Reconciliation of Non-GAAP Financial Measure


Texas Instruments Incorporated
Reconciliation of Non-GAAP Financial Measures


On January 22, 2013, we held a publicly webcast conference call with analysts to discuss fourth-quarter and full-year earnings. During the call we made the non-GAAP references discussed and reconciled to GAAP below. These were in addition to ones documented in the actual earnings release and also discussed during the call.

Gross margin percentage change

We made a non-GAAP reference to the impact that acquisition-related charges associated with National Semiconductor included in Cost of revenue (COR) and underutilization costs had on our gross margins in the fourth quarter and the year-ago quarter. We believe this information provides investors insight into our profitability.


Texas Instruments Incorporated
(Millions of dollars)



 
For Three Months
     
 
Ended
     
 
Dec. 31,
2012
Dec. 31,
2011
Delta
Revenue
$         2,979   
 
$         3,420   
     
Cost of revenue
1,534   
 
1,872   
     
Gross profit as reported (GAAP)
1,445   
 
1,548   
     
Plus adjustment for underutilization costs
170   
 
111   
   
Plus adjustment for acquisition-related charges in COR  
--   
 
103   
     
Gross profit as adjusted (non-GAAP)
1,615   
 
1,762   
     
             
Gross margin as adjusted (non-GAAP)
54.2%
 
51.5%
 
2.7%
   *
             
* 270 basis point improvement            





Adjusted five-year average quarterly sequential revenue growth rates

We also made a non-GAAP reference to TI’s five-year average quarterly sequential growth rates. These five-year averages were calculated as including revenue reported by National Semiconductor (referred to as Silicon Valley Analog or SVA on the call) prior to TI’s September 2011 acquisition and excluding revenue associated with the Wireless segment by quarter over this five-year period.

The table below provides a reconciliation of this non-GAAP sequential growth rate to TI’s sequential growth rate as prepared in accordance with GAAP.






Texas Instruments Incorporated
(Millions of dollars)
 
1Q vs. 4Q Five-Year Sequential Growth Rate Average
 
Revenue as reported (GAAP):
 
    For Three Months
Ended Dec. 31
    For Three Months
Ended Mar. 31
  Sequential
Growth Rate
2011/2012 $ 3,420   $ 3,121   -9% 
2010/2011   3,525     3,392   -4% 
2009/2010   3,005     3,205   7%
2008/2009   2,491     2,086   -16%  
2007/2008   3,556     3,272   -8% 
Five-Year Sequential
    Growth Rate Average
            -6%
 
 
Plus National Semiconductor (NSC) revenue not included above:
 
    For Three Months
Ended Dec. 31
    For Three Months
Ended Mar. 31
   
2011/2012   n/a     n/a    
2010/2011 $ 373   $ 358    
2009/2010   345     368    
2008/2009   422     292    
2007/2008   499     453    
 
 
Less Wireless revenue included in Revenue as reported (GAAP):
 
  
    For Three Months
Ended Dec. 31
    For Three Months
Ended Mar. 31
   
2011/2012 $ 722   $ 373      
2010/2011   767     658      
2009/2010   758     717      
2008/2009   659     563     
2007/2008   1,138        937      
 
 
Revenue as adjusted (non-GAAP):
 
    For Three Months
Ended Dec. 31
    For Three Months
Ended Mar. 31
  Sequential
Growth Rate
2011/2012 $ 2,698   $ 2,748   1.9%
2010/2011   3,131     3,092   -1.2% 
2009/2010   2,592     2,856   10.2% 
2008/2009   2,254     1,815   -19.5%  
2007/2008   2,917     2,788   -4.4%
Five-Year Sequential
    Growth Rate Average
            -2.6%
Rounded growth rate referenced
    in conference call
              -3%
               
 
 
2Q vs. 1Q Five-Year Sequential Growth Rate Average
 
Revenue as reported (GAAP):
 
    For Three Months
Ended Mar. 31
    For Three Months
Ended June 30
  Sequential
Growth Rate
2012 $ 3,121   $ 3,335   7%
2011   3,392     3,458   2%
2010   3,205     3,496   9% 
2009   2,086     2,457   18%  
2008   3,272     3,351   2%
Five-Year Sequential
    Growth Rate Average
            8%
 
 
Plus NSC revenue not included above:
 
    For Three Months
Ended Mar. 31
    For Three Months
Ended June 30
   
2012   n/a     n/a    
2011 $ 358   $ 383    
2010   368     404    
2009   292     281    
2008   453     462    
 
 
Less Wireless revenue included in Revenue as reported (GAAP):
 
    For Three Months
Ended Mar. 31
    For Three Months
Ended June 30
   
2012 $ 373   $ 342    
2011   658     558    
2010   717     727    
2009   563     614    
2008   937     920    
 
 
Revenue as adjusted (non-GAAP):
 
    For Three Months
Ended Mar. 31
    For Three Months
Ended June 30
  Sequential
Growth Rate
2012 $ 2,748   $ 2,993   8.9%
2011   3,092     3,283   6.2%
2010   2,856     3,173   11.1%  
2009   1,815     2,124   17.0%  
2008   2,788     2,893   3.8%
               
Five-Year Sequential
    Growth Rate Average
            9.4%
Rounded growth rate referenced
    in conference call
              9%
               
 
 
3Q vs. 2Q Five-Year Sequential Growth Rate Average
 
Revenue as reported (GAAP):
 
    For Three Months
Ended June 30
    For Three Months
Ended Sept. 30
  Sequential
Growth Rate
2012 $ 3,335   $ 3,390   2%
2011   3,458     3,466   0%
2010   3,496     3,740   7%
2009   2,457     2,880   17%  
2008   3,351     3,387   1%
Five-Year Sequential
    Growth Rate Average
            5%
 
 
Plus NSC revenue not included above:
 
    For Three Months
Ended June 30
    For Three Months
Ended Sept. 30
   
2012   n/a     n/a    
2011 $ 383   $ 315    
2010   404     401    
2009   281     314    
2008   462     466    
 
 
Less Wireless revenue included in Revenue as reported (GAAP):
 
    For Three Months
Ended June 30
    For Three Months
Ended Sept. 30
   
2012 $ 342   $ 325    
2011   558     580    
2010   727     767    
2009   614     691    
2008   920     934    
 
 
Revenue as adjusted (non-GAAP):
 
    For Three Months
Ended June 30
    For Three Months
Ended Sept. 30
  Sequential
Growth Rate
2012 $ 2,993   $ 3,065   2.4%
2011   3,283     3,201   -2.5% 
2010   3,173     3,374   6.3%
2009   2,124     2,503   17.8%  
2008   2,893     2,919   0.9%
Five-Year Sequential
    Growth Rate Average
             5.0% 
Rounded growth rate referenced
    in conference call
               5%
               
 
 
4Q vs. 3Q Five-Year Sequential Growth Rate Average
 
Revenue as reported (GAAP):
 
    For Three Months
Ended Sept. 30
    For Three Months
Ended Dec. 31
  Sequential
Growth Rate
2012 $ 3,390   $ 2,979   -12%  
2011   3,466     3,420   -1%
2010   3,740     3,525   -6%
2009   2,880     3,005    4%
2008   3,387     2,491   -26%  
Five-Year Sequential
    Growth Rate Average
            -8%
 
 
Plus NSC revenue not included above:
 
    For Three Months
Ended Sept. 30
    For Three Months
Ended Dec. 31
   
2012   n/a     n/a    
2011 $ 315   $ n/a    
2010   401     373    
2009   314     345    
2008   466     422    
 
 
Less Wireless revenue included in Revenue as reported (GAAP):
 
    For Three Months
Ended Sept. 30
    For Three Months
Ended Dec. 31
   
2012 $ 325   $ 317    
2011   580     722    
2010   767     767    
2009   691     758    
2008   934     659    
 
 
Revenue as adjusted (non-GAAP):
 
    For Three Months
Ended Sept. 30
    For Three Months
Ended Dec. 31
  Sequential
Growth Rate
2012 $ 3,065   $ 2,662   -13.1%   
2011   3,201     2,698   -15.7%   
2010   3,374     3,131   -7.2% 
2009   2,503     2,592   3.6%
2008   2,919     2,254   -22.8%   
Five-Year Sequential
    Growth Rate Average
            -11.0%  
Rounded growth rate referenced
    in conference call
            -11%