TEXAS INSTRUMENTS INCORPORATED DALLAS, April 22, 2015 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported first-quarter revenue of $3.15 billion, net income of $656 million and earnings per share of 61 cents.
Regarding the company's performance and returns to shareholders, Rich Templeton, TI's chairman, president and CEO, made the following comments:
-- "Revenue growth of 6 percent was the sixth consecutive quarter of
year-over-year growth and within the range of our expectations.
Automotive and industrial markets were strong, as we expected they would
be. Revenue, however, was in the bottom half of our range for two
reasons. First was weak demand in the last month of the quarter in our
personal electronics market, particularly PCs, and in our communications
equipment market, particularly wireless infrastructure equipment. Second
was a steep decline in the currency exchange rate for the euro relative
to the U.S. dollar.
-- "Even so, our core businesses of Analog and Embedded Processing
delivered their seventh and tenth consecutive quarters of year-over-year
growth, respectively. Combined, Analog and Embedded Processing comprised
86 percent of first-quarter revenue.
-- "Gross margin of 57.7 percent was up almost 4 percentage points from a
year ago, reflecting the diversity and longevity of our product
portfolio, as well as the efficiency of our manufacturing strategy.
-- "Our cash flow from operations once again underscored the strength of
our business model. Free cash flow for the trailing 12 months was up 17
percent from a year ago to $3.6 billion, or 27 percent of revenue. This
represents an increase of 2 percentage points from a year ago and is
consistent with our targeted range of 20-30 percent of revenue.
-- "We returned $4.1 billion to shareholders in the past 12 months through
stock repurchases and dividends.
-- "Our strategy to return to shareholders 100 percent of free cash flow
plus proceeds from exercises of equity compensation minus net debt
retirement reflects our confidence in the long-term sustainability of
our business model.
-- "Our balance sheet remains strong, with $3.3 billion of cash and
short-term investments at the end of the quarter, 82 percent of which
was owned by the company's U.S. entities. Inventory ended the quarter at
124 days.
-- "TI's outlook for the second quarter is for revenue in the range of
$3.12 billion to $3.38 billion and earnings per share between 60 and 70
cents. Our estimates assume continuing weakness in our communications
equipment and personal electronics markets, particularly for wireless
infrastructure equipment and PCs, respectively. We also do not expect a
near-term rebound in foreign currency exchange rates. The annual
effective tax rate for 2015 is expected to be about 30 percent."
Free cash flow is a non-GAAP financial measure. Free cash flow is cash flow from operations less capital expenditures.
Earnings summary
Amounts are in millions of dollars, except per-share amounts.
1Q15 1Q14 Change
---- ---- ------
$3,150 $2,983
Revenue 6%
$958 $690
Operating profit 39%
$656 $487
Net income 35%
$0.61 $0.44
Earnings per share 39%
Cash generation
Amounts are in millions of dollars.
Trailing 12 Months
------------------
1Q15 1Q15 1Q14 Change
---- ---- ---- ------
$609 $4,039 $3,486
Cash flow from operations 16%
$123 $431 $405
Capital expenditures 6%
$486 $3,608 $3,081
Free cash flow 17%
Free cash flow % of
revenue 27% 25%
Capital expenditures for the past 12 months were 3 percent of revenue. Our long-term expectation is about 4 percent.
Cash return
Amounts are in millions of dollars.
Trailing 12 Months
------------------
1Q15 1Q15 1Q14 Change
---- ---- ---- ------
$356 $1,354 $1,268
Dividends
paid 7%
$670 $2,781 $2,909
Stock
repurchases -4%
$1,026 $4,135 $4,177
Total
cash
returned -1%
The company's targeted cash return is 100 percent of free cash flow plus proceeds from exercises of equity compensation minus net debt retirement.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)
For Three Months Ended
March 31,
---------
2015 2014
---- ----
Revenue $3,150 $2,983
Cost of revenue (COR) 1,334 1,376
----- -----
Gross profit 1,816 1,607
Research and
development (R&D) 338 366
Selling, general and
administrative (SG&A) 439 479
Acquisition charges 83 83
Restructuring charges/
other (2) (11)
--- ---
Operating profit 958 690
Other income
(expense), net (OI&E) 4 6
Interest and debt
expense 22 25
--- ---
Income before income
taxes 940 671
Provision for income
taxes 284 184
--- ---
Net income $656 $487
==== ====
Diluted earnings per
common share $.61 $.44
==== ====
Average diluted shares
outstanding
(millions) 1,061 1,096
===== =====
Cash dividends
declared per common
share $.34 $.30
==== ====
As a result of accounting rule ASC 260, which requires a portion of Net income to
be
allocated to unvested restricted stock units (RSUs) on which we pay dividend
equivalents,
diluted EPS is calculated using the following:
Net income $656 $487
Income allocated to
RSUs (9) (7)
--- ---
Income allocated to
common stock for
diluted EPS $647 $480
==== ====
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
March 31,
---------
2015 2014
---- ----
Assets
Current assets:
$1,242 $1,565
Cash and cash equivalents
Short-term investments 2,062 2,467
Accounts receivable, net of allowances
of ($12) and ($23) 1,394 1,355
Raw materials 107 95
Work in process 906 898
Finished goods 831 721
--- ---
Inventories 1,844 1,714
----- -----
Deferred income taxes 340 383
Prepaid expenses and other current
assets 810 876
--- ---
Total current assets 7,692 8,360
----- -----
Property, plant and equipment at cost 6,177 6,426
Accumulated depreciation (3,419) (3,247)
------ ------
Property, plant and equipment, net 2,758 3,179
----- -----
Long-term investments 232 212
Goodwill, net 4,362 4,362
Acquisition-related intangibles, net 1,822 2,142
Deferred income taxes 174 200
Capitalized software licenses, net 73 111
Overfunded retirement plans 128 129
Other assets 105 240
--- ---
$17,346 $18,935
Total assets
Liabilities and stockholders' equity
Current liabilities:
$1,000 $1,000
Current portion of long-term debt
Accounts payable 432 405
Accrued compensation 349 364
Income taxes payable 75 101
Deferred income taxes 4 1
Accrued expenses and other liabilities 426 600
--- ---
Total current liabilities 2,286 2,471
----- -----
Long-term debt 3,638 4,652
Underfunded retirement plans 253 218
Deferred income taxes 403 536
Deferred credits and other liabilities 397 438
--- ---
Total liabilities 6,977 8,315
----- -----
Stockholders' equity:
Preferred stock, $25 par value.
Authorized - 10,000,000 shares.
Participating cumulative preferred.
None issued. - -
Common stock, $1 par value. Authorized
- 2,400,000,000 shares.
Shares issued - 1,740,815,939 1,741 1,741
Paid-in capital 1,410 1,181
Retained earnings 29,948 28,331
Treasury common stock at cost.
Shares: March 31, 2015 - 696,401,920;
March 31, 2014
- 661,464,745 (22,199) (20,113)
Accumulated other comprehensive income
(loss), net of taxes (AOCI) (531) (520)
---- ----
Total stockholders' equity 10,369 10,620
------ ------
$17,346 $18,935
Total liabilities and stockholders'
equity
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)
For Three Months Ended
March 31,
---------
2015 2014
---- ----
Cash flows from operating
activities:
$656 $487
Net income
Adjustments to Net income:
Depreciation 203 213
Amortization of acquisition-
related intangibles 80 81
Amortization of capitalized
software 13 16
Stock-based compensation 78 78
Gains on sales of assets (1) (37)
Deferred income taxes 1 -
Increase (decrease) from changes
in:
Accounts receivable (154) (149)
Inventories (60) 17
Prepaid expenses and other current
assets 54 (29)
Accounts payable and accrued
expenses (108) (117)
Accrued compensation (294) (189)
Income taxes payable 147 80
Changes in funded status of
retirement plans 19 22
Other (25) (11)
--- ---
Cash flows from operating
activities 609 462
--- ---
Cash flows from investing
activities:
Capital expenditures (123) (77)
Proceeds from asset sales 1 37
Purchases of short-term
investments (335) (1,051)
Proceeds from short-term
investments 615 785
Other - 1
--- ---
Cash flows from investing
activities 158 (305)
--- ----
Cash flows from financing
activities:
Proceeds from issuance of long-
term debt - 498
Dividends paid (356) (325)
Stock repurchases (670) (720)
Proceeds from common stock
transactions 246 283
Excess tax benefit from share-
based payments 56 49
Other - (4)
--- ---
Cash flows from financing
activities (724) (219)
---- ----
Net change in Cash and cash
equivalents 43 (62)
Cash and cash equivalents at
beginning of period 1,199 1,627
----- -----
$1,242 $1,565
Cash and cash equivalents at end
of period
1Q15 segment results
1Q15 1Q14 Change
---- ---- ------
Analog:
$2,035 $1,837
Revenue 11%
$721 $498
Operating profit 45%
Embedded Processing:
$672 $656
Revenue 2%
$123 $52
Operating profit 137%
Other:
$443 $490
Revenue -10%
$114 $140
Operating profit* -19%
* Includes Acquisition charges and
Restructuring charges/other.
Compared with the year-ago quarter:
Analog: (includes High Volume Analog & Logic, Power Management, High Performance Analog and Silicon Valley Analog)
-- Revenue increased primarily due to Power Management and High Volume
Analog & Logic. Silicon Valley Analog and High Performance Analog also
grew.
-- Operating profit increased primarily due to higher revenue and
associated gross profit.
Embedded Processing: (includes Processor, Microcontrollers and Connectivity)
-- Revenue increased due to Microcontrollers and Connectivity. This was
partially offset by lower Processor revenue.
-- Operating profit increased primarily due to lower operating expenses.
Other: (includes DLP(® )products, custom ASIC products, calculators and royalties)
-- Revenue declined primarily due to custom ASIC and DLP products.
-- Operating profit decreased primarily due to lower gross profit.
Non-GAAP financial information
Free cash flow and associated ratios
This release includes references to free cash flow and ratios based on that measure. These are financial measures that were not prepared in accordance with GAAP. Free cash flow was calculated by subtracting Capital expenditures from the most directly comparable GAAP measure, Cash flows from operating activities (also referred to as cash flow from operations).
The company believes that free cash flow and the associated ratios provide insight into its liquidity, its cash-generating capability and the amount of cash potentially available to return to investors, as well as insight into its financial performance. These non-GAAP measures are supplemental to the comparable GAAP measures.
Reconciliation to the most directly comparable GAAP-based measures is provided in the table below.
For 12 Months Ended
March 31,
---------
2015 2014 Change
---- ---- ------
$4,039 $3,486
Cash flow from operations (GAAP) 16%
Capital expenditures (431) (405)
---- ----
$3,608 $3,081
Free cash flow (non-GAAP) 17%
$13,212 $12,302
Revenue
Cash flow from operations as a
percent of
revenue (GAAP) 31% 28%
Free cash flow as a percent of
revenue
(non-GAAP) 27% 25%
Notice regarding forward-looking statements
This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as TI or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements herein that describe TI's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements.
We urge you to carefully consider the following important factors that could cause actual results to differ materially from the expectations of TI or its management:
-- Market demand for semiconductors, particularly in markets such as
personal electronics and communications equipment;
-- TI's ability to maintain or improve profit margins, including its
ability to utilize its manufacturing facilities at sufficient levels to
cover its fixed operating costs, in an intensely competitive and
cyclical industry;
-- TI's ability to develop, manufacture and market innovative products in a
rapidly changing technological environment;
-- TI's ability to compete in products and prices in an intensely
competitive industry;
-- TI's ability to maintain and enforce a strong intellectual property
portfolio and obtain needed licenses from third parties;
-- Expiration of license agreements between TI and its patent licensees,
and market conditions reducing royalty payments to TI;
-- Economic, social and political conditions in the countries in which TI,
its customers or its suppliers operate, including security risks, health
conditions, possible disruptions in transportation, communications and
information technology networks and fluctuations in foreign currency
exchange rates;
-- Natural events such as health epidemics, severe weather and earthquakes
in the locations in which TI, its customers or its suppliers operate;
-- Availability and cost of raw materials, utilities, manufacturing
equipment, third-party manufacturing services and manufacturing
technology;
-- Changes in the tax rate applicable to TI as the result of changes in tax
law, the jurisdictions in which profits are determined to be earned and
taxed, the outcome of tax audits and the ability to realize deferred tax
assets;
-- Compliance with or changes in the complex laws, rules and regulations to
which TI is or may become subject, or actions of enforcement
authorities, that restrict our ability to manufacture our products or
operate our business, or subject us to fines, penalties or other legal
liability;
-- Losses or curtailments of purchases from key customers and the timing
and amount of distributor and other customer inventory adjustments;
-- Financial difficulties of our distributors or their promotion of
competing product lines to TI's detriment;
-- A loss suffered by a customer or distributor of TI with respect to
TI-consigned inventory;
-- Customer demand that differs from our forecasts;
-- The financial impact of inadequate or excess TI inventory that results
from demand that differs from projections;
-- Impairments of our non-financial assets;
-- Product liability or warranty claims, claims based on epidemic or
delivery failure, recalls by TI customers for a product containing a TI
part or other legal proceedings;
-- TI's ability to recruit and retain skilled personnel;
-- Timely implementation of new manufacturing technologies and installation
of manufacturing equipment, and the ability to obtain needed third-party
foundry and assembly/test subcontract services;
-- TI's obligation to make principal and interest payments on its debt;
-- TI's ability to successfully integrate and realize opportunities for
growth from acquisitions, and our ability to realize our expectations
regarding the amount and timing of restructuring charges and associated
cost savings; and
-- Breaches of our information technology systems or those of our customers
or suppliers.
For a more detailed discussion of these factors, see the Risk Factors discussion in Item 1A of TI's Form 10-K for the year ended December 31, 2014. The forward-looking statements included in this release are made only as of the date of this release. TI undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or risks. If we do update any forward-looking statement, you should not infer that we will make additional updates with respect to that statement or any other forward-looking statement.
About Texas Instruments
Texas Instruments Incorporated (TI) is a global semiconductor design and manufacturing company that develops analog ICs and embedded processors. By employing the world's brightest minds, TI creates innovations that shape the future of technology. TI is helping more than 100,000 customers transform the future, today. Learn more at www.ti.com.
TI trademarks:
DLP
Other trademarks are the property of their respective owners.
TXN-F
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SOURCE Texas Instruments Incorporated
