DALLAS, April 15 /PRNewswire/ -- Texas Instruments Incorporated (NYSE: TXN) today reported its first-quarter 1993 results.
Improvement in TI's financial performance gained momentum in the first quarter of 1993. Profit from operations more than doubled over the first quarter of 1992, on an 11 percent increase in net revenues.
Additionally, TI's annual stockholders meeting will be held today in Dallas.
Summary of Financial Results
For the first quarter of 1993, net revenues were $1,884 million, compared with $1,694 million in the first quarter of 1992. Net income before the cumulative effect of accounting changes was $85 million, compared with $40 million in last year's first quarter. Earnings per share before accounting changes were $0.89, compared with $0.35 a year ago.
On Jan. 1, 1993, TI adopted new accounting standards that change the way the company accounts for income taxes and retiree health-care coverage. After the effects of these changes, TI's net income for the quarter was $81 million, and earnings per share were $0.85.
TI's profit from operations for the quarter was $140 million, compared with $63 million in the first quarter of 1992. Essentially all of the profit improvement came in the semiconductor business, driven by faster-than-market revenue growth in application-specific products. Defense electronics maintained stable margins at levels that meet TI's goals for return on assets. The information technology business operated at a small loss for the quarter.
For TI, profit after tax return on total assets in the first quarter was 5.4 percent, compared with 2.4 percent in the first quarter of 1992. TI's goal is to achieve a sustained after-tax return on total assets of 8-10 percent.
Results for the quarter reflect royalty revenues of $94 million, including one-time royalties totaling $22 million from previously announced agreements with several personal computer manufacturers. These computer system patent settlements demonstrate the strength of TI's patent portfolio across a broad range of important microelectronics technologies.
First-quarter results also include an accrual of $7 million for profit sharing.
Jerry R. Junkins, chairman, president and chief executive officer, commented on TI's progress and strategies:
"In semiconductors, we have changed our products, processes and capacity to better align this business with our customers' needs. We are bringing together the technology, tools, information, and service to help our customers be more competitive in their markets. We call this strategy `Total Integration,' and it is a way for us to provide the best support for our customers, and at the same time, improve the return on assets for this business.
"A key element in our semiconductor strategy is to increase the percentage of differentiated products in our portfolio. As a result of our focus on differentiated products, our semiconductor product mix is better aligned with growth markets. TI's semiconductor orders and revenues reached all-time highs in 1992. This momentum carried into the first quarter of 1993, with orders up substantially over the record level of fourth-quarter 1992.
"Shipments of SuperSPARC(TM) microprocessors continued to increase in the quarter, and cumulative shipments of this 3.1 million transistor product now exceed 100,000 units. We are progressing on development of additional SPARC microprocessors. Shipments of TI486 microprocessors were up sharply over the fourth quarter of last year. These products strengthen our ability to integrate many system functions and technologies around core microprocessors.
"In addition, we have seen a resurgence in demand for bipolar products, as a result of our repositioning to value-added logic, advanced linear and mixed-signal products.
"A key priority in semiconductor is to aggressively reduce cycle times. If we're successful, one major benefit would be to substantially increase the output from our existing semiconductor facilities. We increased semiconductor revenues in the first quarter at a rate well ahead of the estimated market growth of 20 percent relative to the first quarter of last year, while reducing inventories."
Mr. Junkins added that TI's emphasis on total quality, cycle time, and on-time delivery is resulting in improved customer satisfaction and better customer relationships.
About TI's Defense Systems & Electronics Group, Mr. Junkins said:
"The defense electronics business continues to meet TI's profit- after-tax return-on-assets goals. Our challenge is to maintain stable profitability by keeping costs in line with a declining defense market, while continuing to win key programs.
"With TI's strengths in commercial components, systems and software, we are in position to benefit from the current emphasis on dual-use technologies. We are exploring potential long-term commercial applications of our uncooled infrared sensor systems, advanced manufacturing technology, and high-density microelectronics packaging." Mr. Junkins also described programs at TI to assist TI defense employees in job transitioning.
Mr. Junkins said: "In information technology, we have built a rapidly growing business, featuring software tools and applications software, that would rank among the top 20 U.S. software companies based on 1992 revenues.
"TI's software revenues for the first quarter were up from a year ago, but they were lower than we expected, causing our information technology business to operate at a small loss in the quarter. The transition to client/server computing is contributing to hesitation in the U.S. marketplace, affecting the purchase of mainframe computers and software for those mainframes. We are extending the functionality of the Information Engineering Facility(TM) (IEF)(TM) software tool to meet the needs of the emerging client/server market, and we expect to release several client/server products throughout the remainder of this year.
"We will continue to focus on making the investments necessary to maintain leadership in this business, while controlling discretionary costs."
Mr. Junkins said: "Our plans for 1993 are based on double-digit growth of the world semiconductor market. As we projected earlier this year, we expect 25 percent growth in U.S. demand, paced by strength in the computer and telecom end-equipment segments. For the first time since 1985, the U.S. semiconductor market will be larger than the market in Japan. Our latest survey shows that semiconductor inventories at major U.S. end-equipment manufacturers have declined from year-end levels.
"The Asia-Pacific region is expected to grow 28 percent in 1993. The Japanese semiconductor market, which was down 7 percent in 1992, is expected to grow at about 5 percent in 1993. With the measures being taken by the Japanese government, we believe the Japanese economy will begin a slow recovery in the second half of 1993. TI continues to gain share in Japan, with major design wins in consumer electronics, which is Japan's largest end-equipment market. Europe will have steady semiconductor growth of about 13 percent this year. In total, we expect the world semiconductor market to reach at least $70 billion in 1993, up 17 percent from 1992, and it could go higher based on the current strength of orders in the United States.
"In view of increased semiconductor demand, we currently plan to spend $650 million in capital in 1993. This is about $220 million more than in 1992, with emphasis on equipment to support the manufacture of differentiated products.
"In information technology, we believe the investments we are making in client/server software development tools will put us back on our growth track, although restraining the financial results for that business in the near term.
"Research and development investment in 1993 will be up substantially over the constrained levels of 1992. In addition to supporting our base businesses, we are accelerating investments in new technologies, especially digital imaging.
"In summary, we are in the process of reshaping the businesses of TI, both in terms of focus on customer satisfaction through total quality, and the transition to higher value-added products and services. What is emerging is a much different TI, more adaptable to change and in a better position to compete globally.
"Having gone through the struggles of the past few years, we are clearly in a better competitive position: we have a better product mix than at any time in more than a decade; we have better market positions, including several opportunities for new business directions; and we have stronger customer relationships.
"With the excellent execution of which TIers are capable, I am confident TI can be one of the value-added leaders of the 1990s," Mr. Junkins concluded.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Income Statement
(In millions of dollars, except per-share amounts)
Three months ended March 31 1993 1992
Net revenues $1,884 $1,694
Operating costs and expenses:
Cost of revenues 1,407 1,324
General, administrative and marketing 283 274
Employees' retirement and profit sharing
plans 54 33
Total 1,744 1,631
Profit from operations 140 63
Interest income 7 6
Other income (expense) net (6) 5
Interest on loans 12 11
Income before provision for income taxes and
cumulative effect of accounting changes 129 63
Provision for income taxes 44 23
Income before cumulative effect of
accounting changes 85 40
Cumulative effect of accounting changes (4) --
Net income $ 81 $ 40
Net income, less dividends
accrued on preferred stock $ 73 $ 29
Earnings per common and common equivalent
Income before cumulative effect of
accounting changes $ 0.89 $ 0.35
Cumulative effect of accounting changes (0.04) --
Net income $ 0.85 $ 0.35
Cash dividends declared per share
of common stock $ 0.18 $ 0.18
(A) -- Earnings per common and common equivalent share are based on average common and common equivalent shares outstanding (94.3 million shares and 82.4 million shares for the first quarters of 1993 and 1992). The average number of shares used in computing per-share earnings for the first quarter of 1993 assumes the conversion of the company's conversion preferred stock (7.8 million shares) and convertible debentures (2.4 million shares). In computing per-share earnings, "net income, less dividends accrued on preferred stock" is increased by $7 million for the first quarter of 1993 for dividends and interest, net of tax and profit sharing effect, on the conversion preferred stock and convertible debentures considered dilutive common stock equivalents.
Selected Balance Sheet Items
(Millions of dollars)
Cash and short-term investments $ 801 $ 859
Accounts receivable (net) 1,007 975
Inventories (net) 767 734
Total current assets 2,870 2,626
Property, plant and equipment (net) 2,129 2,133
Total assets 5,587 5,185
Current liabilities 1,663 1,665
Long-term debt, loans and current LTD 935 963
Stockholders' equity $2,021 $1,947
Debt-to-total-capital ratio .32 .33
Supplemental Financial Information
TI's orders for the first quarter of 1993 were $2,247 million, compared with $1,885 million in the same period of 1992. Orders were up 39 percent in the components segment, as orders for semiconductors reached all-time highs. Defense electronics orders were down 3 percent, primarily because of the lower quantity of HARM missiles in the fiscal year 1993 contract. Orders were up 6 percent in digital products, and up 10 percent in metallurgical materials.
TI's net revenues for the first quarter of 1993 were $1,884 million, up 11 percent from the same period of last year. Revenues were up 21 percent in components, with strong growth in semiconductors. Revenues in digital products were essentially unchanged. Excluding the multiuser minicomputer systems and service operation sold to Hewlett- Packard in 1992, first-quarter 1993 revenues were up 23 percent over the first quarter of 1992. Revenues in defense electronics were flat from the year-ago level, but down from last year's fourth quarter. Revenues were up 6 percent in the metallurgical materials segment.
Profit from operations for the first quarter of 1993 was $140 million, compared with $63 million in the same period of 1992. Components segment profit margins more than doubled over the same period of last year, primarily because of increased revenues of application- specific semiconductor products and the benefit of cost-reduction actions. Defense electronics margins were stable on essentially unchanged revenues. Profit in the digital segment increased over the same period of last year because of higher royalty revenues. However, both the information technology and consumer businesses operated at a loss in the first quarter of 1993.
The income tax rate for the first quarter of 1993 was 34 percent, which is the current estimate of the rate for the full year.
The company's U.S. employees are currently eligible to receive specified company-paid health-care benefits during retirement. Effective Jan. 1, 1993, the company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions," which requires the accrual of expected retiree health-care benefit costs during the employees' working careers, instead of when the claims are incurred. The company recorded an accumulated postretirement benefit obligation of $454 million and a related deferred income tax asset of $160 million, which resulted in a $294 million charge ($3.12 per share) for the cumulative effect of the accounting change. First-quarter 1993 pretax expense for this benefit plan was $10 million. First-quarter 1992 pretax expense, on a claims-incurred basis, was $6 million.
Effective Jan. 1, 1993, the company adopted SFAS No. 109, "Accounting for Income Taxes," which requires increased recording of deferred income tax assets. As a result, the company recorded additional deferred income tax assets of $203 million, after a valuation allowance of $404 million, and reduced deferred income tax liabilities by $87 million, which resulted in a $290 million credit ($3.08 per share) for the cumulative effect of the accounting change. As of Jan. 1, 1993, after adoption of SFAS No. 109 and SFAS No. 106, the company had total deferred income tax assets of $1,029 million, before a valuation allowance of $404 million, and total deferred income tax