d10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
S
|
QUARTERLY REPORT UNDER SECTION
13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended March 31, 2009
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from ______ to ________
Commission
File Number 001-03761
TEXAS
INSTRUMENTS INCORPORATED
(Exact
Name of Registrant as Specified in Its Charter)
|
|
Delaware
|
75-0289970
|
(State
of Incorporation)
|
(I.R.S.
Employer Identification No.)
|
|
|
12500
TI Boulevard, P.O. Box 660199, Dallas, Texas
|
75266-0199
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code 972-995-3773
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes S No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer S
|
|
Accelerated
filer
|
Non-accelerated
filer
|
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
No S
1,273,453,110
Number of
shares of Registrant’s common stock outstanding as of
March 31,
2009
PART
I - FINANCIAL INFORMATION
ITEM
1. Financial Statements.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Statements of Income
(Millions
of dollars, except share and per-share amounts)
|
|
For
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
2,086 |
|
|
$ |
3,272 |
|
Cost
of revenue
(COR)
|
|
|
1,280 |
|
|
|
1,516 |
|
Gross
profit
|
|
|
806 |
|
|
|
1,756 |
|
Research
and development (R&D)
|
|
|
386 |
|
|
|
514 |
|
Selling,
general and administrative (SG&A)
|
|
|
305 |
|
|
|
435 |
|
Restructuring
expense
|
|
|
105 |
|
|
|
-- |
|
Operating
profit
|
|
|
10 |
|
|
|
807 |
|
Other
income (expense) net
|
|
|
5 |
|
|
|
33 |
|
Income
before income taxes
|
|
|
15 |
|
|
|
840 |
|
Provision
(benefit) for income taxes
|
|
|
(2 |
) |
|
|
178 |
|
Net
income
|
|
$ |
17 |
|
|
$ |
662 |
|
|
|
|
|
|
|
|
|
|
Earnings
per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
.01 |
|
|
$ |
.50 |
|
Diluted
|
|
$ |
.01 |
|
|
$ |
.49 |
|
|
|
|
|
|
|
|
|
|
Average
common shares outstanding (millions):
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,275 |
|
|
|
1,327 |
|
Diluted
|
|
|
1,277 |
|
|
|
1,345 |
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared per share of common stock
|
|
$ |
.11 |
|
|
$ |
.10 |
|
|
|
|
|
|
|
|
|
|
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Statements of Comprehensive Income
(Millions
of dollars)
|
|
For
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$ |
17 |
|
|
$ |
662 |
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Changes
in available-for-sale investments:
|
|
|
|
|
|
|
|
|
Adjustment,
net of
taxes
|
|
|
9 |
|
|
|
(13 |
) |
Reclassification
of recognized transactions, net of taxes
|
|
|
-- |
|
|
|
(3 |
) |
Unrecognized
net actuarial loss of defined benefit plans:
|
|
|
|
|
|
|
|
|
Adjustment,
net of
taxes
|
|
|
31 |
|
|
|
(22 |
) |
Reclassification
of recognized transactions, net of taxes
|
|
|
12 |
|
|
|
5 |
|
Unrecognized
prior service cost of defined benefit plans:
|
|
|
|
|
|
|
|
|
Adjustment,
net of
taxes
|
|
|
(3 |
) |
|
|
6 |
|
Total
|
|
|
49 |
|
|
|
(27 |
) |
Total
comprehensive
income
|
|
$ |
66 |
|
|
$ |
635 |
|
See
accompanying notes.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Balance Sheets
(Millions
of dollars, except share amounts)
|
|
March 31,
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ |
1,436 |
|
|
$ |
1,046 |
|
Short-term
investments
|
|
|
990 |
|
|
|
1,494 |
|
Accounts receivable, net of
allowances of ($20) and ($30)
|
|
|
1,125 |
|
|
|
913 |
|
Raw materials
|
|
|
77 |
|
|
|
99 |
|
Work in process
|
|
|
712 |
|
|
|
837 |
|
Finished goods
|
|
|
309 |
|
|
|
439 |
|
Inventories
|
|
|
1,098 |
|
|
|
1,375 |
|
Deferred income
taxes
|
|
|
676 |
|
|
|
695 |
|
Prepaid expenses and other
current assets
|
|
|
207 |
|
|
|
267 |
|
Total current
assets
|
|
|
5,532 |
|
|
|
5,790 |
|
Property,
plant and equipment at cost
|
|
|
7,030 |
|
|
|
7,321 |
|
Less
accumulated depreciation
|
|
|
(3,915 |
) |
|
|
(4,017 |
) |
Property,
plant and equipment, net
|
|
|
3,115 |
|
|
|
3,304 |
|
Long-term investments
|
|
|
645 |
|
|
|
653 |
|
Goodwill
|
|
|
912 |
|
|
|
840 |
|
Acquisition-related
intangibles
|
|
|
120 |
|
|
|
91 |
|
Deferred
income taxes
|
|
|
967 |
|
|
|
990 |
|
Capitalized
software licenses, net
|
|
|
160 |
|
|
|
182 |
|
Overfunded
retirement plans
|
|
|
17 |
|
|
|
17 |
|
Other
assets
|
|
|
52 |
|
|
|
56 |
|
Total
assets
|
|
$ |
11,520 |
|
|
$ |
11,923 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
326 |
|
|
$ |
324 |
|
Accrued expenses and other
liabilities
|
|
|
907 |
|
|
|
1,034 |
|
Income taxes
payable
|
|
|
21 |
|
|
|
40 |
|
Accrued profit sharing and
retirement
|
|
|
33 |
|
|
|
134 |
|
Total current
liabilities
|
|
|
1,287 |
|
|
|
1,532 |
|
Underfunded
retirement plans
|
|
|
608 |
|
|
|
640 |
|
Deferred
income taxes
|
|
|
61 |
|
|
|
59 |
|
Deferred
credits and other liabilities
|
|
|
354 |
|
|
|
366 |
|
Total
liabilities
|
|
|
2,310 |
|
|
|
2,597 |
|
Stockholders’
equity:
|
|
|
|
|
|
|
Preferred
stock, $25 par value. Authorized – 10,000,000
shares. Participating cumulative preferred. None
issued.
|
|
|
-- |
|
|
|
-- |
|
Common
stock, $1 par value. Authorized – 2,400,000,000 shares. Shares
issued: March 31, 2009 -- 1,739,723,261;
December
31, 2008 -- 1,739,718,073
|
|
|
1,740 |
|
|
|
1,740 |
|
Paid-in
capital
|
|
|
1,020 |
|
|
|
1,022 |
|
Retained
earnings
|
|
|
21,043 |
|
|
|
21,168 |
|
Less
treasury common stock at cost:
Shares: March
31, 2009 -- 466,270,151; December 31, 2008 -- 461,822,215
|
|
|
(13,852 |
) |
|
|
(13,814 |
) |
Accumulated
other comprehensive loss, net of taxes
|
|
|
(741 |
) |
|
|
(790 |
) |
Total
stockholders’ equity
|
|
|
9,210 |
|
|
|
9,326 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
11,520 |
|
|
$ |
11,923 |
|
See
accompanying notes.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
(Millions
of dollars)
|
|
For
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
17 |
|
|
$ |
662 |
|
Adjustments
to net income:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
230 |
|
|
|
241 |
|
Stock-based
compensation
|
|
|
50 |
|
|
|
54 |
|
Amortization
of acquisition-related
intangibles
|
|
|
10 |
|
|
|
10 |
|
Losses
on sale of
assets
|
|
|
-- |
|
|
|
6 |
|
Deferred
income
taxes
|
|
|
3 |
|
|
|
(74 |
) |
Increase
(decrease) from changes in:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(218 |
) |
|
|
89 |
|
Inventories
|
|
|
279 |
|
|
|
(160 |
) |
Prepaid
expenses and other current
assets
|
|
|
8 |
|
|
|
(46 |
) |
Accounts
payable and accrued
expenses
|
|
|
(119 |
) |
|
|
(179 |
) |
Income
taxes
payable
|
|
|
49 |
|
|
|
165 |
|
Accrued
profit sharing and
retirement
|
|
|
(97 |
) |
|
|
(122 |
) |
Other
|
|
|
39 |
|
|
|
3 |
|
Net
cash provided by operating
activities
|
|
|
251 |
|
|
|
649 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Additions
to property, plant and
equipment
|
|
|
(43 |
) |
|
|
(219 |
) |
Purchases
of short-term
investments
|
|
|
(220 |
) |
|
|
(362 |
) |
Sales
and maturities of short-term
investments
|
|
|
729 |
|
|
|
958 |
|
Purchases
of long-term
investments
|
|
|
(2 |
) |
|
|
(2 |
) |
Sales
of long-term
investments
|
|
|
3 |
|
|
|
16 |
|
Acquisitions,
net of cash
acquired
|
|
|
(104 |
) |
|
|
-- |
|
Net
cash provided by investing
activities
|
|
|
363 |
|
|
|
391 |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(141 |
) |
|
|
(133 |
) |
Sales
and other common stock
transactions
|
|
|
18 |
|
|
|
76 |
|
Excess
tax benefit from share-based
payments
|
|
|
-- |
|
|
|
13 |
|
Stock
repurchases
|
|
|
(101 |
) |
|
|
(874 |
) |
Net
cash used in financing
activities
|
|
|
(224 |
) |
|
|
(918 |
) |
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash
equivalents
|
|
|
390 |
|
|
|
122 |
|
Cash
and cash equivalents, beginning of
period
|
|
|
1,046 |
|
|
|
1,328 |
|
Cash
and cash equivalents, end of
period
|
|
$ |
1,436 |
|
|
$ |
1,450 |
|
Certain
amounts in prior periods’ financial statements have been reclassified to conform
to the current presentation.
See
accompanying notes.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Notes to Financial
Statements
1.
|
Description of
business and significant accounting policies and practices. Texas Instruments
(TI) makes, markets and sells high-technology components; about 80,000
customers all over the world buy our
products.
|
Basis of Presentation – The
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the U.S. (US GAAP) and except for
new accounting standards on business combinations, fair value measurements and
earnings per share, on the same basis as the audited financial statements
included in our annual report on Form 10-K for the year ended December 31,
2008. The
consolidated statements of income, statements of comprehensive income and
statements of cash flows for the periods ended March 31, 2009 and 2008, and the
balance sheet as of March 31, 2009, are not audited but reflect all adjustments
that are of a normal recurring nature and are necessary for a fair statement of
the results of the periods shown. The consolidated balance sheet as
of December 31, 2008, presented herein is derived from the audited consolidated
balance sheet presented in our annual report on Form 10-K at that
date. Certain amounts in the prior periods’ financial statements have
been reclassified to conform to the current period
presentation. Certain information and note disclosures normally
included in annual consolidated financial statements have been omitted pursuant
to the rules and regulations of the U.S. Securities and Exchange
Commission. Because the consolidated interim financial statements do
not include all of the information and notes required by US GAAP for a complete
set of financial statements, they should be read in conjunction with the audited
consolidated financial statements and notes included in our annual report on
Form 10-K for the year ended December 31, 2008. The results for the
three-month period are not necessarily indicative of a full year’s
results.
The
consolidated financial statements include the accounts of all
subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation.
All
dollar amounts in the financial statements and tables in the notes, except share
and per-share amounts, are stated in millions of U.S. dollars unless otherwise
indicated.
Acquisitions
– In the first quarter of 2009, we acquired CICLON Semiconductor Device
Corporation (CICLON), a designer of high-frequency, high-efficiency power
management semiconductors for $111 million, including net cash of $104
million. This acquisition expands TI’s ability to help customers
improve energy efficiency in end-equipment designs, such as high-power computing
and server systems. We recognized $70 million of goodwill, which is
not expected to be deductible for tax purposes, $40 million of intangible
assets, and $1 million of other net assets and liabilities. We are
still in the process of finalizing valuations of certain assets and liabilities,
so these provisional measurements are subject to change.
The
former CICLON operations were integrated into our Analog segment. The
results of CICLON’s operations have been included in our financial statements
from the acquisition date and for the first quarter of 2009 were not
significant. Pro forma information for the comparable quarter of 2008
would not be materially different from amounts reported.
Use of Derivatives and Hedging –
We use derivative financial instruments to manage exposure to foreign
exchange risk. We do not apply hedge accounting to our foreign
currency derivative instruments. These instruments are primarily
forward foreign currency exchange contracts that are used as economic hedges to
reduce the earnings impact exchange rate fluctuations may have on our non-U.S.
dollar net balance sheet exposures or for specified non-U.S. dollar forecasted
transactions. Gains and losses from changes in the fair value of
these forward foreign currency exchange contracts are credited or charged to
other
income (expense) net (OI&E). We do not use derivative
financial instruments for speculative or trading purposes and their financial
impact is not significant to our financial condition and results of
operations.
Fair Values of Financial Instruments
– The fair values of our derivative financial instruments were not
significant at March 31, 2009. The fair values of our investments in
cash equivalents, short term and certain long-term investments are disclosed in
Note 7. The carrying values for other current financial assets and
liabilities, such as accounts receivable and accounts payable, approximate fair
value due to the short maturity of such instruments.
Changes in Accounting Standards –
On April 1, 2009, the Financial Accounting Standards Board (FASB) issued
FASB Staff Position (FSP) FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies. This FSP provides additional guidance and
disclosure requirements regarding the recognition and measurement of contingent
assets acquired and contingent liabilities assumed in a business combination
where the fair value of the contingent assets and liabilities cannot be
determined as of the acquisition date. This FSP was effective for us
for acquisitions occurring after January 1, 2009. The adoption of
this FSP did not have a significant impact on our acquisition of CICLON
discussed previously, and its future impact will be dependent upon the specific
terms of future business combinations.
On April
9, 2009, the FASB simultaneously issued the following three FSPs:
·
|
FSP
FAS 157-4, Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly, provides additional guidance to companies for determining
fair values of financial instruments for which there is no active market
or quoted prices may represent distressed transactions. The
guidance includes a reaffirmation of the need to use judgment in certain
circumstances.
|
·
|
FSP
FAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments, requires companies to provide
additional fair value information for certain financial instruments in
interim financial statements, similar to what is currently required to be
disclosed on an annual basis.
|
·
|
FSP
FAS 115-2, FAS 124-2, and EITF 99-20-2, Recognition and Presentation
of Other-Than-Temporary Impairments, amends the existing guidance
regarding impairments for investments in debt
securities. Specifically, it changes how companies determine if
an impairment is considered to be other-than-temporary and the related
accounting. This standard also provides for increased
disclosures.
|
These
FSPs apply to both interim and annual periods and will be effective for us
beginning April 1, 2009. We have evaluated these standards and
believe they will have no impact on our financial condition and results of
operations.
2.
|
Restructuring
activities.
|
In
October 2008, we announced actions that, when complete, will reduce annualized
expenses by more than $200 million in our Wireless segment, especially our
baseband operation. These actions eliminated about 650
jobs. Additionally, in January 2009 we announced actions that include
employment reductions to align our spending with weakened
demand. When complete, our employment will be reduced about 12
percent through a combination of layoffs and voluntary retirements and
departures. Combined, these actions will reduce our annualized costs
by more than $700 million. The total restructuring charges for these
actions are expected to be in excess of $400 million and will continue through
the fourth quarter of 2009.
In the
fourth quarter of 2008, we recognized $230 million in restructuring charges
related to these actions, consisting of $218 million for severance and benefits
costs and $12 million related to impairments of long-lived assets. We
also fully impaired $24 million of assets that were held for sale related to a
separate 2007 action.
In the
first quarter of 2009, we recognized an additional $105 million in restructuring
charges related to these actions. These costs consisted of $98
million for severance and benefits costs and $7 million related to impairments
and other charges for long-lived assets.
The table
below reflects the changes in accrued restructuring balances related to the 2008
and 2009 actions:
|
|
Severance and Benefits
|
|
|
Impairments and Other
Charges
|
|
|
Total
|
|
Restructuring
charges recognized in the quarter ending December 31, 2008
|
|
$ |
218 |
|
|
$ |
12 |
|
|
$ |
230 |
|
Non-cash
charges
|
|
|
(30 |
)* |
|
|
(7 |
) |
|
|
(37 |
) |
Payments
|
|
|
(2 |
) |
|
|
-- |
|
|
|
(2 |
) |
Remaining
accrual at December 31, 2008
|
|
|
186 |
|
|
|
5 |
|
|
|
191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
charges recognized in the quarter ending March 31, 2009
|
|
|
98 |
|
|
|
7 |
|
|
|
105 |
|
Non-cash
charges
|
|
|
(8 |
)* |
|
|
-- |
|
|
|
(8 |
) |
Payments
|
|
|
(62 |
) |
|
|
-- |
|
|
|
(62 |
) |
Remaining
accrual at March 31, 2009
|
|
$ |
214 |
|
|
$ |
12 |
|
|
$ |
226 |
|
* Reflects
post-employment benefit plan curtailment and special termination benefit
charges.
Restructuring
charges by segment recognized in the first quarter of 2009 are as
follows:
|
|
|
|
Analog
|
|
$ |
42 |
|
Embedded
Processing
|
|
|
19 |
|
Wireless
|
|
|
32 |
|
Other
|
|
|
12 |
|
Total
restructuring charges
|
|
$ |
105 |
|
3.
|
Stock-based
compensation. We have several stock-based employee
compensation plans, which are more fully described in Note 3 in our 2008
annual report on Form 10-K.
|
The
amounts of stock-based compensation expense recognized in the periods presented
are as follows:
|
|
For
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COR
|
|
$ |
10 |
|
|
$ |
10 |
|
R&D
|
|
|
14 |
|
|
|
16 |
|
SG&A
|
|
|
26 |
|
|
|
28 |
|
Total
|
|
$ |
50 |
|
|
$ |
54 |
|
|
These
amounts include expense related to non-qualified stock options, RSUs and
stock options offered under our employee stock purchase
plan.
|
4.
|
Income
taxes. Federal income taxes for the interim periods
presented have been included in the accompanying financial statements on
the basis of an estimated annual effective tax rate. As of
March 31, 2009, the estimated annual effective tax rate for 2009 is about
24 percent, which differs from the 35 percent statutory corporate tax rate
primarily due to the effects of non-U.S. tax rates. The first
quarter of 2009 includes discrete tax benefits of $5 million primarily
related to earnings of non-U.S. subsidiaries. The first quarter
of 2008 included a discrete tax benefit of $81 million primarily due to
our decision to indefinitely reinvest the accumulated earnings of a
non-U.S. subsidiary.
|
5.
|
Earnings per share
(EPS). In 2008, the FASB issued FSP EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities, and it became effective for us beginning
January 1, 2009. Under this standard, unvested awards of
share-based payments with rights to receive dividends or dividend
equivalents, such as our restricted stock units (RSUs), are considered
participating securities for purposes of calculating EPS. Under
the two-class method required by EITF 03-6-1, a portion of net income is
allocated to these participating securities and therefore is excluded from
the calculation of EPS allocated to common stock, as shown in the table
below. This FSP requires retrospective application for periods
prior to the effective date and as a result, all prior period earnings per
share data presented herein have been adjusted to conform to these
provisions. The adoption of this FSP did not result in a change to
the previously reported basic EPS and diluted EPS for the three months
ended March 31, 2008.
|
|
Computation
and reconciliation of earnings per common share are as
follows:
|
|
|
For
Three Months Ended
|
|
|
For
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$ |
17 |
|
|
|
|
|
|
|
|
$ |
662 |
|
|
|
|
|
|
|
Less
income allocated to RSUs
|
|
|
-- |
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
Net
Income allocated to common stock for EPS calculation
|
|
$ |
17 |
|
|
|
1,275 |
|
|
$ |
.01 |
|
|
$ |
659 |
|
|
|
1,327 |
|
|
$ |
.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjust
shares for Dilutives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
plans
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$ |
17 |
|
|
|
|
|
|
|
|
|
|
$ |
662 |
|
|
|
|
|
|
|
|
|
Less
income allocated to RSUs
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
Net
Income allocated to common stock for EPS calculation
|
|
$ |
17 |
|
|
|
1,277 |
|
|
$ |
.01 |
|
|
$ |
659 |
|
|
|
1,345 |
|
|
$ |
.49 |
|
Options
to purchase 167 million and 88 million shares of common stock that were
outstanding during the first quarters of 2009 and 2008 were not included in the
computation of diluted earnings per share because their exercise price was
greater than the average market price of the common shares and, therefore, the
effect would be anti-dilutive.
6.
|
Investments in
auction-rate securities. As of March 31, 2009, we held
$492 million ($533 million par value) of auction-rate securities, which
are debt instruments with variable interest rates that historically would
periodically reset through an auction process. The $41 million
difference between fair value and par value is considered temporary and is
recorded as an unrealized loss, net of taxes, in accumulated other
comprehensive income (AOCI) on our balance
sheets.
|
Since
mid-February 2008, conditions in global credit markets have resulted in the
failure of auctions for most auction-rate securities, including those we hold,
because the amount of securities submitted for sale in those auctions exceeded
the amount of bids. A failed auction does not represent a default by the
issuer of the underlying security. When auctions are not successful,
the interest rate moves to a maximum rate defined for each security, and is
generally reset periodically at a level higher than defined short-term interest
benchmarks. To date, we have collected all interest on all of our
auction-rate securities when due and expect to continue to do so in the
future. The principal associated with failed auctions will not be
accessible until successful auctions resume, a buyer is found outside of the
auction process, or issuers use a different form of financing to replace these
securities. In the meantime, issuers continue to repay principal over
time from cash flows prior to final maturity, or make final payments when they
come due according to contractual maturities ranging from 14 to 39
years. We understand that issuers and financial markets are working
on alternatives that may improve liquidity, although it is not yet clear when or
to what extent such efforts will be successful. We expect that we
will receive the principal associated with our auction-rate securities through
one of the means described above. Due to the failed auctions and the
uncertainty regarding the liquidity of these securities, in the first quarter of
2008 we reclassified our investments in auction-rate securities with a par value
of $571 million from short-term investments to long-term
investments.
As of
March 31, 2009, $498 million par value of our auction-rate securities are backed
by pools of student loans guaranteed by the U.S. Department of Education and we
continue to believe that the credit quality of these securities is high based on
this guarantee. As of March 31, 2009, all but one of these securities
were rated AAA/Aaa by the major credit rating agencies, with the remaining
security (with a par value of $25 million) rated AAA/Baa1. The
remaining $35 million par value of our auction-rate securities are covered by
bond insurance and were rated Aa3 by Moody’s as of March 31, 2009.
While our
ability to liquidate auction-rate investments is likely to be limited for some
period of time, we do not believe this will materially impact our ability to
fund our working capital needs, capital expenditures, dividend payments or other
business requirements.
7.
|
Fair value
measurement. Beginning January 1, 2008, we measure and
report our financial assets and liabilities in our financial statements
under the provisions of SFAS 157, Fair Value Measurement.
Effective January 1, 2009, we adopted the provisions of SFAS 157
for non-financial assets and liabilities. We apply SFAS 157 to
all assets and liabilities that are required to be measured at fair
value. The adoption of SFAS 157 for non-financial assets and
liabilities did not have a significant impact on our financial condition
or results of operations.
|
SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants on the measurement date.
SFAS 157
establishes a three-level hierarchy for disclosure to show the extent and level
of judgment used to estimate fair value measurements.
Level 1 –
Uses unadjusted quoted prices that are available in active markets for the
identical assets or liabilities as of the reporting date.
Level 2 –
Uses inputs other than Level 1 that are either directly or indirectly observable
as of the reporting date through correlation with market data, including quoted
prices for similar assets and liabilities in active markets and quoted prices in
markets that are not active. Level 2 also includes assets and
liabilities that are valued using models or other pricing methodologies that do
not require significant judgment since the input assumptions used in the models,
such as interest rates and volatility factors, are corroborated by readily
observable data.
Level 3 –
Uses inputs that are unobservable and are supported by little or no market
activity and reflect the use of significant management
judgment. These values are generally determined using pricing models
for which the assumptions utilize management’s estimates of market participant
assumptions.
Investments
in auction-rate securities are our only Level 3 assets. We use a
discounted cash flow (DCF) model to determine the estimated fair value of these
investments as of each quarter end. The assumptions used in preparing
the DCF model include estimates for the amount and timing of future interest and
principal payments and the rate of return required by investors to own these
securities in the current environment. In making these assumptions we
consider relevant factors including: the formula for each security that defines
the interest rate paid to investors in the event of a failed auction; forward
projections of the interest rate benchmarks specified in such formulas; the
likely timing of principal repayments; the probability of full repayment
considering the guarantees by the U.S. Department of Education of the underlying
student loans, guarantees by other third parties, and additional credit
enhancements provided through other means; and, publicly available pricing data
for student loan asset-backed securities that are not subject to
auctions. Our estimate of the rate of return required by investors to
own these securities also considers the current reduced liquidity for
auction-rate securities.
The table
below sets forth, by level, our assets and liabilities that were accounted for
at fair value as of March 31, 2009. The table does not include cash
on hand and also does not include assets and liabilities that are measured at
historical cost or any basis other than fair value.
|
|
Portion
of Carrying Value Measured
at
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
Level
|
|
|
Level
|
|
|
Level
|
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
Items
measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and government
agency securities
|
|
$ |
45 |
|
|
$ |
45 |
|
|
$ |
-- |
|
|
$ |
-- |
|
Money market
funds
|
|
|
1,258 |
|
|
|
1,258 |
|
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate obligations
guaranteed by FDIC
|
|
|
445 |
|
|
|
-- |
|
|
|
445 |
|
|
|
-- |
|
Corporate
obligations guaranteed by U.K. government
|
|
|
155 |
|
|
|
-- |
|
|
|
155 |
|
|
|
-- |
|
U.S.
government agency and Treasury securities
|
|
|
260 |
|
|
|
260 |
|
|
|
-- |
|
|
|
-- |
|
Mortgage-backed securities –GSE
guaranteed
|
|
|
48 |
|
|
|
-- |
|
|
|
48 |
|
|
|
-- |
|
Mortgage-backed securities –
senior bonds
|
|
|
78 |
|
|
|
-- |
|
|
|
78 |
|
|
|
-- |
|
Other
|
|
|
5 |
|
|
|
-- |
|
|
|
5 |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction–rate
securities
|
|
|
492 |
|
|
|
-- |
|
|
|
-- |
|
|
|
492 |
|
Mutual
funds
|
|
|
86 |
|
|
|
86 |
|
|
|
-- |
|
|
|
-- |
|
Total
assets
|
|
$ |
2,872 |
|
|
$ |
1,649 |
|
|
$ |
731 |
|
|
$ |
492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred credit and other
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent
consideration
|
|
$ |
7 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
7 |
|
Deferred compensation
liabilities
|
|
|
123 |
|
|
|
123 |
|
|
|
-- |
|
|
|
-- |
|
Total
liabilities
|
|
$ |
130 |
|
|
$ |
123 |
|
|
$ |
-- |
|
|
$ |
7 |
|
The
following table summarizes the change in the fair values for Level 3 items for
the quarter ended March 31, 2009.
|
|
Level
3
|
|
Changes
in fair value during the period ended March 31, 2009
(pre-tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance, December 31,
2008
|
|
$ |
482 |
|
|
$ |
-- |
|
Contingent
consideration
|
|
|
-- |
|
|
|
7 |
|
Unrealized gain - included in
AOCI
|
|
|
12 |
|
|
|
-- |
|
Redemptions at
par
|
|
|
(2 |
) |
|
|
-- |
|
Ending Balance, March 31,
2009
|
|
$ |
492 |
|
|
$ |
7 |
|
|
|
|
|
|
|
|
|
|
8.
|
Post-employment
benefit plans. Components of net periodic employee
benefit cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
three months ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$ |
5 |
|
|
$ |
6 |
|
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
11 |
|
|
$ |
10 |
|
Interest
cost
|
|
|
13 |
|
|
|
13 |
|
|
|
7 |
|
|
|
7 |
|
|
|
15 |
|
|
|
15 |
|
Expected
return on plan assets
|
|
|
(12 |
) |
|
|
(11 |
) |
|
|
(7 |
) |
|
|
(7 |
) |
|
|
(16 |
) |
|
|
(20 |
) |
Amortization
of prior service cost
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
(1 |
) |
Recognized
net actuarial
loss
|
|
|
4 |
|
|
|
4 |
|
|
|
2 |
|
|
|
2 |
|
|
|
10 |
|
|
|
1 |
|
Net
periodic benefit
cost
|
|
$ |
10 |
|
|
$ |
12 |
|
|
$ |
3 |
|
|
$ |
4 |
|
|
$ |
19 |
|
|
$ |
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailment
charges
|
|
|
-- |
|
|
|
-- |
|
|
|
2 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Special
termination benefit charges
|
|
|
6 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Total,
including
charges
|
|
$ |
16 |
|
|
$ |
12 |
|
|
$ |
5 |
|
|
$ |
4 |
|
|
$ |
19 |
|
|
$ |
5 |
|
9.
|
Contingencies. We
routinely sell products with a limited intellectual property
indemnification included in the terms of sale. Historically, we
have had only minimal and infrequent losses associated with these
indemnities. Consequently, we cannot reasonably estimate or
accrue for any future liabilities that may
result.
|
We accrue
for known product-related claims if a loss is probable and can be reasonably
estimated. During the periods presented, there have been no material
accruals or payments regarding product warranty or product liability, and
historically we have experienced a low rate of payments on product
claims. Consistent with general industry practice, we enter into
formal contracts with certain customers that include negotiated warranty
remedies. Typically, under these agreements, our warranty for
semiconductor products includes: three years’ coverage; an obligation
to repair, replace or refund; and a maximum payment obligation tied to the price
paid for our products. In some cases, product claims may exceed the
price of our products. From time
to time, we also negotiate contingent consideration payment arrangements
associated with certain acquisitions, which are recorded at fair value.
We are
subject to various other legal and administrative
proceedings. Although it is not possible to predict the outcome of
these matters, we believe that the results of these proceedings will not have a
material adverse effect on our financial condition, results of operations or
liquidity.
Discontinued Operations Indemnity
– In connection with the sale of the former Sensors & Controls
business to an affiliate of Bain Capital, LLC in 2006, we have agreed to
indemnify the former business, renamed Sensata Technologies, Inc., for specified
litigation matters and certain liabilities, including environmental
liabilities. Our indemnification obligations with respect to breaches
of representations and warranties and the specified litigation matters are
generally subject to a total deductible of $30 million and our maximum potential
exposure is limited to $300 million.
|
|
For
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
Segment
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analog
|
|
$ |
814 |
|
|
$ |
1,265 |
|
Embedded
Processing
|
|
|
316 |
|
|
|
425 |
|
Wireless
|
|
|
551 |
|
|
|
921 |
|
Other
|
|
|
405 |
|
|
|
661 |
|
Total
revenue
|
|
$ |
2,086 |
|
|
$ |
3,272 |
|
|
|
|
|
|
|
|
|
|
|
|
For
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
Segment
Operating Profit (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analog
|
|
$ |
(35 |
) |
|
$ |
372 |
|
Embedded
Processing
|
|
|
2 |
|
|
|
96 |
|
Wireless
|
|
|
(13 |
) |
|
|
153 |
|
Other
|
|
|
56 |
|
|
|
186 |
|
Total
operating
profit
|
|
$ |
10 |
|
|
$ |
807 |
|
See Note
2 for restructuring charges impacting segment results for the three months ended
March 31, 2009. There were no restructuring charges impacting segment
results for the three months ended March 31, 2008.
ITEM
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
The
following should be read in conjunction with the Financial Statements and the
related Notes that appear elsewhere in this document. All dollar
amounts in the tables in this discussion are stated in millions of U.S. dollars,
except per-share amounts.
Overview
At Texas
Instruments, we design and make semiconductors that we sell to electronics
designers and manufacturers all over the world. We began operations
in 1930 and are incorporated in Delaware. We are headquartered in
Dallas, Texas, and have design, manufacturing or sales operations in more than
30 countries. We have four segments: Analog, Embedded Processing,
Wireless and Other. We expect Analog and Embedded Processing to be
our primary growth engines in the years ahead, and we therefore focus our
resources on these segments.
We were
the world’s fourth largest semiconductor company in 2008 as measured by revenue,
according to an external source. Additionally, we sell calculators
and related products.
Product
information
Semiconductors
are electronic components that serve as the building blocks inside modern
electronic systems and equipment. Semiconductors come in two basic
forms: individual transistors and integrated circuits (generally known as
“chips”) that combine multiple transistors on a single piece of material to form
a complete electronic circuit. Our semiconductors are used to
accomplish many different things, such as converting and amplifying signals,
interfacing with other devices, managing and distributing power, processing
data, canceling noise and improving signal resolution. Our portfolio
includes products that are integral to almost all electronic
equipment.
We sell
two general categories of semiconductor products: custom and
standard. A custom product is designed for a specific customer for a
specific application, is sold only to that customer and is typically sold
directly to the customer. A standard product is designed for use by
many customers and/or many applications and is generally sold through both
distribution and direct channels. Standard products include both
proprietary and commodity products.
Additional
information regarding each segment’s products follows.
Analog
Analog
semiconductors change real-world signals – such as sound, temperature, pressure
or images – by conditioning them, amplifying them and often converting them to a
stream of digital data so the signals can be processed by other semiconductors,
such as digital signal processors (DSPs). Analog semiconductors are
also used to manage power distribution and consumption. Sales from
our Analog segment accounted for about 40 percent of our revenue in
2008. According to WSTS, an
industry data-gathering organization, the worldwide market for analog
semiconductors was about $36 billion in 2008. Our Analog segment’s
revenue in 2008 was $4.9 billion, or about
14% of this market, giving us the leading position. We believe
that we are well positioned to increase our share over time.
Our
Analog product lines are: high-performance analog, high-volume analog
& logic and power management.
High-performance
analog products: These include standard analog semiconductors, such
as amplifiers, data converters, low-power radio frequency devices and interface
semiconductors (our standard analog portfolio includes more than 15,000
products), that we market to many different customers (nearly 80,000) who use
them in a wide range of products across the industrial, communications,
computing and consumer markets. High-performance analog products
generally have long life cycles, often 10 to 20 years.
High-volume
analog & logic products: These include two product
types. The first, high-volume analog, includes products for specific
applications, including custom products for specific customers. The
life cycles of our high-volume analog products are generally shorter than those
of our high-performance analog products. End markets for high-volume
analog products include communications, automotive, computing and many consumer
electronics products. The second product type, standard linear and
logic, includes commodity products marketed to many different customers for many
different applications.
Power
management products: These include both standard and custom
semiconductors that help customers manage power in any type of electronic
system. We design and manufacture power management semiconductors for
both portable devices (battery-powered devices, such as handheld consumer
electronics, laptop computers and cordless power tools) and line-powered systems
(products that require an external electrical source, such as computers, digital
TVs, wireless base stations and high-voltage industrial equipment).
Embedded
Processing
Our
Embedded Processing products include our DSPs (other than DSPs specific to our
Wireless segment) and microcontrollers. DSPs perform mathematical
computations almost instantaneously to process or improve digital
data. Microcontrollers are designed to control a set of specific
tasks for electronic equipment. Sales of Embedded Processing products
accounted for about 15 percent of our revenue in 2008. The worldwide
market for embedded processors was about $17 billion in
2008. According to external sources, we have about 10 percent market
share in this fragmented market, and we believe we are well positioned to
increase our share over time.
An
important characteristic of Embedded Processing products is that our customers
often invest their own research and development (R&D) to write software that
operates on our products. This investment tends to increase the
length of our customer relationships because customers prefer to re-use software
from one product generation to the next. We make and sell standard,
or catalog, Embedded Processing products used in many different applications and
custom Embedded Processing products used in specific applications, such as
communications infrastructure equipment and automotive.
Wireless
Cell
phones require a modem or “baseband” to connect to the wireless carrier’s
network. Many of today’s advanced cell phones also require an
applications processor to run the phone’s software and services, and
semiconductors to enable connectivity to Bluetooth® devices,
WiFi networks or GPS location services. We design, make and sell
products to satisfy each of these requirements. Wireless products are
typically sold in high volumes and our Wireless portfolio includes both standard
(or merchant) products and custom products. Sales of Wireless
products accounted for about 25 percent of our revenue in 2008, and a
significant portion of our Wireless sales were to a single
customer.
As
wireless communications have proliferated, consumers have demanded capabilities
beyond voice. Smartphones (phones that contain email, media, games
and computing capability) represent one of the fastest growing wireless
markets. These phones tend to include many semiconductor
products. Major handset manufacturers are actively pursuing the
smartphone market and increasingly focusing their R&D on applications and
services. As a result, we believe customer demand for applications
processors will grow as handset manufacturers seek to differentiate their
products by providing software and a unique user experience. Our
OMAPTM product
line has a leading position in the applications processor market and is used by
most of the top handset manufacturers.
Our
Wireless segment has been shifting focus from baseband chips, a market with
shrinking competitive barriers and slowing growth rates, to applications
processors, a market we expect will grow faster than the baseband
market. Consistent with this shift in market focus, we are
concentrating our Wireless investments on our applications processors and
connectivity products and have discontinued further development of merchant
baseband products. While we continue to sell custom baseband
products, we are also decreasing custom baseband investments and expect
substantially all of this revenue to cease by the end of 2012.
Other
Our Other
segment includes revenue from smaller semiconductor product lines and handheld
graphing and scientific calculators, and from royalties received for our
patented technology that we license to other electronics
companies. The semiconductor products in our Other segment include
DLP®
products (primarily used to create high-definition images for business and home
theater projectors, televisions and movie projectors), reduced-instruction set
computing (RISC) microprocessors (designed to provide very fast computing and
often implemented in servers) and custom semiconductors known as
application-specific integrated circuits (ASICs). This segment
accounted for about 20 percent of our revenue in 2008.
Inventory
While our
inventory practices differ by product, we generally maintain inventory levels
that are consistent with our expectations of customer demand.
For
custom semiconductor products, where the risk of obsolescence is higher, we
carry lower levels of inventory when possible. These products have a
single customer, are sold in high volumes and have comparatively shorter life
cycles. Life cycles of these products are often determined by
end-equipment upgrade cycles and can be as short as 12 to 24
months.
For
standard semiconductor products, where the risk of obsolescence is low, we
generally carry higher levels of inventory. These products usually
have many customers and long life cycles, and are often ordered in small
quantities. Standard product inventory is sometimes held in
unfinished wafer form, giving us greater flexibility to meet final package and
test configurations.
As a
result of the following multi-year trends, we now tend to carry relatively
higher levels of inventory (as measured in days of inventory) than in past
years: standard products have become a larger part of our portfolio;
we have increased consignment programs with our largest customers; and our
distributors now carry relatively less inventory on average than in the
past.
We manage
calculator inventory consistent with expected seasonality.
Manufacturing
Semiconductor
manufacturing begins with the wafer fabrication manufacturing process: a
sequence of photo-lithographic and chemical processing steps that fabricate a
number of semiconductor devices on a thin silicon wafer. Each device
on the wafer is tested and the wafer is cut into pieces called
chips. Each chip is assembled into a package that then may be
retested. The entire process typically requires between twelve and
eighteen weeks and takes place in highly specialized facilities.
We own
and operate semiconductor manufacturing sites in North America, Asia and
Europe. These facilities include high-volume wafer fabrication plants
and assembly/test sites. Our facilities require substantial
investment to construct and are largely fixed-cost assets once in
operation. Because we own much of our manufacturing capacity, a
significant portion of our operating cost is fixed. In general, these
fixed costs do not decline with reductions in customer demand or utilization of
capacity and can adversely affect our profit margins as a
result. Conversely, as product demand rises and factory utilization
increases, the fixed costs are spread over increased output, potentially
benefiting our profit margins.
Most of
our Analog semiconductors require a lower level of capital investment in
manufacturing and equipment than is needed for equivalent production levels of
our Embedded Processing and Wireless semiconductors, which are manufactured
using advanced logic wafer manufacturing equipment. While analog
chips benefit from unique, proprietary wafer manufacturing processes, these
processes can be applied using older, less expensive equipment. In
addition, these processes and equipment remain usable for much longer than the
manufacturing processes and equipment required for advanced logic wafer
manufacturing.
To
supplement our internal advanced logic wafer fabrication capacity, maximize our
responsiveness to customer demand and minimize our overall capital expenditures,
our wafer manufacturing strategy utilizes the capacity of outside suppliers,
commonly known as foundries. Our strategy involves installing
internal wafer fabrication capacity to a level we believe will remain fully
utilized over the equipment’s useful lifetime and then outsourcing remaining
capacity needs to foundries. In 2008, external foundries provided
about 50 percent of the fabricated wafers for our advanced logic manufacturing
needs. We expect the proportion of our advanced logic wafers provided
by foundries will increase over time. We expect to maintain
sufficient internal wafer fabrication capacity to meet substantially all our
analog production needs.
In
addition to using foundries to supplement our wafer fabrication capacity, we
selectively use subcontractors to supplement our assembly/test
capacity. We generally use subcontractors for assembly/test of
products that would be less cost-efficient to complete in-house (e.g.,
relatively low-volume products that are unlikely to keep internal equipment
fully utilized), or in the event demand temporarily exceeds our internal
capacity. We believe we often have a cost advantage in maintaining
internal assembly/test capacity. Accordingly, we have recently opened
an environmentally efficient assembly/test facility in the Philippines, and the
facility is in the initial stages of production.
This
internal/external manufacturing strategy is designed to reduce the level of our
required capital expenditures, and thereby reduce our subsequent levels of
depreciation. Expected end results include less fluctuation in our
profit margins due to changing product demand, and lower cash requirements for
expanding and updating our manufacturing capabilities. As our
internal manufacturing efforts shift to a higher percentage of analog products,
an increasing proportion of our capital expenditures is devoted to assembly/test
facilities and equipment. This is primarily due to the lower capital
needs of analog wafer manufacturing equipment.
Product
cycle
The
global semiconductor market is characterized by constant, though generally
incremental, advances in product designs and manufacturing
methods. Chip prices and manufacturing costs tend to decline over
time as manufacturing methods and product life cycles
mature. Typically, new chips are produced in limited quantities at
first and then ramp to high-volume production over
time. Consequently, new products tend not to have a significant
impact on revenue for one or more quarters after they are
introduced. In the discussion below, changes in our shipments are
caused by changing demand for our products unless otherwise noted.
Market
cycle
The
“semiconductor cycle” is an important concept that refers to the ebb and flow of
supply, with relatively stable demand. The semiconductor market
historically has been characterized by periods of tight supply caused by
strengthening demand and/or insufficient manufacturing capacity, followed by
periods of surplus inventory caused by weakening demand and/or excess
manufacturing capacity. This cycle is affected by the significant
time and money required to build and maintain semiconductor manufacturing
facilities.
Seasonality
Our
revenue and operating results are subject to some seasonal
variation. Sales of our semiconductor products are seasonally weaker
in the first quarter than in other quarters, particularly for products sold into
cell phones and consumer electronics applications that have stronger sales later
in the year as manufacturers prepare for the holiday selling
season. Calculator revenue is tied to the U.S. back-to-school season
and, as a result, is at its highest in the second and third
quarters. Royalty revenue is not always uniform or predictable, in
part due to the performance of our licensees and in part due to the timing of
new license agreements or the expiration and renewal of existing
agreements.
Tax
considerations
We
operate in a number of tax jurisdictions and are subject to several types of
taxes including those that are based on income, capital, property and payroll,
as well as sales and other transactional taxes. The timing of the
final determination of our tax liabilities varies among the various
jurisdictions and their taxing authorities. As a result, during any
particular reporting period, we might reflect in our financial statements one or
more tax refunds or assessments, or changes to tax liabilities, involving one or
more taxing authorities.
First-quarter 2009
results
Our
first-quarter revenue was $2.09 billion, net income was $17 million and earnings
per share were $0.01.
Our
revenue and earnings exceeded expectations for the quarter, but we are cautious
because of the business climate. Demand for our products has begun to
stabilize after sharp drops in the past two quarters. Many customers
have increased orders for TI products as they have begun to slow down their
inventory reductions. However, we remain sensitive to continuing
weakness in the global economy, and we have yet to see signs of a broad-based
recovery in our business. In this environment, we will keep our
operations flexible so that we can respond quickly to any shifts in demand,
whether up or down.
Operational
performance in the quarter was good, especially our reduction of
inventory. We reduced our own inventory by $277 million, and at the
same time worked with distributors to reduce channel inventory by $132
million. Our inventory reductions are essentially complete, and we
expect to moderately increase production levels in our factories during the
second quarter.
Our
people are focusing on opportunities for growth in Analog and Embedded
Processing. Among highlights in the quarter were the acquisition of
CICLON Semiconductor, a specialized supplier of analog chips for power
management, and qualification of a new assembly/test factory. Both
improve our ability to serve customers.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Statements
of Income
(In
millions, except per-share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
2,086 |
|
|
$ |
3,272 |
|
|
$ |
2,491 |
|
Cost
of revenue
|
|
|
1,280 |
|
|
|
1,516 |
|
|
|
1,394 |
|
Gross
profit
|
|
|
806 |
|
|
|
1,756 |
|
|
|
1,097 |
|
Research
and development (R&D)
|
|
|
386 |
|
|
|
514 |
|
|
|
431 |
|
Selling,
general and administrative (SG&A)
|
|
|
305 |
|
|
|
435 |
|
|
|
361 |
|
Restructuring
expense
|
|
|
105 |
|
|
|
-- |
|
|
|
254 |
|
Operating
profit
|
|
|
10 |
|
|
|
807 |
|
|
|
51 |
|
Other
income (expense) net
|
|
|
5 |
|
|
|
33 |
|
|
|
(15 |
) |
Income
before income taxes
|
|
|
15 |
|
|
|
840 |
|
|
|
36 |
|
Provision
(benefit) for income taxes
|
|
|
(2 |
) |
|
|
178 |
|
|
|
(71 |
) |
Net
income
|
|
$ |
17 |
|
|
$ |
662 |
|
|
$ |
107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
.01 |
|
|
$ |
.50 |
|
|
$ |
.08 |
|
Diluted
|
|
$ |
.01 |
|
|
$ |
.49 |
|
|
$ |
.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
common shares outstanding (millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,275 |
|
|
|
1,327 |
|
|
|
1,283 |
|
Diluted
|
|
|
1,277 |
|
|
|
1,345 |
|
|
|
1,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared per share of common stock
|
|
$ |
.11 |
|
|
$ |
.10 |
|
|
$ |
.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
38.6 |
% |
|
|
53.7 |
% |
|
|
44.0 |
% |
R&D
|
|
|
18.5 |
% |
|
|
15.7 |
% |
|
|
17.3 |
% |
SG&A
|
|
|
14.6 |
% |
|
|
13.3 |
% |
|
|
14.5 |
% |
Operating
profit
|
|
|
0.5 |
% |
|
|
24.7 |
% |
|
|
2.0 |
% |
Details of financial
results
Revenue
for the first quarter of 2009 was $2.09 billion, a decrease of $1.19 billion, or
36 percent, from the year-ago quarter, and $405 million, or 16 percent from the
prior quarter. Revenue in all segments declined in both comparisons
due to significantly reduced shipments of a broad range of products resulting
from the downturn in global markets.
Gross
profit for the first quarter of 2009 was $806 million, or 38.6 percent of
revenue, a decrease of $950 million, or 54 percent from the year-ago
quarter. Gross profit decreased $291 million, or 27 percent, from the
prior quarter. The decline in gross profit in both comparisons was
due to a combination of significantly lower revenue and the impact of lower
factory utilization. Lower factory utilization decreased our gross
profit by about $320 million from a year ago and about $120 million from the
prior quarter.
Operating
expenses for the first quarter of 2009 were $386 million for R&D and $305
million for SG&A. R&D expense decreased $128 million, or 25
percent, from a year ago primarily due to lower product development costs, and
to a lesser extent, our previously-announced employment
reductions. R&D expense decreased $45 million, or 10 percent,
from the prior quarter primarily due to our previously-announced employment
reductions, particularly in our Other and Wireless segments. SG&A
expense decreased $130 million, or 30 percent, from the year-ago quarter
primarily due to the combination of, in decreasing order, cost control efforts,
the impact of previously-announced employment reductions and lower
compensation-related expenses. SG&A decreased $56 million, or 16
percent, sequentially primarily due to the combination of, in decreasing order,
the impact of previously-announced employment reductions, cost control efforts
and lower compensation-related expenses.
Restructuring
costs in the first quarter of 2009 were $105 million, compared with $254 million
in the prior quarter. The restructuring costs in the first quarter
were for additional severance and benefits costs, primarily for non-U.S.
employees (see Note 2 to the Financial Statements for a detailed discussion of
these charges and payments made during the quarter). We still have
restructuring actions underway in our non-U.S. subsidiaries. We
expect to incur restructuring charges of about $100 million in the second
quarter of 2009. As of March 31, 2009, a total of about 3,200 jobs
have been eliminated since the
first of these actions was announced in October of 2008.
For the
first quarter of 2009, we had operating profit of $10 million, a decrease of 99
percent compared with the year-ago quarter, and a decrease of 80 percent
compared with the previous quarter. The decline from a year ago was
due to lower gross profit, and to a lesser extent, restructuring
charges. Collectively, these factors more than offset lower operating
expenses. The decline from the prior quarter was due to lower gross
profit, which more than offset lower restructuring charges and lower operating
expenses.
Other
income (expense) net (OI&E) for the first quarter of 2009 was $5 million, a
decrease of $28 million from the year-ago quarter, due about equally to lower
interest income and investments. OI&E increased $20 million from
the prior quarter, which included a reserve associated with a former
business.
As of
March 31, 2009, the estimated annual effective tax rate for 2009 is expected to
be about 24 percent (see Note 4 to the Financial Statements for additional
information).
Quarterly
income taxes are calculated using the estimated annual effective tax
rate.
For the
first quarter of 2009 we had a net tax benefit of $2 million, compared with a
tax provision of $178 million in the year-ago quarter. The decrease in the tax
provision from the year-ago quarter was due to lower income before income taxes,
partially offset by a decrease in net discrete tax benefits and, to a lesser
extent, the effect of non-U.S. tax rates. Included in the net tax
benefit for the quarter were $5 million in discrete tax benefits primarily
related to earnings of non-U.S. subsidiaries. The tax provision in
the year-ago quarter included discrete tax benefits of $81 million, which were
primarily due to our decision to indefinitely reinvest the accumulated earnings
of a non-U.S. subsidiary.
In the
previous quarter, we had a net tax benefit of $71 million, which reflected the
cumulative effect of the reinstatement of the federal research tax
credit.
In the
first quarter of 2009, we had net income of $17 million, or earnings per share
of $0.01, compared with net income of $662 million, or earnings per share of
$0.49, for the year-ago quarter and $107 million, or $0.08 per share for the
prior quarter.
Orders in
the first quarter were $2.19 billion, a decrease of 34 percent from the year-ago
quarter. Compared with the prior quarter, orders were up 18 percent,
but orders were unusually weak in the prior quarter as customers began reducing
their inventory in response to the slowing global economy.
Segment
results
Analog
|
|
|
1Q09 |
|
|
|
1Q08 |
|
|
1Q09
vs. 1Q08
|
|
|
|
4Q08 |
|
|
1Q09
vs. 4Q08
|
|
Revenue
|
|
$ |
814 |
|
|
$ |
1,265 |
|
|
|
-36 |
% |
|
$ |
1,015 |
|
|
|
-20 |
% |
Operating
profit (loss) *
|
|
|
(35 |
) |
|
|
372 |
|
|
|
-109 |
% |
|
|
78 |
|
|
|
-145 |
% |
Operating
profit (loss) % of revenue
|
|
|
(4.3 |
%) |
|
|
29.4 |
% |
|
|
|
|
|
|
7.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Includes
restructuring expenses of
|
|
$ |
42 |
|
|
|
-- |
|
|
|
|
|
|
$ |
60 |
|
|
|
|
|
Analog
revenue decreased 36 percent from the year-ago quarter and 20 percent from the
prior quarter, primarily due to lower shipments of high-volume analog &
logic products. To a lesser extent, high-performance analog and power
management revenue also declined in both comparisons due to decreased
shipments. The lower revenue more than offset reductions in operating
expenses and resulted in an operating loss for the first quarter of
2009. Operating profit declined from both the year-ago quarter and
the previous quarter due to lower revenue.
Embedded
Processing
|
|
|
1Q09 |
|
|
|
1Q08 |
|
|
1Q09
vs. 1Q08
|
|
|
|
4Q08 |
|
|
1Q09
vs. 4Q08
|
|
Revenue
|
|
$ |
316 |
|
|
$ |
425 |
|
|
|
-26 |
% |
|
$ |
340 |
|
|
|
-7 |
% |
Operating
profit (loss) *
|
|
|
2 |
|
|
|
96 |
|
|
|
-98 |
% |
|
|
(2 |
) |
|
|
200 |
% |
Operating
profit (loss) % of revenue
|
|
|
0.6 |
% |
|
|
22.5 |
% |
|
|
|
|
|
|
(0.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Includes
restructuring expenses of
|
|
$ |
19 |
|
|
|
-- |
|
|
|
|
|
|
$ |
24 |
|
|
|
|
|
Embedded
Processing revenue decreased 26 percent from the year-ago quarter and 7 percent
from the prior quarter. These declines were primarily due to decreased shipments
of catalog products, and to a lesser extent, decreased shipments of automotive
products. Compared to the year ago-quarter, operating profit
decreased 98%, primarily due to the combination of lower revenue and, to a
lesser extent, restructuring charges.
Wireless
|
|
|
1Q09 |
|
|
|
1Q08 |
|
|
1Q09
vs. 1Q08
|
|
|
|
4Q08 |
|
|
1Q09
vs. 4Q08
|
|
Revenue
|
|
$ |
551 |
|
|
$ |
921 |
|
|
|
-40 |
% |
|
$ |
646 |
|
|
|
-15 |
% |
Operating
profit (loss) *
|
|
|
(13 |
) |
|
|
153 |
|
|
|
-108 |
% |
|
|
(87 |
) |
|
|
85 |
% |
Operating
profit (loss) % of revenue
|
|
|
(2.4 |
%) |
|
|
16.6 |
% |
|
|
|
|
|
|
(13.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Includes
restructuring expenses of
|
|
$ |
32 |
|
|
|
-- |
|
|
|
|
|
|
$ |
130 |
|
|
|
|
|
Wireless
revenue declined 40 percent from the year-ago quarter and 15 percent from the
prior quarter. These decreases were primarily due to decreased
shipments of baseband products, and to a lesser extent, OMAP applications
processor products. Revenue from connectivity products declined from
the previous quarter due to lower shipments, although revenue was higher than
the year-ago quarter due to higher shipments. For the first quarter
of 2009, there was an operating loss. Compared with the year-ago
quarter, operating profit declined due to lower revenue. Lower
revenue more than offset an improvement in operating
expenses. Compared with the prior quarter, our operating loss
improved due to lower restructuring costs.
Other
|
|
|
1Q09 |
|
|
|
1Q08 |
|
|
1Q09
vs. 1Q08
|
|
|
|
4Q08 |
|
|
1Q09
vs. 4Q08
|
|
Revenue
|
|
$ |
405 |
|
|
$ |
661 |
|
|
|
-39 |
% |
|
$ |
490 |
|
|
|
-17 |
% |
Operating
profit (loss) *
|
|
|
56 |
|
|
|
186 |
|
|
|
-70 |
% |
|
|
62 |
|
|
|
-10 |
% |
Operating
profit (loss) % of revenue
|
|
|
13.8 |
% |
|
|
28.1 |
% |
|
|
|
|
|
|
12.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Includes
restructuring expenses of
|
|
$ |
12 |
|
|
|
-- |
|
|
|
|
|
|
$ |
40 |
|
|
|
|
|
Other
revenue decreased 39 percent from the year-ago quarter, primarily due to lower
shipments of, in decreasing order, RISC microprocessors, DLP products and
calculators and lower royalties, while shipments of ASIC products
increased. Compared with the previous quarter, revenue declined 17
percent due to lower shipments of, in decreasing order, DLP products, RISC
microprocessors and ASIC products and lower royalties, while shipments of
calculators increased. Operating profit for the first quarter of 2009 was
lower than the year-ago quarter due to lower revenue, which was partially offset
by lower operating expenses. Compared with the prior quarter,
operating profit decreased due to lower revenue, which was offset by lower
restructuring costs and reductions in operating expenses.
Financial
condition
At the
end of the first quarter of 2009, total cash (cash and cash equivalents plus
short-term investments) was $2.43 billion. This was $114 million
lower than at the end of 2008. In the first quarter we used $104
million of cash for an acquisition (see Note 1 to the Financial Statements for
additional information).
Accounts
receivable were $1.13 billion at the end of the quarter. This was an
increase of $212 million from the end of 2008. Days sales outstanding
were 49 at the end of the quarter compared with 33 at the end of
2008. Days
sales outstanding were unusually low at year end due to a sharp decrease in
shipments to customers during the fourth quarter of 2008, particularly in
December.
Inventory
was $1.10 billion at the end of the quarter. This was a reduction of
$277 million from the end of 2008. Days of inventory at the end of
the first quarter were 77, compared with 89 days at the end of
2008. We took aggressive actions to reduce inventory, including
idling factories during a portion of the quarter.
Depreciation
in the first quarter of 2009 was $230 million, a decrease of $11 million from
the same period a year ago. Capital spending in the first quarter of
2009 totaled $43 million. This was a decrease of $176 million from a
year ago primarily due to lower expenditures for semiconductor assembly/test
facilities and equipment. We continued to constrain capital
expenditures in the first quarter of 2009 as we do not need additional near-term
manufacturing capacity in the current weak demand environment.
Liquidity
and capital resources
Our
sources of liquidity are our cash flows from operations, cash and cash
equivalents, short-term investments and revolving credit
facilities. Cash flow from operations for the first quarter of 2009
was $251 million, a decrease of $398 million from the year-ago
period. This decrease was due to the decrease in net income,
partially offset by changes in working capital used for inventory.
We have
$1.44 billion of cash and cash equivalents and $990 million of short-term
investments as of March 31, 2009. We have a multi-year $1 billion
revolving credit facility and a non-U.S. revolving credit facility of $175
million. As of March 31, 2009, these credit facilities were not being
utilized.
For the
first quarter of 2009, investing activities provided cash of $363 million,
compared with $391 million in the year-ago period.
For the
first quarter of 2009, net cash used in financing activities was $224 million,
compared with $918 million in the year-ago period. We used $101
million of cash in the first quarter of 2009 to repurchase 6.6 million shares of
our common stock and paid dividends of $141 million. In the same
period last year we used $874 million of cash to repurchase 28.6 million shares
of common stock and paid $133 million in dividends. Dividends were
higher due to the increase in the quarterly dividend rate in the fourth quarter
of 2008. Employee exercises of stock options are also reflected in
cash from financing activities. In the first quarter of 2009, such
exercises provided $18 million compared with $76 million for the same period a
year ago.
In 2009,
we expect: an annual effective tax rate of about 24 percent; R&D expense of
$1.5 billion; capital expenditures of $0.3 billion; and depreciation of $0.9
billion.
We
believe we have the necessary financial resources to fund our working capital
needs, capital expenditures, authorized stock repurchases, dividend payments and
other business requirements for at least the next 12 months.
Changes
in accounting standards
See Note
1 to the Financial Statements for detailed information regarding the status of
new accounting standards that are not yet effective for us.
ITEM
3. Quantitative and Qualitative Disclosures About Market Risk.
Information
concerning market risk is contained on page 48 of Exhibit 13 to our Form 10-K
for the year ended December 31, 2008, and is incorporated by reference to such
exhibit.
ITEM
4. Controls and Procedures.
An
evaluation as of the end of the period covered by this report was carried out
under the supervision and with the participation of management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934). Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that those disclosure controls and procedures
were effective. In addition, there has been no change in our internal
control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934) that occurred during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.
PART
II – OTHER INFORMATION
ITEM
2. Unregistered Sales of Equity Securities and Use of Proceeds.
The
following table contains information regarding our purchases of our common stock
during the quarter.
ISSUER
PURCHASES OF EQUITY SECURITIES
|
|
Total
Number
of
Shares
Purchased
|
|
|
Average
Price Paid
per
Share
|
|
|
Total Number
of
Shares
Purchased
as
Part
of
Publicly
Announced
Plans
or
Programs(1)
|
|
Approximate
Dollar Value of Shares that
May
Yet Be
Purchased
Under
the
Plans
or
Programs(1)
|
January
1 through January 31, 2009
|
|
|
3,364,000 |
|
|
$ |
15.03
|
|
|
|
3,364,000
|
|
$3,502 million
|
February
1 through February 28, 2009
|
|
|
3,190,000 |
|
|
$ |
15.61
|
|
|
|
3,190,000
|
|
$3,452
million
|
March
1 through March 31, 2009
|
|
|
30,000 |
|
|
$ |
18.87
|
|
|
|
30,000(2)
|
|
|
Total
|
|
|
6,584,000 |
|
|
$ |
15.33
|
|
|
|
6,584,000(2)
|
|
$3,452 million
|
(1)
|
All
purchases during the quarter were made under an authorization to purchase
up to $5 billion of additional shares of TI common stock, which was
announced on September 21, 2007. No expiration date has been
specified for this authorization.
|
(2)
|
All
purchases were made through open-market purchases except for 30,000 shares
that were acquired in January and 30,000 shares that were acquired in
March through a privately negotiated forward purchase contract with a
non-affiliated financial institution. The forward purchase
contract was designed to minimize the adverse impact on our earnings from
the effect of stock market value fluctuations on the portion of our
deferred compensation obligations denominated in TI
stock.
|
|
|
|
Designation
of Exhibits in This Report
|
|
|
10.1
|
|
Texas
Instruments 2009 Director Compensation Plan (incorporated by reference to
the Registrant’s Proxy Statement dated March 5, 2009 (see Exhibit
B))
|
10.2
|
|
Form
of Executive Officer Nonqualified Stock Option Agreement under Texas
Instruments 2009 Long-term Incentive Plan
|
10.3
|
|
Form
of Executive Officer Restricted Stock Unit Award Agreement under Texas
Instruments 2009 Long-term Incentive Plan
|
31.1
|
|
Certification
of Chief Executive Officer of Periodic Report Pursuant to Rule 13a-15(e)
or Rule 15d-15(e).
|
31.2
|
|
Certification
of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-15(e)
or Rule 15d-15(e).
|
32.1
|
|
Certification
by Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
|
32.2
|
|
Certification
by Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
|
“Safe
Harbor” Statement under the Private Securities Litigation Reform Act of
1995:
This
report includes forward-looking statements intended to qualify for the safe
harbor from liability established by the Private Securities Litigation Reform
Act of 1995. These forward-looking statements generally can be
identified by phrases such as TI or its management “believes,” “expects,”
“anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of
similar import. Similarly, statements herein that describe our
business strategy, outlook, objectives, plans, intentions or goals also are
forward-looking statements. All such forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those in forward-looking statements.
We urge
you to carefully consider the following important factors that could cause
actual results to differ materially from the expectations of TI or its
management:
|
•
|
Market
demand for semiconductors, particularly in key markets such as
communications, entertainment electronics and
computing;
|
|
•
|
TI’s
ability to maintain or improve profit margins, including its ability to
utilize its manufacturing facilities at sufficient levels to cover its
fixed operating costs, in an intensely competitive and cyclical
industry;
|
|
•
|
TI’s
ability to develop, manufacture and market innovative products in a
rapidly changing technological
environment;
|
|
•
|
TI’s
ability to compete in products and prices in an intensely competitive
industry;
|
|
•
|
TI’s
ability to maintain and enforce a strong intellectual property portfolio
and obtain needed licenses from third
parties;
|
|
•
|
Expiration
of license agreements between TI and its patent licensees, and market
conditions reducing royalty payments to
TI;
|
|
•
|
Economic,
social and political conditions in the countries in which TI, its
customers or its suppliers operate, including security risks, health
conditions, possible disruptions in transportation networks and
fluctuations in foreign currency exchange
rates;
|
|
•
|
Natural
events such as severe weather and earthquakes in the locations in which
TI, its customers or its suppliers
operate;
|
|
•
|
Availability
and cost of raw materials, utilities, manufacturing equipment, third-party
manufacturing services and manufacturing
technology;
|
|
•
|
Changes
in the tax rate applicable to TI as the result of changes in tax law, the
jurisdictions in which profits are determined to be earned and taxed, the
outcome of tax audits and the ability to realize deferred tax
assets;
|
|
•
|
Losses
or curtailments of purchases from key customers and the timing and amount
of distributor and other customer inventory
adjustments;
|
|
•
|
Customer
demand that differs from our
forecasts;
|
|
•
|
The
financial impact of inadequate or excess TI inventory that results from
demand that differs from
projections;
|
|
•
|
The
ability of TI and its customers and suppliers to access their bank
accounts and lines of credit or otherwise access the capital
markets;
|
|
•
|
Product
liability or warranty claims, claims based on epidemic or delivery failure
or recalls by TI customers for a product containing a TI
part;
|
|
•
|
TI’s
ability to recruit and retain skilled personnel;
and
|
|
•
|
Timely
implementation of new manufacturing technologies, installation of
manufacturing equipment and the ability to obtain needed third-party
foundry and assembly/test subcontract
services.
|
For a
more detailed discussion of these factors, see the Risk Factors discussion in
Item 1A of our most recent Form 10-K. The forward-looking statements
included in this quarterly report on Form 10-Q are made only as of the date of
this report, and we undertake no obligation to update the forward-looking
statements to reflect subsequent events or circumstances.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
|
TEXAS
INSTRUMENTS INCORPORATED
|
|
|
|
|
|
By:
|
|
/s/
Kevin P. March
|
|
|
|
|
Kevin
P. March
|
|
|
|
|
Senior
Vice President
|
|
|
|
|
and
Chief Financial Officer
|
Date:
April 29, 2009