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TI reports 2Q17 financial results and shareholder returns

Conference call on TI website at 4 p.m. Central time today

DALLAS, July 25, 2017 — (PRNewswire) —  Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported second-quarter revenue of $3.69 billion, net income of $1.06 billion and earnings per share of $1.03.

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

Free cash flow is a non-GAAP financial measure. Free cash flow is cash flow from operations less capital expenditures.

Certain amounts in the prior period have been recast to conform to the current presentation.

Earnings summary

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



2Q17


2Q16


Change

Revenue

$

3,693

$

3,273


13%

Operating profit

$

1,480

$

1,131


31%

Net income

$

1,056

$

819


29%

Earnings per share

$

1.03

$

0.79


30%

 

Cash generation

Amounts are in millions of dollars.






Trailing 12 Months




2Q17



2Q17



2Q16


Change

Cash flow from operations


$

917


$

4,564


$

4,624


-1%

Capital expenditures


$

151


$

527


$

585


-10%

Free cash flow


$

766


$

4,037


$

4,039


0%

Free cash flow % of revenue






28.5%



31.3%



 

Capital expenditures for the past 12 months were about 4 percent of revenue, consistent with TI's long-term expectations.

Cash return

Amounts are in millions of dollars.






Trailing 12 Months




2Q17



2Q17



2Q16


Change

Dividends paid


$

498


$

1,879


$

1,499


25%

Stock repurchases


$

650


$

2,175


$

2,574


-16%

Total cash returned


$

1,148


$

4,054


$

4,073


0%


 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Income

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




For Three Months Ended



June 30,



2017


2016

Revenue


$

3,693


$

3,273

Cost of revenue (COR)



1,319



1,266

Gross profit



2,374



2,007

Research and development (R&D)



378



341

Selling, general and administrative (SG&A)



434



454

Acquisition charges



79



79

Restructuring charges/other



3



2

Operating profit



1,480



1,131

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



26



(8)

Interest and debt expense



20



21

Income before income taxes



1,486



1,102

Provision for income taxes



430



283

Net income


$

1,056


$

819








Diluted earnings per common share


$

1.03


$

.79








Average shares outstanding (millions):







Basic



994



1,004

Diluted



1,015



1,020








Cash dividends declared per common share


$

.50


$

.38








Certain amounts in the prior period have been adjusted to reflect the following: (1) the fourth-quarter 2016 early adoption of ASU 2016-09 related to stock-based compensation, and (2) the first-quarter 2017 early adoption of ASU 2017-07 related to the reclassification of certain pension and other retiree benefit costs to OI&E.


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)


$

458


$

325

Discrete tax items



(28)



(42)

Provision for income taxes (effective taxes)


$

430


$

283


Annual operating tax rate



31%



30%

Effective tax rate



29%



26%


As a result of accounting rule ASC 260, which requires a portion of Net income to be allocated to unvested restricted stock units (RSUs) on which we pay dividend equivalents, diluted EPS is calculated using the following:


Net income


$

1,056


$

819

Income allocated to RSUs



(10)



(10)

Income allocated to common stock for diluted EPS


$

1,046


$

809


 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of dollars, except share amounts)




June 30,



2017


2016

Assets







Current assets:







Cash and cash equivalents


$

1,140


$

1,235

Short-term investments



1,844



1,304

Accounts receivable, net of allowances of ($16) and ($20)



1,469



1,348

Raw materials



109



104

Work in process



1,099



946

Finished goods



739



826

Inventories



1,947



1,876

Prepaid expenses and other current assets



1,111



926

Total current assets



7,511



6,689

Property, plant and equipment at cost



4,656



5,152

Accumulated depreciation



(2,142)



(2,595)

Property, plant and equipment, net



2,514



2,557

Long-term investments



250



224

Goodwill, net



4,362



4,362

Acquisition-related intangibles, net



1,105



1,424

Deferred income taxes



412



231

Capitalized software licenses, net



114



52

Overfunded retirement plans



99



85

Other assets



71



69

Total assets


$

16,438


$

15,693








Liabilities and stockholders' equity







Current liabilities:







Current portion of long-term debt


$

499


$

637

Accounts payable



450



416

Accrued compensation



489



493

Income taxes payable



86



58

Accrued expenses and other liabilities



353



387

Total current liabilities



1,877



1,991

Long-term debt



3,084



2,975

Underfunded retirement plans



101



193

Deferred income taxes



33



40

Deferred credits and other liabilities



635



532

Total liabilities



5,730



5,731

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



1,683



1,598

Retained earnings



34,149



31,933

Treasury common stock at cost







Shares: June 30, 2017 – 749,098,850; June 30, 2016 – 737,467,669



(26,345)



(24,774)

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



(520)



(536)

Total stockholders' equity



10,708



9,962

Total liabilities and stockholders' equity


$

16,438


$

15,693


Certain amounts in the prior period have been recast to conform to the current presentation.


 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Millions of dollars)




For Three Months Ended



June 30,



2017


2016

Cash flows from operating activities







Net income


$

1,056


$

819

Adjustments to Net income:







Depreciation



134



155

Amortization of acquisition-related intangibles



79



79

Amortization of capitalized software



12



8

Stock compensation



75



76

Deferred income taxes



(54)



(59)

Increase (decrease) from changes in:







Accounts receivable



(132)



(76)

Inventories



(104)



(71)

Prepaid expenses and other current assets



83



(8)

Accounts payable and accrued expenses



12



40

Accrued compensation



131



147

Income taxes payable



(385)



(25)

Changes in funded status of retirement plans



19



14

Other



(9)



10

Cash flows from operating activities



917



1,109








Cash flows from investing activities







Capital expenditures



(151)



(158)

Purchases of short-term investments



(1,130)



(993)

Proceeds from short-term investments



1,265



1,210

Other



8



6

Cash flows from investing activities



(8)



65








Cash flows from financing activities







Proceeds from issuance of long-term debt



605



499

Repayment of debt



(375)



(1,000)

Dividends paid



(498)



(382)

Stock repurchases



(650)



(527)

Proceeds from common stock transactions



84



193

Other



(8)



(3)

Cash flows from financing activities



(842)



(1,220)








Net change in Cash and cash equivalents



67



(46)

Cash and cash equivalents at beginning of period



1,073



1,281

Cash and cash equivalents at end of period


$

1,140


$

1,235


Certain amounts in the prior period have been recast to conform to the current presentation.


 

Segment results

Amounts are in millions of dollars.




2Q17



2Q16


Change

Analog:









Revenue


$

2,411


$

2,044


18%

Operating profit


$

1,077


$

781


38%

Embedded Processing:









Revenue


$

868


$

755


15%

Operating profit


$

271


$

192


41%

Other:









Revenue


$

414


$

474


-13%

Operating profit*


$

132


$

158


-16%


* 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)

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).

The company believes that free cash flow and the associated ratios provide insight into its liquidity, its 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 provided in the table below.

Amounts are in millions of dollars.    



For 12 Months Ended





June 30,





2017


2016


Change

Cash flow from operations (GAAP)


$

4,564


$

4,624


-1%

Capital expenditures



(527)



(585)



Free cash flow (non-GAAP)


$

4,037


$

4,039


0%










Revenue


$

14,184


$

12,899












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



32.2%



35.8%



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



28.5%



31.3%



 

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 is useful because it more clearly communicates that discrete tax items are excluded from such rate. The term also helps differentiate from the effective tax rate, which includes discrete tax items. No adjustments are made to the estimated annual effective tax rate when using the term annual operating tax rate.

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.

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 approximately 100,000 customers transform the future, today. 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

Contact:
Texas Instruments Incorporated
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