TI reports second quarter 2020 financial results and shareholder returns
DALLAS, July 21, 2020 /PRNewswire/ -- Texas Instruments Incorporated (TI) (Nasdaq: TXN) today reported second quarter revenue of $3.24 billion, net income of $1.38 billion and earnings per share of $1.48. Earnings per share include a 33-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 12% from the same quarter a year ago, driven
primarily by weakness in the automotive market.
-- "In our core businesses, Analog revenue declined 4% and Embedded
Processing declined 31% from the same quarter a year ago. Analog and
Embedded Processing both had positive sequential growth in the second
quarter excluding the automotive market.
-- "Our cash flow from operations of $6.3 billion for the trailing 12
months again underscored the strength of our business model. Free cash
flow for the same period was $5.7 billion and 42% 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 $6.7 billion to owners in the past 12 months through
stock repurchases and dividends. Over the same period, our dividends
represented 56% 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.
-- "TI's third quarter outlook is for revenue in the range of $3.26 billion
to $3.54 billion, and earnings per share between $1.14 and $1.34."
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.
Q2 2020 Q2 2019 Change
Revenue $
3,239 $
3,668 (12)%
Operating profit $
1,228 $
1,506 (18)%
Net income $
1,380 $
1,305 6%
Earnings per share $
1.48 $
1.36 9%
Cash generation
Amounts are in millions of dollars.
Trailing 12 Months
Q2 2020 Q2 2020 Q2 2019 Change
Cash
flow
from
operations $
1,720 $
6,317 $
7,154 (12)%
Capital
expenditures $
130 $
603 $
1,228 (51)%
Free
cash
flow $
1,590 $
5,714 $
5,926 (4)%
Free
cash
flow
%
of
revenue 41.7% 38.9%
Cash return
Amounts are in millions of dollars.
Trailing 12 Months
Q2 2020 Q2 2020 Q2 2019 Change
Dividends
paid $
823 $
3,226 $
2,784 16%
Stock
repurchases $
882 $
3,468 $
5,224 (34)%
Total
cash
returned $
1,705 $
6,694 $
8,008 (16)%
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)
For Three Months Ended
June 30,
2020 2019
Revenue $
3,239 $
3,668
Cost of revenue (COR) 1,157 1,308
Gross profit 2,082 2,360
Research and development (R&D) 379 390
Selling, general and
administrative (SG&A) 401 420
Acquisition charges 50 80
Restructuring charges/other 24 (36)
Operating profit 1,228 1,506
Other income (expense), net
(OI&E) 99 52
Interest and debt expense 48 44
Income before income taxes 1,279 1,514
Provision for income taxes (101) 209
Net income $
1,380 $
1,305
Diluted earnings per common
share $
1.48 $
1.36
Average shares outstanding
(millions):
Basic 916 937
Diluted 927 953
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) $
164 $
238
Discrete tax items (265) (29)
Provision for income taxes
(effective taxes) $
(101) $
209
Annual operating tax rate 13% 16%
Effective tax rate (8)% 14%
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 $
1,380 $
1,305
Income allocated to RSUs (7) (8)
Income allocated to common
stock for diluted EPS $
1,373 $
1,297
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
June 30,
2020 2019
Assets
Current assets:
Cash and cash equivalents $
4,294 $
3,813
Short-term investments 666 405
Accounts receivable, net of
allowances of ($9) and ($15) 1,176 1,419
Raw materials 182 176
Work in process 977 958
Finished goods 977 945
Inventories 2,136 2,079
Prepaid expenses and other current
assets 216 240
Total current assets 8,488 7,956
Property, plant and equipment at
cost 5,741 5,706
Accumulated depreciation (2,540) (2,341)
Property, plant and equipment 3,201 3,365
Long-term investments 36 300
Goodwill 4,362 4,362
Acquisition-related intangibles 240 469
Deferred tax assets 236 261
Capitalized software licenses 141 88
Overfunded retirement plans 223 104
Other long-term assets 518 479
Total assets $
17,445 $
17,384
===
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $
551 $
1,249
Accounts payable 409 412
Accrued compensation 505 476
Income taxes payable 179 87
Accrued expenses and other
liabilities 519 422
Total current liabilities 2,163 2,646
Long-term debt 6,245 4,558
Underfunded retirement plans 99 121
Deferred tax liabilities 60 49
Other long-term liabilities 1,234 1,524
Total liabilities 9,801 8,898
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 2,182 2,003
Retained earnings 40,780 38,974
Treasury common stock at cost
Shares: June 30, 2020 -
825,225,307; June 30, 2019 -
806,251,136 (36,725) (33,775)
Accumulated other comprehensive
income (loss), net of taxes
(AOCI) (334) (457)
Total stockholders' equity 7,644 8,486
Total liabilities and
stockholders' equity $
17,445 $
17,384
===
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)
For Three Months Ended
June 30,
2020 2019
---
Cash flows from operating activities
Net income $
1,380 $
1,305
Adjustments to net income:
Depreciation 184 173
Amortization of acquisition-
related intangibles 50 80
Amortization of capitalized
software 15 14
Stock compensation 69 67
Gains on sales of assets (1) (21)
Deferred taxes (30) 31
Increase (decrease) from changes in:
Accounts receivable 140 21
Inventories (133) 52
Prepaid expenses and other current
assets 63 18
Accounts payable and accrued
expenses 73 (26)
Accrued compensation 148 129
Income taxes payable (255) (13)
Changes in funded status of
retirement plans (10) 2
Other 27 (36)
---
Cash flows from operating
activities 1,720 1,796
---
Cash flows from investing activities
Capital expenditures (130) (284)
Proceeds from asset sales 1 28
Purchases of short-term
investments (249) (239)
Proceeds from short-term
investments 1,810 200
Other 5 37
---
Cash flows from investing
activities 1,437 (258)
---
Cash flows from financing activities
Proceeds from issuance of long-
term debt 749
Repayment of debt (500)
Dividends paid (823) (722)
Stock repurchases (882) (863)
Proceeds from common stock
transactions 87 146
Other (12) (6)
---
Cash flows from financing
activities (1,381) (1,445)
---
Net change in cash and cash
equivalents 1,776 93
Cash and cash equivalents at
beginning of period 2,518 3,720
---
Cash and cash equivalents at end
of period $
4,294 $
3,813
===
Segment results
Amounts are in millions of dollars.
Q2 2020 Q2 2019 Change
Analog:
Revenue $
2,434 $
2,534 (4)%
Operating profit $
1,053 $
1,108 (5)%
Embedded Processing:
Revenue $
546 $
790 (31)%
Operating profit $
125 $
265 (53)%
Other:
Revenue $
259 $
344 (25)%
Operating profit* $
50 $
133 (62)%
* Includes acquisition charges and
restructuring charges/other.
Compared with the year-ago quarter:
Analog: (includes Power, Signal Chain and High Volume)
-- Revenue decreased in High Volume and Power, while Signal Chain was about
even.
-- Operating profit decreased 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 $85 million, and operating profit decreased $83
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
June 30,
2020 2019 Change
Cash
flow
from
operations
(GAAP) $
6,317 $
7,154 (12)%
Capital
expenditures (603) (1,228)
Free
cash
flow
(non-
GAAP) $
5,714 $
5,926 (4)%
Revenue $
13,689 $
15,240
Cash
flow
from
operations
as a
percentage
of
revenue
(GAAP) 46.1% 46.9%
Free
cash
flow
as a
percentage
of
revenue
(non-
GAAP) 41.7% 38.9%
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:
-- 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 Part II Item 1A of TI's most recent Form 10-Q. 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 (Nasdaq: TXN) is a global semiconductor company that designs, manufactures, tests and sells analog and embedded processing chips for markets such as industrial, automotive, personal electronics, communications equipment and enterprise systems. Our passion to create a better world by making electronics more affordable through semiconductors is alive today, as each generation of innovation builds upon the last to make our technology smaller, more efficient, more reliable and more affordable - making it possible for semiconductors to go into electronics everywhere. We think of this as Engineering Progress. It's what we do and have been doing for decades. Learn more at TI.com.
TI trademarks:
DLP
Other trademarks are the property of their respective owners.
TXN-G
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SOURCE Texas Instruments Incorporated
