Texas Instruments 2011 Annual Report Download - page 33

TEXAS INSTRUMENTS 2011 ANNUAL REPORT ■ 31
ANNUAL
REPORT
Long-term debt
On May 23, 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 will be amortized to Interest and debt expense over the term of the debt.
In connection with this issuance, we also entered into an interest rate swap transaction related to the $1.0 billion floating-rate
debt due 2013. Under this swap 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. The net effect of this swap is to convert the $1.0 billion floating-rate debt to a
fixed-rate obligation bearing a rate of 0.922 percent.
At the acquisition date, we assumed $1.0 billion of outstanding National debt with a fair value of $1.105 billion. The excess of the
fair value over the stated value will be amortized as a reduction of interest and debt expense over the term of the related debt.
The following table summarizes the total long-term debt outstanding as of December 31, 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
Notes due 2013 at 0.875% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Notes due 2014 at 1.375% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Notes due 2015 at 3.95% (assumed with National acquisition) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Notes due 2016 at 2.375% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Notes due 2017 at 6.60% (assumed with National acquisition) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
4,500
Add net unamortized premium (assumed with National acquisition) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Less current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (382)
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,211
As of December 31, 2010, we had no outstanding debt. Interest incurred on debt and amortization of debt expense was $42 million in
2011. Interest incurred in 2010 and 2009 was not material. Cash payments for interest on long-term debt were $54 million in 2011.
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 $109 million, $100 million and $114 million in 2011, 2010 and 2009, 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 the payment.
Purchase commitments
Some of our purchase commitments entered in the ordinary course of business provide for minimum payments. At December 31, 2011,
we had committed to make the following minimum payments under our non-cancellable operating leases, capitalized software licenses
and purchase commitments:
Operating
Leases
Capitalized
Software
Licenses Purchase Commitments
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $102 $73 $215
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 35 97
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 31 20
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 12 4
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 — 2
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 — 10