For more information:
Bill Callahan
(408)721-2871
bill.callahan@nsc.com
Financial:
Jim Foltz
(408) 721-5693
invest@nsc.com
NATIONAL SEMICONDUCTOR REPORTS GROWTH IN 4TH QUARTER EARNINGS BEFORE ONE-TIME CHARGES, WITH CONTINUED STRENGTH IN BOOKINGS
June 5, 1997-- National Semiconductor Corporation® today reported net income of $61.9 million, or 41 cents per share, on National's core operations without the Fairchild businesses and excluding the effect of one-time charges and gains in its fourth fiscal quarter which ended May 25, 1997. Net income was $66.3 million, or 43 cents per share, including Fairchild operations but excluding one-time effects. This compares with net income of $23.6 million or 17 cents per share before one-time charges for the comparable quarter of fiscal 1996. After the effects of previously announced one-time charges and gains National reported a net loss of $14.5 million or 10 cents per share.
Bookings for National's remaining businesses excluding the Fairchild businesses sold in March 1997 grew more than 50 percent above the comparable quarter a year ago, and approximately 8 percent over the immediately preceding quarter.
"This is the fourth consecutive quarter of improvement in bookings, revenues, gross margins and operating earnings in our core businesses," said Brian L. Halla, chairman, president and chief executive officer of National Semiconductor. "With the completion of the Fairchild sale, the repositioning of our wafer fabrication plants, and the acquisition of Mediamatics, all closed in the fourth quarter, we have now cleared the decks for growth," Halla added.
Summary of results (Consolidated including Fairchild): Fourth quarter ended: May 25, 1997 May 26, 1996 -------------------------------------------------------------------------- Net Sales $599.2 $612.4 Net Income( Loss) $(14.5) $ 9.1 Earnings (Loss) per share $ (0.10) $ 0.07 (All figures in millions of dollars, except per share amounts)
Sales for the fourth quarter were $599.2 million. Sales for the quarter, excluding Fairchild, were $580.4 million, up 21 percent over equivalent sales of $456.8 million, which also excludes Dynacraft in the previous year's fourth quarter, and up 9 percent over the $533.0 million recorded in the third quarter of fiscal 1997. Gross margins improved to 44.0 percent. The comparable margins for National's core businesses were 40.5 percent for last year, 41.2 percent for the third quarter of fiscal 1997, and 43.6 percent for this year's fourth quarter.
During the quarter the company recorded a net one-time charge of $87.1 million pre-tax or $80.8 million after tax. The charge consisted of a one-time pre-tax charge in the fourth quarter of $69.9 million representing an $84.5 million charge for the realignment of manufacturing, offset by a $14.6 million credit for recovery of charges taken in the first quarter. National also reported an in-process R&D charge of $62.0 million for its acquisition of Mediamatics in March 1997. These charges were partially offset by a one-time fourth quarter gain of $40.6 million from the Fairchild sale. In the fourth quarter the company realized a $4.2 million gain on the sale of its digital answering machine integrated circuit business.
Net income, excluding these charges, was $66.3 million. Net income from Fairchild was $4.4 million, and net income for core National businesses, excluding one-time effects, was $61.9 million.
Forth Quarter Earnings ($M Pre-Tax Income Tax Provision After-Tax Income(Loss) -------------- ------------- --------------------- National Core Businesses $82.6 $20.7 $61.9 Fairchild $ 5.8 $ 1.4 $ 4.4 ----- ----- ------ $88.4 $22.1 $66.3 Net One-Time Charges ($ 7.1) ($ 6.3) ($80.8) -------- ------- ------- Reported Income (Loss) $ 1.3 $15.8 ($14.5)National said bookings maintained strong growth and continued to exceed billings through the fourth quarter. Weekly run rates for bookings at the end of the quarter slightly outpaced run rates at the beginning of the quarter.
Analog products, led by a doubling of orders for Data Acquisition and Interface System Products applications, grew faster than the company rate compared with the fourth quarter of fiscal 1996, and more than twice as fast as the company compared with the third quarter of fiscal 1997. Local Area Network (LAN) orders were one of the fastest growing segments compared with last year's fourth quarter, and grew in line with the company's growth rate compared with the third quarter of fiscal 1997. LAN continues as National's largest single market segment. Personal Computer products grew in line with the company as a whole.
On a regional basis, bookings in Southeast Asia grew the most on a year-over-year basis, led by strong Local Area Network and Analog orders. In Japan, strength in LANs and Analog enabled that region to show the strongest improvement over the third quarter of fiscal 1997. Otherwise, regional order growth patterns were similar to the corporation as a whole. Fourth quarter orders comparisons exclude results from Fairchild.
"Our backlog is well positioned going into the summer quarter, and our new 8-inch wafer fab in South Portland, Maine is expected to begin volume production this fall, ahead of schedule," Halla said. "We are now well positioned to seize the moment and demonstrate more meaningful and focused revenue growth in fiscal 1998."
For the fiscal year ended May 25, 1997, National reported net sales of $2,507.3 million and net income of $27.5 million or 19 cents per share, compared with sales of $2,623.1 million and net income of $185.4 million or $1.34 per share (fully diluted) for the previous year, which ended May 26, 1996. Fiscal 1997 includes slightly more than three quarters of results from the Fairchild businesses. In addition to the fourth quarter one-time charges, the company also took additional pre-tax net charges of $74.9 million over the first three quarters of fiscal 1997 in connection with the spinout of its Fairchild product lines and the acquisition of PicoPower.
Summary of results: 12 months ended: May 25, 1997 May 26, 1996 ------------------------------------------------------------------------ Net Sales $2,507.3 $2,623.1 Net Income $ 27.5 $ 185.4 Earnings per share $ 0.19 $ 1.34
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 first quarter, the timely ramp up of new submicron production facilities, and the degree of factory utilization. Other risk factors are listed in the company's Form 10Q/A for the third quarter of fiscal 1997, which ended February 23, 1997 and in 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, a Fortune 500 company, produces system on a chip silicon solutions for the information highway, based on its leadership in analog and mixed signal technologies. National is headquartered in Santa Clara, California, and focuses on the communications, personal systems and consumer markets. In March 1997 National sold its Fairchild Semiconductor businesses and now has 12,300 employees worldwide with annual sales of approximately $2.0 billion. Additional company and product information is available on the World Wide Web at www.national.com.
# # #
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)
Three Months Ended Twelve Months Ended
------------------ -------------------
May 25, May 26, May 25, May 26,
1997 1996 1997 1996
-------- ------- -------- --------
Net sales $599.2 $612.4 $2,507.3 $2,623.1
Operating costs and expenses:
Cost of sales 335.7 395.9 1,541.1 1,560.9
Research and development 103.0 90.8 372.1 349.9
Selling, general and
administrative 83.8 116.7 395.7 486.8
Special items:
Restructuring of operations 69.9 - 134.2 -
Gain on sale of Fairchild (40.6) - (40.6) -
In-process R&D charge 62.0 - 72.6 11.4
------ ------ -------- -------
Total operating costs
and expenses 613.8 603.4 2,475.1 2,409.0
------ ------ -------- -------
Operating income(loss) (14.6) 9.0 32.2 214.1
Interest income, net 10.5 3.4 15.1 13.3
Other income, net 5.4 (0.2) 10.0 19.8
------ ------ -------- -------
Income before income taxes 1.3 12.2 57.3 247.2
Income tax provision 15.8 3.1 29.8 61.8
------ ------ -------- -------
Net income(loss) $(14.5) $ 9.1 $ 27.5 $ 185.4
====== ====== ======== =======
Earnings per share:
Primary ($ .10) $ .07 $ .19 $1.36
Fully diluted ($ .10) $ .07 $ .19 $1.34
Selected income statement ratios as a percentage of sales:
Gross margin 44.0% 35.4% 38.5% 40.5%
Research and development 17.2% 14.8% 14.8% 13.3%
Selling, general and 14.0% 19.1% 15.8% 18.6%
administrative
Net income(loss) (2.4%) 1.5% 1.1% 7.1%
Effective tax rate N/M* 25.0% 52.0% 25.0%
* N/M Not Meaningful
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
May 25, May 26,
1997 1996
ASSETS -------- --------
Current assets:
Cash and cash equivalents $ 861.1 $ 442.4
Short-term marketable investments 28.6 61.9
Receivables, net 255.8 281.2
Inventories 181.4 325.7
Deferred tax assets 168.5 71.1
Other current assets 57.2 73.7
------- -------
Total current assets 1,552.6 1,256.0
Property, plant and equipment 2,271.9 2,516.7
Less accumulated depreciation 1,008.5 1,208.6
------- -------
Net property, plant and equipment 1,263.4 1,308.1
Long-term marketable investments 6.4 11.7
Other assets 91.7 82.2
------- -------
Total assets $2,914.1 $2,658.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 12.3 $ 21.5
Accounts payable 248.0 255.6
Accrued expenses 293.4 235.1
Income taxes payable 237.7 164.6
------- -------
Total current liabilities 791.4 676.8
Long-term debt 324.3 350.5
Deferred income taxes 8.9 12.1
Other non-current liabilities 40.7 41.4
------- -------
Total liabilities 1,165.3 1,080.8
------- -------
Commitments and contingencies
Shareholders' equity:
Common stock 72.6 68.4
Additional paid-in capital 1,112.7 930.2
Retained earnings 605.5 581.9
Deferred compensation - Restricted stock (42.0) (3.3)
------- -------
Total shareholders' equity 1,748.8 1,577.2
------- -------
Total liabilities and shareholders' equity $2,914.1 $2,658.0
======== ========
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Twelve Months Ended
--------------------
May 25, May 26,
1997 1996
------- -------
Cash flows from operating activities:
Net income(loss) $ 27.5 $ 185.4
Adjustments to reconcile net income(loss)
with net cash provided by operations:
Depreciation and amortization 231.0 232.6
Gain on disposition of Fairchild (40.6) -
Gain on sale of investments (0.7) (4.3)
Changes in deferred taxes (92.9) 3.3
Tax benefit associated with stock options 18.1 15.9
In-process research and development charge 72.6 11.4
Loss on disposal of equipment 8.2 4.8
Restructuring charges 134.2 -
Other, net 6.1 (0.5)
Changes in certain assets and liabilities, net:
Receivables 26.0 23.8
Inventories 72.6 (77.2)
Other current assets 8.6 (33.3)
Accounts payable and accrued expenses (13.3) (5.3)
Income taxes 73.1 5.0
Other non-current liabilities (0.8) (0.2)
------- -------
Net cash provided by operating activities 529.7 361.4
------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (593.0) (628.1) Sale of equipment - 24.6
Sale and maturity of marketable investments 1,320.3 936.9
Purchase of marketable investments (1,287.0) (952.0)
Disposition of Fairchild - 1997 and
Dynacraft - 1996 400.5 70.0
Sale of notes receivable 65.0 -
Sale of investments 5.1 7.8
Business acquisitions, net of cash acquired (13.7) (19.2)
Purchase of investments and other, net (29.8) (19.0)
------- -------
Net cash used by investing activities (132.6) (579.0)
------- -------
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
(in millions)
Twelve Months Ended
--------------------
May 25, May 26,
1997 1996
------- -------
Cash flows from financing activities:
Issuance of convertible subordinated
notes, less issuance costs $ - $ 253.3
Issuance of debt 52.2 42.0
Repayment of debt (87.6) (29.4)
Issuance of common stock, net 57.0 42.4
Purchase of treasury stock - (63.0)
Payment of preferred dividends - (5.6)
------- -------
Net cash provided by financing activities 21.6 239.7
------- -------
Net change in cash and cash equivalents 418.7 22.1
Cash and cash equivalents at beginning of period 442.4 420.3
------- -------
Cash and cash equivalents at end of period $ 861.1 $ 442.4
======= =======
NATIONAL SEMICONDUCTOR CORPORATION
EARNINGS PER SHARE (Unaudited)
(in millions, except per share amounts)
Three Months Ended Twelve Months Ended
------------------ --------------------
May 25, May 26, May 25, May 26,
1997 1996 1997 1996
-------- ------- -------- --------
Earnings per share:
Primary ($ .10) $ .07 $ .19 $1.36
Fully diluted ($ .10) $ .07 $ .19 $1.34
Weighted average shares:
Primary 143.4 137.8 142.6 132.5
Fully diluted 143.4 137.8 142.9 138.6
Income(loss) used in primary
earnings per common share
calculation(reflecting
preferred dividends,
if applicable) $(14.5) $ 9.1 $ 27.5 $ 179.8
Income(loss) used in fully
diluted earnings per share
(reflecting adjustment for
interest on convertible
notes when dilutive) $(14.5) $ 9.1 $ 27.5 $ 185.4
Notes to Financial Tables
-------------------------
One-Time Charges and Credits----------------------------
In the fourth quarter of fiscal 1997, the Company recorded total net one-time charges of $87.1 million which includes the items described as follows: The Company recorded a net $69.9 million for restructuring of operations that includes new restructuring charges of $84.5 million related to the Company’s recently announced plan for realignment of its wafer fabrication manufacturing. This was offset by a credit of $14.6 million the Company recorded to reverse excess reserves for restructuring charges that were originally recorded in the first quarter of fiscal 1997 in connection with the Company’s reorganization and planned divestiture of the Fairchild Semiconductor organization. The Company recorded a gain of $40.6 million as a result of the disposition of Fairchild Semiconductor in March 1997. The Company also recorded $62.0 million to expense in-process research and development related to the acquisition of Mediamatics in March 1997. In addition, included in other income, net is a $4.2 million gain on the sale of the Company’s digital answering machine business.
In addition, cost of sales for the fourth quarter and year ended May 25, 1997, excludes the effect of $2.8 million and $37.2 million, respectively, of depreciation expense related to the Fairchild fixed assets that were held for disposition. Had the Company continued to record depreciation expense on those assets, cost of sales would have been higher by $2.8 million and $37.2 million for the fourth quarter and year ended May 25, 1997.
In addition to the foregoing items, year-to-date restructuring charges of $134.2 million include a net addition of $64.3 million that reflects the reversal of $192.0 million of the original $256.3 million first quarter restructure charge. Year-to-date in-process research and development charges of $72.6 million also include $10.6 million related to the acquisition of PicoPower assets.
Selected Financial Information
------------------------------
The following table summarizes selected pro forma financial information for the National core business excluding the effect of one-time charges and results of operations of Fairchild Semiconductor and for fiscal 1996, Dynacraft, Inc. which was sold in the third quarter of fiscal 1996.
National Core Business
----------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- -----
Year ended May 25, 1997
-----------------------
Sales $433.4 $507.5 $533.0 $580.4 $2,054.3
Gross profit $162.0 $194.4 $219.6 $252.8 $828.8
Gross margin 37.4% 38.3% 41.2% 43.6% 40.3%
Income before taxes $3.6 $29.2 $47.6 $82.6 $163.0
Year ended May 26, 1996
-----------------------
Sales $476.7 $481.9 $421.9 $456.8 $1,837.3
Gross profit $235.5 $246.0 $186.7 $184.9 $853.1
Gross margin 49.4% 51.0% 44.3% 40.5% 46.4%
Income before taxes $72.8 $79.5 $32.0 $17.0 $201.3
Other Income, Net
----------------------------
Components of other Three Months Ended Twelve Months Ended
income, net were: ------------------ -------------------
(in millions) May 25, May 26, May 25, May 26,
1997 1996 1997 1996
-------- -------- -------- --------
Net intellectual property income $ 1.4 $ 0.7 $ 3.4 $ 14.0
Gain(loss)on investments, net (0.2) (0.9) 0.8 4.3
Other 4.2 - 5.8 1.5
------- ------- ------- -------
Total other income, net $ 5.4 $ (0.2) $ 10.0 $ 19.8
======= ======= ======= =======