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TI Reports Financial Results for 4Q07 and 2007

Revenue is $3.56 Billion and EPS is $0.54 in 4Q07

For Year, Cash Flow from Operations is $4.41 Billion and Return on Invested Capital Exceeds 25 Percent

Conference Call on TI Web Site at 4:30 p.m. Central Time Today www.ti.com

Jan 22, 2008

Download Financials in MS Excel Format (85KB)
Non-GAAP Financial Measure Reconciliation
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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 (Jan. 22, 2008) – Financial results reported today by Texas Instruments Incorporated (TI) (NYSE:TXN) reflect the company’s strong positions in analog and digital signal processing semiconductors.

Growth resumed in the fourth quarter with a revenue increase of 3 percent from the same quarter a year ago. This growth was led by demand for TI’s digital signal processors and high-performance analog products, which were up 12 percent each. Gross profit increased 10 percent and operating profit increased 30 percent, reflecting the quality of the company's product portfolio, the efficiency of its manufacturing strategies and effective expense management. For the year, cash flow from operations was a record $4.41 billion and return on invested capital was more than 25 percent.

“It was a good quarter and a good year for TI. We delivered more value to shareholders and built momentum with customers. Perhaps most important to our future performance, we sharpened our focus on analog with increases in dedicated research and development, sales support and manufacturing capacity. Evidence of our potential in this area was notable in high-performance analog where we again made substantial market share gains,” said Rich Templeton, TI president and chief executive officer. “We move into the first quarter of 2008 expecting year-over-year growth to accelerate in our semiconductor operations.”

Details of financial performance for both the fourth quarter and the year are in the following paragraphs.

Fourth Quarter 2007

  • Revenue was $3.56 billion, up 3 percent from the same quarter a year ago. This was the first year-over-year gain in four quarters, reflecting renewed growth in the company’s Semiconductor segment. Compared with the third quarter of the year, revenue decreased 3 percent due to the expected seasonal decline in graphing calculators, the core products in the company’s Education Technology segment.
  • Gross profit was $1.93 billion, or 54.2 percent of revenue. This was down $58 million from the prior quarter primarily due to seasonally lower revenue from graphing calculators. In addition, the prior quarter included a $39 million gain from the sale of TI’s product line for digital subscriber line (DSL) customer premises equipment. These more than offset higher gross profit in the company’s Semiconductor segment. Compared with the year-ago quarter, gross profit was up $178 million as a greater percentage of revenue came from more-profitable analog and digital signal processing products, and as the company continued to reduce manufacturing costs.
  • Operating expenses were $508 million for research and development (R&D) and $422 million for selling, general and administrative (SG&A). R&D expense decreased $34 million from the prior quarter due to lower costs for severance and semiconductor product development. From the year-ago quarter, R&D expense decreased $48 million due to lower costs for semiconductor product development. The company continues to benefit from more efficient development of advanced digital manufacturing process technologies through its collaborative work with foundries. SG&A decreased $7 million from the prior quarter due to seasonally lower compensation expense. SG&A was about even with the same quarter a year ago.
  • Operating profit was $996 million, or 28.0 percent of revenue. This was a decrease of $17 million from the prior quarter as less gross profit more than offset the benefit of lower operating expenses. Operating profit increased $229 million from the year-ago quarter, primarily due to higher gross profit, as well as lower operating expenses.
  • Other income was $46 million. This was down in both comparisons, $7 million from the prior quarter and $23 million from the year-ago quarter. The declines were primarily due to the non-recurrence of favorable items, including a tax interest benefit in the prior quarter and a settlement with the Italian government in the year-ago quarter.
  • Income from continuing operations was $753 million, including a discrete tax benefit of $11 million. Income was about even with the prior quarter and up $82 million, or 12 percent, from the year-ago quarter. Income in the year-ago quarter included a $72 million benefit from the reinstatement of the federal R&D tax credit.
  • Earnings per share (EPS) were $0.54 and included a discrete tax benefit of $0.01. EPS increased in both comparisons, $0.02 from the prior quarter and $0.09 from the year-ago quarter. EPS in the year-ago quarter included a $0.05 tax benefit from the reinstatement of the federal R&D tax credit.
  • Orders were $3.48 billion. This was a decrease of $75 million from the prior quarter primarily due to the seasonal decline in graphing calculators, and an increase of $402 million from the same quarter a year ago due to stronger demand for the company’s semiconductors.
  • Cash flow from operations was $1.42 billion, a decrease of $109 million from the prior quarter. The prior quarter included a tax refund. At the end of the quarter, total cash (cash and cash equivalents plus short-term investments) was $2.92 billion. This was $745 million lower than the end of the prior quarter and $793 million lower than the same quarter a year ago as the company used $1.88 billion to repurchase 57 million shares of its common stock and paid dividends of $138 million.
  • Capital spending totaled $181 million, primarily for equipment and facilities used to assemble and test semiconductors. Depreciation was $253 million.
  • Accounts receivable were $1.74 billion at the end of the quarter. This was a decrease of $281 million from the prior quarter and reflected normal seasonal patterns, for both lower revenue in the final month of the quarter in the Semiconductor segment and lower revenue in the company’s Education Technology segment. Accounts receivable were down $32 million compared with the same quarter a year ago. Days sales outstanding were 44 at the end of the quarter, compared with 50 at the end of the prior quarter and 46 for the same period in 2006.
  • Inventory was $1.42 billion at the end of the fourth quarter. This was $32 million lower than the prior quarter and $19 million lower than the same quarter a year ago. Days of inventory at the end of the fourth quarter were 78, unchanged from the end of the prior quarter and up from 75 a year ago.

Year 2007

  • Revenue was $13.83 billion, down 3 percent from 2006, due to lower revenue for RISC microprocessors, semiconductors used in cell phone applications and DLP® products. The collective declines in these areas more than offset strong growth from high-performance analog products.
  • Gross profit was $7.33 billion, or 53.0 percent of revenue. This was an increase of $74 million as a greater percentage of revenue came from more-profitable analog and digital signal processing products, and as the company reduced manufacturing costs.
  • Operating expenses were $2.15 billion for R&D and $1.68 billion for SG&A. R&D expense decreased $40 million compared with 2006 as the company benefited from more efficient development of advanced digital manufacturing process technologies through its collaborative work with foundries. SG&A expense decreased $16 million compared with 2006.
  • Operating profit was $3.50 billion, or 25.3 percent of revenue. This was an increase of $130 million, or 4 percent, primarily due to strong gross profit, as well as lower operating expenses.
  • Other income was $195 million, a decrease of $63 million primarily due to lower interest income. The year 2006 included a favorable settlement with the Italian government that was not repeated in 2007.
  • Income from continuing operations was $2.64 billion, about the same as 2006. Net income was $2.66 billion, down from $4.34 billion in 2006 when the company had $1.70 billion in income from discontinued operations, almost all of which came from the gain on the sale of the Sensors & Controls business.
  • EPS from continuing operations was $1.83, up 8 percent from 2006, even though income from continuing operations was about even. The increase in EPS reflects fewer shares outstanding. TI’s portfolio now requires less capital spending and is comprised of higher-margin products. As a result, the company has generated greater levels of cash that it has returned to shareholders through stock repurchases. EPS from discontinued operations was $0.01, compared with $1.09 last year when a gain on the sale of the Sensors & Controls business was included.
  • Orders were $13.69 billion, down $327 million from 2006, due to lower demand for semiconductor products.
  • Cash flow from operations was $4.41 billion, an increase of $1.95 billion from the prior year. Cash flow in 2006 included income tax payments associated with the gain on the sale of the Sensors & Controls business and investments made by the company to carry a higher level of inventory in order to improve its responsiveness to customers. Cash flow in 2007 included a tax refund. For the year, the company used $4.89 billion to repurchase 147 million shares of common stock, reducing shares outstanding by 7 percent. The company paid $425 million in dividends, more than double the $199 million paid in 2006.
  • Capital spending totaled $686 million, primarily for equipment and facilities used to assemble and test semiconductors. This was a decrease of $586 million from the prior year. Depreciation was $1.02 billion.

Outlook
TI intends to provide a mid-quarter update to its financial outlook on March 10, 2008, by issuing a press release and holding a conference call. Both will be available on the company’s web site.

For the first quarter of 2008, TI expects revenue to be in the following ranges:

  • Total TI, $3.27 billion to $3.55 billion;
  • Semiconductor, $3.20 billion to $3.46 billion; and
  • Education Technology, $70 million to $90 million.

TI expects EPS to be in the range of $0.43 to $0.49.

In 2008, TI expects R&D expense of about $2.0 billion, capital expenditures of about $0.9 billion and depreciation of about $1.0 billion. The annual effective tax rate is estimated to be about 31 percent, up from 29 percent in 2007. The tax rate is based on current tax law and does not assume reinstatement of the federal R&D tax credit, which expired at the end of 2007.

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

                                  For Three Months Ended      For Years Ended
                                 Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
                                  2007      2007     2006     2007     2006

    Net revenue                  $3,556    $3,663   $3,463  $13,835  $14,255
    Cost of revenue (COR)         1,630     1,679    1,715    6,502    6,996
    Gross profit                  1,926     1,984    1,748    7,333    7,259
    Research and development (R&D)  508       542      556    2,155    2,195
    Selling, general and
     administrative (SG&A)          422       429      425    1,681    1,697
      Total operating costs
       and expenses               2,560     2,650    2,696   10,338   10,888
    Profit from operations          996     1,013      767    3,497    3,367
    Other income (expense) net       46        53       69      195      258
    Income from continuing
     operations before
     income taxes                 1,042     1,066      836    3,692    3,625
    Provision for income taxes      289       308      165    1,051      987
    Income from continuing
     operations                     753       758      671    2,641    2,638
    Income (loss) from
     discontinued operations,
     net of income taxes              3        18      (3)       16    1,703
    Net income                   $  756    $  776   $  668  $ 2,657  $ 4,341

    Basic earnings per common
     share:
      Income from continuing
       operations                $  .55    $  .54   $  .46  $  1.86  $  1.73
      Net income                 $  .55    $  .55   $  .45  $  1.88  $  2.84

    Diluted earnings per common
     share:
      Income from continuing
       operations                $  .54    $  .52   $  .45  $  1.83  $  1.69
      Net income                 $  .54    $  .54   $  .45  $  1.84  $  2.78

    Average shares outstanding
     (millions):
      Basic                       1,372     1,417    1,469    1,417    1,528
      Diluted                     1,399     1,448    1,499    1,446    1,560

    Cash dividends declared
     per share of common stock   $  .10    $  .08   $  .04  $   .30  $   .13

    Percentage of revenue:

    Gross profit                   54.2%     54.2%    50.5%    53.0%    50.9%
    R&D                            14.3%     14.8%    16.0%    15.6%    15.4%
    SG&A                           11.9%     11.7%    12.3%    12.1%    11.9%
    Operating profit               28.0%     27.6%    22.1%    25.3%    23.6%



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

                                                 Dec. 31, Sept. 30,  Dec. 31,
                                                  2007      2007      2006
    Assets
    Current assets:
      Cash and cash equivalents                 $ 1,328   $   807   $ 1,183
      Short-term investments                      1,596     2,862     2,534
      Accounts receivable, net of
       allowances of ($26), ($30) and ($26)       1,742     2,023     1,774
      Raw materials                                 105       102       105
      Work in process                               876       934       930
      Finished goods                                437       414       402
      Inventories                                 1,418     1,450     1,437
      Deferred income taxes                         654       702       741
      Prepaid expenses and other current assets     180       209       185
      Total current assets                        6,918     8,053     7,854
    Property, plant and equipment at cost         7,568     7,597     7,751
      Less accumulated depreciation              (3,959)   (3,916)   (3,801)
      Property, plant and equipment, net          3,609     3,681     3,950
    Equity and other long-term investments          267       265       287
    Goodwill                                        838       796       792
    Acquisition-related intangibles                 115       108       118
    Deferred income taxes                           510       425       601
    Capitalized software licenses, net              227       242       188
    Overfunded retirement plans                     105        77        58
    Other assets                                     78        77        82
    Total assets                                $12,667   $13,724   $13,930

    Liabilities and Stockholders' Equity
    Current liabilities:
      Loans payable and current portion
       of long-term debt                        $    --   $    --   $    43
      Accounts payable                              657       644       560
      Accrued expenses and other liabilities      1,117     1,092     1,029
      Income taxes payable                           53       152       284
      Accrued profit sharing and retirement         198       143       162
      Total current liabilities                   2,025     2,031     2,078
    Underfunded retirement plans                    184        95       208
    Deferred income taxes                            49        27        23
    Deferred credits and other liabilities          434       434       261
    Total liabilities                             2,692     2,587     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:
       Dec. 31, 2007 -- 1,739,632,601;
       Sept. 30, 2007 -- 1,739,579,782;
       Dec. 31, 2006 -- 1,739,108,694             1,740     1,740     1,739
      Paid-in capital                               931       853       885
      Retained earnings                          19,788    19,172    17,529
      Less treasury common stock at cost:
       Shares: Dec. 31, 2007 -- 396,421,798;
       Sept. 30, 2007 -- 341,373,012;
       Dec. 31, 2006 -- 289,078,450             (12,160)  (10,344)   (8,430)
      Accumulated other comprehensive
       (loss), net of taxes                        (324)     (284)     (363)
      Total stockholders' equity                  9,975    11,137    11,360
    Total liabilities and stockholders' equity  $12,667   $13,724   $13,930



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

                                   For Three Months Ended     For Years Ended
                                 Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
                                   2007     2007     2006     2007     2006
    Cash flows from operating
     activities:
      Net income                 $   756    $ 776  $   668  $ 2,657  $ 4,341
      Adjustments to reconcile
       net income to cash
       provided by operating
       activities of continuing
       operations:
        (Income) loss from
         discontinued operations      (3)     (18)       3      (16)  (1,703)
        Depreciation                 253      262      249    1,022    1,052
        Stock-based compensation      67       66       78      280      332
        Amortization of acquisition-
         related intangibles          10       10       13       48       59
        (Gains) losses on
         sales of assets              --      (39)      --      (39)      --
        Deferred income taxes          4       36      (77)      34     (200)
      Increase (decrease) from
       changes in:
        Accounts receivable          284     (117)     315       40     (116)
        Inventories                   32      (34)      54       11     (248)
        Prepaid expenses and
         other current assets         26       24      (14)      13      (95)
        Accounts payable
         and accrued expenses        (20)     154     (208)      77     (104)
        Income taxes payable         (57)     378     (156)     188     (716)
        Accrued profit sharing
         and retirement               52       45       30       33       28
      Change in funded status of
       retirement plans and
       accrued retirement costs       (3)     (14)     (94)     (16)    (210)
      Other                           21        2      (21)      74       34
    Net cash provided by
     operating activities of
     continuing operations         1,422    1,531      840    4,406    2,454

    Cash flows from investing
     activities:
      Additions to property,
       plant and equipment          (181)    (152)    (214)    (686)  (1,272)
      Proceeds from sales of
       assets                         --       61       14       61    3,000
      Purchases of cash
       investments                  (794)  (1,916)  (1,275)  (5,035)  (6,821)
      Sales and maturities of
       cash investments            2,067    1,374    1,509    5,981    8,418
      Purchases of equity
       investments                    (4)     (15)      (7)     (30)     (40)
      Sales of equity and
       debt investments                2        4        2       11       11
      Acquisitions, net
       of cash acquired              (56)      (4)      --      (87)    (205)
    Net cash provided by
     (used in) investing
     activities of continuing
     operations                    1,034     (648)      29      215    3,091

    Cash flows from financing
     activities:
      Payments on loans and
       long-term debt                 --       --       --      (43)    (586)
      Dividends paid                (138)    (114)     (59)    (425)    (199)
      Sales and other common
       stock transactions             67      166       57      761      418
      Excess tax benefit from
       stock option exercises         10       16       15      116      100
      Stock repurchases           (1,877)  (1,409)  (1,130)  (4,886)  (5,302)
    Net cash used in
     financing activities of
     continuing operations        (1,938)  (1,341)  (1,117)  (4,477)  (5,569)


    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              3      (1)        1        1        2
    Net increase (decrease) in
     cash and cash equivalents       521     (459)    (247)     145      (31)
    Cash and cash equivalents,
     beginning of period             807    1,266    1,430    1,183    1,214
    Cash and cash equivalents,
     end of period               $ 1,328    $ 807  $ 1,183  $ 1,328  $ 1,183

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



                             Segment Net Revenue
                            (Millions of dollars)

                              For Three Months Ended       For Years Ended
                            Dec. 31, Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
                              2007      2007      2006      2007      2006

    Semiconductor*          $ 3,475   $ 3,461   $ 3,385   $13,309   $13,730
    Education Technology         81       202        78       526       525
    Total net revenue       $ 3,556   $ 3,663   $ 3,463   $13,835   $14,255



                            Segment Profit (Loss)
                            (Millions of dollars)

                               For Three Months Ended       For Years Ended
                              Dec. 31, Sept. 30, Dec. 31,  Dec. 31,  Dec. 31,
                                2007      2007     2006      2007      2006

    Semiconductor*            $ 1,117   $ 1,031    $ 908   $ 3,883   $ 3,831
    Education Technology           19        99       19       208       200
    Corporate**                  (140)     (117)    (160)     (594)     (664)
    Profit from operations      $ 996   $ 1,013    $ 767   $ 3,497   $ 3,367

    *  Semiconductor revenue for the year ended December 31, 2006 includes
       a $70 million benefit from a royalty settlement in the second
       quarter.  Semiconductor profit from operations includes a benefit
       of $60 million from the royalty settlement.  Semiconductor profit
       from operations also includes a benefit in the second quarter of
       2006 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.

    ** Corporate includes a gain on the sale of an asset of $39 million in the
       third quarter of 2007 in cost of revenue. Corporate also includes
       the following stock-based compensation expense:

    COR                          $ 13      $ 12     $ 15     $  53     $  64
    R&D                            20        20       24        83       101
    SG&A                           34        34       39       144       167
    Profit from operations       $ 67      $ 66     $ 78     $ 280     $ 332


Semiconductor Segment

  • For the fourth quarter, revenue was $3.48 billion, about even with the prior quarter. Compared with the same quarter a year ago, revenue increased 3 percent because demand was higher for TI’s digital signal processing and analog products.
  • For the year, revenue was $13.31 billion, a decrease of $421 million, or 3 percent, because revenue was lower for RISC microprocessors, semiconductors used in cell phone applications and DLP products. Combined, the declines in these areas more than offset strong growth from high-performance analog products.
  • For analog products:
    • Fourth quarter revenue was $1.37 billion. This was down 2 percent from the prior quarter primarily due to the divestiture of a DSL product line. Revenue was up 4 percent compared with the same quarter a year ago due to stronger demand for high-performance analog products. Revenue from high-performance analog products increased 1 percent from the prior quarter and 12 percent from the same quarter a year ago.
    • Annual revenue was $5.29 billion. This was an increase of 1 percent due to strong demand for high-performance analog products that was mostly offset by lower revenue from custom products sold into cell phone applications. Revenue from high-performance analog products grew 9 percent.
  • For digital signal processing products:
    • Fourth quarter revenue was $1.36 billion. This was an increase of 4 percent from the prior quarter due to demand for products used in cell phone applications and an increase of 12 percent from the same quarter a year ago primarily due to products used in cell phone applications.
    • Annual revenue was $5.07 billion, a decrease of 2 percent due to the divestiture of a DSL product line and declines across a broad range of markets, including cell phone applications.
  • For remaining product lines:
    • Fourth quarter revenue was $739 million. This was down 2 percent compared with the prior quarter as a decline in DLP revenue more than offset gains in microcontroller revenue and royalties. Revenue from standard logic products and RISC microprocessors was about even. Compared with the same quarter a year ago, revenue decreased 14 percent due to declines in DLP revenue, royalties and RISC microprocessor revenue. Revenue from microcontrollers and standard logic products grew from a year ago.
    • Annual revenue was $2.95 billion, down 12 percent from the prior year due to lower demand for RISC microprocessors and DLP products. Revenue from microcontrollers and royalties increased, while standard logic revenue was about even.
  • Gross profit for the fourth quarter was $1.90 billion, or 54.6 percent of revenue. This was up in both comparisons, $55 million from the prior quarter and $165 million from the year-ago quarter. The higher gross profit was a result of a greater percentage of revenue from more-profitable analog and digital signal processing products, and lower manufacturing costs.
  • Gross profit for the year was $7.08 billion, or 53.2 percent of revenue. This was an increase of $30 million from the prior year because a greater percentage of revenue came from more-profitable analog and digital signal processing products, and manufacturing costs were lower.
  • Operating profit for the fourth quarter was $1.12 billion, or 32.1 percent of revenue. This was an increase of $86 million from the prior quarter and $209 million from the same quarter a year ago due to higher gross profit and lower R&D expense.
  • Annual operating profit was $3.88 billion, or 29.2 percent of revenue. This was an increase of $52 million due to higher gross profit and lower R&D expense.
  • Orders in the fourth quarter were $3.40 billion. This was about even with the prior quarter and up 13 percent from the year-ago quarter primarily due to higher demand for digital signal processing products, as well as for analog products.
  • Orders for the year were $13.16 billion. This was a decrease of $329 million from the prior year due to lower demand across a broad range of semiconductor products.

Semiconductor Highlights

  • TI introduced a next-generation power management chip to maximize energy efficiency in multi-kilowatt systems.
  • TI delivered the industry’s first sub-1 GHz radio frequency (RF) system-on-chip solution with an integrated USB controller, enabling a fast, easy bridge between PCs and RF networks.
  • TI announced that Samsung Electronics Co., Ltd. would use TI’s OMAP™ applications processor and Bluetooth® products in its next-generation smartphones.

Education Technology Segment

  • Revenue in the fourth quarter was $81 million. This was a decrease of $121 million from the prior quarter as graphing calculator sales declined with the end of the back-to-school season. It was an increase of $3 million from the year-ago quarter due to higher demand for graphing calculators.
  • Annual revenue was $526 million. This was about even with the prior year.
  • Gross profit in the fourth quarter was $50 million, or 62.1 percent of revenue. This was a decrease of $85 million from the prior quarter due to seasonally lower revenue and an increase of $5 million from the year-ago quarter primarily due to lower product costs, as well as higher revenue.
  • Gross profit for the year was $340 million, or 64.6 percent of revenue. This was an increase of $19 million, or 3.5 percentage points of gross margin, due to lower product costs.
  • Operating profit in the fourth quarter was $19 million, or 23.6 percent of revenue. This was a decrease of $80 million compared with the prior quarter due to less gross profit. Operating profit was even compared with the year-ago quarter as greater gross profit was offset by higher operating expenses.
  • Annual operating profit was $208 million, or 39.4 percent of revenue. This was an increase of $8 million from the prior year due to greater gross profit.

# # #

Safe Harbor Statement
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as TI or its management “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. Similarly, statements in this release 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 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 our most recent Form 10-K. The forward-looking statements included in this release are made only as of the date of publication, and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

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

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