Press release

TI reports financial results for 4Q08 and 2008

DALLAS, Jan 26, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Conference call on TI web site at 4:30 p.m. Central time today

www.ti.com/ir Non-GAAP Reconciliation Charts

Texas Instruments Incorporated (TI) (NYSE: TXN) today announced fourth-quarter revenue of $2.49 billion, net income of $107 million and earnings per share (EPS) of $0.08.

These financial results include restructuring charges of $0.13 per share. Without the charges, EPS would have been $0.21, considerably better than the company's mid-quarter expectations. (See reconciliation table below.)

TI also announced it is making reductions in employment because demand has continued to weaken with the slowing economy. Employment will be reduced 12 percent through 1800 layoffs and 1600 voluntary retirements and departures. Charges for these employment reductions will be about $300 million. Annualized savings from these reductions, plus those announced in October for the restructuring of the company's Wireless business, will be about $700 million after all reductions are complete in the third quarter of 2009.

"We are realigning our expenses with a global economy that continues to weaken," said Rich Templeton, TI chairman, president and chief executive officer. "By reducing expenses now, we keep TI financially strong and able to invest for future growth.

"Most of the reductions will come in our internal support functions and non-core product lines so that a greater percentage of the dollars we spend will go directly toward developing and supporting Analog and Embedded Processing products. We believe these are the areas that will drive TI's future growth and allow us to achieve our financial objectives.

"We are not counting on a near-term economic rebound for improvement. The actions we are taking to reduce expenses and inventory will position TI to deliver solid financial results, even in a period of prolonged economic weakness. When the economy strengthens, we'll be pleased that we focused aggressively on our core product lines."

4Q08 financial summary

Amounts are in millions of dollars, except per-share amounts. Except as noted, financial results are for continuing operations. The sale of TI's former Sensors & Controls business was completed on April 27, 2006, and that business is reported as a discontinued operation.

                                 4Q08     4Q07 vs. 4Q07     3Q08 vs. 3Q08

    Revenue:                   $ 2491   $ 3556     -30%   $ 3387     -26%
    Operating profit:          $   51   $  996     -95%   $  746     -93%
    Income:                    $  107   $  753     -86%   $  563     -81%
    Earnings per share:        $ 0.08   $ 0.54     -85%   $ 0.43     -81%
    Cash flow from operations: $ 1113   $ 1425     -22%   $ 1046       6%

TI's revenue declined 30 percent compared with the fourth quarter of 2007 and declined 26 percent compared with the third quarter of 2008. Revenue in all segments declined in both comparisons.

TI's operating profit declined 95 percent compared with the fourth quarter of 2007 and 93 percent compared with the third quarter. The declines were due to lower revenue and the associated lower gross profit in all segments, higher restructuring charges, as well as the impact of underutilized manufacturing assets. These more than offset other manufacturing cost reductions and lower operating expenses.

Excluding restructuring charges of $254 million, TI's operating profit was $305 million in the fourth quarter, or 12.2 percent of revenue. (See reconciliation table below.)

4Q08 segment results

                           4Q08     4Q07  vs. 4Q07    3Q08  vs. 3Q08    Note
    Analog:
      Revenue            $ 1015    $ 1303     -22%    $ 1289    -21%    (1)
      Operating profit   $   78    $  433     -82%    $  274    -71%
    Embedded Processing:
      Revenue            $  340    $  431     -21%    $  427    -20%    (2)
      Operating
       profit (loss)     $   (2)   $  103    -102%    $   73   -103%
    Wireless:
      Revenue            $  646    $ 1123     -42%    $  915    -29%    (3)
      Operating
       profit (loss)     $  (87)   $  254    -134%    $  155   -156%
    Other:
      Revenue            $  490    $  699     -30%    $  756    -35%    (4)
      Operating
       profit            $   62    $  206     -70%    $  244    -75%

The product categories in each segment are as follows:

    --  Analog:  high-performance analog (includes standard power management
        products, data converters, amplifiers and interface products),
        high-volume analog & logic
    --  Embedded Processing:  DSPs and microcontrollers used in catalog,
        communications infrastructure and automotive applications
    --  Wireless:  DSPs and analog used in basebands, OMAP(TM) applications
        processors and connectivity products for handsets
    --  Other:  DLP(R) products, calculators, RISC microprocessors, ASIC
        products, royalties

    1. The decline in Analog revenue from a year ago and from the prior quarter
       was primarily due to high-volume analog & logic.  High-performance
       analog revenue also declined in both comparisons to a lesser extent.
    2. The decline in Embedded Processing revenue from a year ago and from the
       prior quarter was primarily due to a combination of lower catalog and
       automotive product revenue.  Revenue from communications infrastructure
       products also declined to a lesser extent.
    3. Wireless revenue declined from a year ago and from the prior quarter
       primarily due to lower baseband revenue.
    4. Other revenue decreased from a year ago primarily due to declines in RISC
       microprocessors, DLP products, royalties and calculators.  Other revenue
       decreased from the prior quarter due to the seasonal decline in
       calculator revenue and lower revenue from DLP products, royalties, ASIC
       products and RISC microprocessors.

Operating profit declined in all segments because of the effect of decreased revenue and restructuring charges. Restructuring charges were as follows:

                            4Q08        4Q07        3Q08
    Analog:                $  60         $ 2         $--
    Embedded Processing:   $  24         $ 1         $--
    Wireless:              $ 130         $ 2         $--
    Other:                 $  40         $ 1         $--
    Total:                 $ 254         $ 6         $--

The fourth-quarter 2008 restructuring charges of $254 million included $121 million for a portion of the actions just announced, $109 million for actions announced in October to re-focus the company's Wireless business and $24 million for asset impairments related to an action announced in 2007 to shut down an older digital factory.

4Q08 additional financial information

    --  Net income includes a $67 million tax benefit from the reinstatement of
        the federal research tax credit, which was signed into law in October
        2008 and was retroactive to the beginning of 2008.
    --  Orders were $1.86 billion, down 47 percent from a year ago and down 42
        percent from the prior quarter.
    --  Inventory was reduced by $200 million in the quarter.  The company
        expects to continue to reduce inventory in the first quarter of 2009.
    --  Capital expenditures were $76 million in the quarter, a decline from
        $181 million in the fourth quarter of 2007 and $197 million in the prior
        quarter.  The lower capital expenditures reflect restraints on spending
        implemented by management during this period of weaker demand and the
        lack of need for additional manufacturing capacity in the near term.
    --  The company used $386 million in the quarter to repurchase 20.3 million
        shares of its common stock and paid dividends of $141 million.

Year 2008 financial summary

                                   2008          2007   vs.  2007
    Revenue:                    $ 12501       $ 13835        -10%
    Operating profit:           $  2437       $  3497        -30%
    Income:                     $  1920       $  2641        -27%
    Earnings per share:         $  1.45       $  1.83        -21%
    Cash flow from operations:  $  3330       $  4407        -24%

TI revenue declined 10 percent compared with the prior year primarily due to a decline in Wireless segment revenue. Revenue in the Other segment also declined for the year. As the year progressed and the global economy weakened, the decline in TI revenue accelerated and broadened to the extent that all segments declined from the year-ago quarter in the final quarter of the year.

TI operating profit decreased 30 percent in 2008 due to the decline in revenue and the associated lower gross profit, the impact of underutilized manufacturing assets and higher restructuring charges. These more than offset a reduction in operating expenses.

Excluding restructuring charges of $254 million, TI's operating profit was $2.69 billion in 2008, or 21.5 percent of revenue. (See reconciliation table below.)

Year 2008 segment results

                              2008       2007  vs. 2007   Note
    Analog:
      Revenue              $  4857    $  4927       -1%    (1)
      Operating profit     $  1050    $  1548      -32%
    Embedded Processing:
      Revenue              $  1631    $  1588        3%    (2)
      Operating profit     $   268    $   290       -7%
    Wireless:
      Revenue              $  3383    $  4195      -19%    (3)
      Operating profit     $   347    $   763      -55%
    Other:
      Revenue              $  2630    $  3125      -16%    (4)
      Operating profit     $   772    $   896      -14%

    1. Analog revenue was about even as growth in high-performance analog
       was more than offset by a decline in high-volume analog & logic.
    2. Embedded Processing revenue grew due to increased revenue from
       communications infrastructure and catalog products that more than offset
       a decline in revenue from automotive products.
    3. Wireless revenue declined due to lower baseband revenue.  OMAP
       applications processor revenue also declined.
    4. Other revenue declined due to lower revenue across a broad range of
       products, the effect of the sale of a DSL product line in 2007 and lower
       royalties.

Restructuring charges negatively impacted each segment's operating profit as follows:

                             2008      2007
    Analog:                 $  60      $ 18
    Embedded Processing:    $  24      $  4
    Wireless:               $ 130      $ 20
    Other:                  $  40      $ 10
    Total:                  $ 254      $ 52

2008 additional financial information

    --  Capital expenditures were $763 million in 2008.  Depreciation was $1.02
        billion.
    --  The company used $2.12 billion to repurchase 80.2 million shares of its
        common stock and paid dividends of $537 million.

Outlook

For the first quarter of 2009, TI expects:

    --  Revenue:  $1.62 - 2.12 billion
    --  Earnings per share:  $0.11 loss - 0.03 profit

The EPS estimate includes $0.03 per share resulting from $50 million of estimated restructuring charges. EPS will continue to be impacted in the first quarter by costs associated with underutilized manufacturing assets as a result of lower demand and the company's continued reduction of inventory.

TI will update its first-quarter outlook on March 9, 2009.

For the full year of 2009, TI expects approximately the following:

    --  R&D expense:  $1.5 billion
    --  Capital expenditures:  $300 million
    --  Depreciation:  $900 million
    --  Annual effective tax rate:  24%

                  TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                          Consolidated Statements of Income
               (Millions of dollars, except share and per-share amounts)

                               For Three Months Ended        For Years Ended
                            Dec. 31,  Dec. 31,  Sept. 30,  Dec. 31,  Dec. 31,
                              2008      2007       2008      2008      2007
    Revenue                $  2,491  $  3,556   $  3,387  $ 12,501  $ 13,835
    Cost of revenue           1,394     1,625      1,744     6,256     6,466
    Gross profit              1,097     1,931      1,643     6,245     7,369
    Research and
     development (R&D)          431       507        507     1,940     2,140
    Selling, general and
     administrative (SG&A)      361       422        390     1,614     1,680
    Restructuring expense       254         6         --       254        52
    Operating profit             51       996        746     2,437     3,497
    Other income (expense)
     net                        (15)       46         10        44       195
    Income from continuing
     operations before
     income taxes                36     1,042        756     2,481     3,692
    Provision (benefit) for
     income taxes               (71)      289        193       561     1,051
    Income from continuing
     operations                 107       753        563     1,920     2,641
    Income from
     discontinued
     operations, net of
     taxes                       --         3         --        --        16
    Net income             $    107  $    756   $    563  $  1,920  $  2,657

    Basic earnings per
     common share:
      Income from
       continuing
       operations          $    .08  $    .55   $    .43  $   1.47  $   1.86
      Net income           $    .08  $    .55   $    .43  $   1.47  $   1.88

    Diluted earnings per
     common share:
      Income from
       continuing
       operations          $    .08   $   .54   $    .43  $   1.45   $  1.83
      Net income           $    .08   $   .54   $    .43  $   1.45   $  1.84

    Average shares
     outstanding
     (millions):
      Basic                   1,283     1,372      1,304     1,308     1,417
      Diluted                 1,289     1,399      1,318     1,324     1,446

    Cash dividends
     declared per share
     of common stock       $    .11  $    .10   $    .10  $    .41   $   .30

    Percentage of revenue:
    Gross profit               44.0%     54.3%      48.5%     50.0%     53.3%
    R&D                        17.3%     14.3%      15.0%     15.5%     15.5%
    SG&A                       14.5%     11.9%      11.5%     12.9%     12.1%
    Operating profit            2.0%     28.0%      22.0%     19.5%     25.3%



                     TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                               Consolidated Balance Sheets
                       (Millions of dollars, except share amounts)

                                             Dec. 31,    Dec. 31,   Sept. 30,
                                               2008        2007        2008

    Assets
    Current assets:
      Cash and cash equivalents             $  1,046    $  1,328    $  1,715
      Short-term investments                   1,494       1,596         278
      Accounts receivable, net of
       allowances of ($30), ($26) and ($28)      913       1,742       1,774
      Raw materials                               99         105         103
      Work in process                            837         876         982
      Finished goods                             439         437         490
      Inventories                              1,375       1,418       1,575
      Deferred income taxes                      695         654         679
      Prepaid expenses and other
       current assets                            267         180         191
      Total current assets                     5,790       6,918       6,212
    Property, plant and equipment at cost      7,321       7,568       7,499
      Less accumulated depreciation           (4,017)     (3,959)     (3,982)
      Property, plant and equipment, net       3,304       3,609       3,517
    Long-term investments                        653         267         717
    Goodwill                                     840         838         840
    Acquisition-related intangibles               91         115          99
    Deferred income taxes                        990         510         688
    Capitalized software licenses, net           182         227         202
    Overfunded retirement plans                   17         105         137
    Other assets                                  56          78          54
    Total assets                            $ 11,923    $ 12,667    $ 12,466

    Liabilities and Stockholders' Equity
    Current liabilities:
      Accounts payable                      $    324    $    657    $    601
      Accrued expenses and other
       liabilities                             1,034       1,117         976
      Income taxes payable                        40          53          35
      Accrued profit sharing and retirement      134         198         126
      Total current liabilities                1,532       2,025       1,738
    Underfunded retirement plans                 640         184         186
    Deferred income taxes                         59          49          52
    Deferred credits and other liabilities       366         434         396
    Total liabilities                          2,597       2,692       2,372
    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:  Dec. 31, 2008 --
       1,739,718,073; Dec. 31, 2007 --
       1,739,632,601; Sept. 30, 2008 --
       1,739,717,573                           1,740       1,740       1,740
     Paid-in capital                           1,022         931         973
     Retained earnings                        21,168      19,788      21,204
     Less treasury common stock at cost:
       Shares:  Dec. 31, 2008 -- 461,822,215;
       Dec. 31, 2007 -- 396,421,798;
       Sept. 30, 2008 -- 443,292,628         (13,814)    (12,160)    (13,481)
     Accumulated other comprehensive
      income (loss), net of taxes               (790)       (324)       (342)
     Total stockholders' equity                9,326       9,975      10,094
    Total liabilities and stockholders'
     equity                                 $ 11,923    $ 12,667    $ 12,466



                    TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                        Consolidated Statements of Cash Flows
                                  (Millions of dollars)

                               For Three Months Ended        For Years Ended
                            Dec. 31,  Dec. 31,  Sept. 30,  Dec. 31,   Dec. 31,
                              2008      2007      2008       2008       2007
    Cash flows from
     operating activities:
      Net income            $   107   $   756    $   563   $ 1,920    $ 2,657
      Adjustments to
       net income:
        Income from
         discontinued
         operations              --        (3)        --        --        (16)
        Depreciation            283       253        252     1,022      1,022
        Stock-based
         compensation            51        67         53       213        280
        Amortization of
         acquisition-
         related
         intangibles              8        10          9       37          48
        (Gains) losses on
          sale of assets         --        --         --        6         (39)
        Deferred income
         taxes                  (23)        4        (78)    (182)         34
      Increase (decrease)
       from changes in:
        Accounts
         receivable             889       284         36      865          40
        Inventories             200        32         76       43          11
        Prepaid expenses
         and other
         current assets        (100)       26         50     (125)         13
        Accounts payable
         and accrued
         expenses              (211)      (20)       (24)    (382)         77
        Income taxes
         payable                 13       (47)        41       38         304
        Accrued profit
         sharing and
         retirement             (10)       52         25      (84)         33
      Other                     (94)       11         43      (41)        (57)
    Net cash provided by
     operating activities
     of continuing
     operations               1,113     1,425      1,046    3,330       4,407


    Cash flows from
     investing activities:
      Additions to
       property, plant
       and equipment            (76)     (181)      (197)    (763)       (686)
      Proceeds from sales
       of assets                 --        --         --       --          61
      Purchases of
       short-term
       investments           (1,384)     (794)        --   (1,746)     (5,035)
      Sales and
       maturities
       of short-term
       investments              182     2,067         49    1,300       5,981
      Purchases of
       long-term
       investments               (1)       (4)        (3)      (9)        (30)
      Sales of
       long-term
       investments                7         2         32       55          11
      Acquisitions, net
       of cash acquired          --       (56)        --      (19)        (87)
    Net cash (used in)
     provided by
     investing activities
     of continuing
     operations              (1,272)    1,034       (119)  (1,182)        215


    Cash flows from
     financing activities:
      Payments on loans
       and long-term debt        --        --         --       --         (43)
      Dividends paid           (141)     (138)      (131)    (537)       (425)
      Sales and other
       common stock
       transactions              15        67         30      210         761
      Excess tax benefit
       from share-based
       payments                   2        10          1       19         116
      Stock repurchases        (386)   (1,877)      (429)  (2,122)     (4,886)
    Net cash used in
     financing activities
     of continuing
     operations                (510)   (1,938)      (529)  (2,430)     (4,477)
    Net (decrease)
     increase in cash
     and cash
     equivalents               (669)      521        398     (282)        145
    Cash and cash
     equivalents,
     beginning
     of period                1,715       807      1,317    1,328       1,183
    Cash and cash
     equivalents, end
     of period              $ 1,046   $ 1,328    $ 1,715  $ 1,046     $ 1,328

    Certain amounts in prior periods' financial statements have been
    reclassified to conform to the current presentation.



    The following describes TI's results excluding the impact of
    restructuring charges.  Management believes this presentation provides
    investors additional insight into the underlying business conditions
    and results.

                 TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                             Non-GAAP Reconciliation
            (Millions of dollars, except share and per-share amounts)

                                          For the three
                                           months ended
                                           Dec. 31, 2008

    Pre-tax restructuring charges            $   254
    Tax impact of restructuring charges          (89)
    After-tax restructuring charges          $   165

    Average diluted shares outstanding         1,289

    Earnings per share impact of
     restructuring charges                   $   .13
    Diluted earnings per common share
     as reported                             $   .08
    Diluted earnings per common share
     excluding restructuring charges         $   .21



                                           For the three     For the year
                                            months ended        ended
                                           Dec. 31, 2008     Dec. 31, 2008

    Operating profit as reported             $    51          $  2,437
    Pre-tax restructuring charges                254               254
    Operating profit excluding
     restructuring charges                   $   305          $  2,691

    Revenue                                  $ 2,491          $ 12,501

    Operating profit percentage of
     revenue excluding restructuring
     charges                                    12.2%             21.5%

Safe Harbor Statement

"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 herein 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 TI or its management:

    --  Market demand for semiconductors, particularly 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;
    --  Expiration of license agreements between TI and its 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 its suppliers operate;
    --  Availability and cost of raw materials, utilities, manufacturing
        equipment, third-party manufacturing services and manufacturing
        technology;
    --  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 our forecasts;
    --  The financial impact of inadequate or excess TI inventory that results
        from demand that differs from projections;
    --  TI's ability to access its bank accounts and lines of credit or
        otherwise access the capital markets;
    --  Product liability or warranty claims, claims based on epidemic or
        delivery failure 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 "Risk Factors" in Part II, Item 1A of the Company's Form 10-Q for the third quarter of 2008. The forward-looking statements included in this release are made only as of the date of this release, and the Company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

About Texas Instruments

Texas Instruments (NYSE: TXN) helps customers solve problems and develop new electronics that make the world smarter, healthier, safer, greener and more fun. A global semiconductor company, TI innovates through manufacturing, design and sales operations in more than 25 countries. For more information, go to www.ti.com.

    TI trademarks:
       OMAP
       DLP

Other trademarks are the property of their respective owners.

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