Texas Instruments Inc.'s Senior Unsecured Notes Rated 'A+'

SAN FRANCISCO (S&P Global Ratings) Aug. 26, 2019--S&P Global Ratings today assigned its 'A+' issue-level rating to Dallas-based semiconductor manufacturer Texas Instruments Inc.'s senior unsecured notes. The company will use the proceeds for general corporate purposes, including repayment of debt. We rate the new notes at the same level as our issuer credit rating on the company. All of our other ratings on Texas Instruments are unchanged.
Our view of Texas Instruments' financial risk reflects its low adjusted leverage of about 0.3x, based on our netting of surplus cash against debt as of June 30, 2019, and our expectation for leverage to remain near this area over the next year or two. Texas Instruments returned $3.5 billion to shareholders, including $2 billion in share repurchases, during the first half of 2019, which exceeded $2.4 billion in free operating cash flow (FOCF) generation, but we generally expect the company to limit its shareholder distribution to below FOCF over time.
Since 2018, the company has gradually moved to a net debt position of $1.6 billion as of the second quarter. Nevertheless, we view its financial policy to be generally conservative and expect the company to retain a strong balance sheet through industry cycles.
After two strong years of top line growth, we expect revenue at Texas Instruments to decline near 8% in fiscal 2019 given macroeconomic concerns, weakening demand in China, slowing demand across automotive and industrial end markets, and general weakness in the personal electronics end market. Despite this, our view of Texas Instruments' competitive position remains strong, based on its good market share across analog and embedded portfolios, diverse end markets, strong customer relationships, and above-average profitability, which indicates technology leadership and creates high barriers to entry for its rivals. We believe management has executed well on its growth and diversification strategies over the recent years, and we expect the company to resume growth in fiscal 2020.
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