Texas Instruments Incorporated (TI) reported first-quarter revenue of $2.98 billion, net income of $487 million and earnings per share (EPS) of 44 cents. Those results represent a 3% increase in revenue from $2.88 billion in the first-quarter of 2013, an increase of 35% in net income from $362 million in Q1 of 2013 and an increase of 38% in EPS from 32 cents in the year-earlier quarter. Results include a gain of $37 million, which was not included in the company’s prior outlook and increased earnings by 2 cents per share, for sales of a site and other assets associated with previously announced restructuring actions.
Regarding the company’s performance and returns to shareholders, Rich Templeton, TI’s chairman, president and CEO, made the following comments: “Revenue and earnings for the quarter were in the upper half of the range we expected and marked a good start to the year. We delivered 3 percent year-over-year revenue growth, or 11 percent when legacy wireless revenue is excluded. Analog and Embedded Processing comprised 84 percent of first-quarter revenue.
“Gross margin of 53.9 percent remained strong and reflects the quality of our Analog and Embedded Processing portfolio and the efficiency of our manufacturing strategy. Our business model continues to generate strong cash flow from operations. Free cash flow for the trailing twelve-month period was up 8 percent to $3.1 billion, or 25 percent of revenue. This is consistent with our target of 20-30 percent, which we increased in the first quarter from our prior target of 20-25 percent.
“We returned $4.2 billion to shareholders in the past twelve months through dividends paid and stock repurchases. Our strategy to return to shareholders all free cash flow not needed for debt repayment, and to return proceeds from exercises of equity compensation, reflects our confidence in the long-term sustainability of our business model. In the past twelve months, we returned 99 percent of this targeted amount. Our balance sheet remains strong, with $4.0 billion of cash and short-term investments at the end of the quarter, 84 percent of which was owned by the company’s U.S. entities. Inventory days were 112, consistent with our model of 105-115 days.
“TI’s outlook for the second quarter of 2014 is for revenue in the range of $3.14 billion to $3.40 billion and earnings per share between $0.55 and $0.63. The midpoint of the revenue range would represent 7 percent year-over-year growth, or 13 percent excluding legacy wireless revenue. The annual effective tax rate for 2014 is expected to be about 28 percent, up from our prior estimate of about 27 percent.”
Revenue excluding legacy wireless and free cash flow are non-GAAP financial measures. Free cash flow is Cash flow from operations less Capital expenditures.