10-QPeriod: Q2 FY2009

TEXAS INSTRUMENTS INC Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 29, 2009For Securities:TXN

Summary

Texas Instruments (TXN) reported its second quarter 2009 results, revealing a significant year-over-year revenue decline of 27% to $2.46 billion, reflecting the challenging global economic environment and its impact on semiconductor demand. Despite the revenue contraction, the company demonstrated resilience through sequential improvement, with revenue increasing 18% from the prior quarter, signaling a potential stabilization of market demand. Profitability also showed sequential recovery, with operating profit more than tripling from the first quarter. The company continued to focus on its core Analog and Embedded Processing segments, and strategically acquired Luminary Micro to bolster its microcontroller offerings. Cost management efforts, including workforce reductions, contributed to reduced operating expenses, helping to offset the impact of lower revenue and factory underutilization. While the year-over-year performance was down significantly, the sequential trends suggest a bottoming out of the downturn. TXN's financial position remains solid, with substantial cash and investments, and the company generated positive cash flow from operations. The company is actively managing inventory levels to align with demand and has reduced capital expenditures. Investors should monitor the pace of economic recovery and its impact on consumer and industrial demand for semiconductors.

Financial Highlights

50 data points
Beta

Revenue

$2.46B

45.7% Gross Margin

Net Income

$260.00M

10.6% Net Margin

EPS (Diluted)

$0.20

Total Assets

$11.51B

Cash & Equivalents

$1.76B

Free Cash Flow

$509.00M

Financial Statements
Beta
Revenue$2.46B
Cost of Revenue$1.33B
Gross Profit$1.12B
R&D Expenses$369.00M
SG&A Expenses$327.00M
Operating Income$343.00M
Net Income$260.00M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)1.27B
Shares Outstanding (Diluted)1.27B

Key Highlights

  • 1Revenue for Q2 2009 was $2.46 billion, a 27% decrease year-over-year but an 18% increase sequentially, indicating a potential market stabilization.
  • 2Net income was $260 million ($0.20 diluted EPS) for Q2 2009, down from $588 million ($0.44 diluted EPS) in Q2 2008, but significantly up from $17 million ($0.01 diluted EPS) in Q1 2009.
  • 3The company incurred $85 million in restructuring charges in Q2 2009 related to announced workforce reductions aimed at aligning costs with weakened demand.
  • 4Cash flow from operations for the first six months of 2009 was $808 million, a decrease from the prior year but still demonstrating operational cash generation.
  • 5TXN acquired Luminary Micro in Q2 2009 for $58 million to enhance its Embedded Processing segment's microcontroller portfolio.
  • 6Total inventory decreased to $1.06 billion at the end of Q2 2009 from $1.37 billion at the end of 2008, reflecting successful inventory management.
  • 7Capital expenditures for the first six months of 2009 were significantly reduced to $91 million from $489 million in the same period of 2008.

Frequently Asked Questions

The primary reason for the significant year-over-year decline in revenue is the broad-based downturn in global markets, which has led to reduced demand for semiconductor products across all of Texas Instruments' segments.

Texas Instruments is actively managing costs through employment reductions and other cost-control efforts, including aligning operations with weakened demand. This is reflected in the decrease in R&D and SG&A expenses compared to the prior year and the incurring of restructuring charges.

Texas Instruments views Analog and Embedded Processing as its primary growth engines for the future. The company continues to focus resources on these segments and made a strategic acquisition in the Embedded Processing segment (Luminary Micro) during the quarter to expand its microcontroller offerings.

The company maintains a solid financial position with $1.76 billion in cash and cash equivalents and $792 million in short-term investments as of June 30, 2009. Cash flow from operations remains positive, and the company has access to undrawn credit facilities. Management believes it has sufficient financial resources to meet its obligations for at least the next 12 months.