Texas Instruments Incorporated, often referred to as TI, is one of the largest US technology companies. TI designs and manufactures semiconductors and various integrated circuits, which it sells to electronics designers and manufacturers globally.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(mark one)
For the Fiscal Year Ended December 31, 2005
OR
for the transition period from to
Commission File Number 1-3761
TEXAS INSTRUMENTS INCORPORATED
(Exact name of Registrant as specified in its charter)
Registrant’s Telephone Number, Including Area Code: 972-995-3773
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, par value $1.00
New York Stock Exchange
The Swiss Exchange
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $45,088,206,469 as of June 30, 2005.
1,600,342,965 (Number of shares of common stock outstanding as of January 31, 2006)
Parts I, II and IV hereof incorporate information by reference to the Registrant’s 2005 annual report to stockholders. Part III hereof incorporates information by reference to the Registrant’s proxy statement for the 2006 annual meeting of stockholders.
PART I
Company Overview
Texas Instruments Incorporated (TI) is headquartered in Dallas, Texas, and has manufacturing, design or sales operations in more than 25 countries. We had three separate business segments in 2005: 1) Semiconductor, which accounted for 87 percent of our revenue in 2005; 2) Sensors & Controls, which accounted for 9 percent of our revenue and 3) Educational & Productivity Solutions, which accounted for 4 percent of our revenue. Our largest geographic sources of revenue, in descending order, are: Asia (excluding Japan), Europe, the United States and Japan.
Financial information with respect to TI’s business segments and operations outside the United States is contained in the note to the financial statements captioned “Business Segment and Geographic Area Data” on pages 35 and 36 of TI’s 2005 annual report to stockholders. It is incorporated herein by reference to such annual report.
The company began operations in 1930 and is incorporated in Delaware.
Semiconductor Segment
Semiconductors are electronic components that serve as the building blocks inside of modern electronic systems and equipment. Semiconductors come in two basic forms: individual transistors and integrated circuits (generally known as “chips”) that combine different transistors on a single piece of material to form a complete electronic circuit. Our Semiconductor segment designs, manufactures and sells integrated circuits.
The global semiconductor market is characterized by constant, though generally incremental, advances in product designs and manufacturing methods. Typically, new chips are produced in limited quantities at first and then ramp to high-volume production over time. Chip prices and manufacturing costs tend to decline over time as manufacturing methods and product life cycles mature.
The “semiconductor cycle” is an important concept that refers to the ebb and flow of supply and demand. The semiconductor market historically has been characterized by periods of tight supply caused by strong demand and/or insufficient manufacturing capacity, followed by periods of surplus products caused by declining demand and/or excess manufacturing capacity. This cycle is affected by the significant time and money required to build and maintain semiconductor manufacturing facilities.
We were the world’s third largest semiconductor company in 2005 as measured by revenue, according to preliminary estimates from iSuppli Corporation, an industry analyst. Historically, our Semiconductor segment averages a significantly higher growth rate than our other two business segments.
The majority of our Semiconductor revenue comes from our core products, which are analog semiconductors and digital signal processors, or DSPs. These products enhance, and often make possible, a variety of applications that serve the communications, computer, consumer electronics, automotive and industrial markets. We believe that virtually all of today’s digital electronic equipment requires some form of analog or digital signal processing.
We also design and manufacture other types of semiconductors, such as DLP® products that enable exceptionally clear video, and microprocessors that serve as the brains of high-end computer servers.
Knowledge about the systems our products go into is becoming increasingly important, because it enables us to differentiate our product offerings for our customers. Where a customer may previously have required multiple chips for a system to operate, we are now integrating the functionality of those multiple chips onto a few or even a single chip because we have both the system-level knowledge and the manufacturing technology to do so. An example is our single-chip cell phone solution, which combines the functionality of many separate chips onto one. The digitization of electronics also requires more high-performance analog functionality. With expertise in both digital signal processing and analog at the system level, we believe we are one of a very few semiconductor companies capable of integrating both technologies onto a single chip.
In addition, we enable our customers, particularly original design manufacturers (ODMs), to take advantage of our system-level knowledge and thereby speed their time to market by making available to them standard chipsets and reference designs. (An ODM designs and manufactures products for other companies; those other companies then sell the products under their own brands. A chipset is a group of integrated circuits based principally on our technology that are designed to work together for a specific application and are therefore packaged and sold as a unit. Reference designs are technical blueprints that contain all the essential elements in a system.) Customers using our reference designs, such as cell-phone ODMs, may
2
enhance or modify the design as required. Our ability to deliver integrated solutions and system-level knowledge allows our customers to create more advanced systems and products.
In each of our product categories, we face significant competition. We believe that competitive performance in the semiconductor market depends upon several factors, including the breadth of a company’s product line as well as technological innovation, quality, reliability, price, customer service, technical support and scale.
Following is detailed information on each product category:
Analog
Analog semiconductors process “real world” inputs, such as sound, temperature, pressure and visual images, conditioning them, amplifying them and converting them into digital signals. They also assist in the management of power distribution and consumption, aspects critical to today’s portable electronic devices.
The analog semiconductor market is diverse and complex, and it is one of the largest sectors of the semiconductor industry. We are the world’s largest supplier of analog semiconductors. Analog chips generated about 40 percent of our Semiconductor revenue in 2005.
Our analog product portfolio includes custom mixed-signal products that are designed to a particular customer’s or application’s specifications. These products account for about 55 percent of our analog revenue. The remainder of our analog revenue comes from standard products that are sold across a range of customers and applications. About 40 percent of our analog revenue is from high-performance standard products and about 5 percent is from commodity standard products.
Most of our custom and standard products are proprietary and difficult for competitors to imitate. Many standard analog chips tend to have long life spans.
Approximately 15 percent of our analog revenue comes from products sold into wireless applications. Custom analog chips sold to cell-phone original equipment manufacturers (OEMs) account for most of this revenue. (An OEM designs and sells products under its own brand that it manufactures in-house or has manufactured by others.) A smaller portion comes from analog products included in chipsets that are sold to ODMs.
Our mixed-signal products combine multiple types of analog functionality or analog and digital functions on a single chip. Purchasers of our custom mixed-signal products tend to be very large companies that require high-volume designs for specific applications such as communications, displays, printers and automotive. Entry into this market requires significant up-front investment as well as expertise in both analog and digital functionality. A primary competitive factor in this market is manufacturing expertise and scale.
In the standard analog chip sub-category known as high-performance analog, we have a portfolio of about 15,000 products, including data converters, amplifiers, power management devices and interface chips. Our high-performance analog products are used by more than 50,000 customers. These products are sold primarily through distributors. Prices in this market tend to be stable, with relatively high gross profit margins. The primary competitive factors are a diverse product portfolio to meet wide-ranging customer needs, and manufacturing process technologies that allow us to provide differentiated levels of performance. Products with higher levels of performance tend to command a premium price.
Other standard analog chips are commodity in nature. We design and manufacture thousands of low-cost, high-volume standard products that are sold primarily through distributors. End applications are very diverse and include portable electronic devices and communications. The primary competitive factors in this market are price and availability. Pricing is strongly influenced by supply and demand.
Overall in the analog market, we compete globally with numerous large and small companies, both broad-based suppliers and niche suppliers. Our primary competitors include Analog Devices, Inc.; Linear Technology Corporation; Maxim Integrated Products, Inc.; National Semiconductor Corporation; and STMicroelectronics NV.
Digital Signal Processors, or DSPs
DSP is one of the fastest-growing sectors of the semiconductor industry. We are the world’s largest DSP supplier, and DSP represents about 40 percent of our Semiconductor revenue.
DSPs use complex algorithms and compression techniques to alter and improve a data stream. DSPs perform these functions instantaneously and power efficiently. These products are ideal for applications that require precise, real-time processing of real-world analog signals that have been converted into digital form. Their power efficiency is important for battery-powered devices.
3
The combination of DSP with analog functionality enables a broad range of significant applications. In a cell phone, the process works as follows: 1) the sender’s voice is picked up by an analog sensor in the cell phone’s microphone; 2) an analog-to-digital converter chip changes the analog sound waves of the sender’s voice into a digital code; 3) the DSP compresses these digital signals and removes background noise; and 4) in the listener’s cell phone, the digital code is converted back into the analog sound of the sender’s voice. All this happens in real time.
We offer programmable DSPs, which, among other benefits, enable manufacturers to differentiate their product designs via software rather than having to design new hardware.
Our DSP portfolio includes custom, application-specific and standard products. Custom products are designed for specific customers with very high volumes in established markets. Application-specific products are implementations crafted for specific applications like wireless infrastructure, VoIP (Voice over Internet Protocol) gateways, digital still cameras and residential gateways, to name a few. Our standard DSP products are sold into a broad range of applications and seed the next generation of signal-processing innovation.
About 80 percent of our DSP revenue comes from the cell-phone market. Most of this revenue is derived from custom chips that we develop with large cell-phone manufacturer customers. These products are typically highly integrated semiconductor devices that allow our customers to differentiate their cell-phone products from their competitors’ products through performance, features or cost, and are sold only to a single, high-volume customer. Additional DSP revenue from this market comes from our sales of chipsets. Also included in our DSP-based wireless portfolio are the widely used OMAP™ processors, which are high-performance processors that enable multimedia applications in cell phones and other electronic devices.
In the DSP market, we compete globally with numerous large and small companies, both broad-based and niche suppliers of DSPs as well as suppliers of other technologies that deliver functionality that competes with DSPs. Primary competitive factors are the ability to design and cost-effectively manufacture products, system-level knowledge about targeted end markets, software expertise and applications support. Our primary competitors in the DSP market are Agere Systems, Inc.; Analog Devices, Inc.; and Freescale Semiconductor, Inc. Others who offer competing technologies include Broadcom Corp. and Qualcomm Incorporated.
Other Semiconductor Products
Our other Semiconductor products, which combined account for about 20 percent of our Semiconductor revenue, include the following:
DLP® Products
Our DLP technology is a digital display technology used in projectors and high-definition televisions. Projectors based on this technology are used in businesses, homes, professional venues and digital cinemas. The technology consists of micro-electromechanical devices that use optical semiconductors to digitally manipulate light. At the center of every DLP product is an array of up to 2.2 million microscopic mirrors that switch back and forth very quickly to create a high resolution, highly reliable, full color image. This technology is used by 75 of the world’s top projector and television manufacturers. Since early 1996 when DLP products were first marketed, TI has shipped almost 9 million DLP systems to customers all over the world.
Our DLP® technology competes against other display technologies such as liquid crystal display (LCD), plasma and cathode-ray tube (CRT). The primary competitive elements in this market include picture quality, product form factors, versatility and price.
Reduced Instruction-Set Computing, or RISC, Microprocessors
A microprocessor is the central processing unit of a computer system. RISC microprocessors are designed to provide very fast computing, typically for a specialized application such as servers. Our RISC operation is primarily the manufacture of 64-bit microprocessors designed by Sun Microsystems, Inc. for use in Sun servers.
Microcontrollers
A microcontroller is a microprocessor designed to control a very specific task for electronic equipment. Key applications for our microcontrollers include automotive, industrial motors and controls, meters and consumer products. Primary competitive factors in this market include integration of control peripherals for reduced board space and number of components, an integrated development environment for fast system development and a broad range of microcontroller solutions for upgradeability and flexibility in system design.
4
Standard Logic
Standard logic devices are chips generally used to manage the interchange and manipulation of signals within a system. A substantial number of our standard logic products are considered commodities, for which price and delivery are the key competitive factors. We sell thousands of standard logic products, primarily to distributors and OEMs. End applications include consumer products and communications.
Royalties
An additional source of revenue for TI is royalties received for our patented technology that we license to other electronics companies.
Applications for Our Semiconductor Products
The table below lists the major end markets that use our Semiconductor products and the approximate percentage of our Semiconductor revenue that the market represents. The chart also lists the most frequent applications and our products used within these key markets.
End Market
Applications
TI Products
Communications
(50% of Semiconductor revenue)
Cell phones and infrastructure equipment (wireless)
Broadband (including high-speed wireless home networking, cable modem, digital subscriber line (DSL))
High-frequency radio, telecom accessories (hands-free and voice-enhancement solutions), navigation systems
Computing
(30% of Semiconductor revenue)
Printers
Hard disk drives
Monitors and projectors
Notebook and desktop personal computers
Consumer Electronics
(10% of Semiconductor revenue)
High-definition televisions
Digital still cameras
Digital audio players
Personal video players
Car audio (radios and CD players)
DVD players and recorders
Home theater systems
Industrial
(5% of Semiconductor revenue)
Controls - digital power controls (switch mode power supplies, uninterruptible power supply), motor controls (heating/ventilation/air conditioning, industrial control motor drives, power tools, printers/copiers)
Medical - biophysical monitoring, digital hearing aids, medical imagery, personal medical devices
Security - biometrics (fingerprint identification and authentication), intelligent sensing (smoke and glass-breakage detection)
Automotive
Body systems
Chassis systems
Driver information/telemetrics
Powertrain
Safety systems
Security systems
Manufacturing
We have semiconductor manufacturing sites in North America, Japan, Asia and Europe. These facilities include high-volume wafer fabrication plants and assembly/test sites. Our semiconductor manufacturing facilities require substantial investment to construct and are largely fixed-cost assets once they are in operation. Because we own most of our manufacturing capacity, a significant portion of our operating costs are fixed. In general, these costs do not decline when
5
customer demand or our capacity utilization rates drop, and this can hurt our profit margins. Conversely, as product demand rises and factory utilization increases, the fixed costs are spread over increased output, which should benefit profit margins.
The semiconductor manufacturing process begins with a thin silicon wafer on which an array of semiconductor devices is fabricated. The wafer is then tested, cut into chips, and assembled into packages that are then individually retested.
Our advanced digital products require the most advanced and most capital-intensive manufacturing processes. DSPs and other digital products tend to move to more advanced production techniques every couple of years. Consequently, maintaining an industry leadership position requires significant capital expenditures for new manufacturing capabilities.
Our manufacturing strategy for advanced digital processes is to build internal capacity to a level we believe will remain fully utilized over the equipment’s asset lifetime. We then outsource remaining capacity from outside suppliers, including semiconductor foundries and assembly/test subcontractors. We also outsource the manufacturing of some products when it would be less cost-efficient to make those products in-house, for instance, relatively low-volume products that are unlikely to keep internal equipment fully utilized. This internal/external strategy is designed to reduce the level of our required capital expenditures, and thereby reduce our subsequent levels of depreciation. The expected end result is less fluctuation in our profit margins due to changing product demand. Currently, outside foundries provide about 20 percent of our total wafers produced.
As we move to each succeeding generation of manufacturing process technology, we utilize less space per transistor, which enables us to either: 1) fit more transistors on an equivalent-size chip, 2) decrease the chip’s size or 3) integrate new features onto the chip. By shrinking the size of transistors, we also can provide faster chips that consume less power and cost less per unit to manufacture.
Our manufacturing capabilities are on par with the best in the semiconductor industry. As of December 31, 2005, we have shipped more than 150 million chips manufactured using 90-nanometer process technology, and our 65-nanometer process is now qualified and ramping into production. Our advanced semiconductor research and development (R&D) is now done side-by-side with production of 300-millimeter (mm) wafers in our Dallas DMOS 6 fabrication plant. A second 300-mm facility is under construction to help meet customer demand for advanced chips. 300-mm wafers greatly expand the number of equivalent chips we can put on a single wafer, compared with the previous 200-mm wafers.
In 2005, a majority of our advanced digital products were built using 130-nanometer manufacturing process technology, while devices using 90-nanometer technology continued to increase throughout the year. We also began selling processors manufactured using 65-nanometer process technology. One nanometer is one billionth of a meter.
Since analog manufacturing technology evolves more slowly than digital manufacturing technology, analog products typically do not require us to build new manufacturing facilities. This tends to improve the profit margin on analog products, since the equipment on which they are manufactured are frequently fully depreciated.
Design Centers
Our design centers provide design, engineering and product application support as well as after-sales customer service design. The design centers are strategically located around the world to take advantage of key technical and engineering talent and proximity to key customers.
Customers
Our Semiconductor products are sold to OEMs, ODMs, contract manufacturers and distributors. Our largest single customer in 2005 was an OEM, the Nokia group of companies. Direct sales to Nokia were slightly less than 10 percent of our revenue in both 2004 and 2005, although if indirect sales such as to contract manufacturers are included, Nokia accounted for more than 10 percent of our 2004 and 2005 revenue. Overall, our sales to Nokia as a percent of revenue were slightly higher in 2005 than in 2004.
Sales and Distribution
We market and sell our products through a direct sales force, distributors and authorized third-party sales representatives. We have sales offices in over 25 countries worldwide. Distributors, located around the world, account for about 25 percent of our Semiconductor revenue, and they sell our products directly to a wide range of customers. These distributors typically maintain an inventory of our products. They also sell products from our competitors.
6
Sensors & Controls Segment
Sensors & Controls designs and manufactures sensors, electrical and electronic controls, and radio frequency identification (RFID) systems. We have Sensors & Controls manufacturing operations in the Americas, Europe and Asia, and we also source some products from third-party manufacturers. Sensors & Controls represented 9 percent of our revenue in 2005.
Our sensors business is the market leader in pressure sensing for the heating/ventilation/air conditioning, automotive and industrial markets. Our products improve operating performance, for example, by making a car’s heating and air-conditioning systems work more efficiently. Our pressure sensors for fuel injection and vehicle stability improve safety and performance and help the environment by reducing vehicle emissions and improving gas mileage.
Our controls business includes controls, motor protectors, circuit breakers, arc-fault circuit protectors and thermostats. These products help prevent damage from overheating and fires in a wide variety of applications, including aircraft, commercial heating and air-conditioning systems, refrigerators, cars, lighting and industrial applications.
RFID technology uses wireless radio communications to uniquely identify objects or people. It is used in a broad range of applications including access control to buildings, pay-at-the-pump gasoline sales, vehicle security, document tracking, livestock tracking and identification, product authentication, retail, sports timing, supply chain, ticketing and wireless payment. Our RFID systems consist of a transponder, receiver and other components such as antennas.
As discussed below (see Acquisitions, Divestitures and Investments), we have entered into an agreement to sell to an affiliate of Bain Capital, LLC, for $3 billion, substantially all of our Sensors & Controls segment. The RFID operations, which are not included in the sale, will become part of our Semiconductor segment.
Competition
Sensors & Controls is typically the top supplier in its targeted product areas, although we do have strong multinational and regional competitors. The primary competitive factors in this business are product reliability, manufacturing costs and engineering expertise.
Sensors & Controls products are sold to OEMs and distributors.
Educational & Productivity Solutions (E&PS) Segment
Educational & Productivity Solutions is a leading supplier of graphing handheld calculators. This business segment also provides its customers with business and scientific calculators and a wide range of advanced classroom tools and professional development resources to help students and teachers interactively explore math and science. E&PS relies on third-party manufacturers to build its products. This segment contributed 4 percent of our 2005 revenue.
Our principal competitors in this business are U.S.- and Japan-based companies. The principal competitive factors are an understanding of the education market, technology expertise and price.
E&PS sells its products primarily through retailers and instructional dealers.
Acquisitions, Divestitures and Investments
From time to time we consider acquisitions and divestitures that may strengthen our business portfolio. We also make investments directly or indirectly in private companies. Investments are focused primarily on next-generation technologies and markets strategic to us.
In the first quarter of 2005, we sold to Oki Electric Industry Co., Ltd. the assets associated with our commodity LCD driver product line. In 2004, those assets generated about $200 million in revenue.
In 2005, we announced the acquisition of Chipcon Group ASA, a leading company in the design of short-range, low-power wireless radio-frequency (RF) transceiver devices. Chipcon’s product line complements our existing high-performance
7
analog, power management and ultra-low-power microcontroller portfolio. We agreed to pay approximately $200 million for Chipcon, and the transaction was completed in January 2006.
In early 2006, we entered into an agreement to sell to an affiliate of Bain Capital, LLC, for $3 billion, substantially all of our Sensors & Controls segment. We expect to complete this sale in the first half of 2006. The RFID operations, which are not included in the sale, will become part of our Semiconductor segment. The sale will allow us to intensify our focus on our high-growth core digital signal processing and analog semiconductor opportunities.
Backlog
Our backlog of orders was $2.11 billion at December 31, 2005, and $1.58 billion at December 31, 2004. A substantial number of orders are shipped during the quarter in which they are received. We define backlog as of a particular date as firm purchase orders with a customer requested delivery date within a maximum length of time. As customer requirements and industry conditions change, orders may be, under certain circumstances, subject to cancellation or modification of terms such as pricing, quantity or delivery date. Customer order placement practices continually evolve based on customers’ individual business needs and capabilities, as well as industry supply and capacity considerations. Accordingly, we believe that our backlog at any particular date may not be indicative of revenue for any future period.
Raw Materials
We purchase materials, parts and supplies from a number of suppliers. In some cases we purchase such items from sole source suppliers. The materials, parts and supplies essential to our business are generally available at present, and we believe that such materials, parts and supplies will be available in the foreseeable future.
Intellectual Property
We own many patents, and have many patent applications pending, in the United States and other countries in fields relating to our business. We have developed a strong, broad-based patent portfolio and continually add patents to that portfolio. We also have several agreements with other companies involving license rights and anticipate that other license agreements may be negotiated in the future. In general, our license agreements have multi-year terms and may be renewed after renegotiation.
Our Semiconductor patent portfolio is an ongoing contributor to Semiconductor revenue. We do not consider our business materially dependent upon any one patent or patent license, although taken as a whole, our rights and the products made and sold under patents and patent licenses are important to our business.
We often participate in industry initiatives to set technical standards. Our competitors may also participate in the same initiatives. Participation in these initiatives may require us to license our patents to other companies.
We own trademarks that are used in the conduct of our business. These trademarks are valuable assets, the most important of which are “Texas Instruments” and our corporate monogram. Other valuable trademarks include DLP® and OMAPTM.
Research and Development (R&D)
Our primary area of R&D investment is semiconductor products and semiconductor manufacturing technology. We conduct most of our R&D internally. However, we also closely engage with a wide range of external industry consortia and universities.
From time to time we may terminate R&D projects before completion or decide not to manufacture and sell a developed product. We do not expect that all of our R&D projects will result in products that are ultimately released for sale or that our projects will contribute to revenue until at least a few years following completion.
Our R&D expense was $2.02 billion in 2005, compared with $1.98 billion in 2004 and $1.75 billion in 2003. Included is a charge for the value of acquisition-related in-process R&D of zero in 2005 and 2004 and $23 million in 2003.
Seasonality
Our revenue and operating results are subject to some seasonal variation. E&PS experiences its strongest results in the second and third quarters due to the back-to-school season. The Semiconductor segment generally has a weak first quarter, particularly in product areas such as wireless and consumer electronics that have stronger sales later in the year as manufacturers prepare for the holiday selling season.
8
Employees
At December 31, 2005, we had 35,207 employees.
Available Information
We make available, free of charge, through our investor relations web site our reports on Forms 10-K, 10-Q and 8-K, and amendments to those reports, as soon as reasonably practicable after they are filed with the SEC. Also available through the TI investor relations web site are reports filed by our directors and executive officers on Forms 3, 4 and 5, and amendments to those reports. The URL for our investor relations web site is www.ti.com/ir.
Available on our web site at www.ti.com/corporategovernance are: (i) our Corporate Governance Guidelines; (ii) charters (Statements of Responsibilities) for the Audit, Compensation, and Governance and Stockholder Relations Committees of our board of directors; (iii) our Code of Business Conduct; and (iv) our Code of Ethics for TI Chief Executive Officer and Senior Financial Officers. Stockholders may request copies of these documents free of charge by writing to Texas Instruments Incorporated, P.O. Box 660199, MS 8657, Dallas, Texas, 75266-0199, Attention: Investor Relations.
You should read the following Risk Factors in conjunction with the factors discussed elsewhere in this and other of our filings with the Securities and Exchange Commission (SEC) and in materials incorporated by reference in these filings. These Risk Factors are intended to highlight certain factors that may affect our financial condition and results of operations and are not meant to be an exhaustive discussion of risks that apply to companies like TI with broad international operations. Like other companies, we are susceptible to macroeconomic downturns in the United States or abroad that may affect the general economic climate and our performance and the performance of our customers. Similarly, the price of our securities is subject to volatility due to fluctuations in general market conditions, differences in our results of operations from estimates and projections generated by the investment community, and other factors beyond our control.
Cyclicality in the Semiconductor Market May Affect Our Performance.
Our semiconductor business is our largest business segment and the principal source of our revenue. The semiconductor market has historically been cyclical and subject to significant and often rapid increases and decreases in demand. These changes could adversely affect our results of operations and have an adverse effect on the market price of our securities. In particular, our strategic focus in this business is on the development and marketing of analog integrated circuits and digital signal processors. The results of our operations may be adversely affected in the future if demand for analog integrated circuits or digital signal processors decreases or if these markets or key end-equipment markets such as communications, entertainment electronics and computing grow at a significantly slower pace than management expects.
Our Margins May Vary over Time.
Our profit margins may be adversely affected in the future by a number of factors, including decreases in our shipment volume, reductions in, or obsolescence of our inventory and shifts in our product mix. In addition, the highly competitive market environment in which we operate might adversely affect pricing for our products. Because we own most of our manufacturing capacity, a significant portion of our operating costs are fixed. In general, these costs do not decline with reductions in customer demand or our utilization of our manufacturing capacity, and can adversely affect profit margins as a result.
The Technology Industry Is Characterized by Rapid Technological Change That Requires Us to Develop New Technologies and Products.
Our results of operations depend in part upon our ability to successfully develop, manufacture and market innovative products in a rapidly changing technological environment. We require significant capital to develop new technologies and products to meet changing customer demands that, in turn, may result in shortened product life cycles. Moreover, expenditures for technology and product development are generally made before the commercial viability for such developments can be assured. As a result, there can be no assurance that we will successfully develop and market these new products, that the products we do develop and market will be well received by customers or that we will realize a return on the capital expended to develop such products.
9
We Face Substantial Competition That Requires Us to Respond Rapidly to Product Development and Pricing Pressures.
We face intense technological and pricing competition in the markets in which we operate. We expect that the level of this competition will increase in the future from large, established semiconductor and related product companies, as well as from emerging companies serving niche markets that we also serve. Certain of our competitors possess sufficient financial, technical and management resources to develop and market products that may compete favorably against those of our products that currently offer technological and/or price advantages over competitive products. Competition results in price and product development pressures, which may result in reduced profit margins and lost business opportunities in the event that we are unable to match price declines or technological, product, applications support, software or manufacturing advances of our competitors.
Our Performance Depends in Part upon Our Ability to Enforce Our Intellectual Property Rights and to Develop and License New Intellectual Property.
Access to worldwide markets depends in part on the continued strength of our intellectual property portfolio. There can be no assurance that, as our business expands into new areas, we will be able to independently develop the technology, software or know-how necessary to conduct our business or that we can do so without infringing the intellectual property rights of others. We may have to rely increasingly on licensed technology from others. To the extent that we rely on licenses from others, there can be no assurance that we will be able to obtain all of the licenses we desire in the future on terms we consider reasonable or at all. The lack of a necessary license could expose us to claims for damages and/or injunction from third parties, as well as claims for indemnification by our customers in instances where we have contractually agreed to indemnify our customers against damages resulting from infringement claims. We actively enforce and protect our intellectual property rights, but there can be no assurance that our efforts will be adequate to prevent the misappropriation or improper use of the protected technology.
We benefit from royalty revenue generated from various license agreements. Some agreements expired in 2005 and either have been or are currently being renegotiated. Others will come up for renegotiation in future years. Future royalty revenue depends on the strength of our portfolio and enforcement efforts, and on the sales and financial stability of our licensees. Additionally, the consolidation of our licensees may negatively affect our royalty revenue. Royalty revenue from licensees is not always uniform or predictable, in part due to the performance of our licensees and in part due to the timing of new license agreements or the expiration and renewal of existing agreements.
A Decline in Demand in Certain End-User Markets Could Have a Material Adverse Effect on the Demand for Our Products and Results of Operations.
Our customer base includes companies in a wide range of industries, but we generate a significant amount of revenue from sales to customers in the communications and computer-related industries. Within these industries, a large portion of our revenue is generated by the sale of analog integrated circuits and digital signal processors to customers in the cell-phone, personal computer and communications infrastructure markets. Decline in one or several of these end-user markets could have a material adverse effect on the demand for our products and our results of operations and financial condition.
Our Global Manufacturing, Design and Sales Activities Subject Us to Risks Associated with Legal, Political, Economic or Other Changes.
We have facilities in more than 25 countries worldwide, and in 2005 more than 80 percent of our revenue came from sales to locations outside the United States. Operating internationally exposes us to changes in export controls and other laws or policies, as well as the general political and economic conditions, security risks, health conditions and possible disruptions in transportation networks, of the various countries in which we operate, which could result in an adverse effect on our business operations in such countries and our results of operations. Also, as discussed in more detail on pages 59 and 60 of our 2005 annual report to stockholders, we use forward currency exchange contracts to minimize the adverse earnings impact from the effect of exchange rate fluctuations on our non-U.S. dollar net balance sheet exposures. Nevertheless, in periods when the U.S. dollar significantly fluctuates in relation to the non-U.S. currencies in which we transact business, the remeasurement of non-U.S. dollar transactions can have an adverse effect on our results of operations and financial condition.
Our Results of Operations Could be Affected by Natural Events in the Locations in which We, Our Customers or Suppliers Operate.
We have manufacturing and other operations in locations subject to natural events such as severe weather and earthquakes that could disrupt operations. In addition, our suppliers and customers also have operations in such locations. A natural
10
disaster that results in a prolonged disruption to our operations, or our customers’ or suppliers’, may adversely affect our results of operations and financial condition.
The Loss of or Significant Curtailment of Purchases by Any of Our Largest Customers Could Adversely Affect Our Results of Operations.
While we generate revenue from thousands of customers worldwide, the loss of or significant curtailment of purchases by one or more of our top customers including curtailments due to a change in the design or manufacturing sourcing policies or practices of these customers, or the timing of customer or distributor inventory adjustments may adversely affect our results of operations and financial condition.
Incorrect Forecasts of Customer Demand Could Adversely Affect Our Results of Operations.
Our ability to match inventory and production mix with the product mix needed to fill current orders and orders to be delivered in the given quarter may affect our ability to meet that quarter’s revenue forecast. In addition, when responding to customers’ requests for shorter shipment lead times, we manufacture product based on forecasts of customers’ demands. These forecasts are based on multiple assumptions. If we inaccurately forecast customer demand, we may hold inadequate, excess or obsolete inventory that would reduce our profit margins and adversely affect our results of operations and financial condition.
Our Performance Depends on the Availability and Cost of Raw Materials, Utilities, Critical Manufacturing Equipment and Third-Party Manufacturing Services.
Our manufacturing processes and critical manufacturing equipment require that certain key raw materials and utilities be available. Limited or delayed access to and high costs of these items could adversely affect our results of operations. Additionally, the inability to timely implement new manufacturing technologies or install manufacturing equipment could adversely affect our results of operations. We subcontract a portion of our wafer fabrication and assembly and testing of our integrated circuits. We depend on a limited number of third parties to perform these functions. We do not have long-term contracts with all of these third parties. Reliance on these third parties involves risks, including possible shortages of capacity in periods of high demand.
Our Results of Operations Could be Affected by Changes in Taxation.
We have facilities in more than 25 countries worldwide and as a result are subject to taxation and audit by a number of taxing authorities. Tax rates vary among the jurisdictions in which we operate. Our results of operations could be affected by market opportunities or decisions we make that cause us to increase or decrease operations in one or more countries, or by changes in applicable tax rates or audits by the taxing authorities in countries in which we operate. In addition, we are subject to laws and regulations in various locations that govern the determination of which is the appropriate jurisdiction to decide when and how much profit has been earned and is subject to taxation in that jurisdiction. Changes in these laws and regulations could affect the locations where we are deemed to earn income, which could in turn affect our results of operations. We have deferred tax assets on our balance sheet. Changes in applicable tax laws and regulations could affect our ability to realize those deferred tax assets, which could also affect our results of operations. Each quarter we forecast our tax liability based on our forecast of our performance for the year. If that performance forecast changes, our forecasted tax liability will change.
Our Results of Operations Could be Affected by Warranty Claims, Product Recalls or Product Liability.
We could be subject to warranty or product liability claims that could lead to significant expenses as we defend such claims or pay damage awards. In the event of a warranty claim, we may also incur costs if we decide to compensate the affected customer. We do maintain product liability insurance, but there is no guarantee that such insurance will be available or adequate to protect against all such claims. In addition, it is possible for one of our customers to recall a product containing a TI part. In such instances, we may incur costs and expenses relating to the recall. Costs or payments we may make in connection with warranty claims or product recalls may adversely affect our results of operations and financial condition.
Our Continued Success Depends in Part on Our Ability to Retain and Recruit a Sufficient Number of Qualified Employees in a Competitive Environment.
Our continued success depends in part on the retention and recruitment of skilled personnel, including technical, marketing, management and staff personnel. Experienced personnel in the electronics industry are in high demand and competition for their skills is intense. There can be no assurance that we will be able to successfully retain and recruit the key personnel that we require.
11
Not applicable.
Our principal executive offices are located at 12500 TI Boulevard, Dallas, Texas. The following table indicates the general location of our principal manufacturing and design operations and the business segments that make major use of them. Except as otherwise indicated, we own these facilities.
Semiconductor
Sensors&Controls
E&PS
Dallas, Texas(1)
X
Sherman, Texas(1)(2)
Houston, Texas
Miho, Japan
Kuala Lumpur, Malaysia(3)
Freising, Germany
Baguio, Philippines(4)
Taipei, Taiwan
Aguascalientes, Mexico(5)
Attleboro, Massachusetts(2)
Hiji, Japan
Changzhou, China(2)
Nice, France
Tucson, Arizona
Bangalore, India
Baoying, China(4)
Tokyo, Japan(2)
Jincheon, South Korea
San Diego, California(2)
Our facilities in the United States contained approximately 13,600,000 square feet at December 31, 2005, of which approximately 2,300,000 square feet were leased. Our facilities outside the United States contained approximately 7,100,000 square feet at December 31, 2005, of which approximately 1,900,000 square feet were leased.
We believe that our existing properties are in good condition and suitable for their intended purpose. As discussed in Item 1, we outsource a portion of our product manufacturing. At the end of 2005, we occupied substantially all of the space in our facilities.
Leases covering our currently occupied leased facilities expire at varying dates generally within the next 10 years. We anticipate no difficulty in retaining occupancy through lease renewals, month-to-month occupancy or purchases of leased facilities, or replacing the leased facilities with equivalent facilities.
12
Italian government auditors have substantially completed a review, conducted in the ordinary course, of approximately $250 million of grants from the Italian government to TI’s former memory operations in Italy. The auditors have raised a number of issues relating to compliance with grant requirements and the eligibility of specific expenses for the grants. As of December 31, 2005, the auditors have issued audit reports on 12 of 13 projects. The Ministry of Industry is responsible for reviewing the auditors’ findings. Depending on the Ministry’s decision, the review may result in a demand from the Italian government that we repay a portion of the grants. We believe that the grants were obtained and used in compliance with applicable law and contractual obligations. As of December 31, 2005, the Ministry has published final decrees on 12 of the projects representing approximately $175 million of the grants. We do not expect the outcome to have a material adverse impact on our financial condition, results of operations or liquidity.
We are involved in various proceedings conducted by the federal Environmental Protection Agency and certain other governmental environmental agencies regarding clean-up of contaminated sites. These proceedings are being coordinated with the agencies and, in certain cases, with other potentially responsible parties. Although the factual situations and the progress of each of these matters differ, we believe that the amount of our liability will not have a material adverse effect upon our financial condition, results of operations or liquidity.
The Internal Revenue Code was recently amended to require that companies disclose in their Form 10-K whether they have been required to pay penalties to the Internal Revenue Service for certain transactions that have been identified by the IRS as abusive or that have a significant tax avoidance purpose. We have not been required to pay any such penalties.
PART II
The information contained under the caption “Common Stock Prices and Dividends” on page 62 of TI’s 2005 annual report to stockholders, and the information concerning the number of stockholders of record at December 31, 2005, on page 44 of such annual report are incorporated herein by reference to such annual report.
The following table shows our repurchases of our common stock in the fourth quarter of 2005:
ISSUER PURCHASES OF EQUITY SECURITIES
Period
ApproximateDollar Value ofShares that
May Yet BePurchased
Under the
Plans orPrograms (1)
October 1 through October 31, 2005
November 1 through November 30, 2005
December 1 through December 31, 2005
Total
All purchases were made through open-market purchases except for 1,080,000 shares that were acquired in November through a privately negotiated forward purchase contract with a non-affiliated financial institution. The forward
13
purchase contract was designed to minimize the adverse impact on our earnings from the effect of stock market value fluctuations on the portion of our deferred compensation obligations denominated in TI stock.
The “Summary of Selected Financial Data” for the years 2001 through 2005, which appears on page 44 of TI’s 2005 annual report to stockholders, is incorporated herein by reference to such annual report.
The information contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 45 through 58 of TI’s 2005 annual report to stockholders is incorporated herein by reference to such annual report.
The information concerning market risk is contained on pages 59 and 60 of TI’s 2005 annual report to stockholders and is incorporated herein by reference to such annual report.
The consolidated financial statements of the company at December 31, 2005 and 2004, and for each of the three years in the period ended December 31, 2005, and the report thereon of the independent registered public accounting firm, on pages 6 through 41 of TI’s 2005 annual report to stockholders, are incorporated herein by reference to such annual report.
The “Quarterly Financial Data” on page 61 of TI’s 2005 annual report to stockholders is also incorporated herein by reference to such annual report.
Disclosure Controls and Procedures
An evaluation as of the end of the period covered by this report was carried out under the supervision and with the participation of TI’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of TI’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that those disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed by TI in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.
Internal Control over Financial Reporting
Management’s assessment on our internal control over financial reporting is contained in the Report by Management on Internal Control over Financial Reporting on page 42 of our 2005 annual report to stockholders and is incorporated herein by reference to such annual report.
The Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting opining on management’s assessment, included in the Report by Management on Internal Control over Financial Reporting, and opining on the effectiveness of TI’s internal control over financial reporting is contained on page 43 of our 2005 annual report to stockholders and is incorporated herein by reference to such annual report.
14
PART III
The information with respect to directors’ names, ages, positions, term of office and periods of service, which is contained under the caption “Election of Directors” in our proxy statement for the 2006 annual meeting of stockholders, is incorporated herein by reference to such proxy statement.
The information with respect to the company’s audit committee financial expert contained under the caption “Board Organization” in our proxy statement for the 2006 annual meeting of stockholders is incorporated herein by reference to such proxy statement.
The information with respect to Section 16(a) Beneficial Ownership Reporting Compliance contained under the caption of the same name in our proxy statement for the 2006 annual meeting of stockholders is incorporated herein by reference to such proxy statement.
The following is an alphabetical list of the names and ages of the executive officers of the company and the positions or offices with the company presently held by each person named:
Name
Position
Gilles Delfassy
Thomas J. Engibous
Michael J. Hames
Joseph F. Hubach
Chung-Shing (C.S.) Lee
Stephen H. Leven
Melendy E. Lovett
Gregg A. Lowe
Kevin P. March
Kevin J. Ritchie
Richard K. Templeton
John C. Van Scoter
Teresa L. West
Thomas Wroe, Jr.
The term of office of the above-listed officers is from the date of their election until their successor shall have been elected and qualified. Ms. West and Messrs. Delfassy, Engibous, Hames, Hubach, Leven, Templeton and Wroe have served as executive officers of the company for more than five years. Messrs. Lee and Lowe have served as executive officers of the company since 2001 and have been employees of the company for more than five years. Mr. March became an executive officer of the company in 2003 and has been an employee of the company for more than five years. Ms. Lovett and Mr. Ritchie became executive officers of the company in 2004 and have been employees of the company for more than five years. Mr. Van Scoter became an executive officer of the company in 2005 and has been an employee of the company for more than five years.
Code of Ethics
We have adopted the Code of Ethics for TI Chief Executive Officer and Senior Financial Officers. A copy of the Code can be found on our web site at www.ti.com/ir. We intend to satisfy the disclosure requirements of the Securities and Exchange Commission regarding amendments to, or waivers from, the Code by posting such information on the same web site.
15
Audit Committee
We have a separately designated standing audit committee established in accordance with Section 3(a)5(58)(A) of the Securities and Exchange Act of 1934. The following directors are members of TI’s Audit Committee: James R. Adams (Chair), Carrie S. Cox, Gerald W. Fronterhouse and Pamela H. Patsley.
The information contained under the captions “Director Compensation” and “Executive Compensation” in our proxy statement for the 2006 annual meeting of stockholders is incorporated herein by reference to such proxy statement.
Equity Compensation Plan Information
The following table sets forth information about the company’s equity compensation plans as of December 31, 2005:
Plan Category
Number of Securities to
be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans
Equity Compensation Plans Approved by Security Holders
Equity Compensation Plans Not Approved by Security Holders
Excludes the following:
Includes shares to be issued under the Texas Instruments 2003 Long-Term Incentive Plan, a plan for non-management employees; executive officers and approximately 250 managers of the company are ineligible to receive awards under the plan. The plan authorizes the grant of: (1) stock options, (2) restricted stock and restricted stock units, (3) performance units and (4) other awards (including stock appreciation rights) valued in whole or in part by reference to or otherwise based on common stock of the company. The plan is administered by a board committee appointed by the board of directors consisting entirely of independent directors (the Committee). The Committee has the sole discretion to grant to eligible participants one or more equity awards and to determine the number or amount
16
of any award. Except in the case of awards made through assumption of, or in substitution for, outstanding awards previously granted by an acquired company, and except as a result of an adjustment event such as a stock split, the exercise price under any stock option, the grant price of any stock appreciation right, and the purchase price of any security that may be purchased under any other stock-based award under the plan will not be less than 100% of the fair market value of the stock or other security on the date of the grant of the option, right or award.
Also includes shares to be issued under the Texas Instruments Directors Deferred Compensation Plan, the Texas Instruments Restricted Stock Unit Plan for Directors and the Texas Instruments Stock Option Plan for Non-Employee Directors. These plans were replaced by the Texas Instruments 2003 Director Compensation Plan, and no further grants will be made under them.
Security Ownership of Certain Beneficial Owners and Management
The information concerning (a) the only persons that have reported beneficial ownership of more than 5 percent of the common stock of TI, and (b) the ownership of TI’s common stock by the chief executive officer during 2005 and the four other most highly compensated executive officers, and all executive officers and directors as a group, that is contained under the caption “Share Ownership of Certain Persons” in our proxy statement for the 2006 annual meeting of stockholders, is incorporated herein by reference to such proxy statement. The information concerning ownership of TI’s common stock by each of the directors, which is contained under the caption “Directors’ Ages, Service and Stock Ownership” in such proxy statement, is also incorporated herein by reference to such proxy statement.
The information contained under the caption “Certain Business Relationships” in the company’s proxy statement for the 2006 annual meeting of stockholders is incorporated herein by reference to such proxy statement.
The information with respect to principal accountant fees and services contained under the caption “Proposal to Ratify Appointment of Independent Registered Public Accounting Firm” of our proxy statement for the 2006 annual meeting of stockholders is incorporated herein by reference to such proxy statement.
PART IV
(a) 1 and 2. Financial Statements and Financial Statement Schedules:
The financial statements and financial statement schedule are listed in the index on page 24 hereof.
3. Exhibits:
Designation ofExhibit inthis Report
Description of Exhibit
17
18
19
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
This report includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as TI or its management “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. Similarly, statements herein that describe TI’s business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements.
We urge you to carefully consider the following important factors that could cause actual results to differ materially from the expectations of TI or its management:
Natural events such as severe weather and earthquakes in the locations in which TI, its customers or
20
suppliers operate;
For a more detailed discussion of these factors see the Risk Factors discussion in Item 1A of this report. The forward-looking statements included in this report are made only as of the date of this report and TI undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.
21
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
By:
Date: February 28, 2006
Each person whose signature appears below constitutes and appoints each of Richard K. Templeton, Kevin P. March and Joseph F. Hubach, or any of them, each acting alone, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities in connection with the annual report on Form 10-K of Texas Instruments Incorporated for the year ended December 31, 2005, to sign any and all amendments to the Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 28th day of February 2006.
Signature
Title
/s/ James R. Adams
James R. Adams
/s/ David L. Boren
David L. Boren
/s/ Daniel A. Carp
Daniel A. Carp
/s/ Carries S. Cox
Carrie S. Cox
/s/ Thomas J. Engibous
/s/ Gerald W. Fronterhouse
Gerald W. Fronterhouse
/s/ David R. Goode
David R. Goode
/s Pamela H. Patsley
Pamela H. Patsley
/s Wayne R. Sanders
Wayne R. Sanders
/s/ Ruth J. Simmons
Ruth J. Simmons
22
/s/ Richard K. Templeton
Director; President and Chief
Executive Officer
/s/ Christine Todd Whitman
Christine Todd Whitman
/s/ Kevin P. March
Senior Vice President; Chief
Financial Officer; Chief Accounting Officer
23
TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
(Item 15(a))
Information incorporated by reference to the Registrant’s 2005 annual report to stockholders
Consolidated Financial Statements:
Income for each of the three years in the period ended December 31, 2005
Comprehensive income for each of the three years in the period ended December 31, 2005
Balance sheets at December 31, 2005 and 2004
Cash flows for each of the three years in the period ended December 31, 2005
Stockholders’ equity for each of the three years in the period ended December 31, 2005
Notes to financial statements
Report of Independent Registered Public Accounting Firm
Financial statement schedules have been omitted because the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto.
24