UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

 

Form SD

_______________________

 

Specialized Disclosure Report

NATIONAL INSTRUMENTS CORPORATION

(Exact name of the registrant as specified in its charter)

 

 

(Name and telephone number, including area code, of person to contact in connection with this report)

 

Check the appropriate box to indicate the rule pursuant to which this form is being filed, and provide the period to which the information in this form applies:

 

 

Section 1 – Conflict Minerals Disclosure

 

GENERAL

National Instruments Corporation (the "Company," "NI," "we," "us" or "our") started over 40 years ago on an idea of connecting engineers through software. Our founders created technology to connect instruments to computers in order to accelerate the testing and measurement of innovative technology, and this was the seed of a philosophy of accelerating innovation that continues to be a driving force of our culture, our business, and our operations today. Our tailored, software-connected platform provides an advanced approach through integration of software and modular hardware to create automated test and automated measurement systems. We have continually evolved our offering to include highly innovative products and application-specific systems. NI is based in Austin, Texas, was incorporated under the laws of the State of Texas in May 1976 and was reincorporated in Delaware in June 1994. In March 1995, we completed an initial public offering of our common stock. Our common stock, $0.01 par value, is quoted on the NASDAQ Stock Market under the trading symbol NATI.

In 2010 the US Congress enacted the conflict minerals provisions of the Dodd-Frank Financial Reform legislation. The law’s aim is to curb violence and human rights abuses in the Democratic Republic of the Congo (DRC), the Republic of Congo, the Central African Republic, South Sudan, Uganda, Rwanda, Burundi, Tanzania, Zambia and Angola by requiring disclosure of certain information by public companies that use certain minerals which are necessary to the functionality or production of their products, which minerals include gold, columbite-tantalite (coltan), cassiterite and wolfamite, including their derivatives which are limited to tantalum, tin and tungsten (collectively, the “Conflict Minerals”).

COVERED PRODUCTS

Most NI hardware products and systems contain at least one of the Conflict Minerals and fall into the scope of the law’s requirements; thus, this disclosure includes information on a company level basis that includes general information for our hardware products. We offer two primary hardware form factors, PXI and NI C-series, both with a modular input/output ("I/O") approach in addition to industry standard PCI form factors. The NI PXI modular instrument platform, introduced in 1997, is a standard PC architecture in a rugged form factor with expansion slots and instrumentation extensions for timing, triggering and signal sharing. PXI combines mainstream PC software and PCI hardware with advanced instrumentation capabilities. The NI C-series platform, used in our CompactRIO and CompactDAQ products, is a rugged, high-performance I/O and processing platform used in a wide variety of data acquisition applications. The NI PXI and C-series platforms include field programmable gate array ("FPGA") technology, giving customers programmable hardware capability that provides high performance and is user-customizable with NI LabVIEW software. One example of our application-specific systems is our NI Semiconductor Test System ("STS") which combines NI modular instrumentation with NI software for RF and mixed-signal production testing. The STS features fully production-ready test systems that use NI technology in a form factor suitable for a semiconductor production test environment. The STS combines the NI PXI hardware, TestStand test management software, and LabVIEW graphical programming software inside a fully enclosed test head. The compact STS design houses all the key components of a production tester while using a fraction of the floor space, power, and maintenance typically required by traditional automated test equipment.

Reasonable Country of Origin Inquiry Description

For calendar year 2019, NI has conducted a good faith reasonable country of origin inquiry (“RCOI”) to determine whether the conflict minerals necessary to the functionality or production of NI Products originated in the DRC or an adjoining country or came from scrap or recycled sources.

The Company’s RCOI process included reviewing the products manufactured or contracted to be manufactured during the Reporting Period to identify products that should be deemed in-scope as described by the Adopting Release and conducting an inquiry of our direct suppliers of the in-scope products using the Responsible Minerals Initiative’s (“RMI”) Conflict Minerals Reporting Template (“CMRT”). Based on the results of our RCOI which indicated sourcing from the DRC or an adjoining country, we exercised due diligence on the source and chain of custody of the conflict minerals in accordance with the OECD Due Diligence Guidance.

Conflict Minerals Disclosure

This Form SD of NI is filed pursuant to Rule 13p-1 promulgated under the Securities Exchange Act of 1934, as amended, for the reporting period January 1, 2019 to December 31, 2019.

A copy of NI’s Conflict Minerals Report is provided as Exhibit 1.01 to this Form SD, and is publicly available at http://investor.ni.com/. This website and the information contained therein or connected thereto are not intended to be incorporated into this Form SD or the Conflict Minerals Report.

As specified in Section 2, Item 2.01 of this Form SD, NI is hereby filing its Conflict Minerals Report as Exhibit 1.01 to this report.

Section 2 – Exhibits

The following exhibit is filed as part of this report.

 

 

SIGNATURES

 

 

Date:  June 1, 2020

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EXHIBIT INDEX

 

Exhibit 1.01

 

CONFLICT MINERALS REPORT OF

NATIONAL INSTRUMENTS CORPORATION

I.	Introduction

This is the Conflict Minerals¹ Report of National Instruments Corporation (“we,” “our,” “us,” “NI,” or the “Company”) prepared for calendar year 2019 in accordance with Rule 13p-1 (“Rule 13p-1”) under the Securities Exchange Act of 1934 (the “Act”). Numerous terms in this Report are defined in Rule 13p-1 of the Act and SEC Release No. 34-67716 (August 22, 2012) under the Act (the “Adopting Release”). The reader is referred to these sources for the definitions of defined terms contained herein.

In accordance with Rule 13p-1, we undertook efforts to determine the presence and source of the conflict minerals within our products. The Company designed its efforts in conformity with the internationally recognized due diligence framework set forth in the Organisation for Economic Co-operation and Development (“OECD”) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas² (“OECD Due Diligence Guidance”) and related Supplements.

The statements below are based on the activities performed to date in good faith by the Company and are based on the infrastructure and information available at the time of this filing. Factors that could affect the accuracy of these statements include, but are not limited to, incomplete supplier data or available smelter data, errors or omissions by suppliers or smelters, gaps in supplier or smelter education and knowledge, supplier and smelter unfamiliarity with the protocol, evolving identification of smelters, incomplete information from industry or other third-party sources, all instances of Conflict Minerals necessary to the functionality or manufacturing of NI’s products possibly not yet having been identified, timeliness of data, public information not discovered during a reasonable search, errors in public data, language barriers and translation, oversights or errors in conformant smelter audits, Covered Countries sourced materials being declared secondary materials, companies going out of business in 2019, certification programs being not equally advanced for all industry segments and metals, smuggling of Conflict Minerals from the Covered Countries to countries beyond the covered countries, continuing guidance regarding the SEC final rules, and other issues.

II.

Overview

National Instruments Corporation (the "Company," "NI," "we," "us" or "our") started over 40 years ago on an idea of connecting engineers through software. Our founders created technology to connect instruments to computers in order to accelerate the testing and measurement of innovative technology, and this was the seed of a philosophy of accelerating innovation that continues to be a driving force of our culture, our business, and our operations today. Our tailored, software-connected platform provides an advanced approach through integration of software and modular hardware to create automated test and automated measurement systems. We have continually evolved our offering to include highly innovative products and application-specific systems. NI is based in Austin, Texas, was incorporated under the laws of the State of Texas in May 1976 and was reincorporated in Delaware in June 1994. In March 1995, we completed an initial public offering of our common stock. Our common stock, $0.01 par value, is quoted on the NASDAQ Stock Market under the trading symbol NATI.

We are subject to this rule as we have determined that, during 2019, conflict minerals were likely necessary to the functionality or production of products we manufactured or contracted to manufacture. The Company, as a purchaser of component parts, is many steps removed from the mining of conflict minerals. We do not purchase raw ore or unrefined conflict minerals and we conduct no purchasing activities directly in the DRC or adjoining countries.

The Company developed a policy statement to support the goals expressed by Congress in enacting Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The policy highlights the Company’s commitment to complying with the reporting and due diligence obligations required by the SEC rule and our expectations from our suppliers. The policy as well as our supplier code of conduct and terms and conditions include language highlighting our expectation for suppliers to source responsibly. The policy resides on our corporate website (http://ni.com/conflictminerals).

We have conducted a good faith reasonable country of origin inquiry (“RCOI”) to determine whether the necessary conflict minerals originated in the DRC or an adjoining country or came from recycled or scrap sources.

The Company’s RCOI process included reviewing the products manufactured or contracted to be manufactured during the Reporting Period to identify products that should be deemed in-scope as described by the Adopting Release and conducting an inquiry of our direct suppliers of the in-scope products using the Responsible Minerals Initiative’s (“RMI”) Conflict Minerals Reporting Template (“CMRT”). Based on the results of our RCOI which indicated sourcing from the DRC or an adjoining country, we exercised due diligence on the source and chain of custody of the conflict minerals in accordance with the OECD Due Diligence Guidance. Our due diligence efforts are discussed further in this Conflict Minerals Report.

The Company designed its conflict minerals program to conform, in all material respects, with the five-step framework of the OECD Due Diligence Guidance, the Supplement on Tin, Tantalum, and Tungsten, and the Supplement on Gold, specifically as they relate to our position in the minerals supply chain as a “downstream” company:

Step 1: Establish strong company management systems

Step 2: Identify and assess risks in the supply chain

Step 3: Design and implement a strategy to respond to identified risks

Step 4: Carry out independent third-party audit of smelter/refiner's due diligence practices

Step 5: Report annually on supply chain due diligence

III.	Due Diligence Measures Performed by The Company

The following describes the measures taken to reasonably determine the country of origin and to exercise due diligence in the mineral supply chain in conformance with the OECD Due Diligence Guidance.

Step 1: Establish strong company management systems

a.

Conflict minerals team – The Company established a conflict minerals team that includes individuals from the relevant business units and departments, including trade compliance, procurement, sales, and legal. The team was structured to include the involvement from those in upper management roles, including the VP of Manufacturing, Director of Trade Compliance, and Global Supply Chain Operations Manager, to ensure that critical information, including the Company’s conflict minerals policy, reached relevant employees and suppliers.

b.

Conflict minerals policy – The Company adopted and published a policy establishing the expectations of our suppliers. The policy resides on our corporate website (http://ni.com/conflictminerals). The Company’s expectation for the responsible sourcing of minerals is also incorporated into the Company’s terms and conditions with suppliers.

c.

Supplier engagement – The Company communicated its conflict minerals policy and provided educational materials to our in-scope suppliers. Suppliers were informed when the request for information was initiated on the conflict minerals disclosure requirements as well as recommendations for developing, implementing, and documenting a conflict minerals compliance program. NI also communicated its conflict minerals position statement to its suppliers through the NI Supplier Handbook, available online at ni.com/en-us/about-ni/suppliers.html, which is designed to inform potential and existing suppliers about the Company. Finally, NI requires that its suppliers abide by the NI Supplier Code of Conduct and the labor, health and safety, environmental, and ethics standards of the most current version of the Responsible Business Alliance (RBA) Code of Conduct.

d.

Company level grievance mechanism – As recommended by the OECD Due Diligence Guidance, the Company has a grievance mechanism in place as a risk-awareness system for conflict minerals issues. NI maintains an ethics hotline pursuant to which stakeholders, internal and external, may confidentially report concerns involving conflict minerals, either electronically or by phone.

e.	Records management – The Company will maintain records relating to our conflict minerals program in accordance with the recommended record retention guidelines of five years.

Step 2: Identify and assess risks in the supply chain

We performed the following steps as part of our risk assessment process:

a.

Identified products in scope – Our conflict minerals team conducted a detailed review of the products manufactured or contracted to be manufactured during the Reporting Period to identify products that should be deemed in-scope as described by the Adopting Release. As most NI hardware products contain at least one of the Conflict Minerals this disclosure includes information on a company level basis that includes general information for all NI products.

b.

Conducted RCOI – The Company utilized the most recent version of the industry-developed CMRT to query our suppliers for conflict minerals information. We requested this information from the Tier 1 suppliers who provide materials and components for NI products. We evaluated the responses from the templates submitted by our suppliers to determine our reporting obligation based on this RCOI. See Appendix I for a list of countries of origin identified through the RCOI process.

c.	Completed additional follow-up – The Company contacted direct suppliers multiple times as needed to help ensure compliance with our request for detailed conflict minerals information. We also worked to clarify and validate the accuracy of information provided by our suppliers.

d.

Identified smelters or refiners (“SORs”) – The Company compiled a list of SORs in our supply chain using our suppliers’ responses in their CMRTs. The Company reconciled this list to the list of smelter facilities designated by the RMI’s Responsible Minerals Assurance Process (“RMAP”). The RMAP completes independent, third-party audits of smelters and refiners to determine which can be validated as having systems in place that ensure the minerals are responsible sourced according to the OECD Due Diligence Guidance. The Company maintains a database of smelter aliases to reconcile suppliers’ smelters lists to the list of RMI SORs. We have provided that list in this report within section IV – Product Description; Processing Facilities.

Step 3: Design and implement a strategy to respond to identified risks

We performed the following steps as part of our risk management plan:

a.	Reporting results to senior management – The Conflict Minerals team reports the results of our RCOI to upper management which included the team’s plan to respond to risks identified in the due diligence processes.

b.

Designed and implemented a plan – The Company used established risk rating criteria to evaluate suppliers based on the responses provided within their CMRT, as well as, any additional documentation furnished to support those responses and the suppliers’ due diligence processes. The resulting risk ratings were used to develop specific supplier outreach to address the identified risks and to take corrective actions with suppliers found not in compliance with the Company’s conflict minerals policy.

c.	Identified SORs – As part of the risk mitigation process, the Company reconciled the list of SORs collected from suppliers to the list of smelter facilities validated by the RMI.  The Company maintains a database of smelter aliases to reconcile suppliers’ smelters lists to the list of RMI SORs.

Step 4: Carry out independent third-party audit of smelter/refiner's due diligence practices

The Company is using information provided by independent third party audit programs, including the RMI, London Bullion Market Association (LBMA), and Responsible Jewelry Council (RJC), to confirm the existence and verify the OECD-conformance status of SORs identified during our due diligence.

For SORs that had not been audited as conformant, the Company sent a communication to encourage participation in the RMAP and requested the SOR to provide the mines and/or locations the SOR sources from to assist in identifying all countries of origin. Additionally, the Company sent communications to all suppliers that reported SORs that had not been audited as conformant to request that these suppliers message the SORs to encourage participation in the RMAP.

The Company is also a member of the RMI {Member Code: NAIN}. As a member, the Company financially supports the development of the RMAP and has relied on the RMI to determine the country of origin of conflict minerals in the Company’s products in addition to the Company’s efforts of reaching out to smelters. The efforts to determine location of origin through the RMI are described in the RMI’s Reasonable Country of Origin Inquiry Data methodology.

Step 5: Report annually on supply chain due diligence

Accordingly, this Conflict Minerals Report has been filed with the SEC and is available on our website at http://investor.ni.com/.

¹ The term “conflict mineral” is defined in Section 1502(e)(4) of the Dodd-Frank Wall Street Reform and Consumer Protection Act as (A) columbite-tantalite, also known as coltan (the metal ore from which tantalum is extracted); cassiterite (the metal ore from which tin is extracted); gold; wolframite (the metal ore from which tungsten is extracted); or their derivatives; or (B) any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo (“DRC”) or an adjoining country.

² OECD (2016), OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas: Third Edition, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264252479-en.

IV.	Product Description; Processing Facilities

Product Description –, Most NI hardware products and systems contain at least one of the Conflict Minerals and fall into the scope of the law’s requirements; thus, the following description includes information on a company level basis that includes general information for  our hardware products. We offer two primary hardware form factors, PXI and NI C-series, both with a modular input/output ("I/O") approach in addition to industry standard PCI form factors. The NI PXI modular instrument platform, introduced in 1997, is a standard PC architecture in a rugged form factor with expansion slots and instrumentation extensions for timing, triggering and signal sharing. PXI combines mainstream PC software and PCI hardware with advanced instrumentation capabilities. The NI C-series platform, used in our CompactRIO and CompactDAQ products, is a rugged, high-performance I/O and processing platform used in a wide variety of data acquisition applications. The NI PXI and C-series platforms include field programmable gate array ("FPGA") technology, giving customers programmable hardware capability that provides high performance and is user-customizable with NI LabVIEW software. One example of our application-specific systems is our NI Semiconductor Test System ("STS") which combines NI modular instrumentation with NI software for RF and mixed-signal production testing. The STS features fully production-ready test systems that use NI technology in a form factor suitable for a semiconductor production test environment. The STS combines the NI PXI hardware, TestStand test management software, and LabVIEW graphical programming software inside a fully enclosed test head. The compact STS design houses all the key components of a production tester while using a fraction of the floor space, power, and maintenance typically required by traditional automated test equipment.

Processing Facilities – Based on our due diligence process and the information received from our suppliers, the following facilities were identified by the Company’s suppliers as the smelters and refiners of the tin, tantalum, tungsten and/or gold present in and necessary to the functionality of products manufactured by the Company in the calendar year ended December 31, 2019. The information from our suppliers is still evolving and may contain company-level declarations. As such, this smelter list is presented in good faith as the best information we have to date. For 2019 we identified 92 SORs in our supply chain, 91 have been audited as conformant with the RMAP. This list may contain smelters that are not in our supply chain and/or there may be other smelters not yet identified in our due diligence process. We will continue to update the list as our information and the relevant third-party data from RMI, LBMA, and RJC improves.

V.	Future Due Diligence

We will continue to communicate our expectations and information requirements to our direct suppliers. Over time, we anticipate that the amount of information available globally on the traceability and sourcing of these ores will increase and improve our knowledge. We will continue to make inquiries to our direct suppliers and undertake additional risk assessments when potentially relevant changes in facts or circumstances are identified. If we become aware of a supplier whose due diligence needs improvement, we may continue the trade relationship while that supplier improves its compliance program. We expect our suppliers to take similar measures with their suppliers to ensure alignment throughout the supply chain.

In addition to those above, the Company will undertake the following steps during the next compliance period:

•	Review the conflict minerals policy statement and update if necessary.
•	Continue to collect responses from suppliers using the most recent revision of the CMRT.
•	Engage with suppliers that did not provide a response in 2019 or provided incomplete responses to enhance our data collection for 2020.
•	Monitor and track performance of risk mitigation efforts.
•	Continue engagement with smelters by sending letters to those that have not been audited as conformant.
•	Continue to send messages to our suppliers to engage with these smelters.
•	Collect from suppliers product-level or user-defined level responses where useful.
•	Compare and validate RCOI results to information collected via independent third-party audit programs, such as the RMI, and through our Company’s own coordinated outreach to smelters.
•	Encourage responsible sourcing from the DRC and adjoining countries.

Websites referenced in this Conflict Minerals Report, and the information contained in them or connected to them, are not intended to be incorporated into this Conflict Minerals Report or our Form SD.

This Conflict Minerals Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Any statements contained herein regarding our future financial performance,  operations, or other activities (including, without limitation, statements to the effect that we “will,” “expect,” “anticipate,” “continue,” or other variations thereof or comparable terminology or the negative thereof) should be considered forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors including risk factors set forth in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 20, 2020, our form 10-Q filed with the SEC on May 4, 2020, and other documents filed with the SEC.  We disclaim any obligation to update information contained in any forward-looking statement.

APPENDIX I – Countries of Origin

The potential country of origin information provided in this Appendix is based on the information collected from the Company’s suppliers. It is important to note that this is based, in part, on company level responses and therefore, it is not certain that these countries of origin can be linked to our products.

* The DRC or adjoining countries