10-Q 1 txn-20220930.htm 10-Q txn-20220930
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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, 2022
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 ☒
907,571,712
Number of shares of Registrant’s common stock outstanding as of
October 18, 2022


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,
(In millions, except per-share amounts)2022202120222021
Revenue$5,241 $4,643 $15,358 $13,512 
Cost of revenue (COR)1,624 1,491 4,674 4,486 
Gross profit3,617 3,152 10,684 9,026 
Research and development (R&D)431 388 1,236 1,165 
Selling, general and administrative (SG&A)431 412 1,275 1,262 
Acquisition charges 47  142 
Restructuring charges/other77  209  
Operating profit2,678 2,305 7,964 6,457 
Other income (expense), net (OI&E)33 15 55 134 
Interest and debt expense53 45 154 135 
Income before income taxes2,658 2,275 7,865 6,456 
Provision for income taxes363 328 1,078 825 
Net income$2,295 $1,947 $6,787 $5,631 
Earnings per common share (EPS):    
Basic$2.50 $2.10 $7.35 $6.08 
Diluted$2.47 $2.07 $7.27 $5.99 
Average shares outstanding:    
Basic913 923 919 923 
Diluted923 936 929 936 
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$2,295 $1,947 $6,787 $5,631 
Income allocated to RSUs(11)(9)(30)(24)
Income allocated to common stock for diluted EPS$2,284 $1,938 $6,757 $5,607 
See accompanying notes.    

2

TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
 For Three Months EndedFor Nine Months Ended
Consolidated Statements of Comprehensive IncomeSeptember 30,September 30,
(In millions)2022202120222021
Net income$2,295 $1,947 $6,787 $5,631 
Other comprehensive income (loss)    
Net actuarial losses of defined benefit plans:    
Adjustments, net of tax effect of ($4) and ($1); $2 and ($8)
11 3 (23)24 
Recognized within net income, net of tax effect of ($4) and ($2); ($9) and ($7)
15 8 33 24 
Prior service credit of defined benefit plans:    
Adjustments, net of tax effect of $0 and $0; $0 and $0
1  1  
Recognized within net income, net of tax effect of $0 and $0; $0 and $0
(1)(1)(1)(1)
Derivative instruments:    
Change in fair value, net of tax effect of $0 and $0; $0 and $0
1  1  
Available-for-sale investments:
Unrealized losses, net of tax effect of $0 and $0; $2 and $0
(1) (8) 
Other comprehensive income (loss), net of taxes26 10 3 47 
Total comprehensive income$2,321 $1,957 $6,790 $5,678 
See accompanying notes.    

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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
September 30,December 31,
Consolidated Balance Sheets20222021
(In millions, except par value)  
Assets  
Current assets:  
Cash and cash equivalents$3,169 $4,631 
Short-term investments5,921 5,108 
Accounts receivable, net of allowances of ($10) and ($8)
2,040 1,701 
Raw materials333 245 
Work in process1,347 1,067 
Finished goods724 598 
Inventories2,404 1,910 
Prepaid expenses and other current assets238 335 
Total current assets13,772 13,685 
Property, plant and equipment at cost9,491 7,858 
Accumulated depreciation(3,006)(2,717)
Property, plant and equipment6,485 5,141 
Goodwill4,362 4,362 
Deferred tax assets291 263 
Capitalized software licenses75 85 
Overfunded retirement plans273 392 
Other long-term assets799 748 
Total assets$26,057 $24,676 
Liabilities and stockholders’ equity  
Current liabilities:  
Current portion of long-term debt$499 $500 
Accounts payable780 571 
Accrued compensation662 775 
Income taxes payable123 121 
Accrued expenses and other liabilities734 602 
Total current liabilities2,798 2,569 
Long-term debt7,438 7,241 
Underfunded retirement plans69 79 
Deferred tax liabilities92 87 
Other long-term liabilities1,153 1,367 
Total liabilities11,550 11,343 
Stockholders’ equity:  
Preferred stock, $25 par value. Shares authorized – 10; none issued
  
Common stock, $1 par value. Shares authorized – 2,400; shares issued – 1,741
1,741 1,741 
Paid-in capital2,877 2,630 
Retained earnings49,519 45,919 
Treasury common stock at cost  
Shares: September 30, 2022 – 831; December 31, 2021 – 817
(39,476)(36,800)
Accumulated other comprehensive income (loss), net of taxes (AOCI)(154)(157)
Total stockholders’ equity14,507 13,333 
Total liabilities and stockholders’ equity$26,057 $24,676 
  
See accompanying notes.  
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
 For Nine Months Ended
Consolidated Statements of Cash FlowsSeptember 30,
(In millions)20222021
Cash flows from operating activities  
Net income$6,787 $5,631 
Adjustments to net income:
Depreciation676 555 
Amortization of acquisition-related intangibles 142 
Amortization of capitalized software40 44 
Stock compensation227 180 
Gains on sales of assets(3)(7)
Deferred taxes(18)19 
Increase (decrease) from changes in:
Accounts receivable(339)(239)
Inventories(494)92 
Prepaid expenses and other current assets45 99 
Accounts payable and accrued expenses72 87 
Accrued compensation(114)(103)
Income taxes payable26 (54)
Changes in funded status of retirement plans126 48 
Other(353)(95)
Cash flows from operating activities6,678 6,399 
Cash flows from investing activities  
Capital expenditures(1,830)(1,180)
Proceeds from asset sales3 7 
Purchases of short-term investments(10,795)(6,427)
Proceeds from short-term investments10,007 5,770 
Other59 (36)
Cash flows from investing activities(2,556)(1,866)
Cash flows from financing activities  
Proceeds from issuance of long-term debt695 1,495 
Repayment of debt(500)(550)
Dividends paid(3,174)(2,824)
Stock repurchases(2,767)(385)
Proceeds from common stock transactions191 325 
Other(29)(38)
Cash flows from financing activities(5,584)(1,977)
Net change in cash and cash equivalents(1,462)2,556 
Cash and cash equivalents at beginning of period4,631 3,107 
Cash and cash equivalents at end of period$3,169 $5,663 
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,
 2022202120222021
Revenue:    
Analog$3,993 $3,548 $11,801 $10,292 
Embedded Processing821 738 2,424 2,285 
Other427 357 1,133 935 
Total revenue$5,241 $4,643 $15,358 $13,512 
Operating profit:
Analog$2,185 $1,871 $6,561 $5,295 
Embedded Processing321 282 960 881 
Other (a)172 152 443 281 
Total operating profit$2,678 $2,305 $7,964 $6,457 
(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,
2022202120222021
Revenue:
United States$694 $515 $1,765 $1,437 
Asia (a)3,135 3,082 9,733 8,933 
Europe, Middle East and Africa942 683 2,578 2,061 
Japan310 242 849 716 
Rest of world160 121 433 365 
Total revenue$5,241 $4,643 $15,358 $13,512 
(a)Revenue from products shipped into China was $2.4 billion and $2.5 billion in the third quarters of 2022 and 2021, respectively, and $7.7 billion and $7.3 billion in the first nine months of 2022 and 2021, 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, 2021. The Consolidated Statements of Income, Comprehensive Income and Cash Flows for the periods ended September 30, 2022 and 2021, and the Consolidated Balance Sheet as of September 30, 2022, 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, 2021. Certain amounts in prior periods' financial statements have been reclassified to conform to the current presentation. 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:
 For Three Months Ended September 30,
 20222021
Net IncomeSharesEPSNet IncomeSharesEPS
Basic EPS:      
Net income$2,295   $1,947   
Income allocated to RSUs(11)  (9)  
Income allocated to common stock$2,284 913 $2.50 $1,938 923 $2.10 
Dilutive effect of stock compensation plans10  13 
Diluted EPS: 
Net income$2,295  $1,947 
Income allocated to RSUs(11) (9)
Income allocated to common stock$2,284 923 $2.47 $1,938 936 $2.07 
For Nine Months Ended September 30,
20222021
Net IncomeSharesEPSNet IncomeSharesEPS
Basic EPS:
Net income$6,787 $5,631 
Income allocated to RSUs(30)(23)
Income allocated to common stock$6,757 919 $7.35 $5,608 923 $6.08 
Dilutive effect of stock compensation plans10 13 
Diluted EPS:
Net income$6,787 $5,631 
Income allocated to RSUs(30)(24)
Income allocated to common stock$6,757 929 $7.27 $5,607 936 $5.99 
Potentially dilutive securities representing 6 million and 2 million shares of common stock that were outstanding during the third quarters of 2022 and 2021, respectively, and 5 million and 3 million shares outstanding during the first nine months of 2022 and 2021, 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, 2022. 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, 2022, the carrying value of long-term debt, including the current portion, was $7.94 billion, and the estimated fair value was $6.91 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
Provision for income taxes is based on the following:
For Three Months EndedFor Nine Months Ended
September 30,September 30,
 2022202120222021
Taxes calculated using the estimated annual effective tax rate$391 $337 $1,147 $934 
Discrete tax items(28)(9)(69)(109)
Provision for income taxes$363 $328 $1,078 $825 
Effective tax rate14 %14 %14 %13 %
The effective tax rate differs from the 21% U.S. statutory corporate tax rate due to the effect of U.S. tax benefits.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (IRA), which introduces a new 15% corporate minimum tax effective January 1, 2023, based on adjusted financial statement income. Based on our current analysis of the provisions, we do not believe this legislation will have a material impact on our consolidated financial statements.
4. Valuation of debt and equity investments and certain liabilities
Investments measured at fair value
Money market funds, available-for-sale debt investments and mutual funds are stated at fair value, which is generally based on market prices or broker quotes. See Fair-value considerations. 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, 2022December 31, 2021
Cash and Cash EquivalentsShort-Term InvestmentsLong-Term InvestmentsCash and Cash EquivalentsShort-Term InvestmentsLong-Term Investments
Measured at fair value:      
Money market funds$1,043 $ $ $1,824 $ $ 
Corporate obligations596 1,272  1,060 1,070  
U.S. government and agency securities798 4,301  642 3,388  
Non-U.S. government and agency securities50 348  300 650  
Mutual funds  11   16 
Total2,487 5,921 11 3,826 5,108 16 
Other measurement basis:
Equity-method investments  21   42 
Non-marketable investments  5   4 
Cash on hand682   805   
Total$3,169 $5,921 $37 $4,631 $5,108 $62 
As of September 30, 2022, and December 31, 2021, 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 2022 and 2021.
Proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $3.03 billion and $1.32 billion for the third quarters of 2022 and 2021, respectively, and $10.01 billion and $5.77 billion for the first nine months of 2022 and 2021, respectively. Gross realized gains and losses from these sales were not material.
The following table presents the aggregate maturities of our available-for-sale debt investments as of September 30, 2022:
Fair Value
One year or less$7,292 
One to two years73 
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.
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
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, 2022, our Level 3 assets and liabilities were not material. As of December 31, 2021, we had no Level 3 assets or liabilities.
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, 2022December 31, 2021
 Level 1Level 2TotalLevel 1Level 2Total
Assets:      
Money market funds$1,043 $ $1,043 $1,824 $ $1,824 
Corporate obligations 1,868 1,868  2,130 2,130 
U.S. government and agency securities5,099  5,099 3,629 401 4,030 
Non-U.S. government and agency securities 398 398  950 950 
Mutual funds11  11 16  16 
Total assets$6,153 $2,266 $8,419 $5,469 $3,481 $8,950 
Liabilities:
Deferred compensation$310 $ $310 $395 $ $395 
Total liabilities$310 $ $310 $395 $ $395 
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
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 30,202220212022202120222021
Service cost$4 $5 $1 $ $6 $9 
Interest cost8 8 3 3 7 9 
Expected return on plan assets(6)(8)(3)(2)(15)(20)
Recognized net actuarial loss1 3   1 2 
Amortization of prior service cost (credit)  (1)(1)  
Net periodic benefit costs7 8   (1) 
Settlement losses16 4   1 1 
Total, including other postretirement losses$23 $12 $ $ $ $1 
U.S. Defined BenefitU.S. Retiree Health CareNon-U.S. Defined Benefit
For Nine Months Ended September 30,202220212022202120222021
Service cost$12 $16 $2 $2 $19 $27 
Interest cost20 23 8 8 26 28 
Expected return on plan assets(22)(25)(9)(8)(50)(61)
Recognized net actuarial loss2 11   1 6 
Amortization of prior service cost (credit)  (1)(1)  
Net periodic benefit costs12 25  1 (4) 
Settlement losses29 12   10 2 
Total, including other postretirement losses$41 $37 $ $1 $6 $2 
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, 2022, we had a variable-rate revolving credit facility from a consortium of investment-grade banks that allows us to borrow up to $1 billion until March 2023. The interest rate on borrowings under this credit facility, if drawn, is indexed to the applicable Term Secured Overnight Financing Rate (Term SOFR). As of September 30, 2022, our credit facility was undrawn, and we had no commercial paper outstanding.
Long-term debt
In August 2022, we issued two series of senior unsecured notes for an aggregate principal amount of $700 million, consisting of $400 million of 3.65% notes due in 2032 and $300 million of 4.10% notes due in 2052. We incurred $3 million of issuance and other related costs. The proceeds of the offering were $695 million, net of the original issuance discounts, which will be used for general corporate purposes.
In April 2022, we retired $500 million of maturing debt.
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TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Long-term debt outstanding is as follows:
September 30,December 31,
20222021
Notes due 2022 at 1.85%
$ $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