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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 28, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the transition period
from to .
Commission File Number: 1-6453
NATIONAL SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2095071
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(State of incorporation) (I.R.S. Employer Identification Number)
2900 SEMICONDUCTOR DRIVE, P.O. BOX 58090
SANTA CLARA, CALIFORNIA 95052-8090
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(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 721-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
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Depositary shares, each representing New York Stock Exchange
1/10th share of $32.50 Convertible
Preferred Shares, par value $0.50 per share
Common stock, par value New York Stock Exchange
$0.50 per share Pacific Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
$32.50 Convertible Preferred Shares ($0.50 par value) with a liquidation
preference of $500 per share.
(Title of class)
--Continued on next page--
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d)of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10K or any amendment to this Form 10-K. []
The aggregate market value of voting stock held by non affiliates of the
registrant as of July 14, 1995, was approximately $2,344,064,326.
Shares of Common Stock held by each officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive
determination for other purposes.
The number of shares of the registrant's common stock, $0.50 par value,
as of July 14, 1995, was 123,661,548.
DOCUMENTS INCORPORATED BY REFERENCE
Document Location in Form 10-K
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1995 Annual Report to Shareholders (pp. 23-48, 50-51) Parts I, II and IV
Portions of the Proxy Statement for the Part III
Annual Meeting of Stockholders to be
held on or about September 29, 1995.
Portions of the Company's Registration Part IV
Statement on Form S-3, Registration
No. 33-48935, which became effective
October 5, 1992.
Portions of the Company's Registration Part IV
Statement on Form S-3, Registration
No. 33-52775, which became effective
March 22, 1994.
Portions of the Company's Registration Part IV
Statement on Form S-8, Registration
No. 33-54931, which became effective
August 5, 1994.
Portions of the Company's Registration Part IV
Statement on Form S-8, Registration
No. 33-55699, which became effective
September 30, 1994.
Portions of the Proxy Statement for the Part IV
Annual Meeting of Stockholders held
September 30, 1994
The Index to Exhibits is located on pages 24-26.
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PART I
ITEM 1. BUSINESS
General
National Semiconductor Corporation, including its subsidiaries,
("National" or the "Company") designs, develops, manufactures and
markets a broad line of analog intensive, mixed signal and other
integrated circuits for applications in the communications, personal
systems and industrial market place. National was incorporated under
the laws of the state of Delaware in 1959.
During fiscal years 1995 and 1994, the Company substantially
completed its manufacturing consolidation and reduction in cost
structure in accordance with the restructuring plan announced in fiscal
1992. In the past two years, these actions included the closure of a
wafer fabrication module in its Salt Lake City, Utah facility, closure
of a wafer fabrication line in Santa Clara, California, consolidation of
its Dynacraft, Inc. ("DCI") business which resulted in the elimination
of a manufacturing facility in Milpitas, California and other reductions
in personnel and related infrastructure at its Santa Clara facility.
The Company has initiated significant recapitalization of
facilities, machinery and equipment over the past three years. Capital
investments over the past three years, inclusive of fiscal year 1995,
total $984.6 million. These investments, in conjunction with sizable
research and development investments, are required for the introduction
of leading edge products into the Company's chosen markets.
During fiscal 1995, the Company acquired Comlinear, Inc., a
producer of analog products based in Fort Collins, Colorado. While the
results of the acquisition are immaterial to the Company's overall
financial position and results of operations, the acquisition adds to
the Company's analog products portfolio and brings new design core
competencies into the Company.
Also during fiscal 1995, the Company entered into a joint venture
with a partner in Shanghai, Peoples' Republic of China ("PRC"). The
joint venture, which is majority owned by National, will produce
integrated circuit boards using various National products for
consumption by telecommunications and other enterprises within the PRC.
The joint venture is not material to the Company's overall financial
position and results of operations.
The Company operates in one industry segment. The information
with respect to sales and identifiable assets for National's geographic
segments appearing on page 44-45 of the Company's 1995 Annual Report to
Shareholders under the caption "Industry and Geographic Segment
Information" is incorporated herein by reference.
Products
Semiconductors are 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 and connected to a circuit board or
substrate.
National manufactures a broad variety of analog intensive, mixed
signal and digital products. National's products are used in numerous
commercial applications, including personal systems, telecommunications
and communications products, data processing, automotive, local and wide
area networking and other industrial applications as well as some
consumer applications.
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The Company is a leading supplier of analog and mixed signal
products, serving both broad based markets such as the industrial and
consumer market, and more narrowly defined markets such as Ethernet
Local Area Networks ("LAN") and automotive. While no precise industry
standard for analog and mixed signal exists, the Company considers
products which process analog information, converts analog to digital or
converts digital to analog as analog and mixed signal. Analog and mixed
signal products include amplifiers and regulators, power monitors and
line drivers, products optimized for audio, video, automotive or display
applications, data acquisition and mass storage products. Other Company
products with significant digital to analog or analog to digital
capacity include Local Area Network, wireless networking and wireless
communications, and personal systems and personal communications
products such as its office automation and Super I/O offerings. Analog
and mixed signal business units accounted for 56% of Company revenue in
1995 and their revenues have been increasing over the past few years as a
percentage of total Company revenue.
The Company also sells bipolar and complimentary metal oxide
silicon ("CMOS") logic and memory products. These products are largely
older, more mature offerings serving broad markets in data processing,
switching equipment and personal computing. The Company's bipolar and
CMOS products include many of the mature logic families such as Advanced
Schottky ("AS") and Advanced Low Power Schottky ("ALS"), High
Performance CMOS ("HCMOS") as well as lower density Electronically
Erasable Programmable Read Only Memory ("EEPROM") and Erasable Read Only
Memory ("EPROM") products. The Company is limiting its investment in
mature products to opportunities which complement its analog and mixed
signal product focus. Bipolar and CMOS products accounted for 22% of
1995 revenues, down from the previous year and declining as a percentage
of total Company revenue over the past several years.
The Company's other product offerings include discretes, its 100%
owned DCI plating and stamping operation, and various other products such
as low density microcontrollers and customized integrated circuits.
These products accounted for 22% of sales in 1995 and revenues have been
essentially flat as a percentage of total revenue for several years.
Corporate Structure and Organization. For the last three fiscal
years, the Company's operating divisions were divided into two groups:
the Standards Products Group ("SPG") and the Communications and
Computing Group ("CCG"). SPG served primarily horizontal markets and
CCG served primarily vertical markets. At the start of fiscal 1996, the
Company was further decentralized by eliminating the group structure,
leaving seven main operating divisions, described as follows:
Analog and Mixed Signal Divisions. National continues to be a
leader in analog products and technology, which has been one of the
Company's core competencies since its inception. Analog devices control
continuously variable functions (such as light, color, sound, and power)
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, automotive, custom linear ASIC ("CLASIC"), and peripheral
drivers. The Company's discrete products are comprised primarily of
transistors and diodes which are used as control and actuating devices
in a broad range of electronic systems.
Data Management Division. This Division's products incorporate
bipolar, CMOS and BiCMOS technologies for high-performance applications
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such as switching and data manipulation. These applications are used in
a variety of communications applications and computationally intensive
applications such as workstations and computers, where the Company's
FACT, FAST, BCT and 100K ECL product families are industry standards.
Embedded Technologies Division. The Company's Embedded Technology
Division consists of 4-, 8-, 16-, and 32-bit microcontrollers and memory
products in the form of electronically programmable read only memories
("EPROM") and electronically erasable read only memories ("EEPROM").
The division addresses markets which combine basic computational or
logic algorithms with specific memory storage on chips. National's
higher end, more complex microcontrollers have been optimized for laser
printers, high speed facsimile machines, scanners, and other imaging
applications. Memory configurations of varying densities are also sold
into markets for temporary or permanent data storage such as personal
computers and workstations.
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 close proximity to
share data as a work group. National is one of the world's leading
suppliers of LAN Ethernet controller chip sets, which are currently the
dominant protocol for LANs. National's LAN family includes a number of
sophisticated control functions for networking over standard twisted-
pair telephone wiring such as the Systems Oriented Network Interface
Controller ("SONIC-T"), the AT/LANTIC single chip network controller for
personal computers, and the Repeater Interface Controller ("RIC") for
use with hubs. Through an alliance with Novell, Inc., the Company also
markets its own line of Ethernet adapter cards under its Info Mover
trademark. The LAN Division is also developing products in wireless
networking which operate independent of twisted-pair or coaxial cabling.
Wide Area Networks Division. The Wide Area Networks ("WAN")
Division offers products which allow customers to transmit large amounts
of data at high speed from one location to another anywhere in the
world. The WAN Division also includes wireless communication products
and high performance Application Specific Integrated Circuit ("ASIC")
products. The Company currently supplies numerous solutions that enable
existing telecommunications equipment as well as next generation
SONET/ATM transmission equipment.
Personal Systems Division. The Personal Systems Division develops
products for the personal computer and workstation market. The Company
does not attempt to compete with the host microprocessor, but instead
designs and develops peripheral products which work in tandem with the
host microprocessor in either the personal computer or workstation. For
example, National offers a family of input/output devices which
consolidate many dependent functions on the motherboard. The Division
also markets mass storage products 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.
In addition to the seven product line divisions, National's wholly
owned subsidiary, DCI, produces semiconductor packaging materials such
as low and high pincount leadframes, advanced packaging materials and
tools for both internal consumption and for sale to other semiconductor
manufacturers throughout the world.
Aside from the operating divisions, the Company's corporate
structure also includes the International Business Group ("IBG") and the
Corporate Technology Group ("CTG"), both providing corporate functions
in support of the Company's global customers and technology strategies.
The IBG is organized around the four major regions of the world in which
the Company operates: the Americas, Europe, Japan and Asia and is
comprised of the Company's worldwide sales and marketing organization.
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CTG is the central research arm of the Company, providing pure research,
process development and initial product prototyping necessary for many
of the Company's core production processes and leading edge products.
The CTG also leads in the selection and implementation of integrated
Computer Aided Design ("CAD") tools which design, layout, simulate and
test the logical and physical representation of new products before they
are actually produced.
Marketing and Sales
The Company markets its products throughout the world to original
equipment manufacturers ("OEMs") and distributors. Major OEMs include
IBM, Hewlett Packard, Compaq, Ford, and General Motors as well as NEC,
Fujitsu, Goldstar, Siemens, L.M. Ericsson and others. In addition to
its direct sales force, National uses distributors in all four of its
business regions and has recently initiated a manufacturers
representation ("rep") program in the United States.
The Company has established cross regional marketing groups
responsible for customers operating in multiple regions. In addition,
the Company's focus on analog intensive and mixed signal markets has led
to the introduction of strategic market segment teams who identify
emerging trends and opportunities in these two broad categories, as well
as others.
Customer support is handled by comprehensive, state of the art
central facilities in the United States and Europe. These Customer
Support Centers ("CSC") provide rapid turnaround on product pricing and
availability, technical support for customers questions, order entry and
scheduling. A third CSC is planned for Singapore in early fiscal 1996
to support the Asia region.
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 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.
Customers
National is not dependent upon any single customer, the loss of which
would have a material effect on the Company. In addition, no one
customer or distributor accounted for 10 percent or more of total net
sales in fiscal 1995.
Backlog
Semiconductor backlog quantities and shipment schedules under
outstanding purchase orders are frequently revised to reflect changes in
customer needs. Binding agreements calling for the sale of specific
quantities at specific prices which are contractually subject to price
or quantity revisions are, as a matter of industry practice, rarely
formally enforced. For these reasons, National does not believe that
the amount of backlog at any particular date is meaningful.
Seasonality
Generally, National is affected by the seasonal trends of the
semiconductor and related industries. As a result of these trends, the
Company typically experiences lower revenue in the third fiscal quarter,
primarily due to customer holiday demand adjustments. Revenue usually
has a seasonal peak in the Company's fourth quarter.
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Manufacturing
The design of semiconductor products is based upon customer requirements
and general market trends and needs. These designs are compiled and
digitized by state of the art design equipment and then transferred to
silicon wafers in a series of complex precision processes which include
oxidation, lithography, chemical etching, diffusion, deposition,
implantation and metalization. Production of integrated circuits
continues with wafer sort, where the wafers are tested and separated
into individual circuit devices; assembly, where tiny wires are used to
connect the electronic circuits on the device to the stronger metal
leads or "prongs" of the package in which the device is encapsulated for
protection; and final test, where the devices are subjected to a series
of vigorous tests using computerized circuit testers and for certain
applications, environmental testers such as burn in ovens, centrifuges,
temperature cycle testers, moisture resistance testers, salt atmosphere
testers and thermal shock testers.
The Company's product design and development activities are
conducted predominantly in the United States. Wafer fabrication is
concentrated in four facilities in the United States and in a facility
in Scotland. Nearly all product assembly and final test operations are
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, and the Company recently established a small, majority owned
joint venture in Shanghai, PRC, for the manufacture of boards using
National produced integrated circuits.
National's wafer manufacturing processes span Bipolar, Metal Oxide
Silicon ("MOS"), Complementary Metal Oxide Silicon ("CMOS") and Bipolar
Complementary Metal Oxide Silicon ("BiCMOS") technologies. As products
decrease in size and increase in functionality, National's wafer
fabrication facilities are now required in many cases to be able to
manufacture integrated circuits with sub-micron circuit pattern widths.
Precision manufacturing in wafer fabrication has carried over to
assembly and test where advanced packaging technology and comprehensive
test operations are required for more and more powerful integrated
circuits.
Wafer fabrication processes have been adapted for mixed signal
applications. National also has optimized its CMOS process for
nonvolatile memories, both ultraviolet and electrically erasable. There
are a number of Bipolar processes supporting the Company's standard
products. Of particular importance are several groups of processes that
are optimal for manufacturing the Company's analog products.
Raw Materials
National's manufacturing processes make use of certain key raw materials
critical to its products. These include silicon wafers, certain
chemicals and gases, ceramic and plastic packaging materials and various
precious metals. The Company also is increasingly relying on
subcontractors to supply finished or semi-finished products which the
Company markets through its sales channels. Both raw materials and
semi-finished or finished products are obtained from various sources,
although the number of sources for any particular material or product is
relatively limited. Although the Company feels its current supply of
essential materials is adequate, shortages from time to time have
occurred and could occur again. Significant increases in demand, rapid
product mix changes or natural disaster all could affect the Company's
ability to procure materials or goods.
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Research and Development
National's research and development ("R&D") consists of pure research in
metallurgical, electro-mechanical and solid state sciences,
manufacturing process development and product design. At the corporate
level, CTG performs pure research functions. Much of the process
development is also defined and developed by CTG. The Company envisions
that its process capability will be prototyped in corporate R&D
facilities but more and more of the actual process development and
product design will be done by the operating divisions. R&D expenses
were $283.1 million in 1995 and $257.8 million in 1994, with both years
experiencing increases in R&D in the Company's core Analog and Mixed
Signal products.
Patents
National owns numerous United States and non-U.S. patents and has many
patent applications pending. It considers the development of patents
and the maintenance of an active patent program advantageous to the
conduct of its business but believes that continued success will depend
more on engineering, production, marketing, financial and managerial
skills than on its patent program. The Company licenses certain of its
patents to other manufacturers and participates in a number of cross
licensing arrangements with other parties. In addition, the Company is
currently involved in a program to further capitalize on its
intellectual property assets through licensing of its intellectual
property; the amount of income from the licensing program has varied in
the past and the amount and timing of future income from this program
cannot be forecast with certainty.
Employees
At May 28, 1995, National employed approximately 22,400 people of whom
approximately 7,900 were employed in the United States, 2,500 in Europe,
11,500 in Southeast Asia and 500 in other areas. The Company believes
that its future success depends fundamentally on its ability to recruit
and retain skilled technical and professional personnel. National's
employees in the United States are not covered by collective bargaining
agreements. The Company considers its employee relations worldwide to
be favorable.
Competition and Risks
The Semiconductor Industry
The semiconductor industry is characterized by rapid technological
change and frequent introduction of new technology leading to more
complex and powerful products. The result is a cyclical economic
environment generally characterized by short product life cycles, rapid
selling price erosion and high sensitivity to the overall business
cycle. In addition, substantial capital and R&D investment is required
for development and manufacture of products and processes. The Company
may experience periodic fluctuations in its operating results because of
industry wide conditions. National competes with a number of major
companies in the high-volume segment of the industry. These include
several companies whose semiconductor business may be only part of their
overall operations, such as Motorola, Inc., Philips Electronics, NV, and
Texas Instruments Incorporated. National also competes with a large
number of companies that target particular markets such as Linear
Technology Corporation, Analog Devices, Inc., Advanced Micro Devices,
Inc., SGS-Thompson Microelectronics SA and Cirrus Logic, Inc.
Competition is based on design and quality of the products, product
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performance, price and service, with the relative importance of such
factors varying among products and markets.
International Operations
National conducts a substantial portion of its operations outside the
United States and its business is subject to risks associated with many
factors beyond its control. These factors include fluctuations in
foreign currency rates, instability of foreign economy or its emerging
infrastructure to support demanding manufacturing requirements,
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, the Company has been impacted in the past by
one or more of these factors and could be impacted in the future by such
factors. In addition, although the Company seeks to hedge its exposure
to currency exchange rate fluctuations, the Company's competitive
position relative to non-U.S. suppliers can be affected by the exchange
rate of the U.S. dollar against other currencies, particularly the
Japanese yen.
Environmental Regulations
National believes that compliance with federal, state and local laws or
regulations which have been enacted or adopted to regulate the
environment has not had, nor will have, a material effect upon the
Company's capital expenditures, earnings, competitive or financial
position. (Also see Item 3, Legal Proceedings.)
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ITEM 2. PROPERTIES
National's principal administrative and research facilities are located
in Santa Clara, California. Several other sites in the United States
have major concentrations of wafer fabrication and research and
development capability, including the Company's plants in Salt Lake
City, Utah, South Portland, Maine, and Arlington, Texas. The Company
also operates smaller facilities in Murrysville, Pennsylvania and Fort
Collins, Colorado, among others.
The Company conducts significant manufacturing offshore. One of
National's largest wafer fabrication facility exists in Greenock,
Scotland. Assembly and test functions are performed primarily in
Southeast Asia. These facilities are located in Penang and Malacca,
Malaysia, Cebu, the Philippines, and Singapore. A small manufacturing
facility, majority owned by National, was established in January 1995,
in Shanghai, Peoples' Republic of China. The regional headquarters for
National's International Business Group are located in Santa Clara,
California, Munich, Germany, Tokyo, Japan and Kowloon, Hong Kong.
National maintains local sales offices in various locations and
countries throughout its four business regions. In general, the Company
owns its manufacturing facilities and leases most of its sales and
administrative offices.
During fiscal 1995, the Company repurchased its manufacturing
facility in Arlington, Texas and its research and development facility
in Santa Clara, California, which were part of sales and subsequent
operating leaseback transactions entered into prior to 1990. The
Company continues to increase its property and plant expenditures in
addition to the aforementioned purchases. Wafer fabrication capacity
utilization approached 90% for most of 1995 and the Company continues to
invest substantial sums in modernization and expansion of its
facilities. The Company feels its current plant, property and leased
facilities are well maintained.
ITEM 3. LEGAL PROCEEDINGS
In July 1983, the United States Internal Revenue Service ("IRS")
issued an examination report for the fiscal years ended 1978 and 1979.
The Company filed a protest with the appeals office of the IRS in
September 1983. The IRS issued a Notice of Deficiency for these years in
December 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 in March 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 in January 1990 seeking additional taxes of approximately $52
million (exclusive of interest) for the fiscal years ended 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 spare parts depreciation. The
Company filed a petition with the United States Tax Court contesting
this Notice of Deficiency in April 1990. By order dated August 8, 1991,
the Tax Court granted the Company's and the IRS' motion to consolidate
the two cases for trial. Prior to trial, which was held during 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
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to approximately $52 million (exclusive of interest). An opinion was
issued by the Tax Court on May 2, 1994. The opinion found that
adjustments to income of $40.6 million were due, which the Company
estimates, after giving effect to loss and credit carrybacks, will
result in a tax deficiency of approximately $5 million plus associated
interest of between $35 million and $45 million. The IRS filed a motion
for reconsideration of the opinion on June 3, 1994, seeking an
additional $31 million in income adjustments. The motion was denied by
the Court on June 10, 1994. The Company and the IRS have reached
agreement on the allocation of the additional income, and this agreement
was then presented to the Court. A final decision implementing the
opinion was entered by the Tax Court on June 6, 1995 and is subject to
appeal within 90 days by either the Company or the IRS. It is not known
if an appeal will follow at this time. With respect to the IRS'
examination of tax returns for other fiscal years, the Company and the
IRS settled in January 1994 all issues for fiscal years 1983 through
1985, including issues relating to intercompany product transfer
pricing, without the payment of additional federal tax. This result is
affected by certain net operating loss carryovers and credits, which
will not be determined until the Tax Court litigation is completed. In
April 1995, the IRS issued a Notice of Deficiency for fiscal years 1986
through 1989 seeking additional taxes of approximately $11 million
(exclusive of interest). The issues giving rise to this set of proposed
adjustments relate primarily to the Company's former Israeli operation
and the purchase price paid for Fairchild Semiconductor Corporation.
The Company intends to file a protest with the appeals office of the IRS
contesting the Notice of Deficiency. The Company expects the IRS to
begin examination of the Company's tax returns for fiscal years 1990
through 1993 shortly. The Company believes that adequate tax payments
have been made or accrued for all years and that the Tax Court opinion
will not have a material adverse effect on the Company's financial
position.
On April 22, 1988, the District Director of the United States
Customs Service, San Francisco, issued a Notice of Proposed Action and a
Pre-penalty Notice to the Company alleging underpayment of duties of
approximately $19.5 million on merchandise imported from the Company's
foreign subsidiaries during the period from June 1, 1979 to March 1,
1985. The Company filed an administrative appeal in September 1988. On
May 23, 1991, the District Director revised his action and issued a
Notice of Penalty Claim and Demand for Restoration of Duties, reducing
the alleged underpayment of duties for the same period to approximately
$6.9 million; the alleged underpayment was subsequently reduced on April
22, 1994 to approximately $3.6 million. The revised alleged
underpayment could be subject to penalties that may be computed as a
multiple of the underpayment. The Company is continuing to contest the
Penalty Notice in proceedings at the administrative agency level. The
Company believes that resolution of this matter will not have a material
impact on the Company's financial position.
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 assessment has been subsequently reduced
to $2.1 million. The Company is waiting for the State Board of
Equalization to approve the assessment. The Company believes adequate
provisions have been recorded and that its potential liability, if any,
in excess of amounts already accrued will not have a material adverse
effect upon its 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.
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Patents Nos. 3,472,712; 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 countersued Hughes' parent company,
General Motors ("GM") and Hughes in the same action alleging
infringement of U.S. Patents Nos. 3,901,735; 4,325,984; and 4,599,634.
The case was transferred to the U.S. District Court for the Northern
District of California. The Company also filed an action in California
State Court seeking declaratory relief and alleging breach of contract
by Hughes and GM in connection with a prior patent cross license
agreement entered into between GM and Fairchild Camera and Instruments
Corporation (subsequently renamed Fairchild Semiconductor Corporation
and purchased by the Company in October 1987). In September 1994, the
parties agreed to resolve the dispute in its entirety in a binding
minitrial procedure structured to handle the primary disputed issue; as
part of the agreement, the Company dismissed with prejudice the related
California State Court action. In December 1994, the minitrial was
conducted before a judge selected by the parties on the single issue of
whether claim 2 of the U.S. Patent No. 3,472,712 owned by Hughes was
infringed by one of the Company's semiconductor fabrication processes.
For purposes of the minitrial, the patent was presumed valid and the
parties agreed in advance to the amounts of damages that would be paid
by the Company which amount was not disclosed to the judge until after
the judge had issued his findings. The judge found for Hughes on the
single issue presented in the minitrial and pursuant to prior agreement
of the parties, the Company paid to Hughes the sum of $10 million and
the Federal Court action was dismissed with prejudice. The dismissal
constituted a full settlement and release of all claims for past
infringement of the patents in issue. In addition, the Company granted
Hughes and GM licenses under its patents at issue; no such license was
granted by Hughes back to the Company because the Hughes patents at
issue had expired.
By letter dated January 6, 1994, the Company was notified by the
California Department of Toxic Substances Control ("DTSC") of a Report
of Violation ("ROV") listing 39 violations arising out of inspections of
certain facilities and operations of the Company and its wholly owned
subsidiary, Dynacraft, Inc. ("DCI") located in Santa Clara, California
and the DTSC's further review of information obtained during the
inspections. The deficiencies cited can be described as violations of
various provisions of the California Health and Safety Code and the
California Code of Regulations relating to the record keeping for and
the handling, treatment, storage, and disposal of hazardous products and
wastes. The Company worked with DTSC to correct the deficiencies noted
in the ROV and signed a Stipulation and Order with the DTSC on June 16,
1995 whereby the Company agreed to pay a fine of $490,000. The Company
believes adequate provisions have been recorded and that its potential
liability, if any, in excess of amounts already accrued will not have a
material adverse effect upon its financial position.
On June 18, 1991, the U.S. Environmental Protection Agency ("EPA")
issued a Finding of Violation and Order to the Company and DCI relating
to the alleged failure of the Company and DCI to comply with the federal
categorical pretreatment standards arising from the city of San Jose,
California's pretreatment program. The Order requires the Company and
DCI to comply with all Federal categorical pretreatment standards and to
take further actions to maintain permanent compliance. Since 1992, the
Company and DCI have worked with the U.S. Department of Justice ("DOJ")
and the EPA to settle this matter. A Consent Decree was entered by the
U.S. District Court, Northern District of California on March 30, 1995.
Under the terms of the Consent Decree, National and DCI agreed to pay a
civil penalty in the amount of $50,000 and perform three Supplemental
Environmental Projects ("SEPs"), the costs of which are estimated at
<PAGE>
$445,000. The $50,000 civil penalty has been paid. In the event the
Company and DCI do not perform any or all of the SEPs within two years
of March 30, 1995, stipulated penalties in the amounts of $62,517,
$55,303, and/or $96,180 (the respective amounts for each of the SEPs)
must be paid to the EPA.
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 EPA. The Company has
agreed in principle with the RWQCB to a site remediation plan. In
addition to the Santa Clara site, the Company has been designated as a
potentially responsible party by federal and state agencies with respect
to certain waste sites with which the Company may have had direct or
indirect involvement. Such designations are made regardless of the
extent of the Company's involvement. These claims are in various stages
of administrative or judicial proceedings and include demands for
recovery of past governmental costs and for future investigations and
remedial actions. In many cases, the dollar amounts of the claims have
not been specified and have been asserted against a number of other
entities for the same cost recovery or other relief as was asserted
against the Company. The Company accrues costs associated with such
matters when they become probable and reasonably estimable. The amount
of all environmental charges to earnings, including charges relating to
the Santa Clara site remediation, which did not include potential
reimbursements from insurance coverage, have not been material during
the last three fiscal years. The Company believes that the potential
liability, if any, in excess of amounts already accrued will not have a
material effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the
fiscal year covered by this report.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT *
Name Current Title Age *
- ---- ------------- -----
Gilbert F. Amelio (1) Chairman of the Board,
President and Chief Executive Officer 52
Richard M. Beyer (2) Executive Vice President and
Chief Operating Officer 46
Patrick J. Brockett (3) President, International Business Group 47
Charles P. Carinalli (4)Senior Vice President and 47
Chief Technical Officer
John M. Clark III (5) Senior Vice President, General Counsel 45
and Secretary
Donald Macleod (6) Executive Vice President, Finance and 46
Chief Financial Officer
Kirk P. Pond (7) Executive Vice President and 50
Chief Operating Officer
George M. Scalise (8) Executive Vice President and 61
Chief Administrative Officer
* as of July 1, 1995
Business Experience During Last Five Years
- ------------------------------------------
(1) Mr. Amelio has been President, Chief Executive Officer, and a
Director of the Company since joining the Company in February 1991. He
was named Chairman of the Board in July 1995. Prior to joining the
Company, Mr. Amelio was President of Rockwell Communications Systems and
had previously served as President of Rockwell International
Corporation's Semiconductor Products Division.
(2) Mr. Beyer joined the Company in February 1993 and served as
President of the Communications and Computing Group until being named
Executive Vice President and Chief Operating Officer in June 1995.
Prior to joining the Company, Mr. Beyer was Vice President and General
Manager of the Switching Systems Division of Rockwell International
Corporation.
(3) Mr. Brockett joined the Company in September 1979. Prior to
becoming President, International Business Group in February 1993, he
had held positions as Corporate Vice President, International Business
Group; Vice President, North America Business Center; Vice President and
Managing Director, European Operations; and Vice President and Director
of European Sales.
(4) Mr. Carinalli joined the Company in June 1970. Prior to
becoming Senior Vice President and Chief Technical Officer in February
1993, he was Executive Vice President, Communications and Computing
Group and Chief Technical Officer. Prior to that, he had held positions
<PAGE>
as Vice President, Integrated Systems Group; Group Director, Integrated
Systems Group; and Director of Technology, Advanced Digital Products.
(5) Mr. Clark joined the Company in May 1978. Prior to becoming
Senior Vice President, General Counsel and Secretary in April 1992, he
had held positions as Associate General Counsel, Vice President and
Assistant Secretary.
(6) Mr. Macleod joined the Company in February 1978. Prior to
becoming Executive Vice President, Finance and Chief Financial Officer
in June 1995, he had held positions as Senior Vice President, Finance
and Chief Financial Officer; 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.
(7) Mr. Pond joined the Company as an employee of Fairchild
Semiconductor Corporation ("Fairchild") when Fairchild was acquired by
the Company in October 1987. Prior to becoming Executive Vice President
and Chief Operating Officer in June 1994, he held positions as Co-
President, Standard Products Group and Vice President, Digital Logic
Division.
(8) Mr. Scalise joined the Company in August 1991. Prior to
becoming Executive Vice President and Chief Administrative Officer in
June 1995, he held the positions as Senior Vice President and Chief
Administrative Officer and Senior Vice President, Planning and
Development. 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 37-38, 40-41, 46, and 51 under the
captions "Debt Financing", "Shareholders' Equity", "Financial
Information by Quarter (Unaudited)" and "Common Stock Data" of the
registrant's 1995 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 14, 1995 was $30.375. At July 14, 1995, the number of
record holders of the Company's common stock was 12,986.
ITEM 6. SELECTED FINANCIAL DATA
See "Five-Year Selected Financial Data" on page 23 of the registrant's
1995 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 27 of the registrant's 1995
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 46 of the registrant's 1995 Annual Report to Shareholders, is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to directors, appearing under the caption
"Election of Directors" including subcaptions thereof, in the
registrant's Proxy Statement for the 1995 annual meeting of shareholders
to be held on or about September 29, 1995 and which will be filed in
definitive form pursuant to Regulation 14a on or about August 20, 1995
(hereinafter "1995 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 1995 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 1995 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 1995 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 1995 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 1995 Annual Report to Shareholders
are incorporated by reference into Part II of this report:
Pages in 1995 Annual
Report to Shareholders
----------------------
Consolidated Balance Sheets at May 28, 1995 28
and May 29, 1994.
Consolidated Statements of Operations for each 29
of the years in the three-year period ended
May 28, 1995.
Consolidated Statements of Shareholders' Equity 30
for each of the years in the three-year period
ended May 28, 1995.
Consolidated Statements of Cash Flows for each 31
of the years in the three-year period ended
May 28, 1995.
Notes to Consolidated Financial Statements. 32-46
Independent Auditors' Report. 47
Pages in
(a)2. Financial Statement Schedule this document
- ------------------------------------ -------------
For the three years ended May 28, 1995:
Independent Auditors' Report 17
Schedule II -- Valuation and Qualifying Accounts 18
All other schedules are omitted since the required information is
inapplicable or the information is presented in the consolidated
financial statements or notes thereto.
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.
<PAGE>
(a)3. Exhibits
- ---------------
The exhibits listed in the accompanying Index to Exhibits on pages
20 and 21 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 28, 1995.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
National Semiconductor Corporation:
Under date of June 7, 1995, we reported on the consolidated balance
sheets of National Semiconductor Corporation and subsidiaries as of May
28, 1995, and May 29, 1994, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years in
the three-year period ended May 28, 1995, as contained in the 1995
Annual Report to Shareholders. These consolidated financial statements
and our report thereon are incorporated by reference in the May 28, 1995
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
schedule as listed under item 14(a)2. The financial statement schedule
is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based on
our audits.
In our opinion, the financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set
forth therein.
KPMG PEAT MARWICK LLP
San Jose, California
June 7, 1995
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Years Ended May 30, 1993, May 29, 1994, and May 28,1995
(in millions)
Deducted from receivables
in the consolidated balance sheets
Doubtful Returns and
Description Accounts Allowances Total
- ----------- -------- ----------- -----
Year ended May 30, 1993
- -----------------------
Balance at beginning of period $ 3.5 $ 35.7 $ 39.2
Additions charged against revenue - 222.9 222.9
Additions charged to costs and expenses 0.1 - 0.1
Deductions (0.1)(1) (229.1) (229.2)
-------- -------- --------
Balance at end of period $ 3.5 $ 29.5 $ 33.0
======== ======== ========
Year ended May 29, 1994
- -----------------------
Balance at beginning of period $ 3.5 $ 29.5 $ 33.0
Additions charged against revenue - 193.2 193.2
Deductions (0.5)(1) (191.9) (192.4)
------- ------- --------
Balance at end of period $ 3.0 $ 30.8 $ 33.8
======= ======= ========
Year ended May 28, 1995
- -----------------------
Balance at beginning of period $ 3.0 $ 30.8 $ 33.8
Additions charged against revenue - 214.1 214.1
Deductions (0.6)(1) (213.6) (214.2)
------- --------- --------
Balance at end of period $ 2.4 $ 31.3 $ 33.7
======== ========= ========
________________________________________________
(1) Doubtful accounts written off, less recoveries.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
NATIONAL SEMICONDUCTOR CORPORATION
Date: July 27, 1995 By: /S/ GILBERT F. AMELIO
----------------------
Gilbert F. Amelio
Chairman of the Board, 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 27th day of July
1995.
Signature Title
/S/ GILBERT F. AMELIO Chairman of the Board, President
Gilbert F. Amelio and Chief Executive Officer
(Principal Executive Officer)
/S/ DONALD MACLEOD* Executive Vice President, Finance
Donald Macleod and Chief Financial Officer
(Principal Financial Officer)
/S/ ROBERT B. MAHONEY* Vice President and Controller
Robert B. Mahoney (Principal Accounting Officer)
/S/ GARY P. ARNOLD* Director
Gary P. Arnold
/S/ ROBERT BESHAR* Director
Robert Beshar
/S/ MODESTO A. MAIDIQUE* Director
Modesto A. Maidique
Director
Edward R. McCracken
/S/ J. TRACY O'ROURKE* Director
J. Tracy O'Rourke
/S/ CHARLES E. SPORCK* Director
Charles E. Sporck
/S/ DONALD E. WEEDEN* Director
Donald E. Weeden
*By /S/ GILBERT F. AMELIO
Gilbert F. Amelio, Attorney-in-fact
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
National Semiconductor Corporation:
We consent to incorporation by reference in the Registration
Statements No. 33-48943, 33-48941, 33-54931, 33-55699, 33-55703, and 33-
55715 on Form S-8 of National Semiconductor Corporation and subsidiaries
of our report dated June 7, 1995, relating to the consolidated balance
sheets of National Semiconductor Corporation and subsidiaries as of May
28, 1995, and May 29, 1994, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the years
in the three-year period ended May 28, 1995, which report appears on
page 47 of the 1995 National Semiconductor Corporation Annual Report to
Shareholders ("National Annual Report") and is incorporated by reference
in the May 28, 1995 annual report on Form 10-K of National Semiconductor
Corporation and our report dated June 7, 1995, on the related financial
statement schedule which appears on page 21 of the May 28, 1995 annual
report on Form 10-K. Our report which appears in the National Annual
Report refers to a change in accounting for certain costs in inventory.
KPMG PEAT MARWICK LLP
San Jose, California
July 27, 1995
<PAGE>
INDEX TO EXHIBITS
Item 14(a) (3)
The following documents are filed as part of this report:
1. Financial Statements: reference is made to the Financial
Statements described under Part IV, Item 14(a) (1).
2. Other Exhibits:
Designation Description of Exhibit
- ----------- ----------------------
3.1 Second Restated Certificate of Incorporation of the
Company, as amended (incorporated by reference from the Exhibits to the
Company's Registration Statement on Form S-3 Registration No. 33-52775,
which became effective March 22, 1994); Certificate of Powers,
Designations, Preferences and Rights designating the $32.50 Convertible
Preferred Stock (incorporated by reference from the Exhibits to the
Company's Registration Statement on Form S-3 Registration No. 33-52775,
which became effective March 22, 1994). Certificate of Amendment of
Certificate of Incorporation dated September 30, 1994.
3.2 By-Laws of the Company
4.1 Form of Common Stock Certificate (incorporated by
reference from the Exhibits to the Company's Registration Statement on
Form S-3 Registration No. 33-48935, which became effective October 5,
1992).
4.2 Rights Agreement (incorporated by reference from the
Exhibits to the Company's Registration Statement on Form 8-A filed
August 10, 1988).
4.3 Deposit Agreement and Form of Depositary Receipt
(incorporated by reference from the Exhibits to the Company's
Registration Statement on Form S-3 Registration No. 33-52775, which
became effective March 22, 1994).
10.1 Management Contract or Compensatory Plan or Arrangement:
License Agreement with Wave Systems Corporation (incorporated by
reference from the Exhibits to the Company's 10-Q filed March 18,1994).
10.2 Management Contract or Compensatory Plan or Arrangement:
Key Employee Incentive Plan (incorporated by reference from the Exhibits
to the Company's 10-K filed July 28, 1994). 1995 Key Employee Incentive
Plan Agreement (incorporated by reference from the Exhibits to the
Company's 10-K filed July 28, 1994). 1995 Key Employee Incentive Plan
Agreement as amended through January 12, 1995 (incorporated by reference
from the Exhibits to the Company's 10-Q filed March 17, 1995.)
10.3 Management Contract or Compensatory Plan or Arrangement:
Executive Officer Incentive Plan (incorporated by reference from the
Exhibits to the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders held September 30, 1994 filed on August 10,
1994). 1995 Executive Officer Incentive Plan Agreement (incorporated by
reference from the Exhibits to the Company's 10-K filed July 28, 1994).
1996 Executive Officer Incentive Plan Agreement.
10.4 Management Contract or Compensatory Plan or Arrangement:
Stock Option Plan, as amended through January 19, 1995 (incorporated by
reference from the Exhibits to the Company's 10-Q filed March 17, 1995).
<PAGE>
10.5 Management Contract or Compensatory Plan or Arrangement:
Benefit Restoration Plan (incorporated by reference from the Exhibits to
the Company's 10-Q filed December 14, 1994).
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). Amendment Letter dated November 30, 1993 (incorporated by
reference from the Exhibits to the Company's 10-K filed July 28, 1994).
Agreement with Peter J. Sprague dated May 17, 1995. Non Qualified Stock
Option Agreement with Peter J. Sprague dated May 18, 1995.
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). 1993 Extension of Airplane Use Letter
Agreement with Gilbert F. Amelio doing business as Aero Ventures
(incorporated by reference from the Exhibits to the Company's 10-K filed
August 9, 1993). Airplane Use Agreement with Gilbert F. Amelio doing
business as Aero Ventures (incorporated by reference from the Exhibits
to the Company's 10-Q filed March 18, 1994). Amendment No. 1 to
Airplane Use Agreement with Gilbert F. Amelio doing business as Aero
Ventures (incorporated by reference from the Exhibits to the Company's
10-Q filed December 14, 1994).
10.8 Management Contract or Compensatory Plan or Arrangement:
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:
Director Stock Plan (incorporated by reference from the Exhibits to the
Company's Registration Statement on Form S-8 Registration No. 33-54931
which became effective August 5, 1994).
10.10 Management Contract or Compensatory Plan or Arrangement:
Performance Award Plan (incorporated by reference from the Exhibits to
the Company's Registration Statement on form S-8 Registration No. 33-
55699 which became effective September 30,1994).
10.11 Management Contract or Compensatory Plan or Arrangement:
Consulting Agreement with Harry H. Wetzel (incorporated by reference
from the Exhibits to the Company's 10-K filed July 28, 1994).
10.12 Management Contract or Compensatory Plan or Arrangement:
Preferred Life Insurance Program (incorporated by reference from the
Exhibits to the Company's 10-K filed July 28, 1994).
10.13 Management Contract or Compensatory Plan or Arrangement:
Retired Officers and Directors Health Plan.
11.0 Computation of Earnings (Loss) per share assuming full
dilution.
13.0 Portions of the Annual Report to Shareholders for the
fiscal year ended May 28, 1995 (to be deemed filed only to the extent
required by the instructions to Exhibits for reports on Form 10-K).
<PAGE>
21.0 List of Subsidiaries.
23.0 Consent of Independent Auditors (included in Part IV).
24.0 Power of Attorney.
<PAGE>
<PAGE>
Exhibit 3.1
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
NATIONAL SEMICONDUCTOR CORPORATION
NATIONAL SEMICONDUCTOR CORPORATION (the "Company"), a corporation
organized and existing under and by virtue of General Corporation Law of
the State of Delaware, does hereby certify:
FIRST: That at a Special Meeting of the Board of Directors of the
Company on July 14, 1994, a resolution was duly adopted setting forth a
proposed Amendment to the Certificate of Incorporation of the Company,
declaring said Amendment to be advisable and directing that the
Amendment be submitted for the approval of the Stockholders of the
Company at the Annual Meeting to be held September 30, 1994. Said
resolution proposed that Article FOURTH of the Certificate of
Incorporation be amended to read in full as follows:
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is Three Hundred and One
Million (301,000,000), consisting of One Million (1,000,000) shares
of preferred stock, par value of Fifty Cents ($.50) each
(hereinafter called the Preferred Stock) and Three Hundred Million
(300,000,000) shares of common stock of par value of Fifty Cents
($.50) each (hereinafter called the Common Stock).
The designations and the powers, preferences and rights, and
the qualification, limitations or restrictions thereof, of each
class of stock of the Corporation which are fixed by this
Certificate of Incorporation, and the express grant of authority to
the Board of Directors to fix by resolution or resolutions the
designations, and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the
Preferred Stock which are not fixed by this
Certificate of Incorporation, are as follows:
A. PREFERRED STOCK
(1) Shares of Preferred Stock may be issued from time to time
in one or more series, each such series to have such distinctive
designation as shall be stated and expressed in the resolution or
resolutions adopted by the Board of Directors providing for the
initial issuance of shares of such series, and authority is
expressly vested in the Board of Directors, by such resolution or
resolutions providing for the initial issuance of shares of each
series:
(a) To fix the distinctive designation of such series
and the number of shares which shall constitute such series,
which number may be increased or decreased (but not below the
number of shares thereof then outstanding) from time to time
by actions of the Board of Directors;
<PAGE>
(b) To fix (i) the dividend rate of such series, (ii)
any limitation, restrictions or conditions on the payment of
dividends, including whether dividends shall be cumulative
and, if so, from which date or dates, (iii) the relative
rights of priority, if any, of payment of dividends on shares
of that series and (iv) the form of dividends, which shall be
payable either (A) in cash only, or (B) in stock only, or (C)
partly in cash and partly in stock, or (D) in stock or, at the
option of the holder, in cash (and in such case to prescribe
the terms and conditions of exercising such option), and to
make provision in case of dividends payable in stock for
adjustments of the dividend rate in such events as the Board
of Directors shall determine;
(c) To fix the price or prices at which, and the terms
and conditions on which, the shares of such series may be
redeemed by the Company;
(d) To fix the amount or amounts payable upon the shares
of such series in the event of any liquidation, dissolution or
winding up of the Company and the relative rights of priority,
if any, of payment upon shares of such series;
(e) To determine whether or not the shares of such
series shall be entitled to the benefit of a sinking fund to
be applied the purchase or redemption of such series and, if
so entitled, the amount of such fund and the manner of its
application;
(f) To determine whether or not the shares of such
series shall be made convertible into, or exchangeable for,
shares of any other class or classes of stock of the
Corporation or shares of any other series of Preferred Stock,
and, if made so convertible or exchangeable, the conversion
price or prices, or the rate or rates of exchange, and the
adjustments thereof, if any, at which such conversion or
exchange may be made, and any other terms and conditions of
such conversion or exchange;
(g) To determine whether or not the shares of such
series shall have any voting powers and, if voting powers are
so granted, the extent of such voting powers, provided that
the number of authorized share of Common Stock may be
increased or decreased by the affirmative vote of the holders
of a majority of the Common Stock, voting as a class, and such
increase or decrease shall not require any actions by holders
of shares of Preferred Stock. Except as otherwise provided by
statute or by a determination by the Board of Directors, the
holders of shares of Preferred Stock, as such holders, shall
not have any right to vote in the election of directors or for
any other purpose; and such holders shall not be entitled to
notice of any meeting of stockholders at which they are not
entitled to vote;
(h) To determine whether or not the issue of any
additional shares of such series or of any other series in
addition to such series shall be subject to restrictions in
addition to the restrictions, if any, on the issue of
additional shares imposed in the resolution or resolutions
fixing the terms of any outstanding series of Preferred Stock
<PAGE>
theretofore issued pursuant to this Section A and, if subject
to additional restrictions, the extent of such additional
restrictions; and
(i) Generally to fix the other rights, and any
qualifications, limitations or restrictions of such rights, of
such series; provided, however, that no such rights,
qualifications, limitations or restrictions shall be in
conflict with this Certificate of Incorporation or any
amendment hereof.
(2) Before any dividends shall be declared or paid or any
distribution ordered or made upon the Common Stock (other than a
dividend payable in Common Stock), the Corporation shall comply
with the dividend and sinking fund provisions, if any, of any
resolution or resolutions providing for the issue of any series of
Preferred Stock any shares of which shall at the time be
outstanding. Subject to the foregoing sentence, the holders of
Common Stock shall be entitled, to the exclusion of the holders of
Preferred Stock of any and all series, to receive such dividends as
from time to time may be declared by the Board of Directors.
(3) Upon any liquidation, dissolution or winding up of the
Corporation, the holders of Preferred Stock of each series shall be
entitled to receive the amount to which such holders are entitled
as fixed with respect to such series, including all dividends
accumulated to the date of final distribution, before any payment
or distribution of assets of the Corporation shall be made to or
set apart for the holders of Common Stock; and after such payments
shall have been made to or set apart for the holders of Common
Stock; and after such payments shall have been made in full to the
holders of Preferred Stock, the holders of Common Stock shall be
entitled to receive any and all assets remaining to be paid or
distributed to stockholders and the holders of Preferred Stock
shall not be entitled to share therein. For the purposes of this
paragraph, the voluntary sales, conveyance, lease, exchange or
transfer of all or substantially all the property or assets of the
Corporation or a consolidation or merger of the Corporation with
one or more other corporation (whether or not the Corporation is
the Corporation surviving such consolidation or merger) shall not
be deemed to be a liquidation, dissolution or winding up, voluntary
or involuntary.
(4) Subject to such limitations (if any) as may be fixed by
the Board of Directors with respect to such series of Preferred
Stock in accordance with paragraph (1) of this Section A, Preferred
Stock of each series may be redeemed at any time in whole or from
time to time in part, at the option of the Corporation, by vote of
the Board of Directors, at the redemption price thereof fixed in
accordance with said paragraph (1). If less than all the
outstanding shares of Preferred Stock of such series are to be
redeemed, the shares to be redeemed shall be determined in such
manner as the Board of Directors shall prescribe. At such time or
times prior to the date fixed for redemption as the Board of
Directors shall determine, written notice shall be mailed to each
holder of record of shares to be redeemed, in a postage prepaid
envelope addressed to such holder at his address as shown by the
records of the Corporation, notifying such holders of the election
of the Corporation to redeem such shares and stating the date fixed
for the redemption thereof and calling upon such holder to
<PAGE>
surrender to the Corporation on or after said date, at a place
designated in such notice, his certificate or certificates
representing the number of shares specified in such notice of
redemption. On and after the date fixed in such notice of
redemption, each holder of shares of preferred Stock to be redeemed
shall present and surrender his certificate or certificates for
such shares to the Corporation at the place designated in such
notice and thereupon the redemption price of such shares shall be
paid to or on the order of the person whose name appears on the
records of the Corporation as the holder of the shares designated
for redemption. In case less than all the shares represented by
any such certificate are redeemed a new certificate shall be issued
representing the unredeemed shares. From and after the date fixed
in any such notice as the date of redemption (unless default shall
be made by the Corporation in payment of the redemption price) all
dividends on the shares of Preferred Stock designated for
redemption in such notice shall cease to accrue and all rights of
the holders thereof as stockholders of the Corporation, other than
to receive the redemption price, shall terminate and such shares
shall not thereafter be transferred (except with the consent of the
Corporation) on the books of the Corporation and such shares shall
not be deemed to be outstanding for any purpose whatsoever. At any
time after the mailing of any such notice of redemption the
Corporation may deposit the redemption price of the shares
designated therein for redemption with a bank or trust company in
the United States of America, having capital and surplus of at
least $25,000,000 in trust for the benefit of the respective
holders of the shares designated for redemption but not yet
redeemed. From and after the making of such deposit the sole right
of the holders of such shares shall be the right either to receive
the redemption price of such shares on and after such redemption
date, or, in the case of shares having conversion rights, the right
to convert the same at any time at or before the earlier of the
close of business on such redemption date or such prior date and
time at which the right to convert shall have expired; and except
for these rights, the shares of Preferred Stock so designated for
redemption shall not be deemed to be outstanding for any purpose
whatsoever.
(5) Shares of any series of Preferred Stock which have been
redeemed (whether through the operation of a sinking fund or
otherwise) or purchased by the Corporation, or which, if
convertible, have been converted into shares of stock of the
corporation of any other class or classes, may, upon appropriate
filing and recording to the extent required by law, have the status
of authorized and unissued shares of Preferred Stock and may be
reissued as part of such series or of any other series of Preferred
Stock, subject to such limitations (if any) as may be fixed by the
Board of Directors with respect to such series of Preferred Stock
in accordance with paragraph (1) of this Section A.
B. COMMON STOCK
(1) Except as otherwise provided by (a) the Board of
Directors in fixing the voting rights of any series of the
Preferred Stock in accordance with Section A of this Article FOURTH
or (b) statute, voting power in the election of directors and for
all other purposes shall be vested exclusively in the holders of
the Common Stock.
<PAGE>
(2) In the event of any liquidation, dissolution or winding
up of the Corporation, either voluntary or involuntary after
payment shall have been made to the holders of the Preferred Stock
of the full amount to which they shall be entitled pursuant to
paragraph (3) of Section A of this Article FOURTH, the holders of
Common Stock shall be entitled, to the exclusion of the holders of
the Preferred Stock of any and all series, to share, ratably
according to the number of shares of Common Stock held by them, in
all remaining assets of the Corporation available for distribution
to its stockholders.
All persons who shall acquire stock in this Corporation shall
acquire the same subject to the provisions of this Certificate of
Incorporation, as amended.
SECOND: That at the Annual Meeting of Stockholders of the Company,
which was duly called and held September 30, 1994 upon notice in
accordance with Section 222 of the General Corporation Law of the State
of Delaware, at which a quorum was present and acting throughout, said
Amendment was approved by the affirmative vote of the number of shares
required by law.
THIRD: That said Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of the Company will not be reduced under
or by reason of said Amendment.
IN WITNESS WHEREOF, the Company has caused its corporate seal to be
affixed hereto and this Certificate to be signed by GILBERT F. AMELIO,
President and Chief Executive Officer of the Company, and attested to be
JOHN M. CLARK III, Secretary of the Company this 30th day of September,
1994.
(Corporate Seal) NATIONAL SEMICONDUCTOR CORPORATION
BY //s// GILBERT F. AMELIO
------------------------
GILBERT F. AMELIO
Chairman of the Board,
President and CEO
ATTEST:
By //s// JOHN M. CLARK III
------------------------
JOHN M. CLARK III
Secretary
<PAGE>
<PAGE>
Exhibit 3.2
BY-LAWS
OF
NATIONAL SEMICONDUCTOR CORPORATION
ARTICLE I.
OFFICES
Section 1. Registered Office. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The corporation may also have offices
at such other places both within and without the State of Delaware as
the board of directors may from time to time determine or the business
of the corporation may require.
ARTICLE II.
STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders shall be
held at such place either within or without the State of Delaware as may
be designated by the board of directors.
Section 2. Annual Meeting. An annual meeting of stockholders
shall be held on the fourth Friday in September of each year, at 10:30
A.M., or at such other date and time as shall be designated by the board
of directors. At the annual meeting the stockholders shall elect a
board of directors and transact such other business as may be properly
brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders
(a) may be called by the chairman of the board of directors, the
president, or by a majority of the board of directors but (b) shall be
called by the secretary at the request in writing of stockholders owning
at least 50% in interest of the capital stock of the corporation issued
and outstanding and entitled to vote at such meeting. Any business can
be transacted at a special meeting of the stockholders.
Section 4. Notice of Meetings. The secretary or such other
officer of the corporation as is designated by the board of directors
shall serve personally or send through the mails or by telegraph a
written notice of annual or special meetings of stockholders, addressed
to each stockholder of record entitled to vote at his address as it
appears on the stock transfer books of the corporation, stating the time
and place of the meeting, not less than ten nor more than sixty days
before the date of the meeting, except that a special meeting may be
called on five days' notice. If mailed, notice shall be deemed to have
been given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records
of the corporation. Notice given by telegraph shall be deemed to have
been given upon delivery of the message to the telegraph company.
<PAGE>
Section 5. Waiver of Notice. Notice of a meeting need not be
given to any stockholder who signs a waiver of notice, in person or by
proxy, whether before or after a meeting. The attendance of any
stockholder at a meeting, in person or by proxy, without protesting
either prior thereto or at its commencement the lack of notice of such
meeting, shall constitute a waiver of notice by him. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in any written waiver of
notice.
Section 6. Action by Consent. Any action required to be taken at
any annual or special meeting of stockholders, or any action which may
be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed
by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 7. Stockholder's List. The officer who has charge of the
stock transfer book of the corporation shall prepare and make, at least
ten days before every meeting of the stockholders at which directors are
to be elected, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to examination by any stockholder,
for any purpose germane to the meeting, during ordinary business hours,
for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified, at
the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
Section 8. Quorum. The holders of a majority of the stock issued
and outstanding and entitled to vote at a meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of
stockholders for the transaction of business except as otherwise
provided by statute. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, a majority in interest
of the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from
time to time, without notice other than announcement at the meeting,
until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business
may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days,
or after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote.
Section 9. Proxies. At all meetings of stockholders, each
stockholder entitled to vote shall have one vote, to be exercised in
person or by proxy, for each share of capital stock having voting power,
held by such stockholder. All proxies shall be in writing, shall relate
only to a specific meeting (including continuations and adjournments of
the same), and shall be filed with the secretary at or before the time
of the meeting. Each proxy must be signed by the shareholder or his
attorney-in-fact. The person or persons named in a proxy for a specific
meeting may vote at any adjournment of the meeting for which the proxy
was given. If more than one person is named as proxy, a majority of
<PAGE>
such persons so named present at the meeting, or if only one shall be
present, then that one, shall have and exercise all the powers conferred
upon all of the persons unless the proxy shall provide otherwise. A
proxy purporting to be executed by or on behalf of a stockholder shall
be deemed valid unless challenged prior to or at its exercise and the
burden of proving invalidity shall rest on the challenger.
Section 10. Voting. When a quorum is present at any meeting, the
vote of the holders of a majority of the capital stock having voting
power present in person or represented by proxy shall decide any
question brought before such meeting, except in respect of elections of
directors which shall be decided by a plurality of the votes cast, and
except when the question is one which by express provision of statute a
different vote is required, in which case such express provision shall
govern and control the decision of such question. No vote need be taken
by ballot unless required by statute.
ARTICLE III.
THE BOARD OF DIRECTORS
Section 1. Composition. The board of directors shall consist of
eight directors subject to such automatic increase as may be required by
the corporation's Restated Articles of Incorporation. The board may
enlarge or reduce the size of the board in a vote of the majority of the
directors in office. No director need be a stockholder.
Section 2. Election and Term. Except as provided in Section 3 of
this Article, the directors shall be elected by a plurality vote at the
annual meeting of the stockholders. Each director shall hold office
until his successor is elected and qualified or until his earlier
resignation or removal.
Section 3. Vacancies and Newly Created Directorships. Any vacancy
on the board of directors, or any newly created directorships, however
occurring, may be filled by a majority of the directors then in office,
though less than a quorum or by a sole remaining director. Any vacancy
in the board of directors may also be filled by a plurality vote of the
stockholders unless such vacancy shall have been previously filled by
the board of directors.
Section 4. Powers. The business of the corporation shall be
managed by its board of directors which shall have and may exercise all
such powers of the corporation, including the power to make, alter or
repeal the bylaws of the corporation, and do all such lawful acts and
things as are not by statute directed or required to be exercised or
done by the stockholders.
Section 5. Place of Meetings. The board of directors of the
corporation may hold meetings both regular and special, either within or
without the State of Delaware. Members of the board of directors or any
committee designated by the board, may participate in a meeting of such
board or committee by means of a conference telephone by means of which
all persons participating in the meeting can hear each other, and
participation shall constitute presence in person at such meeting.
Section 6. Regular Meetings. Regular meetings of the board of
directors may be held without call or notice immediately following the
annual meeting of the stockholders and at such time and at such place as
shall from time to time be selected by the board of directors, provided
that in respect of any director who is absent when such selection is
made, the notice, waiver and attendance provisions of Section 7 of this
Article shall apply to such regular meetings.
Section 7. Special Meetings and Notice. Special meetings of the
board of directors may be called by the chairman of the board of
<PAGE>
directors, a majority of the directors or the president on at least two
days' notice given to each director, either personally or by mail or
telegram sent to his business or home address, stating the place, date
and hour of the meeting. If mailed, notice shall be deemed to have been
given when deposited in the United States mail, postage prepaid,
directed to the director at his business or home address. Notice given
by telegraph shall be deemed to have been given upon delivery of the
message to the telegraph company. Notice of a meeting need not be given
to any director who signs a waiver of notice, whether before or after
the meeting. The attendance of any director at a meeting, without
protesting either prior thereto or at its commencement the lack of
notice of such meeting, shall constitute a waiver of notice by him. Any
notice or waiver of notice of a meeting of the board of directors need
not specify the purposes of the meeting.
Section 8. Quorum and Voting. At all meetings of the board of
directors a majority less one of the total number of directors then in
office shall constitute a quorum for the transaction of business, except
that in no case shall less than two directors be deemed to constitute a
quorum, and the act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the board of
directors. If a quorum shall not be present at any meeting of the board
of directors, a majority of less than a quorum may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Action by Consent. Any action required or permitted to
be taken at any meeting of the board of directors may be taken without a
meeting, if all members of the board of directors, then in office,
consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board of directors.
Section 10. Resignation. Any director may resign at any time upon
written notice delivered to the corporation at its principal office.
The resignation shall take effect at the time specified therein, and if
no time be specified, at the time of its dispatch to the corporation.
Section 11. Removal. A director may be removed for cause by the
vote of a majority of the stockholders at a special or annual meeting
after the director has been given reasonable notice and opportunity to
be heard before the stockholders.
Section 12. Committees. The board of directors may, by resolution
passed by a majority of the whole board of directors, designate one or
more committees, each committee to consist of one or more of the
directors of the corporation, which committee, to the extent provided in
the resolution, shall have and may exercise the powers of the board of
directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed
to all papers which may require it. Such committee or committees shall
have such name or names as may be determined from time to time by
resolution adopted by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the board of
directors when required.
ARTICLE IV.
OFFICERS
Section 1. Designation. The officers of the corporation shall
consist of a president, a treasurer, a secretary, and such other
officers including a chairman of the board of directors, one or more
group presidents, vice presidents (including group executive vice
presidents, corporate vice presidents and senior vice presidents),
assistant treasurers and assistant secretaries, as the board of
<PAGE>
directors or the stockholders may deem warranted. With the exception of
the chairman of the board of directors who must be a director, no
officer need be a director or a stockholder. Any number of offices may
be held by the same person.
Section 2. Election and Term. Except for officers to fill
vacancies and newly created offices provided for in Section 6 of this
Article, the officers shall be elected by the board of directors at the
first meeting of the board of directors after the annual meeting of the
stockholders. All officers shall hold office at the pleasure of the
board of directors.
Section 3. Duties of Officers. In addition to those duties that
may from time to time be delegated to them by the board of directors,
the officers of the corporation shall have the following duties:
(a) Chairman of the Board. The chairman of the board shall
preside at all meetings of the stockholders and of the board of
directors at which he is present, shall be ex-officio a member of all
committees formed by the board of directors and shall have such other
duties and powers as the board of directors may prescribe.
(b) President. The president shall be the chief executive
officer of the corporation, shall have general and active management of
the business of the corporation, shall see that all orders and
resolutions of the board of directors are carried into effect, and, in
the absence or nonelection of the chairman of the board of directors,
shall preside at all meetings of the stockholders and the board of
directors at which he is present if he is also a director. The
president also shall execute bonds, mortgages, and other contracts
requiring a seal under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be delegated
expressly by the board of directors to some other officer or agent of
the corporation and shall have such other powers and duties as the board
of directors may prescribe.
(c) Group President. The group president or group
presidents, if any, shall have general and active management of the
group for which they are designated as president by the board of
directors and shall have such other duties and powers as vice-
presidents or as the board of directors or the president may prescribe.
(d) Vice-President. The vice-president or vice-presidents,
if any, shall have such duties and powers as the board of directors or
the president may prescribe. In the absence of the president or in the
event of his inability or refusal to act, the group president or vice-
president, if any, or if there be more than one, the group presidents or
vice-presidents, in the order designated by the board of directors, or,
in the absence of such designation, then in the order of their election,
shall perform the duties and exercise the powers of the president.
(e) Secretaries and Assistant Secretaries. The secretary
shall record the proceedings of all meetings of the stockholders and all
meetings of the board of directors in books to be kept for that purpose,
shall perform like duties for the standing committees when required, and
shall give, or cause to be given, call and/or notices of all meetings of
the stockholders and meetings of the board of directors in accordance
with these by-laws. The secretary also shall have custody of the
corporate seal of the corporation, affix the seal to any instrument
<PAGE>
requiring it and attest thereto when authorized by the board of
directors or the president, and shall have such other duties and powers
as the board of directors may prescribe.
The assistant secretary, if any, or if there be more
than one, the assistant secretaries, in the order designated by the
board of directors, or, if there be no such designation, then in order
of their election, shall, in the absence of the secretary or in the
event of his inability or refusal to act, perform the duties and
exercise the powers of the secretary and shall have such other duties
and powers as the board of directors may prescribe.
In the absence of the secretary or an assistant secretary
at a meeting of the stockholders or the board of directors, an acting
secretary shall be chosen by the stockholders or directors, as the case
may be, to exercise the duties of the secretary at such meeting.
In the absence of the secretary or an assistant secretary
or in the event of the inability or refusal of the secretary or an
assistant secretary to give, or cause to be given, any call and/or
notice required by law or these by-laws, any such call and/or notice may
be given by any person so directed by the board of directors, the
president or stockholders, upon whose requisition the meeting is called
in accordance with these by-laws.
(f) Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities, shall keep full
and accurate accounts of receipts and disbursements in books belonging
to the corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors. The
treasurer shall also disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, shall render to the board of directors, when the board of
directors so requires, an account of all his transactions as treasurer
and of the financial condition of the corporation, and shall have such
other duties and powers as the board of directors may prescribe. If
required by the board of directors, the treasurer shall give the
corporation a bond, which shall be renewed every six years, in such sum
and with such surety or sureties as shall be satisfactory to the board
of directors for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
The assistant treasurer, if any, or if there be more than
one, the assistant treasurers in the order designated by the board of
directors, or, in the absence of such designation, then in the order of
their election, shall, in the absence of the treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the
powers of the treasurer and shall have such other duties and powers as
the board of directors may prescribe.
(g) Other Officers. Any other officer shall have such powers
and duties as the board of directors may prescribe.
Section 4. Resignation. Any officer may resign at any time upon
written notice delivered to the corporation at its principal office.
<PAGE>
The resignation shall take effect at the time specified therein, and if
no time be specified, at the time of its dispatch to the corporation.
Section 5. Removal. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a
majority of the board of directors.
Section 6. Vacancies and Newly Created Offices. A vacancy in
office, however occurring, and newly created offices, shall be filled by
the board of directors.
ARTICLE V.
CAPITAL STOCK
Section 1. Stock Certificates. Each holder of stock in the
corporation shall be entitled to have a certificate signed in an
officer's official capacity or in the name of the corporation by the
chairman of the board of directors, or the president or a vice-president
and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation. Where a certificate is countersigned
(a) by a transfer agent other than the corporation or its employee, or,
(b) by a registrar other than the corporation or its employee, any other
signature on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Section 2. Lost, Stolen or Destroyed Certificates. The board of
directors, or at their direction any officer of the company, may direct
a new certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock
to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the board of directors, or at their
direction any officer of the company, may, in its (his) discretion and
as a condition precedent to the issuance thereof, require the owner of
such lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 3. Transfer. Upon surrender to the secretary or the
transfer agent of the corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, and upon compliance with any provisions
respecting restrictions on transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 4. Issue of Stock. From time to time, the board of
directors may, by vote of a majority of the directors, issue any of the
authorized capital stock of the corporation for cash, property, services
rendered or expenses, or as a stock dividend and on any terms permitted
by law.
Section 5. Fixing Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or to express
consent to corporate action in writing without a meeting or entitled to
receive payment of any dividend or other distribution or allotment of
any rights, or entitled to exercise any rights in respect of any change,
<PAGE>
conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
Section 6. Registered Stockholders. The corporation shall be
entitled to recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person registered
on its books as the owner of shares, and shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of
Delaware.
<PAGE>
ARTICLE VI.
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation may be declared by the board of directors in any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of capital stock. Before payment of any
dividend, there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the directors from time to
time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such
other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such
reserve in the manner in which it was created.
Section 2. Checks. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or such
other person or persons as the board of directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the corporation shall
be fixed by a resolution of the board of directors.
Section 4. Seal. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the words
"Corporate Seal Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VII.
AMENDMENTS
Section 1. Amendments. These by-laws may be amended at any proper
meeting of the stockholders or of the board of directors.
ARTICLE VIII.
INDEMNIFICATION
Section 1. Non-Derivative Proceedings. The corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceedings, had reasonable cause
to believe that his conduct was unlawful.
Section 2. Derivative Proceedings. The corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
<PAGE>
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 3. Amount of Indemnification. To the extent that a
director, officer, employee or agent of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1 or 2, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Determination to Indemnify. Any indemnification under
Sections 1 or 2 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be
made (1) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by
independent legal counsel in written opinion, or (3) by the
stockholders.
Section 5. Advance Payment. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of a director,
officer, employee or agent to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the
corporation as authorized in this section or otherwise pursuant to the
law of Delaware.
Section 6. Non-Exclusiveness of By-Law. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other
subsections of this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of
expenses may be entitled under any statute, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action
in an official capacity and as to action in another capacity while
holding such office.
Section 7. Continuation of Indemnification. The indemnification
and advancement of expenses provided by, or granted pursuant to this
Article VIII, or permitted by statute or otherwise, shall, unless
otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such
a person.
Section 8. Indemnification Insurance. The corporation shall have
power to purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
<PAGE>
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify
him against such liability under the provisions of this section.
<PAGE>
<PAGE>
Exhibit 10.3
NATIONAL SEMICONDUCTOR CORPORATION
1996 EXECUTIVE OFFICER INCENTIVE PLAN AGREEMENT
ARTICLE 1
Definitions
Whenever used in the Agreement, unless otherwise indicated, the
following terms shall have the respective meanings set forth below:
Agreement: This Executive Officer Incentive Plan Agreement.
Award: The amount to be paid to a Plan Participant at
the end of the fiscal year.
Award Date: The date set by the Committee for payment of
Awards, usually approximately forty days after
the Company makes its consolidated financial
statements for the fiscal year generally
available to the press.
Base Salary: The annualized base remuneration received by a
Participant from the Company at the end of the
fiscal year. Extraordinary items, including but
not limited to prior awards, relocation
expenses, expatriate premiums, allowances and tax
adjustments, sales incentives, amounts recognized
as income from stock or stock options, disability
benefits (whether paid by the Company or a third
party) and other similar kinds of extra or
additional remuneration are excluded from the
computation of Base Salary.
Company: National Semiconductor Corporation ("NSC"), a
Delaware corporation, and any other corporation
in which NSC controls directly or indirectly
fifty percent (50%) or more of the combined
voting power of voting securities, and which has
adopted this Plan.
Committee: A committee comprised of directors of National
who are not employees of the Company, as more
fully defined in the Executive Officer Incentive
Plan.
Disability: Inability to perform any services for the Company
and eligible to receive disability benefits under
the standards used by the Company's disability
benefit plan or any successor plan thereto.
Executive Officer: An officer of the Company who is subject to the
reporting and liability provisions of Section 16
of the Securities and Exchange Act of 1934.
<PAGE>
Incentive Levels: The grouping of those Executive Officers
designated as participants as set forth in
Article 4.
Participant: An Executive Officer who at the time shall be a
participant in accordance with the provisions of
Article 3.
Performance Factors considered and scored to determine the
Goal: amount of a participant's Award, which shall be
based on one or more of the business criteria
listed in Section 5(b) of the Plan. Performance
Goals will have four levels of performance as
follows:
(i) Threshold -- The minimum acceptable level of
performance for which an Award may be earned on a
particular Performance Goal.
(ii) Target -- Good performance, as established
by the Committee, reflecting a degree of
difficulty which has a reasonable probability of
achievement.
(iii) Stretch -- Better than Target performance
and reflecting a degree of difficulty with only a
moderate probability of achievement.
(iv) Best Expected -- Exceptional performance
far exceeding the Target level because of the
great degree of difficulty and the limited
probability of achievement.
Retired: Permanent termination of employment with the
Company, and (a) age is either sixty-five (65) or
age is at least fifty-five (55) and years of
service in the employ of the Company is ten (10)
or more, and (b) the terminating employee has
certified to the Vice President-Finance of the
Company that he or she does not intend to engage
in a full-time vocation.
Target Award: The Award, expressed as a percentage of Base
Salary, that is earned by a Participant for
achievement of the Target Performance Measure.
All capitalized terms used in this Agreement and not otherwise
defined herein have the meanings assigned to them in the Executive
Officer Incentive Plan.
ARTICLE 2
Effective Date
The Agreement will become effective as of May 29, 1995, to be
effective for the Company's fiscal year 1996.
<PAGE>
ARTICLE 3
Eligibility for Plan Participation
A. Within ninety (90) days after the commencement of the Company's
fiscal year, the Committee shall designate those Executive Officers who
shall be Plan Participants for the fiscal year and their respective
Incentive Levels.
B. Participants will be notified of their participation once the
Committee has designated Participants. Continued participation will be
re-evaluated at the beginning of each fiscal year.
C. Newly hired Executive Officers and persons who are promoted to
Executive Officers may be added as Participants to the Plan during the
fiscal year. Participants who are added to the Plan during a fiscal
year will receive a prorated Award based on time of participation in the
Plan.
ARTICLE 4
Target Awards
A. Each participant will be assigned an Incentive Level with associated
Target Awards expressed as percentages of the Participant's Base Salary.
Target Awards will be the same for all Participants at any given
Incentive Level.
B. In the event that a Participant changes positions during the Plan
Period and the change results in a change in Incentive Level, whether
due to promotion or demotion, the Incentive Level will be prorated to
reflect the time spent in each position.
ARTICLE 5
Plan Performance Goals
A. Performance Goals, associated weights and levels of performance will
be established by the Committee within ninety (90) days after the start
of the fiscal year. Each Performance Goal will have a defined
Threshold, Target, Stretch and Best Expected level of performance.
Performance Goals and their associated weights may change from one
fiscal year to another fiscal year to reflect the Company's operational
and strategic goals, but must be based on one or more of the business
criteria listed in Section 5(b) of the Plan.
B. Awards will range between 0% and 200% of Target Award. A scale
showing the amount of the Participant's Award relative to the Target
Award at the various performance levels will be developed for each
Performance Goal. Performance levels and associated Awards (as a
percent of the Target Award) will be set from Threshold to Best Expected
for the Performance Goals, with Awards ranging from 50% of the Target
Award at the Threshold level to 200% of the Target Award at the Best
Expected level. The Committee shall retain the discretion to reduce
(but not increase) the Award otherwise payable to a Participant upon
attainment of a Performance Goal. Attachment A hereto contains a chart
reflecting an example of the Award formula.
<PAGE>
ARTICLE 6
Calculation and Payment of Awards
A. A Participant's Award will be calculated as a percentage of Base
Salary as follows:
1) The Participant's Target Award is determined prior to the
beginning of the fiscal year.
2) The performance of the Plan Participants is scored on an
overall basis at the end of the fiscal year.
3) The group's overall performance score creates an incentive
pool.
4) The group's incentive pool is divided among the Participants
within the group, based on individual contributions toward
the group's overall performance score. No one individual
Award may exceed 200% of the Participant's Target Award
amount.
B. The Committee will score the performance of the Plan Participants.
Awards will be paid only after the Committee certifies in writing that
the Performance Goals have been attained. The Committee shall have the
discretion to reduce, but not increase, the amount of an Award otherwise
payable to a Participant upon attainment of the Performance Goal(s)
established for the fiscal year.
C. Awards will be paid in cash on or about the Award Date.
D. Awards will reflect the Participant's Base Salary in effect at the
end of the fiscal year. Participants who take an unpaid leave of
absence during the fiscal year will have their Awards prorated to
reflect actual pay earned during the fiscal year.
E. 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 last day of the fiscal year. A Participant who
terminates employment prior to that date will result in forfeiture of
the Award, except as otherwise provided in this Article 7.
B. If a Participant's employment is terminated during the fiscal year
by Disability, Retirement, or death, the Participant will receive an
Award prorated to reflect the Participant's actual period of employment
during the fiscal year.
C. Unless local law or regulation provides otherwise, payments of
Awards made upon termination of employment by death shall be made on the
Award Date to: (a) beneficiaries designated by the Participant; if
none, then (b) to a legal representative of the Participant; if none,
<PAGE>
then (c) to the persons entitled thereto as determined by a court of
competent jurisdiction.
D. Participants whose employment is terminated by reduction in force
during the fiscal year will receive no Award. If a Participant's
employment is terminated by reduction in force after the fiscal year but
before the Award Date, the Participant will receive the Award on the
Award Date.
E. The Committee reserves the right to reduce an Award on a pro-rata
basis to reflect a Participant's leave of absence during a fiscal year.
Participants on leaves of absence (whether paid or unpaid) on the Award
Date will not receive the Award until he or she returns from the leave
of absence.
F. The right of any Participant to receive an Award under this Plan
shall be forfeited if the Participant's employment is terminated because
of or the Participant is discovered to have engaged in fraud,
embezzlement, dishonesty against the Company, obtaining funds or
property under false pretenses, assisting a competitor without
permission, or interfering with the relationship of the Company with a
customer. A Participant's Award will be forfeited for any of the above
reasons regardless of whether such act is discovered prior to or
subsequent to the Participant's termination of employment or payment of
an Award. If an Award has been paid, such payment shall be repaid to
the Company by the Participant.
<PAGE>
ARTICLE 8
Deferral of Awards
A. If permitted by local law and regulations, a Participant is entitled
to make an irrevocable election (in the form of the Notice of Election
attached) to defer receipt of all or any portion of any Award. For any
fiscal year, the Notice of Election must be completed prior to thirty
(30) days before the end of the fiscal year. Notices of Election are
not self-renewing and must be completed for each fiscal year if deferral
is desired for the applicable fiscal year.
B. For each Participant who elects deferral, the Company will establish
and maintain book entry accounts which will reflect the deferred Award
and any interest credited to the account.
C. For deferred Awards, Participant deferred accounts will be credited
each Award Date with interest set at the rate for long-term A-rated
corporate bonds, as reported by the investment banking firm of Salomon
Brothers Inc. of New York City (or such other investment banking firm as
the Committee may specify) during the first week of each calendar year.
The interest rate will be reset at the beginning of each calendar year.
Interest will begin to accrue on the Award Date and will be credited
each Award Date until the date payment is actually made. If a
Participant's Award is distributed at any time other than on an Award
Date, the Participant's account will be credited with interest until the
date of distribution.
D. Participants will not receive deferred Awards until the earlier of
termination of employment for any reason (including Retirement,
Disability, or death) or a date pre-selected by the Participant. The
account balance will be paid in a lump sum in the month following the
earlier of termination of employment for any reason or the pre-selected
date unless installment payments are permitted and have been elected as
follows: Upon termination of employment by reason of Retirement or
Disability, a Participant who has previously elected to defer an Award
may irrevocably elect to have the balance of the deferred Award plus
accrued interest paid to the Participant in periodic, annual
installments over a period of ten (10) years. Payments shall commence
or be made annually on a day that is within thirty (30) days of the
anniversary date following the Participant's Retirement or Disability.
E. If the Participant's employment is terminated for any reason other
than death, Disability or Retirement, the Participant will be paid the
entire account balance in a lump sum in the month after termination. If
a Participant has requested installment payments and dies either before
or after distribution has begun, the unpaid balance will be paid in a
lump sum in the month following the Participant's death.
F. Payment of part or all of the deferred Award may be accelerated in
the case of severe hardship, which shall mean an emergency or unexpected
situation in the Participant's financial affairs, including, but not
limited to, illness or accident involving the Participant or any of the
Participant's dependents. All payments in case of hardship must be
specifically approved by the Committee.
G. No Participant may borrow against his or her account.
H. If permitted by local law and regulations, the Participant may
designate a beneficiary to receive deferred Awards in the event of the
<PAGE>
Participant's death. The Participant's beneficiary may be changed
without the consent of any prior beneficiary except as follows: In
those jurisdictions where spouses are granted rights by law in a
Participant's earnings, if the Participant is married at the time of
designation, the Participant's spouse must consent to the beneficiary
designation and 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 Article 7C or as
otherwise required by local law or regulation.
ARTICLE 9
Interpretations and Rule-Making
The Committee shall have the sole right and power to: (i)
interpret the provisions of the Agreement, and resolve questions
thereunder, which interpretations and resolutions shall be final and
conclusive; (ii) adopt such rules and regulations with regard to the
administration of the Plan as are consistent with the terms of the Plan
and the Agreement, and (iii) generally take all action to equitably
administer the operation of the Plan and this Agreement.
ARTICLE 10
Declaration of Incentives, Amendment, or Discontinuance
The Committee may on or before the Award Date: (i) determine not to
make any Awards to any or all Participants for any Plan Period; (ii)
make any modification or amendment to this Agreement for any or all
Participants provided such modification or amendment is in accordance
with the terms of the Plan; or (iii) discontinue this Agreement for any
or all Participants provided such modification or amendment is otherwise
in accordance with the Plan.
<PAGE>
ARTICLE 11
Miscellaneous
A. Except as provided in Article 8 H, no right or interest in the Plan
is transferable or assignable except by will or the laws of descent and
distribution.
B. Participation in this Plan does not guarantee any right to continued
employment and the Committee and management reserve the right to dismiss
Participants for any reason whatsoever. Participation in one fiscal
year does not guarantee a Participant the right to participation in any
subsequent fiscal year.
C. The Company reserves the right to deduct from all Awards under this
Plan any taxes or other amounts required by law to be withheld with
respect to Award payments.
D. This Plan constitutes an unfunded Plan of deferred compensation. As
such, any amounts payable hereunder will be paid out of the general
corporate assets of the Company and shall not be transferred into a
trust or otherwise set aside. All accounts under the Plan will be for
bookkeeping purposes only and shall not represent a claim against
specific assets of the Company. The Participant will be considered a
general creditor of the Company and the obligation of the Company is
purely contractual and shall not be funded or secured in any way.
E. Maintenance of financial information relevant to measuring
performance during the fiscal year will be the responsibility of the
Chief Financial Officer of the Company.
F. The provisions of the Plan shall not limit, or restrict, the right
or power of the Committee to continue to adopt such other plans or
programs, or to make salary, bonus, incentive, or other payments, with
respect to compensation of Executive Officers, as in its sole judgment
it may deem proper.
G. Except to the extent superseded by federal law, this Agreement shall
be construed in accordance with the laws of the State of California.
H. No member of the Company's board of directors or any officer,
employee, or agent of the Company shall have any liability to any
person, firm or corporation based on or arising out of this Agreement or
the Plan.
<PAGE>
ATTACHMENT A
CHART describing Incentive Awards
as a percentage of Target Awards
Chart illustrates the manner in which awards are to be calculated
under the Executive Officer Incentive Plan. Achievement of performance
against goals between the Threshold Level and fifty percent of Target
Level results in an Incentive Award of 50% of Target, with the Committee
having discretion to adjust downward when it deems appropriate.
Similarly, performance levels against goals of between 50% and 100%
result in an Incentive Award of 100% of Target, while performance
against goals of between 100% and 150% result in an Incentive Award of
150% of Target (in each case, subject to downward - but not upward -
adjustment by the Committee). Finally, performance against goals of more
than 150% will result in the maximum incentive award of 200% of Target
award, subject to downward adjustment.
In summary, while the Plan formula sets the incentive awards upon
achievement of each level of performance, the shaded areas of the chart
reflect the areas of discretion on award payment that is vested with the
Committee.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
EXECUTIVE OFFICER INCENTIVE PLAN
Notice of Election
If you are a Participant in the Company's Executive Officer
Incentive Plan ("EOIP") and receive an Award under the EOIP for fiscal
year 1996, you may accept payment in calendar year 1996 or you may defer
payment until a later date which is at least one year after the Award
Date. If you want to defer payment, complete this election form and
return it to Donald Macleod, Senior Vice President, Finance, or his
designee by April 26, 1996.
If you do not complete this form, you will receive payment in
calendar year 1996. For further details, refer to the National
Semiconductor Corporation Executive Officer Incentive Plan documents and
Agreement.
* * * * *
DEFERRAL ELECTION:
In accordance with the National Semiconductor Corporation EOIP, I
hereby elect to defer all or part of the Award as specified below, which
Award would otherwise be paid to me under the terms of the KEIP.
1. Please defer ______% or $______ of my EOIP Award. If the
dollar amount selected is greater than the total EOIP Award, the entire
Award will be deferred.
2. The amounts deferred will be payable on the earliest of:
termination of employment for any reason (including retirement,
disability, or death) or on ________________________ (specify pre-
selected distribution date at least one year after the 1996 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 1996 EOIP AWARD AND IS
SUBJECT TO THE TERMS OF THE NATIONAL SEMICONDUCTOR EOIP DOCUMENT.
Consent of spouse (required for
married participants designating
beneficiaries other than spouse)
Signature: ___________________ Signature______________________
Print Name: __________________ Print Name:____________________
Date: ________________________
Received by National Semiconductor Corporation
Date: ________________________________
By: __________________________________
Print Name: __________________________
Title: ________________________________
<PAGE>
<PAGE>
Exhibit 10.7
AGREEMENT
This Agreement is made and entered into as of May 17, 1995, by and
between National Semiconductor Corporation, a Delaware corporation (the
"Company") and Peter J. Sprague ("Sprague").
Recitals
Sprague has served as Chairman of the Board of Directors of the
Company since 1965. Sprague now intends to retire as a member of the
Board of Directors and as Chairman of the Board.
In recognition of his many years of service as a member of the
Board of Directors and as Chairman, the Company wishes to compensate
Sprague in his retirement and to retain him as an independent consultant
to the Company.
Agreement
Now, therefore, it is agreed as follows:
1. Retirement: Sprague hereby resigns as a member of the Board
of Directors of the Company and as Chairman of the Board of Directors
immediately effective as of the date of this Agreement.
2. Compensation: In recognition of Sprague's many years of
service as a member of the Board of Directors of the Company and as
Chairman of the Board, the Company hereby agrees to the following
compensation for such retirement and for services rendered to the
Company as an independent consultant as provided in paragraph 4 hereof:
a. The Company shall pay to Sprague an annual amount of
$250,000, payable in equal monthly installments, for a period of
ten (10) years (the last payment to be made in May 2005).
b. The outstanding indebtedness (principal and interest) of
Sprague to the Company as a result of the loan made by the Company
to Sprague and evidenced by that certain Promissory Note dated
April 20, 1989, (the "Note"), with a balance currently outstanding
of approximately $450,000, is hereby canceled and forgiven and
deemed paid in full as of the date hereof.
c. To the extent that the forgiveness of the Note and the
outstanding balance thereunder as provided above, gives rise to
state and federal income tax, the Company agrees to make a payment
to Sprague in an amount sufficient to cover such tax on the
forgiveness as well as the resulting tax on such payment (the "Tax
Gross Up"). The Tax Gross Up shall be calculated in accordance
with the Company's standard practice and shall be paid by the
Company directly to Sprague within 30 days of the date of this
Agreement. The Company shall have no further obligation with
respect to taxes arising from forgiveness of the Note and the Tax
Gross Up, and payment of such taxes shall be solely the
responsibility of Sprague.
<PAGE>
d. As provided in paragraph 3 hereof, the Company shall grant
to Sprague an option to purchase 300,000 shares of the Company's
Common Stock at an exercise price per share equal to the opening
price of the Common Stock on the New York Stock Exchange on the
date of grant (the "Option"). The date of grant of the Option
shall be the next business day following the date of execution of
this Agreement.
Except as provided by the Tax Gross Up, all compensation and
benefits (including the Option) to Sprague under this agreement shall be
reduced by all federal, state, local and other withholdings and similar
taxes and payments required by applicable law.
3. The Option. The Option shall be evidenced by an option
agreement in the form attached hereto as Exhibit A (the "Option
Agreement"). The Option Agreement shall be executed simultaneously with
the execution of this Agreement. Among other things, the Option
Agreement provides for the following:
a. The Option shall be exercisable in installments to the
extent of 25% of the total number of shares subject to the Option
after each anniversary of the date of the Option Agreement.
b. The Option shall have a term of ten (10) years.
c. The Option and any shares of Common Stock purchased upon
exercise of the Option shall be acquired for investment and not
with a view towards distribution.
d. The Company shall use its reasonable efforts to register
the Option and the underlying shares of Common Stock on Form S-8 as
promptly as practicable, but only to the extent that Form S-8 is
available and the Option is eligible for such registration.
e. The Option shall be non-transferable by Sprague.
4. Consultant. During the term of the consulting arrangement
as set forth below, Sprague agrees to provide consulting services to the
Company upon the reasonable request of the Chief Executive Officer at
the Company, but at such places and times as shall be reasonably
convenient to Sprague in his sole discretion.
a. Sprague shall devote such of his business time and skill
to the revision of such services as shall, in his sole discretion,
be reasonably necessary.
b. Sprague agrees that the compensation provided by paragraph
2 and the Option provided by paragraph 3 above shall be the full
and complete compensation due and payable to Sprague for services
as such consultant.
c. The term of the consulting arrangement shall be from the
date hereof through May 5, 1999, or such later date as may be
agreed to in writing by the Company and Sprague.
d. During the term of the consulting arrangement, Sprague
shall be deemed to be an independent contractor and not an employee
or other representative or agent of the Company.
e. At all times during and after the term of the consulting
<PAGE>
arrangement, Sprague shall keep and treat as confidential all
information relating to the business or operations of the Company,
except information which is in the public domain or comes within
the public domain without any breach of this Consulting Agreement.
f. The consulting arrangement shall not limit or prohibit
Sprague from engaging in other business activities or services.
g. The Company shall have the right to terminate the
consulting arrangement with Sprague at any time after May 5, 1996,
upon written notice; provided, however, that any such termination
of the arrangement, for any reason whatsoever, shall not affect nor
diminish the Option nor the compensation to be paid by the Company
to Sprague as provided in this Agreement.
5. Representations of Sprague: Sprague hereby represents to
the Company as follows:
a. That he is acquiring the Option and the underlying shares
of Common Stock upon exercise of the Option for investment and not
with a view towards distribution thereof. In the event the Option
is not registered on Form S-8, Sprague acknowledges that any Common
Stock purchased upon exercise of the Option shall be deemed
"restricted" securities within the meaning of Rule 144 under the
Securities Act of 1933.
b. Sprague shall comply with the terms of the Option
Agreement.
c. Sprague is not aware of any claims or causes of action
which he, or any entity of which he is an officer, director, or a
1% shareholder or affiliate, has or may have against the Company,
any subsidiary of the Company, or any officer or director of the
Company or a Company subsidiary.
d. Although nothing in this Agreement shall limit or prohibit
Sprague from engaging in other business activities or services,
whether or not competitive to the Company, Sprague does agree that
during the term of the Option, Sprague will use reasonable efforts
not to disparage the Company or its officers and directors nor
engage in conduct (other than competition in the normal course of
business) materially adverse to the interests of the Company.
6. Indemnification. Notwithstanding Sprague's retirement from
the Board, Sprague shall remain entitled to indemnification by the
Company for acts during the time he served as a member of the Company's
Board of Directors to the extent permitted by the Company's governing
documents.
7. Miscellaneous:
a. This Agreement represents the entire understanding between
the parties with respect to the subject matter hereof, and this
Agreement supersedes any and all prior understandings or
agreements, written or oral, with respect to the subject matter
hereof, including without limitation, any understanding, agreements
or obligations respecting any past or future compensation or other
payments to Sprague by the Company.
b. This Agreement shall be governed by and construed in
<PAGE>
accordance with the laws of the State of California.
c. This Agreement shall be binding upon and enure to the
benefit of the executors, administrators, heirs, successors and
assigns of the parties hereto.
d. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and
the same agreement.
e. The waiver by either party of any breach of any provision
of this Agreement shall not operate or be construed as a waiver of
any other subsequent breach of the same or other provision hereof.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day
and year first above written.
NATIONAL SEMICONDUCTOR CORPORATION
BY: //s// GILBERT F. AMELIO
-------------------------
Gilbert F. Amelio
President and Chief Executive Officer
//s// PETER J. SPRAGUE
------------------------
PETER J. SPRAGUE
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Option Agreement dated May 18, 1995 between National Semiconductor
Corporation, a Delaware corporation (the "Company") and Peter J.
Sprague, a consultant of the Company or of any of its subsidiaries (the
("Optionee").
By action taken by the Board of Directors of the Company, the
Company has granted a non-qualified stock option to the Optionee to
purchase shares of its Common Stock, par value $.50 per share ("Common
Stock"). The Company and the Optionee desire to enter this Agreement to
evidence such option. The option is granted pursuant to an Agreement
between the Optionee and the Company dated May 17, 1995.
NOW THEREFORE, in consideration of the mutual promises hereinafter
set forth, the parties hereto agree as follows:
A. The Company hereby evidences its grant to the Optionee of the
right and option (the "Option") to purchase all or any part of the
aggregate of 300,000 full shares of Common Stock at a purchase price of
$27.875 per share on the terms and conditions herein set forth.
B. The term of the Option shall be for a period of TEN YEARS AND
ONE DAY from the date hereof, or for such shorter period as prescribed
herein. The Option shall be exercisable in installments as follows:
none within the first year; during the second year to the extent of 25%
of the total number of shares to which the Option relates; during the
third year to the extent of 50% of said total (including that portion
exercised in the preceding year); during the fourth year to the extent
of 75% of said total (including that portion exercised in the preceding
years); and during the remaining term of the Option to the extent of
100% of said total.
C. This Option is subject to all the ADDITIONAL TERMS AND
CONDITIONS attached hereto and by reference incorporated herein.
IN WITNESS WHEREOF, the Optionee has hereunto set his hand and the
Company has caused this Option Agreement to be duly executed by an
officer thereunto duly authorized.
NATIONAL SEMICONDUCTOR CORPORATION
By: //s// PETER J. SPRAGUE By: //s// JOHN M. CLARK III _
---------------------- -----------------------
Optionee Vice President
<PAGE>
ADDITIONAL TERMS AND CONDITIONS
1. If Optionee shall die without having exercised the Option,
the Option shall become fully exercisable notwithstanding the
installment exercise provisions of Paragraph B. The person or persons
to whom the Optionee's rights under the Option shall pass by will or by
the laws of descent or distribution may exercise the Option within a
period of five (5) years following Optionee's death.
2. Nothing contained in Paragraph 1 hereof is intended to
extend the stated term of the Option, and in no event may the Option be
exercised after the term of the Option stated in Paragraph B hereof has
expired.
3. The Option is exercisable, during the lifetime of the
Optionee, only by the Optionee. The Option shall not be sold, pledged,
assigned or transferred in any manner otherwise than by will or the laws
of descent and distribution, and shall not be subject to attachment or
similar process. Any attempted sale, pledge, assignment, transfer or
other disposition of the Option contrary to the provisions hereof and
the levy of any attachment or similar process upon the Option shall be
null and void and without effect.
4. In the event there is any change in the shares of the
Company through the declaration of stock dividends or a stock split-up,
or through any recapitalization resulting in share split-up, or
combinations or exchanges of shares, or otherwise, the number of shares
subject to the Option and the purchase price of such shares shall be
appropriately adjusted by the Board of Directors of the Company. No
fractional shares shall be issued upon any exercise of the Option.
5. Subject to the terms and conditions of this Agreement, the
Option may be exercised by giving written notice to the Company at its
office in Santa Clara, California, attention of the Secretary, or at
such other office that the Company may designate. Such notice shall (i)
state the election to exercise the Option and the number of full shares
in respect of which it is being exercised, and (ii) be signed by the
person or persons so exercising the Option and, in the event the Option
is being exercised (pursuant to Paragraph 1 hereof) by any person or
persons other than the Optionee, be accompanied by appropriate proof of
the right of such person or persons to exercise the Option. Such notice
shall be accompanied by payment of the full purchase price of such
shares, whereupon the Company shall issue and deliver, or cause to be
issued and delivered a certificate or certificates representing such
shares as soon as practicable after such notice is received. The
purchase price for such shares must be paid in full in cash, or paid in
full, with the consent of the Board of Directors of the Company, in
Common Stock of the Company valued at the opening price of the Common
Stock on the New York Stock Exchange on the date of exercise or a
combination of cash and Common Stock. With the consent of the Board of
Directors of the Company, the payment of all or part of the applicable
withholding taxes due upon exercise of an option, up to the highest
marginal rates then in effect, may be made by the withholding of shares
otherwise issuable upon exercise of the option. Option shares withheld
in payment of such taxes shall be valued at the opening price of the
Company's Common Stock on the New York Stock Exchange on the date of
exercise. The certificate or certificates for the shares as to which
the Option shall have been so exercised shall be registered in the name
<PAGE>
of the person or persons so exercising the Option and shall be delivered
as aforesaid to or upon the written order of the person or persons
exercising the Option. The date of the exercise of the Option will be
the date on which the aforesaid written notice, properly executed and
accompanied as aforesaid is received by the Secretary of the Company.
All shares that shall be purchased upon the exercise of the Option as
provided herein shall be fully paid and nonassessable. Until the
certificate or certificates have been issued as aforesaid, the person or
persons exercising the Option shall possess no rights of a record holder
with respect to any of such shares.
6. The Company will seek to obtain from each regulatory
commission or agency having jurisdiction such authority as may be
required to issue and sell the shares of stock subject to the Option.
Inability of the Company to obtain from any such regulatory commission
or agency authority which counsel for the Company deems necessary for
the lawful issuance and sale of its stock to satisfy the Option shall
relieve the Company from any liability for failure to issue and sell
stock to satisfy the Option pending the time when such authority is
obtained or is obtainable.
7. This Option Agreement shall be governed by the laws of the
State of California.
<PAGE>
<PAGE>
Exhibit 10.13
PLAN DOCUMENT
FOR
NATIONAL SEMICONDUCTOR CORPORATION
RETIRED OFFICERS & DIRECTORS HEALTH PLAN
EIN #95-2095071
ERISA PLAN #502
EFFECTIVE JULY 19, 1983
<PAGE>
TABLE OF CONTENTS
Page
Section I. Purpose 1
Section II. Definitions and Construction 2
Section III. Eligibility, Participation and Election Procedures 5
Section IV. Contributions 6
Section V. Funding Policy 7
Section VI. Benefits 8
Section VII. Claim Procedures 9
Section VIII. Continuation of Coverage 10
Section IX. Administration 11
Section X. Amendments & Terminations 13
Section XI. Miscellaneous 14
<PAGE>
SECTION I. PURPOSE
National Semiconductor Corporation has established over a period of time
several welfare benefit plans for the exclusive benefit of its employees
and their dependents. The purpose of this document is to set forth, or
incorporate by reference, in one document all of these welfare benefits
to which the subject eligible retired Officers and Directors of National
Semiconductor Corporation are legally entitled. The Company intends
that these plans be consolidated into this written instrument entitled
the National Semiconductor Corporation Welfare Benefit Plan. This Plan
is intended to conform to the requirements of the Employee Retirement
Income Security Act of 1974 (ERISA). It is also the intent of the
Company that any benefits provided under this Plan be eligible for
exclusion from the employee's gross income for federal, Social Security,
and where permissible, state and local income tax purposes, under
Sections 79, 105, and 106 of the Code.
<PAGE>
SECTION II. DEFINITIONS AND CONSTRUCTION
2.1 Administrator. The Administrator is the person(s) appointed
pursuant to Section IX below to control and manage the operations
and administration of the Plan and carry out its provisions for
purposes of the Employee Retirement Income Security Act of 1974
(ERISA). Except as may be provided in any Plan listed in Section
2.14 below and incorporated herein by reference, the Administrator
also shall be the named fiduciary (within the meaning of ERISA)
under the plan.
2.2 Administrative Agent. An Administrative Agent is appointed by the
Administrator to assist in certain aspects of the administrative
duties and functions.
2.3 Code. Code means the Internal Revenue Code of 1986, as now in
effect or as it may be amended hereafter, and includes any
regulations or rulings issued thereunder.
2.4 Company. Company means National Semiconductor Corporation and any
designated companies within the Company's controlled group.
2.5 Contract. Contract means an agreement with any insurer listed in
Section 2.14 below and incorporated herein by reference.
2.6 Contribution. The amount payable by the Company or the amount
payable by the Participant for participation under the Plan.
2.7 Coverage. Coverage means the benefits provided according to the
provisions of the Contract(s) listed under Section 2.14 below and
incorporated herein by reference.
2.8 Dependent. Dependent means a Retired Officer or Director's
dependents who are eligible for coverage according to the terms of
the contract applicable to that retiree.
2.9 Effective Date. The Effective Date of this document is July 19,
1983.
2.10 Eligible Retired Officer or Director. An eligible retired Officer
or Director is a retiree who is eligible to participate under the
plan according to the contracts referenced under Section 2.14
below and incorporated herein by reference.
2.11 Fiduciary. The named Fiduciary is the plan Administrator as set
forth under Section 2.1.
2.12 Insurer. Insurer means the insurer designated under Section 2.14
below with which the Company has entered in a Contract.
2.13 Participant. A Participant is an eligible retired Officer or
Director who has become a participant as provided under Section
III.
2.14 Plan. The Plan means the National Semiconductor Corporation
Retired Officers and Directors Health Plan established to provide
welfare benefits for the retired Officers and Directors of the
Company and their Dependents according to the provisions of the
<PAGE>
Contracts listed below as they may be amended from time to time.
Insurance Company Contract # Coverage Effective Date
A. Prudential Ins. G-95678 Medical 6/1/81
Co. of America 94230-8 Stop Loss 6/1/81
94230-D Dental 6/1/81
2.15 Plan Year. Plan Year means a twelve consecutive month period that
begins on June 1 and ends on every May 31 thereafter.
2.16 Similarly Situated Beneficiary. In the case of any former
Participant or former Dependent who has a qualifying event within
the meaning of Section 162(k) of the Code, an individual who has
the same coverage options under the Plan that the former
Participant or former Dependent would have had if the qualifying
event had not occurred is a Similarly Situated Beneficiary;
provided that for purposes of determining charges for continuation
coverage under Section VIII below, a former spouse of an eligible
retired Officer or Director whose coverage terminates by reason of
divorce or legal separation, or death of the retired Officer or
Director shall be treated as similarly situated to an unmarried
individual, a former dependent child whose coverage terminates
because he ceases to be a Dependent shall be treated as similarly
situated to an unmarried individual, and other determinations of
similar status shall be made by the Company in good faith and in a
manner not inconsistent with applicable law or regulations
requiring continued coverage for beneficiaries of the Plan.
2.17 Gender and Number. In construction of the Plan, reference to any
gender shall include the masculine, feminine and neuter genders,
the plural shall include the singular and the singular shall
include the plural whenever appropriate.
2.18 Construction. The terms of the Plan shall be constructed under
the laws of California, except to the extent such laws are
preempted by federal law.
<PAGE>
SECTION III. ELIGIBILITY, PARTICIPATION AND ELECTION PROCEDURES
3.1 Eligibility. Members of the Board of Directors of the Company, the
President of the Company, and Officers at the Vice President or
higher level reporting directly to the President (whether appointed
by Board or otherwise appointed) who retire directly from the
Company after July 19, 1983 and do not become affiliated with any
business in competition with the Company will be eligible provided
they meet the age and service requirements of the Plan. From and
after April 24, 1992, Members of the Board of Directors or
Directors of the Company, the President of the Company, and
Officers at the Vice President or higher level appointed by the
Board, who retire directly from the Company after April 24, 1992
and do not become affiliated with any business in competition with
the Company and who meet the age and service requirements are
eligible to participate in the plan provided they meet the age and
service requirements of the Plan.
3.2 Age and Service Requirements. An eligible Officer or Director may
participate in the Plan provided that he retires when:
A. He has reached age 65;
B. He has reached age 55 and the sum of his age plus years of
service with the Company equals at least 65; or
C. Provided he has the written consent of the President of the
Company, he has reached age 50 and the sum of his age plus
years of service with the Company equals at least 65.
Dependent eligibility will be dictated by the provisions of the
Company indemnity medical/dental plan.
3.3 Termination of Coverage. Coverage for eligible retired Officers or
Directors will continue until the first of the following events:
A. 60 days following the last day of the month which required
plan contributions were not received; or
B. Death.
Coverage for eligible dependents will cease when the retired
Officer or Director's coverage ceases.
<PAGE>
SECTION IV. CONTRIBUTIONS
4.1 Contributions. Contributions shall be made by the Company and the
Participants in accordance with Section IV and shall be paid to the
Insurer(s) or HMO(s) in accordance with the provisions of the
application Contract(s) listed in Section 2.14.
4.2 Contribution Schedule. The amount of contributions necessary shall
be billed by the Company in accordance with the Participant's
Election of Coverage on a semi-annual basis. These amounts are
subject to change from time to time at the Company's discretion and
any changes will be communicated to the Employees during each Open
Enrollment Period. The Contribution Schedule is available from the
Plan Administrator at any time during normal Company working hours.
<PAGE>
SECTION V. FUNDING POLICY
5.1 The Company's policies in funding the Plan are provided in the
contracts referenced in Section 2.14 above and incorporated herein
by reference. A separate fund or trust may (but need not) be
established by the Company as necessary to hold any Company or
Participant contributions hereunder. The Company reserves the
right to change from time to time the funding policy for the Plan.
<PAGE>
SECTION VI. BENEFITS
6.1 Benefits. From the Effective Date of the Plan until amended or
terminated in accordance with Section X below, benefits will be
provided for under the contracts listed in Section 2.14 and
incorporated herein by reference.
6.2 Nondiscriminatory Benefits. The Plan is intended not to
discriminate in favor of Highly Compensated Employees (as that term
is defined in the Code) as to eligibility to participate,
Contributions and/or benefits, and to comply in this respect with
the requirements of the Code. If in judgment of the Plan
Administrator, the operation of the Plan in any Plan Year results
in such discrimination, then such Plan Administrator shall either
amend the Plan affecting the Highly Compensated Employees or impute
income to such Highly Compensated Employees, all as shall be
necessary to assure that, in the judgment of the Plan
Administrator, the Plan does not discriminate.
<PAGE>
SECTION VII. CLAIMS PROCEDURES
7.1 Filing a Claim. Claims are to be submitted to the Insurer in
accordance with the procedures outlined in the applicable contract
listed in Section 2.14 above and incorporated herein by reference.
A claimant may be required to submit whatever proof of loss the
Insurer may require. All claims will be responded to within ninety
(90) days of receipt unless special circumstances warrant a ninety
(90) day extension. The Claimant will be notified of an extension
during the first ninety (90) day period.
7.2 Denial of Claim. If any such claim is denied in whole or in part,
the claimant shall be provided promptly with written notice setting
forth in a manner calculated to be understood by the claimant:
A. A specific reason or reasons for denial;
B. Specific reference to pertinent Plan or contract provisions
upon which the denial is based;
C. A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
D. An explanation of the Plan's Claim Review Procedures set
forth in Section 7.3 below.
7.3 Claim Review Procedures. Within sixty (60) days after denial of
any claim filed under this Plan, the claimant may request, in
writing from the Insurer, a review of the denial. Any claimant
seeking review hereunder is entitled to examine all pertinent
documents and to submit issues and comments in writing. Upon
receipt of request for review, the Insurer must respond within
sixty (60) days unless special circumstances require an extension
of time to one hundred twenty (120) days after receipt of request
for review. The decision on review shall be in writing and shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific
references to pertinent Plan and contract provisions on which the
decision is based.
<PAGE>
SECTION VIII. CONTINUATION OF COVERAGE
8.1 Continuation of Coverage. If a qualifying event within the meaning
of Section 162(k) of the Code occurs with respect to any
Participant or Dependent and, in the case of legal separation or
divorce, death of retired Officer or Director, or a dependent
child's ceasing to be a Dependent, such former Participant or
dependent furnishes the Company with notice of the qualifying event
within the time prescribed by the Company for doing so, he shall be
entitled to continue Coverage of the type available to a Similarly
Situated Beneficiary under the Plan. An election to continue
Coverage shall be made on forms provided by the Company or an
Administrative Agent thereof, in the manner prescribed by the
Company or such Administrative Agent.
8.2 Waiver of Election and Revocation of Waiver. If a former
Participant or Dependent who is entitled to elect to continue
coverage under Section 8.1 above waives such election, but
subsequently, within the election period for such coverage, as
dictated by Section 162(k), revokes the waiver and elects to
continue coverage, such election to continue coverage shall be
effective on a retrospective basis from the date of the qualifying
event.
8.3 Similarly Situated Beneficiary. Notwithstanding any provision in
this Plan to the contrary, a former Participant or Dependent of a
Participant who elects to continue Coverage under this Section
VIII, shall be eligible to change such Coverage in the same manner
and at the same time as an individual who is a Similarly Situated
Beneficiary with respect to the Participant.
8.4 Cost of Continuation Coverage. A former Participant or Dependent
who elects to continue Coverage under this Section VIII shall be
charged for the Coverage 102% of the cost of such coverage to the
Plan.
<PAGE>
SECTION IX. ADMINISTRATION
9.1 Administrator. The Company may appoint one or more Employees who
shall have the authority and responsibility to take any reasonable
actions necessary to control and manage operation of the Plan under
the rules applied on a uniform and nondiscriminatory basis to all
Participants. However, any action by the Company assigning any of
its responsibilities to specific employees as Administrative Agents
shall not constitute delegation of the Administrator's
responsibility but rather shall be treated as the manner in which
the Company has determined internally to discharge such
responsibility.
9.2 Administrative Duties. The authority and responsibility to control
and manage operations of the Plan includes but is not limited to
(1) determination of eligibility; (2) preparation and filing of all
reports required to be filed with any agency of the government; (3)
compliance with all disclosure requirements imposed by law; and (4)
maintenance of all books of accounts, records and all other data as
may be necessary for proper administration of the Plan.
9.3 Rules of Administration. The Company shall adopt such rules for
administration of the Plan as it considers desirable provided they
do not conflict with the Plan or applicable law and may construe
the Plan, correct defects, supply omissions to effectuate the Plan
and, subject to Section VII above, such action shall be conclusive.
Records of administration of the Plan shall be kept and Retired
Officers and Directors may examine records pertaining directly to
them.
9.4 Liability and Responsibility of Administrator. The Administrator
shall be fully protected in respect to any action taken or suffered
by them in good faith, in reliance upon the advice of his advisors.
To the extent permitted by law, the Company shall indemnify the
Administrator against any liability or loss sustained by reason of
any act or failure to act in such capacity as Administrator, if
such act or failure does not involve willful misconduct. Such
indemnification includes attorney's fees and other costs and
expenses reasonably incurred in defense of any action brought
against such Administrator by reason of any such act or failure to
act. No bond or other security shall be required of any
Administrator or Administrative Agent, unless the individual
handles funds or other property of the Plan.
9.5 Liability of the Company. Neither the Company nor any of its
employees shall be liable for any loss due to its error or omission
in administration of the Plan unless the loss is due to the failure
of the Company or such employee to exercise the care, skill,
prudence and diligence under the circumstances then prevailing that
a person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and
with like aims.
9.6 Indemnification of Administrator and Administrative Agents. The
Company shall indemnify each Officer, Director or employee of the
Company for all expenses (other than amounts paid in settlement to
which the Company does not consent) reasonably incurred by him in
connection with any action to which he may be party by reason of
<PAGE>
this performance of administration functions and duties under the
Plan, except in relation to matters as to which he shall be
adjudged in such action to be personally guilty of willful
misconduct in the performance of his duties. The foregoing rights
to indemnification shall be in addition to such other rights as the
individual may enjoy as a matter of law or by reason of insurance
coverage of any kind. Rights granted hereunder shall be in
addition to and not in lieu of any rights to indemnification to
which the individual may be entitled pursuant to the Company's By-
laws.
9.7 Limited Discretionary Authority. Notwithstanding anything in the
Plan to the contrary, and to the extent permitted by applicable
law, the Plan Administrator shall have due discretionary authority
to determine whether the criteria set forth in this Plan, including
the criteria for eligibility and for benefits, have been
established.
<PAGE>
SECTION X. AMENDMENTS AND TERMINATION
10.1 Although termination of the Plan is not anticipated by the Company
as of the Effective Date, the Company necessarily reserves the
right to amend or terminate the Plan at any time; provided,
however, that such amendment or termination shall not affect
either the Company's obligation to pay all accrued benefits under
the Plan or the right of any Participant to file claims for
payment or reimbursement of covered expenses, to the extent that
such amounts were payable prior to such amendment or termination
under the terms of the Plan.
<PAGE>
SECTION XI. MISCELLANEOUS
11.1 No Personal Liability. Nothing contained herein shall impose on
any Officers or Directors of the Company any personal liability
for any benefits due a Participant or Dependent pursuant to the
Plan.
11.2 Additional Procedures. Any rules, regulations, or procedures that
may be necessary for the proper administration of functioning of
the Plan that are not covered herein shall be promulgated and
adopted by the Plan Administrator.
11.3 Severability. If any provision of this Plan shall be held invalid
or unenforceable, such invalidity or unenforceability shall not
affect any other provision and this Plan shall be construed and
enforced as if such provisions had not been included.
In Witness, whereof, the Company has caused this document to be executed
effective as of July 19, 1983.
By: //s// John M. Clark III Date: June 5, 1995
----------------- --------------
Title: Senior Vice President
<PAGE>
<PAGE>
Exhibit 11.0
NATIONAL SEMICONDUCTOR CORPORATION
CALCULATION OF EARNINGS PER SHARE-ASSUMING FULL DILUTION
(in millions, except per share amounts)
Year ended
---------------------------
May 28, May 29, May 30,
1995 1994 1993
------ ------ ------
Net income before cumulative
effect of accounting change $264.2 $259.1 $ 130.3
Cumulative effect of accounting change - 4.9 -
------- ------ -------
Net income $264.2 $264.0 $ 130.3
======= ====== =======
Number of shares:
Weighted average common shares
outstanding 121.4 113.0 107.4
Weighted average common equivalent shares 3.8 8.4 8.5
------- ------ ------
Weighted average common and common
equivalent shares 125.2 121.4 115.9
Additional weighted average common
equivalent shares assuming full dilution 0.1 0.4 0.5
Shares issuable from assumed
conversion of preferred shares 12.2 19.6 16.0
------- ----- ------
Weighted average common and common
equivalent shares - assuming full
dilution 137.5 141.4 132.4(1)
======= ===== ======
Earnings per share - assuming
full dilution before cumulative
effect of accounting change $ 1.92 $ 1.83 $ 0.98
Cumulative effect of accounting change - 0.04 -
------ ------ ------
Net income $ 1.92 $ 1.87 $ 0.98
======= ====== ======
______________________________________________
(1) For fiscal 1993, this calculation is submitted in accordance with
Regulation S-K Item 601 (b)(11) although it is contrary to paragraph 40
of APB Opinion No. 15 because it produces an anti-dilutive result.
<PAGE>
<PAGE>
Exhibit 13.0
NATIONAL SEMICONDUCTOR CORPORATION 1995 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
(in millions, except per share amounts)
May 28, May 29, May 30, May 31, May 26,
Years Ended 1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Net sales $2,379.4 $2,295.4 $2,013.7 $1,717.5 $1,701.8
Net income (loss) $ 264.2 $ 264.0 $ 130.3 $ (120.1) $ (151.4)
Net earnings (loss) per share:
Primary $2.02 $ 2.02 $ 0.98 $ (1.24) $ (1.56)
Fully diluted $1.92 $ 1.87 $ 0.98 $ (1.24) $ (1.56)
Weighted average common
and common equivalent
shares outstanding:
Primary 125.2 121.4 115.9 104.6 103.4
Fully diluted 137.5 141.4 115.9 104.6 103.4
Research and development
expense $ 283.1 $ 257.8 $ 229.2 $ 208.9 $ 198.6
Capital additions $ 478.8 $ 270.7 $ 235.1 $ 189.4 $ 109.8
Current ratio 1.72 1.76 1.67 1.26 1.47
Debt-to-equity ratio 7.5% 2.7% 5.7% 8.4% 7.0%
Number of employees
(in thousands) 22.4 22.3 23.4 27.2 29.8
(See Appendix to Graphs)
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1995 ANNUAL REPORT
5 YEAR SELECTED FINANCIAL DATA
(in millions, except per share amounts)
Years Ended
-----------------------------------------------
May 28, May 29, May 30, May 31, May 26,
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
OPERATING RESULTS
Net sales $2,379.4 $2,295.4 $2,013.7 $1,717.5 $1,701.8
Operating costs
and expenses 2,064.8 2,002.8 1,866.7 1,839.9 1,854.4
------- ------- ------- ------- --------
Operating income (loss) 314.6 292.6 147.0 (122.4) (152.6)
Interest income, net 14.6 10.9 2.9 5.4 3.6
------- ------- ------- ------- --------
Income (loss) before
income taxes and
cumulative effect
of accounting change 329.2 303.5 149.9 (117.0) (149.0)
Income taxes 65.0 44.4 19.6 3.1 1.3
------- ------- ------- ------- -------
Income (loss) from
continuing operations
before cumulative
effect of accounting
change 264.2 259.1 130.3 (120.1) (150.3)
======= ======= ======= ======= =======
Net income (loss) $ 264.2 $ 264.0 $ 130.3 $(120.1) $(151.4)
======= ======= ======= ======= =======
Net income (loss) used in
primary earnings per common
share calculation (reflecting
preferred dividends):
Income (loss) from
continuing operations
before cumulative effect
of accounting change $253.0 $ 240.4 $ 113.2 $(130.1) $(160.3)
Net income (loss) $253.0 $ 245.3 $ 113.2 $(130.1) $(161.4)
======= ======= ======= ======= =======
Earnings (loss) per common share:
From continuing operations
before cumulative effect
of accounting change:
Primary $2.02 $ 1.98 $ 0.98 $ (1.24) $ (1.55)
Fully diluted $1.92 $ 1.83 $ 0.98 $ (1.24) $ (1.55)
Net income (loss):
Primary $2.02 $ 2.02 $ 0.98 $ (1.24) $ (1.56)
Fully diluted $1.92 $ 1.87 $ 0.98 $ (1.24) $ (1.56)
======= ======= ======= ======= =======
Weighted average common
and common equivalent
shares outstanding:
Primary 125.2 121.4 115.9 104.6 103.4
Fully diluted 137.5 141.4 115.9 104.6 103.4
======= ======= ======= ======= =======
<PAGE>
FINANCIAL POSITION AT YEAR-END
Working capital $ 492.4 $ 439.0 $ 336.6 $ 122.0 $ 196.1
Total assets $2,235.7 $1,747.7 $1,476.5 $1,148.9 $1,190.7
Long-term debt $ 82.5 $ 14.5 $ 37.3 $ 33.9 $ 19.9
Total debt $ 106.1 $ 30.1 $ 47.9 $ 45.4 $ 46.0
Shareholders' equity $1,406.7 $1,105.7 $ 837.4 $ 539.4 $ 658.3
======= ======= ======= ======= =======
OTHER DATA
Research and development
expense $ 283.1 $ 257.8 $ 229.2 $ 208.9 $ 198.6
Capital additions $ 478.8 $ 270.7 $ 235.1 $ 189.4 $ 109.8
Number of employees
(in thousands) 22.4 22.3 23.4 27.2 29.8
======= ======= ======= ======= =======
National has paid no cash dividends on its common stock in any of the years
presented above.
See Note 4 to the Consolidated Financial Statements regarding certain
reclassifications of expenses.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
National recorded sales of $2.4 billion in 1995 compared to $2.3 billion
in 1994 and $2.0 billion in 1993. Net income for the fiscal year just
ended was $264.2 million compared to $264.0 million in 1994 and $130.3
million in 1993. Net results in 1995 include income of $5.5 million
from the release of restructuring reserves as compared to a $4.9 million
gain from a change in accounting (see Note 4) and a $2.6 million
restructuring release (see Note 3) both recognized in 1994. The
significant increase in net income for both 1995 and 1994 over 1993 is
due to increased sales and improved gross margins.
(See Appendix to Graphs)
Sales
Sales increased 4 percent in 1995 over 1994. During 1995, sales in the
first half of the year were comparable to the first half of 1994.
Beginning in the third quarter of 1995, sales increased 5 percent over
the comparable period a year earlier and in the fourth quarter of 1995,
sales were up 10 percent as additional capacity came on line to support
increased demand for the Company's products. In addition, customer
orders increased significantly in 1995, especially in the second half.
In 1995 and 1994, the Company's Standard Products Group ("SPG")
comprised 72 percent of total sales while the Company's Communications
and Computing Group ("CCG") comprised 28 percent. This is in contrast
to 1993 when SPG made up 70 percent of total Company sales and CCG 30
percent. After the end of 1995, the Company dissolved the group
structure, in part to allow better reporting alignment with its target
markets. The sales discussion/information that follows is based on the
operation divisions as currently structured.
The Company experienced significant growth in its Analog and Mixed
Signal business unit as sales increased approximately 11 percent.
However, in the Company's more mature divisions, both unit shipments and
pricing decreases contributed to a 17 percent decrease year-on-year in
Bipolar and CMOS Logic and Memory products. Most of the remaining
business units were flat year-on-year with average price decreases
offset by volume increases. For 1995 in aggregate, Analog and Mixed
Signal products represented 56 percent of total Company sales as
compared to 53 percent in 1994. In comparison, Bipolar and CMOS Logic
and Memory products made up 22 percent of total Company revenue for 1995
as compared to 26 percent in 1994.
Fiscal 1995 sales increased by 13 percent and 8 percent in Europe
and Japan over 1994. Due to overall weakness in the dollar, the dollar
value of foreign currency sales increased favorably in both Europe and
Japan, contributing approximately one-half of the increase in reported
sales. Sales in the United States and Asia were essentially flat over
1994. Overall, the Americas, Europe, Japan and Asia regions accounted
for 43%, 24%, 9% and 24% of sales, respectively, in 1995. In 1994, the
regions accounted for 44%, 22%, 9% and 25% of Company sales,
respectively.
Sales increased 14 percent in 1994 over 1993. Unit increases in
volume and modest price increases across most business units contributed
to the rise in sales. The Analog and Mixed Signal business unit
experienced a 13 percent increase in 1994 sales over 1993. At the same
time, older commodity Bipolar and CMOS Logic and Memory products
experienced a similar increase as product shortages and steady or rising
<PAGE>
demand contributed to increased prices and unit shipments. For 1994, in
aggregate, Analog and Mixed Signal sales comprised 53 percent of total
Company revenue comparable with 1993. In comparison, Bipolar and CMOS
Logic and Memory product sales made up 26 percent of Company revenue in
1994 as compared to 25 percent in 1993.
Sales increased from 1993 to 1994 in all geographic regions, with
Europe at 20 percent, Asia at 19 percent, and the Americas at 8 percent.
Within the Asia region, Japan increased 27 percent. Overall, the
Americas, Europe, Japan and Asia regions accounted for 47%, 20%, 8%, and
25% of sales, respectively in 1993.
Although future business conditions are difficult to predict, the
Company's focus on major customers in the personal systems,
communications, industrial and consumer markets will continue for the
foreseeable future. In 1996, the Company expects to increase revenues
as it continues its emphasis in Analog and Mixed Signal market
opportunities. The Company expects to grow at or above market rates in
particular segments of Analog and Mixed Signal, but will not necessarily
match overall market growth due to slowing growth or declines in older
products such as Logic and Memory.
Gross Margin
Gross Margin as a percentage of sales remained essentially flat at 41.8
percent in 1995 compared to 41.8 percent in 1994 and 35.5 percent in
1993 (see Note 4). Higher unit volumes and firm pricing in Analog and
Mixed Signal products were offset by pricing declines in older,
commodity products and in some cases, unit shipments declined as well.
Overall gross margins remained relatively constant for most operating
divisions. Wafer capacity utilization approached 90 percent for most of
the year, but margins were adversely impacted by the inability to match
manufacturing capacity with rising product demand.
The improvement in 1994 gross margin over 1993 was driven by
improved sales mix through the introduction of newer, higher margin
products, as well as reduced offerings of older products. In addition,
wafer capacity utilization improved across fiscal 1994 and the Company
benefited during 1994 from many of the restructuring activities
initiated in previous fiscal years.
Management believes wafer capacity utilization will continue to
remain at comparable levels in 1996 as compared to 1995 even as the
Company makes significant additional investments in plant and equipment.
In addition, the Company continues to realign current manufacturing
capacity with higher growth and higher margin Analog and Mixed Signal
products. While business conditions and overall market pricing have a
major influence on gross margin, the Company's planned expansion and
modernization of current facilities, improvements in manufacturing
efficiency and introduction of new products are expected to result in a
modest improvement in gross margin in 1996.
(See Appendix to Graphs)
Research and Development
Research and development ("R&D") expenses were $283.1 million for fiscal
1995, or 11.9 percent of sales, compared to $257.8 million in fiscal
1994, or 11.2 percent of sales and $229.2 million in 1993, or 11.4
percent of sales. The dollar increase in fiscal 1995 is primarily
attributable to increased spending in process development, incremental
spending for analog intensive products and for design tools. The
Company expects to increase R&D to approximately 13.0 percent of sales
<PAGE>
in fiscal 1996 as the Company invests in process technology, better
integration of its design tools and continued product development.
(See Appendix to Graphs)
Selling, General and Administrative
Selling, general and administrative ("SG&A") expenses decreased to
$402.7 million, or 16.9 percent of sales from $411.3 million, or 17.9
percent of sales in 1994 and $339.2 million, or 16.8 percent in 1993.
SG&A expenses in 1995 include net intellectual property income of $28.7
million compared to $15.9 million in 1994 and $43.7 million in 1993. In
addition, 1995 results include $6.9 million in gains realized on the
sale of equity investments as compared to $2.2 million in similar gains
in 1994 and a writedown of $4.7 million in 1993 of a minority
investment. SG&A in 1994 included a charge of $10.1 million for the
consolidation of sales and marketing facilities in the Company's
International Business Group. In 1993, the Company incurred $11.9
million for tax case related legal expenses (see Note 7) and $10.1
million to centralize sales and logistics facilities within the
Company's International Business Group. The Company continues to pursue
opportunities to leverage its intellectual property, however, the timing
and amount of future licensing income cannot be forecast with certainty
at this time.
Exclusive of the above items, SG&A expenses were $438.3 million or
18.4 percent of sales in 1995, compared to $419.3 million in 1994 or
18.3 percent of sales and $356.2 million or 17.7 percent of sales in
1993. The modest increase in SG&A in 1995 over 1994 is primarily
attributable to increases in sales support and marketing activities.
The increase in 1994 SG&A over 1993 was caused primarily by increased
contributions to certain employee compensation and benefit plans,
including the employee retirement and savings program, as well as
additional product advertising and related promotional costs.
Interest Income and Interest Expense
Net interest income was $14.6 million for 1995 compared to $10.9 million
in 1994 and $2.9 million in 1993. Interest income has increased due
primarily to higher average rates on investments in 1995 as compared to
1994. Interest expense has also increased from 1994 despite lower
average outstanding debt due primarily to prepayment premiums of $2.5
million paid in conjunction with the early buyout of debt associated
with the repurchase of the Company's Arlington, Texas facility and the
sale of a building held by a German subsidiary. Net interest income was
higher in 1994 compared to 1993 due primarily to higher average cash and
investment balances combined with a decrease in interest expense.
(See Appendix to Graphs)
Income Tax Expense
Income tax expense for 1995 was $65.0 million compared to $44.4 million
in 1994 and $19.6 million in 1993. The effective tax rate in 1995 is 20
percent as compared to 15 percent and 13 percent in 1994 and 1993,
respectively. The increases in the effective tax rates over the last
three years are primarily attributable to the exhaustion of certain net
operating loss carryforwards in various tax jurisdictions. The annual
tax rate is expected to rise from 1995 levels as the Company continues
to exhaust net operating loss carry forwards and other tax credits.
<PAGE>
Foreign Operations
The Company has manufacturing facilities in Southeast Asia and Europe
and sales offices throughout the United States, Southeast Asia, Europe,
and Japan. A portion of the transactions at these facilities are
denominated in local currency, which exposes the Company to risk from
exchange rate fluctuations. The Company's risk exposure from expenses
at foreign manufacturing facilities is concentrated in pound sterling,
Singapore dollar and Malaysian ringgit. Net non-U.S. dollar denominated
asset and liability positions are hedged, where practical, using forward
exchange and purchased option contracts. The Company's risk exposure
from foreign revenue is limited to the Japanese yen and major European
currencies, primarily deutsche marks, French francs and Italian lira.
The Company hedges up to 100 percent of the notional value of
outstanding customer orders denominated in foreign currency using
forward exchange contracts and over-the-counter foreign currency
options. A portion of anticipated foreign sales commitments is, at
times, hedged using purchased option contracts which have an original
maturity of one year or less.
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 to support products and manufacturing processes.
The Company may experience periodic fluctuations in its operating
results because of industry wide conditions. These uncertainties can
have a significant impact on the Company's operating results. To
address these uncertainties, the Company focuses on developing target
markets in Analog and Mixed Signal, achieving high manufacturing
utilization, and emphasizing rapid design of leading edge products.
(See Appendix to Graphs)
Financial Condition
As of May 28, 1995, cash and short-term investments totaled $467.4
million, essentially unchanged from May 29, 1994. Cash generated from
operating activities was $428.8 million in 1995, down slightly from
$433.7 million in 1994 principally as a result of increases in
inventories and receivables offset by taxes and related items.
Cash used for investing activities was $450.4 million in 1995
compared to $295.5 million in 1994. Capital expenditures increased
substantially during 1995 from $270.7 million to $478.8 million as the
Company continued to invest in property, plant and equipment to expand
its manufacturing capabilities and modernize existing plants. Capital
expenditures in both 1994 and 1995 included continued expansion of a
CMOS fabrication facility in Arlington, Texas, an analog fabrication
facility in Greenock, Scotland, expansion of the Company's bipolar and
CMOS wafer capacity in South Portland, Maine and upgrading of assembly
and test facilities in Asia. In addition, the Company spent
approximately $86 million in 1995 to repurchase the equity interest in
its Arlington, Texas facility and a research facility in Santa Clara,
California, both of which had been sold and leased back prior to 1990.
The Company expects fiscal 1996 expenditures to be significantly above
1995 levels and directed toward process improvements, capacity
<PAGE>
expansion, continued modernization of existing plants and development of
an 8-inch prototype wafer fabrication line.
The Company's financing activities provided cash of $43.8 million
in 1995 principally from issuance of debt and common stock under
employee benefit plans offset by repayment of debt and the purchase of
treasury stock. Proceeds from the issuance of debt include fourth
quarter borrowings to fund expansion and modernization of facilities and
assumption of debt associated with the repurchase of the two facilities
previously sold and leased back. Cash used in financing activities
during 1995 other than for repayment of debt included the repurchase of
3,115,600 shares of common stock on the open market for $50.4 million,
net of issuances for certain employee benefit plans. The Company also
purchased 500,000 shares of common stock in 1994. The Company is
authorized by the Board of Directors to repurchase up to 3.5 million
shares of common stock at current market prices prior to the end of
calendar 1995. During 1994, net cash used in financing activities was
$17.5 million which consisted primarily of cash paid for repayment of
debt, purchases of treasury stock and payment of preferred dividends
offset by issuances of common stock.
Management foresees significant increased cash outlays for plant
and equipment throughout 1996. Existing cash and investment balances,
together with existing lines of credit, are felt to be sufficient in the
immediate future to finance capital investments. Management is
confident that additional lines of credit or sources of financing to
supplement current cash balances and cash flows from operating
activities can be arranged if needed.
Outlook
Despite continued improvement and profitability in the financial
results, future trends for revenue and profitability continue to be
difficult to predict. Risks and uncertainties facing the Company
include business conditions and the rate of growth in the personal
computer industry and the general economy; competitive factors and price
pressures; market acceptance and timing of new products; capacity
limitations; and international economic conditions. The Company
believes gross margins as a percentage of sales will experience modest
improvement in 1996 as new capacity comes on line and demand continues
for its higher margin Analog and Mixed Signal products. Operating
expenses as a percentage of sales are expected to remain at existing
levels. National 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. In
addition, the Company continues to pursue opportunities to develop joint
venture partnerships or potential acquisitions which enhance its product
portfolio in Analog and Mixed Signal products. Similarly, the Company
continues to critically evaluate product lines and divisions where short
or long term prospects do not coincide with its overall strategic
direction. In these cases, the Company will consider dispositions of
assets or business entities as necessary.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1995 ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
(in millions, except share amounts)
May 28, May 29,
1995 1994
ASSETS ------- -------
Current assets:
Cash and cash equivalents $ 420.3 $ 398.1
Short-term marketable investments 47.1 68.7
Receivables, net 318.0 289.0
Inventories 263.0 212.7
Deferred tax assets 77.4 -
Other current assets 52.5 47.9
------- -------
Total current assets 1,178.3 1,016.4
Property, plant and equipment, net 962.4 668.0
Long-term marketable investments 20.2 20.9
Other assets 74.8 42.4
------- -------
Total assets $2,235.7 $1,747.7
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 23.6 $ 15.6
Accounts payable 272.0 213.7
Accrued expenses 230.7 264.6
Income taxes 159.6 83.5
------- -------
Total current liabilities 685.9 577.4
Long-term debt 82.5 14.5
Deferred income taxes 20.1 18.6
Other non-current liabilities 40.5 31.5
------- -------
Total liabilities $ 829.0 $ 642.0
------- -------
Commitments and contingencies
Shareholders' equity:
Preferred Stock of $0.50 par value. Authorized
1,000,000 shares. Convertible preferred stock:
Issued and outstanding 345,000 shares
in 1995 and 1994 (liquidation
preference of $172.5) $ 0.2 $ 0.2
Common stock of $0.50 par value. Authorized
300,000,000 shares. Issued and outstanding
122,800,405 in 1995; 122,800,095 in 1994 63.1 61.4
Additional paid-in capital 992.3 912.7
Retained earnings 411.0 140.9
Treasury Stock, at cost: 3,094,896 shares
in 1995; 500,000 shares in 1994 (59.9) (9.5)
------- -------
Total shareholders' equity $1,406.7 $1,105.7
------- -------
Total liabilities and shareholders' equity $2,235.7 $1,747.7
======== ========
==================================
See accompanying Notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1995 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
Years Ended
--------------------------------
May 28, May 29, May 30,
1995 1994 1993
-------- -------- --------
Net sales $ 2,379.4 $ 2,295.4 $2,013.7
Operating costs and expenses:
Cost of sales 1,384.5 1,336.3 1,298.3
Research and development 283.1 257.8 229.2
Selling, general and administrative 402.7 411.3 339.2
Restructuring of operations (5.5) (2.6) -
------- ------- -------
Total operating costs
and expenses 2,064.8 2,002.8 1,866.7
------- ------- -------
Operating income 314.6 292.6 147.0
Interest income, net 14.6 10.9 2.9
------- ------- -------
Income before income taxes and
cumulative effect of accounting
change 329.2 303.5 149.9
Income taxes 65.0 44.4 19.6
------- ------- -------
Income before cumulative
effect of accounting change 264.2 259.1 130.3
Cumulative effect of accounting change - 4.9 -
------- ------- -------
Net income $ 264.2 $ 264.0 $ 130.3
======== ======== ========
Earnings per share before cumulative
effect of accounting change:
Primary $ 2.02 $ 1.98 $ 0.98
Fully diluted 1.92 1.83 0.98
======= ======= ======
Earnings per share:
Primary $ 2.02 $ 2.02 $ 0.98
Fully diluted 1.92 1.87 0.98
======= ======= ======
Weighted average shares:
Primary 125.2 121.4 115.9
Fully diluted 137.5 141.4 115.9
======= ======== =======
Net income used in primary earnings
per common share calculation
(reflecting preferred dividends) $ 253.0 $ 245.3 $ 113.2
======= ======== ========
=====================================
See accompanying Notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1995 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in millions, except per share amounts)
Preferred Stock
------------------
Convert- Addi-
ible Treas- tional Retained
Exchange- Convert- Common ury Paid-In Earnings
able ible Stock Stock Capital (Deficit) Total
--------- -------- ------ ------- ------- -------- -------
Balances at
May 31, 1992 $ 0.1 $ - $ 53.2 $ - $703.7 $(217.6) $539.4
Net income - - - - - 130.3 130.3
Issuance of
convertible
preferred shares - 0.2 - - 166.6 - 166.8
Convertible
preferred
dividends of
$32.50 per share - - - - - (7.1) (7.1)
Convertible
exchangeable
preferred
dividends of
$40.00 per share - - - - - (10.0) (10.0)
Issuance of
common stock
under option and
purchase plans - - 1.7 - 16.3 - 18.0
- ------------------------------------------------------------------------
Balances at
May 30, 1993 0.1 0.2 54.9 - 886.6 (104.4) 837.4
Net income - - - - - 264.0 264.0
Redemption and
conversion of
convertible
exchangeable
preferred
shares (0.1) - 4.1 - (5.3) - (1.3)
Convertible
preferred
dividends of
$32.50 per share - - - - - (11.2) (11.2)
Convertible
exchangeable
preferred
dividends of
$40.00 per share - - - - - (7.5) (7.5)
Acquisition of
treasury stock - - - (9.5) - - (9.5)
Issuance of
common stock
under option,
purchase, and
profit sharing
plans and tax
benefit of $2.0 - - 2.4 - 31.4 - 33.8
- ------------------------------------------------------------------------
<PAGE>
Balances at
May 29, 1994 - 0.2 61.4 (9.5) 912.7 140.9 1,105.7
Net income - - - - - 264.2 264.2
Convertible
preferred
dividends of
$32.50 per share - - - - - (11.2) (11.2)
Acquisition of
treasury stock - - - (50.4) - - (50.4)
Issuance of
common stock
under option,
purchase, and
profit sharing
plans and
tax benefit
of $51.9 - - 1.7 - 79.6 - 81.3
Unrealized gain
on available-
for- sale
securities
(net of tax) - - - - - 17.1 17.1
- ------------------------------------------------------------------------
Balances at
May 28, 1995 $ - $0.2 $63.1 $(59.9) $992.3 $411.0 $1,406.7
==== ==== ===== ======= ====== ====== =======
See accompanying Notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1995 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended
------------------------------
May 28, May 29, May 30,
1995 1994 1993
------ ------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 264.2 $ 264.0 $ 130.3
Adjustments to reconcile income
with net cash provided by operations:
Depreciation and amortization 185.4 173.8 159.8
Cumulative effect of accounting
change - (4.9) -
Loss (gain) on sale of investments (6.9) (2.2) 5.2
Other, net 6.5 (1.8) -
Changes in deferred taxes (97.9) 1.7 -
Tax benefit associated with stock
options 51.9 2.0 -
Changes in certain assets and
liabilities:
Receivables (29.0) (16.1) (77.0)
Inventories (50.3) (18.5) 18.2
Other current assets (4.6) 1.5 (22.5)
Accounts payable and accrued
expenses 24.4 51.3 16.4
Income taxes 76.1 13.6 12.2
Other non-current liabilities 9.0 (30.7) (8.6)
------ ------ -------
Net cash provided by operating
activities 428.8 433.7 234.0
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant
and equipment (478.8) (270.7) (233.9)
Proceeds from the sale of
property, plant and equipment - - 15.7
Sale and maturity of available-
for-sale securities 184.9 658.7 42.8
Maturity of held-to-maturity
securities 707.1 - -
Purchase of available-for-sale
securities (144.9) (680.0) (111.1)
Purchase of held-to-maturity securities (696.7) - -
Proceeds from sale of investments - 7.7 1.0
Purchase of investments and other, net (22.0) (11.2) (11.6)
------ ------ ------
Net cash used by investing activities (450.4) (295.5) (297.1)
------ ------ ------
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 159.0 1.9 37.3
Repayment of debt (83.0) (19.7) (23.7)
Collateral deposits and restricted cash - - 20.9
Issuance of common stock, net 29.4 28.5 18.0
Issuance of preferred stock, net
of issuance costs - - 166.8
Purchase of treasury stock (50.4) (9.5) -
Payment of preferred dividends (11.2) (18.7) (17.1)
------- ------ ------
Net cash provided (used) by
financing activities 43.8 (17.5) 202.2
------- ------ ------
Net change in cash and cash equivalents 22.2 120.7 139.1
Cash and cash equivalents at beginning
of year 398.1 277.4 138.3
------ ------ ------
Cash and cash equivalents
at end of year $ 420.3 $398.1 $277.4
====== ====== ======
===============================================
See accompanying Notes to Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION 1995 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.
Revenue Recognition
Revenue from the sale of semiconductor products is generally recognized
when shipped, with a provision for estimated returns and allowances
recorded at the time of shipment. Service and other revenues are
recognized ratably over the contractual period or as the services are
performed.
Inventories
Inventories are stated at the lower of standard cost, which approximates
actual cost on a first-in, first-out basis, or market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is
provided using both accelerated and straight-line methods over the
estimated useful lives of the respective assets, or in the case of
property under capital lease, over the lesser of the useful life or
lease term.
Income Taxes
The income tax provision for 1995 and 1994 has been determined in
accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("FAS 109"), which requires that deferred
liabilities or assets at the end of each period be determined using the
tax rate expected to be in effect when the taxes are actually paid or
recovered. The measurement of deferred tax assets is reduced, if
necessary, by a valuation allowance. The Company adopted FAS 109
effective the first day of fiscal 1994. The impact of adopting FAS 109
did not have a material effect on the consolidated financial statements,
and as such no cumulative effect is recorded for the accounting method
change.
The income tax provision for fiscal year 1993 was determined in
accordance with Statement of Financial Accounting Standards No. 96,
"Accounting for Income Taxes". Accordingly, the provision for income
taxes for 1993 included federal, state and non-U.S. income taxes
currently payable or refundable and deferred amounts as a result of
temporary differences between the tax bases of assets and liabilities
and the corresponding amounts reported in the financial statements.
<PAGE>
Earnings Per Share
Primary earnings per share are computed using the weighted average
number of common shares and dilutive common stock equivalents
outstanding using the treasury stock method. Dilutive common stock
equivalents include stock options. Preferred dividends are reflected as
adjustments to reported net earnings in the calculation. Fully diluted
earnings per common share are computed using the weighted average common
and dilutive common stock equivalents outstanding, plus other dilutive
securities outstanding which are not common stock equivalents such as
Convertible Preferred Shares. If the result of assumed conversions is
dilutive, the dividend requirements for the Convertible Preferred Shares
are reduced while the average shares of common stock outstanding are
increased.
Currencies
The Company's functional currency for all operations worldwide is the
U.S. dollar. Accordingly, gains and losses from translation of foreign
currency financial statements into U.S. dollars are included in the
determination of net income in the period in which they occur. Gains
and losses resulting from foreign currency transactions are also
included in the consolidated statements of operations.
Financial Instruments
Cash and Cash Equivalents. Cash equivalents are highly liquid
instruments with a maturity of three months or less at the time of
purchase. National maintains its cash balances in various currencies
and a variety of financial instruments. The Company has not experienced
any material losses relating to any short-term investment instruments.
Marketable Investments. Effective the beginning of fiscal 1995, the
Company adopted FAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," ("FAS 115"). This adoption was not material to
the Company's financial position. Under FAS 115, the Company has
classified its marketable debt and equity securities into held-to-
maturity or available-for-sale categories. Debt securities are
classified as held-to-maturity when the Company has the positive intent
and ability to hold the securities to maturity. Held-to-maturity
securities are recorded as either short-term or long-term on the balance
sheet based upon contractual maturity date and are stated at amortized
cost. Marketable debt and equity securities not classified as held-to-
maturity are classified as available-for-sale and are carried at fair
market value, with the unrealized gains and losses, net of tax, reported
in a separate component of shareholders' equity. Gains or losses on
securities sold are based on the specific identification method.
Off-Balance Sheet Financial Instruments. The Company utilizes various
off-balance sheet financial instruments to manage market risks
associated with fluctuations in certain interest rates, commodity prices
and foreign currency exchange rates. It is the Company's policy to use
derivative financial instruments to protect against market risks arising
in the normal course of business. Company policies prohibit the use of
derivative instruments for the sole purpose of trading for profit on
price fluctuations or to enter into contracts which intentionally
increase the Company's underlying exposure.
Fair Values of Financial Instruments
Fair values of cash equivalents, short-term investments and short-term
debt approximate cost due to the short period of time until maturity.
Fair values of long-term investments, long-term debt, currency forward
contracts and currency options are based on quoted market prices or
pricing models using prevailing financial market information as of May
28, 1995.
Reclassifications
Certain amounts in prior years' financial statements and related notes
have been reclassified to conform to the 1995 presentation. These
reclassifications are not material.
Note 2. Financial Instruments
Marketable Investments
The Company's policy is to diversify its investment portfolio to reduce
risk to principal from credit, geographic, and investment sector risk.
At May 28, 1995, investments were placed with a variety of different
financial institutions or other issuers, and no individual security,
financial institution, or obligation from a direct issuer exceeded ten
percent of total investments. Investments with a maturity of less than
one year have a rating of A1/P1 or better. Investments with a maturity
of more than one year have a minimum rating of AA/Aa2. The Company's
investment portfolio generally matures within one year or less. Gross
realized gains on available-for-sale securities approximated $6.9
million for the year ended May 28, 1995. Gross realized losses were not
material.
Investments at May 28, 1995 are comprised of the following:
Gross Gross
Amortized Unrealized Unrealized Estimated
(in millions) Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
Short-Term Investments:
Available-for-Sale Securities:
Certificates of deposit $ 5.0 $ - $ - $ 5.0
Corporate bonds 6.0 - - 6.0
Commercial paper 6.9 - 0.1 6.8
Governmental agencies 4.0 - - 4.0
Held-to-Maturity Securities:
Corporate Bonds 25.3 - - 25.3
Total Short-Term ------- -------- -------- -------
Investments $ 47.2 $ - $ 0.1 $ 47.1
Long-Term Investments:
Available-for-Sale Securities:
Equity Securities $ 3.1 $ 17.1 $ - $ 20.2
------- -------- -------- -------
Total Long-Term Investments $ 3.1 $ 17.1 $ - $ 20.2
======= ======== ======== =======
<PAGE>
At May 28, 1995, the Company held $33.0 million and $346.8 million
of available-for-sale and held-to-maturity securities, respectively,
that are classified as cash equivalents on the consolidated balance
sheet. These cash equivalents consist of the following (in millions):
bank time deposits ($156.2), institutional money market funds ($150.0),
certificates of deposit ($14.0), commercial paper ($46.9), repurchase
agreements ($5.3) and government securities ($7.4).
The net unrealized gain on the sale of available-for-sale
securities (of $17.1 million) is included in retained earnings May 28,
1995.
Off-Balance Sheet Financial Instruments
Foreign Currency Instruments
The objective of the Company's foreign exchange risk management policy
is to preserve the U.S. dollar value of after-tax cash flow in relation
to non-U.S. dollar currency movements. The Company uses forward and
option contracts to hedge firm commitments and anticipatory exposures.
These exposures comprise sales of the Company's products in currencies
other than the U.S. dollar. A majority of these sales are made through
the Company's subsidiaries in Europe and Japan. Gains and losses on
financial instruments that are intended to hedge an identifiable firm
commitment are deferred and included in the measurement of the
underlying transaction. Gains and losses on hedges of anticipated
transactions are deferred until such time as the underlying transactions
are recognized or immediately when the transaction is no longer expected
to occur. In addition, the Company uses forward and option contracts to
hedge non-U.S. dollar denominated asset and liability positions. Gains
and losses on these contracts are used to offset the effect of currency
movements on these financial positions.
Interest Rate Derivatives
The Company from time to time enters into interest rate derivative
contracts in order to better match the nature of its cash flows from the
floating-rate income on its cash equivalents and short-term investments
with the predominately fixed-rate interest expense of its long-term
debt. Interest rate swaps are used to extend the effective duration of
a portion of the Company's short-term investment portfolio up to a
maximum of two years. The Company had no outstanding interest rate
derivative contracts as of May 28, 1995.
Commodity Derivatives
The financial performance of the Company's Dynacraft, Inc. subsidiary,
which makes leadframes for integrated circuit packaging, is exposed to
risk from fluctuations in the price of copper. The Company has
purchased a series of call options on the price of copper, a "cap",
which hedges the risk arising to Dynacraft from copper price increases.
The last option expires in August 1995. The purchase price of option
contracts are capitalized and amortized over the life of the option.
Any gains or losses from an option contract, either accrued or realized,
are recorded as an adjustment to operating expenses in the period
earned.
Fair Value and Notional Principal of Off-Balance Sheet Financial
Instruments
The table below shows the fair value and notional principal of the
Company's off-balance sheet instruments as of May 28, 1995 and May 29,
1995. The notional principal amounts for off-balance sheet instruments
provide one measure of the transaction volume outstanding as of year end
and do not represent the amount of the Company's exposure to credit or
<PAGE>
market loss. The estimates of fair value are based on applicable and
commonly used pricing models using prevailing financial market
information as of May 28, 1995 and May 29, 1994. The credit risk amount
shown in the table represents the Company's gross exposure to potential
accounting loss on these transactions if all counterparties failed to
perform according to the terms of the contract, based on then-current
currency exchange rate, interest rate or commodity price at each
respective date. Although the following table reflects the notional
principal, fair value, and credit risk amounts of the off-balance sheet
instruments, it does not reflect the gains or losses associated with the
exposures and transactions that the off-balance sheet instruments are
intended to hedge. The amounts ultimately realized upon settlement of
these financial instruments, together with the gains and losses on the
underlying exposures, will depend on actual market conditions during the
remaining life of the instruments.
Transactions Qualifying as Accounting Hedges (in millions)
1995 1994
Notional Fair Credit Notional Fair Credit
Principal Value Risk Principal Value Risk
--------- ----- ------ --------- ----- ------
Interest rate instruments:
Swaps $ - $ - $ - $ 15.0 $ (0.1) $ -
Foreign exchange instruments:
Forward contracts
To buy dollars 37.3 (1.7) - 48.3 (1.0) -
To sell dollars 55.2 - 0.2 63.4 2.2 2.2
Purchased options 66.0 0.3 0.3 36.0 0.2 0.2
Commodity instruments
Purchased call option
on copper 1.8 0.3 0.3 - - -
The Company has outstanding currency exchange contracts to sell foreign
currency and to purchase U.S. dollars in the future with the predominant
concentration of foreign currency in Japanese yen. The Company has
outstanding currency exchange contracts to buy Malaysian ringgit,
Singapore dollar, and pound sterling and to sell U.S. dollars in the
future. All foreign exchange forward contracts expire within one year.
Unrealized gains and losses on foreign exchange forward contracts that
are accounted for as hedges are deferred and recognized in income in the
same period as the hedged transactions. Deferred gains and losses on
such agreements at May 28, 1995 and May 29, 1994 are immaterial. The
Company has purchased foreign currency options denominated in Japanese
yen and German deutsche mark. All foreign currency option contracts
expire within a year. Purchased foreign exchange option contracts that
qualify for hedge accounting treatment are reported on the balance sheet
at the premium cost, which is amortized over the life of the option.
Unrealized gains and losses on these option contracts are deferred until
the occurrence of the hedged transaction and recognized as a component
of the hedged transaction. Deferred gains and losses on such agreements
at May 28, 1995 and May 29, 1994 are immaterial.
<PAGE>
Fair Value of Financial Instruments
A summary table of estimated fair values of financial instruments at
fiscal year end follows:
1995 1994
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
(in millions) -------- ---------- -------- ----------
Long-term investments $ 20.2 $ 20.2 $ 20.9 $ 20.9
Long-term debt (82.5) (86.5) (14.5) (14.6)
Currency forward contracts:
To buy dollars 0.3 (1.7) 0.3 (1.0)
To sell dollars (0.7) - (0.1) 2.2
Currency options (0.5) 0.3 (0.3) 0.2
Commodity options 0.1 0.3 - -
=====================================
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are primarily investments and trade
receivables. The Company's investment policy requires cash investments
to be placed with high-credit quality counterparties and to limit the
amount of credit from any one financial institution or direct issuer.
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 whenever deemed
necessary. 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.
Note 3. Restructuring of Operations
Included in 1995 results is the release of $10.1 million of
restructuring reserves originally provided in 1994, partially offset by
$4.6 million in additional charges for existing programs identified by
the Company. The release of $10.1 million is attributable to the
Company's decision to retain certain facilities and related support
operations connected therewith. The additional restructuring
requirements include charges for the Company's wholly owned subsidiary,
Dynacraft, Inc. ("DCI"), to consolidate its business, and the decision
by the Company to transfer the remainding military assembly operations
in South Portland, Maine to Singapore. The charges for these actions,
which are expected to be completed early in fiscal 1996, consist
primarily of fixed asset dispositions, reductions in the work force and
costs related to termination of a non-cancelable commitment for a
facility.
During fiscal 1995, the Company utilized $14.5 million of
restructuring reserves, primarily attributable to the consolidation of
its DCI business into one location in California, closure of a wafer
fabrication line in Salt Lake City, Utah and completion of reduction in
headcount and related infrastructure in its Santa Clara, California
plant. Of the reserves, $9.6 million represented cash charges with the
balance taking the form of fixed asset write-offs and other non-cash
items.
During fiscal 1994, the Company utilized $44.2 million of the
restructuring reserves primarily attributable to the closure of a wafer
fabrication module in its Salt Lake City, Utah facility, and closure of
a wafer fabrication line in Santa Clara, California. In addition, the
<PAGE>
Company completed most of the process transfers from its Santa Clara,
California facility to the Greenock, Scotland fabrication facility and
completed the transfer of part of its Mil Aero manufacturing to its
Singapore facility. The Company continued to reduce headcount and
related infrastructure at its Santa Clara, California operation.
During fiscal 1993, the Company's restructuring activities related
to the sale of its Bangkok, Thailand facility and also the sale of its
Migdal Haemek, Israel facility to a joint venture, in which the Company
has less than a 20 percent investment. The Company also continued
activities related to the closure of a fabrication module at its Salt
Lake City, Utah facility and decided to close a fabrication module in
Santa Clara, California.
Note 4. Consolidated Balance Sheet Details
(in millions)
1995 1994
------ ------
RECEIVABLE ALLOWANCES
Doubtful accounts $ 2.4 $ 3.0
Returns and allowances 31.3 30.8
------ ------
Total receivable allowances $ 33.7 $ 33.8
====== ======
INVENTORIES
Raw materials $ 33.9 $ 17.3
Work in process 165.9 129.4
Finished goods 63.2 66.0
------- ------
Total inventories $ 263.0 $ 212.7
======= ======
PROPERTY, PLANT AND EQUIPMENT
Land $ 12.5 $ 8.9
Buildings and improvements 501.4 340.9
Machinery and equipment 1,419.9 1,251.4
Construction in progress 213.8 164.4
------- -------
Total property, plant and equipment 2,147.6 1,765.6
Less accumulated depreciation and
amortization 1,185.2 1,097.6
------- -------
Property, plant and equipment, net $ 962.4 $ 668.0
======= =======
ACCRUED EXPENSES
Payroll and employee related $ 159.3 $ 124.9
Other 71.4 139.7
------- ------
Total accrued expenses $ 230.7 $ 264.6
======= ======
Effective beginning in fiscal 1994, the Company changed its method of
accounting to include certain costs in inventory which were previously
charged directly to cost of sales as incurred. These costs consisted
primarily of product engineering, quality assurance and reliability, and
production control and logistics. The Company believes this change was
preferable under the circumstances because it more closely matched
inventory costs with net sales and more closely aligned the Company with
industry practices. The cumulative effect of this change on years prior
to fiscal 1994 of $4.9 million was reflected in the 1994 first quarter
results.
<PAGE>
Both the impact of the change in fiscal 1994 and the proforma
effect on net income for fiscal 1993 under the new method of accounting
were immaterial.
In addition, beginning in fiscal 1994, the Company reclassified
certain period expenses from cost of sales to R&D expense or to SG&A
expense. The amounts presented in prior period statements of operations
have been reclassified to conform with the fiscal 1994 presentation.
The types of costs consisted primarily of non-manufacturing product
engineering, quality assurance and reliability, applications
engineering, and product line management costs. The Company believes
these reclassifications more closely align Company reporting with
industry practices. For 1993, the effect of the reclassification
decreased cost of sales by $81.3 million and increased R&D and SG&A
expenses by $26.9 million and $54.4 million, respectively. Net income
was not impacted in any period by the reclassifications.
Note 5. Debt Financing
Debt consists of the following:
(in millions) 1995 1994
------ -------
Notes secured by real estate payable
at 11.8% to 12.6% $ 20.2 $ 5.9
Notes secured by equipment payable
at 7.3% to 8.9% 33.0 13.3
Unsecured loans payable at 7.5%
and 4.2%, respectively 50.0 6.4
Obligations under capital leases 2.9 4.5
------- -------
Total loans payable 106.1 30.1
Current portion of long-term debt (23.6) (15.6)
------- -------
Long-term debt $ 82.5 $ 14.5
======= =======
Notes secured by real estate in 1995 consist of three notes assumed as
part of the repurchase of the equity interest in the Company's
Arlington, Texas facility which was sold and leased back prior to 1990.
Interest on these notes is due semi-annually, principal payments vary,
and maturities range from March 1996 to March 2002. The 1994 balance
consists of a mortgage loan held by a foreign subsidiary due in 1996
which was repaid in April 1995. The notes secured by machinery and
equipment have installments payable either monthly or quarterly with
maturities ranging from November 1995 to May 2000. The unsecured 7.5
percent note is due in monthly installments through May 2000. The note
payable in 1994 at 4.2 percent is a variable interest loan at the U.S.
dollar Singapore Interbank Offer Rate plus 0.75 percent and was due in
1999, but was repaid in July 1994.
<PAGE>
For each of the next five years and thereafter, debt and capital
lease obligations are as follows:
Total Debt
(in millions) (Principal only)
----------------
1996 $ 23.6
1997 18.5
1998 17.3
1999 18.5
2000 19.4
Thereafter 8.8
----------------
Total $106.1
================
The Company's multicurrency and revolving financing agreements make
funds available in the form of multicurrency loans, letters of credit
and standby letters of credit. The multicurrency loan agreement ($30
million) expires in December 1995. The revolving credit agreement ($200
million) which includes standby letters of credit expires in December
1997. At May 28, 1995, $42.2 million of the combined total commitments
was utilized.
These agreements contain restrictive covenants, conditions and
default provisions which, among others, restrict payment of dividends
and require the maintenance of financial ratios and certain levels of
tangible net worth. At May 28, 1995, under the most restrictive
covenant, no more than $238.5 million was available for payment of
dividends on the Company's common stock.
Note 6. Interest
(in millions) 1995 1994 1993
------ ------ ------
Interest income $ 21.3 $14.2 $7.3
Interest expense (6.7) (3.3) (4.4)
------- ------- -------
Interest, net $ 14.6 $10.9 $2.9
======= ======= =======
<PAGE>
Note 7. Income Taxes
Worldwide pretax earnings from operations and income taxes consisted of
the following:
(in millions) 1995 1994 1993
------ ------ ------
Income before income taxes:
U.S. $233.5 $264.9 $ 58.6
Non-U.S. 95.7 38.6 91.3
------- ------- -------
$329.2 $303.5 $ 149.9
Income taxes: ======= ======= =======
Current:
U.S. Federal $ 90.7 $ 26.9 $ 1.4
U.S. State and Local 5.0 6.4 2.6
Non-U.S. 12.7 5.6 12.1
------- ------- -------
108.4 38.9 16.1
Deferred:
U.S. Federal and State (96.8) - -
Non-U.S. 1.5 3.5 3.5
Charge in lieu of taxes
attributable to employee
stock plans 51.9 2.0 -
------- ------- -------
$ 65.0 $ 44.4 $ 19.6
======= ======= =======
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at May
28, 1995 and May 29, 1994 are presented below (in millions):
1995 1994
Deferred Tax Assets: ------ ------
Reserves and accruals $ 56.8 $ 80.5
Loss carryovers and other allowances - foreign 50.0 74.8
General business credit carryovers - Federal 46.1 47.1
Capitalized assets and other assets 27.6 14.5
Inventory capitalization and reserves 20.9 19.0
Foreign tax and AMT credit carryovers 7.7 6.8
Capitalized R&D - state 5.7 7.6
------- ------
Total gross deferred assets 214.8 250.3
Less valuation allowance (106.5) (248.6)
------- ------
Net deferred assets $ 108.3 $ 1.7
Deferred tax liabilities:
Capital allowance - foreign $ (20.1) $ (19.4)
Other liabilities (8.9) (0.9)
------- ------
Total gross deferred liabilities (29.0) (20.3)
------- ------
Net deferred tax assets (liabilities) $ 79.3 $ (18.6)
======= ======
Deferred tax assets and liabilities are classified in the consolidated
balance sheet based on the classification of the related asset or
<PAGE>
liability. Included in other assets on the consolidated balance sheet
is $22.0 million of deferred tax assets.
The valuation allowance at May 28, 1995 represented a decrease of
$142.1 million from the balance of $248.6 million at May 29, 1994. Of
this decrease in the total valuation allowance for deferred tax assets,
approximately $51.9 million of recognized tax benefits attributable to
employee stock option exercises was allocated to additional paid-in
capital rather than to income tax benefit.
For fiscal 1993, deferred income taxes arose from temporary
differences between tax bases of assets and liabilities and the reported
amounts in the financial statements. The deferred tax expense reflected
is attributable primarily to depreciation, accruals and allowances.
The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which
those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making
this assessment. Based on the historical taxable income and projections
for future taxable income over the periods which the deferred tax assets
are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences, net
of valuation allowances as of May 28, 1995.
The reconciliation between the amount computed by applying the
U.S. Federal statutory rate and the reported worldwide tax expense
follows:
(dollars in millions) 1995 1994 1993
------- ------- -------
U.S. Federal statutory tax rate 35% 35% 34%
==== ==== ====
Income tax expense at
federal statutory rate $ 115.2 $106.2 $ 51.0
Unutilized (utilized) non-U.S.
losses and tax differential
related to non-U.S. income (19.4) 8.8 1.5
U.S. state and local taxes net
of federal benefits 5.0 4.2 2.6
Change in beginning of year
valuation allowance (36.2) (76.0) -
Utilized U.S. operating
losses under FAS 96 - - (41.3)
Sale of Bangkok facility - - 3.9
Other 0.4 1.2 1.9
------- ------- -------
Reported income tax expense $ 65.0 $44.4 $19.6
======= ======= =======
The temporary difference relating to the unremitted earnings of non-U.S.
subsidiaries for which a deferred tax liability has not been recognized
approximates $514.6 million at May 28, 1995. The additional taxes which
may become due if those earnings were to be remitted to the U.S. are
estimated to be $112.2 million after utilization of U.S. tax credits.
However, it is management's intent that these earnings remain reinvested
indefinitely.
At May 28, 1995, National had credit carryforwards of
approximately $53.9 million for tax return purposes which expire from
1996 through 2008. National also had operating loss carryforwards in
certain non-U.S. jurisdictions.
The U.S. Internal Revenue Service ("IRS") examinations of
National's U.S. Federal income tax returns for fiscal years 1976-1982
<PAGE>
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. National and the IRS subsequently settled all
issues for fiscal years 1976 through 1982 except for intercompany
product transfer prices. This settlement reduced the additional taxes
being sought to approximately $52 million (exclusive of interest).
Trial in the case was held in February 1993 and an opinion was issued by
the U.S. Tax Court in May 1994. The opinion found that adjustments to
income of $40.6 million were due, which the Company estimates, after
giving effect to loss and credit carrybacks, will result in a tax
deficiency of approximately $5 million plus associated interest of
between $35 million and $45 million. The IRS motion for reconsideration
of the opinion, which sought an additional $31 million in income tax
adjustments, was denied by the court in June 1994. The Company and the
IRS have reached agreement on the allocation of the additional income,
and this agreement was presented to the Court in June 1995. A formal
decision implementing the opinion was then entered by the Tax Court
following completion of these final computations and the decision is
subject to appeal by either the Company or the IRS. It is not known if
an appeal will follow at this time.
In January 1994, the Company and the IRS settled all issues for
fiscal years 1983 through 1985, including issues relating to
intercompany product transfer pricing, without the payment of additional
Federal tax. This result will be affected by certain net operating loss
carryovers and credits, which will not be determined until the Tax Court
litigation is completed.
In April 1995, the IRS issued a deficiency notice for fiscal years
1986 through 1989 seeking additional taxes of approximately $11 million
(exclusive of interest). The issues raised by the deficiency notice
relate primarily to the Company's former Israeli operation and the
purchase price paid for Fairchild Semiconductor Corporation. The
Company intends to file a protest of the deficiency notice. The Company
expects the IRS to begin examination of the Company's tax returns for
fiscal years 1990 through 1993 during the summer of 1995. The Company
believes that adequate tax payments have been made and accruals recorded
for all years and that the Tax Court case will not have a material
adverse effect on the Company's financial condition or results of
operations.
Note 8. Shareholders' Equity
Each outstanding share of the Company's common stock carries a stock
purchase right ("Right") issued pursuant to a dividend distribution
declared on August 5, 1988. When exercisable, each Right entitles the
registered holder to purchase one one-thousandth of a share of the
Company's Series A Junior Participating Preferred Stock at a price of
$60.00 per one thousandth share, subject to adjustment. The Rights are
attached to all outstanding shares of common stock and no separate
Rights certificates have been distributed.
The Rights will become exercisable and will detach from the common
stock in the event any individual or group acquires 20 percent or more
of the Company's common stock, or announces a tender or exchange offer
which, if consummated, would result in that person or group owning at
least 20 percent of the Company's common stock. If such person or group
actually acquires 30 percent or more of the Company's common stock
(except pursuant to certain cash tender offers for all of the Company's
common stock), each Right will entitle the holder to purchase, at the
Right's then current exercise prices, the Company's common stock in an
<PAGE>
amount having a market value equal to twice the exercise price.
Similarly, if after the Rights become exercisable, the Company merges or
consolidates with or sells 50 percent or more of its assets or earning
power to another person, each Right will then entitle the holder to
purchase, at the Right's then current exercise price, the stock of the
acquiring company in an amount having a market value equal to twice the
exercise price.
The Company may redeem the Rights at $0.01 per Right at any time
prior to acquisition by a person or group of 20 percent or more of the
Company's outstanding common stock. The Rights will expire August 8,
1998, unless earlier redeemed.
In March 1994, National called for redemption in April 1994 of all
of the issued and outstanding shares of the $40.00 Convertible
Exchangeable Preferred Shares, $0.50 par value (the "Exchangeable
Preferred Shares"). In connection with the redemption, a conversion
privilege offered by National to holders of the Exchangeable Preferred
Shares expired on the redemption date. Essentially all Exchangeable
Preferred Shares were converted by the holders into the Company's common
stock at the rate of 33 shares of common stock for each Exchangeable
Preferred Share. All remaining shares were redeemed and the Company
issued shares of common stock that would have been issued to the holders
of the Exchangeable Preferred Shares had they elected to convert, in
accordance with standby arrangements entered into by the Company. After
the redemption and conversion were complete, a total of 8,250,000 shares
of common stock had been issued.
At May 28, 1995, National had 345,000 shares of $32.50 Convertible
Preferred Shares, $0.50 par value (the "Convertible Preferred Shares")
issued and outstanding. The Convertible Preferred Shares were issued in
October 1992. The liquidation preference of each Convertible Preferred
Share is $500 plus unpaid dividends. The Convertible Preferred Shares
are convertible at any time at the option of the holder into common
stock at the rate of 35.273 shares of common stock for each Convertible
Preferred Share. On or after November 1, 1995, and if the closing price
of the Company's common stock on the New York Stock Exchange exceeds
$17.72 for twenty trading days within any period of thirty consecutive
trading days, the Convertible Preferred Shares are redeemable, in whole
or in part, at the option of the Company for the number of shares of
common stock as are issuable at a conversion rate of 35.273 shares of
common stock for each Convertible Preferred Share. The Convertible
Preferred Shares are not entitled to the benefit of any sinking fund.
Dividends on the Convertible Preferred Shares at an annual rate of
$32.50 per share are cumulative and payable quarterly in arrears, when
and as declared by the Company's Board of Directors. Holders of
Convertible Preferred Shares are entitled to limited voting rights.
The Company was authorized by the Board of Directors to repurchase
up to 3.5 million shares of the Company's common stock at current market
prices prior to the end of calendar 1994. During fiscal 1994, National
purchased 500,000 shares on the open market at a cost of $9.5 million.
In April 1995, the Board of Directors authorized repurchase of up to an
additional 3.5 million shares at current market prices prior to the end
of calendar 1995. During fiscal 1995, National purchased 3,115,600
shares on the open market at a cost of $50.4 million, net of certain
share reissuances in connection with employee benefit plans. The shares
purchased by the Company are being used for issuance under the Company's
various benefit plans and are being held as treasury stock.
National has paid no cash dividends on its common stock and
intends to continue its practice of reinvesting all earnings except
those required for preferred stock dividends.
<PAGE>
Note 9. 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
32,754,929 shares of the Company's common stock. Generally, the terms of
this plan provide that options are granted at the market price on the
date of grant and expire up to a maximum of 10 years and one day after
grant or 3 months after termination of employment (up to 5 years after
termination due to death, disability, or retirement), whichever occurs
first. Options generally become exercisable ratably over a four-year
period.
In connection with the retirement of Peter J. Sprague from his
position as Chairman of the Board of Directors on May 18, 1995, the
Company granted an option to Mr. Sprague to purchase 300,000 shares of
the Company's common stock. The option granted to Mr. Sprague was not
granted under the option plans, but was granted at the market price on
the date of grant, expires ten years and one day after grant and becomes
exercisable ratably over a four-year period.
National has an employee stock purchase plan which authorizes the
issuance of up to 19,950,000 shares of common stock in quarterly
offerings to eligible employees in amounts related to their basic annual
compensation at a price which is equal to 85 percent of the lower of its
fair market value at the beginning and end of a quarterly period. Prior
to January 1995, the employee stock purchase plan granted options which
became exercisable after 13 months and expired after 27 months. The
option price was determined by the Stock Option and Compensation
Committee of the Board of Directors but could not be less than 100
percent of the market value on the date of grant or 85 percent of the
market value on the date of exercise, whichever was lower. The last
options issued under the terms of the previous plan will expire in March
1996.
National also has an employee stock purchase plan available to
employees at international locations which was approved in September
1994 and first made available to employees in January 1995. The global
plan authorizes the issuance of up to 5,000,000 shares of common stock
in quarterly offerings to eligible employees in amounts related to their
basic annual compensation at a price equal to 85 percent of the lower of
its fair market value at the beginning and end of a quarterly period.
Unlike the U.S. stock purchase plan, the stock purchased under the
global stock purchase plan for the account of an employee is held by a
fiduciary in an offshore trust, which allows an employee located in
countries that do not permit direct stock ownership to participate in a
Company stock plan. In addition, the participant's employing company is
responsible for paying the difference between the purchase price set by
the terms of the plan and the fair market value at the time of the
purchase.
<PAGE>
Changes in options outstanding under options granted by the
Company during fiscal 1994 and 1995, whether under the option or
purchase plan or otherwise were as follows:
Number Price
of shares per
(in millions) share
------------- ----------------
Outstanding May 30, 1993 15.2 $3.75 to $14.75
Granted 3.3 $15.00 to $20.50
Exercised (4.7) $3.75 to $14.75
Cancelled (0.6) $3.75 to $20.50
- -------------------------------------------------------------------
Outstanding May 29, 1994 13.2 $3.75 to $20.50
Granted 2.7 $14.88 to $27.88
Exercised (3.1) $3.75 to $20.50
Cancelled (0.5) $3.75 to $20.50
- -------------------------------------------------------------------
Outstanding at May 28, 1995 12.3 $3.75 to $27.88
Exercisable at May 28, 1995 6.9 $3.75 to $20.50
===================================================================
Expiration dates: From May 31, 1995 to May 18, 2005
- -------------------------------------------------------------------
Shares issued under the new terms of the stock purchase plan and the
global stock purchase plan from January 1, 1995 through the end of
fiscal 1995 were as follows:
Number of Shares Price
(in millions) per Share
---------------- ---------
Issued 0.3 $14.34
Under the stock option and purchase plans, 3.4 million shares of common
stock were issued during fiscal 1995. As of May 28, 1995, 30.6 million
shares were reserved for issuance under all stock purchase and option
plans and other options granted by the Company, including shares
available for future option grants.
Note 10. Other Stock Plans
National has a director stock plan approved by shareholders 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 shareholders
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 shareholders. As of May 28, 1995,
22,000 shares had been issued under the director stock plan and 178,000
shares were reserved for future issuances.
National has a performance award plan which was approved by
shareholders in fiscal 1993 which authorizes the issuance of up to 1.0
million shares of the Company's common stock as full or partial payment
of awards to plan participants based on performance units and the
achievement of certain specific performance goals during a performance
plan cycle. Performance plan cycles are three to five years depending
on specific performance measurements, and the earliest a payout can
occur is the third year of a performance plan cycle. Plan participants
<PAGE>
currently consist of a limited group of senior executives. No shares
were issued under the performance award plan during fiscal 1994 or 1995.
The first payout under the plan will occur in fiscal 1996, and expense
recorded in fiscal 1994 and 1995 under the plan was not material.
Note 11. Retirement and Pension Plans
National's Retirement and Savings Program for U.S. employees consists of
two plans as follows:
The profit sharing plan requires Company contributions of the
greater of five percent of consolidated net earnings before income taxes
or one percent of payroll (as defined by the plan). Contributions are
invested 25 percent in National's common stock and 75 percent in cash.
Total shares contributed under the profit sharing plan during fiscal
1995 were 211,565. As of May 28, 1995, 1.9 million shares of common
stock were reserved for future Company contributions.
The salary deferral "401(k)" plan allows employees to defer up to
15 percent of their salaries, subject to certain limitations, with
partially matching Company contributions. Contributions are invested in
one or more of five investment funds at the discretion of the employee.
One of the investment funds is a Company stock fund where contributions
are invested in Company common stock. Although 5.0 million shares of
common stock are reserved for issuance to the stock fund, shares
purchased to date with contributions have been purchased on the open
market and the Company has not issued any stock directly to the stock
fund.
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) 1995 1994 1993
------ ------ ------
Profit Sharing Plan $17.3 $15.9 7.9
- -----------------------------------------------------------
Salary deferral "401(k)" plan $ 9.8 $8.3 $4.1
- -----------------------------------------------------------
Non-U.S. pension and
retirement plans $ 6.3 $4.7 $5.4
===========================================================
Effective beginning fiscal 1994, the Company prospectively adopted
Statement of Financial Accounting Standards No. 106, "Employer's
Accounting for Postretirement Benefits other than Pensions" ("FAS 106").
The adoption did not have a material impact on the Company's financial
statements.
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, "Employer's
Accounting for Postemployment Benefits" ("FAS 112"), effective for
fiscal years beginning after December 15, 1993. Under FAS 112,
postemployment benefits, primarily salary continuation and insurance
<PAGE>
continuation, are accrued at the time the benefit is earned by the
employee. The Company implemented FAS 112 starting in the first quarter
of fiscal 1995. Adoption of FAS 112 did not have a material impact on
the Company's financial statements.
Note 12. Commitments and Contingencies
Commitments. The Company leases certain facilities and equipment under
operating lease arrangements which expire at various times through the
year 2025. Rental expenses under operating leases were $37.4 million,
$48.9 million, and $58.9 million in 1995, 1994, and 1993, respectively.
Minimum commitments under noncancelable operating leases are as follows:
(in millions)
-------------
1996 $ 24.7
1997 17.4
1998 11.3
1999 7.7
2000 6.8
Thereafter 32.0
------
Total $ 99.9
======
During 1995, the Company purchased the equity interest in two facility
sale and leaseback transactions. This had the effect of significantly
reducing the operating lease commitments. The Company has commitments
to purchase fabricated wafers from a joint venture in which it is a
minority interest holder. As of May 28, 1995,
these commitments total $40.4 million, $48.5 million, $42.8 million, and
$10.6 million for fiscal years 1996, 1997, 1998 and 1999, respectively,
based on negotiated prices and minimum contractual volumes.
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
and the alleged underpayment was reduced in a similar action on April
22, 1994 to approximately $3.6 million. The revised alleged
underpayment could be subject to penalties that may be computed as a
multiple of such underpayment. The Company filed an administrative
petition for relief in October 1991 and the Company is continuing to
contest the Penalty Notice in administrative proceedings. The Company
believes that the ultimate resolution of this matter will not have a
material impact on the Company's financial position.
The Company has been named to the National Priorities List
("Superfund") for its Santa Clara, California site and has completed a
Remedial Investigation/Feasibility Study with the Regional Water Quality
Control Board ("RWQCB"), acting as 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
<PAGE>
the site remediation will not have a material effect on the Company's
financial position.
In addition to the Santa Clara site, the Company has been
designated as a potentially responsible party ("PRP") by federal and
state agencies with respect to certain waste sites with which the
Company may have had direct or indirect involvement. Such designations
are made regardless of the extent of the Company's involvement. The
Company has also been cited for alleged deficiencies in its record
keeping for and handling, treatment, storage and disposal of hazardous
products and wastes. These claims are in various stages of
administrative or judicial proceedings and include demands for recovery
of past governmental costs and for future investigations and remedial
actions. In many cases, the dollar amounts of the claims have not been
specified, and with respect to the PRP claims, have been asserted
against a number of other entities for the same cost recovery or other
relief as was asserted against the Company. The Company accrues costs
associated with environmental matters when they become probable and
reasonably estimable. The amount of all environmental charges to
earnings, including charges relating to the Santa Clara site
remediation, which did not include potential reimbursements from
insurance coverage, were not material during fiscal years 1995, 1994,
and 1993. The Company believes that the potential liability, if any, in
excess of amounts already charged to earnings will not have a material
effect on the Company's financial position.
On December 2, 1992, Hughes Aircraft Company ("Hughes") filed a
patent infringement suit in Federal court against the Company seeking
unspecified amounts of damages and costs, which was served on the
Company on January 7, 1993. The Company filed a counter claim against
Hughes' parent, General Motors Corporation, also alleging patent
infringement. In December 1994, the parties participated in a minitrial
proceeding that resolved all matters disputed in the litigation. On the
single issue presented in the minitrial the judge found for Hughes and,
in accordance with an agreement reached with Hughes prior to the
minitrial, damages agreed to in advance were paid by the Company to
Hughes. The settlement did not have a material impact on the Company's
financial position and all matters in dispute in the litigation have
been resolved.
The Company is engaged in tax litigation with the IRS and the
Company's tax returns will soon be under examination by the IRS (see
Note 7). 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 not be
material to the Company's financial position.
Note 13. Industry and Geographic Segment Information
The Company operates in one industry segment and 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
<PAGE>
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 and air transportation.
Elim & Consol-
(in millions) Americas Europe Asia Corporate idated
-------- ------- -------- ---------- -------
1995
Sales to unaffiliated
customers $1,015.9 $562.7 $ 800.8 $ - $2,379.4
Transfers between
geographic areas 459.7 114.3 680.3 (1,254.3) -
-------- ------ ------ ------- -------
Total sales $1,475.6 $677.0 $1,481.1 $(1,254.3) $2,379.4
-------- ------ ------ ------ --------
Total assets $1,016.7 $252.8 $ 623.2 $ 343.0 $2,235.7
======== ====== ======= ======= ========
1994
Sales to unaffiliated
customers $1,010.4 $496.7 $ 788.3 $ - $2,295.4
Transfers between
geographic areas 493.3 153.7 631.4 (1,278.4) -
-------- ------ ------ -------- --------
Total sales $1,503.7 $650.4 $1,419.7 $(1,278.4) $2,295.4
-------- ------ ------ -------- --------
Total assets $ 656.7 $218.9 $ 558.5 $ 313.6 $1,747.7
======== ====== ======= ======= ========
1993
Sales to unaffiliated
customers $ 939.5 $413.2 $ 661.0 $ - $2,013.7
Transfers between
geographic areas 415.6 120.0 558.1 (1,093.7) -
-------- ------ ------ ------- --------
Total sales $1,355.1 $533.2 $1,219.1 $(1,093.7) $2,013.7
-------- ------ ------ ------- --------
Total assets $ 539.7 $222.7 $ 436.6 $ 277.5 $1,476.5
======== ====== ======= ======= ========
<PAGE>
Note 14. Supplemental Disclosure of Cash Flow Information and Non-cash
Investing and Financing Activities
(in millions) 1995 1994 1993
------- ------- -------
Cash paid for:
Interest expense $ 6.4 $ 3.3 $4.5
Interest payment on
tax settlements $30.2 $18.6 $ -
Income taxes $43.2 $27.8 $4.9
Non-cash items:
Issuance of stock for employee
benefit plans $ 4.0 $ 2.0 $ -
The Company recorded capital lease obligations of $1.2 million during
1993, 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, Israel facility.
<PAGE>
Note 15. Financial Information by Quarter (Unaudited)
The following table presents the quarterly information for fiscal 1995
and 1994:
First Second Third Fourth
(in millions, except per) Quarter Quarter Quarter Quarter
share amounts) ------- ------- ------- -------
1995
Net Sales $553.8 $584.4 $571.4 $669.8
Gross Margin $233.2 $251.7 $229.3 $280.7
Net income $ 59.0 $ 67.0 $ 57.0 $ 81.2
====== ====== ====== ======
Primary earnings
per common share $0.44 $0.51 $0.43 $0.62
Weighted average common and ====== ====== ====== ======
common equivalent shares
outstanding 129.1 124.9 124.7 125.6
Fully diluted earnings ===== ===== ===== =====
per common share $0.42 $0.49 $0.42 $0.59
===== ===== ===== =====
Weighted average fully
diluted shares 141.5 137.2 136.9 138.7
===== ===== ===== =====
Common stock price - high $21.50 $19.50 $20.50 $28.50
Common stock price - low $15.63 $14.38 $16.63 $15.13
===== ===== ===== =====
1994
Net Sales $558.9 $582.4 $544.7 $609.4
Gross Margin $228.3 $243.5 $228.4 $258.9
Income before cumulative
effect of accounting change $ 52.2 $ 60.7 $ 63.8 $ 82.4
Net income $ 57.1 $ 60.7 $ 63.8 $ 82.4
Primary earnings per common ====== ====== ====== ======
share before cumulative
effect of accounting change $0.39 $0.46 $0.48 $0.63
Cumulative effect of
accounting change 0.04 - - -
Primary earnings ----- ----- ----- -----
per common share $0.43 $0.46 $0.48 $0.63
====== ====== ====== ======
Weighted average common and
common equivalent shares
outstanding 119.5 120.1 120.8 126.0
Fully diluted earnings per ====== ====== ====== =====
share before cumulative
effect of accounting change $0.37 $0.43 $0.45 $0.58
Cumulative effect of
accounting change 0.04 - - -
Fully diluted earnings ----- ----- ----- -----
per common share $0.41 $0.43 $0.45 $0.58
Weighted average fully ===== ===== ===== =====
diluted shares 140.4 140.6 141.7 143.0
===== ===== ===== =====
Common stock price - high $19.50 $21.75 $21.88 $25.00
Common stock price - low $14.38 $15.00 $14.38 $16.75
===== ===== ===== =====
<PAGE>
Preferred dividends are reflected as adjustments to reported earnings in
the calculation of primary earnings per share.
The Company's common stock is traded on the New York Stock
Exchange and the Pacific Stock Exchange. The quoted market prices are
as reported on the New York Stock Exchange Composite Tape. At May 28,
1995, there were approximately 13,500 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 28, 1995 and May
29, 1994, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the years in the three-
year period ended May 28, 1995. 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 28,
1995 and May 29, 1994, and the results of their operations and their
cash flows for each of the years in the three-year period ended May 28,
1995 in conformity with generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements,
in 1994 the Company changed its method of accounting for certain costs
in inventory.
KPMG PEAT MARWICK LLP
San Jose, California
June 7, 1995
<PAGE>
MANAGEMENT
OFFICERS
EXECUTIVE COMMITTEE
Gilbert F. Amelio
President and Chief
Executive Officer
Richard M. Beyer
Executive Vice
President, and Chief
Operating Officer
Kirk P. Pond
Executive Vice
President and Chief
Operating Officer
Patrick J. Brockett
President,
International
Business Group
Charles P. Carinalli
Senior Vice
President and Chief
Technical Officer
Donald Macleod
Executive Vice President,
Finance and Chief
Financial Officer
George M. Scalise
Executive Vice
President and Chief
Administrative Officer
MANAGEMENT COMMITTEE
consists of the Executive
Committee and the following
officers:
Bami Bastani
Vice President and
General Manager,
Embedded Technologies
Division
Mike Bereziuk
Vice President and
General Manager, Personal
Systems Division
<PAGE>
Michael D. Burger
Vice President and
General Manager,
Southeast Asia Division,
International
Business Group
W. Wayne Carlson
Vice President and
General Manager,
Data Management
Division
Gordon C. Chilton
Vice President,
Asia Pacific
John M. Clark III
Senior Vice President,
General Counsel and
Secretary
Raymond G. Hawkins
Vice President and
General Manager,
Americas Division,
International
Business Group
Gunnar Hurtig III
Vice President,
Corporate Strategic
Planning
Tatsuo Ishihara
President, Japan
Division, International
Business Group
Keith D. Jackson
Vice President and
General Manager, Analog
Mixed Signal Systems
Division
Keith M. Kolerus
Vice President,
Strategy, International
Business Group
Robert G. MacLean
Vice President,
Human Resources
Douglas M. McBurnie
Vice President and
General Manager, Local
Area Networks Division
<PAGE>
R. Thomas Odell
Senior Vice President,
Business Process
Improvement
E. Randy Parker
Senior Vice
President, Quality
and Reliability
Robert M. Penn
Vice President and
General Manager, Wide
Area Networks Division
Hans Rohrer
Vice President and
General Manager,
European Division,
International
Business Group
Richard L. Sanquini
Senior Vice President,
Intellectual Property
Protection and Business
Development
Robert M. Whelton
Vice President and
General Manager,
Analog Products
Division
OTHER OFFICERS
David S. Dahmen
Vice President and Treasurer
Nancy Lucke Ludgus
Assistant Secretary
Robert B. Mahoney
Vice President and 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 LLP
<PAGE>
Board of Directors
Gilbert F. Amelio began his career at Bell Laboratories and has more than 25
years of semiconductor industry experience. He holds 16 patents alone or
jointly and is co-inventor of the charge-coupled device image sensor.
Dr. Amelio is a former vice-president and general manager of Fairchild
Camera and Instrument Corporation's MOS Products Group and was President of
Rockwell Communications Systems before joining National as President and
Chief Executive Officer in 1991.
*Gary P. Arnold has extensive experience in the international electronics
industry in finance, strategic planning and operations. Since January
1993, he has been President, Chief Executive Officer and Chairman of the
Board of Analogy, Inc., a leading supplier of product design and simulation
software headquartered in Beaverton, Oregon. Prior to that he held Chief
Financial Officer positions at Tektronix and at National Semiconductor.
*Robert Beshar has been an attorney in private practice since 1972 following
a distinguished career including legal positions with the New York Harbor
Waterfront Commission the Appellate Division of the New York Supreme Court
and the U.S. Justice Department. He also served in the U.S. Commerce
Department as a Deputy Assistant Secretary, director of the Bureau of
Internatioal Commerce and as National Export Coordinator.
Dr. Modesto A. Maidique has been President of Florida International
University (FIU) since 1986. Prior to that he distinguished himself as a
scholar and a teacher, having taught at Massachusetts Institute of Technology,
Harvard University, and Stanford University. He also established credentials
as a corporate executive and consultant and is a co-founder of Analog Devices
Semiconductor.
J. Tracy O'Rourke, since 1990, has been Chairman and Chief Executive Officer
of varian Associates, a Fortune 500 company with annual sales exceeding
$1 billion. Before joining Varian, he was one of three Executive Vice
Presidents and Chief Operating Officers of Rockwell International Corporation.
He also served earlier as President and Chief Operating Officer of
Allen-Bradley Corporation, where he is credited with transforming the $450-
million private company into a $1.4-billion international electronics
business.
Charles E. Sporck, from 1967 to 1991, served as President and Chief Executive
Officer of National Semiconductor, building the company from a small
transistor manufacturer with annual sales of $7 million to a nearly $2-
billion global semiconductor supplier. He is credited with opening the first
offshore semiconductor assembly and test facilities in Southeast Asia. He
started his career at General Electric Corporation, and prior to joining
National he was General Manager if Fairchild Camera & Instrument Corporation.
*Donald E. Weeden, as Chief Excutive of the Wall Street firm of Weeden &
Company, has been a leading advocate for progressive change in the securities
industry. He is a recognized entrepreneur and venture capitalist, and a
trustee of the Weeden Foundation, which supports projects related to environ-
ment and population concerns.
* Member of the Audit Committee
<PAGE>
WORLDWIDE OPERATIONS
Headquarters
National Semiconductor Corporation
2900 Semiconductor Drive
P.O. Box 58090
Santa Clara, California 95052-8090
Telephone (408) 721-5000
Manufacturing Facilities
Santa Clara, California; South Portland, Maine;
Murrysville, Pennsylvania; Arlington, Texas;
West Jordan, Utah; Malacca, Malaysia; Penang, Malaysia;
Cebu, Philippines; Greenock, Scotland; Singapore
SHAREHOLDER INFORMATION
Common Stock Data
The Company's common stock is traded on the New York Stock
Exchange and the Pacific Stock Exchange.
Annual Meeting of Shareholders
The annual meeting will be held on or about September 29, 1995. A
notice of the meeting, together with a form of proxy and a proxy
statement, will be mailed to shareholders on or about August 20, 1995,
at which time proxies will be solicited by the Board of Directors.
FORM 10-K
If you would like to receive a free copy of the Company's "Form 10-K",
filed with the Securities and Exchange Commission, please send your
request to:
Investor Relations
Mailstop 10-397
National Semiconductor Corporation
P.O. Box 58090
Santa Clara, California 95052-8090
Telephone (408) 721-5800 Fax (408) 721-7254
<PAGE>
APPENDIX TO GRAPHS
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(FINANCIAL HIGHLIGHTS section; 3 separate graphs)
Net Sales $2,379.4 $2,295.4 $2,013.7 $1,717.5 $1,701.8
Profit Before Tax 329.2 303.5 149.9 (117.0) (149.0)
Research and
Development Expense 283.1 257.8 229.2 208.9 198.6
(MD&A - Left of Sales)
Net Sales per Employee 106.2% 102.9% 86.1%
(MD&A - Between Gross Margin and R&D, on the Right)
Net Operating Margin
as a Percent of Sales 13.2% 12.7% 7.3%
(MD&A - Right of SG&A; one graph, broken into 3 sections)
Operating Costs and
Expenses as a Percent
of Sales:
Cost of Sales 58.2% 58.2% 64.5%
Research and Development 11.9% 11.2% 11.4%
Selling, General, and
Administrative 16.9% 17.9% 16.8%
(MD&A - Left of Income Tax Expense)
Stock Price Ending $26.00 $19.00 $14.63
(MD&A - Right of Financial Condition)
Net Property, Plant,
and Equipment $962.4 $668.0 $577.4
<PAGE>
<PAGE>
Exhibit 21.0
NATIONAL SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
The following table shows certain information with respect to the active
subsidiaries of the Company as of May 28, 1995, 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
- ---- ------------- ------------- ----------
Dynacraft, Inc. California 100%
National Semiconductor Delaware 100%
International, Inc.
DTS Caribe, Inc. Delaware 100%
N.S. Publications, Inc. Delaware 100%
Fairchild Semiconductor Corp. Delaware 100%
Comlinear Corporation Delaware 100%
National Semiconductor France 100%
France S.A.R.L.
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
Comlinear Europe Ltd. Great Britain 100%
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
National Semiconductor (HK) Hong Kong Philippines 100%
Distribution Ltd.
National Semiconductor Japan 100%
(Service) Ltd.
National Semiconductor Japan 100%
Japan Ltd.
National Semiconductor Malaysia 100%
SDN. BHD.
<PAGE>
Exhibit 21.0
NATIONAL SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
State or Percent of
other Other country voting
jurisdiction in which securities
of subsidiary is owned by
Name incorporation registered National
- ---- ------------- ------------- ----------
National Semiconductor Malaysia 100%
Technology SDN. BHD.
Dynacraft SDN. BHD. Malaysia 100%
Dynacraft Asia Pacific
SON. BHD. Malaysia 100%
National Semiconductor Pte. Singapore 100%
Ltd.
National Semiconductor Singapore 100%
Asia Pacific Pte. Ltd.
National Semiconductor Singapore 100%
Singapore Manufacturer
Pte. Ltd.
Dynacraft Asia Pacific
Pte. Ltd. Singapore 100%
National Semiconductor
Sunrise of Shanghai People's Republic
Limited of China 51%
National Semiconductor Canada 100%
Canada Inc.
National Semicondutores Brazil 100%
de Brasil Ltda.
Electronica NSC de Mexico, Mexico 100%
S.A. de C.V.
ASIC Limited Bermuda 100%
<PAGE>
<PAGE>
Exhibit 24.0
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the
undersigned persons hereby constitutes and appoints Gilbert F. Amelio,
Donald Macleod, and John M. Clark III, and each of them singly, his true
and lawful attorney-in-fact and in his name, place, and stead, and in
any and all of his offices and capacities with National Semiconductor
Corporation (the "Company"), to sign the Annual Report on Form 10-K for
the Company's 1994 fiscal year, and any and all amendments to said
Annual Report on Form 10-K, and generally to do and perform all things
and acts necessary or advisable in connection therewith, and each of the
undersigned hereby ratifies and confirms all that each of said
attorneys-in-fact may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto
executed this Power of Attorney as of the date set forth opposite his
signature.
SIGNATURE DATE
/S/ GILBERT F. AMELIO July 20, 1995
-----------------
Gilbert F. Amelio
/S/ GARY P. ARNOLD July 20, 1995
-------------
Gary P. Arnold
/S/ ROBERT BESHAR July 20, 1995
-------------
Robert Beshar
/S/ MODESTO A. MAIDIQUE July 20, 1995
-------------------
Modesto A. Maidique
------------------
Edward R. McCracken
/S/ J. TRACY O'ROURKE July 20, 1995
-----------------
J. Tracy O'Rourke
<PAGE>
Exhibit 24.0
(page 2)
/S/ CHARLES E. SPORCK July 20, 1995
-----------------
Charles E. Sporck
/S/ DONALD E. WEEDEN July 20, 1995
----------------
Donald E. Weeden
/S/ DONALD MACLEOD July 17, 1995
--------------
Donald Macleod
/S/ ROBERT B. MAHONEY July 17, 1995
-----------------
Robert B. Mahoney
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Accounts Receivable and interest are shown net consistent with FS pres
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-28-1995
<PERIOD-END> MAY-28-1995
<CASH> 420
<SECURITIES> 47
<RECEIVABLES> 318
<ALLOWANCES> 0
<INVENTORY> 263
<CURRENT-ASSETS> 1178
<PP&E> 2148
<DEPRECIATION> 1185
<TOTAL-ASSETS> 2236
<CURRENT-LIABILITIES> 686
<BONDS> 0
<COMMON> 63
0
0
<OTHER-SE> 1343
<TOTAL-LIABILITY-AND-EQUITY> 2236
<SALES> 2379
<TOTAL-REVENUES> 2379
<CGS> 1385
<TOTAL-COSTS> 1385
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (15)
<INCOME-PRETAX> 329
<INCOME-TAX> 65
<INCOME-CONTINUING> 264
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 264
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 1.92
<PAGE>
</TABLE>
