-----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, VFLgEHeYc/i1gswEv6M9U7VjWQOc7La+1hlcmkt3NOyHzcNNTvM/N+7xyvXqkT5Q o6W0d4enA9eG+dGE9X++Zw== 0000070530-96-000008.txt : 19960419 0000070530-96-000008.hdr.sgml : 19960419 ACCESSION NUMBER: 0000070530-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960225 FILED AS OF DATE: 19960327 SROS: NYSE SROS: PSE 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: 1934 Act SEC FILE NUMBER: 000-02848 FILM NUMBER: 96538974 BUSINESS ADDRESS: STREET 1: 2900 SEMICONDUCTORS DR STREET 2: PO BOX 58090 CITY: SANTA CLARA STATE: CA ZIP: 95052-8090 BUSINESS PHONE: 4087216782 MAIL ADDRESS: STREET 1: 2900 SEMICONDUCTOR DR CITY: SANTA CLARA STATE: CA ZIP: 95052-8090 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 25, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________. Commission File Number: 1-6453 NATIONAL SEMICONDUCTOR CORPORATION ---------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 95-2095071 ---------- ---------- (State of incorporation) (I.R.S. Employer Identification Number) 2900 Semiconductor Drive, P.O. Box 58090 Santa Clara, California 95052-8090 ---------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (408) 721-5000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of Each Class Outstanding at February 25, 1996 ------------------- -------------------------------- Common stock, par value $0.50 per share 135,386,377 1 NATIONAL SEMICONDUCTOR CORPORATION INDEX Part I. Financial Information Page No. -------- Condensed Consolidated Statements of Operations (Unaudited) for the Three Months and Nine Months Ended February 25, 1996 and February 26, 1995 3 Condensed Consolidated Balance Sheets (Unaudited) as of February 25, 1996 and May 28, 1995 4 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended February 25, 1996 and February 26, 1995 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6 Management's Discussion and Analysis of Results of Operations and Financial Condition 9 Part II. Other Information Legal Proceedings 13 Exhibits and Reports on Form 8-K 13 Signature 14 2 PART I. FINANCIAL INFORMATION NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts) Three Months Ended Nine Months Ended ------------------ ------------------- Feb. 25, Feb. 26, Feb. 25, Feb. 26, 1996 1995 1996 1995 -------- ------- -------- -------- Net sales $600.3 $571.4 $2,010.7 $1,709.6 Operating costs and expenses: Cost of sales 368.7 342.1 1,165.0 995.4 Research and development 96.9 72.5 270.5 205.4 Selling, general and administrative 112.1 103.1 370.1 314.5 Restructuring of operations - (5.5) - (5.5) ------ ------ -------- ------- Total operating costs and expenses 577.7 512.2 1,805.6 1,509.8 ------ ------ -------- ------- Operating income 22.6 59.2 205.1 199.8 Interest income, net 4.1 4.7 9.9 12.7 Other income, net 4.0 7.4 20.0 16.2 ------ ------ -------- ------- Income before income taxes 30.7 71.3 235.0 228.7 Income taxes 7.7 14.3 58.7 45.7 ------ ------ -------- ------- Net Income $ 23.0 $ 57.0 $ 176.3 $ 183.0 ====== ====== ======== ======= Earnings per share: Primary $ .17 $ .43 $ 1.30 $1.39 Fully diluted $ .17 $ .42 $ 1.26 $1.33 Weighted average shares: Primary 137.8 124.7 131.1 125.2 Fully diluted 137.8 136.9 142.6 137.5 Income used in primary earnings per share (reflecting preferred dividends) $ 23.0 $ 54.2 $ 170.7 $ 174.6 Income used in fully diluted earnings per share (reflecting adjustment for interest on convertible notes when dilutive) $ 23.0 $ 57.0 $ 180.1 $ 183.0 See accompanying Notes to Condensed Consolidated Financial Statements 3 NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions) Feb. 25, May 28, 1996 1995 ASSETS -------- -------- Current assets: Cash and cash equivalents $ 428.2 $ 420.3 Short-term marketable investments 98.8 47.1 Receivables, net 316.4 318.0 Inventories 326.5 263.0 Deferred tax assets 84.2 77.4 Other current assets 80.3 52.5 ------- ------- Total current assets 1,334.4 1,178.3 Property, plant and equipment 2,337.7 2,147.6 Less accumulated depreciation 1,167.8 1,185.2 ------- ------- Net property, plant and equipment 1,169.9 962.4 Long-term marketable investments 16.0 20.2 Other assets 81.2 74.8 ------- ------- Total assets $2,601.5 $2,235.7 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings and current portion of long-term debt $ 23.4 $ 23.6 Accounts payable 194.4 272.0 Accrued expenses 227.2 230.7 Income taxes 184.2 159.6 ------- ------- Total current liabilities 629.2 685.9 Long-term debt 357.1 82.5 Deferred income taxes 19.4 20.1 Other non-current liabilities 39.7 40.5 ------- ------- Total liabilities 1,045.4 829.0 ------- ------- Commitments and contingencies Shareholders' equity: Convertible preferred stock - 0.2 Common stock 67.8 63.1 Additional paid-in capital 915.1 992.3 Retained earnings 577.0 411.0 Treasury stock, at cost (3.8) (59.9) ------- ------- Total shareholders' equity 1,556.1 1,406.7 ------- ------- Total liabilities and shareholders' equity $2,601.5 $2,235.7 ======== ======== See accompanying Notes to Condensed Consolidated Financial Statements 4 NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) Nine Months Ended -------------------- Feb. 25, Feb. 26, 1996 1995 ------- ------- Cash flows from operating activities: Net Income $ 176.3 $ 183.0 Adjustments to reconcile net income with net cash provided by operations: Depreciation and amortization 169.4 131.6 Gain on sale of investments (5.2) (6.9) Tax benefit associated with stock options 12.8 26.7 In-process research and development charge 11.4 1.5 Loss on disposal of equipment 2.6 4.5 Other, net (4.1) (.9) Changes in certain assets and liabilities, net: Receivables (11.4) (18.5) Inventories (78.0) (33.4) Other current assets (39.9) (4.8) Accounts payable and accrued expenses (74.4) (85.7) Current and deferred income taxes 17.7 (26.2) Other non-current liabilities (1.9) 2.4 ------- ------- Net cash provided by operating activities 175.3 173.3 ------- ------- Cash flows from investing activities: Purchases of property, plant and equipment (423.1) (238.3) Proceeds from sale of equipment 24.6 - Proceeds from the sale and maturities of marketable investments 578.2 618.6 Purchases of marketable investments (630.1) (609.3) Proceeds from sale of net assets of DynaCraft, Inc. 70.0 - Proceeds from sale of investments 7.8 7.9 Business acquisitions, net of cash acquired (19.2) (12.0) Purchases of investments and other, net (10.7) (12.9) ------- ------- Net cash used by investing activities (402.5) (246.0) ------- ------- Cash flows from financing activities: Proceeds from issuance of convertible subordinated notes, less issuance costs 253.3 - Proceeds from the issuance of debt 42.0 61.1 Repayment of debt (20.9) (48.7) Issuance of common stock under employee benefit plans 29.3 11.2 Purchase of treasury stock (63.0) (51.9) Payment of preferred dividends (5.6) (8.4) ------- ------- Net cash provided (used) by financing activities 235.1 (36.7) ------- ------- Net change in cash and cash equivalents 7.9 (109.4) Cash and cash equivalents at beginning of period 420.3 398.1 ------- ------- Cash and cash equivalents at end of period $ 428.2 $ 288.7 ======= ======= See accompanying Notes to Condensed Consolidated Financial Statements 5 Note 1. Summary of Significant Accounting Policies In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position and results of operations of National Semiconductor Corporation and its subsidiaries ("National" or the "Company"). Interim results of operations are not necessarily indicative of the results to be expected for the full year. This report should be read in conjunction with the consolidated financial statements and notes thereto included in the annual report on Form 10-K for the fiscal year ended May 28, 1995. Property, plant and equipment: Property, plant and equipment are recorded at cost. Effective May 29, 1995, the Company prospectively changed its method of accounting for depreciation from the 150 percent declining balance method to the straight-line method for machinery and equipment placed in service on or after that date. The change was adopted because it conforms with predominant industry practice and it is expected to result in a more appropriate distribution of the cost of the new machinery and equipment over its estimated useful life. The effect of the change was an increase to net income of $3.5 million or $.03 per share for the third quarter of fiscal 1996 and $5.7 million or $.04 per share (fully diluted) for the first nine months of fiscal 1996. Assets placed in service prior to fiscal 1996 and assets other than machinery and equipment continue to be depreciated using prior years' depreciation methods consisting of both straight-line and declining balance methods over estimated useful lives, or in the case of property under capital lease and leasehold improvements, over the lesser of the estimated useful life or lease term. The Company capitalizes interest on borrowings during the construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over their useful lives. In the third quarter, the Company capitalized $3.4 million of interest in connection with various capital expansion projects. Prior to the third quarter of fiscal 1996, capitalized interest costs were immaterial. Earnings Per Share: Primary earnings per share are computed using the weighted average number of common shares and dilutive common stock equivalents outstanding using the treasury stock method. Dilutive common stock equivalents include stock options. Preferred dividends are reflected as adjustments to reported net earnings in the calculation for all periods prior to the third quarter of fiscal 1996; during the second quarter of fiscal 1996 all outstanding preferred shares were converted into shares of common stock. Fully diluted earnings per share are computed using the weighted average common and dilutive common stock equivalents outstanding, plus other potentially dilutive securities outstanding which are not common stock equivalents such as convertible preferred shares for all periods prior to the third quarter of fiscal 1996 and convertible subordinated notes beginning in the second quarter of fiscal 1996. If the result of assumed conversions is dilutive, the dividend adjustments for the convertible preferred shares are reduced and net earnings are adjusted for the interest expense on the convertible subordinated notes while the average shares of common stock outstanding are increased. For the third quarter ended February 25, 1996, the effect of assumed conversion of the convertible subordinated notes was antidilutive. 6 Note 2. Components of Inventories The components of inventories were: (in millions) Feb. 25, May 28, 1996 1995 ------- ------- Raw materials $ 37.2 $ 33.9 Work in process 196.6 165.9 Finished goods 92.7 63.2 ----- ------ Total inventories $ 326.5 $ 263.0 ======= ======= Note 3. Other income, net The Company reclassified certain non-operating items that were previously reported as selling, general and administrative expenses as other income, net. The reclassifications had no impact on previously reported net income. Components of other income, net were: (in millions) Three Months Ended Nine Months Ended ------------------ ------------------ Feb. 25, Feb. 26, Feb. 25, Feb. 26, 1996 1995 1996 1995 -------- -------- -------- -------- Net intellectual property income $ 2.5 $ 4.8 $ 13.3 $ 14.3 Gain on sale of investments, net - 2.6 5.2 6.9 Other 1.5 - 1.5 (5.0) ------- ------- ------- ------- Total other income, net $ 4.0 $ 7.4 $ 20.0 $ 16.2 ======= ======= ======= ======= Note 4. Debt Financing In September 1995, the Company completed a private placement of convertible subordinated notes in the total amount of $258.8 million to certain qualified investors. Interest is payable semi-annually beginning April 1, 1996 at an annual rate of 6.5 percent. The notes, which mature in 2002, are not redeemable by the Company prior to October 3, 1998. Thereafter, the notes are redeemable at the option of the Company, initially at 103.714 percent of face value and at decreasing prices thereafter to 100 percent of face value at maturity, plus accrued interest. The notes are convertible, at any time, into shares of the Company's common stock at an initial conversion price of $42.78 per share and are subordinated to senior indebtedness of the Company. The notes have not been and will not be registered under the Securities Act of 1993 and may not be offered or sold within the United States absent registration or exemption from such registration requirements. 7 Note 5. Preferred Stock Redemption In November 1995, the Company called for the redemption on December 1, 1995 of all outstanding shares of its $32.50 Convertible Preferred shares. As a result of the redemption, on December 1, 1995 each Convertible Preferred share was automatically converted into 35.273 shares of the Company's common stock for a total of 12.2 million shares of common stock. This transaction is reflected in the Company's financial statements for the third fiscal quarter ending February 25, 1996. Note 6. Statement of Cash Flows Information (in millions) Nine Months Ended ------------------ Feb. 25, Feb. 26, 1996 1995 -------- -------- Supplemental disclosure of cash flow information: Cash paid for: Interest $ 3.7 $ 3.4 Interest on tax settlements 12.1 30.0 Income taxes 22.8 45.5 Supplemental schedule of non-cash investing and financing activities: Issuance of stock for employee benefit plans $ 4.3 $ 4.0 Tax benefit for employee stock option plans 12.8 26.7 Retirement of treasury stock 119.1 - Unrealized gain (loss) on available-for-sale securities (4.7) 20.2 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Sales Net sales of $600.3 million and $2,010.7 million for the third quarter and first nine months of fiscal 1996 increased by 5.1 percent and 17.6 percent, respectively, over the comparable periods of fiscal 1995 reflecting lower sales growth in the third quarter primarily caused by a general slowdown in new orders from the personal computer market and semiconductor distribution channel. Sales growth was largest in analog and mixed signal product sales with an increase of 10.6 percent and 24.1 percent, respectively, for the same periods. The Company's focus on analog and mixed signal market opportunities continues to drive the overall growth in sales, as sales for analog and mixed signal products grew to 59.1 percent and 58.9 percent of total sales for the third quarter and first nine months of fiscal 1996 from 56.2 percent and 55.9 percent for the comparable periods of fiscal 1995. Within analog and mixed signal product sales, product sales for local area networks and wide area networks, including wireless communication, were the major growth contributors with increases of 21.4 percent and 33.5 percent, respectively, for the third quarter of fiscal 1996 and 17.6 percent and 61.1 percent, respectively, for the first nine months of fiscal 1996 from sales for the comparable periods of fiscal 1995. The shift toward analog and mixed signal products is reflected by the decrease in sales for bipolar, CMOS logic and memory products of 8.0 percent for the third quarter of fiscal 1996 from sales for the same quarter of fiscal 1995 and the lower growth rate in sales of 5.9 percent for the first nine months of fiscal 1996 from sales for the same period of fiscal 1995, as the Company continues its strategy to de-emphasize older logic products and exit the EPROM memory products market. Sales of these products were 19.9 percent and 20.5 percent of total sales for the third quarter and first nine months of fiscal 1996, down from 22.6 percent and 22.7 percent, respectively, for the comparable periods of fiscal 1995. Sales for the remaining product lines were 21.0 percent and 20.6 percent of total sales for the third quarter and first nine months of fiscal 1996, down from 21.2 percent and 21.4 percent, respectively, for each of the corresponding periods of fiscal 1995. Gross Margin Gross margin decreased to 38.6 percent for the third quarter of fiscal 1996 from 40.1 percent for the third quarter of fiscal 1995 due to lower than expected revenues and reduced factory utilization. These factors were caused primarily by a slowdown in new orders through the early part of the third quarter as customers and distributors reduced inventories forcing the Company to reduce production levels. Despite the decrease in gross margin for the third quarter of fiscal 1996, gross margin for the first nine months of fiscal 1996 increased to 42.1 percent from 41.8 percent for the comparable period of fiscal 1995. This improvement is attributable to the continued shift in product portfolio towards higher margin analog and mixed signal products, which provide gross margins in excess of 50 percent, as well as the Company's strategy to de-emphasize older logic products and exit the EPROM memory products market. Research and Development Research and development expenses increased overall by 33.7 percent and 31.7 percent for the third quarter and first nine months of fiscal 1996 over the comparable period of fiscal 1995 and as a percent of sales increased to 16.1 percent and 13.5 percent for the 9 third quarter and first nine months of fiscal 1996 from 12.7 percent and 12.0 percent, respectively, for the comparable periods of fiscal 1995. The increase reflects an $11.4 million charge for in-process research and development related to the acquisition of Sitel Sierra B.V. in the third quarter of fiscal 1996 in addition to the Company's continued investment in the development of new analog and mixed signal products, as well as advanced submicron CMOS process technology. Selling, General, and Administrative The overall increase in selling, general, and administrative ("SG&A") expenses of 8.7 percent and 17.7 percent for the third quarter and first nine months of fiscal 1996 over the comparable periods of fiscal 1995 was attributable to increases in sales support costs and marketing activities proportional to increased sales and increases in contributions to employee compensation and benefit plans, including the employee retirement and savings program and the success sharing incentive plan which commenced in fiscal 1996. During the third quarter, the Company implemented a number of cost reduction programs to maintain cost growth rate below sales growth rate, which decreased SG&A expenses for the current quarter from the previous quarter. However, SG&A expenses increased slightly as a percent of sales at 18.7 percent for the third quarter of fiscal 1996 from 18.0 percent for the same quarter of fiscal 1995, caused by lower than anticipated revenue growth, and remained at 18.4 percent for both the first nine months of fiscal 1996 and the comparable period of fiscal 1995. Interest Income and Interest Expense Interest income increased $2.6 million and $6.0 million, to $8.0 million and $21.6 million, respectively, for the third quarter and first nine months of fiscal 1996 compared to the comparable periods of fiscal 1995. Interest expense increased to $3.9 million and $11.7 million from $.7 million and $2.9 million, respectively, for the comparable periods of fiscal 1995. Interest expense increased in the third quarter despite capitalization of $3.4 million in interest on borrowings related to various capital expansion projects. While the increase in interest income was primarily the result of higher cash balances, it was offset by a greater increase in interest expense associated with the $258.8 million convertible subordinated notes issued by the Company in September 1995, as well as increased borrowing levels related to the Company's continued investment in plant and equipment. Other Income, net Other income was $4.0 million and $20.0 million for the third quarter and first nine months of fiscal 1996, compared to $7.4 million and $16.2 million, respectively, for the comparable periods of fiscal 1995. Included in other income for the third quarter of fiscal 1996 is net intellectual property income of $2.5 million plus a realized gain of $1.5 million primarily arising from the sale of the assets of DynaCraft, Inc., a wholly owned subsidiary of the Company. This compares to net intellectual property income of $4.8 million plus realized gains from sale of investments, net of losses, of $2.6 million for the third quarter of fiscal 1995. For the first nine months of fiscal 1996, other income comprised net intellectual property income of $13.3 million plus realized gains from the sale of investments, net of losses, of $6.7 million. This compares to net intellectual property income of $14.3 million, plus realized gains from sale of investments, net of losses, of $6.9 million offset by a one-time royalty charge of $5.0 million in the first nine months of fiscal 1995. 10 Income Taxes The effective tax rate for fiscal 1996 is approximately 25 percent compared to 20 percent for fiscal year 1995. The increase in the annual effective tax rate primarily relates to the exhaustion of certain net operating loss and tax credit carry forwards. Financial Condition During the first nine months of fiscal 1996, cash and cash equivalents increased $7.9 million compared to a $109.4 million decrease for the first nine months of fiscal 1995. The increase was primarily provided by the proceeds of $253.3 million, net of issuance costs, from the private placement of convertible subordinated notes offset by the Company's continued investment in property, plant and equipment of $423.1 million, an increase of $184.8 million over capital expenditures for the same period of fiscal 1995, plus proceeds from sale of equipment of $24.6 for the first nine months of fiscal 1996. Although the Company is reducing its capital purchase commitments in response to the reduction in new orders, management foresees the continuation of significant cash outlays for plant and equipment for the remainder of fiscal 1996. Existing cash and investment balances, together with existing lines of credit, are considered to be sufficient in the immediate future to finance these capital investments. Outlook Although the Company's revenues grew by 17.6 per cent for the first nine months of fiscal 1996 over the comparable period of fiscal 1995, future trends for revenue and profitability continue to be difficult to predict. Risks and uncertainties facing the Company include business conditions and the rate of growth in the personal computer and communications industries and the general economy, competitive factors and price pressures, market acceptance and timing of new products, and international economic conditions. Through the third quarter of fiscal 1996, the Company's rate of revenue growth and profitability has slowed reflecting the current weakness in the semiconductor distribution channel, as well as in the personal computer and analog mobile communications markets. As a result, the rate of orders for Company products has been adversely impacted. The Company has experienced a general decline in the rate of growth in orders since the end of fiscal 1995 and unless the rate of orders increases, the Company will not be able to sustain the same level of revenue growth it has experienced in the first part of fiscal 1996. Generally, the semiconductor industry experiences a seasonal upturn in new orders during the spring, however, there has not yet been any indication of an upturn. The Company faces the risks that either a seasonal upturn will not be experienced during the fourth quarter of fiscal 1996, or that the occurrence of a seasonal upturn will not provide new orders at a level sufficient to generate revenue growth. Additionally, the Company faces the risk that the slowdown in sales for the personal computer market will continue to unfavorably impact the industry and the Company. Any future gross margin improvement is predicated on increased new order rates in future periods, particularly in the higher margin multi-market analog products, which keep inventories in balance with demand and produce increased manufacturing capacity utilization. Unless the rate of orders increases during the fourth quarter of fiscal 1996, the Company will not be able to achieve the level of revenues and profitability it experienced in the comparable quarter of fiscal 1995. 11 Management is currently evaluating several cost reduction plans to align the cost structure of the Company to current business conditions. The implementation of these cost reduction plans may have an adverse effect on the Company's financial results for the fourth quarter of fiscal 1996. The impact of any cost reduction plans cannot be quantified at this time, because management is still considering the various options and has not yet finalized and approved any plans that will ultimately be implemented. National continues to pursue opportunities to leverage its intellectual property; however, the timing and amount of future licensing income cannot be forecast with certainty at this time. In addition, the Company continues to pursue opportunities to develop joint venture partnerships or potential acquisitions which enhance its product portfolio in analog and mixed signal products. During the quarter, the Company purchased Sitel Sierra B.V., a Netherlands company that designs and supplies components and subsystems for the wireless market; the Company believes this acquisition will exhance its wireless product offerings. Similarly, the Company continues to critically evaluate product lines and divisions where short or long term prospects do not coincide with its overall strategic direction. In these cases, the Company will consider dispositions of assets or business entities as appropriate. During the quarter, the Company completed its sale of the assets of its wholly owned subsidiary, DynaCraft, Inc. The disposition did not have a material effect on the Company's financial position or results of operations. Other On February 2, 1996, Gilbert F. Amelio resigned from his positions as the Company's Chairman, Director, President and Chief Executive Officer. Mr. Amelio's resignation was the result of his acceptance of the Chief Executive Officer position at Apple Computer, Inc. The Company's Board of Directors has commenced a search for a new Chief Executive Officer. Pending the appointment of a new Chief Executive Officer, the three Executive Vice Presidents who comprise the Office of the President will serve together as interim head of the Company, reporting directly to the Board of Directors 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings - - -------------------------- Reference is made to Item 3, Legal Proceedings, in the Company's Annual Report on Form 10-K for the year ended May 28, 1995 and Item 1, Legal Proceedings in the Company's Quarterly Report on 10-Q for the quarter ended August 27, 1995, which information is incorporated herein by reference. Item 6. Exhibits and Reports on Form 8-K - - ----------------------------------------- (a) Exhibits -------- 3.1 Second Restated Certificate of Incorporation of the Company as amended (incorporated by reference from the Exhibits to the Company's Registration Statement on Form S-3 Registration No. 33- 52775, which became effective March 22, 1994); Certificate of Amendment of Certificate of Incorporation dated September 30, 1994 (incorporated by reference from the Exhibits to the Company's 10-K for the fiscal year ended May 28, 1995). 3.2 By Laws for the Company (incorporated by reference from the Exhibits to the Company's 10-K for the fiscal year ended May 28, 1995). 4.1 Rights Agreement (incorporated by reference from the Exhibits to the Company's Registration Form 8-A filed August 10, 1988). First Amendment to the Rights Agreement (incorporated by reference from the Exhibits to the Amendment No. 1 to the Company's Registration Statement on Form 8-A filed December 11, 1995). 4.2 Form of Common Stock Certificate (incorporated by reference from the Exhibits to the Company's Registration Statement on Form S-3 Registration No. 33-48935, which became effective October 5, 1992). 10.1 Management Contract or Compensatory Plan or Agreement: Benefit Restoration Plan (as amended January, 1996 through January 1, 1995) 11.1 Additional Fully Diluted Calculation of Earnings Per Share 27.0 Financial Data Schedule (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during fiscal quarter ended February 25, 1996 13 SIGNATURE - - --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NATIONAL SEMICONDUCTOR CORPORATION Date: March 26, 1996 /s/ Richard D. Crowley ---------------------------------- Richard D. Crowley Vice President and Controller Signing on behalf of the registrant and as principal accounting officer 14 Exhibit 10.1 BENEFIT RESTORATION PLAN - PLAN DOCUMENT As Amended through January 1, 1995 THIS BENEFIT RESTORATION PLAN ("Plan") originally adopted by National Semiconductor Corporation, a corporation organized and existing under the laws of the State of Delaware, (hereinafter referred to as the "Employer") effective as of June 1, 1992, as hereby amended effective as of January 1, 1995: WITNESSETH: WHEREAS, the Employer desires to establish a benefit restoration income plan for the exclusive benefit of certain participants in the National Semiconductor Corporation Retirement and Savings Program ("RASP") so as to reward them for their loyal and faithful service to the Employer and to aid them in increasing their economic security by providing additional funds at retirement with respect to those benefits that are reduced because of the limitations of sections 401(a)(17), 402(g)(1), 401(k) and 415 of the Internal Revenue Code of 1986; and WHEREAS, the Employer has been authorized by its Board of Directors to adopt this Plan in order to provide for the benefits specified; NOW, THEREFORE, in consideration of the premises herein contained, it is hereby declared as follows: ARTICLE 1 Definitions When used herein, the words and phrases defined hereinafter shall have the following meaning unless a different meaning is clearly required by the context. 1.01 "Account" shall mean the Accounts and subaccounts established pursuant to Section 3.05 of the Plan. 1.02 "Annual Matching Restoration Amount" shall mean the amount determined in accordance with Section 3.04 of the Plan. 1.03 "Annual Profit Sharing Restoration Amount" shall mean the amount determined in accordance with Section 3.02 of the Plan. 1.04 "Annual Savings Restoration Amount" shall mean the amount determined in accordance with Section 3.03 of the Plan. 15 1.05 "Beneficiary" shall mean the person or persons last designated by a Participant, by written notice filed with the Committee, to receive a Plan benefit upon his or her death. In the event a Participant fails to designate a person or persons as provided above or if no Beneficiary so designated survives the Participant, then for all purposes of this Plan, the Beneficiary shall be the person(s) designated as the beneficiaries by the Participant under the RASP, and, if none, the Participant's estate. 1.06 "Board" shall mean the Board of Directors of National Semiconductor Corporation. 1.07 "Code" shall mean the Internal Revenue Code of 1986, as amended. 1.08 "Committee" shall mean The Retirement and Savings Program Administrative Committee, as determined by the Board. 1.09 "Compensation" shall mean Compensation as defined in the RASP without giving any effect to the limitations imposed by Section 401(a)(17) of the Code, as now or hereafter in effect. 1.10 "Elected Contribution" shall mean the amount the Participant agrees to defer under this Plan pursuant to procedures established by the Committee up to the maximum permitted deferral pursuant to Section 3.03 of the Plan. 1.11 "Employer" shall mean National Semiconductor Corporation. 1.12 "Interest" shall mean the rate for long-term A-rated corporate bonds, reported by the investment banking firm of Salomon Brothers of New York City (or such other investment banking firm as the Committee may specify) during the first week of each Plan Year. The interest rate will be reset at the beginning of each Plan Year. 1.13 "Participant" shall mean an employee of the Employer participating in the RASP, who satisfies the eligibility requirements of Section 2.01 of the Plan and such other conditions that are established from time to time by the Committee, including a condition relating to the amount of the employee's basic compensation or regular rate of compensation for the Plan Year. 1.14 "Plan" shall mean the National Semiconductor Corporation Benefit Restoration Plan, as amended from time to time. 1.15 "Plan Year" shall mean the twelve consecutive month period ending on the last day of May. 16 1.16 "RASP" shall mean the National Semiconductor Corporation Retirement and Savings Program. 1.17 Capitalized Terms not defined herein shall have the meaning attributed to them in the RASP. ARTICLE II Eligibility 2.01 Eligibility A Participant or Beneficiary shall be eligible to receive an Annual Profit Sharing Restoration Amount in any Plan Year in which he qualifies for an allocation of the Employer's Annual Profit Sharing Contribution under the RASP but the amount of the benefit to which he is entitled is reduced by reason of the application of the limitations set forth in Sections 401(a)(17) or 415(c)(1)(A) of the Code. A Participant or Beneficiary shall be eligible to receive an Annual Savings Restoration Amount in any Plan Year in which he makes the maximum permitted deferral under the RASP, as determined by the Committee, and his Compensation is in excess of an amount determined by the Committee for such Plan Year. A Participant or Beneficiary shall be eligible to receive an Annual Matching Restoration Amount in any Plan Year in which his Compensation exceeds the limitations set forth in Section 401(a)(17) of the Code and he elects to defer at least 6% of his Compensation under Section 5.02 A. of the RASP. 2.02 Enrollment An eligible individual is automatically enrolled in the Annual Profit Sharing Restoration Amount portion of this Plan. Eligible Participants may enroll in the Plan for purposes of the Annual Savings Restoration Amount by November 30 or other date prior to the end of the calendar year that is specified by the Committee ("enrollment date") of any year, effective as of January 1 of the next succeeding calendar year, by submitting an enrollment form on which is stated the amount of elective deferrals elected under the RASP. An employee who becomes eligible after an enrollment date will be required to wait until the next enrollment date to participate in the Annual Savings Restoration Amount portion of the Plan. Eligible Participants must enroll or re-enroll annually each calendar year. ARTICLE III Benefits 3.01 Benefits. The maximum benefits under this Plan to which an eligible Participant or Beneficiary shall be entitled shall be equal to the sum of the vested Annual Profit Sharing Restoration Amount, the Annual Savings Restoration Amount, and the Annual Matching Restoration Amount, plus Interest on such sum. 17 3.02 Annual Profit Sharing Restoration Amount. The Annual Profit Sharing Restoration Amount to which an eligible Participant or Beneficiary shall be entitled shall be an amount equal to the difference, if any, between (a) and (b) below: (a) The amount of the Employer's Annual Profit Sharing Contribution which would have been allocated to a Participant or Beneficiary under the RASP if the Annual Profit Sharing Contribution were determined pursuant to Section 5.01 B.3. of the RASP and the allocation were determined pursuant to Section 6.03 A. of the RASP without giving any effect to the limitations imposed by Sections 401(a)(17) and 415 of the Code, as now or hereafter in effect; less (b) The amount of the Employer's Annual Profit Sharing Contribution allocated to the Participant or Beneficiary under the RASP. 3.03 Annual Savings Restoration Amount. The maximum Annual Savings Restoration Amount from which an eligible Participant or Beneficiary may make an Elected Contribution shall be equal to the difference, if any, between (a) and (b) below: (a) The amount that the Participant could defer if the maximum percentage deferral determined by the Committee under Section 5.02A of the RASP were applied to the Participant's Compensation, and the Participant's Elected Contribution under the RASP were not subject to Sections 401(k), 402(g)(1) or 415 of the Code, as now or hereafter in effect; less (b) The amount of the Participant's Elected Contribution under the RASP. The Participant's Annual Savings Restoration Amount shall be equal to the Participant's Elected Contribution. 18 3.04 Annual Matching Restoration Amount. The Annual Matching Restoration Amount to which an eligible Participant or Beneficiary shall be entitled shall be an amount equal to the difference, if any, between (a) and (b) below: (a) The lesser of (1) 6% of the Participant's Compensation, without giving any effect to the limitations imposed by Section 401(a)(17) of the Code, as now or hereafter in effect, or (2) the limit imposed by Section 402(g) of the Code; and (b) 6% of the Participant's Compensation as limited by Section 401(a)(17) of the Code, multiplied by 50%, or any other percentage as the Board may determine for a given Plan Year under Section 5.03 A. of the RASP. Notwithstanding the foregoing, to the extent that the matching contribution that would otherwise be made on behalf of a Participant under Section 5.03 of the RASP is reduced in accordance with the requirements of Section 401(m) of the Code, such Participant's Annual Matching Restoration Amount shall be likewise limited in accordance with rules established by the Committee. 3.05 Participant's Account. The Employer shall create and maintain adequate records to reflect the interest of each Participant in the Plan. Such records shall be in the form of individual Accounts. When appropriate, a Participant's Account shall consist of a profit sharing restoration subaccount, a savings restoration subaccount, and a matching restoration subaccount. Such Accounts shall be kept for recordkeeping purposes only and shall not be construed as providing for assets to be held in trust or escrow or any other form of asset segregation for the Participant or Beneficiary to whom benefits are to be paid pursuant to the terms of the Plan. 3.06 Allocation to Participant Account and Interest. The Participant's Annual Savings Restoration Amount shall be credited to the Participant's Account as of the date such amount would have been paid to such Participant as remuneration for services, and the Participant's Annual Profit Sharing Restoration Amount and Annual Matching Restoration Amount shall be credited to the Participant's Account as of the last day of a Plan Year. The Participant's balance in his Account shall be credited with Interest at such times and in such manner as determined in the sole discretion of the Committee. 3.07 Vested Percentage. Notwithstanding anything herein to the contrary, a Participant shall be 100% vested at all times in the amounts credited to his savings restoration subaccount and his matching restoration subaccount. A Participant shall be vested in the amount credited to his profit sharing restoration subaccount to the same extent as the Participant is vested in his Profit Sharing Accounts, in accordance with Article VIII of the RASP; provided, however, that forfeited amounts shall not be reallocated among Plan Participants but shall be restored to the forfeiting Participant upon reemployment, in accordance with the procedures set forth in Article VIII of the RASP. ARTICLE IV Distribution of Benefit 19 4.01 Separation from Service. The benefits attributable to the Annual Profit Sharing Restoration Amount plus Interest thereon shall be distributed upon termination of employment for any reason (including retirement, disability or death), and the benefits attributable to the Annual Savings Restoration Amount plus Interest shall be distributed upon the earlier of termination of employment for any reason (including retirement, disability or death), or a date preselected by the Participant either upon eligibility to participate under the Plan or upon such date or dates as may be determined by the Committee. Benefits shall be distributed in a lump sum unless the Participant elects to receive part or all of the benefits in installments pursuant to this Section. An election to receive installment payments under the Plan must be filed with the Committee at least ninety (90) days (hereinafter referred to as the "Election Date") prior to the date of the Participant's termination of employment or, if earlier, the date preselected by the Participant to receive benefits attributable to the Annual Savings Restoration Amount plus Interest. Such election shall be irrevocable at the time it is filed or if later, on the Election Date. If the benefits are payable in installments, such installments will be paid annually over a period selected by the Participant on the Election Date but shall not exceed ten (10) years. The installment payments shall be made within thirty (30) days of each anniversary date of the initial installment. To the extent benefits are not paid in installments, the account balance will be paid in a lump sum in the month following the event giving rise to the distribution. In the event a Participant entitled to installment payments dies before receiving all benefits under the Plan, the unpaid balance will be paid in a lump sum to such Participant's Beneficiary in the month following the Participant's death. 4.02 Hardship. Payment of part or all of the benefits under this Plan may be accelerated in the case of severe hardship, which shall mean an emergency or unexpected situation in the Participant's financial affairs, including, but not limited to, illness or accident involving the Participant or any of the Participant's dependents. All payments in case of hardship must be approved by the Committee. ARTICLE V Administration; Amendments and Termination; Rights Against the Company 5.01 Administration. The Committee shall administer this Plan. With respect to the Plan, the Committee shall have, and shall exercise and perform, all the powers, rights, authorities and duties set forth in the RASP with the same effect as if set forth in full herein with respect to this Plan. Except as expressly set forth herein, any determination or decision by the Committee shall be conclusive and binding on all persons who at any time have or claim to have any interest whatever under this Plan. 20 5.02 Amendment and Termination Prior to a Change in Control. The Employer, solely, and without the approval of the Committee or any Participant or Beneficiary, shall have the right to amend this Plan at any time and from time to time, by resolution adopted by it. Any such amendment shall become effective upon the date stated therein. Notwithstanding the foregoing, no amendment shall adversely affect the rights of any Participant or Beneficiary who was previously receiving benefits under this Plan to continue to receive such benefits or of all other Participants and Beneficiaries to receive the benefits promised under the Plan immediately prior to the later of the effective date or the date of adoption of the amendment. The Employer has established this Plan with the bonafide intention and expectation that from year to year it will deem it advisable to continue it in effect. However, circumstances not now foreseen or circumstances beyond the Employer's control may make it impossible or inadvisable to continue the Plan. Therefore, the Employer, in its sole discretion, reserves the right to terminate the Plan in its entirety at any time; provided, however, that in such event any Participant or Beneficiary who was receiving benefits under this Plan as of the termination date, shall continue to receive such benefits, and all other Participants and Beneficiaries shall remain entitled to receive the benefits promised under the Plan immediately prior to the termination of the Plan. 5.03 Rights Against the Employer. The establishment of this Plan shall not be construed as giving to any Participant, Beneficiary, employee or any person whomsoever, any legal, equitable or other rights against the Employer, or its officers, directors, agents or shareholders, except as specifically provided for herein, or its giving to any Participant any equity or other interest in the assets, business or shares of the Employer or giving any employee the right to be retained in the employment of the Employer. All employees and Participants shall be subject to discharge to the same extent that they would have been if this Plan had never been adopted. Subject to the rights of the Employer to terminate this Plan or any benefit hereunder, the rights of a Participant hereunder shall be solely those of an unsecured creditor of the Employer. ARTICLE VI General and Miscellaneous 6.01 Spendthrift Clause. No right, title or interest of any kind in the Plan shall be transferable or assignable by any Participant or Beneficiary or any other person or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary. Any attempt to alienate, sell, transfer, assign, pledge, garnish, attach or otherwise encumber or dispose of any interest in the Plan shall be void. 21 6.02 Severability. In the event that any provision of this Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan but shall be fully severable, and this Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. 6.03 Construction of Plan. The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of this Plan. Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular. 6.04 Gender. The personal pronoun of the masculine gender shall be understood to apply to women as well as men except where specific reference is made to one or the other. 6.05 Governing Law. THE VALIDITY AND EFFECT OF THIS PLAN AND THE RIGHTS AND OBLIGATIONS OF ALL PERSONS AFFECTED HEREBY SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCEWITH THE LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO ITS OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. 6.06 Unfunded Top Hat Plan. It is the Employer's intention that this Plan be a Top Hat Plan, defined as an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, as provided in Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended from time to time. The Employer may establish and fund one or more trusts for the purpose of paying some or all of the benefits promised to Participants and Beneficiaries under the Plan; provided, however, that (i) any such trust(s) shall at all times be subject to the claims of the Employer's general creditors in the event of the insolvency or bankruptcy of the Employer, and (ii) notwithstanding the creation or funding of any such trust(s), the Employer shall remain primarily liable for any obligation hereunder. Notwithstanding the establishment of any such trust(s), the Participants and Beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of any such trust or of the Employer. 22 6.07 Divestment for Cause. Notwithstanding any other provisions of this Plan to the contrary, the right of any Participant, former Participant or Beneficiary of either to receive or to have paid to any other person, or the right of any such other person to receive any benefits attributable to the Annual Profit Sharing Restoration Amount plus Interest hereunder or the Annual Matching Restoration Amount plus Interest hereunder, shall be forfeited, if such Participant's employment with the Employer is terminated because of or the Participant is discovered to have engaged in fraud, embezzlement, dishonesty against the Employer, obtaining funds or property under false pretenses, assisting a competitor without permission, or interfering with the relationship of the Employer or any subsidiary or affiliate thereof with a customer. A Participant's or Beneficiary's benefits shall be forfeited for any of the above reasons regardless of whether such act is discovered prior to or subsequent to the Participant's termination from the Employer or the payment of benefits under the Plan. If payment has been made, such payment shall be restored to the Employer by the Participant or Beneficiary. ERISA Rights This Plan is intended to provide benefits for a select group of highly- compensated employees within the meaning of the Employee Retirement Income Security Act of 1974 (ERISA). However, it is not subject to most of the requirements of ERISA nor is the Plan eligible for insurance under Title IV of ERISA. Furthermore, the Plan is considered to be an unfunded, non-qualified plan for purposes of complying with the Internal Revenue Code. If you believe your benefit under the Plan has been denied, in whole or in part, you should file a claim with the Retirement and Savings Program Administrative Committee. Your claim will be reviewed using the same procedures as those described in the Summary Plan Description for the RASP. The following information identifies the benefit plan described in this booklet and gives other important administrative data. Plan Name: The Benefit Restoration Plan Plan Sponsor: Employer I.D. Number (EIN): National Semiconductor Corporation EIN: 95-2095071 2900 Semiconductor Drive P.O.Box 58090 Santa Clara, CA 95052-8090 (408) 721-2383 23 Dyna-Craft, Inc. EIN: 94-1682796 2919 San Ysidro Santa Clara, CA 95051 (408) 721-6855 Plan Number: 005 Plan Year: The twelve consecutive month period ending on May 31. Plan records are maintained on the basis of this Plan Year. Plan Administrator: Retirement and Savings Program Administrative Committee c/o Retirement Plans Administration National Semiconductor Corporation 2900 Semiconductor Drive P. O. Box 58090 Santa Clara, CA 95052-8090 (408) 721-2383 Type of Plan: The Plan is a non-qualified deferred compensation plan for selected key employees of National Semiconductor. Agent for Service of Legal Process: Legal process should be served on the company's Corporate Secretary or the Plan Administrator in care of the Retirement Plans Administration Office at the company's address. Funding Medium: The Plan is unfunded and benefits are paid from the Plan sponsor's general assets. 24 NATIONAL SEMICONDUCTOR CORPORATION Exhibit 11.0 ADDITIONAL FULLY DILUTED CALCULATION OF EARNINGS PER SHARE (1) (in millions, except per share amounts) Three Months Ended Nine Months Ended ------------------ -------------------- Feb. 25, Feb. 26, Feb. 25, Feb. 26, 1996 1995 1996 1995 -------- -------- -------- -------- Net income used in fully diluted earnings per share (reflecting adjustment for interest on convertible notes) $ 24.7 $ 57.0 $ 180.1 $ 183.0 ======== ======== ======== ======== Number of shares: Weighted average common shares outstanding 135.1 120.6 127.1 121.2 Weighted average common equivalent shares, net of tax benefit 2.7 4.1 4.0 4.0 -------- -------- -------- -------- Weighted average common and common equivalent shares 137.8 124.7 131.1 125.2 Additional weighted average common equivalent shares assuming full dilution - - - .1 Shares issuable from assumed conversion of preferred shares - 12.2 8.1 12.2 Shares issuable from assumed conversion of convertible notes 6.1 - 3.4 - -------- -------- -------- -------- Additional weighted average common equivalent shares assuming full dilution 143.9 136.9 142.6 137.5 ======== ======== ======== ======== Income per share assuming full dilution $ .17 $ .42 $ 1.26 $ 1.33 ======== ======== ======== ======== (1) For the three months ended February 25, 1996, this calculation is submitted in accordance with Regulation S-K Item 601(b)(11) although it is contrary to paragraph 40 of the APB Opinion No. 15 because it produces an antidilutive result. 25 EX-27 2
5 3-MOS 9-MOS MAY-26-1996 MAY-26-1996 FEB-25-1996 FEB-25-1996 428 428 99 99 316 316 0 0 327 327 1334 1334 2338 2338 1168 1168 2602 2602 629 629 357 357 0 0 0 0 68 68 1488 1488 2602 2602 600 2011 600 2011 369 1165 369 1165 0 0 0 0 (4) (10) 31 235 8 59 23 176 0 0 0 0 0 0 23 176 .17 1.30 .17 1.26
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