10-QPeriod: Q1 FY2009

TEXAS INSTRUMENTS INC Quarterly Report for Q1 Ended Mar 31, 2009

Filed April 29, 2009For Securities:TXN

Summary

Texas Instruments (TXN) reported a significant decline in revenue and net income for the first quarter of 2009 compared to the same period in the prior year, reflecting the challenging global economic environment and a downturn in the semiconductor market. Revenue fell by 36% year-over-year, leading to a sharp decrease in operating profit and net income. Despite these headwinds, management noted that demand for their products had begun to stabilize after sharp drops in previous quarters, with customers slowing their inventory reductions. The company also highlighted progress in reducing its own inventory levels and working with distributors to clear channel inventory. Key strategic initiatives continue, including a focus on growth in the Analog and Embedded Processing segments. The acquisition of CICLON Semiconductor in the first quarter further strengthens TI's position in power management solutions. While acknowledging the ongoing economic uncertainty, Texas Instruments expressed confidence in its ability to fund its operational needs and capital expenditures for at least the next 12 months, supported by strong liquidity including cash, cash equivalents, and unused credit facilities.

Financial Highlights

29 data points
Beta

Revenue

$2.09B

38.6% Gross Margin

Net Income

$17.00M

0.8% Net Margin

EPS (Diluted)

$0.01

Cash & Equivalents

$1.44B

Free Cash Flow

$208.00M

Financial Statements
Beta
Revenue$2.09B
Cost of Revenue$1.28B
Gross Profit$806.00M
R&D Expenses$386.00M
SG&A Expenses$305.00M
Operating Income$10.00M
Net Income$17.00M
EPS (Basic)$0.01
EPS (Diluted)$0.01
Shares Outstanding (Basic)1.27B
Shares Outstanding (Diluted)1.28B

Key Highlights

  • 1Revenue for Q1 2009 was $2.09 billion, a significant 36% decrease from $3.27 billion in Q1 2008, reflecting a challenging market.
  • 2Net income plummeted to $17 million ($0.01/share) from $662 million ($0.49/share) in the prior year's quarter, demonstrating the impact of the economic downturn.
  • 3The company incurred $105 million in restructuring charges in Q1 2009, primarily for severance and benefits related to previously announced employment reductions aimed at reducing costs.
  • 4Texas Instruments successfully reduced its own inventory by $277 million and worked with distributors to lower channel inventory by $132 million, indicating progress in inventory management.
  • 5Despite the revenue decline, the company acquired CICLON Semiconductor for $111 million to bolster its power management capabilities within the Analog segment.
  • 6Operating profit margin contracted severely to 0.5% in Q1 2009 from 24.7% in Q1 2008, largely due to lower revenue and reduced factory utilization.
  • 7Cash flow from operations remained positive at $251 million, though lower than the $649 million in Q1 2008, indicating continued cash generation despite lower profits.

Frequently Asked Questions

The substantial decrease in revenue and net income was primarily driven by a broad downturn in global markets and the semiconductor industry. This led to significantly reduced shipments across most product lines, coupled with lower factory utilization, which negatively impacted gross profit margins.

Texas Instruments is implementing cost-reduction measures, including significant employment reductions announced previously, which resulted in $105 million of restructuring charges in Q1 2009. They are also actively managing inventory levels, having reduced their own inventory by $277 million and worked with distributors to reduce channel inventory. The company is also focusing resources on its growth engines: Analog and Embedded Processing segments.

Texas Instruments has made aggressive efforts to reduce inventory, decreasing its own by $277 million and working with distributors to reduce channel inventory by $132 million. These reductions are largely complete, and the company anticipates moderately increasing production levels in the second quarter. This focus on inventory management is crucial to align production with stabilized demand and improve operational efficiency.

Management noted that demand has begun to stabilize after sharp drops, and customers are slowing inventory reductions. However, they remain cautious due to the continuing weakness in the global economy and have not yet seen signs of a broad-based recovery. The company will maintain operational flexibility to adapt to demand shifts and is confident in its liquidity position to fund its operations and capital needs for at least the next 12 months.