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Item 1. Financial Statements

2024-04-24 compared with 2023-10-25 · 67 added, 154 removed, 354 unchanged (38% of the section changed)

Financial statements

For Three Months Ended For Nine Months Ended

Consolidated Statements of Income September 30, September 30,

For Three Months Ended

Consolidated Statements of Income March 31,

(In millions, except per-share amounts) 2024 2023

24 unchanged sentences

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

For Three Months Ended For Nine Months Ended

Consolidated Statements of Comprehensive Income September 30, September 30,

For Three Months Ended

Consolidated Statements of Comprehensive Income March 31,

(In millions) 2024 2023

3 unchanged sentences

Adjustments, net of tax effect of ($ 2 ) and $ 1

($ 4 ) and $ 2

6 11 6 ( 23 )

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

($ 3 ) and ($ 9 )

Prior service cost (credit) of defined benefit plans:

Adjustments, net of tax effect of $ 0 and $ 0 ;

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

1 ( 1 ) 1 ( 1 )

Derivative instruments:

2 unchanged sentences

Unrealized gains (losses), net of tax effect of $ 2 and $ 0

1 ( 1 ) 2 ( 8 )

Other comprehensive income (loss), net of taxes 2 2

2 unchanged sentences

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

September 30, December 31,

March 31, December 31,

Consolidated Balance Sheets 2024 2023

41 unchanged sentences

Treasury common stock at cost

September 30, 2023 – 833 ;

March 31, 2024 – 831 ;

December 31, 2023 – 832

5 unchanged sentences

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

For Nine Months Ended

Consolidated Statements of Cash Flows September 30,

For Three Months Ended

Consolidated Statements of Cash Flows March 31,

(In millions) 2024 2023

22 unchanged sentences

Proceeds from short-term investments 2,631 4,026

Other ( 40 ) ( 4 )

Cash flows from investing activities ( 3,329 ) 28

1 unchanged sentence

Proceeds from issuance of long-term debt 2,980 1,397

Repayment of debt ( 500 ) ( 500 )

Dividends paid ( 1,183 ) ( 1,125 )

26 unchanged sentences

Segment information

For Three Months Ended For Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

For Three Months Ended

Analog $ 2,836 $ 3,289

10 unchanged sentences

Geographic area information

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

For Three Months Ended For Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

United States $ 630 14 % $ 694 13 % $ 1,900 14 % $ 1,765 11 %

China (a) 1,880 41 2,441 47 5,531 41 7,740 50

Rest of Asia 571 13 694 13 1,654 12 1,993 13

Europe, Middle East and Africa 952 21 942 18 2,894 22 2,578 17

Japan 338 7 310 6 976 7 849 6

Rest of world 161 4 160 3 487 4 433 3

Total revenue $ 4,532 100 % $ 5,241 100 % $ 13,442 100 % $ 15,358 100 %

(a) Revenue from products shipped into China 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.

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 Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Our estimate for revenue based on the geographic location of our end customers’ headquarters, which represents where critical decisions are made, is as follows:

For Three Months Ended

United States $ 1,288 35 % $ 1,357 31 %

5 unchanged sentences

Total revenue $ 3,661 100 % $ 4,379 100 %

(a) Revenue from end customers headquartered in Germany was 13 % and 11 % in the third quarters of 2023 and 2022, respectively, and 13 % and 10 % in the first nine months of 2023 and 2022, respectively.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

(a) Revenue from end customers headquartered in Germany was 13 % in the first quarters of both 2024 and 2023.

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, 2023.

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

The Consolidated Statements of Income, Comprehensive Income and Cash Flows for the periods ended March 31, 2024 and 2023, and the Consolidated Balance Sheet as of March 31, 2024, 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, 2023.

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

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

Significant accounting policies and practices

Earnings per share (EPS)

We use the two-class method for calculating EPS because the restricted stock units (RSUs) we grant are participating securities containing non-forfeitable rights to receive dividend equivalents.

We use the two-class method for calculating EPS because the restricted stock units (RSUs) we grant are participating securities containing nonforfeitable rights to receive dividend equivalents.

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.

1 unchanged sentence

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

For Three Months Ended September 30,

Net Income Shares EPS Net Income Shares EPS

Net income $ 1,709 $ 2,295

Income allocated to RSUs ( 9 ) ( 11 )

Income allocated to common stock $ 1,700 908 $ 1.87 $ 2,284 913 $ 2.50

Dilutive effect of stock compensation plans 8 10

Net income $ 1,709 $ 2,295

Income allocated to RSUs ( 10 ) ( 11 )

Income allocated to common stock $ 1,699 916 $ 1.85 $ 2,284 923 $ 2.47

For Nine Months Ended September 30,

For Three Months Ended March 31,

Net Income Shares EPS Net Income Shares EPS

6 unchanged sentences

Income allocated to common stock $ 1,100 917 $ 1.20 $ 1,699 916 $ 1.85

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

Potentially dilutive securities representing 14 million and 8 million shares of common stock that were outstanding during the first quarters of 2024 and 2023, 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

7 unchanged sentences

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.

The results of these derivative transactions have not been material.

The results of these derivative transactions were not material.

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 September 30, 2023.

The fair values of our derivative financial instruments were not material as of March 31, 2024.

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 September 30, 2023, the carrying value of long-term debt, including the current portion, was $ 11.22 billion, and the estimated fair value was $ 9.82 billion.

As of March 31, 2024, the carrying value of long-term debt, including the current portion, was $ 14.19 billion, and the estimated fair value was $ 13.33 billion.

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

See Note 4 for a description of fair value and the definition of Level 2 inputs.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Provision for income taxes is based on the following:

For Three Months Ended For Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

For Three Months Ended

Taxes calculated using the estimated annual effective tax rate $ 176 $ 276

14 unchanged sentences

Other investments

Our other investments include equity-method investments and non-marketable investments, which are not measured at fair value.

These investments consist of interests in venture capital funds and other non-marketable securities.

Our other investments include equity-method investments and nonmarketable investments, which are not measured at fair value.

These investments consist of interests in venture capital funds and other nonmarketable securities.

Gains and losses from equity-method investments are recognized in OI&E based on our ownership share of the investee’s financial results.

Non-marketable securities are measured at cost with adjustments for observable changes in price or impairments.

Gains and losses on non-marketable investments are recognized in OI&E.

Nonmarketable securities are measured at cost with adjustments for observable changes in price or impairments.

Gains and losses on nonmarketable investments are recognized in OI&E.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Details of our investments are as follows:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

8 unchanged sentences

Equity-method investments — — 13 — — 17

Non-marketable investments — — 5 — — 5

Nonmarketable investments — — 4 — — 5

Total — — 17 — — 22

Cash on hand 706 — — 801 — —

Total $ 2,483 $ 7,910 $ 28 $ 2,964 $ 5,611 $ 34

As of September 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 nine months of 2023 and 2022.

The following table presents the aggregate maturities of our available-for-sale debt investments as of September 30, 2023:

As of March 31, 2024, and December 31, 2023, 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 2024 and 2023.

The following table presents the aggregate maturities of our available-for-sale debt investments as of March 31, 2024:

One year or less $ 7,585

One to two years 629

Proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $ 2.89 billion and $ 3.03 billion for the third quarters of 2023 and 2022, respectively, and $ 9.98 billion and $ 10.01 billion for the first nine months of 2023 and 2022, respectively.

Proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $ 2.63 billion and $ 4.03 billion for the first quarters of 2024 and 2023, respectively.

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

11 unchanged sentences

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

As of September 30, 2023, and December 31, 2022, we had no Level 3 assets or liabilities.

As of March 31, 2024, and December 31, 2023, we had no Level 3 assets or liabilities.

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.

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Level 1 Level 2 Total Level 1 Level 2 Total

7 unchanged sentences

Total liabilities $ 395 $ — $ 395 $ 393 $ — $ 393

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Postretirement benefit plans

3 unchanged sentences

Defined Benefit

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

Service cost $ 2 $ 4 $ — $ 1 $ 4 $ 6

Interest cost 7 8 4 3 14 7

Expected return on plan assets ( 6 ) ( 6 ) ( 4 ) ( 3 ) ( 16 ) ( 15 )

Recognized net actuarial losses (gains) 2 1 ( 1 ) — 3 1

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

Net periodic benefit costs (credits) 5 7 ( 1 ) — 6 ( 1 )

Settlement losses — 16 — — — 1

Total, including other postretirement losses (gains) $ 5 $ 23 $ ( 1 ) $ — $ 6 $ —

Defined Benefit U.S.

Retiree Health Care Non-U.S.

Defined Benefit

For Nine Months Ended September 30, 2023 2022 2023 2022 2023 2022

For Three Months Ended March 31, 2024 2023 2024 2023 2024 2023

Service cost $ 2 $ 2 $ — $ — $ 4 $ 4

2 unchanged sentences

Recognized net actuarial losses (gains) 1 2 ( 1 ) ( 1 ) 3 3

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

Net periodic benefit costs (credits) $ 3 $ 5 $ ( 1 ) $ ( 2 ) $ 2 $ 6

Settlement losses 1 29 — — 1 10

Total, including other postretirement losses (gains) $ 16 $ 41 $ ( 5 ) $ — $ 18 $ 6

Debt and lines of credit

1 unchanged sentence

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

As of September 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.

As of March 31, 2024, 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 2025.

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

As of March 31, 2024, our credit facility was undrawn, and we had no commercial paper outstanding.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

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;

In February 2024, we issued five series of senior unsecured notes for an aggregate principal amount of $ 3.00 billion, consisting of:

• $ 650 million of 4.60 % notes due in 2027;

• $ 650 million of 4.60 % notes due in 2029;

• $ 600 million of 4.85 % notes due in 2034;

• $ 750 million of 5.15 % notes due in 2054;

• $ 350 million further issuance of existing 5.05 % notes due in 2063.

• $ 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.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

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.

We incurred $ 16 million of issuance and other related costs.

1 unchanged sentence

Long-term debt outstanding is as follows:

September 30, December 31,

March 31, December 31,

Notes due 2024 at 2.625 %

16 unchanged sentences

Notes due 2052 at 4.10 %

Notes due 2053 at 5.00 %

Notes due 2054 at 5.15 %

Notes due 2063 at 5.05 %

Total debt 14,300 11,300

3 unchanged sentences

Long-term debt $ 12,840 $ 10,624

Interest and debt expense was $ 98 million and $ 53 million for the third quarters of 2023 and 2022, respectively, and $ 255 million and $ 154 million for the first nine months of 2023 and 2022, respectively.

Interest and debt expense was $ 116 million and $ 68 million for the first quarters of 2024 and 2023, respectively.

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

Capitalized interest was not mater ial.

Capitalized interest was $ 6 million and $ 2 million for the first quarters of 2024 and 2023, respectively.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

13 unchanged sentences

Balance, March 31, 2024 $ 1,741 $ 3,439 $ 52,199 $ ( 40,193 ) $ ( 203 )

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 )

Net income — — 1,709 — —

Dividends declared and paid ($ 1.24 per share)

— — ( 1,126 ) — —

Common stock issued for stock-based awards — 38 — 35 —

Stock repurchases — — — ( 48 ) —

Stock compensation — 79 — — —

Other comprehensive income (loss), net of taxes — — — — 11

Dividend equivalents on RSUs — — ( 6 ) — —

Other — — ( 1 ) — —

Balance, September 30, 2023 $ 1,741 $ 3,280 $ 52,098 $ ( 40,253 ) $ ( 235 )

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

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

10 unchanged sentences

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

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 )

Net income — — 2,295 — —

Dividends declared and paid ($ 1.15 per share)

— — ( 1,051 ) — —

Common stock issued for stock-based awards — 26 — 52 —

Stock repurchases — — — ( 996 ) —

Stock compensation — 68 — — —

Other comprehensive income (loss), net of taxes — — — — 26

Dividend equivalents on RSUs — — ( 5 ) — —

Balance, September 30, 2022 $ 1,741 $ 2,877 $ 49,519 $ ( 39,476 ) $ ( 154 )

Contingencies

15 unchanged sentences

Restructuring charges/other

During the third quarter and first nine months of 2022, restructuring charges/other included $ 77 million and $ 209 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.

During the first quarter of 2024, restructuring charges/other was a credit of $ 124 million primarily due to a gain on the sale of a property.

Prepaid expenses and other current assets

March 31, December 31,

CHIPS and Science Act investment tax credit $ 999 $ 497

Other 302 264

Total $ 1,301 $ 761

Other long-term assets

September 30, December 31,

March 31, December 31,

CHIPS and Science Act investment tax credit $ 498 $ 859

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 third quarters and first nine months of 2023 and 2022.

Our Consolidated Statements of Comprehensive Income include items that have been recognized within net income during the first quarters of 2024 and 2023.

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

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

September 30, September 30,

2023 2022 2023 2022

For Three Months Ended Impact to Related Statement of Income Lines

Net actuarial losses of defined benefit plans:

Recognized net actuarial loss and settlement losses (a) $ 4 $ 19 $ 12 $ 42 Decrease to OI&E

Recognized net actuarial losses (a) $ 3 $ 4 Decrease to OI&E

Tax effect ( 1 ) ( 1 ) Decrease to provision for income taxes

Recognized within net income, net of taxes $ 2 $ 3 Decrease to net income

Prior service cost (credit) of defined benefit plans:

Amortization of prior service cost (credit) (a) $ 1 $ ( 1 ) $ 1 $ ( 1 ) Decrease (increase) to OI&E

Tax effect — — — — (Decrease) increase to provision for income taxes

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

(a) Detailed in Note 5

Stock compensation

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

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

Effect on shares outstanding and treasury shares

The following table reflects the changes in treasury shares:

Balance, January 1 832

Repurchases —

Shares issued for stock compensation ( 1 )

Balance, March 31 831

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