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April 23, 2019

TI reports 1Q19 financial results and shareholder returns

Conference call on TI website at 3:30 p.m. Central time today.  www.ti.com/ir

DALLAS, April 23, 2019 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported first-quarter revenue of $3.59 billion, net income of $1.22 billion and earnings per share of $1.26. Earnings per share include a 4-cent discrete tax benefit 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:

  • "Revenue decreased 5% from the same quarter a year ago as demand for our products continued to slow across most markets.
  • "In our core businesses, Analog revenue declined 2% and Embedded Processing declined 14% from the same quarter a year ago.
  • "Our cash flow from operations of $7.2 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the trailing 12 months was $6.0 billion and represents 38.4% of revenue. This reflects the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-millimeter Analog production.
  • "We have returned $8.0 billion to owners in the past 12 months through stock repurchases and dividends. Our strategy is to return all our free cash flow to owners. Over the last 12 months, our dividends represented 45% of free cash flow, underscoring their sustainability.
  • "TI's second-quarter outlook is for revenue in the range of $3.46 billion to $3.74 billion, and earnings per share between $1.12 and $1.32, which includes an estimated $10 million discrete tax benefit. We continue to expect our annual operating tax rate to be about 16% in 2019."

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.

   

1Q19

 

1Q18

 

Change

Revenue

$

3,594

$

3,789

 

(5)%

Operating profit

$

1,379

$

1,548

 

(11)%

Net income

$

1,217

$

1,366

 

(11)%

Earnings per share

$

1.26

$

1.35

 

(7)%

 

Cash generation

Amounts are in millions of dollars.

         

Trailing 12 Months

     

1Q19

   

1Q19

   

1Q18

 

Change

Cash flow from operations

 

$

1,107

 

$

7,184

 

$

5,680

 

26%

Capital expenditures

 

$

251

 

$

1,193

 

$

757

 

58%

Free cash flow

 

$

856

 

$

5,991

 

$

4,923

 

22%

Free cash flow % of revenue

         

38.4%

   

32.1%

   

 

Cash return

Amounts are in millions of dollars.

         

Trailing 12 Months

     

1Q19

   

1Q19

   

1Q18

 

Change

Dividends paid

 

$

724

 

$

2,668

 

$

2,215

 

20%

Stock repurchases

 

$

1,152

 

$

5,379

 

$

2,879

 

87%

Total cash returned

 

$

1,876

 

$

8,047

 

$

5,094

 

58%

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Income

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

 
   

For Three Months Ended

   

March 31,

   

2019

 

2018

Revenue

 

$

3,594

 

$

3,789

Cost of revenue (COR)

   

1,333

   

1,342

Gross profit

   

2,261

   

2,447

Research and development (R&D)

   

389

   

385

Selling, general and administrative (SG&A)

   

414

   

433

Acquisition charges

   

79

   

80

Restructuring charges/other

   

   

1

Operating profit

   

1,379

   

1,548

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

   

36

   

28

Interest and debt expense

   

38

   

23

Income before income taxes

   

1,377

   

1,553

Provision for income taxes

   

160

   

187

Net income

 

$

1,217

 

$

1,366

             

Diluted earnings per common share

 

$

1.26

 

$

1.35

             

Average shares outstanding (millions):

           

Basic

   

939

   

983

Diluted

   

956

   

1,005

             

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)

 

$

220

 

$

316

Discrete tax items

   

(60)

   

(129)

Provision for income taxes (effective taxes)

 

$

160

 

$

187

 

Annual operating tax rate

   

16%

   

20%

Effective tax rate

   

12%

   

12%

 

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

 

$

1,217

 

$

1,366

Income allocated to RSUs

   

(8)

   

(11)

Income allocated to common stock for diluted EPS

 

$

1,209

 

$

1,355

 

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of dollars, except share amounts)

 
   

March 31,

   

2019

 

2018

Assets

           

Current assets:

           

Cash and cash equivalents

 

$

3,720

 

$

1,717

Short-term investments

   

366

   

2,362

Accounts receivable, net of allowances of ($17) and ($8)

   

1,440

   

1,454

Raw materials

   

191

   

144

Work in process

   

1,016

   

1,076

Finished goods

   

924

   

812

Inventories

   

2,131

   

2,032

Prepaid expenses and other current assets

   

294

   

1,025

Total current assets

   

7,951

   

8,590

Property, plant and equipment at cost

   

5,642

   

4,907

Accumulated depreciation

   

(2,324)

   

(2,171)

Property, plant and equipment

   

3,318

   

2,736

Long-term investments

   

281

   

271

Goodwill

   

4,362

   

4,362

Acquisition-related intangibles

   

549

   

866

Deferred tax assets

   

290

   

218

Capitalized software licenses

   

98

   

102

Overfunded retirement plans

   

96

   

215

Other long-term assets

   

498

   

147

Total assets

 

$

17,443

 

$

17,507

             

Liabilities and stockholders' equity

           

Current liabilities:

           

Current portion of long-term debt

 

$

750

 

$

500

Accounts payable

   

477

   

488

Accrued compensation

   

342

   

344

Income taxes payable

   

113

   

133

Accrued expenses and other liabilities

   

477

   

395

Total current liabilities

   

2,159

   

1,860

Long-term debt

   

5,057

   

3,578

Underfunded retirement plans

   

120

   

92

Deferred tax liabilities

   

43

   

53

Other long-term liabilities

   

1,545

   

1,282

Total liabilities

   

8,924

   

6,865

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

   

1,927

   

1,770

Retained earnings

   

38,396

   

35,619

Treasury common stock at cost

           

Shares: March 31, 2019 – 802,016,668; March 31, 2018 – 759,098,020

   

(33,080)

   

(28,096)

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

   

(465)

   

(392)

Total stockholders' equity

   

8,519

   

10,642

Total liabilities and stockholders' equity

 

$

17,443

 

$

17,507

 

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Millions of dollars)

 
   

For Three Months Ended

   

March 31,

   

2019

 

2018

Cash flows from operating activities

           

Net income

 

$

1,217

 

$

1,366

Adjustments to net income:

           

Depreciation

   

166

   

137

Amortization of acquisition-related intangibles

   

79

   

80

Amortization of capitalized software

   

13

   

12

Stock compensation

   

61

   

70

Gains on sales of assets

   

(2)

   

Deferred taxes

   

4

   

(31)

Increase (decrease) from changes in:

           

Accounts receivable

   

(233)

   

(176)

Inventories

   

86

   

(97)

Prepaid expenses and other current assets

   

223

   

356

Accounts payable and accrued expenses

   

(67)

   

(51)

Accrued compensation

   

(373)

   

(372)

Income taxes payable

   

(94)

   

(131)

Changes in funded status of retirement plans

   

7

   

(15)

Other

   

20

   

(36)

Cash flows from operating activities

   

1,107

   

1,112

             

Cash flows from investing activities

           

Capital expenditures

   

(251)

   

(189)

Proceeds from asset sales

   

2

   

Purchases of short-term investments

   

(149)

   

(996)

Proceeds from short-term investments

   

1,584

   

1,455

Other

   

(13)

   

(4)

Cash flows from investing activities

   

1,173

   

266

             

Cash flows from financing activities

           

Proceeds from issuance of long-term debt

   

743

   

Dividends paid

   

(724)

   

(611)

Stock repurchases

   

(1,152)

   

(873)

Proceeds from common stock transactions

   

151

   

178

Other

   

(16)

   

(11)

Cash flows from financing activities

   

(998)

   

(1,317)

             

Net change in cash and cash equivalents

   

1,282

   

61

Cash and cash equivalents at beginning of period

   

2,438

   

1,656

Cash and cash equivalents at end of period

 

$

3,720

 

$

1,717

 

 

Segment results

Amounts are in millions of dollars.

     

1Q19

   

1Q18

 

Change

Analog:

               

Revenue

 

$

2,518

 

$

2,566

 

(2)%

Operating profit

 

$

1,088

 

$

1,166

 

(7)%

Embedded Processing:

               

Revenue

 

$

796

 

$

926

 

(14)%

Operating profit

 

$

249

 

$

328

 

(24)%

Other:

               

Revenue

 

$

280

 

$

297

 

(6)%

Operating profit*

 

$

42

 

$

54

 

(22)%

 

* Includes acquisition charges and restructuring charges/other.

 

Compared with the year-ago quarter:

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

  • Revenue decreased due to High Volume and Power, partially offset by an increase in Signal Chain.
  • Operating profit decreased due to lower revenue and reduced factory loadings.

Embedded Processing:(includes Connected Microcontrollers and Processors) 

  • Revenue decreased in both product lines.
  • Operating profit decreased due to lower revenue and associated gross profit.

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

  • Revenue decreased by $17 million, and operating profit decreased by $12 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).

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

   
   

March 31,

   
   

2019

 

2018

 

Change

Cash flow from operations (GAAP)

 

$

7,184

 

$

5,680

 

26%

Capital expenditures

   

(1,193)

   

(757)

   

Free cash flow (non-GAAP)

 

$

5,991

 

$

4,923

 

22%

                 

Revenue

 

$

15,589

 

$

15,348

   
                 

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

   

46.1%

   

37.0%

   

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

   

38.4%

   

32.1%

   

 

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:

  • Market demand for semiconductors, particularly in our end markets;
  • Our ability to compete in products and prices in an intensely competitive industry;
  • Customer demand that differs from forecasts and the financial impact of inadequate or excess company inventory that results from demand that differs from projections;
  • Economic, social and political conditions in the countries in which we, our customers or our suppliers operate, including security risks; global trade policies; political and social instability; health conditions; possible disruptions in transportation, communications and information technology networks; and fluctuations in foreign currency exchange rates;
  • Evolving cybersecurity threats to our information technology systems or those of our customers or suppliers;
  • Natural events such as severe weather, geological events or health epidemics in the locations in which we, our customers or our suppliers operate;
  • Our ability to develop, manufacture and market innovative products in a rapidly changing technological environment;
  • 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;
  • Availability and cost of raw materials, utilities, manufacturing equipment, third-party manufacturing services and manufacturing technology;
  • Product liability or warranty claims, claims based on epidemic or delivery failure, or other claims relating to our products, manufacturing, services, design or communications, or recalls by our customers for a product containing one of our parts;
  • Compliance with or changes in the complex laws, rules and regulations to which we are or may become subject, or actions of enforcement authorities, that restrict our ability to manufacture or ship our products or operate our business, or subject us to fines, penalties or other legal liability;
  • Changes in tax law and accounting standards that can impact the tax rate applicable to us, the jurisdictions in which profits are determined to be earned and taxed, adverse resolution of tax audits, increases in tariff rates, and the ability to realize deferred tax assets;
  • A loss suffered by one of our customers or distributors with respect to TI-consigned inventory;
  • Financial difficulties of our distributors or their promotion of competing product lines to our detriment, or the loss of significant distributors;
  • Losses or curtailments of purchases from key customers or the timing and amount of distributor and other customer inventory adjustments;
  • Our ability to maintain or improve profit margins, including our ability to utilize our manufacturing facilities at sufficient levels to cover our fixed operating costs, in an intensely competitive and cyclical industry and despite changes in the regulatory environment;
  • Our ability to maintain and enforce a strong intellectual property portfolio and maintain freedom of operation in all jurisdictions where we conduct business; or our exposure to infringement claims;
  • Instability in the global credit and financial markets that affects our ability to fund our daily operations, invest in the business, make strategic acquisitions, or make principal and interest payments on our debt;
  • Increases in health care and pension benefit costs;
  • Our ability to recruit and retain skilled engineering, management and technical personnel, and effectively manage key employee succession;
  • Our ability to successfully integrate and realize opportunities for growth from acquisitions, or our ability to realize our expectations regarding the amount and timing of restructuring charges and associated cost savings; and
  • Impairments of our 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. 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

Texas Instruments Incorporated (TI) is a global semiconductor design and manufacturing company that develops analog integrated circuits and embedded processors. By employing the world's brightest minds, TI creates innovations that shape the future of technology. TI is helping approximately 100,000 customers transform the future, today. Learn more at www.ti.com.

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Other trademarks are the property of their respective owners.

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SOURCE Texas Instruments Incorporated