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2013 Annual Report
Notice of 2014 Annual Meeting & Proxy Statement

Table of contents

  • Page 1
    2013 Annual Report Notice of 2014 Annual Meeting & Proxy Statement

  • Page 2
    ... a world where semiconductors touch people's lives every day and everywhere. It's a strategy that has made us who we are and who we will be - strong, stable, competitive - with a long runway of opportunities still ahead of us. Note: Free cash ï¬,ow (non-GAAP) = Cash ï¬,ow from operations minus...

  • Page 3
    ... to financial statements ...7 Description of business and significant accounting policies and practices Acquisition-related charges Restructuring charges/other Losses associated with the 2011 earthquake in Japan Stock-based compensation Profit sharing plans Income taxes Financial instruments and...

  • Page 4
    ... 5 42 2,955 719 $ 2,236 $ $ 1.91 1.88 1,151 1,171 $ 0.56 ANNUAL REPORT Earnings per common share: Basic ...Diluted ...Average shares outstanding (millions): Basic ...Diluted ...Cash dividends declared per share of common stock ...See accompanying notes. 2 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 5
    ...2013 2012 2011 Net income ...Other comprehensive income (loss): Available-for-sale investments: Unrealized gains (losses), net of tax benefit (expense) of $0, ($1) and $1 ...Reclassification to Net income, net of tax benefit (expense) of $0, $0 and ($7) ...Net actuarial gains (losses) of defined...

  • Page 6
    ... of dollars, except share amounts] 2013 2012 Assets Current assets: Cash and cash equivalents ...Short-term investments ...Accounts receivable, net of allowances of ($22) and ($31) Raw materials ...Work in process ...Finished goods ...Inventories ...Deferred income taxes ...Prepaid expenses and...

  • Page 7
    ... ...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 and insurance recovery . Purchases of short-term investments...

  • Page 8
    ...Comprehensive Income (Loss) Balance, December 31, 2010 ...2011 Net income ...Dividends declared and paid ($.56 per share) ...Common stock issued for stock-based awards ...Stock repurchases ...Stock-based compensation...Tax impact from exercise of options ...Other comprehensive income (loss), net of...

  • Page 9
    ... and significant accounting policies and practices Business At Texas Instruments (TI), we design and make semiconductors that we sell to electronics designers and manufacturers all over the world. We have two reportable segments, which are established along major categories of products as follows...

  • Page 10
    ...in millions): Net Income 2013 Shares EPS Net Income 2012 Shares EPS Net Income 2011 Shares EPS Basic EPS: Net income ...Income allocated to RSUs ...Income allocated to common stock for basic EPS calculation ...Adjustment for dilutive shares: Stock-based compensation plans ...Diluted EPS: Net income...

  • Page 11
    ...valued at historic exchange rates. Revenue and expense accounts other than depreciation for each month are remeasured at the appropriate daily rate of exchange. Currency exchange gains and losses from remeasurement are credited or charged to OI&E. TEXAS INSTRUMENTS 2013 ANNUAL REPORT • 9 ANNUAL...

  • Page 12
    ... the performance of its segments. These total acquisition-related charges are as follows: For Years Ended December 31, 2013 2012 2011 Amortization of intangible assets ...Retention bonuses ...Stock-based compensation...Severance and other benefits: Employment reductions announced at closing Change...

  • Page 13
    ...are reflected in the Acquisition charges line of our Consolidated statements of income. TEXAS INSTRUMENTS 2013 ANNUAL REPORT • 1 1 ANNUAL REPORT Severance and other benefits costs were for former National employees who were terminated after the closing date. These costs totaled $70 million for...

  • Page 14
    ...goodwill. As of December 31, 2013, $180 million has been paid to terminated employees for severance and benefits. Prior actions In 2012, we announced closure of two older semiconductor manufacturing facilities in Houston, Texas, and Hiji, Japan. Each facility employed about 500 people. We recognized...

  • Page 15
    ... 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. We also have an employee stock purchase plan...

  • Page 16
    ... various stock-based compensation plans at fair value. We estimate the fair values for non-qualified stock options using the Black-Scholes option-pricing model with the following weighted average assumptions. 2013 2012 2011 ANNUAL REPORT Weighted average grant date fair value, per share Weighted...

  • Page 17
    ... stock purchase plan at December 31, 2013, had an exercise price of $36.64 per share, which is 85 percent of the fair market value of TI common stock on the date of automatic exercise. Of the total outstanding options, none were exercisable at year-end 2013. TEXAS INSTRUMENTS 2013 ANNUAL REPORT...

  • Page 18
    ... is paid only if TI's operating margin is at or above 35 percent for a full calendar year. We recognized $161 million, $96 million and $143 million of profit sharing expense under the TI Employee Profit Sharing Plan in 2013, 2012 and 2011, respectively. 1 6 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 19
    ... in Malaysia and the Philippines, and expire in 2018 and 2017, respectively. The total provision for 2012 includes $252 million of discrete tax benefits primarily for additional U.S. tax benefits for manufacturing related to the years 2000 through 2011. TEXAS INSTRUMENTS 2013 ANNUAL REPORT • 1 7

  • Page 20
    ... ... ... ... ... ... ... ... $ Valuation allowance ...Deferred income tax liabilities: Acquisition-related intangibles and fair-value adjustments ...Accrued retirement costs for defined benefit and retiree health care International earnings ...Property, plant and equipment ...Other ... 345 265 262...

  • Page 21
    ... of such instruments. The carrying value of our long-term debt approximates the fair value as measured using broker-dealer quotes, which are Level 2 inputs. See Note 9 for a description of fair value and the definition of Level 2 inputs. TEXAS INSTRUMENTS 2013 ANNUAL REPORT • 1 9 ANNUAL REPORT

  • Page 22
    ...: December 31, 2013 Cash and Cash Equivalents Short-term Investments Long-term Investments December 31, 2012 Cash and Cash Short-term Long-term Equivalents Investments Investments Measured at fair value: Available-for-sale securities Money market funds ...Corporate obligations ...U.S. Government...

  • Page 23
    ...million in 2013, 2012 and 2011, 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 24
    ..., using unobservable inputs in discounted cash flow models to calculate the fair value of each reporting unit. These unobservable inputs are considered Level 3 measurements. In conjunction with the restructuring action related to the Embedded Processing segment as discussed in Note 3, we performed...

  • Page 25
    ... plan. Both defined contribution plans offer an employer-matching savings option that allows employees to make pre-tax contributions to various investment choices, including a TI common stock fund. Employees who elected to continue accruing a benefit in the qualified defined benefit pension plans...

  • Page 26
    ... balance sheets Expense related to defined benefit and retiree health care benefit plans was as follows: U.S. Defined Benefit 2013 2012 2011 U.S. Retiree Health Care 2013 2012 2011 Non-U.S. Defined Benefit 2013 2012 2011 ANNUAL REPORT Service cost ...Interest cost ...Expected return on plan assets...

  • Page 27
    ... recognized on the balance sheet as of December 31, 2012, 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 end of year...

  • Page 28
    ... defined benefit plan Money market collective trusts ...U.S. Government agency and Treasury securities . U.S. bond funds ...U.S. equity funds and option collars ...International equity funds ...Limited partnerships ...Total ...Assets of U.S. retiree health care plan Money market collective trusts...

  • Page 29
    ...TEXAS INSTRUMENTS 2013 ANNUAL REPORT • 2 7 ANNUAL REPORT Assets of U.S. defined benefit plan Money market collective trusts ...U.S. Government agency and Treasury securities . U.S. bond funds ...U.S. equity funds and option collars ...International equity funds ...Limited partnerships ...Total...

  • Page 30
    ... policies Defined Benefit 2013 2012 U.S. Retiree Health Care 2013 2012 Weighted average assumptions used to determine benefit obligations: U.S. discount rate ...5.11% 4.16% 4.83% 3.97% Non-U.S. discount rate ...3.01% 2.80% ANNUAL REPORT U.S. average long-term pay progression ...3.50% 3.50% Non...

  • Page 31
    ... 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. ANNUAL REPORT U.S. Defined Benefit U.S. Retiree Health Care Medicare Subsidy Non-U.S. Defined Benefit 2014 ...2015 ...2016...

  • Page 32
    ...term debt outstanding as of December 31, 2013 and 2012 is as follows: December 31, 2013 2012 ANNUAL REPORT Floating-rate notes due 2013 (swapped to a 0.922% fixed rate) Notes due 2013 at 0.875% ...Notes due 2014 at 1.375% ...Notes due 2015 at 3.95% (assumed with National acquisition) Notes due 2015...

  • Page 33
    ...leases contain renewal options. Other also includes miscellaneous non-operational items such as losses related to former businesses, including settlements in 2012 and 2011; gains and losses from currency exchange rate changes; and gains and losses from our derivative financial instruments, primarily...

  • Page 34
    ... of defined benefit plans (c) ...Tax benefit (expense) ...Reclassification to Net income, net of taxes ...Derivative instrument...Tax benefit (expense) ...Reclassification to Net income, net of taxes ...2013 Related Statement of Income Line $ 108 (37) $ 71 $ (5) 2 $ (3) $ 2 (1) $ 1 Pension expense...

  • Page 35
    ... Processing Other Total ANNUAL REPORT Revenue 2013 ...2012 ...2011 ...Operating profit 2013 ...2012 ...2011 ... ... $ 7,194 6,998 6,375 $ 1,859 1,650 1,693 $2,450 2,257 2,381 $ 185 158 387 $ 2,561 $12,205 3,570 12,825 4,979 13,735 $ 788 $ 2,832 165 1,973 912 2,992 TEXAS INSTRUMENTS 2013 ANNUAL...

  • Page 36
    ... for 10 percent or more of 2013 or 2012 revenue. Sales to the Nokia group of companies, including sales to indirect contract manufacturers, accounted for 13 percent of our 2011 revenue. Revenue from sales to Nokia is reflected primarily in Other. 3 4 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 37
    ... PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Texas Instruments Incorporated We have audited the accompanying consolidated balance sheets of Texas Instruments Incorporated and subsidiaries (the Company) as of December 31, 2013 and 2012, and the related consolidated statements...

  • Page 38
    ... 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. ANNUAL REPORT 3 6 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 39
    ...of Texas Instruments Incorporated and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2013, and our report dated February 24, 2014...

  • Page 40
    ...(a) Free cash flow is a non-GAAP measure derived by subtracting Capital expenditures from Cash flows from operating activities. See Notes to financial statements and Management's discussion and analysis of financial condition and results of operations. 3 8 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 41
    .../arc detection systems and mobile lighting and display systems. SVA products generally have long life cycles, often more than 10 years. SVA consists primarily of products that we acquired through our purchase of National Semiconductor Corporation in 2011. TEXAS INSTRUMENTS 2013 ANNUAL REPORT • 3 9

  • Page 42
    ... capacity. These are typically referred to as upturns and downturns in the semiconductor cycle. The semiconductor cycle is affected by the significant time and money required to build and maintain semiconductor manufacturing facilities. ANNUAL REPORT 4 0 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 43
    ...Free cash flow is a non-GAAP financial measure. For a reconciliation to GAAP and an explanation of the purpose for providing this non-GAAP measure, see the Non-GAAP financial information section after the Liquidity and capital resources section. TEXAS INSTRUMENTS 2013 ANNUAL REPORT • 4 1 ANNUAL...

  • Page 44
    ... our revenue is derived from such a large number of products. From time to time, our revenue and gross profit are affected by changes in demand for higher-priced or lower-priced products, which we refer to as changes in the "mix" of products shipped. 4 2 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 45
    ... tax benefits were $252 million, primarily due to additional U.S. tax benefits for manufacturing related to prior years. Our annual effective tax rates were 24 percent in 2013 and 22 percent in 2012. These rates exclude the impact of the discrete tax benefits. See Note 7 to the financial statements...

  • Page 46
    ..., from 2011. EPS for 2012 was $1.51 compared with $1.88 for 2011. The decline in EPS was due to lower net income. EPS in 2012 benefited $0.03 from 2011 due to a lower number of average shares outstanding as a result of our stock repurchase program. 4 4 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 47
    ...action in Embedded Processing, $38 million related to the Wireless action and $39 million related to the closing of the manufacturing facilities. Of the $126 million, $85 million was for severance and benefit costs and $41 million was for other charges. TEXAS INSTRUMENTS 2013 ANNUAL REPORT • 4 5

  • Page 48
    ... liquidity, our cash-generating capability and the amount of cash potentially available to return to investors, as well as insight into our financial performance. These non-GAAP measures are supplemental to the comparable GAAP measures. ANNUAL REPORT 4 6 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 49
    ...% For Year Ended December 31, 2012 ANNUAL REPORT Dividends paid ...Stock repurchases ...Total cash returned to shareholders ...Percentage of Cash flow from operations (GAAP) ...Percentage of free cash flow (non-GAAP) ... $ 819 1,800 $2,619 77% 90% Long-term contractual obligations Payments Due by...

  • Page 50
    ... 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...

  • Page 51
    ...future economic and market conditions. We base our fair-value estimates on assumptions we believe to be reasonable. Actual cash flow amounts for future periods may differ from estimates used in impairment testing. Changes in accounting standards See Note 1 to the financial statements for information...

  • Page 52
    ... deemed to be other-than-temporary are expensed in net income. Investments in the remaining venture capital funds are stated using the equity method. See Note 9 to the financial statements for details of equity and other long-term investments. 5 0 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 53
    ...$ 106 - 106 (122) $ 88 - 88 363 (a) See Note 2 to the financial statements for additional information. (b) See Note 3 to the financial statements for additional information. TEXAS INSTRUMENTS 2013 ANNUAL REPORT • 5 1 ANNUAL REPORT $ 2,885 1,374 395 362 $ 3,047 1,570 906 660 $ 3,244 1,779...

  • Page 54
    ..., 2013. 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 55
    ...fees฀or฀reporting฀ or substitution costs relating to the discharge of emissions into the environment or the use of certain raw materials in our manufacturing processes Losses฀or฀curtailments฀of฀purchases฀from฀key฀customers฀and฀the฀timing฀and฀amount฀of฀distributor...

  • Page 56
    ANNUAL REPORT (This page intentionally left blank.) 5 4 • 2013 ANNUAL REPORT TEXAS INSTRUMENTS

  • Page 57
    ...฀public฀accounting฀firm฀for฀2014, approval฀of฀the฀TI฀Employees฀2014฀Stock฀Purchase฀Plan, reapproval฀of฀the฀material฀terms฀of฀the฀performance฀goals฀under฀the฀Texas฀Instruments฀2009฀Long-Term฀Incentive฀Plan,฀and such฀other฀matters...

  • Page 58
    ...฀accounting฀firm฀ ...94 Proposal฀to฀approve฀the฀TI฀Employees ฀ 2014฀Stock฀Purchase฀Plan ...95 Proposal฀to฀reapprove฀the฀material฀terms฀of฀the performance goals under the Texas Instruments ฀ 2009฀Long-Term฀Incentive฀Plan ...97 Equity฀compensation฀plan...

  • Page 59
    ... vote to approve named executive officer compensation Proposal฀to฀approve฀the฀TI฀Employees฀ 2014฀Stock฀Purchase฀Plan Proposal฀to฀reapprove฀the฀material฀terms฀ of the performance goals under the Texas฀Instruments฀2009฀Long-Term฀ Incentive฀Plan Proposal฀to...

  • Page 60
    ... 2003 Chair, Governance and Stockholder Relations Committee CARRIE S. COX Age 56 Director since 2004 Lead Director; Chair, Compensation Committee WAYNE R. SANDERS Age 66 Director฀since฀1997 Member, Governance and Stockholder Relations Committee 58 • 2014 PROXY STATEMENT TEXAS INSTRUMENTS

  • Page 61
    ...the฀2014฀annual฀meeting,฀the฀board฀kept฀in฀mind฀that฀the฀most฀important฀issues฀it฀considers฀ typically฀relate฀to฀the฀company's฀strategic฀direction;฀succession฀planning฀for฀senior฀executive฀positions;฀the฀company's฀financial฀ performance...

  • Page 62
    ...financial฀control-related฀matters.฀ •฀ As฀a฀director฀of฀Dr฀Pepper฀Snapple฀Group,฀Inc.฀(2008-present)฀and฀a฀former฀director฀of฀Molson฀Coors฀Brewing฀Company฀ (2005-2009),฀has฀helped฀oversee฀the฀strategy฀and฀operations฀of฀other฀major...

  • Page 63
    ...฀code฀of฀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...

  • Page 64
    ...฀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฀by...

  • Page 65
    ...,฀reports฀its฀activities฀to฀the฀board,฀and฀consults฀with฀the฀ board฀before฀setting฀annual฀executive฀compensation.฀During฀2013,฀the฀committee฀met฀six฀times.฀Please฀see฀page฀81 for a report of the committee. TEXAS INSTRUMENTS 2014 PROXY STATEMENT...

  • Page 66
    ...the฀compensation฀of฀any฀other฀executive฀officer.฀As฀members฀of฀the฀ board,฀the฀members฀of฀the฀committee฀receive฀information฀concerning฀the฀performance฀of฀the฀company฀during฀the฀year฀and฀interact฀ with฀our฀management.฀The฀CEO฀gives...

  • Page 67
    ...such฀as฀accounting,฀finance,฀internal฀controls฀and฀tax฀strategy).฀ Oversight฀responsibility฀for฀compliance฀risk฀is฀shared฀by฀the฀board฀committees.฀For฀example,฀the฀Audit฀Committee฀oversees฀compliance฀ with฀the฀company's฀code฀of฀conduct...

  • Page 68
    ...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...

  • Page 69
    ... members of the board during 2013 for services in all capacities to TI in 2013. Change in Pension Value and Non-qualified Deferred All Other Compensation Compensation Earnings (5) ($)(6) Name Fees Earned or Paid in Cash ($)(2) Stock Awards ($)(3) Option Awards ($)(4) Non-Equity Incentive Plan...

  • Page 70
    ...low price of TI common stock on the date of grant, and for options granted before 2010, the grant becomes fully exercisable upon a change in control of TI. (5) SEC rules require the disclosure of earnings on deferred compensation to the extent that the interest rate exceeds a specified rate (Federal...

  • Page 71
    ... officers accountable for the financial and competitive performance of TI. •฀ 2013 compensation decisions for the CEO: â-‹ Base salary was increased by 3.4 percent over 2012. â-‹ The grant date fair value of equity compensation awarded in 2013 was 2 percent higher than in 2012. The number...

  • Page 72
    ... focuses employees on a company goal, and at a level that will affect behavior. Profit sharing is paid in addition to any performance bonus awarded for the year. For the last nine years, the formula has been based on company-level annual operating profit margin. The formula was set by the TI board...

  • Page 73
    ... the market level of pay, the committee uses information provided by its compensation consultant and TI's Compensation and Benefits organization about compensation paid to executives in similar positions at a peer group of companies (the "Comparator Group"). 1 Total shareholder return refers to the...

  • Page 74
    ... for 2013 Total compensation - Before finalizing the compensation of the executive officers, the committee reviewed all elements of compensation. The information included total cash compensation (salary, profit sharing and projected bonus), the grant date fair value of equity compensation, the...

  • Page 75
    ... officers equity compensation that had a grant date fair value at approximately the median market level, in this case the 40th to 60th percentile of the 3-year average of equity compensation (including an estimate of amounts for 2013) granted by the Comparator Group. TEXAS INSTRUMENTS 2014 PROXY...

  • Page 76
    ... exercise price of the options was the closing price of TI stock on January 25, 2013, the third trading day after the company released its annual and fourth quarter financial results for 2012. All grants were made under the Texas Instruments 2009 Long-Term Incentive Plan, which shareholders approved...

  • Page 77
    ... wireless products, for which the company has had publicly stated exit plans for a number of years. Excluding the legacy wireless products, TI's revenue grew about 1 percent, better than the median rate of competitors.3 Revenue for the company's core businesses of Analog and Embedded Processing was...

  • Page 78
    ...of total cash compensation expected to be paid to similarly situated officers in the Comparator Group. The bonus of each named executive officer was paid under the Executive Officer Performance Plan described on pages 80 and 83. PROX Y S TAT E M E N T 76 • 2014 PROXY STATEMENT TEXAS INSTRUMENTS

  • Page 79
    ...profit sharing and bonus are aggregated in the column for "Non-Equity Incentive Plan Compensation," in accordance with SEC requirements. Please see notes 2 and 3 to the summary compensation table for information about how grant date fair value was calculated. TEXAS INSTRUMENTS 2014 PROXY STATEMENT...

  • Page 80
    ... price of stock options is the closing price of TI stock on the effective date of the grant. Recoupment policy The committee has a policy concerning recoupment ("clawback") of executive bonuses and equity compensation. Under the policy, in the event of a material restatement of TI's financial...

  • Page 81
    ... retired before death. In 2013, having reached the age of 55 with at least 20 years of employment, Mr. Templeton, Mr. March and Mr. Ritchie were eligible for early retirement under the pension plans. Because benefits under the qualified and non-qualified defined benefit pension plans are calculated...

  • Page 82
    ... the best interest 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...

  • Page 83
    ... (1) Performance bonuses for 2013 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...

  • Page 84
    ...are reported in this column for deferred compensation. The amounts in this column represent the change in the actuarial value of the named executive officers' benefits under the qualified defined benefit pension plan (TI Employees Pension Plan) and the non-qualified defined benefit pension plans (TI...

  • Page 85
    ... company's 2009 Long-Term Incentive Plan. For information on the terms and conditions of these options, please see the discussion on page 85. (4) The exercise price of the options is the closing price of TI common stock on January 25, 2013. (5) Shown is the aggregate grant date fair value computed...

  • Page 86
    ... (1) Calculated by multiplying the number of RSUs by the closing price of TI common stock on December 31, 2013 ($43.91). (2) One-quarter of the shares became exercisable on January 25, 2014, and one-third of the remaining shares become exercisable on each of January 25, 2015, January 25, 2016, and...

  • Page 87
    ..., 2015. (9) Vested on January 31, 2014. (10) Vesting date is July 29, 2016. (11) Vesting date is October 31, 2014. The "Option Awards" shown in the table above are non-qualified stock options, each of which represents the right to purchase shares of TI common stock at the stated exercise price. For...

  • Page 88
    ... by the named executive officers in 2013 and the value of any RSUs that vested in 2013. 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 89
    ... used to calculate the present value of the accumulated pension benefits shown are the same as those used by TI for financial reporting purposes and are described in Note 11 in Exhibit 13 to TI's annual report on Form 10-K for the year ended December 31, 2013, except that a named executive officer...

  • Page 90
    ... 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 90. TI Employees Non-Qualified...

  • Page 91
    ... the value of the award at year-end 2013 (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 $26,201 gain in Mr. Templeton's deferred compensation account in 2013. Dividend equivalents are paid at the same rate as...

  • Page 92
    ... executive officer's stock options will continue to become exercisable and his RSUs will continue to vest. Amounts paid to an individual during a paid leave of absence are not counted when calculating benefits under the qualified and non-qualified pension plans. PROX Y S TAT E M E N T 90 • 2014...

  • Page 93
    ... 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 defined benefit plans described above. Stock options...

  • Page 94
    ... upon termination or change in control for each of the named executive officers. Qualified Defined Benefit Pension Plan NonQualified Defined Benefit Pension Plan NonQualified Defined Benefit Pension Plan II Deferred Compensation RSUs Stock Options Total R. K. Templeton (10) Disability ...Death...

  • Page 95
    ... at age 65, in the case of the Non-Qualified Defined Benefit Pension Plan, or separation from service in the case of Plan II. The assumptions used are the same as those described in note 1 above. (3) Calculated by multiplying the number of outstanding RSUs by the closing price of TI common stock as...

  • Page 96
    ...95,000 in 2013 and $635,000 in 2012 for assistance with insurance claims, the TI Foundation audit and training. Pre-approval policy. The Audit Committee is required to pre-approve the audit and non-audit services to be performed by the independent registered public accounting firm in order to assure...

  • Page 97
    ... the effective date of the 2014 ESPP. Key plan provisions Eligibility All employees of TI, and such of its subsidiaries as the Compensation Committee of the company's board of directors shall designate, who are employees on the date of grant of the option (including those on paid or unpaid leave of...

  • Page 98
    ... market value of the stock on the Exercise Day. Accordingly, future benefits that would be received by the executive officers and other eligible employees under the proposed 2014 ESPP are not determinable at this time. The table below sets forth the shares purchased by the named executive officers...

  • Page 99
    ... Day. The company will be entitled to a corresponding deduction. The remainder of the proceeds of sale will be taxed at capital gains rates. The board of directors recommends a vote "FOR" the TI Employees 2014 Stock Purchase Plan. PROPOSAL TO REAPPROVE THE MATERIAL TERMS OF THE PERFORMANCE GOALS...

  • Page 100
    ...; cycle time; earnings before income taxes; earnings before income taxes, depreciation and amortization; earnings per share; free cash flow; gross profit; gross profit margin; manufacturing process yield; market share; net income; net revenue per employee; operating profit, return on assets; return...

  • Page 101
    ... to reapprove the material terms of the performance goals under the Texas Instruments 2009 Long-Term Incentive Plan. EQUITY COMPENSATION PLAN INFORMATION The following table sets forth information about the company's equity compensation plans as of December 31, 2013: Number of Securities to be...

  • Page 102
    ..., 485,408 shares for issuance under the TI Employees 2005 Stock Purchase Plan and 129,264 shares for issuance in settlement of directors' deferred compensation accounts. ADDITIONAL INFORMATION Voting securities As of February 18, 2014, 1,081,741,385 shares of TI common stock were outstanding. This...

  • Page 103
    ...to the shares owned. The table excludes shares held by a family member if a director or executive officer has disclaimed beneficial ownership. No director or executive officer has pledged shares of TI common stock. Name Shares Owned at December 31, 2013 Percent of Class Directors (1) R. W. Babb, Jr...

  • Page 104
    ... reached the company's retirement age for directors. RSUs granted after 2006 are settled in TI common stock generally upon the fourth anniversary of the grant date. (b) The shares in deferred compensation accounts are issued following the director's termination of service. (2) Included in the shares...

  • Page 105
    ...-law, sister-in-law or any person (other than a tenant or employee) sharing the household of a TI director, executive officer or 5 percent holder. The policy specifies that a related person transaction includes, but is not limited to, any financial transaction, arrangement or relationship (including...

  • Page 106
    ... to his deferred compensation and one late filing for Mr. Ritchie with respect to a transfer of shares out of his 401(k) account and a separate sale of shares. The company believes that all other reports during 2013 were timely filed by its directors and executive officers. Telephone and Internet...

  • Page 107
    ... 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 17, 2014. This 2014 proxy statement and the company's 2013 annual report...

  • Page 108
    ... 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. Please use the North entrance to the building. From Love Field airport: Take Mockingbird Lane East to US-75N...

  • Page 109
    ... salary, profit sharing, pension, life insurance, special payments or other benefits related to a participant's employment with the Company. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" pursuant to Section 423 of the Internal Revenue Code of 1986...

  • Page 110
    ... the number of outstanding shares, such as a stock dividend or stock split) will be considered the adoption of a new plan that would require stockholder approval, to the extent required by Section 423 of the Code and the regulations thereunder. PROX Y S TAT E M E N T Terms and conditions of options...

  • Page 111
    ...'s rights to purchase common stock under all employee stock purchase plans of TI or a Related Corporation to accrue at a rate which exceeds $25,000 (or such other maximum as may be prescribed from time to time by the Code) of fair market value of such common stock (determined at the date of grant...

  • Page 112
    ..., sale or delivery of such common stock. The Company may, without liability to participating Employees, defer or cancel delivery of shares or take other action it deems appropriate in cases where applicable laws, regulations or stock exchange rules impose constraints on the normal Plan operations or...

  • Page 113
    ... percent of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same Person is not considered to be a Change in Control; (ii) On the date a majority of members of the Board is replaced during any 12-month period by directors whose...

  • Page 114
    ... Plan. "Company" shall mean Texas Instruments Incorporated, together with any successor thereto. "Cycle Time" shall mean the actual time a specific process relating to a product or service of the Company takes to accomplish. "Earnings Before Income Taxes" shall mean income from continuing operations...

  • Page 115
    ...in revenue from one period to another. (mm) "Shares" shall mean shares of the common stock of the Company, $1.00 par value. (nn) "Specified Employee" shall mean an employee who is a "specified employee" (as defined in Section 409A(2)(b)(i) of the Code) for the applicable period, as determined by the...

  • Page 116
    ... of doubt, the number of Shares available for issuance under the Plan shall not be increased by: (i) the withholding of Shares as a result of the net settlement of an outstanding Option or SAR; (ii) the delivery of Shares to pay the exercise price or withholding taxes relating to an Award; or...

  • Page 117
    ..., the value of which consideration, as established by the Committee, shall, except in the case of Substitute Awards, not be less than the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. TEXAS INSTRUMENTS 2014 PROXY STATEMENT • B-5 PROX...

  • Page 118
    ...(ii) Cycle Time, (iii) Earnings Before Income Taxes, (iv) Earnings Per Share, (v) EBITDA, (vi) Free Cash Flow, (vii) Gross Profit, (viii) Gross Profit Margin, (ix) Manufacturing Process Yield, (x) Market Share, (xi) net income, (xii) Net Revenue Per Employee, (xiii) Operating Profit, (xiv) Return on...

  • Page 119
    ... the Company (including an event described in Section 5(e)), an Option or SAR may not be terminated in exchange for (x) a cash amount greater than the excess, if any, of the Fair Market Value of the underlying Shares on the date of cancellation over the exercise price times the number of Shares...

  • Page 120
    ...Plan, shall extend beyond such date. PROX Y S TAT E M E N T SECTION 16. Governing Law. The Plan shall be construed in accordance with and governed by the laws of the State of Texas without giving effect to the principles of conflict of laws thereof. B-8 • 2014 PROXY STATEMENT TEXAS INSTRUMENTS

  • Page 121
    ...) For Years Ended December 31, 2013 2012 2011 Total Dividends paid ...Stock repurchases ...Total cash returned to shareholders ...Percentage of Cash flow from operations (GAAP) ...Percentage of free cash flow (non-GAAP) ... $1,175 2,868 $4,043 119.5% 136.0% $ 819 1,800 $2,619 76.7% 89.7% $ 644...

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    ...P. O. Box 30170 College Station, TX 77842-3170 Toll free: 800-981-8676 Phone: 781-575-2000 Website: www.computershare.com/investor For online inquiries: https://www-us.computershare.com/investor/contact SEC Form 10-K Stockholders may obtain a copy of the company's annual report to the Securities and...

  • Page 124
    Texas Instruments Incorporated P.O. Box 660199 Dallas, TX 75266-0199 www.ti.com An equal opportunity employer © 2014 Texas Instruments Incorporated TI-30002