Texas Instruments 2008 Annual Report Download - page 42

[ 40 ] TEXAS INSTRUMENTS 2008 ANNUAL REPORT
Discontinued operations
In January 2006, we entered into a definitive agreement to sell substantially all of the former Sensors & Controls segment to an affiliate
of Bain Capital, LLC for $3 billion in cash (see Note 6 to the Financial Statements for additional information). The sale was completed on
April 27, 2006.
Results of operations
2008 compared with 2007
The year 2008 was marked by a dramatic decrease in global demand for semiconductors in the second half, a decline that accelerated
in the fourth quarter. Given this significant change in the economy, we are reducing costs and realigning our expenses and inventory so
that our financial performance will remain solid even in a period of prolonged economic weakness. We have focused most of our cost
reductions in our non-core product areas and internal support functions. We will continue to invest aggressively in Analog and Embedded
Processing and in customer support. We believe these areas will drive our future growth and allow us to achieve our financial objectives.
The cost reduction actions include an employment reduction, which we announced in January 2009, of 12 percent, through 1,800
layoffs and 1,600 voluntary retirements and departures. Charges for these employment reductions will be about $300 million, a portion of
which was recognized in the fourth quarter of 2008. Annualized savings from these reductions, plus those announced in October for the
restructuring of the company’s Wireless business, will be about $700 million after all reductions are complete in the third quarter of 2009.
We expect our results in 2009 will be pressured by lower demand.
Statement of operations — selected items
For the Years Ended
December 31,
2008 2007 2006
Revenue by segment:
Analog........................................................... $4,857 $4,927 $4,746
Embedded Processing ............................................... 1,631 1,588 1,554
Wireless.......................................................... 3,383 4,195 4,308
Other ............................................................ 2,630 3,125 3,647
Revenue ............................................................ 12,501 13,835 14,255
Cost of revenue ....................................................... 6,256 6,466 6,996
Gross profit .......................................................... 6,245 7,369 7,259
Gross profit % of revenue ............................................ 50.0%53.3%50.9%
Research and development (R&D)......................................... 1,940 2,140 2,195
R&D % of revenue.................................................. 15.5%15.5%15.4%
Selling, general and administrative (SG&A) .................................. 1,614 1,680 1,697
SG&A % of revenue................................................. 12.9%12.1%11.9%
Restructuring expense.................................................. 254 52 —
Operating profit ....................................................... 2,437 3,497 3,367
Operating profit % of revenue ......................................... 19.5%25.3% 23.6%
Other income (expense) net.............................................. 44 195 258
Income from continuing operations before income taxes ........................ 2,481 3,692 3,625
Provision for income taxes............................................... 561 1,051 987
Income from continuing operations ........................................ $1,920 $2,641 $2,638
Diluted income from continuing operations per common share ................... $1.45 $ 1.83 $ 1.69
Details of 2008 financial results
Revenue was $12.50 billion, down $1.33 billion, or 10 percent, from 2007. As the year progressed and the global economy weakened,
the decline in our revenue accelerated and broadened. In the fourth quarter all segments experienced double-digit declines compared
with the year-ago quarter.
Gross profit was $6.24 billion, or 50.0 percent of revenue, down 15 percent from $7.37 billion in 2007. This decline was due to
lower revenue and, to a lesser extent, the impact of lower factory utilization resulting from our efforts to reduce inventory. The decline
affected all segments. Last year’s gross profit included a $39 million pre-tax gain on the sale of our broadband digital subscriber line
(DSL) customer-premises equipment product line.