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TI reports 3Q13 financial results and shareholder returns

Conference call on TI website at 4:30 p.m. Central time today
www.ti.com/ir

DALLAS, Oct. 21, 2013 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported third-quarter revenue of $3.24 billion, net income of $629 million and earnings per share of 56 cents

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

  • "Our third-quarter performance reflects the positive structural changes we've made at TI over the past few years as we've focused on Analog and Embedded Processing.
  • "Our revenue in the quarter was up 6 percent sequentially. Excluding the legacy wireless products, revenue grew 10 percent sequentially. Our book-to-bill ratio was 0.97, consistent with an expected seasonal revenue decline in the fourth quarter.
  • "Analog and Embedded Processing are now 80 percent of TI's revenue, eight points higher than a year ago. The combined revenue from these two businesses grew 10 percent sequentially and 7 percent from a year ago. Our legacy wireless products declined to less than 2 percent of revenue.
  • "Earnings per share were higher than expected due to better revenue and gross profit, tight expense control and discrete tax items. Gross margin of 54.8 percent was an all-time high for TI, exceeding the prior record set in the third quarter of 2010, even though both revenue and factory utilization were lower. We believe this reflects the increased quality of revenue that comes from our focus on Analog and Embedded Processing and the efficiency of our manufacturing strategy.
  • "Our business model continues to generate strong cash flow from operations. Free cash flow for the trailing 12 months was almost $3 billion, up 4 percent compared with a year ago. Free cash flow was 24 percent of revenue, consistent with our target of 20-25 percent.
  • "We returned $1.0 billion to shareholders through dividends and stock repurchases in the third quarter. For the trailing 12 months, the return to shareholders totaled $3.8 billion or 133 percent of free cash flow. In the quarter, we announced a dividend increase, our second in 2013. In total, we have increased our dividend by 43 percent this year, resulting in an annualized rate of $1.20 per share. Our strategy to return to shareholders all of our free cash flow not needed for debt repayment reflects our confidence in the long-term sustainability of our Analog and Embedded Processing business model.
  • "Our balance sheet remains strong, with $3.6 billion of cash and short-term investments at the end of the quarter, 82 percent owned by the company's U.S. entities. Inventory days were 106, up from 101 a year ago, and consistent with our model of 105-115 days.
  • "At the mid-point of our fourth-quarter guidance range, revenue would decline 8 percent sequentially and be about even with the fourth quarter of 2012. Excluding legacy wireless revenue, which should decline to about $50 million in the fourth quarter, the mid-point of our outlook would deliver 8 percent growth from a year ago."

Free cash flow and revenue excluding legacy wireless are non-GAAP financial measures.  Free cash flow is Cash flow from operations less Capital expenditures.

Earnings summary

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






3Q13

3Q12

Change

Revenue

$ 3,244

$ 3,390

-4%

Operating profit

$    844

$    840

0%

Net income

$    629

$    784

-20%

Earnings per share

$     .56

$     .67

-16%

 

Cash generation

Amounts are in millions of dollars.




Trailing 12 Months



3Q13


3Q13

3Q12

Change

Cash flow from operations

$ 1,151


$ 3,270

$ 3,298

-1%

Capital expenditures

$    124


$    402

$    551

-27%

Free cash flow

$ 1,027


$ 2,868

$ 2,747

4%

Free cash flow % of revenue

32%


24%

21%


 

Capital expenditures for the last 12 months were 3 percent of revenue.

 

Cash return

Amounts are in millions of dollars.




Trailing 12 Months


3Q13


3Q13

Percentage of

Free Cash Flow

Dividends paid

$     308


$   1,084

38%

Stock repurchases

$     734


$   2,734

95%

 Total cash returned

$  1,042


$   3,818

133%

 

Outlook

For the fourth quarter of 2013, TI expects:

  • Revenue: $2.86 — 3.10 billion
  • Earnings per share: $0.42 — 0.50

TI will update its fourth-quarter outlook on December 9, 2013.

For the full year of 2013, TI continues to expect approximately the following:

  • R&D expense: $1.5 billion
  • Capital expenditures: $0.5 billion
  • Depreciation: $0.9 billion
  • Annual effective tax rate: 24 percent

 

Consolidated Statements of Income

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






For Three Months Ended



Sept. 30,

2013


Sept. 30,

2012


Jun. 30,

2013








Revenue


$       3,244


$       3,390


$       3,047

Cost of revenue


1,465


1,650


1,477

Gross profit


1,779


1,740


1,570

Research and development (R&D)


368


463


389

Selling, general and administrative (SG&A)


465


453


471

Acquisition charges


86


106


86

Restructuring charges/other


16


(122)


(282)

Operating profit


844


840


906

Other income (expense), net


(4)


24


--

Interest and debt expense


24


21


24

Income before income taxes


816


843


882

Provision for income taxes


187


59


222

Net income


$          629


$          784


$          660








Earnings per common share:







   Basic


$           .56


$           .68


$           .59

   Diluted


$           .56


$           .67


$           .58








Average shares outstanding (millions):







   Basic


1,096


1,130


1,103

   Diluted


1,111


1,141


1,117








Cash dividends declared per share of common stock


$           .28


$           .17


$           .28








Percentage of revenue:







Gross profit


54.8%


51.3%


51.5%

R&D


11.3%


13.6%


12.8%

SG&A


14.4%


13.4%


15.5%

Operating profit


26.0%


24.8%


29.7%


As required by accounting rule ASC 260, net income allocated to unvested restricted stock units (RSUs), on which we pay dividend equivalents, is excluded from the calculation of EPS.  The amount excluded is $11 million, $14 million and $11 million for the quarters ending September 30, 2013, September 30, 2012, and June 30, 2013, respectively.

 

Consolidated Balance Sheets

(Millions of dollars, except share amounts)










Sept. 30,

2013


Sept. 30,

2012


Jun. 30,

2013

Assets







Current assets:







   Cash and cash equivalents


$   1,435


$    1,210


$    1,180

   Short-term investments


2,158


2,451


2,064

   Accounts receivable, net of allowances of ($29), ($23) and ($31)


1,524


1,623


1,491

   Raw materials


107


124


101

   Work in process


954


988


926

   Finished goods


665


736


693

   Inventories


1,726


1,848


1,720

   Deferred income taxes


1,039


1,043


1,070

   Prepaid expenses and other current assets


219


409


513

   Total current assets


8,101


8,584


8,038

Property, plant and equipment at cost


6,539


6,806


6,679

   Less accumulated depreciation


(3,030)


(2,751)


(3,068)

   Property, plant and equipment, net


3,509


4,055


3,611

Long-term investments


210


225


203

Goodwill, net


4,362


4,452


4,362

Acquisition-related intangibles, net


2,305


2,643


2,388

Deferred income taxes


227


199


253

Capitalized software licenses, net


139


166


159

Overfunded retirement plans


119


29


106

Other assets


272


161


278

Total assets


$ 19,244


$  20,514


$  19,398








Liabilities and Stockholders' Equity







Current liabilities:







   Current portion of long-term debt


$   1,000


$    1,500


$    1,000

   Accounts payable


426


501


437

   Accrued compensation


567


552


463

   Income taxes payable


37


106


218

   Deferred income taxes


2


3


2

   Accrued expenses and other liabilities


691


766


682

   Total current liabilities


2,723


3,428


2,802

Long-term debt


4,161


4,190


4,165

Underfunded retirement plans


253


350


240

Deferred income taxes


564


593


584

Deferred credits and other liabilities


492


550


539

Total liabilities


8,193


9,111


8,330

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


1,741

   Paid-in capital


1,125


1,193


1,117

   Retained earnings


27,993


27,179


27,677

   Less treasury common stock at cost:







      Shares:  Sept. 30, 2013 — 646,252,825; Sept. 30, 2012

      620,012,959; Jun. 30, 2013 — 639,643,135


(19,236)


(18,093)


(18,877)

    Accumulated other comprehensive income (loss), net of taxes


(572)


(617)


(590)

    Total stockholders' equity


11,051


11,403


11,068

Total liabilities and stockholders' equity


$  19,244


$    20,514


$   19,398

 

Consolidated Statements of Cash Flows

(Millions of dollars)











For Three Months Ended




Sept. 30,

2013


Sept. 30,

2012


Jun. 30,

2013