TI Reports 2Q01 Financial Results
- Pro Forma EPS of $0.03 - Revenue Down 31% from Year-Ago
Quarter and 19% Sequentially - Orders Down 49% from Year-Ago
Quarter and 10% Sequentially - Revenue Expected to Decline 10-15%
Sequentially in 3Q01
DALLAS, July 23 /PRNewswire/ -- Texas Instruments Incorporated (NYSE: TXN - news)
today reported that second-quarter financial results were affected by continued weakness in
electronic end-equipment markets and excess customer inventories, which reduced demand
for its Semiconductor products. TI's second-quarter revenue was $2037 million, down 19
percent from first quarter and consistent with the company's outlook issued in April for a
decline of about 20 percent. Pro forma earnings per share (EPS) were $0.03. Orders
declined 10 percent sequentially to $1704 million.
``Make no mistake, this is a severe downturn, but we now see some signs of stabilization,''
said Tom Engibous, chairman, president and CEO. ``The rate of sequential decline for
Semiconductor orders has slowed, and it appears our Semiconductor revenue is nearing a
bottom. Wireless orders increased, reflecting our customers' continued progress in reducing
excess inventory as well as the impact of new programs. The downturn isn't over, but we are
beginning to shift our focus to recovery and growth.''
Implementation of the company's previously announced cost-reduction measures lowered
expenses, especially in manufacturing and support functions. Manufacturing has reduced
headcount about 15 percent compared with the year-ago period, mostly in labor-intensive
assembly and test operations, and additional savings will be realized as certain facilities
complete their shutdown process. Pro forma SG&A (selling, general and administrative)
expenses were down 30 percent, or $120 million, from the second quarter of 2000 as the
company continued to reduce overhead. Pro forma R&D (research and development)
expenses of $389 million were up slightly from the year-ago quarter as the company
sustained an aggressive expansion of its DSP and Analog product and technology portfolios.
``In contrast to a year ago when customer demand stretched the limits of our production
capacity, the downturn has allowed us to take actions that will lead to stronger growth and higher margins while also
significantly reducing near-term costs,'' Engibous said. ``We have focused our manufacturing resources on advanced
semiconductor processes and more cost-effective operations. We are maintaining our level of R&D investment and developing
those advanced DSP and Analog technologies that will be in highest demand as the markets recover. We have made structural
changes that reduce support costs, and we'll continue to scrutinize all operations for ways to become even more efficient and
attuned to customers.''
Pro forma information excludes certain costs, charges and gains. For more information, see financial statements.
Summary of 2Q01 Financial Results
-- Revenue for TI was $2037 million, down 31 percent from $2932 million
in the year-ago quarter, and down 19 percent sequentially due to
weakness in Semiconductor.
-- Pro forma operating profit was $11 million compared with $670 million
in the year-ago quarter and $340 million in the first quarter due to
lower Semiconductor revenue.
-- Pro forma operating margin was 0.5 percent compared with 22.9 percent
in the year-ago quarter and 13.5 percent in the first quarter due to
lower Semiconductor revenue.
-- Pro forma income was $50 million as other income/interest of
$42 million supplemented the results from operations. Pro forma
income was $543 million in the year-ago quarter and $317 million in
the first quarter.
-- Pro forma EPS was $0.03, down from $0.30 in the year-ago quarter and
$0.18 in the first quarter. About one-half cent of EPS in the quarter
was the result of a lower pro forma tax rate compared with the first
quarter. The second quarter's lower tax rate resulted primarily from
reduced profit as well as tax benefits such as the credit for research
activities.
-- Orders were $1704 million, compared with $3355 million in the year-ago
quarter and $1898 million in the first quarter.
-- According to generally accepted accounting principles: operating loss
was $298 million compared with an operating profit of $645 million in
the year-ago period; operating margin was negative 14.6 percent
compared with positive 22.0 percent; net loss was $197 million
compared with net income of $1296 million; and the diluted loss per
share was $0.11 compared with EPS of $0.72.
-- Cash flow from operating activities was $586 million in the quarter,
more than offsetting the company's capital expenditures of
$342 million. Contributing to the positive cash flow from operating
activities were a $279 million reduction in accounts receivable and a
$97 million reduction in inventory. Cash and cash equivalents plus
short-term investments declined by $75 million in the quarter,
primarily reflecting the company's repurchase of $151 million of its
stock.
Outlook
Third-quarter revenue is expected to decline 10 to 15 percent sequentially as many of TI's Semiconductor customers continue
to reduce inventories in an environment of weak demand for their own products.
Specifically, TI expects the following for the third quarter:
In Semiconductor, wireless revenue will increase slightly from the second quarter but will be more than offset by declines
in other products.
Non-Semiconductor revenue will increase sequentially as seasonal declines in Sensors & Controls are more than offset
by a seasonal increase in sales of educational calculators for Educational & Productivity Solutions.
Pro forma operating margin will decline sequentially about 10 points as a result of lower revenue.
Pro forma non-operating income will decline to about $20 million.
Pro forma EPS will decline to a loss of a few cents.
For 2001, TI expects the following:
-- R&D of $1.6 billion pro forma, unchanged from the company's prior
estimate and even with last year.
-- Capital expenditures of $1.8 billion, unchanged from the prior
estimate and down 35 percent from last year.
-- Depreciation of $1.5 billion pro forma, unchanged from the prior
estimate and up 23 percent from last year.
-- The pro forma tax rate will vary based on the company's level of
profitability. The company's pro forma tax expense/benefit each
quarter is based on a tax rate of 35 percent that is partially or
wholly offset by various tax benefits such as the credit for research
activities, which are expected to be about $25 million in each of the
third and fourth quarters.
PRO FORMA INCOME INFORMATION
(In millions of dollars, except per-share amounts.)
Pro forma supplemental income information, which is not prepared in accordance with generally accepted accounting
principles, excludes amortization of acquisition-related costs (goodwill, other intangibles and deferred compensation), pooling
of interests transaction costs, purchased in-process research and development costs, special charges and gains, and income tax
adjustments. See notes to the following tables for details. The effect of these amounts is partially offset, as appropriate, by their
allocated profit sharing and income tax effects.
For Three Months Ended
June 30 June 30 March 31
2001 2000 2001
Net revenues $2037 $2932 $2528
Cost of revenues 1352 1475 1452
Research and development 389 382 427
Selling, general and administrative 285 405 309
Profit from operations 11 670 340
Other income/interest 42 115 89
Income before income taxes 53 785 429
Provision for income taxes 3 242 112
Pro forma income $50 $543 $ 317
Pro forma earnings per
common share $.03 $.30 $.18
GAAP TO PRO FORMA INCOME RECONCILIATION
(In millions of dollars, except per-share amounts.)
For Three Months Ended June 30, 2001
GAAP Excluded Pro Forma
Net revenues $2037 $--- $2037
Cost of revenues 1523 171 1352
Research and development 412 23 389
Selling, general and administrative 400 115 285
Profit (loss) from operations (298) (309) 11
Other income/interest 42 --- 42
Income before income taxes (256) (309) 53
Provision (benefit) for
income taxes (59) (62) 3
Net income (loss) $(197) $(247) $50
Diluted earnings (loss) per
common share $(.11) $(.14) $.03
Weighted average
shares (millions) 1735.6 1783.5
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statement of Operations
(In millions of dollars, except per-share amounts.)
For Three Months Ended
June 30 June 30
2001 2000
Net revenues $2037 $2932
Operating costs and expenses:
Cost of revenues 1523 1486
Research and development 412 387
Selling, general and administrative 400 414
Total costs of operations 2335 2287
Profit (loss) from operations (298) 645
Other income (expense) net 57 1346
Interest on loans 15 20
Income (loss) before income taxes (256) 1971
Provision (benefit) for income taxes (59) 675
Net income (loss)* $ (197) $ 1296
Diluted earnings (loss) per common share** $(.11) $.72
Basic earnings (loss) per common share $(.11) $.76
Cash dividends declared per share of common stock $.021 $.021
Loss for the second quarter of 2001 includes, in millions of dollars, net special charges of $252, of which $214 is severance
cost for a worldwide cost-reduction program and $35 relates to the restructuring charges for the closing of three
Semiconductor facilities (Merrimack, New Hampshire; Tustin, California; and Santa Cruz, California). Of the $35, $14 is for
severance cost and $16 is for the acceleration of depreciation over the remaining service life of the facilities. Of the $252 net
special charges, $162 is included in cost of revenues, $84 is in selling, general and administrative expense and $6 is in research
and development expense. Also included in the second quarter of 2001 is a $68 increase in the income tax provision to adjust
to the expected tax rate for the year. Income for the second quarter of 2000 includes, in millions of dollars, an investment gain
of $1211 in other income from the sale of 20 million shares of Micron common stock.
Income (loss) includes, in millions of dollars, acquisition-related amortization of $58 and $25 for the second quarters of 2001
and 2000.
Diluted earnings (loss) per common share are based on average common and dilutive potential common shares outstanding
(1735.6 million shares and 1793.9 million shares for the second quarters of 2001 and 2000). For the second quarter of 2001,
dilutive potential common shares outstanding have been excluded due to the net loss for the period.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Income Statement
(In millions of dollars, except per-share amounts.)
For Six Months Ended
June 30 June 30
2001 2000
Net revenues $4565 $5694
Operating costs and expenses:
Cost of revenues 3028 2907
Research and development 858 773
Selling, general and administrative 748 815
Total costs of operations 4634 4495
Profit (loss) from operations (69) 1199
Other income (expense) net 164 1474
Interest on loans 31 41
Income before income taxes and cumulative
effect of an accounting change 64 2632
Provision for income taxes 31 886
Income before cumulative effect of an
accounting change 33 1746
Cumulative effect of an accounting change --- (29)
Net income* $33 $ 1717
Diluted earnings per common share:**
Income before cumulative effect of
an accounting change $.02 $.98
Cumulative effect of an accounting change --- (.02)
Net income $.02 $.96
Basic earnings per common share:
Income before cumulative effect of
an accounting change $.02 $1.02
Cumulative effect of an accounting change --- (.02)
Net income $.02 $1.00
Cash dividends declared per share of common stock $.043 $.043
Loss for the second quarter of 2001 includes, in millions of dollars, net special charges of $252, of which $214 is severance
cost for a worldwide cost-reduction program and $35 relates to the restructuring charges for the closing of three
Semiconductor facilities (Merrimack, New Hampshire; Tustin, California; and Santa Cruz, California). Of the $35, $14 is for
severance cost and $16 is for the acceleration of depreciation over the remaining service life of the facilities. Of the $252 net
special charges, $162 is included in cost of revenues, $84 is in selling, general and administrative expense and $6 is in research
and development expense. Also included in the second quarter of 2001 is a $68 increase in the income tax provision to adjust
to the expected tax rate for the year. Income for the first quarter of 2001 includes, in millions of dollars, net special charges of
$50, of which $11 is severance cost for first quarter employee acceptances under the U.S. voluntary retirement program, $16
is severance cost for restructuring actions in international locations, mostly in Germany, and $25 relates to the fourth quarter
2001 closing of a Semiconductor manufacturing facility in Santa Cruz, California. Of the $25, $16 is for severance cost and $5
is for acceleration of depreciation over the remaining service life of the facility. Of the $50 of net special charges, $44 is
included in cost of revenues, $7 is in selling, general and administrative expenses, $2 is in research and development expense
and $3 is in other income.
Income for the second quarter of 2000 includes, in millions of dollars, an investment gain of $1211 in other income from the
sale of 20 million shares of Micron common stock. Income for the first quarter of 2000 includes, in millions of dollars, special
charges of $29 associated with actions including the closing of the Sensors & Controls manufacturing facility in Versailles,
Kentucky, and TI's acquisition of Toccata Technology ApS. Of the $29, $20 is included in cost of revenues, $6 is in selling,
general and administrative expense, and $3 is in research and development expense.
Income includes, in millions of dollars, acquisition-related amortization of $117 and $51 through June 30, 2001 and 2000.
Diluted earnings per common share are based on average common and dilutive potential common shares outstanding (1785.5
million shares and 1789.1 million shares for the six months ended June 30, 2001 and 2000).
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheet
(In millions of dollars, except per-share amounts.)
June 30 Dec. 31
2001 2000
Assets
Current assets:
Cash and cash equivalents $542 $745
Short-term investments 2472 3258
Accounts receivable, less allowance for losses of
$52 million in 2001 and $54 million in 2000 1666 2204
Inventories:
Raw materials 188 245
Work in process 613 681
Finished goods 281 307
Inventories 1082 1233
Prepaid expenses 122 80
Deferred income taxes 394 595
Total current assets 6278 8115
Property, plant and equipment at cost 9724 9099
Less accumulated depreciation (3781) (3652)
Property, plant and equipment (net) 5943 5447
Investments 2750 2400
Goodwill and other acquisition-related intangibles 829 961
Deferred income taxes 251 106
Other assets 651 691
Total assets $16702 $17720
Liabilities and Stockholders' Equity
Current liabilities:
Loans payable and current portion long-term debt $43 $148
Accounts payable and accrued expenses 1385 1921
Income taxes payable 174 323
Accrued retirement and profit sharing contributions 56 421
Total current liabilities 1658 2813
Long-term debt 1202 1216
Accrued retirement costs 424 378
Deferred income taxes 463 469
Deferred credits and other liabilities 288 256
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: 2001 - 1,739,529,779;
2000 - 1,733,237,248 1740 1733
Paid-in capital 1291 1185
Retained earnings 9282 9323
Less treasury common stock at cost:
Shares: 2001 - 4,918,490;
2000 - 1,184,880 (221) (93)
Accumulated other comprehensive income 684 574
Deferred compensation (109) (134)
Total stockholders' equity 12667 12588
Total liabilities and stockholders' equity $16702 $17720
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Statement of Cash Flows
(In millions of dollars)
For Six Months Ended June 30
2001 2000
Continuing operations:
Cash flows from operating activities:
Income before cumulative effect of
accounting change $33 $ 1746
Depreciation 731 550
Amortization of goodwill and other
acquisition-related intangibles 117 51
Deferred income taxes 14 31
Net currency exchange losses 5 7
(Increase) decrease in working capital
(excluding cash and cash equivalents,
short-term investments, deferred income
taxes, and loans payable and current portion
long-term debt):
Accounts receivable 513 (368)
Inventories 151 (135)
Prepaid expenses (43) (20)
Accounts payable and accrued expenses (508) 69
Income taxes payable (89) 668
Accrued retirement and profit sharing
contributions (356) (105)
Gain on sale of Micron common stock --- (1211)
Increase in noncurrent accrued retirement costs --- 8
Other 137 (53)
Net cash provided by operating activities 705 1238
Cash flows from investing activities:
Additions to property, plant and equipment (1242) (1204)
Purchases of short-term investments (1435) (2811)
Sales and maturities of short-term investments 2203 1899
Purchases of noncurrent investments (177) (90)
Sales of noncurrent investments 39 1613
Net cash used in investing activities (612) (593)
Cash flows from financing activities:
Additions to loans payable --- 3
Payments on loans payable --- (2)
Additions to long-term debt 3 241
Payments on long-term debt (128) (48)
Dividends paid on common stock (74) (69)
Sales and other common stock transactions 87 172
Common stock repurchase program (158) (99)
Net cash provided by (used in)
financing activities (270) 198
Effect of exchange rate changes on cash (26) (31)
Net increase (decrease) in cash and cash
equivalents (203) 812
Cash and cash equivalents, January 1 745 781
Cash and cash equivalents, June 30 $542 $1593
BUSINESS SEGMENT NET REVENUES
(In millions of dollars)
For Three Months Ended For Six Months Ended
June 30 June 30 June 30 June 30
2001 2000 2001 2000
Semiconductor
Trade $ 1652 $ 2507 $ 3824 $ 4889
Intersegment 5 4 9 9
1657 2511 3833 4898
Sensors & Controls
Trade 255 271 515 535
Intersegment 2 --- 2 ---
257 271 517 535
Educational & Productivity
Solutions
Trade 129 125 210 205
Corporate activities (6) (5) (7) (3)
Divested activities --- 30 12 59
Total net revenues $ 2037 $ 2932 $ 4565 $ 5694
BUSINESS SEGMENT PROFIT (LOSS)
(In millions of dollars)
For Three Months Ended For Six Months Ended
June 30 June 30 June 30 June 30
2001 2000 2001 2000
Semiconductor $(37) $634 $267 $ 1246
Sensors & Controls 52 54 103 105
Educational & Productivity
Solutions 38 33 55 41
Corporate activities (42) (57) (79) (127)
Special charges/gains,
and acquisition-related
amortization, net of
applicable profit
sharing (309) 1186 (418) 1132
Interest on loans/other
income (expense),
excluding a first-
quarter 2001 gain of
$3 and a second-quarter
2000 gain of $1211,
included above in
special charges/gains
and acquisition-related
amortization 42 115 130 222
Divested activities --- 6 6 13
Income (loss) before
income taxes and
cumulative effect of
an accounting change $(256) $1971 $64 $ 2632
Semiconductor
-- Semiconductor revenue in the second quarter was $1657 million, down
from $2511 million in the same period of 2000 and $2176 million in the
first quarter due to broad-based weakness in demand.
-- As a result of lower revenue, Semiconductor had a $37 million
operating loss, compared with an operating profit of $634 million in
the year-ago period and $304 million in the first quarter.
-- Analog revenue was down 28 percent from the year-ago period and
24 percent sequentially. DSP revenue decreased 41 percent from the
year-ago quarter and 17 percent sequentially. Analog and DSP
comprised about 65 percent of TI's Semiconductor revenue.
-- TI's remaining Semiconductor revenue decreased from the year-ago
quarter and sequentially.
-- TI's Semiconductor revenue in key markets was as follows:
-- Wireless revenue declined 49 percent compared with the year-ago
quarter and 21 percent sequentially.
-- Revenue from TI's catalog products, which includes DSP and
high-performance Analog, declined 36 percent from the year-ago
quarter and 29 percent sequentially.
-- Broadband communications revenue, which includes digital
subscriber line (DSL) and cable modems, quadrupled compared with
the year-ago quarter and was even with the first quarter.
-- Semiconductor orders were $1321 million, down 55 percent from the
year-ago quarter and 12 percent sequentially. Orders decreased across
most product areas, although wireless increased sequentially.
Semiconductor Highlights
-- TI announced a complete hardware and software chipset solution for
General Packet Radio Service (GPRS) Class 12 wireless handsets. The
chipset provides manufacturers the performance and low power required
for next-generation wireless applications and allows easy migration of
applications software to future products based on TI's OMAP(TM)
architecture. The complete wireless reference design is ready to be
put into final plastics and manufactured in less than six months of
development time.
-- TI intr |
