UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended May 29, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the transition period
from to .
Commission File Number: 1-6453
NATIONAL SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2095071
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(State of incorporation) (I.R.S. Employer Identification Number)
2900 SEMICONDUCTOR DRIVE, P.O. BOX 58090
SANTA CLARA, CALIFORNIA 95052-8090
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(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 721-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
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Depositary shares, each representing New York Stock Exchange
1/10th share of $32.50 Convertible
Preferred Shares, par value $0.50 per share
Common stock, par value New York Stock Exchange
$0.50 per share Pacific Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
$32.50 Convertible Preferred Shares ($0.50 par value) with a liquidation
preference of $500 per share.
(Title of class)
--Continued on next page--
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d)of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non affiliates of the
registrant as of July 22, 1994, was approximately $1,989,708,418.
Shares of Common Stock held by each officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive
determination for other purposes.
The number of shares of the registrant's common stock, $0.50 par value,
as of July 22, 1994, was 122,925,135.
DOCUMENTS INCORPORATED BY REFERENCE
Document Location in Form 10-K
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1994 Annual Report to Shareholders (pp. 23-48,50) Parts I, II and IV
Portions of the Proxy Statement for the Part III
Annual Meeting of Stockholders to be
held on or about September 30, 1994.
Portions of the Company's Registration Part IV
Statement on Form S-3, Registration
No. 33-48935, which became effective
October 5, 1992.
Portions of the Company's Registration Part IV
Statement on Form S-3, Registration
No. 33-52775, which became effective
March 22, 1994.
Portions of the Proxy Statement for the Part IV
Annual Meeting of Stockholders held
October 30, 1992.
The Index to Exhibits is located on pages 27-28.
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PART I
ITEM 1. BUSINESS
General
National Semiconductor Corporation (hereinafter including its
subsidiaries and referred to as "National" or the "Company") designs,
develops, manufactures and markets a broad line of semiconductor
products using analog, digital, and mixed signal technology for
applications in the analog intensive, communications, and personal
systems market places.
National, a global supplier of semiconductor products, was
incorporated under the laws of the State of Delaware in 1959.
During fiscal 1994, the Company essentially completed its
manufacturing consolidation and reduction in cost structure in
accordance with the restructuring plan announced in previous years,
including the closure of a wafer fabrication module in its Salt Lake,
Utah facility, and the closure of a wafer fabrication line in Santa
Clara, California. In addition, the Company completed most of the
process transfers from its Santa Clara facility to the Greenock,
Scotland fabrication facility and completed the transfer of Mil Aero
manufacturing to its Singapore facility. The Company continued to
reduce headcount and related infrastructure at its Santa Clara facility.
In 1994, the Company also decided to consolidate its Dynacraft, Inc.
("DCI") business, consolidate a product division, and decentralize
product engineering support functions. These actions will take place in
fiscal 1995 and will involve asset dispositions, involuntary severance,
and personnel relocation.
The Company operates in one industry segment. The information
with respect to sales and identifiable assets for National's geographic
segments appearing on page 43-44 of the Company's 1994 Annual Report to
Shareholders under the caption "Industry and Geographic Segment
Information" is incorporated herein by reference.
Products
Semiconductors are either integrated circuits (in which a number of
transistors and other elements are combined to form a more complicated
circuit) or discrete devices (such as individual transistors). In an
integrated circuit, various elements are fabricated in a small area or
"chip" of silicon, which is then encapsulated in plastic, ceramic or
other advanced forms of packaging for connection to a circuit board or
substrate.
National manufactures a broad variety of products including
industry standard, application-specific standard and certain custom
devices. National's products are used in numerous commercial and
consumer applications, including personal systems, data processing,
local area networking, telecommunications, automotive, industrial and
military applications.
The Company's business is organized around two major operating
groups, the Communications and Computing Group ("CCG") and the Standard
Products Group ("SPG"). CCG is structured around applications-focused
product lines which use the Company's core technologies to serve
selected vertical markets such as Ethernet local area networks, data and
telecommunications, personal systems peripherals and office automation.
SPG primarily addresses broad, horizontal markets and focuses on large,
high volume product lines, including analog, digital logic, discrete and
certain memory products; however, its products are aligned to complement
vertical market focus. Included within SPG is the Company's wholly-
owned subsidiary, DCI, which supplies semiconductor packaging products
and technology.
Standard Products Group
In SPG, the Company focuses its core strengths in both analog and
digital technologies to primarily design and manufacture high volume
products. In addition to DCI, SPG is comprised of three divisions:
Analog, Data Management and Memory. For fiscal 1994, sales by SPG
represented approximately two-thirds of the Company's total sales.
Analog Division. National continues to be a leader in analog
products and technology, which has been one of the Company's critical
core competencies since its inception. Analog devices control
continuously variable functions (such as light, color, sound, and power)
and are used in automotive,
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telecommunications, audio/video and many industrial applications. The
Company's analog products include high-performance operational
amplifiers, power management circuits, data acquisition circuits and
voltage regulators. National provides a variety of analog products
including standard products, application-specific products and full
custom products, as well as advanced mixed analog-digital solutions.
The Company's mixed-signal products include circuits for video monitors
and consumer audio products, real-time clocks, automotive, custom linear
ASIC ("CLASIC"), and peripheral drivers. The Company's discrete
products are comprised primarily of transistors and diodes which are
used as control and actuating devices in a broad range of electronic
systems.
Data Management Division. In order to properly reflect the
breadth of products in this division, the Digital Logic division was
renamed Data Management in fiscal 1994. This division's products
incorporate bipolar, CMOS and BiCMOS technologies for high-performance
applications such as switching and data manipulation. These
applications are used in a variety of communications applications and
computationally intensive applications such as workstations and
computers, where the Company's FACT, FAST, BCT and 100K ECL product
families are industry standards. The Data Management division also
contains mass storage products which include a wide range of circuits
found in high-performance disk drives such as read/write amplifiers,
pulse detectors, data synchronizers, encoder/decoder circuits, and a
family of motor-speed and head-positioning control devices.
Memory Division. The Company's memory products are used primarily
in computers and information terminals for temporary or permanent data
storage. National's principal memory products include electronically
programmable read only memories ("EPROMS") and electronically erasable
programmable read only memories ("EEPROMS").
Communications and Computing Group
In CCG, the Company utilizes its technological strengths, particularly
in networking and mixed-signal technology, to provide solutions
primarily for the communications and personal systems markets. Mixed-
signal circuits combine analog and digital functions to link computers
together over local and wide area networks, transmit data over telephone
lines, display images on a computer screen and enable computers to store
and access data on disk drives. CCG consists of three operating
divisions: Local Area Networks ("LAN"), Wide Area Networks ("WAN"), and
Embedded Systems. For fiscal 1994, CCG sales represented approximately
one-third of the Company's total sales.
Local Area Networks Division. The worldwide market for Ethernet
LAN products has experienced significant growth in the last several
years. LANs enable individual computer users within a building to share
data as a work-group. National is the world's leading supplier of LAN
Ethernet controller chipsets, which are currently the dominant protocol
for LANs. National's LAN family includes a number of sophisticated
control functions for networking over standard twisted-pair telephone
wiring such as the Systems Oriented Network Interface Controller
("SONIC-T"), the AT/LANTIC single chip network controller for personal
computers, and the Repeater Interface Controller ("RIC") for use with
hubs. Through an alliance with Novell, Inc., the Company also markets
its own line of Ethernet adapter cards under its Info-Mover trademark.
The LAN division is also developing products in wireless networking
which operate independent of twisted-pair or coaxial cabling. The
Company also offers a Token-Ring LAN solution through an alliance with
IBM.
Wide Area Networks Division. The Wide Area Networks ("WAN")
division offers products which allow customers to transmit large amounts
of data at high speed from one office to another anywhere in the world.
The WAN division also includes wireless communication products and high
performance Application Specific Integrated Circuit ("ASIC") products.
The Company currently supplies numerous solutions that address existing
telecommunications equipment as well as next generation SONET/ATM
transmission equipment.
Embedded Systems Division. Embedded control products include 4-,
8-, and 16-bit microcontrollers which combine customized logic and
memory circuits in a single device. National's embedded control
portfolio also includes 16- and 32-bit microprocessor devices for laser
printers, high-speed facsimile machines, scanners and other imaging
applications. The Embedded Systems division also includes the Company's
Super I/O family of input/output devices used on the motherboard of
personal computers. A line of voice processors is used in digital
(tapeless) telephone answering machines and other voice-controlled
applications.
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Marketing and Sales
The Company markets its products throughout the world primarily to
original equipment manufacturers ("OEMs") through its own sales force
and indirectly through distributors. National's marketing and sales
effort is organized around four autonomous regional divisions: The
Americas (primarily the United States), Asia, Europe and Japan.
The Company has also established cross-regional marketing groups
which are responsible for specific customers with worldwide operations.
A comprehensive, state-of-the-art customer service center in Arlington,
Texas exists to centralize customer service operations in the United
States and to handle customer inquiries more effectively.
National augments its sales effort with application engineers
based in the field. These engineers are specialists in National's
complex product portfolio and work with customers to design-in National
parts for their systems. These engineers also help identify emerging
markets for new products and are supported by Company design centers in
the field or at manufacturing sites.
In line with industry practices, National generally credits
distributors for the effect of price reductions on their inventory of
National products, and under specific conditions, repurchases products
that are unsold, slow-moving or have been discontinued by the Company.
Revenue on shipment to distributors is recognized when products are
shipped, with provisions for estimated returns and allowances recorded
at the time of shipment.
Customers
National is not dependent upon any single customer, or upon any single
group of customers, the loss of which would have a material effect on
the Company. In addition, no one customer or distributor accounted for
10 percent or more of total net sales in fiscal 1994.
Backlog
Semiconductor backlog quantities and shipment schedules under
outstanding purchase orders are frequently revised to reflect changes in
customer needs. Binding agreements calling for the sale of specific
quantities at specific prices which are contractually subject to price
or quantity revisions are, as a matter of industry practice, rarely
enforced. For these reasons, National does not believe that the amount
of backlog at any particular date is meaningful.
Seasonality
Generally, National is affected by the seasonal trends of the
semiconductor and related industries. As a result of these trends, the
Company typically experiences lower revenue in the third fiscal quarter,
primarily due to customer holiday demand adjustments. Revenue usually
has a seasonal peak in the fourth fiscal quarter which corresponds
roughly to the middle of the calendar year.
Manufacturing
National has essentially completed a program designed to both
consolidate its manufacturing facilities by closing outdated plants and
to expand and upgrade certain facilities to create "centers of
excellence" for key manufacturing technologies. Within the last two
years, the Company has sold or closed facilities in Bangkok, Thailand;
Campinas, Brazil; Kowloon, Hong Kong; and Tucson, Arizona; and has
transferred a plant in Israel to a minority-owned joint venture. In
addition, the Company has closed significant parts of its wafer
manufacturing structure in the Salt Lake, Utah plant and Santa Clara,
California facility. The Company is establishing its CMOS center of
excellence at its Arlington, Texas facility, its analog center of
excellence at its Greenock, Scotland facility, and has designated its
South Portland, Maine facility as its BiCMOS center of excellence.
The design of semiconductor products is based upon customer
requirements and general market trends and needs. These designs are
compiled and digitized by state-of-the-art design equipment and then
transferred to silicon wafers in a series of complex precision processes
which include oxidation, lithography, chemical etching, diffusion,
deposition, implantation and metallization. Production of the integrated
circuit continues with wafer sort, where the wafers are tested and
separated into individual circuit devices; assembly, where tiny wires
are used to connect the electronic circuits on the device to the
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stronger metal leads or "prongs" of the package in which the device is
encapsulated for protection; and final test, where the devices are
subjected to a series of vigorous tests using computerized circuit
testers and for certain applications, environmental testers such as
burn-in ovens, centrifuges, temperature cycle testers, moisture
resistance testers, salt atmosphere testers and thermal shock testers.
The Company's product design and development activities are
conducted predominantly in the United States. Wafer fabrication is
concentrated in four facilities in the United States as well as in a
facility in Scotland. Nearly all of the product assembly and final test
is performed in facilities in Southeast Asia. For capacity utilization
and other economic reasons, National employs subcontractors to perform
certain manufacturing functions in the United States, Southeast Asia and
Japan. National also utilizes manufacturing capacity of a minority-
owned joint venture which operates the Company's former facility in
Israel.
The Company's primary process technologies include a
family of core processes, including Complimentary Metal Oxide Silicon
("CMOS"). These processes have been adapted for mixed signal
applications. National also has optimized its CMOS process for
nonvolatile memories, both ultraviolet and electrically erasable.
There are a number of bipolar processes supporting the Company's
standard products. Of particular importance are several families of
processes that are optimized for manufacturing the Company's analog
products. In addition, the Company employs several processes that
combine bipolar and CMOS technologies. These BiCMOS processes are used
for their ability to combine very high performance with low power. One
of the more sophisticated of these processes is the ABiC-IV, which the
Company operates in a pilot line.
Raw Materials
National's manufacturing processes make use of many raw materials, such
as silicon wafers, chemicals and gases, ceramic and plastic packages,
and various types of precious and other metals. The Company obtains its
raw materials and supplies from diverse sources. Although supplies for
the materials used by the Company are currently adequate, shortages
could occur in various essential materials due to interruption of supply
or due to sudden increases in demand by semiconductor manufacturers.
Research and Development
National's research and development ("R&D") is performed at two levels.
At the corporate level, process development and a limited amount of
basic research are performed. At the operating division level, R&D is
performed to define and develop products specific to the operating
divisions as well as process development. Over time, the Company
envisions initial process capability will be prototyped in corporate R&D
facilities but more and more of the actual process development as well
as product design will be performed in the operating divisions. R&D
expenses were $257.8 million for fiscal 1994 and were primarily directed
toward high potential markets in personal systems, communications, and
analog-intensive markets.
Patents
National owns numerous United States and non-U.S. patents and has many
patent applications pending. It considers the development of patents
and the maintenance of an active patent program advantageous to the
conduct of its business but believes that continued success will depend
more on engineering, production, marketing, financial and managerial
skills than on its patent program. The Company licenses certain of its
patents to other manufacturers and participates in a number of cross-
licensing arrangements with other parties. In addition, the Company is
currently involved in a program to further capitalize on its
intellectual property assets through licensing of its intellectual
property.
Employees
At May 29, 1994, National employed approximately 22,300 people of whom
approximately 7,700 were employed in the United States, 2,000 in Europe,
12,100 in Southeast Asia and 500 in other areas. The Company believes
that its future success depends fundamentally on its ability to recruit
and retain skilled technical and professional personnel. National's
employees in the United States are not covered by collective bargaining
agreements. The Company considers its employee relations worldwide to
be excellent.
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Competition and Risks
The Semiconductor Industry
The semiconductor industry is characterized by rapid technological
change and frequent introduction of new technology leading to more
complex and powerful products. The result is a cyclical economic
environment with short product life, price erosion and high sensitivity
to the overall business cycle. In addition, substantial capital and R&D
investment is required for products and processes. The Company may
experience periodic fluctuations in its operating results because of
industry-wide conditions. National competes with a number of major
companies in the high-volume segment of the industry. These include
several companies whose semiconductor business may be only part of their
overall operations, such as Motorola, Inc., SGS-Thompson
Microelectronics SA, Texas Instruments Incorporated, and Advanced Micro
Devices, Inc. National also competes with a large number of smaller
companies that target particular niche markets such as Linear Technology
Corporation and Cirrus Logic, Inc. Competition is based on design and
quality of the products, product performance, price and service, with
the relative importance of such factors varying among products and
markets.
International Operations
National conducts a substantial portion of its operations outside the
United States and its business is subject to risks associated with many
factors beyond its control, such as fluctuations in foreign currency
rates, instability of foreign economies, government changes, and U.S.
and foreign laws and policies affecting trade and investment. Although
the Company has not experienced any materially adverse effects with
respect to its foreign operations arising from such factors, there can
be no assurance that such problems will not arise in the future. In
addition, although the Company seeks to hedge its exposure to currency
exchange rate fluctuations, the Company's competitive position relative
to non-U.S. suppliers can be affected by the exchange rate of the U.S.
dollar against other currencies, particularly the Japanese yen.
Environmental Regulations
National believes that compliance with federal, state and local laws or
regulations which have been enacted or adopted to regulate the
environment has not had nor will have a material effect upon the
Company's capital expenditures, earnings, competitive position, or
results of operations. (See also Item 3, Legal Proceedings of this Form
10-K.)
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ITEM 2. PROPERTIES
National's principal administrative and research facilities are located
in Santa Clara, California. The Company's major domestic sites are
primarily devoted to wafer fabrication, research and development, and
general management and administration. These domestic sites include
plants located in Santa Clara, California; South Portland, Maine;
Arlington, Texas; Murraysville, Pennsylvania; and Salt Lake, Utah.
Other wafer fabrication facilities are located in Greenock, Scotland.
Assembly and test functions are performed primarily in facilities
located in Southeast Asia; specifically, Malacca and Penang, Malaysia;
Cebu, Philippines; and Singapore. Regional sales headquarters are
located in Santa Clara, California; Munich, Germany; Kowloon, Hong Kong;
and Tokyo, Japan. National maintains local sales offices in various
locations primarily throughout North America, Europe, Southeast Asia,
Japan, and China. In general, the Company owns its manufacturing
facilities and leases most of its sales and administrative offices.
The Company is party to certain sale and subsequent operating
leaseback transactions involving its manufacturing facility in
Arlington, Texas and its research and development facility in Santa
Clara, California. These leaseback agreements require collateral in the
form of standby letters of credit and compliance with financial
covenants. In June 1994, the Company entered into a letter of intent
with the lessor to purchase the equity interest held by the lessor in
the leaseback agreements and to assume responsibility for payment of the
nonrecourse debt associated therewith. The transaction is scheduled to
close during the first quarter of fiscal 1995.
The Company is continuing to consolidate its worldwide
manufacturing capacity in conjunction with its restructuring plan.
Accordingly, certain facilities have been closed and production
capabilities transferred to other sites. During the fourth quarter of
1994, the Company identified restructuring requirements totaling $10.0
million for DCI, the Company's wholly owned subsidiary, which supplies
semiconductor packaging products and technology. The restructure
reserve for DCI was established specifically for consolidation of the
DCI business and includes both fixed asset dispositions and reductions
in force to bring capacity in line with current and foreseeable business
levels. The Company also decided in 1994 to further eliminate certain
commercial manufacturing in its Santa Clara facility. Concurrent with
restructuring, the Company has increased expenditures for property,
plant and equipment during fiscal 1994 and 1993, as compared to fiscal
1992, much of which was directed toward modernization and expansion of
existing sites. The Company's wafer fabrication capacity utilization
increased from 85 percent at the end of fiscal 1993 to just above 90
percent at the end of 1994. National believes the continued
modernization and expansion of manufacturing facilities, the current
condition of its plants, capacity available from subcontractors, and
continuing improvements in operating efficiencies should allow the
Company to meet expected demand.
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ITEM 3. LEGAL PROCEEDINGS
On July 14, 1983, the United States Internal Revenue Service
("IRS") issued an examination report for the fiscal years ended May 31,
1978 and 1979. The Company filed a protest with the appeals office of
the IRS on September 16, 1983. The IRS issued a Notice of Deficiency for
these years on December 15, 1988 seeking additional taxes of
approximately $24 million (exclusive of interest). The issues giving
rise to the proposed adjustments related primarily to intercompany
product transfer prices and the application of Subpart F provisions of
the United States Internal Revenue Code. The Company filed a petition
with the United States Tax Court contesting the Notice of Deficiency on
March 10, 1989. The IRS' subsequent examination of the Company's United
States tax returns for fiscal years 1980 through 1982 resulted in a
Notice of Deficiency issued on January 30, 1990 seeking additional taxes
of approximately $52 million (exclusive of interest) for the fiscal
years ended May 31, 1976, 1977, 1980, 1981 and 1982. The issues giving
rise to the proposed adjustments for the earlier years related primarily
to reductions in the available net operating loss carrybacks and, for
the later years, to intercompany product transfer prices, full
absorption inventory costing, deductibility of certain reserves and
spares depreciation. The Company filed a petition with the United
States Tax Court contesting this Notice of Deficiency on April 28, 1990.
By order dated August 8, 1991, the Tax Court granted the Company's and
the IRS' motion to consolidate the two cases for trial. Prior to trial,
which was held during the month of February, 1993, the Company and the
IRS reached a settlement on all disputed issues except for the issue of
intercompany product transfer prices; this settlement reduced the total
of the additional taxes being sought to approximately $52 million
(exclusive of interest). An opinion was issued by the Tax Court on May
2, 1994. The opinion found that adjustments to income of $40.6 million
were due, which the Company estimates, after giving effect to loss and
credit carrybacks, will result in a tax deficiency of approximately $5
million plus associated interest of between $35 million and $45 million.
The IRS filed a motion for reconsideration of the opinion on June
3,1994, seeking an additional $31 million in income adjustments. The
motion was denied by the court on June 10, 1994. A final decision
implementing the opinion will be entered by the Tax Court following
completion of final computations and the decision will be subject to
appeal by either the Company or the IRS. With respect to the IRS'
examination of tax returns for other fiscal years, the Company and the
IRS settled in January 1994 all issues for fiscal years 1983 through
1985, including issues relating to intercompany product transfer
pricing, without the payment of additional federal tax. This result
will be affected by certain net operating loss carryovers and credits,
which will not be determined until a final decision is entered in the
Tax Court litigation. The Company's tax returns for fiscal years 1986
through 1989 are still under examination by the IRS. The Company
believes that adequate tax payments have been made and accruals recorded
for all years and that the Tax Court opinion will not have a material
adverse effect on the Company's financial condition.
On April 22, 1988, the District Director of the United States
Customs Service, San Francisco, issued a Notice of Proposed Action and a
Pre-penalty Notice to the Company alleging underpayment of duties of
approximately $19.5 million on merchandise imported from the Company's
foreign subsidiaries during the period from June 1, 1979 to March 1,
1985. The Company filed an administrative appeal in September 1988. On
May 23, 1991, the District Director revised his action and issued a
Notice of Penalty Claim and Demand for Restoration of Duties, reducing
the alleged underpayment of duties for the same period to approximately
$6.9 million; the alleged underpayment was subsequently reduced on April
22, 1994 to approximately $3.6 million. The revised alleged
underpayment could be subject to penalties that may be computed as a
multiple of the underpayment. The Company is continuing to contest the
Penalty Notice in proceedings at the administrative agency level. The
Company believes that resolution of this matter will not have a material
financial impact on the Company.
A sales tax examination conducted by the California State Board of
Equalization for the tax years 1984 to 1988 resulted in a proposed
assessment of approximately $12 million (exclusive of interest and
penalty) in October 1991, which was subsequently reduced to $8.7
million. The Company is contesting the assessment at the administrative
level and believes that amounts paid and accrued are adequate.
On December 2, 1992, Hughes Aircraft Company ("Hughes") filed an
action in the U.S. District Court for the Eastern Division of the
Northern District of Illinois alleging the Company had infringed U.S.
Patents Nos. 3,742,712; 3,507,709; and 3,615,934 and seeking unspecified
amounts of damages and
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costs. The Company was served with the suit on January 7, 1993. The
Company believes the claims are without merit and has filed a
counterclaim against Hughes' parent, General Motors Corporation ("GM")
alleging infringement of U.S. Patents Nos. 3,901,735; 4,325,984; and
4,599,634 owned by the Company. The case has been transferred to the
U.S. District Court for the Northern District of California. The
Company believes that the ultimate resolution of this matter will not
have a material impact on the Company's financial position.
By letter dated January 6, 1994, the Company was notified by the
California Department of Toxic Substances Control ("DTSC") of a Report
of Violation ("ROV") listing 39 violations arising out of inspections
of certain facilities and operations of the Company located in Santa
Clara, California and the DTSC's further review of information obtained
during the inspections. The deficiencies cited can be described as
violations of various provisions of the California Health and Safety
Code and the California Code of Regulations relating to the record
keeping for and the handling, treatment, storage, and disposal of
hazardous products and wastes. The Company is working to correct the
deficiencies noted in the ROV. Although the Company has not yet
received any notification that the state is seeking monetary sanctions
connected with the ROV, the Company does expect that if the state does
institute proceedings seeking monetary sanctions, the amount involved
may exceed $100,000 (the amount specified in Instruction 5c to Item 103
of Regulation S-K of the Securities and Exchange Commission) but will
not have a material adverse effect on the Company's financial position.
The Company has been named to the National Priorities List
("Superfund") for its Santa Clara, California site and has completed a
Remedial Investigation/Feasibility Study with the Regional Water Quality
Control Board ("RWQCB"), acting as agent for the U.S. Environmental
Protection Agency ("EPA"). The Company has agreed in principle with the
RWQCB to a site remediation plan. The Company believes adequate
provisions have been recorded and that its potential liability, if any,
in excess of amounts already accrued for the site remediation plan will
not have a material adverse effect upon its financial position. In
addition to the Santa Clara site, the Company has been designated as a
potentially responsible party by federal and state agencies with respect
to certain waste sites with which the Company may have had direct or
indirect involvement. Such designations are made regardless of the
extent of the Company's involvement. These claims are in various stages
of administrative or judicial proceedings and include demands for
recovery of past governmental costs and for future investigations and
remedial actions. In many cases, the dollar amounts of the claims have
not been specified and have been asserted against a number of other
entities for the same cost recovery or other relief as was asserted
against the Company. The Company accrues costs associated with such
matters when they become probable and reasonably estimable. The amount
of all environmental charges to earnings, including charges relating to
the Santa Clara site remediation, which did not include potential
reimbursements from insurance coverage, have not been material during
the last three fiscal years. The Company believes that the potential
liability, if any, in excess of amounts already accrued will not have a
material effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the
fiscal year covered by this report.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Name Current Title Age
- - ---- ------------- ---
Gilbert F. Amelio (1) President and Chief Executive Officer 51
Richard M. Beyer (2) President, Communications and Computing Group 45
Patrick J. Brockett (3) President, International Business Group 46
Charles P. Carinalli (4)Senior Vice President and 46
Chief Technical Officer
John M. Clark III (5) Senior Vice President, General Counsel 44
and Secretary
Robert G. MacLean (6) Vice President, Human Resources 50
Donald Macleod (7) Senior Vice President, Finance and 45
Chief Financial Officer
Robert B. Mahoney (8) Controller 41
R. Thomas Odell (9) President, Standard Products Group 45
Edgar R. Parker (10) Senior Vice President, 54
Quality and Reliability
Kirk P. Pond (11) Executive Vice President and 50
Chief Operating Officer
Richard L. Sanquini (12)Senior Vice President, 59
Business Development and
Intellectual Property Protection
George M. Scalise (13) Senior Vice President and 60
Chief Administrative Officer
Business Experience During Last Five Years
- - ------------------------------------------
(1) Mr. Amelio has been President, Chief Executive Officer, and a
Director of the Company since joining the Company in February 1991.
Prior to joining the Company, Mr. Amelio was President of Rockwell
Communications Systems and had previously served as President of
Rockwell International Corporation's Semiconductor Products Division.
(2) Mr. Beyer joined the Company in February 1993. Prior to joining
the Company, Mr. Beyer was Vice President and General Manager of the
Switching Systems Division of Rockwell International Corporation.
<PAGE>
(3) Mr. Brockett joined the Company in September 1979. Prior to
becoming President, International Business Group in February 1993, he
had held positions as Corporate Vice President, International Business
Group; Vice President, North America Business Center; Vice President and
Managing Director, European Operations; and Vice President and Director
of European Sales.
(4) Mr. Carinalli joined the Company in June 1970. Prior to
becoming Senior Vice President and Chief Technical Officer in February
1993, he was Executive Vice President, Communications and Computing
Group and Chief Technical Officer. Prior to that, he had held positions
as Vice President, Integrated Systems Group; Group Director, Integrated
Systems Group; and Director of Technology, Advanced Digital Products.
(5) Mr. Clark joined the Company in May 1978. Prior to becoming
Senior Vice President, General Counsel and Secretary in April 1992, he
had held positions as Associate General Counsel, Vice President and
Assistant Secretary.
(6) Mr. MacLean joined the Company in November 1992 and held the
position as Human Resources Director, Americas Division until he became
Vice President, Human Resources in February 1993. Prior to joining the
Company, Mr. MacLean held positions as the European Human Resources
Director for Quantum Corporation and the International Human Resources
Manager for Spectra-Physics, Inc.
(7) Mr. Macleod joined the Company in February 1978. Prior to
becoming Senior Vice President, Finance and Chief Financial Officer in
June 1991, he had held positions as Vice President, Finance and Chief
Financial Officer; Vice President, Financial Projects; Vice President
and General Manager, Volume Products - Europe; and Director of Finance
and Management Services - Europe.
(8) Mr. Mahoney joined the Company as an employee of Fairchild
Semiconductor Corporation ("Fairchild") when Fairchild was acquired by
the Company in October 1987. Prior to becoming Controller of the
Company in October 1990, he served as Director of Finance for Worldwide
Marketing and Sales.
(9) Mr. Odell joined the Company in March 1974. Prior to becoming
President, Standard Products Group in June 1994, he had held positions
as Co-President, Standard Products Group; Vice President, Analog
Division and Santa Clara Foundry Director.
(10) Mr. Parker joined the Company in July 1974. Prior to becoming
Senior Vice President, Quality and Reliability in February 1993, he had
held positions as Senior Vice President, Quality and Strategic
Operations; Senior Vice President, Military/Aerospace Division; Vice
President and General Manager, Military/Aerospace Division; and Vice
President and General Manager, Microcomputer Division.
(11) Mr. Pond joined the Company as an employee of Fairchild in
October 1987. Prior to becoming Executive Vice President and Chief
Operating Officer in June 1994, he held positions as Co-President,
Standard Products Group and Vice President, Digital Logic Division.
(12) Mr. Sanquini first joined the Company in August 1980 and held
the position of Vice President, Microcomputer Division at the time of
his departure in June 1989. From June 1989 until November 1989, Mr.
Sanquini was President and Chief Executive Officer of Information
Storage Devices. Mr. Sanquini rejoined the Company in November 1989,
and prior to becoming Senior Vice President, Business Development and
Intellectual Property Protection in August 1991, he held positions as
acting Senior Vice President, Planning and Development and Vice
President, Corporate Strategic Projects.
<PAGE>
(13) Mr. Scalise joined the Company in August 1991 as Senior Vice
President, Planning and Development and was appointed Senior Vice
President and Chief Administrative Officer in April 1992. Prior to
joining the Company, Mr. Scalise served as Senior Vice President of
Advanced Micro Devices, Inc. until July 1987 and as President and Chief
Executive Officer of Maxtor Corporation from July 1987 to January 1991.
From January 1991 until August 1991, Mr. Scalise was a private investor,
and Chairman and Chief Executive Officer of Advantage Production
Technology Corporation.
Executive officers serve at the pleasure of the Company's Board of
Directors. There is no family relationship among any of the Company's
directors and executive officers.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
See information appearing on pages 36-37,39-40,45-46 and 50 under the captions
"Debt Financing", "Shareholders' Equity", "Financial Information by
Quarter (Unaudited)" and "Common Stock Data" of the registrant's 1994
Annual Report to Shareholders which is incorporated herein by reference.
Market price range data are based on the New York Stock Exchange
Composite Tape. Market price per share at the close of business on July
22, 1994 was $16.250. At July 22, 1994, the number of record holders of
the Company's common stock was 13,413.
ITEM 6. SELECTED FINANCIAL DATA
See "Five-Year Selected Financial Data" on page 23 of the registrant's
1994 Annual Report to Shareholders which is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 24 through 28 of the registrant's 1994
Annual Report to Shareholders which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements described in Item 14(a)1 of Part IV of this
report are incorporated herein by reference.
The "Financial Information by Quarter (Unaudited)," appearing on
page 45 of the registrant's 1994 Annual Report to Shareholders, is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to directors, appearing under the caption
"Election of Directors" including subcaptions thereof, in the
registrant's Proxy Statement for the 1994 annual meeting of shareholders
to be held on or about September 30, 1994 and which will be filed in
definitive form pursuant to Regulation 14a on or about August 10, 1994
(hereinafter "1994 Proxy Statement"), is incorporated herein by
reference. Information concerning executive officers is set forth in
Part I hereof under the caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the caption "Director Compensation",
"Compensation Committee Interlocks and Insider Participation", and
"Executive Compensation" (including all related sub captions thereof) in
the 1994 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information concerning the only known ownership of more than 5
percent of the Company's outstanding Common Stock "Outstanding Capital
Stock, Quorum and Voting" in the 1994 Proxy Statement, is incorporated
herein by reference. The information concerning the ownership of the
Company's equity securities by directors, certain executive officers and
directors and officers as a group, appearing under the caption "Security
Ownership of Management" in the 1994 Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the caption "Compensation Committee
Interlocks and Insider Participation" and "Certain Transactions and
Relations" in the 1994 Proxy Statement is incorporated herein by
reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
- - ---------------------------
The following items appearing in the 1994 Annual Report to Shareholders
are incorporated by reference into Part II of this report:
Pages in 1994 Annual
Report to Shareholders
----------------------
Consolidated Balance Sheets at May 29, 1994 29
and May 30, 1993.
Consolidated Statements of Operations for each 30
of the years in the three-year period ended
May 29, 1994.
Consolidated Statements of Shareholders' Equity 31
for each of the years in the three-year period
ended May 29, 1994.
Consolidated Statements of Cash Flows for each 32
of the years in the three-year
period ended May 29, 1994.
Notes to Consolidated Financial Statements. 33-46
Independent Auditors' Report. 47
Pages in
(a)2. Financial Statement Schedules this document
- - ------------------------------------ -------------
For the three years ended May 29, 1994:
Independent Auditors' Report 18
Schedule I -- Marketable Securities 19
Schedule II -- Amounts Receivable from Related Parties
and Employees Other than Related Parties 20
Schedule V -- Property, Plant, and Equipment 21
Schedule VI -- Accumulated Depreciation and
Amortization of Property, Plant,
and Equipment 22
Schedule VIII -- Valuation and Qualifying Accounts 23
Schedule X -- Supplementary Income Statement
Information 24
All other schedules are omitted since the required information is
inapplicable or the information is presented in the consolidated
financial statements or notes thereto.
<PAGE>
Separate financial statements of the registrant are omitted
because the registrant is primarily an operating company and all
subsidiaries included in the consolidated financial statements being
filed, in the aggregate, do not have minority equity interest or
indebtedness to any person other than the registrant in an amount which
exceeds five percent of the total assets as shown by the most recent
year-end consolidated balance sheet filed herein.
(a)3. Exhibits
- - ---------------
The exhibits listed in the accompanying Index to Exhibits on pages
27 through 28 of this report are filed or incorporated by reference as
part of this report.
(b) Reports on Form 8-K
- - ------------------------
No reports on Form 8-K were filed during the fiscal quarter ended
May 29, 1994.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
National Semiconductor Corporation:
Under date of June 10, 1994, we reported on the consolidated balance
sheets of National Semiconductor Corporation and subsidiaries as of May
29, 1994, and May 30, 1993, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years in
the three-year period ended May 29, 1994, as contained in the 1994
Annual Report to Shareholders. These consolidated financial statements
and our report thereon are incorporated by reference in the May 29, 1994
annual report on Form 10-K of National Semiconductor Corporation. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedules as listed under item 14(a)2. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement
schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set
forth therein.
KPMG PEAT MARWICK
San Jose, California
June 10, 1994
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE I -- MARKETABLE SECURITIES
At May 29, 1994
(in millions of dollars)
Principal Carrying
Title of Issue Amount Cost Market Value
- - -------------- --------- ---- ------ --------
Short-Term Marketable Securities(1)
- - -------------------------------------
Government Securities $ 25.6 $ 25.6 $ 25.6 $ 25.6
Time Deposits 18.0 18.0 18.0 18.0
Commercial Paper 3.4 3.4 3.4 3.4
Corporate Notes 21.7 21.7 21.7 21.7
------- ------- ------- -------
Total Short-term Marketable
Securities $ 68.7 $ 68.7 $ 68.7 $ 68.7
Long-Term Marketable Securities(1)
- - ------------------------------------
Government Securities $ 18.0 $ 18.0 $ 17.9 $ 17.9
Corporate Notes 3.0 3.0 3.0 3.0
------- ------- ------- -------
Total Long-term Marketable
Securities $ 21.0 $ 21.0 $ 20.9 $ 20.9
(1) Except as disclosed, no individual security or group of securities
exceeds 2 percent of total assets.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND EMPLOYEES OTHER THAN RELATED PARTIES
Years Ended May 31, 1992, May 30, 1993, and May 29, 1994
Balance at
beginning Balance at
Year Name of year Additions Collections end of year
- - ---- ---- ---------- --------- ----------- -----------
1992 Peter J. Sprague(1) $645,000 $ - $ 52,800 $592,200
1992 Gilbert F. Amelio(2)$486,000 $ - $ 32,807 $453,193
1993 Peter J. Sprague $592,200 $ 36,790(3) $104,000 $524,990
1993 Gilbert F. Amelio $453,193 $ 30,107(3) $ 20,268 $463,032
1994 Peter J. Sprague $524,990 $ 19,912(3) $ 46,245 $498,657
1994 Gilbert F. Amelio $463,032 $ 31,327(3) $ 31,500 $462,859
1994 Kelvin Phillips $ - $101,285(4) $ - $101,285
1994 James M. Thorburn $ - $100,978(5) $ - $100,978
_____________________________________
(1) The loan is payable on demand with interest at the rate of bank
prime plus one percent, which was 7.75 percent at May 29, 1994. As
security for the loan, Mr. Sprague has pledged certain stock held by him
in a privately held company.
(2) The original loan signed in fiscal 1991 did not bear interest and
was secured by the deed of trust on Mr. Amelio's former personal
residence in Texas. During fiscal 1992, the residence was sold and a
substantial portion of the outstanding principal was replaced with an
unsecured promissory note, which is payable on demand and bears simple
interest at the rate of 7.0 percent.
(3) Represents interest accrued in accordance with the terms described
in (1) and (2).
(4) 7.0 percent interest bearing loan secured by personal residence, due
March 31,1999 and interest accrued in accordance with such terms.
(5) 7.0 percent interest bearing loan secured by personal residence, due
April 8,1999 and interest accrued in accordance with such terms.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
(in millions of dollars)
Balance
Balance at at end
beginning Additions Retire- of
Classification of period at cost (1) ments (2) Other(3) period
- - -------------- ---------- ----------- --------- -------- -------
Year ended May 31, 1992
- - -----------------------
Land $ 9.7 $ - $ 0.2 $ - $ 9.5
Buildings and
improvements 310.3 12.9 38.4 - 284.8
Leasehold improvements 46.3 1.3 3.5 - 44.1
Machinery and equipment 1,175.9 111.1 113.5 - 1,173.5
Construction in progress 60.7 64.1 1.8 - 123.0
-------- ------- ------- ------- -------
$1,602.9 $ 189.4 $ 157.4 $ - $1,634.9
======== ======== ======= ======= ========
Year ended May 30, 1993
- - -----------------------
Land $ 9.5 $ 0.7 $ 0.7 $ (0.6)$ 8.9
Buildings and
improvements 284.8 18.5 31.2 (11.5) 260.6
Leasehold improvements 44.1 15.0 2.1 - 57.0
Machinery and equipment 1,173.5 188.3 162.8 (46.9) 1,152.1
Construction in progress 123.0 12.6 1.9 - 133.7
-------- ------- ------- ------- -------
$1,634.9 $ 235.1 $ 198.7 $ (59.0)$1,612.3
======== ======== ======= ======= ========
Year ended May 29, 1994
- - -----------------------
Land $ 8.9 $ - $ - $ - $ 8.9
Buildings and
improvements 260.6 17.5 4.8 - 273.3
Leasehold improvements 57.0 16.1 5.5 - 67.6
Machinery and equipment 1,152.1 206.4 107.1 - 1,251.4
Construction in progress 133.7 30.7 - - 164.4
-------- ------- ------- ------- -------
$1,612.3 $ 270.7 $ 117.4 $ - $1,765.6
======== ======== ======= ======= ========
____________________________________________
(1) Additions are shown net of transfers to other asset accounts.
(2) Includes assets retired in conjunction with restructuring
programs.
(3) During fiscal 1993, National sold its assembly and test facility
in Bangkok, Thailand. Property, plant and equipment totaling
approximately $59.0 million was disposed on the effective date of the
sale.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT, AND EQUIPMENT
(in millions of dollars)
Balance
Balance at at end
beginning Retire- of
Classification of period Provisions(1)ments (2) Other(3) period
- - -------------- --------- ----------- --------- -------- -------
Year ended May 31, 1992
- - -----------------------
Buildings and
improvements $ 148.2 $ 18.2 $ 16.4 $ - $ 150.0
Leasehold improvements 27.4 3.6 2.8 - 28.2
Machinery and equipment 899.9 137.8 99.7 - 938.0
-------- -------- ------- ------ -------
$1,075.5 $159.6 $118.9 $ - $1,116.2
======== ======== ======= ====== =======
Year ended May 30, 1993
- - -----------------------
Buildings and
improvements $ 150.0 $ 17.0 $ 21.8 $ (7.4) $ 137.8
Leasehold improvements 28.2 3.6 1.9 - 29.9
Machinery and equipment 938.0 132.0 161.6 (41.2) 867.2
-------- -------- ------- ------- -------
$1,116.2 $152.6 $185.3 $(48.6) $1,034.9
======== ======== ======= ======= =======
Year ended May 29, 1994
- - -----------------------
Buildings and
improvements $ 137.8 $ 16.3 $ 1.7 $ - $ 152.4
Leasehold improvements 29.9 4.8 3.5 - 31.2
Machinery and equipment 867.2 146.0 99.2 - 914.0
-------- -------- ------- ------ ------
$1,034.9 $ 167.1 $ 104.4 $ - $1,097.6
======== ======== ======= ====== =======
______________________________________________
(1) Depreciation is provided using both accelerated and straight-
line methods over the estimated useful lives of the respective assets.
Annual depreciation and amortization provisions have been computed based
upon the following estimated useful lives:
Buildings and improvements. . . . . . .10 to 45 years
Machinery and equipment . . . . . . . 3 to 10 years
(2) Includes amounts retired in conjunction with restructuring
programs.
(3) During fiscal 1993, National sold its assembly and test facility
in Bangkok, Thailand. Accumulated depreciation on property, plant and
equipment totaling approximately $48.6 million was disposed on the
effective date of the sale.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
Years Ended May 31, 1992, May 30, 1993, and May 29,1994
(in millions of dollars)
Deducted from receivables
in the balance sheet
Doubtful Returns and
Description Accounts Allowances Total
- - ----------- -------- ----------- -----
Year ended May 31, 1992
- - -----------------------
Balance at beginning of period $ 4.7 $ 43.4 $ 48.1
Additions charged against revenue - 221.5 221.5
Additions charged to costs and expenses (0.5) - (0.5)
Deductions (0.7)(1) (229.2) (229.9)
-------- -------- --------
Balance at end of period $ 3.5 $ 35.7 $ 39.2
======== ======== ========
Year ended May 30, 1993
- - -----------------------
Balance at beginning of period $ 3.5 $ 35.7 $ 39.2
Additions charged against revenue - 222.9 222.9
Additions charged to costs and expenses 0.1 - 0.1
Deductions (0.1)(1) (229.1) (229.2)
------- ------- --------
Balance at end of period $ 3.5 $ 29.5 $ 33.0
======= ======= ========
Year ended May 29, 1994
- - -----------------------
Balance at beginning of period $ 3.5 $ 29.5 $ 33.0
Additions charged against revenue - 193.2 193.2
Additions charged to costs and expenses (0.1) - (0.1)
Deductions (0.4)(1) (191.9) (192.3)
------- --------- --------
Balance at end of period $ 3.0 $ 30.8 $ 33.8
======== ========= ========
________________________________________________
(1) Doubtful accounts written off, less recoveries.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years Ended May 31, 1992, May 30, 1993, and May 29,1994
(in millions of dollars)
Charged to expense (1)
----------------------
1992 1993 1994
---- ---- ----
Maintenance and repairs $89.3 $83.8 $57.7
Advertising $17.9 $26.1 $35.9
____________________________________________
(1) Expense from continuing operations only. All other items
required are less than 1 percent of sales.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
NATIONAL SEMICONDUCTOR CORPORATION
Date: July 28, 1994 By: /S/ GILBERT F. AMELIO
----------------------
Gilbert F. Amelio
Director, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities stated and on the 28th day of July
1994.
Signature Title
/S/ PETER J. SPRAGUE* Chairman of the Board
Peter J. Sprague
/S/ GILBERT F. AMELIO Director, President and
Gilbert F. Amelio Chief Executive Officer
(Principal Executive Officer)
/S/ DONALD MACLEOD* Senior Vice President, Finance and
Donald Macleod Chief Financial Officer
(Principal Financial Officer)
/S/ ROBERT B. MAHONEY* Controller
Robert B. Mahoney (Principal Accounting Officer)
/S/ GARY P. ARNOLD* Director
Gary P. Arnold
/S/ ROBERT BESHAR* Director
Robert Beshar
/S/ MODESTO A. MAIDIQUE* Director
Modesto A. Maidique
/S/ J. TRACY O'ROURKE* Director
J. Tracy O'Rourke
/S/ CHARLES E. SPORCK* Director
Charles E. Sporck
/S/ DONALD E. WEEDEN* Director
Donald E. Weeden
*By /S/ GILBERT F. AMELIO
Gilbert F. Amelio, Attorney-in-fact
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
National Semiconductor Corporation:
We consent to incorporation by reference in the Registration
Statements No. 33-48943, 33-48939 and 33-48941 on Form S-8 of National
Semiconductor Corporation and subsidiaries of our report dated June 10,
1994, relating to the consolidated balance sheets of National
Semiconductor Corporation and subsidiaries as of May 29, 1994, and May
30, 1993, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the years in the three-
year period ended May 29, 1994, which report appears on page 47 of the
1994 National Semiconductor Corporation Annual Report to Shareholders
("National Annual Report") and is incorporated by reference in the May
29, 1994 annual report on Form 10-K of National Semiconductor
Corporation and our report dated June 10, 1994, on the related financial
statement schedules which appears on page 18 of the May 29, 1994 annual
report on Form 10-K. Our report which appears in the National Annual
Report refers to a change in accounting for certain costs in inventory.
KPMG PEAT MARWICK
San Jose, California
July 25, 1994
<PAGE>
INDEX TO EXHIBITS
Item 14(a) (3)
The following documents are filed as part of this report:
1. Financial Statements: reference is made to the Financial
Statements described under Part IV, Item 14(a) (1).
2. Other Exhibits:
Designation Description of Exhibit
- - ----------- ----------------------
3.1 Second Restated Certificate of Incorporation of the
Company, as amended (incorporated by reference from the Exhibits to the
Company's Registration Statement on Form S-3 Registration No. 33-52775,
which became effective March 22, 1994); Certificate of Powers,
Designations, Preferences and Rights designating the $32.50 Convertible
Preferred Stock (incorporated by reference from the Exhibits to the
Company's Registration Statement on Form S-3 Registration No. 33-52775,
which became effective March 22, 1994.)
3.2 By-Laws of the Company (incorporated by reference from the
Exhibits to the Company's Registration Statement on Form S-3
Registration No. 33-52775, which became effective March 22, 1994.)
4.1 Form of Common Stock Certificate (incorporated by
reference from the Exhibits to the Company's Registration Statement on
Form S-3 Registration No. 33-48935, which became effective October 5,
1992.)
4.2 Rights Agreement (incorporated by reference from the
Exhibits to the Company's Registration Statement on Form 8-A filed
August 10, 1988.)
4.3 Deposit Agreement and Form of Depositary Receipt
(incorporated by reference from the Exhibits to the Company's
Registration Statement on Form S-3 Registration No. 33-52775, which
became effective March 22, 1994.)
NOTE: Exhibits 10.X follow Exhibit 21.0 in this Edgar filing.
10.1 Management Contract or Compensatory Plan or Arrangement:
License Agreement with Wave Systems Corporation (incorporated by
reference from the Exhibits to the Company's 10-Q filed March 18,1994.)
10.2 Management Contract or Compensatory Plan or Arrangement:
Key Employee Incentive Plan (incorporated by reference from the Exhibits
to the Company's 10-K filed August 24, 1992). Key Employee Incentive
Plan, as amended.
10.3 Management Contract or Compensatory Plan or Arrangement:
1994 Key Employee Incentive Plan Agreement (incorporated by reference
from the Exhibits to the Company's 10-K filed August 9, 1993). 1995 Key
Employee Incentive Plan Agreement.
10.4 Management Contract or Compensatory Plan or Arrangement:
Executive Officer Incentive Plan and 1995 Executive Officer Incentive
Plan Agreement.
10.5 Management Contract or Compensatory Plan or Arrangement:
1977 Stock Option Plan (Amended) (incorporated by reference from the
Exhibits to the Company's Form 10-K, filed August 17, 1990). Stock
Option Plan, as amended and restated.
10.6 Management Contract or Compensatory Plan or Arrangement:
Benefit Restoration Plan (incorporated by reference from the Exhibits to
the Company's 10-K filed August 24, 1992).
<PAGE>
10.7 Management Contract or Compensatory Plan or Arrangement:
Promissory Note and Agreement with Peter J. Sprague (incorporated by
reference from the Exhibits to the Company's Form 10-K filed August 22,
1991). Amendment Letter dated November 30, 1993.
10.8 Management Contract or Compensatory Plan or Arrangement:
Airplane Use Letter Agreement with Gilbert F. Amelio doing business as
Aero Ventures (incorporated by reference from the Exhibits to the
Company's Form 10-K filed August 22, 1991). 1992 Extension of Airplane
Use Letter Agreement with Gilbert F. Amelio doing business as Aero
Ventures (incorporated by reference from the Exhibits to the Company's
10-K filed August 24, 1992). 1993 Extension of Airplane Use Letter
Agreement with Gilbert F. Amelio doing business as Aero Ventures
(incorporated by reference from the Exhibits to the Company's 10-K filed
August 9, 1993). Airplane Use Agreement with Gilbert F. Amelio doing
business as Aero Ventures (incorporated by reference from the Exhibits
to the Company's 10-Q filed March 18, 1994.)
10.9 Management Contract or Compensatory Plan or Arrangement:
Bridge Loan Agreement with Gilbert F. Amelio (incorporated by reference
from the Exhibits to the Company's Form 10-K filed August 22, 1991).
Loan Agreement with Gilbert F. Amelio (incorporated by reference from
the Exhibits to the Company's 10-K filed August 24, 1992.)
10.10 Management Contract or Compensatory Plan or Arrangement:
Director Stock Plan (incorporated by reference from the Exhibits to the
Company's definitive Proxy Statement for the Annual Meeting of
Stockholders held October 30, 1992 filed on September 17, 1992.)
10.11 Management Contract or Compensatory Plan or Arrangement:
Performance Award Plan (incorporated by reference from the Exhibits to
the Company's 10-K filed August 24, 1992.)
10.12 Management Contract or Compensatory Plan or Arrangement:
Compensation arrangement with Richard M. Beyer (incorporated by
reference from the Exhibits to the Company's 10-K filed August 9, 1993.)
10.13 Management Contract or Compensating Plan or Arrangement:
Settlement Agreement and General Release with Raymond J. Farnham
(incorporated by reference from the Exhibits to the Company's 10-K filed
August 9, 1993.)
10.14 Management Contract or Compensatory Plan or Arrangement:
Consulting Agreement with Harry H. Wetzel.
10.15 Management Contract or Compensatory Plan or Agreement:
Preferred Life Insurance Program.
11.0 Computation of Earnings (Loss) per share assuming full
dilution.
13.0 Portions of the Annual Report to Shareholders for the fiscal
year ended May 29, 1994 (to be deemed filed only to the extent required
by the instructions to Exhibits for reports on Form 10-K.)
18.0 Auditor's Preferability Letter on Accounting Change
(incorporated by reference from the exhibits to the Company's 10-Q filed
September 29,1993.)
21.0 List of Subsidiaries.
23.0 Consent of Independent Auditors (included in Part IV).
24.0 Power of Attorney.
<PAGE>
NOTE: Exhibits 10.X follow Exhibit 21.0 in this Edgar filing.
Exhibit 11.0
NATIONAL SEMICONDUCTOR CORPORATION
CALCULATION OF EARNINGS (LOSS) PER SHARE-ASSUMING FULL DILUTION (1)
(in millions, except per share amounts)
Year ended
---------------------------
May 29, May 30, May 31
1994 1993 1992
------ ------ ------
Net earnings (loss) before cumulative
effect of accounting change $259.1 $130.3 $(120.1)
Cumulative effect of accounting change 4.9 - -
------- ------ -------
Net income (loss) $264.0 $130.3 $(120.1)
======= ====== =======
Number of shares:
Weighted average common shares
outstanding 113.0 107.4 104.6
Net additional shares issuable from
exercise of options and warrants 8.8 9.0 6.1
Shares issuable from assumed
conversion of preferred shares 19.6 16.0 8.3
------ ------ ------
Weighted average common shares
outstanding - assuming full dilution 141.4 132.4 119.0
======= ======= ======
Earnings(loss) per share - assuming
full dilution before cumulative
effect of accounting change $1.83 $0.98 $(1.01)
Cumulative effect of accounting change 0.04 - -
------ ------ ------
Net earnings (loss) $1.87 $0.98 $(1.01)
======= ======= ======
______________________________________________
(1) For fiscal 1992, this calculation is submitted in accordance
with Regulation S-K Item 601(b)(11) although it is contrary to paragraph
40 of APB Opinion No. 15 because it produces an anti-dilutive result.
<PAGE>
Exhibit 13.0
NATIONAL SEMICONDUCTOR CORPORATION 1994 ANNUAL REPORT
5 YEAR SELECTED FINANCIAL DATA
(in millions, except per share amounts)
Years Ended
-----------------------------------------------
May 29, May 30, May 31, May 26, May 27,
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
OPERATING RESULTS
Net sales $2,295.4 $2,013.7 $1,717.5 $1,701.8 $1,675.0
Operating costs
and expenses 2,002.8 1,866.7 1,839.9 1,854.4 1,719.8
------- ------- ------- ------- -------
Operating income (loss) 292.6 147.0 (122.4) (152.6) (44.8)
Interest income, net 10.9 2.9 5.4 3.6 12.4
------- ------- ------- ------- -------
Income (loss) before
income taxes and
cumulative effect
of accounting change 303.5 149.9 (117.0) (149.0) (32.4)
Income taxes (benefit) 44.4 19.6 3.1 1.3 (3.1)
------- ------- ------- ------- -------
Income (loss) from
continuing operations
before cumulative
effect of accounting
change 259.1 130.3 (120.1) (150.3) (29.3)
======= ======= ======= ======= =======
Net income (loss) $ 264.0 $ 130.3 $(120.1) $(151.4) $ (25.0)
======= ======= ======= ======= =======
Net income (loss) used in primary
earnings per common share
calculation (reflecting
preferred dividends):
Income (loss) from
continuing operations
before cumulative effect
of accounting change $240.4 $ 113.2 $(130.1) $(160.3) $ (39.3)
Net income (loss) 245.3 113.2 (130.1) (161.4) (35.0)
======= ======= ======= ======= =======
Earnings (loss) per common share:
From continuing operations
before cumulative effect
of accounting change:
Primary $1.98 $ 0.98 $ (1.24) $ (1.55) $ (0.38)
Fully diluted $1.83 $ 0.98 $ (1.24) $ (1.55) $ (0.38)
Net income (loss):
Primary $2.02 $ 0.98 $ (1.24) $ (1.56) $ (0.34)
Fully diluted $1.87 $ 0.98 $ (1.24) $ (1.56) $ (0.34)
======= ======= ======= ======= =======
Weighted average common
and common equivalent
shares outstanding:
Primary 121.4 115.9 104.6 103.4 102.7
Fully diluted 141.4 115.9 104.6 103.4 102.7
======= ======= ======= ======= =======
FINANCIAL POSITION AT YEAR-END
Working capital $ 439.0 $ 336.6 $ 122.0 $ 196.1 $ 223.4
Total assets $1,747.7 $1,476.5 $1,148.9 $1,190.7 $1,377.6
Long-term debt $ 14.5 $ 37.3 $ 33.9 $ 19.9 $ 64.2
Total debt $ 30.1 $ 47.9 $ 45.4 $ 46.0 $ 76.2
Shareholders' equity $1,105.7 $ 837.4 $ 539.4 $ 658.3 $ 816.8
======= ======= ======= ======= =======
OTHER DATA
Research and development
expense $ 257.8 $ 229.2 $ 208.9 $ 198.6 $ 252.4
Capital additions $ 270.7 $ 235.1 $ 189.4 $ 109.8 $ 182.0
Number of employees at
(in thousands) 22.3 23.4 27.2 29.8 32.7
======= ======= ======= ======= =======
National has paid no cash dividends on its common stock in any of the
years presented above.
See Note 3 to the Consolidated Financial Statements regarding certain
reclassifications of expenses.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
National recorded sales of $2.3 billion in 1994 compared to $2.0 billion
in 1993 and $1.7 billion in 1992. In addition, net income was $264.0
million in 1994 compared to $130.3 million in 1993 and a net loss of
$120.1 million in 1992. Net results in 1994 include a $4.9 million gain
from a change in accounting (see Note 3) and a favorable $2.6 million
restructuring adjustment (see Note 2). The increase in net income in
both 1994 and 1993 was due primarily to increased sales combined with
improved gross margins. The loss in 1992 was primarily attributable to
restructuring charges of $149.3 million.
Fiscal 1994 and 1993 were each 52-week years while fiscal 1992 was
a 53-week year. While the additional week did affect overall sales and
spending during fiscal 1992, the comparability of the annual financial
results from year to year was not materially impacted.
Sales
Sales increased 14 percent in 1994 over 1993 relating primarily to
growth in the Company's Standard Products Group ("SPG") as a result of
increased unit volumes and to a lesser extent, increased average selling
prices. These increases were complemented by higher sales in the
Communications and Computing Group ("CCG") resulting from increased
volumes, partially offset by aggressive pricing actions, particularly in
Ethernet local area network ("LAN") sales. End user markets for the
Company's products are diversified, but are focused in personal
computers, telecommunication and switching systems, automotive, and mass
storage.
Within SPG, analog intensive products contributed to the majority
of the increase in sales year over year, reflecting increases in unit
volume and to a lesser extent, increases in the average selling price.
In addition, the Data Management division, which focuses on digital
logic and mass storage applications, also experienced increased sales as
growth in advanced logic products more than offset declines in older
commodity logic products. Sales of memory products also increased over
the prior year, primarily due to increases in unit volume.
The Company's CCG sales increased in 1994 over 1993, reflecting
increases in unit sales for its Embedded Systems and Wide Area Networks
("WAN") divisions, combined with slight increases in average selling
prices. Total Ethernet sales decreased slightly from the prior year,
reflecting higher volume sales but lower prices, due to aggressive
pricing actions taken during the year.
The increase in SPG sales in 1993 over 1992 relates to increased
unit volume in the Analog, Memory and Data Management divisions and
increased prices on certain products, as well as better product mix,
within the Data Management division. The increase in CCG sales in 1993
compared to 1992 reflects higher average selling prices and increased
volume in the Embedded Systems division and higher Token Ring product
sales, as well as increases in certain products within the LAN division.
Sales increased from 1993 to 1994 in all geographic regions with
Europe at 20 percent, Asia at 19 percent, and the Americas at 8 percent.
Within the Asia region, Japan increased 27 percent. The Americas, Asia,
and Europe regions account for 44 percent, 34 percent ,and 22 percent of
net sales, respectively.
In 1993, the Americas region accounted for 47 percent of net
sales, followed by Asia at 33 percent and Europe at 20 percent. Asia
increased 29 percent from 1992 whereas increases in Americas and Europe
were 13 percent and 11 percent, respectively.
Although future business conditions are difficult to predict, the
Company a slightly slower growth rate in both SPG and CCG sales during
1995 as the Company continues to focus on segments in the automotive
market, personal computers, mass storage, business communications, and
telecommunications.
<PAGE>
Gross Margin
Gross margin as a percentage of net sales improved to 41.8 percent in
1994 from 35.5 percent in 1993 and 31.2 percent in 1992 (as
reclassified, see Note 3), representing significant increases in both
SPG and CCG. The improvement in gross margin was driven by improved
sales mix through the introduction of newer, higher margin products and
reduced offerings of older products. In addition, utilization of wafer
fabrication capacity continues to improve and was just above 90 percent
at the end of fiscal 1994. This is an improvement from 85 percent at
the end of 1993 and nearly 80 percent at the end of 1992. The
improvement in gross margin in fiscal 1993 over 1992 was attributable to
higher volume, improved manufacturing efficiencies, reductions in the
Company's cost structure as a result of its continuing restructuring
plan and a continued shift towards higher margin products.
Management believes wafer fabrication capacity utilization will
decrease slightly during the next fiscal year. Gross margin as a
percentage of net sales is expected to remain at equivalent levels in
fiscal 1995, subject to market influences.
Research and Development
Research and development ("R&D") expenses were $257.8 million for fiscal
1994, or 11.2 percent of sales, compared to $229.2 million, or 11.4
percent and $208.9 million, or 12.2 percent of sales for 1993 and 1992,
respectively. The Company's spending on R&D has increased in absolute
dollars although it has marginally decreased as a percentage of sales
compared to 1993. The dollar increase was mainly due to increased
spending in analog intensive and communication products. The dollar
increase in 1993 was attributed primarily to analog intensive products,
networking products, and various emerging products. The Company expects
to maintain future R&D at a level comparable with fiscal 1994 as a
percentage of sales. National will continue to direct its R&D efforts
toward high potential markets in automotive, personal computers, mass
storage, business communications, and telecommunications markets.
Selling, General and Administrative
Selling, general and administrative ("SG&A") expenses increased to
$411.3 million, or 17.9 percent of sales in 1994 from $339.2 million, or
16.8 percent in 1993, and $299.6 million, or 17.4 percent of sales in
1992. SG&A expenses in fiscal 1994 include a charge of $10.1 million
for consolidation of sales and marketing facilities in the Company's
international business regions offset by net intellectual property
income of $15.9 million and a gain on the sale of a minority investment
of $2.2 million. Equivalent amounts for fiscal 1993 were $43.7 million
for net intellectual property income, partially offset by $11.9 million
for tax case (see Note 6) related legal expenses, $10.1 million
representing costs of centralizing sales and logistics facilities within
the Company's international business regions, and $4.7 million in a
write down of a minority investment. Fiscal 1992 SG&A included a credit
of $21.6 million in net intellectual property income. The Company
continues to pursue opportunities to leverage its intellectual property;
however, the timing and amount of future licensing income cannot be
forecast with certainty at this time.
Exclusive of the above items, SG&A expenses for 1994 were $419.3
million, or 18.3 percent of sales, compared to $356.2 million, or 17.7
percent of sales in 1993 and $321.2 million or 18.7 percent of sales in
1992. The growth in SG&A expenses was fueled by increased contributions
to certain employee, compensation, and benefit plans, including the
employee retirement and savings program, and additional product
advertising and related promotional costs. In addition, as the sales
continue to increase a general increase in selling expenses is incurred.
SG&A expenses in fiscal 1993
<PAGE>
increased in absolute dollars primarily due to increased investments in
marketing, advertising, and training programs. Increased cost of
certain employee benefit plans, including increased contributions to
employee retirement and savings programs, also contributed to the
increase in SG&A for 1993. The Company will continue to emphasize its
investments in market development and employee benefit programs in 1995;
however, fiscal 1995 SG&A expenses are not expected to differ
significantly from those of fiscal 1994 as a percentage of sales.
Restructuring of Operations
Included in 1994 results is a favorable pretax restructuring adjustment
of $2.6 million resulting from a reversal of $24.2 million, originally
provided in 1992, offset by $21.6 million in new charges identified by
the Company for activities to be completed in fiscal 1995. The fiscal
1992 restructuring related primarily to worldwide consolidations of
underutilized manufacturing operations, including write downs of certain
assets, work force reductions, and process transfers. The release of
the $24.2 million is attributable to the Company's decision not to sell
additional manufacturing facilities and a larger than anticipated gain
on the sale of a building housing the Company's former headquarters in
Asia.
During the fourth quarter of 1994, the Company identified new
restructuring requirements totaling $21.6 million (of which $7.7 million
is non-cash). Included in this amount are reserves totaling $10.0
million for the Company's wholly owned subsidiary, Dynacraft, Inc.
("DCI"), for consolidation of the DCI business and includes both fixed
asset dispositions and reductions in work force to bring capacity in
line with current and foreseeable business levels. The action also
includes the consolidation of one division within CCG, the consolation
of certain products, and the decentralization of product engineering
support functions. These actions resulted in a $6.8 million charge
primarily for involuntary severance and personnel relocation as well as
the write off of licensed technology associated with products no longer
supported by CCG. The last major element of the fiscal 1994
restructuring relates to a decision by the Company to discontinue
commercial manufacturing in a facility at the Santa Clara, California
location. The attendant reduction in staffing levels and asset
dispositions required a $4.8 million charge and include further
elimination of product testing at the Santa Clara, California facility.
During fiscal 1994, the Company utilized $44.2 million of
restructuring reserves, primarily attributable to the closure of a wafer
fabrication module in its Salt Lake, Utah facility, and a wafer
fabrication line in Santa Clara. Both of these closures were previously
announced. In addition, the Company completed most of the process
transfers from its Santa Clara, California facility to its Greenock,
Scotland fabrication facility and completed the transfer of Mil Aero
manufacturing to its Singapore facility. The Company continued to
reduce headcount and related infrastructure at its Santa Clara,
California facility.
During fiscal 1993, the Company continued the consolidation
activities related to the restructure charges recorded in fiscal 1992
and 1991. The Company sold its Bangkok, Thailand facility and also sold
its Migdal Haemek, Israel facility to a joint venture, in which the
Company has less than a 20 percent investment. The Company also
continued activities related to the closure of a fabrication module at
its Salt Lake, Utah location and announced the closure of a fabrication
module in Santa Clara, California.
In fiscal 1992, National incurred a restructuring charge of $149.3
million for the consolidation of underutilized manufacturing capacity
including a write down of certain assets, reductions in the work force,
and process transfers. In 1992, National closed manufacturing
facilities in Brazil and Hong Kong and ceased discrete wafer fabrication
operations in Santa Clara, California.
<PAGE>
Interest Income and Interest Expense
Net interest income was $10.9 million for 1994 compared to $2.9 million
in 1993 and $5.4 million in 1992. Interest income has increased due
primarily to higher average cash and investment balances in 1994 as
compared to 1993, as well as a slight increase in interest rates.
Interest expense decreased due to lower average outstanding debt
balances in 1994 over 1993. Net interest income was lower in 1993
compared to 1992 due primarily to lower rates of return on cash and
investment balances combined with higher interest expense.
Income Tax Expense
Income tax expense for 1994 was $44.4 million compared to $19.6 million
and $3.1 million in 1993 and 1992, respectively. The effective tax rate
in 1994 is higher than in 1993 primarily due to the exhaustion of
certain net operating loss carryforwards in 1994. The 1993 effective
tax rate increased compared to 1992 due to the exhaustion of certain
non-U.S. net operating loss carryforwards as well as Thai withholding
tax expense connected with the sale of the Company's former Bangkok
facility. Fiscal 1992 expense is primarily attributable to amounts
withheld offshore in relation to patent licensing income earned during
the year. In addition, 1992 expense includes amounts related to
operations in certain non-U.S. jurisdictions. The annual tax rate is
expected to rise modestly from 1994 levels as the Company continues to
exhaust net operating loss carryforwards.
The Semiconductor Industry
The semiconductor industry is characterized by rapid technological
change and frequent introduction of new technology leading to more
complex and powerful products. The result is a cyclical environment
with short product life, price erosion and high sensitivity to the
overall business cycle. In addition, substantial capital and R&D
investment is required for products and processes. The Company may
experience periodic fluctuations in its operating results because of
industry-wide conditions. These uncertainties can have a significant
impact on the Company's operating results. Accordingly, the Company
continues to develop target markets, focus on high manufacturing
utilization, and emphasize high-potential products.
Financial Condition
During the year, cash and cash equivalents increased $120.7 million from
$277.4 million to $398.1 million. In addition, marketable investments
increased from $68.3 million to $89.6 million. The increase in cash
during 1994 resulted from substantial improvements in cash provided from
operations as compared to fiscal 1993.
The Company generated $431.7 million positive cash flow from
operations during 1994 compared to $234.0 million during 1993,
principally as a result of higher earnings. Net cash used in investing
activities was relatively consistent year to year at $295.5 million
during 1994 and $297.1 million during 1993, primarily for capital
expenditures for property, plant and equipment and acquisitions of
marketable investments. The Company's capital expenditures of $270.7
million in 1994 were directed towards process improvements and
modernization of existing plants, which included continued expansion of
a CMOS fabrication facility in Arlington, Texas, an analog fabrication
facility in Greenock, Scotland, and a BiCMOS fabrication facility in
South Portland, Maine, and upgrading of assembly and test facilities in
Asia. Capital expenditures of $233.9 million in 1993 included expansions
in Arlington, Texas and Greenock, Scotland as well as upgrading of
assembly and test facilities in Asia. The Company expects fiscal 1995
capital expenditures to be above 1994 levels and directed toward process
improvements, modernization of existing plants, and continued expansion
of its Greenock, Scotland and South
<PAGE>
Portland, Maine facilities. In addition, the Company has signed a
letter of intent to repurchase the equity interest in the facility sale
and leaseback transactions made prior to 1990.
Cash used by financing activities was $15.5 million in 1994 as the
Company repaid debt and continued to pay dividends on its convertible
preferred stock. Due to the redemption and conversion of its
convertible exchangeable preferred stock during fiscal 1994, the annual
amount of preferred dividends paid will decrease. The Company also
repurchased 500,000 shares of common stock on the open market for $9.5
million. The Company is authorized by the Board of Directors to
repurchase up to 3.5 million shares of common stock at current market
prices prior to the end of calendar 1994. The cash outflow was
partially offset by proceeds from the issuance of common stock under
employee benefit plans. During 1993, net financing activities generated
$202.2 million cash flow, primarily from the issuance of convertible
preferred stock.
Management believes that existing cash and investment balances,
and existing lines of credit, together with cash provided by
operations, and cash generated from stock issuances to employees, will
be sufficient to fund anticipated capital expenditures and other
investing and financing activities, including common stock repurchases,
through the foreseeable future.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1994 ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
(in millions, except share amounts)
May 29, May 30,
1994 1993
------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 398.1 $ 277.4
Short-term marketable investments 68.7 54.4
Receivables, net 289.0 271.5
Inventories 212.7 189.6
Other current assets 47.9 49.4
------- -------
Total current assets 1,016.4 842.3
Property, plant and equipment, net 668.0 577.4
Long-term marketable investments 20.9 13.9
Other assets 42.4 42.9
------- -------
Total assets $1,747.7 $1,476.5
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 15.6 $ 10.6
Accounts payable 213.7 193.2
Accrued expenses 264.6 232.0
Income taxes 83.5 69.9
------- -------
Total current liabilities 577.4 505.7
Long-term debt 14.5 37.3
Deferred income taxes 18.6 16.9
Other non-current liabilities 31.5 79.2
------- -------
Total liabilities $ 642.0 $ 639.1
------- -------
Commitments and contingencies
Shareholders' equity:
Preferred stock of $0.50 par value.
Authorized 1,000,000 shares.
Convertible exchangeable preferred stock:
Issued and outstanding 250,000 shares in
1993 - 0.1
Convertible preferred stock:
Issued and outstanding 345,000 shares in
1994 and 1993 (liquidation preference
of $172.5 million) 0.2 0.2
Common stock of $0.50 par value. Authorized
200,000,000 shares. Issued and outstanding
122,800,095 in 1994; 109,737,830 in 1993 61.4 54.9
Additional paid-in capital 912.7 886.6
Retained earnings (deficit) 140.9 (104.4)
Treasury Stock, at cost: 500,000 shares (9.5) -
------- -------
Total shareholders' equity 1,105.7 837.4
------- -------
Total liabilities and
shareholders' equity $1,747.7 $1,476.5
======== ========
==================================
See accompanying Notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1994 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
Years Ended
--------------------------------
May 29, May 30, May 31,
1994 1993 1992
-------- -------- --------
Net sales $ 2,295.4 $ 2,013.7 $1,717.5
Operating costs and expenses:
Cost of sales 1,336.3 1,298.3 1,182.1
Research and development 257.8 229.2 208.9
Selling, general and administrative 411.3 339.2 299.6
Restructuring of operations (2.6) - 149.3
------- ------- -------
Total operating costs
and expenses 2,002.8 1,866.7 1,839.9
------- ------- -------
Operating income (loss) 292.6 147.0 (122.4)
Interest income, net 10.9 2.9 5.4
------- ------- -------
Income (loss) before income taxes
and cumulative effect of accounting
change 303.5 149.9 (117.0)
Income taxes 44.4 19.6 3.1
------- ------- -------
Income (loss) before cumulative
effect of accounting change 259.1 130.3 (120.1)
Cumulative effect of accounting change 4.9 - -
------- ------- -------
Net income (loss) $ 264.0 $ 130.3 $(120.1)
======== ======== ========
Earnings (loss) per share before
cumulative effect of accounting change:
Primary $ 1.98 $ 0.98 $ (1.24)
Fully diluted 1.83 0.98 (1.24)
------- ------- -------
Earnings (loss) per share:
Primary $ 2.02 $ 0.98 $ (1.24)
Fully diluted 1.87 0.98 (1.24)
======== ======== ========
Weighted average shares:
Primary 121.4 115.9 104.6
Fully diluted 141.4 115.9 104.6
======= ======== =======
Net income (loss) used in primary
earnings per common share calculation
(reflecting preferred dividends) $ 245.3 $ 113.2 $(130.1)
======= ======== ========
=====================================
See accompanying Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
NATIONAL SEMICONDUCTOR CORPORATION 1994 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Additional Retained
Convertible Common Treasury Paid-In Earnings
(in millions, except per share amounts) Exchangeable Convertible Stock Stock Capital (Deficit) Total
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at May 26, 1991 $0.1 $ - $52.0 $ - $693.7 $ (87.5) $ 658.3
Net Loss - - - - - (120.1) (120.1)
Convertible exchangeable preferred stock
dividends of $40.00 per share - - - - - (10.0) (10.0)
Issuance of commons stock under option,
purchase and award plans - - 1.2 - 10.0 - 11.2
- - --------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1992 0.1 - 53.2 - 703.7 (217.6) 539.4
Net Income - - - - - 130.3 130.3
Issuance of convertible perfeferred shares - 0.2 - - 166.6 - 166.8
Convertible preferred dividends of
$32.50 per share - - - - - (7.1) (7.1)
Convertible exchangeable preferred
dividends of $40.00 per share - - - - - (10.0) (10.0)
Issuance of common stock under option
and purchase plans - - 1.7 - 16.3 - 18.0
- - --------------------------------------------------------------------------------------------------------------------------
Balance at May 30, 1993 0.1 0.2 54.9 - 886.6 (104.4) 837.4
Net Income - - - - - 264.0 264.0
Redemption and conversion of convertible
exchangeable preferred stock (0.1) - 4.1 - (5.3) - (1.3)
Convertible exchageable preferred
dividends of $40.00 per share - - - - - (7.5) (7.5)
Convertible preferred dividends
of $32.50 per share - - - - - (11.2) (11.2)
Acquisition of treasury stock - - - (9.5) - - (9.5)
Issuance of common stock under option,
purchase, and profit sharing plans
and tax benefit of $2.0 - - 2.4 - 31.4 - 33.8
- - --------------------------------------------------------------------------------------------------------------------------
Balance at May 29, 1994 $ - $ 0.2 $ 61.4 $ (9.5) $ 912.7 $ 140.9 $1,105.7
==========================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1994 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended
------------------------------
May 29, May 30, May 31,
1994 1993 1992
------ ------ ------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 264.0 $ 130.3 $(120.1)
Adjustments to reconcile income (loss)
with net cash provided by operations:
Depreciation and amortization 173.8 159.8 167.0
Cumulative effect of accounting
change (4.9) - -
Non-cash restructuring charges - - 35.4
Loss (gain) on sale of investments (2.2) 5.2 -
Other, net (1.8) - 0.3
Changes in certain assets and
liabilities, net of effects of
acquisitions and dispositions:
Receivables (16.1) (77.0) (7.2)
Inventories (18.5) 18.2 (16.8)
Other current assets 1.5 (22.5) (5.9)
Accounts payable and accrued
expenses 51.3 16.4 80.6
Current and deferred income taxes 15.3 12.2 (3.9)
Other non-current liabilities (30.7) (8.6) 6.6
------ ------ -------
Net cash provided by operating
activities 431.7 234.0 136.0
------ ------ ------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property, plant
and equipment (270.7) (233.9) (183.0)
Proceeds from the sale of
property, plant and equipment - 15.7 1.2
Proceeds from the sale and maturity
of marketable investments 658.7 42.8 -
Purchase of marketable investments (680.0) (111.1) -
Proceeds from sale of investments 7.7 1.0 0.6
Purchase of investments and other, net (11.2) (10.8) (4.2)
------ ------ ------
Net cash used by continuing
operations (295.5) (296.3) (185.4)
Discontinued operations:
Payment of accrued liabilities
and income taxes related to the
sale of ISG - (0.8) (5.6)
Payment received on royalty receivable - - 13.0
------ ------ ------
Net cash used by investing activities (295.5) (297.1) (178.0)
------ ------ ------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 1.9 37.3 17.8
Repayment of debt (19.7) (23.7) (24.8)
Collateral deposits and restricted cash - 20.9 (6.4)
Issuance of common stock, net 30.5 18.0 11.2
Issuance of preferred stock, net
of issuance costs - 166.8 -
Purchase of treasury stock (9.5) - -
Payment of preferred dividends (18.7) (17.1) (10.0)
------- ------ ------
Net cash provided (used) by
financing activities (15.5) 202.2 (12.2)
------- ------ ------
Net change in cash and cash equivalents 120.7 139.1 (54.2)
Cash and cash equivalents at beginning
of year 277.4 138.3 192.5
------ ------ ------
Cash and cash equivalents
at end of year $398.1 $277.4 $138.3
====== ====== ======
===============================================
See accompanying Notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1994 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements include National Semiconductor
Corporation and its majority-owned subsidiaries ("National" or the
"Company"). All significant intercompany transactions are eliminated in
consolidation. Investments in which National has less than 20 percent
ownership are accounted for by the cost method.
National has a fiscal year which ends on the last Sunday of May.
Fiscal years 1994 and 1993 were each 52-week years. The fiscal year
ended on May 31, 1992 was a 53-week year.
Revenue Recognition
Revenue from the sales of semiconductor products is generally recognized
when shipped, with a provision for estimated returns and allowances
recorded at the time of shipment. Service and other revenues are
recognized ratably over the contractual period or as the services are
performed.
Inventories
Inventories are stated at the lower of standard cost, which approximates
actual cost on a first-in, first-out basis, or market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is
provided using both accelerated and straight-line methods over the
estimated useful lives of the respective assets, or in the case of
property under capital lease, over the lesser of the useful life or
lease term.
Income Taxes
The income tax provision for 1994 has been determined in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("FAS 109"), which requires that deferred liabilities or
assets at the end of each period be determined using the tax rate
expected to be in effect when the taxes are actually paid or recovered.
The measurement of deferred tax assets is reduced, if necessary, by a
valuation allowance. The Company adopted FAS 109 effective the first day
of fiscal 1994. The impact of adopting FAS 109 did not have a material
effect on the consolidated financial statements, and as such no
cumulative effect is recorded for the accounting method change.
The income tax provisions for fiscal years 1992 and 1993 were
determined in accordance with Statement of Financial Accounting
Standards No. 96 "Accounting for Income Taxes". Accordingly, the
provision for income taxes for those years included federal, state and
non-U.S. income taxes currently payable or refundable and deferred
amounts as a result of temporary differences between the tax bases of
assets and liabilities and the corresponding amounts reported in the
financial statements.
Earnings Per Share
Primary earnings per share are computed using the weighted average
number of common shares and dilutive common stock equivalents
outstanding using the treasury stock method. Dilutive common stock
equivalents include stock options. Preferred dividends are reflected as
adjustments to reported net earnings (loss) in the calculation. Fully
diluted earnings per common share are computed using the weighted
average common and dilutive common stock equivalents outstanding, plus
other dilutive securities outstanding which are not common stock
equivalents. Other dilutive shares which are not common stock
equivalents include the Convertible Exchangeable Preferred Shares and
the Convertible Preferred Shares. If the result of these assumed
conversions is dilutive, the dividend requirements for the Convertible
Exchangeable Preferred Shares and the Convertible Preferred Shares are
reduced while the average shares of common stock equivalents outstanding
are increased.
Currencies
National's functional currency for all operations worldwide is the U.S.
dollar. Accordingly, gains and losses from translation to U.S. dollars
are included in the determination of net income in the period in which
they occur. Aggregate net currency losses and the cost of hedging
through forward exchange and currency option contracts before income
taxes were $0.5 million, $4.7 million and $9.0 million in fiscal 1994,
1993 and 1992, respectively.
<PAGE>
Financial Instruments
Cash and Cash Equivalents. Cash equivalents are highly liquid debt
instruments with a maturity of three months or less at the time of
purchase. National maintains its cash balances in various currencies and
a variety of financial instruments. The Company has not experienced any
material losses relating to any short-term investment instruments.
Marketable Investments. Marketable investments consist of commercial
paper, certificates of deposit, United States and Eurodollar time
deposits, bankers' acceptances, securities issued by the United States
Government, Corporate Notes and Bonds, and privately placed debt.
Investments in time deposits and certificates of deposit are acquired
from banks having combined capital and surplus of not less than $100
million. Investments in commercial paper of industrial firms and
financial institutions are rated A1, P1 or better. Short term marketable
investments mature within one year or less. Marketable investments are
carried at the lower of cost or market. As of May 29, 1994, the
carrying value of marketable investments, which approximates fair value,
was $89.6 million. Fair value for marketable investments was based on
quoted market prices.
The Company's policy is to diversify the investment portfolio to
reduce risk to principal from credit, geographic and investment sector
risk. At May 29, 1994, investments were placed with a variety of
different financial institutions or other issuers, and no individual
non-U.S. government security, financial institution, or issuer exceeded
10 percent of total investments.
In May 1993 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("FAS 115") effective
for fiscal years beginning after December 15, 1993. Under FAS 115, debt
securities that the Company has both the positive intent and ability to
hold to maturity are carried at amortized cost. Debt securities that
the Company does not have the positive intent and ability to hold to
maturity and all marketable equity securities are classified as
available-for-sale or trading and carried at fair value. Unrealized
holding gains and losses on securities classified as available-for-sale
are carried as a separate component of shareholders' equity. Unrealized
holding gains and losses on securities classified as trading are
reported in earnings.
Presently, the Company classifies most debt securities as held-
for-investment and carries them at amortized cost. Securities held-for-
sale are reported at the lower of cost or market and net unrealized
losses are reported in earnings. The Company will prospectively
implement FAS 115 starting in the first quarter of 1995. Management
believes that adoption will not have a material effect on the financial
position or results of operations of the Company.
Receivables. The Company sells its products to distributors and
original equipment manufacturers involved in a variety of industries
including computers and peripherals, automotive, and telecommunications.
National performs continuing credit evaluations of its customers and
although the Company generally does not require collateral, letters of
credit may be required from its customers in certain circumstances.
Historically, the Company has not experienced significant losses related
to receivables from individual customers or groups of customers in any
particular industry or geographic area.
Off-Balance-Sheet Instruments. The Company utilizes various instruments,
primarily forward exchange and currency option contracts, to manage its
risk associated with currency fluctuations on certain sales commitments,
anticipated sales commitments, and net non-U.S. dollar denominated asset
and liability positions. Gains and losses on these instruments that are
intended to hedge an identifiable commitment are deferred and included
in the measurement of the related transaction. The instruments involve
certain market and interest rate risks that exceed amounts recorded in
the accompanying consolidated balance sheets. Cash flows from forward
exchange contracts that are accounted for as hedges of identifiable
transactions or events are classified in the same category as the cash
flows from the item being hedged. Management believes that the
Company's currency exchange contracts do not subject the Company to
undue risk as a result of
<PAGE>
exchange rate movements because gains and losses on these contracts
should offset gains and losses on the assets, liabilities and
commitments being hedged. In the event the counterparties are unable to
meet the terms of these contracts, the Company's risk is limited to the
currency rate differential. However, the Company does not anticipate
non-performance by the counterparties. Notional amounts of these
instruments are often used to express the volume of these contracts. At
fiscal year-end, National had outstanding currency exchange contracts
with net face values of $51.1 million (consisting of $15.1 million in
forward exchange and $36.0 million in option contracts) compared to
$57.0 million for the fiscal year ended 1993. The amount to effectively
close the forward contracts was $16.3 million based on prevailing
currency exchange and interest rates as of May 29, 1994. The fair value
of the currency option contracts was $0.2 million as of May 29, 1994.
Note 2. Restructuring of Operations
During fiscal 1994, National released $24.2 million of restructuring
reserves originally provided in fiscal 1992. The fiscal 1992
restructuring related primarily to worldwide consolidations of
underutilized manufacturing operations, including write downs of certain
assets, work force reductions, and process transfers. The release of
these reserves was attributable to the Company's decision not to
downsize additional manufacturing facilities, and a larger than
anticipated gain on the sale of a building housing the Company's former
manufacturing headquarters in Asia.
During the fourth quarter of fiscal 1994, the Company identified
restructuring requirements totaling $21.6 million (of which $7.7 million
is non-cash) not covered by the 1992 reserve. Included in this amount
are reserves totaling $10.0 million established for DCI, a wholly owned
subsidiary of the Company. The restructure reserve for DCI was
established specifically for consolidation of the DCI business and
includes both fixed asset dispositions and reductions in work force to
bring capacity in line with current and foreseeable business levels.
The reserve also includes the elimination of one division within CCG,
the consolidation of certain products, and the decentralization of
product engineering support functions. These actions resulted in a $6.8
million charge, primarily for involuntary severance and personnel
relocation as well as the write off of licensed technology associated
with products no longer supported by CCG. The last major element of
fiscal 1994 restructuring relates to a decision by the Company to
discontinue commercial manufacturing in part of the facility located at
Santa Clara, California. The attendant reduction in staffing levels and
asset dispositions required a $4.8 million charge and included further
eliminations of product testing on the campus.
The total fiscal 1994 restructuring requirements and release of
fiscal 1992 reserves result in a net reversal of $2.6 million for fiscal
1994. The Company believes reserves are adequate for the planned
actions which are expected to occur during fiscal 1995.
During fiscal 1994, the Company utilized $44.2 million of the
restructuring reserves primarily attributable to the closure of a wafer
fabrication module in its Salt Lake, Utah facility, and closure of a
wafer fabrication line in Santa Clara, California. Both of these
actions were previously announced. In addition, the Company completed
most of the process transfers from its Santa Clara, California facility
to the Greenock, Scotland fabrication facility and completed the
transfer of Mil Aero manufacturing to its Singapore facility. The
Company continued to reduce headcount and related infrastructure at its
Santa Clara, California operation.
During fiscal 1993, the Company continued the restructuring
activities related to the charges recorded in fiscal 1992 and 1991. The
Company sold its Bangkok, Thailand facility and also sold the Migdal
Haemek, Israel facility to a joint venture, in which the Company has
less than a 20 percent investment. The Company also continued
activities related to the closure of a fabrication module at its Salt
Lake, Utah facility and announced the closure of a fabrication module in
Santa Clara, California.
During 1992, the Company recorded a restructuring charge of $149.3
million which related primarily to worldwide consolidations
<PAGE>
of underutilized manufacturing operations, including write downs of
certain assets, work force reductions, and process transfers. During
1992, the Company closed its manufacturing facilities in Brazil and Hong
Kong, ceased discrete wafer fabrication operations in Santa Clara,
California, began the transfer of certain fabrication processes, and
reduced portions of its work force in certain locations worldwide.
Note 3. Consolidated Balance Sheet Details
(in millions)
1994 1993
------ ------
RECEIVABLE ALLOWANCES
Doubtful accounts $ 3.0 $ 3.5
Returns and allowances 30.8 29.5
------ ------
Total receivable allowances $ 33.8 $ 33.0
====== ======
INVENTORIES
Raw materials $ 17.3 $ 24.6
Work in process 129.4 117.7
Finished goods 66.0 47.3
------- ------
Total inventories $ 212.7 $ 189.6
======= ======
PROPERTY, PLANT AND EQUIPMENT
Land $ 8.9 $ 8.9
Buildings and improvements 340.9 317.6
Machinery and equipment 1,251.4 1,152.1
Construction in progress 164.4 133.7
------- ------
Total property, plant and equipment 1,765.6 1,612.3
Less accumulated depreciation and
amortization 1,097.6 1,034.9
------- ------
Property, plant and equipment, net $ 668.0 $ 577.4
======= ======
ACCRUED EXPENSES
Payroll and employee related $ 124.9 $ 96.9
Restructuring of operations 20.8 44.9
Other 118.9 90.2
------- ------
Total accrued expenses $ 264.6 $ 232.0
======= ======
Other non-current liabilities consist principally of accrued
restructuring expenses and deferred compensation, as well as tax related
accruals in fiscal 1993.
Effective beginning fiscal 1994, the Company changed its method of
accounting to include certain costs in inventory which were previously
charged directly to cost of sales as incurred. These costs consist
primarily of product engineering, quality assurance and reliability, and
production control and logistics. The Company believes this change is
preferable in the circumstances because it more closely matches
inventory costs with net sales and more closely aligns the Company with
industry practices. The cumulative effect of this change on years prior
to fiscal 1994 of $4.9 million is reflected in the 1994 first quarter
results.
Both the impact of the change in fiscal 1994 and the proforma effect
on net income for fiscal 1993 under the new method of accounting were
immaterial.
In addition, beginning in fiscal 1994, the Company reclassified
certain period expenses from cost of sales to research and development
expense or to selling, general and administrative expense. The amounts
presented in prior period statements of operations have been
reclassified to conform with the fiscal 1994 presentation. For 1993,
the effect of the reclassification decreased cost of sales by $81.3
million and increased research and development, and selling, general and
administrative expenses by $26.9 million and $54.4 million,
respectively. For 1992, the effect of the reclassification decreased
cost of sales by $65.4 million and increased research and development,
and selling, general and administrative expenses by $16.8 million and
$48.6 million, respectively. Net income was not impacted in any period
by the reclassifications.
Note 4. Debt Financing
Debt consists of the following:
(in millions) 1994 1993
------ -------
Installment and other notes at
6.5%-9.8% $ 5.9 $ 9.7
Mortgage payable at 8.9% 7.1 11.4
Note payable at 4.2% 6.4 13.0
Note payable at 8.75% 6.2 7.9
Obligations under capital leases 4.5 5.9
------- -------
Total loans payable 30.1 47.9
Current portion of long-term debt (15.6) (10.6)
------- -------
Long-term debt $ 14.5 $ 37.3
======= =======
<PAGE>
Installment and other notes consist primarily of obligations of
certain non-U.S. subsidiaries and are generally unsecured. At May 29,
1994, the fair value of debt approximates carrying value. Fair value
was determined based on the nature of the instruments and current
prevailing interest rates for borrowings.
The mortgage payable at 8.9% is payable in monthly installments
through 1996 and is secured by machinery and equipment. The note
payable at 4.2% is a variable interest loan at the U.S. dollar Singapore
Interbank Offer Rate plus 0.75% and is due in quarterly installments
through 1999. The 8.75% note is payable in quarterly installments of
principal and interest through 1997 and is secured by certain machinery
and equipment.
For each of the next five years and thereafter, debt and capital
lease obligations are as follows:
Total Debt
(in millions) (Principal only)
----------------
1995 $15.1
1996 11.8
1997 2.8
1998 .3
1999 .1
Thereafter -
----------------
Total $30.1
================
The Company's multicurrency and revolving financing agreements
make funds available in the form of multicurrency loans, letters of
credit and standby letters of credit in favor of National. The
multicurrency loan agreement ($20 million) and the revolving credit
agreement which includes letters of credit and standby letters of credit
($75 million) expire in December 1994. The Company does not anticipate
any problems in renewing the agreements. At May 29, 1994, $58.2
million of the combined total commitment was utilized, primarily to
support letters of credit.
These agreements contain restrictive covenants, conditions and
default provisions which, among others, require the maintenance of
financial ratios and certain levels of tangible net worth. At May 29,
1994, under the most restrictive covenant, no more than $92.2 million
was available for payment of dividends on the Company's common stock.
Note 5. Interest
(in millions) 1994 1993 1992
------ ------ ------
Interest income $14.2 $7.3 $8.8
Interest expense (3.3) (4.4) (3.4)
------- ------- -------
Interest, net $10.9 $2.9 $5.4
======= ======= =======
Note 6. Income Taxes
Worldwide pretax earnings (loss) from operations and income taxes
(benefit) consisted of the following:
(in millions) 1994 1993 1992
------ ------ ------
Income (loss) before
income taxes:
U.S. $264.9 $ 58.6 $(121.9)
Non-U.S. 38.6 91.3 4.9
------- ------- -------
$303.5 $149.9 $(117.0)
======= ======= =======
Income taxes (benefit):
Current:
U.S. Federal $ 26.9 $ 1.4 $ -
U.S. state and local 6.4 2.6 -
Non-U.S. 5.6 12.1 3.4
------- ------- -------
38.9 16.1 3.4
Deferred:
Non-U.S. 3.5 3.5 (0.3)
Charge in lieu of taxes
attributable to employee
stock plans 2.0 - -
------- ------- -------
$ 44.4 $ 19.6 $ 3.1
======= ======= =======
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at May
29, 1994 are presented below (in millions):
Deferred Tax Assets:
Reserves and Accruals $ 80.5
Inventory capitalization and reserves 19.0
Capitalized assets and other assets 14.5
Loss carryovers and other allowances - foreign 74.8
General business credit carryovers - Federal 47.1
Foreign tax and AMT credit carryovers 6.8
Capitalized R&D - state 7.6
-------
Total gross deferred assets 250.3
Less valuation allowance (248.6)
-------
Net deferred assets $ 1.7
Deferred tax liabilities:
Capital allowance - foreign $ (19.4)
Other liabilities (0.9)
-------
Total gross deferred liabilities (20.3)
-------
Net deferred tax liabilities $ (18.6)
=======
The valuation allowance at May 29, 1994 represented a decrease of $73.5
million from the balance of $322.1 million at May 31, 1993. Of the
total valuation allowance for deferred tax assets, approximately $38
million of subsequently recognized tax benefits attributable to employee
stock option exercises will be allocated to additional paid-in capital
rather than to income tax benefit.
For fiscal years 1993 and 1992, deferred income taxes arise from
temporary differences between the tax bases of assets and liabilities
and their reported amounts in the financial statements. The deferred
tax expense (benefit) reflected for those years is attributable
primarily to depreciation, accruals and allowances.
The reconciliation between the amount computed by applying the
U.S. Federal statutory rate and the reported worldwide tax expense
follows:
(in millions) 1994 1993 1992
------- ------- -------
U.S. Federal statutory tax rate 35% 34% 34%
Income tax expense (benefit) at
Federal statutory rate $106.2 $51.0 $(39.8)
Unutilized non-U.S. losses
and tax differential
related to non-U.S. income 8.8 1.5 5.4
U.S. state and local taxes net
of federal benefits 4.2 2.6 -
Change in beginning of year
valuation allowance (76.0) - -
(Utilized) unutilized U.S.
operating losses under FAS 96 - (41.3) 37.0
Sale of Bangkok facility - 3.9 -
Other 1.2 1.9 0.5
------- ------- -------
Reported income tax expense $44.4 $19.6 $3.1
======= ======= =======
The temporary difference relating to the unremitted earnings of
non-U.S. subsidiaries for which a deferred tax liability has not been
recognized approximates $408.9 million at May 29, 1994. The additional
taxes which may become due if those earnings were to be remitted to the
U.S. are estimated to be $58.6 million after utilization of U.S. tax
credits. However, it is management's intent that these earnings remain
re-invested indefinitely.
At May 29, 1994, National had credit carryforwards of
approximately $53.9 million for tax return purposes which expire from
1996 through 2008. National also had operating loss carryforwards in
certain non-U.S. jurisdictions.
The U.S. Internal Revenue Service ("IRS") examinations of
National's U.S. Federal income tax returns for fiscal years 1976-1982
resulted in the issuance of deficiency notices during fiscals 1989 and
1990 seeking additional taxes amounting to approximately $76 million
(exclusive of interest). National filed petitions with the United
States Tax Court contesting the deficiency notices and
<PAGE>
the cases were consolidated for trial. National and the IRS
subsequently settled all issues for fiscal years 1976 through 1982
except for intercompany product transfer prices. This settlement
reduced the additional taxes being sought to approximately $52 million
(exclusive of interest). Trial in the case was held in February 1993
and an opinion was issued by the U.S. Tax Court in May 1994. The
opinion found that adjustments to income of $40.6 million were due,
which the Company estimates, after giving effect to loss and credit
carrybacks, will result in a tax deficiency of approximately $5 million
plus associated interest of between $35 million and $45 million. The
IRS motion for reconsideration of the opinion, which sought an
additional $31 million in income tax adjustments, was denied by the
court in June 1994. A formal decision implementing the opinion will be
entered by the Tax Court following completion of final computations and
the decision will be subject to appeal by either the Company or the IRS.
In January 1994, the Company and the IRS settled all issues for
fiscal years 1983 through 1985, including issues relating to
intercompany product transfer pricing, without the payment of additional
Federal tax. This result will be affected by certain net operating loss
carryovers and credits, which will not be determined until a final
decision is entered in the Tax Court litigation. The Company's tax
returns for fiscal years 1986 through 1989 are still under examination
by the IRS. The Company believes that adequate tax payments have been
made and accruals recorded for all years and that the Tax Court opinion
will not have a material adverse effect of the Company's financial
condition or results of operations.
Note 7. Shareholders' Equity
Each outstanding share of the Company's common stock carries a stock
purchase right ("Right") issued pursuant to a dividend distribution
declared on August 5, 1988. When exercisable, each Right entitles the
registered holder to purchase one one-thousandth of a share of the
Company's Series A Junior Participating Preferred Stock at a price of
$60.00 per one thousandth share, subject to adjustment. The Rights are
attached to all outstanding shares of common stock and no separate
Rights certificates have been distributed.
The Rights will become exercisable and will detach from the common
stock in the event any individual or group acquires 20 percent or more
of the Company's common stock, or announces a tender or exchange offer
which, if consummated, would result in that person or group owning at
least 20 percent of the Company's common stock. If such person or group
actually acquires 30 percent or more of the Company's common stock
(except pursuant to certain cash tender offers for all of the Company's
common stock), each Right will entitle the holder to purchase, at the
Right's then current exercise prices, the Company's common stock in an
amount having a market value equal to twice the exercise price.
Similarly, if after the Rights become exercisable, the Company merges or
consolidates with or sells 50 percent or more of its assets or earning
power to another person, each Right will then entitle the holder to
purchase, at the Right's then current exercise price, the stock of the
acquiring company in an amount having a market value equal to twice the
exercise price.
The Company may redeem the Rights at $0.01 per Right at any time
prior to acquisition by a person or group of 20 percent or more of the
Company's outstanding common stock. The Rights will expire August 8,
1998, unless earlier redeemed.
In March 1994, National called for redemption in April 1994 of all
of the issued and outstanding shares of the $40.00 Convertible
Exchangeable Preferred Shares, $0.50 par value (the "Exchangeable
Preferred Shares.") In connection with the redemption,
<PAGE>
a conversion privilege offered by National to holders of the
Exchangeable Preferred Shares expired on the redemption date.
Essentially all Exchangeable Preferred Shares were converted by the
holders into the Company's common stock at the rate of 33 shares of
common stock for each Exchangeable Preferred Share. All remaining
shares were redeemed and the Company issued shares of common stock that
would have been issued to the holders of the Exchangeable Preferred
Shares had they elected to convert, in accordance with standby
arrangements entered into by the Company. After the redemption and
conversion were complete, a total of 8,250,000 shares of common stock
had been issued.
At May 29, 1994, National had 345,000 shares of $32.50 Convertible
Preferred Shares, $0.50 par value (the "Convertible Preferred Shares")
issued and outstanding. The Convertible Preferred Shares were issued in
October 1992. The liquidation preference of each Convertible Preferred
Share is $500 plus unpaid dividends. The Convertible Preferred Shares
are convertible at any time at the option of the holder into common
stock at the rate of 35.273 shares of common stock for each Convertible
Preferred Share. On or after November 1, 1995, and if the closing price
of the Company's common stock on the New York Stock Exchange exceeds
$17.72 for twenty trading days within any period of thirty consecutive
trading days, the Convertible Preferred Shares are redeemable, in whole
or in part, at the option of the Company for the number of shares of
common stock as are issuable at a conversion rate of 35.273 shares of
common stock for each Convertible Preferred Share. The Convertible
Preferred Shares are not entitled to the benefit of any sinking fund.
Dividends on the Convertible Preferred Shares at an annual rate of
$32.50 per share are cumulative and payable quarterly in arrears, when
and as declared by the Company's Board of Directors. Holders of
Convertible Preferred Shares are entitled to limited voting rights.
The Company is authorized by the Board of Directors to repurchase
up to 3.5 million shares of the Company's common stock at current market
prices prior to the end of calendar 1994. During May 1994, National
purchased 500,000 shares on the open market at a cost of $9.5 million.
The shares purchased by the Company are being held as treasury stock.
National has paid no cash dividends on its common stock and
intends to continue its practice of reinvesting all earnings except
those required for preferred stock dividends.
Note 8. Stock Option and Purchase Plans
National has a stock option plan under which officers and key employees
may be granted nonqualified or incentive stock options to purchase up to
27,754,929 shares of the Company's common stock. Generally, the terms of
this plan provide that options are granted at the market price on the
date of grant and expire up to a maximum of 10 years and one day after
grant or 3 months after termination of employment (up to 5 years after
termination due to death, disability, or retirement), whichever occurs
first. Options generally become exercisable ratably over a four-year
period.
National also has an employee stock purchase plan which authorizes
the granting of options and the issuance of up to 14,950,000 shares of
common stock in annual or more frequent offerings to eligible employees
in amounts related to their basic annual compensation. From the date of
grant, the options become exercisable after 13 months and expire after
27 months. The option price is determined by the Stock Option and
Compensation Committee of the Board of Directors but may not be less
than 100 percent of the market value on the date of grant or 85 percent
of the market value on the date of exercise, whichever is lower.
<PAGE>
Changes in options outstanding under the stock option and purchase
plans during fiscal 1993 and 1994 were as follows:
Number Price
of shares per
(in millions) share
------------- ----------------
Outstanding May 31, 1992 16.4 $3.75 to $14.75
Granted 2.9 $9.00 to $13.75
Exercised (3.4) $3.75 to $11.50
Cancelled (0.7) $3.75 to $14.75
- - -------------------------------------------------------------------
Outstanding May 30, 1993 15.2 $3.75 to $14.75
Granted 3.3 $15.00 to $20.50
Exercised (4.7) $3.75 to $14.75
Cancelled (0.6) $3.75 to $20.50
- - -------------------------------------------------------------------
Outstanding at May 29, 1994 13.2 $3.75 to $20.50
Exercisable at May 29, 1994 5.1 $3.75 to $14.75
===================================================================
Expiration dates: From August 1, 1994 to April 20, 2004
- - -------------------------------------------------------------------
Under the stock option and purchase plans, 2.5 million shares of common
stock were issued during fiscal 1992. As of May 29, 1994, 18.7 million
shares were reserved for issuance under the stock option and purchase
plans, including shares available for future option grants.
Note 9. Other Stock Plans
National had a director stock plan approved by stockholders in fiscal
1993. The director stock plan authorized the issuance of up to 200,000
shares of the Company's common stock to eligible non-employee directors
of the Company. The common stock was issued automatically to eligible
directors upon approval of the director stock plan by the stockholders
and is issued automatically thereafter to eligible new directors upon
their appointment to the Board and to all eligible directors on the
subsequent election to the Board by stockholders. As of May 29, 1994,
15,000 shares had been issued under the director stock plan and 185,000
shares were reserved for future issuances.
National has a performance award plan approved by stockholders in
fiscal 1993 which authorizes the issuance of up to 1.0 million shares of
the Company's common stock as full or partial payment of awards to plan
participants based on performance units and the achievement of certain
specific performance goals during a performance plan cycle. Performance
plan cycles are three to five years depending on specific performance
measurements, and the earliest a payout can occur is the third year of a
performance plan cycle. Plan participants currently consist of a
limited group of senior executives. No shares were issued under the
performance award plan during fiscal 1993 or 1994. The first payout, if
any, under the plan would occur in fiscal 1996, and expense recorded in
fiscal 1993 and 1994 under the plan was not material.
Note 10. Benefit Plans
National's Retirement and Savings Program for U.S. employees consists of
two plans as follows:
The profit sharing plan in fiscal 1993 and 1994 required company
contributions of the greater of five percent of consolidated net
earnings before income taxes or one percent of payroll (as defined by
the plan). In fiscal 1992, the plan required contributions of five
percent of consolidated net earnings before income taxes. As the
Company was not profitable in 1992, there was no plan expense during
that year. Beginning in fiscal 1993, contributions are invested 25
percent in National's common stock and 75 percent in cash. Total shares
contributed under the profit sharing plan during fiscal 1994 were
122,822. As of May 29, 1994, 2.1 million shares of common stock were
reserved for future company contributions.
The salary deferral "401(k)" plan allows employees to defer up to
15 percent of their salaries, subject to certain limitations, with
partially matching company contributions. Contributions are invested in
one or more of five investment funds at the discretion of the employee.
One of the investment funds is a Company stock fund where contributions
are invested in Company common stock. Although 5.0 million shares of
common stock are reserved for issuance to the stock fund, shares
purchased to date with contributions have been purchased on the open
market and the Company has not issued any stock directly to the stock
fund.
<PAGE>
The benefit restoration plan adopted in fiscal 1993 allows certain
highly compensated employees to receive a higher profit sharing plan
allocation than would otherwise be permitted under IRS regulations and
defer greater percentages of compensation than would otherwise be
permitted under the salary deferral "401(k)" plan and IRS regulations.
The benefit restoration plan is a nonqualified and unfunded plan of
deferred compensation and the Company credits accounts maintained under
it with interest earnings each quarter.
Certain non-U.S. subsidiaries have varying types of defined
benefit pension and retirement plans that are consistent with local
statutes and practices. The annual expense for all plans was as
follows:
(in millions) 1994 1993 1992
------ ------ ------
Profit Sharing Plan $15.9 $7.9 -
- - -----------------------------------------------------------
Salary deferral "401(k)" plan $ 8.3 $4.1 $1.6
- - -----------------------------------------------------------
Non-U.S. pension and
retirement plans $ 4.7 $5.4 $4.9
===========================================================
Effective beginning fiscal 1994, the Company prospectively adopted
Statement of Financial Accounting Standards No. 106, "Employer's
Accounting for Postretirement Benefits other than Pensions" ("FAS 106").
The adoption did not have a material impact on the Company's financial
statements.
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, "Employer's
Accounting for Postemployment Benefits" ("FAS 112"), effective for
fiscal years beginning after December 15, 1993. Under FAS 112,
postemployment benefits, primarily salary continuation and insurance
continuation, are accrued at the time the benefit is earned by the
employee. The Company will implement FAS 112 starting in the first
quarter of fiscal 1995. Management believes that adopting FAS 112 will
not have a material impact on the Company's financial statements or
results of operations.
Note 11. Commitments and Contingencies
Commitments. The Company leases certain facilities and equipment under
operating lease arrangements which expire at various dates through 2009.
Rental expenses under operating leases were $48.9 million, $58.9
million, and $65.6 million in 1994, 1993, and 1992, respectively.
Minimum commitments under noncancelable operating leases are as follows:
(in millions)
-------------
1995 $ 32.4
1996 28.3
1997 23.1
1998 19.5
1999 17.4
Thereafter 125.2
------
Total $245.9
======
Certain of the above lease arrangements relate to the facility sale and
leaseback transactions made prior to 1990. Total commitments under
these lease arrangements are $156.9 million as of May 29, 1994. These
arrangements also require collateral in the form of standby letters of
credit of approximately $41.8 million as of May 29, 1994. The Company
has entered into a letter of intent to repurchase the equity interest in
the facility sale and leaseback transactions which will result in the
partial elimination of these commitments. In connection with the joint
venture established from the sale of the Migdal Haemek, Israel facility
(discussed in Note 2), National has commitments to purchase fabricated
wafers from the joint venture at competitive market prices over the next
two years. As of May 29, 1994, these commitments total $29.1 million
and $15.1 million for fiscal years 1995 and 1996, respectively, based on
existing negotiated prices.
Contingencies -- Legal Proceedings
In April 1988, the Company received a notice from the District Director
of U.S. Customs in San Francisco alleging underpayment of duties of
approximately $19.5 million for the period June 1, 1979 to March 1, 1985
on merchandise imported from the Company's non-
<PAGE>
U.S. subsidiaries. The Company filed an administrative appeal in
September 1988. On May 23, 1991, the District Director revised his
action and issued a Notice of Penalty Claim and Demand for Restoration
of Duties, alleging underpayment of duties of approximately $6.9 million
for the same period and the alleged underpayment was reduced in a
similar action in April 22, 1994 to approximately $3.6 million. The
revised alleged underpayment could be subject to penalties that may be
computed as a multiple of such underpayment. The Company filed an
administrative petition for relief in October 1991 and the Company is
continuing to contest the Penalty Notice in administrative proceedings.
The Company believes that the ultimate resolution of this matter will
not have a material financial impact on the Company or the results of
operations.
The Company has been named to the National Priorities List
("Superfund") for its Santa Clara, California site and has completed a
Remedial Investigation/Feasibility Study with the Regional Water Quality
Control Board ("RWQCB"), acting as an agent for the Federal
Environmental Protection Agency. The Company has agreed in principle
with the RWQCB to a site remediation plan. Management believes that the
potential liability, if any, in excess of amounts already accrued for
the site remediation will not have a material effect on the Company's
financial position.
In addition to the Santa Clara site, the Company has been
designated as a potentially responsible party ("PRP") by federal and
state agencies with respect to certain waste sites with which the
Company may have had direct or indirect involvement. Such designations
are made regardless of the extent of the Company's involvement. The
Company has also been cited for alleged deficiencies in its record
keeping for and handling, treatment, storage and disposal of hazardous
products and wastes. These claims are in various stages of
administrative or judicial proceedings and include demands for recovery
of past governmental costs and for future investigations and remedial
actions. In many cases, the dollar amounts of the claims have not been
specified, and with respect to the PRP claims, have been asserted
against a number of other entities for the same cost recovery or other
relief as was asserted against the Company. The Company accrues costs
associated with environmental matters when they become probable and
reasonably estimable. The amount of all environmental charges to
earnings, including charges relating to the Santa Clara site
remediation, which did not include potential reimbursements from
insurance coverage, were not material during fiscal years 1994, 1993,
and 1992. The Company believes that the potential liability, if any, in
excess of amounts already charged to earnings will not have a material
effect on the Company's financial position.
On December 2, 1992, Hughes Aircraft Company ("Hughes") filed a
patent infringement suit in Federal court against the Company seeking
unspecified amounts of damages and costs, which was served on the
Company on January 7, 1993. The Company has filed a counter claim
against Hughes' parent, General Motors Corporation, also alleging patent
infringement. The Company believes the claims made by Hughes are
without merit and that the ultimate resolution of this matter will not
have a material financial impact on the Company's financial position.
The Company is engaged in tax litigation with the IRS and the
Company's tax returns are under examination by the IRS (see Note 6). In
addition to the foregoing, National is a party to other suits and claims
which arise in the normal course of business. National believes any
liability resulting from those matters would be immaterial to the
Company's financial position.
Note 12. Industry and Geographic Segment Information
The Company is engaged in the design, development, manufacture and
marketing of a wide variety of semiconductor products including analog
integrated circuits, digital integrated circuits, mixed analog and
digital circuits, microcontrollers, hybrid circuits, subsystems,
electronic packaging, and miscellaneous services and supplies for the
semiconductor industry and original equipment manufacturers. National
operates in three main geographic areas. In the informa-
<PAGE>
tion that follows, sales include local sales and exports made by
operations within each area. Total sales by geographic area include
sales to unaffiliated customers and intergeographic transfers, which are
based on standard cost. To control costs, a substantial portion of
National's products are transported between the U.S., Asia, and Europe
in the process of being manufactured and sold. Sales to unaffiliated
customers have little correlation with the location of manufacture. It
is, therefore, not meaningful to present operating profit by geographic
area.
National conducts a substantial portion of its operations outside
of the U.S. and is subject to hazards associated with non-U.S.
operations, such as political risks, currency controls and fluctuations,
tariffs, import controls, air transportation disruptions and employee
relations.
Elim & Consol-
(in millions) Americas Europe Asia Corporate idated
-------- ------- -------- ---------- -------
1994
Sales to unaffiliated
customers $1,010.4 $496.7 $ 788.3 $ - $2,295.4
Transfers between
geographic areas 493.3 153.7 631.4 (1,278.4) -
-------- ------ ------ ------- -------
Total sales $1,503.7 $650.4 $1,419.7 $(1,278.4) $2,295.4
-------- ------ ------ ------ --------
Total assets $ 656.7 $218.9 $ 558.5 $ 313.6 $1,747.7
======== ====== ======= ======= ========
1993
Sales to unaffiliated
customers $ 939.5 $413.2 $ 661.0 $ - $2,013.7
Transfers between
geographic areas 415.6 120.0 558.1 (1,093.7) -
-------- ------ ------ -------- --------
Total sales $1,355.1 $533.2 $1,219.1 $(1,093.7) $2,013.7
-------- ------ ------ -------- --------
Total assets $ 539.7 $222.7 $ 436.6 $ 277.5 $1,476.5
======== ====== ======= ======= ========
1992
Sales to unaffiliated
customers $ 831.7 $373.4 $512.4 $ - $1,717.5
Transfers between
geographic areas 360.1 99.8 485.9 (945.8) -
-------- ------ ------ ------- --------
Total sales $1,191.8 $473.2 $998.3 $(945.8) $1,717.5
-------- ------ ------ ------- --------
Total assets $ 387.3 $177.3 $385.8 $ 198.5 $1,148.9
======== ====== ======= ======= ========
Note 13. Supplemental Disclosure of Cash Flow Information and Noncash
Investing and Financing Activities
(in millions) 1994 1993 1992
------- ------- -------
Cash paid for:
Interest expense $ 3.3 $4.5 $3.6
Interest payment
on tax settlements $18.6 $ - $ -
Income taxes $27.8 $4.9 $7.1
Noncash items:
Issuance of stock for employee
benefit plans $ 2.0 $ - $ -
The Company recorded capital lease obligations of $1.2 million and $6.4
million during 1993 and 1992 respectively, related to the acquisition of
machinery and equipment. Noncash financing activities in fiscal 1993
included the relief of debt of $12.3 million on the sale of the Migdal
Haemek, Israel facility.
<PAGE>
Note 14. Financial Information by Quarter (Unaudited)
The following table presents the quarterly information for fiscal 1994
and 1993:
First Second Third Fourth
(in millions, except per) Quarter Quarter Quarter Quarter
share amounts)
1994
Net Sales $558.9 $582.4 $544.7 $609.4
Gross Margin $228.3 $243.5 $228.4 $258.9
Net income $ 57.1 $ 60.7 $ 63.8 $ 82.4
====== ====== ====== ======
Primary earnings per common share
before cumulative effect
of accounting change $0.39 $0.46 $0.48 $0.63
Cumulative effect of
accounting change 0.04 - - -
Primary earnings ----- ----- ----- -----
per common share $0.43 $0.46 $0.48 $0.63
Weighted average common and ====== ====== ====== ======
common equivalent shares
outstanding 119.5 120.1 120.8 126.0
====== ====== ====== =====
Fully diluted earnings per share
before cumulative effect
of accounting change $0.37 $0.43 $0.45 $0.58
Cumulative effect of
accounting change 0.04 - - -
Fully diluted earnings ----- ----- ----- -----
per common share $0.41 $0.43 $0.45 $0.58
===== ===== ===== =====
Weighted average fully
diluted shares 140.4 140.6 141.7 143.0
===== ===== ===== =====
Common stock price - high $19.50 $21.75 $21.88 $25.00
Common stock price - low $14.38 $15.00 $14.38 $16.75
===== ===== ===== =====
1993
Net Sales $472.4 $491.9 $491.5 $557.9
Gross Margin $164.7 $167.2 $173.8 $209.7
Net income $ 21.9 $ 35.3 $ 26.9 $ 46.2
Primary earnings per common ====== ====== ====== ======
share: $ 0.17 $ 0.27 $ 0.19 $ 0.35
===== ===== ===== =====
Weighted average common and
common equivalent shares
outstanding 114.8 116.0 115.6 117.6
===== ===== ===== =====
Fully diluted earnings per
share $ 0.17 $ 0.27 $ 0.19 $ 0.33
Weighted average fully diluted ==== ==== ==== ====
shares 114.8 116.0 115.6 138.6
===== ===== ===== =====
Common stock price - high $11.75 $14.13 $13.63 $15.00
Common stock price - low $8.50 $9.88 $10.13 $10.63
====== ====== ====== ======
<PAGE>
Fiscal 1994 results of operations include patent licensing income of
$15.9 million, of which $1.4 million, $0.7 million, $5.3 million, and
$8.5 million were included in the first, second, third and fourth
quarters, respectively. Fiscal 1994 results of operations also include
centralization costs for the sales distribution facilities of $10.1
million, primarily recorded in the first and second quarters. In
addition, included in the second quarter was a $2.2 million gain on the
sale of a minority investment, and included in the fourth quarter was a
$2.6 million favorable restructuring adjustment (see Note 2).
Fiscal 1993 results of operations include patent licensing income of
$43.7 million, of which $31.7 million, $8.3 million, and $3.7 million
were included in the second, third and fourth quarters, respectively.
Fiscal 1993 results of operations also include centralization costs for
the sales distribution facilities of $10.1 million, primarily recorded
in the second quarter. Fiscal 1993 results of operations include $11.9
million of legal fees incurred on the tax case (see Note 6), of which
$1.5 million, $4.5 million, $3.2 million, and $2.7 million were incurred
in the first, second, third and fourth quarters, respectively. Also
included in the third quarter of fiscal 1993 was a $4.7 million write
down of a minority investment.
Preferred dividends are reflected as adjustments to reported
earnings in the calculation of primary earnings per share.
The Company's common stock is traded on the New York Stock
Exchange and the Pacific Stock Exchange. The quoted market prices are
as reported on the New York Stock Exchange Composite Tape. At May 29,
1994, there were approximately 13,073 holders of the Company's common
stock.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
National Semiconductor Corporation
We have audited the accompanying consolidated balance sheets of National
Semiconductor Corporation and subsidiaries as of May 29, 1994 and May
30, 1993, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the years in the three-
year period ended May 29,1994. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of National Semiconductor Corporation and subsidiaries as of May 29,
1994 and May 30, 1993, and the results of their operations and their
cash flows for each of the years in the three-year period ended May 29,
1994 in conformity with generally accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements,
the Company changed its method of accounting for certain costs in
inventory in 1994.
KPMG PEAT MARWICK
San Jose, California
June 10, 1994
<PAGE>
MANAGEMENT
DIRECTORS
Peter J. Sprague
Chairman of the Board
of the Company and
Private Financier
Gilbert F. Amelio
President and Chief
Executive Officer
of the Company
Gary P. Arnold*
President, Chairman,
Chief Executive Officer,
Analogy, Inc.
Robert Beshar*
Attorney in private
practice
Modesto A. Maidique
President, Florida
International University
J. Tracy O'Rourke
Chairman and Chief
Executive Officer,
Varian Associates, Inc.
Charles E. Sporck
Formerly President
and Chief Executive
Officer of the Company
Donald E. Weeden*
Chief Executive,
Weeden & Co.
*Member of the
Audit Committee
OFFICERS
Gilbert F. Amelio
President and Chief
Executive Officer
Richard M. Beyer
President,
Communications and
Computing Group
Patrick J. Brockett
President,
International
Business Group
Charles P. Carinalli
Senior Vice
President and Chief
Technical Officer
John M. Clark III
Senior Vice President,
General Counsel and
Secretary
Robert G. MacLean
Vice President,
Human Resources
Donald Macleod
Senior Vice President,
Finance and Chief
Financial Officer
R. Thomas Odell
President,
Standard Products
Group
Edgar R. Parker
Senior Vice
President, Quality
and Reliability
Kirk P. Pond
Executive Vice President
and Chief Operating
Officer
Richard L. Sanquini
Senior Vice President,
Intellectual Property
Protection and Business
Development
George M. Scalise
Senior Vice
President and Chief
Administrative
Officer
David S. Dahmen
Treasurer
Robert B. Mahoney
Controller
John G. Webb
Vice President, Taxes
TRANSFER AGENT AND
REGISTRAR
The First National
Bank of Boston
P.O. Box 644
Boston,
Massachusetts
02102
INDEPENDENT
AUDITORS
KPMG Peat Marwick
<PAGE>
WORLDWIDE OPERATIONS
Headquarters
National Semiconductor Corporation
2900 Semiconductor Drive
P.O. Box 58090
Santa Clara, California 95052-8090
Telephone (408) 721-5000
Manufacturing Facilities
Santa Clara, California; South Portland, Maine; Murrysville,
Pennsylvania; Arlington,
Texas; West Jordan, Utah; Malacca, Malaysia; Penang, Malaysia;
Cebu, Philippines;
Greenock, Scotland; Singapore
SHAREHOLDER INFORMATION
Common Stock Data
The Company's common stock is traded on the New York Stock
Exchange and the Pacific Stock Exchange.
Annual Meeting of Shareholders
The annual meeting will be held on or about September 30, 1994. A
notice of the meeting, together with a form of proxy and a proxy
statement, will be mailed to shareholders on or about August 15, 1994,
at which time proxies will be solicited by the Board of Directors.
FORM 10-K
If you would like to receive a free copy of the Company's "Form 10-K",
filed with the Securities and Exchange Commission, please send your
request to:
Investor Relations
Mailstop 10-397
National Semiconductor Corporation
P.O. Box 58090
Santa Clara, California 95052-8090
Telephone (408) 721-5800 Fax (408) 721-7254
<PAGE>
Appendix to Exhibit 13.0
Narrative description of graphic and image material for items appearing
in Exhibit 13.0 as required by Regulation S-T.
Net Sales per Employee bar graph is located in the Management Discussion
and Analysis of Results of Operations and Financial Condition. The bar
graph shows the net sales per employee in dollars in thousands for the fiscal
years ended 1994, 1993, and 1992. The net sales per employee for the years
above are $63.1, $86.1, and $102.9, respectively.
Gross Margin as a percent of sales bar graph is located in the Management
Discussion and Analysis of Results of Operations and Financial Condition.
The bar graph duplicates information contained in the Management Discussion
and Analysis of Results of Operations and Financial Condition narrative.
Operating Costs and Expenses stacked bar graph is located in the Management
Discussion and Analysis of Results of Operations and Financial Condition.
The bar graph duplicates selling, general and administrative and research
and development as a percent of sales contained in the Management Discussion
and Analysis of Results of Operations and Financial Condition narrative.
The cost of sales as a percent of sales for the three fiscal years ended
1994, 1993, and 1992 are 68.8%, 64.5%, and 58.2%, respectively.
Cash and Investments bar graph is located in the Management Discussion and
Analysis of Results of Operations and Financial Condition. Cash and
Investments reflected in dollars in millions for the fiscal years ended
1994, 1993, and 1992 are shown as $487.7, $345.7, and $159.2, respectively.
Cash provided by Operations bar graph is located in the Management
Discussion and Analysis of Results of Operations and Financial Condition.
Cash provided by operations reflected in dollars in millions for the fiscal
years ended 1994, 1993, and 1992 are shown as $431.7, $234.0, and $136.0
respectively. The amounts for fiscal years ended 1994 and 1993 are also
duplicated in the Management Discussion and Analysis of Results of
Operations and Financial Condition narrative.
<PAGE>
Exhibit 21.0
NATIONAL SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
The following table shows certain information with respect to the active
subsidiaries of the Company as of May 29, 1994, all of which are
included in the consolidated financial statements of the registrant:
State or Percent of
other Other country voting
jurisdiction in which securities
of subsidiary is owned by
Name incorporation registered National
- - ---- ------------- ------------- ----------
Dyna-Craft, Inc. California 100%
National Semiconductor Delaware 100%
International, Inc.
DTS Caribe, Inc. Delaware 100%
N.S. Publications, Inc. Delaware 100%
National Semiconductor Delaware 100%
Property, Inc.
Fairchild Semiconductor Corp. Delaware 100%
National Semiconductor France 100%
France S.A.
National Semiconductor GmbH Germany Belgium 100%
National Semiconductor Israel 100%
(I.C.) Ltd.
National Semiconductor Sp.A. Italy 100%
National Semiconductor A.B. Sweden 100%
National Semiconductor Great Britain Denmark 100%
(U.K.) Ltd. Ireland/
Finland/Norway
Spain
National Semiconductor Netherlands 100%
Benelux B.V.
National Semiconductor Switzerland 100%
International
Finance S.A.
National Semiconductor Australia 100%
(Australia) Pty. Ltd.
National Semiconductor Hong Kong 100%
(Hong Kong) Limited
National Semiconductor Hong Kong Taiwan 100%
(Far East) Limited
Consumer Electronics Limited Hong Kong 100%
National Semiconductor (HK) Hong Kong Philippines 100%
Distribution Ltd.
National Semiconductor Japan 100%
(Service) Ltd.
National Semiconductor Japan 100%
Japan Ltd.
National Semiconductor Malaysia 100%
SDN. BHD.
<PAGE>
Exhibit 21.0
NATIONAL SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
State or Percent of
other Other country voting
jurisdiction in which securities
of subsidiary is owned by
Name incorporation registered National
- - ---- ------------- ------------- ----------
National Semiconductor Malaysia 100%
Technology SDN. BHD.
DynaCraft SDN. BHD. Malaysia 100%
National Semiconductor Pte. Singapore 100%
Ltd.
National Semiconductor Singapore 100%
Asia Pacific Pte. Ltd.
National Semiconductor Singapore 100%
Singapore Manufacturer
Pte. Ltd.
National Semiconductor Canada 100%
Canada Inc.
National Semicondutores Brazil 100%
do Brasil Ltda.
Electronica NSC de Mexico, Mexico 100%
S.A. de C.V.
ASIC Limited Bermuda 100%
<PAGE>
EXHIBIT 10.2
NATIONAL SEMICONDUCTOR CORPORATION
Key Employee Incentive Plan
(as amended effective May 29, 1994)
1. Objectives.
The National Semiconductor Corporation Key Employee Incentive Plan (the
"Plan") is designed to retain executives and other selected employees
and reward them for making major contributions to the success and
profitability of the Company. These objectives are accomplished by
making incentive Awards under the Plan and providing Participants with a
proprietary interest in the growth and performance of the Company.
2. Definitions.
(a) Award - The Award to a Plan Participant pursuant to such
terms, conditions and limitations as the Company may establish in order
to fulfill the objectives of the Plan.
(b) Award Agreement - An agreement between the Company and a
Participant that sets forth the terms, conditions and limitations
applicable to an Award.
(c) Board - The Board of Directors of National Semiconductor
Corporation.
(d) Code - The Internal Revenue Code of 1986, as amended from
time to time.
(e) Committee - The Stock Option and Compensation Committee of
the Company's Board, or such other committee of the Board that is
designated by the Board to administer the Company's compensation
policies and programs.
(f) Company - National Semiconductor Corporation ("NSC") and any
other corporation in which NSC controls, directly or indirectly, fifty
percent (50%) or more of the combined voting power of all classes of
voting securities.
(g) Executive Officer - Any officer of the Company subject to
the reporting requirements of Section 16 of the Securities and Exchange
Act of 1934 ("Exchange Act").
<PAGE>
(h) Participant - An employee of the Company eligible to receive
an Award under the Plan.
3. Eligibility.
Employees of the Company, excluding Executive Officers participating in
the Executive Officer Incentive Plan, eligible for an Award under the
Plan are those who hold positions of responsibility and whose
performance, in the judgment of the management of the Company can have
significant effect on the success of the Company.
4. Administration.
The Plan shall be administered by the Committee which shall have full
and exclusive power to interpret the Plan, to grant waivers of Plan
restrictions and to adopt such rules, regulations and guidelines for
carrying out the Plan as it may deem necessary or proper, all of which
power shall be executed in the best interests of the Company and in
keeping with the objectives of the Plan. These powers include, but are
not limited to, the adoption of modifications, amendments, procedures,
subplans and the like as are necessary to comply with provisions of the
laws of other countries in which the Company may operate in order to
assure the viability of Awards granted under the Plan and to enable
Participants employed in such other countries to receive advantages and
benefits under the Plan and such laws.
5. Delegation of Authority.
The Committee may delegate to the Chief Executive Officer of the Company
and to other senior officers of the Company its duties under the Plan
pursuant to such conditions or limitations as the Committee may
establish.
6. Awards.
The Committee may grant Participants awards of cash at such times and in
such amounts as the Committee deems appropriate and shall set forth in
the related Award Agreement the terms, conditions and limitations
applicable to each Award. Such awards shall be made in accordance with
such guidelines as the Committee may from time to time adopt. Awards
shall be made subject to such conditions and restrictions as the
Committee may determine to be appropriate, which may include, but are
not limited to, continuous service with the Company, achievement of
specific business objectives, increases in specified indices, attaining
growth rates and other comparable measures of Company performance.
7. Payment of Awards.
<PAGE>
No Participant shall have the right to receive payment of any Award
until notified of the amount of such award, in writing, by the Company.
Payment of Awards shall be made in the form of cash and
may include such restrictions as the Company or Committee shall
determine. Payments may be deferred in accordance with procedures
established by the Company to assure that such deferrals comply with
applicable requirements of the Code including, at the choice of
participants, the capability to make further deferrals for payment after
retirement.
8. Tax Withholding.
The Company shall have the right to deduct applicable taxes from any
Award payment.
9. Amendment, Modification, Suspension or
Discontinuance of this Plan.
The Company may amend, modify, suspend or terminate the Plan for the
purpose of meeting or addressing any changes in legal requirements or
for any other purpose permitted by law. The Company will seek
stockholder approval of an amendment if determined to be required by or
advisable under regulations of the Securities and Exchange Commission or
the Internal Revenue Service, the rules of any stock exchange on which
the Company's stock is listed or other applicable law or regulation. No
amendment, suspension, termination or discontinuance may impair the
right of a Participant or his or her designated beneficiary to receive
any Award accrued prior to the later of the date of adoption or the
effective date of such amendment, suspension, termination or
discontinuance.
10. Termination of Employment.
If the employment of a Participant terminates, other than pursuant to
paragraphs (a) and (b) of this Section 10, all unpaid Awards shall be
cancelled immediately, unless the Award Agreement provides otherwise.
(a) Retirement - When a Participant's employment terminates as a
result of retirement, the Company may permit Awards to continue in
effect beyond the date of retirement in accordance with the applicable
Award Agreement, and the vesting of any Award may be accelerated.
(b) Death or Disability of a Participant.
(i) In the event of a Participant's death, the
Participant's estate or beneficiaries shall have a period up to the
expiration date specified in the Award Agreement within which to receive
any outstanding Award held by the Participant under such terms as may be
specified in the applicable Award Agreement. Rights to any such
<PAGE>
outstanding Awards shall pass by will or the laws of descent and
distribution in the following order: (a) to
beneficiaries so designated by the Participant; if none, then (b) to a
legal representative of the Participant; if none, then (c) to the
persons entitled thereto as determined by a court of competent
jurisdiction. Awards so passing shall be made at such times and in such
manner as if the Participant were living.
(ii) In the event a Participant is disabled, Awards and
rights to any such Awards may be paid to the Participant.
(iii) After the death or disability of a Participant, the
Company may, in its sole discretion, at any time (1) terminate
restrictions in Award Agreements; (2) accelerate any or all installments
and rights; and (3) pay the total of any accelerated payments in a lump
sum to the Participant, the Participant's estate, beneficiaries or
representative.
(iv) In the event of uncertainty as to interpretation of or
controversies concerning this paragraph (b) of Section 10, the Company's
determinations shall be binding and conclusive.
11. Cancellation and Rescission of Awards.
Unless the Award Agreement specifies otherwise, the Company may cancel
any unpaid Awards at any time if the Participant is not in compliance
with all other applicable provisions of the Award Agreement and the
Plan. Awards may also be cancelled if the Company determines that the
Participant has at any time engaged in activity harmful to the interest
of or in competition with the Company.
12. Nonassignability.
No Award or any other benefit under the Plan shall be assignable or
transferable by the Participant during the Participant's lifetime.
13. Unfunded Plan.
The Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Participants, any such accounts shall be
used merely as a bookkeeping convenience. The Company shall not be
required to segregate any assets that may at any time be represented by
cash, nor shall the Plan be construed as providing for such segregation,
nor shall the Company nor the Board nor the Committee be deemed
<PAGE>
to be a
trustee of any cash to be granted under the Plan. Any liability of the
Company to any Participant with respect to an Award under the Plan shall
be based solely upon any contractual obligations that may be created by
the Plan and any Award Agreement; no such obligation of the Company
shall be deemed to be secured by any pledge or other encumbrance on any
property of the Company. Neither the Company nor the Board nor the
Committee
<PAGE>
shall be required to give any security or bond for the performance of
any obligation that may be created by the Plan.
14. No Right to Continued Employment.
Nothing in this Plan shall confer upon any employee or Participant any
right to continue in the employ of the Company or shall interfere with
or restrict in any way the right of the Company to discharge an employee
or Participant at any time for any reason, with or without good cause.
15. Effective and Termination Dates.
The Plan as originally adopted by this Company was effective November
25, 1991, and as amended is effective May 29, 1994. The Company may
terminate or suspend the Plan at any time. No Awards may be made while
the Plan is suspended or after it is terminated.
<PAGE>
EXHIBIT 10.3
NATIONAL SEMICONDUCTOR CORPORATION
1995 KEY EMPLOYEE INCENTIVE PLAN AGREEMENT
ARTICLE 1
Definitions
Whenever used in the Agreement, unless otherwise indicated, the
following terms shall have the respective meanings set forth below:
Agreement: This Key Employee Incentive Plan Agreement.
Award: The amount to be paid to a Plan Participant at
the end of the Plan Period.
Award Date: The date forty days after the Company makes its
consolidated financial statements for the
fiscal year generally available to the press.
Base Salary: The annualized base remuneration received by a
Participant from the Company at the end of the
Bonus Period. Extraordinary items, including
but not limited to prior awards, relocation
expenses, expatriate premiums, allowances and
tax adjustments, sales incentives, amounts
recognized as income from stock options and
other similar kinds of extra or additional
remuneration are excluded from the computation
of Base Salary.
Company: National Semiconductor Corporation, a Delaware
corporation, or any other Corporation that has
adopted this Plan as its own Plan.
Committee: A committee comprised of directors of National
who are not employees of the Company, as more
fully defined in the Key Employee Incentive
Plan.
Corporation: The Company and any other corporation in which
the Company controls directly or indirectly,
fifty percent (50%) or more of
the combined voting power of all classes of
voting securities.
Disabled: Inability to perform any services for the
Company and eligible to receive disability
benefits under the standards used by the
Company's disability benefit plan or any
successor plan thereto.
Employee: An individual in the employ of the Company at
any time during the Plan Period.
Executive Officer: An Employee of the Company who is subject to
the reporting and liability provisions of
Section 16 of the Securities and Exchange Act
of 1934.
<PAGE>
Extraordinary Events that, in the opinion of the Committee,
Occurrences: are beyond the significant influence of Plan
Participants or the Company and cause a
significant unintended effect, positive or
negative, on Company operating and financial
results.
Incentive Levels: The grouping of those Employees designated as
Participants as set forth in Article 4.
Participant: An Employee who at the time shall be a
Participant in accordance with the provisions
of Article 3.
Performance Goal: Factors considered and scored to determine the
amount of a Participant's Award and consisting
of three levels of performance as follows:
(i) Threshold - the minimum acceptable level of
performance for which an Award may be earned on
a particular Performance Goal.
(ii) Target - good performance, usually set at
a level equal to the Strategic Business Plan
("SBP II") for financial measures, reflecting a
degree of difficulty which has a reasonable
probability of achievement.
(iii) Superior - exceptional performance far
exceeding the Target level because of the
great degree of difficulty and the limited
((10% -20%) probability of achievement.
Plan Period: The fiscal year of the Company.
Retired: Permanent termination of employment with the
Company, and (a) age is either sixty-five (65)
or age is at least fifty-five (55) and years of
service in the employ of the Company is ten
(10) or more, and (b) the terminating employee
has certified to the Vice President-Finance of
the Company that he or she does not intend to
engage in a full-time vocation.
Target Award: The Award, expressed as a percentage of Base
Salary, that is earned by a Participant for
achievement of the Target Performance Measure.
All capitalized terms used in this Agreement and not otherwise
defined herein have the meanings assigned to them in the Key Employee
Incentive Plan.
ARTICLE 2
Effective Date
The Agreement will become effective as of May 29, 1994, to be
effective for the Company's fiscal year 1995.
<PAGE>
ARTICLE 3
Eligibility for Plan Participation
A. Prior to the commencement of each Plan Period, members of the
Company's management committee will recommend to the President of the
Company potential Participants for the Plan Period and their Incentive
Level. The President of the Company shall then designate Plan
Participants and their Incentive Level for the Plan Period. Executive
Officers may not participate in the plan.
B. Participants will be notified of their eligibility before the
beginning of each Plan Period. Continued participation will be re-
evaluated at the beginning of each Plan Period.
C. Newly hired Employees may be added as Participants to the Plan
during the Plan Period. Other non-participating Employees may be
considered for participation in the Plan after the beginning of the Plan
Period, provided they have assumed significantly greater responsibility
during the Plan Period. Participants who are added to the Plan during a
Plan Period will receive a prorated Award based on months of
participation in the Plan, provided they have at least six months of
Plan participation.
ARTICLE 4
Target Awards
A. Each Participant will be assigned an Incentive Level with
associated Target Awards expressed as percentages of the Participant's
Base Salary. Target Awards will be the same for all Participants at any
given Incentive Level.
B. In the event that a Participant changes positions during the Plan
Period and the change results in a change in Incentive Level, whether
due to promotion or demotion, the Incentive Level will be prorated to
reflect the time spent in each position.
ARTICLE 5
Plan Performance Goals
A. Performance Goals and associated weights will be established at the
start of each Plan Period. Each Performance Goal will have a defined
Threshold, Target and Superior level of performance. Performance Goals
and their associated weights may change from one Plan Period to another
Plan Period to reflect the Company's operational and strategic goals.
<PAGE>
B. Weights for corporate and business unit financial Performance
Measures will be established at the start of each Plan Period and will
be equal unless otherwise approved in advance by the President of the
Company.
C. Awards will range between 0% and 200% of Target Award. A scale
showing the amount of the Participant's Award relative to the Target
Award at the various performance levels will be developed for each
Performance Goal. Performance levels and associated Awards (as a
percent of the Target Award) will be set generally in a straight linear
relationship from Threshold to Superior Performance Goals, with Awards
at the Superior level being 150% of the Target Award, Awards at the
Target level being 100% of the Target Award and Awards at the Threshold
level being 50% of the Target Award. Performances at less than the
Threshold level or more than the Superior level are subject to
discretionary adjustments that may not necessarily follow a linear
progression.
D. Financial and strategic Performance Goals and Target Performance
Goals will be recommended by the responsible group manager for each
specific group or business unit and approved by the President of the
Company.
E. Under exceptional circumstances, revisions to financial performance
targets may be proposed at the midpoint of the Plan Period if the
business environment or key planning assumptions change significantly
from conditions assumed at the start of the Plan Period. Such revisions
are subject to approval by the President of the Company.
F. Performance Goals, performance scales and Awards may be adjusted
in the event the Committee or the President determine there has been an
Extraordinary Occurrence during the Plan Period that (i) affects one or
more Performance Goals; (ii) unreasonably distorts Award calculations;
or (iii) results in undue benefit or detriment to the Plan Participants.
Such adjustments will be made solely for the purpose of neutralizing the
effect of the Extraordinary Occurrence.
ARTICLE 6
Calculation and Payment of Awards
A. A Participant's Award will be calculated as a percentage of Base
Salary as follows:
1) The Participant's Target Award is determined prior to the
beginning of the Plan Period.
2) The performance of the Participant's group is scored on an
overall basis at the end of the Plan Period.
3) The group's overall performance score creates an incentive
pool.
4) The group's incentive pool is divided among the Participants
within the group, based on individual contributions toward the
group's overall performance score. No one individual Award
may exceed 200% of the Participant's Target Award amount.
<PAGE>
B. Measurement of performance on Performance Goals for Participants
will be scored by the Company.
C. Awards will be paid in cash.
D. All or any portion of the Award may be deferred if the Participant
makes a voluntary irrevocable election to defer payment to a future date
pursuant to the deferral terms contained in Article 8.
ARTICLE 7
Termination of Employment
A. To be eligible to receive an Award, the Participant must be
employed by the Company on the Award Date. A Participant who terminates
employment prior to the Award Date will result in forfeiture of the
Award, except as otherwise provided in this Article 7.
Disability: If a Participant is Disabled, the Participant will
receive an Award on the Award Date representing 1/12 of the total Award
for each month of employment in the Plan Period.
Retirement: A Retired Participant will receive on the Award Date
an Award representing 1/12 of the total Award for each month of
employment in the Plan Period.
Death: If a Participant dies, Awards will be paid on the Award
Date to: (a) beneficiaries designated by the Participant; if none, then
(b) to a legal representative of the Participant; if none, then (c) to
the persons entitled thereto as determined by a court of competent
jurisdiction. The amount of the Award will be 1/12 of the total Award
for each month of employment in the Plan Period.
Lay-off: Participants whose employment is terminated by lay-off
during the Plan Period will receive no Award. If a Participant's
employment is terminated by lay-off after the Plan Period but before the
Award Date, the Participant will receive the Award on the Award Date.
B. The Committee reserves the right to reduce an Award on a pro-rata
basis to reflect a Participant's leave of absence during a Plan Period.
ARTICLE 8
Deferral of Awards
A. Each Participant is entitled to make an irrevocable election (in
the form of the Notice of Election attached) to defer receipt of all or
any portion of any Award. For any Plan Period, the Notice of Election
must be completed prior to thirty (30) days before the end of the Plan
Period. Notices of Election are not self-renewing and must be completed
for each Plan Period if deferral is desired for the applicable Plan
Period.
B. For each Participant who elects deferral, the Company will
establish and maintain book entry accounts which will reflect the
deferred Award and any interest credited to the account.
<PAGE>
C. For deferred Awards, Participant deferred accounts will be credited
each Award Date with interest set at the rate for long-term A-rated
corporate bonds, as reported by the investment banking firm of Salomon
Brothers Inc of New York City (or such other investment banking firm as
the Committee may specify) during the first week of each calendar year.
The interest rate will be reset at the beginning of each calendar year.
Interest will begin to accrue on the Award Date and will be credited
each Award Date until the date payment is actually made. If a
Participant's Award is distributed at any time other than on an Award
Date, the Participant's account will be credited with interest until the
date of distribution.
D. Participants will not receive deferred Awards until the earlier of
termination of employment for any reason (including retirement,
disability, or death) or a date pre-selected by the Participant. The
account balance will be paid in a lump sum in the month
following the earlier of termination of employment for any reason or the
pre-selected date unless installment payments are permitted and have
been elected as follows: Upon termination of employment by reason of
retirement or disability, a Participant who has previously elected to
defer an Award may irrevocably elect to have the balance of the deferred
Award plus accrued interest paid to the Participant in periodic annual
installments over a period of ten (10) years. Payments shall commence
or be made annually on a day each year that is within thirty (30) days
of the anniversary date following Participant's retirement or
disability.
E. If the Participant's employment is terminated for any reason other
than death, disability or retirement, the Participant will be paid the
entire account balance in a lump sum in the month after termination. If
a Participant has requested installment payments and dies either before
or after distribution has begun, the unpaid balance will be paid in a
lump sum in the month following the Participant's death.
F. Payment of part or all of the deferred Award may be accelerated in
the case of severe hardship, which shall mean an emergency or unexpected
situation in the Participant's financial affairs, including, but not
limited to, illness or accident involving the Participant or any of the
Participant's dependents. All payments in case of hardship must be
specifically approved by the Company.
G. No Participant may borrow against his or her account.
H. The Participant may designate a beneficiary to receive deferred
Awards in the event of the Participant's death. If the Participant is
married at the time of designation, the Participant's spouse must
consent to the beneficiary designation. The Participant's beneficiary
may be changed without the consent of any prior beneficiary except that,
for married Participants, the Participant's spouse must consent to any
change in beneficiary. If no beneficiary is chosen or the beneficiary
does not survive the Participant, the Award account balance will be paid
in accordance with the terms of the Plan.
<PAGE>
ARTICLE 9
Interpretations and Rule-Making
The Company shall have the right and power to: (i) interpret the
provisions of the Agreement, and resolve questions thereunder, which
interpretations and resolutions shall be final and conclusive; (ii)
adopt such rules and regulations with regard to the administration of
the Plan as are consistent with the terms of the Agreement, and (iii)
generally take all action to equitably administer the operation of the
Plan and this Agreement.
ARTICLE 10
Declaration of Incentives, Amendment, or Discontinuance
The President of the Company acting within his sole discretion may
on or before the Award Date: (i) determine not to make any Awards to any
or all Participants for any Plan Period; (ii) make any modification or
amendment to this Agreement for any or all Participants; or (iii)
discontinue this Agreement for any or all Participants.
ARTICLE 11
Miscellaneous
A. Except as provided in Article 8 H, no right or interest in the Plan
is transferable or assignable except by will or the laws of descent and
distribution.
B. Participation in this Plan does not guarantee any right to
continued employment and management reserves the right to dismiss
Participants for any reason whatsoever. Participation in one Plan
Period does not guarantee the Participant the right to participation in
any subsequent Plan Period.
C. The Company reserves the right to deduct from all Awards under this
Plan any taxes or other amounts required by law to be withheld with
respect to Award payments.
D. This Plan constitutes an unfunded Plan of deferred compensation.
As such, any amounts payable hereunder will be paid out of the general
corporate assets of the Company and shall not be transferred into a
trust or otherwise set aside. All accounts under the Plan will be for
bookkeeping purposes only and shall not represent a claim against
specific assets of the Company. The Participant will be considered a
general creditor of the Company and the obligation of the Company is
purely contractual and shall not be funded or secured in any way.
E. Maintenance of financial information relevant to measuring
performance during the Plan Period will be the responsibility of the
Chief Financial Officer of the Company.
F. The provisions of the Plan shall not limit, or restrict, the right
or power of the Board to continue to adopt such other plans or programs,
or to make salary, bonus, incentive, or other payments, with respect to
compensation of officers or Employees, as in its sole judgment it may
deem proper.
<PAGE>
G. Except to the extent superseded by federal law, this Agreement
shall be construed in accordance with the laws of the State of
California.
H. No member of the Company's board of directors or any officer,
employee, or agent of the Company shall have any liability to any
person, firm or corporation based on or arising out of this Agreement or
the Plan.
NATIONAL SEMICONDUCTOR CORPORATION
KEY EMPLOYEE INCENTIVE PLAN
Notice of Election
If you are a Participant in the Company's Key Employee Incentive
Plan ("KEIP") and receive an Award under the KEIP for fiscal year 1995,
you may accept payment in calendar year 1995 or you may defer payment
until a later date which is at least one year after the Award Date. If
you want to defer payment, complete this election form and return it to
Donald Macleod, Senior Vice President, Finance, or his designee by
April 27, 1995.
If you do not complete this form, you will receive payment in
calendar year 1995. For further details, refer to the National
Semiconductor Corporation Key Employee Incentive Plan documents and
Agreement.
* * * * *
DEFERRAL ELECTION:
In accordance with the National Semiconductor Corporation KEIP, I
hereby elect to defer all or part of the Award as specified below, which
Award would otherwise be paid to me under the terms of the KEIP.
1. Please defer ______% or $______ of my KEIP Award. If the
dollar amount selected is greater than the total KEIP Award, the entire
Award will be deferred.
2. The amounts deferred will be payable on the earliest of:
termination of employment for any reason (including retirement,
disability, or death) or on ________________________ (specify pre-
selected distribution date at least one year after the 1995 Award Date.)
3. In the event of death, my primary beneficiary is:
_______________________________________________
(Print name)
Print address: _______________________________________________
_______________________________________________
My secondary beneficiary (to receive benefits only in the event of death
of my primary beneficiary) is:
_______________________________________________
(Print name)
Print address: _______________________________________________
_______________________________________________
<PAGE>
I UNDERSTAND THIS ELECTION IS IRREVOCABLE FOR THE 1995 KEIP AWARD AND IS
SUBJECT TO THE TERMS OF THE NATIONAL SEMICONDUCTOR KEIP DOCUMENT.
Consent of spouse (required
married participants
beneficiaries other than spouse)
Signature: ___________________________ Signature______________________
Print Name: __________________________ Print Name:____________________
Date: ________________________________
Received by National Semiconductor Corporation
Date: ________________________________
By: __________________________________
Print Name: __________________________
Title: ________________________________
<PAGE>
EXHIBIT 10.4
NATIONAL SEMICONDUCTOR CORPORATION
Executive Officer Incentive Plan
(as adopted effective May 29, 1994)
1. Objectives.
The National Semiconductor Corporation Executive Officer Incentive Plan
(the "Plan") is designed to retain executives and reward them for making
major contributions to the success and profitability of the Company. These
objectives are accomplished by making incentive Awards under the Plan and
providing participants with a proprietary interest in the growth and
performance of the Company.
2. Definitions.
(a) Award - The Award to a Plan participant pursuant to terms and
conditions of the Plan.
(b) Award Agreement - An agreement between the Company and a
participant that sets forth the terms, conditions and limitations
applicable to an Award.
(c) Board - The Board of Directors of National Semiconductor
Corporation.
(d) Code - The Internal Revenue Code of 1986, as amended from time to
time.
(e) Committee - The Stock Option and Compensation Committee of the
Board, or such other committee of the Board that is designated by the Board
to administer the Plan. The Committee shall be constituted to permit the
Plan to comply with the requirements of Section 162(m) of the Code and any
regulations issued thereunder and shall initially consist of not less than
three members of the Board.
(f) Company - National Semiconductor Corporation ("NSC") and any
other corporation in which NSC controls directly or indirectly, fifty
percent (50%) or more of the combined voting power of all classes of voting
securities.
(g) Executive Officer - Any officer of the Company subject to the
reporting requirements of Section 16 of the Securities and Exchange Act of
1934 (Exchange Act).
3. Eligibility.
Only Executive Officers are eligible for participation in the Plan.
<PAGE>
4. Administration.
The Plan shall be administered by the Committee which shall have full
power and authority to construe, interpret and administer the Plan.
Each decision of the Committee shall be final, conclusive and binding
upon all persons. Prior to the beginning of each fiscal year, the
committee shall: (i) determine which Executive Officers are in positions
in which they are likely to make substantial long term contributions to
the Company's success and therefore participate in the Plan for the
fiscal year; and (ii) to which Award level each participant is assigned.
5. Performance Goals.
(a) The Committee shall establish performance goals applicable to
a particular fiscal year prior to its start, provided, however, that
such goals may be established after the start of the fiscal year but
while the outcome of the performance goal is substantially uncertain if
such a method of establishing performance goals is permitted under
proposed or final regulations issued under Code Section 162 (m).
(b) Each performance goal applicable to a fiscal year shall
identify one or more business criteria that is to be monitored during
the fiscal year. Such business criteria include any of the following:
Net income Cash flow
Earnings per share Stockholder return
Debt reduction Revenue
Return on investment Revenue growth
Return on net assets Manufacturing improvements and/or
Operating ratio efficiencies
Quality improvements Return on equity
Market share Cycle time reductions
Profit before tax Customer satisfaction improvements
Size of equity Return on research and development
Reduction in product investment
returns Customer request date
Strategic positioning performance
programs Human resource excellence
Compensation/review programs
program improvements New product releases
Business/information
systems improvements
(c) The Committee shall determine the target level of performance
that must be achieved with respect to each criteria that is identified
in a performance goal in order for a performance goal to be treated as
attained.
<PAGE>
(d) The Committee may base performance goals on one or more of the
foregoing business criteria. In the event performance goals are based
on more than one business criteria, the Committee may determine to make
Awards upon attainment of the performance goal relating to any one or
more of such criteria, provided the performance goals, when established,
are stated as alternatives to one another.
6. Awards.
(a) The Committee shall make Awards only in the event the
Committee certifies in writing prior to payment of the Award that the
performance goal or goals under which the Award is to be paid has or
have been attained.
(b) The maximum Award payable under this Plan to any participant
for any fiscal year shall be the lesser of $2 million (two million
dollars) or 200% of the participant's annualized base renumeration at
the end of the fiscal year.
(c) The Committee in its sole and absolute discretion may reduce
but not increase the amount of an Award otherwise payable to a
participant upon attainment of the performance goal or goals established
for a fiscal year.
(d) A participant's performance must be satisfactory, regardless
of Company performance, before he or she may be paid an incentive Award.
(e) To the extent permitted under regulations issued under Code
Section 162(m), in the event the performance goals for a fiscal year are
attained, the Committee, in its discretion, may grant all or such
portion of an incentive Award for the year as it deems advisable to a
participant (or his or her beneficiary in the case of his death) who is
employed or who is promoted to an Executive Officer position covered by
this Plan during the year, or whose employment is terminated during the
fiscal year, or who suffers a permanent disability.
7. Payment of Awards.
(a) Each participant shall be paid the Award solely in cash as
soon as practicable following grant of the Award by the Committee.
(b) Prior to the end of the fiscal year, each participant may
elect to have the payment of all or a portion of his or her incentive
Award, if any, for the year deferred until the earliest to occur of his
or her retirement, death, disability, resignation, termination of
employment or other date selected by the participant. The election
shall be irrevocable and shall be made
<PAGE>
on a form prescribed by the Committee. The election shall apply to only
that fiscal year. If a
participant has not made an election, any incentive Award for that year
shall be paid pursuant to Section 7(a).
(c) The Company shall establish and maintain book entry accounts
for each participant who has elected deferral. Interest shall accrue on
the deferred incentive Award to the date of distribution, and shall be
credited to the participant deferred accounts annually at the time
Awards are paid until payment is actually made. Interest will be set at
the rate for long term A-rated corporate bonds, as reported by the
investment banking firm of Salomon Brothers Inc. of New York City (or
such other investment banking firm as the Committee may specify during
the first week of each calendar year). The interest rate will be reset
at the beginning of each calendar year.
(d) The deferred incentive Awards are an unfunded obligation of
the Company.
(e) At the time of termination of employment by reason of
retirement or disability of a participant who has elected to defer an
incentive Award, the participant may irrevocably elect to have the
balance of his or her deferred Award plus accrued interest paid to him
or her in periodic, annual installments over a period of ten (10) years.
Payments shall commence or be made annually on a day that is within
thirty (30) days of the anniversary date following the participant's
retirement or disability.
(f) The Committee, in its sole discretion, may accelerate the
payment of the unpaid balance of a participant's deferred Award upon its
determination that the participant has incurred a severe and unexpected
financial hardship. The Committee in making its determination may
consider such factors and require such information as it deems
appropriate.
8. Tax Withholding.
The Company shall have the right to deduct applicable taxes from any
Award payment.
9. Amendment, Modification, Suspension
or Discontinuance of this Plan.
The Committee may amend, modify, suspend or terminate the Plan for the
purpose of meeting or addressing any changes in legal requirements or
for any other purpose permitted by law. The Committee will seek
stockholder approval of an amendment if determined to be required by or
advisable under regulations of the Securities and Exchange Commission or
the Internal Revenue Service, the rules of any stock exchange on which
the Company's stock is
<PAGE>
listed or other applicable law or regulation. No
amendment, suspension, termination or discontinuance may impair the
right of a participant or his or her designated beneficiary to receive
any Award accrued prior to the later
of the date of adoption or the effective date of such amendment,
suspension, termination or discontinuance.
10. Termination of Employment.
If the employment of a participant terminates, other than pursuant to
paragraphs (a) and (b) of this Section 10, all unpaid Awards shall be
cancelled immediately, unless the Award Agreement provides otherwise.
(a) Retirement - When a participant's employment terminates as a
result of retirement, the Committee may permit Awards to continue in
effect beyond the date of retirement in accordance with the applicable
Award Agreement and the vesting of any Award may be accelerated.
(b) Death or Disability of a Participant.
(i) In the event of a participant's death, the participant's
estate or beneficiaries shall have a period up to the expiration date
specified in the Award Agreement within which to receive any outstanding
Award held by the participant under such terms as may be specified in
the applicable Award Agreement. Rights to any such outstanding Awards
shall pass by will or the laws of descent and distribution in the
following order: (a) to beneficiaries so designated by the participant;
if none, then (b) to a legal representative of the participant; if
none, then (c) to the persons entitled thereto as determined by a court
of competent jurisdiction. Awards so passing shall be made at such
times and in such manner as if the participant were living.
(ii) In the event a participant is disabled, Awards and rights
to any such Awards may be paid to the participant.
(iii) After the death or disability of a participant, the
Committee may in its sole discretion at any time (a) terminate
restrictions in Award Agreements; (b) accelerate any or all installments
and rights; and (c) instruct the Company to pay the total of any
accelerated payments in a lump sum to the participant, the participant's
estate, beneficiaries or representative.
(iv) In the event of uncertainty as to interpretation of or
controversies concerning this paragraph (b) of Section 10, the
Committee's determinations shall be binding and conclusive.
<PAGE>
11. Cancellation and Rescission of Awards.
Unless the Award Agreement specifies otherwise, the Committee may cancel
any unpaid Awards at any time if the participant is not in compliance
with all other applicable provisions of the Award Agreement and the
Plan. Awards may also be cancelled if the Committee
determines that the participant has at any time engaged in activity
harmful to the interest of or in competition with the Company.
12. Nonassignability.
No Award or any other benefit under the Plan shall be assignable or
transferable by the participant during the participant's lifetime.
13. Unfunded Plan.
The Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to participants, any such accounts shall be
used merely as a bookkeeping convenience. The Company shall not be
required to segregate any assets that may at any time be represented by
cash, nor shall the Plan be construed as providing for such segregation,
nor shall the Company nor the Board nor the Committee be deemed to be a
trustee of any Award under the Plan. Any liability of the Company to
any participant with respect to an Award under the Plan shall be based
solely upon any contractual obligations that may be created by the Plan
and any Award Agreement; no such obligation of the Company shall be
deemed to be secured by any pledge or other encumbrance on any property
of the Company. Neither the Company nor the Board nor the Committee
shall be required to give any security or bond for the performance of
any obligation that may be created by the Plan.
14. No Right to Continued Employment.
Nothing in this Plan shall confer upon any employee any right to
continue in the employ of the Company or shall interfere with or
restrict in any way the right of the Company to discharge an employee at
any time for any reason whatsoever, with or without good cause.
15. Effective Date.
The Plan shall become effective on May 29, 1994. The Committee may
terminate or suspend the Plan at any time. No awards may be made while
the Plan is suspended or after it is terminated.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
1995 EXECUTIVE OFFICER INCENTIVE PLAN AGREEMENT
ARTICLE 1
Definitions
Whenever used in the Agreement, unless otherwise indicated, the
following terms shall have the respective meanings set forth below:
Agreement: This Executive Officer Incentive Plan
Agreement.
Award: The amount to be paid to a Plan Participant at
the end of the fiscal year.
Award Date: The date set by the Committee for payment of
Awards, usually approximately forty days after
the Company makes its consolidated financial
statements for the fiscal year generally
available to the press.
Base Salary: The annualized base remuneration received by a
participant from the Company at the end of the
fiscal year. Extraordinary items, including
but not limited to prior awards, relocation
expenses, expatriate premiums, allowances and
tax adjustments, sales incentives, amounts
recognized as income from stock options and
other similar kinds of extra or additional
remuneration are excluded from the computation
of Base Salary.
Company: National Semiconductor Corporation, a Delaware
corporation, or any other Corporation that as
adopted this Plan as its own Plan.
Committee: A committee comprised of directors of National
who are not employees of the Company, as more
fully defined in the Executive Officer
Incentive Plan.
Corporation: The Company and any other corporation in which
the Company controls directly or indirectly,
fifty percent (50%) or more of the combined
voting power of all classes of voting
securities.
Disabled: Inability to perform any services for the
Company and eligible to receive disability
benefits under the standards used by the
Company's disability benefit plan or any
successor plan thereto.
Executive Officer: An officer of the Company who is subject to
the reporting and liability provisions of
Section 16 of the Securities and Exchange Act
of 1934.
<PAGE>
Extraordinary Events that, in the opinion of the Committee,
Occurrences: are beyond the significant influence of Plan
participants or the Company and cause a
significant unintended effect, positive or
negative, on Company operating and financial
results.
Incentive Levels: The grouping of those Executive Officers
designated as participants as set forth in
Article 4.
Participant: An Executive Officer who at the time shall be
a participant in accordance with the
provisions of Article 3.
Performance Factors considered and scored to determine the
Goal: amount of a participant's Award, which shall
be based on one or more of the business
criteria listed in Section 5(b) of the Plan.
Performance Goals will have three levels of
performance as follows:
(i) Threshold - the minimum acceptable level
of performance for which an Award may be
earned on a particular Performance Goal.
(ii) Target - good performance, as established
by the Committee, reflecting a degree of
difficulty which has a reasonable probability
of achievement.
(iii) Superior - exceptional performance far
exceeding the Target level because of the
great degree of difficulty and the limited
probability of achievement.
Retired: Permanent termination of employment with the
Company, and (a) age is either sixty-five (65)
or age is at least fifty-five (55) and years
of service in the employ of the Company is ten
(10) or more, and (b) the terminating employee
has certified to the Vice President-Finance of
the Company that he or she does not intend to
engage in a full-time vocation.
Target Award: The Award, expressed as a percentage of Base
Salary, that is earned by a Participant for
achievement of the Target Performance Measure.
All capitalized terms used in this Agreement and not otherwise
defined herein have the meanings assigned to them in the Executive
Officer Incentive Plan.
<PAGE>
ARTICLE 2
Effective Date
The Agreement will become effective as of May 29, 1994, to be
effective for the Company's fiscal year 1995.
ARTICLE 3
Eligibility for Plan Participation
A. Prior to the commencement of the Company's fiscal year, the
Committee shall designate those Executive Officers who shall be Plan
participants for the fiscal year and their respective Incentive Levels.
B. Participants will be notified of their eligibility before the
beginning of the fiscal year. Continued participation will be re-
evaluated at the beginning of each fiscal year.
C. Newly hired Executive Officers and persons who are promoted to
Executive Officers may be added as participants to the Plan during the
fiscal year. Participants who are added to the Plan during a fiscal
year will receive a prorated Award based on months of participation in
the Plan.
ARTICLE 4
Target Awards
A. Each participant will be assigned an Incentive Level with
associated Target Awards expressed as percentages of the participant's
Base Salary. Target Awards will be the same for all participants at any
given Incentive Level.
B. In the event that a participant changes positions during the Plan
Period and the change results in a change in Incentive Level, whether
due to promotion or demotion, the Incentive Level will be prorated to
reflect the time spent in each position.
ARTICLE 5
Plan Performance Goals
A. Performance Goals, associated weights and levels of performance
will be established by the Committee before the start of the fiscal
year. Each Performance Goal will have a defined Threshold, Target and
Superior level of performance. Performance Goals and their associated
weights may change from one fiscal year to another fiscal year to
reflect the Company's operational and strategic goals, but must be based
on one or more of the business criteria listed in Section 5(b) of the
Plan.
B. Awards will range between 0% and 200% of Target Award. A scale
showing the amount of the Participant's Award relative to the Target
Award at the various performance levels will be developed for each
Performance Goal. Performance levels and associated Awards (as a
percent of the Target Award) will be set from Threshold to Superior
Performance
<PAGE>
Measures, with Awards ranging from 50% of the Target Award
at the Threshold level to 200% of the Target Award at the maximum level.
The Committee shall retain the discretion to reduce (but not increase)
the Award otherwise payable to a participant upon attainment of a
Performance Goal. Attachment A hereto contains a chart reflecting an
example of the Award formula.
ARTICLE 6
Calculation and Payment of Awards
A. A participant's Award will be calculated as a percentage of Base
Salary as follows:
1) The participant's Target Award is determined prior to the
beginning of the fiscal year.
2) The performance of the Plan participants is scored on an
overall basis at the end of the Plan Period.
3) The group's overall performance score creates an incentive
pool.
4) The group's incentive pool is divided among the participants
within the group, based on individual contributions toward the
group's overall performance score. No one individual Award
may exceed 200% of the participant's Target Award amount.
B. The Committee will score the performance of the Plan participants.
Awards will be paid only after the Committee certifies in writing that
the Performance Goals have been attained. The Committee shall have the
discretion to reduce, but not increase, the amount of an Award otherwise
payable to a participant upon attainment of the Performance Goal(s)
established for the fiscal year.
C. Awards will be paid in cash.
D. All or any portion of the Award may be deferred if the participant
makes a voluntary irrevocable election to defer payment to a future date
pursuant to the deferral terms contained in Article 8.
ARTICLE 7
Termination of Employment
A. To be eligible to receive an Award, the participant must be
employed by the Company on the Award Date. A participant who terminates
employment prior to the Award Date will result in forfeiture of the
Award, except as otherwise provided in this Article 7.
Disability: If a participant is Disabled, the participant will
receive an Award on the Award Date representing 1/12 of the total Award
for each month of employment in the fiscal year.
Retirement: A Retired participant will receive on the Award Date
an Award representing 1/12 of the total Award for each month of
employment in the fiscal year.
<PAGE>
Death: If a participant dies, Awards will be paid on the Award
Date to: (a) beneficiaries designated by the participant; if none, then
(b) to a legal representative of the participant; if none, then (c) to
the persons entitled thereto as determined by a court of competent
jurisdiction. The amount of the Award will be 1/12 of the total Award
for each month of employment in the fiscal year.
Lay-off: Participants whose employment is terminated by lay-off
during the fiscal year will receive no Award. If a participant's
employment is terminated by lay-off after the fiscal year but before the
Award Date, the participant will receive the Award on the Award Date.
Termination for Cause: Participants whose employment is
terminated for cause prior to the Award Date will receive no award.
B. The Committee reserves the right to reduce an Award on a pro-rata
basis to reflect a participant's leave of absence during a fiscal year.
ARTICLE 8
Deferral of Awards
A. Each participant is entitled to make an irrevocable election (in
the form of the Notice of Election attached) to defer receipt of all or
any portion of any Award. For any fiscal year, the Notice of Election
must be completed prior to thirty (30) days before the end
of the fiscal year. Notices of Election are not self-renewing and must
be completed for each fiscal year if deferral is desired for the
applicable fiscal year.
B. For each participant who elects deferral, the Company will
establish and maintain book entry accounts which will reflect the
deferred Award and any interest credited to the account.
C. For deferred Awards, participant deferred accounts will be credited
each Award Date with interest set at the rate for long-term A-rated
corporate bonds, as reported by the investment banking firm of Salomon
Brothers Inc of New York City (or such other investment banking firm as
the Committee may specify) during the first week of each calendar year.
The interest rate will be reset at the beginning of each calendar year.
Interest will begin to accrue on the Award Date and will be credited
each Award Date until the date payment is actually made. If a
participant's Award is distributed at any time other than on an Award
Date, the participant's account will be credited with interest until the
date of distribution.
D. Participants will not receive deferred Awards until the earlier of
termination of employment for any reason (including retirement,
disability, or death) or a date pre-selected by the Participant. The
account balance will be paid in a lump sum in the month following the
earlier of termination of employment for any reason or the pre-selected
date unless installment payments are permitted and have been elected as
follows: Upon termination of employment by reason of retirement or
disability, a participant who has previously elected to defer an Award
may irrevocably elect to have the balance of the deferred Award plus
accrued interest paid to the participant in periodic, annual
installments over a period of ten (10) years. Payments shall commence
or be made annually on a day that is within thirty (30) days of the
anniversary date following the participant's retirement or disability.
<PAGE>
E. If the participant's employment is terminated for any reason other
than death, disability or retirement, the participant will be paid the
entire account balance in a lump sum in the month after termination. If
a participant has requested installment payments and dies either before
or after distribution has begun, the unpaid balance will be paid in a
lump sum in the month following the participant's death.
F. Payment of part or all of the deferred Award may be accelerated in
the case of severe hardship, which shall mean an emergency or unexpected
situation in the Participant's financial affairs, including, but not
limited to, illness or accident involving the participant or any of the
participant's dependents. All payments in case of hardship must be
specifically approved by the Committee.
G. No participant may borrow against his or her account.
H. The participant may designate a beneficiary to receive deferred
Awards in the event of the participant's death. If the participant is
married at the time of designation and designates a beneficiary
other than the participant's spouse, the participant's spouse must
consent to the beneficiary designation. The participant's beneficiary
may be changed without the consent of any prior beneficiary except that,
for married participants, the participant's spouse must consent to any
change in beneficiary. If no beneficiary is chosen or the beneficiary
does not survive the participant, the Award account balance will be paid
in accordance with the terms of the Plan.
ARTICLE 9
Interpretations and Rule-Making
The Committee shall have the sole right and power to: (i)
interpret the provisions of the Agreement, and resolve questions
thereunder, which interpretations and resolutions shall be final and
conclusive; (ii) adopt such rules and regulations with regard to the
administration of the Plan as are consistent with the terms of the
Agreement, and (iii) generally take all action to equitably administer
the operation of the Plan and this Agreement.
ARTICLE 10
Declaration of Incentives, Amendment, or Discontinuance
The Committee may on or before the Award Date: (i) determine not
to make any Awards to any or all participants for any Plan Period; (ii)
make any modification or amendment to this Agreement for any or all
participants provided such modification or amendment is in accordance
with the terms of the Plan; or (iii) discontinue this Agreement for any
or all participants provided such modification or amendment is otherwise
in accordance with the Plan.
<PAGE>
ARTICLE 11
Miscellaneous
A. Except as provided in Article 8 H, no right or interest in the Plan
is transferable or assignable except by will or the laws of descent and
distribution.
B. Participation in this Plan does not guarantee any right to
continued employment and the Committee and management reserve the right
to dismiss participants for any reason whatsoever. Participation in one
fiscal year does not guarantee the participant the right to
participation in any subsequent fiscal year.
C. The Company reserves the right to deduct from all Awards under this
Plan any taxes or other amounts required by law to be withheld with
respect to Award payments.
D. This Plan constitutes an unfunded Plan of deferred compensation.
As such, any amounts payable hereunder will be paid out of the general
corporate assets of the Company and shall not be transferred into a
trust or otherwise set aside. All accounts under the Plan will be for
bookkeeping purposes only and shall not represent a claim against
specific assets of the Company. The participant will be considered a
general creditor of the Company and the obligation of the Company is
purely contractual and shall not be funded or secured in any way.
E. Maintenance of financial information relevant to measuring
performance during the fiscal year will be the responsibility of the
Chief Financial Officer of the Company.
F. The provisions of the Plan shall not limit, or restrict, the right
or power of the Committee to continue to adopt such other plans or
programs, or to make salary, bonus, incentive, or other payments, with
respect to compensation of Executive Officers, as in its sole judgment
it may deem proper.
G. Except to the extent superseded by federal law, this Agreement
shall be construed in accordance with the laws of the State of
California.
H. No member of the Company's board of directors or any officer,
employee, or agent of the Company shall have any liability to any
person, firm or corporation based on or arising out of this Agreement or
the Plan.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
EXECUTIVE OFFICER INCENTIVE PLAN
Notice of Election
If you are a participant in the Company's Executive Officer
Incentive Plan ("EOIP") and receive an Award under the EOIP for fiscal
year 1995, you may accept payment in calendar year 1995 or you may defer
payment until a later date which is at least one year after the Award
Date. If you want to defer payment, complete this election form and
return it to Donald Macleod, Senior Vice President, Finance, or his
designee by April 27, 1995.
If you do not complete this form, you will receive payment in
calendar year 1995. For further details, refer to the National
Semiconductor Corporation Executive Officer Incentive Plan documents and
Agreement.
* * * * *
DEFERRAL ELECTION:
In accordance with the National Semiconductor Corporation EOIP, I
hereby elect to defer all or part of the Award as specified below, which
Award would otherwise be paid to me under the terms of the KEIP.
1. Please defer ______% or $______ of my EOIP Award. If the
dollar amount selected is greater than the total EOIP Award, the entire
Award will be deferred.
2. The amounts deferred will be payable on the earliest of:
termination of employment for any reason (including retirement,
disability, or death) or on ________________________ (specify pre-
selected distribution date at least one year after the 1995 Award Date.)
3. In the event of death, my primary beneficiary is:
_______________________________________________
(Print name)
Print address: _______________________________________________
_______________________________________________
My secondary beneficiary (to receive benefits only in the event of death
of my primary beneficiary) is:
_______________________________________________
(Print name)
Print address: _______________________________________________
_______________________________________________
<PAGE>
I UNDERSTAND THIS ELECTION IS IRREVOCABLE FOR THE 1995 EOIP AWARD AND IS
SUBJECT TO THE TERMS OF THE NATIONAL SEMICONDUCTOR EOIP DOCUMENT.
Consent of spouse (required
for married participants
designating beneficiaries
other than spouse)
Signature: _________________________ Signature______________________
Print Name: ________________________ Print Name:____________________
Date: ______________________________
Received by National Semiconductor Corporation
Date: ________________________________
By: __________________________________
Print Name: __________________________
Title: ________________________________
<PAGE>
ATTACHMENT A **
Incentive
Award as
% of
Target 200%
Award Max
150%
100%
50%
50% 150%
Threshold Target Superior
** See narrative explanation for graphic material in Appendix 10.4
Chart illustrates the manner in which awards are to be calculated
under the Executive Officer Incentive Plan. Achievement of performance
against goals between the Threshold Level and fifty percent of Target
Level results in an Incentive Award of 50% of Target, with the Committee
having discretion to adjust downward when it deems appropriate.
Similarly, performance levels against goals of between 50% and 100%
result in an Incentive Award of 100% of Target, while performance
against goals of between 100% and 150% result in an Incentive Award of
150% of Target (in each case, subject to downward - but not upward -
adjustment by the Committee). Finally, performance against goals of more
than 150% will result in the maximum incentive award of 200% of target
award, subject to downward adjustment.
In summary, while the Plan formula sets the incentive awards upon
achievement of each level of performance, the shaded areas of the chart
reflect the areas of discretion on award payment that is vested with the
Committee.
<PAGE>
Appendix 10.4
Narrative description of graphic and image material for items appearing
in exhibit 10.4 as required by Regulation S-T.
Line graph illustrating the example of Award Mechanism. Contains a
45 degree line from the (0,0) point. The X and Y axis increase in
increments of 50%. The graph is in a step ladder fashion, using the 45
degree line as a base, with the first step at (50%,50%), the second line
at (100%, 100%) (which is considered a target point) and so on.
<PAGE>
EXHIBIT 10.5
NATIONAL SEMICONDUCTOR CORPORATION
STOCK OPTION PLAN
(as amended and restated through April 22, 1994)
1. TITLE OF PLAN
The title of this Plan is the National Semiconductor Corporation
Stock Option Plan, hereinafter referred to as the "Plan", and formerly
known as the National Semiconductor Corporation 1977 Stock Option Plan.
2. PURPOSE
The Plan is intended to align the interests of eligible key
employees of National Semiconductor Corporation (hereinafter called the
"Corporation") and its
subsidiaries (as hereinafter defined) with the interests of the
stockholders of the Corporation and to provide incentives for them to
exert maximum efforts for the success of the Corporation. By extending
to key employees the opportunity to acquire proprietary interests in the
Corporation and to participate in its success, the Plan may be expected
to benefit the Corporation and its shareholders by making it possible
for the Corporation to attract and retain the best available talent and
by rewarding key management and technical personnel for their part in
increasing the value of the Corporation's shares. It is further
intended that options granted pursuant to this Plan may be incentive
stock options under Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code"), or may be options which are not incentive stock
options (hereinafter called "non-qualified stock options").
3. STOCK SUBJECT TO THE PLAN
There will be reserved for issue upon the exercise of options
granted under the Plan 32,754,929 shares of the Corporation's $.50 par
value Common Stock, subject to adjustment as provided in Paragraph 8,
which may be unissued shares, reacquired shares, or shares bought on the
market. If any option which shall have been granted shall expire or
terminate for any reason (including, but not limited to cancellation by
agreement in exchange for the grant of new option(s) under the Plan)
without having been exercised in full, the unpurchased shares shall
again become available for the purposes of the Plan (unless the Plan
shall have been terminated).
<PAGE>
4. ADMINISTRATION
(a) The Plan shall be administered by a committee of the Board
of Directors of the Corporation (the "Committee") which shall be
appointed by a majority of the whole Board. The Committee shall be
constituted to permit the Plan to comply with (i) Rule 16b-3 promulgated
under the Securities Exchange Act of 1934 ("Exchange Act") and any
successor rule and (ii) IRS regulations issued under Section 162(m) of
the Code, and shall initially consist of not less than three members of
the Board, all of whom are ineligible for benefits under the Plan and
none of whom has been so eligible for at least one year prior to serving
on such Committee.
(b) The Committee shall have the plenary power, subject to and
within the limits of the express provisions of the Plan:
(i) To determine from time to time which of the eligible
persons shall be granted options under the Plan; the time or times
(during the term of the option) within which all or portions of each
option may be exercised and the number of shares for which an option or
options shall be granted to each of them. Notwithstanding the
foregoing, no person may be granted more than 500,000 options during any
one fiscal year of the Company.
(ii) To construe and interpret the Plan and options
granted under it, and to establish, amend, and revoke rules and
regulations for its administration. The Committee, in the exercise of
this power, shall generally determine all questions of policy and
expediency that may arise, may correct any defect, or supply any
omission or reconcile any inconsistency in the Plan or in any option
agreement in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(iii) To prescribe the terms and provisions of each
option granted (which need not be identical).
(iv) To determine whether options granted shall be
incentive stock options or non-qualified stock options.
(v) To determine whether options granted shall be
transferable without consideration to immediate family members or family
trusts for the benefit of optionee's immediate family members. As used
herein, "immediate family" means parents, spouses and children.
(c) The Committee may grant new options in exchange for the
cancellation of stock options previously granted under the Plan or under
any other stock option plan of the Corporation, and the purchase price
of such new options shall be as determined by the Committee (and such
purchase price may be lower than the purchase price of the cancelled
options).
<PAGE>
5. ELIGIBILITY
Options may be granted only to regular salaried officers and key
employees of the Corporation and its subsidiaries. The term
"subsidiary" corporation shall mean any corporation in which the
Corporation controls, directly or indirectly, fifty percent (50%) or
more of the combined voting power of all classes of stock. A director
of the Corporation shall not be eligible for the benefits of the Plan
unless such person also is a regular salaried employee of the
Corporation and/or of any subsidiary.
6. TERMS OF OPTION AND OPTION AGREEMENTS
Each option shall be evidenced by a written Stock Option Agreement
which may expressly identify the options as incentive stock options or
as non-qualified stock options, and be in such form and contain such
provisions as the Committee shall from time to time deem appropriate;
provided, however, that the grant of a non-qualified option pursuant to
this Plan shall in no way be construed to be an alternative to the right
of an employee to purchase stock pursuant to any incentive stock option
heretofore or hereafter granted to an employee pursuant to any stock
option plans now in existence or hereafter adopted by the Corporation.
The terms of the option agreements need not be identical, but each
option agreement shall include, by appropriate language, or be subject
to, the substance of all of the applicable following provisions:
(a) The purchase price under each option granted shall be as
determined by the Committee but shall in no instance be less than 100%
of fair market value on the date of grant. The fair market value on the
date of grant shall be the opening price of the Common Stock on the New
York Stock Exchange on such date (or if there shall be no trading on
such date, then on the first previous date on which there is such
trading).
(b) The maximum term of any incentive stock option shall be
ten years from the date it was granted.
(c) The maximum term of any non-qualified stock option shall
be ten years and one day from the date it was granted.
(d) An option may not be exercised to any extent, either by
the person to whom it was granted or by the grantee's transferee, or by
any person after the grantee's death, unless the person to whom the
option was granted has remained in the continuous employ of the
Corporation, or of a subsidiary, for not less than six months from the
date when the option was granted. Otherwise, each option shall be
exercisable as determined by the Committee.
<PAGE>
(e) The Corporation, during the terms of options granted under
the Plan, at all times will keep available the number of shares of stock
required to satisfy such options.
(f) The Corporation will seek to obtain from each regulatory
commission or agency having jurisdiction such authority as may be
required to issue and sell shares of stock to satisfy such options.
Inability of the Corporation to obtain from any such regulatory
commission or agency authority which counsel for the Corporation deems
necessary for the lawful issuance and sale of its stock to satisfy such
options shall relieve the Corporation from any liability for failure to
issue and sell stock to satisfy such options pending the time when such
authority is obtained or is obtainable.
(g) Neither a person to whom an option is granted nor his or
her transferee, legal representative, heir, legatee, or distributee,
shall be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares subject to such option unless and
until he has exercised his option pursuant to the terms thereof.
(h) In order to be exempt under Section 16 of the Exchange
Act, the option may not be transferable except by will or by the laws of
descent or distribution, and during the lifetime of the person to whom
the option is granted he or she alone may exercise it.
(i) An option shall terminate and may not be exercised if the
person to whom it is granted ceases to be continuously employed by the
Corporation, or by a subsidiary of the Corporation, except (subject
nevertheless to the last sentence of this subparagraph (h)): (1) if the
grantee's continuous employment is terminated for any reason other than
(i) retirement, (ii) permanent disability, or (iii) death, the grantee
or the grantee's transferee may exercise the option to the extent that
the grantee was entitled to exercise such option at the date of such
termination at any time within a period of three (3) months following
the date of such termination, or if the grantee shall die within the
period of three (3) months following the date of such termination
without having exercised such option, the option may be exercised within
a period of one year following the grantee's death by the grantee's
transferee or the person or persons to whom the grantee's rights under
the option pass by will or by the laws of descent or distribution but
only to the extent exercisable at the date of such termination; (2) if
the grantee's continuous employment is terminated by (i) retirement,
(ii) permanent disability, or (iii) death, the option may be exercised
in accordance with its terms and conditions at any time within a period
of five (5) years following the date of such termination by the grantee
or the grantee's transfer, or in the event of the grantee's death, by
the persons to whom the grantee's rights under the option shall pass by
will or by the laws of descent or distribution; (3) if the grantee's
continuous employment
<PAGE>
is terminated and within a period od ninety (90)
days thereafter the grantee is recalled to the active payroll, the
Committee may reinstate any portion of the option previously granted but
not exercised. Nothing contained in this subparagraph (h) is intended
to extend the stated term of the option and in no event may an
option be exercised by anyone after the expiration of its stated term.
(j) Option agreements evidencing incentive stock options shall
contain such terms and provisions as may be necessary to render them
incentive stock options pursuant to Section 422A of the Code and the
Income Tax Regulation thereunder, as the same or any successor statute
or regulations may at the time be in effect.
(k) Nothing in this Plan or in any option granted hereunder
shall confer on any optionee any right to continue in the employ of the
Corporation or any of its subsidiaries, or to interfere in any way with
the right of the Corporation or any of its subsidiaries to terminate his
employment at any time.
7. TIME OF GRANTING OPTION
The Committee shall determine the date on which options are
granted under the Plan. All options granted must be approved at a
meeting of the Committee by a majority of the members of the Committee.
If an option agreement is not executed by an employee and returned to
the Corporation on or prior to ninety (90) days after the date the
option is granted (or such earlier date as the Committee may specify),
such option shall terminate.
8. ADJUSTMENT IN NUMBER OF SHARES AND IN OPTION PRICE
In the event there is any change in the shares of the Corporation
through the declaration of stock dividends or a stock split-up, or
through recapitalization resulting in share split-ups, or combinations
or exchanges of shares, or otherwise, the number of shares available for
option, as well as the shares subject to any option and the option price
thereof, shall be appropriately adjusted by the Committee.
9. PAYMENT OF PURCHASE PRICE AND WITHHOLDING TAXES
(a) The purchase price for all shares purchased pursuant to
options exercised must be either paid in full in cash, or paid in full,
with the consent of the Committee, in Common Stock of the Corporation
valued at fair market value on the date of exercise or a combination of
cash and Common Stock. Fair market value on the date of exercise is the
opening price of the Common Stock
<PAGE>
on the New York Stock Exchange on such
date, or if there shall be no trading on such date, then on the first
previous date which there was such trading.
(b) The Committee may permit the payment of all or part of the
applicable withholding taxes due upon exercise of an option, up to the
highest marginal rates then in effect, by the withholding of shares
otherwise issuable upon exercise of the option. Option shares withheld
in payment of such taxes shall be valued at the
fair market value of the Corporation's Common Stock on the date of
exercise as defined herein.
10. CHANGE IN CONTROL
In the event the Corporation is merged into or acquired by another
entity in a transaction involving a change in control, the Committee
shall have the complete authority and discretion, but not the
obligation, to accelerate the vesting of any outstanding options granted
hereunder. The Committee may also ask the Board of Directors to
negotiate, as part of any agreement involving a sale or merger of the
Corporation, a sale of substantially all the Corporation's assets or
similar transaction, terms providing protection for employees holding
options under the Plan.
11. AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN
(a) The Board may amend, modify, suspend or terminate the Plan
for the purpose of meeting or addressing any changes in legal
requirements or for any other purpose permitted by law. The Board will
seek stockholder approval of an amendment if determined to be required
by or advisable under regulations of the Securities and Exchange
Commission or the Internal Revenue Service, the rules of any stock
exchange on which the Corporation's stock is listed, or other applicable
law or regulation.
(b) The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued. An option may
not be granted while the Plan is suspended or after it is terminated.
(c) The rights and obligations under any options granted while
the Plan is in effect shall not be altered or impaired by amendment,
suspension or termination of the Plan, except with the consent of the
person to whom the option was granted or the grantee's transferee or to
whom rights under an option shall have passed by will or by the laws of
descent and distribution.
12. EFFECTIVE DATE
The Plan, as amended and restated, shall become effective on April
22, 1994, subject to approval by the stockholders of the Corporation
within twelve (12) months after said date.
<PAGE>
EXHIBIT 10.7
November 30, 1993
Mr. Donald Macleod
Senior Vice President - Finance
National Semiconductor Corporation
P.O. Box 58090
Santa Clara, CA 95052
Re: Fee Withholding Authorization
Dated April 20, 1989
Dear Mr. Macleod:
This will confirm our agreement with respect to modification of
the above-referenced director fee withholding authorization, a copy of
which is attached to this letter. Effective as of November 1, 1993,
National Semiconductor Corporation (the "Company") will withhold payment
only of that portion of the fees payable to me as Chairman of the Board
that is necessary to cover accrued interest on my outstanding lcan (the
"Loan") evidenced by that certain Promissory Note dated April 20, 1989.
The remaining amount of such fees, including fees payable for attendance
at Board and Committee meetings, will be paid directly to me in the same
manner as paid to other directors of the Company.
In consideration of this modification of the withholding
arrangement, I hereby confirm that I will use my best efforts to repay
the Loan in full on or prior to July 1, 1994. In particular, in the
event that Wave Systems Corp. successfully completes an underwritten
public offering of its common stock and I am relieved prior to that date
of any "lock-up" restrictions negotiated in connection with such an
offering, I agree to use by best efforts to sell a sufficient amount of
my Wave Systems Corp. holdings to pay down the Loan in full. I further
understand and agree that in the event the Loan has not been repaid by
July 1, 1994, the attached April 20, 1989, withholding authorization
shall once again become effective.
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy of this letter.
Very truly yours,
//s// PETER J. SPRAGUE
Peter J. Sprague
249 Undermountain Road
Lenox, MA 01240
Understood and agreed:
NATIONAL SEMICONDUCTOR CORPORATION
//s// DONALD MACLEOD
Donald Macleod
Senior Vice President-Finance and CFO
<PAGE>
EXHIBIT 10.14
CONSULTING AGREEMENT
This Agreement is entered into as of the 1st day of October, 1993,
by and between National Semiconductor Corporation, a Delaware
corporation ("NSC"), and Harry H. Wetzel, 2000 Washington Street, #7,
San Francisco, CA 94109 ("WETZEL").
WHEREAS, WETZEL served as a member of the Board of Directors of
NSC from 1978 through September 30, 1993;
WHEREAS, NSC desires to have WETZEL provide consulting services on
a non-exclusive basis, as requested by NSC; and
WHEREAS, WETZEL is willing to provide such services on the
following terms and conditions;
NOW, THEREFORE, the parties agree as follows:
1. SERVICES
WETZEL shall provide such consulting services and render
such advice with respect to the business and operations of NSC as NSC
shall request during the term hereof. In providing such services,
WETZEL will report to the President and Chief Executive Officer of NSC
and will look to him for all general and specific direction in providing
such services.
2. TERM
The term of this Agreement shall be eight (8) years,
commencing on October 1, 1993, and terminating on September 30, 2001,
unless earlier terminated by WETZEL giving not less than thirty (30)
days written notice. This Agreement shall not be terminated by NSC
except in the event of willful misconduct by WETZEL in the performance
of services hereunder.
3. COMPENSATION; EXPENSES
As compensation for the services provided by WETZEL to NSC
during the term of this Agreement, NSC agrees to pay WETZEL as follows:
<PAGE>
(a) For the consulting services provided by WETZEL, the
sum of $20,000 annually, payable in twelve (12)
monthly installments of $1,666.66; and
(b) Reimbursement of all documented out-of-pocket
expenses incurred by WETZEL in providing such
services.
4. INDEMNIFICATION
To the extent permitted by law, NSC agrees to indemnify and
hold harmless WETZEL from and against any and all losses, claims,
damages or liabilities, including all reasonable attorney's fees on an
as incurred basis, to which WETZEL may become subject as a result of
providing services under this Agreement; provided, however, that NSC
shall not be responsible for any such loss, claim, damages or liability
which results from the willful misconduct or bad faith of WETZEL while
performing such services.
5. ARBITRATION
Any controversy or dispute between the parties under this
Agreement, or related to the transactions contemplated hereunder, shall
be submitted to arbitration before a panel of three (3) arbitrators
sitting in San Francisco, California, and operating under the auspices
of the American Arbitration Association pursuant to its Commercial
Rules. The majority decision of the arbitrators shall be final, binding
and conclusive upon the parties and judgment may be entered thereon in
any Federal or state court having jurisdiction. Unless the decision of
the arbitrator shall otherwise direct, the parties shall bear equally
the costs and expenses of arbitration and each party shall bear its own
expenses, including the professional fees of its own counsel and expert
witnesses. The parties shall proceed with any arbitration hereunder
expeditiously and shall use their reasonable best efforts to conclude
any such arbitration proceeding in order that a decision may be rendered
within ninety (90) days from the service of the demand for arbitration
by the initiating party.
<PAGE>
6. GOVERNING LAW
This Agreement shall be governed by and construed under the
laws of the State of California.
NATIONAL SEMICONDUCTOR HARRY H. WETZEL
CORPORATION
By: //JOHN M. CLARK III By: //s// HARRY H. WETZEL
<PAGE>
EXHIBIT 10.15
PREFERRED LIFE INSURANCE PROGRAM
THE PLAN
The Preferred Life Insurance program is an executive bonus benefit where
each executive owns a permanent life insurance policy on his life. The
program has been designed so that cost (in most cases) to both National
Semiconductor and each executive is equivalent to the current group life
insurance plan in force. The preferred insurance plan provides
executives the following benefits:
o Enhanced life insurance at cost comparable to term life insurance
o Enhanced flexibility for planning purposes (for details, see
enclosed brochures)
o Policy can be continued upon retirement or termination (i.e.,
complete portability)
o Can have a paid-for policy at retirement (additional premium
required)
o The ability to have third-party ownership (i.e., Irrevocable Life
Insurance Trust)
THE PRODUCT
UltraSpanPrime, an innovative product blending the best features of term
insurance and universal life insurance designed to provide you with
exceptional value at a low cost.
<PAGE>
THE COMPANY
Chubb Life Insurance Company of America is a member of the Chubb Group
of Insurance Companies, one of the largest diversified financial
organizations in North America.
Admitted Assets: 1.65 Billion
Standard & Poors Rating: AAA (Superior)
A.M. Best Ratings: A+ (Superior)
Weiss Research: A- (Recommended)
Capital & Surplus is equal to 19.4% of assets, one of the highest in the
industry.
<PAGE>
Exhibit 24.0
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
persons hereby constitutes and appoints Gilbert F. Amelio, Donald
Macleod, and John M. Clark III, and each of them singly, his true and
lawful attorney-in-fact and in his name, place, and stead, and in any
and all of his offices and capacities with National Semiconductor
Corporation (the "Company"), to sign the Annual Report on Form 10-K for
the Company's 1994 fiscal year, and any and all amendments to said
Annual Report on Form 10-K, and generally to do and perform all things
and acts necessary or advisable in connection therewith, and each of the
undersigned hereby ratifies and confirms all that each of said
attorneys-in-fact may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto
executed this Power of Attorney as of the date set forth opposite his
signature.
SIGNATURE DATE
/S/GILBERT F. AMELIO July 13 , 1994
- - --------------------
Gilbert F. Amelio
/S/PETER J. SPRAGUE July 13 , 1994
- - -------------------
Peter J. Sprague
/S/GARY P. ARNOLD July 13 , 1994
- - -----------------
Gary P. Arnold
/S/ROBERT BESHAR July 13 , 1994
- - ----------------
Robert Beshar
/S/MODESTO A. MAIDIQUE July 13 , 1994
- - ----------------------
Modesto A. Maidique
/S/ J. TRACY O'ROURKE July 13 , 1994
- - ---------------------
J. Tracy O'Rourke
/S/CHARLES E. SPORCK July 13 , 1994
- - --------------------
Charles E. Sporck
/S/DONALD E. WEEDEN July 13 , 1994
- - -------------------
Donald E. Weeden
/S/DONALD MACLEOD July 13 , 1994
- - -----------------
Donald Macleod
/S/ROBERT B. MAHONEY July 13 , 1994
- - --------------------
Robert B. Mahoney
