SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
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FORM 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 24 1996
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TEXAS INSTRUMENTS INCORPORATED
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(Exact name of Registrant as specified in its charter)
Delaware 1-3761
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(State of Incorporation) (Commission File No.)
75-0289970
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(I.R.S. Employer Identification No.)
13500 North Central Expressway
P. O. Box 655474, Dallas, Texas 75265
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code 214-995-2551
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ITEM 5. Other Events.
The information set forth in the Registrant's
news release dated January 23, 1996 (attached hereto as Exhibit
21) is incorporated herein by reference to such news release.
ITEM 7. Exhibits.
Designation of
Exhibit in
this Report Description of Exhibit
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21 Registrant's news release
dated January 23, 1996
SIGNATURE
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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 MARVIN M. LANE, JR.
Marvin M. Lane, Jr.
Vice President and
Corporate Controller
Date: January 24, 1996
Exhibit Index
Designation of
Exhibit in Paper (P)
this Report Description of Exhibit or Electronic (E)
- -------------- ---------------------- -----------------
21 Registrant's news release E
dated January 23, 1996
EXHIBIT 21
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News Release
C-9604
Media Contact:
Neil McGlone (214) 995-4961
(Please do not publish this number)
TI's 1995 Earnings Top $1B On 27 Percent Revenue Growth
Company Achieves Third Consecutive Year of Record Financial Results
DALLAS (January 23, 1996) -- Texas Instruments Incorporated (NYSE: TXN)
capitalized on strong performance in its semiconductor business and
robust worldwide semiconductor market growth in 1995 to produce the best
financial results in company history. TI achieved record revenues,
profits and earnings per share for both fourth quarter 1995 and the full
year.
FINANCIAL SUMMARY
TI's net revenues for 1995 were $13.1 billion, up 27 percent from $10.3
billion in 1994, with most of the increase coming from semiconductors.
Profit from operations was $1594 million, up 47 percent from $1083
million in 1994. This improvement was primarily due to higher
semiconductor operating profits and higher royalties, despite the effect
of unfavorable performance in notebook computers and increased
investments in emerging opportunities.
Net income for the year was $1088 million, compared with $691 million in
1994, an increase of 57 percent. Earnings per share, after the effect
of the two-for-one stock split announced June 15, 1995, were $5.63,
versus $3.63 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.
Net revenues for the fourth quarter of 1995 were $3603 million, up 30
percent from $2782 million in the fourth quarter of 1994. Most of the
increase came from record semiconductor revenues. Profit from
operations increased 41 percent to $409 million, from $291 million in
the same period in 1994. Semiconductor operating profits nearly doubled
from the fourth quarter of 1994, and royalties were substantially
higher. Notebook computers operated at a loss for the quarter.
TI's financial results in the fourth quarter of 1995 also include
substantially higher investments in marketing and new product
development, as well as charges for streamlining operations in the
company's software and notebook computer businesses.
Net income in the fourth quarter of 1995 was $291 million, and earnings
per share were $1.50, compared with net income of $188 million and
earnings per share of $0.99 in the year-ago fourth quarter.
"Clearly, 1995 was a very good year," said Jerry R. Junkins, TI
chairman, president and chief executive officer. "We benefited from
focusing on operational excellence and further refinement of our long-
term business strategies, coupled with a year of more than 40 percent
worldwide semiconductor market growth. The result was a third
consecutive year of record financial performance.
"Although we appear to be entering a period of slower industry growth,
we intend to step up our investments to strengthen TI's long-term
position to build on the gains we've made during the last three years,"
Junkins said.
SEMICONDUCTOR
TI's semiconductor orders in the fourth quarter of 1995 were up strongly
from a year ago, but down slightly from the prior quarter, reflecting
some buildup in customer inventories of semiconductors and pricing
pressures, particularly for dynamic random access memories (DRAMs) and
standard logic products. Combined orders for digital signal processors
(DSPs) and mixed-signal products more than doubled versus the year-ago
quarter. DSPs and mixed-signal products continue to benefit from new
product introductions and new design wins, particularly in hard disk
drives and telecommunications products.
TI's semiconductor revenues were up sequentially and reached record
levels for the fourth quarter of 1995 and for the year, 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.
TI has focused on operational excellence to continue improvements in
semiconductor manufacturing yield, cycle time, asset utilization, and
on-time delivery. As a result, the company generated additional wafer
output from existing facilities equivalent to the capacity of one major
wafer fabrication facility, for the second consecutive year.
DEFENSE SYSTEMS & ELECTRONICS
During 1995, TI's defense systems and electronics business continued to
see favorable results from its focus on customer satisfaction and
operational excellence. Shorter cycle times and the Defense
Department's movement toward commercial practices helped support an
improving revenue trend and stable margins. Revenues in the fourth
quarter were up both sequentially and on a year-to-year basis, partially
due to growing international demand for Paveway precision-guided
weapons, which have now been sold to more than 25 countries outside the
United States.
During 1995, TI completed three small defense acquisitions that will
strengthen the company's capabilities in mission planning, logistics
management and digital battlefield technologies.
For 1995, revenues were up slightly, with increased shipments of Paveway
weapons and emerging programs more than offsetting reduced shipments of
HARM missiles. Success in 1995 lays the foundation for moderate growth
for this business in the future.
MATERIALS & CONTROLS
TI's materials and controls business experienced solid growth and record
revenues for the second consecutive year in 1995. Today, the core
controls business enjoys market leadership around the world. Future
growth opportunities will be focused on emerging markets such as Asia,
Eastern Europe and Latin America, as well as developing new sensors for
automotive electronics and further growth in applications for radio-
frequency identification systems.
PERSONAL PRODUCTIVITY PRODUCTS
Revenues in TI's notebook computer business were up substantially in the
fourth quarter of 1995, reflecting strong customer reception of the
Extensa( line of value-priced notebook computers. The calculator
business experienced a record year, extending its market leadership in
instructional calculators. During 1995, TI significantly increased
marketing investments in the notebook computer business to increase
brand awareness and aggressively communicate a strategic shift that
emphasizes mobility and connectivity in the networked economy. These
investments, coupled with intense price competition, caused the business
to operate at a loss during the quarter and for the year. The high
levels of marketing investment and new product development necessary to
improve the competitiveness of this business are expected to constrain
its near-term financial performance.
EMERGING OPPORTUNITIES
During the fourth quarter of 1995, TI's software business took actions
to further streamline operations and focus on strategic areas such as
object oriented tools, Internet and department solutions. While TI
software operated at a loss for the full year, record revenues were
achieved during the fourth quarter of 1995.
In digital imaging, TI is currently delivering preproduction Digital
Light Processing( subsystems for final qualification by projection
display manufacturers. TI also expects shipments of the first
production subsystems to support deliveries by product manufacturers in
the first quarter of 1996.
SUMMARY
In the near term, TI will be affected by inventory corrections and
pricing pressures in certain areas of the semiconductor market. The
company's DRAM joint ventures, which produce about 75 percent of the
DRAMs marketed by TI, will help reduce the volatility of these market
conditions on TI. However, costs associated with new semiconductor
wafer fabrication facilities will impact the first half of 1996, with
little incremental revenue to offset these costs until the second half
of the year. TI believes that industry demand for memory will continue
to experience solid growth in 1996, despite near-term inventory
corrections and price declines.
As previously announced, four semiconductor patent licenses expired at
the end of 1995 and have not yet been renewed. TI does not accrue
royalties in the absence of agreements. Royalty revenue from these
licenses contributed about $108 million to revenues in the fourth
quarter of 1995, principally attributable to Samsung Electronics Co.,
Ltd. of Korea, with which TI is now in litigation.
Additionally, several licenses will expire at the end of the first
quarter of 1996. Royalty revenue from these licenses was about $40
million in the fourth quarter of 1995. The expiration of these licenses
will have no effect on first quarter 1996 royalty revenue.
Negotiations continue for renewal of expired and expiring licenses.
However, these negotiations by their nature are not predictable as to
outcome or timing.
"Over the past three decades, the world semiconductor market has grown
at an average rate of about 15 percent per year," Junkins said. "The
semiconductor content of electronic end equipment is increasing rapidly,
and new semiconductor markets are rapidly emerging in Asia that will
rival the size of major markets like Japan and the U.S. in the next
decade. Because of these factors, we believe the world semiconductor
market will grow on average 20 percent or more per year, including
1996."
To accelerate the company's future growth, TI plans to increase capital
expenditures in 1996 to about $2.5 billion, up significantly from $1.4
billion in 1995. TI-funded R&D will be increased in 1996 to about $1.1
billion to support targeted opportunities in digital signal processing
solutions, advanced memory and microprocessors, digital imaging
technology, and wireless transmission of video, voice and data.
"We have the core competencies and technologies that play right to the
heart of the digital revolution, the explosion of Internet usage, and
the pervasiveness of the networked society," Junkins said.
"We are in an industry that has the opportunity to grow faster in the
next decade than it has in its previous 30-year history. And TI today
is a company that is better positioned in products and technologies, in
our global presence, and in our commitment to customers than we ever
have been."
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Income Statement
(In millions of dollars, except per-share amounts.)
For Three Months Ended
Dec. 31 Dec. 31
1995 1994
Net revenues $3603 $2782
Operating costs and expenses:
Cost of revenue 2571 2030
Marketing, general and administrative 498 364
Employees' retirement and profit sharing plans 125 97
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Total 3194 2491
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Profit from operations 409 291
Other income (expense) net 31 --
Interest on loans 10 11
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Income before provision for income taxes 430 280
Provision for income taxes 139 92
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Net income $ 291 $ 188
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Earnings per common and common equivalent share* $ 1.50 $ 0.99
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Cash dividends declared per share of common stock $ 0.17 $ 0.12
* Earnings per common and common equivalent share are based on average common
and common equivalent shares outstanding (194.7 million shares and 190.3
million shares for the fourth quarters of 1995 and 1994). Share amounts have
been retroactively adjusted for the two-for-one stock split in 1995.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Income Statement
(In millions of dollars, except per-share amounts.)
For The Years Ended
--------------------
Dec. 31 Dec. 31
1995 1994
Net revenues $13128 $10315
Operating costs and expenses:
Cost of revenues 9318 7471
Marketing, general and administrative 1707 1393
Employees' retirement and profit sharing plans 509 368
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Total 11534 9232
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Profit from operations 1594 1083
Other income (expense) net 73 4
Interest on loans 48 45
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Income before provision for income taxes 1619 1042
Provision for income taxes 531 351
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Net income $ 1088 $ 691
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Earnings per common and common equivalent share* $ 5.63 $ 3.63
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Cash dividends declared per share of common stock $ 0.64 $ 0.47
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* Earnings per common and common equivalent share are based on average
common and common equivalent shares outstanding (193.6 million shares
and 190.9 million shares for 1995 and 1994). In computing per-share
earnings, net income is increased by $2 million in 1995 and 1994 for
interest (net of tax and profit sharing effect) on the convertible
debentures considered dilutive common stock equivalents. Share amounts
have been retroactively adjusted for the two-for-one stock split in
1995.
SELECTED BALANCE SHEET ITEMS
(Millions of dollars)
For The Years Ended
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Dec. 31 Dec. 31
1995 1994
Cash and short-term investments $1553 $1290
Accounts receivable (net) 2320 1442
Inventories (net) 1135 882
Total current assets 5518 4017
Property, plant and equipment (net) 3187 2568
Total assets 9215 6989
Current liabilities 3188 2199
Long-term debt, loans and current LTD 831 820
Stockholders' equity 4095 3039
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Debt-to-total-capital ratio .17 .21
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ADDITIONAL FINANCIAL INFORMATION
Change in orders, Change in net revenues
Segment 1995 vs. 1994 1995 vs. 1994
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Components Up 45% Up 39%
Defense Systems Down 2% Up 1%
& Electronics
Digital Products Up 14% Up 11%
Total Up 32% Up 27%
Change in orders, Change in net revenues
Segment 4Q95 vs. 4Q94 4Q95 vs. 4Q94
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Components Up 39% Up 38%
Defense Systems Up 93% Up 6%
& Electronics
Digital Products Up 26% Up 21%
Total Up 41% Up 30%
TI's orders for 1995 were $13.7 billion, up 32 percent from $10.4
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 $13.1 billion, up 27 percent from $10.3
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
$1594 million, up 47 percent from $1083 million in 1994. Higher
semiconductor operating profits accounted for much of the increase;
higher royalties also contributed. Results for 1994 include $132
million in pretax restructuring and divestiture charges taken in the
first quarter.
Results for 1995 include significantly higher royalty revenues, both for
the fourth quarter and for the year.
TI's orders for the fourth quarter of 1995 were $3583 million, compared
with $2534 million for the same period in 1994. Higher semiconductor and
defense systems and electronics orders were the primary contributors to
the increase. TI's semiconductor orders were up over year-ago levels,
with strong growth in digital signal processors, mixed-signal products
and memory.
Net revenues for the fourth quarter of 1995 were $3603 million, compared
with $2782 million in the fourth quarter of 1994. The increase was due
primarily to higher semiconductor revenues in the components segment,
because of increased volume and new products.
Profit from operations for the fourth quarter increased 41 percent to
$409 million, from $291 million in the same period of 1994.
Improvements in semiconductor operations and higher royalty revenues
were the primary contributors to the increase, partially offset by
losses in the digital segment.
Net income in the fourth quarter of 1995 was $291 million, and earnings
per share were $1.50, compared with net income of $188 million and
earnings per share of $0.99 in the fourth quarter of 1994.
TI's backlog of unfilled orders as of December 31, 1995, was $4528
million, up $615 million from the end of 1994, due to an increase in
semiconductor backlog. Backlog was down $7 million from the end of the
third quarter of 1995.
TI-funded R&D was $927 million for 1995 and $279 million for the fourth
quarter, compared with $689 million and $190 million for the same
periods of 1994.
Capital expenditures were $1439 million in 1995 and $525 million in the
fourth quarter, compared with $1076 million and $320 million in the same
periods of 1994.
Depreciation for 1995 was $756 million, compared with $665 million in
1994, and $206 million in the fourth quarter of 1995, compared with $179
million in the same period of 1994. Depreciation in 1996 is expected to
be about $1 billion.
COMPONENTS SEGMENT
Orders in the components segment were up 45 percent for the year, 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.
For the fourth quarter of 1995, orders in the components segment were up
39 percent over the same period in 1994. Segment revenues were up 38
percent from the same period of a year ago, reflecting higher
semiconductor revenues, which grew faster than the segment. Segment
profit increased substantially over the fourth quarter of 1994 because
of improved semiconductor operating performance and higher royalties.
DEFENSE SYSTEMS & ELECTRONICS SEGMENT
In TI's defense systems and electronics segment, 1995 orders, revenues
and margins were essentially flat with 1994.
Fourth-quarter 1995 orders in defense systems and electronics were up 93
percent from the fourth quarter of 1994, primarily due to timing of
orders. Revenues were up 6 percent from the fourth quarter of 1994,
primarily due to increased shipments to international customers.
Margins remained essentially flat with the fourth quarter of 1994.
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 the year, due to increased marketing expenses and intense
price competition in notebook computers, as well as continued
investments and new product development in communications and
electronics systems, and in the software business.
For the fourth quarter of 1995, orders in the digital segment were up 26
percent and revenues were up 21 percent from the fourth quarter of 1994,
primarily due to increased shipments of notebook computers. The segment
operated at a loss for the quarter.
FINANCIAL CONDITION
TI's financial condition remains strong. Cash flow from operating
activities net of additions to property, plant and equipment was a
positive $228 million for year 1995. During the year, cash and cash
equivalents plus short-term investments increased by $263 million to
$1553 million. In January 1995 the company reduced to zero (from $125
million) the outstanding balance of its asset securitization agreement,
and terminated this agreement effective January 30, 1995. TI's year-end
1995 debt-to-total-capital ratio of .17 is down .02 from the third
quarter level, and down .04 from the year-end 1994 value.
Unused authorizations for future capital expenditures were $1654 million
at December 31, 1995. TI plans to raise capital expenditures in 1996 to
about $2.5 billion, up from $1.4 billion in 1995. The company is
considering various debt financing alternatives in addition to existing
cash balances as sources of funding for these expenditures.
The company maintains unused lines of credit to support commercial paper
borrowing and to provide additional liquidity. Unused lines of credit
were approximately $538 million at December 31, 1995. Of this amount,
$440 million was available to support commercial paper borrowing.
The company believes that its financial condition provides the
foundation for continued support of the programs essential to TI's
future.
INDUSTRY SEGMENT NET REVENUES
Millions of Dollars
-----------------------
1995 1994 1993
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Components
Trade $ 9420 $ 6787 $5091
Intersegment 60 56 66
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9480 6843 5157
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Defense Systems and Electronics
Trade 1718 1710 1842
Intersegment 22 17 14
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1740 1727 1856
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Digital Products
Trade 1829 1661 1454
Intersegment 23 1 4
----- -- -- -----
1852 1662 1458
----- -- -- ----
Metallurgical Materials
Trade 160 152 126
Intersegment 23 25 19
----- - ---- ----
183 177 145
----- -- --- ----
Eliminations and other (127) (94) (93)
----- - ---- ----
Total $13128 $10315 $8523
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INDUSTRY SEGMENT PROFIT (LOSS)
Millions of Dollars
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1995 1994 1993
---- ---- ----
Components $1830 $1101 $ 689
Defense Systems and Electronics 172 172 188
Digital Products (59) 62 34
Metallurgical Materials 2 (8) (4)
Eliminations and corporate items (326) (285) (211)
---- -- -- ----
Income before provision for income taxes and
cumulative effect of accounting changes $1619 $1042 $ 696
==== ==== ====
# # #
"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995:
With the exception of historical information, the matters discussed in
this news release are forward-looking statements that involve risks and
uncertainties including, but not limited to, economic conditions,
product demand and industry capacity, competitive products and pricing,
manufacturing efficiencies, new product development, ability to enforce
patents, availability of raw materials and critical manufacturing
equipment, new plant startups, the regulatory and trade environment, and
other risks indicated in filings with the Securities and Exchange
Commission.
NOTE TO EDITORS: Texas Instruments Incorporated, headquartered in
Dallas, Texas, is a high-technology company with sales or manufacturing
operations in more than 30 countries. TI products and services include
semiconductors; defense electronics systems; software productivity
tools; printers, notebook computers and consumer electronics products;
custom engineering and manufacturing services; electrical controls; and
metallurgical materials.
Extensa and Digital Light Processing are trademarks of Texas Instruments
Incorporated.
More information about TI is located on the World Wide Web at
http://www.ti.com
