Texas Instruments 2006 Annual Report Download - page 23

TEXAS INSTRUMENTS 2006 ANNUAL REPORT 2121
Interest incurred on loans in 2006, 2005 and 2004 was $12 million, $14 million and $24 million. Of these amounts, $5 million in
2006, $5 million in 2005 and $3 million in 2004 were capitalized as a component of capital asset construction costs.
Our remaining long-term debt as of December 31, 2006, of $43 million matures April 1, 2007.
7. Financial Instruments and Risk Concentration
Financial Instruments: The carrying amounts and related estimated fair values at December 31 of our long-term debt were
$43 million and $44 million for 2006 and $630 million and $634 million for 2005. The fair value of long-term debt was based
primarily on the net present value of the expected cash flows using current market interest rates.
We have derivative financial instruments such as interest rate swaps, forward purchase contracts, investment warrants and
forward currency exchange contracts, the carrying value and fair values of which were not significant as of December 31,
2006 or 2005. Our forward currency exchange contracts outstanding at December 31, 2006, had a face value of $268 million to
hedge net balance sheet exposures (including $85 million to sell euros, $82 million to sell British pounds and $48 million to sell
Japanese yen). Our forward currency exchange contracts outstanding at December 31, 2005, had a face value of $191 million
to hedge net balance sheet exposures (including $67 million to sell euros, $41 million to sell Japanese yen and $17 million to
buy Korean won).
Short-term investments are carried at fair value. The carrying values for other current financial assets and liabilities, such as
accounts receivable and accounts payable, approximate fair value due to the short maturity of such instruments.
Risk Concentration: Financial instruments that potentially subject us to concentrations of credit risk are primarily cash
investments, accounts receivable and equity investments. In order to manage our exposure to credit risk, we place cash
investments in investment-grade debt securities and limit the amount of credit exposure to any one issuer. We also limit
counterparties on forward currency exchange contracts and interest rate swaps to investment-grade-rated financial
institutions.
Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers in our
customer base and their dispersion across different industries and geographic areas. We maintain an allowance for losses
based upon the expected collectibility of accounts receivable. These allowances are deducted from accounts receivable in
the balance sheets. Details of these allowances are as follows:
Accounts Receivable Allowances
Balance at
Beginning
of Year
Additions
Charged to
Operating
Results
Recoveries
and Write-
offs, Net
Balance
at End
of Year
2006 .............................................................. $ 34 $ 2 $ (10) $ 26
2005 .............................................................. $36 $ 1 $ (3) $34
2004............................................................... $42 $—$ (6) $ 36
8. Stockholders’ Equity
We are authorized to issue 10,000,000 shares of preferred stock; however, no preferred stock is currently outstanding.
Each outstanding share of TI common stock carries one-fourth of a stock purchase right. Under certain circumstances, each
right may be exercised to purchase one one-thousandth of a share of TI participating cumulative preferred stock for $200.
Under certain circumstances following the acquisition of 20 percent or more of outstanding TI common stock by an acquiring
person (as defined in the rights agreement), each right (other than rights held by an acquiring person) may be exercised to
purchase the common stock of TI or a successor company with a market value of twice the $200 exercise price. The rights,
which are redeemable by us at one cent per right, expire in June 2008.
In 2004, the TI board of directors approved the repurchases of up to 21 million shares and an additional $1 billion of TI
common stock under our stock repurchase program. In 2005, the board of directors authorized the repurchase of $4 billion
of TI common stock in addition to previous authorizations. In January 2006, the board of directors authorized additional
repurchases of up to $5 billion of TI common stock and in September 2006, the board of directors added a new authorization
to repurchase up to $5 billion of TI common stock. These authorizations were in addition to previously announced stock
repurchase authorizations.