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2014 Annual Report
Notice of 2015 Annual Meeting & Proxy Statement

Table of contents

  • Page 1
    2014 Annual Report Notice of 2015 Annual Meeting & Proxy Statement

  • Page 2
    ... to fund our future. In 2014, TI's free cash ï¬,ow of $3.5 billion was 27 percent of revenue, and in the years ahead we expect that rate can improve to 30 percent of revenue sustainably in good economic markets. This gets us to the final piece of our capital management strategy - returning cash to...

  • Page 3
    ... 2013 0 Revenue Operating Profit Net Income 0 Diluted EPS 2014 2.8 1 Free cash flow summary $B 4 7% CAGR 3 2 1 0 2004 2006 2008 2010 2012 2014 CAGR - Compound annual growth rate Cash generation summary (Millions of dollars) 2013 2014 Change Cash return summary (Millions of dollars) 2013 2014...

  • Page 4
    ...฀accounting฀policies฀and฀practices ...32 •฀ (3)฀Acquisition฀charges ...36 •฀ (4)฀Restructuring฀charges/other ...37 •฀ (5)฀Stock-based฀compensation ...38 •฀ (6)฀Profit฀sharing฀plans ...43 •฀ (7)฀Income฀taxes ...43 •฀ (8)฀Financial฀instruments...

  • Page 5
    ... Related Transactions, and Director Independence ...65 Principal Accountant Fees and Services ...65 PART IV Item 15. Exhibits, Financial Statement Schedules ...65 Notice regarding forwarding-looking statements ...67 Signatures ...68 Notice of 2015 annual meeting of stockholders and proxy statement...

  • Page 6
    (This page intentionally left blank.) iv TEXAS IN ST RU M EN TS

  • Page 7
    ... ï,¨ TEXAS INSTRUMENTS INCORPORATED (Exact name of Registrant as specified in its charter) Delaware (State of Incorporation) 75-0289970 (I.R.S. Employer Identification No.) 12500 TI Boulevard, Dallas, Texas (Address of Principal Executive Offices) 75243 (Zip Code) Registrant's Telephone Number...

  • Page 8
    ...customers'฀products.฀The฀vast฀majority฀of฀our฀revenue฀is฀derived฀ from products that are differentiated from competitors' products. Our฀segments฀represent฀groups฀of฀similar฀products฀that฀are฀combined฀on฀the฀basis฀of฀similar฀design฀and฀development...

  • Page 9
    ... our patented technology that we license to other electronics companies. We also include in Other items that are not used in evaluating the results of or in allocating resources to our segments. These include acquisition-related charges; restructuring charges; and certain corporate-level items, such...

  • Page 10
    ... in this market accounted for more than 4% of TI revenue. Personal electronics (29% of TI revenue) Communications equipment (17% of TI revenue) Enterprise systems (6% of TI revenue) Other (calculators, royalties and other) (4% of TI revenue) 4 Texas฀ In sTru m en T s 2014฀FOrm ฀10-K

  • Page 11
    ...the฀breadth฀ of a company's product line, the strength and depth of the sales network, technological innovation, product development execution, technical฀support,฀customer฀service,฀quality,฀reliability,฀price฀and฀scale.฀The฀primary฀competitive฀factors฀for฀our฀Analog...

  • Page 12
    ...have฀consignment฀inventory฀programs฀in฀place฀for฀our฀largest฀customers฀ and฀distributors. Design centers Our design centers provide design, engineering and product application support as well as after-sales customer service. The design centers are strategically located around...

  • Page 13
    ...will฀retire฀from฀the฀company,฀and฀Ms.฀Trochu฀will฀succeed฀him.฀ The฀term฀of฀office฀of฀these฀officers฀is฀from฀the฀date฀of฀their฀election฀until฀their฀successor฀shall฀have฀been฀elected฀and฀qualified.฀All฀have฀ been฀employees฀of...

  • Page 14
    ... Ethics for TI Chief Executive Officer and Senior Finance Officers. Stockholders may request copies of these documents free฀of฀charge฀by฀writing฀to฀Texas฀Instruments฀Incorporated,฀P.O.฀Box฀660199,฀MS฀8657,฀Dallas,฀Texas,฀75266-0199,฀Attention:฀ Investor Relations...

  • Page 15
    ...฀meet฀the฀ technological, product, support, software or manufacturing advancements of our competitors. Our฀performance฀depends฀in฀part฀on฀our฀ability฀to฀enforce฀our฀intellectual฀property฀rights฀and฀to฀develop฀ and license new intellectual property. Access฀to...

  • Page 16
    ...results฀of฀operations฀could฀be฀adversely฀affected฀by฀our฀distributors'฀promotion฀of฀competing฀product฀ lines฀or฀our฀distributors'฀financial฀performance. In฀2014,฀about฀60฀percent฀of฀our฀revenue฀was฀generated฀from฀sales฀of฀our฀products...

  • Page 17
    ...฀to฀support฀the฀financing฀ needs฀of฀the฀company.฀Our฀ability฀to฀fund฀our฀daily฀operations,฀invest฀in฀our฀business,฀make฀strategic฀acquisitions,฀service฀our฀debt฀ obligations฀and฀meet฀our฀cash฀return฀objectives฀requires฀continuous...

  • Page 18
    ...or฀suppliers฀and฀could฀result฀in฀unauthorized฀release฀of฀our,฀our฀customers'฀or฀our฀suppliers'฀confidential฀or฀ proprietary information, cause a disruption to our manufacturing and other operations, result in release of employee personal data, or cause us to incur...

  • Page 19
    ...Our฀principal฀executive฀offices฀are฀located฀at฀12500฀TI฀Boulevard,฀Dallas,฀Texas.฀The฀following฀table฀indicates฀the฀general฀location฀of฀ our฀principal฀manufacturing฀and฀design฀operations฀and฀the฀reportable฀segments฀that฀make฀major฀use...

  • Page 20
    ...฀stock฀during฀the฀fourth฀quarter฀of฀2014. Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (1) Period Total Number of Shares Purchased Average Price Paid...

  • Page 21
    ...financial statements and Management's discussion and analysis of financial condition and results of operations. Texas฀ In sTru m en T s 2014฀FOrm ฀10-K 15 F O RM 1 0 - K Cash flow data Cash flows from operating activities Capital expenditures ...Free cash flow (a) ...Dividends paid ...Stock...

  • Page 22
    ...means we can solve more of these needs than can our competitors, which gives us access to more customers and the opportunity to generate more revenue per system. We invest more than $1 billion each year to develop new products for our portfolio. •฀ A strong foundation of manufacturing technology...

  • Page 23
    ... strong cash flow from operations. In 2014, free cash flow was 27 percent of revenue, up 3 percentage points from a year ago. During the year, we returned $4.2 billion of cash to investors through a combination of stock repurchases and dividends. Free cash flow is a non-GAAP financial measure...

  • Page 24
    ... completed our exit from legacy wireless products. Our business model continued to generate strong cash flow from operations, with free cash flow for 2013 of $3 billion, or 24 percent of revenue. During 2013 we returned over $4 billion of cash to investors through a combination of stock repurchases...

  • Page 25
    ...51 for 2012. EPS benefited $0.06 from 2012 due to a lower number of average shares outstanding as a result of our stock repurchase program. segment฀results฀-฀2013฀compared฀with฀2012 Analog 2013 2012 Change Revenue ...Operating profit ...Operating profit % of revenue ... $ 7,194 1,859...

  • Page 26
    ...Cash flows from financing activities. In 2014, these exercises provided cash proceeds of $616 million compared with $1.31 billion in 2013. Stock option exercises in 2013 were higher than historical averages. We believe we have the necessary financial resources and operating plans to fund our working...

  • Page 27
    ... tax-deductible contributions and the impact from the plans' asset performance, interest rates and potential U.S. and non-U.S. legislation. Critical accounting policies In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United...

  • Page 28
    ...to customers or distributors under programs common in the semiconductor industry. These allowances are based on analysis of historical data, current economic conditions, and contractual terms and are recorded when revenue is recognized. Allowances may include volume-based incentives, product returns...

  • Page 29
    .... Actual cash flow amounts for future periods may differ from estimates used in impairment testing. F O RM 1 0 - K Changes in accounting standards See Note 2 to the financial statements for information on new accounting standards. Off-balance sheet arrangements As of December 31, 2014, we...

  • Page 30
    ...prices of the mutual fund investments are expected to offset related changes in deferred compensation liabilities such that a 10 percent increase or decrease in the investments' fair values would not materially affect operating results. Non-marketable equity securities and some venture capital funds...

  • Page 31
    ...at December 31, 2014 and 2013 ...Cash flows for each of the three years in the period ended December 31, 2014 ...Stockholders' equity for each of the three years in the period ended December 31, 2014 ...Notes to financial statements ...Report of independent registered public accounting firm ...26 28...

  • Page 32
    Consolidated Statements of Income (Millions of dollars, except share and per-share amounts) For Years Ended December 31, 2014 2013 2012 Revenue ...Cost of revenue (COR) ...Gross profit ...Research and development (R&D) ...Selling, general and administrative (SG&A) . Acquisition charges ......

  • Page 33
    Consolidated Statements of Comprehensive Income (Millions of dollars) For Years Ended December 31, 2014 2013 2012 Net income ...Other comprehensive income (loss) Net actuarial gains (losses) of defined benefit plans: Adjustment, net of tax benefit (expense) of $25, ($60) and $29 ...Recognized ...

  • Page 34
    ... and equipment at cost ...Accumulated depreciation ...Property, plant and equipment, net ...Long-term investments ...Goodwill, net ...Acquisition-related intangibles, net ...Deferred income taxes ...Capitalized software licenses, net ...Overfunded retirement plans ...Other assets ...Total assets...

  • Page 35
    ...Accounts payable and accrued expenses ...Accrued compensation ...Income taxes payable ...Changes in funded status of retirement plans ...Other ...Cash flows from operating activities ...Cash flows from investing activities Capital expenditures ...Proceeds from asset sales ...Purchases of short-term...

  • Page 36
    ... Statements of Stockholders' Equity (Millions of dollars, except per-share amounts) Common Stock Paid-In Capital Retained Earnings Treasury Common Stock AOCI Balance, December 31, 2011 ...2012 Net income ...Dividends declared and paid ($0.72 per share) ...Common stock issued for stock...

  • Page 37
    ...those described below in the summary of significant accounting policies and practices. Segment information Revenue: Analog ...Embedded Processing Other ...Total revenue ...Operating profit: Analog ...Embedded Processing Other ...Total operating profit ... For Years Ended December 31, 2014 2013 2012...

  • Page 38
    ... following geographic area information includes revenue, based on product shipment destination and royalty payor location, and property, plant and equipment, based on physical location: For Years Ended December 31, 2014 2013 2012 Revenue: United States . Asia (a) ...Europe ...Japan ...Rest of world...

  • Page 39
    ... delivery occurs when the customer or distributor pulls product from consignment inventory that we store at designated locations. About 60 percent of our distributor revenue is generated from sales of consigned inventory. The allowances we record against this revenue are not material. We determine...

  • Page 40
    ... certain assets acquired in business combinations that were initially recorded at fair value as of the date of acquisition. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining lease term or the 34 Texas฀ In sTru m en T s 2014฀FOrm ฀10-K

  • Page 41
    ... concern, and if so, to provide related footnote disclosures. The standard is effective for annual and interim reporting periods ending after December 15, 2016. We expect it will have no impact on our financial position and results of operations. Texas฀ In sTru m en T s 2014฀FOrm ฀10-K 35

  • Page 42
    ... with the National acquisition. COR In 2011, we discontinued using one of National's distributors. We acquired the distributor's inventory at fair value, resulting in an incremental charge of $21 million to COR upon sale of the inventory in 2012. 36 Texas฀ In sTru m en T s 2014฀FOrm ฀10...

  • Page 43
    ...December 31, 2014, $247 million has been paid to terminated employees for severance and benefits. Also in 2012, we announced closure of two older semiconductor manufacturing facilities in Houston, Texas, and Hiji, Japan. We recognized $200 million in cumulative restructuring charges related to these...

  • Page 44
    ... for annual grants of stock options and RSUs, a one-time grant of RSUs to each new non-employee director and the issuance of TI common stock upon the distribution of stock units credited to deferred compensation accounts established for such directors. 38 Texas฀ In sTru m en T s 2014฀FOrm...

  • Page 45
    ... date, and options have a three-month term. Total stock-based compensation expense recognized was as follows: For Years Ended December 31, 2014 2013 2012 These amounts include expenses related to non-qualified stock options, RSUs and stock options offered under our employee stock purchase plan...

  • Page 46
    ... plans Stock option and RSU transactions under our long-term incentive and director compensation plans during 2014 were as follows: Stock Options Weighted Average Exercise Shares Price per Share RSUs Weighted Average Grant Date Fair Value per Share Shares Outstanding grants, December 31, 2013...

  • Page 47
    ... under the employee stock purchase plan at December 31, 2014, had an exercise price equal to 85 percent of the fair market value of TI common stock on the date of automatic exercise. The automatic exercise occurred on January 2, 2015, resulting in an exercise price of $45.46 per share. Of the...

  • Page 48
    ... to directors' deferred stock accounts that settle in shares of TI common stock. These shares are not included as grants outstanding at December 31, 2014. The effects on cash flows were as follows: For Years Ended December 31, 2014 2013 2012 Proceeds from common stock transactions ...Tax benefit...

  • Page 49
    ... paid only if TI's operating margin is at or above 35 percent for a full calendar year. We recognized $269 million, $161 million and $96 million of profit sharing expense under the TI Employee Profit Sharing Plan in 2014, 2013 and 2012, respectively. 7. Income taxes Income before Income Taxes 2014...

  • Page 50
    ...tax assets and liabilities were as follows: December 31, 2014 2013 F O RM 1 0 - K Deferred income tax assets: Deferred loss and tax credit carryforwards ...Accrued expenses ...Stock-based compensation...Inventories and related reserves ...Retirement costs for defined benefit and retiree health care...

  • Page 51
    ... $569 million and $171 million for the years ended December 31, 2014, 2013 and 2012, respectively. Uncertain tax positions We operate in a number of tax jurisdictions, and our income tax returns are subject to examination by tax authorities in those jurisdictions who may challenge any item on these...

  • Page 52
    ... returns, disputes, adjustments, incentives and collectability. These allowances are deducted from accounts receivable on our Consolidated Balance Sheets. Details of these accounts receivable allowances are as follows: 2014 2013 2012 Balance, January 1 ...Additions charged (credited) to operating...

  • Page 53
    ... $7 million in 2013 and 2012, respectively. Fair-value considerations We measure and report certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the...

  • Page 54
    ... in discounted cash flow models to calculate the fair value of each reporting unit. These unobservable inputs are considered Level 3 measurements. For the years ended December 31, 2014 and 2013, we determined no impairment was indicated. See Note 9 for additional information. In November 2012, as...

  • Page 55
    ... earnings. Employees hired after December 31, 2003, do not receive the fixed employer contribution of 2 percent of the employee's annual eligible earnings. At December 31, 2014 and 2013, as a result of employees' elections, TI's U.S. defined contribution plans held shares of TI common stock totaling...

  • Page 56
    ... paid on these shares of TI common stock for 2014 and 2013 were not material. F O RM 1 0 - K Effects on the Consolidated Statements of Income and Balance Sheets Expense related to defined benefit and retiree health care benefit plans was as follows: U.S. Defined Benefit 2014 2013 2012 U.S. Retiree...

  • Page 57
    ... recognized on the Consolidated Balance Sheet as of December 31, 2014, were as follows: U.S. Defined Benefit U.S. Retiree Health Care Non-U.S. Defined Benefit Total Overfunded retirement plans ...Accrued expenses and other liabilities . . Underfunded retirement plans ...Funded status (FVPA - BO) at...

  • Page 58
    ... and $6 million for the U.S. retiree health care benefit plan; and $22 million and ($2) million for the non-U.S. defined benefit plans. Information on plan assets We report and measure the plan assets of our defined benefit pension and other postretirement plans at fair value. The tables below set...

  • Page 59
    ... rate volatility. For the U.S. plans, we utilize an option collar strategy to reduce the volatility of returns on investments in U.S. equity funds. The only Level 3 assets in our worldwide benefit plans for the periods presented are private equity limited partnerships in our U.S. pension plan...

  • Page 60
    ... and cash equivalents ...Equity securities ... 65% 35% 65% 35% 49% 51% 49% 51% 73% 27% 70% 30% None of the plan assets related to the defined benefit pension plans and retiree health care benefit plan are directly invested in TI common stock. As of December 31, 2014, we do not expect to return...

  • Page 61
    ... from plan assets and not from company assets. U.S. Defined Benefit U.S. Retiree Health Care Medicare Subsidy Non-U.S. Defined Benefit Assumed health care cost trend rates for the U.S. retiree health care benefit plan at December 31 are as follows: 2014 2013 Assumed health care cost trend rate for...

  • Page 62
    ... 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 $113 million, $120 million and $124 million in 2014, 2013 and 2012...

  • Page 63
    ... in 2012; gains and losses from currency exchange rate changes; and gains and losses from our derivative financial instruments, primarily forward foreign currency exchange contracts. December 31, 2014 2013 Prepaid expenses and other current assets Prepaid taxes on intercompany inventory profits...

  • Page 64
    ...2014 2013 Impact to Related Statement of Income Line Details about AOCI Components Net actuarial gains (losses) of defined benefit plans: Recognized net actuarial loss and Settlement losses (a) ...Tax effect...Recognized within Net income, net of taxes ...Prior service cost of defined benefit plans...

  • Page 65
    ...Basic earnings per common share ...Diluted earnings per common share ... $ 0.32 0.32 $ 0.59 0.58 $ 0.56 0.56 $ 0.46 0.46 Texas฀ In sTru m en T s 2014฀FOrm ฀10-K 59 F O RM 1 0 - K Revenue ...Gross profit ...Included in Operating profit: Acquisition charges ...Restructuring charges/other...

  • Page 66
    ... We have audited the accompanying consolidated balance sheets of Texas Instruments Incorporated and subsidiaries (the Company) as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three...

  • Page 67
    ... reporting is effective based on the COSO criteria. TI's independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on the effectiveness of our internal control over financial reporting, which immediately follows this report. Texas฀ In sTru m en T s 2014...

  • Page 68
    ...the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Texas Instruments Incorporated and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash...

  • Page 69
    ...proxy statement. A list of our executive officers and their biographical information appears in Part I, Item 1 of this report. F O RM 1 0 - K Code of Ethics We have adopted the Code of Ethics for TI Chief Executive Officer and Senior Finance Officers. A copy of the Code can be found on our web site...

  • Page 70
    ... Texas Instruments 2009 Director Compensation Plan (the "2009 Director Plan") and the TI Employees 2014 Stock Purchase Plan (the "2014 ESPP"). Also includes 283,825 shares of TI common stock to be issued upon settlement of outstanding awards granted under the National Semiconductor Corporation 2009...

  • Page 71
    ... fees and services contained under the caption "Proposal to ratify appointment of independent registered public accounting firm" in our proxy statement for the 2015 annual meeting of stockholders is incorporated herein by reference to such proxy statement. PART IV ITEM 15. Exhibits, Financial...

  • Page 72
    ... on Form 10-K for the year ended December 31, 2011). Texas Instruments 2003 Director Compensation Plan as amended January 19, 2012. †Form of Stock Option Agreement for Executive Officers under the Texas Instruments 2009 Long-Term Incentive Plan (incorporated by reference to Exhibit 10(l) to the...

  • Page 73
    ...as health epidemics, severe weather and earthquakes in the locations in which TI, its customers or its suppliers operate; •฀ Availability and cost of raw materials, utilities, manufacturing equipment, third-party manufacturing services and manufacturing technology; •฀ Changes in the tax rate...

  • Page 74
    ... attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities in connection with the annual report on Form 10-K of Texas Instruments Incorporated for the year ended December 31, 2014, to sign any...

  • Page 75
    ... Todd Whitman Christine Todd Whitman /s/ Kevin P. March Kevin P. March Director Senior Vice President; Chief Financial Officer; Chief Accounting Officer Texas฀ In sTru m en T s 2014฀FOrm ฀10-K 69 F O RM 1 0 - K Chairman of the Board; Director; President and Chief Executive Officer

  • Page 76
    (This page intentionally left blank.) 70 TEXAS IN ST RU M EN TS

  • Page 77
    ...at the annual meeting. We urge you to vote your shares as promptly as possible by: (1) accessing the Internet website, (2) calling the toll-free number or (3) signing, dating and mailing the enclosed proxy. Sincerely, Dallas, Texas March 4, 2015 T ex as฀ In sT r u m en Ts 2015฀PrOxY฀sTaT em...

  • Page 78
    ... 117 117 118 119 PROXY STATEMENT - MARCH 4, 2015 EXECUTIVE OFFICES 12500 TI BOULEVARD, DALLAS, TEXAS 75243 MAILING ADDRESS: P.O. BOX 660199, DALLAS, TEXAS 75266-0199 Voting procedures and quorum P ROX Y STATE ME NT TI's board of directors requests your proxy for the annual meeting of stockholders...

  • Page 79
    ...the meeting. Majority of votes present in person or by proxy at the meeting must be cast for the proposal. Election of directors Directors are elected at the annual meeting to hold office until the next annual meeting and until their successors are elected and qualified. The board of directors has...

  • Page 80
    ... persons named as proxies may vote for a substitute or the number of directors will be reduced accordingly. Directors RALPH W. BABB, JR. Age 66 Director since 2010 Chair, Audit Committee RONALD KIRK Age 60 Director since 2013 Member, Governance and Stockholder Relations Committee RUTH J. SIMMONS Age...

  • Page 81
    ... acquisitions and divestitures; and significant research and development (R&D) and capital investment decisions. These issues arise in the context of the company's operations, which primarily involve the manufacture and sale of semiconductors all over the world into industrial, automotive, personal...

  • Page 82
    ... First USA, has developed a keen appreciation for audit- and financial control-related matters. •฀ As a director of Dr Pepper Snapple Group, Inc. (2008-present) and a director of Molson Coors Brewing Company (2005-2009), has helped oversee the strategy and operations of other major multinational...

  • Page 83
    ... ethics for our CEO and senior financial officers are available on our website at www.ti.com/corporategovernance. Stockholders may request copies of these documents free of charge by writing to Texas Instruments Incorporated, P.O. Box 660199, MS 8657, Dallas, TX 75266-0199, Attn: Investor Relations...

  • Page 84
    ... former service lasting no longer than one year as an interim chairman of the board, chief executive officer or other executive officer and (c) benefits under a tax-qualified retirement plan, or non-discretionary compensation); 3. A family member of the director was employed as an executive officer...

  • Page 85
    ... accounting firm related to quality control. •฀ Reviewing TI's annual and quarterly reports to the SEC, including the financial statements and the "Management's Discussion and Analysis" portion of those reports, and recommending appropriate action to the board. •฀ Reviewing TI's audit plans...

  • Page 86
    ... members have been Mr. Sanchez (chair), Ms. Patsley and Ms. Whitman. The committee is responsible for: Reviewing the performance of the CEO and determining his compensation. Setting the compensation of the company's other executive officers. Overseeing administration of employee benefit plans...

  • Page 87
    ...the company's executive officers. Pursuant to that authority, the Compensation Committee has delegated to a special committee established by the board the authority to grant a limited number of stock options and restricted stock units under the company's long-term incentive plans. The sole member of...

  • Page 88
    ... whole has oversight responsibility for the company's strategic and operational risks (e.g., major initiatives, competitive markets and products, sales and marketing, and research and development). Throughout the year the CEO discusses these risks with the board during strategy reviews that focus on...

  • Page 89
    ... $15,000 for service as chair of the G&SR Committee. •฀ Annual grant of a 10-year option to purchase TI common stock pursuant to the terms of the Texas Instruments 2009 Director Compensation Plan (Director Plan), which was approved by stockholders in April 2009. The grant date value is $100,000...

  • Page 90
    ... the compensation of all persons who were non-employee members of the board during 2014 for services in all capacities to TI in 2014. Change in Pension Value and Nonqualified Deferred All Other Compensation Compensation Earnings (4) ($) (5) Name Fees Earned or Paid in Cash ($) (1) Stock Awards...

  • Page 91
    ... review the Compensation Discussion and Analysis section of the proxy statement, which follows. It discusses our executive compensation policies and programs and explains the compensation decisions relating to the named executive officers for 2014. We believe that the policies and programs serve the...

  • Page 92
    ...compensation. Variable cash is tied to the short-term performance of the company, and the value of equity is tied to the long-term performance of the company. We believe our compensation program holds our executive officers accountable for the financial and competitive performance of TI. •฀ 2014...

  • Page 93
    ... has been based on company-level annual operating profit margin. The formula was set by the TI board. The committee's practice has been not to adjust amounts earned under the formula. Paid twice monthly Profit sharing Broad-based program designed to emphasize that each employee contributes to the...

  • Page 94
    ... competitors and on our strategic progress in key markets and with customers. These factors have been chosen to reflect our near-term financial performance as well as our progress in building long-term shareholder value. The committee aims to pay total cash compensation (base salary, profit sharing...

  • Page 95
    ... decisions in January 2015 relating to 2014 performance as it used to set salary and equity compensation in January 2014. The table below compares the group to TI in terms of revenue and market capitalization. Revenue ($ billion) * Market Cap ($ billion) * Company Intel Corporation ...QUALCOMM...

  • Page 96
    ... comparing the grant date fair values and number of shares for each of the years shown in the summary compensation table. Grant Date Fair Value * Stock Options (in Shares) Restricted Stock Units (in Shares) Officer Year R. K. Templeton ... 2014 2013 2012 2014 2013 2012 2014 2013 2012 $ 9,800,034...

  • Page 97
    ...was the closing price of TI stock on January 23, 2014, the second trading day after the company released its annual and fourth quarter financial results for 2013. All grants were made under the Texas Instruments 2009 Long-Term Incentive Plan, which shareholders approved in April 2009. In addition to...

  • Page 98
    ... rate as compared with competitor companies. However, this included a $445 million revenue decline in legacy wireless products, for which the company has had publicly stated exit plans under way for a number of years. Excluding legacy wireless products, TI's revenue grew 11 percent, which was better...

  • Page 99
    ... company's manufacturing and technology, the breadth and differentiation of its product portfolio, and the diversity of markets and customers it serves. Performance summary 1-Year 3-Year Revenue growth: total TI ...Revenue growth without legacy wireless products Operating margin ...Free cash flow...

  • Page 100
    ... grant date fair value of their equity compensation. The compensation decisions shown above resulted in the following 2014 compensation mix for the named executive officers: CEO 8% 24% 2% 1% P ROX Y STATE ME NT 94 Other NEOs * 20% 11% 67% Base Salary Equity Compensation 67% Profit Sharing Bonus...

  • Page 101
    ...competitive benefits program and for retention. Like other established U.S. manufacturers, we have had a U.S. qualified defined benefit pension plan for many years. At its origin, the plan was designed to be consistent with those offered by other employers in the diverse markets in which we operated...

  • Page 102
    ... officers. We have the plan to be competitive with the benefits packages offered by other companies. The executive officers' deferred compensation account balances are unsecured and all amounts remain part of the company's operating assets. The value of the deferred amounts tracks the performance...

  • Page 103
    ... of the company and our shareholders that restricted stock unit awards provide for the retention of our executive officers in all market conditions. The Texas Instruments Executive Officer Performance Plan is intended to ensure that performance bonuses under the plan are fully tax deductible under...

  • Page 104
    ... bonuses for 2014 were paid under the Texas Instruments Executive Officer Performance Plan. In accordance with SEC requirements, these amounts are reported in the Non-Equity Incentive Plan Compensation column. (2) Shown is the aggregate grant date fair value of restricted stock unit (RSU) awards...

  • Page 105
    (4) Consists of performance bonus and profit sharing for 2014. Please see page 94 for the amounts of bonus and profit sharing paid to each of the named executive officers for 2014. (5) The company does not pay above-market earnings on deferred compensation. Therefore, no amounts are reported in this...

  • Page 106
    ... quarter and year 2013. The company released these results on January 21, 2014. (2) The stock awards granted to the named executive officers in 2014 were RSU awards. These awards were made under the company's 2009 Long-Term Incentive Plan. For information on the terms and conditions of these RSU...

  • Page 107
    ... named executive officers as of December 31, 2014. Option Awards Stock Awards Equity Incentive Equity Plan Incentive Awards: Plan Awards: Number of Market or Unearned Payout Value Market Value Shares, of Unearned of Shares or Units or Shares, Units Units of Stock Other or Other That Have Not Rights...

  • Page 108
    ... in control of TI. "Change in control" is defined as provided in the Texas Instruments 2009 Long-Term Incentive Plan and occurs upon (1) acquisition of more than 50 percent of the voting stock or at least 80 percent of the assets of TI or (2) change of a majority of the board of directors in a 12...

  • Page 109
    ... by the named executive officers in 2014 and the value of any RSUs that vested in 2014. For option exercises, the value realized is calculated by multiplying the number of shares acquired by the difference between the exercise price and the market price of TI common stock on the exercise date. For...

  • Page 110
    ...executive officer's continued employment after December 31, 2014. Present Value of Accumulated Benefit ($) (6) Payments During Last Fiscal Year ($) Name (1) Plan Name Number of Years Credited Service (#) R. K. Templeton (2) ... TI Employees Pension Plan TI Employees Non-Qualified Pension Plan TI...

  • Page 111
    ... date of payment is the first day of the second calendar month following the month of death. Leaves of absence, including a bridge to retirement, are credited to years of service under the qualified pension plan. Please see the discussion of leaves of absence on page 108. TI฀employees฀non...

  • Page 112
    ...-end 2013 from the value of the award at year-end 2014 (in both cases, the number of RSUs is multiplied by the closing price of TI common stock on the last trading date of the year)); and (c) a $37,056 gain in Mr. Templeton's deferred compensation account in 2014. Dividend equivalents are paid at...

  • Page 113
    ... named executive officers has an employment contract with the company. They are eligible for benefits on generally the same terms as other U.S. employees upon termination of employment or change in control of the company. TI does not reimburse executive officers for any income or excise taxes that...

  • Page 114
    ... the paid leave and end when the executive officer has reached the earlier of age 55 with at least 20 years of employment or age 60 (bridge to retirement). The bridge to retirement will be credited to years of service under the qualified and non-qualified pension plans described above. Stock options...

  • Page 115
    ... in calculating these amounts are the same as the age-65 lump-sum assumptions used for financial reporting purposes for the company's audited financial statements for 2014 and are described in note 6 to the 2014 pension benefits table on page 104. T ex as฀ In sT r u m en Ts 2015฀PrOxY฀sTaT...

  • Page 116
    ...and the closing price of TI common stock as of December 31, 2014 ($53.47), multiplied by the number of shares under such options as of December 31, 2014. (5) Value of the benefit payable in a lump sum to the executive officer's beneficiary calculated as required by the terms of the plan assuming the...

  • Page 117
    ... in 2013. The services provided in exchange for these fees included employee benefit plan audits, certification procedures relating to compliance with local-government or other regulatory standards for various non-U.S. subsidiaries, and access to Ernst & Young's online research tool. Tax fees. Ernst...

  • Page 118
    ..." shares if they have the right to either vote those shares or dispose of them. More than one person may be considered to beneficially own the same shares. Name and Address Shares Owned at December 31, 2014 Percent of Class Capital Research Global Investors (1) 333 South Hope Street Los Angeles, CA...

  • Page 119
    ... TI common stock by directors, the named executive officers and all executive officers and directors as a group. Each director and named executive officer has sole voting power (except for shares obtainable within 60 days, shares subject to RSUs and shares credited to deferred compensation accounts...

  • Page 120
    ... shares in deferred compensation accounts are issued following a director's termination of service. Related person transactions The company has no reportable related person transactions. Because we believe that company transactions with directors and executive officers of TI or with persons related...

  • Page 121
    ...a director's independence; the availability of other sources for comparable products or services; the terms of the arrangement; and the terms available to unrelated third parties or to employees generally. The primary consideration is whether the transaction between TI and the related person (a) was...

  • Page 122
    ..., on or before November 5, 2015. Proposals are to be sent to: Texas Instruments Incorporated, 12500 TI Boulevard, MS 8658, Dallas, TX 75243, Attn: Secretary. If you wish to submit a proposal at the 2016 annual meeting (but not seek inclusion of the proposal in the company's proxy material), we must...

  • Page 123
    ... benefit plan and would like to request electronic delivery, please call TI Investor Relations for more information. Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on April 16, 2015. This 2015 proxy statement and the company's 2014 annual report...

  • Page 124
    Directions and other annual meeting information Directions From DFW airport: Take the North Airport exit to IH-635E. Take IH-635E to the Greenville Avenue exit. Turn right (South) on Greenville. Turn right (West) on Forest Lane. Texas Instruments will be on your right at the second traffic light. ...

  • Page 125
    ... (compound annual growth rate) is calculated using the formula: (Ending Value/Beginning Value)1/number of years-1. Percentage of Revenue For Years Ended December 31, 2014 2013 2012 Free Cash Flow as a Percentage of Revenue (Millions of dollars) For Years Ended December 31, 2014 2013 2012 Total...

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    (This฀page฀intentionally฀left฀blank.) TEXAS IN ST RU M EN TS 121

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  • Page 129
    ..., 2014. The total shareholder return assumes $100 invested at the beginning of the period in TI common stock, the S&P 500 Index and the S&P Information Technology Index. It also assumes reinvestment of all dividends. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Texas Instruments Incorporated...

  • Page 130
    ... cash flow is a non-GAAP financial measure. For a definition of and the reason for using this measure, see page 20 of this Annual Report. For Twelve Months Ended December 31, 2014 2013 Change Cash flows from operations (GAAP) ...Capital expenditures ...Free cash flow (non-GAAP) ...Revenue ...Cash...

  • Page 131
    ...on Form 10-K is available on the Investor Relations website at www.ti.com/ir. Copies of the Form 10-K, including a list of exhibits and any exhibit specifically requested, are available without charge by writing to: Texas Instruments Investor Relations P.O. Box 660199, MS 8657 Dallas, TX 75266-0199...

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    Texas Instruments Incorporated P.O. Box 660199 Dallas, TX 75266-0199 www.ti.com An equal opportunity employer © 2015 Texas Instruments Incorporated TI-30003