Texas Instruments 2012 Annual Report Download - page 32

ANNUAL
REPORT
TEXAS INSTRUMENTS30 • 2012 ANNUAL REPORT
The plans are slightly outside their target allocation ranges due to cash funding late in the year. 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, 2012,
we do not expect to return any of the plans’ assets to TI in the next 12 months.
The following table shows the benefits we expect to pay to participants from the plans in the next ten years. Almost all of the payments
will be made from plan assets and not from company assets.
U.S. Defined
Benefit U.S. Retiree Health Care Medicare Subsidy
Non-U.S.
Defined
Benefit
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $197 $ 34 $ (4) $ 80
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 35 (4) 81
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 37 (4) 87
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 38 (5) 91
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 39 (5) 94
2018-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495 193 (16) 535
Assumed health care cost trend rates for the U.S. retiree health care plan at December 31 are as follows:
2012 2011
Assumed health care cost trend rate for next year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.0% 9.0%
Ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0% 5.0%
Year in which ultimate trend rate is reached . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 2017
A one percentage point increase or decrease in health care cost trend rates over all future periods would have increased or decreased
the accumulated postretirement benefit obligation for the U.S. retiree health care plan at December 31, 2012, by $26 million or
$22 million, respectively. The service cost and interest cost components of 2012 plan expense would have increased or decreased
by $2 million.
Deferred compensation arrangements
We have a deferred compensation plan that allows U.S. employees whose base salary and management responsibility exceed a certain
level to defer receipt of a portion of their cash compensation. Payments under this plan are made based on the participant’s distribution
election and plan balance. Participants can earn a return on their deferred compensation based on notional investments in the same
investment funds that are offered in our defined contribution plans.
As of December 31, 2012, our liability to participants of the deferred compensation plan was $139 million and is recorded in
Deferred credits and other liabilities on our Consolidated balance sheets. This amount reflects the accumulated participant deferrals and
earnings thereon as of that date. Except as described in the next paragraph, no assets are held in trust for the deferred compensation
plan and so we remain liable to the participants. To serve as an economic hedge against changes in fair values of this liability, we invest
in similar mutual funds that are recorded in Long-term investments. We record changes in the fair value of the liability and the related
investment in SG&A as discussed in Note 9.
In connection with the National acquisition, we assumed its deferred compensation plan. As of December 31, 2012, this consisted of
$35 million of obligations and matching assets held in a Rabbi trust. No further contributions will be made to this plan.
12. Debt and lines of credit
Short-term borrowings
We maintain a line of credit to support commercial paper borrowings, if any, and to provide additional liquidity through bank loans. As of
December 31, 2012, we have a five-year variable-rate revolving credit facility from a consortium of investment-grade banks that allows
us to borrow up to $2 billion through March 2017. The interest rate on borrowings under this credit facility, if drawn, is indexed to the
applicable London Interbank Offered Rate (LIBOR). As of December 31, 2012, we have no commercial paper outstanding, having repaid
$1 billion on a cumulative basis in 2012.
Long-term debt
In August 2012, we issued an aggregate principal amount of $1.5 billion of fixed-rate long-term debt, with $750 million due in 2015
and $750 million due in 2019. The proceeds of the offering were $1.492 billion, net of the original issuance discount. We also incurred
$7 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.