- Revenue outlook for Q2 of Fiscal 2006 is approximately 5 percent growth from Q1
On a sequential basis, National's Q1 revenues rose 5.7 percent from the fourth quarter, when the company reported $467 million in revenues and earnings of 36 cents per share. Year over year, National's first quarter sales declined 10 percent from the first quarter of fiscal 2005, when the company reported sales of $548 million, net income of $117.7 million and earnings of 31 cents per share.
First quarter gross margin rose 1.5 percentage points to a record 56.2 percent on the strength of increased sales of National's higher-value analog products. This compares to the 54.7 percent gross margin reported in Q4 and 52.7 percent gross margin reported in Q3.
"Our business was stronger than expected in the first quarter," said Brian L. Halla, National's chairman and CEO. "Sales were up, bookings were up and our backlog was up going into the second quarter. Overall, we're seeing strong demand for analog products, particularly from our wireless and flat panel display customers."
Noteworthy Items Included in GAAP Net Income
National's Q1 net results included several noteworthy pre-tax financial events, including a $28 million charge (primarily for severance) related to the in-progress closure of National's assembly and test plant in Singapore; and a $24.3 million gain related to the sale of National's cordless business unit in Europe. National's income tax expense in Q1 also included additional one-time provisions of approximately $5 million of expense relating to notable items in the quarter.
National's Q4 2005 net results included several notable financial items, including an $86.1 million write-off of goodwill; a $51.1 million gain from the sale of National's PC Super /IO business; and a $2.6 million charge for cost reduction actions; all of these on a pre-tax basis. In addition, the company's income tax provision was a net tax benefit of $55.9 million, primarily related to deferred tax assets.
Bookings Increased Sequentially in Q1 from Q4
National's Q1 worldwide bookings increased 18 percent sequentially from Q4. Excluding bookings that came from two recently divested businesses, bookings grew 13 percent. The bookings rate in Q1 benefited from higher-than- anticipated turns orders. Total company bookings exceeded billings in the first quarter.
Bookings for National's analog standard linear products grew 14 percent sequentially. New orders for portable power management and audio products grew much higher than the company average due primarily to strong demand from customers in the mobile phone and flat panel display markets.
Regionally, bookings increased in North America and Asia Pacific. The majority of the bookings increase came from National's OEM customers. Bookings from major distributors in Q1 were consistent with the prior quarter. Distributor resales of National products to end customers increased in North America and Asia Pacific but were seasonally lower in Europe.
Analog Focus Generates Results
National continued its repositioning towards a richer analog portfolio by divesting itself of businesses that do not align with the company's business model. In May 2005, the company sold its PC Super I/O business to Winbond Electronics. In June, the company sold its cordless business unit in Europe to HgCapital. And in July, the company announced that it would close its assembly and test plant in Singapore in a phased shutdown. The Singapore plant had specialized in high pin-count packages.
"Our actions are consistent with National's ongoing program to maximize resources and support for National's core analog business," Halla said. "They also demonstrate our commitment to increase the return on invested capital for our shareholders."
Outlook for Q2, Fiscal 2006
National anticipates that revenues in the second quarter will increase approximately 5 percent from first-quarter levels. The company also anticipates that gross margin in Q2 will be similar to or slightly higher than Q1's gross margin.
National Declares Dividend
In addition to announcing first-quarter earnings, National today declared a cash dividend of 2 cents per outstanding share of common stock. The dividend is payable October 11, 2005 to stockholders of record at the close of business on September 20, 2005.
Board of Directors Approves New $400 Million Stock Repurchase Program
National's Board of Directors has authorized a new program to buy back an additional $400 million of National's stock. During Q1, the company purchased $275 million worth of National's stock authorized under a prior buy-back program.
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. These factors include, but are not restricted to, 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 10-K for the year ended May 29, 2005 (see Outlook and Risk Factors sections of Management's Discussion and Analysis of Financial Conditions and Results of Operations).
Summary of Results For the 3 months ended
August 2, 2005 August 29, 2004
Net sales $493.8 million $548.0 million
Net income $85.6 million $117.7 million
Earnings per diluted share $0.24 $0.31
About National Semiconductor
National Semiconductor, the industry's premier analog company, creates high-performance analog devices and subsystems. National's leading-edge products include power management circuits, display drivers, audio and operational amplifiers, communication interface products and data conversion solutions. National's key analog markets include wireless handsets, displays and a variety of broad electronics markets, including medical, automotive, industrial, and test and measurement applications. Headquartered in Santa Clara, California, National reported sales of $1.91 billion for fiscal 2005, which ended May 29, 2005. Additional company and product information is available at www.national.com.
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Jeff Weir Long Ly
National Semiconductor National Semiconductor
(408) 721-5199 (408) 721-5007
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NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)
Three Months
Ended
Aug. 28, Aug. 29,
2005 2004
Net sales $493.8 $548.0
Operating costs and expenses:
Cost of sales 216.1 246.4
Research and development 80.5 85.7
Selling, general and administrative 66.7 67.6
Sale of business (24.3) --
Cost reduction and restructuring charges 28.0 1.2
Other operating income, net (1.0) (1.5)
Total operating costs and expenses 366.0 399.4
Operating income 127.8 148.6
Interest income, net 7.1 2.6
Other non-operating expense, net (2.5) (2.2)
Income before taxes 132.4 149.0
Income tax expense 46.8 31.3
Net income $85.6 $117.7
Earnings per share:
Net income:
Basic $0.25 $0.33
Diluted $0.24 $0.31
Selected income statement ratios as a percentage of sales:
Gross margin 56.2% 55.0%
Research and development 16.3% 15.6%
Selling, general and administrative 13.5% 12.4%
Net income 17.3% 21.5%
Effective tax rate 35.3% 21.0%
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
Aug. 28, May 29,
2005 2005
ASSETS
Current assets:
Cash and cash equivalents $860.5 $867.1
Short-term marketable investments 155.1 155.1
Receivables 154.0 123.9
Inventories 157.1 170.2
Deferred tax assets 127.0 126.9
Other current assets 72.5 70.3
Total current assets 1,526.2 1,513.5
Net property, plant and equipment 594.7 605.1
Goodwill 64.9 87.2
Deferred tax assets 196.5 192.2
Other assets 115.5 106.2
Total assets $2,497.8 $2,504.2
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $83.7 $64.7
Accrued expenses 159.5 143.6
Income taxes payable 104.2 76.7
Total current liabilities 347.4 285.0
Long-term debt 22.1 23.0
Other noncurrent liabilities 154.0 142.1
Total liabilities 523.5 450.1
Commitments and contingencies
Shareholders' equity:
Common stock 171.8 174.0
Additional paid-in capital 867.2 1,024.5
Retained earnings 1,039.8 961.2
Unearned compensation (7.5) (7.4)
Accumulated other comprehensive loss (97.0) (98.2)
Total shareholders' equity 1,974.3 2,054.1
Total liabilities and shareholders' equity $2,497.8 $2,504.2
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Three Months Ended
Aug. 28, Aug. 29,
2005 2004
Cash flows from operating activities:
Net income $85.6 $117.7
Adjustments to reconcile net income with net cash
provided by operating activities:
Depreciation, amortization and accretion 43.2 49.0
(Gain) loss on investments 2.2 (0.1)
Share in net losses of equity-method investments 0.3 1.6
Loss on disposal of equipment 1.0 0.1
Gain on sale of business (24.3) --
Tax benefit associated with stock options 23.3 --
Noncash other operating expense, net 0.1 0.5
Other, net (0.9) (0.4)
Changes in certain assets and liabilities, net:
Receivables (30.1) 7.5
Inventories 13.1 (5.6)
Other current assets (2.2) (17.5)
Accounts payable and accrued expenses 16.2 (63.7)
Current and deferred income taxes 22.4 24.6
Other noncurrent assets (10.3) --
Other noncurrent liabilities 11.9 5.9
Net cash provided by operating activities 151.5 119.6
Cash flows from investing activities:
Purchase of property, plant and equipment (11.9) (55.0)
Sale of business 60.0 --
Sale of investments -- 0.1
Funding of benefit plan (1.2) (4.8)
Security deposits on leased equipment -- (2.8)
Other, net (1.1) (0.1)
Net cash provided by (used by) investing activities 45.8 (62.6)
Cash flows from financing activities:
Payment on software license obligations (12.7) (1.5)
Issuance of common stock 91.1 25.1
Purchase and retirement of treasury stock (275.3) --
Cash dividends declared and paid (7.0) --
Net cash (used by) provided by financing activities (203.9) 23.6
Net change in cash and cash equivalents (6.6) 80.6
Cash and cash equivalents at beginning of period 867.1 642.9
Cash and cash equivalents at end of period $860.5 $723.5
PART I. FINANCIAL INFORMATION
EARNINGS PER SHARE (Unaudited)
(in millions, except per share amounts)
Three Months
Ended
Aug. 28, Aug. 29,
2005 2004
Earnings per share:
Basic $0.25 $0.33
Diluted $0.24 $0.31
Net income used in basic and diluted earnings per share
calculation $85.6 $117.7
Weighted-average shares:
Basic 345.8 357.3
Diluted 363.9 381.7
NOTES TO FINANCIAL STATEMENTS
(in millions)
Three Months
Ended
Aug. 28, Aug. 29,
2005 2004
Other operating income, net
Net intellectual property income $(0.7) $(1.5)
Other (0.3) --
Total other operating income, net $(1.0) $(1.5)
Interest income, net
Interest income $7.4 $3.1
Interest expense (0.3) (0.5)
Interest income, net $7.1 $2.6
Other non-operating expense, net
Gain (loss) on investments $(2.2) $(0.1)
Share in net losses of equity-method investments (0.3) (1.6)
Other -- (0.5)
Total other non-operating expense, net $(2.5) $(2.2)
CONTACT: Media: Jeff Weir, +1-408-721-5199 or
Email Contact, or
Financial: Long Ly, +1-408-721-5007 or
Email Contact, both of
National Semiconductor
Web site: http://www.national.com/