SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Check One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended April 2, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File No. 0-12695
INTEGRATED DEVICE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2669985
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2975 Stender Way,
Santa Clara, California 95054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 727-6116
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $1,588,635,000 as of May 18,
1995, based upon the closing sale price on the Nasdaq National Market for that
date. Shares of Common Stock held by each executive officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
There were 38,165,412 shares of the Registrant's Common Stock issued and
outstanding as of May 18, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12, and 13 of Part III incorporate information by reference from
the 1995 Proxy Statement for the Annual Meeting of Stockholders to be held on
August 24, 1995.
ITEM 1. BUSINESS
Integrated Device Technology, Inc. was incorporated in California in 1980 and
reincorporated in Delaware in 1987. The terms the "Company" and "IDT" refer to
Integrated Device Technology, Inc. and its consolidated subsidiaries, unless the
context indicates otherwise.
IDT designs, develops, manufactures and markets a broad range of
high-performance semiconductor products for the desktop computer,
communications, office automation and workstation/server markets using advanced
CMOS (Complimentary Metal Oxide Silicon) and BiCMOS (A Combination of Bipolar
and CMOS) process technologies. The Company focuses its development efforts on
providing proprietary and enhanced industry-standard products that improve the
performance of systems incorporating high-performance microprocessors. The
Company offers over 5,000 product configurations in four product families: SRAM
components and modules, specialty memory products, logic circuits and RISC
(Reduced Instruction Set Computers) microprocessors and subsystems. The Company
has made significant investments and commitments in becoming a supplier of RISC
based microprocessors and now offers a family of 20 microprocessor and related
peripheral products for the desktop computing and embedded systems markets.
The Company markets its products on a worldwide basis primarily to OEMs
through a variety of channels, including a direct sales force, distributors and
independent sales representatives. The Company's end-user customers include
Alcatel, AT&T, Apple Computer, Bay Networks, Canon, Cisco Systems, Compaq
Computer, Dell Computer, Digital Equipment, FORE Systems, Hewlett Packard, IBM,
Intel, Motorola, NEC, Nokia, Olivetti, Siemens Nixdorf, Silicon Graphics, Sun
Microsystems and Tektronix.
The Company attempts to differentiate itself from competitors through unique
architecture, enhanced system cost/performance, and packaging options.
PRODUCTS AND MARKETS
IDT offers over 5,000 product configurations in four product families: SRAM
components and modules, specialty memory products, logic circuits, and RISC
microprocessors and subsystems. During fiscal 1995, these product families
accounted for 40%, 28%, 21% and 11%, respectively, of product revenues. The
Company markets its products primarily to OEMs in the desktop computer,
communications, office automation and workstation/server markets. IDT's product
design efforts are focused on developing proprietary components and integrating
its components into single devices, modules or subsystems to meet the needs of
customers.
SRAMs. SRAMs are memory circuits used for storage and retrieval of data
during a computer system's operation. SRAMs do not require electrical
refreshment of the memory contents to ensure data integrity, allowing them to
operate at high speeds. SRAMs include substantially more circuitry than DRAMs,
resulting in higher production costs for a given amount of memory, and generally
command higher selling prices than the equivalent density DRAM. The market for
SRAMs is fragmented by differing demands for speed, power, density, organization
and packaging. As a result, there are a number of niche markets for SRAMs.
The Company is focused primarily on the cache memory segment of the SRAM
market. The Company's SRAM product strategy is to offer high-performance 5 volt
and 3.3 volt SRAM components and modules that have differentiated features
optimized to work with specified microprocessors, such as the Intel 486 and
Pentium families of microprocessors, the PowerPC microprocessor and MIPS RISC
microprocessors. Cache memory provides an intermediate storage solution between
fast microprocessors and relatively slow DRAM main memory. Cache memory operates
at the speed of the microprocessor and increases the microprocessor's efficiency
by temporarily storing the most frequently used instructions and data. Special
cache tag SRAMs provide a look-up table function that tells the cache controller
which blocks of data are currently stored in the cache SRAMs.
IDT is a leading supplier of cache SRAM components and modules to personal
computer manufacturers. The Company offers a range of cache SRAMs, including
burst-mode cache SRAMs that support the Intel and PowerPC microprocessors, and
cache tag SRAMs. The Company's cache SRAM components are often integrated into
cache memory modules. These modules include the cache controller, cache tag SRAM
and cache SRAM components and are ready to plug into sockets on a computer
system's motherboard. IDT offers a series of standard and custom cache memory
modules for IBM and IBM- compatible PCs and PowerPC-based personal computers as
well as for certain RISC microprocessor-based systems.
The Company continues to develop its next generation SRAM products to meet
the growing cache memory needs of increasingly faster microprocessors. IDT's new
products are being designed to operate at higher speeds and provide greater
levels of integration.
In order to provide SRAM products that meet the varying needs of its
customers, IDT uses primarily CMOS and, to a lesser extent, BiCMOS process
technologies and offers 16K, 64K, 256K and 1 Meg density SRAMs in a number of
speed, organization, power and packaging configurations.
Specialty Memory Products. The Company's proprietary specialty memory
products include FIFOs and multi-port memory products that offer
high-performance features which allow communications and computer systems to
operate more effectively. FIFOs are used as rate buffers to transfer large
amounts of data at high speeds between separate devices or pieces of equipment
operating at different speeds within a system. Multi-port memory products are
used to speed data transfers and act as the link between multiple
microprocessors or between microprocessors and peripherals when the order of the
data to be transferred needs to be controlled. These products are currently used
primarily in peripheral interface, communications and networking products,
including bridges, hubs, routers and switches.
IDT is a leading supplier of both synchronous and asynchronous FIFOs and has
increasingly focused its resources on the design of synchronous FIFOs.
Synchronous FIFOs have been gaining greater market acceptance because they are
faster and provide an easier user interface. IDT's family of 9-bit SyncFIFOs are
being used in many of the newer networking products.
The Company is a leading supplier of multi-port memory products. IDT's family
of multi-port memory products is composed primarily of dual-port asynchronous
devices. The Company also offers four-port products, a synchronous dual-port
device and a new device, known as a SARAM, that combines the flexibility of a
multi-port product with the ease of a FIFO. In addition, the Company is
developing a family of specialty memory products for the emerging asynchronous
transfer mode ("ATM") market. The first member of this ATM family, a SAR
(segmentation and reassembly), is a highly integrated, low cost interface device
for ATM network cards. Other members of the ATM family will include low-cost
physical media interface devices, as well as more highly-integrated SAR devices
for ATM networks.
Logic Circuits. IDT is a leading manufacturer of high-speed byte-wide and
double-density 16-bit CMOS logic circuits for high-performance applications.
Logic circuits control data communication between various elements of electronic
systems, such as between a microprocessor and a memory circuit. IDT offers a
wide range of logic circuit products, which support bus and backplane
interfaces, memory interfaces and other logic support applications where
high-speed, low power and high-output drive are critical. IDT's logic circuits
are used in a broad range of markets.
IDT's 16-bit family of logic products is available in small packages,
enabling board area to be reduced, and has gained increasing market acceptance.
These products are designed for new applications in which small size, low power
and extra low noise are as important as high speeds. IDT also supplies a series
of 8-bit and 16-bit 3.3 volt logic products and a 3.3 volt to 5 volt translator
circuit directed at the growing requirements for 3.3 volt systems in the
notebook and laptop computer and other markets. The Company also offers a family
of clock drivers and clock generators. These devices, placed at critical
positions in a system, correct the degradation of timing that occurs the further
the impulses travel from the main system clock.
RISC Microprocessor Components and Subsystems. IDT is a licensed manufacturer
of MIPS RISC microprocessors. IDT now manufactures MIPS architecture 32-bit and
64-bit standard microprocessors and IDT derivative products for the
communications, office automation, workstation/server and desktop computer
markets.
The Company focuses its RISC microprocessor design and marketing efforts
primarily on the embedded controller market. Embedded controllers are
microprocessors that control a single device such as a printer, copier or
network router. The Company sells several proprietary 32-bit derivative products
for the embedded controller market, including devices with on-circuit SRAM cache
memory and floating point functions.
In 1993, the Company introduced its ORION R4600 microprocessor, which is
capable of clock speeds of up to 150 MHz. The R4600 is a higher performance,
lower cost derivative of the 64-bit R4000 and R4400 microprocessors developed by
MIPS Computer Systems, which was acquired by Silicon Graphics in 1992 ("MIPS"),
and introduced by the Company and other MIPS licensees in 1992 and 1993,
respectively. The R4600 was developed for the Company and to the Company's
specifications by Quantum Effect Design, Inc. ("QED"), a consolidated
subsidiary. Systems based on the ORION family of microprocessors are targeted at
both embedded and desktop applications.
The Company also manufactures RISC subsystems, which are board level products
that contain MIPS RISC architecture microprocessors, cache SRAMs, logic circuits
and supporting software. These products are used in development systems for the
evaluation and design of hardware and software or are integrated into customers'
end-user systems, thereby reducing design cycle time.
* R4600 and Orion are trademarks of Integrated Device Technology, Inc.
CUSTOMERS
The Company markets and sells its products primarily to OEMs in the desktop
computer, communications, office automation and workstation/server markets.
Customers often purchase products from more than one of the Company's product
families.
The following is an alphabetical listing of current representative end-user
customers of the Company, by market:
DESKTOP COMPUTER COMMUNICATIONS OFFICE AUTOMATION WORKSTATION/SERVER
---------------- -------------- ----------------- ------------------
Apple Computer Alcatel Canon Digital Equipment
AST Research AT&T Electronics For Imaging EMC
Compaq Computer Bay Networks QMS NEC
Dell Computer Cabletron Samsung Pyramid Technology
Gateway Computers Cisco Systems Tektronix Siemens Nixdorf
Groupe Bull Ericsson Texas Instruments Silicon Graphics
Hewlett-Packard FORE Systems Toshiba Sun Microsystems
IBM Fujitsu Xerox
ICL Motorola
Intel Nokia
Olivetti Siemens
MARKETING AND SALES
IDT markets and sells its products primarily to OEMs through a variety of
channels, including a direct sales force, distributors and independent sales
representatives.
The Company had 50 direct sales personnel in the United States at April 2,
1995. Such personnel are located at the Company's headquarters and in 17 sales
offices in Alabama, California, Colorado, Florida, Illinois, Maryland,
Massachusetts, Minnesota, New Jersey, New York, Oregon and Texas, and are
primarily responsible for marketing and sales in those areas. IDT also utilizes
three national distributors, Hamilton Hallmark, Future Electronics and Wyle
Laboratories, and several regional distributors in the United States. Hamilton
Hallmark accounted for 15% and 13% of the Company's revenues in fiscal 1994 and
1995, respectively. In addition, IDT uses independent sales representatives,
which generally take orders on an agency basis while the Company ships directly
to the customer. The representatives receive commissions on all products shipped
to customers in their geographic area.
The Company had 31 direct sales personnel and eight sales offices located
outside of the United States at April 2, 1995. Sales activities outside North
America are generally controlled by IDT's subsidiaries located in France,
Germany, Hong Kong, Italy, Japan, Sweden and the United Kingdom. The Company
also has a sales office in Taiwan. The Company has recently increased its direct
marketing efforts to OEMs in Europe and to United States companies with
operations in the Asia/Pacific area. A significant portion of export sales,
however, continues to be made through international distributors, which tend not
to carry inventory or carry significantly smaller levels compared to domestic
distributors. During fiscal 1993, 1994 and 1995, export sales accounted for 36%,
32% and 39% of total revenues. Sales outside the United States are generally
denominated in local currencies. Export sales are subject to certain risks,
including currency controls and fluctuations, changes in local economic
conditions, import and export controls, and changes in tax laws, tariffs and
freight rates.
The Company's distributors typically maintain an inventory of a wide variety
of products, including products offered by IDT's competitors, and often handle
small or rush orders. Pursuant to distribution agreements, the Company grants
distributors the right to return slow-moving products for credit against other
products and offers protection to the distributors against inventory
obsolescence or price reductions. Revenue recognition of sales to distributors
is deferred until the products are resold by the distributor.
MANUFACTURING
IDT believes that maintaining its own wafer fabrication capability
facilitates the implementation of advanced process technologies and new
higher-performance product designs, provides it with a reliable source of supply
of semiconductors and allows it to be more flexible in shifting production
according to product demand. The Company currently operates sub-micron wafer
fabrication facilities in San Jose and Salinas, California. The Salinas
facility, first placed in production in fiscal 1986, includes a 24,000 square
foot, class 3 (less than three particles 0.5 micron or greater in size per cubic
foot) fabrication line. The San Jose facility includes a 24,000 square foot,
class 1 (less than one particle 0.5 micron or greater in size per cubic foot),
six-inch wafer fabrication line that was first placed in production in March
1991. IDT also operates 145,000 square foot component assembly and test
facilities in Penang, Malaysia. Substantially all of the Company's test
operations and a significant portion of its assembly operations are performed at
its Malaysian facility. IDT also uses subcontractors, principally in Korea, the
Philippines and Malaysia, to perform certain assembly operations. If IDT were
unable to assemble or test products offshore, or if air transportation to these
locations were curtailed, the Company's operations could be materially adversely
affected. Additionally, foreign manufacturing exposes IDT to certain risks
generally associated with doing business abroad, including foreign governmental
regulations, currency controls and fluctuation, changes in local economic
conditions and changes in tax rates, tariffs and freight rates. In addition to
this offshore assembly and test capability, the Company has the capacity for
low-volume, quick-turn assembly in Santa Clara as well as limited test
capability in Santa Clara, San Jose and Salinas. Assembly and test of memory
modules and RISC subsystems takes place both domestically and offshore.
The Company has been operating its wafer fabrication facilities in Salinas
and San Jose and its assembly operations in Malaysia near installed equipment
capacity since fiscal 1994. To address its capacity requirements, in fiscal 1995
the Company initiated and substantially completed the conversion of its Salinas
wafer fabrication facility from five-inch to six-inch wafers, and recently
commenced its last manufacturing start of five-inch wafers in this facility. In
fiscal 1995 the Company also added incremental production equipment to its San
Jose facility and completed a 40,000 square foot expansion of assembly and test
facilities in Penang, Malaysia. In addition, in August 1994, construction
commenced on a 192,000 square foot facility containing a 48,000 square foot,
class 1, eight-inch wafer fabrication line in Hillsboro, Oregon. The Company
currently estimates that the cost to construct and equip the Oregon facility
will be approximately $400 to $500 million. The Company believes the
construction of a facility in Oregon reduces the Company's risk of a natural
disaster affecting all of its wafer fabrication facilities which are currently
located in Northern California. It is expected that the Oregon facility will
commence production during fiscal 1996; however, the Oregon facility is not
expected to contribute to revenues until fiscal 1997. In late fiscal 1995 the
Company acquired an interest in approximately 10 acres of land in the
Philippines and intends to construct a 240,000 square foot assembly and test
facility. Construction of the building is expected to begin in the second half
of fiscal 1996 and is projected to be completed in fiscal 1997. The Company
projects the cost to acquire the land, construct the building and equip the
facility in multiple phases will total approximately $75 million in capital
expenditures, of which less than $10 million will be spent in fiscal 1996 and
approximately $40 million in fiscal 1997. The Company faces a number of risks in
order to accomplish its goals to increase production in its existing plants and
to construct, equip and commence operations of the Oregon and Philippines
facilities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company utilizes proprietary CMOS and BiCMOS process technologies
permitting sub-micron geometries. BiCMOS is a combination of bipolar and CMOS
technologies and is used for applications requiring higher speeds. The majority
of IDT's current products are manufactured using its proprietary 0.65 micron
processes, an increasing number are being manufactured using the Company's new
0.5 micron processes and the Company is currently developing several sub-0.5
micron CMOS processes.
Wafer fabrication involves a highly sophisticated, complex process that is
extremely sensitive to contamination. Integrated circuit manufacturing costs are
primarily determined by circuit size because the yield of good circuits per
wafer generally increases as a function of smaller die. Other factors affecting
costs include wafer size, number of process steps, costs and sophistication of
manufacturing equipment, packaging type, process complexity and cleanliness.
IDT's manufacturing process is complex, involving a number of steps including
wafer fabrication, plastic or ceramic packaging, burn-in and final test. The
Company continually makes changes to its manufacturing process to lower costs
and improve yields. From time to time the Company has experienced manufacturing
problems that have caused delays in shipments or increased costs. There can be
no assurance that IDT will not experience manufacturing problems in the future.
The Company generally has been able to arrange for multiple sources of raw
materials, but the number of vendors capable of delivering certain raw
materials, such as silicon wafers, ultra-pure metals and certain chemicals and
gases is very limited. Some of the Company's packages, while not unique, have
very long lead times and are available from only a few suppliers. From time to
time vendors have extended lead times or limited supply to the Company due to
capacity constraints. These circumstances could reoccur and could adversely
affect IDT.
BACKLOG
IDT manufactures and markets primarily standard products. Sales are generally
made pursuant to standard purchase orders, which are frequently revised during
the agreement term to reflect changes in the customer's requirements. The
Company has also entered into master purchase agreements with several of its OEM
customers. These agreements do not require the OEMs to purchase minimum
quantities of the Company's products. Product deliveries are scheduled upon the
Company's receipt of purchase orders under the related OEM agreements.
Generally, these purchase orders and OEM agreements also allow customers to
reschedule delivery dates and cancel purchase orders without significant
penalties. Orders are frequently rescheduled, revised or cancelled. In addition,
distributor orders are subject to price adjustments both prior to, and
occasionally after, shipment. For these reasons, IDT believes that its backlog,
while useful for scheduling production, is not necessarily a reliable indicator
of future revenues.
RESEARCH AND DEVELOPMENT
IDT's competitive position has been established, to a large extent, through
its emphasis on the development of proprietary and enhanced performance
industry-standard products, and the development of advanced CMOS and BiCMOS
processes. IDT believes that its focus on continually advancing its process
technologies has allowed the Company to achieve cost reductions in the
manufacture of most of its products. The Company believes that a continued high
level of research and development expenditures is necessary to retain its
competitive position. The Company maintains research and development centers in
Northern California and Atlanta, Georgia and recently opened a facility in
Austin, Texas that will be focused on microprocessor related research and
development. In addition the new plant start-up costs associated with the Oregon
wafer fabrication facility will significantly increase research and development
expenditures in fiscal 1996. Research and development expenditures as a
percentage of revenues were 19%, 19% and 23% in fiscal 1995, 1994 and 1993,
respectively.
The Company's product development activities are focused on the design of new
circuits and modules that provide enhanced performance for growing applications.
In the SRAM family, IDT is utilizing its 5 volt and 3.3 volt SRAM and subsystem
design expertise to develop advanced SRAM cache memories and modules for
microcomputer systems based on Intel's 486 and Pentium families of
microprocessors and the PowerPC microprocessors, as well as MIPS RISC
microprocessors. IDT's efforts in the specialty memory products area are
concentrated on the development for the communications market of advanced
synchronous FIFOs and more sophisticated multi-port memory products. The Company
is also developing a family of specialty memory products for the emerging ATM
market, and a family of lower voltage logic devices for a broad range of
applications. In the RISC component and subsystems product family, the Company
is emphasizing the design of products for embedded control applications, such as
printers and telecommunications switches. The Company also continues to refine
its CMOS and BiCMOS process technologies to increase the speed and density of
circuits in order to provide customers with advanced products at competitive
prices, thus enhancing their competitive positions. The Company is currently
refining its CMOS process technology to achieve several sub-0.5 micron geometry
processes and converting the production of many products, particularly 3.3 volt
devices, to newer generation processes.
In fiscal 1992, the Company purchased an equity interest in QED, a newly
formed corporation. Pursuant to a development agreement between QED and the
Company, QED developed the ORION R4600 microprocessor for IDT. The Company
recently announced two new ORION derivative products being designed for IDT by
QED, the R4700 microprocessor targeted to desktop systems running WindowsNT or
UNIX operating systems, and the R4650 microprocessor targeted to embedded
applications. The Company owns such products, subject to the payment of
royalties and other fees to QED. IDT has licensed Toshiba and NKK to manufacture
and market certain of these products. There can be no assurance that QED will
continue to design products for the Company or be successful in developing such
products.
COMPETITION
The semiconductor industry is intensely competitive and is characterized by
rapid technological advances, cyclical market patterns, price erosion, evolving
industry standards, occasional shortages of materials, intellectual property
disputes and high capital equipment costs. Many of the Company's competitors
have substantially greater technical, marketing, manufacturing and financial
resources than IDT. In addition, several foreign competitors receive assistance
from their governments in the form of research and development loans and grants
and reduced capital costs, which could give them a competitive advantage. The
Company competes in different product areas, to varying degrees, on the basis of
technical innovation and performance of its products, as well as quality, price
and product availability.
IDT's competitive strategy is to differentiate its products through
high-performance, innovative configurations and proprietary features or to offer
industry-standard products with higher speeds and/or lower power consumption.
There can be no assurance that price competition, introductions of new products
by IDT's competitors, delays in product introductions by IDT or other
competitive factors will not have a material adverse effect on the Company in
the future.
INTELLECTUAL PROPERTY AND LICENSING
IDT has obtained 49 patents in the United States and 18 abroad and has
numerous inventions in various stages of the patent application process. The
Company intends to continue to increase the scope of its patents. The Company
also relies on trade secret, copyright and trademark laws to protect its
products, and a number of the Company's circuit designs are registered pursuant
to the Semiconductor Chip Protection Act of 1984. This Act gives protection
similar to copyright protection for the patterns which appear on integrated
circuits and prohibits competitors from making photographic copies of such
circuits. There can be no assurance that any patents issued to the Company will
not be challenged, invalidated or circumvented, that the rights granted
thereunder will provide competitive advantages to the Company, or that the
Company's efforts generally to protect its intellectual property rights will be
successful.
In recent years, there has been a growing trend of companies to resort to
litigation to protect their semiconductor technology from unauthorized use by
others. The Company in the past has been involved in patent litigation which
adversely affected its operating results. Although the Company has obtained
patent licenses from certain semiconductor manufacturers, the Company does not
have licenses from a number of semiconductor manufacturers who have a broad
portfolio of patents. IDT has been notified that it may be infringing patents
issued to certain semiconductor manufacturers and other parties, and is
currently involved in several license negotiations. There can be no assurance
that additional claims alleging infringement of intellectual property rights,
including infringement of patents that have been or may be issued in the future,
will not be made against the Company in the future or that licenses, to the
extent required, will be available. Should licenses from any such claimant be
unavailable, or not be available on terms acceptable to the Company, the Company
may be required to discontinue its use of certain processes or the manufacture,
use and sale of certain of its products, to incur significant litigation costs
and damages, or to develop noninfringing technology. If IDT is unable to obtain
any necessary licenses, pass any increased cost of patent licenses on to its
customers or develop noninfringing technology, the Company could be materially
adversely affected. In addition, IDT has received patent licenses from several
companies that expire over time, and the failure to renew or renegotiate certain
of these licenses as they expire or significant increases in amounts payable
under these licenses could have an adverse effect on the Company.
On May 1, 1992, IDT and AT&T entered into a five-year royalty-free patent
cross-license agreement. As part of this agreement, patent litigation instituted
by AT&T was settled and dismissed. Under the agreement, IDT made a lump sum
payment and issued shares of its Common Stock to AT&T, granted a discount on
future purchases, and gave credit for future purchases of technology on a
nonexclusive basis.
On December 10, 1992, IDT and Texas Instruments ("TI") entered into a
five-year patent cross- license agreement. As part of this agreement, patent
litigation instituted by TI was dismissed. Under the agreement, IDT granted to
TI a license to certain IDT technology and products and guaranteed TI that it
will realize certain revenues from the technology and products, and IDT will
develop certain products which will be manufactured and sold by both IDT and TI.
See Note 4 of Notes to Consolidated Financial Statements.
EMPLOYEES
At April 2, 1995, IDT and its subsidiaries employed approximately 2,965
people worldwide, of whom approximately 1,045 were in Penang. IDT's success
depends in part on its ability to attract and retain qualified personnel, who
are generally in great demand. Since its founding, the Company has implemented
policies enabling its employees to share in IDT's success. Examples are stock
option, stock purchase, profit sharing and special bonus plans for key
contributors. IDT has never had a work stoppage, no employees are represented by
a collective bargaining agreement, and the Company considers its employee
relations to be good.
ITEM 2. PROPERTIES
The Company presently occupies six major facilities in California and
Malaysia as follows:
LOCATION FACILITY USE SQUARE FEET
---------------- ------------------------------------- -------------
Salinas ........... Wafer fabrication, SRAM and multi- 98,000
port memory operations
Santa Clara ....... Logic and RISC microprocessor 62,000
operations
Santa Clara ....... Administration and sales 43,700
Santa Clara ....... Administration and RISC subsystems 50,000
operations
Penang, Malaysia .. Assembly and test 145,000
San Jose .......... Wafer fabrication, process technology 135,000
development, FIFO and memory
subsystems operations, and research
and development
The Company leases its Salinas facility from Carl E. Berg, a director, and in
October 1994 purchased a 5.5 acre parcel adjacent to its Salinas facility for
$653,000 from Mr. Berg. IDT leases its Salinas and Santa Clara facilities under
leases expiring in 1999 through 2005. The lease for the Salinas facility has two
five-year renewal options. The Company owns its Malaysian and San Jose
facilities, although the Malaysian facilities are subject to long-term ground
leases and the San Jose facility is subject to a mortgage. IDT leases offices
for its sales force in 17 domestic locations as well as Hong Kong, London,
Milan, Munich, Paris, Stockholm, Taipei and Tokyo. See Note 7 of Notes to
Consolidated Financial Statements for information concerning IDT's obligations
under operating and capital leases. The Company has purchased a 23 acre parcel
in Hillsboro, Oregon and construction has commenced on a 192,000 square foot
facility containing a 48,000 square foot, class 1, eight-inch wafer fabrication
line. It is expected that the Oregon facility will commence production during
fiscal 1996; however, the Oregon facility is not expected to contribute to
revenues until fiscal 1997. In late fiscal 1995 the Company acquired an interest
in approximately 10 acres of land in the Philippines and intends to construct a
240,000 square foot assembly and test facility.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Registrant or any of its
subsidiaries is a party, or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
No matters were submitted to a vote of the Company's securityholders during the
last quarter of the fiscal year ended April 2, 1995.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following information as of May 18, 1995 is provided with
respect to each executive officer of the Company.
Name Age Position
D. John Carey 59 Chairman of the Board
Leonard C. Perham 51 President & Chief Executive Officer
William B. Cortelyou 39 Vice President, Wafer Operations
Robin H. Hodge 55 Vice President, Assembly and Test
Alan H. Huggins 42 Vice President, Memory Division
Larry T. Jordan 50 Vice President, Marketing
Daniel L. Lewis 46 Vice President, Sales
Chuen-Der Lien 32 Vice President, Technology Development
Jack Menache 51 Vice President, General Counsel and Secretary
Richard R. Picard 47 Vice President, Logic and Microprocessor
Products
Robert Phillips 50 Vice President, Manufacturing
William D. Snyder 50 Vice President, Finance and Chief Financial
Officer
Mr. Carey was elected to the Board of Directors in 1980 and has been Chairman
of the Board since 1982. He served as Chief Executive Officer from 1982 until
his resignation in April 1991 and was President from 1982 until 1986. Mr. Carey
was a founder of Advanced Micro Devices ("AMD") in 1969 and was an executive
officer there until 1978.
Mr. Perham joined IDT in October 1983 as Vice President and General Manager,
SRAM Division. In October 1986, Mr. Perham was appointed President and Chief
Operating Officer and a director of the Company. In April 1991, Mr. Perham was
elected Chief Executive Officer. Prior to joining IDT, Mr. Perham held executive
positions at Optical Information Systems Incorporated and Zilog Inc.
Mr. Cortelyou joined IDT in 1982. In January 1990, he was elected Vice
President, Wafer Operations, Salinas. Mr. Cortelyou currently serves as Vice
President, Wafer Operations. Prior to joining IDT, Mr. Cortelyou was an engineer
at AMD.
Mr. Hodge joined IDT as Director of Assembly Operations in March 1989. In
January 1990, Mr. Hodge was elected Vice President, Assembly Operations. Mr.
Hodge currently serves as Vice President, Assembly and Test. From 1983 until
joining IDT, Mr. Hodge was Director of Assembly Operations for Maxim Integrated
Products.
Mr. Huggins joined IDT in 1983 and was elected Vice President in 1987. Mr.
Huggins currently serves as Vice President, Memory Division. Prior to joining
the Company, Mr. Huggins held various engineering positions at AMD.
Mr. Jordan joined IDT in July 1987 as Vice President, Marketing. Prior to
joining the Company, Mr. Jordan held management positions in marketing and sales
at SEEQ Technology, Inc. and Intel Corporation.
Mr. Lewis joined IDT in 1984 as Eastern Area Sales Manager. In June 1991, he
was elected Vice President, Sales. Prior to joining IDT, Mr. Lewis held
management positions at Avatar Technologies, Inc., Data General and Zilog.
Dr. Lien joined IDT in 1987 and was elected Vice President, Technology
Development in April 1992. Prior to joining the Company, he held engineering
positions at Digital Equipment Corporation and AMD.
Mr. Menache joined IDT as Vice President, General Counsel and Secretary in
September 1989. From April 1989 until joining IDT, he was General Counsel of
Berg & Berg Developers. From 1986 until April 1989, he was Vice President,
General Counsel and Secretary of The Wollongong Group Inc.
Mr. Picard joined IDT in 1985. In 1989 he was elected Vice President, Static
RAM Product Line. In April 1990 he was appointed Vice President and General
Manager, Logic Products. He was elected Vice President, Logic and Microprocessor
Products in May 1993. Prior to joining IDT, Mr. Picard held management positions
at International Micro Circuits, Zilog and AMD.
Mr. Phillips joined IDT in March 1995 as Vice President, Manufacturing. Prior
to joining IDT, Mr. Phillips was Vice President of Fab, Assembly and Test
Operations at Vitesse Semiconductor and Edsun Labs, and was President of PMT
Manufacturing Technology, Inc.
Mr. Snyder joined the Company as Treasurer in 1985. In May 1990, he was
elected Vice President, Corporate Controller, and in September 1990 Mr. Snyder
was elected Vice President, Finance and Chief Financial Officer. Prior to
joining the Company, Mr. Snyder held financial management positions at Actrix
Computer, Zilog and Digital Equipment Corporation.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Price Range of Common Stock
The Common Stock of the Company is traded on The Nasdaq National Market under
the symbol "IDTI." The following table sets forth the high and low last reported
sale prices for the Common Stock as reported by the Nasdaq National Market
during the fiscal quarters indicated.
HIGH LOW
-------- -------
Fiscal 1996:
First Quarter (through May 24, 1995) ...49-7/8 36-1/16
Fiscal 1995:
First Quarter ...........................31-3/8 23-7/8
Second Quarter ..........................28-7/8 16-1/4
Third Quarter ...........................30-1/16 18-1/2
Fourth Quarter ..........................40-3/4 28-3/8
Fiscal 1994:
First Quarter ...........................11-1/8 6-1/2
Second Quarter ..........................19-5/8 10-1/2
Third Quarter ...........................18-7/8 12-3/8
Fourth Quarter ..........................33-5/8 16-3/4
On May 24, 1995, the last reported sale price of the Common Stock was $46 7/8
per share. As of May 18, 1995, there were approximately 820 record holders of
the Common Stock.
The Company intends to retain any future earnings for use in its business
and, accordingly, does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data as of April 2, 1995 and
April 3, 1994 and for each of the years in the three-year period ended April 2,
1995 have been derived from IDT's Consolidated Financial Statements included
elsewhere in this Form 10-K, which have been audited by Price Waterhouse LLP,
independent accountants, as indicated in their report thereon appearing
elsewhere herein. The following selected financial data as of March 28, 1993,
March 29, 1992, March 31, 1991 and for each of the years in the two-year period
ended March 29, 1992 have been derived from audited consolidated financial
statements not included herein. The data set forth below are qualified in their
entirety by reference to, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and related notes thereto included
elsewhere in this Form 10-K.
FISCAL YEAR ENDED
-------------------------------------------------------------------------
April 2, April 3, March 28, March 29, March 31,
1995 1994 1993 1992(1) 1991
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
Revenues ........................................... $ 422,190 $ 330,462 $ 236,263 $ 202,734 $ 198,559
Cost of revenues ................................... 179,652 159,627 132,285 126,819 99,948
--------- --------- --------- --------- ---------
Gross profit ....................................... 242,538 170,835 103,978 75,915 98,611
--------- --------- --------- --------- ---------
Operating expenses:
Research and development ......................... 78,376 64,237 53,461 52,044 50,848
Selling, general and administrative .............. 64,647 54,329 39,511 48,721 43,625
Restructuring charge ............................. -- -- -- 4,466 --
--------- --------- --------- --------- ---------
Total operating expenses ....................... 143,023 118,566 92,972 105,231 94,473
--------- --------- --------- --------- ---------
Operating income (loss) ............................ 99,515 52,269 11,006 (29,316) 4,138
Interest expense ................................... (3,298) (5,165) (5,855) (7,045) (6,507)
Interest income and other, net ..................... 8,186 3,102 1,127 1,593 3,205
--------- --------- --------- --------- ---------
Income (loss) before provision
(benefit) for income taxes ....................... 104,403 50,206 6,278 (34,768) 836
Provision (benefit) for income taxes ............... 26,101 10,041 942 (1,960) (390)
--------- --------- --------- --------- ---------
Net income (loss)(2) ............................... $ 78,302 $ 40,165 $ 5,336 $ (32,808) $ 1,226
--------- --------- --------- --------- ---------
Net income (loss) per share(2) ..................... $ 2.09 $ 1.21 $ .18 $ (1.25) $ .05
--------- --------- --------- --------- ---------
Shares used in computing net
income (loss) per share .......................... 37,382 33,116 29,701 26,255 26,070
========= ========= ========= ========= =========
April 2, April 3, March 28, March 29, March 31,
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
BALANCE SHEET DATA:
Working capital .......................... $271,695 $143,248 $ 50,885 $ 40,493 $ 63,539
Total assets ............................. 561,975 349,571 239,994 229,730 258,626
Total debt ............................... 42,498 51,646 62,295 66,100 73,858
Stockholders' equity ..................... 414,531 224,367 117,760 104,602 134,524
<FN>
-------
(1) In fiscal 1992, the Company recorded restructuring and other charges of
$24.8 million.
(2) As described in Note 11 of Notes to Consolidated Financial Statements, the
Company's Malaysian subsidiary was granted a tax holiday which extended
through June 30, 1993. Such status had the effect of reducing the Company's
provision for taxes by approximately $1.5 million, $1.0 million and $0.9
million, or $0.5, $0.4 and $0.4 per share, for the years ended March 31,
1993, 1992 and 1991, respectively. Management believes its effective tax
rate in 1996 will increase due to decreased tax benefits associated with its
Malaysian subsidiary.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
IDT designs, develops, manufactures and markets a broad range of
high-performance semiconductor products for the desktop computer,
communications, office automation and workstation/server markets. The Company's
revenues have increased from $236 million in fiscal 1993 to $330 million in
fiscal 1994 and to $422 million in fiscal 1995. This growth has been due to
increasing market acceptance of new products, the expansion of production output
through additions of capital equipment and improved manufacturing processes and
associated die shrinks and yield improvements, and improvements in overall
market conditions, including strong demand for SRAMS. During these periods, the
Company has achieved unit volume growth across all of its market segments. In
fiscal 1995 as a result of strong demand for fast SRAMs used as secondary cache
for 32-bit and 64-bit micropressors the Company shifted product mix in favor of
SRAMs. The higher selling prices of SRAMs in fiscal 1995 resulted in increasing
average selling prices on a company-wide basis for the year.
The Company's gross profit and operating profit margins have improved
significantly from 44.0% and 4.7%, respectively, in fiscal 1993 to 51.7% and
15.8%, respectively, in fiscal 1994 and to 57.5% and 23.6%, respectively, in
fiscal 1995. These improvements were due to economies of scale associated with
increased unit shipments, higher utilization of manufacturing capacity, wafer
fabrication process improvements, die shrinks and a mix shift to higher margin
products, particularly SRAMs.
The Company has been operating near installed equipment capacity since fiscal
1994. To address this situation, the Company initiated a significant capacity
expansion program in 1995, including conversion of the Company's Salinas wafer
fabrication facility from five-inch to six-inch wafers, purchase of incremental
wafer fabrication equipment for the Company's San Jose facility, expansion of
assembly and test facilities in Penang, Malaysia, construction of a new
eight-inch wafer fabrication facility in Oregon and the construction of a new
assembly and test facility in the Philippines. These programs required
substantial capital expenditures in fiscal 1995 and are expected to require a
substantially higher level of expenditures in fiscal 1996 and beyond. See
"Business--Manufacturing--Properties." The Company initiated and substantially
completed the equipment conversion of the Salinas facility in fiscal 1995, and
recently commenced its last manufacturing start of five-inch wafers in this
facility. The substantial portion of the addition of new equipment to the San
Jose facility has occurred and additional equipment will be added in fiscal
1996. The 40,000 square foot expansion of the Penang facilities was completed at
the end of fiscal 1995. It is expected that the Oregon facility will commence
production during fiscal 1996; however, the Oregon facility is not expected to
contribute to revenues until fiscal 1997. The Company has recently completed the
acquisition of land for the new test and assembly facility in the Philippines.
The increased operating expenses associated with the Company's capacity
expansion programs will adversely affect operating results until the Company
achieves volume production utilizing the new facilities and equipment. Although
the Company does not expect to generate revenues from its new Oregon fabrication
facility until fiscal 1997, the Company will recognize substantial operating
expenses associated with the facility in fiscal 1996 and 1997. The Company will
also begin to recognize in fiscal 1997 substantial depreciation expenses upon
commencement of commercial production but before production of substantial
volumes is achieved.
The following table sets forth certain amounts, as a percentage of revenues,
from the Company's consolidated statements of operations for the three fiscal
years ended April 2, 1995, April 3, 1994 and March 28, 1993.
FISCAL YEAR ENDED
--------------------------
April 2, April 3, March 28,
1995 1994 1993
----- ------ ------
Revenues ....................................... 100.0% 100.0% 100.0%
Cost of revenues ............................... 42.5 48.3 56.0
----- ------ ------
Gross margin ................................... 57.5 51.7 44.0
----- ------ ------
Operating expenses:
Research and development ....................... 18.6 19.4 22.6
Selling, general and administrative ............ 15.3 16.5 16.7
----- ------ ------
Total operating expenses ....................... 33.9 35.9 39.3
----- ------ ------
Operating income ............................... 23.6 15.8 4.7
Net interest income ............................ 1.2 (0.6) (2.0)
----- ------ ------
Income before provision for income taxes ....... 24.8 15.2 2.7
Provision (benefit) for income taxes ........... 6.2 3.0 0.4
----- ------ ------
Net income ..................................... 18.6% 12.2% 2.3%
===== ====== ======
RESULTS OF OPERATIONS
Revenues increased 27.8% to $422.2 million in fiscal 1995, as compared to
revenues of $330.5 million in fiscal 1994, which in turn represented a 39.9%
increase over revenues of $236.3 million in fiscal 1993. The increase in fiscal
1995 was attributable to the higher unit volumes across all product families and
sales channels. Sales in Asia-Pacific (excluding Japan) and Europe increased
substantially in fiscal 1995. In addition, much of the increase in revenues was
driven by increasing demand for fast SRAM memory utilized by more powerful
microprocessors, such as the Pentium and PowerPC, which utilize secondary cache
memory for enhanced system performance. As a result of strong industry-wide
demand and capacity constraints, SRAM prices were generally higher throughout
fiscal 1995 as compared to the prior year, particularly in the second half of
fiscal 1995. The Company also achieved in fiscal 1995 higher unit sales of
specialty memories and embedded microprocessors, particularly in the
telecommunications and networking markets. In fiscal 1995 microprocessor sales
were flat as compared to fiscal 1994, due to a decline in sales of nonembedded
microprocessors as a result of the Company's strategic shift of focus toward
sales of embedded microprocessors. Growth in fiscal 1994 was due to increased
unit sales across all product segments, with the largest percentage increase in
the microprocessor segment, as well as favorable pricing during the fiscal year
on certain products, offset in part by lower selling prices for some products.
Revenue growth in fiscal 1993 was attributed to increases in product shipments
across all market segments, offset in part by price reductions on several major
products. Toward the end of fiscal 1993, pricing firmed in the memory business
segment, reversing a trend of steady price erosion over several years, which had
been driven in part by increased demand across all market segments.
Gross profit in fiscal 1995 increased 42.0% to $242.5 million, or 57.5% of
revenues, as compared to $170.8 million or 51.7% of revenues in fiscal 1994.
Gross profit increased 64.3% in fiscal 1994 from $104.0 million or 44.0% of
revenues in fiscal 1993. The improvements in gross profit and gross margins in
fiscal 1995 were primarily attributable to higher prices on certain products,
particularly SRAMs, higher manufacturing capacity utilization and lower costs
achieved through die shrinks. In fiscal 1995 the Company also continued a shift
to more advanced designs and wafer fabrication processes, which resulted in
increased die per wafer yields and therefore lower unit costs. More efficient
test and burn-in procedures also contributed to improved yields and reduced
manufacturing costs. In addition, selective acceptance of new orders as a result
of continued strong demand allowed the Company to shift manufacturing capacity
to higher-margin products. Gross profit also benefited in fiscal 1995 as
compared to fiscal 1994 as a result of a $3.5 million reduction in patent and
royalty expenses related to license agreements. However, the Company's industry
is characterized by patent claims and license agreements, and there can be no
assurance royalty expenses will not increase in the future. In recent periods
the pricing environment for SRAMs has been favorable, notwithstanding the
long-term trend of price declines in the semiconductor market. Significant price
declines for SRAMs or other products in the future could adversely affect the
Company's operating results. The improvement in gross profit in fiscal 1994 was
primarily attributable to greater capacity utilization, which lowered average
wafer manufacturing costs, significant increases in die per wafer due to wafer
fabrication process improvements, and a mix shift to products with higher
average selling prices, particularly microprocessors.
Research and development expenses increased 22.1% to $78.4 million or 18.6%
of revenues in fiscal 1995, as compared to $64.2 million or 19.4% of revenues in
fiscal 1994. In fiscal 1993, R&D expenses were $53.5 million or 22.6% of
revenues. The increases in R&D expenses were due primarily to continued
investments by the Company in both process technology and new product design and
development. In fiscal 1995, the Company introduced over 50 new products, with
more than 600 configurations, and continued to develop its CMOS processes at 0.5
micron geometries and below. A number of activities will cause absolute R&D
spending to increase substantially, including expansion of R&D activity in both
Atlanta, Georgia and Austin, Texas, new plant start-up costs associated with the
Oregon wafer fabrication facility, particularly in fiscal 1996, and further
development of new products and processes. IDT believes that the continuation of
a high level of R&D investment is essential to continue the flow of new
products.
Selling, general and administrative expenses increased 19% to $64.6 million
in fiscal 1995 or 15.3% of revenues, as compared to $54.3 million or 16.5% of
revenues in fiscal 1994. In fiscal 1993, SG&A expenses were $39.5 million or
16.7% of revenues. The increase in SG&A expenses in fiscal 1995 was attributable
to higher costs associated with the higher level of sales, including higher
sales commissions, employee profit sharing and management bonuses, and an
increase in sales personnel, particularly in Europe, although SG&A expenses did
not increase as rapidly as sales. The fiscal 1994 increase was primarily due to
increases in management bonuses, employee profit sharing and the variable
selling expenses associated with the revenue increase.
Interest expense totaled $3.3 million in fiscal 1995, compared to $5.2
million in fiscal 1994 and $5.9 million in fiscal 1993. Interest expense has
decreased as IDT has retired outstanding debt, primarily equipment financing.
IDT continues to impute interest on a long-term obligation associated with a
patent cross-license.
Interest income and other, net, increased to $8.2 million in fiscal 1995
compared to $3.1 million and $1.1 million in fiscal years 1994 and 1993,
respectively. The increase in interest income resulted from significantly higher
cash balances available for investments, due to cash generated from operations
and net proceeds from Common Stock offerings of $46.8 million in October 1993
and $97.6 million in December 1994. In fiscal 1995 interest income also
reflected the general increase in interest rates available for investment funds.
IDT also received approximately $1.0 million of royalty income in fiscal 1995
compared to $0.3 million in fiscal 1994 and none in fiscal 1993.
The effective tax rates for fiscal 1995, 1994 and 1993 of 25%, 20% and 15%,
respectively, differed from the U.S. statutory rate of 35% in fiscal 1995 and
1994 (34% for fiscal 1993) primarily due to earnings of foreign subsidiaries
being taxed at lower rates, as well as the utilization of research and
development credits. In addition, fiscal years 1995 and 1994 benefited from the
realization of certain deferred tax benefits for which a valuation allowance was
previously required. The Company expects that its effective tax rate in 1996
will increase to approximately 32% due to decreased tax benefits associated with
its Malaysian subsidiary. See Note 11 of Notes to Consolidated Financial
Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition improved during fiscal 1995. Cash and cash
equivalents and short-term investments increased from $121.8 million at the end
of fiscal 1994 to $232.1 million at the end of fiscal 1995. Working capital
increased from $143.2 million at April 3, 1994 to $271.7 million at April 2,
1995. These increases were due to improved profitability, as well as a public
stock offering in fiscal 1995 yielding net proceeds of approximately $97.6
million. As of April 2, 1995, the Company had $6.1 million available under
unsecured lines of credit, all of which are overseas. See Note 6 of Notes to
Consolidated Financial Statements.
During fiscal 1993, 1994 and 1995, the Company generated $37.2 million,
$100.1 million and $115.8 million, respectively, of cash flow from operations.
The largest single factor influencing cash flow from operations during fiscal
1993 was the depreciation resulting from the Company's San Jose wafer
fabrication facility. The improved operating results in fiscal 1994 and 1995
also had a significant impact on cash flow during those periods. The Company
anticipates that significant depreciation relating to the San Jose facility will
continue through at least fiscal 1996.
During fiscal 1993, 1994 and 1995, the Company's net cash used in investing
activities was $28.8 million, $68.9 million and $163.2 million, respectively, of
which $28.0 million, $37.4 million and $94.7 million, respectively, were used
for capital equipment and property and plant improvements. During fiscal 1993,
the Company's net cash used in financing activities was $5.9 million, due
primarily to net repayments of $8.8 million related primarily to capital
equipment financing. In fiscal 1994, financing activities generated $34.8
million, the primary source of which was net cash of $46.8 million as a result
of the Company's public equity offering in October 1993. This source was
partially offset by net repayments of equipment financing of $20.5 million. In
fiscal 1995 the Company's financing activities generated $89.2 million, the
primary source of which was net cash of $97.6 million as a result of the
Company's public equity offering in December 1994; these funds were partially
offset by net debt repayments of $14.4 million. See Notes 4, 5, 6 and 7 of Notes
to Consolidated Financial Statements for information regarding the Company's
various financing arrangements.
The Company has international subsidiaries which operate and sell products or
manufacture products in foreign markets. In addition, the Company's export sales
are generally denominated in local currencies. The Company also purchases
materials and equipment from foreign suppliers, and incurs labor costs,
particularly at its Malaysia assembly facility, in foreign currencies. As a
result, the Company is exposed to international factors such as changes in
foreign currency exchange rates, imposition of currency exchange controls or
changes in the economic conditions of the countries in which the Company
operates. The Company utilizes forward exchange contracts to hedge against the
short-term impact of foreign currency fluctuations on certain assets or
liabilities denominated in foreign currencies. At April 2, 1995, the Company had
outstanding various forward exchange contracts valued at approximately $18.5
million. There can be no assurance that the above factors will not adversely
affect the Company's operations in the future or that the Company will be
successful in its hedging efforts. See Note 2 of Notes to Consolidated Financial
Statements.
In view of current and anticipated capacity requirements, the Company
anticipates capital expenditures of approximately $260 million in fiscal 1996,
principally in connection with its capacity expansion programs. In January 1995
the Company entered into a five-year, $60 million Tax Ownership Lease
transaction with respect to the new Oregon wafer fabrication facility. The lease
obligations are secured by the building and collateralized by cash and/or
investments (restricted securities) up to 105% of the lessor's construction cost
until completion of the building and 85% thereafter. Restricted securities
collateralizing this lease were $10.5 million at April 2, 1995 and are expected
to reach approximately $50 million by the completion of the facility in fiscal
1996. The Company is also contingently liable at the end of the lease to the
extent the lessor is not able to realize 85% of the construction costs of the
building upon sale or other disposition of the building by the lessor. The lease
requires monthly payments which vary based upon the London Interbank Offered
Rate (LIBOR) plus 0.3% (6.425% at April 2, 1995). See Note 7 to Consolidated
Financial Statements. The Company may consider additional forms of financing to
help meet its anticipated capital needs for its new Oregon facility, including a
possible bond financing through the State of Oregon, which could yield proceeds
of up to $20 million or more. The Company currently estimates that the cost to
construct and equip the Oregon and Philippines facilities will be approximately
$400 to $500 million and $75 million, respectively. Accordingly, the Company
anticipates significant continuing capital expenditures in the next several
years. See "Risk Factors--Current Capacity Limitations and Risks Associated with
Planned Expansion" and "--Capital Needs."
The Company believes that existing cash and cash equivalents, cash flow from
operations, existing credit facilities and possible other financing arrangements
for the new facilities, will be adequate to fund its anticipated capital
expenditures and working capital needs through fiscal 1996. There can be no
assurance, however, that the Company will not be required to seek other
financing sooner or that such financing, if required, will be available on terms
satisfactory to the Company.
FACTORS AFFECTING FUTURE RESULTS
During fiscal 1995 the Company experienced strong growth in both revenues and
earnings particularly in the last six months. Nonetheless, the Company and the
semiconductor industry in general are subject to a number of uncertainties.
The Company's operating results have been, and in the future may be, subject
to fluctuations due to a wide variety of factors including the timing of or
delays in new product and process technology announcements and introductions by
the Company or its competitors, competitive pricing pressures, fluctations in
manufacturing yields, changes in the mix of products sold, availability and
costs of raw materials, the cyclical nature of the semiconductor industry,
industry-wide wafer-processing capacity, economic conditions in various
geographic areas and costs associated with other events, such as an
underutilization or expansion of production capacity, intellectual property
disputes or other litigation. The semiconductor industry is highly cyclical and
has been subject to significant downturns at various times that have been
characterized by diminished product demand, production overcapacity and
accelerated erosion of average selling prices. In recent periods, the markets
for the Company's products, in particular SRAMs, have been characterized by
excess demand over supply and resultant favorable pricing. These conditions
represent a departure from the long-term trend of declining average selling
prices in the semiconductor market. A material increase in industry-wide
production capacity, shift in industry capacity toward products competitive with
the Company's products, reduced demand, or other factors could result in a rapid
decline in product pricing and could adversely affect the Company's operating
results.
The Company ships a substantial portion of its quarterly sales in the last
month of a quarter. If anticipated shipments in any quarter do not occur, the
Company's operating results for that quarter could be adversely affected. In
addition, a substantial percentage of the Company's products are incorporated
into computer and computer-related products, which have historically been
characterized by significant fluctuations in demand. Furthermore, any decline in
the demand for advanced microprocessors which utilize SRAM cache memory could
adversely affect the Company's operating results. In addition, demand for
certain of the Company's products is dependent upon growth in the communications
market. A slowdown in the computer and related peripherals or communications
markets could also adversely affect the Company's operating results.
As a result of production capacity constraints, the Company has not been able
to take advantage of all market opportunities presented to it. Due to long
production lead times and current capacity constraints, any failure by the
Company to adequately forecast the mix of product demand could adversely affect
the Company's sales and operating resuls. To address its capacity requirements,
in fiscal 1995 the Company initiated extensive production expansion programs,
which face a number of substantial risks including, but not limited to, delays
in construction, cost overruns, equipment delays or shortages, manufacturing
startup or process problems and difficulties in hiring key managers and
technical personnel. In addition, the Company has never operated an eight-inch
wafer fabrication facility, like the one being built in Oregon, and eight-inch
facilities and production equipment are relatively new to the industry.
Accordingly, the Company could incur unanticipated process or production
problems. To remain competitive, the Company must continue to invest in advanced
manufacturing and test equipment. From time to time, the Company has experienced
production difficulties that have caused delivery delays and quality problems.
There can be no assurance that the Company will not experience manufacturing
problems and product delivery delays in the future as a result of among other
things, changes to its process technologies, ramping production, installing new
equipment at its facilities and constructing facilities in Oregon and the
Philippines. Further, the Company's existing wafer fabrication facilities are
located relatively near each other in Northern California. If the Company were
unable to use these facilities, as a result of a natural disaster or otherwise,
the Company's operations would be materially adversely affected until the
Company were able to obtain other production capability.
The Company's capacity additions will result in a significant increase in
fixed and operating expenses. If revenue levels do not increase sufficiently to
offset these additional expense levels, the Company's operating results could be
adversely impacted in future periods. In this regard, the Company has
historically expensed as period costs, rather than capitalized, the operating
expenses associated with bringing a fabrication facility to commercial
production. Although the Company does not expect the Oregon fabrication facility
to contribute to revenues until fiscal 1997, the Company will recognize
substantial operating expenses associated with the facility in fiscal 1996 and
1997. In addition, in fiscal 1997, the Company will begin to recognize
substantial depreciation expenses upon commencement of commercial production but
before production of substantial volume is achieved.
To remain competitive, the Company must continue to devote significant
resources to research and development of new products and processes. There can
be no assurance that the Company will be able to develop and introduce new
products in a timely manner, that new products will gain market acceptance or
that new process technologies can be successfully implemented. Further, the
ability of the Company to compete successfully depends upon a number of factors,
including new product and process technology introductions by the Company and
its competitors customer acceptance of the Company's products, cost effective
manufacturing, assertion of intellectual property rights and general market and
economic conditions. There can be no assurance that the Company will be able to
compete successfully in the future against existing or potential competitors or
that the Company's operating results will not be adversely affected by increased
price competition.
The semiconductor industry is extremely capital intensive. To remain
competitive, the Company must continue to invest in advanced manufacturing and
test equipment. In fiscal 1996 the Company expects to expend approximately $260
million for the purchase of equipment for the Oregon facility, other ongoing
capital expenditures and initial funding for the Philippines assembly and test
facility. The Company currently estimates that the cost to construct and equip
the Oregon and Philippines facilities will be approximately $400 and $500
million and $75 million, respectively. Accordingly, the Company anticipates
significant continuing capital expenditures in the next several years. There can
be no assurance that the Company will not be required to seek financing to
satisfy its cash and capital needs or that such financing would be available on
terms satisfactory to the Company. In this regard, any adverse effect upon the
Company's operating results due to a significant downturn in industry pricing or
otherwise could accelerate the Company's need to seek additional outside
capital.
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which have resulted in
significant and often protracted and expensive litigation. In recent years,
there has been a growing trend of companies to resort to litigation to protect
their semiconductor technology from unauthorized use by others. The Company in
the past has been involved in patent litigation which adversely affected its
operating results. Although the Company has obtained patent licenses from
certain semiconductor manufacturers, the Company does not have licenses from a
number of semiconductor manufacturers who have a broad portfolio of patents. The
Company has been notified that it may be infringing patents issued to certain
semiconductor manufacturers and other parties, and is currently involved in
several license negotiations. There can be no assurance that additional claims
alleging infringement of intellectual property rights will not be asserted in
the future. The intellectual property claims that have been or may be asserted
against the Company could require the Company to discontinue the use of certain
processes or cease the manufacture, use and sale of infringing products, to
incur significant litigation costs and damages, and to develop noninfringing
technology or to acquire licenses to the alleged infringed technology. There can
be no assurance that the Company would be able to obtain such licenses on
acceptable terms or to develop noninfringing technology. Further, the failure to
renew or renegotiate existing licenses or significant increases in amounts
payable under these licenses could have an adverse effect on the Company.
The Company is subject to a variety of regulations related to hazardous
materials used in its manufacturing process. Any failure by the Company to
control the use of, or to restrict adequately the discharge of, hazardous
materials under present or future regulations could subject it to substantial
liability or could cause its manufacturing operations to be suspended.
The Company's Common Stock has experienced substantial price volatility and
such volatility may occur in the future, particularly as a result of quarter to
quarter variations in the actual or anticipated financial results of the Company
or other companies in the semiconductor industry or in the markets served by the
Company, or announcements by the Company or its competitors regarding new
product introductions. In addition, the stock market has experienced extreme
price and volume fluctuations that have affected the market price of many
technology companies' stocks in particular, these factors may adversely affect
the price of the Common Stock.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS
Consolidated Financial Statements included in Item 8:
Report of Independent Accountants
Consolidated Balance Sheets at April 2, 1995 and April 3, 1994
Consolidated Statements of Operations for each of the three fiscal years in the
period ended April 2, 1995
Consolidated Statements of Cash Flows for each of the three fiscal years in the
period ended April 2, 1995
Consolidated Statements of Stockholder's Equity for each of the three fiscal
years in the period ended April 2, 1995
Notes to consolidated financial statements
All other schedules have been omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedules, or because the information required is included in the consolidated
financial statements or notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Integrated Device Technology,
Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Integrated Device Technology, Inc. and its subsidiaries at April 2,
1995 and April 3, 1994, and the results of their operations and their cash flows
for each of the three years in the period ended April 2, 1995, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsiblity is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Jose, California
April 21, 1995
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
APRIL 2, APRIL 3,
1995 1994
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents ..................................... $130,211 $ 88,490
Short-term investments ........................................ 101,874 33,351
Accounts receivable, net of allowance for returns and doubtful
accounts of $3,830 and $4,129 ............................... 71,974 40,643
Inventory ..................................................... 37,459 29,855
Deferred tax assets ........................................... 26,443 26,276
Prepayments and other current assets .......................... 7,013 3,858
---------- ---------
Total current assets ........................................ 374,974 222,473
---------- ---------
Property, plant and equipment, net .............................. 178,780 120,838
Other assets .................................................... 8,221 6,260
---------- ---------
Total assets ................................................ $561,975 $349,571
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................$ 39,814 $ 15,925
Accrued compensation and related expense ........................ 22,889 16,528
Deferred income on shipments to distributors .................... 22,348 17,592
Income taxes payable ............................................ 1,716 1,964
Other accrued liabilities ....................................... 10,609 13,032
Current portion of long-term obligations ........................ 5,903 14,184
---------- ----------
Total current liabilities ..................................... 103,279 79,225
---------- ----------
Long-term obligations ............................................ 36,595 37,462
---------- ----------
Deferred tax liabilities ......................................... 7,570 8,517
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.001 par value: 5,000,000 shares authorized;
no shares issued ..............................................
Common stock; $.001 par value: 65,000,000 shares authorized;
38,104,634 and 33,405,552 shares issued and outstanding ...... 38 33
Additional paid-in capital ...................................... 271,618 160,221
Retained earnings ............................................... 142,819 64,517
Cumulative translation adjustment ............................... 56 (404)
---------- ----------
Total stockholders' equity .................................... 414,531 224,367
---------- ----------
Total liabilities and stockholders' equity ....................$561,975 $349,571
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED
---------------------------------
APRIL 2, APRIL 3, MARCH 28,
1995 1994 1993
---------- --------- -----------
Revenues ..................................... $422,190 $330,462 $236,263
Cost of revenues ............................. 179,652 159,627 132,285
---------- --------- -----------
Gross profit ................................. 242,538 170,835 103,978
---------- --------- -----------
Operating expenses:
Research and development ................... 78,376 64,237 53,461
Selling, general and administrative ....... 64,647 54,329 39,511
---------- ---------- ----------
Total operating expenses ................... 143,023 118,566 92,972
---------- ---------- ----------
Operating income ............................. 99,515 52,269 11,006
Interest expense ............................. (3,298) (5,165) (5,855)
Interest income and other, net ............... 8,186 3,102 1,127
---------- ---------- ----------
Income before provision for income taxes .... 104,403 50,206 6,278
Provision for income taxes ................... 26,101 10,041 942
---------- ---------- ----------
Net income ................................... $ 78,302 $ 40,165 $ 5,336
========== ========== ==========
Net income per share ......................... $ 2.09 $ 1.21 $ .18
========== ========== ==========
Shares used in computing net income per share 37,382 33,116 29,701
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR ENDED
------------------------------------------------
APRIL 2, APRIL 3, MARCH 28,
1995 1994 1993
--------- --------- --------
Operating activities:
Net income .............................................................. $ 78,302 $ 40,165 $ 5,336
Adjustments:
Depreciation and amortization ......................................... 38,816 37,594 37,140
Provision for losses on accounts receivable ........................... 299 476 (742)
Changes in assets and liabilities:
Accounts receivable ................................................... (31,630) 2,071 (6,167)
Inventory ............................................................. (7,604) (2,618) (3,843)
Deferred tax assets ................................................... 4,012 (10,897) 2,616
Other assets .......................................................... (7,157) (1,247) (391)
Accounts payable ...................................................... 23,889 106 (804)
Accrued compensation and related expense .............................. 6,361 9,799 3,158
Deferred income on shipments to distributors .......................... 4,756 7,142 1,093
Income taxes payable .................................................. 7,605 11,574 477
Other accrued liabilities ............................................. (1,846) 5,885 (679)
--------- --------- --------
Net cash provided by operating activities ............................... 115,803 100,050 37,194
--------- --------- --------
Investing activities:
Purchases of property, plant and equipment .............................. (94,717) (37,412) (28,010)
Purchases of short-term investments ..................................... (106,948) (40,221) (4,927)
Proceeds from sales of short-term investments ........................... 38,425 8,747 4,110
--------- --------- --------
Net cash used for investing activities .................................. (163,240) (68,886) (28,827)
--------- --------- --------
Financing activities:
Issuance of common stock, net ........................................... 103,549 55,337 2,981
Proceeds from borrowings ................................................ -- 2,731 32,161
Payment on capital leases and other debt ................................ (14,391) (23,271) (41,006)
--------- --------- --------
Net cash provided by (used for) financing activities .................... 89,158 34,797 (5,864)
--------- --------- --------
Net increase in cash and cash equivalents ............................... 41,721 65,961 2,503
Cash and cash equivalents at beginning of period .......................... 88,490 22,529 20,026
--------- --------- --------
Cash and cash equivalents at end of period ............................... $ 130,211 $ 88,490 22,529
========= ========= ========
Supplemental disclosures:
Interest paid ........................................................... $ 2,698 $ 4,713 5,893
Income taxes paid (refunded) ............................................ 13,901 9,163 (2,050)
<FN>
The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
ADDITIONAL CUMULATIVE TOTAL
COMMON STOCK PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT EQUITY
---------- ---------- ---------- ---------- ---------- ----------
Balance, March 29, 1992 ............................ 26,553,731 $ 27 $ 85,669 $ 19,016 $ (110) $ 104,602
Issuance of common stock ......................... 1,823,990 1 7,480 -- -- 7,481
Tax benefits of stock option
transactions ................................... -- -- 582 -- -- 582
Translation adjustment ........................... -- -- -- -- (241) (241)
Net income ....................................... -- -- -- 5,336 -- 5,336
---------- ---------- ---------- ---------- ---------- ----------
Balance, March 28, 1993 ............................ 28,377,721 28 93,731 24,352 (351) 117,760
Issuance of common stock ......................... 2,027,831 2 9,241 -- -- 9,243
Issuance of common stock at $15.71 per
share, pursuant to public offering, net
of expenses of $366 ............................ 3,000,000 3 46,761 -- -- 46,764
Tax benefits of stock option
transactions ................................... -- -- 10,488 -- -- 10,488
Translation adjustment ........................... -- -- -- -- (53) (53)
Net income ....................................... -- -- -- 40,165 -- 40,165
---------- ---------- ---------- ---------- ---------- ----------
Balance, April 3, 1994 ............................. 33,405,552 33 160,221 64,517 (404) 224,367
Issuance of common stock ......................... 889,082 1 5,987 -- -- 5,988
Issuance of common stock at $25.675
per share, pursuant to public offering, net
of expenses of $261 ............................ 3,810,000 4 97,557 -- -- 97,561
Tax benefits of stock option
transactions ................................... -- -- 7,853 -- -- 7,853
Translation adjustment ........................... -- -- -- -- 460 460
Net income ....................................... -- -- -- 78,302 -- 78,302
---------- ---------- ---------- ---------- ---------- ----------
Balance, April 2, 1995 ............................. 38,104,634 $ 38 $ 271,618 $ 142,819 $ 56 $ 414,531
========== ========== ========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The consolidated financial statements include the
accounts of Integrated Device Technology, Inc. (IDT or the Company) and all of
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated.
Fiscal Year. The Company's fiscal year ends on the Sunday nearest March 31.
Fiscal years 1993 and 1995 each included 52 weeks. The fiscal year ended on
April 3, 1994 was a 53-week year. The fiscal year-end of certain of the
Company's foreign subsidiaries is March 31, and the results of their operations
as of their fiscal year end have been combined with the Company's results of
operations as of April 2, 1995. Transactions during the intervening period were
not significant.
Cash, Cash Equivalents and Short-term Investments. Cash equivalents are
highly liquid investments with original maturities of three months or less at
the time of acquisition or with guaranteed on-demand buy-back provisions.
Short-term investments are valued at amortized cost, which approximates market.
The Company adopted Statement of Financial Accounting Standards (FAS) 115,
"Accounting for Certain Investments in Debt and Equity Securities" effective
April 4, 1994 as required by that pronouncement. The Statement requires
reporting of investments as either held to maturity, trading or available for
sale. The cumulative effect of adopting FAS 115 was not material to the
Company's financial position or results of operations. The Company's investments
are classified as available-for-sale as of April 2, 1995. Investment securities
classified as available-for-sale are measured at market value and net unrealized
gains or losses are recorded as a separate component of stockholders' equity
until realized. Any gains or losses on sales of investments are computed on
specific identification. As of April 2, 1995, gross realized and unrealized
gains and losses on investments available for sale were not material. Management
determines the appropriate classification of debt and equity securities at the
time of purchase and reevaluates the classification at each reporting date.
AVAILABLE-FOR-SALE SECURITIES APRIL 2, 1995
--------------------------------- ---------------
(IN THOUSANDS)
U.S. Government agency securities ........................... $ 36,262
State and local governments ................................... 94,345
Corporate securities .......................................... 73,160
Others ........................................................ 8,215
-------
Total debt and equity securities .............................. 211,982
-------
Less cash equivalents ......................................... 110,108
-------
Short-term investments ........................................ $101,874
=======
Short-term investments of $47,949,000 mature in less than one year and
$53,925,000 have maturities between one and four years.
Inventory. Inventory is stated at the lower of standard cost (which
approximates actual cost on a first-in, first-out basis) or market. Market is
based upon estimated realizable value reduced by normal gross margin. Inventory
at April 2, 1995 and April 3, 1994 was:
APRIL 2, 1995 APRIL 3, 1994
--------------- ---------------
(IN THOUSANDS)
Inventory:
Raw materials .......................... $ 4,404 $ 2,834
Work-in-process ........................ 16,977 10,201
Finished goods ......................... 16,078 16,820
-------- --------
$ 37,459 $ 29,855
======== ========
Property, Plant and Equipment. Property, plant and equipment are stated at
cost. Depreciation is computed for property, plant and equipment using the
straight-line method over estimated useful lives of the assets. Leasehold
improvements and leasehold interests are amortized over the shorter of the
estimated useful lives of the assets or the remaining term of the lease.
Accelerated methods of depreciation are used for tax computations. Property,
plant and equipment at April 2, 1995 and April 3, 1994 were:
APRIL 2, 1995 APRIL 3, 1994
--------------- --------------
(IN THOUSANDS)
Property, plant and equipment:
Land ........................................... $ 6,076 $ 4,382
Machinery and equipment ........................ 332,680 248,095
Building and leasehold improvements ............ 40,576 40,063
Construction-in-progress ....................... 5,553 76
--------- ----------
384,885 292,616
Less accumulated depreciation and amortization ... 206,105 171,778
--------- ----------
$ 178,780 $ 120,838
========= ==========
Income Taxes. The Company accounts for income tax in accordance with
Statement of Financial Accounting Standards (FAS) 109, "Accounting for Income
Taxes". FAS 109 is an asset and liability approach which requires that the
expected future tax consequences of temporary differences between book and tax
bases of assets and liabilities be recognized as deferred tax assets and
liabilities.
Net Income Per Share. Net income per share is computed using the weighted
average number of shares of common stock outstanding during the year, plus
incremental common equivalent shares, if dilutive. Common stock equivalents
consist of stock options (using the treasury stock method).
Revenue Recognition. Revenue from product sales is generally recognized upon
shipment and a reserve is provided for estimated returns and discounts. A
portion of the Company's sales is made to distributors under agreements which
allow certain rights of return and price protection on products unsold by the
distributors. Related gross profits thereon are deferred until the products are
resold by the distributors.
Translation of Foreign Currencies. Accounts denominated in foreign currencies
have been translated in accordance with Statement of Financial Accounting
Standard (FAS) 52. The functional currency for the Company's sales operations is
the applicable local currency with the exception of the Hong Kong sales
subsidiary whose functional currency is the U.S. dollar. For subsidiaries whose
functional currency is the local currency, gains and losses resulting from
translation of these foreign currencies into U.S. dollars are accumulated in a
separate component of stockholders' equity. For the Malaysian manufacturing and
the Hong Kong sales subsidiaries, where the functional currency is the U.S.
dollar, gains and losses resulting from the process of remeasuring foreign
currency financial statements into U.S. dollars are included in income.
Aggregate net foreign currency transaction gains (losses) totaled $(93,000),
$(232,000) and $348,000 in fiscal 1993, 1994 and 1995, respectively. The effect
of foreign currency exchange rate fluctuations on cash balances held in foreign
currencies have not been material.
Fair Value Disclosures of Financial Instruments. The estimated fair value of
financial instruments has been determined by the Company, using available market
information and valuation methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value.
Accordingly, these estimates may not necessarily be indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies could have a
material effect on the estimated fair value amounts. The estimated fair value of
all of the Company's financial instruments at April 2, 1995 was not materially
different from the values presented in the consolidated balance sheet.
Concentration of Credit Risk and Off-Balance-Sheet Risk. The Company markets
high-speed integrated circuits to OEMs and distributors primarily in the United
States, Europe and the Far East. The Company performs on-going credit
evaluations of its customers' financial conditions and limits the amount of
credit extended when deemed necessary but generally does not require collateral.
Management believes that any risk of loss is significantly reduced due to the
diversity of its products, customers and geographic sales areas. The Company
maintains a provision for potential credit losses and write-offs of accounts
receivable were insignificant in each of the three years ended April 2, 1995.
The Company sells a significant portion of its products through third-party
distributors. As a result of the merger of two of the Company's national
distributors, the receivable balance from the merged company is significant in
aggregate for fiscal 1994 and 1995. If the financial condition and operations of
this distributor deteriorate below critical levels, the Company's operating
results could be adversely affected. This distributor's receivable balance
represented 6% and 11% of total accounts receivable at April 2, 1995, and April
3, 1994, respectively.
NOTE 2--DERIVATIVE FINANCIAL STATEMENTS
The Company has foreign subsidiaries which operate and sell or manufacture
the Company's products in various global markets. As a result, the Company is
exposed to changes in foreign currency exchange rates. The Company primarily
utilizes forward exchange contracts to hedge against the short- term impact of
foreign currency fluctuations on certain assets or liabilities denominated in
foreign currencies. The total amount of these contracts is offset by the
underlying assets denominated in foreign currencies. The gains or losses on
these contracts are included in income as the exchange rates change. Management
believes that these forward contracts do not subject the Company to undue risk
due to foreign exchange movements because gains and losses on these contracts
are offset by losses and gains on the underlying assets, and transactions being
hedged. These forward exchange contracts are considered identifiable hedges and
realized and unrealized gains and losses are deferred until settlement of the
underlying commitments. At April 2, 1995 deferred losses aggregated $1,160,000
and there were no deferred gains.
Foreign exchange hedge positions, generally with maturities of less than four
months are as follows:
APRIL 2, 1995 APRIL 3, 1994
--------------- ---------------
(IN THOUSANDS OF U.S. DOLLARS)
Japanese Yen--Sell ........................... $ 10,357 $ 7,234
Japanese Yen--Buy ............................ 1,898 --
British Pound Sterling--Sell ................. 992 534
British Pound Sterling--Buy .................. -- 140
German Deutsche Mark--Sell ................... 142 1,736
German Deutsche Mark--Buy .................... -- 84
French Franc--Sell ........................... 69 2,079
French Franc--Buy ............................ -- 168
Malaysian Ringgits--Sell ..................... 3,022 --
Malaysian Ringgits--Buy ...................... 2,003 --
-------- --------
$ 18,483 $ 11,975
======== ========
The Company is exposed to credit-related losses if counterparties to
financial instruments fail to perform their obligations. However, it does not
expect any counterparties, which presently have high credit ratings, to fail to
meet their obligations. The Company controls credit risk through credit
approvals, limits and monitoring procedures including the use of high credit
quality counterparties.
NOTE 3--OTHER ASSETS--INTANGIBLES
During fiscal 1993, IDT entered into various royalty-free patent
cross-license agreements. The patents licenses granted to IDT under these
agreements have been recorded at their cost of approximately $8,200,000 and are
being amortized on a straight-line basis over five years. The amortization
relating to patents licenses was $1,647,000 for both fiscal years 1995 and 1994.
NOTE 4--LONG-TERM OBLIGATIONS
The Company leases certain equipment under long-term leases or finances
purchases of equipment under bank financing agreements. Leased assets and assets
pledged under financing agreements which are included under property, plant and
equipment are as follows:
APRIL 2, 1995 APRIL 3, 1994
--------------- ---------------
(IN THOUSANDS)
Building improvements ........................ $ -- $ 6,907
Machinery and equipment ...................... 39,316 65,403
------- --------
Less accumulated depreciation
and amortization ............................ 27,396 43,949
------- --------
$11,920 $28,361
======= ========
The capital lease agreements and equipment financings are collateralized by
the related leased equipment and contain certain restrictive covenants.
Future minimum payments under capital leases and equipment financing
agreements, at varying interest rates (4.9%-11.0%) are as follows:
FISCAL YEAR (IN THOUSANDS)
-------------------------------------- --------------
1996 ..................................$ 5,845
1997 ................................... 3,023
1998 ................................... 1,480
1999 ................................... 3
2000 ................................... --
-------
Total minimum payments ................. 10,351
Less interest .......................... 948
-------
Present value of net minimum payments .. 9,403
Less current portion ................... 5,219
-------
$ 4,184
=======
During fiscal 1993, IDT recorded a long-term obligation in connection with
the dismissal of certain litigation and entering into a patent cross-license
agreement. The present values of the amount due at the end of the license term
were $7,581,000 and $7,471,000 at April 2, 1995 and April 3, 1994, respectively.
During the year, this amount payable has been reduced by an amount of royalty
income pursuant to certain guaranteed revenues realized on sales of IDT's
products. The Company is accreting $2,500,000 in future interest charges,
reflecting an 8% discount rate, from the recorded amount at April 2, 1995 to the
amount due at the end of the term using the effective interest method.
NOTE 5--LONG-TERM DEBT
Long-term debt consists of the following:
APRIL 2, 1995 APRIL 3, 1994
--------------- -------------
(IN THOUSANDS)
Mortgage payable bearing interest at 9.625%
due in monthly installments of $142,000
including interest through April 1, 2005
The note is secured by property and
improvements in San Jose, California ............ $10,922 $11,543
Term loan payable to a Malaysian bank at 8%
due in monthly installments of $54,000 .......... -- 791
------- -------
10,922 12,334
Less current portion ............................. 684 1,306
------- -------
$10,238 $11,028
======= =======
Principal payments required in the next five years and beyond are as follows
(in thousands): $684 (1996), $752 (1997), $828 (1998), $911 (1999) and $7,747
(2000 and beyond).
NOTE 6--LINES OF CREDIT
The Company's Malaysian subsidiary has unsecured revolving lines of credit
that allow borrowings up to $2,600,000 with three local banks. These lines have
no expiration date. At April 2, 1995 there were no outstanding borrowings
against these lines. The borrowing rate for these lines would be incurred at the
local bank's cost of funds plus 0.75% to 1% (7.25%-7.30% on April 2, 1995).
In fiscal 1995, the Company's Japanese subsidiary had a secured revolving
line of credit that allowed borrowings up to approximately $3,500,000. The line
of credit automatically extends until the Company requests termination. As of
April 2, 1995, no amounts were outstanding under this line of credit. The
borrowing rate for this line of credit is the local bank's short-term prime rate
existing at the borrowing date plus 0.2%. At April 2, 1995 this short-term
borrowing rate was 3.2%.
The Company also has foreign exchange facilities with several banks that
allow the Company to enter into foreign exchange contracts of up to $55,000,000,
of which $36,518,000 was available at April 2, 1995.
NOTE 7--COMMITMENTS
Lease Commitments. The Company leases most of its administrative and
manufacturing facilities under operating lease agreements which expire at
various dates through 2005. One facility was leased from a principal shareholder
and a director. The annual rent paid to this shareholder totaled approximately
$1,527,000, $1,396,000 and $1,396,000 in fiscal 1995, 1994 and 1993,
respectively. This stockholder lease expired during fiscal 1995 and was renewed
through June 2005.
In January 1995, the Company entered into a five-year $60 million Tax
Ownership Lease transaction to lease the wafer fabrication facility being
constructed for its use in Hillsboro, Oregon. This lease requires monthly
payments which vary based on the London Interbank Offered Rate (LIBOR) plus 0.3%
(6.425% at April 2, 1995). This lease also provides the Company with the option
of either acquiring the building at its original cost or arranging for the
building to be acquired at the end of the respective lease term. The Company's
obligations under the lease are secured by a line of credit trust deed on the
building and collateralized by cash and/or investments (restricted securities)
up to 105% of the lessor's construction costs until completion of the building
which is scheduled for the third quarter of fiscal 1996 and 85% thereafter.
Restricted securities collateralizing this lease were $10,500,000 at April 2,
1995 and are expected to reach approximately $50,000,000 upon the completion of
the facility. The Company is also
contingently liable under a first-loss clause for up to 85% of the constructed
costs of the building. In addition, the Company must maintain compliance with
certain financial convenants. Management believes that this contingent liability
will not have a material adverse effect on the Company's financial position or
results of operations.
The aggregate minimum rent commitments under all operating leases, including
the Hillsboro facility, which will be approximately $3,800,000 per year
beginning when the facility is completed, estimated to be the third quarter of
fiscal 1996, are as follows:
(FISCAL YEAR) (IN THOUSANDS)
-------------------- --------------
1996 ................$ 5,803
1997 ................. 7,567
1998 ................. 7,321
1999 ................. 7,309
2000 ................. 6,916
2001 and thereafter .. 6,861
-------
$41,777
=======
Rent expense for the years ended April 2, 1995, April 3, 1994 and March 28,
1993 totaled approximately $3,326,000, $3,488,000 and $3,303,000 respectively.
In March 1995, the Company paid a down payment of $925,000 on a conditional
purchase of land in the Philippines for the development of a test and
manufacturing facility. The total purchase commitment for this land is
$3,100,000.
As of April 2, 1995, five secured standby letters of credit were outstanding
totaling $8,635,000. Two letters of credit are held in connection with the
Company's workers compensation insurance and mature on June 30, 1995 and June
30, 1996. The other three letters of credit are required for international
purchases and expire in June and December of 1995.
NOTE 8--SALE OF COMMON STOCK
In December 1994, the Company completed a public offering of 3,810,000 shares
of its Common Stock and received net proceeds of $97,600,000. The Company will
use the net proceeds from the offering for construction of its eight-inch wafer
fabrication facility in Hillsboro, Oregon, expansion of existing wafer
fabrication facilities in San Jose and Salinas, California, acquisition of
capital equipment and general corporate purposes, including working capital.
NOTE 9--STOCKHOLDERS' EQUITY
Stock Option Plans. The Company has stock option plans under which key
employees, officers, directors and consultants may be granted options to
purchase shares of the Company's common stock at prices which are not less than
fair market value at the date of grant. Options granted are generally
exercisable in 25% increments each year beginning one year after the grant date.
At April 2, 1995, options for 1,383,018 shares were exercisable at an
aggregate exercise price of $6,990,000. At April 3, 1994, options for 1,172,000
shares were exercisable at an aggregate exercise price of $4,856,000.
Activity under the plans is summarized as follows:
OPTIONS OUTSTANDING
-------------------------------------------------------------------
AVAILABLE AGGREGATE
FOR ISSUANCE NUMBER PRICE PER SHARE PRICE
---------- ---------- -------------- -------------
Balance, March 29, 1992 .................. 2,073,500 4,815,572 $ 3.25-$ 13.25 $ 18,287,000
Additional authorization
Granted ................................ (1,358,323) 1,358,323 $3.625-$ 8.25 6,701,000
Surrendered, canceled or expired ....... 254,930 (447,625) $ 3.25-$ 13.25 (1,810,000)
Exercised .............................. -- (529,371) $ 3.25-$ 7.50 (1,933,000)
---------- ---------- -------------
Balance, March 28, 1993 .................. 970,107 5,196,899 $ 3.25-$12.125 21,245,000
Additional authorization ............... 975,000
Granted ................................ (1,850,234) 1,850,234 $ 7.00-$25.375 26,599,000
Surrendered, canceled or expired ....... 284,010 (287,423) $ 3.25-$22.125 (1,738,000)
Exercised .............................. -- (1,780,613) $ 3.25-$17.625 (6,695,000)
---------- ---------- -------------
Balance, April 3, 1994 ................... 378,883 4,979,097 $ 3.25-$25.375 $ 39,411,000
Additional authorization ............... 1,675,000
Granted ................................ (1,512,056) 1,512,056 $16.50-$39.688 41,595,000
Surrendered, canceled or expired ....... 287,012 (283,601) $ 3.25-$39.688 (4,903,000)
Exercised .............................. -- (738,579) $ 3.25-$28.125 (3,529,000)
---------- ---------- -------------
Balance, April 2, 1995 ................... 828,839 5,468,973 $ 3.25-$39.688 $ 72,574,000
========== ========== =============
Stock Purchase Plan. The Company has a stock purchase plan under which
employees and officers may purchase shares of the Company's common stock. The
purchase price at which shares may be purchased under this plan is 85% of the
lower of the fair market value on the first or last day of each quarterly plan
period. As of April 2, 1995 and April 3, 1994, 1,594,905 and 1,457,771 shares,
respectively, had been purchased by employees, net of repurchases by the
Company, under the terms of the plan agreements. At April 2, 1995, 430,095
shares were reserved and available for issuance under this plan.
Stockholder Rights Plan. In February 1992, the Board approved certain
amendments to the Company's Stockholder Rights Plan. Under the plan, the Company
declared a dividend of one preferred share purchase right (a "Right") for each
outstanding share of common stock. Each Right entitles the holder, under certain
circumstances, to purchase common stock of the Company with a value of twice the
exercise price of the Right. In addition, the Board of Directors may, under
certain circumstances, cause each Right to be exchanged for one share of common
stock or substitute consideration. The Rights are redeemable by the Company and
expire in 1998.
NOTE 10--EMPLOYEE BENEFITS PROFIT SHARING PLAN
Prior to September 24, 1993, under the Company's Profit Sharing Plan, the
Board of Directors could authorize semiannual contributions for the benefit of
employees of up to 10% of pre-tax earnings, before profit sharing. Half of the
annual contribution, net of expenses, was in the form of cash payments directly
to all domestic and Malaysian employees meeting certain service criteria, and
the residual half was contributed directly to the Company's Long-Term Incentive
Plan for the purchase of IDT Common Stock on behalf of the Company's employees.
The Company received approval from the IRS to terminate the Long-Term
Incentive Plan effective September 24, 1993. Effective this date, all shares
were 100% vested and no additional shares of IDT stock will be added to this
account. Beginning September 27, 1993, all IDT employees received an increase in
their cash profit sharing from 5% to 7% and the Company contributed an
additional 1% of pre-tax profits, divided equally among all domestic employees,
to the Company's 401(k) plan.
Administrative expenses are netted against the Profit Sharing Plan
contribution. Contributions for the years ended April 2, 1995, April 3, 1994
and March 28, 1993 for this plan were $8,360,000, $5,128,000 and $477,000
respectively. There were no contributions for the year ended March 29, 1992.
NOTE 11--INCOME TAXES
The components of income before provision for income taxes are as follows:
APRIL 2, APRIL 3, MARCH 28,
1995 1994 1993
---------- ---------- -----------
(IN THOUSANDS)
United States ............... $ 96,524 $ 44,808 $ 2,240
Foreign ..................... 7,879 5,398 4,038
--------- -------- ---------
$104,403 $ 50,206 $ 6,278
========= ======== =========
The provisions (benefits) for income taxes consist of the following:
APRIL 2, APRIL 3, MARCH 28,
1995 1994 1993
---------- ---------- -----------
(IN THOUSANDS)
Current income taxes (benefits):
United States ...................... $ 21,164 $ 14,699 $ (2,467)
State .............................. 3,902 4,039 --
Foreign ............................ 668 798 102
--------- -------- ---------
25,734 19,536 (2,365)
--------- -------- --------
Deferred (prepaid) income taxes:
United States ...................... (182) (5,379) 3,307
State .............................. 549 (4,116) --
--------- -------- --------
367 (9,495) 3,307
--------- -------- ----------
Provision for income taxes ........... $ 26,101 $ 10,041 $ 942
========= ======== ==========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of deferred assets and liabilities are as follows:
APRIL 2, APRIL 3,
1995 1994
-------- ---------
(IN THOUSANDS)
Deferred tax assets:
Deferred income on shipments to distributors ..... $ 8,768 $ 7,466
Non-deductible accruals and reserves ............. 8,980 13,527
Capitalized inventory and other expenses ......... 5,817 4,071
Capitalized research and development ............. 423 825
Other ............................................ 935 273
Refund receivables ............................... 1,520 2,451
-------- ---------
Total deferred tax asset ......................... 26,443 28,613
Valuation allowance .............................. -- (2,337)
-------- ---------
Net deferred tax asset ........................... 26,443 26,276
-------- ---------
Deferred tax liabilities:
Depreciation ..................................... (7,570) (8,517)
-------- ---------
Total deferred tax liability ..................... (7,570) (8,517)
-------- ---------
Net deferred tax asset ........................... $ 18,873 $ 17,759
======== =========
The provision for income taxes differs from the amount computed by applying
the U.S. statutory income tax rate of 35% for the years ended April 3, 1994 and
April 2, 1995 (34% for the year ended March 28, 1993) to income before the
provision (benefit) for income taxes as follows:
APRIL 2, APRIL 3, MARCH 28,
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
Provision at U.S. statutory rate ................$ 36,541 $ 17,572 $ 2,134
Earnings of foreign subsidiaries considered
permanently reinvested, less foreign taxes .... (2,444) (951) (1,701)
General business credits ........................ (6,504) (2,710) 0
Tax rate differential ........................... -- (1,167) 574
State tax, net of federal benefit ............... 3,245 3,558 --
Valuation allowance ............................. (2,337) (6,108) 414
Other ........................................... (2,400) (153) (479)
-------- -------- --------
Provision (benefit) for income taxes ............ $26,101 $ 10,041 $ 942
======== ======== ========
The Company's Malaysian subsidiary operates under a tax holiday which
extended through July 1993. Management believes it is likely that carryovers of
depreciation from the tax holiday period along with expected additional
depreciation grants will defer the time when the Malaysian subsidiary will first
begin to pay local taxes beyond its year ended April 2, 1995.
The Company's intention is to permanently reinvest its earnings in all of its
foreign subsidiaries, except its German subsidiary, Integrated Device
Technology, GmbH. Accordingly, U.S. taxes have not been provided on
approximately $26,900,000 of unremitted earnings, of which approximately
$23,200,000 were earned by the Company's Malaysian subsidiary. Upon distribution
of those earnings in the form of dividends or otherwise, the Company will be
subject to both U.S. income taxes and various foreign country withholding taxes.
NOTE 12--INDUSTRY SEGMENT, FOREIGN OPERATIONS AND SIGNIFICANT CUSTOMERS
IDT operates predominantly in one industry segment and is engaged in the
design, development, manufacture and marketing of high-performance integrated
circuits. No single customer or distributor accounted for more than 10% of net
revenues in fiscal 1993. During fiscal 1994, two of the Company's national
distributors became one entity. Sales through this national distributor
accounted for 13% and 15% of net revenues for fiscal 1995 and 1994,
respectively. If these two distributors had been a single entity during fiscal
1993, it would have accounted for 16% of IDT's total revenues.
Major operations outside the United States include manufacturing facilities
in Malaysia and sales subsidiaries in Japan, the Pacific Rim, and throughout
Europe.
At April 2, 1995, and April 3, 1994 total liabilities for operations outside
of the United States were $42,065,000 and $20,704,000, respectively.
The following is a summary extract of IDT's foreign operations by geographic
areas for fiscal 1995, 1994 and 1993:
TRANSFERS
SALES TO BETWEEN OPERATING
UNAFFILIATED GEOGRAPHIC INCOME IDENTIFIABLE
CUSTOMERS AREAS NET REVENUE (LOSS) ASSETS
---------- ---------- --------- ---------- ---------
(IN THOUSANDS)
Fiscal year ended April 2, 1995
United States ........................... $ 256,014 $ 60,266 $ 316,280 $ 111,394 $ 292,501
Japan ................................... 36,974 -- 36,974 582 11,973
Europe .................................. 85,180 7,566 92,746 9,524 30,788
Asia-Pacific ............................ 44,022 30,929 74,951 5,812 36,855
Eliminations ............................ -- (98,761) (98,761) (217) (48,797)
Corporate ............................... -- -- -- (27,580) 238,655
---------- ---------- --------- ---------- ---------
Consolidated ............................ $ 422,190 -- $ 422,190 $ 99,515 $ 561,975
========== =========== ========= ========== =========
Fiscal year ended April 3, 1994
United States ........................... $ 223,600 $ 42,500 $ 266,100 $ 70,788 $ 197,385
Japan ................................... 29,959 -- 29,959 (257) 8,033
Europe .................................. 60,064 3,274 63,338 677 8,182
Asia-Pacific ............................ 16,839 24,869 41,708 5,146 27,202
Eliminations ............................ -- (70,643) (70,643) (408) (24,470)
Corporate ............................... -- -- -- (23,677) 133,239
---------- ---------- --------- ---------- ---------
Consolidated ............................ $ 330,462 -- $ 330,462 $ 52,269 $ 349,571
========== =========== ========= ========== =========
Fiscal year ended March 28, 1993
United States ........................... $ 152,303 $ 23,585 $ 175,888 $ 22,159 $ 198,993
Japan ................................... 23,022 -- 23,022 (419) 5,651
Europe .................................. 33,907 2,847 36,754 374 8,028
Asia-Pacific ............................ 27,031 20,566 47,597 4,715 24,155
Eliminations ............................ -- (46,998) (46,998) (94) (24,081)
Corporate ............................... -- -- -- (15,729) 27,248
---------- ---------- --------- ---------- ---------
Consolidated ............................ $ 236,263 -- $ 236,263 $ 11,006 $ 239,994
========== =========== ========= ========== =========
Transfers between geographic areas are accounted for at amounts which are
generally above cost and consistent with the rules and regulations of governing
tax authorities. Such transfers are eliminated in the consolidated financial
statements. Operating income by geographic areas reflect foreign earnings
reported by the foreign entities and does not include an allocation of general
corporate expenses. Identifiable assets are those assets that can be directly
associated with a particular foreign entity and thus do not include assets used
for general corporate purposes: cash and cash equivalents, short-term
investments and prepaid income taxes.
NOTE 13--CROSS-LICENSE AGREEMENT
During fiscal 1993, the Company entered into a patent cross-license agreement
which obligated the payment of an amount of royalties dependent upon the level
of the Company's profitability. The amount of royalties accrued during fiscal
1994 was approximately $4,400,000 and has been included in other accrued
liabilities. The Company was not impacted by any further royalty payment from
this agreement beginning fiscal 1995.
SUPPLEMENTARY FINANCIAL INFORMATION
(UNAUDITED)
QUARTERLY RESULTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED APRIL 2, 1995
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER*
--------- ---------- ----------- ---------
Revenues............ $95,043 $95,585 $105,765 $125,797
Gross profit........ 54,632 55,574 60,528 71,804
Net income.......... 16,878 17,006 19,799 24,619
Net income
per share......... $ .47 $ .47 $ .54 $ .61
YEAR ENDED APRIL 3, 1994
Revenues............ $72,766 $80,295 $85,330 $92,071
Gross profit........ 33,948 39,967 45,419 51,501
Net income.......... 4,628 7,733 11,625 16,179
Net income
per share......... $ .15 $ .24 $ .35 $ .45
* represents a 14-week quarter in fiscal 1994.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is incorporated herein by reference the information required by this Item
included in the Company's Proxy Statement for the 1995 Annual Meeting of
Stockholders which will be filed with the Securities and Exchange Commission no
later than 120 days after the close of the fiscal year ended April 2, 1995, and
the information from the section entitled "Executive Officers of the Registrant"
in Part I, Item 4A of this Report.
ITEM 11. EXECUTIVE COMPENSATION
There is incorporated herein by reference the information required by this Item
included in the Company's Proxy Statement for the 1995 Annual Meeting of
Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is incorporated herein by reference the information required by this Item
included in the Company's Proxy statement for the 1995 Annual Meeting of
Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is incorporated herein by reference the information required by this Item
included in the Company's Proxy Statement for the 1995 Annual Meeting of
Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) 1. Financial Statements
The following consolidated financial statements are included in Item
8:
- Consolidated Balance Sheets at April 2, 1995 and April 3, 1994
- Consolidated Statements of Operations for each of the three fiscal
years in the period ended April 2, 1995
- Consolidated Statements of Cash Flows for each of the three fiscal
years in the period ended April 2, 1995
- Consolidated Statements of Stockholders' Equity for each of the
three fiscal years in the period ended April 2, 1995
- Notes to Consolidated Financial Statements
(a) 2. Financial Statements Schedules
No Financial Statement Schedules have been presented since the
required information is not present or not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial
statements or the notes thereto.
(a) 3. Listing of Exhibits
Exhibit No. Description Page
3.1* Restated Certificate of Incorporation (previously filed as
Exhibit 3A to Registration Statement on Form 8-B dated
September 23, 1987).
3.2* Certificate of Amendment of Restated Certificate of
Incorporation (previously filed as Exhibit 3(a) to the
Registration Statement on Form 8 dated March 28, 1989).
3.3* Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock (previously filed as
Exhibit 3(a) to the Registration Statement on Form 8 dated
March 28, 1989).
3.4* Bylaws dated January 25, 1993 (previously filed as Exhibit 3.4
to Annual Report on Form 10-K for the Fiscal Year Ended March
28, 1993).
4.1* Amended and Restated Rights Agreement dated as of February 27,
1992, between the Company and The First National Bank of
Boston (previously filed as Exhibit 4.1 to Current Report on
Form 8-K dated February 27, 1992).
4.2* Form of Indenture between the Company and The First National
Bank of Boston, as Trustee, including Form of Notes
(previously filed as Exhibit 4.6 to the S-3 Registration
Statement (File number 33-59443).
10.1* Lease for 1566 Moffet Street, Salinas, California, dated June
28, 1985 between the Company and Carl E. Berg and Clyde J.
Berg, dba Berg & Berg Developers (previously filed as Exhibit
10.7 to Form S-1 Registration Statement (File No. 33-3189)).
10.2* Assignment of Lease dated October 30, 1985 between the Company
and Synertek Inc. relating to 2975 Stender Way, Santa Clara,
California (previously filed as Exhibit 10.4 to Annual Report
on Form 10-K for the Fiscal Year Ended April 1, 1990).
10.3* Assignment of Lease dated October 30, 1985 between the Company
and Synertek Inc. relating to 3001 Stender Way, Santa Clara,
California (previously filed as Exhibit 10.5 to Annual Report
on Form 10-K for Fiscal Year Ended April 1, 1990).
10.4* Lease dated October 23, 1989 between Integrated Device
Technology International Inc. and RREEF USA FUND - III
relating to 2972 Stender Way, Santa Clara, California
(previously filed as Exhibit 10.6 to Annual Report on Form
10-K for the Fiscal Year Ended April 1, 1990).
10.5* First Deed of Trust and Assignment of Rents, Security
Agreement and Fixture Filing dated March 28, 1990 between the
Company and Santa Clara Land Title Company for the benefit of
The Variable Annuity Life Insurance Company relating to 2670
Seeley Avenue, San Jose, California (previously filed as
Exhibit 10.7 to Annual Report on Form 10-K for the Fiscal Year
Ended April 1, 1990).
10.6* Amended and Restated 1984 Employee Stock Purchase Plan
(previously filed as Exhibit 10.16 to the Quarterly Report on
Form 10-Q for the Fiscal Quarter Ended October 2, 1994).**
10.7* 1994 Stock Option Plan and related documents (previously filed
as Exhibit 10.17 to the Quarterly Report on Form 10-Q for the
Fiscal Quarter Ended October 2, 1994).**
10.8* 1994 Directors Stock Option Plan and related documents
(previously filed as Exhibit 10.18 to the Quarterly Report on
Form 10-Q for the Fiscal Quarter Ended October 2, 1994).**
10.9* Form of Indemnification Agreement between the Company and its
directors and officers(previously filed as Exhibit 10.68 to
Annual Report on Form 10-K for the Fiscal Year Ended April 2,
1989).**
10.10* Manufacturing, Marketing and Purchase Agreement between the
Company and MIPS computer Systems, Inc. dated January 16, 1988
(previously filed as Exhibit 10.12 to Annual Report on Form
10-K for the Fiscal Year Ended March 29, 1992) (Confidential
Treatment Granted).
10.11* Preferred Stock Purchase Agreement dated January 14, 1992
among the Company, Berg & Berg Enterprises, Inc. and Quantum
Effect Design, Inc. (previously filed as Exhibit 10.13 to
Annual Report on Form 10-K for the Fiscal Year Ended March 29,
1992).
10.12* Patent License Agreement between the Company and American
Telephone and Telegraph Company dated May 1, 1992 (previously
filed as Exhibit 19.1 to Quarterly Report on Form 10-Q for the
Quarter Ended June 28, 1992) (Confidential Treatment Granted).
10.13* Patent License Agreement dated September 22, 1992 between the
Company and Motorola, Inc. (previously filed as Exhibit 19.1
to Quarterly Report on Form 10-Q for the Quarter Ended
September 27, 1992) (Confidential Treatment Granted).
10.14* Agreement between the Company and Texas Instruments
Incorporated effective December 10, 1992, including all
related exhibits, among others, the Patent Cross-License
Agreement and the OEM Purchase Agreement (previously filed as
Exhibit 19.1 to Quarterly Report on Form 10-Q for the Quarter
Ended December 27, 1992) (Confidential Treatment Granted).
10.15* Series A Preferred Stock Purchase Agreement dated July 16,
1992 among Monolithic System Technology, Inc. and certain
purchasers (previously filed as Exhibit 10.12 to the Quarterly
Report on Form 10-Q for the Fiscal Quarter Ended October 2,
1994).
10.16* Series B Preferred Stock Purchase Agreement dated March 1994
among Monolithic System Technology, Inc. and certain
purchasers (previously filed as Exhibit 10.13 to the Quarter
Report on Form 10-Q for the Fiscal Quarter Ended October 2,
1994).
10.17* Series C Preferred Stock Purchase Agreement dated June 13,
1994 among Monolithic System Technology, Inc. and certain
purchasers (previously filed as Exhibit 10.14 to the Quarterly
Report on Form 10-Q for the Fiscal Quarter Ended October 2,
1994).
10.18* Domestic Distributor Agreement between the Company and Wyle
Laboratories, Inc. Electronic Marketing Group dated as of
April 15, 1994 (previously filed as Exhibit 10.15 to the
Quarterly Report on Form 10-Q for the Fiscal Quarter Ended
October 2, 1994).
10.19* Lease Extension and Modification Agreement between the Company
and Baccarat Silicon, Inc. dated as of September 1, 1994,
relating to 1566 Moffet Street, Salinas, California
(previously filed as Exhibit 10.16 to the Quarterly Report on
Form 10-Q for the Fiscal Quarter Ended October 2, 1994).
10.20 Promissory Note dated April 28, 1995 between L. Robert
Phillips and the Company and related document.
10.21 Sublease of the Land and Lease of the Improvement by and
between Sumitomo Bank Leasing and Finance, Inc. and the
Company dated January 27, 1995 and related agreements thereto.
21.1 Subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
27.1* Financial Data Schedule (EDGAR version only)(previously filed
as Exhibit 27.1 to the S-3 Registration Statement (File No.
33-59443)).
* These exhibits were previously filed with the Commission as indicated
and are incorporated herein by reference.
** These exhibits are management contracts or compensatory plans or
arrangements required to be filed pursuant to Item 14 (c) of Form
10-K.
(b) Reports on Form 8-K
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTEGRATED DEVICE TECHNOLOGY, INC.
Registrant
May 24, 1995 By: /s/ Leonard C. Perham
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ D. John Carey Chairman of the Board May 24, 1995
(D. John Carey)
/s/ Leonard C. Perham Chief Executive Officer May 24, 1995
(Leonard C. Perham) and Director (Principal
Executive Officer)
/s/ William D. Snyder Vice President, Chief May 24, 1995
(William D. Snyder) Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Carl E. Berg Director May 24, 1995
(Carl E. Berg)
/s/ John C. Bolger Director May 24, 1995
(John C. Bolger)
/s/ Federico Faggin Director May 24, 1995
(Federico Faggin)