- Q2 sales were $422 million, down 9% from Q1 of fiscal 2009 and down 15% from Q2 of fiscal 2008 - Gross margin percentage of 65.6%, down from 66.0% in Q1 and up from 64.4% in last year's Q2 - Diluted EPS of 14 cents, down from the 33 cents reported in Q1 of fiscal 2009 and the 33 cents in last year's Q2 - Sales outlook for Q3 of fiscal 2009 expected to be down approximately 30 percent
Compared to last year, sales decreased approximately 15 percent from the $499.0 million reported in the second quarter of fiscal 2008, and earnings per diluted share declined from the 33 cents recorded one year ago. Gross margin increased from the 64.4 percent reported in the second quarter of fiscal 2008.
Notable Items in Q2, Fiscal 2009 Results
Included in second quarter fiscal 2009 results were approximately $28 million of pre-tax severance and restructuring expenses related primarily to a previously announced action, and approximately $7 million of discrete income tax expenses, which consisted primarily of a write-down of foreign deferred taxes, offset partially by tax benefits associated with the recent restoration of the federal R&D tax credit.
Bookings for Q2, Fiscal 2009
During the second quarter of fiscal year 2009, total bookings decreased by 33 percent compared to the first fiscal quarter. New order rates fell significantly from customers in the wireless handset market (which represents about one third of National's sales) as well as from distributors, which service a large number of customers across a broad range of industries and markets. Regionally, the second quarter bookings decline was most prominent in Asia Pacific and Europe. Total company billings exceeded bookings in the second quarter.
Outlook for Q3, Fiscal 2009
National anticipates that sales in the third quarter of fiscal 2009 will be down sequentially by approximately 30 percent depending on turns orders received in the quarter. The sales outlook is being impacted by significantly lower-than-usual demand levels in the post-holiday season, especially for personal mobile devices. In addition, the company expects gross margins to decline as the company plans to significantly lower its manufacturing activity in the third quarter of fiscal 2009.
Stock Repurchase and Cash Balances
During the second quarter of fiscal 2009, the company repurchased approximately $23 million of stock under its stock buyback program. As of the end of the second quarter of fiscal 2009, National had approximately $127 million of authorization still available under an approved program for future stock repurchases. National Semiconductor's fully diluted weighted average share count for the second quarter of fiscal of 2009 was 234 million shares, down from 241 million shares in the first quarter of fiscal 2009. The company ended the second quarter of fiscal 2009 with approximately $786 million in cash and cash equivalents which was up from the approximately $693 million that the company had at the end of the previous quarter.
Dividend Declaration
The company had previously announced on September 25, 2008 that the Board of Directors had declared a cash dividend of $0.08 per outstanding share of common stock and that the dividend will be paid on Jan. 5, 2009 to shareholders of record at the close of business on Dec. 15, 2008.
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 25, 2008 under the captions "Outlook", "Risk Factors" and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" contained therein and the 10-Q for the quarter ended Aug. 24, 2008.
About National Semiconductor
National Semiconductor creates energy-efficient analog and mixed-signal semiconductors. Its PowerWise(R) products enable systems that consume less power, extend battery life, and generate less heat. Headquartered in Santa Clara, Calif., National reported sales of $1.89 billion for fiscal 2008 which ended May 25, 2008. Additional company and product information is available at http://www.national.com.
Media Contact: Financial:
LuAnn Jenkins Mark Veeh
National Semiconductor National Semiconductor
(408) 721-2440 (408) 721-5007
luann.jenkins@nsc.com invest.group@nsc.com
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In millions, except per share amounts)
Three Months Ended Six Months Ended
Nov. 23, Nov. 25, Nov. 23, Nov. 25,
2008 2007 2008 2007
Net sales $421.6 $499.0 $887.2 $970.5
Cost of sales 144.9 177.8 303.3 352.4
Gross margin 276.7 321.2 583.9 618.1
Research and development 93.5 91.9 183.1 185.7
Selling, general and
administrative 70.6 82.8 152.4 158.3
Severance and restructuring
expenses (recovery) 28.1 - 29.2 (1.5)
Other operating (income)
expense, net (0.1) 2.7 (0.2) (0.4)
Operating expenses, net 192.1 177.4 364.5 342.1
Operating income 84.6 143.8 219.4 276.0
Interest income 3.8 10.1 7.6 21.3
Interest expense (18.7) (23.7) (37.0) (43.3)
Other non-operating expense,
net (12.3) (0.8) (15.1) (1.9)
Income before taxes 57.4 129.4 174.9 252.1
Income tax expense 23.5 38.8 61.4 75.9
Net income $33.9 $90.6 $113.5 $176.2
Earnings per share:
Basic $0.15 $0.35 $0.50 $0.67
Diluted $0.14 $0.33 $0.48 $0.63
Selected income statement
ratios as a percentage of
sales:
Gross margin 65.6% 64.4% 65.8% 63.7%
Research and development 22.2% 18.4% 20.6% 19.1%
Selling, general and
administrative 16.7% 16.6% 17.2% 16.3%
Net income 8.0% 18.2% 12.8% 18.2%
Effective tax rate 40.9% 30.0% 35.1% 30.1%
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions)
Nov. 23, May 25,
2008 2008
ASSETS
Current assets:
Cash and cash equivalents $785.9 $736.8
Receivables 125.9 137.3
Inventories 154.5 148.6
Deferred tax assets 82.6 82.9
Other current assets 36.4 66.0
Total current assets 1,185.3 1,171.6
Net property, plant and equipment 559.3 557.3
Goodwill 60.5 60.5
Deferred tax assets 236.5 247.5
Other assets 108.2 112.2
Total assets $2,149.8 $2,149.1
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $62.5 $62.5
Accounts payable 61.9 53.5
Accrued expenses 187.9 180.3
Income taxes payable 11.6 12.3
Total current liabilities 323.9 308.6
Long-term debt 1,383.4 1,414.8
Long-term income taxes payable 155.9 143.4
Other non-current liabilities 75.9 85.4
Total liabilities 1,939.1 1,952.2
Commitments and contingencies
Shareholders' equity:
Common stock of $0.50 par value 114.7 116.3
Additional paid-in-capital 7.4 -
Retained earnings 175.9 167.4
Accumulated other comprehensive loss (87.3) (86.8)
Total shareholders' equity 210.7 196.9
Total liabilities and shareholders' equity $2,149.8 $2,149.1
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
Six Months Ended
Nov. 23, Nov. 25,
2008 2007
Cash flows from operating activities:
Net income $113.5 $176.2
Adjustments to reconcile net income with net
cash provided by operating activities:
Depreciation and amortization 61.5 65.4
Share-based compensation 35.5 47.6
Excess tax benefit from share-based payment
arrangements (4.3) (13.0)
Tax benefit associated with stock options 6.5 22.2
Loss on investments 15.1 1.7
Gain on disposal of equipment (0.6) (0.5)
Other, net 0.4 0.5
Changes in certain assets and liabilities, net:
Receivables 8.9 (38.9)
Inventories (5.7) 26.6
Other current assets 0.4 15.6
Accounts payable and accrued expenses (1.2) 17.6
Current and deferred income taxes 48.8 14.2
Other non-current liabilities (24.8) (25.1)
Net cash provided by operating activities 254.0 310.1
Cash flows from investing activities:
Purchase of property, plant and equipment (55.1) (52.5)
Proceeds from sale of property, plant, and
equipment 0.6 16.0
Proceeds from sale of investments - 0.2
Funding of benefit plan (0.5) (5.1)
Other, net - (2.6)
Net cash used in investing activities (55.0) (44.0)
Cash flows from financing activities:
Proceeds from unsecured senior notes, net of
issuance costs - 992.9
Proceeds from bank borrowings, net of issuance
costs - 1,996.5
Repayment of bank borrowing (31.4) (1,515.6)
Payment on software license obligations - (8.4)
Excess tax benefit from share-based payment
arrangements 4.3 13.0
Minimum tax withholding paid on behalf of
employees for net share settlements (0.2) (14.1)
Issuance of common stock 33.5 76.3
Purchase and retirement of treasury stock (128.4) (1,780.1)
Cash dividends declared and paid (27.7) (21.3)
Net cash used in financing activities (149.9) (260.8)
Net change in cash and cash equivalents 49.1 5.3
Cash and cash equivalents at beginning of period 736.8 828.6
Cash and cash equivalents at end of period $785.9 $833.9
PART I. FINANCIAL INFORMATION
EARNINGS PER SHARE (Unaudited)
(In millions, except per share amounts)
Three Months Ended Six Months Ended
Nov. 23, Nov. 25, Nov. 23, Nov. 25,
2008 2007 2008 2007
Earnings per share:
Basic $0.15 $0.35 $0.50 $0.67
Diluted $0.14 $0.33 $0.48 $0.63
Net income used in basic
and diluted earnings per
share calculation $33.9 $90.6 $113.5 $176.2
Weighted-average shares
outstanding:
Basic 228.0 258.9 228.9 264.5
Diluted 234.0 271.5 237.6 277.7
OTHER FINANCIAL STATEMENT DETAIL
(In millions)
Three Months Ended Six Months Ended
Other operating (income) Nov. 23, Nov. 25, Nov. 23, Nov. 25,
expense, net 2008 2007 2008 2007
Net intellectual property
income $(0.1) $(0.1) $(0.2) $(0.1)
Gain on sale of manufacturing
plant assets - - - (3.1)
Litigation settlement - 3.3 - 3.3
Other - (0.5) - (0.5)
Total other operating
(income) expense, net $(0.1) $2.7 $(0.2) $(0.4)
Other non-operating
expense, net
Trading securities:
Change in net unrealized
holding losses $(12.3) $(0.8) $(15.1) $(1.9)
Non-marketable investments:
Gain from sale - 0.2 - 0.2
Charitable contribution - (0.2) - (0.2)
Total other non-operating
expense, net $(12.3) $(0.8) $(15.1) $(1.9)
Share-based compensation
expense $16.1 $27.6 $35.5 $47.6
Web site: http://www.national.com/