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Item 1. Financial Statements

2023-07-26 compared with 2023-04-26 · 104 added, 42 removed, 373 unchanged (28% of the section changed)

Financial statements

For Three Months Ended

Consolidated Statements of Income March 31,

For Three Months Ended For Six Months Ended

Consolidated Statements of Income June 30, June 30,

(In millions, except per-share amounts) 2023 2022 2023 2022

24 unchanged sentences

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

For Three Months Ended

Consolidated Statements of Comprehensive Income March 31,

For Three Months Ended For Six Months Ended

Consolidated Statements of Comprehensive Income June 30, June 30,

(In millions) 2023 2022 2023 2022

3 unchanged sentences

Adjustments, net of tax effect of ($ 2 ) and $ 8 ;

($ 1 ) and $ 6

2 ( 40 ) — ( 34 )

Recognized within net income, net of tax effect of ($ 1 ) and ($ 4 );

($ 2 ) and ($ 5 )

Derivative instruments:

2 unchanged sentences

Unrealized gains (losses), net of tax effect of $ 0 and $ 1 ;

( 2 ) ( 3 ) 1 ( 7 )

Other comprehensive income (loss), net of taxes 6 ( 27 ) 8 ( 23 )

2 unchanged sentences

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

March 31, December 31,

June 30, December 31,

Consolidated Balance Sheets 2023 2022

41 unchanged sentences

Treasury common stock at cost

March 31, 2023 – 833 ;

June 30, 2023 – 833 ;

December 31, 2022 – 835

5 unchanged sentences

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

For Three Months Ended

Consolidated Statements of Cash Flows March 31,

For Six Months Ended

Consolidated Statements of Cash Flows June 30,

(In millions) 2023 2022

22 unchanged sentences

Proceeds from short-term investments 7,091 6,974

Other ( 4 ) ( 13 )

Cash flows from investing activities ( 2,357 ) ( 443 )

1 unchanged sentence

Proceeds from issuance of long-term debt 3,000 —

Repayment of debt ( 500 ) ( 500 )

Dividends paid ( 2,250 ) ( 2,123 )

26 unchanged sentences

Segment information

For Three Months Ended

For Three Months Ended For Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Analog $ 3,278 $ 3,992 $ 6,567 $ 7,808

11 unchanged sentences

The following geographic area information is based on product shipment destination, which does not reflect end demand by geography.

For Three Months Ended

For Three Months Ended For Six Months Ended

June 30, June 30,

2023 2022 2023 2022

United States $ 715 16 % $ 577 11 % $ 1,270 14 % $ 1,071 11 %

7 unchanged sentences

The following additional geographic information includes our estimate for revenue based on the location of our end customers’ headquarters, providing a better representation of the geographic profile for where critical decisions are made.

For Three Months Ended

For Three Months Ended For Six Months Ended

June 30, June 30,

2023 2022 2023 2022

United States $ 1,493 33 % $ 1,706 33 % $ 2,850 32 % $ 3,276 32 %

5 unchanged sentences

Total revenue $ 4,531 100 % $ 5,212 100 % $ 8,910 100 % $ 10,117 100 %

(a) Revenue from end customers headquartered in Germany was 13 % and 10 % in the first quarters of 2023 and 2022, respectively.

(a) Revenue from end customers headquartered in Germany was 13 % and 9 % in the second quarters of 2023 and 2022, respectively, and 13 % and 10 % in the first six months of 2023 and 2022, respectively.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

2 unchanged sentences

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, 2022.

The Consolidated Statements of Income, Comprehensive Income and Cash Flows for the periods ended March 31, 2023 and 2022, and the Consolidated Balance Sheet as of March 31, 2023, 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 June 30, 2023 and 2022, and the Consolidated Balance Sheet as of June 30, 2023, 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, 2022.

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

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

Significant accounting policies and practices

2 unchanged sentences

Under the two-class method, a portion of net income is allocated to RSUs and excluded from the calculation of income allocated to common stock.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Computation and reconciliation of earnings per common share are as follows:

For Three Months Ended March 31,

For Three Months Ended June 30,

Net Income Shares EPS Net Income Shares EPS

6 unchanged sentences

Income allocated to common stock $ 1,714 916 $ 1.87 $ 2,281 930 $ 2.45

Potentially dilutive securities representing 8 million and 5 million shares of common stock that were outstanding during the first quarters of 2023 and 2022, respectively, were excluded from the computation of diluted earnings per common share during these periods because their effect would have been anti-dilutive.

For Six Months Ended June 30,

Net Income Shares EPS Net Income Shares EPS

Net income $ 3,430 $ 4,492

Income allocated to RSUs ( 17 ) ( 19 )

Income allocated to common stock $ 3,413 907 $ 3.76 $ 4,473 922 $ 4.85

Dilutive effect of stock compensation plans 9 10

Net income $ 3,430 $ 4,492

Income allocated to RSUs ( 18 ) ( 19 )

Income allocated to common stock $ 3,412 916 $ 3.72 $ 4,473 932 $ 4.80

Potentially dilutive securities representing 9 million and 6 million shares of common stock that were outstanding during the second quarters of 2023 and 2022, respectively, and 9 million and 5 million shares outstanding during the first six months of 2023 and 2022, 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

6 unchanged sentences

We use total return swaps to economically hedge this exposure and offset the related compensation expense, recognizing changes in the value of the swaps and the related deferred compensation liabilities in SG&A.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

In connection with the issuance of long-term debt, we may use financial derivatives such as treasury-rate lock agreements that are recognized in AOCI and amortized over the life of the related debt.

1 unchanged sentence

We do not use derivatives for speculative or trading purposes.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Fair values of financial instruments

The fair values of our derivative financial instruments were not material as of March 31, 2023.

The fair values of our derivative financial instruments were not material as of June 30, 2023.

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 March 31, 2023, the carrying value of long-term debt, including the current portion, was $ 10.13 billion, and the estimated fair value was $ 9.53 billion.

As of June 30, 2023, the carrying value of long-term debt, including the current portion, was $ 11.22 billion, and the estimated fair value was $ 10.46 billion.

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

1 unchanged sentence

Provision for income taxes is based on the following:

For Three Months Ended

For Three Months Ended For Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Taxes calculated using the estimated annual effective tax rate $ 289 $ 395 $ 565 $ 756

21 unchanged sentences

Details of our investments are as follows:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

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

11 unchanged sentences

Total $ 3,439 $ 6,113 $ 31 $ 3,050 $ 6,017 $ 34

As of March 31, 2023, and December 31, 2022, unrealized gains and losses associated with our debt investments were not material.

We did no t recognize any credit losses related to debt investments for the first three months of 2023 and 2022.

The following table presents the aggregate maturities of our available-for-sale debt investments as of March 31, 2023:

One year or less $ 6,089

One to two years 74

Proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $ 4.03 billion and $ 2.77 billion for the first quarters of 2023 and 2022, respectively.

As of June 30, 2023, and December 31, 2022, unrealized gains and losses associated with our debt investments were not material.

We did no t recognize any credit losses related to debt investments for the first six months of 2023 and 2022.

All of our debt securities classified as available-for-sale as of June 30, 2023, have maturities within one year.

Proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $ 3.07 billion and $ 4.20 billion for the second quarters of 2023 and 2022, respectively, and $ 7.09 billion and $ 6.97 billion for the first six months of 2023 and 2022, respectively.

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

4 unchanged sentences

• Level 1 – Uses unadjusted quoted prices that are available in active markets for identical assets or liabilities as of the reporting date.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

• Level 2 – Uses inputs other than Level 1 that are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active.

4 unchanged sentences

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

As of March 31, 2023, and December 31, 2022, we had no Level 3 assets or liabilities.

As of June 30, 2023, and December 31, 2022, 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.

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Level 1 Level 2 Total Level 1 Level 2 Total

12 unchanged sentences

Defined Benefit

For Three Months Ended March 31, 2023 2022 2023 2022 2023 2022

For Three Months Ended June 30, 2023 2022 2023 2022 2023 2022

Service cost $ 2 $ 4 $ 1 $ — $ 4 $ 6

5 unchanged sentences

Total, including other postretirement losses (gains) $ 6 $ 14 $ ( 2 ) $ — $ 6 $ 6

Defined Benefit U.S.

Retiree Health Care Non-U.S.

Defined Benefit

For Six Months Ended June 30, 2023 2022 2023 2022 2023 2022

Service cost $ 4 $ 8 $ 1 $ 1 $ 8 $ 13

Interest cost 14 12 7 5 29 19

Expected return on plan assets ( 11 ) ( 16 ) ( 9 ) ( 6 ) ( 32 ) ( 35 )

Recognized net actuarial losses (gains) 3 1 ( 3 ) — 6 —

Net periodic benefit costs (credits) 10 5 ( 4 ) — 11 ( 3 )

Settlement losses 1 13 — — 1 9

Total, including other postretirement losses (gains) $ 11 $ 18 $ ( 4 ) $ — $ 12 $ 6

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

2 unchanged sentences

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

As of March 31, 2023, the aforementioned line of credit was a variable-rate, revolving credit facility from a consortium of investment-grade banks that allows us to borrow up to $ 1 billion until March 2024.

As of June 30, 2023, the aforementioned line of credit was a variable-rate, revolving credit facility from a consortium of investment-grade banks that allows us to borrow up to $ 1 billion until March 2024.

The interest rate on borrowings under this credit facility, if drawn, is indexed to the applicable Term Secured Overnight Financing Rate (Term SOFR).

As of March 31, 2023, our credit facility was undrawn, and we had no commercial paper outstanding.

As of June 30, 2023, our credit facility was undrawn, and we had no commercial paper outstanding.

Long-term debt

In May 2023, we issued three series of senior unsecured notes for an aggregate principal amount of $ 1.60 billion, consisting of:

• $ 200 million further issuance of existing 4.60 % notes due in 2028;

• $ 200 million further issuance of existing 4.90 % notes due in 2033;

• $ 1.20 billion of 5.05 % notes due in 2063.

We incurred $ 7 million of issuance cost and other related costs.

The proceeds of the offering were $ 1.60 billion, net of the original issuance discounts and premiums, which will be used for general corporate purposes.

In May 2023, we retired $ 500 million of maturing debt.

In March 2023, we issued two series of senior unsecured notes for an aggregate principal amount of $ 1.40 billion, consisting of $ 750 million of 4.90 % notes due in 2033 and $ 650 million of 5.00 % notes due in 2053.

1 unchanged sentence

The proceeds of the offering were $ 1.40 billion, net of the original issuance discounts, which will be used for general corporate purposes.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Long-term debt outstanding is as follows:

March 31, December 31,

June 30, December 31,

Notes due 2023 at 2.25 %

15 unchanged sentences

Notes due 2053 at 5.00 %

Notes due 2063 at 5.05 %

Total debt 11,300 8,800

3 unchanged sentences

Long-term debt $ 10,920 $ 8,235

Interest and debt expense was $ 68 million and $ 52 million for the first quarters of 2023 and 2022, respectively.

Interest and debt expense was $ 89 million and $ 49 million for the second quarters of 2023 and 2022, respectively, and $ 157 million and $ 101 million for the first six months of 2023 and 2022, respectively.

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

15 unchanged sentences

Balance, March 31, 2023 1,741 3,016 50,930 ( 40,192 ) ( 252 )

Net income — — 1,722 — —

Dividends declared and paid ($ 1.24 per share)

— — ( 1,125 ) — —

Common stock issued for stock-based awards — 36 — 29 —

Stock repurchases — — — ( 77 ) —

Stock compensation — 111 — — —

Other comprehensive income (loss), net of taxes — — — — 6

Dividend equivalents on RSUs — — ( 5 ) — —

Balance, June 30, 2023 $ 1,741 $ 3,163 $ 51,522 $ ( 40,240 ) $ ( 246 )

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

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

10 unchanged sentences

Balance, March 31, 2022 1,741 2,667 47,053 ( 37,291 ) ( 153 )

Net income — — 2,291 — —

Dividends declared and paid ($ 1.15 per share)

— — ( 1,060 ) — —

Common stock issued for stock-based awards — 31 — 25 —

Stock repurchases — — — ( 1,266 ) —

Stock compensation — 85 — — —

Other comprehensive income (loss), net of taxes — — — — ( 27 )

Dividend equivalents on RSUs — — ( 4 ) — —

Balance, June 30, 2022 $ 1,741 $ 2,783 $ 48,280 $ ( 38,532 ) $ ( 180 )

Contingencies

10 unchanged sentences

During the periods presented, there have been no material accruals or payments regarding product warranty or product liability.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

We are subject to various legal and administrative proceedings.

Although it is not possible to predict the outcome of these matters, we believe that the results of these proceedings will not have a material adverse effect on our consolidated financial statements.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Supplemental financial information

Restructuring charges/other

During the first quarter of 2022, restructuring charges/other included $ 66 million of preproduction costs at our Lehi, Utah, manufacturing facility, which were included in Other for segment reporting purposes.

During the second quarter and first six months of 2022, restructuring charges/other included $ 66 million and $ 132 million, respectively, of preproduction costs at our Lehi, Utah, manufacturing facility, which were included in Other for segment reporting purposes.

These costs transitioned primarily to cost of revenue after production began in December 2022.

Other long-term assets

March 31, December 31,

June 30, December 31,

CHIPS and Science Act investment tax credit $ 921 $ 395

2 unchanged sentences

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 first quarters of 2023 and 2022.

Our Consolidated Statements of Comprehensive Income include items that have been recognized within net income during the second quarters and first six months of 2023 and 2022.

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

For Three Months Ended Impact to Related Statement of Income Lines

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

June 30, June 30,

2023 2022 2023 2022

Net actuarial losses of defined benefit plans:

4 unchanged sentences

Stock compensation

During the first quarter of 2023, 3 million shares were issued from treasury related to stock compensation.

During the first six months of 2023, 3 million shares were issued from treasury related to stock compensation.

Shares issued from treasury during the second quarter of 2023 were less than 1 million.

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