Texas Instruments 2010 Annual Report Download - page 42

TEXAS INSTRUMENTS 2010 ANNUAL REPORT
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Other
2010 2009
2010฀
vs.฀2009
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,936 $ 2,128 38%
Operating profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,464 712 106%
Operating profit % of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49.9% 33.5%
Restructuring expense* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ฀4 $ 23
Gain on divestiture* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ฀144 —
* Included in operating profit
Revenue from Other was $2.94 billion in 2010. This was an increase of $808 million, or 38 percent, from 2009 primarily due to
increased shipments of DLP products and, to a lesser extent, custom ASIC products. Also contributing to the increase in revenue were
higher royalties, and revenue from transitional supply agreements associated with recently acquired factories and from increased
shipments of calculators.
Operating profit for 2010 from Other was $1.46 billion, or 49.9 percent of revenue. This was an increase of $752 million, or 106 percent,
compared with 2009 due to higher revenue and associated gross profit and, to a lesser extent, the gain on the sale of a product line.
Prior results of operations
2009 compared with 2008
Our 2009 revenue was $10.43 billion, net income was $1.47 billion and EPS was $1.15.
During 2009, despite a severe global economic downturn, we increased our focus on Analog and Embedded Processing. In addition,
we completed actions that significantly reduced our costs. Our major actions during 2009 included implementing a voluntary retirement
program and an involuntary reduction program, staffing Kilby Labs (a creative research facility in Dallas), acquiring two companies to
support our Analog and Embedded Processing objectives and opening an assembly/test site located in the Philippines and the world’s
first 300-millimeter analog wafer factory, located in Richardson, Texas, outfitting both with manufacturing equipment purchased in a
weak market at extremely attractive prices.
Details of 2009 financial results
Revenue in 2009 was $10.43 billion, down $2.07 billion, or 17 percent, from 2008. Revenue for all segments declined compared with the
year-ago period. Growth resumed on a sequential basis in the second quarter of 2009 and on a year-on-year basis in the fourth quarter.
Gross profit was $5.00 billion, a decrease of $1.25 billion, or 20 percent, from 2008. This decline was due to lower revenue. About
$160 million of the decline in gross profit resulted from lower factory utilization, with the vast majority of the underutilization expense
incurred in the first half of 2009.
Operating expenses were $1.48 billion for R&D and $1.32 billion for SG&A. R&D expense decreased $464 million, or 24 percent,
from 2008, with the largest impact in Wireless. SG&A expense decreased $294 million, or 18 percent, from 2008. The operating
expense decreases in both comparisons were primarily due to the combination of the effects of our previously-announced employment
reductions and, to a lesser extent, our other cost-control efforts throughout the year.
Charges for restructuring actions were $212 million compared with $254 million in 2008. The restructuring charges in 2009
consisted of $201 million for severance and benefit costs and $11 million related to impairments of long-lived assets. This compared
with restructuring charges in 2008 that consisted of $218 million for severance and benefit costs and $36 million related to impairments
of long-lived assets. These actions eliminated about 3,900 jobs and were completed in 2009.
Operating profit was $1.99 billion, or 19.1 percent of revenue, compared with $2.44 billion, or 19.5 percent of revenue, in 2008. This
was an 18 percent decrease due to the decline in revenue and the associated gross profit. This decrease more than offset a reduction in
operating expenses and lower restructuring charges. Operating profit decreased from 2008 in all segments.
Other income (expense) net (OI&E) was $26 million, a decrease of $18 million from 2008 due to lower interest income. The decrease
in interest income from a year ago was due to lower interest rates, which more than offset higher average balances of interest-bearing
investments. Additionally, we had expenses associated with former businesses in 2008 that did not recur in 2009.
The tax provision was $547 million compared with $561 million for 2008. The decrease was primarily due to lower income before
income taxes, partially offset by lower discrete tax benefits, and to a lesser extent, a lower federal R&D tax credit. The tax provision for
2009 contained net discrete tax benefits of $7 million. 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.
Income from continuing operations was $1.47 billion, a decrease of $450 million from 2008. EPS for 2009 was $1.15 compared
with $1.44 for 2008. EPS in 2009 benefited $0.05 from a lower number of average shares outstanding as a result of our stock
repurchase program.
Orders were $11.36 billion, which was 4 percent lower than 2008. The decline reflected lower demand for baseband wireless products.