10-Q 1 txn-20210930.htm 10-Q txn-20210930
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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)
Delaware75-0289970
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1.00TXNThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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 EndedFor Nine Months Ended
Consolidated Statements of IncomeSeptember 30,September 30,
(Millions of dollars, except share and per-share amounts)2021202020212020
Revenue$4,643 $3,817 $13,512 $10,385 
Cost of revenue (COR)1,491 1,364 4,486 3,762 
Gross profit3,152 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 charges47 51 142 151 
Restructuring charges/other   24 
Operating profit2,305 1,609 6,457 4,081 
Other income (expense), net (OI&E)15 27 134 151 
Interest and debt expense45 49 135 142 
Income before income taxes2,275 1,587 6,456 4,090 
Provision for income taxes328 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):    
Basic923 917 923 921 
Diluted936 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.    

2

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
 For Three Months EndedFor Nine Months Ended
Consolidated Statements of Comprehensive IncomeSeptember 30,September 30,
(Millions of dollars)2021202020212020
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 taxes10 (1)47 12 
Total comprehensive income$1,957 $1,352 $5,678 $3,919 
See accompanying notes.    

3

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
September 30,December 31,
Consolidated Balance Sheets20212020
(Millions of dollars, except share amounts)  
Assets  
Current assets:  
Cash and cash equivalents$5,663 $3,107 
Short-term investments4,119 3,461 
Accounts receivable, net of allowances of ($9) and ($11)
1,653 1,414 
Raw materials224 180 
Work in process1,034 964 
Finished goods605 811 
Inventories1,863 1,955 
Prepaid expenses and other current assets287 302 
Total current assets13,585 10,239 
Property, plant and equipment at cost6,661 5,781 
Accumulated depreciation(2,640)(2,512)
Property, plant and equipment4,021 3,269 
Goodwill4,362 4,362 
Acquisition-related intangibles9 152 
Deferred tax assets309 343 
Capitalized software licenses88 122 
Overfunded retirement plans252 246 
Other long-term assets647 618 
Total assets$23,273 $19,351 
Liabilities and stockholders’ equity  
Current liabilities:  
Current portion of long-term debt$500 $550 
Accounts payable596 415 
Accrued compensation665 767 
Income taxes payable101 134 
Accrued expenses and other liabilities551 524 
Total current liabilities2,413 2,390 
Long-term debt7,239 6,248 
Underfunded retirement plans129 131 
Deferred tax liabilities86 90 
Other long-term liabilities1,255 1,305 
Total liabilities11,122 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 capital2,563 2,333 
Retained earnings44,847 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’ equity12,151 9,187 
Total liabilities and stockholders’ equity$23,273 $19,351 
  
See accompanying notes.  

4

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
 For Nine Months Ended
Consolidated Statements of Cash FlowsSeptember 30,
(Millions of dollars)20212020
Cash flows from operating activities  
Net income$5,631 $3,907 
Adjustments to net income:
Depreciation555 553 
Amortization of acquisition-related intangibles142 151 
Amortization of capitalized software44 45 
Stock compensation180 182 
Gains on sales of assets(7)(3)
Deferred taxes19 (115)
Increase (decrease) from changes in:
Accounts receivable(239)(318)
Inventories92 (71)
Prepaid expenses and other current assets99  
Accounts payable and accrued expenses87 60 
Accrued compensation(103)(48)
Income taxes payable(54)(316)
Changes in funded status of retirement plans48 16 
Other(95)(29)
Cash flows from operating activities6,399 4,014 
Cash flows from investing activities  
Capital expenditures(1,180)(437)
Proceeds from asset sales7 3 
Purchases of short-term investments(6,427)(3,435)
Proceeds from short-term investments5,770 3,958 
Other(36)(15)
Cash flows from investing activities(1,866)74 
Cash flows from financing activities  
Proceeds from issuance of long-term debt1,495 1,498 
Repayment of debt(550)(500)
Dividends paid(2,824)(2,489)
Stock repurchases(385)(2,538)
Proceeds from common stock transactions325 356 
Other(38)(30)
Cash flows from financing activities(1,977)(3,703)
Net change in cash and cash equivalents2,556 385 
Cash and cash equivalents at beginning of period3,107 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 EndedFor Nine Months Ended
September 30,September 30,
 2021202020212020
Revenue:    
Analog$3,548 $2,865 $10,292 $7,759 
Embedded Processing738 651 2,285 1,850 
Other357 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 Processing282 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 EndedFor Nine Months Ended
September 30,September 30,
2021202020212020
Revenue:
United States$515 $440 $1,437 $1,179 
Asia (a)3,082 2,555 8,933 6,756 
Europe, Middle East and Africa683 578 2,061 1,648 
Japan242 140 716 523 
Rest of world121 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,
 20212020
Net IncomeSharesEPSNet IncomeSharesEPS
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 plans13  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,
20212020
Net IncomeSharesEPSNet IncomeSharesEPS
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 plans13 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.
8

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 EndedFor Nine Months Ended
September 30,September 30,
 2021202020212020
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 rate14 %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 considerations below. 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.
9

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Details of our investments are as follows:
 September 30, 2021December 31, 2020
Cash and Cash EquivalentsShort-Term InvestmentsLong-Term InvestmentsCash and Cash EquivalentsShort-Term InvestmentsLong-Term Investments
Measured at fair value:      
Money market funds$2,132 $ $ $886 $ $ 
Corporate obligations1,136 1,109  256 257  
U.S. government and agency securities1,140 2,587  1,340 3,054  
Non-U.S. government and agency securities385 423   150  
Mutual funds  15   18 
Total4,793 4,119 15 2,482 3,461 18 
Other measurement basis:
Equity-method investments  54   27 
Non-marketable equity investments  4   4 
Cash on hand870   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, 2021December 31, 2020
 Level 1Level 2TotalLevel 1Level 2Total
Assets:      
Money market funds$2,132 $ $2,132 $886 $ $886 
Corporate obligations 2,245 2,245  513 513 
U.S. government and agency securities3,326 401 3,727 4,394  4,394 
Non-U.S. government and agency securities 808 808  150 150 
Mutual funds15  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 BenefitU.S. Retiree Health CareNon-U.S. Defined Benefit
For Three Months Ended September 30,202120202021202020212020
Service cost$5 $5 $ $1 $9 $9 
Interest cost8 7 3 3 9 9 
Expected return on plan assets(8)(9)(2)(2)(20)(20)
Recognized net actuarial loss3 1   2 4 
Amortization of prior service cost (credit)  (1)(1)  
Net periodic benefit costs8 4  1  2 
Settlement losses4 3   1 1 
Total, including other postretirement losses$12 $7 $ $1 $1 $3 
U.S. Defined BenefitU.S. Retiree Health CareNon-U.S. Defined Benefit
For Nine Months Ended September 30,202120202021202020212020
Service cost$16 $14 $2 $2 $27 $25 
Interest cost23 24 8 9 28 28 
Expected return on plan assets(25)(27)(8)(8)(61)(58)
Recognized net actuarial loss11 5   6 11 
Amortization of prior service cost (credit)  (1)(1)  
Net periodic benefit costs25 16 1 2  6 
Settlement losses12 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,
20212020
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