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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 NATIONAL SEMICONDUCTOR REPORTS LOSS OF 16 CENTS PER SHARE ON SALES OF $500 MILLION FOR THIRD FISCAL QUARTERMarch 11, 1999 -- National Semiconductor Corporation? (NYSE:NSM) today reported a net loss of $27.2 million, or 16 cents per share, on sales of $500 million for the third quarter of fiscal 1999. This compares with net income of $26.2 million, or 16 cents per share diluted, on sales of $650 million for the comparable quarter of fiscal 1998, excluding a one-time charge of $5.2 million pre-tax related to an acquisition. Including the one-time charge, results for the third quarter of fiscal 1998 reflected net income of $22.3 million, or 13 cents per share diluted.Summary of results 3 months ended: Feb. 28, 1999 March 1, 1998 (excluding one-time charge) Net Sales $ 500 $ 650 Net Income (Loss) $ (27.2) $ 26.2 Earnings (Loss) per share $ (0.16) $ 0.16All figures in millions of dollars, except per share amounts Overall sales during the quarter dropped slightly from the second quarter as reduced sales of Cyrix microprocessors were only partially offset by improvements in wireless and analog shipments. Gross margins continued to improve over the previous quarter, however, due to the higher contributions from wireless and analog products coupled with slightly higher utilization of the company's manufacturing facilities. "We have seen a continuing validation of our system-on-a-chip for information appliances strategy with numerous new design wins for scanners, Windows-based terminals and digital set-top boxes," said Brian L. Halla, chairman, president and CEO of National Semiconductor. "However, we are going into the fourth quarter more cautiously than we would have expected three months ago because of competitive uncertainties in the personal computer markets," he added. "We do see continuing improvement in our other business lines, particularly analog and wireless, and we expect to start realizing revenue from the new information appliance wins in the second half of this calendar year," Halla said. The company introduced a number of new system-on-a-chip designs during the quarter as well as 19 new analog building block products. The new system-on-a-chip products include the Pantera? single-chip DVD solution and a one-chip scanner solution. National also demonstrated a DVD, streaming video and Web-capable set-top box reference design during the quarter. Quarterly orders declined seasonally by 12 percent from the November quarter and 16 percent compared with last year's third quarter. Although PC motherboard related orders declined, orders in the rest of the business improved sequentially over the second quarter. Holiday weakness resulted in declining December and January bookings, but February orders rebounded significantly and were nearly flat with last year. Wireless system bookings led the company with growth in excess of 50 percent compared with the previous quarter and last year's comparable quarter. This surge in orders from wireless customers also helped the company's Analog Group orders to increase approximately 10 percent over the November quarter and to grow about 25 percent compared with last year. Personal computer bookings showed seasonal weakness and were down significantly compared with the peak demand in the November quarter and also over last year's third quarter. Orders for Cyrix processors and related motherboard devices did pick up, however, at the end of the quarter. Company-wide billings exceeded bookings for the quarter. 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's 10-Q for the quarter ended November 29, 1998 (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 Nine Months Ended
------------------ -------------------
Feb. 28, Mar. 1, Feb. 28, Mar. 1,
1999 1998 1999 1998
-------- -------- -------- --------
Net sales $ 500.1 $ 650.1 1,479.8 $2,026.7
Operating costs and expenses:
Cost of sales 345.0 414.0 1,176.7 1,246.7
Research and development 119.3 128.9 354.3 358.9
Selling, general and
administrative 82.3 90.9 240.2 274.7
Special items:
Merger costs - - - 30.0
Restructuring of operations - - 12.5 -
In-process R&D charge - 5.2 - 7.7
------- ------ -------- -------
Total operating costs
and expenses 546.6 639.0 1,783.7 1,918.0
------- ------ -------- -------
Operating income(loss) (46.5) 11.1 (303.9) 108.7
Interest income(expense), net (0.3) 4.7 (0.5) 19.8
Other income, net 10.5 13.9 2.5 23.2
------- ------- -------- -------
Income(loss) before
income taxes (36.3) 29.7 (301.9) 151.7
Income tax provision(benefit) (9.1) 7.4 (75.5) 37.9
------- ------ -------- -------
Net income(loss) $(27.2) $ 22.3 $(226.4) $ 113.8
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Earnings(loss) per share:
Basic $(0.16) $ .14 $(1.36) $ .70
Diluted $(0.16) $ .13 $(1.36) $ .68
Selected income statement ratios as a percentage of sales:
Gross Margin 31.0% 36.3% 20.5% 38.5%
Research and Development
including in-process R&D
charge for fiscal 1998 23.9% 20.6% 23.9% 18.1%
Selling, general and 16.5% 14.0% 16.2% 13.6%
administrative
Net income(loss) (5.4%) 3.4% (15.3%) 5.6%
Effective tax rate 25.0% 25.0% 25.0% 25.0%
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
Feb. 28, May 31,
1999 1998
ASSETS -------- --------
Current assets:
Cash and cash equivalents $ 457.8 $ 460.8
Short-term marketable investments 105.2 112.4
Receivables, net 199.9 208.5
Inventories 189.6 283.9
Deferred tax assets 132.1 166.2
Other current assets 40.2 76.4
-------- --------
Total current assets 1,124.8 1,308.2
Property, plant and equipment 2,948.7 2,939.7
Less accumulated depreciation (1,340.2) (1,283.9)
-------- --------
Net property, plant and equipment 1,608.5 1,655.8
Other assets 162.7 136.7
-------- --------
Total assets $2,896.0 $3,100.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term borrowings and current
portion of long-term debt $ 43.3 $ 53.9
Accounts payable 225.5 237.0
Accrued expenses 307.8 310.9
Income taxes 153.8 191.8
-------- --------
Total current liabilities 730.4 793.6
Long-term debt 444.3 390.7
Deferred income taxes 1.4 4.4
Other non-current liabilities 55.9 53.1
-------- --------
Total liabilities 1,232.0 1,241.8
-------- --------
Commitments and contingencies
Shareholders' equity:
Common stock 84.0 82.7
Additional paid-in capital 1,243.0 1,212.8
Minimum pension liability (12.5) (12.5)
Retained earnings 349.5 575.9
-------- --------
Total shareholders' equity 1,664.0 1,858.9
-------- --------
Total liabilities and shareholders' equity $2,896.0 $3,100.7
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NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended
--------------------
Feb. 28, Mar. 1,
1999 1998
------- -------
Cash flows from operating activities:
Net income(loss) $(226.4) $ 113.8
Adjustments to reconcile net income(loss)
with net cash provided by operations:
Depreciation and amortization 291.5 217.7
(Gain)loss on investments 0.1 (8.9)
Tax benefit associated with stock options 0.5 17.7
Loss on disposal of equipment 48.7 9.4
Provision for loss on note receivable 1.6 -
Non-cash special charges 12.5 37.7
Other, net (6.3) (3.7)
Changes in certain assets and liabilities, net:
Receivables 8.6 (3.9)
Inventories 94.3 (76.7)
Other current assets 36.2 (3.7)
Accounts payable and accrued expenses (21.6) (48.2)
Current and deferred income taxes (45.0) 0.7
Other non-current liabilities 2.8 2.5
-------- --------
Net cash provided by operating activities 197.5 254.4
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (260.4) (513.9)
Sale and maturity of marketable investments 131.4 1,001.6
Purchase of marketable investments (124.2) (1,034.9)
Sale of investments 0.1 16.2
Business acquisition, net of cash acquired - (8.3)
Other, net (10.3) (14.1)
-------- --------
Net cash used by investing activities (263.4) (553.4)
-------- --------
Cash flows from financing activities:
Proceeds from bank borrowing 77.5 100.4
Repayment of debt (34.5) (137.2)
Issuance of common stock, net 19.9 53.7
-------- --------
Net cash provided by financing activities 62.9 16.9
-------- --------
Net change in cash and cash equivalents (3.0) (282.1)
Adjustment to conform pooling of interest for
cash and cash equivalents at beginning of year - 17.6
Cash and cash equivalents at beginning of period 460.8 897.8
-------- --------
Cash and cash equivalents at end of period $ 457.8 $ 633.3
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PART I. FINANCIAL INFORMATION
EARNINGS PER SHARE (Unaudited)
(in millions, except per share amounts)
Three Months Ended Nine Months Ended
------------------ --------------------
Feb. 28, Mar. 1, Feb. 28, Mar. 1,
1999 1998 1999 1998
-------- ------- -------- --------
Earnings(loss) per share:
Basic $(0.16) $ .14 $(1.36) $ .70
Diluted $(0.16) $ .13 $(1.36) $ .68
Weighted average shares:
Basic 167.5 164.5 166.6 163.5
Diluted 167.5 167.3 166.6 167.7
Income(loss) used in basic
and diluted earnings(loss)
per common share
calculation $(27.2) $ 22.3 $(226.4) $ 113.8
Notes to Financial Tables
-------------------------
(in millions)
Three Months Ended Nine Months Ended
------------------ ------------------
Feb. 28, Mar. 1, Feb. 28, Mar. 1,
1999 1998 1999 1998
-------- -------- -------- --------
Interest income(expense), net
-----------------------------
Interest income $ 7.1 $ 12.1 $ 20.6 $ 38.7
Interest expense $ (7.4) $ (7.4) $ (21.1) $ (18.9)
-------- -------- -------- --------
Interest income(expense), net $ (0.3) $ 4.7 $ (0.5) $ 19.8
======== ======== ======== ========
Other income, net
-----------------
Net intellectual property income $ 10.5 $ 11.7 $ 10.9 $ 14.3
Gain(loss)on investments, net - 1.8 (0.1) 10.3
Other - 0.4 (8.3) (1.4)
-------- -------- -------- --------
Total other income, net $ 10.5 $ 13.9 $ 2.5 $ 23.2
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