Nationstar Mortgage Holdings Inc. (NSM)

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National Semiconductor Corporation (NSM)

F3Q09 Earnings Call

March 11, 2009 8:00 am ET

Executives

Mark Veeh - Investor Relations Manager

Brian Halla - Chairman and Chief Executive Officer

Lewis Chew - Chief Financial Officer

Don Macleod - President and Chief Operating Officer

Analysts

Chris Danely – JP Morgan

Ross Seymore – Deutsche Bank

Tore Svanberg – Thomas Weisel

Doug Freedman - American Technology Research

Sumit Dhanda – Banc of America

Romit Shah – Barclays Capital

Uche Orji – UBS

Craig Hettenbach – Goldman Sachs

John Dryden – Charter Equity

Craig Berger - Friedman, Billings, Ramsey

Mahesh Sanganeria – RBC Capital Markets

Presentation

Operator

(Operator Instructions) Welcome everyone to the National Semiconductor Third Quarter Fiscal Year 2009 Conference Call. I will now turn the call over to Mr. Mark Veeh, Investor Relations Manager.

Mark Veeh

I’d like to welcome everyone to National Semiconductor’s third quarter fiscal year 2009 earnings call. Joining me on the call today are Brian Halla, Chairman and Chief Executive Officer, Lewis Chew, Chief Financial Officer and Don Macleod, President and Chief Operating Officer.

In today’s call I will provide a recap of the third quarter financial results. Brian Halla will give an overview of the current business environment and an update on the company’s focus and priorities going forward. Lewis Chew will expand on the third quarter results and provide the background to our outlook for the fourth quarter of fiscal year 2009. Lastly, Don Macleod will then discuss market trends and products in more detail. We will then take questions until approximately 9:00 am Eastern Daylight Time.

As a reminder, this call will contain forward looking statements that involve risk factors that could cause National’s results to differ materially from management’s current expectations. You should review the safe harbor statement contained in the press release published today as well as our most recent SEC filing for a complete description of those risks.

Also in compliance with SEC Regulation FD, this call is being broadcast live over our Investor Relations website. For those of you who have missed the press release or would like a replay of the call, you can find it on National’s IR website at www.National.com.

Now moving on to our third quarter results as follows. Sales for the quarter were in line with our original guidance and came in at $292 million down 31% from $422 million in the previous quarter and down 36% from $453 million in last year’s third quarter. Gross margins for the quarter came in better then our original guidance at 57.5%, down from 65.8% in the prior quarter and down from 64.3% in last years third quarter. This decrease in gross margin was attributed to both lower revenue and lower factory utilization in the quarter.

Operating expenses for the third quarter came in at $139.4 million. Net interest expense was $16.7 million and the income tax for the quarter was the benefit of $6.5 million. Included in this number is approximately $11 million of discrete tax benefits that have been highlighted in today’s press release. As a result, National posted GAAP net earnings of $21.1 million or $0.09 per fully diluted share in Q3 fiscal year 2009. The fully diluted share count for the third quarter was 231 million shares.

With that I will now turn it over to Brian.

Brian Halla

For this commentary I’ll assume that your questions include:

1) Does National have a unique perspective on market conditions and how are we faring give those conditions?

2) If we have been affected, how bad? More importantly what are we doing about it?

3) I’m sure you’re interested in knowing if National has any more visibility then the other guys in to when things are likely to get better.

4) If this is to be a long protracted down market do we plan to just hunker down until it’s over or do we have a plan for growth in spite of the economy and current shake in consumer confidence.

Let’s review the quarter just ended. National generated revenues of $292 million roughly in line with our guidance of a 30% revenue drop in the quarter. Our gross margins on the declining revenues dropped to 57.5% and gave us net income of $21 million or $0.09 per share which included a tax benefit from about $11 million. The organization did a good job of holding OpEx in the quarter to $139 million, $73 million of which was R&D.

Given the uncertainty in the market and limited visibility we took down inventories by around $5 million; plan to take them down again in the current quarter. In addition our opening backlog is down from where it was when we entered last quarter so we’re guiding somewhere in the range of down 5% to 10% in revenues in the current quarter. A bright spot, however, is that weekly run rates for new orders seemed to stabilize since early January but at lower run rates as you would expect.

Given the lower run rates, what we’ve seen in the marketplace, and in lieu of any eminent restoration of consumer confidence we’re taking immediate actions to resize and reposition both our operating spending and our factory capacity. These actions will lower our break even point and will provide more earnings leverage when revenues do recover in the future.

Starting today we will reduce our headcount by approximately 850 employees with another 875 or so employees to be let go over the next several quarters as we close down our Texas and Suzhou, China manufacturing facilities. This reduction of approximately 1,700 heads represents approximately 26% of our worldwide headcount. Other temporary cost reduction actions include mandatory shut down days in the current quarter and executive salary cuts.

Read the rest of this transcript for free on seekingalpha.com