TEXAS INSTRUMENTS INCORPORATED DALLAS, Jan. 24, 2017 /PRNewswire/ -- Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported fourth-quarter revenue of $3.41 billion, net income of $1.05 billion and earnings per share of $1.02. Earnings per share include a 14-cent benefit for items that were not in the company's original guidance for the quarter.
Regarding the company's performance and returns to shareholders, Rich Templeton, TI's chairman, president and CEO, made the following comments:
-- "Revenue increased 7 percent from the same quarter a year ago, as demand
for our products remained strong in the automotive market. The
improvement we saw in the third quarter for the industrial market
continued. Demand in the personal electronics market was down slightly
from a year ago.
-- "In our core businesses, Analog revenue grew 10 percent and Embedded
Processing grew 6 percent from the same quarter a year ago. Operating
margin increased in both businesses.
-- "Gross margin of 62.5 percent in the fourth quarter reflected the
quality of our product portfolio, as well as the efficiency of our
manufacturing strategy, including the benefit of 300-millimeter Analog
production.
-- "Our cash flow from operations of $4.6 billion for the year again
underscored the strength of our business model. Free cash flow for the
year was up 6 percent from a year ago to $4.1 billion, and represents
30.5 percent of revenue, up from 29.6 percent a year ago.
-- "We have returned $3.8 billion to owners in 2016 through stock
repurchases and dividends, consistent with our strategy to return all of
our free cash flow plus proceeds from exercises of equity compensation
minus net debt retirement. Over the last 12 months, our dividends
represented 40 percent of free cash flow, underscoring their
sustainability.
-- "Our balance sheet remains strong with $3.5 billion of cash and
short-term investments at the end of the quarter, about 80 percent of
which was owned by the company's U.S. entities. Inventory ended the
quarter at 126 days.
-- "TI's first-quarter outlook is for revenue in the range of $3.17 billion
to $3.43 billion and earnings per share between 78 and 88 cents, which
includes a 4-cent estimated tax benefit related to the new accounting
standard for stock compensation. For 2017, TI's annual effective tax
rate is expected to be about 30 percent."
As noted in the first paragraph above, earnings per share for fourth-quarter 2016 include a 14-cent benefit for items not in the company's prior outlook: a 14-cent benefit for several intellectual property agreements, a 1-cent tax benefit related to the adoption of an accounting standard for stock compensation and a 1-cent restructuring charge.
Also today, TI said Brian Crutcher has been promoted to chief operating officer. Crutcher, 44, is a 21-year veteran of the company and has been executive vice president responsible for all business and sales operations, as well as for Kilby Labs and information technology. As COO, he adds oversight of TI's global technology and manufacturing operations to his current duties.
Free cash flow is a non-GAAP financial measure. Free cash flow is cash flow from operations less capital expenditures.
Earnings summary
Amounts are in millions of dollars, except per-share amounts.
4Q16 4Q15 Change
---- ---- ------
Revenue $3,414 $3,189 7%
Operating profit $1,319 $1,142 15%
Net income $1,047 $836 25%
Earnings per share $1.02 $0.80 28%
Cash generation
Amounts are in millions of dollars.
Trailing 12 Months
------------------
4Q16 4Q16 4Q15 Change
---- ---- ---- ------
Cash flow from operations $1,387 $4,614 $4,397 5%
Capital expenditures $110 $531 $551 -4%
Free cash flow $1,277 $4,083 $3,846 6%
Free cash flow % of revenue 30.5% 29.6%
Capital expenditures for the past 12 months were 4 percent of revenue, consistent with TI's long-term expectations.
Cash return
Amounts are in millions of dollars.
Trailing 12 Months
------------------
4Q16 4Q16 4Q15 Change
---- ---- ---- ------
Dividends paid $499 $1,646 $1,444 14%
Stock repurchases $475 $2,132 $2,741 -22%
Total cash returned $974 $3,778 $4,185 -10%
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,
------------ ------------
2016 2015 2016 2015
---- ---- ---- ----
Revenue $3,414 $3,189 $13,370 $13,000
Cost of revenue (COR) 1,281 1,323 5,130 5,440
----- ----- ----- -----
Gross profit 2,133 1,866 8,240 7,560
Research and development (R&D) 343 306 1,370 1,280
Selling, general and administrative (SG&A) 411 405 1,767 1,748
Acquisition charges 80 81 319 329
Restructuring charges/other (20) (68) (15) (71)
--- --- --- ---
Operating profit 1,319 1,142 4,799 4,274
Other income (expense), net (OI&E) 197 19 211 32
Interest and debt expense 19 22 80 90
--- --- --- ---
Income before income taxes 1,497 1,139 4,930 4,216
Provision for income taxes 450 303 1,335 1,230
--- --- ----- -----
Net income $1,047 $836 $3,595 $2,986
====== ==== ====== ======
Diluted earnings per common share $1.02 $.80 $3.48 $2.82
===== ==== ===== =====
Average diluted shares outstanding (millions) 1,018 1,027 1,021 1,043
===== ===== ===== =====
Cash dividends declared per common share $.50 $.38 $1.64 $1.40
==== ==== ===== =====
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 $1,047 $836 $3,595 $2,986
Income allocated to RSUs (13) (12) (44) (42)
--- --- --- ---
Income allocated to common stock for diluted EPS $1,034 $824 $3,551 $2,944
====== ==== ====== ======
With the fourth-quarter 2016
adoption of ASU 2016-09 related to
stock compensation, we were
required to apply the new standard
as of the beginning of 2016. As a
result, the sum of the previously
reported quarters and the fourth
quarter of 2016 does not equal the
full year 2016 amounts above.
Recast amounts can be found in the
Supplementary financial information
section of this release.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
December 31,
------------
2016 2015
---- ----
Assets
Current assets:
Cash and cash equivalents $1,154 $1,000
Short-term investments 2,336 2,218
Accounts receivable, net of allowances of
($17) and ($7) 1,267 1,165
Raw materials 102 109
Work in process 954 846
Finished goods 734 736
--- ---
Inventories 1,790 1,691
----- -----
Prepaid expenses and other current assets 910 1,000
--- -----
Total current assets 7,457 7,074
----- -----
Property, plant and equipment at cost 4,923 5,465
Accumulated depreciation (2,411) (2,869)
------ ------
Property, plant and equipment, net 2,512 2,596
----- -----
Long-term investments 235 221
Goodwill, net 4,362 4,362
Acquisition-related intangibles, net 1,264 1,583
Deferred income taxes 374 201
Capitalized software licenses, net 52 46
Overfunded retirement plans 96 85
Other assets 79 62
--- ---
Total assets $16,431 $16,230
======= =======
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $631 $1,000
Accounts payable 396 386
Accrued compensation 710 664
Income taxes payable 83 95
Accrued expenses and other liabilities 444 410
--- ---
Total current liabilities 2,264 2,555
----- -----
Long-term debt 2,978 3,120
Underfunded retirement plans 129 196
Deferred income taxes 33 37
Deferred credits and other liabilities 554 376
--- ---
Total liabilities 5,958 6,284
----- -----
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 1,674 1,629
Retained earnings 33,107 31,176
Treasury common stock at cost
Shares: 2016 - 744,831,978; 2015 -
729,547,527 (25,523) (24,068)
Accumulated other comprehensive income
(loss), net of taxes (AOCI) (526) (532)
---- ----
Total stockholders' equity 10,473 9,946
------ -----
Total liabilities and stockholders'
equity $16,431 $16,230
======= =======
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of dollars)
For Three Months Ended For Years Ended
December 31, December 31,
------------ ------------
2016 2015 2016 2015
---- ---- ---- ----
Cash flows from operating activities
Net income $1,047 $836 $3,595 $2,986
Adjustments to Net income:
Depreciation 139 172 605 766
Amortization of acquisition-related
intangibles 80 79 319 319
Amortization of capitalized software 8 10 31 48
Stock-based compensation 48 58 252 286
Gains on sales of assets (40) (82) (40) (85)
Deferred income taxes (42) 51 (202) (55)
Increase (decrease) from changes in:
Accounts receivable 166 318 (108) 77
Inventories 18 80 (99) 93
Prepaid expenses and other current
assets (211) 5 (81) 94
Accounts payable and accrued expenses 59 3 72 (142)
Accrued compensation 62 44 36 7
Income taxes payable 180 (10) 333 11
Changes in funded status of retirement
plans (129) (88) (73) (23)
Other 2 (30) (26) 15
--- --- --- ---
Cash flows from operating activities 1,387 1,446 4,614 4,397
----- ----- ----- -----
Cash flows from investing activities
Capital expenditures (110) (164) (531) (551)
Proceeds from asset sales - 100 - 110
Purchases of short-term investments (1,332) (1,054) (3,503) (2,767)
Proceeds from short-term investments 765 437 3,390 2,892
Other (8) 6 (6) 14
--- --- --- ---
Cash flows from investing activities (685) (675) (650) (302)
---- ---- ---- ----
Cash flows from financing activities
Proceeds from issuance of debt - - 499 498
Repayment of debt - - (1,000) (1,000)
Dividends paid (499) (386) (1,646) (1,444)
Stock repurchases (475) (627) (2,132) (2,741)
Proceeds from common stock transactions 57 109 472 396
Other - - (3) (3)
--- --- --- ---
Cash flows from financing activities (917) (904) (3,810) (4,294)
---- ---- ------ ------
Net change in Cash and cash equivalents (215) (133) 154 (199)
Cash and cash equivalents at beginning
of period 1,369 1,133 1,000 1,199
----- ----- ----- -----
Cash and cash equivalents at end of
period $1,154 $1,000 $1,154 $1,000
====== ====== ====== ======
Certain amounts in the prior
periods have been recast to
conform to the current
presentation. See Supplemental
financial information section of
this release.
Quarterly segment results
Amounts are in millions of dollars.
4Q16 4Q15 Change
---- ---- ------
Analog:
Revenue $2,290 $2,073 10%
Operating profit $981 $787 25%
Embedded Processing:
Revenue $744 $700 6%
Operating profit $210 $164 28%
Other:
Revenue $380 $416 -9%
Operating profit* $128 $191 -33%
* Includes Acquisition charges and
Restructuring charges/other.
Compared with the year-ago quarter:
Analog: (includes High Volume Analog & Logic, Power Management, High Performance Analog and Silicon Valley Analog)
-- Revenue increased due to Power Management, High Performance Analog and
Silicon Valley Analog. High Volume Analog & Logic was about even.
-- Operating profit increased primarily due to higher revenue and
associated gross profit.
Embedded Processing: (includes Processors, Microcontrollers and Connectivity)
-- Revenue increased due to Processors and Microcontrollers. Connectivity
also grew.
-- Operating profit increased due to higher gross profit.
Other: (includes DLP(® )products, calculators, custom ASIC products and royalties)
-- Revenue declined due to royalties and custom ASIC products. DLP products
and calculators were about even.
-- Operating profit decreased due to gains on sales of assets in the
year-ago quarter.
Annual segment results
Amounts are in millions of dollars.
2016 2015 Change
---- ---- ------
Analog:
Revenue $8,536 $8,339 2%
Operating profit $3,380 $3,048 11%
Embedded Processing:
Revenue $3,023 $2,787 8%
Operating profit $801 $596 34%
Other:
Revenue $1,811 $1,874 -3%
Operating profit* $618 $630 -2%
* Includes Acquisition charges and
Restructuring charges/other.
Compared with the prior year:
Analog:
-- Revenue increased due to Silicon Valley Analog and High Performance
Analog. Power Management also grew, while High Volume Analog & Logic
declined.
-- Operating profit increased due to higher gross profit, which benefited
from lower manufacturing costs.
Embedded Processing:
-- Revenue increased due to growth in all three product lines, led by
Processors.
-- Operating profit increased primarily due to higher revenue and
associated gross profit.
Other:
-- Revenue declined due to royalties, custom ASIC products and calculators.
This was partially offset by growth in DLP products.
-- Operating profit decreased $12 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).
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,
------------
2016 2015 Change
---- ---- ------
Cash flow from operations (GAAP) $4,614 $4,397 5%
Capital expenditures (531) (551)
---- ----
Free cash flow (non-GAAP) $4,083 $3,846 6%
====== ======
Revenue $13,370 $13,000
======= =======
Cash flow from operations as a percent of revenue (GAAP) 34.5% 33.8%
Free cash flow as a percent of revenue (non-GAAP) 30.5% 29.6%
Supplemental financial information
With the fourth-quarter 2016 adoption of ASU 2016-09 related to stock compensation, we were required to apply the new standard only as of the beginning of 2016 for the Consolidated Statements of Income and on a full retrospective basis for all periods in the Consolidated Statements of Cash Flows. The recast amounts can be found in the chart below.
4Q16 (a) 3Q16 2Q16 1Q16
------- ---- ---- ----
Reported Reported Recast Reported Recast Reported Recast
-------- -------- ------ -------- ------ -------- ------
Income statement data:
Provision for income taxes $450 $413 $363 $323 $283 $282 $239
Net income 1,047 968 1,018 779 819 668 711
Average diluted shares outstanding, in millions 1,018 1,017 1,023 1,016 1,020 1,018 1,022
Basic EPS $1.04 $0.95 $1.00 $0.77 $0.81 $0.65 $0.70
Diluted EPS $1.02 $0.94 $0.98 $0.76 $0.79 $0.65 $0.69
Cash flow data:
Cash flows from operating activities (GAAP) 1,387 1,413 1,465 1,069 1,109 547 653
Capital expenditures (110) (139) (139) (158) (158) (124) (124)
Free cash flow
(non-GAAP) (c) 1,277 1,274 1,326 911 951 423 529
Cash flows from financing activities (917) (676) (728) (1,180) (1,220) (839) (945)
2016 (b) 2015
------- ----
Total Reported Recast
----- -------- ------
Income statement data:
Provision for income taxes $1,335 $1,230 *
Net income 3,595 2,986 *
Average diluted shares outstanding, in millions 1,021 1,043 *
Basic EPS $3.54 $2.86 *
Diluted EPS $3.48 $2.82 *
Cash flow data:
Cash flows from operating activities (GAAP) 4,614 4,268 4,397
Capital expenditures (531) (551) (551)
Free cash flow
(non-GAAP) (c) 4,083 3,717 3,846
Cash flows from financing activities (3,810) (4,165) (4,294)
(a) 4Q16 amounts reflect adoption
of ASU 2016-09.
(b) 2016 total is the sum of
recast 1Q16, 2Q16 and 3Q16, and
reported 4Q16.
(c) Free cash flow is Cash flow
from operating activities less
Capital expenditures.
* Accounting standard ASU 2016-09
allowed only prospective adoption
for the income statement,
therefore the prior annual
periods were not recast.
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 its management:
-- Market demand for semiconductors, particularly in TI's end markets;
-- TI's ability to compete in products and prices in an intensely
competitive industry;
-- Losses or curtailments of purchases from key customers and the timing
and amount of distributor and other customer inventory adjustments;
-- Customer demand that differs from forecasts and the financial impact of
inadequate or excess TI inventory that results from demand that differs
from projections;
-- 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;
-- TI's ability to develop, manufacture and market innovative products in a
rapidly changing technological environment;
-- 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;
-- Natural events such as severe weather, geological events or health
epidemics in the locations in which TI, its customers or its suppliers
operate;
-- Breaches of TI's information technology systems or those of its
customers or suppliers;
-- Availability and cost of raw materials, utilities, manufacturing
equipment, third-party manufacturing services and manufacturing
technology;
-- 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;
-- TI's ability to maintain and enforce a strong intellectual property
portfolio and obtain needed licenses from third parties, expiration of
license agreements between TI and its patent licensees, and market
conditions reducing royalty payments to TI;
-- Compliance with or changes in the complex laws, rules and regulations to
which TI is or may become subject, or actions of enforcement
authorities, that restrict TI's ability to manufacture its products or
operate its business, or subject us to fines, penalties, or other legal
liability;
-- Product liability or warranty claims, claims based on epidemic or
delivery failure, or other claims relating to TI products,
manufacturing, services, design or communications, or recalls by TI
customers for a product containing a TI part;
-- 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, adverse resolution of tax audits and the ability to realize
deferred tax assets;
-- Financial difficulties of distributors or their promotion of competing
product lines to TI's detriment;
-- A loss suffered by a customer or distributor of TI with respect to
TI-consigned inventory;
-- Instability in the global credit and financial markets that affects TI's
ability to fund its daily operations, invest in the business, make
strategic acquisitions, or make principal and interest payments on its
debt;
-- Increases in health care and pension benefit costs;
-- TI's ability to recruit and retain skilled personnel;
-- TI's ability to successfully integrate and realize opportunities for
growth from acquisitions, and its ability to realize its expectations
regarding the amount and timing of restructuring charges and associated
cost savings; and
-- Impairments of TI's non-financial assets.
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 more than 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
