On Sept. 7, National Semiconductor (NYSE:NSM) released Q1 2007 earnings for the period ended Aug. 27.

  • Free cash flow is running a bit low due to plant modernization efforts, such as converting the six-inch wafer plant in Texas to a more efficient eight-inch facility. Combined with serious R&D -- which grew 10.3% from last year -- that's how a company like National invests in its future.

  • Margin growth is looking good, and a net margin greater than 20% is impressive indeed, especially for a hardware manufacturer that runs its own fabrication plants.

  • Wireless handset chips did decline, leading to lower revenues than originally forecast. Sales did beat the company's own lowered guidance, however.

(Figures in millions, except per-share data)

Income Statement Highlights

Avg. Est.

Q1 2007

Q1 2006

Change

Sales

$541

$541

$494

9.6%

Net Profit

--

$120

$86

40.3%

EPS

$0.32

$0.35

$0.24

45.8%

Diluted Shares

--

344

364

(5.6%)



Get back to basics with a look at the income statement.

Margin Checkup

Q1 2007

Q1 2006

Change*

Gross Margin

61.75%

56.24%

5.51

Operating Margin

30.57%

26.63%

3.94

Net Margin

22.18%

17.33%

4.85

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q1 2007

Q1 2006

Change

Cash + ST Invest.

$840

$1,016

(17.3%)

Accounts Rec.

$196

$154

27%

Inventory

$196

$157

24.6%


Liabilities

Q1 2007

Q1 2006

Change

Accounts Payable

$82

$84

(1.6%)

Long-Term Debt

$21*

$22

(4.5%)

*Includes $20.9 million of long-term debt moved to short-term in this quarter

Learn the ways of the balance sheet.

Cash Flow Highlights

Q1 2007

Q1 2006

Change

Cash From Ops.

$133

$153

(12.7%)

Capital Expenditures

$41

$13

219.5%

Free Cash Flow

$92

$140

(34%)



Find out why Fools always follow the money.

Related companies:

  • Analog Devices (NYSE:ADI)
  • Texas Instruments (NYSE:TXN)
  • Marvell Technology (NASDAQ:MRVL)
  • Linear Technology (NASDAQ:LLTC)
  • Fairchild Semiconductor (NYSE:FCS)
  • STMicroelectronics (NYSE:STM)

Related Foolishness:

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At the time of publication, Fool contributor Anders Bylund had no position in any company discussed. Fool rules are here .