On Jan. 22, broad-line semiconductor designer Texas Instruments (NYSE: TXN) released earnings for the 2007 fiscal year -- a period ended Dec. 31, 2007.

  • Generous share buybacks turned flat earnings growth into a very nice ramp-up on a per-share basis. Management explains that the leaner, meaner asset-light manufacturing model that was implemented a couple of years ago simply doesn't call for a lot of infrastructure investments -- so the cash is pumped back to shareholders instead.
  • TI customers clamored for high-margin digital signal processors and analog chips, which helped to drive gross margins wider.
  • The company didn't tell us how much of these results came from international markets, but in 2006, U.S. sales accounted for only 13% of total revenue. Thus TI joins Intel (Nasdaq: INTC) and IBM (NYSE: IBM) in the recession-insulated international club.
  • The P/E ratio may look lofty, but TI backs it up with rambunctious cash flow growth, which gives you a better valuation basis.

(Figures in millions, except per-share data)

Income Statement Highlights

FY 2007

FY 2006

Change

Sales

$13,835

$14,255

(2.9%)

Net Profit, Cont. Ops

$2,657

$2,638

0.1%

EPS, Cont. Ops

$1.83

$1.69

8.3%

Diluted Shares

1,446

1,560

(7.3%)

Get back to basics with the income statement.

Margin Checkup

FY 2007

FY 2006

Change*

Gross Margin

53.0%

50.9%

2.1

Operating Margin

26.7%

25.4%

1.3

Net Margin, Cont. Ops

19.2%

18.5%

0.7

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

FY 2007

FY 2006

Change

Cash + ST Invest.

$2,924

$3,717

(21.3%)

Accounts Rec.

$1,742

$1,774

(1.8%)

Inventory

$1,418

$1,437

(1.3%)

Liabilities

FY 2007

FY 2006

Change

Accounts Payable

$657

$560

17.3%

Long-Term Debt

$0

$0

N/A

The balance sheet reflects the company's health.

Cash Flow Highlights

FY 2007

FY 2006

Change

Cash From Ops.

$4,406

$2,454

79.5%

Capital Expenditures

$686

$1,272

(46.1%)

Free Cash Flow

$3,720

$1,182

214.7%

Owner Earnings

$3,041

$4,180

(27.2%)

Free cash flow is a Fool's best friend.

Competitive Context

Market Cap

Trailing P/E Ratio

CAPS Rating (out of 5)

Qualcomm (Nasdaq: QCOM)

$60,001

18.8

***

Texas Instruments

$41,210

16.9

****

Analog Devices (NYSE: ADI)

$8,230

18.1

***

STMicroelectronics NV (NYSE: STM)

$10,500

N/A

**

National Semiconductor (NYSE: NSM)

$4,580

16.0

**

Using the latest reported numbers from Capital IQ. Keep your partners close and the competition in your vest pocket.

Related Foolishness:

Intel is an active Inside Value recommendation. Our Inside Value team will be happy to teach all you need to know about valuing stocks. The trial is free for 30 days, but the lessons learned are yours forever.

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 publication, Anders Bylund had no position in any company mentioned. Fool rules are here.