Texas Instruments 2006 Annual Report Download - page 53

TEXAS INSTRUMENTS 2006 ANNUAL REPORT 5151
Liquidity and Capital Resources
Our primary source of liquidity is our cash flow from operations. In addition, we have $1.18 billion of cash and cash
equivalents and $2.53 billion of short-term investments, totaling $3.72 billion as of December 31, 2006. Other sources of
liquidity include a new five-year $1 billion revolving credit facility and a non-U.S. revolving credit facility of $175 million (see
Note 6 to the Financial Statements for additional information). As of December 31, 2006, these facilities were not being
utilized.
For the year, cash flow from operations decreased $1.15 billion to $2.45 billion, primarily due to increased working capital
requirements that more than offset higher income from continuing operations. The increased working capital requirements
reflect the payment of income taxes related to the gain on the sale of our former Sensors & Controls business; the reduction
in accounts payable primarily relating to payments for manufacturing equipment and to foundry suppliers; and increased
inventory from the less-than-desirable levels at year-end 2005.
In 2006, investing activities provided $3.09 billion in cash, compared with 2005, when investing activities used cash of $1.63
billion. We received cash proceeds from the sale of the former Sensors & Controls business of $3.00 billion in 2006. Sales and
maturities of cash investments, net of purchases, were $1.60 billion in 2006 compared with a negative $0.42 billion in 2005 as
we increased the cash available for repurchasing shares of our common stock as discussed below.
For 2006, capital expenditures were $1.27 billion, about even with 2005. Our capital expenditures in 2006 were primarily for
assembly and test equipment and advanced wafer fabrication equipment.
For 2006, net cash used in financing activities was $5.57 billion compared with $3.54 billion in 2005, primarily reflecting
increased repurchases of our common stock and the repayment of $586 million of debt. We used $5.30 billion of cash to
repurchase 172 million shares of our common stock in 2006 compared with $4.15 billion used to repurchase 153 million shares
of our common stock in 2005. Repurchases in 2006 reduced our shares outstanding by 9 percent. Dividends paid in 2006 of
$199 million, compared with $173 million in 2005, reflect the effect of increases in the quarterly dividend rate in the fourth
quarters of 2005 and 2006. The quarterly cash dividend rate was increased to $0.03 per share beginning with the dividend
declared on October 20, 2005. The quarterly cash dividend rate was increased to $0.04 per share beginning with the dividend
declared on October 19, 2006. The effect of the dividend rate increases on total dividends paid in 2006 was partially offset by
the lower number of shares outstanding.
Cash proceeds received from the exercise of employee stock options in 2006 were $419 million compared with $461 million in
2005.
In 2005, to avail ourselves of tax savings provided for under the AJCA, we repatriated $1.29 billion of previously undistributed
earnings of non-U.S. subsidiaries. During the fourth quarter of 2005, our Japan subsidiary borrowed $275 million of variable-
rate bank notes in order to facilitate this process. This debt was prepaid in the second quarter of 2006. A portion of this debt
had been due in 2008 and the remainder had been due in 2010. During 2006, we also retired $300 million of maturing debt and
redeemed $11 million of debt that was to mature in 2020.
In 2006, the board of directors authorized the repurchase of an additional $10 billion of our common stock. Cumulatively, our
board of directors has authorized $15 billion in stock repurchases since September 2004. At year end, $5.49 billion of these
authorizations remain.