Investor Presentaiton
FORM 10-K
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Our effective tax rate (Provision for income taxes as a percentage of Income before income taxes) benefits from lower
tax rates (compared to the U.S. statutory income tax rate) applicable to our operations in many of the jurisdictions in
which we operate and from U.S. tax benefits. These lower non-U.S. tax rates are generally statutory in nature, without
expiration and available to companies that operate in those taxing jurisdictions.
Our segments represent groups of similar products that are combined on the basis of similar design and development
requirements, product characteristics, manufacturing processes and distribution channels, and how management allocates
resources and measures results. See Note 1 to the financial statements for more information regarding our segments.
In the fourth quarter of 2016, we adopted ASU 2016-09 related to stock compensation. We applied the new standard
prospectively as of the beginning of 2016 for the Consolidated Statements of Income and on a full retrospective basis for
all periods in the Consolidated Statements of Cash Flows. See Note 2 to the financial statements for more details.
Results of operations
We continued to perform well in 2016, reflecting our focus on Analog and Embedded Processing. These products serve highly
diverse markets with thousands of applications, and we believe have dependable long-term growth opportunities. In 2016, Analog
and Embedded Processing represented 86 percent of revenue. Gross margin of 61.6 percent for the year reflects the quality of our
product portfolio, as well as the efficiency of our manufacturing strategy.
Our focus on Analog and Embedded Processing allows us to generate strong cash flow from operations. In 2016, cash flows
from operations were $4.61 billion, up from $4.40 billion in 2015. Free cash flow in 2016 was 30.5 percent of revenue, up from
29.6 percent a year ago and consistent with our targeted range of 20-30 percent of revenue. During the year, we returned
$3.78 billion of cash to investors through a combination of stock repurchases and dividends. Our dividends represented 40 percent
of free cash flow, underscoring their sustainability. Free cash flow is a non-GAAP financial measure. For a reconciliation to GAAP
and an explanation of the reason for providing this non-GAAP measure, see the Non-GAAP financial information section after the
Liquidity and capital resources section.
Details of financial results - 2016 compared with 2015
Revenue of $13.37 billion was up $370 million, or 3 percent, from 2015, due to higher revenue from Embedded Processing
and Analog.
Gross profit was $8.24 billion, an increase of $680 million, or 9 percent, due to lower manufacturing costs and, to a lesser extent,
higher revenue. Gross profit margin was 61.6 percent compared with 58.2 percent.
Operating expenses were $1.37 billion for R&D and $1.77 billion for SG&A. R&D expense increased $90 million, or 7 percent, due
to a combination of our ongoing allocation of resources into R&D activities and higher compensation-related costs. SG&A expense
increased $19 million, primarily due to higher compensation-related costs.
Acquisition charges associated with our 2011 acquisition of National Semiconductor were $319 million compared with
$329 million. These non-cash charges resulted from the amortization of intangible assets. See Note 13 to the financial statements.
Restructuring charges/other was a net credit of $15 million, which included a gain on the sale of intellectual property of $40 million
that was partially offset by $25 million related to restructuring charges. This compared with a net credit of $71 million in 2015,
which included gains on sales of assets of $83 million that were partially offset by $12 million related to restructuring charges and
other credits. These amounts are included in Other for segment reporting purposes. See Note 3 to the financial statements.
Operating profit was $4.80 billion, or 35.9 percent of revenue, compared with $4.27 billion, or 32.9 percent of revenue.
OI&E for 2016 was $211 million compared with $32 million. The increase is due to income of $188 million from settlements related
to intellectual property infringement.
Our income tax provision was $1.34 billion compared with $1.23 billion. The increase was primarily due to higher income before
income taxes, partially offset by a tax benefit for stock compensation. Our effective tax rates were 27 percent in 2016 and
29 percent in 2015. See Note 6 to the financial statements for a reconciliation of the U.S. statutory income tax rate to the effective
tax rate.
TEXAS INSTRUMENTS . 2016 FORM 10-K
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