Dave Pahl - VP, IR Kevin March - SVP, CFO

Romit Shah - Nomura John Pitzer - Credit Suisse Stacy Rasgon - Sanford Bernstein Blayne Curtis - Barclays Capital Harlan Sur - JPMorgan Vivek Arya - Bank of America Merrill Lynch Ross Seymore - Deutsche Bank Chris Danley - Citi Amit Daryanani - RBC Capital Markets Tore Svanberg - Stifel Nicolaus Ambrish Srivastava - BMO Capital Markets William Stein - SunTrust Robinson Humphrey

Good day and welcome to the Texas Instruments 1Q16 Earnings Release Conference. At this time I would like to turn the conference over to Dave Pahl. Please go ahead.

Good afternoon and thank you for joining our first quarter 2016 earnings conference call. As usual, Kevin March, TI's Chief Financial Officer, is with me today. For any of you who missed the release, you can find it on our website at ti.com/ir. This call is being broadcast live over the web and can be accessed through our website. A replay will be available through the web as well. This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward-looking statements contained in the earnings release published today, as well as TI's most recent SEC filings, for a more complete description. I'll start with a quick summary. Revenue for the quarter was in the upper half of our expected range. Compared with the year ago, notable market activity for our products included continuing strength in automotive as well as improvement in the industrial and communications equipment. Revenue was down 5% due to the weakness in personal electronics market, which declined as expected. Our core businesses of analog and embedded processing comprised 87% of first quarter revenue. Analog revenue declined 8%, while embedded processing revenue grew 8%. Earnings per share were $0.65. With that backdrop, Kevin and I will move on to the details of our performance which we believe continues to be representative of the ongoing strength of our business model. In the first quarter, our cash flow from operations was $547 million. We believe that free cash flow growth, especially on a per share basis, is most important to maximizing shareholder value in the long term. Free cash flow for the trailing 12-month period was $3.7 billion, up 1% from a year ago. Free cash flow margin was 28.4% of revenue, up from 27.3% a year ago and consistent with our targeted range of 20% to 30% of revenue. We continue to benefit from our improved product portfolio and the efficiencies of our manufacturing strategy, the latter of which includes our growing 300 millimeter analog output and the opportunistic purchase of assets ahead of demand. We believe that free cash flow will be valued only if it's returned to shareholders or productively invested in the business. For the trailing 12-month period, we returned $4.2 billion of cash to our investors through a combination of dividends and stock repurchases. Analog revenue decreased 8% from a year ago. The decline was primarily due to high volume, analog and logic. Power management and high-performance analog also declined, while Silicon Valley analog grew. Embedded processing revenue increased 8% from a year ago due to growth in all three product lines, led by processors. Our investments in embedded are translating into tangible results as this quarter's revenue is a record. In our other segment, revenue declined 10% from a year ago, primarily due to custom ASIC products. Compared with a year ago, distributor resales decreased 4% due to lower demand and personal electronics that I described earlier. Inventory increased a couple of days to about 4-1/2 weeks. We believe this inventory level continues to reflect an environment of good product availability due to healthy TI inventories and stable lead times, which, together, drive high customer service metric. As a reminder, inventory in our distribution channel has decreased over the past few years because of our consignment program. Now provide some insight into this quarter's revenue performance by end-market versus a year ago. Automotive demand remained very strong driven by infotainment and hybrid electric vehicle and powertrain systems. Industrial demand strengthened broadly with most sectors growing. Within personal electronics, we had a portion of demand that declined about $150 million as expected. Overall personal electronics was down more than that, primarily due to mobile phones. Communications equipment was about even from a year ago, an improvement from last quarter when it was down about 15%. And finally, enterprise systems declined. We continue to focus on making our company stronger through manufacturing and technology, the breadth of our product portfolio, the reach of our market channels, and our diverse and long-lived positions. These four attributes taken together are at the core of what puts TI in a unique class of companies able to -- capable of long-term free cash flow growth. Kevin will now review profitability, capital management, and our outlook.

Thanks, Dave, and good afternoon everyone. Gross profit in the quarter was $1.82 billion and was 60.6% of revenue, a new record. From a year ago, gross profit margin increased 290 basis points, primarily due to lower manufacturing costs, as well as a higher percentage of more profitable products. Operating expenses were $774 million, about even with the year-ago period. Over the last 12 months we've invested $1.27 billion in R&D, an important element of our capital allocation. Acquisition charges were $80 million, all of which were for the ongoing amortization of intangibles, which is a non-cash expense. Operating profit was $968 million or 32.2% of revenue. Operating profit was up 1% from the year-ago quarter. Operating margin for analog was 36.1%. Operating margin for embedded processing was 25.0%, 670 basis points higher than a year ago, as we focused our investments on the best sustainable growth opportunities with differentiated positions. Net income in the first quarter was $668 million or $0.65 per share. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $547 million in the quarter. Inventory days were 137, as we staged our inventory for increased shipments in the second quarter. Also included were three to four days of inventory associated with a portion of the personal electronics market that started to flow late in the fourth quarter. We expect to ship this material later this year. Capital expenditures were $124 million in the quarter. On a trailing 12-month basis, cash flow from operations was $4.21 billion, up 4% from the same period a year ago. Trailing 12-month capital expenditures were $552 million or 4% of revenue. As a reminder, our long-term expectation is for capital expenditures to be about 4% of revenue, which include the expansion of our 300-millimeter analog capacity. Free cash flow for the past 12 months was $3.65 billion or 28.4% of revenue. Free cash flow was 1% higher than a year ago. This growth reflects the continued strength of our business model. As we said, we believe free cash flow growth, especially on a per share basis is most important to maximizing shareholder value in the long term and will be valued only for this return to shareholders or productively reinvested in the business. As we've noted, our intent is to return 100% of our free cash flow plus any proceeds we receive from exercise of equity compensation, minus net debt retirement. In the first quarter we paid $383 million in dividends and repurchased $630 million of our stock for a total of $1.01 billion. Total cash returned to shareholders in the past 12 months was $4.17 billion. Outstanding share count was reduced by 3.6% over the past 12 months and by 41% since the end of 2004 when we initiated a program designed to produce our share count. These returns demonstrate our confidence in our business model and our commitment to return excess cash to our shareholders. Fundamental to our commitment to return cash are our cash management and tax practices. We ended the first quarter with $2.80 billion of cash and short-term investments with our US entities owning the 80% of our cash. Because our cash is largely onshore, it is readily available for a variety of uses. Our orders in the quarter were $3.09 billion, down 4% from a year ago. Turning to our outlook, for the second quarter we expect revenue in the range of $3.07 billion to $3.33 billion, and earnings per share to be in the range of $0.67 to $0.77. Acquisition charges, which are non-cash amortization charges, will remain about even and hold at about $80 million per quarter to the third quarter of 2019. They'll then decline to about $50 million per quarter for two additional years. Our expectation for our annual effective tax rate in 2016 is about 30%, and this is the tax rate you should use for the second quarter and for the year. So in summary, we believe our first quarter results demonstrate the strength of our business model. And with that, let me turn it back to Dave.

Thanks, Kevin. Operator, you can now open the lines up for questions. In order to provide as many of you as possible an opportunity to ask questions, please limit yourself to a single question. After our response, we'll provide you an opportunity for additional follow-up. Erica [ph]?

Thank you. [Operator Instructions] We'll go first to the line of Romit Shah. Please go ahead. Romit Shah - Nomura: Yes, thank you, and excellent results. Could you give us a little bit more color on what's driving the revenues in Q2 by end-market?

Yeah, Romit. We don't typically provide a forecast by end-market. However, if there's any large shifts, we'll talk about that, you know, much like we did last quarter within a sector in personal electronics. I can say that that demand we would expect to grow sequentially, but it will be down significantly from a year ago. And I'd also say that, outside of that, we would expect the rest of our business to grow both sequentially and year over year. Romit Shah - Nomura: Okay. And yeah, just -- yeah, I know that the conversation to 300-millimeter has been an important part of the improvement in margin profile, and I was wondering if you could just update us on how much of the portfolio is converted to 300 and how much is left.

Romit, I'll go ahead and talk to that. Roughly a quarter of our analog revenue was generated on 300 millimeter last year. We have total internal capability about $8 billion, so we're using about a quarter of that capability at this point in time. Just to remind everyone else who's listening, the reason the 300 millimeter is so important to us is really the economics at the factory level. We get about 2.3 times as many chips per wafer on a 300 millimeter versus the 200 millimeter. The wafer processing cost is about 1.4 times as much. So if you do the math, that means the actual die cost is only about 60% as much on a 300 millimeter as a 200 millimeter wafer. When you kind of take that all the way through to finished goods, all things being equal we wind up with a higher gross margin on those chips to manufacture 300 millimeter. So that's increasingly important to us. As we look out in the future, again we've got about probably $6 billion of growth capacity in 300 millimeter and we continue to increase our loadings in that space. In fact on a year-over-year basis we actually had more starts on 300 millimeter than a year ago.

Good. And I'll just add to Kevin's comment, that as we reported last quarter, we qualified our second 300 millimeter fab, which is DMOS 6, and we do have product running in that fab today. So, thank you, Romit. We'll go to the next caller please.

I'll take our next question from the line of John Pitzer. Please go ahead, your line is open. John Pitzer - Credit Suisse: Yeah, good afternoon guys. Solid execution as always. I guess, could you talk a little bit about the embedded processing op margin improvements? If memory serves me correct, when you got out of the wireless business, you didn't get out of all the costs and you put a lot of that cost into the embedded processing market. If I look at sort of the incremental margin, op margin sequentially, it's greater than 60%. Are we sort of at a tipping point here with that kind of the incremental op margin we should start to see about this business? And is there any reason why the embedded op margin shouldn't converge with the analog op margins over time?

Yeah, John. You might recall was for the year ago we were still in the process of winding up some restructuring items in the embedded processing segment. That finished about the middle of the second quarter, that bled over into the middle of the second quarter. [Inaudible] now we're seeing the benefit of those cost restructurings. The margin improvement that we'll see [inaudible] solid 25% operating profit a quarter, and that's really much closer to what we expect from that business segment. As you noted, we had about, quarter over quarter, about a 62% pull-through [ph] to operating profit from the revenue growth. And as we go forward, the focus of that division will be primarily on very solid cost containment and cost management, but a lot of energy on growing the top line and growing revenue. So that it can continue to drop through more profit as we go forward. I won't attempt to characterize whether or not it achieves the same sort of levels as analog, but we are confident there remains room of improvement in that overall P&L, primarily from continued cost containment and a drive towards revenue growth. John Pitzer - Credit Suisse: You mentioned, as my follow-up, you mentioned in your prepared comments some of the inventory growth you saw in the March quarter. Just kind of curious how long it takes to get back closer to trend, as you exit June, would you expect to see days closer to your trend line, or how should we think about that?

Yeah. I think what's actually interesting, John, is our dollars of inventory are actually down year over year. And as we mentioned in the prepared remarks, our days of inventory were up, and that's up on the expectation of increased shipments in the second quarter. And plus there's a few extra days that are inside that 1Q inventory as a result of the slowdown in personal electronics that we mentioned 90 days ago. We expect that material is going to ship over the balance of the year. And between the increased shipments in 2Q and the shipments of that personal electronics material, we'll see the days of inventory drift back down comfortably inside our model, very similar to what we saw last year. If you go back and take a look last year, we were also a little bit higher in the first quarter, anticipation of second quarter growth, and then days drifted down as we came through the year.

Okay. Thank you, John. And we'll go to the next caller please.

We'll take our next question from Toshiya Hari. Please go ahead.

Hi. This is Charles [ph] on for Toshiya. Your Q2 guide at the midpoint, flat to down year-over-year growth, I was kind of wondering when you expect to kind of return to growth and what the drivers of that will be.

Yeah. So I think if you look at the midpoint, you're right, the year-over-year growth would be down about 1%. As we talked about before, we, on a year-over-year basis, we'll still have the growth impacted due to the weakness inside of personal electronics. Outside of that, we expect to see our businesses growing both sequentially and year on year, and again I think that we're on a good position to capitalize on the trends of industrial and automotive. We think longer term that that's where the growth in our industry will come from. And just as a reminder, we had last year about 46% of our revenues driven by there. So we feel good with where our products are positioned.

Got it. And then gross margin performance was strong, if you want. Outside of lower depreciation and incremental 300 millimeter revenues, where are the other factors that are going to drive upside from here?

Well, you hit two important ones. So we have lower manufacturing costs year over year, driven by, as you mentioned, lower depreciation and increased 300 millimeter wafer starts. But we also had a retromix of overall products. As Dave mentioned in his prepared remarks, industrial was up very solidly for us, and in the industrial space we enjoy a very nice mix of overall profitability. So you have that combination of events going on. And again, to Dave's comments a moment ago, as we continue to see content growth in industrial and automotive, we would expect to continue to see an improvement on our mix from a profitability standpoint too as we look out over the quarters and years. So it's all coming together very nicely for us right now.

Okay, great. Thank you. And we'll go to our next caller please.

Our next question comes from the line of Stacy Rasgon. Please go ahead. Stacy Rasgon - Sanford Bernstein: Hi guys. Thanks for taking my questions. In the quarter, OpEx came in a little higher. I was wondering if you could tell us the driver, what drove that, and what your thoughts are for OpEx for Q2.

Yes, Stacy, OpEx did come in a little bit higher than what we had planned for. There really wasn't any one thing that drove that. There's just a number of small things that were being taken care of in the quarter. As we look into second quarter, recall that 1Q includes about two months' worth of our annual pay and benefit increases. If you look into 2Q you'll need to account for that, that we would have the full three months of pay and benefit increases. I'd expect the change quarter to quarter to be very similar to what you saw last year. Stacy Rasgon - Sanford Bernstein: Got it. Thank you, that's helpful. For my follow-up, I wanted to dig a little bit into the comm infrastructure impact on both embedded processing as well as others. So, embedded dropped 8% year over year. You noted within your other business that your ASIC, custom ASICs, are down year over year. I think both of those tend to be driven very highly by comm infrastructure. Can you help us understand the differential between those two businesses? Is one of them eating the other for example?

Yeah. So, first, let me talk about our embedded business. So, our embedded business, as you remember, has three product lines inside of it. Micro-controllers and processors are both about 45% of that revenue, and connectivity makes up about 10% of that revenue. So we saw growth in all three of those businesses, they all grew very nicely. But it was led by processors. So our communications infrastructure, processors would be inside of that business, but we also sell automotive products that are inside of that business that drove that growth. The -- in the other business, the custom ASIC business, I'll just say that we saw a different mix of products to customers, so it's not always the same. We've got some customers where we only sell both embedded and analog into those customers. So -- and that said, this is a reminder longer term, we do expect that the custom ASIC business will decline, because that functionality is being absorbed into our SOCs inside of the embedded business, so. Thank you -- Stacy Rasgon - Sanford Bernstein: Thank you guys.

-- Stacy. We'll go to the next caller please.

Our next question comes from Blayne Curtis. Please go ahead. Blayne Curtis - Barclays Capital: Hey guys. Thanks for taking my question. Could you just talk about the outperformance in gross margin? You said 300 millimeters. I was just curious what the utilization rates are. And as you look into Q2, it seems that guidance implies kind of sustaining at that level. I just want to make sure that was right and what you're expecting to do with utilizations there.

Yeah, the utilizations actually haven't changed that much in a number of quarters and we don't expect it to change much in the next quarter or two either. The amount of wafers that we're starting are pretty consistent as we go across the quarters. And Blayne, you can kind of see that in -- when our days of inventory is up in 1Q, we're building for increased shipments in 2Q that allows us to run the factories at pretty close to similar utilizations quarter over quarter, rather than ramping them up and down to meet in-quarter demand. So I wouldn't expect utilization to change that much going into the next couple of quarters just as it hasn't in the last number of quarters. Blayne Curtis - Barclays Capital: Got you. And then just my follow-up, you had a correction in consumer as you pointed out. As you look into the back half of the year, you said you expected to sell through. So do you expect your content in those types of [ph] applications to be roughly similar this year and therefore you should see a similar ramp like you did last year?

Yeah, we haven't given color on how much content we have. I'll just say that, when we do engage where we like to be able to engage inside of personal electronics, those types of products that we'll sell across multiple generations of products, and that's not always the case on every product that we make an investment in, but that's where we want to steer our investment dollars. So we're confident that, as we build that inventory, that we'll have demand in the back half. We won't try to predict at this point what that demand will look like, so. Thank you, Blayne, and good to the next caller please.

Our next question comes from the site of Harlan Sur. Please go ahead. Harlan Sur - JPMorgan: Hi, good afternoon. Thanks for taking my question. Another solid showing by the embedded business. You pointed out particular strength in processors, I think you guys talked about comms as a driver there, and maybe some automotive. But your MCU products also grew nicely year over year. Maybe you can just give us some insights on the end-market/applications that drove the growth in that sub-segment.

Yeah. You know, our MCU business is really a great business that we're building. And as you know, we've been investing in that business for some time. We've got and continued to invest both in TI-based architectures as well as ARM-based architectures, and we've got customers that want to have both of those. And we continue to be selective on where we make those investments. Part of the, you know, the way that you differentiate those products is by having peripherals that are optimized for different types of applications. We developed micro-controllers that are targeted for ultra-low-power battery-backed operations that'll be in-fielded for, in some cases, decades, as well as very high-performance-based microcontrollers, so. And we've got very strong connectivity solutions, both wired, but as well as wireless. And that crosses over into our connectivity business that we've got there and that we support over a dozen different interface or wireless standards inside of that business. So, again, very, very broad-based, and we really are encouraged by the results of that business. You have a follow-on, Harlan? Harlan Sur - JPMorgan: Yeah. But in the industrial markets, which was obviously an area of strength for you guys in the March quarter, you guys have talked previously about servicing like I think 14 different sub-segments, so, very broad.

You're correct. Harlan Sur - JPMorgan: You've also talked about content gains in industrial, which is kind of a similar dynamic to the automotive segment. Any of those sub-segments within industrial that are showing more of a bias towards more dollar content gains on a go-forward basis?

Yeah, I think, Harlan, the one nice thing about automotive is we can more easily identify what unit SAR growth is and there's enough analysts that follow that market that we can track with the semiconductor content gain. And there we think that there's probably somewhere around $350 on average that sells into an automotive. That's a number that's been growing very nicely. When I look at that, that's probably about 1% of the average sales price of a car, so it's not too hard to imagine that that number will continue to grow and grow significantly over the future. When you contrast that to industrial, and we think we're in the very early stages of maybe where we were three, five years ago in the automotive market with industrial, you really can't do that same type of analysis, unfortunately, because we've got 14 different sectors that we sell into. Underneath that there are literally hundreds of different end equipment that we track and develop solutions for. And there's just a very, very wide variety of applications. So we can see it going on. And the beauty of it is it's not just one thing. It really is a growth on a very broad basis. And I think that that's reflected in our numbers, not only this quarter but it's been reflected in the numbers for a number of quarters now. So we really look forward to that opportunity in the future. Okay, Harlan. Thank you. And we'll move on to the next caller please.

Our next question comes from the line of Vivek Arya. Please go ahead. Vivek Arya - Bank of America Merrill Lynch: Thanks for taking my question. One more on gross margins. Is the 60.6% the new baseline and we should model the flow-through from this level, or are there any mix benefits that are helping you in the first half that might reverse when the smartphone shipments start to ramp in the second half?

Well, you'll have several things going on across that. That's a pretty tough call to make and more time to get too precise. We would expect industrial and automotive to continue to be a growing portion of our revenue over time. That's where we're focusing our attention, especially R&D dollars. We also expect more starts, as we look out into the future, proportionately more starts on 300 millimeter, which is lower cost wafers. We would also expect the depreciation and declines that we've been seeing this past year to continue, albeit at a slower pace than what we've seen in the last few quarters. So those will give you tailwinds, so even if you do have some of these other products start back up, [inaudible] mix going on inside there that these margins that we're operating at right now are probably representative of what the portfolio can do for our shareholders. Vivek Arya - Bank of America Merrill Lynch: Got it. [Inaudible] Kevin. And as my follow-up, you mentioned that sales growth in Q1 plus what you're guiding to Q2, excluding, I don't recall whether you said personal electronics or just your largest customer, that sales growth is actually up year on year. Could you help us quantify what that growth trend is versus last year?

Yeah, Vivek, we're not being that precise. We just wanted to give some color generally that, you know, where we had that headwind and the demand changing late in the fourth quarter, that that portion of our demand inside of personal electronics, that we expect that it will grow sequentially but be down significantly year over year. And we just haven't gotten more precise than that, so. Okay. Thank you, Vivek. And we'll move on to the next caller please.

Our next question comes from the line of Ross Seymore. Please go ahead. Ross Seymore - Deutsche Bank: Thanks for letting me ask the question guys. I guess the first question would be, your first quarter came in at the high end of the range. Can you just talk about what was the positive surprise in the quarter? And maybe associated with that, Dave, I think in the past you have given sequential end-market performance to match what you've given and then year over year, if that helps to answer both questions, that will be great.

Yes. So again as we had said earlier, that portion of demand where we saw weakness came in about as we expected. The strength was more broad-based, and we continue to, obviously, to see strength in automotive and then the improvement in industrial and comms equipment. So, very, very broad-based strength that we saw. So the second part of your question was sequentially. What we saw from the trends there, no surprise that automotive remained very strong, and it was driven by infotainment as well as the hybrid electric and powertrain systems. Industrial, again we had growth across almost every sector inside of industrial. Personal electronics down, with most sectors declining. And comms equipment was up sequentially, and that was the third quarter in a row that it actually grew. And then enterprise systems was up due to projectors. So, did you have a follow-on, Ross? Ross Seymore - Deutsche Bank: Yeah, I'll make it quick. And you just talked about the comms side, the third quarter in a row it's been up. Generally, how do you think about that versus where we are after earning a ton of inventory and now coming back, are we to the point where we're shipping to end-demand and then now we can grow or shrink with that, or is there some other dynamics going on?

Can you repeat the first part of the question? Because you just cut out a little bit on our side. Ross Seymore - Deutsche Bank: Sure, I'm sorry. So you said your comms business was actually up for the third quarter in a row.

Right. Ross Seymore - Deutsche Bank: Obviously that had fallen due to the end-market before that.

Yeah. Ross Seymore - Deutsche Bank: So the question is, do you think you're back to shipping to end-demand and what do you view to be the growth trajectory of that business longer term?

Yup. Thank you. Thank you. Yeah. I would say that, you know, that business, as you know, Ross, has always remained choppy, and we had a very strong period of growth going back a year ago, followed by declines that we saw last year. It's just, you know, it's really tough to be able to predict what's going to happen in that market. And we just positioned product and inventory to be able to respond if that demand will continue to strengthen. And if it doesn't, we know how to react in that environment too. So it still continues to be a really good business for us. We continue to make investments in it. And we just know that it'll be choppy. Longer term, we don't view it as a market that will be a growth. We don't think that operators will take their CapEx spending up over the next 5, 10, 15 years. But we do think that there will continue to be shifts in how they spend that money. So we continue to make investments where we believe that that growth will be in the future. So, thank you very much and we'll move to the next caller please.

Yes. We'll take our next question from the site of Chris Danley. Please go ahead. Chris Danley - Citi: Hey. Thanks guys. I apologize if these questions have been asked before. I got on here late, I was listening to Zylex [ph] slamming my head against my desk. It sounds like you're guiding for a roughly seasonal, slightly below seasonal environment. If you could just kind of compare now versus a quarter ago, versus a year ago or the last six months how you feel overall about the overall environment. Is it seasonal, a little below seasonal, better than seasonal, getting better, getting worse? Any comments there?

Well, I'd just make the observation that we believe we're just continuing to operate in a very similar macro-environment that we've seen in the last few quarters and even in the recent years. And our guidance obviously is our best estimate of how we'll perform. So we try to stay away from making any precise comments on what a seasonal quarter looks like. As you know, Chris, just -- because if you look at the numbers, there's usually a pretty wide variation on what an average would tell you that it would be. So again, just very similar macro-environment to what we've seen. You have a follow-up? Chris Danley - Citi: Yeah. Real quick, just on channel inventory and distribution inventory. I think you said that channel inventory was up a couple of days, around 4-1/2 weeks. Do you expect channel inventory or disti inventory to go up again in Q2? And then if you could just give us kind of the range that channel inventory/disti inventory has been in for the last, call it, two or three years, is this basically the bottom or a little off the bottom or closer to the peak, or where would that be?

Yeah. Well, we've, as you know, we've, several years ago, implemented our consignment program, so I think we still continue to learn what the right level in that -- in the channel will be. And I'd just say that if we could actually convert all of our shipments and distributions to consignment and carry that inventory ourselves, we'd actually prefer to do that. So if anything, we'd encourage our distributors to take advantage of those programs. We've operated I'd say around four weeks to 4-1/2 weeks I think for some time. That number probably, you know, somewhere in that range, even if it drifted up a little bit, it always just depends on the products that's out there and the speed at which it turns. But we've got other peers that measure the inventory in months, and not weeks. So we're very, you know, efficient on how we use that channel. And it works out really well for both of us and our distributor partners. So we feel very good about where that level is overall. So thank you, Chris, and we'll go to the next caller please. Chris Danley - Citi: Our next question comes from Amit Daryanani. Please go ahead. Amit Daryanani - RBC Capital Markets: Thanks a lot. Good afternoon guys. I guess, question from me, I think the lower depreciation helped you guys on the gross margins about 130 basis points year over year. Do you think that magnitude can sustain throughout calendar 2016 or should we think about depreciation dollars to be more of a flat [inaudible]?

I made a comment a few minutes ago that the rate of depreciation, decline, that we have seen over the past year is -- will slow down meaningfully as we go into 2016. Recall that, from a capital spending standpoint, our model is to spend about 4% of our revenues on CapEx, which we have been doing for the last couple of years, and we expect to continue this year. Our depreciation runs more than 4%, so clearly they'll have to converge at some point. Our depreciable life on most of our equipment is five years. And you may recall that it was about five years ago when we brought on several new factories, one in Izu [ph], some equipment to be brought in to our fab here in the Dallas area, and a factory we bought in China. And so we're seeing those depreciation occurrence roll down now. So the rate of the decline that we saw over the last few quarters this past year will slow down, although it will still decline as we go into 2016. Amit Daryanani - RBC Capital Markets: Got it. And if I just follow up, I think you guys have about a billion dollars of debt that's due in the month of May. Is the thought process to just pay that off with cash on hand and roll it forward, and what would that implication have for your interest expense line as you go forward?

Well, if we pay it off, the interest expense will clearly decline. But I expect that we'll probably do what we've done similarly in the last couple of cycles on this where we have, if the interest rates are favorable by the time we go back into the market, we'll likely pay off a portion and roll the balance into a new issue. In either case, whether we pay off the entire amount or just pay off a portion, roll over the balance, I would expect interest cost will decline by several million dollars a quarter.

Okay. Thank you, Amit. And we'll go to the next caller please.

Please go ahead, Tore Svanberg, your line is open. Tore Svanberg - Stifel Nicolaus: Yes, thank you. So, Silicon Valley Analog was up year over year, and that -- I mean that's better than the industry, better than your peers. Was that mainly due to industrial and automotive strength or were there some shared gains, all the things going on there?

Yeah. Tore, SVA does have a good exposure to both industrial and automotive, and that certainly helped that business. Tore Svanberg - Stifel Nicolaus: Okay. And as my follow-up for Kevin -- Kevin, do you have a CapEx number for us for this year or should we just take 4% of whatever revenue we come up with?

Well, keep it simple, just take 4% of your expected revenue number and you're going to be pretty close to what we're spending. Tore Svanberg - Stifel Nicolaus: All right. Sounds good. Great job guys. Thank you.

Okay. Thank you, Tore. We'll go to the next caller please.

And we'll go next to the line of Ambrish Srivastava. Please go ahead. Ambrish Srivastava - BMO Capital Markets: Hi. Thank you. I had a question on the automotive business. Dave, we haven't talked about the momentum that you guys seem to be witnessing here. Big, sizable business, bigger than your peers, and year after year, just like the rest of the business, it's boring, but it grows. So the question I had was, where are the new opportunities that you guys are now designed if we were to look at where automotive to TI was, say, a couple of years ago? So, what should we be thinking over the next couple of years? Thank you.

Sure, Ambrish. Yeah. The automotive business that we're building continues to be very, very broad-based. So we've got strong participation in both analog as well as embedded. Inside of embedded we've got both processors and microcontrollers, as well as even some connectivity designs inside of that business. From an analog standpoint, it actually is very, very broad-based. And one of the things that we've been focused on is broadening the number of business units that the company participates in automotive. And I think if you went back five, ten years ago, we might have had one or two business units participating in that marketplace. And today, out of our 70 or so different business units, I think over half of them actually ship products into that marketplace. So it's very, very broad-based. We've got five what we call sectors that make up the automotive market. And again the largest one is not more than mid-single-digit as a percentage of our revenue last year. So they are -- the five segments are infotainment and cluster [inaudible] safety, advanced driver, assist systems or ADAS as it's known, body electronics which also includes lighting, and then the hybrid electric vehicle and powertrain. So we've seen growth across all of those sectors, very, very robust growth and a very broad range [ph]. So you have a follow-on, Ambrish? Ambrish Srivastava - BMO Capital Markets: No, that was it for me, Dave. Thank you.

Okay. Operator, we've got time for one more caller.

Okay. We will take our final question from the line of William Stein. Please go ahead, sir. William Stein - SunTrust Robinson Humphrey: Hi, great. Thanks for squeezing me in. Dave, around the middle of last year I think was the first time you highlighted the potential for a 10% customer, and maybe we'd been sort of dancing around this point, but I wonder if you expect that that customer will repeat at a similar magnitude in this year.

Yeah. You know, that's a projection that I won't make on today's call. I think that they and all of our customers, we've got teams that work very, very hard to get products designed into. And with that largest customer, as we talked about before, we sell them hundreds of products, we participate in all of their major platforms. And of course the revenue would always be skewed where they ship their products, and I think they've publicly reported that about two-thirds of their revenues would be in phones. So our revenues will mirror those types of shipments. So we've got good growth in automotive, we've got -- we're seeing strengthening and broad strengthening inside of industrial. And that's a trend we'll see, how those trends continue for the balance of the year. There's a lot of time between now and the end of the year. And then we'll see what happens inside of personal electronics as well, so. You have a follow-on Will? William Stein - SunTrust Robinson Humphrey: Yeah, one on capacity if I can. I'm wondering if you acquired any capacity as you do periodically and if there's any update on the planned fab closure in Scotland?

Yeah, William, I'll go ahead and answer that one. We have been -- we continue to acquire capacity. No new factories here lately, but we do continue to pick up equipment that was quite expensive new for pretty good prices when you buy them the way we buy them. As it relates to the closure of the factory in Scotland, as a reminder, we expect that factory will not close before the end of 2018, as it has been with other factories in the past, when we close those things, they either take a couple of years. As you slowly do lifetime builds on the inventory, and on certain other parts of those factories you'll recall other existing factories. And that's just a multiyear effort. So it's progressing as plan and we again don't expect it to actually complete until about the end of 2018.

Okay. Thank you very much, Will. And thank you all for joining us. A replay of this call is available on our website. Good evening.

We'd like to thank everybody for their participation. Please feel free to disconnect your line at any time.