Press release

TI reports financial results for 3Q09

Conference call on TI web site at 4:30 p.m. Central time today
www.ti.com/ir

Non-GAAP Reconciliation Charts

DALLAS, Oct 19, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Texas Instruments Incorporated (TI) (NYSE: TXN) today announced third-quarter revenue of $2.88 billion, net income of $538 million and earnings per share (EPS) of $0.42.

"Our performance in the quarter exceeded our expectations and was led by a second consecutive quarter of 20-percent growth in Analog," said Rich Templeton, TI chairman, president and CEO. "We are encouraged with the strong sequential increase in demand for our products over the past two quarters as our customers are winding down their inventory corrections and have begun to increase production levels in their factories. This revenue growth, combined with our early actions to pare costs so that we would not be dependent upon an uncertain rebound in the overall economy, has resulted in solid improvements in our profitability.

"Our balance sheet is strong and has allowed us to opportunistically make investments in Analog and Embedded Processing throughout this downturn that should provide returns for years to come. For example, we are increasing our investments in manufacturing capacity to support higher levels of growth, including start-up of the world's first facility to produce analog chips on 300-millimeter wafers. Applying advanced manufacturing technology to analog at an attractive cost will give TI an opportunity to accelerate our strategy and extend our leadership.

"Although we still have much work to do, our progress has been good."

    3Q09 financial summary
    ----------------------

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


                                  3Q09      3Q08 vs. 3Q08     2Q09 vs. 2Q09
                                  ----      ---- --------     ---- --------
                      Revenue:   $2880     $3387   -15%      $2457    17%
             Operating profit:   $ 763     $ 746     2%      $ 343   122%
                   Net income:   $ 538     $ 563    -4%      $ 260   107%
           Earnings per share:   $0.42     $0.43    -2%      $0.20   110%
    Cash flow from operations:   $ 834     $1046   -20%      $ 557    50%

TI's revenue declined 15 percent compared with the third quarter of 2008 and increased 17 percent compared with the second quarter of 2009. The decline from a year ago was the result of declines across all segments, particularly the Wireless segment. The increase from the prior quarter was due to growth in all segments, particularly the Analog segment.

Despite revenue that was $507 million lower compared with the year-ago quarter, TI's operating profit grew $17 million primarily due to lower operating expenses, as well as lower manufacturing costs. Operating profit increased $420 million compared with the second quarter primarily due to higher revenue and the associated gross profit. Operating profit increased from the prior quarter in all segments.

    3Q09 segment results
    --------------------

                             3Q09       3Q08 vs. 3Q08    2Q09 vs. 2Q09   Note
                             ----       ---- --------    ---- --------   ----
    Analog:
        Revenue             $1184      $1289    -8%      $983    20%     (1)
        Operating profit    $ 306      $ 274    12%      $ 96   219%

    Embedded Processing:
        Revenue             $ 393      $ 427    -8%      $350    12%     (2)
        Operating profit    $  75      $  73     3%      $ 28   168%

    Wireless:
        Revenue             $ 675      $ 915   -26%      $601    12%     (3)
        Operating profit    $ 110      $ 155   -29%      $ 58    90%

    Other:
        Revenue             $ 628      $ 756   -17%      $523    20%     (4)
        Operating profit    $ 272      $ 244    11%      $161    69%


    The product categories in each segment are as follows:
     -- Analog:  high-volume analog & logic, high-performance analog (includes
        data converters, amplifiers and interface products) and power
        management
     -- Embedded Processing:  DSPs and microcontrollers used in catalog,
        communications infrastructure and automotive applications
     -- Wireless:  DSPs and analog used in basebands for handsets, OMAP(TM)
        applications processors and connectivity products for wireless
        applications
     -- Other:  includes DLP(R) products, calculators, ASIC products, RISC
        microprocessors and royalties


    (1)  The decline in Analog revenue from a year ago was due to lower high-
         volume analog & logic and high-performance analog revenue.  Power
         management revenue increased slightly.  The increase in Analog
         revenue from the prior quarter was due to growth in all three product
         categories.

    (2)  The decline in Embedded Processing revenue from a year ago was due to
         lower revenue from catalog, communications infrastructure and
         automotive products.  The increase in Embedded Processing revenue
         from the prior quarter was primarily due to higher catalog product
         revenue, while automotive product revenue grew by a lesser amount and
         communications infrastructure product revenue was even.

    (3)  Wireless revenue declined from a year ago due to lower baseband
         revenue.  Revenue from OMAP applications processors also declined,
         although by a lesser amount, while revenue from connectivity products
         increased.  Wireless revenue increased from the prior quarter
         primarily due to higher revenue from baseband products, and by a
         lesser amount, increased revenue from connectivity products and OMAP
         applications processors.

    (4)  Other revenue decreased from a year ago due to declines in RISC
         microprocessors, DLP products, ASIC products, royalties and
         calculators.  Other revenue increased from the prior quarter due to a
         seasonal increase in calculators, as well as higher revenue from DLP
         products, royalties and ASIC products.  Revenue from RISC
         microprocessors declined from the prior quarter.

From a year ago, operating profit increased in the Analog segment primarily due to operating expense reductions, as well as higher gross profit. Operating profit in the Embedded Processing and Other segments increased due to operating expense reductions. Operating profit in the Wireless segment declined due to lower gross profit, which was partially offset by lower operating expenses.

Compared with the prior quarter, operating profit increased in the Analog, Embedded Processing and Other segments due to higher gross profit. Operating profit increased in the Wireless segment primarily due to the combination of higher gross profit and lower restructuring charges.

    Restructuring charges were as follows:

                                  3Q09      3Q08      2Q09
                                  ----      ----      ----
                 Analog:           $ 4       $--       $35
    Embedded Processing:           $ 2       $--       $18
               Wireless:           $ 3       $--       $23
                  Other:           $ 1       $--       $ 9
                  Total:           $10       $--       $85

3Q09 additional financial information

    --  Orders were $3.11 billion, down 4 percent from a year ago but up 11
        percent from the prior quarter.
    --  Inventory was $1.12 billion, down $459 million from a year ago and up
        $53 million from the prior quarter.
    --  Capital expenditures were $226 million in the quarter, an increase from
        $197 million in the year-ago quarter and an increase from $47 million in
        the prior quarter.
    --  TI used $251 million in the quarter to repurchase 10.5 million shares of
        its common stock and paid dividends of $138 million.

    --  Cash and cash equivalents plus short-term investments increased to $2.83
        billion at the end of the quarter.

Outlook

For the fourth quarter of 2009, TI expects:

    --  Revenue:  $2.78 - 3.02 billion

    --  Earnings per share:  $0.42 - 0.50

The EPS estimate includes a negative impact of $0.01 per share resulting from restructuring charges.

TI will update its fourth-quarter outlook on December 8, 2009.

For the full year of 2009, TI expects approximately the following:

    --  R&D expense:  $1.5 billion
    --  Capital expenditures:  $800 million, up from the prior expectation of
        $300 million
    --  Depreciation:  $900 million

    --  Annual effective tax rate:  28%, up from the prior expectation of 27%

                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,
                                                    2009      2008      2009
                                                   -----     -----     -----

    Revenue                                       $2,880    $3,387    $2,457
    Cost of revenue                                1,399     1,744     1,333
                                                   -----     -----     -----
    Gross profit                                   1,481     1,643     1,124
    Research and development (R&D)                   368       507       369
    Selling, general and administrative (SG&A)       340       390       327
    Restructuring expense                             10        --        85
                                                   -----     -----     -----
    Operating profit                                 763       746       343
    Other income (expense) net                         2        10        13
                                                   -----     -----     -----
    Income before income taxes                       765       756       356
    Provision for income taxes                       227       193        96
                                                   -----     -----     -----
    Net income                                    $  538    $  563    $  260
                                                   =====     =====     =====

    Earnings per common share:
      Basic                                       $  .42    $  .43    $  .20
                                                   =====     =====     =====
      Diluted                                     $  .42    $  .43    $  .20
                                                   =====     =====     =====

    Average shares outstanding (millions):
      Basic                                        1,255     1,304     1,267
                                                   =====     =====     =====
      Diluted                                      1,268     1,315     1,272
                                                   =====     =====     =====

    Cash dividends declared per share of common
     stock                                        $  .11    $  .10    $  .11
                                                   =====     =====     =====

    Percentage of revenue:
    Gross profit                                    51.4%     48.5%     45.7%
    R&D                                             12.7%     15.0%     15.0%
    SG&A                                            11.8%     11.5%     13.3%
    Operating profit                                26.5%     22.0%     14.0%

                TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                           Consolidated Balance Sheets
                   (Millions of dollars, except share amounts)


                                               Sept. 30,  Sept. 30, June 30,
                                                  2009      2008      2009
                                                 -----     -----     -----
    Assets
    Current assets:
      Cash and cash equivalents                $ 1,294   $ 1,715   $ 1,765
      Short-term investments                     1,533       278       792
      Accounts receivable, net of allowances
       of ($22), ($28) and ($23)                 1,435     1,774     1,244
      Raw materials                                 89       103        81
      Work in process                              767       982       699
      Finished goods                               260       490       283
                                                 -----     -----     -----
      Inventories                                1,116     1,575     1,063
                                                 -----     -----     -----
      Deferred income taxes                        592       679       668
      Prepaid expenses and other current
       assets                                      168       191       208
                                                 -----     -----     -----
      Total current assets                       6,138     6,212     5,740
                                                 -----     -----     -----
    Property, plant and equipment at cost        6,599     7,499     6,739
      Less accumulated depreciation             (3,654)   (3,982)   (3,799)
                                                 -----     -----     -----
      Property, plant and equipment, net         2,945     3,517     2,940
                                                 -----     -----     -----
    Long-term investments                          627       717       632
    Goodwill                                       926       840       926
    Acquisition-related intangibles                138        99       150
    Deferred income taxes                          928       688       909
    Capitalized software licenses, net             124       202       140
    Overfunded retirement plans                     20       137        20
    Other assets                                    57        54        53
                                                 -----     -----     -----
    Total assets                               $11,903   $12,466   $11,510
                                               =======   =======   =======

    Liabilities and Stockholders' Equity
    Current liabilities:
      Accounts payable                         $   467   $   601   $   421
      Accrued expenses and other liabilities       959       976       931
      Income taxes payable                         148        35        56
      Accrued profit sharing and retirement         88       126        60
                                                 -----     -----     -----
      Total current liabilities                  1,662     1,738     1,468
                                                 -----     -----     -----
    Underfunded retirement plans                   464       186       502
    Deferred income taxes                           60        52        54
    Deferred credits and other liabilities         279       396       273
                                                 -----     -----     -----
    Total liabilities                            2,465     2,372     2,297
                                                 -----     -----     -----

    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, 2009 --
        1,739,770,537; Sept. 30, 2008 --
        1,739,717,573; June 30, 2009 --
        1,739,734,081                            1,740     1,740     1,740
      Paid-in capital                            1,071       973     1,045
      Retained earnings                         21,562    21,204    21,163
      Less treasury common stock at cost:
       Shares:  Sept. 30, 2009 -- 486,897,139;
       Sept. 30, 2008 -- 443,292,628; June 30,
       2009 -- 478,309,646                     (14,257)  (13,481)  (14,061)
      Accumulated other comprehensive income
       (loss), net of taxes                       (678)     (342)     (674)
                                                 -----     -----     -----
      Total stockholders' equity                 9,438    10,094     9,213
                                                 -----    ------     -----
    Total liabilities and stockholders'
     equity                                    $11,903   $12,466   $11,510
                                               =======   =======   =======

                 TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                               (Millions of dollars)


                                                    For Three Months Ended
                                                    ----------------------
                                                 Sept. 30, Sept. 30, June 30,
                                                    2009     2008     2009
                                                    ----     ----     ----
    Cash flows from operating activities:
      Net income                                  $  538   $  563   $  260
      Adjustments to net income:
        Depreciation                                 217      252      221
        Stock-based compensation                      46       53       47
        Amortization of acquisition-related
         intangibles                                  12        9       12
        Deferred income taxes                         71      (78)       6
      Increase (decrease) from changes in:
        Accounts receivable                         (186)      36     (116)
        Inventories                                  (53)      76       37
        Prepaid expenses and other current assets     31       50      (15)
        Accounts payable and accrued expenses         54      (24)     101
        Income taxes payable                          94       41      (52)
        Accrued profit sharing and retirement         28       25       26
      Other                                          (18)      43       30
                                                    ----     ----     ----
    Net cash provided by operating activities        834    1,046      557
                                                    ----    -----     ----

    Cash flows from investing activities:
      Additions to property, plant and equipment    (226)    (197)     (47)
      Purchases of short-term investments           (879)      --     (343)
      Sales and maturities of short-term
       investments                                   139       49      544
      Purchases of long-term investments              --       (3)      (3)
      Redemptions and sales of long-term
       investments                                    16       32       43
      Acquisitions, net of cash acquired              --       --      (51)
                                                   -----    -----    -----
    Net cash (used in) provided by investing
     activities                                     (950)    (119)     143
                                                   -----    -----    -----

    Cash flows from financing activities:
      Dividends paid                                (138)    (131)    (139)
      Sales and other common stock transactions       34       30       19
      Excess tax benefit from share-based
       payments                                       --        1       --
      Stock repurchases                             (251)    (429)    (251)
                                                   -----    -----    -----
    Net cash used in financing activities           (355)    (529)    (371)
                                                   -----    -----    -----
    Net (decrease) increase in cash and cash
     equivalents                                    (471)     398      329
    Cash and cash equivalents, beginning of
     period                                        1,765    1,317    1,436
                                                   -----    -----    -----
    Cash and cash equivalents, end of period      $1,294   $1,715   $1,765
                                                  ======   ======   ======


    Certain amounts in prior periods' financial statements have been
    reclassified to conform to the current presentation.

"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 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;
    --  The ability of TI and its customers and suppliers to access their 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 the Company'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 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 design, sales and manufacturing operations in more than 30 countries. For more information, go to www.ti.com.

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