<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended JANUARY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------- -------
Commission File Number 1-5609
UNITRODE CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 04-2271186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7 CONTINENTAL BOULEVARD, MERRIMACK, NEW HAMPSHIRE 03054
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 424-2410
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
COMMON STOCK, PAR VALUE $.20 NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
Title of class Market
-------------- ------
COMMON STOCK WARRANTS NASDAQ SMALLCAP MARKET
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. [X]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of April 4, 1997, was $404,926,419. As of April 4, 1997 there were
11,710,174 shares of the Registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference certain portions of the information from
the Registrant's definitive proxy statement for the Annual Meeting of
Stockholders to be held June 2, 1997.
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UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
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PART I.
ITEM 1. BUSINESS
General Development of the Business
- ------------------------------------
Unitrode Corporation (the "Company" or "Unitrode") was founded in 1960 and is
incorporated under the laws of Maryland. Since its inception, the Company and
its subsidiaries have designed, manufactured, marketed, and sold electronic
components and sub-systems. After divesting various businesses from 1991 through
1994, Unitrode is now focused on the analog/linear and mixed-signal integrated
circuits business.
On May 31, 1991, Unitrode sold its subsidiary, Power General Corporation, to
Nidec Corporation. The Company sold its Semiconductor Products Division to Micro
USPD Inc., a wholly-owned subsidiary of Microsemi Corporation on July 7, 1992.
During fiscal year 1995, the Company divested two additional operating
divisions: Powercube Corporation to Natel Engineering Company, Inc. on June 23,
1994 and the Micro Networks Division to SMC Acquisition Corporation on October
12, 1994. For further information, reference is hereby made to Note D to the
Company's consolidated financial statements included in Part II, Item 8, hereof.
Financial Information about Industry Segments
- ---------------------------------------------
The Company and its subsidiaries operate within a single industry segment, the
manufacture and sale of electronic components, and have various product
categories within that one segment.
Description of the Business
- ---------------------------
GENERAL
The Company currently designs, manufactures, markets and sells a range of
analog/linear and mixed-signal integrated circuits (ICs). This business was
founded in 1981. The Company's products are principally proprietary,
high-performance analog/linear and mixed-signal integrated circuits which are
used in a variety of applications in EDP/computer, telecommunications,
industrial control and instrumentation, defense/aerospace, and automotive
markets. For the most part, the ICs are used either to control switching power
supplies and small electronic motors, or as high-speed interface and
communication circuits between various pieces of electronic equipment.
THE ANALOG/LINEAR INTEGRATED CIRCUIT INDUSTRY
Integrated circuits are the building blocks of all electronic products today and
may be classified as either analog or digital, depending upon the technique used
to process or act upon electronic signals. Digital circuits process binary
(either "on" or "off") signals that are used mostly in computer memory or logic
devices and in micro-processors. Analog circuits process "real world" signals
which measure physical conditions, such as temperature, force, speed, and
pressure, the frequency and wavelength of which vary continuously. Analog
circuits are used to amplify, monitor, condition, or transform these signals or
to interpret these signals for use by digital logic. Advancements in technology
have led to the development of mixed-signal circuits which combine certain types
of analog and digital functions on the same IC in order to reduce space,
increase reliability, and improve performance.
Worldwide merchant sales of analog ICs were estimated at approximately $17
billion in calendar year 1996, or approximately 15% of the total integrated
circuit market, according to World Semiconductor Trade Statistics, Inc. The
Company estimates that its served available market, the portion of the market in
which its products directly compete, is about $1.6 billion. The Company's share
of this market is estimated at about 8.4%.
The Company believes that the analog/linear integrated circuit market offers
certain advantages compared to the digital market. The life cycles of products
in the analog integrated circuit market tend to be longer and customer pricing
is less volatile than the digital market. The capital requirements for the
analog/linear IC business are lower than those in the digital IC area. In
addition, foreign competition to date has been less interested in the
analog/linear IC business because the products address smaller markets. Unlike
products in the digital market, the value in the product is usually the result
of
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UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
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design innovation utilizing a variety of manufacturing process technologies to
address specific customer applications, many of which are in so-called "niche"
markets.
PRODUCTS AND MARKETS
Advancements in digital processing, such as requirements for lower power and
higher operating frequencies, are driving innovation in analog/linear circuitry.
Another significant trend in the marketplace is the need to reduce the size and
weight of components, particularly for portable and hand-held applications where
these features are critical. As a result, more and more functions are designed
onto a single chip, requiring both advancements in design and improvements in
process technology.
The Company's product offerings are comprised of analog ICs for power supply
control, motor control, lighting, power driving, power quality and power
factoring, as well as high-speed and high-power interface applications. Products
are developed as a result of careful market analysis, a close working
relationship with its customers, and a thorough understanding of their
applications. As a result, most of the products are based upon proprietary
designs and are considered application specific standard products (ASSPs)
because they are designed for targeted tasks. Some of these products have become
standards in the industry.
The Company's major product categories and their functions are:
POWER MANAGEMENT (about 40% of sales): These circuits are used in switching
power supplies (either AC/DC or DC/DC) to modulate, amplify, or regulate current
or voltages, or to protect other circuitry from irregular, spurious, or
erroneous signals. Examples of such products are current-mode pulse-width
modulators (PWMs), resonant-mode ICs, power factor pre-regulator ICs, phase
shifted PWMs, power driver circuits, and battery charger ICs. Using these
advanced control ICs, a customer can design a power supply that is smaller and
more efficient, critical attributes of today's power supply applications.
MOTOR CONTROL (about 34% of sales): These ICs are designed to control the
position, speed, braking, and power consumption of small, fractional-horsepower
DC electric motors, such as servo, stepper and DC brushless motors. These
products combine logic with the power output required to control varied loads.
Also included in this product family are full-bridge power amplifiers which
serve as voice-coil driver ICs used predominantly for precise positioning
applications, such as that required in high-density disk drive heads.
DATA TRANSMISSION/INTERFACE (about 26% of sales): Interface circuits transfer
data signals between or within (an) electronic system(s). These circuits are
used as drivers and receivers in high-speed data transmission, as well as for
active termination. The Company's largest product line in this family is used
principally to provide active termination for 18 and 9 lines of data
transmission in small computer systems interface (SCSI) applications. Mixing and
matching the 18- and 9-line terminators allow designers flexibility in
terminating wide-SCSI busses with 18 and 27 lines. In fiscal year 1997, the
Company introduced a technically advanced family of 27-line, fast/wide-SCSI
circuits which operate at data rates up to 40 megabytes per second and low
voltage differential terminators to meet new ULTRA SCSI requirements.
These products serve a broad range of markets including the EDP/computer,
telecommunications, industrial control and instrumentation, defense/aerospace,
and automotive. The following table identifies the typical user applications by
market:
3
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UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
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MARKET USER APPLICATION
EDP/Computer Mainframes
Desktop & Notebook PCs
Terminals
Printers
Disk Drives, Tape Drives, & RAIDS
Plotters
Battery Chargers/Monitors
Wireless Data Transmission
Portable Computers
Telecommunications Switching Stations
Routers & Hubs
Terminal Servers
Modems/Fax Machines
Cellular Phones
Global Positioning Systems
Battery Chargers/Monitors
Industrial Control HVAC
& Instrumentation Robotics
Utility Equipment
Portable Instruments
Factory Automation
Video Displays
Energy Management
Lighting Systems
Sensors
Defense/Aerospace Satellites
Aircraft Controls
Advanced Weapons
Missile Systems
Displays
Automotive High Intensity Lighting
Airbags
Dashboard Displays
SALES AND DISTRIBUTION
Unitrode's products are sold worldwide by its sales force and through a network
of independent sales representatives and distributors. The Company has about
8,200 end customers. About 74% of sales are either through its direct sales
force or manufacturer's representatives, and the remaining 26% is through
distribution networks.
The Company has three field sales offices to serve selected geographical areas
in North America and also has agreements with seven distributors in North
America who maintain more than 230 branch locations. Field application engineers
are employed to work closely with customers to solve design problems and to
anticipate future product directions.
For the year ended January 31, 1997, international sales represented 69% of
sales. International sales are conducted through five sales offices, located in
England, Germany, Hong Kong, Italy, and Singapore. The Company also has
agreements with distributors or sales representatives for locations throughout
Europe, Asia, Japan, South America, Australia, New Zealand, and the Middle East.
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The Company warrants its products to be free from defects in material or
manufacture and to conform to its published ratings and characteristics in
effect at the time and place of shipment. The Company also has agreements with
certain distributors to provide price protection for inventories held by the
distributor at the time of reductions in published list prices and, under
certain circumstances, for stock rotation on unsold product.
CUSTOMERS
The Company's customer base is comprised of merchant manufacturers, electronics
distributors, and customers with captive manufacturing operations. The captive
manufacturers use the Company's products as integral components of their
equipment and systems. In certain cases, product is sold to a
subcontract-assembly company specified by the captive manufacturer. The merchant
manufacturers typically function as original equipment manufacturers (OEMs) as
well as suppliers of sub-systems to other OEMs. About 60% of sales are to
customers with applications in the electronic data processing (EDP) market and
about 19% are to customers in industrial markets. Revenues from product sales to
one of these accounts, Western Digital Corporation, represented approximately
31%, 25% and 22% of sales in fiscal years 1997, 1996 and 1995, respectively. The
loss of this customer would have a material adverse effect upon the Company.
The Company has no material contracts with the United States Government.
BACKLOG
The Company's backlog was approximately $40.6 million on January 31, 1997, all
of which is expected to be shipped within the current fiscal year. Backlog at
January 31, 1996 was approximately $37.7 million. The Company recognizes backlog
as orders for product, from an end customer or distributor, that have a specific
schedule for delivery within the ensuing twelve months. While annual purchase
agreements are common in the industry, the Company does not recognize such
agreements as backlog.
MANUFACTURING
In 1981, the Company purchased a manufacturing facility in Merrimack, New
Hampshire ("Merrimack"), and converted it for IC wafer fabrication. Since that
time, the original building has been expanded several times and upgraded to
satisfy the need for increased capacity and additional process technologies,
including class-10 lithography capability, as well as to meet requirements for
quality and product reliability.
As of January 1997, the Company's major wafer fabrication process technologies
included standard and enhanced bipolar, bipolar-CMOS (BiCMOS), and
bipolar-CMOS-DMOS (BCDMOS). The majority of the bipolar processing takes place
at the Company's Merrimack facility, and all of the BiCMOS and BCDMOS processing
occurs at GMT Microelectronics Corporation ("GMT"), an independent foundry in
which the Company has a minority investment. (See Note I to the Company's
consolidated financial statements included in Part II, Item 8 hereof). The
Company's bipolar processes are ideal for both precision analog circuits and
power management functions. The BiCMOS process is well-suited for high density
linear designs, especially where speed and lower power consumption are of
primary importance. The BCDMOS process offers all of the advantages of BiCMOS
and, with the addition of lateral DMOS devices, accommodates designs requiring
higher current and voltage. Each of the three major fabrication technologies has
numerous processing options available to enable the product designer to achieve
the optimal product functionality, reliability, and performance.
During fiscal year 1997, the Merrimack wafer fabrication facility produced
approximately 82% of the wafers required to meet customer demands. The Company
also has agreements with several foundries to supply additional wafers as
required, the most significant of which is an agreement with GMT. The agreement
stipulates that as long as the Company maintains its investment in GMT, a
certain percentage of GMT's capacity will be reserved for the Company.
In fiscal year 1997, the Company began construction of a new 6" BiCMOS wafer
fabrication facility in Merrimack to increase manufacturing capacity and expand
process capabilities. The initial phase is currently expected to cost
approximately $36 million. The construction of the new wafer fabrication
facility is expected to be completed by the middle of fiscal year 1998 with
equipment installation and the qualification of manufacturing processes
scheduled for the remainder of the fiscal year. This new facility is expected to
become operational (revenue generating) early in fiscal year 1999.
Following wafer fabrication and wafer testing, the wafers are cut into die which
are then assembled into circuit packages. As is common in the industry, most of
the assembly is done by various IC assembly vendors located in Asia. The Company
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UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
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currently believes that adequate assembly capacity exists and that alternative
sources could be obtained, should the need arise, without significant
interruption of the manufacturing process.
The Company performs nearly all of its final testing for reliability and
conformance on its products at its wholly owned subsidiary, Unitrode Electronics
Singapore Pte. Ltd. ("UES"), located in Ayer Rajah, Singapore. The Company
opened UES in 1986.
RAW MATERIALS
The Company believes that it has adequate sources of raw materials available.
Single crystal silicon is used as a semiconductor material in its integrated
circuits. Shortages in the supply of certain raw materials, including silicon
wafers and plastic molding compounds for packages, have occurred from time to
time. As is typical in the industry, the Company must allow for significant lead
times for certain raw materials. In fiscal year 1996, the Company entered into a
multi-year agreement with a manufacturer of silicon wafers for a guaranteed
wafer supply in order to support the Company's requirements. (See Note J to the
Company's consolidated financial statements included in Part II, Item 8 hereof).
Multiple sources for raw materials are generally maintained. The Company has not
experienced any shortage of energy and none is anticipated.
WORKING CAPITAL
The Company's business does not require working capital in excess of levels that
are considered normal in the industry. Further, it has not been necessary for
the Company to carry significant or unusual amounts of inventory to meet rapid
delivery requirements to customers or to assure itself of a continuous allotment
of raw materials from suppliers. The Company initiates most of its production
based upon its backlog of orders. As is common in the industry, certain
commodity items which are expected by customers to have short lead times are
produced in advance of firm orders.
PRODUCT QUALITY ASSURANCE AND RELIABILITY
The Company is committed to the principles of Total Quality Management (TQM) in
all aspects of its business. The foundation of the Company's TQM is a Quality
System which is continuously reviewed and improved. The disciplines of
statistical process control are practiced throughout the manufacturing
operations. Rigorous procedures using cross-functional teams are in place to
qualify fabrication processes and products prior to shipment. The Company also
routinely qualifies suppliers and assembly subcontractors according to
established standards.
In fiscal year 1996, the International Standards Organization completed its
review of the Company's two manufacturing facilities (Merrimack and UES) and
renewed the Company's registration to ISO 9001/9002, respectively. The Merrimack
facility has continuously maintained conformance to MIL-STD-883 Class B and
Class S since November 1985. In August of 1996, the Defense Supply
Center-Columbus (DSCC) granted the Company full certification for MIL-PRF-38535.
PATENTS, LICENSES, AND TRADEMARKS
The Company owns a number of patents for product and processing techniques, as
well as certain trademarks relating to its business. The Company also has a
number of patent applications pending review. These patents and trademarks
provide it with some competitive advantage. However, Unitrode's business
prospects are dependent primarily upon the ability of its employees to work
closely with customers and develop and deliver high-quality, reliable products
at competitive prices, rather than on its ability to obtain and defend patents
and trademarks. No patent or trademark related to a particular product is of
material importance to the total business.
Unitrode continues to receive royalty payments from International Rectifier
Corporation (IRC) as a result of a 1983 exclusive licensing agreement for
certain MOSFET technology which, with the Company's consent and in consideration
of royalty payments, IRC licenses to others. Depending upon the number of
licensees and the uses of the technology, royalty amounts may vary.
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UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
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RESEARCH & DEVELOPMENT
The Company's development is directed towards new product design and process
technology. At January 31, 1997, 95 employees supported the Company's research
and development efforts. Design engineering offices are located in Merrimack,
New Hampshire; San Jose, California; and Cary, North Carolina.
Research and development expenditures from continuing operations were
approximately $17,976,000, $14,674,000, and $8,766,000 in the years ended
January 31, 1997, 1996 and 1995, respectively.
COMPETITION
The Company competes in the high-performance segment of the analog/linear and
mixed-signal integrated circuit market specifically addressing power management,
motor control, and data transmission/interface applications. Unitrode has a
number of competitors, some of which are substantially larger than the Company,
with significantly greater resources. Unitrode would be adversely affected if
its competitors introduced technologically superior products or offered their
products at prices significantly lower than those of the Company's products. The
major competitive factors include innovative design, product performance, price,
reliability, quality, customer support, and timely delivery. The Company's
ability to compete depends in large part upon the timely introduction of
products that are technologically innovative and which provide cost-effective
solutions for its customers.
SEASONAL ASPECTS
None.
ENVIRONMENTAL REGULATION
The Company expects no material adverse effect upon earnings, capital
expenditures, or its competitive position as a result of compliance with
federal, state, or local provisions which have been enacted or adopted
regulating the discharge of materials to the environment, or otherwise relating
to the protection of the environment (see "Legal Proceedings"). Its facilities
have been designed to comply with government regulations, and the Company
maintains policies and procedures to assure on-going compliance. There can be no
assurance, however, that changes in such regulations will not impose costly
equipment or other requirements on the Company as well as others in the
industry.
EMPLOYEES
As of January 31, 1997, the Company had 562 employees of which 130 were employed
outside of the United States. Approximately 350 employees support the
manufacturing process, 72 employees conduct the sales and marketing effort, 95
employees support research and development, and 45 employees provide
administrative support.
Unitrode has never had a labor work stoppage, and no employees are represented
by a labor organization. The Company considers its employee relations to be
good.
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UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
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Financial Information about Foreign and Domestic Operations and Export Sales
- ----------------------------------------------------------------------------
Reference is hereby made to Note L to the Company's consolidated financial
statements included in Part II, Item 8 hereof for information about foreign and
domestic operations and export sales.
ITEM 2. PROPERTIES
<TABLE>
The Registrant's corporate offices and principal manufacturing facility are
located in Merrimack, New Hampshire. All buildings are well-maintained, suitable
and adequate for the present activities of the Registrant. Information regarding
the principal plants and properties appears below:
<CAPTION>
Approximate Owned or Lease
facility size leased; land expiration
Location Description (square feet) area owned date
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Merrimack, New Hampshire (1) Manufacturing; 110,100 Owned; 19.6 acres --
General Office
Ayer Rajah, Singapore Manufacturing; 19,900 Leased 1998/
General Office 2000
Shannon, Ireland Warehouse; 10,000 Leased 2009
General Office
San Jose, California General Office 5,100 Leased 1998
Cary, North Carolina General Office 10,400 Leased 2001
Worcester, Massachusetts (2) Manufacturing; 83,000 Owned; 6.0 acres --
General Office
Lexington, Massachusetts (2) General Office 16,000 Leased 1999
Lowell, Massachusetts Land -- Owned; 1.3 acres --
<FN>
(1) Approximately 60,000 sq. feet of additional space is under construction as
of January 31, 1997. The additional space will include 28,000 sq. feet for
a new wafer fabrication facility and 32,000 sq. feet for a new office
building.
(2) Facility is leased or sublet to a third party(ies) as of January 31, 1997.
</TABLE>
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Annual Report on Form 10-K
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ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
The Company is involved in investigation and cleanup under the supervision of
the Maine Department of Environmental Protection of groundwater and soil
contamination at the former Westbrook, Maine wafer fabrication facility of its
former Semiconductor Products Division (the "Division"). Although the facility
was closed in 1989, the Division was sold in 1992 and the Westbrook, Maine real
estate was sold in 1994, the Company has retained responsibility for
environmental remediation at this site. The ultimate cost of cleanup at this
site is difficult to predict given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and regulations and
alternative cleanup methods. However, based upon the Company's experience at
this site, the Company has established a reserve, taking into account the
probable and reasonably estimable work to be done at this site, which the
Company believes to be adequate.
The Company has been notified by responsible state authorities in California
that it is one of a number of "potentially responsible parties" under relevant
state statutes with respect to a former hazardous waste treatment facility in
Escondido, California (the "Site"). The treatment facility was owned and
operated by an entity wholly unrelated to the Company. The Company, along with
other financially viable potentially responsible parties, has entered into a
consent decree with governmental authorities regarding the voluntary payment of
cleanup costs and voluntary cleanup measures with respect to the Site. The
Company has established a reserve which the Company believes to be adequate for
future environmental remediation costs at this Site, based upon the probable and
reasonably estimable work to be done at the Site, the other potentially
responsible parties involved at the Site and the Company's volumetric level of
contribution to the Site which is less than one-half of one percent of the total
volume of waste contributed to the Site by the parties to the consent decree. In
view of the difficulty in quantifying the potential costs or damages arising
from the alleged environmental hazards, it is not possible to determine with
certainty the extent of the Company's potential exposure at the Site. However,
based upon its investigation to date, the Company believes that its exposure
(without giving effect to the joint and several liability provisions referred to
below) would not be material and the Company believes that the reserves
established with respect to these liabilities will be adequate. Further,
although statutes provide that all "potentially responsible parties" may be held
jointly and severally liable for the costs of investigation and remediation of a
site, after consideration of the liabilities of other "potentially responsible
parties" with respect to the Site and their respective levels of financial
responsibility, the Company believes that its liability with respect to the Site
is not material. If any liability on the part of the Company were to be measured
by the ratio of the waste attributable to the Company over the total waste
involved, based on information presently available to the Company, the Company's
aggregate liability with respect to the Site would not be material.
Environmental reserves are reviewed as events and developments warrant and
adjusted to reflect the likelihood of additional environmental expenditures.
Based upon information currently available to the Company, management believes
that any additional aggregate liability to which the Company may be subjected
from all the above-mentioned sites would not be material to future financial
results.
OTHER
In addition to the matters described above, from time to time as a normal
incidence of the nature of the Company's business, various claims, charges or
litigation are or may be asserted or commenced against the Company relating to,
among other things, contractual matters, patent disputes, environmental matters
and product liability. While there can be no assurance that the Company will
prevail in all these matters, the Company does not believe that these matters
will have a material adverse effect on the Company's consolidated financial
position or results of operations. However, an adverse resolution of one or more
of such matters could have an adverse effect on the Company's consolidated
results of operations in a quarter in which such matters might be resolved.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's securities holders during
the fourth quarter of the fiscal year ended January 31, 1997.
Executive Officers of the Registrant
- ------------------------------------
<TABLE>
Information relating to the executive officers of the Company is set forth
below. All officers held office as of January 31, 1997.
<CAPTION>
NAME, AGE AND POSITION BUSINESS EXPERIENCE DURING PAST FIVE YEARS
<S> <C>
Edward H. Browder- 57 President (January 1996 to present); Director (June 1991 to
President and Director present); President of Seacliff Technologies (April 1993 to
December 1995); President of Concurrent Logic, Inc. (Prior
to April 1993)
Allan R. Campbell - 55 Senior Vice President, General Counsel and Secretary
Senior Vice President, General Counsel (June 1994 to present); Vice President, General Counsel and
and Secretary Secretary (May 1990 to May 1994)
Robert L. Gable - 66 Chairman and Chief Executive Officer (June 1990 to present);
Chairman and Chief Executive President (March 1992 to January 1996)
Officer; Director
S. Kelley MacDonald - 51 Vice President, Corporate Communications
Vice President, (June 1992 to present); Director of Corporate
Corporate Communications Communications (June 1990 to May 1992)
Patrick J. Moquin - 48 Vice President, Human Resources (August 1995 to present);
Vice President, Human Resources Senior Director, Human Resources, Worldwide Field Operations,
Sun Microsystems, Inc. (May 1994 to July 1995); Various senior-
level human resources positions at Sun Microsystems, Inc.
(April 1986 to April 1994)
Cosmo S. Trapani - 58 Executive Vice President and Chief Financial Officer
Executive Vice President and (June 1994 to present); Vice President, Chief Financial
Chief Financial Officer Officer and Treasurer (August 1990 to May 1994)
</TABLE>
There are no family relationships among these officers, nor any arrangement or
understanding between any officer and any other person pursuant to which the
officer was elected.
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Annual Report on Form 10-K
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To the Company's knowledge, based solely upon the review of copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended January 31, 1997 the Company
complied with all Section 16(a) filing requirements applicable to its officers,
directors and any beneficial owners holding greater than ten percent of its
common stock.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Reference is hereby made to Note M to the Company's consolidated financial
statements included in Part II, Item 8 hereof regarding the Market for the
Registrant's Common Equity and Related Stockholder Matters.
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ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL SUMMARY
<TABLE>
Unitrode Corporation and Consolidated Subsidiaries
(Dollars in thousands except per share data)
<CAPTION>
YEARS ENDED JANUARY 31 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net revenues $133,526 $116,148 $95,359 $85,994 $86,195
Gross profit 70,497 60,982 46,553 38,341 33,785
As a % of net revenues 53% 53% 49% 45% 39%
Depreciation and amortization 11,667 8,998 7,430 5,901 6,502
R&D expenses 17,976 14,674 9,433 8,064 6,352
Operating income 29,087 23,996 9,651 10,949 6,835
Royalties 2,582 2,395 1,722 921 1,158
Pretax income 33,662 27,952 12,522 12,844 9,119
Tax provision rate 39% 37% 26% 35% 32%
Net income 20,677 17,519 9,249 16,448 9,119
As a % of net revenues 15% 15% 10% 19% 11%
As a % of beginning stockholders'
equity 22% 21% 11% 24% 14%
- ------------------------------------------------------------------------------------------------------------------------
SHARE DATA
Net income before extraordinary
item and accounting change $1.74 $1.47 $ .75 $ .65 $ .48
Net income 1.74 1.47 .75 1.27 .70
High and low price 14.75-37.00 17.63-32.50 13.50-21.00 9.88-15.25 6.06-12.06
Closing year-end price 36.75 26.25 18.63 14.88 11.88
Year-end book value 9.93 8.06 6.93 6.69 5.42
Equivalent shares outstanding
(in thousands) 11,853 11,907 12,360 12,924 13,110
Number of stockholders of record 571 652 722 858 894
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL DATA
Cash/short-term investments $52,012 $ 36,228 $ 30,714 $ 30,756 $25,850
Total assets 142,403 118,424 103,304 101,923 85,860
Net working capital 62,582 47,147 37,543 43,378 33,020
Current ratio 3.52 2.95 2.79 3.43 2.81
Plant and equipment-net 41,688 35,289 32,019 29,595 22,270
Capital expenditures 18,687 11,794 15,591 12,573 9,591
Stockholders' equity 115,553 92,417 81,591 84,036 67,629
Total interest-bearing debt - - 300 530 761
- ------------------------------------------------------------------------------------------------------------------------
PRO FORMA OPERATING RESULTS EXCLUDING DISPOSED OPERATIONS
Net revenues $133,526 $116,148 $87,231 $64,602 $49,748
Gross profit 70,497 60,982 44,589 33,245 24,574
As a % of net revenues 53% 53% 51% 51% 49%
Depreciation and amortization 11,667 8,998 6,525 4,231 3,559
R&D expenses 17,976 14,674 8,766 6,142 4,463
Operating income 29,087 23,996 16,048 12,463 7,099
Royalties 2,582 2,395 1,722 921 1,158
Pretax income 33,662 27,952 18,810 14,247 9,272
Tax provision rate 39% 37% 35% 34% 33%
Net income 20,677 17,519 12,226 9,403 6,212
As a % of net revenues 15% 15% 14% 15% 12%
Net income per share 1.74 1.47 .99 .73 .47
</TABLE>
12
<PAGE> 13
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Fiscal Year 1997 Versus Fiscal Year 1996
Net revenues for fiscal year 1997 were $133.5 million, an increase of $17.4
million or 15% compared with $116.1 million in fiscal year 1996. This increase
was primarily due to the rise in demand for products in the computer peripherals
segment of the electronic data processing markets. International revenues
accounted for approximately 69% of total sales for fiscal year 1997 compared to
67% in fiscal year 1996.
Gross profit as a percentage of net revenues was essentially unchanged at 53%
for fiscal year 1997 compared with fiscal year 1996.
Research and development expenses were approximately 13.5% of net revenues, or
$18.0 million, compared with 12.6%, or $14.7 million in the prior year. This
increase of approximately $3.3 million related primarily to additional product
and process development efforts to support opportunities in the Company's
markets. Research and development expenses also included a charge of $800,000
for writedowns on equipment no longer in use. Selling, general and
administrative expenses decreased to approximately 17.6% of net revenues in
fiscal year 1997 compared to 19.2% in fiscal year 1996. This percentage decrease
was principally due to cost controls and the increased sales volume.
Interest income in fiscal year 1997 rose by approximately $399,000 principally
due to the increase in the Company's cash and cash equivalents.
The consolidated effective tax rate for fiscal year 1997 was 38.6% compared to
37.3% in fiscal year 1996. This increase was due primarily to the absence in
fiscal year 1997 of benefits related to tax credits and deferred tax assets that
were available in fiscal year 1996.
Net income increased 18% from $17.5 million, or $1.47 per share, in fiscal year
1996 to $20.7 million, or $1.74 per share, in fiscal year 1997.
Backlog at January 31, 1997 increased approximately 8% to $40.6 million compared
with $37.7 million at January 31, 1996. Backlog improved due to the growth in
the computer peripherals segment of the electronic data processing markets.
RESULTS OF OPERATIONS
Fiscal Year 1996 Versus Fiscal Year 1995
Net revenues in fiscal year 1996 were $116.1 million compared with $95.4 million
in fiscal year 1995, an increase of $20.8 million or 22%. Excluding Powercube
Corporation ("Powercube") and the Micro Networks Division ("Micro Networks"),
which were sold in fiscal year 1995, net revenues in fiscal year 1996 increased
by 33% over the prior year. Integrated circuit sales, which now represent the
total business of the Company, increased due to strong demand for products in
the computer peripherals segment of the electronic data processing markets.
Approximately 67% of analog integrated circuit sales in fiscal year 1996 were
international compared with 63% in fiscal year 1995. Each of the Company's
geographic markets reported increases in net revenues in fiscal year 1996 with
the largest volume increase occurring in the Far East.
Gross profit as a percentage of net revenues was approximately 53% in fiscal
year 1996 compared with 49% in fiscal year 1995. Excluding the disposed
operations, gross profit increased to 53% from 51% in the prior year. This
improvement was primarily due to a lower average cost per unit as a result of
manufacturing efficiencies on the strength of greater capacity utilization and,
therefore, absorption of fixed costs over the increased sales volume.
Research and development expenses from continuing operations were 13% of net
revenues, or $14.7 million, compared with 10%, or $8.8 million in the prior
year. This increase of approximately $5.9 million related primarily to increased
staffing,
13
<PAGE> 14
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
additional product and process development efforts to support opportunities in
the Company's markets, as well as the start-up of the Company's new design
center in San Jose, California. Selling, general and administrative expenses,
excluding disposed operations, decreased to approximately 19% of net revenues in
fiscal year 1996 compared to 23% in fiscal year 1995. Fiscal year 1995 legal
costs of approximately $1.2 million associated with litigation settlements
represented 1.4 percentage points of the decrease. In addition, selling, general
and administrative expenses have declined as a percentage of net revenues in
fiscal year 1996 due to the increased sales volume.
In the fiscal year ended January 31, 1995, the Company had unusual charges of
$5.5 million as a result of the disposal of Powercube and Micro Networks. (For
further information, see Note D to the Company's consolidated financial
statements.)
Interest income rose by approximately $433,000 principally due to an increase in
the weighted average interest rate earned on cash and short-term investments.
The consolidated effective tax rate for fiscal year 1996 was 37.3% compared to
26.1% in fiscal year 1995. The effective tax rate in fiscal year 1995 benefited
from the sale of Micro Networks and Powercube, as well as a reduction of $1.5
million in the valuation allowance for tax carryforwards.
Net income was $17.5 million in fiscal year 1996 compared with $9.2 million in
fiscal year 1995. Excluding disposed operations, net income increased 43% from
$12.2 million, or $.99 per share, to $17.5 million, or $1.47 per share.
Backlog at January 31, 1996 increased 34% to $37.7 million compared with $28.1
million at January 31, 1995. Backlog improved due to the strong demand for
products in the computer peripherals segment of the electronic data processing
markets.
FINANCIAL CONDITION
Cash and cash equivalents at January 31, 1997 increased by $15.8 million during
fiscal year 1997. The principal sources of cash were $35.7 million from
operating activities and $2.0 million in proceeds from exercises of employee
stock options under the Company's stock option plans. The principal uses of cash
were $20.9 million for capital commitments and an investment of $1.5 million in
the redeemable preferred stock of GMT Microelectronics Corporation, ("GMT"), a
wafer fabrication foundry in which the Company maintains a minority interest.
The ratio of current assets to current liabilities improved to 3.52:1 at the end
of fiscal year 1997 compared with 2.95:1 at the end of the previous year.
Working capital of $62.6 million at January 31, 1997 increased by $15.4 million
from January 31, 1996. The Company also has available $25 million under an
unused revolving credit agreement. It is anticipated that the Company's
operating cash needs for fiscal year 1998, including planned capital
expenditures, will be met by internally generated funds and available cash.
In fiscal year 1997, the Company began construction of a new 6" BiCMOS wafer
fabrication facility in Merrimack, New Hampshire in order to increase
manufacturing capacity and expand process capabilities. The initial phase is
expected to cost approximately $36 million. In fiscal year 1997, the Company
spent a total of approximately $18.7 million in capital expenditures which
included $10.5 million for the new wafer fabrication facility. In addition, the
Company spent $2.2 million for deposits on equipment for the new wafer
fabrication facility. In fiscal year 1998, the Company plans to spend
approximately $41 million in capital expenditures which includes completion of
the initial phase of the wafer fabrication facility. The construction of the new
wafer fabrication facility is expected to be completed by the middle of fiscal
year 1998 with equipment installation and the qualification of manufacturing
processes scheduled for the remainder of the fiscal year.
Accounts receivable at January 31, 1997 decreased by $2.0 million from January
31, 1996 to $15.9 million. Receivable days sales outstanding were 44 days at
January 31, 1997 compared to 48 days at the end of the prior year. Inventories
at January 31, 1997 increased by $1.0 million since January 31, 1996 primarily
to support higher production requirements. Prepaid expenses and other current
assets at January 31, 1997 increased by $2.2 million from the prior year
primarily due to deposits made for equipment to be purchased for the new wafer
fabrication expansion program. Accrued employee compensation and benefits has
decreased by $3.4 million primarily due to lower incentive compensation benefits
relating to fiscal year 1997 performance compared to fiscal year 1996.
14
<PAGE> 15
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
The Board of Directors of the Corporation had previously authorized the
repurchase of 4,000,000 shares of its common stock of which 3,425,300 shares
were repurchased at a cost of $38.4 million, or an average price of $11.22 per
share. Effective October 23, 1996, the Board of Directors rescinded the
authorization to repurchase the remaining 574,700 shares.
NEW ACCOUNTING STANDARDS
See Note A in the Company's consolidated financial statements for a discussion
of recently issued accounting standards.
INFLATION
Management has concluded the effect of inflation had no significant impact on
operations.
FACTORS AFFECTING FUTURE RESULTS
The Company's future operating results are difficult to predict and may be
affected by a number of factors including the timely ability to develop and
market new products, competitive pricing pressures, fluctuations in
manufacturing yields, adequate availability of wafers and manufacturing and test
capacity, changes in product mix and economic conditions in the United States
and international markets. Revenues from product sales to one of the Company's
customers, Western Digital Corporation, represented approximately 31%, 25% and
22% of sales in fiscal years 1997, 1996, and 1995, respectively. The loss of
this customer would have a material adverse effect upon the Company's business.
The semiconductor market has historically been cyclical and subject to
significant economic fluctuations at various times. As a result, orders and
backlog may fluctuate widely from time to time. Because of this and other
factors, there can be no assurance that the Company will not experience material
fluctuations in future operating results on a quarterly or annual basis as a
result of its inability to adjust its manufacturing capacity or its cost
structure to increased or reduced customer demand.
The Company has agreements with certain foundries to supply additional wafers as
required, the most significant of which is an agreement with GMT. During fiscal
year 1998, the Company expects changes in its product mix from new products
introduced to significantly increase the volume of wafers produced utilizing
BiCMOS processes. Presently, GMT is the Company's sole source for wafers
requiring BiCMOS processing. Third-party foundry production is expected to
increase from 18% of wafers produced in fiscal year 1997 to approximately 50% of
wafers produced in fiscal year 1998. There can be no assurance that third-party
foundries will be able to meet the Company's higher production requirements.
The Company has commenced expansion of its production facilities to increase
manufacturing capacity and expand process capabilities. There can be no
assurance that the Company will complete the expansion of its production
facilities on time or that the added capacity will be sufficient to satisfy
demand for its products. Delays in equipment installation or the qualification
of manufacturing processes to make the wafer fabrication facility operational
could significantly increase pre-operating costs. In addition, any constraints
in manufacturing and testing capacity could adversely affect the business of the
Company's customers and cause them to seek alternative sources for the products
currently obtained from the Company. Once operational, the Company's additional
capacity will also result in a significant increase in operating expenses, such
as depreciation, and if revenues do not increase to offset these additional
expenses, the Company's future operating results could be adversely affected.
Meanwhile, other semiconductor manufacturers are also expanding or planning to
expand their production capacity over the next several years. There can be no
assurance that the expansion by the Company and its competitors will not lead to
overcapacity in the Company's targeted markets, which could lead to price
erosion that could adversely affect the Company's operating results.
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a new
"safe harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. The Company desires to
take advantage of the new "safe harbor" provisions of the Act. Certain
information contained herein,
15
<PAGE> 16
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
particularly the information appearing under the headings "Business," "Results
of Operations," "Financial Condition", and "Factors Affecting Future Results"
are forward-looking. Information regarding certain important factors that could
cause actual results of operations or outcomes of other events to differ
materially from any such forward-looking statement appears together with such
statement, and/or elsewhere herein.
16
<PAGE> 17
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
BALANCE SHEETS
Unitrode Corporation and Consolidated Subsidiaries
<CAPTION>
January 31 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $52,012,428 $36,228,314
Accounts receivable, net of allowance of
$383,156 in 1997 and $367,804 in 1996 15,863,999 17,904,537
Inventories 10,950,254 9,971,427
Notes receivable 904,503 884,645
Deferred income taxes 3,322,000 4,112,000
Prepaid expenses and other current assets 4,409,491 2,241,077
------------ ------------
Total current assets 87,462,675 71,342,000
------------ ------------
Property, plant and equipment, at cost:
Land 1,835,809 625,790
Buildings and improvements 9,487,469 9,340,263
Machinery and equipment 72,478,894 67,373,176
Construction in progress 9,922,616 1,739,326
------------ ------------
93,724,788 79,078,555
Less: accumulated depreciation 52,036,658 43,789,869
------------ ------------
Property, plant and equipment, net 41,688,130 35,288,686
------------ ------------
Other assets and deferred charges 5,754,723 4,648,505
Restricted cash and investments 812,069 437,285
Notes and other receivables, net of unamortized
discount of $55,238 in 1997 and $78,095
in 1996 3,514,124 4,341,604
Deferred income taxes 1,191,000 102,000
Excess of cost over net assets acquired,
less accumulated amortization of $2,110,207
in 1997 and $1,826,203 in 1996 1,980,122 2,264,126
------------ ------------
Total assets $142,402,843 $118,424,206
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE> 18
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
<TABLE>
BALANCE SHEETS
Unitrode Corporation and Consolidated Subsidiaries
<CAPTION>
January 31 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,768,405 $ 8,401,521
Income taxes payable 4,346,027 2,000,229
Accrued employee compensation and benefits 4,415,997 7,794,635
Other current liabilities 7,349,813 5,998,299
------------ ------------
Total current liabilities 24,880,242 24,194,684
------------ ------------
Deferred income taxes 1,151,000 1,340,000
Other long-term liabilities 818,275 472,348
------------ ------------
Total liabilities 26,849,517 26,007,032
------------ ------------
Commitments and contingent liabilities (Note J)
Stockholders' equity:
Preferred stock, $1.00 par value:
Authorized - 1,000,000 shares, none issued
Common stock, $.20 par value:
Authorized - 30,000,000 shares
Issued - 11,632,798 in 1997
and 11,467,948 in 1996 2,326,560 2,293,590
Additional paid-in capital 28,101,985 25,582,283
Retained earnings 85,255,468 64,838,832
------------ ------------
115,684,013 92,714,705
Less:
Deferred compensation 130,687 297,531
------------ ------------
Total stockholders' equity 115,553,326 92,417,174
------------ ------------
Total liabilities and stockholders' equity $142,402,843 $118,424,206
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 19
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
<TABLE>
STATEMENTS OF OPERATIONS
Unitrode Corporation and Consolidated Subsidiaries
<CAPTION>
Years ended January 31 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues $133,525,514 $116,147,740 $95,358,698
Cost of revenues 63,028,034 55,165,336 48,805,269
------------ ------------ -----------
Gross profit 70,497,480 60,982,404 46,553,429
------------ ------------ -----------
Operating expenses:
Research and development 17,976,048 14,674,199 9,432,841
Selling, general and administrative 23,434,738 22,312,236 21,927,403
Unusual items - - 5,542,002
------------ ------------ -----------
Total operating expenses 41,410,786 36,986,435 36,902,246
------------ ------------ -----------
Income from operations 29,086,694 23,995,969 9,651,183
------------ ------------ -----------
Other income (expense):
Royalty income 2,582,217 2,395,902 1,721,909
Interest income 2,081,410 1,682,166 1,249,187
Interest expense (95,813) (85,204) (95,102)
Non-operating income (expense), net 7,973 (36,929) (5,650)
------------ ------------ -----------
Total other income 4,575,787 3,955,935 2,870,344
------------ ------------ -----------
Income before income tax provision 33,662,481 27,951,904 12,521,527
Income tax provision 12,985,000 10,433,000 3,273,000
------------ ------------ -----------
Net income $ 20,677,481 $ 17,518,904 $ 9,248,527
============ ============ ===========
Earnings per share $ 1.74 $ 1.47 $ .75
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 20
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
<TABLE>
STATEMENTS OF CASH FLOWS
Unitrode Corporation and Consolidated Subsidiaries
<CAPTION>
Years ended January 31 1997 1996 1995 .
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 20,677,481 $ 17,518,904 $ 9,248,527
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 11,667,008 8,997,825 7,429,624
Loss on the sale of divisions - - 5,542,002
Deferred compensation 125,594 205,625 240,314
Deferred income taxes (488,000) 996,000 2,160,000
Other, net 963,636 295,607 248,778
(Increase) decrease in assets:
Accounts receivable 2,050,538 (4,357,979) (2,292,735)
Inventories (978,827) (2,654,925) (1,413,625)
Prepaid expenses and other current assets (129,441) (829,469) (227,931)
Other assets and deferred charges 104,796 (1,050,250) (15,000)
Increase (decrease) in liabilities:
Accounts payable 366,884 1,407,824 1,686,373
Income taxes payable 2,996,092 308,078 (1,108,269)
Accrued employee compensation and benefits (3,378,638) 2,912,982 1,575,868
Other current and long-term liabilities 1,716,191 1,444,859 2,327,075
------------ ------------ ------------
Total adjustments 15,015,833 7,676,177 16,152,474
------------ ------------ ------------
Net cash provided by operating activities 35,693,314 25,195,081 25,401,001
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (18,686,693) (11,794,316) (15,590,878)
Proceeds on sale of businesses - - 5,728,898
Repayment of notes receivable 830,479 865,762 505,298
Proceeds on sale of assets and investments 361,869 1,485,350 56,049
Restricted cash and investments (374,784) (437,285) -
Maturities of short-term investments 4,345,200 14,200,750 499,697
Purchases of short-term investments (4,369,653) (1,289,427) (12,961,780)
Notes receivable and other investments (1,513,571) (21,163) (2,187,676)
Other, net (2,166,080) (528,480) (1,316,405)
------------ ------------ ------------
Net cash provided (used) by investing activities (21,573,233) 2,481,191 (25,266,797)
------------ ------------ ------------
Cash flows from financing activities:
Repayment of debt - (299,696) (230,770)
Purchase of common stock (350,190) (10,025,275) (14,420,393)
Proceeds from exercise of common stock options 2,014,223 1,125,005 2,012,252
------------ ------------ ------------
Net cash provided (used) by financing activities 1,664,033 (9,199,966) (12,638,911)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 15,784,114 18,476,306 (12,504,707)
Cash and cash equivalents at beginning of year 36,228,314 17,752,008 30,256,715
------------ ------------ ------------
Cash and cash equivalents at end of year $ 52,012,428 $ 36,228,314 $ 17,752,008
============ ============ ============
Supplemental information:
Interest paid $ 91,000 $ 98,000 $ 96,000
Income taxes paid, net of tax refunds 11,125,000 9,131,000 2,237,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE> 21
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
<TABLE>
STATEMENTS OF STOCKHOLDERS' EQUITY
Unitrode Corporation and Consolidated Subsidiaries
<CAPTION>
Additional Total
Common Paid-in Retained Deferred Stockholders'
Stock Capital Earnings Compensation Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 31, 1994 $2,511,413 $28,129,198 $54,204,099 $(808,492) $ 84,036,218
Net income 9,248,527 9,248,527
Acquisition of 1,003,840 shares
of common stock (200,768) (4,834,672) (9,384,953) (14,420,393)
Exercise of 238,875 shares
of common stock 47,775 1,964,477 2,012,252
Forfeiture of 11,000 shares
of common stock (2,200) (62,822) 65,022 -
Income tax benefit related
to stock plans 473,997 473,997
Amortization of deferred compensation 240,314 240,314
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1995 2,356,220 25,670,178 54,067,673 (503,156) 81,590,915
Net income 17,518,904 17,518,904
Acquisition of 511,400 shares
of common stock (102,280) (3,175,250) (6,747,745) (10,025,275)
Issuance of 247,883 common stock
warrants 1,500,000 1,500,000
Exercise of 198,248 shares
of common stock 39,650 1,085,355 1,125,005
Income tax benefit related
to stock plans 502,000 502,000
Amortization of deferred compensation 205,625 205,625
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1996 2,293,590 25,582,283 64,838,832 (297,531) 92,417,174
Net income 20,677,481 20,677,481
Acquisition of 16,575 shares
of common stock (3,315) (86,030) (260,845) (350,190)
Exercise of 185,425 shares
of common stock 37,085 1,995,888 2,032,973
Income tax benefit related
to stock plans 650,294 650,294
Forfeiture of 4,000 shares of
common stock (800) (40,450) 41,250 -
Amortization of deferred compensation 125,594 125,594
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1997 $2,326,560 $28,101,985 $85,255,468 $(130,687) $115,553,326
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 22
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Unitrode Corporation and Consolidated Subsidiaries
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of all domestic and foreign subsidiaries. All material intercompany
transactions are eliminated. The accounts of certain immaterial foreign
subsidiaries are included on the basis of fiscal years ending in December.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION: The Company recognizes revenue at the time of shipment. A
portion of the Company's sales are made to certain distributors which provide
for price protection and certain rights of return on product unsold by the
distributors. The Company records a distributor liability reserve for price
adjustments and estimated sales returns.
TRANSLATION OF FOREIGN CURRENCIES: The accounts of foreign subsidiaries have
been translated using the U.S. dollar as the functional currency. Monetary and
non-monetary asset and liability accounts have been translated at the exchange
rate in effect at each year end and historical rates, respectively. Income and
expense accounts are translated at average monthly rates, except for
depreciation, which is translated at historical rates. Exchange gains and losses
are included in other income (expense).
INCOME TAXES: The provision for income taxes is computed on the pretax income of
the consolidated subsidiaries located within each taxing country based on the
current tax law. Deferred taxes result from the future tax consequences
associated with temporary differences between the amount of assets and
liabilities recorded for tax and financial accounting purposes.
EARNINGS PER SHARE: Earnings per share is based on the weighted average number
of common and common equivalent shares outstanding during the year. Average
common and common equivalent shares outstanding were 11,852,565, 11,907,101 and
12,360,405 in fiscal years 1997, 1996 and 1995, respectively.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: The Company considers highly liquid
investments in debt securities purchased within three months of their maturity
date to be cash equivalents. Investments in debt securities that mature within
one year and do not meet the definition of cash equivalents are included in
short-term investments. Cash equivalents and short-term investments are
classified as held to maturity and valued at amortized cost, which approximates
fair market value.
INVENTORIES: Inventories are stated at average cost, but not in excess of net
realizable value.
PROPERTY, PLANT AND EQUIPMENT: Depreciation on plant and equipment is computed
using the straight-line method over the expected useful lives of the assets.
When properties are retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts, and any resulting gain
or loss is reflected in the statements of operations.
INTANGIBLE ASSETS: The excess cost over net assets acquired is amortized over
periods not to exceed 12 years. Patents, copyrights, trademarks, and other
intangible assets are amortized over their estimated useful lives.
STOCKHOLDERS' EQUITY: Pursuant to Maryland law, any shares of common stock
reacquired by the Company constitute unissued shares.
22
<PAGE> 23
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
FORWARD FOREIGN EXCHANGE CONTRACTS: The Company enters into forward foreign
exchange contracts principally as a hedge against trade receivables and firm
orders in its backlog denominated in foreign currencies. Realized and unrealized
gains and losses on these contracts are included in net income and offset the
foreign exchange gains or losses on the hedged trade receivables. At January 31,
1997, the Company had contracts of varying maturities to sell foreign currencies
of 0.8 million German marks, 1.5 million French francs, and 0.2 million British
pounds, totaling approximately $1.1 million. At January 31, 1996, the Company
had contracts of varying maturities to sell foreign currencies of 3.3 million
German marks, 6.0 million French francs, and 0.7 million British pounds,
totaling approximately $4.4 million.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company has used a variety of methods
and assumptions to estimate the fair value of the Company's financial
instruments. The carrying amounts for cash and cash equivalents, short-term
investments, accounts receivable, and accounts payable approximate fair value
because of the short maturity of these instruments. Forward foreign exchange
contracts are valued based on quoted market prices of comparable contracts. The
carrying amount of the Company's notes receivable approximate fair value based
upon comparable credit risks and the interest rates which incorporate such
risks. It was not practicable to estimate the fair value of the Company's
investment in an untraded closely held company. This investment is valued at
original cost.
NEW ACCOUNTING STANDARDS: In February 1997, the Financial Accounting Standards
Board issued SFAS No. 128, "Earnings per Share", which will require adoption in
fiscal year 1998. This statement specifies the computation, presentation and
disclosure requirements of earnings per share. The Company is in the process of
determining the effect of adoption of this statement on its consoldiated
financial statements and related disclosures.
CONCENTRATION OF CREDIT RISK: Financial instruments which subject the Company to
concentrations of credit risk consist principally of cash equivalents,
short-term investments and trade accounts receivable. The Company invests cash
equivalents and short-term investments in high-quality debt securities. Credit
exposure to any one entity is limited by Company policy. No losses have been
experienced on such investments as of January 31, 1997. The Company's trade
accounts receivables are primarily from sales to customers in the EDP/computer
and industrial markets. Excluding the disposed operations, the Company's ten
largest customers accounted for approximately 58%, 54% and 55% of sales in
fiscal years 1997, 1996 and 1995, respectively, and approximately 60% and 53% of
accounts receivable at January 31, 1997 and 1996. The Company's largest
customer, Western Digital, represented approximately 31%, 25% and 22% of sales
in fiscal years 1997, 1996 and 1995, respectively and 31% and 29% of accounts
receivable at January 31, 1997 and 1996. The Company does not require collateral
and has not historically experienced significant credit losses related to
receivables from individual customers or groups of customers in any particular
industry or geographic area.
RECLASSIFICATIONS: Certain amounts for fiscal year 1995 and 1996 have been
reclassified to conform with presentation of similar amounts in fiscal year
1997.
23
<PAGE> 24
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
NOTE B CASH EQUIVALENTS
<TABLE>
Cash equivalents consisted of the following:
<CAPTION>
January 31 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
Cash equivalents:
Tax-exempt municipal securities $21,200,000 $20,450,000
Taxable municipal securities 3,700,000 3,700,000
----------- -----------
$24,900,000 $24,150,000
=========== ===========
</TABLE>
NOTE C NOTES AND OTHER RECEIVABLES
<TABLE>
Notes and other receivables consisted of the following:
<CAPTION>
January 31 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Microsemi Corporation 5% collaterized subordinated promissory
notes, monthly payments through July 1, 2002 $ 2,517,193 $ 2,905,174
Microsemi Corporation 5% subordinated promissory note,
quarterly payments through June 30, 1999 500,000 700,000
Microsemi Corporation other receivables, annual
payments through June 30, 1999,
net of unamortized discount
of $55,238 in 1997 and $78,095 in 1996 184,762 241,905
SMC Acquisition Corporation unsecured note at prime plus
2%, payable quarterly through September 30, 1997 216,672 379,170
GMT Microelectronics Corporation 11.75%
subordinated debenture, due January 9, 2002 1,124,908 1,062,485
GMT Microelectronics Corporation secured promissory note
at prime, due July 1, 1998 80,000 -
Reserve allowance (204,908) (62,485)
----------- -----------
4,418,627 5,226,249
Less: current maturities 904,503 884,645
----------- -----------
Long-term notes and other receivables $ 3,514,124 $ 4,341,604
=========== ===========
</TABLE>
NOTE D ACQUISITIONS AND DISPOSALS
On October 12, 1994, the Company sold certain of the assets of its Micro
Networks Division ("Micro Networks") to SMC Acquisition Corporation (the
"Buyer") pursuant to an Asset Purchase Agreement. The Buyer also assumed certain
of the liabilities of Micro Networks. The assets sold consisted principally of
accounts receivable, inventory, and machinery and equipment. The liabilities
assumed by the Buyer consisted principally of accounts payable and accrued
compensation and benefits. Under the agreement, the Buyer agreed to pay
approximately $3.7 million as follows: $3.0 million in cash on October 12, 1994
and a $650,000 unsecured note payable in equal quarterly installments over 3
years with interest at prime plus 2 percent. The Buyer also entered into a
multi-year lease for use of the building with the Company and agreed to pay
royalties on revenues subject to certain provisions. The Company recorded
charges of approximately $1.4 million for the writeoff of goodwill, $0.4 million
to writedown the building to its estimated fair market value of $2.3 million,
and $1.1 million for disposal costs. In addition, the Company established a
reserve of $325,000 on the unsecured note which was reclassified in fiscal year
1996 since the Buyer had been timely on all of the note payments. The disposal
costs consisted primarily of professional fees, facility related costs, and
employee settlements and bonuses.
On June 23, 1994, the Company sold substantially all of the assets of its wholly
owned subsidiary, Powercube Corporation ("Powercube") to Natel Engineering
Company, Inc. (the "Buyer") pursuant to an Asset Purchase Agreement. The Buyer
also assumed certain of the liabilities of Powercube. The assets sold consisted
principally of accounts receivable, inventory, and machinery and equipment. The
liabilities assumed by the Buyer consisted principally of accounts payable,
accrued
24
<PAGE> 25
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
commissions and accrued warranty. Under the agreement, the Buyer paid
approximately $2.7 million in cash on June 23, 1994 for substantially all of the
assets of Powercube, except for the land and building which the Buyer leased
until March 1995. In addition, the Company recorded a charge of approximately
$1.3 million for writedowns of certain assets and $0.5 million for disposal
costs. The writedown of assets included $0.8 million for the building and $0.5
million for goodwill.
<TABLE>
The following schedule summarizes the basis for the total fiscal year 1995
unusual items charge:
<CAPTION>
Micro Networks Powercube Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total book value of assets sold $ 3,572,136 $ 4,121,128 $ 7,693,264
Total book value of liabilities
assumed by Buyers (401,000) (355,915) (756,915)
----------- ----------- -----------
Net book value of assets sold 3,171,136 3,765,213 6,936,349
Less:
Proceeds on sale 3,690,898 2,688,000 6,378,898
----------- ----------- -----------
Gain (loss) on sale 519,762 (1,077,213) (557,451)
Reserve on unsecured note (325,000) - (325,000)
Writedown of assets (1,825,803) (1,324,780) (3,150,583)
Disposal costs (1,057,748) (451,220) (1,508,968)
----------- ----------- -----------
Unusual items charge $(2,688,789) $(2,853,213) $(5,542,002)
=========== =========== ===========
</TABLE>
<TABLE>
Accrued Disposal Costs and Unusual Charges Rollforward:
<CAPTION>
Balance
(In thousands) at Beginning Change in Balance at
Description of Period Provision Payments Estimates Reclassification End of Period
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
1996 $ 528 $ - $ (528) $ - $ - $ -
1995 1,547 1,509(1) (1,325) (453)(2) (750)(3) 528
<FN>
(1) Disposal costs on sale of Micro Networks and Powercube
(2) Micro Networks and Powercube restructuring charges
(3) Litigation settlement costs reclassed from accrued disposal costs to
accrued legal and settlement expenses.
</TABLE>
25
<PAGE> 26
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
NOTE E INVENTORIES
<TABLE>
Inventories consisted of the following:
<CAPTION>
January 31 1997 1996
--------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 1,282,608 $1,698,344
Work in process 6,302,873 5,384,901
Finished goods 3,364,773 2,888,182
----------- ----------
Total inventory $10,950,254 $9,971,427
=========== ==========
</TABLE>
NOTE F BORROWING ARRANGEMENTS
On October 20, 1995, the Company entered into a three-year, $25 million domestic
revolving credit agreement with a bank. Pursuant to the agreement, interest
rates on the amounts borrowed are at the Bank's prime rate. There were no
borrowings under this agreement during fiscal years 1997 or 1996. The credit
agreement contains various covenants, the most restrictive of which requires a
minimum level of tangible net worth. At January 31, 1997, tangible net worth (as
defined in the agreement) exceeded the required level by approximately $20
million.
Prior to October 20, 1995, the Company maintained a $15 million domestic
revolving credit agreement with another bank. There were no borrowings under
this credit agreement during fiscal years 1996 and 1995.
NOTE G LEASES
Rental expenses incurred for operating leases amounted to $999,000, $700,000 and
$604,000 for the years ended January 31, 1997, 1996 and 1995, respectively.
These leases are principally for the rental of office and manufacturing space.
Many of the leases contain renewal options and some provide for the payment of a
proportionate share of maintenance, insurance and taxes in addition to the
minimum annual rentals.
<TABLE>
At January 31, 1997, the future minimum payments under all leases with
terms greater than one year are as follows:
<CAPTION>
Operating
Fiscal Year Leases
------------------------------------------------------------------------
<S> <C>
1998 $1,096,000
1999 904,000
2000 470,000
2001 184,000
2002 89,000
Thereafter -
----------
Total minimum lease payments $2,743,000
==========
</TABLE>
The Company has a non-cancelable sublease agreement to rent its Lexington office
facilities to a third party which expires July 31, 1999. The Company collected
rent payments of $177,000 in fiscal year 1997 and has a commitment from the
sublessee to receive $688,000 in future rental payments which will offset the
Company's future minimum lease payments of $832,000. At January 31, 1997, the
Company's reserve for future minimum lease payments on its Lexington office
lease was $144,000.
26
<PAGE> 27
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
NOTE H STOCK OPTIONS AND RESTRICTED STOCK
The Company's stock option plans provide for the granting of options to
qualified employees and non-employee directors to purchase the Company's stock
at the fair market value on the date of grant. These options become exercisable
as designated in the grant, not exceeding four years, and may expire up to ten
years from the date of grant.
Options were exercisable for 666,154 shares at January 31, 1997. There were
583,579, 778,554 and 381,005 shares available at January 31, 1997, 1996 and
1995, respectively, for future grants of options. In June 1995, the Company
increased by 1,000,000 the number of shares available for grant under one of its
plans.
Under its Restricted Stock and Cash Bonus Plans, the Company may award shares of
restricted common stock to key executives. Subject to certain conditions, the
restrictions lapse in five equal annual installments, beginning one year from
the date of the award. Upon lapse of the restrictions, the Company pays the
participant a cash bonus to help defray the related personal income taxes. The
cash bonus is the lesser of the amount required to defray the federal income tax
at the maximum marginal tax rate then in effect, or 200% of the fair market
value of the shares at the date of the original award. There may be up to five
such cash bonuses, but the maximum aggregate cash bonus payable over the five
years is the fair market value of the shares on the date of the grant. Upon
termination of employment, the key executive must remit to the Company all
shares still subject to the restrictions. No shares were available for grant at
January 31, 1997, 1996 and 1995 for future awards of restricted stock.
Amortization charged to expense under the Restricted Stock and Cash Bonus Plans
was $125,594, $205,625 and $240,314 for fiscal years 1997, 1996 and 1995,
respectively. Cash bonus payments under the Plans were $153,581, $247,465 and
$331,481 for fiscal years 1997, 1996 and 1995, respectively.
<TABLE>
The following table summarizes stock option and restricted stock transactions
for the three years ended January 31:
<CAPTION>
Stock Option Plans
---------------------------------------------------- Restricted
Weighted Average Stock Plans
Shares Price Range Exercise Price Shares
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at January 31, 1994 849,412 $3.56- $26.69 $ 7.39 120,000
Granted 328,000 14.44- 19.81 16.03 -
Terminated (39,125) 5.56- 26.69 14.52 (11,000)
Exercised/Released (238,875) 3.56- 15.38 8.42 (34,000)
--------- ------------- ------- -------
Outstanding at January 31, 1995 899,412 $3.56- $22.88 $ 9.96 75,000
Granted 606,150 20.63- 30.94 24.96 -
Terminated (16,011) 4.75- 22.88 20.37 -
Exercised/Released (198,248) 3.56- 20.63 5.67 (33,000)
--------- ------------- ------- -------
Outstanding at January 31, 1996 1,291,303 $4.75- $30.94 $ 17.53 42,000
Granted 248,100 18.75- 28.50 28.01 -
Terminated (53,125) 15.38- 30.94 24.15 (4,000)
Exercised/Released (185,425) 4.75- 30.94 10.86 (22,000)
--------- ------------- ------- -------
Outstanding at January 31, 1997 1,300,853 $4.75- $30.94 $ 20.21 16,000
========= ============= ======= =======
</TABLE>
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 requires that companies either recognize
compensation expense for grants of stock, stock options and other equity
instruments based on fair value, or provide pro forma disclosure of net income
and earnings per share in the notes to the financial statements. The Company
adopted the disclosure provisions of SFAS No. 123 in fiscal year 1997 and has
applied APB Opinion No. 25 and related Interpretations in accounting for its
plans.
27
<PAGE> 28
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
<TABLE>
The fair value of each option granted is estimated on the date of grant using
the Black -Scholes option-pricing model with the following assumptions:
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Weighted average fair value of options $ 10.17 $ 8.43
Options granted 248,100 606,150
Assumptions:
Risk-free interest rate 7% 6%
Expected volatility 32% 32%
Expected life of grants 4.4 years 4.4 years
Dividend yield None None
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ ------------------------
Weighted
Weighted Average Weighted
Number Average Remaining Number Average
Range of Outstanding Exercise Contractual Exercisable Exercise
Exercise Prices at 1/31/97 Price Life (in years) at 1/31/97 Price
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.75 - $ 7.88 185,475 $ 5.99 4.4 184,575 $ 5.96
8.31 - 11.63 96,975 10.62 6.0 96,975 10.62
13.63 - 18.75 201,978 15.42 7.2 148,978 15.34
19.81 - 28.63 702,425 24.92 8.7 182,126 22.89
30.94 114,000 30.94 8.6 53,500 30.94
--------- ------ --- ------- ------
$ 4.75 - $30.94 1,300,853 $20.21 7.6 666,154 $15.37
========= ====== === ======= ======
</TABLE>
<TABLE>
Had compensation costs for the Company's stock option plans been determined on
the fair market value at the grant dates for such awards, the Company's net
income and net income per share would approximate the pro forma amounts below:
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net income:
As reported $20,677,481 $17,518,904
Pro forma $19,280,164 $16,917,679
Net income per share:
As reported $ 1.74 $ 1.47
Pro forma $ 1.63 $ 1.42
</TABLE>
The effects of applying SFAS No.123 for the purpose of providing pro forma
disclosures may not be indicative of the effects on reported net income and net
income per share for future years, as the pro forma disclosures include the
effects of only those awards granted after January 31, 1995.
28
<PAGE> 29
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
NOTE I OTHER ASSETS AND DEFERRED CHARGES
<TABLE>
Other assets and deferred charges consisted of the following:
<CAPTION>
January 31 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments $2,500,000 $1,000,000
Property for sale, net of a valuation 2,460,599 2,360,599
allowance of $1,148,043 in 1997
and $350,000 in 1996
Deferred charges 83,200 615,671
Deposits 625,368 600,250
Other 85,556 71,985
---------- ----------
Total $5,754,723 $4,648,505
========== ==========
</TABLE>
On January 9, 1995, the Company entered into an agreement with GMT
Microelectronics Corporation ("GMT"), a Norristown, Pennsylvania foundry, to
supply wafers. As part of the agreement, the Company invested $2.0 million in
GMT as follows: $1.0 million in exchange for one million shares or an
approximate 9% interest in GMT's common stock, and a $1.0 million 11.75%
subordinated debenture due January 9, 2002. On February 28, 1996, the Company
invested an additional $1.5 million in GMT, 5% ten-year redeemable preferred
stock. Preferred shares may be redeemed quarterly by GMT if certain wafer yields
exceed specified levels as defined in a wafer production agreement with the
Company.
At January 31, 1997, property for sale consisted of $2,360,599 for the land and
building in Worcester, Massachusetts and $100,000 for a chemical vapor
deposition system. During fiscal year 1997, the Company recorded a charge of
approximately $800,000 to research and development expense to writedown a
chemical vapor deposition system to estimated fair market value as a result of
the discontinuation of pre-production of certain products and related process
technologies. The Company expects to sell this equipment in fiscal year 1998.
The land and building in Worcester, Massachusetts is currently occupied by the
acquirers of the former Micro Networks Division under a multi-year lease and the
Company is actively seeking a buyer for the property. An expected disposal date
is unknown at this time. The Company recorded a charge of $350,000 to unusual
items in fiscal year 1995 as part of the sale of Micro Networks to writedown the
Worcester building to its estimated fair market value.
On December 29, 1995, the Company sold the land and building in Billerica,
Massachusetts for $1,150,000. A gain of $59,000 was recognized on the sale.
NOTE J COMMITMENTS AND CONTINGENT LIABILITIES
ENVIRONMENTAL MATTERS
The Company is involved in investigation and cleanup under the supervision of
the Maine Department of Environmental Protection of groundwater and soil
contamination at the former Westbrook, Maine wafer fabrication facility of its
former Semiconductor Products Division ( the "Division"). Although the facility
was closed in 1989, the Division was sold in 1992 and the Westbrook, Maine real
estate was sold in 1994, the Company has retained responsibility for
environmental remediation at this Site. The ultimate cost of cleanup at this
Site is difficult to predict given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and regulations and
alternative cleanup methods. However, based upon the Company's experience at the
Site, the Company has established a reserve, taking into account the probable
and reasonably estimable work to be done at the Site, which the Company believes
to be adequate.
The Company has been notified by responsible state authorities in California
that it is one of a number of "potentially responsible parties" under relevant
state statutes with respect to a former hazardous waste treatment facility in
Escondido, California (the "Site"). The treatment facility was owned and
operated by an entity wholly unrelated to the Company. The Company, along with
other financially viable potentially responsible parties, has entered into a
consent decree with governmental authorities regarding the voluntary payment of
cleanup costs and voluntary cleanup measures with respect to
29
<PAGE> 30
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
this Site. The Company has established a reserve which the Company believes to
be adequate for future environmental remediation costs at this Site, based upon
the probable and reasonably estimable work to be done at the Site, the other
potentially responsible parties involved at the Site and the Company's
volumetric level of contribution to the Site which is less than one-half of one
percent of the total volume of waste contributed to the Site by the parties to
the consent decree. In view of the difficulty in quantifying the potential costs
or damages arising from the alleged environmental hazards, it is not possible to
determine with certainty the extent of the Company's potential exposure at the
Site. However, based upon its investigation to date, the Company believes that
its exposure (without giving effect to the joint and several liability
provisions referred to below) would not be material and the Company believes
that the reserves established with respect to these liabilities will be
adequate. Further, although statutes provide that all "potentially responsible
parties" may be held jointly and severally liable for the costs of investigation
and remediation of a site, after consideration of the liabilities of other
"potentially responsible parties" with respect to the Site and their respective
levels of financial responsibility, the Company believes that its liability with
respect to the Site is not material. If any liability on the part of the Company
were to be measured by the ratio of the waste attributable to the Company over
the total waste involved, based on information presently available to the
Company, the Company's aggregate liability with respect to the Site would not be
material.
Environmental reserves are reviewed as events and developments warrant and
adjusted to reflect the likelihood of additional environmental expenditures.
Based upon information currently available to the Company, management believes
that any additional aggregate liability to which the Company may be subjected
from all the above-mentioned sites would not be material to future financial
results.
OTHER LEGAL MATTERS
From time to time as a normal incidence of the nature of the Company's business,
various claims, charges or litigation are or may be asserted or commenced
against the Company relating to, among other things, contractual matters, patent
disputes, environmental matters and product liability. While there can be no
assurance that the Company will prevail in all these matters, the Company does
not believe that these matters will have a material adverse effect on the
Company's consolidated financial position or results of operations. However, an
adverse resolution of one or more of such matters could have an adverse effect
on the Company's consolidated results of operations in a quarter in which such
matters might be resolved.
COMMITMENTS
In fiscal year 1996, the Company entered into a supply agreement with a
manufacturer of silicon wafers. Under this agreement, the Company made a $1
million deposit in advance of production to guarantee certain quantities of
silicon wafers starting in fiscal year 1997. The advance payment will be repaid
to the Company in the form of credits against the price of silicon wafers
purchased from this manufacturer, based upon the monthly allocations in the
contract.
The Company has entered into change-of-control agreements with certain key
executives which grant these officers the right to receive up to twice their
annual salaries and bonuses plus continuation of certain benefits following a
change of control in the Company and termination of these officers.
Capital commitments at January 31, 1997 for an expansion of the wafer
fabrication facility and office space in Merrimack, New Hampshire were $18.1
million for construction costs and equipment.
30
<PAGE> 31
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
NOTE K INCOME TAXES
<TABLE>
Income before income taxes for domestic and foreign operations was as follows:
<CAPTION>
Years ended January 31 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $31,344,530 $24,748,155 $10,203,838
Foreign 2,317,951 3,203,749 2,317,689
----------- ----------- -----------
Total $33,662,481 $27,951,904 $12,521,527
=========== =========== ===========
<CAPTION>
Income tax provision (benefit) is composed of the following:
Years ended January 31 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------
Currently payable:
Federal $10,499,000 $ 7,159,000 $ (110,000)
State 1,603,000 1,124,000 676,000
Foreign 1,234,000 1,156,000 547,000
----------- ----------- -----------
Total current 13,336,000 9,439,000 1,113,000
----------- ----------- -----------
Deferred:
Federal (211,000) 342,000 1,600,000
State (86,000) (73,000) (55,000)
Foreign (54,000) 725,000 615,000
----------- ----------- -----------
Total deferred (351,000) 994,000 2,160,000
----------- ----------- -----------
Total income tax provision $12,985,000 $10,433,000 $ 3,273,000
=========== =========== ===========
</TABLE>
<TABLE>
The approximate tax effect of each significant type of temporary difference and
carryforward was as follows:
<CAPTION>
January 31, 1997 January 31, 1996
---------------- ----------------
<S> <C> <C>
Net deferred tax assets:
Current:
Inventories $ 362,000 $ 460,000
Deferred compensation and
fringe benefit accruals 629,000 1,616,000
Distributor and other reserves 2,464,000 1,840,000
Other (133,000) 196,000
---------- -----------
3,322,000 4,112,000
---------- -----------
Non-current:
Property, plant and equipment 691,000 60,000
Other 191,000 42,000
Deferred compensation 309,000 -
---------- -----------
1,191,000 102,000
---------- -----------
Net deferred tax liabilities:
Non-current:
Property, plant and equipment (1,151,000) (1,340,000)
----------- -----------
Total net deferred tax assets $ 3,362,000 $ 2,874,000
=========== ===========
</TABLE>
31
<PAGE> 32
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
Based on the Company's history of taxable income and projections of future
earnings, management believes that it is more likely than not that sufficient
taxable income will be generated in the foreseeable future to realize the
deferred tax assets.
The Company does not provide for income taxes that may be due upon the
remittance of the earnings of its foreign subsidiaries as the Company intends to
indefinitely reinvest such earnings outside of the United States. As of January
31, 1997, such earnings approximated $7.4 million and the related unrecognized
deferred tax liability approximated $2.4 million.
<TABLE>
The differences between the effective tax rates and the applicable U.S. federal
statutory tax rates were as follows:
<CAPTION>
Years ended January 31 1997 1996 1995
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory tax rate 35.0% 35.0% 35.0%
State taxes, net of federal tax benefit 3.7 2.4 2.8
Tax effect of foreign operations - 0.1 4.0
Sales of operating units - - (8.6)
Change in valuation allowance - - (10.1)
Other, net (0.1) (0.2) 3.0
----- ----- -----
38.6% 37.3% 26.1%
===== ===== =====
</TABLE>
NOTE L INDUSTRY SEGMENT/INTERNATIONAL OPERATIONS
The Company and its subsidiaries operate within a single industry segment - the
manufacture and sale of electronic components. Its products are sold throughout
the world into the EDP/computer, telecommunications, industrial controls and
instrumentation, defense/aerospace, and automotive markets.
<TABLE>
The Company's products are sold worldwide by its sales force and through a
network of independent sales representatives and distributors. Sales and
marketing outside the United States are conducted principally through sales
subsidiaries and by direct export sales from the United States. Data on the
Company's U.S. export sales to unaffiliated customers, based on geographic
location, is presented below. U.S. export sales to unaffiliated customers
include shipments through the Company's international trading operation located
in Shannon, Ireland.
<CAPTION>
(In thousands)
Years ended January 31 1997 1996 1995
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. EXPORT SALES:
Far East $68,219 $54,575 $37,160
Europe 19,093 18,606 15,046
ROW 5,430 4,824 2,369
Disposed divisions - - 795
------- ------- -------
Total $92,742 $78,005 $55,370
======= ======= =======
</TABLE>
32
<PAGE> 33
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
<TABLE>
NOTE M SELECTED QUARTERLY DATA (UNAUDITED)
<CAPTION>
(In thousands except per share data)
Fiscal Year 1997 Quarters First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $34,220 $30,009 $32,075 $37,222 $133,526
Gross profit 18,205 15,906 16,845 19,541 70,497
Net income 5,261 4,707 4,985 5,724 20,677
Net income per share .44 .40 .42 .48 1.74
Stock prices:
High 28.13 30.75 23.88 37.00 37.00
Low 23.38 14.75 17.00 23.50 14.75
<CAPTION>
Fiscal Year 1996 Quarters First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------------
Net revenues $25,325 $28,300 $29,427 $33,096 $116,148
Gross profit 13,222 14,792 15,404 17,564 60,982
Net income 3,799 4,174 4,544 5,002 17,519
Net income per share .32 .35 .38 .42 1.47
Stock prices:
High 22.00 30.88 32.50 29.63 32.50
Low 17.63 20.63 25.63 23.38 17.63
</TABLE>
The Company did not declare any cash dividends during fiscal years 1997 and
1996. The Company's common stock is listed on the New York Stock Exchange.
NOTE N EMPLOYEE BENEFIT PLANS
The Company contributes to the Unitrode Corporation Profit Sharing/401(k)
Savings Plan (the "Plan") which covers all active U.S. employees with at least
three months of service. Under the profit sharing component of the Plan, Company
contributions are made at the discretion of the Board of Directors. The amounts
charged to operations were $1,348,000, $1,915,000, and $1,596,000 for the years
ended January 31, 1997, 1996 and 1995, respectively.
Also, the Company matches 50% of employee contributions up to 2% of compensation
under the 401(k) savings component of the Plan. Company contributions charged to
operations were $206,000, $160,000 and $118,000 for the years ended January 31,
1997, 1996 and 1995, respectively, including disposed operations.
The Company established a deferred incentive compensation plan for selected
engineers in fiscal year 1995. Plan assets consists of restricted cash and
investments which are held in trust until individual payments are required.
NOTE O STOCKHOLDERS' EQUITY
On April 30, 1990, the Company's Board of Directors adopted a Shareholder Rights
Plan (the "Plan") and declared a special dividend of one right for each share of
the Company's common stock outstanding at the close of business on May 14, 1990.
Each right, when exercisable upon the occurrence of certain events, entitles the
registered holder to purchase from the Company a unit consisting of one-one
hundredth of a share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $1.00 per share, at a purchase price of $30.00 per Unit. Upon
the occurrence of certain further events, such as the acquisition of 20% or more
of the Company's common stock by a person or group or the designation of a
person or group as an Adverse Person by the Company's Board of Directors, a
holder of a Unit (except holders who are Acquiring Persons or Adverse Persons,
as defined in the Plan) will be entitled to receive common stock of the Company
having a market value equal to twice the exercise price. Also, if the Company is
acquired in a merger in which the Company is not the surviving corporation, or
there is a sale of 50% or more of the Company's assets or earning power, each
Unit (except Units held by Acquiring Persons or Adverse Persons) may receive
common stock of the acquiring company having a value equal to twice the exercise
price of the right. In general, the Company may redeem the rights at $.01 per
right at any time until 10 days following public announcement that a 20%
position has been acquired in the Company (which period may be extended at any
time while the rights are still redeemable). So long as the rights are not
separately transferable, the Company will issue
33
<PAGE> 34
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
one right with each new share of common stock issued. The total number of rights
outstanding at January 31, 1997 was 11,632,798.
On November 21, 1995, the Company issued 247,883 warrants to purchase Unitrode
Common Stock as final settlement of a class action lawsuit. The warrants were
determined to have a value of $1.5 million at the time of issuance and are
combined with additional paid-in-capital on the Company's balance sheet. Each
warrant entitles the holder to purchase one share of Unitrode Common Stock at a
price of $28.467 per share. The warrants became exercisable on August 21, 1996,
and expire on August 21, 1997.
34
<PAGE> 35
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
REPORT OF MANAGEMENT
The management of Unitrode Corporation is responsible for the preparation of the
consolidated financial statements in accordance with generally accepted
accounting principles and for the integrity and objectivity of all the financial
data included in this annual report. In preparing the financial statements,
management makes informed judgments and estimates as to the expected effects of
events and transactions currently being reported.
To meet this responsibility, the Company maintains a system of internal
accounting controls to provide reasonable assurance that assets are safeguarded,
and that transactions are properly executed and recorded. The system includes
policies and procedures, and reviews by officers of the Company.
The Board of Directors, through its Audit Committee, is responsible for
determining that management fulfills its responsibility with respect to the
Company's financial statements and the system of internal accounting controls.
The Audit Committee is composed solely of outside directors. The Committee meets
periodically and, when appropriate, separately with representatives of the
independent accountants and officers of the Company to monitor the activities of
each.
Coopers & Lybrand L.L.P., the independent accountants, have been selected by the
Board of Directors to examine the Company's financial statements. Their report
appears herein.
Cosmo S. Trapani Robert L. Gable
Executive Vice President Chairman and Chief Executive
and Chief Financial Officer Officer
35
<PAGE> 36
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Unitrode Corporation:
We have audited the consolidated financial statements and the financial
statement schedule of Unitrode Corporation and Consolidated Subsidiaries listed
in Item 14(a) of this Form 10-K. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Unitrode
Corporation and Consolidated Subsidiaries as of January 31, 1997 and 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended January 31, 1997, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 27, 1997
36
<PAGE> 37
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is hereby incorporated by reference from the
Registrant's definitive proxy statement for the Annual Meeting of Stockholders
to be held June 2, 1997.
Information regarding executive officers is included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is hereby incorporated by reference from the
Registrant's definitive proxy statement for the Annual Meeting of Stockholders
to be held June 2, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is hereby incorporated by reference from the
Registrant's definitive proxy statement for the Annual Meeting of Stockholders
to be held June 2, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND SCHEDULES PAGE
- ---------------------------------- ----
Report of Independent Accountants 36
(a) 1. Financial Statements:
Balance Sheets as of January 31, 1997
and 1996 17-18
Statements of Operations for the Years
Ended January 31, 1997, 1996 and 1995 19
Statements of Cash Flows for the Years
Ended January 31, 1997, 1996 and 1995 20
Statements of Stockholders' Equity for
the Years Ended January 31, 1997, 1996
and 1995 21
Notes to Financial Statements 22-34
37
<PAGE> 38
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
(a) 2. Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts 42
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or the notes thereto.
Individual financial statements of the Registrant have been omitted because
consolidated financial statements of the Registrant and all of its subsidiaries
are furnished.
(a) 3. List of Exhibits: The exhibits listed below are filed as a part of
this report.
Executive Compensation Plans and Arrangements:
10A Unitrode Corporation 1983 Stock Option Plan,
adopted June 6, 1983, as amended (filed as Exhibit
4F to the Registration Statement on Form S-8 for
the Registrant (Registration No. 33-12353) and
incorporated herein by reference).
10B Unitrode Corporation 1984 Restricted Stock and
Cash Bonus Plan (filed as Exhibit 4E to the
Registration Statement on Form S-8 for the
Registrant (Registration No. 33-12353) and
incorporated herein by reference).
10C Unitrode Corporation Amended and Restated 1986
Non-Employee Director Option Plan adopted January,
1986 and amended February, 1992 (filed as Exhibit
4 to the Registration Statement on Form S-8 for
the Registrant (Registration No. 33-54544) and
incorporated herein by reference).
10D Forms of Change of Control Employment Agreements
(filed as Exhibit 10K to the Annual Report on Form
10-K filed by the Registrant for the fiscal year
ended January 31, 1991 and incorporated herein by
reference).
10E Unitrode Corporation 1992 Employee Stock Option
Plan, adopted February 1992 (filed as Exhibit 4 to
the Registration Statement on Form S-8 for the
Registrant (Registration No. 33-54542) and
incorporated herein by reference).
10F Unitrode Corporation Fiscal Year 1997
Supplementary Compensation Programs (filed as
Exhibit 10H to the Annual Report on Form 10-K
filed by the Registrant for the fiscal year ended
January 31, 1996, and incorporated herein by
reference).
10G Amendments to the Unitrode Corporation 1992
Employee Stock Option Plan, adopted April, 1995
(filed as Exhibit 10H to the Annual Report on Form
10-K filed by the Registrant for the fiscal year
ended January 31, 1995, and Exhibit 4.5 to the
Registration Statement on Form S-8 for the
Registrant (Registration No.
333-00107) and incorporated herein by reference).
10H Amendment to the Unitrode Corporation 1992
Employee Stock Option Plan, adopted March 17,
1997.
10I Unitrode Corporation Fiscal Year 1998
Supplementary Compensation Programs.
10J Restricted Stock Award Agreement dated as of
August 9, 1993 between Unitrode Corporation and
Robert L. Gable.
38
<PAGE> 39
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
Other Exhibits:
3A Articles of Restatement of the Charter of the
Registrant and Articles of Amendment to the
Charter of the Registrant previously filed and
incorporated by reference to Exhibit 3A to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 31, 1989.
3B Articles Supplementary to the Charter of the
Registrant, previously filed and incorporated by
reference to Exhibits 3(A)(1) and (6) to the
Registrant's current Report on Form 8-K filed May
4, 1990.
3C Articles of Amendment to the Charter of the
Company, previously filed and incorporated by
reference to Exhibit 3B for the Company's Annual
Report on Form 10-K for the fiscal year ended
January 31, 1992.
3D By-laws of the Company, as amended (filed as
Exhibit 3C to the Annual Report on Form 10-K filed
by the Registrant for the fiscal year ended
January 31, 1992, and incorporated herein by
reference).
10K Rights Agreement dated as of May 2, 1990 between
the Company and The First National Bank of Boston
as Rights Agreement (filed as Exhibit 1 to the
Company's Registration Statement on Form 8-A dated
May 3, 1990, and incorporated herein by
reference).
10L Agreement between Micro USPD, Inc. and Unitrode
Corporation dated May 28, 1992 (filed as Exhibit
10L to the Annual Report on Form 10-K filed by the
Company for the fiscal year ended January 31,
1993, and incorporated herein by reference).
10M First Amendment, dated as of April 30, 1993, to
the Rights Agreement, dated as of May 2,
1990,between the Company and The First National
Bank of Boston, as Rights Agreement(filed as
Exhibit 1 to Form 8-A/A, Amendment to Registration
Statement on Form 8-A, dated May 26, 1993, and
incorporated herein by reference).
10N Agreement among Natel Engineering Company, Inc.,
Unitrode Corporation and Powercube Corporation
dated June 23, 1994 (filed as Exhibit 2 to Form
8-K dated June 23, 1994, and incorporated herein
by reference).
10O Agreement between SMC Acquisition Corporation and
Unitrode Corporation dated October 11, 1994 (filed
as Exhibit 2 to Form 8-K dated October 12, 1994,
and incorporated herein by reference).
10P Credit Agreement dated as of October 20, 1995
between Unitrode Corporation and BayBank (filed as
Exhibit 10N to the Annual Report on Form 10-K
filed by the Company for the fiscal year ended
January 31, 1996, and incorporated herein by
reference).
10Q Warrant Agreement between Unitrode Corporation and
the First National Bank of Boston (filed as
Exhibit 1 to Registration Statement on Form 8-A
dated November 2, 1995, and incorporated herein by
reference).
11 Calculation of Primary and Fully Diluted Net
Income Per Share.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
39
<PAGE> 40
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual report on Form 10-K
- --------------------------------------------------------------------------------
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the fourth quarter of
the fiscal year ended January 31, 1997.
40
<PAGE> 41
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
SIGNATURES
<TABLE>
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.
<CAPTION>
<S> <C>
UNITRODE CORPORATION
(Registrant)
April 21, 1997 By: /s/ Robert L. Gable
- ----------------------------- --------------------------------------------------
Date Robert L. Gable, Chairman, Chief Executive Officer
and Director (Principal Executive Officer)
</TABLE>
<TABLE>
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 dates indicated.
<CAPTION>
<S> <C>
April 21, 1997 /s/ Peter A. Brooke
- ----------------------------- ------------------------------------------------------
Date Peter A. Brooke, Director
April 21, 1997 /s/ Edward H. Browder
- ----------------------------- ------------------------------------------------------
Date Edward H. Browder, President and Director
April 21, 1997 /s/ Robert L. Gable
- ----------------------------- ------------------------------------------------------
Date Robert L. Gable, Chairman, Chief Executive Officer
and Director
April 21, 1997 /s/ Kenneth Hecht
- ----------------------------- ------------------------------------------------------
Date Kenneth Hecht, Director
April 21, 1997 /s/ Louis E. Lataif
- ----------------------------- ------------------------------------------------------
Date Louis E. Lataif, Director
April 21, 1997 /s/ Cosmo S. Trapani
- ----------------------------- ------------------------------------------------------
Date Cosmo S. Trapani, Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
April 21, 1997 /s/ James T. Vanderslice
- ----------------------------- ------------------------------------------------------
Date James T. Vanderslice, Director
</TABLE>
41
<PAGE> 42
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
Unitrode Corporation and Consolidated Subsidiaries
<TABLE>
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
<CAPTION>
Additions
Balance at charged to Net Balance
beginning costs and Additions at end
Description of period expenses (Deductions) of period
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
- -------------------------------
1997 $ 367,804 $ - $ 15,352 $ 383,156
========== ========== =========== ==========
1996 $ 296,510 $ 199,900 $ (128,606) $ 367,804
========== ========== =========== ==========
1995 $ 230,138 $ 122,890 $ (56,518)(1) $ 296,510
========== ========== =========== ==========
Inventory Reserves
- ------------------
1997 $ 732,997 $1,159,332 $ (878,000) $1,014,329
========== ========== =========== ==========
1996 $1,218,889 $ 25,000 $ (510,892) $ 732,997
========== ========== =========== ==========
1995 $1,633,258 $ 772,969 $(1,187,338)(2) $1,218,889
========== ========== =========== ==========
<FN>
(1) Includes a reduction of $29,700 due to the sale of Powercube Corporation.
(2) Includes reductions of $318,471 and $554,000, respectively, due to the sales
of Powercube Corporation and the Micro Networks Division.
</TABLE>
42
<PAGE> 1
EXHIBIT 10-H
------------
AMENDMENT NO. 2
TO THE
UNITRODE CORPORATION
1992 EMPLOYEE STOCK OPTION PLAN
The Unitrode Corporation 1992 Employee Stock Option Plan (the "Plan") is hereby
amended in accordance with the provisions of Section 10 of the Plan, by the
Board of Directors, as follows:
1. Section 2 of the Plan is amended by increasing the aggregate number of
shares of the Common Stock, par value $.20 per share, of the
Corporation available for issuance upon exercise of options or stock
appreciation rights granted under the Plan from 2,000,000 to 3,000,000.
2. This Amendment, adopted on the date set forth below, which shall be the
effective date (the "Effective Date"), is subject to approval and
ratification by the stockholders of the Corporation at the 1997 Annual
Meeting of Stockholders, or any adjournment or postponement thereof. In
the event that this Amendment is not approved and ratified by the
stockholders within one year of the Effective date, the Amendment
shall be null and void.
UNITRODE CORPORATION
By: _____________________
Allan R. Campbell
Senior Vice President
Dated: March 17, 1997
<PAGE> 1
EXHIBIT 10-I
------------
UNITRODE CORPORATION
SUPPLEMENTARY COMPENSATION PROGRAMS
-----------------------------------
I. MANAGEMENT BONUS PROGRAM
- -------------------------------
PURPOSE
- -------
The purpose of Unitrode's Management Bonus Program is to reward those key
employees who are identified by a Corporate Senior Officer (the CEO and his
direct reports) as responsible for driving the business objectives of the
Corporation.
ELIGIBILITY
- -----------
Participation in the Management Bonus Program is limited to those key
contributors who are recommended for the program by the appropriate Senior
Officer, approved by the Board of Directors, and who:
1. Are active employees on the day of the award or were active employees
on the last day of the fiscal year but who terminated employment before
the day of the award due to death, disability, involuntary termination
(except termination for cause as defined in Corporate Policy 2-4,
Subsection III-D) or retirement.
- Retirement, for the purposes of eligibility for bonus
distribution, will be defined as follows: A participant in the
management bonus program who has attained the age of at least 55
years which would entitle that person to receive early retirement
recognition.
2. Have been identified as participants at the time of the approval of the
AOP or at the time of employment (or promotion).
- To be eligible, a newly hired employee must be an employee for at
least one fiscal quarter at the end of the fiscal year; for any
participant who has been employed for less than one year, such
employee's award shall be prorated from the date of eligibility.
3. Are NOT eligible for a sales commission program; and
---
4. Are approved for participation by the CEO.
<PAGE> 2
SUPPLEMENTARY COMPENSATION PROGRAMS
ACCRUAL
- -------
1. Bonuses, including officers' bonuses, should be incorporated into the AOP,
approved by the CEO, and accrued for throughout the year with appropriate
adjustment for realistic expectation of individual achievement of
performance objectives (e.g., if individual objectives are challenging, on
average each eligible employee might be expected to achieve about 80% of
his/her individual objectives which, in turn, determine 50% of the bonus
award.)
2. Bonus accruals should be reversed if necessary to preserve the profit
margin of the AOP and within the guidelines established below, to maintain
an appropriate ratio to the profit sharing accrual.
IMPLEMENTATION
- --------------
1. The financial objectives defined in the AOP will be assigned a Bonus target
A through H by the CEO which will guide the Company in designing its
program and establishing the appropriate accrual for the Management Bonus
Program.
2. Once the Bonus Plan is approved by the CEO and the Board of Directors, the
appropriate Senior Officer should establish objectives for each qualified
employee.
AWARDS
- ------
1. Bonuses may be awarded annually, based upon:
a) The achievement of the financial target as defined in the bonus award
matrix; and
b) The achievement of a clear set of objectives which are agreed to by the
supervising Senior Officer, the employee, and the employee's
supervisor.
2. The amount of the award will be determined as a percentage of the
participant's annual base salary at the time the award is paid out, as
follows:
a) Fifty percent of the bonus will depend upon the level at which the
Company achieves its financial target.
b) The remaining 50%, if the Corporation achieves its financial target,
will depend upon the achievement by the individual of the agreed-upon
objectives or portion thereof.
2
<PAGE> 3
SUPPLEMENTARY COMPENSATION PROGRAMS
II. BONUS PROGRAM -- ALL OTHER EMPLOYEES
- ----------------------------------------------
PURPOSE
- -------
Based on the performance of the corporation, the Company may make cash awards in
FY98. The purpose of this bonus program is to reward those employees who are not
participants in the Management Bonus Program for their contribution to the
overall success of Unitrode's performance objectives and goals in a fiscal year.
ELIGIBILITY
- -----------
Participation in this program is limited to employees who are not participants
in the Management Bonus Plan and:
1. Have been employees for at least three months prior to the end of the
fiscal year on January 31; and
2. Are active employees on the day of the award or were active employees on
the last day of the fiscal year, but who terminated employment before the
day of the award due to death, disability, involuntary termination (with
the exception of termination for cause), or retirement. See Section I-1.
Employees with less than 12 months' participation will be prorated from the
date of eligibility as stated above.
3
<PAGE> 1
EXHIBIT 10-J
------------
UNITRODE CORPORATION
7 CONTINENTAL BOULEVARD
MERRIMACK
NEW HAMPSHIRE 03054-4334
TEL (603) 424-2410
[UNITRODE LOGO] FAX (603) 429-8771
August 9, 1993
Mr. Robert L. Gable
35 Sunset Rock Road
Andover, MA 01810
Dear Mr. Gable:
This letter shall serve as the Restricted Stock Award Agreement (the
"Agreement") between you and Unitrode Corporation (the "Corporation"). In
consideration of services rendered by you to the Corporation, the Board of
Directors of the Corporation has determined to award to you 20,000 shares (the
"Shares") of the common stock of the Corporation. The award is effective as of
August 9, 1993 (the "Award Date").
This award is made upon the terms, conditions, restrictions and other provisions
of the Agreement set forth herein, as follows:
1. RESTRICTIONS AND CASH BONUS
---------------------------
(a) During the period of five years after the Award Date, you shall
not sell, exchange, transfer, pledge, hypothecate or otherwise
dispose of the Shares awarded to you except for Shares which have
become vested, as hereinafter provided, and except that title to
Shares which have not vested may pass on your death to your
personal representative, provided such Shares shall otherwise
remain subject to all of the provisions of this Section.
(b) Shares shall vest over said five-year period upon the
satisfaction by you of the condition that you continue to be
employed by the Corporation or any subsidiary as of each vesting
date.
(c) On each anniversary of the Award Date during said five-year
period, if you are employed by the Corporation or any subsidiary,
twenty percent (20%) of the Shares shall become vested. Any
Shares that do not become vested hereunder shall be forfeited
and conveyed to the Corporation.
<PAGE> 2
ROBERT L. GABLE
AUGUST 9, 1993
PAGE 2.
(d) As soon as practicable after Shares have become vested, the
Corporation shall pay a cash bonus to you equal to the lesser of
(i) one hundred percent (100%) of the fair market value of such
Shares multiplied by a fraction, the numerator of which is the
maximum marginal Federal income tax rate then in effect and the
denominator of which is 100% minus such tax rate; and (ii) two
hundred percent (200%) of the fair market value of such Shares as
of the Award Date. In any event, the aggregate of the cash
bonuses paid in connection with Shares which have become vested
shall not be greater than the fair market value of the Shares
awarded to you determined as of the Award Date.
(e) If you should die or become totally disabled prior to the
expiration of said five-year period, all of the Shares awarded to
you which have not yet become vested shall be forfeited and
conveyed to the Corporation except for that number of such Shares
which would have become vested on the next anniversary of the
Award Date, if you had not died or become disabled. Such number
of Shares shall then become vested and a cash bonus computed in
accordance with subsection (d) of this Section shall be paid in
respect thereof to you or your estate.
(f) Notwithstanding any other provision of this Section or of any
other Sections of this Agreement, all Shares awarded hereunder
which have not yet become vested or been forfeited to the
Corporation shall become vested in the event of a change in
control of the Corporation, and the Corporation shall then pay a
cash bonus in accordance with subsection (d) hereof in respect to
all such shares.
2. PROVISIONS RELATING TO SECURITIES ACT
-------------------------------------
(a) Shares shall be registered in your name on the stock and transfer
records of the Corporation and stock certificates delivered as
soon as practicable following the Award Date; provided, however,
that if at any time the Board of Directors of the Corporation
shall determine that the listing upon any securities exchange or
the registration or qualification under any federal or state law
of the Shares to be awarded, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a
condition of or in connection with the award of such Shares,
registration on the stock and transfer records and delivery of
stock certificates may be delayed until such listing,
registration, qualification, consent or approval shall have been
effected or obtained, free of any conditions not acceptable to
the Board of Directors.
<PAGE> 3
ROBERT L. GABLE
AUGUST 9, 1993
PAGE 3.
(b) Delivery of Shares shall be made from shares of authorized but
unissued common stock of the Corporation.
(c) Notwithstanding any other provision of this Agreement, the
Corporation may delay registration on its stock and transfer
records and delivery of stock certificates until one of the
following conditions shall have been satisfied:
(i) The Shares to be awarded at the time of the award
effectively registered under the Securities Act of 1993 as
now in force or hereafter amended (the "Act");
(ii) A no-action letter in respect of the award of such
Shares shall have been obtained by the Corporation from the
Securities and Exchange Commission; or
(iii) Counsel for the Corporation shall have given an
opinion, which opinion shall not be unreasonably
conditioned or withheld, that such Shares are exempt from
registration under the Act.
Moreover, unless the Shares to be awarded have been effectively
registered under the Act, the Corporation shall be under no
obligation to make any award of Shares unless you shall first
give a written representation to the Corporation, satisfactory
in form and scope to the Corporation's counsel and upon which in
the opinion of such counsel the Corporation may reasonably rely,
that you are acquiring the Shares awarded to you as an
investment and not with a view to or for sale in connection with
any distribution of any shares in violation of the Act. Each
certificate representing shares of stock delivered pursuant to
an award and any certificates issued in replacement thereof
shall bear a legend referring to such investment representation.
(d) The Corporation shall undertake to use its best efforts to
register the Shares awarded under the Act on Form S-3 within one
year of the Award Date.
3. DEPOSIT OF SHARES IN ESCROW
---------------------------
In light of the restrictions imposed by this Agreement, certificates of
stock representing Shares awarded under the Plan shall bear a legend to
the effect that the Shares represented thereby may not be sold,
exchanged, transferred, pledged, hypothecated or otherwise disposed of
except in accordance with the terms of this Agreement and the transfer
agent for the common stock of the Corporation shall be so instructed.
Further, you shall deposit such certificates together with a
<PAGE> 4
ROBERT L. GABLE
AUGUST 9, 1993
[UNITRODE LOGO] PAGE 4.
stock power or other instrument of transfer, appropriately endorsed in
blank with signatures guaranteed, with an escrow agent designated by the
Executive Compensation Committee of the Board of Directors under a
deposit agreement requiring the Shares to be held in escrow until the
restrictions as to such Shares imposed by Section 1 shall have lapsed,
and containing such other terms and conditions as the Committee shall
approve, all expenses of any such escrow to be borne by the Corporation.
During the period while the Shares are held in escrow, you, as the
registered holder of such Shares, shall be entitled to vote the same and
to receive all dividends declared thereon.
4. LISTING OF STOCK
----------------
So long as the common stock of the Corporation is listed on the New York
Stock Exchange, the Corporation shall take any necessary steps so that
the Shares awarded to you are listed by the Exchange or will be so
listed upon notice of issuance.
5. NO CONTRACTUAL RIGHT TO PARTICIPATE AND NO RIGHT TO CONTINUED EMPLOYMENT
------------------------------------------------------------------------
Nothing herein shall be deemed to give you or your legal
representatives or assigns, or any other person claiming under or
through you, any contractual or other right to participate in the
benefits of this Agreement. Nothing herein and no action or award
hereunder shall be construed to constitute or be evidence of any
agreement or understanding, express or implied, on the part of the
Corporation to employ or retain you in its employ for any specific
period of time.
6. TRANSFERABILITY
---------------
Except as otherwise specifically provided herein, no right or interest
hereunder shall be assignable or transferable, in whole or in part,
either directly or by operation of law or otherwise including, but not
by way of limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any
<PAGE> 5
ROBERT L. GABLE
AUGUST 9, 1993
[UNITRODE LOGO] PAGE 5.
other manner (except devolution by death); and no such right or interest
shall be subject to any obligation or liability of yours.
7. WITHHOLDING OF INCOME TAXES
---------------------------
The Corporation shall have the right to deduct from any cash bonus paid
hereunder any federal, state or local taxes required by law to be
withheld with respect to any event hereunder which results in taxable
income to you.
Would you please sign and return the enclosed copy of this letter to evidence
your acceptance of the award and your agreement to the terms and conditions
contained herein.
UNITRODE CORPORATION
------------------------
Allan R. Campbell
Senior Vice President
and General Counsel
AGREED AND ACCEPTED:
- --------------------
Robert L. Gable
August 9, 1993
<PAGE> 1
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
Exhibit 11
----------
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
<TABLE>
Calculation of Primary and Fully Diluted Net Income Per Share
-------------------------------------------------------------
<CAPTION>
Years Ended January 31 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $20,677,481 $17,518,904 $ 9,248,527
=========== =========== ===========
Calculation of primary earnings per share:
- ------------------------------------------
Weighted average of common shares
outstanding 11,530,375 11,497,179 11,975,808
Common equivalent shares 322,190 409,922 384,597
----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding 11,852,565 11,907,101 12,360,405
=========== =========== ===========
Net income $ 1.74 $ 1.47 $ .75
=========== =========== ===========
Calculation of fully diluted earnings per share:
- ------------------------------------------------
Weighted average common and common equivalent
shares outstanding (as determined for the
primary earnings per share calculation
above) 11,852,565 11,907,101 12,360,405
Incremental shares to reflect full
dilution 66,579(1) 26,604(1) 14,134(1)
----------- ----------- -----------
Weighted average of common and common
equivalent shares outstanding, as
adjusted 11,919,144 11,933,705 12,374,539
=========== =========== ===========
Net income $ 1.73 $ 1.47 $ .75
=========== =========== ===========
<FN>
(1) This calculation is submitted in accordance with Regulation S-K item 601(b) (11) although not required by
footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%.
</TABLE>
43
<PAGE> 1
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
Exhibit 21
----------
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Subsidiaries of the Registrant
------------------------------
<TABLE>
All operating subsidiaries of the Registrant as of January 31, 1997 (except
subsidiaries which considered in the aggregate do not constitute a significant
subsidiary) were as follows:
<CAPTION>
% of Voting
Jurisdiction of Securities
Name of Subsidiary Incorporation Owned
- ------------------ -------------- -----------
<S> <C> <C>
Unitrode B.V. Netherlands 100%
Unitrode Electronics Asia Ltd. Hong Kong 100%
Unitrode Electronics GmbH West Germany 100%
Unitrode Electronics (Singapore) Singapore 100%
Pte. Ltd.
Unitrode Ireland Limited Ireland 100%
Unitrode S.r.l. Italy 100%
Unitrode U.K. Limited United Kingdom 100%
</TABLE>
44
<PAGE> 1
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
Exhibit 23
----------
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consent of Independent Accountants
----------------------------------
We consent to the incorporation by reference in the Registration
Statements of Unitrode Corporation and Consolidated Subsidiaries on Form S-8
(File Nos. 33-12353, 33-54542, 33-54544 and 333-00107) and Form S-3 (File No.
333-17123) and related prospectuses of our report dated February 27, 1997, on
our audits of the consolidated financial statements and financial statement
schedule of Unitrode Corporation and Consolidated Subsidiaries as of January 31,
1997 and 1996 and for each of the three years in the period ended January 31,
1997, which report is included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 24, 1997
45
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JAN-31-1997
<EXCHANGE-RATE> 1
<CASH> 52,012,428
<SECURITIES> 0
<RECEIVABLES> 16,247,155
<ALLOWANCES> 383,156
<INVENTORY> 10,950,254
<CURRENT-ASSETS> 87,462,675
<PP&E> 93,724,788
<DEPRECIATION> 52,036,658
<TOTAL-ASSETS> 142,402,843
<CURRENT-LIABILITIES> 24,880,242
<BONDS> 0
0
0
<COMMON> 2,326,560
<OTHER-SE> 113,226,766
<TOTAL-LIABILITY-AND-EQUITY> 142,402,843
<SALES> 133,525,514
<TOTAL-REVENUES> 133,525,514
<CGS> 63,028,034
<TOTAL-COSTS> 63,028,034
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,813
<INCOME-PRETAX> 33,662,481
<INCOME-TAX> 12,985,000
<INCOME-CONTINUING> 20,677,481
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,677,481
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 1.73
</TABLE>
