PR Newswire | Oct 26, 2021 04:02PM EDT

10/26 15:01 CDT

TI reports third quarter 2021 financial results and shareholder returnsConference call on TI website at 3:30 p.m. Central time todaywww.ti.com/ir DALLAS, Oct. 26, 2021

DALLAS, Oct. 26, 2021 /PRNewswire/ -- Texas Instruments Incorporated (TI) (Nasdaq: TXN) today reported third quarter revenue of $4.64 billion, net income of $1.95 billion and earnings per share of $2.07.

Regarding the company's performance and returns to shareholders, Rich Templeton, TI's chairman, president and CEO, made the following comments:

* "Revenue increased 22% from the same quarter a year ago due to strong demand in industrial, automotive and personal electronics. Analog revenue grew 24% and Embedded Processing grew 13% from the same quarter a year ago. * "Our cash flow from operations of $8.5 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the same period was $7.1 billion and 41% 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 production. * "We returned $4.2 billion to owners in the past 12 months through dividends and stock repurchases. Over the same period, our dividend represented 53% of free cash flow, underscoring its sustainability. In September, we announced we would increase our dividend by 13%. * "TI's fourth quarter outlook is for revenue in the range of $4.22 billion to $4.58 billion and earnings per share between $1.83 and $2.07. We continue to expect our 2021 annual operating tax rate to be about 14%."

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 2021 Q3 2020 Change

Revenue $ 4,643 $ 3,817 22%

Operating profit $ 2,305 $ 1,609 43%

Net income $ 1,947 $ 1,353 44%

Earnings per share $ 2.07 $ 1.45 43%

Cash generation

Amounts are in millions of dollars.

Trailing 12 Months

Q3 2021 Q3 2021 Q3 2020 Change

Cash flow from operations $ 2,428 $ 8,524 $ 5,768 48%

Capital expenditures $ 486 $ 1,392 $ 600 132%

Free cash flow $ 1,942 $ 7,132 $ 5,168 38%

Free cash flow % of revenue 40.6% 37.6%

Cash return

Amounts are in millions of dollars.

Trailing 12 Months

Q3 2021 Q3 2021 Q3 2020 Change

Dividends paid $ 942 $ 3,761 $ 3,330 13%

Stock repurchases $ 139 $ 400 $ 3,027 (87)%

Total cash returned $ 1,081 $ 4,161 $ 6,357 (35)%

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

For Three Months EndedConsolidated Statements of Income September 30,

(Millions of dollars, except share and per-share amounts) 2021 2020

Revenue $ 4,643 $ 3,817

Cost of revenue (COR) 1,491 1,364

Gross profit 3,152 2,453

Research and development (R&D) 388 386

Selling, general and administrative (SG&A) 412 407

Acquisition charges 47 51

Restructuring charges/other - -

Operating profit 2,305 1,609

Other income (expense), net (OI&E) 15 27

Interest and debt expense 45 49

Income before income taxes 2,275 1,587

Provision for income taxes 328 234

Net income $ 1,947 $ 1,353

Diluted earnings per common share $ 2.07 $ 1.45

Average shares outstanding (millions):

Basic 923 917

Diluted 936 929

Cash dividends declared per common share $ 1.02 $ .90

Supplemental Information

(Quarterly, except as noted)

Our annual operating tax rate, which does not include discrete tax items, was14% in both periods.

Provision for income taxes is based on the following:

Operating taxes (calculated using the estimated annual effective tax rate) $ 337 $ 231

Discrete tax items (9) 3

Provision for income taxes (effective taxes) $ 328 $ 234

A portion of net income is allocated to unvested restricted stock units (RSUs)on which we pay dividend equivalents. Diluted EPS is calculated using thefollowing:

Net income $ 1,947 $ 1,353

Income allocated to RSUs (9) (6)

Income allocated to common stock for diluted EPS $ 1,938 $ 1,347

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets September 30,

(Millions of dollars, except share amounts) 2021 2020

Assets

Current assets:

Cash and cash equivalents $ 5,663 $ 2,822

Short-term investments 4,119 2,696

Accounts receivable, net of allowances of ($9) and ($12) 1,653 1,392

Raw materials 224 192

Work in process 1,034 959

Finished goods 605 921

Inventories 1,863 2,072

Prepaid expenses and other current assets 287 277

Total current assets 13,585 9,259

Property, plant and equipment at cost 6,661 5,698

Accumulated depreciation (2,640) (2,508)

Property, plant and equipment 4,021 3,190

Goodwill 4,362 4,362

Acquisition-related intangibles 9 189

Deferred tax assets 309 299

Capitalized software licenses 88 133

Overfunded retirement plans 252 227

Other long-term assets 647 548

Total assets $ 23,273 $ 18,207

Liabilities and stockholders' equity

Current liabilities:

Current portion of long-term debt $ 500 $ 550

Accounts payable 596 411

Accrued compensation 665 656

Income taxes payable 101 44

Accrued expenses and other liabilities 551 524

Total current liabilities 2,413 2,185

Long-term debt 7,239 6,247

Underfunded retirement plans 129 103

Deferred tax liabilities 86 69

Other long-term liabilities 1,255 1,278

Total liabilities 11,122 9,882

Stockholders' equity:

Preferred stock, $25 par value. Authorized - 10,000,000 shares; 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 2,563 2,257

Retained earnings 44,847 41,305

Treasury common stock at cost

Shares: September 30, 2021 - 817,400,928; September 30, 2020 - 823,174,578 (36,687) (36,643)

Accumulated other comprehensive income (loss), net of taxes (AOCI) (313) (335)

Total stockholders' equity 12,151 8,325

Total liabilities and stockholders' equity $ 23,273 $ 18,207

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

For Three Months EndedConsolidated Statements of Cash Flows September 30,

(Millions of dollars) 2021 2020

Cash flows from operating activities

Net income $ 1,947 $ 1,353

Adjustments to net income:

Depreciation 192 183

Amortization of acquisition-related intangibles 47 51

Amortization of capitalized software 14 16

Stock compensation 50 50

Gains on sales of assets (3) (2)

Deferred taxes 12 (51)

Increase (decrease) from changes in:

Accounts receivable (62) (216)

Inventories (13) 64

Prepaid expenses and other current assets 76 25

Accounts payable and accrued expenses 35 (13)

Accrued compensation 135 157

Income taxes payable (10) (208)

Changes in funded status of retirement plans 13 (1)

Other (5) 35

Cash flows from operating activities 2,428 1,443

Cash flows from investing activities

Capital expenditures (486) (146)

Proceeds from asset sales 3 2

Purchases of short-term investments (1,693) (2,540)

Proceeds from short-term investments 1,315 510

Other (23) (15)

Cash flows from investing activities (884) (2,189)

Cash flows from financing activities

Proceeds from issuance of long-term debt 1,495 -

Dividends paid (942) (825)

Stock repurchases (139) (15)

Proceeds from common stock transactions 75 123

Other (19) (9)

Cash flows from financing activities 470 (726)

Net change in cash and cash equivalents 2,014 (1,472)

Cash and cash equivalents at beginning of period 3,649 4,294

Cash and cash equivalents at end of period $ 5,663 $ 2,822

Segment results

Amounts are in millions of dollars.

Q3 2021 Q3 2020 Change

Analog:

Revenue $ 3,548 $ 2,865 24%

Operating profit $ 1,871 $ 1,320 42%

Embedded Processing:

Revenue $ 738 $ 651 13%

Operating profit $ 282 $ 187 51%

Other:

Revenue $ 357 $ 301 19%

Operating profit* $ 152 $ 102 49%

* Includes acquisition charges and restructuring charges/other.

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,

2021 2020 Change

Cash flow from operations (GAAP) $ 8,524 $ 5,768 48%

Capital expenditures (1,392) (600)

Free cash flow (non-GAAP) $ 7,132 $ 5,168 38%

Revenue $ 17,588 $ 13,735

Cash flow from operations as a percentage of revenue (GAAP) 48.5% 42.0%

Free cash flow as a percentage of revenue (non-GAAP) 40.6% 37.6%

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 associated restructuring charges and 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 semiconductor distributors' promotion of competing product lines to our detriment; or disputes with current or former 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 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 (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.

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SOURCE Texas Instruments Incorporated