TI reports third quarter 2020 financial results and shareholder returns
DALLAS, Oct. 20, 2020 /PRNewswire/ -- Texas Instruments Incorporated (TI) (Nasdaq: TXN) today reported third quarter revenue of $3.82 billion, net income of $1.35 billion and earnings per share of $1.45.
Regarding the company's performance and returns to shareholders, Rich Templeton, TI's chairman, president and CEO, made the following comments:
-- "Revenue increased 18% sequentially with notable strength from the
rebound of automotive demand and growing demand from personal
electronics. Revenue increased 1% from the same quarter a year ago.
-- "In our core businesses, Analog revenue grew 18% and Embedded Processing
grew 19% sequentially. From a year ago, Analog revenue grew 7% and
Embedded Processing declined 10%.
-- "Our cash flow from operations of $5.8 billion for the trailing 12
months again underscored the strength of our business model. Free cash
flow for the same period was $5.2 billion and 38% 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 $6.4 billion to owners in the past 12 months through
stock repurchases and dividends. Over the same period, our dividends
represented 64% of free cash flow, underscoring their sustainability. In
September, we announced we would increase our dividend by 13%. Together,
our stock repurchases and dividends reflect our continued commitment to
return all free cash flow to our owners.
-- "TI's fourth quarter outlook is for revenue in the range of $3.41
billion to $3.69 billion, and earnings per share between $1.20 and
$1.40."
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.
Q3 2020 Q3 2019
Change
Revenue $
3,817 $
3,771 1%
Operating profit $
1,609 $
1,589 1%
Net income $
1,353 $
1,425 (5)%
Earnings per share $
1.45 $
1.49 (3)%
Cash generation
Amounts are in millions of dollars.
Trailing 12 Months
Q3 2020 Q3 2020 Q3 2019
Change
Cash flow from operations $
1,443 $
5,768 $
7,040 (18)%
Capital expenditures $
146 $
600 $
1,007 (40)%
Free cash flow $
1,297 $
5,168 $
6,033 (14)%
Free cash flow % of revenue 37.6% 40.9%
Cash return
Amounts are in millions of dollars.
Trailing 12 Months
Q3 2020 Q3 2020 Q3 2019
Change
Dividends paid $
825 $
3,330 $
2,903 15%
Stock repurchases $
15 $
3,027 $
4,480 (32)%
Total cash returned $
840 $
6,357 $
7,383 (14)%
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)
For Three Months Ended
September 30,
2020 2019
---
Revenue $
3,817 $
3,771
Cost of revenue (COR) 1,364 1,325
---
Gross profit 2,453 2,446
Research and development (R&D) 386 379
Selling, general and administrative (SG&A) 407 399
Acquisition charges 51 79
---
Operating profit 1,609 1,589
Other income (expense), net (OI&E) 27 34
Interest and debt expense 49 43
---
Income before income taxes 1,587 1,580
Provision for income taxes 234 155
---
Net income $
1,353 $
1,425
===
Diluted earnings per common share $
1.45 $
1.49
===
Average shares outstanding (millions):
Basic 917 935
===
Diluted 929 950
===
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) $
231 $
257
Discrete tax items 3 (102)
---
Provision for income taxes (effective taxes) $
234 $
155
===
Annual operating tax rate 14% 16%
Effective tax rate 15% 10%
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 $
1,353 $
1,425
Income allocated to RSUs (6) (8)
---
Income allocated to common stock for diluted EPS $
1,347 $
1,417
===
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
September 30,
2020 2019
Assets
Current assets:
Cash and cash equivalents $
2,822 $
3,893
Short-term investments 2,696 1,174
Accounts receivable, net of allowances of ($12) and ($13) 1,392 1,342
Raw materials 192 175
Work in process 959 955
Finished goods 921 910
Inventories 2,072 2,040
Prepaid expenses and other current assets 277 264
Total current assets 9,259 8,713
Property, plant and equipment at cost 5,698 5,683
Accumulated depreciation (2,508) (2,365)
Property, plant and equipment 3,190 3,318
Long-term investments 47 298
Goodwill 4,362 4,362
Acquisition-related intangibles 189 390
Deferred tax assets 299 257
Capitalized software licenses 133 77
Overfunded retirement plans 227 106
Other long-term assets 501 471
Total assets $
18,207 $
17,992
===
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $
550 $
499
Accounts payable 411 397
Accrued compensation 656 609
Income taxes payable 44 58
Accrued expenses and other liabilities 524 444
Total current liabilities 2,185 2,007
Long-term debt 6,247 5,302
Underfunded retirement plans 103 123
Deferred tax liabilities 69 49
Other long-term liabilities 1,278 1,526
Total liabilities 9,882 9,007
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 2,257 2,058
Retained earnings 41,305 39,674
Treasury common stock at cost
Shares: September 30, 2020 - 823,174,578; September 30, 2019 - 805,637,804 (36,643) (34,045)
Accumulated other comprehensive income (loss), net of taxes (AOCI) (335) (443)
Total stockholders' equity 8,325 8,985
Total liabilities and stockholders' equity $
18,207 $
17,992
===
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)
For Three Months Ended
September 30,
2020 2019
---
Cash flows from operating activities
Net income $
1,353 $
1,425
Adjustments to net income:
Depreciation 183 183
Amortization of acquisition-
related intangibles 51 79
Amortization of capitalized
software 16 13
Stock compensation 50 48
Gains on sales of assets (2)
Deferred taxes (51) (4)
Increase (decrease) from changes in:
Accounts receivable (216) 77
Inventories 64 39
Prepaid expenses and other
current assets 25 44
Accounts payable and accrued
expenses (13) 29
Accrued compensation 157 129
Income taxes payable (208) (93)
Changes in funded status of
retirement plans (1) 17
Other 35 6
---
Cash flows from operating
activities 1,443 1,992
---
Cash flows from investing activities
Capital expenditures (146) (149)
Proceeds from asset sales 2
Purchases of short-term
investments (2,540) (986)
Proceeds from short-term
investments 510 220
Other (15) 1
---
Cash flows from investing
activities (2,189) (914)
---
Cash flows from financing activities
Proceeds from issuance of long-
term debt - 748
Repayment of debt - (750)
Dividends paid (825) (721)
Stock repurchases (15) (456)
Proceeds from common stock
transactions 123 194
Other (9) (13)
---
Cash flows from financing
activities (726) (998)
---
Net change in cash and cash
equivalents (1,472) 80
Cash and cash equivalents at
beginning of period 4,294 3,813
---
Cash and cash equivalents at end
of period $
2,822 $
3,893
===
Segment results
Amounts are in millions of dollars.
Q3 2020 Q3 2019 Change
Analog:
Revenue $
2,865 $
2,674 7%
Operating profit $
1,320 $
1,231 7%
Embedded Processing:
Revenue $
651 $
724 (10)%
Operating profit $
187 $
233 (20)%
Other:
Revenue $
301 $
373 (19)%
Operating profit* $
102 $
125 (18)%
* Includes acquisition
charges.
Compared with the year-ago quarter:
Analog: (includes Power and Signal Chain)
-- Revenue increased in Signal Chain and Power.
-- Operating profit increased due to higher 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 $72 million, and operating profit decreased $23
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
September 30,
2020 2019 Change
Cash flow from operations (GAAP) $
5,768 $
7,040 (18)%
Capital expenditures (600) (1,007)
Free cash flow (non-GAAP) $
5,168 $
6,033 (14)%
Revenue $
13,735 $
14,750
Cash flow from operations as a percentage of revenue (GAAP) 42.0% 47.7%
Free cash flow as a percentage of revenue (non-GAAP) 37.6% 40.9%
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 Form 10-Q for the quarter ended March 31, 2020. 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
