<PAGE>
EXHIBIT 13.1
------------
FINANCIAL HIGHLIGHTS
(Dollar and share amounts in thousands, except per share amounts)
Fiscal Year Ended June 30,
------------------------------------
2000 1999 Change
-------- ------- -----------
For the year:
Net revenues $ 90,977 $59,797 52.1%
Operating income 17,870 9,162 95.0%
Net income 13,215 6,772 95.1%
Earnings per share:
Basic $ 0.63 $ 0.36 75.0%
Diluted 0.56 0.33 69.7%
At year-end:
Cash and short-term investments $140,664 $25,725 446.8%
Total assets 180,366 52,925 222.5%
Shareholders' equity 164,772 46,380 255.3%
Book value per share 6.99 2.26 209.3%
Shares used in computing earnings per share:
Basic 20,906 18,790 11.3%
Diluted 23,578 20,558 14.7%
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data of the Company is qualified by reference
to and should be read in conjunction with the Financial Statements, including
the Notes thereto, and Management's Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere herein. The Statement of
Income Data for each of the years in the three-year period ended June 30, 2000
and the Balance Sheet Data as of June 30, 2000 and 1999 are derived from, and
are qualified by reference to, the Financial Statements which are incorporated
by reference from the Company's 2000 Annual Report to Shareholders. The
Statement of Income Data for the years ended June 30, 1997, and 1996 and the
Balance Sheet Data as of June 30, 1998, 1997 and 1996 are derived from audited
financial statements not included herein. The selected financial data gives
effect to the two-for-one stock split effected on September 8, 2000.
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
--------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share data)
Statement of Income Data:
Net revenues $ 90,977 $59,797 $49,198 $33,166 $41,174
Cost of revenues 52,540 35,484 29,285 20,986 22,797
--------------------------------------------------------------------
Gross profit 38,437 24,313 19,913 12,180 18,377
Operating expenses:
Research and development 8,118 5,976 5,065 4,187 4,414
Selling, general and administrative 12,449 9,175 7,793 5,989 6,471
--------------------------------------------------------------------
Total operating expenses 20,567 15,151 12,858 10,176 10,885
--------------------------------------------------------------------
Income from operations 17,870 9,162 7,055 2,004 7,492
Other income (expense), net 3,263 1,098 738 351 (50)
--------------------------------------------------------------------
Income before income taxes 21,133 10,260 7,793 2,355 7,442
Provision for income taxes 7,918 3,488 2,629 777 2,732
--------------------------------------------------------------------
Net income $ 13,215 $ 6,772 $ 5,164 $ 1,578 $ 4,710
====================================================================
Basic earnings per share $0.63 $0.36 $0.36 $0.36 $1.10
====================================================================
Diluted earnings per share $0.56 $0.33 $0.27 $0.11 $0.31
====================================================================
Shares used in computing basic earnings per
share (1) 20,906 18,790 14,166 4,330 4,298
====================================================================
Shares used in computing diluted earnings per
share (1) 23,578 20,558 18,824 14,632 14,986
====================================================================
</TABLE>
<TABLE>
<CAPTION>
As of June 30,
--------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(in thousands)
Balance Sheet Data:
Working capital $153,273 $37,642 $32,751 $12,984 $12,145
Total assets 180,366 55,925 47,401 23,581 19,820
Long-term obligations --- --- --- --- ---
Shareholders' equity 164,772 46,380 38,611 16,795 15,095
</TABLE>
(1) See Note 1 of Notes to Financial Statements for an explanation of the method
used to determine the number of shares used in computing basic and diluted
earnings per share.
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Annual Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act if 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact are "forward-looking statements" for purposes of
these provisions, including any statements regarding projections of earnings,
revenues or other financial items; plans and objectives of management for future
operations; proposed new products or services; industry, technological or market
trends, our ability to address the need for application specific logic products;
our ability to respond rapidly to customer needs; expanding product sales;
future economic conditions or performance, and any statement of assumptions
underlying any of the foregoing. In some cases, forward-looking statements can
be identified by the use of terminology such as "may," "will," "expects,"
"plans," "anticipates," "estimates," "potential," or "continue," or the negative
thereof or other comparable terminology. Although we believe that the
expectations reflected in the forward-looking statements contained herein are
reasonable, there can be no assurance that such expectations or any of the
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the forward-looking
statements. Our future financial condition and results of operations, as well
as any forward-looking statements, are subject to risks and uncertainties,
including but not limited to the factors set forth in our Form 10-K under the
heading "Risk Factors" and elsewhere in this report. All forward-looking
statements and reasons why results may differ included in this Annual Report are
made as of the date hereof, and we assume no obligation to update any such
forward-looking statement or reason why actual results may differ.
OVERVIEW
Pericom Semiconductor Corporation was incorporated in June 1990. We completed
our first profitable fiscal year on June 30, 1993 and have been profitable in
each of our last thirty quarters. We design, manufacture and market high
performance digital, analog and mixed-signal integrated circuits used for the
transfer, routing, and timing of digital and analog signals within and between
computer, networking, data communications and telecommunications systems. Our
first volume sales occurred in fiscal 1993 and consisted exclusively of 5-volt
8-bit interface logic circuits. Since then we have expanded our product
offering by introducing the following products, among others:
. 3.3-volt 16-bit logic circuits and 8-bit digital switches in fiscal 1994;
. clock generators, 3.3-volt clock synthesizers and buffers, and high-speed
interface products for the networking industry in fiscal 1995;
. 32-bit logic, 16-bit digital switches and Pentium, 56K modem and laser
printer clock synthesizers in fiscal 1996;
. an analog switch family, mixed-voltage logic and a family of clock
generators in fiscal 1997;
. a family of advanced 3.3-volt CMOS logic; clock devices for Pentium and
Pentium II mobile computers; a complete solution for the PC100 memory
module standard; and a 3.3-volt bus switch family offering the fastest bus
switches on the market in fiscal 1998;
. three families of 2.5-volt zero-delay clock drivers for the networking and
telecommunications markets; a family of application-specific bus switches
and integrated clock generators to support the latest Pentium III and
Celeron Intel processors and a complete interface solution for the PC133
memory module standard in fiscal 1999; and
. in fiscal 2000 a crossbar switch used to switch large arrays of processors
and memories in backplane applications like server clusters, networking,
industrial computing and Storage Area Networks; a family of drivers,
receivers, and transceivers supporting the "Low Voltage Differential
Signaling" interface standard; the "SuperClock" programmable skew clock
family targeting networking, telecommunications and Storage Area Network
applications; a complete interface solution for the new double data rate
(DDR) SDRAM memory standard; a family of LVDS cross-point switches to route
signals in OC12 networks; and the AVC+ family of high speed interface
logic.
3
<PAGE>
As is typical in the semiconductor industry, we expect selling prices for our
products to decline over the life of each product. Our ability to increase net
revenues is highly dependent upon our ability to increase unit sales volumes of
existing products and to introduce and sell new products in quantities
sufficient to compensate for the anticipated declines in selling prices of
existing products. We seek to increase unit sales volume through increased wafer
fabrication capacity allocations from our existing foundries, qualification of
new foundries, increased number of die per wafer through die size reductions and
improved yields of good die through the implementation of advanced process
technologies, but there can be no assurance that we will be successful in these
efforts. In fiscal 2000, 1999 and 1998, respectively, approximately 75%, 85%,
and 90% of the wafers for our semiconductor products were manufactured by
Chartered. We qualified AMS as a wafer supplier in fiscal 1991, NJRC in fiscal
1995, TSMC in fiscal 1997 and Hyundai in 1998.
Declining selling prices will adversely affect gross margins unless we are able
to offset such declines with the sale of new higher margin products or achieve
commensurate reductions in unit costs. We seek to improve our overall gross
margin through the development and introduction of selected new products that we
believe will ultimately achieve higher gross margins. A higher gross margin for
a new product is typically not achieved until some period after the initial
introduction of the product -- after start-up expenses for that product have
been incurred and once volume production begins. In general, costs are higher at
the introduction of a new product due to the use of a more generalized design
schematic, lower economies of scale in the assembly phase and lower die yield.
Our ability to decrease unit cost depends on our ability to shrink the die sizes
of our products, improve yields, obtain favorable subcontractor pricing, and
make in-house test and assembly operations more productive and efficient. There
can be no assurance that these efforts, even if successful, will be sufficient
to offset declining selling prices.
Revenue from product sales is recognized upon shipment. Estimated costs for
exchanges, returns, price protection and other concessions are accrued in the
period that sales are recognized. Although we believe that, to date, we have
provided adequate allowances for exchanges, returns, price protection and other
concessions, and, to date, actual amounts incurred have not differed materially
from the allowances, there can be no assurance that actual amounts incurred will
not exceed our allowances, particularly in connection with the introduction of
new products, enhancements to existing products or price reductions.
RESULTS OF OPERATIONS
The following table sets forth certain statement of income data as a percentage
of net revenues for the periods indicated.
Fiscal Year Ended
June 30,
2000 1999 1998
----- ----- -----
Net revenues 100.0% 100.0% 100.0%
Cost of revenues 57.8 59.3 59.5
------------------------------------
Gross Margin 42.2 40.7 40.5
Operating expenses:
Research and development 8.9 10.0 10.3
Selling, general and administrative 13.7 15.3 15.9
------------------------------------
Total operating expenses 22.6 25.3 26.2
------------------------------------
Income from operations 19.6 15.4 14.3
Other income, net 3.6 1.8 1.5
------------------------------------
Income before income taxes 23.2 17.2 15.8
Provision for income taxes 8.7 5.9 5.3
------------------------------------
Net income 14.5% 11.3% 10.5%
====================================
4
<PAGE>
COMPARISON OF FISCAL 2000, 1999 AND 1998
NET REVENUES. Net revenues increased 52.1% from $59.8 million in fiscal 1999 to
$91.0 million in fiscal 2000. The increase in net revenues resulted from overall
strength in the semiconductor industry, continued market acceptance of our
existing products and sales of new products in our SiliconSwitch, SiliconClock
and SiliconInterface product lines, offset in part by a decline in the weighted
average selling price of all products. Net revenues increased 21.5% from $49.2
million in fiscal 1998 to $59.8 million in fiscal 1999. The increase in net
revenues was attributable to increased sales volume in our SiliconSwitch and
SiliconClock product lines, partially offset by a decrease in the sales volume
of the SiliconInterface product line and a decline in the weighted average
selling price for all products.
GROSS PROFIT. Gross profit increased 58.1% from $24.3 million in fiscal 1999 to
$38.4 million in fiscal 2000. Gross margin increased from 40.7% in fiscal 1999
to 42.2% in fiscal 2000. The increase in gross margin resulted from the
introduction and sale of new products at higher gross margins, a shift in mix
towards a higher margin product line, and cost reductions achieved through
reduced wafer, assembly and test costs. These margin increases were partially
offset by decreases in average selling prices in our various product lines.
Gross profit increased 22.1% from $19.9 million in fiscal 1998 to $24.3 million
in fiscal 1999 and gross margin for the same periods rose slightly from 40.5% to
40.7%. This increase was due to the introduction of higher gross margin new
products and ongoing reductions in wafer, assembly and test costs although these
improvements were offset to some extent by decreases in average selling prices
in our various product lines.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 35.8% from
$6.0 million in fiscal 1999 to $8.1 million in fiscal 2000. As a percentage of
net revenues, research and development expenses decreased from 10.0% in fiscal
1999 to 8.9% in fiscal 2000. Research and development expenses increased 18.0%
from $5.1 million in fiscal 1998 to $6.0 million in fiscal 1999 but decreased
slightly as a percentage of net revenues from 10.3% to 10.0%. The increase in
absolute dollars in research and development spending in each year was
attributable to development costs for new products in each of our product lines
and expansion of engineering staff and related infrastructure as we continued
our commitment to new product development. We believe that continued investment
in research and development is critical to attaining our strategic objectives,
and as a result we expect research and development expenses to increase in
absolute dollars in future periods.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses consist primarily of personnel and related overhead costs for sales,
marketing, finance, human resources and general management. Such costs include
advertising, sales materials, sales commissions, and other marketing and
promotional expenses. Selling, general and administrative expenses increased
35.7% from $9.2 million in fiscal 1999 to $12.4 million in fiscal 2000 but
decreased as a percentage of net revenues from 15.3% to 13.7%. Selling, general
and administrative expenses increased 17.7% from $7.8 million in fiscal 1998 to
$9.2 million in fiscal 1999 but decreased as a percentage of net revenue from
15.9% to 15.3%. The increase in expense in each year was primarily attributable
to increased staffing levels and increases in commissions and other incentives
due to sales and profitability growth.
OTHER INCOME, NET. Other income, net includes interest income and expense and
our allocated portion of net losses of Pericom Technology, Inc. ("PTI"), a
British Virgin Islands corporation based in Shanghai, People's Republic of
China. PTI was formed by Pericom and certain Pericom shareholders in 1994 to
develop and market semiconductors in China and certain other Asian countries.
See Note 4 of Notes to Financial Statements. Other income, net increased from
income of $1.1 million in fiscal 1999 to $3.3 million in fiscal 2000. Interest
income increased from $1.4 million in fiscal 1999 to $3.6 million in fiscal 2000
primarily as a result of investment of the net proceeds from our follow-on
public offering in March 2000. Our share of the net losses of PTI increased from
$288,000 in fiscal 1999 to $323,000 in fiscal 2000, excluding $35,000 in
goodwill amortization in fiscal 2000. Other income, net increased from income of
$738,000 in fiscal 1998 to $1,098,000 in fiscal 1999. Interest income increased
from $1.1 million in fiscal 1998 to $1.4 million in fiscal 1999 as a result of
investment of the net proceeds from our initial public offering. The proceeds
were invested for the full fiscal year in 1999 versus approximately 8 months in
fiscal 1998. Our share of the net losses of PTI declined from $345,000 in fiscal
1998 to $288,000 in fiscal 1999.
PROVISION FOR INCOME TAXES. The provision for income taxes was $7,918,000,
$3,488,000 and $2,629,000 in fiscal 2000, 1999 and 1998, respectively. In each
of these fiscal years, the provision for income taxes differed from the federal
statutory rate primarily due to state income taxes and the utilization of
research and development tax credits.
5
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Prior to our initial public offering in October 1997, we used proceeds from the
private sale of equity securities, bank borrowings and internal cash flow to
support our operations, acquire capital equipment and finance inventory and
accounts receivable growth. Operating activities provided approximately $18.2
million in cash in fiscal 2000, $4.1 million in fiscal 1999 and $3.6 million in
fiscal 1998.
Net cash used for investing activities was $5.5 million, $5.3 million and $20.9
million in fiscal 2000, 1999 and 1998, respectively. We made capital
expenditures of approximately $4.2 million in fiscal 2000, $3.0 million in
fiscal 1999 and $2.9 million in fiscal 1998. We expect to spend approximately
$4.0 million in fiscal 2001 to acquire capital equipment, primarily for research
and development and manufacturing capacity expansion, and for leasehold
improvements associated with facilities needs. We used the $100.9 million net
proceeds from our follow-on public offering in March 2000 to purchase short-term
money market funds and in fiscal 1998 the initial public offering provided net
proceeds of $17.1 million, which was used to purchase short-term investments.
As of June 30, 2000, our principal source of liquidity included cash, cash
equivalents and short-term investments of approximately $140.7 million. We
believe that cash generated from operations and existing cash balances will be
sufficient to fund necessary purchases of capital equipment and to provide
working capital at least through the next 12 months. However, there can be no
assurance that future events will not require us to seek additional capital
sooner or, if so required, that adequate capital will be available at all or on
terms acceptable to us.
A portion of our cash may be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
From time to time, in the ordinary course of business, we may evaluate potential
acquisitions of such businesses, products or technologies.
MARKET RISK DISCLOSURE
At June 30, 2000, our investment portfolio consisted of fixed income securities,
excluding those classified as cash equivalents, of $16.5 million (see Note 1 of
Notes to Financial Statements). These securities are subject to interest rate
risk and will decline in value if market interest rates increase. For example,
if market interest rates were to increase immediately and uniformly by 10% from
levels as of June 30, 2000, the decline in the fair value of the portfolio would
not have a material effect on our results of operations over the next fiscal
year. Due to the short duration and conservative nature of these instruments, we
do not believe that we have a material exposure to interest rate risk.
YEAR 2000 DISCLOSURE
The date is now past January 1, 2000 and we have not experienced any immediate
adverse impact from the transition to the year 2000. However, we cannot provide
assurance that our suppliers and customers have not or will not be affected in a
manner that is not yet apparent. We use software, computer technology and other
services internally developed and provided by third-party vendors that may fail
due to the year 2000 phenomenon. This failure may involve significant time and
expense, and uncorrected problems could seriously harm our business. In
addition, the potential failure of our customers to ensure that their operations
are year 2000 compliant could have an adverse effect on them, which in turn
could limit their ability to use our products and services or process our
invoices in a timely manner. Furthermore, customers or potential customers may
delay purchasing our products and services to the extent such customers or
potential customers are required to devote resources to resolving the year 2000
problem. Therefore, we will continue to monitor year 2000 compliance and the
year 2000 compliance of our suppliers and customers.
6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Pericom Semiconductor Corporation:
We have audited the accompanying balance sheets of Pericom Semiconductor
Corporation as of June 30, 2000 and 1999, and the related statements of income,
shareholders' equity and comprehensive income, and of cash flows for each of the
three years in the period ended June 30, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Pericom Semiconductor Corporation at June
30, 2000 and 1999, and the results of its operations and its cash flows for each
of the three years in the period ended June 30, 2000, in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
San Jose, California
July 25, 2000 (September 8, 2000 as to the third paragraph of Note 1)
7
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30,
---------------------------
2000 1999
-------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $124,115 $ 8,328
Short-term investments 16,549 17,397
Accounts receivable:
Trade (net of allowances of $3,343 and $2,570) 12,012 9,719
Other 377 346
Inventories 13,166 9,835
Prepaid expenses and other current assets 209 582
Deferred income taxes 1,099 356
----------------------------
Total current assets 167,527 46,563
Property and equipment--net 8,246 6,509
Investment in and advances to joint venture 4,287 2,611
Other assets 306 242
----------------------------
Total $180,366 $55,925
============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,983 $ 7,295
Accrued liabilities 3,561 1,604
Income taxes payable 1,710 22
----------------------------
Total current liabilities 14,254 8,921
Commitments and contingencies (Notes 8 and 9)
Deferred income taxes 1,340 624
Shareholders' equity:
Preferred stock, 5,000,000 shares authorized; none
issued And outstanding --- ---
Common stock, 60,000,000 shares authorized;
Shares outstanding: 2000, 24,493,994; 1999,
19,038,482 130,834 25,600
Accumulated other comprehensive loss (90) (33)
Retained earnings 34,028 20,813
----------------------------
Total shareholders' equity 164,772 46,380
----------------------------
Total $180,366 $55,925
============================
</TABLE>
See notes to financial statements.
8
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Net revenues $90,977 $59,797 $49,198
Cost of revenues 52,540 35,484 29,285
--------------------------------------------------
Gross profit 38,437 24,313 19,913
Operating expenses:
Research and development 8,118 5,976 5,065
Selling, general and administrative 12,449 9,175 7,793
--------------------------------------------------
Total 20,567 15,151 12,858
--------------------------------------------------
Income from operations 17,870 9,162 7,055
Equity in net loss/goodwill amortization of joint (358) (288) (345)
venture
Interest income 3,621 1,386 1,083
--------------------------------------------------
Income before income taxes 21,133 10,260 7,793
Provision for income taxes 7,918 3,488 2,629
--------------------------------------------------
Net income $13,215 $ 6,772 $ 5,164
==================================================
Basic earnings per share $ 0.63 $ 0.36 $ 0.36
==================================================
Diluted earnings per share $ 0.56 $ 0.33 $ 0.27
==================================================
Shares used in computing basic earnings per share 20,906 18,790 14,166
==================================================
Shares used in computing diluted earnings per share 23,578 20,558 18,824
==================================================
</TABLE>
See notes to financial statements.
9
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Other Total
Preferred Stock Common Stock Retained Comprehensive Shareholders' Comprehensive
------------------ ----------------
Shares Amount Shares Amount Earnings (Loss) Equity Income
-------- -------- ------ -------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, June 30, 1997 9,225 $ 7,717 4,692 $ 201 $ 8,877 --- $ 16,795
Net income and
comprehensive income --- --- --- --- 5,164 --- 5,164 $ 5,164
============
Initial public offering of
common stock, net of
issuance costs of $740 --- --- 4,000 16,000 --- --- 16,000
Conversion of
preferred stock to common stock (9,225) (7,717) 9,225 7,717 --- --- ---
Issuance of common stock under
employee stock plans --- --- 655 495 --- --- 495
Tax benefit resulting from
stock option transactions --- --- --- 157 --- --- 157
-------------------------------------------------------------------------------------------------
BALANCES, June 30, 1998 --- --- 18,572 24,570 14,041 --- 38,611
Net income --- --- --- --- 6,772 --- 6,772 $ 6,772
Unrealized gain/(loss) on
investments --- --- --- --- --- (33) (33) (33)
------------
Comprehensive Income --- --- --- --- --- --- --- $ 6,739
============
Issuance of common stock under
employee stock plans --- --- 466 737 --- --- 737
Tax benefit resulting from
stock option transactions --- --- --- 293 --- --- 293
-------------------------------------------------------------------------------------------------
BALANCES, June 30, 1999 --- --- 19,038 25,600 20,813 (33) 46,380
Net income --- --- --- --- 13,215 13,215 $13,215
Unrealized gain/(loss) on
investments --- --- --- --- --- (57) (57) (57)
------------
Comprehensive Income --- --- --- --- --- --- --- $13,158
============
Issuance of common stock --- ---
In secondary offering net of
issuance costs of $427 4,400 100,949 --- --- 100,949
Issuance of common stock under
employee stock plans --- --- 1,056 2,200 --- --- 2,200
Tax benefit resulting from
stock option transactions --- --- --- 2,085 --- --- 2,085
-------------------------------------------------------------------------------------------------
BALANCES, June 30, 2000 --- --- 24,494 $130,834 $34,028 $(90) $164,772
=================================================================================================
</TABLE>
See notes to financial statements.
10
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,215 $ 6,772 $ 5,164
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and amortization 2,470 1,601 1,144
Loss on disposal of assets 2 --- 10
Equity in net loss/Goodwill amortization of joint venture 358 288 345
Deferred income taxes (27) 278 141
Changes in assets and liabilities:
Accounts receivable (2,324) (4,435) (2,284)
Inventories (3,331) (918) (2,735)
Prepaid expenses and other current assets 372 (429) (4)
Accounts payable 1,688 1,178 1,133
Accrued liabilities 1,958 (252) 652
Income taxes payable 3,773 (3) 64
------------------------------------
Net cash provided by operating activities 18,154 4,080 3,630
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (4,209) (2,988) (2,857)
Purchase of short-term investments (6,209) (13,054) (25,203)
Maturities of short-term investments 7,000 12,682 8,145
(Increase) decrease in other assets (64) (49) (260)
Advances to and investments in investee (2,034) (1,853) (747)
Proceeds from sale of property and equipment --- --- 4
------------------------------------
Net cash used for investing activities (5,516) (5,262) (20,918)
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net of issuance costs 103,149 737 16,495
------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 115,787 (445) (793)
CASH AND CASH EQUIVALENTS:
Beginning of period 8,328 8,773 9,566
------------------------------------
End of period $124,115 $ 8,328 $ 8,773
====================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes $ 4,171 $ 3,210 $ 2,381
------------------------------------
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES:
Tax benefit from stock option transactions $ 2,085 $ 293 $ 157
====================================
</TABLE>
See notes to financial statements.
11
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 2000, 1999 AND 1998
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Pericom Semiconductor Corporation (the "Company") was incorporated in June 1990.
The Company designs, manufactures and markets high performance digital, analog
and mixed-signal integrated circuits used for the transfer, routing, and timing
of digital and analog signals within and between computer, networking, datacom
and telecom systems.
FINANCIAL STATEMENT ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses during the
reporting period. Actual results could differ from those estimates.
BASIS OF PRESENTATION -- All share amounts and per share calculations in the
accompanying financial statements give effect to the two-for-one stock split
effected on September 8, 2000.
CASH EQUIVALENTS -- The Company considers all highly liquid debt instruments
purchased with a remaining maturity of three months or less to be cash
equivalents. The recorded carrying amounts of the Company's cash and cash
equivalents approximate their fair market value.
SHORT-TERM INVESTMENTS -- The Company's policy is to invest in short-term
instruments with investment grade credit ratings. Generally, such investments
have contractual maturities of up to three years. The Company classifies its
short-term investments as "available-for-sale" securities and the cost of
securities sold is based on the specific identification method. At June 30, 2000
short-term investments, and any difference between the fair market value and the
underlying cost of such investments, consisted of the following:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------------- ------------------ ---------------------- ----------------
<S> <C> <C> <C> <C>
Corporate bonds and notes $ 9,427,000 $ --- $(101,000) $ 9,326,000
U.S. government securities 4,012,000 11,000 --- 4,023,000
Equities 500,000 --- --- 500,000
Certificates of deposit 2,700,000 --- --- 2,700,000
--------------------------------------------------------------------------------
$16,639,000 $11,000 $(101,000) $16,549,000
================================================================================
</TABLE>
INVENTORIES are stated at the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT are stated at cost. Depreciation and amortization are
computed using the straight-line method over estimated useful lives of three to
five years.
INVESTMENT IN JOINT VENTURE is accounted for using the equity method. The
difference between the carrying value and the underlying equity in net assets of
the investment is being amortized over five years (see Note 4).
LONG-LIVED ASSETS -- The Company evaluates long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company's policy is to review the
recoverability of all intangible assets based upon undiscounted cash flows on an
annual basis at a minimum, and in addition, whenever events or changes indicate
that the carrying amount of an asset may not be recoverable.
12
<PAGE>
INCOME TAXES --The Company accounts for income taxes under SFAS No. 109,
"Accounting for Income Taxes," which requires an asset and liability approach to
recording deferred taxes.
STOCK-BASED COMPENSATION -- The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
REVENUE RECOGNITION -- Revenue from product sales is recognized upon shipment.
Estimated costs for sales returns, price protection, stock rotation and other
allowances are accrued in the period that sales are recognized. Domestic
distributors are permitted a return allowance of up to 10% of their net
purchases every six months. Revenue from design services, included in net
revenues, is recognized on the completion of project milestones set forth in the
related agreements.
FISCAL PERIOD -- The Company's fiscal years in the accompanying financial
statements have been shown as ending on June 30. Fiscal years 2000, 1999, and
1998 ended on July 1, 2000, July 3, 1999 and June 27, 1998, respectively. Fiscal
2000 and fiscal 1998 each included 52 weeks and fiscal 1999 included 53 weeks.
CONCENTRATION OF CREDIT RISK AND CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES ---
The Company sells its products primarily to large organizations and generally
does not require its customers to provide collateral or other security to
support accounts receivable. The Company maintains allowances for estimated bad
debt losses.
The Company participates in a dynamic high technology industry and believes that
changes in any of the following areas could have a material adverse effect on
the Company's future financial position or results of operations: advances and
trends in new technologies; competitive pressures in the form of new products or
price reductions on current products; changes in product mix; changes in the
overall demand for products and services offered by the Company; changes in
customer relationships; litigation or claims against the Company based on
intellectual property, patent, product, regulatory or other factors; risks
associated with changes in domestic and international economic and/or political
conditions or regulations; availability of necessary components; and the
Company's ability to attract and retain employees necessary to support its
growth.
COMPREHENSIVE INCOME -- In fiscal year 1999, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income", which requires an enterprise to report, by major components and as a
single total, the change in net assets during the period from nonowner sources.
Comprehensive income for the years ended June 30, 2000, 1999 and 1998 has been
disclosed within the statement of shareholders' equity and comprehensive income.
RECENTLY ISSUED ACCOUNTING STANDARDS -- In June 1998, SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities", was issued which defines
derivatives, requires all derivatives be carried at fair value, and provides for
hedging accounting when certain conditions are met. This statement, as amended,
is effective for all fiscal quarters of fiscal years beginning after June 15,
2000. The Company does not believe adoption of this statement will have a
material impact on the Company's financial statements.
In December 1999, the Securities and Exchange Commission (SEC) released Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." This bulletin summarizes certain interpretations and practices
followed by the Division of Corporation Finance and Office of the Chief
Accountant of the SEC in administering the disclosure requirements of the
Federal securities laws in applying generally accepted accounting principles to
revenue recognition in financial statements. Application of the accounting and
disclosures desired in the bulletin is required in the fourth quarter of fiscal
2001. Although the Company has not fully assessed the implications of SAB No.
101, management does not believe adoption of this bulletin will have significant
impact on the Company's consolidated financial position, results of operations
or cash flows.
In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation - an
Interpretation of APB
13
<PAGE>
Opinion No. 25." FIN 44 clarifies the application of APB Opinion No. 25, the
criteria for determining whether a plan qualifies as a noncompensatory plan, the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and the accounting for an exchange of stock
compensation awards in a business combination. The Company is currently
evaluating FIN 44 and does not expect that the pronouncement will have a
material effect on its financial position , results of operations or cash flows.
RECLASSIFICATIONS -- Certain items in the 1999 and 1998 financial statements
have been reclassified to conform with the 2000 presentation. Such
reclassifications had no impact on net income or shareholders' equity.
EARNINGS PER SHARE -- Basic earnings per share is based upon the weighted
average number of common shares outstanding. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock.
Basic and diluted earnings per share for each of the three years in the period
ended June 30, 2000 are as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------------------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Net income $13,215 $ 6,772 $ 5,164
===============================================
Computation of common shares outstanding - basic earnings per share:
Weighted average common stock 20,906 18,790 14,166
===============================================
Basic earnings per share $ 0.63 $ 0.36 $ 0.36
===============================================
Computation of common shares outstanding - diluted earnings per
share:
Weighted average common stock 20,906 18,790 14,166
Weighted average preferred shares --- --- 3,144
Dilutive options using the treasury stock method 2,672 1,768 1,514
------------------------------------------------
Shares used in computing diluted earnings per share 23,578 20,558 18,824
================================================
Diluted earnings per share $ 0.56 $ 0.33 $ 0.27
================================================
</TABLE>
Options to purchase 236,472 shares of Common stock at prices ranging from $15.50
to $35.00 and options to purchase 448,000 shares of Common Stock at prices
ranging from $4.07 to $4.82 were outstanding as of June 30, 2000 and June 30,
1998, respectively, but not included in the computation of diluted net income
per share because the options' exercise prices were greater that the average
market price of the common shares as of such dates and therefore, would be anti-
dilutive under the treasury stock method. There were no anti-dilutive options at
June 30, 1999.
2. INVENTORIES
Inventories consist of (in thousands):
As of June 30,
-----------------------------
2000 1999
------ ------
Finished goods $ 4,403 $2,620
Work-in-process 6,285 5,972
Raw materials 2,478 1,243
-----------------------------
$13,166 $9,835
=============================
14
<PAGE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of (in thousands):
As of June 30,
----------------
2000 1999
------- -------
Machinery and equipment $ 8,788 $ 5,705
Computer equipment and software 5,720 3,631
Furniture and fixtures 451 413
Leasehold improvements 398 332
Construction-in-progress 246 1,383
----------------
Total 15,603 11,464
Accumulated depreciation and amortization (7,357) (4,955)
----------------
Property and equipment - net $ 8,246 $ 6,509
================
Construction-in-progress is primarily leasehold improvements in process, and
machinery and equipment that has not been accepted.
4. INVESTMENT IN JOINT VENTURE
In fiscal 1994, the Company purchased 1,500,000 shares of Series A Convertible
Preferred Stock issued by Pericom Technology, Inc. ("PTI") for $750,000 (an
18.4% equity investment at the time). Such preferred stock is convertible at the
option of the Company into 1,500,000 shares of PTI common stock, does not bear
dividends, has a liquidation preference up to the purchase price and votes based
on the number of common shares into which it is convertible. In fiscal 2000, the
Company purchased an additional 909,090 shares of Series B Convertible Preferred
Stock for $1 million and converted $3.5 million in debt to purchase an
additional 3,181,818 shares of Series B Convertible Preferred Stock. The Series
B issue has liquidation preference over all other classes of stock. With the
fiscal 2000 additional investment, the Company now has a 43.3% equity investment
in PTI. After the additional investment there was approximately a $1.7 million
difference between the carrying value and the underlying equity in net assets of
the investment which is being amortized over five years. Amortization expense
was approximately $35,000 for the year ended June 30, 2000. The investment in
PTI is accounted for using the equity method due to the Company's significant
influence over its operations. In addition, several of the directors of the
Company are also directors of PTI, and certain shareholders of the Company are
also shareholders of PTI. PTI was incorporated in 1994 and in 1995 established a
design center and sales office to pursue opportunities and participate in joint
ventures in China. During the years ended June 30, 1998, 1999 and 2000, the
Company sold $61,000, $65,000 and $29,000 respectively, in services to PTI.
During the years ended June 30, 1998, 1999 and 2000, the Company purchased
$61,000, $72,000 and $890,000 in services from PTI, respectively. In fiscal 2000
the Company began purchasing test and other manufacturing services from PTI. At
June 30, 1998, 1999 and 2000, $846,000, $2,611,000 and $233,000 respectively,
was owed to the Company by PTI for reimbursement of certain administrative
expenses incurred by the Company on behalf of PTI and for advances made to PTI
by the Company. Condensed financial information of the joint venture at June 30,
2000 and June 30, 1999 is as follows (in thousands):
2000 1999
------- -------
Total assets $ 3,926 $ 2,065
Total liabilities 285 2,815
Total equity 3,641 (750)
Revenue $ 1,105 $ 531
Cost of revenues 609 229
----------------
Gross profit 496 302
Expenses 1,649 1,741
----------------
Operating Loss (1,153) (1,439)
Interest and other income/(expense) (27) (77)
----------------
Net loss $(1,180) $(1,516)
================
15
<PAGE>
5. ACCRUED LIABILITIES
Accrued liabilities consist of (in thousands):
As of June 30,
----------------------
2000 1999
---- ----
Accrued compensation $2,066 $ 908
External sales representative commissions 975 572
Other accrued expenses 520 124
------------------
$3,561 $1,604
==================
6. SHAREHOLDERS' EQUITY
In October 1997, the Company completed an initial public offering of 4,000,000
shares of its common stock (selling shareholders sold an additional 1,000,000
shares in the offering) at a price of $4.50 per share. Concurrent with the
offering, 9,225,000 shares of convertible preferred stock were converted into
9,225,000 shares of common stock. In March 2000, the Company completed a
secondary public offering of 4,400,000 shares of its common stock at a price of
$24.25 per share.
PREFERRED STOCK
The number of shares of preferred stock authorized to be issued is 5,000,000.
The Board of Directors is authorized to issue the preferred stock from time to
time in one or more series and to fix the rights, privileges and restrictions of
the shares of such series. As of June 30, 2000, no shares of preferred stock
were outstanding.
STOCK OPTION PLANS
Under the Company's 1990 Stock Option Plan and 1995 Stock Option Plans,
incentive and nonqualified stock options to purchase up to 5,222,706 shares of
common stock have been reserved at June 30, 2000 for issuance to employees,
officers, directors, independent contractors and consultants of the Company.
The options may be granted at not less than the fair value and not less than 85%
of the fair value on grant date for incentive stock options and nonqualified
stock options, respectively. Options vest over periods of up to 48 months as
determined by the Board of Directors. Options granted under the Plans expire 10
years from grant date.
16
<PAGE>
Activity in the Company's option plans is summarized below:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
------ -----
<S> <C> <C>
Balance June 30, 1997 (1,396,616 exercisable at a weighted
average price of $0.57) 2,393,230 $ 0.85
Granted (weighted average fair value of $1.30 per share) 1,671,078 3.17
Exercised (598,628) 0.49
Canceled (277,032) 1.67
Balance June 30, 1998 (1,278,000 exercisable at a weighted 3,188,648 2.07
average price of $1.03)
Granted (weighted average fair value of $2.12 per share) 2,585,350 3.11
Exercised (275,808) 1.03
Canceled (1,652,500) 3.57
--------------------------
Balance, June 30, 1999 (1,769,834 exercisable at a weighted 3,845,690 2.20
average price of $1.50)
Granted (weighted average fair value of $14.09 per share) 1,805,000 16.33
Exercised (836,154) 1.94
Canceled (287,672) 4.37
--------------------------
Balance, June 30, 2000 4,526,864 $ 7.76
============================
</TABLE>
At June 30, 2000, 695,842 shares were available for future issuance under the
option plans.
In fiscal 1999, the Company canceled options to purchase 1,277,950 shares of
common stock with exercise prices ranging from $2.63 to $4.82 per share and
issued replacement options with an exercise price of $2.40 per share.
Additional information regarding options outstanding as of June 30, 2000 is as
follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (Years) Price Exercisable Price
------ ----------- ------------ ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$0.10 - 2.00 884,752 5.19 $ 0.97 805,906 $ 0.91
$2.20 - 2.20 380,000 7.06 2.20 285,210 2.20
$2.28 - 2.40 910,466 7.77 2.40 402,938 2.40
$2.44 - 5.25 877,122 8.49 3.97 310,720 3.80
$5.50 - 20.85 771,024 9.40 11.71 67,518 9.35
$20.94 - 35.00 703,500 9.86 26.63 14,356 24.02
-----------------------------------------------------------------------------------------------------------------------------
$0.10 - 35.00 4,526,864 7.95 $ 7.76 1,886,648 $ 2.38
=============================================================================================================================
</TABLE>
1997 EMPLOYEE STOCK PURCHASE PLAN
In 1997, the Company approved the 1997 Employee Stock Purchase Plan (the "Stock
Purchase Plan"), which allows eligible employees of the Company to purchase
shares of Common Stock through payroll deductions. A total of 600,000 shares of
the Company's Common Stock has been reserved for issuance under the Stock
Purchase Plan. The Stock Purchase Plan permits eligible employees to purchase
Common Stock at a discount through payroll deductions,
17
<PAGE>
during 24-month purchase periods, except that the first purchase period will be
27 months. Each purchase period will be divided into eight consecutive three-
month accrual periods, except that the first accrual period will be six months.
The price at which stock is purchased under the Stock Purchase Plan is equal to
85% of the fair market value of the Common Stock on the first day of the
purchase period or the last day of the accrual period, whichever is lower. The
initial purchase period commenced upon the effective date of the Company's
initial public offering of Common Stock in October 1997 and ended on January 30,
2000. The maximum number of shares of Common Stock that any employee may
purchase under the Stock Purchase Plan during any accrual period is 1,000
shares. During fiscal year 2000, 1999 and 1998, respectively, the Company issued
219,358, 189,876 and 57,658 shares of common stock under the Stock Purchase Plan
at a weighted average price of $2.63, $2.39 and $3.56, respectively. The
weighted average fair value of the fiscal 2000, 1999, and 1998 awards for each
year was $2.21, $1.15 and $1.50 per share.
ADDITIONAL STOCK PLAN INFORMATION
As discussed in Note 1, the Company continues to account for its stock-based
awards using the intrinsic value method in accordance with Accounting Principles
Board No. 25, "Accounting for Stock Issued to Employees," and its related
interpretations. Accordingly, no compensation expense has been recognized in the
financial statements for employee stock arrangements.
SFAS No. 123, "Accounting for Stock-Based Compensation," (SFAS 123), requires
the disclosure of pro forma net income as if the Company had adopted the fair
value method as of the beginning of fiscal 1996. Under SFAS 123, the fair value
of stock-based awards to employees is calculated through the use of option
pricing models, even though such models were developed to estimate the fair
value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the terms of the Company's stock
option awards. These models also require subjective assumptions, including
expected time to exercise, which greatly affect the calculated values. The
Company's calculations were made using the Black-Scholes option pricing model
with the following weighted average assumptions for the Company's stock option
grants:
2000 1999 1998
---- ---- ----
Expected life 5 years 5 years 5 years
Risk-free interest rate 6.21% 5.25% 5.5%
Volatility 91% 83% 75%
Dividend yield 0.00% 0.00% 0.00%
The following weighted average assumptions are included in the estimated grant
date fair value calculations for rights to purchase stock under the Stock
Purchase Plan:
2000 1999 1998
---- ---- ----
Expected life 3 months 3 months 3-6 months
Risk-free interest rate 4.7-5.8% 4.3-4.7% 5.5%
Volatility 66%-99% 66%-88% 76%
Dividend yield 0.00% 0.00% 0.00%
18
<PAGE>
PRO FORMA NET INCOME AND EARNINGS PER SHARE
Had the Company amortized to expense the computed fair values of the 2000, 1999
and 1998 awards under the 1990 Stock Option Plan, 1995 Stock Option Plan and
1997 Employee Stock Purchase Plan, the Company's pro forma net income and
earnings per share for the three fiscal years in the period ended June 30, 2000
would have been as follows:
2000 1999 1998
---- ---- ----
Pro forma net income $11,297,000 $5,734,000 $4,863,000
Pro forma earnings per share:
Basic earnings per share $ 0.54 $ 0.31 $ 0.34
Diluted earnings per share $ 0.48 $ 0.28 $ 0.26
However, the impact of outstanding nonvested stock options granted prior to
fiscal 1996 has been excluded from the pro forma calculation; accordingly, the
1998 pro forma adjustments are not indicative of future period pro forma
adjustments, when the calculation will apply to all applicable stock options.
7. INCOME TAXES
The provision for income taxes consists of (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
--------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Federal:
Current $5,428 $2,774 $2,256
Deferred (116) 235 174
----------------------------------
$5,312 3,009 2,430
State:
Current 432 143 75
Deferred 89 43 (33)
----------------------------------
521 186 42
Charge in lieu of taxes attributable to
employee stock plans 2,085 293 157
----------------------------------
Provision for income taxes $7,918 $3,488 $2,629
==================================
</TABLE>
A reconciliation between the Company's effective tax rate and the U.S. statutory
rate is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
--------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Tax at federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 2.9 1.5 2.7
Research and development tax credits (2.1) (2.7) (2.9)
Other 1.7 .2 (1.1)
-------------------------------
Provision for income taxes 37.5% 34.0% 33.7%
===============================
</TABLE>
19
<PAGE>
The components of the net deferred tax assets (liabilities) were as follows (in
thousands):
As of June 30,
--------------
2000 1999
------ ------
Deferred tax assets:
Accruals and reserves recognized in different periods $ 428 $ 356
Other 671 96
------------------
1,099 452
------------------
Deferred tax liabilities:
Basis difference in fixed assets (1,351) (576)
Other 11 (144)
------------------
(1,340) (720)
------------------
Net deferred tax assets (liabilities) $ (241) $(268)
==================
8. LEASES
The Company leases certain facilities under operating leases through July 2004,
with two consecutive options to extend for an additional three years each upon
termination of the original lease term. The future minimum operating lease
commitments at June 30, 2000 are as follows (in thousands):
Fiscal Year:
2001 $ 806
2002 1,011
2003 1,044
2004 1,076
2005 91
------------
$4,028
============
Rent expense for operating leases for the years ended June 30, 2000, 1999 and
1998 was $1,081,000, $623,000 and $481,000, respectively.
9. CONTINGENCIES
The semiconductor industry is characterized by frequent claims and related
litigation regarding patent and other intellectual property rights. The Company
settled an outstanding claim of this nature in fiscal 1999 without material
adverse effect on the Company's financial position or results of operations.
10. INDUSTRY AND SEGMENT INFORMATION
In fiscal year 1999, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which establishes annual and
interim reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographical areas and major
customers. The Company operates in one reportable segment.
20
<PAGE>
11. MAJOR CUSTOMERS AND GEOGRAPHIC OPERATING INFORMATION
In fiscal 2000 one end customer who purchases through distribution and contract
manufacturing channels represented 14% of net revenues, and one distributor who
sells to multiple end customers represented 11% of net revenues. At June 30,
2000 three customers represented 14%, 11% and 11%, respectively, of trade
accounts receivable. In fiscal 1999 one customer represented 14% of net
revenues, and three customers each represented 11% of trade accounts receivable
at June 30, 1999. In fiscal 1998, one customer accounted for 11% of net revenues
and three customers represented 12%, 11%, and 10% of trade accounts receivable,
respectively, at June 30, 1998
Fiscal Year Ended June 30,
--------------------------
2000 1999 1998
---- ---- ----
Net sales to geographic regions:
United States $48,850 $31,094 $27,059
Europe 7,852 4,784 4,920
Asia 34,275 23,919 17,219
----------------------------------
Total Net Sales $90,977 $59,797 $49,198
==================================
12. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) tax-deferred savings plan under which eligible
employees may elect to have a portion of their salary deferred and contributed
to the plan. Employer matching contributions are determined by the Board of
Directors and are discretionary. There were no employer matching contributions
in fiscal 2000, 1999 or 1998.
* * * * *
QUARTERLY FINANCIAL DATA
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------
June 30 Mar 31 Dec 31 Sep 30 June 30 Mar 31 Dec 31 Sep 30
2000 2000 1999 1999 1999 1999 1998 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $30,310 $23,033 $20,009 $17,625 $15,987 $14,754 $14,510 $14,546
Cost of revenues 17,432 13,294 11,581 10,233 9,298 8,585 8,634 8,967
------------------------------------------------------------------------
Gross profit 12,878 9,739 8,428 7,392 6,689 6,169 5,876 5,579
Operating expenses:
Research and development 2,492 2,133 1,874 1,619 1,601 1,565 1,455 1,355
Selling, general and
administrative 3,946 3,230 2,768 2,504 2,561 2,227 2,292 2,095
------------------------------------------------------------------------
Total operating expenses 6,438 5,363 4,642 4,123 4,162 3,792 3,747 3,450
------------------------------------------------------------------------
Income from operations 6,440 4,376 3,786 3,269 2,527 2,377 2,129 2,129
Other income, net 1,979 704 303 277 264 270 298 266
------------------------------------------------------------------------
Income before income taxes 8,419 5,080 4,089 3,546 2,791 2,647 2,427 2,395
Provision for income taxes 3,199 1,829 1,472 1,419 949 900 825 814
------------------------------------------------------------------------
Net income $ 5,220 $ 3,251 $ 2,617 $ 2,127 $ 1,842 $ 1,747 $ 1,602 $ 1,581
========================================================================
Basic earnings per share $ 0.21 $ 0.16 $ 0.13 $ 0.11 $ 0.10 $ 0.09 $ 0.09 $ 0.08
========================================================================
Diluted earnings per share $ 0.19 $ 0.14 $ 0.12 $ 0.10 $ 0.09 $ 0.08 $ 0.08 $ 0.08
========================================================================
Shares used in computing basic
earnings Per share 24,398 20,570 19,430 19,222 19,000 18,828 18,710 18,622
========================================================================
Share used in computing diluted
earnings Per share 27,162 23,450 22,056 21,640 20,878 21,032 20,386 19,934
========================================================================
</TABLE>
21
<PAGE>
COMMON STOCK PRICE RANGE
The Common Stock of the Company began trading publicly on the Nasdaq National
Market on October 31, 1997 under the symbol PSEM. Prior to that date, there was
no public market for the Common Stock. The Company has not paid cash dividends
and has no present plans to do so. It is the policy of the Company to reinvest
earnings of the Company to finance expansion of the Company's operations, and
the Company does not expect to pay dividends in the foreseeable future. The
following table sets forth for the periods indicated the high and low sale
prices of the Common Stock on the Nasdaq National Market. As of June 30, 2000
there were approximately 7,200 holders of record of the Company's Common Stock.
High Low
---- ---
Fiscal year ended June 30, 1998:
Second Quarter (from October 31, 1997) $ 5.19 $ 3.07
Third Quarter 5.25 3.00
Fourth Quarter 5.13 2.94
Fiscal year ended June 30, 1999:
First Quarter 4.38 2.16
Second Quarter 5.91 2.10
Third Quarter 7.07 3.44
Fourth Quarter 5.82 3.07
Fiscal year ended June 30, 2000:
First Quarter 8.82 5.57
Second Quarter 15.00 6.38
Third Quarter 28.63 11.88
Fourth Quarter 40.94 13.63
22
<PAGE>
CORPORATION INFORMATION
<TABLE>
<S> <C>
BOARD OF DIRECTORS Alex Chi-Ming Hui Chief Executive Officer, President and Chairman
of the Board of Directors
Chi-Hung (John) Hui, Ph.D. (1) Vice President, Technology and Director
Hau L. Lee, Ph.D. (1) Director
Millard (Mel) Phelps (1) Director
Tay Thiam Song (2) Director
Jeffery Young (2) Director
EXECUTIVE OFFICERS Patrick B Brennan Vice President, Finance and Administration
Tat C. Choi, Ph.D. Vice President, Design Engineering
Mark Downing Vice President, Marketing
Daniel W. Wark Vice President, Operations
</TABLE>
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
LEGAL MATTERS Questions regarding legal matters should be directed to:
Patrick B. Brennan, Vice President, Finance and Administration
LEGAL COUNSEL Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304-1018
(650) 813-5600
INDEPENDENT Deloitte & Touche LLP
ACCOUNTANTS 60 South Market Street, Suite 800
San Jose, California 95113-2303
(408) 998-4000
CORPORATE 2380 Bering Drive Tel: (408) 435-0800
OFFICE San Jose, California 95131 Fax: (408) 435-1100
Website Address: www.pericom.com
REGISTRAR AND BankBoston, N.A.
TRANSFER AGENT c/o BostonEquiserve, L.P.
P.O. Box 8040
Boston, Massachusetts 02266-8040
http://www.EquiServe.com
(781) 575-2000
ANNUAL MEETING The annual meeting of shareholders for Pericom Semiconductor
Corporation will be on Thursday, December 14, 2000, at 3:00
P.M., local time at the Company's premises, 2380 Bering
Drive, San Jose, California 95131.
COMMON STOCK Pericom Semiconductor Corporation's Common Stock is traded on
the NASDAQ National Market under the symbol "PSEM".
FORM 10-K A copy of the Corporation's Annual Report on Form 10-K, as
filed with the Securities and Exchange Commission, will be
made available without charge to all shareholders upon written
request to the Company. Direct requests to the attention of
the Chief Financial Officer at the corporate office listed
above.
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