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 24, 2002
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -- EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
Commission File Number: 1-6453
NATIONAL SEMICONDUCTOR CORPORATION
----------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-2095071
-------- ----------
(State of incorporation) (I.R.S. Employer Identification Number)
2900 Semiconductor Drive, P.O. Box 58090
Santa Clara, California 95052-8090
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(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 721-5000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of Each Class Outstanding at February 24, 2002.
------------------- ---------------------------------
Common stock, par value $0.50 per share 179,221,864
NATIONAL SEMICONDUCTOR CORPORATION
INDEX
Page No.
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Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited) for the
Three Months and Nine Months Ended February 24, 2002 and
February 25, 2001 3
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited) for the Three Months and Nine Months Ended
February 24, 2002 and February 25, 2001 4
Condensed Consolidated Balance Sheets (Unaudited) as of
February 24, 2002 and May 27, 2001 5
Condensed Consolidated Statements of Cash Flows (Unaudited) for the
Nine Months Ended February 24, 2002 and February 25, 2001 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7-13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14-20
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Part II. Other Information
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 21-22
Signature 23
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)
Three Months Ended Nine Months Ended
Feb. 24, Feb. 25, Feb. 24, Feb. 25,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net sales $ 369.5 $ 475.6 $1,075.3 $ 1,711.4
Operating costs and expenses:
Cost of sales 236.2 242.6 702.4 838.3
Research and development 110.3 112.0 329.7 327.8
Selling, general and administrative 64.6 76.3 196.9 255.7
Special items - 12.1 1.1 18.5
------------ ------------ ------------ ------------
Total operating costs and expenses 411.1 443.0 1,230.1 1,440.3
------------ ------------ ------------ ------------
Operating income (loss) (41.6) 32.6 (154.8) 271.1
Interest income, net 4.3 13.4 16.8 42.7
Other income, net 2.0 3.0 6.5 48.9
------------ ------------ ------------ ------------
Income (loss) before income taxes (35.3) 49.0 (131.5) 362.7
Income tax expense 2.5 9.8 7.5 72.6
------------ ------------ ------------ ------------
Net income (loss) $ (37.8) $ 39.2 $ (139.0) $ 290.1
============ ============ ============ ============
Earnings (loss) per share:
Basic $ (0.21) $ 0.23 $ (0.79) $ 1.64
Diluted $ (0.21) $ 0.21 $ (0.79) $ 1.53
Weighted-average shares:
Basic 178.4 174.0 176.7 176.7
Diluted 178.4 183.0 176.7 190.2
Income (loss) used in basic and diluted
earnings (loss) per share calculation $ (37.8) $ 39.2 $ (139.0) $ 290.1
See accompanying Notes to Condensed Consolidated Financial Statements
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS) (Unaudited)
(in millions)
Three Months Ended Nine Months Ended
Feb. 24, Feb. 25, Feb. 24, Feb. 25,
2002 2001 2002 2001
------------ ------------- ------------ -------------
Net income (loss) $(37.8) $39.2 $(139.0) $290.1
Other comprehensive income (loss), net of tax:
Reclassification adjustment for net realized
gain on available-for-sale securities
included in net income (loss) (1.5) (0.1) (6.9) (22.4)
Unrealized gain (loss) on
available-for-sale securities 28.4 (2.6) 22.9 41.3
Derivative instruments:
Unrealized loss on cash flow hedges (0.1) - - -
------------ ------------- ------------ -------------
Comprehensive income (loss) $(11.0) $36.5 $(123.0) $309.0
============ ============= ============ =============
See accompanying Notes to Condensed Consolidated Financial Statements
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
Feb. 24, May 27,
2002 2001
------------------------ -----------------------
ASSETS
Current assets:
Cash and cash equivalents $ 654.1 $ 817.8
Short-term marketable investments 32.4 5.0
Receivables, net 126.4 123.4
Inventories 145.5 195.5
Deferred tax assets 97.2 97.2
Other current assets 39.7 36.1
------------------------ -----------------------
Total current assets 1,095.3 1,275.0
Net property, plant and equipment 742.7 815.7
Long-term marketable debt investments 140.2 46.6
Other assets 297.8 225.0
------------------------ -----------------------
Total assets $2,276.0 $2,362.3
======================== =======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 10.3 $ 29.4
Accounts payable 96.0 126.4
Accrued expenses 218.7 262.9
Income taxes payable 78.8 53.1
------------------------ -----------------------
Total current liabilities 403.8 471.8
Long-term debt 21.2 26.2
Other non-current liabilities 102.0 96.4
------------------------ -----------------------
Total liabilities 527.0 594.4
------------------------ -----------------------
Commitments and contingencies
Shareholders' equity:
Common stock 89.6 86.9
Additional paid-in capital 1,382.2 1,280.8
Retained earnings 293.4 432.4
Accumulated other comprehensive loss (16.2) (32.2)
------------------------ -----------------------
Total shareholders' equity 1,749.0 1,767.9
------------------------ -----------------------
Total liabilities and shareholders' equity $ 2,276.0 $ 2,362.3
======================== =======================
See accompanying Notes to Condensed Consolidated Financial Statements
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended
Feb. 24, Feb. 25,
2002 2001
------------------------ -----------------------
Cash flows from operating activities:
Net income (loss) $(139.0) $290.1
Adjustments to reconcile net income (loss)
with net cash provided by operations:
Depreciation and amortization 171.5 179.0
Gain on investments (6.9) (40.8)
Loss on disposal of equipment 3.1 2.7
Donation of equity securities - 20.5
Noncash special items 1.1 18.5
Other, net 0.2 0.3
Changes in certain assets and liabilities, net:
Receivables (1.9) 102.6
Inventories 50.0 (22.8)
Other current assets (3.7) (0.9)
Accounts payable and accrued expenses (71.9) (115.7)
Current and deferred income taxes 25.7 10.8
Other liabilities 5.6 4.5
------------------------ -----------------------
Net cash provided by operating activities 33.8 448.8
------------------------ -----------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (89.4) (168.4)
Maturity of available-for-sale securities 39.5 39.3
Purchase of available-for-sale securities (160.1) (28.0)
Proceeds from sale of equity investments 8.7 33.3
Business acquisition, net of cash acquired (27.5) (98.3)
Purchase of software (16.8) (10.0)
Supplemental benefit plan (14.7) (3.5)
Other, net (10.3) (10.3)
------------------------ -----------------------
Net cash used by investing activities (270.6) (245.9)
------------------------ -----------------------
Cash flows from financing activities:
Repayment of debt (14.1) (14.9)
Issuance of common stock, net 87.2 48.5
Purchase and retirement of treasury stock - (173.5)
------------------------ -----------------------
Net cash provided by (used by) financing activities 73.1 (139.9)
------------------------ -----------------------
Net change in cash and cash equivalents (163.7) 63.0
Cash and cash equivalents at beginning of period 817.8 778.8
------------------------ -----------------------
Cash and cash equivalents at end of period $ 654.1 $841.8
======================== =======================
See accompanying Notes to Condensed Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
In the opinion of our 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 our majority-owned subsidiaries. You should not expect interim
results of operations to be 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 our annual report on Form
10-K for the fiscal year ended May 27, 2001.
Earnings Per Share:
A reconciliation of the shares used in the computation of basic and diluted
earnings per share follows (in millions):
Three Months Ended Nine Months Ended
Feb. 24, Feb. 25, Feb. 24, Feb. 25,
2002 2001 2002 2001
------------ ----------- ----------- -----------
Net income (loss) used for basic and
diluted earnings (loss) per share $(37.8) $39.2 $(139.0) $290.1
============ =========== =========== ===========
Number of shares:
Weighted average common shares outstanding
used for basic earnings per share 178.4 174.0 176.7 176.7
Effect of dilutive securities:
Stock options - 9.0 - 13.5
------------ ----------- ----------- -----------
Weighted average common and potential
common shares outstanding used for
diluted earnings per share 178.4 183.0 176.7 190.2
============ =========== =========== ===========
On February 24, 2002, we had options outstanding to purchase 35.4 million shares
of common stock with a weighted-average exercise price of $27.71, which could
potentially dilute basic earnings per share in the future. These options are not
included in diluted earnings per share because their effect was antidilutive. On
February 25, 2001, we had options outstanding to purchase 13.3 million shares of
common stock with a weighted-average exercise price of $47.32, which could have
potentially diluted basic earnings per share in the future. These options were
also not included in diluted earnings per share as their effect was
antidilutive.
Note 2. Derivative Financial Instruments
At the beginning of the first quarter of fiscal 2002, we adopted Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended. SFAS No. 133, as amended, requires
companies to record derivatives on the balance sheet as assets or liabilities
measured at fair value. Gains or losses resulting from changes in the values of
these derivatives are accounted for based on the use of the derivative and
whether it qualifies for hedge accounting. The cumulative effect of adoption of
this statement was immaterial to both our financial position and results of
operations.
As part of our risk management strategy we use derivative financial instruments,
including forwards, swaps and purchased options, to hedge certain foreign
currency and interest rate exposures. Our intent is to offset gains and losses
that occur from our underlying exposure, with gains and losses on the derivative
contracts used to hedge them. We do not enter into any speculative positions in
derivative instruments. We record all derivatives on the balance sheet at fair
value.
We are exposed to foreign currency exchange rate risk that is inherent in
orders, sales, cost of sales, expenses, and assets and liabilities denominated
in currencies other than the U.S. dollar. We enter into foreign exchange
contracts, primarily forwards and purchased options, to hedge against exposure
to changes in foreign currency exchange rates. These contracts are designated at
inception to the related foreign currency exposures that are being hedged,
including sales by subsidiaries, and assets and liabilities denominated in
currencies other than the U.S. dollar. Our foreign currency hedges typically
mature within one year.
We designate derivative instruments that are used to hedge exposures to
variability in expected future foreign denominated cash flows as cash flow
hedges. We record the effective portion of the gains or losses on the derivative
instrument in accumulated other comprehensive loss as a separate component of
stockholders' equity and reclassify amounts into earnings in the period when the
hedged transaction affects earnings. We recognize the ineffective portion of the
gain or loss on the derivative, if any, in earnings during the period of change.
Derivative instruments that we use to hedge exposures to reduce or eliminate
changes in the fair value of a foreign currency denominated asset or liability
are designated as fair value hedges. We recognize the gain or loss on the
derivative instrument, as well as the offsetting gain or loss on the hedged item
attributable to the hedged risk, in current earnings.
We measure hedge effectiveness for foreign currency forward contracts by
comparing the cumulative change in the hedge contract with the cumulative change
in the hedged item, both of which are based on forward rates. For purchased
options, we measure hedge effectiveness by the change in the option's intrinsic
value, which represents the change in the forward rate relative to the option's
strike price.
We are also exposed to variable cash flow that is inherent in our variable-rate
debt. We use an interest rate swap to convert the variable interest payments to
fixed interest payments. We designate this derivative as a cash flow hedge. For
interest rate swaps, the critical terms of the interest rate swap and hedged
item are designed to match up, enabling us to assume effectiveness under SFAS
No. 133. We recognize amounts as interest expense as cash settlements are paid
or received.
In accordance with our policy, we report hedge ineffectiveness from foreign
currency derivatives for both options and forward contracts in current earnings.
We also report ineffectiveness related to interest rate swaps in current
earnings. Hedge ineffectiveness was immaterial for the third quarter and first
nine months of fiscal 2002. The effective portion of all changes in derivatives
is reported in the same financial statement line item as the changes in the
hedged item.
On February 24, 2002, the net fair values of foreign currency-related
derivatives designated as cash flow hedges and fair value hedges were $0.3
million in other assets and immaterial in other accrued liabilities.
On February 24, 2002, unrealized gains or losses on derivative instruments, net
of taxes, in accumulated other comprehensive income were immaterial. We had $0.6
million and $0.9 million of net realized losses from derivative instruments for
the third quarter and first nine months of fiscal 2002, respectively.
Note 3. Consolidated Financial Statement Details
Balance sheets (in millions):
Feb. 24, May 27,
2002 2001
--------------------------- ---------------------------
Inventories:
Raw materials $ 6.0 $ 8.1
Work in process 89.4 113.8
Finished goods 50.1 73.6
--------------------------- ---------------------------
Total inventories $ 145.5 $ 195.5
=========================== ===========================
Accumulated other comprehensive loss:
Unrealized gain on available-for-sale securities $ 31.0 $ 15.0
Minimum pension liability (47.2) (47.2)
--------------------------- ---------------------------
$ (16.2) $ (32.2)
=========================== ===========================
Statements of operations (in millions):
Three Months Ended Nine Months Ended
Feb. 24, Feb. 25, Feb. 24, Feb. 25,
2002 2001 2002 2001
------------ ----------- ----------- -----------
Special items:
In-process research and development charge $ - $12.1 $ 1.1 $16.2
Restructuring of operations - - - 2.3
------------ -----------
----------- -----------
$ - $12.1 $ 1.1 $18.5
============ =========== =========== ===========
Interest income, net:
Interest income $ 5.3 $14.6 $20.1 $46.4
Interest expense (1.0) (3.3) (3.7)
(1.2)
------------ ----------- ------------ -----------
Interest income, net $ 4.3 $13.4 $16.8 $42.7
============ =========== ============ ===========
Other income, net:
Net intellectual property income $ 1.0 $ 0.9 $ 2.7 $ 5.4
Gain on investments, net 1.0 2.1 4.4 43.5
Other - (0.6) -
-
------------ ----------- ----------- ------------
Total other income, net $ 2.0 $ 3.0 $ 6.5 $48.9
============ =========== =========== ============
Included in gain on investments for the first nine months of fiscal 2001 is a
gain of $20.5 million from the distribution of equity securities that were a
part of our investment portfolio. We donated the securities to establish the
National Semiconductor Foundation. The expense associated with the donation also
totaled $20.5 million and this amount is included in selling, general and
administrative expenses for the first nine months of fiscal 2001.
Note 4. Statement of Cash Flows Information (in millions)
Nine Months Ended
Feb. 24, Feb. 25,
2002 2001
---------------------- -----------------------
Supplemental Disclosure of Cash Flows Information:
Cash paid (refunded) for:
Interest $ 3.2 $ 3.6
Income taxes $ (18.2) $ 61.8
Supplemental Schedule of Non-cash Investing
and Financing Activities:
Issuance of common stock for employee benefit plans $ 4.3 $ 4.1
Issuance of common stock to directors $ 0.2 $ 0.3
Issuance of restricted common stock $ 2.1 $ 7.5
Issuance of common stock in connection
with the settlement of promissory note $ 10.0 $ -
Change in unrealized gain on
available-for-sale securities $ 16.0 $ 18.9
Note 5. Goodwill and Intangible Assets
Beginning in fiscal 2002, we adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." As a result, we no longer amortize goodwill. Instead we
annually evaluate goodwill for impairment. We also evaluate goodwill whenever
events and changes in circumstance suggest that the carrying amount may not be
recoverable from its estimated future cash flows. Upon adoption of this
financial standard, we established reporting units based on our current
reporting structure. We then assigned all existing goodwill to the reporting
units, as well as other assets and liabilities that relate to the reporting
unit. We also completed the first step of the transitional goodwill impairment
test and determined that no potential impairment existed at the time of
adoption. As a result, we have recognized no transitional impairment loss in
fiscal 2002 in connection with the adoption of SFAS No. 142.
The changes in the carrying amount of goodwill for fiscal 2002 are as follows
(in millions):
Analog All
Segment Others Total
--------------- -------------- --------------
Balances at May 27, 2001 $130.4 $1.7 $132.1
Goodwill acquired during fiscal 2002 27.6 - 27.6
--------------- -------------- --------------
Balances at February 24, 2002 $158.0 $1.7 $159.7
=============== ============== ==============
Other intangible assets, which will continue to be amortized, consist of the
following (in millions):
Feb. 24, May 27,
2002 2001
---------------------- ----------------------
Patents $4.9 $4.9
Less accumulated amortization 1.5 0.8
---------------------- ----------------------
$3.4 $4.1
====================== ======================
We expect annual amortization expense for these intangible assets to be (in
millions):
2002 $1.0
2003 1.0
2004 1.0
2005 1.0
2006 0.2
- -------------------------------------------------
$4.2
========
Amortization expense was (in millions):
Three Months Ended Nine Months Ended
Feb. 24, Feb. 25, Feb. 24, Feb. 25,
2002 2001 2002 2001
------------ ----------- ------------ -----------
Goodwill amortization $ - $ 2.7 $ - $ 7.1
Patent amortization 0.3 0.2 0.7 0.4
------------ ----------- ------------ -----------
Total amortization $ 0.3 $ 2.9 $ 0.7 $ 7.5
============ =========== ============ ===========
Pro forma net income (loss) and net income (loss) per share exclusive of
amortization expense was (in millions):
Three Months Ended Nine Months Ended
Feb. 24, Feb. 25, Feb. 24, Feb. 25,
2002 2001 2002 2001
------------ ----------- ------------ -----------
Net income (loss), as reported $ (37.8) $ 39.2 $(139.0) $ 290.1
Add back:
Goodwill amortization - 2.7 - 7.1
------------ ----------- ------------ -----------
Net income (loss) - pro forma $ (37.8) $ 41.9 $(139.0) $ 297.2
============ =========== ============ ===========
Basic earnings (loss) per share, as reported $ (0.21) $ 0.23 $ (0.79) $ 1.64
Add back:
Goodwill amortization - 0.01 - 0.04
------------ ----------- ------------ -----------
Basic earnings (loss) per share - pro forma $ (0.21) $ 0.24 $ (0.79) $ 1.68
============ =========== ============ ===========
Diluted earnings (loss) per share, as reported $ (0.21) $ 0.21 $ (0.79) $ 1.53
Add back:
Goodwill amortization - 0.02 - 0.03
------------ ----------- ------------ -----------
Diluted earnings (loss) per share - pro forma $ (0.21) $ 0.23 $ (0.79) $ 1.56
============ =========== ============ ===========
Note 6. Restructuring of Operations and Cost Reduction Programs
During the third quarter and first nine months of fiscal 2002, we paid severance
of $1.7 million and $14.5 million, respectively, to a total of 471 employees as
part of the cost-reduction program we announced in May 2001. We also paid $1.7
million and $4.7 million for other exit-related costs during the third quarter
and first nine months of fiscal 2002, respectively. Those costs were primarily
associated with restructuring actions we originally announced in fiscal 1999.
Included in accrued liabilities at February 24, 2002, is $11.1 million related
to actions that were not yet completed. Of this amount, $5.5 million represents
costs related to the May 2001 cost reduction program. The remaining amount
represents facility dismantling costs for the closure of the Greenock 4-inch
facility and lease obligations associated with other restructuring actions.
Note 7. Acquisition
In June 2001, we acquired Wireless Solutions Sweden AB, a leading developer of
wireless solutions ranging from telemetry to mobile phones to wireless
networking, including Bluetooth and 802.11 technologies. We expect this
acquisition to enable us to deliver complete wireless reference designs,
including silicon chipsets, hardware and software. The acquisition was accounted
for using the purchase method, with a purchase price of $27.7 million. In
connection with the acquisition, we recorded a $1.1 million in-process research
and development charge, which is included as a component of special items in the
condensed consolidated statement of operations. The amount allocated to the
in-process research and development charge was determined through an established
valuation technique used in the high technology industry and expensed upon
acquisition, because technological feasibility had not been established and no
alternative uses exist. Research and development costs to bring the products to
technological feasibility are not expected to have a material impact on future
operating results. The remainder of the purchase price was allocated to net
liabilities of $1.0 million and intangible assets of $27.6 million, primarily
representing goodwill.
Note 8. Segment Information
The following tables present information related to our reportable segments (in
millions):
Information
Analog Appliance All Total
Segment Segment Others Eliminations Consolidated
-------------- --------------- --------------- ---------------- -----------------
Three months ended
February 24, 2002:
Sales to unaffiliated
customers $282.6 $ 45.1 $41.8 $ - $369.5
============== =============== =============== ================ =================
Segment loss before
income taxes $ (3.5) $(23.1) $(8.7) $ - $(35.3)
============== =============== =============== ================ =================
Three months ended
February 25, 2001:
Sales to unaffiliated
customers $346.2 $ 49.4 $80.0 $ - $475.6
============== =============== =============== ================ =================
Segment income (loss)
before income
taxes $ 60.4 $(25.6) $14.2 $ - $ 49.0
============== =============== =============== ================ =================
Information
Analog Appliance All Total
Segment Segment Others Eliminations Consolidated
-------------- --------------- --------------- ---------------- -----------------
Nine months ended
February 24, 2002:
Sales to unaffiliated
customers $ 810.5 $141.7 $123.1 $ - $1,075.3
============== =============== =============== ================ =================
Segment loss before
income taxes $ (39.3) $(72.1) $(20.1) $ - $ (131.5)
============== =============== =============== ================ =================
Nine months ended
February 25, 2001:
Sales to unaffiliated
customers $ 1,223.8 $180.5 $307.1 $ - $1,711.4
Inter-segment sales - 0.1 - (0.1) -
-------------- --------------- --------------- ---------------- -----------------
Net sales $ 1,223.8 $180.6 $307.1 $ (0.1) $1,711.4
============== =============== =============== ================ =================
Segment income (loss)
before income taxes
$ 344.4 $(63.7) $ 82.0 $ - $ 362.7
============== =============== =============== ================ =================
Item 2. MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements contained in the outlook section and within certain sections of
management's discussion and analysis are forward-looking based on current
expectations and management's estimates. Actual results may differ materially
from those set forth in these forward-looking statements. The forward-looking
statements discussed or incorporated by reference in this section involve a
number of risks and uncertainties. Other risks and uncertainties include, but
are not limited to, the general economy, regulatory and international
conditions, the changing environment of the semiconductor industry, competitive
products and pricing, growth in the wireless, PC and communications
infrastructure 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 our reports and filings with the SEC.
o Critical Accounting Policies
We believe the following critical accounting policies are those policies that
significantly affect the determination of our financial position and results of
operations. These policies also require us to make our most difficult and
subjective judgements:
1. Revenue Recognition
We recognize revenue from the sale of semiconductor products upon shipment,
provided title and risk of loss has passed to the customer, the fee is fixed or
determinable and collection of the revenue is reasonably assured. Service
revenues are recognized as the services are provided or as milestones are
achieved, depending on the terms of the arrangement. A provision for estimated
future returns is recorded at the time of shipment. Approximately 46 percent of
our semiconductor product sales are sold through distributors. We have
agreements with our distributors for various programs, including, among other
things, scrap allowances and volume incentives. The revenue we record for these
distribution sales is net of estimated provisions for these programs. When
determining this net revenue, we must make significant judgements and estimates.
Our estimates are based upon historical experience rates, inventory levels in
the distribution channel, current economic trends and other related factors. To
date the actual distributor activity has been consistent with the provisions we
made in accordance with our estimates. However, because of the inherent nature
of estimates, there is a risk that there could be significant differences
between actual amounts and our estimates. Our financial condition and operating
results are dependent on our ability to make reliable estimates and we believe
that our estimates are reasonable. However, different judgements or estimates
could result in variances that might be significant to reported operating
results.
Intellectual property income is generally not classified as revenue. Such income
is classified as non-operating income and is recognized when the license is
delivered and no further obligations to the customer exist.
2. Inventories
Inventories are stated at the lower of standard cost, which approximates actual
cost on a first-in, first-out basis, or market. We reduce the carrying value of
inventory for estimated obsolescence or unmarketable inventory by an amount that
is the difference between its cost and the estimated market value based upon
assumptions about future demand and market conditions. Our products are
classified as either custom, which are those products manufactured with
customer-specified features or characteristics, or non-custom, which are those
products that do not have customer-specified features or characteristics. We
evaluate obsolescence by analyzing the inventory aging, backlog and future
customer demand on an individual product basis. If actual demand were to be
substantially lower than what we have estimated, we may be required to
write-down inventory below the current carrying value. While these estimates
require us to make significant judgements and assumptions regarding future
events, we believe our relationships with our customers, combined with our
understanding of the end-markets we serve, provide us the ability to make
reliable estimates. We also evaluate the carrying value of inventory for lower
of cost or market on an individual product basis. Our evaluations are based on
the difference between net realizable value and standard cost. Net realizable
value is determined as the selling price of the product less estimated cost of
disposal. The carrying value of inventory is reduced to the lower of cost or the
net realizable value. If actual market conditions and resulting product sales
were to be less favorable than those projected by management, additional
inventory write-downs may be required.
3. Impairment of Goodwill, Intangible Assets and Other Long-lived Assets
We assess the impairment of long-lived assets whenever events or changes in
circumstances indicate that their carrying value may not be recoverable from the
estimated future cash flows expected to result from their use and eventual
disposition. Our long-lived assets subject to this evaluation include property,
plant and equipment. We assess the impairment of goodwill and other intangible
assets whenever events or changes in circumstances indicate that their fair
value is more likely than not to be below their carrying value. Other intangible
assets subject to this evaluation include patents we have acquired and
technology licenses. We are required to make judgements and assumptions in
identifying those events or changes in circumstances that may trigger
impairment. Some of those factors we consider include:
o Significant decrease in market value of an asset
o Significant changes in the extent or manner for which the asset is being used
or in its physical condition o A significant change, delay or departure in our
business strategy related to the asset o Significant negative change in the
business climate, industry or economic conditions o Current period operating or
cash flow losses combined with a history of similar losses or a forecast that
indicates continuing losses associated with the use of an asset
In view of the recent general economic decline, we are periodically evaluating
whether an impairment of our intangible assets and other long-lived assets has
occurred. Our evaluation includes an analysis of estimated expected future
undiscounted net cash flows to be generated by the assets over their estimated
useful lives. If the estimated future undiscounted net cash flows is
insufficient to recover the carrying value of the assets over the estimated
useful lives, we will record an impairment in the amount by which the carrying
value of the assets exceeds their fair value. We determine fair value based on
discounted cash flows using a discount rate commensurate with the risk inherent
in our current business model. If, as a result of our analysis, we determine
that our intangible assets or other long-lived assets have been impaired, we
will recognize an impairment loss in the period in which the impairment is
determined. Any such impairment charge could be significant and could have a
material adverse effect on our financial position and results of operations, if
and when the impairment is recorded. Major factors that influence our cash flow
analysis are our estimates for future revenue and expenses associated with the
use of the asset. Different estimates could have a significant impact on the
results of our evaluation.
We performed a goodwill impairment review upon initial adoption of the new
accounting rules for goodwill as of the beginning of fiscal 2002. We also plan
to perform an annual review for goodwill impairment in our fourth fiscal
quarter. Our impairment review is based on a discounted cash flow approach that
uses our estimates of future revenues and costs for those business units with
goodwill. We use a discount rate commensurate with the risk inherent in the
current business model for the business unit with goodwill. Units with goodwill
include our wireless business unit and displays business unit, which are
operating segments within our Analog segment. The estimates we have used are
consistent with the plans and estimates that we are using to manage the
underlying businesses. If we fail to deliver new products for these business
units, if the products fail to gain expected market acceptance, or market
conditions for these businesses fail to improve, our revenue and cost forecasts
may not be achieved and we may incur charges for goodwill impairment. Such
impairment charges could be significant and could have a material adverse effect
on our financial position and results of operations.
o Overview
We recorded net sales of $369.5 million and $1,075.3 million for the third
quarter and first nine months of fiscal 2002, respectively. This represented a
22 percent and 37 percent decline, respectively, from sales of $475.6 million
and $1,711.4 million for the comparable periods of fiscal 2001. The decline in
sales came from lower demand seen broadly across semiconductor markets. For the
third quarter and first nine months of fiscal 2002, we had a net loss of $37.8
million and $139.0 million, respectively. This compares to net income of $39.2
million and $290.1 million, respectively, for the third quarter and first nine
months of fiscal 2001. Operating results for fiscal 2002 have been primarily
affected by lower sales as a result of slower demand. While the net loss for the
third quarter of fiscal 2002 included no special items, the net loss for the
first nine months of fiscal 2002 included a special item of $1.1 million for an
in-process R&D charge related to the acquisition in the first quarter of
Wireless Solutions Sweden AB. In comparison, net income for the third quarter of
fiscal 2001 included a special item of $12.1 million for an in-process R&D
charge related to the acquisition of innoComm Wireless. Net income for the first
nine months of fiscal 2001 included special items of $18.5 million. In addition
to the in-process R&D charge from the innoComm Wireless acquisition, these
special items included a $4.1 million in-process R&D charge related to the
acquisition of the Vivid Semiconductor business and a $2.3 million charge for
restructuring of operations.
o Sales
The following discussion is based on our operating segments described in Note 12
to the consolidated financial statements included in our Annual Report on Form
10-K for the year ended May 27, 2001.
Our sales for the third quarter and first nine months of fiscal 2002 declined
significantly year on year, as market conditions for the semiconductor industry
remained weak compared to the prior year. Although we saw a slight increase in
unit volume in the third quarter of fiscal 2002, the sales decline for the year
was primarily due to decreased volume of shipments. To a lesser extent, lower
average selling prices were also a factor for both the quarter and the first
nine months of the year.
The Analog segment, which represents 75 percent of our total sales, experienced
declines in sales of 18 percent for the third quarter and 34 percent for the
first nine months of fiscal 2002 compared to the corresponding periods of fiscal
2001. Average selling prices were down in the third quarter of fiscal 2002 due
to shifts in product mix as well as to declining prices on comparable products.
Although volume was down on comparable products, total unit volume for the third
quarter was somewhat mitigated by higher volume from recently introduced lower
priced products. The decline for the first nine months of fiscal 2002 was mostly
due to a large drop in unit volume together with some decreases in average
selling prices. Within the Analog segment, sales of application-specific
wireless products, including radio frequency building blocks, declined by 36
percent and 43 percent for the third quarter and first nine months of fiscal
2002, respectively, over sales for the corresponding periods of fiscal 2001.
Sales of display products increased by 39 percent for the third quarter of
fiscal 2002 over sales for the same quarter of fiscal 2001, as a large increase
in unit volume more than offset decreases in average selling prices. As a
result, sales of display products for the comparative nine-month period declined
by only four percent from sales in fiscal 2001. In the broad-based analog
markets, sales of power management and amplifier products were down for the
third quarter of fiscal 2002 by 28 percent and 22 percent, respectively, from
the same period last year. For the first nine months, sales of these products in
fiscal 2002 were down by 42 percent and 39 percent, respectively, from sales in
fiscal 2001.
Sales for the third quarter and first nine months of fiscal 2002 for the
Information Appliance segment declined 9 percent and 22 percent, respectively,
from sales for the comparable periods of fiscal 2001. The decline was primarily
driven by lower unit volume, as average-selling prices remained fairly steady.
Since a large part of our portfolio of information appliance products is still
consumed in the PC marketplace, the year-to-year slowdown in demand for personal
computers and PC-related products had a significant effect in the decline in
sales for the Information Appliance segment. In addition, the market adoption of
emerging information appliances that are not PCs has been slower than expected.
o Gross Margin
Gross margin as a percentage of sales decreased to 36 percent and 35 percent for
the third quarter and first nine months of fiscal 2002, respectively, from gross
margin of 49 percent and 51 percent for the same periods of fiscal 2001. The
erosion in gross margin was primarily driven by lower factory utilization. Wafer
fabrication capacity utilization during the first nine months of fiscal 2002 ran
at 49 percent, as production activity was reduced considerably by the weakened
business conditions in the semiconductor industry. This compares with wafer
fabrication capacity utilization during the first nine months of fiscal 2001 of
78 percent, when business conditions in the semiconductor industry were very
strong. We also saw lower margins from some products in fiscal 2002, which
contributed to lower gross margin. This was caused mostly from a shift in
product sales mix and to a lesser extent from pricing pressure.
o Research and Development
Our research and development expenses for the third quarter of fiscal 2002
decreased two percent from R&D expenses for the third quarter of fiscal 2001,
mainly reflecting reduced spending for new product development. For the first
nine months of fiscal 2002, our R&D expenses increased one percent over R&D
expenses for the first nine months of fiscal 2001. The fiscal 2002 amount for
the first nine months excludes $1.1 million for an in-process R&D charge related
to an acquisition. The fiscal 2001 amounts for the third quarter and first nine
months exclude $12.1 million and $16.2 million, respectively, for in-process R&D
charges related to acquisitions. The in-process R&D charges are included as a
component of special items in the condensed consolidated statements of
operations. Higher R&D expenses for the first nine months of fiscal 2002 result
mainly from a license agreement with Taiwan Semiconductor Manufacturing Company.
This agreement, which began in fiscal 2001, allows us to gain access to a
variety of TSMC's advanced sub-micron processes for use in our Maine facility as
desired, if and when those processes are developed by TSMC. These advanced
process technologies are expected to accelerate the development of high
performance digital and mixed-signal products in the markets for wireless
handsets, displays, information appliances and information infrastructure.
Through the first nine months of fiscal 2002, we devoted approximately 74
percent of our R&D effort towards new product development and 26 percent towards
the development of process and support technology. Compared to the first nine
months of fiscal 2001, this represents a 10 percent decrease in spending for new
product development and a 20 percent increase in spending for process and
support technology. While spending for new product development declined
slightly, we continue to focus our R&D investment on our key strategic programs.
We continue to invest in the development of new analog and mixed-signal
technology-based products for applications in the wireless handsets, displays,
information appliances and information infrastructure markets. We also continue
to devote resources towards developing new cores and integrating those cores
with other technological capabilities to create system-on-a-chip solutions.
o Selling, General and Administrative
Our selling, general and administrative expenses for the third quarter and first
nine months of fiscal 2002 declined 15 percent and 23 percent, respectively,
from SG&A expenses for the comparable periods of fiscal 2001. The fiscal 2001
SG&A expenses for the first nine months included a $20.5 million expense
associated with the charitable donation of equity securities that were part of
our investment portfolio. We donated the securities to establish the National
Semiconductor Foundation. The fiscal 2001 SG&A expenses also included goodwill
amortization of $2.7 million and $7.1 million for the third quarter and the
first nine months, respectively. Since adopting new accounting rules beginning
in fiscal 2002, we no longer record goodwill amortization. Excluding these
expenses, SG&A expenses for the third quarter and first nine months of fiscal
2002 declined 12 percent and 14 percent, respectively, from SG&A expenses for
the comparable fiscal 2001 period. Overall, the decline in fiscal 2002 expenses
reflect actions that we implemented in the second half of fiscal 2001 to reduce
spending in response to weakened business conditions. Those actions reduced
payroll and employee benefit expenses, as well as discretionary selling and
marketing program expenses.
o Interest Income and Interest Expense
For the third quarter and first nine months of fiscal 2002, we earned net
interest income of $4.3 million and $16.8 million, respectively, compared to
$13.4 million and $42.7 million for the comparable periods of fiscal 2001. The
decrease in net interest income was primarily due to lower average interest
rates on lower average cash balances during fiscal 2002 compared to fiscal 2001.
Offsetting interest expense was slightly lower for fiscal 2002 as we continued
to reduce our outstanding debt balances.
o Other Income, Net
Other income, net was $2.0 million and $6.5 million for the third quarter and
first nine months of fiscal 2002, respectively, compared to $3.0 million and
$48.9 million for the comparable periods of fiscal 2001. The components of other
income, net for the third quarter of fiscal 2002 included a $1.5 million net
gain from equity investments and $1.0 million of net intellectual property
income, which were offset by $0.5 million of non-operating losses associated
with an investment partnership. For the first nine months of fiscal 2002, other
income, net included a $6.9 million net gain from equity investments and $2.7
million of net intellectual property income. This was offset by $2.5 million of
non-operating losses associated with an investment partnership and $0.6 million
from other miscellaneous losses. Other income, net for the third quarter of
fiscal 2001, included a $2.0 million net gain from equity investments, $0.9
million of net intellectual property income and $0.1 million of non-operating
income associated with an investment partnership. For the first nine months of
fiscal 2001, other income, net included a $40.8 million net gain from equity
investments, $5.4 million of net intellectual property income and $2.7 million
of non-operating income associated with an investment partnership. The net gain
from equity investments for the first nine months of fiscal 2001 included a gain
of $20.5 million from the distribution of equity securities that were part of
our investment portfolio, which we donated to establish the National
Semiconductor Foundation. An expense for the same amount associated with the
donation was included in SG&A expenses for the first nine months of fiscal 2001.
o Income Tax Expense
We recorded income tax expense of $2.5 million and $7.5 million for the third
quarter and first nine months of fiscal 2002, respectively. This compares to
income tax expense of $9.8 million and $72.6 million for the corresponding
periods of fiscal 2001. The fiscal 2002 tax expense represents taxes due on
international income, while we have not recognized a tax benefit on operating
losses in the U.S. The fiscal 2001 tax expense is based on a 20 percent
effective rate on both our U.S. and international operations.
o Liquidity and Capital Resources
During the first nine months of fiscal 2002, cash and cash equivalents decreased
$163.7 million compared to an increase of $63.0 million for the first nine
months of fiscal 2001. We describe the primary factors contributing to these
changes below:
We generated cash from operating activities of $33.8 million for the first nine
months of fiscal 2002, compared to $448.8 million generated from operating
activities in the first nine months of fiscal 2001. The net loss for the first
nine months of fiscal 2002 significantly reduced cash from operating activities,
which was partially offset by a smaller net positive change in working capital
components. The positive effect from a decrease in inventories and an increase
in income taxes payable was mostly offset by a net decrease in accounts payable
and accrued expenses. For fiscal 2001, operating cash was generated primarily
from net income adjusted for non-cash expenses, which was partially offset by a
negative impact from changes in working capital components from decreases in
accounts payable and accrued liabilities, which were partially offset by a
decrease in receivables.
Our investing activities used cash of $270.6 million for the first nine months
of fiscal 2002, compared to $245.9 million used for the first nine months of
fiscal 2001. Major uses of cash in fiscal 2002 included investment in property,
plant and equipment of $89.4 million, net purchases of available-for-sale
securities of $120.6 million and the acquisition of Wireless Solutions Sweden AB
for $27.5 million. Major uses of cash in fiscal 2001 included investment in
property, plant and equipment of $168.4 million and the payments of $98.3
million associated with the acquisitions of innoComm Wireless and the Vivid
Semiconductor business.
Our financing activities generated cash of $73.1 million for the first nine
months of fiscal 2002, while they used cash of $139.9 million for the first nine
months of fiscal 2001. The primary source of cash was from the issuance of
common stock under employee benefit plans in the amount of $87.2 million in
fiscal 2002, which was offset by repayment of $14.1 million of our outstanding
debt balances. The primary use of cash in fiscal 2001 was for our repurchase of
5.3 million shares of our common stock on the open market for $173.5 million.
All of the shares of this treasury stock were retired during the same fiscal
2001 period. This more than offset cash inflow of $48.5 million from the
issuance of common stock under employee benefit plans.
Management foresees substantial cash outlays for plant and equipment throughout
the remainder of fiscal 2002, with primary focus on new capabilities that
support our target growth markets, as well as improvements to provide better
manufacturing efficiency and productivity. However, we will continue to manage
that activity in light of current business conditions. Based on current economic
conditions, the fiscal 2002 capital expenditure level is expected to be lower
than the fiscal 2001 level. We expect existing cash and investment balances,
together with existing lines of credit, to be sufficient to finance planned
capital investments remaining for fiscal 2002 and into fiscal 2003. Our cash and
investment balances are dependent on continued collection of customer
receivables and the ability to sell inventories. Although we have not
experienced major problems with our customer receivables, continued and
significant declines in overall economic conditions will probably impact sales
and may lead to problems with customer receivables. In addition, major declines
in financial markets would probably cause reductions in our cash equivalents and
marketable investments.
The following table provides a summary of the effect on liquidity and cash flows
from our contractual obligations as of February 24, 2002:
(in millions) Fiscal Year: 2007 and
2002 2003 2004 2005 2006 thereafter Total
--------------- ---------- --------- --------- -------- ------------- ----------
Contractual obligations:
Debt obligations $ 6.6 $ 4.6 $ 2.1 $ 18.2 - - $ 31.5
Noncancellable
operating leases 5.0 14.9 12.8 10.7 7.0 10.6 61.0
Fairchild manufacturing
agreement 4.8 20.0 - - - - 24.8
Licensing agreements:
TSMC 7.3 32.0 32.0 32.0 19.0 - 122.3
Other 1.3 13.1 5.9 0.9 - 21.2
--------------- ---------- --------- --------- -------- ------------- ----------
Total $ 25.0 $ 84.6 $ 52.8 $ 61.8 $ 26.0 $ 10.6 $260.8
=============== ========== ========= ========= ======== ============= ==========
Commercial Commitments:
Standby letters of credit
under bank multicurrency
agreement $ 20.4 - - - - - $ 20.4
=============== ========== ========= ========= ======== ============= ==========
o Recently Issued Accounting Standards
At the beginning of the first quarter of fiscal 2002, we adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The adoption of
this statement did not have a material impact on our financial statements as
described in Note 2 to the condensed consolidated financial statements. We also
adopted SFAS No. 142, "Goodwill and Other Intangible Assets" at the beginning of
the first quarter of fiscal 2002. The impact of adoption of this statement is
described in Note 5 to the condensed consolidated financial statements.
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001, and eliminates
the use of the pooling-of-interests method. SFAS No. 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. We are
currently analyzing this statement and have not yet determined its impact on our
consolidated financial statements. This Statement will be effective for our
fiscal year 2003.
In October 2001, the Financial Accounting Standards Board also issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." Though SFAS No. 144 retains the basic
requirements of SFAS No. 121 regarding when and how to measure an impairment
loss, it provides additional implementation guidance. SFAS No. 144 also
supersedes the provisions of APB Opinion No. 30, "Reporting Results of
Operations," pertaining to discontinued operations. Separate reporting of a
discontinued operation is still required, but SFAS No. 144 expands the
presentation to include a component of an entity, rather than strictly a
business segment as defined by SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." We are currently analyzing this statement
and have not yet determined its impact on our consolidated financial statements.
This statement will be effective for our fiscal year 2003.
o Outlook
Although semiconductor market conditions for fiscal 2002 continued to be weak
compared to that in fiscal 2001, we experienced sequential quarterly growth in
new orders in the third quarter. The sequential improvement was driven by new
orders coming from wireless handset makers, PC suppliers and display
manufacturers. Fiscal 2002 sales for the third quarter, which is typically a
down quarter, increased slightly over sales for the second quarter. For the
third consecutive quarter we also saw improvement over the preceding quarter in
fill orders, which are orders received with delivery requested in the same
quarter. We expect the relatively strong trend in fill orders to continue into
our fourth quarter. Our order backlog at the beginning of the fourth quarter was
greater than what we had at the beginning of the third quarter. In light of
these factors, we anticipate that sales for the fourth quarter of fiscal 2002
will increase by 6 to 9 percent over sales for the third quarter, ranging from
$390-$405 million. While our fiscal fourth quarter has historically been
seasonally strong, it is also possible this trend may not occur. The actual
level of sales we achieve in the fourth quarter of fiscal 2002 will depend upon
the amount of fill orders we receive. If the level and pattern of fill orders
that we have so far experienced throughout fiscal 2002 are not sustained, the
expected level of sales for the fourth quarter of fiscal 2002 will not be
achieved. We also expect our gross margin percentage for the fourth quarter of
fiscal 2002 to improve over the recently completed third quarter to the 38-40
percent range, as wafer fabrication capacity utilization is expected to run in
the mid-to-high fifty percent range. We plan to continue to control the level of
production activity in our manufacturing facilities in alignment with order
levels and economic conditions. For the fourth quarter of fiscal 2002, we
currently anticipate operating results to improve over the third quarter of
fiscal 2002.
The September terrorist attacks on the U.S. and subsequent associated events
have created additional uncertainty on the state of the U.S. economy overall.
Although we did not experience any immediate direct adverse effect on our
operations from the terrorist attacks, the longer-term and indirect consequences
from this catastrophic event are not yet known. There can be no assurance that
the economic and political climate will improve in the near future. If the slow
business conditions in the global economy continue or become more severe, our
future sales and operating results will be negatively impacted.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Part II, Item 7A, Quantitative and Qualitative Disclosures
About Market Risk, in our Annual Report on Form 10-K for the year ended May 27,
2001 and to the subheading "Financial Market Risks" under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 21 of our Annual Report on Form 10-K for the year ended May
27, 2001 and in Note 1, "Summary of Significant Accounting Policies," and Note
2, "Financial Instruments," in the Notes to the Consolidated Financial
Statements included in Item 8 of our 2001 Form 10-K. There have been no material
changes from the information reported in these sections.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In November 2000, a derivative action was filed in the U.S. District Court in
Delaware against us, Fairchild Semiconductor International, Inc. and Sterling
Holding Company, LLC, by Mark Levy, a Fairchild stockholder. The action was
brought under Section 16(b) of the Securities Exchange Act of 1934 and the rules
issued under that Act by the Securities and Exchange Commission. The plaintiff
sought disgorgement of alleged short-swing insider trading profits. We had
originally acquired Fairchild common and preferred stock in March 1997 at the
time we disposed of the Fairchild business. Prior to its initial public offering
in August 1999, Fairchild had amended its certificate of incorporation to
provide that all Fairchild preferred stock would convert automatically to common
stock upon completion of the initial public offering. As a result, our shares of
preferred stock converted to common stock in August 1999. Plaintiff had alleged
that the acquisition of common stock through the conversion constituted an
acquisition that should be "matched" against our sale in January 2000 of
Fairchild common stock for purposes of computing short-swing trading profits.
The action sought to recover from us on behalf of Fairchild alleged recoverable
profits of approximately $14 million. In February 2002, the judge in the case
granted the motion for summary judgment filed by us and our co-defendants and
dismissed the case, ruling that the conversion was done pursuant to a
reclassification which is exempt from the scope of Section 16(b). Plaintiff
appealed the dismissal of the case in March 2002.
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 our 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 our
Registration Statement on Form S-8 Registration No. 333-09957, which became
effective August 12, 1996); Certificate of Amendment of Certificate of
Incorporation dated September 22, 2000 (incorporated by reference from the
Exhibits to our Registration Statement on Form S-8 Registration No.
333-48424, which became effective October 23, 2000).
3.2 By Laws of the Company, as amended effective October 30, 2001 (incorporated
by reference from the Exhibits to our Form 10-K for the quarter ended
November 25, 2001 filed January 9, 2002).
4.1 Form of Common Stock Certificate (incorporated by reference from the
Exhibits to our Registration Statement on Form S-3
Registration No. 33-48935, which became effective October 5, 1992).
4.2 Rights Agreement (incorporated by reference from the Exhibits to our
Registration Statement on Form 8-A filed August 10, 1988); First Amendment
to the Rights Agreement dated as of October 31, 1995 (incorporated by
reference from the Exhibits to our Amendment No. 1 to the Registration
Statement on Form 8-A filed December 11, 1995); Second Amendment to the
Rights Agreement dated as of December 17, 1996 (incorporated by reference
from the Exhibits to our Amendment No. 2 to the Registration Statement on
Form 8-A filed January 17, 1997).
4.3 Indenture dated as of May 28, 1996 between Cyrix Corporation ("Cyrix") and
Bank of Montreal Trust Company as Trustee (incorporated by reference from
the Exhibits to Cyrix's Registration Statement on Form S-3 Registration No.
333-10669, which became effective August 22, 1996).
4.4 Registration Rights Agreements dated as of May 28, 1996 between Cyrix and
Goldman, Sachs & Co. (incorporated by reference from the Exhibits to
Cyrix's Registration Statement on Form S-3 Registration No. 333-10669,
which became effective August 22, 1996).
10.1 Management Contract or Compensatory Plan or Arrangement: Deferred
Compensation Plan.
10.2 Management Contract or Compensatory Plan or Arrangement: Settlement
Agreement and General Release with Richard A. Wilson.
(b) Reports on Form 8-K
-------------------
No reports on form 8-K were filed for the quarter ending February
24, 2002.
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: April 9, 2002 \s\Robert E. DeBarr
-------------------
Robert E. DeBarr
Controller
Signing on behalf of the registrant
and as principal accounting officer