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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 001-03761
TEXAS INSTRUMENTS INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)

Delaware75-0289970
(State of Incorporation)(I.R.S. Employer Identification No.)
12500 TI Boulevard, Dallas, Texas
75243
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code 214-479-3773


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1.00TXNThe Nasdaq Global Select Market
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes  No 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company 
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
917,772,641
Number of shares of Registrant’s common stock outstanding as of
April 14, 2020

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. Financial statements

 For Three Months Ended
Consolidated Statements of IncomeMarch 31,
(Millions of dollars, except share and per-share amounts)20202019
Revenue$3,329  $3,594  
Cost of revenue (COR)1,241  1,333  
Gross profit2,088  2,261  
Research and development (R&D)377  389  
Selling, general and administrative (SG&A)417  414  
Acquisition charges50  79  
Operating profit1,244  1,379  
Other income (expense), net (OI&E)25  36  
Interest and debt expense45  38  
Income before income taxes1,224  1,377  
Provision for income taxes50  160  
Net income$1,174  $1,217  
Earnings per common share (EPS):  
Basic$1.25  $1.29  
Diluted$1.24  $1.26  
Average shares outstanding (millions):  
Basic931  939  
Diluted943  956  
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$1,174  $1,217  
Income allocated to RSUs(6) (8) 
Income allocated to common stock for diluted EPS$1,168  $1,209  
See accompanying notes.  


2

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
 For Three Months Ended
Consolidated Statements of Comprehensive IncomeMarch 31,
(Millions of dollars)20202019
Net income$1,174  $1,217  
Other comprehensive income (loss)  
Net actuarial losses of defined benefit plans:  
Adjustments, net of tax effect of ($3) and $1
9  (2) 
Recognized within net income, net of tax effect of ($2) and ($3)
8  10  
Available-for-sale investments:
Unrealized gains, net of tax effect of $0 and $0
2    
Other comprehensive income (loss), net of taxes19  8  
Total comprehensive income$1,193  $1,225  
See accompanying notes.  


3

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
March 31,December 31,
Consolidated Balance Sheets20202019
(Millions of dollars, except share amounts)  
Assets  
Current assets:  
Cash and cash equivalents$2,518  $2,437  
Short-term investments2,224  2,950  
Accounts receivable, net of allowances of ($8) and ($8)
1,316  1,074  
Raw materials175  176  
Work in process915  916  
Finished goods913  909  
Inventories2,003  2,001  
Prepaid expenses and other current assets249  299  
Total current assets8,310  8,761  
Property, plant and equipment at cost5,736  5,740  
Accumulated depreciation(2,503) (2,437) 
Property, plant and equipment3,233  3,303  
Long-term investments34  300  
Goodwill4,362  4,362  
Acquisition-related intangibles290  340  
Deferred tax assets208  197  
Capitalized software licenses138  69  
Overfunded retirement plans215  218  
Other long-term assets493  468  
Total assets$17,283  $18,018  
Liabilities and stockholders’ equity  
Current liabilities:  
Current portion of long-term debt$1,051  $500  
Accounts payable363  388  
Accrued compensation353  714  
Income taxes payable62  46  
Accrued expenses and other liabilities552  475  
Total current liabilities2,381  2,123  
Long-term debt5,499  5,303  
Underfunded retirement plans95  93  
Deferred tax liabilities64  78  
Other long-term liabilities1,510  1,514  
Total liabilities9,549  9,111  
Stockholders’ equity:  
Preferred stock, $25 par value. Authorized – 10,000,000 shares
  
Participating cumulative preferred – None issued
    
Common stock, $1 par value. Authorized – 2,400,000,000 shares
  
Shares issued – 1,740,815,939
1,741  1,741  
Paid-in capital2,096  2,110  
Retained earnings40,227  39,898  
Treasury common stock at cost  
Shares: March 31, 2020 – 819,335,097; December 31, 2019 – 808,784,381
(36,002) (34,495) 
Accumulated other comprehensive income (loss), net of taxes (AOCI)(328) (347) 
Total stockholders’ equity7,734  8,907  
Total liabilities and stockholders’ equity$17,283  $18,018  
  
See accompanying notes.  


4

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
 For Three Months Ended
Consolidated Statements of Cash FlowsMarch 31,
(Millions of dollars)20202019
Cash flows from operating activities  
Net income$1,174  $1,217  
Adjustments to net income:
Depreciation186  166  
Amortization of acquisition-related intangibles50  79  
Amortization of capitalized software14  13  
Stock compensation63  61  
Gains on sales of assets  (2) 
Deferred taxes(34) 4  
Increase (decrease) from changes in:
Accounts receivable(242) (233) 
Inventories(2) 86  
Prepaid expenses and other current assets(88) 223  
Accounts payable and accrued expenses  (67) 
Accrued compensation(353) (373) 
Income taxes payable147  (94) 
Changes in funded status of retirement plans27  7  
Other(91) 20  
Cash flows from operating activities851  1,107  
Cash flows from investing activities  
Capital expenditures(161) (251) 
Proceeds from asset sales  2  
Purchases of short-term investments(646) (149) 
Proceeds from short-term investments1,638  1,584  
Other(5) (13) 
Cash flows from investing activities826  1,173  
Cash flows from financing activities  
Proceeds from issuance of long-term debt749  743  
Dividends paid(841) (724) 
Stock repurchases(1,641) (1,152) 
Proceeds from common stock transactions146  151  
Other(9) (16) 
Cash flows from financing activities(1,596) (998) 
Net change in cash and cash equivalents81  1,282  
Cash and cash equivalents at beginning of period2,437  2,438  
Cash and cash equivalents at end of period$2,518  $3,720  
See accompanying notes.  

5

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Notes to financial statements
1. Description of business, including segment and geographic area information
We design, make and sell semiconductors to electronics designers and manufacturers all over the world. We have two reportable segments, which are established along major categories of products as follows:
Analog – consisting of the following product lines: Power, Signal Chain and High Volume.
Embedded Processing – consisting of the following product lines: Connected Microcontrollers and Processors.
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,
 20202019
Revenue:  
Analog$2,460  $2,518  
Embedded Processing653  796  
Other216  280  
Total revenue$3,329  $3,594  
Operating profit:
Analog$1,025  $1,088  
Embedded Processing182  249  
Other37  42  
Total operating profit$1,244  $1,379  
6

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Geographic area information
The following geographic area information includes revenue, based on product shipment destination. 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
March 31,
20202019
Revenue:
United States$390  $477  
Asia (a)2,027  2,092  
Europe, Middle East and Africa619  743  
Japan190  191  
Rest of world103  91  
Total revenue$3,329  $3,594  
(a)Revenue from products shipped into China was $1.7 billion in the first quarters of both 2020 and 2019, 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.

2. 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, 2019. The Consolidated Statements of Income, Comprehensive Income and Cash Flows for the periods ended March 31, 2020 and 2019, and the Consolidated Balance Sheet as of March 31, 2020, 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, 2019. 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. 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.
7

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Computation and reconciliation of earnings per common share are as follows (shares in millions):
 For Three Months Ended March 31,
 20202019
Net IncomeSharesEPSNet IncomeSharesEPS
Basic EPS:      
Net income$1,174    $1,217    
Income allocated to RSUs(6)   (8)   
Income allocated to common stock$1,168  931  $1.25  $1,209  939  $1.29  
Dilutive effect of stock compensation plans12   17  
Diluted EPS: 
Net income$1,174   $1,217  
Income allocated to RSUs(6)  (8) 
Income allocated to common stock$1,168  943  $1.24  $1,209  956  $1.26  
Potentially dilutive securities representing 9 million shares of common stock that were outstanding during the first quarters of both 2020 and 2019, 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 have not been 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, 2020. 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, 2020, the carrying value of long-term debt, including the current portion, was $6.55 billion, and the estimated fair value was $7.06 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.
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Changes in accounting standards – adopted standards for current period
We adopted the following Accounting Standards Updates (ASU) during the current period, none of which had a material impact on our financial position or results of operations.
ASU Description Adopted Date
ASU No. 2016-13Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial InstrumentsJanuary 1, 2020
ASU No. 2018-13Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value MeasurementJanuary 1, 2020
ASU No. 2018-15Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service ContractJanuary 1, 2020

3. Income taxes
Our estimated annual effective tax rate is about 14%, which does not include discrete tax items. This differs from the 21% statutory corporate tax rate due to the effect of U.S. tax benefits.
Provision for income taxes is based on the following:
For Three Months Ended
March 31,
 20202019
Taxes calculated using the estimated annual effective tax rate$166  $220  
Discrete tax items(116) (60) 
Provision for income taxes$50  $160  
Actual effective tax rate4 %12 %

4. Valuation of debt and equity investments and certain liabilities
Investments measured at fair value
Available-for-sale debt investments and trading securities are stated at fair value, which is generally based on market prices or broker quotes. See Fair-value considerations below. Unrealized gains and losses from available-for-sale debt securities are recorded as an increase or decrease, net of taxes, in AOCI on our Consolidated Balance Sheets and any credit losses on available-for-sale debt securities are recorded as an allowance for credit losses with an offset recognized in OI&E in our Consolidated Statements of Income.
We classify certain mutual funds as trading securities. These 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 non-marketable equity investments, which are not measured at fair value. These investments consist of interests in venture capital funds and other non-marketable equity 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 equity securities are measured at cost with adjustments for observable changes in price or impairments. Gains and losses on non-marketable equity investments are recognized in OI&E.
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Details of our investments are as follows:
 March 31, 2020December 31, 2019
Cash and Cash EquivalentsShort-Term InvestmentsLong-Term InvestmentsCash and Cash EquivalentsShort-Term InvestmentsLong-Term Investments
Measured at fair value:      
Available-for-sale debt securities:      
Money market funds$1,912  $  $  $1,213  $  $  
Corporate obligations102  899    174  1,216    
U.S. government agency and Treasury securities150  1,325    604  1,734    
Trading securities:
Mutual funds    14      272  
Total2,164  2,224  14  1,991  2,950  272  
Other measurement basis:
Equity-method investments    16      24  
Non-marketable equity investments    4      4  
Cash on hand354      446      
Total$2,518  $2,224  $34  $2,437  $2,950  $300  
As of March 31, 2020 and December 31, 2019, unrealized gains and losses associated with our available-for-sale investments were not material. We did not recognize any credit losses related to available-for-sale investments for the first three months of 2020 and 2019.
Proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $1.39 billion and $1.58 billion for the first quarters of 2020 and 2019, 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 March 31, 2020:
 Fair Value
One year or less$4,368  
One to two years20  
During the first quarter 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.
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.
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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, 2020 and December 31, 2019, 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, 2020December 31, 2019
 Level 1Level 2TotalLevel 1Level 2Total
Assets:      
Money market funds$1,912  $  $1,912  $1,213  $  $1,213  
Corporate obligations  1,001  1,001    1,390  1,390  
U.S. government agency and Treasury securities1,475    1,475  2,338    2,338  
Mutual funds14    14  272    272  
Total assets$3,401  $1,001  $4,402  $3,823  $1,390  $5,213  
Liabilities:
Deferred compensation$251  $  $251  $298  $  $298  
Total liabilities$251  $  $251  $298  $  $298  

5. Goodwill and acquisition-related intangibles
Goodwill was $4.36 billion as of March 31, 2020 and December 31, 2019. There was no impairment of goodwill during the first three months of 2020 or 2019.
The components of acquisition-related intangibles are as follows:
 March 31, 2020December 31, 2019
Amortization Period (Years)Gross Carrying AmountAccumulated AmortizationNetGross Carrying AmountAccumulated AmortizationNet
Developed technology
8 10
$2,000  $1,710  $290  $2,000  $1,660  $340  
Acquisition charges
Acquisition charges represent the ongoing amortization of intangible assets resulting from the acquisition of National Semiconductor Corporation. These amounts are included in Other for segment reporting purposes, consistent with how management measures the performance of its segments.
Amortization of acquisition-related intangibles was $50 million and $79 million for the first quarters of 2020 and 2019, respectively. Fully amortized assets are written off against accumulated amortization.
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6. Postretirement benefit plans
Expense related to defined benefit and retiree health care benefit plans is as follows:
U.S. Defined BenefitU.S. Retiree Health CareNon-U.S. Defined Benefit
For Three Months Ended March 31,202020192020201920202019
Service cost$4  $4  $1  $1  $8  $8  
Interest cost9  9  3  3  9  11  
Expected return on plan assets(9) (9) (3) (4) (18) (21) 
Recognized net actuarial loss2  2      3  7  
Net periodic benefit costs6  6  1    2  5  
Settlement losses4  3      1  1  
Total, including other postretirement losses$10  $9  $1  $  $3  $6  

7. Debt and lines of credit
Short-term borrowings
We maintain a line of credit to support commercial paper borrowings, if any, and to provide additional liquidity through bank loans. As of March 31, 2020, 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 March 31, 2020, our credit facility was undrawn, and we had no commercial paper outstanding.
Long-term debt
In March 2020, we issued a principal amount of $750 million of fixed-rate, long-term debt due in 2025. We incurred $4 million of issuance and other related costs. The proceeds of the offering were $749 million, net of the original issuance discount, and were used for general corporate purposes, including to repay $500 million of 1.75% notes in April 2020.
Long-term debt outstanding is as follows:
March 31,December 31,
20202019
Notes due 2020 at 1.75%
$500  $500  
Notes due 2021 at 2.75%
550  550  
Notes due 2022 at 1.85%
500  500  
Notes due 2023 at 2.25%
500  500  
Notes due 2024 at 2.625%
300  300  
Notes due 2025 at 1.375%
750    
Notes due 2027 at 2.90%
500  500  
Notes due 2029 at 2.25%
750  750  
Notes due 2039 at 3.875%
750  750  
Notes due 2048 at 4.15%
1,500  1,500  
Total debt6,600  5,850  
Net unamortized discounts, premiums and issuance costs(50) (47) 
Total debt, including net unamortized discounts, premiums and issuance costs6,550  5,803  
Current portion of long-term debt(1,051) (500) 
Long-term debt$5,499  $5,303  
Interest and debt expense was $45 million and $38 million for the first quarters of 2020 and 2019, respectively. This was net of the amortized discounts, premiums and issuance costs. Capitalized interest was not material.
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8. Stockholders’ equity
Changes in equity are as follows:
Common StockPaid-in CapitalRetained EarningsTreasury Common StockAOCI
Balance, December 31, 2019$1,741  $2,110  $39,898  $(34,495) $(347) 
2020
Net income    1,174      
Dividends declared and paid ($0.90 per share)
    (841)     
Common stock issued for stock-based awards