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National Semiconductor Posts 23% Year-to-Year Revenue Growth, 61.4% Gross Margin and Earnings of 34 Cents Per Share for Fourth Quarter of Fiscal Year 2006

Gross margin was 61.4%, up from 60.7% in Q3 and 54.7% in Q4 of FY2005

GAAP net income was $118.8 million, compared to $130.1 million in Q3 and $130.2 million in Q4 FY05

Net income includes a one-time tax charge of approximately $25 million associated with repatriation of accumulated foreign earnings, under the American Jobs Creation Act of 2004. This charge reduced EPS by 7 cents

Q1 FY07 revenue projected to be seasonally down 2 to 3%

Jun 8, 2006

June 8, 2006  --  National Semiconductor Corporation (NYSE:NSM) today reported GAAP net income of $118.8 million, or 34 cents per share, on revenues of $572.6 million for the fourth quarter of fiscal 2006, which ended May 28, 2006. 

National’s fourth quarter revenues were 22.6 percent higher than the $467.0 million revenues recorded in the fourth quarter of fiscal 2005, and 4.5 percent higher sequentially than the $547.7 million revenues reported in Q3 FY06. 

National’s gross margin in Q4 FY06 hit an all-time high of 61.4 percent, up from 60.7 percent in Q3 FY06 and 54.7 percent a year ago. This continuing improvement in gross margin is a direct result of the Company's focus on growing its higher-value Analog product portfolio.

"National continues to show improvement in margins," said Brian L. Halla, National’s chairman and CEO. "Our investment in new, value-added analog products, targeting precision, high speed and best power efficiencies, is paying off. These products deliver higher value to our customers and higher margins and sales to National."

Fourth quarter fiscal 2006 net income included a one-time tax charge of $24.5 million related to the repatriation of accumulated foreign earnings, under provisions of the American Jobs Creation Act of 2004. A year ago, National’s fourth quarter net income of $130.2 million, or 36 cents per share,  included an $86.1 million goodwill write-off, a $51.1 million gain from the sale of National’s PC Super/IO business, and a $2.6 million charge for cost reductions (all on a pre-tax basis). In addition, the income taxes in last year’s fourth quarter were a net benefit of $57.0 million due to deferred tax assets.  The impact of these items, assuming a recent historical FY 2005 tax rate of approximately 20 percent, was a positive contribution to net income of $41.6 million or 11 cents per share in Q4 FY05.

Bookings Increased in Q4
National’s fourth quarter bookings were slightly higher compared to the third quarter.  Bookings also exceeded billings in the fourth quarter of fiscal 2006.  Within the company’s various product lines, new orders for data converters and interface products grew at a much higher rate than the overall company average.  Regionally, bookings increased in Europe, Asia Pacific and Japan.  Year-to-year, total company fourth quarter bookings increased 29 percent over last year's fourth quarter.

Outlook for Q1, Fiscal 2007
Based upon current business conditions, National anticipates that Q1 revenues will be seasonally down 2 to 3 percent from fourth quarter revenues.  Much of the anticipated decline is attributable to lower foundry revenues for businesses previously sold.   Commencing in the first quarter of fiscal 2007, National will begin to report stock compensation expenses in accordance with FASB Statement 123(R).  Gross-margin percentage is expected to be similar to the level achieved in Q4.  

Company Declares Dividend
The Company today declared a cash dividend of $0.03 per outstanding share of common stock.  This dividend will be paid July 10, 2006 to shareholders of record at the close of business on June 19, 2006.                                             

Board Authorizes Additional Stock Buy-Back Program
Today, National also announced that the Board has approved an additional $500 million to buy back National’s common stock beyond previously approved stock-repurchase programs.  The Company bought back $200 million of common stock during the fourth quarter and $951 million of stock during the fiscal year.  The diluted weighted average shares outstanding for Q4 fiscal 2006 was 352.3 million shares.

Summary of Fiscal 2006
Annual revenues were $2.16 billion compared to $1.91 billion in FY05 and $1.98 billion for FY04.  For fiscal 2006, the Company reported net income of $449.2 million. This compares to the $415.3 million net profit reported for FY2005 and the $282.8 million net profit reported for FY2004.   Earnings per share for the year were $1.26 compared to $1.11 for fiscal 2005 and 73 cents for fiscal 2004.  National’s increased profitability has been driven by consistent improvement in gross margin as a result of a growing portfolio of higher-value Analog products.  The gross margin was 59.0 percent for fiscal 2006 compared to 53.4 percent in fiscal 2005 and 51.0 percent in fiscal 2004.

"For the year, we achieved 13 percent revenue growth, increased gross margin by 6 points and delivered 25 percent return on invested capital --- our third straight year of better than 20 percent ROIC," said Halla.

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.  These factors include, but are not restricted to, 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 10-K for the year ended May 29, 2005 (see Outlook and Risk Factors sections of Management's Discussion and Analysis of Financial Conditions and Results of Operations) and the 10-Q for the quarter ended February 26, 2006.

About National Semiconductor
National Semiconductor, the industry's premier analog company, creates high-value analog devices and subsystems.  National's leading-edge products include power management circuits, display drivers, audio and operational amplifiers, interface products and data conversion solutions. National's key analog markets include wireless handsets, displays and a variety of broad electronics markets, including medical, automotive, industrial, and test and measurement applications. Headquartered in Santa Clara, California, National reported sales of $2.16 billion for fiscal 2006, which ended May 28, 2006.  Additional company and product information is available at www.national.com.