- TI Revenue Increases 10% Sequentially, 39% from Year Ago
- Record Revenue in Wireless, High-Performance Analog and
DLP™ Products
- EPS of $0.25
- 3Q04 EPS Expected in Range of $0.26 to $0.29
• Download
Financials in MS Excel Format (48KB)
DALLAS (July 20, 2004) – Texas Instruments Incorporated (TI) (NYSE:
TXN) today reported second-quarter 2004 revenue of $3241 million, an increase
of 10 percent sequentially and 39 percent from the year-ago quarter primarily
due to strength in TI’s Semiconductor business. Earnings per share
(EPS) were $0.25.
Semiconductor revenue increased 8 percent sequentially and 44 percent
from the year-ago quarter primarily due to strong demand for digital signal
processors (DSPs) and analog products used in a broad range of electronic
equipment. Record revenue was achieved in several Semiconductor operations,
including wireless, which grew 15 percent sequentially; high-performance
analog, which grew 13 percent sequentially; and Digital Light Processing™
(DLP), which grew 10 percent sequentially.
“Revenue growth was excellent,” said Rich Templeton, TI
president and chief executive officer. “We believe our Semiconductor
business has gained market share in both the first and second quarters
of 2004, building on TI’s annual market share gains achieved in
2002 and 2003. This reflects the strength we’ve built in our advanced
technology and the relationships we’re developing with customers.
“In particular, this was an important quarter for our wireless
operations, with growth across a broad base of customers and a broad
mix of our products,” Templeton said. “Digital baseband
modems for W-CDMA 3G cell phones have emerged as a significant growth
contributor, accounting for about one-fourth of sequential wireless
revenue growth in the second quarter. In addition, the latest research
from market analyst IDC shows that our OMAP™ processors garnered
two-thirds of the rapidly growing market for wireless application processors
in 2003. The company’s strength in modems and application processors
has given us the early lead in the W-CDMA cell phone market. Underscoring
the importance of this technology combination, TI and 3G service leader
NTT DoCoMo announced plans to integrate next-generation OMAP 2 application
processors with digital baseband modems to support the UMTS standard,
which is based on W-CDMA and is expected to be the prevalent worldwide
standard for 3G wireless phones,” Templeton said.
“2004 is on course to be a very strong year. TI’s Semiconductor
revenue in the second quarter was higher than it has ever been, and
the company’s operating profit is approaching an all-time record.
With stable depreciation and a lower expected profit-sharing accrual
next year, TI is well positioned to continue to deliver higher levels
of profitability as revenue expands,” Templeton said.
Details of Financial Results
Revenue
In the second quarter, TI revenue of $3241 million increased $305 million
sequentially and $902 million from the year-ago quarter.
Gross Profit
Gross profit of $1481 million increased 12 percent sequentially and
69 percent from the year-ago quarter. Gross profit margin was 45.7 percent
of revenue, up 0.7 percentage points sequentially and 8.2 percentage
points from the year-ago quarter. Gross profit and gross profit margin
benefited primarily from higher revenue.
Operating Expenses
Research and development (R&D) expense was $514 million, or 15.8
percent of revenue, compared with $494 million, or 16.8 percent of revenue
in the prior quarter. R&D expense was $424 million, or 18.1 percent
of revenue, in the year-ago quarter. The higher R&D expense is a
result of increased product development activity in Semiconductor, especially
for wireless products, as well as a higher profit-sharing accrual.
Selling, general and administrative (SG&A) expense was $375 million,
or 11.6 percent of revenue, compared with $354 million, or 12.0 percent
of revenue, in the prior quarter. The increase was primarily due to
a higher profit-sharing accrual as well as seasonally higher marketing
expense in the company’s Education Technology (E&PS) business.
In the year-ago quarter, SG&A expense was $328 million, or 14.0
percent of revenue, with the increase primarily due to the profit-sharing
accrual.
Operating Profit
Operating profit of $592 million, or 18.3 percent of revenue, increased
$118 million sequentially and $467 million compared with the year-ago
quarter primarily due to higher gross profit that more than offset higher
operating expenses.
Second-quarter results include a higher profit-sharing accrual, which
contains a cumulative catch-up, compared with the first quarter, reflecting
an upward adjustment in the company’s expectations for its 2004
performance. There was no profit-sharing accrual in the year-ago quarter.
Profit sharing is allocated across cost of revenue, SG&A and R&D.
Profit sharing is expected to decline in 2005 compared with 2004 and
will reflect a new TI employee profit-sharing plan.
Other Income (Expense) Net (OI&E) and Interest Expense
OI&E of $38 million decreased $12 million from the prior quarter
and increased $2 million compared with the year-ago quarter.
Interest expense of $8 million was even sequentially and declined $2
million from the year-ago quarter.
Net Income
Net income was $441 million, or $0.25 per share, an increase of $74
million sequentially and $320 million from the year-ago quarter due
to higher operating profit.
Orders
TI orders of $3253 million increased 1 percent sequentially. Compared
with the year-ago quarter, orders increased 41 percent due to strength
in Semiconductor. Semiconductor orders were $2762 million, down 2 percent
sequentially. Compared with the year-ago quarter, Semiconductor orders
increased 45 percent due to broad-based demand for the company’s
products.
Cash
At the end of the second quarter, total cash (cash and cash equivalents
plus short-term investments and long-term cash investments) was $5534
million.
Cash flow from operations was $506 million, up $113 million sequentially
and $128 million compared with the year-ago quarter.
Capital Expenditures and Depreciation
Capital expenditures of $356 million decreased $45 million sequentially
and increased $194 million from the year-ago quarter. TI’s capital
expenditures in the second quarter were used primarily to increase capacity
for assembly and test operations, and for 90-nanometer wafer fabrication.
Depreciation of $363 million increased $15 million sequentially and
$7 million from the year-ago quarter.
Accounts Receivable and Inventory
Accounts receivable of $1930 million increased $252 million sequentially
due to higher revenue and seasonally higher E&PS receivables. Accounts
receivable increased $490 million from the end of the year-ago quarter
due to higher revenue. Days sales outstanding were 54 at the end of
the second quarter, compared with 51 at the end of the prior quarter
and 55 at the end of the year-ago quarter.
Inventory of $1285 million at the end of the second quarter increased
$137 million sequentially and $285 million from the year-ago quarter
as the company continued to build inventory to targeted levels, especially
in standard products, to support customer plans for the second half
of the year and to ensure the company’s ability to respond to
upside potential. Days of inventory at the end of the second quarter
were 66, compared with 64 days at the end of the prior quarter and 62
days at the end of the year-ago quarter.
Debt
At the end of the second quarter, TI’s debt-to-total-capital ratio
was 0.06, unchanged from the end of the prior quarter. In the third
quarter, TI’s $400 million 7 percent notes will mature and will
be paid using available cash.
Outlook
TI intends to provide a mid-quarter update to its financial outlook
on September 8 by issuing a press release and holding a conference call.
Both will be available on the company’s web site.
For the third quarter of 2004, TI expects revenue to be in the following
ranges:
-
Total TI, $3200 million to $3440 million;
-
Semiconductor, $2780 million to $2980 million;
-
Sensors & Controls, $255 million to $275 million; and
-
E&PS, $170 million to $190 million.
TI expects earnings per share to be in the range of $0.26 to $0.29.
For 2004, TI continues to expect: R&D to be about $2.1 billion;
capital expenditures to be about $1.3 billion; and depreciation to be
about $1.5 billion.
The effective tax rate for the year is expected to be about 29 percent,
unchanged from the prior estimate.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statement of Operations
(In millions of dollars, except per-share amounts)
For Three Months Ended
June 30 Mar. 31 June 30
2004 2004 2003
Net revenue $ 3241 $ 2936 $ 2339
Operating costs and expenses:
Cost of revenue 1760 1614 1462
Gross profit 1481 1322 877
Gross profit % of revenue 45.7% 45.0% 37.5%
Research and development (R&D) 514 494 424
R&D % of revenue 15.8% 16.8% 18.1%
Selling, general and
administrative (SG&A) 375 354 328
SG&A % of revenue 11.6% 12.0% 14.0%
Total 2649 2462 2214
Profit from operations 592 474 125
Operating income % of revenue 18.3% 16.2% 5.3%
Other income (expense) net 38 50 36
Interest on loans 8 8 10
Income before income taxes 622 516 151
Provision for income taxes 181 149 30
Net income* $ 441 $ 367 $ 121
Diluted earnings per common
share** $ .25 $ .21 $ .07
Basic earnings per common share $ .25 $ .21 $ .07
Cash dividends declared per
share of common stock $ .021 $ .021 $ .021
*Income for the second quarter of 2004 includes, in millions of dollars,
a charge of $4 for restructuring actions initiated in the second quarter
of 2003, of which $1 is associated with achieving manufacturing efficiencies
in the Semiconductor business and $3 is associated with moving certain production
lines in the Sensors & Controls business from Attleboro to other TI
sites. The $4 restructuring charge is primarily for severance and benefit
costs and is included in cost of revenue. Income for the first quarter of
2004 includes, in millions of dollars, a charge of $5 for restructuring
actions initiated in the second quarter of 2003, of which $2 is associated
with achieving manufacturing efficiencies in the Semiconductor business
and $3 is associated with moving certain production lines in the Sensors
& Controls business from Attleboro to other TI sites. The $5 restructuring
charge is primarily for severance and benefit costs. Of the $5, $4 is included
in cost of revenue and $1 is in selling, general and administrative expense.
Income for the second quarter of 2003 includes, in millions of dollars,
a charge of $49, of which $26 is for the initial phase of restructuring
associated with moving certain production lines in the Sensors & Controls
business from Attleboro to other TI sites and $23 is for the initial phase
of restructuring to achieve manufacturing efficiencies in the Semiconductor
business. The $49 restructuring charge is primarily for severance and benefit
costs. Of the $49, $43 is included in cost of revenue and $6 is in selling,
general and administrative expense.
Income includes, in millions of dollars, acquisition-related amortization
of $19, $19 and $25 for the second quarter and first quarter of 2004 and
the second quarter of 2003.
**Diluted earnings per common share are based on average common and dilutive
potential common shares outstanding (in millions of shares, 1771.6, 1783.6
and 1762.6 for the second quarter and first quarter of 2004 and the second
quarter of 2003).
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheet
(In millions of dollars)
June 30 Mar. 31 June 30
2004 2004 2003
Assets
Current assets:
Cash and cash equivalents $ 1623 $ 1615 $ 1019
Short-term investments 2311 2522 2075
Accounts receivable, net of
allowances for customer
adjustments and doubtful
accounts of $42 million at
June 30, 2004, $44 million
at March 31, 2004 and
$63 million at June 30, 2003 1930 1678 1440
Inventories:
Raw materials 135 126 113
Work in process 799 692 590
Finished goods 351 330 297
Inventories 1285 1148 1000
Deferred income taxes 467 490 586
Prepaid expenses and other
current assets 491 545 327
Total current assets 8107 7998 6447
Property, plant and equipment
at cost 9831 9738 9362
Less accumulated depreciation (5654) (5550) (4986)
Property, plant and
equipment (net) 4177 4188 4376
Long-term cash investments 1600 1356 1089
Equity investments 254 260 924
Goodwill 693 693 639
Acquisition-related intangibles 138 154 159
Deferred income taxes 496 524 529
Other assets 585 612 471
Total assets $ 16050 $ 15785 $ 14634
Liabilities and Stockholders'
Equity
Current liabilities:
Loans payable and current
portion long-term debt $ 415 $ 435 $ 68
Accounts payable and accrued
expenses 1601 1553 1295
Income taxes payable 35 210 264
Accrued retirement and profit
sharing contributions 183 82 14
Total current liabilities 2234 2280 1641
Long-term debt 375 394 809
Accrued retirement costs 611 620 813
Deferred income taxes 59 57 87
Deferred credits and other
liabilities 333 349 342
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, 2004 - 1,738,123,534;
March 31, 2004 - 1,738,115,567;
June 30, 2003 - 1,740,470,215 1738 1738 1740
Paid-in capital 812 859 966
Retained earnings 10269 9865 8648
Less treasury common stock at
cost:
Shares: June 30, 2004 -
7,045,901; March 31, 2004 -
7,012,862; June 30, 2003 -
9,218,747 (193) (200) (185)
Accumulated other comprehensive
income (loss) (178) (164) (207)
Unearned compensation (10) (13) (20)
Total stockholders' equity 12438 12085 10942
Total liabilities and
stockholders' equity $ 16050 $ 15785 $ 14634
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Statement of Cash Flows
(In millions of dollars)
For Three Months Ended
June 30 Mar. 31 June 30
2004 2004 2003
Cash flows from operating
activities:
Net income $ 441 $ 367 $ 121
Depreciation 363 348 356
Amortization of acquisition-
related costs 19 19 25
Write-downs of equity
investments 1 5 11
Gains on sale of equity
investments (4) (7) (6)
Deferred income taxes 62 6 (7)
(Increase) decrease in
working capital (excluding
cash and cash equivalents,
short-term investments,
deferred income taxes, and
loans payable and current
portion long-term debt):
Accounts receivable (254) (227) (50)
Inventories (137) (164) (118)
Prepaid expenses and other
current assets 56 (97) 50
Accounts payable and accrued
expenses 40 58 112
Income taxes payable (174) 82 (64)
Accrued retirement and profit
sharing contributions 100 65 4
Decrease in noncurrent accrued
retirement costs (5) (64) (1)
Other (2) 2 (55)
Net cash provided by operating
activities 506 393 378
Cash flows from investing
activities:
Additions to property, plant
and equipment (356) (401) (162)
Purchases of short-term
investments (689) (496) (192)
Sales and maturities of
short-term investments 1027 910 673
Purchases of long-term cash
investments (433) (493) (883)
Sales of long-term cash
investments 51 44 287
Purchases of equity investments (12) (2) (1)
Sales of equity investments 19 11 14
Net cash used in investing
activities (393) (427) (264)
Cash flows from financing
activities:
Payments on loans payable --- (1) ---
Payments on long-term debt (28) --- (129)
Dividends paid on common stock (37) (37) (37)
Sales and other common stock
transactions 69 42 47
Common stock repurchase program (113) (172) (61)
Net cash used in financing
activities (109) (168) (180)
Effect of exchange rate changes
on cash 4 (1) (4)
Net increase (decrease) in cash
and cash equivalents 8 (203) (70)
Cash and cash equivalents at
beginning of period 1615 1818 1089
Cash and cash equivalents at
end of period $ 1623 $ 1615 $ 1019
Business Segment Net Revenue
(In millions of dollars)
For Three Months Ended
June 30 Mar. 31 June 30
2004 2004 2003
Semiconductor
Trade $ 2783 $ 2573 $ 1922
Intersegment 1 1 5
2784 2574 1927
Sensors & Controls
Trade 289 283 260
Intersegment 1 1 1
290 284 261
Educational & Productivity
Solutions
Trade 169 79 156
Corporate activities (2) (1) (5)
Total net revenue $ 3241 $ 2936 $ 2339
Business Segment Profit
(In millions of dollars)
For Three Months Ended
June 30 Mar. 31 June 30
2004 2004 2003
Semiconductor $ 526 $ 465 $ 126
Sensors & Controls 77 75 68
Educational & Productivity
Solutions 68 9 58
Corporate activities (56) (51) (53)
Charges/gains and acquisition-
related amortization (23) (24) (74)
Interest on loans/other income
(expense) net 30 42 26
Income before income taxes $ 622 $ 516 $ 151
Semiconductor
- In the second quarter, revenue of $2784 million increased 8 percent
sequentially and 44 percent from the year-ago quarter due to strong
demand across a broad range of Semiconductor products. In particular,
the company generated strong growth from DSPs and analog products used
in cell phones and wireless infrastructure, from high-performance analog
products and from DLP products.
- Gross profit was $1285 million, or 46.2 percent of revenue, an increase
of $97 million from the prior quarter and $542 million from the year-ago
quarter due to higher revenue.
- Operating profit was $526 million, or 18.9 percent of revenue, up
$61 million sequentially and $400 million from the year-ago quarter
due to higher gross profit that more than offset higher operating expenses.
- Analog revenue increased 7 percent sequentially primarily due to higher
demand for high-performance analog products, and increased 44 percent
from the year-ago quarter primarily due to higher demand for high-performance
and wireless analog products. Revenue from TI’s high-performance
analog products increased 13 percent sequentially and 64 percent from
the year-ago quarter due to higher demand. In the first half of 2004,
approximately 40 percent of TI’s Semiconductor revenue came from
analog.
- DSP revenue increased 13 percent sequentially and 53 percent from
the year-ago quarter primarily due to demand in the wireless market.
In the first half of 2004, approximately 35 percent of TI’s Semiconductor
revenue came from DSP.
- TI’s remaining Semiconductor revenue increased 4 percent sequentially
and 34 percent compared with the year-ago quarter due to higher demand
across a broad range of products.
- Results for TI Semiconductor products sold into key end equipments
were as follows:
- Wireless revenue increased 15 percent sequentially and 64 percent
from the year-ago quarter due to broad-based demand across a range
of customers for the company’s DSP-based digital baseband
products, analog power management chips and OMAP application processors.
In the first half of 2004, about 35 percent of TI’s Semiconductor
revenue came from wireless.
- Broadband communications revenue, which includes DSL and cable
modems, voice over Internet protocol (VoIP) and wireless LAN (WLAN),
was about even sequentially as higher demand for the company’s
VoIP products offset a decline in demand for WLAN products. Compared
with the year-ago quarter, broadband revenue increased 44 percent
due to higher demand across all product areas, especially VoIP and
DSL. In the first half of 2004, approximately 5 percent of TI’s
Semiconductor revenue came from broadband.
- Semiconductor orders of $2762 million declined 2 percent sequentially.
Compared with the year-ago quarter, Semiconductor orders were up 45
percent due to broad-based demand for the company’s products.
Semiconductor Highlights
- TI announced that NTT DoCoMo’s new FOMA™ “900i Series”
3G (third-generation) cell phones feature OMAP application processors,
including phones manufactured by NEC, Panasonic Mobile Communications
and Sharp. The devices are the first 3G phones equipped with a Macromedia®
Flash™ browser and deliver over 16 days of static standby time,
1½ hours of high-quality video, large QVGA color displays, advanced
digital cameras with digital zoom, auto focus and other advanced features.
- TI unveiled its Uni-DSL (UDSL) technology, which will allow operators
to add competitive video services using their current infrastructure.
In addition, operators will be able to combine UDSL with limited fiber
deployments to deliver high-definition television (HDTV) plus voice
and data throughout the home using UDSL’s ultra-high speed rates
of up to 200Mbps aggregate throughput per line.
- TI introduced a mixed signal video decoder optimized for use in the
United States, Japan and China. The new product converts multiple video
standards into digital component video for DVD recordable (DVD-R) applications
and television display applications.
Sensors & Controls
- Sensors & Controls revenue was a record $290 million, up 2 percent
sequentially and 11 percent from the year-ago quarter due to higher
demand across a broad range of product lines, particularly for the automotive
market.
- Gross profit was $112 million, or 38.5 percent of revenue, an increase
of $2 million from the prior quarter primarily due to higher revenue,
and up $14 million compared with the year-ago quarter primarily due
to a combination of higher revenue and manufacturing cost reductions.
- Operating profit was a record $77 million, or 26.6 percent of revenue,
an increase of $2 million sequentially and $9 million from the year-ago
quarter due to higher gross profit.
Educational & Productivity Solutions (E&PS)
- E&PS revenue was $169 million, up $90 million sequentially due
to retail stocking in preparation for the upcoming back-to-school season,
and up $13 million from the year-ago quarter primarily due to higher
demand for the company’s new graphing calculator products.
- Gross profit was $99 million, or 58.3 percent of revenue, up $62 million
sequentially and $10 million from the year-ago quarter due to higher
revenue.
- Operating profit was $68 million, or 40.2 percent of revenue, up $59
million from the prior quarter and $10 million from the year-ago quarter
due to higher gross profit.
###
“Safe Harbor” Statement under the Private Securities Litigation
Reform Act of 1995: This webcast 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 in this webcast that describe
the company’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 the company or its management:
- Market demand for semiconductors, particularly for analog chips and
digital signal processors in key markets, such as telecommunications
and computers;
- 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;
- Consolidation of TI’s 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;
- Losses or curtailments of purchases from key customers or the timing
of customer inventory adjustments;
- Availability of raw materials and critical manufacturing equipment;
- TI’s ability to recruit and retain skilled personnel;
- Fluctuations in the market value of TI’s investments and in
interest rates; 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 text under the
heading “Cautionary Statements Regarding Future Results of Operations”
in Item 1 of the company’s most recent Form 10-K. The forward-looking
statements included in this webcast are made only as of the date of publication,
and the company undertakes no obligation to update the forward-looking
statements to reflect subsequent events or circumstances.
Texas Instruments Incorporated provides innovative DSP and analog technologies
to meet our customers’ real world signal processing requirements.
In addition to Semiconductor, the company’s businesses include Sensors
& Controls and Education Technology. TI is headquartered in Dallas,
Texas, and has manufacturing, design or sales operations in more than
25 countries.
Texas Instruments is traded on the New York Stock Exchange under the
symbol TXN. More information is located on the World Wide Web at www.ti.com.
TI Trademarks:
OMAP
Digital Light Processing
DLP
Other trademarks are the property of their respective owners.
Back to Top |
Samples & Purchase Cart
