Ron Slaymaker - Vice President of Investor Relations Kevin P. March - Chief Financial Officer, Chief Accounting Officer and Senior Vice President

John W. Pitzer - Crédit Suisse AG, Research Division Blayne Curtis - Barclays Capital, Research Division Doug Freedman - RBC Capital Markets, LLC, Research Division Stephen Chin - UBS Investment Bank, Research Division Tristan Gerra - Robert W. Baird & Co. Incorporated, Research Division Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division Vivek Arya - BofA Merrill Lynch, Research Division Glen Yeung - Citigroup Inc, Research Division Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division David Wong Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division Patrick Wang - Evercore Partners Inc., Research Division Ambrish Srivastava - BMO Capital Markets U.S. James Covello - Goldman Sachs Group Inc., Research Division Ross Seymore - Deutsche Bank AG, Research Division

Good day, and welcome to the Texas Instruments Third Quarter 2013 Earnings Conference call. At this time, I'd like to turn the conference over to Mr. Ron Slaymaker. Please go ahead, sir.

Good afternoon, and thank you for joining our third quarter earnings conference call. As usual, Kevin March, TI's CFO, is with me today. For any of you who missed the release, you can find it and relevant non-GAAP reconciliations on our website at ti.com/ir. This call is being 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 earnings release published today, as well as TI's most recent SEC filings, for a more complete description. Our mid-quarter update to our outlook is scheduled this quarter for December 9. At that time, we expect to adjust the revenue and earnings guidance ranges as appropriate. This was a good quarter for TI. Revenue came in just above the midpoint of our guidance range, growing 6% sequentially and growing 10% if you exclude legacy wireless revenue, which declined to less than 2% of TI revenue in the quarter. Analog and Embedded Processing increased to 80% of TI revenue. The improved quality of our revenue is reflected in record gross margin in the quarter. Kevin will discuss this more in a few minutes. Revenue growth in the quarter was supported by some of the vertical markets that were especially weak in the second quarter, including computing, game consoles and handset revenue outside of our legacy wireless revenue. Revenue from the communications infrastructure market continued to grow in the quarter. These areas were complemented by a continued strength in our automotive and industrial revenue. From a year ago, revenue declined 4% due to the decrease in legacy wireless revenue. Excluding this revenue, we grew 3% from the year-ago quarter. On this basis, this was the first quarter of year-on-year growth since the third quarter of 2012. Again, excluding legacy wireless, we expect growth to accelerate to 8% in the fourth quarter at the middle of our guidance range. The strength of our business model not only provides strong profitability, it also gives us confidence that we can sustainably generate $0.20 to $0.25 of free cash flow for every dollar of revenue. This metric is especially important to our shareholders as our capital management strategy is to return all of our free cash flow to them, except what is needed to repay debt. When measured over the trailing 12 months, free cash flow was 24% of revenue. Over that same period, we returned 133% of free cash flow to shareholders. In the third quarter alone, we returned $1 billion to shareholders through a combination of dividends and stock repurchases. Earnings in the third quarter were above our expected range, a result of better-than-expected revenue and gross profit, tight operating expense control and some help from discrete tax items. Let me walk through a few details of revenue. Analog revenue grew 11% sequentially. All 4 Analog product lines contributed to this growth, although Power Management was up the most, followed by High Volume Analog & Logic. These areas benefited from sequential growth across many markets, including those vertical markets that were impacted by inventory reductions in the second quarter. Embedded Processing revenue grew 8% sequentially, with processors up the most, followed by growth in microcontrollers and connectivity. Processors were driven by applications processor sales into consumer and automotive applications and DSP sales into industrial applications. Microcontrollers were lifted mostly by sales of MSP430 products into industrial applications, as well as sales of microcontrollers into automotive safety applications. In our Other segment, sequential growth in both product areas was offset by decline in legacy wireless. Legacy wireless revenue fell by $91 million to $57 million as we had expected. This decline was partially offset by growth in calculators and in custom ASIC revenue, which grew as a result of communications infrastructure. Royalties also grew, and DLP product revenue was about even. Turning to distribution. Resales grew 9% sequentially. Distributors' inventory levels declined by about a day to just over 5 weeks. Now Kevin will review profitability and our outlook. Kevin P. March: Thanks, Ron, and good afternoon, everyone. This quarter, gross profit was $1.78 billion, up 13% sequentially. Gross margin was a record 54.8% of revenue and expanded 330 basis points sequentially. I think it is useful to compare this quarter's gross margin to that of the third quarter of 2010, wherein our last high-water mark for gross margin was set at 54.5%. In that earlier quarter, revenue was $3.74 billion, up -- 15% higher than our revenue this past quarter. Factory utilization in that earlier quarter was 8 points higher and our manufacturing capacity was lower since we have not yet brought online our cost-efficient, 300-millimeter analog wafer fab in Richardson, Texas or our yet to be acquired wafer fab in Chengdu, China. We were also still in the early stages of ramping our recently acquired Aizu Japan wafer fab. In addition, Analog and Embedded Processing were also much smaller then, contributing 60% of our revenue at that time. The conclusion one can draw from this is that due to the structural changes that we've made at TI over the past few years, the quality of our revenue is much higher today. It is more diverse, more profitable and less capital intensive; and we remain better positioned to support future growth from a manufacturing capacity standpoint. Continuing to operating expense. Combined R&D and SG&A expense of $833 million was reduced by $27 million sequentially. Acquisition charges were $86 million, unchanged from last quarter. Almost all of this amount is the ongoing amortization of intangibles, which is a noncash expense. The restructuring charges and other line of our income statement transitioned from a $282 million gain last quarter to a $16 million charge this quarter. As a reminder, last quarter's gain was due to the transfer of wireless connectivity technology to a customer. This quarter's charge is associated with the shutdown costs from the previously announced factory closings in Houston and Hiji, Japan. Operating profit was $844 million or 26% of revenue. Our tax rate in the quarter was 23%, a point below our 24% annual effective tax due to discrete items that were included in the third quarter. Our annual effective tax rate is unchanged and 24% is the rate you should use in your models for the fourth quarter. Net income in the third quarter was $629 million or $0.56 per share, which includes $0.01 of discrete tax benefits. Let me now comment on our capital management strategy, starting with cash generation. Cash flow from operations was $1.15 billion in the quarter. We increased our inventory by $6 million compared with the prior quarter. Inventory days increased by 1 day to 106 days, consistent with our model of 105 to 115 days. Capital expenditures were $124 million in the quarter and free cash flow was $1.03 billion. On a trailing 12-month basis, cash flow from operations was $3.27 billion, about the same as a year ago. Trailing 12 months' capital expenditures were $402 million, down 27% from the year ago. As a result, free cash flow was $2.87 billion, up 4% from a year ago. Free cash flow was 24% of revenue for the trailing 12-month period, within our expected range of 20% to 25% of revenue. In the year-ago trailing 12 months period, free cash flow was 21% of revenue. Capital expenditures for the past 12 months were 3% of revenue. Our continued low capital spending level is a direct result of the strong capacity position that we have built with our strategic investments of the past few years. The cash flow that will result as we continue to fill up this capacity should be stronger in the years ahead. I'll note that depreciation expense for the past 12 months exceeded our capital expenditures by $496 million. As a percent of revenue, depreciation was more than 400 basis points higher than our capital expenditures. This is one of the reasons why our free cash flow has been trending higher than our net income. Of course, as depreciation declines at the rate of capital spending over the next few years, gross margin will benefit. Another reason why free cash flow has trended higher than net income is the noncash amortization expense of $80 million to $85 million per quarter, that will remain on our income statement for another 6 years. For the past 12 months, amortization expense was $339 million or about 3% of revenue. And as we've said, strong cash flow, particularly cash flow -- free cash flow, means that we can continue to provide significant cash returns to our shareholders. In the third quarter, TI paid $308 million in dividends and repurchased $734 million of our stock. Our capital management strategy is to return all of our free cash flow to shareholders, except for what we need to repay debt. In the last year, we reduced our debt level by $500 million. Free cash flow was $2.87 billion and we returned a total of $3.82 billion to shareholders or 133% of free cash flow. We've been able to return more than our free cash flow because proceeds from exercises of employee stock options, totaling $1.28 billion over the past 12 months, have also been an additional source of cash for the company. To break out the cash return, in the past 12 months, we repurchased $2.7 billion of our stock or 95% of free cash flow. Similarly, we paid $1.08 billion in dividends or 38% of our free cash flow. Fundamental to our cash return strategy and our cash management and our tax practices, we ended the third quarter with $3.59 billion of cash and short-term investments, with 82% of that amount owned by TI's U.S. entities. Because our cash is largely onshore, it's readily available for a variety of uses, including paying dividends and repurchasing our stock. TI orders were about even sequentially and our book-to-bill ratio was 0.97, consistent with seasonal declines in the fourth quarter. We expect TI revenue in the range of $2.86 billion to $3.10 billion in the fourth quarter. At the middle of this range, revenue would decline 8% sequentially, with about half of that decline coming from the seasonal drop in calculators. The remainder of the decline is consistent with the semiconductor industry's pattern over the past 3 years: 2010, 2011 and 2012, as well as our own history over that same period when legacy wireless revenue is excluded. In the fourth quarter, legacy wireless products should decline to about $50 million. We continue to expect that revenue from these products will essentially be gone as we enter next year. We expect earnings per share to be in the range of $0.42 to $0.50. In summary, we believe the third quarter provides a preview of what TI is capable of producing as a company focused on Analog and Embedded Processing. The improved quality of our revenue is evident from the higher gross margin and free cash flow generation compared with our past. We also believe our top line performance and potential will become more evident without the steady headwind of declining wireless revenue in the past few years. Our manufacturing capacity position remains strong and we have a good opportunity for continued growth, while maintaining our capital expenditures at lower levels in the years ahead. With that, let me turn it back to Ron.

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

[Operator Instructions] And we'll go first to John Pitzer with Crédit Suisse. John W. Pitzer - Crédit Suisse AG, Research Division: Ron, I guess my first question, just relative to that consumer bucket of computing, gaming and handsets, can you just give us a sense of how much that represented of the overall business in the September quarter and how much that was up versus the rest of the businesses sequentially?

John, probably the best I can do is help you understand the weight of each of those segments. I don't have the growth broken out by each of those areas for you. But let me just kind of go through real quickly the weighting of our end market exposure, which I can let you then play with to make some assumptions on. Comps in total were 27% -- and this is first half '13 data -- computing, 23%; industrial, 23%; consumer, 11%; automotive, 13%; and education, 3%. So again, the reason we called out the 3 areas was because I think in second quarter, we called them out as especially weak. And in fact, we also said that in our outlook for third quarter, we expected that they would recovery -- recover. And keep in mind, the reason they were weak in the second quarter was because customers in those areas were depleting inventories ahead of the anticipated new product launches in second half, which we are now well into. So those new product launches were what was driving -- were a factor in those areas that was driving growth. Again, comms infrastructure was already strong and growing in second quarter. It continues in third quarter; as was automotive and industrial, strong second quarter continued as well into the third quarter. Do you have a follow-on, John? John W. Pitzer - Crédit Suisse AG, Research Division: I do. This is for Kevin. Just on the incremental gross margin, Kevin, if you look at both the June and September quarter, your incremental gross margin, both quarters were over 100%. I guess I'm just kind of curious, to what extent was that just the wireless business declining? Do I think about a 30% type gross margin there? And then more importantly, when the legacy -- when the wireless business is down to 0, how should I think about incremental gross margin from there? Kevin P. March: Yes, John. On the -- I'll answer the last part first. The incremental gross margin from our analysis in the past, over the course of the cycle averages about 75% up and down. In any one quarter, it really actually works out to that number tends to be pretty noisy in any one quarter but over time, about 75% and that's what we do for internal planning purposes. As it relates to the most recent quarter, you're right, the fall-through was about 106%. So it's certainly a pretty rich fall-through. And part of that was mix, but part of that also was improved factory utilization as we had higher revenues this quarter than the prior quarter. And so consequently, we had a slight utilization benefit as well.

Next, we'll go to Blayne Curtis with Barclays. Blayne Curtis - Barclays Capital, Research Division: Maybe from a high level, if you can just talk about now that we have -- you definitely showed increasing year-over-year growth. September was up and then December accelerating, although off of a pretty easy compare. For the full year, Analog growth seems more like a few percent. So if you could just talk about now that we have a full picture for the year, do you think there's anything going on in the Analog bucket? Or do you think that this is kind of representative of what the overall market is going?

Blayne, I think the year is not done and right now, there's kind of a lot of point spreads being made for our fourth quarter but we really need to wait until we get into January to understand what the final score is. But I think we feel pretty confident that 2013 when the final scores are in, we'll show market share gains once again for TI. So again, we have to push through the fourth quarter but we believe, just as you've seen over the past few years, once again, we'll be gaining share in 2013 for Analog overall. Do you have a follow-on? Blayne Curtis - Barclays Capital, Research Division: And then just if you can provide some color as to within the segments in Analog, which one you're seeing the -- if there's any material difference between the subsegments. It looked like Power was up a bunch, if I have my numbers right, in September, if you could talk about the growth driver there. And then where you see the biggest declines into December.

Okay. I think in the case of Power, Power had a strong quarter. But also, you used the term earlier, easy compare. It was one that's probably more impacted by weakness, so the inventory reductions and some of those vertical areas in the second quarter. So in the third quarter, its growth was very broad-based, but it also benefited from recovery in some of those vertical markets and then I would say the same for HVAL. So if you look at third quarter, probably because those vertical markets layered on growth to what was already a reasonable base of industrial and automotive, Power and HVAL both grew faster than the catalog spaces of HPA and SVA. Yet I think if you go back to first half of the year and especially second quarter, you probably saw more relative strength in SVA and HPA. So I guess to put it all together, they're all pulling well in terms of growth in 2013 thus far. We'll see where it takes, again, where we go through fourth quarter. But some quarters, you've had more strength out of SVA or HPA and other quarters, as in third quarter, more coming out of Power and HVAL. Okay, Blayne, thank you for your questions.

Next, we'll go to Doug Freedman with RBC Capital Markets. Doug Freedman - RBC Capital Markets, LLC, Research Division: Kevin, can you give us an idea of what sort of we should be thinking for the other operating expenses? I know it seems to be moving around. I do know you had the assets last quarter. But x the asset sale, still a reasonable bit of spending there, can you give us some idea of what we should be budgeting for next year in terms of that line on the income statement? Kevin P. March: Doug, I'm going to try to make sure I've got what you're asking for. OpEx overall for the company, our model is to run between 20% and 25% of revenue, depending upon where we're at in overall revenue demand. And most of that spending is actually inside the Analog and Embedded Processing segment. So it's relatively small levels of ongoing support spending inside the Other segment, a little bit of R&D inside the Other segment for DLP technologies. But other than that, pretty small. The larger numbers you'll see passing through the Other as we go forward will be the continued amortization of intangibles, which will run about $85 million a quarter as we go through 2014. And that will eventually decline into about $80 million a quarter. And keep in mind, that will stay there for 6 years until that finally winds down. In addition, that falls through where we tend to record any restructuring charges. So the restructuring charges that we just had this past quarter, over $16 million, and those also were recorded in the Other segment. As we look into the fourth quarter, I'd expect that you'll see acquisition charges continue at about the $85 million, $86 million level. And you'll see probably a final restructuring charges associated with the closure of our Hiji and Houston factories of about $20 million in the fourth quarter.

And Doug, I think if you look at the income statement for the company, all of the -- for the entire period of comparison here over the last 4 quarters, all of the acquisition charges and restructuring other line are directly from that Other segment. So with that, you can then, if you want to extract that out to see what R&D and SG&A trends have been in that Other segment, you'll see both -- you won't see them independently. But the combination of R&D and SG&A has gone down whether you look at it year-over-year or whether you look at it sequentially. And again, a large -- that's largely driven by the reductions in legacy wireless as Kevin noted. All right, Doug, do you have a follow-on question? Doug Freedman - RBC Capital Markets, LLC, Research Division: Yes. For my follow-on, if we look at the Embedded Processing business, that business growing nicely but not necessarily delivering the operating margins of the corporate average. Can you talk about what you're doing as far as the operating margin leverage to that business? Kevin P. March: Yes. Doug, as you may recall, we spent a couple years significantly increasing our investments in that segment, particularly as it relates to microcontroller portion of that particular segment. We've taken that spending up to a level now that doesn't need to increase anymore. And really, what that business unit has focused on is the top line growth. They get rather attractive gross margins off their -- off the parts when they ship them. It's really about diversifying the revenue base and getting more overall top line growth to fall through to the bottom line. That's really what you just saw quarter-over-quarter. It's that top line growth came through rather nicely to the bottom line.

Okay, Doug. Thanks for your questions.

Next, we'll go to Stephen Chin with UBS. Stephen Chin - UBS Investment Bank, Research Division: First one is on operating expenses for the quarter. It looks like you guys saw OpEx decline about 3% versus the original guidance for down 2%. Wondering if there's any timing or any -- or how you guys were able to do better than your original guidance, and what the expectation process was? Kevin P. March: Yes. So since -- OpEx, we did guide to down about 2%, but we're able to keep a pretty tight handle on spend in the quarter and so it came in a little bit lower than we had originally planned, which, frankly, just dropped by to the bottom line and produced extra earnings per share for our shareholders. As we look into the fourth quarter, we typically have some seasonality in the fourth quarter, what with the holidays for Thanksgiving and during the Christmas break. And so we'd expect to see OpEx probably decline somewhere in the 3% to 5% range as we move into the fourth quarter.

Okay. Do you have a follow-on, Stephen? Stephen Chin - UBS Investment Bank, Research Division: Yes, one question on the Embedded Processing division, particularly the microprocessors. So with the MSP430 that you mentioned, I was wondering, is the consumer or wireless segment an area where you're looking to be more aggressive on expanding the sales of your MC products?

Well, I think probably the way to think about it, Stephen, is probably the biggest driver of growth for microcontrollers will be industrial. These are catalog devices that go into lots and lots and lots of different applications. That being said, we're not -- if there's growth in other end markets or growth opportunities in other end markets, we'll certainly pursue them. But our expectation is that industrial will likely be the largest driver going forward. And that's for the microcontrollers. For the processor side of the business, I would say we would expect comms infrastructure certainly is part of that revenue and an important end market for us. But similarly, we sell DSP products into lots of different applications. And the broader applications are going to be just as important, maybe even more important, than communications infrastructure going forward. And that's not -- that's not anything negative about communications infrastructure, it's just we have great market share, very high market share already in communications infrastructure, where there's still a lot of opportunity in some of these other areas for us to experience not only the rapid growth of that end market, but also rapid market share gains as well. Okay, Stephen, thank you for your question. And one of the things I should further delineate is when I'm talking about industrial likely being the fastest grower for microcontrollers, let me also more broadly include automotive in that as well, because that is a great opportunity that we're very well positioned with those products there. Okay, Stephen. Thank you.

Next, we'll go to Tristan Gerra with Baird. Tristan Gerra - Robert W. Baird & Co. Incorporated, Research Division: Your R&D spending as a percent of revenue is fairly low relative to some of your high-value peers. So what leads you to believe that you can maintain the growth, gain market share and the mix? Or do you think that there's a possibility of poising [ph] your R&D over time? Kevin P. March: Yes, Tristan. Let me just, again, remind everybody of the R&D that you're seeing for TI. The R&D spend that we've had in the Analog segment has been at a pretty consistent level versus the revenues of that business for quite a few years now. And the fact of the matter is, the reality is, that, that R&D spend is being converted fairly efficiently into revenue growth to the point where that business continues to outgrow its competitors and gain market share each year. So I would offer to you that, that's actually a very efficient organization when it comes to our R&D spend. I can't explain why some of their competitors have to spend as much as they do. Similarly, in Embedded Processing, we've increased the spending over there, as I mentioned to the last question, over the last couple of years, largely to expand the opportunities that we can pursue in the microcontroller space. And so after bringing up that level of spending for a couple of years now, I'd say it's high enough at this point. And we now need to see it start converting into real revenue growth, which we're starting to see early signs of. When you look at total TI R&D, it is coming down product sharply. And that's purely a function of us winding down the legacy wireless products, including the announcement that we had that we're closing some of our operations and sites as it relates to that and that will take our total R&D spend down as we go forward. But on the core products of Embedded Processing and Analog, I have no hesitation of being comfortable with the level of R&D spend that we have in those areas today.

And Tristan, let me also just offer, in the Analog space, I would argue we're probably spending more than any of our competitors. You're looking as a percent of revenue, but if you look at absolute dollars, yes, yes, we're bigger in terms of revenue, but we're spending more than any competitor that I'm aware about in that space. So it's not like we're not investing in that business. We're investing quite heavily. All right, do you have a follow-on, Tristan? Tristan Gerra - Robert W. Baird & Co. Incorporated, Research Division: Certainly. And that's very useful. The part of your business that's non-consigned business, so distribution, is your Q4 revenue guidance embedding shipments about in line with end demand? Or any variance that you can mention relative to end demand and sell-in?

Oh, Tristan, I don't know that we have a real breakout in terms of the outlook between consigned versus non-consigned. We're really looking at it just in terms of what we shipped in -- or what we're shipping into that channel. So I don't specifically know the answer to that. I will point, if you just back to third quarter anyway as a reference point, I think we said TI's total revenue, excluding the legacy wireless, grew 10%; and our resales or sales out of the distribution channel, grew 9%. So you saw a very close alignment in the third quarter. I just don't have any specific data to share with respect to fourth quarter. The other thing I'll say, even with third quarter, we had a decline of a day of distribution inventory level. All right. Tristan, thank you.

And next, we'll hear from Stacy Rasgon with Sanford Bernstein. Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division: I had one quick one on OpEx. Your R&D guide for the year still puts you about $1.5 billion, which would not -- which you said OpEx will be down like 4% and the midpoint of that would imply R&D down like 12%. Are you just rounding down to that $1.5 billion? Maybe could you give us a little more color on your expectations after the R&D and the assumptions around the OpEx? Kevin P. March: Yes. Stacy, we do round to the nearest hundred million on all of these guidance numbers we give you, be it R&D or CapEx or any of the others. So in fact, there will be some rounding [indiscernible] there. But keep in mind also, the OpEx guidance I gave includes SG&A as well. And we will see that decline in the fourth quarter, really, on the seasonal patterns I mentioned a moment ago with the holiday periods going on.

Do you have a follow-on, Stacy? Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division: I do. And just around, again, gross margins. It sounds like you got a bit more restructuring left over from the 6-inch fab closures in Q4. Have the benefits from those closures fully impacted gross margins? I think, in total, it was supposed to be about 75 basis points. And if they haven't fully impacted yet, can you give us some feelings for the trajectory of that impact on the margins? Kevin P. March: Yes, Stacy. What we talked about when we announced that we were closing the -- those 2 over-6-inch factories is that once each one of them was closed, we'd see about $50 million per factory of cost savings on an annualized basis. One of those factories did close at the end of the second quarter, and the other one should close here in the fourth quarter. So we're beginning to see -- excuse me, third quarter. So we're beginning to see in the third quarter already partial benefit from that, and we should begin to see the benefit from that second factory closure materialize in the fourth quarter. So going into next year, we'll begin to see that $100 million of annualized cost savings as a result of closing those 2 older factories.

Okay. Stacy, thank you.

Next, we'll go to Vivek Arya with Bank of America Merrill Lynch. Vivek Arya - BofA Merrill Lynch, Research Division: First one, just on the Q4 outlook, I just wanted to make sure if there's been any downshift or conservatism regarding Q4 outlook. Because I think heading into the quarter, there was an expectation that looked macro trends are improving. Industrial businesses are doing better. There is this comms infrastructure build that the broader Analog industrial players would be able to give above-seasonal guidance. Maybe it was optimism. But since then, we have just seen sort of seasonal or slightly below seasonal outlook from Linear, from Cypress; and now, you're also guiding somewhat below Street expectations. So my first question is, has there been any conservatism regarding Q4 outlook? And specifically, what segments do you think will be at seasonal patterns versus below seasonal patterns for Q4? Kevin P. March: Yes, Vivek. I'll go ahead and make some comments on that and let Ron add some additional color. But the -- if you take a look at our guidance, the midpoint of our guidance is down about 8%, third quarter going into forth. About half of that is just the seasonal decline that we normally get with the roll-off of the calculator business. So the other half is pretty much attributable to our underlying semiconductor business. If you take a look at -- we actually believe that, that's probably quite seasonal and, in fact, quite consistent. If you take a look, as I mentioned, in my prepared remarks, 2010, 2011, 2012, the semi industry as a whole, excluding memory, in fact has seen fourth quarter declines from third quarter in each of those past 3 years. And based upon the guidance that we're hearing from some of the other competitors, ourselves included, it looks like we're stepping up for our fourth quarter of -- a fourth year of 4Q declines. In fact, if you take a look at TI and extract out the wireless revenue, you'll see that our revenues have gone down in the fourth quarter of each of those same years, similar to the industry. And in fact, when you just do the simple math during those last 3 years for the industry, it's down about 4%. So in fact, I don't think that we're suggesting that there's some changed outlook or changed future. In fact, I would offer to you that fourth quarter appears to be shaping up quite normally to us. When we take a look at our third quarter orders, they were actually up about 1% sequentially. Our distribution inventories, as Ron mentioned, were down about a day. And they remain quite lean with our distributors as well as our other customers. Our cancellations remain very low, and we've had no unusual requests for backlog push-outs. So when we put all that together, that suggests to us that the fourth quarter is shaping up to be a normal demand environment, similar to what we've seen for the last -- certainly the last 3 years.

Vivek, I think the other thing I would just add is even when we talked to you at the mid-quarter update, I -- somebody asked questions about order trends and I remember saying at that point that orders quarter-to-date have been strong. Book-to-bill was above 1, but that we expected that to slow as we approach the end of the quarter basically as we -- for a couple of factors. One, just seasonality in general, both calculators as well as semiconductors. So don't -- was there a slowing through the end of the quarter? Yes. But also, we expected that slowing would occur, and it pretty much happens almost every year and certainly has happened, as Kevin just pointed out, each of the last 3 years. Do you have a follow-on, Vivek? Glen Yeung - Citigroup Inc, Research Division: Yes, Ron, a very helpful clarification. So as my follow-up, I just wanted to make sure. Kevin, did you say that tax rate for Q4 will be 24%; or for the full year, it would be 24%? And then the real question is on dividends and buybacks, I think you mentioned that they have been at 133% of free cash flow over the last year. How long can this stay at those level? And should we just expect them to turn back to whatever, closer to the 100% targets that you have outlined as a longer-term target? Kevin P. March: Okay, Vivek, the 24% effective tax rate is what you should use for the fourth quarter. With the various things occurring during the year, the entire year will be a little bit different than that. But for planning purposes, use 24% for the fourth quarter. I would remind you that, that tax rate includes the R&D tax credit, which is set to expire at the end of this year. And it's unclear whether or not that will be renewed by congress in a timely fashion as we get into 2014. For us, that provides about a 2% benefit to our taxes. So absent that R&D tax credit, we'd be closer to a 26% tax rate as opposed to the 24% that we're suggesting that you use for fourth quarter. As it relates to buybacks, I would just mention that, again, the reason it's been as strong as it has been, the buybacks and dividends at 133% of our free cash flow, is a function of not only improving free cash flow, which we certainly have seen, but also the benefit the company receives when employees exercise their non-qual stock options. And given the increase in the -- in stock prices this past year for our company, we've seen an increase in employee stock option exercises. Just to give you a few numbers and summarize that to kind of recharacterize what I mentioned in my prepared remarks, our free cash flow for the last 12 months was $2.87 billion. Proceeds from employee stock options was $1.28 billion. So that means we had sources of cash over the last 12 months of $4.15 billion. We used or returned to shareholders, in the form of dividends and buybacks, $3.82 billion. Then we paid off debt earlier this year of $500 million. So we've used a total of $4.32 billion. So we've virtually used all that we have generated this past year. And we do that because one of the things we mentioned our capital management strategy is that we have a model for how much cash that we carry. And to the extent that we generate cash beyond that model level, we're quite comfortable with returning that to shareholders, as we have been doing. As to the ability of that to continue to run at those high levels, that's a really hard call. I would say that stock options do expire over time, and these are generally 10-year stock option grants that are granted to employees. So quite a few of these options are quite old, and they get used up. So I would expect that as we move into the future, we're apt to see less extra cash coming in from stock option exercises, but I think it's almost impossible to try to forecast the magnitude of that change.

Next, we'll go to Steve Smigie with Raymond James. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: I was hoping you could comment a little bit on Silicon Valley Analog here in terms on where we are in your 3-year plan and if you don't have it available this quarter, would it be possible maybe on the quarter update to talk about what revenue is there, just so we can see where it was relative to where you guys acquired it? Kevin P. March: Yes. Steve, I would say with the Silicon Valley Analog, first off on the point of revenues, we disclose revenues at the segment level. We don't disclose revenues below that, so we won't be offering the actual revenue figures for SVA. But if I were to talk about where are we at with respect to our expectation for SVA versus when we acquired National Semiconductor, I would say that the overall revenues are probably a little bit lower than we had initially expected at this point in time, given the overall market environment that we've been faced with this past few years. However, the rate of progress on share gain has been quite a bit faster as we've mentioned during the last call, that those product lines are actually gaining share about a year faster than we expected. In addition, we've had more cost synergies than we modeled into the acquisition. We've had lower interest expense on very low cost that we've been able to issue, and we've had substantially -- substantial benefits from taxes as a result of the acquisition. So when you put it all together, the profit that we're achieving on the National Semiconductor portfolio today is very close to what we have modeled at this point in time. And so I'd say we're reasonably satisfied with that bottom line effect.

Okay, Steve, even though we don't break out revenue quarterly, I can give you a kind of a rough breakout for the subsegments of Analog for 2013 year-to-date: so HVAL, 35%; Power, 25%; and then HPA and SVA are each about 20% of total Analog revenue. And again, that's year-to-date. Do you have a follow-on, Steve? Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: And just if we could follow on in terms of overall acquisition strategy in general. If you look at the microcontroller business, overall, it's still fairly fragmented out there. And also on the Analog side, you guys have talked a lot about gaining share and perhaps accelerating that through acquisition. Is there anything substantial you guys might do on either side there to change your position in any sort of substantial way at this point? Or is it more organic growth from here? Kevin P. March: Yes. Steve, I think that most of our growth for the foreseeable future is going to be organic. To the extent that we do continue looking at acquisitions, given the valuations that we presently see with many companies out there that might be an attractive addition to our portfolio, it's difficult for us to look at what we might have to pay for some of those acquisitions and actually get a reasonable return on the investment for our shareholders. So that suggests to me that to the extent that we are doing acquisitions, they're probably going to be smaller tuck-in ones that probably come with reasonably good product lines to fill in holes that we have or talented engineers to help with our R&D efforts. They're probably going to be biased towards Analog. One of the problems when you go into the microcontroller side, you start getting different architectures into your family of products and that can add complexity that may not be easily leverageable. That's not to say that we wouldn't look there, but that -- these are the odds that you'd see our microcontroller are tuck-in kind of acquisitions.

Okay. Steve, thanks for your questions.

Next, we'll go to David Wong with Wells Fargo.

Your guidance for EPS and revenue this quarter, does it assume that gross margin will be flat to slightly down with the lower revenues? Or does gross margin keep rising? Kevin P. March: Yes. David, I think, inherently, with the revenue decline that we're expecting in the fourth quarter, we'll be reducing the loadings in our factories a little bit. So you'd expect underutilization charges will probably increase a bit and have a corresponding impact on gross margins declining a bit in the quarter.

Okay, great. And a minor administrative thing, you noted that your cash is largely onshore, so you have no problem returning to shareholders. How do you get your tax rate down to 24%, so far below U.S. tax rate and still generate primarily U.S. cash? Kevin P. March: Yes. Well, I would -- first, just comment that I don't really our tax rate is all that low. 24% is an awful lot of money to send to the tax collectors. But that aside, tax inherently are pretty complex and there's a lot of things that can affect the tax rates. And especially a company's somewhat unique global footprint. Our footprint on a global basis, including the benefit that we got with the National acquisition, is allowing us to have a relatively effective current tax rate and further enabling us a pretty high repatriation of cash, which, as you know, [indiscernible] of our cash home and we just ended this past quarter with 82% of our cash onshore. But for planning purposes, as we look into the future, we assume that the U.S. tax rate stays about the same incrementally at 35%, and we just model that on a go-forward basis from a repat standpoint. Our objective, again, is to maintain 80% or more of our cash onshore, so that we have it available to use for our shareholders or dividends and stock buybacks.

Okay. David, thanks for your question.

Next, we'll go to Tore Svanberg with Stifel. Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division: First off, for Kevin, so you have about $4.2 billion in long-term debt, and I think you have about $1 billion in note payable. Can you just remind us what your plans are right now as far as paying back that debt, especially timing? Kevin P. March: Yes, Tore, we do have a short-term debt of $1 billion, that comes due on May 15 of 2014. We had talked during our capital management strategy discussion back in February that debt, clearly, is going to be a portion or part of our capital structure for quite a long time, especially given that we've got debt that goes out as far as 10 years out. And that, in fact, we will continue including debt in our capital structure or rolling over portions of our debt if the economics made sense. And to us, the definition of the economics making sense is if we can issue new debt at rates that are either below our impression of what the inflation rate will be or below our dividend yield. So with that in mind, I can't forecast exactly what we'll wind up doing when May comes around. But clearly, we'll be prepared to pay off that $1 billion if we need to. But if the economics makes sense, we may very well decide to go ahead and just replace that with new debt.

A follow-on, Tore? Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division: Yes, a follow-on for you, Ron. I don't know if you'll answer it or not. But can you give any comment on which end markets will do on a relative basis in the December quarter?

No, but I will give you a consolation and talk about what they did in the third quarter. So in the third quarter, this is not a fourth quarter comment, industrial, as we pointed out, grew and continue to be strong. Automotive grew for us, being driven mainly by infotainment and advanced driver-assist systems, such as blind spot detection, parking assist, a lot of those cool things you see on car commercials these days. And I aspire one day to have a car that actually does that. Computing, notebooks were weak and tablets grew. I heard some competitors talking about weakness in tablets. Don't know where that came from. They were strong for us. Comms infrastructure, the big word was China in third quarter. Operators, in fact, started deployment, released contracts. 2/3 of those contracts went to China OEMs, 1/3 to European. I'll note we sell to both. And maybe different products to different players, but we expect to continue to enjoy participation in that China business. Small cell trials are continuing. What I would say is first deployments, we expect to happen probably, call it mid to second half of next year. Handsets, probably the good news there is now, sub-2% of our revenue is legacy wireless, keeps going down. Consumer, good recovery in revenue there after some of the inventory reductions in second quarter. It's probably a game console comment mostly. Digital television continues weak. So again, sorry, I didn't answer the question, but hopefully, there was some value there. Tore, thank you for your question.

Next, we'll hear from Patrick Wang with Evercore. Patrick Wang - Evercore Partners Inc., Research Division: Just one question for me. Can you help us understand the underutilization charge in Q3, what you see for utilizations in the fourth quarter, I guess, in terms of that charge? And then also, what you plan to exit the year with in terms of inventory, both on the balance sheet and in the channel? Kevin P. March: Yes, Patrick. The underutilization charge in the third quarter was about $70 million. That's down from about $100 million in the prior quarter. And as I mentioned, with reductions in our factory loadings expected during the fourth quarter, I'd expect that charge to go up. But I won't give you a forecast with an exact number just yet. That will be a function of exactly what our [indiscernible] will turn out to be by the end of the quarter. As it relates to inventory, our model for inventory is to carry between 105 and 115 days of inventory. We just closed the current quarter to 106 days. So we've got room that we would probably want to take those days up a little bit more. And with the slowdown in demand in fourth quarter, that seems like a -- and a slight opportunity for us to first go ahead and bring those inventory days up a little bit, as we get ready to enter 2014.

Patrick, I think I understood you say, basically, you got all your questions in there. And to get to more callers, we'll move on to the next caller, please.

Next, we'll go to Ambrish Srivastava from Bank of Montreal. Ambrish Srivastava - BMO Capital Markets U.S.: I apologize, I don't want to put you in the spot, but I'm getting a lot of emails and I'm confused, investors are confused. Going back to the mid-quarter update, I think you did say that long-term seasonality is 8. But then you also said the variability is a lot. So the right way to think about it is a decline up to 4% for the last 4 years, so the last 4-year average. And so, is it that we misinterpreted that in what we're thinking? Not that I was modeling for down 4%, but the Street was clearly higher than me so and hence, they're very close to ask that question. Did we misinterpret your comments or did something change in the quarter?

I think the key to looking at that, Ambrish -- and all of that is exactly true. If you look at 5-year average, it's down 8. If you look at the last 4 years and take, I think it was fourth quarter '08 out, it's down 4. I think what you hear us talking about here are if you look over the last 3 years. I think in case of the industry and TI, both were -- excuse me, it's something like down 9%. And so I guess the difference is just that -- the only real difference in terms of how we're discussing our own data is I think a meaningful change to say, if you take legacy wireless out. And that was, obviously, 3 years ago, 4 years ago, a very significant part of our revenue mix. Today, it's an insignificant part of the mix. So any impact that has on seasonality going forward, frankly, is -- what it did in the past is irrelevant to our future. So that's really the distinction that we're making at this point. Do you have a follow-on, Ambrish? Ambrish Srivastava - BMO Capital Markets U.S.: I did. So just to look forward now, what should -- now that the legacy business will be gone when we go into next year, what should we be thinking about the normal seasonal patterns? And I'm sure you'll answer it, and we'll come back and ask you again for the 4 quarters.

What the -- the math I've done is, I think if you look at first quarter and you take legacy wireless out and you look at the last 3 years, it's flattish. But what I will encourage you to do, I think we have all of that data out on our website, and that would be a great project for you to work on tonight and publish in your note tomorrow. There'd probably be a lot of value added in that. So again, I'll just -- I'll refer you to that data and let you do the math. Ambrish, thank you.

Next, we'll go to Jim Covello with Goldman Sachs. James Covello - Goldman Sachs Group Inc., Research Division: I'll stick with the theme of a couple callers ago and just stick to one question. There's been a lot of activity in the Analog segment lately relative to the sensors. There's been some M&A activity in some of the Analog peers this year that have grown -- in excess of the market have grown because they've gained some share or had some opportunities in the sensor market. How do you feel about TI's position in that market? Where do you see you guys going there?

I don't know that -- probably the one thing I would say, Jim, that in that sensing space and, obviously, there are lots of different types of sensors and they're different. But I think at some time in the last month anyway, a few weeks, we did an announcement really of a breakthrough product category in inductive sensing, which is, basically, an entirely new class of data converters, and that truly is innovative. That truly is breakthrough. That being said, when you look at the size of TI in our portfolio of 100,000 products, it can be a breakaway success and it's not going to have a big impact on TI in terms of moving the needle. But I think it's a great example of the kind of innovation that's been taking place at TI over the last decade and why you see just consistent share gains from our company. A lot of people talk about innovation and a lot of times, that spun up in technical terms. We really simplify it and measure it by our -- we producing and innovating and developing products that customers want. And we really let our market share tell the story. That provides the feedback of what is providing innovation that is valued by our customers. So that's one example, a little broader than your sensing question but absolutely a great space and we're right in the middle of it. Thanks, Jim.

We'll go to Glen Yeung with Citigroup. Glen Yeung - Citigroup Inc, Research Division: Ron, when you look at the activity that you're -- cancellations are falling, I think you might not normally expect to see in the context of sum of orders. Are you seeing anything that's unusual, either one way or the other, from your customers?

No. Cancellations remain at what we would call very low levels by historical standards, and that's part of the reason why we really feel this is a -- we were coming up on a pretty seasonal fourth quarter. We're not seeing anything in the -- on the cancellation front, for example, that would indicate it's anything weaker than normal. I know a lot of people maybe were worried about, well, what's the effect of the government shutdown? Is that showing up in customer demand or anything like that? I'm not sure we have perfect visibly there but we sure didn't see backlog being pushed out by customers. We didn't see a higher rate of cancellations, which we think are both meaningful indicators. Do you have a follow-up, Glen? Glen Yeung - Citigroup Inc, Research Division: Yes. As a follow-up, as I look at the reported gross margin, they're almost around 150 basis points more than what consensus is modeling for next year's gross margins. And I recognize that your movements in revenues and hence utilization will affect that. But as we think about the puts and takes, assuming that next year is even a modest growth year for SEMI conductors, as we think about the puts and takes on gross margins, what could the consensus see right, i.e. gross margins down 150 basis points from current levels, or is, perhaps, consensus seeing things wrong? Kevin P. March: Yes, well, I guess I would just remind people as they're putting their models together of a couple things. As we look at what's going to drive our gross margins going forward, keep in mind, as we fill these very cost-effective factories that we acquired over the last couple of years, and especially as we fill them with a higher mix of industrial and automotive end market-type products, we're going to see margins continue to be pretty healthy. Another important point to keep in mind is that depreciation today is running about 400 basis points ahead of capital expenditures. So by definition, that means depreciation will start to work itself down over the next couple of years. And that, by itself, will be a boost gross margins. So those are probably the 3 things I would really point to, and that is, again, as we grow and fill up those factories; as we improve our portfolio mix, especially industrial and automotive; and as depreciation declines over the next few years on these lower levels of CapEx, those together should provide nice tailwinds to our gross margins as we go forward.

So to the scenario that Glen talked about, at 2014, as any kind of reasonable growth or any growth at all, given those tailwinds, it doesn't sound like the Street, if they're modeling down 150 basis points on gross margin, that does not sound consistent with what you just described. Is that right? Kevin P. March: It sounds inconsistent, but also suggests that you're missing just exactly how much free cash flow we'll generate next year.

All right. Thank you, Kevin. Okay, and I think, operator, we're going to try to squeeze in one final caller and then we'll wrap it up.

Okay. Our final question will come from Ross Seymore with Deutsche Bank. Ross Seymore - Deutsche Bank AG, Research Division: Kevin, you just talked about some of the puts and takes for gross margin for next year. From the $800 million roughly level you were for kind of core OpEx in the fourth quarter of this year x charges, restructuring, et cetera, what sort of OpEx puts and takes should we think of, heading into 2014? Kevin P. March: Ross, I think the simplest thing I'd suggest to you is that, clearly, the people who are in R&D and SG&A, the OpEx buckets as we call it, are correctly anticipating that they'll see pay and benefit increases in 2014. So we would certainly see the effect of that. I would probably also remind you that in first quarter, our OpEx typically is seasonally up from fourth quarter. And that's a function of 2 things: one, it's the absence of the holiday periods that we see in the fourth quarter; and the second is the annual pay and benefit increases that begin to take effect in the first quarter and take full effect in the second quarter. So again, I would expect the spend rate as we go into next year begin to increase, coming off a low fourth quarter. Year-over-year, though, given the wind-down of the legacy wireless, probably still year-over-year attractive within our OpEx model in the 20% to 25% range -- probably 20% to 30% range of revenue, excuse me, being at the lower end of that range.

And Ross, just maybe even shorter term, fourth to first, OpEx typically goes up because of the pay and benefit increase that Kevin described that kicks in, in February but also, just fewer holiday and vacation days taken in first quarter compared with fourth. We see the benefit from those holidays and vacation days. But sequentially, then it tends to work against us in the first quarter. Okay, Ross. Thanks for your questions. And in general, we're going to stop here. Thank you for joining us. A replay of this call is available on our website. Good evening.

And that does conclude today's call. Thank you all for your participation.