NATIONAL SEMICONDUCTOR REPORTS LOSS OF 24 CENTS PER SHARE
BEFORE ONE-TIME CHARGES FOR FOURTH QUARTER OF FISCAL 1999
June 10, 1999 - National Semiconductor Corporation® (NYSE:NSM) today reported a loss of $40 million, or 24 cents per share, on revenues of $486 million before the effect of one-time items, for its fourth quarter of fiscal 1999, which ended May 30, 1999. Including one-time items, the company reported a loss of $783.5 million, or $4.65 per share, on revenues of $477 million. In the comparable quarter of fiscal 1998, National reported a loss of $69.3 million, or 42 cents per share, before the effect of one-time charges, on revenues of $510 million, and a loss of $212.4 million, or $1.29 per share, including one-time charges, with no change in revenues.
During the most recent quarter, National took a one-time net restructuring charge of $688.4 million related to its previously announced decision to exit the standalone Cyrix PC processor business and to sell a majority interest in its 8-inch wafer manufacturing facility in South Portland, Maine. In connection with this announcement the company also recorded one-time charges totaling $55.1 million against revenues, cost of sales and SG&A primarily related to processor inventory write-offs and product returns. (For details see footnote to financial tables.)
Summary of results
3 months ended: May 30, 1999 May 31, 1998
------------ ------------
(excluding Total Company (excluding Total Company
one-time charges) as reported one-time charges) as reported
Net sales $486.0 $ 477.0 $510.0 $ 510.0
Net loss $(40.0) $(783.5) $(69.3) $(212.4)
Loss per share $ (0.24) $ (4.65) $ (0.42) $ (1.29)
All figures in millions of dollars except per share amounts
"We are now on track to be profitable in the November quarter," said Brian L. Halla, president and chief executive officer. "The PC processor business accounted for approximately $45 million in losses during the fourth quarter, and we will complete our exit from that business during the summer quarter.
"Our robust on-going analog business continues to show evidence of a broad-based recovery in the semiconductor marketplace," Halla added. "In addition, the information appliance market is now becoming a reality for us. In May we booked the first material orders from Philips for the set-top box that AOL will offer for AOL TVSM Web browsing, and also announced our agreement to collaborate with Acer to develop additional set-top box applications," Halla added.
The company reported that bookings during the fourth quarter grew 17 percent over the third quarter and 23 percent over last year's fourth quarter. Excluding standalone Cyrix PC processor orders, new bookings grew 21 percent and 26 percent respectively. After increasing significantly at the end of the third quarter, monthly orders continued strong throughout the fourth quarter. All months showed double-digit growth over the previous year. Orders from North American and Southeast Asian markets led the seasonal improvements and year-over-year gains, while European markets were flat to slightly down. Japanese markets were also flat sequentially, but showed the same year-to-year improvement as the company overall. Bookings equaled or exceeded billings in all regions.
Analog orders led the company during the fourth quarter with sequential growth in the 30 percent range and in the high-30s range over last year. The catalog parts, such as power management and amplifier products, along with audio systems circuits led the fourth quarter seasonal improvements. At the same time, wireless and interface circuits almost doubled last year's booking rates.
For the year, the company reported a loss of $220.6 million, or $1.32 per share, on revenues of $2.0 billion, before the effect of one-time charges. This compares with a net profit of $72.7 million, or 44 cents per share, excluding one-time charges, on revenues of $2.5 billion for fiscal 1998. Including one-time charges, the company reported a loss of $1.0 billion, or $6.04 per share, for fiscal 1999, compared with a loss of $98.6 million, or 60 cents per share, for the previous year after one-time charges.
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 transfer of new submicron production facilities, the timely exit of the PC-compatible processor business, 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 February 28, 1999 (see the Outlook section of Management's Discussion and Analysis of Results of Operations and Financial Conditions).
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NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)
Three Months Ended Twelve Months Ended
------------------ -------------------
May 30, May 31, May 30, May 31,
1999 1998 1999 1998
-------- -------- -------- --------
Net sales $ 477.0 $ 510.0 1,956.8 $2,536.7
Operating costs and expenses:
Cost of sales 376.8 405.0 1,553.5 1,651.7
Research and development 117.0 123.1 471.3 482.0
Selling, general and
administrative 77.2 78.5 317.4 353.2
Special items:
Merger costs - - - 30.0
Restructuring of operations 688.4 63.8 700.9 63.8
In-process R&D charge - 95.2 - 102.9
------- ------ -------- -------
Total operating costs
and expenses 1,259.4 765.6 3,043.1 2,683.6
------- ------ -------- -------
Operating loss (782.4) (255.6) (1,086.3) (146.9)
Interest income(expense), net (1.7) 2.5 (2.2) 22.3
Other income, net 0.6 1.7 3.1 24.9
------- ------- -------- -------
Loss before income taxes (783.5) (251.4) (1,085.4) (99.7)
Income tax benefit - (39.0) (75.5) (1.1)
------- ------ -------- -------
Net loss $(783.5) $(212.4) $(1,009.9) $ (98.6)
======= ====== ======== =======
Loss per share:
Basic $ (4.65) $ (1.29) $ (6.04) $ ( .60)
Diluted $ (4.65) $ (1.29) $ (6.04) $ ( .60)
Selected income statement ratios as a percentage of sales:
Gross Margin 21.0% 20.6% 20.6% 34.9%
Research and Development
including in-process R&D
charge for fiscal 1998 24.5% 42.8% 24.1% 23.1%
Selling, general and 16.2% 15.4% 16.2% 13.9%
administrative
Net loss (164.3%) (41.6%) (51.6%) (3.9%)
Effective tax rate 0 % 15.5% 7.0% 1.1%
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
May 30, May 31,
1999 1998
ASSETS -------- --------
Current assets:
Cash and cash equivalents $ 418.7 $ 460.8
Short-term marketable investments 107.2 112.4
Receivables, net 171.9 208.5
Inventories 141.3 283.9
Deferred tax assets 117.9 166.2
Other current assets 32.2 76.4
-------- --------
Total current assets 989.2 1,308.2
Property, plant and equipment 2,319.1 2,939.7
Less accumulated depreciation (1,403.1) (1,283.9)
-------- --------
Net property, plant and equipment 916.0 1,655.8
Long-term marketable investments 24.3 -
Other assets 114.8 136.7
-------- --------
Total assets $2,044.3 $3,100.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term borrowings and current
portion of long-term debt $ 49.3 $ 53.9
Accounts payable 189.8 237.0
Accrued expenses 348.1 310.9
Income taxes 77.8 191.8
-------- --------
Total current liabilities 665.0 793.6
Long-term debt 416.3 390.7
Deferred income taxes - 4.4
Other non-current liabilities 62.2 53.1
-------- --------
Total liabilities 1,143.5 1,241.8
-------- --------
Commitments and contingencies
Shareholders' equity:
Common stock 84.5 82.7
Additional paid-in capital 1,253.1 1,212.8
Retained earnings(deficit) (434.1) 575.8
Accumulated other comprehensive loss (2.7) (12.4)
-------- --------
Total shareholders' equity 900.8 1,858.9
-------- --------
Total liabilities and shareholders' equity $2,044.3 $3,100.7
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NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions) Twelve Months Ended
--------------------
May 30, May 31,
1999 1998
------- -------
Cash flows from operating activities:
Net loss $(1,009.9) $ (98.6)
Adjustments to reconcile net loss
with net cash provided by operations:
Depreciation and amortization 405.6 306.9
(Gain)loss on investments 0.1 (10.3)
Tax benefit associated with stock options - 17.5
Loss on disposal of equipment 50.5 9.7
In-process research and development charge - 102.9
Provision for loss on note receivable 2.1 -
Non-cash special charges 700.9 93.8
Other, net (1.4) (0.7)
Changes in certain assets and liabilities, net:
Receivables 36.6 55.7
Inventories 142.6 (60.6)
Other current assets 44.2 (2.9)
Accounts payable and accrued expenses (80.6) (102.8)
Current and deferred income taxes (61.2) (42.1)
Other non-current liabilities (3.4) 12.3
-------- --------
Net cash provided by operating activities 226.1 280.8
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (303.3) (622.0)
Sale and maturity of marketable investments 167.1 1,020.3
Purchase of marketable investments (162.0) (1,051.5)
Sale of investments 0.1 16.2
Business acquisition, net of cash acquired - (96.4)
Other, net (19.1) (20.2)
-------- --------
Net cash used by investing activities (317.2) (753.6)
-------- --------
Cash flows from financing activities:
Redemption of 5.5% convertible subordinated notes - (126.4)
Proceeds from bank borrowing 77.5 100.4
Repayment of debt (56.5) (19.0)
Issuance of common stock, net 28.0 63.2
-------- --------
Net cash provided by financing activities 49.0 18.2
-------- --------
Net change in cash and cash equivalents (42.1) (454.6)
Adjustment to conform pooling of interest for
cash and cash equivalents at beginning of year - 17.6
Cash and cash equivalents at beginning of year 460.8 897.8
-------- --------
Cash and cash equivalents at end of year $ 418.7 $ 460.8
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PART I. FINANCIAL INFORMATION
EARNINGS PER SHARE (Unaudited)
(in millions, except per share amounts)
Three Months Ended Twelve Months Ended
------------------ --------------------
May 30, May 31, May 30, May 31,
1999 1998 1999 1998
-------- ------- -------- --------
Loss per share:
Basic $ (4.65) $ (1.29) $ (6.04) $( .60)
Diluted $ (4.65) $ (1.29) $ (6.04) $( .60)
Weighted average shares:
Basic 168.5 165.2 167.1 163.9
Diluted 168.5 165.2 167.1 163.9
Loss used in basic
and diluted loss
per common share
calculation $(783.5) $(212.4) $(1,009.9) $(98.6)
Notes to Financial Tables
-------------------------
One-Time Charges
----------------
In May 1999, the Company announced its decision to exit the PC processor business and related support activities in order to sharpen its focus on the emerging information appliance market and on its traditional analog business. The action included the elimination of approximately 1,270 positions worldwide and closure of the Company's 8-inch development wafer fabrication facility located in Santa Clara, California. In connection with this action, operating results for the fourth quarter included a restructure charge of $689.6 million. The decision to exit the PC processor business resulted in significant impairment of capital assets in South Portland, Maine; Richardson, Texas; and Toa Payoh, Singapore that were substantially devoted to supporting the PC processor business. Under Statement of Financial Accounting Standards 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," the Company recorded impairment losses of $494.3 million relating to capital assets in South Portland, Richardson and Singapore. The planned exit of the development wafer fabrication facility in Santa Clara, resulted in an additional $139.6 million impairment loss. The other components of the restructure charge included $37.0 million for severance and $18.7 million for other exit related costs. This charge was partially offset by a $1.2 million release of excess reserves related to certain prior restructure actions that were completed as planned during the fourth quarter.
In addition to the restructure charge, the Company also incurred additional one-time charges of $55.1 million related to the exit of the PC processor business. The charges included $9.0 million against sales for product returns, $43.6 million included in cost of sales for the write down of Cyrix processor inventory and $2.5 million included in SG&A expenses for accounts receivable allowances.
(in millions) Three Months Ended Twelve Months Ended
------------------ -------------------
May 30, May 31, May 30, May 31,
1999 1998 1999 1998
-------- -------- -------- --------
Interest income(expense), net
-----------------------------
Interest income $ 6.3 $ 9.9 $ 26.9 $ 48.6
Interest expense $ (8.0) $ (7.4) $ (29.1) $ (26.3)
-------- -------- -------- --------
Interest income(expense), net $ (1.7) $ 2.5 $ (2.2) $ 22.3
======== ======== ======== ========
Other income, net
-----------------
Net intellectual property income $ 0.4 $ 1.4 $ 11.3 $ 15.7
Gain(loss)on investments, net 0.2 (1.0) 0.1 9.3
Other - 1.3 (8.3) (0.1)
-------- -------- -------- --------
Total other income, net $ 0.6 $ 1.7 $ 3.1 $ 24.9
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