DELAWARE

001-03761

75-0289970

(State or other jurisdiction

of incorporation)

(Commission

file number)

(I.R.S. employer

identification no.)

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Designation
of Exhibit
in this
Report

Description of Exhibit

99

Registrant’s News Release

Dated October 23, 2018 (furnished pursuant to Item 2.02)

TEXAS INSTRUMENTS INCORPORATED

Date: October 23, 2018

By:

/s/ Rafael R. Lizardi

Rafael R. Lizardi

Senior Vice President and

Chief Financial Officer

•

“Revenue increased 4 percent from the same quarter a year ago; however, demand for our products slowed across most markets.

•

“In our core businesses, Analog revenue grew 8 percent and Embedded Processing declined 4 percent from the same quarter a year ago.

•

“Our cash flow from operations of $7.0 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the trailing 12 months was $5.9 billion, or 37.5 percent of revenue. This reflects the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-millimeter Analog production.

•

“We have returned $6.2 billion to owners in the past 12 months through stock repurchases and dividends, and our strategy to return to owners all of our free cash flow remains consistent. Over the last 12 months, our dividends represented 41 percent of free cash flow, emphasizing their sustainability.

•

“In September, we announced we would increase our dividend by 24 percent and also increased our share repurchase authorizations by $12 billion, which together reflect our commitment to return all free cash flow to our owners.

•

“TI’s fourth-quarter outlook is for revenue in the range of $3.60 billion to $3.90 billion, and earnings per share between $1.14 and $1.34. We continue to expect our ongoing annual operating tax rate to be about 20 percent in 2018 and about 16 percent starting in 2019.”

3Q18

3Q17

Change

Revenue

$

4,261

$

4,116

4

%

Operating profit

$

1,937

$

1,788

8

%

Net income

$

1,570

$

1,285

22

%

Earnings per share

$

1.58

$

1.26

25

%

TI reports 3Q18 financial results and shareholder returns

Page 2

Trailing 12 Months

3Q18

3Q18

3Q17

Change

Cash flow from operations

$

2,106

$

6,973

$

4,821

45

%

Capital expenditures

$

370

$

1,039

$

574

81

%

Free cash flow

$

1,736

$

5,934

$

4,247

40

%

Free cash flow % of revenue

37.5

%

29.0

%

Trailing 12 Months

3Q18

3Q18

3Q17

Change

Dividends paid

$

602

$

2,430

$

1,992

22

%

Stock repurchases

$

1,200

$

3,797

$

2,325

63

%

Total cash returned

$

1,802

$

6,227

$

4,317

44

%

TI reports 3Q18 financial results and shareholder returns

Page 3

For Three Months Ended

September 30,

2018

2017

Revenue

$

4,261

$

4,116

Cost of revenue (COR)

1,457

1,460

Gross profit

2,804

2,656

Research and development (R&D)

390

375

Selling, general and administrative (SG&A)

396

412

Acquisition charges

80

80

Restructuring charges/other

1

1

Operating profit

1,937

1,788

Other income (expense), net (OI&E)

23

20

Interest and debt expense

36

19

Income before income taxes

1,924

1,789

Provision for income taxes

354

504

Net income

$

1,570

$

1,285

Diluted earnings per common share

$

1.58

$

1.26

Average shares outstanding (millions):

Basic

969

988

Diluted

989

1,008

Cash dividends declared per common share

$

.62

$

.50

Supplemental Information

(Quarterly, except as noted)

Provision for income taxes is based on the following:

Operating taxes (calculated using the estimated annual effective tax rate)

$

367

$

542

Discrete tax items

(13

)

(38

)

Provision for income taxes (effective taxes)

$

354

$

504

Annual operating tax rate

20

%

31

%

Effective tax rate

18

%

28

%

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

$

1,570

$

1,285

Income allocated to RSUs

(11

)

(11

)

Income allocated to common stock for diluted EPS

$

1,559

$

1,274

TI reports 3Q18 financial results and shareholder returns

Page 4

September 30,

2018

2017

Assets

Current assets:

Cash and cash equivalents

$

1,502

$

1,296

Short-term investments

3,611

2,148

Accounts receivable, net of allowances of ($13) and ($14)

1,585

1,576

Raw materials

171

120

Work in process

1,058

1,103

Finished goods

887

685

Inventories

2,116

1,908

Prepaid expenses and other current assets

654

1,063

Total current assets

9,468

7,991

Property, plant and equipment at cost

5,250

4,668

Accumulated depreciation

(2,199

)

(2,101

)

Property, plant and equipment

3,051

2,567

Long-term investments

278

258

Goodwill

4,362

4,362

Acquisition-related intangibles

707

1,025

Deferred tax assets

243

414

Capitalized software licenses

94

111

Overfunded retirement plans

220

112

Other long-term assets

150

89

Total assets

$

18,573

$

16,929

Liabilities and stockholders’ equity

Current liabilities:

Current portion of long-term debt

$

749

$

499

Accounts payable

492

430

Accrued compensation

613

635

Income taxes payable

104

74

Accrued expenses and other liabilities

424

417

Total current liabilities

2,382

2,055

Long-term debt

4,318

3,084

Underfunded retirement plans

86

108

Deferred tax liabilities

43

38

Other long-term liabilities

1,228

656

Total liabilities

8,057

5,941

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 capital

1,918

1,718

Retained earnings

37,378

34,935

Treasury common stock at cost

Shares: September 30, 2018 – 775,952,837; September 30, 2017 – 754,459,144

(30,167

)

(26,901

)

Accumulated other comprehensive income (loss), net of taxes (AOCI)

(354

)

(505

)

Total stockholders’ equity

10,516

10,988

Total liabilities and stockholders’ equity

$

18,573

$

16,929

TI reports 3Q18 financial results and shareholder returns

Page 5

For Three Months Ended

September 30,

2018

2017

Cash flows from operating activities

Net income

$

1,570

$

1,285

Adjustments to Net income:

Depreciation

151

133

Amortization of acquisition-related intangibles

80

80

Amortization of capitalized software

12

12

Stock compensation

46

54

Deferred taxes

(52

)

(2

)

Increase (decrease) from changes in:

Accounts receivable

(34

)

(106

)

Inventories

(26

)

39

Prepaid expenses and other current assets

151

31

Accounts payable and accrued expenses

51

47

Accrued compensation

137

140

Income taxes payable

22

10

Changes in funded status of retirement plans

12

31

Other

(14

)

(32

)

Cash flows from operating activities

2,106

1,722

Cash flows from investing activities

Capital expenditures

(370

)

(186

)

Purchases of short-term investments

(3,099

)

(1,218

)

Proceeds from short-term investments

1,715

920

Other

(14

)

(4

)

Cash flows from investing activities

(1,768

)

(488

)

Cash flows from financing activities

Dividends paid

(602

)

(495

)

Stock repurchases

(1,200

)

(650

)

Proceeds from common stock transactions

55

76

Other

(8

)

(9

)

Cash flows from financing activities

(1,755

)

(1,078

)

Net change in Cash and cash equivalents

(1,417

)

156

Cash and cash equivalents at beginning of period

2,919

1,140

Cash and cash equivalents at end of period

$

1,502

$

1,296

TI reports 3Q18 financial results and shareholder returns

Page 6

3Q18

3Q17

Change

Analog:

Revenue

$

2,907

$

2,698

8

%

Operating profit

$

1,447

$

1,268

14

%

Embedded Processing:

Revenue

$

894

$

931

(4

)%

Operating profit

$

309

$

325

(5

)%

Other:

Revenue

$

460

$

487

(6

)%

Operating profit*

$

181

$

195

(7

)%

•

Revenue increased due to Power and Signal Chain. High Volume decreased.

•

Operating profit increased primarily due to higher revenue and associated gross profit.

•

Revenue decreased due to Processors.

•

Operating profit decreased primarily due to lower revenue.

•

Revenue decreased by $27 million, and operating profit declined by $14 million.

TI reports 3Q18 financial results and shareholder returns

Page 7

For 12 Months Ended

September 30,

2018

2017

Change

Cash flow from operations (GAAP)

$

6,973

$

4,821

45

%

Capital expenditures

(1,039

)

(574

)

Free cash flow (non-GAAP)

$

5,934

$

4,247

40

%

Revenue

$

15,817

$

14,625

Cash flow from operations as a percent of revenue (GAAP)

44.1

%

33.0

%

Free cash flow as a percent of revenue (non-GAAP)

37.5

%

29.0

%

TI reports 3Q18 financial results and shareholder returns

Page 8

•

Market demand for semiconductors, particularly in our end markets;

•

Our ability to compete in products and prices in an intensely competitive industry;

•

Customer demand that differs from forecasts and the financial impact of inadequate or excess company inventory that results from demand that differs from projections;

•

Economic, social and political conditions in the countries in which we, our customers or our suppliers operate, including security risks; global trade policies; political and social instability; health conditions; possible disruptions in transportation, communications and information technology networks; and fluctuations in foreign currency exchange rates;

•

Evolving cybersecurity threats to our information technology systems or those of our customers or suppliers;

•

Natural events such as severe weather, geological events or health epidemics in the locations in which we, our customers or our suppliers operate;

•

Our ability to develop, manufacture and market innovative products in a rapidly changing technological environment;

•

Timely implementation of new manufacturing technologies and installation of manufacturing equipment, and the ability to obtain needed third-party foundry and assembly/test subcontract services;

•

Availability and cost of raw materials, utilities, manufacturing equipment, third-party manufacturing services and manufacturing technology;

•

Compliance with or changes in the complex laws, rules and regulations to which we are or may become subject, or actions of enforcement authorities, that restrict our ability to manufacture or ship our products or operate our business, or subject us to fines, penalties or other legal liability;

•

Product liability or warranty claims, claims based on epidemic or delivery failure, or other claims relating to our products, manufacturing, services, design or communications, or recalls by our customers for a product containing one of our parts;

•

Changes in tax law and accounting standards that can impact the tax rate applicable to us, the jurisdictions in which profits are determined to be earned and taxed, adverse resolution of tax audits, increases in tariff rates, and the ability to realize deferred tax assets;

•

A loss suffered by one of our customers or distributors with respect to TI-consigned inventory;

•

Financial difficulties of our distributors or their promotion of competing product lines to our detriment, or the loss of a significant number of distributors;

•

Losses or curtailments of purchases from key customers or the timing and amount of distributor and other customer inventory adjustments;

TI reports 3Q18 financial results and shareholder returns

Page 9

•

Our ability to maintain or improve profit margins, including our ability to utilize our manufacturing facilities at sufficient levels to cover our fixed operating costs, in an intensely competitive and cyclical industry and despite changes in the regulatory environment;

•

Our ability to maintain and enforce a strong intellectual property portfolio and maintain freedom of operation in all jurisdictions where we conduct business; or our exposure to infringement claims;

•

Instability in the global credit and financial markets that affects our ability to fund our daily operations, invest in the business, make strategic acquisitions, or make principal and interest payments on our debt;

•

Increases in health care and pension benefit costs;

•

Our ability to recruit and retain skilled engineering, management and technical personnel;

•

Our ability to successfully integrate and realize opportunities for growth from acquisitions, or our ability to realize our expectations regarding the amount and timing of restructuring charges and associated cost savings; and

•

Impairments of our non-financial assets.