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txn-20200421
FALSE0000097476DelawareTexas00000974762020-04-212020-04-21


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K 

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): April 21, 2020
TEXAS INSTRUMENTS INCORPORATED
(Exact name of registrant as specified in charter)

DELAWARE 001-03761 75-0289970
(State or other jurisdiction
of incorporation)		 (Commission
file number)		 (I.R.S. employer
identification no.)
12500 TI BOULEVARD
DALLAS, TEXAS 75243
(Address of principal executive offices)
Registrant’s telephone number, including area code: (214) 479-3773
 
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class Trading
Symbol(s)		 Name of each exchange on which registered
Common Stock, par value $1.00 TXN The Nasdaq Global Select Market
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐



ITEM 2.02.  Results of Operations and Financial Condition
 
The Registrant’s news release dated April 21, 2020, regarding its first-quarter results of operations and financial condition is attached hereto as Exhibit 99.
The attached news release includes references to the following financial measures that were not prepared in accordance with generally accepted accounting principles in the United States (non-GAAP measures): free cash flow and ratios based on free cash flow. The company believes these non-GAAP measures provide insight into its liquidity, cash generating capability and the amount of cash potentially available to return to shareholders, 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 measures is included in the “Non-GAAP financial information” section of the news release.
ITEM 9.01. Exhibits

Designation
of Exhibit
in this
Report		Description of Exhibit
99
Dated April 21, 2020 (furnished pursuant to Item 2.02)
104Cover Page Interactive Data File (embedded within the Inline XBRL document)



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
  TEXAS INSTRUMENTS INCORPORATED
     
Date: April 21, 2020 By: /s/ Rafael R. Lizardi
    Rafael R. Lizardi
    Senior Vice President and
    Chief Financial Officer
Document
Exhibit 99

TI reports first quarter 2020 financial results and shareholder returns
Conference call on TI website at 3:30 p.m. Central time today
www.ti.com/ir
DALLAS (April 21, 2020) – Texas Instruments Incorporated (TI) (Nasdaq: TXN) today reported first quarter revenue of $3.33 billion, net income of $1.17 billion and earnings per share of $1.24. Earnings per share include a 10-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:
•“Revenue decreased 7% from the same quarter a year ago.
•“In our core businesses, Analog revenue declined 2% and Embedded Processing declined 18% from the same quarter a year ago.
•“Our cash flow from operations of $6.4 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the same period was $5.6 billion and 40% 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 $6.6 billion to owners in the past 12 months through stock repurchases and dividends. Over the same period, our dividends represented 55% of free cash flow, underscoring their sustainability. Together, our stock repurchases and dividends reflect our continued commitment to return all free cash flow to our owners.
•“With a COVID-19 recession likely upon us, and with reduced visibility of customer demand, we are using the 2008 financial crisis to model our second quarter outlook. To reflect the increased uncertainty, we have expanded the range of our guidance. Therefore, TI’s second quarter outlook is for revenue in the range of $2.61 billion to $3.19 billion, and earnings per share between $0.64 and $1.04, which includes an estimated $10 million discrete tax benefit. We expect our annual operating tax rate to be about 14% in 2020.”




              1

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.
 Q1 2020

Q1 2019

Change
Revenue$3,329 


$3,594 


(7)%
Operating profit$1,244 


$1,379 


(10)%
Net income$1,174 


$1,217 


(4)%
Earnings per share$1.24 


$1.26 


(2)%
Cash generation
Amounts are in millions of dollars.
  

Trailing 12 Months
 Q1 2020

Q1 2020

Q1 2019

Change
Cash flow from operations$851 


$6,393 


$7,184 


(11)%
Capital expenditures$161 


$757 


$1,193 


(37)%
Free cash flow$690 


$5,636 


$5,991 


(6)%
Free cash flow % of revenue 

39.9 %

38.4 %

 
Cash return
Amounts are in millions of dollars.
  

Trailing 12 Months
 Q1 2020

Q1 2020

Q1 2019

Change
Dividends paid$841 


$3,125 


$2,668 


17 %
Stock repurchases$1,641 


$3,449 


$5,379 


(36)%
Total cash returned$2,482 


$6,574 


$8,047 


(18)%


               2

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)

For Three Months Ended
March 31,
 2020

2019
Revenue$3,329 


$3,594 

Cost of revenue (COR)1,241 


1,333 

Gross profit2,088 


2,261 

Research and development (R&D)377 


389 

Selling, general and administrative (SG&A)417 


414 

Acquisition charges50 


79 

Operating profit1,244 


1,379 

Other income (expense), net (OI&E)25 


36 

Interest and debt expense45 


38 

Income before income taxes1,224 


1,377 

Provision for income taxes50 


160 

Net income$1,174 


$1,217 





Diluted earnings per common share$1.24 


$1.26 





Average shares outstanding (millions): 

 
Basic931 


939 

Diluted943 


956 





Cash dividends declared per common share$.90 


$.77 





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)$166 


$220 

Discrete tax items(116)


(60)

Provision for income taxes (effective taxes)$50 


$160 





Annual operating tax rate14 %

16 %
Effective tax rate4 %

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$1,174 


$1,217 

Income allocated to RSUs(6)


(8)

Income allocated to common stock for diluted EPS$1,168 


$1,209 



              3

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
 March 31,
 2020

2019
Assets 

 
Current assets: 

 
Cash and cash equivalents$2,518 


$3,720 

Short-term investments2,224 


366 

Accounts receivable, net of allowances of ($8) and ($17)1,316 


1,440 

Raw materials175 


191 

Work in process915 


1,016 

Finished goods913 


924 

Inventories2,003 


2,131 

Prepaid expenses and other current assets249 


294 

Total current assets8,310 


7,951 

Property, plant and equipment at cost5,736 


5,642 

Accumulated depreciation(2,503)


(2,324)

Property, plant and equipment3,233 


3,318 

Long-term investments34 


281 

Goodwill4,362 


4,362 

Acquisition-related intangibles290 


549 

Deferred tax assets208 


290 

Capitalized software licenses138 


98 

Overfunded retirement plans215 


96 

Other long-term assets493 


498 

Total assets$17,283 


$17,443 





Liabilities and stockholders’ equity 

 
Current liabilities: 

 
Current portion of long-term debt$1,051 


$750 

Accounts payable363 


477 

Accrued compensation353 


342 

Income taxes payable62 


113 

Accrued expenses and other liabilities552 


477 

Total current liabilities2,381 


2,159 

Long-term debt5,499 


5,057 

Underfunded retirement plans95 


120 

Deferred tax liabilities64 


43 

Other long-term liabilities1,510 


1,545 

Total liabilities9,549 


8,924 

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 – 1,740,815,9391,741


1,741

Paid-in capital2,096


1,927

Retained earnings40,227


38,396

Treasury common stock at cost



Shares: March 31, 2020 – 819,335,097; March 31, 2019 – 802,016,668(36,002)


(33,080)

Accumulated other comprehensive income (loss), net of taxes (AOCI)(328)


(465)

Total stockholders’ equity7,734


8,519

Total liabilities and stockholders’ equity$17,283


$17,443




              4

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)

For Three Months Ended

March 31,
 2020

2019
Cash flows from operating activities 

 
Net income$1,174 


$1,217 

Adjustments to net income:



Depreciation186 


166 

Amortization of acquisition-related intangibles50 


79 

Amortization of capitalized software14 


13 

Stock compensation63 


61 

Gains on sales of assets— 


(2)

Deferred taxes(34)


4 

Increase (decrease) from changes in:



Accounts receivable(242)


(233)

Inventories(2)


86 

Prepaid expenses and other current assets(88)


223 

Accounts payable and accrued expenses— 


(67)

Accrued compensation(353)


(373)

Income taxes payable147 


(94)

Changes in funded status of retirement plans27 


7 

Other(91)


20 

Cash flows from operating activities851 


1,107 





Cash flows from investing activities 

 
Capital expenditures(161)


(251)

Proceeds from asset sales— 


2 

Purchases of short-term investments(646)


(149)

Proceeds from short-term investments1,638 


1,584 

Other(5)


(13)

Cash flows from investing activities826 


1,173 





Cash flows from financing activities 

 
Proceeds from issuance of long-term debt749 


743 

Dividends paid(841)


(724)

Stock repurchases(1,641)


(1,152)

Proceeds from common stock transactions146 


151 

Other(9)


(16)

Cash flows from financing activities(1,596)


(998)





Net change in cash and cash equivalents81 


1,282 

Cash and cash equivalents at beginning of period2,437 


2,438 

Cash and cash equivalents at end of period$2,518 


$3,720 



              5

Segment results
Amounts are in millions of dollars.
 Q1 2020

Q1 2019

Change
Analog: 

 

 
Revenue$2,460 


$2,518 


(2)%
Operating profit$1,025 


$1,088 


(6)%
Embedded Processing:





Revenue$653 


$796 


(18)%
Operating profit$182 


$249 


(27)%
Other:





Revenue$216 


$280 


(23)%
Operating profit*$37 


$42 


(12)%
* Includes acquisition charges.
Compared with the year-ago quarter:
Analog: (includes Power, Signal Chain and High Volume)
•Revenue decreased in Signal Chain and High Volume, offset by growth in Power.
•Operating profit decreased primarily due to lower revenue and associated gross profit.
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 $64 million, and operating profit decreased $5 million.

 

               6

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,


 2020

2019

Change
Cash flow from operations (GAAP)$6,393 


$7,184 


(11)%
Capital expenditures(757)


(1,193)



Free cash flow (non-GAAP)$5,636 


$5,991 


(6)%






Revenue$14,118 


$15,589 


 






Cash flow from operations as a percentage of revenue (GAAP)45.3 %

46.1 %

 
Free cash flow as a percentage of revenue (non-GAAP)39.9 %

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.

              7

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:
•The duration and scope of the COVID-19 pandemic, government and other third-party responses to it and the consequences for the global economy, including to our business and the businesses of our suppliers, customers and distributors;
•Economic, social and political conditions, and natural events in the countries in which we, our customers or our suppliers operate, including global trade policies;
•Market demand for semiconductors, particularly in the industrial and automotive markets, and customer demand that differs from forecasts;
•Our ability to compete in products and prices in an intensely competitive industry;
•Evolving cybersecurity and other threats relating to our information technology systems or those of our customers or suppliers;
•Our ability to successfully implement and realize opportunities from strategic, business and organizational changes, or our ability to realize our expectations regarding the amount and timing of restructuring charges and associated cost savings;
•Our ability to develop, manufacture and market innovative products in a rapidly changing technological environment, and our timely implementation of new manufacturing technologies and installation of manufacturing equipment;
•Availability and cost of raw materials, utilities, manufacturing equipment, third-party manufacturing services and manufacturing technology;
•Product liability, warranty or other claims relating to our products, manufacturing, delivery, 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 operate our business, or subject us to fines, penalties or other legal liability;
•Changes in tax law and accounting standards that 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 disputes with 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 changing 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;
•Increases in health care and pension benefit costs;
•Our ability to recruit and retain skilled personnel, and effectively manage key employee succession; 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.

               8

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.