||
U.S. Government agency and Treasury securities | 2,468 | 1,517 | 951 | ||||||||
Mutual funds | 159 | 159 | — | ||||||||
Total assets | $ | 3,248 | $ | 1,953 | $ | 1,295 | |||||
Liabilities: | |||||||||||
Deferred compensation | $ | 178 | $ | 178 | $ | — | |||||
Total liabilities | $ | 178 | $ | 178 | $ | — |
Fair Value | |||||||||||
December 31, 2012 | Level 1 | Level 2 | |||||||||
Assets: | |||||||||||
Money market funds | $ | 211 | $ | 211 | $ | — | |||||
Corporate obligations | 513 | — | 513 | ||||||||
U.S. Government agency and Treasury securities | 3,019 | 1,145 | 1,874 | ||||||||
Mutual funds | 159 | 159 | — | ||||||||
Total assets | $ | 3,902 | $ | 1,515 | $ | 2,387 | |||||
Liabilities: | |||||||||||
Deferred compensation | $ | 174 | $ | 174 | $ | — | |||||
Total liabilities | $ | 174 | $ | 174 | $ | — |
Level 3 | |||
Changes in fair value during the period (pre-tax): | Auction-rate Securities | ||
Balance, December 31, 2011 | $ | 134 | |
Change in unrealized loss – included in AOCI | 10 | ||
Redemptions | (84 | ) | |
Sales | (20 | ) | |
Balance, June 30, 2012 | $ | 40 |
6. | Goodwill and acquisition-related intangibles |
June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||
Acquisition-related Intangibles | Amortization Period (Years) | Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||||||
Developed technology | 5 - 10 | $ | 2,145 | $ | 413 | $ | 1,732 | $ | 2,145 | $ | 312 | $ | 1,833 | |||||||||||||
Customer relationships | 5 - 8 | 821 | 188 | 633 | 821 | 137 | 684 | |||||||||||||||||||
Other intangibles | 2 - 5 | 17 | 13 | 4 | 46 | 36 | 10 | |||||||||||||||||||
In-process R&D | (a) | 19 | n/a | 19 | 31 | n/a | 31 | |||||||||||||||||||
Total | $ | 3,002 | $ | 614 | $ | 2,388 | $ | 3,043 | $ | 485 | $ | 2,558 |
7. | Postretirement benefit plans |
U.S. Defined Benefit | U.S. Retiree Health Care | Non-U.S. Defined Benefit | |||||||||||||||||||||
For Three Months Ended June 30 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
Service cost | $ | 7 | $ | 6 | $ | 2 | $ | 1 | $ | 10 | $ | 10 | |||||||||||
Interest cost | 10 | 11 | 5 | 6 | 15 | 20 | |||||||||||||||||
Expected return on plan assets | (12 | ) | (12 | ) | (6 | ) | (6 | ) | (16 | ) | (20 | ) | |||||||||||
Amortization of prior service cost (credit) | — | — | 1 | 1 | (1 | ) | (1 | ) | |||||||||||||||
Recognized net actuarial loss | 5 | 4 | 3 | 3 | 7 | 11 | |||||||||||||||||
Net periodic benefit cost | 10 | 9 | 5 | 5 | 15 | 20 | |||||||||||||||||
Settlement loss | 6 | — | — | — | — | — | |||||||||||||||||
Curtailment gain | — | — | — | — | (3 | ) | — | ||||||||||||||||
Total, including other postretirement (gains) losses | $ | 16 | $ | 9 | $ | 5 | $ | 5 | $ | 12 | $ | 20 |
U.S. Defined Benefit | U.S. Retiree Health Care | Non-U.S. Defined Benefit | |||||||||||||||||||||
For Six Months Ended June 30 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
Service cost | $ | 14 | $ | 12 | $ | 3 | $ | 2 | $ | 20 | $ | 20 | |||||||||||
Interest cost | 21 | 23 | 10 | 12 | 31 | 39 | |||||||||||||||||
Expected return on plan assets | (25 | ) | (25 | ) | (12 | ) | (11 | ) | (33 | ) | (40 | ) | |||||||||||
Amortization of prior service cost (credit) | — | — | 2 | 2 | (2 | ) | (2 | ) | |||||||||||||||
Recognized net actuarial loss | 11 | 8 | 6 | 6 | 17 | 23 | |||||||||||||||||
Net periodic benefit cost | 21 | 18 | 9 | 11 | 33 | 40 | |||||||||||||||||
Settlement loss | 13 | — | — | — | — | — | |||||||||||||||||
Curtailment gain | — | — | — | (1 | ) | (3 | ) | — | |||||||||||||||
Special termination benefit gain | — | (2 | ) | — | — | — | — | ||||||||||||||||
Total, including other postretirement (gains) losses | $ | 34 | $ | 16 | $ | 9 | $ | 10 | $ | 30 | $ | 40 |
8. | Debt and lines of credit |
June 30, 2013 | December 31, 2012 | ||||||
Floating-rate notes due 2013 (swapped to a 0.922% fixed rate) | $ | — | $ | 1,000 | |||
Notes due 2013 at 0.875% | — | 500 | |||||
Notes due 2014 at 1.375% | 1,000 | 1,000 | |||||
Notes due 2015 at 3.95% (assumed with National acquisition) | 250 | 250 | |||||
Notes due 2015 at 0.45% | 750 | 750 | |||||
Notes due 2016 at 2.375% | 1,000 | 1,000 | |||||
Notes due 2017 at 6.60% (assumed with National acquisition) | 375 | 375 | |||||
Notes due 2018 at 1.00% | 500 | — | |||||
Notes due 2019 at 1.65% | 750 | 750 | |||||
Notes due 2023 at 2.25% | 500 | — | |||||
5,125 | 5,625 | ||||||
Add net unamortized premium | 40 | 61 | |||||
Less current portion of long-term debt | (1,000 | ) | (1,500 | ) | |||
Total long-term debt | $ | 4,165 | $ | 4,186 |
9. | Contingencies |
10. | Supplemental financial information |
For Three Months Ended June 30, | For Six Months Ended June 30, | |||||||||||||||||
Details About AOCI Components | 2013 | 2012 | 2013 | 2012 | Related Statement of Income Line | |||||||||||||
Net actuarial gains (losses) of defined benefit plans (a) | $ | 21 | $ | 18 | $ | 47 | $ | 37 | Pension expense (b) | |||||||||
Taxes | (5 | ) | (6 | ) | (14 | ) | (14 | ) | Provision for income taxes | |||||||||
Reclassification of recognized transactions, net of taxes | $ | 16 | $ | 12 | $ | 33 | $ | 23 | Net income | |||||||||
Prior service cost of defined benefit plans (c) | $ | (3 | ) | $ | — | $ | (3 | ) | $ | (1 | ) | Pension expense (b) | ||||||
Taxes | 1 | — | 1 | 1 | Provision for income taxes | |||||||||||||
Reclassification of recognized transactions, net of taxes | $ | (2 | ) | $ | — | $ | (2 | ) | $ | — | Net income | |||||||
Derivative instruments | $ | — | $ | — | $ | 1 | $ | — | Interest and debt expense | |||||||||
Taxes | — | — | — | — | Provision for income taxes | |||||||||||||
Reclassification of recognized transactions, net of taxes | $ | — | $ | — | $ | 1 | $ | — | Net income |
11. | Segment data |
For Three Months Ended June 30, | For Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Segment Revenue: | |||||||||||||||
Analog | $ | 1,745 | $ | 1,800 | $ | 3,393 | $ | 3,486 | |||||||
Embedded Processing | 618 | 580 | 1,178 | 1,120 | |||||||||||
Other | 684 | 955 | 1,361 | 1,850 | |||||||||||
Total revenue | $ | 3,047 | $ | 3,335 | $ | 5,932 | $ | 6,456 |
For Three Months Ended June 30, | For Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Segment Operating Profit: | |||||||||||||||
Analog | $ | 416 | $ | 437 | $ | 716 | $ | 771 | |||||||
Embedded Processing | 54 | 52 | 61 | 88 | |||||||||||
Other | 436 | 109 | 524 | 136 | |||||||||||
Total operating profit | $ | 906 | $ | 598 | $ | 1,301 | $ | 995 |
For Three Months Ended | |||||||||||
June 30, 2013 | June 30, 2012 | March 31, 2013 | |||||||||
Revenue | $ | 3,047 | $ | 3,335 | $ | 2,885 | |||||
Cost of revenue | 1,477 | 1,684 | 1,511 | ||||||||
Gross profit | 1,570 | 1,651 | 1,374 | ||||||||
Research and development (R&D) | 389 | 480 | 419 | ||||||||
Selling, general and administrative (SG&A) | 471 | 456 | 459 | ||||||||
Acquisition charges | 86 | 104 | 86 | ||||||||
Restructuring charges/other | (282 | ) | 13 | 15 | |||||||
Operating profit | 906 | 598 | 395 | ||||||||
Other income (expense), net (OI&E) | — | (2 | ) | 2 | |||||||
Interest and debt expense | 24 | 20 | 23 | ||||||||
Income before income taxes | 882 | 576 | 374 | ||||||||
Provision for income taxes | 222 | 130 | 12 | ||||||||
Net income | $ | 660 | $ | 446 | $ | 362 | |||||
Earnings per common share: | |||||||||||
Basic | $ | .59 | $ | .38 | $ | .32 | |||||
Diluted | $ | .58 | $ | .38 | $ | .32 | |||||
Average shares outstanding (millions): | |||||||||||
Basic | 1,103 | 1,140 | 1,107 | ||||||||
Diluted | 1,117 | 1,154 | 1,123 | ||||||||
Cash dividends declared per share of common stock | $ | .28 | $ | .17 | $ | .21 | |||||
Percentage of revenue: | |||||||||||
Gross profit | 51.5 | % | 49.5 | % | 47.6 | % | |||||
R&D | 12.8 | % | 14.4 | % | 14.5 | % | |||||
SG&A | 15.5 | % | 13.7 | % | 15.9 | % | |||||
Operating profit | 29.7 | % | 17.9 | % | 13.7 | % |
2Q13 | 2Q12 | Change | 1Q13 | Change | ||||||||||||||||||||
Revenue | $ | 1,745 | $ | 1,800 | -3 | % | $ | 1,648 | 6 | % | ||||||||||||||
Operating profit | 416 | 437 | -5 | % | 300 | 39 | % | |||||||||||||||||
Operating profit % of revenue | 23.8 | % | 24.3 | % | 18.2 | % |
2Q13 | 2Q12 | Change | 1Q13 | Change | ||||||||||||||||||||
Revenue | $ | 618 | $ | 580 | 7 | % | $ | 561 | 10 | % | ||||||||||||||
Operating profit | 54 | 52 | 4 | % | 7 | 671 | % | |||||||||||||||||
Operating profit % of revenue | 8.8 | % | 9.0 | % | 1.3 | % |
2Q13 | 2Q12 | Change | 1Q13 | Change | |||||||||||||||||||||
Revenue | $ | 684 | $ | 955 | -28 | % | $ | 676 | 1 | % | |||||||||||||||
Operating profit | 436 | 109 | 300 | % | 88 | 395 | % | ||||||||||||||||||
Operating profit % of revenue | 63.7 | % | 11.4 | % | 13.1 | % | |||||||||||||||||||
Acquisition charges* | 86 | 104 | 86 | ||||||||||||||||||||||
Restructuring charges/other* | (282 | ) | 13 | 15 |
YTD 2013 | YTD 2012 | Change | ||||||||||||
Revenue | $ | 3,393 | $ | 3,486 | -3 | % | ||||||||
Operating profit | 716 | 771 | -7 | % | ||||||||||
Operating profit % of revenue | 21.1 | % | 22.1 | % |
YTD 2013 | YTD 2012 | Change | ||||||||||||
Revenue | $ | 1,178 | $ | 1,120 | 5 | % | ||||||||
Operating profit | 61 | 88 | -31 | % | ||||||||||
Operating profit % of revenue | 5.2 | % | 7.8 | % |
YTD 2013 | YTD 2012 | Change | ||||||||||||
Revenue | $ | 1,361 | $ | 1,850 | -26 | % | ||||||||
Operating profit | 524 | 136 | 285 | % | ||||||||||
Operating profit % of revenue | 38.5 | % | 7.4 | % | ||||||||||
Acquisition charges* | 171 | 257 | ||||||||||||
Restructuring charges/other* | (267 | ) | 23 |
For Three Months Ended | |||||||||||
June 30, 2013 | Mar. 31, 2013 | Change | |||||||||
Revenue (GAAP) | $ | 3,047 | $ | 2,885 | 6 | % | |||||
Less legacy wireless revenue | 148 | 210 | |||||||||
TI Revenue less legacy wireless revenue (non-GAAP) | $ | 2,899 | $ | 2,675 | 8 | % |
For the Twelve Months Ended June 30, 2013 | For the Twelve Months Ended June 30, 2012 | Percentage Change | |||||||||
Cash flow from operations (GAAP) | $ | 3,323 | $ | 3,234 | 3 | % | |||||
Less Capital expenditures | 427 | 595 | -28 | % | |||||||
Free cash flow (non-GAAP) | $ | 2,896 | $ | 2,639 | 10 | % |
For the Twelve Months Ended June 30, 2013 | Percentage of Revenue | |||||
Revenue | $ | 12,301 | ||||
Cash flow from operations (GAAP) | $ | 3,323 | 27 | % | ||
Less Capital expenditures | 427 | 3 | % | |||
Free cash flow (non-GAAP) | $ | 2,896 | 24 | % |
For the Twelve Months Ended June 30, 2013 | Percentage of Cash Flow from Operations (GAAP) | Percentage of Free Cash Flow (Non-GAAP) | |||||||
Dividends paid | $ | 971 | 29 | % | 34 | % | |||
Stock repurchases | 2,600 | 78 | % | 90 | % | ||||
Total cash returned to shareholders | $ | 3,571 | 107 | % | 123 | % |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1) | |||||||
April 1, 2013 through April 30, 2013 | 11,295,745 | $ | 35.11 | 11,295,745 | $7.78 billion | ||||||
May 1, 2013 through May 31, 2013 | 8,245,010 | 36.80 | 8,245,010 | $7.47 billion | |||||||
June 1, 2013 through June 30, 2013 | — | — | — | $7.47 billion | |||||||
Total | 19,540,755 | (2) | $ | 35.82 | 19,540,755 | (2) | $7.47 billion | (3) |
(1) | All purchases during the quarter were made under the authorization from our board of directors to purchase up to $7.5 billion of additional shares of TI common stock announced on September 16, 2010. On February 21, 2013, our Board of Directors authorized the purchase of an additional $5.0 billion of our common stock. No expiration date has been specified for these authorizations. |
(2) | All purchases during the quarter were open-market purchases. The table does not include the purchase of 607,508 shares pursuant to orders placed in the first quarter of 2013, for which trades were settled in the first two business days of April 2013. The purchase of these shares is reflected in this item of our report on Form 10-Q for the period ended March 31, 2013. |
(3) | As of June 30, 2013, this amount consisted of the remaining portion of the $7.5 billion authorized in September 2010 and the $5.0 billion authorized in February 2013. |
Designation of Exhibits in This Report | Description of Exhibit |
3(a) | Restated Certificate of Incorporation of the Registrant, dated April 18, 1985 (incorporated by reference to Exhibit 3(a) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(b) | Certificate of Amendment to Restated Certificate of Incorporation of the Registrant, dated April 16, 1987 (incorporated by reference to Exhibit 3(b) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(c) | Certificate of Amendment to Restated Certificate of Incorporation of the Registrant, dated April 21, 1988 (incorporated by reference to Exhibit 3(c) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(d) | Certificate of Amendment to Restated Certificate of Incorporation of the Registrant, dated April 18, 1996 (incorporated by reference to Exhibit 3(d) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(e) | Certificate of Ownership merging Texas Instruments Automation Controls, Inc. into the Registrant, dated March 28, 1988 (incorporated by reference to Exhibit 3(e) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(f) | Certificate of Elimination of Designations of Preferred Stock of the Registrant, dated March 18, 1994 (incorporated by reference to Exhibit 3(f) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(g) | Certificate of Ownership and Merger merging Tiburon Systems, Inc. into the Registrant, dated November 2, 1995 (incorporated by reference to Exhibit 3(g) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(h) | Certificate of Ownership and Merger merging Tartan, Inc. into the Registrant, dated June 21, 1995 (incorporated by reference to Exhibit 3(h) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(i) | Certificate of Designation relating to the Registrant's Participating Cumulative Preferred Stock, dated June 23, 1998 (incorporated by reference to Exhibit 3(i) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(j) | Certificate of Elimination of Designation of Preferred Stock of the Registrant, dated June 18, 1998 (incorporated by reference to Exhibit 3(j) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(k) | Certificate of Ownership and Merger merging Intersect Technologies, Inc. with and into the Registrant, dated July 15, 1999 (incorporated by reference to Exhibit 3(k) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(l) | Certificate of Ownership and Merger merging Soft Warehouse, Inc. with and into the Registrant, dated September 23, 1999 (incorporated by reference to Exhibit 3(l) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(m) | Certificate of Ownership and Merger merging Silicon Systems, Inc. with and into the Registrant, dated December 17, 1999 (incorporated by reference to Exhibit 3(m) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(n) | Certificate of Amendment to Restated Certificate of Incorporation, dated April 20, 2000 (incorporated by reference to Exhibit 3(n) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(o) | Certificate of Ownership and Merger merging Power Trends, Inc. with and into the Registrant, dated May 31, 2001 (incorporated by reference to Exhibit 3(o) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(p) | Certificate of Ownership and Merger merging Amati Communications Corporation with and into the Registrant, dated September 28, 2001 (incorporated by reference to Exhibit 3(p) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(q) | Certificate of Ownership and Merger merging Texas Instruments San Diego Incorporated with and into the Registrant, dated August 27, 2002 (incorporated by reference to Exhibit 3(q) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(r) | Certificate of Ownership and Merger merging Texas Instruments Burlington Incorporated with and into the Registrant, dated December 31, 2003 (incorporated by reference to Exhibit 3(r) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(s) | Certificate of Ownership and Merger merging Texas Instruments Automotive Sensors and Controls San Jose Inc. with and into the Registrant, dated October 31, 2004 (incorporated by reference to Exhibit 3(s) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011). |
3(t) | Certificate of Elimination of Series B Participating Cumulative Preferred Stock (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K filed June 23, 2008). |
3(u) | By-Laws of the Registrant (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K filed July 18, 2008). |
4.1 | Officer's Certificate setting forth the terms of the Notes (incorporated by reference to Exhibit 4.2 of the Registrant's Report on Form 8-K filed May 8, 2013). |
31.1 | Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a-15(e) or Rule 15d-15(e). |
31.2 | Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-15(e) or Rule 15d-15(e). |
32.1 | Certification by Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350. |
32.2 | Certification by Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350. |
101.ins | XBRL Instance Document |
101.def | XBRL Taxonomy Extension Definition Linkbase Document |
101.sch | XBRL Taxonomy Extension Schema Document |
101.cal | XBRL Taxonomy Extension Calculation Linkbase Document |
101.lab | XBRL Taxonomy Extension Label Linkbase Document |
101.pre | XBRL Taxonomy Extension Presentation Linkbase Document |
• | Market demand for semiconductors, particularly in key markets such as communications, computing, industrial, consumer electronics and automotive; |
• | TI's ability to maintain or improve profit margins, including its ability to utilize its manufacturing facilities at sufficient levels to cover its fixed operating costs, in an intensely competitive and cyclical industry; |
• | TI's ability to develop, manufacture and market innovative products in a rapidly changing technological environment; |
• | TI's ability to compete in products and prices in an intensely competitive industry; |
• | TI's ability to maintain and enforce a strong intellectual property portfolio and obtain needed licenses from third parties; |
• | Expiration of license agreements between TI and its patent licensees, and market conditions reducing royalty payments to TI; |
• | Economic, social and political conditions in the countries in which TI, its customers or its suppliers operate, including security risks, health conditions, possible disruptions in transportation, communications and information technology networks and fluctuations in foreign currency exchange rates; |
• | Natural events such as severe weather and earthquakes in the locations in which TI, its customers or its suppliers operate; |
• | Availability and cost of raw materials, utilities, manufacturing equipment, third-party manufacturing services and manufacturing technology; |
• | Changes in the tax rate applicable to TI as the result of changes in tax law, the jurisdictions in which profits are determined to be earned and taxed, the outcome of tax audits and the ability to realize deferred tax assets; |
• | Changes in laws and regulations to which TI or its suppliers are or may become subject, such as those imposing fees or reporting or substitution costs relating to the discharge of emissions into the environment or the use of certain raw materials in our manufacturing processes; |
• | Losses or curtailments of purchases from key customers and the timing and amount of distributor and other customer inventory adjustments; |
• | Customer demand that differs from our forecasts; |
• | The financial impact of inadequate or excess TI inventory that results from demand that differs from projections; |
• | Impairments of our non-financial assets; |
• | Product liability or warranty claims, claims based on epidemic or delivery failure or recalls by TI customers for a product containing a TI part; |
• | TI's ability to recruit and retain skilled personnel; |
• | Timely implementation of new manufacturing technologies and installation of manufacturing equipment, and the ability to obtain needed third-party foundry and assembly/test subcontract services; |
• | TI's obligation to make principal and interest payments on its debt; |
• | TI's ability to successfully integrate and realize opportunities for growth from acquisitions, and our ability to realize our expectations regarding the amount and timing of restructuring charges and associated cost savings; and |
• | Breaches of our information technology systems. |
TEXAS INSTRUMENTS INCORPORATED | |||
BY | /s/ Kevin P. March | ||
Kevin P. March | |||
Senior Vice President and | |||
Chief Financial Officer | |||
Date: | August 2, 2013 |
Date: | August 2, 2013 | |
/s/ Richard K. Templeton | ||
Richard K. Templeton | ||
Chairman, President and | ||
Chief Executive Officer |
Date: | August 2, 2013 | |
/s/ Kevin P. March | ||
Kevin P. March | ||
Senior Vice President and | ||
Chief Financial Officer |
Date: | August 2, 2013 | |
/s/ Richard K. Templeton | ||
Richard K. Templeton | ||
Chairman, President and | ||
Chief Executive Officer |
Date: | August 2, 2013 | |
/s/ Kevin P. March | ||
Kevin P. March | ||
Senior Vice President and | ||
Chief Financial Officer |
Segment data
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Jun. 30, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment data | Segment data See Note 1 for a detailed description of our reportable segments. Prior period segment presentations have been revised to conform to our new reporting structure.
We use centralized manufacturing and facilities organizations to provide products and support to our operating segments. Costs incurred by these organizations, including depreciation, are charged to the segments on a per-unit basis. Consequently, depreciation expense is not an independently identifiable component within the segments’ results and therefore is not provided. |
Income taxes
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6 Months Ended |
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Jun. 30, 2013
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Income Tax Disclosure [Abstract] | |
Income taxes | Income taxes Federal income taxes for the interim periods presented have been included in the accompanying financial statements on the basis of an estimated annual effective tax rate. As of June 30, 2013, the estimated annual effective tax rate for 2013 is about 24 percent, which differs from the 35 percent statutory corporate tax rate due to lower statutory tax rates applicable to our operations in many of the jurisdictions in which we operate and from U.S. tax benefits. These lower tax rates are generally statutory in nature, without expiration and available to companies that operate in those taxing jurisdictions. The first quarter 2013 tax provision included a $65 million discrete tax benefit from the reinstatement of the federal research tax credit retroactive to the beginning of 2012. |
Postretirement benefit plans (Tables)
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of net periodic employee benefit cost | Components of net periodic employee benefit cost are as follows:
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Description of business and significant accounting policies and practices (Policies)
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6 Months Ended |
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Jun. 30, 2013
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation | Basis of presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) and on the same basis as the audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2012, and as updated by the Form 8-K. The consolidated statements of income, statements of comprehensive income and statements of cash flows for the periods ended June 30, 2013 and 2012, and the balance sheet as of June 30, 2013 are not audited but reflect all adjustments that are of a normal recurring nature and are necessary for a fair statement of the results of the periods shown. Certain amounts in the prior periods’ financial statements have been reclassified to conform to the current period presentation. Certain information and note disclosures normally included in annual consolidated financial statements have been omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Because the consolidated interim financial statements do not include all of the information and notes required by U.S. GAAP for a complete set of financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in our annual report on Form 10-K for the year ended December 31, 2012, as updated by the Form 8-K. The results for the three- and six-month periods are not necessarily indicative of a full year’s results. The consolidated financial statements include the accounts of all subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. All dollar amounts in the financial statements and tables in these notes, except per-share amounts, are stated in millions of U.S. dollars unless otherwise indicated. |
Earnings per share | Earnings per share (EPS) Unvested awards of share-based payments with rights to receive dividends or dividend equivalents, such as our restricted stock units (RSUs), are considered to be participating securities and the two-class method is used for purposes of calculating EPS. Under the two-class method, a portion of net income is allocated to these participating securities and, therefore, is excluded from the calculation of EPS allocated to common stock, as shown in the table below. |
Derivatives and hedging | Derivatives and hedging In connection with the issuance of variable-rate long-term debt in May 2011, we entered into an interest rate swap designated as a hedge of the variability of cash flows related to interest payments. Gains and losses from changes in the fair value of the interest rate swap were credited or charged to Accumulated other comprehensive income (loss), net of taxes (AOCI). In connection with the repayment of this long-term debt in the second quarter of 2013, this interest rate swap has been settled for no gain or loss. In association with the issuance of long-term debt, we use financial derivatives such as treasury rate lock agreements, the results of which have not been material. We also use derivative financial instruments to manage exposure to foreign exchange risk. These instruments are primarily forward foreign currency exchange contracts that are used as economic hedges to reduce the earnings impact exchange rate fluctuations may have on our non-U.S. dollar net balance sheet exposures. Gains and losses from changes in the fair value of these forward foreign currency exchange contracts are credited or charged to OI&E. We do not apply hedge accounting to our foreign currency derivative instruments. We do not use derivatives for speculative or trading purposes. |
Fair values of financial instruments | Fair values of financial instruments The fair values of our derivative financial instruments were not significant at June 30, 2013. Our investments in cash equivalents, short-term investments and certain long-term investments, as well as our deferred compensation liabilities, are carried at fair value and are discussed in Note 5. The carrying values for other current financial assets and liabilities, such as accounts receivable and accounts payable, approximate fair value due to the short maturity of such instruments. The carrying value of our long-term debt approximates the fair value as measured using broker-dealer quotes, which are based on Level 2 inputs. See Note 5 for the definition of Level 2 inputs. Fair-value considerations We measure and report certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three-level hierarchy discussed below indicates the extent and level of judgment used to estimate fair-value measurements. Level 1 — Uses unadjusted quoted prices that are available in active markets for identical assets or liabilities as of the reporting date. Level 2 — Uses inputs other than Level 1 that are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data. Our Level 2 assets consist of corporate obligations and some U.S. government agency and Treasury securities. We utilize a third-party data service to provide Level 2 valuations, verifying these valuations for reasonableness relative to unadjusted quotes obtained from brokers or dealers based on observable prices for similar assets in active markets. Level 3 — Uses inputs that are unobservable, supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models that utilize management estimates of market participant assumptions. |
Investment policy | Debt and equity investments We classify our investments as available for sale, trading, equity method or cost method. Most of our investments are classified as available for sale. Available-for-sale and trading securities are stated at fair value, which is generally based on market prices, broker quotes or, when necessary, financial models (see fair-value discussion below). Unrealized gains and losses on available-for-sale securities are recorded as an increase or decrease, net of taxes, in AOCI on our Consolidated balance sheets. We record other-than-temporary impairments on available-for-sale securities in OI&E in our Consolidated statements of income. We classify certain mutual funds as trading securities. These mutual funds hold a variety of debt and equity investments intended to generate returns that offset changes in certain deferred compensation liabilities. We record changes in the fair value of these mutual funds and the related deferred compensation liabilities in SG&A. Changes in the fair value of debt securities classified as trading securities are recorded in OI&E. Our other investments are not measured at fair value but are accounted for using either the equity method or cost method. These investments consist of interests in venture capital funds and other non-marketable equity securities. Gains and losses from equity-method investments are reflected in OI&E based on our ownership share of the investee’s financial results. Gains and losses on cost-method investments are recorded in OI&E when realized or when an impairment of the investment’s value is warranted based on our assessment of the recoverability of each investment. |
Warranty costs and product liabilities policy | Warranty costs/product liabilities We accrue for known product-related claims if a loss is probable and can be reasonably estimated. During the periods presented, there have been no material accruals or payments regarding product warranty or product liability. Historically, we have experienced a low rate of payments on product claims. Although we cannot predict the likelihood or amount of any future claims, we do not believe they will have a material adverse effect on our financial condition, results of operations or liquidity. Consistent with general industry practice, we enter into formal contracts with certain customers that include negotiated warranty remedies. Typically, under these agreements our warranty for semiconductor products includes: three years of coverage; an obligation to repair, replace or refund; and a maximum payment obligation tied to the price paid for our products. In some cases, product claims may exceed the price of our products. |
Contingencies (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended |
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Jun. 30, 2013
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Commitments and Contingencies Disclosure [Abstract] | |
Standard product warranty description | three years of coverage; an obligation to repair, replace or refund; and a maximum payment obligation tied to the price paid for our products |
Standard product warranty coverage | 3 years |
Discontinued operation - indemnification obligation potential exposure | $ 200 |
Segment data (Tables)
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Jun. 30, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Data Table |
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Supplemental financial information (Tables)
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Jun. 30, 2013
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Details about AOCI components | In conformance with ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, the table below details where reclassifications of recognized transactions out of AOCI are recorded on the Consolidated statements of income.
(a) Net actuarial gains (losses) of defined benefit plans is equal to the sum of Recognized net actuarial loss and Settlement loss as detailed in Note 7. (b) This AOCI component is included in the computation of total employee benefit cost which is allocated to COR, R&D, SG&A and Restructuring charges/other in the Consolidated statements of income. (c) Prior service cost of defined benefit plans is equal to the sum of Amortization of prior service cost (credit) and Curtailment gain as detailed in Note 7. |
(Valuation of debt and equity investments and certain liabilities) (Details) (USD $)
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6 Months Ended | ||
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Jun. 30, 2013
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Dec. 31, 2012
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Jun. 30, 2012
Auction Rate Securities Assets [Member]
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Changes in fair value during the period (pre-tax): | |||
Beginning balance | $ 0 | $ 0 | $ 134,000,000 |
Change in unrealized loss – included in AOCI | 10,000,000 | ||
Redemptions | (84,000,000) | ||
Sales | (20,000,000) | ||
Ending balance | $ 0 | $ 0 | $ 40,000,000 |
Segment data (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Segment Data Table [Line Items] | ||||
Segment Revenue | $ 3,047 | $ 3,335 | $ 5,932 | $ 6,456 |
Segment Operating Profit | 906 | 598 | 1,301 | 995 |
Analog [Member]
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Segment Data Table [Line Items] | ||||
Segment Revenue | 1,745 | 1,800 | 3,393 | 3,486 |
Segment Operating Profit | 416 | 437 | 716 | 771 |
Embedded Processing [Member]
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Segment Data Table [Line Items] | ||||
Segment Revenue | 618 | 580 | 1,178 | 1,120 |
Segment Operating Profit | 54 | 52 | 61 | 88 |
Other [Member]
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Segment Data Table [Line Items] | ||||
Segment Revenue | 684 | 955 | 1,361 | 1,850 |
Segment Operating Profit | $ 436 | $ 109 | $ 524 | $ 136 |
Income taxes (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended |
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Mar. 31, 2013
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Jun. 30, 2013
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Income Tax Disclosure [Abstract] | ||
Estimated annual effective tax rate (in hundredths) | 24.00% | |
Statutory corporate tax rate (in hundredths) | 35.00% | |
Discrete tax benefit from the reinstatement of the federal research tax credit retroactive to the beginning of 2012 | $ 65 |
Debt and lines of credit (Tables)
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Long-term Debt, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The following table summarizes the total long-term debt outstanding as of June 30, 2013 and December 31, 2012:
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Acquisition-related charges
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition-related charges | Acquisition-related charges We completed the acquisition of National Semiconductor Corporation (National) in September 2011. Various costs incurred as a result of that acquisition are included in Other, consistent with how management measures the performance of its segments. These total acquisition-related charges are as follows:
The amount of recognized amortization of acquired intangible assets resulting from the National acquisition is based on estimated useful lives varying between two and ten years. See Note 6 for additional information. Retention bonuses reflect amounts already or expected to be paid to former National employees who fulfill agreed-upon service period obligations and are recognized ratably over the required service period. Severance and other benefits costs were for former National employees who were terminated after the closing date. About 350 jobs were eliminated by the end of 2012 as a result of redundancies and cost efficiency measures. As of June 30, 2013, a total of $86 million in cumulative charges have been recognized, of which $81 million has been paid. Stock-based compensation was recognized for the accelerated vesting of equity awards upon the termination of employees, with additional compensation being recognized over the applicable vesting period for the remaining grantees. Transaction and other costs include various expenses incurred in connection with the National acquisition. In 2011, we discontinued using one of National’s distributors. We acquired the distributor’s inventory at fair value, resulting in an incremental charge of $21 million to COR upon sale of the inventory in 2012. |
Valuation of debt and equity investments and certain liabilities
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Valuation of debt and equity investments and certain liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation of debt and equity investments and certain liabilities | Valuation of debt and equity investments and certain liabilities Debt and equity investments We classify our investments as available for sale, trading, equity method or cost method. Most of our investments are classified as available for sale. Available-for-sale and trading securities are stated at fair value, which is generally based on market prices, broker quotes or, when necessary, financial models (see fair-value discussion below). Unrealized gains and losses on available-for-sale securities are recorded as an increase or decrease, net of taxes, in AOCI on our Consolidated balance sheets. We record other-than-temporary impairments on available-for-sale securities in OI&E in our Consolidated statements of income. We classify certain mutual funds as trading securities. These mutual funds hold a variety of debt and equity investments intended to generate returns that offset changes in certain deferred compensation liabilities. We record changes in the fair value of these mutual funds and the related deferred compensation liabilities in SG&A. Changes in the fair value of debt securities classified as trading securities are recorded in OI&E. Our other investments are not measured at fair value but are accounted for using either the equity method or cost method. These investments consist of interests in venture capital funds and other non-marketable equity securities. Gains and losses from equity-method investments are reflected in OI&E based on our ownership share of the investee’s financial results. Gains and losses on cost-method investments are recorded in OI&E when realized or when an impairment of the investment’s value is warranted based on our assessment of the recoverability of each investment. Details of our investments are as follows:
As of June 30, 2013, and December 31, 2012, we had no significant unrealized gains or losses associated with our available-for-sale investments. For the six months ended June 30, 2013 and 2012, we did not recognize in earnings any credit losses related to these investments. For the six months ended June 30, 2013 and 2012, the proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $2.88 billion and $1.47 billion, respectively. Gross realized gains and losses from these sales were not significant. The following table presents the aggregate maturities of investments in debt securities classified as available for sale at June 30, 2013:
Fair-value considerations We measure and report certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three-level hierarchy discussed below indicates the extent and level of judgment used to estimate fair-value measurements. Level 1 — Uses unadjusted quoted prices that are available in active markets for identical assets or liabilities as of the reporting date. Level 2 — Uses inputs other than Level 1 that are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data. Our Level 2 assets consist of corporate obligations and some U.S. government agency and Treasury securities. We utilize a third-party data service to provide Level 2 valuations, verifying these valuations for reasonableness relative to unadjusted quotes obtained from brokers or dealers based on observable prices for similar assets in active markets. Level 3 — Uses inputs that are unobservable, supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models that utilize management estimates of market participant assumptions. The following are our assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2013, and December 31, 2012. For these periods, we had no Level 3 assets or liabilities. These tables do not include cash on hand, assets held by our postretirement plans, or assets and liabilities that are measured at historical cost or any basis other than fair value.
The following table summarizes the change in the fair values for Level 3 assets:
We had no Level 3 assets as of either December 31, 2012, or June 30, 2013. |
Restructuring charges/other
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Jun. 30, 2013
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Restructuring and Related Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring charges/other | Restructuring charges/other Restructuring charges/other is included in Other and is comprised of the following components:
Restructuring actions related to the acquisition of National are discussed in Note 2 and are reflected on the Acquisition charges line of our Consolidated statements of income. 2012 Wireless action In November 2012, we announced an action concerning our former Wireless segment that, when complete, is expected to reduce annualized expenses by about $450 million and will focus our investments on embedded markets with greater potential for sustainable growth. About 1,700 jobs worldwide are expected to be eliminated. We estimate that this action will be substantially complete by the end of 2013. As of June 30, 2013, $48 million has been paid to terminated employees for severance and benefits related to this action. 2011 actions Beginning in the fourth quarter of 2011, we recognized restructuring charges associated with the announced plans to close two older semiconductor manufacturing facilities in Houston, Texas, and Hiji, Japan, in 2013. As of June 30, 2013, about $52 million has been paid to terminated employees for severance and benefits related to this action. The table below reflects the changes in accrued restructuring balances associated with these actions:
(a) Reflects charges for stock-based compensation, impacts of postretirement benefit plans and accelerated depreciation. The accrual balances above are primarily a component of Accrued expenses and other liabilities or Deferred credits and other liabilities on our Consolidated balance sheets, depending on the expected timing of payment. Other Gain on technology transfer During the second quarter of 2013, we entered into an agreement to transfer wireless connectivity technology to a customer. This technology was associated with the former Wireless business that we have previously announced we are exiting. As a result, we recognized a gain of $315 million. |
Debt and lines of credit (Details) (USD $)
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3 Months Ended | 6 Months Ended | 1 Months Ended | ||||||||||||||||||||||||||||
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Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
May 31, 2013
Notes Payable [Member]
|
Aug. 31, 2012
Notes Payable [Member]
|
Jun. 30, 2013
Notes Payable [Member]
Floating-rate notes due 2013 (swapped to a 0.922% fixed rate)
|
Dec. 31, 2012
Notes Payable [Member]
Floating-rate notes due 2013 (swapped to a 0.922% fixed rate)
|
Jun. 30, 2013
Notes Payable [Member]
Notes due 2013 at 0.875%
|
Dec. 31, 2012
Notes Payable [Member]
Notes due 2013 at 0.875%
|
Jun. 30, 2013
Notes Payable [Member]
Notes due 2014 at 1.375%
|
Dec. 31, 2012
Notes Payable [Member]
Notes due 2014 at 1.375%
|
Jun. 30, 2013
Notes Payable [Member]
Notes due 2015 at 0.45%
|
Dec. 31, 2012
Notes Payable [Member]
Notes due 2015 at 0.45%
|
Aug. 31, 2012
Notes Payable [Member]
Notes due 2015 at 0.45%
|
Jun. 30, 2013
Notes Payable [Member]
Notes due 2016 at 2.375%
|
Dec. 31, 2012
Notes Payable [Member]
Notes due 2016 at 2.375%
|
Jun. 30, 2013
Notes Payable [Member]
Notes due 2018 at 1.00%
|
May 31, 2013
Notes Payable [Member]
Notes due 2018 at 1.00%
|
Dec. 31, 2012
Notes Payable [Member]
Notes due 2018 at 1.00%
|
Jun. 30, 2013
Notes Payable [Member]
Notes due 2019 at 1.65%
|
Dec. 31, 2012
Notes Payable [Member]
Notes due 2019 at 1.65%
|
Aug. 31, 2012
Notes Payable [Member]
Notes due 2019 at 1.65%
|
Jun. 30, 2013
Notes Payable [Member]
Notes due 2023 at 2.25%
|
May 31, 2013
Notes Payable [Member]
Notes due 2023 at 2.25%
|
Dec. 31, 2012
Notes Payable [Member]
Notes due 2023 at 2.25%
|
Jun. 30, 2013
National [Member]
Notes Payable [Member]
Notes due 2015 at 3.95% (assumed with National acquisition)
|
Dec. 31, 2012
National [Member]
Notes Payable [Member]
Notes due 2015 at 3.95% (assumed with National acquisition)
|
Jun. 30, 2013
National [Member]
Notes Payable [Member]
Notes due 2017 at 6.60% (assumed with National acquisition)
|
Dec. 31, 2012
National [Member]
Notes Payable [Member]
Notes due 2017 at 6.60% (assumed with National acquisition)
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Debt Instrument | |||||||||||||||||||||||||||||||
Line of credit, borrowing capacity | $ 2,000,000,000 | $ 2,000,000,000 | |||||||||||||||||||||||||||||
Short-term Debt | |||||||||||||||||||||||||||||||
Commercial paper | 0 | 0 | |||||||||||||||||||||||||||||
Long-term Debt | |||||||||||||||||||||||||||||||
Long-term debt, stated interest rate | 0.922% | 0.875% | 1.375% | 0.45% | 2.375% | 1.00% | 1.65% | 2.25% | 3.95% | 6.60% | |||||||||||||||||||||
Long-term Debt, Gross | 5,125,000,000 | 5,125,000,000 | 5,625,000,000 | 1,000,000,000 | 1,500,000,000 | 0 | 1,000,000,000 | 0 | 500,000,000 | 1,000,000,000 | 1,000,000,000 | 750,000,000 | 750,000,000 | 750,000,000 | 1,000,000,000 | 1,000,000,000 | 500,000,000 | 500,000,000 | 0 | 750,000,000 | 750,000,000 | 750,000,000 | 500,000,000 | 500,000,000 | 0 | 250,000,000 | 250,000,000 | 375,000,000 | 375,000,000 | ||
Add net unamortized premium | 40,000,000 | 40,000,000 | 61,000,000 | ||||||||||||||||||||||||||||
Less current portion of long-term debt | (1,000,000,000) | (1,000,000,000) | (1,500,000,000) | ||||||||||||||||||||||||||||
Total long-term debt | 4,165,000,000 | 4,165,000,000 | 4,186,000,000 | ||||||||||||||||||||||||||||
Proceeds from Issuance of Long-term Debt | 986,000,000 | 1,492,000,000 | |||||||||||||||||||||||||||||
Repayments of Long-term Debt | 1,500,000,000 | ||||||||||||||||||||||||||||||
Payments of Debt Issuance Costs | 7,000,000 | 7,000,000 | |||||||||||||||||||||||||||||
Interest and debt expense | $ 24,000,000 | $ 20,000,000 | $ 47,000,000 | $ 41,000,000 |