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 November 24, 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
-----------------------------------
(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 November 24,1996.
------------------- -------------------------------
Common stock, par value $0.50 per share 139,535,128
<PAGE> 1
NATIONAL SEMICONDUCTOR CORPORATION
INDEX
Part I. Financial Information Page No.
--------
Condensed Consolidated Statements of Operations
(Unaudited) for the Three Months and Six Months
Ended November 24, 1996 and November 26, 1995 3
Condensed Consolidated Balance Sheets (Unaudited)
as of November 24, 1996 and May 26, 1996 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Six Months Ended
November 24, 1996 and November 26, 1995 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6
Management's Discussion and Analysis of Results
of Operations and Financial Condition 10
Part II. Other Information
Legal Proceedings 15
Submission of Matters to a Vote of Security Holders 15
Exhibits and Reports on Form 8-K 16
Signature 17
<PAGE> 2
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)
Three Months Ended Six Months Ended
------------------ -------------------
Nov. 24, Nov. 26, Nov. 24, Nov. 26,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales $ 661.5 $ 711.6 $1,227.6 $1,410.4
Operating costs and expenses:
Cost of sales 430.7 398.6 824.6 796.3
Research and development 89.0 88.7 186.4 173.6
Selling, general and
administrative 106.4 128.8 200.4 258.0
Restructuring of operations - - 256.3 -
------- ------ -------- -------
Total operating costs
and expenses 626.1 616.1 1,467.7 1,227.9
------- ------ -------- -------
Operating income(loss) 35.4 95.5 (240.1) 182.5
Interest income, net 1.0 2.7 2.3 5.8
Other income, net 3.0 8.0 .3 16.0
------- ------- -------- -------
Income(loss) before
income taxes 39.4 106.2 (237.5) 204.3
Income tax provision(benefit) 9.9 26.4 (59.4) 51.0
------- ------ -------- -------
Net income(loss) $ 29.5 $ 79.8 $ (178.1) $ 153.3
======= ====== ======== =======
Earnings per share:
Primary $ .21 $ .61 $(1.29) $1.16
Fully diluted $ .21 $ .57 $(1.29) $1.10
Weighted average shares:
Primary 141.6 126.9 138.4 127.2
Fully diluted 142.6 143.1 138.4 141.4
Income (loss) used in primary
earnings per common share
calculation(reflecting
preferred dividends,
if applicable) $ 29.5 $ 77.0 $(178.1) $ 147.7
Income (loss) used in fully
diluted earnings per share
(reflecting adjustment for
interest on convertible
notes when dilutive) $ 29.5 $ 81.9 $(178.1) $ 155.4
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 3
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
Nov. 24, May 26,
1996 1996
ASSETS -------- --------
Current assets:
Cash and cash equivalents $ 396.7 $ 442.4
Short-term marketable investments 45.2 61.9
Receivables, net 304.3 281.2
Inventories 261.9 325.7
Deferred tax assets 140.4 71.1
Other current assets 65.5 73.7
------- -------
Total current assets 1,214.0 1,256.0
Property, plant and equipment 2,535.7 2,516.7
Less accumulated depreciation 1,292.5 1,208.6
------- -------
Net property, plant and equipment 1,243.2 1,308.1
Long-term marketable investments 7.0 11.7
Other assets 87.4 82.2
------- -------
Total assets $2,551.6 $2,658.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term borrowings and current
portion of long-term debt $ 30.8 $ 21.5
Accounts payable 207.4 255.6
Accrued expenses 295.5 235.1
Income taxes 162.6 164.6
------- -------
Total current liabilities 696.3 676.8
Long-term debt 382.8 350.5
Deferred income taxes 11.1 12.1
Other non-current liabilities 39.6 41.4
------- -------
Total liabilities 1,129.8 1,080.8
------- -------
Commitments and contingencies
Shareholders' equity:
Common stock 69.8 68.4
Additional paid-in capital 952.9 926.9
Retained earnings 399.1 581.9
------- -------
Total shareholders' equity 1,421.8 1,577.2
------- -------
Total liabilities and shareholders' equity $2,551.6 $2,658.0
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 4
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions) Six Months Ended
--------------------
Nov. 24, Nov. 26,
1996 1995
------- -------
Cash flows from operating activities:
Net income(loss) $(178.1) $ 153.3
Adjustments to reconcile net income(loss)
with net cash provided by operations:
Depreciation and amortization 134.8 108.8
(Gain)loss on investments 3.0 (5.2)
Tax benefit associated with stock options 4.1 12.0
In-process research and development charge 10.6 -
Loss on disposal of equipment 2.4 4.3
Write-down of inventory 15.1 -
Restructuring charges 256.3 -
Other, net (1.6) (2.3)
Changes in certain assets and liabilities, net:
Receivables (23.1) (36.3)
Inventories 48.7 (40.6)
Other current assets 8.2 (35.2)
Accounts payable and accrued expenses (71.9) (53.3)
Current and deferred income taxes (72.3) 23.2
Other non-current liabilities (1.8) 1.8
-------- --------
Net cash provided by operating activities 134.4 130.5
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (231.8) (277.3)
Proceeds from the sale and maturity of
marketable investments 541.4 305.2
Purchase of marketable investments (524.7) (318.1)
Proceeds from sale of investments - 7.8
Business acquisition (15.4) -
Purchase of investments and other, net (10.4) (10.4)
-------- --------
Net cash used by investing activities (240.9) (292.8)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of convertible subordinated
notes, less issuance costs - 253.3
Proceeds from the issuance of debt 52.2 42.0
Repayment of debt (10.6) (14.7)
Issuance of common stock, net 19.2 22.3
Purchase of treasury stock - (57.4)
Payment of preferred dividends - (5.6)
-------- --------
Net cash provided by financing activites 60.8 239.9
-------- --------
Net change in cash and cash equivalents (45.7) 77.6
Cash and cash equivalents at beginning of period 442.4 420.3
-------- --------
Cash and cash equivalents at end of period $ 396.7 $ 497.9
======== ========
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 fiscal
year ended May 26, 1996.
Property, plant and equipment: Effective the beginning of fiscal
1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," which requires recognition
of impairment of long-lived assets in the event the net book value of
such assets exceeds the future undiscounted cash flows attributable to
such assets. SFAS No. 121 also requires, among other provisions, that
long-lived assets and certain identifiable intangibles that are to be
disposed of, which are not covered by Accounting Principles Board
Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions," be reported at the
lower of the asset's carrying amount or its fair value less cost to
sell. Adoption of SFAS 121 had no material impact on the carrying
values of the Company's assets. In connection with the Company's
announcement that it had formed the Fairchild Semiconductor organization
("Fairchild") and is pursuing a sale or partial financing of all or a
portion of the Fairchild businesses and related assets, the Company
recorded a $189.1 million charge to write down related assets held for
sale to estimated fair value less cost to sell (see Note 5).
Note 2. Components of Inventories
The components of inventories were:
(in millions) Nov. 24, May 26,
1996 1996
------- -------
Raw materials $ 30.0 $ 39.1
Work in process 178.4 208.5
Finished goods 53.5 78.1
----- ------
Total inventories $ 261.9 $ 325.7
======= =======
Note 3. Other income, net
Components of other Three Months Ended Six Months Ended
income,net were: ------------------ ------------------
(in millions) Nov. 24, Nov. 26, Nov. 24, Nov. 26,
1996 1995 1996 1995
-------- -------- -------- --------
Net intellectual property income $ 1.4 $ 8.0 $ 1.7 $ 10.8
Gain(loss)on investments, net - - (3.0) 5.2
Other 1.6 - 1.6 -
------- ------- ------- -------
Total other income, net $ 3.0 $ 8.0 $ .3 $ 16.0
======= ======= ======= =======
<PAGE> 6
Note 4. Statement of Cash Flows Information
(in millions)
Six Months Ended
------------------
Nov. 24, Nov. 26,
1996 1995
-------- --------
Supplemental disclosure of cash flow
information:
Cash paid for:
Interest $ 9.1 $ 4.6
Interest on tax settlements .1 11.3
Income taxes 3.9 14.2
Supplemental schedule of non-cash investing
and financing activities:
Issuance of stock for employee benefit plans $ 3.2 $ 4.3
Tax benefit for employee stock option plans 4.1 12.0
Retirement of treasury stock - 112.5
Unrealized gain (loss) on available-for-sale
securities (4.7) (0.5)
Unearned compensation charge relating to
restricted stock issuance 8.1 -
Amortization of unearned compensation charge .9 -
Note 5. Restructuring of Operations.
One-time Charge:
In June 1996, the Company announced the formation of the Fairchild
Semiconductor organization ("Fairchild") to consist of the Company's
family logic, memory and discrete product lines. In connection with
this reorganization, the Company recorded a $275 million one-time charge
in the first six months of fiscal 1997 that included a restructuring
charge of $256.3 million for the write down of Fairchild assets to
estimated fair value, costs associated with staffing reductions and
other exit costs necessary to reduce the Company's infrastructure in
both Fairchild and the remaining National core business areas. The
Company expects to reduce its work force by approximately 1,400
employees in manufacturing support, selling, general and administrative
areas of both the Fairchild and National core business organizations.
These work force reduction actions that began in July 1996, are expected
to continue through and beyond the Fairchild divestiture. Of this
restructuring charge, approximately $87 million represents cash charges
and $169 million represents fixed asset write downs and other non-cash
items. The remaining components of the $275 million one-time charge
have been recorded in cost of sales and consist of $15.1 million to
write down certain Fairchild inventory to net realizable value and $3.6
million for other cost reduction activities.
As part of the restructuring noted above, the Company is actively
pursuing a sale or partial financing of all or a portion of the
Fairchild businesses and related assets which it expects to finalize by
the end of fiscal 1997. In connection with this action, the Company
recorded charges of $177.7 million and $11.4 million to write down
certain fixed assets of Fairchild and the National core businesses,
respectively, to estimated fair value. The adjustments to the carrying
value of these assets held for disposal were determined based on
estimated fair value of the individual businesses of Fairchild on the
expected date of disposal. The Fairchild assets include land, building
<PAGE> 7
and building improvements, and equipment associated with its 4-inch, 5-
inch and 6-inch wafer fabrication operations in South Portland, Maine,
its 6-inch wafer fabrication operation in Salt Lake City, Utah and its
assembly and test operations in Penang, Malaysia and Cebu, Philippines.
The carrying amount of these assets at November 24, 1996 was $156.2
million. The National core business assets written down in connection
with this action primarily include software and leasehold improvements.
The Company also expects to pay approximately $4.0 million in retention
bonuses to certain Fairchild employees. These amounts will be expensed
to operations ratably over the employee's service period up through the
final date of disposition.
The following table provides a summary of these charges:
Fairchild National
Semiconductor Core Total
Organization Business Company
(in millions) ------------- -------- -------
Restructuring of Operations:
Write down of assets to
estimated fair value $177.7 $11.4 $189.1
Staffing reductions and severance 18.6 36.6 55.2
Other exit costs 9.8 2.2 12.0
------- ------ -------
206.1 50.2 256.3
Other:
Cost of sales 15.1 3.6 18.7
------- ------ -------
$221.2 $53.8 $275.0
======= ====== =======
As a result of the work force reduction actions that occurred in the
first six months of fiscal 1997, the Company paid $13.5 million of
severance to approximately 400 terminated employees. Included in
accrued liabilities at November 24, 1996 is $ 73.2 million related to
remaining severance and other costs of restructuring activities that are
not yet completed.
<PAGE> 8
Selected Financial Information:
The following table summarizes selected financial information excluding
the effect of the one-time charges for the Fairchild Semiconductor
Organization and the National core business:
Three Months Ended Six Months Ended
---------------------- --------------------------
($ in millions) Fair- Nat'l Total Fair- Nat'l Total
child Core Co. child Core Co.
------ ------ ------ ------ -------- -------
Fiscal 1997
- -----------
Period Ended
November 24, 1996:
Sales $154.0 $507.5 $661.5 $286.7 $940.9 $1,227.6
Gross margin 23.6% 38.3% 34.9% 22.8% 37.9% 34.4%
Fiscal 1996
- -----------
Period Ended
November 26, 1995:
Sales $191.2 $520.4 $711.6 $376.8 $1,033.6 $1,410.4
Gross margin 35.5% 47.1% 44.0% 35.0% 46.7% 43.5%
The financial information presented for Fairchild and the National core
business is pro forma and represents sales and cost of sales of the
product portfolios of Fairchild and the National core business. As
such, sales and related cost of sales for certain Fairchild products
manufactured by the National core business are included in the Fairchild
Semiconductor product portfolio pro forma financial information and
sales and related cost of sales for certain National core business
products manufactured by Fairchild are included in the National core
business product portfolio pro forma financial information.
Note 6. Debt
In November 1996, the Company entered into an equipment financing
agreement with a group of banks, which provides the Company borrowings
in stated amounts up to $100 million over a one year period. Borrowings
are collateralized by the underlying equipment. An initial loan draw of
$50.2 million was also made in November. Under the terms of the
agreement, the amounts financed bear interest at the one-month Libor
rate plus 90 basis points (6.275% at November 24, 1996) with principal
and interest due monthly over a five year period. The agreement
contains certain covenant and default provisions that require the
Company to maintain a certain level of tangible net worth and permit the
lenders cross-acceleration rights against certain other credit
facilities of the Company.
Note 7. Contingencies
In July 1996, the Company received notices of assessment totalling
approximately $59.2 million from the Malaysian Inland Revenue Department
relating to the Company's manufacturing operations in Malaysia, which
the Company believes are without merit and intends to contest. The
Company believes it has adequate tax reserves to satisfy an ultimate
resolution of the assessments.
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Sales National Semiconductor Corporation ("National" or the "Company")
recorded net sales of $661.5 million and $1,227.6 million for the second
quarter and first six months of fiscal 1997, respectively, a decrease of
7.0 percent and 13.0 percent from net sales for the comparable periods
of fiscal 1996. Although sales for the second quarter of fiscal 1997
were lower than the quarter a year ago, sales grew over the first
quarter of fiscal 1997, reflecting an improvement in new order rates
that began mid-summer and has continued throughout the current quarter.
Beginning in fiscal 1997, the Company reorganized its structure by
consolidating its seven former operating divisions into the following
four business groups: the Analog Group, the Communications and Consumer
Group, and the Personal Systems Group, all of which represent National's
core businesses, and the Fairchild Semiconductor Group ("Fairchild"),
which was formed as a separate organization consisting of the Company's
family logic, memory and discrete product lines. The Company believes
this structure will enhance the focus and support of the Company's
strength in analog and mixed signal technologies and help further its
strategy to develop application specific integrated products for the
personal systems, communications and consumer markets. The sales
discussion that follows is based on this new structure.
Sales for the second quarter and first six months of fiscal 1997 for
National's core businesses as described above were $507.5 million or
76.7 percent of total sales and $940.9 million or 76.6 percent of total
sales, respectively. This compares to $520.4 million or 73.1 percent of
total sales and $1,033.6 or 73.3 percent of total sales for the same
periods of fiscal 1996. Despite the decrease in these sales, sales for
local area network and wide area network products, including wireless
communication products, continued to grow with increases of 36.3 percent
and 14.5 percent, respectively, for the second quarter of fiscal 1997
over the comparable quarter of fiscal 1996 and 22.0 percent and 16.0
percent, respectively, year over year. In addition, sales strengthened
for personal computer products, which grew 30.7 percent and 21.3
percent in the second quarter and first six months of fiscal 1997,
respectively, over the comparable periods of fiscal 1996. Sales
increases for all of these product areas were the result of increased
unit shipments. Overall, the decrease in sales for the National core
businesses was the result of some modest price declines, particularly in
multi-market analog products, together with overall decreases in unit
shipments for other core business products. Sales for Fairchild were
$154.0 million or 23.3 percent of total sales and $286.7 million or 23.4
percent of total sales for the second quarter and first six months of
fiscal 1997, respectively. This compares to $191.2 million or 26.9
percent of sales and $376.8 million or 26.7 percent of total sales for
the same periods of fiscal 1996. Overall decreases in unit shipments,
together with some modest price declines, resulted in decreased sales
for Fairchild.
Gross Margin Gross margin as a percentage of sales declined to 34.9
percent and 32.8 percent for the second quarter and first six months of
fiscal 1997, respectively, from 44.0 percent and 43.5 percent for the
comparable periods of fiscal 1996. The primary factor contributing to
the gross margin decline was lower wafer fab capacity utilization of 67
percent compared to the essentially full utilization of 91 percent a
<PAGE> 10
year ago. Although order rates improved during the second quarter of
fiscal 1997, the Company increased shipments in September and October by
reducing die bank inventories without significantly increasing new wafer
starts until November. Also included in cost of sales for the first six
months of fiscal 1997 was $18.7 million of the $275 million one-time
charge related to the reorganization and the formation of Fairchild (see
Restructuring of Operations). Without this charge, gross margin as a
percentage of total sales would have been 34.4 percent percent (See Note
5).
Research and Development Research and development ("R&D") expenses
for the second quarter and first six months of fiscal 1997 increased by
0.3 percent and 7.4 percent, respectively, over the comparable periods
of fiscal 1996. As a percentage of sales this represents an increase to
13.5 percent for the second quarter of fiscal 1997 and 15.2 percent for
the first six months of fiscal 1997 from 12.5 percent and 12.3 percent
for the comparable periods of fiscal 1996. Overall, the increase in
fiscal 1997 R&D expenses reflect the Company's accelerated investment in
advanced submicron CMOS process technology, as well as its continued
investment in the development of new analog and mixed signal based
products for applications in the personal systems, communications and
consumer markets. The quarter to quarter increase in R&D expenses was
minimized by the Company's efforts to eliminate redundant new product
applications. For the first six months of fiscal 1997, the increase
also reflects the first quarter one-time charge of $10.6 million for in-
process R&D related to the acquisition of the PicoPower assets. Without
this charge, R&D expenses for the first six months of fiscal 1997 would
have been $175.8 million, or 14.3 percent of sales, compared to $173.6
million, or 12.3 percent of sales, for the comparable period of fiscal
1996.
Selling, General and Administrative Selling, general and
administrative ("SG&A") expenses for fiscal 1997 decreased 17.4 percent
and 22.3 percent over the second quarter and first six months of fiscal
1996, respectively. As a percentage of sales SG&A expenses decreased to
16.1 percent and 16.3 percent of sales for the second quarter and first
six months from 18.1 percent and 18.3 percent of sales for the
comparable periods of fiscal 1996. The decrease is attributable to
certain ongoing cost reduction actions that were implemented in response
to the recent slowdown in market conditions and the reduction of the
Company's infrastructure in both Fairchild and the continuing National
core business areas.
Restructuring of Operations In June 1996, the Company announced the
formation of the Fairchild organization to consist of its family logic,
memory and discrete product lines. The Company is actively pursuing a
sale or partial financing of all or a portion of the Fairchild
businesses and related assets, which it expects to finalize by the end
of fiscal 1997. In connection with this reorganization, the Company
recorded a $275 million one-time charge that included a restructuring
charge of $256.3 consisting of the write down of Fairchild assets to
estimated fair value, costs associated with staffing reductions and
other exit costs necessary to reduce the Company's infrastructure in
both Fairchild and the remaining National core business areas. The
remaining components of the $275 million one-time charge have been
included in cost of sales and consist of $15.1 million to write down
<PAGE> 11
certain Fairchild inventory to net realizable value and $3.6 million for
other cost reduction activities.
Without the effect of this $275 million one-time charge and the $10.6
million one-time charge related to the PicoPower acquisition that was
included in R&D expenses, net income for the first six months would have
been $36.1 million, or $.25 per share.
Interest Income and Interest Expense Net interest income was $1.0
million and $2.3 million for the second quarter and first six months of
fiscal 1997, respectively, compared to $2.7 million and $5.8 million for
the comparable periods of fiscal 1996. The decrease is due to reduced
interest income on lower cash balances in fiscal 1997 and higher
interest expense associated with the $258.8 million convertible
subordinated notes issued by the Company in September 1995, as well as
other borrowings related to the Company's continued investment in plant
and equipment.
Other Income , Net Other income, net was $3.0 million and $.3 million
for the second quarter and first six months of fiscal 1997,
respectively, compared to $8.0 million and $16.0 million for the
comparable periods of fiscal 1996. For the second quarter of fiscal
1997, other income, net included $1.6 million of dividend income from
one of the Company's investment holdings and $1.4 million of net
intellectual property income. This compares to $8.0 million of net
intellectual property income for the second quarter of fiscal 1996. In
addition to the $1.6 million of dividend income, other income, net for
the first six months of fiscal 1997 also included $1.7 million of net
intellectual property income offset by a net loss on investments of $3.0
million primarily attributable to the write down of an investment to net
realizable value. This compares to $10.8 million of net intellectual
property income and $5.2 million of realized gains from sale of
investments, net of losses for the first six months of fiscal 1996.
Income Tax Expense Consistent with fiscal 1996, the Company's
effective tax rate for fiscal 1997 is 25 percent.
Financial Condition During the first six months of fiscal 1997, cash
and cash equivalents decreased $45.7 million compared to a $77.6
increase for the first six months of fiscal 1996. The decrease was
primarily the result of the Company's continued investment in property,
plant and equipment of $231.8 million that more than offset the cash
flows generated from operations of $134.4 million and proceeds from the
draw down of $50.2 million in November 1996 on the Company's new
equipment loan. This compares to $130.5 million generated from cash
flows from operations plus $253.3 million of net proceeds from the
convertible subordinated notes issued by the Company in September 1995,
offset by capital expenditures of $277.3 million for the first six
months of fiscal 1996.
Management foresees significant cash outlays for plant and equipment
throughout fiscal 1997. Management continues to critically review its
planned capital investments in light of business conditions, and expects
the fiscal 1997 capital expenditure rate to be at a slightly lower level
than fiscal 1996. Existing cash and investment balances, together with
<PAGE> 12
existing lines of credit, are felt to be sufficient to finance the
fiscal 1997 capital expenditures.
Outlook The statements contained in this Outlook and in the Financial
Condition section of Management's Discussion and Analysis are forward
looking based on current expectations and management's estimates. In
addition to the risk factors discussed in the Outlook and Financial
Condition sections of Management's Discussion and Analysis of Results of
Operations and Financial Condition on pages 18 through 21 of the
Company's 1996 Annual Report to Shareholders, the following factors may
affect the Company's operating results for fiscal 1997. Actual results
may differ materially from those set forth in such forward looking
statements.
The Company intends to continue to focus on major customers in the
personal systems, communications and consumer markets with continued
emphasis in analog and mixed signal market opportunities. The Company
expects to grow at or above market rates of growth in particular
segments of analog and mixed signal, but may not necessary achieve
growth in the more mature commodity markets for logic and memory
products that are included in Fairchild. Sales trend may also be
affected by product pricing, especially in these commodity areas.
The Company has experienced significant improvement in order rates for
the second quarter in the multi-market analog product area and from
distributors, as well as continued increases in orders in the OEM
channels and personal computer industry as it prepares for the Christmas
season. Although order rates continued to strengthen during the
quarter, the Company faces the risk of a drop in order rates in the
personal computer industry after the Christmas season. In addition,
continued increase in orders from distributors is dependent on increases
in distributor resales. There is also no indication that the current
improvement in order rates will continue. Unless the current
improvement in new orders continues, the Company will not be able to
achieve the operating results and the level of revenue recorded in
fiscal 1996.
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, focus on analog and mixed signal products and introduction
of new products are expected to result in gross margin improvement.
Future gross margin improvement is predicated on increased new order
rates in future periods, particularly in the higher margin multi-market
analog products. Moreover, the typical seasonal impact on wafer fab
capacity utilization during the winter quarter has historically resulted
in lower gross margin for the third quarter. The Company believes that
gross margin for the third quarter of fiscal 1997 can be held at the
same level as the second quarter. However, while management plans to
minimize the impact of vacations and shutdowns at its manufacturing
facilities, the Thanksgiving, Christmas and new year holidays, including
the Chinese new year, will still impact production levels during the
third quarter. Unless wafer fab capacity utilization can be held at a
level comparable with the second quarter, gross margin will be
unfavorably affected.
As previously discussed under the section Restructuring of Operations,
the Company formed the Fairchild organization and is actively pursuing a
sale or partial financing of all or a portion of that business and its
<PAGE> 13
related assets. Since the exact structure and timing of the ultimate
transaction has not yet been determined, it is difficult to predict the
final impact on the Company's financial condition or operating results
for fiscal 1997. The Company faces the risk that it may not be able to
sell or finance all or a portion of the businesses and related assets
under terms that are acceptable to the Company. Retaining these
businesses or related assets may have an unfavorable impact on the
Company's operating results. The Company also faces the risk that the
Fairchild businesses, as well as the Company's other businesses, may be
disrupted and experience lower performance levels during the divestiture
process. In addition, the actual fair value of the assets of these
businesses may be lower or higher than amounts initially estimated.
The Company has received notices of tax assessments from certain
governments of countries within which the Company operates. There can
be no assurance that these governments or other government entities will
not serve future notices of assessments on the Company, or that the
amounts of such assessments and the ability of the Company to favorably
resolve such assessments would not have a material effect on the
Company's financial condition or results of operations.
The forward looking statements discussed or incorporated by reference in
this outlook involve a number of risks and uncertainties. Other risks
and uncertainties include, but are not limited to, the general economy,
regulatory and international economic conditions, changing environment
of the semiconductor industry, competitive products and pricing, growth
in the personal computer and communications industries, the effects of
legal and administrative cases and proceedings, and such other risks and
uncertainties as may be detailed from time to time in the Company's SEC
reports and filings.
<PAGE> 14
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 26, 1996 and Item 1, Legal
Proceedings in the Company's Quarterly Report on 10-Q for the fiscal
quarter ended August 25, 1996, which information is incorporated herein
by reference.
Item 4. Submission of Matters to Vote of Security Holders
- ----------------------------------------------------------
(a) The Registrant's Annual Meeting was held on September 27, 1996.
(b) The following directors were elected at the Meeting:
AUTHORITY
DIRECTOR FOR WITHHEL
-------- ---- --------
Brian L. Halla 121,013,561 1,179,832
Gary P. Arnold 121,016,256 1,177,137
Robert Beshar 121,075,492 1,117,901
Modesto A. Maidique 120,988,067 1,205,326
Edward R. McCracken 121,167,161 1,026,232
J. Tracy O'Rourke 121,009,295 1,184,098
Charles E. Sporck 121,030,944 1,162,449
Donald E. Weeden 120,997,122 1,196,271
(c) Other matters voted on at the Meeting were the following:
(i) To approve the addition of 6,600,000 Shares of Common Stock
to the Stock Option Plan, as amended:
FOR: 88,627,473
AGAINST: 33,025,900
ABSTAIN: 540,000
<PAGE> 15
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 Registration
Statement on Form S-8 Registration No. 333-09957, which
became effective August 12, 1996).
3.2 By-Laws of the Company.
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).
11.0 Additional Fully Diluted Calculation of Earnings Per
Share.
27.0 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8K were filed during the fiscal quarter ended
November 24, 1996.
<PAGE> 16
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: December 20, 1996 /s/ Richard D. Crowley, Jr.
----------------------------------
Richard D. Crowley, Jr.
Vice President and Controller
Signing on behalf of the registrant
and as principal accounting officer
<PAGE> 17
AMENDED AND RESTATED
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.
ARCTICLE 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. Subject to the rights of the holders
of any series of stock having a preference over the Common Stock of the
corporation as to dividends or upon liquidation ("Preferred Stock") with
respect to such series of Preferred Stock, special meetings of the
stockholders may be called only by the chairman of the board or by the
board of directors pursuant to a resolution adopted by a majority of the
total number of directors which the corporation would have if there were
no vacancies (the "Whole Board").
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 and the
<PAGE> 18
purpose or purposes for which the meeting is called, not less than ten
nor more than sixty days before the date 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 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. Only such business shall be conducted
at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting. Any
previously scheduled meeting of the stockholders may be postponed, and
(unless the Certificate of Incorporation otherwise provides) any special
meeting of the stockholders may be cancelled, by resolution of the board
of directors upon public notice given prior to the date previously
scheduled for such meeting of stockholders.
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 trans-
acted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
Section 6. 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 7. Quorum and Adjournment. Except as otherwise provided by
law or by the Certificate of Incorporation, the holders of a majority of
the outstanding shares of the corporation entitled to vote generally in
the election of directors (the "Voting Stock"), present in person or
represented by proxy, shall constitute a quorum at all meetings of
stockholders for the transaction of business, except that when specified
business is to be voted on by a class or series of stock voting as a
class, the holders of a majority of the shares of such class or series
<PAGE> 19
shall constitute a quorum of such class or series for the transaction of
such business. The chairman of the meeting or a majority of the shares
so represented may adjourn the meeting from time to time, whether or not
there is such a quorum. The stockholders present at a duly called
meeting at which a quorum is present may continue to transact business
until adjournment, notwithstanding the withdrawal of enough stockholders
to leave less than a quorum. 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 8. 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
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 9. Notice of Stockholder Business and Nominations.
a. Annual Meetings of Stockholders.
(1) Nominations of persons for election to the board
of directors of the corporation and the proposal of business to
be considered by the stockholders may be made at an annual
meeting of stockholders (a) pursuant to the corporation's notice
of meeting,(b) by or at the direction of the board of directors
or (c) by any stockholder of the corporation who was a
stockholder of record at the time of giving of notice provided
for in this By-Law, who is entitled to vote at the meeting and
who complies with the notice procedures set forth in this By-Law.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to
clause (c) of paragraph (a)(1) of this By-Law, the stockholder
must have given timely notice thereof in writing to the secretary
<PAGE> 20
of the corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the secretary at the
principal executive offices of the corporation not later than the
close of business on the 60th day nor earlier than the close of
business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the
event that the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice
by the stockholder to be timely must be so delivered not earlier
than the close of business on the 90th day prior to such annual
meeting and not later than the close of business on the later of
the 60th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of
such meeting is first made by the corporation. In no event shall
the public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons
for conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as
to the stockholder giving the notice and the beneficial owner, if
any, on whose behalf the nomination or proposal is made (i) the
name and address of such stockholder, as they appear on the
corporation's books, and of such beneficial owner and (ii) the
class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this By-Law to the contrary, in the event
that the number of directors to be elected to the board of
directors of the corporation is increased and there is no public
announcement by the corporation naming all of the nominees for
director or specifying the size of the increased board of
directors at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required
by this By-Law shall also be considered timely, but only with
<PAGE> 21
respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary at the
principal executive offices of the corporation not later than the
close of business on the 10th day following the day on which such
public announcement is first made by the corporation.
b. Special Meetings of Stockholders. Only such business
shall be conducted at a special meeting of stockholders as shall have
been brought before the meeting pursuant to the corporation's notice of
meeting. Nominations of persons for election to the board of directors
may be made at a special meeting of stockholders at which directors are
to be elected pursuant to the corporation's notice of meeting (a) by or
at the direction of the board of directors or (b) provided that the
board of directors has determined that directors shall be elected at
such meeting, by any stockholder of the corporation who is a stockholder
of record at the time of giving of notice provided for in this By-Law,
who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in this By-Law. In the event the
corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the board of directors, any such
stockholder may nominate a person or persons (as the case may be), for
election to such position(s) as specified in the corporation's notice of
meeting, if the stockholder's notice required by paragraph (a)(2) of
this By-Law shall be delivered to the secretary at the principal
executive offices of the corporation not earlier than the close of
business on the 90th day prior to such special meeting and not later
than the close of business on the later of the 60th day prior to such
special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the board of directors to be elected at such
meeting. In no event shall the public announcement of an adjournment of
a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
c. General.
(1) Only such persons who are nominated in accordance
with the procedures set forth in this By-Law shall be eligible to
serve as directors and only such business shall be conducted at a
meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in this
By-Law. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the chairman of the meeting
shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was
made or proposed, as the case may be, in accordance with the
procedures set forth in this By-Law and, if any proposed
nomination or business is not in compliance with this By-Law, to
<PAGE> 22
declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this By-Law, "public announcement"
shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news
service or in a document publicly filed by the corporation with
the Securities and Exchange Commission pursuant to Section 13, 14
or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
By-Law, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this By-Law.
Nothing in this By-Law shall be deemed to affect any rights (I)
of stockholders to request inclusion of proposals in the
corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act or (ii) of the holders of any series of Preferred
Stock to elect directors under specified circumstances.
Section 10. Voting. When a quorum is present at any meeting, the
affirmative vote of the holders of a majority of the capital stock
having voting power present in person or represented by proxy and
entitled to vote on the matter shall decide any question brought before
such meeting, except (i) in respect of elections of directors which
shall be decided, subject to the rights of the holders of any series of
Preferred Stock, by a plurality of the votes cast, and (ii) when the
question is one which by express provision of statute or Certificate of
Incorporation 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.
Section 11. Inspectors of Elections; Opening and Closing the Polls.
The board of directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who
serve the corporation in other capacities, including, without
limitation, as officers, employees, agents or representatives, to act at
the meetings of stockholders and make a written report thereof. One or
more persons may be designated as alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate has been
appointed to act or is able to act at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at
the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or
her ability. The inspectors shall have the duties prescribed by law.
The chairman of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls
for each matter upon which the stockholders will vote at a meeting.
<PAGE> 23
Section 12. Record Date for Action by Written Consent. In order that
the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten (10) days after the
date upon which the resolution fixing the record date is adopted by the
board of directors. Any stockholder of record seeking to have the
stockholders authorize or take corporate action by written consent
shall, by written notice to the secretary, request the board of
directors to fix a record date. The board of directors shall promptly,
but in all events within ten (10) days after the date on which such a
request is received, adopt a resolution fixing the record date (unless a
record date has previously been fixed by the board of directors pursuant
to the first sentence of this Section). If no record date has been fixed
by the board of directors pursuant to the first sentence of this Section
or otherwise within ten (10) days of the date on which such a request is
received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior
action by the board of directors is required by applicable law, shall be
the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in Delaware, its principal place of
business, or to any officer or agent of the corporation having custody
of the book in which proceedings of meetings of stockholders are
recorded. Delivery shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the board
of directors and prior action by the board of directors is required by
applicable law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the date on which the board of directors adopts the
resolution taking such prior action.
Section 13. Inspectors of Written Consent. In the event of the
delivery, in the manner provided by Section 12 of this Article to the
corporation of the requisite written consent or consents to take
corporate action and/or any related revocation or revocations, the
corporation shall engage independent inspectors of elections for the
purpose of promptly performing a ministerial review of the validity of
the consents and revocations. For the purpose of permitting the
inspectors to perform such review, no action by written consent without
a meeting shall be effective until such date as the independent
inspectors certify to the corporation that the consents delivered to the
corporation in accordance with Section 12 of this Article represent at
least the minimum number of votes that would be necessary to take the
corporate action. Nothing contained in this Section shall in any way be
<PAGE> 24
construed to suggest or imply that the board of directors or any
stockholder shall not be entitled to contest the validity of any consent
or revocation thereof, whether before or after such certification by the
independent inspectors, or to take any other action (including, without
limitation, the commencement, prosecution, or defense of any litigation
with respect thereto, and the seeking of injunctive relief in such
litigation).
Section 14. Effectiveness of Written Consent. Every written consent
shall bear the date of signature of each stockholder who signs the
consent and no written consent shall be effective to take the corporate
action referred to therein unless, within sixty (60) days of the
earliest dated written consent received in accordance with Section 12 of
this Article, a written consent or consents signed by a sufficient
number of holders to take such action are delivered to the corporation
in the manner prescribed in Section 12 of this Article.
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
<PAGE> 25
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
directors, a majority of the directors or the president on notice given
to each director, either personally (including by telephone) or by hand
delivery, first-class mail, overnight mail, courier service, telegram or
facsimile transmission sent to his business or home address, stating the
place, date and hour of the meeting. If mailed by first-class mail,
such notice shall be deemed to have been adequately given when deposited
in the United States mail, postage prepaid, directed to the director at
his business or home address, at least five (5) days before such
meeting. Notice given by telegraph, overnight mail or courier service
shall be deemed adequately given upon delivery of the message to the
telegraph company or to the overnight mail or courier service company at
least two days before such meeting. Notice given by facsimile
transmission shall be deemed adequately given upon transmission of the
message at least twelve (12) hours before such meeting. Notice given by
hand delivery or personally shall be deemed adequately given when
delivered at least twelve (12) hours before such meeting. 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
<PAGE> 26
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
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
<PAGE> 27
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 stockhold-
ers 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.
<PAGE> 28
(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 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
<PAGE> 29
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.
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,
<PAGE> 30
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,
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.
<PAGE> 31
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.
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.
<PAGE> 32
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 contenders 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 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,
<PAGE> 33
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,
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> 34
NATIONAL SEMICONDUCTOR CORPORATION Exhibit 11.0
ADDITIONAL FULLY DILUTED CALCULATION OF EARNINGS PER SHARE(1)
(in millions, except per share amounts)
Three Months Ended Six Months Ended
------------------ --------------------
Nov. 24, Nov. 26, Nov. 24, Nov. 26,
1996 1995 1996 1995
-------- -------- -------- --------
Net income(loss) used in
fully diluted EPS(reflect-
ing the adjustment of
interest on convertible
notes) $ 31.5 $ 81.9 $ (173.7) $ 155.4
======== ======== ======== ========
Number of shares:
Weighted average common
shares outstanding 139.0 123.1 138.4 123.1
Weighted average common
equivalent shares, net of
tax benefit 2.6 3.8 2.1 4.1
-------- ------- -------- --------
Weighted average common and
common equivalent shares 141.6 126.9 140.5 127.2
Additional weighted average
common equivalent shares
assuming full dilution 1.0 - .5 -
Shares issuable from
assumed conversion of:
Preferred shares - 12.2 12.2
Convertible notes 6.0 4.0 6.0 2.0
-------- ------- -------- --------
Additional weighted average
common equivalent shares
assuming full dilution 148.6 143.1 147.0 141.4
======== ======== ======== ========
Income(loss) per share
assuming full dilution $ .21 $ .57 $(1.18) $1.10
======== ======== ======== ========
(1) For the three and six months ended November 24, 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.
(2) For purposes of this computation, all outstanding options
and warrants on common stock are assumed to have been
exercised, even though for the six months ended November 24,
1996, the related effects are antidilutive.
<PAGE> 35
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<FISCAL-YEAR-END> MAY-25-1997 MAY-25-1997
<PERIOD-END> NOV-24-1996 NOV-24-1996
<CASH> 397 397
<SECURITIES> 45 45
<RECEIVABLES> 304 304
<ALLOWANCES> 0 0
<INVENTORY> 262 262
<CURRENT-ASSETS> 1214 1214
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<CURRENT-LIABILITIES> 696 696
<BONDS> 383 383
0 0
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<OTHER-SE> 1352 1352
<TOTAL-LIABILITY-AND-EQUITY> 2552 2552
<SALES> 662 1228
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<INCOME-PRETAX> 40 (237)
<INCOME-TAX> 10 (59)
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