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, 1997 Commission File Number 1-3761
TEXAS INSTRUMENTS INCORPORATED
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 75-0289970
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
13500 North Central Expressway, P.O. Box 655474, Dallas, Texas 75265-5474
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 972-995-3773
---------------------------------------------------------------
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
---- ----
191,700,282
- -----------------------------------------------------------------------------
Number of shares of Registrant's common stock outstanding as of June 30, 1997
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
- -----------------------------
<TABLE>
<CAPTION>
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Financial Statements
(In millions of dollars, except per-share amounts.)
For Three Months Ended For Six Months Ended
---------------------- ---------------------
June 30 June 30 June 30 June 30
Income 1997 1996 1997 1996
- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues............................................... $ 2,559 $ 2,399 $ 4,823 $ 5,074
Operating costs and expenses:
Cost of revenues......................................... 1,597 1,722 3,069 3,611
Research and development................................. 280 235 520 478
Marketing, general and administrative.................... 395 402 776 799
------- ------- ------- -------
Total.................................................. 2,272 2,359 4,365 4,888
------- ------- ------- -------
Profit from operations..................................... 287 40 458 186
Other income (expense) net................................. 83 9 94 65
Interest on loans.......................................... 26 12 51 24
------- ------- ------- -------
Income before provision for income taxes................... 344 37 501 227
Provision (credit) for income taxes........................ 120 (4) 175 54
------- ------- ------- -------
Income from continuing operations.......................... 224 41 326 173
Income from discontinued operations........................ 25 35 52 66
------- ------- ------- -------
Net income................................................. $ 249 $ 76 $ 378 $ 239
======= ======= ======= =======
Earnings per common and common equivalent share:
Continuing operations.................................... $ 1.13 $ 0.21 $ 1.65 $ 0.89
Discontinued operations.................................. 0.13 0.18 0.27 0.34
------- ------- ------- -------
Net income............................................... $ 1.26 $ 0.39 $ 1.92 $ 1.23
======= ======= ======= =======
Cash dividends declared per share of common stock.......... $ 0.17 $ 0.17 $ 0.34 $ 0.34
Cash Flows
- ----------
Continuing Operations:
Net cash provided by operating activities............................................ $ 822 $ 93
Cash flows from investing activities:
Additions to property, plant and equipment......................................... (562) (1,122)
Purchases of short-term investments................................................ (634) (10)
Sales and maturities of short-term investments..................................... 117 160
Proceeds from sale of businesses................................................... 177 132
------- -------
Net cash used in investing activities................................................ (902) (840)
Cash flows from financing activities:
Payments on loans payable.......................................................... (300) (2)
Additions to long-term debt........................................................ 27 417
Dividends paid on common stock..................................................... (65) (64)
Sales and other common stock transactions.......................................... 68 6
Other.............................................................................. - 57
------- -------
Net cash provided by (used in) financing activities.................................. (270) 414
Effect of exchange rate changes on cash.............................................. (14) (13)
------- -------
Cash used in continuing operations................................................... (364) (346)
------- -------
Discontinued Operations:
Operating activities................................................................. 73 -
Investing activities................................................................. (16) (40)
------- -------
Cash provided by (used in) discontinued operations................................... 57 (40)
------- -------
Net decrease in cash and cash equivalents.............................................. (307) (386)
Cash and cash equivalents, January 1................................................... 964 1,364
------- -------
Cash and cash equivalents, June 30..................................................... $ 657 $ 978
======= =======
</TABLE>
2
<TABLE>
<CAPTION>
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Financial Statements
(In millions of dollars, except per-share amounts.)
June 30 Dec. 31
Balance Sheet 1997 1996
- ------------- ------- -------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................................... $ 657 $ 964
Short-term investments............................................. 534 14
Accounts receivable, less allowance for losses of
$68 million in 1997 and $90 million in 1996...................... 1,769 1,799
Inventories:
Raw materials.................................................... 108 111
Work in process.................................................. 356 361
Finished goods................................................... 273 231
------- -------
Inventories.................................................... 737 703
------- -------
Prepaid expenses................................................... 55 50
Deferred income taxes.............................................. 427 395
Net assets of discontinued operations.............................. 524 529
------- -------
Total current assets............................................. 4,703 4,454
------- -------
Property, plant and equipment at cost................................ 6,994 6,712
Less accumulated depreciation...................................... (2,874) (2,550)
------- -------
Property, plant and equipment (net).............................. 4,120 4,162
------- -------
Deferred income taxes................................................ 163 192
Other assets......................................................... 401 552
------- -------
Total assets......................................................... $ 9,387 $ 9,360
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Loans payable and current portion long-term debt................... $ 52 $ 314
Accounts payable................................................... 748 775
Accrued and other current liabilities.............................. 1,342 1,397
------- -------
Total current liabilities........................................ 2,142 2,486
------- -------
Long-term debt....................................................... 1,667 1,697
Accrued retirement costs............................................. 734 719
Deferred credits and other liabilities............................... 381 361
Stockholders' equity:
Preferred stock, $25 par value. Authorized - 10,000,000 shares.
Participating cumulative preferred. None issued.................. -- --
Common stock, $1 par value. Authorized - 500,000,000 shares.
Shares issued: 1997 - 191,856,607; 1996 - 190,396,797............ 192 190
Paid-in capital.................................................... 1,183 1,116
Retained earnings.................................................. 3,127 2,814
Less treasury common stock at cost.
Shares: 1997 - 156,325; 1996 - 143,525........................... (13) (12)
Other.............................................................. (26) (11)
------- -------
Total stockholders' equity....................................... 4,463 4,097
------- -------
Total liabilities and stockholders' equity........................... $ 9,387 $ 9,360
======= =======
</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 (198.5 and 194.6 million shares for
the second quarters of 1997 and 1996, and 197.8 and 194.4 million shares for
the six months ended June 30, 1997 and 1996). 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.
Results for the second quarter of 1997 include a pretax operating charge of
$44 million for the termination of joint-venture agreements in Thailand and a
$66 million pretax gain from the sale of three TI businesses, principally
software.
In the first quarter of 1997, the company sold its mobile computing business
and terminated its digital imaging printing development program. As a result,
the company took a pretax charge of $56 million in the first quarter, of which
$27 million was for severance for involuntary employment reductions worldwide.
These severance actions were essentially completed by the end of the quarter
and affected approximately 1,045 employees. The balance, $29 million, was for
other costs associated with the business sale and program termination,
including vendor cancellation and lease charges.
On July 11, 1997, the sale of TI's defense business was closed with Raytheon
Company for $2.95 billion in cash. The net gain from this sale, after taxes
and transaction costs, will be approximately $1.5 billion and will be included
in discontinued operations in the company's third-quarter 1997 report.
Accounting policy on derivatives: Net currency exchange gains and losses from
forward currency exchange contracts to hedge net balance sheet exposures are
charged or credited on a current basis to other income (expense) net. Gains
and losses from forward currency exchange contracts to hedge specific
transactions are deferred and included in the measurement of the related
transactions. Gains and losses from interest rate swaps are included on the
accrual basis in interest expense. Gains and losses from terminated forward
currency exchange contracts and interest rate swaps are deferred and
recognized consistent with the terms of the underlying transaction.
The statements of income, statements of cash flows and balance sheet at June
30, 1997, 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.
Higher operating margins and strong revenues for semiconductors, especially in
digital signal processing solutions, drove substantial improvement in
profitability in the second quarter of 1997 for the Registrant (the "company"
or "TI").
TI's operating margin, excluding a special charge, increased in the quarter to
13 percent, compared with the year-ago level of 2 percent. From the first
quarter of 1997, TI's operating margin increased 3 percentage points,
excluding special charges in both quarters. Improvement in semiconductor
operating margin was the major factor in these changes.
During the quarter, TI made progress in its strategy to strengthen its
leadership in digital signal processing solutions, a market that the company
expects will reach $50 billion over the next decade. This progress was
reflected in the broad market acceptance of TI's newest digital signal
processor, the TMS320C6x. A majority of the major Internet access equipment
providers has chosen the 'C6x for their advanced designs. Total design-ins
are growing at a rate faster than any previous generation of digital signal
processors. Additionally, TI completed the divestitures of the software,
telecommunications systems and multipoint systems businesses in order to focus
resources on digital signal processing solutions.
NOTE: On July 11, the sale of TI's defense business was closed with
Raytheon Company for $2.95 billion in cash. The net proceeds have
been placed in short-term interest-bearing money market securities
and will contribute to interest income. The net gain of approximately
$1.5 billion, after taxes and transaction costs, will be included in
the company's third-quarter 1997 results. Throughout this report, the
defense operation is reported as a discontinued business.
FINANCIAL SUMMARY
Revenues for the second quarter of 1997 were $2559 million, up 7 percent
from the year-ago period, primarily because of strong semiconductor demand,
particularly for TI's digital signal processing solutions. Financial results
in the second quarter of 1996 included revenues from TI businesses that have
since been sold, primarily mobile computing and printers.
Results for the current quarter also include two special pretax items:
an operating charge of $44 million for the termination of joint-venture
agreements in Thailand, and a $66 million gain from the sale of three TI
businesses, the largest of which was software.
Additionally, second quarter 1997 results include an accrual of $32 million
for profit sharing. No accrual was taken in the first quarter of 1997.
Results also include catch-up royalties from two new semiconductor patent
cross-license agreements.
Excluding the two special items, earnings per share (EPS) from
continuing operations were $1.07. Including the special items, EPS from
continuing operations were $1.13, compared with $0.21 in the year-ago period.
EPS from discontinued operations were $0.13, compared with $0.18 in the
second quarter of 1996.
5
Net income from continuing operations, excluding the special items, was $213
million versus $41 million in the second quarter of 1996. Including the
special items, net income was $224 million. Net income from discontinued
operations was $25 million versus $35 million in the second quarter of 1996.
Profit from operations (PFO) from continuing operations, excluding the
operating charge, was $336 million versus $40 million in the year-ago period.
Including the operating charge, PFO from continuing operations was $287
million.
SEMICONDUCTOR
In the second quarter of 1997, semiconductor orders grew 72 percent over the
prior-year level, which had been affected by an unusually sharp decline in
prices for dynamic random access memories (DRAMs). Compared with the first
quarter of 1997, semiconductor orders, excluding memories, were up. Digital
signal processing solutions again reached record levels, with particular
strength in wireless communications and networking end-equipment markets.
Orders for DRAMs were lower, which caused total semiconductor orders to be
flat compared with the first quarter.
Semiconductor revenues were up 17 percent from the second quarter of 1996, and
up 10 percent from the first quarter of 1997. The major portion of the
increase was due to higher sales of digital signal processing solutions, which
represent more than 40 percent of total semiconductor revenues. With the
completed divestitures, semiconductor now constitutes about 80 percent of TI's
total revenues.
Semiconductor PFO increased fourfold versus the year-ago quarter, and more
than 45 percent versus the first quarter of 1997, excluding special charges.
Solid gains were made in manufacturing productivity. Semiconductor operating
margin increased 10 percentage points from a year ago, and was up 4 percentage
points from the first quarter of 1997.
The loss in DRAMs narrowed for the third consecutive quarter. However,
pricing pressures increased in the latter part of the quarter, keeping
pressure on the DRAM business in the near term.
MATERIALS & CONTROLS
Revenues and PFO in TI's materials and controls business were at record levels
in the second quarter of 1997, up 5 percent and 46 percent, respectively, from
the year-ago period. Operating margin increased nearly 3 percentage points
from the first quarter of 1997 and was at solid double-digit levels in the
second quarter.
Increased demand for TIRIS(TM) radio frequency identification systems was a
major factor in the strong growth in orders in materials and controls. Since
the beginning of the year, this business has completed shipment of more than
800,000 TIRIS key tags to Mobil USA as part of Mobil's gas pump point-of-sale
program, called Speedpass(TM).
6
CALCULATORS
Revenues for this business were 19 percent higher in the second quarter of
1997 compared with the year-ago period, and PFO was up 16 percent. The
improvement was due to strength in graphing calculators. This business
typically delivers peak financial performance in the second and third
quarters, due primarily to the school-year cycle.
Also in the second quarter, the calculator business strengthened its focus on
geographic expansion by extending the Teachers Teaching with Technology
program to Europe, Asia and Latin America. This program promotes the adoption
and effective use of TI calculators in math and science curricula.
DIGITAL IMAGING
TI continues to reduce costs in digital imaging as this operation transitions
from a research and development phase into a very competitive market
environment. During the quarter, several projector manufacturers demonstrated
a wide range of new products based on TI's technology. Efforts continue to
resolve production start-up problems on home entertainment projection systems.
SUMMARY
In the second quarter, end-equipment manufacturers continued to tightly
control inventories. TI's latest survey of U.S. customers shows that
semiconductor inventories decreased to a record low level of 2.4 weeks, down
from 2.5 weeks in the previous quarter.
Growth in the market for digital signal processors remains strong -- at about
30 percent annually. Volatility in the DRAM market is expected to continue in
the near term, although the bit growth rate remains above 90 percent.
TI's outlook for longer-term semiconductor market growth remains positive, and
plans for 1997 continue to be based on a moderate market recovery. As a
result, TI expects capital expenditures in 1997 to be at or slightly above the
previous forecast of $1.1 billion.
7
Additional Financial Information
<TABLE>
<CAPTION>
Change in orders, Change in net revenues,
Segment 2Q97 vs. 2Q96 2Q97 vs. 2Q96
- ------- ----------------- -----------------------
<S> <C> <C>
Components up 66% up 19%
Digital Products down 45% down 47%
Total up 38% up 7%
Change in orders, Change in net revenues,
Segment 1H97 vs. 1H96 1H97 vs. 1H96
- ------- ----------------- -----------------------
Components up 30% up 7%
Digital Products down 57% down 60%
Total up 13% down 5%
</TABLE>
TI's orders for the second quarter of 1997 were $2657 million, compared with
$1927 million in the same period of 1996. The increase in the components
segment was due primarily to a substantial increase in orders for digital
signal processing solutions, along with improvement in memory orders. In the
digital products segment, orders were down, primarily due to the sale of TI's
mobile computing and printer businesses.
TI's revenues for the second quarter of 1997 were $2559 million, compared with
$2399 million in the same period of 1996. The increase in components segment
revenues resulted primarily from increased sales of digital signal processing
solutions and higher royalties. Digital products revenues were down,
primarily due to the sale of TI's mobile computing and printer businesses.
PFO from continuing operations for the second quarter was $287 million,
compared to $40 million in the second quarter of 1996. The increase is
primarily due to higher semiconductor revenues and margins, higher royalties,
and the absence of losses in mobile computing.
As previously announced, during the quarter TI entered into ten-year cross-
licensing agreements with NEC Corporation of Japan and Vanguard International
Semiconductor Corporation. The agreement with Vanguard is the first
semiconductor patent agreement between TI and a Taiwanese company other than
TI's joint venture with the Acer Group.
Components segment profit was up considerably over the second quarter of 1996,
primarily due to higher semiconductor revenues and margins and increased
royalties. The digital products segment was profitable for the quarter
primarily due to the absence of losses in mobile computing.
8
For the first six months of 1997, TI's orders were $5157 million, compared
with $4563 million for the first six months of 1996. The increase in
components segment orders resulted from strong demand for digital signal
processing solutions, as well as improvements in all other product areas.
The digital products segment orders were down significantly due to the sale of
the mobile computing, custom manufacturing and printer businesses.
Net revenues for the first half of 1997 were $4823 million, compared with
$5074 million in the first half of 1996. The increase in component segment
revenue resulted from higher semiconductor revenues and higher royalties. The
decrease in digital products segment revenue was due primarily to the sale of
TI's mobile computing, custom manufacturing and printer businesses.
TI's PFO from continuing operations for the first six months of 1997 was $458
million, compared with $186 million in the first half of 1996. The increase
was primarily from higher semiconductor profits due to improved margins and
increased revenues and higher semiconductor royalty revenues. The moderate
digital products segment increase was due primarily to the absence of losses
in mobile computing.
Net income from continuing operations for the first half of 1997 was $326
million, compared with $173 million in the first six months of 1996. Earnings
per share were $1.65, compared with $0.89.
The income tax rate for the first half of 1997 was 35 percent, which is the
current estimate of the rate for the full year.
During the first six months of 1997, cash and cash equivalents plus short-term
investments increased by $213 million to $1191 million. Cash flow from
operating activities net of additions to property, plant and equipment was
$260 million. Capital expenditures during the first half of 1997 totaled $562
million, and the sale of three TI businesses generated $177 million of cash
in the second quarter. On July 11, 1997, Raytheon Company purchased the
assets of TI's defense operations for $2.95 billion in cash. The net proceeds
have been placed in short-term interest-bearing money market securities. TI
intends to use the cash to strengthen its focus on digital signal processing
solutions.
The outstanding balance of commercial paper was reduced from $300 million to
zero during the second quarter. The debt-to-total-capital ratio was .28, down
from the year-end 1996 value of .33.
TI's backlog of unfilled orders as of June 30, 1997, was $1917 million, up
$225 million from the second quarter of 1996 and up $57 million from the first
quarter of 1997. The increase was primarily due to semiconductor.
TI's R&D was $280 million in the second quarter of 1997, compared with $235
million in the second quarter of 1996. R&D for the first six months of 1997
was $520 million, compared with $478 million in the first half of 1996. R&D
for the full year is expected to be $1.1 billion.
Capital expenditures in the second quarter of this year were $337 million,
compared with $598 million in the second quarter of 1996 and $562 million for
the first half of 1997, compared with $1122 million for the first six months
of 1996.
9
Depreciation in the second quarter of 1997 was $274 million, compared with
$212 million in the second quarter of 1996, and $519 million for the first six
months of 1997, compared with $385 million for the same period of 1996.
Depreciation for the total year is projected at $1.1 billion.
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Stockholders held on April 17, 1997, in addition
to the election of directors, the stockholders voted upon the two board
proposals contained in the Registrant's Proxy Statement dated March 7,
1997.
The board nominees were elected as directors with the following vote:
<TABLE>
Nominee For Withheld
------- --- ---------
<S> <C> <C>
James R. Adams 168,330,929 918,941
David L. Boren 168,088,991 1,160,879
James B. Busey IV 168,338,006 911,864
Thomas J. Engibous 168,186,802 1,063,068
Gerald W. Fronterhouse 168,018,560 1,231,310
David R. Goode 168,363,019 886,851
Gloria M. Shatto 168,342,878 906,992
William P. Weber 168,366,954 882,916
Clayton K. Yeutter 168,080,320 1,169,550
</TABLE>
The two board proposals were approved with the following vote:
<TABLE>
Abstentions
(Other Than
Broker Broker
Proposal For Against Non-Votes) Non-Votes
- -------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Board proposal with 165,409,344 2,163,115 561,635 1,115,776
respect to adoption
of the Texas
Instruments Executive
Officer Performance
Plan
Board proposal with 142,617,935 25,127,386 388,775 1,115,774
respect to adoption
of the TI Employees
1997 Stock Purchase
Plan
</TABLE>
10
<TABLE>
<CAPTION>
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Designation of
Exhibits in
this Report Description of Exhibit
-------------- -----------------------------
<S> <C>
10(b)(iii) Amendment No. 2 to TI Deferred
Compensation Plan
11 Computation of primary and fully
diluted earnings per common and
common equivalent 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.
</TABLE>
(b) Report on Form 8-K
The Registrant filed the following report on Form 8-K with the Securities
and Exchange Commission during the quarter ended June 30, 1997: Form 8-K
dated April 21, 1997, which included a news release regarding the sale of
the Registrant's software business.
11
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995:
With the exception of historical information, the matters discussed in this
Report on Form 10-Q are forward-looking statements that involve
risks and uncertainties including, but not limited to, economic conditions,
product demand and industry capacity, competitive products and pricing,
manufacturing efficiencies, new product development, ability to enforce
patents, availability of raw materials and critical manufacturing
equipment, new plant startups, the regulatory and trade environment, and
other risks indicated in filings with the Securities and Exchange
Commission.
Trademarks: TIRIS is a trademark of Texas Instruments Incorporated. Speedpass
is a trademark of Mobil Corporation.
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:/s/ WILLIAM A. AYLESWORTH
William A. Aylesworth
Senior Vice President, Treasurer
and Chief Financial Officer
Date: July 18, 1997
12
<TABLE>
<CAPTION>
Exhibit Index
Designation of Paper (P)
Exhibits in or
this Report Description of Exhibit Electronic (E)
- ---------------- ----------------------- --------------
<S> <C> <C>
10(b)(iii) Amendment No. 2 to TI Deferred E
Compensation Plan
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
</TABLE>
13
EXHIBIT 10(b)(iii)
------------------
AMENDMENT NO. 2
TO
TI DEFERRED COMPENSATION PLAN
TEXAS INSTRUMENTS INCORPORATED, a Delaware Corporation with its principal
offices in Dallas, Texas (hereafter "TI") hereby amends the TI Deferred
Compensation Plan (hereafter the "Plan") established by the Company as of
October 19, 1994 in the respects set forth below:
1. A new second paragraph reading as follows is hereby added to the Plan
immediately following the initial paragraph thereof:
As of the Closing Date, as defined in the Asset Purchase Agreement dated
January 4, 1997 between TI and Raytheon Company, all obligations of TI under
this Plan with respect to the Participants who consent to this Amendment, as
well as all Participants who are "Former Defense Employees" within the meaning
of such Agreement, will be assumed by Raytheon Company as described in such
Agreement, and the Plan will thereafter be interpreted as to such Participants
by substituting, where appropriate, references to Raytheon Company or its
affiliate or successor for references to TI. Nothing herein shall permit the
Participants described in the foregoing sentence to file any Deferred
Compensation Agreement after the Closing Date.
2. Section 1-11 of the Plan hereby is amended so as to read as follows:
Sec. 1-11. Retirement. "Retirement" means the Termination of Employment
of a Participant because of the Participant's retirement pursuant to the terms
of any pension or retirement plan maintained by TI or a subsidiary of TI, or
the Participant's Termination of Employment with TI and all subsidiaries of TI
due to the Participant's disability as determined by the Plan Administrator in
its sole discretion. Notwithstanding the foregoing, for a Participant who
becomes an employee of Raytheon Company or any subsidiary or parent of such
corporation or any successor or survivor of such corporation in a merger or
other reorganization (collectively "Raytheon" hereafter) as a result of the
sale of TI's defense business to Raytheon pursuant to the Asset Purchase
Agreement dated January 4, 1997 between TI and Raytheon, "Retirement" for
purposes of Section 3-4 and Section 3-5 of this Plan means a Termination of
Employment because of the Participant's retirement pursuant to the terms of any
pension or retirement plan maintained by Raytheon, or the Participant's
1
Termination of Employment with Raytheon due to the Participant's disability as
determined by the Plan Administrator in its sole discretion; provided, however,
that the provisions of this sentence shall apply only to such Participants who
consent to this Amendment on or before March 14, 1997 or such other date as may
be determined by the Plan Administrator.
3. Section 1-12 of the Plan hereby is amended so as to read as follows:
Sec. 1-12. Termination of Employment. "Termination of Employment" means
the complete cessation of the employer-employee relationship between a
Participant and TI and all subsidiaries of TI, including a leave of absence
from which the Plan Administrator, in its sole discretion, determines that the
Participant is not expected to return. Notwithstanding the foregoing, for a
Participant who becomes an employee of Raytheon as a result of the sale of TI's
defense business to Raytheon pursuant to the Asset Purchase Agreement dated
January 4, 1997 between TI and Raytheon, "Termination of Employment" for
purposes of Section 3-4 and Section 3-5 of this Plan means complete cessation
of the employee-employer relationship between the Participant and Raytheon,
including a leave of absence in which the Plan Administrator, in its sole
discretion, determines that the Participant is not expected to return;
provided, however, that the provisions of this sentence shall apply only to
such Participants who consent to this Amendment on or before March 14, 1997 or
such other date as may be determined by the Plan Administrator.
This Amendment shall be effective as of January 16, 1997.
EXECUTED as of the 16th day of January, 1997.
TEXAS INSTRUMENTS INCORPORATED
BY:/s/ RICHARD J. AGNICH
2
<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
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income from continuing operations............................ $223,509 $ 41,047 $325,539 $173,047
Add:
Interest, net of tax and profit sharing effect, on
convertible debentures assumed converted............... 345 460 686 921
-------- -------- -------- --------
Adjusted income from continuing operations................... 223,854 41,507 326,225 173,968
Income from discontinued operations.......................... 25,403 34,549 52,718 65,785
-------- -------- -------- --------
Adjusted net income.......................................... $249,257 $ 76,056 $378,943 $239,753
======== ======== ======== ========
Earnings per Common and Common Equivalent Share:
Weighted average common shares outstanding................... 191,494 189,530 191,098 189,486
Weighted average common equivalent shares:
Stock option and compensation plans...................... 4,472 2,583 4,257 2,407
Convertible debentures................................... 2,491 2,493 2,491 2,493
------- ------- ------- -------
Weighted average common and common equivalent shares......... 198,457 194,606 197,846 194,386
======= ======= ======= =======
Earnings per Common and Common Equivalent Share:
Income from continuing operations.......................... $ 1.13 $ 0.21 $ 1.65 $ 0.89
Income from discontinued operations........................ 0.13 0.18 0.27 0.34
-------- -------- -------- --------
Net income................................................. $ 1.26 $ 0.39 $ 1.92 $ 1.23
======== ======== ======== ========
Earnings per Common Share Assuming Full Dilution:
Weighted average common shares outstanding................... 191,494 189,530 191,O98 189,486
Weighted average common equivalent shares:
Stock option and compensation plans...................... 4,475 2,583 4,475 2,409
Convertible debentures................................... 2,491 2,493 2,491 2,493
------- ------- ------- -------
Weighted average common and common equivalent shares......... 198,460 194,606 198,064 194,388
======= ======= ======= =======
Earnings per Common Share Assuming Full Dilution:.
Income from continuing operations.......................... $ 1.13 $ 0.21 $ 1.64 $ 0.89
Income from discontinued operations........................ 0.13 0.18 0.27 0.34
-------- -------- -------- --------
Net income................................................. $ 1.26 $ 0.39 $ 1.91 $ 1.23
======== ======== ======== ========
</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
----------------
1992 1993 1994 1995 1996 1996 1997
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes
and fixed charges:
Income before cumulative
effect of accounting changes,
interest expense on loans,
capitalized interest amortized,
and provision for income taxes..... $ 242 $ 561 $ 943 $1,530 $ 65 $ 259 $ 560
Add interest attributable to
rental and lease expense........... 42 38 40 41 44 22 22
----- ----- ----- ----- ----- ----- -----
$ 284 $ 599 $ 983 $1,571 $ 109 $ 281 $ 582
===== ===== ===== ===== ===== ===== =====
Fixed charges:
Total interest on loans (expensed
and capitalized)..................... $ 57 $ 55 $ 58 $ 69 $ 108 $ 41 $ 65
Interest attributable to rental
and lease expense.................... 42 38 40 41 44 22 22
----- ----- ----- ----- ----- ----- -----
Fixed charges............................ $ 99 $ 93 $ 98 $ 110 $ 152 $ 63 $ 87
===== ===== ===== ===== ===== ===== =====
Combined fixed charges and
preferred stock dividends:
Fixed charges........................ $ 99 $ 93 $ 98 $ 110 $ 152 $ 63 $ 87
Preferred stock dividends
(adjusted as appropriate to a
pretax equivalent basis)........... 55 29 -- -- -- -- --
----- ----- ----- ----- ----- ----- -----
Combined fixed charges and
preferred stock dividends.......... $ 154 $ 122 $ 98 $ 110 $ 152 $ 63 $ 87
===== ===== ===== ===== ===== ===== =====
Ratio of earnings to fixed charges....... 2.9 6.4 10.0 14.3 * 4.5 6.7
===== ===== ===== ===== ===== ===== =====
Ratio of earnings to combined
fixed charges and preferred
stock dividends........................ 1.8 4.9 10.0 14.3 * 4.5 6.7
===== ===== ===== ===== ===== ===== =====
* Not meaningful. The coverage deficiency was $43 million in 1996.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from THE
CONSOLIDATED FINANCIAL STATEMENTS OF TEXAS INSTRUMENTS INCORPORATED AND
SUBSIDIARIES AS OF JUNE 30, 1997, 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>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 657
<SECURITIES> 534
<RECEIVABLES> 1,769
<ALLOWANCES> 68
<INVENTORY> 737
<CURRENT-ASSETS> 4,703
<PP&E> 6,994
<DEPRECIATION> 2,874
<TOTAL-ASSETS> 9,387
<CURRENT-LIABILITIES> 2,142
<BONDS> 1,667
0
0
<COMMON> 192
<OTHER-SE> 4,271
<TOTAL-LIABILITY-AND-EQUITY> 9,387
<SALES> 4,823
<TOTAL-REVENUES> 4,823
<CGS> 3,069
<TOTAL-COSTS> 3,069
<OTHER-EXPENSES> 520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 501
<INCOME-TAX> 175
<INCOME-CONTINUING> 326
<DISCONTINUED> 52
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 378
<EPS-PRIMARY> 1.92
<EPS-DILUTED> 0
</TABLE>
