Texas Instruments Incorporated, often referred to as TI, is one of the largest US technology companies. TI designs and manufactures semiconductors and various integrated circuits, which it sells to electronics designers and manufacturers globally.
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 -------------------------------------------------------------------------- (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>