Press release

TI reports financial results for 2Q10

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

DALLAS, July 19, 2010 /PRNewswire via COMTEX News Network/ -- Texas Instruments Incorporated (TI) (NYSE: TXN) today announced second-quarter revenue of $3.50 billion, net income of $769 million and earnings per share of 62 cents.

"Our Analog and Embedded Processing businesses turned in double-digit sequential growth, outpacing their respective markets and again confirming their ability to positively impact the financial performance of TI. As a result, we delivered our highest-ever quarterly operating profit," said Rich Templeton, TI chairman, president and chief executive officer.

"Orders were strong in the quarter, backlog increased and we expect to grow revenue again in the third quarter. Our steady investments in production capacity, even through last year's downturn, are now allowing us to meet higher demand levels from customers and simultaneously reduce lead times, which we believe is not only in the best interest of our customers, but will also help us gain share.

"As we continue our transformation to an Analog and Embedded Processing company, we believe we can significantly outgrow these markets by offering products that are optimized to the needs of our customers and by putting manufacturing capacity in place before it's needed," Templeton said.

2Q10 financial summary

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



                                  2Q10      2Q09  vs.2Q09       1Q10  vs.1Q10
                                  ----      ----  -------       ----  -------
                      Revenue   $3,496     $2,457      42%     $3,205       9%
             Operating profit   $1,107     $  343     223%     $  950      17%
                   Net income   $  769     $  260     196%     $  658      17%
           Earnings per share   $ 0.62     $ 0.20     210%     $ 0.52      19%
    Cash flow from operations   $  562     $  557       1%     $  710     -21%


TI's operating profit increased compared with the second quarter of 2009 and the prior quarter of 2010 due to higher gross profit, which primarily reflects higher revenue. In addition, compared with a year ago, higher gross profit also reflects the benefit associated with higher utilization of manufacturing assets.

2Q10 segment results



                              2Q10       2Q09  vs. 2Q09        1Q10  vs. 1Q10
                              ----       ----  --------        ----  --------
    Analog:
       Revenue              $1,512       $970       56%      $1,367       11%
       Operating profit     $  472       $103      358%      $  398       19%
    Embedded Processing:
       Revenue              $  516       $350       47%      $  440       17%
       Operating profit     $  115       $ 28      311%      $   73       58%
    Wireless:
       Revenue              $  727       $614       18%      $  717        1%
       Operating profit     $  165       $ 51      224%      $  158        4%
    Other:
       Revenue              $  741       $523       42%      $  681        9%
       Operating profit     $  355       $161      120%      $  321       11%

    Note:  2Q09 has been restated to reflect the 1Q10 transfer of a low-power
    wireless product line from the Analog segment to the Wireless segment.
    During all of 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 three major product areas, especially high-volume analog & logic products.
  • Compared with the prior quarter, the increase in revenue was due to growth in all three major product areas, especially high-performance analog products.
  • The growth in operating profit compared with both a year ago and the prior quarter was 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 catalog products. Revenue from products for automotive and communications infrastructure applications increased to a lesser extent.
  • The gains in operating profit compared with both a year ago and the prior quarter were due to higher gross profit.

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

  • Compared with a year ago, revenue grew due to strength in connectivity products and applications processors. Revenue from baseband products was about even with a year ago.
  • Compared with the prior quarter, revenue was about even as higher revenue from connectivity products was partially offset by lower revenue from baseband products.
  • Operating profit increased from a year ago and from the prior quarter primarily due to higher gross profit.

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

  • Compared with a year ago, revenue grew primarily due to DLP products. Revenue from royalties, custom ASIC products and calculators also grew.
  • Compared with the prior quarter, revenue grew primarily due to seasonally higher calculator sales, which more than offset lower royalties.
  • Operating profit increased from a year ago and from the prior quarter due to higher gross profit.

Restructuring charges were as follows:


                      2Q10       2Q09       1Q10
                      ----       ----       ----
             Analog    $ 7        $34        $ 4
           Embedded
         Processing    $ 3        $18        $ 2
           Wireless    $ 5        $24        $ 3
              Other    $ 2        $ 9        $ 1
              Total    $17        $85        $10

2Q10 additional financial information

  • Orders were $3.73 billion, up 33 percent from a year ago and up 2 percent from the prior quarter.
  • Inventory was $1.35 billion at the end of the quarter, up $286 million from a year ago and up $73 million from the prior quarter.
  • Capital expenditures were $283 million in the quarter compared with $47 million a year ago and $219 million in the prior quarter. Capital expenditures in the quarter were for analog wafer manufacturing equipment and for assembly/test manufacturing equipment.
  • The company used $750 million in the quarter to repurchase 29.7 million shares of its common stock and paid dividends of $147 million.

Outlook

For the third quarter of 2010, TI expects:

  • Revenue: $3.55 - 3.85 billion
  • Earnings per share: $0.64 - 0.74

TI will update its third-quarter outlook on September 9, 2010.

For the full year of 2010, TI expects approximately the following:

  • R&D expense: $1.5 billion
  • Capital expenditures: $1.2 billion, up from the prior expectation of $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
                                   ---------------------------------
                                    June 30,    June 30,    Mar. 31,
                                      2010        2009        2010
                                   ---------   ---------   ---------

    Revenue                        $   3,496   $   2,457   $   3,205
    Cost of revenue                    1,602       1,333       1,516
                                   ---------   ---------   ---------
    Gross profit                       1,894       1,124       1,689
    Research and development(R&D)        392         369         370
    Selling, general and
     administrative (SG&A)               378         327         359
    Restructuring expense                 17          85          10
                                   ---------   ---------   ---------
    Operating profit                   1,107         343         950
    Other income (expense) net             4          13           7
                                   ---------   ---------   ---------
    Income before income taxes         1,111         356         957
    Provision for income taxes           342          96         299
                                   ---------   ---------   ---------
    Net income                     $     769   $     260   $     658
                                   =========   =========   =========

    Earnings per common share:
      Basic                        $     .63   $     .20   $     .53
                                   =========   =========   =========
      Diluted                      $     .62   $     .20   $     .52
                                   =========   =========   =========

    Average shares outstanding
     (millions):
      Basic                            1,208       1,267       1,233
                                   =========   =========   =========
      Diluted                          1,221       1,272       1,246
                                   =========   =========   =========

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

    Percentage of revenue:
    Gross profit                        54.2%      45.7%       52.7%
    R&D                                 11.2%      15.0%       11.5%
    SG&A                                10.8%      13.3%       11.2%
    Operating profit                    31.7%      14.0%       29.7%


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

                                           June 30,    June 30,   Mar. 31,
                                            2010        2009       2010
                                         ---------   ---------  ---------
    Assets
    Current assets:
      Cash and cash equivalents          $   1,138   $   1,765  $   1,217
      Short-term investments                 1,167         792      1,574
      Accounts receivable, net of
       allowances of ($21), ($23)
       and ($20)                             1,715       1,244      1,526
      Raw materials                             98          81         95
      Work in process                          812         699        812
      Finished goods                           439         283        369
                                         ---------   ---------  ---------
      Inventories                            1,349       1,063      1,276
                                         ---------   ---------  ---------
      Deferred income taxes                    566         668        556
      Prepaid expenses and other current
       assets                                  195         208        174
                                         ---------   ---------  ---------
      Total current assets                   6,130       5,740      6,323
                                         ---------   ---------  ---------
    Property, plant and equipment at
     cost                                    6,831       6,739      6,763
      Less accumulated depreciation         (3,591)     (3,799)    (3,601)
                                         ---------   ---------  ---------
      Property, plant and equipment, net     3,240       2,940      3,162
                                         ---------   ---------  ---------
    Long-term investments                      557         632        641
    Goodwill                                   926         926        926
    Acquisition-related intangibles             97         150        111
    Deferred income taxes                      915         909        893
    Capitalized software licenses, net         229         140        219
    Overfunded retirement plans                 22          20         54
    Other assets                                48          53         41
                                         ---------   ---------  ---------
    Total assets                         $  12,164   $  11,510  $  12,370
                                         =========   =========  =========

    Liabilities and Stockholders' Equity
    Current liabilities:
      Accounts payable                        $542        $421       $556
      Accrued expenses and other
       liabilities                             823         931        756
      Income taxes payable                      18          56        317
      Accrued profit sharing and
       retirement                              155          60         90
                                         ---------   ---------  ---------
      Total current liabilities              1,538       1,468      1,719
                                         ---------   ---------  ---------
    Underfunded retirement plans               470         502        425
    Deferred income taxes                       70          54         68
    Deferred credits and other
     liabilities                               331         273        353
                                         ---------    --------  ---------
    Total liabilities                        2,409       2,297      2,565
                                         ---------   ---------  ---------

    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, 2010
         -- 1,739,888,675; June 30, 2009
         -- 1,739,734,081; Mar. 31, 2010
         -- 1,739,818,725                    1,740       1,740      1,740
      Paid-in capital                        1,127       1,045      1,095
      Retained earnings                     23,194      21,163     22,573
      Less treasury common stock at
       cost:
        Shares:  June 30, 2010 --
         544,693,240; June 30, 2009
         -- 478,309,646; Mar. 31, 2010
         -- 517,592,342                    (15,652)    (14,061)   (14,976)
      Accumulated other comprehensive
       income (loss), net of taxes            (654)       (674)      (627)
                                         ---------   ---------  ---------
      Total stockholders' equity             9,755       9,213      9,805
                                         ---------   ---------  ---------
    Total liabilities and
     stockholders' equity                $  12,164   $  11,510  $  12,370
                                         =========   =========  =========


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

                                           For Three Months Ended
                                     ---------------------------------
                                      June 30,    June 30,    Mar. 31,
                                        2010        2009        2010
                                     ---------   ---------   ---------
    Cash flows from
     operating activities:
      Net income                     $     769   $     260   $     658
      Adjustments to net income:
        Depreciation                       215         221         211
        Stock-based compensation            49          47          47
        Amortization of acquisition-
         related intangibles                13          12          13
        Deferred income taxes               (7)          6         (11)
      Increase (decrease) from
       changes in:
        Accounts receivable               (188)       (116)       (251)
        Inventories                        (73)         37         (74)
        Prepaid expenses and
         other current assets               14         (15)        (10)
        Accounts payable and
         accrued expenses                   38         101         (66)
        Income taxes payable              (338)        (52)        203
        Accrued profit sharing
         and retirement                     66          26         (23)
      Other                                  4          30          13
                                     ---------   ---------   ---------
    Net cash provided by
     operating activities                  562         557         710
                                     ---------   ---------   ---------

    Cash flows from investing
     activities:
      Additions to property,
       plant and equipment                (283)        (47)       (219)
      Purchases of short-term
       investments                        (613)       (343)       (599)
      Sales and maturities of
       short-term investments            1,033         544         768
      Purchases of long-term
       investments                          --          (3)         (2)
      Redemptions and sales
       of long-term investments             67          43           1
      Acquisitions, net of
       cash acquired                        --         (51)         --
                                     ---------   ---------   ---------
    Net cash provided by
     (used in) investing
     activities                            204         143         (51)
                                     ---------   ---------   ---------

    Cash flows from financing
     activities:
      Dividends paid                      (147)       (139)       (149)
      Sales and other common
       stock transactions                   50          19          29
      Excess tax benefit from
       share-based payments                  2          --          --
      Stock repurchases                   (750)       (251)       (504)
                                     ---------   ---------   ---------
    Net cash used in
     financing activities                 (845)       (371)       (624)
                                     ---------   ---------   ---------

    Net (decrease) increase
     in cash and cash equivalents          (79)        329          35
    Cash and cash equivalents,
     beginning of period                 1,217       1,436       1,182
                                     ---------   ---------   ---------
    Cash and cash equivalents,
     end of period                   $   1,138   $   1,765   $   1,217
                                     =========   =========   =========

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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