The LM35 won't go negative if there is no negative supply rail. If you think you will encounter negative tempratures, you can connect the lm35's ground pin to ground using two diodes and the output pin to ground with ~18kOhm of resitance. This way the output will be offset. To measure the temperature, you need to connect the output pin to an analog input and the ground pin to another analog input, and use the difference between the two. See the LM35 datasheet for the details of this schematic.