SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 972-995-3773
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ----------------------------- ------------------------
Common Stock, par value $1.00 New York Stock Exchange
London Stock Exchange
Tokyo Stock Exchange
The Swiss Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.X
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $14,825,000,000 as of January 31, 1997.
190,411,694
---------------------------------------------------------------------
(Number of shares of common stock outstanding as of January 31, 1997)
Parts I, II and IV hereof incorporate information by reference to the
Registrant's 1996 annual report to stockholders. Part III hereof incorporates
information by reference to the Registrant's proxy statement for the 1997
annual meeting of stockholders.
PART I
ITEM 1. Business.
General
- -------
Texas Instruments Incorporated (hereinafter the "Registrant,"
including subsidiaries except where the context indicates otherwise) is one of
the world's foremost high technology companies, with sales or manufacturing
operations in more than 30 countries. The Registrant is engaged in the
development, manufacture, and sale of a variety of products in the commercial
electronics and electrical industry primarily for industrial and consumer
markets. These products consist of components, digital products and
metallurgical materials. In addition, the Registrant's patent portfolio has
been established as an ongoing contributor to the Registrant's revenues. The
Registrant's business is based principally on its broad semiconductor
technology and application of this technology to digital solutions for the
networked society. The Registrant from time to time considers acquisitions
and divestitures which may alter its business mix. The Registrant may effect
one or more such transactions at such time or times as the Registrant
determines to be appropriate. As discussed below, the Registrant and Raytheon
Company ("Raytheon") entered into a definitive agreement as of January 4, 1997
under which Raytheon will purchase the Registrant's defense systems and
electronics business. See "ITEM 1. Business, Discontinued Operations."
The information with respect to net revenues, profit and
identifiable assets of the Registrant's industry segments and operations
outside the United States, which is contained in the note to the financial
statements captioned "Industry Segment and Geographic Area Operations" on
pages 28-30 of the Registrant's 1996 annual report to stockholders, is
incorporated herein by reference to such annual report.
Components
- ----------
Components consist of semiconductor integrated circuits (such as
digital signal processors, mixed-signal and analog circuits, microprocessors/
microcontrollers, applications processors, memories, and digital circuits),
semiconductor discrete devices, semiconductor subassemblies (such as custom
modules for specific applications), and electrical and electronic control
devices (such as motor protectors, starting relays, circuit breakers,
thermostats, sensors, and radio-frequency identification systems).
These components are used in a broad range of products for
industrial end-use (such as computers and peripheral equipment,
telecommunications, instrumentation, and industrial motor controls and
automation equipment), consumer end-use (such as cellular phones, modems,
televisions, cameras, automobiles, home appliances, and residential air
conditioning and heating systems), and government end-use (such as defense and
space equipment). The Registrant sells these components primarily to original
equipment manufacturers principally through its own marketing organizations
and to a lesser extent through distributors.
2
Digital Products
- ----------------
Digital products include electronic calculators, software
productivity tools, mobile computing products and other electronic systems.
In 1996, the Registrant sold substantially all of its custom manufacturing
services business and its printer business. Subsequent to year-end 1996, the
Registrant reached an agreement to sell its mobile computing business. Digital
products are used in a broad range of enterprise-wide, work group and personal
information-based applications. The Registrant markets these products through
various channels, including system suppliers, business equipment dealers,
distributors, retailers, and direct sales to end-users and original equipment
manufacturers.
Metallurgical Materials
- -----------------------
Metallurgical materials include clad metals, precision-engineered
parts and electronic connectors for use in a variety of applications such as
appliances, automobiles, electronic components, and industrial and
telecommunications equipment. These metallurgical materials are primarily
sold directly to original equipment manufacturers.
Discontinued Operations
- -----------------------
The Registrant's defense systems and electronics business ("DSE")
consists of radar systems, navigation systems, infrared surveillance and fire
control systems, defense suppression missiles, other weapon systems (including
antitank and interdiction weapons), missile guidance and control systems,
electronic warfare systems, and other defense electronic equipment. Sales are
made to the U.S. government (either directly or through prime contractors) and
to international customers approved by the U.S. government.
The Registrant and Raytheon entered into a definitive agreement as
of January 4, 1997 under which Raytheon will purchase DSE. In connection with
the sale, and in accordance with generally accepted accounting principles, the
Registrant has restated prior financial statements and financial information
to segregate the results of DSE from detailed financial components. As such,
defense-related financial results are reported in the Registrant's
consolidated financial statements on pages 18-21 of the Registrant's 1996
annual report to stockholders as discontinued operations. Operating results,
net asset and other information for discontinued operations appears in the
note to the financial statements captioned Discontinued Operations; unless
otherwise indicated, the financial amounts in this Form 10-K have been
adjusted to reflect continuing operations only.
Competition
- -----------
The Registrant is engaged in highly competitive businesses. Its
competitors include several of the largest companies in the United States,
Asia, and elsewhere abroad as well as many small, specialized companies. The
Registrant is a significant competitor in each of its principal businesses.
Generally, the Registrant's businesses are characterized by rapidly changing
technology which has, throughout the Registrant's history, intensified the
competitive factors, primarily performance and price.
Backlog
- -------
The dollar amount of backlog of orders believed by the Registrant to
be firm was $1623 million as of December 31, 1996 and $2294 million as of
December 31, 1995. The Registrant's backlog does not represent actual revenues
and is only an indication of future revenues which may be entered on the books
of account of the Registrant. Backlog orders are, under certain circumstances,
subject to cancellation by the purchaser without penalty and generally do not
reflect any potential adjustments for price decreases.
3
Raw Materials
- -------------
The Registrant purchases materials, parts and supplies from a number
of suppliers. The Registrant's silicon materials operation became part of a
joint venture with MEMC Electronic Materials, Inc., in May 1995. The
Registrant retains a minority ownership interest in the joint venture. The
materials, parts and supplies essential to the Registrant's business are
generally available at present and the Registrant believes at this time that
such materials, parts and supplies will be available in the foreseeable
future.
Patents and Trademarks
- ----------------------
The Registrant owns many patents in the United States and other
countries in fields relating to its business. The Registrant has developed a
strong, broad-based patent portfolio. The Registrant also has several
agreements with other companies involving license rights and anticipates that
other licenses may be negotiated in the future. The Registrant does not
consider its business materially dependent upon any one patent or patent
license, although taken as a whole, the rights of the Registrant and the
products made and sold under patents and patent licenses are important to the
Registrant's business. As noted above, the Registrant's patent portfolio has
been established as an ongoing contributor to the revenues of the Registrant.
See "ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Registrant owns trademarks that are used in the conduct of its
business. These trademarks are valuable assets, the most important of which
are "Texas Instruments" and the Registrant's corporate monogram.
Research and Development
- ------------------------
The Registrant's research and development expense was $1181 million
in 1996, compared with $842 million in 1995 and $578 million in 1994, and
included a one-time charge in 1996 of $192 million for the value of acquired
in-process research and development as a result of the acquisition of Silicon
Systems, Inc.
Seasonality
- -----------
The Registrant's revenues are subject to some seasonal variation.
Employees
- ---------
The information concerning the number of persons employed by the
Registrant, including persons employed in the Registrant's defense business,
at December 31, 1996 on page 32 of the Registrant's 1996 annual report to
stockholders is incorporated herein by reference to such annual report.
4
ITEM 2. Properties.
The Registrant's principal offices are located at 13500 North
Central Expressway, Dallas, Texas. The Registrant owns and leases plants in
the United States and 15 other countries for manufacturing and related
purposes. The following table indicates the general location of the principal
plants of the Registrant and the industry segments which make major use of
them. Except as otherwise indicated, the principal plants are owned by the
Registrant.
<TABLE>
<CAPTION>
Digital Metallurgical Discontinued
Components Products Materials Operations<F4>(4)
---------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Dallas, Texas<F4>(4) X X X
Austin, Texas<F1>(1) X X
Houston, Texas X
Lewisville, Texas<F4>(4) X
Lubbock, Texas X
McKinney, Texas<F4>(4) X
Plano, Texas<F1>(1) X X
Sherman, Texas<F1>(1)<F4>(4) X X
Temple, Texas X
Santa Cruz, California X
Attleboro, X X
Massachusetts
Almelo, Netherlands X
Freising, Germany X
Avezzano, Italy<F2>(2) X
Baguio, X
Philippines<F3>(3)
Hiji, Japan X
Kuala Lumpur, X
Malaysia<F1>(1)
Miho, Japan X
Singapore<F3>(3) X
Taipei, Taiwan X
____________________
<FN>
<F1>(1)Leased or primarily leased.
<F2>(2)Owned, subject to mortgage.
<F3>(3)Owned on leased land.
<F4>(4)The Lewisville and McKinney plants will be sold and certain plants or
portions thereof in Dallas and Sherman will be leased to Raytheon or
Raytheon-related entities in connection with the sale of DSE.
</TABLE>
The Registrant's facilities in the United States contained
approximately 19,600,000 square feet as of December 31, 1996, of which
approximately 5,400,000 square feet were leased. The Registrant's facilities
outside the United States contained approximately 7,000,000 square feet as of
December 31, 1996, of which approximately 1,800,000 square feet were leased.
The Registrant believes that its existing properties are in good
condition and suitable for the manufacture of its products. At the end of
1996, the Registrant utilized substantially all of the space in its
facilities.
Leases covering the Registrant's leased facilities expire at varying
dates generally within the next 10 years. The Registrant anticipates no
difficulty in either retaining occupancy through lease renewals, month-to-
month occupancy or purchases of leased facilities, or replacing the leased
facilities with equivalent facilities.
5
ITEM 3. Legal Proceedings.
As indicated in the Registrant's Current Report on Form 8-K dated
November 26, 1996, the Registrant reached agreement on a broad 10-year cross
license agreement with Samsung Electronics Co., Ltd., of Korea, which settled
all pending litigation between the companies, including the litigation
discussed in ITEM 3 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995 and ITEM 1 of the Registrant's Quarterly Reports
on Form 10-Q for the quarters ended March 31 and September 30, 1996.
On July 19, 1991, the Registrant filed a lawsuit in Tokyo District
Court against Fujitsu Limited of Japan ("Fujitsu") seeking injunctive relief,
alleging that Fujitsu's manufacture and sale of certain DRAMs infringe the
Registrant's Japanese patent on the invention of the integrated circuit (the
"Kilby" patent). Concurrently, Fujitsu brought a lawsuit in the same court
against the Registrant, seeking a declaration that Fujitsu is not infringing
the Kilby patent. On August 31, 1994, the district court ruled that Fujitsu's
production of 1-megabit and 4-megabit DRAMs and 32K EPROMs does not infringe
the Kilby patent. The Registrant has appealed the court's decision to the
Tokyo High Court.
The Registrant is involved in various investigations and proceedings
conducted by the federal Environmental Protection Agency and certain state
environmental agencies regarding disposal of waste materials. Although the
factual situations and the progress of each of these matters differ, the
Registrant believes that the amount of its liability will not have a material
adverse effect upon its financial position or results of operations and, in
most cases, the Registrant's liability will be limited to sharing clean-up or
other remedial costs with other potentially responsible parties.
6
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant
The following is an alphabetical list of the names and ages of the
executive officers of the Registrant and the positions or offices with the
Registrant presently held by each person named:
Name Age Position
James R. Adams 57 Director; Chairman of the Board
Richard J. Agnich 53 Senior Vice President, Secretary
and General Counsel
William A. Aylesworth 54 Senior Vice President,
Treasurer and Chief Financial
Officer (Chief Accounting
Officer)
Gary D. Clubb 50 Executive Vice President
(President, Digital Imaging)
Thomas J. Engibous 44 Director; President and
Chief Executive
Officer
David D. Martin 57 Executive Vice President
Charles F. Nielson 59 Vice President
Elwin L. Skiles, Jr. 55 Vice President
Richard K. Templeton 38 Executive Vice President
(President, Semiconductor Group)
William P. Weber 56 Director; Vice Chairman
David W. Welp 56 Executive Vice President (President
Systems Group and Defense Systems &
Electronics)
The term of office of each of the above listed officers is from the
date of his election until his successor shall have been elected and
qualified. Messrs. Adams, Engibous and Templeton were elected June 20, 1996
and Mr. Welp was elected on September 19, 1996 to their respective offices of
the Registrant; the most recent date of election of the other officers was
April 18, 1996. Mr. Adams, who has been a director of the Registrant since
1989; was Group President of SBC Communications Inc. from 1992 until his
retirement in 1995, and President and Chief Executive Officer of Southwestern
Bell Telephone Company from 1988 to 1992. Messrs. Agnich, Aylesworth, Martin,
Nielson, Skiles and Weber have served as officers of the Registrant for more
than five years. Messrs. Clubb and Engibous have served as officers of the
Registrant since 1993; and they and Messrs. Templeton and Welp have
been employees of the Registrant for more than five years.
7
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The information which is contained in the note to the financial
statements captioned "Common Stock Prices and Dividends" on page 35 of the
Registrant's 1996 annual report to stockholders, and the information
concerning the number of stockholders of record at December 31, 1996 on
page 32 of such annual report, are incorporated herein by reference to such
annual report.
ITEM 6. Selected Financial Data.
The "Summary of Selected Financial Data" for the years 1992 through
1996 which appears on page 32 of the Registrant's 1996 annual report to
stockholders is incorporated herein by reference to such annual report.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The first two paragraphs of the Letter to the Stockholders on page 2
of the Registrant's 1996 annual report to stockholders and the information
contained under the caption "Management Discussion and Analysis of Financial
Condition and Results of Operations" on pages 33-35 of such annual report are
incorporated herein by reference to such annual report.
ITEM 8. Financial Statements and Supplementary Data.
The consolidated financial statements of the Registrant at
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and the report thereon of the independent auditors, on pages
18-31 of the Registrant's 1996 annual report to stockholders, are incorporated
herein by reference to such annual report.
The "Quarterly Financial Data" on page 35 of the Registrant's 1996
annual report to stockholders is also incorporated herein by reference to such
annual report.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
8
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The information with respect to directors' names, ages, positions,
term of office and periods of service, which is contained under the caption
"Nominees for Directorship" in the Registrant's proxy statement for the 1997
annual meeting of stockholders is incorporated herein by reference to such
proxy statement.
Information concerning executive officers is set forth in Part I
hereof under the caption "Executive Officers of the Registrant."
ITEM 11. Executive Compensation.
The information which is contained under the captions "Directors
Compensation" and "Executive Compensation" in the Registrant's proxy statement
for the 1997 annual meeting of stockholders is incorporated herein by
reference to such proxy statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information concerning (a) the only persons that have reported
beneficial ownership of more than 5% of the common stock of the Registrant,
and (b) the ownership of the Registrant's common stock by the Chief Executive
Officer and the four other most highly compensated executive officers, and all
executive officers and directors as a group, which is contained under the
caption "Voting Securities" in the Registrant's proxy statement for the 1997
annual meeting of stockholders, is incorporated herein by reference to such
proxy statement. The information concerning ownership of the Registrant's
common stock by each of the directors, which is contained under the caption
"Nominees for Directorship" in such proxy statement, is also incorporated
herein by reference to such proxy statement.
The aggregate market value of voting stock held by non-affiliates of
the Registrant shown on the cover page hereof excludes the shares held by the
Registrant's directors, some of whom disclaim affiliate status, executive vice
presidents and senior vice presidents. These holdings were considered to
include shares credited to certain individuals' profit sharing accounts.
ITEM 13. Certain Relationships and Related Transactions.
Not applicable.
9
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1 and 2. Financial Statements and Financial Statement
Schedules:
The financial statements and financial statement schedules are
listed in the index on page 16 hereof.
3. Exhibits:
<TABLE>
<CAPTION>
Designation of
Exhibit in
this Report Description of Exhibit
-------------- -------------------------------------------------
<C> <C>
2 Asset Purchase Agreement dated as of January 4,
1997 between the Registrant and Raytheon Company
(exhibits and schedules omitted) (incorporated by
reference to Exhibit 2.1 to the Registrant's
Current Report on Form 8-K dated January 4,
1997).
3(a) Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit
3(a) to the Registrant's Annual Report on Form
10-K for the year 1993).
3(b) Certificate of Amendment to Restated Certificate
of Incorporation of the Registrant (incorporated
by reference to Exhibit 3(b) to the Registrant's
Annual Report on Form 10-K for the year 1993).
3(c) Certificate of Amendment to Restated Certificate
of Incorporation of the Registrant (incorporated
by reference to Exhibit 3(c) to the Registrant's
Annual Report on Form 10-K for the year 1993).
3(d) Certificate of Amendment to Restated Certificate
of Incorporation of the Registrant (incorporated
by reference to Exhibit 3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996).
3(e) Certificate of Designations relating to the
Registrant's Participating Cumulative Preferred
Stock (incorporated by reference to Exhibit 3(d)
to the Registrant's Annual Report on Form 10-K
for the year 1993).
3(f) Certificate of Ownership Merging Texas
Instruments Automation Controls, Inc. into the
Registrant (incorporated by reference to Exhibit
3(e) to the Registrant's Annual Report on Form
10-K for the year 1993).
3(g) Certificate of Elimination of Designations of
Preferred Stock of the Registrant (incorporated
by reference to Exhibit 3(f) to the Registrant's
Annual Report on Form 10-K for the year 1993).
10
3(h) By-Laws of the Registrant (incorporated by
reference to Exhibit 3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
4(a)(i) Rights Agreement dated as of June 17, 1988
between the Registrant and First Chicago Trust
Company of New York, formerly Morgan Shareholder
Services Trust Company, as Rights Agent, which
includes as Exhibit B the form of Rights
Certificate (incorporated by reference to Exhibit
4(a)(i) to the Registrant's Annual Report on Form
10-K for the year 1993).
4(a)(ii) Assignment and Assumption Agreement dated as of
September 24, 1992 among the Registrant, First
Chicago Trust Company of New York, formerly
Morgan Shareholder Services Trust Company, and
Harris Trust and Savings Bank (incorporated by
reference to Exhibit 4(a)(i) to the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992).
4(b) The Registrant agrees to provide the Commission,
upon request, copies of instruments defining the
rights of holders of long-term debt of the
Registrant and its subsidiaries.
10(a) Texas Instruments Annual Incentive Plan as
amended November 30, 1995 (incorporated by
reference to Exhibit 10(a) to the Registrant's
Annual Report on Form 10-K for the year
1995).<F1>*
10(b)(i) TI Deferred Compensation Plan (incorporated by
reference to Exhibit 10(a)(ii) to the
Registrant's Annual Report on Form 10-K for the
year 1994).<F1>*
10(b)(ii) Amendment No. 1 to TI Deferred Compensation Plan
(incorporated by reference to Exhibit 10(a)(iii)
to the Registrant's Annual Report on Form 10-K
for the year 1994).<F1>*
10(c) Texas Instruments Long-Term Incentive Plan
(incorporated by reference to Exhibit 10(a)(ii)
to the Registrant's Annual Report on Form 10-K
for the year 1993).<F1>*
10(d) Texas Instruments 1996 Long-Term Incentive Plan
(incorporated by reference to Exhibit 10 to the
Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996).<F1>*
10(e) Texas Instruments Restricted Stock Unit Plan for
Directors (incorporated by reference to
Exhibit 10(c) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1996).
11
10(f) Statement of Policy of Registrant's Board of
Directors on Top Officer and Board Member
Retirement Practices (incorporated by reference
to Exhibit 10(b)(vi) to the Registrant's Annual
Report on Form 10-K for the year 1993).<F1>*
11 Computation of 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.
13 Registrant's 1996 Annual Report to Stockholders.
(With the exception of the items listed in the
index to financial statements and financial
statement schedules herein, and the items
referred to in ITEMS 1, 5, 6, 7 and 8 hereof, the
1996 Annual Report to Stockholders is not to be
deemed filed as part of this report.)
21 List of subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
24 Powers of Attorney.
27 Financial Data Schedule.
________________
<FN>
<F1>*Executive Compensation Plans and Arrangements:
Texas Instruments Annual Incentive Plan as amended November 30,
1995 (incorporated by reference to Exhibit 10(a) to the Registrant's
Annual Report on Form 10-K for the year 1995).
TI Deferred Compensation Plan (incorporated by reference to Exhibit
10(a)(ii) to the Registrant's Annual Report on Form 10-K for the
year 1994).
Amendment No. 1 to TI Deferred Compensation Plan (incorporated by
reference to Exhibit 10(a)(iii) to Registrant's Annual Report on
Form 10-K for the year 1994).
Texas Instruments Long-Term Incentive Plan (incorporated by
reference to Exhibit 10(a)(ii) to the Registrant's Annual Report on
Form 10-K for the year 1993).
Texas Instruments 1996 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996).
Statement of Policy of Registrant's Board of Directors on Top
Officer and Board Member Retirement Practices (incorporated by
reference to Exhibit 10(b)(vi) to the Registrant's Annual Report on
Form 10-K for the year 1993).
</TABLE>
12
(b) Reports on Form 8-K:
The Registrant filed with the Securities and Exchange Commission during the
quarter ended December 31, 1996 a Form 8-K dated November 26, 1996, which
included a news release regarding the Registrant's patent license agreement
with Samsung.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995:
With the exception of historical information, the matters discussed
or incorporated by reference in this Report on Form 10-K 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,
timely completion of announced asset sales, 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.
13
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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: February 24, 1997
14
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 24th day of February, 1997.
Signature Title
*JAMES R. ADAMS Chairman of the Board; Director
- ------------------------------------
James R. Adams
*DAVID L. BOREN Director
- ------------------------------------
David L. Boren
*JAMES B. BUSEY IV Director
- ------------------------------------
James B. Busey IV
*THOMAS J. ENGIBOUS President; Chief Executive Officer;
- ------------------------------------ Director
Thomas J. Engibous
*GERALD W. FRONTERHOUSE Director
- ------------------------------------
Gerald W. Fronterhouse
*DAVID R. GOODE Director
- ------------------------------------
David R. Goode
*GLORIA M. SHATTO Director
- ------------------------------------
Gloria M. Shatto
*WILLIAM P. WEBER Vice Chairman; Director
- ------------------------------------
William P. Weber
*CLAYTON K. YEUTTER Director
- ------------------------------------
Clayton K. Yeutter
/s/ WILLIAM A. AYLESWORTH Senior Vice President; Treasurer;
- ------------------------------------ Chief Financial Officer; Chief
William A. Aylesworth Accounting Officer
*By:
/s/ WILLIAM A. AYLESWORTH
-----------------------------
William A. Aylesworth
Attorney-in-fact
15
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a))
<TABLE>
<CAPTION>
Page Reference
--------------
Annual
Report to
Form 10-K Stockholders
--------- ------------
Information incorporated by reference
to the Registrant's 1996 Annual Report
to Stockholders:
<S> <C> <C>
Consolidated Financial Statements:
Income for each of the three 18
years in the period ended
December 31, 1996
Balance sheet at December 31, 19
1996 and 1995
Cash flows for each of the 20
three years in the period
ended December 31, 1996
Stockholders' equity for each of 21
the three years in the period
ended December 31, 1996
Notes to financial statements 22-30
Report of Independent Auditors 31
Consolidated Schedule for each of the three
years in the period ended December 31, 1996:
II. Allowance for losses 17
</TABLE>
All other schedules have been omitted since the required information is
not present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
16
Schedule II
-----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
ALLOWANCE FOR LOSSES
(In Millions of Dollars)
Years Ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
of Year Expenses Deductions of Year
<S> <C> <C> <C> <C>
1996 $45 $163 $118 $90
- ---- ==== ==== ==== ====
1995 $37 $113 $105 $45
- ---- ==== ==== ==== ====
1994 $42 $80 $85 $37
- ---- ==== ==== ==== ====
</TABLE>
Allowances for losses from uncollectible accounts, returns, etc., are deducted
from accounts receivable in the balance sheet.
17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Designation of
Exhibit in Paper (P) or
this Report Description of Exhibit Electronic (E)
- -------------- ------------------------------------------ --------------
<S> <C> <C>
2 Asset Purchase Agreement dated as of
January 4, 1997 between the Registrant and
Raytheon Company (exhibits and schedules
omitted) (incorporated by reference to Exhibit
2.1 to the Registrant's Current Report on
Form 8-K dated January 4, 1997).
3(a) Restated Certificate of Incorporation of the
Registrant (incorporated by reference to
Exhibit 3(a) to the Registrant's Annual
Report on Form 10-K for the year 1993).
3(b) Certificate of Amendment to Restated
Certificate of Incorporation of the
Registrant (incorporated by reference to
Exhibit 3(b) to the Registrant's Annual
Report on Form 10-K for the year 1993).
3(c) Certificate of Amendment to Restated
Certificate of Incorporation of the
Registrant (incorporated by reference to
Exhibit 3(c) to the Registrant's Annual
Report on Form 10-K for the year 1993).
3(d) Certificate of Amendment to Restated
Certificate of Incorporation of the
Registrant (incorporated by reference to
Exhibit 3 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1996).
3(e) Certificate of Designations relating to
the Registrant's Participating Cumulative
Preferred Stock (incorporated by reference
to Exhibit 3(d) to the Registrant's Annual
Report on Form 10-K for the year 1993).
3(f) Certificate of Ownership Merging Texas
Instruments Automation Controls, Inc. into
the Registrant (incorporated by reference to
Exhibit 3(e) to the Registrant's Annual
Report on Form 10-K for the year 1993).
3(g) Certificate of Elimination of Designations
of Preferred Stock of the Registrant
(incorporated by reference to Exhibit 3(f) to
the Registrant's Annual Report on Form 10-K
for the year 1993).
3(h) By-Laws of the Registrant (incorporated by
reference to Exhibit 3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
4(a)(i) Rights Agreement dated as of June 17, 1988
between the Registrant and First Chicago Trust
Company of New York, formerly Morgan Shareholder
Services Trust Company, as Rights Agent, which
includes as Exhibit B the form of Rights
Certificate (incorporated by reference to Exhibit
4(a)(i) to the Registrant's Annual Report on Form
10-K for the year 1993).
4(a)(ii) Assignment and Assumption Agreement dated as
of September 24, 1992 among the Registrant,
First Chicago Trust Company of New York,
formerly Morgan Shareholder Services Trust
Company, and Harris Trust and Savings Bank
(incorporated by reference to Exhibit 4(a)(i)
to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1992).
4(b) The Registrant agrees to provide the Commission,
upon request, copies of instruments defining the
rights of holders of long-term debt of the
Registrant and its subsidiaries.
10(a) Texas Instruments Annual Incentive Plan as
amended November 30, 1995 (incorporated by
reference to Exhibit 10(a) to the Registrant's
Annual Report on Form 10-K for the year 1995).<F1>*
10(b)(i) TI Deferred Compensation Plan (incorporated by
reference to Exhibit 10(a)(ii) to the
Registrant's Annual Report on Form 10-K for the
year 1994).<F1>*
10(b)(ii) Amendment No. 1 to TI Deferred Compensation Plan
(incorporated by reference to Exhibit 10(a)(iii)
to the Registrant's Annual Report on Form 10-K
for the year 1994).<F1>*
10(c) Texas Instruments Long-Term Incentive Plan
(incorporated by reference to Exhibit 10(a)(ii)
to the Registrant's Annual Report on Form 10-K
for the year 1993).<F1>*
10(d) Texas Instruments 1996 Long-Term Incentive Plan
(incorporated by reference to Exhibit 10 to the
Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996).<F1>*
10(e) Texas Instruments Restricted Stock Unit Plan for
Directors (incorporated by reference to
Exhibit 10(c) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1996).
10(f) Statement of Policy of Registrant's Board of
Directors on Top Officer and Board Member
Retirement Practices (incorporated by reference
to Exhibit 10(b)(vi) to the Registrant's Annual
Report on Form 10-K for the year 1993).<F1>*
11 Computation of 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.
13 Registrant's 1996 Annual Report to Stockholders.
(With the exception of the items listed in the
index to financial statements and financial
statement schedules herein, and the items
referred to in ITEMS 1, 5, 6, 7 and 8 hereof, the
1996 Annual Report to Stockholders is not to be
deemed filed as part of this report.)
21 List of subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
24 Powers of Attorney.
27 Financial Data Schedule.
________________
<FN>
<F1>*Executive Compensation Plans and Arrangements:
Texas Instruments Annual Incentive Plan as amended November 30,
1995 (incorporated by reference to Exhibit 10(a) to the Registrant's
Annual Report on Form 10-K for the year 1995).
TI Deferred Compensation Plan (incorporated by reference to Exhibit
10(a)(ii) to the Registrant's Annual Report on Form 10-K for the
year 1994).
Amendment No. 1 to TI Deferred Compensation Plan (incorporated by
reference to Exhibit 10(a)(iii) to Registrant's Annual Report on
Form 10-K for the year 1994).
Texas Instruments Long-Term Incentive Plan (incorporated by
reference to Exhibit 10(a)(ii) to the Registrant's Annual Report on
Form 10-K for the year 1993).
Texas Instruments 1996 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996).
Statement of Policy of Registrant's Board of Directors on Top
Officer and Board Member Retirement Practices (incorporated by
reference to Exhibit 10(b)(vi) to the Registrant's Annual Report on
Form 10-K for the year 1993).
</TABLE>
<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.)
Years ended December 31
------------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Income (loss) from continuing operations..................... $ (46,774) $ 996,226 $ 592,128
Add:
Interest, net of tax and profit sharing effect, on
convertible debentures assumed converted............... - 1,582 2,413
---------- ---------- ----------
Adjusted income (loss) from continuing operations............ (46,774) 997,808 594,541
Income from discontinued operations.......................... 109,397 91,875 98,774
---------- ---------- ----------
Adjusted net income.......................................... $ 62,623 $1,089,683 $ 693,315
========== ========== ==========
Earnings (loss) per Common and Common Equivalent Share:
- ------------------------------------------------------
Weighted average common shares outstanding................... 189,694 187,644 184,124
Weighted average common equivalent shares:
Stock option and compensation plans...................... 2,423 3,127 2,379
Convertible debentures................................... - 2,860 4,352
---------- ---------- ----------
Weighted average common and common equivalent shares......... 192,117 193,631 190,855
========== ========== ==========
Earnings (loss) per Common and Common Equivalent Share:
Income (loss) from continuing operations................... $ (.24) $ 5.15 $ 3.12
Income from discontinued operations........................ .57 .48 .51
---------- ---------- ----------
Net Income................................................. $ .33 $ 5.63 $ 3.63
========== ========== ==========
Earnings (loss) per Common Share Assuming Full Dilution:
- -------------------------------------------------------
Weighted average common shares outstanding................... 189,694 187,644 184,124
Weighted average common equivalent shares:
Stock option and compensation plans...................... 3,309 3,215 2,399
Convertible debentures................................... - 2,860 4,352
---------- ---------- ----------
Weighted average common and common equivalent shares......... 193,003 193,719 190,875
========== ========== ==========
Earnings (loss) per Common Share Assuming Full Dilution:
Income (loss) from continuing operations................... $ (.24) $ 5.15 $ 3.11
Income from discontinued operations........................ .56 .48 .52
---------- ---------- ----------
Net income................................................. $ .32 $ 5.63 $ 3.63
========== ========== ==========
</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)
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <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.......... $ 65 $1,530 $ 943 $ 561 $ 242
Add interest attributable to
rental and lease expense................ 44 41 40 38 42
------ ------ ------ ------ ------
$ 109 $1,571 $ 983 $ 599 $ 284
====== ====== ====== ====== ======
Fixed charges:
Total interest on loans (expensed
and capitalized).......................... $ 108 $ 69 $ 58 $ 55 $ 57
Interest attributable to rental
and lease expense......................... 44 41 40 38 42
------ ------ ------ ------ ------
Fixed charges................................. $ 152 $ 110 $ 98 $ 93 $ 99
====== ====== ====== ====== ======
Combined fixed charges and
preferred stock dividends:
Fixed charges............................. $ 152 $ 110 $ 98 $ 93 $ 99
Preferred stock dividends
(adjusted as appropriate to a
pretax equivalent basis)................ -- -- -- 29 55
------ ------ ------ ------ ------
Combined fixed charges and
preferred stock dividends............... $ 152 $ 110 $ 98 $ 122 $ 154
====== ====== ====== ====== ======
Ratio of earnings to fixed charges............ <F1>* 14.3 10.0 6.4 2.9
====== ====== ====== ====== ======
Ratio of earnings to combined fixed
charges and preferred stock dividends....... <F1>* 14.3 10.0 4.9 1.8
====== ====== ====== ====== ======
<FN>
<F1>* Not meaningful. The coverage deficiency was $43 million in 1996.
</TABLE>
EXHIBIT 13
----------
T O O U R S T O C K H O L D E R S
At Texas Instruments, 1996 was a year of challenge.
Net revenues from continuing operations were $9.9 billion in 1996, down
from $11.4 billion in 1995. PFO from continuing operations, excluding special
charges for cost reduction actions and in-process R&D, was $374 million, down
from $1439 million in 1995. As a result of the announced sale of TI's defense
business to Raytheon Company, financial figures throughout this report have
been adjusted to reflect defense as a discontinued business. We have also
announced the sale of our mobile computing business to The Acer Group.
In TI's continuing operations, most of the decrease in revenues was due to
a precipitous drop in dynamic random access memory (DRAM) prices. From the
fourth quarter of 1995 to the fourth quarter of 1996, DRAM prices dropped
about 80 percent. In our differentiated semiconductor business, however,
revenues for digital signal processing solutions (DSPS), comprised of digital
signal processors plus mixed-signal/analog products, continued to establish
new records. Revenues for all differentiated semiconductor products were
nearly two-thirds of the company's total semiconductor revenues in fourth-
quarter 1996.
As an extended family, Texas Instruments faced its greatest challenge of
the year in the sudden death of our leader and our friend, Jerry Junkins. A
tribute to Jerry immediately follows this letter.
Our vision. In last year's annual report, we introduced a new vision for
Texas Instruments. That vision is World Leadership in Digital Solutions for
the Networked Society. There are three very significant global trends shaping
the networked society.
Number one is the continuing personalization of electronics across
computing, communication and entertainment. The second trend is
digitalization. While unknown to most users, this digitalization trend means
that for the first time all personal electronics
will be speaking a common digital language. The third trend is connectivity,
brought on primarily by computer networking and the recent emergence of the
Internet in the public domain, and by the growing wireless networks of the
world.
Personalized electronics for computing, communication and entertainment -
all speaking a common language - all connected together. These trends will
create a networked society, with its profound impact on the way we live,
learn, work and play. The networked society is still more talk than reality
right now. At TI, we will be a leader in creating the digital solutions that
shape the networked society. It's the companies who get out in front today
that will lead that society forward. TI will be one of those companies.
Our strategic direction. 1996 was a year of strategy development at TI,
providing a company direction that will help us realize our vision. It has
three elements - value, growth and improved financial stability.
Value. First, we will deliver high-quality, value-added solutions to our
customers and to end-users - solutions that provide sustainable
differentiation. Technology and market understanding are at the core of a
value-added solution. At TI, we want to have architectural leadership in every
major market where we compete. Then
2 Texas Instruments Incorporated and Subsidiaries 1996 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
(In millions of dollars, except per-share amounts)
<TABLE>
<CAPTION>
For the years ended December 31
-------------------------------
Income 1996 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues .............................. $ 9,940 $11,409 $ 8,608
------- ------ ------
Operating costs and expenses:
Cost of revenues ......................... 7,146 7,401 5,725
Research and development ................. 1,181 842 578
Marketing, general and administrative .... 1,639 1,727 1,379
------- ------ ------
Total .................................. 9,966 9,970 7,682
------- ------ ------
Profit (loss) from operations ............. (26) 1,439 926
Other income (expense) net ................ 76 79 6
Interest on loans ......................... 73 48 45
------- ------ ------
Income (loss) before provision for
income taxes ............................. (23) 1,470 887
Provision for income taxes ................ 23 474 295
------- ------ ------
Income (loss) from continuing operations .. (46) 996 592
Income from discontinued operations ....... 109 92 99
------- ------- -------
Net income ................................ $ 63 $ 1,088 $ 691
======= ======= =======
Earnings (loss) per common and common
equivalent share:
Continuing operations .................. $ (.24) $ 5.15 $ 3.12
Discontinued operations ................ .57 .48 .51
------- ------- -------
Net income ............................. $ .33 $ 5.63 $ 3.63
======= ====== =======
See accompanying notes.
</TABLE>
18 Texas Instruments Incorporated and Subsidiaries 1996 Annual Report
<TABLE>
<CAPTION>
December 31
------------------
Balance Sheet 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ................................... $ 964 $1,364
Short-term investments ...................................... 14 189
Accounts receivable, less allowance for losses of
$90 million in 1996 and $45 million in 1995................ 1,799 2,079
Inventories ................................................. 703 978
Prepaid expenses ............................................ 50 57
Deferred income taxes ....................................... 395 357
Net assets of discontinued operations ....................... 529 421
------ ------
Total current assets ...................................... 4,454 5,445
------ ------
Property, plant and equipment at cost ........................ 6,712 4,880
Less accumulated depreciation ............................... (2,550) (1,986)
------ ------
Property, plant and equipment (net) ....................... 4,162 2,894
------ ------
Deferred income taxes ........................................ 192 175
Other assets ................................................. 552 234
------ ------
Total assets ................................................. $9,360 $8,748
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Loans payable and current portion long-term debt ............ $ 314 $ 27
Accounts payable and accrued expenses ....................... 1,940 2,313
Income taxes payable ........................................ 163 170
Accrued retirement and profit sharing contributions ......... 69 369
------ ------
Total current liabilities ................................. 2,486 2,879
------ ------
Long-term debt ............................................... 1,697 804
Accrued retirement costs ..................................... 719 643
Deferred credits and other liabilities ....................... 361 327
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: 1996 - 190,396,797;
1995 - 189,526,939......................................... 190 190
Paid-in capital ............................................. 1,116 1,081
Retained earnings ........................................... 2,814 2,881
Less treasury common stock at cost.
Shares: 1996 - 143,525; 1995 - 138,129................... (12) (12)
Other ....................................................... (11) (45)
------ ------
Total stockholders' equity ............................... 4,097 4,095
------ ------
Total liabilities and stockholders' equity ................... $9,360 $8,748
====== ======
See accompanying notes.
</TABLE>
1996 Annual Report Texas Instruments Incorporated and Subsidiaries 19
CONSOLIDATED FINANCIAL STATEMENTS
(In millions of dollars, except per-share amounts)
<TABLE>
<CAPTION>
For the years ended December 31
-------------------------------
Cash Flows 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Continuing operations:
Cash flows from operating activities:
Income (loss) from continuing operations ........ $ (46) $ 996 $ 592
Depreciation .................................... 904 681 580
Deferred income taxes ........................... (51) (54) (32)
Net currency exchange losses .................... 7 6 3
(Increase) decrease in working capital
(excluding cash and cash equivalents,
short-term investments, deferred income
taxes, and loans payable and current
portion long-term debt):
Accounts receivable .......................... 250 (795) (227)
Inventories .................................. 245 (221) (74)
Prepaid expenses ............................. 9 9 (11)
Accounts payable and accrued expenses ........ (404) 691 331
Income taxes payable ......................... (3) 112 (67)
Accrued retirement and profit sharing
contributions ............................... (283) 155 106
Increase (decrease) in noncurrent accrued
retirement costs ............................... 79 48 (3)
Other ........................................... 91 65 82
------ ------ ------
Net cash provided by operating activities ........ 798 1,693 1,280
Cash flows from investing activities:
Additions to property, plant and equipment ...... (2,063) (1,351) (1,020)
Purchases of short-term investments ............. (27) (733) (779)
Sales and maturities of short-term investments .. 202 1,076 732
Acquisition of business, net of cash acquired ... (313) -- --
Proceeds from sale of businesses ................ 150 -- --
------ ------ ------
Net cash used in investing activities ............ (2,051) (1,008) (1,067)
Cash flows from financing activities:
Additions to loans payable ...................... 288 12 40
Payments on loans payable ....................... (2) -- (41)
Additions to long-term debt ..................... 871 24 1
Payments on long-term debt ...................... (199) (12) (88)
Dividends paid on common stock .................. (129) (111) (79)
Sales and other common stock transactions ....... 35 111 110
Other ........................................... (1) (1) (2)
------ ------ ------
Net cash provided by (used in) financing
activities ...................................... 863 23 (59)
Effect of exchange rate changes on cash .......... (16) 10 6
------ ------ ------
Cash provided by (used in) continuing operations . (406) 718 160
------ ------ ------
Discontinued operations:
Operating activities ............................. 86 (26) 252
Investing activities ............................. (80) (88) (56)
Financing activities ............................. -- -- --
------ ------ ------
Cash provided by (used in) discontinued operations 6 (114) 196
------ ------ ------
Net increase (decrease) in cash and
cash equivalents ................................. (400) 604 356
Cash and cash equivalents at beginning of year .... 1,364 760 404
------ ------ ------
Cash and cash equivalents at end of year .......... $ 964 $1,364 $ 760
====== ====== ======
See accompanying notes.
</TABLE>
20 Texas Instruments Incorporated and Subsidiaries 1996 Annual Report
<TABLE>
<CAPTION>
Treasury
Common Paid-In Retained Common
Stockholders' Equity Stock Capital Earnings Stock Other
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 ................. $ 91 $ 932 $1,307 $ (5) $ (10)
1994
- ----
Net income ............................... 691
Dividends declared on common
stock ($.47 per share) ................. (86)
Common stock issued:
To profit sharing trusts................ 31
On exercise of stock options ........... 2 60 3
Other stock transactions, net ............ 18 (4)
Pension liability adjustment ............. 10
Cash investments adjustment............... (1)
------ ------ ------ ------ ------
Balance, December 31, 1994 ................. 93 1,041 1,912 (6) (1)
1995
- ----
Net income ............................... 1,088
Dividends declared on common
stock ($.64 per share) ................. (119)
Two-for-one common stock split............ 94 (94)
Common stock issued:
On exercise of stock options ........... 3 81 6
On conversion of debentures ............ 20
Other stock transactions, net ............ 33 (12)
Pension liability adjustment ............. (45)
Cash investments adjustment............... 1
------ ------ ------ ------ ------
Balance, December 31, 1995 ................. 190 1,081 2,881 (12) (45)
1996
- ----
Net income ............................... 63
Dividends declared on common
stock ($.68 per share) ................. (130)
Common stock issued on exercise
of stock options ....................... 28
Other stock transactions, net ............ 7
Pension liability adjustment ............. 6
Equity and cash investments
adjustment ............................. 28
------ ----- ------ ------ ------
Balance, December 31, 1996 ................. $ 190 $1,116 $2,814 $ (12) $ (11)
====== ====== ====== ======= =======
</TABLE>
See accompanying notes.
1996 Annual Report Texas Instruments Incorporated and Subsidiaries 21
NOTES TO FINANCIAL STATEMENTS
Accounting Policies and Practices
- ------------------------------------------------------------------------------
The consolidated financial statements include the accounts of all
subsidiaries. The preparation of financial statements requires the use of
estimates from which final results may vary. Intercompany balances and
transactions have been eliminated. The U.S. dollar is the functional currency
for financial reporting. With regard to accounts recorded in currencies other
than U.S. dollars, current assets (except inventories), deferred income taxes,
other assets, current liabilities and long-term liabilities are remeasured at
exchange rates in effect at year end. Inventories, property, plant and
equipment and depreciation thereon are remeasured at historic exchange rates.
Revenue and expense accounts other than depreciation for each month are
remeasured at the appropriate month-end rate of exchange. Net currency
exchange gains and losses from remeasurement and 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 and interest rate swaps to hedge specific
transactions are included in the measurement of the related transactions.
As discussed in the Discontinued Operations footnote, the consolidated
financial statements have been restated to classify TI's Defense Systems and
Electronics business as discontinued operations. Also, beginning in 1996, the
company has made reclassifications to its statement of income to conform with
current industry practices. Research and development expense, which was
previously included in cost of revenues, is now presented separately. Also,
employees' retirement and profit sharing plans expense, previously separately
reported, is now allocated throughout operating costs and expenses, consistent
with other employee benefit costs. Prior year amounts have been reclassified
to conform with the 1996 presentation.
Inventories are stated at the lower of cost, current replacement cost or
estimated realizable value. Cost is generally computed on a currently
adjusted standard (which approximates current average costs) or average basis.
Revenues are generally recognized as products are shipped or services are
rendered. Royalty revenue is recognized by the company upon fulfillment of
its contractual obligations and determination of a fixed royalty amount, or,
in the case of ongoing royalties, upon sale by the licensee of royalty-bearing
products, as estimated by the company.
Substantially all depreciation is computed by either the declining-
balance method (primarily 150 percent declining method) or the sum-of-the-
years-digits method. Fully depreciated assets are written off against
accumulated depreciation.
Advertising costs are expensed as incurred. Advertising expense was $124
million in 1996, $131 million in 1995 and $87 million in 1994.
Earnings per common and common equivalent share are based on average
common and common equivalent shares outstanding (192,117,119 shares,
193,630,826 shares and 190,854,565 shares for 1996, 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. In computing per-share earnings, net income is
increased by $2 million in both 1995 and 1994 for interest (net of tax and
profit sharing effect) on the convertible debentures considered dilutive
common stock equivalents.
Discontinued Operations
- ------------------------------------------------------------------------------
On January 6, 1997, TI and Raytheon Company announced that their boards of
directors had approved a definitive agreement dated as of January 4, 1997, for
Raytheon to purchase TI's Defense Systems and Electronics business (DSE) for
$2.95 billion in cash. The transaction is subject to Hart-Scott-Rodino
antitrust review and is expected to close in the second quarter of 1997. The
consolidated financial statements of TI have been restated to present the DSE
operations, assets and liabilities as discontinued operations.
The assets and liabilities of DSE have been classified on the balance sheet as
net assets of discontinued operations and consist of the following:
<TABLE>
<CAPTION>
Millions of dollars
-------------------
1996 1995
------- -------
<S> <C> <C>
Accounts receivable ......................... $278 $240
Inventories (net of progress billings) ...... 221 157
Prepaid expenses ............................ 1 --
Current deferred income taxes ............... 91 96
Property, plant and equipment (net) ......... 296 293
Noncurrent deferred income taxes ............ 62 54
Other assets ................................ 40 47
---- ----
Total assets of DSE ....................... 989 887
---- ----
Accounts payable and accrued expenses ....... 234 259
Accrued retirement costs .................... 226 207
---- ----
Total liabilities of DSE .................. 460 466
---- ----
Net assets of discontinued operations ....... $529 $421
==== ====
</TABLE>
The net income from operations of DSE has been classified on the
statement of income as income from discontinued operations. Summarized
results of discontinued operations are as follows:
<TABLE>
<CAPTION>
Millions of dollars
--------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net revenues ............................... $1,773 $1,720 $1,707
Income before provision for income taxes ... 175 149 155
Provision for income taxes ................. 66 57 56
Income from discontinued operations ........ 109 92 99
</TABLE>
The Defense Systems and Electronics business includes products such as
radar systems, navigation systems, infrared surveillance and fire control
systems, defense suppression missiles, missile guidance and control systems,
and electronic warfare systems, which are sold to the U.S. government (either
directly or through prime contractors) and to international customers approved
by the U.S. government. TI has provided various ongoing services to DSE
including, but not limited to, facilities management, data processing,
security, payroll and employee benefits administration, insurance
administration, duplicating and telecommunications services. Their inclusion
in discontinued operations is based upon TI's intercorporate allocation
procedures for such services. The allocation basis of these
22 Texas Instruments Incorporated and Subsidiaries 1996 Annual Report
expenses and all other central operating costs is first on the basis of direct
usage when identifiable, with the remainder allocated among DSE and other TI
businesses on the basis of their respective revenues, headcount or other
measures. These expenses allocated to DSE totaled $163 million in 1996, $167
million in 1995 and $161 million in 1994. It is expected that TI will reach
agreements for payments from Raytheon to continue to provide certain of these
services on an ongoing basis and others on a transition basis to DSE following
Raytheon's acquisition.
Income from discontinued operations for 1996 includes the effect of a
fourth quarter pretax charge of $32 million for voluntary and involuntary
severance actions in the United States. These actions were essentially
completed by year-end 1996 and affected approximately 700 DSE employees.
Cash Equivalents and Investments
- ------------------------------------------------------------------------------
Debt securities with original maturities within three months are considered
cash equivalents. Debt securities with original maturities beyond three months
have remaining maturities within 13 months and are considered short-term
investments. These cash equivalent and short-term investment debt securities
are available for sale and stated at fair value, which approximates their
specific amortized cost. As of December 31, 1996, these debt securities
consisted primarily of the following types: U.S. government ($9 million),
corporate ($413 million), and asset-backed commercial paper ($300 million). At
December 31, 1995, these debt securities consisted primarily of the following
types: U.S. government ($205 million), corporate ($667 million), and asset-
backed commercial paper ($405 million). Gross realized and unrealized gains
and losses for each of these security types were immaterial in 1996, 1995 and
1994. Proceeds from sales of these cash equivalent and short-term investment
debt securities in 1996, 1995 and 1994 were $10 million, $190 million and $75
million.
Adjustments to fair value of cash equivalent and short-term investments
as well as noncurrent publicly traded equity investments are recorded as an
increase or decrease in stockholders' equity. At December 31, 1996, this
adjustment, net of a deferred tax effect of $15 million, was an increase of
$28 million (zero for cash equivalent and short-term investments and $28
million for noncurrent equity investments). At year-end 1995 and 1994, this
adjustment was zero and a decrease of $1 million. Gross realized and
unrealized holding gains and losses and proceeds from sales of equity
investments were immaterial in 1996, 1995 and 1994. The aggregate fair value
of these noncurrent equity investments at December 31, 1996 was $63 million
compared to their original cost of $20 million. Similar amounts for 1995 were
immaterial.
<TABLE>
<CAPTION>
Inventories
- ---------------------------------------------------------------------------
Millions of Dollars
-------------------
1996 1995
------ ------
<S> <C> <C>
Raw materials and purchased parts .................... $ 111 $ 209
Work in process ...................................... 361 341
Finished goods ....................................... 231 428
------ ------
Inventories .......................................... $ 703 $ 978
====== ======
</TABLE>
To secure access to additional semiconductor plant capacity, TI
participates in several joint ventures formed to construct and operate DRAM
semiconductor manufacturing facilities. Upon formation of the ventures TI
contributed technology and cash to acquire minority interests and entered into
long-term inventory purchase commitments with each joint venture. Under the
agreements, TI purchases the output of the ventures at prices based upon
percentage discounts from TI's average selling prices. This pricing method is
designed to help reduce the effect of market volatility on TI, although it may
not be able to fully comprehend a sharp decline in average unit prices.
Certain co-venturers have the right to buy a portion of the output from TI.
Under the ventures' financing arrangements, the venturers have provided
certain debt and other guarantees. At December 31, 1996 and 1995, TI was
contingently liable for an aggregate of $25 million and $40 million of such
guarantees. Inventory purchases from the ventures aggregated $1176 million in
1996, $1779 million in 1995 and $908 million in 1994. Receivables from and
payables to the ventures were $43 million and $66 million at December 31,
1996, and $25 million and $223 million at December 31, 1995.
The purpose of the joint ventures is to provide semiconductor output for
TI and other co-venturers. As a result, TI expects to recover its cost of the
ventures through sale of the semiconductor output, and is amortizing its cost
of the ventures over the expected initial output period of 3 to 5 years, and
recognizing its share of any cumulative venture net losses in excess of
amortization. The related expense charged to operations was $33 million in
1996, $15 million in 1995 and $15 million in 1994.
Property, Plant and Equipment at Cost
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Millions of Dollars
-------------------
Depreciable Lives 1996 1995
----------------- ------ ------
<S> <C> <C> <C>
Land ............................ $ 89 $ 71
Buildings and improvements ...... 5-40 years 2,372 1,711
Machinery and equipment ......... 3-10 years 4,251 3,098
------ ------
Total ........................... $6,712 $4,880
====== ======
</TABLE>
Authorizations for property, plant and equipment expenditures in future
years were approximately $795 million at December 31, 1996 and $1620 million
at December 31, 1995.
Accounts Payable and Accrued Expenses
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Millions of Dollars
-------------------
1996 1995
------ ------
<S> <C> <C>
Accounts payable .................................... $ 775 $1,044
Advance payments .................................... 84 144
Accrued salaries, wages, severance
and vacation pay ................................... 309 368
Other accrued expenses and liabilities .............. 772 757
------ ------
Total ............................................... $1,940 $2,313
====== ======
</TABLE>
1996 Annual Report Texas Instruments Incorporated and Subsidiaries 23
NOTES TO FINANCIAL STATEMENTS
(continued)
Debt and Lines of Credit
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Millions of Dollars
-------------------
Long-Term Debt 1996 1995
- -------------- ----- -----
<S> <C> <C>
9.0% notes due 1999 ................................... $ -- $ 150
6.75% notes due 1999 .................................. 200 --
6.875% notes due 2000 ................................. 200 --
9.0% notes due 2001 ................................... 150 150
6.65% notes, due in installments through 2001 ......... 200 --
9.25% notes due 2003 .................................. 150 150
6.125% notes due 2006 ................................. 300 --
8.75% notes due 2007 .................................. 150 150
3.98% to 6.10% Italian lira mortgage notes
(17% swapped for 1.60% U.S. dollar obligation) ....... 200 104
2.75% convertible subordinated
debentures due 2002 .................................. 103 103
Other ................................................. 59 10
------ ------
1,712 817
Less current portion long-term debt ................... 15 13
------ ------
Total ................................................. $1,697 $ 804
====== ======
</TABLE>
In the first quarter of 1996, the company issued $300 million of 6.125%
notes due 2006 and, in the third quarter, redeemed, at par, $150 million of
9.0% notes due 1999. In July 1996, the company acquired Silicon Systems,
Inc., via a stock purchase agreement for $340 million in cash plus the
assumption of $235 million 4.0% long-term notes ($217 million, as imputed to
the then prevailing market interest rate of 6.65%) to TDK Corp. of Japan. The
cash payment, initially financed by a draw down on TI's existing line of bank
credit, was permanently financed through the company's issuance on July 26 of
$400 million of notes due 1999 and 2000.
The convertible subordinated debentures may be redeemed at the company's
option at specified prices. The debentures are convertible at the holder's
option into an aggregate 2,493,031 shares of TI common stock at a common stock
conversion price of $41.4375 per share.
A portion of the coupon rates for the notes due 2001 and 2007 (in 1995,
notes due 1999, 2001, 2003 and 2007) have been swapped for commercial-paper-
based or LIBOR-based variable rates through March 1997, resulting in a
combination of fixed plus short-term variable rates for an effective interest
rate of approximately 9.1% and 9.5% as of December 31, 1996 and 1995. The
Italian lira mortgage notes, and related swaps, are due in installments
through 2005. The mortgage notes are collateralized by real estate and
building equipment.
Interest incurred on loans in 1996, 1995 and 1994 was $108 million, $69
million and $58 million. Of these amounts, $35 million in 1996, $21 million
in 1995 and $13 million in 1994 were capitalized as a component of capital
asset construction costs. Interest paid on loans (net of amounts capitalized)
was $54 million in 1996, $48 million in 1995 and $53 million in 1994.
Aggregate maturities of long-term debt due during the four years
subsequent to December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Millions of Dollars
-------------------
<S> <C>
1998 ................................................. $ 60
1999 ................................................. 267
2000 ................................................. 314
2001 ................................................. 229
</TABLE>
The company maintains lines of credit to support commercial paper
borrowings and to provide additional liquidity. These lines of credit totaled
$696 million at December 31, 1996 and $538 million at December 31, 1995. Of
these amounts, at December 31, 1996 and 1995, $600 million and $440 million
exist to support outstanding and future commercial paper borrowings or short-
term bank loans. At December 31, 1996, outstanding commercial paper
borrowings of $299 million with a weighted-average interest rate of 5.49% are
included in current loans payable.
Financial Instruments and Risk Concentration
- ------------------------------------------------------------------------------
Financial instruments: In addition to the swaps discussed in the preceding
note, as of December 31, 1996, the company had forward currency exchange
contracts outstanding of $333 million to hedge net balance sheet exposures
(including $82 million to buy deutsche mark, $48 million to sell yen, and $36
million to sell French francs). At December 31, 1995, the company had forward
currency exchange contracts outstanding of $303 million to hedge net balance
sheet exposures (including $78 million to buy deutsche mark, $40 million to
buy Singapore dollars, and $36 million to buy yen). As of December 31, 1996
and 1995, the carrying amounts and current market settlement values of these
swaps and forward contracts were not significant.
The company uses forward currency exchange contracts, including the
lira note swaps, to minimize the adverse impacts from the effect of exchange
rate fluctuations on the company's underlying non-U.S. net balance sheet
exposures. The interest rate swaps for the company's notes due 2001
and 2007 (in 1995, notes due 1999, 2001, 2003 and 2007) are used to change the
characteristics of the interest rate stream on the debt from fixed rates to a
combination of fixed plus short-term variable rates in order to achieve a mix
of interest rates which, over time, is expected to moderate financing costs.
The effect of these interest rate swaps was to increase interest expense by $2
million and $6 million in 1996 and 1995 and reduce interest expense by $8
million in 1994. These interest rate swaps are sensitive to interest rate
changes. If short-term interest rates increase (decrease) by one percentage
point from year-end 1996 rates, annual interest expense would increase
(decrease) by $3 million.
In order to minimize its exposure to credit risk, the company limits its
counterparties on the forward currency exchange contracts and interest rate
swaps to investment-grade rated financial institutions.
As of December 31, 1996, and 1995, the fair value of long-term debt, based
on current interest rates, was approximately $1759 million and $902 million,
compared with the carrying amount of $1712 million and $817 million.
Risk concentration: Financial instruments which potentially subject the
company to concentrations of credit risk are primarily cash investments and
accounts receivable. The company places its cash investments in investment-
grade, short-term debt securities and limits the amount of credit exposure to
any one commercial issuer. Concentrations of credit risk with respect to the
receivables are limited due to the large number of customers in the company's
24 Texas Instruments Incorporated and Subsidiaries 1996 Annual Report
customer base, and their dispersion across different industries and geographic
areas. The company maintains an allowance for losses based upon the expected
collectibility of accounts receivable.
Stockholders' Equity
- ------------------------------------------------------------------------------
The company is authorized to issue 10,000,000 shares of preferred stock. None
are currently outstanding.
Each outstanding share of the company's common stock carries half a stock
purchase right. Under certain circumstances, each right may be exercised to
purchase one one-hundredth of a share of the company's participating
cumulative preferred stock for $200. Under certain circumstances following
the acquisition of 20% or more of the company's outstanding common stock by an
acquiring person (as defined in the rights agreement), each right (other than
rights held by an acquiring person) may be exercised to purchase common stock
of the company or a successor company with a market value of twice the $200
exercise price. The rights, which are redeemable by the company at 1 cent per
right, expire in June 1998.
Research and Development Expense
- ---------------------------------------------------------------------------
Research and development expense, which totaled $1181 million in 1996, $842
million in 1995 and $578 million in 1994, included a one-time charge in 1996
of $192 million for the value of acquired in-process research and development
as a result of the acquisition of Silicon Systems, Inc., a semiconductor
enterprise. There was no tax offset associated with this one-time charge.
Other Income (Expense) Net
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Millions of Dollars
------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest income ........................... $ 62 $ 87 $ 51
Other income (expense) net ................ 14 (8) (45)
------ ------ ------
Total ..................................... $ 76 $ 79 $ 6
====== ====== ======
</TABLE>
Stock Options
- -----------------------------------------------------------------------------
The company has stock options outstanding to participants under the Texas
Instruments 1996 Long-Term Incentive Plan, approved by stockholders on
April 18, 1996. Options are also outstanding under the 1984 and 1988 Stock
Option Plans and the Texas Instruments Long-Term Incentive Plan; however, no
further options may be granted under these plans. Under all these
stockholder-approved plans, the exercise price per share may not be less than
100 percent of the fair market value on the date of the grant. Substantially
all the options have a 10-year term and do not become exercisable until after
eight years, although exercisability may be accelerated to the extent that
earnings per share goals are achieved.
Under the 1996 Long-Term Incentive Plan, the company may grant stock
options, including incentive stock options; restricted stock and restricted
stock units; performance units; and other stock-based awards, including stock
appreciation rights. The plan provides for the issuance of 18,500,000 shares
of the company's common stock; in addition, if any award under the 1984 or
1988 Stock Option Plans or the Long-Term Incentive Plan terminates, then any
unissued shares subject to the terminated award become available for granting
awards under the 1996 Long-Term Incentive Plan. No more than 2,000,000 shares
of common stock may be awarded as restricted stock, restricted stock units or
other stock-based awards under the plan. In 1996, 55,014 shares of restricted
stock units, which vest over 1 to 5 years, were granted (weighted-average
award-date value of $45.31 per share). In addition, 34,906 previously
unissued shares were issued as Annual Incentive Plan stock awards in 1996
(weighted-average award-date value of $46.56 per share). Compensation expense
for restricted stock units and annual stock awards totaled $1.6 million in
1996.
The company also has stock options outstanding under an Employees Stock
Option Purchase Plan approved by stockholders in 1988. The plan provides for
options to be offered to all eligible employees in amounts based on a
percentage of the employee's prior year's compensation. If the optionee
authorizes and does not cancel payroll deductions which, with interest, will
be equal to or greater than the purchase price, options granted become
exercisable 14 months, and expire not more than 27 months, from date of grant.
Stock option transactions during 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Long-Term
Incentive Weighted- Weighted-
and Stock Average Employees Average
Option Exercise Stock Option Exercise
Plans Price Purchase Plan Price
--------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Balance, Dec. 31, 1993 ....... 8,904,496 $20.51 1,036,612 $29.94
Granted ..................... 1,719,500 35.21 685,124<F1>* 41.07
Forfeited ................... (99,202) 26.51 (141,958) 35.27
Expired ..................... -- -- -- --
Exercised<F2>** ............. (2,365,240) 19.28 (630,996) 28.16
---------- ------ --------- ------
Balance, Dec. 31, 1994 ....... 8,159,554 23.91 948,782 38.37
Granted ..................... 2,911,760 35.68 982,948<F1>* 59.32
Forfeited ................... (118,364) 33.68 (110,485) 48.45
Expired ..................... -- -- -- --
Exercised<F2>** ............. (3,070,378) 20.97 (687,536) 37.41
---------- ------ --------- ------
Balance, Dec. 31, 1995 ....... 7,882,572 29.24 1,133,709 56.13
Granted ..................... 2,663,375 45.84 848,546<F1>* 56.25
Forfeited ................... (198,739) 26.16 (399,909) 58.43
Expired ..................... -- -- -- --
Exercised<F2>** ............. (434,660) 25.80 (386,162) 50.36
---------- ------ ---------- ------
Balance, Dec. 31, 1996 9,912,548 $33.91 1,196,184 $57.31
========= ====== ========= ======
<FN>
<F1> * Excludes options offered but not accepted.
<F2>** Includes previously unissued shares and treasury shares of 820,822 and
zero; 3,656,872 and 101,042; and 2,938,686 and 57,550 for 1996, 1995 and 1994.
</TABLE>
In accordance with the terms of APB No. 25, the company records no
compensation expense for its stock option awards. As required by SFAS
No. 123, the company provides the following disclosure of hypothetical values
for these awards. The weighted-average grant-date value of options granted
during 1996 was estimated to be $18.47 under the Long-Term Incentive Plans
(Long-Term Plans) and $12.10 under the Employees Stock Option Purchase Plan
(Employees Plan). These values were estimated using the Black-Scholes option-
pricing model with the following weighted-average assumptions: expected
1996 Annual Report Texas Instruments Incorporated and Subsidiaries 25
NOTES TO FINANCIAL STATEMENTS
(continued)
dividend yields of 1.48% (Long-Term Plans) and 1.21% (Employees Plan),
expected volatility of 39%, risk-free interest rates of 5.42% (Long-Term
Plans) and 6.15% (Employees Plan); and expected lives of 6 years (Long-Term
Plans) and 1.5 years (Employees Plan). Had compensation expense been recorded
based on these hypothetical values, the company's 1996 net income would have
been $40 million, or $0.21 per share. A similar computation for 1995 would
have resulted in net income of $1078 million, or $5.57 per share. Because
options vest over several years and additional option grants are expected, the
effects of these hypothetical calculations are not likely to be representative
of similar future calculations.
Summarized information about stock options outstanding under the Long-
Term Plans and Stock Option Plans at December 31, 1996, is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------------ --------------------
Weighted- Weighted- Number Weighted-
Number Average Average Exercisable Average
Range of Outstanding Remaining Exercise at Dec. 31, Exercise
Exercise Prices at Dec. 31, 1996 Contractual Life Price 1996 Price
- --------------- ---------------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$16.41 to 27.38 3,263,288 4.5 years $21.63 3,263,288 $21.63
35.10 to 49.50 6,553,410 8.2 39.55 2,245,578 35.51
51.13 to 81.19 95,850 8.9 66.93 35,500 72.31
- --------------- ---------- ---- ------ --------- ------
$16.41 to 81.19 9,912,548 7.0 $33.91 5,544,366 $27.58
=============== ========== ==== ====== ========= ======
</TABLE>
At December 31, 1996, the stock options outstanding under the Employees Plan
have exercise prices of $56.25 or $59.32, depending on the year of grant, and
a weighted-average remaining contractual life of 1.3 years. Of the total
outstanding options, 412,022 are exercisable at year-end 1996.
In connection with the purchase of DSE by Raytheon Company, vested TI
options held by DSE employees under the Long-Term Plans and Stock Option Plans
will be modified by TI to retain their full contractual life instead of
expiring within three months of the DSE transaction. As a result, an expense
charge to discontinued operations will be recorded at the time of the
transaction closing. Unvested Long-Term Plan options will be canceled and
replaced by Raytheon Company with Raytheon options. Vested Employees Plan
options will expire three months after closing. Unvested Employees Plan
options will be canceled and payroll deductions, with interest, will be
refunded. At December 31, 1996, options held by DSE employees were as
follows:
<TABLE>
<CAPTION>
Long-Term and
Stock Option Plans Employee Plan
------------------ -------------
<S> <C> <C>
Vested ......... 489,337 113,868
Unvested ....... 279,363 214,806
</TABLE>
At year-end 1996, 18,415,865 shares were available for future grants under
the 1996 Long-Term Incentive Plan and 2,237,858 shares under the Employees
Stock Option Purchase Plan. As of year-end 1996, 28,765,675 shares were
reserved for issuance under the company's stock option and incentive plans and
3,434,042 shares were reserved for issuance under the Employees Stock Option
Purchase Plan.
The company acquires its common stock from time to time for use in
connection with exercise of stock options and other stock transactions.
Treasury shares acquired in 1996, 1995 and 1994 were 7,730 shares, 135,001
shares and 59,198 shares. Previously unissued common shares issued under the
Long-Term Incentive Plan and the Annual Incentive Plan in 1996, 1995 and 1994
were 49,036 shares, 16,386 shares and 46,330 shares. Treasury shares issued
under the Texas Instruments Restricted Stock Unit Plan for Directors in 1996
were 2,334 shares.
Profit Sharing and Retirement Plans
- -----------------------------------------------------------------------------
The company provides various incentive plans for employees, including general
profit sharing and savings programs as well as an Annual Incentive Plan for
key employees. The company also provides pension and retiree health care
benefit plans in the U.S. and pension plans in certain non-U.S. locations.
Profit sharing: There was no profit sharing expense in 1996. Profit
sharing expense was $257 million in 1995 and $133 million in 1994. Under the
plans, unless otherwise provided by local law, the company and certain of its
subsidiaries contribute a portion of their net profits equal to 25% of the
amount by which consolidated income (as defined) before profit sharing and
income taxes exceeds 8% of the company's consolidated average assets for the
year. Effective 1995, the majority of the profit sharing plans worldwide
provide that, depending on the individual plan, from 50% to 100% of the profit
sharing earned by employees is paid in cash to the eligible participants with
the balance contributed to a deferred plan. For non-U.S. employees,
contributions to a deferred plan generally are invested in TI common stock.
For U.S. employees, several investment options, including TI common stock, are
available.
Except in the event of company contributions in stock, investments in TI
common stock are made by the trustees through purchases of outstanding shares
or through purchases of shares offered from time to time by the company. The
board of directors has authorized the issuance of previously unissued shares
for purposes of the plans; 4,616,918 of such shares were available for future
issuance at December 31, 1996.
The trustees of the profit sharing plans purchased 3,123,905 outstanding
shares of TI common stock in 1996 (4,762,460 shares in 1995 and 1,881,815
shares in 1994) and no previously unissued shares in 1996 and 1995 (403,945
shares in 1994) for use in the profit sharing plans and savings program.
Savings program: The company provides a matched savings program whereby
U.S. employees' contributions of up to 4% of their salary are matched by the
company at the rate of 50 cents per dollar. Contributions are subject to
statutory limitations. The contributions may be invested in several
investment funds including TI common stock. The company's expense under this
program was $17 million in 1996, $14 million in 1995 and $13 million in 1994.
U.S. pension plan: The company has a defined benefit plan covering most
U.S. employees with benefits based on years of service and employee's
compensation. The plan is a career-average-pay plan which has been amended
periodically in the past to produce approximately the same results as a final-
pay type plan. The board of directors of the company has expressed an intent
to make such amendments in the future, circumstances permitting, and the
26 Texas Instruments Incorporated and Subsidiaries 1996 Annual Report
expected effects of such amendments have been considered in calculating U.S.
pension expense. The company's funding policy is to contribute to the plan at
least the minimum amount required by ERISA. Plan assets consist primarily of
common stock, U.S. government obligations, commercial paper and real estate.
As noted in the Discontinued Operations footnote, accrued retirement costs
of $226 million at year-end 1996 and $207 million at year-end 1995, consisting
primarily of the U.S. pension plan and the retiree health care benefit plan
obligations and assets related to DSE employees, is included in discontinued
operations. The following information on pension and retiree health care
benefit plans excludes discontinued operations amounts.
Pension expense of the U.S. plan includes the following components:
<TABLE>
<CAPTION>
Millions of Dollars
--------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned
during the period ...................... $ 40 $ 31 $ 35
Interest cost on projected benefit
obligation ............................. 51 44 42
Return on plan assets:
Actual return .......................... (123) (95) 10
Deferral ............................... 82 57 (47)
Net amortization ........................ (2) (5) (4)
------ ------ ------
U.S. pension expense .................... $ 48 $ 32 $ 36
====== ====== ======
</TABLE>
The funded status of the U.S. plan was as follows:
<TABLE>
<CAPTION>
Millions of Dollars
-------------------
1996 1995
------- -------
<S> <C> <C>
Actuarial present value at Dec. 31 of:
Vested benefit obligation .................... $ (540) $ (434)
======= =======
Accumulated benefit obligation ............... $ (595) $ (493)
======= =======
Projected benefit obligation ................. $ (819) $ (750)
Plan assets at fair value ..................... 611 546
------- -------
Projected benefit obligation in excess of
plan assets .................................. (208) (204)
Unrecognized net asset from initial
application of SFAS 87 ....................... (20) (42)
Unrecognized net loss ......................... 8 60
Unrecognized prior service cost ............... 18 23
------- -------
Accrued pension at Dec. 31 .................... (202) (163)
Less current portion .......................... 45 43
------- -------
Accrued U.S. pension costs .................... $ (157) $ (120)
======= =======
</TABLE>
The projected benefit obligations for 1996 and 1995 were determined using
assumed discount rates of 7.25% and 7.0% and an assumed average long-term pay
progression rate of 4.25%. The assumed long-term rate of return on plan
assets was 9.0%.
Non-U.S. pension plans: Retirement coverage for non-U.S. employees of the
company is provided, to the extent deemed appropriate, through separate plans.
Retirement benefits are based on years of service and employee's compensation,
generally during a fixed number of years immediately prior to retirement.
Funding policies are based on local statutes. Plan assets consist primarily
of common stock, government obligations and corporate bonds.
Pension expense of the non-U.S. plans includes the following components:
<TABLE>
<CAPTION>
Millions of Dollars
-------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned
during the period ...................... $ 64 $ 59 $ 56
Interest cost on projected benefit
obligations ............................ 34 38 32
Return on plan assets:
Actual return .......................... (49) (32) (15)
Deferral ............................... 14 (3) (15)
Net amortization ........................ 13 10 11
------ ------ ------
Non-U.S. pension expense ................ $ 76 $ 72 $ 69
====== ====== ======
</TABLE>
The funded status of the non-U.S. plans was as follows:
<TABLE>
<CAPTION>
Millions of Dollars
---------------------
1996 1995
------ ------
<S> <C> <C>
Actuarial present value at Sept. 30 of:
Vested benefit obligations .................. $ (535) $ (523)
====== ======
Accumulated benefit obligations ............. $ (696) $ (619)
====== ======
Projected benefit obligations ............... $ (940) $ (873)
Plan assets at fair value .................... 500 448
------ ------
Projected benefit obligations in excess of
plan assets ................................. (440) (425)
Unrecognized net liabilities from initial
application of SFAS 87 ...................... 18 21
Unrecognized net loss ........................ 236 253
Unrecognized prior service cost .............. 12 5
------ ------
Accrued non-U.S. pension at Sept. 30 ......... (174) (146)
Additional minimum liability ................. (48) (56)
Adjustments from Sept. 30 to Dec. 31 ......... (3) (5)
Less prepaid pension costs at Dec. 31 ........ 13 12
------ ------
Accrued pension at Dec. 31 ................... (238) (219)
Less current portion ......................... 4 12
------ ------
Accrued non-U.S. pension costs ............... $ (234) $ (207)
====== ======
</TABLE>
The range of assumptions used for the non-U.S. plans reflects the
different economic environments within the various countries. The projected
benefit obligations were determined using a range of assumed discount rates of
3.25% to 8.0% in 1996 and 1995 and a range of assumed average long-term pay
progression rates of 3.0% to 6.0% in 1996 and 3.5% to 6.0% in 1995. The
range of assumed long-term rates of return on plan assets was 7.0% to 9.0%.
Accrued pension at December 31 includes approximately $111 million in 1996 and
$101 million in 1995 for two non-U.S. plans that are not funded. Pension
accounting rules require recognition in the balance sheet of an additional
minimum pension liability equal to the excess of the accumulated benefit
obligation over the fair value of the plan assets. A corresponding amount is
recognized as an intangible asset, not to exceed the amount of unrecognized
prior service cost, with the balance recorded as a reduction of stockholders'
equity. As of December 31, 1996 and 1995, the company has recorded an
additional non-U.S. minimum pension liability of $48 million and $56 million
and an equity reduction of $39 million and $45 million.
Retiree health care benefit plan: The company's U.S. employees are
currently eligible to receive, during retirement, specified company-paid
medical benefits. The plan is contributory and premiums
1996 Annual Report Texas Instruments Incorporated and Subsidiaries 27
NOTES TO FINANCIAL STATEMENTS
(continued)
are adjusted annually. For employees retiring on or after January 5, 1993,
the company has specified a maximum annual amount per retiree, based on years
of service, that it will pay toward retiree medical premiums. For employees
who retired prior to that date, the company maintains a consistent level of
cost sharing between the company and the retiree. Any funding of the plan
obligation will be at amounts determined at the discretion of management.
Expense of the retiree health care benefit plan includes the following
components:
<TABLE>
<CAPTION>
Millions of Dollars
-------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned
during the period ........................... $ 4 $ 4 $ 3
Interest cost on accumulated
postretirement benefit obligation ........... 22 23 24
------ ------ ------
Retiree health care benefit expense .......... $ 26 $ 27 $ 27
====== ====== ======
</TABLE>
The funded status of the plan was as follows:
<TABLE>
<CAPTION>
Millions of Dollars
-------------------
1996 1995
------ ------
<S> <C> <C>
Actuarial present value at Dec. 31 of accumulated
postretirement benefit obligation:
Retirees ....................................... $ (239) $ (235)
Fully eligible employees ....................... (11) (16)
Other employees ................................ (62) (76)
------ ------
Accumulated postretirement benefit obligation .... (312) (327)
Unrecognized net (gain) loss ..................... (23) 6
Unrecognized prior service cost .................. (7) (7)
------ ------
Accrued at Dec. 31 ............................... (342) (328)
Less current portion ............................. 14 12
------ ------
Accrued retiree health care benefit costs ........ $ (328) $ (316)
====== ======
</TABLE>
Retiree health care benefit amounts were determined using health care cost
trend rates of 7.3% for 1997 decreasing to 5.0% by 2000, and assumed discount
rates of 7.25% for 1996 and 7.0% for 1995. Increasing the health care cost
trend rates by 1% would have increased the accumulated postretirement benefit
obligation at December 31, 1996, by $16 million and 1996 plan expense by $2
million.
Special actions: In the fourth quarter of 1996, the company took a pretax
charge of $208 million, of which $91 million was for severance for cost
reduction actions consisting of a voluntary retirement program in the United
States and selected involuntary employment reductions worldwide. These
actions, which primarily involved the components and digital products segments
were essentially completed by year-end 1996 and affected approximately 2,600
employees. The balance of the charge, $117 million, was for asset write-downs
on several product lines, primarily the mobile computing business. In 1994,
the company took a pretax charge of $126 million for restructuring of its
European operations and divestiture of certain non-strategic product lines.
These actions were essentially completed by year-end 1995.
Industry Segment and Geographic Area Operations
- -----------------------------------------------------------------------------
The company is engaged in the development, manufacture and sale of a variety
of products in the commercial electronic and electrical industry primarily for
industrial and consumer markets. These products and their markets consist of
the following: components (semiconductors, such as integrated circuits,
discrete devices and subassemblies, and electrical and electronic control
devices) which are sold primarily to original equipment manufacturers
principally through the company's own marketing organizations and to a lesser
extent through distributors; digital products (such as electronic calculators,
software productivity tools, mobile computing products and other electronic
systems) which are marketed through various channels, including system
suppliers, business equipment dealers, distributors, retailers and direct
sales to end-users and original equipment manufacturers. In 1996, the company
sold substantially all of its custom manufacturing services business and its
printer business, which were part of the digital products segment. Subsequent
to year-end 1996, the company entered into an agreement to sell its mobile
computing business. The company also produces metallurgical materials
(including clad metals, precision-engineered parts and electronic connectors)
which are primarily sold directly to original equipment manufacturers.
The company's business is based principally on its broad semiconductor
technology and application of this technology to digital solutions for the
networked society.
Industry segment and geographic area profit (loss) is not equivalent to
income (loss) before provision for income taxes due to exclusion of general
corporate expenses, net interest, currency exchange gains and losses, and
other items along with elimination of unrealized profit in assets. Profit
sharing expense is allocated to segment results based on payroll costs.
Beginning the fourth quarter of 1995, for geographic area purposes
responsibility for certain interarea product transfers was changed consistent
with the company's pan-European operations approach. The effect of this
change on 1995 geographic area results was to increase Europe profits and
decrease U.S. profits by approximately $70 million. Additionally, prior to
1995, for geographic area purposes U.S. interarea product transfers for
further processing were recorded as cost credits. In 1995, such transfers are
recorded as interarea revenues. The effect of this change was to increase
1995 U.S. interarea revenues by approximately $960 million. Royalty revenue
from patent license agreements is included in the U.S. geographic net revenues
and (except for royalty revenue from microcomputer system patent license
agreements, which is included in the digital products segment) is principally
included in the components segment.
Identifiable assets are those associated with segment or geographic area
operations, excluding unallocated cash and short-term investments, internal
company receivables and deferred income taxes. Generally, revenues between
industry segments and between geographic areas are based on prevailing market
prices or an approximation thereof.
28 Texas Instruments Incorporated and Subsidiaries 1996 Annual Report
<TABLE>
<CAPTION>
Industry Segment Net Revenues
- -----------------------------------------------------------------------------
Millions of Dollars
-------------------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Components
Trade ................................ $ 8,008 $9,419 $6,787
Intersegment ......................... 63 60 56
------- ------ ------
8,071 9,479 6,843
------- ------ ------
Digital Products
Trade ................................ 1,717 1,829 1,661
Intersegment ......................... 7 23 1
------- ------ ------
1,724 1,852 1,662
------- ------ ------
Metallurgical Materials
Trade ................................ 172 160 152
Intersegment ......................... 12 23 25
------- ------ ------
184 183 177
------- ------ ------
Eliminations and other ................ (39) (105) (74)
------- ------- ------
Total ................................. $ 9,940 $11,409 $ 8,608
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Industry Segment Profit (Loss)
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Components ............................ $ 559 $1,840 $1,107
Digital Products ...................... (207) (55) 62
Metallurgical Materials ............... 17 2 (8)
Eliminations and corporate items ...... (392) (317) (274)
------ ------ ------
Income (loss) before provision for
income taxes ......................... $ (23) $1,470 $ 887
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Industry Segment Identifiable Assets
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Components ............................ $6,287 $5,192 $3,650
Digital Products ...................... 642 930 756
Metallurgical Materials ............... 76 88 76
Eliminations and corporate items ...... 1,826 2,117 1,764
Net assets of discontinued operations . 529 421 222
------ ------ ------
Total ................................. $9,360 $8,748 $6,468
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Industry Segment Property, Plant and Equipment
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
Depreciation 1996 1995 1994
- ------------ ------ ------ ------
<S> <C> <C> <C>
Components ............................ $ 851 $ 612 $ 514
Digital Products ...................... 20 23 24
Metallurgical Materials ............... 9 11 10
Eliminations and corporate items ...... 24 35 32
------ ------ ------
Total ................................. $ 904 $ 681 $ 580
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Millions of Dollars
------------------------------
Additions 1996 1995 1994
- --------- ------ ------ ------
<S> <C> <C> <C>
Components ............................ $1,898 $1,207 $ 888
Digital Products ...................... 17 32 42
Metallurgical Materials ............... 7 14 9
Eliminations and corporate items ...... 141 98 81
------ ------ ------
Total ................................. $2,063 $1,351 $1,020
====== ====== ======
</TABLE>
The following geographic area data include revenues, costs and expenses
generated by and assets employed in operations located in each area:
<TABLE>
<CAPTION>
Geographic Area Net Revenues
- ---------------------------------------------------------------------------
Millions of Dollars
-------------------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
United States
Trade ................................ $ 4,489 $5,055 $4,253
Interarea ............................ 1,605 1,467 457
------- ------ ------
6,094 6,522 4,710
------- ------ ------
Europe
Trade ................................ 2,091 2,165 1,557
Interarea ............................ 462 389 253
------- ------ ------
2,553 2,554 1,810
------- ------ ------
East Asia
Trade ................................ 3,280 4,122 2,729
Interarea ............................ 2,171 1,822 1,525
------- ------ ------
5,451 5,944 4,254
------- ------ ------
Other Areas
Trade ................................ 80 67 69
Interarea ............................ 80 59 50
------- ------ ------
160 126 119
------- ------ ------
Eliminations .......................... (4,318) (3,737) (2,285)
------- ------- ------
Total ................................. $ 9,940 $11,409 $ 8,608
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Geographic Area Profit (Loss)
- ---------------------------------------------------------------------------
Millions of Dollars
-------------------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
United States ......................... $ (350) $1,082 $ 879
Europe ................................ 159 203 (28)
East Asia ............................. 335 287 219
Other Areas ........................... 4 (2) 5
Eliminations and corporate items ...... (171) (100) (188)
------- ------ ------
Income (loss) before provision
for income taxes ..................... $ (23) $1,470 $ 887
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Geographic Area Identifiable Assets
- ---------------------------------------------------------------------------
Millions of Dollars
------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
United States ......................... $4,392 $3,071 $2,222
Europe ................................ 1,238 1,299 889
East Asia ............................. 1,896 2,163 1,616
Other Areas ........................... 49 46 43
Eliminations and corporate items ...... 1,256 1,748 1,476
Net assets of discontinued operations . 529 421 222
------ ------ ------
Total ................................. $9,360 $8,748 $6,468
====== ====== ======
</TABLE>
1996 Annual Report Texas Instruments Incorporated and Subsidiaries 29
NOTES TO FINANCIAL STATEMENTS
(continued)
Income Taxes
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (Loss) before Provision for Income Taxes
- ---------------------------------------------------------------------------
Millions of Dollars
-----------------------------------------
Geographic area
profit (loss)
------------------ Elims. &
U.S. Non-U.S. corp. items Total
------- -------- ----------- --------
<S> <C> <C> <C> <C>
1996 ........................ $ (350) $ 498 $ (171) $ (23)
1995 ........................ 1,082 488 (100) 1,470
1994......................... 879 196 (188) 887
</TABLE>
With the exception of interarea elimination of unrealized profit in
assets, which increased $3 million in 1996, increased $5 million in 1995 and
increased $18 million in 1994, the remaining corporate items consist primarily
of general corporate expenses which are applicable to both U.S. and non-U.S.
operations. These expenses are generally deductible for tax purposes in the
U.S.
<TABLE>
<CAPTION>
Provision (Credit) for Income Taxes
- ----------------------------------------------------------------------------
Millions of Dollars
--------------------------------------------
U.S. Federal Non-U.S. U.S. State Total
------------ -------- ---------- -----
<S> <C> <C> <C> <C>
1996
- ----
Current ....................... $(125) $ 202 $ (3) $ 74
Deferred ...................... (44) (6) (1) (51)
----- ----- ----- -----
Total ......................... $(169) $ 196 $ (4) $ 23
===== ===== ===== =====
1995
- ----
Current ....................... $ 319 $ 182 $ 27 $ 528
Deferred ...................... (36) (19) 1 (54)
----- ----- ----- -----
Total ......................... $ 283 $ 163 $ 28 $ 474
===== ===== ===== =====
1994
- ----
Current ....................... $ 217 $ 94 $ 16 $ 327
Deferred ...................... (16) (18) 2 (32)
----- ----- ----- -----
Total ......................... $ 201 $ 76 $ 18 $ 295
===== ===== ===== =====
</TABLE>
Principal reconciling items from income tax computed at the statutory
federal rate follow.
<TABLE>
<CAPTION>
Millions of Dollars
------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Computed tax at statutory rate .............. $ (8) $ 515 $ 310
Effect of acquired in-process R&D ........... 67 -- --
Effect of non-U.S. rates .................... (3) (89) (43)
Research and experimentation tax credits .... (11) (5) (2)
Effect of U.S. state income taxes............ (3) 17 12
Other ....................................... (19) 36 18
------ ------ ------
Total provision for income taxes ............ $ 23 $ 474 $ 295
====== ====== ======
</TABLE>
Included in the effect of non-U.S. rates for 1996, 1995 and 1994 is a $4
million, a $93 million and a $69 million benefit from tax loss carryforward
utilization reduced by certain non-U.S. taxes and losses for which no benefit
was recognized. Provision has been made for deferred taxes on undistributed
earnings of non-U.S. subsidiaries to the extent that dividend payments from
such companies are expected to result in additional tax liability. The
remaining undistributed earnings (approximately $760 million at December 31,
1996) have been indefinitely reinvested; therefore, no provision has been made
for taxes due upon remittance of these earnings. Determination of the amount
of unrecognized deferred tax liability on these unremitted earnings is not
practicable.
The primary components of deferred income tax assets and liabilities
at December 31 were as follows:
<TABLE>
<CAPTION>
Millions of Dollars
-------------------
1996 1995
------ ------
<S> <C> <C>
Deferred income tax assets:
Accrued retirement costs (pension and
retiree health care) ............................ $ 220 $ 201
Inventories and related reserves ................. 193 228
Accrued expenses ................................. 186 197
Loss carryforwards ............................... 44 46
Other ............................................ 197 170
------ ------
840 842
------ ------
Less valuation allowance .......................... (134) (192)
------ ------
706 650
------ ------
Deferred income tax liabilities:
Property, plant and equipment .................... (96) (123)
Other ............................................ (155) (89)
------ ------
(251) (212)
------ ------
Net deferred income tax asset ..................... $ 455 $ 438
====== ======
</TABLE>
As of December 31, 1996 and 1995, the net deferred income tax asset of
$455 million and $438 million was presented in the balance sheet, based on tax
jurisdiction, as deferred income tax assets of $587 million and $532 million
and deferred income tax liabilities of $132 million and $94 million. The
valuation allowance shown above reflects the company's ongoing assessment
regarding the realizability of certain non-U.S. deferred income tax assets.
The balance of the deferred income tax assets is considered realizable based
on carryback potential, existing taxable temporary differences, and
expectation of future income levels comparable to recent results. Such future
income levels are not assured because of the nature of the company's
businesses, which are generally characterized by rapidly changing technology
and intense competition.
The company has aggregate non-U.S. tax loss carryforwards of approximately
$95 million. Of this amount, $38 million expires through the year 2006 and
$57 million has no expiration.
Income taxes paid were $240 million, $384 million and $399 million for
1996, 1995 and 1994.
Rental Expense and Lease Commitments
- ------------------------------------------------------------------------------
Rental and lease expense was $175 million in 1996, $151 million in 1995 and
$143 million in 1994. The company conducts certain operations in leased
facilities and also leases a portion of its data processing and other
equipment. The lease agreements frequently include purchase and renewal
provisions and require the company to pay taxes, insurance and maintenance
costs.
At December 31, 1996, the company was committed under non-cancelable
leases with minimum rentals in succeeding years as follows:
<TABLE>
<CAPTION>
Non-Cancelable Leases
- --------------------------------------------------------------------------
Millions of Dollars
-------------------
<S> <C>
1997 ............................................ $ 113
1998 ............................................ 79
1999 ............................................ 52
2000 ............................................ 38
2001 ............................................ 24
Later years ..................................... 158
</TABLE>
30 Texas Instruments Incorporated and Subsidiaries 1996 Annual Report
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Texas Instruments Incorporated
We have audited the accompanying consolidated balance sheets of Texas
Instruments Incorporated and subsidiaries (the Company) at December 31, 1996
and 1995, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Texas
Instruments Incorporated and subsidiaries at December 31, 1996 and 1995, and
the results of its operations and cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Dallas, Texas
January 22, 1997
1996 Annual Report Texas Instruments Incorporated and Subsidiaries 31
SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years ended December 31 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
Millions of Dollars
<S> <C> <C> <C> <C> <C>
Net revenues ..................... $ 9,940 $11,409 $ 8,608 $ 6,687 $ 5,456
Operating costs and expenses ..... 9,966 9,970 7,682 6,157 5,233
------- ------- ------- ------- -------
Profit (loss) from operations .... (26) 1,439 926 530 223
Other income (expense) net........ 76 79 6 19 6
Interest on loans ................ 73 48 45 47 51
------- ------- ------- ------- -------
Income (loss) before provision
for income taxes ................ (23) 1,470 887 502 178
Provision for income taxes ....... 23 474 295 147 51
------- ------- ------- ------- -------
Income (loss) from continuing
operations before cumulative
effect of accounting changes .... $ (46) $ 996 $ 592 $ 355 $ 127
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------
Earnings (loss) per common and
common equivalent share
from continuing operations
before cumulative effect of
accounting changes .............. $ (.24) $ 5.15 $ 3.12 $ 1.89 $ .55
======= ======= ======= ======= =======
Dividends declared per
common share .................... $ .68 $ .64 $ .47 $ .36 $ .36
- -------------------------------------------------------------------------------
Average common and common
equivalent shares outstanding
during year, in thousands ....... 192,117 193,631 190,855 187,211 170,621
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
As of December 31 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
Millions of Dollars
<S> <C> <C> <C> <C> <C>
Working capital .................. $ 1,968 $2,566 $1,965 $1,499 $1,219
Property, plant and
equipment (net) ................. 4,162 2,894 2,277 1,870 1,804
Total assets ..................... 9,360 8,748 6,468 5,471 4,847
Long-term debt ................... 1,697 804 808 694 909
Stockholders' equity ............. 4,097 4,095 3,039 2,315 1,947
- -------------------------------------------------------------------------------
Employees ........................ 59,927 59,574 56,333 59,048 60,577
Stockholders of record ........... 32,804 30,034 28,740 29,129 31,479
Employees include persons employed in the company's Defense Systems and
Electronics business.
</TABLE>
See Notes to Financial Statements and Management Discussion and Analysis of
Financial Condition and Results of Operations.
32 Texas Instruments Incorporated and Subsidiaries 1996 Annual Report
SUPPLEMENTAL FINANCIAL INFORMATION
Management Discussion and Analysis of
Financial Condition and Results of Operations
- ------------------------------------------------------------------------------
The management discussion and analysis of the company's financial condition
and results of operations consists of the first two paragraphs of the letter
to stockholders set forth on page 2 of this report and the following
additional information:
<TABLE>
<CAPTION>
Change in Change in
orders, net revenues,
Segment 1996 vs. 1995 1996 vs. 1995
-----------------------------------------------------------------------
<S> <C> <C>
Components .......................... Down 27% Down 15%
Digital Products .................... Down 13% Down 7%
-----------------------------------------------------------------------
Total Down 23% Down 13%
</TABLE>
<TABLE>
<CAPTION>
Change in Change in
orders, net revenues,
Segment 4Q96 vs. 4Q95 4Q96 vs. 4Q95
-----------------------------------------------------------------------
<S> <C> <C>
Components .......................... Down 17% Down 18%
Digital Products .................... Down 45% Down 47%
-----------------------------------------------------------------------
Total Down 20% Down 22%
</TABLE>
1996 Results of Operations Compared with 1995
- ------------------------------------------------------------------------------
TI's orders for continuing operations for 1996 were $9.3 billion, down 23
percent from $12.1 billion in 1995. Significantly reduced DRAM prices in the
components segment were the primary contributor to the change.
TI's net revenues for continuing operations for 1996 were $9.9 billion,
down 13 percent from $11.4 billion in 1995. The decrease in the components
segment was due to significantly lower DRAM prices and reduced royalties.
Digital signal processors and mixed-signal/analog products grew strongly in
1996. In the digital products segment, the sale of substantially all the
Custom Manufacturing Services (CMS) business in the first quarter and the sale
of the printer business in the third quarter accounted for most of the
decrease.
PFO from continuing operations for 1996, excluding the special charges,
was $374 million, down from $1439 million in 1995 primarily because of
significantly lower DRAM prices and reduced royalties. Including the special
charges, loss from operations was $26 million.
The special charges for continuing operations during 1996 include $192
million for in-process R&D associated with the purchase of Silicon Systems,
Inc. (SSi) in the third quarter, and $91 million in the fourth quarter for
severance costs related to voluntary retirement and involuntary actions, as
well as $117 million for asset write-downs on certain product lines,
principally mobile computing.
Net loss from continuing operations including special charges in 1996 was
$46 million, and loss per share was $0.24. Net income for the year from
continuing operations, excluding the special charges, was $281 million,
compared with $996 million in 1995. Earnings per share from continuing
operations, excluding the special charges, were $1.46, compared with $5.15 in
1995.
Results from continuing operations for 1995 included $257 million of
profit sharing. There was no profit sharing in 1996.
Net income including discontinued operations for the year was $63 million,
and earnings per share were $0.33.
Royalty revenues were $300 million lower in 1996 than the record royalties
received in 1995. The decrease is primarily due to a reduction in royalty
rates in exchange for longer-term agreements, expired licenses that have not
yet been renewed, and licensees' lower DRAM revenues. Also, first-quarter
1995 royalty revenues included a favorable adjustment of $36 million related
to higher-than-estimated licensee shipments in the second half of 1994.
Payments that licensees will make over the next five years under the
recently negotiated ten-year agreements with Samsung Electronics Co., Ltd.,
Fujitsu Limited, Oki Ltd. and Matsushita Electric Industrial Co., Ltd. are
expected to exceed payments made under the expired five-year licenses.
Negotiations continue with NEC Corporation and several smaller firms,
including firms not previously licensed. TI continues to expect a significant
ongoing stream of royalty revenue into the next century.
The Tokyo High Court has not yet decided TI's appeal of a ruling that
Fujitsu's production of certain memory products does not infringe TI's Kilby
patent. The decision should not have any significant effect on existing
licenses.
For 1997, the estimated effective tax rate for continuing operations is
about 35 percent.
TI's backlog of unfilled orders for continuing operations as of
December 31, 1996, was $1623 million, down $671 million from the end of 1995,
due primarily to decreases in semiconductors and the CMS sale.
R&D for continuing operations was $1181 million for 1996, compared with
$842 million for 1995. The 1996 R&D includes the $192 million charge
associated with the SSi acquisition.
Capital expenditures for continuing operations were $2063 million in 1996,
compared with $1351 million in 1995.
Depreciation for continuing operations for 1996 was $904 million, compared
with $681 million in 1995. Depreciation in 1997 is expected to be about $1.2
billion.
Components Segment: For 1996, orders in the components segment were down 27
percent, and revenues were down 15 percent from 1995, primarily because of the
precipitous drop in DRAM prices and lower royalties. TI's semiconductor
orders for the fourth quarter were up solidly from the third quarter of 1996.
Fourth quarter orders for DSPS, comprised of digital signal processors plus
mixed-signal/analog products, grew more than 30 percent over the fourth
quarter of 1995, with particular strength in wireless communications and mass
storage applications. TI's semiconductor revenues for the fourth quarter of
1996 were up sequentially from the prior quarter. DSPS revenues in 1996
increased strongly from 1995 and exceeded 40 percent of the company's total
semiconductor revenues during the fourth quarter.
Components segment profits for 1996 were down from 1995 because of sharply
lower DRAM prices and lower royalties. Results for the components segment
include a charge of $192 million in the third quarter of 1996 related to the
SSi acquisition and a charge of $61 million in the fourth quarter of 1996 for
cost reduction actions. Excluding charges, semiconductor operating profit in
the fourth quarter of 1996 was up significantly from the third quarter as all
product groups showed improvement. Memory, while improved,
1996 Annual Report Texas Instruments Incorporated and Subsidiaries 33
SUPPLEMENTAL FINANCIAL INFORMATION
(continued)
operated at a loss in the fourth quarter due to continued lower prices and the
high level of fixed investment.
TI's plans for 1997 are based on a moderate recovery in the world
semiconductor market, with sustainable growth in electronic end equipment.
Customer inventories of semiconductors are at historically low levels. DRAM
prices remain volatile and the near-term memory market environment is expected
to be difficult, although the bit growth rate remains strong.
Digital Products Segment: Orders in TI's digital products segment were down
13 percent in 1996, and revenues were down seven percent, compared with 1995.
Excluding the CMS and printer businesses, which were sold during the year,
revenues were up 37 percent. The segment operated at a loss during the year,
due to the high level of marketing expense and intense price competition in
mobile computing, as well as continued investments and new product development
in the software business and in communications and electronics systems.
Fourth quarter operations include the impact of sharply lower mobile computing
revenues, compared with the third quarter of 1996, which negatively impacted
fourth quarter earnings per share by about $0.08 per share from the running
rate of the prior quarter. Results for the digital products segment include a
charge of $125 million in the fourth quarter for cost reduction actions and
asset write-downs. As expected, calculators operated at break-even in the
fourth quarter after achieving substantial seasonal profits in the second and
third quarters.
In addition to the charge for asset write-downs taken in the fourth
quarter, TI expects to take a charge in the first quarter of 1997 for
severance and other costs associated with the sale of the mobile computing
business. As a result of the sale agreement, TI will not reflect operating
results of the mobile computing business subsequent to 1996.
Emerging Opportunities: TI's digital imaging products continue to make steady
progress in the transition from R&D to initial production, targeted at the
very competitive commercial projection display market. The major long-term
challenge continues to be cost reduction to levels that will permit
participation in several markets. The company remains positive about the
opportunity to build a high-growth business and expects to continue
significant investments in 1997.
Discontinued Operations: For discontinued operations, a special pretax charge
of $32 million was taken for voluntary and involuntary severance actions
during the fourth quarter of 1996.
Financial Condition: TI's financial condition remains sound. During the
year, cash and cash equivalents plus short-term investments decreased by $575
million to $978 million. Net cash provided by operating activities was
negatively impacted by the payout of 1995 profit sharing in the first quarter.
Investments in property, plant and equipment were $2063 million for the year,
and the sale of TI's CMS business generated $132 million of cash in the first
half of 1996.
In the third quarter, TI acquired Silicon Systems, Inc. via a stock
purchase agreement for $340 million in cash plus the assumption of a $235
million long-term note to TDK Corp. of Japan. The cash payment, initially
financed by a draw down on TI's existing line of bank credit, was permanently
financed through the company's issuance on July 26 of $400 million of three-
and four-year notes.
On January 6, 1997, TI and Raytheon Company announced that their boards of
directors had approved a definitive agreement for Raytheon to purchase the
assets of TI's defense operations for $2.95 billion in cash. The transaction
is subject to Hart-Scott-Rodino antitrust review and is expected to close in
the second quarter of 1997. TI plans to use the net proceeds from the sale to
strengthen its focus on digital solutions for the networked society.
The outstanding balance of commercial paper was $299 million at the end of
the year, up from zero at the end of 1995. Other financing activities
included the first quarter issuance of $300 million of 6.125% notes due in
2006, the balance increase of Italian lira mortgage notes of $102 million in
the second quarter, and the August 28 redemption, at par, of $150 million of
9.0% notes due in 1999. At year-end, the debt-to-total-capital ratio was .33,
up from .17 at the end of 1995.
Unused authorizations for future capital expenditures were $795 million at
December 31, 1996. Capital expenditures are planned to be about $1.1 billion
in 1997, compared with $2.1 billion in 1996. Excluding the one-time charge
associated with the SSi acquisition, R&D will be increased to about $1.1
billion in 1997, up from $1.0 billion in 1996, primarily to support digital
signal processing solutions and other advanced semiconductor technology.
The company maintains lines of credit to support commercial paper
borrowings and to provide additional liquidity. These lines of credit totaled
$696 million at December 31, 1996. Of this amount, $600 million exists to
support outstanding and future commercial paper borrowings or short-term bank
loans.
The company believes that its financial condition provides the foundation
for continued support of the programs essential to TI's future.
1995 Results of Operations Compared with 1994
TI's orders for 1995 were $12.1 billion, up 39 percent from $8.7 billion in
1994. Significantly higher semiconductor orders in the components segment
were the primary contributor to the change.
TI's net revenues for 1995 were $11.4 billion, up 33 percent from $8.6
billion in 1994. The increase was due primarily to higher semiconductor
revenues in the components segment, resulting from increased shipments and new
products. Demand was particularly strong for digital signal processors,
mixed-signal products and memory. Profit from operations was $1439 million,
up 55 percent from $926 million in 1994. Higher semiconductor operating
profits accounted for much of the increase; higher royalties also contributed.
Results for 1995 included a profit sharing accrual of $257 million compared
with $133 million accrued in 1994. Results for 1994 included $126 million in
pretax restructuring and divestiture charges taken in the first quarter.
Net income from continuing operations for 1995 was $996 million, compared
with $592 million in 1994, an increase of 68 percent. Earnings per share from
continuing operations were $5.15,
34 Texas Instruments Incorporated and Subsidiaries 1996 Annual Report
versus $3.12 for 1994. Consistent with its goal of increasing shareholder
value, TI posted a return on invested capital (ROIC) of 24.8 percent, up from
19.5 percent in 1994 (including the effect of discontinued operations).
Results for 1995 included significantly higher royalty revenues.
TI's backlog of unfilled orders as of December 31, 1995, was $2294
million, up $678 million from the end of 1994, due to an increase in
semiconductor backlog.
TI R&D was $842 million for 1995 compared with $578 million in 1994.
Capital expenditures were $1351 million in 1995, compared with $1020 million
in 1994.
Depreciation for 1995 was $681 million, compared with $580 million in
1994.
Components Segment: Orders in the components segment were up 45 percent for
1995, and revenues up 39 percent from 1994, with particular strength in
semiconductors, which grew faster than the segment. Components segment
profits were up 66 percent, primarily due to improved semiconductor
manufacturing productivity and higher royalties.
Semiconductor revenues reached record levels in 1995, primarily due to
growth in memory and application specific products. Profits, up substantially
in 1995 over 1994, also reached record levels. Semiconductor operating
margins improved in 1995, primarily due to increased manufacturing
productivity.
Digital Products Segment: Orders in TI's digital products segment were up 14
percent in 1995, and revenues up 11 percent, compared with 1994. The segment
operated at a loss during 1995, due to increased marketing expenses and
intense price competition in notebook computers, as well as continued
investments and new product development in communications and electronic
systems, and in the software business.
TI significantly increased marketing investments in the notebook computer
business to increase brand awareness and aggressively communicate a strategic
shift that emphasized mobility and connectivity in the networked society.
These investments, coupled with intense price competition, caused the business
to operate at a loss for 1995. TI software also operated at a loss for 1995.
Common Stock Prices and Dividends
- -----------------------------------------------------------------------------
TI common stock is listed on the New York Stock Exchange and traded
principally in that market. In addition, TI common stock is listed on the
London, Tokyo and Swiss stock exchanges. The table below shows the high and
low prices of TI common stock on the composite tape as reported by The Wall
Street Journal and the dividends paid per common share for each quarter during
the past two years, adjusted for the two-for-one stock split in 1995.
<TABLE>
<CAPTION>
Quarter
--------------------------------------------
1st 2nd 3rd 4th
--------------------------------------------
<S> <C> <C> <C> <C>
Stock prices:
1996 High .................... $55.75 $59.63 $59.25 $68.38
Low ..................... 42.75 48.63 40.50 47.50
1995 High .................... 49.00 72.00 83.75 81.25
Low ..................... 34.38 43.38 66.50 46.00
Dividends paid:
1996 ......................... $ .17 $ .17 $ .17 $ .17
1995 ......................... $ .125 $ .125 $ .17 $ .17
</TABLE>
<TABLE>
<CAPTION>
Quarterly Financial Data
--------------------------------------------------------------------------------------------------------------------
Millions of Dollars, Except Per-Share Amounts
1995 1996
----------------------------------------------------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues ...................... $2,450 $2,807 $3,005 $3,147 $2,675 $2,399 $2,407 $2,459
Gross profit ...................... 875 1,003 1,014 1,116 786 677 664 667
Profit (loss) from operations ..... 303 364 401 371 146 40 (177) (35)
Income (loss) before provision
for income taxes ................. 308 372 398 392 190 37 (185) (65)
Income (loss) from continuing
operations ....................... 205 255 268 268 132 41 (179) (40)
Income from discontinued operations 25 23 21 23 31 35 32 11
----------------------------------------------------------------------------------
Earnings (loss) per common and
common equivalent share:
Continuing operations ........... $ 1.08 $ 1.32 $ 1.38 $ 1.38 $ .68 $ .21 $ (.95) $ (.21)
Discontinued operations ......... .13 .12 .10 .12 .16 .18 .17 .06
----------------------------------------------------------------------------------
Net income (loss) ................. $ 1.21 $ 1.44 $ 1.48 $ 1.50 $ .84 $ .39 $ (.78) $ (.15)
===================================================================
</TABLE>
As a result of the 1996 acquisition of Silicon Systems, Inc., the company
took a one-time charge of $192 million in the third quarter for the value of
acquired in-process research and development. In the fourth quarter of 1996,
the company accrued $105 million for catch-up royalty revenues due under the
new cross-license agreement with Samsung Electronics Co., Ltd. Also in the
fourth quarter, the company took a pretax charge of $208 million for cost
reduction actions.
Earnings (loss) per common and common equivalent share are based on
average common and common equivalent shares outstanding (190,076,427 shares
and 194,676,703 shares for the fourth quarters of 1996 and 1995).
1996 Annual Report Texas Instruments Incorporated and Subsidiaries 35
Exhibit 21
----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
LIST OF SUBSIDIARIES OF THE REGISTRANT
The following are current subsidiaries of the Registrant.
Subsidiary and Name Under Which Business is Done Where Organized
- ------------------------------------------------ ---------------
Silicon Systems, Inc. Delaware
Texas Instruments Deutschland G.m.b.H. Germany
Texas Instruments France S.A. France
Texas Instruments Holland B.V. Netherlands
Texas Instruments Hong Kong Limited Hong Kong
Texas Instruments Italia S.p.A. Italy
Texas Instruments Japan Limited Japan
Texas Instruments Limited United Kingdom
Texas Instruments Malaysia Sdn. Bhd. Malaysia
Texas Instruments (Philippines) Incorporated Delaware
Texas Instruments Singapore (Pte) Limited Singapore
Texas Instruments Taiwan Limited Taiwan
Texas Instruments Software Limited United Kingdom
Note: The names of other subsidiaries of the Registrant are not listed
herein since the additional subsidiaries considered in the aggregate as a
single subsidiary do not constitute a significant subsidiary as defined by
Rule 1.02(v) of Regulation S-X.
EXHIBIT 23
----------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form
10-K of Texas Instruments Incorporated of our report dated January 22, 1997,
included in the 1996 Annual Report to Stockholders of Texas Instruments
Incorporated.
Our audits also included the financial statement schedule of Texas Instruments
Incorporated listed in Item 14(a). This schedule is the responsibility of the
Registrant's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the following
registration statements, and in the related prospectuses thereto, of our
report dated January 22, 1997 with respect to the consolidated financial
statements and consolidated schedule of Texas Instruments Incorporated,
included in or incorporated by reference in this Annual Report on Form 10-K
for the year ended December 31, 1996: Registration Statement No. 33-61154 on
Form S-8, Registration Statement No. 33-21407 on Form S-8, Registration
Statement No. 33-42172 on Form S-8, Registration Statement No. 33-54615 on
Form S-8, Registration Statement No. 333-07127 on Form S-8, Registration
Statement No. 33-18509 on Form S-3 and Registration Statement No. 333-03571 on
Form S-3.
ERNST & YOUNG LLP
Dallas, Texas
February 21, 1997
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints THOMAS J. ENGIBOUS,
WILLIAM A. AYLESWORTH and RICHARD J. AGNICH, and each of them, with full power
to act without the others, his true and lawful attorneys-in-fact and agents,
with full and several power of substitution, for him and in his name, place
and stead, in any and all capacities, to sign the Annual Report on Form 10-K
of Texas Instruments Incorporated for the year ended December 31, 1996, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as they or he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on this 20th day of February, 1997.
/s/ JAMES R. ADAMS
James R. Adams
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints JAMES R. ADAMS, THOMAS J.
ENGIBOUS, WILLIAM A. AYLESWORTH and RICHARD J. AGNICH, and each of them, with
full power to act without the others, his true and lawful attorneys-in-fact
and agents, with full and several power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of Texas Instruments Incorporated for the year ended December 31,
1996, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on this 20th day of February, 1997.
/s/ DAVID L. BOREN
David L. Boren
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints JAMES R. ADAMS, THOMAS J.
ENGIBOUS, WILLIAM A. AYLESWORTH and RICHARD J. AGNICH, and each of them, with
full power to act without the others, his true and lawful attorneys-in-fact
and agents, with full and several power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of Texas Instruments Incorporated for the year ended December 31,
1996, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on this 20th day of February, 1997.
/s/ JAMES B. BUSEY IV
James B. Busey IV
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints JAMES R. ADAMS, WILLIAM
A. AYLESWORTH and RICHARD J. AGNICH, and each of them, with full power to act
without the others, his true and lawful attorneys-in-fact and agents, with
full and several power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K of
Texas Instruments Incorporated for the year ended December 31, 1995, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as they or he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on this 20th day of February, 1997.
/s/THOMAS J. ENGIBOUS
Thomas J. Engibous
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints JAMES R. ADAMS, THOMAS J.
ENGIBOUS, WILLIAM A. AYLESWORTH and RICHARD J. AGNICH, and each of them, with
full power to act without the others, his true and lawful attorneys-in-fact
and agents, with full and several power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of Texas Instruments Incorporated for the year ended December 31,
1996, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on this 20th day of February, 1997.
/s/ GERALD W. FRONTERHOUSE
Gerald W. Fronterhouse
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints JAMES R. ADAMS, THOMAS J.
ENGIBOUS, WILLIAM A. AYLESWORTH and RICHARD J. AGNICH, and each of them, with
full power to act without the others, his true and lawful attorneys-in-fact
and agents, with full and several power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of Texas Instruments Incorporated for the year ended December 31,
1996, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on this 20th day of February, 1997.
/s/ DAVID R. GOODE
David R. Goode
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints JAMES R. ADAMS, THOMAS J.
ENGIBOUS, WILLIAM A. AYLESWORTH and RICHARD J. AGNICH, and each of them, with
full power to act without the others, her true and lawful attorneys-in-fact
and agents, with full and several power of substitution, for her and in her
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of Texas Instruments Incorporated for the year ended December 31,
1996, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on this 20th day of February, 1997.
/s/ GLORIA M. SHATTO
Gloria M. Shatto
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned hereby constitutes JAMES R. ADAMS, THOMAS J. ENGIBOUS,
WILLIAM A. AYLESWORTH and RICHARD J. AGNICH, and each of them, with full power
to act without the others, his true and lawful attorneys-in-fact and agents,
with full and several power of substitution, for him and in his name, place
and stead, in any and all capacities, to sign the Annual Report on Form 10-K
of Texas Instruments Incorporated for the year ended December 31, 1996, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as they or he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on this 20th day of February, 1997.
/s/ WILLIAM P. WEBER
William P. Weber
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints JAMES R. ADAMS, THOMAS J.
ENGIBOUS, WILLIAM A. AYLESWORTH and RICHARD J. AGNICH, and each of them, with
full power to act without the others, his true and lawful attorneys-in-fact
and agents, with full and several power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of Texas Instruments Incorporated for the year ended December 31,
1996, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on this 20th day of February, 1997.
/s/ CLAYTON K. YEUTTER
Clayton K. Yeutter
<TABLE> <S> <C>
<ARTICLE>5
EXHIBIT 27
----------
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF TEXAS INSTRUMENTS INCORPORATED AND
SUBSIDIARIES AS OF DECEMBER 31, 1996, AND FOR THE YEAR THEN ENDED, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> $ 964
<SECURITIES> 14
<RECEIVABLES> 1,799
<ALLOWANCES> 90
<INVENTORY> 703
<CURRENT-ASSETS> 4,454
<PP&E> 6,712
<DEPRECIATION> 2,550
<TOTAL-ASSETS> 9,360
<CURRENT-LIABILITIES> 2,486
<BONDS> 1,697
0
0
<COMMON> 190
<OTHER-SE> 3,907
<TOTAL-LIABILITY-AND-EQUITY> 9,360
<SALES> 9,940
<TOTAL-REVENUES> 9,940
<CGS> 7,146
<TOTAL-COSTS> 7,146
<OTHER-EXPENSES> 1,181
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> (23)
<INCOME-TAX> 23
<INCOME-CONTINUING> (46)
<DISCONTINUED> 109
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63
<EPS-PRIMARY> .33
<EPS-DILUTED> 0
</TABLE>
