Form 10-Q for Second Quarter 2007
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY
REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the quarterly period ended June 30, 2007
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the transition period from
to
Commission
File Number 001-03761
TEXAS
INSTRUMENTS INCORPORATED
(Exact
Name of Registrant as Specified in Its Charter)
|
|
Delaware
|
75-0289970
|
(State
of Incorporation)
|
(I.R.S.
Employer Identification
No.)
|
|
|
12500
TI Boulevard, P.O. Box 660199, Dallas, Texas
|
75266-0199
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code 972-995-3773
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes S No ¨
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer S |
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
¨
No
S
1,429,085,261
Number
of
shares of Registrant’s common stock outstanding as of
June
30,
2007
PART
I - FINANCIAL INFORMATION
ITEM
1. Financial Statements.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Statements of Income
(Millions
of dollars, except share and per-share amounts)
|
|
For
Three Months Ended June 30,
|
|
For
Six Months Ended June 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$
|
3,424
|
|
$
|
3,697
|
|
$
|
6,615
|
|
$
|
7,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenue (COR)
|
|
|
1,640
|
|
|
1,790
|
|
|
3,194
|
|
|
3,452
|
|
Research
and development (R&D)
|
|
|
551
|
|
|
536
|
|
|
1,104
|
|
|
1,069
|
|
Selling,
general and administrative (SG&A)
|
|
|
424
|
|
|
418
|
|
|
828
|
|
|
839
|
|
Total
|
|
|
2,615
|
|
|
2,744
|
|
|
5,126
|
|
|
5,360
|
|
Profit
from operations
|
|
|
809
|
|
|
953
|
|
|
1,489
|
|
|
1,671
|
|
Other
income (expense) net
|
|
|
56
|
|
|
86
|
|
|
95
|
|
|
135
|
|
Income
from continuing operations before income taxes
|
|
|
865
|
|
|
1,039
|
|
|
1,584
|
|
|
1,806
|
|
Provision
for income taxes
|
|
|
251
|
|
|
300
|
|
|
454
|
|
|
524
|
|
Income
from continuing operations
|
|
|
614
|
|
|
739
|
|
|
1,130
|
|
|
1,282
|
|
Income (loss)
from discontinued operations, net of income taxes
|
|
|
(4
|
)
|
|
1,648
|
|
|
(4
|
)
|
|
1,690
|
|
Net
income
|
|
$
|
610
|
|
$
|
2,387
|
|
$
|
1,126
|
|
$
|
2,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
.43
|
|
$
|
.48
|
|
$
|
.79
|
|
$
|
.82
|
|
Net
income
|
|
$
|
.42
|
|
$
|
1.54
|
|
$
|
.78
|
|
$
|
1.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
.42
|
|
$
|
.47
|
|
$
|
.77
|
|
$
|
.80
|
|
Net
income
|
|
$
|
.42
|
|
$
|
1.50
|
|
$
|
.77
|
|
$
|
1.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
shares outstanding (millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,437
|
|
|
1,553
|
|
|
1,439
|
|
|
1,569
|
|
Diluted
|
|
|
1,469
|
|
|
1,586
|
|
|
1,469
|
|
|
1,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared per share of common stock
|
|
$
|
.08
|
|
$
|
.03
|
|
$
|
.12
|
|
$
|
.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Statements of Comprehensive Income
(Millions
of dollars)
|
|
For
Three Months Ended June 30,
|
|
For
Six Months Ended June 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
614
|
|
$
|
739
|
|
$
|
1,130
|
|
$
|
1,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments,
net of tax
|
|
|
(1
|
)
|
|
(6
|
)
|
|
--
|
|
|
(7
|
)
|
Reclassification
of recognized transactions, net of tax
|
|
|
(1
|
)
|
|
--
|
|
|
(1
|
)
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized
net actuarial loss of defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments,
net of tax
|
|
|
68
|
|
|
--
|
|
|
68
|
|
|
--
|
|
Reclassification
of recognized transactions, net of tax
|
|
|
6
|
|
|
--
|
|
|
13
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized
prior service cost of defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments,
net of tax
|
|
|
(1
|
)
|
|
--
|
|
|
(1
|
)
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
pension liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments,
net of tax
|
|
|
--
|
|
|
(1
|
)
|
|
--
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
71
|
|
|
(7
|
)
|
|
79
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
from continuing operations
|
|
|
685
|
|
|
732
|
|
|
1,209
|
|
|
1,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss)
from discontinued operations
|
|
|
(4
|
)
|
|
1,648
|
|
|
(4
|
)
|
|
1,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
$
|
681
|
|
$
|
2,380
|
|
$
|
1,205
|
|
$
|
2,964
|
|
See
accompanying notes.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Balance Sheets
(Millions
of dollars, except share amounts)
|
|
June
30,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,266
|
|
$
|
1,183
|
|
Short-term
investments
|
|
|
2,315
|
|
|
2,534
|
|
Accounts
receivable, net of allowances of ($27) and ($26)
|
|
|
1,897
|
|
|
1,774
|
|
Raw
materials
|
|
|
106
|
|
|
105
|
|
Work
in process
|
|
|
876
|
|
|
930
|
|
Finished
goods
|
|
|
442
|
|
|
402
|
|
Inventories
|
|
|
1,424
|
|
|
1,437
|
|
Deferred
income taxes
|
|
|
1,072
|
|
|
741
|
|
Prepaid
expenses and other current assets
|
|
|
246
|
|
|
181
|
|
Assets
of discontinued operations
|
|
|
--
|
|
|
4
|
|
Total
current assets
|
|
|
8,220
|
|
|
7,854
|
|
Property,
plant and equipment at cost
|
|
|
7,657
|
|
|
7,751
|
|
Less
accumulated depreciation
|
|
|
(3,859
|
)
|
|
(3,801
|
)
|
Property,
plant and equipment, net
|
|
|
3,798
|
|
|
3,950
|
|
Equity
and other long-term investments
|
|
|
254
|
|
|
287
|
|
Goodwill
|
|
|
792
|
|
|
792
|
|
Acquisition-related
intangibles
|
|
|
117
|
|
|
118
|
|
Deferred
income taxes
|
|
|
405
|
|
|
601
|
|
Capitalized
software licenses, net
|
|
|
259
|
|
|
188
|
|
Overfunded
retirement plans
|
|
|
79
|
|
|
58
|
|
Other
assets
|
|
|
96
|
|
|
82
|
|
Total
assets
|
|
$
|
14,020
|
|
$
|
13,930
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Loans
payable and current portion of long-term debt
|
|
$
|
--
|
|
$
|
43
|
|
Accounts
payable
|
|
|
622
|
|
|
560
|
|
Accrued
expenses and other liabilities
|
|
|
1,048
|
|
|
1,029
|
|
Income
taxes payable
|
|
|
187
|
|
|
284
|
|
Accrued
profit sharing and retirement
|
|
|
98
|
|
|
162
|
|
Total
current liabilities
|
|
|
1,955
|
|
|
2,078
|
|
Underfunded
retirement plans
|
|
|
115
|
|
|
208
|
|
Deferred
income taxes
|
|
|
20
|
|
|
23
|
|
Deferred
credits and other liabilities
|
|
|
436
|
|
|
261
|
|
Total
liabilities
|
|
|
2,526
|
|
|
2,570
|
|
|
|
|
|
|
|
|
|
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: 2007 - 1,739,467,307; 2006 - 1,739,108,694
|
|
|
1,739
|
|
|
1,739
|
|
Paid-in
capital
|
|
|
761
|
|
|
885
|
|
Retained
earnings
|
|
|
18,511
|
|
|
17,529
|
|
Less
treasury common stock at cost: Shares:
2007 - 310,382,046; 2006 - 289,078,450
|
|
|
(9,233
|
)
|
|
(8,430
|
)
|
Accumulated
other comprehensive income (loss), net of tax
|
|
|
(284
|
)
|
|
(363
|
)
|
Total
stockholders’ equity
|
|
|
11,494
|
|
|
11,360
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
14,020
|
|
$
|
13,930
|
|
See
accompanying notes.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
(Millions
of dollars)
|
|
For
Six Months Ended June 30,
|
|
|
|
|
2007
|
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
1,126
|
|
$
|
2,972
|
|
Adjustments
to reconcile net income to cash provided by operating activities
of
continuing operations:
|
|
|
|
|
|
|
|
(Income)
loss from discontinued operations
|
|
|
4
|
|
|
(1,690
|
)
|
Depreciation
|
|
|
508
|
|
|
537
|
|
Stock-based
compensation
|
|
|
146
|
|
|
175
|
|
Amortization
of capitalized software
|
|
|
49
|
|
|
59
|
|
Amortization
of acquisition-related intangibles
|
|
|
28
|
|
|
31
|
|
Deferred
income taxes
|
|
|
(6
|
)
|
|
(77
|
)
|
Increase
(decrease) from changes in:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(127
|
)
|
|
(282
|
)
|
Inventories
|
|
|
13
|
|
|
(146
|
)
|
Prepaid
expenses and other current assets
|
|
|
(37
|
)
|
|
(85
|
)
|
Accounts
payable and accrued expenses
|
|
|
(57
|
)
|
|
23
|
|
Income
taxes payable
|
|
|
(133
|
)
|
|
(183
|
)
|
Accrued
profit sharing and retirement
|
|
|
(64
|
)
|
|
(43
|
)
|
Change
in funded status of retirement plans and accrued retirement costs
|
|
|
1
|
|
|
(51
|
)
|
Other
|
|
|
1
|
|
|
(51
|
)
|
Net
cash provided by operating activities of continuing operations
|
|
|
1,452
|
|
|
1,189
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
(353
|
)
|
|
(782
|
)
|
Proceeds
from sales of assets
|
|
|
--
|
|
|
2,986
|
|
Purchases
of cash investments
|
|
|
(2,325
|
)
|
|
(4,216
|
)
|
Sales
and maturities of cash investments
|
|
|
2,540
|
|
|
4,324
|
|
Purchases
of equity investments
|
|
|
(11
|
)
|
|
(22
|
)
|
Sales
of equity and other long-term investments
|
|
|
5
|
|
|
9
|
|
Acquisitions,
net of cash acquired
|
|
|
(27
|
)
|
|
(205
|
)
|
Net
cash provided by (used in) investing activities of continuing operations
|
|
|
(171
|
)
|
|
2,094
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Payments
on loans and long-term debt
|
|
|
(43
|
)
|
|
(586
|
)
|
Dividends
paid
|
|
|
(173
|
)
|
|
(95
|
)
|
Sales
and other common stock transactions
|
|
|
528
|
|
|
279
|
|
Excess
tax benefit from stock option exercises
|
|
|
90
|
|
|
64
|
|
Stock
repurchases
|
|
|
(1,599
|
)
|
|
(2,477
|
)
|
Net
cash used in financing activities of continuing operations
|
|
|
(1,197
|
)
|
|
(2,815
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from discontinued operations:
|
|
|
|
|
|
|
|
Operating
Activities
|
|
|
--
|
|
|
7
|
|
Investing
Activities
|
|
|
--
|
|
|
(16
|
)
|
Net
cash used in discontinued operations
|
|
|
--
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
(1
|
)
|
|
5
|
|
Net
increase in cash and cash equivalents
|
|
|
83
|
|
|
464
|
|
Cash
and cash equivalents, January 1
|
|
|
1,183
|
|
|
1,214
|
|
Cash
and cash equivalents, June 30
|
|
$
|
1,266
|
|
$
|
1,678
|
|
See
accompanying notes.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Notes
to Financial Statements
1. |
Description
of Business and Significant Accounting Policies and
Practices. Texas
Instruments
(TI) makes,
markets and sells high-technology components; more than 50,000 customers
all over the world buy our products.
|
Acquisitions
- In
January 2006, we acquired 100 percent of the equity of Chipcon Group ASA
(Chipcon), a leading company in the design of short-range, low-power wireless
radio frequency semiconductors, based in Oslo, Norway, for $177 million in
cash,
net of cash acquired. The acquisition was accounted for as a purchase business
combination and the results of operations of this business have been included
in
the Semiconductor segment of our consolidated statements of income from the
date
of acquisition. We also made an acquisition in the second quarter of 2006,
which
was not material, that was integrated into the Semiconductor business
segment.
In
the
first quarter of 2007, we also made an asset acquisition, which was not
material, that was integrated into the Semiconductor business
segment.
Dispositions
-
In
January 2006, we entered into a definitive agreement to sell substantially
all
of the Sensors & Controls segment to an affiliate of Bain Capital, LLC,
a global private equity investment firm, for $3 billion in cash. The sale
was completed on April 27, 2006. The operations and cash flows of the former
Sensors & Controls business have been eliminated from our ongoing
operations, and we have no significant continuing involvement in the operations
of the sold business. Beginning in the first quarter of 2006, the former Sensors
& Controls business was presented as a discontinued operation (see Note 2
for detailed information on discontinued operations).
Change
in Capitalization - On
April 2, 2007, we retired $43 million of 8.75% notes at maturity. During the
second quarter of 2006, our Japan subsidiary prepaid $275 million of
variable-rate bank notes.
Basis
of Presentation -
The
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the U.S. (US GAAP) and, except
for
the adoption of a change in accounting for income tax uncertainties, on the
same
basis as the audited financial statements included in our annual report on
Form
10-K for the year ended December 31, 2006. The consolidated statements of
income, statements of comprehensive income and statements of cash flows for
the
periods ended June 30, 2007 and 2006, and the balance sheet as of June 30,
2007,
are not audited but reflect all adjustments that are of a normal recurring
nature and are necessary for a fair statement of the results of the periods
shown. The consolidated balance sheet as of December 31, 2006, presented herein
is derived from the audited consolidated balance sheet presented in our annual
report on Form 10-K at that date. Certain amounts in the prior periods'
financial statements have been reclassified to conform to the current period
presentation. Certain information and note disclosures normally included in
annual consolidated financial statements have been omitted pursuant to the
rules
and regulations of the U.S. Securities and Exchange Commission (SEC). Because
the consolidated interim financial statements do not include all of the
information and notes required by US GAAP for a complete set of financial
statements, they should be read in conjunction with the audited consolidated
financial statements and notes included in our annual report on Form 10-K for
the year ended December 31, 2006. The results for the six-month period are
not
necessarily indicative of a full year's results.
The
consolidated financial statements include the accounts of all subsidiaries.
All
intercompany balances and transactions have been eliminated in consolidation.
All dollar amounts in the financial statements and tables in the notes, except
share and per-share amounts, are stated in millions of U.S. dollars unless
otherwise indicated.
Changes
in Accounting Standards -
In July
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
(FIN) No. 48, "Accounting
for Uncertainty in Income Taxes--An Interpretation of FASB Statement No.
109." We
adopted the provisions of FIN 48 effective January 1, 2007 (see Note 8).
In
February 2007, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 159, "The
Fair Value Option for Financial Assets and Financial Liabilities--Including
an
Amendment of FASB Statement No. 115."
SFAS 159
permits companies to choose to measure at fair value many financial instruments
and certain other items that are not currently required to be measured at fair
value. Entities choosing the fair value option would be required to recognize
subsequent changes in the fair value of those instruments and other items
directly in earnings. This standard also establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and liabilities.
SFAS 159 is effective beginning the first fiscal year that begins after November
15, 2007. We have evaluated the potential impact of this standard and anticipate
it will have no material impact on our financial position and results of
operations.
In
June
2007, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 06-11,
"Accounting
for Income Tax Benefits of Dividends on Share-Based Payment
Awards."
EITF
06-11 provides for the recognition and classification of deferred taxes
associated with dividends or dividend equivalents on nonvested equity shares
or
nonvested equity share units (including restricted stock units (RSUs)) that
are
paid to employees and charged to retained earnings. This issue is
effective for annual periods beginning after September 15, 2007. Also in
June 2007, the EITF ratified EITF Issue
No.
07-3,
"Accounting for Advance Payments for Goods or Services to Be Used
in
Future Research and Development Activities." EITF
07-3 provides that nonrefundable advance payments made for goods or services
to
be used in future research and development activities should be deferred and
capitalized until such time as the related goods or services are delivered
or
are performed, at which point the amounts would be recognized as an expense.
This issue is effective for fiscal years beginning after December 15,
2007. We
are
currently evaluating the potential impact these standards may have on our
financial position and results of operations, but do not believe the impact
will
be material.
Also
in
June 2007, the American Institute of Certified Public Accountants (AICPA) issued
Statement of Position (SOP) No.
07-1,
"Clarification
of the Scope of the Audit and Accounting Guide "Investment Companies" and
Accounting by Parent Companies and Equity Method Investors for Investments
in
Investment Companies."
This SOP
provides guidance for determining whether an
entity
is an investment company and also addresses when the specialized industry
accounting principles of an investment company should be used by a parent
company in consolidation or by an investor that applies the equity method of
accounting to its investment in the entity. This SOP is effective for fiscal
years beginning on or after December 15, 2007. We
have
evaluated the potential impact of this standard and anticipate it will have
no
material impact on our financial position and results of operations.
2. |
Discontinued
Operations.
On January 9, 2006, we announced a definitive agreement to sell
substantially all of the Sensors & Controls segment to an affiliate of
Bain Capital, LLC, for $3 billion in cash. The sale was completed
on April
27, 2006. The former Sensors & Controls business acquired by Bain
Capital, LLC was renamed Sensata Technologies, Inc.
(Sensata).
|
The
results of operations of the former Sensors & Controls business are
presented as discontinued operations. The following summarizes results from
the
discontinued operations of the former Sensors & Controls business for the
periods ended June 30, 2007 and 2006, included in the consolidated statements
of
income.
|
|
For
Three Months Ended
June
30,
|
For
Six Months Ended
June
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$
|
|
|
$
|
81
|
|
$
|
|
|
$
|
375
|
|
Operating
costs and expenses
|
|
|
(4
|
) |
|
84
|
|
|
(4
|
) |
|
313
|
|
Income
(loss) from
discontinued operations, before income taxes
|
|
|
(4
|
)
|
|
(3
|
) |
|
(4
|
) |
|
62
|
|
Provision
for income taxes
|
|
|
--
|
|
|
|
|
|
|
|
|
23
|
|
Income
(loss) from
discontinued operations, net of tax
|
|
|
(4
|
)
|
|
44
|
|
|
(4
|
) |
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on sale of discontinued operations
|
|
|
|
|
|
2,550
|
|
|
|
|
|
2,550
|
|
Provision
for income taxes
|
|
|
|
|
|
899
|
|
|
|
|
|
899
|
|
Gain
on sale of discontinued operations, net of tax
|
|
|
|
|
|
1,651
|
|
|
|
|
|
1,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
income (loss) from discontinued operations
|
|
$
|
(4
|
) |
$
|
1,648
|
|
$
|
(4
|
) |
$
|
1690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
|
|
$
|
1.06
|
|
$
|
|
|
$
|
1.08
|
|
Diluted
|
|
$
|
|
|
$
|
1.04
|
|
$
|
|
|
$
|
1.05
|
|
Earnings
per share amounts from continuing and
discontinued operations may not add to net income per share due to
rounding.
3. |
Earnings
per share.
Computation of earnings per common share (EPS) for income from
continuing
operations, and a reconciliation between the basic and diluted
basis, for
the periods ended June 30, are as
follows:
|
|
|
|
For
Three Months Ended June 30, 2007
|
|
For
Three Months Ended June 30, 2006
|
|
|
|
|
Income
|
|
Shares
|
|
EPS
|
|
Income
|
|
Shares
|
|
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
$
|
614
|
|
|
1,437
|
|
$
|
.43
|
|
$
|
739
|
|
|
1,553
|
|
$
|
.48
|
|
|
Dilutives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation plans
|
|
|
-- |
|
|
32 |
|
|
|
|
|
-- |
|
|
33 |
|
|
|
|
|
Diluted
EPS
|
|
$
|
614
|
|
|
1,469
|
|
$
|
.42
|
|
$
|
739
|
|
|
1,586
|
|
$
|
.47
|
|
|
|
|
For
Six Months Ended June 30, 2007
|
|
For
Six Months Ended June 30, 2006
|
|
|
|
|
Income
|
|
Shares
|
|
EPS
|
|
Income
|
|
Shares
|
|
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
$
|
1,130
|
|
|
1,439
|
|
$
|
.79
|
|
$
|
1,282
|
|
|
1,569
|
|
$
|
.82
|
|
|
Dilutives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation plans
|
|
|
-- |
|
|
30 |
|
|
|
|
|
-- |
|
|
33 |
|
|
|
|
|
Diluted
EPS
|
|
$
|
1,130
|
|
|
1,469
|
|
$
|
.77
|
|
$
|
1,282
|
|
|
1,602
|
|
$
|
.80
|
|
4. |
Stock-based
Compensation.
We have several stock-based employee compensation plans, which
are more
fully described in Note 9 in our 2006 annual report on Form
10-K.
|
The
amounts of stock-based compensation expense recognized in the periods presented
are as follows:
|
|
For
Three Months Ended
June
30,
|
For
Six Months Ended
June
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense recognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COR
|
|
$ |
13 |
|
$ |
16 |
|
$ |
28 |
|
$ |
34 |
|
R&D
|
|
|
21 |
|
|
25 |
|
|
43 |
|
|
53 |
|
SG&A
|
|
|
|
|
|
43
|
|
$
|
|
|
$
|
88
|
|
Total
|
|
$
|
|
|
$
|
84
|
|
$
|
|
|
$
|
175
|
|
The
amounts above include the impact of recognizing compensation expense
related to
RSUs, nonqualified stock options and stock options offered under the
employee
stock purchase plan. Stock-based compensation expense has not been allocated
to
the various segments, but is reflected in
Corporate.
5. |
Post-employment
Benefit Plans.
Components of net periodic employee benefit cost are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Defined
Benefit
|
|
U.S.
Retiree
Health Care
|
|
Non-U.S. Defined
Benefit
|
|
For
Three Months Ended June 30,
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Service
cost
|
|
$
|
6
|
|
$
|
6
|
|
$
|
1
|
|
$
|
1
|
|
$
|
10
|
|
$
|
11
|
|
Interest
cost
|
|
|
11
|
|
|
12
|
|
|
6
|
|
|
6
|
|
|
13
|
|
|
11
|
|
Expected
return on assets
|
|
|
(12
|
)
|
|
(12
|
)
|
|
(7
|
)
|
|
(5
|
)
|
|
(18
|
)
|
|
(16
|
)
|
Amortization
of prior service cost
|
|
|
--
|
|
|
--
|
|
|
1
|
|
|
1
|
|
|
(1
|
)
|
|
(1
|
)
|
Recognized
net actuarial loss
|
|
|
6
|
|
|
6
|
|
|
2
|
|
|
1
|
|
|
2
|
|
|
4
|
|
Net
periodic benefit cost
|
|
$
|
11
|
|
$
|
12
|
|
$
|
3
|
|
$
|
4
|
|
$
|
6
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Defined
Benefit
|
|
U.S.
Retiree
Health Care
|
|
Non-U.S.
Defined
Benefit
|
|
For
Six Months Ended June 30,
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Service
cost
|
|
$
|
13
|
|
$
|
13
|
|
$
|
2
|
|
$
|
2
|
|
$
|
20
|
|
$
|
21
|
|
Interest
cost
|
|
|
21
|
|
|
22
|
|
|
12
|
|
|
12
|
|
|
25
|
|
|
23
|
|
Expected
return on assets
|
|
|
(24
|
)
|
|
(24
|
)
|
|
(13
|
)
|
|
(10
|
)
|
|
(36
|
)
|
|
(33
|
)
|
Amortization
of prior service cost
|
|
|
--
|
|
|
--
|
|
|
1
|
|
|
1
|
|
|
(1
|
)
|
|
(2
|
)
|
Recognized
net actuarial loss
|
|
|
11
|
|
|
11
|
|
|
4
|
|
|
3
|
|
|
5
|
|
|
9
|
|
Net
periodic benefit cost
|
|
$
|
21
|
|
$
|
22
|
|
$
|
6
|
|
$
|
8
|
|
$
|
13
|
|
$
|
18
|
|
6. |
Segment
Data.
We have two reportable operating segments: Semiconductor and
Education
Technology.
|
Segment
information for continuing operations follows:
|
|
For
Three Months Ended June 30,
|
|
For Six
Months Ended June 30,
|
|
Business
Segment Net Revenues
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Semiconductor*
|
|
$
|
3,257
|
|
$
|
3,505
|
|
$
|
6,372
|
|
$
|
6,766
|
|
Education
Technology
|
|
|
167
|
|
|
192
|
|
|
243
|
|
|
265
|
|
Total
net revenues
|
|
$
|
3,424
|
|
$
|
3,697
|
|
$
|
6,615
|
|
$
|
7,031
|
|
|
|
For
Three Months Ended June 30,
|
|
For Six
Months Ended June 30,
|
|
Business
Segment Profit (Loss)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Semiconductor*
|
|
$
|
905
|
|
$
|
1,032
|
|
$
|
1,735
|
|
$
|
1,915
|
|
Education
Technology
|
|
|
74
|
|
|
84
|
|
|
89
|
|
|
98
|
|
Corporate
|
|
|
(170
|
)
|
|
(163
|
)
|
|
(335
|
)
|
|
(342
|
)
|
Profit
from operations
|
|
$
|
809
|
|
$
|
953
|
|
$
|
1,489
|
|
$
|
1,671
|
|
*
Semiconductor revenue in the second quarter of 2006 includes a $70 million
benefit from a royalty settlement. Semiconductor profit from operations
includes a benefit of $60 million from the royalty settlement. Also
included is a benefit of $57 million from a $77 million net sales tax refund
that was due to the settlement of an audit of Texas sales taxes paid on various
purchases over a nine year period. The $57 million effect on profit from
operations is reflected as $31 million in cost of revenue, $21 million in
R&D and $5 million in SG&A. The remaining $20 million of the net sales
tax refund is reflected in Other income (expense) net.
7. |
Restructuring
Actions.
On January 22, 2007, we announced a plan to change the way
we develop
advanced digital manufacturing process technology. Instead
of separately
creating our own core process technology, we will work collaboratively
with our foundry partners to specify and drive the next generations
of
digital process technology. Additionally, we will stop production
at an
older digital factory and move its manufacturing equipment
into several of
our analog factories to support greater analog
output.
|
These
actions will take place throughout 2007, and when complete are expected to
reduce annualized costs by about $200 million. About 500 jobs are expected
to be
eliminated by year end. In total, we will take restructuring charges of
approximately $55 million.
Income
for the second quarter of 2007 includes a charge of $17 million related to
these
actions, and is primarily due to severance and benefit costs of $11 million
and acceleration of depreciation on the facilities’ assets over the remaining
service lives of $6 million. For the six months ending June 30, 2007, income
includes a charge of $31 million, and is primarily due to severance and
benefit costs of $21 million and acceleration of depreciation of $10
million.
Of
the
total restructuring charges for the period, $11 million ($20 million for the
six
months) is included in cost of revenue and $6 million ($11 million for the
six
months) is included in research and development expense, and are reflected
in
Corporate.
As
of
June 30, 2007, $3 million has been settled and paid to terminated employees
for
severance and benefits.
8. |
Income
Taxes.
Federal income taxes for the interim periods presented have
been included
in the accompanying financial statements on the basis of
an estimated
annual rate. As of June 30, 2007, the estimated annual effective
tax rate
for 2007 is about 28 percent. The effective annual tax rate
for 2007
differs from the 35 percent statutory corporate tax rate
due to the
effects of non-U.S. tax rates, the federal research tax credit
and the
deduction for U.S. manufacturing.
|
Uncertain
Tax positions - We
adopted the provisions of FIN 48 effective January 1, 2007.
Through
December 31, 2006, in accordance with prior standards, we assessed the ultimate
resolution of uncertain tax matters as they arose and established reserves
for
tax contingencies when we believed an unfavorable outcome was probable and
the
liability could be reasonably estimated.
As
of
December 31, 2006, we had tax reserves of $178 million and offsets of $76
million to certain of these tax reserves. These offsets were expected to be
realized primarily through procedures for relief from double taxation under
applicable tax treaties with foreign tax jurisdictions or through the reduction
of future tax liabilities. The net amount of the reserves and offsets was
recorded primarily as a reduction of non-current deferred tax
assets.
FIN
48
differs from the prior standards in that it requires companies to determine
that
it is “more likely than not” that a tax position will be sustained by the
appropriate taxing authorities before any benefit can be recorded in the
financial statements. As a result, we reduced the tax reserves
by $20 million, from $178 million to $158 million. In addition, FIN 48 requires
that liabilities for uncertain tax positions be recorded as a separate
liability. Therefore, we reclassified the resulting $158 million liability
for
uncertain tax positions from deferred tax assets to deferred credits and other
liabilities.
As
a
result of the reduction in the liability for uncertain tax positions, we
recorded a $9 million decrease in the amount of accrued interest expense. Our
policy continues to be to recognize accrued interest related to uncertain tax
positions and penalties as components of other income (expense)
net.
The
decrease in tax reserves and the decrease in accrued interest expense both
resulted in an increase to the January 1, 2007, balance of retained earnings,
as
required by the adoption of FIN 48.
Of
the
$158 million liability for uncertain tax positions as of January 1, 2007, $139
million represents tax positions that, if recognized, would impact the effective
tax rate. If these tax positions were recognized, $58 million of the $76 million
deferred tax assets primarily relating to the procedures for relief from double
taxation (as described above) would also be recognized.
The
statute of limitations remains open for U.S. Federal tax returns for 1999 and
following years. Our returns for the years 2000 through 2002 are the subject
of
an appeals proceeding and our returns for the years 2003 through 2004 are
currently under audit. It is reasonably possible that both the appeals
proceeding and the audit will be completed within the next twelve months.
Although we are unable to estimate the range of any reasonably possible increase
or decrease in uncertain tax positions from the eventual outcome of these
matters, we do not anticipate it will result in a material change to our
financial position or results of operations.
In
foreign jurisdictions, the years open to audit represent the years still subject
to the statute of limitations. Years still open to audit by foreign tax
authorities in major jurisdictions include Germany (2001 onward), France (2003
onward), Japan (2000 onward) and Taiwan (2002 onward).
During
the six months ended June 30, 2007, there have been no material changes in
the
liability for uncertain tax positions.
9. |
Contingencies.
We routinely sell products with a limited intellectual property
indemnification included in the terms of sale. Historically,
we have had
only minimal and infrequent losses associated with these
indemnities.
Consequently, any future liabilities brought about by the
intellectual
property indemnities cannot reasonably be estimated or
accrued.
|
We
accrue
for known product-related claims if a loss is probable and can be reasonably
estimated. During the periods presented, there have been no material accruals
or
payments regarding product warranty or product liability, and historically
we
have experienced a low rate of payments on product claims. Consistent with
general industry practice, we enter into formal contracts with certain customers
in which the parties define warranty remedies. Typically, our warranty for
semiconductor products covers three years, an obligation to repair, replace
or
refund, and a maximum payment obligation tied to the price paid for our
products. In some cases, product claims may be disproportionate to the price
of
our products.
We
are
subject to various other legal and administrative proceedings. Although it
is
not possible to predict the outcome of these matters, we believe that the
results of these proceedings will not have a material adverse effect upon our
financial condition, results of operations or liquidity.
Discontinued
Operation Indemnity - In
connection with the sale of the former Sensors & Controls business, we have
agreed to indemnify Sensata for certain specified litigation matters, as well
as
other liabilities, including environmental liabilities. Our indemnification
obligations with respect to breaches of representations and warranties and
the
specified litigation matters are, generally, subject to a total deductible
of
$30 million and our maximum potential exposure is limited to $300
million.
As of
June 30, 2007, there were no significant liabilities recorded under these
indemnification obligations.
10. |
Subsequent
Event.
The previously announced sale of our broadband DSL customer-premises
equipment semiconductor product line to Infineon Technologies
AG closed on
July 31, 2007.
|
ITEM
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
The
following should be read in conjunction with the Financial Statements and the
related Notes that appear elsewhere in this document. All dollar amounts in
the
tables in this discussion are stated in millions of U.S. dollars, except
per-share amounts. All amounts in this discussion reference continuing
operations unless otherwise noted.
Overview
Texas
Instruments makes, markets and sells high-technology components; more than
50,000 customers all over the world buy our products. We have two segments:
Semiconductor and Education Technology. Semiconductor is by far the larger
of
these segments. It accounted for 96 percent of our revenue in 2006, and
historically it averages a higher growth rate than Education Technology,
although the semiconductor market is characterized by wide swings in growth
rates from year to year. We were the world’s third-largest semiconductor company
in 2006 as measured by revenue, according to iSuppli Corporation, an industry
analyst.
In
our
Semiconductor segment, we focus primarily on technologies that make it possible
for a variety of consumer and industrial electronic equipment to process both
analog and digital signals in real time. These technologies are known as analog
semiconductors and digital signal processors, or DSPs, and together they account
for about three-fourths of our Semiconductor revenue. Almost all of
today’s electronic equipment requires some form of analog or digital signal
processing.
Analog
semiconductors process “real world” inputs, such as sound, temperature, pressure
and visual images, conditioning them, amplifying them and converting them into
digital signals. They also assist in the management of power distribution and
consumption, aspects critical to today’s portable electronic devices. Generally,
analog products require less capital-intensive factories to manufacture than
digital products.
Our
analog semiconductors consist of custom products and standard products. Custom
products are designed for specific applications for specific customers. Standard
products include application-specific standard products (designed for a specific
application and usable by multiple customers) and high-performance standard
catalog products (usable in multiple applications by multiple customers). These
standard products are characterized by differentiated features and
specifications, as well as relatively high gross margins. Standard analog
products tend to have long life spans. Many custom and standard products are
proprietary and difficult for competitors to imitate. Analog products also
include commodity products, which are sold in high volume and into a broad
range
of applications, and generally are differentiated by price and availability.
We
are the world’s largest supplier of analog semiconductors.
DSPs
use
complex algorithms and compression techniques to alter and improve a data
stream. These products are ideal for applications that require precise,
real-time processing of real-world signals that have been converted into digital
form. Their power efficiency is important for battery-powered
devices.
Our
DSP
portfolio includes custom, application-specific and standard products. Custom
products are designed for specific customers with very high volumes in
established markets. Application-specific products are implementations crafted
for specific applications like wireless infrastructure, VoIP (Voice over
Internet Protocol) gateways, digital still cameras and residential gateways,
to
name a few. Our standard DSP products are sold into a broad range of
applications and seed the next generation of signal-processing innovation.
We
are the world’s largest supplier of DSPs.
We
expect
that our inventory levels generally will increase from historical levels in
order to meet the requirements of our customers. For example, the analog market
consists of a very broad base of customers that order relatively small
quantities of many different analog products. These customers typically expect
very short order lead times, requiring us to maintain more on-hand inventory.
Also, analog suppliers typically hold a broader range of inventory in order
to
serve their customers, while manufacturing in efficient quantities. Analog
products will be a growing portion of our inventory as our analog business
continues to grow and broaden its product portfolio. Additionally, our large
customers are moving increasingly toward a business model that requires us
to
maintain inventory on a consignment basis on their behalf.
We
own
and operate semiconductor manufacturing sites in the Americas, Japan, Europe
and
Asia. Our facilities require substantial investment to construct and are largely
fixed-cost assets once in operation. Because we own most of our manufacturing
capacity, a significant portion of our operating costs is fixed. In general,
these costs do not decline with reductions in customer demand or our utilization
of our manufacturing capacity, and can adversely affect profit margins as a
result. Conversely, as product demand rises and factory utilization increases,
the fixed costs are spread over increased output, which should improve profit
margins.
We
manufacture most of our analog products in our own factories. To supplement
our
manufacturing capacity, especially for digital products, we outsource a portion
of our product manufacturing to outside suppliers (foundries and assembly/test
subcontractors), which reduces both the amount of capital expenditures and
subsequent depreciation required to meet customer demands and fluctuations
in
profit margins. Outside foundries provided about 50 percent of our total
wafers
for advanced digital products in 2006. (A wafer is a thin slice of silicon
on
which an array of semiconductor devices has been fabricated.)
The
semiconductor market is characterized by constant and typically incremental
innovation in product design and manufacturing technologies. We make significant
investments in research and development (R&D). Typically, products resulting
from our R&D investments in the current period do not contribute materially
to revenue in that period, but should benefit us in future years. In general,
new semiconductor products are shipped in limited quantities initially and
will
then ramp into high volumes over time. Prices and manufacturing costs tend
to
decline over time.
We
strive
to keep improving performance. One example of that effort is by
changing how we develop advanced digital manufacturing process technology.
Instead of separately creating our own process technology, we work
collaboratively with our foundry suppliers to specify and drive the next
generations of digital process technology, and will continue making
products on these processes in our world-class factories. We expect that our
32-nanometer manufacturing process will be the first process technology
developed entirely through this new collaboration. This is a natural extension
of our existing relationships with foundries that will increase our R&D
efficiency and our capital efficiency while maintaining our responsiveness
to
customers. Also, in 2007 we will stop production at an older digital factory
and
move its manufacturing equipment into several of our analog factories to support
greater analog output.
These
changes are being made throughout 2007 and, when complete, are expected to
reduce costs by about $200 million annually. As a result of these changes,
about
500 jobs are expected to be reduced by year end. In total, we expect to incur
restructuring charges of approximately $55 million. These restructuring charges
were $17 million in the second quarter and $31 million year-to-date (see Note
7
to the Financial Statements for additional information).
Our
Education Technology segment is a leading supplier of graphing handheld
calculators. It also provides our customers with business and scientific
calculators and a wide range of advanced classroom tools and professional
development that enables students and teachers to explore math and science
interactively. Our products are marketed primarily through retailers and to
schools through instructional dealers. Education Technology experiences its
strongest results in the second and third quarters in preparation for the
back-to-school season. This business segment represented 4 percent of our
revenue in 2006. Prices of Education Technology products tend to be stable.
We
operate in a number of tax jurisdictions and are subject to several types of
taxes including those based on income, capital, property and payroll, and sales
and other transactional taxes. The timing of the final determination of our
tax
liabilities varies among these jurisdictions and their taxing authorities.
As a
result, during any particular reporting period, we might reflect (in either
income before income taxes, the provision for income taxes, or both) one or
more
tax refunds or assessments, or changes to tax liabilities, involving one or
more
taxing authorities (see Notes 1 and 8 to the Financial Statements for a
discussion of the effects of adopting Financial Accounting Standards Board
(FASB) Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
109”).
Discontinued
Operations
In
January 2006, we entered into a definitive agreement to sell substantially
all
of the former Sensors & Controls segment to an affiliate of Bain Capital,
LLC for $3 billion in cash (see Note 2 to the Financial Statements for
additional information). The sale was completed on April 27, 2006. The former
Sensors & Controls business acquired by Bain Capital, LLC was renamed
Sensata Technologies, Inc. (Sensata).
Second-Quarter
2007 Results
Revenue
was $3.42 billion for the second quarter of 2007. Revenue increased 7 percent
compared with the prior quarter as demand for our semiconductor products began
to rebound following an inventory correction in the semiconductor market. Growth
also benefited from a seasonal increase in demand for our graphing calculator
products. Revenue decreased 7 percent compared with the year-ago quarter
primarily due to lower demand across a broad range of products, and
to a
lesser extent, a royalty settlement in the year-ago quarter of $70
million.
Earnings
per share (EPS) were $0.42. This was a $0.07, or 20 percent, increase from
the
prior quarter and a $0.05 decrease from the year-ago quarter. In the year-ago
quarter, financial results included EPS benefits of $0.03 from a sales tax
refund and $0.02 associated with a favorable royalty settlement, both of
which
are discussed in more detail below under Details of Financial Results.
Our
attention to customers and growing focus on analog continue to help us deliver
stronger financial results. Moreover, we see even greater opportunities ahead
as
the market regains momentum. With our broad product portfolio, spanning both
analog and digital signal processing technologies, we are in a unique position
to support customers working on hundreds of electronics applications across
the
globe. We also see potential to expand our margins, and we recently raised
our
profitability goals to 55 percent gross margin and 30 percent operating margin.
We expect to meet these goals within the next few years.
TEXAS
INSTRUMENTS INCORPORATED AND SUBSIDIARIES
Consolidated
Statements of Income
(Millions
of dollars, except share and per-share amounts)
|
|
For
Three Months Ended
|
|
|
|
June
30,
2007
|
|
Mar.
31,
2007
|
|
June
30,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$
|
3,424
|
|
$
|
3,191
|
|
$
|
3,697
|
|
Cost
of revenue (COR)
|
|
|
1,640
|
|
|
1,554
|
|
|
1,790
|
|
Gross
profit
|
|
|
1,784
|
|
|
1,637
|
|
|
1,907
|
|
Research
and development (R&D)
|
|
|
551
|
|
|
552
|
|
|
536
|
|
Selling,
general and administrative (SG&A)
|
|
|
424
|
|
|
405
|
|
|
418
|
|
Total operating costs and expenses
|
|
|
2,615
|
|
|
2,511
|
|
|
2,744
|
|
Profit
from operations
|
|
|
809
|
|
|
680
|
|
|
953
|
|
Other
income (expense) net
|
|
|
56
|
|
|
39
|
|
|
86
|
|
Income
from
continuing operations before income taxes
|
|
|
865
|
|
|
719
|
|
|
1,039
|
|
Provision
for income taxes
|
|
|
251
|
|
|
203
|
|
|
300
|
|
Income
from
continuing operations
|
|
|
614
|
|
|
516
|
|
|
739
|
|
Income
(loss)
from discontinued operations, net of income taxes
|
|
|
(4
|
)
|
|
--
|
|
|
1,648
|
|
Net
income
|
|
$
|
610
|
|
$
|
516
|
|
$
|
2,387
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings
per common share:
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
.43
|
|
$
|
.36
|
|
$
|
.48
|
|
Net
income
|
|
$
|
.42
|
|
$
|
.36
|
|
$
|
1.54
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
.42
|
|
$
|
.35
|
|
$
|
.47
|
|
Net
income
|
|
$
|
.42
|
|
$
|
.35
|
|
$
|
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
shares outstanding (millions):
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,437
|
|
|
1,442
|
|
|
1,553
|
|
Diluted
|
|
|
1,469
|
|
|
1,470
|
|
|
1,586
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared per share of common stock
|
|
$
|
.08
|
|
$
|
.04
|
|
$
|
.03
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
52.1
|
%
|
|
51.3
|
%
|
|
51.6
|
%
|
R&D
|
|
|
16.1
|
%
|
|
17.3
|
%
|
|
14.5
|
%
|
SG&A
|
|
|
12.4
|
%
|
|
12.7
|
%
|
|
11.3
|
%
|
Operating
profit
|
|
|
23.6
|
%
|
|
21.3
|
%
|
|
25.8
|
%
|
Details
of Financial Results
Gross
profit for the second quarter was $1.78 billion. This was an increase of $147
million from the prior quarter due to higher revenue and a decrease of $123
million from the year-ago quarter due to the combination of the royalty
settlement and the sales tax refund in the year-ago quarter, and to a lesser
extent, lower revenue. As a percentage of revenue, gross profit for the second
quarter improved 80 basis points to a record 52.1 percent compared with 51.3
percent for the prior quarter and 51.6 percent for the year-ago
quarter.
As
previously mentioned, in the second quarter of 2006 we received a royalty
settlement and net sales tax refund. The royalty settlement was included in
Semiconductor revenue. The net sales tax refund was due to the settlement of
an
audit of Texas sales taxes paid on various purchases over a nine-year
period.
The
royalty settlement and sales tax refund benefit included in our 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 (OI&E), 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
|
|
OI&E
|
|
|
--
|
|
|
20
|
|
Income
from continuing operations before income taxes
|
|
|
60
|
|
|
77
|
|
R&D
expense for the second quarter of 2007 was $551 million. This was about even
with the prior quarter and an increase of $15 million from the year-ago quarter
due to the favorable impact of the sales tax refund a year ago.
SG&A
expense for the second quarter was $424 million. This was an increase of $19
million from the prior quarter due to higher compensation-related expenses
and,
to a lesser extent, seasonally higher marketing expenses for graphing
calculators. SG&A expense was about even with the year-ago quarter.
Operating
profit for the second quarter was $809 million, or 23.6 percent of revenue.
This
was an increase of $129 million from the prior quarter due to higher gross
profit in both of our segments. Operating margin grew by 230 basis points
sequentially, as we kept operating expense growth below the level of revenue
growth. Compared with the year-ago quarter, operating profit decreased $144
million from the year-ago quarter primarily due to the combination of the
royalty settlement and the sales tax refund in the year-ago quarter.
OI&E
was $56 million. Other income increased $16 million from the prior quarter
primarily due to the impairment of an investment in the prior quarter. Other
income declined $32 million from a year ago due about equally to the
benefit associated with the sales tax refund in the year-ago quarter and lower
interest income. Additionally,
with the retirement of our remaining debt in April of this year, interest
expense in the quarter was zero. It was $1 million in the prior quarter and
$2
million in the year-ago quarter.
As
of
June 30, 2007, the effective annual tax rate for continuing operations in 2007
is expected to be about 28 percent (see Note 8 to the Financial Statements
for
additional information).
Quarterly
income taxes are calculated using an estimate of the effective tax rate for
the
full year. The tax provision for continuing operations for the second quarter
was $251 million, compared with $203 million in the prior quarter and $300
million in the year-ago quarter. The increase in the tax provision from the
prior quarter is due to an increase in income before income taxes. Compared
with
the year-ago quarter, the tax provision decreased due to lower income before
income taxes.
Income
from continuing operations for the second quarter was $614 million, or $0.42
per
share, compared with $516 million, or $0.35 per share, for the prior quarter
and
$739 million, or $0.47 per share, for the year-ago quarter. The year-ago quarter
included a $0.03 per-share benefit from the sales tax refund and a $0.02
per-share benefit from the royalty settlement. As a result of our share
repurchases over the past twelve months, average diluted shares outstanding
decreased by 117 million shares, increasing earnings per share by
$0.03.
Income
from discontinued operations in the year-ago quarter was $1.65 billion,
or
$1.04 per share, due to the gain on the sale of our former Sensors
& Controls business.
Net
income, which includes continuing and discontinued operations, was $610 million,
or $0.42 per share in the second quarter, compared with $2.39 billion, or
$1.50
per share, in the year-ago quarter.
Orders
in
the second quarter were $3.45 billion. This was an increase of $247 million,
or
8 percent, from the prior quarter due to higher demand for semiconductor
products and, to a lesser extent, seasonally stronger demand for calculators.
Orders declined $455 million from the year-ago quarter due to lower demand
for
semiconductor products that more than offset a $50 million increase in demand
for calculators.
Semiconductor
Semiconductor
revenue in the second quarter was $3.26 billion. This was an increase of 5
percent from the prior quarter due to increased shipments resulting from
higher demand for DSP, DLP® and analog products. Compared with a year ago,
revenue decreased 7 percent as increased shipments resulting from higher demand
for high-performance analog products were more than offset by declines in
shipments resulting from lower demand across a broad range of other
products.
Analog
product revenue of $1.27 billion in the second quarter increased 2 percent
from
the prior quarter due to increased shipments resulting from higher demand for
our high-performance analog products. Compared with the year-ago quarter, analog
revenue decreased 3 percent as a decline in revenue from analog products used
in
cell phone applications more than offset gains in high-performance analog
revenue. Revenue from high-performance analog products increased 6 percent
from
the prior quarter and increased 11 percent from a year ago.
DSP
product revenue of $1.24 billion was up 7 percent from the prior quarter due
to
increased shipments resulting from higher demand for products used in cell
phone
applications. DSP product revenue declined 5 percent from a year ago due to
decreased shipments resulting from lower demand for a broad range of
products.
Remaining
Semiconductor revenue of $746 million in the second quarter was 5 percent higher
than the prior quarter primarily due to increased shipments resulting from
growth in demand for DLP products and, to a lesser extent, standard logic
products. Revenue from sales of microcontrollers and reduced instruction-set
computing (RISC) microprocessors were about even with the prior quarter while
royalties declined.
Remaining
Semiconductor revenue decreased 17 percent from the year-ago quarter primarily
due to decreased shipments resulting from lower demand for, in decreasing order,
RISC microprocessor products, DLP products and standard logic
products. The
royalty settlement in the year-ago quarter also contributed to the decline.
Revenue from sales of microcontrollers were about even with the year-ago
quarter.
On
an
end-equipment basis, revenue in the second quarter from products for
wireless applications increased 6 percent sequentially and decreased 8 percent
from a year ago. The sequential growth was driven mostly by products sold into
3G high-end cell phones. The decline from a year ago was due to lower sales
of
OMAP application processors in the Japan market where a significant
planned customer inventory build was underway in the year-ago quarter.
Wireless infrastructure revenue declined sequentially although it increased
from
a year ago. The sequential decline primarily reflected continued inventory
reductions in the 3G infrastructure markets.
Although
the cell phone market is undergoing changes, we remain confident in the strength
of our position within that market. For example, we recently announced a
significant expansion of our long-standing relationship with LM Ericsson
Telephone Company that will result in our combining 3G modem technology from
Ericsson mobile platforms with our OMAP applications processors. We expect
that
handsets using solutions from this engagement will be available on the market
in
the second half of 2008 and the revenue will ramp over time. However, we
anticipate the wireless market will undoubtedly remain noisy in the months
ahead, as original equipment manufacturers continue to diversify their chip
suppliers. In the end we believe that we offer a combination of
technologies and customer focus that is unmatched, and will enable us to
continue to thrive in the market for wireless applications, as our renewed
engagement with Ericsson demonstrates.
In
DLP
products, second-quarter revenue increased 21 percent sequentially due to
increased shipments resulting from higher demand following
a customer inventory correction in the prior quarter. Revenue declined 11
percent from a year ago primarily due to decreased shipments resulting from
lower demand for products for high-definition televisions.
Semiconductor
gross profit in the second quarter was $1.71 billion, or 52.5 percent of
revenue, an increase of $82 million from the prior quarter due to higher
revenue. Gross profit declined $105 million from the year-ago quarter due
to the
combination of the royalty settlement and the sales tax refund in the year-ago
quarter, and to a lesser extent, lower revenue.
Semiconductor
operating profit in the second quarter was $905 million, or 27.8 percent
of
revenue, an increase of $74 million from the prior quarter due to higher
gross
profit. Operating profit declined $127 million from the year-ago quarter
primarily due to the royalty settlement and the sales tax refund in the year-ago
quarter.
Semiconductor
orders were $3.25 billion. This was an increase of 6 percent from the prior
quarter due to higher demand across a broad range of analog and DSP products.
Orders declined 13 percent from the year-ago quarter due to lower demand
across
a broad range of products.
Education
Technology
Education
Technology revenue in the second quarter was $167 million. This was an increase
of $91 million from the prior quarter as shipments increased from retail
demand
for calculators in preparation for the back-to-school season. Revenue decreased
$25 million from the year-ago quarter, as some major retailers delayed stocking
calculator inventory until the third quarter, closer to the start of the
school
year.
Education
Technology gross profit was $109 million, or a record 65.1 percent of revenue.
This was up $64 million from the prior quarter due to higher revenue. Gross
profit decreased $10 million from the year-ago quarter due to lower revenue.
Education
Technology operating profit was $74 million, or 44.1 percent of revenue. This
was an increase of $58 million from the prior quarter due to higher gross
profit. It was a decrease of $10 million from the year-ago quarter due to lower
gross profit.
First
Six Months of 2007 Results
For
the
first six months of 2007, we report the following:
Revenue
of $6.62 billion decreased $416 million or 6 percent from the year-ago period
primarily due to decreased shipments resulting from lower demand for a broad
range of products,
and
to a
lesser extent, the $70 million royalty settlement in the year-ago
quarter.
Gross
profit for the first six months of 2007 was $3.42 billion compared with $3.58
billion in the year-ago period due to lower revenue in Semiconductor. Gross
profit margin was 51.7 percent of revenue compared with 50.9 percent in the
year-ago period.
R&D
expense for the first six months of 2007 of $1.10 billion increased 3 percent
compared with the year-ago period due to the sales tax refund in the second
quarter of 2006, and to a lesser extent, increased product development costs
in
the first six months of 2007, primarily for wireless applications. R&D
expense as a percent of revenue was 16.7 percent, compared with 15.2 percent
in
the year-ago period.
SG&A
expense for the first six months of 2007 was $828 million, about even with
$839
million in the year-ago period. SG&A expense as a percent of revenue was
12.5 percent compared with 11.9 percent in the year-ago period.
Operating
profit for the first six months of 2007 was $1.49 billion, or 22.5 percent
of
revenue, compared with $1.67 billion, or 23.8 percent of revenue, in the
year-ago period. The decrease was due to lower gross profit.
OI&E
for the first six months of 2007 was $95 million. Other income
decreased $44 million from the first six months of 2006, primarily due to
the combination of lower interest income and the prior period sales tax refund.
Additionally,
with the retirement of our remaining debt in April of 2007, interest expense
in
the first six months of 2007 was $1 million compared with $5 million in the
year-ago period.
The
tax
provision for continuing operations for the first six months of 2007 was $454
million, compared with $524 million in the same period of 2006. The decrease
was
due to lower income before income taxes.
Income
from continuing operations for the first six months of 2007 was $1.13 billion
compared with $1.28 billion for 2006. Earnings per share from continuing
operations were $0.77 per share compared with $0.80 per share in the year-ago
period. As a result of our share repurchases, average diluted shares outstanding
decreased by 133 million shares from the prior period, increasing earnings
per
share by $0.06.
Income
from discontinued operations for the first six months of 2006, which includes
the $1.65 billion gain from the sale of our former Sensors & Controls
business in the second quarter, was $1.69 billion or
$1.05
per share.
Net
income for the first six months of 2007 was $1.13 billion compared with $2.97
billion in the year-ago period.
Orders
of
$6.66 billion were down 11 percent from the year-ago period, reflecting lower
demand for Semiconductor products.
Semiconductor
Semiconductor
revenue in the first six months of 2007 was $6.37 billion, compared with $6.77
billion for the year-ago period, primarily due to decreased shipments resulting
from lower demand for a broad range of products, and
to a
lesser extent, the $70 million royalty settlement in the year-ago
period.
Gross
profit for the first six months of 2007 was $3.34 billion, or 52.4 percent
of
revenue, compared with $3.47 billion, or 51.3 percent of revenue, in the
year-ago period. The decrease was primarily due to lower revenue.
Semiconductor
operating profit for the first six months of 2007 was $1.74 billion, or 27.2
percent of revenue, down from $1.92 billion, or 28.3 percent of revenue, in
the
year-ago period primarily due to lower gross profit.
Semiconductor
orders for the first six months of 2007 were $6.33 billion compared with $7.18
billion for the year-ago period, reflecting lower demand across a broad range
of
products.
Education
Technology
Education
Technology revenue was $243 million for the first six months of 2007 compared
with $265 million for the year-ago period, as shipments decreased because
some major retailers delayed stocking calculator inventory in 2007 until the
third quarter, closer to the start of the school year.
Gross
profit for the first six months of 2007 was $154 million, or 63.2 percent of
revenue, compared with $160 million, or 60.2 percent of revenue in the year-ago
period, due to lower revenue.
Operating
profit for the first six months of 2007 was $89 million, or 36.7 percent of
revenue, compared with $98 million, or 36.8 percent of revenue in the year-ago
period, primarily due to lower gross profit.
Financial
Condition
Total
cash (cash and cash equivalents plus short-term investments) was $3.58 billion
at the end of the second quarter. This was a decrease of $136 million from
year-end 2006. In the last twelve months, we used $4.42 billion to repurchase
143 million shares of common stock and paid $278 million in dividends.
Accounts
receivable were $1.90 billion at the end of the second quarter, an increase
of
$123 million from year-end 2006, due to seasonably higher Education Technology
receivables. Days sales outstanding were 50 at the end of the second quarter
compared with 46 at the end of 2006.
Inventory
was $1.42 billion at the end of the second quarter. This was a decrease of
$13
million from the end of 2006, as we reduced inventory, especially of products
used in wireless applications. This was partially offset by planned
replenishment of long-lived, high-performance analog product inventory and
seasonally higher Education Technology inventory. Days of inventory at the
end
of the second quarter were 78 compared with 75 at the end of 2006 as inventory
decreased at a slower rate than cost of revenue.
Capital
expenditures for the first six months of 2007 were $353 million. This was
a
decrease of $429 million from the year-ago period due to lower expenditures
for
semiconductor manufacturing equipment.
Depreciation
for the first six months of 2007 was $508 million. This was a decrease of
$29
million from the year-ago period.
Even
with
declining revenue in the first six months of 2007, depreciation was only 8
percent of revenue and capital expenditures were 5 percent of revenue,
reflecting the increasing focus of our capital expenditures on analog products
and our strategy of outsourcing much of our advanced digital
production.
Liquidity
and Capital Resources
Cash
flow
from operations for the first six months of 2007 was $1.45 billion compared
with
$1.19 billion for the year-ago period. Lower levels of cash provided by
income from continuing operations for the first six months of 2007 compared
with
the same period of 2006 were more than offset by reduced working capital
requirements, particularly for inventory, accounts receivable and income
taxes.
Net
cash
used in investing activities was $171 million for the first six months of 2007
compared with net cash provided by investing activities of $2.09 billion for
the
same period a year ago. This difference was due to the $2.99 billion in cash
proceeds we received from the sale of the former Sensors & Controls business
in the first six months of 2006, partially offset by the lower levels of capital
expenditures and
cash
used for acquisitions in 2007.
For
the
first six months of 2007, net cash used in financing activities was $1.20
billion compared with $2.82 billion in the year-ago period, as we continued
our
common stock repurchases and retired debt. We used $1.60 billion of cash to
repurchase 50 million shares of common stock in the first six months of 2007
compared with $2.48 billion used to repurchase 79 million shares of common
stock
in the year-ago period. The $173 million in dividends paid on our common stock
in the first six months of 2007, compared with $95 million in the year-ago
period, reflected increases in our regular quarterly cash dividend rate on
common stock since the year-ago period. This higher dividend rate is partially
offset by a lower number of shares outstanding. In April 2007, we retired $43
million of outstanding 8.75% notes upon maturity. The exercise of stock
options by employees for shares of TI stock is also reflected in cash from
financing activities. For the first six months of 2007 such exercises provided
$528 million compared to $279 million for the same period a year ago.
We
believe we have the necessary financial resources to fund our working capital
needs, capital expenditures, authorized stock repurchases, dividend payments
and
other business requirements for at least the next 12 months.
The
previously announced sale of our broadband DSL customer-premises equipment
semiconductor product line to Infineon Technologies AG closed on July 31,
2007.
In
2007,
we expect: an annual effective tax rate of about 28 percent; R&D expense of
about $2.2 billion, capital expenditures of about $0.9 billion and depreciation
of about $1.0 billion.
Long-term
Contractual Obligations
As
a
result of the adoption of FIN 48, we have recorded a $158 million liability
for
uncertain tax positions. We are not updating the disclosures in our long-term
contractual obligations table presented in our 2006 Form 10-K because of
the
difficulty in making reasonably reliable estimates of the timing of cash
settlements with the respective taxing authorities (see Notes 1 and 8 to
the
Financial Statements for additional discussion).
Changes
in Accounting Standards
See
Note
1 to the Financial Statements for detailed information regarding the status
of
new accounting standards that are not yet effective for us.
ITEM
3. Quantitative and Qualitative Disclosures About Market Risk.
Information
concerning market risk is contained on page 55 of Exhibit 13 to our Form 10-K
for the year ended December 31, 2006, and is incorporated by reference to such
exhibit.
ITEM
4. Controls and Procedures.
An
evaluation as of the end of the period covered by this report was carried out
under the supervision and with the participation of management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the
design and operation of our disclosure controls and procedures (as defined
in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that those disclosure controls and procedures were effective in
providing reasonable assurance that information required to be disclosed in
the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Commission’s
rules and forms. In addition, there has been no change in our internal control
over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under
the
Securities Exchange Act of 1934) that occurred during the period covered by
this
report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
PART
II - OTHER INFORMATION
ITEM
2. Unregistered Sales of Equity Securities and Use of Proceeds.
The
following table contains information regarding the Registrant’s purchase of its
common stock during the quarter.
ISSUER
PURCHASES OF EQUITY SECURITIES
Period
|
|
Total
Number
of
Shares
Purchased
|
|
Average
Price Paid
per
Share
|
|
Total Number
of
Shares
Purchased
as
Part
of
Publicly
Announced
Plans
or
Programs
|
|
Approximate
Dollar Value of Shares that
May
Yet Be
Purchased
Under
the
Plans
or
Programs
(1)
|
|
April
1 through April 30, 2007
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
May
1 through May 31, 2007
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
June
1 through June 30, 2007
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
Total
|
|
|
|
|
$
|
|
|
|
24,460,609
|
(2)(3)
|
$
|
3,801,895,064
|
(3)
|
(1) |
All
purchases during the quarter were made under the authorization from
our
Board of Directors to purchase up to $5 billion of additional shares
of TI
common stock announced on September 21, 2006. No expiration date
has been
specified for this authorization.
|
(2) |
All
purchases were made through open-market purchases except for 40,000
shares
that were acquired in May and 20,000 shares that were acquired in
June.
The purchases of these 60,000 shares were made through a privately
negotiated forward purchase contract with a non-affiliated financial
institution. The forward purchase contract was designed to minimize
the
adverse impact on our earnings from the effect of stock market value
fluctuations on the portion of our deferred compensation obligations
denominated in TI stock.
|
(3) |
Includes
the purchase of 4,200,000 shares for which trades were settled in
the
first three business days of July 2007 for $159 million. The table
does
not include the purchase of 1,050,000 shares pursuant to orders placed
in
the first quarter, for which trades were settled in the first three
business days of the second quarter for $32 million. The purchase
of these
shares was reflected in this item in our report on Form 10-Q for
the
quarter ended March 31, 2007.
|
ITEM
4. Submission of Matters to a Vote of Security Holders.
At
the
annual meeting of stockholders held on April 19, 2007, the stockholders elected
TI’s Board of Directors and voted upon one Board proposal contained within our
Proxy Statement dated March 9, 2007.
The
Board
nominees were elected with the following vote:
Nominee
|
For
|
Against
|
Abstentions
(Other
Than
Broker
Non-
Votes)
|
Broker-Non
Votes
|
|
|
|
|
|
James
R. Adams
|
1,205,168,881
|
29,560,127
|
10,793,434
|
--
|
David
L. Boren
|
1,168,921,990
|
66,689,286
|
9,911,168
|
--
|
Daniel
A. Carp
|
1,002,884,333
|
230,864,907
|
11,773,209
|
--
|
Carrie
S. Cox
|
1,218,612,509
|
17,033,185
|
9,876,748
|
--
|
Thomas
J. Engibous
|
1,206,738,255
|
29,097,286
|
9,686,902
|
--
|
David
R. Goode
|
1,207,215,317
|
28,341,905
|
9,965,222
|
--
|
Pamela
H. Patsley
|
1,213,641,842
|
22,011,235
|
9,869,367
|
--
|
Wayne
R. Sanders
|
1,213,451,860
|
22,163,990
|
9,906,594
|
--
|
Ruth
J. Simmons
|
1,002,860,699
|
230,961,590
|
11,700,155
|
--
|
Richard
K. Templeton
|
1,205,544,916
|
30,106,847
|
9,870,681
|
--
|
Christine
Todd Whitman
|
1,002,546,322
|
231,329,619
|
11,646,503
|
--
|
The
Board
proposal was approved with the following vote:
Proposal
|
For
|
Against
|
Abstentions
(Other Than Broker Non-Votes)
|
Broker
Non-Votes
|
|
|
|
|
|
Board
proposal to ratify the appointment of Ernst & Young LLP as the
company's independent registered public accounting firm
|
1,218,858,331
|
17,402,769
|
9,261,644
|
--
|
ITEM
6. Exhibits.
|
|
|
Designation
of Exhibits in This Report
|
|
Description
of Exhibit
|
31.1
|
|
Certification
of Chief Executive Officer of Periodic Report Pursuant to Rule 13a-15(e)
or Rule 15d-15(e).
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-15(e)
or Rule 15d-15(e).
|
|
|
|
32.1
|
|
Certification
by Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
|
|
|
|
32.2
|
|
Certification
by Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
|
“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 herein that describe our 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 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, 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 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 Risk Factors discussion
in
Item 1A of our most recent Form 10-K. The forward-looking statements included
in
this quarterly report on Form 10-Q are made only as of the date of this report,
and we undertake no obligation to update the forward-looking statements to
reflect subsequent events or circumstances.
SIGNATURE
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, thereunto
duly authorized.
TEXAS
INSTRUMENTS INCORPORATED |
|
BY:
/s/ Kevin P.
March
|
Kevin
P. March
|
Senior
Vice President and
|
Chief
Financial Officer
|
Date:
August 1, 2007