DALLAS, July 19 /PRNewswire-FirstCall/ -- Texas Instruments Incorporated (TI) (NYSE: TXN) today announced second-quarter revenue of $3.50 billion, net income of $769 million and earnings per share of 62 cents.

"Our Analog and Embedded Processing businesses turned in double-digit sequential growth, outpacing their respective markets and again confirming their ability to positively impact the financial performance of TI. As a result, we delivered our highest-ever quarterly operating profit," said Rich Templeton, TI chairman, president and chief executive officer.

"Orders were strong in the quarter, backlog increased and we expect to grow revenue again in the third quarter. Our steady investments in production capacity, even through last year's downturn, are now allowing us to meet higher demand levels from customers and simultaneously reduce lead times, which we believe is not only in the best interest of our customers, but will also help us gain share.

"As we continue our transformation to an Analog and Embedded Processing company, we believe we can significantly outgrow these markets by offering products that are optimized to the needs of our customers and by putting manufacturing capacity in place before it's needed," Templeton said.

2Q10 financial summary

Amounts are in millions of dollars, except per-share amounts.
2Q10 2Q09 vs. 2Q09 1Q10 vs. 1Q10
Revenue $3,496 $2,457 42% $3,205 9%
Operating profit $1,107 $343 223% $950 17%
Net income $769 $260 196% $658 17%
Earnings per share $0.62 $0.20 210% $0.52 19%

Cash flow from operations $562 $557 1% $710 -21%
TI's operating profit increased compared with the second quarter of 2009 and the prior quarter of 2010 due to higher gross profit, which primarily reflects higher revenue. In addition, compared with a year ago, higher gross profit also reflects the benefit associated with higher utilization of manufacturing assets.

2Q10 segment results
2Q10 2Q09 vs. 2Q09 1Q10 vs. 1Q10

Analog:
Revenue $1,512 $970 56% $1,367 11%
Operating profit $472 $103 358% $398 19%

Embedded Processing:
Revenue $516 $350 47% $440 17%
Operating profit $115 $28 311% $73 58%

Wireless:
Revenue $727 $614 18% $717 1%
Operating profit $165 $51 224% $158 4%

Other:
Revenue $741 $523 42% $681 9%
Operating profit $355 $161 120% $321 11%

Note: 2Q09 has been restated to reflect the 1Q10 transfer of a low-power wireless product
line from the Analog segment to the Wireless segment. During all of 2009, revenue from this
product line was $68 million, and it operated at a loss of $17 million.

Analog: (includes high-volume analog & logic, high-performance analog and power management products)

Compared with a year ago, the increase in revenue was due to growth in all three major product areas, especially high-volume analog & logic products.
Compared with the prior quarter, the increase in revenue was due to growth in all three major product areas, especially high-performance analog products.
The growth in operating profit compared with both a year ago and the prior quarter was due to higher gross profit.

Embedded Processing: (includes digital signal processor and microcontroller catalog products that are sold across a wide variety of markets, as well as application-specific products that are used in communications infrastructure and automotive electronics)

In both comparisons, revenue growth was primarily due to catalog products. Revenue from products for automotive and communications infrastructure applications increased to a lesser extent.
The gains in operating profit compared with both a year ago and the prior quarter were due to higher gross profit.


Wireless: (includes connectivity products, OMAP™ applications processors and baseband products)

Compared with a year ago, revenue grew due to strength in connectivity products and applications processors. Revenue from baseband products was about even with a year ago.
Compared with the prior quarter, revenue was about even as higher revenue from connectivity products was partially offset by lower revenue from baseband products.
Operating profit increased from a year ago and from the prior quarter primarily due to higher gross profit.

Other: (includes DLP® products, custom ASIC products, calculators and royalties)

Compared with a year ago, revenue grew primarily due to DLP products. Revenue from royalties, custom ASIC products and calculators also grew.
Compared with the prior quarter, revenue grew primarily due to seasonally higher calculator sales, which more than offset lower royalties.
Operating profit increased from a year ago and from the prior quarter due to higher gross profit.


Restructuring charges were as follows:
2Q10 2Q09 1Q10
Analog $7 $34 $4
Embedded Processing $3 $18 $2
Wireless $5 $24 $3
Other $2 $9 $1
Total $17 $85 $10

2Q10 additional financial information

Orders were $3.73 billion, up 33 percent from a year ago and up 2 percent from the prior quarter.
Inventory was $1.35 billion at the end of the quarter, up $286 million from a year ago and up $73 million from the prior quarter.
Capital expenditures were $283 million in the quarter compared with $47 million a year ago and $219 million in the prior quarter. Capital expenditures in the quarter were for analog wafer manufacturing equipment and for assembly/test manufacturing equipment.
The company used $750 million in the quarter to repurchase 29.7 million shares of its common stock and paid dividends of $147 million.


Outlook
For the third quarter of 2010, TI expects:

Revenue: $3.55 – 3.85 billion
Earnings per share: $0.64 – 0.74


TI will update its third-quarter outlook on September 9, 2010.

For the full year of 2010, TI expects approximately the following:

R&D expense: $1.5 billion
Capital expenditures: $1.2 billion, up from the prior expectation of $0.9 billion
Depreciation: $0.9 billion
Annual effective tax rate: 31%


The tax rate estimate is based on current tax law and does not assume reinstatement of the federal R&D tax credit, which expired at the end of 2009.