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 August 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 August 25,1996.
------------------- ------------------------------
Common stock, par value $0.50 per share 138,492,615
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
INDEX
Part I. Financial Information Page No.
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Condensed Consolidated Statements of Operations
(Unaudited) for the Three Months Ended
August 25, 1996 and August 27, 1995 3
Condensed Consolidated Balance Sheets (Unaudited)
as of August 25, 1996 and May 26, 1996 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Three Months Ended
August 25, 1996 and August 27, 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
Exhibits and Reports on Form 8-K 15
Signature 17
<PAGE>
PART I. FINANCIAL INFORMATION
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)
Three Months Ended
------------------
Aug. 25, Aug. 27,
1996 1995
------- -------
Net sales $ 566.1 $ 698.8
Operating costs and expenses:
Cost of sales 393.9 397.7
Research and development 97.4 84.9
Selling, general and administrative 94.0 129.2
Restructuring of operations 256.3 -
------ ------
Total operating costs and expenses 841.6 611.8
------ ------
Operating income(loss) (275.5) 87.0
Interest income, net 1.3 3.1
Other income(expense), net (2.7) 8.0
------ ------
Income(loss) before income taxes (276.9) 98.1
Income tax provision(benefit) (69.3) 24.6
------ ------
Net income(loss) $ (207.6) $ 73.5
======== ========
Earnings per share:
Primary $ (1.51) $ 0.56
Fully dilutive $ (1.51) $ 0.53
Weighted average shares:
Primary 137.7 127.4
Fully dilutive 137.7 139.6
Income used in primary earnings
per share (reflecting preferred
dividends) $ (207.6) $ 70.7
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
Aug. 25, May 26,
1996 1996
ASSETS ------- -------
Current assets:
Cash and cash equivalents $ 307.6 $ 442.4
Short-term marketable investments 39.0 61.9
Receivables, net 288.9 281.2
Inventories 303.6 325.7
Deferred tax assets 140.4 71.1
Other current assets 64.6 73.7
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Total current assets 1,144.1 1,256.0
Property, plant and equipment 2,428.4 2,516.7
Less accumulated depreciation 1,248.7 1,208.6
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Net property, plant and equipment 1,179.7 1,308.1
Long-term marketable investments 6.7 11.7
Other assets 87.7 82.2
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Total assets $2,418.2 $2,658.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 21.2 $ 21.5
Accounts payable 185.7 255.6
Accrued expenses 281.0 235.1
Income taxes 157.0 164.6
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Total current liabilities 644.9 676.8
Long-term debt 347.0 350.5
Deferred income taxes 11.0 12.1
Other non-current liabilities 36.9 41.4
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Total liabilities 1,039.8 1,080.8
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Commitments and contingencies
Shareholders' equity:
Common stock 69.3 68.4
Additional paid-in capital 939.8 930.2
Retained earnings 369.3 578.6
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Total shareholders' equity 1,378.4 1,577.2
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Total liabilities and shareholders' equity $2,418.2 $2,658.0
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Three Months Ended
------------------
Aug. 25, Aug. 27,
1996 1995
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Cash flows from operating activities:
Net income(loss) $ (207.6) $ 73.5
Adjustments to reconcile net income(loss)
with net cash used by operations:
Depreciation and amortization 65.3 51.7
(Gain)loss on investments 3.0 (5.2)
Tax benefit associated with stock options 1.7 6.3
In-process research and development 10.6 -
Loss on disposal of equipment 0.3 -
Write-down of inventory 15.1 -
Non-cash restructuring charges 169.4 -
Other, net 2.7 2.2
Changes in certain assets and liabilities, net:
Receivables (7.7) (30.3)
Inventories 7.0 (14.3)
Other current assets 9.1 (29.0)
Accounts payable and accrued expenses (21.2) (84.5)
Current and deferred income taxes (78.0) 14.7
Other non-current liabilities (4.5) 1.2
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Net cash used by operating activities (34.8) (13.7)
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Cash flows from investing activities:
Purchase of property, plant and equipment (105.2) (110.0)
Proceeds from the sale and maturity of
marketable investments 275.0 145.2
Purchase of marketable investments (252.1) (156.2)
Proceeds from sale of investments - 7.8
Business acquisition (15.4) -
Purchase of investments and other, net (7.1) (6.1)
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Net cash used by investing activities (104.8) (119.3)
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Cash flows from financing activities:
Proceeds from issuance of debt 1.5 42.0
Repayment of debt (5.3) (5.0)
Issuance of common stock, net 8.6 12.5
Purchase of treasury stock - (18.7)
Payment of preferred dividends - (2.8)
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Net cash provided by financing activities 4.8 28.0
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Net change in cash and cash equivalents (134.8) (105.0)
Cash and cash equivalents at beginning of period 442.4 420.3
------ ------
Cash and cash equivalents at end of period $ 307.6 $ 315.3
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE>
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 to be disposed of
that 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
formed the Fairchild Semiconductor organization ("Fairchild") and that it
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) Aug. 25, May 26,
1996 1996
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Raw materials $ 32.7 $ 39.1
Work in process 200.4 208.5
Finished goods 70.5 78.1
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Total inventories $ 303.6 $ 325.7
======= =======
Note 3. Other Income(Expense), Net
Components of other income(expense), net, were:
(in millions) Aug. 25, Aug. 27,
1996 1995
------- -------
Net intellectual property income $ 0.3 $ 2.8
Gain(loss) on investments, net (3.0) 5.2
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Total other income(expense), net $ (2.7) $ 8.0
======= =======
<PAGE>
Note 4. Statement of cash flow information
(in millions)
Three Months Ended
------------------
Aug. 25, Aug. 27,
1996 1995
-------- --------
Supplemental disclosure of cash flow information:
- -------------------------------------------------
Cash paid for:
Interest $ 2.0 $ 1.6
Interest on tax settlements .1 11.3
Income taxes 4.0 4.1
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 1.7 6.3
Retirement of treasury stock - 67.9
Treasury stock purchases included in
accrued liabilities - 2.9
Unrealized gain (loss) on available-for-sale
securities (5.0) 7.3
Unearned compensation charge relating to
restricted stock issuance 6.7 -
Amortization of unearned compensation charge .3 -
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 quarter of fiscal 1997 that included a restructuring charge of $256.3
million, 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 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 began in
July and are expected to continue through 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 1996. In connection with this action, the Company
<PAGE>
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 on the expected date of disposal. Accordingly, there
was no reduction to depreciation expense for the first quarter of fiscal
1997, nor does the Company expect these adjustments to reduce depreciation
for the remainder of fiscal 1997. The Fairchild assets held for sale include
land, building and building improvements, and equipment of its 4-inch,
5-inch and 6-inch wafer fabrication operations in South Portland, Maine
and its 6-inch wafer fabrication operation in Salt Lake City, Utah and
assembly and test operations in Penang, Malaysia and Cebu, Philippines.
The carrying amount of these assets at August 25, 1996 was $161.4
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 quarter of fiscal 1997, the Company paid $1.5 million of severance
to approximately 40 terminated employees. Included in accrued
liabilities at August 25, 1996 is $85.4 million related to remaining
severance and other costs of restructuring activities that are not yet
completed.
<PAGE>
Selected Financial Information:
The following table summarizes selected financial information excluding
the effect of the one-time charges:
Fairchild National
Semiconductor Core Total
Organization Business Company
($ in millions) ------------- ---------- -------
First Quarter Fiscal 1997:
Sales $132.7 $433.4 $566.1
Gross margin 21.8% 37.4% 33.7%
First Quarter Fiscal 1996:
Sales $185.6 $513.2 $698.8
Gross margin 34.5% 46.2% 43.1%
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. 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 the ultimate
resolution of the assessments.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
SALES National Semiconductor Corporation ("National" or the "Company")
recorded net sales of $566.1 million for the first quarter of fiscal
1997, a decrease of 19.0 percent from net sales for the first quarter of
fiscal 1996, reflecting a general slowdown in new orders that continued
into the summer as customers and distributors reduced inventories.
In June 1996, 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 its 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 first quarter of fiscal 1997 for National's core
businesses were $433.4 million, or 76.6 percent of total sales, compared
to $513.2 million, or 73.4 percent of total sales for the first quarter
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 13.0 percent
and 17.7 percent, respectively, for the first quarter of fiscal 1997
over the first quarter of fiscal 1996. Sales increases for these
product areas were the result of increased unit shipments. Overall, the
decrease in sales for the National core businesses was the result of
decreases in unit shipments particularly in multi-market analog
products, together with some modest price declines. Sales for Fairchild
were $132.7 million, or 23.4 percent of total sales for the first
quarter of fiscal 1997, compared to $185.6 million, or 26.6 percent of
sales for the first quarter of fiscal 1996. Overall decreases in unit
shipments together with some modest price declines, particularly in
memory and logic products, resulted in decreased sales for Fairchild.
GROSS MARGIN Gross margin as a percentage of all sales declined to
30.4 percent for the first quarter of fiscal 1997 from 43.1 percent for
the first quarter of fiscal 1996. The primary factor contributing to
this decline was reduced factory utilization due to the slowdown in new
orders that continued into the earlier part of the quarter as customers
and distributors reduced inventories. The Company further reduced
production output in an effort to keep inventories in balance with the
decreasing demand. Also included in cost of sales was $18.7 million of
the $275 million one-time charge the Company recorded in the first
quarter of fiscal 1997 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 33.7 percent
for the first quarter of fiscal 1996 (See Note 5).
<PAGE>
RESEARCH AND DEVELOPMENT Research and development ("R&D") expenses
for the first quarter of fiscal 1997 increased by 14.7 percent over the
first quarter of fiscal 1996 and as a percentage of sales increased to
17.2 percent from 12.1 percent for the first quarter of fiscal 1996.
The increase in R&D expense for fiscal 1997 reflects the Company's
accelerated investment in advanced submicron CMOS process technology, as
well as continued investment in the development of new analog and mixed
signal based products for applications in the personal systems,
communications, consumer and industrial markets. The increase also
reflects the 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 quarter of fiscal 1997 would have been $86.8
million, or 15.3 percent of sales, compared to $84.9 million, or 12.1
percent of sales, for the first quarter of fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative
("SG&A") expenses decreased 27.2 percent over the first quarter of
fiscal 1996 and as a percentage of sales decreased to 16.6 percent of
sales from 18.5 percent of sales for the first quarter of fiscal 1996.
The decrease is attributable to certain cost reduction actions
in response to the 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
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 quarter would have been
$6.5 million, or five cents per share.
INTEREST INCOME AND INTEREST EXPENSE Net interest income was $1.3
million for the first quarter of fiscal 1997 compared to $3.1 million in
fiscal 1996. The decrease is due to reduced interest income as a result
of lower cash balances in fiscal 1997 and higher interest expense
associated with the $258.8 million convertible subordinated notes issued
<PAGE>
by the Company in September 1995, as well as other borrowings related to
the Company's continued investment in plant and equipment.
OTHER INCOME (EXPENSE), NET Other expense, net was $2.7 million for
the first quarter of fiscal 1997, compared to other income, net of $8.0
million for the first quarter of fiscal 1996. Included in other
expense, net for the first quarter of fiscal 1997 was $.3 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. Included in other income, net for the first quarter
of fiscal 1996, was $2.8 million of net intellectual property income and
a net gain on investments of $5.2 million arising from the sale of
certain investments.
INCOME TAX EXPENSE Consistent with fiscal 1996, the Company's
effective tax rate for fiscal 1997 is 25 percent. The Company recorded
an income tax benefit of $69.3 million for the first quarter of fiscal
1997.
FINANCIAL CONDITION During the first quarter of fiscal 1997, cash
and cash equivalents decreased $134.8 million compared to a $105.0
million decrease for the first quarter of fiscal 1996. The decrease was
primarily caused by the Company's greater use of cash in operating
activities of $34.8 million due to the net loss and changes in working
capital together with the Company's continued investment in property,
plant and equipment of $105.2 million for the first quarter of fiscal
1997. This compares to the Company's use of cash in operating activities
of $13.7 million and investment in property, plant and equipment of
$110.0 million offset by $30.8 million in combined proceeds from long-
term debt and issuance of common stock, net of $5.0 million for debt
repayments and $18.7 for purchases of treasury stock for the first
quarter 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
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.
<PAGE>
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. Sales trend may also be affected by product pricing,
especially in these commodity areas.
Although order rates in the earlier part of the quarter were slow, the
Company experienced an increase in order rates beginning in mid-July
particularly in the OEM channels and personal computer industry as it
prepares for the Christmas season. There has been no current indication
that this improvement will continue in either the OEM channels or
personal computer industry. However, new orders in multi-market analog
products remained relatively flat and new orders from distributors,
particularly in North America and Europe, have remained slow as
distributors continue to work through inventory corrections. The
duration of this inventory adjustment at distributors is unknown and may
have a significant ongoing impact on the Company's future operating
results. Unless the current improvement in new orders continues and
order rates for multi-market analog products and from distributors
increase, the Company will be 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.
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
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 result in 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
<PAGE>
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>
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, 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 Registration
Statement on Form S-8 Registration No. 333-09957,
which became effective August 12, 1996).
3.2 By Laws for the Company (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).
4.1 Rights Agreements (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:
Settlement Agreement and General Release with Charles P.
Carinalli.
10.2 Management Contract or Compensatory Plan or Agreement: FY
1997 Executive Officer Incentive Plan Agreement.
11.0 Additional Fully Diluted Calculation of Earnings Per Share
27.0 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
A report on Form 8-K was filed on June 20, 1996, concerning the
Company's announcement that it has formed a new organization
consisting of its family logic, memory and discrete businesses, to
be called Fairchild Semiconductor, and that it is pursuing a
number of alternatives with respect to Fairchild Semiconductor,
including a sale or partial financing of all or a portion of the
<PAGE>
businesses. In connection with this reorganization the Company
announced that it would take a one-time charge of $280 million to
$320 million in the first quarter of fiscal 1997, primarily
reflecting the write-down of assets to estimated realizable value
and costs associated with the reduction of the cost structure of
the Company's remaining business units and central support
organizations. The date of the reported event was June 20, 1996.
No financial statements were filed with the Form 8-K.
<PAGE>
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: October 4, 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>
EXHIBIT 10.1
SETTLEMENT AGREEMENT AND GENERAL RELEASE
----------------------------------------
This Settlement Agreement and General Release (hereinafter
"Agreement") is entered into this 19th day of August, 1996 ("Effective
Date"), by and between Charles P. Carinalli (hereinafter "Employee") and
National Semiconductor Corporation (hereinafter "Company").
WHEREAS, Employee and the Company have agreed that his active
employment at the Company will be terminated effective as of September 3,
1996; and
WHEREAS, Company desires to provide termination benefits to Employee on
the terms specified herein; and
WHEREAS, Company and Employee acknowledge that the termination
benefits specified herein are greater than Employee would otherwise be
entitled to upon termination of his employment; and
WHEREAS, Company and Employee desire to settle fully and finally any
differences between them;
NOW, THEREFORE, in consideration of the mutual covenants and
promises set forth herein, Employee and Company agree as follows:
1. Effective as of September 3, 1996, Employee shall resign as an
active employee and shall be relieved of any further obligations to
perform services as an employee on behalf of the Company. Employee
agrees to resign all positions held as an officer of the Company or any
of its subsidiaries on or before September 3, 1996. This date shall be
referred to as the "Termination Date."
2. On the Termination Date, the Company will pay to Employee the
equivalent of one year's salary, calcuated based on Employee's base
salary in effect as of August 19, 1996, in one lump sum less required
withholdings.
<PAGE>
3. Employee will be eligible for the Executive Officers Incentive
Plan ("EOIP") award for fiscal year 1997, (prorated to reflect service
from May 27, 1996 through the Termination Date) which award will be paid
based on the average of the accomplishment scores for fiscal 1997 for the
Company's executive staff and will be paid in accordance with the
provisions of the EOIP at the same time all other participants receive
their payments. Employee will not be eligible for EOIP for fiscal year
1998.
4. Employee will be credited with twenty-seven (27) months of
service toward any payment of Cycle III of the Performance Award Plan
("PAP"), and fifteen (15) months of service toward any payment of Cycle
IV of PAP. If PAP awards are made, Employee will receive a award
prorated as applicable in accordance with the provisions of the PAP and
payment will be made at the same time all other participants receive
their payments.
5. Through December 31, 1996, Company will provide medical and
dental benefits under the terms of the Company's plans at no cost to
Employee other than the weekly charges incurred by employees for medical
and dental benefits. Employee will have the option to continue medical
and dental coverage under the Company's plans under COBRA effective
January 1, 1997. Coverage under COBRA may run until March 31, 1998.
6. On the Termination Date, Company shall pay Employee any
vacation pay accrued through September 30, 1996 to which Employee may be
entitled under the Company's vacation program. In addition, Employee
bshall have the right to exercise on or before ninety (90) days after the
Termination Date any stock options which have vested through the
Termination Date.
7. Employee's entitlement at termination to any other benefits not
otherwise specified in this Agreement shall be determined by the terms of
the applicable benefit plans.
8. Employee agrees to return all Company property, credit cards,
documents or other materials or equipment that have been furnished to him by
the Company by the Termination Date.
<PAGE>
9. Employee acknowledges that he has had twenty-one (21) days to
consider the terms of this Settlement Agreement and General Release.
Once signed by Employee, Employee shall have an additional seven (7) days
to withdraw Employee's approval of this Agreement and General Release.
If Employee withdraws his approval, this Agreement and General Release
will be void and Employee will not be entitled to receive any benefits
hereunder.
10. Employee, his representatives, heirs, successors and assigns
do hereby completely release and forever discharge Company, its
affiliated, related or subsidiary corporations, and its and their present
and former shareholders, officers, directors, agents, employees,
attorneys, successors and assigns (hereinafter collectively also referred
to as "Company") from all claims, rights, demands, actions, obligations,
liabilities and causes of action of any and every kind, nature and
character whatsoever, known or unknown, which Employee may now have, or
has ever had, against Company, based upon any act or omission by Company
prior to the date of execution of this Agreement by Employee, including,
but not limited to, any and all claims for damages, declaratory or
injunctive relief or attorney's fees, arising from or in any way related
to Employee's employment by Company or the termination thereof, whether
based on tort, contract (express or implied), or any federal, state or
local law, statute or regulation, including, but not limited to, claims
of unlawful age discrimination based on the Age Discrimination in
Employment Act or the California Fair Employment and Housing Act;
provided, however, that this paragraph does not waive any indemnification
rights Employee may have whether as an employee or an officer, pursuant
to Labor Code Section 2802, Company By-Laws or Company policy.
11. It is understood and agreed that the preceding Paragraph is a
full and final Release covering all known as well as all unknown or
unanticipated injuries, debts, claims or damages to Employee including,
without limitation, those arising from or in any way related to his
employment by Company or the termination thereof. Therefore, Employee
waives any and all rights or benefits which he may now have, or in the
future may have, under the terms of Section 1542 of the California Civil
Code which provides as follows:
<PAGE>
A general release does not extend to
claims which the creditor does not know or
suspect to exist in his favor at the time of
executing the release, which if known by him
must have materially affected his settlement
with the debtor.
12. Employee shall not initiate or cause to be initiated against
Company any suit, action, investigation, audit, compliance review or
proceeding of any kind, or participate in same, individually or as a
representative or member of a class, under any contract (express or
implied), law, statute or regulation, federal, state or local, pertaining
in any manner whatsoever to the claims, rights, demands, actions,
obligations, liabilities, and causes of action herein released,
including, without limitation, those relating to his employment by
Company or the termination thereof.
13. It is understood and agreed that this Agreement and each and
every provision thereof shall be confidential and shall not be disclosed
directly or indirectly by Employee to any other person, firm,
organization or other entity, of any and every type, public or private,
for any reason, at any time without the prior written request or consent
of Company unless required by law. Nor shall Employee disclose directly
or indirectly to any person or organization, except as expressly
permitted herein, that Employee received any sum of money from Company
as a result of the termination of his employment with Company. It is
further understood and agreed that it shall not constitute a breach of
this Agreement for Employee to disclose the terms thereof to his
immediate family and to his attorney and his financial advisor and/or
accountant; provided, however, that Employee shall be obliged to use his
best efforts to assure that such persons do not disclose this Agreement
or any provision thereof or the fact that Employee received any sum of
money from Company as a result of the termination of Employee's
employment with Company. It is further understood and agreed that
Company shall make reasonable efforts to maintain the confidentiality of
this Agreement and its contents and shall not disclose this Agreement or
its contents, directly or indirectly, to any of Company's employees or
agents, unless such persons have a work-related need to know or unless
required by law, and Company shall instruct each such person to whom it
discloses this Agreement or its contents to refrain from making any
disclosure to any other person except as permitted by this Agreement.
Company believes that disclosure in its 1997 Proxy Statement may be
required by law. It is further understood and agreed that it shall not
constitute a breach of this Agreement for Employee or Company to respond
to any unsolicited inquiry by stating only that Employee and Company
resolved their differences in a mutually satisfactory manner.
<PAGE>
14. Employee represents that he has had an opportunity to be
represented by Counsel of his own choosing in the negotiation and
preparation of this Agreement, that he has had an adequate opportunity to
consider the Agreement, that he has carefully read the Agreement, that he is
fully aware of and understands its contents and its legal effect, that the
preceding paragraphs recite the sole consideration for this Agreement, that
all agreements and understandings between Employee and Company are embodied,
referenced and expressed herein, and that he enters into this Agreement
voluntarily, without coercion, and based on his own judgment and not
in reliance upon any oral or written representations or
promises made by Company, other than those contained or referenced herein.
15. With respect to any matters under this Agreement that are
governed by state law, the parties agree that this Agreement shall be
construed and governed by the laws of the State of California. The
language of all parts of this Agreement shall in all cases be construed
as a whole, according to its fair meaning, and not strictly for or
against any party.
16. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument.
EMPLOYEE NATIONAL SEMICONDUCTOR CORPORATION
//S// CHARLES P. CARINALLI By: //S// RICHARD A. WILSON
- ------------------------------ ---------------------------
CHARLES P. CARINALLI Title: VP, HUMAN RESOURCES
-----------------------
<PAGE>
EXHIBIT 10.2
NATIONAL SEMICONDUCTOR CORPORATION
1997 EXECUTIVE OFFICER INCENTIVE PLAN AGREEMENT
ARTICLE 1
Definitions
-----------
Whenever used in the Agreement, unless otherwise indicated, the
following terms shall have the respective meanings set forth below:
Agreement: This Executive Officer Incentive Plan Agreement.
- ---------
Award: The amount to be paid to a Plan Participant.
- -----
Award Date: The date set by the Committee for payment of
- ---------- Awards,usually approximately forty days after the
Company makes public its consolidated financial
statements for the fiscal year.
Base Salary: The annualized base remuneration received by a
- ----------- Participant from the Company at the end of the
fiscal year. Extraordinary items, including but
not limited to prior awards, relocation expenses,
international assignment allowances and tax
adjustments, sales incentives, amounts recognized
as income from stock or stock options, disability
benefits (whether paid by the Company or a third
party) and all other remuneration are excluded from
the computation of Base Salary.
Company: National Semiconductor Corporation ("NSC"), a
- ------- Delaware corporation, and any other corporation in
which NSC controls directly or indirectly fifty
percent (50%) or more of the combined voting power
of voting securities, and which has adopted this
Plan.
Committee: A committee comprised of directors of National who
- --------- are not employees of the Company, as more fully
defined in the Executive Officer Incentive Plan.
Disability: Inability to perform any services for the Company
- ---------- and eligible to receive disability benefits under
the standards used by the Company's disability
benefit plan or any successor plan thereto.
<PAGE>
Executive Officer: An officer of the Company who is subject to the
- ----------------- reporting and liability provisions of Section 16
of the Securities and Exchange Act of 1934.
Incentive Levels: The grouping of those Executive Officers designated
- ---------------- as Participants as set forth in Article 4.
Participant: An Executive Officer designated as a Participant
- ----------- in accordance with the provisions of Article 3.
Performance Goal: Factors considered and scored to determine the
- ---------------- amount of a Participant's Award, which shall be
based on one or more of the business criteria
listed in Section 5(b) of the Plan. Performance
Goals will have four levels of performance as
follows:
(i) Threshold -- The minimum acceptable level of
performance.
(ii) Target -- Good performance, as established by
the Committee, reflecting a degree of difficulty
which has a reasonable probability of achievement.
(iii) Stretch -- Better than Target performance
and reflecting a degree of difficulty with only a
moderate probability of achievement.
(iv) Best Expected -- Exceptional performance far
exceeding the Target level because of the great
degree of difficulty and the limited probability of
achievement.
Retirement: Permanent termination of employment with the
- ---------- Company, and (a) the Participant's age is either
sixty-five (65) or age is at least fifty-five (55)
and age plus years of service in the employ of the
Company is sixty-five (65) or more, and (b) the
retiring Participant certifies to the Vice
President-Finance of the Company that he or she
does not intend to engage in a full-time vocation.
Target Award: The Award, expressed as a percentage of Base
Salary, that may be earned by a Participant for
achievement of the Target level of performance.
All capitalized terms used in this Agreement and not otherwise
defined herein have the meanings assigned to them in the Executive
Officer Incentive Plan.
<PAGE>
ARTICLE 2
Effective Date
--------------
The Agreement will become effective as of May 27, 1996, to be
effective for the Company's fiscal year 1997.
ARTICLE 3
Eligibility for Plan Participation
----------------------------------
A. Within ninety (90) days after the commencement of the Company's
fiscal year, the Committee shall designate those Executive Officers who
shall be Plan Participants for the fiscal year and their respective
Incentive Levels.
B. Participants will be notified once the Committee has designated
Participants for the fiscal year. Continued participation will be
determined by the Committee annually pursuant to Article 3A supra at the
beginning of each fiscal year.
C. Newly hired Executive Officers and persons who are promoted to
Executive Officers may be added as Participants to the Plan by the
Committee during the fiscal year. Such Participants will receive a
prorated Award based on time of participation in the Plan.
ARTICLE 4
Target Awards
-------------
A. Each Participant will be assigned an Incentive Level with
associated Target Awards expressed as percentages of the Participant's
Base Salary. Target Awards will be the same for all Participants at any
given Incentive Level.
B. In the event that a Participant changes positions during the Plan
Period and the change results in a change in Incentive Level, whether due to
promotion or demotion, the Incentive Level will be prorated to reflect the
time spent in each position.
ARTICLE 5
Plan Performance Goals
----------------------
A. Performance Goals, associated weights and levels of performance
will be established by the Committee within ninety (90) days after the
start of the fiscal year. Each Performance Goal will have defined
Threshold, Target, Stretch and Best Expected levels of performance.
Performance Goals and their associated weights may change from one fiscal
year to another fiscal year to reflect the Company's operational and
strategic goals, but must be based on one or more of the business
criteria listed in Section 5(b) of the Plan.
B. Actual Award amounts may range between 0% and 200% of Target. A
scale showing the amount of the Participant's Award relative to the
<PAGE>
Target Award at the various performance levels will be developed for each
Performance Goal. Performance levels and associated Awards (as a percent of
the Target Award) will be set from Threshold to Best Expected for the
Performance Goals, with Awards ranging from 50% of the Target Award at the
Threshold level to 200% of the Target Award at the Best Expected level.
Each Performance Goal will be scored at end of the fiscal year at a
rating from 0% to 200%. The sum of the scoring on the Performance
Goals will determine the total performance level for the year. The
Committee shall retain the discretion to reduce (but not increase) the
Award otherwise payable to a Participant upon attainment of the total
Performance Goals. Attachment A hereto contains a chart reflecting an
example of the Award formula.
ARTICLE 6
Calculation and Payment of Awards
---------------------------------
A. The Committee shall set a limit on the maximum amount available for
Awards for the fiscal year. Subject to this maximum amount, a
Participant's Award will be calculated as a percentage of Base Salary as
follows:
1) The Participant's Target Award is determined prior to the
beginning of the fiscal year.
2) The performance of each Participant is scored at the end of
the fiscal year.
3) The Participants' overall performance may yield an incentive
pool.
4) The Participants' incentive pool may then be divided by the
Committee among some or all Participants, based on
individual performance scores. No one individual Award may
exceed 200% of the Participant's Target Award amount.
5) Total Awards may not exceed the maximum limit set for Awards
for the fiscal year. As a result, some or all Award amounts
may be adjusted in order not to exceed the maximum limit.
B. The Committee will score the performance of the Plan Participants.
Awards will be paid only after the Committee certifies in writing that
the ratings on the Performance Goals have been attained. The Committee
shall have the discretion to reduce, but not increase, the amount of an
Award otherwise payable to a Participant upon attainment of the
Performance Goal(s) established for the fiscal year.
C. Awards will be paid in cash on or about the Award Date.
D. Awards will reflect the Participant's Base Salary in effect at the
end of the fiscal year. Participants who take an unpaid leave of absence
during the fiscal year for good cause shown to the satisfaction of the
Committee will have their Awards prorated to reflect actual pay earned
during the fiscal year.
<PAGE>
E. All or any portion of the Award may be deferred if the Participant
makes a voluntary irrevocable election to defer payment to a future date
pursuant to the deferral terms contained in Article 8.
ARTICLE 7
Termination of Employment
-------------------------
A. To be eligible to receive an Award, the Participant must be
employed by the Company on the last day of the fiscal year. A
Participant whose employment has terminated prior to that date will
forfeit the Award, except as otherwise provided in this Article 7.
B. If a Participant's employment is terminated during the fiscal year
by Disability, Retirement, or death, the Participant will receive an
Award reflecting the Participant's performance and actual period of
full-time employment during the fiscal year.
C. Unless local law or regulation provides otherwise, payments of
Awards made upon termination of employment by death shall be made on the
Award Date to: (a) beneficiaries designated by the Participant; if none,
then (b) to a legal representative of the Participant; if none, then (c) to
the persons entitled thereto as determined by a court of competent
jurisdiction.
D. Participants whose employment is terminated by reduction in force
during the fiscal year will receive no Award. If a Participant's
employment is terminated by reduction in force after the fiscal year but
before the Award Date, the Participant will receive the Award on the
Award Date.
E. The Committee reserves the right to reduce an Award to reflect a
Participant's absence from work during a fiscal year. A Participant
absent on the Award Date will not receive an Award until he or she
returns from the absence and satisfies the Committee the absence was for
good cause shown.
F. The right of a Participant to receive an Award shall be forfeited
if the Participant's employment is terminated for good cause shown such
as acts of moral turpitude, a reckless disregard of the rights of other
employees or because of or the Participant is discovered to have engaged
in fraud, embezzlement, dishonesty against the Company, obtaining funds
or property under false pretenses, assisting a competitor without
permission, or interfering with the relationship of the Company with a
customer. A Participant's Award will be forfeited for any of the above
reasons regardless of whether such act is discovered prior to or
subsequent to the Participant's termination of employment or payment of
an Award. If an Award has been paid, such payment shall be repaid to the
Company by the Participant.
<PAGE>
ARTICLE 8
Deferral of Awards
------------------
A. If permitted by local law and regulations, a Participant is
entitled to make an irrevocable election (in the form of the Notice of
Election attached) to defer receipt of all or any portion of any Award.
For any fiscal year, the Notice of Election must be completed prior to
thirty (30) days before the end of the fiscal year. Notices of Election
are not self-renewing and must be completed for each fiscal year if
deferral is desired for the applicable fiscal year.
B. For each Participant who elects deferral, the Company will
establish and maintain book entry accounts which will reflect the
deferred Award and any interest credited to the account.
C. For deferred Awards, Participant deferred accounts will be credited
each Award Date with interest set at the rate for long-term A-rated
corporate bonds, as reported by the investment banking firm of Salomon
Brothers Inc of New York City (or such other investment banking firm as
the Committee may specify) during the first week of each calendar year.
The interest rate will be reset at the beginning of each calendar year.
Interest will begin to accrue on the Award Date and will be credited each
Award Date until the date payment is actually made. If a Participant's
Award is distributed at any time other than on an Award Date, the
Participant's account will be credited with interest until the date of
distribution.
D. Participants will not receive deferred Awards until the earlier of
termination of employment for any reason (including Retirement,
Disability, or death) or a date pre-selected by the Participant. The
account balance will be paid in a lump sum in the month following the
earlier of termination of employment for any reason or the pre-selected
date unless installment payments are permitted and have been elected as
follows: Upon termination of employment by reason of Retirement or
Disability, a Participant who has previously elected to defer an Award
may irrevocably elect to have the balance of the deferred Award plus
accrued interest paid to the Participant in periodic, annual installments
over a period of ten (10) years. Payments shall commence or be made
annually on a day that is within thirty (30) days of the anniversary date
following the Participant's Retirement or Disability.
E. Subject to Section 7.F., if the Participant's employment is
terminated for any reason other than death, Disability or Retirement, the
Participant will be paid the entire account balance in a lump sum in the
month after termination, less any sums due the Company. If a Participant
has requested installment payments and dies either before or after
distribution has begun, the unpaid balance will be paid in a lump sum in
the month following the Participant's death, less any sums due the Company.
F. Payment of part or all of the deferred Award may be accelerated in
the case of severe hardship for good cause shown to the satisfaction of
the Committee, which shall mean an emergency or unexpected situation
including, but not limited to, illness or accident involving the
Participant or any of the Participant's dependents. All payments in case
of hardship must be specifically approved by the Committee.
<PAGE>
G. No Participant may assign, pledge or borrow against his or her
account except as provided in this Agreement.
H. If permitted by local law and regulations, the Participant may
designate a beneficiary to receive deferred Awards in the event of the
Participant's death. The Participant's beneficiary may be changed
without the consent of any prior beneficiary except as follows: In those
jurisdictions where spouses are granted rights by law in a Participant's
earnings, if the Participant is married at the time of designation, the
Participant's spouse must consent to the beneficiary designation and any
change in beneficiary. If no beneficiary is chosen or the beneficiary does
not survive the Participant, the Award account balance will be paid
in accordance with the terms of Article 7C or as otherwise required by
local law or regulation.
ARTICLE 9
Interpretations and Rule-Making
--------------------------------
The Committee shall have the sole right and power to: (i) interpret
the provisions of the Agreement, and resolve questions thereunder, which
interpretations and resolutions shall be final and conclusive; (ii) adopt
such rules and regulations with regard to the administration of the Plan
as are consistent with the terms of the Plan and the Agreement, and (iii)
generally take all action to equitably administer the operation of the
Plan and this Agreement.
ARTICLE 10
Declaration of Incentives, Amendment, or Discontinuance
-------------------------------------------------------
The Committee may on or before the Award Date: (i) determine not to
make any Awards to any or all Participants for any Plan Period; (ii) make
any modification or amendment to this Agreement for any or all
Participants provided such modification or amendment is in accordance
with the terms of the Plan; or (iii) discontinue this Agreement for any
or all Participants provided such modification or amendment is otherwise
in accordance with the Plan.
ARTICLE 11
Miscellaneous
--------------
A. Except as provided in Article 8 H, no right or interest in the Plan
is transferable or assignable except by will or the laws of descent and
distribution.
B. Participation in this Plan does not guarantee any right to continued
employment and the Committee and management reserve the right to dismiss
Participants for any reason whatsoever. Participation in one fiscal year
does not guarantee a Participant the right to participation in any
subsequent fiscal year.
<PAGE>
C. The Company reserves the right to deduct from all Awards under this
Plan any sums due the Company as well as any taxes or other amounts
required by law to be withheld with respect to Award payments.
D. This Plan constitutes an unfunded Plan of deferred compensation. As
such, any amounts payable hereunder will be paid out of the general
corporate assets of the Company and shall not be transferred into a trust
or otherwise set aside. All accounts under the Plan will be for
bookkeeping purposes only and shall not represent a claim against
specific assets of the Company. The Participant will be considered a
general creditor of the Company and the obligation of the Company is
purely contractual and shall not be funded or secured in any way.
E. Maintenance of financial information relevant to measuring
performance during the fiscal year will be the responsibility of the
Chief Financial Officer of the Company.
F. The provisions of the Plan shall not limit, or restrict, the right
or power of the Committee to continue to adopt such other plans or
programs, or to make salary, bonus, incentive, or other payments, with
respect to compensation of Executive Officers, as in its sole judgment
it may deem proper.
G. Except to the extent superseded by federal law, this Agreement shall be
construed in accordance with the laws of the State of California.
H. No member of the Company's board of directors or any officer,
employee, or agent of the Company shall have any liability to any person,
firm or corporation based on or arising out of this Agreement or the Plan.
I. Any dispute relating to or arising from this Agreement shall be
determined by binding arbitration by a three member panel chosen under
the auspices of the American Arbitration Association and acting pursuant
to its Commercial Rules, sitting in San Jose, California. The panel may
assess all fees, costs and other expenses, including reasonable counsel
fees, as the panel sees fit. Notwithstanding the parties' election to
use arbitration to resolve disputes under this Agreement, nothing
contained in that election shall preclude either party, if the
circumstances warrant, from seeking extraordinary relief, such as
injunction and attachment, from any court of competent jurisdiction in
California.
<PAGE>
ATTACHMENT A
CHART describing Incentive Awards
as a percentage of Target Awards
Chart illustrates the manner in which awards are to be calculated
under the Executive Officer Incentive Plan. Achievement of performance
against goals between the Threshold Level and fifty percent of Target
Level results in an Incentive Award of 50% of Target, with the Committee
having discretion to adjust downward when it deems appropriate.
Similarly, performance levels against goals of between 50% and 100%
result in an Incentive Award of 100% of Target, while performance against
goals of between 100% and 150% result in an Incentive Award of 150% of
Target (in each case, subject to downward - but not upward - adjustment by
the Committee). Finally, performance against goals of more than 150% will
result in the maximum incentive award of 200% of Target award, subject to
downward adjustment.
In summary, while the Plan formula sets the incentive awards upon
achievement of each level of performance, the shaded areas of the chart
reflect the areas of discretion on award payment that is vested with the
Committee.
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
EXECUTIVE OFFICER INCENTIVE PLAN
Notice of Election
If you are a Participant in the Company's Executive Officer
Incentive Plan ("EOIP") and receive an Award under the EOIP for fiscal
year 1997, you may accept payment in calendar year 1997 or you may defer
payment until a later date which is at least one year after the Award
Date. If you want to defer payment, complete this election form and
return it to Donald Macleod, Senior Vice President, Finance, or his
designee by April 24, 1997.
If you do not complete this form, you will receive payment in
calendar year 1997. For further details, refer to the National
Semiconductor Corporation Executive Officer Incentive Plan documents and
Agreement.
* * * * *
DEFERRAL ELECTION:
In accordance with the National Semiconductor Corporation EOIP, I
hereby elect to defer all or part of the Award as specified below, which
Award would otherwise be paid to me under the terms of the KEIP.
1. Please defer ______% or $______ of my EOIP Award. If the
dollar amount selected is greater than the total EOIP Award, the entire
Award will be deferred.
2. The amounts deferred will be payable on the earliest of:
termination of employment for any reason (including retirement,
disability, or death) or on ________________________ (specify pre-
selected distribution date at least one year after the 1997 Award Date.)
3. In the event of death, my primary beneficiary is:
_______________________________________________
(Print name)
Print address: ______________________________________________
_______________________________________________
My secondary beneficiary (to receive benefits only in the event of death
of my primary beneficiary) is:
_______________________________________________
(Print name)
Print address: _______________________________________________
_______________________________________________
<PAGE>
I UNDERSTAND THIS ELECTION IS IRREVOCABLE FOR THE 1997 EOIP AWARD AND IS
SUBJECT TO THE TERMS OF THE NATIONAL SEMICONDUCTOR EOIP DOCUMENT.
Consent of spouse (required for married
participants designa- ting beneficiaries
other than spouse)
Signature:___________________ Signature:______________________
Print Name:__________________ Print Name:_____________________
Date: _______________________
Received by National Semiconductor Corporation
Date: ________________________________
By: __________________________________
Print Name: __________________________
Title: _______________________________
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION Exhibit 11.0
ADDITIONAL FULLY DILUTED CALCULATION OF EARNINGS PER SHARE(1)
(in millions, except per share amounts)
Three Months Ended
------------------
Aug. 25, Aug. 27
1996 1995
------- -------
Net Income $(205.2) $ 73.5
======= =======
Number of shares:
Weighted average common
shares outstanding 137.7 123.1
Weighted average common
equivalent shares, net of
tax benefit(2) 1.6 4.3
------- -------
Weighted average common and
common equivalent shares 139.3 127.4
Additional weighted average
common equivalent shares
assuming full dilution - -
Shares issuable from
assumed conversion of:
Preferred shares - 12.2
Convertible notes 6.1 -
------- -------
Weighted average common and
common equivalent shares
assuming full dilution 145.4 139.6
======= =======
Income(loss) per share
assuming full dilution $ (1.41) $ 0.53
======= =======
(1) For the three months ended August 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.
(2) For purposes of this computation, all outstanding options
and warrants on common stock are assumed to have been
exercised, even though for the three months ended August 25,
1996, the related effects are antidilutive.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-25-1997
<PERIOD-END> AUG-25-1996
<CASH> 308
<SECURITIES> 39
<RECEIVABLES> 289
<ALLOWANCES> 0
<INVENTORY> 304
<CURRENT-ASSETS> 1144
<PP&E> 2428
<DEPRECIATION> 1249
<TOTAL-ASSETS> 2418
<CURRENT-LIABILITIES> 645
<BONDS> 0
0
0
<COMMON> 69
<OTHER-SE> 1309
<TOTAL-LIABILITY-AND-EQUITY> 2418
<SALES> 566
<TOTAL-REVENUES> 566
<CGS> 394
<TOTAL-COSTS> 394
<OTHER-EXPENSES> 3
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1)
<INCOME-PRETAX> (277)
<INCOME-TAX> (69)
<INCOME-CONTINUING> (208)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (208)
<EPS-PRIMARY> (1.51)
<EPS-DILUTED> (1.51)
</TABLE>
