Texas Instruments 2008 Annual Report Download - page 47

TEXAS INSTRUMENTS 2008 ANNUAL REPORT [ 45 ]
In 2007, the board of directors authorized the repurchase of an additional $5 billion of our common stock. Cumulatively, our
board of directors has authorized $20 billion in stock repurchases since September 2004. At year-end 2008, $3.55 billion of these
authorizations remain.
We believe we have the necessary financial resources and operating plans to fund our working capital needs, capital expenditures,
dividend payments and other business requirements for at least the next 12 months.
Long-term contractual obligations
Payments Due by Period
Contractual Obligations 2009 2010/2011 2012/2013 Thereafter Total
Operating lease obligations (a)............................... $ 81 $121 $79 $123 $404
Software license obligations (b).............................. 67 40 3 — 110
Purchase obligations (c) ................................... 116 44 820 188
Retirement plans funding (d) ................................ 41 — — — 41
Deferred compensation plan (e).............................. 13 29 54 42 138
Total (f) ................................................ $ 318 $234 $144 $185 $881
(a) Includes minimum payments for leased facilities and equipment, as well as purchases of industrial gases under contracts
accounted for as an operating lease.
(b) Includes payments under license agreements for electronic design automation software.
(c) Includes contractual arrangements with suppliers where there is a fixed non-cancellable payment schedule or minimum payments
due with a reduced delivery schedule. Excluded from the table are cancellable arrangements. However, depending on when certain
purchase arrangements may be cancelled, an additional $12 million of cancellation penalties may be required to be paid, which are
not reflected in the table.
(d) Includes the contributions expected to be made during 2009. Funding projections beyond 2009 are not practical to estimate due to
the rules affecting tax-deductible contributions and the impact from the plans’ asset performance, interest rates and potential U.S.
and international legislation.
(e) Includes an estimate of payments under this plan for the liability that existed at December 31, 2008.
(f) Excluded from the table above are $148 million of uncertain tax liabilities under FIN 48. These amounts have been excluded
because of the difficulty in making reasonably reliable estimates of the timing of cash settlements with the respective taxing
authorities.
Critical accounting policies
In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States, we
use statistical analyses, estimates and projections that affect the reported amounts and related disclosures and may vary from actual
results. We consider the following accounting policies to be both those that are most important to the portrayal of our financial condition
and that require the most subjective judgment. If actual results differ significantly from management’s estimates and projections, there
could be a significant effect on our financial statements.
Revenue recognition
Revenue from sales of our products is recognized upon shipment or delivery, depending upon the terms of the sales order, provided that
persuasive evidence of a sales arrangement exists, title and risk of loss have transferred to the customer, the sales amount is fixed or
determinable and collection of the revenue is reasonably assured. A portion of our sales is to distributors. We recognize revenue from
sales of our products to distributors upon delivery of product to the distributors consistent with the above principles.
We reduce revenue based on estimates of future credits to be granted to customers. Credits are granted for reasons such as
prompt payment discounts, volume-based incentives, other special pricing arrangements and product returns due to quality issues.
Our estimates of future credits are based on historical experience, analysis of product shipments and contractual arrangements with
customers.
Distributor revenue is recognized net of allowances, which are management’s estimates based on analysis of historical data, current
economic conditions and contractual terms. These allowances recognize the impact of credits granted to distributors under certain
programs common in the semiconductor industry whereby distributors receive certain price adjustments to meet individual competitive
opportunities, or are allowed to return or scrap a limited amount of product in accordance with contractual terms agreed upon with the
distributor, or receive price protection credits when our standard published prices are lowered from the price the distributor paid for
product still in its inventory. Historical claims data are maintained for each of the programs, with differences among geographic regions