TI Takes Care of Business: Fool by Numbers

On Jan. 22, semiconductor stalwart Texas Instruments (NYSE: TXN) released fourth-quarter earnings for the 2006 fiscal year ended Dec. 31.

• The income growth didn't exactly set the world on fire, but cash flows and owner earnings did much better. Management then turned around and gave that cash back -- plus $3 billion from the sale of its sensors and controls division -- to shareholders in the form of $5.3 billion in share-repurchase programs over the interceding year. The result is a healthy-looking 12.5% EPS boost.
  
• Margins remained fairly stable, in spite of the well-documented product-mix troubles at the major cell phone manufacturers. TI management points to a flexible, partly outsourced manufacturing model as the saving grace.
  
• The cash conversion cycle lengthened considerably (a bad thing), because of a combination of higher inventory levels and lower payables.

(Figures in millions, except per-share data)

Income Statement Highlights

	Q4 2006	Q4 2005	Change
Sales	$3,463	$3,324	4.2%
Net Profit	$668	$655	2.0%
EPS	$0.45	$0.40	12.5%
Diluted Shares	1499	1643	(8.8%)

Get back to basics with a look at the income statement.

Margin Checkup

	Q4 2006	Q4 2005	Change*
Gross Margin	50.5%	49.9%	0.6
Operating Margin	22.2%	22.9%	(0.7)
Net Margin	19.3%	19.7%	(0.4)

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Management Effectiveness

	Q4 2006	Q4 2005	Change*
Return on Assets	20.9%	19.1%	1.8
Return on Equity	25.6%	24.1%	1.6

*Expressed in percentage points.

See how management puts its financial tools to work.

Balance Sheet Highlights

Assets	Q4 2006	Q4 2005	Change
Cash + ST Investments	$3,717	$5,330	(30.3%)
Accounts Receivable	$1,774	$1,648	7.6%
Inventory	$1,437	$1,185	21.3%

Liabilities	Q4 2006	Q4 2005	Change
Accounts Payable	$560	$702	(20.2%)
Long-Term Debt	$0	$329	N/A

Learn the ways of the balance sheet.

Cash Flow Highlights

	Q4 2006	Q4 2005	Change
Cash From Ops.	$846	$880	(3.9%)
Capital Expenditures	$200	$334	(40.1%)
Free Cash Flow	$646	$546	18.3%
Owner Earnings	$755	$703	7.4%

Find out why Fools always follow the money.

Cash Conversion Checkup

	Q4 2006	Q4 2005	Change
Days in Inventory	68.6	57.9	10.7
Days in Receivables	44.5	43.8	0.7
Days Payables Outstanding	30.1	36.8	(6.7)
Cash Conversion Cycle	83.0	65.0	18.0

Read up on cash conversion metrics.

Related Companies:

• QUALCOMM (Nasdaq: QCOM)
• Marvell Technology (Nasdaq: MRVL)
• Atheros Communications (Nasdaq: ATHR)
• Linear Technology (Nasdaq: LLTC)
• Maxim Integrated Products (Nasdaq: MXIM)
• ON Semiconductor (Nasdaq: ONNN)

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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of writing, Fool contributor Anders Bylund had no position in any of these companies. Fool rules are here.