UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 25, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
Commission File Number: 1-6453
NATIONAL SEMICONDUCTOR CORPORATION
----------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-2095071
---------- ----------
(State of incorporation) (I.R.S. Employer Identification Number)
2900 Semiconductor Drive, P.O. Box 58090
Santa Clara, California 95052-8090
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(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 721-5000
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Title of Each Class Outstanding at February 25, 1996
------------------- --------------------------------
Common stock, par value $0.50 per share 135,386,377
<PAGE> 1
NATIONAL SEMICONDUCTOR CORPORATION
INDEX
Part I. Financial Information Page No.
--------
Condensed Consolidated Statements of Operations
(Unaudited) for the Three Months and Nine Months
Ended February 25, 1996 and February 26, 1995 3
Condensed Consolidated Balance Sheets (Unaudited)
as of February 25, 1996 and May 28, 1995 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Nine Months Ended
February 25, 1996 and February 26, 1995 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6
Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
Part II. Other Information
Legal Proceedings 13
Exhibits and Reports on Form 8-K 13
Signature 14
<PAGE> 2
PART I. FINANCIAL INFORMATION
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)
Three Months Ended Nine Months Ended
------------------ -------------------
Feb. 25, Feb. 26, Feb. 25, Feb. 26,
1996 1995 1996 1995
-------- ------- -------- --------
Net sales $600.3 $571.4 $2,010.7 $1,709.6
Operating costs and expenses:
Cost of sales 368.7 342.1 1,165.0 995.4
Research and development 96.9 72.5 270.5 205.4
Selling, general and
administrative 112.1 103.1 370.1 314.5
Restructuring of operations - (5.5) - (5.5)
------ ------ -------- -------
Total operating costs
and expenses 577.7 512.2 1,805.6 1,509.8
------ ------ -------- -------
Operating income 22.6 59.2 205.1 199.8
Interest income, net 4.1 4.7 9.9 12.7
Other income, net 4.0 7.4 20.0 16.2
------ ------ -------- -------
Income before income taxes 30.7 71.3 235.0 228.7
Income taxes 7.7 14.3 58.7 45.7
------ ------ -------- -------
Net Income $ 23.0 $ 57.0 $ 176.3 $ 183.0
====== ====== ======== =======
Earnings per share:
Primary $ .17 $ .43 $ 1.30 $1.39
Fully diluted $ .17 $ .42 $ 1.26 $1.33
Weighted average shares:
Primary 137.8 124.7 131.1 125.2
Fully diluted 137.8 136.9 142.6 137.5
Income used in primary
earnings per share
(reflecting preferred
dividends) $ 23.0 $ 54.2 $ 170.7 $ 174.6
Income used in fully diluted
earnings per share
(reflecting adjustment
for interest on convertible
notes when dilutive) $ 23.0 $ 57.0 $ 180.1 $ 183.0
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 3
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
Feb. 25, May 28,
1996 1995
ASSETS -------- --------
Current assets:
Cash and cash equivalents $ 428.2 $ 420.3
Short-term marketable investments 98.8 47.1
Receivables, net 316.4 318.0
Inventories 326.5 263.0
Deferred tax assets 84.2 77.4
Other current assets 80.3 52.5
------- -------
Total current assets 1,334.4 1,178.3
Property, plant and equipment 2,337.7 2,147.6
Less accumulated depreciation 1,167.8 1,185.2
------- -------
Net property, plant and equipment 1,169.9 962.4
Long-term marketable investments 16.0 20.2
Other assets 81.2 74.8
------- -------
Total assets $2,601.5 $2,235.7
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 23.4 $ 23.6
Accounts payable 194.4 272.0
Accrued expenses 227.2 230.7
Income taxes 184.2 159.6
------- -------
Total current liabilities 629.2 685.9
Long-term debt 357.1 82.5
Deferred income taxes 19.4 20.1
Other non-current liabilities 39.7 40.5
------- -------
Total liabilities 1,045.4 829.0
------- -------
Commitments and contingencies
Shareholders' equity:
Convertible preferred stock - 0.2
Common stock 67.8 63.1
Additional paid-in capital 915.1 992.3
Retained earnings 577.0 411.0
Treasury stock, at cost (3.8) (59.9)
------- -------
Total shareholders' equity 1,556.1 1,406.7
------- -------
Total liabilities and shareholders' equity $2,601.5 $2,235.7
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 4
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended
--------------------
Feb. 25, Feb. 26,
1996 1995
------- -------
Cash flows from operating activities:
Net Income $ 176.3 $ 183.0
Adjustments to reconcile net income
with net cash provided by operations:
Depreciation and amortization 169.4 131.6
Gain on sale of investments (5.2) (6.9)
Tax benefit associated with stock options 12.8 26.7
In-process research and development charge 11.4 1.5
Loss on disposal of equipment 2.6 4.5
Other, net (4.1) (.9)
Changes in certain assets and liabilities, net:
Receivables (11.4) (18.5)
Inventories (78.0) (33.4)
Other current assets (39.9) (4.8)
Accounts payable and accrued expenses (74.4) (85.7)
Current and deferred income taxes 17.7 (26.2)
Other non-current liabilities (1.9) 2.4
------- -------
Net cash provided by operating activities 175.3 173.3
------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment (423.1) (238.3)
Proceeds from sale of equipment 24.6 -
Proceeds from the sale and maturities of
marketable investments 578.2 618.6
Purchases of marketable investments (630.1) (609.3)
Proceeds from sale of net assets of DynaCraft, Inc. 70.0 -
Proceeds from sale of investments 7.8 7.9
Business acquisitions, net of cash acquired (19.2) (12.0)
Purchases of investments and other, net (10.7) (12.9)
------- -------
Net cash used by investing activities (402.5) (246.0)
------- -------
Cash flows from financing activities:
Proceeds from issuance of convertible subordinated
notes, less issuance costs 253.3 -
Proceeds from the issuance of debt 42.0 61.1
Repayment of debt (20.9) (48.7)
Issuance of common stock under
employee benefit plans 29.3 11.2
Purchase of treasury stock (63.0) (51.9)
Payment of preferred dividends (5.6) (8.4)
------- -------
Net cash provided (used) by financing activities 235.1 (36.7)
------- -------
Net change in cash and cash equivalents 7.9 (109.4)
Cash and cash equivalents at beginning of period 420.3 398.1
------- -------
Cash and cash equivalents at end of period $ 428.2 $ 288.7
======= =======
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 5
Note 1. Summary of Significant Accounting Policies
In the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments necessary to present fairly
the financial position and results of operations of National
Semiconductor Corporation and its subsidiaries ("National" or the
"Company"). Interim results of operations are not necessarily
indicative of the results to be expected for the full year. This report
should be read in conjunction with the consolidated financial statements
and notes thereto included in the annual report on Form 10-K for the
fiscal year ended May 28, 1995.
Property, plant and equipment: Property, plant and equipment are
recorded at cost. Effective May 29, 1995, the Company prospectively
changed its method of accounting for depreciation from the 150 percent
declining balance method to the straight-line method for machinery and
equipment placed in service on or after that date. The change was
adopted because it conforms with predominant industry practice and it is
expected to result in a more appropriate distribution of the cost of the
new machinery and equipment over its estimated useful life. The effect
of the change was an increase to net income of $3.5 million or $.03 per
share for the third quarter of fiscal 1996 and $5.7 million or $.04 per
share (fully diluted) for the first nine months of fiscal 1996. Assets
placed in service prior to fiscal 1996 and assets other than machinery
and equipment continue to be depreciated using prior years' depreciation
methods consisting of both straight-line and declining balance methods
over estimated useful lives, or in the case of property under capital
lease and leasehold improvements, over the lesser of the estimated
useful life or lease term.
The Company capitalizes interest on borrowings during the construction
period of major capital projects. Capitalized interest is added to the
cost of the underlying assets and is amortized over their useful lives.
In the third quarter, the Company capitalized $3.4 million of interest
in connection with various capital expansion projects. Prior to the
third quarter of fiscal 1996, capitalized interest costs were
immaterial.
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 for
all periods prior to the third quarter of fiscal 1996; during the second
quarter of fiscal 1996 all outstanding preferred shares were converted
into shares of common stock. Fully diluted earnings per share are
computed using the weighted average common and dilutive common stock
equivalents outstanding, plus other potentially dilutive securities
outstanding which are not common stock equivalents such as convertible
preferred shares for all periods prior to the third quarter of fiscal
1996 and convertible subordinated notes beginning in the second quarter
of fiscal 1996. If the result of assumed conversions is dilutive, the
dividend adjustments for the convertible preferred shares are reduced
and net earnings are adjusted for the interest expense on the
convertible subordinated notes while the average shares of common stock
outstanding are increased. For the third quarter ended February 25,
1996, the effect of assumed conversion of the convertible subordinated
notes was antidilutive.
<PAGE> 6
Note 2. Components of Inventories
The components of inventories were:
(in millions) Feb. 25, May 28,
1996 1995
------- -------
Raw materials $ 37.2 $ 33.9
Work in process 196.6 165.9
Finished goods 92.7 63.2
----- ------
Total inventories $ 326.5 $ 263.0
======= =======
Note 3. Other income, net
The Company reclassified certain non-operating items that were
previously reported as selling, general and administrative expenses as
other income, net. The reclassifications had no impact on previously
reported net income.
Components of other income,
net were:
(in millions) Three Months Ended Nine Months Ended
------------------ ------------------
Feb. 25, Feb. 26, Feb. 25, Feb. 26,
1996 1995 1996 1995
-------- -------- -------- --------
Net intellectual property income $ 2.5 $ 4.8 $ 13.3 $ 14.3
Gain on sale of investments, net - 2.6 5.2 6.9
Other 1.5 - 1.5 (5.0)
------- ------- ------- -------
Total other income, net $ 4.0 $ 7.4 $ 20.0 $ 16.2
======= ======= ======= =======
Note 4. Debt Financing
In September 1995, the Company completed a private placement of
convertible subordinated notes in the total amount of $258.8 million to
certain qualified investors. Interest is payable semi-annually
beginning April 1, 1996 at an annual rate of 6.5 percent. The notes,
which mature in 2002, are not redeemable by the Company prior to October
3, 1998. Thereafter, the notes are redeemable at the option of the
Company, initially at 103.714 percent of face value and at decreasing
prices thereafter to 100 percent of face value at maturity, plus accrued
interest. The notes are convertible, at any time, into shares of the
Company's common stock at an initial conversion price of $42.78 per
share and are subordinated to senior indebtedness of the Company. The
notes have not been and will not be registered under the Securities Act
of 1993 and may not be offered or sold within the United States absent
registration or exemption from such registration requirements.
<PAGE> 7
Note 5. Preferred Stock Redemption
In November 1995, the Company called for the redemption on December 1,
1995 of all outstanding shares of its $32.50 Convertible Preferred
shares. As a result of the redemption, on December 1, 1995 each
Convertible Preferred share was automatically converted into 35.273
shares of the Company's common stock for a total of 12.2 million shares
of common stock. This transaction is reflected in the Company's
financial statements for the third fiscal quarter ending February 25,
1996.
Note 6. Statement of Cash Flows Information
(in millions)
Nine Months Ended
------------------
Feb. 25, Feb. 26,
1996 1995
-------- --------
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 3.7 $ 3.4
Interest on tax settlements 12.1 30.0
Income taxes 22.8 45.5
Supplemental schedule of non-cash investing
and financing activities:
Issuance of stock for employee benefit plans $ 4.3 $ 4.0
Tax benefit for employee stock option plans 12.8 26.7
Retirement of treasury stock 119.1 -
Unrealized gain (loss) on available-for-sale
securities (4.7) 20.2
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Sales Net sales of $600.3 million and $2,010.7 million for the third
quarter and first nine months of fiscal 1996 increased by 5.1 percent
and 17.6 percent, respectively, over the comparable periods of fiscal
1995 reflecting lower sales growth in the third quarter primarily caused
by a general slowdown in new orders from the personal computer market
and semiconductor distribution channel. Sales growth was largest in
analog and mixed signal product sales with an increase of 10.6 percent
and 24.1 percent, respectively, for the same periods. The Company's
focus on analog and mixed signal market opportunities continues to drive
the overall growth in sales, as sales for analog and mixed signal
products grew to 59.1 percent and 58.9 percent of total sales for the
third quarter and first nine months of fiscal 1996 from 56.2 percent and
55.9 percent for the comparable periods of fiscal 1995. Within analog
and mixed signal product sales, product sales for local area networks
and wide area networks, including wireless communication, were the major
growth contributors with increases of 21.4 percent and 33.5 percent,
respectively, for the third quarter of fiscal 1996 and 17.6 percent and
61.1 percent, respectively, for the first nine months of fiscal 1996
from sales for the comparable periods of fiscal 1995. The shift toward
analog and mixed signal products is reflected by the decrease in sales
for bipolar, CMOS logic and memory products of 8.0 percent for the third
quarter of fiscal 1996 from sales for the same quarter of fiscal 1995
and the lower growth rate in sales of 5.9 percent for the first nine
months of fiscal 1996 from sales for the same period of fiscal 1995, as
the Company continues its strategy to de-emphasize older logic products
and exit the EPROM memory products market. Sales of these products were
19.9 percent and 20.5 percent of total sales for the third quarter and
first nine months of fiscal 1996, down from 22.6 percent and 22.7
percent, respectively, for the comparable periods of fiscal 1995. Sales
for the remaining product lines were 21.0 percent and 20.6 percent of
total sales for the third quarter and first nine months of fiscal 1996,
down from 21.2 percent and 21.4 percent, respectively, for each of the
corresponding periods of fiscal 1995.
Gross Margin Gross margin decreased to 38.6 percent for the third
quarter of fiscal 1996 from 40.1 percent for the third quarter of fiscal
1995 due to lower than expected revenues and reduced factory
utilization. These factors were caused primarily by a slowdown in new
orders through the early part of the third quarter as customers and
distributors reduced inventories forcing the Company to reduce
production levels. Despite the decrease in gross margin for the third
quarter of fiscal 1996, gross margin for the first nine months of fiscal
1996 increased to 42.1 percent from 41.8 percent for the comparable
period of fiscal 1995. This improvement is attributable to the
continued shift in product portfolio towards higher margin analog and
mixed signal products, which provide gross margins in excess of 50
percent, as well as the Company's strategy to de-emphasize older logic
products and exit the EPROM memory products market.
Research and Development Research and development expenses increased
overall by 33.7 percent and 31.7 percent for the third quarter and first
nine months of fiscal 1996 over the comparable period of fiscal 1995 and
as a percent of sales increased to 16.1 percent and 13.5 percent for the
<PAGE> 9
third quarter and first nine months of fiscal 1996 from 12.7 percent and
12.0 percent, respectively, for the comparable periods of fiscal 1995.
The increase reflects an $11.4 million charge for in-process research
and development related to the acquisition of Sitel Sierra B.V. in the
third quarter of fiscal 1996 in addition to the Company's continued
investment in the development of new analog and mixed signal products,
as well as advanced submicron CMOS process technology.
Selling, General, and Administrative The overall increase in
selling, general, and administrative ("SG&A") expenses of 8.7 percent
and 17.7 percent for the third quarter and first nine months of fiscal
1996 over the comparable periods of fiscal 1995 was attributable to
increases in sales support costs and marketing activities proportional
to increased sales and increases in contributions to employee
compensation and benefit plans, including the employee retirement and
savings program and the success sharing incentive plan which commenced
in fiscal 1996. During the third quarter, the Company implemented a
number of cost reduction programs to maintain cost growth rate below
sales growth rate, which decreased SG&A expenses for the current quarter
from the previous quarter. However, SG&A expenses increased slightly as
a percent of sales at 18.7 percent for the third quarter of fiscal 1996
from 18.0 percent for the same quarter of fiscal 1995, caused by lower
than anticipated revenue growth, and remained at 18.4 percent for both
the first nine months of fiscal 1996 and the comparable period of fiscal
1995.
Interest Income and Interest Expense Interest income increased $2.6
million and $6.0 million, to $8.0 million and $21.6 million,
respectively, for the third quarter and first nine months of fiscal 1996
compared to the comparable periods of fiscal 1995. Interest expense
increased to $3.9 million and $11.7 million from $.7 million and $2.9
million, respectively, for the comparable periods of fiscal 1995.
Interest expense increased in the third quarter despite capitalization
of $3.4 million in interest on borrowings related to various capital
expansion projects. While the increase in interest income was primarily
the result of higher cash balances, it was offset by a greater increase
in interest expense associated with the $258.8 million convertible
subordinated notes issued by the Company in September 1995, as well as
increased borrowing levels related to the Company's continued investment
in plant and equipment.
Other Income, net Other income was $4.0 million and $20.0 million
for the third quarter and first nine months of fiscal 1996, compared to
$7.4 million and $16.2 million, respectively, for the comparable periods
of fiscal 1995. Included in other income for the third quarter of
fiscal 1996 is net intellectual property income of $2.5 million plus a
realized gain of $1.5 million primarily arising from the sale of the
assets of DynaCraft, Inc., a wholly owned subsidiary of the Company.
This compares to net intellectual property income of $4.8 million plus
realized gains from sale of investments, net of losses, of $2.6 million
for the third quarter of fiscal 1995. For the first nine months of
fiscal 1996, other income comprised net intellectual property income of
$13.3 million plus realized gains from the sale of investments, net of
losses, of $6.7 million. This compares to net intellectual property
income of $14.3 million, plus realized gains from sale of investments,
net of losses, of $6.9 million offset by a one-time royalty charge of
$5.0 million in the first nine months of fiscal 1995.
<PAGE> 10
Income Taxes The effective tax rate for fiscal 1996 is approximately
25 percent compared to 20 percent for fiscal year 1995. The increase in
the annual effective tax rate primarily relates to the exhaustion of
certain net operating loss and tax credit carry forwards.
Financial Condition During the first nine months of fiscal 1996,
cash and cash equivalents increased $7.9 million compared to a $109.4
million decrease for the first nine months of fiscal 1995. The increase
was primarily provided by the proceeds of $253.3 million, net of
issuance costs, from the private placement of convertible subordinated
notes offset by the Company's continued investment in property, plant
and equipment of $423.1 million, an increase of $184.8 million over
capital expenditures for the same period of fiscal 1995, plus proceeds
from sale of equipment of $24.6 for the first nine months of fiscal
1996. Although the Company is reducing its capital purchase commitments
in response to the reduction in new orders, management foresees the
continuation of significant cash outlays for plant and equipment for the
remainder of fiscal 1996. Existing cash and investment balances,
together with existing lines of credit, are considered to be sufficient
in the immediate future to finance these capital investments.
Outlook Although the Company's revenues grew by 17.6 per cent for
the first nine months of fiscal 1996 over the comparable period of
fiscal 1995, 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 and communications industries and the general economy,
competitive factors and price pressures, market acceptance and timing of
new products, and international economic conditions.
Through the third quarter of fiscal 1996, the Company's rate of revenue
growth and profitability has slowed reflecting the current weakness in
the semiconductor distribution channel, as well as in the personal
computer and analog mobile communications markets. As a result, the
rate of orders for Company products has been adversely impacted. The
Company has experienced a general decline in the rate of growth in
orders since the end of fiscal 1995 and unless the rate of orders
increases, the Company will not be able to sustain the same level of
revenue growth it has experienced in the first part of fiscal 1996.
Generally, the semiconductor industry experiences a seasonal upturn in
new orders during the spring, however, there has not yet been any
indication of an upturn. The Company faces the risks that either a
seasonal upturn will not be experienced during the fourth quarter of
fiscal 1996, or that the occurrence of a seasonal upturn will not
provide new orders at a level sufficient to generate revenue growth.
Additionally, the Company faces the risk that the slowdown in sales for
the personal computer market will continue to unfavorably impact the
industry and the Company. Any future gross margin improvement is
predicated on increased new order rates in future periods, particularly
in the higher margin multi-market analog products, which keep
inventories in balance with demand and produce increased manufacturing
capacity utilization. Unless the rate of orders increases during the
fourth quarter of fiscal 1996, the Company will not be able to achieve
the level of revenues and profitability it experienced in the comparable
quarter of fiscal 1995.
<PAGE> 11
Management is currently evaluating several cost reduction plans to align
the cost structure of the Company to current business conditions. The
implementation of these cost reduction plans may have an adverse effect
on the Company's financial results for the fourth quarter of fiscal
1996. The impact of any cost reduction plans cannot be quantified at
this time, because management is still considering the various options
and has not yet finalized and approved any plans that will ultimately be
implemented.
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. During the quarter, the
Company purchased Sitel Sierra B.V., a Netherlands company that designs
and supplies components and subsystems for the wireless market; the
Company believes this acquisition will exhance its wireless product
offerings. 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
appropriate. During the quarter, the Company completed its sale of the
assets of its wholly owned subsidiary, DynaCraft, Inc. The disposition
did not have a material effect on the Company's financial position or
results of operations.
Other On February 2, 1996, Gilbert F. Amelio resigned from his
positions as the Company's Chairman, Director, President and Chief
Executive Officer. Mr. Amelio's resignation was the result of his
acceptance of the Chief Executive Officer position at Apple Computer,
Inc. The Company's Board of Directors has commenced a search for a new
Chief Executive Officer. Pending the appointment of a new Chief
Executive Officer, the three Executive Vice Presidents who comprise the
Office of the President will serve together as interim head of the
Company, reporting directly to the Board of Directors
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- - --------------------------
Reference is made to Item 3, Legal Proceedings, in the Company's Annual Report
on Form 10-K for the year ended May 28, 1995 and Item 1, Legal Proceedings in
the Company's Quarterly Report on 10-Q for the quarter ended August 27, 1995,
which information is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits
--------
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
Amendment of Certificate of Incorporation dated September 30, 1994
(incorporated by reference from the Exhibits to the Company's 10-K
for the fiscal year ended May 28, 1995).
3.2 By Laws for the Company (incorporated by reference from the
Exhibits to the Company's 10-K for the fiscal year ended May 28,
1995).
4.1 Rights Agreement (incorporated by reference from the Exhibits to
the Company's Registration Form 8-A filed August 10, 1988). First
Amendment to the Rights Agreement (incorporated by reference from
the Exhibits to the Amendment No. 1 to the Company's Registration
Statement on Form 8-A filed December 11, 1995).
4.2 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).
10.1 Management Contract or Compensatory Plan or Agreement: Benefit
Restoration Plan (as amended January, 1996 through January 1,
1995)
11.1 Additional Fully Diluted Calculation of Earnings Per Share
27.0 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during fiscal quarter ended February 25,
1996
<PAGE> 13
SIGNATURE
- - ---------
Pursuant to the requirements 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: March 26, 1996 /s/ Richard D. Crowley
----------------------------------
Richard D. Crowley
Vice President and Controller
Signing on behalf of the registrant
and as principal accounting officer
<PAGE> 14
Exhibit 10.1
BENEFIT RESTORATION PLAN - PLAN DOCUMENT
As Amended through January 1, 1995
THIS BENEFIT RESTORATION PLAN ("Plan") originally adopted by National
Semiconductor Corporation, a corporation organized and existing under the laws
of the State of Delaware, (hereinafter referred to as the "Employer")
effective as of June 1, 1992, as hereby amended effective as of January 1,
1995:
WITNESSETH:
WHEREAS, the Employer desires to establish a benefit restoration income plan
for the exclusive benefit of certain participants in the National
Semiconductor Corporation Retirement and Savings Program ("RASP") so as to
reward them for their loyal and faithful service to the Employer and to aid
them in increasing their economic security by providing additional funds at
retirement with respect to those benefits that are reduced because of the
limitations of sections 401(a)(17), 402(g)(1), 401(k) and 415 of the Internal
Revenue Code of 1986; and
WHEREAS, the Employer has been authorized by its Board of Directors to adopt
this Plan in order to provide for the benefits specified;
NOW, THEREFORE, in consideration of the premises herein contained, it is
hereby declared as follows:
ARTICLE 1
Definitions
When used herein, the words and phrases defined hereinafter shall have the
following meaning unless a different meaning is clearly required by the
context.
1.01 "Account" shall mean the Accounts and subaccounts established pursuant
to Section 3.05 of the Plan.
1.02 "Annual Matching Restoration Amount" shall mean the amount determined in
accordance with Section 3.04 of the Plan.
1.03 "Annual Profit Sharing Restoration Amount" shall mean the amount
determined in accordance with Section 3.02 of the Plan.
1.04 "Annual Savings Restoration Amount" shall mean the amount determined in
accordance with Section 3.03 of the Plan.
<PAGE> 15
1.05 "Beneficiary" shall mean the person or persons last designated by a
Participant, by written notice filed with the Committee, to receive a
Plan benefit upon his or her death. In the event a Participant fails to
designate a person or persons as provided above or if no Beneficiary so
designated survives the Participant, then for all purposes of this Plan,
the Beneficiary shall be the person(s) designated as the beneficiaries
by the Participant under the RASP, and, if none, the Participant's
estate.
1.06 "Board" shall mean the Board of Directors of National Semiconductor
Corporation.
1.07 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.08 "Committee" shall mean The Retirement and Savings Program Administrative
Committee, as determined by the Board.
1.09 "Compensation" shall mean Compensation as defined in the RASP without
giving any effect to the limitations imposed by Section 401(a)(17) of
the Code, as now or hereafter in effect.
1.10 "Elected Contribution" shall mean the amount the Participant agrees to
defer under this Plan pursuant to procedures established by the
Committee up to the maximum permitted deferral pursuant to Section 3.03
of the Plan.
1.11 "Employer" shall mean National Semiconductor Corporation.
1.12 "Interest" shall mean the rate for long-term A-rated corporate bonds,
reported by the investment banking firm of Salomon Brothers of New York
City (or such other investment banking firm as the Committee may
specify) during the first week of each Plan Year. The interest rate
will be reset at the beginning of each Plan Year.
1.13 "Participant" shall mean an employee of the Employer participating in
the RASP, who satisfies the eligibility requirements of Section 2.01 of
the Plan and such other conditions that are established from time to
time by the Committee, including a condition relating to the amount of
the employee's basic compensation or regular rate of compensation for
the Plan Year.
1.14 "Plan" shall mean the National Semiconductor Corporation Benefit
Restoration Plan, as amended from time to time.
1.15 "Plan Year" shall mean the twelve consecutive month period ending on the
last day of May.
<PAGE> 16
1.16 "RASP" shall mean the National Semiconductor Corporation Retirement and
Savings Program.
1.17 Capitalized Terms not defined herein shall have the meaning attributed
to them in the RASP.
ARTICLE II
Eligibility
2.01 Eligibility
A Participant or Beneficiary shall be eligible to receive an Annual Profit
Sharing Restoration Amount in any Plan Year in which he qualifies for an
allocation of the Employer's Annual Profit Sharing Contribution under the RASP
but the amount of the benefit to which he is entitled is reduced by reason of
the application of the limitations set forth in Sections 401(a)(17) or
415(c)(1)(A) of the Code. A Participant or Beneficiary shall be eligible to
receive an Annual Savings Restoration Amount in any Plan Year in which he
makes the maximum permitted deferral under the RASP, as determined by the
Committee, and his Compensation is in excess of an amount determined by the
Committee for such Plan Year. A Participant or Beneficiary shall be eligible
to receive an Annual Matching Restoration Amount in any Plan Year in which his
Compensation exceeds the limitations set forth in Section 401(a)(17) of the
Code and he elects to defer at least 6% of his Compensation under Section 5.02
A. of the RASP.
2.02 Enrollment
An eligible individual is automatically enrolled in the Annual Profit Sharing
Restoration Amount portion of this Plan. Eligible Participants may enroll in
the Plan for purposes of the Annual Savings Restoration Amount by November 30
or other date prior to the end of the calendar year that is specified by the
Committee ("enrollment date") of any year, effective as of January 1 of the
next succeeding calendar year, by submitting an enrollment form on which is
stated the amount of elective deferrals elected under the RASP. An employee
who becomes eligible after an enrollment date will be required to wait until
the next enrollment date to participate in the Annual Savings Restoration
Amount portion of the Plan. Eligible Participants must enroll or re-enroll
annually each calendar year.
ARTICLE III
Benefits
3.01 Benefits.
The maximum benefits under this Plan to which an eligible Participant or
Beneficiary shall be entitled shall be equal to the sum of the vested Annual
Profit Sharing Restoration Amount, the Annual Savings Restoration Amount, and
the Annual Matching Restoration Amount, plus Interest on such sum.
<PAGE> 17
3.02 Annual Profit Sharing Restoration Amount.
The Annual Profit Sharing Restoration Amount to which an eligible Participant
or Beneficiary shall be entitled shall be an amount equal to the difference,
if any, between (a) and (b) below:
(a) The amount of the Employer's Annual Profit Sharing Contribution
which would have been allocated to a Participant or Beneficiary
under the RASP if the Annual Profit Sharing Contribution were
determined pursuant to Section 5.01 B.3. of the RASP and the
allocation were determined pursuant to Section 6.03 A. of the RASP
without giving any effect to the limitations imposed by Sections
401(a)(17) and 415 of the Code, as now or hereafter in effect; less
(b) The amount of the Employer's Annual Profit Sharing Contribution
allocated to the Participant or Beneficiary under the RASP.
3.03 Annual Savings Restoration Amount.
The maximum Annual Savings Restoration Amount from which an eligible
Participant or Beneficiary may make an Elected Contribution shall be equal to
the difference, if any, between (a) and (b) below:
(a) The amount that the Participant could defer if the maximum
percentage deferral determined by the Committee under Section
5.02A of the RASP were applied to the Participant's Compensation,
and the Participant's Elected Contribution under the RASP were not
subject to Sections 401(k), 402(g)(1) or 415 of the Code, as now
or hereafter in effect; less
(b) The amount of the Participant's Elected Contribution under the RASP.
The Participant's Annual Savings Restoration Amount shall be equal to the
Participant's Elected Contribution.
<PAGE> 18
3.04 Annual Matching Restoration Amount.
The Annual Matching Restoration Amount to which an eligible Participant or
Beneficiary shall be entitled shall be an amount equal to the difference, if
any, between (a) and (b) below:
(a) The lesser of (1) 6% of the Participant's Compensation, without
giving any effect to the limitations imposed by Section 401(a)(17)
of the Code, as now or hereafter in effect, or (2) the limit
imposed by Section 402(g) of the Code; and
(b) 6% of the Participant's Compensation as limited by Section
401(a)(17) of the Code,
multiplied by 50%, or any other percentage as the Board may determine for a
given Plan Year under Section 5.03 A. of the RASP. Notwithstanding the
foregoing, to the extent that the matching contribution that would otherwise
be made on behalf of a Participant under Section 5.03 of the RASP is reduced
in accordance with the requirements of Section 401(m) of the Code, such
Participant's Annual Matching Restoration Amount shall be likewise limited in
accordance with rules established by the Committee.
3.05 Participant's Account.
The Employer shall create and maintain adequate records to reflect the
interest of each Participant in the Plan. Such records shall be in the form
of individual Accounts. When appropriate, a Participant's Account shall
consist of a profit sharing restoration subaccount, a savings restoration
subaccount, and a matching restoration subaccount. Such Accounts shall be
kept for recordkeeping purposes only and shall not be construed as providing
for assets to be held in trust or escrow or any other form of asset
segregation for the Participant or Beneficiary to whom benefits are to be paid
pursuant to the terms of the Plan.
3.06 Allocation to Participant Account and Interest.
The Participant's Annual Savings Restoration Amount shall be credited to the
Participant's Account as of the date such amount would have been paid to such
Participant as remuneration for services, and the Participant's Annual Profit
Sharing Restoration Amount and Annual Matching Restoration Amount shall be
credited to the Participant's Account as of the last day of a Plan Year. The
Participant's balance in his Account shall be credited with Interest at such
times and in such manner as determined in the sole discretion of the
Committee.
3.07 Vested Percentage.
Notwithstanding anything herein to the contrary, a Participant shall be 100%
vested at all times in the amounts credited to his savings restoration
subaccount and his matching restoration subaccount. A Participant shall be
vested in the amount credited to his profit sharing restoration subaccount to
the same extent as the Participant is vested in his Profit Sharing Accounts,
in accordance with Article VIII of the RASP; provided, however, that forfeited
amounts shall not be reallocated among Plan Participants but shall be restored
to the forfeiting Participant upon reemployment, in accordance with the
procedures set forth in Article VIII of the RASP.
ARTICLE IV
Distribution of Benefit
<PAGE> 19
4.01 Separation from Service.
The benefits attributable to the Annual Profit Sharing Restoration Amount plus
Interest thereon shall be distributed upon termination of employment for any
reason (including retirement, disability or death), and the benefits
attributable to the Annual Savings Restoration Amount plus Interest shall be
distributed upon the earlier of termination of employment for any reason
(including retirement, disability or death), or a date preselected by the
Participant either upon eligibility to participate under the Plan or upon such
date or dates as may be determined by the Committee.
Benefits shall be distributed in a lump sum unless the Participant elects to
receive part or all of the benefits in installments pursuant to this Section.
An election to receive installment payments under the Plan must be filed with
the Committee at least ninety (90) days (hereinafter referred to as the
"Election Date") prior to the date of the Participant's termination of
employment or, if earlier, the date preselected by the Participant to receive
benefits attributable to the Annual Savings Restoration Amount plus Interest.
Such election shall be irrevocable at the time it is filed or if later, on
the Election Date. If the benefits are payable in installments, such
installments will be paid annually over a period selected by the Participant
on the Election Date but shall not exceed ten (10) years. The installment
payments shall be made within thirty (30) days of each anniversary date of the
initial installment. To the extent benefits are not paid in installments, the
account balance will be paid in a lump sum in the month following the event
giving rise to the distribution.
In the event a Participant entitled to installment payments dies before
receiving all benefits under the Plan, the unpaid balance will be paid in a
lump sum to such Participant's Beneficiary in the month following the
Participant's death.
4.02 Hardship.
Payment of part or all of the benefits under this Plan may be accelerated in
the case of severe hardship, which shall mean an emergency or unexpected
situation in the Participant's financial affairs, including, but not limited
to, illness or accident involving the Participant or any of the Participant's
dependents. All payments in case of hardship must be approved by the
Committee.
ARTICLE V
Administration; Amendments and Termination; Rights Against the Company
5.01 Administration.
The Committee shall administer this Plan. With respect to the Plan, the
Committee shall have, and shall exercise and perform, all the powers, rights,
authorities and duties set forth in the RASP with the same effect as if set
forth in full herein with respect to this Plan. Except as expressly set forth
herein, any determination or decision by the Committee shall be conclusive and
binding on all persons who at any time have or claim to have any interest
whatever under this Plan.
<PAGE> 20
5.02 Amendment and Termination Prior to a Change in Control.
The Employer, solely, and without the approval of the Committee or any
Participant or Beneficiary, shall have the right to amend this Plan at any
time and from time to time, by resolution adopted by it. Any such amendment
shall become effective upon the date stated therein. Notwithstanding the
foregoing, no amendment shall adversely affect the rights of any Participant
or Beneficiary who was previously receiving benefits under this Plan to
continue to receive such benefits or of all other Participants and
Beneficiaries to receive the benefits promised under the Plan immediately
prior to the later of the effective date or the date of adoption of the
amendment.
The Employer has established this Plan with the bonafide intention and
expectation that from year to year it will deem it advisable to continue it in
effect. However, circumstances not now foreseen or circumstances beyond the
Employer's control may make it impossible or inadvisable to continue the Plan.
Therefore, the Employer, in its sole discretion, reserves the right to
terminate the Plan in its entirety at any time; provided, however, that in
such event any Participant or Beneficiary who was receiving benefits under
this Plan as of the termination date, shall continue to receive such benefits,
and all other Participants and Beneficiaries shall remain entitled to receive
the benefits promised under the Plan immediately prior to the termination of
the Plan.
5.03 Rights Against the Employer.
The establishment of this Plan shall not be construed as giving to any
Participant, Beneficiary, employee or any person whomsoever, any legal,
equitable or other rights against the Employer, or its officers, directors,
agents or shareholders, except as specifically provided for herein, or its
giving to any Participant any equity or other interest in the assets, business
or shares of the Employer or giving any employee the right to be retained in
the employment of the Employer. All employees and Participants shall be
subject to discharge to the same extent that they would have been if this Plan
had never been adopted. Subject to the rights of the Employer to terminate
this Plan or any benefit hereunder, the rights of a Participant hereunder
shall be solely those of an unsecured creditor of the Employer.
ARTICLE VI
General and Miscellaneous
6.01 Spendthrift Clause.
No right, title or interest of any kind in the Plan shall be transferable or
assignable by any Participant or Beneficiary or any other person or be subject
to alienation, anticipation, encumbrance, garnishment, attachment, execution
or levy of any kind, whether voluntary or involuntary. Any attempt to
alienate, sell, transfer, assign, pledge, garnish, attach or otherwise
encumber or dispose of any interest in the Plan shall be void.
<PAGE> 21
6.02 Severability.
In the event that any provision of this Plan shall be declared illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan but shall be fully severable, and this Plan
shall be construed and enforced as if said illegal or invalid provision had
never been inserted herein.
6.03 Construction of Plan.
The article and section headings and numbers are included only for convenience
of reference and are not to be taken as limiting or extending the meaning of
any of the terms and provisions of this Plan. Whenever appropriate, words
used in the singular shall include the plural or the plural may be read as the
singular.
6.04 Gender.
The personal pronoun of the masculine gender shall be understood to apply to
women as well as men except where specific reference is made to one or the
other.
6.05 Governing Law.
THE VALIDITY AND EFFECT OF THIS PLAN AND THE RIGHTS AND OBLIGATIONS
OF ALL PERSONS AFFECTED HEREBY SHALL BE CONSTRUED AND DETERMINED
IN ACCORDANCEWITH THE LAWS OF THE UNITED STATES AND THE LAWS
OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO ITS OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
6.06 Unfunded Top Hat Plan.
It is the Employer's intention that this Plan be a Top Hat Plan, defined as an
unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
as provided in Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended from time to time. The
Employer may establish and fund one or more trusts for the purpose of paying
some or all of the benefits promised to Participants and Beneficiaries under
the Plan; provided, however, that (i) any such trust(s) shall at all times be
subject to the claims of the Employer's general creditors in the event of the
insolvency or bankruptcy of the Employer, and (ii) notwithstanding the
creation or funding of any such trust(s), the Employer shall remain primarily
liable for any obligation hereunder. Notwithstanding the establishment of any
such trust(s), the Participants and Beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of any such
trust or of the Employer.
<PAGE> 22
6.07 Divestment for Cause.
Notwithstanding any other provisions of this Plan to the contrary, the right
of any Participant, former Participant or Beneficiary of either to receive or
to have paid to any other person, or the right of any such other person to
receive any benefits attributable to the Annual Profit Sharing Restoration
Amount plus Interest hereunder or the Annual Matching Restoration Amount plus
Interest hereunder, shall be forfeited, if such Participant's employment with
the Employer is terminated because of or the Participant is discovered to have
engaged in fraud, embezzlement, dishonesty against the Employer, obtaining
funds or property under false pretenses, assisting a competitor without
permission, or interfering with the relationship of the Employer or any
subsidiary or affiliate thereof with a customer. A Participant's or
Beneficiary's benefits shall be forfeited for any of the above reasons
regardless of whether such act is discovered prior to or subsequent to the
Participant's termination from the Employer or the payment of benefits under
the Plan. If payment has been made, such payment shall be restored to the
Employer by the Participant or Beneficiary.
ERISA Rights
This Plan is intended to provide benefits for a select group of highly-
compensated employees within the meaning of the Employee Retirement Income
Security Act of 1974 (ERISA). However, it is not subject to most of the
requirements of ERISA nor is the Plan eligible for insurance under Title IV of
ERISA. Furthermore, the Plan is considered to be an unfunded, non-qualified
plan for purposes of complying with the Internal Revenue Code.
If you believe your benefit under the Plan has been denied, in whole or in
part, you should file a claim with the Retirement and Savings Program
Administrative Committee. Your claim will be reviewed using the same
procedures as those described in the Summary Plan Description for the RASP.
The following information identifies the benefit plan described in this
booklet and gives other important administrative data.
Plan Name:
The Benefit Restoration Plan
Plan Sponsor: Employer I.D. Number (EIN):
National Semiconductor Corporation EIN: 95-2095071
2900 Semiconductor Drive
P.O.Box 58090
Santa Clara, CA 95052-8090
(408) 721-2383
<PAGE> 23
Dyna-Craft, Inc. EIN: 94-1682796
2919 San Ysidro
Santa Clara, CA 95051
(408) 721-6855
Plan Number:
005
Plan Year:
The twelve consecutive month period ending on May 31. Plan records are
maintained on the basis of this Plan Year.
Plan Administrator:
Retirement and Savings Program Administrative Committee
c/o Retirement Plans Administration
National Semiconductor Corporation
2900 Semiconductor Drive
P. O. Box 58090
Santa Clara, CA 95052-8090
(408) 721-2383
Type of Plan:
The Plan is a non-qualified deferred compensation plan for selected key
employees of National Semiconductor.
Agent for Service of Legal Process:
Legal process should be served on the company's Corporate Secretary or the
Plan Administrator in care of the Retirement Plans Administration Office at
the company's address.
Funding Medium:
The Plan is unfunded and benefits are paid from the Plan sponsor's general
assets.
<PAGE> 24
NATIONAL SEMICONDUCTOR CORPORATION Exhibit 11.0
ADDITIONAL FULLY DILUTED CALCULATION OF EARNINGS PER SHARE (1)
(in millions, except per share amounts)
Three Months Ended Nine Months Ended
------------------ --------------------
Feb. 25, Feb. 26, Feb. 25, Feb. 26,
1996 1995 1996 1995
-------- -------- -------- --------
Net income used in fully
diluted earnings per share
(reflecting adjustment for
interest on convertible
notes) $ 24.7 $ 57.0 $ 180.1 $ 183.0
======== ======== ======== ========
Number of shares:
Weighted average common
shares outstanding 135.1 120.6 127.1 121.2
Weighted average common
equivalent shares, net of
tax benefit 2.7 4.1 4.0 4.0
-------- -------- -------- --------
Weighted average common and
common equivalent shares 137.8 124.7 131.1 125.2
Additional weighted average
common equivalent shares
assuming full dilution - - - .1
Shares issuable from
assumed conversion
of preferred shares - 12.2 8.1 12.2
Shares issuable from
assumed conversion
of convertible notes 6.1 - 3.4 -
-------- -------- -------- --------
Additional weighted average
common equivalent shares
assuming full dilution 143.9 136.9 142.6 137.5
======== ======== ======== ========
Income per share
assuming full dilution $ .17 $ .42 $ 1.26 $ 1.33
======== ======== ======== ========
(1) For the three months ended February 25, 1996, this calculation
is submitted in accordance with Regulation S-K Item 601(b)(11)
although it is contrary to paragraph 40 of the APB Opinion No.
15 because it produces an antidilutive result.
<PAGE> 25
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> MAY-26-1996 MAY-26-1996
<PERIOD-END> FEB-25-1996 FEB-25-1996
<CASH> 428 428
<SECURITIES> 99 99
<RECEIVABLES> 316 316
<ALLOWANCES> 0 0
<INVENTORY> 327 327
<CURRENT-ASSETS> 1334 1334
<PP&E> 2338 2338
<DEPRECIATION> 1168 1168
<TOTAL-ASSETS> 2602 2602
<CURRENT-LIABILITIES> 629 629
<BONDS> 357 357
0 0
0 0
<COMMON> 68 68
<OTHER-SE> 1488 1488
<TOTAL-LIABILITY-AND-EQUITY> 2602 2602
<SALES> 600 2011
<TOTAL-REVENUES> 600 2011
<CGS> 369 1165
<TOTAL-COSTS> 369 1165
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (4) (10)
<INCOME-PRETAX> 31 235
<INCOME-TAX> 8 59
<INCOME-CONTINUING> 23 176
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 23 176
<EPS-PRIMARY> .17 1.30
<EPS-DILUTED> .17 1.26
</TABLE>
