On Sept. 6, broad-line semiconductor maker National Semiconductor (NYSE:NSM) released first-quarter 2008 earnings for the period ending Aug. 26, 2007.

  • Sales are down significantly from last year because of a challenging year for cell phone manufacturers. Shareholders of other component suppliers such as Texas Instruments (NYSE:TXN) and Analog Devices (NYSE:ADI) would be quick to concur on that point.
  • On the other hand, revenue did tick up 3.4% from last quarter despite the seasonally slow summer business. Over the past 10 years, National's first-quarter sales have been lower than the preceding quarter's more often than not. (Source: Capital IQ, looking at income data over time.)
  • It's the second-fattest gross margin in the company's recorded history -- after Q4 2007.
  • National took on $1.5 billion of new debt to finance some of its share buyback program. The company has some recent and illustrious company in this practice.

(Figures in millions, except per-share data)

Income Statement Highlights

Q1 2008

Q1 2007

Change

Sales

$472

$541

(12.9%)

Net Profit

$86

$120

(28.7%)

EPS

$0.30

$0.35

(14.3%)

Diluted Shares

283.9

343.7

(17.4%)

Get back to basics with the income statement.

Margin Checkup

Q1 2008

Q1 2007

Change*

Gross Margin

63%

61.8%

1.2

Operating Margin

28%

30.6%

(2.5)

Net Margin

18.2%

22.2%

(4.0)
*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q1 2008

Q1 2007

Change

Cash + ST Invest.

$962

$840

14.5%

Accounts Rec.

$176

$196

(10.1%)

Inventory

$166

$196

(15.4%)

Liabilities

Q1 2008

Q1 2007

Change

Accounts Payable

$58

$82

(29.2%)

Long-Term Debt

$1,520

$0.2

7,599%

The balance sheet reflects the company's health.

Cash Flow Highlights

Q1 2008

Q1 2007

Change

Cash From Ops.

$126

$133

(5.2%)

Capital Expenditures

$24

$41

(41.4%)

Free Cash Flow

$102

$92

10.8%

Owner Earnings

$91

$119

(23.5%)

Free cash flow is a Fool's best friend.

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