This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Texas Instruments. (TXN) on 26 January, 2009.
Management:
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Vice President, Investor Relations: Ron Slaymaker
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Chief Financial Officer: Kevin March
Key Investors Issues
- Revenue was $2.49 billion, down 30% from $3.56 billion a year ago.
- Net income was $107 million or 8 cents a share, down 86%.
- The firm used $386 million to repurchase 20.3 million shares of TI common stock and paid dividends of $141 million.
Full Year Highlights:
- Revenue declined 10% to $12.5 billion from $13.8 billion in the prior year.
- Income was down 27% to $1.9 billion or $1.45 a share
Fourth Quarter Highlights
Revenue was $2.49 billion, a 30% drop from $3.56 billion in the year ago quarter as revenue in every segment was down with wireless leading the decline at a 42% decline from a year ago.
- The firm lowered its own inventory by $200 million and worked with distributors to reduce inventory in the channels by more than $70 million as expected.
- Along with lower revenue, inventory reduction had a direct impact on factory utilization levels, lowering the average utilization by about 20% points from the third quarter to 48%.
- This again resulted in unutilized manufacturing costs that were expensed in the quarter and therefore significantly decreased gross profit to $834 million.
The firm reduced operating expenses by $137 million or 15% from a year ago and by 12% sequentially and both R&D and SG&A expenses were reduced as the firm implemented spending controls and employees took accrued vacation time.
- Other income and expense declined to a loss of $15 million, mostly due to a reserve associated with a former business as well as investment losses.
- Net income was $107 million or 8 cents a share, down 86% from $756 million or 55 cents a share in the prior year on weaker revenues and restructuring charges.
Despite lower earnings, cash flow from operations increased to $1.11 billion due to lower working capital requirements and the firm ended with $2.54 billion in total cash.
- The firm used $386 million to repurchase 20.3 million shares of TI common stock and paid dividends of $141 million.
- Inventory days increased to 89 as the 13% reduction in inventory was less than the drop in revenue and TI orders were $1.86 billion, down 42% sequentially.
Operational Insights:
- The firm will be aggressive with inventory again in the first quarter because it''s the best way to align production with true in demand as soon as possible.
- Cost reductions are focused in non core product areas and internal support functions and include reduction of about 3,400 jobs, 1,600 of them voluntary and 1,800 of them involuntary..
- It continues to invest aggressively in analog and embedded processing and in customer support and are confident that over time this will translate to good growth and stronger market positions.
- The firm expects annualized cost savings of about $500 million when these job reductions are complete.
- The firm has discontinued op efforts regarding the sale of the wireless merchant base stand products operation.
Fiscal 2009 Outlook:
- Expect TI revenue in the range of $1.62 billion to $2.12 billion in the first quarter, a decline of about 35% to a decline of about 15%.
- Expect earnings per share to be in the range of 11 cents loss to a 3 cents profit.
- The firm anticipates to operate factories below 35% utilization or at about 15 points lower than the fourth quarter.
- For 2009, it expects R&D expense at about $1.5 billion compared with $1.94 billion in 2008.
- It expects capital expenditures of about $300 million in the year, down from $763 million in 2008.
Key questions and answers from the fourth quarter earnings call conducted by Texas Instruments. (TXN) on 26 January, 2009.
Glen Yeung (Citigroup):
Any thoughts that you may have as to whether or not things have gotten as bad as they''re going to get?
Kevin March: We are not anticipating that we are at a bottom. We think that the economy is shaping up to be as we''ve heard many economists talk about recently, probably the worst one that most of us have experienced in our working lives.
