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 July 25, 2017 (furnished pursuant to Item 2.02)

TEXAS INSTRUMENTS INCORPORATED

Date: July 25, 2017

By:

/s/ Rafael R. Lizardi

Rafael R. Lizardi

Senior Vice President and

Chief Financial Officer

•

“Revenue increased 13 percent from the same quarter a year ago. Demand for our products continued to be strong in the automotive market and continued to strengthen in the industrial market.  

•

“In our core businesses, Analog revenue grew 18 percent and Embedded Processing revenue grew 15 percent from the same quarter a year ago. Operating margin increased in both businesses.

•

“Gross margin of 64.3 percent reflected the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-millimeter Analog production.

•

“Our cash flow from operations of $4.6 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the trailing 12 months was $4.0 billion and represents 28.5 percent of revenue.

•

“We have returned $4.1 billion to owners in the past 12 months through stock repurchases and dividends.

•

“Our balance sheet remains strong with $3.0 billion of cash and short-term investments at the end of the quarter, about 80 percent of which was owned by the company’s U.S. entities. Inventory ended the quarter at 133 days.

•

“TI’s third-quarter outlook is for revenue in the range of $3.74 billion to $4.06 billion, and earnings per share between $1.04 and $1.18, which includes an estimated $20 million discrete tax benefit.”

2Q17

2Q16

Change

Revenue

$

3,693

$

3,273

13

%

Operating profit

$

1,480

$

1,131

31

%

Net income

$

1,056

$

819

29

%

Earnings per share

$

1.03

$

0.79

30

%

TI reports 2Q17 financial results and shareholder returns

Page 2

Trailing 12 Months

2Q17

2Q17

2Q16

Change

Cash flow from operations

$

917

$

4,564

$

4,624

-1

%

Capital expenditures

$

151

$

527

$

585

-10

%

Free cash flow

$

766

$

4,037

$

4,039

0

%

Free cash flow % of revenue

28.5

%

31.3

%

Trailing 12 Months

2Q17

2Q17

2Q16

Change

Dividends paid

$

498

$

1,879

$

1,499

25

%

Stock repurchases

$

650

$

2,175

$

2,574

-16

%

Total cash returned

$

1,148

$

4,054

$

4,073

0

%

TI reports 2Q17 financial results and shareholder returns

Page 3

For Three Months Ended

June 30,

2017

2016

Revenue

$

3,693

$

3,273

Cost of revenue (COR)

1,319

1,266

Gross profit

2,374

2,007

Research and development (R&D)

378

341

Selling, general and administrative (SG&A)

434

454

Acquisition charges

79

79

Restructuring charges/other

3

2

Operating profit

1,480

1,131

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

26

(8

)

Interest and debt expense

20

21

Income before income taxes

1,486

1,102

Provision for income taxes

430

283

Net income

$

1,056

$

819

Diluted earnings per common share

$

1.03

$

.79

Average shares outstanding (millions):

Basic

994

1,004

Diluted

1,015

1,020

Cash dividends declared per common share

$

.50

$

.38

Certain amounts in the prior period have been adjusted to reflect the following: (1) the fourth-quarter 2016 early adoption of ASU 2016-09 related to stock-based compensation, and (2) the first-quarter 2017 early adoption of ASU 2017-07 related to the reclassification of certain pension and other retiree benefit costs to OI&E.

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)

$

458

$

325

Discrete tax items

(28

)

(42

)

Provision for income taxes (effective taxes)

$

430

$

283

Annual operating tax rate

31

%

30

%

Effective tax rate

29

%

26

%

As a result of accounting rule ASC 260, which requires a portion of Net income to be allocated to unvested restricted stock units (RSUs) on which we pay dividend equivalents, diluted EPS is calculated using the following:

Net income

$

1,056

$

819

Income allocated to RSUs

(10

)

(10

)

Income allocated to common stock for diluted EPS

$

1,046

$

809

TI reports 2Q17 financial results and shareholder returns

Page 4

June 30,

2017

2016

Assets

Current assets:

Cash and cash equivalents

$

1,140

$

1,235

Short-term investments

1,844

1,304

Accounts receivable, net of allowances of ($16) and ($20)

1,469

1,348

Raw materials

109

104

Work in process

1,099

946

Finished goods

739

826

Inventories

1,947

1,876

Prepaid expenses and other current assets

1,111

926

Total current assets

7,511

6,689

Property, plant and equipment at cost

4,656

5,152

Accumulated depreciation

(2,142

)

(2,595

)

Property, plant and equipment, net

2,514

2,557

Long-term investments

250

224

Goodwill, net

4,362

4,362

Acquisition-related intangibles, net

1,105

1,424

Deferred income taxes

412

231

Capitalized software licenses, net

114

52

Overfunded retirement plans

99

85

Other assets

71

69

Total assets

$

16,438

$

15,693

Liabilities and stockholders’ equity

Current liabilities:

Current portion of long-term debt

$

499

$

637

Accounts payable

450

416

Accrued compensation

489

493

Income taxes payable

86

58

Accrued expenses and other liabilities

353

387

Total current liabilities

1,877

1,991

Long-term debt

3,084

2,975

Underfunded retirement plans

101

193

Deferred income taxes

33

40

Deferred credits and other liabilities

635

532

Total liabilities

5,730

5,731

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

1,683

1,598

Retained earnings

34,149

31,933

Treasury common stock at cost

Shares: June 30, 2017 – 749,098,850; June 30, 2016 – 737,467,669

(26,345

)

(24,774

)

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

(520

)

(536

)

Total stockholders’ equity

10,708

9,962

Total liabilities and stockholders’ equity

$

16,438

$

15,693

TI reports 2Q17 financial results and shareholder returns

Page 5

For Three Months Ended

June 30,

2017

2016

Cash flows from operating activities

Net income

$

1,056

$

819

Adjustments to Net income:

Depreciation

134

155

Amortization of acquisition-related intangibles

79

79

Amortization of capitalized software

12

8

Stock compensation

75

76

Deferred income taxes

(54

)

(59

)

Increase (decrease) from changes in:

Accounts receivable

(132

)

(76

)

Inventories

(104

)

(71

)

Prepaid expenses and other current assets

83

(8

)

Accounts payable and accrued expenses

12

40

Accrued compensation

131

147

Income taxes payable

(385

)

(25

)

Changes in funded status of retirement plans

19

14

Other

(9

)

10

Cash flows from operating activities

917

1,109

Cash flows from investing activities

Capital expenditures

(151

)

(158

)

Purchases of short-term investments

(1,130

)

(993

)

Proceeds from short-term investments

1,265

1,210

Other

8

6

Cash flows from investing activities

(8

)

65

Cash flows from financing activities

Proceeds from issuance of long-term debt

605

499

Repayment of debt

(375

)

(1,000

)

Dividends paid

(498

)

(382

)

Stock repurchases

(650

)

(527

)

Proceeds from common stock transactions

84

193

Other

(8

)

(3

)

Cash flows from financing activities

(842

)

(1,220

)

Net change in Cash and cash equivalents

67

(46

)

Cash and cash equivalents at beginning of period

1,073

1,281

Cash and cash equivalents at end of period

$

1,140

$

1,235

TI reports 2Q17 financial results and shareholder returns

Page 6

2Q17

2Q16

Change

Analog:

Revenue

$

2,411

$

2,044

18

%

Operating profit

$

1,077

$

781

38

%

Embedded Processing:

Revenue

$

868

$

755

15

%

Operating profit

$

271

$

192

41

%

Other:

Revenue

$

414

$

474

-13

%

Operating profit*

$

132

$

158

-16

%

•

Revenue increased primarily due to Power and Signal Chain, each of which grew by about the same amount. High Volume also grew.

•

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

•

Revenue increased in both product lines by about the same amount.

•

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

•

Revenue decreased by $60 million, and operating profit declined by $26 million.  

For 12 Months Ended

June 30,

2017

2016

Change

Cash flow from operations (GAAP)

$

4,564

$

4,624

-1

%

Capital expenditures

(527

)

(585

)

Free cash flow (non-GAAP)

$

4,037

$

4,039

0

%

Revenue

$

14,184

$

12,899

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

32.2

%

35.8

%

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

28.5

%

31.3

%

TI reports 2Q17 financial results and shareholder returns

Page 7

•

Market demand for semiconductors, particularly in TI’s end markets;

•

TI’s 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 TI inventory that results from demand that differs from projections;

•

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

•

Economic, social and political conditions in the countries in which TI, 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;

•

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

•

Breaches or disruptions of TI’s information technology systems or those of our customers or suppliers;

•

Timely implementation of new manufacturing technologies and installation of manufacturing equipment, or 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 TI is or may become subject, or actions of enforcement authorities, that restrict TI’s ability to manufacture or ship our products or operate our business, or subject TI to fines, penalties, or other legal liability;

•

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

•

Changes in the tax rate applicable to TI as the result of changes in tax law, 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 a customer or distributor of TI with respect to TI-consigned inventory;

•

Financial difficulties of distributors or their promotion of competing product lines to TI’s 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’s 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;

•

TI’s ability to maintain and enforce a strong intellectual property portfolio and maintain freedom of operation; or TI’s exposure to infringement claims;

•

Instability in the global credit and financial markets that affects TI’s 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;

TI reports 2Q17 financial results and shareholder returns

Page 8

•

TI’s ability to recruit and retain skilled engineering, management and technical personnel;

•

TI’s 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 TI’s non-financial assets.