SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995 Commission File Number 1-3761
TEXAS INSTRUMENTS INCORPORATED
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 75-0289970
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(State of Incorporation) (I.R.S. Employer Identification No.)
13500 North Central Expressway, P.O. Box 655474, Dallas, TX 75265-5474
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 214-995-3773
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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 X No
---- ----
93,954,911
- ------------------------------------------------------------------------
Number of shares of Registrant's common stock outstanding as of June 30, 1995
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. Financial Statements.
- ------------------------------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Financial Statements
(In millions of dollars, except per-share amounts.)
For Three Months Ended For Six Months Ended
---------------------- --------------------
<S> <C> <C> <C> <C>
June 30 June 30 June 30 June 30
Income 1995 1994 1995 1994
- ------ ------- ------- ------- -------
Net revenues............................................... $ 3,238 $ 2,510 $ 6,099 $ 4,959
Operating costs and expenses:
Cost of revenues......................................... 2,267 1,802 4,302 3,589
General, administrative and marketing.................... 433 317 803 696
Employees' retirement and profit sharing plans........... 135 99 247 173
------- ------- ------- -------
Total.................................................. 2,835 2,218 5,352 4,458
------- ------- ------- -------
Profit from operations..................................... 403 292 747 501
Other income (expense) net................................. 20 (4) 37 2
Interest on loans.......................................... 13 11 26 22
------- ------- ------- -------
Income before provision for income taxes................... 410 277 758 481
Provision for income taxes................................. 132 93 250 163
------- ------- ------- -------
Net income................................................. $ 278 $ 184 $ 508 $ 318
======= ======= ======= =======
Earnings per common and common equivalent share............ $ 2.88 $ 1.93 $ 5.29 $ 3.35
Cash dividends declared per share of common stock.......... $ 0.34 $ 0.25 $ 0.59 $ 0.43
Cash Flows
- ----------
Net cash provided by operating activities.............................................. $ 625 $ 704
Cash flows from investing activities:
Additions to property, plant and equipment........................................... (522) (459)
Purchases of short-term investments.................................................. (400) (289)
Sales and maturities of short-term investments....................................... 445 105
------- -------
Net cash used in investing activities.................................................. (477) (643)
Cash flows from financing activities:
Dividends paid on common and preferred stock......................................... (46) (34)
Sales and other common stock transactions............................................ 65 84
Other................................................................................ 21 (1)
------- -------
Net cash provided by financing activities.............................................. 40 49
Effect of exchange rate changes on cash................................................ 19 7
------- -------
Net increase in cash and cash equivalents.............................................. 207 117
Cash and cash equivalents, January 1................................................... 760 404
------- -------
Cash and cash equivalents, June 30.............................................. ....... $ 967 $ 521
======= =======
</TABLE>
2
<TABLE>
<CAPTION>
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
(In millions of dollars, except per-share amounts)
June 30 Dec. 31
Balance Sheet 1995 1994
- ------------- ------- -------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................................... $ 967 $ 760
Short-term investments............................................. 485 530
Accounts receivable, less allowance for losses of
$38 million in 1995 and $37 million in 1994...................... 1,941 1,442
Inventories:
Raw materials.................................................... 314 237
Work in process.................................................. 587 553
Finished goods................................................... 313 318
Less progress billings........................................... (202) (226)
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Inventories (net of progress billings)......................... 1,012 882
------- -------
Prepaid expenses................................................... 60 66
Deferred income taxes.............................................. 349 337
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Total current assets............................................. 4,814 4,017
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Property, plant and equipment at cost................................ 5,026 4,895
Less accumulated depreciation...................................... (2,352) (2,327)
------- -------
Property, plant and equipment (net).............................. 2,674 2,568
------- -------
Deferred income taxes................................................ 255 243
Other assets......................................................... 218 161
------- -------
Total assets......................................................... $ 7,961 $ 6,989
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Loans payable and current portion long-term debt................... $ 27 $ 12
Accounts payable................................................... 797 678
Accrued and other current liabilities.............................. 1,705 1,509
------- -------
Total current liabilities........................................ 2,529 2,199
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Long-term debt....................................................... 820 808
Accrued retirement costs............................................. 787 740
Deferred credits and other liabilities............................... 267 203
Stockholders' equity:
Preferred stock, $25 par value. Authorized - 10,000,000 shares.
Participating cumulative preferred. None issued.................. -- --
Common stock, $1 par value. Authorized - 300,000,000 shares.
Shares issued: 1995 - 94,063,930; 1994 - 92,786,992.............. 94 93
Paid-in capital.................................................... 1,109 1,041
Retained earnings.................................................. 2,365 1,912
Less treasury common stock at cost.
Shares: 1995 - 109,019; 1994 - 104,170........................... (10) (6)
Other.............................................................. -- (1)
------- -------
Total stockholders' equity....................................... 3,558 3,039
------- -------
Total liabilities and stockholders' equity........................... $ 7,961 $ 6,989
======= =======
</TABLE>
3
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Notes to Financial Statements
Earnings per common and common equivalent share are based on
average common and common equivalent shares outstanding (96.7 and 95.6
million shares for the second quarters of 1995 and 1994, and 96.2 and
95.3 million shares for the six months ended June 30, 1995 and 1994).
Shares issuable upon exercise of dilutive stock options and upon
conversion of dilutive convertible debentures are included in average
common and common equivalent shares outstanding.
On June 15, 1995, TI's Board of Directors declared a two-for-one
stock split in the form of a 100% stock dividend on the common stock
to shareholders of record July 21, 1995. Number of shares and per-
share amounts herein do not reflect the two-for-one stock split.
Results for the first six months of 1994 include the following
first quarter items: special pretax charges of $132 million and one-
time royalty revenues of $69 million.
The statements of income, statements of cash flows and balance
sheet at June 30, 1995, are not audited but reflect all adjustments
which are of a normal recurring nature and are, in the opinion of
management, necessary to a fair statement of the results of the
periods shown.
4
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Record semiconductor revenues and operating profits led the Registrant
(the "company" or "TI") to its best quarterly performance ever in
revenues, profits and earnings per share. The company continues to
build shareholder value, posting a 22.1 percent return on invested
capital for the four quarters ending June 30, 1995.
FINANCIAL SUMMARY
Net revenues for the second quarter of 1995 were $3238 million, up 29
percent from the second quarter of 1994. The increase resulted
primarily from strong worldwide growth in semiconductor revenues.
Profit from operations for the quarter was $403 million, up 38 percent
from $292 million in the second quarter of 1994. The largest
contributor to TI's profit improvement was higher semiconductor
operating profit. Net income for the quarter was $278 million,
compared with $184 million in the second quarter of 1994. Earnings per
share were $2.88, compared with $1.93 in the second quarter of 1994.
SEMICONDUCTORS
TI's semiconductor orders reached record levels in every major
geographic region, with strength across all major product lines. More
than half of the growth from the first quarter was in application-
specific and mixed-signal/analog products. Orders for TI's digital
signal processors and mixed-signal/analog devices have more than doubled
in the last two years, with particular strength in orders from hard disk
drive and wireless communications manufacturers.
Semiconductor revenues established new records in all major geographic
regions, primarily because of strong demand and stable pricing in memory
and strength in mixed-signal/analog and application-specific products.
Over the last year, more than 40 percent of TI's mixed-signal/analog
revenues have been from products introduced in the last three years.
Semiconductor operating profit was up substantially over the second
quarter of 1994 and also increased over the first quarter of 1995,
primarily as the result of higher revenues. The revenue growth
reflected TI's broad product line and increased TI and joint-venture
production of dynamic random-access memory (DRAM) products. Operating
margins were up from both the second quarter of 1994 and the first
quarter of 1995, on higher revenues and emphasis on greater
manufacturing efficiencies.
TI is ramping up production of advanced microprocessors in its newest
facility in Dallas, Texas. The company is planning to accelerate
construction of the second phase of this facility for future generations
of microprocessors and digital signal processors. This is expected to
pull production forward to late 1996, several months ahead
of the previous schedule.
5
TI's position continues to strengthen in the Asia-Pacific region, the
fastest growing part of the world semiconductor market. The company is
increasing investments in capacity, both in TI-owned facilities and in
cooperation with joint-venture partners. The company is expanding
capacity in its assembly and test facilities in the region.
Construction is under way to expand capacity for production of 16-megabit
DRAMs in the TECH joint venture in Singapore, and the TI-Acer joint
venture has begun production of 16-megabit DRAMs in its expanded
facility in Taiwan. The company is also increasing marketing
investments and plans to expand its Customer Application Centers, which
provide design assistance to strategic customers in the region.
DEFENSE ELECTRONICS
TI's defense electronics revenues were flat with the second quarter of
1994, and margins remained stable. Revenues were up slightly from the
first quarter of 1995; however, TI expects defense revenues for the full
year to be down slightly from 1994.
During the quarter, TI was approved to begin development of two
additional versions of the Joint Stand-Off Weapon (JSOW). These new
versions potentially could add more than $3 billion to the opportunity
for JSOW over the life of the program. TI also received contracts from
the U.S. Naval Air Systems Command for the High-speed Antiradar Missile
(HARM) and from the French Ministry of Defense for the Paveway II
precision-guided weapon system.
MATERIALS & CONTROLS
TI's materials and controls business continues to experience double-
digit revenue growth and strong operating performance. Strong growth is
continuing in the new sensor and radio-frequency-based businesses.
PERSONAL PRODUCTIVITY PRODUCTS
Revenues in TI's personal productivity products business were up from
year-ago levels on the strength of record calculator revenues.
Shipments of the company's higher performance notebook computers began
during the quarter, although later than expected, and the product is
being well accepted in the marketplace. TI is increasing marketing and
product development investments to strengthen its position in the
growing notebook computer market.
EMERGING OPPORTUNITIES
TI continues to invest in its software product line to extend its
leadership position in model-based development into the emerging field
of object-based software tools. During the second quarter, the company
announced the Arranger software development tool that allows mission-
critical applications and databases to be accessed from the desktop.
6
In TI's digital imaging activity, the company is continuing to develop
production processes for Digital Light Processing (DLP) systems based on
the Digital Micromirror Device. Several potential customers have
recently announced engagements with TI to bring products to market using
TI's DLP engines. The company expects to see products in the market by
the end of 1995 or early in 1996.
Progress also continues in the development and marketing of new products
based on TI's voice recognition technology, and field testing is under
way on TI's local multipoint distribution technology for broadband
wireless communications.
SUMMARY
The growth of the worldwide semiconductor market continues to exceed
expectations. The growth is being driven by the higher semiconductor
content of electronic end equipment and by the geographic
diversification of the market. These factors are leading to faster
long-term growth of the industry, as well as contributing to its
increased stability. TI is well positioned around the world to take
advantage of these structural changes in the market.
The combined efforts of TI employees worldwide have resulted in major
improvements in operating performance, productivity and quality. One of
the key elements in this improvement has been the companywide emphasis
on customer satisfaction and business excellence. In June, TI Singapore
was named the winner of the first Singapore Quality Award, the nation's
highest recognition for total quality management. TI Singapore joins
a long list of TI operations that, over the past few years, have been
recognized internationally for excellence in quality. These operational
improvements have laid a foundation for TI to increase investments in
research and development (R&D) and marketing to accelerate its long-term
growth and strengthen its position in the emerging networked society.
ADDITIONAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Change in orders, Change in net revenues,
Segment 2Q95 vs. 2Q94 2Q95 vs. 2Q94
- ------------- ----------------- --------------------
<S> <C> <C>
Components up 52% up 41%
Defense Electronics down 13% flat
Digital Products up 13% up 14%
Total up 36% up 29%
Change in orders, Change in net revenues,
Segment 1H95 vs 1H94 1H95 vs. 1H94
- ----------------- ----------------- -----------------------
<S> <C> <C>
Components up 44% up 34%
Defense Electronics up 26% down 4%
Digital Products up 10% up 9%
Total up 36% up 23%
</TABLE>
7
TI's orders for the second quarter of 1995 were $3462 million, compared
with $2549 million in the same period of 1994. The increase in
components segment orders reflects strong growth across all major
semiconductor product lines. The decrease in defense electronics
orders resulted from timing of receipt of orders. The increase in
digital products orders was in custom manufacturing services and
personal productivity products.
TI's revenues in the second quarter of 1995 were $3238 million, compared
with $2510 million in the second quarter of 1994. Higher semiconductor
revenues, related to increased shipments and new products, accounted for
virtually all of the increase in components segment revenues. Ongoing
royalty revenues were also up from the second quarter of 1994. The
increase in digital products segment revenues came from custom
manufacturing services and personal productivity products.
Components segment profit increased over the second quarter of 1994.
Most of the increase came from improved semiconductor operations; higher
ongoing royalties also contributed to the increase. The digital segment
had a small loss for the quarter. Personal productivity products
operated at a loss caused primarily by higher marketing and product
development investments, but the loss narrowed from the first quarter of
1995. Software operations, although continuing at a loss because of
increased marketing investments, also improved from the first quarter.
Both of these operations were profitable in the second quarter of 1994.
For the first six months of 1995, TI's orders were $6774 million,
compared with $4963 million for the first six months of 1994. The
increase in components segment orders resulted from strong growth in
semiconductor orders, primarily memory and mixed-signal/analog products.
The increase in defense orders resulted primarily from timing of
orders. Most of the increase in digital segment orders was in custom
manufacturing services; orders in personal productivity products were
also higher.
Net revenues for the first half of 1995 were $6099 million, compared
with $4959 million in the first half of 1994. The increase in
components segment revenues resulted from higher semiconductor revenues,
attributable primarily to increased shipments of memory and
application-specific products. The decrease in defense revenues
reflects the continuing gradual decline of mature production programs.
Most of the increase in digital segment revenues over the first half of
1994 was in custom manufacturing services and software.
TI's profit from operations for the first six months of 1995 was $747
million, compared with $501 million in the first half of 1994.
Essentially all the increase was in the components segment, resulting
from improved semiconductor operations, with higher ongoing
royalties also contributing. Digital segment losses narrowed from the
first half of 1994 because of the absence of restructuring and
8
divestiture charges, although the operating loss in software widened
from the first half of 1994 and personal productivity products
went from a profit in the first half of 1994 to a loss in the first half
of 1995.
Net income for the first half of 1995 was $508 million, compared with
$318 million in the first six months of 1994. Earnings per share were
$5.29, compared with $3.35 in the first half of 1994.
First-half 1995 results include several cost-reduction actions in the
first quarter, including consolidations in TI's custom manufacturing
services and personal productivity products businesses. These costs
were more than offset by favorable first-quarter adjustments to prior-
period accruals for ongoing royalties because of higher than expected
shipments by some licensees. First-half 1994 results included $132
million of pretax charges taken in the first quarter for costs related
to restructuring TI's European operations, primarily in the components
segment, and the divestiture of nonstrategic product lines, primarily in
digital products. First-half 1994 results also included $69 million in
one-time royalty revenues in the first quarter, approximately offsetting
the restructuring charge in the components segment.
The income tax rate for the first half of 1995 was 33.0 percent, which
is the current estimate of the rate for the full year.
TI's financial condition remains strong. Cash flow from operating
activities net of additions to property, plant, and equipment was a
positive $103 million for the first half of 1995. During the half, cash
and cash equivalents plus short-term investments increased by $162
million to $1452 million. In January, the company reduced to zero (from
$125 million) the outstanding balance of its asset securitization
agreement and terminated this agreement effective January 30, 1995.
TI's debt-to-total-capital ratio was .19 at the end of the second
quarter, down .02 from the first quarter of 1995 and year-end 1994.
On June 15, the Board of Directors declared a two-for-one stock split in
the form of a 100 percent stock dividend on the common stock, payable on
August 18, 1995, to shareholders of record July 21, 1995. The board
also declared a 36 percent increase in the quarterly cash dividend to 34
cents a share (up from 25 cents a share). This dividend, adjusted for
the stock split, would be 17 cents per share. The cash required for
this dividend increase will be met from current cash flow and cash
balances.
TI's backlog of unfilled orders as of June 30, 1995, was $4571 million,
up $761 million from the second quarter of last year and up $225 million
from the first quarter of this year, primarily because of increases in
semiconductor backlog.
TI-funded R&D was $215 million in the second quarter of 1995, compared
with $168 million in the second quarter of 1994. The increase was
driven primarily by investments in semiconductors. R&D for the first
six months of 1995 was $428 million, compared with $331 million in the
9
first half of 1994. R&D for the full year is now expected to be
approximately $900 million.
Capital expenditures in the second quarter of this year were $300
million, compared with $254 million in the second quarter of 1994, and
$522 million for the first half of 1995, compared with $459 million for
the first six months of 1994.
Depreciation in the second quarter of 1995 was $182 million, compared
with $162 million in the second quarter of 1994, and $359 million for
the first six months of 1995, compared with $317 million for the same
period of 1994.
Return on invested capital (ROIC) and return on common equity (ROCE) are
measures TI uses to monitor progress in building shareholder value. For
the four quarters ending June 30, 1995, ROIC was 22.1 percent, and ROCE
was 28.3 percent. For the four quarters ending June 30, 1994, ROIC was
17.8 percent, and ROCE was 26.6 percent.
10
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Stockholders held on April 20, 1995,
the stockholders voted upon the election of directors.
The board nominees were elected as directors with the following
vote:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- ---------
<S> <C> <C>
James R. Adams 82,901,199 259,366
David L. Boren 82,889,515 271,050
James B. Busey IV 82,902,342 258,222
Gerald W. Fronterhouse 82,886,934 273,630
Jerry R. Junkins 82,905,006 255,558
William S. Lee 82,907,175 253,389
William B. Mitchell 82,903,318 257,247
Gloria M. Shatto 82,896,067 264,498
William P. Weber 82,906,258 254,307
Clayton K. Yeutter 82,900,392 260,172
</TABLE>
A stockholder proposal regarding preferred stock, which was included in
the Registrant's proxy statement for the annual meeting, was withdrawn
by the proponent, the College Retirement Equities Fund.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Designation of
Exhibits in
this Report Description of Exhibit
-------------- -----------------------------
10(c) Texas Instruments Restricted
Stock Unit Plan for Directors.(The
TI Directors Benefit Plan has
been terminated with respect to
current and future directors.)
11 Computation of primary and
fully diluted earnings per
common and common equiv-
alent share.
12 Computation of Ratio of
Earnings to Fixed Charges and
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends.
27 Financial Data Schedule
(b) Report on Form 8-K
None.
11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEXAS INSTRUMENTS INCORPORATED
BY: WILLIAM A. AYLESWORTH
William A. Aylesworth
Senior Vice President,
Treasurer and
Chief Financial Officer
Date: July 21, 1995
12
Exhibit Index
Designation of Paper (P)
Exhibits in or
this Report Description of Exhibit Electronic (E)
- ---------------- ----------------------- --------------
10(c) Texas Instruments Restricted E
Stock Unit Plan for Directors
(The TI Directors Benefit Plan has
been terminated with respect to
current and future directors.)
11 Computation of primary and E
fully diluted earnings per
common and common equiv-
alent share.
12 Computation of Ratio of E
Earnings to Fixed Charges and
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends.
27 Financial Data Schedule E
EXHIBIT 10(c)
-------------
TEXAS INSTRUMENTS RESTRICTED STOCK UNIT PLAN
FOR DIRECTORS
As Adopted June 15, 1995
The Texas Instruments Restricted Stock Unit Plan for Directors is
designed to enhance the ability of the Company to attract and retain
exceptionally qualified individuals and to encourage them to acquire a
proprietary interest in the growth and performance of the Company.
For purposes of this Plan, unless otherwise indicated, the term
"Company" shall mean Texas Instruments Incorporated.
Eligibility
All directors of the Company who are not during the term of this Plan
and who have not previously been officers or employees of the Company
shall participate in this Plan.
Definitions
As used in this Plan, the following terms shall have the meanings set
forth:
(a) "Fair Market Value" shall mean, with respect to any Shares,
the simple average of the high and low prices of such Shares on the
date of grant of Restricted Stock Units (or, if there is no trading on
the New York Stock Exchange on such date, then on the first previous
date on which there is such trading) as reported in "New York Stock
Exchange Composite Transactions"in "The Wall Street Journal";
(b) "Restricted Stock Units" shall mean any Units granted under
paragraphs (a) or (b) under the heading "Grants of Restricted Stock
Units" set forth below; and
(c) "Shares" shall mean shares of the common stock of the Company,
$1.00 par value.
Administration of Plan
This Plan shall be administered by the Secretary of the Company (the
"Secretary"). The Secretary shall have full power and authority to
construe, interpret and administer the Plan. The Secretary may issue
rules and regulations for administration of the Plan. All decisions of
the Secretary shall be final, conclusive and binding upon all parties,
including the Company, the stockholders and the directors. In the event
of the absence or inability of the Corporate Secretary, any Assistant
Secretary shall have the authority to act in his place.
Subject to the terms of the Plan and applicable law, the Secretary shall
have full power and authority to: (i) interpret and administer the Plan
and any instrument or agreement relating to, or Restricted Stock Units
granted under, the Plan; (ii) establish, amend, suspend or waive such
rules and regulations and appoint such agents as the Secretary shall
deem appropriate for the proper administration of the Plan; and (iii)
make any other determination and take any other action that the
Secretary deems necessary or desirable for the administration of this
Plan.
1
Restricted Stock Units Available for Grant
Subject to adjustment as provided below:
(a) Sources of Shares Deliverable Under Restricted Stock Units. Any
Shares delivered pursuant to the settlement of Restricted Stock Units
shall consist of treasury Shares.
(b) Adjustments. In the event that the Secretary shall determine that
any dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an
adjustment is determined by the Secretary to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Secretary shall,
in such manner as he or she may deem equitable, adjust the number of
outstanding Restricted Stock Units; provided, however, that no
fractional Restricted Stock Units shall be issued or outstanding
hereunder. Notwithstanding any such corporate transaction or event, no
adjustment shall be made in the number of Restricted Stock Units to be
granted to new directors who are elected after the occurrence of any
such corporate transaction or event.
Grants of Restricted Stock Units
(a) Initial Grants of Restricted Stock Units. The Company, as of
the effective date of this Plan, shall grant to each then current
director of the Company 1000 Restricted Stock Units. Each Restricted
Stock Unit shall be paid or settled by the issuance of one Share upon
the termination of such recipient's service as a director of the
Company, provided that such termination of service shall have occurred
(i) after the age at which a director is ineligible under the Company's
by-laws to stand for reelection to the Board, (ii) after the completion
of at least eight years of service as a director of the Company or
(iii) as a result of the death or disability of the director. In the
event such recipient's membership on the Board of Directors of the
Company shall terminate prior to the attainment of the age for
ineligibility for reelection and prior to the completion of eight years
of service as a director for reasons other than death or disability,
such Restricted Stock Units shall terminate and all of the rights,
title and interest of the recipient thereunder shall be forfeited in
their entirety. Following the effective date of this Plan, each new
director shall, effective as of the date of such individual's initial
election or appointment to the Board of Directors, be granted 1000
Restricted Stock Units which shall be subject to the same terms and
restrictions as are described in this paragraph (a). Notwithstanding the
foregoing, in no event shall Shares be issued pursuant to a Restricted
Stock Unit granted under this paragraph (a) if a director's service on
the board shall terminate within less than six months after the date of
grant for any reason other than death or disability.
(b) Grants of Restricted Stock Units for Portion of Annual Retainer.
As of the date of the annual meeting of stockholders each year following
the effective date of this Plan, fifty percent (50%) of the annual
retainer (not including retainers for committee membership or committee
chair) payable to each director during the twelve-month period beginning
May 1 of such year and ending April 30 of the following year shall be
paid to the director in the form of Restricted Stock Units. Also,
fifty percent (50%) of each director's annual retainer for the period
beginning May 1, 1995 and ending April 30, 1996 remaining payable after
2
June 30 shall be paid to the director in the form of Restricted Stock
Units, which shall be granted as of the effective date of this Plan.
The number of Restricted Stock Units to be granted under this paragraph
(b) in each case shall be determined by dividing (i) the amount of
annual retainer to be paid in the form of Restricted Stock Units by (ii)
the Fair Market Value of the Shares and shall be rounded up to the next
whole Restricted Stock Unit in the event such determination results in a
fraction of a Restricted Stock Unit. Each such Restricted Stock Unit
shall provide for the issuance of one Share upon the termination of the
recipient's membership on the Board of Directors. In the event a
director's service on the Board shall terminate for any reason during a
year, the number of Restricted Stock Units granted for such year shall
be reduced proportionately, and the excess shall be forfeited.
(c) Right to Dividend Equivalents. Each recipient of Restricted
Stock Units under this Plan shall have the right, during the period when
such Restricted Stock Units are outstanding and prior to the
termination, forfeiture or payment or settlement thereof, to receive
dividend equivalents equal to the amount or value of any cash or other
distributions or dividends payable on the same number of Shares. The
Company shall accumulate dividend equivalents on each dividend payment
date and pay such accumulated amounts without interest annually.
(d) Issuance of Shares Upon Lapse of Restrictions. A stock
certificate or certificates shall be registered and issued in the name
of the holder of Restricted Stock Units and delivered to such holder as
soon as practicable after such Restricted Stock Units have become
payable or settleable in accordance with the terms of the Plan.
(e) Limits on Transfer of Restricted Stock Units. No Restricted
Stock Units and no right under any Restricted Stock Units shall be
assignable, alienable, salable or transferable by a participant
otherwise than by will or by the laws of descent and distribution. All
rights under any Restricted Stock Unit shall be exercisable during the
participant's lifetime only by the participant or, if permissible under
applicable law, by the participant's guardian or legal representative.
No Restricted Stock Unit and no right under any such Restricted Stock
Unit may be pledged, alienated, attached, or otherwise encumbered, and
any purported pledge, alienation, attachment or encumbrance thereof
shall be void and unenforceable against the Company.
(f) Share Certificates. All certificates for Shares delivered
under the Plan pursuant to any Restricted Stock Units shall be subject
to such stop transfer orders and other restrictions as the Secretary
may deem advisable under the Plan and the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock
exchange upon which such Shares or other securities are then listed, and
any applicable Federal or state securities laws, and the Secretary may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
Amendment and Termination
Except to the extent prohibited by applicable law and unless expressly
provided in this Plan:
(a) Amendments to the Plan. The Board of Directors of the Company
may amend, alter, suspend, discontinue or terminate the Plan, without
the consent of any stockholder, participant, other holder or beneficiary
of Restricted Stock Units, or other person; provided, however, that, no
such action shall impair the rights under any Restricted Stock Units
theretofore granted under the Plan.
3
(b) Correction of Defects, Omissions and Inconsistencies. The
Secretary may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Restricted Stock Units in the manner
and to the extent he or she shall deem desirable to carry the Plan into
effect.
General Provisions
(a) Withholding. The Company shall be authorized to withhold from
any Restricted Stock Units granted or any transfer made under any
Restricted Stock Units or under the Plan or from any dividend
equivalents to be paid on Restricted Stock Units the amount (in cash,
Shares, other securities, or other property) of any taxes required to be
withheld in respect of a grant, payment or settlement of Restricted
Stock Units or any payment of dividend equivalents under such Restricted
Stock Units or under the Plan and to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for
the payment of any such taxes.
(b) No Limit on Other Compensation Arrangements. Nothing contained
in the Plan shall prevent the Company from adopting or continuing in
effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in
specific cases.
(c) No Right to Continued Board Membership. The grant of
Restricted Stock Units shall not be construed as giving a participant
the right to be retained as a director of the Company. The Board of
Directors may at any time fail or refuse to nominate a participant for
election to the Board, and the stockholders of the Company may at any
election fail or refuse to elect any participant to the Board free from
any liability or claim under this Plan or any Restricted Stock Units.
(d) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Delaware and
applicable Federal law.
(e) Severability. If any provision of the Plan or any Restricted
Stock Unit is or becomes or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction, or as to any person or any Restricted
Stock Unit, or would disqualify the Plan or any Restricted Stock Unit
under any law deemed applicable by the Secretary, such provision shall
be construed or deemed amended to conform to applicable laws, or if it
cannot be so construed or deemed amended without, in the determination
of the Secretary, materially altering the intent of the Plan or the
Restricted Stock Unit, such provision shall be stricken as to such
jurisdiction, person or Restricted Stock Unit, and the remainder of the
Plan and any such Restricted Stock Unit shall remain in full force and
effect.
(f) No Trust or Fund Created. Neither the Plan nor any Restricted
Stock Units shall create or be construed to create a trust or separate
fund of any kind or a fiduciary relationship between the Company and a
participant or any other person. To the extent that any person acquires
a right to receive Restricted Stock Units, or Shares pursuant to
Restricted Stock Units, from the Company pursuant to this Plan, such
right shall be no greater than the right of any unsecured general
creditor of the Company.
(g) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan.
4
Effective Date of the Plan
The Plan shall be effective as of June 15, 1995.
Term of the Plan
No Restricted Stock Units shall be granted under the Plan after April
18, 2006. However, unless otherwise expressly provided in the Plan or
in the restrictions applying to Restricted Stock Units previously
issued, any Restricted Stock Units theretofore granted may extend beyond
such date, and the authority of the Secretary to interpret, construe,
administer and make determinations under this Plan, and the authority of
the Board of Directors of the Company to amend the Plan, shall extend
beyond such date.
5
<TABLE>
<CAPTION>
EXHIBIT 11
----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
PRIMARY AND FULLY DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands, except per-share amounts.)
For Three Months Ended For Six Months Ended
---------------------- ---------------------
June 30 June 30 June 30 June 30
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income................................................. $278,233 $183,938 $508,223 $317,640
Add:
Interest, net of tax and profit sharing effect, on
convertible debentures assumed converted............. 410 668 817 1,330
-------- -------- -------- --------
Adjusted net income........................................ $278,643 $184,606 $509,040 $318,970
======== ======== ======== ========
Earnings per Common and Common Equivalent Share:
- ------------------------------------------------
Weighted average common shares outstanding................. 93,602 91,944 93,222 91,573
Weighted average common equivalent shares:
Stock option and compensation plans.................... 1,631 1,219 1,438 1,312
Convertible debentures................................. 1,491 2,413 1,492 2,413
-------- -------- -------- --------
Weighted average common and common equivalent shares..... 96,724 95,576 96,152 95,298
======== ======== ======== ========
Earnings per Common and Common Equivalent Share............ $ 2.88 $ 1.93 $ 5.29 $ 3.35
Earnings per Common Share Assuming Full Dilution:
- -------------------------------------------------
Weighted average common shares outstanding................. 93,602 91,944 93,222 91,573
Weighted average common equivalent shares:
Stock option and compensation plans.................... 1,899 1,311 1,999 1,404
Convertible debentures................................. 1,491 2,413 1,492 2,413
-------- -------- -------- --------
Weighted average common and common equivalent shares..... 96,992 95,668 96,713 95,390
======== ======== ======== ========
Earnings per Common Share Assuming Full Dilution........... $ 2.87 $ 1.93 $ 5.26 $ 3.34
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 12
----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in millions)
For Six Months
Ended June 30
--------------
1990 1991 1992 1993 1994 1994 1995
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes
and fixed charges:
Income (loss) before cumulative
effect of accounting changes,
interest expense on loans,
capitalized interest amortized,
and provision for income taxes....... $ 14 $(250) $ 433 $ 755 $1,098 $ 509 $ 790
Add interest attributable to
rental and lease expense............. 50 43 42 38 40 21 20
----- ----- ----- ----- ----- ----- -----
$ 64 $(207) $ 475 $ 793 $1,138 $ 530 $ 810
===== ===== ===== ===== ===== ===== =====
Fixed charges:
Total interest on loans (expensed
and capitalized)..................... $ 47 $ 59 $ 57 $ 55 $ 58 $ 27 $ 35
Interest attributable to rental
and lease expense.................... 50 43 42 38 40 21 20
----- ----- ----- ----- ----- ----- -----
Fixed charges.............................. $ 97 $ 102 $ 99 $ 93 $ 98 $ 48 $ 55
===== ===== ===== ===== ===== ===== =====
Combined fixed charges and
preferred stock dividends:
Fixed charges.......................... $ 97 $ 102 $ 99 $ 93 $ 98 $ 48 $ 55
Preferred stock dividends
(adjusted as appropriate to a
pretax equivalent basis)............. 36 34 55 29 -- -- --
----- ----- ----- ----- ----- ----- -----
Combined fixed charges and
preferred stock dividends............ $ 133 $ 136 $ 154 $ 122 $ 98 $ 48 $ 55
===== ===== ===== ===== ===== ===== =====
Ratio of earnings to fixed charges......... * * 4.8 8.5 11.6 11.0 14.7
===== ===== ===== ===== ===== ===== =====
Ratio of earnings to combined
fixed charges and preferred
stock dividends.......................... ** ** 3.1 6.5 11.6 11.0 14.7
===== ===== ===== ===== ===== ===== =====
* Not meaningful. The coverage deficiency was $33 million in 1990 and $309 million in 1991.
** Not meaningful. The coverage deficiency was $69 million in 1990 and $343 million in 1991.
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<CAPTION>
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF TEXAS INSTRUMENTS INCORPORATED AND
SUBSIDIARIES AS OF JUNE 30, 1995, AND FOR THE SIX MONTHS THEN ENDED,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
<CASH> 967
<SECURITIES> 485
<RECEIVABLES> 1,941
<ALLOWANCES> 38
<INVENTORY> 1,012
<CURRENT-ASSETS> 4,814
<PP&E> 5,026
<DEPRECIATION> 2,352
<TOTAL-ASSETS> 7,961
<CURRENT-LIABILITIES> 2,529
<BONDS> 820
0
0
<COMMON> 94
<OTHER-SE> 3,464
<TOTAL-LIABILITY-AND-EQUITY> 7,961
<SALES> 6,099
<TOTAL-REVENUES> 6,099
<CGS> 4,302
<TOTAL-COSTS> 4,302
<OTHER-EXPENSES> 247
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26
<INCOME-PRETAX> 758
<INCOME-TAX> 250
<INCOME-CONTINUING> 508
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 508
<EPS-PRIMARY> 5.29
<EPS-DILUTED> 0
</TABLE>
