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ANNUAL
REPORT
TEXAS INSTRUMENTS 2012 ANNUAL REPORT • 31
In May 2011, we issued fixed- and floating-rate long-term debt to help fund the National acquisition. The proceeds of the offering
were $3.497 billion, net of the original issuance discount. We also incurred $12 million of issuance costs that are included in Other
assets and are being amortized to Interest and debt expense over the term of the debt.
We also have an interest rate swap agreement related to the $1 billion floating-rate debt due 2013. Under this agreement, we
will receive variable payments based on three-month LIBOR rates and pay a fixed rate through May 15, 2013. Changes in the cash
flows of the interest rate swap are expected to exactly offset the changes in cash flows attributable to fluctuations in the three-month
LIBOR-based interest payments. We have designated this interest rate swap as a cash flow hedge and record changes in its fair value in
AOCI. As of December 31, 2012, the fair value of the swap agreement is a $2 million liability. The net effect of this swap is to convert the
$1 billion floating-rate debt to a fixed-rate obligation bearing a rate of 0.922 percent.
At the acquisition date, we assumed $1 billion of outstanding National debt with a fair value of $1.105 billion. The excess of the fair
value over the stated value is amortized as a reduction of Interest and debt expense over the term of the related debt. In 2012 and 2011,
we amortized $26 million and $9 million, respectively. During 2012, we repaid $375 million of this debt.
Total long-term debt outstanding as of December 31, 2012 and 2011 is as follows:
December 31,
2012 2011
Notes due 2012 at 6.15% (assumed with National acquisition) . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 375
Floating-rate notes due 2013 (swapped to a 0.922% fixed rate) . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Notes due 2013 at 0.875% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 500
Notes due 2014 at 1.375% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Notes due 2015 at 3.95% (assumed with National acquisition) . . . . . . . . . . . . . . . . . . . . . . . . . . 250 250
Notes due 2015 at 0.45% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750 —
Notes due 2016 at 2.375% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Notes due 2017 at 6.60% (assumed with National acquisition) . . . . . . . . . . . . . . . . . . . . . . . . . . 375 375
Notes due 2019 at 1.65% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750 —
5,625 4,500
Add net unamortized premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 93
Less current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,500) (382)
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,186 $ 4,211
Interest and debt expense was $85 million in 2012 and $42 million in 2011. This was net of the amortization of the debt premium and
other debt issuance costs. Cash payments for interest on long-term debt were $97 million in 2012 and $54 million in 2011. Capitalized
interest was not material.
13. 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, $109 million and $100 million in 2012, 2011 and 2010, respectively.
Capitalized software licenses
We have licenses for certain internal-use electronic design automation software that we account for as capital leases. The related
liabilities are apportioned between Accounts payable and Deferred credits and other liabilities on our Consolidated balance sheets,
depending on the contractual timing of payments.