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| 8-K - TEXAS INSTRUMENTS FILING ON FORM 8-K - TEXAS INSTRUMENTS INC | d8k04232014.htm |
Exhibit 99
TI reports 1Q14 financial results and shareholder returns
Conference call on TI website at 4:30 p.m. Central time today
www.ti.com/ir
DALLAS (April 23, 2014) – Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported first-quarter revenue of $2.98 billion, net income of $487 million and earnings per share of 44 cents. Results include a gain of $37 million, which was not included in the company’s prior outlook and increased earnings by 2 cents per share, for sales of a site and other assets associated with previously announced restructuring actions.
Regarding the company’s performance and returns to shareholders, Rich Templeton, TI’s chairman, president and CEO, made the following comments:
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“Revenue and earnings for the quarter were in the upper half of the range we expected and marked a good start to the year.
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“We delivered 3 percent year-over-year revenue growth, or 11 percent when legacy wireless revenue is excluded. Analog and Embedded Processing comprised 84 percent of first-quarter revenue.
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“Gross margin of 53.9 percent remained strong and reflects the quality of our Analog and Embedded Processing portfolio and the efficiency of our manufacturing strategy.
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“Our business model continues to generate strong cash flow from operations. Free cash flow for the trailing twelve-month period was up 8 percent to $3.1 billion, or 25 percent of revenue. This is consistent with our target of 20-30 percent, which we increased in the first quarter from our prior target of 20-25 percent.
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“We returned $4.2 billion to shareholders in the past twelve months through dividends paid and stock repurchases. Our strategy to return to shareholders all free cash flow not needed for debt repayment, and to return proceeds from exercises of equity compensation, reflects our confidence in the long-term sustainability of our business model. In the past twelve months, we returned 99 percent of this targeted amount.
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“Our balance sheet remains strong, with $4.0 billion of cash and short-term investments at the end of the quarter, 84 percent of which was owned by the company’s U.S. entities. Inventory days were 112, consistent with our model of 105-115 days.
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“TI’s outlook for the second quarter of 2014 is for revenue in the range of $3.14 billion to $3.40 billion and earnings per share between $0.55 and $0.63. The midpoint of the revenue range would represent 7 percent year-over-year growth, or 13 percent excluding legacy wireless revenue. The annual effective tax rate for 2014 is expected to be about 28 percent, up from our prior estimate of about 27 percent.”
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Revenue excluding legacy wireless and free cash flow are non-GAAP financial measures. Free cash flow is Cash flow from operations less Capital expenditures.
Earnings summary
Amounts are in millions of dollars, except per-share amounts.
| 1Q14 | 1Q13 |
Change
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Revenue
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$ | 2,983 | $ | 2,885 | 3 | % | ||||
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Operating profit
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$ | 690 | $ | 395 | 75 | % | ||||
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Net income
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$ | 487 | $ | 362 | 35 | % | ||||
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Earnings per share
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$ | .44 | $ | .32 | 38 | % | ||||
Cash generation
Amounts are in millions of dollars.
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Trailing 12 Months
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| 1Q14 | 1Q14 | 1Q13 |
Change
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Cash flow from operations
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$ | 462 | $ | 3,486 | $ | 3,324 | 5% | ||||||
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Capital expenditures
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$ | 77 | $ | 405 | $ | 476 | -15% | ||||||
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Free cash flow
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$ | 385 | $ | 3,081 | $ | 2,848 | 8% | ||||||
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Free cash flow % of revenue
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13 | % | 25 | % | 23 | % | |||||||
Capital expenditures for the past twelve months were 3 percent of revenue.
Cash return
Amounts are in millions of dollars.
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Trailing 12 Months
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| 1Q14 | 1Q14 | 1Q13 |
Change
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Dividends paid
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$ | 325 | $ | 1,268 | $ | 856 | 48% | ||||||
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Stock repurchases
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$ | 720 | $ | 2,909 | $ | 2,179 | 34% | ||||||
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Total cash returned
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$ | 1,045 | $ | 4,177 | $ | 3,035 | 38% | ||||||
Total cash returned over the past twelve months was 99 percent of the company’s targeted cash return model (free cash flow minus net debt retirement plus proceeds from exercises of equity compensation).
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)
| For Three Months Ended Mar. 31, | ||||||||
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2014
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2013
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Revenue
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$ | 2,983 | $ | 2,885 | ||||
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Cost of revenue
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1,376 | 1,511 | ||||||
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Gross profit
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1,607 | 1,374 | ||||||
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Research and development (R&D)
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366 | 419 | ||||||
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Selling, general and administrative (SG&A)
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479 | 459 | ||||||
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Acquisition charges
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83 | 86 | ||||||
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Restructuring charges/other
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(11 | ) | 15 | |||||
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Operating profit
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690 | 395 | ||||||
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Other income (expense), net
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6 | 2 | ||||||
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Interest and debt expense
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25 | 23 | ||||||
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Income before income taxes
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671 | 374 | ||||||
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Provision for income taxes
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184 | 12 | ||||||
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Net income
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$ | 487 | $ | 362 | ||||
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Earnings per common share:
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Basic
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$ | .44 | $ | .32 | ||||
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Diluted
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$ | .44 | $ | .32 | ||||
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Average shares outstanding (millions):
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Basic
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1,081 | 1,107 | ||||||
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Diluted
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1,096 | 1,123 | ||||||
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Cash dividends declared per share of common stock
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$ | .30 | $ | .21 | ||||
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Percentage of revenue:
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Gross profit
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53.9 | % | 47.6 | % | ||||
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R&D
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12.3 | % | 14.5 | % | ||||
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SG&A
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16.1 | % | 15.9 | % | ||||
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Operating profit
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23.1 | % | 13.7 | % | ||||
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. $7 million is excluded for both the quarters ending March 31, 2014 and 2013.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
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Mar. 31, 2014
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Mar. 31, 2013
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Assets
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Current assets:
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Cash and cash equivalents
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$ | 1,565 | $ | 1,393 | ||||
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Short-term investments
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2,467 | 2,469 | ||||||
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Accounts receivable, net of allowances of ($23) and ($26)
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1,355 | 1,333 | ||||||
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Raw materials
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95 | 99 | ||||||
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Work in process
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898 | 930 | ||||||
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Finished goods
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721 | 671 | ||||||
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Inventories
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1,714 | 1,700 | ||||||
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Deferred income taxes
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383 | 469 | ||||||
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Prepaid expenses and other current assets
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876 | 841 | ||||||
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Total current assets
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8,360 | 8,205 | ||||||
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Property, plant and equipment at cost
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6,426 | 6,773 | ||||||
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Accumulated depreciation
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(3,247 | ) | (3,034 | ) | ||||
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Property, plant and equipment, net
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3,179 | 3,739 | ||||||
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Long-term investments
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212 | 204 | ||||||
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Goodwill, net
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4,362 | 4,362 | ||||||
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Acquisition-related intangibles, net
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2,142 | 2,473 | ||||||
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Deferred income taxes
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200 | 264 | ||||||
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Capitalized software licenses, net
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111 | 169 | ||||||
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Overfunded retirement plans
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129 | 62 | ||||||
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Other assets
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240 | 223 | ||||||
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Total assets
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$ | 18,935 | $ | 19,701 | ||||
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Liabilities and Stockholders’ Equity
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Current liabilities:
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Current portion of long-term debt
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$ | 1,000 | $ | 1,500 | ||||
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Accounts payable
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405 | 440 | ||||||
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Accrued compensation
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364 | 365 | ||||||
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Income taxes payable
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101 | 109 | ||||||
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Deferred income taxes
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1 | 2 | ||||||
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Accrued expenses and other liabilities
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600 | 694 | ||||||
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Total current liabilities
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2,471 | 3,110 | ||||||
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Long-term debt
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4,652 | 4,183 | ||||||
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Underfunded retirement plans
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218 | 258 | ||||||
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Deferred income taxes
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536 | 598 | ||||||
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Deferred credits and other liabilities
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438 | 600 | ||||||
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Total liabilities
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8,315 | 8,749 | ||||||
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Stockholders’ equity:
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Preferred stock, $25 par value. Authorized – 10,000,000 shares. Participating cumulative preferred. None issued.
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-- | -- | ||||||
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Common stock, $1 par value. Authorized – 2,400,000,000 shares. Shares issued – 1,740,815,939
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1,741 | 1,741 | ||||||
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Paid-in capital
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1,181 | 1,049 | ||||||
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Retained earnings
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28,331 | 27,330 | ||||||
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Treasury common stock at cost.
Shares: Mar. 31, 2014 – 661,464,745; Mar. 31, 2013 – 631,661,551
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(20,113 | ) | (18,518 | ) | ||||
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Accumulated other comprehensive income (loss), net of taxes
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(520 | ) | (650 | ) | ||||
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Total stockholders’ equity
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10,620 | 10,952 | ||||||
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Total liabilities and stockholders’ equity
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$ | 18,935 | $ | 19,701 | ||||
Certain amounts in the prior period's financial statement have been reclassified to conform to the current presentation.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)
| For Three Months Ended Mar. 31, | ||||||||
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2014
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2013
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Cash flows from operating activities:
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Net income
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$ | 487 | $ | 362 | ||||
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Adjustments to net income:
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Depreciation
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213 | 228 | ||||||
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Amortization of acquisition-related intangibles
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81 | 85 | ||||||
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Amortization of capitalized software
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16 | 32 | ||||||
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Stock-based compensation
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78 | 75 | ||||||
| Gain on sales of assets | (37 | ) | (3 | ) | ||||
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Deferred income taxes
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-- | 26 | ||||||
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Increase (decrease) from changes in:
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Accounts receivable
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(149 | ) | (112 | ) | ||||
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Inventories
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17 | 57 | ||||||
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Prepaid expenses and other current assets
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(29 | ) | 10 | |||||
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Accounts payable and accrued expenses
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(117 | ) | (244 | ) | ||||
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Accrued compensation
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(189 | ) | (154 | ) | ||||
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Income taxes payable
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80 | 29 | ||||||
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Changes in funded status of retirement plans
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22 | 29 | ||||||
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Other
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(11 | ) | (60 | ) | ||||
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Cash flows from operating activities
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462 | 360 | ||||||
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Cash flows from investing activities:
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Capital expenditures
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(77 | ) | (84 | ) | ||||
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Proceeds from asset sales
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37 | 18 | ||||||
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Purchases of short-term investments
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(1,051 | ) | (536 | ) | ||||
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Proceeds from short-term investments
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785 | 615 | ||||||
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Other
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1 | 9 | ||||||
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Cash flows from investing activities
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(305 | ) | 22 | |||||
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Cash flows from financing activities:
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Proceeds from issuance of long-term debt
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498 | -- | ||||||
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Dividends paid
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(325 | ) | (232 | ) | ||||
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Stock repurchases
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(720 | ) | (679 | ) | ||||
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Proceeds from common stock transactions
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283 | 454 | ||||||
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Excess tax benefit from share-based payments
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49 | 52 | ||||||
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Other
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(4 | ) | -- | |||||
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Cash flows from financing activities
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(219 | ) | (405 | ) | ||||
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Net change in Cash and cash equivalents
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(62 | ) | (23 | ) | ||||
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Cash and cash equivalents, beginning of period
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1,627 | 1,416 | ||||||
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Cash and cash equivalents, end of period
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$ | 1,565 | $ | 1,393 |
Certain amounts in the prior period's financial statement have been reclassified to conform to the current presentation.
1Q14 segment results
| 1Q14 | 1Q13 |
Change
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Analog:
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Revenue
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$ | 1,837 | $ | 1,648 | 11 | % | ||||||
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Operating profit
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$ | 498 | $ | 300 | 66 | % | ||||||
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Embedded Processing:
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Revenue
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$ | 656 | $ | 561 | 17 | % | ||||||
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Operating profit
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$ | 52 | $ | 7 | 643 | % | ||||||
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Other:
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Revenue
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$ | 490 | $ | 676 | -28 | % | ||||||
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Operating profit*
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$ | 140 | $ | 88 | 59 | % | ||||||
*Includes Acquisition charges and Restructuring charges/other.
Analog: (includes High Volume Analog & Logic, Power Management, High Performance Analog and Silicon Valley Analog)
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Compared with the year-ago quarter, revenue increased in all product lines. Power Management and High Performance Analog grew about equally, followed by Silicon Valley Analog and High Volume Analog & Logic.
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Operating profit increased from a year ago primarily due to higher revenue and associated gross profit.
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Embedded Processing: (includes Processors, Microcontrollers and Connectivity)
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Compared with the year-ago quarter, revenue increased in all product lines. Microcontrollers grew the most, followed by Processors and Connectivity.
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Operating profit increased from a year ago due to higher revenue and associated gross profit.
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Other: (includes DLP® products, custom ASIC products, calculators, royalties and legacy wireless products)
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Compared with the year-ago quarter, revenue declined due to legacy wireless products.
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Operating profit increased from a year ago due to lower operating expenses, as well as lower restructuring charges/other. These were partially offset by lower gross profit. Restructuring charges/other in the quarter benefited from sales of a site and other assets.
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Non-GAAP financial information
Revenue excluding legacy wireless:
This release includes references to TI’s revenue and revenue outlook excluding legacy wireless products. The company believes these measures, which were not prepared in accordance with generally accepted accounting principles in the United States (GAAP), provide investors with insight into TI’s underlying business results and are supplemental to the comparable GAAP measure. Reconciliation to the most directly comparable GAAP-based measure is provided in the tables below.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
(Millions of dollars)
| For Three Months Ended | ||||||||||||
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Mar. 31, 2014
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Mar. 31, 2013
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Change
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Revenue (GAAP)
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$ | 2,983 | $ | 2,885 | 3 | % | ||||||
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Legacy wireless revenue
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(8 | ) | (210 | ) | ||||||||
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TI Revenue less legacy wireless revenue (non-GAAP)
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$ | 2,975 | $ | 2,675 | 11 | % | ||||||
| For Three Months Ended | ||||||||||||
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Jun. 30, 2014
(Expected)*
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Jun. 30, 2013
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Change
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Revenue (GAAP)
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$ | 3,270 | $ | 3,047 | 7 | % | ||||||
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Legacy wireless revenue
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n/a | (148 | ) | |||||||||
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TI Revenue less legacy wireless revenue (non-GAAP)
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$ | 3,270 | $ | 2,899 | 13 | % | ||||||
*Represents the average of the low point and the high point of the revenue guidance of $3.14 billion – $3.40 billion provided in this release.
Free cash flow and associated ratios:
This release also includes references to free cash flow and various ratios based on that measure. These are financial measures that were not prepared in accordance with GAAP. Free cash flow was calculated by subtracting Capital expenditures from the most directly comparable GAAP measure, Cash flow from operating activities (also referred to as Cash flow from operations). The various ratios in the release compare free cash flow to the following GAAP measures: Revenue, Dividends paid and Stock repurchases.
The company believes these non-GAAP measures provide insight into its liquidity, its cash-generating capability and the amount of cash potentially available to return to investors, as well as insight into its financial performance. These non-GAAP measures are supplemental to the comparable GAAP measures.
Reconciliation to the most directly comparable GAAP-based measures is provided in the tables below.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
(Millions of dollars)
Free cash flow:
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For Three
Months Ended
Mar. 31, 2014
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For Twelve
Months Ended
Mar. 31, 2014
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For Twelve
Months Ended
Mar. 31, 2013
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Change
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Revenue
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$ | 2,983 | $ | 12,302 | $ | 12,589 | ||||||||||
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Cash flow from operations (GAAP)
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$ | 462 | $ | 3,486 | $ | 3,324 | 5 | % | ||||||||
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Capital expenditures
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(77 | ) | (405 | ) | (476 | ) | ||||||||||
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Free cash flow (non-GAAP)
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$ | 385 | $ | 3,081 | $ | 2,848 | 8 | % | ||||||||
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Cash flow from operations as a percent of revenue (GAAP)
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15 | % | 28 | % | 26 | % | ||||||||||
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Free cash flow as a percent of revenue (non-GAAP)
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13 | % | 25 | % | 23 | % | ||||||||||
Total cash returned to shareholders as a percentage of targeted cash return:
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For Twelve
Months Ended
Mar. 31, 2014
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Dividends paid
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$ | 1,268 | ||||||
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Stock repurchases
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2,909 | |||||||
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Total cash returned to shareholders
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$ | 4,177 | ||||||
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Free cash flow (non-GAAP)
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$ | 3,081 | ||||||
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Proceeds from issuance of long-term debt
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$ | 1,484 | ||||||
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Repayment of debt
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(1,500 | ) | ||||||
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Net debt retirement
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$ | (16 | ) | |||||
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Proceeds from common stock transactions
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1,143 | |||||||
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Targeted cash return to shareholders (non-GAAP)
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$ | 4,208 | ||||||
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Total cash returned to shareholders as a percentage of targeted cash return to shareholders (non-GAAP)
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99 | % | ||||||
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Safe Harbor Statement
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
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 its management:
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Market demand for semiconductors, particularly in markets such as personal electronics, especially the mobile phone sector, and industrial;
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TI’s ability to maintain or improve profit margins, including its ability to utilize its manufacturing facilities at sufficient levels to cover its fixed operating costs, in an intensely competitive and cyclical industry;
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TI’s ability to develop, manufacture and market innovative products in a rapidly changing technological environment;
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TI’s ability to compete in products and prices in an intensely competitive industry;
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TI’s ability to maintain and enforce a strong intellectual property portfolio and obtain needed licenses from third parties;
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Expiration of license agreements between TI and its patent licensees, and market conditions reducing royalty payments to TI;
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Violations of or changes in the complex laws, regulations and policies to which our global operations are subject, and economic, social and political conditions in the countries in which TI, its customers or its suppliers operate, including security risks, health conditions, possible disruptions in transportation, communications and information technology networks and fluctuations in foreign currency exchange rates;
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Natural events such as severe weather and earthquakes in the locations in which TI, its customers or its suppliers operate;
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Availability and cost of raw materials, utilities, manufacturing equipment, third-party manufacturing services and manufacturing technology;
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Changes in the tax rate applicable to TI as the result of changes in tax law, the jurisdictions in which profits are determined to be earned and taxed, the outcome of tax audits and the ability to realize deferred tax assets;
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Changes in laws and regulations to which TI or its suppliers are or may become subject, such as those imposing fees or reporting or substitution costs relating to the discharge of emissions into the environment or the use of certain raw materials in our manufacturing processes;
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Losses or curtailments of purchases from key customers and the timing and amount of distributor and other customer inventory adjustments;
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Financial difficulties of our distributors or their promotion of competing product lines to TI’s detriment;
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A loss suffered by a customer or distributor of TI with respect to TI-consigned inventory;
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Customer demand that differs from our forecasts;
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The financial impact of inadequate or excess TI inventory that results from demand that differs from projections;
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Impairments of our non-financial assets;
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Product liability or warranty claims, claims based on epidemic or delivery failure or recalls by TI customers for a product containing a TI part;
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TI’s ability to recruit and retain skilled personnel;
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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;
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TI’s obligation to make principal and interest payments on its debt;
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TI’s ability to successfully integrate and realize opportunities for growth from acquisitions, and our ability to realize our expectations regarding the amount and timing of restructuring charges and associated cost savings; and
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Breaches of our information technology systems.
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For a more detailed discussion of these factors, see the Risk Factors discussion in Item 1A of TI’s Form 10-K for the year ended December 31, 2013. The forward-looking statements included in this release are made only as of the date of this release, and TI undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.
About Texas Instruments
Texas Instruments Incorporated (TI) is a global semiconductor design and manufacturing company that develops analog ICs and embedded processors. By employing the world’s brightest minds, TI creates innovations that shape the future of technology. TI is helping more than 100,000 customers transform the future, today. Learn more at www.ti.com.
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