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

DALLAS, Oct. 25 /PRNewswire-FirstCall/ -- Texas Instruments Incorporated (TI) (NYSE: TXN) today announced third-quarter revenue of $3.74 billion, net income of $859 million and earnings per share of 71 cents.

"Our strong performance was driven by growth in all of our segments," said Rich Templeton, TI chairman, president and chief executive officer.  "TI’s continuing transformation to a company focused on Analog and Embedded Processing delivered new highs for both gross and operating margins.  Strong earnings per share demonstrate the combined impact of solid profits and our diligence to return excess capital to our shareholders through stock repurchases.

"Demand from industrial markets was especially strong, while consumer demand cooled, impacting markets such as computing and televisions.  Across a wide array of markets, our Analog and Embedded Processing products and Wireless smartphone chips continued to gain share.  These products are broadly needed in today’s electronic equipment, and our market share gains reflect the focused investments we’ve made in our portfolio, applications support and manufacturing capacity.

"Importantly, we soon will begin initial shipments from RFAB, the world’s first 300-millimeter manufacturing facility for analog semiconductors.  In the quarter, we also purchased a 200-millimeter analog manufacturing facility in Aizu, Japan, and this month we began our first semiconductor manufacturing operations in China with the purchase of a facility in the high-tech region of Chengdu.  These purchases have been made at substantial discounts, and they support our plans to continue gaining market share over the long term.

"As we move into the fourth quarter, we expect sequentially lower revenue reflecting a combination of seasonal patterns, continued soft demand in computing and consumer markets, and slowing growth in the industrial market," Templeton concluded.

3Q10 financial summary

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

   
 

 3Q10

 

 3Q09

  vs. 3Q09

 

 2Q10

 vs. 2Q10

 

Revenue

$ 3,740

 

$  2,880

30%

 

$ 3,496

7%

 

Operating profit

$ 1,227

 

$     763

61%

 

$ 1,107

11%

 

Net income

$    859

 

$     538

60%

 

$    769

12%

 

Earnings per share

$     .71

 

$      .42

69%

 

$     .62

15%

 

Cash flow from operations

$ 1,318

 

$     834

58%

 

$    562

135%

 
   
               

TI’s operating profit increased compared with the third quarter of 2009 and the prior quarter of 2010 due to higher gross profit, which reflects higher revenue.      

3Q10 segment results

   
 

 3Q10

 

 3Q09

 vs. 3Q09

 

 2Q10

 vs. 2Q10

   

Analog:

                 

   Revenue

$  1,581

 

$  1,168

35%

 

$  1,512

5%

   

   Operating profit

$     520

 

$     311

67%

 

$     472

10%

   

Embedded Processing:

                 

  Revenue

$     579

 

$     393

47%

 

$     516

12%

   

  Operating profit

$     160

 

$       75

113%

 

$     115

39%

   

Wireless:

                 

  Revenue

$     767

 

$     691

11%

 

$     727

6%

   

  Operating profit

$     180

 

$     105

71%

 

$     165

9%

   

Other:

                 

  Revenue

$     813

 

$     628

29%

 

$     741

10%

   

  Operating profit

$     367

 

$     272

35%

 

$     355

3%

   
                   
                   
   
                 

Note:  3Q09 has been restated to reflect the 1Q10 transfer of a low-power wireless product line from the Analog segment to the Wireless segment.  For 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.    
  • Compared with the prior quarter, the increase in revenue was primarily due to growth in high-performance analog products.  Revenue from high-volume analog & logic and power management products increased to a lesser extent.
  • Operating profit increased both from a year ago and the prior quarter 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)

  • Compared with a year ago, revenue grew primarily due to catalog products, as well as due to products sold into communications infrastructure.  Revenue from automotive applications increased to a lesser extent.
  • Compared with the prior quarter, revenue grew due to strength in both communications infrastructure and catalog products.  Revenue from automotive applications was even.  
  • Operating profit increased both from a year ago and the prior quarter 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 declined.
  • Compared with the prior quarter, revenue grew due to baseband and connectivity products.  Revenue from applications processors increased to a lesser extent.
  • Operating profit increased both from a year ago and from the prior quarter 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 and custom ASIC products.  Royalties also increased, while revenue from calculators declined.
  • Compared with the prior quarter, revenue grew primarily due to strength across custom ASIC products, DLP products and calculators.  Royalties were lower.  
  • Operating profit increased both from a year ago and from the prior quarter due to higher gross profit.  
 

Restructuring charges were as follows:

   
 

3Q10

 

3Q09

 

2Q10

 

Analog

$  1

 

$    4

 

$    7

 

Embedded Processing

$  1

 

$    2

 

$    3

 

Wireless

$  1

 

$    3

 

$    5

 

Other

$  1

 

$    1

 

$    2

 

Total

$  4

 

$  10

 

$  17

 
   
           

3Q10 additional financial information

  • Orders were $3.43 billion, up 10 percent from a year ago and down 8 percent from the prior quarter.
  • Inventory was $1.42 billion at the end of the quarter, up $308 million from a year ago and up $75 million from the prior quarter.  Days of inventory were 75 at the end of the quarter, compared with 72 a year ago and 76 at the end of the prior quarter.
  • Capital expenditures were $396 million in the quarter compared with $226 million a year ago and $283 million in the prior quarter.  Capital expenditures in the quarter were primarily for assembly/test manufacturing equipment, as well as analog wafer manufacturing equipment.  
  • The company used $600 million in the quarter to repurchase 24.0 million shares of its common stock and paid dividends of $143 million.
 

Outlook

For the fourth quarter of 2010, TI expects:  

  • Revenue:  $3.36 – 3.64 billion
  • Earnings per share:  $0.59 – 0.67
 

TI will update its fourth-quarter outlook on December 7, 2010.

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

  • R&D expense:  $1.6 billion, up from the prior expectation of $1.5 billion
  • Capital expenditures:  $1.2 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

 
   

Sept. 30,

2010

 

Sept. 30,

2009

 

June 30,

2010

 
               

Revenue

 

$  3,740

 

$  2,880

 

$  3,496

 

Cost of revenue

 

1,701

 

1,399

 

1,602

 

Gross profit

 

2,039

 

1,481

 

1,894

 

Research and development (R&D)

 

417

 

368

 

392

 

Selling, general and administrative (SG&A)

 

391

 

340

 

378

 

Restructuring expense

 

4

 

10

 

17

 

Operating profit

 

1,227

 

763

 

1,107

 

Other income (expense) net

 

8

 

2

 

4

 

Income before income taxes

 

1,235

 

765

 

1,111

 

Provision for income taxes

 

376

 

227

 

342

 

Net income

 

$  859

 

$  538

 

$  769

 
               

Earnings per common share:

             

  Basic

 

$  .71

 

$  .42

 

$  .63

 

  Diluted

 

$  .71

 

$  .42

 

$  .62

 
               

Average shares outstanding (millions):

             

  Basic

 

1,184

 

1,255

 

1,208

 

  Diluted

 

1,196

 

1,268

 

1,221

 
               

Cash dividends declared per share of common stock

 

$  .12

 

$  .11

 

$  .12

 
   

Percentage of revenue:

             

Gross profit

 

54.5%

 

51.4%

 

54.2%

 

R&D

 

11.1%

 

12.7%

 

11.2%

 

SG&A

 

10.5%

 

11.8%

 

10.8%

 

Operating profit

 

32.8%

 

26.5%

 

31.7%

 
             

As required by accounting rule ASC 260, net income allocated to unvested restricted stock units (RSUs) that receive dividends is excluded from the calculation of EPS.  The amount excluded was $13 million, $6 million and $11 million for the quarters ending September 30, 2010, September 30, 2009 and June 30, 2010, respectively.  

 
   
   
 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of dollars, except share amounts)

 
   

Sept. 30,

2010

 

Sept. 30,

2009

 

June 30,

2010

 

Assets

             

Current assets:

             

Cash and cash equivalents

 

$  1,093

 

$  1,294

 

$  1,138

 

Short-term investments

 

1,417

 

1,533

 

1,167

 

Accounts receivable, net of allowances of ($20), ($22) and ($21)

 

1,754

 

1,435

 

1,715

 

Raw materials

 

114

 

89

 

98

 

Work in process

 

875

 

767

 

812

 

Finished goods

 

435

 

260

 

439

 

Inventories

 

1,424

 

1,116

 

1,349

 

Deferred income taxes

 

601

 

592

 

566

 

Prepaid expenses and other current assets

 

179

 

168

 

195

 

Total current assets

 

6,468

 

6,138

 

6,130

 

Property, plant and equipment at cost

 

6,897

 

6,599

 

6,831

 

Less accumulated depreciation

 

(3,441)

 

(3,654)

 

(3,591)

 

Property, plant and equipment, net

 

3,456

 

2,945

 

3,240

 

Long-term investments

 

523

 

627

 

557

 

Goodwill

 

926

 

926

 

926

 

Acquisition-related intangibles

 

86

 

138

 

97

 

Deferred income taxes

 

907

 

928

 

915

 

Capitalized software licenses, net

 

213

 

124

 

229

 

Overfunded retirement plans

 

23

 

20

 

22

 

Other assets

 

47

 

57

 

48

 

Total assets

 

$  12,649

 

$  11,903

 

$  12,164

 
               

Liabilities and Stockholders’ Equity

             

Current liabilities:

             

Accounts payable

 

$  623

 

$  467

 

$  542

 

Accrued expenses and other liabilities

 

965

 

959

 

823

 

Income taxes payable

 

31

 

148

 

18

 

Accrued profit sharing and retirement

 

219

 

88

 

155

 

Total current liabilities

 

1,838

 

1,662

 

1,538

 

Underfunded retirement plans

 

447

 

464

 

470

 

Deferred income taxes

 

82

 

60

 

70

 

Deferred credits and other liabilities

 

320

 

279

 

331

 

Total liabilities

 

2,687

 

2,465

 

2,409

 

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:  Sept. 30, 2010 -- 1,739,932,695; Sept. 30, 2009 --
      1,739,770,537; June 30, 2010 -- 1,739,888,675

 

1,740

 

1,740

 

1,740

 

Paid-in capital

 

1,128

 

1,071

 

1,127

 

Retained earnings

 

23,907

 

21,562

 

23,194

 

   Less treasury common stock at cost:  
      Shares:  Sept. 30, 2010 -- 565,775,203; Sept. 30, 2009 -- 486,897,139;
      June 30, 2010 -- 544,693,240

 

(16,169)

 

(14,257)

 

(15,652)

 

Accumulated other comprehensive income (loss), net of taxes

 

(644)

 

(678)

 

(654)

 

Total stockholders’ equity

 

9,962

 

9,438

 

9,755

 

Total liabilities and stockholders’ equity

 

$  12,649

 

$  11,903

 

$  12,164

 
               
   
   
             

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Millions of dollars)

 
   

For Three Months Ended

 
   

Sept. 30,

2010

 

Sept. 30,

2009

 

June 30,

2010

 

Cash flows from operating activities:

             

Net income

 

$  859

 

$  538

 

$  769

 

Adjustments to net income:

             

  Depreciation

 

213

 

217

 

215

 

  Stock-based compensation

 

48

 

46

 

49

 

  Amortization of acquisition-related intangibles

 

11

 

12

 

13

 

  Deferred income taxes

 

(27)

 

71

 

(7)

 

Increase (decrease) from changes in:

             

  Accounts receivable

 

(29)

 

(186)

 

(188)

 

  Inventories

 

(66)

 

(53)

 

(73)

 

  Prepaid expenses and other current assets

 

(15)

 

31

 

14

 

  Accounts payable and accrued expenses

 

201

 

54

 

38

 

  Income taxes payable

 

23

 

94

 

(338)

 

  Accrued profit sharing and retirement

 

63

 

28

 

66

 

Other

 

37

 

(18)

 

4

 

Net cash provided by operating activities

 

1,318

 

834

 

562

 
               

Cash flows from investing activities:

             

Additions to property, plant and equipment

 

(396)

 

(226)

 

(283)

 

Purchases of short-term investments

 

(599)

 

(879)

 

(613)

 

Sales, redemptions and maturities of short-term investments

 

373

 

139

 

1,033

 

Purchases of long-term investments

 

(4)

 

--

 

--

 

Redemptions and sales of long-term investments

 

23

 

16

 

67

 

Business acquisitions:

             

  Property, plant and equipment

 

(42)

 

--

 

--

 

  Inventories

 

(9)

 

--

 

--

 

  Other

 

(8)

 

--

 

--

 

Business acquisitions, net of cash acquired

 

(59)

 

--

 

--

 

Net cash (used in) provided by investing activities

 

(662)

 

(950)

 

204

 
               

Cash flows from financing activities:

             

Dividends paid

 

(143)

 

(138)

 

(147)

 

Sales and other common stock transactions

 

41

 

34

 

50

 

Excess tax benefit from share-based payments

 

1

 

--

 

2

 

Stock repurchases

 

(600)

 

(251)

 

(750)

 

Net cash used in financing activities

 

(701)

 

(355)

 

(845)

 
               

Net decrease in cash and cash equivalents

 

(45)

 

(471)

 

(79)

 

Cash and cash equivalents, beginning of period

 

1,138

 

1,765

 

1,217

 

Cash and cash equivalents, end of period

 

$  1,093

 

$  1,294

 

$  1,138

 
   
   
   
               

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 entertainment 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.
 

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.

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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