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

DALLAS, July 19 /PRNewswire-FirstCall/ -- Texas Instruments Incorporated (TI) (NYSE: TXN) today announced second-quarter revenue of $3.50 billion, net income of $769 million and earnings per share of 62 cents.  

"Our Analog and Embedded Processing businesses turned in double-digit sequential growth, outpacing their respective markets and again confirming their ability to positively impact the financial performance of TI.  As a result, we delivered our highest-ever quarterly operating profit," said Rich Templeton, TI chairman, president and chief executive officer.   

"Orders were strong in the quarter, backlog increased and we expect to grow revenue again in the third quarter.  Our steady investments in production capacity, even through last year’s downturn, are now allowing us to meet higher demand levels from customers and simultaneously reduce lead times, which we believe is not only in the best interest of our customers, but will also help us gain share.

"As we continue our transformation to an Analog and Embedded Processing company, we believe we can significantly outgrow these markets by offering products that are optimized to the needs of our customers and by putting manufacturing capacity in place before it’s needed," Templeton said. 

2Q10 financial summary

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

   
 

2Q10

 

2Q09

vs. 2Q09

   

1Q10

vs. 1Q10

 

Revenue

$3,496

 

$2,457

42%

   

$3,205

9%

 

Operating profit

$1,107

 

$343

223%

   

$950

17%

 

Net income

$769

 

$260

196%

   

$658

17%

 

Earnings per share

$0.62

 

$0.20

210%

   

$0.52

19%

 

Cash flow from operations

$562

 

$557

1%

   

$710

-21%

 
   
                 

TI’s operating profit increased compared with the second quarter of 2009 and the prior quarter of 2010 due to higher gross profit, which primarily reflects higher revenue.  In addition, compared with a year ago, higher gross profit also reflects the benefit associated with higher utilization of manufacturing assets.    

2Q10 segment results

   
 

2Q10

 

2Q09

vs. 2Q09

 

1Q10

vs. 1Q10

 

Analog:

               

  Revenue

$1,512

 

$970

56%

 

$1,367

11%

 

  Operating profit

$472

 

$103

358%

 

$398

19%

 

Embedded Processing:

               

  Revenue

$516

 

$350

47%

 

$440

17%

 

  Operating profit

$115

 

$28

311%

 

$73

58%

 

Wireless:

               

  Revenue

$727

 

$614

18%

 

$717

1%

 

  Operating profit

$165

 

$51

224%

 

$158

4%

 

Other:

               

  Revenue

$741

 

$523

42%

 

$681

9%

 

  Operating profit

$355

 

$161

120%

 

$321

11%

 
 

Note:  2Q09 has been restated to reflect the 1Q10 transfer of a low-power wireless product
line from the Analog segment to the Wireless segment.  During all of 2009, revenue from this
product line was $68 million, and it operated at a loss of $17 million.

 
               

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 growth in all three major product areas, especially high-volume analog & logic products.    
  • Compared with the prior quarter, the increase in revenue was due to growth in all three major product areas, especially high-performance analog products.
  • The growth in operating profit compared with both a year ago and the prior quarter was due to higher 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)

  • In both comparisons, revenue growth was primarily due to catalog products.  Revenue from products for automotive and communications infrastructure applications increased to a lesser extent.
  • The gains in operating profit compared with both a year ago and the prior quarter were due to higher gross profit.  
 

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

  • Compared with a year ago, revenue grew due to strength in connectivity products and applications processors.  Revenue from baseband products was about even with a year ago.  
  • Compared with the prior quarter, revenue was about even as higher revenue from connectivity products was partially offset by lower revenue from baseband products.
  • Operating profit increased from a year ago and from the prior quarter primarily due to higher gross profit.  
 

Other:  (includes DLP® products, custom ASIC products, calculators and royalties)

  • Compared with a year ago, revenue grew primarily due to DLP products.  Revenue from royalties, custom ASIC products and calculators also grew.
  • Compared with the prior quarter, revenue grew primarily due to seasonally higher calculator sales, which more than offset lower royalties.  
  • Operating profit increased from a year ago and from the prior quarter due to higher gross profit.
 

Restructuring charges were as follows:

 

2Q10

 

2Q09

 

1Q10

   

Analog

$7

 

$34

 

$4

   

Embedded Processing

$3

 

$18

 

$2

   

Wireless

$5

 

$24

 

$3

   

Other

$2

 

$9

 

$1

   

Total

$17

 

$85

 

$10

   
   
             

2Q10 additional financial information

  • Orders were $3.73 billion, up 33 percent from a year ago and up 2 percent from the prior quarter.
  • Inventory was $1.35 billion at the end of the quarter, up $286 million from a year ago and up $73 million from the prior quarter.
  • Capital expenditures were $283 million in the quarter compared with $47 million a year ago and $219 million in the prior quarter.  Capital expenditures in the quarter were for analog wafer manufacturing equipment and for assembly/test manufacturing equipment.  
  • The company used $750 million in the quarter to repurchase 29.7 million shares of its common stock and paid dividends of $147 million.
 

Outlook

For the third quarter of 2010, TI expects:  

  • Revenue:  $3.55 – 3.85 billion
  • Earnings per share:  $0.64 – 0.74
 

TI will update its third-quarter outlook on September 9, 2010.

For the full year of 2010, TI expects approximately the following:

  • R&D expense:  $1.5 billion
  • Capital expenditures:  $1.2 billion, up from the prior expectation of $0.9 billion
  • Depreciation:  $0.9 billion
  • Annual effective tax rate:  31%
 

The tax rate estimate is based on current tax law and does not assume reinstatement of the federal R&D tax credit, which expired at the end of 2009.

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)

 
   

For Three Months Ended

 
   

June 30,
2010

 

June 30,
2009

 

Mar. 31,
2010

 

Revenue

 

$3,496

 

$2,457

 

$3,205

 

Cost of revenue

 

1,602

 

1,333

 

1,516

 

Gross profit

 

1,894

 

1,124

 

1,689

 

Research and development (R&D)

 

392

 

369

 

370

 

Selling, general and administrative (SG&A)

 

378

 

327

 

359

 

Restructuring expense

 

17

 

85

 

10

 

Operating profit

 

1,107

 

343

 

950

 

Other income (expense) net

 

4

 

13

 

7

 

Income before income taxes

 

1,111

 

356

 

957

 

Provision for income taxes

 

342

 

96

 

299

 

Net income

 

$769

 

$260

 

$658

 
               

Earnings per common share:

             

   Basic

 

$.63

 

$.20

 

$.53

 

   Diluted

 

$.62

 

$.20

 

$.52

 
               

Average shares outstanding (millions):

             

   Basic

 

1,208

 

1,267

 

1,233

 

   Diluted

 

1,221

 

1,272

 

1,246

 
               

Cash dividends declared per share of common stock

 

$.12

 

$.11

 

$.12

 
               

Percentage of revenue:

             

Gross profit

 

54.2%

 

45.7%

 

52.7%

 

R&D

 

11.2%

 

15.0%

 

11.5%

 

SG&A

 

10.8%

 

13.3%

 

11.2%

 

Operating profit

 

31.7%

 

14.0%

 

29.7%

 
   
             
 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)

 
   

June 30,
2010

 

June 30,
2009

 

Mar. 31,
2010

 

Assets

             

Current assets:

             

Cash and cash equivalents

 

$1,138

 

$1,765

 

$1,217

 

Short-term investments

 

1,167

 

792

 

1,574

 

Accounts receivable, net of allowances of ($21), ($23) and ($20)

 

1,715

 

1,244

 

1,526

 

Raw materials

 

98

 

81

 

95

 

Work in process

 

812

 

699

 

812

 

Finished goods

 

439

 

283

 

369

 

Inventories

 

1,349

 

1,063

 

1,276

 

Deferred income taxes

 

566

 

668

 

556

 

Prepaid expenses and other current assets

 

195

 

208

 

174

 

Total current assets

 

6,130

 

5,740

 

6,323

 

Property, plant and equipment at cost

 

6,831

 

6,739

 

6,763

 

Less accumulated depreciation

 

(3,591)

 

(3,799)

 

(3,601)

 

Property, plant and equipment, net

 

3,240

 

2,940

 

3,162

 

Long-term investments

 

557

 

632

 

641

 

Goodwill

 

926

 

926

 

926

 

Acquisition-related intangibles

 

97

 

150

 

111

 

Deferred income taxes

 

915

 

909

 

893

 

Capitalized software licenses, net

 

229

 

140

 

219

 

Overfunded retirement plans

 

22

 

20

 

54

 

Other assets

 

48

 

53

 

41

 

Total assets

 

$12,164

 

$11,510

 

$12,370

 
               

Liabilities and Stockholders’ Equity

             

Current liabilities:

             

Accounts payable

 

$542

 

$421

 

$556

 

Accrued expenses and other liabilities

 

823

 

931

 

756

 

Income taxes payable

 

18

 

56

 

317

 

Accrued profit sharing and retirement

 

155

 

60

 

90

 

Total current liabilities

 

1,538

 

1,468

 

1,719

 

Underfunded retirement plans

 

470

 

502

 

425

 

Deferred income taxes

 

70

 

54

 

68

 

Deferred credits and other liabilities

 

331

 

273

 

353

 

Total liabilities

 

2,409

 

2,297

 

2,565

 
               

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:  June 30, 2010 -- 1,739,888,675; June 30, 2009 -- 1,739,734,081; Mar. 31, 2010 -- 1,739,818,725

 

1,740

 

1,740

 

1,740

 

Paid-in capital

 

1,127

 

1,045

 

1,095

 

Retained earnings

 

23,194

 

21,163

 

22,573

 

Less treasury common stock at cost:

             

Shares:  June 30, 2010 -- 544,693,240; June 30, 2009 -- 478,309,646; Mar. 31, 2010 -- 517,592,342

 

(15,652)

 

(14,061)

 

(14,976)

 

Accumulated other comprehensive income (loss), net of taxes

 

(654)

 

(674)

 

(627)

 

Total stockholders’ equity

 

9,755

 

9,213

 

9,805

 

Total liabilities and stockholders’ equity

 

$12,164

 

$11,510

 

$12,370

 
   
             
 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)

 
   

For Three Months Ended

 
   

June 30,
2010

 

June 30,
2009

 

Mar. 31,
2010

 

Cash flows from operating activities:

             

Net income

 

$769

 

$260

 

$658

 

Adjustments to net income:

             

  Depreciation

 

215

 

221

 

211

 

  Stock-based compensation

 

49

 

47

 

47

 

  Amortization of acquisition-related intangibles

 

13

 

12

 

13

 

  Deferred income taxes

 

(7)

 

6

 

(11)

 

Increase (decrease) from changes in:

             

  Accounts receivable

 

(188)

 

(116)

 

(251)

 

  Inventories

 

(73)

 

37

 

(74)

 

  Prepaid expenses and other current assets

 

14

 

(15)

 

(10)

 

  Accounts payable and accrued expenses

 

38

 

101

 

(66)

 

  Income taxes payable

 

(338)

 

(52)

 

203

 

  Accrued profit sharing and retirement

 

66

 

26

 

(23)

 

Other

 

4

 

30

 

13

 

Net cash provided by operating activities

 

562

 

557

 

710

 
               

Cash flows from investing activities:

             

Additions to property, plant and equipment

 

(283)

 

(47)

 

(219)

 

Purchases of short-term investments

 

(613)

 

(343)

 

(599)

 

Sales and maturities of short-term investments

 

1,033

 

544

 

768

 

Purchases of long-term investments

 

--

 

(3)

 

(2)

 

Redemptions and sales of long-term investments

 

67

 

43

 

1

 

Acquisitions, net of cash acquired

 

--

 

(51)

 

--

 

Net cash provided by (used in) investing activities

 

204

 

143

 

(51)

 
               

Cash flows from financing activities:

             

Dividends paid

 

(147)

 

(139)

 

(149)

 

Sales and other common stock transactions

 

50

 

19

 

29

 

Excess tax benefit from share-based payments

 

2

 

--

 

--

 

Stock repurchases

 

(750)

 

(251)

 

(504)

 

Net cash used in financing activities

 

(845)

 

(371)

 

(624)

 
               

Net (decrease) increase in cash and cash equivalents

 

(79)

 

329

 

35

 

Cash and cash equivalents, beginning of period

 

1,217

 

1,436

 

1,182

 

Cash and cash equivalents, end of period

 

$1,138

 

$1,765

 

$1,217

 
   
             

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, entertainment electronics and computing;
  • 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;
  • The ability of TI and its customers and suppliers to access their bank accounts and lines of credit or otherwise access the capital markets;
  • 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.
 

For a more detailed discussion of these factors, see the Risk Factors discussion in Item 1A of the Company’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 the Company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

About Texas Instruments

Texas Instruments (NYSE: TXN) helps customers solve problems and develop new electronics that make the world smarter, healthier, safer, greener and more fun.  A global semiconductor company, TI innovates through design, sales and manufacturing operations in more than 30 countries.  For more information, go to www.ti.com.

TI trademarks:

OMAP

DLP

Other trademarks are the property of their respective owners.

TXN-F

SOURCE Texas Instruments Incorporated

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