Press release

TI reports financial results for 1Q10

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

Non-GAAP Reconciliation Charts

DALLAS, April 26, 2010 /PRNewswire via COMTEX News Network/ -- Texas Instruments Incorporated (TI) (NYSE: TXN) today announced first-quarter revenue of $3.21 billion, net income of $658 million and earnings per share of 52 cents.

"TI invested in new manufacturing capacity for both wafer fabs and assembly/test facilities during the downturn in 2009. The strategic investments we've made over the years are delivering strong growth and market share gains. This was the fourth quarter of excellent sequential increases, with the combined revenue of our Analog and Embedded Processing businesses setting a new record level," said Rich Templeton, TI chairman, president and chief executive officer.

"Momentum continues into the second quarter as demand for our products remains strong, and we add more manufacturing capacity to support our customers. Production output is at an all-time high, and capacity is increasing each quarter in 2010 as we add 200-millimeter equipment purchased last year and as we ramp the industry's first 300-millimeter Analog facility, from which we will start shipments in the fourth quarter."

1Q10 financial summary

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

                                  1Q10     1Q09 vs. 1Q09     4Q09 vs. 4Q09
                                  ----     ---- --- ----     ---- --- ----

                      Revenue   $3,205    $2,086     54%     $3,005     7%
             Operating profit   $  950    $   10  9,400%     $  875     9%
                   Net income   $  658    $   17  3,771%     $  655     0%
           Earnings per share   $ 0.52    $ 0.01  5,100%     $ 0.52     0%
    Cash flow from operations   $  710    $  251    183%     $1,000   -29%

TI's operating profit increased compared with the first quarter of 2009 and the prior quarter primarily due to higher gross profit. Higher gross profit compared with the year-ago quarter included the impact of higher revenue and the benefit associated with higher utilization of manufacturing assets. In addition, restructuring charges were lower compared with a year ago.

1Q10 segment results

                           1Q10       1Q09  vs. 1Q09      4Q09  vs. 4Q09
                           ----       ----  --------      ----  --------
    Analog*:
      Revenue            $1,367       $802      70%     $1,263       8%
      Operating profit
       (loss)            $  398       $(26)    n/a      $  383       4%
    Embedded Processing:
      Revenue            $  440       $316      39%     $  412       7%
      Operating profit   $   73       $  2   3,550%     $   89     -18%
    Wireless*:
      Revenue            $  717       $563      27%     $  758      -5%
      Operating profit
       (loss)            $  158       $(22)    n/a      $  181     -13%
    Other:
      Revenue            $  681       $405      68%     $  572      19%
      Operating profit   $  321       $ 56     473%     $  222      45%

    * All periods have been restated to reflect the transfer of a
    low-power wireless product line from the Analog segment to the
    Wireless segment.  During 2009, revenue from this product line
    was $68 million, and it operated at a loss of $17 million.

Analog: (includes high-volume analog & logic, high-performance analog and power management products)

  • Compared with a year ago, the increase in revenue was due to growth in all major product areas, especially high-volume analog & logic and power management products.
  • Compared with the prior quarter, the increase in revenue was due to approximately equal gains in all three major product areas.
  • The gains in operating profit compared with both a year ago and the prior quarter were primarily due to higher gross profit.

Embedded Processing: (includes digital signal processor and microcontroller catalog products that are sold across a wide variety of markets, as well as application-specific products that are used in communications infrastructure and automotive electronics)

  • In both comparisons, revenue growth was primarily due to an increase in revenue from catalog products. Revenue from automotive products also increased from a year ago, although to a lesser extent.
  • Compared with a year ago, the gain in operating profit was due to higher gross profit.
  • Compared with the prior quarter, operating profit declined due to higher operating expenses.

Wireless: (includes connectivity products, OMAP applications processors and baseband products)

  • Compared with a year ago, revenue grew primarily due to strength in connectivity products and applications processors. Revenue from baseband products also grew from a year ago, although to a lesser extent.
  • Compared with the prior quarter, revenue declined due to seasonally lower baseband revenue.
  • Operating profit increased from a year ago primarily due to higher gross profit and declined from the prior quarter primarily due to lower gross profit.

Other: (includes DLP® products, custom ASIC products, calculators and royalties)

  • Compared with a year ago and the prior quarter, revenue grew due to gains in DLP products, royalties, custom ASIC products and calculators.
  • Operating profit increased from a year ago and from the prior quarter due to higher gross profit.

Restructuring charges were as follows:

                                1Q10    1Q09    4Q09
                                ----    ----    ----

                      Analog    $ 4     $ 40    $ 6
         Embedded Processing    $ 2     $ 19    $ 3
                    Wireless    $ 3     $ 34    $ 1
                       Other    $ 1     $ 12    $ 2
                       Total    $10     $105    $12

1Q10 additional financial information

  • Orders were $3.64 billion, up 66 percent from a year ago and up 12 percent from the prior quarter.
  • Inventory was $1.28 billion at the end of the quarter, up $178 million from a year ago and up $74 million from the prior quarter.
  • Capital expenditures were $219 million in the quarter compared with $43 million a year ago and $436 million in the prior quarter. Capital expenditures in the quarter were primarily for assembly/test manufacturing equipment, as well as for analog wafer manufacturing equipment.
  • The company used $504 million in the quarter to repurchase 20.6 million shares of its common stock and paid dividends of $149 million.

Outlook

For the second quarter of 2010, TI expects:

  • Revenue: $3.31 - 3.59 billion
  • Earnings per share: $0.56 - 0.64

TI will update its second-quarter outlook on June 8, 2010.

For the full year of 2010, TI continues to expect approximately the following:

  • R&D expense: $1.5 billion
  • Capital expenditures: $0.9 billion
  • Depreciation: $0.9 billion
  • Annual effective tax rate: 31%

The tax rate estimate is based on current tax law and does not assume reinstatement of the federal R&D tax credit, which expired at the end of 2009.

                TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                      Consolidated Statements of Income
           (Millions of dollars, except share and per-share amounts)

                                                   For Three Months Ended
                                               -------------------------------
                                               Mar. 31,    Mar. 31,  Dec. 31,
                                                 2010        2009      2009
                                               ---------  ---------  --------

    Revenue                                      $ 3,205    $ 2,086   $ 3,005
    Cost of revenue                                1,516      1,280     1,416
                                               ---------  ---------  --------
    Gross profit                                   1,689        806     1,589
    Research and development (R&D)                   370        386       355
    Selling, general and
     administrative (SG&A)                           359        305       347
    Restructuring expense                             10        105        12
                                               ---------  ---------  --------
    Operating profit                                 950         10       875
    Other income (expense) net                         7          5         6
                                               ---------  ---------  --------

    Income before income taxes                       957         15       881
    Provision (benefit) for income taxes             299         (2)      226
                                               ---------  ---------  --------
    Net income                                   $   658    $    17   $   655
                                               =========  =========  ========

    Earnings per common share:
      Basic                                      $   .53    $   .01   $   .52
                                               =========  =========  ========
      Diluted                                    $   .52    $   .01   $   .52
                                               =========  =========  ========

    Average shares outstanding (millions):
      Basic                                        1,233      1,275     1,243
                                               =========  =========  ========
      Diluted                                      1,246      1,277     1,257
                                               =========  =========  ========

    Cash dividends declared per share
     of common stock                             $   .12    $   .11   $   .12
                                               =========  =========  ========

    Percentage of revenue:
    Gross profit                                    52.7%      38.6%     52.9%
    R&D                                             11.5%      18.5%     11.8%
    SG&A                                            11.2%      14.6%     11.5%
    Operating profit                                29.7%       0.5%     29.1%


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


                                                  Mar. 31,  Mar. 31,  Dec. 31,
                                                    2010      2009      2009
                                                  --------  --------  --------
    Assets
    Current assets:
      Cash and cash equivalents                   $ 1,217   $ 1,436   $ 1,182
      Short-term investments                        1,574       990     1,743
      Accounts receivable, net of allowances of
       ($20), ($20) and ($23)                       1,526     1,125     1,277
      Raw materials                                    95        77        93
      Work in process                                 812       712       758
      Finished goods                                  369       309       351
                                                  -------  --------  --------
      Inventories                                   1,276     1,098     1,202
                                                 --------  --------  --------
      Deferred income taxes                           556       676       546
      Prepaid expenses and other current assets       174       207       164
                                                 --------  --------  --------
      Total current assets                          6,323     5,532     6,114
                                                 --------  --------  --------
    Property, plant and equipment at cost           6,763     7,030     6,705
      Less accumulated depreciation                (3,601)   (3,915)   (3,547)
                                                 --------  --------  --------
      Property, plant and equipment, net            3,162     3,115     3,158
                                                 --------  --------  --------
    Long-term investments                             641       645       637
    Goodwill                                          926       912       926
    Acquisition-related intangibles                   111       120       124
    Deferred income taxes                             893       967       926
    Capitalized software licenses, net                219       160       119
    Overfunded retirement plans                        54        17        64
    Other assets                                       41        52        51
                                                 --------  --------  --------
    Total assets                                  $12,370   $11,520   $12,119
                                                 ========  ========  ========

    Liabilities and Stockholders' Equity
    Current liabilities:
      Accounts payable                            $   556   $   326   $   503
      Accrued expenses and other liabilities          756       907       841
      Income taxes payable                            317        21       128
      Accrued profit sharing and retirement            90        33       115
                                                 --------  --------  --------
      Total current liabilities                     1,719     1,287     1,587
                                                 --------  --------  --------
    Underfunded retirement plans                      425       608       425
    Deferred income taxes                              68        61        67
    Deferred credits and other liabilities            353       354       318
                                                 --------  --------  --------
    Total liabilities                               2,565     2,310     2,397
                                                 --------  --------  --------

    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:  Mar. 31, 2010 --
         1,739,818,725; Mar. 31, 2009 --
         1,739,723,261; Dec. 31, 2009 --
         1,739,811,721                              1,740     1,740     1,740
      Paid-in capital                               1,095     1,020     1,086
      Retained earnings                            22,573    21,043    22,066
      Less treasury common stock at cost:         (14,976)  (13,852)  (14,549)
        Shares:  Mar. 31, 2010 --
         517,592,342; Mar. 31, 2009 --
         466,270,151; Dec. 31, 2009 --
         499,693,704
      Accumulated other comprehensive
       income (loss), net of taxes                   (627)     (741)     (621)
                                                 --------  --------  --------
      Total stockholders' equity                    9,805     9,210     9,722
                                                 --------  --------  --------
    Total liabilities and stockholders'
     equity                                       $12,370   $11,520   $12,119
                                                 ========  ========  ========


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

                                                    For Three Months Ended
                                            ---------------------------------
                                             Mar. 31,    Mar. 31,    Dec. 31,
                                               2010        2009        2009
                                            ---------   ---------   ---------
    Cash flows from operating
     activities:
      Net income                             $  658       $  17      $  655
      Adjustments to net income:
        Depreciation                            211         230         210
        Stock-based compensation                 47          50          44
        Amortization of acquisition-
         related intangibles                     13          10          14
        Deferred income taxes                   (11)          3          66
      Increase (decrease) from
       changes in:
        Accounts receivable                    (251)       (218)        156
        Inventories                             (74)        279         (86)
        Prepaid expenses and other
         current assets                         (10)          8          11
        Accounts payable and accrued
         expenses                               (66)       (119)        (53)
        Income taxes payable                    203          49         (18)
        Accrued profit sharing and
         retirement                             (23)        (97)         27
      Other                                      13          39         (26)
                                            ---------   ---------   ---------
    Net cash provided by
     operating activities                       710         251       1,000
                                            ---------   ---------   ---------

    Cash flows from investing
     activities:
      Additions to property, plant
       and equipment                           (219)        (43)       (436)
      Purchases of short-term
       investments                             (599)       (220)       (831)
      Sales and maturities of
       short-term investments                   768         729         618
      Purchases of long-term
       investments                               (2)         (2)         (4)
      Redemptions and sales of
       long-term investments                      1           3           2
      Acquisitions, net of cash
       acquired                                  --        (104)         --
                                            ---------   ---------   ---------
    Net cash (used in) provided
     by investing activities                    (51)        363        (651)
                                            ---------   ---------   ---------

    Cash flows from financing
     activities:
      Dividends paid                           (149)       (141)       (149)
      Sales and other common stock
       transactions                              29          18          38
      Excess tax benefit from
       share-based payments                      --          --           1
      Stock repurchases                        (504)       (101)       (351)
                                            ---------   ---------   ---------
    Net cash used in financing
     activities                                (624)       (224)       (461)
                                            ---------   ---------   ---------

    Net increase (decrease) in cash and
     cash equivalents                            35         390        (112)
    Cash and cash equivalents, beginning
     of period                                1,182       1,046       1,294
                                            ---------   ---------   ---------

    Cash and cash equivalents, end of
     period                                  $1,217      $1,436      $1,182
                                            =========   =========   =========

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;
  • Changes in laws and regulations to which TI or its suppliers are or may become subject, such as those imposing fees or reporting or substitution costs relating to the discharge of emissions into the environment or the use of certain raw materials in our manufacturing processes;
  • 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;
  • Impairments of our non-financial assets;
  • 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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