10-QPeriod: Q3 FY2016

TEXAS INSTRUMENTS INC Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 3, 2016For Securities:TXN

Summary

Texas Instruments Inc. (TXN) reported solid financial results for the nine months and third quarter ending September 29, 2016. Revenue for the nine months increased by 1.4% to $9.96 billion, driven primarily by growth in the Embedded Processing segment. Net income for the nine months rose to $2.42 billion, a 12.3% increase year-over-year, translating to diluted EPS of $2.34. The company highlighted strong demand in the automotive and industrial markets, while personal electronics remained stable. The company continues to focus on its core Analog and Embedded Processing segments, which together represented 85% of revenue in the third quarter. These segments demonstrated robust operating margins. Texas Instruments also emphasized its commitment to returning capital to shareholders, evidenced by a 32% increase in its quarterly dividend to $0.50 per share, effective November 2016. The company maintained a strong balance sheet and generated significant free cash flow, underscoring its consistent business model.

Financial Highlights

52 data points
Beta

Revenue

$3.67B

62.1% Gross Margin

Net Income

$1.02B

27.7% Net Margin

EPS (Diluted)

$0.98

Total Assets

$16.22B

Cash & Equivalents

$1.37B

Free Cash Flow

$1.33B

Financial Statements
Beta
Revenue$3.67B
Cost of Revenue$1.39B
Gross Profit$2.28B
R&D Expenses$353.00M
SG&A Expenses$442.00M
Operating Income$1.41B
Net Income$1.02B
EPS (Basic)$1.00
EPS (Diluted)$0.98
Shares Outstanding (Basic)1.00B
Shares Outstanding (Diluted)1.02B

Key Highlights

  • 1Revenue for the nine months ended September 30, 2016, increased by 1.4% to $9.96 billion compared to the prior year's $9.81 billion.
  • 2Diluted earnings per share (EPS) for the nine months increased to $2.34 from $2.02 in the same period last year.
  • 3Net income for the nine months rose to $2.42 billion, a 12.3% increase from $2.15 billion in the prior year.
  • 4The company announced a 32% increase in its quarterly cash dividend, raising it from $0.38 to $0.50 per share.
  • 5Free cash flow for the trailing twelve months was $3.87 billion, an 8% increase year-over-year, representing 29.5% of revenue.
  • 6Strong performance was noted in the automotive and industrial markets, with personal electronics demand remaining stable.
  • 7Operating profit margins improved in both the Analog and Embedded Processing segments.

Frequently Asked Questions

Texas Instruments' revenue for the nine months ended September 30, 2016, was $9.96 billion, an increase of $145 million (approximately 1.4%) from $9.81 billion for the nine months ended September 30, 2015. This growth was primarily driven by higher revenue from the Embedded Processing segment.

Texas Instruments demonstrates a strong commitment to returning capital to shareholders through dividends and stock repurchases. The company recently increased its quarterly cash dividend by 32% to $0.50 per share. Furthermore, in the trailing twelve months, the company returned $3.8 billion to shareholders through stock repurchases and dividends, consistent with its strategy to return all free cash flow plus proceeds from equity compensation, minus net debt retirement.

The company's core businesses, Analog and Embedded Processing, are key drivers of revenue and profitability. In the third quarter of 2016, these segments comprised 85% of total revenue. Both segments showed revenue growth compared to the prior year, with Embedded Processing revenue growing 10% and Analog revenue growing 6%. Operating profit margins also increased in both segments.

Texas Instruments reported a strong financial condition at the end of the third quarter of 2016, with $3.14 billion in cash and short-term investments. The company generated $3.03 billion in cash flow from operating activities for the first nine months of 2016 and believes it has sufficient financial resources to fund its working capital needs, capital expenditures, dividend and debt payments, and other business requirements for at least the next 12 months.