-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uj3gc3d2bQo6Y4sMdbErcvjmBCkP7TecteJVAlmJu26vRXNP/9jl+9FCnH/9GwJZ bsBOSjBg8GmFvuQ9rVnp3A== /in/edgar/work/0000070530-00-000013/0000070530-00-000013.txt : 20001012 0000070530-00-000013.hdr.sgml : 20001012 ACCESSION NUMBER: 0000070530-00-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000827 FILED AS OF DATE: 20001011 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL SEMICONDUCTOR CORP CENTRAL INDEX KEY: 0000070530 STANDARD INDUSTRIAL CLASSIFICATION: [3674 ] IRS NUMBER: 952095071 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06453 FILM NUMBER: 737982 BUSINESS ADDRESS: STREET 1: 2900 SEMICONDUCTOR DR STREET 2: PO BOX 58090 CITY: SANTA CLARA STATE: CA ZIP: 95052-8090 BUSINESS PHONE: 4087215000 MAIL ADDRESS: STREET 1: 2900 SEMICONDUCTOR DR CITY: SANTA CLARA STATE: CA ZIP: 95052-8090 10-Q 1 0001.txt FORM 10Q FOR NATIONAL SEMICONDUCTOR CORP 7 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 27, 2000 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 August 27, 2000 ------------------- ------------------------------ Common stock, par value $0.50 per share 178,589,384 NATIONAL SEMICONDUCTOR CORPORATION INDEX Page No. Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended August 27, 2000 and August 29, 1999 3 Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended August 27, 2000 and August 29, 1999 4 Condensed Consolidated Balance Sheets (Unaudited) as of August 27, 2000 and May 28, 2000 5 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended August 27, 2000 and August 29, 1999 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-15 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 Part II. Other Information Item 1. Legal Proceedings 16 Item 6. Exhibits and Reports on Form 8-K 16-17 Signature 18 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts)
Three Months Ended Aug. 27, Aug. 29, 2000 1999 ------------- ------------- Net sales $640.8 $481.8 Operating costs and expenses: Cost of sales 301.4 296.7 Research and development 103.7 115.1 Selling, general and administrative 100.6 76.0 Special items 6.4 - ------------- ------------- Total operating costs and expenses 512.1 487.8 Operating income (loss) 128.7 (6.0) Interest income (expense), net 14.1 (1.4) Other income, net 37.5 57.0 ------------- ------------- Net income before income taxes 180.3 49.6 Income tax expense 36.1 2.5 ------------- ------------- Net income $144.2 $ 47.1 ============= ============= Earnings per share: Basic $ 0.81 $ 0.28 Diluted $ 0.74 $ 0.25 Weighted-average shares: Basic 178.1 170.3 Diluted 195.8 185.4 Income used in basic and diluted earnings per share calculation $144.2 $ 47.1
See accompanying Notes to Condensed Consolidated Financial Statements NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in millions)
Three Months Ended Aug. 27, Aug. 29, 2000 1999 ----------------- ---------------- Net income $144.2 $ 47.1 Other comprehensive income, net of tax: Reclassification adjustment for realized gain included in net income (17.7) - Unrealized gain on available-for-sale securities 53.2 172.3 ----------------- ---------------- Comprehensive income $179.7 $219.4 ================= ================
See accompanying Notes to Condensed Consolidated Financial Statements NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions)
Aug. 27, May 28, 2000 2000 ------------------- ------------------ ASSETS Current assets: Cash and cash equivalents $ 836.5 $ 778.8 Short-term marketable investments 30.3 71.1 Receivables, net 278.4 258.6 Inventories 196.0 192.9 Deferred tax assets 125.7 125.7 Other current assets 60.2 40.5 ------------------- ------------------ Total current assets 1,527.1 1,467.6 Net property, plant and equipment 804.2 803.7 Long-term cash investments 58.8 - Long-term marketable investments 50.0 12.7 Other assets 104.9 98.2 ------------------- ------------------ Total assets $2,545.0 $2,382.2 =================== ================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings and current portion of long-term debt $ 31.7 $ 31.4 Accounts payable 176.3 194.5 Accrued expenses 268.6 315.1 Income taxes 111.4 86.7 ------------------- ------------------ Total current liabilities 588.0 627.7 Long-term debt 44.1 48.6 Other non-current liabilities 66.3 62.6 ------------------- ------------------ Total liabilities 698.4 738.9 ------------------- ------------------ Commitments and contingencies Shareholder's equity Common stock 89.3 88.8 Additional paid-in capital 1,418.4 1,395.3 Retained earnings 330.9 186.7 Accumulated other comprehensive income (loss) 8.0 (27.5) ------------------- ------------------ Total shareholders' equity 1,846.6 1,643.3 ------------------- ------------------ Total liabilities and shareholders' equity $2,545.0 $2,382.2 =================== ==================
See accompanying Notes to Condensed Consolidated Financial Statements
NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) Three Months Ended Aug. 27, Aug. 29, 2000 1999 -------------------------- --------------------------- Cash flows from operating activities: Net income $144.2 $ 47.1 Adjustments to reconcile net income with net cash provided by (used by) operations: Depreciation and amortization 59.3 72.6 Gain on investments (36.1) (48.4) Loss on disposal of equipment 0.8 3.7 Donation of equity securities 20.5 - Non-cash special items 6.4 - Other, net (1.0) 7.4 Changes in certain assets and liabilities, net: Receivables (19.8) (36.8) Inventories (3.1) (4.6) Other current assets (20.5) (1.9) Accounts payable and accrued expenses (63.1) (77.7) Current and deferred income taxes 24.7 12.6 Other liabilities 3.7 1.5 -------------------------- --------------------------- Net cash provided by (used by) operating activities 116.0 (24.5) -------------------------- --------------------------- Cash flows from investing activities: Purchase of property, plant; and equipment (51.0) (21.7) Sale and maturity of marketable investments 2.1 61.3 Purchase of marketable investments (20.0) (62.5) Proceeds from sale of investment 21.3 52.2 Business acquisitions, net of cash acquired (24.9) - Purchase of investments and other, net (0.3) (1.8) -------------------------- --------------------------- Net cash provided by (used by) investing activities (72.8) 27.5 -------------------------- --------------------------- Cash flows from financing activities: Repayment of debt (4.2) (19.0) Issuance of common stock, net 18.7 26.2 -------------------------- --------------------------- Net cash provided by financing activities 14.5 7.2 -------------------------- --------------------------- Net change in cash and cash equivalents 57.7 10.2 Cash and cash equivalents at beginning of period 778.8 418.7 -------------------------- --------------------------- Cash and cash equivalents at end of period $836.5 $428.9 ========================== ===========================
See accompanying Notes to Condensed Consolidated Financial Statements 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. Throughout the notes to the condensed consolidated financial statements, National Semiconductor Corporation and its majority-owned subsidiaries may be referred to as National or the company. Interim results of operations are not necessarily indicative of the results to be expected for the full year. This report should be read in conjunction with the consolidated financial statements and notes thereto included in the annual report on Form 10-K for the fiscal year ended May 28, 2000. Earnings Per Share: A reconciliation of the shares used in the computation for basic and diluted earnings per share follows:
Three Months Ended Aug. 27, Aug. 29, (in millions) 2000 1999 ---------------- --------------- Net income used for basic and diluted earnings per share $144.2 $ 47.1 ================ =============== Number of shares: Weighted-average common shares outstanding used for basic earnings per share 178.1 170.3 Effect of dilutive securities: Stock options 17.7 15.1 ---------------- --------------- Weighted-average common and potential common shares outstanding used for diluted earnings per share 195.8 185.4 ================ ===============
As of August 27, 2000, there were options outstanding to purchase 8.6 million shares of common stock with a weighted-average exercise price of $59.54, which could potentially dilute basic earnings per share in the future, but were not included in diluted earnings per share as their effect was antidilutive. As of August 29, 1999, options outstanding to purchase 2.9 million shares of the company's common stock with a weighted-average exercise price of $30.24 were not included in the computation of diluted earnings per share because their effect was antidilutive. As of August 29, 1999, the company also had outstanding $258.8 million of convertible subordinated notes, which were convertible into approximately 6.0 million shares of common stock. The notes were not assumed to be converted in the computation of diluted earnings per share because they were antidilutive. The notes were paid off during fiscal 2000 and therefore had no effect on the computation of diluted earnings per share as of August 27, 2000.
Note 2. Consolidated Financial Statement Detail The components of inventories were: Aug. 27, May 28, (in millions) 2000 2000 ------------------ ---------------- Raw materials $ 17.2 $ 16.6 Work in process 111.0 112.0 Finished goods 67.8 64.3 ------------------ ---------------- Total inventories $ 196.0 $ 192.9 ================== ================ The components of accumulated other comprehensive income (loss), net of tax, were: Aug. 27, May 28, (in millions) 2000 2000 ------------------ ---------------- Unrealized gain on available-for-sale securities $ 39.2 $ 3.7 Minimum pension liability (31.2) (31.2) ------------------ ---------------- $ 8.0 $ (27.5) ================== ================ The components of special items were: Three Months Ended Aug. 27, Aug. 29, (in millions) 2000 1999 ------------------ ----------------- In-process research and development charge $ 4.1 $ - Restructuring of operations 2.3 - ------------------ ----------------- $ 6.4 $ - ================== =================
Components of Interest income (expense), net and Other income, were: Three Months Ended Aug. 27, Aug. 29, (in millions) 2000 1999 ------------------ ----------------- Interest income (expense), net Interest income $ 15.4 $ 5.9 Interest expense (1.3) (7.3) ------------------ ----------------- Interest income (expense), net $ 14.1 $ (1.4) ================== ================= Other income, net Net intellectual property income $ 1.4 $ 6.8 Gain on investments 36.1 48.4 Other - 1.8 ------------------ ----------------- Total other income, net $ 37.5 $ 57.0 ================== =================
Included in gain on investments for the first quarter of fiscal 2001 is a gain of $20.5 million from the distribution of equity securities that were a part of the company's investment portfolio. The securities were donated to establish the National Semiconductor Foundation. The expense associated with the donation also totaled $20.5 million and is included in selling, general and administrative expenses for the first quarter of fiscal 2001.
Note 3. Statement of Cash Flow Information Three Months Ended Aug. 27, Aug. 29, (in millions) 2000 1999 ---------------- ---------------- Supplemental Disclosure of Cash Flow Information: Cash paid (refunded) for: Interest $ 1.1 $ 3.1 Income taxes $ 11.4 $ (10.0) Supplemental Schedule of Non-cash Investing and Financing Activities: Issuance of stock for employee benefit plans $ 4.1 $ 0.9 Issuance of restricted stock $ 1.7 $ - Issuance of common stock in connection with the settlement of a promissory note $ - $ 5.0 Change in unrealized gain on available-for-sales securities $ 35.5 $ 172.3
Note 4. Restructuring of Operations In connection with its consolidation of the wafer manufacturing operations in Greenock, Scotland, the company recorded a $2.3 million restructuring charge during the first quarter of fiscal 2001. The charge represents additional severance costs associated with the termination of the remaining employees expected to depart with the closure of the 4-inch wafer fabrication facility. During the quarter, higher than expected salaries due to unexpected overtime hours were earned by terminating employees. The actual salaries earned directly impact the computation of the amount of severance these employees have a right to receive upon effective termination. The closure of the 4-inch wafer fabrication facility and the transfer of products and processes to the 6-inch wafer fabrication facility on the same site was substantially completed by the end of September. During the first quarter of fiscal 2001, the company paid $1.7 million in severance to 39 terminated employees in connection with the facility closure. During the quarter, the company also paid $1.8 million of other exit-related costs, primarily related to restructuring actions announced in May 1999. Included in accrued liabilities at August 27, 2000, is $17.3 million related to severance and other exit costs for all restructuring actions discussed in Note 3 to the consolidated financial statements for fiscal 2000 that were not yet completed as of August 27, 2000. These restructuring costs primarily represent facility clean-up costs and lease obligations, as well as approximately $3.2 million of remaining severance related to the closure of the Greenock 4-inch wafer fabrication facility. The timing of actual departure of employees and payment of severance may occur in different accounting periods due to minimum termination notification periods. Severance is usually paid on the effective date of termination. Note 5. Acquisition In July 2000, the company acquired the business and assets of Vivid Semiconductor, Inc. a flat-panel display design firm based in Chandler, Arizona. The addition of Vivid's technologies and expert analog engineering resources is expected to expand National's strengths in creating silicon solutions for the flat-panel display market. The acquisition was accounted for using the purchase method with a purchase price of $25.1 million in cash. In connection with the acquisition, the company recorded a $4.1 million in-process research and development charge, which is included as a component of special items in the condensed consolidated statement of operations. The amount allocated to the in-process research and development charge was determined through an established valuation technique used in the high technology industry and expensed upon acquisition, because technological feasibility had not been established and no alternative uses exist. Research and development costs to bring the products to technological feasibility are not expected to have a material impact on future operating results. The remainder of the purchase price was allocated to net assets of $1.3 million and intangible assets of $19.7 million based on fair market values. The intangible assets primarily include goodwill to be amortized over its useful life of 5 years. Note 6. Segment Information The following table presents information related to the company's reportable segments:
Information Cyrix Analog Appliance Business All Total Segment Segment Unit Others Eliminations Consolidated ----------- -------------- ----------- ---------- ---------------- ---------------- Three months ended August 27, 2000: Sales to unaffiliated customers $ 461.2 $ 65.7 $ - $ 113.9 $ - $ 640.8 Inter-segment sales - 0.1 - - (0.1) - ----------- -------------- ----------- ---------- ---------------- ---------------- Net sales $ 461.2 $ 65.8 $ - $ 113.9 $ (0.1) $ 640.8 =========== ============== =========== ========== ================ ================ Segment income (loss) before income taxes $ 158.6 $ (18.5) $ - $ 40.2 $ 180.3 =========== ============== =========== ========== ================ Three months ended August 29, 1999: Sales to unaffiliated Customers $ 333.4 $ 52.0 $ 18.6 $ 77.8 $ - $ 481.8 Inter-segment sales - 0.1 - - (0.1) - ----------- -------------- ----------- ---------- ---------------- ---------------- Net sales $ 333.4 $ 52.1 $ 18.6 $ 77.8 $ (0.1) $ 481.8 =========== ============== =========== ========== ================ ================ Segment income (loss) before income taxes $ 82.5 $ (29.2) $ (22.6) $ 18.9 $ 49.6 =========== ============== =========== ========== ================
Item 2. MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The company recorded net sales of $640.8 million for the first quarter of fiscal 2001, representing a 33 percent increase from net sales of $481.8 million for the comparable quarter of fiscal 2000. This growth was primarily attributable to continued improvement in market conditions for the semiconductor industry. Net income was $144.2 million for the first quarter of fiscal 2001, compared to net income of $47.1 million for the corresponding period of fiscal 2000. Although the improvement in operating results reflects the effect of the company's decision in May 1999 to exit the Cyrix PC processor business, growth in sales of higher margin analog products and improvement in manufacturing efficiency were also key contributors. Included in net income for the first quarter of fiscal 2001 were special items totaling $6.4 million. The special items represented an in-process R&D charge of $4.1 million related to an acquisition (See Note 5) and a restructuring charge of $2.3 million related to the consolidation of the manufacturing facility in Greenock, Scotland (See Note 4). For the first quarter of fiscal 2000, net income included a $48.4 million gain from the sale of Fairchild Semiconductor stock, as part of Fairchild Semiconductor's initial public offering. Sales The following discussion is based on the company's operating segments described in Note 12 to the consolidated financial statements included in the Annual Report on Form 10K for the year ended May 28, 2000. The increase in overall sales for the first quarter of fiscal 2001 was a result of significantly higher volumes, while average selling prices were relatively flat for most of the company's products. The Analog segment, whose sales now represent 72 percent of the company's total sales, drove the growth in sales. For the first quarter of fiscal 2001, analog product sales grew 38 percent over sales for the comparable quarter of fiscal 2000. This growth was primarily attributable to significantly higher unit volume, while average selling prices increased slightly. Analog segment sales were particularly strong in the wireless cellular markets. Sales for interface products grew by 65 percent, while sales for application-specific wireless communications products, amplifiers, audio and power management products all grew by more than 45 percent over sales for the comparable period of fiscal 2000. Sales in the first quarter of fiscal 2001 for the Information Appliance segment grew 26 percent over sales for the comparable quarter of fiscal 2000 primarily due to higher unit volume as average selling prices remained flat. This comparison excludes sales of the Cyrix PC microprocessor unit, which the company sold in September 1999. Network product sales declined by 12 percent from sales for fiscal 2000. Although the company introduced new products employing new digital signal processing technology in the second half of fiscal 2000, minimal shipments of these new products and decreasing demand for mature ethernet products contributed to the sales decline. The decrease in unit shipments more than offset marginal increases in average selling prices for network products. Gross Margin Gross margin as a percentage of sales increased to 53 percent for the first quarter of fiscal 2001 from 38 percent for the same period of fiscal 2000. The increase in gross margin for fiscal 2001 was primarily driven by improved product mix, as the company shipped more high contribution analog and wireless products, combined with improved factory utilization. With the installed capacity in Maine being fully utilized, wafer fabrication capacity utilization for the first quarter of fiscal 2001 reached 97 percent. This compares to 61 percent for the same period of fiscal 2000, which reflected the effect of lower capacity utilization in Maine due to the company's decision to exit the Cyrix PC microprocessor business in May 1999. Research and Development Total research and development expenses of $107.8 million for the first quarter of fiscal 2001, which included the effect of a $4.1 million in-process R&D charge related to the acquisition in the quarter of Vivid Semiconductor, declined 6 percent from R&D expenses for the same period of fiscal 2000. Excluding the charge for Vivid, R&D expenses for the first quarter of fiscal 2001 declined 10 percent. The primary factor affecting the decrease in R&D expense is the absence of expenses associated with the former 8-inch development wafer fabrication facility in Santa Clara, California. The closure of this facility, which was announced in May 1999, was completed by the end of the first quarter of fiscal 2000. The company continues to invest resources to develop new cores and integrate those cores with its other technological capabilities to create system-on-a-chip products aimed at the emerging information appliance market. It also continues to invest in the development of new analog and mixed-signal technology-based products for applications in the wireless communications, personal systems and consumer markets, as well as in the process technologies needed to support those products. For the first quarter of fiscal 2001, the company devoted approximately 82 percent of its R&D effort towards new product development and 18 percent towards the development of process technology. Compared to the comparable period of fiscal 2000, this represents a 9 percent increase in spending for new product development and a 43 percent decrease in spending for process technology. Selling, General and Administrative Selling, general and administrative expenses increased 32 percent for the first quarter of fiscal 2001 from SG&A expenses for the same period of fiscal 2000. Included in SG&A expenses for the first quarter of fiscal 2001 is an expense of $20.5 million associated with the distribution of equity securities that were part of the company's investment portfolio, which were donated to establish the National Semiconductor Foundation. Excluding this expense, SG&A expenses for the first quarter of fiscal 2001 increased 5 percent over SG&A expenses for the same period of fiscal 2000. This increase is primarily attributable to increases in payroll and employee benefit expenses, including incentive programs related to the company's profitability. Restructuring of Operations In connection with its consolidation of the wafer manufacturing operations in Greenock, Scotland, the company recorded a $2.3 million restructuring charge during the first quarter of fiscal 2001. The charge represents additional severance costs associated with the termination of the remaining employees expected to depart with the closure of the 4-inch fabrication facility. Further detail and discussion of other activity for the first quarter of fiscal 2001 related to restructuring actions is described in Note 4 to the condensed consolidated financial statements. Interest Income and Interest Expense Net interest income was $14.1 million for the first quarter of fiscal 2001 compared to net interest expense of $1.4 million for the same quarter of fiscal 2000. Both higher average cash balances and slightly higher interest rates in fiscal 2001 contributed to an increase in interest income. Interest expense for fiscal 2001 was significantly lower than the same quarter of fiscal 2000 due to the redemption of the company's $258.8 million convertible subordinated notes, which were repaid in November 1999. Other Income, Net Other income, net was $37.5 million for the first quarter of fiscal 2001, compared to $57.0 million for the same quarter of fiscal 2000. The components of other income, net for the first quarter of fiscal 2001 included a net gain of $36.1 million from the company's equity investments and $1.4 million of net intellectual property income. The net gain from equity investments included a gain of $20.5 million from the distribution of equity securities that were part of the company's investment portfolio, which were donated to establish the National Semiconductor Foundation. An expense for the same amount associated with the donation is included in SG&A expenses for the first quarter of fiscal 2001. This compares to other income, net for the first quarter of fiscal 2000, which included a gain of $48.4 million from the sale of a portion of the company's investment in Fairchild stock, $6.8 million of net intellectual property income and other miscellaneous income of $1.8 million. Income Tax Expense The company recorded income tax expense of $36.1 million in the first quarter of fiscal 2001, compared to $2.5 million in the first quarter of fiscal 2000. This is based on the company's expected effective tax rate of 20 percent for fiscal 2001, which is a combination of U.S. alternative minimum tax and foreign tax expense. This compares to a 2 percent effective tax rate for fiscal 2000, which primarily represented foreign income tax expense, as U.S. taxable income was offset by net operating loss carryforwards. Financial Condition During the first quarter of fiscal 2001, cash and cash equivalents increased by $57.7 million compared to an increase of $10.2 million for the first quarter of fiscal 2000. The primary sources contributing to the improvement are described below. For the first quarter of fiscal 2001, operating activities generated cash of $116.0 million while operating activities used cash of $24.5 million in the first quarter of fiscal 2000. The primary contributor to the improvement in operating cash for fiscal 2001 was the increase in net income, which more than offset the negative impact from changes in working capital. For fiscal 2001, the negative impact from changes in working capital was also less than in fiscal 2000 as increases in receivables and inventories were lower. The company's investing activities used cash of $72.8 million in the first quarter of fiscal 2001, while they generated cash of $27.5 million for the first quarter of fiscal 2000. Use of cash in the first quarter of fiscal 2001 primarily related to the company's investment in property, plant and equipment of $51.0 million and a business acquisition of $24.9 million (See Note 5).In comparison the company's investment in property, plant and equipment was $21.7 million for the first quarter of fiscal 2000. That amount was more than offset by the proceeds of $52.2 million from the sale of Fairchild stock. The company's financing activities generated cash of $14.5 million for the first quarter of fiscal 2001, compared to $7.2 million for the first quarter of fiscal 2000. For the first quarter of fiscal 2001, the company received $18.7 million from the issuance of common stock under employee benefit plans and repaid $4.2 million of general debt. A reduction in debt repayment in fiscal 2001 was the result of a significant decrease in company's total debt from the redemption of the company's $258.8 million convertible subordinated notes, which were repaid in November 1999. For the first quarter of fiscal 2000, the company received $26.2 million from the issuance of common stock under employee benefit plans while it repaid $19.0 million of general debt. Management foresees substantial cash outlays for plant and equipment throughout the remainder of fiscal 2001, with primary focus on capacity expansion in its wafer manufacturing, assembly and test facilities, based upon expected future unit volume increases. As a result, the fiscal 2001 capital expenditure level is expected to be significantly higher than the fiscal 2000 level. Existing cash and investment balances, together with existing lines of credit, are expected to be sufficient to finance planned fiscal 2001 capital investments. Outlook The statements contained in this outlook section and within certain sections of management's discussion and analysis are forward-looking based on current expectations and management's estimates. Actual results may differ materially from those set forth in these forward-looking statements. In addition to the risk factors discussed in the Financial Condition and Results of Operations on pages 22 through 24 of the company's 2000 Annual Report on Form 10-K for the fiscal year ended May 28, 2000 filed with the Securities and Exchange Commission, the following factors may also affect the company's operating results for fiscal 2001: Market conditions continued to be strong for National through the end of the first quarter of fiscal 2001, despite the usual summer slowdown experienced in Europe. New orders grew sequentially over the May quarter and sales grew sequentially for the fifth consecutive quarter. The wireless handset market continues to be an important part of the company's growth, as new integrated chipsets are being developed to allow greater penetration in the overall market. Although end market unit growth for wireless handsets continued to be very high, the timing of future growth expectations for the remainder of calendar 2000 is subject to a high level of uncertainty. The expected growth of unit builds by some of National's key wireless customers has been reduced during calendar 2000. Other customers' growth has increased but is dependent on gains in market share, which cannot be assured. Due to recent component shortages, some customers have built up their inventories. The rate in which these inventories are reduced and customer reorders are received in the short-term will have an effect on shipments for the current quarter. As a result, the company remains cautious on near-term trends in its wireless-related business. In addition, since the end of the first quarter of fiscal 2001, certain personal computer companies have made public announcements indicating less demand than expected. This softening could negatively impact the rate of orders received from National's customers who serve the PC market. The level of revenue expected for the second quarter is dependent on meeting a specified level of fill orders, which are orders received and shippable in the same quarter. If the company is unable to achieve the specified level of fill orders, it will be unable to achieve the level of revenue growth expected for the second quarter of fiscal 2001. If the factors discussed above, combined with general semiconductor market conditions, result in a decline in the growth of new orders received, the company may be unable to achieve the level of revenue growth expected for the remainder of fiscal 2001 and operating results will be unfavorably affected. The forward-looking statements discussed or incorporated by reference in this outlook section 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, the changing environment of the semiconductor industry, competitive products and pricing, growth in the PC 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the company's Annual Report on Form 10-K for the year ended May 28, 2000 and to the subheading "Financial Market Risks" under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 21 of the company's Annual Report on Form 10-K for the year ended May 28, 2000 and in Note 1, "Summary of Significant Accounting Policies," and Note 2, "Financial Instruments," in the Notes to the Consolidated Financial Statements included in Item 8. There have been no material changes from the information reported in these sections. PART II. OTHER INFORMATION Item 1. Legal Proceedings On July 1, 1988, the U.S. Customs Service liquidated a number of duty drawback claims previously filed by the company. In connection with the liquidation, the Customs Service denied the payment of drawback that had been previously paid to the company and issued bills to the company in the amount of $2.5 million seeking repayment of the accelerated drawback. The company filed protests of the liquidations in September 1988. The protests were denied in March 1996. The company sought judicial review of the denial in the Court of International Trade. As a prerequisite to filing the summons for judicial review, the Company had paid the denied duties and associated interest totaling $5.2 million. The company and Customs Service reached a settlement of this matter in July 2000. The settlement provided for complete termination of the matter and a payment to the company in the amount of $182,648.82 plus associated interest. As reported in the company's Form 10-K for the fiscal year ended May 28, 2000, the federal securities class action suit initially filed in November 1997 by Goodman Epstein, a former Cyrix shareholder, on behalf of himself and other Cyrix shareholders, went to trial in June 2000 and a jury returned a verdict in favor of the company and other defendants on July 11, 2000. In return for the company's agreement not to seek costs associated with the litigation, plaintiff has agreed not to appeal the case. The period for filing an appeal has expired. The case is now finally concluded. 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). Certificate of Amendment of Certificate of Incorporation dated September 22, 2000. 3.2 By-Laws of the company (incorporated by reference from the Exhibits to the company's Form 10-K for fiscal year ended May 28,2000 filed August 3, 2000). 4.1 Form of Common Stock Certificate (incorporated by reference from the Exhibits to the company's Registration Statement on Form S-3 Registration No. 33-48935, which became effective October 5, 1992). 4.2 Rights Agreement (incorporated by reference from the Exhibits to the company's Registration Statement on Form 8-A filed August 10, 1988). First Amendment to the Rights Agreement dated as of October 31, 1995 (incorporated by reference from the Exhibits to the company's Amendment No. 1 to the Registration Statement on Form 8-A filed December 11, 1995). Second Amendment to the Rights Agreement dated as of December 17, 1996 (incorporated by reference from the Exhibits to the company's Amendment No. 2 to the Registration Statement on Form 8-A filed January 17, 1997). 4.3 Indenture dated as of September 15, 1995 (incorporated by reference from the Exhibits to the company's Registration Statement on Form S-3 Registration No. 33-63649, which became effective November 6, 1995). 4.4 Form of Note (incorporated by reference from the Exhibits to the company's Registration Statement on Form S-3 Registration No. 33-63649, which became effective November 6, 1995). 4.5 Indenture dated as of May 28, 1996 between Cyrix Corporation ("Cyrix") and Bank of Montreal Trust company as Trustee (incorporated by reference from the Exhibits to Cyrix's Registration Statement on Form S-3 Registration No. 333-10669, which became effective August 22, 1996). 4.6 Registration Rights Agreement dated as of May 28, 1996 between Cyrix and Goldman, Sachs & Co. (incorporated by reference from the Exhibits to Cyrix's Registration Statement on Form S-3 Registration No. 333-10669, which became effective August 22, 1996). 10.1 Management contract or Compensatory Plan or Agreement: Fiscal Year 2001 Executive Officer Incentive Plan Agreement. 27.0 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed in the quarter ended August 27, 2000. 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 10, 2000 /s/ Lewis Chew -------------- Lewis Chew Vice President and Controller Signing on behalf of the registrant and as principal accounting officer EX-3 2 0002.txt EXHIBIT 3.1 CERTIFICATE OF AMENDMENT OF INC. 3 CRT\AmCrtIn600 Exhibit 3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF NATIONAL SEMICONDUCTOR CORPORATION NATIONAL SEMICONDUCTOR CORPORATION (the "Company"), a corporation organized and existing under and by virtue of General Corporation Law of the State of Delaware, does hereby certify: FIRST: That at a Special Meeting of the Board of Directors of the Company on June 22, 2000, a resolution was duly adopted setting forth a proposed Amendment to the Certificate of Incorporation of the Company, declaring said Amendment to be advisable and directing that the Amendment be submitted for the approval of the Stockholders of the Company at the Annual Meeting to be held September 22, 2000. Said resolution proposed that Article FOURTH of the Certificate of Incorporation be amended to read in full as follows: FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is Eight Hundred and Fifty One Million (851,000,000), consisting of One Million (1,000,000) shares of preferred stock, par value of Fifty Cents ($.50) each (hereinafter called the Preferred Stock) and Eight Hundred Fifty Million (850,000,000) shares of common stock of par value of Fifty Cents ($.50) each (hereinafter called the Common Stock). The designations and the powers, preferences and rights, and the qualification, limitations or restrictions thereof, of each class of stock of the Corporation which are fixed by this Certificate of Incorporation, and the express grant of authority to the Board of Directors to fix by resolution or resolutions the designations, and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of the Preferred Stock which are not fixed by this Certificate of Incorporation, are as follows: A. PREFERRED STOCK (1) Shares of Preferred Stock may be issued from time to time in one or more series, each such series to have such distinctive designation as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the initial issuance of shares of such series, and authority is expressly vested in the Board of Directors, by such resolution or resolutions providing for the initial issuance of shares of each series: (a) To fix the distinctive designation of such series and the number of shares which shall constitute such series, which number may be increased or decreased (but not below the number of shares thereof then outstanding) from time to time by actions of the Board of Directors; (b) To fix (i) the dividend rate of such series, (ii) any limitation, restrictions or conditions on the payment of dividends, including whether dividends shall be cumulative and, if so, from which date or dates, (iii) the relative rights of priority, if any, of payment of dividends on shares of that series and (iv) the form of dividends, which shall be payable either (A) in cash only, or (B) in stock only, or (C) partly in cash and partly in stock, or (D) in stock or, at the option of the holder, in cash (and in such case to prescribe the terms and conditions of exercising such option), and to make provision in case of dividends payable in stock for adjustments of the dividend rate in such events as the Board of Directors shall determine; (c) To fix the price or prices at which, and the terms and conditions on which, the shares of such series may be redeemed by the Company; (d) To fix the amount or amounts payable upon the shares of such series in the event of any liquidation, dissolution or winding up of the Company and the relative rights of priority, if any, of payment upon shares of such series; (e) To determine whether or not the shares of such series shall be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of such series and, if so entitled, the amount of such fund and the manner of its application; (f) To determine whether or not the shares of such series shall be made convertible into, or exchangeable for, shares of any other class or classes of stock of the Corporation or shares of any other series of Preferred Stock, and, if made so convertible or exchangeable, the conversion price or prices, or the rate or rates of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange; (g) To determine whether or not the shares of such series shall have any voting powers and, if voting powers are so granted, the extent of such voting powers, provided that the number of authorized share of Common Stock may be increased or decreased by the affirmative vote of the holders of a majority of the Common Stock, voting as a class, and such increase or decrease shall not require any actions by holders of shares of Preferred Stock. Except as otherwise provided by statute or by a determination by the Board of Directors, the holders of shares of Preferred Stock, as such holders, shall not have any right to vote in the election of directors or for any other purpose; and such holders shall not be entitled to notice of any meeting of stockholders at which they are not entitled to vote; (h) To determine whether or not the issue of any additional shares of such series or of any other series in addition to such series shall be subject to restrictions in addition to the restrictions, if any, on the issue of additional shares imposed in the resolution or resolutions fixing the terms of any outstanding series of Preferred Stock theretofore issued pursuant to this Section A and, if subject to additional restrictions, the extent of such additional restrictions; and (i) Generally to fix the other rights, and any qualifications, limitations or restrictions of such rights, of such series; provided, however, that no such rights, qualifications, limitations or restrictions shall be in conflict with this Certificate of Incorporation or any amendment hereof. (2) Before any dividends shall be declared or paid or any distribution ordered or made upon the Common Stock (other than a dividend payable in Common Stock), the Corporation shall comply with the dividend and sinking fund provisions, if any, of any resolution or resolutions providing for the issue of any series of Preferred Stock any shares of which shall at the time be outstanding. Subject to the foregoing sentence, the holders of Common Stock shall be entitled, to the exclusion of the holders of Preferred Stock of any and all series, to receive such dividends as from time to time may be declared by the Board of Directors. (3) Upon any liquidation, dissolution or winding up of the Corporation, the holders of Preferred Stock of each series shall be entitled to receive the amount to which such holders are entitled as fixed with respect to such series, including all dividends accumulated to the date of final distribution, before any payment or distribution of assets of the Corporation shall be made to or set apart for the holders of Common Stock; and after such payments shall have been made to or set apart for the holders of Common Stock; and after such payments shall have been made in full to the holders of Preferred Stock, the holders of Common Stock shall be entitled to receive any and all assets remaining to be paid or distributed to stockholders and the holders of Preferred Stock shall not be entitled to share therein. For the purposes of this paragraph, the voluntary sales, conveyance, lease, exchange or transfer of all or substantially all the property or assets of the Corporation or a consolidation or merger of the Corporation with one or more other corporation (whether or not the Corporation is the Corporation surviving such consolidation or merger) shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary. (4) Subject to such limitations (if any) as may be fixed by the Board of Directors with respect to such series of Preferred Stock in accordance with paragraph (1) of this Section A, Preferred Stock of each series may be redeemed at any time in whole or from time to time in part, at the option of the Corporation, by vote of the Board of Directors, at the redemption price thereof fixed in accordance with said paragraph (1). If less than all the outstanding shares of Preferred Stock of such series are to be redeemed, the shares to be redeemed shall be determined in such manner as the Board of Directors shall prescribe. At such time or times prior to the date fixed for redemption as the Board of Directors shall determine, written notice shall be mailed to each holder of record of shares to be redeemed, in a postage prepaid envelope addressed to such holder at his address as shown by the records of the Corporation, notifying such holders of the election of the Corporation to redeem such shares and stating the date fixed for the redemption thereof and calling upon such holder to surrender to the Corporation on or after said date, at a place designated in such notice, his certificate or certificates representing the number of shares specified in such notice of redemption. On and after the date fixed in such notice of redemption, each holder of shares of preferred Stock to be redeemed shall present and surrender his certificate or certificates for such shares to the Corporation at the place designated in such notice and thereupon the redemption price of such shares shall be paid to or on the order of the person whose name appears on the records of the Corporation as the holder of the shares designated for redemption. In case less than all the shares represented by any such certificate are redeemed a new certificate shall be issued representing the unredeemed shares. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in payment of the redemption price) all dividends on the shares of Preferred Stock designated for redemption in such notice shall cease to accrue and all rights of the holders thereof as stockholders of the Corporation, other than to receive the redemption price, shall terminate and such shares shall not thereafter be transferred (except with the consent of the Corporation) on the books of the Corporation and such shares shall not be deemed to be outstanding for any purpose whatsoever. At any time after the mailing of any such notice of redemption the Corporation may deposit the redemption price of the shares designated therein for redemption with a bank or trust company in the United States of America, having capital and surplus of at least $25,000,000 in trust for the benefit of the respective holders of the shares designated for redemption but not yet redeemed. From and after the making of such deposit the sole right of the holders of such shares shall be the right either to receive the redemption price of such shares on and after such redemption date, or, in the case of shares having conversion rights, the right to convert the same at any time at or before the earlier of the close of business on such redemption date or such prior date and time at which the right to convert shall have expired; and except for these rights, the shares of Preferred Stock so designated for redemption shall not be deemed to be outstanding for any purpose whatsoever. (5) Shares of any series of Preferred Stock which have been redeemed (whether through the operation of a sinking fund or otherwise) or purchased by the Corporation, or which, if convertible, have been converted into shares of stock of the corporation of any other class or classes, may, upon appropriate filing and recording to the extent required by law, have the status of authorized and unissued shares of Preferred Stock and may be reissued as part of such series or of any other series of Preferred Stock, subject to such limitations (if any) as may be fixed by the Board of Directors with respect to such series of Preferred Stock in accordance with paragraph (1) of this Section A. B. COMMON STOCK (1) Except as otherwise provided by (a) the Board of Directors in fixing the voting rights of any series of the Preferred Stock in accordance with Section A of this Article FOURTH or (b) statute, voting power in the election of directors and for all other purposes shall be vested exclusively in the holders of the Common Stock. (2) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary after payment shall have been made to the holders of the Preferred Stock of the full amount to which they shall be entitled pursuant to paragraph (3) of Section A of this Article FOURTH, the holders of Common Stock shall be entitled, to the exclusion of the holders of the Preferred Stock of any and all series, to share, ratably according to the number of shares of Common Stock held by them, in all remaining assets of the Corporation available for distribution to its stockholders. All persons who shall acquire stock in this Corporation shall acquire the same subject to the provisions of this Certificate of Incorporation, as amended. SECOND: That at the Annual Meeting of Stockholders of the Company, which was duly called and held September 22, 2000 upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which a quorum was present and acting throughout, said Amendment was approved by the affirmative vote of the number of shares required by law. THIRD: That said Amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. FOURTH: That the capital of the Company will not be reduced under or by reason of said Amendment. IN WITNESS WHEREOF, the Company has caused its corporate seal to be affixed hereto and this Certificate to be signed by BRIAN L. HALL, Chairman, President and CEO of the Company, and attested to by JOHN M. CLARK III, Secretary of the Company this 22nd day of September, 2000. (Corporate Seal) NATIONAL SEMICONDUCTOR CORPORATION BY //s// BRIAN L. HALLA BRIAN L. HALLA Chairman, President and CEO ATTEST: By //s// JOHN M. CLARK III JOHN M. CLARK III Secretary EX-10 3 0003.txt EXH 10.1 2001 EXEC. OFFICER INCENTIVE PLAN AGMNT. 1 Exhibit 10.1 NATIONAL SEMICONDUCTOR CORPORATION 2001 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: Generally, 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 other similar kinds of extra or additional remuneration are excluded from the computation of Base Salary. Company: National Semiconductor Corporation ("NSC"), 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 pla or any successor plan thereto. Executive Officer: An officer of the Company who is subject to the reporting and liability provisions of Section 16 of the Securities and Exchange Act of 1934. Incentive Levels: Percentage of Base Salary assigned to a Participant as a Target Award. Participant: An Executive Officer designated as a Participant i 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. Individual Performance Goals may have two levels of performance as follows: (i) Target -- Expected performance, as established by the Committee,reflecting a degree of difficulty which has a reasonable probability of achievement. (ii) Stretch -- Better than Target performance and reflecting a greater degree of difficulty. Corporate financial Performance Goals will also have a Threshold level of performance, which will be a minimum acceptable level of performance. 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 i a full-time vocation. Target Award: The Award, expressed as a percentage of Base Salary at the assigned Incentive Level, 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 define herein have the meanings assigned to them in the Executive Officer Incentive Plan. ARTICLE 2 Effective Date The Agreement will become effective as of May 29, 2000, to be effective for the Company's fiscal year 2001. 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 re-evaluated 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 Committe during the fiscal year. Such Participants will receive a prorated Award based on time of participation in the Plan. D. Participants may be removed from the Plan during the fiscal year at the discretion of the Committee. Participants so removed will receive a prorated Award based on length of participation in the Plan. ARTICLE 4 Target Awards/Incentive Levels A. Each Participant will be assigned an Incentive Level with associated Target Awards expressed as percentages of the Participant's Base Salary. 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 tim spent in each position. ARTICLE 5 Plan Performance Goals A. Performance Goals and associated weights will be established by the Committee within ninety (90) days after the start of the fiscal year. Each individual Performance Goal will have a defined Target level of performance and may have defined Stretch levels as well. Corporate financial Performance Goals will have defined Threshold, Target and Stretch levels of performance. All Participants will be given the same corporate financial Performance Goals. 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. Actual Award amounts may range between 0% and 200% of Target based on actual achievement on Performance Goals. Each Performance Goal will be scored at the end of the fiscal year. The sum of the scoring on the Performance Goals will determine the total performance level for the year. ARTICLE 6 Calculation and Payment of Awards A. A Participant's Award will be calculated as a percentage of Base Salary at the end of the fiscal year 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, with the sum of the scoring on each Performance Goal determining the total performance level. 3) The total performance level shall be multiplied by the Participant's Incentive Level. No one individual Award may exceed 200% of the Participant's Target Award amount. 4) The Committee may adjust Awards to reflect discretion it deems appropriate. As a result, some or all Award amounts may be adjusted to reflect the exercise of the Committee's discretion. 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. 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 a 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. E. Any Awards that are prorated for any reason under the terms of the Plan or this Agreement will be prorated based on the effective date of the change that resulted in the proration. ARTICLE 7 Termination of Employment A. To be eligible to receive an Award, the Participant must be employed by the Company on the last working 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. F. The right of a Participant to receive an Award,including Awards deferred pursuant to the provisions of Article 8, 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. ARTICLE 8 Deferral of Awards A. If permitted by local law and regulations,a Participant is entitled to make an irrevocable election 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 Smith Barney 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 earlie 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. 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. 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. Awards that are deferred under Article 8 constitute an unfunded Plan of deferred compensation. As such,any amounts payable thereunder 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 Office 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. EX-27 4 0004.txt FDS --
5 1,000,000 US 3-MOS MAY-27-2001 AUG-27-2000 1 837 30 278 0 196 1527 2347 1543 2545 588 0 0 0 89 1758 2545 641 641 301 512 (38) 0 (14) 180 36 144 0 0 0 144 0.81 0.74
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