Item 1. Financial statements

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Item 1. Financial statements

For Three Months Ended
Consolidated Statements of IncomeMarch 31,
(In millions, except per-share amounts)20242023
Revenue$3,661$4,379
Cost of revenue (COR)1,5661,516
Gross profit2,0952,863
Research and development (R&D)478455
Selling, general and administrative (SG&A)455474
Restructuring charges/other(124)—
Operating profit1,2861,934
Other income (expense), net (OI&E)12380
Interest and debt expense11668
Income before income taxes1,2931,946
Provision for income taxes188238
Net income$1,105$1,708
Earnings per common share (EPS):
Basic$1.21$1.87
Diluted$1.20$1.85
Average shares outstanding:
Basic910907
Diluted917916
A portion of net income is allocated to unvested restricted stock units (RSUs) on which we pay dividend equivalents. Diluted EPS is calculated using the following:
Net income$1,105$1,708
Income allocated to RSUs(5)(9)
Income allocated to common stock for diluted EPS$1,100$1,699
See accompanying notes.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

For Three Months Ended
Consolidated Statements of Comprehensive IncomeMarch 31,
(In millions)20242023
Net income$1,105$1,708
Other comprehensive income (loss)
Net actuarial losses of defined benefit plans:
Adjustments, net of tax effect of ($2) and $15(2)
Recognized within net income, net of tax effect of ($1) and ($1)23
Derivative instruments:
Change in fair value, net of tax effect of $0 and $11(2)
Available-for-sale investments:
Unrealized gains (losses), net of tax effect of $2 and $0(6)3
Other comprehensive income (loss), net of taxes22
Total comprehensive income$1,107$1,710
See accompanying notes.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

March 31,December 31,
Consolidated Balance Sheets20242023
(In millions, except par value)
Assets
Current assets:
Cash and cash equivalents$2,483$2,964
Short-term investments7,9105,611
Accounts receivable, net of allowances of ($20) and ($16)1,6711,787
Raw materials417420
Work in process2,1292,109
Finished goods1,5371,470
Inventories4,0833,999
Prepaid expenses and other current assets1,301761
Total current assets17,44815,122
Property, plant and equipment at cost13,73913,268
Accumulated depreciation(3,297)(3,269)
Property, plant and equipment10,4429,999
Goodwill4,3624,362
Deferred tax assets821757
Capitalized software licenses231223
Overfunded retirement plans169173
Other long-term assets1,4121,712
Total assets$34,885$32,348
Liabilities and stockholders’ equity
Current liabilities:
Current portion of long-term debt$1,349$599
Accounts payable551802
Accrued compensation399836
Income taxes payable378172
Accrued expenses and other liabilities876911
Total current liabilities3,5533,320
Long-term debt12,84010,624
Underfunded retirement plans111108
Deferred tax liabilities5563
Other long-term liabilities1,3431,336
Total liabilities17,90215,451
Stockholders’ equity:
Preferred stock, $25 par value. Shares authorized – 10; none issued——
Common stock, $1 par value. Shares authorized – 2,400; shares issued – 1,7411,7411,741
Paid-in capital3,4393,362
Retained earnings52,19952,283
Treasury common stock at cost
Shares: March 31, 2024 – 831; December 31, 2023 – 832(40,193)(40,284)
Accumulated other comprehensive income (loss), net of taxes (AOCI)(203)(205)
Total stockholders’ equity16,98316,897
Total liabilities and stockholders’ equity$34,885$32,348
See accompanying notes.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

For Three Months Ended
Consolidated Statements of Cash FlowsMarch 31,
(In millions)20242023
Cash flows from operating activities
Net income$1,105$1,708
Adjustments to net income:
Depreciation346265
Amortization of capitalized software1616
Stock compensation106104
Gains on sales of assets(129)—
Deferred taxes(71)(8)
Increase (decrease) from changes in:
Accounts receivable11618
Inventories(84)(531)
Prepaid expenses and other current assets(24)(4)
Accounts payable and accrued expenses(77)(124)
Accrued compensation(444)(407)
Income taxes payable212185
Changes in funded status of retirement plans176
Other(72)(68)
Cash flows from operating activities1,0171,160
Cash flows from investing activities
Capital expenditures(1,248)(982)
Proceeds from asset sales1921
Purchases of short-term investments(4,864)(3,013)
Proceeds from short-term investments2,6314,026
Other(40)(4)
Cash flows from investing activities(3,329)28
Cash flows from financing activities
Proceeds from issuance of long-term debt2,9801,397
Dividends paid(1,183)(1,125)
Stock repurchases(3)(103)
Proceeds from common stock transactions6585
Other(28)(15)
Cash flows from financing activities1,831239
Net change in cash and cash equivalents(481)1,427
Cash and cash equivalents at beginning of period2,9643,050
Cash and cash equivalents at end of period$2,483$4,477
See accompanying notes.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Notes to financial statements

  1. Description of business, including segment and geographic area information

We design and manufacture semiconductors that we sell to electronics designers and manufacturers all over the world. We have two reportable segments, Analog and Embedded Processing, each of which represents groups of similar products that are combined on the basis of similar design and development requirements, product characteristics, manufacturing processes and distribution channels. Our segments also reflect how management allocates resources and measures results.

  • Analog semiconductors change real-world signals, such as sound, temperature, pressure or images, by conditioning them, amplifying them and often converting them to a stream of digital data that can be processed by other semiconductors, such as embedded processors. Analog semiconductors are also used to manage power in all electronic equipment by converting, distributing, storing, discharging, isolating and measuring electrical energy, whether the equipment is plugged into a wall or using a battery. Our Analog segment consists of two major product lines: Power and Signal Chain.

  • Embedded Processing products are the digital “brains” of many types of electronic equipment. They are designed to handle specific tasks and can be optimized for various combinations of performance, power and cost, depending on the application.

We report the results of our remaining business activities in Other. Other includes operating segments that do not meet the quantitative thresholds for individually reportable segments and cannot be aggregated with other operating segments. Other includes DLP® products, calculators and custom ASIC products.

Our centralized manufacturing and support organizations, such as facilities, procurement and logistics, provide support to our operating segments, including those in Other. Costs incurred by these organizations, including depreciation, are charged to the segments on a per-unit basis. Consequently, depreciation expense is not an independently identifiable component within the segments’ results and, therefore, is not provided.

Segment information

For Three Months Ended
March 31,
20242023
Revenue:
Analog$2,836$3,289
Embedded Processing652832
Other173258
Total revenue$3,661$4,379
Operating profit:
Analog$1,008$1,574
Embedded Processing105237
Other (a)173123
Total operating profit$1,286$1,934

(a)Includes restructuring charges/other

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Geographic area information

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
March 31,
20242023
Revenue:
United States$1,28835%$1,35731%
China6231787620
Rest of Asia401113949
Europe, Middle East and Africa (a)955261,27029
Japan330943810
Rest of world642441
Total revenue$3,661100%$4,379100%

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

  1. Basis of presentation and significant accounting policies and practices

Basis of presentation

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 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. Securities and Exchange Commission. 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-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 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.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

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

For Three Months Ended March 31,
20242023
Net IncomeSharesEPSNet IncomeSharesEPS
Basic EPS:
Net income$1,105$1,708
Income allocated to RSUs(5)(9)
Income allocated to common stock$1,100910$1.21$1,699907$1.87
Dilutive effect of stock compensation plans79
Diluted EPS:
Net income$1,105$1,708
Income allocated to RSUs(5)(9)
Income allocated to common stock$1,100917$1.20$1,699916$1.85

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

We use derivative financial instruments to manage exposure to foreign exchange risk. These instruments are primarily forward foreign currency exchange contracts, which are used as economic hedges to reduce the earnings impact that exchange rate fluctuations may have on our non-U.S. dollar net balance sheet exposures. Gains and losses from changes in the fair value of these forward foreign currency exchange contracts are credited or charged to OI&E. We do not apply hedge accounting to our foreign currency derivative instruments.

We are exposed to variability in compensation charges related to certain deferred compensation obligations to employees. 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.

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 were not material. We do not use derivatives for speculative or trading purposes.

Fair values of financial instruments

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 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

  1. Income taxes

Provision for income taxes is based on the following:

For Three Months Ended
March 31,
20242023
Taxes calculated using the estimated annual effective tax rate$176$276
Discrete tax items12(38)
Provision for income taxes$188$238
Effective tax rate14.5%12.2%

The effective tax rate differs from the 21% U.S. statutory corporate tax rate due to the effect of U.S. tax benefits.

  1. Valuation of debt and equity investments and certain liabilities

Investments measured at fair value

Money market funds, debt investments and mutual funds are stated at fair value, which is generally based on market prices or broker quotes. We classify all debt investments as available-for-sale. See Fair-value considerations. Unrealized gains and losses are recorded as an increase or decrease, net of taxes, in AOCI on our Consolidated Balance Sheets, and any credit losses are recorded as an allowance for credit losses with an offset recognized in OI&E in our Consolidated Statements of Income.

Our mutual funds hold a variety of debt and equity investments intended to generate returns that offset changes in certain deferred compensation liabilities. We record changes in the fair value of these mutual funds and the related deferred compensation liabilities in SG&A.

Other investments

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. 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:

March 31, 2024December 31, 2023
Cash and Cash EquivalentsShort-Term InvestmentsLong-Term InvestmentsCash and Cash EquivalentsShort-Term InvestmentsLong-Term Investments
Measured at fair value:
Money market funds$1,473$—$—$1,068$—$—
Corporate obligations1302,322—3491,605—
U.S. government and agency securities1745,292—6963,808—
Non-U.S. government and agency securities—296—50198—
Mutual funds——11——12
Total1,7777,910112,1635,61112
Other measurement basis:
Equity-method investments——13——17
Nonmarketable investments——4——5
Total——17——22
Cash on hand706——801——
Total$2,483$7,910$28$2,964$5,611$34

As of March 31, 2024, and December 31, 2023, unrealized gains and losses associated with our debt investments were not material. We did not 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:

Fair Value
One year or less$7,585
One to two years629

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.

Fair-value considerations

We measure and report certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The three-level hierarchy described below indicates the extent and level of judgment used to estimate fair-value measurements.

  • 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. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data. We utilize a third-party data service to provide Level 2 valuations. 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.

  • 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 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.

March 31, 2024December 31, 2023
Level 1Level 2TotalLevel 1Level 2Total
Assets:
Money market funds$1,473$—$1,473$1,068$—$1,068
Corporate obligations—2,4522,452—1,9541,954
U.S. government and agency securities3,5921,8745,4663,6188864,504
Non-U.S. government and agency securities—296296—248248
Mutual funds11—1112—12
Total assets$5,076$4,622$9,698$4,698$3,088$7,786
Liabilities:
Deferred compensation$395$—$395$393$—$393
Total liabilities$395$—$395$393$—$393
  1. Postretirement benefit plans

Expenses related to defined benefit and retiree health care benefit plans are as follows:

U.S. Defined BenefitU.S. Retiree Health CareNon-U.S. Defined Benefit
For Three Months Ended March 31,202420232024202320242023
Service cost$2$2$—$—$4$4
Interest cost67341414
Expected return on plan assets(6)(6)(3)(5)(19)(15)
Recognized net actuarial losses (gains)12(1)(1)33
Net periodic benefit costs (credits)$3$5$(1)$(2)$2$6
  1. Debt and lines of credit

Short-term borrowings

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

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

Long-term debt

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; and

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

We incurred $16 million of issuance and other related costs. The proceeds of the offering were $2.98 billion, net of the original issuance discounts, which will be used for general corporate purposes.

Long-term debt outstanding is as follows:

March 31,December 31,
20242023
Notes due 2024 at 2.625%$300$300
Notes due 2024 at 4.70%300300
Notes due 2025 at 1.375%750750
Notes due 2026 at 1.125%500500
Notes due 2027 at 4.60%650—
Notes due 2027 at 2.90%500500
Notes due 2028 at 4.60%700700
Notes due 2029 at 4.60%650—
Notes due 2029 at 2.25%750750
Notes due 2030 at 1.75%750750
Notes due 2031 at 1.90%500500
Notes due 2032 at 3.65%400400
Notes due 2033 at 4.90%950950
Notes due 2034 at 4.85%600—
Notes due 2039 at 3.875%750750
Notes due 2048 at 4.15%1,5001,500
Notes due 2051 at 2.70%500500
Notes due 2052 at 4.10%300300
Notes due 2053 at 5.00%650650
Notes due 2054 at 5.15%750—
Notes due 2063 at 5.05%1,5501,200
Total debt14,30011,300
Net unamortized discounts, premiums and issuance costs(111)(77)
Total debt, including net unamortized discounts, premiums and issuance costs14,18911,223
Current portion of long-term debt(1,349)(599)
Long-term debt$12,840$10,624

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

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

  1. Stockholders’ equity

Changes in equity are as follows:

Common StockPaid-in CapitalRetained EarningsTreasury Common StockAOCI
Balance, December 31, 2023$1,741$3,362$52,283$(40,284)$(205)
2024
Net income——1,105——
Dividends declared and paid ($1.30 per share)——(1,183)——
Common stock issued for stock-based awards—(29)—94—
Stock repurchases———(3)—
Stock compensation—106———
Other comprehensive income (loss), net of taxes————2
Dividend equivalents on RSUs——(7)——
Other——1——
Balance, March 31, 2024$1,741$3,439$52,199$(40,193)$(203)
Common StockPaid-in CapitalRetained EarningsTreasury Common StockAOCI
Balance, December 31, 2022$1,741$2,951$50,353$(40,214)$(254)
2023
Net income——1,708——
Dividends declared and paid ($1.24 per share)——(1,125)——
Common stock issued for stock-based awards—(37)—118—
Stock repurchases———(96)—
Stock compensation—104———
Other comprehensive income (loss), net of taxes————2
Dividend equivalents on RSUs——(6)——
Other—(2)———
Balance, March 31, 2023$1,741$3,016$50,930$(40,192)$(252)
  1. Contingencies

Indemnification guarantees

We routinely sell products with an intellectual property indemnification included in the terms of sale. Historically, we have had only minimal, infrequent losses associated with these indemnities. Consequently, we cannot reasonably estimate any future liabilities that may result.

Warranty costs/product liabilities

Our stated warranties for semiconductor products obligate us to repair, replace or credit the purchase price of a covered product back to the buyer. Product claim consideration may exceed the price of our products. Historically, we have experienced a low rate of payments on product claims. Although we cannot predict the likelihood or amount of any future claims, we do not believe they will have a material adverse effect on our consolidated financial statements. We accrue for known product-related claims if a loss is probable and can be reasonably estimated. During the periods presented, there have been no material accruals or payments regarding product warranty or product liability.

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES

General

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.

  1. Supplemental financial information

Restructuring charges/other

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,
20242023
U.S. CHIPS and Science Act investment tax credit$999$497
Other302264
Total$1,301$761

Other long-term assets

March 31,December 31,
20242023
U.S. CHIPS and Science Act investment tax credit$498$859
Other914853
Total$1,412$1,712

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 2024 and 2023. The table below details where these transactions are recorded in our Consolidated Statements of Income.

For Three Months EndedImpact to Related Statement of Income Lines
March 31,
20242023
Net actuarial losses of defined benefit plans:
Recognized net actuarial losses (a)$3$4Decrease to OI&E
Tax effect(1)(1)Decrease to provision for income taxes
Recognized within net income, net of taxes$2$3Decrease to net income

(a)Detailed in Note 5

Effect on shares outstanding and treasury shares

The following table reflects the changes in treasury shares:

2024
Balance, January 1832
Repurchases—
Shares issued for stock compensation(1)
Balance, March 31831

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