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TI reports 4Q17 and 2017 financial results and shareholder returns

Conference call on TI website at 3:30 p.m. Central time today

DALLAS, Jan. 23, 2018 — (PRNewswire) — Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported fourth-quarter revenue of $3.75 billion, net income of $344 million and earnings per share of 34 cents. Earnings per share include 75 cents in tax-related expenses not in the company's original guidance primarily due to the recently passed tax reform act.

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 periods have been recast to conform to the current presentation.

Earnings summary

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



4Q17


4Q16


Change

Revenue

$

3,750

$

3,414


10%

Operating profit

$

1,563

$

1,332


17%

Net income

$

344

$

1,047


-67%

Earnings per share

$

0.34

$

1.02


-67%

 

Cash generation

Amounts are in millions of dollars.






Trailing 12 Months




4Q17



4Q17



4Q16


Change

Cash flow from operations


$

1,929


$

5,363


$

4,614


16%

Capital expenditures


$

231


$

695


$

531


31%

Free cash flow


$

1,698


$

4,668


$

4,083


14%

Free cash flow % of revenue






31.2%



30.5%



 

Cash return

Amounts are in millions of dollars.






Trailing 12 Months




4Q17



4Q17



4Q16


Change

Dividends paid


$

611


$

2,104


$

1,646


28%

Stock repurchases


$

706


$

2,556


$

2,132


20%

Total cash returned


$

1,317


$

4,660


$

3,778


23%

 

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Income

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




For Three Months Ended


For Years Ended



December 31,


December 31,



2017


2016


2017


2016

Revenue


$

3,750


$

3,414


$

14,961


$

13,370

Cost of revenue (COR)



1,310



1,277



5,347



5,113

Gross profit



2,440



2,137



9,614



8,257

Research and development (R&D)



386



340



1,508



1,356

Selling, general and administrative (SG&A)



409



405



1,694



1,742

Acquisition charges



79



80



318



319

Restructuring charges/other



3



(20)



11



(15)

Operating profit



1,563



1,332



6,083



4,855

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



8



184



75



155

Interest and debt expense



21



19



78



80

Income before income taxes



1,550



1,497



6,080



4,930

Provision for income taxes



1,206



450



2,398



1,335

Net income


$

344


$

1,047


$

3,682


$

3,595














Diluted earnings per common share


$

.34


$

1.02


$

3.61


$

3.48














Average shares outstanding (millions):

Basic



985



998



991



1,003

Diluted



1,007



1,018



1,012



1,021














Cash dividends declared per common share


$

.62


$

.50


$

2.12


$

1.64














Certain amounts in the prior periods have been adjusted to reflect 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


Provision for income taxes is based on the following:


Operating taxes (calculated using the estimated annual effective tax rate)


$

476


$

465


$

1,858


$

1,489

Discrete tax items



730



(15)



540



(154)

Provision for income taxes (effective taxes)


$

1,206


$

450


$

2,398


$

1,335


Annual operating tax rate



31%



31%



31%



30%

Effective tax rate



78%



30%



39%



27%


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


$

344


$

1,047


$

3,682


$

3,595

Income allocated to RSUs



(3)



(13)



(33)



(44)

Income allocated to common stock for diluted EPS


$

341


$

1,034


$

3,649


$

3,551

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of dollars, except share amounts)




December 31,



2017


2016

Assets







Current assets:







Cash and cash equivalents


$

1,656


$

1,154

Short-term investments



2,813



2,336

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



1,278



1,267

Raw materials



126



102

Work in process



1,089



954

Finished goods



742



734

Inventories



1,957



1,790

Prepaid expenses and other current assets



1,030



910

Total current assets



8,734



7,457

Property, plant and equipment at cost



4,789



4,923

Accumulated depreciation



(2,125)



(2,411)

Property, plant and equipment, net



2,664



2,512

Long-term investments



268



235

Goodwill



4,362



4,362

Acquisition-related intangibles



946



1,264

Deferred tax assets



264



374

Capitalized software licenses



110



52

Overfunded retirement plans



208



96

Other assets



86



79

Total assets


$

17,642


$

16,431








Liabilities and stockholders' equity







Current liabilities:







Current portion of long-term debt


$

500


$

631

Accounts payable



466



396

Accrued compensation



722



710

Income taxes payable



128



83

Accrued expenses and other liabilities



442



444

Total current liabilities



2,258



2,264

Long-term debt



3,577



2,978

Underfunded retirement plans



89



129

Deferred tax liabilities



78



33

Deferred credits and other liabilities



1,303



554

Total liabilities



7,305



5,958

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



1,776



1,674

Retained earnings



34,662



33,107

Treasury common stock at cost







Shares: 2017 – 757,657,217; 2016 – 744,831,978



(27,458)



(25,523)

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



(384)



(526)

Total stockholders' equity



10,337



10,473

Total liabilities and stockholders' equity


$

17,642


$

16,431

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Millions of dollars)




For Three Months Ended


For Years Ended



December 31,


December 31,



2017


2016


2017


2016

Cash flows from operating activities













Net income


$

344


$

1,047


$

3,682


$

3,595

Adjustments to Net income:













Depreciation



133



139



539



605

Amortization of acquisition-related intangibles



79



80



318



319

Amortization of capitalized software



12



8



47



31

Stock-based compensation



45



48



242



252

Gains on sales of assets





(40)





(40)

Deferred taxes



159



(42)



112



(202)

Increase (decrease) from changes in:













Accounts receivable



299



166



(7)



(108)

Inventories



(49)



18



(167)



(99)

Prepaid expenses and other current assets



33



(211)



76



(81)

Accounts payable and accrued expenses



70



59



51



72

Accrued compensation



82



62



(3)



36

Income taxes payable



694



180



468



333

Changes in funded status of retirement plans



(15)



(129)



21



(73)

Other



43



2



(16)



(26)

Cash flows from operating activities



1,929



1,387



5,363



4,614














Cash flows from investing activities













Capital expenditures



(231)



(110)



(695)



(531)

Proceeds from asset sales







40



Purchases of short-term investments



(1,450)



(1,332)



(4,555)



(3,503)

Proceeds from short-term investments



790



765



4,095



3,390

Other



(7)



(8)



(12)



(6)

Cash flows from investing activities



(898)



(685)



(1,127)



(650)














Cash flows from financing activities













Proceeds from issuance of debt



494





1,099



499

Repayment of debt







(625)



(1,000)

Dividends paid



(611)



(499)



(2,104)



(1,646)

Stock repurchases



(706)



(475)



(2,556)



(2,132)

Proceeds from common stock transactions



162



57



483



472

Other



(10)





(31)



(3)

Cash flows from financing activities



(671)



(917)



(3,734)



(3,810)














Net change in Cash and cash equivalents



360



(215)



502



154

Cash and cash equivalents at beginning of period



1,296



1,369



1,154



1,000

Cash and cash equivalents at end of period


$

1,656


$

1,154


$

1,656


$

1,154

 

 

Quarterly segment results

Amounts are in millions of dollars.




4Q17



4Q16


Change

Analog:









Revenue


$

2,535


$

2,290


11%

Operating profit


$

1,188


$

990


20%

Embedded Processing:









Revenue


$

896


$

744


20%

Operating profit


$

307


$

214


43%

Other:









Revenue


$

319


$

380


-16%

Operating profit*


$

68


$

128


-47%


* 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)

 

Annual segment results

Amounts are in millions of dollars.




2017



2016


Change

Analog:









Revenue


$

9,900


$

8,536


16%

Operating profit


$

4,468


$

3,416


31%

Embedded Processing:









Revenue


$

3,498


$

3,023


16%

Operating profit


$

1,143


$

817


40%

Other:









Revenue


$

1,563


$

1,811


-14%

Operating profit*


$

472


$

622


-24%


* Includes Acquisition charges and Restructuring charges/other.

 

Compared with the prior year:

Analog: 

Embedded Processing: 

Other: 

 

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 Years Ended





December 31,





2017


2016


Change

Cash flow from operations (GAAP)


$

5,363


$

4,614


16%

Capital expenditures



(695)



(531)



Free cash flow (non-GAAP)


$

4,668


$

4,083


14%










Revenue


$

14,961


$

13,370












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



35.8%



34.5%



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



31.2%



30.5%



 

This release also includes references to an annual operating tax rate, a non-GAAP term the company uses to describe the estimated annual effective tax rate, a GAAP measure that by definition does not include discrete tax items. The company believes the term annual operating tax rate 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

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Company Name: Texas Instruments Incorporated
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Financial data for Texas Instruments Incorporated