10-QPeriod: Q1 FY2004

TEXAS INSTRUMENTS INC Quarterly Report for Q1 Ended Mar 31, 2004

Filed April 28, 2004For Securities:TXN

Summary

Texas Instruments Inc. (TXN) reported strong year-over-year growth for the first quarter of 2004, with net revenue increasing by 34% to $2.94 billion and net income surging to $367 million, or $0.21 per diluted share. This performance was primarily driven by a robust increase in the Semiconductor segment, which saw revenue grow by 38% year-over-year, fueled by strong demand for Analog and Digital Signal Processor (DSP) products, particularly in the wireless applications sector. The company also experienced a significant improvement in gross profit margin to 45.0%, up from 39.3% in the prior year, largely due to increased revenue and better utilization of its fixed-cost manufacturing assets. Despite increased R&D and SG&A expenses, including the reintroduction of profit sharing accruals, operating profit also saw substantial growth. The company highlighted strength in its DLP products and high-performance analog segments, alongside a continued increase in semiconductor content per phone for its wireless offerings. Texas Instruments maintained a strong financial position with $5.5 billion in cash and investments, and actively repurchased shares during the quarter, indicating confidence in its future prospects.

Key Highlights

  • 1Net revenue for the first quarter of 2004 increased by 34% year-over-year to $2.94 billion.
  • 2Net income more than tripled year-over-year, reaching $367 million ($0.21 per diluted share).
  • 3The Semiconductor segment was a key growth driver, with revenue up 38% year-over-year, driven by strong demand in Analog and DSP products.
  • 4Gross profit margin improved significantly to 45.0% from 39.3% in the prior year, reflecting increased revenue and manufacturing efficiency.
  • 5The company reintroduced profit sharing accruals, reflecting expectations for continued strong growth and profitability.
  • 6Texas Instruments ended the quarter with a robust cash position of $5.5 billion.
  • 7The company actively repurchased approximately 5.6 million shares of its common stock during the quarter.

Frequently Asked Questions

The primary driver of revenue growth was the Semiconductor segment, which saw a 38% year-over-year increase. This was fueled by strong demand across a broad range of products, particularly Analog and Digital Signal Processors (DSPs), especially for wireless applications, and record revenue from DLP products. High-performance analog products also contributed significantly to growth.

Profitability saw a significant improvement. Net income rose from $117 million in Q1 2003 to $367 million in Q1 2004. This was supported by a substantial increase in gross profit margin, which improved to 45.0% from 39.3%, due to higher revenue and better utilization of manufacturing assets, which offset increased R&D and SG&A expenses, including the reintroduction of profit sharing.

Texas Instruments expects 2004 to be another strong year for its Semiconductor business, anticipating continued revenue growth and higher operating margins. The company has started making profit-sharing accruals and is increasing R&D and manufacturing capacity to meet expected demand. The company believes it has sufficient financial resources to fund its operations and investments for at least the next 12 months.

The company maintains a strong financial condition with a low debt-to-total-capital ratio of 0.06. Its primary liquidity sources are cash and investments totaling $5.5 billion. The company intends to use its available cash resources to meet its $400 million debt obligation maturing in Q3 2004.