Texas Instruments 2015 Annual Report Download - page 24

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

FORM 10-K

Analog (includes High Volume Analog & Logic, Power Management, High Performance Analog and Silicon Valley Analog product lines)
2014 2013 Change
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,104 $ 7,194 13%
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,786 1,859 50%
Operating profit % of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.4% 25.8%
Analog revenue increased in all products lines. Revenue from Power grew the most, followed by revenue from, in decreasing order, HPA,
HVAL and SVA. Operating profit increased primarily due to higher revenue and associated gross profit.
Embedded Processing (includes Processor, Microcontrollers and Connectivity product lines)
2014 2013 Change
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,740 $ 2,450 12%
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384 185 108%
Operating profit % of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.0% 7.6%
Embedded Processing revenue increased primarily due to Microcontrollers and Processor, which contributed about equally to the
increase. Connectivity increased to a lesser extent. Revenue from Processor increased as a result of a more favorable mix of products
shipped. Operating profit increased primarily due to higher revenue and associated gross profit.
Other (includes DLP products, custom ASIC products, calculators, royalties and legacy wireless products)
2014 2013 Change
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,201 $ 2,561 -14%
Operating profit * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 777 788 -1%
Operating profit % of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.3% 30.8%
* Includes Acquisition charges and Restructuring charges/other
Other revenue decreased due to legacy wireless products. Operating profit was about even as reductions in operating expenses were
offset by changes in Restructuring charges/other. See Note 4 to the financial statements for information regarding Restructuring
charges/other.
Prior results of operations
Our performance in 2013 was strong, reflecting our increased focus on Analog and Embedded Processing. During 2013, 79 percent
of our revenue came from Analog and Embedded Processing, with Analog revenue increasing 3 percent from 2012 and Embedded
Processing revenue increasing 9 percent from 2012. Operating margin for Analog was 25.8 percent, and it exceeded 30 percent
during the second half of 2013. Operating margin for Embedded Processing was 7.6 percent. Additionally, we completed our exit from
legacy wireless products. Our business model continued to generate strong cash flow from operations, with free cash flow for 2013
of $3 billion, or 24 percent of revenue. During 2013 we returned over $4 billion of cash to investors through a combination of stock
repurchases and dividends.

Revenue was $12.20 billion, down $620 million, or 5 percent, from 2012 due to lower revenue from legacy wireless products.
Despite the decline in overall revenue, gross profit of $6.36 billion was about even with 2012 due to a more favorable mix of products
shipped and, to a lesser extent, lower manufacturing costs. Gross profit margin was 52.1 percent of revenue compared with 49.6
percent in 2012.
Operating expenses were $1.52 billion for R&D and $1.86 billion for SG&A. R&D expense decreased $355 million, or 19 percent, from
2012 primarily reflecting the wind-down of our legacy wireless products. R&D expense as a percent of revenue was 12.5 percent
compared with 14.6 percent in 2012. SG&A expense increased $54 million, or 3 percent, from 2012 primarily due to higher variable
compensation and other support costs, partially offset by reduced costs from the wind-down of our legacy wireless products. SG&A
expense as a percent of revenue was 15.2 percent compared with 14.1 percent in 2012.