10-QPeriod: Q1 FY2014

TEXAS INSTRUMENTS INC Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 2, 2014For Securities:TXN

Summary

Texas Instruments Inc. (TXN) reported strong first-quarter 2014 results, demonstrating revenue growth and improved profitability. The company's revenue increased by 3% year-over-year, or a more significant 11% when excluding the legacy wireless business. This growth was primarily driven by the Analog and Embedded Processing segments, which now constitute 84% of total revenue and are identified as the company's future growth engines. Profitability saw a substantial improvement, with gross margin reaching 53.9%, up from 47.6% in the prior year, reflecting a favorable product mix, higher revenue, and efficient manufacturing operations. Operating profit more than doubled year-over-year. The company also highlighted its strong free cash flow generation, which increased by 8% year-over-year, and a continued commitment to returning capital to shareholders through dividends and stock repurchases. Overall, the report indicates a company successfully navigating its strategic shift away from legacy products towards its core, higher-margin segments.

Financial Highlights

52 data points
Beta

Revenue

$2.98B

53.9% Gross Margin

Net Income

$487.00M

16.3% Net Margin

EPS (Diluted)

$0.44

Total Assets

$18.93B

Cash & Equivalents

$1.56B

Free Cash Flow

$385.00M

Financial Statements
Beta
Revenue$2.98B
Cost of Revenue$1.38B
Gross Profit$1.61B
R&D Expenses$366.00M
SG&A Expenses$479.00M
Operating Income$690.00M
Net Income$487.00M
EPS (Basic)$0.44
EPS (Diluted)$0.44
Shares Outstanding (Basic)1.08B
Shares Outstanding (Diluted)1.10B

Key Highlights

  • 1Revenue increased by 3% to $2.98 billion, with a stronger 11% growth excluding legacy wireless products.
  • 2Net income rose to $487 million, leading to a diluted EPS of $0.44, up from $0.32 in the prior year.
  • 3Gross profit margin improved significantly to 53.9% from 47.6% year-over-year, driven by product mix and higher revenue.
  • 4Operating profit more than doubled, reaching $690 million compared to $395 million in the same period last year.
  • 5Analog and Embedded Processing segments now represent 84% of total revenue, indicating a successful strategic shift.
  • 6Free cash flow for the trailing twelve months increased by 8% to $3.1 billion, and the company returned $4.2 billion to shareholders.
  • 7The company issued $500 million in new long-term debt and continued its share repurchase program.

Frequently Asked Questions

Revenue growth was primarily driven by the Analog and Embedded Processing segments. The company also noted that excluding legacy wireless products, revenue growth was a robust 11%, indicating the success of its strategic shift towards core product lines.

Profitability saw a significant improvement. The gross profit margin increased from 47.6% to 53.9%, driven by a more favorable product mix, higher revenue, and manufacturing efficiencies. Operating profit more than doubled year-over-year.

Texas Instruments continues its strategy of returning free cash flow not needed for debt repayment, along with proceeds from equity compensation exercises, to shareholders. In the trailing twelve months, the company returned $4.2 billion to shareholders through dividends and stock repurchases, representing 99% of its targeted amount.

The company announced cost-saving actions in January 2014 related to Embedded Processing and operations in Japan, aiming for annualized savings of approximately $130 million by the end of 2014. These actions are expected to be substantially complete by mid-2015. The first quarter saw a net credit of $11 million related to these and prior restructuring actions, largely due to gains from asset sales.