Using the Texas Instruments Inc. 2015 annual report and financial statements , define economic value and explain how an adjusted book value approach to valuing assets and liabilities moves book value nearer to economic value. You are required to provide a written response which highlights four specific elements in Texas Instruments balance sheet that might need to be adjusted to arrive at an economic value. For each element, explain the type of adjustment and the type of information that might be required before an adjustment could be made to arrive at an economic value for Texas Instruments at its 2015 financial year-end.

Consolidated Statements of Income

For Years Ended December 31,

2015 2014 2013

(Millions of dollars, except share and per-share amounts)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,000 $ 13,045 $ 12,205

Cost of revenue (COR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,440 5,618 5,841

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,560 7,427 6,364

Research and development (R&D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,280 1,358 1,522

Selling, general and administrative (SG&A) . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,748 1,843 1,858

Acquisition charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 330 341

Restructuring charges/other . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71) (51) (189)

Operating profit . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,274 3,947 2,832

Other income (expense), net (OI&E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 21 17

Interest and debt expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 94 95

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,216 3,874 2,754

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230 1,053 592

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,986 $ 2,821 $ 2,162

Earnings per common share (EPS):

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.86 $ 2.61 $ 1.94

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.82 $ 2.57 $ 1.91

Average shares outstanding (millions):

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,030 1,065 1,098

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,043 1,080 1,113

Cash dividends declared per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.40 $ 1.24 $ 1.07

As a result of accounting rule ASC 260, which requires a portion of Net income to be allocated to unvested restricted stock units

(RSUs) on which we pay dividend equivalents, diluted EPS is calculated using the following:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,986 $ 2,821 $ 2,162

Income allocated to RSUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42) (43) (36)

Income allocated to common stock for diluted EPS . . . .. . . . . . . . . . . . . . . . . $ 2,944 $ 2,778 $ 2,126

See accompanying notes.

TEXAS INSTRUMENTS 2015 FORM 10-K 27

FORM 10-K

Consolidated Statements of Comprehensive Income

For Years Ended December 31,

2015 2014 2013

(Millions of dollars)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . $ 2,986 $ 2,821 $ 2,162

Other comprehensive income (loss)

Net actuarial gains (losses) of defined benefit plans:

Adjustment, net of tax benefit (expense) of $36, $25 and ($60) . . . . . . . . . . . . . . . . . . . . . (74) (46) 105

Recognized within Net income, net of tax benefit (expense) of ($25), ($21) and ($37) . . . . 53 42 71

Prior service (cost) credit of defined benefit plans:

Adjustment, net of tax benefit (expense) of ($11), $0 and $1 . . . . . . . . . . . . . . . . . . . . . . . 20 (1) (3)

Recognized within Net income, net of tax benefit (expense) of $0, $0 and $2 . . . . . . . . . . (3)

Derivative instruments:

Recognized within Net income, net of tax benefit (expense) of ($1), ($1) and ($1) . . . . . . . 1 1 1

Other comprehensive income (loss), net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) 171

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,986 $ 2,817 $ 2,333

See accompanying notes.

28 TEXAS INSTRUMENTS 2015 FORM 10-K

FORM 10-K

Consolidated Balance Sheets

December 31,

2015 2014

(Millions of dollars, except share amounts)

Assets

Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000 $ 1,199

Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,218 2,342

Accounts receivable, net of allowances of ($7) and ($12) . . . . . . . . . . . . . . . . . . . . . 1,165 1,246

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 101

Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 846 896

Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 736 787

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,691 1,784

Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 850

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,074 7,421

Property, plant and equipment at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,465 6,266

Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . (2,869) (3,426)

Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 2,596 2,840

Long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 224

Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,362 4,362

Acquisition-related intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,583 1,902

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 201 180

Capitalized software licenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 83

Overfunded retirement plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 127

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 62 233

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,230 $ 17,372

Liabilities and stockholders equity

Current liabilities:

Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . $ 1,000 $ 1,001

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 437

Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 664 651

Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 95 71

Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 498

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,555 2,658

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 3,120 3,630

Underfunded retirement plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 225

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 64

Deferred credits and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376 405

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,284 6,982

Stockholders equity:

Preferred stock, $25 par value. Authorized 10,000,000 shares

Participating cumulative preferred. None issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock, $1 par value. Authorized 2,400,000,000 shares

Shares issued 1,740,815,939 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 1,741 1,741

Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,629 1,368

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 31,176 29,653

Treasury common stock at cost

Shares: 2015 729,547,527; 2014 694,189,127 . . . . . . . . . . . . . . . .. . . . . . . . . . . (24,068) (21,840)

Accumulated other comprehensive income (loss), net of taxes (AOCI) . . . . . . . . . . . . . (532) (532)

Total stockholders equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,946 10,390

Total liabilities and stockholders equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,230 $ 17,372

See accompanying notes.

TEXAS INSTRUMENTS 2015 FORM 10-K 29

FORM 10-K

Consolidated Statements of Cash Flows

For Years Ended December 31,

2015 2014 2013

(Millions of dollars)

Cash flows from operating activities

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,986 $ 2,821 $ 2,162

Adjustments to Net income:

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 766 850 879

Amortization of acquisition-related intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 321 336

Amortization of capitalized software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 59 82

Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286 277 287

Gains on sales of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (85) (73) (6)

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (55) (61) 50

Increase (decrease) from changes in:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 (49) 16

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 (53) 26

Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 65 (136)

Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (188) (194) (284)

Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 89 18

Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (81) 78

Changes in funded status of retirement plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23) (58) 28

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68) (21) (152)

Cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 4,268 3,892 3,384

Cash flows from investing activities

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . (551) (385) (412)

Proceeds from asset sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 142 21

Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . (2,767) (3,107) (3,907)

Proceeds from short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,892 2,966 4,249

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7 46

Cash flows from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (302) (377) (3)

Cash flows from financing activities

Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498 498 986

Repayment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,000) (1,000) (1,500)

Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,444) (1,323) (1,175)

Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,741) (2,831) (2,868)

Proceeds from common stock transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442 616 1,314

Excess tax benefit from share-based payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 100 80

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (3) (7)

Cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . (4,165) (3,943) (3,170)

Net change in Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (199) (428) 211

Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 1,199 1,627 1,416

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000 $ 1,199 $ 1,627

See accompanying notes.

30 TEXAS INSTRUMENTS 2015 FORM 10-K

FORM 10-K

Consolidated Statements of Stockholders Equity

Common

Stock

Paid-in

Capital

Retained

Earnings

Treasury

Common

Stock AOCI

(Millions of dollars, except per-share amounts)

Balance, December 31, 2012 . . . . . . . . . . . . . . . . . . . . . $ 1,741 $ 1,176 $ 27,205 $ (18,462) $ (699)

2013

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,162

Dividends declared and paid ($1.07 per share) . . . . . . . . . . . . . . . . (1,175)

Common stock issued for stock-based awards . . . . . . . . . . . . . . . . (273) 1,540

Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,868)

Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287

Tax impact from exercise of options . . . . . . . . . . . . . . . . . . . . . . . . 25

Other comprehensive income (loss), net of taxes . . . . . . . . . . . . . . . 171

Dividend equivalents paid on restricted stock units . . . . . . . . . . . . . (19)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4)

Balance, December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,741 1,211 28,173 (19,790) (528)

2014

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,821

Dividends declared and paid ($1.24 per share) . . . . . . . . . . . . . . . . (1,323)

Common stock issued for stock-based awards . . . . . . . . . . . . . . . . (226) 781

Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,831)

Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277

Tax impact from exercise of options . . . . . . . . . . . . . . . . . . . . . . . . 110

Other comprehensive income (loss), net of taxes . . . . . . . . . . . . . . . (4)

Dividend equivalents paid on restricted stock units . . . . . . . . . . . . . (18)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4)

Balance, December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,741 1,368 29,653 (21,840) (532)

2015

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,986

Dividends declared and paid ($1.40 per share) . . . . . . . . . . . . . . (1,444)

Common stock issued for stock-based awards . . . . . . . . . . . . . (116) 513

Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,741)

Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

Tax impact from exercise of options . . . . . . . . . . . . . . . . . . . . . . 90

Other comprehensive income (loss), net of taxes . . . . . . . . . . . .

Dividend equivalents paid on restricted stock units . . . . . . . . . . (19)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Balance, December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,741 $ 1,629 $ 31,176 $ (24,068) $ (532)

See accompanying notes.

TEXAS INSTRUMENTS 2015 FORM 10-K 31

FORM 10-K

Notes to financial statements

1. Description of business, including segment and geographic area information

We design, make and sell semiconductors to electronics designers and manufacturers all over the world. We have two reportable

segments, which are established along major categories of products as follows:

Analog consists of the following product lines: High Volume Analog & Logic; Power Management; High Performance

Analog; and Silicon Valley Analog, which consists primarily of products that we acquired through our purchase of National

Semiconductor Corporation (National) in 2011.

Embedded Processing consists of the following product lines: Microcontrollers, Processors and Connectivity.

We report the results of our remaining business activities in Other. Other includes operating segments that do not meet the

quantitative thresholds for individually reportable segments and cannot be aggregated with other operating segments. Other

includes DLP products, calculators, custom ASICs and royalties received from agreements involving license rights to our patent

portfolio.

We also include in Other items that are not used in evaluating the results of or in allocating resources to our segments. Examples of

these items include Acquisition charges (see Note 13); restructuring charges (see Note 3); revenue from our legacy wireless

products; and certain corporate-level items, such as litigation expenses, environmental costs, insurance settlements, and gains

and losses from other activities, including asset dispositions. We allocate the remainder of our expenses associated with corporate

activities to our operating segments based on specific methodologies, such as percentage of operating expenses or headcount.

Our centralized manufacturing and support organizations, such as facilities, procurement and logistics, provide support to our

operating segments, including those in Other. Costs incurred by these organizations, including depreciation, are charged to the

segments on a per-unit basis. Consequently, depreciation expense is not an independently identifiable component within the

segments results and, therefore, is not provided. The assets and liabilities associated with these organizations are included in

Other.

With the exception of goodwill, we do not identify or allocate assets by operating segment, nor does the chief operating decision

maker evaluate operating segments using discrete asset information. We have no material intersegment revenue. The accounting

policies of the segments are the same as those described below in the summary of significant accounting policies and practices.

Segment information

For Years Ended December 31,

2015 2014 2013

Revenue:

Analog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,339 $ 8,104 $ 7,194

Embedded Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,787 2,740 2,450

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,874 2,201 2,561

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,000 $ 13,045 $ 12,205

Operating profit:

Analog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,048 $ 2,786 $ 1,859

Embedded Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596 384 185

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630 777 788

Total operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,274 $ 3,947 $ 2,832

32 TEXAS INSTRUMENTS 2015 FORM 10-K

FORM 10-K

Geographic area information

The following geographic area information includes revenue, based on product shipment destination and royalty payor location,

and property, plant and equipment, based on physical location. The revenue information is not necessarily indicative of the

geographic area in which the end applications containing our products are ultimately consumed because our products tend to be

shipped to the locations where our customers manufacture their products. Specifically, many of our products are shipped to our

customers in China who may include these parts in the manufacture of their own end products, which they may in turn export to

their customers around the world.

For Years Ended December 31,

2015 2014 2013

Revenue:

United States . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,612 $ 1,625 $ 1,666

Asia (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,910 7,915 7,370

Europe, Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,163 2,294 1,926

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,127 1,032 1,072

Rest of world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 179 171

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,000 $ 13,045 $ 12,205

(a) Revenue from products shipped into China, including Hong Kong, was $5.8 billion in 2015, $5.7 billion in 2014 and $5.2

billion in 2013.

December 31,

2015 2014 2013

Property, plant and equipment, net:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,370 $ 1,436 $ 1,765

Asia (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 958 1,096 1,277

Europe, Middle East and Africa . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 162 196

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 124 144

Rest of world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 22 17

Total property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,596 $ 2,840 $ 3,399

(a) Property, plant and equipment at our two sites in the Philippines was $471 million in 2015, $546 million in 2014 and

$678 million in 2013.

Consolidated Balance Sheets MIlomsofdolars acept sham amounts) Curent assets: Cash and cash equivalents Short-term investments Accounts receivable, net of alowances of (ST and (S12) Raw materials Prepaid expenses and other current assets Total current assets Property, plant and equipment at cost Property, plant and equipment, net Long-term investments Goodwill, net on-related intangibles, net Capitalized software licenses, net Overfunded retirement plans Other assets otal assets Liabilities and stockholders' equity Curent liabilities: Current portion of long-term debt Accounts payable Accrued compensation Income taxes payable Accrued expenses and other liabilities Total current liabilities Long-term debt Underfunded retirement plans Deferred income taas Deferred credits and otherliabiites otal liabilities Stockholders' equity Preferred stock $25 par value Authorized 10,000,000 shares Participating cumulative preferred. None issued. Common stock, $1 par value Authorized 2,400,000,000 shares Shares issued 740,815,939 Paid-in capital Retained eamings Treasury common stock at cost Shares: 2015 -729,547,527; 2014-694,189,127 Accumulated other comprehensive income loss, net oftares (A0C0 Total stockholdens equity Total liabilities and stockholders equity See accompanying notes. 1,000 1,1 2,218 2,342 1,165 1,246 109 101 846 736 1691 1,784 1.000 7.074 7421 2S96 2,840 4,362 1,583 1,902 201 180 127 $16,230 $17,372 1,000 1,001 410 498 2,555 2,658 3,120 3,630 196 37 376 6284 6,982 1,741 1,741 1,629 1,368 31,176 29,653 (24.068) 121,840) 9,946 10,390 16230