10-QPeriod: Q3 FY2002

TEXAS INSTRUMENTS INC Quarterly Report for Q3 Ended Sep 30, 2002

Filed November 12, 2002For Securities:TXN

Summary

Texas Instruments Incorporated (TXN) reported a significant turnaround in its third quarter of 2002, with net income of $188 million, a substantial improvement from a net loss of $117 million in the same quarter of the prior year. This positive performance was driven by a 22% increase in net revenues to $2,248 million, primarily fueled by a strong rebound in the Semiconductor segment. The company also showed improved profitability in its Sensors & Controls and Educational & Productivity Solutions segments. For the first nine months of 2002, net income was $245 million compared to a loss of $85 million in the prior year. While overall revenue for the nine-month period was slightly down, the improved profitability reflects successful cost-reduction efforts initiated in 2001 and the benefits of increased factory utilization in the Semiconductor segment. The company ended the quarter with a robust cash position and continues to focus on expense control and aligning resources with market demand, though it anticipates a sequential revenue decline in the fourth quarter.

Key Highlights

  • 1Texas Instruments reported a significant swing to profitability in Q3 2002, with net income of $188 million, a dramatic improvement from a net loss of $117 million in Q3 2001.
  • 2Net revenues increased by 22% year-over-year to $2,248 million in Q3 2002, primarily driven by a 26% increase in Semiconductor segment revenue.
  • 3The Semiconductor segment, especially DSP and Analog products, showed strong year-over-year growth, accounting for over 70% of total Semiconductor revenue and showing particular strength in wireless applications.
  • 4The company's nine-month net income for 2002 was $245 million, a substantial recovery from a net loss of $85 million in the same period of 2001.
  • 5Texas Instruments ended the quarter with a strong liquidity position, with total cash and investments amounting to $3,644 million.
  • 6The company implemented cost-reduction measures in 2001, which appear to be contributing to improved profitability, although some restructuring charges and related payments continue.
  • 7Despite the strong quarterly performance, Texas Instruments anticipates a sequential revenue decline in the fourth quarter of 2002, citing generally weaker orders except for wireless.

Frequently Asked Questions

The primary driver was a significant recovery and growth in the Semiconductor segment, which saw a 26% increase in revenue year-over-year. This growth was led by strong performance in DSP and Analog products, particularly in wireless applications.

Profitability has dramatically improved. Texas Instruments swung from a net loss of $117 million in Q3 2001 to a net income of $188 million in Q3 2002. For the nine-month period, net income was $245 million in 2002, compared to a net loss of $85 million in 2001.

The company anticipates a sequential decline in total revenue for the fourth quarter of 2002, with Semiconductor revenue also expected to decline. Profit from operations (PFO) is expected to be around breakeven.

Texas Instruments maintains a strong liquidity position, with total cash and investments of $3,644 million as of September 30, 2002. The company believes it has sufficient resources to meet its obligations for the next 12 months.