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 24, 2018 (furnished pursuant to Item 2.02)

TEXAS INSTRUMENTS INCORPORATED

Date: July 24, 2018

By:

/s/ Rafael R. Lizardi

Rafael R. Lizardi

Senior Vice President and

Chief Financial Officer

•

“Revenue increased 9 percent from the same quarter a year ago. Demand for our Analog and Embedded Processing products continued to be strong in the industrial and automotive markets.

•

“Our cash flow from operations of $6.6 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the trailing 12 months was $5.7 billion, or 36.6 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 $5.6 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.

•

“TI’s third-quarter outlook is for revenue in the range of $4.11 billion to $4.45 billion, and earnings per share between $1.41 and $1.63, which includes an estimated $10 million discrete tax benefit. We continue to expect our ongoing annual operating tax rate to be about 20 percent in 2018 and 16 percent starting in 2019.”

2Q18

2Q17

Change

Revenue

$

4,017

$

3,693

9

%

Operating profit

$

1,712

$

1,480

16

%

Net income

$

1,405

$

1,056

33

%

Earnings per share

$

1.40

$

1.03

36

%

TI reports 2Q18 financial results and shareholder returns

Page 2

Trailing 12 Months

2Q18

2Q18

2Q17

Change

Cash flow from operations

$

1,826

$

6,589

$

4,564

44

%

Capital expenditures

$

249

$

855

$

527

62

%

Free cash flow

$

1,577

$

5,734

$

4,037

42

%

Free cash flow % of revenue

36.6

%

28.5

%

Trailing 12 Months

2Q18

2Q18

2Q17

Change

Dividends paid

$

606

$

2,323

$

1,879

24

%

Stock repurchases

$

1,018

$

3,247

$

2,175

49

%

Total cash returned

$

1,624

$

5,570

$

4,054

37

%

TI reports 2Q18 financial results and shareholder returns

Page 3

For Three Months Ended

June 30,

2018

2017

Revenue

$

4,017

$

3,693

Cost of revenue (COR)

1,398

1,319

Gross profit

2,619

2,374

Research and development (R&D)

384

378

Selling, general and administrative (SG&A)

441

434

Acquisition charges

79

79

Restructuring charges/other

3

3

Operating profit

1,712

1,480

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

24

26

Interest and debt expense

30

20

Income before income taxes

1,706

1,486

Provision for income taxes

301

430

Net income

$

1,405

$

1,056

Diluted earnings per common share

$

1.40

$

1.03

Average shares outstanding (millions):

Basic

977

994

Diluted

997

1,015

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)

$

344

$

458

Discrete tax items

(43

)

(28

)

Provision for income taxes (effective taxes)

$

301

$

430

Annual operating tax rate

20

%

31

%

Effective tax rate

18

%

29

%

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

$

1,405

$

1,056

Income allocated to RSUs

(11

)

(10

)

Income allocated to common stock for diluted EPS

$

1,394

$

1,046

TI reports 2Q18 financial results and shareholder returns

Page 4

June 30,

2018

2017

Assets

Current assets:

Cash and cash equivalents

$

2,919

$

1,140

Short-term investments

2,211

1,844

Accounts receivable, net of allowances of ($9) and ($16)

1,551

1,469

Raw materials

155

109

Work in process

1,079

1,099

Finished goods

856

739

Inventories

2,090

1,947

Prepaid expenses and other current assets

821

1,111

Total current assets

9,592

7,511

Property, plant and equipment at cost

5,025

4,656

Accumulated depreciation

(2,170

)

(2,142

)

Property, plant and equipment

2,855

2,514

Long-term investments

271

250

Goodwill

4,362

4,362

Acquisition-related intangibles

787

1,105

Deferred tax assets

205

412

Capitalized software licenses

101

114

Overfunded retirement plans

205

99

Other long-term assets

149

71

Total assets

$

18,527

$

16,438

Liabilities and stockholders’ equity

Current liabilities:

Current portion of long-term debt

$

—

$

499

Accounts payable

492

450

Accrued compensation

472

489

Income taxes payable

120

86

Accrued expenses and other liabilities

382

353

Total current liabilities

1,466

1,877

Long-term debt

5,066

3,084

Underfunded retirement plans

82

101

Deferred tax liabilities

50

33

Other long-term liabilities

1,229

635

Total liabilities

7,893

5,730

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

1,867

1,683

Retained earnings

36,413

34,149

Treasury common stock at cost

Shares: June 30, 2018 – 766,450,417; June 30, 2017 – 749,098,850

(29,016

)

(26,345

)

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

(371

)

(520

)

Total stockholders’ equity

10,634

10,708

Total liabilities and stockholders’ equity

$

18,527

$

16,438

TI reports 2Q18 financial results and shareholder returns

Page 5

For Three Months Ended

June 30,

2018

2017

Cash flows from operating activities

Net income

$

1,405

$

1,056

Adjustments to Net income:

Depreciation

144

134

Amortization of acquisition-related intangibles

79

79

Amortization of capitalized software

10

12

Stock compensation

74

75

Deferred taxes

1

(54

)

Increase (decrease) from changes in:

Accounts receivable

(97

)

(132

)

Inventories

(58

)

(104

)

Prepaid expenses and other current assets

61

83

Accounts payable and accrued expenses

6

12

Accrued compensation

123

131

Income taxes payable

120

(385

)

Changes in funded status of retirement plans

29

19

Other

(71

)

(9

)

Cash flows from operating activities

1,826

917

Cash flows from investing activities

Capital expenditures

(249

)

(151

)

Purchases of short-term investments

(1,213

)

(1,130

)

Proceeds from short-term investments

1,375

1,265

Other

6

8

Cash flows from investing activities

(81

)

(8

)

Cash flows from financing activities

Proceeds from issuance of long-term debt

1,500

605

Repayment of debt

(500

)

(375

)

Dividends paid

(606

)

(498

)

Stock repurchases

(1,018

)

(650

)

Proceeds from common stock transactions

102

84

Other

(21

)

(8

)

Cash flows from financing activities

(543

)

(842

)

Net change in Cash and cash equivalents

1,202

67

Cash and cash equivalents at beginning of period

1,717

1,073

Cash and cash equivalents at end of period

$

2,919

$

1,140

TI reports 2Q18 financial results and shareholder returns

Page 6

2Q18

2Q17

Change

Analog:

Revenue

$

2,690

$

2,411

12

%

Operating profit

$

1,263

$

1,077

17

%

Embedded Processing:

Revenue

$

943

$

868

9

%

Operating profit

$

334

$

271

23

%

Other:

Revenue

$

384

$

414

(7

)%

Operating profit*

$

115

$

132

(13

)%

•

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

•

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

•

Revenue increased in both product lines about equally.

•

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

•

Revenue decreased by $30 million, and operating profit declined by $17 million.

TI reports 2Q18 financial results and shareholder returns

Page 7

For 12 Months Ended

June 30,

2018

2017

Change

Cash flow from operations (GAAP)

$

6,589

$

4,564

44

%

Capital expenditures

(855

)

(527

)

Free cash flow (non-GAAP)

$

5,734

$

4,037

42

%

Revenue

$

15,672

$

14,184

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

42.0

%

32.2

%

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

36.6

%

28.5

%

TI reports 2Q18 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 2Q18 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.