TI reports second quarter 2020 financial results and shareholder returns

Rhea-AI Summary

Texas Instruments (TXN) reported Q2 2020 revenue of $3.24 billion, a 12% decrease year-over-year, attributed mainly to declines in the automotive sector. Despite this, the company's net income rose to $1.38 billion, and EPS increased 9% to $1.48, benefiting from a 33-cent item. Cash flow from operations stood at $6.3 billion over the past year, with free cash flow at $5.7 billion. Looking ahead, TXN projects Q3 revenue between $3.26 billion and $3.54 billion and EPS between $1.14 and $1.34.

Positive

• Net income increased 6% year-over-year to $1.38 billion.
• Earnings per share rose 9% to $1.48.
• Cash flow from operations totaled $6.3 billion over the trailing 12 months.
• Free cash flow represented 42% of revenue, totaling $5.7 billion.
• Returned $6.7 billion to shareholders through stock repurchases and dividends.

Negative

• Revenue decreased 12% from Q2 2019.
• Analog revenue declined 4% and Embedded Processing revenue fell 31% year-over-year.
• Total cash returned to shareholders decreased 16% year-over-year.

DALLAS, July 21, 2020 /PRNewswire/ -- Texas Instruments Incorporated (TI) (Nasdaq: TXN) today reported second quarter revenue of $3.24 billion, net income of $1.38 billion and earnings per share of $1.48. Earnings per share include a 33-cent benefit for items that were 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 12% from the same quarter a year ago, driven primarily by weakness in the automotive market.
• "In our core businesses, Analog revenue declined 4% and Embedded Processing declined 31% from the same quarter a year ago. Analog and Embedded Processing both had positive sequential growth in the second quarter excluding the automotive market.
• "Our cash flow from operations of $6.3 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the same period was $5.7 billion and 42% 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 $6.7 billion to owners in the past 12 months through stock repurchases and dividends. Over the same period, our dividends represented 56% of free cash flow, underscoring their sustainability. Together, our stock repurchases and dividends reflect our continued commitment to return all free cash flow to our owners.
• "TI's third quarter outlook is for revenue in the range of $3.26 billion to $3.54 billion, and earnings per share between $1.14 and $1.34."

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.

	Q2 2020		Q2 2019		Change
Revenue	$	3,239		$	3,668		(12)%
Operating profit	$	1,228		$	1,506		(18)%
Net income	$	1,380		$	1,305		6%
Earnings per share	$	1.48		$	1.36		9%

 

Cash generation

Amounts are in millions of dollars.

			Trailing 12 Months
	Q2 2020		Q2 2020		Q2 2019		Change
Cash flow from operations	$	1,720		$	6,317		$	7,154		(12)%
Capital expenditures	$	130		$	603		$	1,228		(51)%
Free cash flow	$	1,590		$	5,714		$	5,926		(4)%
Free cash flow % of revenue			41.7%		38.9%

 

Cash return

Amounts are in millions of dollars.

			Trailing 12 Months
	Q2 2020		Q2 2020		Q2 2019		Change
Dividends paid	$	823		$	3,226		$	2,784		16%
Stock repurchases	$	882		$	3,468		$	5,224		(34)%
Total cash returned	$	1,705		$	6,694		$	8,008		(16)%

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of dollars, except share and per-share amounts)
		For Three Months Ended June 30,
		2020		2019
Revenue		$	3,239		$	3,668
Cost of revenue (COR)		1,157		1,308
Gross profit		2,082		2,360
Research and development (R&D)		379		390
Selling, general and administrative (SG&A)		401		420
Acquisition charges		50		80
Restructuring charges/other		24		(36)
Operating profit		1,228		1,506
Other income (expense), net (OI&E)		99		52
Interest and debt expense		48		44
Income before income taxes		1,279		1,514
Provision for income taxes		(101)		209
Net income		$	1,380		$	1,305
Diluted earnings per common share		$	1.48		$	1.36
Average shares outstanding (millions):
Basic		916			937
Diluted		927			953
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)		$	164		$	238
Discrete tax items			(265)		(29)
Provision for income taxes (effective taxes)		$	(101)		$	209
Annual operating tax rate		13%		16%
Effective tax rate		(8)%		14%
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		$	1,380		$	1,305
Income allocated to RSUs		(7)		(8)
Income allocated to common stock for diluted EPS		$	1,373		$	1,297

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of dollars, except share amounts)
	June 30,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	4,294		$	3,813
Short-term investments	666		405
Accounts receivable, net of allowances of ($9) and ($15)	1,176		1,419
Raw materials	182		176
Work in process	977		958
Finished goods	977		945
Inventories	2,136		2,079
Prepaid expenses and other current assets	216		240
Total current assets	8,488		7,956
Property, plant and equipment at cost	5,741		5,706
Accumulated depreciation	(2,540)		(2,341)
Property, plant and equipment	3,201		3,365
Long-term investments	36		300
Goodwill	4,362		4,362
Acquisition-related intangibles	240		469
Deferred tax assets	236		261
Capitalized software licenses	141		88
Overfunded retirement plans	223		104
Other long-term assets	518		479
Total assets	$	17,445		$	17,384
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt	$	551		$	1,249
Accounts payable	409		412
Accrued compensation	505		476
Income taxes payable	179		87
Accrued expenses and other liabilities	519		422
Total current liabilities	2,163		2,646
Long-term debt	6,245		4,558
Underfunded retirement plans	99		121
Deferred tax liabilities	60		49
Other long-term liabilities	1,234		1,524
Total liabilities	9,801		8,898
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	2,182		2,003
Retained earnings	40,780		38,974
Treasury common stock at cost
Shares: June 30, 2020 – 825,225,307; June 30, 2019 – 806,251,136	(36,725)		(33,775)
Accumulated other comprehensive income (loss), net of taxes (AOCI)	(334)		(457)
Total stockholders' equity	7,644		8,486
Total liabilities and stockholders' equity	$	17,445		$	17,384

 

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Millions of dollars)

FAQ

What were Texas Instruments' earnings results for Q2 2020?

Texas Instruments reported Q2 2020 revenue of $3.24 billion, net income of $1.38 billion, and earnings per share of $1.48.

How did Texas Instruments perform compared to Q2 2019?

In Q2 2020, Texas Instruments experienced a 12% decrease in revenue compared to Q2 2019, though net income increased by 6%.

What is Texas Instruments' outlook for Q3 2020?

Texas Instruments projects Q3 2020 revenue in the range of $3.26 billion to $3.54 billion, with earnings per share expected between $1.14 and $1.34.

How much cash flow did Texas Instruments generate?

Texas Instruments generated cash flow from operations of $6.3 billion over the trailing 12 months.

What percentage of free cash flow did Texas Instruments return to shareholders?

Texas Instruments returned $6.7 billion to shareholders, which was 56% of its free cash flow.