10-QPeriod: Q2 FY2012

TEXAS INSTRUMENTS INC Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 3, 2012For Securities:TXN

Summary

Texas Instruments (TXN) reported a decrease in revenue and net income for the second quarter and the first six months of 2012 compared to the prior year periods. This decline was driven by broad product declines, particularly in baseband products, and increased acquisition and restructuring charges. Despite these headwinds, the company highlighted sequential growth in its key Analog and Embedded Processing segments, which are considered its primary growth engines. The acquisition of National Semiconductor in late 2011 continues to impact results, contributing to higher acquisition charges and operating expenses, but also strengthening the Analog segment. Management noted increasing customer caution in placing new orders due to the uncertain global economic environment, leading to an expectation of flat sequential revenue growth in the third quarter, below seasonal averages. The company is focusing on managing costs and strengthening its position in Analog and Embedded Processing, while also planning a significant debt offering to fund general corporate purposes, which may include stock repurchases. Investors should monitor the company's ability to navigate the challenging economic landscape and capitalize on the growth potential in its strategic segments.

Financial Highlights

52 data points
Beta

Revenue

$3.33B

49.5% Gross Margin

Net Income

$446.00M

13.4% Net Margin

EPS (Diluted)

$0.38

Total Assets

$19.52B

Cash & Equivalents

$1.19B

Free Cash Flow

$529.00M

Financial Statements
Beta
Revenue$3.33B
Cost of Revenue$1.68B
Gross Profit$1.65B
R&D Expenses$480.00M
SG&A Expenses$456.00M
Operating Income$598.00M
Net Income$446.00M
EPS (Basic)$0.38
EPS (Diluted)$0.38
Shares Outstanding (Basic)1.14B
Shares Outstanding (Diluted)1.15B

Key Highlights

  • 1Revenue for the quarter decreased by 3.6% year-over-year to $3.34 billion, and for the first six months, it decreased by 5.9% to $6.46 billion.
  • 2Net income for the quarter fell 33.6% year-over-year to $446 million, with diluted EPS at $0.38, down from $0.56 in the prior year quarter.
  • 3The acquisition of National Semiconductor (incurred $104 million in acquisition charges this quarter) continued to impact profitability, alongside restructuring charges related to facility closures.
  • 4Despite overall revenue decline, the Analog segment showed year-over-year revenue growth of 13% for the quarter, largely due to the inclusion of National Semiconductor's results (SVA).
  • 5The Wireless segment experienced a significant revenue decrease of 39% year-over-year, primarily driven by declines in baseband products.
  • 6Cash flow from operations remained strong at $1.12 billion for the first six months of 2012, though down from the prior year's $1.145 billion.
  • 7The company repurchased $600 million of its common stock in the first six months of 2012 and paid $390 million in dividends.

Frequently Asked Questions

The acquisition of National Semiconductor, completed in September 2011, contributed to revenue growth in the Analog segment, which increased by 13% year-over-year. However, it also led to increased acquisition charges of $104 million in the current quarter, impacting overall profitability. Management is focused on integrating National's operations to realize growth opportunities.

Management expressed caution due to the uncertain global economic environment, leading to increased customer caution in placing orders. They estimate third-quarter revenue to be about even with the second quarter and below the seasonal average growth rate. The company is prepared to support higher shipments if demand increases.

The Wireless segment revenue decreased by 39% year-over-year, primarily due to significant declines in baseband products, which the company expects to largely cease by the end of 2012. Revenue from connectivity products also declined. While the company is focusing on OMAP applications processors and connectivity, the baseband product line's wind-down is a major factor.

The company reported cash and cash equivalents of $1.19 billion and short-term investments of $1.14 billion as of June 30, 2012, totaling $2.33 billion in cash. Operating cash flow remains a primary source of liquidity. The company has a $2 billion revolving credit facility. Notably, on July 30, 2012, Texas Instruments priced $1.5 billion in senior unsecured notes to fund general corporate purposes, potentially including stock repurchases.