National Semi net lower; sales, EPS top expectations

- Sales outlook for Q1 of fiscal 2009 expected to range from $460 million to $475 million

SANTA CLARA, Calif., June 5 /PRNewswire-FirstCall/ -- National Semiconductor Corp. (NYSE: NSM) today reported sales of $462 million and net income of $83 million, or 34 cents per share, for the fourth quarter of fiscal 2008 which ended May 25, 2008. National's fourth quarter of fiscal 2008 results included $9 million of pre-tax charges primarily for severances related to previously announced actions. Fourth quarter results also included approximately $6 million of discrete tax benefits.

National's fourth quarter fiscal 2008 sales of $462 million were 2 percent higher sequentially from the third quarter of fiscal 2008, when the company reported $453.4 million in sales and earnings of 29 cents per share.

Gross margin of 65.9 percent in National's fourth quarter of fiscal 2008 was up from the 64.3 percent gross margin achieved in the third quarter of fiscal 2008. The sequential improvement was driven by strong manufacturing performance and cost efficiencies as well as improved product mix of higher-value analog products.

"Business conditions improved in the quarter, and we were able to turn this into higher gross margins," said Brian L. Halla, National's chairman and CEO. "We are focused on growth, expanding our base business into new, attractive markets leveraging our PowerWise(R) product portfolio to help our customers be much more energy efficient in their systems."

Compared to last year, fourth quarter fiscal 2008 sales were up from the $455.9 million reported in the fourth quarter of fiscal 2007, and earnings per share were above the 28 cents recorded a year ago. Gross margin in the fourth quarter of fiscal 2008 was also higher than the 62.5 percent reported in the fourth quarter of fiscal 2007.

Bookings for Q4, Fiscal 2008

National's total company bookings in the fourth quarter of fiscal 2008 increased by 12 percent sequentially over the third quarter. This increase was primarily driven by higher orders from the distribution channel as well as increased bookings for wireless handsets and other personal mobile devices. Regionally, fourth quarter bookings grew in all regions except Japan. Total company bookings exceeded billings in the fourth quarter.

Summary of Fiscal 2008

Annual sales were $1.89 billion compared to $1.93 billion in fiscal 2007. For fiscal 2008, National reported net income of $332 million, including $90 million of pre-tax stock compensation expenses under FASB Statement 123(R), compared to net income of $375 million in fiscal 2007. Earnings per share for the year were $1.26 compared to $1.12 in fiscal 2007 which included $111.5 million of pre-tax stock compensation expenses. National's gross margin in fiscal 2008 increased to 64.4 percent compared to 60.7 percent in fiscal 2007 reflecting continued improvements in the company's higher-value analog portfolio and strong execution in manufacturing. The company's effective tax rate was 26.4 percent for fiscal 2008 compared to 29.3 percent for fiscal 2007. Return on invested capital for fiscal 2008 was approximately 23 percent compared to approximately 21 percent for fiscal 2007.

Other Notable Items in Q4, Fiscal 2008 Results

Fourth quarter fiscal 2008 net results included approximately $9.1 million in expenses for severances and a factory modernization effort as well as $6 million of discrete tax benefits. Also included in fourth quarter fiscal 2008 results was $20 million in pre-tax stock compensation expense under FASB Statement 123(R). One year ago, the fourth quarter of fiscal 2007 included $25 million of pre-tax stock compensation expense.

Outlook for Q1, Fiscal 2009

National anticipates that sales in the first quarter of fiscal 2009 will range from $460 million to $475 million.

Stock Repurchase Program

During the fourth quarter of fiscal 2008, the company repurchased approximately $224 million of stock under its stock buyback program. As of the end of the fourth quarter of fiscal 2008, National had approximately $256 million of authorization still available under approved programs for future stock repurchases. National Semiconductor's fully diluted weighted average share count for the fourth quarter of fiscal of 2008 was 246.3 million shares, down from 255.5 million shares in the third quarter of fiscal 2008.

Company Declares Dividend

The company announced today that the Board of Directors has declared a cash dividend of $0.06 per outstanding share of common stock. This dividend will be paid on July 7, 2008 to shareholders of record at the close of business on June 16, 2008.

Special Note

This release contains forward-looking statements dependent on a number of risks and uncertainties pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Except for historical information contained herein, the matters set forth in this press release, including management's expectations regarding future performance, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks and uncertainties include, but are not restricted to, such factors as new orders received and shipped during the quarter, the degree of factory utilization, the sale of inventories at existing prices, and the ramp up and sale of new analog products. Other risk factors are included in the Company's Annual Report on Form 10-K for the fiscal year ended May 27, 2007 under the captions "Outlook", "Risk Factors" and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" contained therein and the 10-Q for the quarter ended February 24, 2008.

About National Semiconductor

National Semiconductor creates energy-efficient analog and mixed-signal semiconductors. Its PowerWise(R) products enable systems that consume less power, extend battery life, and generate less heat. Headquartered in Santa Clara, Calif., National reported sales of $1.89 billion for fiscal 2008 which ended May 25, 2008. Additional company and product information is available at http://www.national.com.

     Media Contact:              Financial:
     LuAnn Jenkins               Mark Veeh
     National Semiconductor      National Semiconductor
     (408) 721-2440              (408) 721-5007
     luann.jenkins@nsc.com       invest.group@nsc.com



    NATIONAL SEMICONDUCTOR CORPORATION
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
    (In millions, except per share amounts)

                             Three Months Ended        Twelve Months Ended
                            May 25,      May 27,      May 25,      May 27,
                              2008         2007         2008         2007

    Net sales               $462.0       $455.9     $1,885.9     $1,929.9
    Cost of sales            157.4        171.1        671.5        757.7
    Gross margin             304.6        284.8          1,214.4            1,172.2

        Research  and
          development                            90.2                  95.7                363.0                363.7
        Selling,  general
          and  administrative              79.8                  75.0                315.5                310.9
        Severance  and
          restructuring
          expenses                                    9.1                    0.6                  27.2                    4.6
        Gain  on  sale  of
          manufacturing  plant
          assets                                            -                        -                  (3.1)                      -
        Litigation  settlement                -                        -                    3.3                        -
        In-process  research
          and  development
          charge                                            -                        -                        -                    6.1
        Other  operating  income,
          net                                            (0.4)                (0.6)                (0.6)                (2.8)

        Operating  expenses              178.7                170.7                705.3                682.5

        Operating  income                  125.9                114.1                509.1                489.7
        Interest  income                        4.8                    9.8                  33.8                  40.1
        Interest  expense                  (19.6)                  0.1                (85.5)                (1.2)
        Other  non-operating
          income  (expense),  net          1.1                    0.9                  (6.2)                  2.0

        Income  before  taxes            112.2                124.9                451.2                530.6
        Income  tax  expense                29.0                  34.8                118.9                155.3

        Net  income                              $83.2                $90.1              $332.3              $375.3

        Earnings  per  share:
        Basic                                        $0.35                $0.29                $1.31                $1.17
        Diluted                                    $0.34                $0.28                $1.26                $1.12

        Selected  income
          statement  ratios  as  a
          percentage  of  sales:

        Gross  margin                          65.9%                62.5%                64.4%                60.7%
        Research  and  development  19.5%                21.0%                19.2%                18.8%
        Selling,  general  and
          administrative                    17.3%                16.5%                16.7%                16.1%
        Net  income                              18.0%                19.8%                17.6%                19.4%

        Effective  tax  rate              25.8%                27.9%                26.4%                29.3%



        NATIONAL  SEMICONDUCTOR  CORPORATION
        CONDENSED  CONSOLIDATED  BALANCE  SHEETS  (Unaudited)
        (In  millions)

                                                                                                            May  25,                May  27,
                                                                                                              2008                      2007
        ASSETS
        Current  assets:
            Cash  and  cash  equivalents                                              $736.8                  $828.6
            Receivables                                                                            137.3                    150.6
            Inventories                                                                            148.6                    176.0
            Deferred  tax  assets                                                              80.2                      73.2
            Other  current  assets                                                            66.0                      62.1

            Total  current  assets                                                      1,168.9                1,290.5

        Net  property,  plant  and  equipment                                    557.3                    583.5
        Goodwill                                                                                        60.5                      63.6
        Deferred  tax  assets                                                                208.7                    197.8
        Other  assets                                                                              112.2                      69.9

        Total  assets                                                                        $2,107.6              $2,205.3

        LIABILITIES  AND  SHAREHOLDERS'  EQUITY
        Current  liabilities:
            Current  portion  of  long-term  debt                                $62.5                          $-
            Accounts  payable                                                                    53.5                      59.9
            Accrued  expenses                                                                  180.3                    122.7
            Income  taxes  payable                                                            12.3                    117.4

            Total  current  liabilities                                                308.6                    300.0

        Long-term  debt                                                                      1,414.8                      20.6
        Long-term  income  taxes  payable                                          143.4                            -
        Other  non-current  liabilities                                              85.4                    157.7

            Total  liabilities                                                          $1,952.2                  $478.3

        Commitments  and  contingencies

        Shareholders'  equity:
            Common  stock  of  $0.50  par  value                                  $116.3                  $155.1
            Retained  earnings                                                                125.9                1,685.7
            Accumulated  other  comprehensive  loss                          (86.8)                (113.8)

            Total  shareholders'  equity                                              155.4                1,727.0

        Total  liabilities  and  shareholders'  equity            $2,107.6              $2,205.3



        NATIONAL  SEMICONDUCTOR  CORPORATION
        CONDENSED  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS  (Unaudited)
        (In  millions)

                                                                                                              Twelve  Months  Ended
                                                                                                            May  25,                May  27,
                                                                                                              2008                      2007
        Cash  flows  from  operating  activities:
        Net  income                                                                                $332.3                  $375.3
        Adjustments  to  reconcile  net  income  with  net
          cash  provided  by  operating  activities:
            Depreciation  and  amortization                                        132.7                    144.7
            Share-based  compensation  expense                                    89.7                    111.5
            Excess  tax  benefit  from  share-based
              payment  arrangements                                                        (17.0)                  (12.6)
            Tax  benefit  associated  with  stock  options                  27.5                      29.6
            Loss  (gain)  on  investments                                                  6.0                      (2.0)
            Loss  on  disposal  of  equipment                                            3.3                        0.7
            Non-cash  restructuring  expenses                                        4.5                            -
            Gain  on  sale  of  manufacturing  plant  assets                (3.1)                          -
            In-process  research  and  development  charge                      -                        6.1
            Other,  net                                                                                  4.0                        2.4
            Changes  in  certain  assets  and  liabilities,
              net:
                Receivables                                                                          13.3                      57.9
                Inventories                                                                          27.1                      15.7
                Other  current  assets                                                      (19.3)                      7.9
                Accounts  payable  and  accrued  expenses                      44.5                  (126.0)
                Income  taxes                                                                        29.4                        2.7
                Other  non-current  liabilities                                    (30.6)                      4.4
        Net  cash  provided  by  operating  activities                    644.3                    618.3
        Cash  flows  from  investing  activities:
        Purchase  of  property,  plant  and  equipment                  (111.3)                (106.6)
        Business  acquisition,  net  of  cash  acquired                          -                      (8.2)
        Proceeds  from  sale  of  property,  plant,  and
          equipment                                                                                    16.6                        1.2
        Sale  and  maturity  of  available-for-sale  securities          -                    110.8
        Proceeds  from  sale  of  investments                                        0.2                            -
        Funding  of  benefit  plan                                                          (5.6)                    (8.5)
        Other,  net                                                                                    (1.9)                      2.9
        Net  cash  used  in  investing  activities                          (102.0)                    (8.4)

        Cash  flows  from  financing  activities:
        Proceeds  from  unsecured  senior  notes,  net  of
          issuance  costs                                                                        992.9                            -
        Proceeds  from  bank  borrowings,  net  of  issuance
          costs                                                                                      1,996.5                            -
        Repayment  of  bank  borrowing                                          (1,546.8)                          -
        Payment  on  software  license  obligations                          (8.7)                    (8.7)
        Excess  tax  benefit  from  share-based  payment
          arrangements                                                                              17.0                      12.6
        Minimum  tax  withholding  paid  on  behalf  of
          employees  for  net  share  settlements                              (14.6)                    (1.4)
        Issuance  of  common  stock                                                      103.7                    103.1
        Purchase  and  retirement  of  treasury  stock              (2,123.5)                (774.0)
        Cash  dividends  declared  and  paid                                      (50.6)                  (45.1)
        Net  cash  used  in  financing  activities                          (634.1)                (713.5)
        Net  decrease  in  cash  and  cash  equivalents                    (91.8)                (103.6)
        Cash  and  cash  equivalents  at  beginning  of  year          828.6                    932.2
        Cash  and  cash  equivalents  at  end  of  year                    $736.8                  $828.6



        PART  I.    FINANCIAL  INFORMATION
        EARNINGS  PER  SHARE  (Unaudited)
        (In  millions,  except  per  share  amounts)

                                                          Three  Months  Ended              Twelve  Months  Ended
                                                        May  25,            May  27,            May  25,            May  27,
                                                          2008                  2007                  2008                  2007

        Earnings  per  share:
            Basic                                    $0.35                $0.29                $1.31                $1.17
            Diluted                                $0.34                $0.28                $1.26                $1.12

        Net  income  used  in
          basic  and  diluted
          earnings  per  share
          calculation                          $83.2                $90.1              $332.3              $375.3

        Weighted-average
          shares  outstanding:
            Basic                                    236.8                312.0                252.8                319.5
            Diluted                                246.3                327.5                264.3                334.2



        OTHER  FINANCIAL  STATEMENT  DETAIL
        (In  millions)

        Other  operating                    Three  Months  Ended              Twelve  Months  Ended
          income,  net                      May  25,            May  27,            May  25,            May  27,
                                                          2008                  2007                  2008                  2007

        Net  intellectual
          property  income                  $(0.4)              $(0.6)              $(0.6)              $(1.8)
        Other                                                -                        -                        -                  (1.0)
            Total  other
              operating
              income,  net                      $(0.4)              $(0.6)              $(0.6)              $(2.8)

        Other  non-operating
          income  (expense),  net

        Gain  (loss)  on
          investments                            $1.1                  $0.9                $(6.0)                $2.0
        Charitable  contribution            -                        -                  (0.2)                      -
        Total  other
          non-operating  income
          (expense),  net                      $1.1                  $0.9                $(6.2)                $2.0
 

Web site: http://www.national.com/




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