<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000 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.)
12500 TI Boulevard P.O. Box 660199, Dallas, Texas 75266-0199
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 972-995-3773
---------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
818,196,147
--------------------------------------------------------------------------
Number of shares of Registrant's common stock outstanding as of
March 31, 2000
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
- -----------------------------
<TABLE>
<CAPTION>
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Financial Statements
(In millions of dollars, except per-share amounts.)
For Three Months Ended
Mar.31 Mar.31
Income 2000 1999
- ------ -------- --------
<S> <C> <C>
Net revenues................................................................ $ 2,653 $ 2,081
Operating costs and expenses:
Cost of revenues.......................................................... 1,370 1,133
Research and development.................................................. 373 311
Marketing, general and administrative..................................... 388 331
-------- --------
Total................................................................... 2,131 1,775
-------- --------
Profit from operations...................................................... 522 306
Other income (expense) net.................................................. 124 88
Interest on loans........................................................... 19 18
-------- --------
Income before provision for income taxes.................................... 627 376
Provision for income taxes.................................................. 201 121
-------- --------
Net income.................................................................. $ 426 $ 255
======== ========
Diluted earnings per common share.......................................... $ 0.50 $ 0.31
======== ========
Basic earnings per common share............................................. $ 0.52 $ 0.32
======== ========
Cash dividends declared per share of common stock........................... $ .0425 $ .0425
Cash Flows
- ----------
Net cash provided by operating activities................................... $ 402 $ 234
Cash flows from investing activities:
Additions to property, plant and equipment................................ (641) (206)
Purchases of short-term investments....................................... (967) (452)
Sales and maturities of short-term investments............................ 1,209 766
Purchases of noncurrent investments....................................... (25) (15)
Sales of noncurrent investments........................................... 54 174
Acquisition of businesses, net of cash acquired........................... -- (50)
------- -------
Net cash provided by (used in) investing activities......................... (370) 217
Cash flows from financing activities:
Payments on long-term debt................................................ (29) (34)
Dividends paid on common stock............................................ (35) (33)
Sales and other common stock transactions................................. 129 76
Common stock repurchase program........................................... (66) (175)
------- -------
Net cash used in financing activities....................................... (1) (166)
Effect of exchange rate changes on cash..................................... (18) (8)
------- -------
Net increase in cash and cash equivalents................................... 13 277
Cash and cash equivalents, January 1........................................ 662 632
------- -------
Cash and cash equivalents, March 31......................................... $ 675 $ 909
======= =======
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Financial Statements
(In millions of dollars, except per-share amounts.)
Mar. 31 Dec. 31
Balance Sheet 2000 1999
- ------------- ------- -------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................................... $ 675 $ 662
Short-term investments............................................. 1,755 2,000
Accounts receivable, less allowance for losses of
$64 million in 2000 and $67 million in 1999...................... 1,911 1,843
Inventories:
Raw materials.................................................... 164 161
Work in process.................................................. 508 463
Finished goods................................................... 265 221
------- -------
Inventories.................................................... 937 845
------- -------
Prepaid expenses................................................... 113 100
Deferred income taxes.............................................. 583 605
------- -------
Total current assets............................................. 5,974 6,055
------- -------
Property, plant and equipment........................................ 7,583 7,120
Less accumulated depreciation...................................... (3,367) (3,285)
------- -------
Property, plant and equipment (net).............................. 4,216 3,835
------- -------
Investments.......................................................... 6,364 4,204
Goodwill and other acquisition-related intangibles................... 500 503
Deferred income taxes................................................ 39 41
Other assets......................................................... 407 390
------- -------
Total assets......................................................... $17,500 $15,028
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Loans payable and current portion long-term debt................... $ 385 $ 313
Accounts payable................................................... 853 668
Accrued and other current liabilities.............................. 1,280 1,647
------- -------
Total current liabilities........................................ 2,518 2,628
------- -------
Long-term debt....................................................... 991 1,097
Accrued retirement costs............................................. 741 797
Deferred income taxes................................................ 1,724 994
Deferred credits and other liabilities............................... 327 257
Stockholders' equity:
Preferred stock, $25 par value. Authorized - 10,000,000 shares.
Participating cumulative preferred. None issued.................. -- --
Common stock, $1 par value. Authorized - 1,200,000,000 shares.
Shares issued: 2000 - 819,479,690; 1999 - 813,926,025............ 819 814
Paid-in capital.................................................... 995 822
Retained earnings.................................................. 6,569 6,175
Less treasury common stock at cost.
Shares: 2000 - 1,283,543; 1999 - 1,034,757....................... (161) (109)
Accumulated other comprehensive income............................. 2,977 1,553
------- -------
Total stockholders' equity....................................... 11,199 9,255
------- -------
Total liabilities and stockholders' equity........................... $17,500 $15,028
======= =======
</TABLE>
3
<PAGE>
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Notes to Financial Statements
1. Diluted earnings per common share are based on average common and dilutive
potential common shares outstanding (851.6 and 824.7 million shares for the
first quarters of 2000 and 1999).
2. In the first quarter of 2000, the company recorded pretax charges of $29
million, primarily associated with previously announced actions, including the
closing of the Materials & Control manufacturing facility in Versailles,
Kentucky, and TI's acquisition of Toccata Technology ApS. Of the $29 million
charge, $12 million is for severance for the elimination of 480 jobs in
Kentucky. At March 31, 2000, the pay-out of the severance cost obligation had
not yet begun. Of the $29 million charge, $20 million is included in cost of
revenues, $6 million in marketing, general and administrative expense, and $3
million in research and development expense.
3. In the first quarter of 1999, the company announced a consolidation of
semiconductor manufacturing operations in Japan to improve manufacturing
efficiencies and reduce costs. The action resulted in a pretax charge of $14
million in the first quarter, of which $13 million was for severance for the
elimination of 153 jobs in Hatagoya, Japan. At year-end 1999, this program was
complete. Of the $14 million charge, $11 million was included in cost of
revenues and $3 million in marketing, general and administrative expense.
4. In the first quarter of 1999, sale of the Micron subordinated note and
other securities generated $172 million in cash.
5. Total comprehensive income, i.e., net income plus investment and pension
liability adjustments to stockholders' equity, for the first quarters of 2000
and 1999 was $1850 million and $266 million.
6. There has been no significant change in the status of the audit and
investigation concerning grants from the Italian government.
7. In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101 on revenue recognition. TI is currently
evaluating the impact of SAB No. 101, which is effective in the second quarter
of 2000, and expects any effect to be immaterial.
8. A two-for-one stock split in the form of a 100 percent stock dividend,
payable on May 22, 2000, was announced on April 20, 2000. The EPS amounts in
this report were calculated on a pre-split basis.
9. The statements of income, statements of cash flows and balance sheet at
March 31, 2000, are not audited but reflect all adjustments which are of a
normal recurring nature and are, in the opinion of management, necessary to a
fair statement of the results of the periods shown.
4
<PAGE>
10. Business segment information is as follows:
<TABLE>
<CAPTION>
For Three Months Ended
----------------------
Business Segment Net Revenues Mar. 31 Mar. 31
(millions of dollars) 2000 1999
- ----------------------------- ------- -------
<S> <C> <C>
Semiconductor
Trade.......................................... $2,265 $1,737
Intersegment................................... 5 4
------- -------
2,270 1,741
------- -------
Materials & Controls
Trade.......................................... 290 245
Intersegment................................... -- --
------- -------
290 245
======= =======
Educational & Productivity Solutions
Trade.......................................... 87 81
Corporate activities............................. 2 (4)
Divested activities.............................. 4 18
------- -------
Total net revenues............................... $2,653 $2,081
======= =======
</TABLE>
Note: The following Segment data includes ongoing amortization of goodwill and
other acquisition-related intangible assets.
<TABLE>
<CAPTION>
Business Segment Profit (Loss)
(millions of dollars)
- -----------------------------
<S> <C> <C>
Semiconductor.................................... $ 556 $ 331
Materials & Controls............................. 55 40
Educational & Productivity Solutions............. 12 10
Corporate activities............................. (74) (58)
Special charges and gains, net
of applicable profit sharing................... (29) (25)
Interest on loans/other income (expense) net..... 105 70
Divested activities.............................. 2 8
------- -------
Income before income taxes....................... $ 627 $ 376
======= =======
</TABLE>
5
<PAGE>
11. Acquisition-related purchased in-process R&D charges were $79 million in
1999. These charges are for the value of acquired in-process research and
development from business purchase acquisitions. Values for acquired
in-process R&D (purchased R&D) were determined at the acquisition date based
upon the appraised value of the related developmental projects. Purchased R&D
projects were assessed, analyzed and valued within the context and framework
articulated by the Securities and Exchange Commission herein described as the
Exclusion Approach.
Significant assumptions, detailed in the table below, used in determining the
value of purchased R&D included the discount rate, the estimated beginning
date of projected operating cash flows, and the remaining cost and time, in
engineer-months, to complete the R&D projects. The term "engineer-month"
refers to the average amount of research work expected to be performed by an
engineer in a month.
The relative stage of completion and projected operating cash flows of the
underlying in-process projects acquired were the most significant and
uncertain assumptions utilized in the valuation analysis of the in-process
R&D. Such uncertainties could give rise to unforeseen budget overruns and/or
revenue shortfalls in the event that TI is unable to successfully complete and
commercialize the projects. TI management is primarily responsible for
estimating the value of the purchased R&D in all acquisitions accounted for
under the purchase method. TI expects to essentially meet its original return
expectations for the projects.
6
<PAGE>
<TABLE>
<CAPTION>
Millions of Dollars
- -----------------------------------------------------------------------------------------------------------------------------------
Cost/time to Year
Purchased complete R&D projects cash flows
Entity Acquisition Consid- Other in-process Appraisal R&D Discount --------------------- projected
acquired date eration Goodwill intangibles R&D charge method focus rate At At to begin
acquisition Mar. 2000
- ---------- ----------- --------- -------- ----------- ---------- --------- ----- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Butterfly First $ 52 $ 33 $ 5 $ 10 Exclusion Short 25% $5/264 $2.0/140 2000
VLSI, quarter approach distance engineer engineer
Ltd. 1999 wireless months months
technology
for voice-
plus-data
transmission
products
Libit Signal Second $365 $207 $106 $ 52 Exclusion Silicon 22% $5/492 $0.5/50 2000
Processing quarter approach Solutions engineer engineer
Ltd. 1999 and months months
Internet
telephony
software
for cable
modems, etc.
for Internet
access
Integrated Third $ 67 $ 32 $ 11 $ 16 Exclusion Intel- 25% $4/233 $0.3/40 2000
Sensor quarter approach ligent engineer engineer
Solutions, 1999 sensors months months
Inc. for
auto/ind.
markets
</TABLE>
7
<PAGE>
12. The following is a reconciliation of individual restructuring accruals (in
millions of dollars).
<TABLE>
<CAPTION>
Year of Charge
---------------------------------------------------------------------------------------------------
1997 1998 1999 2000
----------------------------------- ---------------------------------- -------------------- -------
Divest. of M&C Reserves SC SC operation SC SC cost
MCB/ cost against and closing & Unitrode operation reduction M&C
term. Reduction gains on Corp. M&C sale of semiconductor closing in action site
Description* Total of DIPD action business sales actions operation action Japan in U.S. closing
- ------------ ----- ---------- --------- -------------- ------- ------------ ------------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1999....... $ 76 $ 14 $ 8 $ 22 $ 17 $ 6 $ 1 $ 2 $ 6
CHARGES:
Severance .............. 12 $ 12
Various charges ........ 1 1
DISPOSITION:
Severance payments ..... (6) (1) (3) (2)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
BALANCE, MARCH 31, 2000 $ 83 $ 14 $ 7 $ 22 $ 14 $ 6 $ 1 $ 2 $ 4 $ 13
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
*Abbreviations
SC = Semiconductor Business
MCB = Mobile Computing Business
DIPD = Digital Imaging Printing Development Program
M&C = Materials and Controls Business
Corp. = Corporate Division
</TABLE>
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Registrant (the "company" or "TI") announced first-quarter 2000 financial
results that showed continued strong growth for the company.
SUMMARY OF FINANCIAL RESULTS
For the first quarter of 2000, TI reported the following:
- - Total revenues were $2653 million, up 27 percent from $2081 million in the
year-ago quarter and up 4 percent sequentially, primarily due to increased
strength in semiconductor.
- - Semiconductor revenues were $2270 million, up 30 percent from $1741 million
in the same quarter of 1999 and up 3 percent sequentially.
- - Cost of revenues in the first quarter was $1370 million compared to $1133
million in the year-ago quarter. Cost of revenues increased less than the
increase in revenues, on a percentage basis, reflecting manufacturing
efficiencies associated with higher product shipments.
- - Research and development (R&D) totaled $373 million, compared to $311
million in the first quarter of 1999, including in-process R&D from
acquisitions. The increase was primarily due to semiconductor, including
increased strategic investment for DSP and analog.
- - Marketing, general and administrative expense in the quarter was $388
million, compared to $331 million in the year-ago quarter, primarily due to
higher semiconductor expenditures, mostly associated with increases in
marketing-related activities. The increase was less than the increase in
revenues, on a percentage basis.
- - Other income (expense) net increased from $88 million in the first quarter
of 1999 to $124 million in the first quarter of 2000, primarily due to
investment gains.
- - The income tax rate for the quarter was 32 percent.
- - TI orders in the first quarter were $2876 million, up 26 percent from $2281
million in the year-ago quarter and up 5 percent from the fourth quarter
primarily due to semiconductor.
- - Results for this quarter include special charges of $29 million, primarily
associated with previously announced actions, including the closing of a
Materials & Controls manufacturing facility in Versailles, Kentucky, and
TI's acquisition of Toccata Technology ApS. Also included is amortization
of goodwill and other acquisition-related intangibles of $25 million.
For the first quarter of 1999, results include special charges of $25
million, primarily for a consolidation of semiconductor manufacturing
operations in Japan. Also included is amortization of goodwill and other
acquisition-related intangibles of $10 million.
For the fourth quarter of 1999, results include acquisition-related costs
of $86 million associated with TI's pooling of interests acquisitions of
Unitrode Corporation and Power Trends, Inc., amortization of goodwill and
9
<PAGE>
other acquisition-related intangibles of $26 million, and a tax benefit
effect of $67 million, primarily for research and experimental tax credit
items.
Additional information relating to these items appears below under the
heading "Special Charges and Gains."
OUTLOOK
The company expects accelerating sequential revenue growth overall in the
second quarter as it enters a seasonally stronger period in all its business
segments, with semiconductor driving most of the growth.
In the second quarter in semiconductor, wireless growth is expected to
accelerate after seasonal first-quarter pressures. Broadband communications,
which includes digital subscriber line (DSL) and cable modem, also should
continue to grow rapidly although from a low base. The mass market should
maintain high growth as new applications for TI's catalog DSP and analog
products continue to expand. Hard disk drive revenues are expected to decline
in the quarter.
In Educational and Productivity Solutions (E&PS), product shipments will
continue to become more aligned with back-to-school retail sales as revenue
that traditionally came in the second quarter shifts into the third quarter.
For the year 2000, TI expects robust growth to continue in its semiconductor
business, driven by strength in communications end-equipment markets,
including wireless and broadband, as well as continued strength in the mass
market. By the end of the fourth quarter, TI expects to reach operating margin
of 25 percent, before the effect of special charges and amortization of
acquisition-related intangibles.
Additionally, TI is raising its capital expenditure forecast to $2.5 billion
for the year, reflecting management's outlook for strong continued demand for
its DSP and analog products. Depreciation for the year is expected to be $1.3
billion. R&D for 2000 is expected to be $1.5 billion, primarily for DSP and
analog, excluding purchased in-process R&D and the amortization of
acquisition-related intangibles.
SEMICONDUCTOR
Semiconductor revenues in the first quarter were $2270 million, up 30 percent
from the same period in 1999, primarily driven by DSP and analog.
Semiconductor revenues increased 3 percent sequentially.
Semiconductor operating margin for the first quarter was 24.5 percent, up 5.5
points from 19.0 percent in the same quarter a year ago. Sequentially,
operating margin declined 0.8 points primarily due to increased investment in
R&D.
DSP revenues in the first quarter were up 50 percent from the same quarter a
year ago and up 2 percent sequentially, breaking the historical seasonal
pattern of first-quarter revenue declines and reinforcing a strong growth
outlook for 2000. This quarter's sequential growth was driven primarily by a
20 percent increase in revenues from catalog DSP products for the mass market,
more than offsetting weakness from hard disk drive. Catalog DSP revenues
increased 71 percent compared with the first quarter of 1999.
10
<PAGE>
During the quarter, market analyst Forward Concepts said TI had DSP market
share of 48 percent in 1999 and continued its leadership in DSP. TI is the
only company to gain DSP market share for six consecutive years.
Analog revenues in the first quarter were up 25 percent compared with a year
ago and were up slightly from the fourth quarter. Sequential growth in analog
was affected by weakness in hard disk drive. During the quarter, Dataquest
said that TI continued its world leadership in the analog market in 1999. TI
is the only major supplier to gain share in each of the last four years. In
addition, TI attained the number one position in the fast-growing power
management segment for the first time.
Revenues for TI's remaining semiconductor products increased from the year-ago
quarter and from the fourth quarter of 1999. Royalties also increased, both
from a year ago and sequentially.
Semiconductor orders increased 28 percent from the year-ago quarter and 3
percent sequentially primarily due to DSP and analog.
Compared with the first quarter of 1999, wireless revenues increased 49
percent, mass market revenues grew 55 percent and hard disk drive revenues
declined 19 percent. Broadband communications revenues more than doubled when
compared to fourth quarter as DSL products transitioned into initial
high-volume production.
MATERIALS & CONTROLS (M&C)
M&C revenues in the first quarter were a record $290 million, up 18 percent
from $245 million a year ago, primarily due to automotive sensors.
Sequentially, first-quarter revenues were up 15 percent from $253 million in
the fourth quarter primarily due to industrial control products and automotive
sensors.
Operating margin in the first quarter increased to 18.9 percent, up 2.5 points
from a year ago and up 1.2 points from the fourth quarter of 1999, reflecting
tight cost controls combined with increased revenues.
In February, M&C announced it will close its manufacturing and business center
in Versailles, Kentucky, with manufacturing being consolidated into other
locations for increased efficiencies.
EDUCATIONAL & PRODUCTIVITY SOLUTIONS (E&PS)
Revenues for E&PS in the first quarter of 2000 were $87 million, up 8 percent
from the year-ago quarter. Sequentially, revenues were down 3 percent.
Operating margin for the quarter was 13.9 percent, up from 12.0 percent in the
year-ago quarter, primarily due to increased manufacturing efficiencies.
During the quarter, E&PS sponsored the T3-Teachers Teaching with Technology
International Conference in Dallas, which was attended by 3000 teachers.
ADDITIONAL FINANCIAL INFORMATION
During the first quarter of 2000, cash and cash equivalents plus short-term
investments decreased by $232 million to $2430 million primarily due to the
payment of 1999 profit sharing to employees in the first quarter.
11
<PAGE>
First-quarter 2000 cash flow from operating activities was $402 million.
First-quarter capital expenditures totaled $641 million compared with $206
million in the first quarter of 1999.
Depreciation for the first quarter of 2000 was $257 million, compared with
$229 million in the same quarter a year ago.
At the end of the first quarter, the debt-to-total capital ratio was .11
versus .13 at the end of 1999.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101 on revenue recognition. TI is currently
evaluating the impact of SAB No. 101, which is effective in the second quarter
of 2000, and expects any effect to be immaterial.
SPECIAL CHARGES AND GAINS
First Quarter of 2000:
In the first quarter of 2000, pretax charges of $29 million were taken,
primarily associated with previously announced actions, including the closing
of the Materials & Controls manufacturing facility in Versailles, Kentucky,
and TI's acquisition of Toccata Technology ApS. Of the $29 million charge, $12
million was for severance for the elimination of 480 jobs in Kentucky by the
first quarter of 2001. At March 31, 2000, the pay-out of the severance cost
obligation had not yet begun. Of the $29 million, $20 million is included in
cost of revenues, $6 million in marketing, general and administrative expense
and $3 million in research and development expense. The primary benefit from
the Kentucky action is reduced people costs which are estimated to reach $10
million annually. The benefit is expected to begin in the third quarter of
2000.
Fourth Quarter of 1999:
In the fourth quarter of 1999, a special charge of $86 million was taken for
acquisition related costs associated with TI's pooling of interests
acquisition of Unitrode. Of the $86 million charge, $83 million was included
in marketing, general and administrative expense, $2 million in cost of
revenues and $1 million in other income (expense) net.
First Quarter of 1999:
In the first quarter of 1999, the company announced a consolidation of
semiconductor manufacturing operations in Japan to improve manufacturing
efficiencies and reduce costs. This action resulted in a pretax charge of $14
million in the first quarter, of which $13 million was for severance for the
elimination of 153 jobs in Hatogaya, Japan. At year-end 1999, this program was
complete. Of the $14 million charge, $11 million was included in cost of
revenues and $3 million in marketing, general and administrative expense. The
primary benefit from this consolidation action was reduced people costs, which
were estimated to reach $11 million annually. The benefit was expected to
begin in the fourth quarter of 1999.
Purchased In-Process R&D Charges
Acquisition-related purchased in-process R&D charges were $79 million in 1999.
These charges are for the value of acquired in-process research and
development from business purchase acquisitions. Values for acquired
in-process R&D (purchased R&D) were determined at the acquisition date based
upon the appraised value of the related developmental projects. Purchased R&D
projects were assessed, analyzed and valued within the context and framework
articulated by the Securities and Exchange Commission herein described as the
Exclusion Approach.
12
<PAGE>
Significant assumptions, detailed in the table below, used in determining the
value of purchased R&D included the discount rate, the estimated beginning
date of projected operating cash flows, and the remaining cost and time, in
engineer-months, to complete the R&D projects. The term "engineer-month"
refers to the average amount of research work expected to be performed by an
engineer in a month.
The relative stage of completion and projected operating cash flows of the
underlying in-process projects acquired were the most significant and
uncertain assumptions utilized in the valuation analysis of the in-process
R&D. Such uncertainties could give rise to unforeseen budget overruns and/or
revenue shortfalls in the event that TI is unable to successfully complete and
commercialize the projects. TI management is primarily responsible for
estimating the value of the purchased R&D in all acquisitions accounted for
under the purchase method. TI expects to essentially meet its original return
expectations for the projects.
13
<PAGE>
<TABLE>
<CAPTION>
Millions of Dollars
- -----------------------------------------------------------------------------------------------------------------------------------
Cost/time to Year
Purchased complete R&D projects cash flows
Entity Acquisition Consid- Other in-process Appraisal R&D Discount --------------------- projected
acquired date eration Goodwill intangibles R&D charge method focus rate At At to begin
acquisition Mar. 2000
- ---------- ----------- --------- -------- ----------- ---------- --------- ----- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Butterfly First $ 52 $ 33 $ 5 $ 10 Exclusion Short 25% $5/264 $2.0/140 2000
VLSI, quarter approach distance engineer engineer
Ltd. 1999 wireless months months
technology
for voice-
plus-data
transmission
products
Libit Signal Second $365 $207 $106 $ 52 Exclusion Silicon 22% $5/492 $0.5/50 2000
Processing quarter approach Solutions engineer engineer
Ltd. 1999 and months months
Internet
telephony
software
for cable
modems, etc.
for Internet
access
Integrated Third $ 67 $ 32 $ 11 $ 16 Exclusion Intel- 25% $4/233 $0.3/40 2000
Sensor quarter approach ligent engineer engineer
Solutions, 1999 sensors months months
Inc. for
auto/ind.
markets
</TABLE>
14
<PAGE>
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Information concerning market risk is contained on pages B-35 and B-36 of the
Registrant's proxy statement for the 2000 annual meeting of stockholders and
is incorporated by reference to such proxy statement.
PART II - OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds.
On March 15, 2000, the Registrant acquired all the outstanding shares of
capital stock of Toccata Technology ApS, a company incorporated under the
laws of the Kingdom of Denmark, in exchange for 136,362 shares of TI common
stock. The issuance and sale of the shares of TI common stock described above
were deemed to be exempt from registration under the Securities Act of 1993,
as amended, in reliance on Regulation S promulgated thereunder based on the
facts and circumstances of the acquisition and upon representations and
warranties made by the shareholders of Toccata Technology ApS.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Designation of
Exhibits in
This Report Description of Exhibit
-------------- -----------------------------
<S> <C>
11 Computation of Basic and
Diluted Earnings Per Common
and Dilutive Potential
Common Share
12 Computation of Ratio of
Earnings to Fixed Charges
27 Financial Data Schedule as of
March 31, 2000 and for the
3 months then ended
27.1 Restated Financial Data Schedule
as of March 31, 1999 and for the
3 months then ended.
</TABLE>
(b) Reports on Form 8-K.
None.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995:
This Form 10-Q includes "forward-looking statements" intended to qualify for
the safe harbor from liability established by the Private Securities
Litigation Reform Act of 1995. These forward-looking statements generally can
be identified by phrases such as TI or its management "believes," "expects,"
"anticipates," "foresees," "forecasts," "estimates" or other words or phrases
15
<PAGE>
of similar import. Similarly, such statements herein that describe the
company's business strategy, outlook, objectives, plans, intentions or goals
also are forward-looking statements. All such forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those in forward-looking statements.
We urge you to carefully consider the following important factors that could
cause actual results to differ materially from the expectations of the company
or its management:
- - Market demand for semiconductors, particularly for digital signal
processors and analog chips in key markets, such as telecommunications and
computers;
- - TI's ability to develop, manufacture and market innovative products in a
rapidly changing technological environment;
- - TI's ability to compete in products and prices in an intensely competitive
industry;
- - TI's ability to maintain and enforce a strong intellectual property
portfolio and obtain needed licenses from third parties;
- - Global economic, social and political conditions in the countries in which
TI and its customers and suppliers operate, including fluctuations in
foreign currency exchange rates;
- - Losses or curtailments of purchases from key customers;
- - TI's ability to recruit and retain skilled personnel;
- - Availability of raw materials and critical manufacturing equipment.
For a more detailed discussion of these factors, see the text under the
heading "Cautionary Statements Regarding Future Results of Operations" in
Item 1 of the company's most recent Form 10-K. The forward-looking statements
included in this Form 10-Q are made only as of the date of this report and
the company undertakes no obligation to publicly update the forward-looking
statements to reflect subsequent events or circumstances.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEXAS INSTRUMENTS INCORPORATED
BY: /s/ WILLIAM A. AYLESWORTH
-------------------------------
William A. Aylesworth
Senior Vice President,
Treasurer and
Chief Financial Officer
Date: April 20, 2000
16
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Designation of Paper (P)
Exhibits in or
this Report Description of Exhibit Electronic (E)
- ---------------- ----------------------- --------------
<S> <C> <C>
11 Computation of Basic and E
Diluted Earnings Per Common
and Dilutive Potential
Common Share
12 Computation of Ratio of E
Earnings to Fixed Charges
27 Financial Data Schedule E
as of March 31, 2000 and for
the 3 months then ended
27.1 Restated Financial Data Schedule E
as of March 31, 1999 and for the
3 months then ended.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
EARNINGS PER COMMON AND DILUTIVE POTENTIAL COMMON SHARE
For Three Months Ended
------------------------
Mar 31 Mar 31
2000 1999
-------- --------
<S> <C> <C>
Net income (in millions)....................................... $ 426 $ 255
======== ========
DILUTED EARNINGS PER COMMON AND DILUTIVE POTENTIAL COMMON SHARE:
Weighted average common shares outstanding (in thousands)...... 816,057 799,339
Weighted average dilutive potential common shares:
Stock option and compensation plans........................ 35,561 25,328
-------- --------
Weighted average common and dilutive potential common shares... 851,618 824,667
======== ========
Diluted earnings per common share.............................. $ .50 $ .31
======== ========
BASIC EARNINGS PER COMMON SHARE:
Weighted average common shares outstanding (in thousands)...... 816,057 799,339
======== ========
Basic earnings per common share................................ $ .52 $ .32
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
----------
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
For Three Months
Ended March 31
----------------
1995 1996 1997 1998 1999 1999 2000
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Income from continuing operations before
income taxes and fixed charges:
Income before extraordinary item,
interest expense on loans,
capitalized interest amortized,
and provision for income taxes..... $1,563 $ 105 $ 882 $ 725 $2,112 $ 399 $ 651
Add interest attributable to
rental and lease expense........... 41 44 44 41 30 9 7
----- ----- ----- ----- ----- ----- -----
$1,604 $ 149 $ 926 $ 766 $2,142 $ 408 $ 658
===== ===== ===== ===== ===== ===== =====
Fixed charges:
Total interest on loans (expensed
and capitalized)..................... $ 69 $ 108 $ 114 $ 85 $ 84 $ 20 $ 24
Interest attributable to rental
and lease expense.................... 41 44 44 41 30 9 7
----- ----- ----- ----- ----- ----- -----
Fixed charges............................ $ 110 $ 152 $ 158 $ 126 $ 114 $ 29 $ 31
===== ===== ===== ===== ===== ===== =====
Ratio of earnings to fixed charges....... 14.5 * 5.8 6.1 18.8 14.2 21.2
===== ===== ===== ===== ===== ===== =====
</TABLE>
* Not meaningful. The coverage deficiency was $3 million in 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF TEXAS INSTRUMENTS INCORPORATED AND
SUBSIDIARIES AS OF MARCH 31, 2000, AND FOR THE THREE MONTHS THEN ENDED, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 675
<SECURITIES> 1,755
<RECEIVABLES> 1,911
<ALLOWANCES> 64
<INVENTORY> 937
<CURRENT-ASSETS> 5,974
<PP&E> 7,583
<DEPRECIATION> 3,367
<TOTAL-ASSETS> 17,500
<CURRENT-LIABILITIES> 2,518
<BONDS> 991
0
0
<COMMON> 819
<OTHER-SE> 10,380
<TOTAL-LIABILITY-AND-EQUITY> 17,500
<SALES> 2,653
<TOTAL-REVENUES> 2,653
<CGS> 1,370
<TOTAL-COSTS> 1,370
<OTHER-EXPENSES> 373
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 627
<INCOME-TAX> 201
<INCOME-CONTINUING> 426
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 426
<EPS-BASIC> .52
<EPS-DILUTED> .50
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS RESTATED FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF TEXAS INSTRUMENTS
INCORPORATED AND SUBSIDIARIES AS OF MARCH 31, 1999, AND FOR THE THREE MONTHS
THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 909
<SECURITIES> 1,391
<RECEIVABLES> 1,504
<ALLOWANCES> 58
<INVENTORY> 664
<CURRENT-ASSETS> 5,122
<PP&E> 6,625
<DEPRECIATION> 3,208
<TOTAL-ASSETS> 11,371
<CURRENT-LIABILITIES> 2,071
<BONDS> 989
0
0
<COMMON> 401
<OTHER-SE> 6,503
<TOTAL-LIABILITY-AND-EQUITY> 11,371
<SALES> 2,081
<TOTAL-REVENUES> 2,081
<CGS> 1,133
<TOTAL-COSTS> 1,133
<OTHER-EXPENSES> 311
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 376
<INCOME-TAX> 121
<INCOME-CONTINUING> 255
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 255
<EPS-BASIC> .32
<EPS-DILUTED> .31
</TABLE>
