DISCONTINUED OPERATIONS
			On January 6, 1997, TI and Raytheon Company announced that their boards of directors had approved a definitive agreement dated as of January 4, 1997, for Raytheon to purchase TI's Defense Systems and Electronics business (DSE) for $2.95 billion in cash. This transaction was closed on July 11, 1997. The net gain on sale of this discontinued operation, after income taxes of $876 million, was $1473 million. The consolidated financial statements of TI have been restated to present the DSE operations, assets and liabilities as discontinued operations. The assets and liabilities of DSE were classified on the 1996 balance sheet as net assets of discontinued operations and consisted of the following (millions of dollars): Accounts receivable $ 278 Inventories (net of progress billings) 221 Prepaid expenses 1 Current deferred income taxes 91 Property, plant and equipment (net) 296 Noncurrent deferred income taxes 62 Other assets 40    Total assets of DSE 989 Accounts payable and accrued expenses 234 Accrued retirement costs 226    Total liabilities of DSE 460 Net assets of discontinued operations $ 529 The net income from operations of DSE was classified on the statement of income as income from discontinued operations. Summarized results of discontinued operations prior to the close were as follows: Millions of dollars 1997   1996 1995 Net revenues $ 812   $1,773 $1,720 Income before   provision for   income taxes 84   175 149 Provision for income   taxes 32   66 57 Income from   discontinued   operations 52   109 92 The Defense Systems and Electronics business included products such as radar systems, navigation systems, infrared surveillance and fire control systems, defense suppression missiles, missile guidance and control systems, and electronic warfare systems, which were sold to the U.S. government (either directly or through prime contractors) and to international customers approved by the U.S. government. TI provided various ongoing services to DSE including, but not limited to, facilities management, data processing, security, payroll and employee benefits administration, insurance administration, duplicating and telecommunications services. Their inclusion in discontinued operations was based upon TI's intercorporate allocation procedures for such services. The allocation basis of these expenses and all other central operating costs was first on the basis of direct usage when identifiable, with the remainder allocated among DSE and other TI businesses on the basis of their respective revenues, headcount or other measures. These expenses allocated to DSE totaled $76 million in 1997, $163 million in 1996 and $167 million in 1995. TI has agreements to receive payments from Raytheon for continuing to provide certain of these services on an ongoing basis and others on a transition basis to DSE. Income from discontinued operations for 1996 includes the effect of a fourth quarter pretax charge of $32 million for voluntary and involuntary severance actions in the United States. These actions were essentially completed by year-end 1996 and affected approximately 700 DSE employees.

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