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• Download Financials in MS Excel Format (49KB)
• Conference call on TI web site at 4:30 p.m. Central time today
DALLAS (Oct. 20, 2008) – Texas Instruments Incorporated (TI) (NYSE: TXN) today announced third-quarter revenue of $3.39 billion, net income of $563 million and earnings per share of $0.43.
“We entered the third quarter with a cautious view of the economy and its impact on our markets. Revenue was weak, as expected, because consumers and corporations reduced their spending in this uncertain economy,” said Rich Templeton, TI chairman, president and chief executive officer.
“Even so, the soundness of our strategic direction was underscored by results from our core businesses. Revenue for our Analog business was steady and revenue for our Embedded Processing business grew 9 percent compared with a year ago. Although not immune to near-term economic pressures, these are two of the best long-term opportunities in our industry. We are a leader in each and expect to strengthen our position even in this period of economic weakness.
“Our outlook for the fourth quarter is for revenue to decline substantially based on weak order trends over the past few months. In anticipation of declining demand, we reduced our own inventory aggressively in the third quarter, which brought factory utilization down and put additional pressure on our profitability. We also worked closely with our distributors to reduce the inventory in our channels. We will accelerate our inventory reduction in the fourth quarter. We also will continue to reduce expenses and capital spending. At the same time, we will continue to invest in opportunities to strengthen our positions in Analog and Embedded Processing.”
TI also announced today it is taking actions that will reduce expenses by about one-third, or more than $200 million annualized, in its Wireless business, especially in its cellular baseband operation. The company is also actively pursuing the sale of the merchant portion of this operation and is in discussions with potential buyers. In the custom portion of this operation, TI will continue to support select programs.
TI will focus its remaining Wireless investments in OMAP™ applications processors, which are at the heart of many of today’s most exciting smartphone products.
“Smartphones are growing rapidly and our handset customers are differentiating their product lines through applications and user interfaces. We anticipated this opportunity and have been investing in it for more than a decade. As a result, our OMAP applications processors lead the market, and we will concentrate on extending this lead,” Templeton said.
Reductions in cellular baseband operations will begin immediately and are expected to be complete by June 2009. The full annualized savings of more than $200 million will be achieved once these reductions are complete. The company expects to take restructuring charges of approximately $110 million across the next three quarters.
Financial summary
Amounts are in millions of dollars, except per-share amounts. Except as noted, financial results are for continuing operations. The sale of TI’s former Sensors & Controls business was completed on April 27, 2006, and that business is reported as a discontinued operation.
| |
|
3Q08 |
|
3Q07 |
|
vs.
3Q07 |
|
2Q08 |
|
vs.
2Q08 |
Revenue: |
|
$ |
3387 |
|
$ |
3663 |
|
-8% |
|
$ |
3351 |
|
1% |
Operating profit: |
|
$ |
746 |
|
$ |
1013 |
|
-26% |
|
$ |
833 |
|
-10% |
Income: |
|
$ |
563 |
|
$ |
758 |
|
-26% |
|
$ |
588 |
|
-4% |
Earnings per share: |
|
$ |
0.43 |
|
$ |
0.52 |
|
-17% |
|
$ |
0.44 |
|
-2% |
Cash flow from operations: |
|
$ |
1052 |
|
$ |
1531 |
|
-31% |
|
$ |
520 |
|
102% |
Revenue
TI’s revenue declined 8 percent compared with the third quarter of last year as growth in Embedded Processing was more than offset by declines in Wireless and Other revenue. Revenue was about even with the prior quarter.
|
|
3Q08 |
|
3Q07 |
|
vs.
3Q07 |
|
2Q08 |
|
vs.
2Q08 |
|
Note |
Analog: |
|
$ |
1289 |
|
$ |
1308 |
|
-1% |
|
$ |
1287 |
|
0% |
|
(1) |
Embedded Processing: |
|
$ |
427 |
|
$ |
390 |
|
9% |
|
$ |
439 |
|
-3% |
|
(2) |
Wireless: |
|
$ |
915 |
|
$ |
1094 |
|
-16% |
|
$ |
902 |
|
1% |
|
(3) |
Other: |
|
$ |
756 |
|
$ |
871 |
|
-13% |
|
$ |
723 |
|
5% |
|
(4) (5) |
Revenue by product category for historical periods reflects minor reclassifications to previously reported amounts.
The product categories include:
- Analog: high-performance analog, high-volume analog & logic
- Embedded Processing: catalog, communications infrastructure and automotive DSPs and microcontrollers
- Wireless: basebands, OMAP applications processors, connectivity products for handsets
- Other: DLP®products, calculators, RISC microprocessors, ASIC products, royalties
| (1) |
Analog revenue was about even with a year ago as growth in high-performance analog was offset by declines in high-volume analog & logic. Both areas were about even with the prior quarter. |
| (2) |
Embedded Processing revenue grew from a year ago due to higher demand for communications infrastructure products as well as catalog products that more than offset a decline in automotive products. The sequential decline was due to lower demand for catalog and automotive products that more than offset growth in communications infrastructure products. |
| (3) |
Wireless revenue declined from a year ago due to lower baseband revenue. Wireless revenue was about even with the prior quarter. |
| (4) |
Other revenue decreased from a year ago primarily due to declines in RISC microprocessors, royalties and calculators. This comparison was also impacted by the sale of a DSL product line, which had revenue of about $40 million in the year-ago quarter. Compared with the prior quarter, Other revenue grew due to growth in DLP and ASIC products that more than offset a decline in royalties. |
| (5) |
Other revenue includes Education Technology segment revenue of $182 million compared with $202 million in the year-ago quarter and $176 million in the prior quarter. Essentially all of this revenue is from sales of calculators |
Additional financial information
- Income includes a $34 million discrete tax benefit primarily due to adjustments identified through the completion of prior years’ tax returns. It also includes $44 million of charges associated with impairments of long-lived assets and site consolidations.
- Orders were $3.23 billion, down 9 percent from a year ago and down 7 percent from the prior quarter.
- Inventory was reduced by $76 million in the quarter although it remains above the company’s desired levels.
- The company used $429 million in the quarter to repurchase 17.1 million shares of its common stock and paid dividends of $131 million.
Outlook
For the fourth quarter of 2008, TI expects:
- Revenue: $2.83 – 3.07 billion
- Earnings per share (EPS): $0.30 – 0.36
Semiconductor revenue is expected to decline in the range of 10 percent from the third quarter and Education Technology is expected to decline seasonally.
This EPS estimate includes a $0.05 benefit from the reinstatement of the federal research tax credit, which was signed into law in October 2008 and was retroactive to the beginning of the year. The estimate also includes charges of about $0.01 per share associated with the company’s restructuring actions in its Wireless business.
TI will update its fourth-quarter outlook on December 8, 2008.
For the full year of 2008, TI expects approximately the following:
- R&D expense: $2.0 billion
- Capital expenditures: $0.8 billion, compared with $0.9 billion in the prior estimate
- Depreciation: $1.0 billion
- Annual effective tax rate: 28%*
* Includes the full-year impact of the reinstatement of the federal research tax credit, which reduces the annual effective tax rate by about 2 percentage points.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)
For Three Months Ended
Sept. 30, Sept. 30, June 30,
2008 2007 2008
Revenue $ 3,387 $ 3,663 $ 3,351
Cost of revenue 1,744 1,679 1,602
Gross profit 1,643 1,984 1,749
Research and development (R&D) 507 542 488
Selling, general and administrative (SG&A) 390 429 428
Operating profit 746 1,013 833
Other income (expense) net 10 53 17
Income from continuing operations before
income taxes 756 1,066 850
Provision for income taxes 193 308 262
Income from continuing operations 563 758 588
Income from discontinued operations,
net of taxes -- 18 --
Net income $ 563 $ 776 $ 588
Basic earnings per common share:
Income from continuing operations $ .43 $ .54 $ .45
Net income $ .43 $ .55 $ .45
Diluted earnings per common share:
Income from continuing operations $ .43 $ .52 $ .44
Net income $ .43 $ .54 $ .44
Average shares outstanding (millions):
Basic 1,304 1,417 1,320
Diluted 1,318 1,448 1,341
Cash dividends declared per share of
common stock $ .10 $ .08 $ .10
Percentage of revenue:
Gross profit 48.5% 54.2% 52.2%
R&D 15.0% 14.8% 14.6%
SG&A 11.5% 11.7% 12.8%
Operating profit 22.0% 27.6% 24.9%
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
Sept. 30, Sept. 30, June 30,
2008 2007 2008
Assets
Current assets:
Cash and cash equivalents $ 1,715 $ 807 $ 1,317
Short-term investments 278 2,862 331
Accounts receivable, net of allowances
of ($28), ($30) and ($24) 1,774 2,023 1,811
Raw materials 103 102 111
Work in process 982 934 997
Finished goods 490 414 543
Inventories 1,575 1,450 1,651
Deferred income taxes 679 702 641
Prepaid expenses and other current assets 191 209 259
Total current assets 6,212 8,053 6,010
Property, plant and equipment at cost 7,499 7,597 7,603
Less accumulated depreciation (3,982) (3,916) (3,999)
Property, plant and equipment, net 3,517 3,681 3,604
Long-term investments 717 265 766
Goodwill 840 796 840
Acquisition-related intangibles 99 108 108
Deferred income taxes 688 425 626
Capitalized software licenses, net 202 242 220
Overfunded retirement plans 137 77 128
Other assets 54 77 80
Total assets $ 12,466 $ 13,724 $ 12,382
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 601 $ 644 $ 677
Accrued expenses and other liabilities 976 1,092 955
Income taxes payable 35 152 26
Accrued profit sharing and retirement 126 143 102
Total current liabilities 1,738 2,031 1,760
Underfunded retirement plans 186 95 187
Deferred income taxes 52 27 57
Deferred credits and other liabilities 396 434 394
Total liabilities 2,372 2,587 2,398
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, 2008 --
1,739,717,573; Sept. 30, 2007 --
1,739,579,782; June 30, 2008 --
1,739,712,567 1,740 1,740 1,740
Paid-in capital 973 853 940
Retained earnings 21,204 19,172 20,773
Less treasury common stock at cost:
Shares: Sept. 30, 2008 -- 443,292,628;
Sept. 30, 2007 -- 341,373,012;
June 30, 2008 -- 428,835,142 (13,481) (10,344) (13,138)
Accumulated other comprehensive loss,
net of taxes (342) (284) (331)
Total stockholders' equity 10,094 11,137 9,984
Total liabilities and stockholders' equity $ 12,466 $ 13,724 $ 12,382
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)
For Three Months Ended
Sept. 30, Sept. 30, June 30,
2008 2007 2008
Cash flows from operating activities:
Net income $ 563 $ 776 $ 588
Adjustments to net income:
Income from discontinued operations -- (18) --
Depreciation 252 262 245
Stock-based compensation 53 66 54
Amortization of acquisition-related
intangibles 9 10 10
Gain on sale of assets -- (39) --
Deferred income taxes (78) 36 (7)
Increase (decrease) from changes in:
Accounts receivable 36 (117) (149)
Inventories 76 (34) (73)
Prepaid expenses and other current
assets 50 24 (29)
Accounts payable and accrued expenses (24) 154 32
Income taxes payable 41 394 (181)
Accrued profit sharing and retirement 25 45 23
Other 49 (28) 7
Net cash provided by operating activities
of continuing operations 1,052 1,531 520
Cash flows from investing activities:
Additions to property, plant and equipment (197) (152) (271)
Proceeds from sales of assets -- 61 --
Purchases of short-term investments -- (1,916) --
Sales and maturities of short-term
investments 49 1,374 111
Purchases of long-term investments (3) (15) (3)
Sales of long-term investments 32 4 --
Acquisitions, net of cash acquired -- (4) (19)
Net cash used in investing activities of
continuing operations (119) (648) (182)
Cash flows from financing activities:
Dividends paid (131) (114) (132)
Sales and other common stock transactions 30 166 89
Excess tax benefit from share-based
payments 1 16 3
Stock repurchases (429) (1,409) (433)
Net cash used in financing activities of
continuing operations (529) (1,341) (473)
Effect of exchange rate changes on cash (6) (1) 2
Net increase (decrease) in cash and cash
equivalents 398 (459) (133)
Cash and cash equivalents, beginning of
period 1,317 1,266 1,450
Cash and cash equivalents, end of period $ 1,715 $ 807 $ 1,317
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 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 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;
- 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;
- TI's ability to access its bank accounts and lines of credit or otherwise access the capital markets;
- 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 text under the heading “Risk Factors” in Part II, Item 1A of the Company’s Form 10-Q for the second quarter of 2008, which was filed on July 31, 2008. 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 manufacturing, design and sales operations in more than 25 countries. For more information, go to www.ti.com.
TI Trademarks:
OMAP
DLP
Other trademarks are the property of their respective
owners.
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