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TI reports third quarter 2019 financial results and shareholder returns

October 23, 2019

DALLAS, Oct. 22, 2019 /PRNewswire/ -- Texas Instruments Incorporated (TI) (Nasdaq: TXN) today reported third quarter revenue of $3.77 billion, net income of $1.43 billion and earnings per share of $1.49. Earnings per share include a 9-cent benefit for items that were not in the company’s original guidance.

Regarding the company’s performance and returns to shareholders, Rich Templeton, TI’s chairman, president and CEO, made the following comments:

Free cash flow, a non-GAAP financial measure, is cash flow from operations less capital expenditures.

Earnings summary

Amounts are in millions of dollars, except per-share amounts.


Q3 2019


Q3 2018


Change

Revenue

$

3,771


$

4,261


(11)%

Operating profit

$

1,589


$

1,937


(18)%

Net income

$

1,425


$

1,570


(9)%

Earnings per share

$

1.49


$

1.58


(6)%

Cash generation

Amounts are in millions of dollars.




Trailing 12 Months


Q3 2019


Q3 2019


Q3 2018


Change

Cash flow from operations

$

1,992


$

7,040


$

6,973


1%

Capital expenditures

$

149


$

1,007


$

1,039


(3)%

Free cash flow

$

1,843


$

6,033


$

5,934


2%

Free cash flow % of revenue



40.9%


37.5%



Cash return

Amounts are in millions of dollars.




Trailing 12 Months


Q3 2019


Q3 2019


Q3 2018


Change

Dividends paid

$

721


$

2,903


$

2,430


19%

Stock repurchases

$

456


$

4,480


$

3,797


18%

Total cash returned

$

1,177


$

7,383


$

6,227


19%

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Income

(Millions of dollars, except share and per-share amounts)



For Three Months Ended
September 30,


2019


2018

Revenue

$

3,771


$

4,261

Cost of revenue (COR)

1,325


1,457

Gross profit

2,446


2,804

Research and development (R&D)

379


390

Selling, general and administrative (SG&A)

399


396

Acquisition charges

79


80

Restructuring charges/other


1

Operating profit

1,589


1,937

Other income (expense), net (OI&E)

34


23

Interest and debt expense

43


36

Income before income taxes

1,580


1,924

Provision for income taxes

155


354

Net income

$

1,425


$

1,570





Diluted earnings per common share

$

1.49


$

1.58





Average shares outstanding (millions):




Basic

935


969

Diluted

950


989





Cash dividends declared per common share

$

.77


$

.62






Supplemental Information

(Quarterly, except as noted)



Provision for income taxes is based on the following:






Operating taxes (calculated using the estimated annual effective tax rate)

$

257


$

367

Discrete tax items

(102)


(13)

Provision for income taxes (effective taxes)

$

155


$

354





Annual operating tax rate

16%


20%

Effective tax rate

10%


18%





A portion of net income is allocated to unvested restricted stock units (RSUs) on which we pay dividend equivalents. Diluted EPS is calculated using the following:





Net income

$

1,425


$

1,570

Income allocated to RSUs

(8)


(11)

Income allocated to common stock for diluted EPS

$

1,417


$

1,559

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of dollars, except share amounts)



September 30,


2019


2018

Assets




Current assets:




Cash and cash equivalents

$

3,893


$

1,502

Short-term investments

1,174


3,611

Accounts receivable, net of allowances of ($13) and ($13)

1,342


1,585

Raw materials

175


171

Work in process

955


1,058

Finished goods

910


887

Inventories

2,040


2,116

Prepaid expenses and other current assets

264


654

Total current assets

8,713


9,468

Property, plant and equipment at cost

5,683


5,250

Accumulated depreciation

(2,365)


(2,199)

Property, plant and equipment

3,318


3,051

Long-term investments

298


278

Goodwill

4,362


4,362

Acquisition-related intangibles

390


707

Deferred tax assets

257


243

Capitalized software licenses

77


94

Overfunded retirement plans

106


220

Other long-term assets

471


150

Total assets

$

17,992


$

18,573





Liabilities and stockholders' equity




Current liabilities:




Current portion of long-term debt

$

499


$

749

Accounts payable

397


492

Accrued compensation

609


613

Income taxes payable

58


104

Accrued expenses and other liabilities

444


424

Total current liabilities

2,007


2,382

Long-term debt

5,302


4,318

Underfunded retirement plans

123


86

Deferred tax liabilities

49


43

Other long-term liabilities

1,526


1,228

Total liabilities

9,007


8,057

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

2,058


1,918

Retained earnings

39,674


37,378

Treasury common stock at cost




Shares: September 30, 2019 – 805,637,804; September 30, 2018 – 775,952,837

(34,045)


(30,167)

Accumulated other comprehensive income (loss), net of taxes (AOCI)

(443)


(354)

Total stockholders' equity

8,985


10,516

Total liabilities and stockholders' equity

$

17,992


$

18,573

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Millions of dollars)



For Three Months Ended


September 30,


2019


2018

Cash flows from operating activities




Net income

$

1,425


$

1,570

Adjustments to net income:




Depreciation

183


151

Amortization of acquisition-related intangibles

79


80

Amortization of capitalized software

13


12

Stock compensation

48


46

Deferred taxes

(4)


(52)

Increase (decrease) from changes in:




Accounts receivable

77


(34)

Inventories

39


(26)

Prepaid expenses and other current assets

44


151

Accounts payable and accrued expenses

29


51

Accrued compensation

129


137

Income taxes payable

(93)


22

Changes in funded status of retirement plans

17


12

Other

6


(14)

Cash flows from operating activities

1,992


2,106





Cash flows from investing activities




Capital expenditures

(149)


(370)

Purchases of short-term investments

(986)


(3,099)

Proceeds from short-term investments

220


1,715

Other

1


(14)

Cash flows from investing activities

(914)


(1,768)





Cash flows from financing activities




Proceeds from issuance of long-term debt

748


Repayment of debt

(750)


Dividends paid

(721)


(602)

Stock repurchases

(456)


(1,200)

Proceeds from common stock transactions

194


55

Other

(13)


(8)

Cash flows from financing activities

(998)


(1,755)





Net change in cash and cash equivalents

80


(1,417)

Cash and cash equivalents at beginning of period

3,813


2,919

Cash and cash equivalents at end of period

$

3,893


$

1,502

Segment results

Amounts are in millions of dollars.


Q3 2019


Q3 2018


Change

Analog:






Revenue

$

2,674


$

2,907


(8)%

Operating profit

$

1,231


$

1,447


(15)%

Embedded Processing:






Revenue

$

724


$

894


(19)%

Operating profit

$

233


$

309


(25)%

Other:






Revenue

$

373


$

460


(19)%

Operating profit*

$

125


$

181


(31)%


* Includes acquisition charges and restructuring charges/other.

Compared with the year-ago quarter:

Analog: (includes Power, Signal Chain and High Volume)

Embedded Processing: (includes Connected Microcontrollers and Processors)

Other: (includes DLP® products, calculators and custom ASIC products)

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).

We believe that free cash flow and the associated ratios provide insight into our liquidity, our cash-generating capability and the amount of cash potentially available to return to shareholders, as well as insight into our 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,




2019


2018


Change

Cash flow from operations (GAAP)

$

7,040


$

6,973


1%

Capital expenditures

(1,007)


(1,039)



Free cash flow (non-GAAP)

$

6,033


$

5,934


2%







Revenue

$

14,750


$

15,817









Cash flow from operations as a percent of revenue (GAAP)

47.7%


44.1%



Free cash flow as a percent of revenue (non-GAAP)

40.9%


37.5%



This release also includes references to an annual operating tax rate, a non-GAAP term we use to describe the estimated annual effective tax rate, a GAAP measure that by definition does not include discrete tax items. We believe the term annual operating tax rate helps differentiate from the effective tax rate, which includes discrete tax items.

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 our management:

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. 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

From connected cars and intelligent homes to self-monitoring health devices and automated factories, Texas Instruments Incorporated (TI) (Nasdaq: TXN) products are at work in virtually every type of electronic system. With operations in more than 30 countries, we engineer, manufacture, test and sell analog and embedded semiconductor chips. Our employees, about 30,000 worldwide, are driven by core values of integrity, innovation and commitment, and work every day to shape the future of technology. 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