Message-ID: <26860495.1075851527276.JavaMail.evans@thyme> Date: Wed, 24 Oct 2001 12:23:34 -0700 (PDT) From: midday24@alerts.equityalert.com To: alewis@ect.enron.com Subject: Your News Alert for TXN Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable X-From: "Equity Alert Center" @ENRON X-To: Andrew Lewis X-cc: X-bcc: X-Folder: \ALEWIS (Non-Privileged)\Deleted Items X-Origin: LEWIS-A X-FileName: ALEWIS (Non-Privileged).pst =09[IMAGE]=09 =09[IMAGE]=09[IMAGE]=09 [IMAGE] [IMAGE] [IMAGE] [IMAGE] Upgrades [IMAGE] DownGrades = [IMAGE] Coverage Initiated [IMAGE] Coverage Reiterated [IMAGE] Stock Splits= [IMAGE] Buybacks [IMAGE] Dividends [IMAGE] Pos Pre-Announce [IMAGE] Neg Pr= e-Announce [IMAGE] Pos Surprises [IMAGE] Neg Surprises [IMAGE] Earnings Rev= isions [IMAGE] IPO - Lockup Periods [IMAGE] IPO - Latest Pricing [IMAGE] IP= O - Quite Periods [IMAGE] IPO - Postponements [IMAGE] IPO - Withdrawals [IM= AGE] IPO - Latest Filings [IMAGE] [IMAGE] [IMAGE] [IMAGE] [IMAGE] = Unsubscribe [IMAGE] Update my Membership / Profile [IMAGE] Forgot Usernam= e / Password [IMAGE] Add / Edit Alerts [IMAGE] View My Alerts [IMAGE] [I= MAGE] [IMAGE] [IMAGE] [IMAGE] [IMAGE] [IMAGE] [IMAGE] [IMAGE] =09 As= requested, your News Alert for TXN follows from EquityAlert.com. 10-Q= : TEXAS INSTRUMENTS INC (EDGAR Online via COMTEX) -- ITEM 2. Management's= Discussion and Analysis of Financial Condition and Results of Operations = The Registrant (the "company" or "TI") announced third-quarter financial r= esults that show the company's third-quarter revenue was $1849 million, dow= n 9 percent from the second quarter and slightly better than the company's = outlook issued in July for a decline of 10 to 15 percent. Orders, which had= fallen 10 percent sequentially in the second quarter, declined 4 percent s= equentially in the third quarter to $1638 million. Semiconductor orders wer= e about even with the second-quarter level. TI's overall book-to-bill for= semiconductors continued to rise sequentially, and TI's DSP book-to-bill e= xceeded one for the second consecutive quarter. DSP revenue was up 10 perce= nt sequentially and orders were up 11 percent sequentially. Orders for high= -performance Analog turned the corner and increased 10 percent sequentially= . Inventory was reduced by $182 million from the end of the second quarte= r. Despite the decline in revenue, days of inventory were reduced to 58 fro= m 72 at the end of the second quarter. Cash flow from operations was $334 m= illion, and free cash flow was $22 million. The company also repurchased $1= 52 million of company stock. SUMMARY OF FINANCIAL RESULTS For the thi= rd quarter of 2001, TI reported the following: - Total revenue for TI was= $1849 million, down 41 percent from $3149 million in the year-ago quarter = and down 9 percent sequentially due to weakness in Semiconductor. - Cost = of revenues in the third quarter was $1424 million, compared with $1637 mil= lion in the year-ago quarter. Cost of revenues decreased primarily due to d= ecreased Semiconductor revenue. - Research and development (R&D) totaled = $358 million, down from $533 million in the third quarter of 2000 primarily= due to acquisition- related charges for in-process R?in the third quarter = of 2000. - Selling, general and administrative expense in the quarter was= $312 million, down from $453 million in the year-ago quarter due to saving= s resulting from restructuring activities and tight spending controls. - = Other income (expense) net decreased from $565 million in the third quarter= of 2000 to $37 million in the third quarter of 2001, primarily due to a ga= in on the sale of Micron stock in the third quarter of 2000. - The income= tax rate for the quarter was 47 percent. - TI orders in the third quarte= r were $1638 million, compared with $3250 million in the year-ago quarter a= nd $1704 million in the second quarter. Results for the third quarter of = 2001 include net special charges of $37 million, of which $19 million is se= verance cost for a worldwide cost- reduction program and $16 million relate= s to the restructuring charges for the closing of three Semiconductor facil= ities (Santa Cruz, California; Merrimack, New Hampshire; and Tustin, Califo= rnia). Of the $16 million, $15 million is for the acceleration of depreciat= ion over the remaining service life of the facilities. Also included is amo= rtization of goodwill and other acquisition-related intangibles of $56 mill= ion. For the second quarter of 2001, results include net special charges = of $252 million, of which $214 million is severance cost for a worldwide co= st-reduction program and $35 million relates to the restructuring charges f= or the closing of three Semiconductor facilities (Merrimack, New Hampshire;= Tustin, California; and Santa Cruz, California). In addition, TI recorded = a $68 million increase to the income tax provision to adjust to the expecte= d tax rate for the year. Also included is amortization of goodwill and othe= r acquisition-related intangibles of $58 million. For the first quarter o= f 2001, results include net special charges of $50 million, of which $11 mi= llion is severance cost for first-quarter employee acceptances under the U.= S. voluntary retirement program, $16 million is severance cost for restruct= uring actions in international Semiconductor locations, and $25 million rel= ates to the closing of a Semiconductor manufacturing facility in Santa Cruz= , California. Also included is amortization of goodwill and other acquisiti= on-related intangibles of $59 million. For the third quarter of 2000, res= ults include investment gains of $425 million, included in other income, fr= om the sale of 5.6 million shares of Micron Technology, Inc. (Micron) commo= n stock, and net special charges of $163 million, of which $112 million is = for purchased in-process R?costs from the Dot Wireless, Inc. and Alantro Co= mmunications, Inc. acquisitions, $41 million is for pooling of interests tr= ansaction costs from the Burr- Brown Corporation acquisition, and $10 milli= on, net, is for several Semiconductor and Sensors & Controls restructuring = and other actions in the U.S., Japan and Europe. Also included is amortizat= ion of goodwill and other acquisition-related intangibles of $41 million. = For the second quarter of 2000, results include an investment gain of $121= 1 million, included in other income, from the sale of 20 million shares of = Micron common stock. Also included is amortization of goodwill and other ac= quisition-related intangibles of $25 million. For the first quarter of 20= 00, results included net special charges of $29 million for actions includi= ng the closing of a Sensors & Controls manufacturing facility in Versailles= , Kentucky, and TI's acquisition of Toccata Technology ApS. Also included i= s amortization of goodwill and other acquisition-related intangibles of $25= million. Additional information relating to these items appears below un= der the heading "Special Charges and Gains." OUTLOOK It appears that thi= rd quarter of 2001 will mark the bottom for semiconductor orders, and the f= loor for revenue should be set in the fourth quarter. Fourth-quarter TI rev= enue is expected to decline about 10 percent sequentially, mostly due to no= rmal seasonal declines in Educational & Productivity Solutions (E&PS) as we= ll as continued weakness in Semiconductor. Specifically, TI expects the f= ollowing for the fourth quarter compared to the third quarter: - In Semic= onductor, revenue will decline about 5 percent as continued growth in DSP i= s more than offset by declines in other products. - Sensors & Controls re= venue will be about even. - E&PS revenue will decline by about $110 milli= on, or 60 percent, as the back-to-school season for educational products en= ds. - Operating margin will decline about 9 percentage points before the = effect of special charges and amortization of goodwill and other acquisitio= n-related intangibles, reflecting the lower revenue level and further reduc= tions in inventory. - Non-operating income will decline about $10 million= reflecting lower interest rates. - Loss per share will be about 6 cents = more in the fourth quarter, compared with the third quarter, before the eff= ect of special charges and amortization of goodwill and other acquisition-r= elated intangibles. For 2001, TI expects the following: - R?of $1.5 bil= lion, excluding acquisition-related amortization and purchased in-process R= &D, compared with the company's prior estimate of $1.6 billion and last yea= r's $1.6 billion. - Capital expenditures of $1.8 billion, unchanged from = the prior estimate and down about 35 percent from last year. - Depreciati= on of $1.6 billion, compared with the prior estimate of $1.5 billion and up= about 30 percent from last year. SEMICONDUCTOR Semiconductor revenue in= the third quarter was $1453 million, down from $2692 million in the year-a= go period. Revenue was down from $1657 million in the second quarter due to= continued weakness across most Semiconductor products, excluding DSP. As= a result of lower revenue, Semiconductor had a $219 million operating loss= , compared with an operating profit of $681 million in the year-ago period = and an operating loss of $37 million in the second quarter. Analog revenu= e was down 45 percent from the year-ago period and 16 percent sequentially = due to broad based weakness in demand. In the first nine months of the year= , about 40 percent of total Semiconductor revenue came from Analog. DSP r= evenue decreased 37 percent from the year-ago quarter due to broad based we= akness in demand but increased 10 percent sequentially due to strength in w= ireless. In the first nine months of the year, about 25 percent of total Se= miconductor revenue came from DSP. TI's remaining Semiconductor revenue d= ecreased from the year-ago quarter and sequentially. TI's Semiconductor r= evenue in key markets was as follows: - Wireless revenue was down 42 perc= ent from the year-ago period but increased 16 percent sequentially. In the = first nine months of the year, about 20 percent of total Semiconductor reve= nue came from wireless. - Revenue from TI's catalog products, comprised o= f high-performance Analog and DSP, declined 52 percent from the year-ago qu= arter and 16 percent sequentially. In the first nine months of the year, ab= out 15 percent of total Semiconductor revenue came from catalog products. = - Broadband communications revenue, which includes digital subscriber line= (DSL) and cable modems, was up 8 percent from the year-ago quarter but dec= lined 53 percent sequentially. In the first nine months of the year, about = 5 percent of total Semiconductor revenue came from broadband communications= . - Semiconductor orders were $1308 million, compared with $2884 in the y= ear-ago period and $1321 million in the second quarter. SENSORS & CONTR= OLS Revenue was $222 million, compared with $245 million in the year-ago p= eriod due to overall market weakness, and down from $257 million in the sec= ond quarter due to seasonal patterns in the heating and air conditioning in= dustry and market weakness. Operating profit was $45 million, or 20.2 per= cent of revenue. Operating profit in the year-ago period was $43 million, o= r 17.5 percent of revenue. Operating profit in the second quarter was $52 m= illion, or 20.2 percent of revenue. EDUCATIONAL & PRODUCTIVITY SOLUTIO= NS (E&PS) E&PS revenue was $179 million, compared with $175 million in th= e year-ago quarter. Sequentially, revenue increased by $50 million due to b= ack-to- school sales of educational products. Operating profit was $67 mi= llion, or 37.3 percent of revenue, compared with $64 million, or 36.3 perce= nt of revenue in the year-ago quarter. Operating profit increased 76 percen= t from the second quarter's $38 million due to seasonality. FIRST NINE = MONTHS OF 2001 For the first nine months of 2001, TI reported the follow= ing: - TI revenue was $6414 million, down from $8843 million in the first= nine months of 2000, due to Semiconductor. The decrease in Semiconductor r= evenue for the first nine months of 2001 was primarily due to weakness acro= ss most Semiconductor products. The decrease in Sensors & Controls was prim= arily due to overall market weakness. E&PS was up slightly due to strength = of educational products. - Cost of revenues was $4452 million compared wi= th $4544 million in the year-ago period. Cost of revenues decreased primari= ly due to decreased Semiconductor revenue. - R?totaled $1216 million, com= pared with $1306 million in the first nine months of 2000. The decrease was= primarily due to acquisition-related charges for purchased in-process R?in= the first nine months of 2000. - Selling, general and administrative exp= ense was $1060 million, down from $1268 million in the year-ago period prim= arily due to cost reduction actions and reduced profit sharing. - Other i= ncome (expense) net decreased from $2039 million in the first nine months o= f 2000 to $201 million for the first nine months of 2001, primarily due to = the sale of Micron stock in 2000. - The income tax rate was 46 percent. = - Orders were $5239 million, down from $9601 million for the same period a= year ago, primarily due to weakness in Semiconductor. Semiconductor orders= for the first nine months were down, primarily due to a combination of wea= k electronic end-equipment markets and excess customer inventories. Sensors= & Controls orders were down due to overall market weakness. E&PS orders we= re up slightly due to strength of educational products. FINANCIAL CONDIT= ION In the first nine months of 2001, cash and cash equivalents plus short= -term investments decreased by $1011 million to $2992 million, primarily du= e to capital expenditures. During the third quarter of 2001, cash and cash = equivalents plus short-term investments decreased by $22 million due to the= repurchase of the company's common stock. Cash flow from operating activ= ities was $1039 million in the first three quarters of 2001. Capital expe= nditures totaled $1554 million in the first nine months of 2001, compared w= ith $1789 million in the first nine months of 2000. Capital expenditures to= taled $312 million in the third quarter of 2001 versus $585 million in the = year-ago quarter. Depreciation for the first three quarters of 2001 was $= 1145 million, compared with $869 million in the same period a year ago. Dep= reciation for the third quarter of 2001 was $414 million, versus $319 milli= on in the year-ago quarter. Debt-to-total-capital ratio was 0.10 at the e= nd of the third quarter, the same as at the end of 2000. In June 2001, th= e Financial Accounting Standards Board issued Statements of Financial Accou= nting Standards No. 141, Business Combinations, and No. 142, Goodwill and O= ther Intangibles, effective for fiscal years beginning after December 15, 2= 001. Under the new rules, goodwill and intangible assets deemed to have ind= efinite lives will no longer be amortized but will be subject to annual imp= airment tests in accordance with the Statements. Other intangible assets wi= ll continue to be amortized over their useful lives. The company will apply= the new rules on accounting for goodwill and other intangible assets begin= ning in the first quarter of 2002. Application of the non- amortization pro= visions of the Statement is expected to result in an increase in net income= of $100 million ($0.06 per share). During 2002, the company will perform t= he first of the required impairment tests of goodwill and indefinite lived = intangible assets as of January 1, 2002 and has not yet determined what eff= ect, if any, these tests will have on the earnings and financial position o= f the company. SPECIAL CHARGES AND GAINS Third Quarter of 2001 As o= f September 30, 2001, $184 million of the $290 million aggregate severance = cost obligations for the first, second and third quarter 2001 worldwide cos= t reduction and restructuring actions affecting a total of 5724 employees h= ad been paid. In total, these first, second and third quarter 2001 actions = are expected to result in annualized savings of approximately $400 million.= In the third quarter of 2001, pretax charges of $37 million net were taken= , of which $19 million was severance cost for a worldwide cost- reduction p= rogram affecting 285 employees and $16 million relates to the restructuring= charges for the closing of three Semiconductor facilities (Santa Cruz, Cal= ifornia; Merrimack, New Hampshire; and Tustin, California). Of the $16 mill= ion, $15 million was for the acceleration of depreciation over the remainin= g service life of the facilities. Of the $37 million, $27 million is includ= ed in cost of revenues, $8 million is in selling, general and administrativ= e expense and $2 million is in research and development expense. Second Q= uarter of 2001 In the second quarter of 2001, pretax charges of $252 mill= ion net were taken, of which $214 million was severance cost for a worldwid= e cost-reduction program affecting 3778 employees and $35 million relates t= o the restructuring charges for the closing of three Semiconductor faciliti= es (Merrimack, New Hampshire; Tustin, California; and Santa Cruz, Californi= a) affecting an additional 559 employees. Of the $35 million charge, $14 mi= llion was for severance cost and $16 million was for the acceleration of de= preciation over the remaining service life of the facilities. Of the $252 m= illion, $162 million was included in cost of revenues, $84 million is in se= lling, general and administrative expense and $6 million is in research and= development expense. Also included was a $68 million increase to the incom= e tax provision to adjust to the expected tax rate for the year. First Qu= arter of 2001 In the first quarter of 2001, pretax charges of $50 million= net were taken, of which $11 million was for severance cost for 241 first-= quarter employee acceptances under the U.S. voluntary retirement program, $= 16 million was for severance cost for restructuring actions affecting 261 e= mployees in international Semiconductor locations, and $25 million relates = to the closing of a Semiconductor manufacturing facility in Santa Cruz, Cal= ifornia. Of the $25 million charge, $16 million was for severance cost for = 600 employees and $5 million was for acceleration of depreciation over the = remaining service life of the facility. Of the $50 million, $44 million was= included in cost of revenues, $7 million is in selling, general and admini= strative expense, $2 million is in research and development expense, and $3= million is in other income. Third Quarter of 2000 In the third quarter= of 2000, TI recorded investment gains of $425 million from the sale of 5.6= million shares of Micron Technology, Inc. (Micron) common stock, offset by= special charges of $163 million net, of which $112 million was for purchas= ed in-process R? costs from the Dot Wireless, Inc. and Alantro Communicatio= ns, Inc. acquisitions, $41 million was for acquisition costs from the pooli= ng of interests with Burr-Brown Corporation, and $10 million, net, was for = several Semiconductor and Sensors & Controls restructuring and other action= s in the U.S., Japan and Europe affecting 432 employees. Of the $163 millio= n, $112 million was included in research and development expense, $46 milli= on is in selling, general and administrative expense, $31 million is in cos= t of revenues, $15 million is in net revenues and $11 million is in other i= ncome. The primary benefit from the above actions is reduced personnel cost= s, which are estimated to reach $31 million annually. The benefit began in = the fourth quarter of 2000. As of September 30, 2001, $13 million of the $1= 9 million severance cost obligation had been paid. Second Quarter of 2000= In the second quarter of 2000, an investment gain of $1211 million, incl= uded in other income, was realized from the sale of 20 million shares of Mi= cron common stock. First Quarter of 2000 In the first quarter of 2000, = pretax charges of $29 million net were taken, associated with actions inclu= ding the closing of the Sensors & Controls manufacturing facility in Versai= lles, Kentucky, and TI's acquisition of Toccata Technology ApS. Of the $29 = million charge, $12 million was for severance for the elimination of 480 jo= bs in Kentucky. Of the $29 million, $20 million was included in cost of rev= enues, $6 million is in selling, general and administrative expense and $3 = million is in research and development expense. The primary benefit from th= e Kentucky action is reduced personnel costs, which are estimated to reach = $10 million annually. The benefit began in the fourth quarter of 2000. As o= f September 30, 2001, $9 million of the severance cost obligation had been = paid. Purchased In-Process R?Charges Year-to-date acquisition-related p= urchased in-process research and development (R&D) charges were zero in 200= 1 and $112 million in 2000. These charges are for R?from business purchase = acquisitions. Values for acquired in-process R?(purchased R&D) were determi= ned at the acquisition date based upon the appraised value of the related d= evelopmental projects. Purchased R?projects were assessed, analyzed and val= ued within the context and framework articulated by the Securities and Exch= ange Commission herein described as the Exclusion Approach. Major assumpt= ions, detailed in the following table, used in determining the value of sig= nificant purchased R?included the discount rate, the estimated beginning da= te of projected operating cash flows, and the remaining cost and time, in e= ngineer-months, to complete the R?projects. The term "engineer month" refer= s to the average amount of research work expected to be performed by an eng= ineer in a month. The relative stage of completion and projected operatin= g cash flows of the underlying in-process projects acquired were the most s= ignificant and uncertain assumptions utilized in the valuation analysis of = the purchased R&D. Such uncertainties could give rise to unforeseen budget = overruns and/or revenue shortfalls in the event that TI is unable to succes= sfully complete and commercialize the projects. TI management is primarily = responsible for estimating the value of the purchased R?in all acquisitions= accounted for under the purchase method. TI expects to essentially meet it= s original return expectations for the projects. Millions of Dollars - = Cost/time to Pur= chased complete R&D Year = in-process = projects cash flows Entity Acquisition Con= sid- Other Deferred R&D Appraisal R&D Discount = -------------------- projected acquired date eration Goodwill in= tan- compen- charge method focus rate At acquisi- At = to begin gibles sation = tion Sept. 2001 --------- -----= ------ --------- -------- ------ -------- -------- --------- ---------= -------- ---------- --------- -------- Alantro Third $277 = $148 $ 81 $ 32 $ 52 Exclusion Wireless 24% $4.1/ = $1.7/66 2002 Commun- quarter = approach networking 256 engineer ication= s, 2000 t= echnology engineer months Inc. = for home months = = and office (c) 1995-2001 Cybernet Data Systems, Inc. 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