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Analysis of Income Taxes

Advanced level

Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Income Tax Expense (Benefit)

Texas Instruments Inc., income tax expense (benefit), continuing operations

US$ in millions

	12 months ended:	Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015
	U.S. federal
	Non-U.S.
	U.S. state
	Current
	U.S. federal
	Non-U.S.
	U.S. state
	Deferred
	Provision for income taxes

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

Item	Description	The company
Current	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Texas Instruments Inc.’s current decreased from 2017 to 2018 and from 2018 to 2019.
Deferred	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Texas Instruments Inc.’s deferred decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.
Provision for income taxes	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Texas Instruments Inc.’s provision for income taxes decreased from 2017 to 2018 and from 2018 to 2019.

Effective Income Tax Rate (EITR)

Texas Instruments Inc., effective income tax rate (EITR) reconciliation

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	U.S. statutory income tax rate
	U.S. tax benefit for foreign derived intangible income
	U.S. excess tax benefit for stock compensation
	U.S. R&D tax credit
	Non-U.S. effective tax rates
	U.S. tax benefit for manufacturing
	Other
	Effective tax rate, before U.S. Tax Act
	U.S. Tax Act transitional non-cash expense
	U.S. Tax Act enactment-date effects and measurement period adjustments
	Effective tax rate

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

Item	Description	The company
Effective tax rate, before U.S. Tax Act	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Texas Instruments Inc.’s effective tax rate, before U.S. Tax Act decreased from 2017 to 2018 and from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

Texas Instruments Inc., components of deferred tax assets and liabilities

US$ in millions

		Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015
	Deferred loss and tax credit carryforwards
	Accrued expenses
	Stock compensation
	Inventories and related reserves
	Retirement costs for defined benefit and retiree health care
	Other
	Deferred tax assets, before valuation allowance
	Valuation allowance
	Deferred tax assets, after valuation allowance
	Property, plant and equipment
	Acquisition-related intangibles and fair-value adjustments
	International earnings
	Other
	Deferred tax liabilities
	Net deferred tax asset (liability)

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

Item	Description	The company
Deferred tax assets, before valuation allowance	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Texas Instruments Inc.’s deferred tax assets, before valuation allowance increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.
Deferred tax assets, after valuation allowance	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Texas Instruments Inc.’s deferred tax assets, after valuation allowance increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.
Net deferred tax asset (liability)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Texas Instruments Inc.’s net deferred tax asset (liability) increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Deferred Tax Assets and Liabilities, Classification

Texas Instruments Inc., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Deferred tax assets
	Deferred tax liabilities

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

Item	Description	The company
Deferred tax assets	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	Texas Instruments Inc.’s deferred tax assets increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.
Deferred tax liabilities	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.

Adjustments to Financial Statements: Removal of Deferred Taxes

Texas Instruments Inc., adjustments to financial statements

US$ in millions

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Total Liabilities
	Total liabilities (as reported)
	Less: Noncurrent deferred tax liabilities, net
	Total liabilities (adjusted)
	Adjustment to Stockholders’ Equity
	Stockholders’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Stockholders’ equity (adjusted)
	Adjustment to Net Income
	Net income (as reported)
	Add: Deferred income tax expense (benefit)
	Net income (adjusted)

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

Texas Instruments Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Texas Instruments Inc., adjusted financial ratios

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

Financial ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Texas Instruments Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Texas Instruments Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Texas Instruments Inc.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Texas Instruments Inc.’s adjusted ROE improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Texas Instruments Inc.’s adjusted ROA improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Texas Instruments Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Revenue
	Profitability Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Revenue
	Profitability Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

2019 Calculations

¹ Net profit margin = 100 × Net income ÷ Revenue
= 100 × ÷ =

² Adjusted net profit margin = 100 × Adjusted net income ÷ Revenue
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Texas Instruments Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Total Asset Turnover

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Revenue
	Total assets
	Activity Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Revenue
	Adjusted total assets
	Activity Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

2019 Calculations

¹ Total asset turnover = Revenue ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= ÷ =

Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Texas Instruments Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Financial Leverage

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Stockholders’ equity
	Solvency Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted stockholders’ equity
	Solvency Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

2019 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= ÷ =

Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Texas Instruments Inc.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Stockholders’ equity
	Profitability Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Adjusted stockholders’ equity
	Profitability Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

2019 Calculations

¹ ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =

² Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Texas Instruments Inc.’s adjusted ROE improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Adjusted Return on Assets (ROA)

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Total assets
	Profitability Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-24).

2019 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =

² Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Texas Instruments Inc.’s adjusted ROA improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

	Texas Instruments Inc.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

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Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

Texas Instruments Inc. (NASDAQ:TXN)

Analysis of Income Taxes

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Adjustments to Financial Statements: Removal of Deferred Taxes

Texas Instruments Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Texas Instruments Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)