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TI reports Q4 2019 and 2019 financial results and shareholder returns

January 23, 2020 GMT

DALLAS, Jan. 22, 2020 /PRNewswire/ -- Texas Instruments Incorporated (TI) (Nasdaq: TXN) today reported fourth quarter revenue of $3.35 billion, net income of $1.07 billion and earnings per share of $1.12. Earnings per share include a 1-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.


Q4 2019


Q4 2018


Change

Revenue

$

3,350


$

3,717


(10)%

Operating profit

$

1,249


$

1,516


(18)%

Net income

$

1,070


$

1,239


(14)%

Earnings per share

$

1.12


$

1.27


(12)%

Cash generation

Amounts are in millions of dollars.




Trailing 12 Months


Q4 2019


Q4 2019


Q4 2018


Change

Cash flow from operations

$

1,754


$

6,649


$

7,189


(8)%

Capital expenditures

$

163


$

847


$

1,131


(25)%

Free cash flow

$

1,591


$

5,802


$

6,058


(4)%

Free cash flow % of revenue



40.3%


38.4%



Cash return

Amounts are in millions of dollars.




Trailing 12 Months


Q4 2019


Q4 2019


Q4 2018


Change

Dividends paid

$

841


$

3,008


$

2,555


18%

Stock repurchases

$

489


$

2,960


$

5,100


(42)%

Total cash returned

$

1,330


$

5,968


$

7,655


(22)%


TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Income

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




For Three Months Ended
December 31,


For Years Ended
December 31,



2019


2018


2019


2018


Revenue

$

3,350



$

3,717



$

14,383



$

15,784


Cost of revenue (COR)

1,253



1,310



5,219



5,507


Gross profit

2,097



2,407



9,164



10,277


Research and development (R&D)

386



400



1,544



1,559


Selling, general and administrative (SG&A)

412



414



1,645



1,684


Acquisition charges

50



79



288



318


Restructuring charges/other



(2)



(36)



3


Operating profit

1,249



1,516



5,723



6,713


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

53



23



175



98


Interest and debt expense

45



36



170



125


Income before income taxes

1,257



1,503



5,728



6,686


Provision for income taxes

187



264



711



1,106


Net income

$

1,070



$

1,239



$

5,017



$

5,580














Diluted earnings per common share

$

1.12



$

1.27



$

5.24



$

5.59














Average shares outstanding (millions):












Basic

933



953



936



970


Diluted

948



970



952



990














Cash dividends declared per common share

$

.90



$

.77



$

3.21



$

2.63















Supplemental Information





Provision for income taxes is based on the following:












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

$

188



$

277



$

903



$

1,304


Discrete tax items

(1)



(13)



(192)



(198)


Provision for income taxes (effective taxes)

$

187



$

264



$

711



$

1,106














Effective tax rate

15%



18%



12%



17%














Our annual operating tax rate, which does not include discrete tax items, was 16% compared with 20% in the prior year.











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

$

1,070



$

1,239



$

5,017



$

5,580


Income allocated to RSUs

(6)



(8)



(31)



(42)


Income allocated to common stock for diluted EPS

$

1,064



$

1,231



$

4,986



$

5,538


TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of dollars, except share amounts)



December 31,


2019


2018

Assets






Current assets:






Cash and cash equivalents

$

2,437



$

2,438


Short-term investments

2,950



1,795


Accounts receivable, net of allowances of ($8) and ($19)

1,074



1,207


Raw materials

176



181


Work in process

916



1,070


Finished goods

909



966


Inventories

2,001



2,217


Prepaid expenses and other current assets

299



440


Total current assets

8,761



8,097


Property, plant and equipment at cost

5,740



5,425


Accumulated depreciation

(2,437)



(2,242)


Property, plant and equipment

3,303



3,183


Long-term investments

300



251


Goodwill

4,362



4,362


Acquisition-related intangibles

340



628


Deferred tax assets

197



295


Capitalized software licenses

69



89


Overfunded retirement plans

218



92


Other long-term assets

468



140


Total assets

$

18,018



$

17,137








Liabilities and stockholders' equity






Current liabilities:






Current portion of long-term debt

$

500



$

749


Accounts payable

388



478


Accrued compensation

714



724


Income taxes payable

46



103


Accrued expenses and other liabilities

475



420


Total current liabilities

2,123



2,474


Long-term debt

5,303



4,319


Underfunded retirement plans

93



118


Deferred tax liabilities

78



42


Other long-term liabilities

1,514



1,190


Total liabilities

9,111



8,143


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

2,110



1,950


Retained earnings

39,898



37,906


Treasury common stock at cost






Shares: 2019 – 808,784,381; 2018 – 795,665,646

(34,495)



(32,130)


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

(347)



(473)


Total stockholders' equity

8,907



8,994


Total liabilities and stockholders' equity

$

18,018



$

17,137


TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Millions of dollars)



For Three Months Ended


For Years Ended


December 31,


December 31,


2019


2018


2019


2018

Cash flows from operating activities












Net income

$

1,070



$

1,239



$

5,017



$

5,580


Adjustments to net income:












Depreciation

186



158



708



590


Amortization of acquisition-related intangibles

50



79



288



318


Amortization of capitalized software

14



12



54



46


Stock compensation

41



42



217



232


Gains on sales of assets



(3)



(23)



(3)


Deferred taxes

50



(23)



81



(105)


Increase (decrease) from changes in:












Accounts receivable

268



378



133



71


Inventories

39



(101)



216



(282)


Prepaid expenses and other current assets

(20)



101



265



669


Accounts payable and accrued expenses

(29)



(13)



(93)



(7)


Accrued compensation

100



105



(15)



(7)


Income taxes payable

7



147



(193)



158


Changes in funded status of retirement plans

3



10



29



36


Other

(25)



14



(35)



(107)


Cash flows from operating activities

1,754



2,145



6,649



7,189














Cash flows from investing activities












Capital expenditures

(163)



(323)



(847)



(1,131)


Proceeds from asset sales



9



30



9


Purchases of short-term investments

(2,070)



(333)



(3,444)



(5,641)


Proceeds from short-term investments

305



2,163



2,309



6,708


Other

7



(11)



32



(23)


Cash flows from investing activities

(1,921)



1,505



(1,920)



(78)














Cash flows from financing activities












Proceeds from issuance of long-term debt





1,491



1,500


Repayment of debt





(750)



(500)


Dividends paid

(841)



(736)



(3,008)



(2,555)


Stock repurchases

(489)



(2,009)



(2,960)



(5,100)


Proceeds from common stock transactions

48



38



539



373


Other

(7)



(7)



(42)



(47)


Cash flows from financing activities

(1,289)



(2,714)



(4,730)



(6,329)














Net change in cash and cash equivalents

(1,456)



936



(1)



782


Cash and cash equivalents at beginning of period

3,893



1,502



2,438



1,656


Cash and cash equivalents at end of period

$

2,437



$

2,438



$

2,437



$

2,438


Quarterly segment results

Amounts are in millions of dollars.


Q4 2019


Q4 2018


Change

Analog:






Revenue

$

2,497


$

2,638


(5)%

Operating profit

$

1,050


$

1,233


(15)%

Embedded Processing:






Revenue

$

633


$

791


(20)%

Operating profit

$

160


$

234


(32)%

Other:






Revenue

$

220


$

288


(24)%

Operating profit*

$

39


$

49


(20)%


* 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)

Annual segment results

Amounts are in millions of dollars.


2019


2018


Change

Analog:






Revenue

$

10,223



$

10,801



(5)%

Operating profit

$

4,477



$

5,109



(12)%

Embedded Processing:






Revenue

$

2,943



$

3,554



(17)%

Operating profit

$

907



$

1,205



(25)%

Other:






Revenue

$

1,217



$

1,429



(15)%

Operating profit*

$

339



$

399



(15)%


* Includes acquisition charges and restructuring charges/other.

Compared with the prior year:

Analog:

Embedded Processing:

Other:

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 Years Ended




December 31,




2019


2018


Change

Cash flow from operations (GAAP)

$

6,649


$

7,189


(8)%

Capital expenditures

(847)


(1,131)



Free cash flow (non-GAAP)

$

5,802


$

6,058


(4)%







Revenue

$

14,383


$

15,784









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

46.2%


45.5%



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

40.3%


38.4%



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