TEXAS INSTRUMENTS INCORPORATED DALLAS, July 21, 2014 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported second-quarter revenue of $3.29 billion, net income of $683 million and earnings per share of 62 cents.
Regarding the company's performance and returns to shareholders, Rich Templeton, TI's chairman, president and CEO, made the following comments:
-- "Revenue for the quarter came in just above the middle of our expected
range and earnings were near the top of the range, marking another
quarter of solid execution.
-- "We delivered 8 percent year-over-year revenue growth, or 13 percent
when legacy wireless revenue is excluded. Analog and Embedded
Processing comprised 82 percent of second-quarter revenue, 4 points
higher than a year ago.
-- "Gross margin of 57.1 percent, a new record, reflects the quality of our
Analog and Embedded Processing portfolio and the efficiency of our
manufacturing strategy.
-- "The strength of our business model is reflected in our generation of
cash flow from operations. Free cash flow for the trailing twelve-month
period was up 10 percent from a year ago to $3.2 billion, or 25 percent
of revenue. This is consistent with our target of 20-30 percent.
-- "We returned $4.2 billion to shareholders in the past twelve months
through dividends paid and stock repurchases. Our strategy to return to
shareholders all free cash flow not needed for net debt retirement, and
to return proceeds from exercises of equity compensation, reflects our
confidence in the long-term sustainability of our business model.
-- "Our balance sheet remains strong, with $2.8 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 days were 111,
consistent with our model of 105-115 days.
-- "TI's outlook for the third quarter of 2014 is for revenue in the range
of $3.31 billion to $3.59 billion and earnings per share between $0.66
and $0.76. The annual effective tax rate for 2014 is expected to be
about 28 percent, unchanged from our previous guidance."
Revenue excluding legacy wireless and free cash flow are non-GAAP financial measures. Free cash flow is cash flow from operations less capital expenditures.
Earnings summary
Amounts are in millions of dollars, except per-share amounts.
2Q14 2Q13 Change
---- ---- ------
Revenue $3,292 $3,047 8%
Operating profit $982 $906 8%
Net income $683 $660 3%
Earnings per share $.62 $.58 7%
Cash generation
Amounts are in millions of dollars.
Trailing 12 Months
------------------
2Q14 2Q14 2Q13 Change
---- ---- ---- ------
Cash flow from
operations $775 $3,587 $3,323 8%
Capital
expenditures $80 $388 $427 -9%
Free cash flow $695 $3,199 $2,896 10%
Free cash flow %
of revenue 21% 25% 24%
Capital expenditures for the past twelve months were 3 percent of revenue.
Cash return
Amounts are in millions of dollars.
Trailing 12 Months
------------------
2Q14 2Q14 2Q13 Change
---- ---- ---- ------
Dividends paid $323 $1,282 $971 32%
Stock repurchases $743 $2,931 $2,600 13%
Total cash returned $1,066 $4,213 $3,571 18%
The company's targeted cash return model is free cash flow minus net debt retirement plus proceeds from exercises of equity compensation.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)
For Three Months Ended June 30,
-------------------------------
2014 2013
---- ----
Revenue $3,292 $3,047
Cost of revenue 1,411 1,477
----- -----
Gross profit 1,881 1,570
Research and development
(R&D) 349 389
Selling, general and
administrative (SG&A) 472 471
Acquisition charges 82 86
Restructuring charges/other (4) (282)
--- ----
Operating profit 982 906
Other income (expense), net 3 --
Interest and debt expense 24 24
--- ---
Income before income taxes 961 882
Provision for income taxes 278 222
--- ---
Net income $683 $660
==== ====
Earnings per common share:
Basic $.63 $.59
==== ====
Diluted $.62 $.58
==== ====
Average shares outstanding
(millions):
Basic 1,071 1,103
===== =====
Diluted 1,086 1,117
===== =====
Cash dividends declared per
share of common stock $.30 $.28
==== ====
Percentage of revenue:
Gross profit 57.1% 51.5%
R&D 10.6% 12.8%
SG&A 14.3% 15.5%
Operating profit 29.8% 29.7%
As required by accounting rule ASC 260, net income allocated to unvested restricted stock units (RSUs), on which we pay dividend equivalents, is excluded from the calculation of EPS. The amount excluded is $10 million and $11 million for the quarters ending June 30, 2014 and 2013.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
June 30,
---------
2014 2013
---- ----
Assets
Current assets:
Cash and cash equivalents $1,216 $1,180
Short-term investments 1,588 2,064
Accounts receivable, net of allowances of ($14) and ($31) 1,527 1,491
Raw materials 93 101
Work in process 894 926
Finished goods 757 693
--- ---
Inventories 1,744 1,720
----- -----
Deferred income taxes 389 474
Prepaid expenses and other current assets 992 1,109
--- -----
Total current assets 7,456 8,038
----- -----
Property, plant and equipment at cost 6,452 6,679
Accumulated depreciation (3,408) (3,068)
------ ------
Property, plant and equipment, net 3,044 3,611
----- -----
Long-term investments 219 203
Goodwill, net 4,362 4,362
Acquisition-related intangibles, net 2,062 2,388
Deferred income taxes 194 253
Capitalized software licenses, net 101 159
Overfunded retirement plans 126 106
Other assets 246 278
--- ---
Total assets $17,810 $19,398
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $254 $1,000
Accounts payable 402 437
Accrued compensation 484 463
Income taxes payable 109 218
Deferred income taxes 2 2
Accrued expenses and other liabilities 552 682
--- ---
Total current liabilities 1,803 2,802
----- -----
Long-term debt 4,394 4,165
Underfunded retirement plans 224 240
Deferred income taxes 484 584
Deferred credits and other liabilities 439 539
--- ---
Total liabilities 7,344 8,330
----- -----
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 1,273 1,117
Retained earnings 28,686 27,677
Treasury common stock at cost. (20,722) (18,877)
Shares: June 30, 2014 - 673,260,360; June 30, 2013 -
639,643,135
Accumulated other comprehensive income (loss), net of taxes (512) (590)
---- ----
Total stockholders' equity 10,466 11,068
------ ------
Total liabilities and stockholders' equity $17,810 $19,398
======= =======
Certain amounts in the prior period's financial statement have been reclassified to conform to the current presentation.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)
For Three Months Ended June 30,
-------------------------------
2014 2013
---- ----
Cash flows from
operating
activities:
Net income $683 $660
Adjustments to net
income:
Depreciation 213 221
Amortization of
acquisition-related
intangibles 80 85
Amortization of
capitalized software 14 15
Stock-based
compensation 77 75
Gain on sales of
assets (2) --
Deferred income taxes (57) (40)
Increase (decrease)
from changes in:
Accounts receivable (165) (160)
Inventories (30) (20)
Prepaid expenses and
other current assets 14 (318)
Accounts payable and
accrued expenses (59) (36)
Accrued compensation 113 95
Income taxes payable (128) 115
Changes in funded
status of retirement
plans 19 23
Other 3 (41)
--- ---
Cash flows from
operating activities 775 674
--- ---
Cash flows from
investing
activities:
Capital expenditures (80) (97)
Proceeds from asset
sales 3 --
Purchases of short-
term investments (415) (1,866)
Proceeds from short-
term investments 1,294 2,268
Other -- 5
--- ---
Cash flows from
investing activities 802 310
--- ---
Cash flows from
financing
activities:
Proceeds from
issuance of long-
term debt -- 986
Repayment of debt (1,000) (1,500)
Dividends paid (323) (309)
Stock repurchases (743) (721)
Proceeds from common
stock transactions 125 343
Excess tax benefit
from share-based
payments 15 11
Other -- (7)
--- ---
Cash flows from
financing activities (1,926) (1,197)
------ ------
Net change in Cash
and cash equivalents (349) (213)
Cash and cash
equivalents,
beginning of period 1,565 1,393
----- -----
Cash and cash
equivalents, end of
period $1,216 $1,180
====== ======
Certain amounts in the prior period's financial statement have been reclassified to conform to the current presentation.
2Q14 segment results
2Q14 2Q13 Change
---- ---- ------
Analog:
Revenue $1,995 $1,745 14%
Operating profit $664 $416 60%
Embedded Processing:
Revenue $703 $618 14%
Operating profit $104 $54 93%
Other:
Revenue $594 $684 -13%
Operating profit* $214 $436 -51%
* 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. High Performance
Analog, High Volume Analog & Logic and Silicon Valley Analog also grew.
-- Operating profit increased primarily due to higher revenue and
associated gross profit.
Embedded Processing: (includes Processors, Microcontrollers and Connectivity)
-- Revenue increased primarily due to Processors and Microcontrollers, both
of which grew about the same amount. Connectivity also grew.
-- Operating profit increased due to higher revenue and associated gross
profit.
Other: (includes DLP(® )products, custom ASIC products, calculators, royalties and legacy wireless products)
-- Revenue declined due to legacy wireless products.
-- Operating profit decreased due to the non-recurrence of a gain
associated with the transfer of wireless connectivity technology.
Non-GAAP financial information
Revenue excluding legacy wireless
This release includes a reference to TI's revenue excluding legacy wireless product revenue. The company believes this measure, which was not prepared in accordance with generally accepted accounting principles in the United States (GAAP) and is supplemental to the comparable GAAP measure, provides investors with insight into TI's underlying business results.
Reconciliation to the most directly comparable GAAP measure is provided in the table below.
For Three Months Ended June 30,
-------------------------------
2014 2013 Change
---- ---- ------
Revenue (GAAP) $3,292 $3,047 8%
Legacy wireless revenue (5) (148)
--- ----
TI Revenue less legacy wireless revenue (non-GAAP) $3,287 $2,899 13%
====== ======
Free cash flow and associated ratios
This release also 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 Three For Twelve Months Ended June 30,
Months Ended
June 30, 2014
-------------
Change
2014 2013
---- ----
Revenue $3,292 $12,547 $12,301
Cash flow from operations (GAAP) $775 $3,587 $3,323 8%
Capital expenditures (80) (388) (427)
--- ---- ----
Free cash flow (non-GAAP) $695 $3,199 $2,896 10%
==== ====== ======
Cash flow from operations as a percent of revenue (GAAP) 24% 29% 27%
Free cash flow as a percent of revenue (non-GAAP) 21% 25% 24%
Safe Harbor Statement
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:
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, especially the mobile phone sector, and
industrial;
-- 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;
-- Violations of or changes in the complex laws, regulations and policies
to which our global operations are subject, and 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 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;
-- Changes in laws and regulations to which TI or its suppliers are or may
become subject, such as those imposing fees or reporting or substitution
costs relating to the discharge of emissions into the environment or the
use of certain raw materials in our manufacturing processes;
-- 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 or recalls by TI customers for a product containing a
TI part;
-- 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.
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, 2013. The forward-looking statements included in this release are made only as of the date of this release, and TI undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.
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
SOURCE Texas Instruments Incorporated
