National Semiconductor Takes $285.6 Million One-Time Charge And Reports Improved Order Activity In First Quarter
September 5, 1996 -- National Semiconductor Corporation (NYSE:NSM) today reported a net loss of $207.6 million, or $1.51 per share, for the first quarter of fiscal 1997, ended August 25, 1996, including one-time pre-tax charges of $285.6 million relating to the spinout of its Fairchild product lines and the acquisition of PicoPower.
Without these charges, which are detailed in a footnote to the financial tables, net income for the quarter would have been $6.5 million, or five cents per share. These results compared with net income of $73.5 million, or 53 cents per share for the comparable quarter of fiscal 1996.
"The Fairchild spinout was a logical step in focusing the company and ensuring its long-term health," said Brian H. Halla, who became chief executive officer of the company on May 3, 1996. "In addition we took some major cost cutting actions throughout the corporation and we believe we are now better positioned going forward," he added.
"Bookings showed improvement throughout the quarter, but we will maintain guarded optimism for a while longer before declaring a trend," Halla said.
Revenues for the first quarter were $566.1 million, compared with $698.8 million for the comparable quarter of fiscal 1996.
Summary of results: First quarter ended: August 25, 1996 August 27, 1995 Net Sales $566.1 $698.8 Net Income(Loss) (207.6) 73.5 Earnings (Loss) per share (1.51) 0.53 (All figures in millions of dollars, except per share amounts)Worldwide orders showed growth in the mid-teen percentage range compared with the fourth quarter of fiscal 1996 (ended May 26, 1996), and were strongest in the last few weeks of the first quarter. Overall worldwide orders were down approximately 10 percent relative to the first quarter of last year.
Orders from personal computer makers showed the strongest growth and were up significantly over last year's first quarter levels, as renewed demand for Pentium-compatible Super I/O&153; chips almost doubled from the fourth quarter. Local Area Network orders continued to grow, with 100-megabit solutions replacing older generations. Wireless communications also continued to set new order records. Although analog multimarket products and logic multimarket orders both improved toward the end of the first quarter, they were still down from the previous year.
On a regional basis, bookings in North America and Southeast Asia were up compared with the spring quarter, while orders in Europe and Japan were flat. Southeast Asia showed order increases over last year's first quarter.
This report contains forward looking statements dependent on a number of risks and uncertainties including such factors as, but not restricted to, new orders received and shipped during the current quarter, the timely ramp up of new submicron production facilities, the degree of factory utilization, and the successful sale of existing inventories. Other risk factors are listed in the company's Form 10K for the year ended May 26, 1996 (see the outlook section of Management's Discussion and Analysis of Results of Operations and Financial Conditions.)
NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts)Three Months Ended ------------------ Aug. 25, Aug. 27, 1996 1995 ------- ------- Net sales $ 566.1 $ 698.8 Operating costs and expenses: Cost of sales 393.9 397.7 Research and development 97.4 84.9 Selling, general and administrative 94.0 129.2 Restructuring of operations 256.3 - ------ ------ Total operating costs and expenses 841.6 611.8 ------ ------ Operating income(loss) (275.5) 87.0 Interest income, net 1.3 3.1 Other income(expense), net (2.7) 8.0 ------ ------ Income(loss) before income taxes (276.9) 98.1 Income tax provision(benefit) (69.3) 24.6 ------ ------ Net income(loss) $ (207.6) $ 73.5 ======== ======== Earnings (loss) per share: Primary $(1.51) $ 0.56 Fully dilutive $(1.51) $ 0.53 Selected income statement ratios as a percentage of sales: Gross margin 30.4% 43.1% Research and development 17.2% 12.1% Selling, general and administrative 16.6% 18.5% Net income (loss) (36.7%) 10.5% NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions) Aug. 25, May 26, 1996 1996 ------- ------- ASSETS Current assets: Cash and cash equivalents $ 307.6 $ 442.4 Short-term marketable investments 39.0 61.9 Receivables, net 288.9 281.2 Inventories 303.6 325.7 Deferred tax assets 140.4 71.1 Other current assets 64.6 73.7 ------- ------- Total current assets 1,144.1 1,256.0 Property, plant and equipment 2,428.4 2,516.7 Less accumulated depreciation 1,248.7 1,208.6 ------- ------- Net property, plant and equipment 1,179.7 1,308.1 Long-term marketable investments 6.7 11.7 Other assets 87.7 82.2 ------- ------- Total assets $2,418.2 $2,658.0 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings and current portion of long-term debt $ 21.2 $ 21.5 Accounts payable 185.7 255.6 Accrued expenses 281.0 235.1 Income taxes 157.0 164.6 ------- ------- Total current liabilities 644.9 676.8 Long-term debt 347.0 350.5 Deferred income taxes 11.0 12.1 Other non-current liabilities 36.9 41.4 ------- ------- Total liabilities 1,039.8 1,080.8 ------- ------- Commitments and contingencies Shareholders' equity: Common stock 69.3 68.4 Additional paid-in capital 939.8 930.2 Retained earnings 369.3 578.6 ------- ------- Total shareholders' equity 1,378.4 1,577.2 ------- ------- Total liabilities and shareholders' equity $2,418.2 $2,658.0 ======== ======== NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) Three Months Ended ------------------ Aug. 25, Aug. 27, 1996 1995 ------- ------- Cash flows from operating activities: Net income(loss) $ (207.6) $ 73.5 Adjustments to reconcile net income(loss) with net cash used by operations: Depreciation and amortization 65.3 51.7 (Gain)/loss on investments 3.0 (5.2) Tax benefit associated with stock options 1.7 6.3 In-process research and development 10.6 - Loss on disposal of equipment 0.3 - Write-down of inventory 15.1 - Non-cash restructuring charges 169.4 - Other, net 2.7 2.2 Changes in certain assets and liabilities, net: Receivables (7.7) (30.3) Inventories 7.0 (14.3) Other current assets 9.1 (29.0) Accounts payable and accrued expenses (21.2) (84.5) Current and deferred income taxes (78.0) 14.7 Other non-current liabilities (4.5) 1.2 ------ ----- Net cash used by operating activities (34.8) (13.7) ------ ----- Cash flows from investing activities: Purchase of property, plant and equipment (105.2) (110.0) Proceeds from the sale and maturity of marketable investments 275.0 145.2 Purchase of marketable investments (252.1) (156.2) Proceeds from sale of investments - 7.8 Business acquisition (15.4) - Purchase of investments and other, net (7.1) (6.1) ------ ----- Net cash used by investing activities (104.8) (119.3) ------ ----- Cash flows from financing activities: Proceeds from issuance of debt 1.5 42.0 Repayment of debt (5.3) (5.0) Issuance of common stock, net 8.6 12.5 Purchase of treasury stock - (18.7) Payment of preferred dividends - (2.8) ------ ----- Net cash provided by financing activities 4.8 28.0 ------ ----- Net change in cash and cash equivalents (134.8) (105.0) Cash and cash equivalents at beginning of period 442.4 420.3 ------ ------ Cash and cash equivalents at end of period $ 307.6 $ 315.3 ======== ======== NATIONAL SEMICONDUCTOR CORPORATION EARNINGS PER SHARE(Unaudited) (in millions, except per share amounts) Three Months Ended ------------------ Aug. 25, Aug. 27, 1996 1995 ------- ------- Earnings (loss) per share: Primary $(1.51) $ 0.56 Fully diluted $(1.51) $ 0.53 Weighted average shares: Primary 137.7 127.4 Fully diluted 137.7 139.6 Income(loss) used in primary earnings per common share calculation (reflecting preferred dividends) $ (207.6) $ 70.7Notes to Financial Tables
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One-Time Charges
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In the first quarter of fiscal 1997, the Company recorded several one-time charges as previously announced. In June of 1996, the Company formed the Fairchild Semiconductor organization consisting of its family logic, memory and discrete product lines. In connection with this reorganization, the Company recorded a $275 million one-time charge that includes a restructuring charge of $256.3 made up of the write down of Fairchild Semiconductor assets to estimated realizable value, costs associated with staffing reductions and other exit costs necessary to reduce the Company's infrastructure in both Fairchild Semiconductor and the National core business areas. The remaining components of the $275 million one-time charge have been recorded in cost of sales and consist of $15.1 million to write down certain Fairchild inventory to net realizable value and $3.6 million for cost reduction activities.
The Company also recorded a one-time charge included in research and development expenses of $10.6 million to expense in-process research and development related to the acquisition of PicoPower.
The following table provides a summary of these one-time charges:Fairchild National Semiconductor Core Total Organization Business Company ------------- -------- ------- Restructuring of Operations: Write down of assets to net realizable value $177.7 $11.4 $189.1 Staffing reductions and severance 18.6 36.6 55.2 Other exit costs 9.8 2.2 12.0 ------- ------ ------- 206.1 50.2 256.3 Other: Cost of sales 15.1 3.6 18.7 Research and development expenses - 10.6 10.6 ------- ------ ------- $221.2 $64.4 $285.6 ======= ====== =======Selected Financial Information
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The following table summarizes selected financial information excluding the effect of the one-time charges:
Fairchild National Semiconductor Core Total Organization Business Company ------------- ---------- ------- First Quarter Fiscal 1997: Revenues $132.7 $433.4 $566.1 Gross margin 21.8% 37.4% 33.7% Income before taxes $5.1 $3.6 $8.7 First Quarter Fiscal 1996: Revenues $185.6 $513.2 $698.8 Gross margin 34.5% 46.2% 43.1% Income before taxes $27.0 $71.1 $98.1The financial information presented for Fairchild Semiconductor and National Core Business is pro forma and includes certain expenses for research and development, selling and marketing, and headquarter functions which are allocated from central corporate cost centers.
Other Income(Expense), Net
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Other income, net for the first quarter of fiscal 1997 includes $.3 million of net intellectual property income offset by a net loss on investments of $3.0 million primarily attributable to the write down of an investment to net realizable value. Other income, net for the first quarter of fiscal 1996 included $2.8 million of net intellectual property income and a net gain on investments of $5.2 million arising from the sale of certain investments.
Alan MarkowFinancial Contact:
408 721-8103
Alan.Markow@nsc.com
Alan Bernheimer
408 721-8665
Alan Bernheimer@nsc.com
Jim Foltz
408 721-5693
invest@nsc.com