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TEXAS INSTRUMENTS1 0 • 2013 ANNUAL REPORT
ANNUAL
REPORT
Derivatives and hedging
In connection with the issuance of variable-rate long-term debt in May 2011, we entered into an interest rate swap designated as a
hedge of the variability of cash flows related to interest payments. Gains and losses from changes in the fair value of the interest rate
swap were credited or charged to Accumulated other comprehensive income (loss), net of taxes (AOCI). We repaid this long-term debt
in the second quarter of 2013, and this interest rate swap was settled for no gain or loss. In association with the issuance of long-term
debt, we use financial derivatives such as treasury rate lock agreements that are recognized in AOCI and amortized over the life of the
related debt. The results of these derivative transactions have not been material.
We also use derivative financial instruments to manage exposure to foreign exchange risk. These instruments are primarily forward
foreign currency exchange contracts, which are used as economic hedges to reduce the earnings impact that exchange rate fluctuations
may have on our non-U.S. dollar net balance sheet exposures. Gains and losses from changes in the fair value of these forward foreign
currency exchange contracts are credited or charged to OI&E. We do not apply hedge accounting to our foreign currency derivative
instruments.
We do not use derivatives for speculative or trading purposes.
Changes in accounting standards
In January 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-01,
Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This standard clarifies that a
previously-issued standard on disclosure requirements relating to offsetting (or netting) financial instruments applies only to derivatives,
repurchase agreements and certain securities lending transactions. This standard was effective as of the first quarter of 2013 and did
not have a material impact on our financial disclosures as the derivatives to which it applies are not significant.
In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income. This standard requires an entity to disclose information about amounts reclassified out of
AOCI. This standard was effective as of the first quarter of 2013. See Note 15 for the required disclosure.
2. Acquisition-related charges
We incurred various costs as a result of the 2011 acquisition of National that are included in Other, consistent with how management
measures 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $323 $325 $ 87
Retention bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757 46
Stock-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 17 50
Severance and other benefits:
Employment reductions announced at closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —16 29
Change of control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —— 41
Transaction and other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —35 62
As recorded in Acquisition charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 450 315
Distributor contract termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —21 —
Inventory related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —— 96
Property, plant and equipment related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —— 15
As recorded in COR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —21 111
Total acquisition-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $341 $471 $426
Acquisition charges
The amount of recognized amortization of intangible assets resulting from the National acquisition is based on estimated useful lives.
See Note 10 for additional information.
Retention bonuses reflect amounts paid to former National employees who fulfilled agreed-upon service period obligations and were
recognized ratably over the required service period.
Stock-based compensation was recognized for the accelerated vesting of equity awards upon the termination of employees, with
additional compensation being recognized over the applicable vesting period for the remaining grantees.