National Semiconductor Reports Results for Fourth Quarter Fiscal 2011

- Q4 sales of $374.1 million increased 9% from Q3 of fiscal 2011 and decreased 6% from Q4 of fiscal 2010

- Gross margin of 66.5% was flat with Q3 and down from 68.8% in Q4 of fiscal 2010

- GAAP earnings per share of 26 cents was up from 24 cents in Q3 and down from 33 cents in last year's Q4

- Q4 results include about $14 million of merger-related expenses and an increase in diluted share count of 9 million shares

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National Semiconductor Corp.

Jun 09, 2011, 04:00 ET

SANTA CLARA, Calif., June 9, 2011 /PRNewswire/ -- National Semiconductor Corp. (NYSE:NSM) today reported sales of $374.1 million and net income of $67.1 million, or 26 cents per diluted share, for the fourth quarter of fiscal 2011, which ended May 29, 2011.

National's fourth quarter sales were 9 percent higher than the third quarter of fiscal 2011, when the company reported $343.9 million in sales, and 6 percent lower than the $398.5 million reported in the fourth quarter of fiscal 2010. Increased sales to the broad-based industrial power market, primarily through the distribution channel, and improvements in the automotive and the communications infrastructure areas more than offset flat sales in our wireless handset business and Japan sales that were lower due to the effects of the March earthquake and tsunami.

Fourth quarter net income of $67.1 million, or 26 cents per diluted share, was an increase from the $59.4 million, or 24 cents per diluted share, in the third quarter of fiscal 2011. In last year's fourth quarter, National reported net income of $79.2 million, or 33 cents per diluted share.

Gross margin was 66.5 percent in the fourth quarter of fiscal 2011 – flat with Q3 and down from the fourth quarter of fiscal 2010. Although revenue increased sequentially, factory utilization dropped slightly in order to reduce days of inventory by 13 in the fourth quarter from 109 days to 96. National reported gross margin of 66.5 percent in the third quarter of fiscal 2011 and 68.8 percent in the fourth quarter of fiscal 2010.

"Business conditions were a little better than we expected in the quarter," said Don Macleod, National's chief executive officer. "With bookings up 21%, the first increase for three quarters, we were able to get back to meaningful quarterly revenue growth."

Merger Agreement Announced During Q4, Fiscal 2011

On April 4, 2011 it was announced that National had entered into a definitive agreement to be acquired by Texas Instruments Incorporated for $25 per share in an all-cash transaction. Our fourth quarter fiscal 2011 results included approximately $14 million of expenses attributable to the planned merger. Nearly all of these costs are included in SG&A expenses.

In addition, our weighted average share count increased from 247 million diluted shares in the third quarter to 256 million diluted shares in the fourth quarter of fiscal 2011. This increase was driven by a number of outstanding stock options that were exercised subsequent to the April 4, 2011 announcement. Also, under the terms of the merger agreement, National will not be declaring or paying any further dividends during the pendency of the merger transaction. National will hold a special meeting of stockholders on June 21, 2011 to seek stockholder approval of the merger with Texas Instruments. The completion of the merger is also subject to regulatory approval from various international jurisdictions.

Summary of Full Year Fiscal 2011

For fiscal 2011, National reported sales of $1.52 billion and net income of $298.8 million or $1.20 per diluted share. In fiscal 2010, National reported sales of $1.42 billion and net income of $209.2 million or 87 cents per diluted share. Gross margin in fiscal 2011 was 68.3 percent, compared to 65.9 percent in fiscal 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 and the quarterly report on Form 10-Q for the quarter ended Feb. 27, 2011.

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 $1.52 billion for fiscal 2011. Additional information is available at www.national.com.

National Semiconductor is a registered trademark of National Semiconductor Corporation. All other brand or product names are trademarks or registered trademarks of their respective holders.

Media Contact:	Financial:
Lee Ann Schlatter	Mark Veeh
(408) 721-7680	(408) 721-5007
[email protected]	[email protected]

NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In millions, except per share amounts)
	Q4 FY11			Q3 FY11			Q4 FY10			YTD 2011			YTD 2010
	Three Months Ended									Twelve Months Ended
	May 29, 2011			Feb. 27, 2011			May 30, 2010			May 29, 2011			May 30, 2010

Net sales	$	374.1		$	343.9		$	398.5		$	1,520.4		$	1,419.4
Cost of sales		125.3			115.2			124.2			482.0			484.2
Gross margin		248.8			228.7			274.3			1,038.4			935.2

Research and development		72.2			65.6			70.2			278.6			272.7
Selling, general and administrative		79.8			63.1			81.3			282.3			317.0
Severance and restructuring expenses		1.1			8.2			7.3			25.6			20.1
Other operating (income) expense, net		(0.2)			0.4			(0.1)			0.3			(0.4)

Operating expenses		152.9			137.3			158.7			586.8			609.4

Operating income		95.9			91.4			115.6			451.6			325.8

Interest income		0.8			0.6			0.5			2.6			1.8
Interest expense		(14.2)			(14.1)			(14.8)			(55.1)			(60.3)
Other non-operating income (expense), net		1.2			1.8			(4.8)			3.9			1.3

Income before taxes		83.7			79.7			96.5			403.0			268.6
Income tax expense		16.6			20.3			17.3			104.2			59.4
Net income	$	67.1		$	59.4		$	79.2		$	298.8		$	209.2

Earnings per share:
Basic	$	0.27		$	0.25		$	0.33		$	1.24		$	0.88
Diluted	$	0.26		$	0.24		$	0.33		$	1.20		$	0.87


Selected income statement ratios as a percentage of sales:

Gross margin		66.5	%		66.5	%		68.8	%		68.3	%		65.9	%
Research and development		19.3	%		19.1	%		17.6	%		18.3	%		19.2	%
Selling, general and administrative		21.3	%		18.3	%		20.4	%		18.6	%		22.3	%
Net income		17.9	%		17.3	%		19.9	%		19.7	%		14.7	%

Effective tax rate		19.8	%		25.5	%		17.9	%		25.9	%		22.1	%


Percentage increase (decrease) in selected items:	Q4 FY11 vs Q3 FY11	Q4 FY11 vs Q4 FY10	YTD FY11 vs YTD FY10

Net sales	8.8%	(6.1%)	7.1%
Net income	13.0%	(15.3%)	42.8%
Diluted earnings per share	8.3%	(21.2%)	37.9%

NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions)
	May 29, 2011		May 30, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	1,093.5	$	1,027.0
Short-term investments		40.0		-
Receivables		81.5		98.2
Inventories		132.0		118.6
Deferred tax assets		64.1		70.3
Other current assets		187.5		156.8

Total current assets		1,598.6		1,470.9

Net property, plant and equipment		421.1		390.1
Goodwill		68.3		66.1
Deferred tax assets, net		209.1		245.5
Other assets		98.2		102.2
Total assets	$	2,395.3	$	2,274.8

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	-	$	276.5
Accounts payable		49.2		49.8
Accrued liabilities		142.1		204.5
Income taxes payable		4.2		17.6

Total current liabilities		195.5		548.4

Long-term debt		1,042.8		1,001.0
Long-term income taxes payable		195.8		175.3
Other non-current liabilities		110.7		124.2

Total liabilities		1,544.8		1,848.9

Commitments and contingencies

Shareholders' equity:
Common stock of $0.50 par value		125.9		119.5
Additional paid-in-capital		391.5		188.3
Retained earnings		457.5		250.3
Accumulated other comprehensive loss		(124.4)		(132.2)

Total shareholders' equity		850.5		425.9
Total liabilities and shareholders' equity	$	2,395.3	$	2,274.8

NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions)
	Twelve Months Ended
		May 29, 2011		May 30, 2010
Cash flows from operating activities:
Net income	$	298.8	$	209.2
Adjustments to reconcile net income with net cash provided by operating activities:
Depreciation and amortization		80.3		91.8
Share-based compensation		52.2		65.4
Excess tax benefit from share-based payment arrangements		(11.0)		(0.3)
Tax benefit (expense) associated with stock options		36.3		(6.8)
Gain on investments		(6.7)		(5.6)
Non-cash restructuring recovery		(1.0)		(8.3)
(Gain) loss on disposal of equipment		(0.5)		0.9
Impairment (recovery) of equipment and other assets		10.0		(1.2)
Loss on extinguishment of debt		-		2.1
Other, net		5.6		7.4
Changes in certain assets and liabilities, net:
Receivables		17.0		(28.2)
Inventories		(13.5)		15.7
Other current assets		(45.8)		(23.1)
Accounts payable and accrued liabilities		(67.3)		59.9
Current and deferred income taxes		16.5		14.6
Other non-current liabilities		2.6		9.4
Net cash provided by operating activities		373.5		402.9
Cash flows from investing activities:
Purchase of property, plant and equipment		(100.0)		(43.3)
Proceeds from sale of property, plant and equipment		4.7		3.1
Purchase of short-term investments		(80.0)		-
Proceeds from maturity of short-term investments		40.0		-
Business acquisition, net of cash acquired		(4.1)		(4.8)
Funding of benefit plan		(3.7)		(1.6)
Redemption of benefit plan		8.6		7.5
Other, net		0.4		(2.6)
Net cash used in investing activities		(134.1)		(41.7)
Cash flows from financing activities:
Proceeds from unsecured senior notes, net of issuance costs		-		244.9
Repayment of debt		(250.0)		(265.6)
Proceeds from liquidation of derivative instrument in fair value hedge		13.0		-
Payment on software license obligations		(6.6)		(6.3)
Excess tax benefit from share-based payment arrangements		11.0		0.3
Minimum tax withholding paid on behalf of employees for net share settlements		(3.5)		(2.0)
Issuance of common stock		154.8		71.2
Cash payments in connection with stock option exchange program		-		(1.3)
Cash dividends declared and paid		(91.6)		(75.7)
Net cash used in financing activities		(172.9)		(34.5)
Net change in cash and cash equivalents		66.5		326.7
Cash and cash equivalents at beginning of year		1,027.0		700.3
Cash and cash equivalents at end of year	$	1,093.5	$	1,027.0

PART I. FINANCIAL INFORMATION EARNINGS PER SHARE (Unaudited) (In millions, except per share amounts)
	Q4 FY11		Q3 FY11		Q4 FY10		YTD 2011		YTD 2010
	Three Months Ended						Twelve Months Ended
	May 29, 2011		Feb. 27, 2011		May 30, 2010		May 29, 2011		May 30, 2010

Net income used in basic and diluted
earnings per share calculation	$	67.1	$	59.4	$	79.2	$	298.8	$	209.2

Earnings per share:
Basic	$	0.27	$	0.25	$	0.33	$	1.24	$	0.88
Diluted	$	0.26	$	0.24	$	0.33	$	1.20	$	0.87

Weighted-average shares outstanding:
Basic		246.9		241.5		238.0		241.8		236.4
Diluted		256.3		247.0		243.6		248.2		241.3

OTHER FINANCIAL STATEMENT DETAIL (In millions)
	Q4 FY11		Q3 FY11			Q4 FY10			YTD 2011		YTD 2010
	Three Months Ended								Twelve Months Ended
	May 29, 2011			Feb. 27, 2011			May 30, 2010		May 29, 2011		May 30, 2010

Other operating (income) expense, net:
Net intellectual property income	$	(0.2)		$	-		$	(0.3)	$	(0.2)	$	(0.3)
Litigation settlement		-			-			0.2		-		(0.3)
Other		-			0.4			-		0.5		0.2
Total other operating (income) expense, net	$	(0.2)		$	0.4		$	(0.1)	$	0.3	$	(0.4)

Other non-operating income (expense), net:
Gain (loss) on investments	$	1.2		$	1.8		$	(0.5)	$	6.7	$	5.6
Loss on extinguishment of debt		-			-			(2.1)		-		(2.1)
Net loss on derivative instrument in fair
value hedge		-			-			(2.2)		(2.1)		(2.2)
Loss on liquidation of derivative instrument
in fair value hedge		-			-					(0.7)
Total other non-operating income (expense), net	$	1.2		$	1.8		$	(4.8)	$	3.9	$	1.3