TEXAS INSTRUMENTS INCORPORATED DALLAS, April 27, 2016 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported first-quarter revenue of $3.01 billion, net income of $668 million and earnings per share of 65 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 was in the upper half of our expected range.
Compared with a year ago, notable market activity for our products
included continuing strength in automotive, as well as improvement in
industrial and communications equipment. Revenue was down 5 percent due
to weakness within the personal electronics market, which declined as
expected.
-- "Our core businesses of Analog and Embedded Processing comprised 87
percent of first-quarter revenue. From a year ago, Analog revenue
declined 8 percent while Embedded Processing revenue grew 8 percent.
Operating margin increased in both businesses.
-- "Gross margin of 60.6 percent was a new record, reflecting 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 once again underscored the strength of
our business model. Free cash flow for the trailing 12 months was up 1
percent from a year ago to $3.7 billion. This represents 28.4 percent of
revenue, up from 27.3 percent a year ago, and is consistent with our
targeted range of 20-30 percent of revenue.
-- "We have returned $4.2 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 $2.8 billion of cash and
short-term investments at the end of the quarter, 80 percent of which
was owned by the company's U.S. entities. Inventory ended the quarter at
137 days.
-- "TI's second-quarter outlook is for revenue in the range of $3.07
billion to $3.33 billion, and earnings per share between 67 and 77
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.
Change
1Q16 1Q15
---- ----
Revenue $3,008 $3,150 -5%
Operating profit $968 $958 1%
Net income $668 $656 2%
Earnings per share $0.65 $0.61 7%
Cash generation
Amounts are in millions of dollars.
Trailing 12 Months
------------------
1Q16 1Q16 1Q15 Change
---- ---- ---- ------
Cash flow from operations $547 $4,206 $4,039 4%
Capital expenditures $124 $552 $431 28%
Free cash flow $423 $3,654 $3,608 1%
Free cash flow % of revenue 28.4% 27.3%
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
------------------
1Q16 1Q16 1Q15 Change
---- ---- ---- ------
Dividends paid $1,471 $1,354 9%
$383
$630 $2,701
Stock repurchases $2,781 -3%
$1,013 1%
Total cash returned $4,172 $4,135
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,
---------
2016 2015
---- ----
Revenue $3,008 $3,150
Cost of revenue (COR) 1,184 1,334
----- -----
Gross profit 1,824 1,816
Research and development (R&D) 326 338
Selling, general and administrative (SG&A) 448 439
Acquisition charges 80 83
Restructuring charges/other 2 (2)
--- ---
Operating profit 968 958
Other income (expense), net (OI&E) 4 4
Interest and debt expense 22 22
--- ---
Income before income taxes 950 940
Provision for income taxes 282 284
--- ---
Net income $668 $656
==== ====
Diluted earnings per common share $.65 $.61
==== ====
Average diluted shares outstanding (millions) 1,018 1,061
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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 $668 $656
Income allocated to RSUs (9) (9)
--- ---
Income allocated to common stock for diluted EPS $659 $647
==== ====
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
March 31,
---------
2016 2015
---- ----
Assets
Current assets:
Cash and cash equivalents $1,281 $1,242
Short-term investments 1,519 2,062
Accounts receivable, net of allowances of ($11) and ($12) 1,269 1,394
Raw materials 105 107
Work in process 888 906
Finished goods 812 831
--- ---
Inventories 1,805 1,844
----- -----
Prepaid expenses and other current assets 785 810
--- ---
Total current assets 6,659 7,352
----- -----
Property, plant and equipment at cost 5,290 6,177
Accumulated depreciation (2,736) (3,419)
------ ------
Property, plant and equipment, net 2,554 2,758
----- -----
Long-term investments 220 232
Goodwill, net 4,362 4,362
Acquisition-related intangibles, net 1,503 1,822
Deferred income taxes 175 170
Capitalized software licenses, net 53 73
Overfunded retirement plans 84 128
Other assets 76 95
--- ---
Total assets $15,686 $16,992
======= =======
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $1,249 $1,000
Accounts payable 387 432
Accrued compensation 340 349
Income taxes payable 67 75
Accrued expenses and other liabilities 377 426
--- ---
Total current liabilities 2,420 2,282
----- -----
Long-term debt 2,869 3,628
Underfunded retirement plans 195 253
Deferred income taxes 38 63
Deferred credits and other liabilities 382 397
--- ---
Total liabilities 5,904 6,623
----- -----
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 1,558 1,410
Retained earnings 31,457 29,948
Treasury common stock at cost
Shares: March 31, 2016 - 734,244,179; March 31, 2015 - 696,401,920 (24,443) (22,199)
Accumulated other comprehensive income (loss), net of taxes (AOCI) (531) (531)
---- ----
Total stockholders' equity 9,782 10,369
----- ------
Total liabilities and stockholders' equity $15,686 $16,992
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)
For Three Months Ended
March 31,
---------
2016 2015
---- ----
Cash flows from operating activities
Net income $668 $656
Adjustments to Net income:
Depreciation 161 203
Amortization of acquisition-related intangibles 80 80
Amortization of capitalized software 8 13
Stock-based compensation 72 78
Gains on sales of assets - (1)
Deferred income taxes 24 1
Increase (decrease) from changes in:
Accounts receivable (100) (154)
Inventories (114) (60)
Prepaid expenses and other current assets 43 54
Accounts payable and accrued expenses (104) (108)
Accrued compensation (322) (294)
Income taxes payable 131 147
Changes in funded status of retirement plans 18 19
Other (18) (25)
--- ---
Cash flows from operating activities 547 609
--- ---
Cash flows from investing activities
Capital expenditures (124) (123)
Proceeds from asset sales - 1
Purchases of short-term investments (200) (335)
Proceeds from short-term investments 900 615
Other (3) -
--- ---
Cash flows from investing activities 573 158
--- ---
Cash flows from financing activities
Dividends paid (383) (356)
Stock repurchases (630) (670)
Proceeds from common stock transactions 131 246
Excess tax benefit from share-based payments 43 56
--- ---
Cash flows from financing activities (839) (724)
---- ----
Net change in Cash and cash equivalents 281 43
Cash and cash equivalents at beginning of period 1,000 1,199
----- -----
Cash and cash equivalents at end of period $1,281 $1,242
====== ======
1Q16 segment results
Amounts are in millions of dollars.
Change
1Q16 1Q15
---- ----
Analog:
Revenue $1,879 $2,035 -8%
Operating profit $679 $721 -6%
Embedded Processing:
Revenue $729 $672 8%
Operating profit $182 $123 48%
Other:
Revenue $400 $443 -10%
Operating profit* $107 $114 -6%
* 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 decreased primarily due to High Volume Analog & Logic. Power
Management and High Performance Analog also declined, while Silicon
Valley Analog grew.
-- Operating profit decreased primarily due to lower revenue, which was
partially offset by lower manufacturing costs and a higher percentage of
more profitable products.
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, as well as lower operating expenses.
Other: (includes DLP(® )products, calculators, custom ASIC products and royalties)
-- Revenue declined primarily due to custom ASIC products.
-- Operating profit decreased by $7 million.
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 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.
Amounts are in millions of dollars.
For 12 Months Ended
March 31,
---------
2016 2015 Change
---- ---- ------
Cash flow from operations (GAAP) $4,206 $4,039 4%
Capital expenditures (552) (431)
---- ----
Free cash flow (non-GAAP) $3,654 $3,608 1%
====== ======
Revenue $12,858 $13,212
======= =======
Cash flow from operations as a percent of revenue (GAAP) 32.7% 30.6%
Free cash flow as a percent of revenue (non-GAAP) 28.4% 27.3%
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 Form 10-K for the year ended December 31, 2015. 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
