Form 8-K TEXAS INSTRUMENTS INC For: Apr 23

April 23, 2019 4:19 PM

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): April 23, 2019

 

TEXAS INSTRUMENTS INCORPORATED

(Exact name of registrant as specified in charter)

 

 

DELAWARE

 

001-03761

 

75-0289970

(State or other jurisdiction

of incorporation)

 

(Commission

file number)

 

(I.R.S. employer

identification no.)

12500 TI BOULEVARD

DALLAS, TEXAS 75243

(Address of principal executive offices)

Registrant’s telephone number, including area code: (214) 479-3773

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 

 

 

 


 

 

ITEM 2.02.  Results of Operations and Financial Condition

 

The Registrant’s news release dated April 23, 2019, regarding its first-quarter results of operations and financial condition is attached hereto as Exhibit 99.

The attached news release includes references to the following financial measures that were not prepared in accordance with generally accepted accounting principles in the United States (non-GAAP measures): free cash flow and ratios based on free cash flow. The company believes these non-GAAP measures provide insight into its liquidity, 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 included in the “Non-GAAP financial information” section of the news release.

 

ITEM 9.01. Exhibits

 

Designation
of Exhibit
in this
Report

 

Description of Exhibit

 

 

 

99

 

Registrant’s News Release

 

 

Dated April 23, 2019 (furnished pursuant to Item 2.02)

 

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

TEXAS INSTRUMENTS INCORPORATED

 

 

 

 

 

Date: April 23, 2019

 

By:

 

/s/ Rafael R. Lizardi

 

 

 

 

Rafael R. Lizardi

 

 

 

 

Senior Vice President and

 

 

 

 

Chief Financial Officer

 

 

 

Exhibit 99

TI reports 1Q19 financial results and shareholder returns

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

www.ti.com/ir

 

 

DALLAS (April 23, 2019) – Texas Instruments Incorporated (TI) (NASDAQ: TXN) today reported first-quarter revenue of $3.59 billion, net income of $1.22 billion and earnings per share of $1.26. Earnings per share include a 4-cent discrete tax benefit 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 5% from the same quarter a year ago as demand for our products continued to slow across most markets.

“In our core businesses, Analog revenue declined 2% and Embedded Processing declined 14% from the same quarter a year ago.

“Our cash flow from operations of $7.2 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the trailing 12 months was $6.0 billion and represents 38.4% 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 $8.0 billion to owners in the past 12 months through stock repurchases and dividends. Our strategy is to return all our free cash flow to owners. Over the last 12 months, our dividends represented 45% of free cash flow, underscoring their sustainability.

“TI’s second-quarter outlook is for revenue in the range of $3.46 billion to $3.74 billion, and earnings per share between $1.12 and $1.32, which includes an estimated $10 million discrete tax benefit. We continue to expect our annual operating tax rate to be about 16% in 2019.”

Free cash flow, a non-GAAP financial measure, is cash flow from operations less capital expenditures.

 


 

TI reports 1Q19 financial results and shareholder returns

Page 2

 

Earnings summary

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

 

 

 

1Q19

 

 

1Q18

 

 

Change

 

Revenue

 

$

3,594

 

 

$

3,789

 

 

 

(5

)%

Operating profit

 

$

1,379

 

 

$

1,548

 

 

 

(11

)%

Net income

 

$

1,217

 

 

$

1,366

 

 

 

(11

)%

Earnings per share

 

$

1.26

 

 

$

1.35

 

 

 

(7

)%

 

Cash generation

Amounts are in millions of dollars.

 

 

 

 

 

 

 

Trailing 12 Months

 

 

 

1Q19

 

 

1Q19

 

 

1Q18

 

 

Change

 

Cash flow from operations

 

$

1,107

 

 

$

7,184

 

 

$

5,680

 

 

 

26

%

Capital expenditures

 

$

251

 

 

$

1,193

 

 

$

757

 

 

 

58

%

Free cash flow

 

$

856

 

 

$

5,991

 

 

$

4,923

 

 

 

22

%

Free cash flow % of revenue

 

 

 

 

 

 

38.4

%

 

 

32.1

%

 

 

 

 

 

Cash return

Amounts are in millions of dollars.

 

 

 

 

 

 

 

Trailing 12 Months

 

 

 

1Q19

 

 

1Q19

 

 

1Q18

 

 

Change

 

Dividends paid

 

$

724

 

 

$

2,668

 

 

$

2,215

 

 

 

20

%

Stock repurchases

 

$

1,152

 

 

$

5,379

 

 

$

2,879

 

 

 

87

%

Total cash returned

 

$

1,876

 

 

$

8,047

 

 

$

5,094

 

 

 

58

%

 

 

 


 

TI reports 1Q19 financial results and shareholder returns

Page 3

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Income

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

 

 

 

For Three Months Ended

March 31,

 

 

 

2019

 

 

2018

 

Revenue

 

$

3,594

 

 

$

3,789

 

Cost of revenue (COR)

 

 

1,333

 

 

 

1,342

 

Gross profit

 

 

2,261

 

 

 

2,447

 

Research and development (R&D)

 

 

389

 

 

 

385

 

Selling, general and administrative (SG&A)

 

 

414

 

 

 

433

 

Acquisition charges

 

 

79

 

 

 

80

 

Restructuring charges/other

 

 

 

 

 

1

 

Operating profit

 

 

1,379

 

 

 

1,548

 

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

 

 

36

 

 

 

28

 

Interest and debt expense

 

 

38

 

 

 

23

 

Income before income taxes

 

 

1,377

 

 

 

1,553

 

Provision for income taxes

 

 

160

 

 

 

187

 

Net income

 

$

1,217

 

 

$

1,366

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

1.26

 

 

$

1.35

 

 

 

 

 

 

 

 

 

 

Average shares outstanding (millions):

 

 

 

 

 

 

 

 

Basic

 

 

939

 

 

 

983

 

Diluted

 

 

956

 

 

 

1,005

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

.77

 

 

$

.62

 

 

 

 

 

 

 

 

 

 

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)

 

$

220

 

 

$

316

 

Discrete tax items

 

 

(60

)

 

 

(129

)

Provision for income taxes (effective taxes)

 

$

160

 

 

$

187

 

 

 

 

 

 

 

 

 

 

Annual operating tax rate

 

 

16

%

 

 

20

%

Effective tax rate

 

 

12

%

 

 

12

%

 

 

 

 

 

 

 

 

 

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

 

$

1,217

 

 

$

1,366

 

Income allocated to RSUs

 

 

(8

)

 

 

(11

)

Income allocated to common stock for diluted EPS

 

$

1,209

 

 

$

1,355

 

 

 

 

 


 

TI reports 1Q19 financial results and shareholder returns

Page 4

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of dollars, except share amounts)

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,720

 

 

$

1,717

 

Short-term investments

 

 

366

 

 

 

2,362

 

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

 

 

1,440

 

 

 

1,454

 

Raw materials

 

 

191

 

 

 

144

 

Work in process

 

 

1,016

 

 

 

1,076

 

Finished goods

 

 

924

 

 

 

812

 

Inventories

 

 

2,131

 

 

 

2,032

 

Prepaid expenses and other current assets

 

 

294

 

 

 

1,025

 

Total current assets

 

 

7,951

 

 

 

8,590

 

Property, plant and equipment at cost

 

 

5,642

 

 

 

4,907

 

Accumulated depreciation

 

 

(2,324

)

 

 

(2,171

)

Property, plant and equipment

 

 

3,318

 

 

 

2,736

 

Long-term investments

 

 

281

 

 

 

271

 

Goodwill

 

 

4,362

 

 

 

4,362

 

Acquisition-related intangibles

 

 

549

 

 

 

866

 

Deferred tax assets

 

 

290

 

 

 

218

 

Capitalized software licenses

 

 

98

 

 

 

102

 

Overfunded retirement plans

 

 

96

 

 

 

215

 

Other long-term assets

 

 

498

 

 

 

147

 

Total assets

 

$

17,443

 

 

$

17,507

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

750

 

 

$

500

 

Accounts payable

 

 

477

 

 

 

488

 

Accrued compensation

 

 

342

 

 

 

344

 

Income taxes payable

 

 

113

 

 

 

133

 

Accrued expenses and other liabilities

 

 

477

 

 

 

395

 

Total current liabilities

 

 

2,159

 

 

 

1,860

 

Long-term debt

 

 

5,057

 

 

 

3,578

 

Underfunded retirement plans

 

 

120

 

 

 

92

 

Deferred tax liabilities

 

 

43

 

 

 

53

 

Other long-term liabilities

 

 

1,545

 

 

 

1,282

 

Total liabilities

 

 

8,924

 

 

 

6,865

 

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

 

 

1,927

 

 

 

1,770

 

Retained earnings

 

 

38,396

 

 

 

35,619

 

Treasury common stock at cost

 

 

 

 

 

 

 

 

Shares: March 31, 2019 – 802,016,668; March 31, 2018 – 759,098,020

 

 

(33,080

)

 

 

(28,096

)

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

 

 

(465

)

 

 

(392

)

Total stockholders’ equity

 

 

8,519

 

 

 

10,642

 

Total liabilities and stockholders’ equity

 

$

17,443

 

 

$

17,507

 

 

 

 

 


 

TI reports 1Q19 financial results and shareholder returns

Page 5

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Millions of dollars)

 

 

 

For Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

1,217

 

 

$

1,366

 

Adjustments to net income:

 

 

 

 

 

 

 

 

Depreciation

 

 

166

 

 

 

137

 

Amortization of acquisition-related intangibles

 

 

79

 

 

 

80

 

Amortization of capitalized software

 

 

13

 

 

 

12

 

Stock compensation

 

 

61

 

 

 

70

 

Gains on sales of assets

 

 

(2

)

 

 

 

Deferred taxes

 

 

4

 

 

 

(31

)

Increase (decrease) from changes in:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(233

)

 

 

(176

)

Inventories

 

 

86

 

 

 

(97

)

Prepaid expenses and other current assets

 

 

223

 

 

 

356

 

Accounts payable and accrued expenses

 

 

(67

)

 

 

(51

)

Accrued compensation

 

 

(373

)

 

 

(372

)

Income taxes payable

 

 

(94

)

 

 

(131

)

Changes in funded status of retirement plans

 

 

7

 

 

 

(15

)

Other

 

 

20

 

 

 

(36

)

Cash flows from operating activities

 

 

1,107

 

 

 

1,112

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(251

)

 

 

(189

)

Proceeds from asset sales

 

 

2

 

 

 

 

Purchases of short-term investments

 

 

(149

)

 

 

(996

)

Proceeds from short-term investments

 

 

1,584

 

 

 

1,455

 

Other

 

 

(13

)

 

 

(4

)

Cash flows from investing activities

 

 

1,173

 

 

 

266

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

743

 

 

 

 

Dividends paid

 

 

(724

)

 

 

(611

)

Stock repurchases

 

 

(1,152

)

 

 

(873

)

Proceeds from common stock transactions

 

 

151

 

 

 

178

 

Other

 

 

(16

)

 

 

(11

)

Cash flows from financing activities

 

 

(998

)

 

 

(1,317

)

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

1,282

 

 

 

61

 

Cash and cash equivalents at beginning of period

 

 

2,438

 

 

 

1,656

 

Cash and cash equivalents at end of period

 

$

3,720

 

 

$

1,717

 

 

 

 

 


 

TI reports 1Q19 financial results and shareholder returns

Page 6

 

Segment results

Amounts are in millions of dollars.

 

 

 

1Q19

 

 

1Q18

 

 

Change

 

Analog:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

2,518

 

 

$

2,566

 

 

 

(2

)%

Operating profit

 

$

1,088

 

 

$

1,166

 

 

 

(7

)%

Embedded Processing:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

796

 

 

$

926

 

 

 

(14

)%

Operating profit

 

$

249

 

 

$

328

 

 

 

(24

)%

Other:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

280

 

 

$

297

 

 

 

(6

)%

Operating profit*

 

$

42

 

 

$

54

 

 

 

(22

)%

 

*

Includes acquisition charges and restructuring charges/other.

Compared with the year-ago quarter:

Analog: (includes Power, Signal Chain and High Volume)

Revenue decreased due to High Volume and Power, partially offset by an increase in Signal Chain.

Operating profit decreased due to lower revenue and reduced factory loadings.

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 by $17 million, and operating profit decreased by $12 million.


 


 

TI reports 1Q19 financial results and shareholder returns

Page 7

 

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

March 31,

 

 

 

 

 

 

 

2019

 

 

2018

 

 

Change

 

Cash flow from operations (GAAP)

 

$

7,184

 

 

$

5,680

 

 

 

26

%

Capital expenditures

 

 

(1,193

)

 

 

(757

)

 

 

 

 

Free cash flow (non-GAAP)

 

$

5,991

 

 

$

4,923

 

 

 

22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

15,589

 

 

$

15,348

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

46.1

%

 

 

37.0

%

 

 

 

 

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

 

 

38.4

%

 

 

32.1

%

 

 

 

 

 

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.

 

 

 


 

TI reports 1Q19 financial results and shareholder returns

Page 8

 

# # #

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:

Market demand for semiconductors, particularly in our end markets;

Our ability to compete in products and prices in an intensely competitive industry;

Customer demand that differs from forecasts and the financial impact of inadequate or excess company inventory that results from demand that differs from projections;

Economic, social and political conditions in the countries in which we, our customers or our suppliers operate, including security risks; global trade policies; political and social instability; health conditions; possible disruptions in transportation, communications and information technology networks; and fluctuations in foreign currency exchange rates;

Evolving cybersecurity threats to our information technology systems or those of our customers or suppliers;

Natural events such as severe weather, geological events or health epidemics in the locations in which we, our customers or our suppliers operate;

Our ability to develop, manufacture and market innovative products in a rapidly changing technological environment;

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;

Availability and cost of raw materials, utilities, manufacturing equipment, third-party manufacturing services and manufacturing technology;

Product liability or warranty claims, claims based on epidemic or delivery failure, or other claims relating to our products, manufacturing, 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 manufacture or ship our products or operate our business, or subject us to fines, penalties or other legal liability;

 

 

 


 

TI reports 1Q19 financial results and shareholder returns

Page 9

 

Changes in tax law and accounting standards that can 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 the loss of 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 despite changes in the 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 that affects our ability to fund our daily operations, invest in the business, make strategic acquisitions, or make principal and interest payments on our debt;

Increases in health care and pension benefit costs;

Our ability to recruit and retain skilled engineering, management and technical personnel, and effectively manage key employee succession;

Our ability to successfully integrate and realize opportunities for growth from acquisitions, or our ability to realize our expectations regarding the amount and timing of restructuring charges and associated cost savings; and

Impairments of our 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. 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 (TI) is a global semiconductor design and manufacturing company that develops analog integrated circuits 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:

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Other trademarks are the property of their respective owners.

 

 

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