Texas Instruments Incorporated

10/27/2021 | Press release | Distributed by Public on 10/27/2021 07:32

Quarterly Report (Form 10-Q)

txn-20210930

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 September 30, 2021
☐ 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)
Delaware 75-0289970
(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 class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $1.00 TXN The 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 filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller 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 ☒
923,526,047
Number of shares of Registrant's common stock outstanding as of
October 19, 2021

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. Financial statements
For Three Months Ended For Nine Months Ended
Consolidated Statements of Income September 30, September 30,
(Millions of dollars, except share and per-share amounts) 2021 2020 2021 2020
Revenue $ 4,643 $ 3,817 $ 13,512 $ 10,385
Cost of revenue (COR) 1,491 1,364 4,486 3,762
Gross profit 3,152 2,453 9,026 6,623
Research and development (R&D) 388 386 1,165 1,142
Selling, general and administrative (SG&A) 412 407 1,262 1,225
Acquisition charges 47 51 142 151
Restructuring charges/other - - - 24
Operating profit 2,305 1,609 6,457 4,081
Other income (expense), net (OI&E) 15 27 134 151
Interest and debt expense 45 49 135 142
Income before income taxes 2,275 1,587 6,456 4,090
Provision for income taxes 328 234 825 183
Net income $ 1,947 $ 1,353 $ 5,631 $ 3,907
Earnings per common share (EPS):
Basic $ 2.10 $ 1.47 $ 6.08 $ 4.22
Diluted $ 2.07 $ 1.45 $ 5.99 $ 4.17
Average shares outstanding (millions):
Basic 923 917 923 921
Diluted 936 929 936 933
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 $ 1,947 $ 1,353 $ 5,631 $ 3,907
Income allocated to RSUs (9) (6) (24) (19)
Income allocated to common stock for diluted EPS $ 1,938 $ 1,347 $ 5,607 $ 3,888
See accompanying notes.

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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
For Three Months Ended For Nine Months Ended
Consolidated Statements of Comprehensive Income September 30, September 30,
(Millions of dollars) 2021 2020 2021 2020
Net income $ 1,947 $ 1,353 $ 5,631 $ 3,907
Other comprehensive income (loss)
Net actuarial losses of defined benefit plans:
Adjustments, net of tax effect of ($1) and $3; ($8) and $4
3 (7) 24 (8)
Recognized within net income, net of tax effect of ($2) and ($2); ($7) and ($7)
8 7 24 21
Prior service credit of defined benefit plans:
Recognized within net income, net of tax effect of $0 and $0; $0 and $0
(1) (1) (1) (1)
Other comprehensive income (loss), net of taxes 10 (1) 47 12
Total comprehensive income $ 1,957 $ 1,352 $ 5,678 $ 3,919
See accompanying notes.

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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
September 30, December 31,
Consolidated Balance Sheets 2021 2020
(Millions of dollars, except share amounts)
Assets
Current assets:
Cash and cash equivalents $ 5,663 $ 3,107
Short-term investments 4,119 3,461
Accounts receivable, net of allowances of ($9) and ($11)
1,653 1,414
Raw materials 224 180
Work in process 1,034 964
Finished goods 605 811
Inventories 1,863 1,955
Prepaid expenses and other current assets 287 302
Total current assets 13,585 10,239
Property, plant and equipment at cost 6,661 5,781
Accumulated depreciation (2,640) (2,512)
Property, plant and equipment 4,021 3,269
Goodwill 4,362 4,362
Acquisition-related intangibles 9 152
Deferred tax assets 309 343
Capitalized software licenses 88 122
Overfunded retirement plans 252 246
Other long-term assets 647 618
Total assets $ 23,273 $ 19,351
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 500 $ 550
Accounts payable 596 415
Accrued compensation 665 767
Income taxes payable 101 134
Accrued expenses and other liabilities 551 524
Total current liabilities 2,413 2,390
Long-term debt 7,239 6,248
Underfunded retirement plans 129 131
Deferred tax liabilities 86 90
Other long-term liabilities 1,255 1,305
Total liabilities 11,122 10,164
Stockholders' equity:
Preferred stock, $25 par value. Authorized - 10,000,000 shares; 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 2,563 2,333
Retained earnings 44,847 42,051
Treasury common stock at cost
Shares: September 30, 2021 - 817,400,928; December 31, 2020 - 821,461,787
(36,687) (36,578)
Accumulated other comprehensive income (loss), net of taxes (AOCI) (313) (360)
Total stockholders' equity 12,151 9,187
Total liabilities and stockholders' equity $ 23,273 $ 19,351
See accompanying notes.

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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
For Nine Months Ended
Consolidated Statements of Cash Flows September 30,
(Millions of dollars) 2021 2020
Cash flows from operating activities
Net income $ 5,631 $ 3,907
Adjustments to net income:
Depreciation 555 553
Amortization of acquisition-related intangibles 142 151
Amortization of capitalized software 44 45
Stock compensation 180 182
Gains on sales of assets (7) (3)
Deferred taxes 19 (115)
Increase (decrease) from changes in:
Accounts receivable (239) (318)
Inventories 92 (71)
Prepaid expenses and other current assets 99 -
Accounts payable and accrued expenses 87 60
Accrued compensation (103) (48)
Income taxes payable (54) (316)
Changes in funded status of retirement plans 48 16
Other (95) (29)
Cash flows from operating activities 6,399 4,014
Cash flows from investing activities
Capital expenditures (1,180) (437)
Proceeds from asset sales 7 3
Purchases of short-term investments (6,427) (3,435)
Proceeds from short-term investments 5,770 3,958
Other (36) (15)
Cash flows from investing activities (1,866) 74
Cash flows from financing activities
Proceeds from issuance of long-term debt 1,495 1,498
Repayment of debt (550) (500)
Dividends paid (2,824) (2,489)
Stock repurchases (385) (2,538)
Proceeds from common stock transactions 325 356
Other (38) (30)
Cash flows from financing activities (1,977) (3,703)
Net change in cash and cash equivalents 2,556 385
Cash and cash equivalents at beginning of period 3,107 2,437
Cash and cash equivalents at end of period $ 5,663 $ 2,822
See accompanying notes.

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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, 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.
•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 For Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Revenue:
Analog $ 3,548 $ 2,865 $ 10,292 $ 7,759
Embedded Processing 738 651 2,285 1,850
Other 357 301 935 776
Total revenue $ 4,643 $ 3,817 $ 13,512 $ 10,385
Operating profit:
Analog $ 1,871 $ 1,320 $ 5,295 $ 3,398
Embedded Processing 282 187 881 494
Other (a) 152 102 281 189
Total operating profit $ 2,305 $ 1,609 $ 6,457 $ 4,081
(a)Includes acquisition charges and restructuring charges/other
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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 For Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Revenue:
United States $ 515 $ 440 $ 1,437 $ 1,179
Asia (a) 3,082 2,555 8,933 6,756
Europe, Middle East and Africa 683 578 2,061 1,648
Japan 242 140 716 523
Rest of world 121 104 365 279
Total revenue $ 4,643 $ 3,817 $ 13,512 $ 10,385
(a)Revenue from products shipped into China was $2.5 billion and $2.2 billion in the third quarters of 2021 and 2020, respectively, and $7.3 billion and $5.7 billion in the first nine months of 2021 and 2020, respectively, 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, 2020. The Consolidated Statements of Income, Comprehensive Income and Cash Flows for the periods ended September 30, 2021 and 2020, and the Consolidated Balance Sheet as of September 30, 2021, 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, 2020. The results for the three- and nine-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.
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Computation and reconciliation of earnings per common share are as follows (shares in millions):
For Three Months Ended September 30,
2021 2020
Net Income Shares EPS Net Income Shares EPS
Basic EPS:
Net income $ 1,947 $ 1,353
Income allocated to RSUs (9) (6)
Income allocated to common stock $ 1,938 923 $ 2.10 $ 1,347 917 $ 1.47
Dilutive effect of stock compensation plans 13 12
Diluted EPS:
Net income $ 1,947 $ 1,353
Income allocated to RSUs (9) (6)
Income allocated to common stock $ 1,938 936 $ 2.07 $ 1,347 929 $ 1.45
For Nine Months Ended September 30,
2021 2020
Net Income Shares EPS Net Income Shares EPS
Basic EPS:
Net income $ 5,631 $ 3,907
Income allocated to RSUs (23) (19)
Income allocated to common stock $ 5,608 923 $ 6.08 $ 3,888 921 $ 4.22
Dilutive effect of stock compensation plans 13 12
Diluted EPS:
Net income $ 5,631 $ 3,907
Income allocated to RSUs (24) (19)
Income allocated to common stock $ 5,607 936 $ 5.99 $ 3,888 933 $ 4.17
Potentially dilutive securities representing 2 million and 3 million shares of common stock that were outstanding during the third quarters of 2021 and 2020, respectively, and 3 million and 4 million shares outstanding during the first nine months of 2021 and 2020, 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 have not been material.
We do not use derivatives for speculative or trading purposes.
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Fair values of financial instruments
The fair values of our derivative financial instruments were not material as of September 30, 2021. 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 September 30, 2021, the carrying value of long-term debt, including the current portion, was $7.74 billion, and the estimated fair value was $8.43 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.

3. Income taxes
Our estimated annual effective tax rate is about 14%, which does not include discrete tax items. This differs from the 21% U.S. 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 For Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Taxes calculated using the estimated annual effective tax rate $ 337 $ 231 $ 934 $ 561
Discrete tax items (9) 3 (109) (378)
Provision for income taxes $ 328 $ 234 $ 825 $ 183
Effective tax rate 14 % 15 % 13 % 4 %
Our provision for income taxes for the first nine months of 2020 included a $249 million discrete tax benefit for the settlement of a depreciation-related uncertain tax position. Accrued interest of $46 million related to this uncertain tax position was reversed and included in OI&E.

4. Valuation of debt and equity investments and certain liabilities
Investments measured at fair value
Available-for-sale debt investments, money market funds and mutual funds are stated at fair value, which is generally based on market prices or broker quotes. See Fair-value considerationsbelow. 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.
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 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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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Details of our investments are as follows:
September 30, 2021 December 31, 2020
Cash and Cash Equivalents Short-Term Investments Long-Term Investments Cash and Cash Equivalents Short-Term Investments Long-Term Investments
Measured at fair value:
Money market funds $ 2,132 $ - $ - $ 886 $ - $ -
Corporate obligations 1,136 1,109 - 256 257 -
U.S. government and agency securities 1,140 2,587 - 1,340 3,054 -
Non-U.S. government and agency securities 385 423 - - 150 -
Mutual funds - - 15 - - 18
Total 4,793 4,119 15 2,482 3,461 18
Other measurement basis:
Equity-method investments - - 54 - - 27
Non-marketable equity investments - - 4 - - 4
Cash on hand 870 - - 625 - -
Total $ 5,663 $ 4,119 $ 73 $ 3,107 $ 3,461 $ 49
As of September 30, 2021, and December 31, 2020, 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 nine months of 2021 and 2020. All of our debt securities classified as available for sale as of September 30, 2021, have maturities within one year.
Proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $1.32 billion and $510 million for the third quarters of 2021 and 2020, respectively, and $5.77 billion and $3.71 billion for the first nine months of 2021 and 2020, respectively. Gross realized gains and losses from these sales were not material.
During the first nine months 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.
•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 September 30, 2021, and December 31, 2020, we had no Level 3 assets or liabilities.
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
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.
September 30, 2021 December 31, 2020
Level 1 Level 2 Total Level 1 Level 2 Total
Assets:
Money market funds $ 2,132 $ - $ 2,132 $ 886 $ - $ 886
Corporate obligations - 2,245 2,245 - 513 513
U.S. government and agency securities 3,326 401 3,727 4,394 - 4,394
Non-U.S. government and agency securities - 808 808 - 150 150
Mutual funds 15 - 15 18 - 18
Total assets $ 5,473 $ 3,454 $ 8,927 $ 5,298 $ 663 $ 5,961
Liabilities:
Deferred compensation $ 367 $ - $ 367 $ 350 $ - $ 350
Total liabilities $ 367 $ - $ 367 $ 350 $ - $ 350

5. Postretirement benefit plans
Expenses related to defined benefit and retiree health care benefit plans are as follows:
U.S. Defined Benefit U.S. Retiree Health Care Non-U.S. Defined Benefit
For Three Months Ended September 30, 2021 2020 2021 2020 2021 2020
Service cost $ 5 $ 5 $ - $ 1 $ 9 $ 9
Interest cost 8 7 3 3 9 9
Expected return on plan assets (8) (9) (2) (2) (20) (20)
Recognized net actuarial loss 3 1 - - 2 4
Amortization of prior service cost (credit) - - (1) (1) - -
Net periodic benefit costs 8 4 - 1 - 2
Settlement losses 4 3 - - 1 1
Total, including other postretirement losses $ 12 $ 7 $ - $ 1 $ 1 $ 3
U.S. Defined Benefit U.S. Retiree Health Care Non-U.S. Defined Benefit
For Nine Months Ended September 30, 2021 2020 2021 2020 2021 2020
Service cost $ 16 $ 14 $ 2 $ 2 $ 27 $ 25
Interest cost 23 24 8 9 28 28
Expected return on plan assets (25) (27) (8) (8) (61) (58)
Recognized net actuarial loss 11 5 - - 6 11
Amortization of prior service cost (credit) - - (1) (1) - -
Net periodic benefit costs 25 16 1 2 - 6
Settlement losses 12 10 - - 2 2
Total, including other postretirement losses $ 37 $ 26 $ 1 $ 2 $ 2 $ 8

6. 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 September 30, 2021, 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 September 30, 2021, our credit facility was undrawn, and we had no commercial paper outstanding.
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Long-term debt
In September 2021, we issued three series of senior unsecured notes for an aggregate principal amount of $1.50 billion, consisting of:

•$500 million of 1.125% notes due in 2026;
•$500 million of 1.90% notes due in 2031; and
•$500 million of 2.70% notes due in 2051.

We incurred $10 million of issuance costs. The proceeds of the offering were $1.50 billion, net of the original issuance discounts, which will be used for general corporate purposes.
In February 2021, we retired $550 million of maturing debt.
Long-term debt outstanding is as follows:
September 30, December 31,
2021 2020
Notes due 2021 at 2.75%
$ - $ 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%
750 750
Notes due 2026 at 1.125%
500 -
Notes due 2027 at 2.90%
500 500
Notes due 2029 at 2.25%
750 750
Notes due 2030 at 1.75%
750 750
Notes due 2031 at 1.90%
500 -
Notes due 2039 at 3.875%
750 750
Notes due 2048 at 4.15%
1,500 1,500
Notes due 2051 at 2.70%
500 -
Total debt 7,800 6,850
Net unamortized discounts, premiums and issuance costs (61) (52)
Total debt, including net unamortized discounts, premiums and issuance costs 7,739 6,798
Current portion of long-term debt (500) (550)
Long-term debt $ 7,239 $ 6,248
Interest and debt expense was $45 million and $49 million for the third quarters of 2021 and 2020, respectively, and $135 million and $142 million for the first nine months of 2021 and 2020, respectively. This was net of the amortized discounts, premiums and issuance costs. Capitalized interest was not material.
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
7. Stockholders' equity
Changes in equity are as follows:
Common Stock Paid-in Capital Retained Earnings Treasury Common Stock AOCI
Balance, December 31, 2020 $ 1,741 $ 2,333 $ 42,051 $ (36,578) $ (360)
2021
Net income - - 1,753 - -
Dividends declared and paid ($1.02 per share)
- - (940) - -
Common stock issued for stock-based awards - (3) - 199 -
Stock repurchases - - - (100) -
Stock compensation - 61 - - -
Other comprehensive income (loss), net of taxes - - - - 13
Dividend equivalents on RSUs - - (4) - -
Balance, March 31, 2021 1,741 2,391 42,860 (36,479) (347)
Net income - - 1,931 - -
Dividends declared and paid ($1.02 per share)
- - (942) - -
Common stock issued for stock-based awards - 25 - 29 -
Stock repurchases - - - (146) -
Stock compensation - 69 - - -
Other comprehensive income (loss), net of taxes - - - - 24
Dividend equivalents on RSUs - - (4) - -
Other - - 1 - -
Balance, June 30, 2021 1,741 2,485 43,846 (36,596) (323)
Net income - - 1,947 - -
Dividends declared and paid ($1.02 per share)
- - (942) - -
Common stock issued for stock-based awards - 27 - 48 -
Stock repurchases - - - (139) -
Stock compensation - 50 - - -
Other comprehensive income (loss), net of taxes - - - - 10
Dividend equivalents on RSUs - - (3) - -
Other - 1 (1) - -
Balance, September 30, 2021 $ 1,741 $ 2,563 $ 44,847 $ (36,687) $ (313)
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Common Stock Paid-in Capital Retained Earnings Treasury Common Stock AOCI
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 - (77) - 223 -
Stock repurchases - - - (1,730) -
Stock compensation - 63 - - -
Other comprehensive income (loss), net of taxes - - - - 19
Dividend equivalents on RSUs - - (4) - -
Balance, March 31, 2020 1,741 2,096 40,227 (36,002) (328)
Net income - - 1,380 - -
Dividends declared and paid ($0.90 per share)
- - (823) - -
Common stock issued for stock-based awards - 17 - 70 -
Stock repurchases - - - (793) -
Stock compensation - 69 - - -
Other comprehensive income (loss), net of taxes - - - - (6)
Dividend equivalents on RSUs - - (4) - -
Balance, June 30, 2020 1,741 2,182 40,780 (36,725) (334)
Net income - - 1,353 - -
Dividends declared and paid ($0.90 per share)
- - (825) - -
Common stock issued for stock-based awards - 26 - 97 -
Stock repurchases - - - (15) -
Stock compensation - 50 - - -
Other comprehensive income (loss), net of taxes - - - - (1)
Dividend equivalents on RSUs - - (3) - -
Other - (1) - - -
Balance, September 30, 2020 $ 1,741 $ 2,257 $ 41,305 $ (36,643) $ (335)

8. 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
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. 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 financial condition, results of operations or liquidity. 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.
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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 financial condition, results of operations or liquidity.
9. Supplemental financial information
Property, plant and equipment at cost
In October 2021, we completed our acquisition of Micron Technology's 300-millimeter semiconductor factory in Lehi, Utah, for cash consideration of about $900 million.
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 third quarters and first nine months of 2021 and 2020. The table below details where these transactions are recorded in our Consolidated Statements of Income.
For Three Months Ended For Nine Months Ended Impact to Related Statement of Income Lines
September 30, September 30,
2021 2020 2021 2020
Net actuarial losses of defined benefit plans:
Recognized net actuarial loss and settlement losses (a) $ 10 $ 9 $ 31 $ 28 Decrease to OI&E
Tax effect (2) (2) (7) (7) Decrease to provision for income taxes
Recognized within net income, net of taxes $ 8 $ 7 $ 24 $ 21 Decrease to net income
Prior service credit of defined benefit plans:
Amortization of prior service credit (a) $ (1) $ (1) $ (1) $ (1) Increase to OI&E
Tax effect - - - - Increase to provision for income taxes
Recognized within net income, net of taxes $ (1) $ (1) $ (1) $ (1) Increase to net income
(a)Detailed in Note 5.
Stock compensation
Total shares of 1,064,600 and 6,163,997 were issued from treasury shares during the third quarter and first nine months of 2021, respectively, related to stock compensation.
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ITEM 2. Management's discussion and analysis of financial condition and results of operations
Overview
We design, make and sell semiconductors to electronics designers and manufacturers all over the world. Technology is the foundation of our company, but ultimately, our objective and the best metric to measure progress and generate long-term value for owners is the growth of free cash flow per share.
Our strategy to maximize free cash flow per share growth has three elements:
1.A great business model that is focused on analog and embedded processing products and built around four sustainable competitive advantages. The four sustainable competitive advantages are powerful in combination and provide tangible benefits:
i.A strong foundation of manufacturing and technology that provides lower costs and greater control of our supply chain.
ii.A broad portfolio of analog and embedded processing products that offers more opportunity per customer and more value for our investments.
iii.The reach of our market channels that gives access to more customers and more of their design projects, leading to the opportunity to sell more of our products into each design and gives us better insight and knowledge of customer needs.
iv.Diversity and longevity of our products, markets and customer positions that provide less single point dependency and longer returns on our investments.
Together, these competitive advantages help position TI in a unique class of companies capable of generating and returning significant amounts of cash for our owners. We make our investments with an eye towards long-term strengthening and leveraging of these advantages.
2.Discipline in allocating capital to the best opportunities. This spans how we select R&D projects, develop new capabilities like TI.com, invest in new manufacturing capacity or how we think about acquisitions and returning cash to our owners.
3.Efficiency, which means constantly striving for more output for every dollar spent.
We believe that our business model with the combined effect of our four competitive advantages sets TI apart from our peers and will for a long time to come. We will invest to strengthen our competitive advantages, be disciplined in capital allocation and stay diligent in our pursuit of efficiencies. Finally, we will remain focused on the belief that long-term growth of free cash flow per share is the ultimate measure to generate value.
Management's discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with the financial statements and the related notes that appear elsewhere in this document. In the following discussion of our results of operations:
•Our segments represent groups of similar products that are combined on the basis of similar design and development requirements, product characteristics, manufacturing processes and distribution channels, and how management allocates resources and measures results. See Note 1 to the financial statements for more information regarding our segments.
•When we discuss our results:
◦Unless otherwise noted, changes in our revenue are attributable to changes in customer demand, which are evidenced by fluctuations in shipment volumes.
◦New products do not tend to have a significant impact on our revenue in any given period because we sell such a large number of products.
◦From time to time, our revenue and gross profit are affected by changes in demand for higher-priced or lower-priced products, which we refer to as changes in the "mix" of products shipped.
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◦Because we own much of our manufacturing capacity, a significant portion of our operating cost is fixed. When factory loadings decrease, our fixed costs are spread over reduced output and, absent other circumstances, our profit margins decrease. Conversely, as factory loadings increase, our fixed costs are spread over increased output and, absent other circumstances, our profit margins increase. Increases and decreases in factory loadings tend to correspond to increases and decreases in demand.
•For an explanation of free cash flow and the term "annual operating tax rate," see the Non-GAAP financial information section.
•All dollar amounts in the tables are stated in millions of U.S. dollars.
The coronavirus (COVID-19) pandemic and its effects are impacting and will likely continue to impact market conditions and business operations across industries worldwide, including at TI. Therefore, we remain cautious about how the economy might behave for the next few years and continue to monitor potential impact on our operations.
Performance summary
Our third quarter revenue was $4.64 billion, net income was $1.95 billion and earnings per share (EPS) were $2.07.
Revenue increased 22% from the same quarter a year ago due to strong demand in industrial, automotive and personal electronics. Analog revenue grew 24% and Embedded Processing grew 13% from the same quarter a year ago.
Our cash flow from operations of $8.5 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the same period was $7.1 billion and 41% 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 production.
We returned $4.2 billion to shareholders in the past 12 months through dividends and stock repurchases. Over the same period, our dividend represented 53% of free cash flow, underscoring its sustainability. In September, we announced we would increase our dividend by 13%.
Results of operations - third quarter 2021 compared with third quarter 2020
Revenue of $4.64 billion increased $826 million, or 22%, due to higher revenue from Analog and, to a lesser extent, Embedded Processing.
Gross profit of $3.15 billion was up $699 million, or 28%, primarily due to higher revenue. As a percentage of revenue, gross profit increased to 67.9% from 64.3%.
Operating expenses (R&D and SG&A) were $800 million compared with $793 million.
Acquisition charges were $47 million compared with $51 million and were non-cash.
Operating profit was $2.31 billion, or 49.6% of revenue, compared with $1.61 billion, or 42.2% of revenue.
OI&E was $15 million of income compared with $27 million of income.
Our provision for income taxes was $328 million compared with $234 million. This increase was due to higher income before income taxes. Our annual operating tax rate, which does not include discrete tax items, was 14% in both periods. We use "annual operating tax rate" to describe the estimated annual effective tax rate, which differs from the 21% U.S. statutory corporate tax rate due to the effect of U.S. tax benefits.
Net income was $1.95 billion compared with $1.35 billion. EPS was $2.07 compared with $1.45.
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Third quarter 2021 segment results
Our segment results compared with the year-ago quarter are as follows:
Analog (includes Power and Signal Chain product lines)
Q3 2021 Q3 2020 Change
Revenue $ 3,548 $ 2,865 24 %
Operating profit 1,871 1,320 42 %
Operating profit % of revenue 52.7 % 46.1 %
Analog revenue increased in both product lines, led by Signal Chain. Operating profit increased primarily due to higher revenue and associated gross profit.
Embedded Processing (includes microcontrollers and processors)
Q3 2021 Q3 2020 Change
Revenue $ 738 $ 651 13 %
Operating profit 282 187 51 %
Operating profit % of revenue 38.2 % 28.7 %
Embedded Processing revenue increased. Operating profit increased primarily due to higher revenue and associated gross profit.
Other (includes DLP®products, calculators and custom ASIC products)
Q3 2021 Q3 2020 Change
Revenue $ 357 $ 301 19 %
Operating profit* 152 102 49 %
Operating profit % of revenue 42.6 % 33.9 %
* Includes acquisition charges and restructuring charges/other
Other revenue increased $56 million, and operating profit increased $50 million.
Results of operations - first nine months of 2021 compared with first nine months of 2020
Revenue of $13.51 billion increased $3.13 billion, or 30%, due to higher revenue from Analog and, to a lesser extent, Embedded Processing.
Gross profit of $9.03 billion was up $2.40 billion, or 36%, primarily due to higher revenue. As a percentage of revenue, gross profit increased to 66.8% from 63.8%.
Operating expenses were $2.43 billion compared with $2.37 billion.
Acquisition charges were $142 million compared with $151 million and were non-cash.
Operating profit was $6.46 billion, or 47.8% of revenue, compared with $4.08 billion, or 39.3% of revenue.
OI&E was $134 million of income compared with $151 million of income.
Our provision for income taxes was $825 million compared with $183 million. This increase was due to higher income before income taxes and lower discrete tax benefits compared to the year-ago period, which included a $249 million benefit from the settlement of a depreciation-related uncertain tax position.
Net income was $5.63 billion compared with $3.91 billion. EPS was $5.99 compared with $4.17.
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Year-to-date segment results
Our segment results compared with the year-ago period are as follows:
Analog
YTD 2021 YTD 2020 Change
Revenue $ 10,292 $ 7,759 33 %
Operating profit 5,295 3,398 56 %
Operating profit % of revenue 51.4 % 43.8 %
Analog revenue increased in both product lines, led by Signal Chain. Operating profit increased due to higher revenue and associated gross profit.
Embedded Processing
YTD 2021 YTD 2020 Change
Revenue $ 2,285 $ 1,850 24 %
Operating profit 881 494 78 %
Operating profit % of revenue 38.6 % 26.7 %
Embedded Processing revenue increased. Operating profit increased primarily due to higher revenue and associated gross profit.
Other
YTD 2021 YTD 2020 Change
Revenue $ 935 $ 776 20 %
Operating profit* 281 189 49 %
Operating profit % of revenue 30.1 % 24.4 %
* Includes acquisition charges and restructuring charges/other
Other revenue increased $159 million, and operating profit increased $92 million.
Financial condition
At the end of the third quarter of 2021, total cash (cash and cash equivalents plus short-term investments) was $9.78 billion, an increase of $3.21 billion from the end of 2020.
Accounts receivable were $1.65 billion, an increase of $239 million compared with the end of 2020. Days sales outstanding for the third quarter of 2021 were 32 compared with 31 at the end of 2020.
Inventory was $1.86 billion, a decrease of $92 million from the end of 2020. Days of inventory for the third quarter of 2021 were 112 compared with 123 at the end of 2020.
Liquidity and capital resources
Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and a variable-rate, revolving credit facility. Cash flows from operating activities for the first nine months of 2021 were $6.40 billion, an increase of $2.39 billion from the year-ago period due to higher net income and lower cash used for working capital.
Our revolving credit facility is with a consortium of investment-grade banks and allows us to borrow up to $2 billion until March 2024. This credit facility also serves as support for the issuance of commercial paper. As of September 30, 2021, our credit facility was undrawn, and we had no commercial paper outstanding.
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Investing activities for the first nine months of 2021 used $1.87 billion compared with providing cash of $74 million in the year-ago period. Capital expenditures were $1.18 billion compared with $437 million in the year-ago period and were primarily for semiconductor manufacturing equipment and facilities in both periods. We expect our capital expenditures to continue to increase in future periods. Short-term investments used cash of $657 million compared with providing cash of $523 million in the year-ago period.
Financing activities for the first nine months of 2021 used $1.98 billion compared with $3.70 billion in the year-ago period. In 2021, we received net proceeds of $1.50 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $550 million. In the year-ago period, we received net proceeds of $1.50 billion from the issuance of fixed-rate, long-term debt, and we retired maturing debt of $500 million. Dividends paid were $2.82 billion compared with $2.49 billion in the year-ago period, reflecting an increase in the dividend rate. We used $385 million to repurchase 2.1 million shares of our common stock compared with $2.54 billion used in the year-ago period to repurchase 23.3 million shares. Employee exercises of stock options provided cash proceeds of $325 million compared with $356 million in the year-ago period.
We had $5.66 billion of cash and cash equivalents and $4.12 billion of short-term investments as of September 30, 2021. We believe we have the necessary financial resources and operating plans to fund our working capital needs, capital expenditures, dividend and debt-related payments, and other business requirements for at least the next 12 months.
In October 2021, we completed our acquisition of Micron Technology's 300-millimeter semiconductor factory in Lehi, Utah, for cash consideration of about $900 million.
Non-GAAP financial information
This MD&A includes references to free cash flow and ratios based on that measure. These are financial measures that were not prepared in accordance with generally accepted accounting principles in the United States (GAAP). Free cash flow was calculated by subtracting capital expenditures from the most directly comparable GAAP measure, cash flows from operating activities (also referred to as cash flow from operations).
We believe that free cash flow and the associated ratios provide insight into our liquidity, our cash-generating capability and the amount of cash potentially available to return to shareholders, as well as insight into our financial performance. These non-GAAP measures are supplemental to the comparable GAAP measures.
Reconciliation to the most directly comparable GAAP measures is provided in the table below.
For 12 Months Ended
September 30,
2021 2020 Change
Cash flow from operations (GAAP) $ 8,524 $ 5,768 48 %
Capital expenditures (1,392) (600)
Free cash flow (non-GAAP) $ 7,132 $ 5,168 38 %
Revenue $ 17,588 $ 13,735
Cash flow from operations as a percentage of revenue (GAAP) 48.5 % 42.0 %
Free cash flow as a percentage of revenue (non-GAAP) 40.6 % 37.6 %
This MD&A also includes references to an annual operating tax rate, a non-GAAP term we use to describe the estimated annual effective tax rate, a GAAP measure that by definition does not include discrete tax items. We believe the term annual operating tax rate helps differentiate from the effective tax rate, which includes discrete tax items.
Long-term contractual obligations
Information regarding long-term contractual obligations is in Item 7 of our Form 10-K for the year ended December 31, 2020. Additionally, in September 2021, we issued $500 million principal amount of 1.125% notes maturing in 2026, $500 million principal amount of 1.90% notes maturing in 2031 and $500 million principal amount of 2.70% notes maturing in 2051. We retired $550 million of maturing debt in February 2021.
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ITEM 4. Controls and procedures
An evaluation as of the end of the period covered by this report was carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that those disclosure controls and procedures were effective. In addition, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1A. Risk factors
Information concerning our risk factors is contained in Item 1A of our Form 10-K for the year ended December 31, 2020, and is incorporated by reference herein.
ITEM 2. Unregistered sales of equity securities and use of proceeds
The following table contains information regarding our purchases of our common stock during the quarter.
ISSUER PURCHASES OF EQUITY SECURITIES
Period Total Number of Shares Purchased Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)
July 1, 2021 through July 31, 2021 264,068 $ 187.33 245,473 $ 10.34 billion
August 1, 2021 through August 31, 2021 378,737 188.82 378,737 10.27 billion
September 1, 2021 through September 30, 2021 112,060 189.21 112,060 10.25 billion
Total 754,865 (b) $ 188.36 (b) 736,270 $ 10.25 billion (c)

(a)All open-market purchases during the quarter were made under the authorization from our board of directors to purchase up to $12.0 billion of additional shares of TI common stock announced September 20, 2018.

(b)In addition to open-market purchases, 18,595 shares of common stock were surrendered by employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units.

(c)As of September 30, 2021, this amount consisted of the remaining portion of the $12.0 billion authorized in September 2018. No expiration date has been specified for this authorization.
ITEM 5. Other information
Section 13(r) of the Securities Exchange Act of 1934 disclosure

During the period covered by this report and as permitted by General License 1B from the U.S. Office of Foreign Assets Control, we engaged with the Russian Federal Security Service (FSB) solely to permit the import, distribution and use of certain of our catalog semiconductor products in Russia. No gross revenue or net profit is directly attributable to these engagements with the FSB, and we intend to continue them to the extent permitted by law.
22

ITEM 6. Exhibits
Designation of Exhibits in This Report Description of Exhibit
3(a)
3(b)
4(a)
31(a)
Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a).†
31(b)
Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a).†
32(a)
Certification by Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.†
32(b)
Certification by Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.†
101.ins XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.†
101.def XBRL Taxonomy Extension Definition Linkbase Document.†
101.sch XBRL Taxonomy Extension Schema Document.†
101.cal XBRL Taxonomy Extension Calculation Linkbase Document.†
101.lab XBRL Taxonomy Extension Label Linkbase Document.†
101.pre XBRL Taxonomy Extension Presentation Linkbase Document.†
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).†
† Filed or furnished herewith.

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Notice regarding forward-looking statements
This report includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as TI or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements herein that describe TI's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements.
We urge you to carefully consider the following important factors that could cause actual results to differ materially from the expectations of TI or our management:
•The duration and scope of the COVID-19 pandemic, government and other third-party responses to it and the consequences for the global economy, including to our business and the businesses of our suppliers, customers and distributors;
•Economic, social and political conditions, and natural events in the countries in which we, our customers or our suppliers operate, including global trade policies;
•Market demand for semiconductors, particularly in the industrial and automotive markets, and customer demand that differs from forecasts;
•Our ability to compete in products and prices in an intensely competitive industry;
•Evolving cybersecurity and other threats relating to our information technology systems or those of our customers or suppliers;
•Our ability to successfully implement and realize opportunities from strategic, business and organizational changes, or our ability to realize our expectations regarding the amount and timing of associated restructuring charges and cost savings;
•Our ability to develop, manufacture and market innovative products in a rapidly changing technological environment, and our timely implementation of new manufacturing technologies and installation of manufacturing equipment;
•Availability and cost of raw materials, utilities, manufacturing equipment, third-party manufacturing services and manufacturing technology;
•Product liability, warranty or other claims relating to our products, manufacturing, delivery, services, design or communications, or recalls by our customers for a product containing one of our parts;
•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 operate our business or subject us to fines, penalties or other legal liability;
•Changes in tax law and accounting standards that 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 semiconductor distributors' promotion of competing product lines to our detriment; or disputes with current or former distributors;
•Losses or curtailments of purchases from key customers or the timing and amount of distributor and other customer inventory adjustments;
•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 changing 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;
•Increases in health care and pension benefit costs;
•Our ability to recruit and retain skilled personnel, and effectively manage key employee succession; and
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•Impairments of our non-financial assets.
For a more detailed discussion of these factors, see the Risk factors discussion in Item 1A of our most recent Form 10-K. The forward-looking statements included in this report are made only as of the date of this report, and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances. If we do update any forward-looking statement, you should not infer that we will make additional updates with respect to that statement or any other forward-looking statement.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ Rafael R. Lizardi
Rafael R. Lizardi
Senior Vice President and
Chief Financial Officer
Date: October 27, 2021