10-QPeriod: Q3 FY2011

TEXAS INSTRUMENTS INC Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 4, 2011For Securities:TXN

Summary

Texas Instruments (TXN) reported its third-quarter 2011 results, marked by a significant strategic acquisition and a general economic slowdown impacting revenue. Revenue for the quarter was $3.47 billion, a decrease from the prior year's $3.74 billion, reflecting softer demand across most markets. Net income also declined to $601 million from $859 million in the prior year, with diluted earnings per share at $0.51 compared to $0.71. The most impactful event of the quarter was the completion of the acquisition of National Semiconductor Corporation for $6.56 billion on September 23, 2011. This acquisition is expected to bolster TXN's Analog segment and expand its product portfolio. While the acquisition is a strategic positive, it also introduced significant acquisition-related costs and complexities, impacting the current quarter's profitability and balance sheet. The company also faced challenges from the Japan earthquake's impact on manufacturing, though recovery efforts were largely completed. Management noted ongoing economic uncertainty, but expressed confidence in their ability to gain market share in core businesses.

Financial Highlights

52 data points
Beta

Revenue

$3.47B

50.3% Gross Margin

Net Income

$591.00M

17.1% Net Margin

EPS (Diluted)

$0.51

Total Assets

$20.91B

Cash & Equivalents

$1.58B

Free Cash Flow

$947.00M

Financial Statements
Beta
Revenue$3.47B
Cost of Revenue$1.72B
Gross Profit$1.74B
R&D Expenses$395.00M
SG&A Expenses$388.00M
Operating Income$814.00M
Net Income$591.00M
EPS (Basic)$0.52
EPS (Diluted)$0.51
Shares Outstanding (Basic)1.14B
Shares Outstanding (Diluted)1.16B

Key Highlights

  • 1Completed the strategic acquisition of National Semiconductor Corporation for $6.56 billion on September 23, 2011, significantly expanding the Analog segment's offerings.
  • 2Third-quarter revenue decreased by 7% year-over-year to $3.47 billion, impacted by economic uncertainty and a decline in demand.
  • 3Net income for the quarter was $601 million ($0.51 diluted EPS), down from $859 million ($0.71 diluted EPS) in the prior year, partly due to acquisition costs.
  • 4Acquisition costs, including transaction fees, restructuring, and stock-based compensation related to National Semiconductor, amounted to $147 million in the quarter.
  • 5The company increased its quarterly cash dividend by 31% to $0.17 per share, marking the eighth consecutive annual increase.
  • 6Despite revenue declines, TXN continues to focus on its Analog and Embedded Processing segments as key growth drivers.
  • 7Inventory levels increased, partly due to the acquisition and efforts to improve customer service levels.

Frequently Asked Questions

The most significant event was the completion of the acquisition of National Semiconductor Corporation on September 23, 2011, for $6.56 billion. This acquisition is intended to strengthen Texas Instruments' position in the analog semiconductor market.

The acquisition contributed $18 million in revenue from the acquisition date to September 30. However, it also resulted in substantial acquisition-related costs of $147 million recognized in the third quarter, impacting profitability. Furthermore, the acquisition significantly increased goodwill on the balance sheet by $3.53 billion and added $1.105 billion in long-term debt.

Management indicated that economic uncertainty is weighing on demand across most markets. They anticipate similar conditions for the fourth quarter but remain confident in their ability to gain market share in their core Analog and Embedded Processing businesses.

Texas Instruments announced a 31% increase in its quarterly cash dividend to $0.17 per share, which is an annualized rate of $0.68 per share. This marks the eighth consecutive year of dividend increases, demonstrating a commitment to returning capital to shareholders.