Texas Instruments 2008 Annual Report Download - page 43

TEXAS INSTRUMENTS 2008 ANNUAL REPORT [ 41 ]
Operating expenses were $1.94 billion for R&D and $1.61 billion for SG&A. R&D expense decreased $200 million, or 9 percent, from
2007 due to the combination of expense reductions in Wireless and, to a lesser extent, the benefit from our collaborative work with
foundries on advanced logic manufacturing technologies. We previously developed these manufacturing technologies almost exclusively
in-house. SG&A expense decreased $66 million, or 4 percent, from 2007 due to the combination of lower compensation-related
expenses and lower expenses for consumer advertisements for DLP high-definition television products.
Restructuring charges of $254 million recognized in the fourth quarter of 2008 included $121 million for a portion of the employment
actions described above, $109 million for actions announced in October 2008 to re-focus our Wireless segment and $24 million for
asset impairments related to an action announced in 2007 to shut down an older digital factory in connection with our decision to work
with foundries on advanced logic manufacturing technology. The restructuring costs recognized consisted of $218 million for severance
and benefit costs and $36 million related to impairments of long-lived assets. 2007 restructuring costs relating to the factory shutdown
were $52 million, consisting of severance and benefit costs of $31 million and acceleration of depreciation on the factory’s assets of
$21 million. See Note 2 to the Financial Statements for additional information.
Operating profit was $2.44 billion, or 19.5 percent of revenue, compared with $3.50 billion, or 25.3 percent of revenue, in 2007.
This was a 30 percent decrease due to the decline in revenue and the associated lower gross profit, the impact of underutilized
manufacturing assets, and higher restructuring charges. These more than offset a reduction in operating expenses.
Other income (expense) net (OI&E) was $44 million, a decrease of $151 million from 2007 primarily due to lower interest income.
The decrease in interest income from a year ago was primarily due to lower interest rates, and to a lesser extent, lower average
interest-bearing investments.
The tax provision was $561 million, compared with $1.05 billion for the prior year. The decrease was primarily due to lower income
before income taxes. The tax provision for 2008 contained net discrete tax benefits of $122 million, primarily resulting from our decision
to indefinitely reinvest the accumulated earnings of a non-U.S. subsidiary. The tax provision for 2007 contained net discrete tax benefits
of $28 million. See Note 5 to the Financial Statements for a reconciliation of tax rates to the statutory federal tax rate.
Our annual effective tax rate for 2009 is estimated to be about 24 percent, a decrease from 28 percent in 2008 primarily due to
lower income before income taxes.
Income from continuing operations was $1.92 billion, a decrease of $721 million from 2007. EPS for 2008 was $1.45 per
share, compared with $1.83 per share for 2007. The impact of restructuring costs reduced EPS by $0.12 per share in 2008 and by
$0.02 per share in 2007. EPS in 2008 benefited $0.12 from a lower number of average shares outstanding as a result of our stock
repurchase program.
Orders were $11.86 billion, which was 13 percent lower than 2007. In the fourth quarter of 2008, orders were $1.86 billion, which was
42 percent lower than in the third quarter of 2008. The declines in both periods reflected lower demand over a broad range of our products.
Segment results
A detailed discussion of our segment results appears below. See Note 17 to the Financial Statements for a description of changes in
our segments. When reviewing each segment’s results, bear in mind that restructuring charges negatively impacted each segment’s
operating profit as follows:
2008 2007
Analog................................................................................... $ 60 $ 18
Embedded Processing ....................................................................... 24 4
Wireless ................................................................................. 130 20
Other.................................................................................... 40 10
Total restructuring ....................................................................... $254 $ 52