TI reports third quarter 2020 financial results and shareholder returns

 

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

Contact:
Company Name: Texas Instruments Incorporated
Media contacts: Cindy Goforth
Email Contact Whitney Jodry
Email Contact Investor Relations contact: Dave Pahl
Email Contact (Please do not publish these email addresses.)
Web: http://www.ti.com
Financial data for Texas Instruments Incorporated



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