Conference call on TI website at 4:30 p.m. Central time today
 

DALLAS, April 18, 2011 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NYSE: TXN) today announced first-quarter revenue of $3.39 billion, net income of $666 million and earnings per share of 55 cents.  

"2011 started strong, with customer demand in January and February tracking our expectations for a first quarter of above-seasonal growth," said Rich Templeton, TI chairman, president and chief executive officer.  "But the Japan earthquake that’s taken such a heartbreaking human toll in the country also disrupted local demand starting in mid-March and impaired operations at two of our factories there.  This impact and substantially weaker demand for Wireless baseband chips resulted in revenue that was below the middle of our expected range.  The lower revenue combined with expenses resulting from the earthquake affected earnings per share.  New orders, however, were strong through the quarter, indicative of the underlying strength in our markets.

"Recovery of our operations in Japan is progressing well.  One of our factories will soon be resuming full production, and the other has restarted initial processing of wafers and is on schedule for full loadings in mid-July.  Nonetheless, many of our Japanese customers remain in the early stages of reopening their own factories, and we and our customers face potential supply chain disruptions.  We expect growth in the second quarter, though it will be pressured by the situation in Japan.  Provided consumer and enterprise demand remain strong, we expect a good second half of the year."

1Q11 financial summary

Amounts are in millions of dollars, except per-share amounts.  

   
 

1Q11

 

1Q10

vs. 1Q10

 

4Q10

vs. 4Q10

 

Revenue

$  3,392

 

$  3,205

6%

 

$  3,525

-4%

 

Operating profit

$     908

 

$     950

-4%

 

$  1,230

-26%

 

Net income

$     666

 

$     658

1%

 

$     942

-29%

 

Earnings per share

$      .55

 

$      .52

6%

 

$      .78

-29%

 

Cash flow from operations

$     516

 

$     710

-27%

 

$  1,230

-58%

 
               

TI’s operating profit was negatively impacted by about $30 million for costs resulting from the earthquake.  These costs were recorded in the company’s Other segment.  TI’s earnings per share were negatively impacted by about 2 cents by these costs.  

Operating profit declined from a year ago due to higher operating expenses.  Compared with the prior quarter, operating profit was lower primarily due to a $144 million gain on the sale of a product line in the prior quarter and lower gross profit, which resulted from lower revenue.  

Net income in the prior quarter also included a $78 million tax benefit, which was primarily associated with the reinstatement of the federal R&D tax credit that was retroactive to the beginning of 2010.  

1Q11 segment results

   
 

1Q11

 

1Q10

vs. 1Q10

 

4Q10

vs. 4Q10

   

Analog:

                 

        Revenue

$  1,536

 

$  1,367

12%

 

$  1,518

1%

   

        Operating profit

$     418

 

$     398

5%

 

$     486

-14%

   

Embedded Processing:

                 

        Revenue

$     533

 

$     440

21%

 

$     538

-1%

   

        Operating profit

$     102

 

$       73

40%

 

$     143

-29%

   

Wireless:

                 

        Revenue

$     658

 

$     717

-8%

 

$     767

-14%

   

        Operating profit

$     141

 

$     158

-11%

 

$     180

-22%

   

Other:

                 

        Revenue

$     665

 

$     681

-2%

 

$     702

-5%

   

        Operating profit

$     247

 

$     321

-23%

 

$     421

-41%

   
                   
                   
   
                 

Analog:  (includes high-volume analog & logic, high-performance analog and power management products)  

  • Compared with a year ago, the increase in revenue was due to higher revenue from the combination of high-performance analog, power management and high-volume analog & logic products.  
  • Compared with the prior quarter, revenue was about even as an increase in revenue from power management products was mostly offset by a decline in revenue from high-performance analog products.  High-volume analog & logic product revenue was about even.
  • Operating profit increased from a year ago due to higher gross profit.  Operating profit decreased from the prior quarter primarily due to lower gross profit.
 

Embedded Processing:  (includes digital signal processor and microcontroller catalog products that are sold across a wide variety of markets, as well as application-specific products that are used in communications infrastructure and automotive electronics)

  • Compared with a year ago, the increase in revenue was due to higher revenue from the combination of catalog products and products sold into communications infrastructure and automotive applications.  
  • Compared with the prior quarter, revenue was about even as an increase in revenue from products sold into automotive applications was offset by lower revenue from products sold into communications infrastructure and lower catalog product revenue.
  • Operating profit increased from a year ago due to higher gross profit.  Operating profit declined from the prior quarter primarily due to lower gross profit.  
 

Wireless:  (includes connectivity products, OMAP™ applications processors and baseband products)  

  • Compared with a year ago, the decline in revenue was due to lower revenue from baseband products.  Revenue from connectivity products increased and revenue from applications processors was about even.    
  • Compared with the prior quarter, revenue declined due to lower revenue from baseband products.  Revenue from connectivity products increased but was offset by a decline in applications processors.  
  • Operating profit decreased from the year-ago quarter due to higher operating expenses and decreased from the prior quarter due to lower gross profit.  
 

Other:  (includes DLP® products, custom ASIC products, calculators and royalties, as well as products sold under transitional supply agreements associated with recently acquired factories)

  • Compared with a year ago, the decline in revenue was primarily due to lower royalties, which were mostly offset by increased revenue from transitional supply agreements.  
  • Compared with the prior quarter, the decline in revenue was due to lower revenue from custom ASIC products and royalties that was partially offset by higher revenue from calculators and DLP products.  
  • Operating profit decreased from a year ago due to lower gross profit.  Operating profit decreased from the prior quarter primarily due to a gain on sale in the prior quarter.  Operating profit was negatively impacted by about $30 million for costs resulting from the earthquake in Japan.
 

1Q11 additional financial information

  • Orders were $3.58 billion, down 2 percent from a year ago and up 14 percent from the prior quarter.
  • Inventory was $1.68 billion at the end of the quarter, up $402 million from a year ago and up $158 million from the prior quarter.  Most of the increase was due to the company building inventory to help support high customer service levels.  About one-third of the sequential increase was Wireless baseband inventory that resulted from weak demand at a single customer.
  • Capital expenditures were $194 million in the quarter compared with $219 million a year ago and $301 million in the prior quarter.  Capital expenditures in the quarter were primarily for assembly/test equipment, as well as for analog wafer manufacturing equipment.  
  • The company used $771 million in the quarter to repurchase 21.9 million shares of its common stock and paid dividends of $153 million.
 

Outlook

For the second quarter of 2011, TI expects:  

  • Revenue:  $3.41 – 3.69 billion
  • Earnings per share:  $0.52 – 0.60
 

This estimate includes a negative impact of about 5 cents for costs resulting from the earthquake and its aftermath in Japan.  

TI will update its second-quarter outlook on June 8, 2011.

For the full year of 2011, TI expects approximately the following:

  • R&D expense:  $1.7 billion
  • Capital expenditures:  $0.9 billion
  • Depreciation:  $0.9 billion
  • Annual effective tax rate:  28%, down from the prior expectation of 30%
 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Income

(Millions of dollars, except share and per-share amounts)

 
   

For Three Months Ended

 
               
   

Mar. 31,

2011

 

Mar. 31,

2010

 

Dec. 31,

2010

 
               

Revenue                                         

 

$  3,392

 

$  3,205

 

$  3,525

 

Cost of revenue                                   

 

1,664

 

1,516

 

1,656

 

Gross profit                                      

 

1,728

 

1,689

 

1,869

 

Research and development (R&D)                     

 

422

 

370

 

393

 

Selling, general and administrative (SG&A)             

 

396

 

359

 

389

 

Restructuring expense                             

 

--

 

10

 

1

 

Acquisition cost / divestiture (gain)                    

 

2

 

--

 

(144)

 

Operating profit                                   

 

908

 

950

 

1,230

 

Other income (expense) net                         

 

10

 

7

 

18

 

Income before income taxes                         

 

918

 

957

 

1,248

 

Provision for income taxes                           

 

252

 

299

 

306

 

Net income                                       

 

$     666

 

$     658

 

$     942

 
               

Earnings per common share:

             

 Basic                                          

 

$      .56

 

$      .53

 

$      .79

 

 Diluted                                         

 

$      .55

 

$      .52

 

$      .78

 
               

Average shares outstanding (millions):

             

 Basic                                          

 

1,167

 

1,233

 

1,170

 

 Diluted                                         

 

1,194

 

1,246

 

1,189

 
               

Cash dividends declared per share of common stock      

 

$      .13

 

$      .12

 

$      .13

 
               

Percentage of revenue:

             

Gross profit                                      

 

50.9%

 

52.7%

 

53.0%

 

R&D                                            

 

12.4%

 

11.5%

 

11.1%

 

SG&A                                           

 

11.7%

 

11.2%

 

11.1%

 

Operating profit                                   

 

26.8%

 

29.7%

 

34.9%

 
   
             

As required by accounting rule ASC 260, net income allocated to unvested restricted stock units (RSUs) on which we pay dividend equivalents is excluded from the calculation of EPS.  The amount excluded from earnings per common share was $10 million, $8 million and $14 million for the quarters ending March 31, 2011, March 31, 2010 and December 31, 2010.

 
 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of dollars, except share amounts)

 
   

Mar. 31,

2011

 

Mar. 31,

2010

 

Dec. 31,

2010

 

Assets

             

Current assets:

             

Cash and cash equivalents                                       

 

$    1,343

 

$    1,217

 

$    1,319

 

Short-term investments                                           

 

1,514

 

1,574

 

1,753

 

Accounts receivable, net of allowances of ($20), ($20) and ($18)         

 

1,568

 

1,526

 

1,518

 

Raw materials                                                 

 

132

 

95

 

122

 

Work in process                                                

 

934

 

812

 

919

 

Finished goods                                                 

 

612

 

369

 

479

 

Inventories                                                    

 

1,678

 

1,276

 

1,520

 

Deferred income taxes                                           

 

771

 

556

 

770

 

Prepaid expenses and other current assets                          

 

170

 

174

 

180

 

Total current assets                                             

 

7,044

 

6,323

 

7,060

 

Property, plant and equipment at cost                                 

 

6,712

 

6,763

 

6,907

 

Less accumulated depreciation                                    

 

(3,055)

 

(3,601)

 

(3,227)

 

Property, plant and equipment, net                                 

 

3,657

 

3,162

 

3,680

 

Long-term investments                                             

 

449

 

641

 

453

 

Goodwill                                                        

 

924

 

926

 

924

 

Acquisition-related intangibles                                       

 

69

 

111

 

76

 

Deferred income taxes                                             

 

899

 

893

 

927

 

Capitalized software licenses, net                                   

 

193

 

219

 

205

 

Overfunded retirement plans                                         

 

28

 

54

 

31

 

Other assets                                                     

 

47

 

41

 

45

 

Total assets                                                     

 

$  13,310

 

$  12,370

 

$  13,401

 
               

Liabilities and Stockholders’ Equity

             

Current liabilities:

             

Accounts payable                                               

 

$       605

 

$       556

 

$       621

 

Accrued compensation                                           

 

348

 

323

 

629

 

Income taxes payable                                           

 

247

 

317

 

109

 

Accrued expenses and other liabilities                               

 

593

 

523

 

622

 

Total current liabilities                                            

 

1,793

 

1,719

 

1,981

 

Underfunded retirement plans                                       

 

527

 

425

 

519

 

Deferred income taxes                                             

 

82

 

68

 

86

 

Deferred credits and other liabilities                                   

 

334

 

353

 

378

 

Total liabilities                                                    

 

2,736

 

2,565

 

2,964

 

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:  Mar. 31, 2011 -- 1,740,394,740; Mar. 31, 2010 --

             

   1,739,818,725; Dec. 31, 2010 -- 1,740,166,101                      

 

1,740

 

1,740

 

1,740

 

Paid-in capital                                                  

 

1,068

 

1,095

 

1,114

 

Retained earnings                                               

 

25,206

 

22,573

 

24,695

 

Less treasury common stock at cost:                                        

             

   Shares:  Mar. 31, 2011 -- 579,225,953; Mar. 31, 2010 --

             

   517,592,342; Dec. 31, 2010 -- 572,722,397                         

 

(16,738)

 

(14,976)

 

(16,411)

 

Accumulated other comprehensive income (loss), net of taxes           

 

(702)

 

(627)

 

(701)

 

Total stockholders’ equity                                         

 

10,574

 

9,805

 

10,437

 

Total liabilities and stockholders’ equity                                

 

$  13,310

 

$  12,370

 

$  13,401

 
               
   
             

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Millions of dollars)

 
   

For Three Months Ended

 
   

Mar. 31,

2011

 

Mar. 31,

2010

 

Dec. 31,

2010

 

Cash flows from operating activities:

             

Net income                                    

 

$     666

 

$      658

 

$     942

 

Adjustments to net income:

             

 Depreciation                                  

 

224

 

211

 

226

 

 Stock-based compensation                      

 

57

 

47

 

47

 

 Amortization of acquisition-related intangibles       

 

7

 

13

 

10

 

 Gain on divestiture                             

 

--

 

--

 

(144)

 

 Deferred income taxes                         

 

31

 

(11)

 

(143)

 

Increase (decrease) from changes in:

             

 Accounts receivable                           

 

(44)

 

(251)

 

237

 

 Inventories                                   

 

(158)

 

(74)

 

(91)

 

 Prepaid expenses and other current assets         

 

(9)

 

(11)

 

22

 

 Accounts payable and accrued expenses          

 

(83)

 

(26)

 

(40)

 

 Accrued compensation                         

 

(281)

 

(63)

 

64

 

 Income taxes payable                           

 

137

 

191

 

78

 

Other                                         

 

(31)

 

26

 

22

 

Net cash provided by operating activities              

 

516

 

710

 

1,230

 
               

Cash flows from investing activities:

             

Additions to property, plant and equipment           

 

(194)

 

(219)

 

(301)

 

Proceeds from divestiture

 

--

 

--

 

148

 

Purchases of short-term investments               

 

(872)

 

(599)

 

(699)

 

Sales, redemptions and maturities of short-term

             

 investments

 

1,111

 

768

 

390

 

Purchases of long-term investments                

 

(1)

 

(2)

 

(2)

 

Redemptions and sales of long-term investments       

 

19

 

1

 

56

 

Business acquisitions:

             

  Property, plant and equipment                   

 

--

 

--

 

(158)

 

  Inventories                                   

 

--

 

--

 

(5)

 

  Other                                       

 

--

 

--

 

23

 

Business acquisitions, net of cash acquired         

 

--

 

--

 

(140)

 

Net cash provided by (used in) investing activities       

 

63

 

(51)

 

(548)

 
               

Cash flows from financing activities:

             

Dividends paid                                 

 

(153)

 

(149)

 

(153)

 

Sales and other common stock transactions         

 

350

 

29

 

287

 

Excess tax benefit from share-based payments       

 

19

 

--

 

10

 

Stock repurchases                             

 

(771)

 

(504)

 

(600)

 

Net cash used in financing activities                   

 

(555)

 

(624)

 

(456)

 
               

Net increase in cash and cash equivalents

 

24

 

35

 

226

 

Cash and cash equivalents, beginning of period

 

1,319

 

1,182

 

1,093

 

Cash and cash equivalents, end of period

 

$  1,343

 

$  1,217

 

$  1,319

 
   
   
             

Certain amounts in prior periods’ financial statements have been reclassified to conform to the current presentation.

 
 

Safe Harbor Statement

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.  These forward-looking statements generally can be identified by phrases such as TI or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import.  Similarly, statements herein that describe TI’s business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements.  All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements.  

We urge you to carefully consider the following important factors that could cause actual results to differ materially from the expectations of TI or its management:

  • Market demand for semiconductors, particularly in key markets such as communications, computing, industrial and consumer electronics;
  • 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 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; and
  • Timely implementation of new manufacturing technologies, installation of manufacturing equipment and the ability to obtain needed third-party foundry and assembly/test subcontract services.
 

TI specifically notes that circumstances arising out of the recent earthquakes and tsunami in Japan, including disruptions and increased costs of TI’s production, disruptions in our supply chain (including utilities) and reduced or delayed demand from customers, could cause actual results to differ from the expectations of TI or its management. 

For a more detailed discussion of these factors, see the Risk Factors discussion in Item 1A of TI’s most recent Form 10-K.  The forward-looking statements included in this release are made only as of the date of this release, and TI undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

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