National Instruments Reports Record Third Quarter Revenue, 19% Growth in Net Income

AUSTIN, Texas -- October 23, 2003 -- National Instruments (Nasdaq: NATI) today reported net income of $8 million, up 19 percent from Q3 2002. Third quarter revenue was a record $105 million, a 9 percent increase from the third quarter of 2002, and the fifth consecutive quarter of year-over-year revenue growth. Fully diluted earnings per share (EPS) for Q3 were 15 cents.

"Our commitment to investing in R&D remains a key driver for our growth," said Dr. James Truchard, NI CEO. "More than 350 man-years of development on LabVIEW 7 Express and next-generation DAQmx driver software has paid off this quarter with strong double-digit software growth. With many new products and record sales for data acquisition, modular instrumentation and distributed I/O products, we delivered 9 percent growth in revenue and 19 percent growth in profitability."

Q3 2003 Highlights

• Record third quarter revenue, fifth consecutive quarter of year-over-year revenue growth
• Revenue up 9 percent, net income up 19 percent year-over-year
• Double-digit growth for software sales and record quarterly sales of data acquisition, modular instrumentation and distributed I/O products
• Major product releases, including PXI 100 MS/s mixed-signal suite, TestStand 3.0, LabWindows/CVI 7.0, Measurement Studio 7.0 and MATRIXx 6.3
• Record cash and short term investments of $172 million
• Cash dividend of 5 cents per common share

"We were pleased to see our growth improve in Q3 and believe this was a result of our strong new product output and an early stage recovery in global manufacturing," said Alex Davern, NI CFO. "We reported record revenue for the first nine months of the year, reinforcing our expectation of record revenue for the year."

Geographically, the growth of revenue in U.S. dollar terms for Q3 2003 as compared to Q3 2002 was as follows: Europe, up 18 percent; Asia, up 18 percent; and Americas, up 1 percent, giving overall growth of 9 percent, up from 7 percent last quarter. In local currency terms, revenue was up 3 percent in Europe, up 33 percent in Asia, up 1 percent in the Americas, giving overall local currency growth of 7 percent, up from 3 percent last quarter.

NI anticipates record revenue for 2003 and expects high single-digit, year-over-year revenue growth in Q4 2003. In addition, the company estimates earnings per share will be in the range of 20 to 23 cents per share for Q4 2003.

Interested parties can listen to a conference call today, Oct. 23, 2003, beginning at 4:00 p.m. CDT, at ni.com/call. Replay information will be available by calling (719) 457-0820, confirmation code #262922, from Oct. 23, 2003 at 7:00 p.m. CDT, through Oct. 30, 2003 at 12:00 a.m. CDT.

This release contains "forward-looking statements," including R&D investment as a driver for growth, recovery in global manufacturing, and the company's expectations regarding record revenue for the year, revenue growth for the fourth quarter, and estimated earnings for the fourth quarter. These statements are subject to a number of risks and uncertainties, including the risk of adverse changes in the global economy, delays in the release of new products, fluctuations in customer demand for NI products, manufacturing inefficiencies, and foreign exchange fluctuations. Actual results may differ materially from the expected results. The company directs you to documents filed with the SEC for other risks associated with the company's future performance.

About National Instruments
National Instruments (www.ni.com) is a technology pioneer and leader in virtual instrumentation -- a revolutionary concept that has changed the way engineers and scientists approach measurement and automation. Leveraging the PC and its related technologies, virtual instrumentation increases productivity and lowers costs for customers worldwide through easy-to-integrate software, such as the NI LabVIEW graphical development environment, and modular hardware, such as PXI modules for data acquisition, instrument control and machine vision. Headquartered in Austin, Texas, NI has more than 3,000 employees and direct operations in 40 countries. In 2002, the company sold products to more than 25,000 different companies in more than 80 countries around the world. For the past four consecutive years, FORTUNE magazine has named NI one of the 100 best companies to work for in America.

Readers may obtain investment information from the company's investor relations department at (512) 683-5090, by sending e-mail to nati@ni.com or on the Web at www.ni.com/nati.

The condensed consolidated balance sheets, statements of income, and cash flows to follow.

	September 30, 2003 (unaudited)	December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents	$ 34,015	$ 40,240
Short-term investments	138,210	113,638
Accounts receivable, net	68,313	62,981
Inventories	38,448	39,247
Other current assets	18,199	21,860
Total current assets	297,185	277,966
Property and equipment, net	151,126	152,133
Intangibles, net and other assets	40,365	28,615
Total assets	$488,676	$458,714
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	26,108	25,578
Accrued expenses	36,021	40,935
Total current liabilities	62,129	66,513
Deferred income taxes	5,402	5,738
Total liabilities	67,531	72,251
Stockholders' equity:
Common stock	518	511
Additional paid-in capital	86,097	72,063
Retained earnings	341,349	321,813
Other	(6,819)	(7,924)
Total stockholders' equity	421,145	386,463
Total liabilities and stockholders' equity	$488,676	$458,714

	Three Months Ended September 30, (unaudited)		Nine Months Ended September 30, (unaudited)
	2003	2002	2003	2002
Net sales	$104,644	$96,020	$303,983	$284,264
Cost of sales	27,434	25,196	80,598	77,157
Gross profit	77,210	70,824	223,385	207,107
Sales and marketing	40,282	36,679	116,951	105,653
Research and development	18,370	16,095	50,497	47,762
General and administrative	8,438	8,224	25,244	22,559
Patent litigation	362	1,220	3,796	3,513
Total operating expenses	67,452	62,218	196,488	179,487
Operating income	9,758	8,606	26,897	27,620
Interest income, net	570	785	1,876	2,419
Foreign exchange, net	(209)	(612)	116	(1,288)
Other income, net	486	506	606	1,028
Income before income taxes	10,605	9,285	29,495	29,779
Provision for income taxes	2,651	2,600	7,374	8,338
Net income	$7,954	$6,685	$22,121	$21,441
Earnings per share:
Basic	$0.15	$0.13	$0.43	$0.42
Diluted	$0.15	$0.13	$0.41	$0.40
Weighted average shares outstanding:
Basic	51,532	51,195	51,468	51,286
Diluted	53,932	52,906	53,719	53,603
Dividends declared per share	$0.05	--	$0.05	--

	Nine Months Ended September 30, (unaudited)
	2003	2002
Cash flow from operating activities:
Net income	$22,121	$21,441
Adjustments to reconcile net income to cash from operating activities:
Charges to income not requiring cash outlays:
Depreciation and amortization	18,787	14,862
Benefit from deferred income taxes	(514)	(3,769)
Tax benefit from stock option plans	2,565	1,164
Changes in operating assets and liabilities:
Increase in accounts receivable	(5,332)	(1,894)
Decrease (increase) in inventory	799	(7,015)
Decrease in prepaid expense and other assets	4,071	3,154
(Decrease) increase in current liabilities	(4,384)	5,677
Net cash provided by operating activities	38,113	33,620
Cash flow from investing activities:
Payment for acquisitions, net of cash received	(5,316)	--
Capital expenditures	(12,870)	(24,753)
Capitalization of internally developed software	(9,449)	(3,025)
Additions to other intangibles	(1,022)	(2,214)
Purchases of short-term investments	(105,626)	(106,294)
Sales/maturities of short-term investments	81,054	130,531
Net cash used in investing activities	(53,229)	(5,755)
Cash flow from financing activities:
Proceeds from issuance of common stock	11,476	6,666
Repurchase of common stock	--	(17,420)
Dividends paid	(2,585)	--
Net cash provided by (used in) financing activities	8,891	(10,754)
Net increase (decrease) in cash and cash equivalents	(6,225)	17,111
Cash and cash equivalents at beginning of period	40,240	49,089
Cash and cash equivalents at end of period	$ 34,015	$ 66,200
Non-cash financing activities
Accrued liability for repurchase of common stock	$ --	$ 2,203

Contact:

Kimberly Allen Investor Relations Manager National Instruments (512) 683-6873

Jennifer Howard-Brown Media Relations Manager National Instruments (512) 683-8713

Related Links:

• Investor Relations