•

“Revenue increased 12 percent from the same quarter a year ago. Demand for our products continued to be strong in the industrial and automotive markets.

•

“In our core businesses, Analog revenue grew 16 percent and Embedded Processing revenue grew 17 percent from the same quarter a year ago. Operating margin increased in both businesses.

•

“Gross margin of 64.5 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 $4.8 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the trailing 12 months was $4.2 billion and represents 29.0 percent of revenue.

•

“We have returned $4.3 billion to owners in the past 12 months through dividends and stock repurchases. In September, we announced we would increase our dividend by 24 percent and also increased our share repurchase authorizations by $6 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 $3.57 billion to $3.87 billion, and earnings per share between $1.01 and $1.15, which includes an estimated $20 million discrete tax benefit.”

3Q17

3Q16

Change

Revenue

$

4,116

$

3,675

12

%

Operating profit

$

1,788

$

1,408

27

%

Net income

$

1,285

$

1,018

26

%

Earnings per share

$

1.26

$

0.98

29

%

TI reports 3Q17 financial results and shareholder returns

Page 2

Trailing 12 Months

3Q17

3Q17

3Q16

Change

Cash flow from operations

$

1,722

$

4,821

$

4,673

3

%

Capital expenditures

$

186

$

574

$

585

-2

%

Free cash flow

$

1,536

$

4,247

$

4,088

4

%

Free cash flow % of revenue

29.0

%

31.1

%

Trailing 12 Months

3Q17

3Q17

3Q16

Change

Dividends paid

$

495

$

1,992

$

1,533

30

%

Stock repurchases

$

650

$

2,325

$

2,284

2

%

Total cash returned

$

1,145

$

4,317

$

3,817

13

%

TI reports 3Q17 financial results and shareholder returns

Page 3

For Three Months Ended

September 30,

2017

2016

Revenue

$

4,116

$

3,675

Cost of revenue (COR)

1,460

1,391

Gross profit

2,656

2,284

Research and development (R&D)

375

353

Selling, general and administrative (SG&A)

412

442

Acquisition charges

80

80

Restructuring charges/other

1

1

Operating profit

1,788

1,408

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

20

(9

)

Interest and debt expense

19

18

Income before income taxes

1,789

1,381

Provision for income taxes

504

363

Net income

$

1,285

$

1,018

Diluted earnings per common share

$

1.26

$

.98

Average shares outstanding (millions):

Basic

988

1,003

Diluted

1,008

1,023

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)

$

542

$

418

Discrete tax items

(38

)

(55

)

Provision for income taxes (effective taxes)

$

504

$

363

Annual operating tax rate

31

%

30

%

Effective tax rate

28

%

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

$

1,285

$

1,018

Income allocated to RSUs

(11

)

(11

)

Income allocated to common stock for diluted EPS

$

1,274

$

1,007

TI reports 3Q17 financial results and shareholder returns

Page 4

September 30,

2017

2016

Assets

Current assets:

Cash and cash equivalents

$

1,296

$

1,369

Short-term investments

2,148

1,768

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

1,576

1,447

Raw materials

120

104

Work in process

1,103

949

Finished goods

685

755

Inventories

1,908

1,808

Prepaid expenses and other current assets

1,063

789

Total current assets

7,991

7,181

Property, plant and equipment at cost

4,668

4,982

Accumulated depreciation

(2,101

)

(2,437

)

Property, plant and equipment, net

2,567

2,545

Long-term investments

258

233

Goodwill, net

4,362

4,362

Acquisition-related intangibles, net

1,025

1,344

Deferred income taxes

414

355

Capitalized software licenses, net

111

50

Overfunded retirement plans

112

64

Other assets

89

82

Total assets

$

16,929

$

16,216

Liabilities and stockholders’ equity

Current liabilities:

Current portion of long-term debt

$

499

$

634

Accounts payable

430

428

Accrued compensation

635

647

Income taxes payable

74

68

Accrued expenses and other liabilities

417

393

Total current liabilities

2,055

2,170

Long-term debt

3,084

2,977

Underfunded retirement plans

108

201

Deferred income taxes

38

35

Deferred credits and other liabilities

656

547

Total liabilities

5,941

5,930

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

1,718

1,624

Retained earnings

34,935

32,565

Treasury common stock at cost

Shares: September 30, 2017 – 754,459,144; September 30, 2016 – 739,693,480

(26,901

)

(25,102

)

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

(505

)

(542

)

Total stockholders’ equity

10,988

10,286

Total liabilities and stockholders’ equity

$

16,929

$

16,216

TI reports 3Q17 financial results and shareholder returns

Page 5

For Three Months Ended

September 30,

2017

2016

Cash flows from operating activities

Net income

$

1,285

$

1,018

Adjustments to Net income:

Depreciation

133

150

Amortization of acquisition-related intangibles

80

80

Amortization of capitalized software

12

7

Stock compensation

54

56

Deferred income taxes

(2

)

(125

)

Increase (decrease) from changes in:

Accounts receivable

(106

)

(98

)

Inventories

39

68

Prepaid expenses and other current assets

31

95

Accounts payable and accrued expenses

47

14

Accrued compensation

140

149

Income taxes payable

10

47

Changes in funded status of retirement plans

31

24

Other

(32

)

(20

)

Cash flows from operating activities

1,722

1,465

Cash flows from investing activities

Capital expenditures

(186

)

(139

)

Purchases of short-term investments

(1,218

)

(978

)

Proceeds from short-term investments

920

515

Other

(4

)

(1

)

Cash flows from investing activities

(488

)

(603

)

Cash flows from financing activities

Dividends paid

(495

)

(382

)

Stock repurchases

(650

)

(500

)

Proceeds from common stock transactions

76

154

Other

(9

)

—

Cash flows from financing activities

(1,078

)

(728

)

Net change in Cash and cash equivalents

156

134

Cash and cash equivalents at beginning of period

1,140

1,235

Cash and cash equivalents at end of period

$

1,296

$

1,369

TI reports 3Q17 financial results and shareholder returns

Page 6

3Q17

3Q16

Change

Analog:

Revenue

$

2,698

$

2,323

16

%

Operating profit

$

1,268

$

957

32

%

Embedded Processing:

Revenue

$

931

$

795

17

%

Operating profit

$

325

$

224

45

%

Other:

Revenue

$

487

$

557

-13

%

Operating profit*

$

195

$

227

-14

%

•

Revenue increased due to Power and Signal Chain. High Volume was about even.

•

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

•

Revenue increased in Processors and Connected Microcontrollers.

•

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

•

Revenue decreased by $70 million, and operating profit declined by $32 million.  

TI reports 3Q17 financial results and shareholder returns

Page 7

For 12 Months Ended

September 30,

2017

2016

Change

Cash flow from operations (GAAP)

$

4,821

$

4,673

3

%

Capital expenditures

(574

)

(585

)

Free cash flow (non-GAAP)

$

4,247

$

4,088

4

%

Revenue

$

14,625

$

13,145

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

33.0

%

35.5

%

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

29.0

%

31.1

%

TI reports 3Q17 financial results and shareholder returns

Page 8

•

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;

TI reports 3Q17 financial results and shareholder returns

Page 9

•

Increases in health care and pension benefit costs;

•

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.