March 8, 2001 - National Semiconductor Corporation (NYSE:NSM) today reported net income of $48.9 million, or 27 cents per share, on revenues of $475.6 million for the third quarter of fiscal 2001, which ended February 25, 2001. This excludes a pretax charge of $12.1 million for in process R&D related to the acquisition of innoCOMM during the quarter. Including that charge, the company reported net earnings of $39.2 million, or 21 cents per share. In the comparable quarter last year, which ended Feb. 27, 2000, the company reported net earnings of $99.8 million, or 51 cents per share, on sales of $548.9 million before net gains from nonrecurring items of $228.0 million. Including these net gains, the company had net income of $327.8 million, or $1.68 per share for the previous year's third quarter.
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Summary of results
3 months ended: Feb. 25, 2001 Feb. 27, 2000
Net sales $ 475.6 $ 548.9
Net income $ 39.2 $ 327.8
Net income before charge and net gains $ 48.9 $ 99.8
from nonrecurring items
Earnings per share diluted before charge $ 0.27 $ 0.51
and net gains from nonrecurring items
All figures in millions of dollars, except per share amounts
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In a weak overall semiconductor market, National maintained profitability by achieving gross margins of 49 percent during the third quarter. Margins benefited from the increasing number of proprietary analog products in the company's product mix, which are less vulnerable to price erosion, and from National's ability to maintain manufacturing efficiencies.
"We will continue to focus on profitability and critical investments during this period of slower demand and inventory corrections in the wireless handset and PC markets," said Brian L. Halla, president and chief executive officer.
During the quarter National completed the acquisition of innoCOMM, a privately held analog design company that is a leading developer of chipsets for wireless networking applications. This acquisition strengthened National's intellectual property and market position in the wireless sector, especially in high-end wireless RF capabilities including home networking and Bluetooth technologies.
"Although we saw bookings and turns orders improve in February, we are still maintaining a cautious outlook," Halla added. Turns orders are orders requested for delivery in the same quarter.
The company reported that third quarter worldwide bookings declined 30 percent sequentially from the second quarter of fiscal 2001, and 38 percent compared to the robust bookings of the previous year's third quarter. After three months of sequential declines through January, bookings grew in February.
"We now anticipate a slight sales decline in the fourth quarter," Halla said, "However, we expect total fiscal year 2001 sales to marginally exceed last year's revenues of $2.1 billion. Going forward, our goal is to maintain profitability, control costs and continue investing in targeted high growth markets that will give shareholders the best rate of return."
For its fourth quarter outlook the company is expecting sequential sales to decline by as much as 10 percent. Gross margins also may decline around 5 percentage points, due to lower factory utilization. These factors may result in earnings of 3 to 5 cents per share.
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 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 10Q from the second quarter ended November 26, 2000 and the 10-K for the year ended May 28, 2000 (see Outlook section of Management's Discussion and Analysis of Result of Operations and Financial Conditions) and the Annual Report dated May 28, 2000.
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NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)
Three Months Ended Nine Months Ended
------------------ -------------------
Feb 25, Feb. 27, Feb. 25, Feb. 27,
2001 2000 2001 2000
------- ------- -------- --------
Net sales $ 475.6 $ 548.9 $1,711.4 $1,544.6
Operating costs and expenses:
Cost of sales 242.6 285.2 838.3 863.4
Research and development 112.0 90.7 327.8 290.8
Selling, general and
administrative 76.3 78.1 255.7 229.2
Special items:
In-process R&D charge 12.1 4.2 16.2 4.2
Restructuring of operations - (9.9) 2.3 (13.0)
Gain on disposition of Cyrix
PC microprocessor business - - - (26.8)
------- ------- -------- --------
Total operating costs
and expenses 443.0 448.3 1,440.3 1,347.8
------- ------- -------- --------
Operating income 32.6 100.6 271.1 196.8
Interest income, net 13.4 4.8 42.7 5.0
Other income, net 3.0 227.7 48.9 284.9
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Income before income taxes
and extraordinary item 49.0 333.1 362.7 486.7
Income tax expense 9.8 5.3 72.6 13.0
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Net income before
extraordinary item 39.2 327.8 290.1 473.7
Extraordinary loss on early
extinguishment of debt, net
taxes of $0.4 million - - - 6.8
------- ------- -------- --------
Net income $ 39.2 $ 327.8 $ 290.1 $ 466.9
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Earnings per share before
extraordinary item:
Basic $ 0.23 $ 1.88 $ 1.64 $ 2.75
Diluted $ 0.21 $ 1.68 $ 1.53 $ 2.49
Earnings per share:
Basic $ 0.23 $ 1.88 $ 1.64 $ 2.71
Diluted $ 0.21 $ 1.68 $ 1.53 $ 2.46
Selected income statement ratios as a percentage of sales:
Gross margin 49.0% 48.0% 51.0% 44.1%
Research and development(excluding
in-process R&D charge) 23.5% 16.5% 19.2% 18.8%
Selling, general and
administrative 16.0% 14.2% 14.9% 14.8%
Net income 8.2% 59.7% 17.0% 30.2%
Effective tax rate 20.0% 1.6% 20.0% 2.7%
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)
(in millions)
Feb. 25, May 28,
2001 2000
ASSETS -------- --------
Current assets:
Cash and cash equivalents $ 841.8 $ 778.8
Short-term marketable investments 13.0 22.3
Receivables, net 156.0 258.6
Inventories 215.7 192.9
Deferred tax assets 125.7 125.7
Other current assets 39.0 40.5
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Total current assets 1,391.2 1,418.8
Net property, plant and equipment 814.7 803.7
Long-term cash investments 47.4 48.8
Other assets 248.8 110.9
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Total assets $2,502.1 $2,382.2
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 31.4 $ 31.4
Accounts payable 123.7 194.5
Accrued expenses 292.2 315.1
Income taxes 97.5 86.7
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Total current liabilities 544.8 627.7
Long-term debt 33.7 48.6
Other non-current liabilities 89.3 62.6
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Total liabilities 667.8 738.9
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Commitments and contingencies
Shareholders' equity:
Common stock 86.7 88.8
Additional paid-in capital 1,281.6 1,395.3
Retained earnings 476.8 186.7
Accumulated other comprehensive loss (8.6) (27.5)
Less: Treasury stock, at cost (2.2) -
-------- --------
Total shareholders' equity 1,834.3 1,643.3
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Total liabilities and shareholders' equity $2,502.1 $2,382.2
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NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended
----------------------
Feb. 25, Feb. 27,
2001 2000
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Cash flows from operating activities:
Net income $ 290.1 $ 466.9
Adjustments to reconcile net income
with net cash provided by operations:
Depreciation and amortization 179.0 202.3
Gain on investments (40.8) (272.5)
Loss on disposal of equipment 2.7 9.1
Donation of equity securities 20.5 -
Non-cash special items 18.5 (35.6)
Other, net 0.3 3.3
Changes in certain assets and liabilities, net:
Receivables 102.6 (75.6)
Inventories (22.8) (33.1)
Other current assets (0.9) (11.4)
Accounts payable and accrued expenses (115.7) (65.9)
Current and deferred income taxes 10.8 9.9
Other liabilities 4.5 2.9
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Net cash provided by operating activities 448.8 200.3
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Cash flows from investing activities:
Purchase of property, plant and equipment (168.4) (94.1)
Sale of equipment - 8.6
Sale and maturity of marketable investments 39.3 127.7
Purchase of marketable investments (28.0) (106.7)
Sale of investments 33.3 286.0
Business acquisitions, net of cash acquired (98.3) (22.2)
Disposition of Cyrix PC microprocessor business - 75.0
Purchase of investments and other, net (23.8) (2.2)
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Net cash provided by (used by)
investing activities (245.9) 272.1
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Cash flows from financing activities:
Redemption of convertible subordinated notes - (265.8)
Repayment of debt (14.9) (33.6)
Issuance of common stock, net 48.5 105.8
Purchase and retirement of treasury stock (173.5) -
------- -------
Net cash used by financing activities (139.9) (193.6)
------- -------
Net change in cash and cash equivalents 63.0 278.8
Cash and cash equivalents at beginning of period 778.8 418.7
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Cash and cash equivalents at end of period $ 841.8 $ 697.5
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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. 25, Feb. 27, Feb. 25, Feb. 27,
2001 2000 2001 2000
------- ------- ------- -------
Earnings per share:
Basic $ 0.23 $ 1.88 $ 1.64 $ 2.71
Diluted $ 0.21 $ 1.68 $ 1.53 $ 2.46
Weighted-average shares:
Basic 174.0 174.7 176.7 172.4
Diluted 183.0 194.8 190.2 189.9
Income used in basic and
diluted earnings per
common share calculation $ 39.2 $327.8 $290.1 $466.9
Weighted-average shares used in basic and diluted earnings per share for
the three and nine months ended February 25, 2001 include the effect of
the company?s repurchase of approximately 1.9 million and 7.4 million
shares of common stock, respectively. In addition, weighted-average
shares used in diluted earnings per share for the same periods reflect
less dilution from outstanding options due to lower average market price.
NOTES TO FINANCIAL STATEMENTS:
Detail of nonrecurring items:
Three Months Ended
------------------
Feb. 25, Feb. 27,
2001 2000
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Special items:
In-process R&D charge $ 12.1 $ 4.2
Restructuring of operations (9.9)
Other income, net:
Gain on sale of Fairchild stock (222.3)
-------- --------
Total charge (gain) from nonrecurring items $ 12.1 $(228.0)
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Income statement detail:
Three Months Ended Nine Months Ended
------------------ -----------------
Feb. 25, Feb. 27, Feb. 25, Feb. 27,
2001 2000 2001 2000
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Interest income, net
--------------------
Interest income $ 14.6 $ 8.1 $ 46.4 $ 21.6
Interest expense (1.2) (3.3) (3.7) (16.6)
------- ------ ------- -------
Interest income, net $ 13.4 $ 4.8 $ 42.7 $ 5.0
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Other income, net
-----------------
Net intellectual property income $ 0.9 $ 3.7 $ 5.4 $ 10.6
Gain on investments, net 2.0 224.0 40.8 272.5
Other 0.1 - 2.7 1.8
------- ------- ------- -------
Total other income, net $ 3.0 $227.7 $ 48.9 $284.9
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