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National Semiconductor Reports $404 million Revenues for Third Quarter;
Projects 4 to 7 Percent Sequential Increase for Fourth Quarter Sales
March 6, 2003 - National Semiconductor Corporation (NYSE:NSM) today reported revenues of $404.3 million for the third quarter of fiscal 2003, which ended February 23, 2003, and recorded a net loss of $36.4 million, or 20 cents a share. The third quarter net loss included $13.8 million of R&D expense for writedowns of technology licenses and $17.0 million of special items primarily for severances related to the workforce reduction that the company announced on Feb. 20, 2003. Without these two items, the net loss would have been $5.6 million, or 3 cents a share.
| Summary of results |
| 3 months ended: |
February 23, 2003 |
February 24 , 2002 |
Net sales
Net loss as reported
Net loss per diluted share
as reported
Net loss excluding license
writedowns and special
items
Net loss per diluted share
excluding license
writedowns and special
items |
$ 404.3
$ (36.4)
$ (0.20)
$ (5.6)
$ (0.03) |
$ 369.5
$ (37.8)
$ (0.21)
--
-- |
|
All figures in millions of dollars, except per share amounts |
National's third quarter sales represented a 9 percent increase over last year's third quarter, when the company reported a loss of $37.8 million, or 21 cents per share on revenues of $369.5 million. On a sequential basis, third quarter revenues seasonally declined 4 percent from the second quarter, which was within the guidance range provided at the beginning of the quarter. "Bookings picked up in the quarter, especially in our analog businesses," said Brian L. Halla, chairman, president and CEO of National Semiconductor. "The improved analog orders were led by our power management, amplifier and audio products, as well as by National's continued penetration at key market-leading handset customers."
National Semiconductor's third quarter orders rose 3 percent over the November quarter and 5 percent year-to-year. After a seasonal drop in December, bookings grew month to month for the remainder of the quarter. Analog order rates outperformed the company averages, led by double-digit growth in power management circuits and integrated audio amplification circuits. Both improvements were driven by content gains in wireless handsets and other portable devices. Orders for advanced I/O products that go into notebook computers and servers also increased from the second quarter.
North America bookings dropped seasonally, while all other regions improved sequentially and year-to-year. Bookings exceeded billings in all regions.
Outlook for Q4
National's guidance is for fourth quarter revenues to increase by 4 to 7 percent over the third quarter, which equates to a range of approximately $420 to $432 million. Gross margins are also expected to improve over the third quarter, while both R&D and SG& A expenses are expected to decrease.
"During the quarter we took major steps to reposition the company for greater profitability and announced plans to sell two of our businesses," Halla said. "When we complete these actions, our operating expenses will decline even further from our fourth quarter guidance levels, while the loss of revenue contribution will be relatively minor. These actions are consistent with our focus on driving higher returns sooner."
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 at existing prices, and the ramp up of recently introduced products. Other risk factors are included in the company's 10-Q from the second quarter ended November 24, 2002, and the 10-K for the year ended May 26, 2002 (see the Outlook section of Management's Discussion and Analysis of Results of Operations and Financial Conditions) and the Annual Report dated May 26, 2002.
About National Semiconductor
National Semiconductor is the premier analog company driving the information age. Combining real-world analog and state-of-the-art digital technology, the company is focused on analog-based semiconductor products, which include stand-alone devices and subsystems in the areas of power management, imaging, display drivers, audio, amplifiers and data conversion. The company targets key markets such as wireless, displays, information infrastructure and a broad range of portable applications. With headquarters in Santa Clara, California, National reported sales of $1.5 billion for its most recent fiscal year. 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 Nine Months Ended
------------------ -------------------
Feb. 23, Feb. 24, Feb. 23, Feb. 24,
2003 2002 2003 2002
------- ------- -------- --------
Net sales $ 404.3 $ 369.5 $1,247.2 $1,075.3
Operating costs and expenses:
Cost of sales 231.8 236.2 711.3 702.4
Research and development 119.7 110.3 337.5 329.7
Selling, general and
administrative 66.8 64.5 205.0 193.8
Special items 17.0 - 17.7 1.1
------- ------- -------- --------
Total operating costs
and expenses 435.3 411.0 1,271.5 1,227.0
------- ------- -------- --------
Operating loss (31.0) (41.5) (24.3) (151.7)
Interest income, net 3.3 4.3 11.0 16.8
Other income (expense), net (6.2) 1.9 (8.1) 3.4
------- ------- -------- --------
Loss before income taxes (33.9) (35.3) (21.4) (131.5)
Income tax expense 2.5 2.5 7.5 7.5
------- ------- -------- --------
Net loss $ (36.4) $ (37.8) $ (28.9) $ (139.0)
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Net loss per share:
Basic $ (0.20) $ (0.21) $ (0.16) $ (0.79)
Diluted $ (0.20) $ (0.21) $ (0.16) $ (0.79)Selected income statement ratios as a percentage of sales:
Gross margin 42.7% 36.1% 43.0% 34.7%
Research and development,
excluding IPR&D charge 29.6% 29.9% 27.1% 30.7%
Selling, general and
administrative 16.5% 17.5% 16.4% 18.0%
Net loss (9.0%) (10.2%) (2.3%) (12.9%)
Effective tax rate N/A N/A N/A N/A NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
Feb. 23, May 26,
2003 2002
ASSETS -------- --------
Current assets:
Cash and cash equivalents $ 759.2 $ 681.3
Short-term marketable debt securities 100.2 153.1
Receivables, net 137.2 131.7
Inventories 147.9 145.0
Deferred tax assets 58.7 58.7
Other current assets 26.7 38.3
-------- --------
Total current assets 1,229.9 1,208.1
Net property, plant and equipment 707.7 737.1
Long-term marketable debt securities - 10.0
Goodwill 173.3 173.3
Other assets 128.0 160.3
-------- --------
Total assets $2,238.9 $2,288.8
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 3.2 5.5
Accounts payable 96.5 123.7
Accrued expenses 220.4 226.7
Income taxes payable 55.2 47.9
-------- --------
Total current liabilities 375.3 403.8
Long-term debt 19.9 20.4
Other non-current liabilities 95.2 83.5
-------- --------
Total liabilities 490.4 507.7
-------- --------
Commitments and contingencies
Shareholders' equity:
Common stock 91.2 90.2
Additional paid-in capital 1,431.9 1,402.5
Retained earnings 281.6 310.5
Accumulated other comprehensive loss (56.2) (22.1)
-------- --------
Total shareholders' equity 1,748.5 1,781.1
-------- --------
Total liabilities and shareholders' equity $2,238.9 $2,288.8
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NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended
----------------------
Feb. 23, Feb. 24,
2003 2002
------- -------
Cash flows from operating activities:
Net loss $ (28.9) $(139.0)
Adjustments to reconcile net loss
with net cash provided by operating activities:
Depreciation, amortization and accretion 172.1 171.5
Net gain(loss)on investments 1.8 (6.9)
Writedowns of R&D technology licenses 13.8 -
Loss on disposal of equipment 2.1 3.1
Noncash special items 1.1 1.1
Other, net 0.9 0.2
Changes in certain assets and liabilities, net:
Receivables (5.4) (1.9)
Inventories (2.9) 50.0
Other current assets (0.5) (3.7)
Accounts payable and accrued expenses (33.5) (71.9)
Current and deferred income taxes 7.3 25.7
Other noncurrent liabilities 9.8 5.6
------- -------
Net cash provided by operating activities 137.7 33.8
------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (137.1) (106.2)
Sale and maturity of available-for-sale securities 577.1 39.5
Purchase of available-for-sale securities (515.1) (160.1)
Sale of investments 16.6 8.7
Sale of equipment 2.3 -
Business acquisitions, net of cash acquired (11.0) (27.5)
Purchase of nonmarketable investments (16.3) (13.1)
Funding of benefit plan (3.3) (14.7)
Other, net 2.9 2.8
------- -------
Net cash used by investing activities (83.9) (270.6)
------- -------
Cash flows from financing activities:
Repayment of debt (4.5) (14.1)
Issuance of common stock, net 28.6 87.2
------- -------
Net cash provided by financing activities 24.1 73.1
------- -------
Net change in cash and cash equivalents 77.9 (163.7)
Cash and cash equivalents at beginning of period 681.3 817.8
------- -------
Cash and cash equivalents at end of period $ 759.2 $ 654.1
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EARNINGS PER SHARE (Unaudited)
(in millions, except per share amounts)
Three Months Ended Nine Months Ended
------------------ -----------------
Feb. 23, Feb. 24, Feb. 23, Feb. 24,
2003 2002 2003 2002
------- ------- ------- -------
Net loss per share:
Basic $(0.20) $(0.21) $(0.16) $(0.79)
Diluted $(0.20) $(0.21) $(0.16) $(0.79)
Weighted-average shares:
Basic 182.1 178.4 181.4 176.7
Diluted 182.1 178.4 181.4 176.7
Net loss used in basic and
diluted earnings per
common share calculation $(36.4) $(37.8) $(28.9) $(139.0)
RECONCILIATION OF NET LOSS AS REPORTED TO NET LOSS EXCLUDING
LICENSE WRITEDOWNS AND SPECIAL ITEMS
(in millions)
Three Months Ended
-----------------
Feb. 23,
2003
-----------------
Net loss as reported $ (36.4)
Add back:
Special items - Cost reduction charge 17.0
Writedowns of technology licenses 13.8
-----------------
Net loss excluding license writedowns
and special items $ (5.6)
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NOTES TO FINANCIAL STATEMENTS:
(in millions)
Three Months Ended Nine Months Ended
------------------ -----------------
Feb. 23, Feb. 24, Feb. 23, Feb. 24,
2003 2002 2003 2002
------- ------- ------- -------
Special items
-------------
In-process reseach and
development charges $ - $ - $ 0.7 $ 1.1
Cost reduction charge 17.0 - 17.0 -
------- ------- ------- -------
Total special items $ 17.0 $ - $ 17.7 $ 1.1
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Interest income, net
--------------------
Interest income $ 3.7 $ 5.3 $ 12.3 $ 20.1
Interest expense (0.4) (1.0) (1.3) (3.3)
------- ------- ------- -------
Interest income, net $ 3.3 $ 4.3 $ 11.0 $ 16.8
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Other income(expense), net
-----------------
Net intellectual property income $ 0.1 $ 1.0 $ 4.2 $ 2.7
Gain(loss) on investments, net (6.3) 0.9 (12.3) 1.3
Other - - - (0.6)
------- ------- ------- -------
Total other income(expense),net $ (6.2) $ 1.9 $ (8.1) $ 3.4
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