-----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, I3J6/XyKRDdUk9wHy0wNiS6ns8gHXj7/Up5P+++AOc7FB8QX64ZQI4/SfEs9VpVN bABYtwfl1FK2enUKT/aCqg== 0000070530-97-000016.txt : 19971002 0000070530-97-000016.hdr.sgml : 19971002 ACCESSION NUMBER: 0000070530-97-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970824 FILED AS OF DATE: 19971001 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL SEMICONDUCTOR CORP CENTRAL INDEX KEY: 0000070530 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [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: 97689437 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 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 24, 1997 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 24,1997. - ------------------- ----------------------------- Common stock, par value $0.50 per share 146,912,719 NATIONAL SEMICONDUCTOR CORPORATION INDEX Part I. Financial Information Page No. -------- Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended August 24, 1997 and August 25, 1996 3 Condensed Consolidated Balance Sheets (Unaudited) as of August 24, 1997 and May 25, 1997 4 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended August 24, 1997 and August 25, 1996 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 15 PART I. FINANCIAL INFORMATION NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts) Three Months Ended ------------------ Aug. 24, Aug. 25, 1997 1996 ------- ------- Net sales $ 600.8 $ 566.1 Operating costs and expenses: Cost of sales 351.4 393.9 Research and development 101.7 86.8 Selling, general and administrative 73.9 94.0 Special items: Restructuring of operations - 256.3 In-process R&D charge - 10.6 ------- ------- Total operating costs and expenses 527.0 841.6 ------- ------- Operating income(loss) 73.8 (275.5) Interest income, net 12.7 1.3 Other income(expense), net 7.0 (2.7) ------- ------- Income(loss) before income taxes 93.5 (276.9) Income tax provision(benefit) 23.4 (69.3) ------- ------- Net income(loss) $ 70.1 $(207.6) ======= ======= Earnings per common share: Primary $ 0.47 $(1.51) Fully diluted $ 0.45 $(1.51) Weighted average common shares: Primary 149.9 137.7 Fully diluted 156.7 137.7 Income(loss) used in primary and fully diluted earnings per common share $ 70.1 $ (207.6) See accompanying Notes to Condensed Consolidated Financial Statements NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions) Aug. 24, May 25, 1997 1997 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 659.6 $ 832.1 Short-term marketable investments 119.1 57.6 Receivables, net 301.8 255.8 Inventories 193.9 181.4 Deferred tax assets 168.5 168.5 Other current assets 51.9 57.2 -------- -------- Total current assets 1,494.8 1,552.6 Property, plant and equipment 2,455.0 2,271.9 Less accumulated depreciation (1,049.1) (1,008.5) -------- -------- Net property, plant and equipment 1,405.9 1,263.4 Other assets 98.4 98.1 -------- -------- Total assets $2,999.1 $2,914.1 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings and current portion of long-term debt $ 32.8 $ 12.3 Accounts payable 248.2 248.0 Accrued expenses 270.7 293.4 Income taxes 236.6 237.7 -------- -------- Total current liabilities 788.3 791.4 Long-term debt 302.6 324.3 Other noncurrent liabilities 53.2 49.6 -------- -------- Total liabilities 1,144.1 1,165.3 -------- -------- Commitments and contingencies Shareholders' equity: Common stock 73.4 72.6 Additional paid-in capital 1,108.7 1,070.7 Retained earnings 672.9 605.5 -------- -------- Total shareholders' equity 1,855.0 1,748.8 -------- -------- Total liabilities and shareholders' equity $2,999.1 $2,914.1 ======== ======== See accompanying Notes to Condensed Consolidated Financial Statements NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) Three Months Ended ------------------ Aug. 24, Aug. 25, 1997 1996 ------- ------- Cash flows from operating activities: Net income(loss) $ 70.1 $(207.6) Adjustments to reconcile net income(loss) with net cash provided by (used in) operations: Depreciation and amortization 56.8 65.3 (Gain)/loss on sale of investments (6.7) 3.0 Tax benefit associated with stock options 9.0 1.7 In-process research and development charge - 10.6 Loss on disposal of equipment 4.2 0.3 Write down of inventory - 15.1 Restructuring of operations - 256.3 Other, net 0.1 2.7 Changes in certain assets and liabilities, net: Receivables (46.0) (7.7) Inventories (12.5) 7.0 Other current assets 5.3 9.1 Accounts payable and accrued expenses (20.0) (108.1) Current and deferred income taxes (2.2) (78.0) Other liabilities 4.7 (4.5) ------- ------- Net cash provided by (used in) operating 62.8 (34.8) activities ------- ------- Cash flows from investing activities: Purchase of property, plant and equipment (196.3) (105.2) Sale and maturity of marketable investments 524.2 275.0 Purchase of marketable investments (577.0) (252.1) Business acquisition, net of cash acquired - (15.4) Purchase of investments and other, net (8.8) (7.1) ------- ------- Net cash used in investing activities (257.9) (104.8) ------- ------- Cash flows from financing activities: Issuance of debt 0.4 1.5 Repayment of debt (1.6) (5.3) Issuance of common stock, net 23.8 8.6 ------- ------- Net cash provided by financing activities 22.6 4.8 ------- ------- Net change in cash and cash equivalents (172.5) (134.8) Cash and cash equivalents at beginning of period 832.1 442.4 ------- ------- Cash and cash equivalents at end of period $ 659.6 $ 307.6 ======= ======= 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 ("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 25, 1997. Earnings Per Share: The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. SFAS No. 128 requires the presentation of basic earnings per share (EPS) and, for companies with complex capital structures or potentially dilutive securities, such as convertible debt, options and warrants, diluted EPS. SFAS No. 128 is effective for annual and interim periods ending after December 15, 1997. As permitted under SFAS No. 128, the Company is presenting the following pro forma earnings per common share, as if SFAS No. 128 was effective for the periods presented: Three Months Ended ------------------ Aug. 24, Aug. 25, 1997 1996 ------- ------- Earnings per common share: Basic $ 0.48 ($1.51) Diluted $ 0.45 ($1.51) Weighted average common shares: Basic 146.0 137.7 Diluted 156.0 137.7 Financial Instruments As more fully described on pages 33-36 in the Company's 1997 Annual Report on Form 10-K, the Company utilizes various off-balance sheet financial instruments to manage market risks associated with fluctuations in certain interest rates and foreign currency exchange rates. The criteria the Company uses for designating an instrument as a hedge include the instrument's effectiveness in risk reduction and direct matching of the financial instrument to the underlying transaction. Gains and losses on currency forward and option contracts that are intended to hedge an identifiable firm commitment are deferred and included in the measurement of the underlying transaction. Gains and losses on hedges of anticipated transactions are deferred until such time as the underlying transactions are recognized or recognized immediately if the transaction is terminated earlier than initially anticipated. Gains and losses on any instruments not meeting the above criteria would be recognized in income in the current period. Subsequent gains or losses on the related financial instrument are recognized in income in each period until the instrument matures, is terminated or is sold. Income or expense on swaps is accrued as an adjustment to the yield of the related investments or debt hedged by the instrument. Cash flows associated with derivative transactions are reported as arising from operating activities in the condensed consolidated statements of cash flows. Note 2. Components of Inventories The components of inventories were: (in millions) Aug. 24, May 25, 1997 1997 ------- ------- Raw materials $ 16.9 $ 15.4 Work in process 125.5 118.8 Finished goods 51.5 47.2 ------- ------- Total inventories $ 193.9 $ 181.4 ======= ======= Note 3. Other Income(Expense), Net Components of other income(expense), net, were: (in millions) Aug. 24, Aug. 25, 1997 1996 ------- ------- Net intellectual property income $ 0.3 $ 0.3 Gain(loss) on investments, net 6.7 (3.0) ------- ------- Total other income(expense), net $ 7.0 $ ( 2.7) ======= ======= Note 4. Statement of Cash Flow Information (in millions) Three Months Ended ------------------ Aug. 24, Aug. 25, 1997 1996 -------- -------- Supplemental Disclosure of Cash Flow - ------------------------------------ Information ----------- Cash paid for: Interest $ 1.2 $ 2.1 Income taxes 15.2 4.0 Supplemental Schedule of Noncash Investing - ------------------------------------------ and Financing Activities ------------------------ Issuance of stock for employee benefit plans $ 2.5 $ 3.2 Tax benefit for employee stock option plans 9.0 1.7 Unrealized loss on available-for-sale securities 2.7 5.0 Unearned compensation charge relating to restricted stock issuance - 6.7 Restricted stock cancellation 0.2 - Amortization of unearned compensation charge 3.7 0.3 Note 5. Merger On July 28, 1997, the Company announced that it had entered into a definitive merger agreement with Cyrix Corporation (Cyrix). Cyrix designs, develops and markets IBM personal computer software-compatible microprocessors for the personal computer industry and is a source of X86 microprocessors of original design for the personal computer marketplace. Under the terms of the agreement, each share of Cyrix common stock will be exchanged for 0.825 of a share of National common stock. According to Cyrix, as of June 29, 1997, Cyrix had approximately 19.7 million shares of common stock outstanding, exclusive of approximately 0.5 million treasury shares. Accordingly, it is expected that approximately 16.2 million shares of National common stock will be issued in the merger. National will also reserve for issuance approximately 5.6 million shares of National common stock, which may be issued from time to time to holders of Cyrix convertible notes and stock options, and to participants in the Cyrix Employees Stock Purchase Plan. The merger requires the approval of Cyrix's stockholders and is subject to regulatory approvals and other customary conditions. It is currently expected that the transaction will be completed in November 1997. The Company expects to recognize a special charge related to certain acquisition and related expenses in its second quarter of fiscal 1998 when the transaction is expected to be completed. The transaction is intended to be accounted for as a pooling of interests and to qualify as a tax-free reorganization. Note 6. Contingencies In fiscal 1997, the Company received notices of assessment totalling approximately $59.2 million from the Malaysian Inland Revenue Department relating to the Company's manufacturing operations in Malaysia. The issues giving rise to the assessments relate to intercompany transfer pricing, primarily for fiscal 1993. The Company believes the assessments are without merit and has been contesting them administratively. The Company believes that adequate accruals have been recorded for the years in question. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview National Semiconductor Corporation (National or the Company) recorded net sales of $600.8 million for the first quarter of fiscal 1998, a 6.1 percent increase from net sales of $566.1 million for the first quarter of fiscal 1997. Net income was $70.1 million for the first quarter of fiscal 1998 compared to a net loss of $207.6 million for the first quarter of fiscal 1997. These results reflect a comparison to operating results for the first quarter of fiscal 1997 that included the Fairchild Semiconductor operations (Fairchild), which the Company divested in the fourth quarter of fiscal 1997. The Company has presented management's discussion and analysis of financial condition and results of operations to also include comparison to fiscal 1997 of the Company's core business without Fairchild. The Company's core business includes the Analog Group, the Communications and Consumer Group, and the Personal Systems Group. The following selected financial information is presented for such comparative purposes. The selected financial information for the quarter ended August 25, 1996 for the Company's core business excludes special items and the effect of special charges related to the Company's reorganization of its operating structure in the first quarter of fiscal 1997: Three Months Ended ---------------------------------- (in millions) Aug. 24, 1997 Aug. 25, 1996 ------------- ------------------ Core Total Business Company -------- -------- Net sales $600.8 $433.5 $566.1 Gross profit $249.4 $162.0 $172.2 Gross margin 41.5% 37.4% 30.4% Research and development $101.7 $82.3 $97.4 Selling, general and administrative $73.9 $75.3 $94.0 Net income (loss) $70.1 $2.8 $(207.6) Sales Sales of $600.8 million for the first quarter of fiscal 1998 increased 38.6 percent compared to sales of $433.5 million for the same period of fiscal 1997 for the Company's core business. This growth resulted from improved new order rates the Company experienced through the summer period. The increase in sales reflects the continued growth in sales for wide area network products including wireless communication products, local area network products and personal computer products, which grew 18.6 percent, 47.1 percent and 33.3 percent, respectively, for the first quarter of fiscal 1998 over the first quarter of fiscal 1997. Sales for multimarket analog products also grew 51.1 percent for the first quarter of fiscal 1998 over the same period of fiscal 1997. Sales increases for all of these product areas were the result of increased unit shipments. Overall, increased unit shipments resulted in increased sales despite some modest price declines, particularly in the LAN Ethernet products. Gross Margin Gross margin as a percentage of sales was 41.5 percent for the first quarter of fiscal 1998 compared to 30.4 percent for the same period of fiscal 1997. Gross margin for the first quarter of fiscal 1998 improved over gross margin of 37.4 percent for the Company's core business which excludes the effect of Fairchild and special charges of $18.7 million related to the Company's reorganization in the first quarter of fiscal 1997. The primary factor contributing to the improvement was increased factory utilization which reached 87 percent in the first quarter of fiscal 1998 as new orders continued to grow during the summer. Research and Development Research and development (R&D) expenses for the first quarter of fiscal 1998 increased by 4.4 percent from the first quarter of fiscal 1997. Excluding the effect of Fairchild and a $10.6 million special charge for in-process R&D related to the acquisition of the PicoPower division of Cirrus Logic Inc. from the first quarter of fiscal 1997, R&D expenses for the first quarter of fiscal 1998 increased by 23.6 percent over R&D expenses of $82.3 million for the Company's core business. Although the Company increased its investment in R&D for the first quarter of fiscal 1998 over the same quarter of fiscal 1997 for the core business, R&D expenses as a percentage of sales decreased to 16.9 percent from 19.0 percent as the increase in sales of 38.6 percent exceeded the increase in R&D expenses. Overall, the increase in R&D expenses reflects the Company's accelerated investment in advanced submicron CMOS process technology that is part of the Company's focus on state-of-the-art process technology, which has been set as one of the Company's strategic imperatives. The increase also reflects the Company's continued investment in the development of new analog and mixed signal based products for applications in the personal systems, communications and consumer markets. Selling, General and Administrative Selling, general and administrative (SG&A) expenses for the first quarter of fiscal 1998 decreased by 21.4 percent from the first quarter of fiscal 1997. Excluding the Fairchild SG&A expenses from the first quarter of fiscal 1997, SG&A expenses for the first quarter of fiscal 1998 decreased by 1.9 percent from SG&A expenses of $75.3 million for the Company's core business. While the Company held expenses relatively flat year to year, as a percentage of sales, SG&A expenses decreased to 12.3 percent from 17.4 percent for the same quarter of fiscal 1997 for the core business as sales grew by 38.6 percent. The decrease reflects the effect of centralization initiatives implemented in connection with the Company's fiscal 1997 reorganization that have reduced the Company's infrastructure. Interest Income and Interest Expense Net interest income was $12.7 million for the first quarter of fiscal 1998 compared to $1.3 million in the first quarter of fiscal 1997. The increase was primarily attributable to interest earned on higher cash balances. In addition, the Company capitalized $5.4 million of interest associated with capital expansion projects for the first quarter of fiscal 1998, compared to 1.6 million for the same quarter of fiscal 1997. Other Income, Net Other income, net was $7.0 million for the first quarter of fiscal 1998 compared to other expense, net of $2.7 million for the first quarter of fiscal 1997. Included in other income, net for the first quarter of fiscal 1998 was $0.3 million of net intellectual property income and a $6.7 million net gain from the sale of stock from the Company's investment holdings. Other expense, net for the first quarter of fiscal 1997 includes $0.3 million of net intellectual property income offset by a $3.0 million net loss on investments primarily attributable to the write down of an investment to net realizable value. Income Tax Expense Income tax expense for the first quarter of fiscal 1998 is based on the Company's expected effective tax rate for fiscal 1998 of 25 percent. Financial Condition During the first quarter of fiscal 1998, cash and cash equivalents decreased $172.5 million compared to a $134.8 million decrease for the first quarter of fiscal 1997. The decrease was primarily the result of the Company's continued investment in property, plant and equipment of $196.3 million and net purchases of marketable investments of $52.8 million that offset cash flows generated from operating activities of $62.8 million and proceeds from issuance of common stock of $23.8 million. This compares to $105.2 million of investment in property, plant and equipment together with $34.8 million of cash used in operating activities for the first quarter of fiscal 1997. Management foresees significant cash outlays for plant and equipment throughout fiscal 1998. The capital expenditure level for fiscal 1998 is expected to be slightly higher than the fiscal 1997 level. Existing cash and investment balances, together with existing lines of credit, are expected to be sufficient to finance planned fiscal 1998 capital investments. Outlook The statements contained in this Outlook and in the Financial Condition section of Management's Discussion and Analysis are forward looking based on current expectations and management's estimates. Actual results may differ materially from those set forth in such forward looking statements. In addition to the risk factors discussed in the Outlook and Financial Condition sections of Management's Discussion and Analysis of Results of Operations and Financial Condition on pages 23 through 25 of the Company's 1998 Annual Report on Form 10-K filed with the Securities and Exchange Commission, the following factors may also affect the Company's operating results for fiscal 1998. As business conditions for the semiconductor industry improved in calendar 1997, the Company experienced significant improvement in new order rates. New orders were strong and continued to grow through the summer period. Although the Company expects this trend to continue through fiscal 1998, there is a risk that the improvement in new order rates may be temporary. If the rate of new orders does not continue to increase, the Company may be unable to sustain the level of revenue growth expected for fiscal 1998 and operating results will be unfavorably affected. Additionally, the rate of orders and product pricing may be affected by continued and increasing competition and by growth rates in the personal computer and networking industries. The Company expects to continue to pursue opportunities to acquire key technology to augment its technical capability or to achieve faster time to market as an alternative to internally developing such technology. In addition to the Company's regular involvement in licensing arrangements and joint venture relationships, these opportunities are expected to include business acquisitions. With such acquisitions, there is the risk that future operating performance may be unfavorably impacted due to acquisition related costs, such as but not limited to, in-process R&D charges, added R&D expenses, lower gross margins from acquired product portfolios and restructure costs associated with duplicate facilities. In July 1997, the Company entered into a definitive merger agreement with Cyrix Corporation (Cyrix). Cyrix designs, develops and markets IBM personal computer software-compatible microprocessors and is a supplier of high-performance microprocessors to the personal computer industry. Under the terms of the agreement, each share of Cyrix common stock will be exchanged for 0.825 of a share of National common stock. It is expected that approximately 16.2 million shares of National common stock will be issued in the merger and an additional 5.6 million shares of National common stock will be reserved for issuance in the future to holders of Cyrix convertible notes and stock options, and to participants in the Cyrix Employees Stock Purchase Plan. The merger, which is expected to be completed in November 1997, is also intended to be accounted for as a pooling of interests. While the Company expects to recognize special charges related to certain acquisition and related expenses associated with the transaction in its second quarter when the transaction is expected to be completed, the amount of these costs and its impact to the Company's operating results have not yet been determined. The Company believes the technologies and capabilities of each company are complementary and the separate operations compatible, however, the integration of the companies may have an unfavorable impact on future operating results if the Company encounters unforeseen obstacles or is unable to successfully execute its integration plan. Since the merger is expected to be accounted for as a pooling of interests, the assets and liabilities of Cyrix will be combined with the Company's consolidated financial statements and the Company will restate its historical financial statements to include the Cyrix financial statements as if the two companies had been previously combined. The Company has received notices of tax assessments from certain governments of countries within which the Company operates. There can be no assurance that these governments or other government entities will not serve future notices of assessments on the Company, or that the amounts of such assessments and the failure of the Company to favorably resolve such assessments would not have a material adverse effect on the Company's financial condition or results of operations. In addition, the Company is engaged in administrative tax appeals with the IRS and the Company's tax returns for certain years are under examination in the U.S. and Malaysia. There can be no assurance that the ultimate outcome of the tax appeals or tax examinations would not have a material adverse effect on the Company's future financial condition or results of operations. 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 personal computer and communications industries, the effects of legal and administrative cases and proceedings, and such other risks and uncertainties as may be detailed from time to time in the Company's SEC reports and filings. PART II. OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- There have been no material developments in the legal proceedings reported in Item 3 in the Company's Annual Report on Form 10-K for the year ended May 25, 1997. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits -------- 2.1 Agreement and Plan of Merger by and among National Semiconductor Corporation, Nova Acquisition Corporation and Cyrix Corporation dated as of July 28, 1997 (incorporated by reference from the Exhibits to the 10-K for the fiscal year ended May 25, 1997 filed August 6, 1997). 3.1 Second Restated Certificate of Incorporation of the Company as amended (incorporated by reference from the Exhibits to the Company's Registration Statement on Form S-3 Registration No.33-52775, which became effective March 22, 1994); Certificate of Amendment of Certificate of Incorporation dated September 30, 1994 (incorporated by reference from the Exhibits to the Company's Registration Statement on Form S-8 Registration No. 333-09957, which became effective August 12, 1996). 3.2 By Laws for the Company (incorporated by reference from the Registration Statement on Form S-8 Registration No. 333-36733, which became effective September 30, 1997). 4.1 Rights Agreements (incorporated by reference from the Exhibits to the Company's Registration Form 8-A filed August 10, 1988). First Amendment to the Rights Agreement (incorporated by reference from the Exhibits to the Amendment No. 1 to the Company's Registration Statement on Form 8-A filed December 11, 1995). 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). 4.2 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). 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 Registration Rights Agreement dated as of September 21, 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). 4.5 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). 10.1 Management Contract or Compensatory Plan or Agreement: Director Stock Plan, as amended through June 26, 1997 (incorporated by reference from the Exhibits to Company's definitive Proxy Statement for the Annual Meeting of Stockholders held September 26, 1997 filed on August 12, 1997). 10.2 Management Contract or Compensatory Plan or Agreement: Director Stock Option Plan (incorporated by reference from the Exhibits to the Company's definitive Proxy Statement for the Annual Meeting held September 26, 1997 filed on August 12, 1997). 10.3 Management Contract or Compensatory Plan or Agreement: FY 1998 Executive Officer Incentive Plan Agreement. 10.4 Management Contractor Compensatory Plan or Agreement: Long Term Disability Coverage Plan Summary, National Semiconductor Corporate Executive Staff. 10.5 Management Contract or Compensatory Plan or Agreement: Long Term Disability Plan Summary, National Semiconductor Executive Employees. 10.6 Stock Option Agreement between National Semiconductor Corporation and Cyrix Corporation (incorporated by reference from the Exhibits to the Company's 10-K for the fiscal year ended May 25, 1997 filed August 6, 1997). 11.0 Statement re computation of earnings per share 27.0 Financial Data Schedule (b) No reports on Form 8K were filed during the fiscal quarter ended August 24, 1997. 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 1, 1997 /s/ Richard D. Crowley, Jr. ---------------------------------- Richard D. Crowley, Jr. Vice President and Controller Signing on behalf of the registrant and as principal accounting officer Exhibit 10.3 NATIONAL SEMICONDUCTOR CORPORATION 1998 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. Base Salary includes salary continuation and sick leave paid by the Company. 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"), a - ------- Delaware corporation, and any other corporation in which NSC controls directly or indirectly fifty percent (50%) or more of the combined voting power of voting securities, and which has adopted this Plan. Committee: A committee comprised of directors of National - --------- who are not employees of the Company, as more fully defined in the Executive Officer Incentive Plan. Disability: Inability to perform any services for the - ---------- Company and eligible to receive disability benefits under the standards used by the Company's disability benefit plan or any successor plan thereto. 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 in accordance with the provisions of Article 3. Performance Goal: Factors considered and scored to determine the - ---------------- amount of a Participant's Award, which shall be based on one or more of the business criteria listed in Section 5(b) of the Plan. Performance Goals will have four levels of performance as follows: (i) Threshold -- The minimum acceptable level of performance for which an Award may be earned on a particular Performance Goal. (ii) Target -- Good performance, as established by the Committee, reflecting a degree of difficulty which has a reasonable probability of achievement. (iii)Stretch -- Better than Target performance and reflecting a degree of difficulty with only a moderate probability of achievement. (iv) Best Expected -- Exceptional performance far exceeding the Target level because of the great degree of difficulty and the limited probability of achievement. Retirement: Permanent termination of employment with the - ---------- Company, and (a) the Participant's age is either sixty-five (65) or age is at least fifty-five (55) and age plus years of service in the employ of the Company is sixty-five (65) or more, and (b) the retiring Participant certifies to the Vice President-Finance of the Company that he or she does not intend to engage in a full-time vocation. Target Award: The Award, expressed as a percentage of Base - ------------ Salary 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 defined 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 26, 1997, to be effective for the Company's fiscal year 1998. 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 Committee 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 ------------- 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 time spent in each position. ARTICLE 5 Plan Performance Goals ---------------------- A. Performance Goals, associated weights and levels of performance will be established by the Committee within ninety (90) days after the start of the fiscal year. Each Performance Goal will have defined Threshold, Target, Stretch and Best Expected levels of performance. Performance Goals and their associated weights may change from one fiscal year to another fiscal year to reflect the Company's operational and strategic goals, but must be based on one or more of the business criteria listed in Section 5(b) of the Plan. B. Actual Award amounts may range between 0% and 200% of Target. A scale showing the amount of the Participant's Award relative to the Target Award at the various performance levels will be developed for each Performance Goal. Performance levels and associated Awards (as a percent of the Target Award) will be set generally from Threshold to Best Expected for the Performance Goals, with Awards ranging from 50% of the Target Award at the Threshold level to 200% of the Target Award at the Best Expected level. Each Performance Goal will be scored at end of the fiscal year with a rating from 0% to 200%. The sum of the scoring on the Performance Goals will determine the total performance level for the year, which shall be subject to calculation as provided in Attachment A. ARTICLE 6 Calculation and Payment of Awards A. The Committee shall set a limit on the maximum amount available for Awards for the fiscal year. Subject to this maximum amount, a Participant's Award will be calculated as a percentage of Base Salary as follows: 1) The Participant's Target Award is determined prior to the beginning of the fiscal year. 2) The performance of each Participant is scored at the end of the fiscal year. 3) The overall performance of the Participants creates an incentive pool. 4) The Participants' incentive pool may then be divided by the Committee among some or all Participants, based on individual performance scores. No one individual Award may exceed 200% of the Participant's Target Award amount. 5) Total Awards may not exceed the maximum limit set for Awards for the fiscal year. As a result, some or all Award amounts may be adjusted in order not to exceed the maximum limit. B. The Committee will score the performance of the Plan Participants. Awards will be paid only after the Committee certifies in writing that the ratings on the Performance Goals have been attained. C. Awards will be paid in cash on or about the Award Date. D. Awards will reflect the Participant's Base Salary in effect at the end of the fiscal year. Participants who take an unpaid leave of absence during the fiscal year for good cause shown to the satisfaction of the Committee will have their Awards prorated to reflect actual pay earned during the fiscal year. E. Any Awards that are prorated for any reason under the terms of the Plan or this Agreement will be prorated based on the start dates of the Company's fiscal accounting periods. By way of example but not of limitation, if a Participant changes Incentive Levels in the middle of a fiscal accounting period, the Award will be prorated using the first day of the accounting period following the period in which the change occurred. ARTICLE 7 Termination of Employment A. To be eligible to receive an Award, the Participant must be employed by the Company on the last day of the fiscal year. A Participant whose employment has terminated prior to that date will forfeit the Award, except as otherwise provided in this Article 7. B. If a Participant's employment is terminated during the fiscal year by Disability, Retirement, or death, the Participant will receive an Award reflecting the Participant's performance and actual period of full-time employment during the fiscal year. C. Unless local law or regulation provides otherwise, payments of Awards made upon termination of employment by death shall be made on the Award Date to: (a) beneficiaries designated by the Participant; if none, then (b) to a legal representative of the Participant; if none, then (c) to the persons entitled thereto as determined by a court of competent jurisdiction. D. Participants whose employment is terminated by reduction in force during the fiscal year will receive no Award. If a Participant's employment is terminated by reduction in force after the fiscal year but before the Award Date, the Participant will receive the Award on the Award Date. E. The Committee reserves the right to reduce an Award to reflect a Participant's absence from work during a fiscal year. A Participant absent on the Award Date will not receive an Award until he or she returns from the absence and satisfies the Committee the absence was for good cause shown. F. The right of a Participant to receive an Award, 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 Brothers Inc of New York City (or such other investment banking firm as the Committee may specify) during the first week of each calendar year. The interest rate will be reset at the beginning of each calendar year. Interest will begin to accrue on the Award Date and will be credited each Award Date until the date payment is actually made. If a Participant's Award is distributed at any time other than on an Award Date, the Participant's account will be credited with interest until the date of distribution. D. Participants will not receive deferred Awards until the earlier of termination of employment for any reason (including Retirement, Disability, or death) or a date pre-selected by the Participant. The account balance will be paid in a lump sum in the month following the earlier of termination of employment for any reason or the pre-selected date unless installment payments are permitted and have been elected as follows: Upon termination of employment by reason of Retirement or Disability, a Participant who has previously elected to defer an Award may irrevocably elect to have the balance of the deferred Award plus accrued interest paid to the Participant in periodic, annual installments over a period of ten (10) years. Payments shall commence or be made annually on a day that is within thirty (30) days of the anniversary date following the Participant's Retirement or Disability. E. Subject to Section 7.F., if the Participant's employment is terminated for any reason other than death, Disability or Retirement, the Participant will be paid the entire account balance in a lump sum in the month after termination, less any sums due the Company. If a Participant has requested installment payments and dies either before or after distribution has begun, the unpaid balance will be paid in a lump sum in the month following the Participant's death, less any sums due the Company. F. Payment of part or all of the deferred Award may be accelerated in the case of severe hardship for good cause shown to the satisfaction of the Committee, which shall mean an emergency or unexpected situation including, but not limited to, illness or accident involving the Participant or any of the Participant's dependents. All payments in case of hardship must be specifically approved by the Committee. 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 Officer of the Company. F. The provisions of the Plan shall not limit, or restrict, the right or power of the Committee to continue to adopt such other plans or programs, or to make salary, bonus, incentive, or other payments, with respect to compensation of Executive Officers, as in its sole judgment it may deem proper. G. Except to the extent superseded by federal law, this Agreement shall be construed in accordance with the laws of the State of California. H. No member of the Company's board of directors or any officer, employee, or agent of the Company shall have any liability to any person, firm or corporation based on or arising out of this Agreement or the Plan. I. Any dispute relating to or arising from this Agreement shall be determined by binding arbitration by a three member panel chosen under the auspices of the American Arbitration Association and acting pursuant to its Commercial Rules, sitting in San Jose, California. The panel may assess all fees, costs and other expenses, including reasonable counsel fees, as the panel sees fit. Notwithstanding the parties' election to use arbitration to resolve disputes under this Agreement, nothing contained in that election shall preclude either party, if the circumstances warrant, from seeking extraordinary relief, such as injunction and attachment, from any court of competent jurisdiction in California. ATTACHMENT A Incentive | Award as | % of | Target 200%---| |-------. Award Max | | . | | . | | . 150%---| |-------. | | . | | . | | . 100%---| |-------. | | . | | . | | . 50%---|--------. | . | . | . |._______|________|________|________|________ 50% 100% 150% 200% Threshold Target Superior Best Expected Chart illustrates the manner in which awards are to be calculated under the Executive Officer Incentive Plan. Achievement of performance against goals between the Threshold Level and fifty percent of Target Level results in an Incentive Award of 50% of Target, with the Committee having discretion to adjust downward when it deems appropriate. Similarly, performance levels against goals of between 50% and 100% result in an Incentive Award of 100% of Target, while performance against goals of between 100% and 150% result in an Incentive Award of 150% of Target (in each case, subject to downward - but not upward - adjustment by the Committee). Finally, performance against goals of more than 150% will result in the maximum incentive award of 200% of Target award, subject to downward adjustment. In summary, while the Plan formula sets the incentive awards upon achievement of each level of performance, the shaded areas of the chart reflect the areas of discretion on award payment that is vested with the Committee. Exhibit 10.4 LONG TERM DISABILITY COVERAGE PLAN SUMMARY NATIONAL SEMICONDUCTOR CORPORATION EXECUTIVE STAFF - -------------------------------------------------------------------------- Group Long Term Disability Plan Definitions Eligibility You are eligible for LTD coverage if you are: a full-time active employee, earning over $160,000 annually, working a minimum of 30 hours per week, and are a member of the Company's Executive staff. Elimination Period The Elimination Period is the length of time of continuous disability which must be satisfied before you are eligible to receive benefits. LTD benefits will begin after 360 consecutive days of total or partial disability, as described in the definition below. Definition of Disability LTD Definition: You will be considered disabled and eligible for benefits if, because of injury or sickness: you are limited from performing the material and substantial duties of your regular occupation; and have a 20% or more loss in indexed monthly earnings due to the same sickness or injury. Benefit Amount Monthly LTD Benefit: 60% of your basic monthly earnings to a maximum of $20,000 Benefit Integration Your LTD Benefits may be reduced by the amount of other income replacement benefits you receive for the same disability, such as benefits from Social Security, Workers' Compensation, etc. How does LTD coverage If you are disabled according to your policy's work? definition of disability, you will be eligible to receive a monthly benefit based on 60% of your basic monthly earnings. Benefits will begin after an "Elimination Period" of 360 days and will be paid for as long as you continue to meet the policy's definition of disability for the benefit duration specified. You will not be required to pay your premium during the time you are receiving benefits. Benefit Duration Age at Disability Maximum Period of Payment ----------------- ------------------------- Less than age 60 To age 65, but not less than 5 years Age 60 60 months Age 61 48 months Age 62 42 months Age 63 36 months Age 64 30 months Age 65 24 months Age 66 21 months Age 67 18 months Age 68 15 months Age 69 and over 12 months Instances when benefits Benefits will not be paid for disabilities would not be paid caused by, contributed to by, or resulting from: intentionally self-inflicted injuries; active participation in a riot; war, declared or undeclared, or any act of war; conviction of a crime under state or federal law; loss of professional license, occupational license or certification; pre-existing conditions (see definition). Benefit will not be paid for any period of disability during which you are incarcerated. Pre-existing Condition A pre-existing condition is a sickness or injury Exclusion for First for which you received medical treatment, $15,000 of Monthly consultation, care or services including Benefit diagnostic measures or took prescribed drugs or medicines, or if you had symptoms for which an ordinary prudent person would have consulted a health care provider in the 3 months prior to your effective date of coverage. If you suffer a disability caused by, contributed to by or resulting from a pre- existing condition and it begins in the first 12 months after your effective date, that disability will be limited to a monthly benefit of $7,500. Pre-existing Condition A pre-existing condition is a sickness or injury Exclusion for Monthly for which you received medical treatment, benefit amounts over consultation, care or services including $15,000 diagnostic measures, or took prescribed drugs or medicines, or if you had symptoms for which an ordinary prudent person would have consulted a health care provider in the 24 months prior to your effective date of coverage. Any disability caused or contributed to by a pre-existing condition will be limited to a $15,000 monthly benefit unless the employee remains treatment free for 12 consecutive months beginning or after the effective date of coverage. Mental and Nervous Disabilities due to a sickness or injury which are primarily based on self-reported symptoms and disabilities due to mental illness have a limited payment period of 24 months per lifetime. Mental and nervous benefits will continue beyond 24 months only if you are institutionalized or hospitalized as a result of the disability. Survivor Benefit When the insurer receives proof that you have died, it will pay your eligible survivor a lump sum benefit equal to 3 months of your gross disability payment if, on the date of your death, you disability had continued for 180 or more consecutive days and you were receiving or were entitled to receive benefit payments under the plan. Work Incentive Benefit The Plan provides a financial incentive to help you return to work. Return-to-work earnings will not be deducted from your disability benefit. Instead, for the first 12 months after you return to work, there will be no deductions from your disability benefit until your earnings plus your benefit exceed your pre-disability earnings. After 12 months, your benefit will be reduced in proportion to your loss in earnings. Cost of Coverage You pay for the cost of coverage through payroll deductions. This plan highlight summary is provided to help you understand your insurance coverage. If the terms of this plan highlight summary and the policy differ, the policy will govern. Exhibit 10.5 LONG TERM DISABILITY COVERAGE PLAN SUMMARY NATIONAL SEMICONDUCTOR CORPORATION EXECUTIVE EMPLOYEES - ------------------------------------------------------------------------- Group Long Term Disability Plan Definitions Eligibility You are eligible for LTD coverage if you are: a full-time active employee, earning over $160,000 annually, working a minimum of 30 hours per week. Elimination Period The Elimination Period is the length of time of continuous disability which must be satisfied before you are eligible to receive benefits. LTD benefits will begin after 360 consecutive days of total or partial disability, as described in the definition below. Definition of Disability LTD Definition: You would be considered disabled and eligible for LTD benefits if, because of injury or sickness: you cannot perform each of the material duties of your regular occupation, and after benefits have been paid for 24 months, you cannot perform each of material duties of any gainful occupation for which you are reasonably fitted by education, training or experience. while unable to perform all the material duties of your regular occupation on a full-time basis are: a. performing at least one of the material duties of your regular occupation or another occupation on a part-time or full-time basis; and b. earning at least 20% less per month than you indexed pre-disability earning due to that same injury or sickness. Gainful Occupation Gainful occupation means an occupation that is or can be expected to provide you with an income of at least equal to your gross disability payment within 12 months of your return to work. Benefit Amount Monthly LTD Benefit: 60% of your basic monthly earnings to a maximum of $20,000 Benefit Integration Your LTD Benefits may be reduced by the amount of other income replacement benefits you receive for the same disability, such as benefits from Social Security, Workers' Compensation, etc. How does LTD coverage If you are disabled according to your policy's work? definition of disability, you will be eligible to receive a monthly benefit based on 60% your basic monthly earnings. Benefits will begin after an "Elimination Period" of 360 days and will be paid for as long as you continue to meet the policy's definition of disability for the benefit duration specified. You will not be required to pay your premium during the time you are receiving benefits. Benefit Duration Age at Disability Maximum Period of Payment ----------------- ---------------------------- Less than age 60 To age 65, but not less than 5 years Age 60 60 months Age 61 48 months Age 62 42 months Age 63 36 months Age 64 30 months Age 65 24 months Age 66 21 months Age 67 18 months Age 68 15 months Age 69 and over 12 months Instances when benefits Benefits will not be paid for disabilities would not be paid caused by, contributed to by, or resulting from: intentionally self-inflicted injuries; active participation in a riot; war, declared or undeclared, or any act of war; conviction of a crime under state or federal law; loss of professional license, occupational license or certification; pre-existing conditions (see definition). Benefits will not be paid for any period of disability during which you are incarcerated. Pre-existing Condition A pre-existing condition is a sickness or injury Exclusion for First for which you received medical treatment, $15,000 of consultation, care or services including Monthly diagnostic measures, or took prescribed drugs or Benefit medicines, or if you had symptoms for which an ordinary prudent person would have consulted a health care provider in the 3 months prior to your effective date of coverage. If you suffer a disability caused by, contributed to by or resulting from a pre- existing condition and it begins in the first 12 months after your effective date, that disability will be limited to a monthly benefit of $7,500. Pre-existing Condition A pre-existing condition is a sickness or injury Exclusion for Monthly for which you received medical treatment, benefit amounts over consultation, care or services including $15,000 diagnostic measures, or took prescribed drugs or medicines, or if you had symptoms for which an ordinary prudent person would have consulted a health care provider in the 24 months prior to your effective date of coverage. Any disability caused or contributed to by a pre-existing condition will be limited to a $15,000 monthly benefit unless the employee remains treatment free for 12 consecutive months beginning or after the effective date of coverage. Mental and Nervous Disabilities due to a sickness or injury which are primarily based on self-reported symptoms and disabilities due to mental illness have a limited payment period of 24 months per lifetime. Mental and nervous benefits will continue beyond 24 months only if you are institutionalized or hospitalized as a result of the disability. Survivor Benefit When the insurer receives proof that you have died, it will pay your eligible survivor a lump sum benefit equal to 3 months of your gross disability payment if, on the date of your death, you disability had continued for 180 or more consecutive days and you were receiving or were entitled to receive benefit payments under the plan. Work Incentive Benefit The Plan provides a financial incentive to help you return to work. The Plan will not deduct your return-to-work earnings from your disability benefit. Instead, for the first 12 months after you return to work, there will be no deductions from your disability benefit until your earnings plus your benefit exceed your pre- disability earnings. After 12 months, your benefit will be reduced in proportion to your loss in earnings. Cost of Coverage You pay for the cost of coverage through payroll deductions. This plan highlight summary is provided to help you understand your insurance coverage. If the terms of this plan highlight summary and the policy differ, the policy will govern. Exhibit 11.0 NATIONAL SEMICONDUCTOR CORPORATION STATEMENT RE COMPUTATION OF EARNINGS PER SHARE (in millions, except per share amounts) Three Months Ended ------------------- Aug 24, Aug 25, 1997 1996 ------ ------- Net income, as reported and used for primary earnings per share $ 70.1 $(207.6) Adjustment for interest on convertible notes - 2.4 ------ ------- Net income used for fully diluted earnings per share $ 70.1 $(205.2) (2) ====== ======= Number of shares: Weighted average common shares outstanding 146.0 137.7 Weighted average common equivalent shares, net of tax benefit 3.9 1.6 (3) ------ ------- Weighted average common and common equivalent shares for primary earnings per share 149.9 139.3 (4) Additional weighted average common equivalent shares assuming full dilution 0.8 0.1 (3) Shares issuable from assumed conversion of convertible notes 6.0 6.0 ------ ------- Weighted average common and common equivalent shares for fully diluted earnings per share 156.7 145.4 (1)(4) ====== ======= Earnings per share: Net income $0.45 $(1.41) (1) ====== ======= Earnings per common share, as reported: Primary $0.45 $(1.41) ====== ======= Fully diluted $0.45 $(1.41) ====== ======= (1) For the three months ended August 25, 1996, this calculation is submitted in accordance with Regulation S-K Item 601(b)(11) although it is contrary to paragraph 40 of the APB Opinion No. 15 because it produces an antidilutive result. (2) For the three months ended August 25, 1996, since the effect of using net loss for fully diluted earnings per share is antidilutive, primary and fully diluted earnings per share is calculated using net loss, as reported. (3) For purposes of this computation, all outstanding options and warrants on common stock are assumed to have been exercised, even though for the three months ended August 25, 1996, the related effect are antidilutive. (4) For the three months ended August 25, 1996, the effect of shares from the assumed exercise of all outstanding options and warrants and from the assume conversion of convertible debt related to fully diluted earnings per share is antidilutive. As a result, primary and fully diluted earnings per share is calculated using weighted average common shares outstanding. 30 of 16 EX-27 2
5 3-MOS AUG-24-1997 AUG-24-1997 660 119 302 0 194 1495 2455 1049 2999 788 303 0 0 73 1711 2999 601 601 351 351 102 0 (13) 93 23 70 0 0 0 70 0.47 0.45
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