Texas Instruments 2008 Annual Report Download - page 46

[ 44 ] TEXAS INSTRUMENTS 2008 ANNUAL REPORT
Embedded Processing
Embedded Processing revenue in 2007 was $1.59 billion, an increase of $34 million, or 2 percent, from 2006, primarily due to higher
revenue from automotive products.
Operating profit was $290 million, or 18.3 percent of revenue. This was an increase of $37 million from 2006 due to higher gross profit.
Wireless
Wireless revenue in 2007 was $4.19 billion, a decrease of $113 million, or 3 percent, from 2006, as increased shipments of products
sold into cell phone applications were insufficient to offset normal price declines. Also, the addition by the LM Ericsson Telephone
Company of another supplier of 3G basebands for handset applications began to affect our results in the fourth quarter of 2007.
Operating profit was $763 million, or 18.2 percent of revenue. This was an increase of $128 million from 2006 due primarily to
higher gross profit, and to a lesser extent, lower operating expenses.
Other
Other revenue in 2007 was $3.12 billion, down $522 million, or 14 percent, from the prior year, primarily due to lower shipments of
RISC microprocessors and, to a lesser extent, of DLP products. Revenue was also lower due to the divestiture of our DSL customer
premises equipment product line in the third quarter of 2007.
Operating profit was $896 million, or 28.7 percent of revenue. This was a decrease of $128 million from 2006 due to lower revenue.
Financial condition
At the end of 2008, total cash (cash and cash equivalents plus short-term investments) was $2.54 billion, down $384 million from the
end of 2007. Total cash at year-end 2007 included $1.04 billion of auction-rate securities, which were then classified as short-term
investments. Our remaining auction-rate securities of $482 million at year-end 2008 are classified as long-term investments and are
not included in total cash at that date. See Notes 8 and 9 to the Financial Statements for additional information.
Accounts receivable were $913 million at the end of 2008. This was a decrease of $829 million compared with the end of 2007.
Days sales outstanding were 33 at the end of 2008, compared with 44 at the end of 2007. The sharp decrease in accounts receivable
reflects the significant decrease in shipments to customers during the fourth quarter of 2008, particularly in December.
Inventory was $1.38 billion at the end of 2008, $43 million lower than a year ago, and a reduction of $200 million from the end of
the third quarter of 2008, reflecting the aggressive actions taken to reduce our inventory. Days of inventory at the end of 2008 were 89,
compared with 79 at the end of 2007, as the reduction in inventory was less than the decrease in our revenue.
For the year, depreciation was $1.02 billion, unchanged from 2007. Due to lower revenue in 2008, depreciation rose to 8.2 percent
of revenue. Capital expenditures increased in 2008 as we continued to focus on facilities and equipment for manufacturing Analog
products. Capital expenditures rose from 5.0 to 6.1 percent of revenue. However, during the fourth quarter we constrained capital
expenditures, as we do not need additional near-term manufacturing in the current weak demand environment.
Liquidity and capital resources
Our sources of liquidity are cash flow from operations, cash and cash equivalents, short-term investments and revolving credit facilities.
Our primary source of liquidity is cash flow from operations. Cash flow from operations for 2008 was $3.33 billion, a decrease
of $1.08 billion from the prior year primarily due to lower net income. Cash flow in 2007 included receipt of a $390 million payment
associated with a tax refund from settlement of prior-year tax matters.
We have $1.05 billion of cash and cash equivalents and $1.49 billion of short-term investments as of December 31, 2008. We
have a multi-year $1 billion revolving credit facility and a non-U.S. revolving credit facility of $175 million. See Note 13 to the Financial
Statements for additional information. As of December 31, 2008, these facilities were not being utilized.
In 2008, investing activities used $1.18 billion in cash, primarily for capital expenditures, and to a lesser extent, the net purchase
of short-term investments. For 2008, capital expenditures were $763 million, an increase of $77 million from 2007 due to higher
expenditures for facilities and equipment for manufacturing Analog products.
For 2008, net cash used in financing activities was $2.43 billion, compared with $4.48 billion in 2007. We used $2.12 billion of cash
to repurchase 80 million shares of our common stock in 2008, compared with $4.89 billion used to repurchase 147 million shares of
our common stock in 2007. Dividends paid in 2008 of $537 million, compared with $425 million in 2007, reflect the effect of increases
in the quarterly dividend rate in the second and fourth quarters of 2007, as well as an increase (to $0.11 per share) in the fourth quarter
of 2008. The effect of the dividend rate increases on total dividends paid in 2008 was partially offset by the lower number of shares
outstanding. Employee exercises of TI stock options are also reflected in cash from financing activities. In 2008, such exercises provided
cash proceeds of $210 million, compared with $761 million in 2007.
In April 2007, we retired $43 million of outstanding 8.75% notes upon maturity. We have no debt outstanding.