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, 1997 Commission File Number 1-3761 TEXAS INSTRUMENTS INCORPORATED ----------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 75-0289970 ------------------------ ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 8505 Forest Lane, 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 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 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. The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $17,423,000,000 as of December 31, 1997. 389,498,552 --------------------------------------------------------------------- (Number of shares of common stock outstanding as of December 31, 1997) Parts I, II and IV hereof incorporate information by reference to the Registrant's 1997 annual report to stockholders. Part III hereof incorporates information by reference to the Registrant's proxy statement for the 1998 annual meeting of stockholders. PART I ITEM 1. Business. Semiconductors - -------------- Texas Instruments Incorporated ("TI," or the "Registrant," including subsidiaries except where the context indicates otherwise) is a global semiconductor company and the world's leading designer and supplier of digital signal processing solutions, the engines driving the digitization of electronics. These digital signal processing solutions consist primarily of digital signal processors and mixed-signal/analog devices that convert the analog signals of the real world into digital data, then back again as analog output. They enable a wide range of new products and features for TI's more than 30,000 customers in industrial, commercial and government end-equipment markets. TI also is a world leader in the design and manufacturing of other semiconductor products. Those products include application-specific integrated circuits, reduced instruction-set microprocessors, microcontrollers, standard logic, and memories. Semiconductors comprised 83% of TI's total revenues in 1997. TI's semiconductor products are used in a diverse range of electronic systems, including digital cell phones, pagers, computers, printers, mass storage devices, modems, networking equipment, digital cameras and video recorders, motor controls, autos, and home appliances. Products are sold primarily to original-equipment manufacturers and through distributors. In addition, TI's semiconductor patent portfolio has been established as an ongoing contributor to semiconductor revenues. The semiconductor business is intensely competitive, subject to rapid technological change, and requires high rates of investment. TI faces strong competition in all of its semiconductor product lines. The rapid pace of change and technological breakthroughs constantly create new opportunities for existing competitors and start-ups, which can quickly render existing technologies less valuable. In digital signal processors, TI competes with a growing number of large and smaller companies, both U.S.-based and international. New product development capabilities, applications support, software knowledge and advanced technology are the primary competitive factors in this business. The market for mixed-signal/analog devices is highly fragmented. TI competes with many large and smaller companies, both U.S.-based and international. Primary competitive factors in this business are the availability of innovative designs, a broad range of process technologies and applications support and in the standard products area, price. In memory, TI competes with a number of very large companies, primarily in Japan and Korea. TI is among the smaller competitors in this highly volatile market. Competitive factors in this business are primarily price and performance. Acquisitions and Divestitures - ----------------------------- From time to time TI considers acquisitions and divestitures that may strengthen its business portfolio. TI may effect one or more of these transactions at such time or times as it determines to be appropriate. In 2 1997, as TI tightened its focus on digital signal processing solutions, it announced the acquisition of technology companies that brought unique expertise to its core business. In the first quarter, TI acquired Intersect Technologies, Inc., a developer and designer of hardware, software and firmware for the mass storage market, a market that increasingly uses digital signal processing solutions. In the fourth quarter, TI acquired Amati Communications Corporation, the leading developer of technology for high-speed Internet connections, a market expected to reach $6 billion over the next decade. TI also acquired GO DSP Corporation, a developer of software for digital signal processors, in the first quarter of 1998. In 1997 TI divested various business units. These divestitures included the sale of the mobile computing business to The Acer Group in the first quarter, the software business to Sterling Software, Inc. in the second quarter, and the defense systems and electronics business (DSE) to Raytheon Company ("Raytheon") in the third quarter. In accordance with generally accepted accounting principles, the consolidated financial statements have been restated to classify DSE as discontinued operations. Operating results, net asset and other information for discontinued operations appear in the note to the financial statements captioned "Discontinued Operations" on pages 20-21 of TI's 1997 annual report to stockholders; unless otherwise indicated, the financial amounts in this Form 10-K have been adjusted to reflect continuing operations only. Other TI Businesses - ------------------- In addition to semiconductors, TI has two other principal segments. The largest, representing 10% of TI's revenues, is materials and controls. This business sells electrical and electronic controls, electronic connectors, sensors, radio-frequency identification systems and clad metals into markets such as automotive, heating and air conditioning, and home appliances. While the top supplier in some product areas, TI faces strong multinational competitors. The primary competitive factors in this business are product reliability, manufacturing costs, and engineering expertise. The products of this business are sold directly to original-equipment manufacturers and through distributors. Educational & Productivity Solutions (E&PS) represents 5 percent of TI's revenues and consists largely of educational and graphing calculators. This business sells primarily through retailers and to schools through instructional dealers. TI's principal competitors in this business are several Japanese companies. Technology expertise, price and infrastructure for education and market understanding are primary competitive factors in this business. In addition, TI continues to invest in digital imaging, an emerging business that produces micro-mirror-based devices that enable revolutionary brightness and clarity in large-screen video displays. The primary sales route is directly to original-equipment manufacturers. TI faces competition in this business primarily from a competing technology known as liquid crystal displays from Asian manufacturers. Primary competitive factors in this business are price, brightness and performance of the display, and in some applications, size and weight. General Information - ------------------- TI is headquartered in Dallas, Texas, and has manufacturing, design or sales operations in more than 25 countries. TI's largest geographic markets are in the United States, Japan and Europe. TI has been in operation since 1930. 3 The financial information with respect to TI's business segments and operations outside the United States, which is contained in the note to the financial statements captioned "Business Segment and Geographic Area Data" on pages 30-32 of TI's 1997 annual report to stockholders, is incorporated herein by reference to such annual report. Backlog - ------- The dollar amount of backlog of orders believed by the Registrant to be firm was $1623 million as of December 31, 1997 and 1996. 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 do not reflect any potential adjustments for price decreases. Raw Materials - ------------- The Registrant purchases materials, parts and supplies from a number of suppliers. 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. The Registrant's patent portfolio has been established as an ongoing contributor to the revenues of the Registrant. 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 $1536 million in 1997, compared with $1181 million in 1996 and $842 million in 1995. Included is a charge for the value of in-process research and development of $461 million in 1997 and $192 million in 1996 as a result of the acquisitions of Amati Communications Corporation and Silicon Systems, Inc., respectively. Seasonality - ----------- The Registrant's revenues are subject to some seasonal variation. Employees - --------- The information concerning the number of persons employed by the Registrant, at December 31, 1997 on page 35 of the Registrant's 1997 annual report to stockholders is incorporated herein by reference to such annual report. 4 ITEM 2. Properties. The Registrant's principal executive offices are located at 8505 Forest Lane, 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 business segments which make major use of them. Except as otherwise indicated, the principal plants are owned by the Registrant. Materials Semiconductor and Controls E&PS ------------- ------------ ---- Dallas, Texas(1) X X X Houston, Texas X Lubbock, Texas X Sherman, Texas(1)(2) X Santa Cruz, California X Attleboro, X X Massachusetts Freising, Germany X X Avezzano, Italy(3) X Baguio, X Philippines(4) Hiji, Japan X Kuala Lumpur, X X Malaysia(2) Miho, Japan X Singapore(4) X Taipei, Taiwan X Aguascalientes, Mexico X X ____________________ (1) Certain plants or portions thereof in Dallas and Sherman are leased to Raytheon or Raytheon-related entities in connection with the sale of DSE. (2) Leased or primarily leased. (3) Owned, subject to mortgage. (4) Owned on leased land. The Registrant's facilities in the United States contained approximately 17,900,000 square feet as of December 31, 1997, of which approximately 3,700,000 square feet were leased. The Registrant's facilities outside the United States contained approximately 7,000,000 square feet as of December 31, 1997, of which approximately 1,700,000 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 1997, 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. 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 appealed the court's decision to the Tokyo High Court. In September 1997, the Tokyo High Court upheld the decision that Fujitsu's production of such products does not infringe TI's Kilby patent. The Registrant has appealed the ruling to the Japan Supreme Court. In November, the Japan Patent Office invalidated the Kilby patent. The Registrant plans to appeal this decision to the Tokyo High Court. Since the Kilby patent expires in 2001, the Registrant does not expect the outcome of either appeal to be material. 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. ITEM 4. Submission of Matters to a Vote of Security Holders. Not applicable. 6 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 58 Director; Chairman of the Board Richard J. Agnich 54 Senior Vice President, Secretary and General Counsel William A. Aylesworth 55 Senior Vice President, Treasurer and Chief Financial Officer (Chief Accounting Officer) Gary D. Clubb 51 Executive Vice President (President, Digital Imaging) Thomas J. Engibous 45 Director; President and Chief Executive Officer David D. Martin 58 Executive Vice President Charles F. Nielson 60 Vice President Elwin L. Skiles, Jr. 56 Vice President Richard K. Templeton 39 Executive Vice President (President, Semiconductor Group) William P. Weber 57 Director; Vice Chairman 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, and the most recent date of election of each of them was April 17, 1997. 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. Messrs. Adams and Templeton have served as officers of the Registrant since 1996. Messrs. Clubb, Engibous and Templeton have been employees of the Registrant for more than five years. 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 41 of the Registrant's 1997 annual report to stockholders, and the information concerning the number of stockholders of record at December 31, 1997 on page 35 of such annual report, are incorporated herein by reference to such annual report. 7 ITEM 6. Selected Financial Data. The "Summary of Selected Financial Data" for the years 1993 through 1997 which appears on page 35 of the Registrant's 1997 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 information contained under the caption "Management Discussion and Analysis of Financial Condition and Results of Operations" on pages 36-41 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, 1997 and 1996 and for each of the three years in the period ended December 31, 1997, and the report thereon of the independent auditors, on pages 14-34 of the Registrant's 1997 annual report to stockholders, are incorporated herein by reference to such annual report. The "Quarterly Financial Data" on page 42-43 of the Registrant's 1997 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. 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 1998 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," "Executive Compensation" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Registrant's proxy statement for the 1998 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 1998 annual meeting of stockholders, is incorporated herein by reference to such proxy statement. The information concerning ownership of the Registrant's 8 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. 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: Designation of Exhibit in this Report Description of Exhibit -------------- ------------------------------------------------- 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). 9 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) Certificate of Ownership and Merger Merging Tiburon Systems, Inc. into the Company (incorporated by reference to Exhibit 4(g) to the Registrant's Registration Statement No. 333-41919 on Form S-8). 3(i) Certificate of Ownership and Merger Merging Tartan, Inc. into the Company (incorporated by reference to Exhibit 4(h) to the Registrant's Registration Statement No. 333-41919 on Form S-8). 3(j) By-Laws of the Registrant (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K dated December 4, 1997). 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)(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).* 10 10(a)(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).* 10(a)(iii) Amendment No. 2 to TI Deferred Compensation Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).* 10(a)(iv) Amendment No. 3 to TI Deferred Compensation Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).* 10(b) 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).* 10(c) 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).* 10(d) Texas Instruments Executive Officer Performance Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997).* 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) Texas Instruments Directors Deferred Compensation Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 10(g) 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).* 11 Computation of earnings per common and dilutive potential common 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 1997 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 1997 Annual Report to Stockholders is not to be deemed filed as part of this report.) 11 21 List of subsidiaries of the Registrant. 23 Consent of Ernst & Young LLP. 24 Powers of Attorney. 27 Financial Data Schedule. ________________ *Executive Compensation Plans and Arrangements: 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). Amendment No. 2 to TI Deferred Compensation Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997). Amendment No. 3 to TI Deferred Compensation Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 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). Texas Instruments Executive Officer Performance Plan (incorporated by reference to the Registrant's Quarterly Report on form 10-Q for the quarter ended March 31, 1997). 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). (b) Reports on Form 8-K: None. "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, global 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 and continuity of DRAM joint venture manufacturing operations, timely completion of announced acquisitions, the regulatory and trade environment, timely completion of Year 2000 software modifications, and other risks indicated in filings with the Securities and Exchange Commission. 12 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 23, 1998 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 23rd day of February, 1998. 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 *DANIEL A. CARP Director - ------------------------------------ Daniel A. Carp *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 *WAYNE R. SANDERS Director - ------------------------------------ Wayne R. Sanders *GLORIA M. SHATTO Director - ------------------------------------ Gloria M. Shatto 13 *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 14 TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14(a)) Page Reference -------------- Annual Report to Form 10-K Stockholders --------- ------------ Information incorporated by reference to the Registrant's 1997 Annual Report to Stockholders: Consolidated Financial Statements: Income for each of the three 14 years in the period ended December 31, 1997 Balance sheet at December 31, 15 1997 and 1996 Cash flows for each of the 16-17 three years in the period ended December 31, 1997 Stockholders' equity for each of 18 the three years in the period ended December 31, 1997 Notes to financial statements 19-33 Report of Independent Auditors 34 Consolidated Schedule for each of the three years in the period ended December 31, 1997: II. Allowance for losses 16 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. 15 Schedule II ----------- TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES ALLOWANCE FOR LOSSES (IN MILLIONS OF DOLLARS) Years Ended December 31, 1997, 1996, and 1995 Additions Balance at Charged to Balance Beginning Costs and at End of Year Expenses Deductions of Year 1997 $90 $133 $150 $73 - ---- ==== ==== ==== ==== 1996 $45 $163 $118 $90 - ---- ==== ==== ==== ==== 1995 $37 $113 $105 $45 - ---- ==== ==== ==== ==== Allowances for losses from uncollectible accounts, returns, etc., are deducted from accounts receivable in the balance sheet. 16 Exhibit Index Designation of Exhibit in Electronic this Report Description of Exhibit or Paper -------------- ---------------------- --------- 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) Certificate of Ownership and Merger Merging Tiburon Systems, Inc. into the Company (incorporated by reference to Exhibit 4(g) to the Registrant's Registration Statement No. 333-41919 on Form S-8). 3(i) Certificate of Ownership and Merger Merging Tartan, Inc. into the Company (incorporated by reference to Exhibit 4(h) to the Registrant's Registration Statement No. 333-41919 on Form S-8). 3(j) By-Laws of the Registrant (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K dated December 4, 1997). 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)(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).* 10(a)(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).* 10(a)(iii) Amendment No. 2 to TI Deferred Compensation Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).* 10(a)(iv) Amendment No. 3 to TI Deferred Compensation Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).* 10(b) 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).* 10(c) 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).* 10(d) Texas Instruments Executive Officer Performance Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997).* 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) Texas Instruments Directors Deferred Compensation Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 10(g) 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).* 11 Computation of earnings per common E and dilutive potential common share. 12 Computation of Ratio of Earnings to E Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 13 Registrant's 1997 Annual Report to E 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. E 23 Consent of Ernst & Young LLP. E 24 Powers of Attorney. E 27 Financial Data Schedule. E ________________ *Executive Compensation Plans and Arrangements: 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). Amendment No. 2 to TI Deferred Compensation Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997). Amendment No. 3 to TI Deferred Compensation Plan (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 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). Texas Instruments Executive Officer Performance Plan (incorporated by reference to the Registrant's Quarterly Report on form 10-Q for the quarter ended March 31, 1997). 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).