UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE
OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 24, 2006
TEXAS
INSTRUMENTS INCORPORATED
(Exact
name of registrant as specified in charter)
|
DELAWARE
|
|
001-03761
|
|
75-0289970
|
|
(State
or other jurisdiction of incorporation)
|
|
(Commission
file number)
|
|
(I.R.S.
employer identification
no.)
|
12500
TI BOULEVARD
P.O.
BOX 660199
DALLAS,
TEXAS 75266-0199
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (972) 995-3773
Check
the
appropriate box below if the Form 8-K is intended to simultaneously satisfy
the
filing obligation of the registrant under any of the following provisions:
|
¨
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
¨
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
|
¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
ITEM
2.02. Results of Operations and Financial Condition
The
Registrant's news release dated July 24, 2006, regarding its second quarter
2006
results of operations and financial condition attached hereto as Exhibit 99
is
incorporated by reference herein.
ITEM
9.01. Exhibits
|
Designation
of
Exhibit
in
this
Report
|
|
Description
of Exhibit
|
|
99
|
|
Registrant’s
News Release
|
|
|
|
Dated
July 24, 2006 (furnished pursuant to Item
2.02)
|
“Safe
Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
This report 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 report 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;
|
| · |
Expiration
of license agreements between TI and its 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 “Risk
Factors” in Item 1A of the Company’s most recent Form 10-K. The forward-looking
statements included in this report on Form 8-K are made only as of the date
of
this report, and the Company undertakes no obligation to update the
forward-looking statements to reflect subsequent events or
circumstances.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
|
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TEXAS
INSTRUMENTS INCORPORATED
|
||
|
Date:
July 24, 2006
|
|
By:
|
|
/s/
Kevin P. March
|
|
|
|
|
|
Kevin
P. March
|
|
|
|
|
|
Senior
Vice President
|
|
|
|
|
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and
Chief Financial Officer
|
Exhibit
99
TI
Reports 2Q06 Financial Results
| · |
Revenue
Up 11% Sequentially and 24% from a Year Ago, Including $70 Million
for
Royalty Settlement
|
| · |
$0.47
EPS from Continuing Operations, Up 42% Sequentially and 34% from
a Year
Ago
|
| · |
$1.50
EPS from Continuing and Discontinued Operations, Including Gain on
Sale
|
Conference
Call on TI Web Site at 4:30 p.m. Central Time Today
www.ti.com
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.
DALLAS
(July 24, 2006) - Texas Instruments Incorporated (TI) (NYSE: TXN) today reported
revenue of $3.70 billion for the second quarter of 2006. Revenue was 11 percent
higher sequentially and 24 percent higher than the same quarter a year ago
as
demand for the company’s semiconductors continued to strengthen. Sequential
growth also benefited from seasonal demand for graphing calculators as retailers
began to stock for the upcoming back-to-school season. As previously announced,
the company received a $70 million royalty settlement in the quarter that was
included in revenue.
Earnings
per share (EPS) from continuing operations were $0.47, up 42 percent
sequentially and 34 percent from a year ago. EPS included an expense of $0.03
from stock-based compensation, a benefit of $0.03 from a sales tax refund and
a
benefit of $0.02 from the royalty settlement. The company began expensing stock
options in the third quarter of 2005 and, therefore, equivalent stock-based
compensation expense was not reflected in the year-ago quarter, when the company
earned $0.35 per share from continuing operations.
“This
was
another excellent quarter for Texas Instruments,” said Rich Templeton, president
and chief executive officer. “All regions of the world showed strong revenue
growth from a year ago. Revenue from our wireless semiconductors grew 27
percent, including more than 70 percent growth in 3G; revenue from
high-performance analog semiconductors grew 32 percent; and revenue from our
DLP®
picture
technology grew 34 percent.
“Strategically,
our focus on open wireless standards was reinforced by the actions of operators
around the world, who are accelerating their infrastructure transitions to
GSM
because of its cost effectiveness and the wide range of choices it offers,”
Templeton said.
“Going
into the third quarter, our backlog of orders is up, and our outlook is for
seasonal growth. As always, we will pay close attention to the world’s economies
and to our inventory in the various market channels.”
Gross
Profit
TI’s
gross profit was $1.91 billion, or 51.6 percent of revenue. This was an increase
of $235 million from the prior quarter and an increase of $481 million from
the
year-ago quarter. The increases over both periods reflect higher revenue in
the
company’s two segments, Semiconductor and Educational & Productivity
Solutions (E&PS).
Operating
Expenses
Research
and development (R&D) expense was $536 million, or 14.5 percent of revenue.
R&D increased $3 million from the prior quarter and $51 million from the
year-ago quarter. The increases were due to higher spending for development
of
new semiconductor devices, particularly associated with wireless applications.
Selling,
general and administrative (SG&A) expense was $418 million, or 11.3 percent
of revenue. This expense decreased $3 million from the prior quarter and was
up
$79 million from the year-ago quarter. The increase from a year ago was
primarily due to the combination of stock-based compensation expense and higher
spending for consumer advertising of the company’s DLP semiconductors used in
high-definition televisions.
Operating
Profit
Operating
profit was $953 million, or 25.8 percent of revenue. This was an increase of
$235 million from the prior quarter primarily due to higher gross profit in
both
of the company’s segments. It was also an increase of $351 million from the
year-ago quarter due to higher gross profit in the Semiconductor segment. Total
stock-based compensation expense of $84 million, or 2.3 percent of revenue,
was
included in Corporate in the second quarter of 2006.
Other
Income (Expense) Net (OI&E)
OI&E
of $88 million increased $36 million from the prior quarter and $32 million
from
the year-ago quarter due to a sales tax refund and higher interest income.
Net
Income
Income
from continuing operations was $739 million, or $0.47 per
share.
Net
income, which includes income from continuing and discontinued operations,
was
$2.39 billion, or $1.50 per share. This included $1.65 billion from discontinued
operations, almost all of which was a gain on the sale of the company’s former
Sensors & Controls business.
Orders
TI
orders
were $3.91 billion. This was an increase of $302 million from the prior quarter
and an increase of $767 million from the year-ago quarter. Both increases were
primarily due to higher demand for the company’s semiconductor products.
Cash
Cash
flow
from operations was $667 million. This was an increase of $145 million from
the
prior quarter and a decrease of $97 million from the year-ago quarter.
At
the
end of the second quarter, total cash (cash and cash equivalents plus short-term
investments) was $5.67 billion, up $2.01 billion from the end of the prior
quarter and up $1.20 billion from the end of the year-ago quarter. These
increases were primarily due to the $2.98 billion of cash from the sale of
the
company’s Sensors & Controls business as well as income from continuing
operations, partially offset by the cash used for stock repurchases. During
the
second quarter of 2006, the company repurchased 33 million shares of TI common
stock for $1.04 billion and paid $47 million in dividends. Also in the quarter,
$275 million of variable-rate bank notes were prepaid.
Capital
Spending and Depreciation
Capital
expenditures were $374 million. This was a decrease of $34 million from the
prior quarter and an increase of $127 million from the year-ago
quarter.
TI’s
capital expenditures in the second quarter were primarily for equipment used
in
the assembly and test of semiconductors.
Depreciation
was $267 million, a decrease of $3 million from the prior quarter and a decrease
of $70 million from the year-ago quarter.
Accounts
Receivable and Inventories
Accounts
receivable were $1.93 billion. This was an increase of $131 million from the
prior quarter due to seasonally higher receivables for calculators in the
E&PS segment, and an increase
of $191 million from the year-ago quarter reflecting higher revenue. Days sales
outstanding were 47 at the end of the second quarter compared with 49 at the
end
of the prior quarter and 53 at the end of the year-ago quarter.
Inventory
was $1.34 billion at the end of the second quarter. This was an increase of
$89
million from the prior quarter as the company built inventory to support
expected product shipments in the second half of the year. Compared with the
year-ago quarter, inventory increased $219 million. Days of inventory at the
end
of the second quarter were 67 compared with 67 at the end of the prior quarter
and 65 at the end of the year-ago quarter.
Outlook
TI
intends to provide a mid-quarter update to its financial outlook on
September
11, 2006, by issuing a press release and holding a conference call. Both will
be
available on the company’s web site.
For
the
third quarter of 2006, TI expects revenue from continuing operations to be
in
the following ranges:
| · |
Total
TI, $3.63 billion to $3.95 billion;
|
| · |
Semiconductor,
$3.45 billion to $3.75 billion; and
|
| · |
Educational
& Productivity Solutions, $180 million to $200
million.
|
TI
expects earnings per share from continuing operations to be in the range of
$0.42 to $0.48.
The
effective tax rate for continuing operations in 2006 is expected to be about
30
percent, unchanged from the prior estimate. This tax rate is based on
current tax law and does not assume reinstatement of the federal research tax
credit, which expired at the end of 2005. Additionally
in 2006 for continuing operations, TI still expects expense for R&D to be
about $2.2 billion and capital expenditures to be about $1.3 billion.
Depreciation is expected to be about $1.05 billion, up slightly from the prior
estimate.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Statements of Income
(Millions
of dollars, except per-share amounts)
|
|
For
Three Months Ended
|
|||||||||
|
|
June
30,
2006
|
Mar.
31,
2006
|
June
30,
2005
|
|||||||
|
Net
revenue
|
$
|
3,697
|
$
|
3,334
|
$
|
2,971
|
||||
|
Cost
of revenue (COR)
|
1,790
|
1,662
|
1,545
|
|||||||
|
Gross
profit
|
1,907
|
1,672
|
1,426
|
|||||||
|
Gross
profit % of revenue
|
51.6
|
%
|
50.1
|
%
|
48.0
|
%
|
||||
|
Research
and development (R&D)
|
536
|
533
|
485
|
|||||||
|
R&D
% of revenue
|
14.5
|
%
|
16.0
|
%
|
16.3
|
%
|
||||
|
Selling,
general and administrative (SG&A)
|
418
|
421
|
339
|
|||||||
|
SG&A
% of revenue
|
11.3
|
%
|
12.6
|
%
|
11.4
|
%
|
||||
|
Total operating costs and expenses
|
2,744
|
2,616
|
2,369
|
|||||||
|
Profit
from operations
|
953
|
718
|
602
|
|||||||
|
Operating
profit % of revenue
|
25.8
|
%
|
21.5
|
%
|
20.3
|
%
|
||||
|
Other
income (expense) net
|
88
|
52
|
56
|
|||||||
|
Interest
expense on loans
|
2
|
3
|
2
|
|||||||
|
Income
from
continuing operations before income taxes
|
1,039
|
767
|
656
|
|||||||
|
Provision
for income taxes
|
300
|
225
|
72
|
|||||||
|
Income
from
continuing operations
|
739
|
542
|
584
|
|||||||
|
Income
from
discontinued operations, net
of income taxes
|
1,648
|
43
|
44
|
|||||||
|
Net
income
|
$
|
2,387
|
$
|
585
|
$
|
628
|
||||
|
Basic
earnings
per common share:
|
||||||||||
|
Income
from continuing operations
|
$
|
.48
|
$
|
.34
|
$
|
.36
|
||||
|
Net
income
|
$
|
1.54
|
$
|
.37
|
$
|
.38
|
||||
|
Diluted
earnings per common share:
|
||||||||||
|
Income
from continuing operations
|
$
|
.47
|
$
|
.33
|
$
|
.35
|
||||
|
Net
income
|
$
|
1.50
|
$
|
.36
|
$
|
.38
|
||||
|
Average
shares outstanding (millions):
|
||||||||||
|
Basic
|
1,553
|
1,585
|
1,633
|
|||||||
|
Diluted
|
1,586
|
1,618
|
1,669
|
|||||||
|
Cash
dividends declared per share of common stock
|
$
|
.030
|
$
|
.030
|
$
|
.025
|
||||
|
Stock-based
compensation expense included in continuing
operations:
|
||||||||||
|
COR
|
16
|
18
|
--
|
|||||||
|
R&D
|
25
|
28
|
--
|
|||||||
|
SG&A
|
43
|
45
|
5
|
|||||||
|
Profit
from operations
|
84
|
91
|
5
|
|||||||
|
%
of revenue
|
2.3
|
%
|
2.7
|
%
|
0.2
|
%
|
||||
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Balance Sheets
(Millions
of dollars, except share amounts)
|
|
June
30,
2006
|
Mar.
31,
2006
|
June
30,
2005
|
|||||||
|
Assets
|
||||||||||
|
Current
assets:
|
||||||||||
|
Cash
and cash equivalents
|
$
|
1,678
|
$
|
722
|
$
|
2,128
|
||||
|
Short-term
investments
|
3,992
|
2,942
|
2,345
|
|||||||
|
Accounts
receivable, net of allowances of ($28), ($32) and ($34)
|
1,929
|
1,798
|
1,738
|
|||||||
|
Raw
materials
|
108
|
91
|
75
|
|||||||
|
Work
in process
|
818
|
819
|
686
|
|||||||
|
Finished
goods
|
409
|
336
|
355
|
|||||||
|
Inventories
|
1,335
|
1,246
|
1,116
|
|||||||
|
Deferred
income taxes
|
632
|
626
|
597
|
|||||||
|
Prepaid
expenses and other current assets
|
215
|
248
|
224
|
|||||||
|
Assets
of discontinued operations
|
11
|
516
|
452
|
|||||||
|
Total
current assets
|
9,792
|
8,098
|
8,600
|
|||||||
|
Property,
plant and equipment at cost
|
8,406
|
8,442
|
8,798
|
|||||||
|
Less
accumulated depreciation
|
(4,422
|
)
|
(4,574
|
)
|
(5,172
|
)
|
||||
|
Property,
plant and equipment, net
|
3,984
|
3,868
|
3,626
|
|||||||
|
Equity
and debt investments
|
253
|
240
|
265
|
|||||||
|
Goodwill
|
792
|
793
|
677
|
|||||||
|
Acquisition-related
intangibles
|
117
|
131
|
84
|
|||||||
|
Deferred
income taxes
|
428
|
390
|
568
|
|||||||
|
Capitalized
software licenses, net
|
197
|
222
|
285
|
|||||||
|
Prepaid
retirement costs
|
219
|
184
|
232
|
|||||||
|
Other
assets
|
146
|
112
|
149
|
|||||||
|
Total
assets
|
$
|
15,928
|
$
|
14,038
|
$
|
14,486
|
||||
|
Liabilities
and Stockholders’ Equity
|
||||||||||
|
Current
liabilities:
|
||||||||||
|
Loans
payable and current portion of long-term debt
|
$
|
43
|
$
|
--
|
$
|
306
|
||||
|
Accounts
payable
|
788
|
720
|
575
|
|||||||
|
Accrued
expenses and other liabilities
|
994
|
895
|
811
|
|||||||
|
Income
taxes payable
|
870
|
280
|
248
|
|||||||
|
Accrued
profit sharing and retirement
|
77
|
43
|
62
|
|||||||
|
Liabilities
of discontinued operations
|
11
|
157
|
115
|
|||||||
|
Total
current liabilities
|
2,783
|
2,095
|
2,117
|
|||||||
|
Long-term
debt
|
--
|
318
|
55
|
|||||||
|
Accrued
retirement costs
|
103
|
116
|
526
|
|||||||
|
Deferred
income taxes
|
15
|
17
|
36
|
|||||||
|
Deferred
credits and other liabilities
|
239
|
254
|
289
|
|||||||
|
Total
liabilities
|
3,140
|
2,800
|
3,023
|
|||||||
|
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:
June 30, 2006 -- 1,739,086,194; March 31, 2006 -- 1,739,070,044;
June 30,
2005 -- 1,738,514,238
|
1,739
|
1,739
|
1,739
|
|||||||
|
Paid-in
capital
|
779
|
744
|
611
|
|||||||
|
Retained
earnings
|
16,271
|
13,930
|
12,197
|
|||||||
|
Less
treasury common stock at cost:
Shares:
June 30, 2006 -- 206,501,103; March 31, 2006 -- 181,032,577; June
30, 2005
-- 115,461,457
|
(5,911
|
)
|
(5,092
|
)
|
(2,908
|
)
|
||||
|
Accumulated
other comprehensive income (loss):
|
||||||||||
|
Minimum
pension liability
|
(66
|
)
|
(65
|
)
|
(163
|
)
|
||||
|
Unrealized
gains (losses) on available-for-sale investments
|
(23
|
)
|
(17
|
)
|
(11
|
)
|
||||
|
Unearned
compensation
|
(1
|
)
|
(1
|
)
|
(2
|
)
|
||||
|
Total
stockholders’ equity
|
12,788
|
11,238
|
11,463
|
|||||||
|
Total
liabilities and stockholders’ equity
|
$
|
15,928
|
$
|
14,038
|
$
|
14,486
|
||||
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
(Millions
of dollars)
|
|
For
Three Months Ended
|
|||||||||
|
|
June
30,
2006
|
Mar.
31,
2006
|
June
30,
2005
|
|||||||
|
Cash
flows from operating activities:
|
||||||||||
|
Net
income
|
$
|
2,387
|
$
|
585
|
$
|
628
|
||||
|
Adjustments
to reconcile net income to cash provided by
operating
activities of continuing operations:
|
||||||||||
|
Less
income from discontinued operations
|
(1,648
|
)
|
(43
|
)
|
(44
|
)
|
||||
|
Depreciation
|
267
|
270
|
337
|
|||||||
|
Stock-based
compensation
|
84
|
91
|
5
|
|||||||
|
Amortization
of capitalized software
|
29
|
30
|
31
|
|||||||
|
Amortization
of acquisition-related intangibles
|
15
|
16
|
15
|
|||||||
|
Deferred
income taxes
|
(41
|
)
|
(36
|
)
|
(174
|
)
|
||||
|
Increase/(decrease)
from changes in:
|
||||||||||
|
Accounts
receivable
|
(138
|
)
|
(144
|
)
|
(220
|
)
|
||||
|
Inventories
|
(89
|
)
|
(57
|
)
|
40
|
|||||
|
Prepaid
expenses and other current assets
|
26
|
(111
|
)
|
112
|
||||||
|
Accounts
payable and accrued expenses
|
129
|
(106
|
)
|
11
|
||||||
|
Income
taxes payable
|
(334
|
)
|
151
|
12
|
||||||
|
Accrued
profit sharing and retirement
|
35
|
(78
|
)
|
29
|
||||||
|
Noncurrent
accrued retirement costs
|
(45
|
)
|
(6
|
)
|
5
|
|||||
|
Other
|
(10
|
)
|
(40
|
)
|
(23
|
)
|
||||
|
Net
cash provided by operating activities of continuing
operations
|
667
|
522
|
764
|
|||||||
|
Cash
flows from investing activities:
|
||||||||||
|
Additions
to property, plant and equipment
|
(374
|
)
|
(408
|
)
|
(247
|
)
|
||||
|
Proceeds
from sales of assets
|
2,982
|
4
|
--
|
|||||||
|
Purchases
of cash investments
|
(3,063
|
)
|
(1,153
|
)
|
(248
|
)
|
||||
|
Sales
and maturities of cash investments
|
1,983
|
2,341
|
1,192
|
|||||||
|
Purchases
of equity investments
|
(17
|
)
|
(5
|
)
|
(6
|
)
|
||||
|
Sales
of equity and debt investments
|
2
|
7
|
--
|
|||||||
|
Acquisition
of businesses, net of cash acquired
|
(28
|
)
|
(177
|
)
|
--
|
|||||
|
Net
cash provided by investing activities of continuing
operations
|
1,485
|
609
|
691
|
|||||||
|
Cash
flows from financing activities:
|
||||||||||
|
Payments
on loans and long-term debt
|
(275
|
)
|
(311
|
)
|
(10
|
)
|
||||
|
Dividends
paid on common stock
|
(47
|
)
|
(48
|
)
|
(41
|
)
|
||||
|
Sales
and other common stock transactions
|
137
|
142
|
116
|
|||||||
|
Excess
tax benefit from stock option exercises
|
57
|
7
|
--
|
|||||||
|
Stock
repurchases
|
(1,037
|
)
|
(1,440
|
)
|
(1,292
|
)
|
||||
|
Net
cash used in financing activities of continuing operations
|
(1,165
|
)
|
(1,650
|
)
|
(1,227
|
)
|
||||
|
Cash
flows from discontinued operations:
|
||||||||||
|
Operating
activities
|
(28
|
)
|
35
|
62
|
||||||
|
Investing
activities
|
(6
|
)
|
(10
|
)
|
(22
|
)
|
||||
|
Net
cash provided by (used
in) discontinued operations
|
(34
|
)
|
25
|
40
|
||||||
|
Effect
of exchange rate changes on cash
|
3
|
2
|
9
|
|||||||
|
Net
increase/(decrease) in cash and cash equivalents
|
956
|
(492
|
)
|
277
|
||||||
|
Cash
and cash equivalents, beginning of period
|
722
|
1,214
|
1,851
|
|||||||
|
Cash
and cash equivalents, end of period
|
$
|
1,678
|
$
|
722
|
$
|
2,128
|
||||
Certain
amounts in the prior periods’ financial statements have been reclassified to
conform to the current presentation.
Business
Segment Net Revenue
(In
millions of dollars)
|
|
For
Three Months Ended
|
|||||||||
|
|
June
30,
2006
|
Mar.
31,
2006
|
June
30,
2005
|
|||||||
|
Semiconductor
|
$
|
3,505
|
$
|
3,262
|
$
|
2,791
|
||||
|
Educational
& Productivity Solutions
|
192
|
74
|
181
|
|||||||
|
Intersegment
eliminations
|
--
|
(2
|
)
|
(1
|
)
|
|||||
|
Total
net revenue
|
$
|
3,697
|
$
|
3,334
|
$
|
2,971
|
||||
Business
Segment Profit (Loss)
(In
millions of dollars)
|
|
For
Three Months Ended
|
|||||||||
|
|
June
30,
2006
|
Mar.
31,
2006
|
June
30,
2005
|
|||||||
|
Semiconductor*
|
$
|
1,032
|
$
|
883
|
$
|
597
|
||||
|
Educational
& Productivity Solutions
|
84
|
13
|
79
|
|||||||
|
Corporate**
|
(163
|
)
|
(178
|
)
|
(74
|
)
|
||||
|
Profit
from operations
|
$
|
953
|
$
|
718
|
$
|
602
|
||||
*
Semiconductor profit from operations includes a benefit of $57 for a state
sales
tax refund and $60 from the royalty settlement in the second quarter of
2006.
**
Corporate includes stock-based compensation expense of $84, $91 and $5
respectively.
The
royalty settlement and sales tax refund benefit included in TI's second quarter
2006 results are detailed as follows. All items are in the Semiconductor segment
results except the $20 million in Other income (expense) net, which is in
Corporate.
|
|
Royalty
Settlement
|
Sales
Tax Refund
|
|||||
|
Orders
|
$
|
70
|
$
|
--
|
|||
|
Net
revenue
|
70
|
--
|
|||||
|
Cost
of revenue
|
10
|
(31
|
)
|
||||
|
Gross
profit
|
60
|
31
|
|||||
|
R&D
|
--
|
(21
|
)
|
||||
|
SG&A
|
--
|
(5
|
)
|
||||
|
Profit
from operations
|
60
|
57
|
|||||
|
Other
income (expense) net
|
--
|
20
|
|||||
|
Income
from continuing operations
before income taxes
|
60
|
77
|
|||||
Semiconductor
| · |
Revenue
in the second quarter was $3.51 billion. This was an increase of
7 percent
from the prior quarter primarily due to demand for the company’s analog
products and a $70 million royalty settlement received in the second
quarter from Conexant Systems, Inc. It was also an increase of 26
percent
from the year-ago quarter primarily due to demand for the company’s DSP
and analog products.
|
| o |
Analog
revenue was up 8 percent from the prior quarter and increased 23
percent
from the year-ago quarter primarily due to demand for the company’s
high-performance analog products and analog products used in broadband
applications. Revenue from high-performance analog products grew
5 percent
from the prior quarter and 32 percent from a year ago.
|
| o |
DSP
revenue was about even with the prior quarter, and was up 24 percent
from
the year-ago quarter primarily due to higher demand from the wireless
market.
|
| o |
TI’s
remaining Semiconductor revenue increased 17 percent from the prior
quarter and 31 percent from a year ago due to the royalty settlement
and
broad-based growth in demand for DLP products, RISC microprocessors,
standard logic products and microcontrollers.
|
| · |
Gross
profit was $1.82 billion, or 51.8 percent of revenue. This was an
increase
of $157 million from the prior quarter and an increase of $490 million
from the year-ago quarter. The increases over both periods were due
to
higher revenue.
|
| · |
Operating
profit was $1.03 billion, or 29.4 percent of revenue. This was an
increase
of $149 million from the prior quarter and an increase of $435 million
from the year-ago quarter. The increases over both periods were due
to
higher gross profit.
|
| · |
Semiconductor
orders were $3.75 billion. This was an increase of 10 percent from
the
prior quarter primarily due to demand for analog products, and an
increase
of 26 percent from a year ago due to strong demand for analog and
DSP
products.
|
Semiconductor
Highlights
| · |
TI
is increasing its wireless design presence in India with a new R&D
center in Chennai, focusing on a platform of open-standard technologies
that span TI’s wireless product portfolio.
|
| · |
TI
unveiled details of its 45-nanometer manufacturing process that uses
immersion lithography to double the number of chips per wafer, increase
performance by 30 percent and reduce power consumption by 40 percent,
providing customers early access to faster, smaller and lower power
products.
|
| · |
TI
began volume production of a high-performance analog power management
chip
that extends battery life in smartphones, digital still cameras and
other
single-cell lithium-ion-powered portable multimedia devices, by delivering
96 percent efficiency over a wide range of input
voltages.
|
Educational
& Productivity Solutions
| · |
Revenue
in the second quarter was $192 million. This was an increase of $118
million from the prior quarter as retailers began to stock product
in
preparation for the upcoming back-to-school season. It was also an
increase of $11 million from the year-ago quarter due to higher demand
from instructional dealers that supply school districts.
|
| · |
Gross
profit was $119 million, or 61.9 percent of revenue. Gross profit
increased $78 million from the prior quarter and $8 million from
the
year-ago quarter primarily due to higher revenue.
|
| · |
Operating
profit was $84 million, or 43.9 percent of revenue. This was an increase
of $71 million from the prior quarter and $5 million from the year-ago
quarter. The increases were 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;
|
| · |
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 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 “Risk
Factors” in Item 1A 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 includes the Educational & Productivity Solutions
business. 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 www.ti.com.
TI
Trademark:
DLP
Other
trademarks are the property of their respective
owners.