TI resumed production ahead of schedule at Japan factories

"We are pleased with the continued success of the TI portfolio in Analog and Embedded Processing. Sequential revenue growth was driven by Embedded Processing up 12% and Analog up 3%, and we believe we again gained market share in both segments," said Rich Templeton, TI's chairman, president and chief executive officer. "In the quarter, we also resumed production ahead of schedule at our Japan factories that were damaged in the earthquake, thanks to excellent work by our teams on the ground. "We expect growth in the third quarter, but because of mixed macroeconomic and market signals we are prepared for a broader-than-normal range of growth possibilities. We note that production at some computing and consumer manufacturers appears lukewarm even though we're heading into the back-to-school and holiday seasons. At the same time, Asian distributor resales have been strong, demand from our Japanese customers is increasing and our backlog increased in the second quarter. We've planned for modest sequential growth in the third quarter, yet are prepared to support higher demand if it materializes." TI's pending acquisition of National Semiconductor has cleared all antitrust reviews with the exception of China, which is underway. The company continues to expect the transaction to close before the end of the year. "We look forward to welcoming the people of National Semiconductor and to expanding the portfolio of unique products we can offer our Analog customers," Templeton concluded. 2Q11 financial summary TI's operating profit was negatively impacted by about USD 50 million due to costs associated with the March earthquake in Japan. These costs were net of proceeds from ongoing insurance claims and were included in cost of revenue in the company's Other segment. Costs of USD 13 million associated with TI's pending acquisition of National Semiconductor also were included in the Other segment. Operating profit declined from a year ago primarily due to lower gross profit, which declined as a result of the earthquake-related costs, lower factory utilization and lower revenue. Compared with the prior quarter, operating profit was about even as profit from higher revenue was offset by lower factory utilization, higher earthquake-related costs and higher operating expenses. 2Q11 segment results Analog: (includes high-volume analog & logic, high-performance analog and power management products) - Compared with the year-ago and the prior quarters, the increase in revenue was due to higher revenue from the combination of power management and high-performance analog. - Operating profit decreased from the year-ago quarter due to higher operating expenses and higher manufacturing costs, which were due to capacity additions. Operating profit increased from the prior quarter primarily due to higher gross profit. Embedded Processing: (includes digital signal processor and microcontroller catalog products that are sold across a wide variety of markets, as well as application-specific products that are used in communications infrastructure and automotive electronics) - Compared with the year-ago and the prior quarters, the increase in revenue was primarily due to higher revenue from products sold into communications infrastructure applications. Revenue from catalog products and products sold into automotive applications increased to a lesser extent. - Operating profit increased from the year-ago and the prior quarters due to higher gross profit. Wireless: (includes connectivity products, OMAP applications processors and baseband products) - Compared with the year-ago and the prior quarters, the decline in revenue was due to lower revenue from baseband products. Revenue from the combination of applications processors and connectivity products grew in both comparisons. - Operating profit decreased from the year-ago and the prior quarters primarily due to lower gross profit. Other: (includes DLP products, custom ASIC products, calculators and royalties, as well as products sold under transitional supply agreements associated with recently acquired factories) - Compared with the year-ago quarter, the decline in revenue was primarily due to lower revenue from DLP products, lower royalties and the sale of a cable modem product line in the fourth quarter of 2010. These declines were partially offset by higher revenue from transitional supply agreements. - Compared with the prior quarter, the increase in revenue was due to higher seasonal calculator revenue, which was partially offset by lower revenue from DLP products. - Operating profit decreased from the year-ago and the prior quarters due to earthquake-related costs and acquisition-related costs. 2Q11 additional financial information - Orders were USD 3.60 billion, down 3% from the year-ago quarter and about even with the prior quarter. - Inventory was USD 1.76 billion at the end of the quarter, up USD 413 million from a year ago and up USD 84 million from the prior quarter. The increase in both comparisons was primarily due to the company building inventory for higher customer service levels, which included the ramp-up of new manufacturing capacity. - Capital expenditures were USD 276 million in the quarter compared with USD 283 million a year ago and USD 194 million in the prior quarter. Capital expenditures in the quarter were primarily for assembly and test equipment used in the company's manufacturing operations. - The company used USD 452 million in the quarter to repurchase 13.0 million shares of its common stock and paid dividends of USD 150 million. - To fund its pending acquisition of National Semiconductor, TI issued USD 3.5 billion of debt in the second quarter and USD 1.2 billion of commercial paper in July. Outlook For the third quarter of 2011, TI expects: - Revenue: USD 3.40–3.70 billion - Earnings per share: USD 0.55–0.65 For the full year of 2011, TI expects approximately the following: - R&D expense: USD 1.7 billion - Capital expenditures: USD 0.9 billion - Depreciation: USD 0.9 billion - Annual effective tax rate: 27%, down from the prior expectation of 28%