- TI Revenue Increases 8% Sequentially, 13% from Year Ago
- Gross Profit Up 18% Sequentially, 23% from Year Ago
- EPS of $0.25, Including Contribution from Micron Stock Sale
and Impact of Restructuring and Acquisition Charges
- Semiconductor Revenue Increases 10% Sequentially, 16% from
Year Ago
- Semiconductor Orders Up 21% Sequentially, 29% from Year
Ago
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Financials in MS Excel Format (55KB)
Note: All results are reported in accordance with U.S. GAAP.
DALLAS (October 20, 2003) -- Texas Instruments Incorporated (NYSE:
TXN) today reported financial results that reflect strengthened conditions
across its semiconductor markets in the third quarter. TI's total revenue
of $2533 million increased 8 percent sequentially and 13 percent from
the year-ago quarter due to growth in Semiconductor. Earnings per share
(EPS) were $0.25 in the quarter, including a contribution from the sale
of Micron Technology, Inc. common stock and the impact of charges for
restructuring and an acquisition.
Semiconductor segment revenue increased 10 percent sequentially due to
higher shipments of DSP products into the wireless and digital consumer
electronics markets, as well as higher shipments of high-performance analog
products. Compared with the year-ago quarter, Semiconductor revenue increased
16 percent due to higher shipments of DSP, high-performance analog and
Digital Light Processing™ (DLP™) products.
TI revenue from the Semiconductor wireless market increased 22 percent
sequentially and 30 percent from the year-ago quarter due to growth
in 2.5G wireless modems and OMAP™ applications processors. Broadband
revenue increased 11 percent sequentially primarily due to strong demand
for the company's latest multimode wireless local area networking (LAN)
products that support the IEEE 802.11 a, b and g standards. Broadband
revenue increased 74 percent from the year-ago quarter due to strength
in wireless LAN and DSL. Revenue from Analog products increased 7 percent
sequentially and 6 percent from the year-ago quarter primarily due to
demand for high-performance analog products. DSP revenue increased 22
percent sequentially and 37 percent from the year-ago quarter.
In the Sensors & Controls segment, revenue decreased 7 percent
sequentially and increased 2 percent from the year-ago quarter. In the
Educational & Productivity Solutions (E&PS) segment, revenue
increased 13 percent sequentially and decreased 2 percent from the year-ago
quarter.
In the third quarter, the company incurred $56 million in charges related
to previously announced restructuring actions, of which $48 million
is included in cost of revenue, $7 million in selling, general and administrative
(SG&A) expense and $1 million in research and development (R&D)
expense. The company also incurred a non-tax-deductible $23 million
in-process R&D charge related to the company's acquisition of Radia
Communications, Inc. in the quarter.
Gross profit of $1030 million increased 18 percent sequentially and
23 percent from the year-ago quarter. Gross profit margin was 40.7 percent
of revenue, up 3.2 percentage points sequentially and 3.6 percentage
points from the year-ago quarter as higher revenue fell through to gross
profit at a high rate due to increased utilization of the company's
largely fixed-cost manufacturing assets in its Semiconductor operations.
R&D expense of $468 million was up 10 percent sequentially and
13 percent from the year-ago quarter due to the inclusion of purchased
in-process R&D from the Radia acquisition, as well as increased
product development activity within Semiconductor, especially for wireless
products.
SG&A expense of $313 million decreased 5 percent sequentially primarily
due to a lease termination expense in the second quarter. SG&A expense
was about even with the year-ago period.
Operating profit of $249 million, or 9.8 percent of revenue, increased
$124 million sequentially and $140 million from the year-ago quarter
due to higher gross profit.
Other income (expense) net (OI&E) of $143 million includes interest
income, investment gains (losses) and other items. OI&E increased
$107 million sequentially and $86 million from the year-ago quarter
due to a pre-tax gain of $106 million from the company's previously
announced sale of 24.7 million shares of Micron stock. Interest expense
of $8 million declined $2 million sequentially and $6 million from the
year-ago quarter due to the company's lower debt level.
Net income in the quarter was $447 million, or $0.25 per share. The
Micron transaction includes the recognition of a previously reserved
tax benefit of $162 million associated with TI's impairment write-down
of Micron stock in the fourth quarter of 2002. The effective tax rate
for the quarter was 26 percent exclusive of the tax impact resulting
from the recognition of the previously reserved tax benefit associated
with the Micron stock transaction. The effective tax rate was higher
than previously expected due to a revision in the company's expected
tax rate for the year and the resulting cumulative catch-up tax expense
of $6 million. The effective tax rate for the year is expected to be
24 percent.
TI orders of $2662 million increased 15 percent sequentially and 26
percent from the year-ago period. Semiconductor orders of $2295 million
increased 21 percent sequentially and 29 percent from the year-ago period.
The Semiconductor book-to-bill ratio was 1.08 for the third quarter,
up from 0.99 in the prior quarter.
"TI's revenue and profit margins continue to rebound," said Tom Engibous,
TI chairman, president and CEO. "As the semiconductor market has rebuilt
momentum, TI has grown faster as a result of the manufacturing technology
and product R&D investments we maintained through the industry's
downturn.
"These investments have resulted in volume production of a wide range
of 130-nanometer products with 90-nanometer products already sampling
and scheduled to be in production soon. TI has shipped more than 100
million chips to our customers in 130-nanometer," Engibous said. "When
these advanced technologies are combined with 300-millimeter wafers,
it means TI can design and manufacture products that perform better,
consume less power and cost less than products from competitors that
have not made or been able to make these investments.
"One example of the success of this strategy is the development of
OMAP applications processors for smartphones and PDAs. These processors
generated about half of our wireless revenue growth in the third quarter
compared with a year ago," Engibous said. "We see similar enthusiasm
for TI's new products for the broadband and digital consumer electronics
markets, as well as for our new high-performance analog products. We
expect that the revenue growth from these and other new products, as
well as the benefits of ongoing cost management and lower depreciation
levels, will be drivers for further profit expansion."
Total cash (cash and cash equivalents plus short-term investments and
long-term cash investments) of $4538 million increased by $355 million
from the end of the prior quarter and by $894 million from the end of
the year-ago quarter. Cash flow from operations increased to $510 million
from $378 million in the prior quarter due to higher net income, and
decreased from $565 million in the year-ago quarter. Capital expenditures
were $233 million in the third quarter, up from $162 million in the
previous quarter and down from $269 million in the year-ago quarter.
Accounts receivable increased by $82 million sequentially and $94 million
from the year-ago quarter due to higher revenue. Days sales outstanding
declined to 54 days at the end of the third quarter from 55 days in
the prior quarter and 57 days in the year-ago quarter.
Inventory decreased by $5 million sequentially primarily due to higher
seasonal shipments of E&PS products in the quarter. Compared with
the year- ago quarter, inventory increased $172 million in anticipation
of higher Semiconductor product shipments in the fourth quarter of 2003
and to support reduced product lead times. Days of inventory were 60
days at the end of the third quarter compared with 62 days at the end
of the prior quarter and 52 days at the end of the year-ago quarter.
Outlook
TI intends to provide a mid-quarter update to its financial
outlook on December 8 by issuing a press release and holding a conference
call. Both will be available on the company's web site.
For the fourth quarter of 2003, TI expects revenue to be in the following
ranges:
- Total TI, $2490 million to $2700 million;
- Semiconductor, $2185 million to $2365 million;
- Sensors & Controls, $235 million to $255 million; and
- E&PS, $70 million to $80 million.
TI expects earnings per share to be in the range of $0.14 to $0.19. Restructuring
charges in the fourth quarter are expected to be about $15 million.
For 2003, TI expects: R&D to be about $1.75 billion, higher than
the previous estimate due to the Radia acquisition; capital expenditures
to be about $800 million, unchanged from the previous estimate; and depreciation
to be about $1.4 billion, unchanged from the previous estimate. The effective
tax rate for the year is expected to be about 24 percent, exclusive of
the tax impact resulting from the recognition of the previously reserved
$162 million tax benefit associated with the Micron stock transaction
during the third quarter.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statement of Operations
(In millions of dollars, except per-share amounts)
For Three Months Ended
Sept. 30 June 30 Sept. 30
2003 2003 2002
Net revenue $ 2533 $ 2339 $ 2248
Operating costs and expenses:
Cost of revenue 1503 1462 1413
Gross profit 1030 877 835
Gross profit % of revenue 40.7% 37.5% 37.1%
Research and development (R&D) 468 424 415
R&D % of revenue 18.5% 18.1% 18.4%
Selling, general and
administrative (SG&A) 313 328 311
SG&A % of revenue 12.3% 14.0% 13.8%
Total 2284 2214 2139
Profit from operations 249 125 109
Operating income % of
revenue 9.8% 5.3% 4.9%
Other income (expense) net 143 36 57
Interest on loans 8 10 14
Income before income taxes 384 151 152
Provision (benefit) for
income taxes (63) 30 (36)
Net income* $ 447 $ 121 $ 188
Diluted earnings per common
share** $ .25 $ .07 $ .11
Basic earnings per common share $ .26 $ .07 $ .11
Cash dividends declared per
share of common stock $ .021 $ .021 $ .021
*Income for the third quarter of 2003 includes, in millions of dollars,
a charge of $56 for restructuring actions initiated in the second quarter
of 2003, of which $48 is associated with achieving manufacturing efficiencies
in the Semiconductor business and $8 is associated with moving certain production
lines in the Sensors & Controls business from Attleboro to other TI
sites. The $56 restructuring charge is primarily for severance cost. Of
the $56, $48 is included in cost of revenue, $7 is in selling, general and
administrative expense, and $1 is in research and development expense. Income
for the third quarter of 2003 also includes an investment gain of $106,
included in other income, from the sale of 24.7 million shares of Micron
Technology, Inc. common stock, and a charge of $23 for purchased in-process
R&D costs, included in research and development expense, from the Radia
Communications, Inc. acquisition. 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 cost. 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 $26, $25 and $30 for the third and second quarters of 2003 and the
third quarter of 2002.
**Diluted earnings per common share are based on average common and dilutive
potential common shares outstanding (1766.8 million shares, 1762.6 million
shares and 1761.8 million shares for the third and second quarters of
2003 and the third quarter of 2002).
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheet
(In millions of dollars)
Sept. 30 June 30 Dec. 31
2003 2003 2002
Assets
Current assets:
Cash and cash equivalents $ 943 $ 1019 $ 949
Short-term investments 2360 2075 2063
Accounts receivable, net of
allowances for customer
adjustments and doubtful
accounts of $62 million at
September 30, 2003,
$63 million at June 30, 2003,
and $60 million at
December 31, 2002 1522 1440 1217
Inventories:
Raw materials 106 113 121
Work in process 625 590 478
Finished goods 264 297 191
Inventories 995 1000 790
Deferred income taxes 576 586 545
Prepaid expenses and other
current assets 398 327 562
Total current assets 6794 6447 6126
Property, plant and equipment
at cost 9443 9362 9516
Less accumulated depreciation (5202) (4986) (4722)
Property, plant and
equipment (net) 4241 4376 4794
Long-term cash investments 1235 1089 1130
Equity investments 684 924 808
Goodwill 703 639 638
Acquisition-related intangibles 184 159 185
Deferred income taxes 612 529 618
Other assets 633 471 380
Total assets $15086 $14634 $14679
Liabilities and Stockholders'
Equity
Current liabilities:
Loans payable and current
portion long-term debt $ 434 $ 68 $ 422
Accounts payable and
accrued expenses 1436 1295 1204
Income taxes payable 284 264 293
Accrued retirement and
profit sharing contributions 15 14 15
Total current liabilities 2169 1641 1934
Long-term debt 402 809 833
Accrued retirement costs 647 813 777
Deferred income taxes 87 87 129
Deferred credits and other
liabilities 353 342 272
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: September 30,
2003 - 1,740,470,215;
June 30, 2003 - 1,740,470,215;
December 31, 2002 -
1,740,364,197 1740 1740 1740
Paid-in capital 953 966 1042
Retained earnings 9059 8648 8484
Less treasury common stock
at cost:
Shares: September 30, 2003 -
9,844,861; June 30, 2003 -
9,218,747; December 31, 2002 -
9,775,781 (198) (185) (229)
Accumulated other comprehensive
income (loss) (105) (207) (262)
Deferred compensation (21) (20) (41)
Total stockholders' equity 11428 10942 10734
Total liabilities and
stockholders' equity $15086 $14634 $14679
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Statement of Cash Flows
(In millions of dollars)
For Three Months Ended
Sept. 30 June 30 Sept. 30
2003 2003 2002
Cash flows from operating
activities:
Net income $ 447 $ 121 $ 188
Depreciation 356 356 390
Amortization of acquisition-
related costs 26 25 30
Purchased in-process research
and development 23 --- ---
Write-downs of equity
investments 11 11 9
Gains on sale of equity
investments (108) (6) ---
Deferred income taxes (79) (7) (100)
(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 (72) (50) 23
Inventories 5 (118) (3)
Prepaid expenses and other
current assets (70) 50 38
Accounts payable and accrued
expenses 139 112 105
Income taxes payable 32 (64) 13
Accrued retirement and
profit sharing contributions 1 4 (159)
Increase (decrease) in
noncurrent accrued retirement
costs (141) (1) 51
Other (60) (55) (20)
Net cash provided by operating
activities 510 378 565
Cash flows from investing
activities:
Additions to property, plant
and equipment (233) (162) (269)
Purchases of short-term
investments (879) (192) (216)
Sales and maturities of
short-term investments 743 673 955
Purchases of long-term
cash investments (311) (883) (503)
Sales of long-term cash
investments --- 287 69
Purchases of equity investments (8) (1) (6)
Sales of equity investments 350 14 ---
Acquisition of business, net
of cash acquired (128) --- ---
Net cash provided by (used in)
investing activities (466) (264) 30
Cash flows from financing
activities:
Payments on loans payable (3) --- (15)
Payments on long-term debt (30) (129) ---
Dividends paid on common stock (37) (37) (37)
Sales and other common stock
transactions 17 47 23
Common stock repurchase program (60) (61) (88)
Net cash used in financing
activities (113) (180) (117)
Effect of exchange rate
changes on cash (7) (4) (1)
Net increase (decrease) in cash
and cash equivalents (76) (70) 477
Cash and cash equivalents at
beginning of period 1019 1089 487
Cash and cash equivalents at
end of period $ 943 $ 1019 $ 964
Business Segment Net Revenue
(In millions of dollars)
For Three Months Ended
Sept. 30 June 30 Sept. 30
2003 2003 2002
Semiconductor
Trade $ 2115 $ 1922 $ 1830
Intersegment 3 5 1
2118 1927 1831
Sensors & Controls
Trade 242 260 236
Intersegment 1 1 1
243 261 237
Educational & Productivity
Solutions
Trade 177 156 181
Corporate activities (5) (5) (1)
Total net revenue $ 2533 $ 2339 $ 2248
Business Segment Profit
(In millions of dollars)
For Three Months Ended
Sept. 30 June 30 Sept. 30
2003 2003 2002
Semiconductor $ 264 $ 126 $ 67
Sensors & Controls 58 68 52
Educational & Productivity
Solutions 73 58 72
Corporate activities (41) (53) (52)
Charges/gains and acquisition-
related amortization 1 (74) (30)
Interest on loans/other
income (expense) net,
excluding a third-quarter 2003
gain of $106 included above in
Charges/gains and acquisition-
related amortization 29 26 43
Income before income taxes $ 384 $ 151 $ 152
Semiconductor
- Semiconductor revenue in the third quarter was $2118 million, up 10
percent sequentially and 16 percent from the year-ago quarter.
- Gross profit for the third quarter was $899 million, up from $743
million in the prior period and $668 million in the year-ago quarter
due to higher revenue.
- Gross profit margin of 42.4 percent in the quarter was up 3.8 percentage
points sequentially and 5.9 percentage points from the year-ago quarter
primarily due to higher factory utilization levels.
- Semiconductor operating profit for the third quarter increased to
$264 million, or 12.5 percent of revenue, from $126 million in the prior
quarter and $67 million in the year-ago quarter due to higher gross
profit.
- Analog revenue increased 7 percent sequentially and 6 percent from
the year-ago quarter primarily due to higher shipments of high- performance
analog products, as well as higher shipments to the storage and broadband
markets. During the first three quarters of 2003, about 40 percent of
total Semiconductor revenue came from Analog.
- DSP revenue increased 22 percent sequentially and 37 percent from
the year-ago quarter due to higher shipments to the wireless and digital
consumer electronics markets. During the first three quarters of 2003,
about 35 percent of total Semiconductor revenue came from DSP.
- TI's remaining Semiconductor revenue was about even sequentially.
Compared with the year-ago quarter, revenue increased 8 percent as gains
in DLP, royalties and standard logic more than offset declines in microcontrollers
and RISC microprocessors.
- TI's Semiconductor revenue in key markets was as follows:
- Wireless revenue increased 22 percent sequentially and 30 percent
from the year-ago quarter due to higher shipments of 2.5G modems and
OMAP applications processors. During the first three quarters of 2003,
about 30 percent of total Semiconductor revenue came from wireless.
- Revenue from TI's catalog products, composed of high- performance
analog and catalog DSP, increased 9 percent sequentially and 17 percent
from the year-ago quarter due to higher shipments of high-performance
analog products. During the first three quarters of 2003, about 15
percent of total Semiconductor revenue came from catalog products.
- Broadband communications revenue, which includes DSL and cable modems,
voice over packet (VoP) and wireless LANs, increased 11 percent sequentially
due to higher wireless LAN shipments and 74 percent from the year-ago
quarter due to higher wireless LAN and DSL shipments. During the first
three quarters of 2003, about 5 percent of total Semiconductor revenue
came from broadband communications.
- Semiconductor orders were $2295 million, up 21 percent sequentially
and 29 percent from the year-ago quarter due to higher demand for the
company's DSP and Analog products.
3Q Highlights
- Handspring, Inc. selected TI's OMAP310 processors to power Handspring's
new Treo 600 smartphone.
- TI's OMAP applications processors and GSM/GPRS chipset technology
were selected for BenQ Corp.'s first smartphone.
- LG Electronics selected TI's Class-D audio power amplifiers for four
new CDMA phones, enabling longer talk-times and higher output power
for gaming, polyphonic ringers and speaker phone applications. The new
LG cell phones also use TI DSPs.
- Multiple manufacturers have selected TI's AR7 ADSL router-on-a-chip,
including more than eight original design manufacturers in Asia as well
as Westell Technologies.
- TI introduced a new low power, compact 802.11a/b/g solution designed
for mobile, battery-powered devices such as cell phones and PDAs. The
solution is designed into several cell phones and PDAs, including Motorola's
Wi-Fi(R)/cellular dual-system phone.
- TI announced a new 802.11-enabled ADSL router platform that enables
consumers to achieve download speeds up to 24Mbps.
- TI announced that half of the industry's top 10 digital consumer point-and-shoot
camera manufacturers are currently using TI's DSP- based digital media
platform.
- Panasonic selected TI's new digital audio amplifiers for home theater
products.
- TI introduced a new high-performance analog battery charging and power
conversion chip that leverages TI's advanced analog manufacturing processes
to deliver 97 percent power conversion efficiency while occupying up
to 3x less board space.
Sensors & Controls
- Sensors & Controls revenue was $243 million in the third quarter,
down 7 percent sequentially due to seasonally weaker shipments of control
products used in air conditioning systems. Compared with the year-ago
quarter, revenue was up 2 percent.
- Gross profit was $90 million, or 37.0 percent of revenue, down from
$98 million in the prior quarter due to lower revenue. Gross profit
increased from $82 million in the year-ago quarter due to manufacturing
cost reductions.
- Operating profit was $58 million, or 24.0 percent of revenue, down
from $68 million in the prior quarter due to lower gross profit. Operating
profit increased from $52 million in the year-ago quarter due to higher
gross profit.
Educational & Productivity Solutions (E&PS)
- E&PS revenue was $177 million in the third quarter, up 13 percent
sequentially due to higher seasonal back-to-school shipments of graphing
calculators. Compared with the year-ago period, revenue decreased 2
percent.
- Gross profit was $103 million, or 58.1 percent of revenue, up 15 percent
sequentially due to higher revenue and about even with the year-ago
quarter.
- Operating profit was $73 million, a record 41.2 percent of revenue,
up from $58 million in the previous quarter due to higher gross profit
and about even with the year-ago quarter.
Additional Financial Information
- Depreciation was $356 million in the third quarter, even with the
prior quarter and down from $390 million in the year-ago quarter.
- At the end of the third quarter, the debt-to-total-capital ratio was
0.07, unchanged from the end of the prior quarter.
###
"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, such statements in this
release 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 digital signal
processors and analog chips 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;
- Timely completion and successful integration of announced acquisitions;
- Economic, social and political conditions in the countries in which
TI, its customers or its suppliers operate, including security risks,
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 and installation
of manufacturing equipment.
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 release 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 Educational & Productivity Solutions. 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
.
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DLP
OMAP
Other trademarks are the property of their
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