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For More Information P.R.: Bill Callahan (408) 721-2871 Email ID: bill.callahan@nsc.com Alan Bernheimer (408) 721-8665 Email ID: alan.bernheimer@nsc.com Financial: Jim Foltz (408) 721-5693 Email ID: invest.group@nsc.com World Wide Web: http://www.national.com NATIONAL SEMICONDUCTOR REPORTS LOSS OF 42 CENTS PER SHARE BEFORE ONE-TIME CHARGES FOR FOURTH QUARTER OF FISCAL 1998June 11, 1998--National Semiconductor Corporation (NSM:NYSE) today reported a loss of $69.3 million, or 42 cents per share, excluding the effects of one-time charges in the fourth quarter of fiscal 1998 which ended May 31, 1998.Summary of results
_______________________________________________________________________
3 months ended: May 31, 1998 May 25, 1997
(excluding National Core & Cyrix Total Company
one-time charges) (excluding as reported
one-time charges)
Net sales $510.0 $651.7 $670.5
Net income (loss) $(69.3) $ 57.4 $(19.0)
Earnings (loss) per share (diluted)$( 0.42) $ 0.36 (0.12)
All figures in millions of dollars, except per share amounts
National said fourth quarter bookings declined compared with both the third quarter of fiscal 1998 and the fourth quarter of fiscal 1997, but noted that the rate of decline slowed during May. The North American market was the most affected, followed by Southeast Asia and Europe respectively. Bookings in Japan actually improved slightly from the poor third quarter of fiscal 1998, but were still down on a year-to-year comparison.Summary of results _______________________________________________________________________
12 months ended: May 31, 1998 May 25, 1997
National Core & Cyrix National Core & Cyrix Total Company
(excluding (excluding As Reported
one-time charges) one-time charges)
Net sales $2,536.7 $2,231.5 $2,684.4
Net income $ 72.7 $ 96.2 $ 1.6
Earnings per share (diluted) $0.44 $ 0.60 $ 0.01
All figures in millions of dollars, except per share amounts
This outlook 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 remainder of the fourth quarter, the timely ramp up of new submicron production facilities, the degree of factory utilization, the successful sale of existing inventories, and the ramp up of recently introduced products. Other risk factors are included in the company Form 10Q for the quarter ended March 1, 1998 (see the Outlook section of Management's Discussion and Analysis of Results of Operations and Financial Conditions).
PART I. FINANCIAL INFORMATION
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)
Three Months Ended Twelve Months Ended
------------------ -------------------
May 31, May 25, May 31, May 25,
1998 1997 1998 1997
(Restated) (Restated)
-------- ------- -------- --------
Net sales $510.0 $670.5 $2,536.7 $2,684.4
Operating costs and expenses:
Cost of sales 405.0 392.6 1,651.7 1,672.5
Research and development 123.1 110.8 482.0 404.5
Selling, general and
administrative 78.5 96.1 353.2 448.9
Special items:
Merger costs - - 30.0 -
Restructuring of operations 63.8 69.9 63.8 134.2
Gain on sale of Fairchild - (40.6) (40.6)
In-process R&D charge 95.2 62.0 102.9 72.6
------ ------ -------- -------
Total operating costs
and expenses 765.6 690.8 2,683.6 2,692.1
------ ------ -------- -------
Operating loss (255.6) (20.3) (146.9) (7.7)
Interest income, net 2.5 8.5 22.3 6.1
Other income, net 1.7 6.1 24.9 18.7
------ ------ -------- -------
Income(loss) before
income taxes (251.4) (5.7) (99.7) 17.1
Income tax provision(benefit) (39.0) 13.3 (1.1) 15.5
------ ------ -------- -------
Net income(loss) $(212.4) $(19.0) $ (98.6) $ 1.6
====== ====== ======== =======
Earnings(loss) per share:
Basic $(1.29) $( .12) $( .60) $ .01
Diluted $(1.29) $( .12) $( .60) $ .01
Selected income statement ratios as a percentage of sales:
Gross margin 20.6% 41.4% 34.9% 37.7%
Research and development
exclude in-process R&D
charge 24.1% 16.5% 19.0% 15.1%
Selling, general and
administrative 15.4% 14.3% 13.9% 16.7%
Net income (41.6%) (2.8%) (3.9%) .1%
Effective tax rate (15.5%) n/m (1.1%) n/m
n/m: not meaningful
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)(in millions)
May 31, May 25,
1998 1997
(Restated)
ASSETS -------- --------
Current assets:
Cash and cash equivalents $ 460.8 $ 897.8
Short-term marketable investments 112.4 79.6
Receivables, net 208.5 281.0
Inventories 283.9 205.8
Deferred tax assets 166.2 173.3
Other current assets 76.4 99.9
------- --------
Total current assets 1,308.2 1,737.4
Property, plant and equipment 2,939.7 2,420.4
Less accumulated depreciation (1,283.9) (1,071.4)
------- --------
Net property, plant and equipment 1,655.8 1,349.0
Other assets 136.7 124.4
------- --------
Total assets $3,100.7 $3,210.8
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 53.9 $ 15.4
Accounts payable 237.0 265.5
Accrued expenses 310.9 306.8
Income taxes 191.8 238.1
------- --------
Total current liabilities 793.6 825.8
Long-term debt 390.7 460.5
Deferred income taxes 4.4 12.1
Other non-current liabilities 53.1 40.7
------- --------
Total liabilities 1,241.8 1,339.1
------- --------
Commitments and contingencies
Shareholders' equity:
Common stock 82.7 80.7
Additional paid-in capital 1,200.3 1,111.7
Retained earnings 575.9 679.3
------- --------
Total shareholders' equity 1,858.9 1,871.7
------- --------
Total liabilities and shareholders' equity $3,100.7 $3,210.8
======== ========
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)(in millions)
Twelve Months Ended
--------------------
May 31, May 25,
1998 1997
(Restated)
------- -------
Cash flows from operating activities:
Net income(loss) $ (98.6) $ 1.6
Adjustments to reconcile net income(loss)
with net cash provided by operations:
Depreciation and amortization 300.6 258.1
Gain on disposition of Fairchild - (40.6)
Gain on investments (10.3) (0.7)
Loss on disposal of equipment 9.7 8.2
Tax benefit associated with stock options 17.5 18.6
In-process research and development charge 102.9 72.6
Merger costs 30.0 -
Restructuring of operations 63.8 134.2
Other, net 13.8 6.1
Changes in certain assets and liabilities, net:
Receivables 55.7 30.0
Inventories (60.6) 60.4
Other current assets (2.9) (17.3)
Accounts payable and accrued expenses (102.8) (6.5)
Current and deferred income taxes (42.1) (10.8)
Other non-current liabilities 12.3 (0.8)
------- -------
Net cash provided by operating activities 289.0 513.1
------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (622.0) (605.6)
Sale and maturity of marketable investments 1,020.3 1,320.3
Purchase of marketable investments (1,051.5) (1,338.0)
Sale of investments 16.2 5.1
Disposition of Fairchild - 400.5
Sale of Fairchild notes receivable - 65.0
Business acquisitions, net of cash acquired (96.4) (13.7)
Purchase of investments and other, net (28.4) (14.6)
------- -------
Net cash used by investing activities (761.8) (181.0)
------- -------
Cash flows from financing activities:
Issuance of 5.5% convertible subordinated notes,
less issuance costs - 126.5
Redemption of 5.5% convertible subordinated notes (126.4) -
Issuance of debt 100.4 59.1
Repayment of debt (19.0) (165.9)
Issuance of common stock, net 63.2 59.3
------- -------
Net cash provided by financing activities 18.2 79.0
------- -------
Net change in cash and cash equivalents (454.6) 411.1
Adjustment to conform pooling of interests for
cash and cash equivalents at beginning of year 17.6 -
Cash and cash equivalents at beginning of period 897.8 486.7
------- -------
Cash and cash equivalents at end of period $ 460.8 $ 897.8
======= =======
PART I. FINANCIAL INFORMATION
EARNINGS PER SHARE (Unaudited)
(in millions, except per share amounts)
Three Months Ended Twelve Months Ended
------------------ --------------------
May 31, May 25, May 31, May 25,
1998 1997 1998 1997
(Restated) (Restated)
-------- ------- -------- --------
Earnings (loss) per share:
Basic ($1.29) ($ .12) ($ .60) $ .01
Diluted ($1.29) ($ .12) ($ .60) $ .01
Weighted average shares:
Basic 165.2 159.5 163.9 156.1
Diluted 165.2 159.5 163.9 159.1
Income (loss) used in basic
earnings (loss) per common
share calculation ($212.4) ($19.0) ($98.6) $ 1.6
Income (loss) used in diluted
earnings (loss) per share
(reflecting adjustment for
interest on convertible
notes when dilutive) ($212.4) ($19.0) ($98.6) $ 1.6
Notes to Financial Tables------------------------- One-Time Charges ---------------- As part of an overall cost reduction plan implemented in the fourth quarter of fiscal 1998, the Company announced a worldwide workforce reduction of approximately 1,400 people, primarily in its Santa Clara, California, headquarters and other front-end wafer manufacturing operations. This included approximately 560 employees affected by the previously announced closure of the Company's 5- and 6-inch wafer manufacturing facilities in Santa Clara. In addition to new cost reduction actions, the plan includes modification of certain previously announced actions related to the closure of the Santa Clara 5- and 6-inch wafer manufacturing facilities, as well as additional asset impairment of the 0.65-micron wafer manufacturing facility in Arlington, Texas. As a result, the Company recorded a net $63.8 million special charge in the fourth quarter of fiscal 1998. The special charge includes approximately $32.5 million for severance and lease termination costs, $10.6 million for the write-off of assets related to discontinued product development programs and $10.2 million for the write-off of assets related to discontinued process technology development. It also includes an additional $20.3 million asset impairment of the Arlington wafer manufacturing facility. These charges were offset by the release of $6.8 million of excess reserves for severance and other exit costs related to the Company's reorganization of its operating structure in the first quarter of fiscal 1997 and the release of $3.0 million of excess reserves for other exit costs related to the Company's planned realignment of its manufacturing facilities announced in the fourth quarter of fiscal 1997. In the fourth quarter of fiscal 1998, the Company also completed the acquisition of ComCore Semiconductor, a designer of integrated circuits for computer networking and broadband communications. In connection with the acquisition, the Company recorded $95.2 million for an in-process R&D charge and $4.3 million of goodwill. In addition, the company recorded $15.0 million of unearned compensation related to employee retention arrangements which will be charged to operations, primarily research and development, over the next three years.
The following table summarizes selected financial information for the three months ended May 31, 1998 excluding the effect of the special charges discussed in the preceding paragraphs:
As Restructure In-Process Excluding
Reported Charge R&D Charge Special
Charges
---------- ----------- ---------- ---------
Pretax loss $ 251.4 ($ 63.8) ($ 95.2) ($ 92.4)
Tax benefit 39.0 ( 15.9) - 23.1
--------- --------- --------- ---------
Net loss ($ 212.4) $ 47.9 $ 95.2 ($ 69.3)
========= ========= ========= =========
Loss per share ($ 1.29) $ .29 $ .58 ($ .42)
Merger------ On November 17, 1997, the Company merged with Cyrix Corporation ("Cyrix"). Cyrix designs, develops and markets X86 microprocessors of original design for the personal computer marketplace. In connection with the merger, the Company recorded a one-time charge of $30.0 million related to certain merger and related expenses which is included in the statement of operations for the twelve months ended May 31, 1998. These expenses primarily include transaction fees for investment bankers, attorneys, and accountants; financial printing costs; and costs associated with the elimination of duplicate facilities and operations.
National Core with Cyrix
Selected Finincial Information
---------------------------------
Three Months Ended
---------------------------------
Total Special National
Company Items Core with
Incr(Decr) Cyrix
May 31, 1998: --------- -------- ---------
Net sales $ 510.0 $ 510.0
Gross profit $ 105.0 $ 105.0
Gross margin 20.6% 20.6%
Research & development $ 123.1 $ 123.1
Selling, gen. & admin. $ 78.5 $ 78.5
Special items-net change $ 159.0 ($ 159.0) $ -
Net loss $ 212.4 ($ 143.1) $ 69.3
Loss per share-
diluted: $ 1.29 $ .42
Three Months Ended
---------------------------------------------
Total Special Fairchild National
Company Items Core with
Incr(Decr) Cyrix
May 25, 1997: --------- -------- --------- ----------
Net sales $ 670.5 $ (18.8) $ 651.7
Gross profit $ 277.9 $ (10.7) $ 267.2
Gross margin 41.4% 41.0%
Research & development $ 110.8 $ (1.1) $ 109.7
Selling, gen. & admin. $ 96.1 $ (3.5) $ 92.6
Special items-net change $ 91.3 ($ 91.3) $ -
Other income, net $ 6.1 ($ 4.2) $ .3 $ 2.2
Net loss(income) $ 19.0 ($ 80.8) $ 4.4 $ (57.4)
Loss (earnings) per share-
diluted: $ .12 $ ( .36)
National Core with Cyrix
Selected Financial Information
------------------------------
Twelve Months Ended
---------------------------------
Total Special National
Company Items Core with
Incr(Decr) Cyrix
May 31, 1998: --------- -------- ---------
Net sales $2,536.7 $2,536.7
Gross profit $ 885.0 $ 885.0
Gross margin 34.9% 34.9%
Research & development $ 482.0 $ 482.0
Selling, gen. & admin. $ 353.2 $ 353.2
Special items-net change $ 196.7 ($ 196.7) $ -
Net loss(income) $ 98.6 ($ 171.3) ($ 72.7)
Loss (earnings per share-
diluted: $ .60 $ (.44)
Twelve Months Ended
---------------------------------------------
Total Special Fairchild National
Company Items Core with
Incr(Decr) Cyrix
May 25, 1997: --------- -------- --------- ----------
Net sales $2,684.4 $ (452.9) $2,231.5
Gross profit $1,011.9 $ (137.4) $ 874.5
Gross margin 37.7% 39.2%
Research & development $ 404.5 $ (15.1) $ 389.4
Selling, gen. & admin. $ 448.9 $ (62.9) $ 386.0
Special items-net change $ 166.2 ($ 166.2) $ -
Other income, net $ 18.7 ($ 4.2) $ 2.9 $ 17.4
Net income $ 1.6 $ 137.0 $ (42.4) $ 96.2
Earnings per share-
diluted: $ .01 $ .60
The selected financial information presented above for the three months and twelve months ended May 25, 1997 is pro forma and includes certain expenses for research and development, selling and marketing, and headquarter functions which were allocated from central corporate cost centers to National Core and Fairchild Semiconductor.
Other Income, Net
----------------------------
Components of other Three Months Ended Twelve Months Ended
income,net were: ------------------ -------------------
(in millions) May 31, May 25, May 31, May 25,
1998 1997 1998 1997
(Restated) (Restated)
-------- -------- -------- --------
Net intellectual property income $ 1.4 $ 2.1 $ 15.7 $ 10.1
Gain(loss)on investments, net (1.0) (0.2) 9.2 0.8
Other 1.3 4.2 - 7.8
------- ------- ------- -------
Total other income, net $ 1.7 $ 6.1 $ 24.9 $ 18.7
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