TEXAS INSTRUMENTS INCORPORATED DALLAS, July 25, 2016 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported second-quarter revenue of $3.27 billion, net income of $779 million and earnings per share of 76 cents.
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 solidly in the
upper half of our expected range. Compared with a year ago, demand for
our products continued to be strong in the automotive market, and grew
in the industrial and communications equipment markets. Despite
sequential growth, demand in the personal electronics market was down
from a year ago.
-- "In our core businesses, Embedded Processing revenue grew 9 percent and
Analog revenue was about even with the same quarter a year ago.
Operating margin increased in both businesses.
-- "Gross margin of 61.2 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 7 percent from a year ago to $3.9
billion, and this represents 30.0 percent of revenue, up from 27.4
percent a year ago.
-- "We have 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 $2.5 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 133 days.
-- "TI's third-quarter outlook is for revenue in the range of $3.34 billion
to $3.62 billion, and earnings per share between 81 and 91 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.
2Q16 2Q15 Change
---- ---- ------
$3,273 $3,232
Revenue 1%
$1,117 $1,010
Operating profit 11%
$779 $696
Net income 12%
$0.76 $0.65
Earnings per share 17%
Cash generation
Amounts are in millions of dollars.
Trailing 12 Months
------------------
2Q16 2Q16 2Q15 Change
---- ---- ---- ------
Cash flow from operations $1,069 $4,455 $4,084 9%
Capital expenditures $158 $585 $476 23%
Free cash flow $911 $3,870 $3,608 7%
Free cash flow % of revenue 30.0% 27.4%
Capital expenditures for the past 12 months were 4.5 percent of revenue, consistent with TI's long-term expectations.
Cash return
Amounts are in millions of dollars.
Trailing 12 Months
------------------
2Q16 2Q16 2Q15 Change
---- ---- ---- ------
Dividends paid $382 $1,499 $1,385 8%
Stock repurchases $527 $2,574 $2,692 -4%
Total cash returned $909 $4,073 $4,077 0%
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
June 30,
--------
2016 2015
---- ----
Revenue $3,273 $3,232
Cost of revenue (COR) 1,270 1,351
----- -----
Gross profit 2,003 1,881
Research and development (R&D) 345 320
Selling, general and administrative (SG&A) 460 470
Acquisition charges 79 82
Restructuring charges/other 2 (1)
--- ---
Operating profit 1,117 1,010
Other income (expense), net (OI&E) 6 3
Interest and debt expense 21 24
--- ---
Income before income taxes 1,102 989
Provision for income taxes 323 293
--- ---
Net income $779 $696
==== ====
Diluted earnings per common share $.76 $.65
==== ====
Average diluted shares outstanding (millions) 1,016 1,051
===== =====
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 $779 $696
Income allocated to RSUs (10) (10)
--- ---
Income allocated to common stock for diluted EPS $769 $686
==== ====
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
June 30,
--------
2016 2015
---- ----
Assets
Current assets:
Cash and cash equivalents $1,235 $1,184
Short-term investments 1,304 2,122
Accounts receivable, net of allowances of ($20) and ($17) 1,348 1,434
Raw materials 104 112
Work in process 946 940
Finished goods 826 833
--- ---
Inventories 1,876 1,885
----- -----
Prepaid expenses and other current assets 926 1,089
--- -----
Total current assets 6,689 7,714
----- -----
Property, plant and equipment at cost 5,152 6,097
Accumulated depreciation (2,595) (3,412)
------ ------
Property, plant and equipment, net 2,557 2,685
----- -----
Long-term investments 224 228
Goodwill, net 4,362 4,362
Acquisition-related intangibles, net 1,424 1,742
Deferred income taxes 231 200
Capitalized software licenses, net 52 63
Overfunded retirement plans 85 127
Other assets 69 83
--- ---
Total assets $15,693 $17,204
======= =======
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $637 $1,750
Accounts payable 416 417
Accrued compensation 493 481
Income taxes payable 58 117
Accrued expenses and other liabilities 387 425
--- ---
Total current liabilities 1,991 3,190
----- -----
Long-term debt 2,975 3,123
Underfunded retirement plans 193 254
Deferred income taxes 40 42
Deferred credits and other liabilities 532 390
--- ---
Total liabilities 5,731 6,999
----- -----
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 1,681 1,504
Retained earnings 31,850 30,286
Treasury common stock at cost
Shares: June 30, 2016 - 737,467,669; June 30, 2015 - 706,714,155 (24,774) (22,812)
Accumulated other comprehensive income (loss), net of taxes (AOCI) (536) (514)
---- ----
Total stockholders' equity 9,962 10,205
----- ------
Total liabilities and stockholders' equity $15,693 $17,204
======= =======
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
June 30,
--------
2016 2015
---- ----
Cash flows from operating activities
Net income $779 $696
Adjustments to Net income:
Depreciation 155 198
Amortization of acquisition-related intangibles 79 80
Amortization of capitalized software 8 13
Stock-based compensation 76 84
Gains on sales of assets - (2)
Deferred income taxes (59) (57)
Increase (decrease) from changes in:
Accounts receivable (76) (40)
Inventories (71) (41)
Prepaid expenses and other current assets (8) (5)
Accounts payable and accrued expenses 39 (34)
Accrued compensation 147 125
Income taxes payable (25) (225)
Changes in funded status of retirement plans 14 22
Other 11 6
--- ---
Cash flows from operating activities 1,069 820
----- ---
Cash flows from investing activities
Capital expenditures (158) (125)
Proceeds from asset sales - 9
Purchases of short-term investments (993) (919)
Proceeds from short-term investments 1,210 860
Other 6 1
--- ---
Cash flows from investing activities 65 (174)
--- ----
Cash flows from financing activities
Proceeds from issuance of long-term debt 499 498
Repayment of debt (1,000) (250)
Dividends paid (382) (354)
Stock repurchases (527) (654)
Proceeds from common stock transactions 194 51
Excess tax benefit from share-based payments 39 8
Other (3) (3)
--- ---
Cash flows from financing activities (1,180) (704)
------ ----
Net change in Cash and cash equivalents (46) (58)
Cash and cash equivalents at beginning of period 1,281 1,242
----- -----
Cash and cash equivalents at end of period $1,235 $1,184
====== ======
2Q16 segment results
Amounts are in millions of dollars.
2Q16 2Q15 Change
---- ---- ------
Analog:
Revenue $2,044 $2,049 0%
Operating profit $771 $728 6%
Embedded Processing:
Revenue $755 $690 9%
Operating profit $189 $135 40%
Other:
Revenue $474 $493 -4%
Operating profit* $157 $147 7%
* 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 was about even as growth in High Performance Analog and Silicon
Valley Analog was offset by declines in High Volume Analog & Logic and
Power Management.
-- Operating profit increased primarily due to higher gross profit, which
benefited from 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 declined due to calculators, royalties and custom ASIC products,
partially offset by an increase in DLP products.
-- Operating profit increased $10 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
June 30,
--------
2016 2015 Change
---- ---- ------
Cash flow from operations (GAAP) $4,455 $4,084 9%
Capital expenditures (585) (476)
---- ----
Free cash flow (non-GAAP) $3,870 $3,608 7%
====== ======
Revenue $12,899 $13,152
======= =======
Cash flow from operations as a percent of revenue (GAAP) 34.5% 31.1%
Free cash flow as a percent of revenue (non-GAAP) 30.0% 27.4%
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
