National Semiconductor Reports Results for First Quarter Fiscal 2011

- Q1 sales of $412 million increased 3% from Q4 of fiscal 2010 and 31% from last year's Q1

- GAAP earnings per share of 36 cents was up from 33 cents in Q4 and 13 cents in Q1 of fiscal 2010

- Gross margin of 70.9% increased from 68.8% in Q4 and 61.1% in Q1 of fiscal 2010

- Sales outlook for Q2 of fiscal 2011 expected to be $390 million to $415 million (flat to down 5 percent)

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Sep 09, 2010, 04:00 ET

SANTA CLARA, Calif., Sept. 9 /PRNewswire-FirstCall/ -- National Semiconductor Corp. (NYSE: NSM) today reported sales of $412.0 million and net income of $88.8 million, or 36 cents per diluted share, for the first quarter of fiscal 2011, which ended Aug. 29, 2010.

National's first quarter sales were 3 percent higher sequentially from the $398.5 million in sales reported in the fourth quarter of fiscal 2010, and 31 percent higher than the $314.4 million reported in the first quarter of fiscal 2010. First quarter fiscal 2011 sales increased sequentially due primarily to demand from wireless handset and industrial markets, the two largest markets served by National.

First quarter net income of $88.8 million, or 36 cents per diluted share, was an increase from the $79.2 million, or 33 cents per diluted share, in the fourth quarter of fiscal 2010. National reported net income of $29.8 million, or 13 cents per diluted share, in the first quarter of fiscal 2010.

First quarter gross margin of 70.9 percent set a new record for the company, driven by improved manufacturing cost efficiencies from higher capacity utilization and benefits from manufacturing consolidation completed in the fourth quarter of fiscal 2010. National reported gross margin of 68.8 percent in the fourth quarter of fiscal 2010 and 61.1 percent in the first quarter of fiscal 2010.

"Our business model is working well with another quarter of revenue growth, 70 percent gross margins and over 36 percent operating margins," said Don Macleod, National's chairman and chief executive officer. "However, in the near term, slower growth in our end markets and distribution channel, along with some likely inventory reduction, will mute the seasonal growth that we would normally see in our business during this time of the year."

Bookings for Q1, Fiscal 2011

In the first quarter of fiscal 2011, National's total company bookings decreased 10 percent sequentially, primarily from the company's distribution channel. However, order rates improved slightly in the quarter for analog and power management products for the personal mobile device and communications infrastructure markets.

Notable Items in Q1

First quarter fiscal 2011 results included a $9.8 million pre-tax restructuring charge related to process transfers and shutdown activity for a previously announced manufacturing consolidation.

Outlook for Q2, Fiscal 2011

For the second quarter of fiscal 2011, National projects revenues to be between $390 million to $415 million, or flat to a decrease of 5 percent, compared to the first quarter of fiscal 2011.

Dividend Increases to $0.10 Per Share

As announced on July 14, 2010, the Board of Directors declared an increase of National's cash dividend to $0.10 per outstanding share of common stock from the previous dividend of $0.08 per share. The dividend will be paid on Oct. 12, 2010 to shareholders of record at the close of business on Sept. 20, 2010.

Special Note

This release contains forward-looking statements dependent on a number of risks and uncertainties pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Except for historical information contained herein, the matters set forth in this press release, including management's expectations regarding future performance, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks and uncertainties include, but are not restricted to, such factors as new orders received and shipped during the quarter, the degree of factory utilization, the sale of inventories at existing prices, and the ramp up and sale of new analog products. Other risk factors are included in the company's annual report on Form 10-K for the fiscal year ended May 30, 2010 under the captions "Outlook," "Risk Factors" and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" contained therein.

About National Semiconductor

National Semiconductor is a leader in power management technology. Known for its easy-to-use analog integrated circuits and world-class supply chain, National's high-performance analog products enable its customers' systems to be more energy efficient. Headquartered in Santa Clara, Calif., National reported sales of $1.42 billion for fiscal 2010. Additional information is available at www.national.com.

Media Contact:	Financial:
LuAnn Jenkins	Mark Veeh
(408) 721-2440	(408) 721-5007
[email protected]	[email protected]

NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In millions, except per share amounts)
	Q1 FY11			Q4 FY10			Q1 FY10
	Three Months Ended
	Aug. 29, 2010			May 30, 2010			Aug. 30, 2009

Net sales	$	412.0		$	398.5		$	314.4
Cost of sales		120.0			124.2			122.2
Gross margin		292.0			274.3			192.2

Research and development		71.3			70.2			65.3
Selling, general and administrative		70.0			81.3			73.0
Severance and restructuring expenses		9.8			7.3			5.7
Other operating expense (income), net		0.1			(0.1)			(2.0)

Operating expenses		151.2			158.7			142.0

Operating income		140.8			115.6			50.2

Interest income		0.6			0.5			0.5
Interest expense		(13.0)			(14.8)			(15.7)
Other non-operating (expense) income, net		(2.4)			(4.8)			3.3

Income before taxes		126.0			96.5			38.3
Income tax expense		37.2			17.3			8.5
Net income	$	88.8		$	79.2		$	29.8

Earnings per share:
Basic	$	0.37		$	0.33		$	0.13
Diluted	$	0.36		$	0.33		$	0.13


Selected income statement ratios as a percentage of sales:

Gross margin		70.9	%		68.8	%		61.1	%
Research and development		17.3	%		17.6	%		20.8	%
Selling, general and administrative		17.0	%		20.4	%		23.2	%
Net income		21.6	%		19.9	%		9.5	%

Effective tax rate		29.5	%		17.9	%		22.2	%


Percentage change in selected items: Increase	Q1 FY11 vs Q4 FY10		Q1 FY11 vs Q1 FY10

Net sales	3.4	%	31.0	%
Net income	12.1	%	198.0	%
Diluted earnings per share	9.1	%	176.9	%

NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions)
	Aug. 29, 2010		May 30, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	778.7	$	1,027.0
Receivables		114.2		98.2
Inventories		126.7		118.6
Deferred tax assets		69.7		70.3
Other current assets		150.5		156.8

Total current assets		1,239.8		1,470.9

Net property, plant and equipment		401.9		390.1
Goodwill		68.3		66.1
Deferred tax assets, net		244.4		245.5
Other assets		114.3		102.2
Total assets	$	2,068.7	$	2,274.8

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	27.7	$	276.5
Accounts payable		56.5		49.8
Accrued expenses		146.0		204.5
Income taxes payable		33.3		17.6

Total current liabilities		263.5		548.4

Long-term debt		1,013.6		1,001.0
Long-term income taxes payable		179.9		175.3
Other non-current liabilities		127.7		124.2

Total liabilities		1,584.7		1,848.9

Commitments and contingencies

Shareholders' equity:
Common stock of $0.50 par value		119.8		119.5
Additional paid-in-capital		200.9		188.3
Retained earnings		296.0		250.3
Accumulated other comprehensive loss		(132.7)		(132.2)

Total shareholders' equity		484.0		425.9
Total liabilities and shareholders' equity	$	2,068.7	$	2,274.8

NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions)

	Three Months Ended
		Aug. 29, 2010		Aug. 30, 2009
Cash flows from operating activities:
Net income	$	88.8	$	29.8
Adjustments to reconcile net income with net cash provided by operating activities:
Depreciation and amortization		19.5		24.3
Share-based compensation		13.5		13.8
Excess tax benefit from share-based payment arrangements		(0.4)		(0.1)
Tax expense associated with stock options		(4.7)		(2.5)
Gain on investments		-		(3.3)
Non-cash restructuring recovery		-		(0.1)
(Gain) loss on disposal of equipment		(1.4)		0.7
Impairment of equipment and other assets		3.2		-
Other, net		3.8		1.7
Changes in certain assets and liabilities, net:
Receivables		(16.0)		(14.4)
Inventories		(7.7)		11.1
Other current assets		(2.8)		(8.0)
Accounts payable and accrued expenses		(75.6)		(10.9)
Current and deferred income taxes		21.7		(18.8)
Other non-current liabilities		3.3		8.3
Net cash provided by operating activities		45.2		31.6
Cash flows from investing activities:
Purchase of property, plant and equipment		(23.4)		(5.9)
Proceeds from sale of property, plant and equipment		4.1		-
Business acquisition, net of cash acquired		(4.1)		-
Funding of benefit plan		(2.6)		(0.5)
Redemption and net realized gains/losses of benefit plan		0.4		1.4
Other, net		-		(0.2)
Net cash used in investing activities		(25.6)		(5.2)
Cash flows from financing activities:
Repayment of bank borrowing		(250.0)		(15.6)
Payment on software license obligations		(3.2)		(3.2)
Excess tax benefit from share-based payment arrangements		0.4		0.1
Minimum tax withholding paid on behalf of employees for net share settlements		(0.1)		(1.4)
Issuance of common stock		4.1		46.2
Cash dividends declared and paid		(19.1)		(18.7)
Net cash (used in) provided by financing activities		(267.9)		7.4
Net change in cash and cash equivalents		(248.3)		33.8
Cash and cash equivalents at beginning of period		1,027.0		700.3
Cash and cash equivalents at end of period	$	778.7	$	734.1

PART I. FINANCIAL INFORMATION EARNINGS PER SHARE (Unaudited) (In millions, except per share amounts)
		Q1 FY11		Q4 FY10		Q1 FY10
	Three Months Ended
		Aug. 29, 2010		May 30, 2010		Aug. 30, 2009

Net income used in basic and diluted
earnings per share calculation		$	88.8	$	79.2	$	29.8

Earnings per share:
Basic		$	0.37	$	0.33	$	0.13
Diluted		$	0.36	$	0.33	$	0.13

Weighted-average shares outstanding:
Basic			238.8		238.0		233.6
Diluted			244.6		243.6		237.9

OTHER FINANCIAL STATEMENT DETAIL (In millions)
		Q1 FY11		Q4 FY10		Q1 FY10
	Three Months Ended
		Aug. 29, 2010		May 30, 2010		Aug. 30, 2009

Other operating expense (income), net:
Net intellectual property income		$	-	$	(0.3)	$	-
Litigation settlement			-		0.2		(2.0)
Other			0.1		-		-
Total other operating expense (income), net		$	0.1	$	(0.1)	$	(2.0)

Other non-operating (expense) income, net:
(Loss) gain on investments		$	-	$	(0.5)	$	3.3
Loss on extinguishment of debt			-		(2.1)
Net loss on derivative instrument in fair
value hedge			(2.4)		(2.2)		-
Total other non-operating (expense) income, net		$	(2.4)	$	(4.8)	$	3.3