THIS IS AN AMENDMENT TO THE NATIONAL SEMICONDUCTOR 10K 1993 FILED ON
AUGUST 9, 1993 AT 4:40:51PM EASTERN TIME. THE ASSESSION FOR THIS FILING
WAS 0000070530-93-000018. THIS AMENDMENT IS BEING FILED DUE TO THE FACT
THAT THE TEXT WAS INADVERTANTLY EXCLUDED FROM THE FILE TRANSMITTED VIA
EDGAR DUE TO A PROBLEM WITH THE SUBMISSION TAGS USED IN THE HEADER.
THIS IS ONLY A REFILING OF THE AUGUST 9, 1993 EDGAR SUBMISSION, NO CHANGES
HAVE BEEN MADE TO THE FORM 10K SUBMITTED TO THE SEC IN COMFORMING PAPER
FORMAT SUBMITTED PERSUANT TO RULE 901(D) OF REGULATION S-T.
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 30, 1993
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
(State of incorporation) (I.R.S. Employer Identification Number)
2900 SEMICONDUCTOR DRIVE, P.O. BOX 58090
SANTA CLARA, CALIFORNIA 95052-8090
(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
- ------------------- ------------------------
Depositary shares, each representing New York Stock Exchange
1/10th share of $40.00 Convertible Exchangeable
Preferred Shares, par value $0.50 per share
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:
$40.00 Convertible Exchangeable Preferred Shares ($0.50 par value) with a
liquidation preference of $500 per share.
(Title of class)
$32.50 Convertible Preferred Shares ($0.50 par value) with a liquidation
preference of $500 per share.
(Title of class)
--Continued on next page--
<PAGE>
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. [X].
The aggregate market value of voting stock held by non affiliates of
the registrant as of July 23, 1993, was approximately $1,821,972,124.
The number of shares of the registrant's common stock, $0.50 par value,
as of July 23, 1993, was 110,422,533.
DOCUMENTS INCORPORATED BY REFERENCE
Document Location in Form 10-K
-------- ---------------------
1993 Annual Report to Shareholders (pp. 23 - 46) Parts I, II and IV
Portions of the Proxy Statement for the Part III
Annual Meeting of Stockholders to be
held on or about October 1, 1993.
Portions of the Company's Registration Part IV
Statement on Form S-7, Registration
No. 2-69429, which became effective
on October 15, 1980.
Portions of the Company's Registration Part IV
Statement on Form S-3, Registration
No. 2-99864, which became effective
September 6, 1985.
Portions of the Company's Registration Part IV
Statement on Form S-8, Registration
No. 33-18414, which became effective
December 1, 1987.
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 Proxy Statement for the Part IV
Annual Meeting of Stockholders held
October 30, 1992.
The Index to Exhibits is located on pages 26-27.
<PAGE>
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 including analog intensive, digital and mixed signal and
complex integrated circuits.
National was incorporated under the laws of the State of
Delaware in 1959. The Company commenced operations in Danbury,
Connecticut, as a manufacturer of transistors. In 1967, it moved its
headquarters to Santa Clara, California and has since become a global
supplier of semiconductor products. During fiscal 1988, the Company
acquired the operations of Fairchild Semiconductor Corporation
("Fairchild") and certain affiliates engaged in the merchant
semiconductor business. During fiscal 1989, National sold
substantially all of the Company's former Information Systems Group
("ISG"). ISG marketed and supported mainframe computers and designed,
manufactured and marketed electronic terminals used in retail
operations.
During fiscal 1993, the Company continued its manufacturing
consolidation and reduction in cost structure in accordance with the
restructuring plan announced in fiscal 1992. As part of the
restructuring, the Company continued activities related to the closure
of a fabrication module at its Salt Lake City, Utah location. The
Company also continued to transfer production operations from Santa
Clara, California to its plants in the United Kingdom and Arlington,
Texas, sold the Bangkok, Thailand assembly and test facility and
completed the establishment of a joint venture to operate its former
manufacturing facility in Migdal Haemek, Israel, as an independent
entity. The Company retains less than a 20 percent share in the joint
venture. As of fiscal year end 1993, the Company continues to maintain
restructuring reserves related to the 1992 plan to consolidate
manufacturing facilities. In fiscal 1992, National incurred a
restructuring charge of $149.3 million for the consolidation of
worldwide manufacturing capacity including writedown of certain
assets, specific reductions in the manufacturing workforce, and
process transfers. In 1992, National closed manufacturing facilities
in Brazil and Hong Kong and ceased discrete wafer fabrication
operations in Santa Clara, California. During fiscal 1991, National
incurred a $119.6 million restructuring charge in connection with the
Company's exit from the very high-speed, high-density static random
access memory ("SRAM") business resulting in the sale of its Puyallup,
Washington, wafer fabrication facility.
The Company operates in only one industry segment. The
information with respect to sales and identifiable assets for
National's geographic segments appearing on page 41 of the Company's
1993 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 industrial and some
consumer applications, including personal systems and data processing,
communications, 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 addresses broad, horizontal
markets and focuses on large, high volume product lines, including
analog, digital logic, discrete and certain memory products. The
Company also has a wholly-owned subsidiary, Dynacraft, Inc. which supplies
semiconductor packaging products and technology.
<PAGE>
Communications and Computing Group
In CCG, the Company utilizes its technological strengths, particularly
in 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 four operating divisions:
Ethernet local area networks ("LAN"), advanced networks, wide area
networks ("WAN"), and embedded systems. For fiscal 1993, sales by the
CCG group represented approximately one-third of the Company's total
sales.
Ethernet 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 at the work-group level. 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 such as the
Systems Oriented Network Interface Controller ("SONIC"), the
controller for networking over standard twisted-pair telephone wiring
("STNIC"), the AT/LANTIC single chip network controller for personal
computers, and the Repeater Interface Controller ("RIC") for use with
multi-media networks.
Advanced Networks Division. The Company offers a Token-Ring
LAN solution through an alliance with IBM, and the Company continues
to introduce products aimed at the 16- and 32-bit workstation and
other high performance systems. Also included in the advanced
networks division are products targeted at Fiber Distributed Data
Interface (FDDI) markets.
WAN Division. WANs allow the telecommunications customer to
transmit large amounts of data at high speed from one office to
another anywhere in the world. The WAN Division also includes
wireless networks and high performance ASIC products. The Company
currently supplies numerous solutions that address existing analog
telecommunications equipment as well as next generation SONET/S3
transmission equipment.
Embedded Systems Division. Embedded control products include
4-, 8-, 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 peripherals. The Embedded Systems division also includes the
Company's Super I/O family of input/output devices used in personal
systems. A line of voice processors is used in digital (tapeless)
telephone answering machines and other voice-controlled applications.
Standard Products Group
In SPG, the Company focuses its core strengths in both analog and
digital technologies to design and manufacture the Company's high
volume products. SPG is comprised of four divisions: analog, digital
logic, memory and discrete components. For fiscal 1993, 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 and sound) and
are used in automotive, 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, memory management circuits and peripheral drivers.
Digital Logic Division. National's digital logic 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 as
well as computationally intensive applications such as workstations
and computers, where the Company's FACT, FAST, BCT and 100K ECL
product families are industry standards. The logic 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").
<PAGE>
Discrete Components Division. 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.
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. In
1992, National established a comprehensive, state-of-the-art customer
service center in Arlington, Texas, 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. No one customer or distributor accounted for
10 percent or more of total net sales in fiscal year 1993, 1992, or
1991.
Backlog
Semiconductor 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 not 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 quarter,
primarily due to customer demand levels.
Manufacturing
National has commenced a program designed both to consolidate its
manufacturing facilities by closing outdated plants and to expand and
upgrade certain facilities to create "centers of excellence" for key
manufacturing technologies. To date, the Company has sold or closed
plants in Thailand, Brazil, Hong Kong and Tucson, Arizona and has
transferred a plant in Israel to a minority-owned joint venture. The
Company is establishing its CMOS center of excellence at its
Arlington, Texas facility and 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 Company has
also implemented programs to reduce costs as well as programs designed
to increase manufacturing yields.
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 lithography, chemical etching, oxidation,
diffusion, deposition, implantation and metallization. Production of
the integrated circuit continues with wafer sort, where the wafers are
separated into individual circuit devices; assembly, where tiny wires
are used to connect the electronic circuits on the device to the
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.
<PAGE>
The Company's product design and development activities are
performed predominantly in the United States. Wafer fabrication is
concentrated in four facilities in the United States as well as 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 CMOS logic processes, of which four generations are in production
for digital products. All those processes are also adapted for mixed
signal applications. National also has CMOS processes optimized for
nonvolatile memories, both UV 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 on 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 increased demand in the industry. On
July 4, 1993, an explosion destroyed the Sumitomo Chemicals plant in
Niihama, Japan. Through this plant, Sumitomo Chemicals supplied a
significant portion of the world's supply of epoxy cresolnovolac
("ECN") which is used in producing compound that is used in packaging
the Company's semiconductor devices. The Company is currently
assessing the impact of the explosion on its supplies of molded ECN
and is currently working with suppliers to qualify alternative sources
of ECN. Although it is still too early to determine the impact, if any,
of the explosion, the Company is currently able to maintain customer
orders at current and historic run rates.
Research and Development
National's research and development ("R&D") is performed at two
levels. At the corporate level, process development and basic
research are performed. At the operating division level, R&D is
performed to define and develop products specific to the operating
divisions.
R&D expense was $202.3, $192.1, and $198.6 million in fiscal
1993, 1992, and 1991, respectively. The Company's spending on
research and development has increased in absolute dollars although
decreased as a percent of sales compared to fiscal 1992, primarily as
a result of the growth in sales in 1993. The Company continues to
refocus its R&D resources; during fiscal 1992, the Company reallocated
R&D spending from certain memory and application specific integrated
circuit ("ASIC") products to the Company's growth areas by increasing
R&D expenditures in LAN and certain analog product lines, as well as
in the Innovative Products Division, a business unit charged with the
development of emerging products. These efforts are designed to
improve return on R&D investment by allocating a large percentage of
this investment to developing products in the Company's growth areas,
as well as to improve product performance and to reduce product cost.
The Company expects to maintain future R&D at a level comparable with
fiscal 1993 as a percentage of sales, and National will continue to
direct its R&D efforts 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 and is
currently involved in a program to further capitalize on its
intellectual property assets through licensing of its intellectual
property.
<PAGE>
Employees
At May 30, 1993, National employed approximately 23,400 people of whom
approximately 8,500 were employed in the United States, 1,800 in
Europe, 12,700 in Southeast Asia and 400 in other areas. This
compares to a total of approximately 27,200 and 29,800 people employed
by the Company worldwide as of May 31, 1992 and May 26, 1991,
respectively. The decrease in fiscal 1993 was largely due to the
disposition of plants in Bangkok, Thailand and Migdal Haemek, Israel.
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.
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 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 is only part of their
overall operations, such as Motorola, Inc., Hitachi, Ltd., Nippon
Electric Company, Ltd., and Texas Instruments Incorporated, each of
which has substantially greater financial resources than the Company.
National also competes with a large number of smaller companies that
target particular niche 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 economics, 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, or competitive position.
(See also Item 3, Legal Proceedings of this Form 10-K.)
<PAGE>
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 and warehousing.
These domestic sites include plants located in Santa Clara,
California; South Portland, Maine; Arlington, Texas; and Salt Lake
City, 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; Hong Kong; and Tokyo, Japan. National maintains
local sales offices in various locations primarily throughout North
and South America, Europe, and Asia. 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.
The Company is continuing to consolidate its worldwide
manufacturing capacity in conjunction with the restructuring plan
announced in fiscal 1992. In accordance with this plan, certain
facilities are being closed and production capabilities transferred to
other sites. To facilitate the consolidation and transfers, the
Company increased expenditures for property, plant and equipment
during fiscal 1993 and 1992, as compared to fiscal 1991, much of
which was directed toward modernization and expansion of existing
sites. The Company's wafer fabrication capacity was 85 percent at the
end of fiscal 1993. National believes that, along with the continued
consolidation and modernization of manufacturing facilities the
current condition of its plants is suitable and that productive
capacity is sufficient to meet current demand.
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
United States 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). Briefs in the case were filed in June 1993, but the
Company is not able to predict when a decision will be rendered. As a
result of the length of time which has elapsed since the fiscal years
in question as well as the effect of compounding, the amount of
interest on any tax liability ultimately determined to be owing would
be a multiple of the amount of the underlying additional tax. The
Company's tax returns for fiscal 1983 through 1985 are under
examination by the IRS, and the Company expects the IRS to raise
similar issues. The Company believes that adequate tax payments have
been made and accruals recorded for all years.
<PAGE>
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 revised alleged underpayment could be
subject to penalties that may be computed as a multiple of such
underpayment. The Company is continuing to contest the claims in
proceedings at the administrative agency level and filed an
administrative petition for relief in October 1991. 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.
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 materially adverse effect upon its
financial position. Other than the Santa Clara site, the other
matters where the Company has been named as a potentially responsible
party ("PRP") are primarily instances where other PRP's have been
principally responsible for the clean-up of hazardous wastes. The
Company has accrued amounts related to certain of these matters and it
believes the potential liability, if any, in excess of amounts already
accrued will not have a material effect on the Company's financial
position.
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 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. In a related action, the Company has
filed a complaint for declaratory relief and breach of contract in
California State Court against both Hughes and GM alleging, inter
alia, that under a prior patent cross license agreement entered into
between GM and Fairchild Camera and Instrument Corporation
(subsequently renamed Fairchild Semiconductor Corporation and
purchased by the Company in October, 1987) that the Company is
licensed under the patents at issue in the suit brought by Hughes.
Although Hughes removed the case to federal court on its own motion,
the case was remanded back to the California state court by the
federal district court. The Company believes that the ultimate resolution
of this matter will not have a material financial impact 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.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Current Title Age
Gilbert F. Amelio (1) President and Chief Executive Officer 50
Donald P. Beadle (2) Senior Vice President and Executive Advisor 57
Richard M. Beyer (3) President, Communications and Computing Group 44
Patrick J. Brockett (4) President, International Business Group 45
Charles P. Carinalli (5)Senior Vice President and 45
Chief Technical Officer
John M. Clark III (6) Senior Vice President, General Counsel 43
and Secretary
Robert G. MacLean (7) Vice President, Human Resources 49
Donald Macleod (8) Senior Vice President, Finance and 44
Chief Financial Officer
Robert B. Mahoney (9) Controller 40
R. Thomas Odell (10) Co-President, Standard Products Group 44
Edgar R. Parker (11) Senior Vice President, 53
Quality and Reliability
Kirk P. Pond (12) Co-President, Standard Products Group 49
Richard L. Sanquini (13)Senior Vice President, 58
Business Development and
Intellectual Property Protection
George M. Scalise (14) Senior Vice President and 59
Chief Administrative Officer
Business Experience During Last Five Years
(1) Mr. Amelio has been President, Chief Executive Officer, and a
Director of National since joining the Company in February
1991. Prior to joining National, Mr. Amelio was President of
Rockwell Communications Systems and had previously served as
President of Rockwell International Corporation's Semiconductor
Products Division.
(2) Mr. Beadle joined the Company in January 1960. Prior to
becoming Senior Vice President and Executive Advisor in
February, 1993, he held positions as Senior Vice President,
International Business Group; Vice President, Worldwide
Marketing; and Sales and Managing Director, European
Operations.
<PAGE>
(3) 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 and had also previously served as
Vice President and General Manager of PABX Systems Corporation,
an affiliate of Alcatel, N.A.
(4) Mr. Brockett joined the Company in September 1979. Prior to
becoming President, International Business Group in February
1993, he 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.
(5) 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.
(6) Mr. Clark joined the Company in May 1978. Prior to becoming
Senior Vice President, General Counsel and Secretary in April
1992, he held positions as Associate General Counsel, Vice
President and Assistant Secretary.
(7) 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.
(8) Mr. Macleod joined the Company in February 1978. Prior to
becoming Senior Vice President, Finance and Chief Financial
Officer in June 1991, he 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.
(9) 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.
(10) Mr. Odell joined the Company in March 1974. Prior to becoming
Co-President, Standard Products Group in June 1991, he held
positions as Vice President, Analog Division and Santa Clara
Foundry Director.
(11) Mr. Parker joined the Company in July 1974. Prior to becoming
Senior Vice President, Quality and Reliability in February
1993, he held positions as Senior Vice President, Quality and
Strategic Operations; Senior Vice President,
Military/Aerospace; Vice President and General Manager,
Military/Aerospace Division; and Vice President and General
Manager, Microcomputer Division.
(12) Mr. Pond joined the Company as an employee of Fairchild in
October 1987. Prior to becoming Co-President, Standard
Products Group in June 1991, he held positions as Vice
President, Digital Logic Division, and Executive Vice President
of Fairchild's Standard Products division.
<PAGE>
(13) 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.
(14) 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 35-37, 42 and 46 under the captions
"Debt Financing", "Shareholders' Equity", "Financial Information by
Quarter (Unaudited)" and "Common Stock Data" of the registrant's 1993
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 23, 1993 was $16.50. At July 23, 1993, the number
of record holders of the Company's common stock was 14,844.
ITEM 6. SELECTED FINANCIAL DATA
See "Five-Year Selected Financial Data" on page 23 of the registrant's
1993 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 1993
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 42 of the registrant's 1993 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" in the registrant's Proxy Statement for the
1993 annual meeting of shareholders to be held on or about October 1,
1993 and which will be filed in definitive form pursuant to Regulation
14a on or about August 20, 1993 (hereinafter "1993 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 1993 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 1993 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 1993 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 1993 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 1993 Annual Report to
Shareholders are incorporated by reference into Part II of this
report:
Pages in 1993 Annual
Report to Shareholders
Consolidated Balance Sheets at May 30, 1993 29
and May 31, 1992.
Consolidated Statements of Operations for each 30
of the years in the three-year period ended
May 30, 1993.
Consolidated Statements of Shareholders' Equity 31
for each of the years in the three-year period
ended May 30, 1993.
Consolidated Statements of Cash Flows for each 32
of the years in the three-year
period ended May 30, 1993.
Notes to Consolidated Financial Statements. 33-42
Independent Auditors' Report. 43
Pages in
(a)2. Financial Statement Schedules this document
For the three years ended May 30, 1993:
Independent Auditors' Report 17
Schedule I -- Marketable Investments 18
Schedule II -- Amounts Receivable from Related Parties 19
Schedule V -- Property, Plant, and Equipment 20
Schedule VI -- Accumulated Depreciation and 21
Amortization of Property, Plant,
and Equipment
Schedule VIII -- Valuation and Qualifying Accounts 22
Schedule X -- Supplementary Income Statement 23
Information
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 26 and 27 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 30, 1993.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
National Semiconductor Corporation:
Under date of June 11, 1993, we reported on the consolidated balance
sheets of National Semiconductor Corporation and subsidiaries as of
May 30, 1993, and May 31, 1992, and the related consolidated
statements of operations, shareholders' equity and cash flows for each
of the years in the three-year period ended May 30, 1993, as contained
in the 1993 Annual Report to Shareholders. These consolidated
financial statements and our report thereon are incorporated by
reference in the May 30, 1993, 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 11, 1993
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE I -- MARKETABLE INVESTMENTS
At May 30, 1993
(in millions of dollars)
Principal Carrying
Title of Issue Amount Cost Market Value
Short-Term Marketable Investments (A)
Government Securities $ 43.0 $ 42.4 $ 42.4 $ 42.4
Time Deposits 5.0 5.0 5.0 5.0
Banker's Acceptances 5.0 5.0 5.0 5.0
Corporate Notes 2.0 2.0 2.0 2.0
------- ------- ------- -------
Total Short-term
Marketable Investments $ 55.0 $ 54.4 $ 54.4 $ 54.4
Long-Term Marketable Investments (A)
Government Securities $ 10.6 $ 10.6 $ 10.6 $ 10.6
Corporate Notes 3.3 3.3 3.3 3.3
------- ------- ------- -------
Total Long-term Marketable Investments $ 13.9 $ 13.9 $ 13.9 $ 13.9
(A) 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
Years Ended May 26, 1991, May 31, 1992, and May 30, 1993
Balance at
beginning Balance at
Year Name of year Additions Collections end of year
1991 Peter J. Sprague $682,000 $ ---- $ 37,000 $645,000
1991 Gilbert F. Amelio ---- $486,000 ---- $486,000
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
_________________________________________
(1) The loan is payable on demand with interest at the rate of bank
prime plus one percent, which was 7.0 percent at May 30, 1993.
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) In fiscal 1993, represents interest accrued in accordance with
the terms described in (1) and (2).
<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 (3) Other(2) period
- -------------- ---------- ----------- --------- -------- -------
Year ended May 26, 1991
Land $ 13.7 $ -- $ -- $ (4.0) $ 9.7
Buildings and improvements 315.9 30.8 -- (36.4) 310.3
Leasehold improvements 50.0 5.3 3.1 (5.9) 46.3
Machinery and equipment 1,133.0 164.8 64.1 (57.8) 1,175.9
Construction in progress 154.1 (91.1) 2.3 -- 60.7
---------- ----------- --------- -------- -------
$1,666.7 $ 109.8 $ 69.5 $(104.1)$1,602.9
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
____________________________________________
(1) Additions are shown net of transfers to other asset
accounts.
(2) During fiscal 1991, National sold its wafer fabrication
facility in Puyallup, Washington. Property, plant and
equipment amounting to approximately $104.1 million was
disposed of on the effective date of the sale. During
fiscal 1993, National sold its assembly and test facility in
Bangkok, Thailand. Property, plant and equipment totaling
approximately $59.0 million was disposed of on the effective
date of the sale.
(3) Includes assets reserved in conjunction with restructuring
programs.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT, AND EQUIPMENT
Years Ended May 26, 1991, May 31, 1992 and May 30, 1993
(in millions of dollars)
Balance
Balance at at end
beginning Retire- of
Classification of period Provisions(1)ments (3) Other(2) period
- -------------- ---------- ----------- --------- -------- -------
Year ended May 26, 1991
Buildings and improvements $ 132.7 $ 20.1 $ 3.0 $ (1.6)$ 148.2
Leasehold improvements 29.2 3.9 1.9 (3.8) 27.4
Machinery and equipment 802.6 154.1 45.3 (11.5) 899.9
----------- ----------- -------- ------- -------
$ 964.5 $178.1 $ 50.2 $ (16.9)$1,075.5
=========== =========== ======== ======= =======
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
______________________________________________
(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) In 1991, represents the relief of accumulated depreciation
as of the effective date of sale of the Company's former
wafer fabrication facility located in Puyallup, Washington.
In 1993, represents the relief of accumulated depreciation
as of the effective date of sale of the Company's former
assembly and test facility in Bangkok, Thailand.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
Years Ended May 26, 1991, May 31, 1992 and May 30, 1993
(in millions of dollars)
Deducted from receivables
in the balance sheet
Doubtful Returns and
Description accounts allowances Total
Year ended May 26, 1991
Balance at beginning of period $ 5.6 $ 50.7 $ 56.3
Additions charged against revenue ---- 232.1 232.1
Additions charged to costs and expenses (0.7) ---- (0.7)
Deductions (0.2)(1) (239.4) (239.6)
-------- -------- --------
Balance at end of period $ 4.7 $ 43.4 $ 48.1
======== ======== ========
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
======== ======== ========
________________________________________________
(1) Doubtful accounts written off, less recoveries.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years Ended May 26, 1991, May 31, 1992 and May 30, 1993
(in millions of dollars)
Charged to expense (1)
1991 1992 1993
Maintenance and repairs $80.2 $89.3 $83.8
Advertising (2) $17.9 $26.1
____________________________________________
(1) Expense from continuing operations only. All other items
required are less than 1 percent of sales.
(2) Amount in this year does not exceed one 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: August 9, 1993 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 9th day of
August 1993.
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/ RICHARD J. DANZIG* Director
Richard J. Danzig
/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
/S/ HARRY H. WETZEL* Director
Harry H. Wetzel
*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
11, 1993, relating to the consolidated balance sheets of National
Semiconductor Corporation and subsidiaries as of May 30, 1993, and May
31, 1992, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the years in the
three-year period ended May 30, 1993, which report appears on page 43
of the 1993 National Semiconductor Corporation Annual Report to
Shareholders and is incorporated by reference in the May 30, 1993,
annual report on Form 10-K of National Semiconductor Corporation and
our report dated June 11, 1993, on the related financial statement
schedules which appears on page 17 of the May 30, 1993 annual report
on Form 10-K.
KPMG PEAT MARWICK
San Jose, California
August 6, 1993
<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 Restated Certificate of Incorporation of the Company, as
amended
(incorporated by reference from the Exhibits to the Company's
Registration Statement on Form S-7 Registration No. 2-69429,
which became effective October 15, 1980);
Certificate of Amendment dated November 26, 1980 (incorporated by
reference from the exhibits to the Company's Form 10-K filed
August 24, 1992);
Certificate of Amendment dated October 28, 1983 (incorporated by
reference from the exhibits to the Company's Form 10-K filed
August 24, 1992);
Certificate of the Powers, Designations, Preferences and Rights
of the $40 Convertible Exchangeable Preferred Shares
(incorporated by reference from the Exhibits to the Company's
Registration Statement on Form S-3 Registration No. 2-99864,
which became effective September 6, 1985);
Certificate of Amendment dated October 31, 1986 (incorporated by
reference from the exhibits to the Company's Form 10-K filed
August 24, 1992);
Certificate of Amendment dated October 30, 1987 (incorporated by
reference from the Exhibits to the Company's Registration
Statement on Form S-8 Registration No. 33-18414, which became
effective December 1, 1987).
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. 33-48935, which became
effective October 5, 1993).
3.2 By-Laws of the Company (incorporated by reference from the
Exhibits to the Company Form 10-K filed August 24, 1992).
4.1 Form of Deposit Agreement, including form of Depositary Receipt
(incorporated by reference from the Exhibits to the Company's
Registration Statement on Form S-3 Registration No. 2-99864,
which became effective September 6, 1985).
4.2 Form of Indenture with respect to the 8% Convertible Subordinated
Debentures due 2010 (incorporated by reference from the Exhibits
to the Company's Registration Statement on Form S-3 Registration
No. 2-99864, which became effective September 6, 1985).
4.3 Form of Rights Agreement (incorporated by reference from the
Exhibits to the Company's Registration Statement on Form 8-A
filed August 10, 1988).
4.4 Form of Deposit Agreement, including Form of Depositary Receipt
(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).
10.1 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).
10.2 Management Contract or Compensatory Plan or Arrangement: 1993
Key Employee Incentive Plan Agreement (incorporated by reference from
the Exhibits to the Company's 10-K filed August 24, 1992).
10.3 Management Contract or Compensatory Plan or Arrangement: 1994
Key Employee Incentive Plan Agreement
10.4 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).
10.5 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).
10.6 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).
10.7 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).
Management Contract or Compensatory Plan or Arrangement: 1993
Extension of Airplane Use Letter Agreement with Gilbert F. Amelio
doing business as Aero Ventures.
10.8 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).
10.9 Management Contract or Compensatory Plan or Arrangement:
Compensation arrangement with Gilbert F. Amelio (incorporated by
reference from the Exhibits to the Company's Form 10-K filed
August 22, 1991).
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.
10.13 Management Contract or Compensating Plan or Arrangement:
Settlement Agreement and General Release with Raymond J. Farnham.
11.0 Computation of Earnings (Loss) per share.
13.0 Portions of the Annual Report to Shareholders for the fiscal year
ended May 30, 1993 (to be deemed filed only to the extent
required by the instructions to Exhibits for reports on Form
10-K).
22.0 List of Subsidiaries.
24.0 Consent of KPMG Peat Marwick (included in Part IV).
25.0 Power of Attorney.
<PAGE>
EXHIBIT 10.3
NATIONAL SEMICONDUCTOR CORPORATION
1994 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 An Employee of the Company who is subject to the reporting
Officer: and liability provisions of Section 16 of the Securities
and Exchange Act of 1934.
<PAGE>
Extraordinary Events that, in the opinion of the Committee, are beyond the
Occurrences: significant influence of Plan Participants or the Company and
cause a significant unintended effect, positive or negative,
on Company operating and financial results.
Incentive The grouping of those Employees designated as Participants as
Levels: 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 Factors considered and scored to determine the amount
Measure: of a Participant's Award and consisting of three levels as
follows:
(i) Threshold - the minimum acceptable level of performance
for which an Award may be earned on a particular
Performance Measure.
(ii) Target - good performance, usually set at a level
equal to the Annual Operating Plan ("AOP") 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.
<PAGE>
ARTICLE 2
Effective Date
The Agreement will become effective as of May 31, 1993, to
be effective for the Company's fiscal year 1994.
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, provided however, that only the Committee shall
approve Executive Officers for Plan participation and their
respective Incentive Levels.
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 Measures
A. Performance Measures and associated weights will be
established at the start of each Plan Period. Each Performance
Measure will have a defined Threshold, Target and Superior level
of performance. The Committee will establish Performance
Measures and their associated weights for Executive Officers.
Performance Measures and their
<PAGE>
associated weights may change from
one Plan Period to another Plan Period to reflect the Company's
operational and strategic goals.
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
Committee for the Executive Officer Participants or by the
President of the Company for all other Participants.
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 Measure. 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 Measures, 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 Measures and Target
Performance Measures will be recommended by the responsible
group manager for each specific group or business unit and
approved by the President of the Company. Performance
objectives, financial and strategic Performance Measures and
Target Performance Measures will be established by the Committee
for all Executive Officer Participants.
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
Committee for Executive Officer Participants and by the
President of the Company for all other Participants.
F. Performance Measures, performance scales and Awards may be
adjusted by the Committee in the event the Committee determines
there has been an Extraordinary Occurrence during the Plan
Period that (i) affects one or more Performance Measures; (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.
<PAGE>
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. Performance objectives for Executive Officer Participants
will be scored by the Committee.
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.
<PAGE>
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.
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 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 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 on a
calendar quarterly basis.
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. At that time, the Committee (after considering the
Participant's preferences but nevertheless in its sole
discretion) will decide whether the Participant will receive the
Award in installments or in a lump sum. Generally, installments
may be requested for deferred Awards paid upon termination of
employment by an employee becoming Disabled or Retired. If the
deferred Award is paid in installments, such installments will
be paid annually over a ten year period on a date each year that
is within thirty (30) days after the anniversary of the
Participant's retirement date or date of disability. If not
paid in installments, 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.
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 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, 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 Committee 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. For Executive Officer Participants, such
determinations can only be made by the Committee.
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.
<PAGE>
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.
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
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 1994, you may accept payment in calendar year 1994
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, by April 30, 1994.
If you do not complete this form, you will receive payment in
calendar year 1994. 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 1994
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 1994 KEIP
AWARD AND IS SUBJECT TO THE TERMS OF THE NATIONAL SEMICONDUCTOR
KEIP 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>
EXHIBIT 10.7
AMENDMENT NO. 2
THIS AMENDMENT No. 2 to a certain letter agreement dated July
15, 1991 (the "Letter Agreement") is made, entered into and
effective as of the 14th day of July, 1993, by and between
NATIONAL SEMICONDUCTOR CORPORATION, a Delaware corporation,
having its principal place of business at 2900 Semiconductor
Drive, Santa Clara, California 95052-8090 (hereinafter "the
Company") and GILBERT F. AMELIO, dba AERO VENTURES, 13416 Middle
Fork Lane, Los Altos Hills, California 94022 (hereinafter
"Amelio").
WITNESSETH:
WHEREAS, the Company and Amelio entered into the Letter
Agreement under which the Company authorized Amelio to use his
personal airplane for business travel in connection with his
employment by the Company; and
WHEREAS, the Letter Agreement originally terminated by its
terms on July 15, 1992; and
WHEREAS, the Letter Agreement was amended by amendment dated
July 15, 1992 (Amendment No. 1); and
WHEREAS Amendment No. 1, inter alia, extended the termination
date of the Letter Agreement to July 14, 1993; and
WHEREAS, the parties desire to amend and extend the Letter
Agreement for an additional twelve month period;
NOW, THEREFORE, in furtherance of the foregoing premises and in
consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto, intending to be
legally bound hereby, do agree as follows:
1. Pursuant to Paragraph 9 of the Letter Agreement, the Company
and Amelio do hereby agree, subject to the approval of the Board
of Directors of the Company, to renew the Letter Agreement as
amended by Amendment No. 1, for the period July 14, 1993 through
July 13, 1994.
2. Except as amended by Amendment No. 1 and as provided in
Paragraph 1 of this Agreement, the terms and conditions of the
Letter Agreement shall remain unchanged.
3. Charlene Amelio, wife of Gilbert F. Amelio, consents and
agrees to the terms and conditions of this Agreement.
National Semiconductor Corporation
By: JOHN M. CLARK III G. F. AMELIO
----------------------- --------------------------
John M. Clark III Gilbert F. Amelio dba Aero
Secretary Ventures
CHARLENE AMELIO
--------------------------
Charlene Amelio
<PAGE>
Exhibit 10.12
Compensation Arrangement - Richard M. Beyer
Mr. Beyer joined the Company February 1, 1993 as President of
the Company's Communications and Computing Group. Mr. Beyer is
eligible to participate in benefit and compensation plans made
available to all employees and executive officers. He also
received the following additional benefits:
1. A sign on bonus in the amount of $50,000 was paid to Mr. Beyer.
2. Mr. Beyer received $44,732 for reimbursement for payment of
taxes associated with the sign on bonus.
3. Although not eligible under the terms of the Key Employee
Incentive Plan ("KEIP") to participate in the KEIP until fiscal
1994, Mr. Beyer received an incentive payment in the amount of
$100,000 at the end of fiscal 1993.
<PAGE>
Exhibit 10.13
SETTLEMENT AGREEMENT AND GENERAL RELEASE
This Settlement Agreement and General Release (hereinafter
"Agreement") is entered into this 24 day of May, 1993, by
and between Raymond J. Farnham (hereinafter "Employee") and
National Semiconductor Corporation (hereinafter "Company").
WHEREAS, Employee voluntarily wishes to resign his position
with the Company, effective as of May 31, 1993; and
WHEREAS, Company desires to provide termination benefits to
Employee on the terms specified herein; and
WHEREAS, Company and Employee acknowledge that the termination
benefits specified herein are greater than Employee would
otherwise be entitled to upon termination of his employment; and
WHEREAS, Company and Employee desire to settle fully and
finally all differences between them;
NOW, THEREFORE, in consideration of the mutual covenants and
promises set forth herein, Employee and Company agree as follows:
1. Effective as of May 31, 1993, Employee shall resign as an
active employee and shall be relieved of any further obligations
to perform services as an employee on behalf of the Company.
Employee agrees to resign all positions held as an officer of
the Company or any of its subsidiaries on or before May 24, 1993.
2. Subject to the limitation set forth below, the Company will
continue to pay Employee's salary (at current levels) and all
associated benefits as if an active employee for an additional
period of one year, ending May 31, 1994. However, if Employee
accepts full-time employment prior to May 31, 1994, Employee
shall so notify Company's Vice President, Human Resources, and
Company shall thereupon be relieved of the obligation to provide
salary and benefits to Employee; provided, that, should such
employment occur prior to December 31, 1993, Company shall pay
to Employee in a lump-sum the amount of additional salary (but not
<PAGE>
benefits) that would otherwise have been paid to Employee
through December 31, 1993. On the earlier of June 1, 1994 or
the date Employee begins full-time employment with another
company, Employee shall start on unpaid personal leave of
absence, without any benefits, which shall extend through
December 15, 1994. The Company's internal records shall reflect
that Employee's employment terminated as a result of voluntary
resignation on December 15, 1994.
3. Employee will be eligible for the Key Employee Incentive
Plan ("KEIP") award for fiscal year 1993, which award will be
paid in accordance with the provisions of the plan at the same
time all other participants receive their payments. Employee
will not be eligible to participate in KEIP for fiscal year
1994. Employee's Accomplishment Score for fiscal year 1993
shall be the average of all Management Committee scores, plus or
minus 15%.
4. Employee will be credited with twelve (12) months of service
toward any payment of the fiscal year 1993 cycle of the
Performance Award Plan. If an award is made, Employee will
receive a prorated award in accordance with the provisions of
the plan and receive payment at the same time all other
participants receive their payments. Employee will not be
eligible to receive any performance units under the Performance
Award Plan for the fiscal year 1994 cycle.
5. Company agrees to provide Employee, at no cost, with Key
Executive career transition services through Right Associates.
6. On December 15, 1994, Company shall pay Employee any accrued
vacation pay to which Employee may be entitled under the
Company's vacation program. In addition, Employee shall have
the right to exercise on or before March 15, 1995, any stock
options which have vested through December 15, 1994; provided,
however, that Employee hereby waives the right to exercise that
portion of his September 16, 1991, and September 23, 1992,
option grants which would otherwise vest on September 16, 1994
(3125 shares) and September 23, 1994 (3000 shares), respectively.
7. Employee agrees to return all Company property, credit
cards, documents or other materials or equipment that have been
furnished to him by the Company by May 31, 1993, except the
laptop personal computer and
<PAGE>
cellular phone which may be retained
by Employee through the earlier of acceptance of new full-time
employment or May 31, 1994. All telephone charges after May 31,
1993, shall be the responsibility of Employee.
8. Employee, his representatives, heirs, successors and assigns
do hereby completely release and forever discharge Company, its
affiliated, related or subsidiary corporations, and its and
their present and former shareholders, officers, directors,
agents, employees, attorneys, successors and assigns
(hereinafter collectively also referred to as "Company") from
all claims, rights, demands, actions, obligations, liabilities
and causes of action of any and every kind, nature and character
whatsoever, known or unknown, which Employee may now have, or
has ever had, against Company, based upon any act or omission by
Company prior to the date of execution of this Agreement by
Employee, including, but not limited to, any and all claims for
damages, declaratory or injunctive relief or attorneys' fees,
arising from or in any way related to Employee's employment by
Company or the termination thereof, whether based on tort,
contract (express or implied), or any federal, state or local
law, statute or regulation, including, but not limited to,
claims of unlawful age discrimination based on the Federal Age
Discrimination in Employment Act of 1967 or the California Fair
Employment and Housing Act; provided, however, that this
paragraph does not waive any indemnification rights Employee may
have whether as an employee or an officer, pursuant to Labor
Code Section 2802, Company By-Laws or Company policy.
9. It is understood and agreed that the preceding Paragraph is
a full and final Release covering all known as well as all
unknown or unanticipated injuries, debts, claims or damages to
Employee including, without limitation, those arising from or in
any way related to his employment by Company or the termination
thereof. Therefore, Employee waives any and all rights or
benefits which he may now have, or in the future may have, under
the terms of Section 1542 of the California Civil Code which
provides as follows:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have
materially affected his settlement with the debtor.
<PAGE>
10. Employee shall not initiate or cause to be initiated
against Company any suit, action, investigation, audit,
compliance review or proceeding of any kind, or participate in
same, individually or as a representative or member of a class,
under any contract (express or implied), law, statute or
regulation, federal, state or local, pertaining in any manner
whatsoever to the claims, rights, demands, actions, obligations,
liabilities, and causes of action herein released, including,
without limitation, those relating to his employment by Company
or the termination thereof.
11. It is understood and agreed that this Agreement and each
and every provision thereof shall be confidential and shall not
be disclosed directly or indirectly by Employee to any other
person, firm, organization or other entity, of any and every
type, public or private, for any reason, at any time without the
prior written request or consent of Company unless required by
law. Nor shall Employee disclose directly or indirectly to any
person or organization, except as expressly permitted herein,
that Employee received any sum of money from Company as a result
of the termination of his employment with Company. It is
further understood and agreed that it shall not constitute a
breach of this Agreement for Employee to disclose the terms
thereof to his immediate family and to his attorney and his
financial advisor and/or accountant; provided, however, that
Employee shall be obliged to use his best efforts to assure that
such persons do not disclose this Agreement or any provision
thereof or the fact that Employee received any sum of money from
Company as a result of the termination of Employee's employment
with Company. It is further understood and agreed that Company
shall make reasonable efforts to maintain the confidentiality of
this Agreement and its contents and shall not disclose this
Agreement or its contents, directly or indirectly, to any of
Company's employees or agents, unless such persons have a
work-related need to know or unless required by law, and Company
shall instruct each such person to whom it discloses this
Agreement or its contents to refrain from making any disclosure
to any other person except as permitted by this Agreement.
Company believes that disclosure in its 1993 Proxy Statement
will be required by law. It is further understood and agreed
that it shall not constitute a breach of this Agreement for
Employee or Company to respond to any unsolicited inquiry by
stating only that Employee and Company resolved their
differences in a mutually-satisfactory manner.
<PAGE>
12. Any dispute between Employee and Company as to the
violation of any provision of this Agreement shall be resolved
by arbitration, which arbitration shall be conducted in
accordance with the rules of the American Arbitration
Association insofar as said rules are not in conflict with the
provisions of this Agreement.
13. Employee represents that he has had an opportunity to be
represented by Counsel of his own choosing in the negotiation
and preparation of this Agreement, that he has had an adequate
opportunity to consider the Agreement, that he has carefully
read the Agreement, that he is fully aware of and understands
its contents and its legal effect, that the preceding paragraphs
recite the sole consideration for this Agreement, that all
agreements and understandings between Employee and Company are
embodied, referenced and expressed herein, and that he enters
into this Agreement voluntarily, without coercion, and based on
his own judgment and not in reliance upon any oral or written
representations or promises made by Company, other than those
contained or referenced herein.
14. With respect to any matters under this Agreement that are
governed by state law, the parties agree that this Agreement
shall be construed and governed by the laws of the State of
California. The language of all parts of this Agreement shall
in all cases be construed as a whole, according to its fair
meaning, and not strictly for or against any party.
15. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
EMPLOYEE NATIONAL SEMICONDUCTOR CORPORATION
RAYMOND J. FARNHAM By: ROBERT G. MACLEAN
Title: V.P. Human Resources
<PAGE>
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 28, May 27, May 26, May 31, May 30,
1989 1990 1991 1992 1993
Earnings (loss) from
continuing operations $(205.5) $ (29.3) $(150.3) $(120.1) $130.3
Add: Adjustment of interest
(net) (2) 9.7 10.3 17.3 -- --
Earnings (loss) used in per share ----- ------- ------ ------- -----
calculation
Continuing operations (195.8) (19.0) (133.0) (120.1) 130.3
Discontinued operations 182.3 4.3 ( 1.1) -- --
------- ------- ------- ------- ------
Net earnings (loss) $ (13.5) $ 14.7 $(134.1) $(120.1) $130.3
======= ======= ======= ======= ======
Number of shares:
Weighted average common
shares outstanding 103.1 102.7 103.4 104.6 107.4
Net additional shares
issuable from exercise
of options and warrants (2) 3.0 3.7 5.5 6.1 9.0
Shares issuable from
assumed conversion of
preferred shares 8.3 8.3 8.3 8.3 16.0
------- ------- ------- ------- ------
Weighted average common
shares outstanding -
assuming full dilution 114.4 114.7 117.2 119.0 132.4
======= ======= ======= ======= ======
Earnings(loss) per share-
assuming full dilution:
Continuing operations $(1.71) $(0.17) $(1.14) $(1.01) $0.98
Discontinued operations 1.59 0.04 (0.01) -- --
------- ------- ------- ------- ------
Net earnings (loss) $(0.12) $(0.13) $(1.15) $(1.01) $0.98
======= ======= ======= ======= ======
______________________________________________
(1) 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.
(2) For fiscal years 1988 through 1991, all outstanding options and warrants
on common stock are assumed to have been exercised and in fiscal 1992 and
1993, all outstanding options on common stock are assumed to have been
exercised, even though the related effects may be anti-dilutive. The
assumed proceeds from such exercise have been applied as follows: a) to
repurchase 20 percent of the average outstanding common shares, and then
b) to eliminate outstanding debt with c) any remaining funds invested in
U.S. government securities or commercial paper. The resulting interest
adjustment is net of income tax effects.
<PAGE>
Exhibit 13.0
NATIONAL SEMICONDUCTOR CORPORATION 1993 ANNUAL REPORT
5 YEAR SELECTED FINANCIAL DATA
(in millions, except per share amounts)
Years Ended
--------------------------------------------
May 30, May 31, May 26, May 27, May 28,
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
OPERATING RESULTS
Net sales $2,013.7 $1,717.5 $1,701.8 $1,675.0 $1,647.9
Operating costs and expenses 1,866.7 1,839.9 1,854.4 1,719.8 1,834.9
------- ------- ------- ------- -------
Operating income (loss) 147.0 (122.4) (152.6) (44.8) (187.0)
Interest, net 2.9 5.4 3.6 12.4 (11.5)
------- ------- ------- ------- -------
Income (loss) from continuing
operations before income taxes 149.9 (117.0) (149.0) (32.4) (198.5)
Income taxes (benefit) 19.6 3.1 1.3 (3.1) 7.0
------- ------- ------- ------- -------
Income (loss) from continuing
operations 130.3 (120.1) (150.3) (29.3) (205.5)
======= ======= ======= ======= =======
Net income (loss) $ 130.3 $(120.1) $(151.4) $ (25.0) $ (23.2)
======= ======= ======= ======= =======
Net income (loss) used in per
common share calculation
(reflecting preferred
dividends) $ 113.2 $(130.1) $(161.4) $ (35.0) $ (33.2)
======= ======= ======= ======= =======
Earnings (loss) per common share:
Earnings (loss) from
continuing operations $ 0.98 $ (1.24) $ (1.55) $ (0.38) $ (2.09)
Net earnings (loss) $ 0.98 $ (1.24) $ (1.56) $ (0.34) $ (0.32)
======= ======= ======= ======= =======
Weighted average common
and common equivalent
shares outstanding 115.9 104.6 103.4 102.7 103.1
======= ======= ======= ======= =======
FINANCIAL POSITION AT YEAR-END
Working capital $ 336.6 $ 122.0 $ 196.1 $ 223.4 $ 229.6
Total assets 1,476.5 1,148.9 1,190.7 1,377.6 1,416.1
Long-term debt 37.3 33.9 19.9 64.2 52.2
Total debt 47.9 45.4 46.0 76.2 62.2
Shareholders' equity 837.4 539.4 658.3 816.8 848.5
======= ======= ======= ======= =======
OTHER DATA
Research and development expense $ 202.3 $ 192.1 $ 198.6 $ 252.4 $ 251.6
Capital additions $ 235.1 $ 189.4 $ 109.8 $ 182.0 $ 277.6
Number of employees at year end
(in thousands) 23.4 27.2 29.8 32.7 32.2
======= ======= ======= ======= =======
==============================
National's former Information Systems Group has been classified as
discontinued operations as these businesses were sold in 1989.
National has paid no cash dividends on its common stock in any of
the years presented above.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Continuing Operations
During 1993, National recorded sales of $2,013.7 million compared to
$1,717.5 million in fiscal 1992 and $1,701.8 million in fiscal 1991.
The Company recorded net income of $130.3 million in 1993
compared to net losses of $120.1 million and $151.4
million in 1992 and 1991, respectively. The losses in
1992 and 1991 were primarily attributable to restructuring
charges of $149.3 million and $119.6 million recorded in
the respective years.
Fiscal 1993 and 1991 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 in fiscal 1993 over 1992 primarily because
of growth in the Company's Communications and Computing
Group ("CCG"), and within the Standard Products Group
("SPG"), in analog intensive products and digital logic
products.
The Company's CCG sales increased over the prior
year, primarily because of increased sales in the embedded
systems division and advanced network division. Increased
sales in both of these divisions were a result of higher
average selling prices and increased volume. Ethernet
local area network sales were up slightly from the prior
year. However, the sales increase was not as substantial
as the increase from fiscal 1991 to fiscal 1992. The
increase in Ethernet local area network sales in 1993 was
primarily due to increased unit sales, partially offset by
declining prices. The Company expects continued sales
growth in CCG in the future. In 1992, CCG experienced
significant sales growth over 1991 driven primarily by
increased demand for Ethernet devices. In 1992, other
parts of CCG recorded flat to slightly higher sales when
compared to 1991, with the exception of Application
Specific Integrated Circuit ("ASIC") division sales,
particularly in CMOS gate array products, which decreased
from year to year.
The Company's SPG sales increased over the prior
year primarily due to significant increases in the analog
and digital logic divisions. Analog unit volume increased
substantially while average selling prices dropped
slightly from the prior year. The increase in digital
logic sales was due to improved mix, increased prices on
certain products and an increase in units sold. Sales of
memory products also increased over the prior year,
primarily due to increased volume. SPG realized slightly
lower sales in fiscal 1992 compared to 1991 primarily due
to the decline in sales of certain memory products and to
the discontinuance of certain mature products. Also in
1992, sales were down moderately in the digital logic
division when compared to 1991 resulting primarily from
competitive pricing pressures and evolution of the market
toward micro-peripheral products. The analog division
grew moderately during fiscal 1992 due in part to a modest
turnaround in the automotive and other original equipment
markets.
Sales increased across all geographic regions to
$2,013.7 million in fiscal 1993, an increase of 17
percent from fiscal 1992. Sales in the Americas, primarily
North America, increased 13 percent and European sales
increased 11 percent, while the strongest increase in
sales came from the Asian region with an increase of 29
percent. The Americas, Asian, and European regions
comprised 47 percent, 33 percent and 20 percent,
respectively, of the Company sales for the fiscal year
ended May 30, 1993. Although future business conditions
are difficult to predict, the Company currently expects
sales to increase in fiscal 1994, though at much more
modest rates than in fiscal 1993.
<PAGE>
Gross Margin
During 1993, gross margin, which reached a level of 34.5
percent of sales in the fourth quarter, was 31.5 percent
of sales for the annual period compared to 27.4 percent
and 23.9 percent for fiscal 1992 and 1991, respectively.
The improvement in gross margin in fiscal 1993 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 the Company's higher margin
products. Utilization of wafer fabrication capacity
improved to 85 percent at the end of fiscal 1993. This
compares to capacity utilization of nearly 80 percent at
the end of fiscal 1992 and less than 70 percent at the end
of fiscal 1991. The improvement in gross margin in fiscal
1992 over fiscal 1991 was generally attributable to an
improved product mix driven by increased sales of higher
margin CCG and analog products during the fiscal year,
combined with cost reductions resulting from the Company's
restructuring activities, and improved manufacturing
efficiencies and yields. The Company expects gross margin
to improve as a percentage of sales in 1994. The extent
of improvement is subject to market influences as well as
the effectiveness with which manufacturing transfers and
consolidation can bring about further reductions to the
cost structure.
During fiscal year 1993, the Company continued its
manufacturing consolidation and reduction in cost
structure in accordance with the restructuring plan
announced in fiscal year 1992. As part of the
restructuring, the Company continued to transfer
production operations from Santa Clara, California to the
United Kingdom, sold the Bangkok, Thailand assembly and
test facility and established a joint venture to operate
its former manufacturing facility in Migdal Haemek,
Israel, as an independent entity. The Company retains
less than a 20 percent share in the joint venture. As of
fiscal year ended 1993, the Company continues to maintain
restructuring reserves related to the 1992 plan to
consolidate manufacturing facilities. In fiscal 1992,
National incurred a restructuring charge of $149.3 million
for the consolidation of worldwide manufacturing capacity
including a writedown of certain assets, specific
reductions in the manufacturing workforce, and process
transfers. In 1992, National closed manufacturing
facilities in Brazil and Hong Kong and ceased discrete
wafer fabrication operations in Santa Clara, California.
During fiscal 1991, National incurred a $119.6 million
restructuring charge in connection with the Company's exit
from the very high-speed, high-density static random
access memory ("SRAM") business, resulting in the sale of
its Puyallup, Washington, wafer fabrication facility. The
restructuring activities in fiscal 1991 also included a
reduction in workforce of approximately 2,000 people,
closure of its Tucson, Arizona, military product assembly
and test operations, and closure or consolidation of
certain wafer fabrication facilities.
Research and development
Research and development ("R&D") expenses were $202.3
million for fiscal 1993, or 10.0 percent of sales,
compared to $192.1 million, or 11.2 percent and $198.6
million, or 11.7 percent of sales for fiscal 1992 and
1991, respectively. The Company's spending on research
and development has increased in absolute dollars although
it has decreased as a percent of sales compared to fiscal
1992, primarily as a result of the growth in sales in
1993. The Company continues to refocus its R&D resources.
Accordingly, expenditures have been directed to such areas
as analog intensive
<PAGE>
products, networking products and the
Company's Innovative Products Division, a business unit
charged with the development of emerging products. The
1992 decrease in R&D expense from 1991 was primarily a
result of reduced spending on memory and ASIC products,
allowing for greater emphasis on the Company's growth
areas. Specifically, the Company increased its 1992 R&D
expenditures in Ethernet local area network and certain
analog product lines as well as in the Company's
Innovative Products Division. The Company expects to
maintain future R&D at a level comparable with fiscal 1993
as a percentage of sales. National will continue to
direct its R&D efforts toward high potential markets in
personal systems, communications, and analog-intensive
markets.
Selling, general and administrative
Selling, general and administrative ("SG&A") expenses for
fiscal 1993 were $284.8 million, or 14.1 percent of sales,
compared to $251.0 million, or 14.6 percent and $241.9
million, or 14.2 percent of sales in fiscal 1992 and 1991,
respectively. SG&A expenses in fiscal 1993 included a
credit of $43.7 million related to patent licensing income
earned as a result of the Company's continuing
intellectual property licensing activities, offset by
$11.9 million in legal expenses in connection with a tax
case, which is discussed further in Note 6 to the
consolidated financial statements, $4.7 million in a write
down of a minority investment, and $10.1 million
representing the costs of centralizing sales and logistics
facilities within the Company's International Business
Regions. Fiscal 1992 SG&A included a credit of $21.6
million related to patent licensing income. Fiscal 1991
SG&A included $8.9 million in non-recurring income
consisting of a $6.3 million gain on the sale of an
investment and a $2.6 million gain on the sale of a non-
U.S. facility. 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.
Excluding the items discussed above, SG&A expenses
would have been $301.8 million, or 15.0 percent of sales
in fiscal 1993 as compared to $272.6 million or 15.9
percent of sales in fiscal 1992. SG&A expenses in fiscal
1993 have 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. Exclusive of the items
discussed above, SG&A expenses increased in 1992 as
compared to 1991 and were affected by incremental
personnel costs combined with a greater emphasis on
marketing and market development programs. During 1992,
the Company increased its focus on advertising and
communication, planning and development, and on human
resource programs. Other increases in SG&A expense during
fiscal 1992 stemmed from legal and other costs associated
with tax and patent licensing matters. These additional
expenses were offset somewhat by lower costs related to
the Company's currency transactions, primarily a result of
a stronger U.S. dollar and more effective hedging
strategies during 1992. The Company will continue to
emphasize its investments in market development and
employee strategic programs in 1994; however, fiscal 1994
SG&A expenses are not expected to differ significantly
from those of fiscal 1993 as a percentage of sales.
<PAGE>
Interest income and interest expense
Net interest income was $2.9 million for fiscal 1993
compared to $5.4 million in fiscal 1992 and $3.6 million
in 1991. The decrease in net interest income is due to
primarily to a decrease in interest income combined with
an increase in interest expense in fiscal 1993. Interest
income has decreased due to a decreased rate of return on
cash and investment balances. Interest expense in 1993
has increased over 1992 due to slightly higher average
debt balances.
Income tax expense
Income tax expense for fiscal 1993 was $19.6 million
compared to $3.1 million and $1.3 million in fiscal 1992
and 1991, respectively. The fiscal 1993 effective tax
rate has increased 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
Bangkok facility. Fiscal 1992 expense is primarily
attributable to amounts withheld offshore in relation to
patent licensing income earned during the year. In
addition, both 1992 and 1991 expense include amounts
related to operations in certain non-U.S. jurisdictions.
The Company's effective tax rate is expected to increase
in fiscal 1994 as the Company's U.S. Federal rate will
increase due to exhaustion of net operating losses.
Financial Accounting Standard No. 109, "Accounting for
Income Taxes ("FAS 109"), will be adopted by the Company
in the first quarter of fiscal 1994. Management believes
that implementation of FAS 109 will not have a material
financial impact on the Company.
The Semiconductor Industry
The Company faces uncertainties inherent in the
semiconductor industry. Specifically, relatively short
product life-cycles, unforeseeable global economic events
or conditions, uncertainties in global markets,
particularly in the personal computing market, and
competitive pricing pressures, particularly in standard
product areas such as memory, family logic and standard
linear, can have significant impact on the Company's
operating results. In order to address some of these
uncertainties, the Company continues to develop target
markets, improve manufacturing utilization, and focus on
high-potential products.
Financial Condition
The Company's financial condition strengthened as of the
1993 fiscal year end as compared to 1992 and 1991. During
fiscal 1993, cash and cash equivalents increased to $277.4
million, an increase of $139.1 million as compared to a
decrease of $54.2 million in fiscal 1992 and an increase
of $63.8 million in fiscal 1991. In addition, in 1993 the
Company at fiscal year end had marketable investments of
$68.3 million. Increased cash in 1993 resulted from
substantial improvements in cash provided from operations
and from financing activities as compared to fiscal 1992.
Cash provided by operating activities was $234.0
million in fiscal 1993 compared to $136.0 million and
$125.9 million in fiscal 1992 and 1991, respectively. The
primary increase in cash provided from operations in
fiscal 1993 compared to 1992 was income provided by
continuing operations of $130.3 million for fiscal 1993
compared to a loss of $120.1 million in fiscal 1992,
offset partially by increased receivables at the end of
fiscal 1993. The primary factors generating increased
operating cash flow in fiscal 1992 compared to 1991 were
higher accounts payable and accrued
<PAGE>
expense balances,
offset to a degree by greater inventory balances necessary
to meet increasing demand and to facilitate process and
product transfers associated with restructuring
activities.
Cash used in investing activities was $297.1
million, $178.0 million, and $10.3 million in fiscal
1993, 1992, and 1991, respectively. Cash used for
investing activities in fiscal 1993 included $233.9
million for purchases of property, plant and equipment and
a net purchase of marketable investments of $68.3 million.
Capital expenditures included continued expansions of a
CMOS fabrication facility in Arlington, Texas, the analog
bipolar fabrication facility in Greenock, Scotland, and
upgrading of assembly and test facilities in Asia. The
Company will continue to incur capital expenditures for
plant expansions as well as for ongoing activities
associated with its restructuring plans to consolidate
worldwide manufacturing capacity. Capital expenditures of
$183.0 million in fiscal 1992 included expansions in
Arlington, Texas, and Greenock, Scotland. Fiscal 1991
investing activities included proceeds of $86.0 million
from the sale of the Puyallup, Washington, facility. This,
coupled with lower expenditures on property, plant and
equipment, caused fiscal 1991 cash usage to be
significantly lower than fiscal 1992.
Cash provided by financing activities was $202.2
million in 1993, which came primarily from $166.8 million
from issuance of convertible preferred stock. In
addition, cash provided from financing activities included
a return of restricted cash of $20.9 million, $18.0
million from exercise of stock options related to the
Company's various stock option and purchase plans, and
$13.6 million in cash proceeds from issuance of debt, net
of cash repayments. Cash used in financing activities in
1993 also included $17.1 million for payment of preferred
stock dividends. Cash used in financing activities was
$12.2 million in 1992, which included net reductions in
debt of $7.0 million, excluding additions to capital lease
obligations, and payment of preferred dividends of $10.0
million. These payments were offset by cash received of
$11.2 million from the exercise of stock options related
to the Company's various employee stock option and
purchase plans. Cash used in financing activities in 1991
included a significant net reduction in debt of $30.2
million and a collateral cash deposit of $14.5 million.
In May 1993, Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("FAS 115"), was issued and becomes
effective in fiscal 1995. FAS 115 establishes certain
accounting and reporting requirements for certain
investments in equity securities and for all investments
in debt securities. Management has not yet determined the
impact that adopting FAS 115 would have on the financial
position or results of operations of the Company.
The Company expects fiscal 1994 capital expenditures
to be above 1993 levels and directed toward process
improvements, modernization of existing plants, and
continued expansion of its Greenock, Arlington and South
Portland, Maine facilities. In addition, the Company will
continue to fund other activities associated with the
restructuring plan of plant consolidation and capacity
utilization improvement. Management believes that
existing cash and investment balances, and existing lines
of credit, together with cash provided by operations,
will be sufficient to fund anticipated capital
expenditures and other investing and financing activities
through the foreseeable future.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1993 ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
(in millions, except share amounts)
May 30, May 31,
1993 1992
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 277.4 $ 138.3
Restricted cash - 20.9
Short-term marketable investments 54.4 -
Receivables, net of allowances of $33.0;
$39.2 in 1992 271.5 194.5
Inventories 189.6 207.8
Other current assets 49.4 33.5
------- -------
Total current assets 842.3 595.0
Property, plant and equipment, net 577.4 518.7
Long-term marketable investments 13.9 -
Other assets 42.9 35.2
------- -------
Total assets $1,476.5 $1,148.9
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 10.6 $ 11.5
Accounts payable 193.2 189.8
Accrued expenses 232.0 211.9
Income taxes 69.9 59.8
------- -------
Total current liabilities 505.7 473.0
Long-term debt 37.3 33.9
Deferred income taxes 16.9 14.8
Other noncurrent liabilities 79.2 87.8
------- -------
Total liabilities 639.1 609.5
------- -------
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 and 1992 (liquidation preference of
$125.0 million) 0.1 0.1
Convertible Preferred Stock:
Issued and outstanding 345,000 shares in
1993 (liquidation preference of $172.5
million) 0.2 -
Common stock of $0.50 par value. Authorized
200,000,000 shares. Issued and outstanding
109,737,830 in 1993; 106,295,994 in 1992 54.9 53.2
Additional paid-in capital 886.6 703.7
Accumulated deficit (104.4) (217.6)
------- -------
Total shareholders' equity 837.4 539.4
------- -------
Total liabilities and
shareholders' equity $1,476.5 $1,148.9
======== ========
==================================
See accompanying Notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1993 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
Years Ended
--------------------------------
May 30, May 31, May 26,
1993 1992 1991
-------- -------- --------
Net sales $ 2,013.7 $1,717.5 $1,701.8
Operating costs and expenses:
Cost of sales 1,379.6 1,247.5 1,294.3
Research and development 202.3 192.1 198.6
Selling, general and
administrative 284.8 251.0 241.9
Restructuring of operations - 149.3 119.6
------- ------- -------
Total operating costs
and expenses 1,866.7 1,839.9 1,854.4
------- ------- -------
Operating income (loss) 147.0 (122.4) (152.6)
Interest, net 2.9 5.4 3.6
------- ------- -------
Income (loss) from continuing
operations before income taxes 149.9 (117.0) (149.0)
Income taxes 19.6 3.1 1.3
------- ------- -------
Income (loss) from continuing operations 130.3 (120.1) (150.3)
Discontinued operations - - (1.1)
------- ------- -------
Net income (loss) $ 130.3 $(120.1) $(151.4)
======== ======== ========
Net income (loss) used in
per common share
calculation (reflecting
preferred dividends) $ 113.2 $(130.1) $(161.4)
======= ======== ========
Earnings (loss) per common share:
Continuing operations $ 0.98 $ (1.24) $ (1.55)
Discontinued operations - - (0.01)
------- ------- -------
Net earnings (loss) $ 0.98 $ (1.24) $ (1.56)
======= ======== ========
Weighted average common
and common equivalent
shares outstanding 115.9 104.6 103.4
======= ======== =======
=====================================
See accompanying Notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1993 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in millions)
Preferred Stock Common Stock
---------------------------- ------------
Addit-
Convertible onal Retained
Exchangeable Convertible Paid-In Earnings
Shares Amount Shares Amount Shares Amount Capital (Deficit)Total
------ ------ ------ ------ ------ ------ ------- ------- ------
Balances at
May 27, 1990 0.3 $0.1 - - 103.2 $51.6 $691.2 $ 73.9 $816.8
Net loss - - - - - - - (151.4)(151.4)
Convertible
Exchangeable
Preferred stock
dividends of
$40.00 per
share - - - - - - - (10.0) (10.0)
Issuance of
common stock
under option,
purchase and
award plans - - - - 0.6 0.4 2.5 - 2.9
- ------------------------------------------------------------------------------
Balances at
May 26, 1991 0.3 0.1 - - 103.8 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
common stock
under option,
purchase and
award plans - - - - 2.5 1.2 10.0 - 11.2
- ------------------------------------------------------------------------------
Balances at
May 31, 1992 0.3 0.1 - - 106.3 53.2 703.7 (217.6) 539.4
Net income - - - - - - - 130.3 130.3
Issuance of
Convertible
Preferred
Shares - - 0.3 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 - - - - 3.4 1.7 16.3 - 18.0
- ------------------------------------------------------------------------------
Balances at
May 30, 1993 0.3 $0.1 0.3 $0.2 109.7 $54.9 $886.6 $(104.4)$837.4
=== ==== === ==== ===== ===== ====== ======= ======
========================================
See accompanying Notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1993 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended
----------------------------
May 30, May 31, May 26,
1993 1992 1991
------ ------ ------
OPERATIONS:
Income (loss) from continuing operations $ 130.3 $(120.1) $(150.3)
Adjustments to reconcile income (loss) with
net cash provided by continuing operations:
Depreciation and amortization 159.8 167.0 181.9
Noncash restructuring charges - 35.4 31.0
Loss on investments and fixed assets 5.2 - -
Other, net - 0.3 (3.9)
Changes in certain assets and liabilities, net
of effects of acquisitions and dispositions:
Receivables (77.0) (7.2) 15.3
Inventories 18.2 (16.8) 23.3
Other current and noncurrent assets (22.5) (5.9) 22.7
Accounts payable and accrued expenses 16.4 80.6 3.5
Current and deferred income taxes 12.2 (3.9) 2.3
Other current and noncurrent liabilities (8.6) 6.6 0.1
------ ------ ------
Net cash provided by operating activities 234.0 136.0 125.9
------ ------ ------
INVESTING
Purchases of property, plant and equipment (233.9) (183.0) (109.8)
Proceeds from the sale of property,
plant and equipment 15.7 1.2 86.3
Proceeds from the sale of marketable investments 42.8 - -
Purchase of marketable investments (111.1) - -
Payments for business acquisitions
and investments (10.8) (4.2) (3.0)
Proceeds from sale of investments and
other, net 1.0 0.6 11.4
------ ------ ------
Net cash used by continuing operations (296.3) (185.4) (15.1)
Discontinued operations:
Payment to the accrued liabilities and
income taxes related to the sale of ISG (0.8) (5.6) (5.2)
Payment received on royalty receivable - 13.0 10.0
------ ------ ------
Net cash used by investing activities (297.1) (178.0) (10.3)
------ ------ ------
FINANCING
Proceeds from issuance of debt 37.3 17.8 21.1
Repayment of debt (23.7) (24.8) (51.3)
Collateral deposits and restricted cash 20.9 (6.4) (14.5)
Issuance of common stock under
employee benefit plans 18.0 11.2 2.9
Issuance of preferred stock, net of issuance
costs 166.8 - -
Payment of preferred dividends (17.1) (10.0) (10.0)
------ ------ ------
Net cash provided (used) by financing activities 202.2 (12.2) (51.8)
------ ------ ------
Net change in cash and cash equivalents 139.1 (54.2) 63.8
Cash and cash equivalents at beginning of year 138.3 192.5 128.7
------ ------ ------
Cash and cash equivalents at end of year $277.4 $138.3 $192.5
====== ====== ======
===============================================
See accompanying notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1993 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 1993 and 1991 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 provisions have been determined in accordance with
Statement of Financial Accounting Standards No. 96 "Accounting for
Income Taxes". Accordingly, the provision for income taxes includes
Federal, state and non-U.S. income taxes currently payable or
refundable and those deferred as a result of temporary differences
between the tax bases of assets and liabilities and their reported
amounts in the financial statements. Deferred tax balances are
determined using the tax rate expected to be in effect when the taxes
will actually be paid or refunds received.
In February 1992, the Financial Accounting Standard Board issued
Statement of Financial Accounting Standard No. 109, "Accounting for
Income Taxes" ("FAS 109"), which must be adopted by the Company by
fiscal 1994. FAS 109 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 will adopt FAS 109 in the first
quarter of fiscal 1994 and has determined that adopting FAS 109 will
not have a material effect on the consolidated financial statements.
Earnings Per Share
Primary earnings per share amounts presented are based on the weighted
average number of common shares and common stock equivalents, which
consist of the effect of common stock options under the Stock Option
Plan and the Employee Stock Purchase Plan outstanding during each
period using the treasury stock method. Common stock equivalents were
anti-dilutive for fiscal 1992 and 1991 and were excluded from the
calculations of earnings per share. Preferred dividends are reflected
as adjustments to reported net earnings (loss) in the calculation of
earnings (loss) per share. Fully diluted earnings per common share
include any dilutive effects of the assumed conversion of 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. The
conversion had a dilutive effect only in the fourth quarter of fiscal
1993.
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 $4.7 million, $9.0 million and $17.9 million in fiscal
1993, 1992 and 1991, respectively.
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
<PAGE>
experienced any material losses relating to any short-term investment
instruments it has used for excess cash balances.
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 dollars. 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 and are carried
at the lower of cost or market. As of May 30, 1993, carrying value of
short term marketable investments approximates fair value. As of May
30, 1993, the fair value of long term investments which are carried at
the lower of cost or market, was $13.9 million. Fair value for short
term and long term 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 30, 1993, 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.
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
exchange rate movements because gains and losses on these contracts
should offset losses and gains 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 $57.0 million (consisting of
$15.0 million in forward exchange and $42.0 million in option
contracts) and $83.0 million for the fiscal years ended 1993 and 1992,
respectively. The amount to effectively close the forward contracts was
$18.1 million based on prevailing currency exchange and interest rates
as of May 30, 1993. The fair value of the currency option contracts
was $0.2 million as of May 30, 1993.
Discontinued Operations
In fiscal 1991, discontinued operations reflect the changes in
estimated amounts of accrued expenses net of income tax refunds that
were originally recorded in fiscal 1989 in the gain on sale of
National's former Information Systems Group.
Note 2. Restructuring of Operations
During fiscal 1993, the Company continued the restructuring activities
related to the charges recorded in 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 location and
announced the closure of a fabrication module in Santa Clara,
California, with transtfer of production to other
<PAGE>
facilities. The Company continues to maintain accrued liabilities for
restructuring activities not yet completed.
During 1992, the Company recorded a restructuring charge of
$149.3 million which related primarily to worldwide consolidations of
underutilized manufacturing operations, including write-downs of
certain assets, workforce 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 workforce in certain locations worldwide.
During 1991, National incurred a $119.6 million restructuring
charge in connection with the Company's exit from the very high-speed,
high-density static random access memory business, which resulted in
the sale of its Puyallup, Washington, wafer fabrication facility. The
restructuring activities also included a worldwide reduction in
workforce, closure of its Tucson, Arizona, assembly and test
operations, and consolidation of certain wafer fabrication facilities.
Note 3. Consolidated Balance Sheet Details
(in millions)
1993 1992
------- -------
INVENTORIES
Raw materials $ 24.6 $ 19.8
Work in process 117.7 137.0
Finished goods 47.3 51.0
------- -------
Total inventories $ 189.6 $ 207.8
======= =======
PROPERTY, PLANT AND EQUIPMENT
Land $ 8.9 $ 9.5
Buildings and improvements 317.6 328.9
Machinery and equipment 1,152.1 1,173.5
Construction in progress 133.7 123.0
------- -------
Total property, plant and equipment 1,612.3 1,634.9
Less accumulated depreciation and
amortization 1,034.9 1,116.2
------- -------
Total property, plant and equipment,
net $ 577.4 $ 518.7
------- -------
ACCRUED EXPENSES
Payroll and employee related $ 96.9 $ 75.4
Restructuring of operations 44.9 90.3
Other 90.2 46.2
------- -------
Total accrued expenses $ 232.0 $ 211.9
======= =======
Other noncurrent liabilities consist principally of tax related
accruals as well as accrued restructuring expenses and deferred
compensation.
Note 4. Debt Financing
Debt consists of the following:
(in millions) 1993 1992
------- -------
Bank borrowings generally due within
one year $ -- $ 3.0
Installment and other notes at
6.5%-9.8% 9.7 26.8
Mortgage payable at 8.9% 11.4 --
Note payable at 4.1% 13.0 --
Note payable at 8.75% 7.9 9.5
Obligations under capital leases 5.9 6.1
Total loans payable 47.9 45.4
Short-term borrowings and current
portion of long-term debt (10.6) (11.5)
------- -------
Long-term debt $ 37.3 $ 33.9
======= =======
Installment and other notes consist primarily of obligations of
certain non-U.S. subsidiaries and are generally unsecured. At May 30,
1993, 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 1995 and is secured by machinery and equipment. The note
payable at 4.1% is a variable interest loan at the U.S. dollar
Singapore Interbank Offer Rate plus .75 percent 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)
----------------
1994 $10.6
1995 11.0
1996 14.1
1997 4.4
1998 2.2
Thereafter 5.6
----------------
Total $47.9
================
The Company's multicurrency and revolving financing agreements
make funds available in the form of multicurrency loans, letters of
credit and standby
<PAGE>
letters of credit in favor of National. The
multicurrency loan agreement ($20 million) expires in December 1993 and
the revolving credit agreement which includes letters of credit and
standby letters of credit ($75 million) expires in December 1994. At
May 30, 1993, $57.7 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 and
profitability. At May 30, 1993, under the most restrictive covenant,
no more than approximately $44.7 million was available for payment of
dividends on the Company's common stock.
Note 5. Interest
(in millions) 1993 1992 1991
------- ------- -------
Interest income $7.3 $8.8 $9.4
Interest expense (4.4) (3.4) (5.8)
------- ------- -------
Interest, net $2.9 $5.4 $3.6
======= ======= =======
Note 6. Income Taxes
Worldwide pretax earnings (loss) from continuing operations and income
taxes (benefit) consisted of the following:
(in millions) 1993 1992 1991
------- ------- -------
Income (loss) before
income taxes:
U.S. $58.6 $(121.9) $(126.5)
Non-U.S. 91.3 4.9 (22.5)
------- ------- -------
$149.9 $(117.0) $(149.0)
======= ======= =======
Income taxes (benefit):
Current:
U.S. Federal 1.4 - -
U.S. state and local 2.6 - (0.3)
Non-U.S. 12.1 3.4 1.8
------- ------- -------
16.1 3.4 1.5
======= ======= =======
Deferred:
U.S. Federal - - -
Non-U.S. 3.5 (0.3) (0.2)
------- ------- -------
3.5 (0.3) (0.2)
------- ------- -------
$19.6 $3.1 $1.3
======= ======= =======
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
above 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) 1993 1992 1991
------- ------- -------
U.S. Federal statutory tax
rate 34% 34% 34%
Income tax expense (benefit) at
Federal statutory rate $51.0 $(39.8) $(50.7)
(Utilized) unutilized non-U.S.
losses and tax differential
related to non-U.S. income 1.5 5.4 21.5
U.S. state and local taxes 2.6 - (0.3)
(Utilized) unutilized U.S.
operating losses (41.3) 37.0 27.3
Sale of Bangkok facility 3.9 - -
Other 1.9 0.5 3.5
------- ------- -------
Reported income tax expense $19.6 $3.1 $1.3
======= ======= =======
The temporary difference relating to the unremitted earnings of
non-U.S. subsidiaries for which a deferred tax liability has not been
recognized approximates $360 million at May 30, 1993. The additional
taxes which may become due if those earnings were to be remitted to the
U.S. are estimated to be $8.2 million after utilization of U.S. tax
credits and net operating loss carryforwards. However, it is
management's intent that these earnings remain invested indefinitely.
At May 30, 1993, National had a U.S. net operating loss
carryforward of approximately $346 million for financial reporting
purposes and $65 million for tax return purposes. Credit carryforwards
are approximately $58 million for financial reporting purposes and $81
million for tax return purposes which expire 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 fiscal 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 the cases were
consolidated for trial.
<PAGE>
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 briefs were filed in
June 1993, but the Company is not able to predict when a decision will
be rendered. As a result of the length of time which has elapsed since
the fiscal years in question as well as the effect of compounding, the
amount of any tax liability ultimately owed would be a multiple of the
amount of the underlying additional tax. The Company's tax returns for
fiscal 1983 through 1985 are under examination by the IRS and the
Company expects the IRS to raise similar issues. The Company believes
the amounts paid or accrued are adequate.
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% 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% of the Company's common stock. If such person or group
actually acquires 30% 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% 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% or more of the
Company's outstanding common stock. The Rights will expire August 8,
1998, unless earlier redeemed.
As of May 30, 1993, National had 250,000 shares of $40.00
Convertible Exchangeable Preferred Shares, $0.50 par value, (the
"Exchangeable Preferred Shares") issued and outstanding. The
liquidation value of each Exchangeable Preferred Share is $500 plus
unpaid dividends. The Exchangeable Preferred Shares are convertible at
any time at the option of the holder into common stock at the rate of
33 shares of common stock for each Exchangeable Preferred Share. The
Exchangeable Preferred Shares are exchangeable at the option of the
Company, in whole but not in part, on any dividend payment date for 8%
Convertible Subordinated Debentures due 2010 at the rate of $500
principal amount of Debentures for each Exchangeable Preferred Share.
If these Debentures are issued, commencing no earlier than 1996, the
Company is required to make annual payments into a sinking fund to
provide for their redemption. The sinking fund requirement is
approximately $6.3 million annually beginning fiscal 1997 to 2010. The
Exchangeable Preferred Shares are redeemable for cash at any time at
the option of the Company, in whole or in part, at prices declining to
$500 per share, on or after September 1, 1995, plus unpaid dividends.
Dividends on the Exchangeable Preferred Shares at an annual rate of $40
per share are cumulative and payable quarterly in arrears, when and as
declared by the Company's Board of Directors. Holders of Exchangeable
Preferred Shares are entitled to limited voting rights.
In October 1992, National issued 345,000 shares of $32.50
Convertible Preferred Shares, $0.50 par value (the "Convertible
Preferred Shares"). 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
<PAGE>
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.
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.
Periodically, National may purchase its own shares on the open
market, but has not purchased any of its shares in the last three
fiscal years.
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 be 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. In December 1990, options for 10,686,664 shares were
cancelled and new options for 10,686,664 shares were granted at the
market price of the Company's common stock on the date of the new
grant.
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 that 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.
Changes in options outstanding under the stock option and
purchase plans during fiscal 1992 and 1993 were as follows:
Number Price
of shares per
(in millions) share
------------- ------------------
Outstanding May 26, 1991 15.6 $3.75 to $14.75
Granted 4.5 $4.63 to $9.13
Exercised (2.5) $3.40 to $8.88
Cancelled (1.2) $3.75 to $14.75
- -------------------------------------------------------------------
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 at May 30, 1993 15.2 $3.75 to $14.75
Exercisable at May 30, 1993 5.4 $3.75 to $14.75
===================================================================
Expiration dates: From February 2, 1994 to April 22, 2003
- -------------------------------------------------------------------
As of May 30, 1993, 23.4 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 has a director stock plan approved by stockholders in fiscal
1993. The director stock plan authorizes 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 30, 1993,
8,000 shares had been issued under the director stock plan and 192,000
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
<PAGE>
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. The first payout, if any,
under the plan would occur in fiscal 1996, and expense recorded in
fiscal 1993 under the plan was not material.
Note 10. Benefit Plans
Retirement and Savings Programs. National's Retirement and Savings
Program for U.S. employees consists of two plans as follows:
The profit sharing plan in fiscal 1993 requires company
contributions of the greater of five percent of consolidated net
earnings before income taxes or one percent of payroll (as defined).
In fiscal 1992 and 1991, the plan required contributions of five
percent of consolidated net earnings before income taxes. As the
Company was not profitable in 1992 or 1991, there was no plan expense.
Contributions were previously made and invested in National's common
stock but are now made and invested 25% in National's common stock and
75% in cash. As of May 30, 1993, 2.2 million shares of common stock
were reserved for future company contributions.
The salary deferral "401(k)" plan allows employees to defer up to
twelve 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 all been
purchased on the open market and the Company has not issued any stock
directly to the stock fund.
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) 1993 1992 1991
------- ------- -------
Profit Sharing Plan $7.9 - -
- ----------------------------------------------------------
Salary deferral "401(k)" plan $4.1 $1.6 $1.8
- ----------------------------------------------------------
Non-U.S. pension and
retirement plans $5.4 $4.9 $4.2
==========================================================
Postretirement Benefits Other Than Pensions. In December 1990, the
Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 106, "Employer's Accounting for Postretirement
Benefits other than Pensions" ("FAS 106"), which will become effective
during fiscal year 1994. The statement requires that postretirement
benefits, primarily health care benefits, be fully accrued by the date
that employees attain full eligibility for all such benefits.
Postretirement health care benefits for an insignificant number of
individuals, formerly Fairchild employees, would require accrual under
FAS 106. Management believes that adopting FAS 106 will not have a
material impact on the Company's financial statements.
Postemployment Benefits. In November 1992, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
112, "Employer's Accounting for Postemployment Benefits" ("FAS 112"),
which will become effective during fiscal year 1995. The statement
requires that postemployment benefits, primarily salary continuation
and insurance continuation, be accrued for at the time the benefit is
earned by the employee. Management believes that adopting FAS 112 will
not have a material impact on the Company's financial statements.
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 $58.9 million, $65.6
million,
<PAGE>
and $69.9 million in 1993, 1992, and 1991, respectively.
Minimum commitments under noncancelable operating leases are as
follows:
(in millions)
-------------
1994 $39.0
1995 23.7
1996 19.0
1997 16.5
1998 15.0
Thereafter 124.9
------
Total $238.1
======
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 $169.3 million as of May 30, 1993. These
arrangements also require collateral in the form of standby letters of
credit of approximately $41.6 million as of May 30, 1993. 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 a period of three years. As of May 30,
1993, these commitments total $41.0 million, $32.0 million, and $24.0
million for fiscal years 1994, 1995, 1996, respectively, based on
existing negotiated prices. Such commmitments may be reduced based on
sales by the joint venture to other third parties or by reductions in
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-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. 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. The
Company believes that the ultimate resolution of this matter will not
have a material financial impact on the Company.
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.
Other than the Santa Clara site, the other matters for which the
Company has been named as a potentially responsible party ("PRP") are
primarily instances where other PRP's have been principally responsible
for the clean-up of hazardous wastes. The Company has accrued amounts
related to certain of these matters and 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.
On December 2, 1992, Hughes Aircraft Company ("Hughes") filed a
patent infringement suit in Federal court against the Company, which
was served on the Company on January 7, 1993. National has filed a
complaint in state court for declaratory relief against both Hughes and
its parent corporation, General Motors Corporation ("GM") alleging
that, under a patent cross license agreement between GM and Fairchild
Camera and Instrument Corporation (subsequently renamed Fairchild
Semiconductor Corporation and purchased by the Company in October
1987), National is licensed under the patents at issue in the suit
brought by Hughes. 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.
<PAGE>
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 information 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 &
(in millions) Americas Europe Asia Corporate Consolidated
-------- ------- -------- --------- ------------
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
======== ====== ======= ======= ========
1991
Sales to unaffiliated
customers $828.6 $385.5 $487.7 $ - $1,701.8
-------- ------ ------ ------- --------
Transfers between
geographic areas 382.4 95.2 520.7 (998.3) -
-------- ------ ------ ------- --------
Total sales $1,211.0 $480.7 $1,008.4 $(998.3) $1,701.8
-------- ------ ------ ------- --------
Total assets $395.6 $164.2 $375.7 $255.2 $1,190.7
======== ====== ======= ======= ========
Note 13. Supplemental Disclosure of Cash Flow Information and Noncash
Investing and Financing Activities
(in millions) 1993 1992 1991
------- ------- -------
Cash paid (received) during
the year for
Interest expense on
continuing operations $4.5 $3.6 $6.7
----- ----- -----
Income taxes on continuing
operations $4.9 $ 7.1 $0.1
===== ===== =====
During 1993 and 1992, the Company recorded capital lease obligations of
$1.2 million and $6.4 million, respectively, related to the acquisition
of machinery and equipment. Non cash financing activities in fiscal
1993 included the relief of debt of $12.3 million on the sale of the
Migdal Haemek facility.
<PAGE>
Note 14. Financial Information by Quarter (Unaudited)
The following table presents the quarterly information for
fiscal 1993 and 1992:
First Second Third Fourth
(in millions, except per) Quarter Quarter Quarter Quarter
share amounts)
1993
Net Sales $472.4 $491.9 $491.5 $557.9
Gross Margin 142.9 146.1 152.8 192.3
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 n/a n/a n/a $0.33
Weighted average fully diluted
shares n/a n/a n/a 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
====== ====== ====== ======
1992
Net Sales $411.0 $413.2 $401.8 $491.5
Gross Margin 93.9 112.6 115.4 148.1
Net income (loss) (168.0) 5.9 14.5 27.5
Earnings (loss) per common ====== ====== ====== ======
share: $(1.64) $0.03 $0.11 $0.22
Weighted average common and ====== ====== ====== ======
common equivalent shares
outstanding 103.8 103.9 111.4 114.4
===== ===== ===== =====
Common stock price - high $7.38 $6.62 $10.88 $11.50
Common stock price - low $5.00 $3.88 $5.25 $8.25
===== ===== ===== =====
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
writedown of a minority investment.
Fiscal 1992 results of operations include licensing income of
$8.5 million and $13.1 million which was recorded in the third and
fourth quarters, respectively.
Preferred dividends are reflected as adjustments to reported
earnings (loss) in the calculation of primary earnings (loss) per
share. Fully diluted earnings per share are disclosed in the fourth
quarter of 1993 as it was the only quarter in which the results were
dilutive.
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 30,
1993, there were approximately 15,274 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 30, 1993
and May 31, 1992, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years
in the three-year period ended May 30, 1993. 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 30,
1993 and May 31, 1992, and the results of their operations and their
cash flows for each of the years in the three-year period ended May 30,
1993 in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK
San Jose, California
June 11, 1993
<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 and Chief
Executive Officer,
Analogy, Inc.
Robert Beshar*
Attorney in private
practice
Richard J. Danzig*
Partner, Latham &
Watkins, Attorneys
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.
Harry H. Wetzel*
Retired. Formerly
Chairman and Chief
Executive Officer
of The Garrett
Corporation
(retiring from the
Board effective
October 1993)
*Member of the
Audit Committee
OFFICERS
Gilbert F. Amelio
President and Chief
Executive Officer
Donald P. Beadle
Senior Vice
President and
Executive Advisor
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
Co-President,
Standard Products
Group
Edgar R. Parker
Senior Vice
President, Quality
and Reliability
Kirk P. Pond
Co-President,
Standard Products
Group
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 October 1, 1993. A
notice of the meeting, together with a form of proxy and a proxy
statement, will be mailed to shareholders on or about August 25,
1993, 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>
Exhibit 22.0
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 30, 1993, 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%
Stamping Technology Corp. 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 22.0
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%
Manufacturer Singapore
Pte. Ltd.
National Semiconductor Canada 100%
Canada Inc.
National Semicondutores Brazil 100%
do Brasil Ltda.
Fairchild Semicondutores Brazil 100%
Ltda.
Electronica NSC de Mexico, Mexico 100%
S.A. de C.V.
ASIC Limited Bermuda 100%
<PAGE>
Exhibit 25.0
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 1993 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
GILBERT F. AMELIO July 13, 1993
-----------------------
Gilbert F. Amelio
PETER J. SPRAGUE July 13, 1993
-----------------------
Peter J. Sprague
GARY P. ARNOLD July 13, 1993
-----------------------
Gary P. Arnold
ROBERT BESHAR July 13, 1993
-----------------------
Robert Beshar
RICHARD J. DANZIG July 13, 1993
-----------------------
Richard J. Danzig
J. TRACY O'ROURKE July 13, 1993
-----------------------
J. Tracy O'Rourke
CHARLES E. SPORCK July 13, 1993
-----------------------
Charles E. Sporck
<PAGE>
Exhibit 25.0
(page 2)
DONALD E. WEEDEN July 13, 1993
-----------------------
Donald E. Weeden
HARRY H. WETZEL July 13, 1993
-----------------------
Harry H. Wetzel
DONALD MACLEOD July 13, 1993
-----------------------
Donald Macleod
ROBERT B. MAHONEY July 13, 1993
-----------------------
Robert B. Mahoney
