Texas Instruments 2008 Annual Report Download - page 31

TEXAS INSTRUMENTS 2008 ANNUAL REPORT [ 29 ]
14. Commitments and contingencies
Operating leases: We conduct certain operations in leased facilities and also lease a portion of our data processing and other equipment.
In addition, certain long-term supply agreements to purchase industrial gases are accounted for as operating leases. Lease agreements
frequently include purchase and renewal provisions and require us to pay taxes, insurance and maintenance costs. Rental and lease
expense incurred was $124 million, $123 million and $125 million in 2008, 2007 and 2006.
Capitalized software licenses: We have licenses for certain electronic design automation software that are accounted for in accordance
with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The related
liabilities are apportioned between current liabilities (accounts payable) and long-term liabilities (deferred credits and other liabilities) on
our balance sheet.
Purchase commitments: Some of our purchase commitments entered in the ordinary course of business provide for minimum
payments.
Summary: At December 31, 2008, we had committed to make the following minimum payments under operating leases, capitalized
software licenses and purchase commitments:
Operating
Leases
Capitalized
Software
Licenses
Purchase
Commitments
2009 ................................................................ $ 81 $ 67 $ 116
2010 ................................................................ 67 22 26
2011 ................................................................ 54 18 18
2012 ................................................................ 42 3 4
2013 ................................................................ 37 — 4
Thereafter ........................................................... 123 —20
Indemnification guarantees: We routinely sell products with a limited intellectual property indemnification included in the terms of
sale. Historically, we have had only minimal, infrequent losses associated with these indemnities. Consequently, we cannot reasonably
estimate or accrue for any future liabilities that may result.
Warranty costs/product liabilities: We accrue for known product-related claims if a loss is probable and can be reasonably estimated.
During the periods presented, there have been no material accruals or payments regarding product warranty or product liability, and
historically we have experienced a low rate of payments on product claims. Consistent with general industry practice, we enter into
formal contracts with certain customers that include negotiated warranty remedies. Typically, under these agreements our warranty for
semiconductor products includes: three years coverage; an obligation to repair, replace or refund; and a maximum payment obligation
tied to the price paid for our products. In some cases, product claims may exceed the price of our products.
General: We are subject to various legal and administrative proceedings. Although it is not possible to predict the outcome of these
matters, we believe that the results of these proceedings will not have a material adverse effect upon our financial condition, results of
operations or liquidity.
Discontinued operations indemnity: In connection with the sale of the former Sensors & Controls business in 2006, we have agreed
to indemnify Sensata for specified litigation matters and certain liabilities, including environmental liabilities. Our indemnification
obligations with respect to breaches of representations and warranties and the specified litigation matters are generally subject to a
total deductible of $30 million and our maximum potential exposure is limited to $300 million.
15. Stockholders’ equity
We are authorized to issue 10,000,000 shares of preferred stock. No preferred stock is currently outstanding.
Treasury shares acquired in connection with the board-authorized stock repurchase program in 2008, 2007 and 2006 were
77,162,667 shares; 147,645,809 shares; and 173,580,794 shares. As of December 31, 2008, $3.55 billion of stock repurchase
authorizations remain and no expiration date has been specified.