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National Semiconductor Reports $93.1 Million Profit, 8.5 Percent Growth in Sales for Third Quarter, FY2004

· Q3 GAAP earnings are 48 cents per share, up from 34 cents per share in Q2

· Gross margin rose to 51.4%, compared to 50.1% in Q2

· Revenues reached $513.6 million, an increase of 8.5% from Q2 and 27% year-to-year

· Bookings increased 12% sequentially and 47% year-to-year

· Q4 Outlook: Company anticipates 7% to 10% sequential revenue growth

Mar 11, 2004

March 11, 2004 - National Semiconductor Corporation (NYSE:NSM) today reported a GAAP profit of $93.1 million, or 48 cents per share, on revenues of $513.6 million for the third quarter of fiscal 2004, which ended February 29.  National's third quarter sales were 27 percent higher than the third quarter of fiscal 2003 and 8.5 percent higher sequentially from the second quarter of fiscal 2004, when the company reported revenues of $473.5 million and earnings of 34 cents per share.  The third quarter fiscal 2004 results included a $1.9 million pretax credit for special items relating to prior cost reduction actions.  Without this credit, National's profit would have been $91.5 million, or 47 cents per share.  As previously disclosed, the company's third quarter included 14 calendar weeks, instead of the normal 13 weeks.

"National's sales into the PC and wireless handset markets were better sequentially than we usually see at this time of year," said Brian L. Halla, National's chairman, president and CEO. "Beyond those markets, demand in general for National's analog products picked up during the quarter, particularly in power management, and that's translating into growth in sales and profits."

National Semiconductor's gross margin increased 1.3 percentage points in the third quarter to 51.4 percent, an increase from 50.1 percent in Q2.  A year ago, National reported gross margin of 42.7 percent for the third quarter of fiscal 2003.  The gain in gross margin was driven by a stronger mix of analog products, increased revenue from new products and improved pricing.  The company's fabrication utilization rate was approximately 94 percent in Q3, which was comparable to Q2.

"Consistent with our emphasis on improving shareholder value, we increased National's return on invested capital (ROIC) to 24 percent during the third quarter," Halla said. "We achieved this by expanding our gross margins and controlling our expenses."

Strong Bookings Continued in Q3
National's worldwide bookings increased 12 percent sequentially in Q3 and 47 percent year-to-year.  All regions saw increased bookings in Q3, both sequentially and year-to-year.  Billings also rose in all regions, but bookings increased at a faster pace than billings.  Overall, bookings substantially exceeded billings in Q3.  Bookings for all months in the third quarter also were stronger than the previous year.

Bookings for National's power management products continued to lead the company as National's strength in power for portable applications was complemented by expanded opportunities for power in broader markets. Bookings for amplifier and data conversion products also grew substantially.

Positive Revenue and Earnings Outlook for Q4 2004
"Our stronger-than-expected Q3 bookings generated increased backlog and good momentum for the fourth quarter," Halla said.  "We anticipate additional improvements in Q4, both in sales and return on invested capital, by leveraging our analog strengths with key customers and the broad-based distribution markets."

National's guidance for the fourth quarter of FY 2004 is for revenues to grow 7 to 10 percent sequentially.  Consistent with this growth, gross margins are also expected to improve. The company anticipates operating expenses comparable to or slightly higher than the third quarter.

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 fourth quarter, the degree of factory utilization, the successful construction of our Suzhou assembly and test facility, the successful sale of inventories at existing prices, and the ramp up of recently introduced products.  Other risk factors are included in the Company's 10-K for the year ended May 25, 2003 (see Outlook and Risk Factors sections of Management's Discussion and Analysis of Financial Conditions and Results of Operations) and the 10-Q dated November 23, 2003.

Summary of Results

For 3 months ended

For 3 months ended

 

February 29, 2004

February 23, 2003

Net sales

$513.6 million

$   404.3 million

Net income (loss)

$  93.1 million

$    (36.4) million

Earnings (loss) per share

$      0.48       

$     (0.20)       


Net income (loss), excluding
special items in fiscal 2004
and 2003 and license writedowns
in fiscal 2003

$  91.5 million

$     (5.6) million


Earnings (loss) per share,
excluding special items in fiscal
2004 and 2003 and license
writedowns in fiscal 2003

$     .47         

$     (0.03)       

About National Semiconductor
National Semiconductor, the industry's premier analog company, creates high performance analog devices and subsystems. National's leading-edge products include power management circuits, display drivers, audio and operational amplifiers, imaging sensors and data conversion solutions. National's key markets include wireless handsets, displays, PCs, networks and a broad range of portable applications. With headquarters in Santa Clara, California, National reported sales of $1.67 billion for fiscal 2003, which ended May 25, 2003. Additional company and product information is available at www.national.com
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