What changed in this filing

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Item 1. Financial Statements

2021-10-27 compared with 2021-07-22 · 87 added, 51 removed, 391 unchanged (26% of the section changed)

Financial statements

For Three Months Ended For Six Months Ended

Consolidated Statements of Income June 30, June 30,

For Three Months Ended For Nine Months Ended

Consolidated Statements of Income September 30, September 30,

(Millions of dollars, except share and per-share amounts) 2021 2020 2021 2020

25 unchanged sentences

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

For Three Months Ended For Six Months Ended

Consolidated Statements of Comprehensive Income June 30, June 30,

For Three Months Ended For Nine Months Ended

Consolidated Statements of Comprehensive Income September 30, September 30,

(Millions of dollars) 2021 2020 2021 2020

7 unchanged sentences

($ 7 ) and ($ 7 )

Available-for-sale investments:

Unrealized losses, net of tax effect of $ 0 and $ 0 ;

Prior service credit of defined benefit plans:

Recognized within net income, net of tax effect of $ 0 and $ 0 ;

( 1 ) ( 1 ) ( 1 ) ( 1 )

Other comprehensive income (loss), net of taxes 10 ( 1 ) 47 12

2 unchanged sentences

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

June 30, December 31,

September 30, December 31,

Consolidated Balance Sheets 2021 2020

42 unchanged sentences

Treasury common stock at cost

June 30, 2021 – 817,729,258 ;

September 30, 2021 – 817,400,928 ;

December 31, 2020 – 821,461,787

5 unchanged sentences

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

For Six Months Ended

Consolidated Statements of Cash Flows June 30,

For Nine Months Ended

Consolidated Statements of Cash Flows September 30,

(Millions of dollars) 2021 2020

55 unchanged sentences

Segment information

For Three Months Ended For Six Months Ended

June 30, June 30,

For Three Months Ended For Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

13 unchanged sentences

The geographic revenue information does not necessarily reflect end demand by geography because our products tend to be shipped to the locations where our customers manufacture their products.

For Three Months Ended For Six Months Ended

June 30, June 30,

For Three Months Ended For Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

5 unchanged sentences

Total revenue $ 4,643 $ 3,817 $ 13,512 $ 10,385

(a) Revenue from products shipped into China was $ 2.5 billion and $ 1.8 billion in the second quarters of 2021 and 2020, respectively, and $ 4.8 billion and $ 3.5 billion in the first six months of 2021 and 2020, respectively, which includes shipments to customers that manufacture in China and then export end products to their customers around the world, as well as distributors that transship inventory through China to service other countries.

(a) Revenue from products shipped into China was $ 2.5 billion and $ 2.2 billion in the third quarters of 2021 and 2020, respectively, and $ 7.3 billion and $ 5.7 billion in the first nine months of 2021 and 2020, respectively, which includes shipments to customers that manufacture in China and then export end products to their customers around the world, as well as distributors that transship inventory through China to service other countries.

Basis of presentation and significant accounting policies and practices

1 unchanged sentence

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and on the same basis as the audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2020.

The Consolidated Statements of Income, Comprehensive Income and Cash Flows for the periods ended June 30, 2021 and 2020, and the Consolidated Balance Sheet as of June 30, 2021, are not audited but reflect all adjustments that are of a normal recurring nature and are necessary for a fair statement of the results of the periods shown.

The Consolidated Statements of Income, Comprehensive Income and Cash Flows for the periods ended September 30, 2021 and 2020, and the Consolidated Balance Sheet as of September 30, 2021, are not audited but reflect all adjustments that are of a normal recurring nature and are necessary for a fair statement of the results of the periods shown.

Certain information and note disclosures normally included in annual consolidated financial statements have been omitted pursuant to the rules and regulations of the U.S.

1 unchanged sentence

Because the consolidated interim financial statements do not include all of the information and notes required by GAAP for a complete set of financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in our annual report on Form 10-K for the year ended December 31, 2020.

The results for the three- and six-month periods are not necessarily indicative of a full year’s results.

The results for the three- and nine-month periods are not necessarily indicative of a full year’s results.

Significant accounting policies and practices

4 unchanged sentences

Computation and reconciliation of earnings per common share are as follows (shares in millions):

For Three Months Ended June 30,

For Three Months Ended September 30,

Net Income Shares EPS Net Income Shares EPS

6 unchanged sentences

Income allocated to common stock $ 1,938 936 $ 2.07 $ 1,347 929 $ 1.45

For Six Months Ended June 30,

For Nine Months Ended September 30,

Net Income Shares EPS Net Income Shares EPS

6 unchanged sentences

Income allocated to common stock $ 5,607 936 $ 5.99 $ 3,888 933 $ 4.17

Potentially dilutive securities representing 2 million and 9 million shares of common stock that were outstanding during the second quarters of 2021 and 2020, respectively, and 3 million and 9 million shares outstanding during the first six months of 2021 and 2020, respectively, were excluded from the computation of diluted earnings per common share during these periods because their effect would have been anti-dilutive.

Potentially dilutive securities representing 2 million and 3 million shares of common stock that were outstanding during the third quarters of 2021 and 2020, respectively, and 3 million and 4 million shares outstanding during the first nine months of 2021 and 2020, respectively, were excluded from the computation of diluted earnings per common share during these periods because their effect would have been anti-dilutive.

Derivatives and hedging

11 unchanged sentences

Fair values of financial instruments

The fair values of our derivative financial instruments were not material as of June 30, 2021.

The fair values of our derivative financial instruments were not material as of September 30, 2021.

Our investments in cash equivalents, short-term investments and certain long-term investments, as well as our deferred compensation liabilities, are carried at fair value.

The carrying values for other current financial assets and liabilities, such as accounts receivable and accounts payable, approximate fair value due to the short maturity of such instruments.

As of June 30, 2021, the carrying value of long-term debt, including the current portion, was $ 6.25 billion, and the estimated fair value was $ 6.97 billion.

As of September 30, 2021, the carrying value of long-term debt, including the current portion, was $ 7.74 billion, and the estimated fair value was $ 8.43 billion.

The estimated fair value is measured using broker-dealer quotes, which are Level 2 inputs.

5 unchanged sentences

Provision for income taxes is based on the following:

For Three Months Ended For Six Months Ended

June 30, June 30,

For Three Months Ended For Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

3 unchanged sentences

Effective tax rate 14 % 15 % 13 % 4 %

Our provision for income taxes for the second quarter and first six months of 2020 included a $ 249 million discrete tax benefit for the settlement of a depreciation-related uncertain tax position.

Our provision for income taxes for the first nine months of 2020 included a $ 249 million discrete tax benefit for the settlement of a depreciation-related uncertain tax position.

Accrued interest of $ 46 million related to this uncertain tax position was reversed and included in OI&E.

14 unchanged sentences

Details of our investments are as follows:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Cash and Cash Equivalents Short-Term Investments Long-Term Investments Cash and Cash Equivalents Short-Term Investments Long-Term Investments

2 unchanged sentences

Corporate obligations 1,136 1,109 — 256 257 —

government agency and Treasury securities 350 2,762 — 1,340 3,054 —

government and agency securities 1,140 2,587 — 1,340 3,054 —

government and agency securities 385 423 — — 150 —

Mutual funds — — 15 — — 18

5 unchanged sentences

Total $ 5,663 $ 4,119 $ 73 $ 3,107 $ 3,461 $ 49

As of June 30, 2021, and December 31, 2020, unrealized gains and losses associated with our available-for-sale investments were not material.

We did no t recognize any credit losses related to available-for-sale investments for the first six months of 2021 and 2020.

Proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $ 2.46 billion and $ 1.81 billion for the second quarters of 2021 and 2020, respectively, and $ 4.46 billion and $ 3.20 billion for the first six months of 2021 and 2020, respectively.

As of September 30, 2021, and December 31, 2020, unrealized gains and losses associated with our available-for-sale investments were not material.

We did no t recognize any credit losses related to available-for-sale investments for the first nine months of 2021 and 2020.

All of our debt securities classified as available for sale as of September 30, 2021, have maturities within one year.

Proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $ 1.32 billion and $ 510 million for the third quarters of 2021 and 2020, respectively, and $ 5.77 billion and $ 3.71 billion for the first nine months of 2021 and 2020, respectively.

Gross realized gains and losses from these sales were not material.

The following table presents the aggregate maturities of our available-for-sale debt investments as of June 30, 2021:

One year or less $ 4,451

One to two years 100

During the first six months of 2020, we entered into total return swaps to economically hedge the variability of certain deferred compensation obligations to employees.

During the first nine months of 2020, we entered into total return swaps to economically hedge the variability of certain deferred compensation obligations to employees.

As a result, we received proceeds of $ 253 million from the sale of investments in mutual funds that were previously being utilized to offset this exposure.

8 unchanged sentences

We verify these valuations for reasonableness relative to unadjusted quotes obtained from brokers or dealers based on observable prices for similar assets in active markets.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

• Level 3 – Uses inputs that are unobservable, supported by little or no market activity and reflect the use of significant management judgment.

These values are generally determined using pricing models that utilize management estimates of market participant assumptions.

As of June 30, 2021, and December 31, 2020, we had no Level 3 assets or liabilities.

As of September 30, 2021, and December 31, 2020, we had no Level 3 assets or liabilities.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

The following are our assets and liabilities that were accounted for at fair value on a recurring basis.

These tables do not include cash on hand, assets held by our postretirement plans, or assets and liabilities that are measured at historical cost or any basis other than fair value.

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Level 1 Level 2 Total Level 1 Level 2 Total

1 unchanged sentence

Corporate obligations — 2,245 2,245 — 513 513

government agency and Treasury securities 2,711 401 3,112 4,394 — 4,394

government and agency securities 3,326 401 3,727 4,394 — 4,394

government and agency securities — 808 808 — 150 150

Mutual funds 15 — 15 18 — 18

7 unchanged sentences

Defined Benefit

For Three Months Ended June 30, 2021 2020 2021 2020 2021 2020

For Three Months Ended September 30, 2021 2020 2021 2020 2021 2020

Service cost $ 5 $ 5 $ — $ 1 $ 9 $ 9

2 unchanged sentences

Recognized net actuarial loss 3 1 — — 2 4

Amortization of prior service cost (credit) — — ( 1 ) ( 1 ) — —

Net periodic benefit costs 8 4 — 1 — 2

4 unchanged sentences

Defined Benefit

For Six Months Ended June 30, 2021 2020 2021 2020 2021 2020

For Nine Months Ended September 30, 2021 2020 2021 2020 2021 2020

Service cost $ 16 $ 14 $ 2 $ 2 $ 27 $ 25

2 unchanged sentences

Recognized net actuarial loss 11 5 — — 6 11

Amortization of prior service cost (credit) — — ( 1 ) ( 1 ) — —

Net periodic benefit costs 25 16 1 2 — 6

4 unchanged sentences

We maintain a line of credit to support commercial paper borrowings, if any, and to provide additional liquidity through bank loans.

As of June 30, 2021, we had a variable-rate revolving credit facility from a consortium of investment-grade banks that allows us to borrow up to $ 2 billion until March 2024.

As of September 30, 2021, we had a variable-rate revolving credit facility from a consortium of investment-grade banks that allows us to borrow up to $ 2 billion until March 2024.

The interest rate on borrowings under this credit facility, if drawn, is indexed to the applicable London Interbank Offered Rate (LIBOR).

As of June 30, 2021, our credit facility was undrawn, and we had no commercial paper outstanding.

As of September 30, 2021, our credit facility was undrawn, and we had no commercial paper outstanding.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Long-term debt

In September 2021, we issued three series of senior unsecured notes for an aggregate principal amount of $ 1.50 billion, consisting of:

• $ 500 million of 1.125 % notes due in 2026;

• $ 500 million of 1.90 % notes due in 2031;

• $ 500 million of 2.70 % notes due in 2051.

We incurred $ 10 million of issuance costs.

The proceeds of the offering were $ 1.50 billion, net of the original issuance discounts, which will be used for general corporate purposes.

In February 2021, we retired $ 550 million of maturing debt.

Long-term debt outstanding is as follows:

June 30, December 31,

September 30, December 31,

Notes due 2021 at 2.75 %

8 unchanged sentences

Notes due 2031 at 1.90 %

Notes due 2039 at 3.875 %

Notes due 2048 at 4.15 %

Notes due 2051 at 2.70 %

Total debt 7,800 6,850

3 unchanged sentences

Long-term debt $ 7,239 $ 6,248

Interest and debt expense was $ 44 million and $ 48 million for the second quarters of 2021 and 2020, respectively, and $ 90 million and $ 93 million for the first six months of 2021 and 2020, respectively.

Interest and debt expense was $ 45 million and $ 49 million for the third quarters of 2021 and 2020, respectively, and $ 135 million and $ 142 million for the first nine months of 2021 and 2020, respectively.

This was net of the amortized discounts, premiums and issuance costs.

24 unchanged sentences

Balance, June 30, 2021 1,741 2,485 43,846 ( 36,596 ) ( 323 )

Net income — — 1,947 — —

Dividends declared and paid ($ 1.02 per share)

— — ( 942 ) — —

Common stock issued for stock-based awards — 27 — 48 —

Stock repurchases — — — ( 139 ) —

Stock compensation — 50 — — —

Other comprehensive income (loss), net of taxes — — — — 10

Dividend equivalents on RSUs — — ( 3 ) — —

Other — 1 ( 1 ) — —

Balance, September 30, 2021 $ 1,741 $ 2,563 $ 44,847 $ ( 36,687 ) $ ( 313 )

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Common Stock Paid-in Capital Retained Earnings Treasury Common Stock AOCI

18 unchanged sentences

Balance, June 30, 2020 1,741 2,182 40,780 ( 36,725 ) ( 334 )

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Net income — — 1,353 — —

Dividends declared and paid ($ 0.90 per share)

— — ( 825 ) — —

Common stock issued for stock-based awards — 26 — 97 —

Stock repurchases — — — ( 15 ) —

Stock compensation — 50 — — —

Other comprehensive income (loss), net of taxes — — — — ( 1 )

Dividend equivalents on RSUs — — ( 3 ) — —

Other — ( 1 ) — — —

Balance, September 30, 2020 $ 1,741 $ 2,257 $ 41,305 $ ( 36,643 ) $ ( 335 )

Contingencies

10 unchanged sentences

Product claim consideration may exceed the price of our products.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

We are subject to various legal and administrative proceedings.

2 unchanged sentences

Property, plant and equipment at cost

On June 30, 2021, we announced that we signed an agreement to acquire Micron Technology’s 300-millimeter semiconductor factory in Lehi, Utah, for cash consideration of $ 900 million.

We plan to complete the transaction by the end of 2021.

In October 2021, we completed our acquisition of Micron Technology’s 300-millimeter semiconductor factory in Lehi, Utah, for cash consideration of about $ 900 million.

Details on amounts reclassified out of accumulated other comprehensive income (loss), net of taxes, to net income

Our Consolidated Statements of Comprehensive Income include items that have been recognized within net income during the second quarters and first six months of 2021 and 2020.

Our Consolidated Statements of Comprehensive Income include items that have been recognized within net income during the third quarters and first nine months of 2021 and 2020.

The table below details where these transactions are recorded in our Consolidated Statements of Income.

For Three Months Ended For Six Months Ended Impact to Related Statement of Income Lines

June 30, June 30,

For Three Months Ended For Nine Months Ended Impact to Related Statement of Income Lines

September 30, September 30,

2021 2020 2021 2020

3 unchanged sentences

Recognized within net income, net of taxes $ 8 $ 7 $ 24 $ 21 Decrease to net income

Prior service credit of defined benefit plans:

Amortization of prior service credit (a) $ ( 1 ) $ ( 1 ) $ ( 1 ) $ ( 1 ) Increase to OI&E

Tax effect — — — — Increase to provision for income taxes

Recognized within net income, net of taxes $ ( 1 ) $ ( 1 ) $ ( 1 ) $ ( 1 ) Increase to net income

(a) Detailed in Note 5.

Stock compensation

Total shares of 633,845 and 5,099,397 were issued from treasury shares during the second quarter and first six months of 2021, respectively, related to stock compensation.

Total shares of 1,064,600 and 6,163,997 were issued from treasury shares during the third quarter and first nine months of 2021, respectively, related to stock compensation.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements