TI Reports 4Q05 and 2005 Financial Results25 January 2006
Texas Instruments Incorporated (NYSE: TXN) (TI) today reported revenue for the fourth quarter of 2005 of $3.59 billion, up 14 percent from the year-ago quarter as growth in the Semiconductor segment accelerated. Fourth-quarter revenue was even with the third quarter of 2005 as growth in semiconductors was offset by the expected seasonal decline of graphing calculator sales in the Educational & Productivity Solutions segment. For the year, TI revenue reached a record $13.39 billion, an increase of 6 percent. TI also set a new high for operating margin of 20.8 percent.
The company's Semiconductor segment reported growth of 3 percent sequentially for revenue of $3.23 billion, a new quarterly record, and expanded its operating margin to a second consecutive quarterly high. Semiconductor revenue grew 15 percent from the year-ago quarter due to demand for TI's digital signal processors (DSPs) and analog chips used in high-growth communications and entertainment electronics.
Earnings per share were $0.40 in the fourth quarter and were $1.39 for the year. Earnings per share include stock-based compensation expense of $0.03 in the fourth quarter and $0.07 for the year. The company began expensing stock options in the third quarter of 2005 and, therefore, equivalent stock-based compensation expense was not reflected in prior periods.
Separately, the company announced that its Board of Directors has authorized a $5 billion stock repurchase. This authorization is in addition to previously announced stock repurchase authorizations.
"2005 was TI's 75th year in operation, and as we crossed that milestone we delivered record annual results for revenue, operating profit, operating margin and operating cash flow," said Rich Templeton, TI president and chief executive officer. "We also gained market share in our core semiconductor technologies of DSP and analog for the fourth consecutive year.
"Highlights for 2005 include a reinforced leadership position in semiconductors for wireless cell phones. We solidly achieved our goal to exceed $1 billion of semiconductor revenue in the newest cell-phone generation, known as 3G, by doubling our shipments of OMAP(TM) application processors and almost tripling our shipments of baseband modems. Other highlights include initial shipments of a new family of DSPs for digital video known as DaVinci(TM), our agreement to acquire radio frequency expert Chipcon for high-performance analog, customer sampling of our multi-mode UMTS chipset for wireless cell phones, and strong consumer acceptance of our DLP(R) technology in 1080p high-definition televisions.
"TI enters 2006 in excellent health. Customer and channel inventories appear lean, and demand is solid. Overall, the combination of our customers, products and manufacturing abilities will enable us to keep evolving TI into a company that produces superior revenue and earnings growth on a sustained basis."
Gross Profit
In the fourth quarter, TI's gross profit was $1.73 billion, or 48.3 percent of revenue. Gross profit declined $37 million from the third quarter due to a seasonal decline in the Educational & Productivity Solutions segment, which more than offset gross profit increases in the Semiconductor and Sensors & Controls segments. Gross profit increased $400 million from the year-ago quarter, primarily due to higher gross margin in Semiconductor.
For the year, gross profit of $6.36 billion, or 47.5 percent of revenue, increased 13 percent, primarily due to higher gross margin in the company's Semiconductor segment.
Stock-based compensation expense included in cost of revenue was $17 million in the fourth quarter and $33 million for the year 2005.
Operating Expenses
In the fourth quarter, research and development (R&D) expense of $500 million, or 13.9 percent of revenue, decreased $27 million sequentially, primarily due to seasonally lower pay and benefits as employees observed holidays and took vacation time. R&D increased $13 million from the year-ago quarter. For the year, R&D expense of $2.02 billion, or 15.0 percent of revenue, increased $37 million. Stock-based compensation expense included in R&D was $27 million in the fourth quarter and $53 million in 2005.
In the fourth quarter, selling, general and administrative (SG&A) expense of $424 million, or 11.8 percent of revenue, decreased $5 million sequentially as seasonally lower pay and benefits offset higher semiconductor marketing expenses. SG&A increased $61 million from a year ago. For the year, SG&A expense of $1.56 billion, or 11.6 percent of revenue, increased 8 percent. Stock-based compensation expense included in SG&A was $42 million in the fourth quarter and $92 million in 2005.
Operating Profit
In the fourth quarter, operating profit of $810 million, or 22.6 percent of revenue, was about even sequentially as the seasonal decline in the Educational & Productivity Solutions segment offset strong contribution from the Semiconductor segment. Operating profit increased $326 million from the year-ago quarter due to higher operating margin in Semiconductor. Semiconductor operating margin was 28.1 percent of revenue, an increase of 11.0 percentage points from the year-ago quarter.
For the year, operating profit of $2.79 billion, or 20.8 percent of revenue, increased 26 percent due to higher operating margin in Semiconductor. Semiconductor operating margin of 23.9 percent of revenue increased 5.2 percentage points from the prior year.
Total stock-based compensation expense of $86 million in the fourth quarter and $178 million in 2005 was included in corporate activities.
Other Income (Expense) Net (OI&E)
OI&E of $51 million increased $2 million sequentially, and decreased $35 million from a year ago primarily due to favorable resolution of an open sales-tax item in the year-ago quarter.
For the year, OI&E of $206 million decreased by $29 million primarily due to lower income from settlements with the Italian government related to the company's former memory-chip operations.
Net Income
In the fourth quarter, net income was $655 million or $0.40 per share, including $0.03 of stock-based compensation expense. For the year, net income was $2.32 billion, or $1.39 per share, including $0.07 of stock-based compensation expense. The overall tax rate, which includes discrete tax items, was 24 percent for the fourth quarter and 22 percent for the year.
Orders
TI orders of $3.77 billion increased $27 million sequentially and $823 million from the year-ago quarter due to higher demand for Semiconductor products. For the year, TI orders of $13.92 billion increased 12 percent as demand grew for the company's Semiconductor products.
Cash
Cash flow from operations of $908 million decreased $606 million sequentially and $389 million from the year-ago quarter. For the year, cash flow from operations increased 20 percent to $3.77 billion.
At the end of the fourth quarter, total cash (cash and cash equivalents plus short-term investments) was $5.34 billion, up $84 million from the end of the previous quarter and down $1.02 billion from the end of the year-ago period. During the quarter, the company repurchased $870 million of TI common stock and paid $48 million in dividends. During 2005, the company repurchased $4.15 billion of TI common stock, reducing average diluted shares outstanding by almost 100 million shares, and paid $173 million in dividends. In 2004, the company repurchased $753 million of TI common stock, and paid $154 million in dividends.
In 2005, to avail the company of tax savings provided for under the American Jobs Creation Act, TI repatriated $1.3 billion of previously undistributed earnings of non-U.S. subsidiaries. During the fourth quarter, TI's Japan subsidiary borrowed $275 million in order to facilitate this process.
Capital Spending and Depreciation
Capital expenditures of $346 million decreased $104 million sequentially and increased $135 million from the year-ago quarter. For the year, capital expenditures of $1.33 billion increased by $32 million. TI's capital expenditures in the fourth quarter and the year were primarily for assembly and test equipment, advanced wafer fabrication equipment and construction of the company's new 300-millimeter manufacturing facility in Richardson, Texas.
Depreciation of $344 million increased $5 million sequentially and decreased $46 million from a year ago. For the year, depreciation was $1.38 billion, a decrease of $104 million.
Beginning in the first quarter of 2006, TI will change its method of depreciation from an accelerated to a straight-line method on its existing and future property, plant and equipment assets. This change is the result of a study that was conducted regarding the usage pattern of TI's long-lived depreciable assets. The study indicated a trend toward more consistent utilization of assets as TI has focused its product portfolio on differentiated products and supplemented its internal semiconductor manufacturing with supply from foundries.
Accounts Receivable and Inventories
Accounts receivable of $1.81 billion at the end of the fourth quarter decreased $103 million sequentially due to seasonally lower receivables in the company's Educational & Productivity Solutions segment. Accounts receivable increased $116 million from the year-ago quarter due to higher revenue. Days sales outstanding were 45 at the end of the fourth quarter compared with 48 at the end of the previous quarter and 48 at the end of the year-ago quarter.
Inventory of $1.27 billion at the end of the fourth quarter increased $115 million sequentially as the company built inventory from the lower-than- desired levels of the third quarter. For the year, inventory increased by $17 million compared with the end of 2004. The increases for both the quarter and the year were primarily in work-in-process, with fourth-quarter finished goods still remaining below desired levels. Days of inventory at the end of the fourth quarter were 62 compared with 57 at the end of the previous quarter and 62 at the end of the year-ago quarter.
Outlook
TI intends to provide a mid-quarter update to its financial outlook on March 6, 2006, by issuing a press release and holding a conference call. Both will be available on the company's web site.
The previously announced divestiture of the Sensors & Controls operations is expected to close in the first half of 2006. The financial results of this business will be accounted for as a discontinued operation beginning with the first quarter of 2006.
For the first quarter of 2006, TI expects revenue from continuing operations to be in the following ranges:
* Total TI, $3.11 billion to $3.38 billion;
* Semiconductor, $3.05 billion to $3.30 billion; and
* Educational & Productivity Solutions, $60 million to $80 million.
TI expects earnings per share from continuing operations to be in the range of $0.29 to $0.33. This estimate includes about $0.04, or about $90 million, for stock-based compensation expense. Earnings per share in the first quarter will be negatively impacted by about $0.03 due to a higher expected tax rate when compared with the fourth quarter of 2005. Earnings per share from discontinued operations are expected to be about $0.03.
In 2006 for continuing operations, the estimated annual effective tax rate is about 30 percent, which is based on current tax law and does not assume reinstatement of the federal research tax credit, which expired at the end of 2005.
Also in 2006 for continuing operations, TI expects R&D expense of about $2.2 billion and capital expenditures of about $1.3 billion. Depreciation is expected to be about $1.03 billion and reflects the company's change to a straight-line calculation. Depreciation under the company's prior accelerated method would have been about $1.21 billion.
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(In millions, except per-share amounts)
For Three Months Ended For Years Ended
Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 31
2005 2005 2004 2005 2004
Net revenue $ 3591 $ 3590 $ 3153 $ 13392 $ 12580
Cost of revenue (COR) 1857 1819 1819 7029 6954
Gross profit 1734 1771 1334 6363 5626
Gross profit % of
revenue 48.3% 49.3% 42.3% 47.5% 44.7%
Research and development
(R&D) 500 527 487 2015 1978
R&D % of revenue 13.9% 14.7% 15.5% 15.0% 15.7%
Selling, general and
administrative (SG&A) 424 429 363 1557 1441
SG&A % of revenue 11.8% 12.0% 11.5% 11.6% 11.5%
Total operating
expenses 924 956 850 3572 3419
Profit from operations 810 815 484 2791 2207
Operating profit % of
revenue 22.6% 22.7% 15.4% 20.8% 17.5%
Other income (expense)
net 51 49 86 206 235
Interest on loans 2 2 2 9 21
Income before income
taxes 859 862 568 2988 2421
Provision for income
taxes 204 231 78 664 560
Net income $ 655 $ 631 $ 490 $ 2324 $ 1861
Basic earnings per
common share $ .41 $ .39 $ .28 $ 1.42 $ 1.08
Diluted earnings per
common share $ .40 $ .38 $ .28 $ 1.39 $ 1.05
Average shares
outstanding, basic 1606 1624 1725 1640 1730
Average shares
outstanding, diluted 1643 1663 1759 1671 1768
Cash dividends declared
per share of common
stock $ .030 $ .025 $ .025 $ .105 $ .089
Stock-based compensation expense included in items above:
COR 17 16 --- 33 ---
% of revenue 0.5% 0.5% --- 0.2% ---
R&D 27 26 --- 53 ---
% of revenue 0.8% 0.7% --- 0.4% ---
SG&A 42 40 4 92 18
% of revenue 1.2% 1.1% 0.1% 0.7% 0.1%
Profit from operations 86 82 4 178 18
% of revenue 2.4% 2.3% 0.1% 1.3% 0.1%
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(In millions of dollars)
Dec. 31 Sept. 30 Dec. 31
2005 2005 2004
Assets
Cash and cash equivalents $ 1219 $ 1946 $ 2668
Short-term investments 4116 3305 3690
Accounts receivable, net of allowances
for customer adjustments and doubtful
accounts of $39 million at
December 31, 2005, $48 million at
September 30, 2005, $41 million at
December 31, 2004 1812 1915 1696
Raw materials 122 114 117
Work in process 827 719 756
Finished goods 324 325 383
Inventories 1273 1158 1256
Deferred income taxes 619 581 554
Prepaid expenses and other current
assets 146 177 272
Total current assets 9185 9082 10136
Property, plant and equipment at cost 8921 9189 9573
Less accumulated depreciation (5022) (5324) (5655)
Property, plant and equipment, net 3899 3865 3918
Equity and debt investments 236 234 264
Goodwill 713 708 701
Acquisition-related intangibles 64 76 111
Deferred income taxes 393 413 449
Capitalized software licenses, net 245 262 307
Prepaid retirement costs 210 224 277
Other assets 118 120 136
Total assets $15063 $14984 $16299
Liabilities and Stockholders' Equity
Loans payable and current portion
long-term debt $ 301 $ 303 $ 11
Accounts payable 750 796 552
Accrued expenses and other liabilities 998 962 892
Income taxes payable 163 82 203
Accrued profit sharing and retirement 134 103 267
Total current liabilities 2346 2246 1925
Long-term debt 360 55 368
Accrued retirement costs 136 510 589
Deferred income taxes 23 33 40
Deferred credits and other liabilities 261 267 314
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: December 31, 2005 --
1,738,780,512; September 30, 2005 --
1,738,650,318; December 31, 2004 --
1,738,156,615 1739 1739 1738
Paid-in capital 742 674 750
Retained earnings 13394 12787 11242
Less treasury common stock at cost:
Shares: December 31, 2005 --
142,190,707; September 30, 2005 --
120,597,527; December 31, 2004 --
20,041,497 (3856) (3152) (480)
Accumulated other comprehensive income
(loss):
Minimum pension liability (65) (158) (168)
Unrealized holding gains (losses) on
investments (16) (15) (15)
Deferred compensation (1) (2) (4)
Total stockholders' equity 11937 11873 13063
Total liabilities and stockholders'
equity $15063 $14984 $16299
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In millions of dollars)
For Three Months Ended For Years Ended
Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 31
2005 2005 2004 2005 2004
Cash flows from
operating activities:
Net income $ 655 $ 631 $ 490 $ 2324 $ 1861
Adjustments to
reconcile net income
to cash provided by
operating activities:
Depreciation 344 339 390 1375 1479
Stock-based
compensation 86 82 4 178 18
Amortization of
acquisition-related
costs 13 13 16 56 70
(Gains)/losses on sale
of investments (5) --- 2 --- 1
(Gains)/losses on
sales of assets --- --- --- (26) ---
Deferred income taxes (93) 110 (41) (194) 68
(Increase) decrease
from changes in:
Accounts receivable 99 (12) 280 (139) (238)
Inventories (115) 44 100 (25) (272)
Prepaid expenses and
other current assets 34 58 230 117 148
Accounts payable and
accrued expenses (18) 248 (116) 264 (71)
Income taxes payable 107 (154) 63 35 59
Accrued profit sharing
and retirement 18 32 44 (145) 235
Noncurrent accrued
retirement costs (185) 8 (168) (166) (248)
Other (32) 115 3 118 36
Net cash provided by
operating activities 908 1514 1297 3772 3146
Cash flows from investing
activities:
Additions to property,
plant and equipment (346) (450) (211) (1330) (1298)
Sales of assets --- --- --- 47 ---
Purchases of cash
investments (2690) (2095) (652) (5851) (3674)
Sales and maturities
of cash investments 1887 1147 894 5430 3809
Purchases of equity
investments (4) (5) (6) (17) (22)
Sales of equity and
debt investments 14 39 1 53 32
Acquisition of
businesses, net of
cash acquired (1) --- --- (19) (8)
Net cash provided by
(used in) investing
activities (1140) (1364) 26 (1687) (1161)
Cash flows from financing
activities:
Additions to loans
payable and long-term
debt 275 --- --- 275 ---
Payments on loans
payable and long-term
debt (1) --- --- (11) (435)
Dividends paid on
common stock (48) (41) (44) (173) (154)
Sales and other common
stock transactions 128 160 75 461 192
Excess tax benefit from
stock-option exercises 17 42 --- 59 ---
Common stock
repurchases (870) (496) (370) (4151) (753)
Net cash used in
financing activities (499) (335) (339) (3540) (1150)
Effect of exchange rate
changes on cash 4 (2) 10 6 15
Net increase (decrease)
in cash and cash
equivalents (727) (187) 994 (1449) 850
Cash and cash equivalents,
beginning of period 1946 2133 1674 2668 1818
Cash and cash equivalents,
end of period $ 1219 $ 1946 $ 2668 $ 1219 $ 2668
Business Segment Net Revenue
(In millions of dollars)
For Three Months Ended For Years Ended
Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 31
2005 2005 2004 2005 2004
Semiconductor
Trade $ 3225 $ 3134 $ 2797 $11718 $10938
Intersegment 1 1 1 4 3
3226 3135 2798 11722 10941
Sensors & Controls
Trade 300 278 276 1167 1124
Intersegment 2 2 1 5 3
302 280 277 1172 1127
Educational &
Productivity Solutions
Trade 67 177 80 506 518
Intersegment
eliminations (4) (2) (2) (8) (6)
Total net revenue $ 3591 $ 3590 $ 3153 $13392 $12580
Business Segment Profit (Loss)
(In millions of dollars)
For Three Months Ended For Years Ended
Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 31
2005 2005 2004 2005 2004
Semiconductor $ 907 $ 835 $ 478 $ 2797 $ 2050
Sensors & Controls 66 60 62 266 281
Educational &
Productivity Solutions 10 79 16 188 176
Corporate * (152) (145) (53) (408) (213)
Charges/gains and
acquisition-related
amortization (21) (14) (19) (52) (87)
Profit from operations $ 810 $ 815 $ 484 $ 2791 $ 2207
* Profit from operations includes, in millions of dollars, stock-based
compensation expense of $86, $82 and $4 for the fourth quarter and
third quarter of 2005 and the fourth quarter of 2004, and $178 and
$18 for the years ended December 31, 2005 and 2004.
Semiconductor
* Revenue of $3.23 billion in the fourth quarter increased $91 million
sequentially, or 3 percent, and increased 15 percent from the year-ago
quarter primarily due to demand for the company's wireless and high-
performance analog products. Revenue from wireless products grew
4 percent sequentially and 12 percent from a year ago. Revenue from
high-performance analog products grew 8 percent sequentially and
41 percent from a year ago. For the year, Semiconductor revenue of
$11.72 billion increased 7 percent primarily due to demand for
wireless products, which grew 14 percent, as well as high-performance
analog products, which grew 13 percent.
* Gross profit in the fourth quarter was $1.63 billion, or 50.7 percent
of revenue. Gross profit increased $40 million sequentially due to
manufacturing cost reductions and increased $429 million from the
year-ago quarter, primarily due to higher revenue, as well as
manufacturing cost reductions and higher utilization of manufacturing
assets. For the year, gross profit of $5.73 billion, or 48.9 percent
of revenue, increased $767 million, primarily due to manufacturing
cost reductions, as well as higher revenue.
* Operating profit in the fourth quarter was $907 million, or
28.1 percent of revenue, up $72 million sequentially due to higher
gross profit and lower operating expenses. Compared with the year-ago
quarter, operating profit increased $429 million due to higher gross
profit. For the year, operating profit was $2.80 billion, or
23.9 percent of revenue, up $747 million due to higher gross profit.
* Analog revenue in the fourth quarter increased 2 percent sequentially
and 20 percent from the year-ago quarter due to demand for high-
performance analog products, as well as wireless analog products. For
the year, analog revenue increased 4 percent primarily due to growth
in demand for high-performance analog products, which more than offset
the loss of revenue from the company's commodity liquid crystal
display (LCD) driver product line that was divested in the first
quarter of 2005. In 2005, about 40 percent of total Semiconductor
revenue came from analog.
* DSP revenue in the fourth quarter increased 2 percent sequentially and
12 percent from the year-ago quarter, primarily due to higher demand
from the wireless market. For the year, DSP revenue increased
15 percent primarily due to demand for wireless products. In 2005,
about 40 percent of total Semiconductor revenue came from DSP.
* TI's remaining Semiconductor revenue in the fourth quarter grew
7 percent sequentially and 13 percent from the year-ago quarter. The
sequential increase was primarily due to demand for commodity standard
logic products, and the increase from a year ago primarily was due to
demand for commodity standard logic products, DLP products and
microcontrollers. For the year, remaining Semiconductor revenue
increased 2 percent primarily due to demand for RISC microprocessors
and microcontrollers that offset a decline in DLP products.
* Semiconductor orders of $3.39 billion in the fourth quarter increased
2 percent sequentially, primarily due to demand for high-performance
analog products and increased 31 percent from a year ago due to broad-
based demand. For the year, orders increased 13 percent to
$12.23 billion due to broad-based demand for the company's DSP and
analog products.
Latest Semiconductor Highlights
* In the fourth quarter, TI began sampling a multi-mode UMTS chipset
developed with NTT DoCoMo based on TI's high-performance OMAP(TM)
2 architecture to serve the worldwide 3G cell-phone market.
* The first DaVinci DSP-based solutions became available in the fourth
quarter, enabling digital video innovation, saving development time
and lowering overall system costs.
* A 14-bit, 190MSPS (mega samples per second) analog-to-digital
converter began sampling in the fourth quarter. With best-in-class
dynamic performance and low total power dissipation, it is ideal for
wireless communications, video and imaging, test and measurement, and
instrumentation applications.
* Initial Hollywood(TM) chips, which enable broadcast TV on cell
phones, started being delivered to customers this quarter. Initial
cell phones that use this 90-nanometer technology are expected to be
on the market in late 2006.
* TI qualified its advanced 65-nanometer process technology in the
fourth quarter and moved to volume manufacturing, providing more
processing performance for advanced applications in a smaller space
without increasing power consumption.
* TI introduced a new DLP HDTV solution that supports light-emitting
diode (LED) light sources. Samsung is expected to ship HDTVs based
on the technology in 2006.
* Landmark Theatres has chosen DLP Cinema(R) technology as a preferred
digital projection technology for its theater chain.
* TCL Communication Technology has selected TI's 2.5G wireless platform,
including its DRP(TM)-based, single-chip cell-phone technology, for
low-cost handsets.
* TI is expanding its high-performance analog portfolio with the
announced acquisition of Chipcon, a leading supplier of low-power,
radio-frequency transceiver technology.
Sensors & Controls
* Revenue in the fourth quarter was $302 million, up $22 million
sequentially primarily due to higher shipments of sensor products, and
up $25 million from the year-ago quarter due to demand for sensors.
For the year, revenue was $1.17 billion, up 4 percent due to higher
demand for sensor products.
* Gross profit in the fourth quarter was $98 million, or 32.3 percent of
revenue, up $5 million sequentially due to higher revenue, and about
even with the year-ago quarter. For the year, gross profit was
$404 million, or 34.5 percent of revenue, a decrease of $19 million
from the prior year primarily due to start-up costs.
* Operating profit in the fourth quarter was $66 million, or
21.7 percent of revenue, up $6 million sequentially due to higher
gross profit and up $4 million from the year-ago quarter due to lower
operating expenses. For the year, operating profit was $266 million,
or 22.7 percent of revenue, a decrease of $15 million from the prior
year due to lower gross profit.
Educational & Productivity Solutions
* Revenue in the fourth quarter was $67 million, down $110 million
sequentially due to the seasonal decline for graphing calculators, and
down $13 million from the year-ago quarter primarily due to tighter
inventory management at retail customers. For the year, revenue was
$506 million, down 2 percent primarily due to tighter inventory
management at retail customers.
* Gross profit in the fourth quarter was $35 million, or 52.4 percent of
revenue, down $75 million sequentially and $7 million from the year-
ago quarter due to lower revenue. For the year, gross profit of
$300 million, or a record 59.2 percent of revenue, increased
$8 million, primarily due to lower manufacturing costs.
* Operating profit in the quarter was $10 million, or 15.1 percent of
revenue, a decrease of $69 million, and down $6 million from the year-
ago quarter due to lower gross profit. For the year, operating profit
was a record $188 million, or 37.2 percent of revenue, an increase of
$12 million due to higher gross profit.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as TI or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements in this release that describe the Company's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements.
We urge you to carefully consider the following important factors that could cause actual results to differ materially from the expectations of the Company or its management:
* Market demand for semiconductors, particularly for analog chips and
digital signal processors in key markets such as communications,
entertainment electronics and computing;
* TI's ability to maintain or improve profit margins, including its
ability to utilize its manufacturing facilities at sufficient levels
to cover its fixed operating costs, in an intensely competitive and
cyclical industry;
* TI's ability to develop, manufacture and market innovative products in
a rapidly changing technological environment;
* TI's ability to compete in products and prices in an intensely
competitive industry;
* TI's ability to maintain and enforce a strong intellectual property
portfolio and obtain needed licenses from third parties;
* Consolidation of TI's patent licensees and market conditions reducing
royalty payments to TI;
* Economic, social and political conditions in the countries in which
TI, its customers or its suppliers operate, including security risks,
health conditions, possible disruptions in transportation networks and
fluctuations in foreign currency exchange rates;
* Natural events such as severe weather and earthquakes in the locations
in which TI, its customers or suppliers operate;
* Availability and cost of raw materials, utilities and critical
manufacturing equipment;
* Changes in the tax rate applicable to TI as the result of changes in
tax law, the jurisdictions in which profits are determined to be
earned and taxed, the outcome of tax audits and the ability to realize
deferred tax assets;
* Losses or curtailments of purchases from key customers and the timing
and amount of distributor and other customer inventory adjustments;
* Customer demand that differs from company forecasts;
* The financial impact of inadequate or excess TI inventories to meet
demand that differs from projections;
* Product liability or warranty claims, or recalls by TI customers for a
product containing a TI part;
* TI's ability to recruit and retain skilled personnel; and
* Timely implementation of new manufacturing technologies, installation
of manufacturing equipment and the ability to obtain needed third-
party foundry and assembly/test subcontract services.
For a more detailed discussion of these factors, see the text under the heading "Cautionary Statements Regarding Future Results of Operations" in Item 1 of the Company's most recent Form 10-K. The forward-looking statements included in this release are made only as of the date of publication, and the Company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.
Texas Instruments Incorporated provides innovative DSP and analog technologies to meet our customers' real world signal processing requirements. In addition to Semiconductor, the company's businesses include Sensors & Controls and Educational & Productivity Solutions. TI is headquartered in Dallas, Texas, and has manufacturing, design or sales operations in more than 25 countries.
Texas Instruments is traded on the New York Stock Exchange under the symbol TXN. More information is located on the World Wide Web at http://www.ti.com .
TI Trademarks:
OMAP
DaVinci
DLP
Hollywood
DLP Cinema
DRP
Other trademarks are the property of their respective owners.
Source: prnewswire
All trademarks and copyrighted information contained herein are the property of their respective owners.
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