01—Abstract
Summary
Summary of the 10-K/A filed June 21, 1996. Cited figures are marked; the original filing is the authoritative source.
Texas Instruments' 10-K/A (Amendment No. 1, restating the original 10-K for fiscal 1995, filed June 1996) shows a record year.
Net revenues rose 27% to $13.1 billiona, net income rose 57% to $1,088 million (the first time above $1 billion), and EPS rose 55% to $5.63 on a split-adjusted basis. Profit from operations increased 47% to $1,594 million, driven mainly by the Components segment (semiconductors), where profit rose 66% on manufacturing productivity and royalties. Orders grew 32% to $13.7 billion and backlog reached $4.5 billion.
Return on invested capital was 24.8%, up from 19.5%. Investors should weigh this against a heavy investment program and some near-term headwinds. Management guided 1996 capital expenditures to about $2.5 billionb (up from $1.4 billion) and R&D to about $1.1 billion, and depreciation is expected to roughly double to about $1 billion.
Management warned of inventory corrections and DRAM and standard logic pricing pressure in the first half of 1996, with new fab costs arriving before incremental revenue. The Digital Products segment operated at a loss due to notebook computer price competition and heavy marketing spend. Free cash flow after capex was only $228 millionc, and the company issued $300 million of notes in February 1996 to help fund the buildout.
Legal and intellectual property matters are significant. TI filed patent infringement litigation against Samsung in January 1996 and faces a Samsung countersuit and ITC complaints. TI's royalty stream was boosted by a one-time $108 milliond accrual from licenses that expired at end-1995, and several licenses have not yet been renewed.
TI also has an appeal pending in the Fujitsu Kilby patent case in Tokyo and remains subject to U.S. defense procurement investigations. This filing is an amendment restating the original February 1996 10-K in its entirety, and the financial data is incorporated by reference from the 1995 annual report.
02—Key points
Key Highlights
- Record 1995 results: net revenues of $13.1 billion (up 27%), net income of $1,088 million (up 57%, first year above $1 billion), and EPS of $5.63 (up 55%).
- Components segment drove growth: segment revenues up 39% and segment profit up 66% to $1,830 million, aided by manufacturing productivity and higher royalties.
- Orders rose 32% to $13.7 billion and backlog grew to $4.5 billion, up $615 million year over year, indicating strong forward demand.
- ROIC improved to 24.8% from 19.5%, with debt-to-total-capital falling to 0.17 from 0.21.
- 2026 planned step-up in investment: capex of about $2.5 billion (vs. $1.4 billion in 1995) and R&D of about $1.1 billion, with depreciation expected near $1 billion, which pressures near-term margins.
- Digital Products segment posted a loss on notebook computer price competition and marketing investment, and management expects it to constrain near-term performance.
- Major legal exposure: patent litigation with Samsung (new in January 1996), the pending Fujitsu Kilby patent appeal, and ongoing U.S. defense procurement investigations.
03—Questions
Frequently Asked Questions
How strong was TI's 1995 financial performance?
Very strong. Net revenues rose 27% to $13.1 billion, profit from operations rose 47% to $1,594 million, and net income rose 57% to $1,088 million. EPS was $5.63 after the two-for-one split in 1995. Semiconductor revenues and profits reached record levels.
What are the main near-term risks for 1996?
Management flagged inventory corrections and pricing pressure in DRAMs and standard logic products. New semiconductor fab costs were expected to weigh on the first half of 1996 with little incremental revenue until the second half. Depreciation was also expected to rise to about $1 billion, and the Digital Products segment was expected to remain under pressure.
Why did the royalty revenue matter, and what is the outlook?
Royalties were boosted in 1995, including about $108 million of accrued revenue from licenses that expired at year-end, mostly from Samsung. Several licenses have not yet been renewed, and renewal timing and outcomes are unpredictable. The company expects a significant ongoing royalty stream through the decade, with licenses running through 1998 to 2001.
What is the capital spending plan and how is it financed?
TI planned to raise capex to about $2.5 billion in 1996 from $1.4 billion in 1995, mainly for semiconductor capacity. Funding comes from existing cash (cash plus short-term investments of $1.55 billion), the $300 million notes issued in February 1996, and other debt alternatives. Unused lines of credit were about $538 million.
Is this filing an original report or an amendment, and does it change the numbers?
This is Amendment No. 1 on Form 10-K/A, which restates the annual report in its entirety to correct the February 23, 1996 filing. The filing's financial statements are incorporated by reference from the 1995 annual report to stockholders. Investors should check the restated content against the original filing for any specific corrections, as the amendment does not itemize what changed.
04—Continue