National Semiconductor Corporation (National Semiconductor) has reported net sales of $292.4 million for the third quarter of fiscal 2009, down 36%, compared with the net sales of $453.4 million in the year-ago quarter. It has also reported a net income of $21 million, or $0.09 per diluted share, for the third quarter of fiscal 2009, compared with the net income of $72.9 million, or $0.29 per diluted share, in the year-ago quarter.
Gross margin of 57.5% in National’s third quarter of fiscal 2009 was down from the 65.8% gross margin achieved in the second quarter of fiscal 2009. Gross margin decreased from the 64.3% reported in the third quarter of fiscal 2008.
Notable Items in Q3, Fiscal 2009 Results:
Third quarter fiscal 2009 results included about $11 million of discrete income tax benefits, primarily due to the realization of deferred taxes associated with a former equity investment. In addition, since company’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.
Bookings for Q3, Fiscal 2009:
In the third quarter of fiscal year 2009, total bookings decreased by about 25% compared to the second quarter 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 third quarter bookings decline was seen broadly across all major geographies. Total company billings exceeded bookings in the third quarter.
Outlook for Q4, Fiscal 2009:
National Semiconductor expects sales in the fourth quarter of fiscal 2009 to decrease sequentially by 5 to 10% as the company’s distribution channel continues to be negatively impacted by the weak economy.
Company Announces Plan to Re-align Spending and Consolidate Manufacturing:
In response to economic conditions and related business levels, National will take actions in the fourth quarter of fiscal 2009 to reduce overall expenses and shift more of its R&D investments towards new and emerging growth opportunities. As part of the plan, the company will eliminate about 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, for all of the actions discussed above, 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 fourth quarter 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% of the company’s workforce.
“The worldwide recession has impacted National’s business as demand has fallen considerably,” said Brian L. Halla, chairman and chief executive officer. “However, the actions we announced today will help us remain competitive as we continue to focus on growing markets that can benefit from our new energy-efficiency initiatives.