Texas Instruments Incorporated
Reconciliation of Non-GAAP Financial Measure
Gross Margin Comparison

On April 18, 2006, we held a publicly webcast conference call with analysts to discuss our first-quarter earnings. During that call, we referenced the improvement in our gross margin compared with the prior quarter resulting from the sale of our Sensors & Controls business. This comparison of first quarter 2006 gross margin of 50.1% was made to our as-reported fourth-quarter gross margin of 48.3% that was first disclosed in January 2006 along with our fiscal year 2005 results of operations. At the time the 2005 results were announced, our Sensors & Controls business was included as part of our continuing operations. With the decision by the Board of Directors in January 2006 to sell the Sensors & Controls business, this business has been classified as discontinued operations beginning in the first quarter of 2006.

GAAP requires us to disclose all results of our Sensors & Controls business as discontinued operations for all periods presented, including restating prior historical information on a comparable basis to ensure consistency across those periods. Consequently, our comparison during the webcast of first-quarter 2006 gross margin for continuing operations (which exclude our Sensors & Controls results) to our as-previously reported fourth-quarter 2005 gross margin (which included our Sensors & Controls results) was inconsistent with GAAP. The comparison required by GAAP would be to the restated fourth-quarter 2005 gross margin of 49.8%.

We included this non-GAAP comparison because we wanted to ensure our investors fully understood the immediate, beneficial impact of the sale of our Sensors & Controls business on our gross margin. The above table provides a reconciliation of our fourth quarter 2005 gross margin including our discontinued operations.