How profitable was Texas Instruments in 1995 compared with prior years?

TI reported 1995 net income of $1.088 billion and primary EPS of $5.63, compared with $690.9 million ($3.63 per share) in 1994 and about $476 million ($2.54 before accounting changes) in 1993. Pre-tax income was $1.619 billion, with $531 million in income tax expense.

What are the main legal risks facing TI according to this filing?

The most significant items are the patent dispute with Samsung, which includes U.S. district court suits and cross-complaints at the ITC that seek exclusion orders against each other's products; the Kilby patent case against Fujitsu, where TI lost at trial in Japan and is appealing; and U.S. government procurement investigations that could result in suspension or debarment for up to three years. Management said it could not predict outcomes or estimate potential claim amounts.

How dependent is TI on government business?

Direct federal government sales represented roughly 8% of 1995 net revenues, primarily from the defense systems and electronics segment. These contracts can be canceled for the government's convenience and depend on congressional appropriations, so defense budget changes could affect that portion of revenue.

Is TI's balance sheet and debt position a concern?

Based on the financial data schedule, TI had total assets of $9.215 billion, current assets of $5.518 billion against current liabilities of $3.188 billion, and long-term debt of $804 million. Interest expense of about $69 million was covered more than 15 times by pre-tax earnings before fixed charges, which indicates low financial risk.

What corporate changes did TI make around the end of 1995?

TI moved its silicon materials operation into a joint venture with MEMC Electronic Materials in May 1995 and retained a minority interest. After year-end 1995, it agreed to sell substantially all of its custom manufacturing services business. The filing notes that TI may pursue further acquisitions or divestitures that could alter its business mix.

TXN 10-K FY1995 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed February 23, 1996. Cited figures are marked; the original filing is the authoritative source.

Texas Instruments' 1995 Form 10-K shows a company at a strong earnings peak.

Financial Data Schedule figures put 1995 total revenues at $13.128 billion^a, net income at $1.088 billion, and primary EPS at $5.63, up from $3.63 in 1994 and $2.51 in 1993. Pre-tax income was $1.619 billion against $531 million of tax expense. Total assets were $9.215 billion, with stockholders' equity of roughly $4.1 billion, and long-term debt of $804 million.

Fixed-charge coverage rose to 15.6x, up from 11.6x in 1994, indicating very low leverage risk. Backlog grew to $4.528 billion^b from $3.913 billion, and R&D spending rose to $927 million from $689 million, roughly 7% of revenue. The filing is largely a wrapper that incorporates the financial statements, MD&A, and segment data by reference to the 1995 Annual Report to Stockholders, so detailed segment profitability and the narrative outlook are not included in this document.

Investors should note the legal and regulatory overhang: a patent war with Samsung spanning U.S. federal court and ITC proceedings, a long-running Kilby patent dispute with Fujitsu in Japan, and ongoing U.S. government procurement investigations that could lead to suspension or debarment from government contracts. Government sales were about 8%^c of revenue, concentrated in the defense segment, which is subject to appropriations risk.

Subsequent to year-end, TI agreed to sell its custom manufacturing services business, and it also contributed its silicon materials operation to a joint venture with MEMC Electronic Materials in May 1995. Overall, the filing portrays a highly profitable semiconductor-led company with a strong balance sheet, a growing patent licensing income stream, and a clear set of litigation and government-contracting risks that bear watching.

02—Key points

Key Highlights

Revenue of $13.1 billion and net income of $1.09 billion in 1995; primary EPS of $5.63 versus $3.63 in 1994 (about 55% growth).
Backlog of firm orders rose to $4.53 billion at year-end 1995, up from $3.91 billion, though about 18% of the defense-related backlog is not expected to fill within the year.
R&D expense increased to $927 million in 1995 from $689 million in 1994 and $590 million in 1993.
Fixed-charge coverage improved to 15.6x in 1995 from 11.6x in 1994, reflecting minimal debt-servicing burden; long-term debt was about $804 million.
Patent litigation is a material focus: TI sued Samsung in January 1996 over DRAM-related patents, Samsung countered with its own suits and ITC complaint, and the Fujitsu Kilby patent case is on appeal in Japan.
Government sales were about 8% of 1995 revenue, mainly in defense systems and electronics, and carry cancellation-for-convenience and appropriations risk, plus exposure to federal procurement investigations.
Portfolio actions: silicon materials were moved into a joint venture with MEMC in May 1995 (minority stake retained), and an agreement to sell the custom manufacturing services business was reached after year-end 1995.

03—Questions

Frequently Asked Questions

How profitable was Texas Instruments in 1995 compared with prior years?
TI reported 1995 net income of $1.088 billion and primary EPS of $5.63, compared with $690.9 million ($3.63 per share) in 1994 and about $476 million ($2.54 before accounting changes) in 1993. Pre-tax income was $1.619 billion, with $531 million in income tax expense.
What are the main legal risks facing TI according to this filing?
The most significant items are the patent dispute with Samsung, which includes U.S. district court suits and cross-complaints at the ITC that seek exclusion orders against each other's products; the Kilby patent case against Fujitsu, where TI lost at trial in Japan and is appealing; and U.S. government procurement investigations that could result in suspension or debarment for up to three years. Management said it could not predict outcomes or estimate potential claim amounts.
How dependent is TI on government business?
Direct federal government sales represented roughly 8% of 1995 net revenues, primarily from the defense systems and electronics segment. These contracts can be canceled for the government's convenience and depend on congressional appropriations, so defense budget changes could affect that portion of revenue.
Is TI's balance sheet and debt position a concern?
Based on the financial data schedule, TI had total assets of $9.215 billion, current assets of $5.518 billion against current liabilities of $3.188 billion, and long-term debt of $804 million. Interest expense of about $69 million was covered more than 15 times by pre-tax earnings before fixed charges, which indicates low financial risk.
What corporate changes did TI make around the end of 1995?
TI moved its silicon materials operation into a joint venture with MEMC Electronic Materials in May 1995 and retained a minority interest. After year-end 1995, it agreed to sell substantially all of its custom manufacturing services business. The filing notes that TI may pursue further acquisitions or divestitures that could alter its business mix.

04—Continue

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