UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 5, 1998
NATIONAL SEMICONDUCTOR CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 1-6453 95-2095071
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(State of incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
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
NATIONAL SEMICONDUCTOR CORPORATION
INDEX
Page No.
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Item 5. Other Events 3
Item 7. Financial Statements and Exhibits 4
Signature 5
Item 5. Other Events
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On October 5, 1998, the Company announced plans to consolidate its wafer
manufacturing operations in Greenock, Scotland and to seek investors to
acquire and operate the facility in Greenock as an independent foundry
business. The decision for this action was made in light of continued
weakness in the semiconductor market, which has resulted in overall
lower capacity utilization in the Company's manufacturing facilities.
In addition to the information included in the Company's News Release
dated October 5, 1998, which is incorporated herein by reference, the
following is provided to further describe the impact of the Company's
actions:
The Company will close its 4-inch wafer fabrication facility ("Fab 1")
and consolidate Fab 1 manufacturing into the Company's 6-inch wafer
fabrication facility ("Fab 3"). This action is expected to be completed
within 12 to 18 months. In connection with the closure of Fab 1, the
Company will incur a one-time charge of approximately $18-$25 million in
its second quarter of fiscal 1999. The charge will include
approximately $10-$15 million for severance, approximately $3-$5 million
for costs associated with the dismantling of Fab 1 and approximately $5
million for other related exit costs. In accordance with 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, the Company reviewed the carrying value of the Fab 1 assets for
impairment in light of the change in circumstances. The Company
performed an impairment test utilizing expected cash flows over the
remaining estimated useful lives of these assets and determined that
they were not impaired, since the carrying value of the assets will be
fully recovered through expected cash flows prior to the expected date
of disposal. The Company expects to dispose of the Fab 1 assets at the
time of closure and will continue to use these assets until that time.
Therefore, the related assets do not meet the criteria for assets to be
held for disposal under SFAS No. 121, because the Company does not have
the current ability to remove the assets from operation. As a result,
the Company will recognize approximately $2.5 million additional
depreciation expense per quarter over the next 18 months, which
represents the acceleration of depreciation related to these assets due
to their shortened remaining useful lives and reduces their carrying
value to expected salvage value at the time of disposal.
In conjunction with plans to seek outside investors to acquire and
operate the Greenock facility, the Company reviewed the carrying value
of the Fab 3 assets for impairment. The Company performed an impairment
test utilizing expected cash flows over the remaining estimated useful
lives of these assets and determined that they were not impaired, since
the carrying value of the assets become fully recovered through expected
cash flows prior to the expected date of disposal. The assets also do
not meet the criteria for assets to be held for disposal under SFAS No.
121, because the Company does not have the current ability to remove the
assets from operation. Management believes that the likely sale of the
assets would result in substantial loss, as estimated sales proceeds
would not exceed the asset carrying value based on current depreciation
rates. There is also a risk that the Company will be unsuccessful in
seeking investors, in which case, the Company may decide to either
shutdown or continue to operate the facility. Management has re-
evaluated the remaining useful lives and salvage value of these assets,
based on the probability of these potential alternatives. As a result,
the Company will recognize approximately $6 million additional
depreciation expense per quarter over the adjusted remaining lives of
the Fab 3 assets, which represents acceleration of depreciation to
reduce their carrying value to expected fair value less cost to sell at
the estimated time of disposal.
Other costs associated with this action, which will be charged to future
operations, include approximately $20-$25 million for process transfer
costs and approximately $6-$8 million for retention bonuses. The
process transfer costs will be recorded as incurred and the retention
bonuses will be recorded ratably as earned over the employees' service
period.
Item 7. Financial Statements and Exhibits
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(c). Exhibits
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Designation
of Exhibit Description of Exhibit
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99 Contents of News Release dated October 5,
1998.
SIGNATURE
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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 8, 1998
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Richard D. Crowley, Jr.
Vice President and Controller
Signing on behalf of the
registrant and as principal
accounting officer
www.national.com
For more information:
P.R.: Bill Callahan Alan Bernheimer
(408) 721-2871 (408) 721-8665
[email protected] [email protected]
Financial: Jim Foltz
(408) 721-5693
[email protected]
NATIONAL SEMICONDUCTOR ANNOUNCES PLANS TO RESTRUCTURE
AND SPIN OUT WAFER MANUFACTURING OPERATIONS IN SCOTLAND
SANTA CLARA, CA, October 5, 1998--National Semiconductor
Corporation (NSM:NYSE) today announced plans to consolidate its
wafer manufacturing operations in Greenock, Scotland and said it
is currently seeking investors to spin out the remaining
operations there as an independent foundry operation.
The Greenock facility near Glasgow currently has two
manufacturing lines designated as Fab 1, which processes 4-
inch diameter wafers, and Fab 3, which processes 6-inch wafers.
The plan announced today will close Fab 1 and consolidate all
manufacturing at this site into Fab 3. Employment at Greenock will
not be affected for at least six months, but expectations are that
the consolidation will reduce total employment there from 1,000 to
400, starting in March 1999. The full transition to Fab 3 is
expected to take another 12 months after that to reach completion.
Some product lines and personnel will also be transferred to other
National facilities with excess capacity. The action has no impact
on the company's Product Development/Design Center in Greenock,
which employs 40 people. National said negotiations for the spin
out will go forward simultaneously as part of the company's
efforts to establish the Greenock site as a new foundry business
in Scotland.
National attributed the actions to continuing weakness in
the global semiconductor market, which has resulted in
underutilization of the company's wafer manufacturing sites
worldwide, excluding the company's new 0.25-micron facility in
South Portland, Maine, which is operating at full capacity.
"This decision in no way reflects on the outstanding
performance of our Scottish workforce," said Brian Halla,
president and chief executive officer of National Semiconductor.
"We greatly value the contributions they have made to our
operations and deeply regret the impact of this action on this
highly skilled and motivated workforce," he added.
"We currently have the equivalent of one factory too many to
meet the business level of the next four to five years," Halla
said. "The decision to consolidate our operations at Greenock and
seek investors to operate the facility independently is a direct
result of continuing softness in the semiconductor market and of
factory utilization rates below 50 percent. We believe our
restructuring plans for Greenock offer the best prospects to
ensure continuation of manufacturing operations there and to
preserve the employment opportunities of the greatest possible
number of current employees," he added.
National said that even its best forecasts of market growth
over the next several years would not support current capacity
levels at Greenock but added that the flexibility of a foundry
relationship would be a more viable approach to meeting periods of
peak market demand.
As a result of the restructuring, the company said it will
take an additional one-time charge of approximately $25 million in
the current quarter, which ends November 29, 1998.
National said it is prepared to support the spin out by
buying back wafers and providing support services for a period of
time to be negotiated. The company has previously completed
similar successful transfers of manufacturing and other operations
in the United States and Israel, including the spin out of its
Fairchild Semiconductor businesses in 1997, and the transfer of
its manufacturing operations in Israel to Tower Semiconductor in
1993.
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