TEXAS INSTRUMENTS INCORPORATED DALLAS, Oct. 26, 2016 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported third-quarter revenue of $3.68 billion, net income of $968 million and earnings per share of 94 cents.
TI also increased its quarterly dividend by 32 percent to 50 cents per share, or $2.00 annualized. The increase reflects TI's continued strength in free cash flow generation and its commitment to return excess cash to shareholders. The quarterly dividend was declared and will be payable November 21, 2016, to shareholders of record on November 7, 2016.
Regarding the company's performance and returns to shareholders, Rich Templeton, TI's chairman, president and CEO, made the following comments:
-- "Revenue and earnings per share for the quarter were slightly above our
expected range. Compared with a year ago, demand for our products
continued to be strong in the automotive market and improved in the
industrial market. Demand in the personal electronics market was about
even with a year ago.
-- "In our core businesses, Embedded Processing revenue grew 10 percent and
Analog revenue grew 6 percent from the same quarter a year ago.
Operating margin increased in both businesses.
-- "Gross margin of 62.0 percent reflected the quality of our product
portfolio, as well as the efficiency of our manufacturing strategy,
including the benefit of 300-millimeter Analog production.
-- "Our cash flow from operations of $4.5 billion for the trailing 12
months again underscored the strength of our business model. Free cash
flow for the trailing 12 months was up 8 percent from a year ago to $3.9
billion, and represents 29.5 percent of revenue, up from 27.5 percent a
year ago.
-- "We have returned $3.8 billion to shareholders in the past 12 months
through stock repurchases and dividends, consistent with our strategy to
return to shareholders all of our free cash flow plus proceeds from
exercises of equity compensation minus net debt retirement.
-- "Our balance sheet remains strong with $3.1 billion of cash and
short-term investments at the end of the quarter, about 80 percent of
which was owned by the company's U.S. entities. Inventory ended the
quarter at 117 days.
-- "TI's fourth-quarter outlook is for revenue in the range of $3.17
billion to $3.43 billion, and earnings per share between 76 and 86
cents. For 2016, TI's annual effective tax rate is expected to be about
30 percent, unchanged from previous guidance."
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.
3Q16 3Q15 Change
---- ---- ------
$3,675 $3,429
Revenue 7%
$1,395 $1,164
Operating profit 20%
$968 $798
Net income 21%
$0.94 $0.76
Earnings per share 24%
Cash generation
Amounts are in millions of dollars.
Trailing 12 Months
------------------
3Q16 3Q16 3Q15 Change
---- ---- ---- ------
$1,413 $4,110
Cash flow from operations $4,459 8%
$139 $512
Capital expenditures 14%
$585
$1,274 $3,598
Free cash flow 8%
$3,874
Free cash flow % of revenue 29.5% 27.5%
Capital expenditures for the past 12 months were 4 percent of revenue, consistent with TI's long-term expectations.
Cash return
Amounts are in millions of dollars.
Trailing 12 Months
------------------
3Q16 3Q16 3Q15 Change
---- ---- ---- ------
$382 $1,533
Dividends paid $1,414 8%
$2,284
Stock repurchases $500 $2,812 -19%
$3,817
Total cash returned $882 $4,226 -10%
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)
For Three Months Ended
September 30,
-------------
2016 2015
---- ----
Revenue $3,675 $3,429
Cost of revenue (COR) 1,395 1,432
----- -----
Gross profit 2,280 1,997
Research and development (R&D) 356 316
Selling, general and administrative (SG&A) 448 434
Acquisition charges 80 83
Restructuring charges/other 1 -
--- ---
Operating profit 1,395 1,164
Other income (expense), net (OI&E) 4 6
Interest and debt expense 18 22
--- ---
Income before income taxes 1,381 1,148
Provision for income taxes 413 350
--- ---
Net income $968 $798
==== ====
Diluted earnings per common share $.94 $.76
==== ====
Average diluted shares outstanding (millions) 1,017 1,035
===== =====
Cash dividends declared per common share $.38 $.34
==== ====
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 $968 $798
Income allocated to RSUs (11) (11)
--- ---
Income allocated to common stock for diluted EPS $957 $787
==== ====
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
September 30,
-------------
2016 2015
---- ----
Assets
Current assets:
Cash and cash equivalents $1,369 $1,133
Short-term investments 1,768 1,602
Accounts receivable, net of allowances of ($14) and ($16) 1,447 1,481
Raw materials 104 108
Work in process 949 913
Finished goods 755 750
--- ---
Inventories 1,808 1,771
----- -----
Prepaid expenses and other current assets 789 945
--- ---
Total current assets 7,181 6,932
----- -----
Property, plant and equipment at cost 4,982 5,742
Accumulated depreciation (2,437) (3,113)
------ ------
Property, plant and equipment, net 2,545 2,629
----- -----
Long-term investments 233 216
Goodwill, net 4,362 4,362
Acquisition-related intangibles, net 1,344 1,662
Deferred income taxes 355 247
Capitalized software licenses, net 50 54
Overfunded retirement plans 64 76
Other assets 82 81
--- ---
Total assets $16,216 $16,259
======= =======
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $634 $1,000
Accounts payable 428 367
Accrued compensation 647 615
Income taxes payable 68 84
Accrued expenses and other liabilities 393 431
--- ---
Total current liabilities 2,170 2,497
----- -----
Long-term debt 2,977 3,121
Underfunded retirement plans 201 247
Deferred income taxes 35 41
Deferred credits and other liabilities 547 383
--- ---
Total liabilities 5,930 6,289
----- -----
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 1,757 1,562
Retained earnings 32,432 30,731
Treasury common stock at cost
Shares: September 30, 2016 - 739,693,480; September 30, 2015 - 721,186,352 (25,102) (23,551)
Accumulated other comprehensive income (loss), net of taxes (AOCI) (542) (513)
---- ----
Total stockholders' equity 10,286 9,970
------ -----
Total liabilities and stockholders' equity $16,216 $16,259
======= =======
Certain amounts in the prior
period's balance sheet 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
September 30,
-------------
2016 2015
---- ----
Cash flows from operating activities
Net income $968 $798
Adjustments to Net income:
Depreciation 150 193
Amortization of acquisition-related intangibles 80 80
Amortization of capitalized software 7 12
Stock-based compensation 56 66
Deferred income taxes (125) (50)
Increase (decrease) from changes in:
Accounts receivable (98) (47)
Inventories 68 114
Prepaid expenses and other current assets 95 40
Accounts payable and accrued expenses 9 (48)
Accrued compensation 149 132
Income taxes payable 47 99
Changes in funded status of retirement plans 24 24
Other (17) (4)
--- ---
Cash flows from operating activities 1,413 1,409
----- -----
Cash flows from investing activities
Capital expenditures (139) (139)
Purchases of short-term investments (978) (459)
Proceeds from short-term investments 515 980
Other (1) 7
--- ---
Cash flows from investing activities (603) 389
---- ---
Cash flows from financing activities
Repayment of debt - (750)
Dividends paid (382) (348)
Stock repurchases (500) (790)
Proceeds from common stock transactions 159 35
Excess tax benefit from share-based payments 47 4
--- ---
Cash flows from financing activities (676) (1,849)
---- ------
Net change in Cash and cash equivalents 134 (51)
Cash and cash equivalents at beginning of period 1,235 1,184
----- -----
Cash and cash equivalents at end of period $1,369 $1,133
====== ======
Segment results
Amounts are in millions of dollars.
3Q16 3Q15 Change
---- ---- ------
Analog:
Revenue $2,323 $2,182 6%
Operating profit $949 $812 17%
Embedded Processing:
Revenue $795 $725 10%
Operating profit $220 $174 26%
Other:
Revenue $557 $522 7%
Operating profit* $226 $178 27%
* 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 due to High Performance Analog, Silicon Valley Analog
and Power Management. High Volume Analog & Logic was about even.
-- Operating profit increased primarily due to higher revenue and lower
manufacturing costs.
Embedded Processing: (includes Microcontrollers, Processors and Connectivity)
-- Revenue increased in all three product lines, led by Processors.
-- Operating profit increased primarily due to higher revenue and
associated gross profit.
Other: (includes DLP(® )products, calculators, custom ASIC products and royalties)
-- Revenue increased primarily due to calculators and DLP products,
partially offset by a decrease in royalties and custom ASIC products.
-- Operating profit increased primarily due to higher revenue and
associated gross profit.
Non-GAAP financial information
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 shareholders, 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 measures is provided in the table below.
Amounts are in millions of dollars.
For 12 Months Ended
September 30,
-------------
2016 2015 Change
---- ---- ------
Cash flow from operations (GAAP) $4,459 $4,110 8%
Capital expenditures (585) (512)
---- ----
Free cash flow (non-GAAP) $3,874 $3,598 8%
====== ======
Revenue $13,145 $13,080
======= =======
Cash flow from operations as a percent of revenue (GAAP) 33.9% 31.4%
Free cash flow as a percent of revenue (non-GAAP) 29.5% 27.5%
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 TI's end markets;
-- TI's ability to compete in products and prices in an intensely
competitive industry;
-- Losses or curtailments of purchases from key customers and the timing
and amount of distributor and other customer inventory adjustments;
-- Customer demand that differs from forecasts and the financial impact of
inadequate or excess TI inventory that results from demand that differs
from projections;
-- 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;
-- 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, geological events or health
epidemics in the locations in which TI, its customers or its suppliers
operate;
-- Breaches of TI's information technology systems or those of its
customers or suppliers;
-- Availability and cost of raw materials, utilities, manufacturing
equipment, third-party manufacturing services and manufacturing
technology;
-- 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 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;
-- 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 TI's ability to manufacture its products or
operate its business, or subject us to fines, penalties, or other legal
liability;
-- Product liability or warranty claims, claims based on epidemic or
delivery failure, or other claims relating to TI products,
manufacturing, services, design or communications, or recalls by TI
customers for a product containing a TI part;
-- 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, adverse resolution of tax audits and the ability to realize
deferred tax assets;
-- Financial difficulties of 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;
-- Instability in the global credit and financial markets that affects TI's
ability to fund its daily operations, invest in the business, make
strategic acquisitions, or make principal and interest payments on its
debt;
-- Increases in health care and pension benefit costs;
-- TI's ability to recruit and retain skilled personnel;
-- TI's ability to successfully integrate and realize opportunities for
growth from acquisitions, and its ability to realize its expectations
regarding the amount and timing of restructuring charges and associated
cost savings; and
-- Impairments of TI's non-financial assets.
For a more detailed discussion of these factors, see the Risk Factors discussion in Item 1A of TI's most recent Form 10-K. The forward-looking statements included in this release are made only as of the date of this release, and we undertake 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-G
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SOURCE Texas Instruments Incorporated
