National reports Q3 income, consolidation plans

National Semiconductor Corp. has reported sales of $292 million and net income of $21.1 million or 9 cents per diluted share, for the Q3 of fiscal 2009, which ended March 1, 2009. In the company's Q2 of fiscal 2009, the company reported $422 million in sales and $36 million in net income or 16 cents per diluted share. Gross margin of 57.5 percent in National's Q3 of fiscal 2009 was down from the 65.8 percent gross margin achieved in Q2 of fiscal 2009.

Compared with last year, sales decreased approximately 36 percent from the $453 million reported in Q3 of fiscal 2008, and earnings per diluted share declined from the 29 cents recorded one year ago. Gross margin decreased from the 64.3 percent reported in Q3 of fiscal 2008.

Q3 fiscal 2009 results included approximately $11 million of discrete income tax benefits, primarily due to the realization of deferred taxes associated with a former equity investment. In addition, since National's fiscal 2009 is a 53-week year, there were 14 weeks in the third fiscal quarter. The fourth fiscal quarter will be a normal 13-week quarter.

In the Q3 of fiscal year 2009, total bookings decreased by approximately 25 percent compared to the Q2 of fiscal 2009. This decline was primarily driven by lower order rates from the distribution channel, which services a large number of customers across a broad range of industries and markets. Regionally, the Q3 bookings decline was seen broadly across all major geographies. Total company billings exceeded bookings in Q3.

National expects sales in Q4 of fiscal 2009 to decrease sequentially by 5 to 10 percent as the company's distribution channel continues to be negatively impacted by the weak economy.

Consolidation plan
In response to economic conditions and related business levels, National will take actions in Q4 of fiscal 2009 to reduce overall expenses, and shift more of its R&D investments toward new and emerging growth opportunities. As part of the plan, the company will eliminate approximately 850 positions worldwide in product lines, sales and marketing, manufacturing and support functions. Notification to affected employees will begin immediately.

As part of the manufacturing consolidation plan, the company will close its assembly and test plant in Suzhou, China, and its wafer fabrication plant in Arlington, Texas. The closures will occur in phases over several quarters, eventually resulting in the elimination of an additional 875 positions. The volume currently being supported by these two facilities will be transferred primarily to other National locations. After the consolidation, National will have three manufacturing facilities: wafer fabrication plants in South Portland, Maine and Greenock, Scotland, and an assembly and test facility in Melaka, Malaysia.

In total, it is estimated that the company will ultimately incur between $160 million and $180 million in charges, consisting of severances, asset impairments and other exit-related costs, of which $130 million to $145 million would likely be recorded in the Q4 of fiscal 2009 and the remainder in ensuing quarters. National currently employs about 6,500 people worldwide, and these actions will result in the elimination of 26 percent of the company's workforce.

"The worldwide recession has impacted National's business as demand has fallen considerably," said Brian Halla, chairman and CEO. "However, the actions we announced will help us remain competitive as we continue to focus on growing markets that can benefit from our new energy-efficiency initiatives."

The company announced that the board of directors has declared a cash dividend of $0.08 per outstanding share of common stock and that the dividend will be paid on April 14, 2009 to shareholders of record at the close of business on March 23, 2009.