DALLAS, July 21 /PRNewswire-FirstCall/ -- Texas Instruments (TI)
(NYSE: TXN) today announced second-quarter revenue of $3.35 billion, net
income of $588 million and earnings per share of $0.44.
"Our core areas of Analog and Embedded Processing delivered solid revenue
growth," said Rich Templeton, TI's chairman, president and CEO. "Each grew
sequentially and increased 10 percent from a year ago. These technologies are
critical to thousands of different types of electronic equipment, making them
some of the most attractive markets in the semiconductor industry. We believe
our portfolio combined with our passion to help customers solve critical
problems will drive good long-term growth."
In total, TI's revenue in the second quarter was in the lower half of the
company's range of expectations, as were earnings per share. Demand slowed
unexpectedly in June primarily because distributors reduced inventory levels
and did not replenish them late in the quarter. Additionally, Wireless
revenue declined in the quarter, continuing its first-quarter weakness.
"We believe this slower demand was due to a mix of reasons, including a
weaker economic environment and greater confidence in TI's ability to deliver
products within short lead times," Templeton said. "Our orders were up in the
quarter and backlog grew, but we are cautious given the demand environment we
just experienced. If demand strengthens as quickly as it slowed, we are
well-positioned to meet it."
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.
2Q08 2Q07 vs. 2Q07 1Q08 vs. 1Q08
Revenue: $ 3351 $ 3424 -2% $ 3272 2%
Operating profit: $ 833 $ 809 3% $ 807 3%
Income: $ 588 $ 614 -4% $ 662 -11%
Earnings per share: $ 0.44 $ 0.42 5% $ 0.49 -10%
Cash flow from operations: $ 520 $ 898 -42% $ 641 -19%
Revenue
TI's revenue declined 2 percent compared with the second quarter of last
year as growth in Analog and Embedded Processing was not sufficient to offset
declines in Wireless and Other revenue. Revenue grew 2 percent compared with
the prior quarter as growth in Analog, Embedded Processing and Other more than
offset the decline in Wireless.
2Q08 2Q07 vs. 2Q07 1Q08 vs. 1Q08 Note
Analog: $ 1292 $ 1170 10% $ 1265 2% (1)
Embedded Processing: $ 436 $ 397 10% $ 418 4% (2)
Wireless: $ 903 $ 1024 -12% $ 922 -2% (3)
Other: $ 720 $ 833 -14% $ 667 8% (4) (5)
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(TM) applications processors, connectivity
products for handsets
-- Other: DLP(R) products, calculators, RISC microprocessors, ASIC
products, royalties
(1) Analog revenue growth in both comparisons was due to stronger
demand for high-performance analog products.
(2) Embedded Processing revenue growth in both comparisons was
primarily due to stronger demand for catalog products, as well as
communications infrastructure products.
(3) Wireless revenue declines in both comparisons were due to lower
sales of baseband products.
(4) Other revenue decreased from a year ago due to declines across a
number of product lines, especially the impact from the sale of a
DSL product line in the third quarter of 2007 and lower demand for
RISC microprocessors. Compared with the first quarter of 2008,
Other revenue grew due to seasonal demand for calculators that
more than offset lower revenue for RISC microprocessors.
(5) The Other category includes revenue from the Education Technology
segment of $176 million compared with $167 million in the year-ago
quarter and $81 million in the prior quarter. Essentially all of
this revenue is from sales of calculators.
Additional financial information
-- Operating profit increased 3 percent from both the year-ago and prior
quarters due to lower operating expenses.
-- Income declined 4 percent from the year-ago quarter due to lower
interest income. Income declined 11 percent from the prior quarter due
to a higher tax provision. The prior quarter included $81 million of
discrete tax benefits.
-- Orders were $3.46 billion, about even with the year-ago quarter and up
4 percent from the prior quarter.
-- Inventory increased in the quarter to above the company's desired
levels. This was primarily due to higher manufacturing costs and
lower-than-expected revenue in the quarter. Additionally, the company
built calculator inventory to support the upcoming back-to-school
season.
-- The company used $433 million in the quarter to repurchase 14.1 million
shares of its common stock and paid dividends of $132 million.
Outlook
For the third quarter of 2008, TI expects:
-- Revenue: $3.26 - 3.54 billion
-- Earnings per share: $0.41 - 0.47
TI will update its third-quarter outlook on September 9, 2008.
For the full year of 2008, TI continues to expect approximately the
following:
-- R&D expense: $2.0 billion
-- Capital expenditures: $0.9 billion
-- Depreciation: $1.0 billion
-- Annual effective tax rate: 31%
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)
For Three Months Ended
June 30, June 30, Mar. 31,
2008 2007 2008
Revenue $ 3,351 $ 3,424 $ 3,272
Cost of revenue 1,602 1,640 1,516
Gross profit 1,749 1,784 1,756
Research and development (R&D) 488 551 514
Selling, general and administrative (SG&A) 428 424 435
Operating profit 833 809 807
Other income (expense) net 17 56 33
Income from continuing operations before
income taxes 850 865 840
Provision for income taxes 262 251 178
Income from continuing operations 588 614 662
Loss from discontinued operations,
net of taxes -- (4) --
Net income $ 588 $ 610 $ 662
Basic earnings per common share:
Income from continuing operations $ .45 $ .43 $ .50
Net income $ .45 $ .42 $ .50
Diluted earnings per common share:
Income from continuing operations $ .44 $ .42 $ .49
Net income $ .44 $ .42 $ .49
Average shares outstanding (millions):
Basic 1,320 1,437 1,327
Diluted 1,341 1,469 1,347
Cash dividends declared per share of
common stock $ .10 $ .08 $ .10
Percentage of revenue:
Gross profit 52.2% 52.1% 53.7%
R&D 14.6% 16.1% 15.7%
SG&A 12.8% 12.4% 13.3%
Operating profit 24.9% 23.6% 24.7%
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
June 30, June 30, Mar. 31,
2008 2007 2008
Assets
Current assets:
Cash and cash equivalents $ 1,317 $ 1,266 $ 1,450
Short-term investments 331 2,315 426
Accounts receivable, net of allowances
of ($24), ($27) and ($25) 1,811 1,897 1,669
Raw materials 111 106 111
Work in process 997 876 943
Finished goods 543 442 524
Inventories 1,651 1,424 1,578
Deferred income taxes 641 1,072 659
Prepaid expenses and other current assets 259 246 193
Total current assets 6,010 8,220 5,975
Property, plant and equipment at cost 7,603 7,657 7,493
Less accumulated depreciation (3,999) (3,859) (3,908)
Property, plant and equipment, net 3,604 3,798 3,585
Long-term investments 766 254 791
Goodwill 840 792 838
Acquisition-related intangibles 108 117 105
Deferred income taxes 626 405 618
Capitalized software licenses, net 220 259 225
Overfunded retirement plans 128 79 122
Other assets 80 96 79
Total assets $ 12,382 $ 14,020 $ 12,338
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 677 $ 622 $ 680
Accrued expenses and other liabilities 955 1,048 871
Income taxes payable 26 187 218
Accrued profit sharing and retirement 102 98 79
Total current liabilities 1,760 1,955 1,848
Underfunded retirement plans 187 115 191
Deferred income taxes 57 20 60
Deferred credits and other liabilities 394 436 382
Total liabilities 2,398 2,526 2,481
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, 2008 --
1,739,712,567; June 30, 2007 --
1,739,467,307; March 31, 2008 --
1,739,660,927 1,740 1,739 1,740
Paid-in capital 940 761 926
Retained earnings 20,773 18,511 20,318
Less treasury common stock at cost:
Shares: June 30, 2008 -- 428,835,142;
June 30, 2007 -- 310,382,046;
March 31, 2008 -- 416,925,336 (13,138) (9,233) (12,776)
Accumulated other comprehensive loss,
net of taxes (331) (284) (351)
Total stockholders' equity 9,984 11,494 9,857
Total liabilities and stockholders' equity $ 12,382 $ 14,020 $ 12,338
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)
For Three Months Ended
June 30, June 30, Mar. 31,
2008 2007 2008
Cash flows from operating activities:
Net income $ 588 $ 610 $ 662
Adjustments to reconcile net income to
cash provided by operating activities
of continuing operations:
Loss from discontinued operations -- 4 --
Depreciation 245 256 241
Stock-based compensation 54 69 54
Amortization of acquisition-related
intangibles 10 14 10
Losses on sales of assets -- -- 6
Deferred income taxes (7) (3) (74)
Increase (decrease) from changes in:
Accounts receivable (149) (144) 89
Inventories (73) (15) (160)
Prepaid expenses and other current assets (29) 42 (46)
Accounts payable and accrued expenses 32 110 (179)
Income taxes payable (181) (76) 165
Accrued profit sharing and retirement 23 47 (122)
Other 7 (16) (5)
Net cash provided by operating activities of
continuing operations 520 898 641
Cash flows from investing activities:
Additions to property, plant and equipment (271) (174) (219)
Purchases of short-term investments -- (1,479) (362)
Sales and maturities of short-term
investments 111 1,529 958
Purchases of long-term investments (3) (6) (2)
Sales of long-term investments -- 3 16
Acquisitions, net of cash acquired (19) -- --
Net cash (used in) provided by investing
activities of continuing operations (182) (127) 391
Cash flows from financing activities:
Payments on loans and long-term debt -- (43) --
Dividends paid (132) (115) (133)
Sales and other common stock transactions 89 374 76
Excess tax benefit from share-based payments 3 56 13
Stock repurchases (433) (742) (874)
Net cash used in financing activities of
continuing operations (473) (470) (918)
Effect of exchange rate changes on cash 2 -- 8
Net (decrease) increase in cash and cash
equivalents (133) 301 122
Cash and cash equivalents, beginning of
period 1,450 965 1,328
Cash and cash equivalents, end of period $ 1,317 $ 1,266 $ 1,450
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 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;
-- 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 Risk Factors
discussion in Item 1A of our 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 manufacturing,
design and sales operations in more than 25 countries. For more information,
go to http://www.ti.com.
TI Trademarks:
OMAP
DLP
Other trademarks are the property of their respective owners.
